Insurance Co. Ltd. Vs. Harjeet Rice Mills  Insc 364 (25 July 2005)
R.C. Lahoti & P.K. Balasubramanyan P.K. Balasubramanyan, J.
National Insurance Company, the respondent in a claim before the State
Commission under the Jammu & Kashmir Consumer Protection Act, is the
appellant before us. M/s Harjeet Rice Mills, the respondent herein, had insured
its stocks with the appellant for the period September 1991 to September 1992.
The respondent herein approached the State Consumer Commission with a claim
that there was an accidental fire in its godown in the night intervening the
first and second January 1992; that the goods stocked were lost in the fire;
that the surveyor appointed had estimated the loss at Rs. 8,96,500/- on finding
that the loss was due to a fire caused by a short circuit; that the appellant
had repudiated the claim unjustly; that there was thus deficiency in service
and that the respondent was entitled to a sum of Rs. 9 lakhs as the value of
the goods lost, to a sum of Rs. 1 lakh as damages for mental agony and for
interest at 24% per annum on the entire amount, from the date of the incident
of fire. The appellant resisted the claim by contending, inter alia, that the
State Commission had no jurisdiction to entertain the claim; that on a further
investigation, it was revealed that the fire was not caused by short-circuit;
that it was a deliberate act of causing a fire with a view to make a claim on
the insurance policy; that the loss was highly exaggerated since the godown
concerned did not have the capacity to take in the quantity allegedly stored
and lost; that it was a case of an attempted insurance fraud; that the claim
was closed as a no claim; that there was no deficiency in service and that the
claim was liable to be rejected.
State Commission did not consider the objection to its jurisdiction on merits.
It held that the Surveyor's report relied on by the claimant has to be accepted
and an order for payment out of that amount with interest thereon at the rate
of 18% per annum from the date of the loss till the date of payment had to be
made. It also held that the claim for compensation had to be denied, since, if
granted, the amount awarded would have exceeded its jurisdiction. Thus, the
appellant was directed to pay a sum of Rs. 8,96,500/- with interest thereon at
the rate of 18% per annum from 2.1.1992, till the date of payment. The
appellant filed an appeal before the High Court of Jammu & Kashmir. The
High Court declined to interfere, essentially stating that the finding of fact
arrived at by the State Commission, could not be interfered with in the
circumstances of the case. Thus, the appeal was dismissed.
Learned Senior Counsel for the appellant first submitted that the High Court
was in error in not setting aside the decision of the State Commission on the
ground that the State Commission lacked pecuniary jurisdiction to entertain the
claim. He pointed out that the pecuniary jurisdiction was limited to
entertaining claims for Rs. 10 lakhs or less and that in the present case, the
claim was for Rs. 10 lakhs plus interest thereon, taking the claim out of the
purview of the Commission.
counsel for the respondent submitted that the claim was for Rs. 10 lakhs and
the claim for interest cannot take the claim beyond the jurisdiction of the
State Commission. He also pointed out that the Act has since been amended and
now the Commission has been conferred jurisdiction to entertain a claim for a
sum above Rs. 10 lakhs. He also submitted that the objection to pecuniary
jurisdiction was not taken at the threshold and the High Court was justified in
overruling the contention in that regard.
do not think it necessary to go into this question on merits in view of the
course we propose to adopt and in view of the amendment to the Act enhancing
the pecuniary jurisdiction of the State Commission and the present claim being
within that enhanced jurisdiction.
of the main defences attempted by the appellant was that the fire was not
accidental and hence the appellant had no liability under the policy. The
respondent- claimant met this plea by pointing out that the surveyor had
reported that the fire was caused by a short-circuit as pleaded by it. It is
true that the Surveyor's report supported the claim of the respondent herein.
But the said report was also based on an investigation by the police,
supporting a conclusion that the fire was caused by short-circuit of
electricity. It is seen that there was a further police investigation and the
Deputy Superintendent of Police R.S. Pura had reported that the earlier
investigation was perfunctory, that the cause of the fire has to be properly
investigated and in the circumstances a fresh investigation was called for. The
appellant had engaged a private investigator to investigate and that agency had
reported that the fire might not have been caused by short-circuit; that it
could have been arson or a deliberate attempt to make an insurance claim; that
the loss estimated could not have occurred considering the capacity of the godown
and that the available materials in the custody of the police indicated that
what was burned was paddy husk and not rice or paddy itself as claimed. The
appellant argued before the Commission that in the light of this report, the
Commission should decline jurisdiction and direct the claimant to go to a Civil Court to establish its claim. It was also
argued that the report of the Surveyor could not be accepted in the
circumstances, especially in view of the report of the Deputy Superintendent of
Police. The claimant argued that the report of the private investigator could
not be looked into in the light of Section 64 UM(c) of the Insurance Act, since
there was nothing to show that the private investigator was licensed. The State
Commission accepted the position canvassed for by the claimant and refused to
look into the report of the private investigator. The High Court in appeal,
also endorsed that position.
are of the view that the State Commission should have given an opportunity to
the appellant before us to prove the investigation report. Section 64UM of the
Insurance Act cannot stand in the way of the insurance company in establishing
that the claim was a fraud on the company, or that it was a case of
deliberately causing a fire so as to lay the foundation for an insurance claim.
Similarly, the Commission did not apply its mind to the aspect highlighted that
the first police investigation was reported to be perfunctory and a fresh,
proper investigation had been recommended. Similarly, the discrepancy in the
capacity of the godown and the possibility that what was lost was only or
mainly paddy husk, should have persuaded the Commission to make a proper
enquiry before deciding to accept the Surveyor's report in this case. The High
Court, in our view, has failed to exercise its appellate jurisdiction properly.
It failed to see that it had the duty as the Appellate Authority to satisfy
itself that no fraud was involved and that the claim was genuine and
sustainable. We are of the view that adequate prima facie material was
available to warrant a proper enquiry on that question.
this situation, we are satisfied that interference is called for in this
are satisfied that the proper course to adopt is to set aside the decisions of
the High Court and the State Commission and to remand the claim for a fresh
enquiry and decision by the Commission.
we are of the view that a proper enquiry and a fresh decision by the initial
authority itself is called for, we refrain from discussing the relevant aspects
argued before us, so as to ensure that no prejudice is caused to either side.
Now that the claim comes within the limit of the pecuniary jurisdiction of the
State Commission, we are satisfied that the proceedings can be remanded to the
State Commission itself for a proper decision on all the questions involved
including the question of the cause of fire. We, therefore, allow this appeal
and setting aside the decisions of the High Court and that of the State
Commission, remand the claim of the respondent herein to the State Commission
for an investigation de novo. The State Commission will give the parties
effective opportunity to lead whatever evidence they may want and decide the
claim afresh, including its sustainability, on the basis of the evidence that
may be adduced. The parties will appear before the State Commission on
19.9.2005. We make no order as to costs.