M/S.Suraj Mal Ram
Niwas Oil Mills (P) Ltd Vs. United India Insurance Co. Ltd. & ANR. [2010] INSC
840 (8 October 2010)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 1375 OF 2003 M/S SURAJ
MAL RAM NIWAS OIL -- APPELLANT (S) MILLS (P.) LTD.
VERSUS LTD. &
ANR.
D.K. JAIN, J.:
1.
This
appeal, by special leave, is directed against the judgment and order dated 12th
July 2002, delivered by the National Consumer Disputes Redressal Commission
(for short "the National Commission") in First Appeal No. 354 of
1996, whereby it set aside order dated 24th June, 1996 passed by the Consumer
Disputes Redressal Commission, Rajasthan (for short "the State
Commission") and held that the respondents - insurance 1 company was
justified in repudiating the insurance claim of the appellant.
2.
Both
the respondents are the same insurance company, the first being the registered
and head office and the second its local branch office.
3.
Shorn
of unnecessary details, the facts material for the purpose of disposal of this
appeal may be stated thus: The appellant company is engaged in the business of
manufacture and sale of "Bhisham" brand mustard oil and cakes. They
had obtained an open transit insurance policy from the respondents covering
"all types of edible oils in tins..." transported by rail/road (which
had to be declared) from Jaipur to anywhere in India. Initially, the liability
of the respondents was limited to `10 lakhs but during the relevant period, the
limit was enhanced to `1 crore. The insurance policy was subject to certain
conditions attached as schedule to the policy. Additionally, the cover note
also contained the following special condition and warranty:
"Each &
every consignment must be declared immediately before dispatch of goods."
4.
On
14th August 1992, the appellant dispatched 1194 tins of oil valued at `
5,84,790/- from Jaipur to Dharamnagar by rail and from Dharamnagar to Agartala
by road to one M/s Sree Sree Kaibalia Bhandar, Agartala.
5.
The
railway wagon carrying the said goods met with an accident on 28th September
1992, resulting in extensive damage to the consignment.
6.
It
is an admitted fact that the appellant did not inform either of the two
respondents herein about the said accident till 30th September 1992 but claims
to have informed their Agartala office on 28th September 1992 itself, who had
also appointed a surveyor. The consignment, in damaged condition, was forwarded
to Agartala by road on 29th September 1992. The challans bearing Nos. 40336,
40337 and 40338 prepared by the road carrier M/s Paul Brothers clearly
mentioned the damaged state of the goods. The said goods were received by the
consignee on the same day.
7.
On
30th September 1992, the consignee informed the Agartala branch office of
respondent No. 1 about the damage to the goods. The road carrier, M/s Paul
Brothers also reported the matter to the respondent No. 2, herein.
Subsequently, on 3rd October 1992, the road carrier issued a shortage/damage
certificate stating that 153 tins were handed over in 3 fully empty condition
and in the remaining 1041 tins, there was shortage of oil.
8.
It
appears from the report of the surveyor, one Mr. Tapan Kumar Saha, that the
Agartala branch of respondent No.1 had issued instructions for survey on 28th
November 1992. On 10th November 1992, he submitted his report whereby he
assessed the total loss at `4,39,178/- payable by the respondents. The said
report was also communicated to respondent No. 2.
9.
On
6th August 1993, another surveyor, Mr. S.K. Bakliwal, was appointed by
respondent No. 2, who reported that during the period from 1st April 1992 to
14th August 1992, the appellant had only declared dispatches worth `91,22,778/-
whereas the total dispatches by the appellant during that period were to the
tune of `1,43,59,303/-.
10.
Respondent
No. 2 thereafter requested Mr. Tapan Kumar Saha to segregate the damage caused
to the goods at the place of accident, and the subsequent damage that occurred
during the transportation of the damaged consignment to Agartala. In his report
dated 22nd March 1994, the surveyor observed that loss of oil due to the
railway accident was 2,048 kgs. and from Dharamnagar to Agartala, it was 10,676
kgs.
11.
On
23rd August 1993, the appellant requested the respondents to honour their
claim, followed by a reminder on 12th May 1994. On 1st August 1994, the
respondents, vide letter No. UIIC:DOII:JPR:1994-95, repudiated the claim of the
appellant on the following grounds:
i.
"As
per the terms and conditions of the policy, you were supposed to declare each
and every dispatch. From 10-4-1992 to 14-8-1992, you have dispatches goods
worth `1,43,59,303/- while you have only declared as per your record, goods
worth `91,22,778/-. Out of these declarations, a number of declarations have
not reached the company's office. Even considering it to be correct as the
dispatched have exceeded rupees one crore long back, the policy has not
continued to cover the dispatch in question, and thus your claim cannot be
entertained.
ii.
You
have further violated the terms and conditions of the policy by removing goods
from the rail accident site without survey of the loss having been done by the
Insurance Company's Surveyor immediately after the accident, and without the
permission of the Insurance Company. You have not given any information or
sought any permission before removing the goods from the rail accident site to
Agartala.
iii.
You
have aided in increasing the losses knowingly that the goods dispatched from
the rail accident site to Agartala were not properly packed, and carrying of
the oil in damaged tins is clear violation of the terms and conditions of the
policy and the normal conduct of behaviour. From the Surveyor's Report, it is
evident that the losses which have been quantified on the basis of the
certificates while the rail authorities are to the tune of `71,130/- while the
rest of the damages have occurred during the transshipment from the rail
accident site to Agartala in damaged tins by M/s Paul Brothers, the Road
carriers. It is also not disputed that during the carriage of the goods by road
from rail accident site to Agartala, there was no accident and these losses are
contributed to your own fault, negligences and want 5 of proper care to carry
the oil only after transferring the oil from tins damaged as a result of the
rail accident into new tins."
12.
Being
aggrieved with the rejection of their claim, the appellant filed a complaint
before the State Commission, preferring a claim of `5,50,798/- along with
interest at the rate of 24% payable from 10th November 1992 till its payment
against the respondents.
13.
The
State Commission, vide its order dated 24th June 1996, allowed the complaint of
the appellant and directed the respondents to pay `4,39,178/- with interest at
the rate of 12% per annum from 1st January 1993 till payment, and `2,000/- as
costs. In relation to the grounds of repudiation pressed into service by the
respondents, the State Commission, inter alia, observed that firstly, the
effect of non-declaration of the consignments could only be that they were not
covered by the insurance policy, and the appellant company having not crossed
the limit of `1 crore in relation to consignments which were desired to be
covered by insurance, the consignment in question would be covered by the
insurance policy as declaration was duly made in regard to it; secondly, the
liability of the respondents would not be affected by the reason that the
assessment of loss was not done immediately after the unloading of goods at
Dharamnagar; and thirdly, it did not matter that the loss or damage to the 6
consignment was remotely caused by the negligence of the insured unless the
loss was due to the wilful act of the insured.
14.
Aggrieved
by the said order of the State Commission, the respondents preferred an appeal
before the National Commission. As aforestated, the National Commission allowed
the appeal of the respondents, observing thus:
"The insured's
failure to report the loss caused by Rail accident and removal of consignment
without giving Surveyor a chance to assess the loss at first hand and on the
contrary aggravating the loss on account of improper care while transporting it
by Road after the initial damage as well violating the terms of the policy by
not reporting each and every dispatch as per terms of the policy prejudices the
interest of the appellant and in our view repudiation by the appellant was in
order."
15.
Being
dissatisfied with the said order, the appellant is before us in this appeal.
16.
Mr.
A.K. Ganguli, learned senior counsel appearing for the appellant, strenuously
urged that admittedly the respondents were informed of the accident on 28th
September 1992 by the consignee through their Agartala office and this fact has
been overlooked by the National Commission while recording the finding that the
surveyor was not given a chance to assess the real loss. To buttress the
contention that intimation of loss of 7 subject matter of insurance even by
the consignee was sufficient and appellant's claim could not be rejected for
want of intimation about the accident by the insured themselves, learned
counsel commended us to the Davies1, wherein it was held that if the insurance
company receives all material knowledge from another source so that they are
not prejudiced at all by the failure of the insured himself to inform them,
then they cannot rely on such a condition in the insurance contract to defeat
the claim. It was pleaded that in the present case the surveyor had also
surveyed the consignment as soon as the goods reached their destination and had
assessed the loss at `4,39,178/-. It was contended that since insurance
contracts are a different species of contract, their interpretation is governed
by different principles and in the event of any ambiguity in any clause or
where two interpretations are possible, an interpretation which favours the
policy holders should be given. In support of the proposition, learned counsel
relied on the decisions of this Court in General 1 [1966] 2 Lloyd's Rep.1 2
(1966) 3 SCR 500 3 (2005) 9 SCC 174 8
17.
As
regards the objection of the respondents about the non-disclosure of dispatch
of each and every consignment, as pointed by the second surveyor, learned
counsel submitted that the said condition has to be understood in the context
of the fundamental condition that the insurance cover was intended to secure
only the "insurable interest" of the appellant in the dispatches. It was
urged that the appellant had declared only those consignments in which they had
an "insurable interest" as in relation to dispatches which had not
been declared, the consignees had desired that their consignments should be
dispatched without an insurance cover. In all such cases, the purchasers took
the risk of loss to their goods, and hence the appellant had no "insurable
interest" in them, unlike in the consignment in question for which due
declaration was made. Reference was made to the decisions of this Court in New
India Assurance Co. Ltd. Lal Ramesh Chand & Ors.7, wherein it was held that
"insurable interest" 4 1995 Supp (1) SCC 754 5 (1999) 3 SCC 465 6
(1997) 6 SCC 383 7 (2008) 10 SCC 626 9 over a property is "such interest
as shall make the loss of the property to cause pecuniary damage to the
assured."
18.
It
was then contended by learned counsel for the appellant that in the instant
case the insurance policy covered all risks from the point of loading at Jaipur
till the final delivery and the appellant was only under a duty to ensure that
goods were in a properly packed condition when they were handed over at Jaipur
for transport by train. It was asserted that the appellant had done everything
possible to ensure that the goods reached their destination in proper condition
as the event that had occurred at Dharamnagar station was beyond their control.
In order to buttress the contention that the goods were in transit till they
reached their destination, viz. Agartala, learned counsel relied on Kilroy
Thompson, case the respondents have not led any evidence to prove negligence on
the part of the appellant.
19.
Relying
on the decisions rendered by the National Commission in 8 [1956] 2 Lloyd's Rep.
49 9 (2007) 7 SCC 101 10 (1991) CPJ 189 10 contended that the jurisdiction of
a consumer forum has to be construed liberally and it covers unilateral
repudiation of a claim arising out of insurance. It was also submitted that
apart from the fact that the present case does not involve any complicated
issues of fact for which very detailed evidence would have to be led, which the
State or the National Commission would not be able to do, mere complication
either of facts or of law cannot be a ground for shutting the doors of those
fora to the person aggrieved. To buttress the submission, reliance was placed
on the Development Credit Bank Ltd.14
20.
Per
contra, Mr. Vineet Malhotra, learned counsel appearing for the respondents,
while supporting the judgment of the National Commission, urged that the claim
of the appellant could not be considered as the appellant had violated the
special condition of the policy by not disclosing each and every consignment
before it had left the factory 11 (1991) CPJ 516 12 (1992) CPJ 121 13 (2002) 6
SCC 635 14 (2003) 7 SCC 233 11 premises. It was asserted that the said
condition was the basic condition of the policy and on its breach the liability
of the respondents stood repudiated. It was also pleaded that the moment goods
worth Rs.1 crore had been dispatched from the factory of the appellant, the
policy ceased to exist. It was argued that prior to the dispatch of the goods
in question, goods worth `1,43,59,303/- had already been dispatched, whereas
the appellant had declared dispatches of goods only worth `91,22,778/- and,
therefore, liability of the respondents under the policy ceased to exist both
on account of non-declaration of material facts, as also due to the fact that
the value of dispatches had exceeded the policy limit. In support of his plea
that it was not open to the insured to pick and choose the consignments for the
purpose of declaration, learned counsel relied on Townend15. Learned counsel
contended that appellant had also violated the terms of policy by not informing
the respondents immediately about the accident as well as not taking adequate
steps to minimise the losses, in as much as the goods dispatched from
Dharamnagar to Agartala were not properly packed. According to the learned
counsel, the insurance policy casts an obligation on the insured and its agents
to take steps for 15 1919 (2) 127 (KB) 12 minimizing losses, and the fact that
the appellant permitted the carriage of oil in broken tins clearly establishes
that the appellant had violated the terms of the policy and, therefore, the
respondents cannot be made liable for the losses.
21.
Lastly,
learned counsel urged that there must be strict compliance with the terms and
conditions of an insurance policy, and the appellant having breached a
fundamental condition of the policy, the respondent is not liable to pay any
amount to them. In support of the contention that in a contract of insurance,
rights and obligations are strictly governed by the terms of the policy and no
exception or relaxation can be given on the ground of equity, learned counsel
relied on the judgments of this Court in Assurance Company Limited18.
22.
Before
embarking on an examination of the correctness of the grounds of repudiation of
the policy, it would be apposite to examine the nature of a contract of
insurance. It is trite that in a contract of insurance, the 16 (2008) 14 SCC
598 17 (2004) 8 SCC 644 18 (2009) 5 SCC 599 13 rights and obligations are
governed by the terms of the said contract. Therefore, the terms of a contract
of insurance have to be strictly construed, and no exception can be made on the
ground of equity. In General Assurance Society Ltd. (supra), a Constitution
Bench of this Court had observed that:
"In interpreting
documents relating to a contract of insurance, the duty of the court is to
interpret the words in which the contract is expressed by the parties, because
it is not for the court to make a new contract, however reasonable, if the
parties have not made it themselves." (See also: Oriental Insurance Zuari
Industries Limited & Ors.21; Amravati District Central Insurance Company
Limited.22)
23.
Similarly,
in Harchand Rai Chandan Lal's case (supra), this Court held that:
"The terms of
the policy have to be construed as it is and we cannot add or subtract
something. Howsoever liberally we may construe the policy but we cannot take
liberalism to the extent of substituting the words which are not
intended."
19 (1999) 6 SCC 451
20 (2009) 7 SCC 777 21 (2009) 9 SCC 70 22 (2010) 5 SCC 294 14
24.
Thus,
it needs little emphasis that in construing the terms of a contract of insurance,
the words used therein must be given paramount importance, and it is not open
for the Court to add, delete or substitute any words. It is also well settled
that since upon issuance of an insurance policy, the insurer undertakes to
indemnify the loss suffered by the insured on account of risks covered by the
policy, its terms have to be strictly construed to determine the extent of
liability of the insurer. Therefore, the endeavour of the court should always
be to interpret the words in which the contract is expressed by the parties.
25.
Having
considered the instant case on the touchstone of the aforenoted broad
principles to be borne in mind while examining the claim of an insured, we are
of the opinion that the claim of the appellant must fail on the short ground
that there was a breach of the afore-extracted special condition incorporated
in the cover note. The special condition viz. "each and every
consignment" must be declared before dispatch of goods is clear and admits
of no ambiguity. The appellant was obliged to declare "each and every
consignment" before it left the appellant's factory premises and there is
nothing in the policy to suggest that the insured had the liberty to pick and
choose the dispatches which they wanted to declare to the insurer, not even at
the instance of the consignee, who otherwise is a stranger to the contract
between the insurer and the insured. We have no hesitation in rejecting the
plea of the appellant that they were required to declare only those dispatches
in which they had an insurable interest. It bears repetition that
notwithstanding any request by the consignee, the policy of insurance
postulated declaration in respect of each and every dispatch by the appellant.
Therefore, the fact that purchasers did not want an insurance cover on certain
dispatches had no bearing on the obligation of the appellant to declare each
and every dispatch under the policy. It is a settled proposition of law that a
stranger cannot alter the legal obligations of parties to the contract.
26.
We
are in complete agreement with the National Commission that there was a breach
of the special condition in the cover note for the insurance policy on the part
of the appellant and, therefore, the repudiation of the claim of the appellant
by the respondents was justified. 27.Having come to the conclusion that the
repudiation of the claim preferred by the appellant on the aforestated ground
was valid, we deem it unnecessary to evaluate the correctness of the other
rival submissions made before us by the learned counsel.
27.
Resultantly,
the appeal being devoid of any merit deserves to be dismissed. It is dismissed
accordingly, leaving the parties to bear their own costs.
............................................J.
[ D.K. JAIN ]
............................................J.
[ T.S. THAKUR ]
NEW
DELHI,
OCTOBER
8, 2010.
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