Calcutta High Court
Corporation Limited & Anr vs The New India Assurance Company Limited on 29 January, 2024
Author: Sabyasachi Bhattacharyya
Bench: Sabyasachi Bhattacharyya
In the High Court at Calcutta
Constitutional Writ Jurisdiction
Original Side
The Hon'ble Justice Sabyasachi Bhattacharyya
W.P.O. No. 2532 of 2022
The West Bengal Power Development
Corporation Limited & Anr.
Vs.
The New India Assurance Company Limited
For the petitioner : Mr. Suddhasatva Banerjee, Adv.
Mr. Chayan Gupta, Adv.
Mr. Shoham Sanyal, Adv.
Mr. Aviroop Mitra, Adv.
For the respondent : Mr. S.N. Ganguly, Adv.
Mr. Siddhartha Goswami, Adv.
Mr. Vivekananda Das, Adv.
Hearing concluded on : 22.01.2024
Judgment on : 29.01.2024
Sabyasachi Bhattacharyya, J:-
1. The petitioner no.1, the West Bengal Power Development Corporation
Limited, is a Public Sector Undertaking of the Government of West
Bengal. One of its main thermal power plants is situated at
Bakreswar in Birbhum, West Bengal which was covered by a
comprehensive Mega/Industrial All Risk Insurance Policy from the
respondent, the New India Assurance Company Limited for a total
sum insured of Rs. 73,56,36,46,295/-. In August, 2017, sudden
vibration was observed in the machinery. The supplier of the plant
and machineries, Bharat Heavy Electricals Limited (BHEL) was
contacted for advice and the operational parameters were transmitted
to BHEL. As per the advice of BHEL, the unit was shut down in
August, 2018 to facilitate inspection. The Turbo Generator Set was
dismantled and inspected when the Generator Rotor was found
damaged, the findings of the inspection and recommendations
regarding which were drawn in a Minutes of meeting between BHEL
and petitioner no.1 on August 19, 2018 which has been annexed to
the present writ petition. Ultimately, the petitioner no. 1 lodged an
insurance claim with the respondent-insurance company in
September 9, 2018 referring to such minutes for damage to the tune
of Rs. 32,70,96,000/- by a letter dated September 19, 2018.
2. The respondent appointed a surveyor, Shri Ashok Chopra of Ashok
Chopra and Company, Surveyors and Loss Adjusters, who submitted
his initial report opining that the loss was not admissible under the
terms and conditions of the Policy. However, the gross assessed loss
was quantified by him at Rs. 32,53,26,000/-.
3. The petitioners objected in writing, upon which there was
correspondence between the parties. Two sets of "Root Cause
Analysis" (RCA) Reports were obtained which indicated that the
damage to the alternator rotor was sudden and accidental. As such,
the petitioner no. 1 requested the respondent to revisit the stand by
its Letter dated June 24, 2019.
4. By an e-mail dated August 29, 2019, the respondent informed the
petitioner no. 1 that its Competent Authority had agreed to review and
reopen the claim and appointed an independent agency, TCR
Advanced Engineering, Vadodara, to investigate the cause of loss. The
said independent agency issued its RCA Report on October 25, 2019,
concluding that the incident was sudden and accidental. In terms
thereof, the respondent asked its Surveyor, Shri Ashok Chopra to
review/reassess the loss in reference to the RCA Report, upon which
the Surveyor submitted an Addendum Report recommending an
amount of Rs. 23,32,00,202/- to be admissible. The admissibility of
the claim was not disputed by the Surveyor but the quantum was.
5. To resolve the issue, a meeting was held at the Head Office of the
respondent on September 14, 2021 upon which the General Managers
of the respondent and the Surveyor, according to the petitioners,
agreed with the representation and accordingly on September 15,
2021 the surveyor issued an Addendum Survey Report removing
under-insurance applied in his earlier report and recommended a
claim settlement of Rs. 30.50 Cr. (net).
6. The respondent by an e-mail dated September 20, 2021 admitted that
loss payable is Rs. 30,50,15,562/- in terms of the second Addendum
Report of the Surveyor. However, the said amount was not paid.
Upon further communication from the end of the petitioner, by a
cryptic e-mail dated January 24, 2022, it was intimated from the end
of the respondent to the petitioners that despite their best effort, the
Competent Authority had decided to maintain the earlier decision for
repudiation of the claim.
7. Challenging the said repudiation, the present writ petition has been
preferred.
8. Learned counsel for the petitioners argues that the repudiation is
arbitrary. After the first Surveyor Report was reopened and an expert
appointed, the same Surveyor rectified his report and gave a fresh
report. It was settled between the parties that there was loss, on the
basis of the second report of the Surveyor. Thus, it is argued that
there was no occasion for the respondent to do a volte face and turn
back to their original repudiation.
9. Learned counsel argues that although a Surveyor‟s report is not
sacrosanct and the insurance company is not bound by the same, the
insurance company cannot repudiate the same without any cogent
reason. For such proposition, learned counsel cites the following
judgments:
i) (2009) 8 SCC 507 [Sri Venkateswara Syndicate Vs. Oriental
Insurance Co. Ltd.];
ii) 2021 SCC OnLine SC 628 [National Insurance Co. Ltd. Vs.
Hareshwar Enterprises Pvt. Ltd. & Ors.];
iii) 2023 SCC OnLine Sc 648 [National Insurance Co. Ltd. Vs. Vedic
Resorts & Hotels Pvt. Ltd.].
10. It is next argued that whenever the insurance company seeks to
repudiate a claim by relying on an exclusion clause, it is for the
insurer to establish with cogent evidence that the claim falls within
such clause. In case of ambiguity, the interpretation in favour of the
insured should be accepted. In support of such proposition, learned
counsel cites National Insurance Co. Ltd. Vs. Vedic Resorts & Hotels
Pvt. Ltd., reported at 2023 SCC OnLine SC 648.
11. It is argued that a writ petition under Article 226 of the Constitution is
maintainable. Mandamus can be issued directing payment of the
insurance claim. For such proposition, learned counsel cites the
following judgments:
i) (2001) 2 SCC 160 [Life Insurance Corpn. of India vs. Asha Goel
(Smt.) & Ors.];
ii) (2013) 4 CHN 670 [Anindya Dutta vs. The New India Assurance
Co. Ltd. & Ors.];
iii) MANU/GJ/1760/2021 [Cube Construction Engineering vs. State
of Gujarat].
12. The petitioners contend that Regulations 15(8) and 15(9) of IRDAI,
Protection of Policy Holders‟ Interest Regulations, 2017 also mandates
the insurance company, in case of rejection of an insurance claim
under a Policy, to record reasons within 30 days from the date of
receipt of the final survey/additional information/additional survey
report. In case the insurance company admits the claim for a lesser
amount, it has to state in writing the basis of settlement. Timely
settlement of claim, as per the IRDAI Regulations, is mandatory as
evidenced from Regulation 15(10).
13. Learned counsel for the respondent/insurer argues that the
Surveyor‟s report is not binding on the insurer and the insurance
company can independently decide on the claim. In the present case,
the terms and conditions of the relevant Policy are binding on both the
insured and insurer. Further, learned counsel for the respondent
contends that the present dispute requires adjudication of facts
involving recording of evidence including cross-examination of the
relevant engineers in charge of AMC (Annual Maintenance Contract) of
BHEL, the Surveyor, the expert, etc., and, thus, such money claim
cannot be decided by way of a writ petition.
14. By referring to the relevant Policy, it is argued that it postulates
indemnification of the insured against sudden and accidental break-
down of property insured, including physical explosion/implosion,
collapse or rapture of boilers and other pressure vessels directly and
wholly attributable to any clause, except as thereinafter provided,
occurring during the currency of the policy. Again, „sudden‟ shall
mean accidental and not reasonably foreseen or a gradual occurrence.
15. Learned counsel also places reliance on the four essentials of a
contract of insurance, which are (i) the definition of the risk, (ii) the
duration of the risk, (iii) the premium and (iv) the amount of
insurance. The terms of the insurance policy have to be strictly
construed to determine extent of liability of the insurer and the
endeavour of the court must always be to interpret the words in which
the contract is expressed by the parties. It is argued that the court is
not expected to venture into extra liberalism that may result in re-
writing of the contract or substituting the terms not intended by the
parties.
16. Learned counsel for the Insurance Company, by placing reliance on its
affidavit-in-opposition, argues at length on the technical issues
involved in order to impress upon the court that there were previous
similar vibrations over a period of time, which were not taken care of
by the petitioner no. 1. The BHEL had recommended that the
Generator Rotor be taken out for inspection and rectification.
However, despite similar earlier incidents of higher vibrations in
August, 2017, on the advice of BHEL, the annual maintenance service
provider of the petitioner no. 1, the insured did not consider it to be a
major problem and chose not to attend to it until the unit was shut
down on July 27, 2018 for an annual overhaul of boiler, not generator,
when the exciter rotor was to be checked.
17. Thus, it is argued that there was no sudden breakdown but there was
a systematic and continuous process of cracking and breaking. The
Surveyor inferred inter alia that breakdown of mechanical or electrical
plant is defined as an actual breaking or burning out of any part of
the plant while in use from mechanical or electrical defect causing
sudden stoppage and necessitating immediate repair or replacement
as per insuring clause under Section 1B of the Policy and that there
was not actual breakage but only cracks and no sudden stoppage
while the STG ran for well over a year before the insured chose to shut
down. Thus, it is argued that there was no sudden breakdown but a
continuous wear and tear.
18. Learned counsel places reliance on Milan Krishna Roy Vs. Allahabad
Bank and Ors., reported at MANU/WB/0216/2009 with regard to the
proposition that disputed questions of fact cannot be entered into by
the writ court.
19. Learned counsel for the respondent also cites Universal Paper Mills Vs.
Union of India and others, reported at (1998) 1 CLT 155 (HC) where a
co-ordinate Bench of this Court had observed while determining a
question as to whether for money claimed on account of insurance an
amount can be assessed by the writ court. This Court held that it
could not have in the facts and circumstances directed the payment of
money claimed under the insurance policies and the only remedy
available was a regular civil suit.
20. Learned counsel also places reliance on New India Assurance
Company Limited vs. Pradeep Kumar, reported at (2009) 7 SCC 787
and National Insurance Company Limited Vs. Hareshwar, reported at
(2021) 6 SCJ 632, in both of which the Supreme Court had held that
the surveyor‟s report is not binding upon the insurer and is not the
last and final word. It is not sacrosanct and/or conclusive and can be
departed from.
21. Thus, it is argued that the writ petition ought to be dismissed.
Learned counsel also relies on Life Insurance Corporation of India and
Ors. vs. Kiran Sinha, reported at AIR 1985 SC 1265 for the proposition
that a money claim under an insurance policy cannot be decided by a
writ petition and the only remedy was for the petitioner to go before a
regular Civil Court.
22. While deciding the issues upon hearing learned counsel, it is required
to look into the Insurance Regulatory and Development Authority of
India Notification dated June 22, 2017, cited by the petitioners.
Clause 15 thereof deals with claim procedure in respect of a general
insurance policy. Sub-clause (6) provides for an additional report to
be filed if an insurer on the receipt of a survey report finds that it is
incomplete in any respect.
23. Sub-clause (7) provides that the Surveyor, on receipt of the
communication, shall furnish an additional report.
24. It is relevant to note that in the present case, the first report of the
Surveyor was not accepted and a fresh expert was appointed,
whereafter the Surveyor was directed to file an additional report which
was done.
25. The next sub-clause of Clause 15 provides that on receipt of the final
survey report or additional survey report and on receipt of all required
information, the insurer shall within the period of 30 days offer a
settlement of the claim to the insured/claimant. If the insurer, for
any reasons to be recorded in writing and communicated to the
insured/claimant, decides to reject a claim under the policy, it shall
do so within a period of 30 days of the final survey report and/or
additional information/documents or the additional survey report, as
the case may be. Here, there was no such repudiation.
26. Sub-clause (9) of Clause 15 stipulates that in case the amount
admitted is less than the amount claimed, the insurer shall inform the
insured/claimant in writing about the basis of settlement, in
particular where the claim is rejected, and shall give reasons for the
same in writing, drawing reference to the specific terms and
conditions of the policy document. In the event the claim is not
settled within 30 days, sub-clause (10) provides for two per cent
interest above the bank rate from the date of receipt of the last
relevant and necessary document till the date of actual payment.
27. In the present case, admittedly, the first report of the Surveyor was
not accepted by the insurer. After correspondence and discussion
between the parties, the respondent/insurance company directed an
independent expert to file a report. An elaborate report was filed by
the expert, which has also been produced before this Court. The said
expert‟s report took into account metallurgical tests and several other
technical aspects of the matter. The said detailed report was
subsequently placed before the Surveyor, who accepted the same and
gave an Addendum to his initial report, admitting and accepting the
claim of the petitioner.
28. The insurance company had in effect repudiated the first report of the
Surveyor. Thus, the said chapter cannot be reopened by merely
reiterating the same, overlooking the elaborate process of expert
opinion and second Surveyor‟s report which took place thereafter.
29. Importantly, even after the Addendum report being submitted by the
same Surveyor subsequent to the expert‟s report, a meeting was held
on September 14, 2021 between the General Managers of the
respondent and the Surveyor as well as the petitioners where the said
General Managers and the Surveyor agreed with the representation of
the petitioner no. 1 and on September 15, 2021, the Surveyor issued
Addendum Survey Report removing the under-insurance applied in
the earlier report.
30. Again, the respondent-company by its e-mail dated September 20,
2021, annexed as Annexure „P-9‟ to the writ petition, intimated the
petitioners that the loss assessed by the Surveyor finally was Rs.
30,50,15,562/-.
31. As such, there was no scope of the respondent to resile from such
position thereafter. However, by the impugned e-mail communication
dated January 24, 2022, which is as cryptic as can be, it was
informed that the "Competent Authority" of the insurance company
had decided to maintain the earlier decision for repudiation of the said
claim.
32. The earlier decision dated June 4, 2019, however, was already a
bygone chapter, having been reopened by the act of appointment of an
independent expert and asking for an Addendum from the self-same
Surveyor. Hence, the reliance on the previous report was palpably
without authority and de hors the high norms of reasonableness
which are required to be followed by State instrumentalities like the
respondent-insurer.
33. The effort of the insurance company to provide justification to its
repudiation post facto by way of the averments made in the affidavit-
in-opposition filed in the writ petition is a lame attempt to furnish
reasons where none was given in the impugned repudiation dated
January 24, 2022. It is well-settled that such subsequent explanation
given in the pleadings in connection with the writ petition, whereas
none were originally furnished in the impugned repudiation, are not
tenable in the eye of law.
34. In any event, there was no application of mind by the
respondent/insurance company while repudiating the detailed expert
report which had also been accepted by the Surveyor.
35. The judgments noted above undoubtedly say that the Surveyor‟s
report is not binding on the insurer. In Sri Venkateswara Syndicate
(supra) as well as in Hareshwar Enterprises (supra) and Vedic Resorts
(supra), it was observed that the Surveyor‟s report is not sacrosanct
and binding on the insurance company. However, in the same breath,
the insurance company cannot simply brush aside the same without
giving any reason therefor.
36. In Vedic Resort‟s case, it was clearly held that if the insurance
company seeks to rely on an exclusion clause, cogent evidence and
reasons have to be given by it for so relying.
37. As to the maintainability of an application under Article 226 of the
Constitution of India, undoubtedly it is settled law that detailed
questions of law requiring evidence to be adduced cannot be decided
by the writ court.
38. The present challenge, however, is on the count of arbitrariness and
palpable illegality in repudiating the insurance claim of the petitioner
in a cryptic manner, without referring to the subsequent incidents and
relevant documents, including the expert‟s report and Surveyor‟s
report furnished at the behest of the insurance company itself, and
going back to the initial Surveyor‟s report which had been reopened by
appointing an independent expert. Thus, the writ petition is very
much maintainable on such counts.
39. In view of the above discussions, the impugned repudiation of the
petitioners‟ claim by the respondent-insurance company by its e-mail
dated January 24, 2022 cannot stand the scrutiny of law.
40. However, it would be premature for this Court to usurp the
jurisdiction of the respondent-insurer by deciding on the veracity of
the claim upon considering the technical details of the expert report
and the Surveyor‟s report, without the writ court having any expertise
to do so. Hence, while setting aside the impugned repudiation, in the
same breath, it is not for the Court but for the insurer to take into
consideration the said documents and decide accordingly upon
furnishing proper reasons therefor.
41. Thus, WPO No. 2532 of 2022 is allowed partially on contest, thereby
setting aside the impugned order repudiating the petitioners‟ claim
and directing the respondent/insurance company to decide afresh the
insurance claim of the petitioners under the Policy held by it with the
respondent/insurer, taking into account the second Addendum Report
given by the Surveyor, Shri Ashok Chopra, in conjunction with the
expert report authored by the TCR Advanced Engineering. Such
reassessment shall be done in accordance with law, if necessary upon
giving an opportunity of hearing to the petitioners, within February
29, 2024 positively. Within a week thereafter, the detailed and
reasoned decision of the respondent on such claim, keeping in view
the observations hereinabove, shall be communicated in writing to the
petitioners.
42. It is made clear that the merits of such fresh consideration are not
entered into by this Court and it will be open to the respondent to act
in accordance with law and procedure while undertaking such fresh
consideration.
43. There will be no order as to costs.
44. Urgent certified server copies, if applied for, be issued to the parties
upon compliance of due formalities.
( Sabyasachi Bhattacharyya, J. )
