New India Assurance Co. Ltd. vs Union Of India & Ors.
2010 Latest Caselaw 2726 Del

      IN THE HIGH COURT OF DELHI AT NEW DELHI

      W.P.(C) 7569/2007 & CMs 2454/2008, 9099, 11255/2009

                                       Reserved on: 10th February 2010
                                       Decision on: 24th May 2010

      NEW INDIA ASSURANCE CO. LTD.                 ..... Petitioner
               Through: Mr. Atul Y. Chitale, Sr. Advocate with
               Ms. Sunaina Dutta, Advocate

                      versus

      UNION OF INDIA & ORS.                   ..... Respondents
               Through: Mr. Sachin Datta with
               Mr. Manikya Khanna, Advocate for R-1/UOI.
               Mr. Arunabh Chaudhary, Advocate for R-2/IRDA.
               Mr. Sukumar Pattjoshi with
               Mr. Somesh Kumar Dubey, Advocates for R-3.

      CORAM:          JUSTICE S. MURALIDHAR

      1. Whether Reporters of local papers may be
         allowed to see the judgment?                       No
      2. To be referred to the Reporter or not?             Yes
      3. Whether the judgment should be reported in Digest? Yes

                               JUDGMENT

24.05.2010

1. Interesting questions of law concerning powers and jurisdiction of

the Insurance Regulatory Development Authority (IRDA), Respondent

No.2 herein under Section 64UM of the Insurance Act, 1938 (hereafter

„Insurance Act‟) and the powers of the Central Government,

Respondent No.1 herein, as the Appellate Authority under Section 110

H of the Insurance Act, arise for consideration in the present writ

petition.

Background Facts

2. The Respondent No. 3 M/s J.P. Exports, having its place of business

in Renigunta at Andhra Pradesh, is a proprietary concern engaged in

the business of Red Sanders Wood. Respondent No.3 took a Fire

Policy from the Petitioner for the stock of Red Sanders Wood in its

godown at the premises located in Srikalahasti Road, Renigunta,

Andhra Pradesh. The fire policy for the period 29th March 1996 to 28th

March 1997 covered stocks furniture and fixtures stored at its premises

for a sum of Rs. 29.5 crores. The sum ensured was enhanced by 2.25

crores on 4th June 1996 by an extra endorsement. It was further

enhanced by Rs. 5.25 crores on 24th June 1996 by another extra

endorsement. The total sum thereby insured stood enhanced to Rs. 37

crores. Apart from the above Fire Policy, there was a second policy for

the same period covering stocks at another premises at Renigunta for

the sum of Rs. 3 crores. A third policy covering stocks kept near the

Check Post at Renigunta was insured for a sum of Rs. 4.5 crores.

3. On 29th June 1996, an accidental fire broke out at the godown at

Srikalahasti Road, Door No. 16-237, Renigunta. According to the

intimation given to the police by Respondent No. 3, there was a stock

of nearly 2850 tons of Red Sanders Wood in the godown on 28th June

1996. Of this, a stock of 1150 tons of dressed Red Sanders Wood was

inside the godown and 1700 tons of undressed Red Sanders Wood was

outside in the compound. According to the Petitioner, till the date of

loss, Respondent No. 3 had not filed income-tax or sales tax returns

related to the Red Sanders Wood since its export was banned during

that period and there were no earnings on that score. No market value

could therefore be attributed to the stock lying in the godown.

Respondent No. 3 gave a written notice to the Branch Manager of the

Petitioner at the Tirupathi Branch on 4th July 1996. It preferred a claim

for damages amounting to Rs. 35.67 crores which claim was revised to

Rs. 40.17 crores subsequently.

4. According to the Petitioner, the claim made was in contravention of

Condition No. 6 of the Insurance Policy which requires an intimation

to be given to the insurer within 15 days of the loss together with a

claim containing as particular an account as may be reasonably

practicable of all the property damaged or destroyed and the amount of

loss or damage suffered having regard to their value at the time of the

accident.

5. The Petitioner appointed two Joint Surveyors, namely, Mr. C.P.

Mehta and Mr. N. Velayutham for assessing the loss caused due to the

fire in the premises of Respondent No. 3. The Petitioner also appointed

Mr. M.V. Subbareddy, a retired Addl. I.G. (Prisons) as an Independent

Investigator to investigate the claims. The said Joint Surveyors

submitted their final survey report dated 31st December 1997 in which

they assessed the loss at Rs.1,43,19,876. Based on the above survey

report dated 31st December 1997, the Petitioner by its letter dated 21st

May 2001 repudiated the claim of Respondent No. 3 on the ground of

non-compliance with the terms and conditions of the fire policy and

particularly with reference to the Condition Nos. 2, 3, 6 & 8. The

repudiation was also based of the report of the independent investigator

Mr. M.V. Subbareddy made in the year 2001.

6. It was the Petitioner‟s case that the Respondent No. 3 had not

cooperated with it and had not submitted the required documents such

as bills, vouchers in support of the quantum of wood that was

destroyed in the fire, thereby intentionally causing delay in processing

the claim. It was further pointed out by the Petitioner that the required

permission from the Forest Department for felling the Red Sanders

Wood was not provided by Respondent No. 3 which had therefore

violated the forest laws and had also been charged with an offence

punishable under Section 194 and 200 IPC. It is also stated that the

Respondent No. 3 had made false declarations and had adopted

fraudulent means to obtain benefit under the policy. By a subsequent

letter dated 1st June 2001 the Petitioner indicated additional grounds

for repudiation. The Petitioner claimed that it had come to its

knowledge that the Respondent No. 3 had been allegedly involved in

illegal and smuggling activities and had violated the forest laws.

Respondent No.3 had not taken care to repair the southern wall of the

godown which put the Red Sanders Wood to greater risk of fire

thereby violating the conditions 2 and 3 of the Fire Policy. Respondent

No. 3 had failed to give necessary particulars in support of its claim as

required under condition No. 6 of the Fire Policy.

7. Aggrieved by the repudiation of its claims, Respondent No. 3 filed

an appeal before the IRDA, Respondent No. 3 herein. IRDA on its part

appointed Mr. Moinuddin Mohd. and Mr. R. Madhusudan as two new

Joint Surveyors on 31st July 2002 for survey and loss assessment. The

said two surveyors disagreed vastly on the quantum of claim payable.

Mr. Madhusudan assessed the claim of Respondent No. 3 at Rs.21.01

crores. On the other hand, Mr. Moinuddin Mohd. assessed the claim at

Rs. 2,21,34,819/-. The IRDA asked the Petitioner for its comments on

the survey report. The Petitioner replied on 12th May 2003 referring to

an agreement dated 6th May 1998 entered into between Mr. R.

Madhusudan and Respondent No. 3 whereby Respondent No. 3 had

promised to pay Mr. Madhusudan 50% of the insurance claim. An

order dated 2nd June 2003 was passed by the IRDA directing the

Petitioner to settle the claim at Rs. 2,21,34,819/-. This was purportedly

on the basis of the assessment made by Mr. Moinuddin Mohd.

8. Aggrieved by the above direction, the Petitioner filed an appeal on

26th June 2003 under Section 110H of the Insurance Act to the

Appellate Authority i.e. the Financial Sector Division, in the Ministry

of Finance, Department of Economic Affairs, Government of India.

The contention was that against the repudiation of a claim, the IRDA

could at best enhance or reduce the assessment finalized by the

surveyors appointed by the Petitioner. It could not independently

appoint surveyors or intervene once the claim was repudiated. It was

also contended that the claim by Respondent No. 3 was time barred.

9. By an order dated 5th March 2004, the Appellate Authority directed

the IRDA to appoint yet another set of surveyors to report on the claim

because the earlier surveyor Mr. Madhusudan was an interested party

and therefore relying on his report could prejudice the proceedings. At

that stage, the IRDA filed an application before the Appellate

Authority for recalling and modifying the order dated 5th March 2004.

It prayed for settlement of the claims in terms of the order dated 2nd

June 2003 passed by it.

10. By an order dated 30th September 2005, the Appellate Authority

reiterated its earlier order dated 5th March 2004. In the meanwhile it

directed the Petitioner to pay Respondent No.3 Rs. 2,21,34,819/- as per

the order dated 2nd June 2003 of the IRDA. This payment was subject

to the findings of the IRDA on the basis of the fresh joint survey

reports.

11. In compliance with the above directions, the Petitioner paid Rs.

2,17,55,270/- to the Respondent No. 3 after deducting an amount of

Rs. 3,79,549/- towards audit recovery.

12. Pursuant to the order dated 30th September 2005, the IRDA

appointed Mr. N.V.P. Sharma and Mr. R. Srivatsan as Joint Surveyors

on 30th November 2005. They submitted a report dated 9th October

2006 assessing the net loss at Rs. 7,95,50,300/-. The IRDA by its order

dated 1st February 2007 rejected the said assessment and directed the

Petitioner to pay the sum as already settled by Mr. Moinuddin.

13. Aggrieved by the order dated 1st February 2007 of the IRDA,

Respondent No. 3 filed an appeal before the Appellate Authority on

17th February 2007. By its order dated 20th June 2007, the Appellate

Authority passed the impugned order directing the Petitioner to pay a

sum of Rs. 7,95,50,300/- less the amount of Rs. 2,21,34,819/- already

paid to Respondent No. 3. It was further directed that the Petitioner

shall pay the aforementioned amount along with the interest at 2%

above the bank rate at the beginning of the financial year, with effect

from, 21st May 2001 till the date of payment in full within 30 days of

the receipt of the order. This is the order under challenge in this writ

petition. Incidentally a challenge is laid to the earlier order dated 5 th

March 2004 of the Appellate Authority as well as the survey report

submitted by the Joint Surveyors pursuant to that order.

Subsequent Proceedings

14. While directing notice to issue in this petition, this Court on 24th

October 2007 suspended the operation of the impugned order. Initially

a learned Single Judge of this Court by a judgment dated 20th February

2009 accepted the preliminary objection raised by Respondent No. 3

that this Court did not have jurisdiction to entertain the present writ

petition and accordingly dismissed it on that ground. On an appeal by

the Petitioner, a Full Bench of this Court by a judgment dated 2nd July

2009 in LPA No. 109 of 2009 reversed the learned Single Judge and

held that this Court had jurisdiction to entertain the writ petition since

the Appellate Authority whose decision was under challenge was

located within the territorial jurisdiction of this Court. On 27th July

2009 the writ petition and the interim orders passed earlier were

revived before the Single Judge.

15. CM 11255 of 2009 was thereafter filed by the Petitioner placing on

record the fact that in March 2008 the Respondent No. 3 had filed a

complaint in the National Consumer Disputes Redressal Commission

(NCDRC) in which an interim order had been passed by the NCDRC

on 27th March 2009 directing the Petitioner herein to pay Respondent

No.3 Rs. 5,74,15,481/- as interim relief subject to the latter furnishing

a bank guarantee.

16. Aggrieved by the said order, the Petitioner filed a SLP (Civil) No.

1250 of 2009. On 10th August 2009 the Supreme Court permitted the

Petitioner to withdraw the said SLP with liberty to file an application

before the NCDRC in view of the interim order dated 27th July 2009

passed by this Court reviving the earlier stay order dated 24th October

2007. When the matter went back before the NCDRC an order was

passed by it on 27th August 2009 recalling its earlier order dated 27th

March 2009. Respondent No. 3 thereafter urged before this court that it

should take up for hearing the present writ petition and vacate the

interim order dated 27th July 2009. Respondent No.3 also filed CM No.

14021 of 2009 pointing out that there was no mechanism for

enforcement of an order passed by the IRDA and therefore, the

Petitioner should be asked to deposit the balance amount in this court

which could be released to Respondent No. 3 upon it furnishing

security.

Submissions of Counsel

17. This Court has heard the submissions of Mr. Atul Y. Chitale, the

learned Senior counsel appearing for the Petitioner, Mr. Sukumar

Pattjoshi, the learned counsel appearing for Respondent No. 3, Mr.

Arunabh Basu, the learned counsel appearing for IRDA and Mr.

Sachin Datta, the learned counsel appearing for the Union of India.

18. It is submitted by Mr. Chitale that Section 64 UM (1) Insurance

Act deals essentially with licencing of surveyors and loss assessors.

Section 64 UM (2) applies to a claim in respect of a "loss requiring to

be paid or settled" in India on a policy of insurance. It is stated that

such a claim shall not be admitted for payment or settled by the insurer

unless he has obtained a report from an approved surveyor or loss

assessor. The insurer has the right to pay or settle any claim at any

amount different from the amount assessed by the approved surveyor

or loss assessor. Relying upon the decision of the Supreme Court in

New India Insurance Co. v. Pradeep Kumar (2009) 7 SCC 787, it is

submitted that the insurance company is not bound by the survey

report. The submission is that if at the very threshold the insurance

company does not decide to entertain the claim and repudiates the

claim then the question of appointing any surveyor does not arise. Sub-

section (3) of Section 64 UM which brings in the IRDA does not get

attracted unless and until the insurer decides to accept the claim for

settlement. The emphasis is on a claim "requiring to be paid or settled

in India." In other words, according to Mr. Chitale if the claim is not

required to be paid or settled, then the IRDA will have no jurisdiction

under Section 64 UM (3). In such event, it cannot call for an

independent report from any other surveyor or loss assessor within

such time as may be specified.

19. Mr. Chitale submits that there is no procedure prescribed for filing

an appeal before the IRDA by the insured in case its claim is

repudiated. It has to only file a suit for damages against the insurance

company. It is next submitted that under Section 64 UM (4) on

receiving a report as directed by it under Section 64 UM (3), the IRDA

can issue directions settling a claim at a figure either less or more than

that at which it is proposed to be settled by the insurer. In such event,

the insurer shall be bound to comply with such a direction. It is

accordingly submitted that where the insurer has decided to repudiate

the claim, there was no question of such a direction being issued by the

IRDA.

20. On the basis of the above interpretation, it is submitted that in the

instant case the direction issued by the IRDA for appointing two

surveyors to prepare a survey report was itself entirely without

jurisdiction. The further direction issued by it for settling the claim of

the Respondent No. 3 at a particular figure was also entirely without

jurisdiction.

21. It is submitted that the purpose of Section 64 UM (3) of the

Insurance Act is to allow the IRDA, acting as a regulator, to appoint

independent surveyors and direct payment or settlement of claims so as

not to cause any hardship to the insured or the insurer. Its powers are

summary in nature based on survey reports without giving the parties

the right to adduce independent evidence or the right of cross-

examination. It is submitted that the IRDA does not have any

adjudicatory powers or trappings of a civil court. The legislative intent,

it is submitted, is to leave it to the parties to go before the civil court in

case there is a complete repudiation of the claims or a shortfall in the

claim. As long as the claim involved complicated questions of facts, it

was the civil court alone which was competent to decide such dispute.

22. As far as the powers of Appellate Authority are concerned, it is

submitted that once the proceedings before the IRDA are itself without

jurisdiction, the Appellate Authority under Section 110H could also

not issue directions to the IRDA to again appoint fresh surveyors. It is

submitted that in the instant case, the Appellate Authority exceeded its

jurisdiction in issuing the impugned order dated 5th March 2004 and

the subsequent order dated 20th June 2007 requiring the Petitioner to

pay the sum of Rs.7,95,50,300/- less the amount already paid, i.e.,

Rs.2,21,34,819/-.

23. It is further contended that the mere submission to the jurisdiction

of the Appellate Authority did not amount to waiver by the Petitioner

of its right to challenge the jurisdiction of both the IRDA and the

Appellate Authority. It is submitted that in any event since the

Respondent No. 3 filed an independent claim before the NCDRC for a

sum of Rs. 40 crores, the justification for its claim would be tested by

that forum.

24. Appearing for Respondent No. 3, Mr. Sukumar Pattjoshi, submits

that factual disputes between the parties are not to be decided by this

Court in exercise of its jurisdiction under Article 226 of the

Constitution. All that is required to be decided is whether the

impugned orders were without jurisdiction and could be said to be

perverse. It is pointed out that in the order dated 5th March 2004 the

Appellate Authority had held that the IRDA had jurisdiction even in

the case of a repudiated claim. That order was not challenged at that

stage by the Petitioner. Even when the IRDA filed an application

before the Appellate Authority for recalling the order dated 5th March

2004, the jurisdiction of the Appellate Authority to issue such direction

was not questioned. The direction issued on 30th September 2005 by

the Appellate Authority asking the Petitioner to pay Respondent No. 3

Rs.2,21,34,819/- was complied with. This effectively meant that any

objection that the Petitioner may have had to the order dated 5 th March

2004 stood extinguished. It is submitted that by filing an appeal under

Section 110H against the order dated 2nd June 2003 passed by the

IRDA, the Petitioner gave up a challenge to the jurisdiction of the

Appellate Authority. It never objected to the jurisdiction of the IRDA

as long as the IRDA was seized of the matter. It is further pointed out

that the order dated 30th September 2005 passed by the Appellate

Authority appointing fresh surveyors and directing the Petitioner to

pay Rs. 2,21,34,819/- has not been challenged by the Petitioner. It has

been complied with on 28th March 2006 by the Petitioner without

protest.

25. It is submitted by Mr. Pattjoshi that notwithstanding the report of

the Joint Surveyors appointed by the Appellate Authority, assessing the

loss at Rs.7,95,50,300/-, the IRDA passed an order dated 1st February

2007 reiterating its earlier order. In the circumstances, the subsequent

order passed by the Appellate Authority on 20 th June 2007 was fully

justified. It is submitted that the order dated 20th June 2007 is only by

way of implementation of the earlier order dated 30th September 2005

which has not been challenged by the Petitioner. The order dated 5th

March 2004 was not acted upon because that order merged into the

order dated 30th September 2005 which has not been challenged by the

Petitioner.

26. Mr. Pattjoshi refers to the judgment in Skandia Ins Co. Ltd. v.

Kokilaben Chandravarden JT 1987 (2) SC 43 and submits that the

terms of the contract cannot override the statute under which the

insurer is obliged to indemnify the insured when some mishap occurs

by mischance. It is submitted that a reading of Section 14(B) of the

Insurance Regulatory Development Authority Act („IRDA Act‟)

together with Section 64 UM(2), (3) & (4) of the Insurance Act

indicates the wide powers of the IRDA to deal with such claims of the

insurers. Further, the Appellate Authority‟s power is co-terminus with

the power of the IRDA. Reliance is placed on the judgment in Jute

Corporation of India Ltd. v. Commissioner of Tax JT 1990 (4) SC

346 and CIT, MP, Bhopal v. M/s Nirheram Deluram JT 1997(3) SC

688. It is further submitted that since the claim was above Rs. 20,000/-

it was mandatorily required by the IRDA to appoint independent

surveyors. Reliance is placed on the judgment in Sri Venkateswara

Syndicate v. Oriental Insurance Company Ltd. (2009) 8 SCC 507 and

New India Assurance Company Ltd. v. Pradeep Kumar (2009) 7 SCC

787. Reliance is also placed on the decisions of this Court in Rajinder

Kumar Khanna v. The Oriental Insurance Company 41(1990) DLT

176; Surveyor's Welfare Association (Regd.) v. Union of India

59(1995) DLT 205 and Oriental Insurance Company Ltd. v. Amira

Foods (India) Ltd. (passed in OMP No. 319 of 2003, judgment dated

14th October 2009). It is submitted that the IRDA‟s role is independent

and uninfluenced by the act of repudiation by the insurer of a claim,

and it has a duty under Section 14 (2)(b) IRDA Act to settle insurance

claims for the protection of the interests of the policy holders.

Jurisdiction of the IRDA

27. IRDA is a statutory authority constituted under the IRDA Act. The

preamble of the IRDA states that it is an "Act to provide for the

establishment of an Authority to protect the interests of holders of

insurance policies, to regulate, promote and ensure orderly growth of

the insurance industry and for matters connected therewith or

incidental thereto and further to amend the Insurance Act, 1938, the

Life Insurance Corporation Act, 1956 and the General Insurance

Business (Nationalisation) Act, 1972."

28. The Statement of Objects and Reasons (`SOR‟) indicates that a

need was felt for the insurance industry, which was being privatized, to

be regulated. After specifying in the SOR, the duties, powers and

functions of the IRDA, it was stated that these functions and powers

"would enable the Authority to perform the role of an effective

watchdog and regulator for the insurance sector in India." Further, in

order to enable the Authority to function "in a truly independent

manner and discharge its assigned responsibilities effectively", it was

proposed to vest the Authority with statutory status.

29. Section 14 of the IRDA Act specifies the duties, powers and

functions of the IRDA. Under Section 14 (2) (b) IRDA Act, its powers

and functions include:

"(b) protection of the interests of the policy-holders in matters concerning assigning of policy, nomination by policy-holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance"

30. Therefore, it is plain that one of the functions of the IRDA includes

protecting the interests of the policy holders in matters concerning

settlement of insurance claims. If the above provision has to be given a

meaningful interpretation, keeping in view the objective of having the

IRDA as an independent statutory authority, then clearly the intention

of the Parliament was to vest the IRDA with sufficient powers to

discharge those functions. The powers of the IRDA under Section

64UM (2), (3) and (4) of the Insurance Act have to be understood in

light of the provisions of Section 14(2) (b) of the IRDA Act.

Surveyor's Reports how far binding

31. This court is unable to accept the submission of the learned Senior

counsel for the Petitioner on the interpretation of Section 64UM (2) of

the Insurance Act. That provision begins with the words "No claim in

respect of a loss which has occurred in India and requiring to be paid

or settled in India .....". It refers to a claim in respect of a loss which

has occurred in India. To that extent, there can be no doubt that the

claim made by Respondent No. 3 is a claim in respect of a loss which

has occurred in India. The second limb is that it should be a claim

"requiring to be paid or settled in India." This virtually would include

every claim whether the insurance company accepts such claim for

payment or not. The words "requiring to be paid" cannot be restricted

to those claims which insurance company has decided to accept for

payment. Every claim made against an insurance company in respect

of a loss, would be a claim within the purview of the claims "requiring

to be paid or settled" under Section 64UM(2) Insurance Act.

32. The Petitioner also understood that the claim made by the

Respondent No. 3 was a claim which fell within the definition of

Section 64UM(2) of the Insurance Act. That is why the Petitioner

appointed two surveyors upon receiving the claim. It was sought to be

contended by the learned Senior counsel for the Petitioner that the said

appointment of the two surveyors by the Petitioner was not strictly

pursuant to Section 64UM(2) Insurance Act but only as a preliminary

evaluation of the claim. This contention is really an afterthought. When

the Petitioner appointed two surveyors, clearly it was pursuant to the

mandate of Section 64UM(2).

33. The claim made by Respondent No. 3 was above Rs. 20,000/-.

Acting on the report of the surveyors, the Petitioner decided by its

letters dated 21st May 2001 and 1st June 2001 to entirely repudiate the

claim. This was despite the fact that the Joint Surveyors assessed the

loss at Rs.1,43,19,876/-. Under the proviso to sub-section (2) of

Section 64UM, it is open to the insurer to "pay or settle any claim at

any amount different from the amount assessed by the approved

surveyor or loss assessor." Under the proviso to sub-section (2), it was

not open to the Petitioner to repudiate the claim once it appointed the

surveyors and the surveyors gave an assessment of the loss.

34. At this juncture a reference may be made to the decisions of the

Supreme Court in New India Insurance Co. v. Pradeep Kumar

(supra) and Sri Venkateswara Syndicate v. Oriental Insurance Co.

Ltd. (supra). Both have observations on the extent to which the insurer

can be held to be bound by the report of the surveyor. In New India

Insurance Co. v. Pradeep Kumar, it was observed (SCC, p.790):

"22. In other words although the assessment of loss by the approved surveyor is a prerequisite for payment or settlement of claim of twenty thousand rupees or more by insurer, but surveyor‟s report is not the last and final word. It is not that sacrosanct that it cannot be departed from; it is not conclusive. The approved surveyor‟s report may be the basis or foundation for settlement of a claim by the insurer in respect of the loss suffered by the insured but surely such report is neither binding upon the insurer nor insured."

35. Four months later, in Sri Venkateswara Syndicate v. Oriental

Insurance Co. Ltd., the Court while interpreting Section 64 UM (2) of

the Insurance Act observed (SCC, p.518):

"37. The option to accept or not to accept the report is with the insurer. However, if the rejection of the report is arbitrary and based on no acceptable reasons, the courts or other forums can definitely step in and correct the error committed by the insurer while repudiating the claim of the insured. We hasten to add, if the reports are prepared in good faith, with due application of mind and in the absence of any error or ill motive, the insurance company is not expected to reject the report of the surveyors."

36. The resultant position is that while generally a surveyor‟s report is

not binding on the insurer, given the fact that there is an in-built review

mechanism before the IRDA and then the Central Government, the

refusal by the insurer to abide by a surveyor‟s report has to be for good

reasons, the legal tenability of which can be tested by the IRDA or the

central government as the case may be. As far as the instant case is

concerned, the Petitioner was required to show good reasons why it

was completely repudiating the claim of Respondent No.3 thereby

accepting none of the reports of the surveyors appointed by it. Further,

it was open to the IRDA as well as the central government to appoint

surveyors to verify that the assessments made earlier were justified.

Scope of IRDA's powers

37. Turning next to sub-section (3) of Section 64UM, this is where the

IRDA comes into the picture. It is empowered at any time in respect of

any claim of the nature referred to in sub-section (2) of Section 64UM

to call for an independent report from any other approved surveyor or

loss assessor as specified by it. Therefore, even in respect of a claim

that has been repudiated by the insurer it would be, within the scope of

the powers and functions of the IRDA to intervene at the instance of

the aggrieved claimant. Although there is no procedure prescribed as

such, given the scope of the powers and the functions of the IRDA as

set out in Section 14 (2)(b) of the IRDA Act, in the present case the

IRDA was wholly within its jurisdiction in entertaining the Petitioner‟s

appeal. Therefore, by appointing the independent surveyors and calling

for a report the IRDA did not commit any illegality. In deciding to act

upon the report of one of them, again, the IRDA did not commit any

illegality.

38. Counsel for Respondent No. 3 is right in his contention that by

filing an appeal before the Appellate Authority under Section 110H,

the Petitioner has waived its right to question the jurisdiction of such

Appellate Authority at a later stage. Be that as it may, the question that

next arises is about the scope of powers of the Appellate Authority

under Section 110H.

Scope of powers of the Appellate Authority

39. Learned counsel for Respondent No. 3 is correct in his submission

that the powers of the Appellate Authority are co-terminus with that of

the IRDA. In the instant case, the Appellate Authority could very well

have exercised the powers and functions of the IRDA for the purposes

of Section 64UM (3) of the Insurance Act. Consequently, this Court

does not find any illegality having been committed by the Appellate

Authority by passing the order dated 5th March 2004. The question

whether the loss assessed by one surveyor or the other was correct is

not within the scope of the present proceedings under Article 226 of

the Constitution. It is essentially about the powers and functions of the

different authorities under the Insurance Act.

40. In that view of the matter, this Court is of the opinion that the

Appellate Authority was justified in directing the IRDA by its order

dated 5th March 2004 to appoint two fresh surveyors to again assess the

loss because one of the assessors who had been appointed earlier

turned out to be an interested party. Given the scope and functions of

the Appellate Authority, which is co-terminus with that of the IRDA,

these directions could not be said to be illegal or ultra vires the powers

of the Appellate Authority under the Insurance Act.

Validity of impugned orders

41.The principal challenge in this petition is to the validity of the

impugned order dated 20th June 2007 of the Appellate Authority by

which the Petitioner has been asked to settle the claim of the

Respondent No. 3 at a sum of Rs.7,95,50,300/-. This was clearly

consequential to the earlier order dated 30th September 2005 passed by

the Appellate Authority. It is based on the report of the Joint Surveyors

and of the Principal Chief Conservator of Forests. Since that order has

not been challenged, this Court is not called upon to examine the

correctness of the Joint Surveyors‟ report.

42. Given the scope of the powers of judicial review of this Court

under Article 226 of the Constitution, this Court is not called upon to

examine if the grounds on which the claim of the Respondent No.3

was repudiated by the petitioner were valid or not. The incidental

challenge to the earlier order dated 5th March 2004 of the Appellate

Authority as well as the survey report submitted by the Joint Surveyors

pursuant to that order must also fail for the simple reason that the order

dated 5th March 2004 has been reiterated by the Appellate Authority in

the subsequent order dated 30th September 2005 which has not been

challenged by the petitioner. Even otherwise, this Court finds no

illegality having been committed in the passing of the said order dated

5th March 2004 by the Appellate Authority.

43. The challenge to the report submitted by the Joint Surveyors also

cannot be entertained by this Court as a further super appellate

authority. The impugned order dated 20th June 2007 of the Appellate

Authority which has examined the said report is a fairly detailed one

giving cogent reasons for its conclusion, with which this Court

concurs. Neither the reasoning nor the conclusion arrived at in the

impugned order can be said to be suffering from any legal infirmity

that calls for interference.

Conclusion

44. In that view of the matter, the challenge to the impugned orders

and the report of the joint surveyors by the Petitioner must fail. The

writ petition is dismissed with costs of Rs. 30,000/- which will be paid

by the Petitioner to Respondent No. 3 within a period of four weeks.

The interim orders stand vacated. The stay application, CM 9099 of

stands dismissed. Miscellaneous applications, i.e., CM Nos. 2454 of

2008 and 11255 of 2009 for vacation of interim stay stand disposed of.

S. MURALIDHAR, J.

MAY 24, 2010 ak