Jharkhand High Court
M/S Ativeer Cold Storage Pvt. Ltd. A ... vs Universal Sompo General Insurance ... on 23 September, 2024
Author: Ratnaker Bhengra
Bench: Ratnaker Bhengra, Anubha Rawat Choudhary
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Commercial Appeal No. 23 of 2020
1. M/s Ativeer Cold Storage Pvt. Ltd. a company incorporated and
registered under the Companies Act, 1956, having its registered
office at Ranchi Road, P.O. Marar, P.S. Mandu (O.P. Kuju),
District Ramgarh, through its authorized signatory Sri Praveen
Kumar Jain, son of Late Ramesh Kumar Jain, aged about 44 years,
resident of Ranchi Road, P.O. Marar, P.S. Mandu, District
Ramgarh.
2. Praveen Kumar Jain, son of Late Ramesh Kumar Jain, aged about
44 years, resident of Ranchi Road, P.O. Marar, P.S. Mandu,
District Ramgarh the Erstwhile Director, and now an authorized
signatory of M/s Ativeer Cold Storage Pvt. Ltd.
... ... Plaintiffs/Appellants
Versus
1. Universal Sompo General Insurance Company Ltd. having its
Registered Office at 201/208, Crystal Plaza, Opposite Infinity
Mall, Link Road, Andheri West, Mumbai, P.O. and P.S. Andheri
West, District Mumbai Maharashtra.
2. Pegasus Assets Reconstruction Pvt Ltd through its authorised
signatory Deblina Mukherjee, aged about 38 years, daughter of Sri
Ashit Kumar Mukherjee, having its registered office at 55- 56, 5th
Floor, Press House, Nariman point, Mumbai - 400021 and
Representative office at 54, Ekdalia Road, PO & PS Gariahat,
Kolkata - 700019 [ substituted in place of Allahabad Bank, SSI
Finance Branch, P.O and P.S. Ramgarh Cantt, District-
Ramgarh vide order dated 05.09.2023]
... ... Respondents
With
Commercial Appeal No. 1 of 2021
Universal Sompo General Insurance Co. Ltd. Regd., Office at
201/208 Crystal Plaza, Opposite Infinity Mall, Link Road Andheri
West, P.O. & P.S. Andheri West, Mumbai-400058 through Piyush
Shankar, [aged about 40 years], Assistant General Manager,
[Legal Claims] Son of Sri R.K. Sharma, resident of Ravindra
Kumar, B- 307, Sunrise C.H.S. Chandavali Raheja Vihar, P.O.&
P.S Pawai, District Mumbai, 400072.
... ... Appellant/Defendant
Versus
1. M/s Ativeer Cold Storage Private Limited, Regd. Office at Ranchi,
Road, P.O. Marar, P.S. Station Mandu, (O.P. Kuju), District-
Ramgarh
2. Praveen Kumar Jain, Director, M/s Ativeer Cold Storage Pvt. Ltd.,
P.O. and P.S. Mandu (O.P Kuju) District- Ramgarh
... ... Respondents/ Plaintiffs
3. Pegasus Assets Reconstruction Pvt Ltd through its authorised
signatory Deblina Mukherjee, aged about 38 years, daughter of Sri
Ashit Kumar Mukherjee, having its registered office at 55- 56, 5th
Floor, Press House, Nariman point, Mumbai - 400021 and
Representative office at 54, Ekdalia Road, PO & PS Gariahat,
Kolkata - 700019 [ substituted in place of Allahabad Bank, SSI
Finance Branch, P.O and P.S. Ramgarh Cantt, District-
Ramgarh vide paragraph 19 of this judgment]
... ...
Proforma Respondents/Defendants
---
CORAM :HON'BLE MR. JUSTICE RATNAKER BHENGRA
HON'BLE MRS. JUSTICE ANUBHA RAWAT CHOUDHARY
---
In Com. Appeal 23/2020
For the appellants : Mr. Vibhor Mayank, Advocate
Mr. Shivam Kumar, Advocate
For the Respondent no. 1 : Mr. Rajeev Kumar, Advocate
For the Respondent-2 : Mr. Indrajit Sinha, Advocate
: Mr. Ankit Vishal, Advocate
In Com. Appeal 1/2021
For the Appellant(s) : Mr. Rajeev Kumar, Advocate
For the Respondent no. 1 and 2 : Mr. Vibhor Mayank, Advocate
Mr. Shivam Kumar, Advocate
For the Respondent-3 : Mr. Indrajit Sinha, Advocate
: Mr. Ankit Vishal, Advocate
---
C.A.V. on 20/08/2024 Pronounced on 23/09/2024
Per, Anubha Rawat Choudhary, J.
1. These two commercial appeals arise out of the judgment dated
18.09.2020 and decree dated 01.10.2020 passed in the original suit
number 4 of 2018 (Title Suit No. 196 of 2011) by the Court of learned
District Judge I-cum-Commercial Court at Dhanbad.
2. The appellants in commercial appeal No. 23 of 2020 are the
plaintiffs in the suit and the appellant in commercial appeal No. 1 of
2021 is the defendant No. 1 in the suit.
3. The suit was filed on 21.12.2011 inter alia for seeking decree
for payment of Rs. 2,54,14,770/- being the insurance claim as per
scheduled A of the plaint with a prayer that the said amount be
realised and recovered from the defendants jointly and severally with
interest @ 18 per cent. Over and above the claim stated in scheduled
A of the plaint with cost of the suit.
4. Commercial Appeal 23 of 2020 has been filed by the plaintiffs
against part of the judgment dated 18.09.2020 (decree signed on
01.10.2020) passed by learned District Judge-I-cum-Presiding Officer,
Commercial Court, Dhanbad in Original Suit No. 04 of 2018 (Title
Suit No. 196 of 2011) in terms of which the suit filed on behalf of the
appellants has been partly decreed to the extent of Rs. 1,25,85,177.40
only. The surviving grievance is for the balance claim.
5. Commercial Appeal No. 1 of 2021 has been filed by the
defendant no.1 and is directed against the aforesaid judgement
whereby claim of Rs.1,25,85,177.40 has been allowed and decreed
with 12% interest per annum till the realization of the amount.
6. The case arises out of claim of insurance coverage with respect
to damages arising from rotten potatoes in the cold storage of the
plaintiffs. The claim was mentioned in the schedule A to the plaint
and the suit was filed for the following reliefs:
(a) That a decree for Rs. 2,54,14,770/- being the Insurance
Claim as per Schedule "A" of the Plaint may be awarded
and the same be realised and recovered from the
Defendants jointly and severally and be paid to the
Plaintiffs.
(b) That by issue of Permanent and Perpitual Injunction the
Defendants, their Agents or Representatives be restrained
from causing any sorts of obstructions in the business and
management of the cold storage, its machineries and
properties of the Plaintiff and their Officers, Agents and
Representatives.
(c) That an interest @ 18 % over and above the claim stated
in Schedule A of the Plaint be also awarded
(d) That cost of the Suit be awarded.
(e) That any other relief just and equitable the Plaintiffs
found entitled to be also awarded.
SCHEDULE "A"
DETAILS OF DAMAGE AND CLAIM
Quantity of Stock
1 Got Rotten in Quintals 15558 quintals
2 Average Rate Per Quintals Rs. 1600/-
3 Total value of stock damaged Rs. 2,48,92,800/-
4 Carriage out ward for rotten Rs. 1,50,000/-
stock
5 Reinstatement of bamboo rack Rs. 3,40,000/-
Damaged due to rotten potatoes
6 Parts and repairs of machineries Rs. 31,970/-
7 Total of (3)+(4)+(5)+(6) Rs.2,54,14,770/-
7. The following issues framed by the learned commercial court: -
(i) Is the suit maintainable in the present form?
(ii) Is the suit bad for non-joinder or mis-
joinder of the parties?
(iii) Has the plaintiff got valid cause of action
for filing the suit?
(iv) Is the suit is barred by law of limitation,
estoppel, acquiescence and waiver?
(v) Whether the plaintiff is entitled to get a
decree for Rs. 2,54,14,770/- being the insurance
claim as per Schedule-A of the plaint against
the defendants jointly and severally?
(vi) Has the plaintiff entitled to get a decree for
permanent and perpetual injunction against the
defendant?
(vii) Whether the plaintiff is entitled to get
interest @ 18% over the claimed amount?
(viii) To what other relief or relieves, the
plaintiffs are entitled?
8. The learned trial court decided the issues in favour of the
plaintiffs and partly decreed the suit to the extent of Rs.
1,25,85,177.40 with interest @12% per annum with realisation against
the defendant no.1 insurance company after deductions as per standard
rules. The findings in connection with Issue no. 5, 6 and 7 are in
paragraph 16 to 18 and findings in connection with Issue no. 1, 2, 3, 4
and 8 have been given in paragraph 19 of the impugned judgement.
9. Case of the appellants (plaintiffs) before this court in
Commercial Appeal no. 23 of 2020 as argued by the learned
counsel
A. The learned counsel for the plaintiff has submitted that the
appellant had claimed an amount of Rs. 2,54,14,770/- on
account of damage of stock and damage to machineries. The
detail break up has been mentioned in schedule A of the plaint.
He has referred to paragraph Nos. 27, 28, 32 of plaint and the
schedule-A. He submits that the plaintiffs are primarily arrived
by the rate of the potatoes which has been taken by the learned
court while quantifying the compensation payable to the
plaintiffs under the insurance cover. He submits that as per the
schedule, the average rate per quintal of stock was mentioned as
Rs. 1600/-. The learned counsel submits that the rate was
relating to potatoes and the learned court has allowed
compensation @ Rs. 808.92 per quintal of rotten potatoes. The
learned counsel has submitted that no evidence was led from the
side of the plaintiffs with regard to the rate of potatoes per
quintal but according to him the schedule which has been
appended to the plaint and also the rate mentioned therein
remained undisputed in the written statement and therefore
referring to order VIII rule 5 of CPC, the rate was admitted and
consequently the court ought to have allowed damages @ Rs.
1600/- per quintal and not Rs. 808.92 per quintal.
B. The learned counsel has also submitted that he has also filed an
interlocutory application seeking permission to lead additional
evidence and through this the rate of potatoes at the relevant
point of time has been sought to be brought on record. During
the course of arguments, the learned counsel neither has any
explanation as to why no evidence was led by the plaintiffs at
the stage of the trial of the suit nor has any explanation
regarding the requirement of due diligence on the part of the
appellant at the relevant point of time. However, he submits that
it is for the court to consider as to whether the additional
evidence is required for proper adjudication of the issue relating
to the rate at which the compensation for loss due to rotting of
potatoes is to be granted. He has referred to paragraph 9 of the
written statement. The learned counsel has further submitted
that the rate taken as Rs. 808.92 per quintal was not based on
any material or pleadings. He has further submitted that the
court has made out the third case and no issue with regard to the
rate of potatoes was framed by the court concerned. The learned
counsel has relied upon the following judgements: -
i. (1999) 8 SCC 396, Balraj Taneja and Another
Versus Sunil Madan And Another. Paragraph-11
ii. 2024 SCC Online SC 227, Thangam and Another
Versus Navamani Ammal. Paragraph-35
C. The learned counsel while referring to order 41 rule 27 submits
that the appellant is not covered under rule (aa) but is covered
under rule (b) thereof whereby the appellate court if requires
any document which is required to be produced or any witness
to be examined or for any substantial cause may permit
production of additional evidence. At this the learned counsel
has relied upon the following judgments (2022)7 SCC 247, A.
Andisamy Chettiar v. A. Subburaj Chettiar paragraph 8.
10. Case of the respondent- insurance company (defendant no.
1) before this court in Commercial Appeal no. 23 of 2020
The learned counsel for the insurance company has submitted
that the rate of Rs 808.92 per quintal of potatoes was taken from
the stock statement submitted by the plaintiffs to the bank in
August 2009 which was specifically mentioned in the final
survey report. Therefore, the argument of the appellant in
commercial appeal No. 23 of 2020 that there was no basis to
take the rate as Rs 808.92 per quintal is devoid of any basis.
The learned counsel has also submitted that neither in the
written statement nor at any point of time the rate per quintal of
potatoes was admitted to be Rs. 1600/- per metric ton. The
learned counsel has vehemently opposed the prayer for
additional evidence.
11. Argument of the appellant Insurance Company in
Commercial Appeal no. 01 of 2021
i. The learned counsel for the insurance company submits that
entire claim was exaggerated in view of the fact that the cold
storage had two chambers each of 2500 metric ton and one
metric ton is equal to 1000 kgs and 250 metric tons is equal to
2500 quintals and therefore the total capacity was only 5000
quintals and the plaintiffs have claimed damages of 15,558
quintals of potatoes. The learned counsel has further submitted
that the specific case of the plaintiffs was that the potatoes
started germinating on account of high temperature on 5th of
September but the temperature chart in the survey report
indicates that the temperature was within normal range right
from 13th August 2009 till 10th September, 2009.
ii. The learned counsel has referred to paragraph 3 of the evidence
of PW3 who deposed that around 80 to 90 tractors of potatoes
were disposed of and thrown in the jungle during the period
from 22.09.2009 to 30.09.2009 [Total 9000 quintals] and the
land on which the rotten potatoes were thrown belonged to one
Raj Kumar Singh. He submits that such evidence is beyond the
pleadings of the parties.
iii. The learned counsel has submitted that the damages have been
assessed at the full quantity as prayed by the plaintiffs although
as per the survey report there was a loss of only 6558 quintals.
The learned counsel has also submitted that as per the evidence
of the plaintiffs they had not maintained proper record of the
stock and the stock register exhibited by them as exhibit -28 is
not admitted. The learned counsel has also referred to the cross
examination of the P.W-4 in paragraph 7 to 9 and submitted that
it reveals that the plaintiffs had sold 9000 to 9500 quintals of
potatoes from 01.09.2009 but no entry was made in the stock
register.
iv. The learned counsel for the insurance company has specifically
referred to paragraph nos. J, K, L M, S and U of the memo of
appeal which are quoted as follows: -
"J. For that the learned Court below failed to take
adverse inference of the unexplained delay of 13 days in
intimating and disposing off the so-called rotten
potatoes.
K. For that statement of P.W.4 in para 9 that when first
and the second compressor broke down on 25.07.2009
and 28.07.2009 but the potatoes were not removed from
the cold storage, and, the fact that the potatoes were
removed on 01.09.2009 was not mentioned in the log
book, which escaped the kind attention of learned Court
below and thus the finding in that respect by arrival at a
conclusion that (1) the potatoes got rotten as a result of
compression breakdown as well as ascertainment of
quantity of potatoes which have allegedly rotten was
completely against the record.
L. For that the learned Commercial Court delivered a
judgment ignoring the temperature register (Ext 29)
surveyor's Report (exhibit No. Ext 22) based upon the
entry in the log book and stock register of company
itself.
M. For that log book (Ext.28) did show that the
temperature was normal during the power disruptions
i.e. from 27.08.2009 to 08.09.2009.
S. For that the intimation to the Bank on 18.09.2009
(Ext-15) could not have contained a claimed as potato
were discarded since 22.09.2009 admittedly without any
intimation and it remained unverified the learned Court
should have insisted on proof, instead of assuming the
things as closed.
U. For that learned Court below erred by overlooking
the records as major break down of electric supply on
7th & 8th Sept. 2009, and during that period Diesel
Generator was operational and the temperature
remained normal so the breakdown and sprouting were
not at all related incident."
v. The learned counsel has specifically pointed out the temperature
register [Exhibit 29], surveyor's report [Exhibit 22] and stock
register [Exhibit 28] and intimation given to the bank [Exhibit
15] have not been properly considered.
vi. The learned counsel has referred to the general exclusion in the
standard fire and special peril policy exhibit A to submit that
there was a general exclusion with regard to "loss, destruction
or damage to the stock in cold storage premises caused by
change in temperature". He submits that specific case of the
plaintiffs was that the loss on account of change of temperature
in the cold storage and therefore in view of the general
exclusion clause the plaintiffs were not entitled for any
damages. He has referred to the paragraph 4 of the written
statement which is quoted as under: -
"4. With reference to the statements made in
paragraphs 3 to 6 of the plaint, save and except what
are matters of record and what appears therefrom all
other allegations and/or averments are denied and
disputed. It is denied that National Insurance fully
covered the stock. The National Insurance policy only
covered loss arising due to the perils named therein and
did not provide for any "Add on Cover" for
deterioration of stock in any manner. It is denied that
the cold storage and the loan were covered by an
insurance policy of the National Insurance Co. Ltd. The
policy only covered the property underlying that loan,
for specific perils named therein. Apart from the perils
named in the said Policy, loss arising from any other
perils would not trigger the policy coverage. The
plaintiffs were not insured by any policy for any peril
that was not specified therein."
12. Case of respondent- plaintiffs in Commercial Appeal no. 01
of 2021
a. The learned counsel for the appellant has specifically referred to
paragraph 15 and 16 of the impugned judgement. He submits
that the add on coverage was granted to the appellant by the
insurance company.
b. The learned counsel has referred to the clause 10 of the final
survey report (Exhibit-22) and submits that the stock found on
the spot was only to the extent of 6558 quintal and the
surveyors did not take into consideration the stock of 9000
quintals of potatoes which was reportedly disposed on earlier
during the period of 22.09.2009 and 30.09.2009.
c. The learned counsel has referred to the potato stock register
(Exhibit-28) as mentioned in internal page No. 9 of the survey
report and he submits that the appellant maintained the stock
register and the stock register indicated that total 9000 quintals
potatoes were discarded during the period of 22.09.2009 and
30.09.2009.
d. The learned counsel has submitted that primarily the arguments
which has been advanced by the insurance company have
already been considered in the survey report and it is their own
report and under such circumstances they cannot selectively
rely upon the final survey report. He submits that the survey
report is an admitted document which has considered by the
learned trial court.
Findings of the Court
13. Background of the case, plaint, written statement and
evidences adduced by the parties.
A. The plaint.
(a) As per the case of the plaintiffs, the plaintiff No. 1 is a company
dealing in cold storage and plaintiff No. 2 is its director.
Allahabad bank had extended credit facilities to the plaintiff no.1
and initially the loan was fully covered by the Insurance Policy of
National Insurance Company Limited. At the time of review and
enhancement of loan vide letter dated 18.03.2019 (Exhibit-18)
Allahabad Bank suo-moto took the insurance coverage of the
credit facilities from the defendant no.1 insurance company and
the plaintiffs was compelled to accept the same. The Defendant
No. 1 is a joint venture with Allahabad Bank and other banking
company and it was stated that defendant No. 2 is also an associate
agent of the defendant no.1. Three policies were issued and further
there was add on coverage of Earthquake, Terrorism, DOS
(Depletion of Stock) in cold storage due to change in temperature
with Clauses and Endorsement attached to the policy. The details
of the policy have been mentioned in paragraphs 9, 10 and 11 of
the plaint which are as follows: -
"9. That the First Policy i.e. Standard Fire and
Special Perils Policy was issued on 25/05/2009 and
the period of Insurance was 16/05/2009 to 15/05/2010
by paying Rs. 1,15,907/- as a premium inclusive of
terrorism premium and other add on cover. The
Policy No. is 2114/50109042/00/000 dated
25/05/2009 as issued by the said Company by its
Branch Office at SSI Finance Branch, Ramgarh. The
Policy covered the following risk.
Stocks: On stock of Potato, Imali, Mahua, Fruits,
Flowers and Vegetables, sum assured Rs.
2,50,00,000/-
Building including Building occupied as Cold
Storage including Plinth sum assured Rs.
1,77,65,000/- and foundation.
Others: Plant and machinery sum assured Rs.
45,85,068/-, Furniture Fixture and Fittings - Rs.
2,00,000/- Electrical Installations Rs. 21,98,610/-
Apart from that there was also coverage of add on
covers - Earthquake, Terrorism, DOS in Cold
Storage due to change in temperature with Clauses
and Endorsement attached to the Policy-
1. Agreed Bank Clause.
2. Designation of Property.
3. Reinstatement Value Policies.
4. Local Authority Clause.
5. Terrorism Clause.
6. Earthquake, Fire and Shock endorsement.
10. That the Second Policy i.e. Machinery Break Down Policy
was issued on 26/05/2009 and the period of Insurance was
16/05/2009 to 15/05/2010 by paying Rs. 22,318 as a premium.
The policy No. is 2218/50110644/00/000 as issued by the said
Company by its Branch Office at SSI Finance Branch,
Ramgarh. The policy covered the risk of Plant and
Machinery.
11. That the Third Policy i.e. Burglary Policy was issued
on 25/05/2009 and the period of insurance was 10/05/2009 to
15/05/2010 by paying Rs. 15,406 as a premium. The Policy
No. is 2913/50109429/00/000 as issued by the said company
by its Branch Office at SSI Finance Branch, Ramgarh. The
policy covered the risk of burglary of Furniture, Fixture,
Fittings, Utensils and appliances used in business in other
Plant and Machinery and Electrical Installations occupied as
Cold Storage."
(b) The problems in running the cold storage have been narrated in
paragraphs 12 to 18 of the plaint. It has been asserted that the cold
storage was running smoothly and on 25.07.2009 at around 1:50
PM the compressor of the freezer stopped working due to break
down and consequently the standby compressor was started and
the repair of the compressor was ordered. In the meantime,
standby compressor also got breakdown on 28.07.2009 on account
of major fault and the repair of the same was also ordered. The
repair of the high-speed compressor was completed on 02.08.2009
and in the meantime the temperature of the chamber went high and
reached 53˚ F. The Super freeze Compressor was repaired on
03.08.2009 and with the help of D.G. the second Compressor was
also started to bring the temperature down.
It was the specific case of the plaintiff that due to irregular supply
of electricity, cyclone and natural calamities the temperature of the
chamber could not be maintained and it resulted in sprouting. It
was asserted that the claim of the plaintiff was genuine as the
break down was within the purview of the Company's Policy and
Policy Schedule.
The details about disruption of electricity were given in paragraph
18 of the plaint. There was disruption of electricity during the
period from 27.08.2009 to 08.09.2009 which could be easily seen /
understood as from 27/08/2009 to 08/09/2009 i.e. in 13 days only
approximately 100 hours of electricity was supplied that too with
most of the time it was single phase or low voltage. The Plaintiff
tried their best to bring the temperature down using DG set but due
to continuous running of the DG set there was occasional
breakdown of the DG set time and again. The Plaintiff
immediately informed the Defendant No. 2 who is an Agent of the
insurance Company by letter dated 18/09/2009 (Exhibit-15). It is
the case of the plaintiff that all the aforesaid factors resulting in
sprouting of potatoes that could not be controlled. The potatoes
deteriorated so rapidly that the plaintiffs had to be dispose of the
potatoes at the earliest before it became dangerous for nearby
locality. Before such destruction the plaintiff reminded the
defendant No. 2 by letter dated 25.09.2009 (Exhibit-7).
(c) It was the case of the plaintiff in paragraph 19 of the plaint that
the plaintiff sustained huge loses towards damages of potatoes for
changing temperature and due intimation was given to the
defendant No. 2 on 18.09.2009 (Exhibit-15) and 25.09.2009
(Exhibit- 7) and claim of Rs. 2,50,42,000/- was raised in the same
date.
(d) It was categorically mentioned in the plaint at paragraph 20 and
onwards that the defendants appointed one surveyor to survey the
claim under the complaint on 30th September 2009 and the
surveyor conducted the inspection of the cold storage on 1 st
October 2009. The plaintiff asserted that no concurrence was taken
from them in the matter of selection or appointment of the
surveyor nor they were ever asked to nominate the surveyor for
joint inspection. It was asserted that one Santosh Pandey who was
Store in-charge simply assisted in conducting inspection and
provided whatever materials were required by the surveyor and the
inspection note was wrongly termed as Joint Inspection Note
[Exhibit-D].
(e) The final survey report was submitted on 24.04.2010 [Exhibit-22
and Exhibit-E]. The defendant No. 1 did not submit denial of any
settlement of the claim within 30 days from the receipt of the final
survey report and without there being any reasons assigned, the
defendant No. 1 denied the claim 45 days after the survey report
by letter dated 08th June 2010 [Exhibit-2 and Exhibit-F], on the
reasons stated therein without giving any opportunity to the
plaintiff to answer against the survey report.
(f) The survey report was challenged by the plaintiff by stating that it
was erroneously concluded by the defendant no.1 in its rejection
of claim that though the claim form as submitted mentions the date
of loss as 25.07.2009 to 18.09.2009 the same were never intimated
to the defendant no.1 in conformity with relevant Policy condition
nor the defendant no.1 nor its authorized representative were
accorded any opportunity to verify the cause of loss, nor assessed
loss since 05.09.09. It was asserted that in the Surveyors Report it
has been wrongly concluded that the claim intimation was first
lodged on 30.09.09.
(g) It was asserted by the plaintiff that it was wrongly reported that the
cold storage chambers were operating normally and efficiently and
there was no untoward incident leading to variation in chamber
temperature. It was asserted that as a matter of fact 15,558 quintals
potatoes and not 9000 quintals of potatoes were rotten on
05.09.2009 but it was misrepresented by the defendant. It was
asserted that the potatoes were to be disposed of due to the delay
caused by the Insurer in nomination of the surveyor and the
potatoes were disposed of with due notice to the defendants. The
machineries of the cold storage were also insured with the
defendants.
(h) The plaintiffs had sustained damages to the extent of Rs.
2,54,14,770/- on account of damage to stock and repairs of
machineries, the bills were also tendered to the defendant no.1. It
was the case of the plaintiffs that it was wrongly stated by the
defendant no.1 in letter dated 08.06.2010 that the total power
disruption/stoppage from Jharkhand State Electricity Board on
07.09.2009 and 08.09.2009 was due to bad weather which did not
even cause variation in chamber temperature and that the
breakdown of the compressor was routine/normal operational
failures and did not arise due to operation of any specific named
insured perils under the Policy.
(i) As per the plaint the cause of action arose on 18th September,
2009, and date of claim intimated by the plaintiffs to their banker,
defendant no. 2; then on 1st October, 2009, the date of inspection
for assessment of damage; then on 24.04.2010 the date of Final
Survey Report and then on 08.06.2010, the date of rejection of
claim and finally on 11.06.2011, the Legal Notice.
(j) Relief prayed and the schedule to the plaint regarding calculation
of damages was mentioned in the schedule to the plaint. It was
only in the schedule to the plaint that the average rate of potatoes
per quintal was mentioned as Rs.1600/- per quintal but no such
averment was made with regards to the rate in the body of the
plaint.
B. Written statement defendant no.1
I. The defendant no.1 denied all allegations and averments except
what was specifically admitted in the written statement.
II. It was denied that the cold storage and the loan were covered by
the insurance policy of National Insurance Company Limited;
the National Insurance Policy only covered loss arising due to
perils named therein and did not provide for any add on cover
for deterioration of stock in any manner.
III. It was denied that defendant No. 2 Suo Moto made insurance
through defendant No. 1 and that the plaintiff was compelled to
accept the insurance policy.
IV. It was asserted that the insurance coverage of the plaintiff was
comprehensive to the extent that it relates to the perils
mentioned in the policy and no insurance coverage was
extended to the plaintiffs by the defendant no.1 for perils that
were not specifically mentioned in the policy. It was asserted
that the plaintiff procured standard Fire and Special Peril Policy
for the period of 16.05.2009 to 15.05.2010 a copy of which was
filed along with the written statement marked as "Annexure A".
V. It was asserted that the insurance was for building including
plinth and foundation, stocks and other plants and machineries
furniture, fixtures, fittings, electrical installation for the same
specified.
VI. It was specifically stated in the written statement at paragraph 6
that-
"add on coverage regarding deterioration of stock in cold
storage due the change in temperature was further insured for
a sum of Rs. 2,50,00,000/- and this policy was endorsed vide
Endorsement Schedule dated 16.05.2009. The endorsement as
the add on cover for deterioration of stock due to change of
temperature was erroneously mentioned under the policy. The
correct add on cover was deterioration of stock in cold storage
premises due to accidental power failure consequent to
damage at the premises of power station due to an insured
peril. A copy of endorsement dated 16.05.2009 was annexed as
"Annexure B" to the written statement.'
The deterioration of stock in cold storage premises due
to accidental power failure consequent to damage at the
premises of power station due to an insured peril under the
said policy covers destruction of or damage to the property
insured, caused by change of temperature in consequence of
failure of electric supply at the terminal ends of electric
service feeder from which the insured obtains electric supply
directly due to damage caused by any peril insured against
under the said policy. The essential ingredients for the loss to
the trigger under this Clause are follows: -
i) Deterioration of stock due to change in temperature
ii) Due to failure of electricity at the terminal ends of
electricity service provider (Jharkhand State Electricity
Board) due to insured peril.
iii) Duration of each such failure exceeds 24 hours.
The said policy though covered destruction of or damage to
the property cause by change in temperature directly due to
damage caused by any peril insured against under this policy.
The deterioration of stock thus had to be resulted on change
in temperature caused by any of the perils specified in the said
policy, against which the plaintiff No. 1 was insured. The
perils have been specified in the said policy namely, Fire
Lightening, Explosion/Implosion, Aircraft Damage, Riot,
Strike and Malicious Damage, Storm, Cyclone, Typhoon,
Tempest, Hurricane, Tornado, Flood and Inundation, Impact
Damage, Subsidence and Landslide including Rock Slide,
Bursting and/or overflowing of Water Tanks, Apparatus and
Pipes, Missile Testing operations, Leakage from Automatic
Sprinkler Installation, Bush Fire."
VII. With respect to the cause of sprouting of potatoes specific stand
was taken in paragraph 7 and 8 of the written statement while
responding to the averments made in paragraph 12 to 18 and 19
to 25 of the plaint respectively. It was denied that the
temperature of the chamber could not be maintained due to
cyclone and natural calamities which resulted in sprouting and
with respect to the other pleading, it was stated that remaining
statement are annihilating. It has been asserted that the plaintiff
has admitted that the change in temperature was due to break
down of super freeze 7.5 X 7.5 compressor. The standby
compressor also suffered break down on 28.7.2009. It has
further been specifically pleaded by the plaintiff that high speed
compressor was repaired and completed on 2nd August, 2009. In
the meantime, the temperature of the chamber reached 53
degree F. It has been vehemently denied that the claim is
genuine and/or that the break down is within the purview of the
said policy and/or the policy schedule. By a letter dated 18 th
September, 2009 (Annexure "C") the plaintiff had informed the
defendant No. 2 that the Potatoes kept in the storage had
deteriorated due to unforeseen reason and variation in chamber
temperature and it was admitted in the said letter that the
sprouting had already occurred. The plaintiffs have further
admitted that the potatoes were rotten and that they were sold.
VIII. It was stated that the policy though covers destruction of or
damage to the property caused by change in temperature
directly due to damage caused by any peril insurance against the
policy, it was asserted that the deterioration of stock had to be
resulted of change in temperature caused by any of the perils
specified in the said policy against which the plaintiff No. 1 was
insured. The peril which was specified in the policy were
namely Fire, Lightning, Explosion/Implosion, Aircraft Damage,
Riot, Strike and Malicious damage, Storm, Cyclone, Typhoon,
Tempest, Hurricane, Tornado, Flood and Inundation, Impact
Damage, Subsidence and Landslide including Rock slide,
Bursting and or overflowing of water tanks, apparatus and
pipes, Missile testing operation, leakage from automatic
Sprinkler Installation, Bush fire.
IX. It was denied in the written statement that the temperature of
the chamber could not be maintained due to cyclone and natural
calamities which resulted in sprouting and that the plaintiff had
admitted that the temperature was due to breakdown and super
freeze compressor and the standby compressor had also suffered
breakdown and repair of high-speed compressor was completed
only on 02nd August, 2009. It was denied that the breakdown
was within the purview of the said policy or the policy
schedule. It was also indicated that in the pleadings under
reference, the plaintiffs had admitted that the potatoes were
rotten and that they were sold. It was asserted that the plaintiff
claims to have started discarding the potatoes with effect from
22nd September, 2009 and the claim intimation was received by
the insurance company defendant No. 1 on 29th of September,
2009. There was a delay of 02 months since the temperature has
risen and the plaintiff had categorically stated that the
temperature had risen on 02nd of August, 2009 almost 53˚ F,
which is also 11˚ C.
X. Intimation to defendant No. 1 was given after lapse of almost 20
days after the stocks had allegedly deteriorated and
consequently the defendant No. 1 was not allowed or granted
opportunity to inspect the deteriorated stock. The loss was
caused due to poor maintenance of plant and machinery of the
cold storage. It was asserted that the deterioration of stock was
intimated to defendant No. 2 by the plaintiff vide letter dated
18.09.2009 which in turn was intimated to defendant No. 1 vide
letter dated 24.09.2009 and claim was received in their office on
29.09.2009. Immediately thereafter, an independent surveyor
was appointed on 30.09.2009 and survey took place on
01.10.2009 and the store manager Sri Subhash Pandey of the
plaintiffs was throughout present at the time of inspection and a
joint inspection note was prepared (annexure-D to the written
statement). The information contained in the joint inspection
note has been stated to be as under: -
i) That the cold storage was functioning efficiently
since March 2009 till 4.9.2009.
ii) On 5.9.2009, it was found that germination has
taken place in some bags of potatoes, immediately
preventive actions like shifting of potato bags, using
extra air circulation fans. However, the problem
persisted and more bags were getting affected. As
such immediately delivery/sale was started and
badly damaged bags were taken out and destroyed.
iii) No untoward incident had happened at the cold
storage.
XI. It was the specific case that the spoilage happened not due to no
cover perils but due to other unconnected causes such as break
down of machinery. A reference was made to the final survey
report dated 24.04.2010 (annexure-E to the written statement)
and following observations of the final survey report have been
highlighted:
i) The temperature was normal up to 29th July, 2009. It has
started increasing on 30th July, 2009. It reached its peak on
03rd August, 2009. Thereafter, started decreasing with effect
from 4th August, 2009 and reached normal level on 13th
August, 2009.
ii) From the cold storage log records, it was evident that the
temperature was maintained well within normal range. It
was concluded after a comprehensive assessment of records
and the chamber log along with cold storage log records
that the disruption to September 07-08 to did not lead to any
change in temperature and thus had no change in potato
stock which in any case were indentified as damaged on
5.9.2009 i.e. prior to the alleged power failure.
iii) There was a major break down of electric supply on 7th and
8th September, 2009. However, since the plaintiff D.G. set
was operational, the temperature inside the cold storage
remains well within normal range. There was no change in
temperature due to power failure. The J.S.E.B. supplied
break down had no effective on cold storage operation and
temperature.
iv) Change in temperature was not due to any of the insured
perils.
v) The claim intimation was received by the defendant No. 1 on
29th September, 2009. The surveyor was appointed on 30th
September, 2009 and the survey was conducted on 1st
October, 2009. Hence, the surveyors were not provided with
any opportunity to inspect allegedly damaged 9000 Quintals
of potato stocks.
vi) That the change in temperature and the alleged deterioration
of stock took place on account of break down of compressor
and that the temperature became normal on 12th August,
2009. There was no increase in temperature up to 1st
October, 2009.
XII. In paragraph 8 of the written statement itself, it was denied that
the joint inspection report/survey report was deceptive/
laboured report. It was reiterated that potatoes germinated on
05th of September, 2009. It was denied that defendant No.1 did
not submit any repudiation of claim by letter dated 08 th June,
2010 which was marked as "Annexure F". The defendant No. 1
had repudiated the claim of the plaintiffs. It was asserted that
the plaintiff was not entitled for any amount of claimed under
the policy. It was specifically denied that any fact was wrongly
stated in the repudiation of claim and so called in the survey
report. It was asserted that simplicitor deterioration of stock due
to change in temperature was not covered under the policy
rather the deterioration of stock due to change in temperature
must be related to insurance perils.
C. Written statement of defendant no.2
So far as the defendant No. 2 is concerned, a separate written
statement was filed. The defendant number 2 denied the
allegations made in the plaint and asserted that the plaintiff was
a defaulter of loan. It was also stated that the bank had taken
possession of the cold storage under the provisions of the
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act (SARFAESI Act). It was
asserted that the survey report was against the plaintiff and
further asserted that as per survey report the claim of the
plaintiff was not covered under the policy conditions. The
averments made in paragraph 19 of the plaint was denied. It was
asserted that no such information was ever given to the bank on
18.09.2009 and reminders on 25.09.2009 and also that the
defendants have not received any legal Notice as mentioned. It
was stated that so far settlement of the claim was concerned, it
was a matter between plaintiff and defendant No. 1.
D. The following witnesses were examined on behalf of the
plaintiffs:-
(i) P.W. 1 Praveen Kumar Jain
(ii) P.W. 2 Siddharth Chatterjee
(iii) P.W. 3 Jogendra Kumar Mahato
(iv) P.W. 4 Rakesh Bhagat
E. The following Documents were exhibited by the plaintiffs:-
Distinguishing Description of By whom Date of Whether Remark
Mark or Documents / Article filed admission admitted after
Number or without
objection
Exhibit 1 Photo copy of legal Plaintiff 03/03/2020 With objection
notice dated
6/7/2010
Exhibit 1/1 Legal notice dated Plaintiff 03/03/2020 With objection
11/6/2011
Exhibit 2 Photo copy of letter Plaintiff 03/03/2020 Without
dated 8/6/2010 of objection
USGI Co. Ltd.
Exhibit 3 Extracts from Plaintiff 03/03/2020 With objection
minutes of meeting
of Board of
Directors dated
10/12/2010
Exhibit 4 Photo copy of Plaintiff 03/03/2020 With objection
Machines of Ativeer
Cold Storage
Exhibit 5 Letter dated Plaintiff 03/03/2020 With objection
12/12/2009 to
Protocol Surveyor &
Engineering Pvt. Ltd.
Exhibit 6 Letter dated Plaintiff 03/03/2020 With objection
30/10/2009 to
Protocol Surveyor &
Engineering Pvt. Ltd.
Exhibit 7 Letter dated Plaintiff 03/03/2020 With objection
25/9/2009 to Chief
Manager Allahabad
Bank
Exhibit 8 Letter dated Plaintiff 03/03/2020 With objection
28/1/2010 to
Protocol Surveyor &
Engineering Pvt. Ltd.
Exhibit 9 Availability of power Plaintiff 03/03/2020 With objection
issued by JSEB
Exhibit 10 Photo copy of form Plaintiff 03/03/2020 With objection
DX dated 31/7/2009
Exhibit 11 Letter dated Plaintiff 03/03/2020 With objection
12/1/2010 to
Protocol Surveyor &
Engineering Pvt. Ltd.
Exhibit 12 Book of Standard Plaintiff 03/03/2020 Without
Fire and Special objection
Perils Policy
Exhibit 13 Book of Machinery Plaintiff 03/03/2020 Without
Breakdown Policy objection
Exhibit 14 Photo copy of fire Plaintiff 03/03/2020 With objection
insurance claim
form
Exhibit 15 Letter dated Plaintiff 03/03/2020 With objection
18/9/2009 to Chief
Manager Allahabad
Bank
Exhibit 16 Letter dated Plaintiff 03/03/2020 With objection
14/6/2010 to USGI
Co. Ltd.
Exhibit 16/1 Letter to Insurance Plaintiff 03/03/2020 With objection
Officer
Exhibit 17 Sanction letter Plaintiff 03/03/2020 With objection
dated 25/3/2006
Exhibit 18 Sanction letter Plaintiff 03/03/2020 With objection
dated 18/3/2009
Exhibit 19 Review of account Plaintiff 03/03/2020 With objection
dated 28/3/2008
Ref No.
20R/ADV/2545/07-
Exhibit 20 Letter dated Plaintiff 03/03/2020 With objection
14/6/2010 to USGI
Co. Ltd.
Exhibit 21 Photo copy of Letter Plaintiff 03/03/2020 With objection
dated 31/10/2009
to Protocol Surveyor
Exhibit 22 Final Survey Report Plaintiff 03/03/2020 Without
objection
Exhibit 23 Money receipt issue Plaintiff 03/03/2020 With objection
by Super Tech
(India)
Exhibit 24 Letter dated Plaintiff 03/03/2020 With objection
23/1/2010 to
Santosh Pandey
Exhibit 25 Burglary Policy Plaintiff 03/03/2020 With objection
Schedule
Exhibit 26 Machinery Plaintiff 03/03/2020 Without
breakdown Policy objection
Schedule
Exhibit 27 Standard Fire and Plaintiff 03/03/2020 Without
Special Perils Policy objection
Schedule
Exhibit 28 Stock Register Plaintiff 03/03/2020 With objection
Exhibit 29 Register of Plaintiff 03/03/2020 With objection
Temperature
Marked X / Photographs Plaintiff 03/03/2020 With objection
13 for
identification
Exhibit 30 Xerox copies & Plaintiff 16/3/2020 With objection
email message of
Laxmi Kant Mohanti
F. The following Witnesses were examined on behalf of the defendant
no.1:-
(i) D.W. 1 Shiv Kumar Agarwal
(ii) D.W. 2 Aishwarya Tripathi
G. The following Documents were exhibited by the defendant no.1:-
Distinguishing Description of By whom Date of Whether Remark
Mark or Documents / filed admission admitted
Number Article after or
without
objection
Exhibit A Xerox copy of Defendant 16/3/2020 Without
standard fire and objection
special Peril Policy
Schedule and
policy condition
Exhibit B Policy Defendant 16/3/2020 With
Endorsement objection
Exhibit C Xerox copy of Defendant 16/3/2020 Without
letter dated objection
18/9/2009
Exhibit D Xerox copy of joint Defendant 16/3/2020 With
inspection note objection
Exhibit E Survey final report Defendant 16/3/2020 With
dated 24/4/2010 objection
Exhibit F Xerox copy of Defendant 16/3/2020 With
letter dated objection
8/6/2010
Exhibit G Xerox copy of Defendant 16/3/2020 With
stock statement objection
Marked H to Photographs Defendant 16/3/2020 Without
H/15 for objection
identification
H. On behalf of the defendant no. 2 neither any witness has been
examined nor any document has been filed.
I. The aforesaid witnesses of the parties have supported their
respective cases and have been cross examined at length.
14. Before proceeding further, it is important to rectify some
typographical error in the order dated 05.09.2023.
15. The records of the case reveal that on 05.09.2023, both these cases
were taken up along with I.A. No. 7323 of 2023 in Commercial
Appeal No. 23 of 2020 and I.A. No. 7322 of 2023 in Commercial
Appeal No. 01 of 2021.
16. Through the aforesaid applications, a prayer for substitution of
Pegasus Assets Reconstruction Private Limited was made in place of
Allahabad Bank who is respondent No. 2 in Commercial Appeal No.
23 of 2020 and respondent No. 3 in Commercial Appeal No. 01 of
2021. The aforesaid interlocutory applications were allowed vide
order dated 05.09.2023, but in the operative portion of the order, the
interlocutory applications which have been allowed have been
mentioned as I.A. No. 7323 of 2023 and I.A. No. 7272 of 2023
although it should have been I.A. No. 7323 of 2023 and I.A. No. 7322
of 2023.
17. On account of such error, the office has continued to show I.A. No.
7322 of 2023 is pending in Commercial Appeal No. 01 of 2021.
18. Upon going through the order dated 05.09.2023 and noticing the
aforesaid error, the order dated 05.09.2023 is hereby modified to the
extent that in paragraph 3 of the said order I.A. No. 7323 of 2023 and
I.A. No. 7272 of 2023 be read as I.A. No. 7323 of 2023 and I.A. No.
7322 of 2023.
19. Consequently, office is directed to carry out the necessary correction
in memo of parties with respect to Commercial Appeal No. 01 of
2021 by substituting the applicant Pegasus Assets Reconstruction
Private Limited in place of Allahabad Bank.
20. Given the aforesaid background and on the basis of the arguments
advanced by the parties, the points for determination in these two
appeals are: -
a. Whether the deterioration of stocks (DOS) of potatoes
was on account of change in temperature?
b. Whether the defendant no. 1 ever issued any policy to the
plaintiff no. 1 to cover 'the deterioration of stocks (DOS)
on account of change in temperature'?
c. Whether the alleged loss on account of 'the deterioration
of stocks (DOS) on account of change in temperature'
was excluded by the exclusion clause which, interalia,
excluded the losses on account of 'the deterioration of
stocks (DOS) on account of change in temperature' or it
was covered by the insurance policy issued by the
defendant no. 1?
d. Whether the endorsement schedule dated 16.05.2009
(exhibit-B) by way of rectifying the alleged error of
insurance under "add on cover" was ever issued to the
plaintiffs?
e. Whether the endorsement schedule dated 16.05.2009
(exhibit-B) restricting the coverage of insurance policy as
issued for 'add on cover' on account of-
'DOS in cold storage due to change in temperature'
to
'Deterioration of Stocks in Cold Storage premises due to
accidental power failure consequent to damage at the
premises of Power Station due to an insured peril.'
is binding on the plaintiffs?
f. Whether the plaintiffs claim of damages on account of
deterioration of stocks (DOS) was covered by the
insurance policy issued by the defendant no.1?
g. Whether the plaintiff could prove the extent of damages on
account of deterioration of stocks (DOS) in terms of
quantity as claimed (15,558 quintal of potatoes) and
whether the learned court was justified in allowing full
claim of the plaintiff on account of deterioration of stocks
(DOS) so far as the quantity of loss (15,558 quintal of
potatoes) is concerned?
h. Whether the rate of stock of potatoes per quintal as
claimed by the plaintiff in the schedule (Rs.1600/- per
quintal) stood admitted in the written statement filed by the
defendants?
i. whether the learned court was justified in taking the rate of
stock of potatoes per quintal from the stock statement
(Rs.808.92 Per quintal) given by the plaintiffs to the
defendant no.2 (bank) and further calculating the loss on
such basis?
j. Whether the Interlocutory application being I.A No. 1824
of 2024 filed on behalf of the plaintiffs (appellant in
Commercial Appeal no. 23 of 2020) is fit to be allowed?
21. The entire dispute arises out of claim of insurance made by the
plaintiffs from the defendant no. 1 insurance company primarily on
account of deterioration of stocks (DOS) of potatoes. The plaintiffs as
well as the defendant no.1 are aggrieved by the impugned judgement
and both have filed their appeals. The Allahabad Bank [now Pegasus
Assets Reconstruction Pvt. Ltd] is a pro forma party in both the cases.
The insurance claim filed by the plaintiffs before the insurance
company was disallowed but the suit has been partly decreed in favour
of the plaintiffs.
The learned court has accepted that the plaintiff is entitled to insurance
claim for 15,558 quintal of potatoes which suffered deterioration of
stocks (DOS) on account of change in temperature @ Rs. 808.92/- per
quintal although the plaintiff had claimed it @ Rs. 1600/- per quintal.
The plaintiffs are accordingly aggrieved by the impugned judgement.
The insurance company had disputed the entire claim on the ground
that 'deterioration of stocks (DOS) on account of change in
temperature' was not covered by the policy. It is their further case
that otherwise also the loss was not proved and much stock was
already disposed of prior to intimation to the insurance company and
thus they did not have an opportunity to inspect the deteriorated
stocks.
22. Allahabad Bank had sanctioned term loan of Rs. 225 lacs and cash
credit of Rs. 73 lacs and O.D. facility of Rs. 22.5 lacs to the plaintiff
no. 1 on 23.03.2006 and the loan was covered by insurance policy
under National Insurance Company Ltd. The loan was reviewed on
28.03.2008 and then on 18.03.2009 and credit facilities were enhanced
and the insurance company was changed from National Insurance
Company Ltd to the defendant no.1. The credit facilities were covered
by three policies issued by the defendant insurance company. The first
policy was for Standard Fire & Special Perils policy; the other two
policies were for machinery breakdown and burglary respectively. It is
the case of the plaintiffs that the earlier insurer namely, National
Insurance Company Ltd was unilaterally changed by the Allahabad
Bank to that of defendant no.1 at the time of review and enhancement
of the credit facilities. It has come on record that the defendant no.1
insurance company was a joint venture of Karnataka Bank and
Allahabad Bank.
23. It is not in dispute that the plaintiff no. 1 had started a cold storage in
March 2008 and the cold storage was insured under the Standard Fire
& Special Perils policy for the period from 16.05.2009 to 15.05.2010
with the defendant no. 1 Insurance Company. The insurance policy
has been exhibited by the insurance company as exhibit A and the
insurance policy with all its terms and conditions has also been
exhibited by the plaintiffs. The details of the insurance policies as it
appears from the records and also mentioned in the final survey report
which was conducted at the instance of the insurance company and
has been exhibited and referred to by both the parties, are as follows: -
Policy No. : 2114/50109428/00/000
Type of Policy : Standard Fire & Special Perils Policy
Period of From 16.05.2009
Insurance To 15.05.2010
The Insured : M/s Ativeer Cold Storage Pvt. Ltd.
At Hutpa, PO Jhumra, District
Hazaribagh, Jharkhand
The Insurer : M/s Universal Sompo General Insurance
Co. Ltd.
Regional Office, 7th Floor, Express Towers,
42-A, Shakespeare Sarani, near La
Martiniere for Girls School,Kolkata-700 017
Sum Insured Details
Location Risk Risk Description Sum Insured
(Rs.)
1252892031 Building On Building 17765000
Including Plinth Occupied As Cold
and Foundation Storage
1252892031 Stocks On Stock of Potato, 25000000
IMLI. Mahuwa Fruits
Flowers & Vegetables
1252892031 Others Plant & Machinery. 6983678
Furniture, Fixture &
Fittings. Electrical
Installations
Add on Covers
Add on Covers Opted for
SI Add on Cover Sum Insured (Rs.)
No.
1. DOS IN COLD STORAGE 2,50,00,000
DUE TO CHANGE IN
TEMPERATURE
2. EARTHQUAKE 4,97,48,678
3. TERRORISM 4,97,48,678
24. As per the final survey report and as per the specific case of the
defendant no.1 Insurance company due to some error, the 'Add on
Cover' relating to 'DOS in cold storage due to change in
temperature' was further endorsed vide endorsement schedule
No.2114/50109428/00/001 with effective date as on 16.05.2009
(exhibit-B). The endorsement as mentioned in exhibit B was in the
following words:
"The add on cover for DOS in cold storage due to change
in temperature was erroneously mentioned under the
policy. The correct add-on-cover is Deterioration of
Stocks in Cold Storage premises due to accidental power
failure consequent to damage at the premises of Power
Station due to an insured peril. The premium rate
charged for this add on is 25% of the policy rate and was
collected at the time of inception of policy"
On account of the aforesaid endorsement dated 16.05.2009 (exhibit-B),
the defendant no.1 claimed that plaintiffs are not entitled to insurance
claim for 'DOS in cold storage due to change in temperature' as it was
not covered due to an insured peril. On the other hand, the plaintiffs
have strongly denied and disputed the issuance of endorsement
16.05.2009 (exhibit-B) and have emphasised that the DOS was covered
by the insurance policy under 'Add on Cover' relating to 'DOS in cold
storage due to change in temperature'. It is further argument of the
defendant no.1 company that 'DOS in cold storage due to change in
temperature' was under exclusion clause and therefore no insurance
claim could have been allowed on account of 'DOS in cold storage due
to change in temperature.'
Point of determination no. (j) (additional evidence at appellate stage)-
I.A NO. 1824 of 2024 in commercial appeal no. 23 of 2020.
25. As argued by the learned counsel for the plaintiffs, the interlocutory
application seeking additional evidence at appellate stage has been filed
to bring on record the rate of potatoes at the relevant point of time so
that the amount of loss in terms of money be arrived at by this appellate
court. The reason for not adducing the aforesaid evidence at the stage of
trial of the suit has not been explained and it has been argued that the
admissibility of additional evidence does not depend upon the
relevancy to the issue on hand, or on the fact, whether the applicant had
an opportunity for adducing such evidence at an earlier stage or not, but
it depends upon whether or not the appellate court requires the evidence
sought to be adduced to enable it to pronounce judgment or for any
other substantial cause. For this the plaintiffs have relied upon the
judgement passed in the case of Sanjay Kumar Singh v. State of
Jharkhand, (2022) 7 SCC 247: (2022) 3 SCC (Civ) 699.
26. With respect to power of appellate court in the matter of allowing
additional evidence by either party, in the judgement passed by the
Hon'ble Supreme Court in the case of Sanjay Kumar Singh (supra) it
has been held that the general principle is that the appellate court
should not travel outside the record of the lower court and cannot take
any evidence in appeal. However, as an exception, Order 41 Rule 27
CPC enables the appellate court to take additional evidence in
exceptional circumstances and it is also true that the appellate court
may permit additional evidence if the conditions laid down in the said
Rule are found to exist and the parties are not entitled, as of right, to the
admission of such additional evidence. It has also been held that where
the additional evidence sought to be adduced removes the cloud of
doubt over the case and the evidence has a direct and important bearing
on the main issue in the suit and interest of justice clearly renders it
imperative that it may be allowed to be permitted on record. The
appellate court is to consider, whether or not the appellate court
requires the additional evidence so as to enable it to pronounce
judgment. The paragraphs of the aforesaid judgement relevant for the
purposes of the present case are as under: -
"7. It is true that the general principle is that the appellate
court should not travel outside the record of the lower court
and cannot take any evidence in appeal. However, as an
exception, Order 41 Rule 27 CPC enables the appellate
court to take additional evidence in exceptional
circumstances. It may also be true that the appellate court
may permit additional evidence if the conditions laid down
in this Rule are found to exist and the parties are not
entitled, as of right, to the admission of such evidence.
However, at the same time, where the additional evidence
sought to be adduced removes the cloud of doubt over the
case and the evidence has a direct and important bearing on
the main issue in the suit and interest of justice clearly
renders it imperative that it may be allowed to be permitted
on record, such application may be allowed. Even, one of
the circumstances in which the production of additional
evidence under Order 41 Rule 27 CPC by the appellate court
is to be considered is, whether or not the appellate court
requires the additional evidence so as to enable it to
pronounce judgment or for any other substantial cause of
like nature.
8. As observed and held by this Court in A. Andisamy
Chettiar v. A. Subburaj Chettiar, the admissibility of
additional evidence does not depend upon the relevancy to
the issue on hand, or on the fact, whether the applicant had
an opportunity for adducing such evidence at an earlier
stage or not, but it depends upon whether or not the
appellate court requires the evidence sought to be adduced
to enable it to pronounce judgment or for any other
substantial cause. It is further observed that the true test,
therefore is, whether the appellate court is able to
pronounce judgment on the materials before it without
taking into consideration the additional evidence sought to
be adduced."
27. There is no explanation on the part of the plaintiff that why they did
not lead any evidence at the stage of trial of the suit with respect to
the rate of potatoes nor it is their case in the interlocutory application
that new materials have come to light which they could not have
found upon due diligence and accordingly could not adduce such
evidence before the learned court.
28. Further, this court is of the view that there is material on record to
support the rate which has been taken by the learned court and
accordingly even this court does not require additional evidence to be
led in order to decide the case.
29. Upon perusal of the records of this case, this court finds that the
defendant bank had extended loan facilities to the plaintiffs and the
stock was also covered and the document with regard to the stock
statement showing the rate of potatoes submitted to the bank by the
plaintiffs at the relevant point of time is on record which has been
considered by the court to arrive at the loss in terms of money by
applying the same rate, that is Rs. 808.92 per quintal. The stock
statement as submitted is the document of plaintiff and the same has
not been disputed by the learned counsel for the plaintiff even before
this court. The final survey report has also taken the rate as Rs.
808.92 per quintal based on stock statement submitted to the bank by
the plaintiff and not accepted the claim @ Rs.1600/- per quintal. The
plaintiffs before this court have not been able to satisfy this court as
to why the same view be not taken by this court except submitting
that the rate mentioned in the schedule to the plaint was admitted by
the defendant which was mentioned as Rs.1600/- per quintal and
therefore it is their specific argument that the learned court ought to
have taken the rate of potatoes as Rs.1600/- per quintal and not Rs.
808.92 per quintal. In the aforesaid circumstances, this court is of the
considered view that this court does not require any additional
evidence to be able to pronounce judgment while calculating the loss in
terms of money with respect to rotting the potatoes in the cold storage
as claimed by the plaintiffs. This court is of the considered view that
the appellant has not been able to make out a case for adducing
additional evidence.
30. Accordingly, I.A No. 1824 of 2024 seeking to adduce additional
evidence is dismissed. The point of determination no. (j) is
accordingly decided against the plaintiffs and in favour of the
defendants.
The point of determination no. (h) and (i)
31. Upon perusal of the plaint and written statement, this court finds that
the defendant No. 1 in the written statement in paragraph 9 had clearly
denied that 15558 quintals of potatoes were rotten. It was also denied
that the plaintiffs had sustained any damage on account of deterioration
of stock and so-called repair of machineries and that the claims raised
by the plaintiffs were frivolous and did not relate to and so called "add
on cover" by the insurance policy. In the paragraph 10 of the written
statement, it has been denied that the plaintiffs had suffered damages to
the extent stated. It is important to note that the average rate of potatoes
at Rs. 1600/- per quintal was mentioned only at one place, that is, in the
schedule of claim appended to the plaint. Though the rate mentioned in
the schedule of claim has not been specifically denied, but the same
will not amount to admission on the part of the defendants considering
the averments made in the written statement. Upon totality of the
written statement filed on behalf of the defendant No. 1 this court is of
the considered view that the nature of claim and also the extent of claim
both in terms of quantity and quantification in terms of money was
denied by the defendant No. 1. The claim with regard to the loss of
potatoes on account of deterioration was relatable to the rate as well as
the quantity. Admittedly neither any oral evidence nor any
documentary evidence was led by the plaintiffs with regard to the
claimed rate of per quintal of potatoes as Rs.1600/- per quintal. The
claim of damages as a whole was denied and in such circumstances the
argument of the learned counsel for the plaintiffs in the appeal filed by
them that the average rate of potatoes at Rs. 1600/- per quintal stood
admitted by the defendant No. 1. in the written statement is devoid of
any merits and hence rejected.
32. In the judgment passed by the Hon'ble Supreme Court reported in 2024
SCC OnLine 227 (Supra) this court finds that the Hon'ble Supreme
Court observed that the perusal of the plaint in that case showed that it
contained 10 paragraphs besides the prayer and in the written statement
no specific para wise reply was given rather the defendant had given its
own story containing 15 paragraphs besides prayer in paragraph 16.
The Hon'ble Supreme Court observed in paragraph 34 of the said
Judgment that in the absence para wise reply of the plaint, it becomes a
roving inquiry for the Court to find out as to which line in some
paragraph in the plaint is either admitted or denied in the written
statement filed, as there is no specific admission or denial with
reference to the allegation in different paras. The Hon'ble Supreme
Court referred to order VIII Rules 3 and 5 CPC which clearly provides
for specific admission and denial of the pleadings in the plaint and
observed that a general or evasive denial is not treated sufficient.
Proviso to Order VIII Rule 5 CPC provides that even the admitted facts
may not be treated to be admitted, still the court in its discretion may
require those facts to be proved. This is an exception to the general rule.
General rule is that the facts admitted, are not required to be proved.
33. In the present case this court finds that in the entire plaint there is no
mention with regard to the average rate of Potatoes. It was mentioned
only in the schedule to the plaint while giving calculation of damages.
The defendant No. 1 had denied almost every averment made in the
plaint by filing para wise reply and has completely denied the claim.
Since there was no averment with regard to the rate in the body of the
plaint, there was no occasion for the defendant No. 1 to deal
specifically with the rate of potatoes as mentioned in the schedule of
the plaint except that the entire claim of damages was denied in the
written statement. In view of the aforesaid facts and circumstances, this
Court is of the considered view that the Judgment relied upon by the
plaintiffs reported in 2024 SCC OnLine SC 227 does not apply to the
facts and circumstances of this case. It cannot be said that in the written
statement the average rate of potatoes at Rs. 1600/- per quintal as
mentioned in the schedule in the plaint stood admitted by the defendant
No. 1.
34. This court finds that the learned court has taken into consideration the
rate which was disclosed by the plaintiff in the bank statement whereby
the plaintiff had submitted the stock statement to the bank and had
taken the rate from such statement which was filed by the plaintiff
before the surveyor and the surveyor has recorded the rate per quintal
of potato in the survey report itself. This survey report was relied upon
by both the parties.
35. This court is of the considered view that the rate at which the potato
was bought was within the exclusive knowledge of the plaintiffs. The
stock statement of the relevant period submitted by the plaintiffs to the
respondent bank revealed the rate of purchase of potatoes per quintal.
The bank statement was the self-disclosure of the plaintiff no. 1 and
therefore this court is of the considered view that the learned court has
rightly picked up the rate from the bank statement which was submitted
by none less than the plaintiff no. 1 to the bank while submitting the
stock. This rate was also taken in the final survey report of the surveyor
by referring to the stock statement submitted to the bank by the plaintiff
no. 1. In such circumstances, the learned court has rightly taken into
consideration the rate as per bank stock statement at the rate of 808.92
quintal and accordingly decreed the suit. This court is of the considered
view that though the plaintiff did not lead any evidence with respect to
the rate of potatoes but the learned court has rightly taken into
consideration the materials available on record to come to the rate as
Rs. 808.92 per quintal for the purposes of calculation of loss due to
rotten potatoes.
36. Accordingly, the point of determination no. (h) and (i) are decided
against the plaintiffs and in favour of the defendants. The rate of
loss of potatoes has been rightly taken as Rs. 808.92 per quintal.
Point of determination no.(a) -cause of damages to potatoes
37. It is the case of the defendant no. 1 insurance company before this court
is that the trial court erred in ignoring date on which the temperature
rise took place and its nexus with breakdown. It has been asserted that
breakdown of compressors admittedly took place on 25.07.2009 and
was repaired on 03.08.2009, and even as per the case of the plaintiffs
sprouting was noticed only on 05.09.2009. It is their case that the
learned Court delivered judgment ignoring the temperature register
(Exhibit 29) surveyor's Report (Exhibit 22) which was based upon the
entry in the log book and stock register (Exhibit 28) of company itself.
The temperature register (Exhibit 29) showed that the temperature was
normal during the power disruptions i.e. from 27.08.2009 to
08.09.2009. It is further case of the insurance company that P.W.4 in
paragraph 9 has stated that when first and the second compressor broke
down on 25.07.2009 and 28.07.2009 the potatoes were not removed
from the cold storage and this statement escaped the attention of the
Court and while recording a finding that the potatoes got rotten as a
result of compressor breakdown, the Court erred by overlooking the
records; major break down of electric supply was on 7 th & 8th Sept.
2009, and during that period Diesel Generator was operational and the
temperature remained normal so, such breakdown and sprouting were
not at all related incident. If it was notional that germination took place
on 05.09.2009 during the period of power failure from 27.08.2009 to
8.09.2009 [during which temperature was normal], it can be safely
stated that sprouting was not due to temperature rise. The temperature
shown in temperature chart maintained by plaintiff and exhibited as
Exhibit 29 showed the temperature on 05.09.2009 as 40.5 F, and on
06.09.2009 as 40 F. Thus, the case of the defendant no. 1 is that the
damages to potatoes did not take place due to rise in temperature and
the temperature remained normal for the material period.
38. On the other hand, it is the case of the plaintiffs that the cold storage
was running smoothly and on 25.07.2009 at around 1:50 PM the
compressor of the freezer stopped working due to break down and
consequently the standby compressor was started and the repair of the
compressor was ordered. In the meantime, standby compressor also got
breakdown on 28.07.2009 on account of major fault and the repair of
the same was also ordered. The repair of the high-speed compressor
was completed on 02.08.2009 and in the meantime the temperature of
the chamber went high and reached 53˚ F. The Super Freeze
Compressor was repaired on 03.08.2009 and with the help of D.G. the
second Compressor was also started to bring the temperature down. It is
their case that due to irregular supply of electricity, cyclone and natural
calamities the temperature of the chamber could not be maintained and
it resulted in sprouting. The details about disruption of electricity were
given in paragraph 18 of the plaint. There was disruption of electricity
during the period from 27.08.2009 to 08.09.2009 which could be easily
seen / understood as from 27/08/2009 to 08/09/2009 i.e. in 13 days only
approximately 100 hours of electricity was supplied that too with most
of the time it was single phase or low voltage. The Plaintiff tried their
best to bring the temperature down using DG set but due to continuous
running of the DG set there was occasional breakdown of the DG set
time and again. It is the case of the plaintiffs that all the aforesaid
factors resulting in sprouting of potatoes that could not be controlled. It
was the case of the plaintiff in paragraph 19 of the plaint that the
plaintiff sustained huge loses towards damages of potatoes for changing
temperature.
39. Upon going through the written statement, this court finds that it was
asserted that the insurance coverage of the plaintiff was comprehensive
to the extent that it relates to the perils mentioned in the policy and no
insurance coverage was extended to the plaintiffs by the defendant no.
1 for perils that were not specifically mentioned in the policy. With
respect to the cause of sprouting of potatoes specific stand was taken in
paragraph 7 and 8 of the written statement while responding to the
averments made in paragraph 12 to 18 and 19 to 25 of the plaint
respectively. It was denied that the temperature of the chamber could
not be maintained due to cyclone and natural calamities which resulted
in sprouting and that the plaintiff has admitted that the change in
temperature was due to break down of super freeze 7.5 X 7.5
compressor and the standby compressor also suffered break down on
28.07.2009 and was repaired on 2nd August, 2009 and in the meantime,
the temperature of the chamber reached 53 degree F and a reference
was made to the letter dated 18th September, 2009 (Annexure "C") that
the plaintiff had informed the defendant No. 2 that the Potatoes kept in
the storage had deteriorated due to unforeseen reason and variation in
chamber temperature. It was asserted that the policy though covers
destruction of or damage to the property caused by change in
temperature directly due to damage caused by any peril insurance
against the policy and the deterioration of stock had to be a result of
change in temperature caused by any of the perils specified in the said
policy against which the plaintiff No. 1 was insured. The peril which
was specified in the policy were namely Fire, Lightning,
Explosion/Implosion, Aircraft Damage, Riot, Strike and Malicious
damage, Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado,
Flood and Inundation, Impact Damage, Subsidence and Landslide
including Rock slide, Bursting and or overflowing of water tanks,
apparatus and pipes, Missile testing operation, leakage from automatic
Sprinkler Installation, Bush fire. It was denied in the written statement
that the temperature of the chamber could not be maintained due to
cyclone and natural calamities which resulted in sprouting and that the
plaintiff had admitted that the temperature was due to breakdown and
super freeze compressor and the standby compressor had also suffered
breakdown and repair of high-speed compressor was completed only on
02nd August, 2009.
40. A reference was made to the final survey report dated 24.04.2010
(Annexure-E to the written statement) and, inter alia, following
observations of the final survey report have been highlighted-
Change in temperature was not due to any of the insured
perils.
And also
That the change in temperature and the alleged
deterioration of stock took place on account of breakdown
of compressor and that the temperature became normal on
12th August, 2009. There was no increase in temperature up
to 1st October, 2009.
41. This court finds that even in the letter repudiating the insurance
coverage issued by the defendant no. 1 (Exhibit-1) it was concluded
that on the whole, there was no variation in temperature in the insured
chambers due to direct operation of any insured peril, that is, due to
accidental power failure/ disruption from electric power supplier's
station /sub-station etc arisen from direct operation of any of the named
insurance peril under the policy at the electric suppliers' station/point
and that direct operation of the insurance peril resulting in stoppage of
electricity to the insured peril resulting in the rise in temperature in the
cold storage chamber only shall be a condition precedent to admission
of any liability on "add on cover" . While rejecting the claim , the
endorsement schedule (exhibit-B ) was taken into consideration .
42. The stand taken in the written statement reveals that it was not the case
of the defendant no. 1 that there was no temperature variation and that
the potatoes did not rot due to temperature variation. Their case was
that the temperature variation was not due to any of the insured perils as
per 'add on cover'. For which they highlighted that as per the survey
report, change in temperature was not due to any of the insured perils
and that the change in temperature and the deterioration of stock took
place on account of breakdown of compressor and that the temperature
became normal on 12th August, 2009 and there was no increase in
temperature up to 1st October, 2009. Thus, the fact that the stock
deteriorated due to change in temperature is not in dispute but the case
of the defendant no. 1 was not covered as the change in temperature
was not due to any insured peril for which their specific case is that the
policy was further endorsed by endorsement schedule dated
16.05.2009[exhibit-B] and the coverage of deterioration of stock due to
change in temperature was qualified by the insured peril only as
mentioned in the endorsement schedule dated 16.05.2009[exhibit-B].
The argument of the learned counsel for the insurance company that the
stock did not deteriorate on account of change of temperature is
contrary to their written statement and also the highlights of the final
survey report as relied upon by the defendant no. 1 in their written
statement that the change in temperature and the alleged deterioration
of stock took place on account of breakdown of compressor and that the
temperature became normal on 12th August, 2009 onwards.
43. Praveen Kumar Jain who was the plaintiff No. 2 and also the Director
of the plaintiff No. 1 in his examination-in-chief has stated that on
25.07.2009, the super freeze 7.5 x 7.5 compressor was stopped due to
breakdown and measures were taken to repair and before it could be
repaired, the standby compressor also broke down on 28.07.2009 and
steps were taken to repair and once the spares were received and the
high-speed compressor was restarted. Thereafter, the temperature of the
chamber which reached to 53-degree Fahrenheit started falling down.
The other compressor was also started with power supplied by
generator set to further reduce the temperature level. It was asserted
that from 27.08.2009 to 08.09.2009 there was supply of electricity of
about 116 hrs instead of 312 hours and whatever was supplied was
supplied as low voltage; diesel generator set could not be used
continuously for such long period which were switched off and on so as
to keep the chamber temperature at standard level. It was their further
case that intermittent breakdown of diesel generator set was also
covered under the insurance peril. It was deposed that due to aforesaid
reasons, there was sprouting of potato kept and preserved in cold
storage and ultimately, bulk of potato got rotten and the same were
disposed off as waste product. The photographs of disposal of rotten
potatoes were exhibited. It was asserted that the Chief Manager of the
defendant No. 2 was informed about the sprouting of potatoes and
further requested to take necessary steps for informing the defendant
No. 1 vide letter dated 18.09.2009 and before disposing of the sprouting
potatoes, another written information was given on 25.09.2009 to
Allahabad Bank. The plaintiff No. 1 received no information from
Allahabad Bank or defendant No. 1 till 01.10.2009 when one surveyor
came to inspect the cold storage and an inspection note was prepared by
the surveyor and thereafter the defendant No. 1 appointed one
surveyor/loss surveyor who prepared final survey report dated
24.04.2010 and the plaintiffs came to know about the rejection of the
claim by virtue of letter dated 08.06.2010. The decision rejecting the
claim has been challenged. It was asserted that due to perishable nature
of potato, the same could not be preserved at varying temperature level
which resulted into disposal of 15,558 quintals and one of the staffs of
the plaintiff No. 1 arranged the disposal under instructions of the
Company.
44. It was their specific case in paragraph 30 in examination-in-chief that
the perils due to change in temperature was duly covered under the
Standard Fire and Special Perils policy and due to proximate clause of
temperature change the loss of stored potato was caused and as such the
insurance claim preferred by the plaintiff ought to have been settled. It
was asserted that the change in temperature itself was due to covered
peril under machinery breakdown policy. It was asserted in paragraph
31 of the examination-in-chief that the plaintiff No. 1 Company was
provided with add on cover for perils of deterioration of stock due to
change in temperature and as such the loss was needed to be
compensated. The total add on cover was for sum of Rs. 2.5 crores. The
plaintiff No. 1 serve a legal notice dated 11.06.2011 which remained
unreplied. Paragraph 30 and 31 of the examination-in-chief of P.W.-1
are quoted as under: -
"(30) That the perils due to change in temperature was
duly covered under the Standard Fire and Special Perils
policy and due to proximate clause of temperature change
the loss of stored potato was caused and as such the
insured claim preferred by the plaintiff ought to have been
settled. The change in temperature itself was due to
covered peril under machinery Breakdown policy.
(31) That the plaintiff no. 1 Company was provided with
add on cover for perils of deterioration of stock (DOS)
due to change in temperature and as such the loss needs
to be comprehended. The said add on cover was for total
sum insured of Rs. 2.5 crores."
45. P.W.-1 has been thoroughly cross examined. He asserted that his claim
was based on change of temperature on cold storage chamber due to
which he suffered losses. He has asserted that on account of compressor
breakdown, there was change of temperature. The standby compressor
was also broken down. He received repaired high speed compressor on
02.08.2009 and by that time, the temperature of the chamber had
increased. He stated that on 18.09.2009, a letter was issued to the Bank
that the temperature change had happened on account of unknown
reasons and the potatoes were damaged. It took around 20 days for the
potatoes to rot.
P.W.2 has been examined as an employee of plaintiff No. 1. He has
asserted that the details of the insurance policy are mentioned in the
policy document and the policy was valid during the period from
16.05.2009 to 15.05.2010 and whatever premium was asked by the
defendants was paid. He has stated that on 25.07.2009, the compressor
was broken down and such breakdown was insured under the covered
peril of the insurance policy. The standby compressor was also broken
down on 28.07.2009. The plaintiff Company made full efforts to get the
compressor repaired which got repaired on 02.08.2009 and 03.08.2009.
During the time when the machine was broken down, it was a rainy
season and there was all of freeze of electricity on account of storm and
lightening due to which the supply of electricity was not being made. A
diesel generator set was also installed but it could not run for 24 hours
due to which the temperature in the cold storage could not be
maintained. On account of the aforesaid circumstances, the potatoes got
started germination which happened on account of increase in
temperature. He has asserted that he is an eye-witness to all that
happened with regard to breaking down of compressor and the efforts
were made by the Company. P.W.-2 has been cross-examined by the
defendant No. 1 but nothing could come to contradict the stand of the
plaintiffs with regards to the fact that the potatoes started rotting due to
change in temperature on account of breakdown in compressor
machinery and other attending reasons.
The P.W-4 is the person who was responsible for keeping the stock in
the cold storage. This witness has supported the case of the plaintiff in
his chief. This witness has been cross-examined. He has stated that
during the period from 2008 to March 2010, he was in-charge of the
cold storage. He has stated that the temperature escalated on account of
breakdown of compressor though the compressor were not broken
down on the same day, but there was a gap of 2-3 days. He has also
given the details regarding the breakdown of the compressor and its
repair on 02.08.2009 and 03.08.2009. He has stated that in the cold
storage they used to maintain 36-39 degree Fahrenheit and on
02.08.2009, he came to know for the first time that the temperature had
increased to 53 degree Fahrenheit and on 28.07.2009, when the other
compressor got damaged then the temperature got rose to 39 degree
Fahrenheit. The two compressors became out of order on 25.07.2009
and 28.07.2009 which restarted on 02.08.2009 and 03.08.2009. As per
the register, on 28.07.2009 the temperature was 36-37 Fahrenheit. On
25.07.2009 and 28.07.2009, when the compressors went out of order,
the potatoes were not taken out. He has stated that 9000 to 9500
quintals potatoes were taken out on 01.09.2009 and were sold whose
entry was not made in the stock register.
46. In view of the aforesaid discussions, this court finds that there is
enough material on record that the potatoes in the cold storage
deteriorated due to change in temperature which was on account of
break down in machinery and other attending circumstances as
described and detailed in the oral evidences and remained intact in
cross examination also. The fact that the sprouting in potatoes occurred
after about 20 days on 05.09.2009 does not have any impact on the case
of the plaintiff that deterioration in stock was on account of rise in
temperature. The entire circumstances have been well explained by the
plaintiffs. The point of determination no. (a) is accordingly decided in
favour of the plaintiffs and against the defendants.
Point no determination no. (b)
47. It is a specific case of the plaintiff in paragraph 9 of the plaint that the
first policy i.e. Standards Fire and Special Peril Policy was issued on
25.05.2009 and the period of Insurance was from 16.05.2009 to
15.05.2010 upon payment of Rs. 1,15,907/- as premium inclusive of
terrorism premium and other add on cover. The policy number was
2114/50109042/00/000 dated 25.05.2009 issued by the defendant No. 1
insurance company by its branch office at SSI
Finance Branch, Ramgarh. The issuance of insurance policy is not in
dispute. The insurance policy has also been produced by the defendant
no.1 insurance company as Exhibit A which reveals that the policy
issue date was 25.05.2009 valid for a period for 16.05.2009 to
15.05.2010 and total premium was Rs. 1,15,907/- add on cover was
earthquake, terrorism, DOS in cold storage due to change in
temperature.
48. In the plaint the description of policy has been given in paragraph 9
which matches with Exhibit A filed by the defendant No.1. Paragraph 9
has been responded by the defendant No. 1 in paragraph 6 of the
written statement while responding to paragraph 9 to 11 of the plaint. In
paragraph 6 of the written statement the date of issuance of policy has
not been disputed and the reference has been made to insurance policy
(Annexure A to the written statement).
In furtherance to the aforesaid, a specific stand has been taken in
paragraph 6 of the written statement that the policy was further
endorsed by endorsement schedule dated 16.05.2009 [exhibit-B].
It has been stated that the endorsement as the 'add on cover' for
'deterioration of stock due the change in temperature' was
erroneously mentioned under the policy. The correct 'add on cover'
was deterioration of stock in cold storage premise due the accidental
power failure, consequent the damage at the premise of power session
due to an insured peril. A copy of endorsement dated 16.05.2009 was
attached and marked as Annexure B to the written statement which was
exhibited as Exhibit B (with objection).
49. Thus, on the one hand the issuance of policy on 25.05.2009 is not in
dispute which included 'add on cover' for 'deterioration of stock on
account of change in temperature' but the defendant No. 1 has taken a
stand in the written statement that the policy was further endorsed vide
endorsement schedule dated 16.05.2009 [exhibit-B] whereby the error
in the original insurance policy was sought to be rectified.
50. The very act of issuance of exhibit-B as claimed by the defendant no.1
seeking rectification of insurance policy originally issued as mentioned
above leaves no doubt in the mind of this court that the policy for 'add
on cover' for 'deterioration of stock on account of change in
temperature' was issued to the plaintiff inspite of exclusion clause and
other clauses in the policy. Point of determination no. (b) is
accordingly decided against the insurance company and in favour of
the plaintiffs.
Point of determination no. (d) ( e) and (f )
51. This court has perused the Exhibit B which is termed as endorsement
schedule dated 16.05.2009 by the defendant No. 1 in written statement
and finds that the said endorsement has no date of issuance and further
16.05.2009 is shown as the effective time and date of the policy and it
is shown to be valid till 15.05.2010. The insurance policy as originally
issued has shown the valid period from 16.05.2009 to 15.05.2010.
Therefore, the Exhibit B which is said to be endorsement dated
16.05.2009 is an undated document and 16.05.2009 is the effective date
of policy. In this connection, it is important to note that the D.W- No. 2
[who is a Chartered Accountant and had prepared the final survey
report] during his cross examination has stated that he never asked the
insured as to whether they were aware about aforesaid endorsement
schedule dated 16.05.2009 [exhibit-B] ; he stated that the insurance
documents were produced to him by the insurance company and he did
not remember as to whether the plaintiffs ever handed over any
document regarding the insurance. He has further stated in his cross
examination that the date is not mentioned in the endorsement schedule
[exhibit-B] and he is not aware as to whether the plaintiff was informed
about the endorsement [exhibit-B] .
Further, DW 2 who happens to be the Legal Officer of the defendant
No. 1 has stated in his evidence that the policy as well as the
endorsement [exhibit-B] was issued and the claim of the plaintiff is not
covered by the policy and endorsement. He has stated in his cross
examination that he had joined the defendant No. 1 company in July,
2019 and he was deposing before the court upon going through the file.
He has stated in his cross examination that the endorsement schedule
[exhibit-B] has no signature and date but at the same time he has stated
that the insurance policy schedule also does not have sign and date.
This witness in his cross examination has stated that after issuance of
the insurance policy, the error could be known within a period of 10
minutes in presence of the insured itself and therefore nothing was
taken in writing from the insured. He further stated that the correction
endorsement [exhibit-B] was given in presence of the insured only and
since both the things were done in presence of the insured, nothing was
taken in writing. He has stated that no certificate was taken from the
insured with respect to endorsement schedule [exhibit-B] as there is no
concept of taking signature of the insured in the policy and the
endorsement. He has further explained the manner of issuance of
insurance policy. He has stated that first the party seeking insurance
gives the proposal, then the bank processes the proposal by forwarding
it to the insurance company and then the insurance company accepts the
proposal. First the proposal is accepted and then the policy is issued. He
has further accepted that for the purposes of endorsement [exhibit-B]
no proposal was given because in the proposal form itself 'deterioration
of stock due to change in temperature' is not mentioned. He has stated
that in the policy schedule there is digital signature of N. Sampat. He
has further stated that it is incorrect to say that if the endorsement
schedule would not have been there, then the claim of the insured
would not have been allowed. The exact sentence is quoted as under:-
"कहना गलत है कक अगर यह इन्डोर्समेंट नहीं होता तो इन््योडस का
क्लेम एलाउड नहीं होता।"
From the perusal of the evidence of DW 2, it is clear that he had
joined the insurance company only in July 2019 and he has himself
deposed that he was giving his evidence on the basis of information
available in files. However, nothing has been produced from the file to
support his statement that the endorsement schedule was issued
immediately after 10 minutes from issuance of policy. Further he has
also stated that no proposal was given from the side of the insured with
regard to endorsement and has given the reason for that by stating that
in the proposal form itself the deterioration of stock due to change in
temperature was not written. However, the proposal form has not been
exhibited.
Further, it is not in dispute that initially policy was issued with 'add on
cover' for 'deterioration of stock due the change in temperature' but
as per P.W-2 , the said insurance coverage was rectified by issuance of
endorsement schedule [exhibit-B] and the rectification restricted the
coverage to the insured perils. This witness has stated that the
endorsement [exhibit-B] had a digital signature of N. Sampat but
neither N. Sampat has been examined nor any reason has been
mentioned for non-examination of N. Sampat. On the other hand, DW
2 who is a Legal Officer had joined in July, 2019 and certainly he
cannot be said to have any personal knowledge with regard to the
assertion that after issuance of policy the error was detected within 10
minutes and the endorsement schedule [exhibit-B] rectifying the error
was issued. This is over and above the fact that the witness has
admitted that the endorsement schedule [exhibit-B] does not have the
date of issuance. The fact also remains that even if the evidence of DW
2 is taken to be correct then also the policy was admittedly issued at the
first instance and only thereafter, the endorsement schedule[exhibit-B]
was said to have been issued. He has explained the procedure of
issuance of policy which reveals that the contract of insurance policy
initiates by submission of proposal by the insured and the contracts
stands concluded by issuance of the insurance policy.
52. In view of the evidences which have been placed on record and the
aforesaid discussions of the evidences, this court is of the view that the
contract of insurance stood concluded upon issuance of policy which
was interalia issued for 'add on cover' of 'deterioration of stock due
the change in temperature' ; nothing has been brought on record to
show that the endorsement schedule [exhibit-B] restricting the aforesaid
'add on cover' issued after issuance of the insurance policy to the
plaintiff was in presence of the plaintiff or was within the knowledge
of the plaintiff or was ever issued to the plaintiff. The fact remains that
the endorsement schedule [exhibit-B] which has been heavily relied
upon by the defendant No. 1 to deny the insurance coverage of 'add on
cover' of 'deterioration of stock due the change in temperature' could
not be proved by the defendant No. 1 that it was issued or was within
the knowledge of the plaintiffs. DW 1 has also stated that at the time of
preparation of Survey report they had never asked the plaintiff with
regard to the knowledge about the endorsement schedule [exhibit-B]
nor they had asked the plaintiff to submit the policy document and all
the policy documents were submitted by the defendant No. 1.
53. In the aforesaid facts and circumstances, this court has no hesitation in
coming to a finding that the so called endorsement schedule [exhibit-B]
modifying the terms of the insurance policy from
'deterioration of stock on account of change in temperature'
to
"The add on cover for DOS in cold storage due to change in
temperature was erroneously mentioned under the policy. The
correct add-on-cover is Deterioration of Stocks in Cold Storage
premises due to accidental power failure consequent to damage at
the premises of Power Station due to an insured peril. The
premium rate charged for this add on is 25% of the policy rate
and was collected at the time of inception of policy",
is a unilateral act of the insurance company and is not binding on the
plaintiffs.
54. Since the endorsement schedule [exhibit-B] has been held to be a
unilateral act of the defendant no.1 and not binding on the plaintiffs, the
plaintiffs are governed by the policy as originally issued, that is
'deterioration of stock on account of change in temperature'. It has
already been held while deciding point of determination no (a) that the
cause of deterioration of stock was on account of change in
temperature, the damages/compensation claimed on account of loss of
stock was covered by the insurance policy originally issued.
55. The learned trial court has also recorded a finding with regards to
endorsement schedule [exhibit-B] that once a concluded contract was
arrived at, the parties are bound by it and the endorsement schedule
[exhibit-B] was issued after conclusion of contract of insurance. The
findings on the aforesaid point are quoted as under: -
" 17. On behalf of the defendants as discussed above Exhibit
A is Standard Fire and Special Perils Policy Schedule.
Exhibit B is Endorsement Schedule of Fire Large Risk Policy.
On perusal of Exhibit B I find that it is written that the add on
cover for DOS in cold storage due to change in temperature
was erroneously mentioned under the policy. The correct add
on cover is deterioration of stocks in cold storage premises
due to accidental power failure consequent to damage at the
premises of power Station due to an insured peril. The
premium rate charged for this add on is 25% of the policy
rate and was collected at the time of inception of policy.
Admittedly, it is not signed by the plaintiffs and Aishwarya
Tripathi D.W. 2 has stated that within 10 minutes of the
policy issued, the error was found in presence of the insured.
They had not taken anything in writing from the insured and
correction endorsement was given in presence of the insured.
He admits that there is no signature of insured on this
endorsement and further states that it is not required to take
signature of the insured on the endorsement.
...............................
It is well settled that the insurance business is governed by
Insurance Act, 1938 and Rules and Regulations framed under
it. It is also admitted fact that the Nodal Agency to regulate
the law in India is Insurance Regulatory & Development
Authority (IRDA). The unilateral alteration in add on cover
was not known to the plaintiffs as per the material on record
and admission of Aishwarya Tripathi D.W. 2. Sec. 62 of
Indian Contract Act provides that if the parties to a contract
agree to substitute a new contract for it, or to rescind or alter
it, the original contract need not be performed. As per settled
principle of law, once a concluded contract was arrived at,
the parties are bound by it. Any novation in the contract is to
be brought on the same terms as the contract was required
for entering into for valid and concluded contract. The
reliance may be placed upon the case of BCCL Vs. BPL
Mobile Cellular reported in (2008) 13 SCC 597.
............................................."
56. This court fully agrees with the aforesaid findings of the learned trial
court and has already given reasons as aforesaid as to why the
endorsement schedule [exhibit-B] unilaterally amending the 'add on
cover' of 'deterioration of stock on account of change in
temperature' and restricting to certain insured peril cannot be relied
upon by the defendant no.1 to deny the claim of the plaintiffs under the
already issued insurance policy for 'add on cover' of 'deterioration of
stock on account of change in temperature'. Thus, this court is also of
the considered view that no reliance can be placed by the defendant
no.1 insurance company on the endorsement schedule [exhibit-B] to
deny the insurance claim of the plaintiffs.
57. Thus, the coverage of the claim of deterioration of stock has to be seen
in the light of the policy issued to the plaintiffs with 'add on cover' for
'deterioration of stock due the change in temperature' and without the
endorsement schedule [exhibit-B]. The reason for deterioration was
change in temperature has already been decided in favour of the
plaintiffs while deciding point no (a).
58. The points of determination no (d), (e) and (f) are accordingly
decided in favour of the plaintiffs and against the defendants.
Point of determination no. (c )
59. Now the consequences of the exclusion clause in the policy is also
required to be examined.
60. The learned counsel appearing on behalf of the insurance company has
drawn the attention of this court to clause of the general exclusions in
the standard fire and special peril policy being general exclusion No. 6
which read as follows:
"Loss, destruction or damage to stock in cold storage
premises caused by change of temperature"
61. He has argued that on the basis of aforesaid general exclusion as
mentioned in the policy itself the plaintiff was not entitled for any loss
of stock due to change of temperature and reliance has been placed
upon clause 3 dealing with "Standard Fire and Special Peril Policy -
Policy Endorsement Wordings which permits the coverage only with a
rider are as follows: -
"3. Deterioration of Stocks in Cold Storage premises due to
accidental power failure consequent to damage at the
premises of Power Station due to an insured peril"
Having paid additional Premium as specified in the schedule it
is hereby agreed and declared that notwithstanding anything
to the contrary in this Policy or in any of its conditions, this
policy covers destruction of or damage to the property hereby
insured caused by change of temperature in consequence of
failure of electric supply at the terminal ends of electric
service feeders from which the insured obtains electric supply
directly due to damage caused by any peril insured against
under this Policy to property at insured premises or any
Electric Station or Sub-Station of Public Electric Supply
undertaking from which the Insured obtains electric supply
Provided that the Company shall not be liable for any loss
occasioned by the deliberate act of the Government, Municipal
or Local Authority or Supply Authority not performed for the
sole purpose of safeguarding life or protecting any part of the
supply undertaking's systems or by the exercise by any such
authority of its power to withhold or restrict or ration supply
not necessitated solely by damage to the Supply Undertaking's
generating or supply equipment by an insured peril.
Provided further that the Company shall not be liable for any
loss unless the duration of each such failure exceeds 24 hours.
Subject otherwise to the terms, exceptions, conditions and
limitations of this Policy.
In any action, suit or other proceedings where the company
alleges that by reason of the provisions of this condition any
loss or damage is not covered by the insurance, the burden of
proving that this loss or damage is covered shall be upon the
insured.
62. In the judgment passed by the Hon'ble Supreme Court in (2023) 1 SCC
428 "M/s Texco Marketing (P) Ltd. vs TATA AIG General Insurance
Company Limited, the Hon'ble Supreme Court has elaborately dealt
with the exclusion clause in the insurance policy, its nature and impact.
The Hon'ble Supreme Court in paragraph 22 and 42 to 48 has held that
there is an onerous responsibility on the part of the insurer while
dealing with an exclusion clause. The insurer in statutorily mandated as
per regulation 3(2) of Insurance Regulatory and Development
Authority (Protection of Policy Holder's Interests) Regulation, 2002 to
the effect that the insurer and his agent are duty bound to provide all
material information in respect of a policy to the insured to enable him
to decide on the best cover that would be in his interest. It has also been
held that regulation 3(4) mandates that if proposal form is not filled by
the insured, a certificate has to be incorporated at the end of the said
form that all the contents of the form and documents have been fully
explained to the insured and made him to understand. Similarly, Clause
4 enjoins a duty upon the insurer to furnish a copy of the proposal form
within thirty days of the acceptance, free of charge. It has held that any
non-compliance with these mandatory statutory obligations would lead
to the irresistible conclusion that the offending clause, be it an
exclusion clause, cannot be pressed into service by the insurer against
the insured as he may not be in knowhow of the same. It has been held
that any non-compliance on the part of the insurance companies with
the 2002 regulation would take away their right to plead repudiation of
contract by placing reliance upon any of the terms and conditions
included thereunder without compliance of 2002 regulations. It has
been held that there is a mandatory obligation of the insurer particularly
in regard to exclusion clause or restriction of cover and upon failure to
do so, no reliance can be placed on the exclusion clause. Paragraph 10,
11, 12, 13, 15, 16, 22, 23, 42, 43, 44, 45, 46, 47 and 48 are as quoted as
under:-
"10. Adhesion contracts are otherwise called standard form
contracts. Contracts of insurance are one such category of
contracts. These contracts are prepared by the insurer having
a standard format upon which a consumer is made to sign. He
has very little option or choice to negotiate the terms of the
contract, except to sign on the dotted lines. The insurer who,
being the dominant party dictates its own terms, leaving it
upon the consumer, either to take it or leave it. Such contracts
are obviously one-sided, grossly in favour of the insurer due to
the weak bargaining power of the consumer.
11. The concept of freedom of contract loses some significance
in a contract of insurance. Such contracts demand a very high
degree of prudence, good faith, disclosure and notice on the
part of the insurer, being different facets of the doctrine of
fairness. Though, a contract of insurance is a voluntary act on
the part of the consumer, the obvious intendment is to cover
any contingency that might happen in future. A premium is
paid obviously for that purpose, as there is a legitimate
expectation of reimbursement when an act of God happens.
Therefore, an insurer is expected to keep that objective in
mind, and that too from the point of view of the consumer, to
cover the risk, as against a plausible repudiation.
Exclusion clause
12. An exclusion clause in a contract of insurance has to be
interpreted differently. Not only the onus but also the burden
lies with the insurer when reliance is made on such a clause.
This is for the reason that insurance contracts are special
contracts premised on the notion of good faith. It is not a
leverage or a safeguard for the insurer, but is meant to be
pressed into service on a contingency, being a contract of
speculation. An insurance contract by its very nature
mandates disclosure of all material facts by both the parties.
13. An exclusion clause has to be understood on the
touchstone of the doctrine of reading down in the light of the
underlining object and intendment of the contract. It can
never be understood to mean to be in conflict with the main
purpose for which the contract is entered. A party, who relies
upon it, shall not be the one who committed an act of fraud,
coercion or misrepresentation, particularly when the contract
along with the exclusion clause is introduced by it. Such a
clause has to be understood on the prism of the main contract.
The main contract once signed would eclipse the offending
exclusion clause when it would otherwise be impossible to
execute it. A clause or a term is a limb, which has got no
existence outside, as such, it exists and vanishes along with
the contract, having no independent life of its own. It has got
no ability to destroy its own creator i.e. the main contract.
When it is destructive to the main contract, right at its
inception, it has to be severed, being a conscious exclusion,
though brought either inadvertently or consciously by the
party who introduced it. The doctrine of waiver, acquiescence,
approbate and reprobate, and estoppel would certainly come
into operation as considered by this Court in Union of
India v. N. Murugesan [Union of India v. N. Murugesan,
(2022) 2 SCC 25 : (2022) 1 SCC (Civ) 711 : (2022) 1 SCC
(L&S) 328] .
Duty of disclosure, good faith and notice
15. The principles governing disclosure, good faith and notice
are founded on the common law principle of fairness. These
principles are meant to be applied with more rigour in
standard form contracts such as insurance contracts. Such an
application is warranted much more when we deal with an
exclusion clause. A very high standard of good faith,
disclosure and due compliance of notice is required on the
part of the insurer, keeping in view the unique nature of an
insurance contract.
16. An act of good faith on the part of the insurer starts from
the time of its intention to execute the contract. A disclosure
should be a norm and what constitutes a material fact
requires a liberal interpretation. It is only when an insurer is
not intending to act on an exclusion clause, the aforesaid
principles may not require a strict compliance. The three
elements which we have discussed are interconnected and
overlapping. It is the foremost duty of the insurer to give effect
to a due disclosure and notice in its true letter and spirit.
When an exclusion clause is introduced making the contract
unenforceable on the date on which it is executed, much to the
knowledge of the insurer, non-disclosure and a failure to
furnish a copy of the said contract by following the procedure
required by statute, would make the said clause redundant and
non-existent.
Doctrine of blue pencil
22. On a discussion of the aforesaid principle, we would
conclude that there is an onerous responsibility on the part of
the insurer while dealing with an exclusion clause. We may
only add that the insurer is statutorily mandated as per
Regulation 3(2) of the Insurance Regulatory and Development
Authority (Protection of Policyholders' Interests) Regulations,
2002, dated 16-10-2002 (hereinafter referred to as "the IRDA
Regulations, 2002") to the effect that the insurer and his
agent are duty bound to provide all material information in
respect of a policy to the insured to enable him to decide on
the best cover that would be in his interest. Further, sub-
regulation (4) of Regulation 3 mandates that if proposal form
is not filled by the insured, a certificate has to be incorporated
at the end of the said form that all the contents of the form and
documents have been fully explained to the insured and made
him to understand. Similarly, Regulation 4 enjoins a duty
upon the insurer to furnish a copy of the proposal form within
thirty days of the acceptance, free of charge. Any non-
compliance, obviously would lead to the irresistible
conclusion that the offending clause, be it an exclusion clause,
cannot be pressed into service by the insurer against the
insured as he may not be in knowhow of the same.
23. In such a situation, the doctrine of "blue pencil" which
strikes off the offending clause being void ab initio, has to be
pressed into service. The said clause being repugnant to the
main contract, and thus destroying it without even a need for
adjudication, certainly has to be eschewed by the court. The
very existence of such a clause having found to be totally
illegal and detrimental to the execution of the main contract
along with its objective, requires an effacement in the form of
declaration of its non-existence, warranting a decision by the
court accordingly.
42. Both the Forums have held concurrently that Respondent
1 was conscious of the fact that the contract was entered into
for insuring a shop situated in the basement. The aforesaid
position is not only a factual one but also accepted by the
respondents as no challenge has been laid against the
impugned order. Similarly, there was no specific denial on the
non-compliance of adequate notice. The National Commission
has not given any finding on this aspect, though it was dealt
with in extenso by the State Commission. On a reading of
Section 21(a) of the Consumer Protection Act, 1986, it is clear
that it is not akin to Section 96 of the Civil Procedure Code,
1908. Even otherwise, the impugned order has not considered
all the relevant materials which were duly taken note of by the
State Commission.
43. Once it is proved that there is a deficiency in service and
that Respondent 1 knowingly entered into a contract,
notwithstanding the exclusion clause, the consequence would
flow out of it. We have already discussed the scope and ambit
of the provisions under the Contract Act, 1872. Even as per
the common law principle of acquiescence and estoppel,
Respondent 1 cannot be allowed to take advantage of its own
wrong, if any. It is a conscious waiver of the exclusion clause
by Respondent 1.
44. Under the impugned order, we have already taken note of
and discussed, the findings of the State Commission, which
are indeed approved by the National Commission. These
findings are sufficient enough to come to the conclusion that
the terms of the contract are unfair, particularly the exclusion
clause, and that Respondent 1 has indulged in unfair trade
practice. In such view of the matter, the decision of the
National Commission cannot be sustained as the appellant
cannot be non-suited only on the ground of mere deficiency in
service without taking note of the fact that it is the duty of the
Forum to grant the consequential relief by exercising the
power under Sections 14(d) and 14(f) of the Consumer
Protection Act, 1986 which mandates the payment of adequate
compensation by way of an award. The said provision makes
it consequential in granting adequate compensation once it
finds deficiency, the existence of unfair terms in the contract
and unfair trade practice on the part of the other party. In
other words, a party is entitled for the relief which the law
provides.
45. Non-compliance of Clauses (3) and (4) of the IRDA
Regulations, 2002 preceded by unilateral inclusion, and
thereafter followed by the execution of the contract, receiving
benefits, and repudiation after knowing that it was entered
into for a basement, would certainly be an act of unfair trade
practice. This view is fortified by the finding that the exclusion
clause is an unfair term, going against the very object of the
contract, making it otherwise un-executable from its
inception.
46. Therefore, we have no hesitation in setting aside the order
passed by the National Commission. However, we are in
agreement with the submission made by the counsel appearing
for the respondents that the State Commission without any
basis granted a sum of Rs. 2.5 lakhs towards harassment and
mental agony. We are of the view that no case for awarding
amount under that head has been made out as the respondents
merely took a legal stand.
47. In light of the aforesaid, the order impugned passed by the
National Commission in Tata AIG General Insurance Co. Ltd.
v. Texco. Mktg. (P) Ltd. stands set aside except to the extent of
deciding a sum of Rs. 2.5 lakhs towards harassment and
mental agony. The appeal stands allowed in party.
48. Before we part with this case, we would like to extend a
word of caution to all the insurance companies on the
mandatory compliance of Clauses (3) and (4) of the IRDA
Regulations, 2002. Any non-compliance on the part of the
insurance companies would take away their right to plead
repudiation of contract by placing reliance upon any of the
terms and conditions included thereunder."
63. This court finds that admittedly the insurance policy was issued to the
plaintiffs with 'add on cover' for 'deterioration of stock due the
change in temperature'. It is not the case of the defendant No. 1 that
the terms and conditions of the policy particularly, the general
exclusions including exclusion No. 6 was brought to the notice of the
plaintiffs at the stage of proposal/consideration of insurance policy
rather it is the specific case that the policy for 'deterioration of stock
due the change in temperature' was erroneously issued. The DW 2 ,
who joined the defendant no.1 insurance company much later in 2019
admitted to have deposed on the basis of available files stated that the
policy was issued on the basis of the proposal but the proposal of the
plaintiffs seeking insurance has not been produced and exhibited nor
there is any statement in the entire written statement of defendant no.1
-insurance company with regard to the proposal for which the policy
was processed and issued.
64. In the present case, DW 2 has stated that proposal was submitted by the
plaintiffs but has not exhibited the proposal form rather DW 2 has taken
a stand that there was no requirement to take fresh proposal for the
endorsement subsequently issued as the endorsement was issued in
terms of the proposal but the proposal form has not been exhibited
before this court to substantiate the aforesaid statement.
65. This court also finds that the defendants have neither pleaded nor
proved the compliance of any of the provisions of the aforesaid
regulations of 2002 and have neither pleaded nor proved that the
plaintiffs were made aware about the exclusion clause or that the
endorsement subsequently issued was in terms of the proposal
submitted by the plaintiffs. Proposal has not been exhibited by the
defendant no.1 to show that the policy read with the endorsement
schedule [exhibit-B] was in accordance with the proposal itself and the
plaintiffs were aware and were told about the exclusion clause at the
time of giving proposal itself and that the plaintiffs have consciously
and willingly accepted the policy with the exclusion clause. The fact
remains that the insurance policy was admittedly issued with the 'add
on cover' for 'deterioration of stock due the change in temperature'
inspite of the aforesaid general exclusion clause in the policy and the
contract of insurance stood concluded by issuance of policy. The
rectification of the so-called mistake by issuing endorsement schedule
[exhibit-B] and bringing the insurance in conformity with the aforesaid
exclusion clause in the insurance policy has not been proved and it has
been held while deciding point of determination no (e) that the
endorsement schedule [exhibit-B] was a unilateral act of the defendant
no.1 and was not binding on the plaintiffs and have confirmed the
finding of the learned trial court in this regard.
66. In view of the aforesaid facts and circumstances, and also considering
the aforesaid judgment passed by the Hon'ble Supreme Court in Texco
Marketing (P) Ltd (supra), this court is of the considered view that the
defendant insurance company cannot be permitted to rely upon the
exclusion clause No. 6 to deny the claim of the plaintiffs in terms of the
insurance policy was admittedly issued with the 'add on cover' for
'deterioration of stock due the change in temperature'.
Point of determination no. (c ) is accordingly decided in favour of the
plaintiffs and against the defendants.
Point of determination no. (g)- quantity of loss
67. Exhibit-28 (marked with objection), the stock register filed by the
plaintiffs relates to stock of potato in the month of September 2009 and
October 2009. On the date of inspection by the surveyor on 01.10.2009,
the available stock was admittedly found to be 6558 quintals. Through
this stock register (Exhibit-28), the plaintiffs have tried to show that on
21.09.2009, 15,558 quintals of rotten potatoes were available in the
stock and these rotten potatoes were discarded from 22.09.2009
continuously for nine days @ 1,000 quintals per day. The learned court
while coming to the quantity of rotten potatoes has totally relied upon
Exhibit-28 and referred to the final survey report (Exhibit-E) and
observed that even the surveyor had admitted that total loss was 6558
quintals and the learned court further recorded that it was an admitted
fact that 9000 quintal of potatoes were discarded by the plaintiff as per
the survey report and thereby the learned court took the total loss as
9000+ 6558 = 15,558 quintals of rotten potatoes and calculated the loss
@ Rs. 808.92 per quintal and upon multiplication arrived at total loss of
Rs. 1,25,85,177.40.
68. This court finds that although the survey report refers to the claim of
the plaintiffs based on stock register [exhibit-28] but had allowed the
claim only to the extent of 6558 quintals , which was the stock of rotten
potatoes available on the date of inspection.
69. In order to appreciate the arguments and case of the respective parties
the contents of the stock register exhibit-28 [marked with objection]
relating to the month of September 2009 and October 2009 are quoted
as under: -
POTATO STOCK FOR THE MONTH OF SEPTEMBER, 2009
Date Opening Purchase Total in Sale in Closing in Damage Potato
in Qntl. in Qntl. Qntl. Qntl. Qntl. Destroyed
1.09.09 24958 - 24958 785 24173
2.09.09 24173 - 24173 613 23560
3.09.09 23560 - 23560 490 23070
4.09.09 23070 - 23070 420 22650
5.09.09 22650 - 22650 545 22105
6.09.09 22105 - 22105 287 21818
7.09.09 21818 - 21818 428 21390
8.09.09 21390 - 21390 480 20910
9.09.09 20910 - 20910 500 20410
10.09.09 20410 - 20410 608 19802
11.09.09 19802 - 19802 472 19330
12.09.09 19330 - 19330 513 18817
13.09.09 18817 - 18817 350 18467
14.09.09 18467 - 18467 594 17873
15.09.09 17873 - 17873 785 17088
16.09.09 17088 - 17088 610 16478
17.09.09 16478 - 16478 920 15558
18.09.09 15558 - 15558 - 15558
19.09.09 15558 - 15558 - 15558
20.09.09 15558 - 15558 - 15558
21.09.09 15558 - 15558 - 15558
22.09.09 15558 - 15558 - 15558 1000
23.09.09 14558 - 14558 - 14558 1000
24.09.09 13558 - 13558 - 13558 1000
25.09.09 12558 - 12558 - 12558 1000
26.09.09 11558 - 11558 - 11558 1000
27.09.09 10558 - 10558 - 10558 1000
28.09.09 09558 - 09558 - 09558 1000
29.09.09 08558 - 08558 - 08558 1000
30.09.09 07558 - 07558 - 07558 1000
POTATO STOCK FOR THE MONTH OF OCTOBER, 09
Date Opening Purchase Total in Sale in Closing in Damage
Stock in in qntl. qntl. qntl. qntl. Potato Thrown
qntl. in Ontl.
1.10.09 6558 - 6558 - 6558
2.10.09 6558 - 6558 - 6558
3.10.09 6558 - 6558 - 6558 1000
4.10.09 5558 - 5558 - 5558 1000
5.10.09 4558 - 4558 - 4558 1000
6.10.09 3558 - 3558 - 3558 1000
7.10.09 2558 - 2558 - 2558 1000
8.10.09 1558 - 1558 - 1558 1000
9.10.09 558 - 558 - 558 558 NIL
10.10.09 NIL
70. As per the case of the plaintiffs, they noticed sprouted / damaged
potatoes for the first time on 05.09.2009. As per the stock register
(Exhibit-28) 7092 quintal were sold from 05.09.2009 till 17.09.2009 ;
9400 quintals were sold from 01.09.2009 till 17.09.2009 ; 9000 quintals
were destroyed from 22.09.2009 to 30.09.2009; stock available on
01.10.2009 was 6558 quintals which were destroyed during the period
from 03.10.2009 to 09.10.2009.
71. P.W-1 in his evidence has stated that about 26000 quintals of potatoes
were purchased; 15,558 quintals of potatoes were purchased from
traders; about 10,000 quintals of potatoes were sold; it was not correct
to say that 15,558 quintals of potatoes were not available in the stock;
the insurance claim was repudiated and no information was given to
the insurance company regarding sale of 10,000 quintals of potatoes.
P.W-3 has stated in his examination in chief that from 22.09.2009 to
30.09.2009 about 9000 quintals of rotten potatoes were taken in 80 to
90 tractors and were thrown/destroyed by burring in the land of one Raj
Kumar Singh. In his cross examination this witness has stated that on
21.09.2009 there was 26000 quintals of potatoes; apart from 9000
quintals of rotten potatoes, 9000 quintals were sold and he could not
account for remaining 8000 quintals of potatoes and has further stated
that it was taken out after expiry of one month from 30.09.2009.
P.W-4 in his cross examination has stated that 9000 to 9500 quintals of
potatoes were taken out from 01.09.2009 and were sold but their entry
were not made in the stock register. The said statement during cross
examination is quoted as follows: -
" रजिस्टर के अनुर्ार द िं 28.07.2009 को तापमान 36-37 जडग्री
फारे नहाईट था। द िं 25.07.2009 को कम्प्रश े र खराब हुआ तो आलू नहीं
जनकाले । द िं 28.07.2009 को र् ू रा कम्प्रशे र खराब हुआ तब भी आलू
नहीं जनकाला । 9000 - 9500 ककविंटल आलू क 01.09.2009 र्े
जनकाले और बेच क ये। उर्का इिं टी स्टॉक रजिस्टर में नहीं है।"
P.W-2 has stated in his examination in chief that altogether 15,558
quintals of rotten potatoes were destroyed. In his cross examination he
has stated that 15,000 quintals of rotten potatoes were removed; when
the potatoes started rotting, some part was sold and remaining part was
thrown and about 10,000 quintals were sold.
72. The stock register -Exhibit 28 (with objection) does not reflect the stock
of 26,000 quintals at any point of time and thus the evidence of P.W-1
and 3 does not match with the stock register; further P.W-4 who was
the care taker of the cold storage and had signed the stock register has
deposed that 9000 to 9500 quintals of potatoes were taken out from
01.09.2009 and were sold but their entry was not made in the stock
register. Thus, as per evidence of P.W-4, the stock register did not
reflect the correct position of sale as he has stated that 9000 to 9500
quintals of potatoes were sold but not shown in the stock register. Even
the evidence of P.W-2 does not match with the entries made in the
stock register (Exhibit-28 - marked with objection).
73. On account of the conflicting version of different witnesses P.W-1 to
P.W-4 with respect to stock and entries in stock during their cross
examination, no reliance can be placed on exhibit-28. Further, the
witnesses have stated that 80 to 90 tractors were engaged to throw the
rotten potatoes during 22.09.2009 to 30.09.2009 but no bill or voucher
with regards to their payment has been exhibited.
74. In view of the aforesaid facts and circumstances, this court is of the
considered view that no reliance can be placed on the exhibit-28, the
stock register and apart from the aforesaid there is no other evidence on
record to substantiate the claim of the plaintiffs that they had destroyed
9000 quintals of rotten potatoes from 22.09.2009 to 30.09.2009 for
which even the surveyor did not give the benefit as per final survey
report. However, on 01.10.2009 the surveyor had found 6558 quintals
of rotten potatoes and had quantified the loss only with respect to 6558
quintals of rotten potatoes after recording that disposal of 9000 quintals
of rotten potatoes were not presented for verification and confined the
assessment of loss to the physically verified quantity, that is, 6558
quintals of rotten potatoes.
75. On the point of quantification of damages (in terms of quantity and rate
per quintal of potatoes), the learned trial court has recorded following
findings: -
" ....It was found by the Surveyor that there was 6558
quintals of potato stock in the bag having 50 kgs each. As
per the photographs attached by the defendants in Exhibit
X series. I find that the potatoes in the stock were
germinating (H/4, H/5, H/7, H/8, H/9, H/11, H/12 and
H/15). The damage (germination) to the potato stock was
noted on 05-09-2009 and even the surveyor has admitted
that total loss was 6558 quintals. As per the bank Stock
statement of August 2009 the rate was 808.92 per quintal
of the potato. It is also admitted fact that about 9000
quintals of potato were discarded by the plaintiffs which is
also admitted by the surveyor in their survey report,
exhibit E. When added the total loss of potato to the
plaintiffs came to 9000 + 6558 = 15558 quintals. It is
settled principle of law that Surveyor being a third-party
submitting report carries great weight and should
ordinarily be accepted unless it is shown to be arbitrary or
based upon extraneous material. The reliance may be
placed upon the case of M/s Hinafii India Limited Vs.
United India Insurance Co. Ltd. reported in 2015 (3) CPR
35 NC. It is held that the plaintiffs suffered loss of
destruction of 15558 quintals of potatoes worth Rs. 808.92
per quintal. When calculated the total amount comes to
15558 X 808.92 = Rs. 1,25,85,177.40. ......."
76. This court finds that the learned trial court has not considered the oral
evidences of the P.W-1 to 4 while holding that that altogether (9000 +
6558) 15,558 quintals of rotten potatoes were destroyed and decided by
the point by referring to the exhibit -28 (marked with objection), the
stock register. The learned court also committed error of record while
holding that it was an admitted fact that about 9000 quintals of potato
were discarded by the plaintiffs which was also admitted by the
surveyor in their survey report, exhibit E. The extent of loss in terms of
the quantity was through disputed by the defendant no. 1. The
observation of the surveyor in the survey report is also contrary to the
aforesaid finding and the surveyor had allowed the claim only to the
extent of 6558 quintals of potatoes which was available on the date of
inspection. The surveyor has recorded as follows with respect to claim
of destruction of 9000 quintals of potatoes during the period prior to
1.10.2009 as follows: -
"During on first visit on 01.10.2009, the insured informed
us that the stock of potatoes are stored in jute bags, each
bag of weight approx. 50 Kg. We counted the bags and
arrived at the stock of 6558 quintals, which correlates with
the stock register figure as on 01.10.2009. The insured
reportedly disposed of the damage's potatoes between from
22.09.2009 and 30.09.2009 @ 1000 quintals per day, i.e.
total 9000 quintals-before intimation to the underwriters
or our inspection of the same. We have not considered the
disposed of 9000 quintals as part of the claim, since the
same were not presented for our verification. Therefore,
the loss assessment is restricted to physically verified
quantity of 6558 quintals only."
77. With respect to the verification of destruction of rotten potatoes during
the period from 22.09.2009 to 30.09.2009 @ 1000 quintals per day i.e.
9000 quintals, it was the specific case of the plaintiffs that they had
communicated the Allahabad Bank [who was in joint venture with the
defendant No. 1] with regard to deterioration of stock as back as on
15.09.2009 and also intimated the Allahabad Bank prior to destroying
the damaged potatoes during the period from 22.09.2009 to 30.09.2009
and since the rotten potatoes were hazardous and have foul smell, the
plaintiffs had no option but to destroy them at the earliest. On the other
hand, the case of the defendant No. 1 was that the claim was placed
before the defendant No. 1 much belatedly and immediately thereafter
and without any loss of time the steps were taken for joint inspection on
01.10.2009 and surveyor was appointed but nothing was presented for
physical verification by the surveyor with regard to disposal of 9,000
quintals of potatoes during the period from 22.09.2009 to 30.09.2009.
78. This Court is of the considered view that even if the aforesaid stand
of the plaintiffs is accepted for a moment, then also it was certainly
upon to the plaintiffs to lead evidence (Oral and Documentary) with
regard to actual destruction of 9,000 quintals of potatoes during the
period from 22.09.2009 to 30.09.2009 and in fact the plaintiffs led
evidence to that effect and in support of that they heavily relied upon
the stock register (Exhibit-28) and also led oral evidence . However, the
aforesaid discussion with regard to oral evidence and the stock register
as produced by the plaintiffs i.e. Exhibit- 28 (marked with objection),
this Court finds that the oral evidence on behalf of the plaintiffs with
regard to maintaining stock register is conflicting and as discussed
above, PW 4 who was the care taker of the cold storage and had signed
the stock register deposed that 9000 to 9500 quintals of potatoes were
taken out from 01.09.2009 and were sold but the entry was not made in
the stock register. Meaning thereby that sale of 9000 to 9500 quintals of
potatoes was not recorded in the stock register and it was over and
above the sales which have been specifically recorded in the stock
register.
79. Considering the totality of the materials on record this court finds that
the stock register [Exhibit-28] and its entries could not be proved to be
correct as the witnesses of the plaintiffs have given statements in their
cross examination which are contrary to the entries in the stock register
and even the survey report rejects the claim of the plaintiffs with
regards to disposal of the damaged potatoes from 22.09.2009 to
30.09.2009 @ 1000 quintals per day, i.e. total 9000 quintals.
Considering the survey report and the materials on record, it is not in
dispute that 6558 quintals of rotten potatoes were found on the date of
inspection on 01.10.2009 and accordingly the plaintiffs having failed to
prove disposed of the damaged potatoes from 22.09.2009 to 30.09.2009
@ 1000 quintals per day, i.e. total 9000 quintals. As already held
above, the rate per quintal of potatoes as taken by the learned trial court
@ Rs. 808.92 per quintal does not call for any interference.
Accordingly, the plaintiffs are entitled for loss of 6558 quintals of
rotten potatoes and not 15558 quintals as claimed and allowed by the
learned trial court. Accordingly, the plaintiffs are entitled to the total
amount comes to 6558 X 808.92 = Rs. 53,04,897.36 and not Rs.
1,25,85,177.40 [15558 X 808.92] as decreed by the learned court. The
judgement of the learned trial court is accordingly set aside to the
extent it relates to grant of compensation for damages of potatoes over
and above 6558 quintals.
80. Thus, the point for determination no.(g) is partly decided in favour of
the defendant no.1 by reducing the quantum of compensation under
insurance cover confined to 6558 quintals of rotten potatoes [ as was
found by the surveyor on the date of inspection and as recorded in the
final survey report] instead of 15,558 quintals as claimed by the
plaintiffs and thus the allowed claim is reduced from Rs.
1,25,85,177.40 to Rs. 53,04,897.36 to be payable with interest as
directed by the learned court.
81. In view of the aforesaid findings, it is held as follows: -
a) The interlocutory petition being I.A. No. 1824 of 2024 seeking
production of additional evidence with regards to per quintal rate
of potatoes is rejected.
b) The general exclusion clause no.6 in the insurance policy as
relied upon by the insurance company is not applicable in the
facts and circumstances of this case.
c) The claim of the plaintiff is governed by 'add on cover' of the
insurance policy as initially issued, that is, 'deterioration of
stock due the change in temperature' and not by its unilateral
subsequent amendment vide endorsement schedule [exhibit-B].
d) Commercial Appeal No. 23 of 2020 seeking enhancement of
rate of potatoes from Rs. 808.92 per quintal to 1600 per quintal
is dismissed.
e) Commercial Appeal No. 1 of 2021 is partly allowed. The claim
of the compensation with respect to rotten potatoes is confined
and limited to the quantity of 6558 quintals of rotten potatoes
instead of claim allowed by the learned trial court for the
quantity of 15,558 quintals of rotten potatoes.
(Ratnaker Bhengra, J.)
(Ratnaker Bhengra, J.)
(Anubha Rawat Choudhary, J.)
Rakesh
A.F.R.
