Karnataka High Court
United India Insurance Company Limited vs Jayavant Products Limited on 6 June, 2025
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RFA No.100049 of 2020
IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH
DATED THIS THE 6TH DAY OF JUNE, 2025
PRESENT
THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
AND
THE HON'BLE MR. JUSTICE G BASAVARAJA
REGULAR FIRST APPEAL NO. 100049 OF 2020
BETWEEN:
1. UNITED INDIA INSURANCE COMPANY LIMITED,
AN INSURANCE COMPANY DULY
CONSTITUTED AND HAVING ITS
HEAD OFFICE AT 24, WHITES ROAD,
CHENNAI-600014
REPRESENTED BY ITS CHAIRMAN.
2. UNITED INDIA INSURANCE COMPANY LIMITED,
DIVISIONAL OFFICE, 1ST FLOOR,
KESHWAPUR, HUBBALLI-580023.
ITS REPRESENTED BY
ITS AUTHORIZED SIGNATORY.
...APPELLANTS
(BY SRI. S.K. KAYAKAMATH, ADVOCATE)
AND:
JAYAVANT PRODUCTS LIMITED,
A COMPANY DULY CONSTITUTED
AND FUNCTIONING UNDER THE
PROVISIONS OF INDIAN COMPANIES ACT,
HAVING ITS OFFICE AT
AZAD ROAD, NEAR CBTI,
BHANDIWAD BASE, HUBBALLI-580020
AND REPRESENTED BY ITS
EXECUTIVE DIRECTOR,
SHRI. NEMICHAND J MEHTA.
...RESPONDENT
(SOLE RESPONDENT SERVICE HELD SUFFICIENT)
[CAUSETITLE AMENDED VIDE COURT ORDER DATED: 09.01.2024]
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RFA No.100049 of 2020
THIS RFA IS FILED UNDER SECTION 96 CPC., PRAYING
TO SET ASIDE THE JUDGMENT AND DECREE DATED
31.08.2019 PASSED IN O.S.NO.243/1998 ON THE FILE OF THE
PRINCIPAL SENIOR CIVIL JUDGE, HUBBALLI, PARTLY
DECREEING THE SUIT FILED FOR RECOVERY OF MONEY.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 02.04.2025, COMING ON FOR
PRONOUNCEMENT OF ORDERS THIS DAY, THE COURT
DELIVERED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
AND
HON'BLE MR. JUSTICE G BASAVARAJA
CAV JUDGMENT
(PER: HON'BLE MR. JUSTICE G BASAVARAJA)
The appellant in this appeal is assailing the
judgment and decree dated 31st August, 2019 passed in
Original Suit No.243 of 1998 by the Principal Senior Civil Judge,
Hubballi (for short hereinafter referred to as the "trial Court").
2. For the sake of convenience, the parties in this appeal
are referred to with their rank and status before the trial Court.
3. Facts in nutshell leading to this appeal are, Plaintiff
filed suit against defendants seeking recovery of
Rs.3,53,70,000/- with interest at the rate of 21% per annum
on insurance amount of Rs.227.04 lakh. It is stated in the
plaint that the plaintiff is a Public Limited Company duly
registered under the Companies Act, 1956. Defendant No.1 is
an Insurance Company carrying its business in General
Insurance having its Head Office at Chennai and Divisional
Office at Hubballi. Plaintiff is a Small-scale Industry having its
manufacturing unit at Sherewad village, Hubballi Taluk and for
the past several years carrying on business in manufacturing
Hill-Grass Brooms, Plastic Brooms, Toilet brushes, etc. in the
name and style as "Monkey Brand Brooms", "555 Brand
Brooms", "Scented Brooms". The products of the plaintiff have
acquired name and fame and are available in every nook and
corner of the country and every household is acquainted with
the plaintiff's brand of brooms. The plaintiff has 100 employees
directly working under it and nearly 500 employees are working
through labour contractors and the annual turnover of the
plaintiff-company is about Rs.8.00 crore and the employees,
dealers and distributors are depending upon the production and
marketing of the plaintiff-company. It is contended that the
plaintiff-Company has taken three Go-downs-A, B & C on lease
as Jaratarghar godowns situate at Gabbur, Hubballi and also
has another godown at the factory premises at Sherewad. The
plaintiff-company is procuring hill grass from North-eastern
States like West Bengal and Assam and as the hill grass is
available only in the months of January and February, the
plaintiff-company is constrained to purchase the requirement of
the company for the entire year during those months and stock
them in their godowns at Gabbur, Hubballi. It is further
contended that the plaintiff-company has sophisticated and
modern machinery in its factory for manufacturing brooms and
other products and in that regard all the machinery,
equipments, raw-material, finished products, including packing
material, were insured with the defendant No.1 under its
Hubballi Branch for a sum of Rs.4,24,00,000/- under Policy
No.0711002/0/11/13/01011/97-98 dated 21st July, 1997 out of
which, Gabbur godowns were insured for a sum of
Rs.2,25,00,000/- by paying premium of Rs.3,44,250/- and the
defendant No.1 issued policy under cover note in conclusive
proof of contract of insurance which is based on the principles
of Uberrima-fides. It is also contended that the details of raw-
materials, stocks and valuation of each godown and factory
premises and its machinery were given in the proposal form
and the same had been accepted by the defendant No.1. It is
contended that in the intermediate night of 22nd and 23rd
August, 1997, a fire accident took place in Jaratarghar A, B & C
Godowns resulting in entire stock worth Rs.2,27,04,000/-
burning down to ashes. These godowns were insured for fire,
malicious damages, etc. for an amount of Rs,2,25,00,000/-.
The plaintiff-company informed the defendant No.1 about the
fire accident on the same day i.e. 23rd August, 2007 and the
officers also visited the site on the same day. The entire stock
was charred to ashes causing loss of Rs.2,27,04,000/- and FIR
was lodged in Bendigeri Police Station, Hubli. The Plaintiff-
Company has also made claim seeking settlement of insurance
amount, but defendant No.1 went on making queries to which
the Plaintiff-company answered all the queries. Despite,
defendant No.2 rejected the claim of the plaintiff-company on
an untenable ground of fraud. Thus, claiming damages towards
loss of production, so also, compensation towards harassment,
the plaintiff-company filed suit seeking compensation from the
defendants in an extent of Rs.2,27,04,000/- with interest at
21% per annum amounting to Rs.3,53,70,000/-.
4. After service of summons, defendants appeared
through their counsel. Defendant No.2 filed written statement
and defendant No.1 filed memo adopting the written statement
filed by defendant No.2. The gist of the written statement of
defendant No.2 is that the suit of the plaintiff is false, frivolous
and vexatious and not tenable either in the eye of law or on
facts. It is contended that documents are concocted, created
and prayers made are false prayers. The defendants are
justified in repudiating the claim of the plaintiff by invoking
Clause 8 of the Policy. It is contended that the plaintiff has
forfeited its claim whatsoever upon the Policy and the Policy
was issued in favour of State Bank of Mysore, Main Branch,
Hubballi as the materials were in the custody of State Bank of
Mysore as a key loan and therefore the said Banker is the
necessary party. It is further stated that the practice adopted
by the plaintiff not to utilize the stocks pledged for consumption
and to procure the fresh stock from the market indicates that
no real pledge of stock has taken place. The plaintiff-company
is a public limited company and the books of record were not
maintained in accordance with standard practices. The books
were certified by the Auditors on the basis of declaration and
verification certificate issued by the management with regard to
stocks at the closing of accounts. It is further stated that on
the basis of declaration made by the plaintiff since there is key
loan obtained from State Bank of Mysore, Main Branch,
Hubballi, technically, the Bank would be recipient of the benefit
of policy. Accordingly, it was contended that the suit is not
maintainable and prayed for dismissal of suit.
5. Based on the pleadings, The trial Court has framed
the following issues:
1) Whether goods worth of Rs.227.04 Lakh was
stocked in the Jaratarghar Godown ABC, at the
time of fire accident?
2) Whether defendant illegally rejected plaintiff's
claim?
3) Whether plaintiff suffered loss of profits of
Rs.50,00,000-00 on account of rejection of their
claim?
4) Whether plaintiff is entitled for damages of
Rs.25,000,00-00 for tension of mental agony?
5) Whether they have incurred expenses of
Rs.8,000/- to get settle their claim?
6) Whether plaintiff is entitled for suit claim from
defendant?
7) What decree or order?
Additional Issue:
Whether defendants prove that State Bank of
Mysore is a necessary party?
6. To prove the case of the plaintiff, one Nemichand s/o
Jayavantraj Mehta examined himself as PW1 and also examined
one more witness as PW2 and got marked seven documents as
Exhibits P1 to P7. On closure of plaintiff side evidence, one
Bailur Padmanabha Bhat has been examined as DW1 and
Sriyuths Shambhu, Upendra, Srivatsan and Srinivas
Ramanujapuram Anandam Pillai are examined as DWs2 to 5
respectively and got marked 49 documents as per Exhibits D1
to D49 and also marked six material objects as per MOs1 to 6.
Having heard on both sides, the trial Court has answered the
issues as under:
Issue No.1 : partly in the affirmative;
Issue No.2 : in the affirmative:
Issue No.3 : partly in the affirmative;
Issue No.4 : partly in the affirmative;
Issue No.5 : does not survive consideration;
Issue No.6 : partly in the affirmative
Additional issue : in the negative
7. In view of the above findings, trial Court has partly
decreed the suit of the plaintiff with costs holding that
defendants are liable to pay Rs.1,56,00,000/- (Rupees one
crore fifty six lakh) to the plaintiff with interest at the rate of
8% per annum from the date of Suit till its realisation. Being
aggrieved by this Judgment and decree passed by the trial
Court, defendant-Insurance Company has preferred this
appeal.
8. Sri S.K. Kayakmath, learned Counsel appearing for
the appellants, submits that the impugned Judgment and
decree passed by the trial Court is contrary to fact, law and
evidence on record and the same is liable to be set aside. He
would submit that the judgment is without considering the
terms and conditions of the Policy, more, particularly, Clause 8
of the policy conditions which has resulted into miscarriage of
justice. He would submit that the terms and conditions of the
Policy is required to be honoured in its letter and spirit, and
awarding the damages virtually amounts to rewriting the
contract, which is opposed to the Constitutional Bench
Judgment of the Hon'ble Apex Court rendered in the case of
NEW INDIA ASSURANCE COMPANY LIMITED v. C.M. JAYA AND
OTHERS reported in AIR 2002 SC 651.
9. He would further submit that the plaintiff has filed suit
for recovery seeking indemnification of the damages from the
insurance company on account of policy of insurance issued by
defendants. The plaintiff is claiming liquidated damages based
upon the loss caused to the raw material stored in A, B & C
godowns situate at Gabbur Village. The plaintiff has failed to
prove with cogent evidence the quantity of the materials stored
in godowns. Learned Counsel would further submit that the
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plaintiff has not produced documentary evidence i.e. the stock
register as on the date of the fire accident, however, the trial
Court has made a guesswork and awarded the damages in an
extent of Rs.1,56,00,000/- which is not sustainable in the eye
of law.
10. Learned Counsel would further submit that the
burden of proof with regard to Issue No.1 is on the plaintiff to
prove the damages caused to it in the fire accident, and the
plaintiff having not placed any acceptable, cogent evidence to
substantiate the actual loss, the Trial Court, instead of
dismissing the suit, has erroneously observed that the
defendants have not complied with the terms and conditions of
the policy, and the same is arbitrary and capricious. The trial
Court has erroneously shifted the burden upon the defendant to
prove the damages which is not sustainable in the eye of law.
On all these grounds he sought to allow the appeal and
consequently to dismiss the suit.
11. Despite service of notice through paper publication,
respondent remained absent and unrepresented.
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12. Having heard the arguments advanced on behalf of
the appellants and on perusal of the materials placed before us,
the following points would arise for our consideration:
1. Whether the appellants have made out a ground
to interfere with the impugned judgment and
decree passed by the trial Court?
2. What order?
13. Our answer to the above points would be as
under:
Point No.1: in the negative;
Point No.2: As per final order
Regarding Point No.1:
14. Plaintiff has filed suit for recovery of money of
Rs.3,53,70,000/- with interest at the rate of 21% per annum
on the insurance amount of Rs.227.04 lakh. The trial Court has
decreed the suit in part by directing defendants to pay a sum of
Rs.1,56,00,000/- to the plaintiff with interest at the rate of 8%
per annum from the date of Suit to realisation. However, the
plaintiff has not preferred any appeal/cross appeal/cross
objections against the Judgment and decree passed by the trial
Court.
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15. It is an undisputed fact that the plaintiff is a Public
Limited Company, constituted and registered under the
provisions of Indian Companies Act, 1956 and running small-
scale industry having its manufacturing unit at No.534,
Sherewad Village, Hubballi Taluk. The plaintiff-company is
carrying on the business in manufacturing and marketing of
Hill-Grass brooms, Plastic brooms and toilet brushes, etc. It is
also not in dispute that the plaintiff is having three godowns in
Jartharghar Gabbur Village, Hubbali as A, B & C Godowns,
wherein the plaintiff stocked the Hill grass as per the
requirements for production and the same would be used for
the whole year. It is also an undisputed fact that there was a
fire accident in early hours between 22nd and 23rd August 1997
in the said godowns, resulting in the plaintiff-company suffering
loss to the tune of Rs.227.04 lakh and one of the directors of
plaintiff-Company viz. Gautam Shanti Lal Mehta, suffered burn
injuries while attempting to save the stock , finally succumbed
to burn injuries on 2nd September 1997 at Marina Hospital in
Mumbai. It is also not in dispute that the plaintiff has obtained
insurance policy from defendants 1 & 2 relating to raw
materials and stock in the three godowns of plaintiff-Company
on 19th August 1987 as per Exhibit P6, and the said policy is
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pertaining to property situated at 534, factory godown,
Sherewad, Hubballi for Rs.2,00,00,000/-, No.123/143,
Jartargarh Building, Gabbur, i.e. A and B godowns for Rs.1.00
crore each and C godown for Rs.25.00 lakh and one more
godown, and the total sum insured as per Exhibit P6 is Rs.4.25
crore and the premium amount paid is Rs.3,27,037/-.
Accordingly, plaintiff-company is insured with defendant No.2-
Insurance Company for the materials worth of Rs.4,25,00,000/-
16. It is specific contention of the plaintiff that due to fire
accident that took place in the early hours on 23rd August 1997,
the entire material stocked in the A, B & C godowns worth
Rs.2,27,04,000/- got charred into ashes and in the said
accident, one of the directors of the plaintiff Company by name
Gautam Shantilal Mehta sustained severe burn injuries and
succumbed to same on 02nd September 1997 in the hospital.
Though the plaintiff-company had obtained insurance for the
said stock and paid a premium of Rs.3,44,250/-, due to the
said fire accident plaintiff-company suffered loss of raw
material worth Rs.227.04 lakh. The plaintiff-company claimed
interest on the said amount from 23rd August 1997 till filing the
suit in an extent of Rs.53,62,000/-; Rs.8,000/- towards
expenses; Rs.25.00 lakh towards tension and mental agony;
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and Rs.50.00 lakh towards loss of profit due to deliberate
inaction on the defendant-Insurance Company. In total, the
plaintiff has suffered a financial loss of Rs.3,53,70,000/-. When
the plaintiff has approached defendant claiming the loss caused
to it due to the fire accident, defendants illegally rejected the
claim of the plaintiff on the ground that the alleged claim is a
fraud, manipulated, created and falsely claimed though there
was no loss to that extent in the fire accident as is claimed.
The plaintiff-company has relied on Exhibits P1 to P7 to
substantiate its contention. Exhibit P1 is the Memorandum of
Association and Articles of Association of Jayavant Products
Limited; Exhibit P2 is the certificate issued by the Fire
Department about the fire accident that took place on 23rd
August 1997 in the godowns of plaintiff-Company in which it is
mentioned that about 110 lorry loads of Hill grass brooms, and
other raw materials were burnt; Exhibits P3 to P5 are the
Annual Reports of Jayavant Products Limited issued by Auditors
M/s. Shanti Lal Jain & Company for the years 1995-96, 1996-
97 and 1997-98, respectively; Exhibit P6 is the insurance
policy issued by the defendant in the name of plaintiff Company
through State Bank of Mysore, Main Branch, Hubballi; and
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Exhibit P7 is the copy of notice dated 21st July, 1998 issued by
defendant rejecting the claim of the plaintiff-company.
17. On the other hand, defendants have relied upon
number of documents. Out of them, Exhibit D1 is the letter
dated 29th December 1987 written by the plaintiff-company to
the Divisional Manager, United India Insurance Company
Limited for settlement of claim; Exhibit D2 is the list of
documents given to the Surveyor; Exhibit D3 is the signature of
Director on stock inspection report; Exhibit D4 is the cheque
dated 12th August 1997 issued by the plaintiff in favour of
defendant No.2 for Rs.2,42,393/-; Exhibit D5 is the Bank
endorsement whereby the cheque was returned for insufficient
funds; Exhibit D6 is the Claim Form for fire and allied perils
filled by the plaintiff-Company, where the name of the insured
is shown as plaintiff-company and insured amount
Rs.2,27,04,000/- item of raw material affected in fire in
godowns at Gabbur and the policy is valid for the period 19th
August 1997 to 18th August 1998; Exhibit D7 is the annexure to
claim giving godown-wise details about stock and nature;
Exhibit D8 is the file of plaintiff-company bearing purchase
invoices, bills of Northeast Transport Company including
payment details; Exhibit D9 is the investigation report of new
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Gabbur godowns of plaintiff-Company submitted by Shambhu
Alagundgi, an M.Sc. Graduate in Criminology and Forensic
Science; Exhibit D10 is another annexure to investigation
report and the fire accident at plaintiff-Company Gabbur
godown and contains Annexure 1 to 10 as mentioned in the List
of Annexures; Exhibit D11 is the joint survey report filed by Dr.
R.A. Srinivas and S Upendra with regard to claim of the
plaintiff-Company in view of the fire accident in the said
godowns; Exhibit D12 is the final report of the investigation
with regard to the claim of plaintiff-Company arising out of fire
accident in the godowns at Gabbur; Exhibits D13 to D47 are
vehicle details furnished by the Superintendent of Office of
Deputy Transport Commissioner, Eluru, WG district to Srivatsan
Surveyors Pvt Ltd, Chennai about the particulars of vehicles
used for purchase of raw materials. Exhibit D48 is a letter of
Range Forest Officer to the defendant No.2 in respect of
investigation issue of TTP issued by Jamsola, Check Gate;
Exhibit D49 is the true copy of Checking Register of Forest
products at Jamsola Check Gate addressed to the plaintiff-
Company.
18. PW1 has deposed in his evidence as to the complaint
averments.
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19. PW2 is the Regional Fire Officer, Hubballi who visited
the spot immediately after getting the information about the
fire accident at godowns of plaintiff-company. According to
PW2, it took about 42 hours to bring the fire under control and
since the Fire was 'A' class fire, six water tankers were used
continuously to extinguish the said fire, and due to pressure of
water, the raw materials and Hill grass gushed away with water
and due to fire, even the top of the godowns was damaged.
20. DW1-Bailur Padmanabha Bhatt in his cross-
examination has deposed that the policy of insurance was valid
from 19th August 1997 till 18th August 1988, and the value of
Policy was for Rs.4,25,00,000/-.
21. Defendants have not disputed the fire accident and
the certificate issued by this Station Fire Officer, which is
marked as Exhibit P2. It is also admitted by defendants that
they have not initiated any legal proceedings against the
plaintiff-company with regard to the alleged
fraud/misrepresentation of facts. Additionally, during the
course of arguments, the learned Counsel for the appellants
would submit that the appellants will not press the defence set
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up by the defendants as to the fraud alleged to have been
committed by the plaintiff-company.
22. Exhibit P12, being a public document issued by a
public servant in the discharge of his official duties, carries with
it a presumption of authenticity and regularity under the Indian
Evidence Act, 1872. In particular, Section 114(e) of the Act
mandates that the Court shall presume, unless the contrary is
proved, that official acts have been regularly performed. In the
present case, the defendants have failed to produce any
material evidence to rebut this statutory presumption. There is
nothing on record to suggest that the issuance of Exhibit P12
was irregular or tainted in any manner. Furthermore, the
evidence of PW2, who issued the certificate marked as Exhibit
P2, remains unshaken and stands corroborated by the final
investigation report. A careful examination of the documents
on record reveals no substantial ground to discredit the
testimony of PW2 or to discard the contents of Exhibit P2. On
the contrary, the plaintiff has supported its case with credible
and legally admissible evidence. The defendants have relied
upon Exhibit D10, a letter dated 24th September 1997, issued
by the Fire Station Officer, Karnataka State Fire Services, under
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Letter No.103:ಉಆ:ಹು ಾ/97, which is enclosed as Annexure-2.
This document records that approximately 110 lorry loads of
brooms and raw materials were destroyed in the fire accident.
Additionally, another letter dated 24th February 1998,
addressed by the same officer to Mr. Shambhu Alagundgi,
Investigating Officer of the United India Insurance Company
Limited, reiterates that around 110 lorry loads of brooms were
consumed in the fire. Significantly, these documents have not
been disputed or challenged by the defendants during trial.
Taking into account all the materials placed on record, the trial
Court has made a reasoned assessment of the loss suffered by
the plaintiff and quantified the damages at Rs.1.56 crore, along
with interest at the rate of 8% per annum. It is pertinent to
note that the defendants have not brought forth any evidence
to establish that the plaintiff-company failed to comply with
Clause 8 of the policy conditions. No cogent or convincing
evidence has been presented to demonstrate any violation of
the terms and conditions of the insurance policy by the plaintiff.
23. On the other hand, the plaintiff has led legally
acceptable evidence to prove that it suffered a loss of
approximately Rs.227.04 lakh due to the fire accident. This
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assessment is based on the report submitted by PW2. While the
trial Court could have awarded the full amount of Rs.227.04
lakh, it appears to have taken a balanced view by considering
not only PW2's report but also the testimonies of DWs 2 to 5
and Exhibit P5, the Annual Report of the plaintiff-company for
the financial year 1997-98, prepared by the Chartered
Accountants, M/s. Shanti Lal Jain & Company. On that basis,
the trial Court reasonably assessed the loss at Rs.1.56 crore.
This assessment is supported by the evidentiary material on
record and does not warrant any interference.
24. Even on re-appreciation, re-examination and re-
evaluation of the entire evidence on record, we do not find any
error or legal infirmities in the impugned Judgment and decree
passed by the trial Court. Hence, we answer Point No.1 in the
negative.
Regarding Point No.2:
25. For the aforestated reasons, we proceed to pass the
following:
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ORDER
1. Appeal dismissed;
2. Judgment and decree dated 31st August 2019
passed in Original Suit No.243 of 1998 by the
Principal Senior Civil Judge, Hubballi, is
confirmed;
3. Draw decree accordingly.
Sd/-
(SACHIN SHANKAR MAGADUM)
JUDGE
Sd/-
(G BASAVARAJA)
JUDGE
lnn
CT-CMU
