Madras High Court
M/S. United India Insurance Co. Ltd vs M/S.Thiruvannamalai Pothys on 5 January, 2024
Author: R.Subramanian
Bench: R.Subramanian
O.S.A.(CAD) No.131 of 2022
THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 05.01.2024
CORAM:
THE HONOURABLE MR. JUSTICE R.SUBRAMANIAN
AND
THE HONOURABLE MR. JUSTICE R.SAKTHIVEL
O.S.A.(CAD).No.131 of 2022
and
C.M.P.No.15206 of 2022
1.M/s. United India Insurance Co. Ltd.,
Registered Office,
No.24, Whites Road, Chennai – 600 014.
2.M/s. United India Insurance Co. Ltd.,
Branch Office,
No.95, First Floor, Big Street,
Thiruvannamalai. ...Appellants
Vs.
1.M/s.Thiruvannamalai Pothys,
Rep. by its Proprietor Mr.K.Sekar,
No.57A, Theradi Street,
Thiruvannamalai – 606601.
2.Bank of Baroda,
Rep. by its Branch Manager,
Thiruvannamalai Branch,
No.15, R.R.Complex, Polur Road,
Thiruvannamalai – 606601. ...Respondents
Prayer: Original Side Appeal (Commercial Appellate Division) filed under
1/16
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O.S.A.(CAD) No.131 of 2022
Section 13(1A) of the Commercial Courts Act, 2015 to set aside the
judgment and decree passed in C.S.No.444 of 2017 dated 21.06.2022 and
thereby dismiss the suit in C.S.No.444 of 2017 with costs.
For Appellants : Mr.N.Venkatraman
for M/s.Nageswaran and Narichania
For Respondents : Mr.M.Santhanaraman for R1
Ms.Revathi Manivannan for R2
******
JUDGMENT
(Judgment of the Court was delivered by R.SUBRAMANIAN, J.)
The Insurance Company is on appeal aggrieved by a decree for
payment of a sum of Rs.4,20,85,328/- with interest at 12% per annum on
Rs.2,25,23,012/- from the date of decree till date of realization.
2. The parties will be referred to as per the rank in the suit for the
purpose of convenience.
3. The suit in O.S.No.444 of 2017 was laid by the plaintiff seeking a
decree for a sum of Rs.6,82,49,000/- being the loss caused to the plaintiff
due to the fire accident that took place on 20.10.2014 in the textile
showroom belonging to the plaintiff. The plaintiff had taken insurance
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policy to cover the risk of loss by fire on 25.03.2014 and the said policy was
to be invogue till 24.03.2015. Claiming that the entire goods that were
stored in the showroom were lost because of the fire and adding the value of
other furniture and fittings that were there in the showroom, the plaintiff
sought for a decree for Rs.6,82,49,000/- as aforesaid. The Insurance
Company repudiated the liability on the ground that there is a breach of
policy condition, particularly policy condition No.3(a) and therefore the
Insurance Company was not liable. This repudiation triggered the suit.
4. The Insurance Company resisted the suit contending that there was
suppression of material facts by the plaintiff and the premises remained
closed for nearly 35 days, prior to the date of accident, since access to it was
barred by the building owner in a dispute between him and the plaintiff.
Terming it as violation of policy condition 3(a), the Insurance Company
contended that the repudiation is justified. It was also further contended that
the cause of the fire is not an accident and therefore the Insurance Company
cannot be held liable. The report of the surveyor was relied upon to
highlight the fact that the cause of the fire was not an accident.
5. On the above pleadings the Hon'ble Judge framed the following
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issues:-
(i) Whether the High Court has jurisdiction to try the
suit?
(ii) Whether the plaintiff is entitled to the claim under
the policy issued by the second defendant and whether the
plaintiff had acted in a diligent manner and maintained proper
stocks/ registers to prove the loss?
(iii) Whether there was breach of policy conditions by
the plaintiff as concluded by the second defendant?
(iv) Whether the third defendant is a necessary party to
the suit?
(v) Whether the repudiation of the claim by the
defendants was legal?
(vi) Whether the first and second defendants are liable
to be pay the suit claim?
(vii) To what reliefs are the parties entitled to?
6. On the jurisdiction, the Hon'ble Judge found that this Court has got
territorial jurisdiction and the said finding is not very seriously challenged in
the appeal. On issue No.4 regarding impleading of the Banker, the Hon'ble
Judge found that the said issue was framed prior to the impleading of the 3 rd
defendant Banker of the plaintiff and upon impleading, the necessacity to
dwell upon that issue do not arise. This left the Hon'ble Judge with issue
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Nos.2, 3, 5, 6 and 7.
7. Since Issue Nos.2, 3 and 5 were interconnected the Hon'ble Judge
dealt with them together and concluded that the failure on the part of the
plaintiff to have informed the Insurance Company about the closure of the
shop by the landlord, the expiry of the lease and the disconnection of the
power supply by the landlord would not amount to breach of policy
condition 3(a) and therefore the repudiation by the Insurance Company on
the ground of violation of policy condition 3(a) is not justified. As regards
condition 3(b) which relates to closure of the shop, the Hon'ble Judge as of
fact found that the said condition was deleted. On the finding that there was
no breach of policy conditions, the Hon'ble Judge concluded that the
Insurance Company would be liable to discharge the claim and the
repudiation was not justified.
8. Addressing the quantum, the Hon'ble Judge found that the evidence
placed by the plaintiff cannot be accepted, since supporting materials in the
form of stock registers were not produced. He however went by the
Surveyor's report which assessed the value of the goods damaged at
Rs.2,25,23,012/- and held that the plaintiff would be entitled to the amount
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of loss as certified by the Surveyor. As a sequitur to the above finding, a
decree followed, leading to this appeal by the Insurance Company.
9. We have heard Mr.N.Venkatraman, learned counsel for
M/s.Nageswaran and Narichania appearing for the appellants,
Mr.M.Santhanaraman, learned counsel appearing for the 1st respondent and
Ms.Revathi Manivannan, learned counsel appearing for the 2nd respondent
Bank.
10. Mr.N.Venkatraman, learned counsel appearing for the appellants
would vehemently contend that the Hon'ble Judge erred in concluding that
there was no violation of the policy condition 3(a), he would invite our
attention to the judgment of the Hon'ble Supreme Court in Isnar Aqua
Farms Vs. United India Insurance Co. Ltd., reported in 2023 SCC OnLine
SCC 945, wherein, the Hon'ble Supreme Court had reiterated the well settled
principle of Insurance Law that an utmost good faith is expected from both
the parties to the contract. Specific attention is drawn to paragraph No.12 of
the said judgment which reads as follows:-
12. Be in noted, in General Assurance Society Limited v.
Chandumull Jain [AIR 1966 SC 1644], a Constitution Bench
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had observed, in the context of the insured, that uberrima fides,
i.e., good faith, is the requirement in a contract of insurance.
More recently, in Jacob Punnen v. United India Insurance
Company Limited [(2022) 3 SCC 655], this Court affirmed and
reiterated the edict laid down earlier in Modern Insulators
Limited v. Oriental Insurance Company Limited [(2000) 2 SCC
734], that it is the fundamental principle of insurance law that
utmost good faith must be observed by the contracting parties;
that good faith forbids either party from non-disclosure of the
facts which the party knows; and that the insured has a duty to
disclose and similarly it is the duty of the insurance company
to disclose all material facts within their knowledge since the
obligation of good faith applies to both equally. This
obligation and duty would rest on both parties not only at the
inception of the contract of insurance but throughout its
existence and even thereafter.
11. The learned counsel would also further contend that the plaintiff
having failed to report the factum of expiry of the lease, the closure and the
dis-connection of electricity supply to the premises is guilty of suppressing
material facts which would have an effect on the perils insured. The learned
counsel would fault the Hon'ble Judge for concluding that non-disclosure of
these facts would not have an effect on the peril and therefore such non-
disclosure cannot be a ground for repudiation of the policy.
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12. On the value of damages, the learned counsel would contend that
the Hon'ble Judge having disbelieved the evidence that was placed by the
plaintiff, regarding the value of the goods that were stored during the date of
accident, ought not to have decreed the suit going by the surveyor's report.
It is the contention of the learned counsel that once the plaintiff has failed to
discharge the burden to prove the quantum of loss, the Court cannot fall
back on the evidence of the defendants to grant a decree.
13. Contending contra Mr.M.Santhanaraman, learned counsel
appearing for the 1st respondent would submit that no doubt, an insurance is
the contract based on good faith, but, at the same time, a non-disclosure in
order to render the policy voidable should be on a material fact which will
have an impact on the peril that is insured. Unless it is shown that non-
disclosure increases the chances of peril or there is a non-disclosure with
reference to a very material fact, the insured cannot be said to have
committed breach of clause 3(a) and hence the Insurance Company cannot
be absolved of its liability on the basis of non-disclosure of a fact which is
not vital.
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14. Addressing the issue relating to burden of proof, the learned
counsel would submit that in a civil dispute, the Court can go by
preponderance of probability and once the fact that there was an accident in
a textile showroom and the fact that there were goods inside is established,
the rejection of evidence of the plaintiff regarding valuation of the goods, by
itself cannot non-suit the plaintiff. If some other evidence is available, it
was open to the Court to look into that evidence and base its conclusion on
that evidence. The learned counsel would submit that this is the exercise
that had been carried out by the Hon'ble trial Judge and he having gone by
the surveyor's report there is no ground for interference with the said finding
of the Hon'ble Judge.
15. We have considered the rival submissions.
16. From the arguments of the learned counsel on either side, the
following points arise for determination:
1. Whether there is a breach of condition 3(a) by the
Insured.
2. Whether the trial Judge was right in basing his finding
relating to the loss on the report of the Surveyor.
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POINT NO.1:
17. The policy condition Nos.1, 3(a) and 3(b) reads as follows:-
1. This policy shall be voidable in the event of mis-
representation, mis-description or non disclosure of any
material particulars.
3. Under any of the following circumstances the
insurance ceases to attach as regards the property affected
unless the insured, before the occurrence of any loss or
damage, obtains the sanction of the company signified by
endorsement upon the policy by or on behalf of the company:-
(a) If the trade or manufacture carried on be altered, or
if the nature of the occupation of or other circumstances
affecting the building insured or containing the insured
property be changed in such a way as to increase the risk of
loss or damage by insured perils.
(b) If the building insured or containing the insured
property becomes unoccupied and so remains for a period of
more that 30 days (this condition is not applicable to
dwellings).
18. On an assessment of the evidence, the Hon'ble Judge has found
that the first limb of 3(a) is not attracted viz., the trade or manufacture
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carried on in the premises is not altered. As far as the second limb is
concerned, the Hon'ble Judge found that the fact that the lease had expired
and the possession of the plaintiff became as one of the tenant holding over
instead of tenant is not something that would materially alter the risk of the
Insurance Company. As regards the disconnection of electricity supply also,
the Hon'ble Judge concluded that it would not increase the peril, but, it
would have an effect of decreasing the peril. On the closure of the premises
for more than 30 days it was found that since 3(b) stood deleted the same
cannot be a ground to repudiate the policy.
19. It is this finding of the Hon'ble Judge which is challenged by the
learned counsel for the appellants contending that once there is a suppression
of some information, be it material or not and irrespective of weather it will
have an effect of increasing the chances of peril, the Insurance Company
will have a right to repudiate the policy.
20. We are unable to subscribe to the said contention of the learned
counsel. A policy of the Insurance Company covers a particular risk and
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clause 3(a) sets out a requirement or a duty of the insured. As rightly held by
the Hon'ble Judge it is not enough for the Insurance Company to show that
there was a failure on the part of the insured to provide information to it
which would go one step further and show that the aspect or the fact which
was kept away from the Insurance Company had a direct link to the chances
of peril and increased the possibilities of the accident. Unless it is shown that
the fact that was not intimated to the Insurance Company had a direct link or
a direct effect on the peril covered, it cannot be said that there was a
violation of condition 3(a). We have no quarrel with the proposition of law
that contract of insurance being a contract in good faith, there is a duty on
the part of the insured as well as the insurer to act in good faith throughout
its subsistence. But, that by itself would not in our considered opinion
enable the Insurance Company to repudiate a policy on flimsy reason of non
information.
21. The Hon'ble Judge has taken pains to examine the evidence on
record, advert to each and every condition that occurs in condition 3(a) and
conclude that none of the circumstances pointed out would have an effect of
increasing the chances of peril and therefore it would not amount to
suppression of material information within the meaning of condition 3(a).
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We see no reason to disagree with the Hon'ble Judge on the said conclusions.
POINT NO.2:-
22. On the quantum, the insured viz., the plaintiff claimed a sum of
Rs.6,82,49,000/-. He produced some evidence in the form of purchase bills
to show the availability of the materials. The Hon'ble Judge disbelieved that
evidence since it was not supported by any corroborative material in the
form of stock register. Possibility of the plaintiff having sold some of those
goods was also not ruled out. Therefore, the evidence offered by the
plaintiff on the quantum of loss was not accepted. The Hon'ble Judge went
by the surveyor's report and concluded that since the surveyor quantified the
loss at Rs.2,25,23,012/-, the plaintiff would be entitled for a decree for the
said amount with 12% interest.
23. Mr.N.Venkatraman, learned counsel appearing for the appellants
would vehemently contend that having held that the plaintiff has not proved
the value of the goods that were damaged, the Court was not right in relying
upon the surveyor's report to grant a decree in favour of the plaintiff.
24. The learned counsel would contend that the plaintiff has not
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discharged the burden of proving the loss. This submission of the learned
counsel in our opinion overlooks the fact that the proof of loss is one thing
and proof of quantum of loss is another. As regards proof of loss there is
overwhelming evidence available in the case on hand. The fact that the
plaintiff was conducting textile business was not in dispute. The fact that a
fire accident occurred is not in dispute. Therefore, the fact that there was a
loss cannot be disputed. It is only the quantum of loss that is to be proved.
The plaintiff has placed some evidence on the quantum of loss. That
evidence has been rightly rejected by the Hon'ble Judge for want of
supporting materials. The surveyor's report is also evidence. Though it has
been produced by the defendant it could be looked into for the purpose of
ascertaining the quantum of loss.
25. As we had already pointed out, in civil cases, the Court can go by
preponderance of probabilities and strict proof or proof beyond doubt is not
required. There is some evidence to show that there has been loss and
quantum of loss is Rs.2,25,23,012/-. There is no suggestion by the Insurance
Company that the assessment of the quantum of the loss by the surveyor is
flawed for some reason or the other. The surveyor has been cross-examined
by the plaintiff at length on the valuation and his evidence, in our opinion,
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supports the report and there is no reason for us to take a contra view.
26. We are therefore unable to conclude that the Hon'ble Judge had
erred in accepting the surveyor's report on the quantum of loss. We therefore
do not see any reason to interfere with the judgment and decree of the
Hon'ble Judge. The appeal fails and it is accordingly dismissed. No costs.
Consequently, the connected miscellaneous petition is closed.
(R.S.M.,J.) (R.S.V,J.)
05.01.2024
dsa
Index :No
Internet :Yes
Neutral Citation :No
Speaking order
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R.SUBRAMANIAN, J.
and
R.SAKTHIVEL, J.
dsa
05.01.2024
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