The New India Assurance Company ... vs M/S. Sri Naga Durga Silk Reeling ...
2023 Latest Caselaw 2941 Tel

      HONOURABLE SMT. JUSTICE P.SREE SUDHA

                APPEAL SUIT No.645 of 2008

JUDGMENT:

This appeal is filed by the defendant aggrieved by the

judgment and decree, dated 17.01.2008, passed in O.S.No.08

of 2004 on the file of the II-Additional District Judge,

Nalgonda at Suryapet.

2. Appellant herein is defendant and respondent herein

is plaintiff in the suit. The parties will be referred to as

arrayed before the trial Court.

3. The backdrop of the case leading to filing of this

appeal is as under:

M/s Sri Naga Durga Silk Reeling Industry, Dorakunta

(Plaintiff) filed the suit for recovery of policy amount of

Rs.13,83,380/- from the New India Assurance Company

Limited, Nalgonda (Defendant) with pendente lite and future

interest at 9% per annum.

Brief averments of the plaint are as under:

PSS, J A.S.No.645 of 2008

The proprietor of the plaintiff industry, namely,

Gangireddy Adinarayana Reddy ran the industry having

purchased the land, building, plant and machinery in an

auction held by the APSFC in the year 1997. Earlier the said

industry was run by M/s Venkateswara Silk Reeling

Industry and as they fell in arrears of certain amounts to the

APSFC, the said unit was seized under Section 29 of S.F.C.

Act and sold it to the said G.Adinarayana Reddy. Later, the

plaintiff took policy from the defendant for a sum of

Rs.16,00,000/- with Policy No.1161010606186 valid for 12

months commencing from 31.10.1998 to 30.10.1999. The

policy was for the coverage of any risk in respect of the

building, machinery and accessories and stock of silk, yarn

etc., and out of the said amount of Rs.16,00,000/-,

Rs.12,00,000/- was towards building; Rs.3,00,000/- towards

machinery and accessories and Rs.1,00,000/- towards stock

of silk, yarn etc., The plaintiff paid Rs.12,432/- towards

premium. It is further stated that on 17.11.1998 at about PSS, J A.S.No.645 of 2008

11.30 P.M. the factory premises caught fire due to some

explosion, as a result of it, the building was collapsed,

machinery and stocks were extensively damaged.

Thereafter, the plaintiff lodged a report before Kodad Rural

Police Station and the police registered a case in Crime

No.154 of 1998 for the offence punishable under Section 3 of

the Indian Explosive Substances Act. However, the police

filed a charge sheet against the proprietor of the plaintiff

industry and four others for the offences punishable under

Sections 3 and 5 of the I.E.S. Act. The proprietor of the

plaintiff industry was confined in jail and after his release,

he made a claim petition before the defendant company

requesting to pay the policy amount. In the last week of

September, 1999, the defendant sent a letter dated

02.03.1999 stating that the damage caused to the plaintiff's

industry was not unforeseen and it was fraudulent and so

the claim was closed. Thereafter, the proprietor of the

plaintiff industry was acquitted by the learned Assistant PSS, J A.S.No.645 of 2008

Sessions Judge, Suryapet, vide judgment dated 12.02.2002,

passed in S.C.No.649 of 2000, and after his acquittal, he

again approached the defendant along with a copy of the

said judgment and requested the defendant to pay the

policy amount. However, the defendant through a letter

dated 04.06.2002 refused to pay the same stating that the

claim was closed and no further correspondence is

entertained on the subject. It is further stated that refusal to

pay the amount on the ground of fraud is arbitrary and

illegal. The plaintiff got estimated the damage caused to the

factory by an architect vide his report dated 30.11.1998. The

loss sustained by the plaintiff was to a tune of

Rs.10,52,000/- and since the defendant failed to pay the

amount immediately after the claim, the plaintiff is also

entitled to claim interest over the said amount at 9% per

annum from January 1999 to 30.06..2002 and thus the

plaintiff is entitled to recover an amount of Rs.13,83,380/-

from the defendant.

PSS, J A.S.No.645 of 2008

4. In the written statement, the defendant admitted with

regard to the coverage of policy of the plaintiff from

31.10.1998 to 30.10.1998 and also the payment of premium

amount. It is contended that the defendant had no

knowledge about the criminal case against the plaintiff.

After receipt of application of the plaintiff on 01.12.1996, the

defendant deputed a Surveyor on 03.12.1998 to estimate the

loss, who gave his report on 23.02.1999 stating that the loss

was not genuine and it was due to wilful act by the insured.

Basing on the said report, the defendant addressed a letter

on 02.03.1999 stating that the company was unable to settle

the claim as per the details of the Surveyor's report and the

same was not claimed by the plaintiff. On 19.10.2000, the

plaintiff gave a letter requesting to furnish a copy of the

letter dated 02.03.1999 and accordingly the same was

furnished to the plaintiff and that the plaintiff failed to give

information to the company immediately. It is further

contended that on 19.11.1999, a news item was published in PSS, J A.S.No.645 of 2008

Eenadu and Vartha Telugh daily Newspapers that the

plaintiff himself responsible for explosion in the factory.

The plaintiff again gave a letter on 21.05.2002 by enclosing a

copy of the judgment in S.C.No.649 of 2000 asking the

reason as to why the claim was not settled. After going

through the judgment and letter of the plaintiff, the

defendant replied that the claim was closed as 'No Claim'.

Therefore, it is prayed to dismiss the suit with exemplary

costs as the plaintiff suppressed the real facts.

5. During trial, on behalf of the plaintiff, P.Ws.1 to 3

were examined and got marked Exs.A-1 to A-6. On behalf

of the defendant, D.W.1 was examined and got marked

Ex.B1.

6. The trial Court, after considering the entire evidence,

both oral and documentary, and the respective contentions

of the learned Counsel appearing on either side, decreed the

suit with costs for Rs.13,83,380/- with subsequent interest at PSS, J A.S.No.645 of 2008

6% per annum on the principal amount of Rs.10,52,000/-

from the date of plaint till the date of realization.

7. Aggrieved by the aforesaid judgment and decree of

the trial Court, the present appeal has been preferred by

defendant, inter alia, contending that the claim was

repudiated on 02.03.1999 itself and hence the suit is barred

by limitation as it was filed on 23.09.2002. Merely because

the copy of the letter dated 02.03.1999 was received on

19.10.2000, it will not save the limitation. As per the terms

of the policy, in case of any disclaim, the suit has to be filed

in 12 months. Since the plaintiff failed to file the suit within

the stipulated time, the Insurance Company is not liable for

any loss or damage. It is further contended that the entire

claim was made by playing fraud and mere acquittal of the

plaintiff by the criminal Court in S.C.No.649 of 2000, is not

sufficient to hold that there is no fraud played by the

plaintiff on the Insurance Company. As per the decision of

the Supreme Court in 2006 (1) IAC 260, the Insurance PSS, J A.S.No.645 of 2008

Company can appoint the Surveyor and can act upon

irrespective of the investigation by the police. The trial

Court failed to see that stock register was not filed and Sales

clerk was not examined to prove the quantum. It is further

contended that the Surveyor need not give any notice and

even otherwise, when the Surveyor has inspected the

premises itself is enough to say that the plaintiff has got

notice of the survey. The trial Court failed to see that the

amount cannot be fixed on the estimation and valuation

certificate and that the plaintiff failed to prove the extent of

loss caused due to the accident. The trial Court also failed

to see that the claim of interest at 12% per annum on

Rs.10,52,000/- from January, 1999 to 30.06.2002 is incorrect.

It is further contended that as per the terms of the policy,

the insured has to inform as soon as possible about the

alleged loss, but not later than seven days. Therefore, he

requested the Court to set aside the impugned judgment of

the trial Court.

PSS, J A.S.No.645 of 2008

8. Heard the learned Counsel appearing on either side

and perused the entire material available on record.

9. The proprietor of the plaintiff industry, who was

examined as P.W.1, filed his chief-examination affidavit

reiterating the contents of the plaint. In the cross-

examination, he admitted that he was in jail for about eight

days. He also admitted that the accident took place on

17.11.1998 and he informed the same to the defendant on

the next day morning by phone. He further stated that he

intimated the accident to the defendant in writing on

30.11.1998. He denied the suggestion that after receipt of

written intimation, the Insurance Company deputed a

Surveyor on 03.12.1998. He admitted that he got surveyed

the loss by a private surveyor on 30.11.1998. It was

suggested to him that to avoid his liability to S.F.C, he got

created the accident and committed fraud and that the

Insurance Company repudiated his claim basing on the PSS, J A.S.No.645 of 2008

report of the Surveyor, but he denied the same. It was also

suggested to him that his claim was barred by limitation,

but he denied the same.

10. One K.Chalapathi Rao, who worked as a Watchman

in the plaintiff factory from June, 1997 to November, 1998,

was examined as P.W.2 and he stated in his chief-

examination that he along with his wife used to stay in the

factory premises in a Shed and on 17.11.1998 at about 11 or

11.30 P.M. while they were sleeping, they heard a bomb

sound and they woke up and found the building collapsing

and that they went to Kodad at about 1.30 A.M. on the same

night and informed about the explosion to P.W.1 and P.W.1

came to the factory and saw the exploded premises.

Thereafter, P.W.2 went to Rural Police Station, Kodad and

reported the matter and that the police came to the factory

premises in the early hours of 18.11.1998, conducted

panchanama and examined him and his wife and recorded PSS, J A.S.No.645 of 2008

their statements. He further stated that the factory was

exploded by some unknown miscreants, however, the

police without proper verification arrested P.W.1 and after

eight days he was released and that due to explosion, P.W.1

sustained huge loss. In the cross-examination, he stated that

the factory ran for 1 ½ years and he informed the incident to

the owner of the factory at Kodad in the night itself and that

he gave evidence in criminal case. It was suggested to him

that his owner and others arranged bombs and blasted the

factory to avoid loan amount to S.F.C., but he denied the

same.

11. P.W.3, who was running business under the name and

style of 'Vasthu Nerman' at Kodad since 1987, stated in his

evidence that he undertakes to value, estimate and planning

of the buildings and constructions and that he is a

recognized Valuer of the damaged structure. He further

stated that at the request of P.W.1, he has inspected his PSS, J A.S.No.645 of 2008

damaged industry and building on 29.11.1998 and found

the building collapsed due to some explosion and he has

estimated the damage to a tune of Rs.9,52,000/- and issued

Ex.A2/Valuation Certificate along with the estimation of

the damaged parts to the plaintiff on 30.11.1998. In the

cross-examination, he stated that he is having registration

certificate on the subject and he inspected the premises

about ten days after the accident and that he verified the

quotations and bills in respect of machinery. He denied the

suggestion that he gave Ex.A2 in order to help the plaintiff.

12. D.W.1, who is working as an Insurance Surveyor for

the past 18 years, has stated in his evidence that, on

03.12.1998, defendant company deputed him to estimate the

loss of plaintiff Industry and submit a report and

accordingly he visited the Industry and found that the

insured was not present and he failed to give any

information regarding the loss and estimation. He made PSS, J A.S.No.645 of 2008

enquiries with the local people and also with the help of

daily Telugu Newspapers, he came to know that the

plaintiff was arrested as he was the cause for the explosion

of his own factory. He could not get any assistance from

anybody and the factory was closed when he visited the

premises and nobody was there to give any information and

that basing on the local enquiries and with the help of paper

news, he came to the conclusion that the loss was not

genuine and it was due to willful act of the insured and

accordingly he submitted his report on 23.02.1999. In the

cross-examination, he stated that he is a licensed surveyor,

but he has not filed his license in the Court. He stated that

on the oral instructions of the defendant company, he

conducted the survey and in Ex.B1, he has not at all

assessed the loss. He has issued a notice to P.W.1 in the

month of January, 1999 and he has submitted the

acknowledgment to the Insurance Company. Before

conducting survey, he has not issued any notice to the PSS, J A.S.No.645 of 2008

plaintiff and nobody was present when he inspected the

premises. He has not recorded the statements of neighbours

and that he has not examined any newsagents of Eenadu

and Vaartha. He prepared his report in the month of

February, 1999. He has taken photographs of the collapsed

building.

13. The Point that arises for consideration is whether the

judgment of the trial Court is on proper appreciation of

facts or not?

14. There is no dispute regarding the fact that the plaintiff

Industry has obtained a "Fire Accident Policy" from the

defendant company for one year commencing from

31.10.1998 to 30.10.1999 and paid the premium amount.

The case of the plaintiff is that some miscreants have

exploded his factory on the night of 17.11.1998, which was

informed by his Watchman (P.W.2) and thereafter he

lodged a complaint before the police, Kodad Rural Police PSS, J A.S.No.645 of 2008

Station and the same was registered as a case in Crime

No.154 of 1998. He further stated that the police, without

making proper investigation, filed charge sheet against the

plaintiff and four others for the offences punishable under

Sections 3 and 5 of Explosive Substances Act and the same

was numbered as S.C.No.649 of 2000 and after conducting

trial, the learned Assistant Sessions Judge, Suryapet,

acquitted the plaintiff and others for the offences with

which they were charged vide judgment dated 12.02.2002.

On the other hand, the defendant contended that

immediately after the knowledge of the accident, the

defendant company deputed D.W.1-Surveyor to estimate

the loss of the plaintiff's industry, and accordingly, he

visited the industry, inquired with the local people, verified

the news items published in Eenadu and Vaartha, and

submitted a report under Ex.B1 stating that the plaintiff

alone exploded his own factory, and as such, the insurance

company is not liable to pay the insurance amount.

PSS, J A.S.No.645 of 2008

15. In fact, the duty of the Surveyor is to assess the loss,

but in Ex.B1/Survey report, he has not assessed the loss and

simply he gave opinion that the plaintiff was responsible for

the fire accident. Learned Counsel for the

appellant/defendant relied upon a decision of the Supreme

Court in Sonell Clocks and Gifts Ltd., Vs. New India Assurance

Co. Ltd., 1, wherein it was held as under:

"Suffice it to observe that Galada's case, (2016) 14 SCC 161, will be of no avail to the facts and circumstances of the present case. In this case, the event occurred on 04.08.2004, but intimation was given to the insurer only on 30.11.2004 after a gap of around 3 months 25 days. No explanation was offered for such a long gap much less plausible and satisfactory explanation. The stipulation in condition No.6 of the policy to forthwith give notice to the insurer is to facilitate the insurer to make a meaningful investigation into the cause of damage and nature of loss, if any. This Court in Parvesh Chander Chadha, MANU/SC/1343/2010, has held that it is the duty of insured to inform the loss forthwith after the incident."

16. Learned Counsel for the appellant/defendant

contended that the defendant company can verify the cause

2018 ACJ 2672 PSS, J A.S.No.645 of 2008

of the blast by an independent inquiry through their

surveyor, and as such, even if the plaintiff was acquitted in

a criminal case, they are not liable to pay the compensation.

The contention of the appellant's counsel is not at all

sustainable because the surveyor (D.W.1) simply enquired

the local people and relied upon the newspaper clippings

and held that the plaintiff alone exploded the factory. Even

the police registered a case against the plaintiff and others

with the same suspicion. However, after conducting a full-

fledged trial in S.C. No. 649 of 2000, the learned Assistant

Sessions Judge, Suryapet, acquitted the plaintiff and others,

vide judgment dated 12.02.2002, as the plaintiff was not

responsible for the fire accident. Once the plaintiff was

acquitted by the Criminal Court, it cannot be said that the

report of the Surveyor (D.W.1) under Ex.B1 stands on a

higher footing than the judgment of the Criminal Court.

PSS, J A.S.No.645 of 2008

17. Learned Counsel for the appellant/defendant further

argued that as per the terms of the policy, the insured has to

inform as soon as possible about the alleged accident, but

not later than 7 days. He further contended that the

plaintiff gave information only after judgment of acquittal

in S.C.No.649 of 2000 dated 12.02.2002 and thus the suit of

the plaintiff is barred by limitation. From a perusal of the

written statement filed by the defendant, it is clear that the

defendant himself admitted that the application for claim

was submitted by the plaintiff on 30.11.1998 with a delay of

12 days from the date of accident and the defendant

received the said application on 01.12.1998 and thereafter

deputed the Surveyor on 03.12.1998 to estimate the loss. In

fact, immediately after the fire accident, the plaintiff was

confined in jail for seven days. The plaintiff, who was

examined as P.W.1, in his cross-examination stated that the

accident took place on 17.11.1998 and that he informed the

same to the defendant on the next day of the accident by PSS, J A.S.No.645 of 2008

phone and also gave an application to the defendant in

writing on 30.11.1998. As the plaintiff was confined in jail,

he could not give the application for claim in writing

immediately after the accident. Therefore, the delay in

giving the application is not willful and it is beyond his

control. Therefore, the argument of the learned Counsel for

the appellant/defendant that the application for claim was

not submitted by the plaintiff within seven days as per the

terms of the policy is not tenable. Basing on Ex.B1-report of

D.W.1/Surveyor dated 23.02.1999, the claim of the plaintiff

was repudiated by the defendant vide letter dated

02.03.1999. Thereafter, the plaintiff submitted another letter

on 21.05.2002 to reconsider his claim by duly enclosing

Ex.A5-certified copy of the judgment of acquittal passed in

S.C.No.649 of 2000. However, the defendant has not

considered the same vide Ex.A4-letter dated 04.06.2002,

which reads as follows:

PSS, J A.S.No.645 of 2008

"This has reference to your letter dated 14th May, 2002 and the same is received by us on 21st May 2002 in regard to your Fire Claim lodged in December, 1998 and in this connection, we have to state that we have already written a letter dated 2nd March, 1999 to you, wherein it has been clearly mentioned that the claim is closed as 'NO CLAIM' and no further correspondence is entertained on the subject."

18. D.W.1-Surveyor appointed by the defendant-

Insurance company has not assessed the loss under Ex.B1-

Survey report. The plaintiff examined P.W.3, who is a

recognized Valuer of the damaged structures etc., He

stated that on the request of the plaintiff, he has inspected

the damaged industry and building of the plaintiff on

29.11.1998 and assessed the damage to a tune of

Rs.9,52,000/- for the building and machinery under Ex.A2-

Valuation Certificate. He stated that he was having

registration certificate and that he verified the quotations

and bills in respect of the machinery and assessed it

properly. He further stated that he was running business

under the name and style of 'Vasthu Nerman' at Kodad

since 1987 and he undertakes to value, estimate and PSS, J A.S.No.645 of 2008

planning of the building and constructions and that he was

a recognized Valuer of the damaged structures etc.

Therefore, the damage assessed by P.W.3 under Ex.A2-

Valuation certificate was rightly considered by the trial

Court for granting damages to the plaintiff. Though D.W.1-

Surveyor was deputed by the defendant on 03.12.1998 to

estimate the loss and D.W.1 submitted his report on

23.02.1999, the defendant company has not paid

compensation to the plaintiff even after he approached the

Court and as such the trial Court rightly granted interest as

claimed by the plaintiff.

19. Admittedly, Ex.A1-Fire Accident Policy was in

existence as on the date of accident and premium amount

was paid by the plaintiff. Initially, the plaintiff was

suspected for causing explosion to his own factory.

However, he was acquitted in the criminal case after a full-

fledged trial. But, the defendant company did not consider PSS, J A.S.No.645 of 2008

the same and they simply tried to avoid its liability to pay

the compensation on one pretext or the other. The

defendant company simply repudiated the claim on the

ground that the plaintiff alone exploded his own factory

and as such he played fraud upon the defendant company.

As per the evidence of D.W.1 and Ex.B1-Surveyor report, it

cannot be said that the plaintiff alone exploded the factory

in order to get the insurance amount. As per Ex.A5-

judgment in S.C.No.649 of 2000, it is evident that the

plaintiff was not responsible for the fire accident. Further,

the defendant-company should have deputed the Surveyor

and got inspected the factory premises of the plaintiff

immediately after the accident to know the exact loss or

damage caused to the factory of the plaintiff, but they failed

to do so and as such they cannot dispute Ex.A2-Valuation

Certificate issued by P.W.3.

PSS, J A.S.No.645 of 2008

20. In view of the foregoing reasons, I find that the trial

Court, after evaluating the entire evidence both oral and

documentary, rightly decreed the suit of the plaintiff.

21. However, the evidence of P.W.3-Recognized Valuer of

the damaged structures etc., would disclose that the

plaintiff sustained loss of Rs.9,52,000/- for the building and

machinery under Ex.A2-Valuation Certificate dated

30.11.1998. But, in the plaint it was wrongly mentioned as

Rs.10,52,000/- by the plaintiff and claimed interest at 9% per

annum on Rs.10,52,000/- from January, 1999 to 30.06.2002,

and filed the suit for recovery of an amount of

Rs.13,83,380/-. The trial Court also decreed the suit for an

amount of Rs.13,83,380/- without applying its mind.

Therefore, this Court finds that the judgment of the trial

Court needs to be modified as under:

22. This Court is of the considered view that the loss

sustained by the plaintiff was to a tune of Rs.9,52,000/- and PSS, J A.S.No.645 of 2008

he is also entitled to pendente lite interest at 9% per annum

on the said amount from January, 1999 to 30.06.2002, which

comes to Rs.2,99,880/-, and thus the plaintiff is entitled to

recover an amount of Rs.9,52,000/- + Rs.2,99,880/- =

Rs.12,51,880/-. Hence, the suit is decreed with costs for

Rs.12,51,880/- with subsequent interest at 6% per annum on

the principal amount of Rs.9,52,000/- from the date of plaint

till the date of realization.

23. Accordingly, the Appeal Suit is dismissed with the

above modification. There shall be no order as to costs.

Miscellaneous petitions, if any, pending, shall stand

closed.

_______________________ JUSTICE P.SREE SUDHA

06.10.2023 Gsn.