Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 83 OF 2023
(@ SLP(C) NO. 9049 OF 2021)
M/s Oswal Plastic Industries ...Appellant(S)
Versus
Manager, Legal Deptt N.A.I.C.O. Ltd. ...Respondent(S)
J U D G M E N T
M. R. Shah, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 20.02.2019, passed by the
National Consumer Disputes Redressal Commission, New
Delhi (hereinafter referred to as the NCDRC) in First
Appeal No. 207/2015, by which the NCDRC has set aside
the order passed by the State Consumer Disputes
Redressal Commission, Punjab (hereinafter referred to as
the State Commission) and has modified the same to the
extent that the insurance company shall be liable to pay
Signature Not Verified
Digitally signed by R
Natarajan
Date: 2023.01.13
16:29:12 IST
Reason:
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only Rs. 12,60,000/ instead of Rs. 29,17,500/, the
original complainant has preferred the present appeal.
2. That the appellant herein obtained Standard Fire and
Special Perils Policy with effect from 02.07.2009. The sum
insured was Rs. 2.50 crores. According to the appellant,
the policy was on reinstatement value. The policy was
enhanced to Rs. 4.50 crores. That during the validity
period of policy i.e., on 17.10.2009 fire broke out in the
factory premises resulting into loss of material, stock, and
machinery of the value of Rs. 76,64,000/. The surveyor
appointed by the insurance company observed/assessed
as such the loss on reinstatement value basis at Rs.
29,17,500/ and on depreciated value at Rs. 12,60,000/.
The insurance company despite the reports of the surveyor
and investigator repudiated the claim. The appellant
herein – original complainant filed the complaint before the
State Commission, interalia , seeking a claim of Rs.
76,64,000/ together with interest. It was the case on
behalf of the complainant that the complainant had
purchased the machinery to replace the damaged
machinery at the cost of Rs. 1,34,07,836/. The State
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Commission vide order dated 10.11.2014 relying upon the
surveyor report and the loss assessed by the surveyor on
the basis of the reinstatement value awarded a sum of Rs.
29,17,500/ together with 9% interest from the date of
repudiation letter dated 28.10.2010. The State
Commission also awarded Rs. 1 lakh as compensation and
Rs. 11,000/ as litigation expenses. At this stage, it is
required to be noted that though the original complaint
was for Rs. 76,64,000/, however, in view of surveyor
report and on reinstatement value determined at Rs.
29,17,500/, the State Commission awarded Rs.
29,17,500/ being reinstatement value. The order passed
by the State Commission was the subject matter of appeal
by the insurance company before the NCDRC. By the
impugned judgment and order, the NCDRC has allowed
the said appeal and has modified the order passed by the
State Commission awarding Rs. 12,60,000/ along with
interest @ 7% from Rs. 29,17,500/ by observing that the
complainant shall be entitled to the depreciated value and
not the reinstatement value. The NCDRC also set aside the
award of compensation of Rs. 1 lakh.
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2.1 Feeling aggrieved and dissatisfied with the impugned
judgment and order passed by the NCDRC awarding Rs.
12,60,000/ only instead of Rs. 29,17,500/ i.e., awarding
depreciated value and not the reinstatement value, the
original complainant has preferred the present appeal.
3. Shri Jay Savla, learned Senior Advocate appearing on
behalf of the appellant herein – original complainant has
vehemently submitted that the impugned judgment and
order passed by the NCDRC awarding depreciated value
and not the reinstatement value is just contrary to Clause
9 of Section 2 of the insurance policy.
3.1 It is submitted that as such the surveyor assessed the loss
on reinstatement basis at Rs. 29,17,500/. It is submitted
that therefore, as such the repudiation was rightly held to
be improper.
3.2 It is submitted that as such the complainant had
purchased the new machinery in view of five machines
being gutted in fire and therefore, the State Commission
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was absolutely justified in awarding Rs. 29,17,500/ being
reinstatement value on the basis of the surveyor report.
3.3 Relying upon Clause 9 of Section 2 of the policy, it is
vehemently submitted that the complainant shall be
entitled to the reinstatement value. It is submitted that the
NCDRC has wrongly reduced the claim to Rs. 12,60,000/
by misinterpreting Clause 9 of Section 2 of the policy. It is
submitted that as such the said clause 9 shall not have
any relevance. It is submitted that it only gives option to
the insurance company to reinstate or replace the
damaged/destroyed property. It is submitted that as the
company has not reinstated the property, the clause itself
was not applicable.
3.4 It is submitted that as observed and held by this Court in
the case of
Canara Bank Vs. United India Insurance
Company Limited and Ors.; 2020 (3) SCC 455 ,
provisions of the policy must be read and interpreted in
such a manner so as to give effect to the reasonable
expectations of all the parties. It is submitted that it is
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further held that coverage provisions should be interpreted
broadly and if there is any ambiguity, the same should be
resolved in favour of the insured.
3.5 Making the above submissions and relying upon the above
decision, it is prayed to allow the present appeal by
quashing and setting aside the impugned judgment and
order passed by the NCDRC and to restore the order
passed by the State Commission.
4. Present appeal is vehemently opposed by the learned
counsel appearing on behalf of the insurance company.
4.1 It is submitted that in the facts and circumstances of the
case and on true interpretation of Clause 9 of Section 2 of
the insurance policy, the NCDRC has not committed any
error in awarding the depreciated value and not awarding
the reinstatement value as claimed by the complainant.
4.2 It is submitted that as rightly observed by the NCDRC that
the goods insured were to be replaced on "as is basis" i.e.,
if the machinery is an old machinery, it is to be replaced
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by an old machinery and therefore, as the actual
reinstatement has not been done by the complainant or by
the insurance company and the money is to be paid to the
insured on reinstatement basis, one has to find out the
value of the machinery on replacement basis i.e., the value
of the old machinery, which can be calculated only
through deducting the value of the depreciation from the
current value of the machinery.
4.3 Making the above submissions, it is prayed to dismiss the
present appeal.
5. The short question which is posed for consideration of this
Court is whether in the facts and circumstances of the
case and on true interpretation of relevant clause of
insurance policy, in case of damage of the plant and
machinery due to fire, the complainant shall be entitled to
the reinstatement value or the depreciated value?
5.1 While dealing with the aforesaid issue, relevant clause 9 of
Section 2 of the policy is required to be considered, which
reads as under:
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"9. If the Company at its option, reinstate or
replace the property damaged or destroyed, or any
part thereof, instead of paying the amount of the
loss or damage, or join with any other Company or
Insurer(s) in so doing the Company shall not be
bound to reinstate exactly or completely but only
as circumstances permit and in reasonably
sufficient manner, and in no case shall the
Company be bound to expend more in
reinstatement than it would have cost to reinstate
such property as it was at the time of the
occurrence of such loss or damage nor more than
the sum insured by the Company thereon. If the
Company so elect to reinstate or replace any
property the insured shall at his own expense
furnish the Company with such plans,
specifications, measurements, quantities and such
other particulars as the Company may require,
and no acts done or caused to be done, by the
Company with a view to reinstatement or
replacement shall be deemed an election by the
Company to reinstate or replace.
If in any case the Company shall be unable to
reinstate or repair the property hereby insured,
because of any municipal or other regulations in
force affecting the alignment of streets or the
construction of buildings or otherwise, the
Company shall, in every such case, only be liable
to pay such sum as would be requisite to reinstate
or repair such property if the same could lawfully
be reinstated to its former condition."
5.2 On true interpretation and on fair reading of above clause,
firstly the option is given to the insurance company to
reinstate or replace property damaged or destroyed instead
of paying the amount of loss or damage. If the insurance
company exercises the option of reinstatement or replaces
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the property damaged, the company shall not be bound to
reinstate completely or partly but only as circumstances
permit and in reasonably sufficient manner, and in no
case shall the company be bound to expend more in
reinstatement than it would have cost to reinstate such
property as it was at the time of the occurrence of such
loss or damage not more than the sum insured by the
company thereon. However, in any case the company is
unable to reinstate or repair the property insured, because
of any municipal or other regulations in force affecting the
alignment of streets or the construction of buildings or
OTHERWISE, in that case, the company shall be liable to
pay such sum as would be requisite to reinstate or repair
such property if the same could lawfully be reinstated to
its former condition. Present is the case dealing with
second eventuality, namely, the company was unable to
reinstate or repair the property. The surveyor in its report
determined the loss on the basis of reinstatement value at
Rs. 29,17,500/ and on the basis of depreciated value at
Rs. 12,60,000/. Though, the complainant claimed Rs.
76,64,000/ being the value of the new machinery,
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however, as rightly observed by the State Commission as
well as the NCDRC, the complainant shall not be entitled
to the said amount. However, at the same time considering
second part of Clause 9 reproduced hereinabove, in case
company is unable to reinstate or repair the property
insured, the insurance company shall be liable to pay such
sum as would be requisite to reinstate or repair such
property if the same could lawfully be reinstated to its
former condition. For the aforesaid purpose, the report of
surveyor wound be relevant evidence to consider the sum
required to reinstate or repair. Therefore, as per second
part of Clause 9 of Section 2 of the policy, the complainant
shall be entitled to the reinstatement value and not the
depreciated value. The NCDRC has misinterpreted and
misread the Clause 9. The NCDRC has seriously erred in
observing and holding that the insurance company shall
be liable to pay the depreciated value only and not the
reinstatement value. The State Commission was absolutely
justified in awarding the reinstatement value. The
impugned judgment and order passed by the NCDRC
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awarding the depreciated value and not the reinstatement
value is unsustainable for the reasons stated hereinabove.
6. In view of the above and for the reasons stated above, the
present appeal succeeds. The impugned judgment and
order passed by the NCDRC is hereby quashed and set
aside. The order passed by the State Commission is hereby
restored. The complainant shall be entitled to Rs.
29,17,500/ being the reinstatement value with interest @
7% from the date of order of the State Commission i.e.,
10.11.2014 till the actual payment. The present appeal is
accordingly allowed. No costs.
…………………………………J.
(M. R. SHAH)
…………………………………J.
(C.T. RAVIKUMAR)
NEW DELHI,
JANUARY 13, 2023.
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