Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9
CASE NO.:
Appeal (civil) 4366 of 1999
PETITIONER:
Polymat India P. Ltd. & Anr.
RESPONDENT:
National Insurance Co. Ltd. & Ors.
DATE OF JUDGMENT: 01/12/2004
BENCH:
B.N. Agrawa & A.K. Mathur
JUDGMENT:
J U D G M E N T
With
(C.A. No. 6063/1999 )
National Insurance Co.Ltd.
Versus
Polymat India P. Ltd. & Anr.
A.K. MATHUR, J.
Both the appeals arise against the order passed by the
National Consumer Disputes Redressal Commission, New Delhi.
One Civil Appeal No. 4366/1999 is filed by the Polymat
India Pvt. Ltd. and the other Civil Appeal No. 6063/1999 is filed
by the National Insurance Company Ltd. & Ors. against the order
passed by the National Consumer Disputes Redressal
Commission, New Delhi on 27th May, 1999 in the Original
Petition No. 204 of 1994.
Since both the appeals raise common question of law and
arise out of the same order, they are disposed of by the common
order.
Brief facts of the case are as under:
That the Original Petition was filed by the Complainant M/s
Polymat India Pvt. Ltd. & Anr. as a consequence of its claim
under 2 fire policies bearing No. 101600/3101669/0 in respect of
Building, machinery and accessories and furniture and other
contents and the other bearing No. 101600/3101670/0 regarding
stocks and used/burn lubricating oil and refined oil in its factory
premises consequent upon a fire being repudiated by the Insurance
Company, Opposite Party No. 1. The insured Polymat India Pvt.
Ltd. is a factory measuring 251’x 150’ and is bounded by 7’ high
brick wall on South and Chain-link fencing on the North, East and
West Sides. Inside the factory premises the Complainant had a
shed measuring 101’ x 41’ constructed of brick wall with asbestos
sheets louvers at upper and asbestos sheets roofing on tubular
frame structure. Attached to the South side of the shed was a
lean-to structure measuring about 85’ x 25’ and constructed of
brick walls and roofing on tubular frame. The construction was
divided into several rooms housing the office, quality control
laboratory, workshop-cum-rest room and store room for tools and
equipment. These rooms had their opening inside the shed. In the
said factory a Dove-tail batch type acid and clay treatment process
for refining the used/burnt lubricating oil was undertaken. The raw
material for the process was the burnt and used lubricating oil
which was received in barrels and stored in the open yard. Apart
from that, oil was also brought in and unloaded into used oil pits.
The finished product i.e. refined lubricating oil was either being
loaded into oil tankers or being filled in drums. In the part of the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9
plant which was in open the centrifugation, settling and
decantation, dehydration, condensation of lighter volatile
impurities, acid treatment and condensation of volatile matters
were being conducted. The part of the operation which was carried
on inside the shed were the less hazardous process like clay
treatment and neutralization, filtration and centrifugation, oil
blending etc. In that shed two Thermic Fluid Heaters, one oil
fired boiler and one water softening plant were also installed. At
the material time, all these plants and machinery and materials
were covered by the two fire insurance policies. In the said
policies the banker of the claimant was also one of the
beneficiaries. The said two policies were of dated 19th and 20th
March, 1992. It was alleged that in 1992 the bankers were
changed by the Complainant from Grindlays Bank, Chowringhee
Branch, Calcutta to Allahabad Bank, Camac Street Branch,
Calcutta and all the fixed assets were mortgaged by the
Complainant in favour of the West Bengal Financial Corporation
to secure the loans received by the Complainant No. 1. All the
fixed assets, stocks and stocks-in-process of the Complainant
remained insured with the New India Assurance Co. upto 19th/20th
March, 1992. But after the change of the bankers from Grindlays
Bank to Allahabad Bank the Complainant also changed their
insurer from the New India Assurance Co. Ltd. to National
Insurance Co. Ltd.. It is also pointed out that the Development
Officer of the National Insurance Co. Ltd. one Mr. Sandip Guha
brought two proposal forms for fire insurance on or about 17th
March, 1992 and got those signed by the Complainant in blank.
He also took with him photocopies of the previous policies issued
by New India Assurance Co. Ltd. It is further alleged that the
premises of the Complainant were inspected by the said
Development Officer and after inspection, the rates of premium
were fixed. The premium which was demanded by the Opposite
Party No. 1 being Rs. 12,012/- and Rs. 3,890/- respectively which
was paid by the Complainant. In the said policies the location of
the property was mentioned as "factory-cum-godown and office
premises", though there was no godown in the factory premises.
Thereafter on 13th January 1993 the said factory premises and the
entire building, furniture, fixtures and fittings, stocks in process
and other material lying outside factory shed were completely
destroyed in fire. The insurance company appointed one Shri
S.N.M. Consultants as the Surveyors. The Surveyors visited the
premises and conducted an inspection. The complainant supplied
all information sought by the surveyors. The complainant was
informed by the surveyors that they had been instructed by the
opposite parties not to assess loss to the plant and machinery,
furniture, fixtures and fittings and civil structure outside the
covered shed and building and all that plant and machinery which
were lying installed in the open part of the factory premises were
not allowed to be covered by the insurance. Therefore, the
Surveyors only assessed the losses inside the covered area. The
Surveyors were also informed that they were supposed to assess
the loss inside the covered area only. The complainant from the
very beginning requested the Insurer to amend the policies as there
was no godown within the precincts of the factory premises and
all goods lying inside the plant and outside the plant should be
insured. But no response was received from the Insurance
Company. Even the Surveyors report was not made available to
the complainant despite repeated requests. Therefore, the present
claim was filed before the National Consumer Disputes Redressal
Commission. It was also alleged that Insurance Company did not
decide despite the insured complainant continued to incur losses of
interest on the outstandings of Allahabad Bank and the West
Bengal Financial Corporation. It is alleged that release of part
payment on account of payment of atleast 75% of whatever had
been assessed by the Surveyors was also not released. Ultimately
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9
on July, 1994, Complainant received a letter dated 1st July, 1994
claiming the two fire policies for a sum of Rs. 19,95,432.75 and
Rs.9,242.28 respectively i.e. Rs. 20,04,675/- after deduction
therefrom a sum of Rs. 19,224/- as ’penal premium’ being the
difference of premium between Class-I and Class \026II construction
for three years and two vouchers for signatures of the
Complainant with the direction to send further cheque for a sum
of Rs 4239/-, which was also paid. It was alleged that these two
vouchers were signed by the complainant without prejudice to its
claim for the balance and returned to the insurer-Opposite Parties.
The complainant demanded the details of deduction from its
claim and received a statement of accounts but no reasons were
given for this deduction. The Surveyors assessed the loss at Rs.
48,73,095/- only but the reasons for reducing this amount to Rs.
20,23,899/- which was not even 50% of the loss assessed by the
Surveyors. The complainant claimed a sum of Rs. 58,20,161/-
under the said two policies . But the surveyors assessed the loss at
Rs. 48,73,095/-. It is alleged that inspite of this, the opposite
parties even upto the date of filing of the complaint had not paid
even the reduced amount of Rs. 20,04,675/- minus Rs. 19,224/-
which they had originally offered under the two policies. When
the matter could not be sorted out then the complainant filed the
present claim before the National Forum. Respondents filed a
response to the present complaint that they had settled the claim at
a little over Rs. 20 lakhs as a non-standard claim because under
the policy the premises was described as of 1st class construction.
The Insurance Company refuted the other allegations and
explained that they disallowed the claim relating to plant and
machinery outside the covered area installed outside the building
and had also not considered the claim of the goods i.e. the drums
of oil lying in the open within the factory precincts. It is also
contended that the complainant was not kept in dark about the
basis of settlement. It was also urged that regarding queries of
the Complainant, a letter dated 12th August, 1994 was sent giving
details to the complainant, which was received by the complainant
on 31st August, 1994. In this background., National Commission
examined that whether the claim of complainant is justified or not.
The Commission after considering the matter took view that the
factory premises includes the plant & machinery and goods inside
the shed and outside the shed are covered under both fire policies.
The commission relied on the definition of the factory as
given in the Factory Act 1948.
It was also observed that as per the guidelines in settling the
claims 75% of loss should have been settled. No basis or
reasons were given as to why original claim was not settled at
75% of loss as determined by the Surveyor which was not
disputed. It was also observed that dilatory approach adopted
by Insurance Company resulted in harassment to complainant and
he had to suffer additional interest liability from time to time by
the financial institutions and it was also observed that the assessee
is entitled to 75% of the claim assessed by the surveyors i.e. 75%
of Rs. 48,73,095.75, which comes to Rs. 36,54,821.25 and
interest was levied @ 18% per annum commencing from two
months after the receipt of the Surveyor’s report till the date of
payment and also imposed the cost of Rs. 10,000/-. Aggrieved
against this order, both these appeals were filed, one by Insurance
Company and the other by M/s Polymat India, hence both are
disposed of by the common order.
The first and foremost question for consideration is, as per
the terms of the policy whether all the goods which are lying
within the shed or outside the shed are covered under the policy or
not. In Policy No. 101600/3101670/0 under heading ’Property to
be insured’ which reads as under:-
"Stock in trade or merchandise consisting Rs. 15,00,000/-.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9
(A ground plan of the premises may please be sketched in the
space provided showing also Adjoining and/or adjacent property
within 15M (50ft) therefrom."
Clause 8 of the Policy which is relevant for our purpose
reads as under:
"Are there any goods stored in the open, or is
there is kutcha shed or timber built or thatched
roof building with 15M (50ft.) or the property No
to which this proposal applied? If so, please
give details."
In the original policy, the expression used was "Factory-
cum-Godown-cum-Office".
In another Policy also in similar query No. 8, a similar
answer was given that is in negative.
The answer of the insured complainant was in negative that
no goods are stored in open, or in kutcha shed or timber built or
thatched roof building within 15M (50ft.) of the property to
which proposal applies. In short that goods lying outside plant are
not insured.
Therefore, the question is when the complainant themselves
has given the answer in negative to the aforesaid queries in both
the policies, whether the complainant is entitled to the benefit of
loss occasioned to him on the goods lying outside the factory
premises in the open.
It may also be relevant to mention here that after the
proposal form was received by the complainant and they
immediately requested by a letter on 20th April 1992 to National
Insurance Co. pointing out certain discrepancies in both the
policies and requested to carry out corrections in both the
policies, i.e., request for incorporating the name of the
Allahabad Bank, Camac Street, Calcutta as mortgagee along with
West Bengal Financial Corporation, secondly, the coverage of
plant and machinery inside or outside the building and the
coverage for stock and stock in process and lastly the expression
’Godown cum factory’ be deleted as there is no ’godown’. Letter
dated 20th April, 1992 reads as under:
"Polymat India Pvt. Ltd.
1/B , D.L. Khan Road
Calcutta 700 027
20th April 1992
The National Insurance Co. Ltd.
Calcutta Division XVIII,
6, Lyons Range,
Calcutta 700 001
Sub.: Correction in Policy No. 101600/3101669/0(BMC)
Policy No. 101600/3101670/0 (SSP)
Dear Sir,
With reference to the captioned two policies delivered
through your Development Officer, Mr. Guha, palease note the
following discrepancies which please amend and oblige.
1. Policy No. 101600/3101669/0 (BMC)
a) Besides West Bengal Financial Corporation, the Allahabad
Bank, Camac Street Branch is also interested as Mortgagee in
respect of our entire building: plant machinery &
equipments; and furniture, fittings & fixtures.
b) In the last paragraph, the item nos. should be 1,2 & 5 and 1,2
& 4.
c) Besides Plant & Machinery installed in Open Yard/in
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9
Building, item 2 should also include Laboratory Equipment,
Stores, Spares, etc lying anywhere in our Factory Complex
(inside and/or outside the Building).
2. Policy No. 101600/3101670/0 (SSP)
The coverage required is for Stock and Stock in Process,
i.e., all types of raw materials & chemicals; stocks
undergoing any process and the semi finished/finished
stock- inside or outside the building but within our
factory compound (as hypothecated to the Allahabad
Bank). It may be noted that in the Policy the sum of
Rs.15,00,000/- is wrongly stated against item 4 instead of
item 3. (We have no Godown in our Factory Compound).
Please made necessary change in both the Policies on
above stated basis. Please also send us photocopies of the
two proposal forms which we had handed over to your Mr.
Guha on 17th March, 1992- signed blank by our
representative Shri Sidheswar Chakraborty so that you
could fill in the queries of those two proposal forms on
the basis of expiring policies of New India Assurance
Company Ltd., in appropriate manner.
Thanking you,
Yours faithfully
For Polymat India (P) Ltd.
Sd/-
(Rita Jhawar)
Manager: Finance & Accounts
CC: The Allahabad Bank --for information
Camac Street Branch
3C, Camac Street
Calcitta 700 016"
These three amendments were suggested by the aforesaid
communication. The Insurance Company by the communication
dated 23rd April, 1992 agreed to only amendement to the extent of
the name of the Bank, namely, Allahabad Bank as maortgagee
and no further amendment was made in the original Policies. This
was also confirmed by the evidence of sole witness Shri
Samaresh Sarkar, Divisional Manager produced by the Insurance
Company in evidence before the National Forum. No evidence
was led by the complainant before the National Forum. Therefore,
the question is how the correspondence and documents produced
by both the parties are to be construed. But unfortunately the
National Commission did not consider all these aspects and
immediately rushed to direct to pay 75% of the loss assessed
by the surveyors.
Now, the question whether the expression "Factory-cum-
Godown" includes all plant & machinery and all goods lying
within the boundary wall of the factory, was covered under both
the Policies.
The expression "Factory" has been defined under Section
2(m) of the Factories act which reads as under:
"Factory" means any premises including the
precincts thereof-
(i) whereon ten or more workers are working, or
were working on any day of the preceding
twelve months, and in any part of which a
manufacturing process is being carried on with
the aid of power, or is ordinarily so carried on,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9
or
(ii) whereon twenty or more workers are working,
or were working on any day of the preceding
twelve months, and in any part of which a
manufacturing process is being carried on
without the aid of power, or is ordinarily so
carried on, -
but does not include a mine subject to the operation of
the Mines Act, 1952, a mobile unit belonging to the
armed forces of the Union, a railway running shed or a
hotel, restaurant or eating place."
The factory has also been defined in the Law Lexicon:
"A building or buildings with plant for the manufacture
of goods."
The word ’factory’ unless specially defined by statute,
is always used in connection with the place where some
kind of manufacturing process is carried on. The
activity of exhibiting films does not fall within the
definition of factory contained in the Factories Act."
Factory means any premises, including the precincts
thereof, in any part of which a manufacturing process is
carried on. The expression ’premises’ including the
precincts thereof’ takes within its connotation not
merely the building but the open area or the compound
about that particular building. S.T. Trading Co. Vs.
Union of India, AIR 1966 Guj. 116, 125 (Employees
Provident Funds Act (19 of 1952), S 2(g)."
So far as the definition of factory is concerned as given
in Factories Act, it shows that where the manufacturing process is
undertaken, that means the manufacturing process which is
undertaken within the plants. This does not cover the outside area
of plant. But each definition has to be construed in the context in
which it is used. Loosely the expression, ’factory’ may include
the whole premises of factory. But each expression has to be given
the meaning in the context where it occurs. The expression
"Factory-cum-Godown" has to be read in the present context with
the other conditions which appear in the Policy document. In fact
the Clause 8 which has been reproduced above, specifically made
reference that whether the goods are stored in open or there is
kuccha shed or timber built or thatched roof building within 15M
(50ft.) of the property to which this proposal applies? If so, give
the details. But no detail was given and it was answered in
negative. Therefore, what was sought to be insured was plant and
machinery. It is admitted that there was no godown. Therefore, it
is clear that goods lying outside the plant were not insured. Had
the intention of the parties been otherwise then they would have
answered query No. 8 in positive terms with details. But it was
answered in negative. Therefore, the documents have to be
construed in the manner it is presented and we cannot give a
different interpretation dehors the context. Both the parties have
executed the contract and complainant made a disclosure to query
No.8 categorically in negative that no goods are lying in open or
in Kaccha shed. That shows that the goods lying in covered area
were only insured and none else.
In this connection, a reference may be made to series of
decisions of this Court wherein it has been held that duty of the
Court to interpret the document of contract as was understood
between the parties.. In the case of General Assurance Society
Ltd. Vs. Chandmull Jain
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9
reported in 1966 (3) SCR 500 at pages 509-510, it was observed
as under:
"In interpreting documents relating to a contract of
insurance, the duty of the court is to interpret the words
in which the contract is expressed by the parties,
because it is not for the court to make a new contract,
however reasonable, if the parties have not made it
themselves."
Similarly, in the case of Oriental Insurance Co. Ltd. Vs.
Samayanallur Primary Agricultural Co-op. Bank resported in
(1999) 8 SCC 543- Para 3 at page 546-f, it was observed as
under:
"The insurance policy has to be construed having
reference only to the stipulations contained in it and no
artificial farfetched meaning could be given to the
words appearing in it."
Therefore, the terms of the contract have to be construed
strictly without altering the nature of the contract as it may affect
the interest of parties adversely.
In this connection, it may also be relevant to mention here
that when this proposal was approved the same was sent to the
complainant and the complainant wanted some amendments in
both policies i.e. coverage of goods lying outside plant including
the expression factory \026cum- godown as there was no godown in
existence but those amendments were not agreed to by the
insurance company, they only agreed to make amendment of
incorporation of name of the Bank, i.e., Allahabad Bank in the
Policy. When the terms of the contract have been reduced in
writing it cannot be changed without the mutual agreement by
way of both the parties. In the present case, they did not agree for
amendment of the policies, if the complainant was vigilant and
wanted this expression to be deleted he should have prosecuted
the matter seriously or repudiated the Policy. The only defence
pleaded was that they were assured orally but no evidence was
led by complainant. On the contrary, suggestion was denied by
single witness produced by the Insurance Company before
National Forum.
In this connection, our attention was invited to decision of
this Court in the case of United India Insurance Co. Ltd. Vs. M. K.
J. Corporation reported in (1996) 6 SCC 428 wherein it was
observed as under:
"\005..After the completion of the contract, no material
alteration can be made in its terms except by mutual
consent."
Therefore, in the present case when the proposal was sought
to be amended and it was only agreed to by the Insurance
company to the extent substituting the Bank i.e. Allahabad Bank
and the other amendments were not agreed by the Insurance
Company, the complainant had a choice to repudiate the
insurance policy or to obtain a proper declaration. But the
complainant did not pursue the matter further, it is to be blamed
itself for this.
Therefore, after construing the terms of the contract it
transpires that the intention between the parties was to cover the
plant and machinery which were lying in the factory, i.e., in the
covered area and in the shed and not the goods which were lying
outside the covered area. Therefore the order of the Commission
directing the payment of 75% of the assessment made by the
Surveyor of the goods which were lying inside and outside the
factory was not correct approach on the part of the Commission.
The Commission should have examined the matter in detail
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9
in terms of the policy and the relevant documents bearing on the
subject. This was not done. Therefore, we have no hesitation to
say that what was sought to be covered by both the Policies was
only plant and machinery in shed and not the goods which were
lying outside the plant and shed.
Next question is whether the reduction of the amount by
insurance company under various heads is justified or not?
We have gone through the reasons given by the Insurance
Company for reducing the amount and we are of the opinion that
the reasons given by the Insurance Company appear to be
reasonable and justified which read as under:-
"1. Though surveyor assessed the total loss on building as
Rs. 5,52,049/- but while computing we only accepted
Rs. 4,97,049/- as the balance amount of Rs. 55,000/- is
assessment relating to the portion which is not inside
the building.
2. Regarding plant and machinery though the surveyor
assessed Rs. 24,61,757/- but we considered Rs.
14,97,651/- and rest Rs. 9,64,106/- was related to the
assessment of the plant and machinery installed outside
the building.
3. Regarding assessment of furniture, fixture and fittings
though you mentioned that the surveyor assessed Rs.
1,76,820/- but it did not appear true according to the
survey report the surveyor assessed only Rs. 1,55,820/-.
But we could consider to the tune of Rs. 87,320/- as the
business amount of Rs. 68,500/- was related to the
portion kept outside the building.
Under SSP Policy though the surveyor assessed Rs.
16,17,212/- but we could consider only (i) Hydraulic
Oil (630 litres) amounting to Rs.11,100/- and (ii)
H.S.D. in barrel (1081 litres) amounting to Rs. 2624/-
aggregating to Rs. 13,724/- and rest of the items
assessed by surveyor were beyond the scope of cover
and not within the purview of the policy."
Therefore, on this account also we do not find any merit to
interfere in the matter.
The next question is with regard to award of interest. As
per the guidelines laid down, the Insurance Company had to settle
the claim within two months of the Surveyor’s Report. The
reason for delay has been explained. Since the fire took place on
13th January, 1993, the Insurance Company appointed the
Surveyor and Surveyor sent his report. dated November 5, 1993
which was received by the appellant on November 9, 1993. Since
there was some discrepancies in the survey report, the Insurance
Company vide their letter dated December 14, 1993 sought
clarification from the surveyors which was replied on 22.4.94 by
the Surveyors. The Insurance Company after that took the
decision and informed the claimant vide their letter dated 1.7.94
for approval of the claim for Rs. 20,23,899/- under both the
polices. Therefore, it was submitted that almost within stipulated
time the intimation was sent to them, as such the levy of interest
@ 18% by the Commission is not justified.
We are satisfied that the action taken by the Insurance Co.
was within reasonable time. Therefore, it cannot be saddled with
a high rate of interest @ 18%. However Insurance Companies
should have speed up disposal of claims in order to inspire greater
confidence in them. Be that as it may, since the amount was
received by the claimant in 1994, therefore, levy of interest @
18% does not appear to be justified. Hence, we set aside the order
awarding interest @ 18% per annum. Similarly a levy of cost of
litigation of Rs. 10,000/- also does not appear to be justified in the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9
present case as in view of our finding above. Hence, we allow the
C.A. No. 6063/1999 filed by National Insurance Company and set
aside the order of the Commission.
Polymat India Pvt. Ltd.. (C.A. No. 4366/99) have also filed
appeal against the same order and their grievance is Commission
ought to have granted entire loss assessed by Surveyors instead of
75% & interest should have been awarded from the date of loss.
Since, we have examined the whole matter in detail, we are
satisfied that claimant is not entitled to be compensated loss as
claimed by them. Hence, we do not find any merit in this appeal
and the same is dismissed with no orders as to costs.