Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7402 OF 2009
Oriental Insurance Company Limited ...Appellant
Versus
M/s. J.K. Cement Works …Respondent
J U D G M E N T
MOHAN M. SHANTANAGOUDAR, J.
1. This appeal arises out of the judgment dated 18.11.2008
passed by the National Consumer Disputes Redressal
Commission (‘NCDRC’) in Original Petition No. 59 of 2005. Vide
the impugned judgment, the NCDRC allowed the consumer
complaint filed by the Respondent herein, directing the Appellant
to pay Rs. 58,89,400/ to the Respondent, along with interest @
9% per annum from 01.06.2004 till the date of payment.
2. The brief facts giving rise to this appeal are as follows:
Signature Not Verified
Digitally signed by
ASHWANI KUMAR
Date: 2020.01.28
17:21:21 IST
Reason:
2.1 Respondent herein (Complainant) is a cement
manufacturer, having a factory in Nimbahera, District
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Chittorgarh, Rajasthan. These factory premises included an open
coal yard, where a stock of coal that was used in the
manufacturing process was stored.
2.2 The Respondent purchased a Standard Fire and Special
Perils insurance policy from the Appellant herein for the stock of
coal for the period between 20.11.2002 and 19.11.2003. Among
other things, the policy covered damage caused by “ Storm,
Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and
Inundation ”.
2.3 Due to heavy rains in Nimbahera on 29.08.2003 and
30.08.2003, some of the coal was washed off, and the stock of
coal suffered damage. Consequently, on 01.09.2003, the
Respondent informed the Appellant of the damage and requested
the appointment of a surveyor. The surveyor so appointed
submitted its report on 29.03.2004, assessing the loss caused to
the Respondent at Rs.58,89,400/.
2.4 Upon receiving such report, the Appellant sought a
clarification from the surveyor, as to whether the loss could be
said to have been caused by “ Flood and Inundation ” in terms of
the wording of the insurance policy. The Appellant also hired a
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Chartered Accountant to verify the declarations submitted by the
Respondent visàvis its accounts books and daily stocks.
2.5 On 13.08.2004, the surveyor reaffirmed its stand that the
losses in question were payable to the Respondent as per the
terms and conditions of the policy. On the other hand, the
Chartered Accountant hired by the Appellant reported on
02.09.2004 that he was unable to verify the declarations because
the Respondent had not provided the necessary documents to
him.
2.6 Notably, vide letter dated 14.12.2004, the Appellant
repudiated the Respondent’s claim on the ground that the loss
caused to it did not fall within the scope of the policy, having
occurred due to heavy and extraordinary rain and not ‘flood’ or
‘inundation’.
2.7 Aggrieved by this repudiation, the Respondent filed a
consumer complaint before the NCDRC seeking compensation to
the tune of Rs.1.32 crores. Vide the impugned order dated
18.11.2008, the NCDRC allowed the complaint to the extent of
the loss assessed by the surveyor, i.e. Rs.59,89,400/, and
directed the Appellant to pay the said amount along with interest
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at the rate of 9% per annum. The instant appeal has been filed by
the Appellant against this order.
3. Heard learned counsel for the parties.
4. Learned counsel for the Appellant argued that the terms
‘flood’ and ‘inundation’ refer to two significantly different
phenomena that cannot be equated with each other. He
contended that the term ‘flood’ refers to overflowing of water
bodies such as rivers, ponds, lakes etc. Accordingly, he
submitted that since it was not the case of the Respondent that
there was a water body near the factory which had overflown into
the coal yard, the loss cannot be said to have been caused by a
‘flood’. With respect to the term ‘inundation’, he argued that the
same refers to ‘accumulation of water’ and could thus not be
applied to the instant case as the coal had merely been washed
off due to heavy rains.
5. Per contra, learned counsel for the Respondent submitted
that even if the Appellant’s definition of ‘inundation’ as
‘accumulation of water’ were to be accepted, the surveyor’s report
had clearly observed that that there was an accumulation of
water in the coal yard, thereby making the policy applicable.
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Further, it was brought to our attention that the surveyor had
relied on the rainfall data of Nimbahera for 29.08.2003 and
30.08.2003, as received from the Meteorological Department of
the Government of India, to conclude that that there were
adequate rains in the area to cause floods/inundation. It was
also submitted that the Appellant could not have appointed a
second surveyor unilaterally, as the procedure under Section 64
UM of the Insurance Act, 1938, requiring permission from the
Insurance Regulatory and Development Authority before
appointing a second surveyor, had not been followed.
6. At the very outset, we note that as far as the Respondent’s
contention regarding the appointment of a second surveyor is
concerned, the Appellant had only appointed a Chartered
Accountant for the purposes of verifying the accounts books of
the Respondent regarding its daily stock of coal. In our
considered opinion, the appointment of a Chartered Accountant
for this limited purpose is not tantamount to the appointment of
a surveyor. Thus, we do not consider it necessary to deal with the
prerequisites for the appointment of a second surveyor in the
instant case.
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7. Further, it is pertinent to note that the quantum of
compensation or the date of the incident are not in dispute here.
Nor has it been argued by the Appellant that the date of the
incident did not fall within the insurance period. The central
question that then remains to be considered is whether the loss
caused to the Respondent occurred due to ‘flood’ or ‘Inundation’.
8. Before delving into the particular facts of this case, it may
be useful to refer to the dictionary meanings of the terms ‘flood’
and ‘inundation’.
8.1 The word ‘flood’ is defined in the Concise Oxford English
th
as follows:
Dictionary , 8 edition (1990)
“… 1 a an overflowing or influx of water beyond its
normal confines, esp. over land; an inundation.
b the water that overflows.
2 a an outpouring of water; a torrent ( a flood of
rain )…”
Particularly in the context of insurance contracts, Stroud’s
th
Judicial Dictionary , 5 edition (1986) defines the word ‘flood’,
in reference to
Young v. Sun Alliance and London Insurance ,
[1977] 1 W.L.R. 104 , an English case decided by the Court of
Appeal, and reads as follows:
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“…“Flood” in an insurance policy meant a large
movement or irruption of water, and did not cover
mere seepage from a natural source...”
8.2 The word ‘inundate’ is defined in the
Concise Oxford
th
English Dictionary , 8 edition (1990) as follows:
“… flood.
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2 overwhelm ( inundated with enquiries )…”
Further, per Black’s Law Dictionary, 9th edition (1990) ,
the word ‘inundate’ means:
“To overflow or overwhelm; esp. to flood with water”
9. Simply put, a flood may be described as overflow of water
over land. Floods can be broadly divided into the following
categories: coastal floods, fluvial floods (river floods), and pluvial
floods (surface floods).
9.1 Coastal floods occur when water from a sea or an ocean
flows into nearby areas. They are caused either by extreme tidal
activity (high tides) or by a storm surge – strong winds from a
hurricane or other storms forcing the water onshore – or by the
simultaneous occurrence of both these phenomena.
9.2 Fluvial or river flood occurs when the water level exceeds
the capacity of a river, stream, or lake, resulting in the overflow of
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the surplus water to surrounding banks and neighbouring land.
They are usually caused by either excessive rainfall or unusually
high melting of snow because of rising temperatures.
9.3 Lastly, pluvial or surface floods refers to the accumulation
of water in an area because of excessive rainfall. These floods
occur independently of an overflowing water body. Pluvial floods
include flash floods which take place due to intense, torrential
rains over a short period of time. A pluvial flood may also occur if
the area is surrounded by hilly regions from where the runoff
water comes and accumulates in the lowlying area. In urban
localities, because of concrete streets and dense construction,
rainwater is unable to seep into the ground. Steady rainfall over a
few days or torrential rains for a short period of time may
overwhelm the capacity of the drainage systems in place, leading
to accumulation of water on the streets and nearby structures,
and resulting in immense economic damage.
10. So far as the term ‘inundation’ is concerned, it can be used
to refer to both the act of overflow of water over land that is
normally dry and to the state of being inundated. Inundation can
also be intentional, which is sometimes carried out for military
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purposes, as well as for agricultural and rivermanagement
purposes. In the latter sense, i.e. as a state of being, inundation
refers to accumulation of water in which objects or land may be
submerged. In simpler terms, inundation can be used to refer
both the act of overflow of water as well as the result of such
overflow.
11. It flows from the above discussion that overflow of water due
to a flood may result in the state of inundation. As discussed
above, floods are of different types, and may be caused due to
several factors complementing each other. Usually, noncoastal
floods originate from rainfall, but the magnitude of rainfall
sufficient to cause a flood, and the damage that a flood causes,
may vary depending on a variety of aspects such as the location
of land (lowlying or altitudinous), the water retention capacity of
the soil, and the density of population and manmade
construction in the area, among other things. In rare cases, a
noncoastal flood may also occur without any rainfall. For
instance, shortcomings in the construction of a dam may lead to
its complete breakdown, resulting in a flood.
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12. It is not the case of the appellant that the coal was not
properly stocked or that there was any negligence on part of the
Respondent. The only arguments advanced by the Appellant are:
, that the terms ‘flood’ and ‘inundation’ cannot be equated,
firstly
and, secondly , that ‘flood’ needs to be understood in a narrow
sense to refer only to the overflowing of a water body, and to
exclude instances where overflowing of water occurs due to
excessive rainfall.
12.1 We have already highlighted that the terms ‘flood’ and
‘inundation’ are often used synonymously to refer to the act of
overflowing of water over land that is generally dry. Therefore, the
first argument of the Appellant cannot be sustained.
12.2 Similarly, given our prior discussion on pluvial floods,
which occur independently of a water body, it is clear that floods
are not restricted to overflow of water bodies. Thus, the second
argument raised by the Appellant also lacks merit.
12.3 Furthermore, the second argument made by the Appellant
seems tenuous even if we look into the intent of the parties
entering into the contract, as it has not come on record that there
was any water body near the coal yard or the factory premises. In
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such a scenario, where there was no risk of water from a water
body overflowing onto the dry land where the coal yard was
located, it could not have been the intention of the parties
entering into the contract to give a restrictive meaning to the
term ‘flood’. Such a narrow interpretation would lead to the
conclusion that the insertion of the term ‘flood’ was superfluous,
which could not have been the case.
13. In the instant case, the Appellant has not disputed that
there were heavy rains on 29.08.2003 and 30.08.2003 in the
Nimbahera region. In fact, the surveyor appointed by the
Appellant had also observed in its report that heavy rainfall had
occurred in the area, causing floodlike conditions that resulted
in some of the coal kept in the insured premises being washed
off. Moreover, the surveryor’s report also stated that there was
accumulation of water due to the heavy rains, that had caused
the coal to get washed off.
14. The NCDRC in the following cases: (i)
Bajaj Allianz
,
General Insurance Co. Ltd. v. M/s. Gondamal Hardyal Mal
[2009] NCDRC 127 , (ii) Oriental Insurance Co. Ltd. v. M/s
, and (iii)
Sathyanarayana Setty & Sons , [2012] NCDRC 124
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Oriental Insurance Co. Ltd. v. M/s R.P. Bricks , [2013] NCDRC
, had held that damage caused by heavy rainfall would not
494
fall beyond the ‘ flood and inundation ’ clause of the Standard Fire
and Special Perils insurance policies. It is brought to our notice
by the learned counsel appearing for the Respondent that the
aforesaid view has been consistently taken by the NCDRC. The
aforementioned view of the NCDRC supports the impugned
judgment and the same cannot be said to be erroneous.
15. In view of the above, the appeal stands dismissed. The
Appellant is directed to pay the sum awarded by the NCDRC
within a period of eight weeks from the date of this order, to the
Respondent.
……………………........................J.
[MOHAN M. SHANTANAGOUDAR]
…….……………….......................J.
[R. SUBHASH REDDY]
New Delhi;
January 28, 2020
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