Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      1 Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1299     OF 2019 (Arising out of Special Leave Petition (Civil)No.27695 of 2018)

SUMIT KUMAR SAHA ……Appellant

VERSUS

RELIANCE GENERAL INSURANCE COMPANY LTD.   ..…. Respondent

JUDGMENT

Uday Umesh Lalit, J.

1. Leave granted.

2. This appeal arises out of final judgment and order dated 16.02.2018

passed  by  the  National  Consumers  Disputes  Redressal  Commission  (‘the

National Commission’, for short) in First Appeal No.182 of 2014.

3. On  27.03.2007  the  appellant  purchased  one  Volvo  Hydraulic

Excavator for a sum of Rs.49,75,000/- with VAT amounting to Rs.1,99,000/-,

the  total  purchase  value  thus  being  Rs.51,74,000/-.  Immediately  after  the

purchase  said  Hydraulic  Excavator  was  insured  with  the  respondent  vide

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      2 “Contractor,  Plants  &  Machinery  Insurance  Policy”  bearing  number

150719225001168.  The insurance policy thereafter stood renewed. For the

period  22.07.2009  to  21.07.2010,  the  sum  insured  was  Rs.46,56,600/-  on

payment  of  premium  of  Rs.33,700/-.   The  column  regarding  ‘coverage’

mentioned the ‘year of make’ of said Excavator as ‘2007’.  Under the caption

– PROVISIONS, the policy contained following stipulations:-

“1. SUM INSURED –

It is a requirement of this insurance that the sum insured shall be equal to the cost of replacement of the insured property by new property of the same kind and same capacity, which shall mean its replacement cost including freight, dues and customs duties if any and erection costs.

2. BASIS OF INDEMNITY -  

a) In cases where damage to an insured item can be repaired the Company will pay expenses necessarily incurred to restore the damaged  machine  to  its  condition  immediately  prior  to  the accident/loss  plus  the  cost  of  dismantling  and  re-erection incurred  for  the  purpose  of  effecting  the  repairs  as  well  as ordinary freight to and from a repair-shop, customs duties and dues if any, to the extent such expenses have been included in the sum insured.  If the repairs are executed at a workshop owned by the  insured,  the  Company  will  pay  the  cost  of  materials  and wages incurred for the purpose of the repairs plus a reasonable percentage to cover overhead charges.

No deduction shall be made for depreciation in respect of parts replaced,  except  those  with  limited  life,  but  the  value  of  any salvage  will  be  taken  into  account.   If  the  cost  of  repairs  as detailed hereinabove equals or exceeds the actual  value of  the

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      3 machinery  insured  immediately  before  the  occurrence  of  the damage, the settlement shall be made on the basis provided for in (b) below.

b) In  cases  where  an  insured  item  is  totally  destroyed  the Company  will  pay  the  actual  value  of  the  item  immediately before the occurrence of  the loss,  including costs  for  ordinary freight,  erection  and  customs  duties  if  any,  provided  such expenses  have  been  included  in  the  sum insured,  such  actual value to be calculated by deducting proper depreciation form the replacement  value of the item.   The Company will also pay any normal charges for dismantling of the machinery destroyed but the salvage shall be taken into account.  

Any extra charges incurred for  overtime, night-work,  work on public holiday, express freight, are covered by this insurance only if especially agreed to in writing.

In the event  of  the Makers’ drawing,  patterns  and core  boxes necessary for the execution of a repair, not being available, the Company shall  not  be liable  for  the cost  of  making any such drawings, patterns and core boxes.

The cost of any alteration, improvements or overhauls shall not be recoverable under this Policy.

The cost of any provisional repairs will be borne by the Company if  such repairs  constitute  part  of  the  final  repairs,  and do not increase the total repair expenses.

If the sum insured is less than the amount required to be insured as per Provision-I herein above, the Company will pay only in such proportion as the sum insured bears to the amount required to be insured.  Every item, if more than one, shall be subject to this condition separately.   

The  Company  will  make  payments  only  after  being  satisfied, with  the  necessary  bills  and  documents,  that  the  repairs  have

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      4 been effected or replacement have taken place, as the case may be.   The  Company  may,  however,  not  insist  for  bills  and documents in case of total loss where the insured is unable to replace the damaged equipment for reasons beyond their control. In such a case claims can be settled on ‘Indemnity Basis’.”

4.  Said Hydraulic Excavator was hired and was to be used at a different

location.  The appellant duly intimated the change of location.  On 30.06.2010

the Hydraulic Excavator was badly damaged in a fire while it was at such

changed location.  An FIR was lodged on 01.07.2010 with the local police and

the respondent was also immediately intimated about the damage and was

requested to survey the damage and settle the claim.

5. On 07.07.2010 a surveyor came to be appointed by the respondent to

survey and assess the loss and damage. Though the survey was undertaken,

the claim of the appellant was not getting settled and as such reminders were

sent  by  the  appellant  on  18.08.2010  and  10.02.2011.   Thereafter,  on

13.04.2011  the  appellant  was  intimated  that  the  loss  was  assessed  by  the

surveyor  at  Rs.25,24,273/-.   The  relevant  portion  from  the  report  of  the

surveyor Cunningham Lindsey was to the following effect :-  

“GROSS LOSS Both  types  of  claim  settlement possibilities  viz.  in  Partial  Loss  and Constructive  Total  Loss  basis  were explored.   Finally,  it  was  established that  PL  i.e.  repairing  of  the  whole

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      5 excavator  will  involve  much  higher than its insured value.  Hence, we have considered  it  as  case  of  Constructive Total Loss.   

Considering the above, the Gross Loss comes around Rs.5,100,000.00,  which is the present new replacement cost of same  type  and  capacity  of  excavator. Refer  attached  quotation  for  new machine.

MARKET VALUE OF LOSS

Since  procurement,  i.e.  27th March 2007 and the date of loss i.e. 30th June 2010  the  subject  excavator  was  in operation for 3 years and 3 months.  As such,  considering  the  life  of  such excavator as 10 years, the depreciation for 3 years and 3 months works out to 32.5% .  Hence, the depreciated value or  Market  Value  of  the  excavator  is Rs.3,442,500.00

SALVAGE REALISATION

The  matter  of  salvage  was  first discussed  with  the  insured,  who refused  to  retain  the  same. Immediately,  we  informed  all  the details  of  the affected machine to the insurer  for  appropriate  action  on  the salvage  disposal  through  their concerned department.  As a result of the  same,  the  insurer  vide  their  mail dated  21st February  2011,  confirmed that  they  had  recovered  Rs.650,000 from the subject  excavator,  which we opine  to  be  extremely  fair  and reasonable  considering  the  extent  of damage  to  the  excavator  and

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      6 remoteness of the location of loss.

ASSESSED LOSS Rs.2,792,500.00 (as net of salvage)

UNDER INSURANCE The present new replacement cost of an excavator of same type and capacity is Rs.5,100,000.00,  whereas  the  sum insured  taken  for  the  same  is  of Rs.4,656,000.00.  On comparing those two, it is worked out that the property is under insured by 8.71%.

ADJUSTED LOSS Rs.2,549,273.25  (as  net  of  under insurance)

DEDUCTIBLE For Individual Value over Rs.25 lakhs upto  Rs.50  lakhs  Rs.25,000.00  (Flat Excess) for claims arising out of perils other than AOG perils.

NET  ADJUSTED LOSS

Rs.2,524,273.00  (as  net  of  policy excess)

RECOMMENDATION We  recommend  payment  of  the  net adjusted amount of Rs.2,524,273 under Policy  No.1507192215001168  in  full discharge  of  the  claim  subject  to Agreed Bank Clause.”  

6. The  appellant  being  aggrieved,  filed  case  No.CC/18/11  before  the

State  Consumer  Disputes  Redressal  Commission,  West  Bengal  (‘the  State

Commission’, for short).  The appellant submitted that the Excavator was a

total loss and that he was entitled to the insured amount of Rs.46,56,600/-

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      7 along with interest @ 12% p.a. and compensation as claimed in the complaint.

During the pendency of the matter, the appellant placed on record the report

of a surveyor appointed by him.  Said surveyor had assessed the loss on two

counts, namely “loss assessed on repairing basis” at Rs.94,64,357.70 and on

“total loss basis” at Rs.41,90,940.00.  The relevant portion from the report of

said surveyor named Subbiah Jeyakarthigesan was as under :- “LOSS ASSESSED ON REPAIRING BASIS Rs.9,464,357.70

(Rupees Ninety four lacs sixty four thousand three hundred fifty seven & seventy only).   

ASSESSMENT ON TOTAL LOSS BASIS Present depreciated cost of the Excavator  as declared to the Insurance Company and  accepted by them      Nu. 4,656,600.00 Less: 10% Depreciation for usage from  the date of insurance to the date of accident        Rs.    465,660.00

   ______________ Assessed on Total Loss Basis      Rs. 4,190,940.00

(Rupees Forty one lacs ninety thousand nine hundred forty only.)

UNDER INSURANCE In  my  opinion  the  under  insurance  in  this  case  will  not  be applicable  as  the  total  machine  has  been  totally  burnt.   The machine  has  been  insured  for  Rs.46,56,600.00  which  is  after application of depreciation from the period of purchase to the last renewal of the insurance policy, as such I have not applied any under insurance in this case.”

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      8 7. The State Commission allowed the complaint. The relevant portions

of its order dated 04.12.2013 are as under :-

“Thirdly, the loss assessed by the Surveyor appointed by the insurance company has taken into consideration the depreciation value @ 32% of the original purchase value of Rs.51,74,000/- only, but the premium as on 7th July 2009 was  made after  fixing depreciation  value.   It  is quite reasonable that the depreciation value, as pointed out by the surveyor appointed by the insured in reply to question No.8 of the OP, that the depreciation has been applied by the OP at the time of renewal of policy and depreciation can be  applied only  once,  only from the period from the date of renewal of insurance to the date of accident.  Again, in reply to question No.9 of the OP, it  has  been  held  that  under  insurance  @  8.71%  is incorrect as the insurance company has put in their own value  at  the  time  of  renewing  the  policy  without obtaining  the  proposal  form  from  the  owner  of  the excavator machine.  We also agree with the view taken by the surveyor appointed by the insured as stated in his reply to question No.10 of the OP that salvage wreck is the property of the insurance company and it cannot be forced  upon  the  owner  of  the  damaged machine…………….

Ordered That  the  complaint  be  and  the  same  is  allowed  on contest against O.P.Nos. 1 & 2 who are hereby directed to pay a sum of Rs.41,90,940/- (Forty one lakh ninety thousand nine hundred and forty only) with interest @ Rs.8% p.a. from the date of filing of the claim.  The said

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      9 OPs.  are  also  directed  to  pay a  sum of  Rs.1,00,000/- (One lakh only) as compensation for harassment, mental agony  and  financial  loss,  apart  from  another  sum  of Rs.5,000/-  (Five  thousand  only)  as  costs.   The  entire amount shall be paid by OP Nos.1 & 2 within 45 days from the date of this order in default whereof, interest @9% p.a. shall be payable till full realisation.”

8. The respondent, being aggrieved filed First Appeal No.182 of 2014

which was partly allowed by the National Commission vide its judgment and

order dated 16.02.2018.  The National Commission held as under:

“… … …The  Insurance  Company  is  responsible  to indemnify the loss on the basis of the replacement of the damaged machine in the same condition at which it was at  the day of  the accident.   In the present  case, though IDV of  Rs.46,56,000/-  was  mentioned in  the policy and was agreed between the parties, however, if the new machine is available for Rs.51,00,000/- then on that basis the same machine of 3.25 years age could be available on the approximate price being arrived at by deducting the depreciation for 3.25 years from the current  price  of  the  new  machine.   Obviously,  the insurance  Company  shall  go  for  this  price  for replacement as this is less than the IDV.  On this basis, the  surveyor  has  calculated  depreciated  price  of  the new  machine  fit  for  replacement  as  Rs.34,42,500/- after  applying  depreciation  of  10%  p.a.  since  the purchase of the machine on the current price of new machine till the date of accident.”

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      10 The National Commission further observed that the salvage value to

the tune of Rs.6,50,000/-,  which was realized by the respondent could not

have been deducted from the aforesaid sum of Rs.34,42,500/.  The National

Commission, thus directed the respondent to pay a sum of Rs.34,17,500/- for

settlement of the insurance claim of the appellant.  It was found that since the

respondent was willing to settle the matter for Rs.25,42,273/-, the respondent

would be liable to pay interest on the differential amount of Rs.8,93,227/- @

8% p.a.    

9. The decision of the National Commission is presently under appeal.

We heard Mr. Soumya Roop Sanyal, learned Advocate for the appellant and

Mr. Joy Basu,  learned Senior Advocate  for  the respondent.   The appellant

contended that it was a case of a total loss as accepted by both the surveyors

and going by the “sum insured” as agreed by the parties, the appellant was

entitled to Rs.46,56,000/-.  It was submitted that the Insurance Company was

well  aware  that  the  Excavator  was  of  2007  make  and  after  deducting

appropriate  depreciation  the  value  that  was  arrived at  for  the  purposes  of

cover  of  insurance  was  Rs.46,56,600/-.   Countering  said  submission,  the

respondent submitted that despite stipulation of such amount as sum insured,

the Insurance Company would not  be  disentitled in  the present  case from

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      11 contending that the actual value after suffering appropriate depreciation ought

to be one that was indicated by its surveyor.  Reliance was placed upon the

decision  of  this  Court  in  Sikka  Papers  Limited v.  National  Insurance

Company Limited and others1.

10. It is common ground that as a result of fire, the Excavator was a “total

loss”  and  the  insured  would  be  entitled  to  the  replacement  cost  of  the

Excavator.   The  point,  however,  is  what  is  the  amount  or  value  that  the

insured is entitled to.

11. The  policy  in  question  indicates  that  the  “year  of  make”  of  the

Excavator  was  “2007”  while  the  policy  was  for  the  period  22.07.2009  to

21.07.2010.  The parties were aware that the Excavator was purchased in the

year 2007 for Rs.51.74 lakhs.  If the contract mentioned the sum insured to be

Rs.46,56,600/- the parties must be deemed to be aware about the significance

of that sum and the fact that it represented the value of the Excavator as on the

date when the coverage was obtained.  In this regard the conclusion arrived at

and  the  observations  made  in  Dharmendra  Goel v.  Oriental  Insurance

Company Limited2 are noteworthy.  In that case a vehicle was bought in the

year 2000 and the relevant period of coverage was 2002-2003. The vehicle

1 (2009)7 SCC 777 2 (2008) 8 SCC 279

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      12 met with an accident.   The surveyor found it to be a total loss which was

assessed at Rs.1,80,000/-. In an action instituted in the Consumer Forum, the

National Commission had granted compensation at said level of Rs.1,80,000/-

with interest.  Questioning such assessment, the insured was in an appeal and

submitted,  inter  alia,  that  he  was  entitled  to  the  sum  insured,  namely,

Rs.3,54,000/-.  Paragraphs 5 and 7 of the decision bring out the principle that

the  Insurance  Company  having  accepted  the  value  of  the  vehicle  to  be

Rs.3,54,000/-, was bound by that value.  Said paragraphs 5 and 7 were as

under:

          “5. We have heard the learned counsel for the parties and have gone through the record very carefully. The facts as narrated above remain uncontroverted.  Admittedly,  the accident  had happened on 10-9-2002 during the validity of the insurance policy  taken  on  13-2-2002  insuring  the  vehicle  for  Rs 3,54,000 on a premium of Rs 8498. It is also the admitted position that the vehicle had been declared to be a total loss by the surveyor appointed by the Company though the value of  the vehicle  on  total  loss  basis  had been assessed at  Rs 1,80,000. We are, in the circumstances, of the opinion that as the Company itself had accepted the value of the vehicle at Rs 3,54,000 on 13-2-2002, it could not claim that the value of the vehicle on total loss basis on 10-9-2002 i.e. on the date of the accident was only Rs 1,80,000.

…   …   …  

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      13                     7. It must be borne in mind that Section 146 of the Motor

Vehicles  Act,  1988  casts  an  obligation  on  the  owner  of  a vehicle  to  take  out  an  insurance  policy  as  provided under Chapter XI of the Act and any vehicle driven without taking such a policy invites a punishment under Section 196 thereof. It  is,  therefore,  obvious  that  in  the  light  of  this  stringent provision  and  being  in  a  dominant  position  the  insurance companies  often  act  in  an  unreasonable  manner  and  after having accepted the value of a particular insured good disown that very figure on one pretext or the other when they are called upon to pay compensation. This “take it or leave it” attitude is clearly unwarranted not only as being bad in law but ethically indefensible. We are also unable to accept the submission that it was for the appellant to produce evidence to prove that the surveyor’s report was on the lower side in the light of the fact that a price had already been put on the vehicle by the Company itself at the time of renewal of the policy. We accordingly hold that in these circumstances, the Company was bound by the value put on the vehicle while renewing the policy on 13-2-2002.”

 12. Mr. Basu, learned Senior Advocate, however relied upon the decision

of this Court in Sikka Papers (supra).  In that matter a diesel generating set

purchased in the year 1997 for Rs.45 lakhs was insured for Rs.35 lakhs for the

period  from  08.04.1999  to  07.04.2000.   Said  diesel  generating  set  broke

down. The complainant demanded what it had paid i.e. Rs.25 lakhs for the

repairs but the insurer, relying upon the report of the Surveyor, did not agree.

According to the Surveyor the net loss was Rs.14,45,000/-.  But the Surveyor

found that the generating set was under insured and as such the figure of net

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      14 loss that was assessed ought to suffer deduction of 25.71%.  The net assessed

loss was,  therefore,  at  the level  of  Rs.10,47,491/-.   This  Court  raised two

questions:

“(1) Whether  the  insurer  was  justified  in  accepting  report dated 15-5-2000 submitted by the surveyor who had assessed the loss of Rs.14,45,000/- after deducting about Rs.10,55,000/- from  Rs.25,00,000/-  i.e.  actual  amount  paid  by  the complainant for repairing the diesel generating set?

(2) Whether  the  insurer  was  justified  in  deducting  an amount of Rs.3,71,509.50 (25.71%) as under insurance from the loss assessed at Rs.14,45,000/- by the surveyor in its report dated 15-5-2000?”

As regards first  question,  this  Court  found that  insurer  would not  be

liable in respect of wearing out of machinery from normal use or exposure

and the cost of replacement of insured property by new property of the same

kind  and  same  capacity  would  be  subject  to  the  exception  that  repair  or

replacement would not extend to the machinery or parts which had undergone

normal wear and tear.  With regard to the second question, on facts it was

found that  there was an element of  under insurance and the surveyor was

justified in deducting 25.71%.

13. We do not see how the decision in Sikka Papers (supra) could

be of any relevance in the present matter.  The cases of “under insurance”

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      15 stand on a completely different footing.  In such cases the Insurance Company

stands denied of appropriate premium.  If  the sum insured is,  in any way,

lesser than the real value of the subject matter of insurance, and if there be

cases  of  partial  replacement  or  partial  loss,  it  is  well  accepted  that  the

Insurance  Company is  entitled to  proportionate  deduction  representing  the

proportion of undervaluation.  It is this facet of the matter which weighed

with the Court in Sikka Papers (supra) in affirming the surveyor’s report in so

far as 25.71% deduction was concerned.  Even in the present matter under the

caption “Provisions”, the stipulation in para 2 is to the effect that if the sum

insured “is less than the amount required to be insured ……. the company

will  pay only in  such proportion as  the  sum insured bears  to  the  amount

required to be insured.”

14. It is not the case of the Insurance Company that there was any

“under insurance” in the present matter.   On the other hand, the contention is

that  as  against  the  sum insured which was  Rs.46,56,600/-  the  depreciated

value was Rs.34,42,500/-.  So according to the Insurance Company, if at all it

was a case of over insurance.  If we go by the idea of receipt of premium, then

the Insurance Company had received more than what according to it the real

value would have justified.

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      16

15. It is precisely in this set of facts that the question in the present

matter  arises.   If  both  the  sides,  with  their  eyes  open,  had  arrived  at  a

particular figure to be the real value of the subject matter of insurance, is it

open to any party to dispute said sum and contend that the real value was

something different  from what  was  declared by the parties  to  be the sum

insured.  One may understand cases where there is non-disclosure of material

facts which may go to the root of the matter and as such the sanctity of the

agreement itself may get  affected.  But if  both the parties had agreed and

arrived at an understanding, which understanding was otherwise not vitiated

by any misrepresentation, fraud or coercion, the parties must be held bound

by stipulation of such figure.  This was the idea and the underlying principle

in Dharmendra Goel (supra)

16. The relevant stipulation in the present case, namely clause (b)

of  Provision -Basis  of  Indemnity speaks of  calculation of  actual  value  by

deducting “proper depreciation”.  The Surveyor of the Insurance Company

has worked the figure of  depreciation by starting with the figure of  Rs.51

lakhs as the cost of a new Excavator and then deducting 32.5% by way of

depreciation assuming the life of Excavator to be 10 years.  In his assessment,

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      17 therefore,  the  stipulation  of  the  figure  of  Rs.46,56,600/-  on  the  day  the

contract was entered into, had no significance.  Was he right and justified and

how could he assume the life of the Excavator to be 10 years?  If that was the

understanding between the parties, the figure of sum insured could have been

different.  If the surveyor was calculating the depreciation from the day when

the policy was entered into till  the date  when the accident  occurred,  such

exercise could certainly be justified.  But the exercise undertaken was in the

nature  of  not  only  considering  the  depreciation  post  the  policy  but  even

including the period prior thereto.  That exercise was already undertaken by

the parties and in their assessment the real value of the Excavator as on the

day when the policy was taken out was Rs.46,56,600/-.  In the face of such

agreement  and  understanding,  the  surveyor  could  not  have  calculated

depreciation for a period prior to the date of policy or contract.  The purport

of aforesaid clause was to arrive at proper valuation as on the day when there

was total destruction.  He could have undertaken the exercise post the date of

policy to assess the real value of the insured property as on the date when the

fire actually took place.  And for such purposes, the assessment must start

with the amount described as “sum insured” on the day when the contract was

entered into.  It was not open to the Surveyor or to the Insurance Company to

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      18 disregard the figure stipulated as ‘sum insured’.  The loss had to be assessed

in the present case, keeping said figure in mind.

17. Having  considered  the  entire  matter,  in  our  view,  except  in

cases where the agreement on part of the Insurance Company is brought about

by fraud, coercion or misrepresentation or cases where principle of uberrima

fide is attracted, the parties are bound by stipulation of a particular figure as

sum insured.  Therefore, the surveyor and the Insurance Company were not

justified  in  any way  in  questioning and  disregarding the  amount  of  “sum

insured”.  Further depreciation, if any, can always be computed keeping the

figure of “sum insured” in mind.  The starting figure, therefore, in this case

had to be the figure which was stipulated as “sum insured”.  Since Excavator,

after  the policy was taken out was used for eleven months,  there must  be

some reasonable  depreciation  which  ought  to  be  deducted  from the  “sum

insured”.  The surveyor appointed by the insured was right in deducting 10%

and  in  arriving  at  the  figure  of  Rs.41,90,940/-.   The  other  issue  which

weighed with the surveyor appointed by the Insurance Company regarding

deduction of salvage value was rightly answered by the National Commission

and  as  such  does  not  require  any  elaboration.   We,  thus,  find  that  the

             Civil Appeal No1299./2019 @ SLP(C)No.27695/2018                Sumit Kumar Saha  vs.  Reliance General Insurance Co. Ltd.

                                      19 assessment made by the State Commission was quite correct and that made by

the National Commission was completely incorrect.

18. We, therefore, allow this appeal, set aside the decision of the National

Commission  and  restore  the  judgment  and  order  passed  by  the  State

Commission.  No costs.

………..…..……..……J.                                                                                (Uday Umesh Lalit)

..………….……………J.                                 (R. Subhash Reddy)

New Delhi, January 30, 2019