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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2059 OF 2015

Saurashtra Chemicals Ltd.  (Presently known as Saurashtra  Chemicals Division of Nirma Ltd.)      ...APPELLANT

VERSUS

National Insurance Co. Ltd             ...RESPONDENT

J U D G M E N T

KRISHNA MURARI, J.

The appellant purchased a standard fire and special perils policy from the

respondent  National  Insurance  Company  Ltd.  thereby  insuring  the  risk  of

loss/damage to the stock of coal and lignite stored in its factory compound. An

additional premium of Rs. 59,200/- was paid by the appellant company so as to

cover  the  risk  of  loss  of  the  aforesaid  stock  on  account  of  spontaneous

combustion.  The  appellant  was  declared  a  Sick  Unit  and  was  accordingly

registered  under  SICA.  The  factory  remained  closed  from  17.02.2006  to

09.08.2006 and was re-opened on 10.08.2006.

2. After re-opening it  was noticed between the period from 11.8.2006 to

20.8.2006  that  some  amount  of  stock  of  coal  and  lignite  has  been

diminished/destroyed on account of spontaneous combustion, causing loss and

damage.  Intimation  in  this  regard  was  sent  to  the  respondent-insurer  on

12.09.2006.

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3. Pursuant to the claim made, a surveyor was appointed who visited the

premises of the appellant on 18.09.2006 and sought certain details, which were

provided on 28.11.2006. After carrying out the requisite survey, the surveyor

submitted his  report  on  11.04.2007 assessing  total  loss  to  the  tune of  Rs.

63,43,679/-.

4. The  claim  lodged  by  the  appellant  was  however  repudiated  by  the

respondent-insurer vide communication dated 27.07.2007 on the ground that

since spontaneous combustion did not result into fire thus, loss had not been

caused  by  fire  as  stipulated  in  the  relevant  endorsement  with  respect  to

spontaneous  combustion  of  the  insurance policy.  The appellant  was  further

informed through the letter that unless spontaneous combustion results into

fire, there is no liability under the policy.  

5. On denial of the claim the appellant approached the National Consumer

Disputes  Redressal  Commission (hereinafter  referred to as the NCDRC) vide

consumer complaint no. 115 of 2007 seeking following reliefs:-

(a) To direct  the  respondent  company to  allow the  demanded   

claim of Rs. 98,46,732/- on account of loss suffered by it on

account  of  loss  of  stock  of  goods  insured  with  the   

respondent;

(b) To award compensation of a sum of Rs. 25,00,000/- on account

of pain and suffering suffered by the appellant on account of   

deficient service provided by the respondent company;

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(c) Award of sum of Rs. 11,81,608/- being interest @ 18% from  

the date of the claim till the filing of the petition;

(d) Award  further  interests  @  18%  pendent lite  on  amounts   

specified in Clause (a) and (b);

(e) Award cost of Rs. 1,00,000/- to the complainant;

The complaint was resisted by the Insurer on three main grounds:-

(i) No claim was payable under the terms and conditions on which policy   

was issued inasmuch as destruction or damage, if any, caused to the   

property by fire on account of its own fermentation, natural heating or   

spontaneous combustion or undergoing natural heating or drying process

is not covered.

(ii) Since the factory remained closed from 17.02.2006 to 09.08.2006, the   

insurance cover ceased to operate in view of the condition no. 3 of the  

policy  which provides that  unless  the insured has obtained the prior   

sanction of the company in this regard, the insurance would cease to   

operate as regards the property affected :

(a)  if  the  trade  or  manufacture  carried  on  be

altered or if  the nature of  occupation of  or other

circumstances  affecting  the  building  insured  or

containing the property insured be changed in such

a way as to increase the risk of loss or damage.

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(b) if  the  building  insured  or  containing  the

insured  property  becomes  unoccupied  and  so

remains for a period of more than 30 days.  

(iii) Intimation of claim was sent with considerable delay of over a month   

thereby violating condition no. 6(i) of the General Conditions of Policy.

6. Insofar  as  ground nos.  (i)  and (ii)  are  concerned,  the  same were  not

accepted by NCDRC and were decided against the respondent-insurer.   The

said two grounds (i) and (ii) are not in issue before us in this appeal as such we

need not  enter into the same.

7. However ground no. (iii) raised by the respondent-insurer in defence to

the claim of the appellant found favour with the NCDRC and the complaint was

dismissed on the premise that there was breach of conditions incorporated in

Clause 6(i) of the General Conditions of Policy.  Under Clause 6(i) the intimation

of loss and damage was required to be given in writing by way of notice within

15 days of the occurance thereof. It is an admitted case between the parties

that intimation of loss/damage was given by the appellant to the respondent-

insurer for the first time on 12.09.2006 and a claim for loss for a sum of Rs. 1.4

Crores to 1.5 Crores was made  vide letter dated 14.09.2006.

8. The  NCDRC  rejected  the  claim  holding  that  since  the  complainant

(Appellant herein) had contravened Clause 6(i)  of the General  Conditions of

Policy, no claim is payable.

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9. We have heard Sh. Nikhil Goel, Learned Counsel for the appellant and Sh.

Yogesh Malhotra for the respondent.  

10. It is submitted by Learned Counsel for the appellant that the NCDRC has

erred in holding that the claim stands defeated  because of delayed intimation

as  postulated  in  Clause  6(i)  of  the  General  Conditions  of  Policy.  It  is  also

contended that, since respondent company had appointed a surveyor, its right

to advance the plea, with respect to the claim being not maintainable because

of delayed intimation as envisaged in Clause 6(i), stood waived. It is further

contended that since the letter of repudiation does not even remotely refer to

delayed  intimation  or  delayed  claim,  as  postulated  in  Clause  6(i),  the  said

ground cannot be taken as a defence to the claim.  Reliance in support of the

above contentions is placed upon judgment rendered by this Court in Galada

Power  and  Telecommunication  Ltd.  vs.  United  India  Insurance

Company Ltd & Another.1

11. Mr. Yogesh Malhotra, Learned Counsel for the respondent-insurer while

supporting  the  order  passed  by  the  NCDRC  contended  that  by  mere

appointment of a surveyor, the insurer is not estopped from raising a plea of

the violation of a condition warranting repudiation of the claim. Hence there is

no waiver of the condition relating to delay in intimation as stipulated in the

General Conditions of Policy.  It is further submitted that the judgment rendered

by the two judge Bench of this Court in the case of Galada (Supra) was

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1 (2016) 14 SCC 161

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considered by a three Judge Bench in the case of  Sonell Clocks and Gifts Ltd.

v/s New India Assurance Company Ltd.2 and was distinguished on the ground

that dictum in Galada case was in context of peculiar facts of that case.

12. We have considered the argument advanced by Learned Counsel at the

bar.  

The twin issues which arise for consideration in this appeal are:-

(1) Whether the respondent-insurer  had waived the condition  relating to   

delay in intimation and lodging of the claim, by appointing a surveyor.

(2) Whether in the absence of any mention, of aspect of delay in intimation  

and violation of conditions of Clause 6(i) of General Conditions of Policy,  

in the repudiation letter, the same could be taken as defence before the  

NCDRC.

13. It is not disputed that on the basis of the communication made by the  

appellant, the respondent-insurer appointed a surveyor on 18.09.2006 without

any caveat and qualification.

14. The Surveyor submitted his report dated 11.04.2007 assessing total loss

to the tune of Rs. 63,43,679/-. Subsequently, vide letter dated 27.07.2007 the

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2 (2018) 9 SCC 784

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respondent-insurer repudiated the claim by stating as under:-

M/s Saurashtra Chemicals Ltd. Nirma House, Ashram Road, Ahmedabad,

Kind Attn: Sh. Deepak Shah, Company Secretary.

Dear Sir,

Re:- Policy No. 301200/11/06/3300000033 Claim No. 301200/33/37/2007 Loss/Damage due to Spontaneous Combustion to Lignite and Coal.

This has reference to the claim lodged by you as above.

On scrutiny of survey reports, various claim documents, the nature cause and circumstances of the loss, it is noticed that in the instant case the Spontaneous Combustion has occurred, but it did not result into the fire and loss has not been caused by fire only as stipulated  in  the  relevant  endorsement  of  spontaneous combustion.

Further, the spontaneous combustion endorsement is clear and  unambiguous  in  this  regard  and  unless  the  spontaneous combustion results into fire, there is no liability under the policy.

In view of the above the competent authority has decided to repudiate the said claim which please note.

   Sd/- (George Valamchery) Sr. Divisional Manager.

15. As is evident from the repudiation letter there is no reference to

any of  the aspects  enumerated in  Clause 6(i)  of  the General  Conditions  of

Policy which reads as under:-

“6(i) On the happening of any loss or damage, the insured shall forthwith give notice thereof to the company and shall within 15 days after the loss or damage or such further time as the company may in writing allow in that behalf deliver to the company.”

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16. Insofar as issue (1) is concerned, a two Judge Bench of this Court in the

case of Galada (supra) where despite violation of duration clause stipulated in

Clause 5(3) to Clause 5(5) of the policy insurance company had appointed a

surveyor held as under:-

“13. The National Commission has relied upon Clause 5 and on that  basis  has  rejected  the  claim by  putting  the  blame on  the complainant. The letter of repudiation dated 20-9-1999, which we have reproduced hereinbefore,  interestingly,  does not  whisper a single word with regard to delay or, in fact, does not refer at all to the  duration  clause.  What  has  been  stated  in  the  letter  of repudiation is that the claim lodged by the complainant does not fall under the purview of transit loss because of the subsequent investigation  report.  It  is  evincible,  the  insurer  had  taken cognizance  of  the  communication  made  by  the  Appellant  and nominated a surveyor to verify the loss. Once the said exercise has been undertaken, we are disposed to think that the insurer could not have been allowed to take a stand that the claim is hit by the clause pertaining to duration…………….

18. In the instant case, the insurer was in custody of the policy. It had prescribed the clause relating to duration.  It was very much aware  about  the  stipulation  made  in  Clauses  5(3)  to  5(5),  but despite  the  stipulations  therein,  it  appointed  a  surveyor. Additionally, as has been stated earlier, in the letter of repudiation, it only stated that the claim lodged by the insured was not falling under the purview of transit loss.   Thus,  by positive action,  the insurer has waived its right to advance the plea that the claim was not  entertainable  because  conditions  enumerated  in  duration clause were not satisfied. In our considered opinion, the National Commission could not have placed reliance on the said terms to come to the conclusion that there was no policy cover in existence and that the risks stood not covered after delivery of goods to the consignee.”

17. However,  the  dictum  in  Galada case  (supra)  came  up  for

consideration before a three Judge Bench of this Court in the case of  Sonnel

Clocks  and  Gifts  Ltd. (supra)  and  it  was  distinguished  on  the  ground  that

dictum in Galada is in context of the peculiar facts and circumstances of that

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case and does not lay down that on appointment of the surveyor, the insurer is

estopped  from  raising  of  plea  of  violation  of  condition  stipulated  in  the

insurance  policy.  It  may  be relevant  to  extract  the  following  from the said

report:-

“20. The  Respondent  has  rightly  pointed  out  the  other distinguishing features  in  the present  case.  To wit,  in  that  case [Galada], the Court had considered Clause 5 of a Marine Insurance Policy wherein the issue was whether the insurance cover itself had extinguished by efflux of time and that the intimation given by the insured to the insurer was not made within 7 days of arrival of the vehicle at the destination mentioned in the policy. According to the insurer, on expiry of 7 days from delivery the insurance cover stood perished and no cover would subsist beyond the said 7 days’ period. It is in that context, the Court noted that appointment of the  surveyor  by  the  insurer  beyond  the  said  period  can  be construed as an act of waiver by the insurer of the position that the policy stands extinguished. In other words, appointment of a surveyor by the insurer was interpreted as a manifestation of the stand of the insurer that the insurance cover still subsists. This is evident from the dictum in para 13 of the reported decision as the Court noted that once a surveyor was nominated to verify the loss, the insurer could not be allowed to take a stand that the claim is hit by the clause pertaining to duration and more so because of absence of any mention in the letter of repudiation. Thus, it went on  to  hold  that  from  the  positive  conduct  of  the  insurer  in unequivocally appointing a surveyor, the insurer had waived the right which was in its favour under the duration clause.  

21. The expression “duration” is of some significance which is reflective of the existence or otherwise of the policy itself. In the present  case,  there  is  no  dispute  about  the  subsistence  of  the policy  but  is  one  of  violation  of  Condition  6  of  the  policy. Furthermore, in the present case the controversy will have to be answered on the basis of Standard Fire and Special Perils  Policy relatable  to Condition 6 obligating the insured to give forthwith intimation of the loss to the insurer. The two clauses are materially different and relate to two different and distinct insurance policies. In other words, Clause 5 of the Marine Insurance Policy and Clause 6  of  the  present  policy  are  incomparable  being  qualitatively different.

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22. To  put  it  differently,  Galada  case  was  not  a  case  which considered repudiation based on a premise or a reason similar to Condition 6 of the present policy and a specific plea taken by the insurer  in  that  behalf  in  the  repudiation  letter  itself.  Notably, Clause 5 of  the Marine Insurance Policy which was the subject- matter in Galada case did not have a negative covenant as in this case  in  the  proviso  to  Condition  6  of  the  subject  policy.  The fulfilment of the stipulation in Clause 6 of the General Conditions of the Policy is the sine qua non to maintain a valid claim under the policy.

23. We, therefore, agree with the Respondent that the dictum in Galada case is in the context of the facts of that case and does not lay down that on the appointment of a surveyor, per se, the insurer is  estopped  from  raising  a  plea  of  violation  of  the  condition warranting a repudiation of the claim. The factum of waiver has to be gathered from the totality of the obtaining circumstances.”

       (Emphasis supplied)

18. In view of the law laid down by the three Judge Bench in the  Sonnel

Clocks  (supra), the argument that by appointing a surveyor the respondent-

insurer is estopped from raising the plea of violation of condition prescribing a

time limit for intimation/lodging of the claim, has no legs to stand. Thus issue

no. (1) is answered accordingly.

19. Insofar as issue no. (2) is concerned it is undisputed that the letter of

repudiation did not even remotely mention anything about violation of duration

clause stipulated in  Clause (6)  (i)  of  the General  Conditions  of  Policy.   The

Respondent-insurer  repudiated  the  claim  solely  on  the  ground  that   since

spontaneous combustion did not result into fire and loss had not been caused

by fire as  stipulated by policy conditions,   there was no liability  under  the

policy.   It  was  for  the  first  time the  respondent-insurer  raised  the  issue of

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delayed intimation of claim and violation of stipulation of Clause 6(i)  of the

General Conditions of Policy in its reply filed before NCDRC.   

20. This court in the case of Galada Power Ltd. (supra) has elucidated upon

issue (2) as under :

“It  is  evincible,  the  insurer  had  taken  cognizance  of  the communication made by the Appellant and nominated a surveyor to verify the loss. Once the said exercise has been undertaken, we are disposed to think that the insurer could not have been allowed to take a stand that the claim is hit by the clause pertaining to duration. In the absence of any mention in the letter of repudiation and also from the conduct of the insurer in appointing a surveyor, it can safely be concluded that the insurer had waived the right which was in its favour under the duration clause. In this regard, Mr. Mukherjee, learned Senior Counsel appearing for the Appellant has commended us  to  a  decision of  the High Court  of  Delhi  in Krishna Wanti v. LIC, wherein the High Court has taken note of the fact that if the letter of repudiation did not mention an aspect, the same could not be taken as a stand when the matter is decided. We approve the said view.”

      (Emphasis supplied)

21. Undoubtedly, as mentioned supra, this Court in Sonnel Clocks (supra) has

distinguished  Galada  Power on  facts  and  held  that  the  appointment  of  a

surveyor cannot, as a matter of law, be construed as a waiver of the terms and

conditions of the insurance policy.  However, in Sonnel Clocks, the insurer had

taken a specific plea in the repudiation letter that the loss was not conveyed

within the stipulated period.  Hence the singular issue before this Court was

only whether the insurer had waived the condition as to delay in intimation by

appointing a surveyor.  This Court in Sonnel Clocks did not have the occasion to

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consider whether the insurance company could have raised delay as a ground

for repudiation for the first time before the consumer forum.

22. Hence we are of  the considered opinion that the law as laid down in

‘Galada’  on  issue  (2)  still  holds  the  field.   It  is  a  settled  position  that  an

insurance company cannot travel beyond the grounds mentioned in the letter

of repudiation.   If the insurer has not taken delay in intimation as a specific

ground in letter of repudiation, they cannot do so at the stage of hearing of the

consumer complaint before NCDRC.

23. Admittedly  in  the  case  at  hand  there  was  no  reference  of  delay  in

intimation or lodging of the claim as stipulated in Clause 6(i) of the General

Conditions of Policy in the repudiation letter.  

24. The NCDRC has failed to take into consideration this aspect of the matter

and,  therefore,  cannot  be  held  to  be  justified in  rejecting  the  claim of  the

appellant, on that ground.

25. In  view  of  the  aforesaid  analysis  the  appeal  stands  allowed  and  the

impugned judgment and the order of the NCDRC is set aside.  The Respondent-

insurer is directed to make payment of Rs. 63,43,679/-,  as assessed by the

surveyor, to the appellant with interest @ 8% from the date of the filing of the

claim of petition till date of payment.  The payment, as above, be made within

eight weeks from today.

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26. There will be no order as to costs.  

.….............................J. (MOHAN M. SHANTANAGOUDAR)

.................................J. (KRISHNA MURARI)

NEW DELHI; DECEMBER 13, 2019.