Jaina Construction Company vs Oriental Insurance Company … on 11 February, 2022


Try out our Premium Member services: Virtual Legal Assistant, Query Alert Service and an ad-free experience. Free for one month and pay only if you like it.

Supreme Court of India

Jaina Construction Company vs Oriental Insurance Company … on 11 February, 2022

Author: Sanjiv Khanna

Bench: Sanjiv Khanna, Hon’Ble Ms. Trivedi

                                                                            REPORTABLE



                                       IN THE SUPREME COURT OF INDIA
                                        CIVIL APPELLATE JURISDICTION


                                           CIVIL APPEAL NO. 1069 OF 2022


                           JAINA CONSTRUCTION COMPANY                     .... APPELLANT


                                                   VERSUS


                           THE ORIENTAL INSURANCE COMPANY
                           LIMITED & ANR.                 .... RESPONDENTS




                                                 JUDGMENT

BELA M. TRIVEDI, J.

1. The present appeal is directed against the impugned order dated 9th

September, 2016 passed by the National Consumer Disputes Redressal

Commission, New Delhi (hereinafter referred to as “the NCDRC”) in

Revision Petition No. 1104 of 2016 whereby the NCDRC while allowing

Signature Not Verified the said Revision Petition filed by Respondent No. 1-Insurance Company,
Digitally signed by
Anita Malhotra
Date: 2022.02.11
15:28:30 IST
Reason: has set aside the order dated 16th December, 2015 passed by the State

Consumer Disputes Redressal, Commission, Haryana at Panchkula and

1
the order dated 26th February, 2015 passed by the District Consumer

Disputes Redressal Forum, Gurgaon.

2. Heard Mr. Avinash Lakhanpal, learned counsel appearing on behalf of the

appellant. None has entered appearance on behalf of the respondents though

duly served.

3. The precise question that falls for consideration before this Court is –

whether the Insurance Company could repudiate the claim in toto, made

by the owner of the vehicle, which was duly insured with the insurance

company, in case of loss of the vehicle due to theft, merely on the ground

that there was a delay in informing the company regarding the theft of

vehicle?

4. The undisputed facts transpiring from the record are that the vehicle in

question i.e., Tata Aiwa Truck bearing Registration No. RJ-02-098177

was purchased by the appellant on 31.10.2007. The said vehicle was duly

insured with Respondent No. 1- Insurance Company. The said vehicle was

robbed by some miscreants on 04.11.2007. Consequently, an FIR was

registered by the appellant-complainant on 05.11.2007 for the offence

under Section 395 IPC at Police Station Nagina, District Mewat

(Haryana). The police arrested the accused and also filed the challan

against them in the concerned Court, however, the vehicle in question

could not be traced and, therefore, the police filed untraceable report on

23.08.2008. Thereafter, the complainant lodged the claim with the

2
Insurance Company with regard to the theft of the vehicle in question. The

Insurance Company, however, failed to settle the claim within a

reasonable time, and therefore, the appellant-complainant filed a

complaint being the Consumer Complaint No. 63 of 2010 before the

District Consumer Disputes Redressal Forum, Gurgaon.

5. It may be noted that during the pendency of the complaint before the

District Forum, the respondent no.1- Insurance Company repudiated the

claim of the complainant vide its letter dated 19.10.2010, stating inter alia

that there was a breach of condition no. 1 of the policy which mandated

immediate notice to the insurer of the accidental loss/damage, and that the

complainant had intimated about the loss on 11.04.2008 i.e. after the lapse

of more than five months and, therefore, the Insurance Company had

disowned their liability on the claim of the complainant.

6. The District Forum allowed the said claim of the complainant by holding

that the complainant was entitled to the insured amount on non-standard

basis, i.e., Rs. 12,79,399/- as 75% of the IDV i.e., Rs. 17,05,865/- with

interest @ 6% p.a. from the date of filing of the complaint till realization

from the Insurance Company. The District Forum also awarded

compensation of Rs.10,000/- and litigation expenses of Rs.5,000/- to the

complainant. The aggrieved Insurance Company preferred an appeal

being Appeal No. 612 of 2015 before the State Consumer Disputes

Redressal Commission (Haryana), Panchkula. The complainant also

3
preferred an appeal being Appeal No. 537 of 2015 seeking enhancement

of compensation. The State Commission dismissed the appeal filed by the

Insurance Company and partly allowed the appeal filed by the

complainant by increasing rate of interest awarded by the District Forum

from 6% to 9% vide the Judgment and Order dated 16.12.2015. The

aggrieved Insurance Company preferred the Revision Petition before the

NCDRC which came to be allowed as stated hereinabove.

7. Since the respondent no.1 – Insurance Company has repudiated the claim

of the complainant on the ground that the complainant had committed the

breach of Condition No. 1 of the Insurance Contract, it would be beneficial

to reproduce the said condition, which reads as under:

“1. Notice shall be given in writing to the company
immediately upon the occurrence of any accidental
loss or damage in the event of any claim and
thereafter the insured shall give all such
information and assistance as the company shall
require. Every letter, claim, writ, summons and/or
process or copy thereof shall be forwarded to the
company immediately on receipt by the insured.

Notice shall also be given in writing to the company
immediately the insured shall have knowledge of
any impending prosecution, inquest or fatal inquiry
in respect of any occurrence which may give rise to
a claim under this policy. In case of a major loss,
theft or criminal act which may be the subject of a
claim under this policy the insured shall give
immediate notice to the police and co-operate with

4
the company in securing the conviction of the
offender.”

8. At the outset, it may be noted that there being a conflict of decisions of

the Bench of two Judges of this Court in case of Om Prakash vs. Reliance

General Insurance & Another and in case of Oriental Insurance

Company Limited vs. Parvesh Chander Chadha, on the question as to

whether the delay occurred in informing the Insurance Company about the

occurrence of the theft of the vehicle, though the FIR was registered

immediately, would disentitle the claimant of the insurance claim, the

matter was referred to a three Judge Bench. The three Judge Bench in case

of Gurshinder Singh vs. Shriram General Insurance Company Ltd. &

Another reported in 2020 (11) SCC 612 in similar case as on hand,

interpreted the very condition no. 1 of the Insurance Contract and observed

as under:

“9. We are of the view that much would depend
upon the words “cooperate” and “immediate”, in
Condition 1 of the standard form for commercial
vehicles package policy. Before we analyse this case
any further, we need to observe the rules of
interpretation applicable to a contract of insurance.

Generally, an insurance contract is governed by the
rules of interpretation applicable to the general
contracts. However, due to the specialised nature of
contract of insurance, certain rules are tailored to
suit insurance contracts. Under the English law, the
development of insurance jurisprudence is given

5
credence to Lord Mansfield, who developed the law
from its infancy. Without going much into the
development of the interpretation rules, we may
allude to Neuberger, J. in Arnold v. Britton, which
is simplified as under:

(1) Reliance placed in some cases on
commercial common sense and
surrounding circumstances was not to
be invoked to undervalue the
importance of the language of the
provision which is to be construed.

(2) The less clear the words used were, the
more ready the court could properly be
to depart from their natural meaning,
but that did not justify departing from
the natural meaning.

(3) Commercial common sense was not to
be invoked retrospectively, so that the
mere fact that a contractual
arrangement has worked out badly, or
even disastrously, for one of the parties
was not a reason for departing from the
natural language.

(4) A court should be very slow to reject
the natural meaning of a provision as
correct simply because it appeared to be
a very imprudent term for one of the
parties to have agreed.

(5) When interpreting a contractual
provision, the court could only take into
account facts or circumstances which

6
existed at the time that the contract was
made and which were known or
reasonably available to both parties.

(6) If an event subsequently occurred
which was plainly not intended or
contemplated by the parties, if it was
clear what the parties would have
intended, the court would give effect to
that intention.

10. A perusal of the aforesaid shows that this
contract is to be interpreted according to the context
involved in the contract. The contract we are
interpreting is a commercial vehicle package policy.
There is no gainsaying that in a contract, the
bargaining power is usually at equal footing. In this
regard, the joint intention of the parties is taken into
consideration for interpretation of a contract.
However, in most standard form contracts, that is
not so. In this regard, the court in such
circumstances would consider the application of the
rule of contra proferentem, when ambiguity exists
and an interpretation of the contract is preferred
which favours the party with lesser bargaining
power.

11. It is argued on behalf of the respondents and
rightly so, that the insurance policy is a contract
between the insurer and the insured and the parties
would be strictly bound by the terms and conditions
as provided in the contract between the parties.

12. In our view, applying the aforesaid principles,
Condition 1 of the standard form for commercial
vehicles package policy will have to be divided into
two parts. The perusal of the first part of Condition

7
1 would reveal that it provides that “a notice shall be
given in writing to the company immediately upon
the occurrence of any accidental loss or damage”. It
further provides that in the event of any claim and
thereafter, the insured shall give all such
information and assistance as the company shall
require. It provides that every letter, claim, writ,
summons and/or process or copy thereof shall be
forwarded to the insurance company immediately
on receipt by the insured. It further provides that a
notice shall also be given in writing to the company
immediately by the insured if he shall have
knowledge of any impending prosecution inquest or
fatal inquiry in respect of any occurrence, which
may give rise to a claim under this policy.

13. A perusal of the wordings used in this part would
reveal that all the things which are required to be
done under this part are related to an occurrence of
an accident. On occurrence of an accidental loss,
the insured is required to immediately give a notice
in writing to the company. This appears to be so that
the company can assign a surveyor so as to assess
the damages suffered by the insured/vehicle. It
further provides that any letter, claim, writ,
summons and/or process or copy thereof shall be
forwarded to the company immediately on receipt by
the insured. As such, the intention would be clear.
The question of receipt of letter, claim, writ,
summons and/or process or copy thereof by the
insured, would only arise in the event of the criminal
proceedings being initiated with regard to the
occurrence of the accident. It further provides that
the insured shall also give a notice in writing to the
company immediately if the insured shall have the
knowledge of any impending prosecution inquest or
fatal inquiry in respect of any occurrence which

8
may give rise to a claim under this policy. It will
again make the intention clear that the immediate
action is contemplated in respect of an accident
occurring to the vehicle.

14. We find that the second part of Condition 1 deals
with the “theft or criminal act other than the
accident”. It provides that in case of theft or
criminal act which may be the subject of a claim
under the policy, the insured shall give immediate
notice to the police and cooperate with the company
in securing the conviction of the offender. The
object behind giving immediate notice to the police
appears to be that if the police is immediately
informed about the theft or any criminal act, the
police machinery can be set in motion and steps for
recovery of the vehicle could be expedited. In a case
of theft, the insurance company or a surveyor would
have a limited role. It is the police, who acting on the
FIR of the insured, will be required to take
immediate steps for tracing and recovering the
vehicle. Per contra, the surveyor of the insurance
company, at the most, could ascertain the factum
regarding the theft of the vehicle.

15. It is further to be noted that, in the event, after
the registration of an FIR, the police successfully
recovering the vehicle and returning the same to the
insured, there would be no occasion to lodge a claim
for compensation on account of the policy. It is only
when the police are not in a position to trace and
recover the vehicle and the final report is lodged by
the police after the vehicle is not traced, the insured
would be in a position to lodge his claim for
compensation.

16. ……………………

9

17. That the term “cooperate” as used under the
contract needs to be assessed in the facts and
circumstances. While assessing the “duty to
cooperate” for the insured, inter alia, the court
should have regard to those breaches by the insured
which are prejudicial to the insurance company.
Usually, mere delay in informing the theft to the
insurer, when the same was already informed to the
law enforcement authorities, cannot amount to a
breach of “duty to cooperate” of the insured.

18. ……………

19. …………..

20. We, therefore, hold that when an insured has
lodged the FIR immediately after the theft of a
vehicle occurred and when the police after
investigation have lodged a final report after the
vehicle was not traced and when the
surveyors/investigators appointed by the insurance
company have found the claim of the theft to be
genuine, then mere delay in intimating the
insurance company about the occurrence of the
theft cannot be a ground to deny the claim of the
insured.”

9. In the opinion of the Court the afore-stated ratio of the judgment clinches

the issue involved in the case on hand. In the instant case also, the FIR

was lodged immediately on the next day of the occurrence of theft of the

vehicle by the complainant. The accused were also arrested and charge-

sheeted, however, the vehicle could not be traced out. Of course, it is true

that there was a delay of about five months on the part of the complainant

10
in informing and lodging its claim before the Insurance Company,

nonetheless, it is pertinent to note that the Insurance Company has not

repudiated the claim on the ground that it was not genuine. It has

repudiated only on the ground of delay. When the complainant had lodged

the FIR immediately after the theft of the vehicle, and when the police

after the investigation had arrested the accused and also filed challan

before the concerned Court, and when the claim of the insured was not

found to be not genuine, the Insurance Company could not have

repudiated the claim merely on the ground that there was a delay in

intimating the Insurance Company about the occurrence of the theft.

10. In that view of the matter, the Court is of the opinion that the NCDRC

should not have set aside the orders of the District Forum and the State

Commission by holding that the repudiation of the insurance claim by the

insurance company was justified. The impugned order being erroneous

and against the settled position of law, deserves to be set aside, and is set

aside, accordingly.

11. The appeal is allowed, affirming the order of the State Commission.

……………………………J.

[SANJIV KHANNA]

NEW DELHI …………………………J.

11.02.2022                                           [BELA M. TRIVEDI]

                                       11



Source link