Oriental Insurance Company … vs Malana Power Company Ltd. on 15 November, 2021


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Supreme Court of India

Oriental Insurance Company … vs Malana Power Company Ltd. on 15 November, 2021

Author: R. Subhash Reddy

Bench: R. Subhash Reddy, Hrishikesh Roy

                                                                                   REPORTABLE
                                       IN THE SUPREME COURT OF INDIA

                                       CIVIL APPELLATE JURISDICTION

                                           CIVIL APPEAL NO.5132 OF 2019


                         The Oriental Insurance Co. Ltd.                      ...Appellant(s)


                                     versus


                         Malana Power Company Ltd.                           ...Respondent(s)



                                                J U D G M E N T

R.SUBHASH REDDY, J.

1. This Civil Appeal is filed by the appellant/the

Oriental Insurance Company Limited, aggrieved by the

order dated 28.02.2019 passed in O.P. No.53 of 2005,

by the National Consumer Disputes Redressal

Commission, New Delhi. By the aforesaid order, the

National Commission has allowed the complaint filed

by the respondent/complainant Company and directed

the appellant to pay a sum of Rs.4,68,33,840/-
Signature Not Verified

Digitally signed by
towards the loss suffered by the respondent, in
Rajni Mukhi
Date: 2021.11.15
14:47:35 IST
Reason:

terms of insurance policy along with interest @ 6%

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per annum from the date of filing the complaint till

the date of payment.

2. The respondent is a company which runs a Hydro

Power Project around Malana Nalah. The respondent

was interested in securing an indemnity in respect

of any shortfall that may take place in aggregate

annual power generation at its Hydro Power Plant due

to failure of hydrology which depends upon vagaries

of nature.

3. For the year 2001-02, the respondent has obtained

policies from M/s. IFFCO-TOKIO General Insurance

Company. M/s.IFFCO-TOKIO General Insurance Company

provided a package deal of the two insurance

policies to the respondent. First one was Industrial

All Risk Insurance Policy which covered material,

damages due to fire and special perils, machinery

breakdown, loss of profit etc., for a period of 12

months. The second insurance policy was Special

Contingency Policy which covered loss of power

generation due to loss of hydrology. The insurance

coverage for the year 2001-02 was for a period of 12

months commencing from 07.07.2001 to 06.07.2002. The

2
respondent has obtained policies from the appellant

in similar lines for the period commencing from

07.07.2002 to 06.07.2003. In respect of Special

Contingency Policy, which covered the loss of power

generation due to loss of hydrology, the risk cover

for the year 2001-02 was Rs.5.00 crores. Since the

likely loss of power generation was estimated to be

around Rs.8.00 Crores, the respondent wanted the

risk coverage enhanced from Rs.5.00 Crores to

Rs.10.00 Crores for the year 2002-03. The terms and

conditions were accepted by the appellant. The

Special Contingency Policy which is obtained from

the appellant for the year 2002-03 covered Rs.10.00

Crores instead of Rs.5.00 Crores, as provided by the

earlier insurer i.e. IFFCO-TOKIO for the previous

year i.e. 2001-02. The Special Contingency Policy

issued by the appellant was identical to the one

issued by M/s.IFFCO-TOKIO except the sum insured was

Rs.10.00 Crores in case of short-fall in the

aggregate annual power generation due to loss of

hydrology. A premium of Rs.16,95,750/- was paid by

the respondent. As per the terms of the contract

entered into, the Insurance Company was entitled to

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cancel the policy by issuing 7 (seven) days’ prior

notice.

4. When the appellant was not able to obtain

reinsurance in the reinsurance market for getting it

protected as per the requirements of business

retention norms by the Insurance Industry, it has

addressed a letter dated 11.11.2002 to the

respondent for modifying the terms and conditions of

the policy to reduce the insurance coverage to

Rs.5.00 Crores from Rs.10.00 Crores. It is

specifically mentioned in the letter dated

11.11.2002 issued by the appellant that the sum

insured had to be kept at Rs.5.00 Crores as no

reinsurer was willing to accept the sum insured

beyond Rs.5.00 Crores. When the said proposal for

revising the policy with a sum insured of Rs.5.00

Crores was not accepted by the respondent, the

appellant vide proceedings dated 25.11.2002

cancelled the policy by refunding the premium on

pro-rata basis for the remaining period i.e., from

27.11.2002 to 06.07.2003.

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5. The respondent vide letter dated 26.11.2002

informed the appellant that there has been a

shortfall of 28302839 KWH of electricity generated

from 07.02.2002 to 20.11.2002 and the loss suffered

was Rs.5,20,37,800/- and after deduction of 10%, the

respondent has claimed an amount of

Rs.4,68,33,840/-. By the said letter, the respondent

has made a formal claim with the appellant for

reimbursement of the amount as per the terms of the

policy. As the same was not acceded to, the

respondent approached the National Consumer Disputes

Redressal Commission, New Delhi, claiming an amount

of Rs.8,56,77,608.81 as per the Special Contingency

Policy.

6. The appellant has filed written statement

opposing the claim. While contesting the claim on

various grounds, mainly it was the case of the

appellant that the respondent has fraudulently

suppressed the hydrological data of that project of

the previous year. The plea of the appellant was not

accepted by the National Commission mainly on the

ground that the appellant, with open eyes, had

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entered into a Memorandum of Understanding (MoU)

with the respondent and issued the policy on the

same lines as that of preceding year for the year

2001-02, by duly incorporating the available

hydrology data. The National Commission has found

that there is no non-disclosure of material

information in terms of the insurance policy issued

by the appellant when the available hydrology data

was duly supplied by the respondent and incorporated

in the policy itself. Further, with reference to

cancellation of the insurance policy, the National

Commission has found that at no point of time, there

was any complaint of any material suppression with

regard to hydrology data and further noticed that

the notice dated 20.11.2002 for cancellation of the

special contingency policy was also only for the

reason that the respondent was not accepting for

amendment of the policy for revision of the sum

insured to Rs.5.00 Crores from Rs.10.00 Crores only

on the ground that they were not able to reinsure

their interest. The National Commission by clearly

recording a finding that there was no suppression

and fraud on the part of respondent, has allowed the

6
claim of the respondent and directed to pay an

amount of Rs.4,68,33,840/- which is the loss

suffered by the respondent in terms of the policy

along with interest @ 6% per annum.

7. We have heard Sri Mahavir Singh, learned senior

counsel appearing for the appellant and Sri Neeraj

Malhotra, learned Senior Counsel appearing for the

respondent.

8. Even in this appeal, by referring to the

impugned order and other material placed on record,

the learned Senior Counsel appearing for the

appellant has mainly contended that the respondent

had obtained policy by playing fraud and

suppression, as such, the respondent is not entitled

to make any claim against the appellant. It is

submitted that there is non-disclosure of previous

hydrology data of the year 2001-02 before obtaining

the policy despite the same was available with the

respondent. It is further submitted that after

obtaining the subject policy from the appellant, few

days thereafter, the respondent made a claim against

the earlier insurer M/s.IFFCO-TOKIO, which itself

7
shows that by changing the insurance companies, the

respondent was in the habit of making wrong claims.

It is submitted that in view of the suppression /

non-disclosure of hydrology data of the previous

year though it was available with the respondent,

the appellant has rightly repudiated the claim of

the complainant company. It is contended that the

National Commission without considering the matter

as per the settled legal position, by recording

erroneous findings, allowed the claim made by the

respondent. In support of his argument, the learned

Senior Counsel has placed reliance on the judgment

of this Court in the case of Oriental Insurance

Company v. Mahendra Construction1.

9. On the other hand, Sri Neeraj Malhotra, learned

Senior Counsel appearing for the respondent, by

taking us to the findings recorded by the National

Commission and other material placed on record, has

submitted that there was no suppression or fraud

played by the respondent, as pleaded and the claim

of the respondent was rightly allowed by the

National Commission. The learned Senior Counsel has
1
(2019) 18 SCC 209

8
also submitted that in the absence of any errors in

the order impugned, there are no grounds to

interfere with the same. It is contended that the

appellant is aware of the conditions of the

insurance policy which the respondent has obtained

for the previous year 2001-02 from M/s.IFFCO-TIKIO

and as per the same terms and conditions, the

subject policy was issued by the appellant. At no

point of time, the appellant asked for the hydrology

data. It is submitted that without informing the

respondent, the appellant has appointed M/s. A.K.

Gupta & Associates for carrying out a survey and

called for report on the loss of power generation.

The Surveyor appointed by the Insurance Company has

submitted a report which was not even furnished to

the respondent and based on such report, the claim

made by the respondent was repudiated. It is

submitted that having regard to the material

produced before the National Commission, it has come

to a definite finding that there was no suppression

or non-disclosure from the side of the respondent,

as such, there was no reason or justification for

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repudiating the claim made by the respondent and

allowed the claim of Rs.4,68,33,840/-.

10. On hearing the learned counsel on both sides

and perusal of the material placed on record, we too

are of the opinion that there was no suppression or

non-disclosure by the respondent in suppressing any

hydrology data of the previous year, as pleaded by

the appellant. The data of the years 1993 to 2002

could not be provided as the same was not available

with the respondent and it was also made known to

the appellant.

11. The Surveyor appointed by the Insurance Company

instead of assessing the loss of hydrology as per

the policy, went into several aspects which are

irrelevant to the claim. The Special Contingency

Policy for the year 2001-02 was obtained from IFFCO-

TOKIO and sum insured was only Rs.5.00 Crores. When

the respondent has requested to increase the

coverage to Rs.10.00 Crores, the same was agreed by

the appellant and entered into an MoU with the

similar terms and conditions of the previous year

policy which was with IFFCO-TOKIO. Except the amount

10
of coverage was increased from Rs.5.00 Crores to

Rs.10.00 Crores in the policy issued by the

appellant, all other terms and conditions were the

same. The appellant was aware of the earlier

insurance policy entered into by the respondent with

the IFFCO-TOKIO prior to issuance of the subject

policy in favour of the respondent for the period

covering from 07.07.2002 to 06.07.2003. If they were

to examine the hydrology data of the previous year,

it was well within the knowledge of the appellant to

ask for such data even before entering into

contract. It is not a case of suppression or non-

disclosure of data as pleaded, and whatever data was

available, the respondent has made known to the

appellant. When the appellant was aware of the

earlier insurance policy obtained from IFFCO-TOKIO

by the respondent, there was no reason for not

asking for such hydrology data of the previous year.

As such, it cannot be said that there was non-

disclosure of hydrology data or any fraud from the

side of the respondent, as is projected by the

appellant so as to repudiate the claim.

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12. Further, it is to be noticed that the

cancellation of the subject policy vide proceedings

dated 25.11.2002 was also not on account of

suppression or fraud played by the respondent, but

it was only for the reason that the respondent has

not acceded to the request of the appellant to

modify the sum insured from Rs.10.00 Crores to

Rs.5.00 Crores. Further, the cancellation of policy

is on the ground that they were not able to re-

insure the claim in the re-insurance market for

protection of their interest. If there was any

suppression or non-disclosure, as pleaded, the

appellant would have cancelled only on such ground.

No such ground was raised at any point of time

either at the stage of issuing notice dated

20.11.2002, or while issuing the proceedings dated

25.11.2002 cancelling the policy for the remaining

period by refunding premium on pro-rata basis.

13. Though it is contended by Mr. Mahavir Singh,

learned Senior Counsel that the respondent has

encashed the cheque which was issued towards refund

of pro-rata premium, we are of the view that the

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same will not make any difference as the claim was

only for the period for which the insurance policy

was in force.

14. In view of the above, we are of the view that

there was no non-disclosure or fraud, as pleaded by

the apellant to repudiate the claim. Whether there

was any material suppression or not, is a matter of

fact, which is to be verified from the facts and

circumstances of each case and material on record.

15. Though the learned counsel for the appellant

relied on the judgment of this Court in the case of

Oriental Insurance Company Limited v. Mahendra

Construction1, but the same would not render any

assistance to support his case. In the aforesaid

judgment, there was non-disclosure of previous claim

against the insured goods in the proposal for

insurance itself. In view of the same, this Court

has held that insured made a false representation

and suppressed relevant material. Coming to the case

on hand, the previous policy with IFFCO-TOKIO for

the preceding year, for the period from 07.07.2001

to 06.07.2002 was made known to the appellant, as

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such, it cannot be said that there was any

suppression or non-disclosure.

16. For the aforesaid reasons, we are of the view

that there is no merit in this Civil Appeal, and the

same being devoid of merit, is dismissed. The

appellant has deposited an amount of Rs.1.25 crores

before Registry of this Court which is kept in

fixed deposit. We permit the respondent to withdraw

the said amount of Rs.1.25 crores along with accrued

interest, if any, without furnishing any security.

The appellant shall pay the balance amount due to

the respondent within a period of three (03) months

from today.

…………………………………………J
(R. SUBHASH REDDY)

…………………………………………J
(HRISHIKESH ROY)
NEW DELHI;

November 15th, 2021

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