Narsingh Ispat Ltd. vs Oriental Insurance Company Ltd. & Anr.

Narsingh Ispat Ltd. vs Oriental Insurance Company Ltd. & Anr.  - Supreme Court Case Decision 2022 - 

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

CIVIL APPEAL NO.10671 of 2016 
Narsingh Ispat Ltd. …..Appellant
Oriental Insurance Company Ltd. & Anr.   …..Respondents
Abhay S. Oka, J.
1. This is an appeal under Section 23 of the Consumer Protection
Act, 1986.   The appellant has challenged the judgment and order
dated   18th  October   2016   of   the   National   Consumer   Disputes
Redressal   Commission   (for   short,   ‘the   Commission’).   By   the   said
Judgment,   the   Commission   dismissed   the   Consumer   Complaint
No.165 of 2012 filed by the appellant. 
2. The   appellant   had   taken   Standard   Fire   and   Special   Perils
Policy from the respondent­insurance company for the period from
28th  June 2009 to 27th  June 2010.   The policy was in respect of
Engineering Workshop and Plant at Village Khunti District Saraikela,
Jharkhand.   The total sum assured was Rs.26,00,00,000/­ under
different headings.  The appellant paid a premium of Rs.2,20,462/­.
According to the appellant, the policy covered the loss caused to the
property of the appellant on account of fire, lightning, explosion, riots,
strike etc.
3. The appellant lodged a claim on the basis of the said policy,
based on the incident of 23rd March 2010.  As per the claim made by
the appellant, after midnight of 22nd March 2010, about 50­60 antisocial people with arms and ammunition entered the factory premises
of the appellant at Village Khunti, District Saraikela in Jharkhand.
According to the appellant’s case, the mob demanded money and jobs
for local people.  According to the case of the appellant, substantial
damage was caused to its factory, machinery and other equipment.
According to the appellant, the object of the incident was to terrorise
the   management   of   the   appellant   and   workers   in   the   factory   by
forcing them to pay a ransom to the miscreants.  A First Information
Report was also registered at the instance of the appellant based on
the said incident.   The appellant lodged a regular claim with the
respondent company on the basis of the policy.   According to the
appellant’s case, a surveyor appointed by the respondent­insurance
company   carried   out   the   survey   and   assessed   the   loss   at
Rs.89,43,422/­.   However, by addressing a letter on 21st December
2010, the appellant claimed that the respondent­insurance company
was liable to make an interim payment of Rs.1.5 crores.
4. By   the   letter   dated   23rd  December   2010,   the   respondentinsurance   company   repudiated   the   appellant’s   claim   by   placing
reliance   on   the   Exclusion   Clause   in   the   policy   regarding   loss   or
damage caused by the acts of terrorism.  Therefore, the appellant filed
the complaint mentioned above before the Commission complaining
about deficiency in the service offered by the respondent­insurance
company.   In the complaint, a prayer was made for the grant of
monetary relief of Rs.1,51,35,780/­ on account of the loss suffered by
the appellant.  A separate amount of Rs.25,00,000/­ was claimed on
account of agony and harassment caused to the appellant due to
illegal   repudiation   of   the   policy   by   the   respondent­insurance
company.  The appellant claimed interest at the rate of 18% p.a on
the amounts mentioned above and cost amount of Rs.10,00,000/­.
5. By the impugned judgment and order, the Commission held
that   because   of   the   “Terrorism   Damage   Exclusion   Warranty”   (for
short, ‘the Exclusion Clause’), the respondent company was justified
in   repudiating   the   claim   of   the   appellant   based   on   the   policy   of
insurance.   It was held that the damage caused to the factory and
equipment of the appellant was due to an act of terrorism.
6. For   the   sake   of   convenience,   we   are   reproducing   the   said
Exclusion Clause, which reads thus: 
“Terrorism Damage Exclusion Warranty :
Notwithstanding any provision to the contrary within this
insurance it is agreed that this insurance excludes loss,
damage cost or expense of whatsoever nature directly or
indirectly caused by, resulting from or in connection with
any act of terrorism regardless of any other cause or
event contributing concurrently or in any other sequence
to the loss.
For   the   purpose   of   this   endorsement   an   act   of
terrorism means an act, including but not limited to
the use of force or violence and/or the threat thereof,
of  any  person  or  group(s)  of  persons  whether  acting
alone   or   on   behalf   of   or   in   connection   with   any
organization(s)   or   government(s),   committed   for
political,   religious,   ideological   or   similar   purpose
including the intention to influence any government
and/or to put the public, or any section of the public
in fear.
The   warranty   also   excludes   loss,   damage,   cost   or
expenses   of   whatsoever   nature   directly   or   indirectly
caused   by,   resulting   from   or   in   connection   with   any
action taken in controlling, preventing, suppressing or in
any way relating to action taken in respect of any act of
                                     (emphasis added)
7. Shri Santosh Kumar, the learned counsel appearing for the
appellant,   submitted   that   the   police   had   registered   a   First
Information Report against unknown persons. After completing the
investigation,   the   police   filed   a   closure   report   recording   that   the
accused   could   not   be   traced.     He   submitted   that   though   the
respondent­insurance company relied upon the Investigation Report
in the letter of repudiation, neither a copy thereof was supplied to the
appellant nor was it produced before the Commission.   He pointed
out that after this Court issued a specific direction, a copy of the
Investigation Report was filed on record by the respondent, which
records that it was not conclusively proved that Maoist activists or
any such activists made the attack.  He submitted that on a conjoint
reading of the First Information Report, closure Report filed by the
police   and   Investigation   Report   submitted   by   the   Investigator
appointed by the respondent­insurance company, it is apparent that
it   was   not   a   case   of   a   terrorist   act   within   the   meaning   of   the
Exclusion Clause.  The learned counsel tried to rely upon the concept
of   ‘terrorism’   under   various   enactments   such   as   the   Unlawful
Activities   (Prevention)   Act,   1967   and   the   National   Investigation
Agency   Act,   2006.     He   submitted   that   the   burden   was   on   the
insurance company to prove that the Exclusion Clause was attracted
in the facts of the case.  He submitted that if there was any ambiguity
about whether the Exclusion Clause was attracted, the insurance
contract will have to be construed in favour of the appellant­insurer.
In support of this proposition, he relied upon a decision of this Court
in the case of National Insurance Co. Ltd. v. Ishar Das Madan Lal1
8. The learned counsel appearing for the appellant submitted that
even   according   to   the   report   of   the   surveyor   appointed   by   the
respondent   company,   the   damage   caused   to   the   machinery   and
equipment has been quantified at approximately Rs.89,00,000/­.  He
submitted that by setting aside the impugned judgment and order,
1 (2007) 4 SCC 105
the   respondent   company   may   be   directed   to   pay   a   sum   of
Rs.89,00,000/­   to   the   appellant   along   with   interest,   and   the
Commission may be directed to consider the case of the appellant for
grant of additional amount based on the evidence on record.
9. Shri Santosh Paul, the learned senior counsel appearing for
the   respondent­insurance   company,   invited   our   attention   to   the
allegations   made   in   the   First   Information   Report   regarding   the
incident of 23rd  March 2010.   He submitted that the fact that 120
people   entered   the   factory   premises   of   the   appellant   along   with
weapons and carried out large scale destruction shows that it was an
act of terrorism to terrorise the workers of the appellant and its
management.   He submitted that the police have applied Sections
147, 148, 149, 323, 307, 379, 427, 435 and 447 of the Indian Penal
Code read with Section 17 of the Criminal Law (Amendment) Act,
1908 (for short, ‘the Amendment Act of 1908’).  He submitted that it
was a case of unlawful association as defined in Section 15 of the
Amendment   Act   of   1908.     He   submitted   that   under   Section   17
thereof, the unlawful association is made an offence.  He submitted
that the very fact that the provisions of the Amendment Act of 1908
have been applied shows that the loss caused to the appellant was
due to a terrorist act.   He submitted that the burden was on the
appellant to show that liability arises under the said policy.   He
submitted that the appellant failed to discharge the burden.   He
would, therefore, submit that no interference is called for with the
finding of the Commission.
10. We have given a careful consideration to the submissions of
the rival parties.  In its letter dated 23rd March 2010 addressed to the
respondent,   the   version   of   the   appellant   of   the   incident   which
occurred around 12:30 a.m. on 23rd March 2010 has been stated. The
relevant part of the letter reads thus: 
“With reference to the above and continuation to verbal
information given to you over telephone, our submissions
are as follows :
Please note that in last midnight 12.30 A.M. around 50­
60 antisocial peoples with arm ammunitions entered into
factory premises through back side door of the factory
Some of them marched towards DG Room and got fired
one DG and tried to destroy it.
Some   of   them   moved   towards   control   room   of   blast
furnace and damaged control system of Blast Furnace
available in control room and beaten the men working
They have also damaged Security room, office room and
computers available there.
They have taken away around 15 Nos. of mobile phone,
walky talky sets and cash found in drawer of factory
office   premises,   materials   particularly   relating   to   PIG
Company   people   informed   immediately   to   the   nearest
police station over telephone.
Since blast furnace need continuous working and once it
is cooled and to get it reheated it would have been cost to
the  Company for Rs.30­45 lakhs  so  that Co­operative
Housing Society Limited people took immediate steps for
damaged control in main blast furnace.
You are requested to kindly look into the matter very
seriously and appoint Surveyors who can visit the site at
the earliest possible manner.”
In the subsequent letter dated 15th April 2010, the appellant stated
that the purpose of the anti­social persons was to create terror so
that the appellant would be forced to pay a ransom. We have already
reproduced the Exclusion Clause, which defines the act of terrorism.
Given the definition, the actions can be termed as acts of terrorism
provided the same are committed for political, religious, ideological or
similar   purposes.   The   words   “similar   purposes”   will   have   to   be
construed ejusdem generis.
11. In the present case, the repudiation of the policy made by the
respondent is based on the Preliminary Survey Report, Investigation
Report and the Final Survey Report.   The Survey Reports cannot
throw   any   light   on   the   question   whether   there   was   an   act   of
terrorism. The Survey Reports do not record any factual findings
regarding the incidents which caused the loss.  Reliance was placed
on the Investigation Report in the letter of repudiation.  A copy of the
said   Report,   placed   on   record   along  with   I.A.   No.38075   of   2022,
records  a  conclusion  drawn  by  the  Investigator  appointed  by  the
respondent   that   it   is   not   conclusively   proved   that   the   persons
involved in the incident belonged to Maoist or similar groups. The FIR
and Closure Report do not refer to acts of terrorism as defined under
Exclusion Clause.  The Final Report (Closure Report) shows that the
police   had   registered   a   First   Information   Report   against   105
miscreants who could not be traced.
12. In paragraph 8 in the case of Ishar Das Madan Lal1
, this Court
held thus: 
“8. However, there may be an express clause excluding the
applicability   of   insurance   cover.    Wherever   such   an
exclusionary clause is contained in a policy, it would be
for  the   insurer  to   show  that  the  case   falls  within  the
purview thereof.  In a case of ambiguity, it is trite, the
contract   of   insurance   shall   be   construed   in   favour   of
the   insured.     [See  United   India   Insurance   Co.   Ltd.  v.
Pushpalaya Printers (2004) 3 SCC 694, Peacock Plywood (P)
Ltd. v. Oriental Insurance Co. Ltd. (2006) 12 SCC 673 and
United India Insurance Co. Ltd. v. Kiran Combers & Spinners
(2007) 1 SCC 368]”
                                    (emphasis added)
13. The respondent has not discharged the burden of bringing the
case within the four corners of the Exclusion Clause. When the policy
itself defines the acts of terrorism in the Exclusion Clause, the terms
of the policy being a concluded contract will govern the rights and
liabilities of the parties.  Therefore, the parties cannot rely upon the
definitions of ‘terrorism’ in various penal statutes since the Exclusion
Clause contains an exhaustive definition of acts of terrorism.
14. Thus, the Commission committed an error by applying the
Exclusion Clause.  Moreover, the policy specifically covers the damage
to   the   insured’s   property   caused   by   violent   means.   We   are
reproducing the relevant clause in that behalf :
“V. Riot Strike and Malicious Damage
Loss  of or visible  physical damage  or  destruction
by  external  violent  means  directly  caused  to  the
property insured but excluding those caused by
a) total   or   partical   (sic)   cessation   of   work   or   the
retardation or interruption or (sic) cessation or any
process or operations or omissions of any kind.
b) Permanent   or   temporary   dispossession   resulting
from confiscation, commandeering, requisition or
destruction   by  order  of  the   Government  or  any
lawfully constituted Authority.
c) Permanent   or   temporary   dispossession   of   any
building   or   plant   or   unit   of   (sic)   machinery
resulting   from   the   unlawful   occupation   by   any
person   of   such   building   or   plant   or   unit   or
machinery or prevention of access to the same.
d) Burglary,   housebreaking,   theft,   larceny   or   any
such attempt or any omission of any kind of any
person (whether or not such act is committed in
the course of a disturbance of public peace) in any
malicious act.
If   the   Company   alleges   that   the   loss/damage   is   not
caused by any malicious act, the burden of proving the
contrary shall be upon the insured.”
(emphasis added)
The policy covers explicitly a liability arising out of the damage to the
property of the insured due to riots or the use of violent means.
Hence,   the   decision   to   repudiate   the   policy  cannot  be   sustained.
Under the insurance policy, there are different limits prescribed for
various acts covered by the policy.  In the impugned Judgment, it is
noted that the parties had filed affidavits­in­lieu of evidence before
the   Commission.     An   adjudication   will   have   to   be   made   on   the
quantum of the amount payable to the appellant after appreciating
the evidence on record, including the valuation reports.  However, the
valuer appointed by the respondent­company has valued the loss
caused   to   the   appellant   at   approximately   Rs.89,00,000/­.     We,
therefore, propose to direct the respondent to deposit the said amount
with   the   Commission   with   liberty   to   the   appellant   to   make   an
application for withdrawal.
15. As there was no warrant for applying the Exclusion Clause, the
impugned  judgment and  order  will  have  to  be set  aside,  and  by
restoring the complaint filed by the appellant, the same will have to
be ordered to be heard by the Commission afresh.
16. Accordingly, the impugned judgment and order is hereby set
aside. Consumer Complaint No.165 of 2012 filed by the appellant
before the Commission is restored to the file. After allowing parties to
lead further evidence, the Commission shall decide the complaint
filed by the appellant in accordance with law and in the light of what
is held in this judgment.  The Commission is requested to pass an
appropriate   final   order   on   the   remanded   complaint   within   four
months from today.  We make it clear that we have not expressed a
definitive   opinion   on   the   quantum   of   the   amount  payable   to   the
appellant under the policy of insurance, and the said issue is left
open for the decision of the Commission in accordance with law.   
17. As observed earlier, the respondent shall deposit the sum of
Rs.89,00,000/­ in the Registry of the Commission within one month
from today and the same shall be deposited in the interest­bearing
account on auto renewal basis.  At the same time, the appellant will
be at liberty to file an application for withdrawal of the amount before
the Commission pending complaint.  If such an application is filed by
the appellant, the Commission may examine on its own merits and
decide the same in accordance with law. 
18. Accordingly, the appeal is allowed in the above terms with no
order as to costs.
         [ABHAY S. OKA]
New Delhi
May 02, 2022.


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