JUSTICE SUDIP AHLUWALIA, MEMBER

2. The factual background, in brief, is that the Complainant/Respondent owned a Hydraulic Excavator, EC-290 of Volvo make  which was insured with the Opposite Party/Insurance Company from 12.04.2013 to midnight of 11.04.2014, for a total assured sum of Rs. 24,00,000/-.  During the insurance period, the Excavator was employed for soil laying work on NH-1, Sikandrabad Bulandshahr Highway. However, local influential individuals demanded “rangdari” (Extortion Money) to allow its operation in their area. Due to these threats, the Complainant parked the machine at a flour Mill in Sikandrabad and refrained from using it until the situation was resolved.

3. On 15.05.2013, the Complainant received a call informing them that the Excavator, which was parked at the flour Mill, had caught fire and sustained severe damage. The next morning, the Complainant visited the site and found the machine in a badly burnt and damaged condition. The owner of the Mill had already reported the incident to the Police.

The Complainant promptly notified the Insurance Company on 17.05.2013, via written communication. An FIR No. 240, dated 26.05.2013 was also registered regarding the incident. The Insurance Company arranged for the machine to be inspected by Alpha Technical Services Pvt. Ltd., an authorized Service Centre for Volvo. The Inspection Report, dated 22.05.2013, classified the machine as a total loss and estimated the repair cost to be Rs.86,89,754/-.

The Complainant submitted all the required documents to the Insurance Company to claim indemnification for the loss. Despite consistent follow-ups and requests for the earliest reimbursement of the Insurance Claim, the Complainant was shocked to learn that the Insurance Company had repudiated the Claim.  The Insurance Company cited that the vehicle had been confiscated on 09.04.2013, prior to the commencement of the Insurance Policy on 12.04.2013. They further stated that the machine had been taken under a conspiracy of extortion, which was not covered by the Policy.

4. It is the case of the Complainant that the vehicle was damaged by fire on 15.05.2013, while it was parked at the flour Mill in Sikandrabad, which was within the insurance period.  As per the Policy terms, they are entitled to indemnification for the loss incurred due to the fire. The Complainant contends that the repudiation of the Claim by the Insurance Company amounts to deficiency of service, causing significant mental harassment and agony. 

5. In the Complaint filed before the Ld. State Commission, the Complainant had prayed as following –

“I) Complainant may kindly be accepted;

 

II) O.P. may kindly be directed to indemnify the loss of the complainant by releasing the sum insured, i.e. Rs. 24 lacs with interest @24%.

III) O.P may kindly be directed to pay the compensation to the tune of Rs. 1,00,000/- to the complainant for causing mental agony and harassment to the complainant;

IV) O.P. may kindly be directed to pay he litigation charges to the tune of Rs. 55,000/- to the complainant…”

6. The Ld. State Commission vide the impugned Order dated 14.09.2016 partly allowed the Complaint and directed the Appellants to pay to the Complainant the IDV of Rs. 24,00,000/- if the salvage is retained by the Insurance Company otherwise the value of salvage, i.e. Rs. 5,00,000/- to be deducted from the IDV, along with Rs. 11,000/- towards mental agony, harassment and Rs. 5100/- towards litigation costs. The  relevant  extracts of the impugned Order are set out as below –

“5. Learned counsel for the O.P. vehemently argued that as per clause 'L' of exceptions, the insurance company, is not liable to pay compensation in case of confiscation. In the present case the machine was taken away by unsocial elements on 09.04.2015. FIR qua this incident was registered on 26.05.2013. Information about fire was also not given immediately. So his claim was rightly repudiated as per letter dated 23.09.2013, copy of this Annexure R-6. Even otherwise as per surveyor the loss is to the tune of Rs.2,29,213/- and he cannot claim more than the same. In support of his arguments he placed reliance upon the opinion of Hon'ble National Commission in Budha Ganesh Vs. New India Assurance Company Ltd. 2014 (1) CPR 370.

 

6. This argument is of no avail. Clause 'L' of exceptions is not applicable in this case. If any vehicle is confiscated by any authority only then the insurance company can allege that it was not liable to pay compensation and not otherwise. In the present case, machine was taken away by un-social elements and thereafter it was set on fire by them, as per complainant. It does not amount to confiscation and insurance company wrongly repudiated the claim as per Annexure R-6. As per complainant the machine was burnt on 15.05.2013 whereas insurance policy started from 12.04.2013. In this way the period of incident is covered by insurance policy. As per arguments of O.P's. counsel it cannot be presumed that due to delay in information complainant is not entitled for claim as per opinion of Hon'ble National Commission expressed in aforesaid case laws because the view expressed by Hon'ble National Commission is pertaining to theft cases and not in cases of burn. Had the machine been stolen then it could have been a different matter.

 

7. Further, the loss assessed by surveyor is not proper which is reproduced as under:-

The surveyor has taken into consideration the price of the new machine in the year 2013 whereas the present machine was 13 years old, so it cannot be presumed that it was under-valued. At the time of insurance the value of the machine was assessed as Rs.24,00,000/-. The right of the complainant is to be assessed keeping in view that value. So the depreciation assessed by surveyor is altogether wrong and not applicable in this case. The IDV of the vehicle was Rs.24/- lacs and salvage value is assessed as Rs. Five lacs. If the complainant wants to retain salvage then the company can deduct Rs. five lacs from IDV. Otherwise after retaining salvage, the company liable to pay the full value. The assessment made by surveyor cannot be taken into consideration for assessing the loss.

 

8. As a sequel to above discussion complainant is entitled for the IDV of machine i.e. Rs.24,00,000/- lacs if the salvage is retained by the company otherwise value of salvage i.e. Rs.5,00,000/- is to be deducted from IDV. He is also awarded compensation to the tune of Rs. 11,000/- for mental agony and harassment etc. and Rs.5100/- as litigation expenses. ”  

 

7. Ld. Counsel for Appellant has argued that the impugned Order should be set aside because it was incorrectly concluded that the Respondent’s loss occurred within the Insurance Policy period. The insured machine was forcefully and illegally taken by Mr. Gajinder Pardhan and his accomplices on 09.04.2013, as stated in the FIR. This date is prior to the commencement of the Insurance Policy on 12.04.2013. Consequently, the loss occurred before the Policy's inception, and thus the Insurance Policy does not cover the incident; That the State Commission erroneously identified the cause of loss as the burning of the machine on 15.05.2013.  Since the machine was taken from the Respondent's possession on 09.04.2013, the actual loss happened on that date. The burning incident on 15.05.2013, occurred when the Respondent no longer had possession of the machine.  Hence, the directive to pay for a loss not covered by the Policy is flawed; That the loss is excluded from the insurance coverage under the policy’s exceptions clause 'L', which excludes losses due to conspiracy, confiscation, or commandeering by malicious persons. The machine was confiscated by Mr. Gajinder Pardhan and his accomplices, which qualifies as a conspiracy or confiscation under this Clause. The State Commission's interpretation that these conditions must occur together and be enforced by authorities is erroneous;

8.  Ld. Counsel for Appellant has further argued that the Respondent had violated Condition 6 of the Insurance Policy, which requires immediate notification to the Insurer of any potential claim. The Respondent delayed notifying the Insurance Company by 38 days and informed the Police after 47 days. This delay constitutes a breach of the Policy terms, releasing the Appellant from liability.

9. Additionally, the Appellant has highlighted discrepancies between the Respondent’s Affidavit in the Complaint and the FIR. In the FIR, the Respondent had stated that the machine was taken forcibly on 09.04.2013, whereas, in the Complaint, it was claimed that the machine was voluntarily parked at a flour Mill. Such contradictory statements undermine the Respondent's credibility and indicate an attempt to mislead the Court.

10. Ld. Counsel for Appellant also argued that the Respondent approached the State Commission with unclean hands, having concealed material facts, including an existing Insurance Policy with another Insurer and the prior loss of possession of the machine. The Proposal Form submitted to the Appellant also omitted these crucial details. The State Commission should have considered these misrepresentations and dismissed the Complaint with strict penalties; That the State Commission’s order to pay Rs. 24 lakhs to the Respondent, after deducting Rs. 5 lakhs for salvage is not tenable. Even if the Appellant is liable, the payable amount should be Rs. 2,29,213/- as assessed by the Surveyor, considering depreciation and other factors. The State Commission failed to justify discarding the Surveyor's assessment and awarding the full sum insured.

11. Ld. Counsel for Respondent has argued that the Appellant has made several erroneous claims in their grounds of Appeal.  It has wrongly claimed that the Respondent had suffered a loss on 09.04.2013, which is entirely incorrect, as the Insured machine was damaged due to a fire on 15.05.2013 while it was parked at the flour Mill in Sikandrabad. As per the Insurance Policy, the Respondent is entitled to compensation for this loss; It was also contended on behalf of the Respondent that the Appellant has wrongly asserted that the Respondent was not in possession of the insured machine since 09.04.2013. This is untrue, as the Respondent was aware of the machine’s location at the flour Mill in Sikandrabad and had the ability to retrieve it at any time.  Further according to the Respondent, the Appellant’s claim that clause 'L' of the Insurance Policy applies to this case is also unfounded. The damage occurred due to a fire on 15.05.2013, and the Respondent is therefore entitled to indemnification under the Policy for this event.

12.  Ld. Counsel for the Respondents also argued that the Appellant’s allegation regarding contradictory statements between the FIR and the Affidavit in the Complaint is baseless. The Respondent had consistently maintained that the machine was parked at the flour Mill and was damaged by fire. The Appellant’s argument that the Respondent approached the State Commission with unclean hands, by allegedly not disclosing material details or another Insurance Policy, is also incorrect. 13. Further, according to the Respondent, the Ld. State Commission had correctly directed the Appellant to pay to the Respondent Rs. 24 lakhs after deducting Rs. 5 lakhs towards salvage, as the amount assessed by the Surveyor does not reflect the actual loss suffered. The machine, being insured for Rs. 24 lakhs, was completely destroyed in the fire, and depreciation or underinsurance does not apply in this case.

14. This Commission has heard the Ld. Counsel for the Appellant and Respondent, and perused the material available on record. 

15. It is seen from the FIR lodged by Mr. Vijender Singh, husband of Mrs. Babita Devi, Proprietor of the Respondent Firm, that he had categorically mentioned that the Excavator/Poclain machine had been forcibly taken away from his possession by one Gajender Pardhan and his accomplices on 9.4.2013, and was kept at Village Lalpur, in illegal possession of the same accused persons, till it was burnt on 15.5.2013, after which the informant Vijender reached the spot on 16.5.2013 where the Flour Mill had been burnt on the previous day.  The relevant extracts from the FIR lodged by Mr. Vijender are set out as below –

“The aforesaid accused No. 2 to 6 had issued notice to the applicant for dishonouring of the above mentioned cheques, in reply to which, the applicant  had written that his above said machine was in illegal confinement of the above said accused and the entire drama was being played to secure the amount of Rangdari. The Poclain machine of applicant was standing at village Lalpur in illegal possession of abovesaid accused.  On 15.05.2013, I received a phone call from Rukam of village Bilsuri at night that my above mentioned machine caught fire at a flour mill of Sikandrabad. On 16.05.2013, the applicant reached at the spot and saw that machine was in burnt condition. The owner of the flour mill informed the Police wherein he had clearly mentioned that machine was parked there by Gajender Pardhan and two other persons……”

16. Interestingly, Mrs. Babita Devi, wife of the informant, Vijender and Proprietor of the Complaint Firm when confronted with the contents of the FIR as re-produced above, in her cross-examination sought to wash her hands off the same by stating “I do not know whether the machine was forcibly taken from my husband by Gajender Pardhan to Village Lalpur and then parked it at vacant flour mill at Sikanderbad and then put the same on fire”.

17. The aforesaid contents of the FIR lodged by Mr.Vijender on behalf of the Complainant/his wife Babita Devi, and non-denial of the same by Babita Devi in her cross-examination therefore leaves no doubt whatsoever that the Excavator was not in possession of the Complainant w.e.f. 9.4.2013, from the moment it had been forcibly taken away from Mr. Vijender’s possession by Gajender Pardhan and his henchmen, till it was finally burnt by them on 15.5.2013.  To that extent, the repudiation of the same would appear to be justified in view of Clause (i) of the Exceptions contained in the Insurance Policy, according to which the Insurance Company would not be liable in respect of the insured item, in a case of “conspiracy or confiscation”.  Undoubtedly, in the present case, the Excavator had been forcibly taken away from the possession of Mr.Vijender by the accused Gajender Pardhan and his accomplices in pursuance of their declared “conspiracy” of extracting money by way of extortion from the Complainant side, on account of which it certainly would appear to be covered by the aforesaid Exceptional Clause.  In Para 6 of its impugned Order, Ld. State Commission had noted that the vehicle had not been “confiscated” in as much as “confiscation” can only be done by an Authority and not by unsocial elements.  The Ld. State Commission, however, would appear to have ignored that taking away the vehicle by those unsocial elements in pursuance of their “conspiracy” to compel the Complainant to pay any ransom money, as alleged in the FIR, in itself fell into the Exceptional Clause (i) of the Insurance Policy. 

18. Even otherwise, the Insurance was obtained by the Complainant on 12.4.2013 which was three days after possession of the Excavator had already been forcibly taken away from the Complainant, who was therefore in no position to ensure that it would not be destroyed by the miscreants.  Such dispossession had taken place during subsistence of the previous Insurance Policy issued by a different Company “HDFC Ergo” which was operative till 11.4.2013.  In our Order passed on 13.5.2024, we had directed the Insured Respondent to place a copy of the previous Insurance Policy to confirm whether it was already operative at the relevant time or not and if yes, then what could have been the reason for the Insured in not reporting about the forcible removal of the Insured item immediately to the Law enforcing Authorities.  But, such Policy was not placed before us, and none had subsequently appeared on behalf of the Respondent in any case to provide any clarification when the matter lastly came up for hearing before us on 3.12.2024.

19. In this view of the matter, the Complainant again would not appear to be entitled to any relief, since a contract of Insurance is founded on the principle of “Uberrima Fide” i.e. absolute honesty on the part of both the parties.  Suppression of the fact that the Insured item/Excavator vehicle was not in possession of the Complainant and had been forcibly taken away from it by the miscreants at the time of seeking the Policy would certainly amount to a case of wilful suppression of a material fact from the Insurer which, if apprised about such fact could have taken a considered decision as to whether or not it should accept the proposal for Insurance.  It may be argued that there was an implied waiver of such condition on the part of the Insurance Company. But in the present case, we are not inclined to accept such supposition in view of the decision in “Glencore International Ag & Anr.  Vs. Portman & Ors., England and Wales Court of Appeal (Civil Division), No. QBCMF 95/0668/B, decided on 13.12.1996”,  in which it was observed inter alia –

“An insurer cannot waive a class of information that he does not know exists.  That requires a fair presentation of the risk.  It is obvious that a presentation cannot be fair …. Unusual facts are not disclosed.  The insurer is entitled to assume the fairness of the presentation.  Without it he cannot sensibly be said to refrain from asking questions.  He must be on notice of the existence of information before he can be said to waive it.”

(Emphasis added)

 

20. For the aforesaid reasons, we are of the considered view that the Ld. State Commission had acted erroneously in allowing the Complaint seeking Insurance Claim by the Respondent/Complainant vide its impugned Order which, in the given facts and circumstances, is found to be not tenable.

21. The First Appeal is, therefore, allowed after setting aside the impugned Order.  The Complaint filed by the Respondent consequently stands dismissed.

22. Parties to bear their own costs.

23. Pending application(s), if any, also stand disposed off as having been rendered infructuous.