Gauhati High Court
The New India Assurance Co.Ltd & 2 Ors vs M/S. Malpani Industries Ltd on 27 November, 2015
Author: Suman Shyam
Bench: Suman Shyam
IN THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
PRINCIPAL SEAT AT GUWAHATI
(CIVIL APPELLATE JURISDICTION)
RFA No.40 of 2013
New India Assurance Co. Ltd. & 2 others.
... ... ... Appellants/Defendants
-Versus-
M/S Malpani Industries,
Benganakhowa, Golaghat.
... ... ... Respondent/Plaintiff.
BEFORE HON'BLE MR. JUSTICE SUMAN SHYAM For the appellants : Mr. A. Sahad, Advocate.
Mr. J. B. Saikia, Advocate.
For the respondent : Mr. M. K. Choudhury, Sr. Advocate.
Mr. T. N. Srinivasan, Advocate.
Dates of hearing : 11.06.2015, 18.06.2015, 21.07.2015, 28.07.2015, 16.09.2015, 22.09.2015 and 29.09.2015.
Date of Judgment : 27 .11. 2015 Page 1 of 54 JUDGMENT AND ORDER (CAV)
1. This appeal has been preferred against the judgment dated 07.03.2013 and decree dated 15.03.2013 , passed by the learned Civil Judge, Golaghat in Money Suit No.9/2003, decreeing the suit filed by the respondent/plaintiff for an amount of Rs.2,26,75,388/- (Rupees Two Crores Twenty Six Lacs Seventy Five Thousand Three Hundred and Eighty Eight) only together with future interest calculated at the rate of 2% per annum above the lending rate of the Bank as per the IRDA Regulation to be reckoned on the basis of prevailing rate on 07.03.2013 to be recovered from the date of institution of the suit i.e. 13.03.2003 till recovery of the decreetal amount.
2. The plaintiff's case, in brief, as projected in the plaint, is that the plaintiff is a partnership firm duly registered under the Indian Partnership Act, 1932 having its registered head office at Bengenakhowa, Golaghat Town in the district of Golaghat, Assam. The plaintiff firm is represented by its Managing Partner viz. Sri Jugal Kishore Malpani.
3. The plaintiff firm owns a veneer and Saw Mill situated at Dihingiagaon, P.O. Silonijan under Bokajan P.S. in the district of Karbi Anglong, Assam. The said mill used to be operated for converting logs of timber into veneer and sawn timber belonging to the plaintiff Page 2 of 54 and others. It is the case of plaintiff that the Karbi Anglong Autonomous Council (KAAC) issued transit passes from time to time for a period of three months on the basis of which the plaintiff's mill used to operate. However, by issuing an order bearing No.KAC/F- 231(PT-ii)/93-97/2455/A dated 12.09.1996 the KAAC had suspended the operation of the Mill belonging to the plaintiff pending conclusion of an enquiry. Subsequently, the Divisional Forest Officer, Karbi Anglong(E), submitted an enquiry report dated 03.01.1997 whereby, the plaintiffs aforementioned mill was found to be in order since no illegality and/or irregularity in operation of the mill could be detected by the Forest authorities. Although the operation of the plaintiff's mill was found to be in order, yet, the KAAC authorities did not revoke the earlier order dated 12.09.1996 by which the operation of the mill was suspended.
4. By a resolution dated 30.10.1996 the KAAC had decided that the transit passes for royalty paid timbers shall be issued for a period of three months at a time subject to the condition that no round logs would be permitted to be transported outside the district and that all timbers to be permitted only to the local mills. Accordingly, felled timbers that were royalty paid were allowed to be transported for a period of three months. In view of the above decision of the KAAC a large number of timbers converted into sawn timber as well as the logs of timber brought by different Page 3 of 54 persons got accumulated in the plaintiff's mill premises but the same could not be processed due to continuance of the ban order upon the mill. Many of those logs had been purchased on credit subject to the condition that payment would be made only after the mill was allowed to be run by the competent authority.
5. Since the KAAC did not permit the operation of the plaintiff's mill despite the enquiry report dated 03.01.1997 submitted by the Divisional Forest Officer, Karbi Anglong, the plaintiff firm was compelled to approach this Court by filing a writ petition, whereafter, the suspension order was withdrawn by the authorities vide communication dated 09.07.1998 on condition that the plaintiff would withdraw the writ petition filed before this High Court against the suspension order dated 12.09.1996. On receipt of the communication dated 09.07.1998 the plaintiff had withdrawn the writ petition on 09.08.1998 with liberty to file afresh, if required.
6. In the meantime, by the order dated 12.12.1996 the Hon'ble Supreme Court of India had imposed a ban on the movement of felled trees and timbers from any of the seven North Eastern States or transportation to any other State of the country either by rail or road or waterways. Subsequently, by the order dated 04.03.1997 the Apex Court had directed preparation of inventory of all logs and timbers- both of private operation and that of the Government for Page 4 of 54 the purpose of physical verification by the District Level Committee and also by the State Level Committees as per norms finalized for the purpose and a complete ban was imposed on conversion. In view of the above order made by the Hon'ble Apex Court the plaintiff had prepared an inventory of the entire logs numbering 3054 in total, lying in the Mill premises of the plaintiff and presented the same for verification by the authorities. The District Level Committee and the State Level Committee found the said inventory to be in order after scrutinizing the same. The inventoried timbers were allowed to be dealt with by the Supreme Court by its order dated 15.01.1998 under an One-time scheme of exemption for a period of six months but since during the relevant period of time the operation of the plaintiff's mill remained under suspension under order of the District Council, hence the plaintiff could not avail the benefit of the said onetime exemption scheme as permitted by the Hon'ble Apex Court as a result of which the plaintiff's Saw and Veneer Mill continued to remain inoperative even during that period.
7. Since there was no operation in the Saw Mill belonging to the plaintiff, hence it was not possible to retain and or keep large number of employees in the pay roll without there being any business transaction by paying the salary and wages nor was it possible for the plaintiff firm to keep bearing the regular electricity Page 5 of 54 charges as per the industrial rate. As such, the plaintiff firm had retained only one watchman in service so as to guard the mill premises. Even the electricity supply was disconnected with effect from 18.07.1997 as the ASEB has refused to continue the supply of electricity for domestic purposes after disconnecting the industrial connection.
8. Situated thus and having regard to the fact that the law and order situation in the Karbi Anglong area was not congenial due to terrorist activities, the plaintiff firm decided to seek an insurance cover for the properties located in the Mill site. Accordingly, the plaintiff made an enquiry from the Assistant Administrative Officer, (AAO) (D) of the defendant No.3 stationed at Golaghat whereafter the said official had also visited the Mill premises and conducted a survey of the moveable and immoveable properties in the mill premises. The AAO(D) had also examined the inventory of timber prepared under the orders of the Hon'ble Supreme Court besides other connected papers pertaining to the procurement of the timbers. Thereafter, on being satisfied with the status of the insurable goods and items, the said Administrative Officer of the Insurance Company had issued a letter No.5KA/GLGT/99 dated 19.04.1999 addressed to the Manager of the plaintiff firm enclosing a statement showing the amount of premium calculated for logs of timber in open, logs in pond, sawn timber in godown and for other Page 6 of 54 immoveable properties. The total premium for all the assets to be covered by the insurance policy was stated to be Rs.90,660/-. Based on the said communication issued by the insurance Company, the plaintiff had sent a cheque dated 21.04.1999 drawn on Vijaya Bank, Golaghat for the aforementioned amount being the payment of premium for 4 numbers of policies issued in favour of the plaintiff by the defendants which was duly received by the Insurance Company. Thereafter, on completion of the necessary formalities the defendant No.3 had issued four policies covering the risk for the period from 21.04.1999 to 20.04.2000 of the moveable and immoveable properties located at the mill premises of the plaintiff. By the Policy No.1153050203488 the risk in respect of logs in open, logs in pond and sawn timber in store were covered for a total sum of Rs.1,94,12,464/-. Similarly, under the Policy No.1153050203490 the staff quarter located at the Mill premises was covered for a sum of Rs.1,00,000/-. Since the other two insurance policies are not relevant in the facts and circumstances of the present case, hence no details of these two policies have been mentioned in the plaint.
9. On 20.04.2000 the AAO(D) of Golaghat informed the plaintiff that the four policies obtained by the plaintiff were due for expiry on 20.04.2000 and therefore, the plaintiff was asked to send the premium for renewal of the aforesaid policies, if so desired. Accordingly, the due amount of premium having been paid, the Page 7 of 54 aforementioned insurance policies stood renewed for a further period of one year reckoned from 26.06.2000 to 25.06.2001. Accordingly, Police No.1153010800615 was issued being the renewal of Policy No.1153050203488 whereas renewed Policy No.1153010800617 was issued corresponding to old Policy No.115350203490 covering the staff quarters of the plaintiff's mill premises. When the original insurance policy was issued and even at the time of renewal of the aforesaid policies it was well within the knowledge of the defendants that the plaintiff's mill was a silent mill where the operation was stopped due to the orders passed by the authorities as indicated in the plaint.
10. On 22.03.2001 at about 0030 hours a fire broke out in the mill premises in which all the logs lying in open excepting one log were completely destroyed. The staff quarter was also totally gutted by the fire. On receipt of a telephone call at about 6.30 AM on 22.03.2001 at Golaghat informing him about the fire that had broken out in the mill premises, the Managing Partner of the plaintiff firm, Sri J. K. Malpani, had immediately telephoned the Fire Service Station at Golaghat whereafter he came to know from them that a fire tenderer had already been dispatched to the site on receipt of information from Santipur Police Outpost. On 23.03.2001 the AAO(D), Golaghat was also informed about the incident of fire in the mill premises. An FIR was lodged by Mr. N. K. Murthy, an Page 8 of 54 employee of the plaintiff, at about 5.00 PM on 22.03.2001 and the Administrator of Karbi Anglong Autonomous District Council was also informed by the plaintiff about the fire in which the inventoried and released logs in the mill premises were destroyed by fire by the letter dated 26.06.2001.
11. By the letter No.JDA/FCLINCG ::01 : 2975 dated 26.03.2001 the defendant No.3 had acknowledged the receipt of the plaintiff's letter dated 23.03.2001 and requested the plaintiff to intimate at the earliest , the proximate cause of the fire. Accordingly, by letter dated 31.03.2001 addressed to the defendant No.3 the plaintiff had informed the insurer that as per statement of the employees Mr. Mohan Baishya and Dharma Rao, they had seen the fire at about 0030 hours on 22.03.2001 when they had woken up from sleep after hearing a sudden sound. In the said letter it was also mentioned that the plaintiff suspected that some bad elements might have set the fire. A photocopy of the FIR was also enclosed along with the said letter. In response to the aforesaid letter issued by the plaintiff, the defendant No.3 by his letter dated 04.04.2001, inter alia, informed that since the plaintiff was unable to furnish information regarding the proximate cause of the fire and its source and since the plaintiff's employees Mohan Baishya and Dharma Rao had remained silent till about 6.30 AM in the morning of 22.03.2001 i.e. for about six hours after the outbreak of the fire, hence the defendant Page 9 of 54 No.3 presumes that there was something doubtful regarding the fire incident prompting the two employees to remain silent for such a long period.
12. In response to the letter dated 04.04.2001 the plaintiff had replied on 18.04.2001 informing the defendant No.3 that the plaintiff's aforesaid two employees could not inform immediately about the fire incident out of fear due to the prevailing law and order situation. A copy of the FIR duly certified by the Officer-in- Charge of the Bokajan Police Station was also forwarded to the defendant No.3 with a request to expedite the process of settlement of the claim since the defendant No.3 had not even sent a claim form and remained silent over the matter until receipt of letter dated 30.10.2001 issued by the plaintiff addressed to the defendant No.2 by marking a copy to the defendant No.3. Thereafter, by a letter dated 16.11.2001 the defendant No.3 had informed the plaintiff that the appointed Investigators of the case had not yet completed the entrusted job by collecting all information from various outside agencies with regard to the origin and proximate cause of fire, the culprits involved in arsoning and their motive behind the same as well as the actual financial loss suffered by the plaintiff. Thereafter, although the defendants had appointed a Surveyor and an independent Investigator to conduct an enquiry from their side so as to process the insurance claim Page 10 of 54 made by the plaintiff and notwithstanding the fact that the aforesaid Surveyor/Investigator had completed their investigation long back, yet, the defendants did not take any step for settling the claim of the plaintiff but were simply sitting over the matter.
13. It is the further case of the plaintiff that the insurance policy covered the risk of fire, riot, strike, lightening etc. and the said policy was issued after a detailed survey and scrutiny of the assets covered by the policies. Although there was no apparent ground communicated to the plaintiff for non-settlement of the insurance claim and despite the fact that under the insurance norms all claims are required to be settled within a period of 30 days, yet the defendants have failed to process and/or settle the claims apparently based on a mere suspicion that there has been some foul play by the plaintiff although there was absolutely no basis for any such suspicion. Since the repeated communications made by the plaintiff requesting early settlement of the claim had failed to evoke any response from the defendants despite the fact that all such documents and information, time and again sought for by the defendants, had been duly furnished to them, the plaintiff was compelled to issue the letter dated 06.01.2003 addressed to the defendant No.3 renewing its request for early settlement of the claim within a period of fortnight failing which the plaintiff would be compelled to take remedial measures for redressal of its grievances. Page 11 of 54 When the said letter dated 03.01.2003 had failed to evoke any response from the defendants, the plaintiff was compelled to institute the Money Suit in the Court of Civil Judge, Golaghat for a decree for realization of the amount due under the aforementioned two insurance policies together with interest applicable therein.
14. Upon receipt of summons the defendants had appeared and contested the suit by filing joint written statement, inter alia, questioning the maintainability of the suit on the ground of competence of the plaintiff to sue on the grounds of want of cause of action; the suit being not maintainable due to non-service of prior demand notice and also on the ground that the plaintiff's suit was false, frivolous and vexatious. In their written statement the answering defendants while denying the claim of the plaintiff to the effect that the total number of logs lying in the mill premises was 3054, had also contended that the averments made in the plaint were all false and therefore, stood denied. The defendants have further averred that the preliminary enquiry conducted by the Insurance Company revealed that various information leading them to reasonably believe that the incident of fire was stage managed by the plaintiff and the same was neither an accident nor an act of sabotage by the extremists. The defendants have further stated that although in the FIR the plaintiff has claimed that about 2900 logs were destroyed in the fire, yet the Surveyor who Page 12 of 54 had visited the site immediately after the incident found approximately 414 burnt logs within the mill campus. Further, during the enquiry it could be found that 996 logs had been illegally procured and ordered to be seized by the Divisional Forest Officer, East Division, Diphu vide order No.SKAC/F/231/PT-II/93-94/44(A) dated 14.12.98.
15. In their written statement the defendants have also contended that the plaintiffs had stocked huge number of logs even at a time when the Hon'ble Supreme Court had banned movement of all timbers, felling of trees and operation of timber and veneer mills by the order dated 12.12.1996. The defendants also stated that the fact that the Hon'ble Supreme Court had passed an order dated 15.01.1998 allowing onetime scheme of exemption for six months for disposal of all the inventoried timbers by the mills and that any stock remaining thereafter will vest in the State Government was not brought to the notice of the defendants at the time of executing the insurance policies. They further averred that the Hon'ble Supreme Court had directed that "Units which have not furnished details/information to the High Power Committee so far or which have not been cleared by the High Power Committee shall not be granted any licence and the stocks in their custody, if any, shall be confiscated by the State Government." All these facts were neither known to the answering Page 13 of 54 defendants prior to the enquiry after the fire nor the plaintiff ever disclosed them prior to the obtaining of insurance cover on the logs. The defendants have therefore,, stated that by suppressing the aforesaid relevant information the plaintiff has committed fraud thereby forfeiting any claim to receive the amount covered under the policy.
16. The defendants have further denied the statement made by the plaintiff that the fire broke out in the mill premises at about 0030 hours on 22.03.2001 in which all logs lying in the open excepting one log were completely destroyed. In this context, the defendants had state that the preliminary enquiry made by Sri N. Kotoky, Surveyor and Loss Assessor engaged by the defendants on 22.03.2001 had found on the basis of enquiry made in the neighbourhood that the fire was seen at about 10.00 PM on 21.03.2001. In the subsequent enquiry made by Investigator Sri M. K. Nandi engaged by the Company, he also found that fire was set at 10.00 PM on 21.03.2001 and the chowkidar of the plaintiff posted at the mill site had set fire to the staff quarter at about 4.00 AM on 22.03.2001. The defendants further averred that the enquiry of the police made into the incident had been found to be irregular inasmuch as the police enquiry did not take into account the fact that a large number of logs were also stacked on Government land and by the side of the road outside the mill campus which logs were also stated to have been Page 14 of 54 burnt in the fire. According to the defendants, the total number of logs found burnt inside the campus were approximately 414 pieces and not 3054 as claimed in the plaint.
17. The defendants have further stated in the written statement that from the information gathered by Yousuf Ali Hazarika, the Insurance Investigator, it appeared that the incident of fire was the handiwork of some interested person thereby raising suspicion on the genuineness of the entire incident. The said Investigator had also found several discrepancies/lacunae in the police report as a result of which the defendants chose not to rely upon the same and go by the reports submitted by its own Investigator. The investigation conducted by the defendant No.3 had also revealed that out of the total number of logs stacked in the mill premises, approximately 414 pieces of logs were found burnt inside in a selective manner whereas a number of logs were found burnt outside the mill campus. They also found no involvement of any terrorist organization in the incident as a result of which the defendants were convinced that the plaintiff or their men might have intentionally burnt the logs in a selective manner out of the ones which were already damaged with the sole objective of recouping the losses through the insurance policies.
18. In their written statement, the defendants have also stated that the delay in settlement of claim was on account of the fact Page 15 of 54 that the plaintiffs did not furnish a number of important documents to the defendants including the copies of the income tax returns for 2000-2001, the audit report, details of excise duty payment particulars, conversion register, sales invoices, dispatch register, notice of closure of the mill as well as a legible copy of the land Patta pertaining to the factory land which has resulted into delay in processing the claim . The defendants have also stated that the suit filed by the plaintiff is a premature one since the defendants are still processing the claim of the plaintiff and no final decision had been taken in the matter. Having stated as above, the defendants in the succeeding paragraphs of the written statement have also gone on to make a statement to the effect that since according to them it was case of sabotage engineered by the plaintiff firm through its own employees so as to make wrongful gain under the insurance policies hence, the suit filed by the plaintiff is liable to be dismissed.
19. On the basis of the pleadings of the parties the learned trial Court had framed the following issues :-
"i) Whether the plaintiff has any right to sue?
ii) Whether the suit is maintainable in law and on facts?
iii) Whether the suit is based upon false, frivolous and baseless allegation?
iv) Whether the plaintiff has violated the terms and conditions of the fire Insurance policy with a motive to defraud defendants?
v) Whether the suit is pre-mature?
Page 16 of 54
vi) Whether the suit is bad for absence of notice?
vii) whether there is any cause of action for the suit?
viii) Whether the plaintiff ever disclosed prior to obtaining insurance cover on logs about the banned movement of all timbers and confiscated the logs by the State Government on the order of the Hon'ble Supreme Court and accordingly the plaintiff stopped the mill by withdrawing staffs and electricity supply?
ix) Whether the policies cover the logs kept outside the mill premises and whether plaintiff has any insurable interest in the logs?
x) Whether the enquiry conducted by the defendant could not be compelled to non-cooperation of the plaintiff by not supplying information such as Audit report, excise duty and other documents to come to a just and proper decision?
xi) Whether the logs lying in the mill compound of the plaintiff were deteriorated due to expose to sun and rain and were attacked by white ants resulting into valueless logs?
xii) Whether the defendants are liable for payment of interest for non-settling the plaintiff's claim and/or for non-payment of plaintiff dues in time ?
xiii) Whether the alleged fire was accidental or willful?
xiv) Whether the plaintiff is entitled to a decree as prayed for?
xv) To what other relief/reliefs the parties are entitled?"
20. During the course of trial the plaintiff side had examined 13 witnesses in total and had produced Ext-1 to 84 as documentary evidence whereas the defendants side had examined 5 witnesses Page 17 of 54 and produced Exts-A to KK in the form of their documentary evidence numbering 37 in total. After hearing the learned counsels for the parties and on an appraisal of the evidence available on record the learned trial Court had recorded findings in respect of all the issues in favour of the plaintiff firm. Consequently, the suit filed by the plaintiff stood decreed with all the reliefs prayed for by the plaintiff.
21. Being aggrieved by the aforesaid judgment and decree dated 07.03.2013 and 15.03.2013 respectively, the defendants as appellants have preferred the instant First Appeal on the grounds mentioned in the memorandum of appeal which are quoted herein below for ready reference :-
"I. For that the learned lower Court did not hear the argument on 1/2/2013 and as per official record the presiding Officer was on duty at Bongaigaon and therefore misquoted and delivered the impugned judgment for which the same is liable to be set aside/quashed.
II. For that the findings arrived at by the learned Court below are erroneous, perverse and not based on the evidence on record and hence the impugned judgment is liable to be set aside/quashed.
III. For that the findings of the court below while deciding issue no:1 that the plaintiff's (respondent) evidence stands unrebutted and that the cause of action having arisen while the risk coverage was valid under the appellant/defendant is Page 18 of 54 perverse finding in view of the fact that land described in Exhibit No.19 in KP Patta No.22 was issued on 6/1/2004 by the revenue authority and Ex-20 the possession certificate of 6(six) bighas of government land under Dag no.23, issued by the land surveyor (Mondal) PW - during pendency of the suit no where it was mentioned that the respondent/plaintiff was allowed to establish mill and as such the plaintiff was not the owner of the land where the Mill stood is evident. In addition to in the proposal from Exhibit-35 dated 21/4/1999, the respondent/plaintiff admitted that the insured properties does not belong to the respondent/plaintiff and from Ext-GG the report of the Chartered Accountant on the balance sheet, in respect of the respondent firm it is found that the legal entity of the plaintiff/respondent firm is not confirmed.
Therefore the learned Court below ignored this integral part of the insurance contract and ownership of 20 bighas of land where the mill is allegedly stood at the time of Insurance as per proposal exhibit -35 and thus came to a perverse findings for which the impugned judgment and decree is liable to be set aside/quashed.
IV. For that while decided issue no.2 in the proposal form Exhibit -35 regarding the policies the plaintiff in column No.7 (a & b) mentioned that the plaintiff/respondent desired to insure the Building Plant and Machinery, logs (both sawn and round) on Reinstatement Value Clause and the goods to be insured under this policy are not their own is an admitted position. Under the Insurance contract, the properties of other persons are not subjected to insurance as is done in the instant suit. From the report of Chartered Accountant Ex-GG, it is found that the plaintiff/respondent firm has no legal entity Page 19 of 54 and the income tax returns filed were not authenticated, some of the Income Tax returns bears seal of Jorhat instead of Golaghat. The transit passes for the logs were procured during ban period illegally, the logs allegedly received from some of the persons were not properly acquired and title and the sale of logs by the concerned seller (witnesses) were incomplete.
Stock registers of the logs not proved in original.
The respondent/plaintiff filed the suit on the basis of some agreement of sale of logs whereon title to those logs were not properly transferred in favour of the plaintiff/respondent whereon it has no INSURABLE RIGHT which the respondent/plaintiff admitted in the proposal form exhibit- 35 and thus the respondent/plaintiff suit is not maintainable as per insurance law. But the learned Civil Judge did not consider the documentary evidence adduced by the appellant/defendant and thus came to a perverse findings and which is liable to be set aside/quashed.
V. For that while decided issue No.3, Ext-35, the proposal form regarding the policies Ext-19, a periodic khiraj hand patta No.22 in Barpathat Mouza under Dihingia Gaon under Karbi Anglong District was issued on 6.1.2004 in respect of 16 bighas 2 kathas land vide Ext-19 in favour of the plaintiff/respondent for a period of 10 years with effect from 1st April 2003-2004 to 30th March 2013 while the policy was effected from 1999-2000. Further the possession certificate of another 6 bighas of Sarkari land in Dag No.23 at Dihingia Gaon vide Ext-2 issued by one Rengma, a Mondal, "surveyor" of Silonijan Circle on 6.8.2003 is not an official document nor was issued under the Land Rules is an inadmissible document, both the annexure 19 & 20 were procured during pendency Page 20 of 54 of this suit just to legalise the vexatious claim. Further by Ext-20 the respondent/plaintiff was not authorized to stack logs likewise the Ext-23 the so called agreement in incomplete, unstamped and bears no signature of the respondent/plaintiff and as such inadmissible in evidence and not a legal document to be relied on. Ext-23 is just an commitment given by one Trayadhar Gogoi without there being any Schedule of land. Further the inventories of logs prepared on 24.4.1997 showing 3054 number of logs not proved in original. The F.I.R. Ext-47 lodged on 22.3.2001 after the alleged fire by the Manager of the plaintiff Mr. Krishnamurthy with the officer-in- charge Shantipur Police Outpost under Bokajan Police Station mentioned about 2900 numbers of logs in the mill. PW 1 Mr. J.K.Malpani the Managing Director of the respondent/plaintiff of the firm in his evidence admitted that after 31.3.1999 the mill license was not renewed and they received letter from competent authority of sawing of logs on 12.9.96. But he paid premium on 21.4.19989. He further admitted that the logs were not shown in their mill stock register, income tax returns or balance sheet. Ext-18, the logs received register not proved in the original nor produced in original of Ext-18 remained not proved. Admittedly these are the attested photocopy and the pages are not serially marked and tallied. Although he stated 3054 number of logs were purchased those were not shown in the balance sheet return. PW 1 admitted that in Ext-11 and 17 no date has been mentioned and also admitted that the Forest Department seized 35 numbers of logs.
VI. For that while decided issue No.4, the learned Civil Judge failed to consider the documentary as well as oral Page 21 of 54 evidence on record relevant to Insurance Contract which Insured is bound to disclose all the material facts of the subject matter of insurance in the proposal form and any suppression or non disclosure of material fact is fatal to the insurance contract. The respondent/plaintiff admittedly knew that at the time of offer for insurance logs in the mill were damaged due to exposure in the sun and rain, attack by white ants and some of the logs turning into soil as per exhibit
-P copy of writ petition (Civil) 5341 of 1999, Exhibit-P(1) letter addressed by plaintiff/respondent to the Conservator of Forest, Karbi Anglong specifically admitted that the logs and timbers has already been rotten/cracked due to exposure to sun and rain since 12/9/1996 (date of suspension) and are attacked by white ants. Further delay will cause heavy loss to the respondent/plaintiff as the timbers are perishable materials. But at the time of filing proposal and declaration effecting insurance the respondent/plaintiff suppressed about the deteriorating conditions of the logs in the mill. But the learned lower court did not consider this aspects and came to a perverse findings for which impugned judgment and decree is liable to be set aside and quashed.
VII. For that while decided issue No.5 from the evidence on record and the correspondence made between the respondent/plaintiff and the appellant/ defendant it is apparent that the documents sought for settlement of the claim prefer by the respondent/plaintiff were under process at the time of institution of the suit and the learned Lower Court did not consider this aspect and came to an erroneous findings on this issue for which the finding arrived at is liable to be set aside/quashed.
Page 22 of 54 VIII. For that while decided issue no.7 the learned Court below while decided this vital issue did not at all consider the proposal form EXT-35 filed by the respondent/plaintiff wherein it was admitted that the property insured does not belong to the respondent/plaintiff firm. It was further stated in EXT-35 that the mill was not operating at the relevant time and as such the policy was issued as silent one. The respondent/plaintiff in Writ Petition(C) No.5341/1999 in para no.22 the respondent/plaintiff on affidavit stated before the Hon'ble High Court the inventorised stock already rotten/crack due to exposure to sun, rain and attacked by white ants since 12/9/1996. From Ext-P(1) letter of plaintiff/ respondent dtd 20/5/1999 to the conservator of forest, Karbi Anglong that timbers has already been rotten/crack due to exposure of the sun, since 12/2/1996 and affected by white ants Timber is perishable and will lose its value. The PWs mentionably 3, 4, 5, 9 & 10 could not prove their lease of forest scope. Ext-19 & 20 in respect of the land where the mill allegedly stood were procured during pendency of the suit and not in the name of the respondent/plaintiff. From Ext-GG the opinion given by the Chartered Accountant after examining the balance sheet/profit and loss accounts in the financial year 1999-2000 and 2000-2001, income tax return, transit passes of logs obtained during banned period improperly title of the logs not established, improper maintenance of accounts, incomplete transfer of logs remained unrebutted and thus became conclusive proof that the respondent/ plaintiff was not the lawful owner of the logs and those were admittedly not belong to the respondent/plaintiff. The insurance policies were obtained Page 23 of 54 misrepresenting all the above facts. The learned Lower Court while decided the issue No.7 did not consider these vital documentary evidence and come to a perverse finding for which the impugned judgment is liable to be set aside and quashed.
IX. For that while decided issue no.8 the proposal form Ext- 5 which is the foundation of the relevant insurance policies while submitted by the respondent/plaintiff clearly mentioned that the insured property does not belong to him. Although the logs were under seizure same were concealed at the time of proposal from the documentary and oral evidence it is apparent that the mill was suspended by the Karbi Anglong Autonomous Council and thereafter the ban imposed for which the plaintiff had to withdraw his staff from the mill to minimize the expenses and thereby concealing these facts and insurance policies were affected.
For that while decided issue no.9 from Ext-19 and 20 it is very much apparent that respondent/plaintiff were not the owner of the land where mill stood. Ext-20 was obtained without following any procedure. And was issued by unauthorized person of a government land during pendency of the suit. The land mentioned in Ext-20 belong to the Government and nowhere it is mentioned that the respondent/plaintiff is authorized to establish mill thereon. And as such the policies did not cover the logs outside the mill premises and therefore the plaintiff/respondent had no insurable interest on the logs beyond on the Government land but these aspect was not considered by the lower court and therefore come to a perverse findings for which the judgment and decree is liable to be set aside and quashed. Page 24 of 54 X. While decided issue no.10 the learned Lower Court erroneously held that the absence or non-existing of documents were a plot to repudiate the genuine claim of the respondent/plaintiff. While decided this issue the respondent/plaintiff could not furnish the documents sought for to settle the claim of the respondent/plaintiff. The documents like Income Tax returns, Balance sheet of returns, Original of logs receipt register, the Original of transit passes, the land upon which the mill stood were not at all proved. The agreement with some of the witnesses from whom the respondent/plaintiff purchased logs were not at all proved legally, while the mill stood at Siloginan/Golaghat to the copy of Income return produced by the respondent/plaintiff bears seal of Jorhat. As per claim of the respondent/plaintiff logs numbering 3054 were in stake in the mill premises at the time of fire while the F.I.R lodged by the Manager of the respondent/plaintiff mentioned about 2900 number of logs, admission of the PW 1 in the writ petition and letter written to the conservator of Forest that the logs were damaging due to exposure of sun, rain and attacked by white ants creates reasonable doubt in the mind of the surveyor/ loss assessor to settle the claim and due to non-cooperation the matter has been delayed was not at all considered by the learned lower Court for which the findings arrived at by the Court below is erroneous and liable to be set aside and quashed. XII. For that while decided issue No.11 Mohan Baishya, logs were rotten and prevented the logs by spraying insecticides (PW 7). Writ Petition (Civil) No.5341 of 1999 filed by the respondent/plaintiff against the State of Assam and others in Page 25 of 54 para no.22 the respondent/plaintiff on affidavit affirmed that "As the inventorised stock of timbers had already been rotten/crack due to exposure to sun and rain and attacked by white ants since 12/9/1996 and by the said writ petition the respondent/plaintiff prayed for issuance of a rule in the nature of mandamus or any other appropriate writ or direction vide Ext-P. Admittedly the said WP was dismissed on withdrawal. Ext-P Writ Petition(C) 5341/1999 inventorised stock already rotten, crack due to exposure to sun, rain and attacked by white ants since 12/9/1996. Ext-P(1) letter of dtd. 20/5/1999 to the Conservator of Forest, Timber has already been rotten/crack due to exposure to sun and rain since 12/2/96 and attacked by white ants. Timber is perishable it would lose value.
XIII. For that the learned lower Court while decided the issue no.12 erroneously hold that the appellant/defendants are liable for payment of interest as per regulation 9(6) of the Insurance Regulatory and Development Authority (Protection of Policy holders' Interest) Regulation 2002 and the plaintiff is entitled to interest @ 2% above the prime lending rate of the Schedule land as on 7.3.2013. From the documentary evidence in the record it is established that the respondent/ plaintiff had not disclosed all the above facts prior to the obtaining of insurance coverage of logs. The plaintiff conspired to defraud the defendant company by obtaining a fire insurance coverage on the alleged burnt logs and timbers by misappropriation of material facts. As such the respondent/plaintiff is not entitled to claim any relief against the appellant/defendants. No cause of action has arisen to institute the case against us. Further that the respondent/ Page 26 of 54 plaintiff did not cooperate the appellant/ defendant in conducting survey works.
XIV. For that the learned lower Court while discussed and decided the issue no.13 did not consider the totality of evidence on record and came to a perverse findings and decided the issue in favour of the plaintiff. The learned lower Court ignored the piece of evidence on record adduced by their own witnesses PW 6 Abdul Guffer an ASI of Police, Barpather Police Outpost. That on 22/3/2001 at about 4 a.m. (in the morning) he received an information over telephone that on the previous night the mill was caught fire from one Smti. Anima Neog a teacher, and thereafter he along with his staff rushed to the place of occurrence to the mill, after ten minutes of receiving information. Having reached the mill site he saw burning of the labour quarters and logs within the mill. He also found 2, 3 workers staying on the road and he had not seen other neighbouring people. While PW -7 Sri Mohan Baishya giving contradictory evidence stated that having seen the fire and sound of gun firing out of fear remained in the mill, they also stated that at about 6.30/7 am they went to Golaghat and stated about the incident to PW 1. Admittedly the police detained them for two consecutive days. XV. For that the lower Court failed to consider the decisions in its proper perspective while decided the issue No.1 to 13 and come to a perverse finding especially while decided issue No.,gave a wrong finding and as such the plaintiff/respondent is not entitled to get the reliefs prayed in the plaint and ought to have dismissed the suit being false frivolous and baseless but contrary to evidence on record the Page 27 of 54 learned lower Court decided these issues in favour of the respondent/plaintiff."
22. I have heard Mr. A. Sahad, learned counsel appearing on behalf of the appellants and have also heard Mr. M. K. Choudhury, learned senior counsel assisted by Mr. T. N. Srinivasan, Advocate, appearing on behalf of the respondent.
23. Mr. Sahad, learned counsel for the appellants, submitted that during the time when the insurance policy was issued covering the logs, the ban imposed by the Hon'ble Supreme Court of India by the order dated 12.12.1996 as well as the subsequent orders were in force. Therefore, the plaintiff could not have procured such large number of logs and also could not have got those logs inventoried by the Divisional Forest Officer, Karbi Anglong district in violation of the order passed by the Hon'ble Apex Court. He further submitted that on 15.01.1998 the Hon'ble Supreme Court had granted onetime exemption by relaxing the ban for a period of six months so as to allow the utilization of the inventoried stocks of logs by the mill owners subject to clearance by High Power Committee constituted under the orders of the Supreme Court and accordingly the High Power Committee had cleared the logs of the respondent/plaintiff for utilization. However, since the plaintiff could not avail the window granted by the Apex Court and utilized the logs within the limited period on account of the fact that the license of the mill Page 28 of 54 was kept suspended by the KAAC authorities, hence with the expiry of the six months period all the timbers automatically became property of the State by operation of the order of the Apex Court and therefore, the plaintiff did not have any right in respect of the aforementioned logs with effect from 15.07.1998. Mr. Sahad has further argued that in the writ petition filed by the plaintiff in the Gauhati High Court bearing number WP(C)5341/1999 before the renewal of the insurance policy seeking leave to operate the mill, the plaintiff had stated that the logs were already damaged by exposure to sun and rain and also due to damage caused by white ants. The admission of the aforementioned fact made by the plaintiff in the writ petition stating that the logs were damaged renders the renewal of the insurance as a defective contract due to non disclosure of such material facts by the plaintiff to the defendants at the time of renewal.
24. By referring to clause 8 of the General Conditions of Contract (GCC) contained in the insurance policy Mr. Sahad submits that every insurance policy is based on good faith and therefore, if it emerges that the insurance policy is based on any false declaration then the benefits under the policy shall stand automatically forfeited. He submits that since the plaintiff failed to declare the aforesaid material facts at the time of issuance of the policy and/or during the subsequent renewal, hence the entire policy stood Page 29 of 54 nullified by operation of clause 8 of the GCC . As such, the plaintiff would not be entitled to any benefit under the policy.
25. Mr. Sahad further submits that the defendants have brought on record the report of the Surveyor as well as the Investigator which would go to show that the fire was caused at the instance of and with the complicity of the plaintiff as the same was apparently stage managed. This is not a case of accidental fire as claimed by the plaintiff and as such all benefits under the policy stood automatically forfeited on account of fraud. He, therefore, contends that despite the evidence brought on record by the defendants in support of the aforesaid claim the learned Court below failed to appreciate such evidence available on record in the correct perspective and erroneously decreed the suit filed by the plaintiff by ignoring such cogent evidence available on record.
26. By referring to a decision of the Apex Court rendered in Civil Appeal No.2776 of 2002 (Satwant Kaur Sandhu vs. New India Assurance Company Ltd.) Mr. Sahad submits that it is a fundamental principle of insurance law that utmost faith must the observed by the contracting parties. Since the plaintiff has acted in breach of such good faith, hence the benefit under the policy automatically stood forfeited. In support of the aforesaid argument, the appellants have relied upon the following decisions :-
1) AIR 2013 SC 415 [ U. SREE vs. U. SRINIVAS]
Page 30 of 54
2) Appeal (Civil) 6277 of 2004 [United India Insurance Co.
Ltd. v. M/s. Harchand Rai Chandan Lal] decided by the Hon'ble Supreme Court of India on 24.09.2004.
3) Special Leave Petition (Civil) 8479 of 1999 [United India Insurance Co. Ltd. vs. Rajendra Singh & others] decided by the Hon'ble Supreme Court on 14.03.2000.
4) Civil Appeal No.2080 of 2002 [Vikram Greentech (I) Ltd.
& another vs. New India Assurance Co. Ltd.] decided by the Hon'ble Apex Court on 01.04.200025.
27. Per contra, Mr. M. K. Choudhury, learned senior counsel appearing for the respondent/plaintiff, submits that the plaintiff has proved the insurance policies bearing No.1153050203488 as well as policy no.1153050203490. The corresponding renewal policies taken with effect from 26.06.2000 to 25.06.2001 for logs in open, logs in pond, sawn timbers as well as the staff quarter had also been adduced in evidence and duly proved by the plaintiff. The aforesaid insurance policies clearly shows that the same were all peril policies for a total sum of Rs.1,94,12,464/- for the logs in open, logs in pond and sawn timbers whereas the amount covered under the policy attracted for the staff quarter was for a sum of Rs.1 lakh. He submits that a perusal of the policies would go to show that the same were issued in respect of a silent mill clearly signifying that the plaintiff's mill was not in operation when the insurance policy was made. The evidence on record would also clearly establish that the insured moveable properties covered 3054 logs in all, the cost of Page 31 of 54 which was Rs.1,76,99,434/-. That apart, the plaintiff had also led evidence to prove and establish the fact that the incident of fire had, in fact, occurred on the fateful night. Since the insurance policy was also applicable for covering risk against fire, hence, the Court below has rightly decreed the suit of the plaintiff for the amount claimed in the plaint.
28. Mr. Choudhury further submits that the FIR lodged on 22.03.2001 before the Shantipur Police Outpost under Bokajan Police Station read with the final report dated 10.11.2001 submitted by the Bokajan police in connection with Bokajan P.S. Case No.31/2001 giving a Final Report which was accepted by the learned Magistrate on 13.12.2001 goes to show that the fire was the handiwork of anti social elements. The certificate of the Fire Officer, Golaghat also lends support to the claim made by the plaintiff. As such, the plaintiff had succeeded in proving and establishing the fact that the fire was caused by antisocial elements. As against such cogent evidence available on record the defendants' side had not been able to lead any evidence to prove that the fire incident was a handiwork of the plaintiff firm and the same was a stage managed incident for the sole purpose of availing the benefit of the insurance policies. The learned senior counsel, therefore, contends that since the defendants have alleged fraud on the part of the plaintiff, the burden of proving and establishing the same was Page 32 of 54 upon the defendants which burden they have failed to discharge. In that view of the matter, there is no illegality or infirmity in the judgment and decree passed by the learned trial Court.
29. Mr. Choudhury further submits that the defendants have not been able to show any legally justifiable reason for the delay in settlement of the insurance claim made by the plaintiff. A scrutiny of the materials available on record would go to show that the plaintiff has furnished all relevant information including the documents called for by the defendants so as to ensure early settlement of the claim. However, notwithstanding the same, the defendants have deliberately delayed the settlement of the claim for nearly 16 months after the claim had been lodged. When the repeated reminders issued by the plaintiff failed to yield any result and the letter dated 16.01.2003 issued by the plaintiff requesting the defendants to settle the claim within 15 days of the receipt of the letter had also gone in vain, hence, the plaintiff was compelled to institute the suit for recovery of the insurance amount. He submits that the delay in settlement of the claim has entailed adverse pecuniary consequences to the plaintiff for no fault on its part. As such, the plaintiff was entitled to suitable compensation in the form of interest which has been rightly decreed by the Court below as per the provisions of Regulation 9(5) of the IRDA Regulations. On the basis of such submission Mr. Choudhury contends that there is no Page 33 of 54 scope for interfering with the judgment and decree passed by the learned trial Court and as such the appeal deserves to be dismissed by this Court.
30. I have considered the rival submissions made at the bar and have also meticulously examined the judgment and decree under appeal as well as the voluminous evidence available in the Lower Court Record. From a perusal of the judgment and decree passed by the learned trial court as well as the grounds taken in the appeal, it appears that the key questions that would arise for consideration by this Court in this appeal would be as to whether the plaintiff firm was entitled to receive the amount claimed for under the insurance policies and/ or whether the policies stood forfeited on account of fraud committed by the plaintiff. I propose to answer the above questions by framing the following points of determination :-
A. Whether the suit filed by the plaintiff is maintainable in its present form?
31. It is the pleaded case of the plaintiff that it is a registered partnership firm having its office at Bengenakhowa, Golaghat represented by its managing partner. During the course of trial, the plaintiff had also adduced evidence in support of the aforesaid claim and such evidence of the plaintiff went unrebutted. Therefore, as per the provisions of Order XXX Rule 1 of the CPC the plaintiff firm was competent to sue in its own name. It is also evident Page 34 of 54 from the record that the plaintiff firm had obtained insurance policy covering the logs in open, logs in pond and sawn timbers as well as its staff quarter by paying premium of Rs.90,668/- and the said policy covered the risk of fire, riot, strike, lightning etc. The aforesaid policies were in force from the period from 26.06.2000 to 25.06.2001. It is also the case of the plaintiff that a fire broke out in the mill premises at 00.30 hours on 22.03.2001 in which logs lying in the open excepting one were completely destroyed and the staff quarter was also gutted in fire. After the said incident the plaintiff had lodged its claim with the insurance company i.e. the appellant No.1 herein and the necessary documents as called for by the appellants had also been furnished which included the copies of FIR and the certificate issued by the Fire authorities. Thereafter, a number of reminders had been issued by the plaintiff firm requesting early settlement of the insurance claim. However, despite such reminders issued by the plaintiff the defendants had neither repudiated the claim of the plaintiff nor settled the claim thereby causing loss and injury to the plaintiff.
32. On 06.01.2003 the plaintiff had made a final request to the defendants calling upon the insurer to settle the claim within a period of fortnight failing which legal options will be contemplated. Despite such ultimatum issued by the plaintiff, no action was taken by the defendants as a result of which the plaintiff was compelled Page 35 of 54 to institute the suit for recovery of an amount of Rs.2,26,75,388/- being the amount receivable under the insurance policies i.e. Exts- 44 and 45 together with interest calculated at the rate of 18% per annum on the said sum with effect from 22.03.2001 till 13.03.2003 i.e. the date of filing of the suit. From the pleadings contained in the written statement it is evident that the defendants had repudiated the claim of the plaintiff alleging fraud on its part. Therefore, the plaintiff has cause of action to institute the suit.
33. There is nothing on record to show that the suit filed by the plaintiff was not maintainable in the eye of law. Even during the trial no such material could be brought on record by the defendants to show that the suit was not maintainable. While dealing with the Issue Nos. I, II, III, V, & VI the learned trial Court had elaborately discussed the pleadings of the parties as well as the materials available on record so as to answer the aforementioned issues pertaining to maintainability of the suit in favour of the plaintiff. I do not find any illegality or infirmity in the findings recorded by the learned trial Court in respect of the Issue Nos.I, II, III, V, VI & VII holding the plaintiff's suit to be maintainable in the present form and therefore, the finding of the learned trial Court on the aforementioned issues stands affirmed.
B. Whether the insurance policies were obtained by the Plaintiff in breach of good faith ?
Page 36 of 54
34. As has been indicated herein before, the plaintiff had obtained as many as four insurance policies from the defendants out of which the insurance policy No.1153050203488 (Ext-37) was an " All peril " policy which covered the risk against fire, riot, strike etc. in respect of logs in open, logs in pond and also sawn timber in store for a total sum of Rs.1,94,12,464/-. The said policy was initially in force from 21.04.1999 to 20.04.2000 for the aforesaid immoveable properties located at the mill premises of the plaintiff. The aforementioned policy was thereafter renewed by means of a renewal policy (Ext-44) taking effect for the period from 26.06.2000 to 25.06.2001 by paying renewal premium. Similarly, a separate policy bearing No.1153050203490 (Ext-38) was obtained by the plaintiff covering the staff quarter located at the mill premises for a sum of Rs.1 lakh which was also renewed by means of Ext-45 for the same period. A perusal of the insurance policy document bearing No.1153010800615 (Ext-44) goes to show that the saw mill was "silent" at the time of issuance of the original policy i.e. Ext-37 as well as the renewal policy i.e. Ext-44 meaning thereby, that the saw mill of the plaintiff was not in operation at the time of issuance of the policy. A perusal of the evidence of DW 1 further goes to show that the insurer had carried out a detailed inspection of the mill premises as well as the properties available therein, obtaining all necessary particulars as regards the property to be insured. It is the categorically pleaded case of thee plaintiff that the representative Page 37 of 54 of the insurance company was duly informed about the fact that the mill was silent (non-operational) and the reasons that led to suspension of the operation of the mill. From the above evidence available on record, it is apparent that the defendants had issued the insurance policy being fully aware of the attending facts and circumstances under which the plaintiff's mill had remained non- operational since past couple of years.
35. The learned counsel for the appellants has strenuously argued that at the time of issuance of the original policy (Ext-37) the plaintiff firm did not disclose the fact that there was an order passed by the Apex Court imposing a ban on movement of felled trees and timbers from any of the seven North Eastern States or transportation to any other State of the country by virtue of the order dated 12.12.1996. He further submits that the defendants were also not aware of the fact that the Apex Court had passed an order dated 04.03.1997 directing preparation of inventory of all the logs and timbers and that by means of subsequent order dated 15.01.1998 a "onetime scheme of exemption" for a period of six months was permitted by the Apex Court. He also submitted that since the plaintiff could not avail the benefit of the said scheme by operating the logs, hence, as per the order passed by the Apex Court the aforementioned logs/timbers stood confiscated and vested in the state by operation of the order passed by the Page 38 of 54 Supreme Court . Therefore, the plaintiff could not, in any event, have insured the aforesaid logs nor can the plaintiff avail the benefit of the insurance policy on such account.
36. Materials on record suggest that the plaintiff's mill license was active upto 31.03.1999. However, due to the ban order passed by the Karbi Anglong Autonomous District Council on 12.09.1996 suspending the operation of the plaintiff's saw -cum- veneer mill as well as the order passed by the Apex Court banning the movement of logs and timbers the plaintiffs saw mill remained non-functional during the relevant period. During the course of trial the plaintiff had produced Ext-18 i.e. log receipt register containing entry of the logs purchased and the related accounts. That apart, from the evidence of PWs, 4, 5, 10, 11 and 12 as well as Exts-5, 6, 7, 8, 9, 10 and 11 what can be seen is that the plaintiff firm had, in fact, purchased logs during the relevant period of time. PW 13, Sri Deendranath Sonowal, Forest Range Officer, had also stated that the inventoried 3054 number of logs of 3352.157 cm were allowed to be transported to Durga Saw Mill, an H.P.C. approved saw mill for converting to sawn timber by DFO, Karbi Anglong East Division, Diphu vide his order No.B/KAE/INVENTORIED LOGS/2003-04/3585-86 dated 22.03.2004 (Ext-83) and the transit passes were also issued in that regard. From the above evidence available on record, it is not possible to conclude that defendants were unaware of the reasons Page 39 of 54 that had resulted into suspension of the operation of the plaintiff's mill. There is nothing on record to suggest that any information sought by the insurer was not faithfully furnished by the plaintiff firm.
37. It is settled law that the insurance policy is based on good faith and the insured is required to faithfully disclose all material information that would have a bearing on the risks sought to be covered under the policy. However, in the instant case, the defendants have neither been able to plead nor established as to which material fact was suppressed by the plaintiff firm at the time of obtaining the insurance policy. Therefore, the submission made by Mr. Sahad that the plaintiff firm had suppressed material facts while obtaining the insurance policies in questions cannot be countenanced by this court. I am, therefore, of the opinion that the learned trial court has rightly decided the issue no. VII in favour of the Plaintiff and the same does not call for any interference by this court.
C. Whether the claim of the plaintiff was vitiated by fraud ?
38. It is evident from the record that after the fire incident had taken place the plaintiff firm had lodged the insurance claim under the two policies Exts-44 and 45 whereafter the insurer had also deputed a Surveyor to conduct a survey and submit a report. Leaving aside a minor discrepancy as regards the exact time of occurrence of the fire there is no dispute about the fact that the Page 40 of 54 incident of fire, in fact, took place in the mill premises on the night of 22.03.2001 whereby a large number of logs including the staff quarter was completely gutted. Being dissatisfied with the report of the surveyor, the insurer had appointed Sri Moloy Kanti Nandi to conduct an enquiry and submit a report. The report submitted by Moloy Kanti Nandi is available on record as Ext-D produced by the defendants. A perusal of the said report goes to that a number of circumstances raising suspicion as regards the genuineness of the incident of fire has been indicated in the said report. Such circumstances include statements made before the investigator by two persons, namely, Badan Gogoi and Sri Leela Gogoi, who had claimed to have witnessed one Mohan Baishya, the chowkidar of the plaintiff firm as well as Dharma Rao, another employee, pouring kerosene oil on the logs and the staff quarter and putting fire on the same. The Investigator's Report (Ext-D) also mentions about the unusual manner in which logs spread over a large area got selectively burnt within a short span of time and also the fact that the thatched roof house standing next to the staff quarter was not at all affected by the fire although the same was more susceptible to fire thereby indicating at a sabotage at the instance of the plaintiff firm. The investigator's report has also expressed serious doubt as to whether the incident was actually an act of terrorist or a stage managed fire. It would be pertinent to mention herein that although Sri Moloy Kanti Nandi was an investigator Page 41 of 54 appointed by the insurance company, yet, he was examined by the plaintiff as PW 9 during the course of trial.
39. PW 9, i.e. the author of the Ext-D, during the course of recording his testimony, however, did not make any reference to Badan Gogoi and Leela Gogoi. Surprisingly enough, although the defendants have taken a stand that the fire incident had been stage managed by the plaintiff firm so as to avail the benefit of the insurance policy by practicing fraud upon the insurance company, yet, no attempt had been made by the defendants to summon Badan Gogoi and Leela Gogoi as witnesses. There is nothing on record to indicate as to why those persons were not called as witnesses by the defendants. It would, however, be relevant to mention herein that the Ext-D report also indicates that from further investigation it had come to light that Badan Gogoi had land dispute with the managing partner of the plaintiff firm and that there was no corroboration of the said testimony of Badan Gogoi and Leela Gogoi.
40. From a scrutiny of the evidence available on record it can be seen that the plaintiff side had lead sufficient evidence in support of its claim that there was an incident of fire that took place on the midnight of 22.03.2001 wherein the logs in open, logs in pond and the sawn timber covered by the Ext-44 insurance policy got destroyed and the staff quarter covered by the Ext-45 policy Page 42 of 54 also got completely gutted in the fire. As has been indicted herein before, the issuance of the insurance policies viz., Exts-44 and 45, are not in dispute. The plaintiff had also brought on record the report of the Fire Authorities, copy of the FIR as well the Final Report. The report of the PW-9 brought on record in the form of Exhibit-D also clearly supports the claim of the plaintiff that a large number of logs were destroyed by fire in the mill site on the night of 22-03- 2001. The aforesaid evidence read with the bulk of documentary and oral evidence adduced by the plaintiff goes to show that the the plaintiff side had clearly succeeded in prima facie establishing its case as per pleadings contained in the plaint. Since, the defendants had alleged fraud on the part of the plaintiff in engineering the fire, the onus to prove the said fact by leading cogent evidence on record was , therefore, upon the defendants.
41. Order VI Rule 4 CPC requires the particulars to be given in all cases where the party pleading relies on any misrepresentation, fraud, breach of trust etc. It is also the requirement of law that such pleadings should be proved by leading cogent evidence on record in order to succeed in a case where fraud is alleged. In the instant case, although the defendants have alleged fraud on the part of the plaintiff, yet, save and except making some vague allegation in the written statement, the defendants side have neither laid the factual foundation of fraud by furnishing the requisite particulars in Page 43 of 54 the written statement nor have they been able to establish fraud on the part of the plaintiff by leading cogent evidence on record. The averments made in the written statements, taken in its entirety, at best indicates the existence of some suspicious circumstance involving the entire incident without there being any attempt to substantiate the same. Party alleging fraud must prove the same. Mere suspicion cannot take the place of proof of fraud. In the absence of cogent evidence on record backed by proper pleadings, plea of fraud taken by the defendants could not have been accepted by court below. As a matter of fact, a scrutiny of the material on record leaves an impression in the mind of this court that the defendants were not at all serious about the allegation of fraud leveled against the Plaintiff. In view of the above, I am of the opinion that the learned Court below has rightly decided the Issue Nos.VIII, XII & XIII in favour of the plaintiff based on evidence available on record. Since the defendants have failed to prove and establish fraud on the part of the plaintiff, hence, the plaintiff firm cannot be denied the benefit under the insurance policy to the extent of risk covered by the same.
D. Whether the plaintiff is entitled to the principal amount claimed in the suit under Exts-44 and 45 and if so, to what extent ?
42. Ext-45 is the insurance policy which covered the staff quarter situated at the plaintiff's mill site for an amount of Rs 1,00,000/- Page 44 of 54 (Rupees one lakh ). In view of what has been observed in the foregoing paragraphs, I have no hesitation to hold that the plaintiff firm would be entitled to the sum assured under the policy (Ext-45) in respect of the staff quarter since the defendants have failed to establish the existence of any cogent ground to deny the claim of the plaintiff under the said policy.
43. As regards the insurance policy Ext-37 as well as the corresponding renewal policy Ext-44, a perusal of the policy document goes to show that the sum assured for the logs in open, logs in pond and sawn timber is an amount of Rs.1,94,12,464/-. Although the insurance policy document does not indicate the number of logs/sown timber which would stand covered under the document yet , it appears from record that the aforesaid amount would cover the logs in the stock , which as per the stock register maintained by the Plaintiff firm was 3054. The insurance policy document, however, mentions in categorical terms that "the property insured is situated at Bengenakhowa, Golaghat, Pin - 785621 in the building of pucca/katcha construction occupied as saw mill (silent)". From a perusal of the policy document what, therefore, emerges is that the policy document covers logs in open, logs in pond and sawn timbers located inside the mill premises of the plaintiff firm . In other words, from the simple language employed in the policy document, the plaintiff firm would not be Page 45 of 54 entitled to any coverage in respect of properties damaged by fire, riot, strike etc. if the same is not located within the mill premises.
44. From the testimony of PW 2, Lot Mondal, it can be seen that the plaintiff's mill premises covered a total area of 14 bighas which is covered by barbed wire fencing and an area of six bighas of land being a Government plot is lying adjacent to the mill premises. From the evidence of the surveyor employed by the defendants what can be further seen is that in the fire incident as many as 414 logs were found to be burning inside the mill premises whereas a number logs were found to have been burnt in the aforementioned six bighas plot of land which falls outside the mill premises of the plaintiff firm. The aforesaid position of fact is also not in dispute that logs lying outside the mill premises and in the aforementioned six bighas plot of Government land had also been destroyed by fire. While recording the findings in respect of Issue No.IX the learned Court below had categorically observed as follows :
"On the other hand, PW 2, Naren Rengma, the Lot Mondal, in the case stated that an area measuring 6 bighas of land adjacent to the plaintiff's land is a Government land. As such, the said 6 bighas of land i.e. Government land does not come within the purview of the policy."
45. From a scrutiny of the materials available on record what can be seen is that the plaintiff side had produced documentary Page 46 of 54 evidence including the inventories prepared under the order of the Apex Court to show that as many as 3054 numbers of logs were stacked in the mill premises on the night on which the fire incident took place but the plaintiff side has not been able to lead evidence to show as to how many of those logs had actually been destroyed by fire inside the mill premises. As has been indicated herein above, the insurance policy clearly spelt out that the properties within the mill premises would only stand covered under the policy in question. The defendants have also categorically raised the plea that as per the surveyors report, only 414 number of logs were found to be burnt inside the mill premises.
46. As per the terms and conditions of the Insurance Policy, the plaintiff would be entitled to insurance cover only in respect of the logs that were burnt inside the mill premises. Since the Plaintiff had approached the court seeking a money decree against the Insurance Company , on the face of such categorical stand taken by the defendants , it was incumbent upon the plaintiff to lead evidence to prove and establish the number of logs covered by the insurance policy that was actually burnt inside the mill premises. However, a proper scrutiny of the evidence goes to show that the plaintiff has failed to prove that 2900 logs were destroyed in the fire inside the mill premises. On the contrary, evidence on record shows that only 414 number of log were actually burnt inside the mill Page 47 of 54 premises. The aforesaid position of fact is also admitted by the defendants. The remaining logs were found to have been burnt and lying in the "six bighas" of government land which is not within the mill premises.
47. In the case of Vikram Greentech India Limited and Another vs New India Assurance Company Limited reported in (2009) 5 SCC 599, the Apex Court has held that the rights and liabilities in an insurance contract would be strictly governed by the language of the contract and there is no room for an equitable consideration in such matters. The observations made by the Hon'ble Apex Court in paragraphs 16, 17, 18 and 19 of the aforesaid judgment are quoted herein below :-
"16. An insurance contract, is a species of commercial transactions and must be construed like any other contract to its own terms and by itself. In a contract of insurance, there is requirement of uberrima fides i.e. good faith on the part of the insured. Except that, in other respects, there is no difference between a contract of insurance and any other contract.
17. The four essentials of a contract of insurance are :
(i) the definition of the risk, (ii) the duration of the risk, (iii) the premium, and (iv) the amount of insurance. Since upon issuance of the insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of the risks covered by the insurance policy, its terms have to be strictly construed to determine the extent of liability of the insurer.Page 48 of 54
18. The endeavour of the court must always be to interpret the words in which the contract is expressed by the parties. The court while construing the terms of policy is not expected to venture into extra liberalism that may result in rewriting the contract or substituting the terms which were not intended by the parties. The insured cannot claim anything more than what is covered by the insurance policy. (General Assurance Society Ltd. v. Chandmull Jain [AIR 1966 SC 1644], Oriental Insurance Co. Ltd. v. Sony Cheriyan [(1999) 6 SCC 451] and United India Insurance Co. Ltd. v.
Harchand Rai Chandan Lal [(2004) 8 SCC 644]).
19. A document like proposal form is a commercial document and being an integral part of policy, reference to the proposal form may not only be appropriate but rather essential. However, the surveyors' report cannot be taken aid of nor can it furnish the basis for construction of a policy. Such outside aid for construction of insurance policy is impermissible."
48. That apart, in another decision of the Hon'ble Apex Court in the case of Deokar Export Pvt. Limited vs. New India Assurance Compnay Limited reported in (2008) 14 SCC 598, the Apex Court has observed as follows :-
"14. The contention of the learned counsel for the appellant that an equitable view must be taken in untenable. In a contract of insurance, rights and obligations are strictly governed by the policy of Page 49 of 54 insurance. No exception or relaxation can be made on the ground of equity."
49. In view of the law laid down by the Hon'ble Apex Court in the aforementioned decisions it is, thus, apparent that in a case of claim settlement under an insurance policy the rights and obligations of the parties would be strictly governed by the terms of the contract and no exceptions or relaxation can be made on the ground of equity. As has been indicated herein before, in the instant case the insurance policy had categorically provided that the properties located within the mill premises alone would be covered under the insurance policy. The policy document did not indicate any definite number of logs but it appears that all logs in pond, logs in open and sawn timbers that are legitimately stored in the plaintiff's mill premises would be covered under the policy for the amount indicated therein. Therefore, one of the essential conditions of the insurance policy was that the properties must be located within the mill premises. In a suit of this nature it would not be enough to show that as per the stock register, the total number of logs stored in the mill matches the claim made in the suit but the plaintiff will also have to establish that the properties had been destroyed inside the premises.
50. As has been held above, the plaintiff has failed to prove that 2850 number of logs were stacked inside the mill premises and had Page 50 of 54 been burnt in the fire inside the premises. That apart , the learned court below has also held that logs found outside the mill premises would not be covered under the Insurance Policy which finding has remained un assailed in the present appeal. The plaintiff have neither disputed the fact that the six bighas of land was Government land nor have they been able to show that the said land was a part of mill premises. If that be so then the insurance policy would not cover those logs burnt in the six bigha plot of Government Land . Since the evidence on record suggest that there were only 414 number of logs burnt inside the mill premise hence, the learned trial court was not correct in deciding the Issue Nos. IX, XI and XIV in favour of the plaintiff by holding that the plaintiff was entitled to the decree for recovery of an amount pertaining to 2850 logs out of the total inventoried logs numbering 3050 as per the stock register . Therefore, the findings of the learned trial on the above issues stand interfered with.
51. On the other hand, although the defendants have alleged that the logs burnt in the fire were all damaged by sun, rain and attack, they have not been able to prove the said allegation, at least in so far those 414 logs are concerned. As such, it is held that the amount awarded to the plaintiff under the impugned decree shall remain confined to 414 numbers of logs only. Page 51 of 54
E. whether the plaintiff is entitled to claim interest ?
52. It has already been discussed herein before that the plaintiff was entitled to the benefit under the insurance policy to the extent of such number of logs burnt in the fire incident as would be covered by the policy document. It is not in dispute that the plaintiff firm had lodged its claim soon after the fire incident that took place in the month of March, 2001. The documentary evidence available on record shows that the plaintiff firm had furnished all necessary information including the documents that had been called for by the defendants having relevance for the purpose of settlement of the claim. Despite the fact that the demands made by the defendants were represented on all occasions, yet, the plaintiff firm had furnished all such documents on time and as per the demand made by the defendants.
53. As per the IRDA guidelines the defendants side was required to settle the claim within 30 days from the date of submission of the report of the surveyor. However, in the instant case the insurer had neither repudiated the claim of the plaintiff nor settled the same despite receipt of the surveyor report. Save and except alleging certain suspicious circumstances leading to the fire incident the defendants have failed to offer any justifiable ground for delaying the settlement of the insurance claim. Since the rights and obligations of the parties are governed under the contract having a Page 52 of 54 commercial angle in the matter, it is obvious that delay in settlement of claims would have adverse financial implications on the insured. Records do not disclose any justifiable ground for the insurer to delay the settlement of the claim over a period of 16 months after the claim was lodged.
54. It is not in dispute that as per the IRDA Regulations, the insured will be entitled to claim interest on the claimed amount if the settlement is delayed beyond 30 days from the date of submission of the surveyors report. It is also not in dispute the IRDA Regulations permit a claim of interest payment by the insurance claimant at the rate decreed by the learned trial court. In the Memorandum of appeal although the defendants/appellants have taken ground no XIII questioning decision of the trial court as regards issue no XII, yet, during the hearing of the appeal no argument has been advanced by the learned counsel for the appellants on the said point. A reading of the ground taken in the memo of appeal also does not indicate with any degree of clarity or precision as to on what basis the decision of the trial court rendered in issue no XII is being assailed. On the contrary what can be seen is that the said ground pertained to the decision rendered in issue no VIII. As such, I am of the considered opinion that the learned trial Court has rightly decided the Issue Nos.X, XII & XV in favour of the plaintiff by awarding interest at the rate of Rs.2% above the Bank lending rate Page 53 of 54 as per the IRDA regulations with effect from the date of institution of the suit i.e. 13.03.2003 till realization of the full and final amount.
55. In view of what has been discussed herein before, this appeal shall stand partly allowed. The plaintiff firm is held to be entitled to the insurance claim amount covered under the Ext-44 policy to the extent the same relates to 414 numbers of logs. The amount payable to the plaintiff under the decree would, therefore, be computed on the basis of 414 numbers of logs only . The judgment and decree passed by the learned trial Court would stand modified to the above extent.
Prepare a decree accordingly.
Registry to send back the LCR.
JUDGE T U Choudhury Page 54 of 54