National Insurance Co. Ltd., Rep. By Its ... vs Anjaneya Tobacco Company, Rep. By Its ... on 6 January, 2006

[Cites 9, Cited by 0]

Andhra HC (Pre-Telangana)

National Insurance Co. Ltd., Rep. By Its ... vs Anjaneya Tobacco Company, Rep. By Its ... on 6 January, 2006

Equivalent citations: I(2007)ACC133, 2007ACJ2578, 2006(1)ALT762

2. The present Appeal Suit is filed by defendant No. 1 in the suit assailing the judgment and decree, dated 28-10-1996, passed by the Principal Subordinate Judge, Ongole, decreeing the suit O.S.No. 87 of 1989 in part; while the cross-objections were filed by the plaintiff seeking to grant interest at 18 per cent per annum from the date of fire accident i.e., 10-10-1986 till the date of realisation on the amount of Rs. 96,48,295/-.

3. The suit is filed for realisation of a sum of Rs. 1,49,28,745/- towards compensation for the loss occurred in the godown of the plaintiff due to fire accident.

4. The appellant - National Insurance Company Limited, Calcutta, is defendant No. 1, the respondent No. 1 - M/s. Anjaneya Tobacco Company, Tangutur, Prakasam District, is plaintiff and the respondent No. 2 -Union Bank of India, Gandhi Road, Ongole, Prakasam District, is defendant No. 2 in the suit.

5. For the sake of convenience, in this judgment, the parties will be referred to as per their array in the suit.

6. The averments of the plaint, in brief, are as under:

The plaintiff had been insuring their tobacco stocks and structures with defendant No. 1 since 1980. The stocks and superstructures have been duly insured by the plaintiff prior to 10-10-1986 under several policies, including damages occurred due to fire, riot, strike, malicious damage, earthquake damage, air craft damage, flood and cyclone damages etc. Prompt payment of premiums is not disputed. At about 01-00 a.m., on the intervening night of 10/11-10-1986, there was a fire accident in the godown of the plaintiff, as a result, tobacco stocks worth Rs. 1,26,000,00/- were burnt away. The godown and the abutting temporary structures, which were insured, were also completely damaged resulting in further loss of about Rs. 10,00,000/-. The accident was duly intimated to Fire Station House Officer, Tangutur, Station House Officer, Singarayakonda Police Station, and the Divisional Officer of defendant No. 1 at Ongole. The efforts of the brigade of Tangutur and Kandukur failed in putting off all the flames, but were successful only to the extent of flames not being spread to the neighbouring godowns. On 11-11-1986, plaintiff made a claim before defendant No. 1 in a printed form for a sum of Rs. 1,37,000,00/- towards damages. Consequently, defendant No. 1 deputed surveyors, who conducted survey and assessed the damage as Rs. 92,83,294-85 paise and took the consent letter from the plaintiff for the said amount on 21-12-1987. Though the actual loss was much more, the plaintiff, in an anxiety to settle the claim and in the interest of their business, agreed to that amount. The plaintiff received a letter, dated 2-5-1988, from the Regional Office of defendant No. 1 at Hyderabad, stating that the policies taken by him could not be considered as the cause of loss was outside the purview of the 'perils' covered under the policies.

7. Initially, plaintiff was given to understand that the accident might not be due to short circuit of power supply but might have been caused due to fire coming into contact with kerosene. The plaintiff was not a direct witness to the accident and hence was not sure of the exact cause of fire as due to short circuit or due to malicious act of anybody. However, the possibility of accident being occurred due to short circuit was ruled out. The Police Officials who investigated into the accident were also not sure about the exact cause of accident and as such referred the case as 'undetectable'.

8. In nut shell, the case of plaintiff is, firstly the accident is squarely covered by the conditions of the policy; secondly there was an agreement between the plaintiff and the surveyors of defendant No. 1 regarding the value of tobacco stocks damaged; thirdly the cause of accident was concluded to be undetected by all the concerned authorities; fourthly there was no allegation by defendant No. 1 about any complicity of plaintiff in the accident; fifthly the fire and malicious damage are clearly within the ambit of the insurance effected with defendant No. 1 and sixthly the burden lies heavily on defendant No. 1 to categorically allege and prove the reasons to disown its liability and that the letter addressed in this regard by defendant No. 1, dated 2-5-1988, does not disclose any such material.

9. It is the further averment of plaintiff in the plaint that the insurance was effected under reinstatement Clause with regard to damages to the superstructures. Since defendant No. 1 has totally denied the liability, plaintiff was forced to claim his estimated cost of reinstatement of structures; that plaintiff had been enjoying credit facility for the damaged stocks of tobacco from defendant No. 2 (Bank) and in view of the accident the amount has become overdue long ago as a result plaintiff had to pay the interest to defendant No. 2 at the rate of 18 percent per annum with quarterly rests.

10. The plaintiff issued a notice to defendant No. 1 demanding a sum of Rs. 1,02,88,294-85 paise with interest at the rate of 18 percent per annum with quarterly rests from 10-10-1986 and for further damage for wrongful with holding of money. Restricting the claim to Rs. 1,02,88,000/- with interest thereon, plaintiff prays to decree the suit with interest at the rate of 18 percent per annum with quarterly rests from the date of filing of suit till the date of realization.

11. The averments made in the written statement filed by defendant No. 1, while repelling the plaint averments, in brief, are that since plaintiff has not produced any documentary proof showing the partners of the firm and the power of B. Venkata Narasaiah, said to be the Managing Partner, to represent plaintiff-firm, the suit is not maintainable and that the same is opposed to the provisions of the Partnership Act, 1932 (for brevity "the Act"). However, it is admitted that policies were issued in favour of plaintiff; that there was no intimation to defendant No. 1 prior to 11-10-1986 regarding the fire accident that took place during the intervening night of 10/11-10-1986; that it is only on 11-1-1986, defendant No. 1 received a claim from plaintiff for Rs. 1.37 crores; that a Surveyor was deputed, who is not an employee of defendant No. 1, but he was a qualified and authorised surveyor, as licensed by the Controller of Insurance, Government of India, New Delhi; that it is the practice to depute a Surveyor to assess the quantum of loss and ascertain cause of loss subject to the terms and conditions of the policy without prejudice to the contentions of the parties; that there was no delay in the process of survey and the delay, if any, was attributable only to the plaintiff for his non-co-operation in complying with the requirements like submission of records etc; that the assessment made by the Surveyor is not binding on defendant No. 1 and it is only as a matter of practice the Surveyor will collect a letter from the claimants showing the acceptance of the claimants regarding the assessment of loss made by the surveyor, and in that course, the letter, dated 21-12-1987, obtained from the plaintiff was only a formal one.

12. It is further averred that plaintiff did not take immediate steps to mitigate the damages by informing the Fire Department and also removing the stocks; that defendant No. 1 sent a letter, dated 2-5-1988, to plaintiff repudiating his claim. The defendant No. 1 denied that the accident was due to short circuit or due to 'malicious acts of anybody', which are in the purview of the risks covered by the policies.

13. It is further averred that the Surveyor, by name P.M. Mohan Rao (D.W.1), submitted his preliminary report suspecting that the accident was a case of arson by kerosene. Therefore, sample of partially burnt wood and pieces of glass with soot was got tested in two independent laboratories and further that there were anonymous letters to defendant No. 1 before occurrence about the accident.

14. The reports from the said laboratories reveal the presence of kerosene in the soot-covered samples sent by the Surveyor; that an Investigating Officer, by name M.M. Narendranath (D.W.2), was appointed when the Surveyor appointed earlier was not definite about the origin of fire. However, the Surveyor confirmed that the fire was not caused by any electric short circuit, but was caused deliberately by using kerosene. The investigation revealed that no outsider was involved in it; that the analysis report of M/s. Data Quest Investigation Limited, Boston, U.S.A., expressed the opinion that the cause of accident was by using kerosene, which indicates that there was interference of human agency. The Police dropped further action because, from their point of view, there was no direct evidence in order to prove that a particular person was responsible for the offence of arson. Further, the report of Police that the accident was 'undetectable' does not mean to say that there was no complicity of plaintiff.

15. It is further averred that tobacco trade in Guntur and Prakasam Districts was going through certain difficult times due to drop in demand in International market during 1983-84 and as a result, the tobacco stocks of 1983-84 crop were still lying unsold in the godowns of plaintiff; that plaintiff was heavily indebted to the financing agencies and was unable to discharge his liabilities and, therefore, plaintiff intentionally resorted to put fire to his Godown and stocks by his own agencies.

16. Finally, it is the contention of defendant No. 1 that since the accident occurred in the godown of plaintiff, which has no access to any outside agency, except the watchman of plaintiff, being on duty and due to various other suspicious circumstances, the burden heavily lies on plaintiff to prove that the fire was really accidental and not by any outside human agency.

17. The defendant No. 2 filed written statement admitting the hypothecation of stocks in trade by plaintiff with it for the loans advanced and to be advanced; that the loan was still subsisting; that since the hypothecated stocks were gutted in the fire, the first charge of defendant No. 2 for the loan extended to plaintiff was covered under the cover note and the policy in question; that the cover note and policy were also issued in the name of defendant No. 2 with banker's Clause and that since defendant No. 2 had first charge on any amount decreed in the suit, to the said effect, a direction be incorporated in the judgment.

18. On considering the averments in the plaint and the written statement, the Court below framed the following issues for trial:

(1) Whether the contention of First defendant that the plaintiff resorted to intention of fire their own agencies and the alleged fire is not accident is not true and correct?

(2) Whether the letter, dt. 21-12-1987, taken by the first defendant surveyor from the plaintiff regarding the quantum of loss binding upon the first defendant?

(3) To what relief?

19. To substantiate their respective contentions, the plaintiff examined its Managing Partner as P.W.1 and 7 others as P.Ws.2 to 8 and got marked Exs.A-1 to A-82 on its behalf. Defendant No. 1 examined the Surveyor by name P.M. Mohana Rao as D.W.1 and 7 others as D.Ws.2 to 7 and got marked Exs.B-1 to B-20. Exs.X-1 to X-6 were marked through third parties.

20. The Court below after considering the entire material, including the evidence, both oral and documentary, available on record, came to the conclusion that plaintiff is entitled to a sum of Rs. 96,48,295/-, decreed the suit in part and accordingly directed defendant No. 1 to pay the same with interest at 12 per cent per annum from 10-10-1986 till the date of suit (28-4-1989) and also pay interest at 6 per cent per annum on the said amount of Rs. 96,48,295/- from the date of suit till the date of realization.

21. The main contentions of learned Senior Counsel Sri T. Anantha Babu, appearing for defendant No. 1, in brief, are that since the proceedings are civil in nature and since the plaintiff is claiming legal right of redemption on account of the fire accident, the burden of proof heavily lies on plaintiff. In order to substantiate his contention, he relies on Sections 101, 102 and 103 of the Code of Civil Procedure (sic. Evidence Act). Hence, he maintains that it is for the plaintiff to establish that the fire was accidental or due to mischief of third parties in order to attract the liability provisions under the policy. He further contends that the claim specifically was on the basis of fire due to short circuit; that subsequently it was revealed that there was involvement of third party, which is contrary to Clause 13 of the policy; that this contention was substantiated by examining the Assistant Engineer of the A.P.S.E.B. Since it was stated by the witnesses examined on behalf of plaintiff that there were no enemies for plaintiff, the natural corollary would be that the benefit would accrue only to plaintiff as a result of the fire accident and that the motive and opportunity to cause such an accident could be attributable only to plaintiff; that plaintiff was heavily indebted to banking institutions and so the amount that will be received from the Insurance Company was the only way to clear bank loans and that there was a special relationship with the Police. This is evident by the letter addressed by the Director General and Inspector General of Police, Andhra Pradesh, Hyderabad (for brevity "the Director General and Inspector General of Police") through Ex.A-25, dated 8-4-1988.

22. The learned Senior Counsel appearing for defendant No. 1 also vehemently contended that since admittedly there were no enemies to plaintiff even as per his own statement, the only inference that can be drawn is that the fire was caused only by the plaintiff or its partners. He further contended that the ingredients of Section 69 of the Act are not satisfied.

23. On the other hand, Sri M. Chandra Sekhara Rao, learned Counsel appearing for plaintiff, contended that Ex.A-18, letter of repudiation, was addressed only after the Surveyors were appointed and reports were submitted by them; that the repudiation in Ex.A-18 is vague; that the quantum of loss was not denied, but the binding nature alone was denied; that in order to establish that defendant No. 1 was not bound on the ground that the loss was outside the purview of the premises covered by the policy, no evidence was adduced and inasmuch as no satisfactory evidence was adduced by defendant No. 1, in order to prove that the reports are not correct, an inference has to be drawn in favour of plaintiff.

24. In view of the rival contentions, the points that would fall for our consideration are:

(1) Whether the plaintiff could establish successfully - as to whether the fire was due to accident or due to mischief of third parties in order to overcome the exception mentioned in Clause-13 of the conditions of the policy?

(2) Whether the stock verification was properly conducted and the assessment made by the two (2) surveyors under Exs.B-1 and B-4 can be believed or not?

(3) To what relief?

25. In Re Point No. 1: In this context, it is useful to notice the provisions of Sections 101 and 102 of the Code of Civil Procedure (sic. Evidence Act), which read thus::

Section-101: Burden of Proof: Whoever desires any Court to give judgment as to any legal right or liability dependant on the existence of facts which he asserts must prove that those facts exist.

Section-102: On whom burden of proofIies:-The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.

26. From a conjoint reading of these two provisions, it is abundantly clear that, no doubt, it is the plaintiff, who is claiming compensation covered by the policies under Exs. A-1 to A-14 stating that it was an accident may be because of short circuit. The surveyor, initially appointed by defendant No. 1, reported that the fire accident was not out of short circuit but out of usage of kerosene. Even after two independent surveyors assessed the loss of stocks, at a particular sum, defendant No. 1 repudiated the same stating that the cause of fire accident was not covered by the perils covered by the conditions of the policies. Therefore, the plaintiff was aware of the fire accident but not the reason for the fire accident.

27. On the other hand, defendant No. 1 was assertive about the fraud in order to repudiate the claim of plaintiff. Therefore, the burden heavily lies on defendant No. 1 regarding the existence of so-called fraud on the part of plaintiff and its manner. Of course, in normal course, the burden of proof lies on plaintiff, who seeks a judgment as to his legal right but basing on the facts and circumstances of the case, particularly in view of the repudiation made by defendant No. 1 on the specific ground that there was fraud on the part of plaintiff, it is only defendant No. 1 which has to prove the existence of such fraud. If defendant No. 1 fails to prove the existence of such fraud, as it is its assertion that the fraud was in existence, it shall have to be declared as having failed to prove its case.

28. In other words, if defendant No. 1 is successful in proving the existence of fraud in the accident, plaintiff would automatically fail. Hence, it is imperative to examine the evidence let in on behalf of defendant No. 1 more carefully and we will deal with the same later i.e., during the course of discussion.

29. In this context, for better appreciation of the facts of the case, Clause-13 of the policy, which is relevant, is required to be noticed. It runs thus:

Clause-13: If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof or if any fraudulent means or devices are used by the insured or any one acting on his behalf to obtain any benefit under the policy, or, if the loss or damage be occasioned by the willful act, or with the connivance of the insured, all benefit under this policy shall be forfeited.

30. From a perusal of the above Clause-13 of the policy, it is obvious that the said Clause is an exception to the liability on the part of defendant No. 1. Further, in order to attract the said Clause, it is necessary to look into the ingredients set out therein viz., firstly the claim must have been made in a fraudulent manner; secondly any false declaration must have been made or any fraudulent means or devices are used: thirdly such a false declarations must have been used by the insured or anyone acting on his behalf in order to obtain any benefit under the policy; fourthly the loss or damage must have been caused by wilful act of the insured or with his connivance and fifthly in the above circumstances the benefit under the policy can be forfeited.

31. To put it in a simpler way, the claimant has to prove that the claim has been caused by reasons other than those set out in Clause-13 and, in such cases, undoubtedly the burden lies on the plaintiff to prove the cause or causes which are otherwise not attracted by the conditions under Clause-13.

32. It is to be seen that the initial case of plaintiff was that the fire accident was due to an electric short circuit. The services of the Assistant Engineer, Electricity Board, were also requisitioned to inspect the premises, who, in turn, gave a certificate under Ex.A-24, dated 18-10-1986, stating that the fire might be due to short circuit in the internal wiring of the godown. He further stated that it cannot be judged at that stage.

33. In the plaint, it was averred that on 2-5-1988, the Regional Manager of defendant No. 1, Hyderabad, addressed a letter stating that the policies cannot be considered as the cause of loss is outside the purview of the perils covered under the policies. It was further averred that during oral discussion with defendant No. 1, the plaintiff was given to understand that the accident might not be due to short circuit in the electricity line and it might be due to arson caused by kerosene. It was further averred that the plaintiff, not being a direct witness to the accident, is under the impression that the cause of fire accident was due to short circuit only.

34. As noticed above, the Assistant Engineer of A.P.S.E.B., in Ex.A-24 stated that the possibility of accident being caused due to short circuit cannot be ruled out. In other words, there is not definite opinion expressed by the said Assistant Engineer under Ex.A-24 as regards cause of accident. Therefore, the opinion expressed by the said Assistant Engineer in Ex.A-24 is not much useful to the case of defendant No. 1.

35. Few circumstances, which are highlighted by the learned Senior Counsel appearing for defendant No. 1, are - firstly. the godown was a big (large) godown and electric short-circuit could not have resulted in such an extensive fire accident; secondly the main switch was in the office room and thirdly the wiring was intact, as spoken to by P.W.2.

36. As regards the first circumstance, it is to be seen that the cause of fire accident due to short circuit was only a doubt expressed by plaintiff. Even according to plaint averments, plaintiff was not an eyewitness to the fire accident nor did the plaintiff stick to the same version. If that were the case, the plaintiff would not have sought the opinion of an Assistant Engineer from the Electricity Board who, in turn, could only state that the possibility of taking place of fire accident due to short-circuit cannot be ruled out. Therefore, neither there was any clear opinion given by an expert nor it was the definite case of the plaintiff that the fire accident was caused due to electric short-circuit.

37. As regards the second circumstance, there was sufficient evidence, according to the learned Senior Counsel appearing for the defendant No. 1, that kerosene was extensively used.

38. In this context, it is to be noted that samples were sent to two (2) different agencies - one to the Expert in Laboratory at USA and the other to the Expert in Laboratory at Delhi. The Expert in the Laboratory at USA reported through Ex.B-3 that kerosene was found on all the specimens and the Expert in Laboratory at Delhi addressed a letter through Ex.B-9 stating that the samples were not adequate and accordingly they required at least one square meter of glass for their examination.

39. Therefore, it is the contention of the learned Senior Counsel appearing for the defendant No. that since the Expert from the Laboratory of Delhi could not give any opinion on the basis of the specimens sent to him, the authenticity or competency of the Expert from the Laboratory of Delhi was under serious doubt.

40. It is not in dispute that since the report from the Expert of the Laboratory in the USA had already been received, no further correspondence or any attempt was ever made by the surveyor to send further samples to the Laboratory at Delhi.

41. In this regard, it is to be noted that subsequent to the letter under Ex.B-9 addressed by the Expert from the Laboratory of Delhi asking for one square metre of glass for further examination, some time later a certificate under Ex.B-8 was sent wherein it was stated that there was no indication of kerosene or other inflammatory material. Hence, it is contended by the learned Senior Counsel appearing for the defendant No. 1 that this report of the Expert from the Laboratory at Delhi is highly questionable and the report sent by the Expert of the Laboratory of the USA can be accepted. He further contended that no attempt was ever made by the plaintiff to discredit the report of the Expert from the Laboratory of the USA.

42. At this juncture, it is to be noted that the report sent by the Expert of the Laboratory at USA, which was marked as Ex.B-3, shall have to be proved by examining the Expert from USA or by sending the same to any other Expert for examination and report in corroboration of the report of the Expert of the Laboratory at USA, but no such steps were taken by the defendant No. 1. Therefore, the treatment that ought to be given, according to the learned Senior Counsel appearing for the defendant No. 1, to the report sent by the Expert from the Laboratory of USA, ought to have given when steps were taken by the defendant No. 1 to prove the same.

43. Even assuming that the fire accident had occurred due to pouring of kerosene or even assuming that the defendant No. 1 successfully established that the fire accident was not due to short-circuit but only because of pouring of kerosene, the same cannot be concluded in favour of defendant No. 1, nor a finding can be recorded against the plaintiff, for the reason that mere use of kerosene is not sufficient to disconnect the accident from Clause 13 of the policy.

44. Nextly it is pointed out by the learned Senior Counsel appearing for the defendant No. 1 that there were electric lights in the godown and the office of the plaintiff and the lights were not burning when the fire accident took place. In such an event, the theory of electric short circuit cannot be accepted. Further, P.W.2, categorically deposed that the compound gate would be locked from 6-00 p.m., or 7-00 a.m. (sic. p.m.), and after the gate was locked except the watchman no one was in the compound and there was no possibility to anyone to enter into the compound.

45. The other circumstances against the plaintiff, as contended by learned Senior Counsel appearing for defendant No. 1, are that when P.W.2 himself stated that no one can enter into the compound after 6-00 p.m., or 7-00 p.m. to set fire to the godown, the same would show that the fire accident was caused with the participation of a group of persons belonging to the plaintiff.

46. Again, it is to be noted here that, all the circumstances, even if accepted, would only show the fire accident was not because of the short-circuit as initially felt by the plaintiff but was due to some mischief caused by an outside agency.

47. But, the question again would be whether the fire accident can be excluded from the purview of Clause 13 of the policy?

48. It is pointed out by the learned Senior Counsel appearing for the defendant No. 1 that there were two anonymous letters, which were marked as Exs.B-19 and B-20, accusing the plaintiff of planning to set fire were written on the letter heads of the plaintiff-firm. But, P.W.1 does not suspect anyone as stated in his evidence.

49. In this context, it is to be noted that the said two anonymous letters under Exs.B-19 and B-20 were addressed even before the occurrence of fire accident stating that some plan was being hatched by the plaintiff to burn the tobacco stocks in its godown.

50. What is intriguing is that defendant No. 1 did not initiate any enquiry or action into those two anonymous letters nor there was anything in that regard on record. This inaction on the part of defendant No. 1 being insurer cannot be accepted. Further, those two anonymous letters were allegedly written on the letter heads of plaintiff-firm. P.W.1 did not doubt anybody. If really somebody had the knowledge of the future plan, the said two anonymous letters would have been written on different papers but not on the very letter heads of plaintiff-firm itself. This appears to us as something absurd.

51. In order to rely on the said two anonymous letters, defendant No. 1 ought to have conducted an enquiry immediately after receipt of the same and as a result of which the further bid to create a 'make-believe accident' could have been foiled. Therefore, having failed in its duty to inquire into the said two anonymous letters, defendant No. 1 cannot put the entire blame and burden on the shoulders of plaintiff. In fact, that was the earliest occasion for defendant No. 1 to make an attempt to avert an untoward incident.

52. On the other hand, the defendant No. 1 had taken very lightly the said two anonymous letters by sleeping over them. The least that could be expected from defendant No. 1 in this regard is to inform the plaintiff about the said two anonymous letters. Even that was not done by defendant No1. Had that been done so, and if the fire accident took place thereafter, then the present accident could be termed as 'willful act' of plaintiff, which resulted in the damage and consequently the exception under Clause 13 could have been applied and the benefit under the policy could have been forfeited.

53. The further contentions of the learned Senior Counsel appearing for defendant No. 1 is that the stocks of tobacco were of the years 1982-83 and 1983-84 and the tobacco was of the variety which had no local market; that the same were useful only for the purpose of export; that since the plaintiff could not obtain any export orders for more than two years, the quality of the product got depreciated; that the only way for plaintiff to meet the urgent need of repayment of the loans was to create an artificial damage, get substantial amount towards damages and repay the bank loans and, since the situation of plaintiff at the relevant point of time was gloomy, the entire motive and possibility have to be attributed only to plaintiff and to none else.

54. In this regard, it is to be seen that these contentions are all more in the nature of presumptions. There is no actual proof, except the oral evidence here and there on behalf of defendant No. 1, that the plaintiff alone was responsible for the fire accident. In other words, according to defendant No. 1, the fire accident was wilfully caused by plaintiff alone, for which there is no acceptable evidence available on record.

55. The further comments made by the learned Senior Counsel appearing for defendant No. 1 against the plaintiff are not really called for since they were not established and all those comments pointing out the plaintiff himself as the sole responsible person to create the fire accident are uncalled for.

56. It is on record that the police also investigated into the matter. In fact, an enquiry was conducted by the C.I.D. Ex.A-25, dated 8-4-1988, is the letter addressed by the Director General and Inspector General of Police to the plaintiff.

57. From a perusal of the said Ex.A-25, it appears that upon the requisition made by plaintiff, to direct investigation into the case registered in Crime No. 116 of 1986 for the offence punishable under Section 436 of the Indian Penal Code of Singarayakonda Police Station, by an independent agency, it is replied that the case had been enquired into in great depth by the C.I.D., and their enquiry revealed that though the fire could not appear to be accidental, there is no evidence to prove that it was committed by, or in conspiracy by, any of the partners of plaintiff-firm and eventually, it was opined that the case had to be treated as "undetectable".

58. The notice referred by the Magistrate to the Circle Inspector of Police is Ex.A-26 and the report of the Circle Inspector of Police who investigated into the matter is Ex.A-27. Therefore, there is absolutely no failure on the part of plaintiff in reacting to the fire accident. In fact, the plaintiff acted with due diligence and promptitude immediately after the fire accident took place. By way of giving complaint to the police, the matter was referred to the Magistrate who in turn referred the same to the police again for investigation and the eventual report of investigation was that the cause of fire accident could not be traced. Accordingly, the Director General and Inspector General of Police addressed a letter under Ex. A-18 stating that the cause of fire accident has to be treated as 'undetectable'. There is no surprise if the Director General and Inspector General of Police has written a letter under Ex.A-18 with regard to an accident of that magnitude.

59. As a matter of fact, the police official from the level of Circle Inspector of Police, who was the investigating officer, to the level of the Director General and Inspector General of Police conducted the enquiry and reported the result of the enquiry to plaintiff promptly. It is an action to be appreciated but not to be criticized or condemned, and hence no mala fides can be attributed to plaintiff.

60. Further more, defendant No. 1, instead of attempting to make out an unholy connection between plaintiff and the Director General and Inspector General of Police, ought to have come-forward with appropriate evidence as to what actually ought to have been done and as to what was actually missing in the enquiry. At least, the reasons must have been spelt out by defendant No. 1 by letting in evidence through its witnesses in clear terms as to what were the reasons to comment that the letter of the Director General and Inspector General of Police under Ex.A-25 was a doubtful one. Surprisingly, there is no comment against Ex.A-27, which is the report of the Circle Inspector of Police. The present type of criticism against the Director General and Inspector General of Police, who is a State Official, without establishing allegations would lead defendant No. 1 nowhere and would only disclose its evasive attitude.

61. A great deal of comment was made on the said letter (Ex.A-25) attributing mala fides to plaintiff and the Director General and Inspector General of Police.

62. At this juncture, we are of the view that the said comment again is not really called for. What all could be seen from the said Ex.A-25 is that on the requisition made by plaintiff an enquiry was conducted by the C.I.D., which is an independent authority, and since there was no interference on the part of plaintiff nor its partners, the cause of fire accident was treated as 'undetectable'.

63. Further, it is to be noticed that the said Ex.A-25 was addressed to plaintiff but not to defendant No. 1 or to anybody for the simple reason that a requisition appears to have been made by plaintiff to the police to enquire into the matter about the involvement of any of its partners. After conducting an enquiry, the police had arrived at the conclusion that it was 'undetectable case". Merely because the Director General and Inspector General of Police, who is the head of the entire investigating agency in the State, addressed a letter to plaintiff, it cannot be said that there is an unholy connection between plaintiff and the Director General and Inspector General of Police.

64. In this connection, there is nothing in the evidence of witnesses examined on behalf of defendant No. 1, nor any contra oral or documentary evidence was let in by it to disprove the contents of Ex.A-25 letter or to establish the so-called alleged unholy connection between plaintiff and the Director and Inspector General of Police.

65. It is further on record that even the two (2) surveyors by name Mr. P.M. Mohana Rao and Mr. N. Velayudham, who were examined as D.Ws.1 and 4 on behalf of defendant No. 1, could not say anything nor attribute the whole guilt to plaintiff.

66. The next contention of the learned Senior Counsel appearing for defendant No. 1 is that plaintiff had presented the insurance claim on 11-11-1986 under Ex.A-16 i.e., after expiry of one month from the date of fire accident, and the same was repudiated by defendant No. 1 through its letter, under Ex.A-18, dated 2-5-1988. But, the suit was filed by plaintiff just prior to its being barred by time. Therefore, it is contended by the learned Senior Counsel appearing for defendant No. 1 that the long waiting of plaintiff would, in fact, only indicate that first of all plaintiff intended to extricate himself from the criminal case and then file the suit.

67. As already noticed above, on the complaint made by plaintiff himself, a case in Crime No. 116 of 1986 had been registered for the offence punishable under Section 436 of the Indian Penal Code, got detected by the C.I.D. into the entire case in detail, including the involvement, if any, of the partners of plaintiff and consequently the Director General and Inspector General of Police intimated the plaintiff that the case has to be treated as 'undetectable' and there was no involvement of any of the partners of plaintiff-firm.

68. The surveyor by name P.M. Mohana Rao, appointed by defendant No. 1, who was examined as D.W.1, had taken a letter under Ex.A-28, dated 21-12-1987, from plaintiff requesting to accept the quantification of damage at Rs. 96,48,295/-. Further, it was the evidence of P. W. 1 that though the damage was more, in a hurry to get something and to settle the matter with defendant No. 1, he accepted the request of the surveyor by name P.M. Mohana Rao.

69. In fact, from the said Ex.A-28, dated 21-12-1987, it is clear that one of the surveyors requested the plaintiff to accept the quantification made by him immediately in order to forward the same to defendant No. 1 and after acceptance by plaintiff, the same appears to have been sent to defendant No. 1 and then only its repudiation emerged through Ex.A-18. In the meanwhile, the investigation into the case in Crime No. 116 of 1986 was also in progress.

70. Therefore, the so-called delay in filing the suit cannot be attributed against the plaintiff because of the intervention of these events. There is absolutely any amount of genuineness in the conduct of plaintiff and accordingly we do not find any ingenuity in the conduct of plaintiff in filing the suit lately. Surveyors were appointed to assess the extent of damage and the cause of damage by defendant No. 1 as well as plaintiff on his own and the repudiation were all going simultaneously as could be seen from the said events. Therefore, it cannot be said that there was long delay in filing the suit. Even if there was any delay, it cannot be termed as 'the delay' since the suit was filed within the period of limitation and the reasons in such a way are not unreasonable.

71. For better appreciation, the letter, under Ex.A-18, dated 2-5-1988, addressed by defendant No. 1 repudiating the claim of plaintiff, is extracted, which runs thus:

NATIONAL INSURANCE COMPANY LIMITED (Subsidiary of General Insurance Corporation of India) Hyderabad Regional Office: 3rd Floor, Mogul's Court, Basheerbagh, Hyderabad-500 001.

 Our Ref: Hrd:Tech:Akm:ck:88                   Dt.2-5-1988.
 

M/s. Anjaneya Tobacco Company 

Growers & Exporters, 

Tangutur-523274. Regd.With A.D.
 

Dear Sirs,

Fire Loss dt.10-10-86 against Policy Nos. (i) 5813/3107738/86 (ii) 5813/3107833/86 (iii) 5880/3100924/06 (iv) 5880/3109116/86 & (v) 5880/3300045/86.

We regret to inform you that your claim of Rs. 96,48,295/- arising out of the fire dated 10-10-86 against the above policies could not be considered as the cause of loss is outside the purview of the perils covered under the policies issued to you.

Please acknowledge receipt of the letter.

Thanking you, Yours faithfully, (PRITAM SINGH) Regional Manager

72. Since it was repudiated by defendant No. 1 in the above language, the burden is heavily cast upon it in order to prove that the fire accident was wilful and thereby it is not liable to reimburse the loss sustained by plaintiff. Hence, it is necessary to examine the evidence adduced on behalf of defendant No. 1.

73. D.W.6 was examined in order to prove that two anonymous letters were received by the Regional Manager of defendant No. 1 prior to his inspection of Plaintiff-Firm. Those anonymous letters, which were addressed on the letterheads of plaintiff, would only state that involvement of plaintiff and its partners, but those anonymous letters were not accepted by the Court below since the originals of the same were not filed. When some Photostat copies of letters were tried to be marked, an objection was taken by plaintiff and that was sustained by the Court below. Except this, there is nothing in the evidence of D.W.6.

74. D.W.7 is the Inspector of police, who got the investigation conducted in Crime No. 116 of 1986 of Singarayakonda Police Station. He deposed in his chief-examination that he cannot say whether he has verified the anonymous letters during his investigation in Cr.No. 116 of 1986 and that C.I.D. police also have investigated into the case and if some time is granted he would enquire in the C.I.D. Office whether the file relating to Cr.No. 116 of 1986 is available there or not.

75. It is the further chief-examination of D.W.7 that he mentioned in his final report Ex.B-17, sent to the Judicial First Class Magistrate, Kandukur, that the Branch Manager of National Insurance Company, Ongole, produced two anonymous letters received by them. Exs.B-19 and B-20 are the Xerox copies of aforesaid anonymous letters, and they were marked subject to objection raised by the Counsel appearing for plaintiff in the Court below. In his further chief-examination (conducted on 21-8-1996), D.W.7 categorically deposed - "The Xerox copies of anonymous letters which are confronted to me today in the witness box were not submitted before me during my investigation".

76. As already noted above, Xerox copies of anonymous letters were marked as Exs.B-19 and B-20 for the limited purpose of identification and subject to the objection raised by the learned Counsel appearing for plaintiff. However, the objection was subsequently sustained by the Court below. Therefore, those two anonymous letters, Exs.B-19 and B-20, cannot be treated as part of the evidence nor can they be relied on. Therefore, the evidence of D.W.7 also is of no avail to the case of defendant No. 1.

77. On the other hand, P.W.1 deposed that he was the Managing Partner of plaintiff. Of course, there is some controversy as to whether P.W.1 was really the Managing Partner of plaintiff and has any authority to depose representing the plaintiff. This controversy need not be gone into much since the plaintiff is a firm and whether P.W. 1 or the other partners deposed on behalf of plaintiff does not really affect the case of plaintiff adversely.

78. P. W. 1 deposed that on the intervening night of 10-11-1986 there was a fire accident in the godown of plaintiff wherein the tobacco stocks worth about 1.26 crores of rupees were burnt away completely and there was damage caused to the structures also which would worth Rs. 10,00,000/-. Soon after the fire accident, the same was informed to the Police Station and Fire Station also. Information has also been furnished to the Divisional Office of defendant No. 1 for the claim of plaintiff for the loss sustained by him. Immediately on 11-10-1986, defendant No. 1 deputed its survey party for assessing the loss and damage and consequently the loss was estimated at Rs. 96,83,294-85 paise. The said survey party took the consent of plaintiff by way of a letter for the said amount on 21-12-1987. The said letter was marked as Ex.A-28.

79. P.W.1 deposed that Exs.A-1 to A-14 are the fire policies and that malicious damage is one of the perils clearly covered by Exs.A-1 to A-14 policies; that initially they were at the impression that the fire accident took place because of electric short-circuit or by arson by some mischievous elements. His evidence is that all the stocks were mortgaged to defendant No. 2 for the loans obtained by plaintiff and as on the date of fire accident, the stocks were under lock and key of defendant No. 2.

80. P. W. 1 deposed that one of the partners of plaintiff by name P. Venkata Subbaiah reported about the fire accident to Singarayakonda Police Station, which was registered as Crime No. 116 of 1986, and the F.I.R. was marked as Ex.A-15.

81. The evidence of P.W.1 on the other aspects, like the opinion of the Director General and Inspector General of Police in Ex.A-25 that neither the plaintiff nor its partners are responsible for the fire accident and the same has to be treated as 'undetectable', and also with regard to the report of the Circle Inspector of Police, Kandukur, to the effect that the cause of fire accident was 'undetectable' etc., is the same as that of the evidence spoken to by the witnesses examined on behalf of defendant No. 1

82. P.W.1 deposed that all the partners of plaintiff are rich persons with decent social status. He deposed that somebody came to the plaintiff-firm on behalf of defendant No. 1 and inquired about the anonymous letters and went away after satisfying themselves that those letters were baseless. It is the further evidence of P.W.1 that defendant No. 1 entertained insurance from plaintiff for the total stocks to a tune of about Rs. 7,50,00,000/-.

83. While deposing that Anjaneya Tobacco Company Private Limited is the sister concern of plaintiff, P.W.1 narrated the events after the fire accident took place.

84. According to P.W.1, by the time of his arrival, the shutters of the godown were closed and the flames were coming out from all the godowns except one godown, as there was no fire in the said godown and that there was no possibility for him to see from outside as to how many bales of tobacco were caught fire and how many bales were not caught fire inside the godown; the keys of the shutters of the godown were with the Manager of defendant No. 2 who came to the godown at about 10-30 a.m., or 11-00 a.m., on 11-10-1986, and opened the locks of the shutters.

85. P.W.2, Addanki Subbarayudu was the person who worked as night watchman of plaintiff-firm on the date of fire accident. He corroborated the evidence of P.W.1.

86. Further, insofar as the letter of repudiation under Ex.A-18 is concerned, it could only be seen that defendant No. 1 simply stated that the cause of loss is outside the purview of the perils covered under the policies issued to the plaintiff. No reasons were assigned. Hence, such repudiation cannot be treated as a valid repudiation inasmuch as the same is vague. The repudiation for the sake of mere repudiation cannot be called as repudiation.

87. It is to be further seen from the above mentioned letter of repudiation that as regards the quantification made by the two (2) surveyors there was no denial nor there was any report from the said two (2) surveyors, who were examined as D.Ws.1 and 4, reporting that the fire accident took place because of the intervention of plaintiff himself wilfully. Therefore, the fire accident is beyond the scope of the risk covered by Clause 13 of the policy.

88. It is further on record that in order to prove the bona fides and also to repel the contention of defendant No. 1 that the fire accident was wilful, plaintiff gave a report to the police immediately after the fire accident, and the certified copy of First Information Report (F.I.R.) is marked as Ex.A-15. The plaintiff gave the said report to the nearest police station within few hours after the fire accident. It is noteworthy that the police themselves gave information to the Fire Station at Singarayakonda and both the Fire Brigades arrived at the place where the fire accident occurred and tried to extinguish the flames in the godown of plaintiff.

89. The main conduct of defendant No. 1 is that the claim of plaintiff cannot be considered since the loss was out of the purview of the perils covered under the policies issued by it.

90. The tenor of the repudiation letter under Ex.A-18, which has already been extracted above, would only suggest lack of responsibility on the part of defendant No. 1 and nothing more. When such a huge claim was made by plaintiff, if at all defendant No. 1 intends to repudiate the same, it ought to have repudiated the same with reasons. Mere rejection of the claim of plaintiff, on the simple ground that the claim was out of the purview of the perils covered under the policies issued by it, is not adequate.

91. When defendant No. 1 intends to repudiate the claim made by plaintiff to a tune of about one crore rupees, such repudiation should be supported by reasons in order to enable the plaintiff to understand why its claim was rejected, and also to enable the plaintiff to explain to the insurer on relevant doubts expressed.

92. The most important thing is that defendant No. 1 examined D.Ws.3, 5 and 6 to substantiate the averment in the written statement that the f i re accident was out of the purview of the perils of the policies.

93. D.W.3 was the person who visited the place of fire accident within few hours, precisely, even before the fire was not extinguished.

94. D.W.3 did not speak anything about the role of plaintiff or of somebody on behalf of plaintiff or its partners behind the fire accident. In other words, in order to prove that the fire accident was wilful, D.W.3 was examined on behalf of defendant No. 1, but nothing was stated by him in that regard.

95. Therefore, when D.W.3, who was the key witness on behalf of defendant No. 1, did not say anything about the alleged fraud on the part of plaintiff, it cannot be held that plaintiff had wilfully caused the fire accident.

96. Further, a lot more had been alleged against the plaintiff in the written statement of defendant No. 1. But, nothing substantial could be elicited from the evidence of D.Ws.3, 5 and 6. D.W.3 did not even say anything about the involvement of plaintiff nor any or the partners of plaintiff. Even D.Ws.5 and 6 also did not say anything in this regard.

97. It is also to be noted that D.W.3, who is stated to be the first person present within a few hours at the scene of fire accident, was, in fact, the right person to say something about the alleged involvement or fraud on the part of plaintiff. Admittedly, he was the first man to inform the higher authorities of defendant No. 1 about the doubts, if any regarding the alleged fraud etc., on the part of plaintiff. But, no such report was ever made by D.W.3 to defendant No. 1.

98. On the contrary, conspicuously, defendant No. 1 had appointed two (2) surveyors i.e., D.Ws.1 and 4. As already noticed, D.Ws.1 and 4 have visited the place of the accident and assessed the loss as Rs. 96,48,295/- and requested the plaintiff to accept for the same and pursuant to the said request, plaintiff had accepted the assessment of loss made by the surveyors in a hurry to settle the matter.

99. Simultaneously, plaintiff was making all its best efforts that were expected to be made by it, including giving report to the police and informing the officials of defendant No. 1 etc. The above conduct of D.W.3, in simply keeping quiet without making any complaint to defendant No. 1 makes it obvious that the reason to repudiate the claim of plaintiff by defendant No. 1 cannot be appreciated for the simple reason that there was no basis, reason and elaboration. Such kind of perfunctory repudiation cannot be appreciated, at any rate.

100. Mr. V. Pritham Singh, who was examined as D.W.5, was the Regional Manager of defendant No. 1 at the relevant point of time and also the person who received information about the fire accident and deputed Wing Commander by name Mohan Rao to conduct preliminary survey to assess the loss. He deposed that the survey or opined in the report that the fire accident was not acceleratory but no reasons were assigned by him except saying that the fire accident was not acceleratory. Further more, D.W.5 stated in his cross-examination that "as per the company regulation and policy condition, if any person insured his property for fire and malicious damage and if that property was lost in a fire accident and if that party is not responsible for the fire accident the company is liable to pay the claim."

101. The important thing to be noted here is that D.W.5 is the person who addressed the letter of repudiation under Ex.A-18.

102. D.W.5 deposed that "...however there is no doubt that the origin of the fire is kerosene but not electrical short-circuit. Whether it is a short circuit or by pouring kerosene so long as the party is not responsible for the accident our company is liable for the claim." He further deposed that after the police reported the case as 'undetectable', no attempt was made to file any private complaint either against the plaintiff or its partners for the alleged fraud and the consequential fraudulent claim. This inaction on the part of defendant No. 1 is a semblance of failure on its part and would clearly indicate that it did not act prudently on vital aspects.

103. D.W.5 categorically deposed that "the very purpose of appointing surveyor, investigation or other agencies is to gather all the relevant information to enable them to take a decision either to pay the claim or to repudiate the same."

104. From the above evidence of D.W.5, it is abundantly clear that it is no matter whether the fire accident took place because of electric short-circuit or because of pouring kerosene. If the fire accident was caused by any person or persons mischievously or maliciously, the same is covered by the conditions of policy and the insurer is liable to pay the claim so long as there is no wilful involvement of plaintiff or any of the partners of plaintiff.

105. Therefore, it is essential for defendant No. 1 to establish that the fire accident was only because of the involvement of plaintiff in order to repudiate the claim of plaintiff. It is not sufficient to say that the repudiation can be made on the basis of some doubtful circumstances like divergent view expressed by two Experts i.e., one from the Laboratory of USA and the other from the Laboratory of Delhi and the other circumstances.

106. When defendant No. 1 is capable of investigating into the cause of fire accident and when it has men and effective mechanism to investigate into the same and as and when strong reasons are found the same ought to have been put on record and in turn the plaintiff ought to have been informed of those reasons before making any repudiation.

107. As already noticed, D.W.3 was at the place of fire accident within few hours after the occurrence of fire accident and reported the same to the higher official of defendant No. 1; that on such information, a surveyor had been appointed immediately and subsequently another investigating officer had also been appointed; that on behalf of plaintiff a report was given to the police and F.I.R., was registered by the police; that the Magistrate referred the matter to the police, investigation was conducted by the Circle Inspector of Police and a report was submitted by him under Ex.A-27 and basing on that report, the Director General and Inspector General of Police addressed a letter under Ex.A-25 informing the plaintiff that the fire accident has to be treated as 'undetectable'.

108. It is also important to notice that it was further stated in Ex.A-25 that the investigation reveals that there was no involvement of any of the partners of plaintiff nor the cause of accident could be traced.

109. This exercise of investigation has been done by legally recognized agency like the C.I.D. This investigation by the C.I.D. and the investigation by the local police are in addition to the investigation conducted by defendant No. 1 on its own.

110. Even assuming that there are divergent views expressed by two experts, from the Laboratories at the USA and the Delhi about the presence of kerosene on the samples, that by itself is not conclusive and cannot be a ground for making an allegation that the fire accident was wilful. In other words, merely because of the divergent view expressed by the said two experts, one from the Laboratory at the USA and the other Laboratory at Delhi, the cause of fire accident cannot automatically be attributed to plaintiff.

111. That apart, what all that could be achieved by defendant No. 1 through its investigating process was that the fire accident was not because of electrical short-circuit and was only because of pouring of kerosene and nothing more than that.

112. On the other hand, the investigation conducted by an independent agency i.e., the C.I.D., revealed that was no involvement of plaintiff or its partners in the fire accident. Therefore, when the reports of both the plaintiff and defendant No. 1 are juxtaposed, the only thing that would come out is that the fire accident was firstly because of fire but not short circuit and secondly there was no involvement of plaintiff or its partners nor the fire accident was wilfully caused by plaintiff.

113. Further, when those two things are read together with the evidence of D.Ws.5 and 3, it further goes to show that so long as there is no involvement of plaintiff for the mischievous fire accident, defendant No. 1 is liable to redeem the loss caused to plaintiff due to fire accident.

114. Mr. M.M. Narendranath, another surveyor appointed by the defendant No. 1, who was examined as D.W.2, expressed doubts with regard to the fire accident. He opined that the fire accident was not due to electric short-circuit and was deliberately done by plaintiff or its agencies. This opinion was based on the report submitted by him under Ex.B-11. He further deposed that the plaintiff approached him when he was at Bangalore seeking his help but the same had not been reported in Ex.B-11. Interestingly, he admits that he did not even inform defendant No. 1 about the alleged approach made by plaintiff seeking his help.

115. Therefore, it is not safe to conclude that the plaintiff had really approached D.W.2 and sought his help, particularly when a case was registered by police at the instance of plaintiff, investigation was ordered and conducted and a report was submitted and final opinion by the Director General and Inspector General of Police was also given stating that there was no involvement of plaintiff or any of its partners in the fire accident.

116. Though the report of D.W.2 in Ex.B-11 speaks about so many aspects, he simply marked Ex.B-11. But, there is no contra evidence. However, a perusal of Ex.B-11 would only reveal that, as per the reason assigned therein, D.W.2 tried to establish the involvement of plaintiff and its partners. D.W.2 relied on various probabilities.

117. In this context, we are of the view that on the basis of the probabilities expressed by D.W.2, this Court cannot arrive at a conclusion that all those probabilities are really probable and such an exercise on the part of this Court is far fetching. Further, unless and until the opinions expressed by D.W.2 are established in the Court or supported by the 'other surveyor, appointed by defendant No. 1, it is not safe to rely on the mere opinions of D.W.2. It is to be noted that D.W.2 is the surveyor of defendant No. 1.

118. It is to be further noted that D.Ws.1 and 4 are the independent surveyors. So, as between the report of the surveyor of defendant No. 1 (D.W.2), and the reports of the independent surveyors (D.Ws.1 and 4), in normal course, the opinion of the independent surveyors alone has to be given preference inasmuch as the possibility of such a surveyor (D.W.2) of defendant No. 1 being partial and overzealous cannot be ruled out. At least, the evidence of P.W.2 (sic. D.W.2) must be corroborated by independent surveyors i.e., D.Ws.1 and 4.

119. Except the specific opinion of D.W.2, in all other aspects - like the fire accident taking place not because of short-circuit but because of pouring kerosene and putting fire only -, the evidence of D.Ws. 1 and 4 would corroborate the evidence of D.W.2.

120. Now, the question would be - as to who poured the kerosene in order to generate the fire accident.

121. There is absolutely no evidence in this regard implicating the plaintiff and its partners.

122. At the cost of repetition, as already recorded above, the Circle Inspector of Police, who investigated into the matter after reference by the Magistrate in Crime No. 116 of 1986, reported that the accident occurred due to fire but there was no involvement of either the plaintiff or its partners and hence it has to be treated as 'undetectable'.

123. Again, it is to be remembered that, in his evidence, D.W.2, the Surveyor of defendant No. 1, also stated that if there was no involvement directly or indirectly by plaintiff or its partners, defendant No. 1 has to pay compensation to plaintiff.

124. In nutshell, the evidence of D.W.2 and the report filed by him in Ex.B-11 are totally based on probabilities and other circumstances, as pointed out earlier. Further, the main interesting thing is that in his report in Ex.B-11, D.W.2 did not state any reasons while implicating the plaintiff and its partners except saying that the plaintiff was in dues to defendant No. 2 and that since some amounts were not paid, the stocks in the godown of plaintiff were kept under lock and key by defendant No. 2.

125. These circumstances may, at best, point out the alleged default said to have been committed by the plaintiff in payment of dues to its creditors, but that does not mean that in all such cases of default, the debtors would set ablaze to its own properties in order to discharge the financial liabilities from out of the amounts that may be received from the Insurance Companies.

126. The contention of the learned Senior Counsel appearing for the plaintiff is that it is common knowledge that in tobacco trade there would be slump for couple of years and there would be good market for the old stocks also in the subsequent years. The plaintiff mostly rely on foreign markets such as UK, Egypt etc., and the demand depends upon the production in other countries during the particular years.

127. In fact, in Ex.B-4, which is the preliminary report filed by the independent surveyor, who was examined as D.W.1, appointed by defendant No. 1, it is recorded as under:

The shipping loan was originally given on the basis of an export order for Egypt. However, this order was over an year old and is yet to materialize due to certain international monetary fluctuations and uncertainties. Recently tobacco board along with the representatives of the traders from Guntur had visited Egypt and had certain useful deliberations. It is learned that this contract may materialize very soon. The buyers are insisting on one year post shipment credit. This is not in conformity with Reserve Bank of India norms. However, the tobacco board and the traders are helpful of quoting a special dispensation from the Reserve Bank of India and this contract at last may fructify.

128. From the above, it could be seen that there was a slump in the tobacco trade but it was only because of various conditions mentioned in the report submitted by D.W.1, that too, only for a short period. Therefore, it is hard to believe the version of defendant No. 1 that there was slump and that the plaintiff was heavily indebted to defendant No. 2 and, therefore, resorted to the said fraudulent activity of creating the fire accident wilfully. Hence, the contention of defendant No. 1 attributing fraud on account of the slump in tobacco business and heavy indebtedness of plaintiff resulted in the fraudulent fire accident is totally unfounded.

129. For the aforesaid reasons, we are of the considered view that defendant No. 1 failed to establish the alleged fraud on the part of plaintiff so as to disentitle the plaintiff to have the claim covered by the policies under Exs.A-1 to A-14.

130. Accordingly, point No. 1 is answered in favour of plaintiff and against defendant No1.

131. In Re point No. 2: In this regard, it is to be noted that one Sri P.M. Mohana Rao, Wing Commander, who was the official surveyor of defendant No. 1 and examined as D.W.1, has stated that the stocks of tobacco as on the date of fire accident were under the custody of defendant No. 2 and the godown which contains the entire stock was under the lock and key of defendant No. 2.

132. In order to prove the said fact, the Manager of defendant No. 2 was examined as D.W.3. He stated that he had physically verified the stocks of tobacco lying in the godown as on 4-9-1986 i.e., about three weeks before the fire accident. The stock statement also was produced, as per which there was a total stock of tobacco worth about Rs. 1,35,89,361/-. Immediately after receipt of information about the fire accident, defendant No. 1 had appointed a surveyor by name P.M. Mohan Rao, Wing Commander, who was examined as D.W.1, on whose advice the Regional Manager of defendant No. 1 appointed Yagi Associates, Guntur, to assess the loss and to submit a report in that regard.

133. Sri N. Velayudham, the surveyor appointed by defendant No. 1, was examined as D.W.4. He stated that the accounts of plaintiff were verified between August 1987 and October 1987 in the presence of the representatives of plaintiff and that they have finalized their report after verifying the accounts of plaintiff with reference to the report submitted by Yagi Associates. He went on saying that they found the stocks of plaintiff in the said godown completely burnt. He also stated that the assessment of loss sustained by plaintiff made by him and D.W.1 was correct.

134. Therefore, from the above, it is clear that the surveyors have assessed the loss sustained by plaintiff after verification of Stock Registers made available to them. Even though the quantum of tobacco stock was not precisely made, still, roughly, the estimate of loss is about Rs. 92, 83,000/-. The version of D.Ws.1 and 4, who are independent surveyors, appointed by defendant No. 1 itself, has been further strengthened by the evidence of P. W.3, the Manager of Defendant No. 2, who stated that the stock verification was made on 4-9-1986 i.e., few weeks before the fire accident and he further made an endorsement in Ex.A-79 that assessment was made after verification of stocks in the presence of partners of the plaintiff.

135. A perusal of Ex.A-79 makes it abundantly clear that on 4-9-1986 Yagi Associates (Chartered Accountants of Guntur) verified the tobacco stocks, to find out as to whether the loss assessed by independent surveyors i.e., D.Ws.1 and 4, appointed by defendant No. 1 itself is correct or not and, eventually, arrived at a conclusion that Exs.A-32 to A-34 i.e., E.B.III Registers and stock Registers under Exs.A-35 to A-38 were true and correct.

136. It is also not in dispute that the surveyors, appointed by defendant No. 1, also obtained a consent letter from the plaintiff on 21 -2-1987 for the amount assessed by them towards loss of tobacco stocks. Of course, the plaintiff had stated that though the claim was originally for a sum of Rs. 1,26,00,000/-, in view of the assessment made by the surveyors, engaged by defendant No. 1 and also its own surveyor i.e., D.W.2, it accepted the worth of the stock as Rs. 96,48,295/- and had given the consent letter.

137. Furthermore, regarding the discrepancy, if any, in the assessment of loss of tobacco stock, if defendant No. 1 was very serious, it ought to have cross-examined the witnesses examined on behalf of plaintiff. But, the things went in other way than what expected. As already noticed, D.Ws.1 and 4 are the independent surveyors, appointed by defendant No. 1 itself, and therefore, there cannot be any scope in the light of their deposition that the assessment of loss was not properly made by them.

138. Another interesting thing to be noted is that in the letter of repudiation i.e., Ex. A-18, dated 2-5-1988, defendant No. 1 simply denied the liability on the ground of alleged fault, but did not make any denial with regard to the quantum of loss sustained and as assessed by plaintiff in the accident. Further, verification of tobacco stocks was done not only by the independent surveyors, but also by the Chartered Accountants, who were appointed by defendant No. 1 itself, who thoroughly verified the accounts of plaintiff.

139. From the over all evidence on record, on this Point No. 2, it is clear that verification was properly done and defendant No. 1, when failed to establish the alleged fraud, in order to deny its liability towards plaintiff, cannot, now, challenge the quantification of the loss sustained in the course of the fire accident.

140. Hence, Point No. 2 also is answered in favour of plaintiff and against defendant No. 1.

141. The plaintiff has claimed interest at the rate of 18 percent per annum on the amount of loss assessed by D.Ws.1 and 4 i.e., Rs. 96,48,295/- from the date of fire accident i.e., 10-10-1986, till the date of realization.

142. In this connection, it is to be seen that when an application C.M.P.No. 3827 of 1997 had been filed by plaintiff seeking to vacate the order of interim stay, dated 20-1-1997, granted by this Court in C.M.P.No. 20155 of 1996, the said order of interim stay had been modified by this Court through order, dated 10-4-1997, in C.M.P.No. 3827 of 1997 and C.M.P.No. 20155 of 1996, which is as under:

Heard the learned Counsel on either side.

Sri G. Pedda Babu, the learned Counsel for the respondent, placing reliance on the order dated 11-8-1994 of a Division bench of this Court made in CM.P. Nos. 8436/94 and 9812/94 in A.S. No. 507/94, submits that the petitioner shall be permitted to deposit the entire decretal amount into the trial Court and the trial Court shall be directed to keep the said amount in a Fixed deposit till the appeal is disposed of.

True, such a direction was given in the above referred petitions. However, having regard to the facts and circumstances of this case, we see no justification to pass a similar order. On the other hand, we feel that interest of justice would be met if the petitioner is directed to pay interest at the rate of 15% per annum on the decretal amount from the date of decree as directed in the impugned decree in case he fails in this appeal.

Accordingly, the interim stay is made absolute on condition of the petitioner pays interest at the rate of 15% per annum on the decretal amount from the date of the decree instead of 6% per annum as directed in the impugned decree in case he fails in this appeal.

143. Admittedly, the Court below has awarded interest at the rate of 12 per cent per annum on the amount of loss assessed by D.Ws.1 and 4 i.e., Rs. 96,48,295/-, from the date of fire accident i.e., 10-10-1986, till the date of filing of suit i.e., 28-4-1989, and at the rate of 6 per cent per annum from the date of suit i.e., 28-4-1989 till the date of realization.

144. However, having regard to the facts and circumstances of the case and in view of the rates of interest being drastically reduced in all fields, and also keeping in view the rate of interest fixed by the apex Court in various cases, we deem it appropriate to fix the rate of interest as 9 per cent per annum althrough i.e., from the date of fire accident i.e., 10-10-1986, till the date of realization of the amount.

145. In Re Point No. 3: For the foregoing reasons, the Appeal Suit, filed by defendant No. 1 - National Insurance Company Limited, Calcutta, is dismissed and consequently the Cross-Objections, filed by plaintiff -M/s. Anjaneya Tobacco Company, Tangutur, Prakasam District, are allowed in part. The interest is awarded at 9 per cent per annum on Rs. 96,48,295/- from the date of fire accident i.e., 10-10-1986 till the date of realization. However, there shall be no order as to costs.

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Andhra HC (Pre-Telangana)