Delhi High Court
Playwell Impex (P) Ltd vs United India Insurance Co. Ltd on 9 October, 2015
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 9th October, 2015
+ W.P.(C) No. 9625/2015
PLAYWELL IMPEX (P) LTD. ..... Petitioner
Through: Mr. Sachin Datta, Sr. Adv. with Mr.
Dinesh Sharma, Ms. Ritika Jhurani &
Ms. Prity Sharma, Advs.
Versus
UNITED INDIA INSURANCE CO. LTD. ..... Respondent
Through: None.
CORAM:-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
RAJIV SAHAI ENDLAW, J
CM No.22818/2015 (for exemption)
1. Allowed, subject to just exceptions.
2. The application is disposed of.
W.P.(C) No. 9625/2015
3. The petition impugns the communication dated 17th September, 2015
of the respondent Insurance Company intimating the petitioner that its
grievance complaint for repudiation of its claim for loss due to fire had been
examined and the entire matter had been reviewed by the Grievance Review
Committee of the respondent Insurance Company and the decision of
repudiation of the claim was upheld. Axiomatically, the petitioner seeks
W.P.(C) No.9625/2015 Page 1 of 19
mandamus to the respondent Insurance Company to release the insurance
claim assessed by the surveyor.
4. The petitioner made a claim for loss of its goods by fire under a policy
issued by the respondent Insurance Company. The respondent Insurance
Company vide its communication dated 17th October, 2014 to the petitioner
as under:
"This is in reference to your aforesaid claim in respect of reported fire loss at
your basement godown situated at 160, Chitra Vihar, Vikas Marg, New Delhi-
92. As per the policy records the situation in question stands covered for
Ground Floor & First Floor at 160, Chitra Vihar, Vikas Marg since the inception
of insurance from our office i.e. 25.8.2010 and further renewed timely without
any change in address and situations. The reported fire loss had occurred in the
basement of the situation address on 9.4.2013. When the surveyor visited the
effected premises it was noticed that the loss has occurred in the basement area
which as per the policy was not mentioned in the policy schedule and that too it
was never pointed out by you, the difference in the situations address covered.
As per your request / clarifications vide letter no.nil dated 24.6.2014 the case
was put up to the competent authority for allowing us to consider your case, the
competent authority has not considered the case and stated that the claim is not
tenable as the General Insurance Contract is an annual contract and any
ignorance of rules on the part of insured cannot be interpreted, otherwise the
wordings of the policy and in this particular case there is gross ignorance on the
part of Insured and since the policy was issued in 2010 with the situations
mentioned and you never pointed difference of situation mentioned in the policy
schedule, as such on these grounds your claim is repudiated by the competent
authority and the claim is not maintainable under the contract of insurance,
which please note".
W.P.(C) No.9625/2015 Page 2 of 19
repudiated the said claim of the petitioner.
5. The petitioner as aforesaid made a complaint to the Grievance Review
Committee of the respondent Insurance Company and which has vide
impugned communication dated 17th September, 2015 stated as under:
"Re: Grievance complaint for repudiation of Fire Claim
no.040801/11/13/13/900001 under policy no.040801/11/12/12/0000157,
Insured - M/s Playwell Impex Pvt. Ltd.
Date of loss : 09.04.2013
We have received the above complaint from you complaining against the
decision of the Branch Office Aakashdeep New Delhi for denial of your claim
on the ground that the location where the loss took place was not covered under
the policy. We have called on the entire underwriting record of the policies and
the matter was reviewed by the Grievance Review Committee and observed that
the post loss endorsement to correct the address of the above location cannot be
considered at this moment. We upheld the decision taken by the Branch
Office".
6. The repudiation by the respondent Insurance Company of the claim of
the petitioner under the policy is inter alia on the ground that though the
insurance policy obtained by the petitioner was with respect to the goods
stored on the ground and first floors of property No.160, Chitra Vihar, Vikas
Marg, Delhi, the goods with respect to loss of which the claim was made
were stored in the basement of the said property.
W.P.(C) No.9625/2015 Page 3 of 19
7. The senior counsel for the petitioner contends that the reference in the
insurance policy to the first floor of the property is a typographical error and
„mistake‟ on the part of the respondent Insurance Company. It is argued that
the petitioner had sought insurance policy with respect to the goods stored in
the basement and the ground floor and not in the ground floor and the first
floor. It is contended that the respondent Insurance Company on account of
its own mistake which was discovered only when claim was made, in the
policy issued mentioned the place of storage of goods as ground and first
floor. It is further contended that the respondent Insurance Company, for its
own mistake is not entitled to repudiate the insurance claim.
8. In support thereof attention is drawn to the letter dated 20th August,
2010 claimed to have been written by the petitioner to the respondent
Insurance Company seeking the said insurance as well as the copy of the
proposal form for insurance stated to have been submitted by the petitioner
prior to issuance of the insurance policy. It is shown from the copy of the
letter dated 20th August, 2010 that the petitioner had claimed the insurance
with respect to the ground floor and the basement. Reliance in this regard is
also placed on another insurance policy against burglary obtained by the
petitioner on the same day and on the basis of same forwarding letter and
W.P.(C) No.9625/2015 Page 4 of 19
proposal form and which is with respect to the ground floor and the
basement.
9. The claim of the petitioner in the writ petition is based on the contract
of insurance between the petitioner and the respondent Insurance Company
and is essentially a money claim. Attention of the senior counsel for the
petitioner is invited to the dicta of the Supreme Court in Joshi Technologies
International Inc. Vs. Union of India (2015) 7 SCC 728 where the
Supreme Court, after review of host of earlier judgments on the subject,
inter alia held as under:
"68. The Court thereafter summarized the legal position in the following
manner: (ABL International Ltd. Vs. Export Credit Guarantee
Corporation of India Ltd. (2004) 3 SCC 553 paras 27-28)
"27. From the above discussion of ours, following legal
principles emerge as to the maintainability of a writ
petition:
(a) In an appropriate case, a writ petition as against a State
or an instrumentality of a State arising out of a
contractual obligation is maintainable.
(b) Merely because some disputed questions of facts arise
for consideration, same cannot be a ground to refuse to
entertain a writ petition in all cases as a matter of rule.
W.P.(C) No.9625/2015 Page 5 of 19
(c) A writ petition involving a consequential relief of
monetary claim is also maintainable.
28. However, while entertaining an objection as to the
maintainability of a writ petition under Article 226 of the
Constitution of India, the court should bear in mind the fact
that the power to issue prerogative writs under Article 226
of the Constitution is plenary in nature and is not limited by
any other provisions of the Constitution. The High Court
having regard to the facts of the case, has a discretion to
entertain or not to entertain a writ petition. The Court has
imposed upon itself certain restrictions in the exercise of
this power [See: Whirlpool Corporation Vs. Registrar of
Trade Marks, [1998 (8) SCC 1]. And this plenary right of
the High Court to issue a prerogative writ will not normally
be exercised by the Court to the exclusion of other available
remedies unless such action of the State or its
instrumentality is arbitrary and unreasonable so as to violate
the constitutional mandate of Article 14 or for other valid
and legitimate reasons, for which the court thinks it
necessary to exercise the said jurisdiction."
69. The position thus summarized in the aforesaid principles has to be
understood in the context of discussion that preceded which we
have pointed out above. As per this, no doubt, there is no absolute
bar to the maintainability of the writ petition even in contractual
matters or where there are disputed questions of fact or even when
monetary claim is raised. At the same time, discretion lies with the
High Court which under certain circumstances, can refuse to
W.P.(C) No.9625/2015 Page 6 of 19
exercise. It also follows that under the following circumstances,
"normally", the Court would not exercise such a discretion:
69.1. The Court may not examine the issue unless the action has some
public law character attached to it.
69.2. Whenever a particular mode of settlement of dispute is provided in
the contract, the High Court would refuse to exercise its discretion
under Article 226 of the Constitution and relegate the party to the
said made of settlement, particularly when settlement of disputes is
to be resorted to through the means of arbitration.
69.3. If there are very serious disputed questions of fact which are of
complex nature and require oral evidence for their determination.
69.4. Money claims per se particularly arising out of contractual
obligations are normally not to be entertained except in exceptional
circumstances.
70. Further, the legal position which emerges from various judgments
of this Court dealing with different situations/aspects relating to
contracts entered into by the State/public authority with private
parties, can be summarized as under:
70.1. At the stage of entering into a contract, the State acts purely in its
executive capacity and is bound by the obligations of fairness.
70.2. State in its executive capacity, even in the contractual field, is
under obligation to act fairly and cannot practice some
discriminations.
70.3. Even in cases where question is of choice or consideration of
competing claims before entering into the field of contract, facts
have to be investigated and found before the question of a violation
W.P.(C) No.9625/2015 Page 7 of 19
of Article 14 could arise. If those facts are disputed and require
assessment of evidence the correctness of which can only be tested
satisfactorily by taking detailed evidence, involving examination
and cross- examination of witnesses, the case could not be
conveniently or satisfactorily decided in proceedings under Article
226 of the Constitution. In such cases court can direct the aggrieved
party to resort to alternate remedy of civil suit, etc.
70.4. Writ jurisdiction of High Court under Article 226 was not intended
to facilitate avoidance of obligation voluntarily incurred.
70.5. Writ petition was not maintainable to avoid contractual obligation.
Occurrence of commercial difficulty, inconvenience or hardship in
performance of the conditions agreed to in the contract can provide
no justification in not complying with the terms of contract which
the parties had accepted with open eyes. It cannot ever be that a
licensee can work out the licence if he finds it profitable to do so:
and he can challenge the conditions under which he agreed to take
the licence, if he finds it commercially inexpedient to conduct his
business.
70.6. Ordinarily, where a breach of contract is complained of, the party
complaining of such breach may sue for specific performance of
the contract, if contract is capable of being specifically performed.
Otherwise, the party may sue for damages.
70.7. Writ can be issued where there is executive action unsupported by
law or even in respect of a corporation there is denial of equality
before law or equal protection of law or if can be shown that action
of the public authorities was without giving any hearing and
violation of principles of natural justice after holding that action
W.P.(C) No.9625/2015 Page 8 of 19
could not have been taken without observing principles of natural
justice.
70.8. If the contract between private party and the State/instrumentality
and/or agency of State is under the realm of a private law and there
is no element of public law, the normal course for the aggrieved
party, is to invoke the remedies provided under ordinary civil law
rather than approaching the High Court under Article 226 of the
Constitutional of India and invoking its extraordinary jurisdiction.
70.9. The distinction between public law and private law element in the
contract with State is getting blurred. However, it has not been
totally obliterated and where the matter falls purely in private field
of contract. This Court has maintained the position that writ
petition is not maintainable. The dichotomy between public law and
private law, rights and remedies would depend on the factual
matrix of each case and the distinction between public law
remedies and private law, field cannot be demarcated with
precision. In fact, each case has to be examined, on its facts
whether the contractual relations between the parties bear insignia
of public element. Once on the facts of a particular case it is found
that nature of the activity or controversy involves public law
element, then the matter can be examined by the High Court in writ
petitions under Article 226 of the Constitution of India to see
whether action of the State and/or instrumentality or agency of the
State is fair, just and equitable or that relevant factors are taken into
consideration and irrelevant factors have not gone into the decision
making process or that the decision is not arbitrary.
70.10. Mere reasonable or legitimate expectation of a citizen, in such a
situation, may not by itself be a distinct enforceable right, but
W.P.(C) No.9625/2015 Page 9 of 19
failure to consider and give due weight to it may render the
decision arbitrary, and this is how the requirements of due
consideration of a legitimate expectation forms part of the principle
of non-arbitrariness.
70.11. The scope of judicial review in respect of disputes falling within the
domain of contractual obligations may be more limited and in
doubtful cases the parties may be relegated to adjudication of their
rights by resort to remedies provided for adjudication of purely
contractual disputes."
(emphasis added)
10. I am informed that the insurance policy also contains an arbitration
clause though the senior counsel for the petitioner states that it is a limited
one. The Supreme Court, in dicta aforesaid has clearly held that in such
cases, writ petitions are not to be entertained. Not only so, the issue arising
for adjudication has no public law character attached to it. In fact the senior
counsel for the petitioner has not even attempted to argue so. Further, the
claim in the writ petition is but a monetary claim arising from contractual
obligations on the allegation of the respondent Insurance Company being in
breach thereof. The contract between the parties is strictly in the realm of
private law.
11. The senior counsel for the petitioner has of course pegged his case on
ABL International Ltd. supra. However, the Supreme Court in Joshi
W.P.(C) No.9625/2015 Page 10 of 19
Technologies International Inc. supra has further laid down as to how the
position summarized in ABL International Ltd. supra is to be understood in
the context of the earlier judgments of the Supreme Court.
12. The senior counsel for the petitioner has contended that the alternative
remedy of a suit would be a „longer‟ remedy and the petitioner should not be
relegated thereto.
13. In my opinion, the aforesaid is also based on a misconception about
the civil suits, at least as far as the city of Delhi is concerned. People, on a
wrong premise that the disposal of suits takes longer, whenever have a claim
or grievance against an entity or body which qualifies as a „State‟, instead of
resorting to the civil suit or to arbitration, have started filing writ petitions
and which has resulted in multiplying manifold the number of writ petitions
and consequently the time taken in disposal thereof. Writ petitions,
remaining pending in the High Courts for four to five years, are not
uncommon. On the contrary suits, diligently followed and pursued by the
counsels, are found to be disposed of within a year or in slightly more than a
year. Owing to the practice which has developed, of preferring the writ
petition instead of civil / arbitration remedies, the writ Courts are left with
no time to adjudicate the matters required to be adjudicated in such
W.P.(C) No.9625/2015 Page 11 of 19
jurisdiction expeditiously or to bestow on them the attention which they
deserve.
14. There is yet another aspect of the matter. The respondent Insurance
Company has repudiated the insurance claim of the petitioner owing to the
loss suffered being not at the place insured. According to the petitioner, the
wrong place got mentioned in the insurance policy owing to a mistake of the
respondent Insurance Company. The question, whether a contract suffers
from a mistake or not and whether the contract is to be ordered to be
corrected, is in my opinion not open for adjudication in a writ jurisdiction.
A plea of mistake is a plea of fact which can be adjudicated only in a suit or
in an arbitration, if applicable. Without the examination and cross
examination of the representatives of the petitioner and the respondent
Insurance Company, no definite finding in that regard can be given. Else,
under Section 20 of the Indian Contract Act, 1872, a contract which suffers
from a mistake of matter of fact, which is essential to the contract /
agreement, is void. At this stage, we do not know whether the respondent
Insurance Company was willing to give a policy for insurance against fire
with respect to a basement or not. We do not also know what were the
parameters insisted upon by the respondent Insurance Company for insuring
W.P.(C) No.9625/2015 Page 12 of 19
the goods against fire. On enquiry, the senior counsel for the petitioner, on
instruction, states that the first floor of the property is also with the
petitioner.
15. What the petitioner is in effect seeking is amendment / rectification of
the contract of insurance entered into with the respondent Insurance
Company. The petitioner, though admittedly in receipt of insurance policy,
soon after it was issued by respondent Insurance Company and deemed to be
in know of contents thereof, before the incident of fire, did not object to
contents thereof. A question would also arise whether the Court can order a
contract entered into between the parties to be rectified / amended. The said
aspect has also been dealt in Joshi Technologies International Inc. supra as
under:-
"54. As noted above, the contention of the Respondent is that PSCs
are in the nature of a contract agreed to between the two independent
contracting parties. It is also mentioned that before the signing of the
PSCs, the approval of Cabinet is obtained which reflects that the PSC as
submitted to the Cabinet has the approval of one of the contracting
parties, namely, Government of India in this case. When it is signed by
the other party it means that it has the approval of both the parties.
Therefore, a contracting party cannot claim to be oblivious of the
provisions of the law or the contents of the contract at the time of signing
and, therefore, later on cannot seek retrospective amendment as a matter
W.P.(C) No.9625/2015 Page 13 of 19
of right when no such right is conferred under the contract. Even the
doctrine of fairness and reasonableness applies only in the exercise of
statutory or administrative actions of the State and not in the exercise of
contractual obligation and issues arising out of contractual matters are to
be decided on the basis of law of contract and not on the basis of the
administrative law. No doubt, under certain situations, even in respect of
contract with the State relief can be granted Under Article 226. We
would, thus, be dealing with this aspect in some detail.
55. Law in this aspect has developed through catena of judgments of
this Court and from the reading of these judgments it would follow that
in pure contractual matters extraordinary remedy of writ Under Article
226 or Article 32 of the Constitution cannot be invoked. However, in a
limited sphere such remedies are available only when the non-
Government contracting party is able to demonstrate that its a public law
remedy which such party seeks to invoke, in contradistinction to the
private law remedy simpliciter under the contract. Some of the case law
to bring home this cardinal principle is taken note of hereinafter.
72. As pointed out earlier as well, the contract in question was signed
after the approval of the Cabinet was obtained. In the said contract, there
was no clause pertaining to Section 42 of the Act. The Appellant is
presumed to have knowledge of the legal provision, namely, in the
absence of such a clause, special allowances under Section 42 would be
impermissible. Still it signed the contract without such a clause, with
open eyes. No doubt, the Appellant claimed these deductions in its
income tax returns and it was even allowed these deductions by the
Income Tax Authorities. Further, no doubt, on this premise, it shared the
profits with the Government as well. However, this conduct of the
appellant or even the respondents, was outside the scope of the contract
W.P.(C) No.9625/2015 Page 14 of 19
and that by itself may not give any right to the appellant to claim a relief
in the nature of mandamus to direct the Government to incorporate such
a clause in the contract, in the face of the specific provisions in the
contract to the contrary as noted above, particularly, Article 32 thereof. It
was purely a contractual matter with no element of public law involved
thereunder."
(emphasis added)
16. On request of the senior counsel for the petitioner, the matter was
passed over to enable him to consider.
17. The senior counsel for the petitioner after passover has drawn attention
to the dicta of the Supreme Court in State of Kerala Vs. M.K. Jose 2015
SCC OnLine SC 726 where, in the context of maintainability of writ
petitions in contractual matters, reference was made to an old judgment in
Gunwant Kaur Vs. Municipal Committe, Bhatinda (1969) 3 SCC 769 inter
alia holding that the question, whether the matter entails disputed questions
of fact or not can only be examined after calling for a counter affidavit and
thereafter examining the same to find out how much of the claim is admitted
and how much disputed. On the basis thereof it is contended that at least
notice of this petition be issued and if from counter affidavit it is found that
the petitioner‟s claim is disputed, the petition be then dismissed.
W.P.(C) No.9625/2015 Page 15 of 19
18. However in the present case, the battle line between the parties have
already been drawn. The petitioner, after repudiation of its claim as far back
as on 17th October, 2014, availed of the opportunity of making the complaint
before the Grievance Review Committee of the respondent Insurance
Company, making the same contentions as are being made before this Court
and the respondent Insurance Company after reviewing the matter has
upheld the repudiation. In this view of the matter, merely issuing notice of
the petition and which may result in the petition remaining pending for a
long period of time owing to the heavy board of this Court, does not serve
the purpose. In fact in a number of cases, this Court is compelled to, after the
period of limitation for approaching the Civil Court has expired owing to the
petition remaining pending for several years in the High Court, to make the
respondent agree not to take the defence of limitation in the event of the civil
Court being approached and / or to direct that the civil claim will not be
dismissed for the reason of limitation. I am therefore of the opinion that
when it can be known from the happenings preceding the filing of the
petition that the respondent Insurance Company is disputing the claim and
raising factual disputes, the formality of issuing a notice of the petition, as
the senior counsel for the petitioner seeks, need not be adhered to. I may in
W.P.(C) No.9625/2015 Page 16 of 19
this regard notice that there is a sea change in the dockets of the Court from
the year 1969 when it was held that the decision, whether the claim is
disputed, be taken after calling for counter affidavit. What may have been a
good practice to follow nearly half a century ago, in todays time, is not
found practicable. I may also mention that the Supreme Court, in M.K. Jose
supra also, held the writ petition to be not maintainable.
19. Mention may also be made of order dated 18th March, 2015 of the
Supreme Court in Civil Appeal No.3053/2015 arising out of SLP (C)
no.15689/2011 titled National Highways Authority of India Vs. MEIL-
EDB LLC (JV) and wherein the view taken by the Division Bench of this
Court in judgment dated 10th March, 2011 in W.P.(C) No.8418/2010 titled
M/s. Madhucon Projects Ltd Vs. National Highways Authority of
India was for consideration. The Division Bench of this Court, in writ
jurisdiction, had interfered with the action of the National Highways
Authority of India (NHAI) of forfeiture of Bid Security reasoning that such
forfeiture by way of damages, by invocation of Bank Guarantee, could not
be effected without the NHAI proving the damages. The Supreme Court
held:-
W.P.(C) No.9625/2015 Page 17 of 19
"We are confronted with a situation when there is
a contract between the parties, duly signed by the
Respondent which restricts forfeiture of 5% of the value
of the Bid Security ostensibly not by way of a penalty. Of
course, as is to be expected, the Respondent disagrees
and on the contrary submits that the deduction / forfeiture
is in terrorem and is punitive in nature. A Writ Court may
at least as a temporary or preliminary view decide
whether the damages imposed by an Authority amenable
to writ jurisdiction such as NHAI indubitably are punitive
or not, but it should abjure from going into the minute
calculation. That controversy should be left to the Civil
Court to decide, i.e. whether the deduction / forfeiture, in
the present instance of 5% of the value of the Bid Security
is punitive or otherwise. We think that the course that
commends itself to us is to relegate the parties to the Civil
Courts to determine whether any damages had been
suffered by the National Highways Authority of India and
if so whether the deduction of 5% was a fair pre-estimate
or was punitive in nature. Since the parties have been
bona fide prosecuting writ proceedings in the event of the
plaintiff seeks enlargement / extension of time for filing of
a Suit, the Courts in seisin will keep all the circumstances
in view before passing an order."
20. From the aforesaid also it follows that a final decision with respect to
the contractual rights of the parties is not permissible in writ jurisdiction.
21. I, therefore, do not find any merit in the petition which is dismissed as
not maintainable with liberty of course to the petitioner to avail of the
appropriate remedies under the general civil laws.
W.P.(C) No.9625/2015 Page 18 of 19
22. It is however clarified that in the event of the petitioner adverting to
the civil remedies, none of the observations contained herein which have
been made only in the context of maintainability, would influence the
decision of the said proceedings.
No costs.
RAJIV SAHAI ENDLAW, J.
OCTOBER 09, 2015 „gsr‟ ..
(corrected & released on 17th October, 2015) W.P.(C) No.9625/2015 Page 19 of 19