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Karnataka High Court

United India Insurance Company Limited vs Jayavant Products Limited on 6 June, 2025

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                                   RFA No.100049 of 2020



     IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH
           DATED THIS THE 6TH DAY OF JUNE, 2025
                         PRESENT
     THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
                           AND
           THE HON'BLE MR. JUSTICE G BASAVARAJA
       REGULAR FIRST APPEAL NO. 100049 OF 2020
BETWEEN:

1.    UNITED INDIA INSURANCE COMPANY LIMITED,
      AN INSURANCE COMPANY DULY
      CONSTITUTED AND HAVING ITS
      HEAD OFFICE AT 24, WHITES ROAD,
      CHENNAI-600014
      REPRESENTED BY ITS CHAIRMAN.

2.   UNITED INDIA INSURANCE COMPANY LIMITED,
     DIVISIONAL OFFICE, 1ST FLOOR,
     KESHWAPUR, HUBBALLI-580023.
     ITS REPRESENTED BY
     ITS AUTHORIZED SIGNATORY.
                                         ...APPELLANTS
(BY SRI. S.K. KAYAKAMATH, ADVOCATE)
AND:

JAYAVANT PRODUCTS LIMITED,
A COMPANY DULY CONSTITUTED
AND FUNCTIONING UNDER THE
PROVISIONS OF INDIAN COMPANIES ACT,
HAVING ITS OFFICE AT
AZAD ROAD, NEAR CBTI,
BHANDIWAD BASE, HUBBALLI-580020
AND REPRESENTED BY ITS
EXECUTIVE DIRECTOR,
SHRI. NEMICHAND J MEHTA.
                                           ...RESPONDENT
(SOLE RESPONDENT SERVICE HELD SUFFICIENT)
[CAUSETITLE AMENDED VIDE COURT ORDER DATED: 09.01.2024]
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                                                    RFA No.100049 of 2020



     THIS RFA IS FILED UNDER SECTION 96 CPC., PRAYING
TO SET ASIDE THE JUDGMENT AND DECREE DATED
31.08.2019 PASSED IN O.S.NO.243/1998 ON THE FILE OF THE
PRINCIPAL SENIOR CIVIL JUDGE, HUBBALLI,          PARTLY
DECREEING THE SUIT FILED FOR RECOVERY OF MONEY.

     THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT     ON    02.04.2025,  COMING    ON    FOR
PRONOUNCEMENT OF ORDERS THIS DAY, THE COURT
DELIVERED THE FOLLOWING:

CORAM:          HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
                AND
                HON'BLE MR. JUSTICE G BASAVARAJA

                                CAV JUDGMENT

(PER: HON'BLE MR. JUSTICE G BASAVARAJA) The appellant in this appeal is assailing the judgment and decree dated 31st August, 2019 passed in Original Suit No.243 of 1998 by the Principal Senior Civil Judge, Hubballi (for short hereinafter referred to as the "trial Court").

2. For the sake of convenience, the parties in this appeal are referred to with their rank and status before the trial Court.

3. Facts in nutshell leading to this appeal are, Plaintiff filed suit against defendants seeking recovery of Rs.3,53,70,000/- with interest at the rate of 21% per annum on insurance amount of Rs.227.04 lakh. It is stated in the plaint that the plaintiff is a Public Limited Company duly registered under the Companies Act, 1956. Defendant No.1 is -3- RFA No.100049 of 2020 an Insurance Company carrying its business in General Insurance having its Head Office at Chennai and Divisional Office at Hubballi. Plaintiff is a Small-scale Industry having its manufacturing unit at Sherewad village, Hubballi Taluk and for the past several years carrying on business in manufacturing Hill-Grass Brooms, Plastic Brooms, Toilet brushes, etc. in the name and style as "Monkey Brand Brooms", "555 Brand Brooms", "Scented Brooms". The products of the plaintiff have acquired name and fame and are available in every nook and corner of the country and every household is acquainted with the plaintiff's brand of brooms. The plaintiff has 100 employees directly working under it and nearly 500 employees are working through labour contractors and the annual turnover of the plaintiff-company is about Rs.8.00 crore and the employees, dealers and distributors are depending upon the production and marketing of the plaintiff-company. It is contended that the plaintiff-Company has taken three Go-downs-A, B & C on lease as Jaratarghar godowns situate at Gabbur, Hubballi and also has another godown at the factory premises at Sherewad. The plaintiff-company is procuring hill grass from North-eastern States like West Bengal and Assam and as the hill grass is available only in the months of January and February, the -4- RFA No.100049 of 2020 plaintiff-company is constrained to purchase the requirement of the company for the entire year during those months and stock them in their godowns at Gabbur, Hubballi. It is further contended that the plaintiff-company has sophisticated and modern machinery in its factory for manufacturing brooms and other products and in that regard all the machinery, equipments, raw-material, finished products, including packing material, were insured with the defendant No.1 under its Hubballi Branch for a sum of Rs.4,24,00,000/- under Policy No.0711002/0/11/13/01011/97-98 dated 21st July, 1997 out of which, Gabbur godowns were insured for a sum of Rs.2,25,00,000/- by paying premium of Rs.3,44,250/- and the defendant No.1 issued policy under cover note in conclusive proof of contract of insurance which is based on the principles of Uberrima-fides. It is also contended that the details of raw- materials, stocks and valuation of each godown and factory premises and its machinery were given in the proposal form and the same had been accepted by the defendant No.1. It is contended that in the intermediate night of 22nd and 23rd August, 1997, a fire accident took place in Jaratarghar A, B & C Godowns resulting in entire stock worth Rs.2,27,04,000/- burning down to ashes. These godowns were insured for fire, -5- RFA No.100049 of 2020 malicious damages, etc. for an amount of Rs,2,25,00,000/-. The plaintiff-company informed the defendant No.1 about the fire accident on the same day i.e. 23rd August, 2007 and the officers also visited the site on the same day. The entire stock was charred to ashes causing loss of Rs.2,27,04,000/- and FIR was lodged in Bendigeri Police Station, Hubli. The Plaintiff- Company has also made claim seeking settlement of insurance amount, but defendant No.1 went on making queries to which the Plaintiff-company answered all the queries. Despite, defendant No.2 rejected the claim of the plaintiff-company on an untenable ground of fraud. Thus, claiming damages towards loss of production, so also, compensation towards harassment, the plaintiff-company filed suit seeking compensation from the defendants in an extent of Rs.2,27,04,000/- with interest at 21% per annum amounting to Rs.3,53,70,000/-.

4. After service of summons, defendants appeared through their counsel. Defendant No.2 filed written statement and defendant No.1 filed memo adopting the written statement filed by defendant No.2. The gist of the written statement of defendant No.2 is that the suit of the plaintiff is false, frivolous and vexatious and not tenable either in the eye of law or on facts. It is contended that documents are concocted, created -6- RFA No.100049 of 2020 and prayers made are false prayers. The defendants are justified in repudiating the claim of the plaintiff by invoking Clause 8 of the Policy. It is contended that the plaintiff has forfeited its claim whatsoever upon the Policy and the Policy was issued in favour of State Bank of Mysore, Main Branch, Hubballi as the materials were in the custody of State Bank of Mysore as a key loan and therefore the said Banker is the necessary party. It is further stated that the practice adopted by the plaintiff not to utilize the stocks pledged for consumption and to procure the fresh stock from the market indicates that no real pledge of stock has taken place. The plaintiff-company is a public limited company and the books of record were not maintained in accordance with standard practices. The books were certified by the Auditors on the basis of declaration and verification certificate issued by the management with regard to stocks at the closing of accounts. It is further stated that on the basis of declaration made by the plaintiff since there is key loan obtained from State Bank of Mysore, Main Branch, Hubballi, technically, the Bank would be recipient of the benefit of policy. Accordingly, it was contended that the suit is not maintainable and prayed for dismissal of suit. -7- RFA No.100049 of 2020

5. Based on the pleadings, The trial Court has framed the following issues:

1) Whether goods worth of Rs.227.04 Lakh was stocked in the Jaratarghar Godown ABC, at the time of fire accident?

2) Whether defendant illegally rejected plaintiff's claim?

3) Whether plaintiff suffered loss of profits of Rs.50,00,000-00 on account of rejection of their claim?

4) Whether plaintiff is entitled for damages of Rs.25,000,00-00 for tension of mental agony?

      5)    Whether      they       have      incurred        expenses       of
            Rs.8,000/- to get settle their claim?

      6)    Whether plaintiff is entitled for suit claim from
            defendant?

      7)    What decree or order?


      Additional Issue:

Whether defendants prove that State Bank of Mysore is a necessary party?

6. To prove the case of the plaintiff, one Nemichand s/o Jayavantraj Mehta examined himself as PW1 and also examined one more witness as PW2 and got marked seven documents as Exhibits P1 to P7. On closure of plaintiff side evidence, one -8- RFA No.100049 of 2020 Bailur Padmanabha Bhat has been examined as DW1 and Sriyuths Shambhu, Upendra, Srivatsan and Srinivas Ramanujapuram Anandam Pillai are examined as DWs2 to 5 respectively and got marked 49 documents as per Exhibits D1 to D49 and also marked six material objects as per MOs1 to 6. Having heard on both sides, the trial Court has answered the issues as under:

     Issue No.1          : partly in the affirmative;
     Issue No.2          : in the affirmative:
     Issue No.3          : partly in the affirmative;
     Issue No.4          : partly in the affirmative;
     Issue No.5          : does not survive consideration;
     Issue No.6          : partly in the affirmative
     Additional issue    : in the negative

7. In view of the above findings, trial Court has partly decreed the suit of the plaintiff with costs holding that defendants are liable to pay Rs.1,56,00,000/- (Rupees one crore fifty six lakh) to the plaintiff with interest at the rate of 8% per annum from the date of Suit till its realisation. Being aggrieved by this Judgment and decree passed by the trial Court, defendant-Insurance Company has preferred this appeal.

RFA No.100049 of 2020

8. Sri S.K. Kayakmath, learned Counsel appearing for the appellants, submits that the impugned Judgment and decree passed by the trial Court is contrary to fact, law and evidence on record and the same is liable to be set aside. He would submit that the judgment is without considering the terms and conditions of the Policy, more, particularly, Clause 8 of the policy conditions which has resulted into miscarriage of justice. He would submit that the terms and conditions of the Policy is required to be honoured in its letter and spirit, and awarding the damages virtually amounts to rewriting the contract, which is opposed to the Constitutional Bench Judgment of the Hon'ble Apex Court rendered in the case of NEW INDIA ASSURANCE COMPANY LIMITED v. C.M. JAYA AND OTHERS reported in AIR 2002 SC 651.

9. He would further submit that the plaintiff has filed suit for recovery seeking indemnification of the damages from the insurance company on account of policy of insurance issued by defendants. The plaintiff is claiming liquidated damages based upon the loss caused to the raw material stored in A, B & C godowns situate at Gabbur Village. The plaintiff has failed to prove with cogent evidence the quantity of the materials stored in godowns. Learned Counsel would further submit that the

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plaintiff has not produced documentary evidence i.e. the stock register as on the date of the fire accident, however, the trial Court has made a guesswork and awarded the damages in an extent of Rs.1,56,00,000/- which is not sustainable in the eye of law.

10. Learned Counsel would further submit that the burden of proof with regard to Issue No.1 is on the plaintiff to prove the damages caused to it in the fire accident, and the plaintiff having not placed any acceptable, cogent evidence to substantiate the actual loss, the Trial Court, instead of dismissing the suit, has erroneously observed that the defendants have not complied with the terms and conditions of the policy, and the same is arbitrary and capricious. The trial Court has erroneously shifted the burden upon the defendant to prove the damages which is not sustainable in the eye of law. On all these grounds he sought to allow the appeal and consequently to dismiss the suit.

11. Despite service of notice through paper publication, respondent remained absent and unrepresented.

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12. Having heard the arguments advanced on behalf of the appellants and on perusal of the materials placed before us, the following points would arise for our consideration:

1. Whether the appellants have made out a ground to interfere with the impugned judgment and decree passed by the trial Court?

2. What order?

13. Our answer to the above points would be as under:

Point No.1: in the negative; Point No.2: As per final order Regarding Point No.1:

14. Plaintiff has filed suit for recovery of money of Rs.3,53,70,000/- with interest at the rate of 21% per annum on the insurance amount of Rs.227.04 lakh. The trial Court has decreed the suit in part by directing defendants to pay a sum of Rs.1,56,00,000/- to the plaintiff with interest at the rate of 8% per annum from the date of Suit to realisation. However, the plaintiff has not preferred any appeal/cross appeal/cross objections against the Judgment and decree passed by the trial Court.

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15. It is an undisputed fact that the plaintiff is a Public Limited Company, constituted and registered under the provisions of Indian Companies Act, 1956 and running small- scale industry having its manufacturing unit at No.534, Sherewad Village, Hubballi Taluk. The plaintiff-company is carrying on the business in manufacturing and marketing of Hill-Grass brooms, Plastic brooms and toilet brushes, etc. It is also not in dispute that the plaintiff is having three godowns in Jartharghar Gabbur Village, Hubbali as A, B & C Godowns, wherein the plaintiff stocked the Hill grass as per the requirements for production and the same would be used for the whole year. It is also an undisputed fact that there was a fire accident in early hours between 22nd and 23rd August 1997 in the said godowns, resulting in the plaintiff-company suffering loss to the tune of Rs.227.04 lakh and one of the directors of plaintiff-Company viz. Gautam Shanti Lal Mehta, suffered burn injuries while attempting to save the stock , finally succumbed to burn injuries on 2nd September 1997 at Marina Hospital in Mumbai. It is also not in dispute that the plaintiff has obtained insurance policy from defendants 1 & 2 relating to raw materials and stock in the three godowns of plaintiff-Company on 19th August 1987 as per Exhibit P6, and the said policy is

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pertaining to property situated at 534, factory godown, Sherewad, Hubballi for Rs.2,00,00,000/-, No.123/143, Jartargarh Building, Gabbur, i.e. A and B godowns for Rs.1.00 crore each and C godown for Rs.25.00 lakh and one more godown, and the total sum insured as per Exhibit P6 is Rs.4.25 crore and the premium amount paid is Rs.3,27,037/-. Accordingly, plaintiff-company is insured with defendant No.2- Insurance Company for the materials worth of Rs.4,25,00,000/-

16. It is specific contention of the plaintiff that due to fire accident that took place in the early hours on 23rd August 1997, the entire material stocked in the A, B & C godowns worth Rs.2,27,04,000/- got charred into ashes and in the said accident, one of the directors of the plaintiff Company by name Gautam Shantilal Mehta sustained severe burn injuries and succumbed to same on 02nd September 1997 in the hospital. Though the plaintiff-company had obtained insurance for the said stock and paid a premium of Rs.3,44,250/-, due to the said fire accident plaintiff-company suffered loss of raw material worth Rs.227.04 lakh. The plaintiff-company claimed interest on the said amount from 23rd August 1997 till filing the suit in an extent of Rs.53,62,000/-; Rs.8,000/- towards expenses; Rs.25.00 lakh towards tension and mental agony;

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and Rs.50.00 lakh towards loss of profit due to deliberate inaction on the defendant-Insurance Company. In total, the plaintiff has suffered a financial loss of Rs.3,53,70,000/-. When the plaintiff has approached defendant claiming the loss caused to it due to the fire accident, defendants illegally rejected the claim of the plaintiff on the ground that the alleged claim is a fraud, manipulated, created and falsely claimed though there was no loss to that extent in the fire accident as is claimed. The plaintiff-company has relied on Exhibits P1 to P7 to substantiate its contention. Exhibit P1 is the Memorandum of Association and Articles of Association of Jayavant Products Limited; Exhibit P2 is the certificate issued by the Fire Department about the fire accident that took place on 23rd August 1997 in the godowns of plaintiff-Company in which it is mentioned that about 110 lorry loads of Hill grass brooms, and other raw materials were burnt; Exhibits P3 to P5 are the Annual Reports of Jayavant Products Limited issued by Auditors M/s. Shanti Lal Jain & Company for the years 1995-96, 1996- 97 and 1997-98, respectively; Exhibit P6 is the insurance policy issued by the defendant in the name of plaintiff Company through State Bank of Mysore, Main Branch, Hubballi; and

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Exhibit P7 is the copy of notice dated 21st July, 1998 issued by defendant rejecting the claim of the plaintiff-company.

17. On the other hand, defendants have relied upon number of documents. Out of them, Exhibit D1 is the letter dated 29th December 1987 written by the plaintiff-company to the Divisional Manager, United India Insurance Company Limited for settlement of claim; Exhibit D2 is the list of documents given to the Surveyor; Exhibit D3 is the signature of Director on stock inspection report; Exhibit D4 is the cheque dated 12th August 1997 issued by the plaintiff in favour of defendant No.2 for Rs.2,42,393/-; Exhibit D5 is the Bank endorsement whereby the cheque was returned for insufficient funds; Exhibit D6 is the Claim Form for fire and allied perils filled by the plaintiff-Company, where the name of the insured is shown as plaintiff-company and insured amount Rs.2,27,04,000/- item of raw material affected in fire in godowns at Gabbur and the policy is valid for the period 19th August 1997 to 18th August 1998; Exhibit D7 is the annexure to claim giving godown-wise details about stock and nature; Exhibit D8 is the file of plaintiff-company bearing purchase invoices, bills of Northeast Transport Company including payment details; Exhibit D9 is the investigation report of new

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Gabbur godowns of plaintiff-Company submitted by Shambhu Alagundgi, an M.Sc. Graduate in Criminology and Forensic Science; Exhibit D10 is another annexure to investigation report and the fire accident at plaintiff-Company Gabbur godown and contains Annexure 1 to 10 as mentioned in the List of Annexures; Exhibit D11 is the joint survey report filed by Dr. R.A. Srinivas and S Upendra with regard to claim of the plaintiff-Company in view of the fire accident in the said godowns; Exhibit D12 is the final report of the investigation with regard to the claim of plaintiff-Company arising out of fire accident in the godowns at Gabbur; Exhibits D13 to D47 are vehicle details furnished by the Superintendent of Office of Deputy Transport Commissioner, Eluru, WG district to Srivatsan Surveyors Pvt Ltd, Chennai about the particulars of vehicles used for purchase of raw materials. Exhibit D48 is a letter of Range Forest Officer to the defendant No.2 in respect of investigation issue of TTP issued by Jamsola, Check Gate; Exhibit D49 is the true copy of Checking Register of Forest products at Jamsola Check Gate addressed to the plaintiff- Company.

18. PW1 has deposed in his evidence as to the complaint averments.

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19. PW2 is the Regional Fire Officer, Hubballi who visited the spot immediately after getting the information about the fire accident at godowns of plaintiff-company. According to PW2, it took about 42 hours to bring the fire under control and since the Fire was 'A' class fire, six water tankers were used continuously to extinguish the said fire, and due to pressure of water, the raw materials and Hill grass gushed away with water and due to fire, even the top of the godowns was damaged.

20. DW1-Bailur Padmanabha Bhatt in his cross- examination has deposed that the policy of insurance was valid from 19th August 1997 till 18th August 1988, and the value of Policy was for Rs.4,25,00,000/-.

21. Defendants have not disputed the fire accident and the certificate issued by this Station Fire Officer, which is marked as Exhibit P2. It is also admitted by defendants that they have not initiated any legal proceedings against the plaintiff-company with regard to the alleged fraud/misrepresentation of facts. Additionally, during the course of arguments, the learned Counsel for the appellants would submit that the appellants will not press the defence set

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up by the defendants as to the fraud alleged to have been committed by the plaintiff-company.

22. Exhibit P12, being a public document issued by a public servant in the discharge of his official duties, carries with it a presumption of authenticity and regularity under the Indian Evidence Act, 1872. In particular, Section 114(e) of the Act mandates that the Court shall presume, unless the contrary is proved, that official acts have been regularly performed. In the present case, the defendants have failed to produce any material evidence to rebut this statutory presumption. There is nothing on record to suggest that the issuance of Exhibit P12 was irregular or tainted in any manner. Furthermore, the evidence of PW2, who issued the certificate marked as Exhibit P2, remains unshaken and stands corroborated by the final investigation report. A careful examination of the documents on record reveals no substantial ground to discredit the testimony of PW2 or to discard the contents of Exhibit P2. On the contrary, the plaintiff has supported its case with credible and legally admissible evidence. The defendants have relied upon Exhibit D10, a letter dated 24th September 1997, issued by the Fire Station Officer, Karnataka State Fire Services, under

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Letter No.103:ಉಆ:ಹು ಾ/97, which is enclosed as Annexure-2. This document records that approximately 110 lorry loads of brooms and raw materials were destroyed in the fire accident. Additionally, another letter dated 24th February 1998, addressed by the same officer to Mr. Shambhu Alagundgi, Investigating Officer of the United India Insurance Company Limited, reiterates that around 110 lorry loads of brooms were consumed in the fire. Significantly, these documents have not been disputed or challenged by the defendants during trial. Taking into account all the materials placed on record, the trial Court has made a reasoned assessment of the loss suffered by the plaintiff and quantified the damages at Rs.1.56 crore, along with interest at the rate of 8% per annum. It is pertinent to note that the defendants have not brought forth any evidence to establish that the plaintiff-company failed to comply with Clause 8 of the policy conditions. No cogent or convincing evidence has been presented to demonstrate any violation of the terms and conditions of the insurance policy by the plaintiff.

23. On the other hand, the plaintiff has led legally acceptable evidence to prove that it suffered a loss of approximately Rs.227.04 lakh due to the fire accident. This

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assessment is based on the report submitted by PW2. While the trial Court could have awarded the full amount of Rs.227.04 lakh, it appears to have taken a balanced view by considering not only PW2's report but also the testimonies of DWs 2 to 5 and Exhibit P5, the Annual Report of the plaintiff-company for the financial year 1997-98, prepared by the Chartered Accountants, M/s. Shanti Lal Jain & Company. On that basis, the trial Court reasonably assessed the loss at Rs.1.56 crore. This assessment is supported by the evidentiary material on record and does not warrant any interference.

24. Even on re-appreciation, re-examination and re- evaluation of the entire evidence on record, we do not find any error or legal infirmities in the impugned Judgment and decree passed by the trial Court. Hence, we answer Point No.1 in the negative.

Regarding Point No.2:

25. For the aforestated reasons, we proceed to pass the following:

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ORDER

1. Appeal dismissed;

2. Judgment and decree dated 31st August 2019 passed in Original Suit No.243 of 1998 by the Principal Senior Civil Judge, Hubballi, is confirmed;

3. Draw decree accordingly.

Sd/-

(SACHIN SHANKAR MAGADUM) JUDGE Sd/-

(G BASAVARAJA) JUDGE lnn CT-CMU