National Consumer Disputes Redressal
M/S. Home Flooring & Decor Private ... vs National Insurance Co. Ltd. on 15 July, 2025
IN THE NATIONAL CONSUMER DISPUTES REDRESSAL
COMMISSION AT NEW DELHI
RESERVED ON: 03.07.2025
PRONOUNCED ON: 15.07.2025
CONSUMER COMPLAINT NO. 455 OF 2019
M/s. Home Flooring & Décor Private Ltd.
Available at Puregulab,
Post-Gopiganj, District-Bhadohi,
Uttar Pradesh, India. .... Complainant
Versus
National Insurance Company Limited
Sahay Building,
Main Road, Bhadohi, S.R.N.-110 049,
Uttar Pradesh, India. ... Opposite Party
BEFORE:
HON'BLE AVM J. RAJENDRA, AVSM VSM (Retd), PRESIDING MEMBER
HON'BLE MR. JUSTICE ANOOP KUMAR MENDIRATTA, MEMBER
For the Complainant : Mr. Joydeep Sarma, Mr. Kaushal
Kapoor & Mr. Rajiv Tiwari, Advocates
For the Opposite Party : Mr. Sanjay Rawat, Advocate (VC)
JUDGMENT
Air Vice Marshal J. RAJENDRA, AVSM VSM (Retd.)
1. This Consumer Complaint has been filed under Section 21 of the Consumer Protection Act, 1986 (for short "the Act") against the Opposite Party seeking to direct the OP:
(a) Allow the present complaint and direct the Respondent to immediately settle insurance claim of Rs.1,54,43,735/-;
(b) Direct the Respondents to compensate the Complainant for causing for mental harassment, agony and loss of business and reputation for a sum of Rs.50,00,000;
(c) Award cost of these proceedings to the complainant; and in that behalf
(d) Pass/make such other appropriate order and/or directions as this Hon'ble Court may deem fit and proper in the facts and circumstances of the present case.CC/455/2019 Page 1 of 30
2. Brief facts of the case, as per the Complainant, are that the Complainant, a Private Ltd Company based in Bhadohi, Uttar Pradesh, manufacturing carpets. The company availed a Standard Fire and Special Perils Policy No. 450602/11/17/3300000273, effective from 21.11.2017 to 20.11.2018 from the OP to secure its stock. On 14.07.2018, unusually heavy rains in Bhadohi caused waterlogging, chocked drainage pipes, and resulted in water overflowing from a nearby government canal and entering the Complainant's godown, damaging its entire carpet stock lying in the building. The Complainant immediately lodged a claim for an estimated loss of Rs. 1,45,00,000 on 18.07.2018, citing coverage under Clause VI (storm, flood, inundation) and Clause IX (bursting/ overflowing of pipes) of the policy, cooperated with the surveyor by providing all requested details, and subsequently obtained a meteorological certificate confirming the unprecedented rainfall. Despite repeated follow-ups, the OP repudiated the claim vide letter dated 27.02.2019, erroneously stating that water entered through the godown ventilator from accumulated rainwater on the premises did not constitute 'inundation'. The Complainant contended that the rejection is illegal, absurd and contrary to the policy terms and dictionary definition of inundation (overflow of waters out of their bed). The Complainant claimed that the repudiation constitutes deficiency in service, unfair trade practice, and CC/455/2019 Page 2 of 30 violates the Consumer Protection Act, 1986, under which the Complainant is a consumer. The Complainant thus sought a direction for the OP to settle the quantified claim of Rs.1,54,43,735 plus compensation of Rs.50,00,000 for mental harassment, agony, and loss of reputation, along with costs, as the rejection threatened the survival of this small business.
3. Upon notice, the complaint was resisted by the Opposite Party (OP) by filing its Written Statement. The OP raised preliminary objections contending that the complaint is entirely unsustainable and must be dismissed outright. Primarily, the claimed loss of water damage to carpets due to rainwater entering the godown through a ventilator. This clearly resulted from the Complainant's own failure to maintain a blocked drainage pipe on their own premises, and not from any insured peril like "Storm, Cyclone, Flood, or Inundation" as defined under Clause VI of the policy. The proximate cause was negligent maintenance and not any natural calamity. Additionally, the Complainant acted in bad faith by falsifying documents, including mistranslated letters/police reports, concealing facts, and inflating the claims, warranting dismissal and potential perjury proceedings. The complaint is not maintainable as the dispute arose from commercial activity (manufacturing/export), which excludes the firm from being s "consumer" under the Consumer Protection Act. Complex disputes CC/455/2019 Page 3 of 30 such as causation, negligence etc require adjudication by civil court and not summary proceedings under the Act. The claim violates insurance principles of utmost good faith, proximate cause and strict policy interpretation. The independent Surveyor‟s Report dated 28.08.2018 confirmed that the loss was not covered under the policy.
There was 42% underinsurance and repair costs were inflated. As the Complainant did not approach with clean hands, is not entitled to any relief. The OP sought for the dismissal of the complaint with costs.
4. The Complainant filed Rejoinder reiterating the facts stated in the complaint and filed its evidence including Board Resolution dated 22.11.2018 (Exhibit CW1/1), copy of the Insurance Policy along with terms and conditions (Exhibit CW1/2), a list of damaged stock (Exhibit CW1/3), Letters dated 18.07.2018 and 19.07.2018 (Exhibit CW1/4 and Exhibit CW1/5), communication dated 20.07.2018 and newspaper article (Exhibit CW1/6), Email dated 31.07.2018 (Exhibit CW1/7), Communications dated 22.08.2018 (Exhibit CW1/8), copy of the Letter dated 13.11.2018 (Exhibit CW1/9), Letter dated 03.08.2018 and certificate dated 21.11.2018 (Exhibit CW1/10), repudiation letter dated 27.02.2019 (Exhibit CW1/11), Surveyor Report dated 24.08.2018.
5. In evidence, OP submitted a copy of the authorization (Exhibit OPW1/1), copy of letter dated 20.07.2018 (Exhibit OPW1/2), survey report dated 24.08,2018 (Exhibit OPW1/3).
CC/455/2019 Page 4 of 306. The learned counsel for the complainant reiterated the facts stated and the grounds advanced in the complaint, and argued that the Complainant, a private limited carpet manufacturing company based in Bhadohi, Uttar Pradesh, availed a Standard Fire and Special Perils Policy No. 450602/11/17/3300000273 from the OP-insurance company, valid from 21.11.2017, to 20.11.2018. On 14.07.2018, unusual heavy rains caused waterlogging in Bhadohi, leading to choked drainage pipes and overflow from a nearby government canal, which inundated the Complainant‟s godown and damaged carpets worth ₹1,45,00,000. The Complainant immediately lodged a claim on 18/19.07.2018, citing policy coverage for "flood or inundation" under Clause VI and "overflowing of pipes" under Clause IX. The Complainant fully cooperated with the surveyor in the process of evaluation and provided all records sought. Despite providing evidence, including a meteorological data certificate confirming recorded rainfall, the OP repudiated the claim vide 27.02.2019 erroneously contending that the water ingress was through ventilators "may not be termed as inundation." This rejection violated the policy terms and established law, as affirmed by the Supreme Court in Oriental Insurance Co. Ltd. vs. M/s J.K. Cement Works, Civil Appeal No.7402 of 2009, decided on 28.01.2020 and reiterated by the NCDRC, which holds that damage from heavy rainfall falls squarely CC/455/2019 Page 5 of 30 within "flood/inundation" coverage. The OPs reliance on baseless allegations of negligence in blocked pipes contradicts its own surveyor‟s report dated 24.08.2018, which attributed the loss solely to rainfall. He asserted that the Complainant, having suffered crippling financial loss and mental agony due to this deficient service and unfair trade practice, is entitled for settlement of the revised claim for ₹1,54,43,735, compensation of ₹50,00,000 for harassment and costs of litigation. The learned counsel relied upon the judgment of the Hon‟ble Supreme Court in Gopal Dikshit vs. United India Insurance Company Ltd., Civil Appeal No.6623 of 2025, decided on 19.05.2025.
7. The learned counsel for OP contended that the complaint is devoid of merit and must be dismissed, as it is a well-settled principle in jurisprudence governing private commercial contracts, particularly the insurance which constitutes a special class guided by principles like utmost good faith and proximate cause, that courts cannot rewrite the terms agreed or examine commercial wisdom, and must instead strictly interpret the policy as expressed by the parties without venturing into extra-liberalism or making a new contract. Applying this principle to the present case, where the policy explicitly covers loss directly caused by Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood, or Inundation (excluding earthquake/volcanic CC/455/2019 Page 6 of 30 consequences), the admitted cause of loss due to rainwater entering the godown through a ventilator due to a blocked drainage pipe on the complainant's own terrace, demonstrably stems from the own negligence of the Complainant in failing to ensure routine maintenance of the building as evidenced by their initial letters, claim form and survey report. The learned counsel for the OP asserted that the loss, therefore, was not due to a reason which constitutes a direct or proximate result of any covered peril like flood or inundation. This was especially due to absence of evidence of widespread flooding affecting the complex. Consequently, the repudiation was correct as the liability cannot extend beyond the policy terms, and the complainant, engaged in large-scale commercial activity for profit, further falls outside the ambit of a 'consumer' under the Consumer Protection Act, 1986. He sought complaint to be dismissed with costs. He relied upon Vikram Greentech India Ltd. v. New India Assurance Co. Ltd. (2009) 5 SCC 599; and Bajaj Allianz General Insurance Co. Ltd. and Ors. V. The State of Madhya Pradesh, 2020 SCC OnLine SC 401 in support of his arguments.
8. We have examined the pleadings and associated documents placed on record and rendered thoughtful consideration to the arguments advanced by the learned counsels for both the parties.
CC/455/2019 Page 7 of 309. The main issues to be determined in the case are, whether this commission has jurisdiction to entertain the complaint? Whether the circumstances under which the stocks in question sustained damage falls within the scope of the policy in question? If the incident is within the scope of the policy, what is the compensation, if any, liable be paid by the Opposite Party to the Complainant?
10. As regards jurisdiction of this Commission, on the grounds relied upon by the OP that the Complainant being a commercial entity, does not fall within the definition of a "consumer" under the Consumer Protection Act, 1986 (the Act). In this regard, it is undisputed that the Complainant availed an insurance policy to protect its business assets, which is not for commercial resale or profit generation from the insurance service itself. In Gopal Dikshit vs. United India Insurance Co. Ltd. (Supra) it is clarified that purchase of insurance policy for business falls under "service" under the Act and, therefore, the Complainant is a consumer under the Act.
11. It is undisputed that the pecuniary jurisdiction under the Consumer Protection Act, 1986, is governed by the value of the goods/ services and the compensation claimed. This principle has been established by the Larger Bench of this Commission in Ambrish Kumar Shukla and Ors. Vs. Ferrous Infrastructure Pvt. Ltd. (I (2017) CPJ 1 (NC), that:
CC/455/2019 Page 8 of 30"14. Reference order dated 11.08.2016 Issue No. (i) It is evident from a bare perusal of Section 21, 17 and 11 of the Consumer Protection Act that it's the value of the goods or services and the compensation, if any, claimed which determines the pecuniary jurisdiction of the Consumer Forum. The Act does not envisage determination of the pecuniary jurisdiction based upon the cost of removing the deficiencies in the goods purchased or the services to be rendered to the consumer. Therefore, the cost of removing the defects or deficiencies in the goods or the services would have no bearing on the determination of the pecuniary jurisdiction. If the aggregate of the value of the goods purchased or the services hired or availed of by a consumer, when added to the compensation, if any, claimed in the complaint by him, exceeds Rs. 1.00 crore, it is this Commission alone which would have the pecuniary jurisdiction to entertain the complaint. For instance if a person purchases a machine for more than Rs. 1.00 crore, a manufacturing defect is found in the machine and the cost of removing the said defect is Rs. 10.00 lacs, it is the aggregate of the sale consideration paid by the consumer for the machine and compensation, if any, claimed in the complaint which would determine the pecuniary jurisdiction of the Consumer Forum. Similarly, if for instance, a house is sold for more than Rs.1.00 crore, certain defects are found in the house, and the cost of removing those defects is Rs. 5.00 lacs, the complaint would have to be filed before this Commission, the value of the services itself being more than Rs. 1.00 crore."
12. Admittedly, the claim value (₹1.54 crore + compensation) exceeded ₹1 Crore, placing it within this Commission‟s pecuniary jurisdiction. Applying the principle from Ambrish Kumar Shukla (Supra), the aggregate claim far exceeds the ₹1 Crore threshold.
Consequently, the complaint is within the pecuniary jurisdiction of this Commission.
CC/455/2019 Page 9 of 3013. As regards the issue of Coverage Under the Insurance Policy whether the loss falls under "Flood/Inundation" (Clause VI), the case of the Complainant is unprecedented rainfall caused canal overflow and water ingress into the godown, constituting "inundation." The Meteorological Certificate and surveyor‟s report (Exhibit OPW1/3) confirm heavy rainfall. On the other hand, the OP‟s defense is water entered through ventilators due to blocked drains on the complainant‟s premises, negating "inundation." As regards the Policy in question, the relevant portions of Insurance Policy covering the risks are as follows:-
"VI. Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado Flood and Inundation (STFI) Loss, destruction or damage directly caused by storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood or Inundation excluding those resulting from earthquake, Volcanic eruption or other convulsions of nature. (Wherever earthquake cover is given as an „ad on cover" the words "excluding those resulting from earthquake volcanic eruption or other convulsions of nature" shall stand deleted).
14. In catena of judgments, the nature of insurance contracts, scope and restraint to be exercised in interpreting the terms of the contracts are well discussed and crystallized by this Commission and Hon‟ble Supreme Court. In Oriental Insurance Company Limited vs. J.K. Cement Works, 2020 SCC OnLine SC 83, the Hon‟ble Supreme Court has held as follows:
8. Before delving into the particular facts of this case, it may be useful to refer to the dictionary meanings of the terms "flood" and "inundation".CC/455/2019 Page 10 of 30
8.1. The word "flood" is defined in Concise Oxford English Dictionary, 8th Edn. (1990) as follows:
"flood.-- ... 1a an overflowing or influx of water beyond its normal confines, esp. over land; an inundation. b the water that overflows.
2a an outpouring of water; a torrent (a flood of rain)."
Particularly in the context of the insurance contracts, Stroud's Judicial Dictionary, 5th Edn. (1986) defines the word "flood", in Young v. Sun Alliance & London Insurance Ltd [Young v. Sun Alliance & London Insurance Ltd., (1977) 1 WLR 104 (CA)], an English case decided by the Court of Appeal, and reads as follows:
"... „Flood‟ in an insurance policy meant a large movement or irruption of water, and did not cover mere seepage from a natural source..."
8.2. The word "inundate" is defined in Concise Oxford English Dictionary, 8th Edn. (1990) as follows:
"inundate.-- ... 1 flood.
2 overwhelm (inundated with enquiries)."
Further, per Black's Law Dictionary, 9th Edn. (1990), the word "inundate" means:
"inundate.-- To overflow or overwhelm; esp., to flood with water."
9. Simply put, a flood may be described as overflow of water over land. Floods can be broadly divided into the following categories: coastal floods, fluvial floods (river floods), and pluvial floods (surface floods).
9.1. The coastal floods occur when water from a sea or an ocean flows into nearby areas. They are caused either by extreme tidal activity (high tides) or by a storm surge -- strong winds from a hurricane or other storms forcing the water onshore -- or by the simultaneous occurrence of both these phenomena.
9.2. The fluvial or river flood occurs when the water level exceeds the capacity of a river, stream, or lake, resulting in the overflow of the surplus water to surrounding banks and neighbouring land. They are usually caused by either excessive rainfall or unusually high melting of snow because of rising temperatures.
CC/455/2019 Page 11 of 309.3. Lastly, the pluvial or surface floods refers to the accumulation of water in an area because of excessive rainfall. These floods occur independently of an overflowing water body. The pluvial floods include the flash floods which take place due to intense, torrential rains over a short period of time. A pluvial flood may also occur if the area is surrounded by hilly regions from where the run-off water comes and accumulates in the low-lying area. In urban localities, because of the concrete streets and dense construction, rainwater is unable to seep into the ground. Steady rainfall over a few days or torrential rains for a short period of time may overwhelm the capacity of the drainage systems in place, leading to accumulation of water on the streets and nearby structures, and resulting in immense economic damage.
10. So far as the term "inundation" is concerned, it can be used to refer to both the act of overflow of water over land that is normally dry and to the state of being inundated. The inundation can also be intentional, which is sometimes carried out for military purposes, as well as for agricultural and river management purposes. In the latter sense i.e. as a state of being, inundation refers to accumulation of water in which objects or land may be submerged. In simpler terms, inundation can be used to refer both the act of overflow of water as well as the result of such overflow.
11. It flows from the above discussion that overflow of water due to a flood may result in the state of inundation. As discussed above, floods are of different types, and may be caused due to several factors complementing each other. Usually, non-coastal floods originate from rainfall, but the magnitude of rainfall sufficient to cause a flood, and the damage that a flood causes, may vary depending on a variety of aspects such as the location of land (low-lying or altitudinous), the water retention capacity of the soil, and the density of population and manmade construction in the area, among other things. In rare cases, a non-coastal flood may also occur without any rainfall. For instance, shortcomings in the construction of a dam may lead to its complete breakdown, resulting in a flood."
CC/455/2019 Page 12 of 3015. In Oriental Insurance Co. Ltd. Vs JK Cement Works (Supra), this Commission in Vaibhav Dyestuff Industries and Ors. Vs. New India Insurance Co. Ltd & Ors, FA No.613 and 633 of 2015, decided on 30.01.2024 has held as under:
34. The inundation in the present case has resulted from excessive rainfall and according to the aforesaid orders and judgments, inundation would stand covered under the risk policy, which is also available in the present case. The accumulation of water to the extent of 9" to 1 foot as observed by the surveyor and its retention for about 16 hours in the premises, that to a certain extent is also supported by photographs, renders the claim to be preponderantly probable and therefore acceptable. Consequently, in view of the conclusions drawn hereinabove and the law as discussed, no error is discernable in the conclusions drawn by the State Commission, while allowing the complaint. The loss had occurred due to heavy rainfall and it appears that the surveyor seems to have inappropriately recommended non-payment of damages and his report, which contradicts his own observation is not creditworthy.
16. As per Oriental Insurance Co. Ltd. vs. M/s J.K. Cement Works (Supra), "inundation" covers water overflow from natural sources (e.g., canals) due to heavy rain. The surveyor‟s report (Exhibit OPW1/3) attributes the loss to rainfall, not maintenance failure. Blocked drains may be contributory but do not sever the link to the natural calamity.
The meteorological certificate (Exhibit CW1/10) proves rainfall of 5.1 MM on 14.07.2018 and 2.8 MM on the next day, overwhelming drainage systems. The loss qualifies as "inundation" under Clause VI and repudiation was deficient service.
CC/455/2019 Page 13 of 3017. In the case in question, the only contention of the OP while repudiating the claim is that the damage of stock due to entry of accumulated rainwater of own premises through ventilator of the godown may not be termed as inundation. In this regard, it is an admitted position that the Complainant‟s stocks damaged due to waterlogging on account of heavy rainfall and water seepage into the building through the ventilator. Therefore, water seepage into the building and damage are undisputed. The said contention of OP based on which the claim was repudiated is also not stated as part of the terms of contract. As per the precedents cited above, the entry of large volume of rainwater deserves to be termed as inundation and is covered as a risk under the policy. Even if it is considered that there exists some ambiguity in this regard, in approaching such cases entailing absence of clarity with respect to contractual obligations, contentions between the parties and liabilities with respect to insurance contracts, Hon‟ble Supreme Court in Mahakali Sujatha vs. The Branch Manager, Future Generali India Life Insurance Company Ltd. & Anr., Civil Appeal No.3821 of 2024, decided on 10.04.2024 has held ―40. Insofar as the Query 6.1 is concerned, it is noted that the same is not clear and it is not known in what context the details of the insured were sought with regard to any existing life insurance policy. On a reading of Query 6.1 holistically, it is also not clear regarding the nature of information that was sought by the respondent insurance company as discussed above. The answer CC/455/2019 Page 14 of 30 given by the insured to the Query 6.1 was thus in the negative. In this backdrop, can it be said that there was a suppression of material fact by the insured in the proposal form. In this context, it is necessary to place reliance on the contra proferentem rule. This Court in the case of Manmohan Nanda, discussed the rule of contra proferentem as under:
―45. The contra proferentem rule has an ancient genesis. When words are to be construed, resulting in two alternative interpretations then, the interpretation which is against the person using or drafting the words or expressions which have given rise to the difficulty in construction, applies. This rule is often invoked while interpreting standard form contracts. Such contracts heavily comprise of forms with printed terms which are invariably used for the same kind of contracts. Also, such contracts are harshly worded against individuals and not read and understood most often, resulting in grave legal implications. When such standard form contracts ordinarily contain exception clauses, they are invariably construed contra proferentem rule against the person who has drafted the same.
46. Some of the judgments which have considered the contra proferentem rule are referred to as under:
46.1. In General Assurance Society Ltd. v. Chandumull Jain, AIR 1966 SC 1644, it was held that where there is an ambiguity in the contract of insurance or doubt, it has to be construed contra proferentem against the insurance company. 46.2. In DDA v. Durga Chand Kaushish, AIR 1973 SC 2609, it was observed:
―In construing document one must have regard, not to the presumed intention of the parties, but to the meaning of the words they have used. If two interpretations of the document are possible, the one which would give effect and meaning to all its parts should be adopted and for the purpose, the words creating uncertainty in the document can be ignored.‖ 46.3. Further, in Central Bank of India Ltd. v. Hartford Fire Insurance Co. Ltd., AIR 1965 SC 1288, it was held:
―11. ... what is called the contra proferentem rule should be applied and as the policy was in a standard form contract prepared by the insurer alone, it should be interpreted in a way that would be favourable to the assured.‖ 46.4. In Sahebzada Mohammad Kamgarh Shah v. Jagdish Chandra Deo Dhabal Deb, AIR 1960 SC 953, it was observed that where there is an ambiguity it is the duty of the court to look at all the parts of the document to ascertain what was really CC/455/2019 Page 15 of 30 intended by the parties. But even here the rule has to be borne in mind that the document being the grantor's document it has to be interpreted strictly against him and in favour of the grantee.
46.5. In United India Insurance Co. Ltd. v. Orient Treasures (P) Ltd., (2016) 3 SCC 49 , this Court quoted Halsbury's Laws of England (5th Edn. Vol. 60, Para 105) on the contra proferentem rule as under:
―37. ... Contra proferentem rule.--Where there is ambiguity in the policy the court will apply the contra proferentem rule. Where a policy is produced by the insurers, it is their business to see that precision and clarity are attained and, if they fail to do so, the ambiguity will be resolved by adopting the construction favourable to the insured. Similarly, as regards language which emanates from the insured, such as the language used in answer to questions in the proposal or in a slip, a construction favourable to the insurers will prevail if the insured has created any ambiguity. This rule, however, only becomes operative where the words are truly ambiguous; it is a rule for resolving ambiguity and it cannot be invoked with a view to creating a doubt. Therefore, where the words used are free from ambiguity in the sense that, fairly and reasonably construed, they admit of only one meaning, the rule has no application.‖ 46.6. The learned counsel for the appellant have relied upon Sushilaben Indravadan Gandhi v. New India Assurance Co.
Ltd., (2021) 7 SCC 151, wherein it was observed that any exemption of liability clause in an insurance contract must be construed, in case of ambiguity, contra proferentem against the insurer. In the said case reliance was placed on Export Credit Guarantee Corpn.(India) Ltd v. Garg Sons International, (2014) 1 SCC 686, wherein this Court held as under :
―39. ... 11. The insured cannot claim anything more than what is covered by the insurance policy. ―The terms of the contract have to be construed strictly, without altering the nature of the contract as the same may affect the interests of the parties adversely.‖ The clauses of an insurance policy have to be read as they are. Consequently, the terms of the insurance policy, that fix the responsibility of the Insurance Company must also be read strictly. The contract must be read as a whole and every attempt should be made to harmonise the terms thereof, keeping in mind that the rule of contra proferentem does not CC/455/2019 Page 16 of 30 apply in case of commercial contract, for the reason that a clause in a commercial contract is bilateral and has mutually been agreed upon.‖ Having regard to the aforesaid discussion on contra proferentem rule, it is noted that the Queries 6.1 and 6.2 are not clear in themselves as we have discussed the same above. Therefore, the answer given by the deceased cannot be taken in a manner so as to negate the benefit of the policy by repudiation of the same on the demise of the insured.
41. At this stage, we may also dilate on the aspect of burden of proof. Though the proceedings before the Consumer Fora are in the nature of a summary proceeding. Yet the elementary principles of burden of proof and onus of proof would apply. This is relevant for the reason that no corroborative evidence to what has been deposed in the affidavit is let in by the insurance company in order to establish a valid repudiation of the claim in the instant case. Section 101 of the Evidence Act, 1872 states that whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person. This Section clearly states that the burden of proving a fact rests on the party who substantially asserts the affirmative of the issue and not upon the party who denies it; for a negative is usually incapable of proof. Simply put, it is easier to prove an affirmative than a negative. In other words, the burden of proving a fact always lies upon the person who asserts the same. Until such burden is discharged, the other party is not required to be called upon to prove his case. The court has to examine as to whether the person upon whom burden lies has been able to discharge his burden. Further, things which are admitted need not be proved. Whether the burden of proof has been discharged by a party to the lis or not would depend upon the facts and circumstances of the case. The party on whom the burden lies has to stand on his own and he cannot take advantage of the weakness or omissions of the opposite party.
Thus, the burden of proving a claim or defence is on the party who asserts it.
42. Section 102 of the Evidence Act, 1872 provides a test regarding on whom the burden of proof would lie, namely, that the burden lies on the person who would fail if no evidence were given on either side. Whenever the law places a burden of proof upon a party, a presumption operates against it. Hence, burden of proof and presumptions have to be considered together. There are CC/455/2019 Page 17 of 30 however exceptions to the general rule as to the burden of proof as enunciated in Sections 101 and 102 of the Evidence Act, 1872, i.e. in the context of the burden of adducing evidence: (i) when a rebuttable presumption of law exists in favour of a party, the onus is on the other side to rebut it; (ii) when any fact is especially within the knowledge of any person, the burden of proving it is on him (Section 106). In some cases, the burden of proof is cast by statute on particular parties (Sections 103& 105).
43. There is an essential distinction between burden of proof and onus of proof; burden of proof lies upon a person who has to prove the fact and which never shifts but onus of proof shifts. Such a shifting of onus is a continuous process in the evaluation of evidence. For instance, in a suit for possession based on the title, once the plaintiff has been able to create a high degree of probability so as to shift the onus on the defendant, it is for the defendant to discharge his onus and in the absence thereof, the burden of proof lying on the plaintiff shall be held to have been discharged so as to amount to proof of the plaintiff's title vide RVE Venkatachala Gounder vs. Arulmigu Viswesaraswami and VP Temple (2003)8SCC 752.
44. In a claim against the insurance company for compensation, where the appellants in the said case had discharged the initial burden regarding destruction, damage of the showroom and the stocks therein by fire and riot in support of the claim under the insurance policy, it was for the insurance company to disprove such claim with evidence, if any, vide Shobika Attire vs. New India Assurance Co. Ltd., (2006) 8 SCC 35.
45. Section 103 of the Evidence Act, 1872 states that the burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person. This Section enlarges the scope of the general rule in Section 101 that the burden of proof lies on the person who asserts the affirmative of the issue. Further, Section 104 of the said Act states that the burden of proving any fact necessary to be proved in order to enable any person to give evidence of any other fact is on the person who wishes to give such evidence. The import of this Section is that the person who is legally entitled to give evidence has the burden to render such evidence. In other words, it is incumbent on each party to discharge the burden of proof, which rests upon him. In the context of insurance contracts, the burden is on the insurer to prove the allegation of non-disclosure of a material fact and that the non-disclosure was fraudulent. Thus, the CC/455/2019 Page 18 of 30 burden of proving the fact, which excludes the liability of the insurer to pay compensation, lies on the insurer alone and no one else.
46. Section 106 of the Evidence Act, 1872 states that when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. This Section applies only to parties to the suit or proceeding. It cannot apply when the fact is such as to be capable of being known also by persons other than the parties. (Source: Sarkar, Law of Evidence, 20th Edition, Volume-2, LexisNexis)
47. In light of the aforesaid discussion on burden of proof, it has to be analysed if the respondent in the present case has adequately discharged his burden of proof about the fact of suppression of previous life insurance policies of the insured.
48. The respondent insurance company has produced no documentary evidence whatsoever before the District Forum to prove its allegation that the insured had taken multiple insurance policies from different companies and had suppressed the same. The District Forum had therefore concluded that there was no documentary evidence to show that the deceased-life insured had taken various insurance policies except an averment and on that basis the repudiation was held to be wrong. Before the State Commission, the respondent had provided a tabulation of the 15 different policies taken by the insured-deceased, amounting to Rs.71,27,702. The same has been extracted above. However, the said tabulation was not supported by any other documentary evidence, like the policy documents of these other policies, or pleadings in courts, or such other corroborative evidence. The respondent sought to mark a bunch of documents before the State Commission, which related to the policy papers of the insured with another insurer, i.e., Kotak Life Insurance. However, the respondent was not granted permission by the State Commission, as the said documents were neither original, nor certified, nor authenticated. Apart from this, there was no effort made by the respondent to bring any authenticated material on record. Thus, in the absence of any evidence to prove that the insured-deceased possessed some insurance policies from other insurance companies, the State Commission upheld the decision of the District Forum in setting aside the repudiation of the claim by the respondent.
49. Before the NCDRC, the respondent again provided the aforesaid tabulation of policies of the insured-deceased. The respondents in their affidavit stated that the insured-deceased had CC/455/2019 Page 19 of 30 taken multiple insurance policies before taking the policy from them. The NCDRC however accepted the averment of the respondents, without demanding corroborative documentary evidence in support of the said fact. The NCDRC, on the contrary, also held that the fact about multiple policies was not dealt with by the appellant in her complaint or evidence affidavit and this therefore proved that the insured had indeed taken the policies from multiple companies as claimed by the respondents.
50. The aforesaid approach adopted by the NCDRC is, in our view, not correct. The cardinal principle of burden of proof in the law of evidence is that ―he who asserts must prove‖, which means that if the respondents herein had asserted that the insured had already taken fifteen more policies, then it was incumbent on them to prove this fact by leading necessary evidence. The onus cannot be shifted on the appellant to deal with issues that have merely been alleged by the respondents, without producing any evidence to support that allegation. The respondents have merely provided a tabulation of information about the other policies held by the insured-deceased. The said tabulation also has missing information with respect to policy numbers and issuing dates and bears different dates of births. Further, this information hasn't been supported with any other documents to prove the averment in accordance with law. No officer of any other insurance company was examined to corroborate the table of policies said to have been taken by the deceased policy holder, father of the appellant herein. Moreover, the table produced is incomplete and contradictory as far as the date of birth of the insured is concerned. Therefore, in our view, the NCDRC could not have relied upon the said tabulation and put the onus on the appellant to deal with that issue in her complaint and thereby considered the said averment as proved or proceeded to prove the stance of the opposite party. A fact has to be duly proved as per the Evidence Act, 1872 and the burden to prove a fact rests upon the person asserting such a fact. Without adequate evidence to prove the fact of previous policies, it was incorrect to expect the appellant to deal with the said fact herself in the complaint or the evidence affidavit, since as per the appellant, there did not exist any previous policy and thus, the onus couldn't have been put on the appellant to prove what was non- existent according to the appellant.
51. The respondents, vide their counter affidavit before this court, have sought to produce some documents to substantiate their claim of other existing insurance policies of the insured/deceased, but the same cannot be permitted to be exhibited at this stage, that too, in an appeal filed by the complainant who is the CC/455/2019 Page 20 of 30 beneficiary under the policies in question. Any documentary evidence sought to be relied upon by the respondent ought to have been led before the District Forum but the same was not done. It was before the District Forum that the evidence was led and examined and at that stage, the respondent did not take adequate steps to lead any oral or documentary evidence to prove their assertion. Their attempt to annex documents in support of their claim before the State Commission was also declined due to the presentation of unauthenticated documents. Therefore, it can be safely concluded that the respondents have failed to adequately prove the fact that the insured-deceased had fraudulently suppressed the information about the existing policies with other insurance companies while entering into the insurance contracts with the respondents herein in the present case. Therefore, the repudiation of the policy was without any basis or justification.
52. Moreover, we have also held on the facts of this case having regard to the nature of queries in Query Nos.6.1 and 6.2, there was no suppression of any material fact as per our earlier discussion based on the contra proferentem rule.
53. In light of the above discussion, the impugned order dated 22.07.2019 passed by the NCDRC in Revision Petition No.1268 of 2019 is set aside. The respondent company is directed to make the payment of the insurance claim under both the policies to the appellant, amounting to Rs. 7,50,000/- and Rs. 9,60,000/-, with interest at the rate of 7% per annum from the date of filing the complaint, till the actual realisation.
54. The appeal stands allowed in the aforesaid terms.‖
18. In view of the above, we are of the considered view that the incident wherein the Complainant‟s stock damaged in the heavy rain on 14.07.2018 due to waterlogging can be termed as due to rainwater inundation, which is a covered risk under the policy in question.
19. The mandate for due consideration of the Surveyor‟s Report was elucidated in Sri Venkateshwara Syndicate Vs. Oriental Insurance Company Limited (2009) 8 SCC 507, wherein the Hon‟ble Supreme Court has observed as under:
CC/455/2019 Page 21 of 30―22) The assessment of loss, claim settlement and relevance of survey report depends on various factors. Whenever a loss is reported by the insured, a loss adjuster, popularly known as loss surveyor, is deputed who assess the loss and issues report known as surveyor report which forms the basis for consideration or otherwise of the claim. Surveyors are appointed under the statutory provisions and they are the link between the insurer and the insured when the question of settlement of loss or damage arises. The report of the surveyor could become the basis for settlement of a claim by the insurer in respect of the loss suffered by the insured. There is no disputing the fact that the Surveyor/Surveyors are appointed by the insurance company under the provisions of Insurance Act and their reports are to be given due importance and one should have sufficient grounds not to agree with the assessment made by them. We also add, that, under this Section the insurance company cannot go on appointing Surveyors one after another so as to get a tailor made report to the satisfaction of the concerned officer of the insurance company, if for any reason, the report of the Surveyors is not acceptable, the insurer has to give valid reason for not accepting the report. Scheme of Section 64-UM particularly, of sub-sections (2), (3) and (4) would show that the insurer cannot appoint a second surveyor just as a matter of course. If for any valid reason the report of the Surveyor is not acceptable to the insurer may be for the reason if there are inherent defects, if it is found to be arbitrary, excessive, exaggerated etc., it must specify cogent reasons, without which it is not free to appoint second Surveyor or Surveyors till it gets a report which would satisfy its interest.
Alternatively, it can be stated that there must be sufficient ground to disagree with the findings of Surveyor/Surveyors. There is no prohibition in the Insurance Act for appointment of second Surveyor by the Insurance Company, but while doing so, the insurance company has to give satisfactory reasons for not accepting the report of the first Surveyor and the need to appoint second Surveyor.‖ ―23) Section 64 UM(2) of the Insurance Act, 1938, reads that `No claim in respect of a loss which has occurred in India and requiring to be paid or settled in India equal to or exceeding twenty thousand rupees in value on any policy of insurance, arising or intimates to an insurer at any time after the expiry of a period of one year from the commencement of the Insurance (Amendment) Act, 1968 shall, unless otherwise directed by the Authority, be admitted for payment or settled by the insurer unless CC/455/2019 Page 22 of 30 he has obtained a report on the loss that has occurred from a person who holds a license issued under this Section to act as a surveyor. In our considered view, the Insurance Act only mandates that while settling a claim, assistance of surveyor should be taken but it does not go further and say that the insurer would be bound whatever the surveyor has assessed or quantified, if for any reason, the insurer is of the view that certain material facts ought to have been taken into consideration while framing a report by the surveyor and if it is not done, it can certainly depute another surveyor for the purpose of conducting a fresh survey to estimate the loss suffered by the insured. In the present case, the insurer has stated in the counter affidavit filed before the National Commission and even before us, why the appointment of second Surveyor was necessitated and also has given valid reasons for appointing second Surveyor and also has assigned valid reason for not accepting the report of Joint Surveyor. The correspondence between the insurer and the Surveyors would indicate the particulars differed by the insurer for differing with the assessment of loss made by the Surveyors. The option to accept or not to accept the report is with the insurer. However, if the rejection of the report is arbitrary and based on no acceptable reasons, the courts or other forums can definitely step in and correct the error committed by the insurer while repudiating the claim of the insured. We hasten to add, if the reports are prepared in good faith, due application of mind and in the absence of any error or ill motive, the insurance company is not expected to reject the report of the Surveyors.‖
20. The Hon‟ble Supreme Court in Khatema Fibres Ltd. v. New India Assurance Company Ltd., 2021 SCC OnLine SC 818, decided on 28.09.2021 has held that:
"32. It is true that even any inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law or which has been undertaken to be performed pursuant to a contract, will fall within the definition of the expression „deficiency‟. But to come within the said parameter, the appellant should be able to establish (i) either that the Surveyor did not comply with the code of conduct in respect of his duties, responsibilities and other professional requirements as specified by the regulations made under the Act, in terms of Section 64UM(1A) of the Insurance Act, 1938, as it stood then; or (ii) that the insurer acted arbitrarily in rejecting the whole or a part of the Surveyor‟s CC/455/2019 Page 23 of 30 Report in exercise of the discretion available under the Proviso to section 64UM(2) of the Insurance Act, 1938.
...
37. Two things flow out of the above discussion, They are (i) that the surveyor is governed by a code of conduct, the breach of which may give raise to an allegation of deficiency in service; and
(ii) that the discretion vested in the insurer to reject the report of the surveyor in whole or in part, cannot be exercised arbitrarily or whimsically and that if so done, there could be an allegation of deficiency in service.
38. A Consumer Forum which is primarily concerned with an allegation of deficiency in service cannot subject the surveyor‟s report to forensic examination of its anatomy, just as a civil court could do. Once it is found that there was no inadequacy in the quality, nature and manner of performance of the duties and responsibilities of the surveyor, in a manner prescribed by the Regulations as to their code of conduct and once it is found that the report is not based on adhocism or vitiated by arbitrariness, then the jurisdiction of the Consumer Forum to go further would stop."
21. At the same time, it is an undisputed position that the rainwater had entered into the storage area where the Complainant‟s stocks were located, through the ventilator. It is the specific observation of the surveyor that there were drainpipes of the roof were passing from the roof and old ventilator communicating the showroom and closed by plywood. The damage occasioned to the stocks due to rainwater entering through the ventilator and the Complainant ought to have taken steps necessary to ensure that such ventilators were adequately sealed to prevent rainwater seeping through and causing such damage to the stocks. Further the storage remained closed for two days. Therefore, while the entry of large volume of rainwater seeped through the ventilator could be termed as inundation, the Complainant CC/455/2019 Page 24 of 30 failed to take necessary steps to secure the insured property against such entry of rainwater. Thus, while the Complainant is entitled for relief under policy, however, there is a lapse on the part of the Complainant which has led to such substantial damage to stocks.
While addressing the scope for considering such deviations in insurance contracts, Hon‟ble Supreme Court in Ashok Kumar versus New India Assurance Co. Ltd., 2023, LiveLaw (SC) 587 has held:
―14) It is well settled in a long line of judgments of this Court that any violation of the condition should be in the nature of a fundamental breach so as to deny the claimant any amount. [see Manjeet Singh vs. National Insurance Company Limited and Another, [(2018) 2 SCC 108]; B.V. Nagaraju vs. Oriental Insurance Co. Ltd., Divisional Officer, Hassan, [(1996) 4 SCC 647], National Insurance Co. Ltd. Vs. Swaran Singh and Others, [(2004) 3 SCC 297] and Lakhmi Chand vs. Reliance General Insurance, [(2016) 3 SCC 100] ]
15) It is an admitted position in the Repudiation Letter and the Survey Report that the theft did happen. What is alleged is that the Claimant was negligent in leaving the vehicle unattended with the key in the ignition. Theft is defined in Section 378 of the IPC as follows:-
―378. Theft.--Whoever, intending to take dishonestly any moveable property out of the possession of any person without that person's consent, moves that property in order to such taking, is said to commit theft.‖ As will be seen from the definition, theft occurs when any person intended to take dishonestly any moveable property out of the possession of any person without that person's consent, moves that property in order to such taking. It is not the case of the Insurance Company that the Claimant consented or connived in the removal of the vehicle, in which event that would not be theft, in the eye of law. Could it be said, as is said in the repudiation letter, that the theft of the vehicle was totally the result of driver Mam Chand leaving the vehicle unattended with the key in the ignition? On the facts of this case, the answer has to be in the CC/455/2019 Page 25 of 30 negative. It is noticed in the repudiation letter that the driver Mam Chand had, after alighting from the vehicle, gone to enquire about the location of Mittal's Farm and that after he went some distance, he heard the sound of the starting of the vehicle and it being stolen away. The time gap between the driver alighting from the vehicle and noticing the theft, is very short as is clear from the facts of the case. It cannot be said, in such circumstances, that leaving the key of the vehicle in the ignition was an open invitation to steal the vehicle.
16) The Court of Appeal in England, in the case of David Topp vs. London Country Bus (South West) Limited, [1993] EWCA Civ 15 had occasion to consider the issue, though in the context of liability of the owner of the vehicle for a fatal accident. The facts as set out in the judgment are as follows:-
―In accordance with usual practice, the driver, Mr. Green, left the bus in that lay-by at the bus stop at about 2.35 p.m. on 24th April 1988. He left it unlocked, with the ignition key in it. He had then a 40 minute rest period before resuming his duties, driving a different bus. There was an arrangement under which the drivers could spend their rest period in the hospital. 23 The expectation was that another driver, about eight minutes after Mr. Green had left the bus in the lay-by, would pick the bus up and drive the same route. But the other driver, who should have picked the bus up at about 2.43 p.m., did not do so because he was feeling unwell. His shift would have been non-compulsory overtime, and he did not report for his overtime. The bus therefore remained in the lay-by. Mr. Green saw it there later and reported that it was still standing there. Therefore, there is no doubt that the depot knew that the bus was there. But, possibly because of shortage of drivers or available staff, nothing was done to pick the bus up that evening. It was taken by somebody who has never been traced just before 11.15 at night, driven for a relatively short distance until the point where Mrs. Topp was knocked down and killed, and it was abandoned round the corner from there.‖ Referring to the judgment of Lord Justice Robert Goff in P. Perl (Exporters) Ltd. vs. Camden London Borough Council [1984] QB 342, the Court of Appeal held as under:-
―In so far as the case is put on the basis that to leave the bus unlocked and with the key in the ignition on the Highway near a public house is to create a special risk in a special category, CC/455/2019 Page 26 of 30 it is pertinent to refer to a passage in the judgment of Lord Justice Robert Goff (as he then was) in P. Perl (Exporters) Ltd. V. Camden London Borough Council [1984] QB 342 at page 359E-F where he said:
―In particular, I have in mind certain cases where the defendant presents the wrongdoer with the means to commit the wrong, in circumstances where it is obvious or very likely that he will do so - as, for example, where he hands over a car to be driven by a person who is drunk, or plainly incompetent, who then runs over the plaintiff...‖ But the sort of cases to which Lord Justice Robert Goff was there referring are far different from the present case. It may be added that that there is no evidence that the malefactor had been frequenting the public house that is shown in the picture; we do not know who he was, nor is there any evidence or presumption that persons who do frequent that particular public house are particularly likely to steal vehicles and engage in joy-riding.‖ (underlining is ours) The above reasoning appeals to us to conclude that the present case was an eminently fit case, where the claim at 75% ought to have been awarded on a non-standard basis. Even if there was some carelessness, on the peculiar facts of this case, it was not a fundamental breach of Condition No.5 warranting total repudiation. It was rightly so ordered by the District Forum and affirmed by the State Commission.
17) Learned counsel for the Insurance Company, in his written submissions, has placed before us an unreported order dated 29.03.2022 passed by this Court in SLP (C) No. 6518 of 2018 titled Kanwarjit Singh Kang vs. M/s ICICI Lombard General Insurance Co. Ltd. & Anr. to support his case on the breach of Condition No.5.
We have carefully perused the order. In the said order, it is recorded that concurrently the Claimant lost before the fora below and it is also recorded that the State Commission did not find the ground of leaving the ignition keys in the vehicle to be a valid reason to repudiate the claim. However, on the ground of unexplained and inordinate delay in lodging the FIR, the repudiation was upheld. In that case, while the loss was on 25.03.2010, the intimation to Police was only on 02.04.2010 so clearly it was a breach of Condition No.1. No doubt, in the penultimate paragraph of the order it is recorded that the want of reasonable care on the part of the petitioner in that case operated heavily against the petitioner and it was concluded CC/455/2019 Page 27 of 30 that the repudiation could not be faulted. However, the primary reason for repudiation was the violation of condition No.1 viz. the delay in intimation to the Police. Further since there was a fundamental breach of Condition No.1, there was no occasion to raise points for settlement of claim on non-standard basis. There is no whisper about the breach of Condition No.5 being not a fundamental breach. We find the present case, on facts, completely different as there is no breach of Condition No.1 because the intimation to the police was immediate. There have been concurrent awards by the District Forum and State Commission on non- standard basis by applying Nitin Khandelwal (supra) and Amalendu Sahoo (supra). Hence, the order will in no manner assist the respondent-Company.
18) In Amalendu Sahoo (supra), this Court noticed the guidelines issued by the New India Assurance Co. Ltd. in settling claims on non-standard basis. The guidelines read as under:-
Sl.No Description Percentage of settlement
(i) Under declaration of Deduct 3 years' difference in licensed carrying premium from the amount of capacity. claim or deduct 25% of claim amount, whichever is higher.
(ii) Overloading of vehicles Pay claims not exceeding 75% of beyond licensed admissible claim.
carrying capacity.
(iii) Any other breach of Pay up to 75% of admissible warranty/condition of claim.‖ policy including limitation as to use.
The above guidelines were followed by this Court in Amalendu Sahoo (supra) as is clear from para 14 of the said judgment. The District Forum and the State Commission have rightly applied Amalendu Sahoo (supra) to the facts of the present case and awarded 75% on non-standard basis.
19) Nitin Khandelwal (supra) and Amalendu Sahoo (supra) lay down the correct formula that where there is some contributory factor, a proportionate deduction from the assured amount would be all that the Insurance Company can aspire to deduct. We are inclined to accept the plea of the appellant that in the case at hand, on the facts governing the scenario, Clause (iii) of the table set out in para 14 of Amalendu Sahoo (supra) is attracted and CC/455/2019 Page 28 of 30 the District Forum and the State Commission were justified in awarding the entire 75% of the admissible claim.‖
22. Applying the reasoning of the Hon‟ble Supreme Court, it is evident that although there was a lapse on the part of the Complainant which resulted in leakage of rainwater, such lapse by itself does not constitute a fundamental breach of the insurance policy. We, therefore, are of the considered view that the Complainant‟s claim be allowed on non-standard basis @ 75% of the Net Assessed Loss as determined by the independent surveyor.
23. The Surveyor determined the net adjusted loss suffered by the complainant of Rs.45,19,495. While the surveyor recommended the said claim as not within the scope of the policy, for the reasons stated above, we are of the considered view that the stocks damaged was due to inundation of the rainwater and thus the loss sustained by the Complainant is within the scope of the policy in question. At the same time, considering the entire facts and circumstances of the case, including the above precedents, we are of the considered view that the Complainant‟s claim be allowed on non-standard basis @ 75% of Rs.45,19,495, the Net Assessed Loss as determined by the surveyor.
24. In view of the above, the Consumer Complaint No.455 of 2019 is partly allowed and disposed of as follows:
CC/455/2019 Page 29 of 30ORDER I. The Opposite Party/Insurer is directed to pay the Complainant Rs.33,89,621 (75% of Rs.45,19,495), along with simple interest @ 6% per annum from the date of repudiation of the claim till the date of final payment, within a period of two months from the date of this order. In the event of delay the rate of simple interest applicable for the entire period shall be @ 8% per annum.
II. The OP/Insurer is also to pay Rs.25,000 to the Complainant as costs of litigation.
25. With these directions, Consumer Complaint No.455 of 2019 is disposed of.
26. All pending Applications, if any, also stand disposed of accordingly.
......................................................... (AVM J. RAJENDRA AVSM VSM (Retd.)) PRESIDING MEMBER ............................................. (ANOOP KUMAR MENDIRATTA) MEMBER /bs CC/455/2019 Page 30 of 30