Madras High Court
M/S.Thiruvannamalai Pothys vs The United India Insurance Company Ltd on 21 June, 2022
Author: Senthilkumar Ramamoorthy
Bench: Senthilkumar Ramamoorthy
C.S.(Comm. Div) No.444 of 2017
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Judgment reserved on 22.04.2022
Judgment pronounced on 21.06.2022
CORAM
The Hon'ble Mr. Justice SENTHILKUMAR RAMAMOORTHY
Civil Suit (Comm.Div) No.444 of 2017
M/s.Thiruvannamalai Pothys,
Rep. by its Proprietor Mr.K.Sekar,
No.57A, Theradi Street,
Thiruvannamalai – 606 601. ... Plaintiff
vs.
1.The United India Insurance Company Ltd.
Having Regs. Office at No.24, Whites Road,
Chennai – 600 014.
2.United India Insurance Company Ltd.
Having Branch Office at No.96, Big Street,
1st Floor, Thiruvannamalai.
3.Bank of Baroda,
Rep. by its Branch Manager,
Thiruvannamalai Branch,
No.15, R.R. Complex, Polur Road,
Thiruvannamalai – 606 601. ... Defendants
_____________
https://www.mhc.tn.gov.in/judis
Page No.1 of 32
C.S.(Comm. Div) No.444 of 2017
The suit is filed under Order VI Rule 1 of O.S. Rules r/w Order
VII Rule 1 of CPC to direct the Defendants to pay a sum of Rs.6,82,49,000/-
together with future interest thereon @ 24% per annum from the date of
plaint till the date of realization and for the costs of the suit.
For Plaintiff : Mr.M.Santhanaraman
and Mr.M.R.Sivakumar
For Defendants : M/s.Nageswaran & Narichania
For D1 and D2
Mr.P.V.Ramachandran for D3
JUDGMENT
The suit was filed by the insured under a standard fire and special perils policy against the insurer for recovery of a sum of Rs.6,82,49,000/- with interest thereon at 24% per annum from the date of plaint till the date of realization.
2. The Plaintiff is a proprietary concern, represented by its proprietor, Mr.K.Sekar. The Plaintiff is engaged in the business of selling garments. The Plaintiff stated that its stocks-in-trade are purchased from suppliers either on cash and carry or credit basis, and that the monthly _____________ https://www.mhc.tn.gov.in/judis Page No.2 of 32 C.S.(Comm. Div) No.444 of 2017 turnover is about Rs.25,00,000/-. For purposes of the above business, the Plaintiff established a showroom in Thiruvannamalai on 29.08.2012 in premises measuring about 7500 sq.ft. and consisting of three floors. According to the Plaintiff, garments were purchased and stocked in the said premises. The Plaintiff also incurred expenditure towards infrastructure such as false ceiling, electrical work, facelift, wood and glass work and air- conditioning. The shop was insured by the first and second Defendants(the Insurer) under a standard fire and special perils policy bearing Policy No.012102/11/13/11/00000470, which was valid from 17:00 hours on 25.03.2014 until midnight of 24.03.2015. The insured perils were enumerated in the policy and covered 12 perils such as fire, lightning, explosion, storm, etc. The sum insured under the policy is Rs.6,82,49,000/-. The original copy of the insurance policy was mortgaged with the Bank of Baroda, Thiruvannamalai Branch, the third Defendant herein.
3. The Plaintiff stated that there was a fire at the shop on 20.10.2014 at about 8:00 p.m. On the same date, the Plaintiff was informed about the fire. Therefore, the Plaintiff lodged a police complaint, which was registered under Crime No.536 of 2014 on the file of the Inspector of _____________ https://www.mhc.tn.gov.in/judis Page No.3 of 32 C.S.(Comm. Div) No.444 of 2017 Police, Town Police Station, Thiruvannamalai. The Plaintiff informed the Insurer about the fire accident and submitted a claim on 24.10.2014 for a sum of Rs.7,49,32,000/-. The said claim covered the value of stock, electrical equipments and other fittings. The police authorities investigated the cause of the accident on the basis of the report of the Tamil Nadu Electricity Board and the Assistant Director of the Tamil Nadu Forensic Sciences Department. On such basis, the final report dated 27.10.2015 was filed before the Judicial Magistrate No.1, Thiruvannamalai, stating that the fire was caused accidentally.
4. The Insurer appointed an independent surveyor, namely, M/s.Meticulous Surveyors, to conduct a survey and also appointed one Mr.M.S.Prasad as the Investigator. Subsequently, the Insurer issued a letter of repudiation on 31.03.2016 rejecting the Plaintiff's claim. Since the letter of repudiation was sent to the address at which the shop was functioning earlier, it was not received until the repudiation letter was sent to the other shop of the Plaintiff on 12.04.2016. According to the Plaintiff, the reasons specified in the repudiation letter, namely, the breach of condition Nos.1, 3(a) and (b) of the fire policy are not valid. The Plaintiff stated that the _____________ https://www.mhc.tn.gov.in/judis Page No.4 of 32 C.S.(Comm. Div) No.444 of 2017 dispute between the Plaintiff, as the tenant, and his landlord is being made an excuse to evade the liability of the Insurer. According to the Plaintiff, the fact that the landlord sealed the main entrance door of the premises by welding the lock did not, in any manner, enhance the risk or cause the fire. The Plaintiff also pointed out that the report of the statutory authority, which is the Forensic Sciences Department, was ignored by the Insurer. Similarly, the final report of the police was also disregarded. In support of the claim, the Plaintiff relied upon the purchase bills for purchase of garments.
5. The Insurer (the first and second Defendants) filed a common written statement. In the said written statement, the Insurer alleged that the suit is not maintainable and is liable to be dismissed for non-joinder of the Bank of Baroda. Based on the said objection, the Bank of Baroda was impleaded as the third Defendant. According to the Insurer, the claim form discloses that the insured premises was closed for almost two months prior to the alleged fire accident. The Insurer relied upon Clause 6 (1) of the insurance policy and stated that the notice of claim should be provided to the Insurer within 15 days from the date of loss or damage. On account of _____________ https://www.mhc.tn.gov.in/judis Page No.5 of 32 C.S.(Comm. Div) No.444 of 2017 failure to adhere to the condition, it is stated that the suit claim is liable to be rejected.
6. The Insurer further stated as follows. M/s.Meticulous Surveyors Private Limited conducted a detailed survey of the property and submitted a report dated 26.02.2015, which disclosed that the lease for the premises expired on 28.08.2014 and had not been renewed as on the date of the fire accident. The landlord had disconnected the electricity connection to the Plaintiff's show room and the Plaintiff had installed a 50 KVA diesel generator set (DG set) for the supply of power. The change in source of electricity supply altered the risk at the premises. Thus, material facts were not disclosed. The Plaintiff's premises was closed and the shutter door was welded to an iron rod, thereby preventing the Plaintiff from carrying on business from 14.09.2014. Consequently, no business activity was carried on at the premises for a period of 36 days, i.e. from 14.09.2014 to 20.10.2014. The surveyor concluded that the fire was not an accident but was caused by external means. The Plaintiff failed to provide the requisite documents, including accounts to reflect the stock position as on the date of the alleged accident.
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7. The Insurer also relied upon the Investigator's Report dated 17.02.2016 wherein it was concluded that the cause of fire was not accidental. The Insurer alleged that the Plaintiff committed breach of condition No.1, 3(a) and (b) of the policy and that, therefore, the Insurer was justified in repudiating the claim of the Plaintiff. The Insurer also asserted that no part of the cause of action arose within the jurisdiction of this Court and that this Court does not have territorial jurisdiction.
8. The third Defendant filed a written statement wherein it was stated that the obligation to pay the insurance premium was imposed on the Plaintiff and that the right to receive compensation in relation to the fire accident is also conferred on the Plaintiff. According to the third Defendant, the dispute is between the Plaintiff and the first and second Defendants.
9. Upon completion of pleadings, the following issues were framed:
(i) Whether the Court has jurisdiction to try the suit?
(ii) Whether the Plaintiff is entitled to the claim under the policy issued by the second Defendant _____________ https://www.mhc.tn.gov.in/judis Page No.7 of 32 C.S.(Comm. Div) No.444 of 2017 and whether the Plaintiff had acted in a diligent manner and maintained proper stocks / registers to prove the loss?
(iii) Whether there was breach of policy conditions by the Plaintiff as concluded by the second Defendant?
(iv) Whether the third Defendant is a necessary party to the suit?
(v) Whether the repudiation of the claim by the Defendants was legal?
(vi) Whether the first and second Defendants are liable to be pay the suit claim?
(vii) To what reliefs are the parties entitled to?
10. The Plaintiff adduced oral evidence by examining K.Sekar, Proprietor, as P.W.1. Exs.P1 to P15 were exhibited in course of the examination-in-chief of P.W.1. P.W.1 was cross-examined by learned counsel for the first and second Defendants. The first and second Defendants examined two witnesses. Mr.M.K.Muthuvelu, Licensed Surveyor, was examined as D.W.1 and Exs.D1 to D7 were exhibited through him. The Assistant Manager of the first and Second Defendants, Mrs.U.K.Sujatha, was examined as D.W.2 and Exs.D8 to D12 were _____________ https://www.mhc.tn.gov.in/judis Page No.8 of 32 C.S.(Comm. Div) No.444 of 2017 exhibited through her. D.W.1 and 2 were cross-examined by learned counsel for the Plaintiff.
11. The parties filed written submissions. Oral submissions on behalf of the Plaintiff were made by Mr.M.Santhanaraman, learned counsel; on behalf of the first and second Defendants by M/s.Nageswaran and Narichania, learned counsel; and on behalf of the third Defendant by Mr.P.V.Ramachandran, learned counsel.
Issue No.1
12. Issue No.1 relates to the jurisdiction of the Court to try the suit. The Insurer asserted that the Plaintiff's shop was at Thiruvannamalai, the insurance policy was taken from the Branch Office at Thiruvannamalai and the accident occurred at Thiruvannamalai. Therefore, the Insurer contended that this Court does not have territorial jurisdiction. This contention was refuted by the Plaintiff on the basis that the first Defendant has its registered office and carries on business at Chennai within the jurisdiction of this Court. The Plaintiff also stated that Application No.2063 of 2017 was filed to grant leave to institute the suit before this Court. The _____________ https://www.mhc.tn.gov.in/judis Page No.9 of 32 C.S.(Comm. Div) No.444 of 2017 said application was allowed by order dated 06.04.2017 after considering the submission of the Applicant/Plaintiff that the first Defendant has an office in Chennai, which is within the jurisdiction of the Court. The Plaintiff contended that the Insurer did not file an application to revoke leave. In support of the contention that this Court does not have jurisdiction, the Insurer relied on the judgment of the Hon'ble Supreme Court in M/s.Patel Roadways Ltd. Bombay v. M/s.Prasad Trading Company, AIR 1992 SC 1514 (Patel Roadways), and, in particular, paragraphs 9 & 10 of the said judgment. On the other hand, the Plaintiff relied upon the Division Bench judgment of this Court in V.Selladurai v. Nethaji and another, 2006 SCC Online Mad 781, wherein, this Court relied upon Clause 12 of the Letters Patent and concluded that a suit may be instituted either where the defendant resides, carries on business, or personally works for gain, or where the cause of action arises wholly or in part. The Plaintiff also pointed out that Section 20 of the Code of Civil Procedure, 1908 (the CPC) is not applicable to suits filed on the original side of this Court by virtue of Section 120 thereof. Instead, the relevant provision is Clause 12 of the Letters Patent.
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13. As correctly contended by learned counsel for the Plaintiff, Section 20 of CPC does not apply to suits filed on the original side of this Court. As regards Clause 12 of the Letters Patent, it provides for suits to be filed before this Court in its ordinary original civil jurisdiction either if the cause of action has arisen wholly, or, in case the leave of the Court was first obtained, partly, within the jurisdiction of this Court or if the defendant at the time of commencement of the suit resides or carries on business or personally works for gain within the limits of the court's jurisdiction. The undisputed position is that the suit was instituted after obtaining leave to sue under Clause 12 of the Letters of Patent. Clause 12 of the Letters of Patent does not contain the following explanation, which is contained in Section 20 of CPC.
''A Corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place''.
The decision of the Hon'ble Supreme Court in Patel Roadways hinged on the second limb of the explanation to Section 20. Therefore, as correctly contended by learned counsel for the Plaintiff, Patel Roadways and New _____________ https://www.mhc.tn.gov.in/judis Page No.11 of 32 C.S.(Comm. Div) No.444 of 2017 Moga Transport Company v. United India Insurance Company Limited, AIR 2004 SC 2154, are not applicable to a suit filed under Clause 12 of the Letters Patent. Thus, issue No.1 is decided in favour of the Plaintiff and against the Defendants.
14. Issue No.4 deals with the question of whether the third Defendant is a necessary party to the suit. By order dated 03.10.2019 in Application No.5764 of 2019, this Court concluded that the third Defendant should be impleaded and directed the Plaintiff to carry out necessary amendments in the plaint. Therefore, Issue No.4 is no longer relevant and does not warrant discussion.
15. Issue Nos.2, 3 and 5 are closely inter-linked. These issues pertain to the claim made by the Plaintiff under the insurance policy and whether such claim is sustainable. Therefore, all these issues are considered and determined in a consolidated manner.
16. The insurance policy is on record as Ex.P3, Ex.D1 and Ex.D9. The letter of repudiation dated 31.03.2016 was exhibited as Ex.D12 through _____________ https://www.mhc.tn.gov.in/judis Page No.12 of 32 C.S.(Comm. Div) No.444 of 2017 D.W.2. The said letter of repudiation cites breach of condition No.1, 3(a) and (b) of the policy as the grounds for repudiation. Therefore, the said three conditions should be extracted. Condition No.1 is extracted below:
“1. This policy shall be voidable in the event of mis- representation, mis-description or non disclosure of any material particulars.” The Insurer relied upon this clause and the letter dated 31.12.2015 (Ex.D7) from Meticulous Surveyors Private Limited to the Insurer and alleged non disclosure of the following: expiry of the lease/ unauthorised occupation; the dispute between the Plaintiff (tenant) and his landlord and the consequential disconnection of electricity supply; the change in source of power supply; tampering of the main entrance shutter to bar entry to the premises and; closure of the premises for 36 days continuously before the fire. The Insurer also alleged that the fire was not accidental. The insurance policy was issued on 25.03.2014. Since the lease was in force up to 28.08.2014, the expiry thereof was subsequent to the date of issuance of the policy. The disconnection of electricity supply and the sealing of the premises on 14.09.2014 also took place subsequently. Therefore, it should be examined whether Condition 1 also imposes disclosure obligations in relation to events that occurred after the issuance of the policy.
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17. The Hon'ble Supreme Court examined this question in paragraph 12 of Life Insurance Corporation of India and Others v. Asha Goel and Another, (2001) 2 SCC 160 (Asha Goel) and held that the duty to disclose material facts runs throughout the continuance of the contract of insurance and that it is binding on both parties to the contract. Paragraph 12, in relevant part, is extracted below:
“...The contracts of insurance including the contract of life assurance are contracts uberrima fides and every fact of material (sic material fact) must be disclosed, otherwise, there is good ground for rescission of the contract. The duty to disclose material facts continues right up to the conclusion of the contract and also implies any material alteration in the character of the risk which may take place between the proposal and its acceptance. If there are any misstatements or suppression of material facts, the policy can be called into question.” In Asha Goel, the Court also formulated a test to determine the circumstances when the duty to disclose is triggered and held as follows:
_____________ https://www.mhc.tn.gov.in/judis Page No.14 of 32 C.S.(Comm. Div) No.444 of 2017 “...For determination of the question whether there has been suppression of any material facts it may be necessary to also examine whether the suppression relates to a fact which is in the exclusive knowledge of the person intending to take the policy and it could not be ascertained by reasonable enquiry by a prudent person.” Therefore, in order to determine whether non-disclosure of facts or suppression constitutes breach of the conditions of the insurance policy, the test is whether the suppression is of a material fact, which, in turn, means a fact that increases the risk of the insured perils and was not previously disclosed. The admitted position is that the Plaintiff did not inter alia disclose to the Insurer that the lease had expired or that electricity supply was disconnected or that entry to the premises had been barred by the landlord.
18. In order to determine the materiality of the non disclosed facts, Condition Nos. 3 (a) and (b) are set out below and considered next:
_____________ https://www.mhc.tn.gov.in/judis Page No.15 of 32 C.S.(Comm. Div) No.444 of 2017 “3. Under any of the following circumstances the insurance ceases to attach as regards the property affected unless the insured, before the occurrence of any loss or damage, obtains the sanction of the company signified by endorsement upon the policy by or on behalf of the company:-
(a) If the trade or manufacture carried on be altered, or if the nature of the occupation of or other circumstances affecting the building insured or containing the insured property be changed in such a way as to increase the risk of loss or damage by insured perils.
(b) If the building insured or containing the insured property becomes unoccupied and so remains for a period of more than 30 days (this condition is not applicable to dwellings).'' With regard to Condition 3(a), the questions that falls for consideration are whether: (i) the trade or manufacture that was carried on was altered [the first limb of Condition 3(a)]; or (ii) the nature of occupation or other circumstances affecting the building insured or containing the insured property was changed in such a way as to increase the risk of loss or damage by the insured perils [the second limb of Condition 3(a)]. The Plaintiff was _____________ https://www.mhc.tn.gov.in/judis Page No.16 of 32 C.S.(Comm. Div) No.444 of 2017 in the business of selling garments and remained in the same business as on the date of the accident. Therefore, the first limb of Condition 3(a) is not attracted. As regards the second limb, the nature of occupation was arguably changed inasmuch as the Plaintiff became either a tenant by holding over or a statutory tenant instead of a tenant under the lease deed and the entry to the premises was barred, as on the date of the accident, by welding an iron rod at the shutter door. The shop was also kept continuously closed for a period of 36 days. In order to attract the second limb of Condition 3(a), however, it is necessary that the change in the nature of occupation or other circumstances affecting the building should increase the risk of loss or damage by the insured perils. To put it differently, if the change in the nature of tenancy or the disputes between the Plaintiff and his landlord increased the risk of fire, the Plaintiff would have breached Condition 3(a) unless the Plaintiff had informed the Insurer and obtained prior sanction by way of an endorsement on the policy in respect thereof.
On the other hand, if the change in nature of the tenancy and events such as the sealing of the premises by the landlord or the disconnection of electricity supply did not increase risk, Condition 3(a) is not breached. While on the issue of risk, it should be borne in mind that an insurer agrees to underwrite _____________ https://www.mhc.tn.gov.in/judis Page No.17 of 32 C.S.(Comm. Div) No.444 of 2017 specific perils of the insured by making an assessment of potential risk on the basis of disclosed facts and prior experience in the business. Therefore, as instructed by Asha Goel, disclosure of all material facts, which could impact risk, both at the time of issuance of the policy and during the term of the policy is vital.
19. As regards change in the nature of tenancy, there is no basis to conclude that the change from tenancy under the lease to tenancy by holding over or statutory tenancy per se increased the risk. The disputes between the landlord and tenant and the actions consequential thereto would qualify as other circumstances affecting the building as per the second limb of Condition 3(a) and, therefore, should be subject to examination. Upon expiry of the lease, the landlord disconnected the regular electricity supply and also barred entry to the premises. Once again, disconnection per se does not increase risk and, in fact, may lower risk. The sourcing of power through alternative means, upon disconnection, is a distinct matter and could have an impact on risk. The disconnection of regular electricity supply would have increased risk manifold if the Plaintiff had drawn electricity by unauthorized tapping of an alternative source of supply from the Tamil _____________ https://www.mhc.tn.gov.in/judis Page No.18 of 32 C.S.(Comm. Div) No.444 of 2017 Nadu Electricity Board, but the Insurer does not even make such an allegation. The evidence on record discloses that the Plaintiff used a DG set as the source of power. Significantly, the installation of the DG set was disclosed in the proposal form dated 24.03.2014 (Ex.D8) and the fact that the DG set was included in the insured block of assets in the insurance policy (Ex.P3) proves that the Insurer had knowledge of both the installation and likely use, whenever required, of the DG set. The only undisclosed fact was the likely continual use of the DG set, but this pales into insignificance in view of the non-use of the shop for about 36 days ending on the date of the fire. Thus, the disconnection of the power supply and the use of the DG set did not constitute a breach of Condition 3(a).
20. Although the alleged breach of Condition 3(a) should be tested from the perspective of potential impact on risk at the time of occurrence of the material event and not with reference to the actual event or contingency that triggered the claim on the policy, it is, nonetheless, of some value to examine documents that throw light on the actual cause of the fire. The Final Report (Ex.P8) of the police, which was submitted on the basis of inspection, information from witnesses and reports from the _____________ https://www.mhc.tn.gov.in/judis Page No.19 of 32 C.S.(Comm. Div) No.444 of 2017 Forensic Sciences Department reveals that the cause of the fire is neither an electrical short circuit nor the presence of any inflammable fuels. Therefore, the change in source of power supply of the premises did not cause the accident.
21. Whether the entry barrier resulting in the closure of the shop was a material event that increased risk is examined next. Ordinarily, the lack of access for the insured to the insured premises would be construed as a material fact that increases risk because it becomes harder for the insured to take remedial or mitigative measures upon occurrence of an insured peril. In this case, however, Condition 3(b), which invalidates the policy if the building remains unoccupied for more than 30 days, was deleted. As regards Condition 3(b), the Plaintiff relied upon the answers of D.W.2 to questions 22 and 23 in support of the submission that Condition No.3(b) was deleted. The Plaintiff also relied upon the survey report, which was marked as Ex.D6, at internal page 22, wherein there is a reference to the deletion of Condition 3(b). More importantly, as briefly discussed above, the policy indicates categorically that Condition 3(b) was deleted. Hence, Condition 3(b) cannot be cited by the Insurer to justify the repudiation. _____________ https://www.mhc.tn.gov.in/judis Page No.20 of 32 C.S.(Comm. Div) No.444 of 2017
22. The Hon'ble Supreme Court in Satwant Kaur Sandhu v. New India Assurance Co. Ltd,(2009) 8 SCC 316, held, in relevant part, as under:
''22...Any fact which goes to the root of the contract of insurance and has a bearing on the risk involved would be ''material''.'' When viewed in the above contractual and factual context, the policy cannot be construed as invalidated by non-disclosure of the barrier on entry. In other words, it is not material enough to go to the root of and invalidate the insurance policy. Therefore, it cannot be said that the risk qua the insured perils increased on account of any of the above factors.
23. As regards the alleged breach of Condition 6(i), the Plaintiff contended that the letter of repudiation did not make reference to the alleged breach of Condition 6(i). Without prejudice, the Plaintiff relied on question 17 and the answer thereto of D.W.2 to state that the claim form was signed on 21.10.2014, which is within 15 days from the date of the accident. The Plaintiff also relied upon the answers of D.W.1 to questions 2 and 3 wherein D.W.1 admitted that he had received the requisition to inspect the _____________ https://www.mhc.tn.gov.in/judis Page No.21 of 32 C.S.(Comm. Div) No.444 of 2017 suit property on 21.10.2014. From the above, it is clear that Condition 6(i) was not contravened.
24. While a contract of insurance requires utmost good faith, the specific conditions only mandate the invalidity of the policy if the change in circumstances increased the risk of the insured perils. For reasons set out above, the events cited by the Insurer did not increase the risk of the insured perils. Therefore, it is concluded that the Plaintiff did not commit a breach of Conditions No.1, 3(a) or even 6(i) of the insurance policy. As regards Condition 3(b), the evidence conclusively indicates that Condition 3(b) was deleted. Therefore, Issue Nos.2, 3 and 5 are decided in favour of the Plaintiff and against the Insurer.
25. Although it was concluded that the Plaintiff did not breach the conditions discussed above and that, consequently, the repudiation by the Insurer was not legal, the sustainability of the claim is a distinct matter which remains to be addressed. The suit claim is for a sum of Rs.6,82,49,000/-. The validity of the claim should be tested against the insurance policy. While the sum assured under the insurance policy is _____________ https://www.mhc.tn.gov.in/judis Page No.22 of 32 C.S.(Comm. Div) No.444 of 2017 Rs.6,82,49,000/-, the break up of the sum assured is relevant. The block description annexed to the insurance policy attributes the following values to the insured items: Rs.5,50,00,000/- to the stock-in-trade; Rs.59,00,000/- to the furniture, fixtures and fittings; Rs.54,99,000/- to the air-conditioners and diesel generator; and Rs.18,50,000/- to the tiles, floorings and elevation works, etc., thereby aggregating to a sum of Rs.6,82,49,000/-. In support of the claim, the Plaintiff produced the invoices in relation to the purchase of stock. These invoices were exhibited as Exs.P10 to P15(6 series' of invoices). Significantly, the Plaintiff did not produce its stock statement. At paragraph 13 of the plaint, it was pleaded that the stock statements for the relevant period would reveal the availability of stock on the date of accident. In the proof affidavit of PW1, at paragraph 13, he stated that “the stock statements for the relevant period would reveal the availability of stock on the date of accident and the quantum of loss suffered by the plaintiff....” However, the stock statement was not produced in course of trial by citing the destruction thereof during the fire. The Plaintiff also stated that the original purchase bills/invoices were destroyed in the fire and, therefore, produced the photocopies of the purchase bills by stating that the photocopies were available with the Plaintiff's Auditor. Thus, from the _____________ https://www.mhc.tn.gov.in/judis Page No.23 of 32 C.S.(Comm. Div) No.444 of 2017 evidence on record, it is not possible to conclude with certainty that the stock-in-trade purchased as per the purchase bills corresponds to the stock- in-trade stored at the premises on the date of the accident.
26. The Surveyor's report should be closely examined with regard to the stock which was stored at the shop when the accident occurred. The Surveyor concluded that the aggregate value of stock at the relevant site based on actual count was Rs.2,83,47,807/-. According to the Plaintiff, the Surveyor disregarded Exs.P10 to P15. In particular, the Plaintiff contended that the Surveyor(D.W.1) admitted in response to question 17 during cross examination that Exs.P10 to P15 were given to him, and that in spite of being provided copies of the purchase bills, the Surveyor only took into account the stock that remained intact and disallowed the claim in respect of stocks that were gutted. The Plaintiff also contended that the Surveyor admitted in response to questions 20 to 23 that the entire stock stored on the ground floor was gutted and that he did not take the value of such stock into account. Similarly, he did not take into account the value of gutted stocks in the first and second floors. Questions 22 and 23 and the answers thereto of DW1 are set out below:
_____________ https://www.mhc.tn.gov.in/judis Page No.24 of 32 C.S.(Comm. Div) No.444 of 2017 “Q22. Is it correct that the actual quantity of stocks kept in ground, 1st and 2nd floor and gutted in fire were not taken into consideration for arriving at the actual quantum of loss due to fire?
A. Yes Q.23.Is it correct to state that the stocks totally gutted which could not be identified the value of that was not taken into consideration?
A. Yes, for the reasons the items could not be identified and the insured has not given the bills for such items that got totally gutted in the fire.” The Plaintiff also pointed out that the Surveyor deducted the salvage value of stocks but did not hand over such stocks to the Plaintiff. Questions 25 and 26 and the answers thereto of DW1 are set out below:
“Q.25. Is it correct that the recovered stocks value of which was deducted from the actual cost were left in the subject premises and the value thereof was disallowed from the actual value of the stocks?
A. Yes.
_____________ https://www.mhc.tn.gov.in/judis Page No.25 of 32 C.S.(Comm. Div) No.444 of 2017 Q.26. Is it correct to state that you have instructed the plaintiff not to sell the recovered stocks till the settlement of claim?
A. Yes.”
27. While the Plaintiff produced the purchase bills for an aggregate sum of Rs.7,49,32,000/-, the break up of the items insured under the policy indicates that the value of Rs.5,50,00,000/- was attributed to the stocks-in-trade. Therefore, it is reasonable to use this as the maximum amount that may be claimed towards stock-in-trade. The evidence on record also shows that only the value of available stocks, including damaged stocks, was taken into account and not the value of fully gutted stocks. Consequently, the valuation of loss as regards the stock-in-trade by the Surveyor does not reflect the total value of damaged stocks-in-trade. The Plaintiff, however, failed to produce the stock statement indicating the quantity and value of stocks actually available at the premises at the time of or even at a time reasonably proximate to the date of the accident. Therefore, there is no basis to conclude with any degree of conviction that stocks-in-trade of the value of Rs.7,49,32,000/- were stored in the shop at _____________ https://www.mhc.tn.gov.in/judis Page No.26 of 32 C.S.(Comm. Div) No.444 of 2017 the time of the accident. On examining the purchase bills, these bills indicate that the relevant stocks were purchased between March and September 2014. Thus, some of the stocks were purchased more than six months prior to the fire. The possibility that some of the relevant stock was either stored in the other shop of the Plaintiff or had been sold prior to the date of the accident cannot be ruled out on the basis of the available evidence. The Plaintiff has also not correlated the purchase invoices and the stocks to which value was attributed by the Surveyor, even by way of oral evidence, so as to point out the purchase invoices for which no value was attributed.
28. The Plaintiff relied upon the judgment in M/S.Sriraj Steels P Ltd v. United India Insurance Co. Ltd, 2017 SCC Online Mad 8027,(Sriraj Steels) and, in particular, paragraph 21 thereof to contend that the failure of the surveyor to inspect the goods and the rejection of the claim without assigning cogent reasons was sufficient to uphold the claim of the plaintiff therein on the basis of bills and invoices. The Plaintiff also pointed out that the said judgment was affirmed by the Division Bench of this Court in United India Insurance Company v. Sriraj Steels P Ltd 2021 SCC Online _____________ https://www.mhc.tn.gov.in/judis Page No.27 of 32 C.S.(Comm. Div) No.444 of 2017 Mad. 2700 (Sriraj Steels D.B). On the contrary, the Insurer relied upon the judgment of the Hon'ble Supreme Court in Khatema Fibres Ltd v. New India Assurance Company Ltd and another IV (2021) CPJ 1 (SC) and, in particular, paragraphs 32,37 and 38 thereof to conclude that due weight should be given to the report of the surveyor.
29. Apart from the stock-in-trade, the Surveyor also inspected and valued other items such as the centralized AC, electrical cables, camera, furniture, tiles, etc. while arriving at a net loss of Rs.2,25,23,012/-. As discussed above, the Plaintiff has failed to establish the value of stock available at the insured premises when the accident occurred. While it was contended that the stock statement was destroyed in the fire, it is unconvincing to state that photocopies of purchase bills were available with the auditor but not stock statements. Although Sriraj Steels was relied on to contend that the Surveyor should not reject the claim without assigning cogent reasons, in this case, the Surveyor cannot be faulted for not considering fully gutted and unidentifiable stocks in the absence of a stock statement or a document correlating the purchase bills and the stocks at site. Thus, in view of the failure of the Plaintiff to discharge the burden of proof _____________ https://www.mhc.tn.gov.in/judis Page No.28 of 32 C.S.(Comm. Div) No.444 of 2017 in such regard, the only recourse available is to go by the report of the Surveyor. As such, the Plaintiff is entitled to a sum of Rs.2,25,23,012/-. This sum should have been paid to the Plaintiff within 30 days from the date of the Surveyor's report, i.e. on or before 25.03.2015. On account of non payment, the Plaintiff is entitled to interest on the sum from 25.03.2015. By taking into account the prevailing rate of interest at the relevant point of time, interest is awarded at the rate of 12% per annum. In addition, the Plaintiff is entitled to the recovered stocks, the value of which was deducted while making the assessment of the claim.
30. In the result, the suit is partly decreed by directing the first and second Defendants to pay the Plaintiff the sum of Rs.2,25,23,012/- along with interest thereon at 12% per annum from 25.03.2015 till the date of realization. The Plaintiff is also entitled to the possession of the recovered stocks, the value of which was deducted by the Surveyor, so as to deal with the same as deemed fit by the Plaintiff. On the basis of the loser pay principle, the Plaintiff is entitled to costs. As regards court fee, the Plaintiff succeeded in its claim only to the extent of Rs.2,25,23,012/- and is, therefore, entitled to costs of Rs.2,30,000 towards court fee. In addition, the _____________ https://www.mhc.tn.gov.in/judis Page No.29 of 32 C.S.(Comm. Div) No.444 of 2017 Plaintiff is entitled to reasonable lawyer's fees and other expenses. In the aggregate, the first and second Defendants are directed to pay a sum of Rs.4,50,000/-as costs to the Plaintiff.
21.06.2022 Index : Yes Internet : Yes rrg Plaintiff's witness:
1.Mr.R.Sekar : P.W.1 Defendants' witnesses:
1.Mr.M.K.Muthuvelu : D.W.1
2.Mrs.U.K.Sujatha : D.W.2 Documents exhibited by the Plaintiff:
Sl.No Exhibi Date Particulars of Documents
ts
1. Ex.P1 18.09.2012 Original Registration Certificate of the Plaintiff
2. Ex.P2 10.01.2014 Original Fire and Rescue Service License
3. Ex.P3 25.03.2014 Photocopy of Insurance Policy
4. Ex.P4 21.10.2014 Certified copy of the Police complaint
5. Ex.P5 21.10.2014 Certified copy of FIR
6. Ex.P6 24.10.2014 Photocopy of Insurance Claim
7. Ex.P7 05.11.2014 Photocopy of certificate issued by Fire and Rescue Department
8. Ex.P8 27.10.2015 Certified copy of Final Report by Police _____________ https://www.mhc.tn.gov.in/judis Page No.30 of 32 C.S.(Comm. Div) No.444 of 2017 Sl.No Exhibi Date Particulars of Documents ts
9. Ex.P9 - Original Repudiation Letter
10. Ex.P10 - Photocopy of Purchase Bills
11. Ex.P11 - Photocopy of Purchase Bills
12. Ex.P12 - Photocopy of Purchase Bills
13. Ex.P13 - Photocopy of Purchase Bills
14. Ex.P14 - Photocopy of Purchase Bills
15. Ex.P15 - Photocopy of Purchase Bills Documents exhibited by the Defendants:
Sl. Exhibit Date Particulars of Documents
No. s
1. Ex.D1 - Original Insurance Policy
2. Ex.D2 24.10.2014 Letter sent by the Surveyor to the Plaintiff
3. Ex.D3 02.11.2014 Letter sent by the Surveyor to the Plaintiff
4. Ex.D4 10.11.2014 Letter sent by the Surveyor to the Plaintiff
5. Ex.D5 26.11.2014 Letter sent by Surveyor to the Plaintiff
6. Ex.D6 26.02.2015 Surveyor Report
7. Ex.D7 31.12.2015 Letter to Surveyor to the second Defendant
8. Ex.D8 24.03.2014 Proposal form
9. Ex.D9 28.03.2014 Policy of insurance with terms and conditions
10. Ex.D10 29.05.2015 Interim report
11. Ex.D11 09.11.2015 Final Report
12. Ex.D12 17.02.2016 Investigation Report
SKRJ
SENTHILKUMAR RAMAMOORTHY, J.
_____________
https://www.mhc.tn.gov.in/judis
Page No.31 of 32
C.S.(Comm. Div) No.444 of 2017
rrg
Pre-Delivery Judgment
C.S.(Comm.Div)No.444 of 2017
21.06.2022
_____________
https://www.mhc.tn.gov.in/judis
Page No.32 of 32