Supreme Court - Daily Orders
M/S Laxmi Narayan Contractors vs United India Insurance Co. Ltd. on 20 February, 2024
Bench: Pamidighantam Sri Narasimha, Aravind Kumar
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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL (NO.) 2694/2024
(@ SPECIAL LEAVE PETITION (CIVIL) NO. 35343/2016)
M/S LAXMI NARAYAN CONTRACTORS Appellant(s)
VERSUS
UNITED INDIA INSURANCE CO. LTD. Respondent(s)
O R D E R
1. Leave granted.
2. The appellant-contractor was a successful bidder for the construction of a minor irrigation tank across Pedda Vanka in Kurnool District. After entering into the agreement with the Superintending Engineer, Minor Irrigation Works on 02.05.2005, the contractor purchased “Contractors All Risk Policy" from the respondent insurance company. The policy covered the risk in two stages. The first stage of the insurance policy covered losses to the construction for the period 03.05.2005 to 02.05.2006. The second stage of the insurance cover pertained to the maintenance covering the period w.e.f. 03.05.2006 to 02.05.2008. The contractor completed the construction of the tank as per schedule. Under the contract, the contractor was also supposed to carry out maintenance-related works of the said project.
3. During the maintenance period, there were heavy rains on the night of 22.06.2007, causing extensive damage to the tank. The Signature Not Verified Digitally signed by contractor VARSHA MENDIRATTA Date: 2024.03.19 13:26:43 IST carried out repairs for the damaged portion and Reason: submitted a claim with the insurance company.
4. The claim was, however, rejected by the insurance company on 2 11.07.2007 and 23.01.2008 on the ground that the insurance policy is confined only to works related to maintenance. It stated that the claim for expenses incurred in repairing the tank, damaged due to flooding, is not admissible under the policy.
5. Challenging the rejection of the claim, the contractor filed a complaint before the District Forum which came to be allowed on 19.07.2010. The District Forum awarded a compensation of about Rs.20,00,000/-, holding that the amount is clearly covered by the Insurance Policy and the damage has occurred during the maintenance period. The relevant portion from the District Forum’s order is as follows:
“11. Admittedly the Ops neither repudiated the claim nor settled the claim. According to the Ops, since the flood occurred on 22-06-2007. During the maintenance period the Ops are not liable to pay compensation. Admittedly the flood occurred on 22-06-2007 during the maintenance period. Ex.Bl is the insurance policy. The exclusion clause in the policy does not say that the policy does not cover the damage caused to the work due to major perils like floods. It is also mentioned in Ex.Al that the major perils shall mean claims arising out of flood, inundation etc. In the present case on hand the tank was damaged due to flood on 22-06-2007 i.e. during the period of maintenance· The contention of the Ops that the policy does not cover perils like flood cannot be accepted. There is no specific mention in Ex.B1 that it does not cover the damage caused due to floods. The damage occurred to the tank on 22-06-2007. When Ex.Bl policy was in force. The OPs cannot escape their liability by saying that the damage was occurred to the tank due to poor quality of construction. There is evidence on record to show that the complainant constructed the tank as per the agreement and that the said tank was damaged to some extent due to flood water on 22-06-2007. As the policy was in force covering the risk during maintenance period the ops are liable to indemnify the loss sustained by the complainant. The failure on the part of the Ops in not settling the claim within reasonable time amounts to deficiency of service. The Ops are liable to pay Rs.20,00,000/- as claimed by the complainant.” 3
6. The findings of the District Forum were clear. It found that the damage occurred during the maintenance period, and that the damage due to flood is not part of any exclusion clause under the policy. It was also found that the expression “major perils” included claims arising out of flood, inundation, etc.
7. Questioning the decision of the District Commission, the insurance company filed an appeal before the State Commission. The State Commission again examined the matter in detail. By its order dated 08.02.2012, it dismissed the appeal. The reasoning of the State Commission is as follows:
“10) The terms of the policy did not exclude the loss due to floods etc. What all was excluded was damage due to war, invasion, acts of terrorism etc. It also excludes wilful act or wilful negligence of the insured or his representative, cessation of work, whether total or partial. In fact memo No. 8 - Major perils/AOG perils reads as follows:
The major peril/acts of god claims shall mean claims arising out of:
a) Earthquake - fire and shock
b) Landslide/Rockslide/Subsidence
c) Flood /Inundation
d) Storm/Tempest/Hurricane/Typhoon/Cyclone/ Lighting or other atmospheric disturbances.
e) Collapse
f) Water damage for wet risks i.e., contract involving works in rivers, Canals, lakes or sea.
Therefore the damage caused due to flood and inundation is covered by terms of the policy. The other contention is that the said inundation was occurred during the maintenance period, and not during construction period. Ex-facie, we are of the opinion that it makes no difference since in the policy, two periods are mentioned to cover the perils while in construction from 3.5.2005 to 2.5.2006 and the other during maintenance period from 3.5.2006 to 2.5.2008. No doubt if the construction has not been completed the insurance company need not pay any amount if any peril is occurred. The contention was that the construction was not completed therefore it does not cover the first period i.e., from 3.5.2005 to 2.5.2006 and the policy for maintenance did not commence, and therefore they need not pay any amount.
4[…]
13) From the above it is beyond doubt that the complainant had completed the construction of the tank. The insurance company though raised a plea that the construction was not made and time was extended by the Government of Andhra Pradesh for one more year, correspondingly he did not take the policy covering the risk during completion of construction, and therefore it was not liable, no evidence was let in. Now the appellant intends to raise a contention that the contractor did not furnish the completion certificate from the irrigation department, proof of approval of final bill e.tc., and therefore it has to be presumed that the construction was not completed. However, the insurance company surveyor did not say so nor furnished any evidence to that effect. When their own surveyor having visited and found that the tank was damaged due to floods, and there was no whisper that he did not complete the construction, the insurance company is not entitled to raise this plea. This contention is wholly misconceived. We do not see any misappreciation of fact or law by the Dist. Forum in this regard. We do not see any merits in the appeal.”
8. We have heard Mrs. K. Radha, and Mr. K. Maruthi Rao, learned counsels for the appellant and Mrs. Anjani Aiyagari, AOR and Mr. Abhishek Kumar Gola, learned counsel for the respondent, assisted by Mr. Piyush Aggarwal, Mr. Arun Kumar Nagar, Advocates and Mr. Sudhir Naagar, AOR.
9. The concurrent findings of the District Commission as well as the State Commission are consistent and clear. The insurance company, however, being dissatisfied with the said decisions, approached the National Consumer Disputes Commission (hereinafter, the ‘NCDRC’) by filing a revision petition under Section 21(b), Consumer Disputes Act, 1986.
10. The jurisdiction of the NCDRC either under the 1986 Act or under Section 58(b) of the 2019 Act is identical. As noted above, 5 the judgment of the NCDRC was pronounced in the year 2016. We may reproduce the relevant portion of Section 21(b) of the 1986 Act providing the scope of the jurisdiction that NCDRC would exercise:
“21. Jurisdiction of the National Commission.—Subject to the other provisions of this Act, the National Commission shall have jurisdiction— […]
(b) to call for the records and pass appropriate orders in any consumer dispute which is pending before or has been decided by any State Commission where it appears to the National Commission that such State Commission has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested, or has acted in the exercise of its jurisdiction illegally or with material irregularity.”
11. At this juncture, we would like to reiterate that the jurisdiction of the NCDRC is very limited, and should be exercised in exceptional circumstances. It should only be exercised if one of the parameters specified under Section 21(b) of the 1986 Act is satisfied. In Sunil Kumar Maity v. State Bank of India,1 this court has held that the revisional jurisdiction cannot be invoked for an in-depth appraisal of concurrent findings based on reasonable views of the available evidence.
12. In the present case, the NCDRC allowed the revision by the insurance company. Reversing the concurring findings of the District and the State Commissions, it passed the following order:-
“9. On reading of the above, it is clear that the terms and conditions of the insurance policy stipulate that during the maintenance period, the insurance shall cover loss or damage to the contract works caused by the insured contractor in the course of the operations carried out for the purpose of complying with the obligations under the maintenance provisions of the contract. Admittedly, the water tank constructed by the respondent contractor got damaged because of excessive flooding of water and not during the course of 1 2022 SCC OnLine SC 77 6 operations carried out by the respondent contractor for the purpose of complying with the obligations under the maintenance contract. Therefore, in view of the above stipulations in the insurance contract, the insurance company cannot be held liable to indemnify the respondent complainant.
10. Looking from the different angle. Admittedly, the subject tank was constructed and handed over by the respondent complainant to the Andhra Government Minor Irrigation Department. Thus, it is clear that after the construction of the tank, the respondent contractor was left with no insurable interest in the tank. As regards the maintenance cover, terms and conditions noted above clearly stipulate that insurance policy shall cover only the loss or damage to the contract work caused by contractor in the course of operations carried out for the purpose of complying with the provisions of maintenance contract. The respondent complainant has failed to produce the maintenance contract to throw light upon the obligations of the respondent under the contract. Thus, in absence of the evidence pertaining to the terms and conditions of the maintenance contract and any evidence to the effect that the tank was damaged in the course of maintenance of operation carried out by the respondent, the insurance company cannot be held liable for the damage caused to the tank. Therefore, in our view, the repudiation of the insurance claim was justified and there was no deficiency in service on the part of the petitioner insurance company. The Fora below have totally ignored the above noted stipulations in the insurance contract. Therefore, the orders of the Fora below suffer from material irregularity and cannot be sustained.”
13. The approach adopted by the NCDRC is that the insurance covers loss or damage to the works caused, “in the course of operations carried out for the purpose of complying, with the provisions of maintenance contract.” In view of the fact that the water tank constructed by the contractor received damage due to flooding, the NCDRC reversed the findings of the District and State Commissions and held that the insurance company cannot be held liable to indemnify the contractor. The NCDRC also supplied an additional reason by putting an undue burden on the contractor to hold that he 7 has “failed to produce the maintenance contract to throw light upon the obligations of the respondent under the contract. Thus, in absence of the evidence pertaining to the terms and conditions of the maintenance contract and any evidence to the effect that the tank was damaged in the course of maintenance of operation carried out by the respondent, the insurance company cannot be held liable for the damage caused to the tank.”
14. We are not in agreement with the approach adopted by the National Commission. Apart from exceeding its revisional jurisdiction, we are of the opinion that the NCDRC is not correct in the analysis and the reasoning that it adopted.
15. The District and the State Commissions have correctly appreciated the policy and supplied a reasonable and just interpretation of its terms. The contractor’s obligation to repair the tank and restoring it during the maintenance period is an act of adopting a corrective measure. The insurance policy nowhere restricts itself to pre-emptive maintenance, nor does it exclude corrective maintenance.
16. The NCDRC has committed a serious error in reversing the findings of the District and the State Commissions, and in allowing the appeal of the insurance company.
17. In view of the above, we allow the appeal filed by the contractor and set aside the judgment of the NCDRC dated 24.08.2016 8 and restore the judgments and orders the District and the State Commissions.
18. The Appellant shall be entitled to costs quantified at Rs.25,000/-.
………………………………………………………………,J.
[PAMIDIGHANTAM SRI NARASIMHA] ………………………………………………………………,J.
[ARAVIND KUMAR] NEW DELHI;
20TH FEBRUARY, 2024
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ITEM NO.16 COURT NO.16 SECTION XVII-A
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 2694/2024
M/S LAXMI NARAYAN CONTRACTORS Appellant(s)
VERSUS
UNITED INDIA INSURANCE CO. LTD. Respondent(s)
Date : 20-02-2024 This appeal was called on for hearing today. CORAM : HON'BLE MR. JUSTICE PAMIDIGHANTAM SRI NARASIMHA HON'BLE MR. JUSTICE ARAVIND KUMAR For Appellant(s) Mr. K. Maruthi Rao, Adv.
Mrs. K.Radha, Adv.
Mrs. Anjani Aiyagari, AOR For Respondent(s) Mr. Abhishek Kumar Gola, Adv.
Mr. Piyush Aggarwal, Adv.
Mr. Arun Kumar Nagar, Adv.
Mr. Sudhir Naagar, AOR UPON hearing the counsel the Court made the following O R D E R Leave granted.
The appeal is allowed in terms of the signed order. Pending application(s), if any, shall stand disposed of.
(VARSHA MENDIRATTA) (RAM SUBHAG SINGH)
COURT MASTER (SH) COURT MASTER (NSH)
(Signed order is placed on the file)