# CASE DETAILS NEW INDIA ASSURANCE CO. LTD. & ORS v. M/S. MUDIT ROADWAYS

- **Citation:** 2023 INSC 1022
- **Court:** Supreme Court of India
- **Decided:** 2023-11-24
- **Case number:** Civil Appeal No. 339 of 2023
- **Bench:** Hrishikesh Roy, Sanjay Karol
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/case-details-new-india-assurance-co-ltd-ors-v-m-s-mudit-roadways-36606
- **Pages:** 22

## Headnote

Issue for consideration: Whether the National Commission was
justifi ed in allowing the fi re insurance claim of the insured against the
insurance company.
Consumer Protection Act, 1986 - Fire insurance claim - Repudiation
of - Fire broke out at a insured warehouse - Insured having paid for
coverage against fi re and safeguarding the custom bonded goods - Survey
and investigations reports - Majority suggesting electric short circuit as
the cause and two reports suggesting sparks from rooftop welding work -
Repudiation of claim by the Insurance Company - Consumer complaint
by the insured - Allowed by the National Commission holding that the
insurance policy covered the complainant's warehouse and the roofi ng work
did not signifi cantly increase the risk and directed payment of specifi ed
amount with interest - Correctness:
Held: Insurance company's obligation to the insured is of much
greater import - Precise cause of a fi re, whether attributed to a short-circuit
or any alternative factor, remains immaterial, provided the claimant is not
the instigator of the fi re - Claim of the insured against the insurer is upheld
- Insurer cannot introduce additional reasoning beyond those detailed in
their letter, to justify the repudiation - Area where the fi re occurred was
covered by the said insurance policy - Looking at the various documents,
it is reasonable to conclude that the insured premises was the one that was
identifi ed and insured by the insurance company - Repair work undertaken
on the rooftop to prevent water leakage to the warehouse would not fall in
the category of an alteration which would increase the risk insured for the
1028
SUPREME COURT REPORTS
[2023] 13 S.C.R.
warehouse premises - Signifi cant time gap that exists between the welding
work and the fi re has no logical explanation - Basis of the repudiation
accordingly appears to be unreasonable and is not acceptable - Surveyor's
report, although comprehensive otherwise, is inconclusive on the aspect
identifying the actual cause of fi re - Given that the surveyor's report only
relies on the Forensic Examiner fi ndings, it would be unsafe to rely on
the said report - Furthermore, the claimant neither assumes the role of
importer nor owner; instead, they function solely as a custodian entrusted
with the goods on behalf of their clients - Customs duty component of the
claim should, in the given event, be discharged directly to the Customs
Department - Thus, it is a case of wrongful repudiation by the insurer - No
legal infi rmity in the impugned decision allowing the insured's insurance
claim. [Paras 33, 35, 37, 41, 47, 50, 55, 56, 58]
Insurance - Insurance contracts - Doctrine of uberrimae fi dei:
Held: Trust serves as the cornerstone, forming the essence of the
insurer-insured relationship - Fundamental principle is that insurance is
governed by the doctrine of uberrimae fi dei-there must be complete good
faith on the part of the insured - Heart and soul of an insurance contract
lies in the protection it accords to those who wish to be insured by it - This
understanding encapsulates the foundational belief that insurance accords
protection and indemnifi cation, preserving the sanctity of trust within its
clauses - Eff ectively, the insurer assumes a fi duciary duty to act in good faith
and honour their commitment - This responsibility becomes particularly
pronounced when the insured, in their actions, have not been negligent - In
light of the vital role that trust plays in insurance contracts, it is important
to ensure that the insurer adequately fulfi ls the duty that has been cast on
it, by virtue of such a covenant. [Para 57]
Insurance Act, 1938 - s. 64 (UM) (4) - Value of a surveyor's report:
Held: An approved surveyor's assessment is necessary for a
claim - s. 64(UM)(4) mandates that claims above Rs. 20,000 must be
initially assessed by an approved surveyor - Insurer has the discretion
to settle the claim for a diff erent amount, than what is assessed by the

## Text

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[2023] 13 S.C.R. 1027 : 2023 INSC 1022
1027
CASE DETAILS
NEW INDIA ASSURANCE CO. LTD. & ORS.
v.
M/S. MUDIT ROADWAYS
(Civil Appeal No. 339 of 2023)
NOVEMBER 24, 2023
[HRISHIKESH ROY AND SANJAY KAROL, JJ.]
HEADNOTES
Issue for consideration: Whether the National Commission was
justifi ed in allowing the fi re insurance claim of the insured against the
insurance company.
Consumer Protection Act, 1986 - Fire insurance claim - Repudiation
of - Fire broke out at a insured warehouse - Insured having paid for
coverage against fi re and safeguarding the custom bonded goods - Survey
and investigations reports - Majority suggesting electric short circuit as
the cause and two reports suggesting sparks from rooftop welding work -
Repudiation of claim by the Insurance Company - Consumer complaint
by the insured - Allowed by the National Commission holding that the
insurance policy covered the complainant's warehouse and the roofi ng work
did not signifi cantly increase the risk and directed payment of specifi ed
amount with interest - Correctness:
Held: Insurance company's obligation to the insured is of much
greater import - Precise cause of a fi re, whether attributed to a short-circuit
or any alternative factor, remains immaterial, provided the claimant is not
the instigator of the fi re - Claim of the insured against the insurer is upheld
- Insurer cannot introduce additional reasoning beyond those detailed in
their letter, to justify the repudiation - Area where the fi re occurred was
covered by the said insurance policy - Looking at the various documents,
it is reasonable to conclude that the insured premises was the one that was
identifi ed and insured by the insurance company - Repair work undertaken
on the rooftop to prevent water leakage to the warehouse would not fall in
the category of an alteration which would increase the risk insured for the
1028
SUPREME COURT REPORTS
[2023] 13 S.C.R.
warehouse premises - Signifi cant time gap that exists between the welding
work and the fi re has no logical explanation - Basis of the repudiation
accordingly appears to be unreasonable and is not acceptable - Surveyor's
report, although comprehensive otherwise, is inconclusive on the aspect
identifying the actual cause of fi re - Given that the surveyor's report only
relies on the Forensic Examiner fi ndings, it would be unsafe to rely on
the said report - Furthermore, the claimant neither assumes the role of
importer nor owner; instead, they function solely as a custodian entrusted
with the goods on behalf of their clients - Customs duty component of the
claim should, in the given event, be discharged directly to the Customs
Department - Thus, it is a case of wrongful repudiation by the insurer - No
legal infi rmity in the impugned decision allowing the insured's insurance
claim. [Paras 33, 35, 37, 41, 47, 50, 55, 56, 58]
Insurance - Insurance contracts - Doctrine of uberrimae fi dei:
Held: Trust serves as the cornerstone, forming the essence of the
insurer-insured relationship - Fundamental principle is that insurance is
governed by the doctrine of uberrimae fi dei-there must be complete good
faith on the part of the insured - Heart and soul of an insurance contract
lies in the protection it accords to those who wish to be insured by it - This
understanding encapsulates the foundational belief that insurance accords
protection and indemnifi cation, preserving the sanctity of trust within its
clauses - Eff ectively, the insurer assumes a fi duciary duty to act in good faith
and honour their commitment - This responsibility becomes particularly
pronounced when the insured, in their actions, have not been negligent - In
light of the vital role that trust plays in insurance contracts, it is important
to ensure that the insurer adequately fulfi ls the duty that has been cast on
it, by virtue of such a covenant. [Para 57]
Insurance Act, 1938 - s. 64 (UM) (4) - Value of a surveyor's report:
Held: An approved surveyor's assessment is necessary for a
claim - s. 64(UM)(4) mandates that claims above Rs. 20,000 must be
initially assessed by an approved surveyor - Insurer has the discretion
to settle the claim for a diff erent amount, than what is assessed by the
surveyor - Surveyor's report cannot be considered a sacred document
and contrary evidence, including an investigation report, is subject to
rebuttal. [Para 42, 43, 45]
1029
LIST OF CITATIONS AND OTHER REFERENCES
New India Assurance Co. Ltd. vs. Pradeep Kumar (2009) 7 SCC 787:
[2009] 16 SCR 508; Galada Power & Telecommunication Ltd. vs. United
India Insurance Co. Ltd. (2016) 15 SCC 161; Canara Bank vs. United
India Insurance Company; (2020) 3 SCC 455: [2020] 7 SCR 498; Khatema
Fibres Ltd. vs. New India Assurance Co. Ltd. & Anr 2021 SCC OnLine SC
818; Saurashtra Chemicals Ltd. vs. National Insurance Co. Ltd (2019) 19
SCC 70; JSK Industries Pvt. Ltd. vs. Oriental Insurance Co. Ltd. 2022 SCC
OnLine 1451 - referred to.
MacGillivray on Insurance Law - 12th Ed., John Birds, Sweet and
Maxwell (2012) - referred to.
OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION : Civil Appeal No.339 of 2023.
From the Judgment and Order dated 10.08.2022 of the National
Consumer Disputes Redressal Commission, New Delhi in CC No.765 of
2020.
Appearances:
Aditya Kumar, C. George Thomas, Ms. Prachi Pandey, Advs. for the
Appellants.
Parthiv K. Goswami, Mrinal Kumar Choudhary, Sr. Advs., Devesh
Tripathi, Ms. Anasuya Choudhary, Faraz Anees, Mukeshwar Nath Dubey,
Abhishek Yadav, Ms. Richa Pandey, Alok Tripathi, Ravi Kumar, Rajatdeep
Sharma, Praveen Swarup, Advs. for the Respondent.
JUDGMENT / ORDER OF THE SUPREME COURT
JUDGMENT
HRISHIKESH ROY, J.
1. Heard Mr. Aditya Kumar, learned counsel appearing for the appellants.
Also heard Mr. Parthiv K. Goswami and Mr. Mrinal Kumar Choudhury, learned
Senior Counsel for the respondent.
NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT
ROADWAYS
1030
SUPREME COURT REPORTS
[2023] 13 S.C.R.
2. This appeal challenges the 10.8.2022 order of the National Consumer
Disputes Redressal Commission (hereinafter referred to as, 'the NCDRC'
for short), which partially allowed the consumer complaint directing the
Insurance Company to pay Rs.6,57,55,155/- for a fi re insurance claim with
9% interest from claim denial date within 8 weeks, or face 12% interest
beyond the stipulated 8 weeks.
INSURANCE POLICIES & CLAIM PROCESS
3. The respondent purchased the following insurance policies:
Sr.
No.
Description
Date Pr emium
Paid
Duration of
Policy
Sum Insured
1
Standard Fire and Special
Perils Policy
17080011170100000734
19.06.2017
19.06.2017 to
18.06.2018
Rs. 6 Crores
2
Customs Duty Package Policy
11140046172480000017
30.09.2017
30.09.2017 to
29.09.2018
Rs. 20 Crores
3
Standard Fire and Special
Perils Policy
11140011170100001014
30.11.2017
30.11.2017 to
29.11.2018
Rs. 150 Crores
4
Additional Endorsement
to Customs Duty Package
Policy
29.12.2020
 -
Rs. 75 Crores
4. These insurance policies covered premises of 106750 sq. ft. (covered
area) and 15000 sq. ft. (open area) at Survey No. 09, Hissa No. 03, at Village
- Veshvi, Taluka - Uran, District - Raigad, Maharashtra. The claimant
leased the premises from M/s. Platinum Logistics for warehousing purpose.
Claimant paid Rs.44,02,562/- to New India Assurance for safeguarding the
custom bonded goods and for covering the risk against fi re, etc.
5. During the pendency of the insurance policies, on 14.03.2018, a fi re
broke out at the insured warehouse. The respondent then informed the Insurance
Company and the Custom authorities about the same. The Insurance Company
appointed M/s. J.C. Bhansali and Co. as Surveyors to assess the loss. On
03.10.2018, the insured raised a claim for a sum of Rs. 6,57,55,155/-. Of the
total claim, Rs. 5,54,17,891/- was against Policy No. 17080011170100000734;
Rs.18,73,984/- under Policy No.11140011170100001014 and Rs. 2,15,18,802/-
under Policy No.11140046172480000017 respectively.
1031
REPORTS ON THE FIRE ON 14.03.2018
6. On the day of the fi re incident, the matter was also reported to the
police, resulting in the FIR No. 03/2018 on 15.03.2018. Police investigation
prima facie concluded an electrical short circuit as the cause, which was
relayed to the Insurance Surveyor.
7. Another report (dated 23.04.2018), addressed by the Inspection
Division of Department of Industry Energy and Labour of the Maharashtra
Government, recorded that the fi re accident in a portion of the warehouse
was on account of electrical sparks since the area had an electrical setup
and stored combustible materials like boxes, papers and chemicals.
8. The Jawaharlal Nehru Port Trust's investigation, conducted by onsite fi refi ghters revealed in their report (09.05.2018) that the probable cause
was an electrical short circuit.
9. Two additional reports (07.08.2018 & 31.08.2018) prepared by
independent surveyors appointed by the claimant's clients were submitted.
Both reports indicated that a short circuit was the likely cause of the fi re.
10. M/s. Screen Facts Services Pvt. Ltd., the Forensic Examiner
hired by the Insurance Company, inspected the portion of the fi re-aff ected
warehouse and in their report (10.12.2018) stated that combustible materials
were stored where the fi re occurred but ruled out short circuit as the cause,
due to the absence of electrical wiring. The Forensic Examiner highlighted
that welding work on the roof, carried out until 16:04 hrs. on the incident day,
was a possible cause. It recorded that negligence during welding work in the
secure warehouse caused the fi re due to sparks and infl ammable materials.
11. The Investigator, M/s. J. Basheer & Associates, appointed by the
appellants, concluded in their 11.04.2019 report that fi re was due to an
electrical short circuit, contradicting the Forensic Examiner's fi ndings. They
also noted that the insurance policy did not cover the warehouse at Survey
No. 9/3 because it was not aff ected by the fi re.
12. M/s. J.C. Bhansali & Co., the Insurance Company's Surveyor, in
their report (15.04.2019) concluded the following:-
"1. Cause of Fire is due to the negligence on the part of the management
in not taking adequate precautions when the construction work was
going on;
NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT
ROADWAYS [HRISHIKESH ROY, J.]
1032
SUPREME COURT REPORTS
[2023] 13 S.C.R.
2. Almost 18000 to 20000 sq. ft. area of the roof of bonded Warehouse
which is custom bonded Warehouse was uncovered, i.e., there were
no roof sheets at the time of loss, due to which circumstances aff ected
the building insured or containing the insured property were changed,
in such a way which increased the risk of loss or damage by insured
perils and;
3.The Survey Numbers of the fi re aff ected Warehouse have not been
declared/covered under the Policy.
4. Policy covers location at survey No. 9/3, but the offi ce of the insured
and a Warehouse located at the Surveyor No. 9/3 were not fi re aff ected
and they were safe;
5. Hence, claim under reference is out of the scope of relevant policy
& liability under the claim does not arise."
13. After receiving the Survey and Investigation Reports, the Insurance
Company, with their 15.07.2019 communication, rejected the respondent's
claim. In their subsequent communication (14.12.2019), the following
two reasons were stated: 1) The insured premises at Survey No. 9/3 was
unaff ected by the fi re, and 2) The fi re resulted from the insured's negligence
during roof construction in a secure customs-bonded warehouse with
hazardous chemicals. Construction work in the warehouse increased the
risk, causing insurance coverage to cease under Clause 3 of the policy's
terms and conditions. Following are the details of the repudiation letters
issued by the Insurance Company:
Sr No
Date
Letter of Repudiation
1.
28.06.19
Insurance Company's letter repudiating the claim with
respect to policy no. 1114046172480000017 (Customs
duty package policy)
2.
15.07.19
Insurance Company's letter repudiating the claim with
respect insurance policy no. 17080011170100000734
(Standard Fire and Special Perils Policy- Goods Held
in Trust)
3.
14.12.19
Insurance Company's letter repudiating the claim with
respect insurance policy no. 17080011170100000734
(Standard Fire and Special Perils Policy)
1033
CONSUMER COMPLAINT
14. The respondent, dissatisfi ed with the aforesaid repudiation of
claim, fi led Complaint No. 765 of 2020 under the Consumer Protection Act,
1986, citing service defi ciencies and unfair trade practices by New India
Assurance Co. Ltd. In their response, the Insurance Company referred to the
Investigation Report (11.04.2019) from M/s. J. Basheer & Associates and
the Final Survey Report (15.04.2019) from M/s. J.C. Bhansali & Co. They
contended that the fi re occurred during roof welding work undertaken by
the insured without adequate precautions. It was also stated that the insured
warehouse at Survey No. 9/3 was not aff ected by the fi re. Furthermore, the
roof work in the warehouse increased the risk, violating general condition
3 of the Insurance Policy, justifying the repudiation.
15. In the impugned order, the NCDRC considered two vital issues
to arrive at its decision:
(i) Whether the Complainant's Warehouse located at Survey No.
9 Hissa 3 (9/3) Village Veshvi, Tal-Uran, District - Raigad was
insured by the Opposite Party;
(ii) What was the cause of fi re incident that occurred on 14.03.2018?
16. The NCDRC ruled in favour of the complainant concluding that
the insurance policy covered the complainant's warehouse. On the second
issue, NCDRC noted the time lag between the welding work and the fi re
incident and observed that the Forensic report is inconclusive. The other
reports suggesting an electrical short circuit as the cause of the fi re was
found to be more acceptable.
17. Adverting to the roofi ng work done by the insured, NCDRC held
that it did not signifi cantly increase the risk, and therefore Clause no. 3
was inapplicable. Referring to the ratio in New India Assurance Co. Ltd.
vs. Pradeep Kumar1; NCDRC highlighted that the approved Surveyor's
report, though important, is not absolute and not binding on the parties. The
NCDRC accordingly ruled in favour of the insured fi nding defi ciency in
service of the insurance company. Thus, direction was issued for payment
of the specifi ed sum, with interest.
1
(2009) 7 SCC 787.
NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT
ROADWAYS [HRISHIKESH ROY, J.]
1034
SUPREME COURT REPORTS
[2023] 13 S.C.R.
ARGUMENTS
18. Mr. Aditya Kumar, the learned counsel for the appellants,
contended that the cause of the fi re was negligence on the part of the
insured. Reports of the forensic investigator (M/s Screen Facts Services
Pvt. Ltd.) dated 10.12.2018 (Annexure A-10) were relied upon, which
found that electrical short-circuit was not the cause of the fi re incident.
Instead, the fi re could have occurred due to sparks that may have fallen
on fl ammable chemicals stored in the adjoining area, during welding.
Surveyor's Report (M/s Bhansali & Co.) dated 15.04.2019 (Annexure
A-12) was relied upon to further suggest that the fi re occurred due to
negligence on the part of the insured in not taking adequate precautions
during the roof repair work. By undertaking such repair work without
precautions, the insured property was altered in a way that increased the
risk of loss or damage. Additionally, storing hazardous chemicals during
construction or repair work was itself a negligent act and amounted to
violation of policy conditions.
19. The learned counsel points out that the forensic inspector and the
surveyors were specifi cally tasked to investigate the fi re incident. Since
short-circuit as the cause of fi re was ruled out, Mr. Kumar argues that the
negligence theory on the part of the insured (in undertaking roof construction
work in the vicinity of stored combustible materials), ought to be accepted.
20. For the appellants, Mr. Kumar also reads the Surveyor's Report
(M/s Basheer & Associates) dated 11.04.2019 (Annexure A-11) which
concluded that the insurance policy did not cover the premises of the fi reaff ected warehouse. And as such, repudiation is justifi ed since the insurance
coverage was limited to the offi ce of the insured and the warehouse which
suff ered no burning incident.
21. Since Rs. 2,15,18,802.45/- was claimed towards custom duty
liability, the appellants argue that compensating the insured warehouse is
erroneous as custom duty liability rests only upon the importer under Sections
12 and 46 of the Customs Act, 1962. The counsel relies on Section 23 of the
Customs Act, 1962 to argue that granting of compensation for destroyed
imported goods stored in the warehouse, is unjustifi ed. Additionally, it
is also contended that the Customs Department's demand letter lacked
a statutory basis. It is therefore submitted that the insured cannot seek
1035
indemnifi cation for the fi re loss as any such compensation would amount
to unjust enrichment.
22. The learned counsel submits that the doctrine of waiver as applied
in Galada Power & Telecommunication Ltd. vs. United India Insurance
Co. Ltd.2, had been overruled. Moreover, a legal submission can be urged
at any stage of proceedings. Therefore, grounds of unjust enrichment and
customs duty could still be argued before the court although they were not
argued earlier.
23. Per contra, Mr. Parthiv K. Goswami, the learned senior counsel
appearing for the claimant contends that the insurance company cannot be
permitted to urge additional grounds beyond those mentioned in the letter
of repudiation. The appellants must therefore limit their submissions to the
grounds mentioned in the repudiation letter.
24. The learned counsel then submits that it is clear from the Leave
& License Agreement dated 04.07.2015 that M/s Platinum Logistics had
leased out land situated on Survey No.9/3 in Village - Veshvi, Taluka -
Uran, Raigad to the claimant. Further, approval was sought & obtained
from the Customs Department for a bonded warehouse on the same land.
The insurance policy mentions the location of the insured premises as
Mudit Roadways, Survey No.9/3 CPP Forbes CFS, Chirner Road, Village -
Veshvi, Uran, MH1369, Maharashtra-400702. For justifying the claim, Mr.
Goswami reads the two communications from the Tehsildar, Uran, Raigad
dated 25.03.2018 (Annexure R-18) and 23.03.2018 (Annexure R-20) and
also relies upon the telephone connection (Annexure R-16), electricity
connection (Annexure R-17) and other communications from the Executive
Magistrate (Annexure R-10) to point out that the fi re incident occurred in
the same address of the insured ware-house. Besides, the customers who
appointed their own independent surveyors (M/s Kannan & M/s Proclaim)
noted that the warehouse where the stock got burnt, was located at Survey
No. 9/3 (Annexure R-8). Accordingly, it is argued that there was no basis for
the insurance company to contend that the fi re in the warehouse was outside
the purview of the premises, covered by the insurance policy.
2
(2016) 15 SCC 161.
NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT
ROADWAYS [HRISHIKESH ROY, J.]
1036
SUPREME COURT REPORTS
[2023] 13 S.C.R.
25. Specifi cally on the aspect of cause of fi re, Mr. Goswami contends
that the welding machine & cylinders were taken away from the fi eld of
view at 11.56.16 hours and the roof welding work did not continue in any
case, beyond 16.04 hours on 14.03.2018. Therefore, if the sparks from the
welding work were the cause of the fi re, it would not go un-noticed for 26
minutes since combustible chemicals, papers, etc. would have instaneously
caught fi re. Because of the conspicuous gap of around 26 minutes between
the end of the welding work and the occurrence of fi re, it would be illogical
according to Mr. Goswami to attribute the welding work to be the cause
for the fi re. With this projection, the claimants contend that there was no
negligence on the part of the insured and the cause of fi re was rightly
attributed to an electrical short-circuit.
26. It was further argued that multiple reports from diff erent govt.
departments as well as independent surveyors supported the conclusion that
the fi re had occurred on account of a short-circuit. In addition, it was also
pointed out that no welding took place during the GI sheet roofi ng work as
those would melt during welding. Instead, nuts & bolts were used in the
GI roofi ng work.
27. On the aspect of the violation of insurance policy conditions, it
was argued that roof repair work was being carried out to address the water
leakage issue from the warehouse roof. Thus, there was no alteration of
the insured premises which would have increased the fi re risk. The insured
therefore never violated the general condition.
28. On the issue of remission of customs duty, it is argued that the
benefi t of Sections 22 & 23 of the Customs Act 1962 was only available to
importers and not those who hold such goods in trust for their clients. In
addition, undertaking obtained from the claimant stating that they would
not claim a remission or abatement on the customs duty payable (Annexure
R-4) was also placed on record. It is accordingly submitted that the remission
and abatement of duty available does not benefi t the claimants and the said
amount (Rs. 2,13,00,061/-) may directly be paid to the Customs Department.
29. The learned counsel for the claimants relied on Canara Bank vs.
United India Insurance Company3 to contend that the insurance company
3
(2020) 3 SCC 455.
1037
cannot escape its liability if there is nothing to prove that the fi re was caused
by the insured itself, irrespective of what the cause of fi re was. Reliance
was also placed on Khatema Fibres Ltd. vs. New India Assurance Co. Ltd.
& Anr.4 to argue that the surveyor's report was not sacrosanct and therefore,
could be departed from, if needed.
DISCUSSION AND CONCLUSION
30. We have reviewed both parties' arguments and carefully examined
the multiple reports from various agencies, civic authorities, the insurance
company, and surveyors.
CONTENTIONS BEYOND THE LETTER OF REPUDIATION
31. The relevant portion of the letter of repudiation is reproduced
below:
"... ... ... ... the insured premises not aff ected due to alleged fi re. The
above mention premises where the loss occurred due to alleged fi re is
not insured under the Policy. Thus the alleged loss dogs (sic) not fall
within the purview of the policy... ... ... ...
The root cause of the fi re incident was due to the negligence on the
part of the Management in not taking adequate precautions when the
construction work was going on that too in a secured customs bonded
warehouse where many hazardous chemicals were stored: The alleged
cause of fi re is hot (sic) covered under the policy... ... ... ..."
The insurance company in their letter mentioned two specifi c grounds
to repudiate the claim: (i) that the location of fi re was part of the premises
not covered under the insurance policy, and (ii) that there was negligence on
the part of the insured in carrying out repairs at the roof of the warehouse
which caused the fi re.
32. Notably, in earlier cases like Galada Power and Telecommunication
Ltd. vs. United India Insurance Co. Ltd. & Anr.5 and Saurashtra Chemicals
Ltd. vs. National Insurance Co. Ltd.6, it was declared that new grounds
4
2021 SCC OnLine SC 818.
5
(2016) 14 SCC 161.
6
(2019) 19 SCC 70
NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT
ROADWAYS [HRISHIKESH ROY, J.]
1038
SUPREME COURT REPORTS
[2023] 13 S.C.R.
for repudiation cannot be introduced during the hearing if they were not
included in the repudiation letter. This legal principle was reiterated in JSK
Industries Pvt. Ltd. vs. Oriental Insurance Co. Ltd.7:
"10. Mr. Gopal Shankarnarayan, learned senior counsel for the
appellants has argued both on substantive and procedural points to
assail the aforesaid orders. His fi rst submission is that the insurance
company cannot resist a claim petition on grounds beyond those
cited by them while repudiating a claim. In support of this argument,
a decision of this Court in the case Saurashtra Chemicals Ltd. v.
National Insurance Co. Ltd. [(2019) 19 SCC 70] has been cited. In
this judgment, it has been held: -
"23. Hence, we are of the considered opinion that the law, as laid down
in Galada [Galada Power & Telecommunication Ltd. v. United
India Insurance Co. Ltd., (2016) 14 SCC 161: (2017) 2 SCC
(Civ) 765] on Issue (2), still holds the fi eld. It is a settled
position that an insurance company cannot travel beyond the
grounds mentioned in the letter of repudiation. If the insurer
has not taken delay in intimation as a specifi c ground in letter
of repudiation, they cannot do so at the stage of hearing of the
consumer complaint before NCDRC."
33. Canvassing supplementary arguments during the hearing,
(beyond those in the insurer's repudiation letter), is explicitly prohibited.
Consequently, it is held that the insurer cannot introduce additional reasoning
beyond those detailed in their letter, to justify the repudiation.
LOCATION OF FIRE IF COVERED UNDER THE POLICY
34. Let us now analyse whether the burnt site was covered under
the insurance policy. The Leave & License Agreement dated 04.07.2015
identifi es all three warehouses functioning within the compound operated
by M/s Platinum Logistics, with the same Survey No. i.e., 9/3. In fact, the
policy documents as well as the License issued under Section 57 of Customs
Act 1962 refers to the warehouse situated at Survey No. 9/3, Village - Veshvi,
Gavan Phata, Chirner Road, Opp. Forces CFS, Taluka - Uran, Raigad. The
policy document specifi ed the address of the insured as 'Mudit Roadways,
7
2022 SCC OnLine 1451
1039
Survey No. 9/3, Opp. Forbes CSF, Chirner Road, Village - Veshvi, Uran,
MH1369, MH-4000702.' In addition, the impugned order rightly points out
that the warehouse was physically verifi ed by the Customs Authorities after
which telephone and electricity connections were provided to the insured at
the same address. All communication addressed to the claimants, including
letters of repudiation from the insurance company, admit to having insured
the premises located at the given address.
35. Therefore, looking at the policy documents, the Leave & License
Agreement and various communications received from the customs, police,
fi re & electricity departments, it is reasonable to conclude that the insured
premises was the one that was identifi ed and insured at Survey No. 9/3, by
the insurance company. Needless to say, there is nothing to conclude that
the area where the fi re occurred on 14.03.2018 was not covered by the said
insurance policy.
ALTERATION TO INSURED PREMISES & RISK INCREASE
36. To consider this aspect, Clause 3 in the insurance policy is relevant
which reads as below:
"3. Under any of the following circumstances the insurance ceases
to attach as regards the property aff ected unless the insured, before
the occurrence of any loss or damage, obtains the sanction of the
Company signifi ed 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 aff ecting
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.
(c)
If the interest in the property passes from the insured
otherwise than by will or operation of law."
37. Clause 3(a) indicates that the insurance policy would cease to
be applicable or cover the insured premises in certain cases where there
NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT
ROADWAYS [HRISHIKESH ROY, J.]
1040
SUPREME COURT REPORTS
[2023] 13 S.C.R.
is an increased risk of loss or damage to the insured premises or goods
within it. In this case, the insured had undertaken repairs on the rooftop
to prevent water leakage to the warehouse. Such essential repair work on
the rooftop by itself, cannot be reasonably construed to be an alteration
that would increase the risk of loss or damage, as has been urged by the
insurance company. In our assessment, the said repair work would not fall
in the category of an alteration which would increase the risk insured for
the warehouse premises. Therefore, no infi rmity is seen with the view taken
by the NCDRC on the same.
CAUSE OF THE FIRE & NEGLIGENCE - MULTIPLE REPORTS
38. While dealing with the 14.03.2018 fi re incident, several agencies,
authorities and organisations have reported on the warehouse fi re accident.
Those are summarized as follows:
S.
NO.
REPORT
DATE
FINDINGS
APPOINTED BY
1.
Electrical
Inspector
23.04.2018
Sparks created from
the Short Circuit of
the Electrical setup
at the corner of the
Go-down.
Under Section 161(2)
(a), The Electricity Act,
2003 by the Appropriate
Government.
2.
Asst.
Manager,
Jawaharlal
Nehru Port
Trust's
09.05.2018
Probable cause of
incident reported
as Electrical Short
Circuit.
Claimant
3.
Independent
Sy. - M/s H
Kannan
07.08.2018
S p a r k s f r o m
Electrical Short
Circuit ignited
i n f l a m m a b l e
chemicals stored.
Bajaj Allianz Gen.
Insurance Co. - Insurers
to M/s. Global Exim
(M/s Mudit Roadway's
Clients)
4.
Independent
Sy. - M/s
Proclaim
31.08.2018
Probable Cause of
incident determined
as Short Circuit
based on the police
report & fi re brigade.
TATA AIG Gen.
Insurance Co. - Insurers
to Expanded Polymer
System (M/s Mudit
Roadway's Clients)
1041
5.
Police
Investigation
(Not
annexed)
03.11.2018
Electrical short
circuit could be the
cause of fi re
6.
Order of the
Executive
Magistrate
03.11.2018
IO concluded that
the accidental fire
was caused pursuant
to Short Circuit
Section 21 CrPC, Rule
105 of Bombay Police
Manual, 1959.
7.
M/s. J
Basher &
Associates
11.04.2019
Relied on Police
Report (3.11.18) to
conclude cause of
fi re as Short Circuit.
Observed that fire
aff ected warehouse
survey nos. are not
the risk location as
per insurance policy.
Insurance Co.
8.
M/s Screen
Facts
Services Pvt.
Ltd.
Forensic
Investigation
Report
10.12.2018
Sparks from the
ongoing welding
work ignited the
fl ammable chemicals
b/w A & D. Cause
not electrical in
nature as there was
no electrical wiring
equipment near the
area of incident.
Insurance Co.
9.
M/s. J.C.
Bhansali &
Co
Investigation
Report
15.04.2019
Negligence by
management in
not taking adequate
precautions while
construction work was
underway leading to
sparks falling during
wielding. (Based
on M/s Screen & J
Basheer).
Insurance Co.
NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT
ROADWAYS [HRISHIKESH ROY, J.]
1042
SUPREME COURT REPORTS
[2023] 13 S.C.R.
38.1 The above tabulated summary of reports reveals multiple and
confl icting fi ndings. Seven of the reports suggest short-circuit as the cause
for fi re. The 23.04.2018 report of the Electrical Inspector highlighted that
a short-circuit around 4:30 pm on 14.03.2018, led to sparks in M/s. Mudit
Roadways' warehouse. Consequently, the falling electrical sparks ignited
the boxes, papers, and chemicals. The Assistant Manager of the Jawaharlal
Nehru Trust also affi rmed that the fi re was triggered by an electrical shortcircuit, as observed by the fi re-fi ghting teams at site.
38.2 Likewise, M/s. J. Basheer & Associates' 11.04.2019 report suggest
that the fi re's exact cause is inconclusive but a short-circuit could be the
spark for the incident. The Special Executive Magistrate-cum-Assistant
Police Commissioner in the Navi Mumbai Port Division accepted the police
investigation report and concluded (on 03.11.2018) that the accidental fi re
resulted from a short-circuit.
38.3 The forensic investigation report dated 10.12.2018 analysed
various aspects, including the chemical analysis of debris and CCTV footage
from the 17 cameras installed in the insured premises. It determined that a
short-circuit was not the cause but rather sparks from rooftop welding work
may have triggered the fi re. The surveyor's report from M/s. Bhansali &
Co. dated 15.04.2019 also aligned with such conclusion. Investigators found
that substantial welding work was conducted that day and pointed towards
sparks igniting the stored fl ammable chemicals in the warehouse. According
to them, the insured's negligence during construction work in a warehouse
with numerous hazardous chemicals, was the root cause for the fi re.
38.4 Although the footage from Camera No. 3 and video from Camera
No.9 were not available, the forensic team analysed the available CCTV
footage. They observed that welding equipment with cylinders were being
brought to the rooftop at 11:51:17 hrs and the welding work being carried
out from 11:51:17 hrs to 11:56:16 hrs, after which the equipments were
removed from the vicinity. At 12:10:17 hrs., a worker was observed removing
the welding red boxes. This is noteworthy as it indicates that the welding
equipments were taken away by the workers around four hours before the
fi re occurred. Subsequently, the workers were seen transporting GI roofi ng
sheets as head loads to the roofi ng work site, which continued until 16:04
hrs. The CCTV footage showed workers also using a crane to move GI
1043
roofi ng sheets and MS Roofi ng Trusses to the roof repair area post-welding.
A substantial time gap of 4 hours, 19 minutes, and 43 seconds separated the
end of welding work from the fi re itself. Even if rooftop repair continued until
16:04 hrs., a signifi cant 26-minute time lag existed before the fi re started.
38.5 The Forensic Investigator's conclusion that sparks from rooftop
welding caused the fi re appear to be illogical, as they overlooked other
potential causes like short-circuit. Negligence despite workers not being
involved in welding-related tasks near the time of the fi re, was wrongly
attributed to the insured. Moreover, evidence was not available that sparks
fell on fl ammable chemicals attributable to activities, undertaken by workers.
39. Of the nine reports, seven suggest short-circuit as the likely fi re
cause, while two infer negligence on the insured's part, for in-adequate
precautions, during warehouse construction.
40. Logically if it were the welding sparks which caused the fi re, it
should have occurred shortly after 11:54:27 during the welding works or
around 16:04 hours during rooftop repair. The 4 hours 19 minutes 43 seconds
time gap is startlingly signifi cant. The 26-minute time lag after roofi ng
work ended and the fi re does not have any rational explanation. There is no
evidence of welding during the roofi ng work at 16:04 or closer to the fi re
time, which explains the inconclusive forensic report stating sparks "could
have" caused the fi re at 16:30.
41. The repudiation as noted is based on two reports (i) the forensic
report of Screen Facts Service Pvt. Ltd. and of (ii) M/s Bhansali & Co. The
fi rst one notably was inconclusive. The other reports suggest short-circuit
as the likely cause, not negligence. The signifi cant time gap that exists
between the welding work and the fi re at 16:30 has no logical explanation.
The basis of the repudiation accordingly appears to be un-reasonable and
is not acceptable.
VALUE OF A SURVEYOR'S REPORT
42. According to the Insurance Act 1938, an approved surveyor's
assessment is necessary for a claim. The claimant however contends that the
surveyor's report is not defi nitive. The key question is the extent to which
the report is binding and under what conditions can it be overridden in. To
NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT
ROADWAYS [HRISHIKESH ROY, J.]
1044
SUPREME COURT REPORTS
[2023] 13 S.C.R.
address this, Section 64(UM)(4) of the Insurance Act, 1938 can be usefully
read which concerns surveyors and loss assessors:
64-UM. (4) 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 intimated 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 he has obtained a report, on
the loss that has occurred, from a person who holds a licence issued
under this section to act as a surveyor or loss assessor (hereafter
referred to as "approved surveyor or loss assessor"):
Provided that nothing in this sub-section shall be deemed to take away
or abridge the right of the insurer to pay or settle any claim at any
amount diff erent from the amount assessed by the approved surveyor
or loss assessors"."
43. The above provision mandates that claims above Rs. 20,000 must
be initially assessed by an approved surveyor. It is noteworthy that the
insurer has the discretion to settle the claim for a diff erent amount, than
what is assessed by the surveyor.
44. In New India Assurance Co. Ltd. v. Pradeep Kumar (supra), the
court addressed whether one had to accept payment based on the surveyors'
assessment or could provide independent evidence to support higher costs
for replacement and repairs. The court's pertinent conclusion is as follows:
"22. In other words 1although assessment of loss by approved surveyor
is a prerequisite for payment or settlement of claim of twenty thousand
rupees or more by insurer, yet surveyor's report is not the last and
fi nal word. It is not that sacrosanct that it cannot be departed from;
it is not conclusive. The approved surveyor's report may be basis or
foundation for settlement of a claim by the insurer in respect of loss
suff ered by insured but such report is neither binding upon the insurer
nor insured."
45. Guided by the above ratio, the situation in the present case is
found to be similar. The surveyor's report cannot be considered a sacred
1045
document and contrary evidence, including an investigation report, is
subject to rebuttal. The key question is whether the investigation report is
indispensable, or if the survey report alone is suffi cient, to determine the
cause of the fi re.
46. The analysis of the forensic examiner is reproduced below for
ready reference: -
"19.01. Insured has claimed for loss due to fi re. Cause of fi re as
claimed-fi re due to short circuit.
19.02. Cause of fi re was investigated by M/s Screenfacts Services Pvt
Ltd.
19.03. M/s Screenfacts Services Pvt. Ltd. have concluded cause of
fi re as under:-
19.04. Taking into consideration the construction of roofi ng in the
gap between E & F segments of the warehouse on that day. which
involved considerable welding working it is opined that during welding
at the roofl evel sparks could have fallen on the adjoining fl ammable
chemicals stored between A & D indicating the fi re.
19.05. The root cause of the fi re incident was due to the negligence on
the part of the management in not taking adequate precautions when
the construction work was going on, that too in a secured customs
bonded warehouse where many hazardous chemicals were stared."
47. The surveyor's abovementioned report, although comprehensive
otherwise, is inconclusive on the aspect identifying the actual cause of fi re.
Given that the surveyor's report only relies on the Forensic Examiner, i.e.,
M/s Screen Facts Services Pvt. Ltd.'s fi ndings, it would be unsafe in this
Court's opinion to rely on the said report.
EXTENT OF LIABILITY WHEN CAUSE OF FIRE
INDETERMINABLE
48. Multiple survey reports suggesting diff erent causes of fi re present
a perplexing conundrum on the insurance claim. The reports provided by
the insurer, though submitted with intent, were found to be inconclusive
and also contradictory. The reports furnished by the claimant, which include
assessments by government departments and two independent surveyors,
NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S.