# JSK INDUSTRIES PVT. LTD v. ORIENTAL INSURANCE COMPANY LIMITED

- **Citation:** [2022] 15 S.C.R. 581
- **Court:** Supreme Court of India
- **Decided:** 2022-10-18
- **Case number:** Civil Appeal No. 7630 of 2022
- **Bench:** Dinesh Maheshwari, Aniruddha Bose
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/jsk-industries-pvt-ltd-v-oriental-insurance-company-limited-35630
- **Pages:** 10

## Headnote

Insurance: Insurance Claim - Repudiation of - Appellants
took insurance coverage - However, insurance company repudiated
their claim on the ground that there was no sufficient balance to
cover the declaration and/or loss - State Commission as also
National Commission rejected the claim - Held: Insurance company
took a defense which did not form the basis of repudiation of the
claim - National Commission ought not to have gone beyond the
grounds of repudiation and into the nature of coverage, which
according to the National Commission had effectively changed from
"anywhere in India to anywhere in India" to a sales turnover policy,
limiting the policy coverage of the subject- goods from the points of
departure at the two locations - Matter remanded to State
Commission for taking decision afresh on the claim of the appellants
on the ground which formed the basis of repudiation.
Allowing the appeal, the Court
HELD: 1.1 The National Commission rejected the appeal
of the appellant on the ground that they had converted "from
anywhere in India to anywhere in India" policy into the sales
turnover policy covering transportation of goods only from two
locations specified in the endorsement. The repudiation of the
appellants' claim was on the ground of exhaustion of insurance
coverage and the State Commission also determined the issue
primarily on that ground. Both the National Commission and the
State Commission had referred to the nature of the policy but the
State Commission did not come to a specific finding as to whether
the goods otherwise remained insured from the port to the
appellants' factory. It was the finding of the National Commission
on the other hand that the policy was only applicable on supplies
made from the two locations. As regards financial limit of the
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581
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SUPREME COURT REPORTS
[2022] 15 S.C.R.
policy, the appellants' stand before the National Commission was
that there was available coverage to accommodate their claim.
On this count, the observation of the National Commission was
that if exhaustion of the coverage limit was the sole reason for
repudiation of the claim, the matter could have been remanded
to the State Commission for the decision of the complaint on
merits. That was the course which ought to have been directed
by the National Commission because the only ground on which
repudiation of the claim was made was lack of financial coverage.
The National Commission ought not to have gone beyond the
grounds of repudiation and into the nature of coverage. Thus,
the order of the National Commission as also State Commission
are set aside and the matter is remanded to the State Commission
for taking a decision afresh on the claim of the appellants on the
grounds which formed the basis of repudiation and determine as
to whether at the material point of time there was sufficient
balance to cover the claim on account of declaration made as
regards loss suffered by the appellants. [Paras 14, 15][589-C-G;
590-B-C]
Saurashtra Chemicals Ltd. v. National Insurance Co.
Ltd. (2019) 19 SCC 70 - referred to.
Case Law Reference
(2019) 19 SCC 70
referred to
Para 14

## Text

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581
JSK INDUSTRIES PVT. LTD.
v.
ORIENTAL INSURANCE COMPANY LIMITED
(Civil Appeal No. 7630 of 2022)
OCTOBER 18, 2022
[DINESH MAHESHWARI AND ANIRUDDHA BOSE, JJ.]
Insurance: Insurance Claim - Repudiation of - Appellants
took insurance coverage - However, insurance company repudiated
their claim on the ground that there was no sufficient balance to
cover the declaration and/or loss - State Commission as also
National Commission rejected the claim - Held: Insurance company
took a defense which did not form the basis of repudiation of the
claim - National Commission ought not to have gone beyond the
grounds of repudiation and into the nature of coverage, which
according to the National Commission had effectively changed from
"anywhere in India to anywhere in India" to a sales turnover policy,
limiting the policy coverage of the subject- goods from the points of
departure at the two locations - Matter remanded to State
Commission for taking decision afresh on the claim of the appellants
on the ground which formed the basis of repudiation.
Allowing the appeal, the Court
HELD: 1.1 The National Commission rejected the appeal
of the appellant on the ground that they had converted "from
anywhere in India to anywhere in India" policy into the sales
turnover policy covering transportation of goods only from two
locations specified in the endorsement. The repudiation of the
appellants' claim was on the ground of exhaustion of insurance
coverage and the State Commission also determined the issue
primarily on that ground. Both the National Commission and the
State Commission had referred to the nature of the policy but the
State Commission did not come to a specific finding as to whether
the goods otherwise remained insured from the port to the
appellants' factory. It was the finding of the National Commission
on the other hand that the policy was only applicable on supplies
made from the two locations. As regards financial limit of the
[2022] 15 S.C.R. 581
581
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[2022] 15 S.C.R.
policy, the appellants' stand before the National Commission was
that there was available coverage to accommodate their claim.
On this count, the observation of the National Commission was
that if exhaustion of the coverage limit was the sole reason for
repudiation of the claim, the matter could have been remanded
to the State Commission for the decision of the complaint on
merits. That was the course which ought to have been directed
by the National Commission because the only ground on which
repudiation of the claim was made was lack of financial coverage.
The National Commission ought not to have gone beyond the
grounds of repudiation and into the nature of coverage. Thus,
the order of the National Commission as also State Commission
are set aside and the matter is remanded to the State Commission
for taking a decision afresh on the claim of the appellants on the
grounds which formed the basis of repudiation and determine as
to whether at the material point of time there was sufficient
balance to cover the claim on account of declaration made as
regards loss suffered by the appellants. [Paras 14, 15][589-C-G;
590-B-C]
Saurashtra Chemicals Ltd. v. National Insurance Co.
Ltd. (2019) 19 SCC 70 - referred to.
Case Law Reference
(2019) 19 SCC 70
referred to
Para 14
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7630
of 2022.
From the Judgment and Order dated 15.01.2018 of the National
Consumer Disputes Redressal Commission at New Delhi in First Appeal
No. 700 of 2012.
Gopal Shankarnarayan, Sr. Adv., D. Bharat Kumar, Tadimall
Bhaskar Gowtham, Aman Shukla, Ms. Tanya Srivastava,
M. Chandrakanth Reddy, Gopal Jha, Advs. for the Appellant.
S. M. Suri, Ms. Manjeet Chawla, Yashvardhan S. Soam, Advs.
for the Respondent.
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The Judgment of the Court was delivered by
ANIRUDDHA BOSE, J.
Leave granted.
2. The repudiation of a claim in respect of a "Marine Cargo-Open
Policy" gives rise to this appeal and the appellants are the claimants
before us. The policy, initially covered a sum of rupees two hundred
crores. Under the heading "Risk Details", against Sl.No.1 of the policy
document, next to the column "Voyage", it was indicated "from anywhere
in India to anywhere in India". Period of Insurance was from 29th October
2009 to Midnight on 28th October 2010. There was subsequent addition
of terms and raising of insurance coverage as well. Fresh endorsement
schedules were issued incorporating the changes. These endorsement
schedules, however, carried the expression "Attached to and forming
part of policy No.12012/21/2010/876" (that being the original policy
number). The endorsement schedule dated 25th November 2009 described
the policy as "On the Sales Turnover basis". This endorsement became
effective from 14:50 hrs on 25th November 2009. The next endorsement
was made on 8th April 2010, also attached to the original policy, by which
sum insured was raised by a further rupees two hundred crores.
3. The appellants are traders and manufacturers of aluminium
products. They claim to have purchased, by high seas sale agreement
dated 22nd June 2010, eight containers of aluminium ingots. These
containers had arrived at Jawaharlal Nehru Port Trust (JNPT) and from
there, they were sent to the appellants' factory unit at Silvassa by a
transporter by road. The appellants' case is that out of the eight containers,
one was stolen and the incident of theft took place on 2nd July 2010.
According to the appellants, value of stolen goods was rupees thirtyfour lakhs ninety two thousand and eighty one. Their claim was lodged
with the respondent on 18th March 2011 but this was repudiated by the
latter. The appellants then approached the State Consumer Disputes
Redressal Forum (Maharashtra) against the insurance company. We
shall henceforth refer to the said forum as the State Commission.
4. The appellants' initial Complaint Case no. CC/12/177 was
rejected by the State Commission, by an order passed on 27th July 2012
and the appeal against that dismissal order registered as Appeal No. 700
of 2012, was also dismissed by the National Consumer Disputes
JSK INDUSTRIES PVT. LTD. v. ORIENTAL INSURANCE
COMPANY LIMITED
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Redressal Commission ("National Commission") by an order pronounced
on 15th January 2018. This decision is under appeal before us.
5. As we have already narrated, the policy underwent some
changes. Clause 3 of the endorsement schedule dated 25th November
2009 specified:-
"3. The supplies made from the following two works locations
are held covered under the locations mentioned below.
a)
JSK Industries Private Limited,
Survey No. 369/1/1/2,
Behind Siyaram Silk Mills,
Village Sayil,
Slivassa-396230,
UT of Dadra and Nagar Haveli.
b)
JSK Industries Private Limited,
126/1-8 Rakholi High School Road, Rakholi Village,
Slivassa-396240
UT of Dadra and Nagar haveli.
Other terms and conditions of the policy remain
unaltered.
(quoted verbatim from the paperbook)
6. After the appellants lodged the claim, the insurance company
by a communication dated 7th September 2011, raised certain queries.
These included:-
"1. The above stock turn over policy was issued on 29.10.2009
for a sum insured of Rs. 200 crores. As per the documents
and statements submitted the above sum insured has exhausted
as on 22.12.2009 & no balance was available to cover further
declarations.
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2. Endorsement for increase in sum insured was passed on
08.04.2010 for Rs. 200 crores which was fully utilized to cover
declarations for the period 08.04.2010 till May 2018 as per
the documents and statements submitted.
3. The above loss has occurred between 10.07.2010 &
12.07.2010 and as per 1 % 2 above there is no sufficient
balance to cover the above declarations and/ or loss.
However you being given one more opportunity to
substantiate your claim in view of the grounds of repudiation
mentioned before a final decision is taken of cure end your
representation/ clarification must reach us within 2 weeks from
the date of receipt of this letter, Please note that in case we
have response from you within 2 weeks from the date of receipt
of this letter the claim shall stand repudiated for the reasons
indicated above without further advices from us."
(quoted verbatim from the paperbook)
7. As it would be evident from the aforesaid communication, the
appellants were given an opportunity to explain their stand in the light of
the preliminary view of the insurance company that their claims were
not tenable. The appellants took a stand that their insurance coverage
was enhanced to Rs.400 crores and in a table contained in their response
dated 20th September 2011, it was explained by them that the aforesaid
coverage of Rs.400 crores was not exhausted. The insurance company,
however, stuck to their stand and formally repudiated their claim by a
letter issued on 24th January 2012. The ground for repudiation was that
there was no sufficient balance to cover the declaration and/or loss. The
repudiation letter recorded:-
"The reply submitted by you have been examined and the
Competent Authority has concluded that no new facts have
been brought/furnished by you which could satisfactorily
answer the issues raised in our above letter.
Your claim therefore has been repudiated for the reason
mentioned in our above letter i.e. "there is no sufficient
balance to cover the above declaration and/or loss"
(quoted verbatim from the paperbook)
JSK INDUSTRIES PVT. LTD. v. ORIENTAL INSURANCE
COMPANY LIMITED [ANIRUDDHA BOSE, J.]
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8. The State Commission rejected the claim of the appellants,
taking into account the fact that their policy was subsequently converted
into Sales Turnover basis to cover sale transaction up to Rs.400 crores
in a given time and though their policy coverage had been enhanced, the
same did not cover the loss on which their claim was raised. It was,
inter-alia, held by the State Commission:-
"5. On the date of occurrence i.e. cause of action (02/07/
2010) insurance cover under the policy though earlier
increased with sum assured of 400 crores but such contingency
was not covered as admittedly, the sales transactions taken
place were not covered for lack, of balance of sales
transaction to cover under insurance policy. Even during the
course of argument, Ld. counsel for the complainant company
conceded to this position, yet he tried to press for admission
of this complaint. Interestingly, survey report of the authorized
surveyor available on record to assess the loss due to theft of
the container with material therein states that such a cover
under insurance policy is not extended and rightly so on going
through the policy terms and conditions. Complainant
company has not made carrier as a party against whom
possibly the complaint could have been processed. We do not
find any merit in complaint and, therefore, complaint is
rejected in limine at the admission stage itself."
(quoted verbatim from the paperbook)
9. As we have already indicated, the National Commission, in
appeal, also rejected the appellants' contention. The National Commission
in its decision under appeal construed the implication of Sales Turnover
and held:-
"8. I have thoroughly examined the record and have given a
thoughtful consideration to the arguments advanced by both
the sides. It is true that the order of the State Commission is
very cryptic and does not clearly state the details of the reasons
on which the complaint has been dismissed. Prima facie, the
State Commission has dismissed the complaint on the basis of
the facts mentioned in the repudiation letter that the insurance
limit was exhausted before the claim arose. This assertion has
been disputed by the complainant and it has been claimed
that there was still an insurance limit left for Rs.3.89 crores
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and, therefore, it was not correct to hold that the total
insurance limit was exhausted and that too, without getting
the version of the OP. Had this been the only reason, the
matter could have been remanded to the State Commission,
for the decision of the complaint on merits, but the fact of the
matter is that the nature of the policy after the endorsement
dated 25.11.2009 became such that only the sold material
was covered and not the imported material. The State
Commission has obliquely mentioned this fact, but has not
made this a point for dismissal of the complaint. In fact, the
complainant should have taken some other insurance for
transport of the goods from JNPT to Silvasa. The complainant
had neither taken any extra policy nor has he made the
transporter, a party in the complaint case.
9. The endorsement of 25.11.2009 that the policy would be
on "sales turn-over basis" also mentions that the insurance
would be on "sales turn-over basis" on the material going
out from the two premises of the industry at Silvasa.
10. Learned counsel for the Appellant has not shown any
document to controvert this assertion of the insurance
company that the policy was only applicable on the sales
supplies from the two premises of the industry at Silvasa.
11. It is a settled principle of law that the terms of the policy
are to be construed as per the written agreement of the policy.
It could not be shown by the learned counsel for the Appellant
that any imported material would also be included in the
covered items under the policy even after the endorsement
dated 25.11.2009 which restricts the policy to only on "sales
turn-over basis" on the supplies, from two locations of the
industry at Silvasa."
(quoted verbatim from the paperbook)
10. Mr. Gopal Shankarnarayan, learned senior counsel for the
appellants has argued both on substantive and procedural points to assail
the aforesaid orders. His first 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
JSK INDUSTRIES PVT. LTD. v. ORIENTAL INSURANCE
COMPANY LIMITED [ANIRUDDHA BOSE, J.]
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Co. Ltd. [(2019) 19 SCC 70] has been cited. In this judgement, 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 field. 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 specific
ground in letter of repudiation, they cannot do so at the stage
of hearing of the consumer complaint before NCDRC."
As regards implication of the Sales Turnover Policy, his argument
is that the said policy cannot be construed to mean to cover only those
goods which are already sold. His submission on this count is that in
such a situation the title of the goods would have passed on to the buyer
and the appellants would not have any insurable interest in the said goods.
11. He has further argued that the National Commission erred in
interpreting the terms of the policy. According to him, the policy
endorsement dated 25th November 2009 did not withdraw coverage of
any of the goods named in the policy while in transit "from anywhere in
India to anywhere in India" and the implication of including the two
locations specified meant that as per the 'Sales Turnover policy' the
appellants were required to declare their sales made from the mentioned
two work locations (factories) on monthly/quarterly basis to the respondent
only for the purpose of computing the balance cover.
12. Mr. S. M. Suri, learned counsel for the respondent-insurance
company submitted that the main case of the insurance company is that
the policy covered only those goods within the coverage which left the
two units which have been specified in the earlier part of this judgment.
13. First, we shall examine the ratio of the decision of this Court
in the case of Saurashtra Chemicals Ltd. (supra). In that case, it was
a claim relating to standard fire and special perils policy. Repudiation
was solely on the ground that a spontaneous combustion did not result
into fire and loss had not been caused by the fire as stipulated by policy
conditions. The insured had approached the National Commission. One
of the defenses taken by the insurance company in the Commission was
that the intimation of claim was with delay for over a month. This delay,
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according to the insurance company vitiated condition 6(i) of the general
conditions of the policy, as applicable in that case. The insurance company
was successful before the National Commission. The insured preferred
an appeal which was heard and decided by a Coordinate Bench. Before
the Bench, the main point on which the case turned was that the insurance
company was taking a defense which did not form the basis of repudiation
of the claim. It is in that context this Court held this was impermissible.
The reasoning of the Court appeared in paragraph 23 of the report,
which we have quoted above.
14. Addressing the merits of the present case, we find that the
National Commission mainly rejected the appeal of the appellant on the
ground that they had converted "from anywhere in India to anywhere in
India" policy into the sales turnover policy covering transportation of
goods only from two locations specified in the endorsement made on
25th November 2009. The repudiation of the appellants' claim was on
the ground of exhaustion of insurance coverage and the State Commission
also determined the issue primarily on that ground. Both the National
Commission and the State Commission had referred to, in their respective
decisions, the nature of the policy but the State Commission did not
come to a specific finding as to whether the goods otherwise remained
insured from the JNPT port to the appellants' factory. It was the finding
of the National Commission on the other hand that the policy was only
applicable on supplies made from the two locations at Silvassa. We have
quoted this passage from the order of the National Commission earlier
in this judgment. As regards financial limit of the policy, the appellants'
stand before the National Commission was that there was available
coverage of Rs. 3.89 crores to accommodate their claim. On this count,
the observation of the National Commission was that if exhaustion of
the coverage limit was the sole reason for repudiation of the claim, the
matter could have been remanded to the State Commission for the
decision of the complaint on merits. In our opinion, that was the course
which ought to have been directed by the National Commission because
the only ground on which repudiation of the claim was made was lack of
financial coverage. Thus, following the ratio of the decision of the
Coordinate Bench in the case of Saurashtra Chemicals Ltd. (supra),
the National Commission ought not to have gone beyond the grounds of
repudiation and into the nature of coverage, which according to the
National Commission had effectively changed from "anywhere in India
to anywhere in India" to a sales turnover policy, limiting the policy
JSK INDUSTRIES PVT. LTD. v. ORIENTAL INSURANCE
COMPANY LIMITED [ANIRUDDHA BOSE, J.]
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coverage of the subject-goods from the points of departure at the two
locations at Silvassa. These are all terms of art applicable to the insurance
trade but we do not consider it necessary to dilate on this aspect of the
dispute having regard to the decision of this Court in the case of
Saurashtra Chemicals Ltd. (supra).
15. Under these circumstances, we set aside the decisions of the
National Commission as also of that State Commission and remand the
matter to the State Commission for taking a decision afresh on the claim
of the appellants on the grounds which formed the basis of repudiation
and determine as to whether at the material point of time there was
sufficient balance to cover the claim on account of declaration made as
regards loss suffered by the appellants.
16. The appeal stands allowed in the above terms.
17. There shall be no order as to costs.
18. Pending application(s), if any, shall stand disposed of.
Nidhi Jain
Appeal allowed.