# New India Assurance Company Ltd. Through its Manager v. M/s Tata Steel Ltd

- **Citation:** 2024 INSC 356
- **Court:** Supreme Court of India
- **Decided:** 2024-04-30
- **Case number:** Civil Appeal No. 2759 of 2009
- **Bench:** Surya Kant, K.V. Viswanathan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/new-india-assurance-company-ltd-through-its-manager-v-m-s-tata-steel-ltd-37820
- **Pages:** 36

## Headnote

A claim for 35.08 crores was filed by the insured after the '20 Hi Cold
Rolling Mill' was totally destroyed due to fire. Since running of the
company was important, the Insured got a new 6 Hi Cold Rolling Mill
installed in its unit and commenced production. Admittedly, based
on the interim report of the surveyors, a sum of Rs.4,92,80,905/-
was released in favour of the Insured by NIACL-insurer. Thereafter,
the Insured gave consent for receiving Rs.20.95 Crores as net
adjusted loss. However, the NIACL computed depreciation at 60%
and settled the claim on 03.01.2003 stating the loss amount as
Rs.7.88 Crores. The issues arising for consideration are as follows:
(i) Was the Reinstatement Value Clause part of the policy; (ii)
Was NIACL justified in computing loss on depreciation basis and
fixing depreciation at 60%; (iii) Is the Insured justified in claiming
reinstatement value by placing reliance on the judgment in Oswal
Plastic Industries.
Headnotes
Insurance - Reinstatement value clause - Whether the
memorandum consisting of the Reinstatement Value Clause
was a part of the policy - The Insured contended that the
memorandum containing the Reinstatement Value Clause was
not part of the policy:
Held: The contention of the insured rejected - This is for the reason
that before the NCDRC in the written statement filed by the NIACL it
was specifically pleaded that copy of the fire policy was not attached
with the Reinstatement Value Clause issued along with the policy,
so the answering Respondent-insurer (NIACL) was filing the copy
of the policy with complete terms and conditions and clauses along
with the written statement - In the replication filed by the Insured,
there was no denial of this averment. [Paras 31 and 32]
286
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Insurance - Computation of loss on depreciation basis - Was
NIACL justified in computing loss on depreciation basis and
fixing depreciation at 60%:
Held: It emerges clearly that under the main terms of the policy the
company was to pay the Insured the value of the property at the
time of happening of the destruction (except where NIACL opts to
reinstate) - There was a special memorandum attached to the policy
- That memorandum was the Reinstatement Value Clause which
substituted the basis upon which the amount was payable from the
value on the date of destruction to the cost of replacing or reinstating
the property i.e. property of the same kind or type but not superior
or more extensive than the insured property when new - However,
as it transpires the said memorandum ceased to have any force
since the Insured was unable and unwilling to replace or reinstate
the property - Special Provision 4 (b) of the memorandum applied
and rendered the Reinstatement Value Clause ineffective - Also,
the Insured under Clause 6(b) of the conditions had an obligation to
give NIACL all such further particulars, plans, specifications, books,
vouchers and invoices with respect to the claim - It is sufficiently
brought out that in spite of the surveyors writing to the Insured
repeatedly (on 14.12.1998, 03.05.2002, 24.06.2002 and 07.08.2002),
there was no information forthcoming from the Insured about the
invoices as proof of the value of the damaged equipment and the
cost of the new equipment - Instead, the insured originally undertook
that they will reinstate the damaged property; received the on account
payment of Rs.4,92,80,905/- and informed NIACL that they have
placed order for repair of 20 Hi Cold Rolling Mill - Thereafter by their
letter of 16.06.1999, the Insured sought assessment of net adjusted
loss at Rs.20.95 Crores - The surveyors of NIACL kept asking for
the basic and relevant particulars, the Insured without furnishing
the same kept asking for the settlement of the money - NIACL
did not completely repudiate the claim - NIACL cannot be faulted
for resorting to depreciation method - NIACL was also justified in
writing the letter of 12.11.2002 (to increase the depreciation to 6

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* Author
[2024] 5 S.C.R. 285 : 2024 INSC 356
New India Assurance Company Ltd.
Through its Manager
v.
M/s Tata Steel Ltd.
(Civil Appeal No. 2759 of 2009)
30 April 2024
[Surya Kant and K.V. Viswanathan,* JJ.]
Issue for Consideration
A claim for 35.08 crores was filed by the insured after the '20 Hi Cold
Rolling Mill' was totally destroyed due to fire. Since running of the
company was important, the Insured got a new 6 Hi Cold Rolling Mill
installed in its unit and commenced production. Admittedly, based
on the interim report of the surveyors, a sum of Rs.4,92,80,905/-
was released in favour of the Insured by NIACL-insurer. Thereafter,
the Insured gave consent for receiving Rs.20.95 Crores as net
adjusted loss. However, the NIACL computed depreciation at 60%
and settled the claim on 03.01.2003 stating the loss amount as
Rs.7.88 Crores. The issues arising for consideration are as follows:
(i) Was the Reinstatement Value Clause part of the policy; (ii)
Was NIACL justified in computing loss on depreciation basis and
fixing depreciation at 60%; (iii) Is the Insured justified in claiming
reinstatement value by placing reliance on the judgment in Oswal
Plastic Industries.
Headnotes
Insurance - Reinstatement value clause - Whether the
memorandum consisting of the Reinstatement Value Clause
was a part of the policy - The Insured contended that the
memorandum containing the Reinstatement Value Clause was
not part of the policy:
Held: The contention of the insured rejected - This is for the reason
that before the NCDRC in the written statement filed by the NIACL it
was specifically pleaded that copy of the fire policy was not attached
with the Reinstatement Value Clause issued along with the policy,
so the answering Respondent-insurer (NIACL) was filing the copy
of the policy with complete terms and conditions and clauses along
with the written statement - In the replication filed by the Insured,
there was no denial of this averment. [Paras 31 and 32]
286
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Insurance - Computation of loss on depreciation basis - Was
NIACL justified in computing loss on depreciation basis and
fixing depreciation at 60%:
Held: It emerges clearly that under the main terms of the policy the
company was to pay the Insured the value of the property at the
time of happening of the destruction (except where NIACL opts to
reinstate) - There was a special memorandum attached to the policy
- That memorandum was the Reinstatement Value Clause which
substituted the basis upon which the amount was payable from the
value on the date of destruction to the cost of replacing or reinstating
the property i.e. property of the same kind or type but not superior
or more extensive than the insured property when new - However,
as it transpires the said memorandum ceased to have any force
since the Insured was unable and unwilling to replace or reinstate
the property - Special Provision 4 (b) of the memorandum applied
and rendered the Reinstatement Value Clause ineffective - Also,
the Insured under Clause 6(b) of the conditions had an obligation to
give NIACL all such further particulars, plans, specifications, books,
vouchers and invoices with respect to the claim - It is sufficiently
brought out that in spite of the surveyors writing to the Insured
repeatedly (on 14.12.1998, 03.05.2002, 24.06.2002 and 07.08.2002),
there was no information forthcoming from the Insured about the
invoices as proof of the value of the damaged equipment and the
cost of the new equipment - Instead, the insured originally undertook
that they will reinstate the damaged property; received the on account
payment of Rs.4,92,80,905/- and informed NIACL that they have
placed order for repair of 20 Hi Cold Rolling Mill - Thereafter by their
letter of 16.06.1999, the Insured sought assessment of net adjusted
loss at Rs.20.95 Crores - The surveyors of NIACL kept asking for
the basic and relevant particulars, the Insured without furnishing
the same kept asking for the settlement of the money - NIACL
did not completely repudiate the claim - NIACL cannot be faulted
for resorting to depreciation method - NIACL was also justified in
writing the letter of 12.11.2002 (to increase the depreciation to 60%)
because after reviving the demand to reinstate the plant, the Insured
failed to furnish the documents required and even admittedly the
plant as allegedly reinstated was of 6 Hi Cold Rolling Plant and
not 20 Hi Cold Rolling Plant - An additional affidavit was also filed
by NIACL before NCDRC to clarify the established practice for
computing depreciation - The base figure of Rs. 20.09 crores was
kept intact - Insured stood to gain by keeping figure at Rs. 20.09
[2024] 5 S.C.R.
287
New India Assurance Company Ltd. Through its Manager v.
M/s Tata Steel Ltd.
crores - The depreciation at 60% upheld - Thus, the NIACL rightly
ordered the settlement of the claim on 03.01.2003 stating the loss
amount as Rs.7.88 Crores and ordering the balance amount of 2.88
crores be paid after adjusting the on account payment. [Paras 57,
58, 59, 66, 68, 69, 70, 71]
Insurance - Is the Insured justified in claiming reinstatement
value by placing reliance on the judgment in Oswal Plastic
Industries:
Held: No clause similar to the memorandum of reinstatement
value clause appears to have existed in Oswal Plastic Industries
- Oswal Plastic Industries has no application to the facts of the
present case. [Para 75]
Case Law Cited
Oswal Plastic Industries v. Manager, Legal Deptt
N.A.I.C.O. Ltd. [2023] 1 SCR 985 : 2023 SCC OnLine
SC 43; Sri Venkateswara Syndicate v. Oriental Insurance
Co. Ltd. [2009] 14 SCR 57 : (2009) 8 SCC 507;
Dharmendra Goel v. Oriental Insurance Co. Ltd. [2008]
11 SCR 578 : (2008) 8 SCC 279; Sumit Kumar Saha
v. Reliance General Insurance Company Ltd. [2019] 1
SCR 763 : (2019) 16 SCC 370 - held inapplicable.
List of Acts
Insurance Act, 1938; IRDA (Protection of Policyholders' Interests)
Regulations, 2002.
List of Keywords
Insurance; Reinstatement value clause; Report of the surveyors; Net
adjusted loss; Consumer Complaint; Depreciation; Computation of
loss on depreciation basis; Cost of replacing or reinstating the property.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2759 of 2009
From the Judgment and Order dated 05.08.2008 of the National
Consumers Disputes Redressal Commission, New Delhi in CC No.
233 of 2000
With
Special Leave Petition (Civil) No. 10001 of 2009 and Civil Appeal
Nos. 5242-5243 of 2009
288
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Appearances for Parties
Joy Basu, Sanjay Jain, Sr. Advs., Ms. Nandini Gore, Ms. Sonia Nigam,
Akhil Abraham Roy, Mohammad Shahyan Khan, Arvind Thapliyal,
Siddhant Grover, Surya Kapoor for M/S. Karanjawala & Co., Vishnu
Mehra, Ms. Manjeet Chawla, Ms. Harshita Sukhija, Nishank Tripathi,
Yuvraj Sharma, Ms. Palak Jain, Mrs. Manik Karanjawala, Mrs. Usha
Pant Kukreti, Advs. for the appearing parties.
Judgment / Order of the Supreme Court
Judgment
K.V. Viswanathan, J.
1.
Leave granted in SLP (Civil) No. 10001 of 2009.
2.
I.A. No. 48152 of 2022 in Civil Appeal No. 2759 of 2009 is filed by
the Respondent [earlier known as M/s Bhushan Steel and Strips
Ltd, hereinafter referred to as the "Complainant" or the "Insured"]
seeking change of its name in the proceedings to 'Tata Steel Ltd'. The
Complainant/Insured has filed similar IAs in the connected appeals
filed by it. It is stated that the name of the Complainant/Insured
was changed to 'Bhushan Steel Ltd' in the year 2007. Thereafter
while these appeals were pending, the company underwent a
Corporate Insolvency Resolution Process and was successfully
taken over by 'Tata Steel Ltd' on 27.11.2018 and was renamed as
'Tata Steel BSL Ltd'. Thereafter, it is seen that the Complainant/
Insured further underwent a merger/amalgamation and was finally
merged/amalgamated with 'Tata Steel Ltd' w.e.f. 11.11.2021. In
view of the said facts, all the applications for change of name are
allowed.
3.
These are four Civil Appeals arising out of the proceedings in Original
Petition No. 233 of 2000 before the National Consumer Disputes
Redressal Commission, New Delhi ["NCDRC"].
4.
Civil Appeal No. 2759 of 2009 has been filed by the New India
Assurance Company Limited [hereinafter referred to as "NIACL" or
the "Insurer" or the "Insurance Company"] challenging the order
dated 05.08.2008 of the NCDRC. By the said order, the NCDRC
partly allowed the complaint of the Insured. The NCDRC awarded
an amount of Rs.13,15,27,000/- with interest at 10% per annum from
the expiry of two months since the submission of survey report dated
[2024] 5 S.C.R.
289
New India Assurance Company Ltd. Through its Manager v.
M/s Tata Steel Ltd.
11.12.2001, payable to the Insured. The amount already paid by the
Insurance Company was ordered to be adjusted and a cost of Rs.
50,000/- was also awarded to the Insured. NIACL, in this Appeal,
is aggrieved with the finding that the Complainant's claim must be
settled, based on calculating depreciation at the rate of 32% - and
not 60%.
5.
The Civil Appeal arising out of SLP(Civil) No. 10001 of 2009
has been filed by the Insured/Complainant. The grievance here
is against the dismissal of Misc. Application No. 298 of 2008 in
Original Petition No. 233 of 2000 seeking review of the order
dated 05.08.2008.
6.
Civil Appeal Nos. 5242-5243 of 2009 have been filed by the Insured/
Complainant against the main order dated 05.08.2008 (passed in
O.P. No. 233 of 2000) and order dated 29.08.2008 (allowing the
application for rectification and correcting the figure awarded to Rs.
13,51,27,000/- instead of Rs. 13,15,27,000/-) respectively.
7.
The grievance pleaded by the Insured/Complainant in its connected
appeals is that the compensation awarded ought to have been greater
because, according to it, the base figure on which the depreciation
of 32% was computed should have been Rs.28 Crores and not
Rs.20,09,95,000/-. The claim was that, so computing, the amount
payable by NIACL should have been Rs. 18.91 Crores.
Brief Summary of Facts:
8.
The Insured had taken an insurance policy from NIACL for the
entire machinery and equipment of its mill by paying a premium
of Rs.62,09,655/-. The policy was for the period 29.09.1998
to 28.09.1999. According to the Insured, due to a fire accident
on 12.12.1998, the '20 Hi Cold Rolling Mill' fitted with imported
equipment was fully destroyed resulting in a loss of Rs. 35.08
crores. The incident of fire was intimated to NIACL on 12.12.1998
itself. Surveyors 'M/s R.K. Singhal and Company Pvt. Ltd.' and
subsequently 'M/s A.K. Govil and Associates' and 'M/s P.C. Gandhi'
were appointed by NIACL. A claim for Rs. 35.08 crores was filed
on 29.01.1999. According to the Insured, this was based upon
the quotations received from various manufacturers of the said
machinery and the complete details of cost for replacing and/or
repairing the machines.
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9.
The Insured also pleaded that since the running of the company
was important, it got a 6 Hi Cold Rolling Mill installed in its unit and
commenced production by spending Rs.29.60 crores apart from
excise duties.
10. Admittedly, based on the interim report of the surveyors, a sum of
Rs.4,92,80,905/- was released in favour of the Insured by NIACL
on 24.03.1999. According to the Insured, after the release of the
amount, it placed an order with 'M/s Flat Products Equipments (India)
Limited' ["M/s Flat Products"] for reinstating the 20 Hi Cold Rolling
machine by replacing the totally damaged and partially damaged
parts for a total sum of Rs.25 crores, and paid Rs.3,75,00,000/- to
M/s Flat Products by way of advance payment. Further, a sum of
Rs.47.50 lacs on account of inspection charges of mill housing
and Rs. 25 lacs for transportation of mill housing were also paid.
According to the Insured, though it lost more than Rs. 25 crores,
in view of the persistence from the Insurance Company, vide letter
dated 16.06.1999, it gave consent for receiving Rs.20.95 Crores as
net adjusted loss to avoid loss of time.
11. According to the Insured, since no response was forthcoming and
the balance amount was not released, Consumer Complaint bearing
Case No. 233 of 2000 was filed by the Insured before the NCDRC
on 30.05.2000.
12. According to NIACL, after receipt of the information about the fire
accident on 12.12.1998, NIACL immediately appointed the surveyors
and soon thereafter, on the basis of the interim survey report, onaccount payments were made. The Joint Surveyors submitted their
report on 11.12.2001. The vigilance complaints were also closed
on 18.01.2002.
13. According to NIACL, it was only on 27.03.2002 that the Insured
informed NIACL about the fact of having already installed a new
6 Hi Cold Rolling Mill and requested them for joint inspection with
the surveyors. In the Joint Surveyors' Report of 11.12.2001, the
loss was assessed at Rs.19.55 crores on replacement basis and
Rs.13.51 crores on depreciation basis. The surveyors, on 03.05.2002,
requested the Complainant to furnish several information for which
there was no response. It was contended by NIACL that the plea of
the Insured in their letter of 27.03.2002 that it had placed an order
for cold rolling mill on 11.01.1999 and the same was installed in
[2024] 5 S.C.R.
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New India Assurance Company Ltd. Through its Manager v.
M/s Tata Steel Ltd.
September-October, 1999 at the cost of Rs. 31.37 crores and the
prayer that the replacement should be treated as reinstatement, is
completely unacceptable. The machine installed is 6 Hi Cold Rolling
as against the damaged mill which was 20 Hi Cold Rolling. According
to NIACL, the claim has been rightly settled at Rs.7.88 Crores.
Proceedings before the NCDRC:
14. Though several other points were argued before us by the Insured,
the point canvassed before the NCDRC [and pleaded in the Insured's
connected Appeals] related only to the calculation of depreciation. The
argument taken by the Insured before the NCDRC was that NIACL
was not justified in computing depreciation at 60% while the surveyors
in the reports had recommended 32% as depreciation. The NCDRC
observed that the effort by the Insured to install a lesser capacity 6
Hi Cold Rolling Mill was an effort in desperation. It also found the
claim to be genuine. Addressing the issue of depreciation, it held
that after the initial recommendation in the Joint Surveyors' Report
dated 11.12.2001 of computing 32% depreciation, the surveyors were
persuaded by the letter of the Insurance Company dated 12.11.2002
to increase the depreciation to 60%. An additional affidavit was called
for from the NIACL to justify the depreciation at 60%. After perusing
the affidavit, the NCDRC held that there were no standard guidelines
for calculating depreciation and that it had been calculated differently
for different units. According to the NCDRC, the affidavit quoted the
instances of very high depreciation just to suit the convenience of
NIACL. It may be mentioned that the affidavit relied on certain cases
where depreciation was computed at a maximum rate up to 75% -
80%. The NCDRC held that the issuance of the letter of the Insurance
Company to the Surveyors seeking revision of calculation was issued
eleven months after the Joint Surveyors' Report dated 11.12.2001
and that this was not a healthy practice. So holding, it maintained
the depreciation at 32% and directed the payments as noted above.
Appeal to this Court:
15. The appeal by NIACL seeks depreciation to be fixed at 60%.
The Insured also in its appeals has focused only on the issue of
depreciation with the argument being that the base figure on which
32% depreciation was calculated should have been Rs.28 crores
and not Rs.20.09 crores. There are no other grounds raised in the
memo of the appeal.
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16. However, the Insured during the course of submission, while candidly
admitting that no other point had been raised in the memo of appeal,
relied on the judgment in Oswal Plastic Industries v. Manager, Legal
Deptt N.A.I.C.O. Ltd., [2023 SCC OnLine SC 43] to contend that the
reinstatement value should have been awarded in full and that in the
case of reinstatement value no question of depreciation arises. This
argument has been dealt with herein below at an appropriate stage.
Contentions of NIACL:-
17. Appearing for NIACL, learned Senior Counsel Mr. Sanjay Jain
contended that the insurance policy had a special condition in the
form of Reinstatement Value Clause; that there are two methods of
settlement of a claim depending on the nature of the policy, namely,
the reinstatement value basis and market value basis (or depreciation
basis); that under the Reinstatement Value Clause, the method of
indemnity was to be the "cost of replacing or reinstating the same i.e.
property of the same kind or type but not superior or more extensive
than the insured property when new"; that the reinstatement was to
be carried out by the Insured within 12 months or within such further
extended time; that para 2 of the Special Provisions provided that
until expenditure has been incurred by the Insured in replacing/
reinstating the damaged property, the Insurance Company shall not
be liable to pay any amount in excess of the amount which would
have been payable under the policy, if the said reinstatement clause
had not been incorporated; para 4 of the Special Provisions provided
that if the Insured expressed its intention to replace/reinstate the
damaged property and the Insured is unable or unwilling to replace
the damaged property on the same or another site, the reinstatement
clause was to be rendered ineffective.
18. Adverting to the impugned judgment, learned Senior Counsel
contended that the findings that (i) the insurer, out of sheer
desperation, bought the 6 Hi configuration; (ii) the depreciation rate
as calculated by the NIACL was erroneous; and (iii) NIACL's letter
to the surveyor asking for a revised calculation was not a healthy
practice, are all erroneous findings which are completely untenable.
According to learned Senior Counsel, the Insured in violation of
the undertaking did not take any steps for reinstatement; that there
was no delay on the part of the Insurance Company and in fact on
account payment of Rs. 4,92,80,905/- had been released as early as
[2024] 5 S.C.R.
293
New India Assurance Company Ltd. Through its Manager v.
M/s Tata Steel Ltd.
on 24.03.1999; that the NCDRC overlooked the fact that the Insured
did not comeback to the Insurance Company with any information
for about 08 months and only on 26.11.1999, followed by another
letter of 10.02.2000 asked for extension of time limit for reinstatement
of the insured property; that the same was accommodated by the
NIACL and on 07.03.2000, an extension of 12 months was given
and which time limit period was also not adhered to; that the Insured
after receiving the interim payment claimed that Rs. 3.75 crores were
advanced to M/s Flat Products and the said vendor neither repaired
the insured property nor replaced the same; that nearly two years
later on 28.06.2001, M/s Flat Products informed the Insured that
they had lost their expertise and, as such, the delay could not be
attributed to the NIACL; that the Insured informed the NIACL about
having installed a 6 Hi Cold Rolling Mill (as against the insured
property of 20 Hi Cold Rolling Mill), on 27.03.2002, without revealing
the date of actual installation and without giving any comparable
specification, which unilateral act cannot be termed as "an act of
sheer desperation" as termed by the NCDRC.
19. It is submitted by the learned Senior Counsel that under the
aforesaid circumstances, the Reinstatement Value Clause was
rendered inoperative. However, the Insurance Company gave another
opportunity to act in good faith and provide necessary specification
and particulars, which were not provided for, in spite of the undertaking
in the letter of 09.07.2002. Hence, by no stretch of imagination could
the delay be attributable to the Insurance Company.
20. Insofar as the percentage of depreciation was concerned, it was
contended that the NCDRC erroneously disregarded the affidavit
filed by the Insurance Company clarifying the standard practice. On
the finding about the practice adopted by the Insurance Company
as "not being a healthy practice", Mr. Sanjay Jain submitted that the
NIACL gave ample opportunities to provide cogent material and it
is only upon their failure to furnish the necessary documents, as
obligated in the policy, that NIACL was constrained to settle the
claim on market value basis by applying the necessary percentage
of depreciation. It was contended that in the report of 11.12.2001,
the joint surveyors, while arriving at the depreciation rate of 32%,
did not have any material. Therefore, it was a prudent act on the
part of the NIACL to arrive at a calculation on the basis of market
value with the applicable rates of depreciation, after informing the
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surveyors that the reinstatement method was not an option any
longer. The learned Senior Counsel submitted that the claim was
finally assessed by the surveyors, who in their survey report dated
07.12.2002 and after computing the balance life of ten years arrived
at the depreciation rate of 60%. Hence, NIACL's conduct in accepting
that report could not be said to be arbitrary. It was argued that there
was no disagreement on the surveyor's report.
21. The learned Senior Counsel emphasized that even today, the Insured
has no definite proof available with regard to the actual age of the
mill and as to when it was procured from its vendor; or under what
circumstances and condition the same was procured and other
essential details. In this background, the assessment made by
the surveyors, who are experts, could not be said to be illegal or
untenable. The learned Senior Counsel further submitted that the
recommendation of depreciation at 32% was at the stage when no
material was forthcoming and was not supported by any cogent
material and clarity on this aspect emerged only on the report of
07.12.2002. According to the learned Senior Counsel, ground (D)
in Civil Appeal Nos.5242-5243 of 2009 records an admission of the
Insured about the NCDRC rightly proceeding on depreciation basis.
22. Learned Senior Counsel submitted that there was no ambiguity and
hence there is no room for the applicability of doctrine of contra
proferentem. The survey report of 11.12.2001 was prepared at a
premature stage with all relevant disclaimers. Alternatively, it was
submitted that under Section 64 UM (2) of the Insurance Act, 1938,
the NIACL was entitled to differ from the recommendation of the
surveyor.
23. Learned Senior Counsel strongly refuted the reliance placed in the
convenience compilation, by the Insured on the judgment in Oswal
Plastic Industries (supra). Learned Senior Counsel contended
that Oswal Plastic Industries (supra) was not a case with the
Reinstatement Value Clause as a special condition. Learned Senior
Counsel contended that unlike in Oswal Plastic Industries (supra),
Clause 9 had no application to the facts of the present case. That in
any event documents were not provided by the Insured to NIACL.
Dealing with Regulation 9(3) of the IRDA (Protection of Policyholders'
Interests) Regulations, 2002 ["IRDA Regulations"], learned Senior
Counsel submitted that the joint surveyors report dated 07.12.2002
was for all intents and purposes the original surveyors report and as
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New India Assurance Company Ltd. Through its Manager v.
M/s Tata Steel Ltd.
such Regulation 9(3) assuming it to be mandatory had no application.
Alternatively, it was contended that Regulation 9(3) is only directory.
24. Insofar as the cross appeal is concerned, the learned Senior Counsel
contended that the claim for the base figure as Rs. 28 crores is
absolutely unjustified, there being no cogent material to support the
same. In fact, the stand of the Insured was that its vendor M/s Flat
Products had expressed its inability due to loss of expertise and the
same was conveyed two years after receiving the advance. For all
these reasons, the learned Senior Counsel prayed that the appeal
of NIACL be allowed and the appeals of the Insured be dismissed.
Contentions of the Insured/Complainant: -
25. Mr. Joy Basu, learned Senior Counsel appearing for the Insured,
at the very outset, contended that the memorandum containing the
Reinstatement Value Clause was never part of the policy document
issued by the NIACL. This memorandum, according to the learned
senior counsel, was never received by the Insured. Without prejudice
to the same, it is contended that Clause 9 of the conditions in the
policy has to be read in conjunction with the Reinstatement Value
Clause. Since, as per para 4, the Reinstatement Value Clause got
extinguished, Clause 9 of the conditions became applicable.
26. Learned Senior Counsel submitted that in terms of Clause 9 where
reinstatement/repair is not possible, the surveyor's assessment of
reinstatement has to be complied with. Learned senior counsel relied
on the judgment in Oswal Plastic Industries (supra). Learned
Senior Counsel contended that the interpretation of Clause 9 was
laid down only by the Oswal Plastic Industries (supra) judgment
in January, 2023 and as such the Insured should be allowed
to canvass the argument based on Oswal Plastic Industries
(supra). According to learned Senior Counsel, the inability/failure
to reinstate as contemplated in the last part of the Clause 9 is the
failure of the NIACL. Learned Senior Counsel further contended
that it is only with the hope of an expedited settlement that the
Insured accepted the lower figure of Rs. 20.95 Crores. Calculating
on reinstatement basis, the surveyors in their report of 11.12.2001
arrived at the figure of Rs. 19.55 crores without application of any
depreciation. According to the Insured, the amount further due is
Rs.11,80,87,699/-.
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27. Alternatively, it is submitted by the learned Senior Counsel that even
if the market value basis is to be applied, depreciation has to be
calculated on the sum insured of Rs. 80 crores. To support this plea,
learned Senior Counsel relied on Dharmendra Goel vs. Oriental
Insurance Co. Ltd. (2008) 8 SCC 279. Further, without prejudice,
it is contended that if depreciation was not to be calculated on the
sum insured, then the depreciation has to be calculated on the cost
of the new locally sourced 20 Hi Cold Rolling Machine which would
cost Rs. 25 crores plus taxes totaling Rs 28 crores. Further, it is
contended that the depreciation rate was 32% as mentioned by the
surveyors in their report of 11.12.2001 and NIACL has not adduced
any reasons for deviating from the recommendation of the surveyors.
Learned Senior Counsel submitted that the surveyor's response of
07.12.2002 was "a reluctant response from an embarrassed surveyor"
to the letter of NIACL dated 12.01.2002 which, according to the learned
senior counsel, was a letter by the insurer asking the surveyors to
compute maximum depreciation. In any event, according to the learned
Senior Counsel, the doctrine of contra proferentem applied and the
interpretation in favour of the Insured should have been adopted. It
was argued that there was a breach of Regulation 9(3) of the IRDA
Regulations. So contending, the learned senior counsel prayed that
the appeal of NIACL be dismissed and the cross appeals of the
Insured be allowed.
Questions before this Court:
28. In the above background, the questions that arise for consideration
are as follows:
i.
Was the Reinstatement Value Clause part of the policy?
ii.
Was NIACL justified in computing loss on depreciation basis
and fixing depreciation at 60%?
iii.
Is the Insured justified in claiming reinstatement value by placing
reliance on the judgment in Oswal Plastic Industries (supra)?
iv.
To what reliefs are the parties entitled?
Discussion and Reasons:
29. At the outset, it is important to set out the crucial clauses of the
policy in question.
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297
New India Assurance Company Ltd. Through its Manager v.
M/s Tata Steel Ltd.
Fire Policy "C"
In consideration of the insured name in the schedule
hereto having paid to the New India Assurance
Company Limited (hereinafter called the company)
the premium mentioned in the said schedule. THE
COMPANY AGREES (subject to the Condition and
Exclusions contained herein or endorsed or otherwise
expressed hereon) that it after payment of the
premium the property Insured described in the said
schedule or any part of such property, be destroyed
or damaged by:
1.
Fire
......
6.
..... During the period of Insurance named in the said
schedule or of any subsequent period in respect of
which the insured shall have paid and the Company
shall have accepted the premium required for the
renewal of the policy the Company will pay to the
insured the value of the property at the time of the
happening of its destruction or the amount of such
damage or at its opinion reinstate or replace such
property or any part thereof.
Conditions
......
6. (i) On the happening of any loss or damage the
insured shall forthwith give notice thereof to the
company and shall within 15 days after the loss or
damage or such further time as the Company may in
writing allow in that behalf, deliver to the company;
a. A claim in writing for the loss or damage containing
as particular an account as may be reasonably
practicable of all the several articles or items or
property damaged or destroyed, and of the amount
of the loss or damage thereto respectively, having
regard to their value at the time of the loss or,
b. Particular of all other insurance, if any:
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The insured shall also at all times at his own expense
produce, procure and give to the company all such
further particulars, plans, specifications, books,
vouchers, invoices, duplicates or copies thereof,
documents investigation reports (internal/external),
proof and information with respect to the claim and
the origin and cause of the insured perils and the
circumstances under which the loss or damage
occurred, and any matter touching the liability or the
amount of the liability of the Company as may be
reasonably required by or on behalf of the Company
together with a declaration on Oath or in other legal
form of the truth of the claim and of any matter
connected therewith.
No claim under this policy shall be payable unless
the terms of this condition have been complied with.
30. Two other important clauses viz., Clause 9 of the Conditions and
the memorandum containing the Reinstatement Value Clause are
extracted below at the appropriate place in the discussion.
Answer to Question No (i) :-
31. There was a debate at the Bar as to whether the memorandum
consisting of the Reinstatement Value Clause (extracted later in
the judgment) was a part of the policy. The argument was raised by
senior counsel for the Insured who contended that the memorandum
containing the Reinstatement Value Clause was not part of the policy.
We reject this contention at the outset. This is for the reason that
before the NCDRC in the written statement filed by the NIACL, in
para 3, it was specifically pleaded as under:
"The copy of the fire policy at pages 13 to 22 is a true
copy of the policy issued by the Respondent. However, the
Reinstatement Value Clause issued along with the policy
is not attached to the same. The answering Respondent
is filing herewith the copy of the policy with complete
terms and conditions and clauses as Annexure R-1 to
this written Statement."
32. In the replication filed by the Insured, there was no denial of this
averment. Hence, we reject the contention of the Insured that the
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New India Assurance Company Ltd. Through its Manager v.
M/s Tata Steel Ltd.
memorandum of the Reinstatement Value Clause was not the
part of the policy. There are other factors which establish that
the Reinstatement Value Clause was part of the Policy. They are
discussed hereinbelow. Issue (i), set out above, is answered in favor
of NIACL.
Discussion of Question No. (ii) :-
33. Coming back to the clauses in the insurance policy, it will be seen
that the assurance in the opening clause of the policy was that NIACL
will pay to the Insured the value of the property at the time of the
happening of its destruction OR the amount of such damage OR
at its option, reinstate or replace such property or any part thereof.
In the conditions, it was incorporated that the Insured was at all
times at its own expense to produce, procure and give to NIACL
all such further particulars, plans, specifications, books, vouchers,
invoices, duplicates or copies thereof, documents, investigation
reports (internal/external), proof and information with respect to the
claim and all matters provided for in Clause 6. It is also stipulated
that no claim under this policy was payable unless the terms of this
condition was complied with.
34. Clause 9 of the Conditions states that if NIACL, at its option, reinstate
or replace the property damaged or destroyed, or any part thereof,
instead of paying the amount of loss or damage, or join with any
other company or Insurance in so doing, NIACL shall not be bound
to reinstate exactly or completely but only as circumstances permit
and in reasonably sufficient manner, and in no case shall NIACL be
bound to spend more in reinstatement than it would have cost to
reinstate such property as it was at the time of occurrence of such
loss or damage nor more than the sum insured by the Company
thereon. Clause 9 reads as follows:
"9. If the company at its option, reinstate or replace the
property damaged or destroyed, or any part thereof, instead
of paying the amount of the loss or damage, or join with
any other company or insurance, in so doing, the company
shall not be bound to reinstate exactly or completely but
only as circumstances permit and in reasonably sufficient
manner and in no case shall the company be bound to
spend more in reinstatement than it would have cost
to reinstate such property as it was at the time of the
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occurrence of such loss or damage nor more than the
sum insured by the Company thereon,
If the Company so elect to reinstate or replace an property
the insured shall at his own expense furnish the company
with such plans, specifications, measurements, quantities
and such other particulars as the company may require, and
no acts done, or caused to be done, by the company with
a view to reinstatement or replacement shall be deemed
an election by the Company to reinstate or replace.
If in any case the Company shall be unable to reinstate
or repair the property hereby insured, because of any
municipal or other regulations in force affecting the
alignment of streets or the construction of buildings or
otherwise, the Company shall, in every such case, only be
liable to pay such sum as would be requisite to reinstate
or repair such property if the same could lawfully be
reinstated to its former condition."
35. To the policy is attached the memorandum of the Reinstatement
Value Clause which reads as follows:
REINSTATEMENT VALUE CLAUSE
Attached to and forming part of policy No.
It is hereby declared and agreed that in the event of the
property Insured under (Items Nos. of ) the within policy
being destroyed or damaged, the basis upon which the
amount payable under each of the said items of the
policy is to be calculated, shall be the cost of replacing
or reinstating on the same, i.e. property of the same
kind or type but not superior or more extensive than
the insured property when new subject to the following
Special Provisions and subject also to the terms and
conditions of the policy except manner as the same may
be varied hereby.
SPECIAL PROVISIONS
1.
The work of the replacement or reinstatement (which
may be carried out upon another site and in any
manner suitable to the requirements of the insured
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New India Assurance Company Ltd. Through its Manager v.
M/s Tata Steel Ltd.
subject to the liability of the Company not being
thereby increased) must be commenced and carried
out with reasonable dispatch and in any case must be
completed within 12 months after the destruction or
damage or within such further time as the company
may (during the said 12 months) in writing allow;
otherwise no payment beyond the amount which
would have been payable under the policy if this
memorandum had not been incorporated therein
shall be made.
2.
Until expenditure has been incurred by the Insured
in replacing or reinstating the property destroyed or
damaged the company shall not be liable for any
payment in excess of the amount which would have
been payable under the policy if this memorandum
had not been incorporated therein.
3.
If at the time of replacement or reinstatement the sum
representing the cost which would have been incurred
in replacement or reinstatement if the whole of the
property covered had been destroyed exceeds the
sum insured thereon at the breaking out of any fire or
at the commencement of any destruction of or damage
to such property by any other peril insured against by
this policy, then the Insured shall be considered as
being his own insurer for the excess and shall bear
a rateable proportion of the loss accordingly. Each
item of the policy (it more than one) to which this
Memorandum applies shall be separately subject to
the foregoing provision.
4.
This Memorandum shall be without force or effect if:
(a) The Insured fails to intimate to the company
within 6 months from the date of destruction or
damage or such further time as the Company
may in writing allow, his intention to replace or
reinstate the property destroyed or damaged.
(b) The Insured is unable or unwilling to replace or
reinstate the property destroyed or damaged on
the same or another site.
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36. The memorandum of the Reinstatement Value Clause stipulates that
it was declared and agreed that in the event of the property Insured
under the policy being destroyed or damaged,
a.
The basis upon which the amount payable under each of the
said items of the policy is to be calculated, shall be the cost of
replacing or reinstating on the same, i.e.