2023 (12) TMI 430 - SC - Indian Laws

Warehouse insured or not - cause of fire incident that occurred - introduction of additional reasoning to justify the repudiation - Alteration to insured premises and risk increase - Cause of fire and negligence - multiple reports - Value of a surveyor's report - Extent of liability when cause of fire indeterminable - Reimbursement of Customs Duty and unjust enrichment. Appellants contended that the cause of the fire was negligence on the part of the insured. Introduction of additional reasoning to justify the repudiation - HELD THAT - In earlier cases like Galada Power and Telecommunication Ltd. vs. United India Insurance Co. Ltd. Anr. 2016 (7) TMI 1603 - SUPREME COURT and SAURASHTRA CHEMICALS LTD VERSUS NATIONAL INSURANCE CO LTD 2019 (12) TMI 1664 - SUPREME COURT , it was declared that new grounds for repudiation cannot be introduced during the hearing if they were not included in the repudiation letter - thus 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 or not - HELD THAT - Looking at the policy documents, the Leave License Agreement and various communications received from the customs, police, fire electricity departments, it is reasonable to conclude that the insured premises was the one that was identified and insured at Survey No. 9/3, by the insurance company. Needless to say, there is nothing to conclude that the area where the fire occurred on 14.03.2018 was not covered by the said insurance policy. Alteration to insured premises and risk increase - HELD THAT - Clause 3(a) indicates that the insurance policy would cease to be applicable or cover the insured premises in certain cases where there 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 present 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 infirmity is seen with the view taken by the NCDRC on the same. Cause of fire and negligence - multiple reports - HELD THAT - 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 first one notably was inconclusive. The other reports suggest short-circuit as the likely cause, not negligence. The significant time gap that exists between the welding work and the fire 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 - HELD THAT - The surveyor s report, although comprehensive otherwise, is inconclusive on the aspect identifying the actual cause of fire. Given that the surveyor s report only relies on the Forensic Examiner, i.e., M/s Screen Facts Services Pvt. Ltd. s findings, it would be unsafe in this Court s opinion to rely on the said report. Extent of liability when cause of fire indeterminable - HELD THAT - It was unequivocally declared that the precise cause of a fire, whether attributed to a short-circuit or any alternative factor, remains immaterial, provided the claimant is not the instigator of the fire. This case underscored the fundamental principle that an insurance company s obligation to the insured is of much greater import. The NCDRC s judicious application of this binding precedent appears to be well-merited. Reimbursement of Customs Duty and unjust enrichment - HELD THAT - The reports suggesting electrical short circuit as the trigger for the warehouse fire, is found to fit in with the attendant circumstances. As a corollary, the fire at the warehouse cannot be attributable to any negligent act of the insured. Moreover, the fire is found to have occurred within the insured warehouse and the appellant s plea to the contrary, is not believable. Therefore, it is a case of wrongful repudiation by the appellants. No legal infirmity is thus seen with the impugned decision favouring the respondent s insurance claim. The appeal of the Insurance Company deserves to be dismissed. But even while dismissing the appeal, to avoid any confusion, the customs duty component of the claim should, in the given event, be discharged directly to the Customs Department. All other legal consequences will follow on upholding the claim of the insured against the appellants - the appeal stands dismissed favouring the insured.

Summary

Issues Involved:
1. 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.
2. What was the cause of the fire incident that occurred on 14.03.2018?
3. Whether the insurance policy's Clause 3 was applicable due to alteration and increased risk.
4. Whether the insurance company can introduce new grounds for repudiation beyond those mentioned in the repudiation letter.
5. Whether the insured is entitled to claim customs duty as part of the insurance claim.
6. Whether the surveyor's report is binding and conclusive.
7. Whether the insurance company wrongfully repudiated the claim.

Summary:

1. Insured Premises:
The NCDRC ruled that the insurance policy covered the complainant's warehouse at Survey No. 9/3. The Leave & License Agreement, policy documents, and various communications from customs, police, fire, and electricity departments confirmed that the insured premises were indeed located at Survey No. 9/3.

2. Cause of Fire:
The NCDRC found that the cause of the fire was more likely due to an electrical short circuit rather than negligence during welding work. Multiple reports from various agencies, including the Electrical Inspector and Jawaharlal Nehru Port Trust, supported this conclusion. The significant time gap between the welding work and the fire further weakened the negligence theory.

3. Alteration and Increased Risk:
The NCDRC held that the roof repair work did not significantly increase the risk, making Clause 3 of the insurance policy inapplicable. Essential repair work on the rooftop to prevent water leakage could not be reasonably construed as an alteration increasing the risk of loss or damage.

4. Grounds for Repudiation:
The Supreme Court reiterated that the insurance company cannot introduce new grounds for repudiation during the hearing if they were not included in the repudiation letter. This principle was upheld in previous cases like Galada Power and Telecommunication Ltd. vs. United India Insurance Co. Ltd.

5. Customs Duty:
The insurance claim included a customs duty amount of Rs. 2,13,00,061.01. The court found that the insured, being a custodian and not an importer, was not entitled to remission under Sections 22 and 23 of the Customs Act, 1962. The customs duty component should be directly remitted to the Customs Department to avoid unjust enrichment.

6. Surveyor's Report:
The court held that the surveyor's report is not sacrosanct and can be departed from if contrary evidence is presented. The surveyor's report in this case was found to be inconclusive and not binding.

7. Wrongful Repudiation:
The court concluded that the insurance company wrongfully repudiated the claim. The fire was found to have occurred within the insured warehouse, and the cause was attributed to an electrical short circuit, not negligence. The NCDRC's decision favoring the insured was upheld.

Conclusion:
The appeal of the Insurance Company was dismissed. The customs duty component of the claim should be discharged directly to the Customs Department. All other legal consequences will follow on upholding the claim of the insured against the appellants. The parties were ordered to bear their own costs.