NEW INDIA ASSURANCE CO. LTD. & ORSversusM/S. MUDIT ROADWAYS

                [2023] 13 S.C.R. 1027 : 2023 INSC 1022



                             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
justified in allowing the fire 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 fire 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 roofing work
did not significantly increase the risk and directed payment of specified
amount with interest – Correctness:
       Held: Insurance company’s obligation to the insured is of much
greater import – 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 – 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 fire 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
identified 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
                                      1027
1028          SUPREME COURT REPORTS                         [2023] 13 S.C.R.


warehouse premises – Significant time gap that exists between the welding
work and the fire 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 fire – Given that the surveyor’s report only
relies on the Forensic Examiner findings, 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 infirmity 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 fidei:
       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 fidei-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 indemnification, preserving the sanctity of trust within its
clauses – Effectively, the insurer assumes a fiduciary 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 fulfils 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 different 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]
  NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT 1029
                   ROADWAYS

       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.
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 fire 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.          Description         Date Premium       Duration of      Sum Insured
 No.                                   Paid            Policy
 1     Standard Fire and Special 19.06.2017      19.06.2017 to       Rs. 6 Crores
       Perils Policy
                                                 18.06.2018
       17080011170100000734
 2     Customs Duty Package Policy 30.09.2017    30.09.2017 to       Rs. 20 Crores
       11140046172480000017
                                                 29.09.2018
 3     Standard Fire and Special 30.11.2017      30.11.2017 to       Rs. 150 Crores
       Perils Policy
                                                 29.11.2018
       11140011170100001014
 4     Additional Endorsement 29.12.2020         -                   Rs. 75 Crores
       to Customs Duty Package
       Policy

      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 fire, etc.
       5. During the pendency of the insurance policies, on 14.03.2018, a fire
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.
  NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT 1031
          ROADWAYS [HRISHIKESH ROY, J.]

               REPORTS ON THE FIRE ON 14.03.2018
     6. On the day of the fire 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 fire 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 on-
site firefighters 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 fire.
      10. M/s. Screen Facts Services Pvt. Ltd., the Forensic Examiner
hired by the Insurance Company, inspected the portion of the fire-affected
warehouse and in their report (10.12.2018) stated that combustible materials
were stored where the fire 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 fire due to sparks and inflammable materials.
      11. The Investigator, M/s. J. Basheer & Associates, appointed by the
appellants, concluded in their 11.04.2019 report that fire was due to an
electrical short circuit, contradicting the Forensic Examiner’s findings. They
also noted that the insurance policy did not cover the warehouse at Survey
No. 9/3 because it was not affected by the fire.
      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;
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 affected
       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 fire affected Warehouse have not been
       declared/covered under the Policy.
       4. Policy covers location at survey No. 9/3, but the office of the insured
       and a Warehouse located at the Surveyor No. 9/3 were not fire affected
       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
unaffected by the fire, and 2) The fire 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)
    NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT 1033
            ROADWAYS [HRISHIKESH ROY, J.]

                        CONSUMER COMPLAINT
      14. The respondent, dissatisfied with the aforesaid repudiation of
claim, filed Complaint No. 765 of 2020 under the Consumer Protection Act,
1986, citing service deficiencies 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 fire 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 affected by the fire. 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 fire 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 fire
incident and observed that the Forensic report is inconclusive. The other
reports suggesting an electrical short circuit as the cause of the fire was
found to be more acceptable.
      17. Adverting to the roofing work done by the insured, NCDRC held
that it did not significantly 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 finding deficiency in
service of the insurance company. Thus, direction was issued for payment
of the specified sum, with interest.


1   (2009) 7 SCC 787.
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 fire 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 fire incident.
Instead, the fire could have occurred due to sparks that may have fallen
on flammable 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 fire 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 specifically tasked to investigate the fire incident. Since
short-circuit as the cause of fire 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 fire-
affected warehouse. And as such, repudiation is justified since the insurance
coverage was limited to the office of the insured and the warehouse which
suffered 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 unjustified. 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
    NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT 1035
            ROADWAYS [HRISHIKESH ROY, J.]

indemnification for the fire 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 fire 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 fire in the warehouse was outside
the purview of the premises, covered by the insurance policy.



2   (2016) 15 SCC 161.
1036          SUPREME COURT REPORTS                        [2023] 13 S.C.R.


      25. Specifically on the aspect of cause of fire, Mr. Goswami contends
that the welding machine & cylinders were taken away from the field 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 fire, it would not go un-noticed for 26
minutes since combustible chemicals, papers, etc. would have instaneously
caught fire. Because of the conspicuous gap of around 26 minutes between
the end of the welding work and the occurrence of fire, it would be illogical
according to Mr. Goswami to attribute the welding work to be the cause
for the fire. With this projection, the claimants contend that there was no
negligence on the part of the insured and the cause of fire was rightly
attributed to an electrical short-circuit.
     26. It was further argued that multiple reports from different govt.
departments as well as independent surveyors supported the conclusion that
the fire had occurred on account of a short-circuit. In addition, it was also
pointed out that no welding took place during the GI sheet roofing work as
those would melt during welding. Instead, nuts & bolts were used in the
GI roofing 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 fire risk. The insured
therefore never violated the general condition.
      28. On the issue of remission of customs duty, it is argued that the
benefit 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 benefit 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.
    NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT 1037
            ROADWAYS [HRISHIKESH ROY, J.]

cannot escape its liability if there is nothing to prove that the fire was caused
by the insured itself, irrespective of what the cause of fire 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 affected due to alleged fire. The
      above mention premises where the loss occurred due to alleged fire 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 fire 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 fire is hot (sic) covered under the policy... ... ... ...”
      The insurance company in their letter mentioned two specific grounds
to repudiate the claim: (i) that the location of fire 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 fire.
      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
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 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 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 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.”
     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
identifies 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 specified the address of the insured as ‘Mudit Roadways,


7   2022 SCC OnLine 1451
  NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT 1039
          ROADWAYS [HRISHIKESH ROY, J.]

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 verified 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,
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 & 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 affected unless the insured, before
     the occurrence of any loss or damage, obtains the sanction of the
     Company signified 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 affecting
                 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
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 infirmity 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 fire incident, several agencies,
authorities and organisations have reported on the warehouse fire accident.
Those are summarized as follows:
  S.    REPORT         DATE          FINDINGS              APPOINTED BY
 NO.
1.     Electrical    23.04.2018   Sparks created from     Under Section 161(2)
       Inspector                  the Short Circuit of    (a), The Electricity Act,
                                  the Electrical setup    2003 by the Appropriate
                                  at the corner of the    Government.
                                  Go-down.
2.     Asst.         09.05.2018   Probable cause of       Claimant
       Manager,                   incident reported
       Jawaharlal                 as Electrical Short
       Nehru Port                 Circuit.
       Trust’s
3.     Independent   07.08.2018   Sparks from             Bajaj Allianz Gen.
       Sy. – M/s H                Electrical Short        Insurance Co. – Insurers
       Kannan                     Circuit ignited         to M/s. Global Exim
                                  inflammable             (M/s Mudit Roadway’s
                                  chemicals stored.       Clients)
4.     Independent   31.08.2018   Probable Cause of       TATA A I G G e n .
       Sy. – M/s                  incident determined     Insurance Co. – Insurers
       Proclaim                   as Short Circuit        to Expanded Polymer
                                  based on the police     System (M/s Mudit
                                  report & fire brigade.   Roadway’s Clients)
 NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT 1041
         ROADWAYS [HRISHIKESH ROY, J.]

5.   Police          03.11.2018   El ectri cal short
     Investigation                circuit could be the
                                  cause of fire
     (Not
     annexed)
6.   Order of the    03.11.2018   IO concluded that       Section 21 CrPC, Rule
     Executive                    the accidental fire     105 of Bombay Police
     Magistrate                   was caused pursuant     Manual, 1959.
                                  to Short Circuit
7.   M/s. J          11.04.2019   Relied on Police        Insurance Co.
     Basher &                     Report (3.11.18) to
     Associates                   conclude cause of
                                  fire as Short Circuit.
                                  Observed that fire
                                  affected warehouse
                                  survey nos. are not
                                  the risk location as
                                  per insurance policy.
8.   M/s Screen      10.12.2018   Sparks from the         Insurance Co.
     Facts                        ongoing welding
     Services Pvt.                work ignited the
     Ltd.                         flammable chemicals
                                  b/w A & D. Cause
     Forensic
                                  not electrical in
     Investigation
                                  nature as there was
     Report
                                  no electrical wiring
                                  equipment near the
                                  area of incident.
9.   M/s. J.C.       15.04.2019   N e g l i g e n c e b y Insurance Co.
     Bhansali &                   m an age m en t i n
     Co                           not taking adequate
                                  precautions while
     Investigation
                                  construction work was
     Report
                                  underway leading to
                                  sparks falling during
                                  wielding. (Based
                                  on M/s Screen & J
                                  Basheer).
1042         SUPREME COURT REPORTS                       [2023] 13 S.C.R.


      38.1 The above tabulated summary of reports reveals multiple and
conflicting findings. Seven of the reports suggest short-circuit as the cause
for fire. 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 affirmed that the fire was triggered by an electrical short-
circuit, as observed by the fire-fighting teams at site.
      38.2 Likewise, M/s. J. Basheer & Associates’ 11.04.2019 report suggest
that the fire’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 fire
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 fire. 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 flammable 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 fire.
      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
fire occurred. Subsequently, the workers were seen transporting GI roofing
sheets as head loads to the roofing work site, which continued until 16:04
hrs. The CCTV footage showed workers also using a crane to move GI
  NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT 1043
          ROADWAYS [HRISHIKESH ROY, J.]

roofing sheets and MS Roofing 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 fire itself. Even if rooftop repair continued until
16:04 hrs., a significant 26-minute time lag existed before the fire started.
      38.5 The Forensic Investigator’s conclusion that sparks from rooftop
welding caused the fire 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 fire, was wrongly
attributed to the insured. Moreover, evidence was not available that sparks
fell on flammable chemicals attributable to activities, undertaken by workers.
     39. Of the nine reports, seven suggest short-circuit as the likely fire
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 fire, 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 significant. The 26-minute time lag after roofing
work ended and the fire does not have any rational explanation. There is no
evidence of welding during the roofing work at 16:04 or closer to the fire
time, which explains the inconclusive forensic report stating sparks “could
have” caused the fire 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
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
      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 definitive. The key question is the extent to which
the report is binding and under what conditions can it be overridden in. To
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 different 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 different 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
       final 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
       suffered 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
  NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT 1045
          ROADWAYS [HRISHIKESH ROY, J.]

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 sufficient, to determine the
cause of the fire.
     46. The analysis of the forensic examiner is reproduced below for
ready reference: -
     “19.01. Insured has claimed for loss due to fire. Cause of fire as
     claimed-fire due to short circuit.
     19.02. Cause of fire was investigated by M/s Screenfacts Services Pvt
     Ltd.
     19.03. M/s Screenfacts Services Pvt. Ltd. have concluded cause of
     fire as under:-
     19.04. Taking into consideration the construction of roofing 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 rooflevel sparks could have fallen on the adjoining flammable
     chemicals stored between A & D indicating the fire.
     19.05. The root cause of the fire 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 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
      48. Multiple survey reports suggesting different causes of fire 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,
1046          SUPREME COURT REPORTS                         [2023] 13 S.C.R.


have however consistently identified the cause of the fire as a short-circuit.
While it is difficult to go by the reports relied upon by the insurance company,
the reports furnished by the claimants being consistent and logical are more
acceptable in ascertaining the true cause of the fire.
      49. On the above aspect, the NCDRC has rightly placed reliance on
Canara Bank v. United India Insurance Co. Ltd.8, wherein the Court decided
to not place reliance on the surveyor’s report conducted by M/s Truth Labs,
for lack of sufficient analysis & held that:
       “In any event, neither in the report of M/s Truth Labs nor in the other
       reports by the Insurance Company is there anything to show that
       the insured had set the cold store on fire. Whether the fire took place
       by a short circuit or any other reason, as long as insured is not the
       person who caused the fire, the Insurance Company cannot escape its
       liability in terms of the insurance policy. We reject the contention of
       the Insurance Company that the fire was ignited by the use of kerosene
       and hence it is not liable.”
      50. Therefore, 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.
         APPLICABILITY OF CUSTOMS DUTY & UNJUST
                      ENRICHMENT
      51. In order to better appreciate and understand the argument pertaining
to unjust enrichment, the claim statement (11.02.2019) needs to be perused.
The claimant as can be noticed, deducted Rs. 2,39,00,664.20 for covered
losses and Rs. 19,75,388 for burnt cargo salvage. Notably, the final custom
duty amount under the policy was determined as Rs. 2,13,00,061.01.
Customs authorities communicated their intent to recover this precise sum,
Rs. 2,13,00,061, from the insured through the letters dated 06.02.2019 and
26.10.2020. In response to these communications, the insured submitted
an undertaking on 11.08.2015 (Annexure R-4), explicitly stating that they


8   (2020) 3 SCC 455.
  NEW INDIA ASSURANCE CO. LTD. & ORS. v. M/S. MUDIT 1047
          ROADWAYS [HRISHIKESH ROY, J.]

would not seek any remissions related to customs duty under Sections 22
and 23 of the Customs Act 1962. This action rules out unjust enrichment
for the claimants on account of the customs duty.
       52. Additionally, the Public Warehouse Licensing Regulations, 2016
mandate that public warehouse licensees must agree to pay all duties,
interest, fines, and penalties related to stored goods. It was for this reason that
the customs duty package policy was also obtained by the insured from the
insurance company, so as to indemnify themselves for the goods destroyed
or damaged in the warehouse. Needless to say, the said Regulations make
the insured duty-bound to pay all such necessary duties, fines or penalties.
It is in that context that the insured had specifically stated that the insurance
company may directly remit the said component of duty to the authorities,
instead of remitting it to the insured. This would circumvent any unjust
enrichment, towards the insured.
      53. The key question here is whether the insurance claim should
include the customs duty amount of Rs. 2,13,00,061.01/- as claimed by the
respondent. The insurance company argued that customs duty should not
be included because the Customs Act, 1962 specifies that only the importer
of goods is liable to pay customs duty when they file a bill of entry.
      54. The insurer anchored their stand on Section 15(1)(b) of the Customs
Act stating that duty rates for warehoused goods are determined when a bill of
entry for home consumption is filed, and duty assessment (Section 17) only
occurs when a bill of entry (Section 46) is presented. In this case, no bills
of entry were filed, and no assessed goods were lost in the fire. According
to the insurer, since the taxable event never happened, there is no customs
duty liability. The counsel also cited Section 23 of the Customs Act, which
required the Assistant Commissioner of Customs to remit duty for lost or
destroyed goods, before clearance.
      55. However, the counsel for the claimant rightly contended that the
privileges enshrined in Sections 22 and 23 of the Customs Act, pertaining to
abetment and remission, extend exclusively to those classified as ‘importers’
of insured goods. The crux of the argument revolves around the claimant’s
distinct position, as 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.
1048           SUPREME COURT REPORTS                            [2023] 13 S.C.R.


      56. The upshot of the above discussion is 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.
      57. In the realm of risk and uncertainty, individuals and organisations
seek solace in the bastion of insurance – a covenant forged on the bedrock
of trust. Trust serves as the cornerstone, forming the essence of the insurer-
insured relationship. The fundamental principle is that insurance is governed
by the doctrine of uberrimae fidei – there must be complete good faith
on the part of the insured.9 The heart & 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 & indemnification, preserving the sanctity of trust within its
clauses. Effectively, the insurer assumes a fiduciary 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 fulfils the duty that has been cast on
it, by virtue of such a covenant.
      58. Accordingly, 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. It
is ordered accordingly.
     59. With the above, the appeal stands dismissed favouring the insured.
The parties to bear their own cost.

Headnotes prepared by:                                              Appeal dismissed.
Nidhi Jain



9   MacGillivray on Insurance Law – 12th Ed., John Birds, Sweet and Maxwell (2012).