ORIENTAL INSURANCE COMPANY LIMITEDversusM/S. J.K. CEMENT WORKS

50                       [2020]
              SUPREME COURT     5 S.C.R. 50
                             REPORTS                      [2020] 5 S.C.R.


A            ORIENTAL INSURANCE COMPANY LIMITED
                                      v.
                        M/S. J.K. CEMENT WORKS
                        (Civil Appeal No. 7402 of 2009)
B                            JANUARY 28, 2020
                [MOHAN M. SHANTANAGOUDAR AND
                     R. SUBHASH REDDY, JJ.]
           Insurance:
C           Standard Fire and Special Perils Insurance Policy –
     Covering damage inter alia by ‘Flood and inundation’ – Claim for
     loss caused due to heavy rainfall – Surveyor assessed the loss
     stating that same was payable as per the terms and conditions of
     the policy – Insurance Company repudiated the claim on the
     ground that loss was due to heavy rain and not flood or inundation
D
     – Consumer complain – Consumer Court allowed the claim of
     insured to the extent of the loss as assessed by the surveyor –
     Appeal to Supreme Court – Held: Loss was covered by the policy
     – Damage caused by heavy rainfall would be covered by ‘flood
     and inundation’ clause.
E          Words and Phrases:
           ‘Flood’ and ‘Inundation’ – Meanings of, discussed.
           Dismissing the appeal, the Court
           HELD: 1. The appellant had only appointed a Chartered
F    Accountant for the purposes of verifying the accounts books of
     the respondent regarding its daily stock of coal. The appointment
     of a Chartered Accountant for this limited purpose does not
     tantamount to the appointment of a surveyor. Thus, it is not
     necessary to deal with the pre-requisites for the appointment
G    of a second surveyor in the instant case. [Para 6] [54-F-H]
           2.1 Overflow of water due to a flood may result in the state
     of inundation. Simply put, a flood may be described as overflow
     of water over land. Floods can be broadly divided into the
     following categories: coastal floods, fluvial floods (river floods),
     and pluvial floods (surface floods). Floods may be caused due
H
                                      50
          ORIENTAL INSURANCE COMPANY LIMITED v.                         51
                 M/S. J.K. CEMENT WORKS

to several factors complementing each other. Usually, non-              A
coastal floods originate from rainfall, but the magnitude of rainfall
sufficient to cause a flood, and the damage that a flood causes,
may vary depending on a variety of aspects such as the location
of land (low-lying or altitudinous), the water retention capacity
of the soil, and the density of population and man-made
                                                                        B
construction in the area, among other things. In rare cases, a
non-coastal flood may also occur without any rainfall. For
instance, shortcomings in the construction of a dam may lead to
its complete breakdown, resulting in a flood. [Paras 9 and 11]
[55-G-H; 56-G-H; 57-A]
      2.2 The terms ‘flood’ and ‘inundation’ are often used             C
synonymously to refer to the act of overflowing of water over
land that is generally dry. Pluvial floods occur independently of
a water body. Thus, it is clear that floods are not restricted to
overflow of water bodies. Even if the intent of the parties
entering into the contract is looked into, as it has not come on        D
record that there was any water body near the coal yard or the
factory premises. In such a scenario, where there was no risk
of water from a water body overflowing onto the dry land where
the coal yard was located, it could not have been the intention
of the parties entering into the contract to give a restrictive
meaning to the term ‘flood’. Such a narrow interpretation would         E
lead to the conclusion that the insertion of the term ‘flood’ was
superfluous, which could not have been the case. [Paras 12.1-
12.3][57-C-F]
      2.3 It is not the case of the appellant that the coal was not
properly stocked or that there was any negligence on part of the        F
respondent. In the instant case, the appellant has not disputed
that there were heavy rains. In fact, the surveyor appointed by
the appellant had also observed in its report that heavy rainfall
had occurred in the area, causing flood-like conditions that
resulted in some of the coal kept in the insured premises being
washed off. Moreover, the surveryor’s report also stated that           G
there was accumulation of water due to the heavy rains, that had
caused the coal to get washed off. [Paras 12, 13][57-A-B][57-F-
H]
      Bajaj Allianz General Insurance Co. Ltd. v. M/s.
      Gondamal Hardyal Mal [2009] NCDRC 127 ; Oriental                  H
52            SUPREME COURT REPORTS                          [2020] 5 S.C.R.


A          Insurance Co. Ltd. v. M/s Sathyanarayana Setty & Sons
           [2012] NCDRC 124 ; Oriental Insurance Co. Ltd. v.
           M/s R.P. Bricks [2013] NCDRC 494 – approved.
           Young v. Sun Alliance and London Insurance [1977]
           1 W.L.R. 104 – referred to.
B          Concise Oxford English Dictionary, 8th Edition (1990)
           Stroud’s Judicial Dictionary, 5 th Edition (1986) ;
           Black’s Law Dictionary, 9 th edition (1990) –
           referred to.
                             Case Law Reference
C
     [2009] NCDRC 127                    approved               Para 14
     [2012] NCDRC 124                    approved               Para 14
     [2013] NCDRC 494                    approved               Para 14
           CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7402
D    of 2009.
            From the Judgment and Order dated 18.11.2008 of the National
     Consumer Disputes Redressal Commission, New Delhi in Original
     Petition No. 59 of 2005.
           Vishnu Mehra and Ms. Manjeet Chawla, Advs. for the
E    Appellant.
            Gagan Gupta, Sanjeev Agarwal and Prashant Chaudhary, Advs.
     for the Respondent.
           The Judgment of the Court was delivered by
F          MOHAN M. SHANTANAGOUDAR, J.
            1. This appeal arises out of the judgment dated 18.11.2008 passed
     by the National Consumer Disputes Redressal Commission (‘NCDRC’)
     in Original Petition No. 59 of 2005. Vide the impugned judgment, the
     NCDRC allowed the consumer complaint filed by the Respondent
G    herein, directing the Appellant to pay Rs. 58,89,400/- to the Respondent,
     along with interest @ 9% per annum from 01.06.2004 till the date of
     payment.
           2. The brief facts giving rise to this appeal are as follows:
           2.1 Respondent herein (Complainant) is a cement manufacturer,
H    having a factory in Nimbahera, District Chittorgarh, Rajasthan. These
          ORIENTAL INSURANCE COMPANY LIMITED v.                              53
M/S. J.K. CEMENT WORKS [MOHAN M. SHANTANAGOUDAR, J.]

factory premises included an open coal yard, where a stock of coal           A
that was used in the manufacturing process was stored.
      2.2 The Respondent purchased a Standard Fire and Special Perils
insurance policy from the Appellant herein for the stock of coal for the
period between 20.11.2002 and 19.11.2003. Among other things, the
policy covered damage caused by “Storm, Cyclone, Typhoon, Tempest,           B
Hurricane, Tornado, Flood and Inundation”.
       2.3 Due to heavy rains in Nimbahera on 29.08.2003 and
30.08.2003, some of the coal was washed off, and the stock of coal
suffered damage. Consequently, on 01.09.2003, the Respondent informed
the Appellant of the damage and requested the appointment of a               C
surveyor. The surveyor so appointed submitted its report on 29.03.2004,
assessing the loss caused to the Respondent at Rs.58,89,400/-.
       2.4 Upon receiving such report, the Appellant sought a
clarification from the surveyor, as to whether the loss could be said to
have been caused by “Flood and Inundation” in terms of the wording           D
of the insurance policy. The Appellant also hired a Chartered Accountant
to verify the declarations submitted by the Respondent vis-à-vis its
accounts books and daily stocks.
      2.5 On 13.08.2004, the surveyor reaffirmed its stand that the
losses in question were payable to the Respondent as per the terms           E
and conditions of the policy. On the other hand, the Chartered
Accountant hired by the Appellant reported on 02.09.2004 that he was
unable to verify the declarations because the Respondent had not
provided the necessary documents to him.
                                                                             F
       2.6 Notably, vide letter dated 14.12.2004, the Appellant repudiated
the Respondent’s claim on the ground that the loss caused to it did not
fall within the scope of the policy, having occurred due to heavy and
extraordinary rain and not ‘flood’ or ‘inundation’.
       2.7 Aggrieved by this repudiation, the Respondent filed a
                                                                             G
consumer complaint before the NCDRC seeking compensation to the
tune of Rs.1.32 crores. Vide the impugned order dated 18.11.2008, the
NCDRC allowed the complaint to the extent of the loss assessed by
the surveyor, i.e. Rs.59,89,400/-, and directed the Appellant to pay the
said amount along with interest at the rate of 9% per annum. The instant
appeal has been filed by the Appellant against this order.                   H
54            SUPREME COURT REPORTS                          [2020] 5 S.C.R.


A          3. Heard learned counsel for the parties.
            4. Learned counsel for the Appellant argued that the terms ‘flood’
     and ‘inundation’ refer to two significantly different phenomena that
     cannot be equated with each other. He contended that the term ‘flood’
     refers to overflowing of water bodies such as rivers, ponds, lakes etc.
B    Accordingly, he submitted that since it was not the case of the
     Respondent that there was a water body near the factory which had
     overflown into the coal yard, the loss cannot be said to have been caused
     by a ‘flood’. With respect to the term ‘inundation’, he argued that the
     same refers to ‘accumulation of water’ and could thus not be applied
     to the instant case as the coal had merely been washed off due to
C    heavy rains.
            5. Per contra, learned counsel for the Respondent submitted that
     even if the Appellant’s definition of ‘inundation’ as ‘accumulation of
     water’ were to be accepted, the surveyor’s report had clearly observed
     that that there was an accumulation of water in the coal yard, thereby
D    making the policy applicable. Further, it was brought to our attention
     that the surveyor had relied on the rainfall data of Nimbahera for
     29.08.2003 and 30.08.2003, as received from the Meteorological
     Department of the Government of India, to conclude that that there
     were adequate rains in the area to cause floods/inundation. It was also
E    submitted that the Appellant could not have appointed a second surveyor
     unilaterally, as the procedure under Section 64-UM of the Insurance
     Act, 1938, requiring permission from the Insurance Regulatory and
     Development Authority before appointing a second surveyor, had not
     been followed.

F           6. At the very outset, we note that as far as the Respondent’s
     contention regarding the appointment of a second surveyor is concerned,
     the Appellant had only appointed a Chartered Accountant for the
     purposes of verifying the accounts books of the Respondent regarding
     its daily stock of coal. In our considered opinion, the appointment of a
     Chartered Accountant for this limited purpose is not tantamount to the
G    appointment of a surveyor. Thus, we do not consider it necessary to
     deal with the prerequisites for the appointment of a second surveyor in
     the instant case.
            7. Further, it is pertinent to note that the quantum of
     compensation or the date of the incident are not in dispute here. Nor
H    has it been argued by the Appellant that the date of the incident did
          ORIENTAL INSURANCE COMPANY LIMITED v.                              55
M/S. J.K. CEMENT WORKS [MOHAN M. SHANTANAGOUDAR, J.]

not fall within the insurance period. The central question that then         A
remains to be considered is whether the loss caused to the Respondent
occurred due to ‘flood’ or ‘Inundation’.
      8. Before delving into the particular facts of this case, it may be
useful to refer to the dictionary meanings of the terms ‘flood’ and
‘inundation’.                                                                B
      8.1 The word ‘flood’ is defined in the Concise Oxford English
Dictionary, 8th edition (1990) as follows:
      “…1 a an overflowing or influx of water beyond its normal
      confines, esp. over land; an inundation.
                                                                             C
      b the water that overflows.
      2 a an outpouring of water; a torrent (a flood of rain)…”
      Particularly in the context of insurance contracts, Stroud’s
Judicial Dictionary, 5th edition (1986) defines the word ‘flood’, in
reference to Young v. Sun Alliance and London Insurance, [1977]              D
1 W.L.R. 104, an English case decided by the Court of Appeal, and
reads as follows:
      “…”Flood” in an insurance policy meant a large movement or
      irruption of water, and did not cover mere seepage from a natural
      source...”                                                             E

      8.2 The word ‘inundate’ is defined in the Concise Oxford
English Dictionary, 8th edition (1990) as follows:
      “…1 flood.
      2 overwhelm (inundated with enquiries)…”                               F
      Further, per Black’s Law Dictionary, 9th edition (1990), the
word ‘inundate’ means:
      “To overflow or overwhelm; esp. to flood with water”
       9. Simply put, a flood may be described as overflow of water          G
over land. Floods can be broadly divided into the following categories:
coastal floods, fluvial floods (river floods), and pluvial floods (surface
floods).
       9.1 Coastal floods occur when water from a sea or an ocean
flows into nearby areas. They are caused either by extreme tidal activity    H
56            SUPREME COURT REPORTS                           [2020] 5 S.C.R.


A    (high tides) or by a storm surge – strong winds from a hurricane or
     other storms forcing the water onshore – or by the simultaneous
     occurrence of both these phenomena.
           9.2 Fluvial or river flood occurs when the water level exceeds
     the capacity of a river, stream, or lake, resulting in the overflow of the
B    surplus water to surrounding banks and neighbouring land. They are
     usually caused by either excessive rainfall or unusually high melting of
     snow because of rising temperatures.
            9.3 Lastly, pluvial or surface floods refers to the accumulation
     of water in an area because of excessive rainfall. These floods occur
C    independently of an overflowing water body. Pluvial floods include flash
     floods which take place due to intense, torrential rains over a short
     period of time. A pluvial flood may also occur if the area is surrounded
     by hilly regions from where the run-off water comes and accumulates
     in the low-lying area. In urban localities, because of concrete streets
     and dense construction, rainwater is unable to seep into the ground.
D    Steady rainfall over a few days or torrential rains for a short period of
     time may overwhelm the capacity of the drainage systems in place,
     leading to accumulation of water on the streets and nearby structures,
     and resulting in immense economic damage.
             10. So far as the term ‘inundation’ is concerned, it can be used
E    to refer to both the act of overflow of water over land that is normally
     dry and to the state of being inundated. Inundation can also be
     intentional, which is sometimes carried out for military purposes, as well
     as for agricultural and river-management purposes. In the latter sense,
     i.e. as a state of being, inundation refers to accumulation of water in
F    which objects or land may be submerged. In simpler terms, inundation
     can be used to refer both the act of overflow of water as well as the
     result of such overflow.
            11. It flows from the above discussion that overflow of water
     due to a flood may result in the state of inundation. As discussed above,
G    floods are of different types, and may be caused due to several factors
     complementing each other. Usually, non-coastal floods originate from
     rainfall, but the magnitude of rainfall sufficient to cause a flood, and
     the damage that a flood causes, may vary depending on a variety of
     aspects such as the location of land (low-lying or altitudinous), the water
     retention capacity of the soil, and the density of population and man-
H    made construction in the area, among other things. In rare cases, a non-
          ORIENTAL INSURANCE COMPANY LIMITED v.                                 57
M/S. J.K. CEMENT WORKS [MOHAN M. SHANTANAGOUDAR, J.]

coastal flood may also occur without any rainfall. For instance,                A
shortcomings in the construction of a dam may lead to its complete
breakdown, resulting in a flood.
       12. It is not the case of the appellant that the coal was not
properly stocked or that there was any negligence on part of the
Respondent. The only arguments advanced by the Appellant are: firstly,          B
that the terms ‘flood’ and ‘inundation’ cannot be equated, and, secondly,
that ‘flood’ needs to be understood in a narrow sense to refer only to
the overflowing of a water body, and to exclude instances where
overflowing of water occurs due to excessive rainfall.
      12.1 We have already highlighted that the terms ‘flood’ and               C
‘inundation’ are often used synonymously to refer to the act of
overflowing of water over land that is generally dry. Therefore, the first
argument of the Appellant cannot be sustained.
       12.2 Similarly, given our prior discussion on pluvial floods, which
occur independently of a water body, it is clear that floods are not            D
restricted to overflow of water bodies. Thus, the second argument raised
by the Appellant also lacks merit.
       12.3 Furthermore, the second argument made by the Appellant
seems tenuous even if we look into the intent of the parties entering
                                                                                E
into the contract, as it has not come on record that there was any water
body near the coal yard or the factory premises. In such a scenario,
where there was no risk of water from a water body overflowing onto
the dry land where the coal yard was located, it could not have been
the intention of the parties entering into the contract to give a restrictive
meaning to the term ‘flood’. Such a narrow interpretation would lead            F
to the conclusion that the insertion of the term ‘flood’ was superfluous,
which could not have been the case.
       13. In the instant case, the Appellant has not disputed that there
were heavy rains on 29.08.2003 and 30.08.2003 in the Nimbahera
region. In fact, the surveyor appointed by the Appellant had also               G
observed in its report that heavy rainfall had occurred in the area,
causing flood-like conditions that resulted in some of the coal kept in
the insured premises being washed off. Moreover, the surveryor’s report
also stated that there was accumulation of water due to the heavy rains,
that had caused the coal to get washed off.                                     H
58             SUPREME COURT REPORTS                     [2020] 5 S.C.R.


A           14. The NCDRC in the following cases: (i) Bajaj Allianz
     General Insurance Co. Ltd. v. M/s. Gondamal Hardyal Mal, [2009]
     NCDRC 127, (ii) Oriental Insurance Co. Ltd. v. M/s
     Sathyanarayana Setty & Sons, [2012] NCDRC 124, and (iii)
     Oriental Insurance Co. Ltd. v. M/s R.P. Bricks, [2013] NCDRC
     494, had held that damage caused by heavy rainfall would not fall
B
     beyond the ‘flood and inundation’ clause of the Standard Fire and
     Special Perils insurance policies. It is brought to our notice by the
     learned counsel appearing for the Respondent that the aforesaid view
     has been consistently taken by the NCDRC. The aforementioned view
     of the NCDRC supports the impugned judgment and the same cannot
C    be said to be erroneous.
           15. In view of the above, the appeal stands dismissed. The
     Appellant is directed to pay the sum awarded by the NCDRC within a
     period of eight weeks from the date of this order, to the Respondent.

D
     Kalpana K. Tripathy                                    Appeal dismissed.




E




F




G




H