Supreme Court of India
POLYMAT INDIA P. LTD. AND ANR.versusNATIONAL INSURANCE CO. LTD. AND ORS.
- Citation
- 2004 INSC 685
- Decided
- 1 December 2004
- Disposal
- Dismissed
- Bench
- B N AGRAWAL
Holding
Only plant and machinery within the factory premises were covered; the insurer’s reduction of the claim and denial of interest were justified.
Summary
Polymat India Ltd. and an associate insured their factory premises against fire under two policies issued by National Insurance Co. Ltd. The policies described the location as "factory‑cum‑godown" and the insured answered in the negative to a query about goods stored in the open. After a fire destroyed the building, plant, machinery and stock, the insurer assessed loss only for items inside the covered area and reduced the claim amount, excluding goods stored outside. The National Consumer Disputes Redressal Commission ordered payment of 75% of the assessed loss with 18% interest. On appeal, the Supreme Court held that the policy terms, as answered negatively, covered only plant and machinery within the factory premises; the insurer’s reduction was justified; and the levy of interest was unwarranted. Consequently, the insurer’s appeal was allowed and the complainant’s appeal dismissed.
Issues considered
- The scope of coverage under the fire insurance policies – whether goods stored outside the factory premises were insured.
- Whether the insurer could lawfully reduce the claim amount by excluding items not covered by the policy.
- Whether interest at 18% per annum should be awarded on the delayed payment.
- Whether the insured’s request to amend the policy was effective without the insurer’s consent.
Legislation cited
Subjects
fire insurancepolicy interpretationcontract amendmentclaim settlementinterestFactories Actconsumer disputeSupreme Court
Judgment
POLYMAT INDIA P. LTD. AND ANR. A
v.
NA TI ON AL INSURANCE CO. LTD. AND ORS.
DECEMBER 1, 2004
'l 'f.).
B
[B.N. AGRAWAL AND A.K. MATHUR, JJ.]
Insurance-Of premises and goods of a factory against fire-Insured
specifically mentioned that no goods were stored in open-Subsequent
request of the insured to amend the Policy so as to cover the gpods inside
as well as outside the building-Non-amendment of Policy to that effect- C
No further action by insured to repudiate the policy-Loss-Assessment only
in respect of goods lying in covered area-Assessment amount further
reduced by insurance company-Reasons for reduction given-Claim before
National Consumer Redressal Commission-Order for payment of 75% of
assessed amount with 18% interest holding that goods inside as well as D
outside the covered area were covered under Policies-On appeal, held:
In view of the declaration of the insured, the goods lying in the covered
area were only insured and non else-Terms of contract having been
reduced in writing and the same not being amended by insurance Company,
the same could not have been changed without mutual agreement of both
the parties-Reasons for reduction of assessment amount justified-The E
action taken by insurance Company was within reasonable time, hence levy
of interest @ 18% not justified-Contract-Factories Act, 1948.
Deeds and Documents-lnte1pretation of-Held: Documents have to
be construed in the manner it is presented and cannot be interpreted dehors p
the context.
Appellant, a factory, entered into two fire insurance Policies with
the respondent-Insurance Company. In the said Policies the location of
the property was mentioned as "factory-cum-godown and office
premises". In clause 8 of the policy the appellant answered that no goods G
were stored in open, or in kutcha shed or timber built or thatched roof
building within 15M (50ft) of the property to which proposal applied.
After receipt of the proposal of Policy appellant requested the respondent-
Com pany to carry out corrections in both the Policies i.e. (1)
incorporating name of Bank as mortgagee (2) coverage of plant and H
535
536 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.
A machinery inside or outside the building and coverage for stock and
stock in process and (3) deletion of expression "Godown-cum-factory"
as there was no godown. Respondent-Company agreed for amendment
to the extent of including t~e Bank as mortgagee and no further
amendment was made to the original Policies. The said factory premises
and the entire building, furniture, fixtures and fittings, stocks in process
B
and other material lying outside factory shed were completely destroyed
in fire. Surveyors assessed the losses only inside the covered area and
assessed the loss at Rs. 48,73,095. But the Respondent-Company reduced
the amount to Rs. 20,04,675 on the ground that the balance amount was
assessment in respect of portion and things lying outside the building
C and in respect of things beyond purview of the policy.
Appellant filed claim before the National Consumer Disputes
Redressal Commission. National Commission held that factory premises
included the plant and machinery and goods inside the shed as well as
D outside the shed and were covered under the Policies; that as per
guidelines assessee was entitled to 75% of the claim assessed by the
Surveyors and levied interest @ 18% holding that due to dilatory
approach adopted by Insurance Company appellant-complainant had
to suffer additional interest liability by the financial institutions. Hence
the cross appeals.
E
Allowing the appeal of the Insurance Company and dismissing that
of the Complainant-factory, the Court
HELD: ·1.1. So far as the definition of factory is concerned as given
F in Factories Act, 1948 it shows that where the manufacturing process
is undertaken, that means the manufacturing process which is undertaken
within the plants. This does not cover the outside area of plant. But each
definition has to be construed in the context in which it is used. Loosely
the expression, 'factory' may include the whole premises of factory. But
each expression has to be given the meaning in the context where it
G occurs. The expression "Factory-cum-Godown" has to be read in the
present context with the other conditions which appear in the Policy
document. It is admitted that there was no godown. The documents have
to be construed in the manner it is presented and the Court cannot give
a different interpretation dehors the context. Both the parties have
H executed the contract and complainant made a disclosure to query No.
POLYMAT INDIA P. LTD. v. NATIONAL INS. CO. LTD. 537
8 of the Policy categorically in negative that no goods are lying in open A
or in Kuccha shed. That shows that the goods lying in covered area were
only insured and none else. The terms of the contract have to be construed
strictly without altering the nature of the contract as it may affect the
interest of parties adversely. [546-C-E, F-G; 547-D-E]
General Assurance Society Ltd. v. Chandmull Jain, (1966) 3 SCR 500 B
and Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Co-
op. Bank, (1999) 8 SCC 543, relied on.
1.2. When the terms of the contract have been reduced in writing
it cannot be changed without the mutual agreement by way of both the
parties. Therefore, in the present case when the proposal was sought to
c
be amended ant it was only agreed to by the Insurance Company to the
extent substituting the Bank and the other amendments were not agreed
by the Insurance Company, the complainant had a choice to repudiate
the Insurance Policy or to obtain a proper declaration. But the
complainant did not pursue the matter further, it is to be blamed itself D
for this. [547-F, 548-C-E]
United India Insurance Co. Ltd. v. MK.J. Corporation, (1996] SCC
428, relied on.
1.3. Therefore, after construing the terms of the contract it transpires E.
that the intention between the 1,parti~s was to cover the plant and
machinery which were lying in the factory i.e., in the covered area and
in the shed ai;id not the goods which were lying outside the covered area.
Therefore the order of the Commission directing the payment of 75%
of the assessment made by the Surveyor of the goods which were lying F
inside and outside the factory was not the correct approach on the part
of the Commission. [547-C-E]
2. The reasons given by the Insurance Company for reducing the
amount are reasonable and justified. [547-F-G]
G
3. As per the guidelines laid down, the Insurance Company had to
settle the claim within two months of the Surveyor's Report. The reason
for delay has been explained. Levy of interest@ 18% by the Commission
is not justified. The action taken by the Insurance Company was within
reasonable time. (549-E-G]
H
538 SUPREME COURT REPORTS (2004] SUPP. 6 S.C.R.
A CIVIL APPELLATE illRISDICTION : Civil Appeal No. 4366 of
2004.
From the Judgment and Order dated 27.5.99 passed in Original Petition
No. 204 of 1994 by the National Consumer Disputes Redressal Commission,
B New Delhi.
WITH
C.A. No. 6063 of 1999.
C Raju Rama-chandran, Ms. Vandana Mohata, Ms. Anusuya Sadhu, Ms.
Pallavi Langar, Mrs. Shiraz Contractor Patodia, Vishnu Mehra and B.K.
Satija for the appearing parties.
The Judgment of the Court was delivered by
D.
A.K. MATHUR, J. : Both the appeals arise against the order passed
by the National Consumer Disputes Redressal Commission, New Delhi.
One Civil Appeal No. 4366/1999 is filed by the Polymat India Pvt. Ltd.
and the other Civil Appeal No. 6063/1999 is filed by the National Insurance
E Company Ltd. & Ors. against the order passed by the National Consumer
Disputes Redressal Commission, New Delhi on 27th May, 1999 in the
Original Petitio? ~o. 204 of 1994~"· •
Since both the appeals raise common question of law and arise out of
the same order, they are disposed of by the common order.
F
Brief facts of the case are as under :
That the Original Petition was filed by the Complainant Mis. Polymat
India Pvt. Ltd. & Anr. as a consequence·of its claim under 2 fire policies
G bearing No. 101600/3101669/0 in respect of Building, machinery and
accessories and furniture and other contents and the other bearing No.
l 01600/3101670/0 regarding stocks and used/burn lubricating oil and refined
oil in its factory premises consequent upon a fire being repudiated by the
Insurance Company, Opposite Pa1iy No. 1. The insured Polymat India Pvt.
H Ltd. is a factory measuring 251' x 150' and is bounded by 7' high brick
POLYMAT INDIA P. LTD. v. N.I.C. LTD. [MATHUR, J.] 539
wall on South and Chain-link fencing on the North, East and West Sides. A
Inside the factory premises the Complainant had a shed measuring 101' x
41' constructed of brick wall with asbestos sheets louvers at upper and
asbestos sheets roofing on tubular frame structure. Attached to the South
side of the shed was a lean-to structure measuring about 85' x 25' and
constructed of brick-walls and roofing on tubular frame. The construction B
was divided into several rooms housing the office, quality control laboratory,
workshop-cum-rest room and store room for tools and equipment. These
rooms had their opening inside the shed. In the said factory a Dove-tail batch
type acide and clay treatment process for refining the used/burnt lubricating
oil was undertaken. The raw material for the process was the bunt and used
lubricating oil which was received in barrels and stored in the open yard. C
Apart from that, oil was also brought in and unloaded into used oil pits. The
finished product i.e. refined lubricating oil was either being loaded into oil
tankers or being filled in drums. In the part of the plaint which was in open
the centrifugation, settling and decantation, dehydration, condensation of
lighter volatile impurities, acid treatment and condensation of volatile matters D
,. were being conducted. The part of the operation which was carried on side
the shed were the less hazardous process like clay treatment and neutralization,
filtration and centrifugation, oil blending etc. In that shed two Thermic Fluid
Heaters, one oil fired boiler and one water softening plant were also installed.
At the material time, all these plaints and machinery and materials were
covered by the two fire insurance policies. In the said policies the banker E
of the claimant was also one of the beneficiaries. The said fwo policies were
of dated 19th and 20th March, 1992. It was alleged that in 1992 the bankers
were charged by the Complainant from Grindlays Bank, Chowringhee Branch,
Calcutta to Allahabad Bank, Camac street Branch, Calcutta and all the fixed
assets were mortgaged by the Complainant in favour of the West Bengal F
Financial Corporation to secure the loans received by the Complainant No.
1 All the fixed assets, stocks and stocks-in-process of the Complainant
remained insured with the New India Assurance Co. upto 19th/20th March,
1992. But after the change oithe bankers from Grindlays Bank to Allahabad
Bank the Complainant also changed their insurer from the New India
Assurance Co. Ltd. to National Insurance Co. Ltd .. It is also pointed out that G
the Development Officer of the National Insurance Co. Ltd. one Mr. Sandip
.Guha brought two proposal forms for fire insurance on or about 17th March,
1992 and got those signed by the Complainant in blank. He also took with
his photocopies of the previous policies issued by New India Assurance Co.
Ltd. It is further alleged that the premises of the Complainant were inspected H
540 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.
A by the said Development Officer and after inspection, the rates of premium
were fixed. The premium which 'was demanded by the Opposite Party No.
I being Rs. 12,012 and Rs. 3,890 respectively which was paid by the
Complainant. In the said policies the location of the property was mentioned
as "factory-cum-godown and office premises", though there was no godown
B in the factory premises. Thereafter on I 3th January I 993 the said factory
premises and the entire building, furniture, fixtures and fittings, stocks in
process and other material lying outside factory shed were completely
destroyed in fire. The insurance company appointed one Shri S.N.M.
Consultants as the Surveyors. The Surveyors visited the premises and
conducted an inspection. The complainant supplied all information sought
c by the surveyors. The complainant was informed by the surveyors that they
had been instructed by the opposite parties not to assess loss to the plaint
and machinery, furniture, fixtures and fittings and civil structure outside the
covered shed and building and all the plant and machinery which were lying
installed in the open part of the factory premises were not allowed to be
D covered by the insurance. Therefore, the Surveyors only assessed the loses
inside the covered area. The Surveyors were also informed that they were
supposed to assess the loss inside the covered area only. The complainant
from the very beginning requested the fnsurer to amend the policies as there
was no godown within the precincts of the factory premises and all goods
lying inside the plant and outside the plant should be insured. But no
.E
response was received from the Insurance Company. Even the Surveyors
report was not made available to the complainant despite repeated requests.
Th_erefore, the present claim was ti led before the National Consumer Disputes
Redressal Commission. It was also alleged that Insurance Company did not
decide despite the insured complainant continued to incur losses of interest
F on the outstandings of Allahabad Bank and the West Bengal Financial
Corporation. It is alleged that release of part payment on account of payment
of atleast 75% of whatever had been assessed by the Surveyors was also not
released. Ultimately on July, I 994, Complainant received a letter dated I st
July, I 994 claiming the two fire polices for a sum of Rs. I 9,95,432.75 and
G Rs. 9,242.28 respectively i.e. Rs. 20,04,675 after deduction therefrom a sum
of Rs. 19,224 as 'penal premium' being the difference ofpremium between
Class-I and Class-II construction for three years and two vouchers for
signatures of the Complainant with the direction to send further cheque for
a sum of Rs. 4239, which was also paid. It was alleged that these two
vouchers were signed by the complainant without prejudice to its claim for
H the balance and returned to the insurer-Opposite Parties. The complainant
POLYMAT INDIA P. LTD. v. N.I.C. LTD. [MATHUR, J.] 541
demanded the details of deduction from its claim and received a statement A
of accounts but no reasons were given for this decution. The Surveyors
assessed the loss at Rs. 48,73,095 only but the reasons for reducing this
amount of Rs. 20,23,899 which was not even 50% of the loss assessed by
the Surveyors. The complainant claimed a sum of Rs. 58,20,161 under the
said two policies. But the surveyors assessed the loss at Rs. 48,73,095. It
B
is alleged that inspite of this, the opposite parties even upto the date of filing
of the complaint had not paid even the reduced amount of Rs. 20,04,675
minus Rs. 19,224 which they had originally offered under the two policies.
When the matter could not be sorted out then the complainant filed the
present claim before the National Forum. Respondents filed a response to
the present complaint that they had settled the claim at a little over Rs. 20 c
lakhs as a non-standard claim because under the policy the premises was
described as of I st class construction. The Insurance Company refuted the
other allegations and explained that they disallowed the claim relating to
plant 1nd machinery outside the covered area installed outside the building
and had also not considered the claim of the goods i.e. the drums of oil lying D
in the open within the factory precincts. It is also contended that the
complainant was not kept in dark about the basis of settlement. It was also
urged that regarding querries of the Complainant, a letter dated 12th August,
1994 was sent giving details to the complainant, which was received by the
complainant on 3 lst August, 1994. In this background, National Commission
examined that whether the claim of complainant is justified or not. The E
Commission after considering the matter took view that the factory premises
includes the plaint & machinery and goods inside the shed and outside the
shed are covered under both fire policies.
The commission relied on the definition of the factory as given in the F
Factory Act 1948.
It was also observed that as per the guidelines in settling the claims
75% of loss should have been settled. No basis or reasons were given as
to why original claim was not settled at 75% of loss as determined by the
Surveyor which was not disputed. It was also observed that dilatory approach G
adopted by Insurance Company resulted in harassment to complainant and
he had to suffer additional interest liability from time to time by the financial
institutions and it was also observed that the assessed is entitled to 75% of
the claim assessed by the surveyors i.e. 75% of Rs. 48,73,095.75, which
comes to Rs. 36,54,821.25 and interest was levied @ 18% per annum H
542 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.
A commencing from two months after the receipt of the Surveyor's report till
the date of payment and also imposed the cost of Rs. I 0,000. Aggrieved
against this order, both these appeals were filed, one by Insurance Company
and the other by Mis. Polymat India, hence both are disposed of by the
common order.
B
The first and foremost question for consideration is, as per the terms
of the policy whether all the goods which are lying within the shed or outside
the shed are covered under the policy or not. In Policy No. 101600/3 l 0 l 670i
0 under heading 'Property to be insured' which read as under :-
c "Stock in trade or merchandise consisting Rs. 15,00,000. (A ground
plan of the premises may please be sketched in the space provided showing
also Adjoining and/or adjacent property within l 5M (50ft) therefrom."
Clause 8 of the Policy which is relevant for our purpose reads as under:
D
"Are there any goods stored in the open,
or is there is kutcha shed or timber built
or thatched roof building with ISM (50ft.) No
or the property to which this proposal
applied? If so; please give details."
E
In the original policy, the expression used was "Factory-cum-Godown-
cum-Office".
In another Policy also in similar query No. 8, a similar answer was
F given that is in negative.
The answer of the insured complainant was in negative that no goods
are stored in open, or in kutcha shed or timber built or thatched roof building
within l 5M (50ft.) of the property to which proposal applies. In short that
G goods lying outside plant are not insured.
Therefore, the question is when the complainant themselves has given
the answer in negative to the aforesaid queries in both the policies, whether
the complainant is entitled to the benefit of loss occasioned to him on the
H goods lying outside the factory premises in the open.
POLYMAT INDIA P. LTD. v. N.I.C. LTD. [MATHUR, J.] 543
It may also be relevant to mention here that after the proposal form A
was received by the complainant and they immediately requested by a letter
on 20th April 1992 to National Insurance Co. pointing out certain
discrepancies in both the policies and requested to carry out corrections in
both the policies, i.e., request for incorporating the name of the Allahabad
Bank, Camac Street, Calcutta as mortgagee along with West Bengal Financial B
Corporation, secondly, the coverage of plaint and machinery inside or
outside the building and the coverage for stock and stock in process and
lastly the expression 'Godown-cum-factory' be deleted as there is no
'god own'. Letter dated 20th April 1992 reads as under :
"Polymat India Pvt. Ltd. C
1/B, D.L. Khan Road
Calcutta 700 027
20th April 19921
The National Insurance Co. Ltd. D
Calcutta Division XVIII,
6, Lyons Range,
Calcutta 700 001
Sub : Correction in Policy NO. 101600/3101669/0(BMC)
Policy No. 101600/3101670/0 (SSP) E
Dear Sir,
With reference to the captioned two polices delivered through
your Development Officer, Mr. Guha, please note the following F
discrepancies which please amend and oblige.
1. Policy No. 1016001310166910 (BMC)
a) Besides West Bengal Financial Corporation, the Allahabad
Bank, Camac Street Branch is also interested as Mortgagee in G
respect of our entire building : plant machinery & equipments;
and furniture, fittings & fixtures.
... b) In the last paragraph, the item nos. should be 1, 2 & 5 and
1, 2 & 4. H
544 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.
A c) Besides Plant & Machinery installed in Open Yard/in Building,
items 2 should also included Laboratory Equipment, Stores,
Spares, etc. lying anywhere in our Factory Complex (inside
and/or outside the Building).
B 1. Policy No. 1016001310167010 (SSP)
The coverage required is for Stock and Stock in Process, i.e., all
types ofraw materials & chemicals; stocks undergoing any process
and the semi finished/finished stock-inside or outside the building
but within out factory compound (as hypothecated to the Allahabad
c Bank). It may be noted that in the Policy the sum of Rs. 15,00,000
is wrongly stated against item 4 instead of item 3. (We have no
Godown in our Factory Compound).
Please made necessary change in both the Policies on above stated
D basis. Please also send us photocop;ie's"of the two proposal forms
which we had handed over to your Mr. Guha on 17th March, 1992
- signed blank by our representative Shri Sidheswar Chakraborty
so that you could fill in the queries of those two proposal forms
on the basis of expiring policies of New India Assurance Company
Ltd., in appropriate manner.
E
Thanking you,
Yours faithfully
For Polymat India (P) Ltd.
F
Sd/-
(Rita Jhawar)
Manager : Finance & Acounts
CC : The Allahabad Bank - for information
Camac Street Branch
G 3C, Camac Street
Calcutta 700 016"
h
These three amendments were suggested by the aforesaid
communication. The Insurance Company by the communication dated 23rd
April, 1992 agreed to only amendment to the extent of the name of the Bank,
-
POLYMAT INDIA P. LTD. v. N.I.C. LTD. [MATHUR, J.] 545
namely, Allahabad Bank as mortgagee and no further amendment was made A
in the original Policies. This was also confirmed by the evidence of sole
witness Shri Samaresh Sarkar, Divisional Manager produced by the Insurance
Company in evidence before the National Forum. No evidence was led by
the complainant before the National Forum. Therefore, the question is how
the correspondence and documents produced by both the parties are to be B
construed. But unfortunately, the National Commission did not consider all
these aspects and immediately rushed to direct to pay 75% of the loss
assessed by the surveyors.
Now, the question whether the expression "Factory-cum-Godown"
includes all plant & machinery and all goods lying within the boundary wall C
of the factory, was covered under both the Policies.
The expression "Factory" has been defined under Section 2(m) of the
Factories act which reads as under :
D
"Factory" means any premises including the precincts thereof-
(i) whereon ten or more workers are working, or were working
on any day of the preceding twelve months, and in any part
of which a manufacturing process is being carried on with the
aid or power, or is ordinarily so carried on, or E
(ii) whereon twenty or more workers are working, or were working
on any day of the preceding twelve months, and in any part
of which a manufacturing process is being carried on without
the aid of power, or is ordinary so carried on, -
F
but does not include a mine subject to the operation of the Mines
Act, 1952, a mobile unit belonging to the armed forces of the
Union, a railway running shed or a hotel, restaurant or eating
place."
G
The factory has also been defined in the Law Lexicon :
"A building or buildings with plant for the manufacture of goods."
The word 'factory' unless specially defined by statute, is always H
546 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.
A used in connection with the place where some kind of manufacturing
process is carried on. The activity of exhibiting films does not fall
within the definition on factory contained in the Factories Act."
Factory means any premises, including the precincts thereof, in any
part of which a manufacturing process is carried on. The expression
B
'premises' including the precincts thereof' takes within its
connotation not merely the building but the open area or the
compound about that particular building. S. T Trading Co. v. Union
of India, AIR (1966) Guj. 116, 125 (Employees Provident Funds
Act {19 of I 952), S 2 (g)."
c
So far a the definition of factory is concerned as given in Factories Act,
it shows that where the manufacturing process is undertaken, that means the
manufacturing process which is undertaken within the plants. This does not
cover the outside area of plant. But each definition has to be construed in
D the context in which it is used. Loosely the expression, 'factory' may include
the whole premises of factory. But each expression has to be given the
meaning in the context where it occurs. The expression "Factory-cum-
Godown" has to be read in the present context with the other conditions
which appear in the Policy document. In fact the Clause 8 which has been
reproduced above, specifically made reference that whether the goods are
E stored in open or there is kuccha shed or timber built or thatched roof
building within l 5M {50ft.) of the property to which this proposal applies?
If so, give the details. But no detail was given and it was answered in
negative. Therefore, what was sought to be insured was plant and machinery
. It is admitted that there was no godown. Therefore, it is clear that goods
F lying outside the plaint were not insured. Had the intention of the parties
been otherwise then they would have answered query No. 8 in positive terms
with details. But it was answered in negative. Therefore, the documents have
to be construed in the manner it is presented and we cannot give a different
interpretation dehors the context. Both the parties have executed the contract
and complainant made a disclosure to query No. 8 categorically in negative
G that no goods are lying in open or in Kaccha shed. That shows that the goods
lying in covered area were only insured and none else.
In this connection, a reference may be made to series of decisions of
this Court wherein it has been held that duty of the Court to interpret the
H· document of contact as was understood between the parties. In the case of
POLYMAT INDIA P. LTD. v. N.l.C. LTD. [MATHUR, J.] 547
General Assurance Society Ltd. v. Chandmull Jain reported in [1966] 3 SCR A
500 at pages 509-510, it was observed as under :
"In interpreting documents relating to a contract of insurance, the
duty of the court is to interpret the words in which the contract is
expressed by the parties, because it is not for the court to make a B
new contract; however reasonable, if the parties have not made it
themselves."
Similarly, in the case of Original Insurance Co. Ltd. v. Samayanallur
Primary Agricultural Co-op. Bank reported in [1999] 8 SCC 543 - Para 3
at page 546-f, it was observed as under : c
"The insurance policy has to be construed having reference only
to the stipulations contained in it and no artificial farfetched meaning
could be given to the words appearing in it."
D
Therefore, the terms of the contract have to be construed strictly
without altering the nature of the contact as it may affect the interest of
parties adversely.
In this connection, it may also be relevant to mention here that when
this proposal was approved the same was sent to the complainant and the E
complainant wanted some amendments in both policies i.e. coverage of
goods lying outside plant including the expression factory-cum-godown as
there was no godown in existence but those amendments were not agreed
to by the insurance company, they only agreed to make amendment of
incorporation ofname of the Bank, i.e., Allahabad Bank in the Policy. When F
the terms of the contract have been reduced in writing it cannot be changed
without the mutual agreement by way of both the parties. In the present case,
they did not agree for amendment of the policies, if the complainant was
vigilant and wanted this expression to be deleted he should have prosecuted
the matter seriously or repudiated the Policy. The only defence pleaded was
that they were assured orally but no evidence was led by complainant. On G
the contrary, suggestion was denied by single witness produced by the
Insurance Company before National Forum.
In this connection, our attention was invited to decision of this Court
in the case of United India Insurance Co. Ltd. v. M.K.J. Corporation H
548 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.
A reported in [1996] 6 sec 428 wherein it was observed as under :
" ... After the completion of the contract, no material alteration can
be made in its terms except by mutual consent."
B Therefore, in the present case when the proposal was sought to be
amended and it was only agreed to be the Insurance company to the extent
substituting the Bank i.e. Allahabad Bank and the other amendments were
not agreed by the Insurance Company, the complainant had a choice to
repudiate the insurance policy or to obtain a proper declaration. But the
complainant did not pursue the matter further, it is to be blamed itself for
c this.
Therefore, after construing the terms of the contract it transpires that
the intention between the parties was to cover the plantand machinery which
were lying in the factory, i.e., in the covered area and in the shed and not
.D the goods which were lying outside the covered area. Therefore the order
of the Commission directing the payment of 75% of the assessment made
by the Surveyor of the goods which were lying inside the outside the factory
was not correct approach on the part of the Commission.
The Commission should have examined the matter in detail in terms
E of the pol icy and the relevant documents bearing on the subject. This was
not done. Therefore, we have no hesitation to say that what was sought to
be covered by both the Policies was only plant and machinery in shed and
not the goods which were lying outside the plant and shed.
F Next question is whether the reduction of the amount by insurance
company under various heads is justified or not?
We have gone through the reasons given by the Insurance Company
for reducing the amount and we are of the opinion that the reasons given
by the Insurance Company appear to be are reasonable and justified which
G read as under :
"I. Though surveyor assessed the total loss on building as Rs.
5,52,049 but while computing we only accepted Rs. 4,79,049
as the balance amount of Rs. 55,000 is assessment relating to
the portion which is not inside the building.
H
POLYMAT INDIA P. LTD. v. N.I.C. LTD. [MATHUR, J.] 549
2. Regarding plant and machinery though the surveyor assessed A
Rs. 24,61, 757 but we considered Rs. I{97 ,651 and rest Rs.
9,64, 106 was related to the assessment of the plant and
machinery installed outside the building.
3. Regarding assessment of furniture, fixture and fittings though B
you mentioned that the surveyor assessed Rs. 1,76,820 but it
did not appear true according to the survey report the surveyor
assessed only Rs. 1,55,820. But we could consider to the tune
of Rs. 87,320 as the business amount of Rs. 68,500 was related
to the portion kept outside the building.
c
Under SSP Policy though the surveyor assessed Rs. 16, 17,212
but we could consider only (i) Hydraulic Oil (630 litres)
amounting to Rs. 11, 100 and (ii) H.S.D. in barrel (1081 litres)
amounting of Rs. 2624 aggregating to Rs. 13,724 and rest of
the it~ms assessed by surveyor were beyond the scope of D
cover and not within the purview of the policy."
Therefore, on this account also we do not find any merit to interfere
in the matter.
The next question is with regard to award of interest. As per the E
guidelines laid down, the Insurance Company had to settle the claim within
two months of the Surveyor's Report. The reason for delay had been
explained. Since the fire took place oh 13th January, 1993 1 the Insurance
Company appointed the Surveyor ad Surveyor sent his report dated November
5, 1993 which was received by the appellant on November 9, 1993. Since F
there was some discrepancies in the survey report, the Insurance Company
vide their letter dated December 14, 1993 sought clarification from the
surveyors which was'· replied on 22.4.94 by the Surveyors. The Insurance
Company after that took the decision and informed the claimant vide their
letter dated 1.7.194 for approval of the claim for Rs. 20,23,899 under both
the polices. Therefore, it was submitted that almost within stipulated time G
-.( the intimation was sent to them as such the levy of interest @18% by the
-
I
Commission is not justified.
We are satisfied that the action taken by the Insurance Co. was within
reasonable time. Therefore, it cannot be saddled with a high rate of interest H
550 SUPREME COURT REPORTS [2004) SUPP. 6 S.C.R.
A @ 18%. However Insurance Companies should have speed up disposal of
claims in order to inspire greater confidence in them. Be that as it may, since
the amount was received by the claimant in 1994, therefore, levy of interest
@ 18% does not appear to be justified. Hence, we set aside the order
awarding interest @ 18% per annum. Similarly a levy of cost of litigation
B of Rs. 10,000 also does not appear to be justified in the present case as in
view of our finding above. Hence, we allow the C.A. No. 6063/1999 filed
by National Insurance Company and set aside the order of the Commission.
Polymat India Pvt. Ltd. (C.A. No. 4366/99) have also filed appeal
against the same order and their grievance is commission ought to have
C granted entire loss assessed by Surveyors instead of 75% & interest should
have been awarded from the date ofloss. Since, we have examined the whole
matter in detail, we are satisfied that claimant is not entitled to be compensated
loss as claimed by them. Hence, we do not find any merit in this appeal and
the same dismissed with no orders as to costs.
D
K.K.T. Appeal dismissed.
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