Holding

The insurer was justified in both accepting the surveyor's assessment and applying the under‑insurance deduction, and a corporate entity cannot claim mental harassment damages.

Summary

Sikka Papers Ltd. insured a diesel generating set for Rs.35,00,000 but the set broke down and the insurer appointed a surveyor who allowed reimbursement only for parts damaged in the accident, rejecting claims for wear‑and‑tear replacements. The company paid Rs.25,00,000 for repairs and claimed the full amount plus Rs.10,00,000 for mental harassment, but the insurer paid only Rs.8,07,110 after applying a 25.71% under‑insurance deduction. The dispute before the Supreme Court centered on whether the insurer was justified in accepting the surveyor's assessment and in applying the pro‑rata under‑insurance formula, and whether a corporate entity could claim damages for mental harassment. The Court held that the surveyor's report was proper, that the policy’s general exception excludes wear‑and‑tear parts from reimbursement, and that the under‑insurance deduction was contractually permissible. It also ruled that a company cannot claim mental harassment damages, which are available only to natural persons. Consequently, the appeal was dismissed and the National Consumer Disputes Redressal Commission’s award upheld.

Issues considered

Whether the insurer was justified in accepting the surveyor's report that limited reimbursement to accident‑related damages.
Whether the insurer was justified in deducting a 25.71% under‑insurance amount under the pro‑rata clause.
Whether a corporate entity can claim damages for mental harassment under the Consumer Protection Act.

Legislation cited

Consumer Protection Act, 1986
Insurance Act, 1938s. 64-UM(2)

Subjects

machinery insuranceunder‑insurancewear and tearsurveyor reportmental harassmentcorporate entityconsumer protectionindemnitypro‑rata clausecontract interpretation

Judgment

J
'

[2009] 9 S.C.R. 1088

A SIKKA PAPERS LTD. 1
v.
NATIONAL INSURANCE CO. LTD. & ORS.
(Civil Appeal No. 6527 of 2002)
MAY 29, 2009 I-
B
[D.K. JAIN AND R.M. LODHA, JJ.]

Consumer Protection Act, 1986

c Compensation - Machinery Insurance Policy -
Reimbursement on breaking down of. machinery - On
surveyor's report some parts advised to be replaced - Many ,
other parts also got replaced - Held: The parts which had
suffered due to wear and tear, although replaced, could not
D form part of claim for reimbursement under the terms of policy
- In case of under - insurance, the insurer is entitled to pay y
. only in such proportion as the sum insured bears to the
amount insured - The pro-rata formula and the amount
deducted from the sum payable on account of under-
insurance ·cannot be faulted - National Commission did not
E commit any error in accepting surveyor's report - Insurance
- Under - insurance.

Consumer Protection

F Claim by company towards mental harassment - Held:
Not legally permissible - It is only natural person who can
claim for mental harassment and not a corporate entity.

The appellant-company purchased a Diesel
Generating Set for 45,25,000/- and got it insured for Rs.
G 35,00,000/-. The said generating set broke down within
the period of insurance. The surveyor appointed by the
insurer inspected the machine and identified the
damages. He suggested the damaged parts to be

H 1088 .
SIKKA PAPERS LTD. v. NATIONAL INSURANCE co.1089
LTD. & ORS .
....
'\ replaced. The complainant sent the machine for repairs A
to authorized repairers and got many other parts also
replaced. According to the complainant it paid Rs.
25,00,000/- to the repairers and handed over the bills to
the insurer. Since the insurer agreed to pay Rs.8,07,110/
- only, the complainant approached the National B
Commission claimjng Rs. 25,00,000/- towards cost of
repairs and Rs.10,00,000/- for mental harassment. The
~ >- stand of the insurer was that as per the surveyor's report
on assessment of damages, only those items that were
affected in accident were to be replaced, but the insured c
got other parts also replaced which did not suffer any
damage as a result of accident and as such, the insurer
was not liable for replacement of such parts. The National
Commission directed the insurer to pay to the
complainant an amount of Rs. 10,47,491/- with 12% D

..
' 'f
interest.
In the appeal filed by the insured, the questions for
consideration before the Court were: (1) Whether the
insurers were justified in accepting the report dated May
't
15, 2000 submitted by the surveyor who had assessed E
the loss of Rs. 14,45,000/- after deducting about
Rs.10,55,000/- from Rs.25,00,000/- i.e. actual amount paid
...- by the complainant for repairing the diesel generating set
>--
(ii) whether the insurer was justified in deducting the
amount of Rs.3,71,509.50 (25.71%) as under-insurance F
from the loss assessed at Rs.14,45,000/- by the surveyor
in its report dated May 15,2000.

Dismissing the appeal, the Court

HELD: 1.1. In view of the General Exceptions G
incorporated in the Machinery Insurance Policy, ·the
provision of 'sum insured', viz. the cost of replacement·
of insured property by new property of the same kind
and same capacity, is subject to the exception that repair
H
1090 SUPREME COURT REPORTS [2009] 9 S.C.R.
... l

A or replacement shall not extend to the machinery or parts I
which have undergone normal wear and tear due to its
use and exposure; the insurer is required to reimburse
the insured to the extent of monies spent on repairs or
replacement of the machinery to the kind of position that
B it was before the incident of damage. [Para 11] [1099-C-
F]

New India Assurance Company Limited vs. Pradeep -~ "{
J
1

Kumar 2009 (6) SCALE 253 and Vikram Greentech (/) Ltd.
& Anr. vs. New India Assurance Co. Ltd. JT 2009(5) SC 579,
c referred to.

1.2. The parts which had suffered due to wear and
tear on account of constant use, although replaced, ,_
could not form part of claim for reimbursement under the I

D terms of policy and, therefore, surveyor in its report dated
May 15, 2000 cannot be said to have wrongly rejected y \
~':"-
such claim. The complainant has failed to show any
reason to reject surveyor's report. [Para 15] [1103-D-E]

Dictionary of insurance (llnd Edition by C. Bennett,
E
referred to.

2. As per invoice the diesel generating set was _,_
purchased by the complainant in the year 1997 for ~t~
Rs.45,25,000/-, but got the insurance cover valuing the
F . machine at. Rs.35,00000/-. ·Apparently,. therefore, there is
an element of under-insurance. It is also to be noted that ·
the value of the item is always declared by the insured
at the time of insurance while the element of under-
insurance is calculated by the insurer at the time of
G assessment of loss. The policy provides that if the sum
insured is less than the amount required to be insured,
the insurer will pay in such proportion as the sum insured -
bears to the amount insured. In accordance with such
provision in the policy, if the surveyor applied for the pro-
H rata formula and deducted 25.71% from the loss so
- SIKKA PAPERS LTD. v. NATIONAL INSURANCE C0.1091
LTD. & ORS.
{
o(

assessed i.e. Rs.3,71,509.50 from the sum payable as A
under-insurance, such deduction cannot be faulted. [Para
17] [1104-8-F]

3. The claim of Rs.10,00,000/- made by the
complainant for mental harassment is wholly 8
misconceived and untenable. It is only the natural person
who can claim damages for mental harassment and not
the corporate entity. The complainant is a company and,
therefore, claim for mental harassment is not legally
permissible. [Para 19] [1104-H; 1105-A]
c
4. The view taken by the National Commission does
not suffer from any legal flaw justifying interference by
this Court. [Para 20] [1105-B]
Case Law Reference: D
JT 2009 (5) SC 579 referred tO Para 9
2009 (6) SCALE 253 referred to Para 12
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
6527 of 2002. E

From the Judgment & Order dated 18.07.2002 of the
National Consumer Disputes Redressal Commission, New
Delhi in Original Petition No. 407 of 2000.
F
K.K. Mishra (for P.K. Jain) for the Appellant.

Atul Nanda, Rameeza Hakeem and P.N. Puri for the
Respondents.

The Judgment of the Court was delivered by G
R.M. LODHA, J. 1. This appeal under Section 23 of the
Consumer Protection Act, 1996 (for short 'the Act') is at the
instance of the complainant as its,' claim to the tune of
Rs.35,06,000/- against the National Insurance Company H
1092 SUPREME COURT REPORTS [2009) 9 S.C.R. )

....'
A Limited (for short 'insurer') has not been accepted in its entirety ~

and the National Commission in its judgment and order dated
July 18, 2002 directed the in~urer to pay to the complainant an
amount of Rs. 10,47,491 only along with interest at the rate of
12% from March 1, 2000, till the date of payment after adjusting
B the amoµnt already paid.
2. The facts from which the controversy arises are these:
'~
The complainant, Sikka Paper Limited, is a limited "'
company engaged in the manufacture of paper having a paper
c mill unit in District Muzaffamagar (U.P.). For want of regular and
continuous supply.ofelectricity from the Uttar State Electricity
Board, the complainant purchased the Diesel Generating Set
of 1000 KVA of Kirloskar Cumins Limited with alternator of
1250 KVA for the smooth running of its unit. The said diesel -
D generating set along with alternator was got insured by the
complainant for a period from April 8, 1999 to April 7, 2000 'r
for Rs.35,00,000/- vide insurance policy No. 451902/46/99/415. .....
The complainant paid a premium amount of Rs.55,860/- to the
insurer.
E
3. On December 25, 1999, the said generating set broke
down and it could not start again despite efforts. The concerned
officers of the insurer were intimated in this regard by the
~
complainant and they were requested for arranging immediate
survey of the insured generating set. The first surveyor
F appointed by the insurer is said to have completed his
inspection on December 26, 1999 and advised the complainant
to send the engine to the authorized repairers viz., Cumins
+-
Diesel Sale and Service (India) Limited, Pune. On December
30, 1999, anot~er surveyor is said to have inspected the diesel
G generating set and identified the damages and the complainant
·~
with the consent of the insurer, sent the diesel generating set
for repairs to authorized repairers at Pune. The authorized
repairers gave the estimate of expenses of repairs to the tune
of Rs.27,00,395/- and repaired the diesel generating set. The
H ·I
SIKKA PAPERS LTD. v. NATIONAL INSURANCE CO. 1093
-( LTD. & ORS. [R.M. LODHA, J.]
\
complainant is said to have paid Rs. 25,00,000/- to the A
repairers.

4. The case of the complainant is that all bills acquired and
directed by the insurer and their appointed surveyors and as
required by the policy were handed over to the insurer and the B
complainant was told that the actual expenses incurred by them
in the repairs of the diesel generating set as well as
;- ~
reinstatement charges would be paid but later on they agreed
to reimburse Rs.8,07,110/- only. Constrained thereby, the
complainant approached the National Commission and
claimed a sum of Rs.25,00,000/- towards repairs of diesel
c
generating set; Rs.10,00,000/- for mental harassment and
damages along with interest and costs. The complainant
alleged that the insurer failed to discharge their obligations
under the insurance policy and with mala fide intention to defeat
'4 and delay its legitimate claim, adopted all unwarranted and D
-f" illegal devices.

5. The insurer resisted the complaint and set up the plea
that claim of Rs.8,07, 110/- was accepted as per the surveyor's
report dated May 15, 2000; the surveyor considered the E
" damage caused as a result of the accident to the various parts
of the diesel generating set and wherever he found that
,. '.l-
replacement was required, he provided for the same. The
insurer stated that the surveyor assessed the damages on the
basis of only those items which were affected in accidental F
=1 damage and the balance items not following the scope of the
· policy were disallowed. It was the case of the insurer that the
parts which did not suffer any damage as a result of accident
were not liable to be replaced at the expense of the insurer.
The insurer also averred that the surveyor in its report dated
( I F
May 15, 2000 after considering the damage caused to the
diesel generating set has allowed amounts for carrying out the
necessary replacement of parts damaged in accident after
deducting the depreciation. The deduction at the rate of 25.71 %
as under..:insurance was also sought to be justified. The insurer
H
1094 SUPREME COURT REPORTS [2009] 9 S.C.R.
,_

A denied the claim towards mental harassment. f ....
6. The National Commission, inte~ alia, considered the
matter thus:

... We are also unable to accept the figure given by
B the Complainant for purchase of the Engine as well as
while it meets the 'capacity' requirement but not of 'kind'
i.e. a cumin engine thus not meeting the requirement of the ~ ....
Terms of Policy as reproduced earlier under the head 'Sum
Insured'. We find that the third Surveyor has taken pains
c to explain each and every part of the repairs, freight etc.
and his assessment of loss is as per terms of the Policy
which alone can form the basis of payment to the
Complainant. We also see further material on record that
estimates of Rs.25 lakhs for repairs relate to replacement
D of several parts not affected by the incident but to prolong ,..
the life of the Engine. Full reimbursement has been made ...:;
for replacement of crankshaft, Main bearings, connecting
Rod bearing, oil coolers{ind Gears but not for cylinder
liners, Piston and Piston rings as they are expendibles,
E to the extent that they are subject to wear and tear on
account of constant use. The latter contingency is not
covered by terms of the policy, hence cannot be allowed.
'I-
In the light of above discussions, we direct the
Opposite Party to pay to the Complainant an amount of
F
Rs.10,47,491/- as assessed by the third Surveyor along
with interest @ 12% from 1.3.2000 i.e. after two months
of the receipt of the report of the second Surveyor, till the
date of payment after adjusting for the payment already
made. The Opposite Party shall also pay cost of Rs. 5000/
G - to the complainant." -\
,,
7. We heard the learned counsel for the parties. In the light
of the contentions advanced before us, the following two
questions arise for our consideration:
H
SIKKA PAPERS LTD. v. NATIONAL INSURANCE C0.1095
LTD. & ORS. [R.M. LODHA, J.]
'·-<'
\ A
(one) Whether the insurer was justified in accepting report
dated May 15, 2000 submitted by the surveyor who had
assessed the loss of Rs.14,45,000/- after deducting about
Rs.10,55,000/- from Rs.25,00,000/- i.e. actual amount paid
by the complainant for repairing the diesel generating set
? B

(two) Whether the insurer was justified in deducting an
.... amount of Rs.3,71,509.50 (25.71%) as under insurance
·" from the loss assessed at Rs.14,45,000/- by the surveyor
in its report dated May 15, 2000 ?
c
re : question (one)

8. That the complainant took machinery insurance policy
to cover diesel generating set of 1000 KVA with alternator of
1250 KVA from the insurer is not in dispute. The said diesel D
~ generating set with alternator was got insured for the period
from April 8, 1999 to April 7, 2000. Although the said diesel
generating set with alternator was purchased by the
complainant as per the invoice in 1997 for Rs. 45,00,000/-, it
is not in dispute that sum insured for alternator was Rs.
E
9,00,000/- and diesel generating set Rs.26,00,000/- i.e.,
insurance cover was for Rs. 35,00,000/- in all. It is also an
::,,.- admitted position that on December 25, 1999, the diesel
..... generating set that was insured with insurer broke down and
could not be started. The spot survey was got conducted by the
insurer and on the advice of the surveyor, the diesel generating F
set was sent to authorized repairers at Pune for repairs. The
last surveyor's report is May 15, 2000. According to the
complainant, they paid a sum of Rs.25,00,000/- to the repairers
for the repairs of diesel generating set but the insurer relying
...
> upon the report of the last surveyor agreed to reimburse the sum G
of Rs.8,07, 110/- only which was not acceptable to the
~
complainant.

9. In Vikram Greentech (/) Ltd. & Anr. v. New India
H
1096 SUPREME COURT REPORTS (2009] 9 S.C.R.
,__I

- 1
A Assurance Co. Ltd., we considered the essentials of insurance
of contract thus:

"15. An insurance contract, is a species of commercial
transactions and must be construed like any other contract
to its own terms and by itself. In a contract of insurance,
B
there is requirement of uberimma tides i.e. good faith on
the part of the insured. Except that, in other respects, there
is no difference between a contract of insurance and any
other contract. The four essentials of a contract of
insurance are, (i) the definition of the risk, (ii) the duration
c of the risk, (iii) the premium and (iv) the amount of
insurance. Since upon issuance of insurance policy, the
insurer undertakes to indemnify the loss suffered by the
insured on account of risks covered_ by the insurance
policy, its terms have to be strictly construed to deJermine
D the extent of liability of the insurer. The endeavour of the
court must always be to interpret the words in which the
contract is expressed by the parties. The court while
construing the terms of policy is not expected to venture
into extra liberalism that may result in re-writing the contract
E or substituting the terms which were not intended by the
parties. The insured cannot claim anything more than what

-
is covered by the insurance policy. [General Assurance
Society Ltd. Vs. Chandumull Jain and another, AIR 1966
·SC 1644, Oriental .Insurance Co. Ltd. vs. Sony Cheriyan •
F (1999) 6 SCC 451 and United India Insurance Co. Ltd.
vs. Harchand Rai Chandan Lal (2004) 8 SCC ~-"

10. The relevant portion of Machinery Insurance Policy
taken by the complainant from the insurer are :
G "NOW THIS POLICY OF INSURANCE WITNESSETH
THAT subject to the terms and exemptions exclusions
provisions and conditions contained herein or endorsed
hereon the Company will at its own option by payment or

H 1. JT 2009 (5) SC 579.
- SIKKA PAPERS LTD. v. NATIONAL INSURANCE C0:1097
LTD. & ORS. [R.M. LODHA, J.]
reinstatement or repair indemnify the Insured against A
unforeseen and sudden physical damage by any cause not
hereinafter excluded to any Insured property specified in
the attached Schedule whilst in the premises therein
mentioned necessitating its immediate repair or
replacement. B

GENERAL EXCEPTIONS .
\
THE COMPANY SHAL'L NOT BE LIABLE UNDER
I .

THIS POLICY IN RESPECT OF:-
c
1 ............................... ..

.. 2 ................................ .

3 ................................ . '
D
_. 4 ............................... ..
5. Deterioration of or wearing away or wearing out of any
machine caused by or naturally resulting from normal use
or exposure.
E
Special Exclusions:

¥ 1............................... ..
2 ................................ .
F
3 ............................... ..

PROVISIONS

Sum Insured:
G
It is a requirement of this Insurance that the Sum Insured
shall be equal to the cost of replacement of the insured
property by new property or the same kind and same
capacity which shall mean its replacement cost including
freight dues and customs duties if any and erection costs. H
1098 SUPREME COURT REPORTS [2009) 9 S.C.R.

"-

A Basis of Indemnity:

a) In cases where carnage to an insured item can be .....
repaired the Company will pay expenses necessarily
incurred to restore the damaged machine to its former
state ~f serviceability plus the cost dismantling and re-
B
erection incurred for the purpose of effecting the repairs
as well as ordinary freight to and from a repair-shop
customs duties and dues if any to the extent such expenses ·~ ""('

have been included in the Sum Insured if the repairs are
executed at a workshop owned by Insured, the Company
c will pay the cost of materials and wages incurred for the
purpose of the repairs plus a reasonable percentage to
cover overhead charges.

No deduction shall be made for depreciation in respect of
-
D parts replaced except those with limited life but the value
of any salvage will be taken into account if the cost of
repairs as detailed herein above equals or exceeds the
y
....
actual value of the machinery insured immediately before
the occurrence of the damage the settlement shall be
E made on the basis provided for in (b) below.

b) ............ ········· ............ ········
v
............... ··············· ············· ..)
-"

F ··························· ················
··························· ················
... ························ ......... ·······
G If the sum insured is less than the amount required to be
insured as per Provision 1 hereinabove the Company will ~

pay only in such. proportion as the sum insured bears to •
the amount required to be insured: Every item is more than
one shall be subject to this condition separately.
H
SIKKA PAPERS LTD. v. NATIONAL INSURANCE C0.1099
LTD. & ORS. [R.M. LODHA, J.)
..................... ..... ... ....... ...... . .......................• A

11. It has been argued on behalf of the complainant that
the insured must be reimbursed for the entire repairs costs
incurred by it in repair of diesel generating set since as per
. insurance policy, the insurer was responsible for the payment
B
of any sort of loss or reinstatement or repair and indemnify th~
insured in all respects. Relying upon the policy, it was
• submitted that it was the duty of the insurer to pay the necessary
expenses incurred to restore the damaged generating set to
its former state and the cost of dismantling and erection etc.
We find it difficult to accept the aforestated contention since it c
overlooks the General Exceptions incorporated in the policy that
provide that the insurer shall not be liable under the policy in
respect of deterioration of or wearing away or wearing out of
· machine caused by or naturally resulting from normal use or
exposure. In other words, the policy does not provide for D
protection against wear and tear that the machinery had
undergone and that the insured may have chosen to replace .
. The provision of 'sum insured' viz., the cost of replacement of
insured property by new property of the same kind and same
capacity is subject to the exception that repair or replacement E
shall not extend to the machinery or parts which have undergone
normal wear and tear due to its use and exposure. In terms of
•
the Machinery Insurance Policy taken by the insured, the insurer
is required to reimburse the insured to the extent of moneys
spent on repairs or replacement of the machinery to the kind F
of position that it was before the incident of damage.

12. In this backdrop, before we tum to the surveyor's report
dated May 15, 2000, we deem it proper to notice Section 64
UM(2) of the Insurance Act, 1938 that reads thus:
G
'
"64-UM (2)- 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 H
1100 SUPREME COURT REPORTS (2009] 9 S.C.R:

A 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
B 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
c assessed by the approved surveyor or loss assessor."

13. Recently, in New India Assurance Company Umited
v. Pradeep Kumar 2 , we had occasion to consider the
aforesaid provision and we held thus :
[) . '
"The object of the aforesaid provision is that where
the claim in respect of loss required to be paid by the
insurer is Rs.20,000/- or more, the loss must first be
assessed by an approved surveyor ( or loss assessor)
before it is admitted for payment or settlement by the
E
insurer. Proviso appended thereto, however, makes it clear
that insurer may settle the claim for the loss suffered by
insured at any a_mount or pay to the insured any amount
different from the amount assessed by the approved
surveyor (or loss assessor). In other words although the
F assessment of loss by the approved surveyor is a pre-
requisite for payment or settlement of claim of twenty
thousand rupees or more by insurer, but 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
G approved surveyor's report may be basis or foundation for
settlement of a claim by the insurer in respect of the loss •
suffered by the insured but surely such report is neither
binding upon the insurer nor insured."

H 2. 2009 (6) SCALE 253.
SIKKA PAPERS LTD. v. NATIONAL INSURANCE C0.1101
LTD. & ORS. [R.M. LODHA, J.]
·- A

~-.
' 14. The last surveyor in his report dated May 15, 2000
assessed the loss thus :

I) Working of Claim under Invoice No. 601184989 dated
·: 13.01.2000 of Mis.COSS :
We have allowed Labour Charges at Rs.80,000. B
Rs.80,000
Octroi Charge Rs.16,200
... ~ Freight Charges Rs.16,000
Transit Insurance Rs. 3,500
c
Rs.1, 15,700
Works Contract Tax 4% 4,628

-- Rs.1,20,328
D
... II) Working of Claim. under Invoice No.601184990 dated
..,, 311112000 of Mis. COSS:
i

1) "Kit-Crank Shaft" - Part No.AR 388113400K9-1 No.
Rs.13,80,895.52

·-
-·'
(vide Page 1, Sr.No.1 of Subject invoice)
Add 4% Work contract Tax Rs. 55,235.83
E

"' y
_Rs.14,36, 131.35
"'
The subjects Kit -Crank Sha~ is comprising of set Main F
Bearings & connecting Rod Bearings, the reasonable total
value for them is taken at Rs.1,35, 131.35.

Less Reasonable cost for set of main bearings &
Connecting rod bearings Rs. 1,39, 131.35 G
~

..... -------
Rs.13,01,000/-

Thus , bifurcation of costs are as under:- ·
..,... Cost of Crank Shaft Rs.13,01,000 H
1102 SUPREME COURT REPORTS [2009] 9 S.C.R.

-'
A Cost of set of main bearings & > '
Connecting rod bearings Rs. 1,35,131
••'
--------~~-
Rs.14,36, 131.35

B A) Assessment for Crank Shaft:
Cost for Crank Shaft Rs.13,01,000
Less additional policy excess for the
Crank shaft as per endorsement .. 20% Rs. 2,60,200 +., ,...,,
'-
~

c Net Loss Rs.10,40,800

B) Assessment for set of main bearings
& connecting rod bearings:- .,,
Cost for the set Rs. 1,35, 131.35
Less reasonable depreciation .. 50% Rs. 67,565.67
D
}"
Net Loss after depreciation Rs. 67,565.67 ,,..,,

2) Gears - 2 Nos. @ Rs.2587.69 -
Part No.3177095 (Vide Page 6,Sr.
E _,
No.91 of subject Invoice) Rs. 7,763.07 '
Add 4% work contract Tax Rs. 310.52
Rs. 8,073.59
~
Less reasonable depreciation 50% Rs. 4,036. 79 .,.
Net' Loss after depreciation Rs. 4,036.80
F
Thus, net loss after depreciation for (1) & (2)=
A + B + Gears above for items under
i
Invoice No.60/184990 Rs.11, 12,402.47 I-
·i

G Ill) Working of claim under Invoice No.
601184991 Dt. 3110112000 of Mis.COSS
!-
+--
Core Coolers (Oil collers) - 4 Nos. @
54,205.42 - Part No.3627295 Rs. 2, 16,821.68
H Add 4% Work contract Tax Rs. 8,672.87 ~

~
SIKKA PAPERS LTD. v. NATIONAL INSURANCE C0.1103
LTD. & ORS. [R.M. LODHA, J.]
-ff'
~
4, This is not a Limited life item and hence A
there is no any depreciation applicable
.. for it under the policy
Net Loss Rs. 2,25,494.55

Thus net loss under all the three Invoice B

.. ,._
as per claim bill works out to I) + 11)
+Ill) Rs.14,58,225.02
Less reasonable Salvage at scrap value Rs. 13,225.02

Less under-insurance -25.71% vide page
Rs.14,45,000.00
c
No.13 Rs. 3,71,509 .50
I Rs.10,73,490.50
Say Rs.10,73,491
Less Policy Excess Rs. 26,000
Net assessed Loss Rs.10,47,491/-"
D
1'
..., 15. The parts which had suffered due to wear and tear-on
account of constant use, although, replaced could not form part
of claim for reimbursement under the terms of policy and,
therefore, surveyor in its report dated May 15, 2000 cannot be
said to have wrongly rejected such claim. It is true that E
surveyor's report is not the last word but then there must be
legitimate reasons for departing from such report. In our view,
)(
the complainant has failed to show any reason justifying
rejection of surveyor's report dated May 15, 2000.
F
re : question (two)

16. In the Dictionary of Insurance (Second Edn.) by C.
Bennett, "under-insurance" is explained thus:

,, "under-insurance occurs when the amount of G
.... insurance is less than the full value of property
insured and means that the insured pays a smaller
premium than that required as the rate is fixed on
the basis of full values being insured. It leads to
-. partial loss claims being scaled down by average H
1104 SUPREME COURT REPORTS [2009] 9 S.C.R.

....
A (qv.)." ~

The expression "average" is explained thus: ~~

"In non-marine property insurance if a sum insured
is 'subject to average', and the sum insured is less
B than the value at risk at the time of loss, the claim
will be reduced in the same proportion. The
measure combats under-insurance."

17. As per the invoice, the diesel generating set and the
~ ...
c alternator was purchased by the complainant in the year 1997
for Rs.45,25,000/-. The complainant, however, got the insurance
cover valuing diesel generating set (Rs~26,00,000/-) and
·'
alternator (Rs.9,00,000/-), in all for Rs.35,00,000/-. Apparently,
therefore, there is an element of under-insurance. There is merit
D in the contention of learned counsel for the insurer that the value
of the item is always declared by the insured at the time of t
issuance of the insurance policy while the element of under- "":'
insurance is calculated by the insurer at the time of assessment
of loss. Although on behalf of the complainant, it was contended
that under-insurance, if any, must be calculated at the.time of
E
issuance of policy and could n_ot be deducted at the time of
assessment of the loss but we find it difficult to accept the
same. The policy provides that if the sum insured is less than
)(
the amount required to be insured, the insurer will pay only in
,_
such proportion as the sum insured bears to the amount
F insured. In accordance with the said provision in the policy if ''
the surveyor applied the pro-rata formula and deducted 25. 71 %
from the loss so assessed i.e. Rs.3,71,509.50 from the sum
payable as under-insurance, such deduction cannot be faulted.

G 18. We are, thus, of the view that the National Commission
,..
did not commit any error· in accepting the Surveyor's report
.dated May 1S, 2000 as the assessment made there-under is "'
proper and in accordance with the provisions of the policy.

19. By way of footnote, we may observe that claim of
H "f'
SIKKA PAPERS LTD. v. NATIONAL INSURANCE C0.1105
LTD. & ORS. [R.M. LODHA, J.]

Rs.10,00,000/- made by the complainant for mental harassment A
is wholly misconceived and untenable. The complainant .is a
company and, therefore, claim for mental harassment Is not
legally permissible. It is only the natural person who can claim
damages for mental harassment and not the corporate entity.
B
20. In all, we find th.at the consideration of the matter by
the National Commission does not suffer from any legal flaw
justifying interference by us.

21. Appeal is, accordingly, dismissed with no order as to
costs. C

R.P. Appeal dismissed.

)