M/S Oswal Plastic Industries vs Manager Legal Deptt N.A.I.C.O Ltd

M/s Oswal Plastic Industries ...Appellant(S)

Versus

Manager, Legal Deptt N.A.I.C.O. Ltd. ...Respondent(S)

JUDGMENT

M. R. Shah, J.

1. Feeling aggrieved and dissatisfied with the impugned

judgment and order dated 20.02.2019, passed by the

National Consumer Disputes Redressal Commission, New

Delhi (hereinafter referred to as the NCDRC) in First

Appeal No. 207/2015, by which the NCDRC has set aside

the order passed by the State Consumer Disputes

Redressal Commission, Punjab (hereinafter referred to as

the State Commission) and has modified the same to the

Signature Not Verified extent that the insurance company shall be liable to pay Digitally signed by R Natarajan Date: 2023.01.13 16:29:12 IST Reason: 1 only Rs. 12,60,000/­ instead of Rs. 29,17,500/­, the

original complainant has preferred the present appeal.

2. That the appellant herein obtained Standard Fire and

Special Perils Policy with effect from 02.07.2009. The sum

insured was Rs. 2.50 crores. According to the appellant,

the policy was on reinstatement value. The policy was

enhanced to Rs. 4.50 crores. That during the validity

period of policy i.e., on 17.10.2009 fire broke out in the

factory premises resulting into loss of material, stock, and

machinery of the value of Rs. 76,64,000/­. The surveyor

appointed by the insurance company observed/assessed

as such the loss on reinstatement value basis at Rs.

29,17,500/­ and on depreciated value at Rs. 12,60,000/­.

The insurance company despite the reports of the surveyor

and investigator repudiated the claim. The appellant

herein – original complainant filed the complaint before the

State Commission, inter­alia, seeking a claim of Rs.

76,64,000/­ together with interest. It was the case on

behalf of the complainant that the complainant had

purchased the machinery to replace the damaged

machinery at the cost of Rs. 1,34,07,836/­. The State

2 Commission vide order dated 10.11.2014 relying upon the

surveyor report and the loss assessed by the surveyor on

the basis of the reinstatement value awarded a sum of Rs.

29,17,500/­ together with 9% interest from the date of

repudiation letter dated 28.10.2010. The State

Commission also awarded Rs. 1 lakh as compensation and

Rs. 11,000/­ as litigation expenses. At this stage, it is

required to be noted that though the original complaint

was for Rs. 76,64,000/­, however, in view of surveyor

report and on reinstatement value determined at Rs.

29,17,500/­, the State Commission awarded Rs.

29,17,500/­ being reinstatement value. The order passed

by the State Commission was the subject matter of appeal

by the insurance company before the NCDRC. By the

impugned judgment and order, the NCDRC has allowed

the said appeal and has modified the order passed by the

State Commission awarding Rs. 12,60,000/­ along with

interest @ 7% from Rs. 29,17,500/­ by observing that the

complainant shall be entitled to the depreciated value and

not the reinstatement value. The NCDRC also set aside the

award of compensation of Rs. 1 lakh.

3 2.1 Feeling aggrieved and dissatisfied with the impugned

judgment and order passed by the NCDRC awarding Rs.

12,60,000/­ only instead of Rs. 29,17,500/­ i.e., awarding

depreciated value and not the reinstatement value, the

original complainant has preferred the present appeal.

3. Shri Jay Savla, learned Senior Advocate appearing on

behalf of the appellant herein – original complainant has

vehemently submitted that the impugned judgment and

order passed by the NCDRC awarding depreciated value

and not the reinstatement value is just contrary to Clause

9 of Section 2 of the insurance policy.

3.1 It is submitted that as such the surveyor assessed the loss

on reinstatement basis at Rs. 29,17,500/­. It is submitted

that therefore, as such the repudiation was rightly held to

be improper.

3.2 It is submitted that as such the complainant had

purchased the new machinery in view of five machines

being gutted in fire and therefore, the State Commission

4 was absolutely justified in awarding Rs. 29,17,500/­ being

reinstatement value on the basis of the surveyor report.

3.3 Relying upon Clause 9 of Section 2 of the policy, it is

vehemently submitted that the complainant shall be

entitled to the reinstatement value. It is submitted that the

NCDRC has wrongly reduced the claim to Rs. 12,60,000/­

by mis­interpreting Clause 9 of Section 2 of the policy. It is

submitted that as such the said clause 9 shall not have

any relevance. It is submitted that it only gives option to

the insurance company to reinstate or replace the

damaged/destroyed property. It is submitted that as the

company has not reinstated the property, the clause itself

was not applicable.

3.4 It is submitted that as observed and held by this Court in

the case of Canara Bank Vs. United India Insurance

Company Limited and Ors.; 2020 (3) SCC 455,

provisions of the policy must be read and interpreted in

such a manner so as to give effect to the reasonable

expectations of all the parties. It is submitted that it is

5 further held that coverage provisions should be interpreted

broadly and if there is any ambiguity, the same should be

resolved in favour of the insured.

3.5 Making the above submissions and relying upon the above

decision, it is prayed to allow the present appeal by

quashing and setting aside the impugned judgment and

order passed by the NCDRC and to restore the order

passed by the State Commission.

4. Present appeal is vehemently opposed by the learned

counsel appearing on behalf of the insurance company.

4.1 It is submitted that in the facts and circumstances of the

case and on true interpretation of Clause 9 of Section 2 of

the insurance policy, the NCDRC has not committed any

error in awarding the depreciated value and not awarding

the reinstatement value as claimed by the complainant.

4.2 It is submitted that as rightly observed by the NCDRC that

the goods insured were to be replaced on "as is basis" i.e.,

if the machinery is an old machinery, it is to be replaced

6 by an old machinery and therefore, as the actual

reinstatement has not been done by the complainant or by

the insurance company and the money is to be paid to the

insured on reinstatement basis, one has to find out the

value of the machinery on replacement basis i.e., the value

of the old machinery, which can be calculated only

through deducting the value of the depreciation from the

current value of the machinery.

4.3 Making the above submissions, it is prayed to dismiss the

present appeal.

5. The short question which is posed for consideration of this

Court is whether in the facts and circumstances of the

case and on true interpretation of relevant clause of

insurance policy, in case of damage of the plant and

machinery due to fire, the complainant shall be entitled to

the reinstatement value or the depreciated value?

5.1 While dealing with the aforesaid issue, relevant clause 9 of

Section 2 of the policy is required to be considered, which

reads as under: ­

7 "9. If the Company at its option, reinstate or replace the property damaged or destroyed, or any part thereof, instead of paying the amount of the loss or damage, or join with any other Company or Insurer(s) in so doing the Company shall not be bound to reinstate exactly or completely but only as circumstances permit and in reasonably sufficient manner, and in no case shall the Company be bound to expend more in reinstatement than it would have cost to reinstate such property as it was at the time of the occurrence of such loss or damage nor more than the sum insured by the Company thereon. If the Company so elect to reinstate or replace any property the insured shall at his own expense furnish the Company with such plans, specifications, measurements, quantities and such other particulars as the Company may require, and no acts done or caused to be done, by the Company with a view to reinstatement or replacement shall be deemed an election by the Company to reinstate or replace.

If in any case the Company shall be unable to reinstate or repair the property hereby insured, because of any municipal or other regulations in force affecting the alignment of streets or the construction of buildings or otherwise, the Company shall, in every such case, only be liable to pay such sum as would be requisite to reinstate or repair such property if the same could lawfully be reinstated to its former condition."

5.2 On true interpretation and on fair reading of above clause,

firstly the option is given to the insurance company to

reinstate or replace property damaged or destroyed instead

of paying the amount of loss or damage. If the insurance

company exercises the option of reinstatement or replaces

8 the property damaged, the company shall not be bound to

reinstate completely or partly but only as circumstances

permit and in reasonably sufficient manner, and in no

case shall the company be bound to expend more in

reinstatement than it would have cost to reinstate such

property as it was at the time of the occurrence of such

loss or damage not more than the sum insured by the

company thereon. However, in any case the company is

unable to reinstate or repair the property insured, because

of any municipal or other regulations in force affecting the

alignment of streets or the construction of buildings or

OTHERWISE, in that case, the company shall be liable to

pay such sum as would be requisite to reinstate or repair

such property if the same could lawfully be reinstated to

its former condition. Present is the case dealing with

second eventuality, namely, the company was unable to

reinstate or repair the property. The surveyor in its report

determined the loss on the basis of reinstatement value at

Rs. 29,17,500/­ and on the basis of depreciated value at

Rs. 12,60,000/­. Though, the complainant claimed Rs.

76,64,000/­ being the value of the new machinery,

9 however, as rightly observed by the State Commission as

well as the NCDRC, the complainant shall not be entitled

to the said amount. However, at the same time considering

second part of Clause 9 reproduced hereinabove, in case

company is unable to reinstate or repair the property

insured, the insurance company shall be liable to pay such

sum as would be requisite to reinstate or repair such

property if the same could lawfully be reinstated to its

former condition. For the aforesaid purpose, the report of

surveyor wound be relevant evidence to consider the sum

required to reinstate or repair. Therefore, as per second

part of Clause 9 of Section 2 of the policy, the complainant

shall be entitled to the reinstatement value and not the

depreciated value. The NCDRC has mis­interpreted and

mis­read the Clause 9. The NCDRC has seriously erred in

observing and holding that the insurance company shall

be liable to pay the depreciated value only and not the

reinstatement value. The State Commission was absolutely

justified in awarding the reinstatement value. The

impugned judgment and order passed by the NCDRC

10 awarding the depreciated value and not the reinstatement

value is unsustainable for the reasons stated hereinabove.

6. In view of the above and for the reasons stated above, the

present appeal succeeds. The impugned judgment and

order passed by the NCDRC is hereby quashed and set

aside. The order passed by the State Commission is hereby

restored. The complainant shall be entitled to Rs.

29,17,500/­ being the reinstatement value with interest @

7% from the date of order of the State Commission i.e.,

10.11.2014 till the actual payment. The present appeal is

accordingly allowed. No costs.

…………………………………J. (M. R. SHAH)

…………………………………J. (C.T. RAVIKUMAR) NEW DELHI, JANUARY 13, 2023.

11