Narsingh Ispat Ltd vs Oriental Insurance Co Ltd

Narsingh Ispat Ltd. …..Appellant

Versus

Oriental Insurance Company Ltd. & Anr. …..Respondents

JUDGMENT

Abhay S. Oka, J.

1. This is an appeal under Section 23 of the Consumer Protection

Act, 1986. The appellant has challenged the judgment and order

dated 18th October 2016 of the National Consumer Disputes

Redressal Commission (for short, ‘the Commission’). By the said

Judgment, the Commission dismissed the Consumer Complaint

No.165 of 2012 filed by the appellant.

2. The appellant had taken Standard Fire and Special Perils

Policy from the respondent­insurance company for the period from

28th June 2009 to 27th June 2010. The policy was in respect of

Engineering Workshop and Plant at Village Khunti District Saraikela, Signature Not Verified Digitally signed by Jayant Kumar Arora Date: 2022.05.02

Jharkhand. The total sum assured was Rs.26,00,00,000/­ under 17:25:58 IST Reason:

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different headings. The appellant paid a premium of Rs.2,20,462/­.

According to the appellant, the policy covered the loss caused to the

property of the appellant on account of fire, lightning, explosion, riots,

strike etc.

3. The appellant lodged a claim on the basis of the said policy,

based on the incident of 23rd March 2010. As per the claim made by

the appellant, after midnight of 22nd March 2010, about 50­60 anti­

social people with arms and ammunition entered the factory premises

of the appellant at Village Khunti, District Saraikela in Jharkhand.

According to the appellant’s case, the mob demanded money and jobs

for local people. According to the case of the appellant, substantial

damage was caused to its factory, machinery and other equipment.

According to the appellant, the object of the incident was to terrorise

the management of the appellant and workers in the factory by

forcing them to pay a ransom to the miscreants. A First Information

Report was also registered at the instance of the appellant based on

the said incident. The appellant lodged a regular claim with the

respondent company on the basis of the policy. According to the

appellant’s case, a surveyor appointed by the respondent­insurance

company carried out the survey and assessed the loss at

Rs.89,43,422/­. However, by addressing a letter on 21st December

2010, the appellant claimed that the respondent­insurance company

was liable to make an interim payment of Rs.1.5 crores.

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4. By the letter dated 23rd December 2010, the respondent­

insurance company repudiated the appellant’s claim by placing

reliance on the Exclusion Clause in the policy regarding loss or

damage caused by the acts of terrorism. Therefore, the appellant filed

the complaint mentioned above before the Commission complaining

about deficiency in the service offered by the respondent­insurance

company. In the complaint, a prayer was made for the grant of

monetary relief of Rs.1,51,35,780/­ on account of the loss suffered by

the appellant. A separate amount of Rs.25,00,000/­ was claimed on

account of agony and harassment caused to the appellant due to

illegal repudiation of the policy by the respondent­insurance

company. The appellant claimed interest at the rate of 18% p.a on

the amounts mentioned above and cost amount of Rs.10,00,000/­.

5. By the impugned judgment and order, the Commission held

that because of the “Terrorism Damage Exclusion Warranty” (for

short, ‘the Exclusion Clause’), the respondent company was justified

in repudiating the claim of the appellant based on the policy of

insurance. It was held that the damage caused to the factory and

equipment of the appellant was due to an act of terrorism.

6. For the sake of convenience, we are reproducing the said

Exclusion Clause, which reads thus:

“Terrorism Damage Exclusion Warranty :

Notwithstanding any provision to the contrary within this

3 insurance it is agreed that this insurance excludes loss, damage cost or expense of whatsoever nature directly or indirectly caused by, resulting from or in connection with any act of terrorism regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

For the purpose of this endorsement an act of terrorism means an act, including but not limited to the use of force or violence and/or the threat thereof, of any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s), committed for political, religious, ideological or similar purpose including the intention to influence any government and/or to put the public, or any section of the public in fear.

The warranty also excludes loss, damage, cost or expenses of whatsoever nature directly or indirectly caused by, resulting from or in connection with any action taken in controlling, preventing, suppressing or in any way relating to action taken in respect of any act of terrorism.” (emphasis added)

7. Shri Santosh Kumar, the learned counsel appearing for the

appellant, submitted that the police had registered a First

Information Report against unknown persons. After completing the

investigation, the police filed a closure report recording that the

accused could not be traced. He submitted that though the

respondent­insurance company relied upon the Investigation Report

in the letter of repudiation, neither a copy thereof was supplied to the

appellant nor was it produced before the Commission. He pointed

out that after this Court issued a specific direction, a copy of the

4 Investigation Report was filed on record by the respondent, which

records that it was not conclusively proved that Maoist activists or

any such activists made the attack. He submitted that on a conjoint

reading of the First Information Report, closure Report filed by the

police and Investigation Report submitted by the Investigator

appointed by the respondent­insurance company, it is apparent that

it was not a case of a terrorist act within the meaning of the

Exclusion Clause. The learned counsel tried to rely upon the concept

of ‘terrorism’ under various enactments such as the Unlawful

Activities (Prevention) Act, 1967 and the National Investigation

Agency Act, 2006. He submitted that the burden was on the

insurance company to prove that the Exclusion Clause was attracted

in the facts of the case. He submitted that if there was any ambiguity

about whether the Exclusion Clause was attracted, the insurance

contract will have to be construed in favour of the appellant­insurer.

In support of this proposition, he relied upon a decision of this Court

in the case of National Insurance Co. Ltd. v. Ishar Das Madan Lal1.

8. The learned counsel appearing for the appellant submitted that

even according to the report of the surveyor appointed by the

respondent company, the damage caused to the machinery and

equipment has been quantified at approximately Rs.89,00,000/­. He

submitted that by setting aside the impugned judgment and order, 1 (2007) 4 SCC 105

5 the respondent company may be directed to pay a sum of

Rs.89,00,000/­ to the appellant along with interest, and the

Commission may be directed to consider the case of the appellant for

grant of additional amount based on the evidence on record.

9. Shri Santosh Paul, the learned senior counsel appearing for

the respondent­insurance company, invited our attention to the

allegations made in the First Information Report regarding the

incident of 23rd March 2010. He submitted that the fact that 120

people entered the factory premises of the appellant along with

weapons and carried out large scale destruction shows that it was an

act of terrorism to terrorise the workers of the appellant and its

management. He submitted that the police have applied Sections

147, 148, 149, 323, 307, 379, 427, 435 and 447 of the Indian Penal

Code read with Section 17 of the Criminal Law (Amendment) Act,

1908 (for short, ‘the Amendment Act of 1908’). He submitted that it

was a case of unlawful association as defined in Section 15 of the

Amendment Act of 1908. He submitted that under Section 17

thereof, the unlawful association is made an offence. He submitted

that the very fact that the provisions of the Amendment Act of 1908

have been applied shows that the loss caused to the appellant was

due to a terrorist act. He submitted that the burden was on the

appellant to show that liability arises under the said policy. He

6 submitted that the appellant failed to discharge the burden. He

would, therefore, submit that no interference is called for with the

finding of the Commission.

10. We have given a careful consideration to the submissions of

the rival parties. In its letter dated 23 rd March 2010 addressed to the

respondent, the version of the appellant of the incident which

occurred around 12:30 a.m. on 23 rd March 2010 has been stated. The

relevant part of the letter reads thus:

“With reference to the above and continuation to verbal information given to you over telephone, our submissions are as follows :

Please note that in last midnight 12.30 A.M. around 50­ 60 antisocial peoples with arm ammunitions entered into factory premises through back side door of the factory premises.

Some of them marched towards DG Room and got fired one DG and tried to destroy it.

Some of them moved towards control room of blast furnace and damaged control system of Blast Furnace available in control room and beaten the men working there.

They have also damaged Security room, office room and computers available there.

They have taken away around 15 Nos. of mobile phone, walky talky sets and cash found in drawer of factory office premises, materials particularly relating to PIG Irons.

Company people informed immediately to the nearest police station over telephone.

7 Since blast furnace need continuous working and once it is cooled and to get it reheated it would have been cost to the Company for Rs.30­45 lakhs so that Co­operative Housing Society Limited people took immediate steps for damaged control in main blast furnace.

You are requested to kindly look into the matter very seriously and appoint Surveyors who can visit the site at the earliest possible manner.”

In the subsequent letter dated 15 th April 2010, the appellant stated

that the purpose of the anti­social persons was to create terror so

that the appellant would be forced to pay a ransom. We have already

reproduced the Exclusion Clause, which defines the act of terrorism.

Given the definition, the actions can be termed as acts of terrorism

provided the same are committed for political, religious, ideological or

similar purposes. The words “similar purposes” will have to be

construed ejusdem generis.

11. In the present case, the repudiation of the policy made by the

respondent is based on the Preliminary Survey Report, Investigation

Report and the Final Survey Report. The Survey Reports cannot

throw any light on the question whether there was an act of

terrorism. The Survey Reports do not record any factual findings

regarding the incidents which caused the loss. Reliance was placed

on the Investigation Report in the letter of repudiation. A copy of the

said Report, placed on record along with I.A. No.38075 of 2022,

records a conclusion drawn by the Investigator appointed by the

8 respondent that it is not conclusively proved that the persons

involved in the incident belonged to Maoist or similar groups. The FIR

and Closure Report do not refer to acts of terrorism as defined under

Exclusion Clause. The Final Report (Closure Report) shows that the

police had registered a First Information Report against 105

miscreants who could not be traced.

12. In paragraph 8 in the case of Ishar Das Madan Lal1, this Court

held thus:

“8. However, there may be an express clause excluding the applicability of insurance cover. Wherever such an exclusionary clause is contained in a policy, it would be for the insurer to show that the case falls within the purview thereof. In a case of ambiguity, it is trite, the contract of insurance shall be construed in favour of the insured. [See United India Insurance Co. Ltd. v. Pushpalaya Printers (2004) 3 SCC 694, Peacock Plywood (P) Ltd. v. Oriental Insurance Co. Ltd. (2006) 12 SCC 673 and United India Insurance Co. Ltd. v. Kiran Combers & Spinners (2007) 1 SCC 368]” (emphasis added)

13. The respondent has not discharged the burden of bringing the

case within the four corners of the Exclusion Clause. When the policy

itself defines the acts of terrorism in the Exclusion Clause, the terms

of the policy being a concluded contract will govern the rights and

liabilities of the parties. Therefore, the parties cannot rely upon the

definitions of ‘terrorism’ in various penal statutes since the Exclusion

Clause contains an exhaustive definition of acts of terrorism.

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14. Thus, the Commission committed an error by applying the

Exclusion Clause. Moreover, the policy specifically covers the damage

to the insured’s property caused by violent means. We are

reproducing the relevant clause in that behalf :

“V. Riot Strike and Malicious Damage

Loss of or visible physical damage or destruction by external violent means directly caused to the property insured but excluding those caused by

a) total or partical (sic) cessation of work or the retardation or interruption or (sic) cessation or any process or operations or omissions of any kind.

b) Permanent or temporary dispossession resulting from confiscation, commandeering, requisition or destruction by order of the Government or any lawfully constituted Authority.

c) Permanent or temporary dispossession of any building or plant or unit of (sic) machinery resulting from the unlawful occupation by any person of such building or plant or unit or machinery or prevention of access to the same.

d) Burglary, housebreaking, theft, larceny or any such attempt or any omission of any kind of any person (whether or not such act is committed in the course of a disturbance of public peace) in any malicious act.

If the Company alleges that the loss/damage is not caused by any malicious act, the burden of proving the contrary shall be upon the insured.”

(emphasis added)

The policy covers explicitly a liability arising out of the damage to the

10 property of the insured due to riots or the use of violent means.

Hence, the decision to repudiate the policy cannot be sustained.

Under the insurance policy, there are different limits prescribed for

various acts covered by the policy. In the impugned Judgment, it is

noted that the parties had filed affidavits­in­lieu of evidence before

the Commission. An adjudication will have to be made on the

quantum of the amount payable to the appellant after appreciating

the evidence on record, including the valuation reports. However, the

valuer appointed by the respondent­company has valued the loss

caused to the appellant at approximately Rs.89,00,000/­. We,

therefore, propose to direct the respondent to deposit the said amount

with the Commission with liberty to the appellant to make an

application for withdrawal.

15. As there was no warrant for applying the Exclusion Clause, the

impugned judgment and order will have to be set aside, and by

restoring the complaint filed by the appellant, the same will have to

be ordered to be heard by the Commission afresh.

16. Accordingly, the impugned judgment and order is hereby set

aside. Consumer Complaint No.165 of 2012 filed by the appellant

before the Commission is restored to the file. After allowing parties to

lead further evidence, the Commission shall decide the complaint

filed by the appellant in accordance with law and in the light of what

11 is held in this judgment. The Commission is requested to pass an

appropriate final order on the remanded complaint within four

months from today. We make it clear that we have not expressed a

definitive opinion on the quantum of the amount payable to the

appellant under the policy of insurance, and the said issue is left

open for the decision of the Commission in accordance with law.

17. As observed earlier, the respondent shall deposit the sum of

Rs.89,00,000/­ in the Registry of the Commission within one month

from today and the same shall be deposited in the interest­bearing

account on auto renewal basis. At the same time, the appellant will

be at liberty to file an application for withdrawal of the amount before

the Commission pending complaint. If such an application is filed by

the appellant, the Commission may examine on its own merits and

decide the same in accordance with law.

18. Accordingly, the appeal is allowed in the above terms with no

order as to costs.

………………………………..J. [AJAY RASTOGI]

………………………………..J. [ABHAY S. OKA] New Delhi May 02, 2022.

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