Sangrur Sales Corporation vs United India Insurance Company Ltd.

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No 378 of 2020 (Arising out of SLP(C) No 1899 of 2020) (Arising out of SLP(C) D No 47437 of 2018)

Sangrur Sales Corporation .... Appellant(s)

Versus

United India Insurance Company Limited & Anr ....Respondent(s)

JUDGMENT

Dr Dhananjaya Y Chandrachud, J

1 Delay condoned.

2 Leave granted.

3 This appeal arises from a judgment and order of the National

Consumer Disputes Redressal Commission1 dated 7 March 2018.

4 The appellant obtained a “Standard Fire and Special Perils Insurance

Policy” from the first respondent to cover his shop situated at Gausala

Road, Sangrur. The shop was insured in the value of Rs 18,00,000 and Signature Not Verified Digitally signed by SANJAY KUMAR Date: 2020.01.21 17:19:31 IST the policy was valid from 21 June 2011 to 20 June 2012. On 29 March Reason:

2012, the showroom in which the appellant carried on the business of

1 NCDRC 2

sanitaryware collapsed as a result of the work of excavation which was

being carried on in an adjacent plot. A First Information Report was lodged

on 30 March 2012 at the Police Station, Sangrur and intimation of the loss

was given to the insurer. A surveyor was appointed. The claim was

repudiated by the insurer on 11 May 2012. This led to the institution of the

consumer complaint before the District Consumer Disputes Redressal

Forum2, Sangrur. The District Forum allowed the claim in the amount of

Rs 18,00,000, together with interest at nine per cent per annum from the

date of the institution of the complaint. The order of the District Forum was

upheld by the State Consumer Disputes Redressal Commission 3, Punjab

on 5 May 2016. However, in a revision filed by the insurer, the NCDRC

reversed the order awarding the claim.

5 Notice was issued in the present proceedings on 22 April 2019. The

office report indicates that the insurer has been served. There is no

appearance on its behalf.

6 The dispute between the parties turns on a construction of clause VIII

(e) of the policy of insurance. Before adverting to the exclusions, it is

necessary to extract the relevant part of the insurance policy, which reads

as follows:

“In consideration of the insured named in the Schedule hereto having paid to the United India Insurance Company Limited (hereinafter called the Company) the full premium mentioned in the said schedule, the company agrees, (subject to the conditions and exclusions contained herein or endorsed or otherwise expressed hereon) that if after payment of the premium the Property insured described in the said Schedule or any part of the such property to be destroyed or damaged

2 District Forum 3 SCDRC 3

by any of the perils specified hereunder during the period of insurance named in the said schedule or of any subsequent period in respect of which the Insured shall have paid and the Company shall have accepted the premium required for the renewal of the policy, the Company shall pay to the Insured the value of the Property at the time of the happening of its destruction or the amount of such damage or at its option reinstate or replace such property or any part thereof.”

7 Clause VIII is in the following terms:

“VIII. Subsidence and Landslide including Rock slide: Loss, destruction or damage directly caused by subsidence of part of the site on which the property stands or land slide/rock slide excluding:

a) the normal cracking, settlement or bedding down of new structures

b) the settlement or movement of made up ground

c) coastal or river erosion

d) defective design or workmanship or use of defective materials

e) demolition, construction, structural alterations or repair of any property or groundworks or excavations.”

8 Clause VIII brings within the purview of the insured perils a loss,

destruction or damage directly caused by subsidence of a part of the site

on which the property stands or a land slide/rock slide, but excludes, what

is stipulated in sub-clauses (a) to (e) thereafter. The exclusion in sub-

clause (a) refers to the normal cracking, settlement or bedding down of

new structures. The exclusion in clause (d) refers to defective design or

workmanship or use of defective materials. The crucial exclusion is the

one in sub-clause (e) which has weighed with the NCDRC. Clause (e)

relates to the demolition, construction or structural alterations or repair of

any property or groundworks or excavations.

4 9 In the present case, the appellant was not engaged in any work of

demolition, construction or structural alterations nor was it engaged in any

repair of its property. The excavation which was the cause of the loss, was

being carried on in a neighbouring plot and not by the appellant in his own

property. In the absence of a specific qualification indicating that the

exclusion will apply to an excavation being carried on by a third party, the

reasonable construction of sub-clause (e) of Clause VIII is that it should

apply only to a situation where the excavation is being carried on by the

insured himself in his own property. Significantly, the words “of any

property” qualify the words preceding them namely, “demolition,

construction, structural alterations or repair” and not the words that follow.

10 It is well-settled that in the event that the two constructions are

possible or in the event of an ambiguity, that construction which is

beneficial to the insured should be accepted consistent with the purpose

for which the policy was taken, namely to cover the risk on the happening

of a certain event. [See in this context, the decision of this Court in United

India Insurance Co Ltd v Pushpalaya Printers4.

11 The NCDRC, in reversing the concurrent views of the District Forum

and the SCDRC, held thus:

“On bare reading of the above, it is clear that as per the above noted condition, the loss caused to the insured property due to demolition, construction, structural alterations or repair of any property or ground works or excavations is excluded from the risk covered. On perusal of para 3(b) of the copy of complaint placed on record, it is evident that as per the stand taken by the complainant on 29.03.2012 the insured showroom had fallen accidentally as a result of subsidence and land sliding due to digging work being carried

4 (2004) 3 SCC 694 5

out by the neighbour in adjacent plot. It is also alleged in the said paragraph that a daily diary report no.54 dated 30.03.2012 regarding the incident was duly lodged with the P.S. Sangrur. From the aforesaid admission on the part of the complainant, it is evident that loss was caused to the insured because of collapse of the insured building as a result of excavation work being carried out in the adjacent plot resulting in subsidence and land sliding. Thus, in my view, in view of the above noted specific exclusion clause, the petitioner/ insurance company was justified in repudiating the insurance claim.”

12 The error of the NCDRC lies in reading the exclusion in regard to

excavations as being applicable in a situation such as the present where

the cause which resulted in the damage was a work of a third party which

was carrying on an excavation in independent premises. It is not in

dispute that no part of the excavation was attributable to any act or

omission on the part of the appellant. Hence, to read the exclusion, as

being attracted in the present case, would not be to a reasonable

construction of the policy of insurance.

13 For the above reasons, we allow the appeal and set aside the

impugned judgment and order of the NCDRC dated 7 March 2018. In

consequence, we restore the order of the District Forum dated 5 May

2016, as affirmed by the SCDRC. In the circumstances, there shall be no

order as to costs.

…………...…...….......………………........J. [Dr Dhananjaya Y Chandrachud]

…..…..…....…........……………….…........J. [Hrishikesh Roy] New Delhi;

January 17, 2020 6

ITEM NO.59 COURT NO.8 SECTION XVII-A

S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS

SPECIAL LEAVE PETITION (CIVIL) Diary No(s).47437/2018

(Arising out of impugned final judgment and order dated 07-03-2018 in RP No. 2399/2016 passed by the National Consumer Disputes Redressal Commission, New Delhi)

SANGRUR SALES CORPORATION Petitioner(s)

VERSUS

UNITED INDIA INSURANCE COMPANY LTD. & ANR. Respondent(s)

(WITH IA No. 61971/2019 - CONDONATION OF DELAY IN FILING, IA No. 61972/2019 - CONDONATION OF DELAY IN REFILING / CURING THE DEFECTS)

Date : 17-01-2020 This petition was called on for hearing today.

CORAM :

HON'BLE DR. JUSTICE D.Y. CHANDRACHUD HON'BLE MR. JUSTICE HRISHIKESH ROY

For Petitioner(s) Mr. Navneet Kumar, Adv.

Mr. Vikas Bhadana, Adv.

Mr. Mohit Singh, Adv.

Mr. Parijat Kishore, AOR

For Respondent(s) Mr. Raunak Jain, Adv. Mr. A. V. Rangam, AOR Mr. Buddy A. Ranganadhan, Adv.

UPON hearing the counsel the Court made the following O R D E R

Delay condoned.

Leave granted.

The appeal is allowed in terms of the signed reportable judgment.

Pending application, if any, stands disposed of.

(SANJAY KUMAR-I) (SAROJ KUMARI GAUR) AR-CUM-PS COURT MASTER

(Signed reportable judgment is placed on the file)