Vishnu Bhagwan Agrawal Propreitor & Anr. vs National Insurance Co. Ltd. through its Regional Director

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 4661 OF 2007

VISHNU BHAGWAN AGRAWAL & ANR. Appellant(s)

VERSUS

NATIONAL INSURANCE CO. LTD. Respondent(s)

J U D G M E N T

ROHINTON FALI NARIMAN, J.

The present appeal arises from the judgment of a Division

Bench of the Allahabad High Court dated 22.01.2004, upholding

the judgment of the learned Civil Judge dated 22.04.1997, by

which a learned Umpire's Award was set aside.

The facts of this case are that the appellant kept jute

stock in the premises of Haryana Oil Mills situated at Lucknow,

which was mortgaged in favour of the Bank of Baroda. The Signature Not Verified

original Digitally signed by period for which this stock was insured was from SAPNA BISHT Date: 2017.11.03 16:21:24 TLT Reason: 13.10.1984 to 13.10.1985. It is not in dispute that as on

27.10.1984, the amount for which the jute was insured was raised 2

from Rs.10 lakhs to Rs.20 lakhs. The entire stock pledged to the

Bank was insured. By a letter dated 01.07.1985, it appears that

the appellant purchased more stock of jute and asked for an

increase in the value of the insurance policy limited to

Rs.25 lakhs and odd. This, according to the Insurance Company,

was not accepted and is one bone of contention between the

parties. Another bone of contention between the parties is

whether the insured stock should be valued as on the date of the

fire or as on the date of purchase.

The appellant before us produced evidence in the form of

purchase receipts of the value of stock of jute which amounted

to Rs.703.21/- per quintal. However, this was not accepted in

the survey that was done at the behest of the Insurance Company.

By their report dated 07.10.1985, the Surveyors valued stock

@ Rs.404/- per quintal on the basis that no authentic rate

quotations were available in the Lucknow/Kanpur jute market. The

Surveyors, therefore, adopted the spot rate quoted in the

Calcutta market for W-5 quality jute, which was adjusted to the

qualities the insured had in stock, (which was W-4 and TD 5

quality jute), and after adding expenses incurred, an average

rate of Rs.404/- per quintal for both qualities was worked out.

The ultimate amount, therefore, that was offered by the

Insurance Company, based on the Surveyor's report, came to a sum

of Rs.12,30,039.41np. Since this was not accepted by the

appellant, arbitration between the appellant and the respondent

began. Mr. P.B. Agrawal, one learned Arbitrator, found in favour 3

of the appellant and awarded a sum of Rs.23,55,132.71p., with

interest @ 10 % per annum from 10th March, 1986, up to the date

of the Award and @ 6 % per annum from the date of the Award to

the date of payment. Mr. P.P. Malhotra, another learned

Arbitrator, came to the conclusion that the limit of the fire

insurance policy itself was Rs.20 Lakhs and could not be

exceeded and that the loss suffered by the claimant, as per the

market value prevailing on the date of the fire, came to

Rs.12,30,039.41np as per the Surveyor's report. In view of this

divergence of opinion between the arbitrators, the matter was

referred to an Umpire, namely Mr. S.C. Maheshwari, learned

Senior Advocate. After considering the facts of the case, the

learned Umpire concluded as follows:

“It is thus clear that the Insurance Company had accepted and agreed to insured's letter dated 1.7.85 and the property covered under the policy in question stood increased from Rs.20 lakhs to Rs.25, 45, 121.70 with effect from 1.7.85 to 13.10.85 and simply because an endorsement letter was not issued by the company before the date of happening, it would not mean that the Insurance Company can go back from its commitment. As discussed earlier, the first increment in the policy from Rs.10 lakhs to Rs.20 lakhs was though effected from 27.10.84 but the endorsement letter was issued by the company as late as 11.2.85 and had there been any happening in between 27.10.84 to 11.2.85, the company could not have taken the plea that the original policy was only for Rs.10 lakhs and the same was never increased. Having once given the implied consent, the Insurance Company is now estopped from pleading that the sum insured was only Rs.20 lakhs and not Rs.25,45,121.70 as claimed by the claimant.

9. Keeping in mind the evidence led by the parties as well as the facts and circumstances attending to the present case, I am of the firm opinion that as on 1st July 1985, the sum insured of the policy stood increased to Rs.25,45,121.70 np (Rs.23, 13, 747 plus 10 per cent) and the basis of loss settlement also stood amended to the cost price plus 10 per cent instead of 4

the market price.

10. There is no dispute about the fact that the quantity of raw jute involved in the fire was 3122.72 quintals and the cost price of the same was Rs.703.21 per quintal. Both the figures have also been confirmed by the surveyor appointed by opposite party No.1. On this basis the cost price works out to Rs.21,95, 927.93 and since the basis of the loss settlement is cost price plus 10 per cent, the amount works out to Rs.24, 15, 520.72.”

The learned Civil Judge, by his judgment dated 22.04.1997,

found that the learned Umpire had misconducted himself on two

counts; firstly, the fact that the letter dated 01.07.1985

which was sent by the appellant to the Insurance Company, and

no response thereto by the Insurance Company would be taken to

mean that the proposal was accepted. According to the learned

District Judge, there can be no acceptance by implication or by

conduct, and therefore, this part of the Umpire's award was set

aside. Further, it was also held that the value of the goods

should be at the time of the fire and since this is so, the

purchase price of the said goods cannot be looked at.

Therefore, both the conclusions of the learned Umpire were set

aside on the ground that the Umpire misconducted himself, and

the Umpire was directed to file his reconsidered award in light

of the judgment of the learned District Judge within four

months. An appeal from the aforesaid judgment was unsuccessful.

The High Court basically reiterated the same conclusion as the

learned District Judge and found the learned Umpire's Award to

be perverse.

5

The learned Senior Advocate appearing on behalf of the

appellant has urged before us that the Umpire's award is

certainly a possible view that could be taken on the facts of

the case. The learned District Judge, as well as the High

Court, have exceeded their jurisdiction in treating the

Umpire's award as a first appeal. Equally, according to the

learned counsel, the Umpire having taken Rs.703.21 as a figure

per quintal of jute, did so on the basis of evidence produced

before him and, as the fire occurred within an extremely short

time from the date of purchase, the purchase price would

certainly reflect the market value of the said jute on the date

of the fire. Equally, he placed the Surveyor's report before us

and stated that instead of arriving at a figure based on the

purchase price, the Surveyor was extremely arbitrary in going

to the spot rate for different quality jute, in a completely

different market; arriving at a much lower figure; and,

therefore, the Umpire's award was not merely a possible view,

it was the correct view on the facts of the case. Both the

District Judge and the High Court were incorrect in holding

that the Umpire had misconducted himself and that his award is

beyond jurisdiction.

In reply, Shri Vishnu Mehra, appearing on behalf of the

Insurance Company, has sought to place the judgments of the

District Judge as well as the High Court before us, and has

stated that it is obvious that the Umpire has misconducted

himself on both the counts. He relied upon the judgment of 6

this Court in Polymat India (P)Ltd. & Anr. vs. National

Insurance Co. Ltd. & Ors.,(2005) 9 SCC 174, for the

proposition that when the insurance policy is written, it can

be amended only in writing and not by conduct of the parties,

and that, therefore, the arbitrator's view was not a possible

view in law on the facts of the case.

We have heard the learned counsel for the parties.

In our view, the learned Umpire took a possible view on the

facts of the case having analysed the evidence before him and

having arrived at the conclusion that the insurance policy was

raised, given the conduct of the Insurance Company, not only

in not replying to the letter dated 01.07.1985 but also in

adjusting the sum of additional premium. It is clear that

though the insurance policy may have to be amended in the

manner known to the law and that too in writing between the

parties, yet estoppel by conduct is a ground the Umpire was

well within his legal ken to hold. Further, in the absence of

anything to rebut the evidence produced on behalf of the

appellant that the purchase price of the jute would reflect

the market value as on the date of the fire, equally the

umpire was well within his legal bounds in arriving at a

conclusion, on facts, that the sum of Rs.703.23/- per quintal

would reflect the market value of the jute stock as on the

date of the fire.

7

Shri Mehra, learned counsel for the Insurance Company,

cited a judgment Polymat India (P) Ltd. (supra) in reply and

relied on paragraph 22, in particular, that when the terms of

contract have been reduced to writing it cannot be changed

without the mutual written agreement of both the parties. On

the facts of that case, it was found in paragraph 14 that

where three amendments to the policy were suggested by the

petitioner, the Insurance Company by its reply agreed to only

one. This being the case, since the other two amendments were

not, in fact, agreed to by the Insurance Company, the Court

held that where the terms of a contract are in writing they

cannot be changed without mutual agreement of parties. It is

in this context that the Court held that mutuality is

necessary to effect changes in an insurance policy. We have

found on the facts of the present case that the Insurance

Company would be estopped by conduct because of encashing and

adjusting the enhanced insurance premium, which would lead to

the limit being raised to over Rs.25 lakhs. We are, therefore,

of the view that this judgment does not advance the

respondent's case any further.

It has been settled by a catena of judgments under the

Arbitration Act, 1940, that an arbitration award is not to be

lightly interfered with. So far as the grounds for challenge

are concerned, no legal error apparent on the face of the

award or misconduct in the sense of legal misconduct, i.e.

that material evidence that is vital has been ignored, is made 8

out on the facts of the present case. The arbitrator's

findings can be said to be a possible one on the facts of the

case. We find that none of these findings are, therefore,

impeachable and that, therefore, the impugned judgment

deserves to be set aside. The Umpire's award is thus

resuscitated by us, and payments that have to be made under

the Award shall be made by the Insurance Company within a

period of three months from the date of this judgment.

Mr. Manoj Swarup, learned counsel for the appellant, states

that the Bank is no longer involved in this matter, in that,

all dues to the Bank have since been paid off. We accept this

statement and, therefore, direct the Insurance Company to pay

the appellant his dues within a period of three months from

today.

The judgment of the High Court is set aside. The appeal is

allowed, and the Umpire's award is consequently upheld.

.....…..............J. (ROHINTON FALI NARIMAN)

.....…..............J. (SANJAY KISHAN KAUL)

NEW DELHI;

OCTOBER 26, 2017.

9

ITEM NO.102 COURT NO.12 SECTION III-A

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

Civil Appeal No(s). 4661/2007

VISHNU BHAGWAN AGRAWAL PROPREITOR & ANR. Appellant(s)

VERSUS

NATIONAL INSURANCE CO. LTD. THROUGH ITS Respondent(s) REGIONAL DIRECTOR

Date : 26-10-2017 This appeal was called on for hearing today.

CORAM :

HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN HON'BLE MR. JUSTICE SANJAY KISHAN KAUL

For Appellant(s) Mr. Manoj Swarup,Adv.

Ms. Lalita Kohli,Adv.

Mr. Abhishek Swarup,Adv.

Mr. Sajid Imam Naqvi,Adv.

For M/s Manoj Swarup And Co., AOR

For Respondent(s) Mr. Vishnu Mehra,Adv. Mr. B. K. Satija, AOR

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

We have heard the learned counsel for the parties. The appeal is allowed, and the Umpire's award is consequently upheld in terms of the signed reportable judgment.

Pending application(s), if any, shall stand disposed of.

(SAPNA BISHT) (SAROJ KUMARI GAUR) SENIOR PERSONAL ASSISTANT COURT MASTER

(Signed reportable judgment is placed on the file)