LAW FOR ALL

Monday, February 10, 2020

Fire Accident - Framers Produce was destroyed in cold storage - Insurance Claim - Whether the farmers are consumers under the Act ? ‘the farmers’, had grown Byadgi Chilli Crop during the year 20122013. Some of the farmers had some other crops. These farmers had stored their agricultural produce in a cold store run by a partnership firm under the name and style of Sreedevi Cold Storage, hereinafter referred to as ‘the cold store’. These farmers also obtained loans from Canara Bank, hereinafter referred to as ‘the Bank’. The loan was advanced by the Bank to each one of the farmers on security of the agricultural produce stored in the cold store. The cold store was insured with the United India Insurance Company Limited, hereinafter referred to as ‘the insurance company’. A fire took place in the cold store on the night intervening 13.01.2014 and 14.01.2014. The entire building of the cold store and the entire stock of agricultural produce was destroyed. -but the claim of the cold store was repudiated by the insurance company mainly on the ground that the fire was not an accidental fire - Since the claims of the farmers were either rejected or not answered, they filed claim petitions against the cold store, the Bank and the insurance company in which the primary relief claimed was the value of the agricultural produce as on the date of fire and interest thereupon and each of the farmers also claimed damages of Rs.1,00,000/ per head..- The insurance company resisted the complaint mainly on the ground that the ‘farmers’ were not consumers’ within the meaning of Consumer Protection Act, 1986,- apex court held the fire was an accidental fire and occurred due to a short circuit. These are pure findings of fact which, in our view, cannot be challenged in these proceedings. - The definition of consumer under the Act is very wide and it includes beneficiaries who can take benefit of the insurance availed by the insured. As far as the present case is concerned, under the tripartite agreement entered between the Bank, the cold store and the farmers, the stock of the farmers was hypothecated as security with the Bank and the Bank had insisted that the said stock should be insured with a view to safeguard its interest. We may refer to the penultimate clause of the tripartite agreement which reads as follows: “WHEREAS the Third Party has agreed to insure the produce/goods stored in the cold storage to indemnify the produce in case of any casualty or accident by any means to cover the risk and also to cover the loan amount to avoid loss at the cost of the Second Party till the release order or repayment of the loan amount.” The aforesaid clause in unambiguous terms binds the cold store to insure the goods, to indemnify the produce, to cover the risk and cover the loan amount. This insurance policy has to be taken at the cost of the second party which is the farmer. Therefore, there can be no manner of doubt that the farmer is a beneficiary under the policy. The farmer is, therefore, definitely a consumer and we uphold the orders of both the Commissions that the complaint under the Act is maintainable.

Fire Accident - Framers Produce was destroyed in cold storage - Insurance Claim - Whether the farmers are consumers under the Act ?
‘the farmers’, had grown Byadgi Chilli Crop during the year 20122013. Some of the
farmers had some other crops. These farmers had stored their agricultural produce in a cold store run by a partnership firm under the name and style of Sreedevi Cold Storage, hereinafter
referred to as ‘the cold store’. These farmers also obtained loans from Canara Bank, hereinafter referred to as ‘the Bank’. The loan was advanced by the Bank to each one of the farmers on security
of the agricultural produce stored in the cold store. The cold store was insured with the United India Insurance Company Limited, hereinafter referred to as ‘the insurance company’. A fire took
place in the cold store on the night intervening 13.01.2014 and 14.01.2014. The entire building of the cold store and the entire stock of agricultural produce was destroyed. -but the claim of the cold store was repudiated by the insurance company mainly on the ground that the fire was not an accidental fire - Since the claims of the farmers were either rejected or not answered, they filed claim petitions against the cold store, the Bank and the insurance company in which the primary relief claimed was the value of the agricultural produce as on the date of fire and interest thereupon and each of the farmers also claimed damages of Rs.1,00,000/ per head..- The insurance company resisted the complaint mainly on the ground that the ‘farmers’ were not consumers’ within the meaning of Consumer Protection Act, 1986,- apex court held the fire was an accidental fire and occurred due to a short circuit. These are pure findings of fact which, in our view, cannot be challenged in these proceedings. - The definition of consumer under the Act is very wide and it includes beneficiaries who can take benefit of the insurance availed
by the insured. As far as the present case is concerned, under the tripartite agreement entered between the Bank, the cold store and the farmers, the stock of the farmers was hypothecated as security with the Bank and the Bank had insisted that the said stock should be insured with a view to safeguard its interest. We may refer to the penultimate clause of the tripartite agreement which reads as follows:
“WHEREAS the Third Party has agreed to insure the
produce/goods stored in the cold storage to
indemnify the produce in case of any casualty or
accident by any means to cover the risk and also to
cover the loan amount to avoid loss at the cost of the
Second Party till the release order or repayment of
the loan amount.”
The aforesaid clause in unambiguous terms binds the cold store to insure the goods, to indemnify the produce, to cover the risk and cover the loan amount. This insurance policy has to be taken at the cost of the second party which is the farmer. Therefore, there can be no manner of doubt that the farmer is a beneficiary under the policy. The farmer is, therefore, definitely a consumer and we uphold the orders of both the Commissions that the complaint under the Act is maintainable.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1042 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 20393 OF 2018)
CANARA BANK …APPELLANT(S)
Versus
M/S UNITED INDIA INSURANCE CO.
LTD. & ORS. …RESPONDENT(S)
WITH
CIVIL APPEAL NO. 10431051 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 2477424782 OF 2018
CIVIL APPEAL NO. 10521059 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 2595725964 OF 2018)
CIVIL APPEAL NO. 10601071 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 2513725148 OF 2018)
CIVIL APPEAL NO. 10721081 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 2523525244 OF 2018)
CIVIL APPEAL NO. 10821090 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 2553525543 OF 2018)
CIVIL APPEAL NO. 10911097 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 2532525331 OF 2018)
1
CIVIL APPEAL NO. 10981106 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 2607726085 OF 2018)
CIVIL APPEAL NO. 11071117 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 2649426504 OF 2018)
CIVIL APPEAL NO. 11181126 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 2571425722 OF 2018)
CIVIL APPEAL NO. 11271133 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 2534325349 OF 2018)
CIVIL APPEAL NO. 11341203 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 3144931518 OF 2018)
J U D G M E N T
Deepak Gupta, J.
Leave granted.
2. All these appeals are being decided by one common judgment
since they arise out of a common order dated 08.06.2018 of the
National Consumer Disputes Redressal Commission, New Delhi,
hereinafter referred to as ‘the National Commission’.
3. Briefly stated the facts of the case are that most of the
claimants, hereinafter referred to as ‘the farmers’, had grown
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Byadgi Chilli Crop during the year 20122013. Some of the
farmers had some other crops. These farmers had stored their
agricultural produce in a cold store run by a partnership firm
under the name and style of Sreedevi Cold Storage, hereinafter
referred to as ‘the cold store’. These farmers also obtained loans
from Canara Bank, hereinafter referred to as ‘the Bank’. The loan
was advanced by the Bank to each one of the farmers on security
of the agricultural produce stored in the cold store. The cold store
was insured with the United India Insurance Company Limited,
hereinafter referred to as ‘the insurance company’. A fire took
place in the cold store on the night intervening 13.01.2014 and
14.01.2014. The entire building of the cold store and the entire
stock of agricultural produce was destroyed.
4. After the fire, the cold store, which had taken out a
comprehensive insurance policy, raised a claim with the insurance
company but the claim of the cold store was repudiated by the
insurance company mainly on the ground that the fire was not an
accidental fire. The farmers had also issued notice to the
insurance company in respect of the plant, machinery and
building but this claim was repudiated by the insurance company
3
on the additional ground that the farmers had no locus standi to
make the claim as the insured was the cold store and not the
farmers. It was further pleaded that Condition No.8 of the
insurance policy had been violated, and that there was no privity
of contract between the farmers and the insurance company.
Since the claims of the farmers were either rejected or not
answered, they filed claim petitions against the cold store, the
Bank and the insurance company in which the primary relief
claimed was the value of the agricultural produce as on the date of
fire and interest thereupon and each of the farmers also claimed
damages of Rs.1,00,000/ per head. There were 91 claim petitions
filed and in most of them the agricultural produce was Byadgi
Chilli. In a few petitions, the agricultural produce was Dabbi
Chilli, Guntur Chilli, Bengal Gram, Coriander (Dhania), Jwar etc.
However, this will not have any material impact on the decision of
these cases. The details containing the name of the claimants, the
nature of the produce, number of bags and quantity thereof, rate,
and number of kilograms have been set out in Para 7 of the
judgment of the National Commission which we are not
reproducing for the sake of brevity.
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5. In the claims filed it was pleaded that the cold store while
levying the general charges had also charged the insurance
premium paid by it. It would be pertinent to mention that a
tripartite agreement had been entered into by each one of the
farmers while taking a loan from the Bank and hypothecating the
agricultural produce which was stored in the cold store. The
farmer, the Bank, and the cold store were parties to the tripartite
agreement. The cold store issued a warehouse receipt giving the
particulars of the crop stored, the value thereof and also the date
of the tripartite agreement. For the period in question i.e. from
20122013 till the occurrence of fire, the cold store was admittedly
insured with the insurance company. The plant and machinery of
the cold store was insured for Rs.5 crores and the stocks were
insured for Rs.30 crores.
6. The case of the farmers was that in terms of the tripartite
agreement, the cold store had got the stocks insured from the
insurance company. The fire was an accidental fire and, therefore,
in terms of the policy, the insurance company was liable to pay the
amount of value of the agricultural produce stored with the cold
store as on the date of fire and was also liable to pay interest on
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the amount payable. The insurance company resisted the
complaint mainly on the ground that the ‘farmers’ were not
‘consumers’ within the meaning of Consumer Protection Act, 1986,
hereinafter referred to as ‘the Act’. It was also claimed that there
was no privity of contract between the farmers and the insurance
company because the policy was taken by the cold store and not
by the farmers. It was alleged that the entire story of loans was a
false story. On merits, any conceivable objection which could be
taken was taken. The insurance company went to the extent of
denying that the claimants were farmers or they had produced the
agricultural produce or that they had stored it in the cold store. It
was also alleged that the Bank was negligent as it did not take any
step to recover the amount due for more than two years. The case
of the insurance company is that nobody in his right mind would
store agricultural produce for such a long period of time.
Therefore, the very genuineness of the tripartite agreement was
challenged. The other main ground taken was that the fire was
not an accident and there was no spontaneous combustion on
account of electrical short circuit. According to the insurance
company, there was an element of arson involved and the cold
store seems to have been deliberately set on fire.
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7. The stand of the cold store was that the fire was accidental
and that since the stock was insured, the amount was payable by
the insurance company. The Bank supported the claim of the
farmers with the caveat that the amount should be paid to it so
that it could set it off against the loans advanced to the farmers.
8. The Karnataka State Consumer Disputes Redressal
Commission at Bangalore, hereinafter referred to as ‘the State
Commission’ vide judgment dated 28.04.2017 held that the
farmers had proved that the fire took place on account of electrical
short circuit and no element of human intervention or use of
kerosene was found. The State Commission also found that as per
the tripartite agreement entered into between the farmers, the
Bank and the cold store, it was mandatory for the cold store to
insure the goods so hypothecated by the farmers with the Bank.
The insurance company was held liable to pay the amount to the
farmers. The State Commission assessed the value of the goods
by taking the value as reflected in the warehouse receipts issued
at the time of taking of loan and did not accept the plea of the
farmers that they should get the market value of the goods as on
the date of fire. The Bank was also held deficient in service. The
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cold store and the insurance company were held jointly and
severely liable and were directed to pay the value of the
agricultural produce hypothecated with the Bank to the
farmers/claimants as on the date of tripartite agreement together
with the interest at the rate of 14% per annum payable from six
months from the date of the incident till the date of realisation.
One complaint being Complaint No.597 of 2015 was dismissed. In
some of the complaints, the Bank was also held jointly and
severely liable to pay the costs of Rs.10,000/ whereas in a large
number of cases the complaint against the Bank was dismissed.
9. Aggrieved by the aforesaid judgment dated 28.04.2017 of the
State Commission, an appeal was filed before the National
Commission. By the impugned judgment, the National
Commission concurred with the findings of the State Commission
and held that the farmers are consumers. It held that the
insurance company was aware of the fact that the goods were held
in trust. It further held that there is no evidence to show that the
fire was not an accidental fire or that the fire had been started by
the owner of the cold store. However, it partly allowed the appeal
of the insurance company and reduced the interest from 14% per
8
annum to 12% per annum. The farmers had also filed appeal
claiming that in terms of the insurance policy they should have
been paid the value of the goods as on the date of fire. However,
this claim was rejected basically on the ground that the farmers
had failed to show that the chilli and/or other produce stored is of
the same class and characteristics as reflected in the Varietywise
Periodic Report of the Bengaluru Market for different commodities.
As far as the appeals filed by the Bank were concerned, the
National Commission held that in the peculiar facts of the case
where the farmers had suffered substantial losses, the principal
amount of loan advanced by the Bank would be remitted by the
insurance company to the Bank but the other amount i.e. interest
and damages, would be given to the farmers. It was also held that
there was no deficiency of service on behalf of the Bank and the
costs imposed on the Bank in some of the cases were set aside.
10. Before this Court, appeals have been filed by the insurance
company, the farmers, the cold store and the Bank.
11. We have heard Shri P.P. Malhotra, learned senior counsel
appearing for the insurance company, Dr. Rajeev Dhavan and Shri
Gopal Shankaranarayanan, learned senior counsel appearing for
9
the farmers, Shri Sajan Poovayya, learned senior counsel
appearing for the cold store and Shri Dhruv Mehta, learned senior
counsel appearing for the Bank.
Appeals of the Insurance Company
12. Shri P.P. Malhotra, learned senior counsel appearing for the
insurance company raised several issues for consideration of this
Court. One of the contentions raised by him is that the fire in
question was not an accidental fire. It is also contended that the
farmers were not consumers and therefore the consumer fora have
no jurisdiction to decide the dispute. He next contends that there
is no privity of contract between the farmers and the insurance
company. According to him, a contract of insurance is to be
strictly construed between the parties to the contract. He submits
that there was no insurable interest of the farmers and the
tripartite agreement entered between the Bank, the farmers and
the cold store was never disclosed to the insurance company. He
further submits that there is nondisclosure of important facts by
the cold store (insured) and, as such, the insurance company is
not liable. He also urged that the liability of the insurance
company is excluded by virtue of General Exclusion Clause 5 and
10
General Condition no.1 and General Condition no.8 of the
insurance policy.
Whether the fire was an accident?
13. As far as this issue is concerned, both the State Commission
and the National Commission have come to the conclusion that
the fire was an accidental fire and occurred due to a short circuit.
These are pure findings of fact which, in our view, cannot be
challenged in these proceedings. However, since lengthy
arguments were addressed by Shri P. P. Malhotra in this behalf,
we shall deal with the same. At the outset, we may note that the
electrical inspector, the police investigation team and the forensic
science laboratory (FSL) have all come to the conclusion that the
fire took place due to a short circuit. The concluding portion of
the report of the FSL reads as follows:
“From the above examination, the following
observations have been made
1. Presence of combustible materials like thermocol
(which are used to insulate the walls) pillars, wooden
partitions and the grains stored inside the building
could have enhanced the spread of fire.
2. The congested space in the building might have
accelerated the smoldering fire.
3. The fire might have originated at the sixth floor
front side of the building. But it was not possible to
11
locate the exact place of origin of fire since the
complete building was involved in fire.
4. An electrical short circuit may have initiated the
fire.”
The insurance company relies upon the findings given by a
company namely Truth Labs and those of Rank Surveyors Private
Limited, which read as follows:
“Based on a thorough and indepth inspection of the
incident site, forensic examinations, field
investigations, documentary evidence analysis and
personal evidence obtained, it is concluded that the
fire occurred in M/s. Sree Devi Cold Storage, Billary
on the intervening night of 13/14th January 2014.
a. Was not due to spontaneous combustion on
account of bacterial/chemical fires.
b. Was not due to electrical failure caused by short
circuit.
c. And was on account of extraneous ignitable fire
accelerants such as kerosene used deliberately for
ignition, initiation, propagation and burning of
stocks in the cold storage through human
intervention.
d. Based on the motive, means and opportunity to
carry out such malicious acts the possibility of the
involvement of management in such a nefarious act
cannot be ruled out.”
14. We may note that it is not disputed that in the construction
of the cold store, the temperature was maintained by insulating
the walls of the cold store. Bitumen (coal tar) and Thermocol were
12
used for providing insulation. The FSL found that in a fire which
takes place in a building where such material is used for
construction, hydro carbons would obviously be present. On the
other hand, M/s. Truth Labs mainly relied upon the presence of
hydro carbons to come to the conclusion that the fire had not
occurred spontaneously and on account of electrical short circuit
but occurred on account of extraneous ignitable fire accelerants
such as kerosene. The conclusions of M/s. Truth Labs were based
on some inspection and chemical analysis carried out by a team
headed by Dr. R. Srinivas. Admittedly, this report of Dr. R.
Srinivas was never furnished to the parties nor was placed before
the State Commission. Interestingly, when Mr. G. V. H. V. Prasad,
Director of M/s. Truth Labs was put a specific query whether the
walls of the ground floor and the top floor and the inside portion of
the cold store along with 169 pillars were constructed by
sandwiching bitumen and thermocol between the concrete in order
to raise the level of insulation, he replied that ‘he was not aware of
how the Cold Storage was built’. This clearly shows the shoddy
manner in which M/s. Truth Labs conducted the investigation.
There can be no proper investigation of a fire if the investigating
agency does not even try to find out what is the nature of
13
construction of the building which has been destroyed in the fire.
M/s. Truth Labs has clearly stated that the observation that fire
took place on account of extraneous ignitable fire accelerants, is
based on the chemical analysis report which shows presence of
hydro carbons in the debris. It is apparent that M/s. Truth Labs,
for reasons best known to it, did not analyse the material used for
construction because if it had done so, it would have realised that
hydro carbons would be present when thermocol or bitumen are
burnt. Thermocol is basically a rigid plastic foam material which
is derived from petroleum and natural gas byproducts. Bitumen
is a semisolid hydrocarbon product produced from crude oil.
Both thermocol and bitumen are derivatives of petroleum products
and hence are hydrocarbons by their very nature. Therefore,
presence of hydrocarbons would be natural when a fire takes
place. The presence of hydro carbon could not lead to a conclusion
that kerosene oil had been used to ignite the fire.
15. The National Commission has also dealt in detail with this
issue and has come to the conclusion that M/s. Truth Labs visited
the burnt cold store on two occasions and collected samples on
both the occasions. It, however, decided to send 12 samples
14
collected only in the second visit for analysis. Interestingly, the
controlled samples were collected from a plastic bag containing
(fresh unaffected) chillies found in the burnt stock of the affected
premises. The controlled samples did not show presence of hydro
carbons and hence, the assumption that the presence of hydro
carbons in the remaining samples was not relatable to thermocol
and tar. There is no explanation why the samples taken on the
first visit were not sent for analysis. It is also difficult to believe
that in a building which has been totally gutted in a fire, there
would be one plastic bag containing (fresh unaffected) chillies
found in the burnt stock. It is possible that these unburnt chillies
may have been introduced later on. Therefore, we cannot place
any reliance on the report of M/s. Truth Labs.
16. In any event, neither in the report of M/s. Truth Labs nor in
the other reports by the insurance company is there anything to
show that the insured had set the cold store on fire. Whether the
fire took place by a short circuit or any other reason, as long as
insured is not the person who caused the fire, the insurance
company cannot escape its liability in terms of the insurance
policy. We reject the contention of the insurance company that
15
the fire was ignited by the use of kerosene and hence it is not
liable.
Rule of Strict Interpretation
17. It has been submitted on behalf of the insurance company
that the terms of the insurance policy should be construed strictly
and since only the insurance company and the cold store (insured)
were parties to the contract of insurance, the insurance company
will not be liable to pay any claim to the farmers. Various
authorities were cited by both sides.
18. In United India Insurance Co. Ltd. v. Harchand Rai
Chandan Lal1
this Court held as follows:
“9….It is settled law that terms of the policy shall
govern the contract between the parties, they have to
abide by the definition given therein and all those
expressions appearing in the policy should be
interpreted with reference to the terms of policy and
not with reference to the definition given in other
laws. It is a matter of contract and in terms of the
contract the relation of the parties shall abide and it
is presumed that when the parties have entered into
a contract of insurance with their eyes wide open,
they cannot rely on the definition given in other
enactment….”
1 (2004) 8 SCC 644
16
19. Reliance was placed on Raghunath Rai Bareja v. Punjab
National Bank2
wherein it was held:
“58. We may mention here that the literal rule of
interpretation is not only followed by judges and
lawyers, but it is also followed by the layman in his
ordinary life. To give an illustration, if a person says
“this is a pencil”, then he means that it is a pencil;
and it is not that when he says that the object is a
pencil, he means that it is a horse, donkey or an
elephant. In other words, the literal rule of
interpretation simply means that we mean what we
say and we say what we mean. If we do not follow
the literal rule of interpretation, social life will
become impossible, and we will not understand each
other. If we say that a certain object is a book, then
we mean it is a book. If we say it is a book, but we
mean it is a horse, table or an elephant, then we will
not be able to communicate with each other. Life will
become impossible. Hence, the meaning of the literal
rule of interpretation is simply that we mean what
we say and we say what we mean.”
20. Reliance was also placed on the following paragraph in Suraj
Mal Ram Niwas Oil Mills (P) Ltd. v. United India Insurance Co.
Ltd.3
:
“26. Thus, it needs little emphasis that in construing
the terms of a contract of insurance, the words used
therein must be given paramount importance, and it
is not open for the court to add, delete or substitute
any words. It is also well settled that since upon
issuance of an insurance policy, the insurer
undertakes to indemnify the loss suffered by the
insured on account of risks covered by the policy, its
terms have to be strictly construed to determine the
extent of liability of the insurer. Therefore, the
endeavour of the court should always be to interpret
2 (2007) 2 SCC 230
3 (2010) 10 SCC 567
17
the words in which the contract is expressed by the
parties.”
21. The principles relating to interpretation of insurance policies
are well settled and not in dispute. At the same time, the
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 including the insured and the beneficiaries. It is also well
settled that coverage provisions should be interpreted broadly and
if there is any ambiguity, the same should be resolved in favour of
the insured. On the other hand, the exclusion clauses must be
read narrowly. The policy and its components must be read as a
whole and given a meaning which furthers the expectations of the
parties and also the business realities. According to us, the entire
policy should be understood and examined in such a manner and
when that is done, the interpretation becomes a commercially
sensible interpretation. As far as the present case is concerned, if
we read the tripartite agreement along with the terms of the policy
it is obvious that the Bank insisted that the stock be insured. The
farmers were told that they would pay the premium. The cold
store while fixing the rent obviously factored the premium into the
rent. It was obvious that the intention of the parties was that they
18
would be compensated by the insurance company in case of any
untoward loss.
Whether the farmers are consumers and the issue of privity of
contract
22. One of the main grounds of attack to the judgments of both
the State Commission and the National Commission on behalf of
the insurance company is that the farmer is not a consumer
insofar as the insurance company is concerned. The contention is
based on the ground that the insurance policy is admittedly only
between the insurance company and the cold store. It is further
urged by Shri Malhotra that the claim of the cold store for damage
to the building, plants and machinery was repudiated by the
insurance company on 16.09.2015. The cold store has not
challenged the repudiation. Thereafter, all the complaints have
been filed through one counsel which indicates that they have
been orchestrated by the cold store itself. It is also submitted that
the tripartite agreement is not relevant as far as the insurance
company is concerned since the insurance company is not a
signatory to the tripartite agreement. It is further contended that
the coverage for the goods was only for the goods owned by the
cold store and not by the farmers who are in the nature of third
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parties. It is contended that in some cases the tripartite
agreement has not even been signed by the Bank.
23. On the other hand, on behalf of the farmers, it is submitted
that they paid rent to the cold store which included the element of
insurance. It is submitted that the crops were given on
contractual bailment to the cold store for a valuable consideration
and, therefore, the cold store held the goods as a bailee on behalf
of the farmers. It is also submitted that in terms of the tripartite
agreement, the cold store was bound to take out an insurance
policy and the crops and the premises were separately insured and
the insurance was renewed every time for a period of 3 years. It is
also submitted that insurance company was aware that the
insurance policy had been taken for the benefit of the real owners
i.e. farmers.
24. To decide these issues, it would be apposite to refer to the
definition of ‘consumer’ under Section 2(d) of the Act, which reads
as follows:
“2 Definitions. (1) In this Act, unless the context
otherwise requires,
xxx xxx xxx
(d) "consumer" means any person who,
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(i) buys any goods for a consideration which has
been paid or promised or partly paid and partly
promised, or under any system of deferred payment
and includes any user of such goods other than the
person who buys such goods for consideration paid
or promised or partly paid or partly promised, or
under any system of deferred payment, when such
used is made with the approval of such person, but
does not include a person who obtains such goods
for resale or for any commercial purpose; or
(ii) hires or avails of any services for a consideration
which has been paid or promised or partly paid and
partly promised, or under any system of deferred
payment and includes any beneficiary of such
services other than the person who hires or avails of
the services for consideration paid or promised, or
partly paid and partly promised, or under any
system of deferred payment, when such services are
availed of with the approval of the first mentioned
person…;”
25. The definition of consumer under the Act is very wide and it
not only includes the person who hires or avails of the services for
consideration but also includes the beneficiary of such services
who may be a person other than the person who hires or avails of
services.
26. Taking the issue of privity of contract, we are of the considered
view that as far as the Act is concerned, it is not necessary that
there should be privity of contract between the insurance company
and the claimants. The definition of consumer under Section 2(d)
quoted hereinabove is in 2 parts. Subclause (i) of Section 2(1)(d)
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deals with a person who buys any goods and includes any user of
such goods other than the person who buys such goods as long as
the use is made with the approval of such person. Therefore, the
definition of consumer even in the 1st part not only includes the
person who has purchased but includes any user of the goods so
long as such user is made with the approval of the person who has
purchased the goods. As far as the definition of the consumer in
relation to hiring or availing of services is concerned, the definition,
in our view, is much wider. In this part of the section, consumer
includes not only the person who has hired or availed of the
services but also includes any beneficiary of such services.
Therefore, an insured could be a person who hires or avails of the
services of the insurance company but there could be many other
persons who could be the beneficiaries of the services. It is not
necessary that those beneficiaries should be parties to the contract
of insurance. They are the consumers not because they are parties
to the contract of insurance but because they are the beneficiaries
of the policy taken out by the insured.
27. The definition of consumer under the Act is very wide and it
includes beneficiaries who can take benefit of the insurance availed
by the insured. As far as the present case is concerned, under the
22
tripartite agreement entered between the Bank, the cold store and
the farmers, the stock of the farmers was hypothecated as security
with the Bank and the Bank had insisted that the said stock should
be insured with a view to safeguard its interest. We may refer to the
penultimate clause of the tripartite agreement which reads as
follows:
“WHEREAS the Third Party has agreed to insure the
produce/goods stored in the cold storage to
indemnify the produce in case of any casualty or
accident by any means to cover the risk and also to
cover the loan amount to avoid loss at the cost of the
Second Party till the release order or repayment of
the loan amount.”
28. The aforesaid clause in unambiguous terms binds the cold
store to insure the goods, to indemnify the produce, to cover the
risk and cover the loan amount. This insurance policy has to be
taken at the cost of the second party which is the farmer.
Therefore, there can be no manner of doubt that the farmer is a
beneficiary under the policy. The farmer is, therefore, definitely a
consumer and we uphold the orders of both the Commissions that
the complaint under the Act is maintainable.
29. Shri Malhotra in support of his argument relied upon the
judgement of this Court in M. C. Chacko v. The State Bank of
23
Travancore, Trivandrum4 wherein the appellant as Manager of
High Land Bank, Kottayam, had an overdraft account with the
Bank. The father of the appellant had executed letters of
guarantee in favour of Bank agreeing to pay the amounts due to
the Bank under the overdraft agreement subject to a limit of
Rs.20,000/. The Court held:
“10. Even if it be granted that there was an intention
to create a charge, the Kottayam Bank not being a
party to the deed could enforce the charge only if it
was a beneficiary under the terms of the contract,
and it is not claimed that the Bank was a beneficiary
under the deed Ext. D1. The suit against M.C.
Chacko must therefore be dismissed.”
30. We are of the view that this judgment has no relevance to the
case before us. This Court held that the Kottayam Bank was not
only not a party to the deed but was also not a beneficiary under
the contract. In our opinion, the Consumer Protection Act clearly
provides that a beneficiary of the services, other than the insured
is a consumer under the Act.
General Exclusion Clause No.5
31. It has been urged that there is violation of Clause 5 of the
policy under the heading of General Exclusion wherein losses of
4 (1969) 2 SCC 343
24
certain types have not been covered. The said clause reads as
follows:
“5. Loss, destruction or damage to bullion or unset
precious stones, any curios or works of art for an
amount exceeding Rs.10000/ goods held in trust or
on commission, manuscripts, plans, drawings,
securities, obligations or documents of any (illegible)
stamps, coins or paper money, cheques, books of
accounts or other business books, computer
systems records, explosives unless otherwise
expressly stated in the policy.”
32. The argument raised by Shri Malhotra is that since the goods
were held in trust by the cold store, the insurance company is not
liable. We are not at all impressed with this argument. This is not
a case where the goods were deposited only on the basis of trust.
The goods were kept in the cold store on payment of rent by the
farmer. This is not a case envisaged under Exclusion Clause 5
quoted hereinabove. These goods were also not held on
commission. Shri Rajeev Dhavan, learned senior counsel appearing
for the farmers submits that the relationship between the farmer
and the cold store was of bailor and bailee. He submits that the
crops were given on contractual bailment to the cold store for
consideration.
25
33. In the present case, as pointed out above, the farmer had
agreed to pay consideration to the cold store and, therefore, the
goods were not held in trust per se but the goods were held by cold
store as bailee of the goods for consideration. The possession of the
farm produce was handed over by the bailor, i.e. farmer to the cold
store i.e. the bailee, in terms of the contract. There may be inter se
rights and liabilities between the farmer and the cold store but it
cannot be said that the goods were held ‘in trust’. The goods were
also not held ‘on commission’. No commission was payable and
only rental was paid. Therefore, we reject this argument on behalf
of the insurance company.
General Condition Nos. 1 & 8:
34. Shri Malhotra has placed reliance on Condition Nos. 1 & 8 of
Part B of the General Conditions of the Insurance Policy:
“(B) GENERAL CONDITIONS:
1. This policy shall be voidable in the event of
misrepresentation, misdescription or nondisclosure of any material particular.
xxx xxx xxx
8. If the claim be in any respect fraudulent, or if
any false declaration be made or used in support
thereof or if any fraudulent means or devices are
used by the insured or anyone acting on his behalf
to obtain any benefit under the policy or if the loss
26
or damage be occasioned by the willful act, or with
the connivance of the insured, all benefits under this
policy shall be forfeited.”
35. The contention of Shri Malhotra is that the insurance company
was not informed by the Bank, the cold store or the farmers that
the farm produce or the insured goods belong to the farmers and
therefore the policy is voidable. At the outset, we may note that
misrepresentation or misdescription only makes the policy voidable.
The insurance company never chose to declare the policy void for 3
long years when it was in existence and, at this stage, cannot be
permitted to wriggle out of its liability by taking this objection.
Even otherwise, we are of the view that the submission made on
behalf of the insurance company is without any substance. The
policies of insurance clearly show that the premises was separately
insured for Rs.5 crores and the stock in trade were insured for
Rs.30 crores. This insurance was taken not only for the year when
the fire took place but was renewed for 3 long years. The insurance
policy had an Agreed Bank Clause which reads as follows:
“(1) AGREED BANK CLAUSE:
It is hereby declared and agreed:
(i) That upon any monies becoming payable under
this policy the same shall be paid by the company to
the bank and such part of any monies so paid as
may relate to the interests of other parties insured
27
hereunder shall be received by the Bank as Agents
for such other parties.
(ii) That the receipts of the Bank shall be complete
discharge of the company thereon and shall be
binding on all the parties insured hereunder.”
36. The aforesaid clause itself clearly indicates that it was agreed
by the insurance company that upon any amount being payable
under the policy in question, the same would be paid to the Bank
and the amount so paid “may relate to the interests of other
parties”. The said amount would be received by the Bank as agent
for other parties. Therefore, the insurance policy itself envisaged
that there were interest of other parties and not only the Bank and
the insured. Therefore, it was for the insurance company to verify
and find out who was the owner of the goods. It could not presume
that all the goods belong to the cold store. The assumption of the
insurance company that it had insured the goods belonging to the
cold store itself has no factual basis. It is a wellknown fact that
cold stores are constructed in such a way that there are many
compartments in the cold store. Any person can deposit a small or
large amount of goods to be kept in cold store. Normally, it is the
goods of third parties which are stored in a cold store and,
therefore, we are dealing with a policy of insurance whereby the
premises and the stock and goods in a cold store have been
28
insured. The natural corollary would be that the insurance
company should have known that the goods belong to the third
parties. From the policy of insurance, we find that in respect of
description of risk, the insurance covers “Stock of Guntur
Chillies/Byadigi Chillies/Other variety Chillies, Jawar Seeds,
Bengal Garam, Red Gram, Tambrind, Coriander Seeds & Other
pulses.”
37. This stock in trade was covered for a sum of Rs.30 crores and
premium was charged accordingly. A prudent insurance company
before issuing a policy of such a heavy amount, must or at least
should have ascertained the value and the nature of the goods.
The insurance company before us is one of the largest nationalised
insurance companies and a presumption has to be drawn that it
must have verified the details before insurance policy was issued.
If verification had been done by a visit to the cold store, it could
have been easily found out who are the owners of the stock. In
case, the insurance company has chosen not to verify the stock it
cannot take advantage of its own negligence. The principle of
uberrima fides has no application because the cold store had
declared all necessary facts. The bank clause clearly indicated
that the goods were hypothecated/pledged to the Bank. Therefore,
29
the insurance company now cannot turn around and claim that
the names of the owners were not supplied to it at the time of
insurance. We also cannot lose sight of the fact that the insurance
policy was renewed at least twice. Therefore, the policy was in
existence for 3 years and it is in the 3rd year that the fire took
place. If the insurance company chooses not to even write a letter
to the insured or take any steps to verify the value of the goods
and ownership of the goods, it cannot now turn around and urge
that it was not aware about the nature or ownership of the goods.
Fraudulent Claim
38. The insurance company also contends that the whole scheme
is fraudulent and that no farmer in his right senses would store
agricultural produce for such a long time. This argument is totally
baseless.
39. Byadgi Chilli is the major component of the goods that were
stored in the cold store. It is a very famous variety of chilli and is
produced in two types – dabbi and kaddi. One of the main uses of
this chilli is not only as an item of food but as an item to extract
red colour pigment which is used in the manufacture of lipsticks,
nail polishes, and other cosmetics etc. The material extracted is
30
called oleoresin, which is a red oil extracted from the pods. Many
cold stores have been constructed in the area where this chilli is
grown because if these chillies are stored at a low temperature of 4
to 6 degree Celsius, the colour and purity is maintained and it also
increases the amount of oleoresin which can be extracted from
chilli by about 30% to 40%. As such the farmers took a
commercial decision to store the chillies because after storing it,
the value would go higher.
40. The insurance company also urged that some of the tripartite
agreements are not signed by the officials of the Bank. It is urged
that this shows that the agreements cannot be relied upon. We
are not at all in agreement with this submission. As long as the
parties to the tripartite agreement i.e. the Bank, the farmer and
the cold store, are not disputing the correctness of the agreement,
there is no reason why we should not accept the same to be a
genuine document.
Nondisclosure of material facts:
41. It has been urged on behalf of the insurance company that
while submitting the proposal form on 21.03.2013, the cold store
had not listed out the names of the parties who had an insurable
31
interest including the financial institutions. It is, therefore,
submitted that the cold store deliberately did not disclose the fact
that the produce belonged to the farmers. Shri Malhotra placed
reliance on the judgment in Satwant Kaur Sandhu v. New India
Assurance Co. Ltd.5 wherein it was held that:
“25. The upshot of the entire discussion is that in a
contract of insurance, any fact which would
influence the mind of a prudent insurer in deciding
whether to accept or not to accept the risk is a
“material fact”. If the proposer has knowledge of
such fact, he is obliged to disclose it particularly
while answering questions in the proposal form.
Needless to emphasise that any inaccurate answer
will entitle the insurer to repudiate his liability
because there is clear presumption that any
information sought for in the proposal form is
material for the purpose of entering into a contract
of insurance.”
42. At the outset, we may mention that the initial insurance policy
was taken in the year 2011, if not earlier, and that proposal form
was very material. The same has not been produced by the
insurance company before us. Thereafter, it was only renewal of
the policy. Furthermore, if a column is left blank, again the
insurance company should have asked the insured to fill in the
column. There is no wrong information given in the proposal form
though it may be true that all the requisite information was not
5 (2009) 8 SCC 316
32
supplied. The column requires listing out the parties who have an
insurable interest including financial institutions. Since the policy
had a bank clause, the name of Canara Bank should have been
mentioned in column 5. That was not there. If the insurance
company while accepting the proposal form does not ask the
insured to clarify any ambiguities then the insurance company after
accepting the premium cannot now urge that there was a wrong
declaration made by the insured. In case the insured had written
that there were no persons who had an insurable interest, the
position may have been different but leaving out the column blank
does not mean that there was some misdeclaration of facts. We are,
therefore, clearly of the view that the judgment of this Court in
Satwant Kaur Sandhu’s case (supra) is not applicable to the facts
of the present case.
43. As already held above, the insurance company itself could
have also taken some initiative in the matter. To make a contract
void the nondisclosure should be of some very material fact. No
doubt, it would have been better if the Bank and the insured had
given at least 1 tripartite agreement to the insurance company but,
in our view, in the peculiar facts of this case, not disclosing the
tripartite agreement or the names of the owners cannot be said to
33
be such a material fact as to make the policy void or voidable. We
are clearly of the view that there is no fraudulent claim made.
There is no false declaration made and neither is the loss and
damage occasioned by any wilful act or connivance of the insured.
44. In view of the above discussion, we are clearly of the view that
the insurance company under the insurance policy is liable to
indemnify the cold store with regard to the value of goods and since
the farmers are the beneficiaries, they are entitled to get the amount
payable under the policy. However, this will obviously be subject to
the bank clause which we have already referred to above.
34
Appeal of the Bank
45. The Bank has raised objections to the interest portion of the
amount being given to the farmers. Otherwise it supports the case
of the farmers. Reliance has been placed on the bank clause
already quoted above and it is submitted that the direction of the
National Commission to pay the interest to the farmers is against
the Agreed Bank Clause in terms of which the money is to be paid
to the Bank till the outstandings of the Bank are covered. Shri
Dhruv Mehta, learned senior counsel for the Bank submits that
since the farmers are claiming benefit of the policy, they cannot
urge that the bank clause is not applicable. It is further submitted
by him that the National Commission has to decide questions on
the basis of legal considerations and equitable considerations or
equity has no role to play in such matters. On the other hand, it
has been urged by Dr. Rajeev Dhavan that the bank clause is only
a processual clause.
46. We cannot accept the submission of Dr. Dhavan that the
bank clause lays down only a process. The insurance policy is a
contract and the amount has to be paid as per the terms of the
contract. In our view, the National Commission could not have
35
ordered that the interest on the amount payable to the farmers
should not be paid to the Bank till the liabilities of the Bank are
paid out. Arguments have been addressed before us that this
Court may exercise its power under Article 142 of the Constitution
of India to ensure that justice is done to the farmers. We feel that
there is no need to invoke the jurisdiction under Article 142
because even after paying off the dues of the Bank, some amount
of the value of the goods along with interest thereupon will be
payable to the farmers.
Whether there was a deficiency in service on the part of the
Bank
47. It was urged on behalf of the insurance company that there is
deficiency of service by the Bank and, in fact, it was argued that
the Bank connived with the farmers because it did not get the
valuation of the products done properly and further, it took no
steps to sell the agricultural produce after one year which liberty it
had in terms of the tripartite agreement. We find no force in this
argument. As already pointed out above, the value of Byadgi
chillies which was the major agricultural produce stored in the
cold store rises the longer it is kept in the cold store. Therefore,
the Bank could have taken a commercial decision not to sell the
36
produce because the product was not deteriorating in any manner
and its value was not diminishing.
48. The State Commission had held that there was deficiency on
behalf of the Bank in rendering services but the National
Commission held otherwise. We are of the view that the Bank was
remiss to a limited extent. When the Bank issues loans against
the hypothecation of goods, as in the present case, and insists that
the goods should be insured to safeguard its outstandings then a
duty lies upon the Bank to inform the insurance company of the
policy. If both the Bank and the insurance company had done
what would be expected of good financial institutions, there would
have been no needless litigation. The matter has dragged to this
stage only because the names of the farmers were not mentioned
in the policy or because the tripartite agreement was not handed
over to the insurance company. The Bank, as a prudent financial
institution, should have insisted that the tripartite agreement
should also be handed over to the insurance company. Therefore,
we feel that there is some level of deficiency on behalf of the Bank.
49. In view of the aforesaid, we feel that the Bank cannot claim
interest at the contractual rate and is not entitled to claim interest
37
at the contractual rate because the farmers have been driven
through a long drawn litigation which could have been easily
avoided if the Bank had itself sent the copy of the tripartite
agreement to the insurance company or insisted that the insured
should send the same to the insurance company. We accordingly
hold that the Bank cannot claim interest at the contractual rate.
We are therefore, of the view that the Bank would be entitled to
charge simple interest right from the date of grant of loan at the
rate of 12% per annum.
The amount of claim payable:
50. The farmers in their appeal have claimed that in terms of the
policy of insurance the value of the goods was to be assessed on the
date of fire and the value was not to be assessed as mentioned on
the date when the goods were stored in the cold store. In this
regard, we may make reference to the opening portion of the
insurance policy wherein the insurance company has agreed to
insure the goods. Relevant portion of the insurance policy 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
38
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 such
property be destroyed or damaged 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.”
51. The highlighted portion of the aforesaid clause leaves no
manner of doubt that the insurance company in consideration of
the premium received had agreed to either reinstate the goods or
replace the same or pay to the insured the value of the property at
the time of happening of its destruction or damage. The State
Commission and the National Commission had rejected the claim of
the farmers in this regard on the ground that the varietywise
periodic report of the Bengaluru market, produced by the farmers,
showed that the range between minimum and maximum price for
Byadgi and Guntur chillies etc. is very vast and to arrive at an
average price would mean construing that all the chillies are of
standard quality. According to the National Commission, this
39
would be a speculative exercise based on the assumption that the
entire quantity of chillies is of the same class and characteristic.
52. At the time when the farmers deposited the goods with the cold
store there were handed over warehouse receipts which not only
gave identity of the agricultural produce but also reflected the
quantity of the agricultural produce and its market value on the
date when this produce was stored in the cold store. However, the
quality of the produce is not reflected in the warehouse receipts.
53. Though we hold that in terms of the clause discussed above
the insurance company is liable to pay the value of the goods as
on the date of the fire, we feel that the National Commission was
right when it came to the conclusion that it was not possible to
award an amount based on the varietywise periodic report of the
Bengaluru market. This is the only evidence produced by the
farmers and brought to our notice to support their contention.
The National Commission is right that the difference between
minimum price for which this product was sold during the period
14.12.2013 to 14.01.2014 and the maximum price for the same
agricultural produce during this period is so high that without
exactly knowing what was the quality of agricultural produce, it
40
would not be possible to ascertain what was the price on the date
of fire. To give an example, Byadgi chillies have a price range of
Rs. 3,200 per quintal to Rs. 17,300 per quintal i.e. Rs.32 per
kilogram to Rs.173 per kilogram. There is no way for any Court to
determine what the exact price would have been without having
the benefit of the quality of produce. Unfortunately, even in the
warehouse receipts there is no gradation or reflection of the quality
of the produce.
54. We, therefore, affirm the decision of the National Commission
that the value of the goods as reflected in the warehouse receipts
should be taken to be the value on the date of fire. We may add
that this value is not very different from the median value for most
of the products. We rely upon the value given in the warehouse
receipts because that was the value which was given by the
farmers, not knowing that their product is going to be burnt, and
was accepted by the cold store, which must have known the value
of the product in the local market and accepted by the Bank,
which on the basis of such surety advanced the loan.
55. In view of the aforesaid discussion, we are of the view that
the Bank shall be entitled to recover the principal amount
41
advanced by it to each one of the farmers along with the simple
interest at the rate of 12% per annum from the date of advancing
of loan till repayment thereof. The insurance company is liable to
pay the value of goods as reflected in the warehouse receipts of
each farmer along with simple interest at the rate of 12% per
annum from the date of fire till payment of the amount. The dues
of the Bank till the date of fire will have to be first determined and,
thereafter, the excess will be payable to the farmer along with the
interest.
56. To clarify the issue we take the example of the first farmerThippa Reddy at Sr. No.1, in whose Account No.1425844005736,
the loan of Rs.10,00,000/ was sanctioned on 30.08.2011. The
insurance company has worked out his outstanding on the date of
incident at Rs.13,57,307/ whereas the value of the goods was
2,00,2000 as per the warehouse receipt. If we calculate simple
interest at the rate of 12% per annum on Rs.10,00,000/ from
30.08.2011 till 14.01.2014, it works out to Rs.2,84,712/
approximately. Obviously, if the farmer has paid any amount
towards the loan that will also have to be adjusted but for the sake
42
of clarification, we are assuming that no amount has been paid.
Therefore, with effect from 14.01.2014, the insurance company
shall be liable to pay interest on 10,00,000/ at the rate of 12%
per annum to the Bank and shall also be liable to pay a sum of
Rs.7,17,288/ along with interest at the rate of 12% per annum
from 14.01.2014 till payment to the farmer.
57. In view of the above, we dispose of the appeals with the
following directions:
1.That the insurance company shall be liable to pay to
each one of the farmers the value of his goods to be
assessed as per the rate mentioned on the warehouse
receipts when the goods were stored in the Cold Store
in terms of our direction given hereinabove along with
interest at the rate of 12% per annum from the date of
fire till payment or deposit thereof.
2.That the Canara Bank shall file certified statements of
accounts before the Karnataka State Consumer
Disputes Redressal Commission showing the principal
amount of loan advanced to each farmer and the
amount due to the Bank by calculating simple interest
43
@ 12% p.a. up to 13.01.2014 i.e. payable by 14.01.2014
after adjusting the payments which the Bank may have
received in the loan account.
3.The Bank in the statement of accounts shall also set out
the amount due with the aforesaid rate of interest up to
30.04.2020.
4.The aforesaid statement be filed before the State
Commission on or before 02.03.2020.
5.That thereafter, the State Commission in each appeal
shall determine the amount payable to the farmer by
calculating it in terms of the clarification given above i.e.
after adjusting the amount due to the Bank as on
14.01.2014. This exercise be completed on or before
31.03.2020.
6.Out of the aforesaid amount, the Insurance Company
shall pay the amount of loan along with simple interest
at the rate of 12% per annum from the date of
advancement of loan to the date of payment directly to
the Bank.
44
7.Thereafter, the insurance company shall deposit the
amount payable to the farmers with the State
Commission on or before 30.04.2020.
58. All appeals are disposed of in the aforesaid terms. No order
as to costs. Pending application(s), if any, shall also stand(s)
disposed of.
…………………………….J.
(S. Abdul Nazeer)
…………………………….J.
(Deepak Gupta)
New Delhi
February 06, 2020
45

Cout can grant compensation more than claimed when the claimant is a minor In view of the above, we award a sum of Rs.62,27,000/ to the claimant under the following heads : S.No Heads Amount (i) Expenses relating to treatment, hospitalisation and transportation Rs. 2,50,000/ (ii) Loss of earnings (family members) Rs. 51,000/ (iii) Loss of future earnings Rs.14,66,000/ (iv) Attendant charges Rs.21,60,000/ (v) Pain, suffering, loss of amenities Rs.15,00,000/ (vi) Loss of Marriage prospects Rs. 3,00,000/ (vii) Future medical treatment Rs. 5,00,000/ This amount shall carry an interest @7.5% p.a. from the date of filing of the claim petition till payment/deposit of the amount. Obviously, the insurance company shall be entitled to adjust the amount already paid. Further, the insurance company shall also be entitled to recover the amount from the owner in terms of the award of the MACT, which has not been challenged either before the High Court or us. We are aware that the amount awarded by us is more than the amount claimed. However, it is well settled law that in motor accident claim petitions, the Court must award just compensation and, in case, the just compensation is more than the amount claimed, that must be awarded especially where the claimant is a minor.

Cout can grant compensation more than claimed when the claimant is a minor
In view of the above, we award a sum of Rs.62,27,000/ to the claimant under the following heads :
S.No Heads Amount (i) Expenses relating to treatment, hospitalisation and transportation
Rs. 2,50,000/
(ii) Loss of earnings (family members)
Rs. 51,000/
(iii) Loss of future earnings Rs.14,66,000/

(iv) Attendant charges Rs.21,60,000/
(v) Pain, suffering, loss of amenities Rs.15,00,000/
(vi) Loss of Marriage prospects Rs. 3,00,000/
(vii) Future medical treatment Rs. 5,00,000/
This amount shall carry an interest @7.5% p.a. from the date of filing of the claim petition till payment/deposit of the amount.
Obviously, the insurance company shall be entitled to adjust the amount already paid. Further, the insurance company shall also be entitled to recover the amount from the owner in terms of
the award of the MACT, which has not been challenged either
before the High Court or us.
We are aware that the amount awarded by us is more than the amount claimed. However, it is well settled law that in motor accident claim petitions, the Court must award just compensation and, in case, the just compensation is more than the amount claimed, that must be awarded especially where the claimant is a minor.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 735 OF 2020
(Arising out of Special Leave Petition (C) No.15504 OF 2019)
KAJAL …APPELLANT(S)
Versus
JAGDISH CHAND & ORS. …RESPONDENT(S)
J U D G M E N T
Deepak Gupta, J.
1. Kajal was a bright young girl. She used to attend school,
play with her friends and lead a normal life like any other child.
Unfortunately, on 18th October, 2007, while Kajal was travelling
on a tractor with her parents, the tractor was hit by a truck
which was driven rashly. In the said accident, Kajal suffered
serious injuries resulting in damage to her brain. This has had
very serious consequences on her. She was examined at the Post
Graduate Institute of Medical Education and Research,
1
Chandigarh (PGI, Chandigarh for short), for assessment of her
disability. According to the said report, because of head injury
Kajal is left with a very low I.Q. and severe weakness in all her
four limbs, suffers from severe hysteria and severe urinary
incontinence. Her disability has been assessed as 100%.
2. Dr. Chhabra (PW4), who was one of the members of the
Board which issued the disability certificate (Ex.P6) stated that
as per the assessment her I.Q. is less than 20% of a child of her
age and her social age is only of a 9 month old child. This means
that Kajal while lying on the bed will grow up to be an adult with
all the physical and biological attributes which a woman would
get on attaining adulthood, including menstruation etc., but her
mind will remain of a 9 month old child. Basically, she will not
understand what is happening all around her.
3. How does one assess compensation in such a case? No
amount of money can compensate this child for the injuries
suffered by her. She can never be put back in the same position.
However, compensation has to be determined in terms of the
provisions of Motor Vehicles Act, 1988 (for short the Act). The
Act requires determination of payment of just compensation and
2
it is the duty of the court to ensure that she is paid compensation
which is just.
4. Kajal through her father filed a claim petition, under the
Act. The Motor Accident Claims Tribunal (MACT for short)
awarded Rs.11,08,501/ and held that since there was violation
of the terms of policy the insurance company would pay the
amount but would be entitled to recover the same from the
owner. The High Court enhanced the award amount to
Rs.25,78,501/ under the following heads:
Heads High Court
Age 12
Multiplier
Income (taken to be) Rs. 15,000/
Disability 100%
Loss of income and permanent
disability compensation
Rs. 2,70,000/
Pain, suffering loss of amenities Rs. 3,00,000/
Attendant charges Rs. 3,20,000/
(Rs.2500 for 44
years)
Future medical expenses Rs. 2,00,000/
Loss of marriage prospects Rs. 3,00,000/
Medical
Treatment
Rs. 1,38,501/
Transportation details / special diet Rs. 50,000/
Total Rs.25,78,501/
Aggrieved by the award the claimant is before this Court.
5. The principles with regard to determination of just
compensation contemplated under the Act are well settled.
3
Injuries cause deprivation to the body which entitles the claimant
to claim damages. The damages may vary according to the gravity
of the injuries sustained by the claimant in an accident. On
account of the injuries, the claimant may suffer consequential
losses such as (i) loss of earning; (ii) expenses on treatment which
may include medical expenses, transportation, special diet,
attendant charges etc., (iii) loss or diminution to the pleasures of
life by loss of a particular part of the body, and (iv) loss of future
earning capacity. Damages can be pecuniary as well as nonpecuniary, but all have to be assessed in Rupees and Paise.
6. It is impossible to equate human suffering and personal
deprivation with money. However, this is what the Act enjoins
upon the courts to do. The court has to make a judicious attempt
to award damages, so as to compensate the claimant for the loss
suffered by the victim. On the one hand, the compensation
should not be assessed very conservatively, but on the other
hand, compensation should also not be assessed in so liberal a
fashion so as to make it a bounty to the claimant. The court while
assessing the compensation should have regard to the degree of
deprivation and the loss caused by such deprivation. Such
compensation is what is termed as just compensation. The
4
compensation or damages assessed for personal injuries should
be substantial to compensate the injured for the deprivation
suffered by the injured throughout his/her life. They should not
be just token damages.
7. There are numerous cases where the principles for grant of
compensation have been enunciated. It would be relevant to
quote pertinent observations from a few.
8. In Phillips v. Western Railway Co.
1
, Field, J., while
emphasizing that damages must be full and adequate, held thus:
"You cannot put the plaintiff back again into his original
position, but you must bring your reasonable common
sense to bear, and you must always recollect that this is
the only occasion on which compensation can be given.
The plaintiff can never sue again for it. You have,
therefore, now to give him compensation once and for all.
He has done no wrong, he has suffered a wrong at the
hands of the defendants and you must take care to give
him full fair compensation for that which he has
suffered." Besides, the Tribunals should always
remember that the measures of damages in all these
cases "should be such as to enable even a tortfeasor to
say that he had amply atoned for his misadventure".
9. In the case of Mediana2
, Lord Halsbury held:
"Of course the whole region of inquiry into damages is
one of extreme difficulty. You very often cannot even lay
down any principle upon which you can give damages;
nevertheless, it is remitted to the jury, or those who
stand in place of the jury, to consider what compensation
in money shall be given for what is a wrongful act. Take
the most familiar and ordinary case: how is anybody to
measure pain and suffering in moneys counted? Nobody
1 (1874) 4 QBD 406
2 [1900] AC 113
5
can suggest that you can by any arithmetical calculation
establish what is the exact amount of money which
would represent such a thing as the pain and suffering
which a person has undergone by reason of an accident.
In truth, I think it would be very arguable to say that a
person would be entitled to no damages for such thing.
What manly mind cares about pain and suffering that is
past? But, nevertheless, the law recognizes that as a
topic upon which damages may be given."
10. The following observations of Lord Morris in his speech in H.
West & Son Ltd. v. Shephard3
, are very pertinent:
"Money may be awarded so that something tangible may
be procured to replace something else of the like nature
which has been destroyed or lost. But money cannot
renew a physical frame that has been battered and
shattered. All that Judges and courts can do is to award
sums which must be regarded as giving reasonable
compensation. In the process there must be the
endeavour to secure some uniformity in the general
method of approach. By common assent awards must be
reasonable and must be assessed with moderation.
Furthermore, it is eminently desirable that so far as
possible comparable injuries should be compensated by
comparable awards."
In the same case Lord Devlin observed that the proper approach
to the problem was to adopt a test as to what contemporary
society would deem to be a fair sum, such as would allow the
wrongdoer to "hold up his head among his neighbours and say
with their approval that he has done the fair thing", which
should be kept in mind by the court in determining
compensation in personal injury cases.
3 1963 2 WLR 1359
6
11. Lord Denning while speaking for the Court of Appeal in the
case of Ward v. James4
, laid down the following three basic
principles to be followed in such like cases:
"Firstly, accessibility: In cases of grave injury, where the
body is wrecked or brain destroyed, it is very difficult to
assess a fair compensation in money, so difficult that the
award must basically be a conventional figure, derived
from experience or from awards in comparable cases.
Secondly, uniformity: There should be some measure of
uniformity in awards so that similar decisions may be
given in similar cases; otherwise there will be great
dissatisfaction in the community and much criticism of
the administration of justice. Thirdly, predictability:
Parties should be able to predict with some measure of
accuracy the sum which is likely to be awarded in a
particular case, for by this means cases can be settled
peaceably and not brought to court, a thing very much to
the public good."
12. The assessment of damages in personal injury cases raises
great difficulties. It is not easy to convert the physical and
mental loss into monetary terms. There has to be a measure of
calculated guess work and conjecture. An assessment, as best
as can, in the circumstances, should be made.
13. In McGregor’s Treatise on Damages, 14th Edn., para 1157,
referring to heads of damages in personal injury actions states:
"The person physically injured may recover both for his
pecuniary losses and his nonpecuniary losses. Of these
the pecuniary losses themselves comprise two separate
items, viz., the loss of earnings and other gains which the
plaintiff would have made had he not been injured and
the medical and other expenses to which he is put as a
4 (1965) 1 All ER 563
7
result of the injury, and the courts have subdivided the
nonpecuniary losses into three categories, viz., pain and
suffering, loss of amenities of life and loss of expectation
of life."
14. In M/s Concord of India Insurance Co. Ltd. v. Nirmala
Devi and others5
, this Court held:
"2….The determination of the quantum must be liberal,
not niggardly since the law values life and limb in a free
country in generous scales."
15. In R.D. Hattangadi v. Pest Control (India) Pvt. Ltd.6
,
dealing with the different heads of compensation in injury cases
this Court held thus:
"9. Broadly speaking, while fixing the amount of
compensation payable to a victim of an accident, the
damages have to be assessed separately as pecuniary
damages and special damages. Pecuniary damages are
those which the victim has actually incurred and which
are capable of being calculated in terms of money;
whereas nonpecuniary damages are those which are
incapable of being assessed by arithmetical calculations.
In order to appreciate two concepts pecuniary damages
may include expenses incurred by the claimant: (i)
medical attendance; (ii) loss of earning of profit up to the
date of trial; (iii) other material loss. So far as nonpecuniary damages are concerned, they may include:
(i) damages for mental and physical shock,
pain and suffering already suffered or likely to
be suffered in the future; (ii) damages to
compensate for the loss of amenities of life
which may include a variety of matters, i.e., on
account of injury the claimant may not be able
to walk, run or sit; (iii) damages for loss of
expectation of life, i.e. on account of injury the
normal longevity of the person concerned is
shortened; (iv) inconvenience, hardship,
5 1980 ACJ 55 (SC)
6 (1995) 1 SCC 551
8
discomfort, disappointment, frustration and
mental stress in life."
16. In Raj Kumar v. Ajay Kumar and Others7
, this Court laid
down the heads under which compensation is to be awarded for
personal injuries.
"6. The heads under which compensation is awarded in
personal injury cases are the following:
Pecuniary damages (Special damages)
(i)Expenses relating to treatment, hospitalization,
medicines, transportation, nourishing food, and
miscellaneous expenditure.
(ii) Loss of earnings (and other gains) which the
injured would have made had he not been
injured, comprising:
(a) Loss of earning during the period of
treatment;
(b) Loss of future earnings on account of
permanent disability.
(iii) Future medical expenses.
Nonpecuniary damages (General damages)
(iv) Damages for pain, suffering and trauma as a
consequence of the injuries.
(v) Loss of amenities (and/or loss of prospects of
marriage).
(vi) Loss of expectation of life (shortening of
normal longevity).
In routine personal injury cases, compensation will be
awarded only under heads (i), (ii) (a) and (iv). It is only in
serious cases of injury, where there is specific medical
evidence corroborating the evidence of the claimant,
that compensation will be granted under any of the
heads (ii)(b), (iii), (v) and (vi) relating to loss of future
earnings on account of permanent disability, future
medical expenses, loss of amenities (and/or loss of
prospects of marriage) and loss of expectation of life.”
7 (2011) 1 SCC 343
9
17. In K. Suresh v. New India Assurance Company Ltd.
and Ors.
8
, this Court held as follows :
“2...There cannot be actual compensation for anguish of
the heart or for mental tribulations. The
quintessentiality lies in the pragmatic computation of the
loss sustained which has to be in the realm of realistic
approximation. Therefore, Section 168 of the Motor
Vehicles Act, 1988 (for brevity ‘the Act’) stipulates that
there should be grant of “just compensation”. Thus, it
becomes a challenge for a court of law to determine “just
compensation” which is neither a bonanza nor a windfall,
and simultaneously, should not be a pittance.”
18. Applying the aforesaid principles, we now proceed to assess
the compensation.
Expenses relating to treatment, hospitalization, medicines,
transportation etc.
19. The High Court under the two heads of medical treatment
and transport has awarded Rs.1,88,501/. Out of this an
amount of Rs.1,38,501/ is the actual expense incurred on the
treatment of Kajal. One must remember that amongst people
who are not Government employees and belong to the poorer
strata of society, bills are not retained. Some of the bills have
been excluded by the courts below only on the ground that the
name of the patient is not written on the bill. There is no
dispute with regard to the long period of treatment and
8 (2012) 12 SCC 274
10
hospitalisation of this young girl. Immediately after the accident
on 18.10.2007, she was admitted at a hospital in Karnal. From
there, she was referred to the PGI, Chandigarh, where she
remained admitted from 21.10.2007 till 12.11.2007 and,
thereafter, she was again admitted in the hospital from
12.11.2007 till 08.12.2007. She was in the hospital for almost
51 days, and both Dr. Sameer Aggarwal (PW3) from the hospital
at Karnal and Dr. Rajesh Chhabra (PW4), from PGI,
Chandigarh, have supported this. Limiting the amount only to
the bills which have been paid in the name of the claimant only,
would not be reasonable. Therefore, the amount payable for
actual medical expenses is increased from Rs.1,38,501/ to
Rs.2,00,000/. The amount awarded for transportation at
Rs.50,000/ is reasonable. Therefore, under this head we award
Rs.2,50,000/.
Loss of earnings
20. Both the courts below have held that since the girl was a
young child of 12 years only notional income of Rs.15,000/ per
annum can be taken into consideration. We do not think this is
a proper way of assessing the future loss of income. This young
girl after studying could have worked and would have earned
11
much more than Rs.15,000/ per annum. Each case has to be
decided on its own evidence but taking notional income to be
Rs.15,000/ per annum is not at all justified. The appellant has
placed before us material to show that the minimum wages
payable to a skilled workman is Rs.4846/ per month. In our
opinion this would be the minimum amount which she would
have earned on becoming a major. Adding 40% for the future
prospects, it works to be Rs.6784.40/ per month, i.e.,
81,412.80 per annum. Applying the multiplier of 18 it works out
to Rs.14,65,430.40, which is rounded off to Rs.14,66,000/
21. Though the claimant would have been entitled to separate
attendant charges for the period during which she was
hospitalised, we are refraining from awarding the same because
we are going to award her attendant charges for life. At the
same time, we are clearly of the view that the tortfeasor cannot
take benefit of the gratuitous service rendered by the family
members. When this small girl was taken to PGI, Chandigarh,
or was in her village, 23 family members must have
accompanied her. Even if we are not paying them the attendant
charges they must be paid for loss of their wages and the
amount they would have spent in hospital for food etc. These
12
family members left their work in the village to attend to this
little girl in the hospital at Karnal or Chandigarh. In the hospital
the claimant would have had at least two attendants, and taking
the cost of each at Rs.500/ per day for 51 days, we award her
Rs.51,000/.
Attendant charges
22. The attendant charges have been awarded by the High
Court @ Rs.2,500/ per month for 44 years, which works out to
Rs.13,20,000/. Unfortunately, this system is not a proper
system. Multiplier system is used to balance out various factors.
When compensation is awarded in lump sum, various factors are
taken into consideration. When compensation is paid in lump
sum, this Court has always followed the multiplier system. The
multiplier system should be followed not only for determining
the compensation on account of loss of income but also for
determining the attendant charges etc. This system was
recognised by this Court in Gobald Motor Service Ltd. v.
R.M.K. Veluswami9
. The multiplier system factors in the
inflation rate, the rate of interest payable on the lump sum
9 AIR 1962 SC 1
13
award, the longevity of the claimant, and also other issues such
as the uncertainties of life. Out of all the various alternative
methods, the multiplier method has been recognised as the most
realistic and reasonable method. It ensures better justice
between the parties and thus results in award of ‘just
compensation’ within the meaning of the Act.
23. It would be apposite at this stage to refer to the observation
of Lord Reid in Taylor v. O’Connor10:
"Damages to make good the loss of dependency over a
period of years must be awarded as a lump sum and that
sum is generally calculated by applying a multiplier to
the amount of one year's dependency. That is a perfectly
good method in the ordinary case but it conceals the fact
that there are two quite separate matters involved, the
present value of the series of future payments, and the
discounting of that present value to allow for the fact that
for one reason or another the person receiving the
damages might never have enjoyed the whole of the
benefit of the dependency. It is quite unnecessary in the
ordinary case to deal with these matters separately.
Judges and counsel have a wealth of experience which is
an adequate guide to the selection of the multiplier and
any expert evidence is rightly discouraged. But in a case
where the facts are special, I think, that these matters
must have separate consideration if even rough justice is
to be done and expert evidence may be valuable or even
almost essential. The special factor in the present case is
the incidence of Income Tax and, it may be, surtax."
24. This Court has reaffirmed the multiplier method in various
cases like Municipal Corporation of Delhi v. Subhagwati
10 1971 AC 115
14
and Ors.
11
, U.P. State Road Transport Corporation and Ors.
v. Trilok Chandra and Ors.
12
, Sandeep Khanduja v. Atul
Dande and Ors.13
. This Court has also recognised that
Schedule II of the Act can be used as a guide for the multiplier to
be applied in each case. Keeping the claimant’s age in mind, the
multiplier in this case should be 18 as opposed to 44 taken by
the High Court.
25. Having held so, we are clearly of the view that the basic
amount taken for determining attendant charges is very much
on the lower side. We must remember that this little girl is
severely suffering from incontinence meaning that she does not
have control over her bodily functions like passing urine and
faeces. As she grows older, she will not be able to handle her
periods. She requires an attendant virtually 24 hours a day.
She requires an attendant who though may not be medically
trained but must be capable of handling a child who is bed
ridden. She would require an attendant who would ensure that
she does not suffer from bed sores. The claimant has placed
before us a notification of the State of Haryana of the year 2010,
11 1966 ACJ 57
12 (1996) 4 SCC 362
13 (2017) 3 SCC 351
15
wherein the wages for skilled labourer is Rs.4846/ per month.
We, therefore, assess the cost of one attendant at Rs.5,000/
and she will require two attendants which works out to
Rs.10,000/ per month, which comes to Rs.1,20,000/ per
annum, and using the multiplier of 18 it works out to
Rs.21,60,000/ for attendant charges for her entire life. This
takes care of all the pecuniary damages.
Pain, Suffering and Loss of Amenities
26. Coming to the nonpecuniary damages under the head of
pain, suffering, loss of amenities, the High Court has awarded
this girl only Rs.3,00,000/. In Mallikarjun v. Divisional
Manager, The National Insurance Company Limited and
Ors.
14, this Court while dealing with the issue of award under
this head held that it should be at least Rs.6,00,000/, if the
disability is more than 90%. As far as the present case is
concerned, in addition to the 100% physical disability the young
girl is suffering from severe incontinence, she is suffering from
severe hysteria and above all she is left with a brain of a nine
month old child. This is a case where departure has to be made
14 2013 (10) SCALE 668
16
from the normal rule and the pain and suffering suffered by this
child is such that no amount of compensation can compensate.
27. One factor which must be kept in mind while assessing the
compensation in a case like the present one is that the claim can
be awarded only once. The claimant cannot come back to court
for enhancement of award at a later stage praying that
something extra has been spent. Therefore, the courts or the
tribunals assessing the compensation in a case of 100%
disability, especially where there is mental disability also, should
take a liberal view of the matter when awarding compensation.
While awarding this amount we are not only taking the physical
disability but also the mental disability and various other
factors. This child will remain bedridden for life. Her mental
age will be that of a nine month old child. Effectively, while her
body grows, she will remain a small baby. We are dealing with a
girl who will physically become a woman but will mentally
remain a 9 month old child. This girl will miss out playing with
her friends. She cannot communicate; she cannot enjoy the
pleasures of life; she cannot even be amused by watching
cartoons or films; she will miss out the fun of childhood, the
excitement of youth; the pleasures of a marital life; she cannot
17
have children who she can love let alone grandchildren. She will
have no pleasure. Her’s is a vegetable existence. Therefore, we
feel in the peculiar facts and circumstances of the case even
after taking a very conservative view of the matter an amount
payable for the pain and suffering of this child should be at least
Rs.15,00,000/.
Loss of marriage prospects
28. The Tribunal has awarded Rs.3,00,000/ for loss of
marriage prospects. We see no reason to interfere with this
finding.
Future medical treatment
29. The claimant has been awarded only Rs.2,00,000/ under
this head. This amount is a pittance. Keeping in view the
nature of her injuries and the fact that she is bedridden this
child is bound to suffer from a lot of medical problems. True it
is that there is no evidence in this regard but there can hardly
be such evidence. She may require special mattress which will
have to be changed frequently. In future as this girl grows, she
may face many other medical issues because of the injuries
suffered in the accident. Keeping in view her young age and
18
assuming she would live another 5060 years, it would not be
unjust to award her Rs.5,00,000/ for future medical expenses.
How the compensation should be invested?
30. The tribunal while awarding the compensation had stated
that the amount payable to the share of Kajal would be kept in a
Fixed Deposit till she attains the age of 18 years. The High
Court while enhancing the amount of compensation has directed
that the enhanced amount be paid to the appellant within 45
days. This is totally contrary to the guidelines laid down by this
Court in General Manager, Kerala State Road Transport
Corporation, Trivandrum v. Susamma Thomas and Ors.
15
,
wherein it has been held clearly that the amount payable to the
minors should not be normally released. The guidelines in this
case were as follows :
“17….(i) The Claims Tribunal should, in the case of minors,
invariably order the amount of compensation awarded to
the minor be invested in long term fixed deposits at least
till the date of the minor attaining majority. The expenses
incurred by the guardian or next friend may, however, be
allowed to be withdrawn;
(ii) In the case of illiterate claimants also the Claims Tribunal
should follow the procedure set out in (i) above, but if
lump sum payment is required for effecting purchases of
any movable or immovable property such as, agricultural
implements, rickshaw, etc., to earn a living, the Tribunal
may consider such a request after making sure that the
15 (1994) 2 SCC 176
19
amount is actually spent for the purpose and the demand
is not a ruse to withdraw money;
(iii) In the case of semiliterate persons the Tribunal should
ordinarily resort to the procedure set out at (i) above
unless it is satisfied, for reasons to be stated in writing,
that the whole or part of the amount is required for
expanding and existing business or for purchasing some
property as mentioned in (ii) above for earning his
livelihood, in which case the Tribunal will ensure that the
amount is invested for the purpose for which it is
demanded and paid;
(iv) In the case of literate persons also the Tribunal may
resort to the procedure indicated in (i) above, subject to
the relaxation set out in (ii) and (iii) above, if having regard
to the age, fiscal background and strata of society to
which the claimant belongs and such other
considerations, the Tribunal in the larger interest of the
claimant and with a view to ensuring the safety of the
compensation awarded to him thinks it necessary to do
order;
(v) In the case of widows the Claims Tribunal should
invariably follow the procedure set out in (i) above;
(vi) In personal injury cases if further treatment is necessary
the Claims Tribunal on being satisfied about the same,
which shall be recorded in writing, permit withdrawal of
such amount as is necessary for incurring the expenses
for such treatment;
(vii) In all cases in which investment in long term fixed
deposits is made it should be on condition that the Bank
will not permit any loan or advance on the fixed deposit
and interest on the amount invested is paid monthly
directly to the claimant or his guardian, as the case may
be;
(viii) In all cases Tribunal should grant to the claimants
liberty to apply for withdrawal in case of an emergency. To
meet with such a contingency, if the amount awarded is
substantial, the Claims Tribunal may invest it in more
than one Fixed Deposit so that if need be one such F.D.R.
can be liquidated….”
These guidelines protect the rights of the minors, claimants who
are under some disability and also widows and illiterate person
who may be deprived of the compensation paid to them in lump
20
sum by unscrupulous elements. These victims may not be able
to invest their monies properly and in such cases the MACT as
well the High courts must ensure that investments are made in
nationalised banks to get a high rate of interest. The interest in
most cases is sufficient to cover the monthly expenses. In
special cases, for reasons to be given in writing, the MACT or the
trial court may release such amount as is required. We reiterate
these guidelines and direct that they should be followed by all
the tribunals and High Courts to ensure that the money of the
victims is not frittered away.
Interest
31. The High Court enhanced the amount of compensation by
Rs.14,70,000/ and awarded interest @ 7.5% per annum but
directed that the interest of 7.5% shall be paid only from the
date of filing of the appeal. This is also incorrect. We are
constrained to observe that the High Court was not right in
awarding interest on the enhanced amount only from the date of
filing of the appeal. Section 171 of the Act reads as follows :
“171. Award of interest where any claim is allowed.—
Where any Claims Tribunal allows a claim for
compensation made under this Act, such Tribunal may
direct that in addition to the amount of compensation
21
simple interest shall also be paid at such rate and from
such date not earlier than the date of making the claim
as it may specify in this behalf.”
Normally interest should be granted from the date of filing of the
petition and if in appeal enhancement is made the interest
should again be from the date of filing of the petition. It is only if
the appeal is filed after an inordinate delay by the claimants, or
the decision of the case has been delayed on account of
negligence of the claimant, in such exceptional cases the interest
may be awarded from a later date. However, while doing so, the
tribunals/High Courts must give reasons why interest is not
being paid from the date of filing of the petition. Therefore, we
direct that the entire amount of compensation including the
amount enhanced by us shall carry an interest of 7.5% per
annum from the date of filing of the claim petition till
payment/deposit of the amount.
Relief
32. In view of the above, we award a sum of Rs.62,27,000/
to the claimant under the following heads :
S.No
.
Heads Amount
22
(i) Expenses relating to treatment,
hospitalisation and
transportation
Rs. 2,50,000/
(ii) Loss of earnings (family
members)
Rs. 51,000/
(iii) Loss of future earnings Rs.14,66,000/

(iv) Attendant charges Rs.21,60,000/
(v) Pain, suffering, loss of amenities Rs.15,00,000/
(vi) Loss of Marriage prospects Rs. 3,00,000/
(vii) Future medical treatment Rs. 5,00,000/
This amount shall carry an interest @7.5% p.a. from the date of
filing of the claim petition till payment/deposit of the amount.
Obviously, the insurance company shall be entitled to adjust the
amount already paid. Further, the insurance company shall
also be entitled to recover the amount from the owner in terms of
the award of the MACT, which has not been challenged either
before the High Court or us.
33. We are aware that the amount awarded by us is more than
the amount claimed. However, it is well settled law that in
motor accident claim petitions, the Court must award just
compensation and, in case, the just compensation is more than
23
the amount claimed, that must be awarded especially where the
claimant is a minor.
34. The insurance company shall deposit the enhanced amount
before the MACT in terms of the judgment after deducting the
amount already paid by the insurance company within a period
of 3 months from today. The MACT shall keep the entire
amount in a fixed deposit in a nationalised bank, for a period of
5 years, giving highest rate of interest. The interest payable on
this amount shall be released on quarterly basis to the father of
the child. This amount shall be spent for paying the attendants
and for the care of the child alone. Even after 5 years since this
child for all intents and purpose shall remain a person under a
disability, the MACT shall keep renewing the amount on these
terms. We, however, further direct that in case the parents or
the guardian moves an application for release of some amount to
meet some special medical expenses, then MACT may consider
release of the same.
35. The appeal is disposed of in the aforesaid terms. No order
as to costs. Pending application(s), if any, also stand(s)
disposed of.
24
...................................J.
(L. Nageswara Rao)
...................................J.
(Deepak Gupta)
New Delhi
February 05, 2020
25

No Person could have been tried for the same offence twice at the behest of the the complainant who himself a complainant in both the FIRs. Section 300 of the Cr.P.C. provides as follows: “300. Person once convicted or acquitted not to be tried for same offence. (1) A person who has once been tried by a Court of competent jurisdiction for an offence and convicted or acquitted of such offence shall, while such conviction or acquittal remains in force, not be liable to be tried again for the same offence, nor on the same facts for any other offence for which a different charge from 7 the one made against him might have been made under subSection (1) of Section 221, or for which he might have been convicted under subSection (2) thereof.” 13. In view of the conclusion that the substratum of the two FIRs are the same and that the appellant has already stood acquitted on 07.08.1998 of the charge with regard to forging any general power of attorney of the respondent, we are of the considered opinion that the subsequent prosecution of the appellant in FIR No. 114 of 2008 dated 09.10.2008 is completely unsustainable. In the result, the FIR dated 09.10.2008, the orders dated 18.12.2015, 31.05.2016 and the impugned order dated 01.03.2017 are set aside. The appeal is allowed.

No Person could have been tried for the same offence twice at the behest of the the complainant who himself a complainant in both the FIRs.

Section 300 of the Cr.P.C. provides as follows: “300. Person once convicted or acquitted not to be tried for same offence. (1) A person who has once been tried by a Court of competent jurisdiction for an offence and convicted or acquitted of such offence shall, while such conviction or acquittal remains in force, not be liable to be tried again for the same offence, nor on the same facts for any other offence for which a different charge from 7 the one made against him might have been made under subSection (1) of Section 221, or for which he might have been convicted under subSection (2) thereof.” 13. In view of the conclusion that the substratum of the two FIRs are the same and that the appellant has already stood acquitted on 07.08.1998 of the charge with regard to forging any general power of attorney of the respondent, we are of the considered opinion that the subsequent prosecution of the appellant in FIR No. 114 of 2008 dated 09.10.2008 is completely unsustainable. In the result, the FIR dated 09.10.2008, the orders dated 18.12.2015, 31.05.2016 and the impugned order dated 01.03.2017 are set aside. The appeal is allowed.

NONREPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 237 OF 2020
(Arising out of S.L.P.(Crl.)No.4592 of 2017)
PREM CHAND SINGH ..........APPELLANT(s)
Versus
THE STATE OF UTTAR PRADESH
AND ANOTHER ......RESPONDENT(s)
JUDGMENT
NAVIN SINHA, J.
Leave granted.
2. The appellant has challenged the order dated 18.12.2015
rejecting his application for discharge and the affirmation of
the same on 31.05.2016 in Criminal Revision No. 70 of 2016
by the 4th Additional Sessions Judge, Gonda (U.P.).
1
3. The respondent no.2 is stated to have given a general
power of attorney to the appellant on 02.05.1985 and on the
basis of which the appellant sold certain lands belonging to
the respondent. The respondent lodged FIR No. 160 of 1989
on 14.09.1989 that he had never executed any general power
of attorney in favour of the appellant and that the appellant
has forged general power of attorney to sell his lands illegally.
The appellant was acquitted in the trial as the charge could
not be established. Though no records are available, the
acquittal is not disputed by counsel for respondent. The
respondent then filed Civil Suit No. 353 of 2007 to cancel the
general power of attorney. On 09.10.2008, the respondent
filed an application under Section 156(3) Cr.P.C. before the
court which was forwarded to the police leading to registration
of FIR No. 114 of 2008 on 09.10.2008 alleging that the
appellant had forged general power of attorney and on the
basis of the same had sold certain lands of the respondent.
2
That earlier also the appellant had sold lands of the
respondent in like manner.
4. The appellant filed an application for discharge referring
to his acquittal dated 07.08.1998 under Section 419 or 420
Cr.P.C. pleading that he could not be tried for the same
offence twice and that the FIR was based on concealment of
facts with regard to the earlier acquittal. The Judicial
Magistrate Class II Gonda rejected the discharge application
simplicitor on the ground that the order of acquittal dated
07.08.1998 had not been brought on record. Revision against
the same was dismissed holding that the grounds urged on
behalf of the appellant can more appropriately be urged at the
time of framing of the charges.
5. Mr. Pradeep Kant, learned senior counsel appearing for
the appellant, submitted that the order of acquittal dated
07.08.1998 and the subsequent institution of Civil Suit
No.353 of 2007 for the cancellation of the general power of
attorney executed by the respondent is not in dispute. The
3
subsequent FIR on 09.10.2008 itself refers to the general
power of attorney which was the subject matter of FIR No. 160
of 1989 but conceals the order of acquittal of the appellant. It
is submitted that in the facts of the case, the institution of the
FIR on 09.10.2008 long years after execution of general power
of attorney dated 02.05.1985 is, therefore, a complete abuse of
the process of law and the proceedings are fit to be quashed.
Referring to Section 300 Cr.P.C. it is submitted that the
appellant could not have been tried for the same offence twice
at the behest of the respondent who is the complainant
himself in both the FIRs.
6. Mr. Amit Yadav, learned Counsel for the respondentcomplainant, submits that the High Court has declined
interference since the ingredients of the two FIRs were
different. While the FIR No. 160 of 1989 was under Section
419 or 420 IPC the second FIR was under Sections 467, 468
and 471 also. Furthermore, the second FIR contains
allegations that the appellant put up an imposter in place of
4
the respondent before the registration authorities and
collusively executed sale deed in respect of his lands along
with Sushil Kumar Singh and Arvind in pursuance of a
general power of attorney which respondent had never
executed. The discharge application was, therefore, rightly
rejected and interference declined in revision.
7. We have heard learned counsel for the parties.
8. The FIR No. 160 of 1989 alleges that the respondent on
account of his job invariably stayed outside. The appellant
had created a forged general power of attorney from the
respondent in his name with regard to his lands bearing Gata
no. 77/0.87 decimal and sold it on the basis of the forged
general power of attorney which the respondent became aware
of on 25.07.1989. The respondent denied having ever
executed any general power of attorney in favour of the
appellant. The respondent does not dispute that the appellant
was acquitted of the charge by judgment dated 07.08.1998.
5
The fact that the judgement may not have been made available
is therefore inconsequential.
9. The institution of Civil Suit No. 353 of 2007 by the
respondent for cancellation of the general power of attorney,
after the acquittal of the appellant, is nothing but an
acknowledgment of the genuineness of the general power of
attorney executed by the respondents which he now wished to
revoke.
10. The respondent then filed an application under Section
156(3) Cr.P.C. which was forwarded by the Magistrate to the
police leading to registration of FIR dated 09.10.2008. The
allegations are similar that the appellant put up an imposter
in place of the respondent and along with one Sushil Kumar
Singh and Arvind on the basis of a general power of attorney,
which the respondent had never executed, sold his lands. The
FIR itself recites that earlier also the appellant had sold the
lands of the respondent on the basis of same general power of
6
attorney, but conceals the order of acquittal dated 07.08.1998,
and also the institution of Civil Suit No. 353 of 2007 for
annulment of the same.
11. It is, therefore, apparent that the subject matter of both
the FIRs is the same general power of attorney dated
02.05.1985 and the sales made by the appellant in pursuance
of the same. If the substratum of the two FIRs are common,
the mere addition of Sections 467, 468 and 471 in the
subsequent FIR cannot be considered as different ingredients
to justify the latter FIR as being based on different materials,
allegations and grounds.
12. Section 300 of the Cr.P.C. provides as follows:
“300. Person once convicted or acquitted not to be
tried for same offence.
(1) A person who has once been tried by a Court of
competent jurisdiction for an offence and
convicted or acquitted of such offence shall,
while such conviction or acquittal remains in
force, not be liable to be tried again for the
same offence, nor on the same facts for any
other offence for which a different charge from
7
the one made against him might have been
made under subSection (1) of Section 221, or
for which he might have been convicted under
subSection (2) thereof.”
13. In view of the conclusion that the substratum of the two
FIRs are the same and that the appellant has already stood
acquitted on 07.08.1998 of the charge with regard to forging
any general power of attorney of the respondent, we are of the
considered opinion that the subsequent prosecution of the
appellant in FIR No. 114 of 2008 dated 09.10.2008 is
completely unsustainable. In the result, the FIR dated
09.10.2008, the orders dated 18.12.2015, 31.05.2016 and the
impugned order dated 01.03.2017 are set aside. The appeal is
allowed.
……….………………………..J.
(Navin Sinha)
………………………………….J.
(Krishna Murari)
New Delhi,
February 07, 2020
8

whether the appellants were required to pay the price of coal consumed in their manufacturing process at a preferential rate, known in the trade parlance as “linked price”, or the price under a Liberalised Sales Scheme (LSS).

whether the appellants were required to pay the price of coal consumed in their manufacturing process at a preferential rate, known in the trade parlance as “linked price”, or the price under a Liberalised Sales Scheme (LSS).

(Non-Reportable)
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8153 OF 2009
M/s. S.K.J. Coke Industries Ltd.& Anr. ..….Appellants
Versus
Coal India Ltd. & Ors. …..Respondents
J U D G M E N T
ANIRUDDHA BOSE, J.
The core dispute in this appeal involves the question as to
whether the appellants were required to pay the price of coal
consumed in their manufacturing process at a preferential rate, known
in the trade parlance as “linked price”, or the price under a Liberalised
Sales Scheme (LSS). The latter pricing mechanism is similar to open
market price of coal. The predecessor in title of the first appellant
were a firm under the trade name Mahabir Coke Industries. At the
material time, they were engaged in production of low ash
metallurgical coal at a location close to Guwahati. They wanted to be
under the preferential pricing regime on the strength of an
Page 1 of 19
arrangement with the respondent coal companies agreed upon in the
year 1989. Under such arrangement Mahabir Coke Industries were
permitted to lift 4000 metric tonnes of coal per month. Traditionally,
the coal industry has been deeply regulated by the Government of
India. The Colliery Control Order, 1945 was one of such regulating
instruments. This Control Order has been replaced by Colliery
Control Order, 2000 with effect from 1st January, 2000 but that factor
is not of much significance so far as the present appeal is concerned.
The basic coal mining industry is nationalised and largely controlled
by the Coal India Ltd., a public sector undertaking. The appellants
were approved linkage of said 4000 metric tonnes of low ash coal
from Tirup and Tikak mines of North Eastern Coalfields (NEC). The
said coal company is a subsidiary of Coal India Limited (CIL). The
linking order was issued on 20th September, 1989. The respondent
coal companies in course of hearing before us have sought to
distinguish between “linkage” and “allocation”. Their stand is that in
the case of the appellants, there was monthly allocation of the said
quantity of coal only for which they cannot claim preferential price.
As cokeries, they were allocated coal suitable for use in steel plants
Page 2 of 19
subject to availability. The respondents’ case is that linkage at
preferential price is given to the industries or thermal plants out of
coal not suitable for use in steel plants. For that reason, according to
the respondent coal companies, appellants were not given linkage but
allocated specified quantity. Clause 3 of the 1945 Control Order
empowered categorisation and gradation of coal by the Central
Government. Clause 4 thereof authorised the Central Government to
fix different prices of coal for different classes, grades, sizes of coal as
also prices of different collieries.
2. On 16th June 1994, a notification was issued by the Central
Government in pursuance of the aforesaid two Clauses of the 1945
Control Order stipulating the classes and grades in which coal and
coke were to be categorised. That notification also stipulated the sale
prices for such coal, at which they could be sold by the colliery owner
at pitheads. Table I thereof provided gradation with grade
specifications of different types of coal. There was no such grading in
respect of coal produced in the State of Assam and certain other states
in the North Eastern Region in that Table. We shall henceforth refer to
Page 3 of 19
coal lifted by the appellants as “Assam coal”. The second Table (Table
II) to this notification dealt with sale prices of different types of coal
mainly on the basis of “Useful heat value in kilo calories per
kilogram”. For coal from Assam and that region, price for ungraded
coal with ash content not exceeding 25% was specified to be “not
exceeding Rs.741.00 p.” NEC made provisional declaration of grade
of Assam coal under Clause 3A(1) of the 1945 Control Order on 11th
June 1997. By a further notification dated 26th August 1997 the
revised prices thereof were notified. Thereafter, by another
notification dated 24th February 1999, the gradation formalities for
coal produced in Assam and other States in the said region was
completed by effecting suitable amendments to the notification dated
16th June 1994. In Clause 9 (ii) of the 1994 notification, there was
stipulation to the following effect for computing the price of coal
depending upon their ash content:-
“9. (i)…………………..
(ii) In case of coal produced in the State of
Assam, Arunachal Pradesh, Meghalaya
and Nagaland the price payable shall be
increased at the rate of Rs.1/- per tonne for
each percentage of ash by which the ash
Page 4 of 19
content falls below 22 per cent. Similarly
when ash content exceeds 25 per cent, the
price shall be reduced at the same rate of
Rs. 11 per tonne per cent of ash by which
the ash content exceeds 25 per cent.”
3. The first appellant, whose predecessors were the petitioners
before the First Court continued with receiving coal in terms of the
notification dated 16th June, 1994 at the price stipulated therein till
18th January 1996. Admitted position is that coal lifted by the
appellants had ash content below 25%. From 19th January 1996, the
price NEC was charging the appellants stood substantially enhanced.
The reason for this, according to the respondent companies, was that a
Liberalised Sales Scheme (LSS) was implemented by the CIL under
authorisation of the Central Government to that effect. The LSS
under which price was enhanced was on the basis of a notification
dated 9th January, 1996. That notification was followed by another
notification dated 11th March, 1996. On the latter date, a Liberalised
Sales Scheme (Modified) was introduced. The notification of 9th
January, 1996 reads:-
“S.O. 21(E). In pursuance of the provisions of
clause 18 of the Colliery Control Order, 1945,
as continued in force by section 16 of the
Essential Commodities Act, 1995 (10 of 1955),
Page 5 of 19
the Central Government, having regard to the
stock position of coal, hereby exempts the Coal
India Ltd., Subsidiaries of Coal India Limited
and the Singareni Collieries Company Limited
in respect of coal sold by them under any
Liberalized sale Scheme (LSS) of the
Government of India from the provisions of
clauses 4, 4A and 4B of the said order.
This notification shall remain in force on
and from the date of its publication in the
official Gazette and until the 31st day of March,
1996.”
4. As pleaded in paragraph 22 of the appellant’s writ petition,
clause 2.3 of that Scheme specified that the declaration of source
under “LSS” was not to affect rail loading for linked/sponsored
consumers or coal supplies to road linked/sponsored consumers. The
appellants continued to lift coal under protest on payment of such
higher price. Subsequently on 16th November 1996, the linkage
committee of the Coal India Limited in its 85th meeting took the
following decision under agenda item nos. 23 and 24:
“23. ‘Linkage’ of coal to SSF units & cokery
units –
The Committee deliberated on the agenda
items and decided that SSF units and cokery
units which have been allocated coal by Coal
India Ltd., should be treated as ‘linked unit’, in
Page 6 of 19
the same manner as other linked industrial units
in the non-core sector. The committee also
decided that-
(a) Coal Clearance Letter/Coal Allocation
Letters issued to SSF units and Cokery units
should be treated as ‘Linkage Advice Letters’
which are issued to other non-core sector units;
(b) The present system of capacity
assessment for SSF units by CMPOI and cokery
units by a joint team of officers from Coal
Co/CMPOI/CIL, should continue;
(c) All cokery units should be required to
obtain sponsorship/recommendation letters from
the concerned State Govts., in the same manner
as sponsorship/recommendation is required for
other non-core sector units.
24. Case of M/s Mahabir Coke Industries,
Guwahati, AssamThe agenda item was discussed by the
Committee. As already decided in the previous
agenda item (i.e. item No.23), all cokery units
and SSF units who have been allocated coal by
CIL, should be treated as ‘linked’ units.
Regarding the ‘price’ to be charged for supply
of low ash coal to M/s. Mahabir Coke
Industries, Guwahati, this matter should be
decided by NEC-Assam as prevalent at any
point of time.”
5. On 12th March, 1997, a notification was issued by the Central
Government in substance deleting clause 4 of the Control Order of
Page 7 of 19
1945 from the notification dated 16th June 1994. The relevant
portion of the notification dated 12th March 1997 stipulated:-
“S.O. 190 (E). – In pursuance of clauses 3 and 4
of the Colliery Control Order, 1945, as
continued in force by Section 16 of the Essential
Commodities Act, 1955 (10 of 1955), the
Central Government hereby makes the
following further amendments to the
notification of the Government of India in the
Ministry of Coal No.S.O.- -453(E) dated the 16th
June, 1994 on and from the date of publication
of this notification in the Official Gazette,
namely:-
In the said Notification:-
(a) in the preamble:-
(i) for the words and figures “clauses 3
and 4”, the word and figure “clause 3”
shall be substituted,
(ii) the words and figures “and fixes in
Tables II, V and VI below the sale price
at which coal or coke may be sold by
the colliery owners at pit-heads” shall
be omitted.
(b) Table II relating to non-cooking coal, Table
V relating to hard coke, Table VI relating to soft
coke and the Notes and the Annexure thereunder
shall be omitted.”
6. The appellants founded their writ petition projecting them as
“linked consumer” and contended that they were to pay the price of
Page 8 of 19
coal not beyond that notified on 16th June 1994. The reliefs asked for
in their petition included a prayer for writ in the nature of mandamus
commanding CIL and NEC to charge the appellants notified price as
applicable to linked or sponsored units. Prayer was also made for
refund of excess sum realised from them as LSS price.
7. Before the First Court, the respondents had run a case that till
12th March, 1997, price for NEC coal was fixed by the Government of
India for linked consumers. It has been submitted before us on behalf
of the coal companies that till 18th January 1996, prices for the linked
consumers and for the consumers lifting coal on allocation had
remained the same. For those other than linked consumers, price was
fixed by the CIL with effect from 19th January, 1996 in accordance
with the LSS as from that point of time, these coal companies were
exempted from Clause 4 of the 1945 Control Order.
8. The main point argued on behalf of the appellants before the
First Court was that in not charging the appellants coal price as
applicable to a linked unit, the authorities had ignored the resolution
adopted in the 85th meeting of the Linkage Committee for non-core
sector consumers. As a corollary, the appellants contended that they
Page 9 of 19
were not obliged to pay the LSS price as enhanced from 19th January,
1996. The First Court, however, rejected such plea referring to the
second part of the aforesaid resolution of the Linkage Committee.
Under that part, the appellants were required to pay the “price
prevalent at any point of time”. The case of the appellants that “price”
referred to in that part was “linkage price” was not accepted by the
First Court. The reasoning of the First Court would appear from the
following passage of the judgment:-
“After taking into consideration all relevant
facts and circumstances and having regard to the
submission made by learned counsel for the
parties, this Court, however, finds it difficult to
appreciate the grievance raised herein on behalf
of the writ petitioner. The very basis of the
claim of the writ petitioner, as referred to earlier,
is the resolution adopted in the 85th meeting. It
was specifically mentioned that while the
petitioner could be treated as a linked unit, the
price was to be charged as decided by the NEC,
Assam as prevalent at any point of time.”
9. The stand of the appellants before the Division Bench was that
since Assam coal remained ungraded under the 16th June 1994
notification and the relevant entry in the Table I was removed only on
24th February 1999, the coal companies did not have authority to
Page 10 of 19
grade the coal prior to that date. Before the Division Bench,
appellants’ case was that since there was no specification as regards
gradation under Clause 3 by the Central Government, the coal
companies could not have had exercised their power for such
gradation as also price specification in terms of Clause 3A thereof.
The authority cited before the Division Bench of the High Court was
the case of Ashoka Smokeless Coal India Pvt. Ltd. vs. Union of
India [(2007) 2 SCC 640]. This judgment has been referred to before
us also in support of the argument of the appellants that there could be
no pricing discrimination in respect of two sets of non-core
consumers. This was a case where constitutionality of e-auction
system was challenged and that was the focus of that decision.
Paragraph 161 of the said report was relied upon before us in which it
has been held and observed:
“161. The effect is that today, while the core
sector (92%) on its own and non-core nonlinked SSI/tiny units (through NCCF/other
agencies) (1%) are being supplied coal at a fixed
price, on the other hand, the non-core linked
SSI/tiny units (4%) are being subjected to
differential treatment, without any rational
classification, by supplying the coal to the latter
on the price to be ascertained by the traderPage 11 of 19
controlled process of e-auction and thereby
putting the petitioner units on a par with the
trader. The scheme of e-auction is, therefore,
ultra vires Article 14 of the Constitution of
India.”
10. The Division Bench of the High Court in appeal instituted by
the appellants found that the said decision did not have any impact so
far as appellant’s claim was concerned once the dual system of pricing
was found to be acceptable. This is the judgment which is under
appeal before us. We also confirm this view of the Appellate Bench as
we find such view to be the correct view so far as applicability of the
ratio of the case of Ashoka Smokeless Coal India (supra) is
concerned.
11. It has also been urged before us on behalf of the appellants that
in the Resolution of 16th November 1996, the appellants had been
specifically referred to as “linked consumer” and in that context the
expression “price” as contained in the second part of the Resolution
ought to imply the price for linked consumers only. The case of CCT,
Ranchi and Another Vs. Swarn Rekha Cokes and Coals (P) Ltd.
and Others [(2004) 6 SCC 689] was relied upon by the learned
Page 12 of 19
counsel for the appellants mainly for interpretation of the aforesaid
Resolution (agenda item no.24). The appellants seek to contend that
while interpreting a provision by which a legal fiction is created, the
Court must ascertain the purpose for which the fiction was created
and having done so, Court should assume those facts and
consequences exist, which are incidental to and inevitable corollaries
for giving effect to such fiction. The rationale behind the appellants’
citing this decision is the wording of the aforesaid Resolution of 16th
November 1996. It has been specified in agenda items 23 and 24 of
that Resolution that all cokery units which have been allocated coal
by CIL ought to be treated as linked units. The appellants have argued
that once they were treated as a linked unit, the price benefit attached
to a linked unit should automatically follow. From the said
Resolution, however, we find a specific agenda item concerning the
first appellant, and the Resolution as adopted specifically stipulates
that the price to be charged from the appellants was to be decided by
the NEC Assam as prevalent at any point of time. In view of this
specific treatment of pricing along with reference to the first appellant
as a linked unit, in our opinion, said Resolution has to be construed to
Page 13 of 19
mean that treatment of the appellant as a linked unit was for the
purpose of regular supply of coal and the pricing factor was separated
from such deemed linking. This would be apparent from the decision
taken against agenda item no.23, in which reference has been made to
SSF units and cokery units which had been allocated (emphasis
supplied) coal, and it was these units which were to be treated as
linked units. The distinction between “allocation” and “linking”
clearly emerges from the said decision of the linking committee. It is
a fact that the first appellant’s treatment as a linked unit was a fiction.
But such fiction was replaced by reality on the basis of a specific
provision in the Resolution (agenda item no.24) so far as pricing is
concerned. As the Resolution dealt with “linking” and “pricing”
separately, the fictional linking could not be extended to actual
pricing. The respondents have taken consistent plea that the
expression “linked” has been loosely used and for non-core sector
units, it meant allocation of specified quantity of coal only. In
paragraphs 16 and 17 of NEC’s affidavit-in-opposition to the writ
petition, it has been stated:-
Page 14 of 19
“16. At the said meeting, the decision was
taken to treat SSF and cokery units including
Mahabir Coke as a “linked units”. Such
treatment as a linked unit do not mean grant of
actual linkage. So, Mahabir Coke cannot claim
to be a linked unit. The advantage of being
treated as a linked unit was that Mahabir Coke
will be assured for monthly supply of 4000 MT
coal per month by NEC. The said
resolution/decision also provides that the price
to be charged for supply of low ash coal to
Mahabir Coke will be decided by NEC on the
basis of price prevalent at any point of time i.e.
current price prevailing at the time of supply.
17. There are nearly 200 Cokery units, in India
out of them only three cokery unit, including
cokery unit of Mahabir Coke, are located at
Assam. Mahabir Coke, along with other two
cokery units have been getting low ash Assam
coal which is of superior grade than what the
other cookeries of all over India have been
getting from their respective coal companies.
Normally all other cookeries are getting the
higher ash content coal. The other cookeries
located outside Assam get coal having ash
content of 25 – 30%, whereas the cookeries
located in Assam are getting low ash coal of
NEC having ash content of only 7%. The other
cookeries located outside Assam take supply of
low ash coal from NEC, under LSS for blending
the same with higher ash content coal which
they have been getting from other coal
companies. All other cookeries including three
cookeries of Assam, who are buying the same
low ash coal as supplied to Mahabir Coke, have
been paying the LSS price as notified from time
to time.”
Page 15 of 19
12. Learned counsel for the appellants has brought to our notice the
following observations of the Division Bench in different parts of the
judgment:-
“At the time the Linkage Committee stipulated
that the price payable by the appellant company
would be as per the prevailing rate to be decided
by the fifth Respondent, no coal company had
any authority to supersede the price fixed by the
Central Government by a notification issued
under the Colliery Control Order, 1945. At the
highest, such conditional treatment of the
appellant company as a linked unit, could come
into play only if the price of coal was
deregulated by the Central Government; ipso
facto by reason of the Linkage Committee
decision of November 16, 1995 the appellant
company could not be charged at a rate in
derogation of what the Central Government
notified.”
xx xx xx xx xx xx
“The price of Assam coal at Rs. 741/- per MT
(subject to the variation on account of ash
content) became inoperative upon the
notification of March 12, 1997.”
xx xx xx xx xx xx
“The appellants remain liable to pay the
difference in price on the basis of price fixed by
the respondents subsequent to the notification of
March 12, 1997.”
Page 16 of 19
13. In our opinion, the exemption granted by the Central
Government by the notification dated 9th January, 1996 to Coal India
and their subsidiaries from the provisions of Clauses 4, 4A and 4B of
the 1945 Control Order in respect of sale of coal under LSS, the fetter
imposed by the aforesaid notification of June 1994 got effectively
removed. Specific stand taken by the respondents is that the linking
of the first appellant was only in respect of the quantum of coal to be
obtained by them and they were not entitled to price benefits of linked
consumers. For the appellants, it was only a case of allocation. Thus,
the point of time from when the appellants became liable to pay LSS
rate would be the time when LSS price was raised after 9th January
1996. Prior to that date, we have already reproduced the coal
companies’ submission that the linked price and non-linked price had
remained the same. So far as the aforesaid observations in the
impugned judgment is concerned, such reasoning does not appear to
us to be correct. But our views on this point would not advance the
case of the appellants. That is so because in our opinion, it was within
the power of the NEC to enhance the price for LSS consumers upon
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CIL and their subsidiaries being exempted from Clause 4 of the 1945
Control Order on and from 9th January 1996.
14. It appears that a liberalised pricing system has been prevailing
since the year 1993. We find no reason to disbelieve the coal
companies when they assert that there was only allocation of coal in
favour of the first appellant. Thus the appellants did not have vested
legal right to preferential pricing as linked consumers. The 9th
January 1996 notification empowered Coal India Ltd. and their
subsidiaries to charge price to consumers beyond that notified on 16th
June 1994 in respect of Assam coal. The appellants were in the noncore sector. Around that point of time only parity between LSS price
and linked price was broken and the first appellant was required to
pay the LSS price. So far as allocation is concerned, the agenda 24 of
the 85th meeting of the linkage committee retained the supply volume.
But that Resolution is in tune with the NEC’s stand taken before us
that LSS price ought to be charged to the appellants. The factual
argument of the appellants that the two other cokery units in Assam
were not linked, are of no relevance. The appellants have not been
able to sustain a case before us that their linking agreement covered
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both allocation and pricing as is the case of other linked consumers.
So far as the other cokery units are concerned, it has been clarified by
the learned counsel for the coal companies that they lift coal of high
ash content between 25-30% which would automatically take them
out of the price advantage specified in Table II of the 1994
notification. We accordingly do not find any reason to set aside the
judgment of the Division Bench.
15. The appeal is accordingly dismissed. No order as to costs. The
interim orders, if any, shall stand dissolved.
…………….………..…..J.
(Deepak Gupta)
………………………….J.
(Aniruddha Bose)
New Delhi,
Dated: 7th February, 2020.
Page 19 of 19

LAW FOR ALL

LawforAll

advocatemmmohan

Just for legal information but not form as legal opinion

Monday, February 10, 2020

whether the appellants were required to pay the price of coal consumed in their manufacturing process at a preferential rate, known in the trade parlance as “linked price”, or the price under a Liberalised Sales Scheme (LSS).