Controversy - to the reservations to Scheduled Castes and Scheduled Tribes in promotions in the posts of Assistant Engineer (Civil) in Public Works Department, Government of Uttarakhand. ? Apex court held that There is no fundamental right which inheres in an individual to claim reservation in promotions. No mandamus can be issued by the Court directing the State Government to provide reservations. - the High court order directing that all future vacancies that are to be filled up by promotion in the posts of Assistant Engineer, should only be from the members of Scheduled Castes and Scheduled Tribes, is wholly unjustifiable and is hence set aside.- The submission made on behalf of the reserved category candidates that the judgment of this Court in Suresh Chand Gautam (supra) needs reconsideration is without substance in view of the findings recorded above. We are in agreement with the decision of this Court in Suresh Chand Gautam (supra) in which it was held that no mandamus can be issued by the Court to the State to collect quantifiable data relating to adequacy of representation of the Scheduled Castes and Scheduled Tribes in public services.

 Controversy - to the reservations to Scheduled Castes and Scheduled Tribes in promotions in the posts of Assistant Engineer (Civil) in Public Works Department, Government of Uttarakhand. ?
Apex court held that There is no fundamental right which inheres in an individual to claim reservation in promotions. No mandamus can be issued by the Court directing the State Government to provide reservations. - the High court order directing that all future vacancies that are to be filled up by promotion in the posts of Assistant Engineer, should only be from the members of Scheduled Castes and Scheduled Tribes, is wholly unjustifiable and is hence set aside.- The submission made on behalf of the reserved category candidates that the judgment of this Court in Suresh Chand Gautam (supra) needs reconsideration is without substance in view of the findings recorded above. We are in agreement with the decision of this Court in Suresh Chand Gautam (supra) in which it was held that no mandamus can be issued by the Court to the State to collect quantifiable data relating to adequacy of representation of the Scheduled Castes and Scheduled Tribes in public services.

Non-Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal No. 1226 of 2020
[Arising out of S.L.P. (Civil) No. 23701 of 2019]
Mukesh Kumar & Anr.
.... Appellant(s)
Versus
The State of Uttarakhand & Ors.
…. Respondent(s)
WITH
Civil Appeal No. 1227 of 2020
[Arising out of S.L.P. (Civil) No. 22640 of 2019]
Civil Appeal No. 1228 of 2020
[Arising out of S.L.P. (Civil) No. 25508 of 2019]
Civil Appeal No. 1229 of 2020
[Arising out of Dy. No.39572 of 2019 @S.L.P. (Civil) No. 3668
of 2020]
Civil Appeal No. 1230 of 2020
[Arising out of S.L.P. (Civil) No. 27715 of 2019]
Civil Appeal No. 1231 of 2020
[Arising out of S.L.P. (Civil) No. 28039 of 2019]
Civil Appeal No. 1232 of 2020
[Arising out of S.L.P. (Civil) No. 27735 of 2019]
Civil Appeal No. 1233 of 2020
[Arising out of S.L.P. (Civil) No. 28947 of 2019]
J U D G M E N T
L. NAGESWARA RAO, J.
1 | P a g e
1. The Controversy in the above Appeals pertains to the
reservations to Scheduled Castes and Scheduled Tribes in
promotions in the posts of Assistant Engineer (Civil) in Public
Works Department, Government of Uttarakhand.
2. The Uttar Pradesh Public Services (Reservation for
Scheduled Castes, Scheduled Tribes and Other Backward
Classes) Act, 1994 (for short “the 1994 Act”) provided for
reservation in public services and posts in favour of persons
belonging to Scheduled Castes, Scheduled Tribes and Other
Backward Classes of citizens. Section 3(1) of the said Act
stipulated reservation at the stage of direct recruitment.
According to Section 3(7) of the 1994 Act, the Government
Orders providing reservation for appointment to public posts
filled up by promotion which were existing on the date of
commencement of the 1994 Act shall continue till they are
modified or revoked. After the formation of the State of
Uttarakhand in 2001, the Uttar Pradesh Public Services
(Scheduled Caste, Scheduled Tribe and Other Backward
Caste Reservation) Act, 1994 was made applicable to the
State of Uttaranchal by a Notification dated 30.08.2001 with
2 | P a g e
a modification in the percentage of reservations. 21%
reservation for Scheduled Castes was modified to 19% and
2% for Scheduled Tribes was increased to 4%. Likewise,
21% reservation provided in the 1994 Act for Other
Backward Classes was altered to 14%.
3. A Division Bench of the High Court of Judicature at
Allahabad in Mukund Kumar Shrivastava v. State of
U.P.
1
 upheld the validity of Rule 8-A of the Uttar Pradesh
Servants Government Seniority Rules, 1991 (for short “the
Seniority Rules”) which dealt with consequential seniority of
persons belonging to Scheduled Castes and Scheduled
Tribes. Later, in Prem Kumar Singh v. State of U.P.
2
,
another Division Bench of the High Court of Judicature at
Allahabad, Lucknow Bench held that the judgment in
Mukund Kumar Shrivastava (supra) is per incuriam and
not a binding precedent. In Prem Kumar Singh’s case
(supra), the High Court declared Section 3(7) of the 1994
Act and Rule 8-A of the Seniority Rules unconstitutional.
While declaring the correctness of the judgments of the
1 (2011) 1 ALL LJ 428
2 (2011) 3 ALL LJ 343
3 | P a g e
High Court, this Court by its judgment in Uttar Pradesh
Power Corporation v. Rajesh Kumar
3
 held that Section
3(7) of the 1994 Act is unconstitutional insofar as it is
contrary to the dictum in M. Nagaraj & Ors. v. Union of
India & Ors.
4
4. The challenge to Section 3(7) of the 1994 Act, as
extended to the State of Uttarakhand, was upheld by the
High Court of Uttarakhand in Vinod Prakash Nautiyal &
Others v. State of Uttarakhand & Others
5
. Relying
upon the judgment of this Court in U.P. Power
Corporation (supra), the High Court of Uttarakhand
declared Section 3(7) of the 1994 Act unconstitutional and
directed that no promotion can be given by the State by
taking recourse to Section 3(7) of the 1994 Act. The
application filed for review of the judgment in Vinod
Prakash Nautiyal (supra) was dismissed. By way of
implementation of the judgment of the High Court dated
06.07.2011 in Vinod Prakash Nautiyal (supra), a
committee was constituted by the Government of
3 (2012) 7 SCC 1
4 (2006) 8 SCC 212
5 W.P. (S/B) No.45 of 2011
4 | P a g e
Uttarakhand for collection of quantifiable data relating to
the backwardness of the reserved communities in the State
of Uttarakhand and the inadequacy of their representation
in public posts.
5. On 05.09.2012, the State Government decided that all
posts in public services in the State shall be filled up without
providing any reservations to Scheduled Castes and
Scheduled Tribes. All Government Orders to the contrary
were superseded by the proceeding dated 05.09.2012. Mr.
Gyan Chand who was working as Assistant Commissioner
(Civil), State Tax and belonging to Scheduled Caste
Community filed a Writ Petition for quashing the proceeding
dated 05.09.2012. The High Court by its judgment dated
01.04.2019 struck down the proceeding dated 05.09.2012
as being contrary to the law declared by this Court in Indra
Sawhney v. Union of India & Ors.
6 and Jarnail Singh &
Ors. v. Lachhmi Narain Gupta & Ors.
7
 While referring to
the judgments of this Court in M. Nagaraj (supra) and
Jarnail Singh (supra), the High Court held that Article 16(4)
6 (1992) Supp.3 SCC 217
7 (2018) 10 SCC 396
5 | P a g e
of the Constitution in an enabling provision. The High Court
observed that it is not necessary for the State Government
to collect quantifiable data regarding representation of
Scheduled Castes and Scheduled Tribes in State services or
regarding their backwardness before providing reservation
in their favour in promotion posts. The High Court was of the
opinion that the judgment in Vinod Prakash Nautiyal
(supra) related to the constitutional validity of Section 3(7)
of the 1994 Act alone and the Notifications pertaining to
reservation in promotion in favour of Scheduled Castes and
Scheduled Tribes were not set aside. The Appeals arising
out of Civil Appeal @ S.L.P.(Civil) No.25508 of 2019 and Civil
Appeal @S.L.P. (Civil) @ Diary No.39572 of 2019 have been
filed assailing the judgment of the High Court dated
01.04.2019.
6. Vinod Kumar and three others belonging to the
Scheduled Castes working in the Public Works Department,
Government of Uttarakhand filed a Writ Petition in the High
Court of Uttarakhand seeking a direction to the Respondent
therein to prepare a separate list of eligible candidates as
6 | P a g e
per Rule 5 of the Uttarakhand Promotion by Selection (on
posts outside the purview of Public Service Commission)
Eligibility Rules, 2003 and to prepare a separate list for each
category of eligible candidates of General, Scheduled Castes
and Scheduled Tribes for promotion to the post of Assistant
Engineer (Civil) in Public Works Department. A further
direction to the State Government was sought to hold a
departmental promotion committee for promotion to the
posts of Assistant Engineers after providing reservation to
Scheduled Castes and Scheduled Tribes in accordance with
the Government Orders dated 30.08.2001, 31.08.2001 and
17.02.2004 by which reservation was provided in promotion.
The Writ Petition was disposed of by the High Court on
15.07.2019 with a direction to the State Government to
implement reservations in promotion by promoting only
members of Scheduled Castes and Scheduled Tribes in
future vacancies to maintain the quota earmarked for the
said categories. Civil Appeals @ S.L.P.(Civil) No. 23701 of
2019 and Civil Appeal @ S.L.P. (Civil) No.22640 of 2019 are
challenging the judgment dated 15.07.2019.
7 | P a g e
7. In the meanwhile, the Respondents in Writ Petition
(Civil) No.117 of 2019 i.e. the State of Uttarakhand filed an
application for review of the judgment dated 01.04.2019.
The High Court realized that it committed an apparent error
in its judgment dated 01.04.2019, while deciding the Writ
Petition by referring to the judgment of this Court in Jarnail
Singh (supra). The High Court clarified that the State
Government is obligated to collect quantifiable data
regarding inadequacy of representation of the Scheduled
Castes and Scheduled Tribes in state services before
providing reservation in promotion. The High Court clarified
that it is not necessary for the State Government to collect
data regarding backwardness of the Scheduled Castes and
Scheduled Tribes in the light of the direction of this Court in
Jarnail Singh (supra). The High Court also observed that
the State is not obligated to provide reservation in
promotions to members of Scheduled Castes and Scheduled
Tribes as Article 16(4-A) of the Constitution is an enabling
provision. However, reservation can be provided by the
State Government only after collecting data regarding
inadequacy of representation of the Scheduled Castes and
8 | P a g e
Scheduled Tribes in state services. As such, the High Court
directed the State Government to collect quantifiable data
regarding inadequacy of the representation of the
Scheduled Castes and Scheduled Tribes in Government
services which would enable the State Government to take
a considered decision on providing or not providing
reservation. The State Government was directed to take a
decision whether to provide reservation or not only after
considering the data relating to the adequacy or inadequacy
of representation of Scheduled Castes and Scheduled Tribes
in the services of the State within a period of four months
from the date of receipt of the judgment. Aggrieved by the
order dated 15.11.2019 passed in Review Petition in W. P.
(S/B) No.117 of 2019, the Civil Appeal @ S.L.P.(Civil)
No.27715 of 2019, Civil Appeal @ S.L.P.(Civil) No.28039 of
2019, Civil Appeal @ S.L.P. (Civil) No.27735 of 2019 and Civil
Appeal @ S.L.P.(Civil) No. 28947 of 2019 have been filed.
8. Mr. Ranjit Kumar, learned Senior Counsel appearing for
the Appellants in SLP (C) No. 25508 of 2019, Mr. Mukul
Rohtagi and Mr. P.S. Narsimha, learned Senior Counsel
9 | P a g e
appearing for the State of Uttarakhand contended that there
is no fundamental right to claim reservation in appointments
or promotions to public posts. There is no constitutional
duty on the part of the State Government to provide
reservations. Article 16 (4) and 16 (4-A) are merely
enabling provisions. On 15.09.2012, the State of
Uttarakhand, after due consideration, decided that there
shall be no reservation in promotions. They relied upon the
judgment of the High Court of Uttarakhand in Vinod
Prakash Nautiyal (supra) by which Section 3 (7) of the
1994 Act was declared unconstitutional. It was submitted by
them that the State Government has not brought any law in
terms of the judgment of this Court in M. Nagaraj & Ors.
(supra). It was urged by the learned Senior Counsel that
there is no necessity for collection of any quantifiable data
after the Government has taken a decision not to provide
reservations. The collection of data, according to them, is
required only to justify a decision to provide reservation. It
was also submitted by them that according to a judgment of
this Court in Suresh Chand Gautam v. State of U.P.
8
 no
8 (2016) 11 SCC 113
10 | P a g e
direction can be given by the Court to the State Government
to collect quantifiable data on the basis of which a decision
to provide reservation should be taken. They placed
reliance on the judgment of this Court in M. Nagaraj &
Ors. (supra) to argue that the State is not bound to make
reservations.
9. On the other hand, Mr. Kapil Sibal, Mr. Dushyant Dave
and Mr. Colin Gonsalves, learned Senior Counsel and Dr. K.
S. Chauhan, learned counsel, appearing for the reserved
category employees submitted that the State cannot refuse
to collect quantifiable data regarding the adequacy or
inadequacy of representation of the Scheduled Castes and
Scheduled Tribes in public services. They submitted that
there is an obligation on the State to provide reservations in
promotions for upliftment of the members of the Scheduled
Castes and Scheduled Tribes as mandated by Article 16 (4)
and 16 (4-A) of the Constitution of India. The right to
equality of persons belonging to Scheduled Castes and
Scheduled Tribes cannot be defeated by the State
Government by not discharging its constitutional obligation
of implementing Article 16 (4) and 16 (4-A) of the
11 | P a g e
Constitution. They urged before this Court that according to
the law laid down by this Court, the State has a duty to
decide not to provide reservations only after the State is
satisfied that the Scheduled Castes and Scheduled Tribes
are adequately represented in public posts on the basis of
quantifiable data. According to them, Suresh Chand
Gautam (supra) was not correctly decided and needs
reconsideration. It was also submitted on behalf of the
reserved category candidates that a Committee was
constituted by the Government of Uttarakhand to collect
quantifiable data regarding the adequacy of representation
of persons belonging to Scheduled Castes and Schedules
Tribes in public posts in accordance with the judgment of
this Court in M. Nagaraj (supra). According to the report
submitted by the Committee, there is inadequate
representation of the Scheduled Castes and Scheduled
Tribes in government services in the State of Uttarakhand.
The said report was approved by the State Cabinet. It was
contended by the learned counsel that the State
Government was duty bound to provide reservations on the
basis of the data that was collected by the Committee.
12 | P a g e
10. The central point that arises for our consideration in
these appeals is whether the State Government is bound to
make reservations in public posts and whether the decision
by the State Government not to provide reservations can be
only on the basis of quantifiable data relating to adequacy
of representation of persons belonging to Scheduled Castes
and Scheduled Tribes.
11. Article 16 (4) and 16 (4-A) do not confer fundamental
right to claim reservations in promotion9
. By relying upon
earlier judgments of this Court, it was held in Ajit Singh
(II) (supra) that Article 16 (4) and 16 (4-A) are in the nature
of enabling provisions, vesting a discretion on the State
Government to consider providing reservations, if the
circumstances so warrant. It is settled law that the State
Government cannot be directed to provide reservations for
appointment in public posts10. Similarly, the State is not
bound to make reservation for Scheduled Castes and
Scheduled Tribes in matters of promotions. However, if they
wish to exercise their discretion and make such provision,
the State has to collect quantifiable data showing
9 Ajit Singh (II) v. State of Punjab, (1999) 7 SCC 209
10 C.A. Rajendran v. Union of India, (1968) 1 SCR 721
13 | P a g e
inadequacy of representation of that class in public services.
If the decision of the State Government to provide
reservations in promotion is challenged, the State
concerned shall have to place before the Court the requisite
quantifiable data and satisfy the Court that such
reservations became necessary on account of inadequacy of
representation of Scheduled Castes and Scheduled Tribes in
a particular class or classes of posts without affecting
general efficiency of administration as mandated by Article
335 of the Constitution11
.
12. Article 16 (4) and 16 (4-A) empower the State to make
reservation in matters of appointment and promotion in
favour of the Scheduled Castes and Scheduled Tribes ‘if in
the opinion of the State they are not adequately
represented in the services of the State’. It is for the
State Government to decide whether reservations are
required in the matter of appointment and promotions to
public posts. The language in clauses (4) and (4-A) of
Article 16 is clear, according to which, the inadequacy of
representation is a matter within the subjective satisfaction
11 M. Nagaraj (supra)
14 | P a g e
of the State. The State can form its own opinion on the
basis of the material it has in its possession already or it
may gather such material through a
Commission/Committee, person or authority. All that is
required is that there must be some material on the basis of
which the opinion is formed. The Court should show due
deference to the opinion of the State which does not,
however, mean that the opinion formed is beyond judicial
scrutiny altogether. The scope and reach of judicial scrutiny
in matters within the subjective satisfaction of the executive
are extensively stated in Barium Chemicals v. Company
Law Board
12
, which need not be reiterated13
.
13. On the basis of the settled law of this Court pertaining
to the scope of Article 16 (4) and 16 (4-A) of the
Constitution, we proceed to determine the correctness of
the judgments of the High Court. As noted above, the
judgment of the High Court in Writ Petition No.117 of 2019 is
to the effect that the proceeding dated 05.09.2012 issued
by the Government of Uttarakhand by which it was decided
to fill up the promotional posts or vacancies without
12 AIR 1967 SC 295
13 Indra Sawhney v. Union of India (1992) Supp. (3) SCC 217
15 | P a g e
providing reservations to Scheduled Castes and Scheduled
Tribes was struck down. It was held by the High Court that
the notifications that were issued by the Government of
Uttarakhand, providing for reservations, continued to
operate. A direction was issued by the High Court that
reservation in promotion in favour of the Scheduled Castes
and Scheduled Tribes can be made by the State Government
without having quantifiable data regarding the
backwardness of the Scheduled Castes and Schedules Tribes
or the adequacy of their representation in the Government
services.
14. The application filed for review of the judgment in Writ
Petition No.117 of 2019 was decided by a judgment dated
08.11.2019 by the High Court. Realising the error
committed in its judgment dated 01.04.2019, the High Court
modified the judgment by holding that according to the
decision of this Court in Jarnail Singh v. Lachhmi Narain
Gupta
14
, the State was obligated to collect quantifiable
data regarding the inadequacy of representation of the
Scheduled Castes and Scheduled Tribes in public services.
14 (2018) 10 SCC 396
16 | P a g e
The High Court observed that Article 16 (4) and 16 (4-A) of
the Constitution are enabling provisions, and the State
Government is not obligated to provide reservations in
promotion in favour of members of the Scheduled Castes
and Scheduled Tribes. The High Court expressed its opinion
that reservation in promotion to public posts can be
provided by the State Government only after collecting data
regarding the inadequacy of their representation in service.
In light of the above, the High Court directed the State
Government to collect quantifiable data regarding the
adequacy or inadequacy of representation of Scheduled
Castes and Scheduled Tribes in state services which would
enable the State Government to take a considered decision
as to whether or not reservation in promotion should be
provided in favour of Scheduled Castes and Scheduled
Tribes. The collection of quantifiable data was directed to
be completed within four months from the date of receipt of
the judgment.
15. The High Court committed an error by striking down
the proceeding dated 05.09.2012 by which a decision was
taken not to provide reservation in promotions without
17 | P a g e
giving any reasons, except stating that the said decision is
contrary to the judgments of this Court in Jarnail Singh and
Indra Sawhney (supra). A perusal of the proceeding dated
05.09.2012 would show that the decision taken by the State
Government was by way of implementation of the judgment
of the High Court of Uttarakhand in Vinod Prakash
Nautiyal (supra) by which Section 3(7) of the 1994 Act,
relating to the provision of reservation in promotion, was
struck down. By its judgment dated 10.07.2012 in Vinod
Prakash Nautiyal (supra), the High Court declared Section
3 (7) of the 1994 Act as contrary to the law laid down by this
Court in M. Nagaraj (supra). There was a further
declaration that no promotion can be given by the State of
Uttarakhand by taking recourse to Section 3 (7) of the 1994
Act. However, the State Government was given liberty to
bring out another legislation in accordance with the
mandate of the Constitution of India, by following the
judgment in M. Nagaraj (supra). This Court dismissed the
SLP filed against the said judgment. At this juncture, it is
relevant to mention that certain notifications were issued
after the formation of the State of Uttarakhand by which
18 | P a g e
reservation in promotion to public posts as provided in the
State of Uttar Pradesh was adapted with certain
modifications. As stated above, the Government of
Uttarakhand appointed a Committee for collection of
quantifiable data pertaining to the adequacy or inadequacy
of representation of the members of Scheduled Castes and
Scheduled Tribes in public services in the State. The
Committee submitted its report, according to which the
representation of Scheduled Castes and Scheduled Tribes is
inadequate. The State Cabinet approved the
recommendation of the Committee on 12.04.2012.
Ultimately, the State Government by a proceeding dated
05.09.2012 decided to set aside all previous Government
orders relating to reservation in promotions to Government
services in the State. As the Government is not bound to
provide reservation in promotions, we are of the opinion
that there is no justifiable reason for the High Court to have
declared the proceeding dated 05.09.2012 as illegal.
16. The direction that was issued to the State Government
to collect quantifiable data pertaining to the adequacy or
inadequacy of representation of persons belonging to
19 | P a g e
Scheduled Castes and Scheduled Tribes in Government
services is the subject matter of challenge in some appeals
before us. In view of the law laid down by this Court, there
is no doubt that the State Government is not bound to make
reservations. There is no fundamental right which inheres in
an individual to claim reservation in promotions. No
mandamus can be issued by the Court directing the State
Government to provide reservations. It is abundantly clear
from the judgments of this Court in Indra Sawhney, Ajit
Singh (II), M. Nagaraj and Jarnail Singh (supra) that
Article 16 (4) and 16 (4-A) are enabling provisions and the
collection of quantifiable data showing inadequacy of
representation of Scheduled Castes and Scheduled Tribes in
public service is a sine qua non for providing reservations in
promotions. The data to be collected by the State
Government is only to justify reservation to be made in the
matter of appointment or promotion to public posts,
according to Article 16 (4) and 16 (4-A) of the Constitution.
As such, collection of data regarding the inadequate
representation of members of the Scheduled Castes and
Schedules Tribes, as noted above, is a pre requisite for
20 | P a g e
providing reservations, and is not required when the State
Government decided not to provide reservations. Not being
bound to provide reservations in promotions, the State is
not required to justify its decision on the basis of
quantifiable data, showing that there is adequate
representation of members of the Scheduled Castes and
Schedules Tribes in State services. Even if the underrepresentation of Scheduled Castes and Schedules Tribes in
public services is brought to the notice of this Court, no
mandamus can be issued by this Court to the State
Government to provide reservation in light of the law laid
down by this Court in C.A. Rajendran (supra) and Suresh
Chand Gautam (supra). Therefore, the direction given
by the High Court that the State Government should first
collect data regarding the adequacy or inadequacy of
representation of Scheduled Castes and Scheduled Tribes in
Government services on the basis of which the State
Government should take a decision whether or not to
provide reservation in promotion is contrary to the law laid
down by this Court and is accordingly set aside. Yet another
direction given by the High Court in its judgment dated
21 | P a g e
15.07.2019, directing that all future vacancies that are to be
filled up by promotion in the posts of Assistant Engineer,
should only be from the members of Scheduled Castes and
Scheduled Tribes, is wholly unjustifiable and is hence set
aside.
17. The submission made on behalf of the reserved
category candidates that the judgment of this Court in
Suresh Chand Gautam (supra) needs reconsideration is
without substance in view of the findings recorded above.
We are in agreement with the decision of this Court in
Suresh Chand Gautam (supra) in which it was held that
no mandamus can be issued by the Court to the State to
collect quantifiable data relating to adequacy of
representation of the Scheduled Castes and Scheduled
Tribes in public services.
18. The High Court was not informed about the
appointment of a Committee for collection of quantifiable
data and the completion of such exercise by the Committee,
which was approved by the State Cabinet. However, the
State Government took a conscious decision not to provide
reservation in promotions. The direction given by the High
22 | P a g e
Court to collect quantifiable data, therefore, is wholly
unnecessary as the State is already in possession of the said
data.
19. In view of the aforesaid, the impugned judgments of
the High Court in Writ Petition (S/B) No.351 of 2019, Writ
Petition (S/B) No.117 of 2019 and Review Application No.389
of 2019 in Writ Petition (S/B) No.117 of 2019 are set aside.
20. The Appeals are disposed of accordingly.
 .……..........................J.
 [L. NAGESWARA RAO]


 …...…….....................J.
 [HEMANT GUPTA]
New Delhi,
February 07, 2020.
23 | P a g e

Whether the respondent no. 1 who is occupying the 16th floor of the building in question,has not paid a single rupee onaccount of lease rent, maintenance charges, electricity chargesand other charges and, therefore, the order directing restorationof electricity without requiring the tenant­sub lessee to pay the requisite charges is totally without jurisdiction. ? In view of the aforesaid discussion we set aside the order of the Calcutta High Court and direct as under: I. We are of the view that respondent no. 1 must pay the following amounts for the restoration of electricity:­ i) Lease Rent of Rs.7,29,240 (for the period from 01.02.2012 to 02.12.2019). ii) Maintenance charges of Rs.2,11,20,000 (@ Rs.2,20,000 per month from 01.02.2012 to 31.01.2020). iii) Electricity charges of Rs.1,05,60,000 (@ Rs.1,10,000 per month from 01.02.2012 to 31.01.2020). II. Out of the total of Rs. 3,24,09,240 payable by respondent no.1, we direct it to pay Rs.1,00,00,000 within one month from today. Respondent no.1 shall pay the rest of the amount in three equal instalments of Rs.74,69,746, Rs.74,69,747, and Rs. Rs.74,69,747 to be paid on 15.03.2020, 15.04.2020 and 15.05.2020 respectively. III. In case the respondent no.1 pays the amount of Rs.1,00,00,000/­ to the petitioner then within 3 days of this payment, the petitioner shall restore the electricity. IV. With respect to the lease rent, electricity charges, maintenance charges and other charges, the petitioner shall raise a bill on or before 10th day of each month. The first such bill shall be raised on 10th March, 2020 and the amount shall be paid by respondent no.1 latest by 20th March, 2020. Even in case of any dispute, it shall deposit a sum of Rs.3,50,000/­ every month without prejudice to the rights of the parties. The dispute with regard to the remaining amount can be decided in accordance with law. V. The respondent no.1 through its Chief Executive (Authorised Signatory) shall file an affidavit undertaking to comply with the aforesaid direction within 2 weeks from today. VI. If any of these conditions are violated, the petitioner shall be entitled to disconnect the electricity.

Whether the respondent no. 1 who   is   occupying   the   16th  floor   of   the   building   in   question,has not paid a single rupee onaccount of lease rent, maintenance charges, electricity chargesand other charges and, therefore, the order directing restorationof electricity without requiring the tenant­sub lessee to pay the requisite charges is totally without jurisdiction. ?


In view of the aforesaid discussion we set aside the order of the Calcutta High Court and direct as under:
I. We are of the view that respondent no. 1 must pay the following amounts for the restoration of electricity:­
i)   Lease   Rent   of   Rs.7,29,240   (for   the   period   from
01.02.2012 to 02.12.2019).
ii)   Maintenance   charges   of   Rs.2,11,20,000   (@
Rs.2,20,000   per   month   from   01.02.2012   to
31.01.2020).
iii) Electricity charges of Rs.1,05,60,000 (@ Rs.1,10,000
per month from 01.02.2012 to 31.01.2020).
II. Out of the total of Rs. 3,24,09,240 payable by respondent
no.1, we direct it to pay Rs.1,00,00,000 within one month
from today. Respondent no.1 shall pay the rest of the amount
in three equal instalments of Rs.74,69,746, Rs.74,69,747,
and Rs. Rs.74,69,747 to be paid on 15.03.2020, 15.04.2020
and 15.05.2020 respectively. 
III.   In   case   the   respondent   no.1   pays   the   amount   of
Rs.1,00,00,000/­ to the petitioner then within 3 days of this
payment, the petitioner shall restore the electricity.  
IV.   With   respect   to   the   lease   rent,   electricity   charges,
maintenance charges and other charges, the petitioner shall
raise a bill on or before 10th  day of each month.   The first
such bill shall be raised on 10th March, 2020 and the amount
shall be paid by respondent no.1 latest by 20th March, 2020.
Even   in   case   of   any   dispute,   it   shall   deposit   a   sum   of
Rs.3,50,000/­ every month without prejudice to the rights of
the   parties.     The   dispute   with   regard   to   the   remaining
amount can be decided in accordance with law. 
V.   The   respondent   no.1   through   its   Chief   Executive
(Authorised Signatory) shall file an affidavit undertaking to
comply   with   the   aforesaid   direction   within   2   weeks   from
today.
VI. If any of these conditions are violated, the petitioner shall
be entitled to disconnect the electricity. 

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE PETITION (CIVIL) NO. 21341 OF 2019
INFINITY INFOTECH PARKS LIMITED        …PETITIONER(S)
VERSUS
SHIVA JUTE MILLS PRIVATE LIMITED
THROUGH CHIEF EXECUTIVE
(AUTHORISED SIGNATORY) & ANR.        …RESPONDENT(S)
O R D E R
Deepak Gupta, J.
This petition is directed against the order passed by the
High Court of Calcutta dated 31.07.2019 in C.O. No.541 of 2019
whereby it allowed the petition of the respondent no. 1 herein
and directed the petitioner herein to restore the electricity of the
property occupied by the respondent no.1 herein.
2. The grievance of the petitioner is that the respondent no. 1
who   is   occupying   the   16th  floor   of   the   building   in   question
comprising about 29,445 sq. ft., has not paid a single rupee on
1
account of lease rent, maintenance charges, electricity charges
and other charges and, therefore, the order directing restoration
of electricity without requiring the tenant­sub lessee to pay the
requisite charges is totally without jurisdiction.
3. We are only referring to the facts which are necessary for
decision of this case and our discussion is restricted to passing
an equitable order.  The facts, shorn of unnecessary details, are
that the petitioner­ Infinity Infotech Parks Limited is a lessee in
the building known as INFINITY BENCHMARK, Bidhannagar, in
the District of North 24­Parganas, Kolkata.  The 16th floor of the
said building was divided into 3 offices.   The entire 16th  floor
along with 5 car parking spaces was sub­leased by the petitioner
in favour of the respondent no. 2­ M/s. Pearl Studios Pvt. Ltd.,
which   in   turn   sub­leased   the   entire   premises   in   favour   of
respondent   no.   1   vide   lease   deed   dated   01.02.2012   and   the
admitted   case   of   the   parties   is   that   from   01.02.2012,   the
respondent no. 1 is in occupation of the property.  The claim of
the petitioner is that it is entitled to Rs.7,29,240/­ on account of
lease rent up to 02.12.2019.
2
4. At the outset, we may note that certain disputes between
petitioner   and   respondent   no.   2   are   the   subject   matter   of
arbitration proceedings and, therefore, we are not commenting on
the   merits   of   the   same   and   are   confining   ourselves   to   the
admitted fact that respondent no. 1 is in possession of the entire
premises from 01.02.2012.  We may also note that an objection
was raised that the sub­lease in favour of respondent no. 1 is
unregistered and insufficiently stamped and, therefore, should be
impounded.   We feel that this is a matter for the trial court to
decide and we have looked into the lease deed only to strike out a
balance between the parties and anything said in this order is
without prejudice to the rights of the parties with regard to the
admissibility of the lease deed in evidence. We make it clear that
we   have   passed   this   order   at   the   interim   stage   and   any
observations made herein are only for passing this interim order
and shall not be taken into consideration while deciding the main
proceedings which must be decided on the basis of the evidence
led before the trial court or the arbitral tribunal.
3
5. The   petitioner   claims   Rs.7,29,240/­   as   lease   rent   from
01.02.2012   to   02.12.2019   which   amount   is   not   seriously
disputed by the respondent no. 1.
6. The petitioner has also claimed a sum of Rs.15 per sq. ft.
per month as maintenance charges inclusive of taxes for the 3
office areas measuring 29,445 sq. ft.  Reference has been made to
clause 5 and 7 of the lease deed, which are reproduced as under:
“V. To bear and pay proportionate share of all kinds of
expenses for all periodical repairs for common areas of
the said building, Air conditioning, additions, alterations,
treatment,   polishing,   maintaining,   rebuilding   and
cleaning,   painting,   entrances,   common   landings
corridors, staircases, sewers, drains pipes, electric lines
and   installation,   insurance   and   other   conveniences
including annual maintenance charges in respect thereof
as may be incurred by the Sub­Lessor, from time to time
and such proportionate share together with service tax
shall be calculated and apportioned by the Sub­Lessor
conclusively and the same shall be binding on the SubLessee.
   xxx         xxx xxx
VII.   It   is   made   clear   that   the   said   service   and
maintenance   together   with   air­conditioning   charges   as
envisaged herein to be provided by the Sub­Lessor to the
Sub­Lessee and such charges for the same shall be based
upon all kinds of actual proportionate costs, charges and
expenses of whatsoever nature plus 20% (twenty percent)
management fee to be levied thereon and service tax as
may be applicable shall be paid by the Sub­Lessee to the
Sub­Lessor during the subsistence of this Sub­Lease and
such proportionate share together with service tax shall
be   calculated   and   apportioned   by   the   Sub­Lessor
conclusively and the same shall be binding on the Sub4
Lessee, provided further it is made clear that the SubLessee shall pay aforesaid charges for common services
and maintenance as enumerated in the Fifth Schedule as
stated   hereunder   and   air­conditioning   charges   to   be
provided in the said sub­demised space at the fixed rate
of Rs.15/­ per Sq.ft. for a period of one year from the date
of   commencement   hereof   and   Sub­Lessor   shall   give
rebate at the rate of Rs. 7/­ per Sq.ft. out of the said
charges of Rs.15/­ per Sq.ft. for the initial period of two
months from the date of commencement and thereafter
with effect from 15th November, 2009 until the completion
of   one   year   the   Sub­Lessee   shall   pay   at   the   rate   of
Rs.15/­ per Sq.ft. per month as stated hereinabove.”
7. The case of the petitioner is that the respondent no.1 has
not paid a single rupee as maintenance charges and as per the
terms of the lease deed, Rs.15/­ per sq. ft. was to be paid except
for   the   months   of   August   and   September,   2009   for   which   a
rebate of Rs.7 per sq. ft. was to be given, meaning thereby that
for these two months only Rs.8/­ per sq. ft. was to be charged.
On the other hand, on behalf of the respondent no. 1 it is claimed
that no air­conditioning is being provided to the premises in its
possession and, therefore, the rate of Rs.15/­ per sq. ft. is not
payable.     Relying   upon   clause   7   quoted   hereinabove,   it   is
contended that the amount of Rs.15/­ per sq. ft. was payable
only for the first year from commencement of the sub­lease and,
thereafter,   it   was   to   be   paid   on   actual   basis   plus   20%   as
management fees to be levied thereupon and service tax as may
5
be applicable.  It is submitted on behalf of the respondent no. 1
that the management never raised invoices on the basis of the
actual expenses incurred by it and, therefore, this amount was
not paid.
8. We have considered the rival contentions of the parties and
we make it clear that we are not deciding this plea on merits.
However, we have no doubt in our mind that the sub­lessee
cannot claim that no amount is payable by it.  It has not paid a
single rupee to the petitioner despite occupying the premises for
more than 7 years.   We cannot appreciate this conduct of the
sub­lessee.  In a multi­storeyed building of this nature there has
to   be   provision   for   security   guards,   cleaning   services,   lift
operators, parking attendants, etc. When the parties had agreed
that Rs.15/­ per sq. ft. per month would be paid in the first year,
we can presume that the sub­lessee must have satisfied itself
that these are the approximate expenses to be incurred by the
petitioner for maintenance of the building.  Since air­conditioning
has   admittedly   not   been   provided   by   the   petitioner,   for   the
purpose   of   this   order,   we   deem   it   fit   and   proper   to   fix   the
maintenance   charges   at   50%   of   the   regular   rate   by   giving   a
6
discount of 50% for not providing the air­conditioning, which
comes to Rs.7.50 per sq. ft.   The maintenance charges payable
@7.50 per sq. ft. for 29,445 sq. ft. works out to Rs.2,20,837.50
per month which are rounded of to 2,20,000/­ per month.
9. Coming   to   the   second   claim   of   electricity   charges,   the
petitioner has claimed minimum demand charges at Rs. 384 per
KVA   per   month   plus   electricity   duty,   transmission   and
distribution losses from the electricity bills placed on record by
both the sides.  It is not disputed that the entire building has a
sanctioned load of 1445 KVA.  The sanctioned load in respect of
the premises on the 16th  floor works out to 266.43 KVA.   The
contention of the respondent no.1 is that it has hardly used the
premises and is only liable to pay the actual charges for the
electricity consumed by it.   It is also contended that since the
petitioner has not raised invoices or produced the bills of actual
consumption of the 16th floor, the respondent no.1 is not liable
make such payment.     We find that the respondent no.1 has
placed on record bills of the year 2011 raised by the petitioner in
respect of the same premises to the account of Pearl Studios Pvt.
Ltd.­respondent   no.   2   and   these   bills   are   for   a   sum   of
7
Rs.76,571/­   +   Rs.59,706/­   +   Rs.3,96,855/­   i.e.   total
Rs.5,33,132/­,     for   a   period   of   approximately   one   month.
Electricity tariff has not come down and the contention of the
respondent no.1 that it is only liable to pay electricity charges at
the rate of Rs. 10,000/­, cannot be accepted.   The area in its
possession is almost  30,000 sq. ft.   Even if there is no airconditioning, the sanctioned load is 266.43 KVA.   According to
the bill of 04.11.2019, the demand charges are Rs. 384 per KVA
per month.  Therefore, at present the minimum demand charges
for 266.43 KVA works out to Rs.1,02,309.12.  In any event, the
respondent   no.1   cannot   escape   its   liability   has   to   pay   the
minimum demand charges.  It is contended that earlier demand
charges were at a lower rate of Rs. 317 per KVA but we are sure
that there may have been some months where the respondent
no.1 may have utilised more than the minimum demand and it is
liable to pay minimum charges which for the purpose of this
order are ascertained at Rs.1,00,000/­ per month.  In addition to
the minimum demand charges, some fixed charges are payable to
the West Bengal State Electricity Distribution Company Ltd. in
addition  to the energy consumed charges.   Keeping all  these
factors into consideration we feel that as an interim measure the
8
respondent no.1 shall pay at least Rs.1,10,000/­ per month on
this account.
10. It was also urged on behalf of the respondent no.1 that
there   were   some   periods   during   which   the   electricity   was
disconnected and, therefore, it should not be asked to pay any
charges for the said period.   We are not in agreement with the
said submission.  The respondent no.1 did not pay a single rupee
either on account of lease rent, maintenance charges, electricity
charges or other charges and in such event, the petitioner had no
option but to disconnect the electricity.  We are, therefore, of the
view that the High Court clearly misdirected itself in directing
restoration of the electricity without ensuring payment of some
amount to the petitioner.
11. As   far   as   the   claim   of   the   petitioner   for   other   charges
including water charges are concerned, we are not passing any
order   at   this   stage.     We   are   also   not   passing   any   order   for
payment   of   interest   at   this   stage.     These   can   be   finally
determined by the Court which decides the matter.   Therefore,
the liability only on account of minimum electricity charges of
9
Rs.1,10,000/­ per month from 01.02.2012 till 31.01.2020 works
out to Rs.1,05,60,000/­.
12. In view of the aforesaid discussion we set aside the order of
the Calcutta High Court and direct as under:
I. We are of the view that respondent no. 1 must pay the
following amounts for the restoration of electricity:­
i)   Lease   Rent   of   Rs.7,29,240   (for   the   period   from
01.02.2012 to 02.12.2019).
ii)   Maintenance   charges   of   Rs.2,11,20,000   (@
Rs.2,20,000   per   month   from   01.02.2012   to
31.01.2020).
iii) Electricity charges of Rs.1,05,60,000 (@ Rs.1,10,000
per month from 01.02.2012 to 31.01.2020).
II. Out of the total of Rs. 3,24,09,240 payable by respondent
no.1, we direct it to pay Rs.1,00,00,000 within one month
from today. Respondent no.1 shall pay the rest of the amount
in three equal instalments of Rs.74,69,746, Rs.74,69,747,
and Rs. Rs.74,69,747 to be paid on 15.03.2020, 15.04.2020
and 15.05.2020 respectively. 
10
III.   In   case   the   respondent   no.1   pays   the   amount   of
Rs.1,00,00,000/­ to the petitioner then within 3 days of this
payment, the petitioner shall restore the electricity.  
IV.   With   respect   to   the   lease   rent,   electricity   charges,
maintenance charges and other charges, the petitioner shall
raise a bill on or before 10th  day of each month.   The first
such bill shall be raised on 10th March, 2020 and the amount
shall be paid by respondent no.1 latest by 20th March, 2020.
Even   in   case   of   any   dispute,   it   shall   deposit   a   sum   of
Rs.3,50,000/­ every month without prejudice to the rights of
the   parties.     The   dispute   with   regard   to   the   remaining
amount can be decided in accordance with law. 
V.   The   respondent   no.1   through   its   Chief   Executive
(Authorised Signatory) shall file an affidavit undertaking to
comply   with   the   aforesaid   direction   within   2   weeks   from
today.
VI. If any of these conditions are violated, the petitioner shall
be entitled to disconnect the electricity. 
11
13. The petition is disposed of in the aforesaid terms.  Pending
application(s), if any, stand(s) disposed of.
...................................J.
(Deepak Gupta)
..................................J.
(Aniruddha Bose)
New Delhi
February 7, 2020
12

Whether the services rendered by the appellants under the Adult Education and Non-Formal Education Project1 cannot be counted under a Government scheme for the purpose of pensionary benefits after the appellants were appointed by the State.?

Whether the services rendered by the appellants under the Adult Education and Non-Formal Education Project1 cannot be counted under a Government scheme for the purpose of pensionary benefits after the appellants were appointed by the State.?

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 505-531 OF 2020
(ARISING OUT OF SLP (CIVIL) NOS. 27922-27948 OF 2017)
PARMESHWAR NANDA ETC. .....APPELLANT(S)
VERSUS
THE STATE OF JHARKHAND THROUGH CHIEF
SECRETARY & ORS. ETC. .....RESPONDENT(S)
W I T H
CIVIL APPEAL NOS. 532-542 OF 2020
(ARISING OUT OF SLP (CIVIL) NOS. 32135-32145 OF 2017)
CIVIL APPEAL NO. 543 OF 2020
(ARISING OUT OF SLP (CIVIL) NO. 852 OF 2018)
CIVIL APPEAL NO. 544 OF 2020
(ARISING OUT OF SLP (CIVIL) NO. 4380 OF 2019)
A N D
CIVIL APPEAL NOS. 545-546 OF 2020
(ARISING OUT OF SLP (CIVIL) NOS. 4698-4699 OF 2019)
J U D G M E N T
HEMANT GUPTA, J.
Civil Appeal Nos. 505-531 of 2020
Civil Appeal Nos. 532-542 of 2020
Civil Appeal Nos. 543 of 2020
1
A N D
Civil Appeal Nos. 545-546 of 2020
1. The present appeals are directed against an order passed by the
Full Bench of High Court of Jharkhand on 16th June, 2017 wherein it
has been held that the services rendered by the appellants under
the Adult Education and Non-Formal Education Project1
 cannot be
counted under a Government scheme for the purpose of
pensionary benefits after the appellants were appointed by the
State.
2. Briefly, the facts are that the appellants were appointed under the
Project, co-sponsored by the Central Government and the State
Government, in the erstwhile undivided State of Bihar between the
period 1978 to 1990. Some of the appellants were appointed as
Adult Education Supervisors whereas other appellants were
appointed in the ministerial cadre such as Stenographer, Clerk cum
Accountant, Clerk cum Typist, Peon as well as Drivers. The
appellants were working under the Project during the bifurcation of
the State and their services fell in the successor State of Jharkhand
which was formed on 15th November, 2000. The Government of
India vide policy decision dated 1st April, 2001 closed the Project.
The Government of Jharkhand, consequent to the bifurcation of
State of Bihar, declared the employees to be surplus w.e.f. 16th
May, 2001.
1 for short, ‘Project’
2
3. The Government of Jharkhand issued a notification dated 30th May,
2007 for absorption of the employees engaged in the Project in the
Departments of Food, Public Distribution and Consumer Affairs,
Finance, Social Welfare, Women and Child Development, Urban
Development etc. on different posts, in their respective prescribed
scales of pay. A perusal of the said notification shows that there
were 756 employees who were declared as surplus and were to be
absorbed by the State. It appears that most of the surplus
employees were absorbed in different scales of pay vide letter of
appointments starting from 24th July, 2007 except those who had
attained the age of superannuation or had died prior to such
absorption.
4. As per Clauses 11 and 12 of the notification dated 30th May, 2007,
the surplus employees absorbed were to be treated as new
appointments and the services rendered by them prior to their
declaration as surplus i.e. prior to 15th May, 2001, would not be
counted for the purpose of their seniority and pay protection.
Clauses 11 and 12 of the notification read as under:
“11. The adjustment of surplus personnels will be
considered new appointment and being surplus on the
basis of prior service, they will not be benefitted of
seniority.
12. These surplus personnels will not be benefitted by
pay protection.”
5. 59 writ petitions came to be filed claiming pensionary benefits and
seniority before the High Court. The matter was placed before the
3
Full Bench in view of the divergence of opinions of the two Division
Benches of the Jharkhand High Court in State of Jharkhand &
Ors. v. Bhubneshwar Mahto
2
 and State of Jharkhand & Ors. v.
Bimal Kumar Sinha
3
.
6. LPA No. 515 of 2004 was preferred by the State against the order of
the learned Single Bench passed on 21st November, 2003. The writ
petitioner was directed to be paid salary for the period 16th May,
2001 to 31st July, 2001 i.e. the date of his retirement. The writ
petitioner was ordered to be treated as a regular employee of the
State, having been appointed on 10th December, 1968, much
before the Project started in the year 1978. LPA No. 188 of 2004
was preferred by the State against the order of the learned Single
Bench. In the appeal, it was held that the writ petitioner therein
was appointed under the Project which was abolished on the
specific condition that past service rendered by him will not be
taken into account. Such writ petitions were categorized into three
groups by the Full Bench. The first group of petitions were from
those employees who had retired after being declared surplus w.e.f.
16th May, 2001 but before they were absorbed pursuant to the
notification dated 30th May, 2007. In this category, some of the
writ petitioners were legal heirs of those employees who had died
during this period before being absorbed. The second group of
petitions were from those employees who were declared surplus
but were absorbed by the Government of Jharkhand vide
2 LPA No. 515 of 2004
3 LPA No. 188 of 2004
4
notification dated 30th May, 2007 and had retired thereafter. The
third group of petitions were from those employees who were
working on the date of filing of the writ petitions, after being
absorbed by the Government of Jharkhand vide the aforementioned
notification. The employees in writ petitions comprising of
Categories I and II claim pensionary benefits whereas the writ
petitions filed in Category III claim seniority by taking into
consideration their past services rendered under the Project
resulting into payment of pension after attaining the age of
superannuation.
7. The common challenge in all the writ petitions were to clauses 11
and 12, as reproduced above. It was the stand of the writ
petitioners that they are being treated as fresh appointees and
their past service has not been counted for the purposes of
seniority or fixation of their initial salary.
8. The High Court in the impugned order referred to Jharkhand
Pension Rules to hold that the following three conditions are
required to be satisfied before the service can be treated to be
pensionable service-
(i) Service must be under Government.
(ii) Employment must be substantive and permanent.
(iii) Service must be paid by Government.
9. Rule 59 provides that the State Government can declare any
specific kind of service rendered in a non-gazetted capacity to
qualify for pension even though either or both of conditions (1) and
5
(2) are not fulfilled. The High Court held that no declaration of the
State Government in general terms has been made nor any
direction in individual cases issued in favour of any such
petitioners.
10. Before this Court, learned counsel for the appellants referred to
Circular issued by the State Government under Rule 59 of Bihar
Pension Rules, 1950 which would be applicable in the State of
Jharkhand after its bifurcation in terms of State Reorganization Act.
The Circular dated 12th August 1969 reads thus:
“Regarding: - Declaration of a temporary service
of a Government Servant who is not confirmed as
pensionable.
Under the existing pension rules, a temporary
Government servant if not confirmed in any point, is not
entitled to pension unless his services are declared
pensionable under Rule 59 of the Bihar Pension Rules.
2. There are a large number of temporary Government
servants employed under different Schemes which are
in existence for the last 15-20 years and it will cause
hardship to them if they are not allowed pension after
their retirement.
3. The State Government after careful consideration
have, therefore, been pleased to decide that if the
service of the temporary or officiating government
servant who is not confirmed in any post is continuous
and is more than 15 years, it will be considered as
pensionable under rule 59 of the Bihar Pension Rules.
4. These orders will be applicable to government
servants retiring on or after 12 August, 1969.”
11. The argument is that the issue relating to arrears of salary for the
period 16th May, 2001 till the date of the absorption of the
6
employees under notification dated 30th May, 2007 stands
concluded by an order passed by this Court in State of Jharkhand
& Ors. v. Asgar Ali & Ors.
4
, therefore, the appellants are entitled
to consequential benefits of pension.
12. On the other hand, the argument of learned counsel for the
respondents is that the said Circular was not referred to by the
appellants before the High Court and rightly so, as such Circular is
not applicable to the employees engaged under Central
Government sponsored project. Still further, it is the temporary or
officiating service of a Government servant which is to be
considered as pensionable under Rule 59 of the Rules. Since the
employees engaged under the Project were not discharging duties
as temporary or officiating Government servants, therefore, such
Circular will not be applicable to them. It is, thus, argued that the
view of the Full Bench of the Jharkhand High Court does not
warrant any interference in the present appeals.
13. Before we consider the respective arguments of the learned
counsel for the parties, some of the statutory provisions of
Jharkhand Pension Rules are required to be reproduced:
“Rule 31:- Permanent post means a post carrying a
definite rate of pay and sanctioned without limit of
time.
Rule 38:- Substantive pay means the pay other than
special pay, personal pay or emoluments classed as pay
by the Provincial government under rule 26(a)(iii) to
which a government servant is entitled on account of a
4 Special Leave to Appeal (Civil) CC Nos. 10361-10364 of 2014 decided on 18th July,
2014.
7
post to which he has been appointed substantively or
by reasons of his substantive position in a cadre.
Rule 40:- Temporary post means a post carrying a
definite rate of pay and sanctioned for a limited time.
CHAPTER III
GENERAL PROVISIONS RELATING TO GRANT OF PENSION
SECTION-1-GENERAL
Rule 58:- The service of Government servant does not
qualify for pension unless it conforms to the following
three conditions:-
First-The service must be under Government.
Second-The employment must be substantive and
permanent.
Third-The service must be paid by Government.
Rule 59:- The Provincial Government may, however, in
the case of service paid from general revenues, even
though either or both of conditions (1) and (2) are not
fulfilled-
(1) declare that any specified kind of service rendered
in a non-gazetted capacity shall qualify for pension.
(2) in individual cases, and subject to such conditions as
it may think fit to impose in each case, direct that
service rendered by a Government servant shall count
for pension.
Rule 60:- The service of a Government servant does not
qualify unless he is appointed and his duties and pay
are regulated by the Government, or under conditions
determined by the Government. The following are
examples of Government servants exclude from
pension by this rule;
(1) Employees of a municipality,
(2) Employees of grant-in-aid schools and institutions.
(3) Service on an establishment paid from the house
hold allowance of the Governor or from his contract
establishment allowance.
Rule 61:- Service does not qualify unless the
Government servant holds substantively a post on a
permanent establishment.
Rule 74:- Services which satisfied the conditions
8
prescribed in sub-sections (2) and (3) qualifies, or does
not qualify, according to the source from which it is
paid; with reference to this rule, service is classified as
follows:-
(a) Paid from the general revenues.
(b) Paid from local funds.
(c) Paid from funds in respect to which the Government
hold the position of trustee.
(d) Paid by fees levied by law, or under the authority of
the Govt. or by commission.
(e) Paid by the grant, in accordance with law and
custom, of a tenure in land, or of a source of income, or
right to collect money.
Rule 103:- An interruption in the service of a
Government servant entails forfeiture of his past
service, except in the following case:-
(a) Authorised leave of absence.
(b) Unauthorized absence in continuation of authorized
leave of absence so long as the post of the absentee is
not substantively filled; if his post is substantively filled,
the past service of the absentee is forfeited.
(c) Suspension, where it is immediately followed by
reinstatement whether to the same or to a different
post, or where the Government servant dies or is
permitted to retire or is retired while under suspension.
(d) Abolition of the post or loss of appointment owing to
reduction of establishment.
(e) Transfer or non-qualifying service in an
establishment under Government Control. The transfer
must be made by a competent authority; a Government
servant who voluntarily resigns qualifying service
cannot claim the benefit of this exception. Transfer to a
grant-in-aid school entails forfeiture.
(f) Time occupied in transit from one appointment to
another provided that the Government servant is
transferred under the orders of competent authority, or,
if he is a non-gazetted Government servant with the
consent of the head of his old office.”
14. Before this Court, 3 writ petitioners are in appeal falling in category
I, 18 falling in category II and 6 falling in category III.
15. In the order under appeal, the claim of the employees for pension
9
was declined for the reason that no declaration within the meaning
of Rule 59(1) in general terms has been made nor any direction in
individual cases issued in their favour. The High Court relied upon
judgment of this Court reported as Dhyan Singh & Ors. v. State
of Haryana & Ors.
5
. The High Court also held that judgment of
Single Bench of Patna High Court in Baliram Singh & Ors. v.
State of Bihar & Ors.
6
is per incuriam. The High Court concluded
as under:
“The foregoing discussion therefore makes it clear that
past services of these petitioners/employees were
under the centrally sponsored scheme known as Adult
Education/Non-formal Education/Mass Education Project
which was abolished w.e.f. 1.4.2001 by the Central
Government and consequently w.e.f. 15.5.2001 by the
Government of Jharkhand. Appointment of these
petitioners/employees under such a scheme/project
therefore, cannot be treated as under regular
establishment of the Government on a permanent and
substantive post. Moreover, their pay and allowances
were borne by the grant-in-aid released by the Central
Government from time to time. That is the reason why
their services were treated as surplus once the Central
Government closed the scheme w.e.f. 1.4.2001.
Petitioners have failed to controvert the aforesaid
position on facts.”
16. The judgment in Baliram Singh has attained finality with the
judgment of this Court reported as State of Bihar & Ors. v.
Baliram Singh & Ors.
7
. In the aforesaid case, the policy decision
of absorbing the writ petitioners appointed under the Project
contained a clause that the candidates will be treated as fresh
appointments and that the earlier services rendered by them shall
5 (2002) 10 SCC 656
6 2016 SCC OnLine Pat 9958
7 (2018) 18 SCC 46
10
be calculated for their pension. The writ petitioners before the
Patna High Court claimed back wages from the date of their
termination till the date they were absorbed. This Court declined
the claim of back wages. The Court held as under:
“18. In the present case, however, the respondents
have neither challenged the termination order after
closure of the Non-Formal Education Scheme with effect
from 1-4-2001 nor the policy dated 20-5-2005 under
which they have been appointed or the appointment
letter dated 16-3-2007. Even the appointment letter
dated 16-3-2007 unambiguously predicates that the
appointment was a fresh appointment and the past
services would be reckoned only for the purpose of
grant of pension and nothing more. Indisputably, the
respondents acted upon such terms and conditions of
appointment without any demurrer. They chose to file
the subject writ petition only in the year 2013, when the
cause of action first arose on 1-4-2001, then on 20-5-
2005 and once again, on 16-3-2007. Unless the
respondents are to be reinstated in their previous post
(held prior to 1-4-2001), the question of awarding back
wages would not arise at all. The relief of back wages is
and can be linked only to the order of reinstatement. It
cannot be awarded in isolation or, for that matter,
during the period when the respondents were not in
employment at all.”
17. The case of Dhyan Singh was in respect of appointments under
the Project in the State of Haryana. The services of the employees
were discharged upon abolishing of the aforementioned Project.
The employees invoked the writ jurisdiction of the court claiming
fixation of their salary by taking past service and for pension. This
Court declined such claim and held as under:
“…..The continuance/engagement of the appellants
under the specific scheme cannot be held to be an
employment under any establishment of the
Government. Such schemes are taken up for
certain contingencies when money for the same is
11
provided either by the Central Government or at
times by some foreign countries. But the
employment under such scheme not being a part
of the formal cadre of the State Government, it is
difficult to hold that the period for which an
employee rendered service under such scheme can
be counted either for the purposes of deciding their
pensionary benefits or even for fixing of their
salary in the scale of pay once they are regularly
absorbed.”
18. In the present case, Clause 11 of the notification dated 30th May,
2007 issued by Government of Jharkhand is to the effect that
absorption of the surplus personnel will be considered as new
appointments and they will not be granted benefit of seniority on
the basis of their past service. Neither will such past service
entitle them to such pay protection. One of the appointment
letters appointing 65 candidates as Project Officers was issued on
20th December, 2007. Such appointment letter had following
clauses which read as under:
“4. Adjusted employees shall be covered under the old
Pension Scheme. Their service period prior to
retrenchment shall be counted for the purpose of
pension. Period of retrenchment shall not be counted
for the purpose of pension.
5. Adjustment of above surplus Project Officers shall be
considered as fresh appointment and benefit of
seniority on the basis their service rendered prior to
becoming surplus shall not be admissible to them.”
The appointment letters to the other employees is on similar lines.
19. The argument of the learned counsel for the appellants is that the
policy decision of the State, vide notification dated 30th May, 2007
12
only denies them the benefit of seniority or pay protection but not
of their past service being counted towards pensionary benefits. It
is contended that in terms of Rule 59 of the Rules, the State
Government has declared that the services rendered by a
temporary Government servant employed under different schemes
would be entitled to pension after the completion of 15 years of
service.
20. The entire case is based upon Rule 59 of the Rules and the Circular
dated 12th August, 1969 of the erstwhile State of Bihar. We do not
find any merit in the arguments raised by the learned counsel for
the appellants. Rule 59 of the Rules empowers the State
Government to declare any specified kind of service rendered by
one in a non-gazetted service to qualify for pension, provided, that
the salary is paid from the general revenue. Rule 58 of the Rules
contemplates the conditions that are required to be satisfied for
services to be pensionable. Herein, as it has been reiterated before,
first condition is that the service must be under the Government;
second, that it must be substantive and permanent; and third, that
it must be paid by the Government.
21. The appellants were appointed under a specific Scheme i.e. the
Project. Such project was not a permanent establishment of the
Government as it was meant for a specific purpose funded by the
Central Government for a specified period. The appointment of the
appellants under the Project is not a part of any cadre of the State
13
Government. Therefore, the first condition of Rule 58 that the
service rendered must be under the State Government is not
satisfied by the appellants having been appointed under the
Project. The second condition that employment must be
substantive and permanent is again not satisfied by the appellants
as the employment of the appellants was under the Project. A
permanent post in terms of Rule 31 of the Rules means a post
carrying a definite rate of pay and that is sanctioned without a time
limit. The appointment of the appellants under the project was not
in a pay scale nor was it sanctioned without a time limit. Further,
substantive pay is defined in Rule 38 of the Rules as a person who
is appointed in a cadre. At best, the appellants satisfied only the
third condition i.e. that they were paid by the Government.
22. If the first and second conditions mentioned in Rule 58 of the Rules
are not satisfied, the State Government can declare any specified
kind of service rendered in a non-gazetted capacity to qualify for
pension. The Circular dated 12th August, 1969 deals with
pensionary benefits to a temporary Government servant. The
appellants were never appointed by the Government either on a
temporary or on permanent basis. The appellants were engaged
under the Project i.e. a scheme, therefore, the benefit of such a
Circular cannot be claimed by the appellants. Still further, sub-rule
(1) of Rule 59 of the Rules empowers the State to declare any
specific kind of service to qualify for pension. The notification for
absorption circulated on 30th May, 2007 and the subsequent letter
14
of appointments do not contain any condition that the services
rendered by the appellants under the Project shall qualify for
pension. The policy decision contemplates that it is a fresh
appointment and no benefit either of seniority or pay protection
shall be given. The appellants have not disputed such condition of
appointment having been appointed under such policy decision
vide the notification dated 30th May, 2007. The Circular has not
granted pensionary benefits. In the absence of any specific
condition in the Circular to grant pensionary benefits, it is not
possible to read that pensionary benefits are to be granted to the
erstwhile employees of the Project. The appellants cannot turn
around to say that the services rendered by them under the Project
shall be counted for pension. The Circular dated 12th August, 1969
is not even remotely applicable to the employees appointed under
the Project as the very nature of the appointment was for a specific
purpose and not for an unlimited period of time.
23. The case of Baliram Singh arises out of the policy of the State of
Bihar wherein the past service has been specifically ordered to be
considered for pension. Since in the State of Jharkhand, the policy
decision is to treat them as fresh appointments without any benefit
of seniority and pay protection, therefore, to count the period when
the appellants were working under a Project as pensionable service
is beyond comprehension. The appellants have been appointed as
fresh candidates and, therefore, their period of service for pension
has to be calculated from the date of their regular appointment and
15
therefore they cannot get any benefit of past service rendered by
them.
24. Learned counsel for the appellants have referred to an order
passed by this Court in Asgar Ali & Ors. v. State of Jharkhand
& Ors.
8
 wherein the direction of the High Court for payment of
arrears was not interfered with. It is contended that since the
appellants have been paid salary for the period prior to their
regular appointment, the appellants would be entitled to pension
as well.
25. The Single Bench of the Jharkhand High Court in a judgment
reported as Asgar Ali dealt with a prayer for absorption and for
payment of arrears of salary from 16th May, 2001, i.e. when the
employees were rendered as surplus, till January, 2008, i.e. the
date of their absorption, in Writ Petition No.729 of 2004. The
learned Single Bench vide order dated 4th January, 2010, directed
the state for the payment of salary for the reason that the services
of the employees under the Project were not retrenched, therefore,
the employees were entitled to their salary. In such petition the
employees had made no claim for counting of past services for the
purposes of pensionary benefits. As against such order of the
learned Single Judge, the state sought LPA No.533 of 2012 which
was dismissed vide order dated 1st October, 2013. Thereafter the
State sought a Special Leave Petition which was also dismissed
with a direction to make phased payments of salary to the writ
8 2010 SCC OnLine Jhar 8
16
petitioners/employees. Again, no claim for counting of past
services for the purposes of pension was made or allowed by the
Court. It was merely a monetary benefit which was granted on
account of no formal order of retrenchment being passed against
the employees employed under the Project.
26. Since the appellants were absorbed as fresh appointees without
pay protection and seniority, as a consequence thereof, they will
not be entitled to count their past service rendered under the
Project for the purpose of pension. We, thus, do not find any error
in the order passed by the High Court which may warrant
interference in the present appeals. Accordingly, the appeals are
dismissed.
Civil Appeal No. 544 of 2020
27. The present appeal is directed against an order passed by Division
Bench of the High Court of Patna on 20th June, 2018 whereby LPA
No.189 of 2018 filed by the State was dismissed relying upon an
order passed by the Single Bench in CWJC No. 20780 of 2010 and
CWJC No. 20801 of 2010 on 19th April, 2011 wherein referring to
Rule 103 of Bihar Pension Rules, 1950, it was held that an
interruption in service on account of the abolition of a post shall not
entail forfeiture of the past service of a Government servant, i.e.
the intervening period can be counted for pensionary benefits. In
view of the said fact, the State was directed to consider the writ
petitioners as continuing in service between 1992 and 1998 solely
17
for the purpose of granting personal monetary benefits. The
petitioners were not to be entitled to payment of salary for the
period in any manner and neither claim any seniority over other
Government servants.
28. After the aforesaid judgments, Baliram Singh along with others
filed CWJC No. 22208 of 20139
 to claim back wages for the period
from 1st October, 2001 to 3rd July, 2007. The learned Single Bench
allowed the writ petition on 22nd August, 2016. Thereafter, LPA No.
2307 of 2016 was dismissed on 15th January, 2018. The said orders
were set aside by this Court in Baliram Singh. Therefore, the
reliance of the High Court on an order passed at earlier stage on
Baliram Singh no longer holds good. It may be noticed that in the
State of Bihar, past services rendered by employees under the
Project were taken into consideration for pensionary benefits. In
view of the said fact, the present appeal is disposed of in the same
terms as in Baliram Singh.

.............................................J.
L. NAGESWARA RAO
.............................................J.
 (HEMANT GUPTA)
NEW DELHI;
FEBRUARY 07, 2020.
9 2016 SCC OnLine Patna 9958 decided on 22nd August, 2016.
18

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
2
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. 
4
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
5
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. 
6
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
7
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
19
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, ­
20
(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)
21
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