Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No.2140 OF 2007
United India Insurance Co. Ltd. ……Appellant(s)
VERSUS
M/s Orient Treasures Pvt. Ltd. ……Respondent(s)
WITH
CIVIL APPEAL No.5141 OF 2007
M/s Orient Treasures Pvt. Ltd. ……Appellant(s)
VERSUS
United India Insurance Co. Ltd. ……Respondent(s)
J U D G M E N T
Abhay Manohar Sapre, J.
C.A. No. 2140 of 2007
1) This appeal under Section 23 of the Consumer Protection Act, 1986 is
filed against the order dated 19.03.2007 of the National Consumer Disputes
Redressal Commission (hereinafter referred to as “the Commission”), New
Delhi in Original Petition No. 375 of 1999 whereby the Commission allowed
the petition filed by the respondent herein and directed the appellant-
insurance company to pay a sum of Rs.36,10,211/- with interest @10% p.a.
from 03.12.1995 till date of payment and also directed the insurance
company to pay costs assessed at Rs.50,000/- to the respondent-Complainant
herein.
2) In order to appreciate the issue involved in this appeal, which lies
in a narrow compass, it is necessary to set out the relevant facts in brief
infra.
3) The appellant herein is an insurance company incorporated under the
Companies Act having its registered office at No. 24, Whites Road, Chennai.
The respondent herein is also a company incorporated under the Companies
Act, 1956 having its registered office at Oceanic Buildings, Quilon, Kerala
and its branches inter alia at Janpriya Centre No.34, Sir Thyagaraya Road,
Pondy Bazar, Chennai.
4) The respondent herein is the complainant. They are engaged in the
business of sale of various kinds of Jewellery. The respondent is having
their jewellery shop known as “Kanchana Mahal” which is situated at
Janpriya Centre No.34, Sir Thyagaraya Road, Pondy Bazar, Chennai.
5) The respondent had insured their jewellery kept in their shop with
the appellant under successive “Jewellers Block Policies” with effect from
02.07.1993 onwards. The procedure followed was that the respondent was
required to submit proposal form. On receipt of the proposal form, the
officials of the appellant-insurance company used to inspect the shop to
verify the security and storage particulars.
6) The respondent filled up the insurance proposal form by providing
necessary information as mentioned in the form. On the basis of the said
proposal form, the appellant issued an insurance policy in favour of the
respondent from 02.07.1993 to 01.07.1994. It was then subsequently renewed
for further one year, i.e. from 02.07.1994 to 01.07.1995.
7) On 02.06.1995, the respondent alleged that there was a burglary in
their Jewellery shop. According to the respondent, on the night of
02.06.1995, burglars broke open the locks of shutters, entered the shop and
decamped with the gold and silver ornaments valued at Rs.40,63,735.53. The
respondent accordingly lodged FIR at the concerned Police Station on
03.06.1995. The respondent also informed the appellant on 03.06.1995 by a
telegraphic communication about this incident. By letter dated 05.06.1995,
the appellant informed the respondent that a Surveyor has been appointed to
assess the loss suffered by the respondent in the burglary. The surveyor
then inspected the site and also examined all the relevant material, books,
inventory etc. with a view to assess the actual loss alleged to have been
suffered by the respondent and accordingly assessed the total loss at
Rs.36,10,211/. Thereafter he submitted his report. After investigation,
the police also submitted a final investigation report on 24.06.1995
treating the case as untraceable.
8) The respondent then submitted their claim with the appellant on the
basis of the Insurance Policy and claimed that they are entitled to receive
the value of Jewellery which they lost in burglary committed in their shop
on 02.06.1995. On 19.01.1998, the Divisional Manager of the Insurance
Company, Tuticorin after examining the respondent’s claim for loss of their
Jewellery repudiated the claim inter alia on the ground that the stolen
gold ornaments and silver articles were found to had been kept on display
window and in the sales counters at the time of burglary which took place
in the night of 02.06.1995, which according to appellant, was contrary to
the terms of the policy and, therefore, not covered in the policy. In other
words, such items were not insured. It was further stated that the policy
was issued subject to the terms, conditions, warranties and exclusion
printed in the proposal form which was a part of policy. The appellant
relied on clause 12 of the policy and stated that since the burglary in the
shop took place during night and stolen articles kept in window display
and lying out of safe in the shop were stolen, the appellant could not be
made liable to indemnify such loss which, according to them, was not
insured and specifically excluded from the insurance policy.
9) Being aggrieved by the decision of the appellant-Insurance Company,
the Respondent sent letters and reminders pointing out therein the terms of
the proposal form and policy and insisted that the loss was fully covered
by the policy and hence they were entitled to claim the value of the lost
articles from the appellant on the basis of Insurance Policy. As nothing
was done, the respondent filed a complaint before the National Consumer
Disputes Redressal Commission, New Delhi (hereinafter referred to as “the
Commission”) being Original Petition No. 375 of 1999 claiming a sum of
Rs.1,32,06,786.30.
10) By order dated 19.03.2007, the Commission partly allowed the
petition filed by the respondent and directed the appellant-Insurance
Company to pay a sum of Rs.36,10,211/- with interest @ 10% p.a. from
03.12.1995 till date of payment and also directed the Insurance Company to
pay costs assessed at Rs.50,000/- to the respondent.
11) Aggrieved by the said order, the appellant-Insurance Company has
filed this appeal.
12) Dissatisfied with the claim awarded by the Commission, the respondent
has filed C.A. No. 5141 of 2007 seeking enhancement in the quantum of
claim. According to the respondent, they are entitled to claim a sum of
Rs.1,32,06,786.30 as against Rs. 36,10,211/- awarded by the Commission.
13) Heard Mr. P.P. Malhotra, learned senior counsel for the appellant and
Mr. H. Ahmadi, learned senior counsel for the respondent.
14) Shri P.P.Malhotra, learned senior counsel appearing for the appellant
while assailing the legality and correctness of the impugned order mainly
urged two points in support of his submissions.
15) In the first place, learned senior counsel urged that the Commission
erred in partly allowing the complaint filed by the respondent herein by
passing the impugned award against the appellant. According to learned
counsel, had the Commission properly interpreted clauses 4 and 5 of the
proposal form, which was part of the policy along with clause 12 of the
policy then in such event, the respondent's complaint was liable to be
dismissed in its entirety.
16) Elaborating the aforementioned submission, learned counsel pointed
out that the plain reading of clauses 4 and 5 (b) with their note and
clause 12 of the policy clearly show that the respondent's claim was
excluded from the policy issued by the appellant because it was in relation
to the items which were kept in display window and out of safe at the time
of burglary.
17) In other words, the submission was that the respondent's claim was
not covered under the policy and was expressly excluded by virtue of
clauses 4 and 5(b) read with clause 12 of the policy because firstly, the
burglary in the shop took place in night hours and secondly, the stolen
articles were kept in display window and outside the safe.
18) Learned counsel, therefore, urged that due to these two admitted
facts, the note appended to clauses 4 and 5 read with clause 12 was
attracted rendering the respondent's complaint as not maintainable.
19) Learned counsel further pointed out that the respondent despite
knowing these clauses of the proposal form/policy instead of seeking any
clarification regarding meaning of the clauses paid the premium pursuant
thereto the appellant issued the Insurance policy on the terms and
conditions set out therein which are binding on both parties while
adjudicating their rights against each other arising out of the policy.
20) Learned counsel, in the second place, submitted that the language of
clauses 4, 5 and 12 being plain, clear and unambiguous conveying only one
meaning, the appellant had every right to rely upon these clauses while
opposing the respondent's complaint on merits.
21) Learned counsel, therefore, submitted that in the light of these
facts, the respondent had no right to file a complaint against the
appellant seeking monetary compensation for the loss alleged to have been
suffered by them arising out of burglary of their articles stolen from
their shop. Such claim, according to learned counsel, was barred by virtue
of clauses 4, 5 and 12 of the policy and was therefore, liable to be
dismissed as being untenable.
22) In support of his submission, learned counsel placed reliance on the
decisions in General Assurance Society Ltd. vs. Chandumull Jain & Anr.,
AIR 1966 SC 1644 = (1966) 3 SCR 500, United India Insurance Co. Ltd. vs.
Harchand Rai Chandan Lal (2004) 8 SCC 644, Oriental Insurance Co. Ltd. vs.
Sony Cheriyan, (1999) 6 SCC 451, Rahee Industries Ltd. vs. Export Credit
Guarantee Corporation of India Ltd. & Anr., (2009) 1 SCC 138, Sikka Papers
Ltd. vs. National Insurance Co. Ltd. & Ors., (2009) 7 SCC 777, Vikram
Greentech India Ltd. & Anr. vs. New India Assurance Co. Ltd., (2009) 5 SCC
599, New India Assurance Co. Ltd. vs. Zuari Industries Ltd. & Ors., (2009)
9 SCC 70, Amravati District Central Cooperative Bank Ltd. vs. United India
Fire and General Insurance Co. Ltd., (2010) 5 SCC 294, Suraj Mal Ram Niwas
Oil Mills P. Ltd. vs. United India Insurance Co. Ltd. & Anr., (2010) 10 SCC
567, Deokar Exports P. Ltd. vs. New India Assurance Co. Ltd., (2008) 14
SCC 598, Export Credit Guarantee Corp. of India Ltd. vs. Garg Sons
International, (2014) 1 SCC 686 and Rust vs. Abbey Life Assurance Co. Ltd.
& Anr., (1979) Vol.2 Lloyd’s Law Reports 334.
23) In reply, Mr. H. Ahmadi, learned senior counsel appearing for the
respondent while supporting the impugned order contended that the
issue involved in this case needs to be decided in the light of the
principle underlined in the rule known as "contra proferentem rule”.
According to learned counsel, there is an ambiguity in the language/words
of clauses 4 and 5 of the proposal form and since the ambiguity noticed
created some confusion as to what these clauses actually provide and expect
the respondent to comply at the time of filling the proposal form for
obtaining the insurance policy, this Court should interpret the clauses by
applying the principle underlined in the aforesaid rule in such a way that
its benefit would go to the respondent rather than to the appellant. It was
also his submission that the appellant being the author of the proposal and
policy are not entitled to claim the benefit of the clauses of proposal
form/policy in their favour thereby defeating the rights of the respondent
which they have got under the policy to enforce against the appellant for
claiming the compensation.
24) Learned counsel also contended that the respondent had intended to
insure all their articles kept in the shop regardless of timings and the
manner in keeping the articles in their shop. He also pointed out that the
respondent having paid the full premium for the articles which were valued
at Rs. 2 crore as disclosed by the respondent in clauses 4 and 5 and
therefore the respondent was entitled to claim compensation for the loss of
the stolen items (jewelry) treating them as insured and covered under the
policy, issued in their favour.
25) So far as the connected appeal filed by the respondent-Complainant is
concerned, the submission of the learned senior counsel for the respondent
was that the Commission erred in not allowing their complaint in its
entirety despite availability of evidence on record. Learned counsel,
therefore, prayed for dismissal of the appellant's appeal and allowing the
appeal filed by the respondent by enhancing the quantum of compensation as
claimed by the respondent in the complaint.
26) Learned senior counsel also placed reliance on the same decisions
which were cited by learned senior counsel for the appellant and contended
that the law laid down therein also supports the respondent's case.
27) Having heard the learned counsel for the parties and on perusal of
the record of the case including the written submissions, we find force in
the submissions of learned counsel for the appellant (Insurance company-
Insurer).
28) The question which arises for consideration in this appeal is whether
the Commission was justified in allowing the complaint filed by the
respondent against the appellant-Insurance Company in part and was,
therefore, justified in awarding a sum of Rs.36,10,211/- to the respondent.
29) In order to answer the aforementioned question, clauses 4, 5 of the
proposal form and clause 12 of the policy need mention infra.
(1)
|4 |WINDOW DISPLAY | |
| |State the approximate value | |
| |of any of article of |Rs.3,50,5000/- |
| |Jewellery or Gem stock which | |
| |will be displayed in the | |
| |window (A pad or tray | |
| |containing a number of rings | |
| |or other articles to be | |
| |counted as one article). | |
| |(Give separate answer for | |
| |each location). | |
| |Note : Window display at | |
| |night is not covered. | |
|5 |STOCK | |
| |a. What was (i) the average |(a)(i)New Shop |
| |daily total value of your |(b)(iii)New shop |
| |stock during the past 12 | |
| |months? | |
| |(ii) Will the whole of your |(b) All stocks of |
| |stock when on your premises |Gold, Diamond, |
| |be kept in safe at night and |Gems, Silver and |
| |at all times when the state |other precious |
| |value and class of stock |stones-kept outside|
| |which will left outside |the |
| |safes. |safe-Rs.2,00,00,000|
| |Note : We do not cover |(Two crores). |
| |stocks kept out of the | |
| |safe---business hours at | |
| |night. | |
(2)
The company shall not be liable for under this policy in respect of
1 to 11………….
12. Loss or damage to property, insured whilst in window display at night
or whilst kept out of safe after business hours.”
30) Before we examine the issue involved in the case, it is necessary to
take note of the law laid down on the subject by the Constitution Bench of
this Court in General Assurance Society Ltd. vs. Chandumull Jain & Anr.,
AIR 1966 SC 1644.
31) The Constitution Bench in this case has explained the true nature of
contract relating to Insurance and laid down the relevant factors which the
courts should keep in mind while interpreting the contract of insurance.
32) Justice Hidayatullah, J. (as His Lordship then was) speaking for the
Bench in his distinctive style of writing held in Para 11 as under:
“11. A contract of insurance is a species of commercial transactions and
there is a well established commercial practice to send cover notes even
prior to the completion of a proper proposal or while the proposal is being
considered or a policy is in preparation for delivery. A cover note is a
temporary and limited agreement. It may be self contained or it may
incorporate by reference the terms and conditions of the future policy.
When the cover note incorporates the policy in this manner, it does not
have to recite the term and conditions, but merely to refer to a particular
standard policy. If the proposal is for a standard policy and the cover
note refers to it, the assured is taken to have accepted the terms of that
policy. The reference to the policy and its terms and conditions may be
expressed in the proposal or the cover note or even in the letter of
acceptance including the cover note. The incorporation of the terms and
conditions of the policy may also arise from a combination of references in
two or more documents passing between the parties. Documents like the
proposal, cover note and the policy are commercial documents and to
interpret them commercial habits and practice cannot altogether be ignored.
During the time the cover note operates, the relations of the parties are
governed by its terms and conditions, if any, but more usually by the terms
and conditions of the policy bargained for and to be issued. When this
happens the terms of the policy are incipient but after the period of
temporary cover, the relations are governed only by the terms and
conditions of the policy unless insurance is declined in the meantime.
Delay in issuing the policy makes no difference. The relations even then
are governed by the future policy if the cover notes give sufficient
indication that it would be so. In other respects there is no difference
between a contract of insurance and any other contract except that in a
contract of insurance there is a requirement of uberrima fides i.e. good
faith on the part of the assured and the contract is likely to be construed
contra proferentem that is against the company in case of ambiguity or
doubt. A contract is formed when there is an unqualified acceptance of the
proposal. Acceptance may be expressed in writing or it may even be implied
if the insurer accepts the premium and retains it. In the case of the
assured, a positive act on his part by which he recognises or seeks to
enforce the policy amounts to an affirmation of it. This position was
clearly recognised by the assured himself, because he wrote, close upon the
expiry of the time of the cover notes, that either a policy should be
issued to him before that period had expired or the cover note extended in
time. In interpreting documents relating to a contract of insurance, the
duty of the court is to interpret the words in which the contract is
expressed by the parties, because it is not for the court to make a new
contract, however reasonable, if the parties have not made it themselves.
Looking at the proposal, the letter of acceptance and the cover notes, it
is clear that a contract of insurance under the standard policy for fire
and extended to cover flood, cyclone etc. had come into being.”
33) Keeping in view the aforesaid principle of law in mind and applying
the same to the facts of the case, we proceed to examine the issue involved
in this appeal.
34) Mere perusal of the note appended to clause 4 quoted above would go
to show that the appellant (Insurance Company) had made it clear in the
proposal form itself that "window display of articles at night is not
covered". This clearly meant that the insurance coverage was given to the
articles kept in "window display during day time in business hours" whereas
insurance coverage was not given to the articles when they were kept in
"window display at night".
35) In other words, if the burglary had been committed during day time in
business hours and in that burglary, the articles kept in display window
were stolen then in such circumstances, the appellant was liable to
reimburse the loss to the respondent of such stolen articles as insured
articles under the policy. But if the burglary had been committed of the
articles kept in display window during night time (after business hours)
then in such circumstances the appellant having made it clear to the
respondent in the note in clause 4 that they would not be liable to
indemnify the loss of any such articles kept in display window after
business hours, the respondent was not entitled to claim any compensation
for the loss of any such stolen articles. In other words, the insurance
coverage was not extended to such stolen articles under the policy.
36) Similarly, mere perusal of note appended to clause 5 quoted above
would go to show that the appellant had made it clear in the proposal form
itself to the respondent that "stock which is kept out of the safe after
business hours at night" is not covered under the policy. This clearly
meant that "stock kept out of safe during business hours", if stolen, was
insured and given coverage under the policy but if it was kept out of safe
after business hours at night, then it was not covered under the policy and
therefore, the appellant was not liable to indemnify the loss sustained by
the respondent of any such stolen articles.
37) In other words, if the burglary had been committed during day time in
business hours then the appellant was liable to reimburse the loss to the
respondent of the stolen articles treating them as insured articles under
the policy. But if the burglary had been committed of the stock/articles
kept out of safe after business hours at night then in such circumstances
the appellant was not liable to indemnify the loss of any such stolen
articles by virtue of note appended to clause 5. In these circumstances,
the respondent was not entitled to claim any compensation for the loss
sustained in the burglary of any such stolen articles.
38) In our considered opinion, there is neither any ambiguity nor
vagueness and nor absurdity in the language/wording of note appended to
clauses 4 or/and 5. On the other hand, we find that the language/wording
of the note in both the clauses is plain, clear, unambiguous and creates no
confusion in the mind of the reader about its meaning. That apart clause 12
of the policy, in clear terms, provides that the appellant would not be
liable to indemnify any loss under the policy if such loss or damage to the
insured property occurs while the insured property was kept in window
display at night or while it was kept out of safe after business hours.
39) This takes us to the next submission of Mr. Ahmadi, learned senior
counsel for the respondent that we should apply the rule of contra
proferentum to interpret clauses 4 and 5 because according to him there is
an ambiguity in the language/wording of clauses 4 and 5 and secondly, the
appellant being the author of these clauses has no right to take benefit of
the ambiguity to defeat the rights of the respondent. Learned counsel
maintained that the interpretation of the clauses should, therefore, be
made in such a way that its benefit would go to the respondent (insured)
for claiming compensation from the appellants. We cannot accept this
submission of learned counsel for the respondent for more than one reason.
40) In Halsbury's Laws of England (fifth edition- Volume 60 Para 105 )
principle of contra proferentem rule is stated thus :
“Contra proferentem rule. Where there is ambiguity in the policy the court
will apply the contra proferentem rule. Where a policy is produced by the
insurers, it is their business to see that precision and clarity are
attained and, if they fail to do so, the ambiguity will be resolved by
adopting the construction favourable to the insured. Similarly, as regards
language which emanates from the insured, such as the language used in
answer to questions in the proposal or in a slip, a construction favourable
to the insurers will prevail if the insured has created any ambiguity.
This rule, however, only becomes operative where the words are truly
ambiguous; it is a rule for resolving ambiguity and it cannot be invoked
with a view to creating a doubt. Therefore, where the words used are free
from ambiguity in the sense that, fairly and reasonably construed, they
admit of only one meaning, the rule has no application.”
41) The aforesaid rule, in our considered opinion, has no application to
the facts of this case. It is for the reason that firstly, we find that
there is no ambiguity in the language/wording used in clauses 4 and 5. In
other words, as held above, the language/wording of clauses 4 and 5 and the
note appended thereto is clear, plain and unambiguous and carries only one
meaning. Secondly, in the absence of any ambiguity, the respondent is not
entitled to invoke the principle underlined in the rule of contra
proferentem for interpreting the clauses of the policy and lastly, presence
of ambiguity in the language of policy being sine qua non for invocation of
the contra proferentem rule, which is not present here, we cannot apply the
rule for deciding the issue involved in case.
42) It is a settled rule of interpretation that when the words of a
statute are clear, plain or unambiguous, i.e., they are reasonably
susceptible to only one meaning, the courts are bound to give effect to
that meaning irrespective of consequences. In other words, when a language
is plain and unambiguous and admits of only one meaning, no question of
construction of a statue arises, for the Act speaks for itself. Equally
well-settled rule of interpretation is that whenever the NOTE is appended
to the main Section, it is explanatory in nature to the main Section and
explains the true meaning of the main Section and has to be read in the
context of main Section (See - G.P.Singh -Principle of Statutory
Interpretation 13th Edition page 50 and 172). This analogy, in our
considered opinion, equally applies while interpreting the words used in
any contract.
43) Coming now to the facts of the case, it is not in dispute that the
burglary took place in the respondent's shop during night hours on
02.06.1995 when the burglars took away the jewelry (gold/silver ornaments)
kept in display window and jewelry lying out of safe. The appellant was,
therefore, justified in contending that the stolen articles were not
covered under the policy by virtue of clauses 4, 5 of Proposal Form and
Clause 12 of the policy and no liability could be fastened on them to
indemnify the loss of such articles for awarding any compensation to the
respondent. Indeed clauses 4, 5 and 12 were clearly attracted in
appellant’s favour.
44) We do not agree to the submission of Mr. Ahmadi, learned senior
counsel for the respondent that once the respondent disclosed their
intention to get their stock (ornaments) valued at Rs 2 Crores insured with
the appellant by filling the details in Columns 4 and 5 of the proposal
form and once they paid the necessary premium to the appellant, the
respondent became entitled to claim loss of the stolen items from the
appellant treating the stolen items as insured under the policy regardless
of note contained in clauses 4 , 5 and clause 12 of the policy. In our
view, the submission has a fallacy.
45) Firstly, as mentioned above, if the burglary had taken place during
day time in business hours in respect of the items kept in display window
or out of safe, the appellant was liable to compensate the respondent for
the entire loss suffered by them treating the stolen items as insured items
under the policy. In other words, if the burglary had taken place during
business hours then item kept in display window or those lying out of safe
were covered under the policy.
46) Likewise, if the burglary had taken place during night in relation to
the items kept in the safe, then also the appellant was liable to
compensate the loss suffered by the respondent in burglary treating the
stolen items as insured items under the policy.
47) In both the category of cases mentioned above, the appellant was not
entitled to rely upon clauses 4, 5 and 12 to avoid their liability because
both the instances did not fall either in clause 4 or clause 5 or clause
12. However, this was not the case set up by the respondent against the
appellant.
48) On the other hand, it is the case of the respondent that the burglary
took place at night and the insured items kept in display window and some
lying out of safe were stolen. Due to these facts, clauses 4, 5 and 12 were
attracted against the respondent.
49) In order to claim benefit of the policy, it was obligatory upon the
respondent to have removed the insured items from display window everyday
after business hours and keep them inside safe during night hours till
opening of the shop next day. Like wise all insured items in side the shop
should also have been kept in side the safe everyday after business hours
till opening of the shop next day. It was, however, not done by the
respondent.
50) A contract of insurance is one of the species of commercial
transaction between the insurer and insured. It is for the parties
(insurer/insured) to decide as to what type of insurance they intend to do
to secure safety of the goods and how much premium the insured wish to pay
to secure insurance of their goods as provided in the tariff. If the
insured pays additional premium to the insurer to secure more safety and
coverage of their insured goods, it is permissible for them to do so. In
this case, the respondent did not pay any additional premium to get the
coverage of even two instances mentioned above to avoid rigour of note of
clauses 4, 5 and clause 12.
51) In view of foregoing discussion, we cannot concur with the reasoning
and the conclusion arrived at by the Commission. The appeal filed by the
insurance company, i.e., Civil Appeal No. 2140 of 2007, therefore, deserves
to be allowed. It is accordingly allowed. Impugned order is set aside. As a
consequence thereof, the complaint filed by the respondent against the
appellant out of which this appeal arises is dismissed. No costs.
Civil Appeal No. 5141 of 2007
In the light of the order passed in Civil Appeal No. 2140 of 2007, it is
not necessary to examine the merits of the claim filed by the Complainant,
which has been rendered infructuous. The appeal thus fails and is dismissed
as having rendered infructuous. No costs.
.……...................................J.
[J. CHELAMESWAR]
………..................................J.
[ABHAY MANOHAR SAPRE]
New Delhi,
January 13, 2016.
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