A. P. SAHI, J (PRESIDENT)

1. The Complainant has come up alleging deficiency against the New India Assurance Company Limited contending that the loss of the stocks of rice and paddy that had been insured with the Opposite Party Company has not been indemnified on an erroneous interpretation of the terms of the policy inspite of the fact that the incident of fire in which the loss occurred had also witnessed the loss of building / plant and machinery that was offered to be settled by the Insurance Company.
2. The facts in brief that need to be appreciated are that the Complainant owns a Rice mill in the District of Motihari, Bihar and during the course of his business he was also under an agreement with the Bihar State Food & Civil Supplies Corporation Limited to mill rice on the paddy supplied by the Corporation and return the processed rice back to the Corporation. This processing and milling of the rice led to the operations involving lifting of paddy and delivering of rice under the agreement with the Corporation.
3. In order to secure the production unit and the stocks, etc. from the perils of fire and burglary, an insurance cover was taken from the Opposite Party / Insurance Company where a sum of Rs.1,00,00,000/- was insured towards the stocks of rice and paddy, etc. The insurance cover was admittedly valid for the period 27.06.2012 to 26.06.2013. The policy termed as Standard Fire and Special Perils policy is Annexure A on record.
4. Unfortunately on 13.11.2012 a fire broke out in the premises of the mill as a result whereof the plant, machinery, building furniture and fixtures were damaged and together with it the stock of paddy and rice was also destroyed beyond use as alleged.
5. An FIR was lodged with the Police Station on 14.11.2012 and information was sent to the Insurance Company. The Branch Manager demanded certain documents in respect of the claim that was also sent.
6. The Surveyor M/s Phalguni Purkayastha was appointed to survey the loss and a preliminary report was sent on 27.11.2012. On receipt of the documents from the Complainant a final report was tendered on 27.12.2012 recording that the proximate cause of loss was a fire that was claimed to have been ignited on account of the falling of a lamp that had been positioned during the celebrations on Diwali. The fire report was taken into consideration which the Surveyor indicated was not on a proper format but while recording its findings it was held that the fire had occurred, but whether it was accidental or by an insured peril was not established. The Surveyor opined that paddy that was held in trust was not covered under the insurance policy and therefore there was no insurable claim.
7. However, the loss and salvage was assessed and a summary was drawn up indicating loss caused to the building to the tune of Rs.2,90,000/-.
8. It may be pointed out that an investigation was also carried out by one Mr. Rahul Ranjan who submitted his report on 28.01.2013 indicating that the walls of the mills were cracked and there was no indication of any malicious act on the part of the owner alleging arson. The said report was submitted and since there was a doubt about the details in the fire report a request was made by the Insurance Company to the State Fire Officials at Patna, Bihar, whereupon a Committee was constituted and a report was submitted dated 27.04.2013 confirming that there was a possibility of the fire having occurred on account of Deepavali lamp that might have fallen down but at the same time also expressed its doubt regarding the source of the fire.
9. Nonetheless the Insurance Company vide letter dated 19.02.2013 offered a payment of Rs.2,85,000/- as an indemnification amount for settling the claim and requesting the Complainant to fill up the details as also the discharge voucher in order to receive the said payment.
10. The Complainant did not accept the same and protested, and having failed to receive a suitable response a legal notice was sent to which a Reply was sent by the Insurance Company reiterating its stand that they have already settled their claim for a sum of Rs.2,85,000/- vide letter dated 19.02.2013.
11. However the claim by the Complainant was not accepted as a result whereof the present Complaint was filed on which notices were issued and Parties have exchanged their pleadings that are on record.
12. The case was adjourned on several occasions and could not be concluded when ultimately on 07.03.2024 the case was heard and the following Order was passed:
    • Learned counsel for the complainant has joined online and has sought an adjournment today to enable him to assist the Bench.

Mr. C.K. Gola, learned counsel for the opposite parties has also joined online and he has advanced his submissions in short contending that the goods which have been lost/ damaged in a fire were stocks that were held in trust and did not belong to the complainant.Consequently, in view of the terms and conditions of the policy, since goods held in trust were not insured therefore the complainant was not entitled to indemnification on that count.

It is also submitted by Mr. Gola that there is a serious doubt with regard to the cause of fire and the complainant has not been able to establish the exact cause of fire for which he relies on the report of the fire department, where on the one hand it has been indicated that there is a possibility of the fire having been caused due to the goods being ignited upon the lighting of a lamp as it was the festive day of Diwali, however, the alternative, which has been suggested is that the fire might have beengenerated deliberately for which three indicators have been given. Mr. Gola therefore submits that the cause of fire has not been clinchingly established to be an accident and quite possibly it might not be accidental. Hence, the claim was rightly repudiated and consequently the complaint deserves to be rejected.

He has also pointed out that in a document which is a bond executed bythe complainant in favour of the District Manager, Bihar State Food and Civil Supplies Corporation, clause 11 therein has been hand written, which even otherwise does not extend any advantage to the claimant.

He therefore submits that once a proposal and the policy only covers the stocks of the complainant and not of the stocks held in trust, the claim is inadmissible and has been rightly repudiated as it has been found that the damage has been caused to the paddy that was stocked and belonged to the Bihar State Food and Civil Supplies Corporation. Mr. Gola, therefore, contends that the repudiation does not suffer from any infirmity and is supported by the surveyor’s report dated 27.12.2012.

The contention therefore in short is that neither the cause of fire has been convincingly established nor the stocks that have been lost in the fire were insured, hence, the complainant cannot take any advantage of the insurance cover.

Learned counsel for the complainant has sought an adjournment.

List on 01.05.2024.”

13. Since an adjournment had been sought on behalf of the Complainant the matter was again directed to come up on 01.05.2024 when a second adjournment was sought whereafter the matter was finally heard on 04.09.2024.
14. Learned Counsel for the Complainant has vehemently argued that the stock of paddy and rice that was the subject matter of agreement between the Complainant and Bihar State Food & Civil Supplies Corporation Limited, was an insured stock which was destroyed and hence the same was indemnifiable as it was covered under the policy. The contention is that in effect the entire stock was in custody of the Complainant and the purpose for which the policy was taken was to secure all the stocks. He has further invited the attention of the Bench to the proposal form which is appended along with the Reply of the Opposite Party at Page No. 22 thereof to contend that no separate categories of stocks were sought to be insured. Inviting the attention of the Bench to the details under clause 10 of the said policy he points out that the Insurance proposal was for building upto the plinth for Rs.4,00,000/-, building over the plinth for Rs.16,00,000/-, the plants and machinery for Rs.11,69,000/- and all the stocks of paddy, rice, bran, broken rice kept in the premises for Rs.1,00,00,000/-. Thus, all the stocks were clearly covered as was requested in the proposal form and which stands corroborated by the insurance cover i.e. Annexure A appended to the Reply of the Opposite Party. He has invited the attention of the Bench to the recital in column 1 at Page No. 17 to urge that a sum of Rs.1,00,00,000/- of stocks is clearly mentioned and for which a premium has also been paid. He further submits that the building, plant and machinery were also insured which is categorically included indicating that the building and super structure is insured for Rs.16,00,000/-, on the plinth and the foundation area for Rs.4,00,000/- and plants and machinery together with accessories for Rs.11,69,000/-.
15. He therefore submits that the stand of the Insurance Company not to indemnify the claim with regard to stocks of paddy and rice in process or held in trust was unjustified and contrary to the terms of the policy. The intention of the Parties was to insure all the stocks in its entirety  without distinction as proposed through the proposal form.
16. He submits that the very purpose of the insurance was to secure these very stocks and the custody of the said stocks of the Food and Civil Supplies Corporation was entrusted to the Complainant under the agreement. The agreement has been filed on record as an Annexure – to the Reply of the Opposite Party.
17. He further submits that once the occurrence of fire was not disputed then to bifurcate the policy on the ground of stocks held in trust and denying indemnity is contrary to the intention of the insurance contract and is otherwise illegal. To substantiate his submissions he submits that such stocks even if kept under entrustment is liable to be construed as a stock insured under the policy and for that he has relied on the judgment of the Andhra Pradesh High Court in the case of United India Insurance Company Limited, Madras and ors. versus Sri Balaji Dental Laboratory reported in 1999 SCC OnLine AP 391. He has invited the attention to the discussion in the said judgment on the issue of insurable interest in the property and with the aid of Paragraph No. 16 and 17 of the said report he contends that the relationship under the agreement between the Complainant and the Corporation clearly reflects that in the event of a loss the Complainant would have insurable interest and it is for this purpose that the insurance coverage had been taken. Paragraph No. 16 and 17 of the judgement are extracted herein under:
    • 16.   The next question is whether the respondent has an insurable interest in the property. The admitted fact is that the appellant is a lessee and he has mortgaged the lease hold interest to the Corporation. The learned Counsel for the appellant contended that he being not the owner of the property has no insurable interest in the premises insured, therefore they are not entitled for the insured amount. In this context reference may be made to the judgment of the Gnana Sundaram v. Vulcan Insurance Co., AIR 1931 Rangoon 210 (DB). The said judgment explains the meaning of “Insurance interest”. The said judgment reads as follows:
      • A man is interested in a thing to whom advantage may arise or prejudice happen from the circumstances which may attend it………and whom ut importeth that its condition as to safety or other quality shall continue. Interest does not necessarily imply a right to the whole or part of the thing, nor necessarily imply a right to the whole or part of the thing, nor necessarily and exclusively that which may be subject of privation, but he having some relation to, or concern in the subject of the insurance; which relation or concern, by the happening of the perils insured against, may be so effected as to produce a damage, detriment or prejudice to the person insuring. And where a man is so circumstanced with respect to matters exposed to certain risks and dangers as to have a moral certainty of advantage or benefit but for these risks and dangers, he may be said to be interested in the safety of the thing. To be interested in the preservation of a thing is to be so circumstanced with respect to it as to have benefit from the existence, prejudice from its destruction.”
      • Only those recover who have an insurable interest and they can recover only to the extent to which that insurable interest is damaged by the loss. In the course of the argument it has been sought to establish a distinction between a fire policy and a marine policy. It has been urged that a fire policy is not quite a contract of indemnity and that the assured can get something more than what he has lost. It seems to me that there is no justification in authority, and I can see no foundation in reason, for any suggestion of that kind. What is it that is insured in a fire policy? Not the bricks and materials used in the building the house, but the interest of the assured in the subject-matter of insurance, not the legal interest only, but the beneficial interest.”
18. He submits that an insurable interest need not necessarily be an interest of ownership and it can be an interest other than an ownership as well. The contention is that even if there is an interest in part then too the claim was indemnifiable. In the instant case there was a substantial interest of the Complainant in the supply of custom milled rice to the level of the profits to which the Complainant was entitled in the process and as such it cannot be said that the Complainant had no insurable interest. To the contrary once the agreement with the Corporation allows certain benefits thereunder, the insurance coverage includes indemnification of stocks in which the Complainant had a partial interest. The interest as per the ratio cited above was to preserve the stocks for its processing.  He therefore submits with the aid of the said judgment that the claim with regard to stocks and paddy of rice could not have been denied by the Insurance Company.
19. He then cited the judgment of the Jammu and Kashmir High Court in the case of M/s Oriental Insurance Company Limited versus Sham Lal Matoo reported in AIR 2006 J&K 103. Placing reliance on Paragraph No. 12, 13 and 14 of the said judgment it is urged that the insurable interest in the property can be gathered from the pecuniary damage caused to the beneficiary who is entitled to enjoy benefits of the policy with reference to the goods which are insured. Paragraph No. 12, 13 and 14 are extracted herein under:

“12. A contract of fire insurance as in the present case requires an insurable interest in the subject matter and the test of determination of that interest is whether the loss of property would cause a pecuniary loss to the insured and whether he would have attained any pecuniary benefit or advantage from preservation of the insured property. If the insured would suffer the loss or derive the benefit he would be having an insurable interest in the subject matter of the insurance contract which was good enough to entitle him to the assessed loss. What was the extent of his interest and whether he was with full or part of the property was irrelevant for purposes of settling his claim. Because the Insurance of the subject matter and its ownership may not necessarily go together. They may be insurance to cover the interest of others and the person insuring the interest may not be the owner of the property. This finds support from the Supreme Court judgment in New India Assurance Co. Ltd. v. G.N. Sainani, (1997) 6 SCC 383 : (AIR 1997 SC 2938) holding (Para 11):

“……. To put it in other words, insurable interest in property would be such interest as shall make the loss of the property to cause pecuniary damage to the assured. To come under the scope of the word ‘consumer’ as defined in the Act it should be possible for the assured to assign his insurable interest in the goods subject matter of the policy for the assignee as a consumer to enjoy the benefit of the policy with reference to the goods which are insured. What has been assigned in the present case is the amount of loss suffered by the assured on account of shortlanding of the goods, meaning thereby that right to recover the loss is assigned to the assignee and not that any service is to be rendered under the policy by the insurer with reference to the goods. We are looking at the whole thing from the point of the consumer under the Act. Unless the assignee has some insurable interest in the property subject matter of the insurance up till the time the policy terminates, he cannot be beneficiary of any service required to be rendered by the insurer under the policy…..”

13. It may also be advantageous to clarify any cobwebs in this regard by quoting the following passage from Banerjee's Law of Insurance:

“Insurable interest is not synonymous with legal interest. Thus an interest on an agreement to purchase is an insurable interest. A warehouse man who has assumed the obligation to insure the goods while in his possession has an insurable Interest. Even the interest of a bailee is sufficient to establish an interest and an unpaid vendor of goods as an insurable interest in the property. Similarly, a husband has an insurable interest in his wife's property and a wife in turn has an insurable interest in the property of her husband. So also a landlord may insure his rent which he may lose through the destruction of his premises, a tenant of premises has an insurable interest founded upon the beneficial enjoyment of the premises, which he loses in the event of their destruction, so also a tenant renting a furnished house has an insurable interest in the furniture. Likewise a creditor whose debt is secured by legal or equitable mortgage upon any specific property has an insurable interest in that property. So also a mortgagor has an insurable interest in the property mortgaged. A bankrupt remaining in possession of his estate has an insurable interest in it. A man may also insure the profits which he expects from some undertaking or adventure or from the carrying on a business.”

14. All this leaves no scope for doubt that the ownership issue racked up by the Appellant Company was not relevant for purposes of settling the respondent's claim. Moreso, when there was no rival (sic) to the insurance amount payable and when the respondent's (sic) not left behind any legal heir. The Appellant Company also on no logic could withhold or retain the other half of the insurance amount which according to it would have gone to the deceased brother of the respondent. This, in our view, appears to be illogical on the face of it, because the Company was under an obligation to pay to the insured who was holding the policy and who had the insurable interest in the property. It cannot be denied that he was interested in the preservation of the Insured house and would suffer a loss for any damage caused to the house. He had the requisite insurable interest. It was, therefore, duty bound to pay the assessed loss to the holder of the policy and could not retain or withhold any amount on the plea that the property was in the joint ownership of the respondent and his deceased brother. This, in our view, was the ipse dixit of the Appellant Company which had only resulted in avoidable litigation, forcing the respondent to approach the Commission and tills Court.”

20. Relying on the said judgment it is urged that the issue of ownership which has been raised in the instant case by the Insurance Company is unwarranted in as much as the pecuniary interest involved in the stocks entitles the Complainant to claim indemnity as he has a partial interest of profits arising out of the said stocks which he is entitled to in terms of the agreement with the Corporation, more so, when the Insurance policy had been taken for the stocks. He further submits that to exclude the stocks of the Corporation treating it to be outside the purview of the policy is a misconceived and incorrect approach of the Insurance Company. He submits that even on a perusal of the policy such exclusion is not justified.
21. Mr. Gola, learned Counsel for the Insurance Company has invited the attention of the Bench to the arguments that were recorded vide Order dated 07.03.2024 to contend that the terms of the agreement with the Corporation does not in any way come to the aid of the Complainant who cannot claim any advantage of insurance coverage when stocks in process and stocks held in trust had been consciously not included in the risk covered under the policy. It is for this reason that the claim of the Complainant was settled in respect of the Buildings / Plant and machinery to the extent that the damage was surveyed and found by the Surveyor. He therefore submits that the settlement offered cannot be said to be either arbitrary or contrary to the terms of the policy. The Complainant is not entitled to any indemnification for the stocks of paddy and rice, etc. and hence the Complaint deserves to be dismissed.
22. The law on the subject as cited hereinabove by the learned Counsel for the Complainant is undisputable and as what is insurable interest has been discussed and held to be available in a large number of decisions including that of Contship Container Lines Limited versus D. K. Lall and Ors. reported in (2010) 4 SCC 256 paragraph No. 17 to 23.
23. However the ratio of these decisions on the facts of the present case would not be applicable in the light of the distinguishable specific features of the policy and the exact coverage involved herein as discussed hereinafter.
24. Having considered the submissions raised, the proposal for the policy does indicate a request for insuring the stocks of paddy and rice for Rs.1,00,00,000/- . The extract of the proposal is reproduced herein under:-

25. This proposal was converted into a policy which is a final document of the insurace contract and has been filed as Annexure A.  The same is reproduced herein under:-

26. A perusal of the said box leaves no room for doubt that there is no reference to any risk coverage for any amount for stocks “in process or stocks held in trust”. All the columns are nil. In effect there is no coverage indicated for the stocks and a sum of Rs.1,00,00,000/- is mentioned for furniture, fittings and other items. It is thus clear that there was no coverage under the said policy for the peril of fire relating to stocks in process or held in trust or otherwise. The sum insured summary in the same document which has 10 columns also shows ‘0’ coverage of stocks, stocks in process or stocks held in trust.
27. The policy therefore nowhere covers the stocks whether in process or held in trust or even otherwise. In the absence of any such coverage a mere mention in the proposal cannot apply to the stocks presently involved which was admittedly the paddy supplied by the Bihar State Food and Civil Supplies Corporation for supplying custom mill rice back to the Corporation. The stock was therefore not owned by the Complainant nor was the said stock insured and covered under the policy. The contention of the Complainant that it should be presumed to have been covered on the strength of the proposal is a far fetched argument and in the event the Complainant wanted to establish the same he ought to have led evidence to that effect. There is no deficiency that can be located if the Insurance Company has declined to entertain the request of the Complainant for loss of stock of paddy and rice that was owned by the Corporation and left out of the coverage of the policy. In the absence of any such deficiency the entire claim is unfounded and based on no evidence.
28. On the facts of the present case therefore there cannot be any inference of an insurable claim of any amount either on the basis of an alleged claim of ownership or even partial interest in the loss of paddy as alleged and suffered. The Complainant himself should have been careful for having got all categories of stocks included in the coverage for which indemnification is being claimed. If there was any error in the coverage contrary to the intent in the proposal, the complainant could have requested for verification but there is no pleading or evidence to that effect.  Thus there seems to be no attempt by the complainant to get the policy altered or modified to be in tune with the proposal. No inference of coverage can now be culled out through oral submission when the document of policy is crystal clear.  In the absence of any coverage, the policy is not susceptible to any such interpretation as suggested by the learned Counsel for the Complainant inasmuch as there is no ambiguity in the terms and conditions of thereof so as to apply the ratio of the decisions quoted above to infer any insurable interest in favour of the Complainant. This is not even a case for applying the rule of contra-proferentum.
29. The policy being absolutely clear and unequivocal in its term, there is no coverage for the stocks as claimed by the Complainant and therefore there is no evidence or any material to substantiate the contention of the Complainant for any claim to indemnify the loss of paddy or rice as pleaded.
30. Coming to the other losses claimed, it is evident that the insurance was also for the building, plants and machinery.  The Surveyor M/s Phalguni Purkayastha, in his report dated 27.12.2012 has indicated the loss on account of the damage cause to the building which he has computed for the walls  and the cracks that needs to be repaired, the spread out whereof was approximately 200 sq. ft.   A calculation at the rate of Rs. 1500 per sq. ft. was made as the approximate loss and accordingly a gross loss of Rs. 3 lacs was calculated.  After deducting the excess of Rs.10,000/-, a recommendation for payment of Rs. 2,90,000/- was made. 
31. The Insurance Company in the said background on 19.02.2013 sent an offer of settlement which document is on record. The said letter offered a sum of Rs.2,85,000/- as full and final settlement of the claim but the Complainant did not sign the said voucher as it had claimed the entire amount of the loss of paddy as well  as  other losses.
32. In the above background, this part of the loss as assessed by the Surveyor was agreed upon by the Insurance Company to be paid to the Complainant.  Accordingly, this complaint is partly allowed directing the Insurance Company to pay an amount of Rs.2,85,000/- to the Complainant with 9% p.a. interest thereon w.e.f. the date of loss i.e. 13.11.2012 till the date of actual payment within a period of three months. In the event of default the rate of interest shall stand enhance to 12% p.a.
33. The Complaint is, therefore, party allowed.