JSK INDUSTRIES PVT. LTDversusORIENTAL INSURANCE COMPANY LIMITED

                        [2022] 15 S.C.R. 581                            581


                  JSK INDUSTRIES PVT. LTD.                              A
                                 v.
         ORIENTAL INSURANCE COMPANY LIMITED
                  (Civil Appeal No. 7630 of 2022)
                        OCTOBER 18, 2022                                B
  [DINESH MAHESHWARI AND ANIRUDDHA BOSE, JJ.]
       Insurance: Insurance Claim – Repudiation of – Appellants
took insurance coverage – However, insurance company repudiated
their claim on the ground that there was no sufficient balance to
                                                                        C
cover the declaration and/or loss – State Commission as also
National Commission rejected the claim – Held: Insurance company
took a defense which did not form the basis of repudiation of the
claim – National Commission ought not to have gone beyond the
grounds of repudiation and into the nature of coverage, which
according to the National Commission had effectively changed from       D
“anywhere in India to anywhere in India” to a sales turnover policy,
limiting the policy coverage of the subject- goods from the points of
departure at the two locations – Matter remanded to State
Commission for taking decision afresh on the claim of the appellants
on the ground which formed the basis of repudiation.
                                                                        E
      Allowing the appeal, the Court
      HELD: 1.1 The National Commission rejected the appeal
of the appellant on the ground that they had converted “from
anywhere in India to anywhere in India” policy into the sales
turnover policy covering transportation of goods only from two          F
locations specified in the endorsement. The repudiation of the
appellants’ claim was on the ground of exhaustion of insurance
coverage and the State Commission also determined the issue
primarily on that ground. Both the National Commission and the
State Commission had referred to the nature of the policy but the       G
State Commission did not come to a specific finding as to whether
the goods otherwise remained insured from the port to the
appellants’ factory. It was the finding of the National Commission
on the other hand that the policy was only applicable on supplies
made from the two locations. As regards financial limit of the
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                                581
582           SUPREME COURT REPORTS                     [2022] 15 S.C.R.


A     policy, the appellants’ stand before the National Commission was
      that there was available coverage to accommodate their claim.
      On this count, the observation of the National Commission was
      that if exhaustion of the coverage limit was the sole reason for
      repudiation of the claim, the matter could have been remanded
      to the State Commission for the decision of the complaint on
B
      merits. That was the course which ought to have been directed
      by the National Commission because the only ground on which
      repudiation of the claim was made was lack of financial coverage.
      The National Commission ought not to have gone beyond the
      grounds of repudiation and into the nature of coverage. Thus,
C     the order of the National Commission as also State Commission
      are set aside and the matter is remanded to the State Commission
      for taking a decision afresh on the claim of the appellants on the
      grounds which formed the basis of repudiation and determine as
      to whether at the material point of time there was sufficient
      balance to cover the claim on account of declaration made as
D
      regards loss suffered by the appellants. [Paras 14, 15][589-C-G;
      590-B-C]

            Saurashtra Chemicals Ltd. v. National Insurance Co.
            Ltd. (2019) 19 SCC 70 – referred to.
E
                            Case Law Reference

      (2019) 19 SCC 70              referred to             Para 14

            CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7630
F     of 2022.

            From the Judgment and Order dated 15.01.2018 of the National
      Consumer Disputes Redressal Commission at New Delhi in First Appeal
      No. 700 of 2012.

G          Gopal Shankarnarayan, Sr. Adv., D. Bharat Kumar, Tadimall
      Bhaskar Gowtham, Aman Shukla, Ms. Tanya Srivastava,
      M. Chandrakanth Reddy, Gopal Jha, Advs. for the Appellant.

             S. M. Suri, Ms. Manjeet Chawla, Yashvardhan S. Soam, Advs.
      for the Respondent.
H
    JSK INDUSTRIES PVT. LTD. v. ORIENTAL INSURANCE                               583
                  COMPANY LIMITED

       The Judgment of the Court was delivered by                                A
       ANIRUDDHA BOSE, J.
       Leave granted.
       2. The repudiation of a claim in respect of a “Marine Cargo-Open
Policy” gives rise to this appeal and the appellants are the claimants           B
before us. The policy, initially covered a sum of rupees two hundred
crores. Under the heading “Risk Details”, against Sl.No.1 of the policy
document, next to the column “Voyage”, it was indicated “from anywhere
in India to anywhere in India”. Period of Insurance was from 29th October
2009 to Midnight on 28th October 2010. There was subsequent addition
of terms and raising of insurance coverage as well. Fresh endorsement            C
schedules were issued incorporating the changes. These endorsement
schedules, however, carried the expression “Attached to and forming
part of policy No.12012/21/2010/876” (that being the original policy
number). The endorsement schedule dated 25th November 2009 described
the policy as “On the Sales Turnover basis”. This endorsement became             D
effective from 14:50 hrs on 25th November 2009. The next endorsement
was made on 8th April 2010, also attached to the original policy, by which
sum insured was raised by a further rupees two hundred crores.
        3. The appellants are traders and manufacturers of aluminium
products. They claim to have purchased, by high seas sale agreement              E
dated 22nd June 2010, eight containers of aluminium ingots. These
containers had arrived at Jawaharlal Nehru Port Trust (JNPT) and from
there, they were sent to the appellants’ factory unit at Silvassa by a
transporter by road. The appellants’ case is that out of the eight containers,
one was stolen and the incident of theft took place on 2nd July 2010.
According to the appellants, value of stolen goods was rupees thirty-            F
four lakhs ninety two thousand and eighty one. Their claim was lodged
with the respondent on 18th March 2011 but this was repudiated by the
latter. The appellants then approached the State Consumer Disputes
Redressal Forum (Maharashtra) against the insurance company. We
shall henceforth refer to the said forum as the State Commission.                G
       4. The appellants’ initial Complaint Case no. CC/12/177 was
rejected by the State Commission, by an order passed on 27th July 2012
and the appeal against that dismissal order registered as Appeal No. 700
of 2012, was also dismissed by the National Consumer Disputes
                                                                                 H
584              SUPREME COURT REPORTS                   [2022] 15 S.C.R.


A     Redressal Commission (“National Commission”) by an order pronounced
      on 15th January 2018. This decision is under appeal before us.
            5. As we have already narrated, the policy underwent some
      changes. Clause 3 of the endorsement schedule dated 25th November
      2009 specified:-
B           “3. The supplies made from the following two works locations
            are held covered under the locations mentioned below.
            a)    JSK Industries Private Limited,
                  Survey No. 369/1/1/2,
C                 Behind Siyaram Silk Mills,
                  Village Sayil,
                  Slivassa-396230,
                  UT of Dadra and Nagar Haveli.
D           b)    JSK Industries Private Limited,
                  126/1-8 Rakholi High School Road, Rakholi Village,
                  Slivassa-396240
                  UT of Dadra and Nagar haveli.
E                 Other terms and conditions of the policy remain
                  unaltered.




F

                                   (quoted verbatim from the paperbook)
            6. After the appellants lodged the claim, the insurance company
      by a communication dated 7th September 2011, raised certain queries.
G     These included:-
            “1. The above stock turn over policy was issued on 29.10.2009
            for a sum insured of Rs. 200 crores. As per the documents
            and statements submitted the above sum insured has exhausted
            as on 22.12.2009 & no balance was available to cover further
H           declarations.
    JSK INDUSTRIES PVT. LTD. v. ORIENTAL INSURANCE                            585
         COMPANY LIMITED [ANIRUDDHA BOSE, J.]

      2. Endorsement for increase in sum insured was passed on                A
      08.04.2010 for Rs. 200 crores which was fully utilized to cover
      declarations for the period 08.04.2010 till May 2018 as per
      the documents and statements submitted.
      3. The above loss has occurred between 10.07.2010 &
      12.07.2010 and as per 1 % 2 above there is no sufficient                B
      balance to cover the above declarations and/ or loss.
      However you being given one more opportunity to
      substantiate your claim in view of the grounds of repudiation
      mentioned before a final decision is taken of cure end your
      representation/ clarification must reach us within 2 weeks from         C
      the date of receipt of this letter, Please note that in case we
      have response from you within 2 weeks from the date of receipt
      of this letter the claim shall stand repudiated for the reasons
      indicated above without further advices from us.”
                               (quoted verbatim from the paperbook)           D
        7. As it would be evident from the aforesaid communication, the
appellants were given an opportunity to explain their stand in the light of
the preliminary view of the insurance company that their claims were
not tenable. The appellants took a stand that their insurance coverage
was enhanced to Rs.400 crores and in a table contained in their response      E
dated 20th September 2011, it was explained by them that the aforesaid
coverage of Rs.400 crores was not exhausted. The insurance company,
however, stuck to their stand and formally repudiated their claim by a
letter issued on 24th January 2012. The ground for repudiation was that
there was no sufficient balance to cover the declaration and/or loss. The
repudiation letter recorded:-                                                 F
      “The reply submitted by you have been examined and the
      Competent Authority has concluded that no new facts have
      been brought/furnished by you which could satisfactorily
      answer the issues raised in our above letter.
                                                                              G
      Your claim therefore has been repudiated for the reason
      mentioned in our above letter i.e. “there is no sufficient
      balance to cover the above declaration and/or loss”
                               (quoted verbatim from the paperbook)
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586            SUPREME COURT REPORTS                        [2022] 15 S.C.R.


A            8. The State Commission rejected the claim of the appellants,
      taking into account the fact that their policy was subsequently converted
      into Sales Turnover basis to cover sale transaction up to Rs.400 crores
      in a given time and though their policy coverage had been enhanced, the
      same did not cover the loss on which their claim was raised. It was,
      inter-alia, held by the State Commission:-
B
            “5. On the date of occurrence i.e. cause of action (02/07/
            2010) insurance cover under the policy though earlier
            increased with sum assured of 400 crores but such contingency
            was not covered as admittedly, the sales transactions taken
            place were not covered for lack, of balance of sales
C           transaction to cover under insurance policy. Even during the
            course of argument, Ld. counsel for the complainant company
            conceded to this position, yet he tried to press for admission
            of this complaint. Interestingly, survey report of the authorized
            surveyor available on record to assess the loss due to theft of
D           the container with material therein states that such a cover
            under insurance policy is not extended and rightly so on going
            through the policy terms and conditions. Complainant
            company has not made carrier as a party against whom
            possibly the complaint could have been processed. We do not
            find any merit in complaint and, therefore, complaint is
E           rejected in limine at the admission stage itself.”
                                    (quoted verbatim from the paperbook)
              9. As we have already indicated, the National Commission, in
      appeal, also rejected the appellants’ contention. The National Commission
F     in its decision under appeal construed the implication of Sales Turnover
      and held:-
            “8. I have thoroughly examined the record and have given a
            thoughtful consideration to the arguments advanced by both
            the sides. It is true that the order of the State Commission is
G           very cryptic and does not clearly state the details of the reasons
            on which the complaint has been dismissed. Prima facie, the
            State Commission has dismissed the complaint on the basis of
            the facts mentioned in the repudiation letter that the insurance
            limit was exhausted before the claim arose. This assertion has
            been disputed by the complainant and it has been claimed
H           that there was still an insurance limit left for Rs.3.89 crores
   JSK INDUSTRIES PVT. LTD. v. ORIENTAL INSURANCE                            587
        COMPANY LIMITED [ANIRUDDHA BOSE, J.]

      and, therefore, it was not correct to hold that the total              A
      insurance limit was exhausted and that too, without getting
      the version of the OP. Had this been the only reason, the
      matter could have been remanded to the State Commission,
      for the decision of the complaint on merits, but the fact of the
      matter is that the nature of the policy after the endorsement
                                                                             B
      dated 25.11.2009 became such that only the sold material
      was covered and not the imported material. The State
      Commission has obliquely mentioned this fact, but has not
      made this a point for dismissal of the complaint. In fact, the
      complainant should have taken some other insurance for
      transport of the goods from JNPT to Silvasa. The complainant           C
      had neither taken any extra policy nor has he made the
      transporter, a party in the complaint case.
      9. The endorsement of 25.11.2009 that the policy would be
      on “sales turn-over basis” also mentions that the insurance
      would be on “sales turn-over basis” on the material going              D
      out from the two premises of the industry at Silvasa.
      10. Learned counsel for the Appellant has not shown any
      document to controvert this assertion of the insurance
      company that the policy was only applicable on the sales
      supplies from the two premises of the industry at Silvasa.             E
      11. It is a settled principle of law that the terms of the policy
      are to be construed as per the written agreement of the policy.
      It could not be shown by the learned counsel for the Appellant
      that any imported material would also be included in the
      covered items under the policy even after the endorsement              F
      dated 25.11.2009 which restricts the policy to only on “sales
      turn-over basis” on the supplies, from two locations of the
      industry at Silvasa.”
                               (quoted verbatim from the paperbook)
       10. Mr. Gopal Shankarnarayan, learned senior counsel for the          G
appellants has argued both on substantive and procedural points to assail
the aforesaid orders. His first submission is that the insurance company
cannot resist a claim petition on grounds beyond those cited by them
while repudiating a claim. In support of this argument, a decision of this
Court in the case Saurashtra Chemicals Ltd. v. National Insurance
                                                                             H
588            SUPREME COURT REPORTS                          [2022] 15 S.C.R.


A     Co. Ltd. [(2019) 19 SCC 70] has been cited. In this judgement, it has
      been held:-
            “23. Hence, we are of the considered opinion that the law, as
            laid down in Galada [Galada Power & Telecommunication
            Ltd. v. United India Insurance Co. Ltd., (2016) 14 SCC 161 :
B           (2017) 2 SCC (Civ) 765] on Issue (2), still holds the field. It is
            a settled position that an insurance company cannot travel
            beyond the grounds mentioned in the letter of repudiation. If
            the insurer has not taken delay in intimation as a specific
            ground in letter of repudiation, they cannot do so at the stage
            of hearing of the consumer complaint before NCDRC.”
C
              As regards implication of the Sales Turnover Policy, his argument
      is that the said policy cannot be construed to mean to cover only those
      goods which are already sold. His submission on this count is that in
      such a situation the title of the goods would have passed on to the buyer
      and the appellants would not have any insurable interest in the said goods.
D
             11. He has further argued that the National Commission erred in
      interpreting the terms of the policy. According to him, the policy
      endorsement dated 25th November 2009 did not withdraw coverage of
      any of the goods named in the policy while in transit “from anywhere in
      India to anywhere in India” and the implication of including the two
E     locations specified meant that as per the ‘Sales Turnover policy’ the
      appellants were required to declare their sales made from the mentioned
      two work locations (factories) on monthly/quarterly basis to the respondent
      only for the purpose of computing the balance cover.
            12. Mr. S. M. Suri, learned counsel for the respondent-insurance
F     company submitted that the main case of the insurance company is that
      the policy covered only those goods within the coverage which left the
      two units which have been specified in the earlier part of this judgment.
             13. First, we shall examine the ratio of the decision of this Court
      in the case of Saurashtra Chemicals Ltd. (supra). In that case, it was
G     a claim relating to standard fire and special perils policy. Repudiation
      was solely on the ground that a spontaneous combustion did not result
      into fire and loss had not been caused by the fire as stipulated by policy
      conditions. The insured had approached the National Commission. One
      of the defenses taken by the insurance company in the Commission was
      that the intimation of claim was with delay for over a month. This delay,
H
    JSK INDUSTRIES PVT. LTD. v. ORIENTAL INSURANCE                            589
         COMPANY LIMITED [ANIRUDDHA BOSE, J.]

according to the insurance company vitiated condition 6(i) of the general     A
conditions of the policy, as applicable in that case. The insurance company
was successful before the National Commission. The insured preferred
an appeal which was heard and decided by a Coordinate Bench. Before
the Bench, the main point on which the case turned was that the insurance
company was taking a defense which did not form the basis of repudiation
                                                                              B
of the claim. It is in that context this Court held this was impermissible.
The reasoning of the Court appeared in paragraph 23 of the report,
which we have quoted above.
        14. Addressing the merits of the present case, we find that the
National Commission mainly rejected the appeal of the appellant on the
ground that they had converted “from anywhere in India to anywhere in         C
India” policy into the sales turnover policy covering transportation of
goods only from two locations specified in the endorsement made on
25th November 2009. The repudiation of the appellants’ claim was on
the ground of exhaustion of insurance coverage and the State Commission
also determined the issue primarily on that ground. Both the National         D
Commission and the State Commission had referred to, in their respective
decisions, the nature of the policy but the State Commission did not
come to a specific finding as to whether the goods otherwise remained
insured from the JNPT port to the appellants’ factory. It was the finding
of the National Commission on the other hand that the policy was only
applicable on supplies made from the two locations at Silvassa. We have       E
quoted this passage from the order of the National Commission earlier
in this judgment. As regards financial limit of the policy, the appellants’
stand before the National Commission was that there was available
coverage of Rs. 3.89 crores to accommodate their claim. On this count,
the observation of the National Commission was that if exhaustion of          F
the coverage limit was the sole reason for repudiation of the claim, the
matter could have been remanded to the State Commission for the
decision of the complaint on merits. In our opinion, that was the course
which ought to have been directed by the National Commission because
the only ground on which repudiation of the claim was made was lack of
financial coverage. Thus, following the ratio of the decision of the          G
Coordinate Bench in the case of Saurashtra Chemicals Ltd. (supra),
the National Commission ought not to have gone beyond the grounds of
repudiation and into the nature of coverage, which according to the
National Commission had effectively changed from “anywhere in India
to anywhere in India” to a sales turnover policy, limiting the policy         H
590                SUPREME COURT REPORTS                       [2022] 15 S.C.R.


A     coverage of the subject-goods from the points of departure at the two
      locations at Silvassa. These are all terms of art applicable to the insurance
      trade but we do not consider it necessary to dilate on this aspect of the
      dispute having regard to the decision of this Court in the case of
      Saurashtra Chemicals Ltd. (supra).
B            15. Under these circumstances, we set aside the decisions of the
      National Commission as also of that State Commission and remand the
      matter to the State Commission for taking a decision afresh on the claim
      of the appellants on the grounds which formed the basis of repudiation
      and determine as to whether at the material point of time there was
      sufficient balance to cover the claim on account of declaration made as
C     regards loss suffered by the appellants.
              16. The appeal stands allowed in the above terms.
              17. There shall be no order as to costs.
              18. Pending application(s), if any, shall stand disposed of.
D

      Nidhi Jain                                                     Appeal allowed.




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F




G




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