M/S. MODERN INSULATORS LTD.versusTHE ORIENTAL INSURANCE CO. LTD.

A                     MIS. MODERN INSULATORS LTD.
                                         v.
                  THE ORIENTAL JNSURA~CE CO. LTD.

                              FEBRUARY 22,2000
B               [S. SAGHIR AHMAD A..l\ffi S.N. PHCKAN, JJ.j

           Consumers Protection Act, 1986-·Section 2( l) (g)-lnsurance-
    Deficiency in-Terms and conditions of the policy not forwarded to the in-
    ~·ured-Held, the said tennJ' and conditions ure not binding.
c
        Consumers Protection Act, 198&-Section 19-Appeafs-Scope
    of-Held, no new facts can be urged.

           The appellant manufactured high tension insulators for tra nsmis-
    sion lines. The appellant had taken out an "AU Ris l~ Insurance Policy" from
D   the respondent for Rs. 50 lakhs for the installation of 25 M3 Iillo with
    furniture. The policy covered risks against loss during storage-cum-erec-
    tion including triaJ and testing of the insulators.

          The appellant erected the kiln and loaded it with insulators for trial
    and testing. In the process of trial, the complete kiln furniture with
E
    insulators collapsed on the kiln car and the furniture uot damaged. The
    appellant lodged a claim with the respondent and the surveyors assessed
    the damage of the appellant at Rs. 4,66,873.

         When the res pondent failed to settle the claim of the appellant, the
F   appellant filed a complaint before the State Consumer Disputes Redressal
    Commission. In its reply to the complaint, the respondent claimed that the
    damaged property was not covered by insur.mce policy. The State Com-
    mission allowed the complaint of the appellant.

G         Against the order of the State Commission, the respondent filed an
    appeal before the National Cons umer Disputes Redressal Commission
    taking a plea that the policy of insurance contained an exclusion clause
    that in the case of second hand/used property, the insurance shall cease
    immediately on the commencement of the test and that the appellant had
    violated the terms and conditions of the policy by using kiln furniture. The
H   appellant denied this and contended that he was supplied only with the
                                       1076
              MODERN INSUlATORS LTD. v. ORIENTALINSt.:RANCECO.          1077

cover note and the schedule of insurance policy and the other terms and         A
conditions including the above mentioned exclusion clause were never
supplied to him. A Jetter \\Titten by the Branch Manager of the respondent,
confirmed the claim of the appellant.

        The Nation11l Commission allowed the appeal on the ground that it
was the equal responsibility of the respondent to call for the terms and        B
conditions of the policy to understund the extent of the risk covered under
the policy.

        Allowing the appeal, this Court

      HELD : 1.1. The finding of the National Commission is untenable in
                                                                                c
law. A!i the terms and conditions of the standard poJicy wherein the
exclusion clause was included, were neither a part of the contract of
insurance nor disclosed to the appellant, the respondent cannot claim the
benefit of the said exclusion clause. (1079-G]
                                                                                D
      1.2. It is the fundamental principle of insurance law that utmost good
faith must be observed by the contracting parties and good faith forbids
either party from non-disclosure of the facts which the parties know. The
insured has a duty to disclose and similarly it is the duty of the insurance
company and its agent to disclose aU material facts In their knowledge since    E
the obligation of good faith applies to both equally. (1079·F]

      2. It is a settled position of law that in an appeal the parties cannot
urge new facts. From the pleadings of the respondent before the State
Commissioa it is found that the respondent pleaded that the property
damaged was not covered under the Insurance policy. This plea was given         F
a go-by before the National Commission and a new plea was talten up in
the grounds of appeal that the terms and conditions of the insurance policy
were violated by the appellant by using used kiln furniture. Allowing the
appeal on the basis of this new ground is not sustainable in Jaw. [I080·A-HJ

        CIVIL APPELLATE JURISDICflON : Civil Appeal No. 6895 of                 G
1997.

     From the Judgment and Order dated 8.1.97 of the National Con-
sumers Disputes Redressal Commi!>l>ion, New Delhi in F.A. No. 595 of
m1                                                                              H
    1078                  SUPREME COURT REPORTS                  (2000]1 S.C.R.
A        Arun Jaitley, M.L. Verma, Rajeev Sharma, Ms. Urmil Narang and
    O.K. Sinha for the Appellant.

         A.K. Raina, G.G. Upadhyay, R.D. Upadhyay and Kr. A.M. Singh for
    the Respondent.

B          The Judgment of the Court was delivered by

           PHUKAN, J, This appeal is directed against the order dated 08.01.97
    passed by the National Consumer Disputes Redressal Commission
    whereby the Commission set aside the order passed by the State Commis-
    sion of Rajasthan in the appeal fded by the respondent.
c
         The appdlant has a factory wherein it manufactures high tension
  insulators for transmission lin~s. The appellant had taken out an insurance
  policy known as 'All Risk Insurance Policy' for Rs. 50 lakhs for installation
  of 25 M3 kiln with furniture. The policy covered risks against loss during
D storage-cum-erection including trial and testing. After completion of the
  erection of 25 M3 kiln, the same was loaded with insulators on 12.7.88 for
  trial and testing and when it was opened on 16.7.88 it was found that
  complete structure of kiln furniture with insulators had cpllapsed on kiln
  car and various items of kiln furniture were damaged. A claim of Rs.
  5,73,397.43 was lodged with the respondent and the surveyors assessed the
E damage at Rs. 4,66,873. As the claim was not settled a complaint was filed
  before the State Commission alleging negligence on the part of the respon-
  dent and claiming the amount assessed by the surveyor with interest.

            The respondent - Insurance Company in the reply to th~ complaint
     flled before the Stat~; Commission pleaded that damaged property was not
F    covered by the insurance policy. The State Commission after considering
     the materials on record r<.:jected the plea of the respondent and directed
     the respondent to indemnify the loss by making payment of Rs. 4,66,873
     with interest @. 18% per dllllutn.

G          An appeal was filed before the National Consumer Disputes Redres-
     sal Commission and in the grounds of appeal it was stated that the
     appellant violated the terms and conditions of the policy by using used kiln
     furniture. This was denied by the appellant.

           The appellant also urged before the National Commission that only
H    the cover note and the schedule of insurance policy were supplied and
0

           MODERN rNst.'lATORS LTD. "· ORIEI'ITAL INSURANCECO. fPHUKAN,J.J   1079
    other terms and conditions including the exclusion clause were not com-          A
    municated. According to the. appellant the above document supplied did
    not contain the exclusion clause. The said exclusion clause runs as follows:

            ''In the case of second h<tnd/used property the insurance hereunder
            shall, however, cease immediately on the commencement of the
            ~                                                                        B
          The National Commission asked the parties to file affidavits to prove
    that the exclusion clause was duly communicated to the appellant. Wt:. have
    been taken through the affidavits filed and we find in the affidavit of the
    appellant the letter received by the appellant from the Branch Manager of · C
    the respondent was referred to wherein it was confirmed that appellant was
    supplied only with a cover note and the schedule of the policy. So the other
    terms and conditions contruning the above exclusion clause were not
    communicated. In the reply affidavit flled by the respondent it was not
    specifically mentioned that the exclusion clause was also communicated to
    the appellant.                                                               D

            The National Commission was of the view that "it is equally respon-
    sibility of the respondent to caLl for these terms and conditions even if they
    were not sent by the appellant as alleged, to understand the extent of risks
    covered under the policy and the associated aspects."
                                                                                     E
          lt is the fundamental principle of insurance law that utmost good
    faith must be observed by the contracting parties and good faith forbids
    either party from non-disclosure of the facts which the parties know. The
    insured has a duty to disclose and similarly it is the duty of the insurance
    company and its agents to disclose all material facts in their knowledge         F
    since obligation of good faith applie!i to both equally.

           In view of the above settled position of law, we are of the opinion
    that the view expressed by the National Commission is not correct. As the
    above terms and conditions of the standard policy wherein the exclusion
    clause was included, were neither a part of the contract of insurance nor        G
    disclosed to the appellant, respondent cannot claim the benefit of the said
    exclusion clause. Therefore, the finding of the National Commission is
    untenable in law.

          We may refer to the next ground on which appeal has to be allowed.         H
                                                                                 "0.

    1080                 SUPREME COURT REPORTS                 (2000) 1 S.C.R.
A It is settled position of law that in an appeal the parties cannot urge new
    facts. From the pleadings of the n;spondent before the State Commission,
    it is found that respondent pleaded that the property damaged was not
    covered under the insurance policy. This plea was given a go by before the
    National Commission and a new plea was taken up in the grounds of appeal
    that the terms and conditions of the insurance policy were violated by the
B   appellant by using used kiln furniture'. The National Commission accepted
    this new ground and allowed the appeal, which in our opinion is not
    sustainable in law.

          For the reasons sta:ed above, we hotd that the present appeal has·
C   merits.
          In the result, appeal is aUowed. The judgment of the National Com-
    mission is set aside and the judgment of the State Commission is restored.

           Considering the facts and circumstances of the case, we direct the
D parties to bear their own cost.
    B.K.M.                                                   Appeal aUowed.