M/S OSWAL PLASTIC INDUSTRIESversusMANAGER, LEGAL DEPTT. N.A.I.C.O. LTD

                          [2023] 1 S.C.R. 985                            985


               M/S OSWAL PLASTIC INDUSTRIES                              A
                                  v.
          MANAGER, LEGAL DEPTT. N.A.I.C.O. LTD.
                    (Civil Appeal No. 83 of 2023)
                        JANUARY 13, 2023                                 B
         [M. R. SHAH AND C. T. RAVIKUMAR, JJ.]
       Insurance – In case of damage of the plant and machinery
due to fire, whether the complainant entitled to reinstatement value
or depreciated value under insurance policy – Appellant subscribed
to a Fire & Perils policy – A fire broke out and the surveyor assessed   C
the loss at Rs.29,17,500/- on reinstatement value and Rs.12,60,000/
- on depreciated value – Insurance company despite the reports of
the surveyor, repudiated the claim – State Commission relying on
the surveyor report, awarded Rs.29,17,500/- with 9% interest from
the date of repudiation observing entitlement on reinstatement value
– NCDRC set aside the order of State Commission and awarded              D
Rs.12,60,000/- along with 7% interest observing entitlement to
depreciated value – On appeal, held: As per clause 9 of the
insurance policy, the complainant shall be entitled to reinstatement
value and not depreciated value – The report of the surveyor would
be relevant to consider the sum required to reinstate or repair –
NCDRC has mis-interpreted and mis-read the clause 9 – NCDRC              E
erred in holding that insurance company is liable to pay depreciated
value only – Order of the NCDRC set side – The order passed by
the State Commission restored.
       Allowing the appeal, the Court
       HELD: 1. Considering second part of Clause 9 of the               F
insurance policy, in case company is unable to reinstate or repair
the property insured, the insurance company shall be liable to
pay such sum as would be requisite to reinstate or repair such
property if the same could lawfully be reinstated to its former
condition. For the aforesaid purpose, the report of surveyor wound
be relevant evidence to consider the sum required to reinstate           G
or repair. Therefore, as per second part of Clause 9 of Section 2
of the policy, the complainant shall be entitled to the reinstatement
value and not the depreciated value. The NCDRC has mis-
interpreted and mis-read the Clause 9. The NCDRC has seriously
erred in observing and holding that the insurance company shall
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                                 985
986             SUPREME COURT REPORTS                          [2023] 1 S.C.R.


A     be liable to pay the depreciated value only and not the
      reinstatement value. The State Commission was absolutely
      justified in awarding the reinstatement value. The impugned
      judgment and order passed by the NCDRC awarding the
      depreciated value and not the reinstatement value is
      unsustainable. The impugned judgment and order passed by the
B     NCDRC is hereby quashed and set aside. The order passed by
      the State Commission is hereby restored. The complainant shall
      be entitled to Rs. 29,17,500/- being the reinstatement value with
      interest @ 7% from the date of order of the State Commission.
      [Paras 5.2 and 6][990-C-G]
             Canara Bank vs. United India Insurance Company
C            Limited and Ors., 2020 (3) SCC 455 : [2020] 7
             SCR 498 – referred to.
                                Case Law Reference
      [2020] 7 SCR 498                   referred to               Para 3.4
             CIVIL APPELLATE JURISDICTION : Civil Appeal No.83 of
D     2023.
             From the Judgment and Order dated 20.02.2019 of the National
      Consumer Dispute Redressal Commission, New Delhi in First Appeal
      No.207 of 2015.
             Jay Savla, Sr. Adv., Dhananjay Garg, Abhishek Garg, D. K. Garg,
E     Akhil Dehlan, Sanjay Chhabra, Advs. for the Appellant.
             Amit Kumar Singh, Mrs. K Enatoli Sema, Ms. Chubalemla Chang,
      Prang Newmai, Advs. for the Respondent.
             The Judgment of the Court was delivered by
             M. R. SHAH, J.
F            1. Feeling aggrieved and dissatisfied with the impugned judgment
      and order dated 20.02.2019, passed by the National Consumer Disputes
      Redressal Commission, New Delhi (hereinafter referred to as the
      NCDRC) in First Appeal No. 207/2015, by which the NCDRC has set
      aside the order passed by the State Consumer Disputes Redressal
      Commission, Punjab (hereinafter referred to as the State Commission)
G     and has modified the same to the extent that the insurance company
      shall be liable to pay only Rs. 12,60,000/- instead of Rs. 29,17,500/-, the
      original complainant has preferred the present appeal.
             2. That the appellant herein obtained Standard Fire and Special
      Perils Policy with effect from 02.07.2009. The sum insured was Rs.
      2.50 crores. According to the appellant, the policy was on reinstatement
H     value. The policy was enhanced to Rs. 4.50 crores. That during the
  M/S OSWAL PLASTIC INDUSTRIES V. MANAGER, LEGAL                              987
         DEPTT N.A.I.C.O. LTD. [M. R. SHAH, J.]

validity period of policy i.e., on 17.10.2009 fire broke out in the factory   A
premises resulting into loss of material, stock, and machinery of the value
of Rs. 76,64,000/-. The surveyor appointed by the insurance company
observed/assessed as such the loss on reinstatement value basis at Rs.
29,17,500/- and on depreciated value at Rs. 12,60,000/-. The insurance
company despite the reports of the surveyor and investigator repudiated
the claim. The appellant herein – original complainant filed the complaint    B
before the State Commission, inter-alia, seeking a claim of Rs. 76,64,000/
- together with interest. It was the case on behalf of the complainant
that the complainant had purchased the machinery to replace the damaged
machinery at the cost of Rs. 1,34,07,836/-. The State Commission vide
order dated 10.11.2014 relying upon the surveyor report and the loss
assessed by the surveyor on the basis of the reinstatement value awarded      C
a sum of Rs. 29,17,500/- together with 9% interest from the date of
repudiation letter dated 28.10.2010. The State Commission also awarded
Rs. 1 lakh as compensation and Rs. 11,000/- as litigation expenses. At
this stage, it is required to be noted that though the original complaint
was for Rs. 76,64,000/-, however, in view of surveyor report and on
reinstatement value determined at Rs. 29,17,500/-, the State Commission       D
awarded Rs. 29,17,500/- being reinstatement value. The order passed
by the State Commission was the subject matter of appeal by the
insurance company before the NCDRC. By the impugned judgment
and order, the NCDRC has allowed the said appeal and has modified
the order passed by the State Commission awarding Rs. 12,60,000/-
along with interest @ 7% from Rs. 29,17,500/- by observing that the           E
complainant shall be entitled to the depreciated value and not the
reinstatement value. The NCDRC also set aside the award of
compensation of Rs. 1 lakh.
       2.1 Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the NCDRC awarding Rs. 12,60,000/- only instead           F
of Rs. 29,17,500/- i.e., awarding depreciated value and not the
reinstatement value, the original complainant has preferred the present
appeal.
       3. Shri Jay Savla, learned Senior Advocate appearing on behalf of
the appellant herein – original complainant has vehemently submitted
that the impugned judgment and order passed by the NCDRC awarding             G
depreciated value and not the reinstatement value is just contrary to
Clause 9 of Section 2 of the insurance policy.
       3.1 It is submitted that as such the surveyor assessed the loss on
reinstatement basis at Rs. 29,17,500/-. It is submitted that therefore, as
such the repudiation was rightly held to be improper.
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988             SUPREME COURT REPORTS                            [2023] 1 S.C.R.


A            3.2 It is submitted that as such the complainant had purchased the
      new machinery in view of five machines being gutted in fire and therefore,
      the State Commission was absolutely justified in awarding Rs. 29,17,500/
      - being reinstatement value on the basis of the surveyor report.
             3.3 Relying upon Clause 9 of Section 2 of the policy, it is
      vehemently submitted that the complainant shall be entitled to the
B     reinstatement value. It is submitted that the NCDRC has wrongly reduced
      the claim to Rs. 12,60,000/- by mis-interpreting Clause 9 of Section 2 of
      the policy. It is submitted that as such the said clause 9 shall not have
      any relevance. It is submitted that it only gives option to the insurance
      company to reinstate or replace the damaged/destroyed property. It is
      submitted that as the company has not reinstated the property, the clause
C     itself was not applicable.
             3.4 It is submitted that as observed and held by this Court in the
      case of Canara Bank Vs. United India Insurance Company Limited
      and Ors.; 2020 (3) SCC 455, provisions of the policy must be read
      and interpreted in such a manner so as to give effect to the reasonable
D     expectations of all the parties. It is submitted that it is further held that
      coverage provisions should be interpreted broadly and if there is any
      ambiguity, the same should be resolved in favour of the insured.
             3.5 Making the above submissions and relying upon the above
      decision, it is prayed to allow the present appeal by quashing and setting
      aside the impugned judgment and order passed by the NCDRC and to
E     restore the order passed by the State Commission.
             4. Present appeal is vehemently opposed by the learned counsel
      appearing on behalf of the insurance company.
             4.1 It is submitted that in the facts and circumstances of the case
      and on true interpretation of Clause 9 of Section 2 of the insurance
      policy, the NCDRC has not committed any error in awarding the
F
      depreciated value and not awarding the reinstatement value as claimed
      by the complainant.
             4.2 It is submitted that as rightly observed by the NCDRC that
      the goods insured were to be replaced on “as is basis” i.e., if the
      machinery is an old machinery, it is to be replaced by an old machinery
G     and therefore, as the actual reinstatement has not been done by the
      complainant or by the insurance company and the money is to be paid to
      the insured on reinstatement basis, one has to find out the value of the
      machinery on replacement basis i.e., the value of the old machinery,
      which can be calculated only through deducting the value of the
      depreciation from the current value of the machinery.
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  M/S OSWAL PLASTIC INDUSTRIES V. MANAGER, LEGAL                               989
         DEPTT N.A.I.C.O. LTD. [M. R. SHAH, J.]

        4.3 Making the above submissions, it is prayed to dismiss the          A
present appeal.
        5. The short question which is posed for consideration of this
Court is whether in the facts and circumstances of the case and on true
interpretation of relevant clause of insurance policy, in case of damage
of the plant and machinery due to fire, the complainant shall be entitled
to the reinstatement value or the depreciated value?                           B
        5.1 While dealing with the aforesaid issue, relevant clause 9 of
Section 2 of the policy is required to be considered, which reads as
under: -
        “9. If the Company at its option, reinstate or replace the property
        damaged or destroyed, or any part thereof, instead of paying the       C
        amount of the loss or damage, or join with any other Company or
        Insurer(s) in so doing the Company shall not be bound to reinstate
        exactly or completely but only as circumstances permit and in
        reasonably sufficient manner, and in no case shall the Company
        be bound to expend more in reinstatement than it would have cost
        to reinstate such property as it was at the time of the occurrence     D
        of such loss or damage nor more than the sum insured by the
        Company thereon. If the Company so elect to reinstate or replace
        any property the insured shall at his own expense furnish the
        Company with such plans, specifications, measurements, quantities
        and such other particulars as the Company may require, and no
        acts done or caused to be done, by the Company with a view to          E
        reinstatement or replacement shall be deemed an election by the
        Company to reinstate or replace.
        If in any case the Company shall be unable to reinstate or repair
        the property hereby insured, because of any municipal or other
        regulations in force affecting the alignment of streets or the
        construction of buildings or otherwise, the Company shall, in every    F
        such case, only be liable to pay such sum as would be requisite to
        reinstate or repair such property if the same could lawfully be
        reinstated to its former condition.”
        5.2 On true interpretation and on fair reading of above clause,
firstly the option is given to the insurance company to reinstate or replace   G
property damaged or destroyed instead of paying the amount of loss or
damage. If the insurance company exercises the option of reinstatement
or replaces the property damaged, the company shall not be bound to
reinstate completely or partly but only as circumstances permit and in
reasonably sufficient manner, and in no case shall the company be bound
to expend more in reinstatement than it would have cost to reinstate           H
990              SUPREME COURT REPORTS                           [2023] 1 S.C.R.


A     such property as it was at the time of the occurrence of such loss or
      damage not more than the sum insured by the company thereon. However,
      in any case the company is unable to reinstate or repair the property
      insured, because of any municipal or other regulations in force affecting
      the alignment of streets or the construction of buildings or
      OTHERWISE, in that case, the company shall be liable to pay such
B     sum as would be requisite to reinstate or repair such property if the
      same could lawfully be reinstated to its former condition. Present is the
      case dealing with second eventuality, namely, the company was unable
      to reinstate or repair the property. The surveyor in its report determined
      the loss on the basis of reinstatement value at Rs. 29,17,500/- and on the
      basis of depreciated value at Rs. 12,60,000/-. Though, the complainant
C     claimed Rs. 76,64,000/- being the value of the new machinery, however,
      as rightly observed by the State Commission as well as the NCDRC, the
      complainant shall not be entitled to the said amount. However, at the
      same time considering second part of Clause 9 reproduced hereinabove,
      in case company is unable to reinstate or repair the property insured, the
      insurance company shall be liable to pay such sum as would be requisite
D     to reinstate or repair such property if the same could lawfully be reinstated
      to its former condition. For the aforesaid purpose, the report of surveyor
      wound be relevant evidence to consider the sum required to reinstate or
      repair. Therefore, as per second part of Clause 9 of Section 2 of the
      policy, the complainant shall be entitled to the reinstatement value and
      not the depreciated value. The NCDRC has mis-interpreted and mis-read
E     the Clause 9. The NCDRC has seriously erred in observing and holding
      that the insurance company shall be liable to pay the depreciated value
      only and not the reinstatement value. The State Commission was
      absolutely justified in awarding the reinstatement value. The impugned
      judgment and order passed by the NCDRC awarding the depreciated
      value and not the reinstatement value is unsustainable for the reasons
F     stated hereinabove.
              6. In view of the above and for the reasons stated above, the
      present appeal succeeds. The impugned judgment and order passed by
      the NCDRC is hereby quashed and set aside. The order passed by the
      State Commission is hereby restored. The complainant shall be entitled
G     to Rs. 29,17,500/- being the reinstatement value with interest @ 7%
      from the date of order of the State Commission i.e., 10.11.2014 till the
      actual payment. The present appeal is accordingly allowed. No costs.

      Ankit Gyan                                                     Appeal allowed.
      (Assisted by : Abhishek Pratap Singh, LCRA)
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