Holding

The loss caused by the terrorist attack is excluded under Provision (b) of Endorsement IMT‑21, so the insurer is not liable to indemnify.

Summary

Muralidhar Sarangi owned two trucks insured under two policies of New India Assurance. While transporting goods in Assam, the trucks were destroyed by Bodo terrorists, resulting in loss of the vehicles and the death of a driver. The insurer denied the claim, stating that terrorist risk was excluded. The State Consumer Disputes Redressal Commission held the loss covered as a "malicious act" under Clause (c) of the policy, but the National Consumer Disputes Redressal Commission reversed, finding the loss excluded by Provision (b) of Endorsement IMT‑21, which bars coverage for acts of terrorism, rebellion, etc. On appeal, the Supreme Court upheld the National Commission’s view, concluding that the terrorist act fell within the exclusion and the insurer was not liable. The appeal was dismissed.

Issues considered

Whether destruction of the trucks by Bodo terrorists constitutes a "malicious act" covered under Clause (c) of the insurance policy.
Whether the loss is excluded by Provision (b) of Endorsement IMT‑21, which excludes coverage for mutiny, rebellion, terrorism and related acts.

Legislation cited

Armed Forces (Special Powers) Act, 1958
Terrorist and Disruptive Activities (Prevention) Act, 1987s. Section 3(1), s. Section 3(2)

Subjects

insuranceterrorismmalicious actendorsement exclusionconsumer disputesBodo insurgencypolicy interpretationliability

Judgment

A MURALIDHAR SARANGI
v.
THE NEW INDIA ASSURANCE CO. LTD.

FEBRUARY 28, 2000

B (S. SAGHIR AHMAD AND D.P. WADHWA, JJ.)

Insurance-Trncks-Destrnction in terrorists attack-Liability of !11-
surance Company-Held insurance company not liable to indemnify such
destrnction-Clause l(c) of Policy-Expression 'Malicious Act'-Scope
C of-Insured held not entitled to claim in view of the provision (b) of Endor-
sement LM. T. 21.

Ten-01ist a11d Disrnptive Activities (Preve11tio11) Act, 1987: Applicability
of

D Anned Force (Special Powers) Act, 195~Applicability of

While carrying goods t.o the State of Assam on a National Highway
two trucks belonging to the Appellant were completely destroyed in an
attack by .Bodo extremists. The appellant's claim for indemnification in
terms of the Insurance Policies was rejected by the Respondent-Insurance
E Company on the ground that the·claim was not payable as terrorist risk
was not covered by the Insurance Policies. The State Consumer Disputes
Redressal Commission, Cuttack held that Insurance Company was liable
to make good the loss in terms of the Insurance Policies because the
destruction of the two trucks by Bodo terrorists was covered by Clause (c)
F of Condition No. 1 of the Policies which provided that the Insurance
Company will indemnify the insured against loss of damage to the Motor
vehicle and/or its accessories whilst thereon by malicious act. On appeal
the National Consumer Disputes Redressal Commission held that the loss
caused to the trucks in question by the act of Bodo terrorists was not
covered by the terms of the Insurance Policies and as such the appellant
G was not entitled to claim indemnification of the loss sustained by him. It
gave a finding that the case was covered by Provision (b) of Endorsement
No. I.M.T. 21 which provides "mutiny assuming the proportion of or
amounting to popular rising, military rising, rebellion, revolution, insur-
rection, military or usurped power or any act of any person acting on
H behalf of or in connection with any organisation with activities directed
1220
MURLIDHAR SARAN GI v. NEW INDIA ASSURANCE CO. 1221

towards the overthrow by force of the Government de jure or defacto or to A
the influence of it by terrorism or violence or by the direct or indirect
consequence of the said occurrences." Hence this appeal by the insured.
:;i

Dismissing the appeal, this Court

HELD : 1. The National Commission was fully justified in its con· B
clusion that the respondent was not liable for the loss suffered by the
__,,.. appellant at the hands of Bodo activists who completely destroyed the
"trucks of the appellant by setting them on fire and killed one of the drivers.
[1227-F·G]
2. A 'malicious act', according to State Commission, would be an act c
prohibited by law, which is done with intention to cause loss to another.
The act which resulted in the destruction of the trucks belonging to the
appellant could have been treated to be a "malicious act" but having regard
to the circumstances of this case, specially that the incident took place in
an area which had already been declared to be a "disturbed area" within D
the meaning of the Armed Forces (Special Powers) Act, 1958 and where
the provisions of TADA Act were enforced, such activity cannot be con·
sidered in isolation. [1226-A-B]

3. Endorsement IMT 21 consists of two distinct parts. The first part
speaks of mutiny assuming the proportion of popular rising, military E
rising, rebellion, revolution, insurrection etc. The second part con-
templates any act of any persons acting on behalf of or in connection with
any organisation with activities directed towards the overthrow by force of
the Government de jure or defacto or to the influence of it by terrorism or
violence or by the direct or indirect consequence of the said occurrences. F
Whether these acts of terrorism by Bodo activists are intended to over-
throw the Government, de facto or de jure, by force, have not been
established by direct evidence, but the series of ~ts resulting in the loss
of life and property so as to compel the authorities to declare the whole
area as "disturbed area" for the purpose of the Armed Forces (Special
Powers) Act, 1958, as also to enforce the Terrorist and Disruptive Ac- G
tivities (Prevention) Act, 1987, definitely point out that not only the com-
).. . mon people but also the Government, established by law, is intended to be
overawed by acts of terrorism in an organised manner for and on behalf
of a group which is basically responsible for such activities. The second
part also speaks of the acts of "terrorism or violence". Such acts are made H
1222 SUPREME COURT REPORTS [2000] 1 S.C.R.

A punishable under sub-section (2) with death or imprisonment for life etc.
The terrorist acts may be done with intent to "overawe" the Government
as by law established or to strike terror in people or any section of the
people or to alienate any section of the people and other acts specified
therein. When read in the light of the statutory provisions as also the
attending circumstances of this case, it becomes clear that Provision (b)
B of Endorsement IMT 21 of the Insurance Policies did not cover the risk
complained of. [1226-C-G; 1227-D-F]

1996.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9946 of - --
c From the Judgment and Order 16.11.1993 of the National Consumer
Disputes Redressal Commission, New Delhi in P.A. No. 188 of 1992.

P.N. Misra, Ms. Kumud Lata Das and S. Misra for the Appellant.

D S.K. Paul, Salil Paul and Ms. Indra Sawhney for the Respondent.

The Judgment of the Court was delivered by

S. SAGHIR AHMAD, J. The appellant was the owner of two trucks
No. AMA 8761 and OAC 7123 in respect of which he had obtained two
E Policies, namely, (i) Policy No.3521504 00591 for the period from 11.8.1988
to 10.8.1989 and (ii) Policy No.31521504 00984 for the period from 5.2.1989
to 4.2.1990.

On 23rd of March, 1989, while the aforesaid trucks were carrying
goods to the State of Assam on National Highway No.31A, they were
F attacked at a place at Thaplaijhara in Kokrajhar District by Bodo terrorists
with the result that both the trucks were completely destroyed by fire and
the driver of one of the trucks was shot dead. The matter was reported to
the police and the Officer-in-charge of the Police Station Gossaigaon,
District Kokrajhar also issued a Certificate on 13.6.1989 that the incident,
G as reported, was found to be correct on investigation. lt was also certified
that the accused could not be traced nor could any clue be found.

The appellant informed the respondent about the loss sustained by ·<
him and claimed indemnification in terms of the Insurance Policies in
respect of the two trucks which were destroyed by the fire caused to them
H by the Bodo extremists. The respondent appointed Surveyors who sub-
i

MURLIDHAR SARANGI v. NEW INDIA ASSURANCE CO. (S. SAGHIR AHMAD, J.] 1223

- mitted the reports dated 29.5.1989 and 30.5.1989 in respect of the trucks A
in question and gave their own assessment of the loss sustained by the

- appellant. It is stated that the respondent, through a letter dated 2.3.1990,
issued by the Divisional Manager, New India Assurance Co. Ltd., offered
an_ amount of Rs. 1,43,000 for settlement of the claim in respect of truck
No. AMA 8761. It appears that it was not acceptable to the appellant who B
consequently issued a notice to the respondent on 22.3.1991. It was in reply
to this notice that the respondent, by their letter dated 30.7.1991,
repudiated the claim of the appellant on the ground that the Policy did not
cover the terrorist action and, consequently, nothing was payable to the
appellant under both the Policies. The appellant filed a complaint before
the State Consumer Disputes Redressal Commission, Cuttack, Orissa (for C
short, 'the State Commission') which, by its judgment dated 9.4.1992,
allowed the claim together with Rs.5000 as damages in respect of the
· vehicles in question for delaying the settlement of the claim without any
_., justification. It was directed that the amount assessed by the Surveyors in
respect of both the trucks would be paid to the appellant. The State D
Commission recorded a finding that the action of the Bodo terrorists in
damaging and completely destroying the trucks in question by fire would
amount to a "MALICIOUS ACT", contemplated by the Policies of In-
surance and, therefore, the respondent was liable to make good the loss in
terms of the Insurance Policies taken by the appellant for the two trucks.
The respondent challenged the order of the State Commission before the E
National Consumer Disputes Redressal Commission, New Delhi, (for
short, 'the National Commission') which, by its judgment dated 16.11.1993,
allowed their appeal and held that the loss caused to the trucks in question
by the act of Bodo terrorists was not covered by the terms of the Insurance
Policies and as such the appellant was not entitled to claim indemnification F
of the loss sustained by him. It is in these circumstances that the present
appeal has been filed.

In order to understand the respective claims of the parties, it will be
useful to look to the case of the respondent and consider the facts on the
basis of which they are trying to avoid their liability under the Insurance G
Policies. In their written statement, filed before the State Consumer Dis-
. putes Redressal Commission, Cuttack, Orissa, the respondent, inter alia,
stated as under:-

"11. That as a matter of fact the damage to the two vehicles were H
1224 SUPREME COURT REPORTS (2000) 1 S.C.R.

A caused by Bodo Militants (Extremists) by bomb blast who burnt
down sixteen loaded trucks and made a bomb attack on passenger
there (as come out in the Daily News paper "The Telegraph" on
-
25.03.89. Xerox copies of news paper annexed as Annexures F &
G. This opp. party though received the survey report about the
total loss of the two vehicles yet has some confusion crept up as
B to the admissibility of the claim (since the policy was not extended
to cover terrorist activity), the matter was referred to the Regional
Office at Calcutta. In Calcutta, the Regional Office discussed the
matter at length and obtained opinion from their legal experts as
to whether the claim was payable or not. Even the Additional
c District Magistrate of Kokrajhar was contacted to apprise the opp.
party as to whether the area or place where the incident took place
was declared as disturbed area within the meaning of Armed
Forces (Special Powers) Act, 1958. The office of the Deputy
Commissioner through the A.D.M., certified that the whole of the •
District - Kokrajhar was declared to be disturbed area. Xerox copy .
D
of the certificate is annexed as Annexure-H.

Being informed by the A.D.M., the Regional Office, Calcutta
forwarded the file to their head office, Bombay on 9.3.90 seeking
their further advice in the matter. This opp.party also collected a
E letter issued by the Govt. of Assam to the A.G.M., Oriental
Insurance Company in which it was clearly mentioned that in the
whole of the State of Assam, the Terrorist and Disruptive Activities
(Prevention) Act, 1987 had been promulgated with effect from
5.5.88. Xerox copy annexed as Annexure-J.

F 12. That the Head Office sent a letter on 30.3.90 to the Calcutta
Regional Office as the claim was to be repudiated since no
coverage of terrorist risk was given in the policy and no premium
was accepted from the complainant. Xerox copy annexed as An-
nexure-K.
G
13. That after receiving the said letter the Regional Office sent
instruction to the Divisional Office, J ajpur Road to inform the
complainant about such repudiation. Xerox copy is annexed as
Annexure-1.

H 14. That the Divisional Office accordingly on 5.6.90 sent a
MURLIDHAR SARANGI v. NEW INDIA ASSURANCE CO. fS. SAGHIR AHMAD. J.] 1225

registered letter to the complainant stating therein that the claim A
is not payable as the terrorist risk was not covered in the policy
and as such both the claims are closed as no claim. Xerox copy is
annexed as Annexure-M."

From the above, it will be seen that not only the Terrorist and
Disruptive Activities (Prevention) Act, 1987 (for short, 'the TADA Act') B
was promulgated in the State of Assam, the Armed Forces (Special
Powers) Act, 1958 was also enforced there. The Terrorist and Disruptive
Activities (Prevention) Act was enforced in the State of Assam with effect
from 5.5.1988. It also appears that whole of the District Kokrajhar was
declared as "disturbed area" within the meaning of the Armed Forces C
(Special Powers) Act, 1958. It is in this background that the other conten-
tions of the learned counsel for the parties may be examined on merits. It
is contended by the learned counsel for the appellant that the claim was
covered by Section 1 of the Policy which provides, inter alia, as under:-

"1. The Company will indemnify the Insured against loss or damage D
to the Motor Vehicle and/or its accessories whilst thereon........ .

(c) by malicious act... ................ "

Learned counsel for the respondent, on the contrary, contended that E
the claim made by the appellant was not enforceable under the Policies in
question on account of Provision (b) of Endorsement No. IMT 21 which
provides as under:-

"(b) mutiny assuming the proportion of or amounting to popular

-
rising, military rising, rebellion, revolution, insurrection, military or F
usurped power or any act of any person acting on behalf of or in
connection with any organisation with activities directed towards
the overthrow by force of the Government de ju re or de facto or
to the influence of it by terrorism or violence or by the direct or
indirect consequence of the said occurrences."
G
While the State Commission held that the destruction of the two
trucks at the hands of the Bodo terrorists would be covered by Clause (c)
of Condition No.1 of the Policy as it was a "malicious act", the National
Commission recorded the finding that the case would be governed by the
Provision (b) of Endorsement No.IMT 21. A 'malicious act', according to H
1226 SUPREME COURT REPORTS [2000) 1 S.C.R.

A State Commission, would be an act prohibited by law, which is done with
intention to cause loss to another. The act which resulted in the destruction
of the trucks belonging to the appellant could have been treated to be a
"malicious act" but having regard to the circumstances of this case, specially
that the incident took place in an area which had already been declared to
be a "disturbed area" within the meaning of the Armed Forces (Special
B Powers) Act, 1958 and where the provisions of TADA Act were enforced,
such activity cannot be considered in isolation.
-,·
Endorsement IMT 21, which has been reproduced above, consists of
two distinct parts. The first part speaks of mutiny assuming the proportion
c of popular rising, military rising, rebellion, revolution, insurrection etc. The
second part consists of :

"Any act of any person acting on behalf of or in connection with
any organisation with activities directed towards the overthrow by
force of the Government de jure or de facto or to the influence of
D
it by terrorism or violence or by the direct or indirect consequence
of the said occurrences."

The second part thus contemplates individual acts, though, the acts
may have been done on behalf of or in connection with any organisation
E or under the influence of it. Whether these acts of terrorism by Bodo
activists are intended to overthrow the Government, de facto or de jure, by
force, have not been established by direct evidence, but the series of acts
resulting in the loss of life and property so as to compel the authorities to
declare the whole area as "disturbed area" for the purpose of the Armed
F Forces (Special Powers) Act, 1958, as also to enforce the Terrorist and
Disruptive Activities (Prevention) Act, 1987, definitely point out that not
only the common people but also the Government, established by law, is
intended to be overawed by acts of terrorism in an organised manner for
and on behalf of a group which is basically responsible for such activities.

G The second part also speaks of the acts of "terrorism or violence".
Terrorism, as ordinarily understood, means the act of terrorising. In
Webster's Comprehensive Dictionary, one of the meaning assigned to the
word "terrorism" is that it means "unlawful acts of violence committed in
an organised attempt to overthrow a Government." Sub-section (1) of
H Section 3 of TADA Act, 1987 provides as under:-
i

MURLIDHAR SARANGI v. NEW INDIAASSURANCECO. (S. SAGHIRAHMAD, J.J 1227

"3. Punishment for terrorist acts.- (1) Whoever with intent to A
overawe the Government as by law established or to strike terror
in people or any section of the people or to alienate any section
of the people or to adversely affect the harmony amongst different
sections of the people does any act or thing by using bombs,
dynamite or other explosive substances or inflammable substances B
or fire- arms or other lethal weapons or poisons or noxious gases
or other chemicals or by any other substances (whether biological
or otherwise) of a hazardous nature in such a manner as to cause,
or as is likely to cause, death of, or injuries to, any person or
persons or loss of, or damage to, or destruction of, property or
disruption of any supplies or services essential to the life of the C
community, or detains any person and threatens to kill or injure
such person in order to compel the Government or any other
person to do or abstain from doing any act, commits a terrorist
.·act."

The above are acts which are treated as terrorist acts and such acts D
are made punishable under Sub-section (2) with death or imprisonment for
life etc. etc. The terrorist acts may be done with intent to "overawe" the
Government as by law established or to strike terror in people or any
section of the people or to alienate any section of the people and other
acts specified therein. E
Disruptive activities have been set qut in Section 4 of the Act which
may not be enumerated here.

When read in the light of the above statutory provisions as also the
attending circumstances of this case, it becomes clear that Provision (b) of F
Endorsement IMT 21 of the Insurance Policies did not cover the risk
complained of. The trucks were destroyed by acts of terrorism and a driver
of the truck was also shot dead. The National Commission was, therefore,
fully justified in its conclusion that the respondent was not liable for the
loss suffered by the appellant at the hands of Bodo activists who completely
destroyed the trucks of the appellant by setting them on fire and killed one G
of the drivers .
... For the reasons stated above, we find no merit in this appeal which
is dismissed but without any order as to costs.

T.N.A. Appeal dismissed.