NATIONAL INSURANCE CO. LTD.versusHARJEET RICE MILLS

A                       NATIONAL INSURANCE CO. LTD.
                                     v.
                             HARJEET RICE MILLS

                                   JULY 25, 2005

B            [R.C. LAHOTI, CJ. AND P.K. BALASUBRAMANYAN, JJ.]


        · Jam mu and Kashmir Consumer Protection Act, j 987:

           Claim against Insurance Company-Fire caused in godown-Stocked
C   goods lost in fire-Surveyor ~s report based on police investigation, which on
    further investigation reported as perfunctory-Claim resisted by Insurance
    Company as an Insurance fraud stating that fire was caused deliberately-
    Held, State Consumer Commission should have given an opportunity. to
    prove investigation report-s. 64-UM of Insurance Act cannot stand in the
D   way of Insurance Company in establishing that the claim was a fraud on the
    Company-High Court failed lo exercise appellate jurisdiction properly so
    as td satisfy itself that no fraud was involved and the claim was genuine cmd
    sustainable-Interference warranted-Case remitted to Sta,te Consumer
    Commission to decide afresh all the questions involved including the cause
    of fire-Insurance Act, I938-:-s.64-UM-Constitution of India-Article 136.
E
          Respondent-consumer filed a claim against the appellant-Insurance
    Company before the Stat~ Consumer Commission for the loss stated to h~ve
    been caused by an accidental fire in its godown. The Insurance Company
    resisted the claim, inter alia, on· the grounds that the fire was not caused by
    short-circuit but was a deliberate act with a view to make the claim and it was
F   a case of an attempted insurance fraud; and that, even otherwise, the loss was
    highly exaggerated. The State Commission allowed the claim. The appeal filed
    by the Insurance Company was dismissed by the Hig'h Court.

          In the present appeal filed by the Insurance Company, it was contended
G   that though the surveyor had reported that the fire was caused by a short-;
    circuit, but the said report was based on a police investigation; which, on a
    further investigation, was reported by the Deputy Superintendent of Police
    as perfunctory; and that the cause of the fire and the goods and .its quantity
    stated to have burnt were to be properly investigated.

                                         794
   NATIONAL INSURANCE CO.LTD. v. HARJEET RICE MILLS [BALASUBRAMANYAN, J.]     795

    Allowing the appeal and remitting the matter to the State Consumer               A
Commission, the Court

        HELD: l.L The State Consumer Commission sh.ould have given an
. opportunity to the appellant to prove the investigation report. Section 64 UM
  of the Insurance Act, 1938 cannot stand in the way oft.he insurance company
  in establishing that the claim was a fraud on the company, or that it was a' B
 case of deliberately causing a fire so as to lay the foundation for an insurance
 claim. The Commissien did not apply its mind to the aspect highlighted that
 the first police investigation was reported to be perfunctory and a fresh,
  proper investigation had been recommended. Similarly, the discrepancy in the
 capacity of the godown and the possibility that what was lost was only or mainly C
  paddy husk should have persuaded the Commission to make a proper enquiry
  before deciding to accept the Surveyor's report. [798-B, C)

        1.2. The High Court has failed to exercise its appellate jurisdiction
properly. It failed to see that it had the duty as the Appellate Authority to satisfy
itself that .no fraud was involved and that the claim was genuine and sustainable. D
Adequate primafacie material was available to warrant a prop~r enquiry on
that question. In this situation, interference is called for in this appeal.
                                           -                                1798-D)

        1.3. Since a proper enquiry. and a fresb decision by the initial authority
itself is called for, the decisions of the High Court and the State Commission       E
are set aside. In view of the amendment to the Jam mu and Kashmir Consumer
Protect Act, the claim comes within the limit of the pecuniary jurisdiction of
the State Commission, which would decide afresh all the questions involved
including the question of the cause of fire. (798~E, F]

      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2431 of2000.                   F
     From. the Judgment and Order dated 12.7.99 of the Jammu and Kashmir
High Court in C.I.M.A.No. 31 of 1997.

      A.B. Rohatgi and M.K. Dua with him for the Appellant.

      Anoop G. Choudhary and K.K. Mohan with him for the Respondent.                 G
      The Judgment of the Court was delivered by

      P.K. BALASUBRAMANY AN, J. 1. The National Insurance Company,
the respondent in a claim before the State Commission under the Jammu &
Kashmir Consumer Protection Act, is the appellant before us. Mis Harjeet H
     796                    SUPREME COURT REPORTS [2005] SUPP. l S.C.R.

A   Rice Mills, the respondent herein, had insured its stocks with the appellant
    for the period September 199 l to September 1992. The respondent herein
    approached the State Consumer Commission with a claim that there was an
    accidental fire in its godown in the night intervening the first and second
    January 1992; that the goods stocked were lost in the fire; that the surv,eyor
    appointed had estimated the loss at Rs. 8,96,500 on finding that the loss was
B   due to a fire caused by a short circuit; that the appellant h~d repudiated the
    claim unjustly; that there was thus deficiency in service and that the respondent
    was entitled to a sum of Rs. 9 iakhs as the value of the goods lost, to a sum
    of Rs. 1 lakh as d!!mages for mental agony and for interest at 24% per annum
    on the entire amount, from the date of the incident of fire. The appellant
C   resisted. the claim by contending, inter a/ia, that the State Commission had
    no jurisdiction to entertain the claim; that on a further investigation, it was
    revealed that the fire was not caused by short-circuit; that it was a deliberate
    act of causing a fire with a view to make a claim on the insurance policy; that
    the loss was highly exaggerated since the godown concerned did not have
    the capacity to take in the quantity allegedly stored and lost; that it was a
D   case of an attempted insurance fraud; that the claim was closed as a no claim;
    that there was no deficiency in service and that the claim was liable to be
    rejected.

            2. The State Commission did not consider the objection to its jurisdiction
E     on merits. It .held that the Surveyor's report relied on by the claimant has to
     be. accepted and an order for payment out of that amount with interest
     thereon at the rate of_l8% per annum from the date of the loss till the date
     of payment had to be made. It also held that the claim for compensation had
     to be denied, ·since, if granted, the amount awarded would have exceeded its
     jurisdiction. Thus, the appellant was directed to pay a sum of Rs. 8,96,500 with
F    interest thereon at the rate of 18% per annum from 2.1.1992, till the date of
     payment. The appellant filed an appeal before the High Court of Jammu &
     Kashmir. The High Court declined to interfere, essentially stating that the
    .finding of fact arrived at by the State Commission, could not be interfered
     with in the circumstances of the case. Thus, the appeal was dismissed.               I

G       3. Learned Senior Counsel for the appellant first submitted that the High
  Court was in error in not setting_ aside the decision of the State Commission          .....'
  on the ground that the State Commission lacked pecuniary jurisdiction to
  entertain the claim. He pointed out that the pecuniary jurisdiction was limited
  to entertaining claims for Rs. IO lakhs or less and that in the present case,
H the claim was for Rs. 10 lakhs plus interest thereon, taking the cl~im out of
         NATIONAL INSURANCE CO.LTD. v. HARJEET RICE MILLS [BALASUBRAMANYAN, J.] 797

       the purview of the Commission. Learned counsel for the respondent submitted       A
       that the claim was for Rs. 10 lakhs and the claim for interest cannot take· the
       claim beyond the jurisdiction of the State Commisi;ion. He also pointed qut
       that the Act has since been amended and now the Commission has been
       conferred jurisdiction to entertain a claim for a sum above Rs. 10 lakhs. He
       also submitted that the objection to pecuniary jurisdiction was not taken at      B
       the threshold and the High Court was justified in overruling the contention
       in that regard.

            4. We do not think it necessary to go into this question on merits in
       view of the course we propose to adopt and in view of the amendment to the
       Act enhanci!1g the pecuniary jurisdiction of the State Commission and the         C
       present claim being within that enhanced jurisdiction.

              5. One of the main defences attempted by the appellant was that the fire
       was not accidental and hence the appellant had no liability under the policy.
       °The respondent"claimant met _this plea by pointing out that the surveyor had
       reported that the fire was caused by a short-circuit as pleaded by it. It is true D
       that the Surveyor's report supported the claim of the respondent herein. But
       the said report was also based on an investigation by the police, supporting
       a conclusion that the fire was caused by short-circuit of electricity. It is seen
       that there was a further police investigation and the Deputy Superintendent
       of Police R.S. P~ra had reported that·the earlier investigation was perfunctory,
       that the cause of the fire has to be properly investigated and in the E
       circumstances a fresh investigation was called for. The appellant had engaged
       a private investigator !O investigate and that agency had reported that the fire
       might not have been caused by short-circuit; that it could have been arson
       or a deliberate attempt to make an insurance claim; that the loss estimated
       could not have occurred considering the capacity of the godown and that the F .
       available materials in the custody of .the police indica~ed that what was
       burned \\'.lis paddy husk and not rice or padd)". itself as claimed. The appellant
       argued before the Commission that in the light of this report, the Commission
       should decline jurisdiction and direct the claimant to go to a Civil Court to
       establish its claim. It was also argued that the report of the Surveyor could
       not be accepted in the circumsta~ces, especially iri view of the report· of the G

....   Deputy Superintendent of Police. The claimant argued that the report of the ·
       private investigator could not be looked into in the light of Section 64 UM( c)
       of the Insurance Act, since there was nothing to show that the private
        investigator was licensed. The State Commission accepted the ·position
       canvassed for by the claimant and refused to look into the report of the H
    798                     SUPREME COURT REPORTS [2005) SUPP. 1 S.C.R.

A private investigator. The High Court in appeal, also endorsed that position.
           6. ~e are of the view that t~e State Commission should have given an
    opportunity to the appellant before us to prove the investigation report.
    Section 64UM of the Insurance Act cannot stand in the way of the .insurance
    company in establishing that the claim was a fraud on the company, or that
B it was a case of deliberately causing a fire so as to· lay the foundation for an
    insurance claim. Similarly, the Commission did not apply its mind to the aspect
    highlighted that the first police investigation was reported !O be perfunctory
    and a fresh, proper investigation Mid been recommended. Similarly, the
  . discrepancy    in the capacity of the godown and the possibility that what was
               ._.....
C lost was only or mainly paddy husk, should have persuaded the Commission
    to make a proper enquiry before d,eciding to accept the Surveyor's report in
    this case. The High Court, in our view, has failed to exercise its appellate
   jurisdiction properly. It failed to see that it had the duty as the Appellate
    Authority to satisfy itself that no fraud was involved and that the claim was
    genuine and sustainable. We are_ of the view that adequate prima facie
D material :as avail~ble to warrari(a proper enquiry on that question. In this
    situation, we are satisfied that interference is called for in this appeal.

          7. We are satisfied that the proper course to adopt is to set.aside tqe
   decisions of the High Court and the State Commission and to remand the
  claim for a fresh enquiry and decision by the Commission. Since, we are of
E the view that a proper enquiry and a fresh decision by the initial authority
   itself is called for, we refrain from discussing the relevant aspects argued
   before us, so as to ensure that no prejudice is caused to either side. Now that
   the claim comes within the limit of the pecuniary jurisdiction Of the State
   Commission, we are satisfied that the. proceedings can b~ remanded to .the
p State Commission itself for a proper decision on all the questions involved
   including the qu\!stion of the cause of fire. We, therefore, allow· this appeal
 _ and setting aside the. decisions of the High Court and that of the State
   Commission, remand the claim of the respondeJlt herein to the State Commission
   for an investigation de novo. 'the State Commission will give the parties
   effective opportunity to lead whatever evidence they may want artd ·decide
G the claim afresh, including its sustainability, on the basis of the evidence that
   may be adduced. The parties will appear before the State Commission on
   19.9.2005. We make no order as to costs.

     R.P.                                                         Appeal allowed.
                                                                                      -
H