NATIONAL INSURANCE COMPANY LTD. vs THIRUVALLUVAR SILK COTTON INDUSTRIES

THIS is an appeal against the order of the State Commission, Tamil Nadu at Madras in O.P. No. 466/92 entitled National Insurance Company Ltd. v. Thiruvalluvar Silk Cotton Industries. National Insurance Company Ltd. is the appellant herein and Thiruvalluvar Silk Cotton Industries are Respondent before us.

THE facts of the case are that the Respondent owned a Silk Cotton Factory at Bodinay-akkanur, which had been insured, for fire insurance with the National Insurance Company Ltd. for about ten years. There was a fire accident in this factory on 27.1.92 and the Respondent herein preferred a claim of the sum of Rs. 3,59,497/- in respect of two policies covering the risk for the stocks, building, machinery and stocks stored in the process block. The Insurance Company however, offered Rs. 1,12,414/- against the claim of Rs. 3,59,497/-. The Respondent objected saying that the amount offered was arbitrary and without any basis. The contention of the Insurance Company was that the provisions of the fire warranty were violated and also there was suppression of material facts. Therefore, the entire claim cannot be accepted by them. While the Insurance Company admitted that there was a fire and appointed Sri Jayarama Pandian for preliminary survey, they contended that the processing activity was going on in God own No. 3 in breach of the terms of warranty and also that there was suppression of the fact that the machinery was working in the godown. The Respondents herein contested both the contentions of the Insurance Company. The State Commission examined all the evidence produced before them as well as the , documents presented by both sides. After a careful consideration, they did not accept the version of the Insurance Company. They noted a letter from the Indian Bank to the Divisional Manager, National Insurance Company saying that "we were using Godown No. 3 of M/s. Thiruvalluvar Silk Cotton Industries as godown for the purpose of storing silk cotton materials which are pledged to us. The key of the godown was under our custody". In the face of this letter the State Commission concluded that there was no ground to accept the contention of the Insurance Company that the Respondent was using Godown No. 3 as a cleaning hall with an inter-connection with the machine hall. The State Commission, therefore, did not accept the contention of the Insurance Company that there has been any breach of warranty or any deliberate suppression of material facts on the part of the Respondents as regards policy for the stocks. They also held that there has been no breach of warranty or misrepresentation and suppression of facts as regards policy covering building, machinery and stocks other than in Godown No. 3. The State Commission also accepted the report of the Surveyor as regards the loss to the stock in Godown No. 3 after deducting the salvage. As regards the other Policy No. 289 for a sum of Rs. 3.00 lakhs covering the following three items " (1) building of Class-1 construction, (2) machinery installed and (3) stock of cleaned/uncleaned silk cotton, silk cotton pods etc., the State Commission has discussed in detail the basis for determining the quantum of loss and awarding the claim in this regard.

WE have heard the Counsel for the Insurance Company as well as the Respondent before us, and have carefully perused the records pertaining to this case. We are of the considered view that the State Commission has rightly rejected the contention of the Insurance Company as regards claims under both the policies and therefore, uphold the order of the State Commission on the award of Rs. 2,40,177.40 with interest thereon at 18% per annum from 6.5.92 till the date of payment for the loss suffered by the Respondent. We also uphold the order for the payment of Rs. 5,000/- for mental agony and Rs. 2,000/- as costs to the Respondent herein. However, we are unable to uphold the award of Rs. 10,000/- per month for loss of business from 6.5.92 till the date of payment. In this regard the State Commission has quoted the view of the National Commission in the case "United India Insurance Company Limited v. Shri Hussan Sultan Nadaf, cited as II (1992) CPR 716 wherein it was held that where the Insurance Company delayed the settling of the claim on lame excuses and defences, the insured is entitled to compensation for business loss. While this view taken by this Commission is reiterated, the quantum of compensation has always to be on the basis of established loss by way of some evidence and proof. As we do not find such evidence or proof in this case, we are inclined to disagree with the view of the State Commission in regard to determining the quantum of loss and thus awarding a payment of Rs. 10,000/- per month on this account from 6.5.92. The award of Rs. 10,000/- per month is arbitrary and it cannot be upheld.

THIS appeal is, therefore, partly allowed to the extent that the order in so far as it directs the payment of Rs. 10,000/- per month for loss of business from 6.5.92 is hereby set aside. The order directing payment for loss of stocks and damages to building etc. at Rs. 2,40,177.40 with interest thereon, Rs. 5,000/- for mental agony and Rs. 2,000/- as costs is upheld. There will be no order as to costs.