1. Insurance claim dispute — disagreement over increase in sum insured via correspondence and valuation of stock based on purchase price versus market rate. (Para 2 , 3 )
Back
Next 
2017 Supreme(SC) 1653
SUPREME COURT OF INDIA
ROHINTON FALI NARIMAN, SANJAY KISHAN KAUL, JJ.
VISHNU BHAGWAN AGRAWAL & ANR. - Appellants
VERSUS
NATIONAL INSURANCE CO. LTD. - Respondent
CIVIL APPEAL NO. 4661 OF 2007
Decided On : 26-10-2017
Important Points
The court emphasized the application of estoppel by conduct in the context of amending the insurance policy and upheld the Umpire's award based on the analysis of evidence.
Subject
Insurance Law - Insurance Policy Interpretation
Act Referred
Headnote
Insurance Policy - Interpretation of Policy Terms - Arbitration Act - [Insurance Policy] - [Interpretation of Policy Terms] - [Arbitration Act, 1940, Section 30] - The court discussed the interpretation of the insurance policy terms, the conduct of the parties, and the application of estoppel by conduct in the context of amending the insurance policy. The court upheld the Umpire's award based on the analysis of evidence and found that the findings were a possible view on the facts of the case.
Fact of the Case:
The appellant's jute stock, mortgaged to the Bank of Baroda, was insured. Disputes arose regarding the increase in the insured amount, valuation of the stock, and the basis for loss settlement. Arbitration ensued, resulting in divergent opinions and a subsequent Umpire's award.
Finding of the Court:
The court found that the Umpire's award was a possible view on the facts of the case, and the findings were not impeachable. The court set aside the judgments of the lower courts and upheld the Umpire's award, directing the Insurance Company to pay the appellant's dues within three months.
Issues: Disputes over the increase in insured amount, valuation of stock, and basis for loss settlement; Misconduct of the Umpire; Jurisdiction of the lower courts in treating the Umpire's award as a first appeal.
Ratio Decidendi: The court upheld the Umpire's award based on the analysis of evidence and found that the findings were a possible view on the facts of the case. The court also emphasized that an arbitration award is not to be lightly interfered with and set aside the judgments of the lower courts.
Final Decision: The judgment of the High Court was set aside, and the Umpire's award was upheld. The Insurance Company was directed to pay the appellant's dues within three months.
Legal Category Hierarchy
Advocates Appeared:
For the Appellants : Mr. Manoj Swarup, Adv., Ms. Lalita Kohli, Adv., Mr. Abhishek Swarup, Adv., Mr. Sajid Imam Naqvi, Adv. For M/s. Manoj Swarup And Co., AOR.
For the Respondents: Mr. Vishnu Mehra, Adv., Mr. B. K. Satija, AOR.
For the Appellants : Mr. Manoj Swarup, Adv., Ms. Lalita Kohli, Adv., Mr. Abhishek Swarup, Adv., Mr. Sajid Imam Naqvi, Adv. For M/s. Manoj Swarup And Co., AOR.
For the Respondents: Mr. Vishnu Mehra, Adv., Mr. B. K. Satija, AOR.
Table of Contents
2. Whether insurance policy amendments require written agreement or can be implied by conduct — whether stock valuation should be based on purchase price or market rate. (Para 5 , 6 )
3. The insurance company is estopped from denying the policy increase after adjusting the additional premium; purchase price may reflect market value if the time gap is short. (Para 8 , 9 )
4. Arbitration awards should not be interfered with if they represent a possible view based on evidence, and estoppel by conduct can apply to written insurance policies. (Para 8 , 10 )
5. Appeal allowed — High Court judgment set aside — Umpire's award upheld and resuscitated. (Para 10 , 11 )
6. Can a written insurance policy be amended by the conduct of the parties?
Yes. While insurance policies are typically amended in writing, the doctrine of estoppel by conduct applies if the insurance company's actions, such as encashing and adjusting an enhanced insurance premium, imply acceptance of the amendment. (Para 8 , 9 )
7. Under what circumstances can the purchase price of goods be used to determine market value for an insurance claim?
The purchase price can be held to reflect the market value on the date of the loss if the event occurred within an extremely short time from the date of purchase and there is no evidence to rebut this conclusion. (Para 8 )
8. What is the legal standard for interfering with an arbitration award under the Arbitration Act, 1940?
Arbitration awards are not to be lightly interfered with. Interference is only justified if there is a legal error apparent on the face of the award or legal misconduct, such as the ignoring of vital material evidence. (Para 10 )
JUDGMENT :
ROHINTON FALI NARIMAN, J.
1. The present appeal arises from the judgment of a Division Bench of the Allahabad High Court dated 22.01.2004, upholding the judgment of the learned Civil Judge dated 22.04.1997, by which a learned Umpire's Award was set aside.
2. The facts of this case are that the appellant kept jute stock in the premises of Haryana Oil Mills situated at Lucknow, which was mortgaged in favour of the Bank of Baroda. The original period for which this stock was insured was from 13.10.1984 to 13.10.1985. It is not in dispute that as on 27.10.1984, the amount for which the jute was insured was raised from Rs.10 lakhs to Rs.20 lakhs. The entire stock pledged to the Bank was insured. By a letter dated 01.07.1985, it appears that the appellant purchased more stock of jute and asked for an increase in the value of the insurance policy limited to Rs.25 lakhs and odd. This, according to the Insurance Company, was not accepted and is one bone of contention between the parties. Another bone of contention between the parties is whether the insured stock should be valued as on the date of the fire or as on the date of purchase.
3. The appellant before us produced evidence in the form of purchase receipts of the value of stock of jute which amounted to Rs.703.21/-per quintal. However, this was not accepted in the survey that was done at the behest of the Insurance Company. By their report dated 07.10.1985, the Surveyors valued stock @ Rs.404/-per quintal on the basis that no authentic rate quotations were available in the Lucknow/Kanpur jute market. The Surveyors, therefore, adopted the spot rate quoted in the Calcutta market for W-5 quality jute, which was adjusted to the qualities the insured had in stock, (which was W-4 and TD 5 quality jute), and after adding expenses incurred, an average rate of Rs.404/-per quintal for both qualities was worked out. The ultimate amount, therefore, that was offered by the Insurance Company, based on the Surveyor's report, came to a sum of Rs.12,30,039.41np. Since this was not accepted by the appellant, arbitration between the appellant and the respondent began. Mr. P.B. Agrawal, one learned Arbitrator, found in favour of the appellant and awarded a sum of Rs.23,55,132.71p., with interest @ 10 % per annum from 10th March, 1986, up to the date of the Award and @ 6 % per annum from the date of the Award to the date of payment. Mr. P.P. Malhotra, another learned Arbitrator, came to the conclusion that the limit of the fire insurance policy itself was Rs.20 Lakhs and could not be exceeded and that the loss suffered by the claimant, as per the market value prevailing on the date of the fire, came to Rs.12,30,039.41np as per the Surveyor's report. In view of this divergence of opinion between the arbitrators, the matter was referred to an Umpire, namely Mr. S.C. Maheshwari, learned Senior Advocate. After considering the facts of the case, the learned Umpire concluded as follows :
“It is thus clear that the Insurance Company had accepted and agreed to insured's letter dated 1.7.85 and the property covered under the policy in question stood increased from Rs.20 lakhs to Rs.25,45,121.70 with effect from 1.7.85 to 13.10.85 and simply because an endorsement letter was not issued by the company before the date of happening, it would not mean that the Insurance Company can go back from its commitment. As discussed earlier, the first increment in the policy from Rs.10 lakhs to Rs.20 lakhs was though effected from 27.10.84 but the endorsement letter was issued by the company as late as 11.2.85 and had there been any happening in between 27.10.84 to 11.2.85, the company could not have taken the plea that the original policy was only for Rs.10 lakhs and the same was never increased. Having once given the implied consent, the Insurance Company is now estopped from pleading that the sum insured was only Rs.20 lakhs and not Rs.25,45,121.70 as claimed by the claimant.
9. Keeping in mind the evidence led by t
