1. Insurance claim repudiation — Fire loss — Dispute over overvaluation of premises and non-possession of requisite license for storing hazardous chemicals — Appeal under Consumer Protection Act. (Para 1 , 2 , 3 )
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2020 Supreme(SC) 156
SUPREME COURT OF INDIA
MOHAN M. SHANTANAGOUDAR, R. SUBHASH REDDY, JJ.
M/S BASPA ORGANICS LIMITED – APPELLANT
VERSUS
UNITED INDIA INSURANCE COMPANY LIMITED – RESPONDENT
CIVIL APPEAL NO. 13401 OF 2015
Decided on : 14-02-2020
Advocates Appeared:
For the Appellant :Rajiv Raheja, Advocate
For the Respondent:P.P. Malhotra, Vineet Malhotra, Mohit Paul, Sunaina Paul, Shubhendu Kaushik, Advocates
For the Appellant :Rajiv Raheja, Advocate
For the Respondent:P.P. Malhotra, Vineet Malhotra, Mohit Paul, Sunaina Paul, Shubhendu Kaushik, Advocates
IMPORTANT POINT
It cannot be said that an exemption from obtaining a licence under Solvent, Raffinate and Slop (Acquisition, Sale, Storage and Prevention of Use in Automobiles) Order, 2000 would amount to an exemption to obtain a licence under Petroleum Act, 1934.
Headnote:
Consumer Protection Act, 1986 – Section 23 – Insurance – Fire and Special Perils Policy – Damage caused to factory due to fire – Claim repudiated on grounds of undervaluation as well as suppression of material fact – Complaint dismissed by National Commission – For storage of petroleum Class A less than 30 litres in quantity, no licence is required under Petroleum Act or rules thereunder – However, Appellant had stored much more than 300 litres of Hexane and licence under Article 3 of Petroleum Rules, 1976 would not be sufficient – For petroleum Class A exceeding 300 litres, a licence under Article 7 is required when it is not being stored in receptacles exceeding 1000 litres in capacity – Second surveyor had clearly stated that Hexane had leaked from tanks in which it was stored – It is not the case of Appellant that it provided documents stipulated by Controller of Explosives – Appellant was required to obtain a licence under 1976 Rules for the storage of Hexane, be it under Article 6 or 7, and has failed to show that it possessed any such licence – Licence issued under Essential Commodities Act and control orders are for a different purpose altogether compared to Petroleum Act – It cannot be said that an exemption from obtaining a licence under Solvent, Raffinate and Slop (Acquisition, Sale, Storage and Prevention of Use in Automobiles) Order, 2000 would amount to an exemption to obtain a licence under Petroleum Act – Non-disclosure of non-possession of a licence was of a material nature and constituted a violation of Condition 1 of insurance policy – Respondent was justified in repudiating claim of Appellant on this ground – Second issue, regarding overvaluation of subject factory, was not seriously argued by either party – Moreover, it is a question of fact which this Court generally does not probe deeply – Appeal dismissed. (Paras 13.1, 15, 18, 21, 22, 30, 31, 32, 33, 34 and 35)
Facts of the case:
Present appeal arises out of the judgment dated 21.07.2015 passed by National Consumer Disputes Redressal Commission, New Delhi dismissing consumer complaint (Original Petition No. 48 of 2004) filed by Appellant herein.
Findings of the Court:
Licence issued under the Essential Commodities Act and control orders are for a different purpose altogether compared to the Petroleum Act. Licensing regime envisaged in clause 3 of 2000 Order, and the exemption granted thereto, is in addition to licensing requirements under the Petroleum Act.
Result : Appeal dismissed.
Legal Category Hierarchy
- insurance law
- administrative law
- consumer law
Table of Contents
2. Appellant claims exemption from licensing under Essential Commodities Act; Respondent contends license required under Petroleum Rules and premises were overvalued. (Para 4 , 5 )
3. Hexane qualifies as Petroleum Class A; storage exceeding 300 litres requires licensing under Petroleum Rules; Essential Commodities Act regulations are additional to, not substitutes for, Petroleum Act requirements. (Para 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 )
4. Licensing regimes under the Essential Commodities Act and the Petroleum Act serve different purposes; exemption under one does not dispense with requirements of the other. (Para 28 , 29 , 30 , 31 )
5. Appeal dismissed — Repudiation of insurance claim upheld for breach of policy terms regarding material non-disclosure. (Para 34 , 35 )
6. Does an exemption from licensing under the Essential Commodities Act dispense with the need for a license under the Petroleum Act?
No. The licensing regime under the Essential Commodities Act regulates production, supply, and distribution for public interest, whereas the Petroleum Act focuses on safety and storage. They are independent requirements; an exemption under the former does not exempt a person from the latter. (Para 28 , 29 , 30 )
7. When is a license required for storing Petroleum Class A under the Petroleum Act and 1976 Rules?
No license is needed for quantities up to 30 litres. For quantities between 30 and 300 litres, a license under Article 3 is required. For quantities exceeding 300 litres, licenses under Article 6 (for installations/bulk) or Article 7 (otherwise than in bulk) are required. (Para 11 , 13 , 14 , 15 )
8. Does the non-possession of a statutory license for storing hazardous materials constitute a material non-disclosure in an insurance policy?
Yes. If the policy is voidable upon misrepresentation or non-disclosure of any material particular, the failure to obtain and disclose a mandatory statutory license for the lawful storage of hazardous substances constitutes a material breach. (Para 31 )
JUDGMENT
Mohan M. Shantanagoudar. J.
The present appeal arises out of the judgment dated 21.07.2015 passed by the National Consumer Disputes Redressal Commission, New Delhi ("National Commission") dismissing the consumer complaint (Original Petition No. 48 of 2004) filed by the Appellant herein.
2. The facts giving rise to this appeal are as follows:
2.1 One M/s Shrirang Agro Chemical Pvt. Ltd., having its factory premises in Tarapur, Thane District, was engaged in the business of manufacturing a chemical called Cyper Methnic Acid Chloride ("CMAC"), an intermediate product used in growing cash crops. The said factory premises had become a sick unit, and was auctioned off by the Maharashtra State Financial Corporation ("MSFC"). The bidding took place on 14.03.2001, and on 15.03.2001, the Appellant was declared the highest bidder, having quoted a price of Rs. 4 crores.
2.2 The Appellant commenced production of CMAC in November 2001. The previous company (Shrirang Agro Chemical Pvt. Ltd.) had taken an insurance coverage from the Respondent, and the Appellant continued this coverage. To this end, after inspecting the plant and machinery, a Fire and Special Perils Policy was issued by the Respondent from 12.11.2001 to 11.12.2001 insuring the subject premises for a total Insured Declared Value of Rs.12.5 crores. The said policy was continued for the period between 12.12.2001 and 11.01.2002 as well.
2.3 On 03.01.2002, a fire broke out at the factory premises, based on which the Appellant filed a claim with the Respondent. On 30.01.2004, based on reports from the three surveyors, the Respondent repudiated the claim of the Appellant on two grounds. It was held, firstly, that the Appellant had purchased the factory premises for only Rs. 4 crores, but had overvalued it and taken a policy for an excessive value of Rs. 12.5 crores, and secondly, that the Appellant suppressed the material fact of not being duly licensed for the storage and use of Hexane at the factory. Aggrieved by such repudiation, the Appellant filed a consumer complaint before the National Commission.
3. The National Commission dismissed the Appellant's complaint, holding that the repudiation was justified on both the above counts, i.e., that the Appellant had overstated the value of the factory while taking insurance, and that the Appellant was operating without obtaining the requisite licence for the storage of Hexane. It is against this dismissal that the Appellant has approached this Court by way of an appeal under Section 23 of the Consumer Protection Act, 1986.
4. Learned Senior Counsel appearing on behalf of the Appellant, Shri S.S. Naphade, argued against the appointment of the third surveyor, S.B. Nalluri & Associates ("third surveyor"). He contended that once the second surveyor, Mehta and Padamsey Surveyors Pvt. Ltd. ("second surveyor"), had clearly assessed the loss and submitted a detailed report wherein it had ruled out any mala fides on part of the Appellant, there was no occasion to appoint the third surveyor. Learned Senior Counsel also relied on the notification dated 21.11.2001 issued by the Ministry of Petroleum and Natural Gas in exercise of its powers under the Essential Commodities Act, 1955 ("the Essential Commodities Act"), to argue that the Appellant was exempt from obtaining a licence for storage of Hexane, since according to him, the Appellant had stored less than 20 kilolitres of Hexane. It was submitted that the said notification clearly stipulated that there was no requirement of a licence for storing up to 20 kilolitres of Hexane.
5. On the other hand, learned Senior Counsel appearing on behalf of the Respondent, Shri P.P. Malhotra, contended that repudiation of the claim was justified, inasmuch as the Appellant had not disclosed that it was not in possession of the requisite licence for storing Hexane. It was contended that the Appellant was required to obtain a licence as per either Article 3 or Article 7 of the First Schedule to the Petroleum Ru
