Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2020 Supreme(SC) 608

SUPREME COURT OF INDIA
D.Y. CHANDRACHUD, HRISHIKESH ROY, JJ.
Sangrur Sales Corporation – Appellant
Versus
United India Insurance Company Limited and Another – Respondents
Civil Appeal No. 378 of 2020, SLP (C) Nos. 47437 of 2018, 1899 of 2020
Decided On : 17-01-2020

Advocates:
Advocate Appeared:
For the Appellants : Mr. Navneet Kumar, Mr. Vikas Bhadana, Mr. Mohit Singh, Mr. Parijat Kishore.
For the Respondents: Mr. Raunak Jain, Mr. A.V. Rangam, Mr. Buddy A. Ranganadhan.

In case of ambiguity, the construction beneficial to the insured should be accepted, consistent with the purpose for which the policy was taken.

Headnote:
Insurance - Property Insurance - Clause VIII (e) - Standard Fire and Special Perils Insurance Policy - [SUBSIDENCE AND LANDSLIDE INCLUDING ROCK SLIDE] - [Clause VIII (e)] - The court discussed the interpretation of the exclusion clause in the insurance policy, specifically clause VIII (e), and concluded that the exclusion should apply only to a situation where the excavation is being carried on by the insured himself in his own property. The court emphasized that in case of ambiguity, the construction beneficial to the insured should be accepted, consistent with the purpose for which the policy was taken.
Fact of the Case:

The appellant's shop collapsed due to excavation work being carried out in an adjacent plot, leading to the repudiation of the insurance claim by the insurer. The appellant filed a consumer complaint, which was initially allowed but later reversed by the NCDRC.
Finding of the Court:

The NCDRC erred in reading the exclusion clause as applicable to a situation where the cause of damage was the work of a third party carrying out an excavation in independent premises. The court allowed the appeal and set aside the NCDRC's judgment, restoring the order of the District Forum.
Issues: Interpretation of the exclusion clause in the insurance policy, applicability of the exclusion to a situation where the cause of damage was the work of a third party carrying out an excavation in independent premises.
Ratio Decidendi: In case of ambiguity, the construction beneficial to the insured should be accepted, consistent with the purpose for which the policy was taken. The exclusion should apply only to a situation where the excavation is being carried on by the insured himself in his own property.
Final Decision: The appeal was allowed, and the NCDRC's judgment was set aside, restoring the order of the District Forum.

JUDGMENT :

D.Y. CHANDRACHUD, J.

1. Delay condoned.

2. Leave granted.

3. This appeal arises from a judgment and order of the National Consumer Disputes Redressal Commission [NCDRC] dated 7 March 2018.

4. The appellant obtained a “Standard Fire and Special Perils Insurance Policy” from the first respondent to cover his shop situated at Gausala Road, Sangrur. The shop was insured in the value of Rs. 18,00,000 and the policy was valid from 21 June 2011 to 20 June 2012. On 29 March 2012, the showroom in which the appellant carried on the business of sanitary-ware collapsed as a result of the work of excavation which was being carried on in an adjacent plot. A First Information Report was lodged on 30 March 2012 at the Police Station, Sangrur and intimation of the loss was given to the insurer. A surveyor was appointed. The claim was repudiated by the insurer on 11 May 2012. This led to the institution of the consumer complaint before the District Consumer Disputes Redressal Forum [District Forum] Sangrur. The District Forum allowed the claim in the amount of Rs 18,00,000, together with interest at nine per cent per annum from the date of the institution of the complaint. The order of the District Forum was upheld by the State Consumer Disputes Redressal Commission [SCDRC] Punjab on 5 May 2016. However, in a revision filed by the insurer, the NCDRC reversed the order awarding the claim.

5. Notice was issued in the present proceedings on 22 April 2019. The office report indicates that the insurer has been served. There is no appearance on its behalf.

6. The dispute between the parties turns on a construction of clause VIII (e) of the policy of insurance. Before adverting to the exclusions, it is necessary to extract the relevant part of the insurance policy, which reads as follows:

“In consideration of the insured named in the Schedule hereto having paid to the United India Insurance Company Limited (hereinafter called the Company) the full premium mentioned in the said schedule, the company agrees, (subject to the conditions and exclusions contained herein or endorsed or otherwise expressed hereon) that if after payment of the premium the Property insured described in the said Schedule or any part of the such property to be destroyed or damaged by any of the perils specified hereunder during the period of insurance named in the said schedule or of any subsequent period in respect of which the Insured shall have paid and the Company shall have accepted the premium required for the renewal of the policy, the Company shall pay to the Insured the value of the Property at the time of the happening of its destruction or the amount of such damage or at its option reinstate or replace such property or any part thereof.”

7. Clause VIII is in the following terms:

(a) the normal cracking, settlement or bedding down of new structures.

(b) the settlement or movement of made up ground.

(d) defective design or workmanship or use of defective materials.

(e) demolition, construction, structural alterations or repair of any property or groundworks or excavations.”

8. Clause VIII brings within the purview of the insured perils a loss, destruction or damage directly caused by subsidence of a part of the site on which the property stands or a land slide/rock slide, but excludes, what is stipulated in sub-clauses (a) to (e) thereafter. The exclusion in sub-clause (a) refers to the normal cracking, settlement or bedding down of new structures. The exclusion in clause (d) refers to defective design or workmanship or use of defective materials. The crucial exclusion is the one in sub-clause (e) which has weighed with the NCDRC. Clause (e) relates to the demolition, construction or structural alterations or repair of any property or ground-works or ex

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2020 Supreme(SC) 608

SUPREME COURT OF INDIAD.Y. CHANDRACHUD, HRISHIKESH ROY, JJ.Sangrur Sales Corporation – AppellantVersusUnited India Insurance Company Limited and Another – RespondentsCivil Appeal No. 378 of 2020, SLP (C) Nos. 47437 of 2018, 1899 of 2020Decided On : 17-01-2020

In case of ambiguity, the construction beneficial to the insured should be accepted, consistent with the purpose for which the policy was taken.

Cases Referred (1)

SUPREME COURT OF INDIA
D.Y. CHANDRACHUD, HRISHIKESH ROY, JJ.
Sangrur Sales Corporation – Appellant
Versus
United India Insurance Company Limited and Another – Respondents
Civil Appeal No. 378 of 2020, SLP (C) Nos. 47437 of 2018, 1899 of 2020
Decided On : 17-01-2020