New India Assurance Company Ltd. vs Hemkund Duplex and Board Pvt. Ltd.

Headnote:(A) Insurance Act, 1938 - Section 64UM - Consumer Protection Act, 1986 - Section 2(1)(g) - Fire insurance claim - Appointment of approved surveyor - Requirement for claims exceeding twenty thousand rupees - Surveyor's report is a pre-requisite for settlement but is not sacrosanct, conclusive, or binding upon the insurer or the insured (Paras 18, 20) - Discretion of the insurer to reject a surveyor's report must not be exercised arbitrarily or whimsically (Para 21) - Appointment of a second surveyor requires the insurer to specify cogent reasons (Para 22).

(B) Repudiation of claim - Arson and Fraud - Reasonable cause to suspect that the insured may have been the instigator of the fire or that the claim is fraudulent - If an insured makes false averments to bolster a claim, contrary to policy conditions, the insurer is lawfully entitled to reject such claim (Paras 26, 32).

Facts of the case:
A claim was filed under fire insurance policies for stock and buildings after a fire occurred in a factory yard. Multiple reports from the preliminary surveyor, an investigative agency, and the final surveyor highlighted several abnormalities: an abnormal delay in notifying the fire brigade, lack of sincere efforts to extinguish the fire, evidence that the structure had been demolished by a JCB prior to the fire, and manipulated books of accounts depicting imaginary yields to inflate the claim. The insurer repudiated the claim citing violations of policy conditions regarding honest disclosure and the prohibition of fraudulent declarations.

Findings of Court:
The repudiation of the claim was sustainable as policy conditions requiring honest and full disclosure and the avoidance of false declarations were breached. Evidence from workers contradicted management's claims regarding the nature of stock stored in the affected area, revealing that only unusable scrap, and not usable raw material, was stored there. Furthermore, financial records were found to be arbitrary and manipulated to create hypothetical book stock.

Issues: Whether the insurer was justified in repudiating the claim in its entirety based on surveyor reports and findings of breach of policy conditions.

Ratio Decidendi: The court ruled that when an insured makes false declarations to bolster a claim in violation of policy conditions, the insurer is lawfully entitled to reject the claim. A consumer forum is not justified in brushing aside detailed surveyor reports that negate the genuineness of a claim on factual grounds without providing a reasonable basis (Paras 34).

Result: Appeal allowed.

Legal Category Hierarchy

1. Appeal against NCDRC order directing insurance payment on fire policy — Repudiation of claim based on fraudulent declarations. (Para 1 , 2 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 )

2. Insurer contended claim was fraudulent with manipulated books; insured argued cause of fire immaterial and claim genuine. (Para 2 , 10 , 12 , 15 , 16 , 17 , 26 )

3. Surveyor reports showed false declarations, breach of policy conditions, suspicious delay, and lack of bonafide firefighting efforts. (Para 15 , 16 , 17 , 28 , 29 , 30 , 31 , 32 , 33 )

4. If insured makes false averments violating policy conditions on honest disclosure and false declarations, insurer may reject claim. (Para 31 , 32 , 34 )

5. Appeal allowed; NCDRC order set aside; insured's appeal dismissed; deposited amount returned to insurer. (Para 35 )

6. Can an insurer reject a claim based on a surveyor's report that finds inflated claims and manipulated records?

Yes, if the surveyor's report establishes breach of policy conditions requiring honest disclosure and barring false declarations, rejection is justified. (Para 31 , 32 , 34 )

7. What evidence vitiates an insured’s fire insurance claim on grounds of fraud?

False declarations about stock, contradictory statements by employees, inability to correlate books with physical stock, and suspicious delay in informing fire brigade. (Para 15 , 16 , 17 , 28 , 29 , 32 , 33 )

8. Is a surveyor’s report binding on the insurer or the insured?

No, it is not the last word. But the insurer’s discretion to reject it must be exercised with cogent reasons, not arbitrarily. (Para 20 , 21 )

9. Does an insured’s failure to make sincere firefighting efforts affect insurance claim validity?

Yes, lack of bonafide efforts to minimize loss, like delayed calling fire brigade and ineffective sprinkling, can support repudiation. (Para 28 , 29 )

10. What is the effect of false declarations supporting an insurance claim under policy conditions?

Under standard fire policies, making false declarations in support of a claim can lead to forfeiture of all benefits under the policy. (Para 31 , 32 )

JUDGMENT :

SANJAY KUMAR, J

1. M/s. New India Assurance Company Ltd., the appellant in Civil Appeal No. 7221 of 2025, assails the order dated 19.11.2024 passed by the National Consumer Disputes Redressal Commission¹[For short, ‘the NCDRC’], New Delhi, in Consumer Complaint No. 66 of 2011, whereby it was directed to pay a sum of Rs.2,40,00,000/- to M/s. Hemkund Duplex and Board Pvt. Ltd., the respondent therein, with interest thereon within 45 days of the order, failing which the amount payable was to carry higher interest @ 12% per annum from the date of expiry of 45 days till the date of actual payment. Further, it was directed to pay compensation of Rs.3,00,000/- for deficiency in service, on account of inordinate delay in settling the claim, along with litigation costs of Rs.1,00,000/-. While so, unsatisfied with the order dated 19.11.2024 of the NCDRC and the quantum of compensation awarded to it thereunder, the respondent filed Civil Appeal No. 11416 of 2025.

2. The claim put forth by the respondent, M/s. Hemkund Duplex and Board Pvt. Ltd., the complainant in Consumer Complaint No. 66 of 2011, was for compensation of Rs.7,31,31,096.78, with interest @18% per annum, apart from other damages, on the strength of two fire insurance policies that it had with the appellant insurance company.

3. Parties are referred to as arrayed in Civil Appeal No. 7221 of 2025.

4. The respondent took over a sick unit in the year 2005 and took up its manufacture of paper boards, etc., ostensibly using waste paper, boards, Hessian bags, hay, medicine wrappers, packaging material, cuttings of egg trays and old waste, coloured and white paper cuttings, etc., as raw material. The factory of the respondent at Najibabad consisted of an open yard and three godowns, i.e., two pucca godowns and one tin shed. It insured its stock and buildings with the appellant under two separate fire policies. The fire policy for the stock was for a sum of Rs.13,00,00,000/- and the coverage was from 30.12.2008 to 29.12.2009. The fire policy for the buildings, plant and machinery was for a sum of Rs.14,00,00,000/- and the coverage was from 28.02.2009 to 27.02.2010.

5. While so, on 07.05.2009, at about 1.30 pm, a fire is stated to have broken out in the waste paper yard inside the factory of the respondent, resulting in damage to the raw material and to the tin shed. Anil Kumar, a supervisor, was stated to be the first person who saw the fire in the tin shed and told Gagandeep Singh, the Vice President of the respondent, who informed the fire brigade and the police. The fire brigade is stated to have arrived at around 2.30 pm. The appellant was also informed on the very same day. R.C. Bajpai was appointed by the appellant as a preliminary surveyor on 08.05.2009 and he carried out an inspection. On 09.05.2009, the respondent lodged its claim with the appellant.

6. However, by his report dated 24.06.2009, R.C. Bajpai stated that the case required meticulous investigation to rule out the possibility of a deliberate fire and hypothetical loss. Having said so, he tentatively assessed the net loss of the stock and building at Rs.56,46,681/-. The appellant then brought in Royal Associates, an investigative and detective agency, which filed a report on 02.03.2010. It opined that the date and time of the fire seemed genuine, but the cause of the fire was not clear; the tin shed was in an isolated place inside the factory and workers rarely visited it; there was no chance of anybody throwing an ignited beedi/ cigarette in the godown, as smoking was prohibited inside the factory; even throwing of ignited material from outside the factory was remote, as it was covered with a roof and there was a boundary wall of sufficient height around the factory; and there seemed to be no usable stock inside the tin shed. The fire station was informed one hour after the fire though it was just 06-07 kms away from the factory but the respondent did not bother to send someone. The appellant was advised to

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2026 Supreme(SC) 1151

SUPREME COURT OF INDIA
Sanjay Kumar, Sanjeev Sachdeva, JJ.
M/s. New India Assurance Company Ltd. – Appellant
Versus
M/s. Hemkund Duplex and Board Pvt. Ltd. – Respondent
Civil Appeal No. 7221 of 2025 With Civil Appeal No. 11416 of 2025
Decided On : 21-09-2026

An insurer is lawfully entitled to repudiate a claim if the insured violates policy conditions by making false declarations or fraudulent statements to bolster the claim, particularly when supported by surveyor reports indicating arson or financial manipulation.

Legal Category Hierarchy

Table of Contents

6. Can an insurer reject a claim based on a surveyor's report that finds inflated claims and manipulated records?

7. What evidence vitiates an insured’s fire insurance claim on grounds of fraud?

8. Is a surveyor’s report binding on the insurer or the insured?

9. Does an insured’s failure to make sincere firefighting efforts affect insurance claim validity?

10. What is the effect of false declarations supporting an insurance claim under policy conditions?

Judicial Analysis

2026 Supreme(SC) 1151

SUPREME COURT OF INDIASanjay Kumar, Sanjeev Sachdeva, JJ.M/s. New India Assurance Company Ltd. – AppellantVersusM/s. Hemkund Duplex and Board Pvt. Ltd. – RespondentCivil Appeal No. 7221 of 2025 With Civil Appeal No. 11416 of 2025Decided On : 21-09-2026

An insurer is lawfully entitled to repudiate a claim if the insured violates policy conditions by making false declarations or fraudulent statements to bolster the claim, particularly when supported by surveyor reports indicating arson or financial manipulation.

Legal Category Hierarchy

Table of Contents

6. Can an insurer reject a claim based on a surveyor's report that finds inflated claims and manipulated records?

7. What evidence vitiates an insured’s fire insurance claim on grounds of fraud?

8. Is a surveyor’s report binding on the insurer or the insured?

9. Does an insured’s failure to make sincere firefighting efforts affect insurance claim validity?

10. What is the effect of false declarations supporting an insurance claim under policy conditions?

Cases Referred (7)

Judicial Analysis

SUPREME COURT OF INDIA
Sanjay Kumar, Sanjeev Sachdeva, JJ.
M/s. New India Assurance Company Ltd. – Appellant
Versus
M/s. Hemkund Duplex and Board Pvt. Ltd. – Respondent
Civil Appeal No. 7221 of 2025 With Civil Appeal No. 11416 of 2025
Decided On : 21-09-2026