1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1069 OF 2022

JAINA CONSTRUCTION COMPANY .... APPELLANT

VERSUS

THE ORIENTAL INSURANCE COMPANY

LIMITED & ANR. .... RESPONDENTS

J U D G M E N T

BELA M. TRIVEDI, J.

1. The present appeal is directed against the impugned order dated 9

th

September, 2016 passed by the National Consumer Disputes Redressal

Commission, New Delhi (hereinafter referred to as “the NCDRC”) in

Revision Petition No. 1104 of 2016 whereby the NCDRC while allowing

the said Revision Petition filed by Respondent No. 1-Insurance Company,

has set aside the order dated 16

th

December, 2015 passed by the State

Consumer Disputes Redressal, Commission, Haryana at Panchkula and

2

the order dated 26

th

February, 2015 passed by the District Consumer

Disputes Redressal Forum, Gurgaon.

2. Heard Mr. Avinash Lakhanpal, learned counsel appearing on behalf of the

appellant. None has entered appearance on behalf of the respondents though

duly served.

3. The precise question that falls for consideration before this Court is -

whether the Insurance Company could repudiate the claim in toto, made

by the owner of the vehicle, which was duly insured with the insurance

company, in case of loss of the vehicle due to theft, merely on the ground

that there was a delay in informing the company regarding the theft of

vehicle?

4. The undisputed facts transpiring from the record are that the vehicle in

question i.e., Tata Aiwa Truck bearing Registration No. RJ-02-098177

was purchased by the appellant on 31.10.2007. The said vehicle was duly

insured with Respondent No. 1- Insurance Company. The said vehicle was

robbed by some miscreants on 04.11.2007. Consequently, an FIR was

registered by the appellant-complainant on 05.11.2007 for the offence

under Section 395 IPC at Police Station Nagina, District Mewat

(Haryana). The police arrested the accused and also filed the challan

against them in the concerned Court, however, the vehicle in question

could not be traced and, therefore, the police filed untraceable report on

23.08.2008. Thereafter, the complainant lodged the claim with the

3

Insurance Company with regard to the theft of the vehicle in question. The

Insurance Company, however, failed to settle the claim within a

reasonable time, and therefore, the appellant-complainant filed a

complaint being the Consumer Complaint No. 63 of 2010 before the

District Consumer Disputes Redressal Forum, Gurgaon.

5. It may be noted that during the pendency of the complaint before the

District Forum, the respondent no.1- Insurance Company repudiated the

claim of the complainant vide its letter dated 19.10.2010, stating inter alia

that there was a breach of condition no. 1 of the policy which mandated

immediate notice to the insurer of the accidental loss/damage, and that the

complainant had intimated about the loss on 11.04.2008 i.e. after the lapse

of more than five months and, therefore, the Insurance Company had

disowned their liability on the claim of the complainant.

6. The District Forum allowed the said claim of the complainant by holding

that the complainant was entitled to the insured amount on non-standard

basis, i.e., Rs. 12,79,399/- as 75% of the IDV i.e., Rs. 17,05,865/- with

interest @ 6% p.a. from the date of filing of the complaint till realization

from the Insurance Company. The District Forum also awarded

compensation of Rs.10,000/- and litigation expenses of Rs.5,000/- to the

complainant. The aggrieved Insurance Company preferred an appeal

being Appeal No. 612 of 2015 before the State Consumer Disputes

Redressal Commission (Haryana), Panchkula. The complainant also

4

preferred an appeal being Appeal No. 537 of 2015 seeking enhancement

of compensation. The State Commission dismissed the appeal filed by the

Insurance Company and partly allowed the appeal filed by the

complainant by increasing rate of interest awarded by the District Forum

from 6% to 9% vide the Judgment and Order dated 16.12.2015. The

aggrieved Insurance Company preferred the Revision Petition before the

NCDRC which came to be allowed as stated hereinabove.

7. Since the respondent no.1 - Insurance Company has repudiated the claim

of the complainant on the ground that the complainant had committed the

breach of Condition No. 1 of the Insurance Contract, it would be beneficial

to reproduce the said condition, which reads as under:

“1. Notice shall be given in writing to the company

immediately upon the occurrence of any accidental

loss or damage in the event of any claim and

thereafter the insured shall give all such

information and assistance as the company shall

require. Every letter, claim, writ, summons and/or

process or copy thereof shall be forwarded to the

company immediately on receipt by the insured.

Notice shall also be given in writing to the company

immediately the insured shall have knowledge of

any impending prosecution, inquest or fatal inquiry

in respect of any occurrence which may give rise to

a claim under this policy. In case of a major loss,

theft or criminal act which may be the subject of a

claim under this policy the insured shall give

immediate notice to the police and co-operate with

5

the company in securing the conviction of the

offender.”

8. At the outset, it may be noted that there being a conflict of decisions of

the Bench of two Judges of this Court in case of Om Prakash vs. Reliance

General Insurance & Another and in case of Oriental Insurance

Company Limited vs. Parvesh Chander Chadha, on the question as to

whether the delay occurred in informing the Insurance Company about the

occurrence of the theft of the vehicle, though the FIR was registered

immediately, would disentitle the claimant of the insurance claim, the

matter was referred to a three Judge Bench. The three Judge Bench in case

of Gurshinder Singh vs. Shriram General Insurance Company Ltd. &

Another reported in 2020 (11) SCC 612 in similar case as on hand,

interpreted the very condition no. 1 of the Insurance Contract and observed

as under:

“9. We are of the view that much would depend

upon the words “cooperate” and “immediate”, in

Condition 1 of the standard form for commercial

vehicles package policy. Before we analyse this case

any further, we need to observe the rules of

interpretation applicable to a contract of insurance.

Generally, an insurance contract is governed by the

rules of interpretation applicable to the general

contracts. However, due to the specialised nature of

contract of insurance, certain rules are tailored to

suit insurance contracts. Under the English law, the

development of insurance jurisprudence is given

6

credence to Lord Mansfield, who developed the law

from its infancy. Without going much into the

development of the interpretation rules, we may

allude to Neuberger, J. in Arnold v. Britton, which

is simplified as under:

(1) Reliance placed in some cases on

commercial common sense and

surrounding circumstances was not to

be invoked to undervalue the

importance of the language of the

provision which is to be construed.

(2) The less clear the words used were, the

more ready the court could properly be

to depart from their natural meaning,

but that did not justify departing from

the natural meaning.

(3) Commercial common sense was not to

be invoked retrospectively, so that the

mere fact that a contractual

arrangement has worked out badly, or

even disastrously, for one of the parties

was not a reason for departing from the

natural language.

(4) A court should be very slow to reject

the natural meaning of a provision as

correct simply because it appeared to be

a very imprudent term for one of the

parties to have agreed.

(5) When interpreting a contractual

provision, the court could only take into

account facts or circumstances which

7

existed at the time that the contract was

made and which were known or

reasonably available to both parties.

(6) If an event subsequently occurred

which was plainly not intended or

contemplated by the parties, if it was

clear what the parties would have

intended, the court would give effect to

that intention.

10. A perusal of the aforesaid shows that this

contract is to be interpreted according to the context

involved in the contract. The contract we are

interpreting is a commercial vehicle package policy.

There is no gainsaying that in a contract, the

bargaining power is usually at equal footing. In this

regard, the joint intention of the parties is taken into

consideration for interpretation of a contract.

However, in most standard form contracts, that is

not so. In this regard, the court in such

circumstances would consider the application of the

rule of contra proferentem, when ambiguity exists

and an interpretation of the contract is preferred

which favours the party with lesser bargaining

power.

11. It is argued on behalf of the respondents and

rightly so, that the insurance policy is a contract

between the insurer and the insured and the parties

would be strictly bound by the terms and conditions

as provided in the contract between the parties.

12. In our view, applying the aforesaid principles,

Condition 1 of the standard form for commercial

vehicles package policy will have to be divided into

two parts. The perusal of the first part of Condition

8

1 would reveal that it provides that “a notice shall be

given in writing to the company immediately upon

the occurrence of any accidental loss or damage”. It

further provides that in the event of any claim and

thereafter, the insured shall give all such

information and assistance as the company shall

require. It provides that every letter, claim, writ,

summons and/or process or copy thereof shall be

forwarded to the insurance company immediately

on receipt by the insured. It further provides that a

notice shall also be given in writing to the company

immediately by the insured if he shall have

knowledge of any impending prosecution inquest or

fatal inquiry in respect of any occurrence, which

may give rise to a claim under this policy.

13. A perusal of the wordings used in this part would

reveal that all the things which are required to be

done under this part are related to an occurrence of

an accident. On occurrence of an accidental loss,

the insured is required to immediately give a notice

in writing to the company. This appears to be so that

the company can assign a surveyor so as to assess

the damages suffered by the insured/vehicle. It

further provides that any letter, claim, writ,

summons and/or process or copy thereof shall be

forwarded to the company immediately on receipt by

the insured. As such, the intention would be clear.

The question of receipt of letter, claim, writ,

summons and/or process or copy thereof by the

insured, would only arise in the event of the criminal

proceedings being initiated with regard to the

occurrence of the accident. It further provides that

the insured shall also give a notice in writing to the

company immediately if the insured shall have the

knowledge of any impending prosecution inquest or

fatal inquiry in respect of any occurrence which

9

may give rise to a claim under this policy. It will

again make the intention clear that the immediate

action is contemplated in respect of an accident

occurring to the vehicle.

14. We find that the second part of Condition 1 deals

with the “theft or criminal act other than the

accident”. It provides that in case of theft or

criminal act which may be the subject of a claim

under the policy, the insured shall give immediate

notice to the police and cooperate with the company

in securing the conviction of the offender. The

object behind giving immediate notice to the police

appears to be that if the police is immediately

informed about the theft or any criminal act, the

police machinery can be set in motion and steps for

recovery of the vehicle could be expedited. In a case

of theft, the insurance company or a surveyor would

have a limited role. It is the police, who acting on the

FIR of the insured, will be required to take

immediate steps for tracing and recovering the

vehicle. Per contra, the surveyor of the insurance

company, at the most, could ascertain the factum

regarding the theft of the vehicle.

15. It is further to be noted that, in the event, after

the registration of an FIR, the police successfully

recovering the vehicle and returning the same to the

insured, there would be no occasion to lodge a claim

for compensation on account of the policy. It is only

when the police are not in a position to trace and

recover the vehicle and the final report is lodged by

the police after the vehicle is not traced, the insured

would be in a position to lodge his claim for

compensation.

16. ……………………

10

17. That the term “cooperate” as used under the

contract needs to be assessed in the facts and

circumstances. While assessing the “duty to

cooperate” for the insured, inter alia, the court

should have regard to those breaches by the insured

which are prejudicial to the insurance company.

Usually, mere delay in informing the theft to the

insurer, when the same was already informed to the

law enforcement authorities, cannot amount to a

breach of “duty to cooperate” of the insured.

18. ……………

19. …………..

20. We, therefore, hold that when an insured has

lodged the FIR immediately after the theft of a

vehicle occurred and when the police after

investigation have lodged a final report after the

vehicle was not traced and when the

surveyors/investigators appointed by the insurance

company have found the claim of the theft to be

genuine, then mere delay in intimating the

insurance company about the occurrence of the

theft cannot be a ground to deny the claim of the

insured.”

9. In the opinion of the Court the afore-stated ratio of the judgment clinches

the issue involved in the case on hand. In the instant case also, the FIR

was lodged immediately on the next day of the occurrence of theft of the

vehicle by the complainant. The accused were also arrested and charge-

sheeted, however, the vehicle could not be traced out. Of course, it is true

that there was a delay of about five months on the part of the complainant

11

in informing and lodging its claim before the Insurance Company,

nonetheless, it is pertinent to note that the Insurance Company has not

repudiated the claim on the ground that it was not genuine. It has

repudiated only on the ground of delay. When the complainant had lodged

the FIR immediately after the theft of the vehicle, and when the police

after the investigation had arrested the accused and also filed challan

before the concerned Court, and when the claim of the insured was not

found to be not genuine, the Insurance Company could not have

repudiated the claim merely on the ground that there was a delay in

intimating the Insurance Company about the occurrence of the theft.

10. In that view of the matter, the Court is of the opinion that the NCDRC

should not have set aside the orders of the District Forum and the State

Commission by holding that the repudiation of the insurance claim by the

insurance company was justified. The impugned order being erroneous

and against the settled position of law, deserves to be set aside, and is set

aside, accordingly.

11. The appeal is allowed, affirming the order of the State Commission.

.................................J.

[SANJIV KHANNA]

NEW DELHI ..............................J.

11.02.2022 [BELA M. TRIVEDI]