REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4962 OF 2002

KANDIMALLA RAGHAVAIAH & CO. … APPELLANT

VERSUS

NATIONAL INSURANCE CO. & ANR. … RESPONDENTS

J U D G M E N T

D.K. JAIN, J.

1.Challenge in this Appeal under Section 23 of the Consumer

Protection Act, 1986 (“the Act”, for short) is to a common judgment

and order dated 17

th

April, 2002, passed by the National Consumer

Disputes Redressal Commission, (“the Commission”, for short) in

Original Petitions No. 97 of 1996 and 248 of 1997, whereby the

Commission has dismissed appellant’s two complaints alleging

deficiency in service against two different insurance companies on

account of non-settlement of insurance claims made by the

appellant, on the ground that both the complaints were barred by

limitation under Section 24A of the Act.

2.The salient facts giving rise to the appeal are as follows:

The appellant firm was engaged in the business of tobacco at

Chelakaluripet, Guntur District, Andhra Pradesh. They constructed

godowns in the premises of M/s Kandimalla Venkateswarlu at

Padripuram, in the same district for storage of tobacco. On 4

th

December, 1987 the appellant took out a Fire Policy ‘C’ with the

National Insurance Company — Respondent No.1 in this appeal

(subject matter of O.P. No. 248 of 1997), in the account of the Indian

Bank – Respondent No.2 herein, against loss or damage by fire etc.

for a period of 4 months from 4

th

December, 1987 to 3

rd

April, 1988 for

a sum of Rs.1,35,000/- and paid a premium of Rs.17,634/-. On 8

th

March, 1988 the appellant obtained loan from Respondent No.2 —

Indian Bank by hypothecating the tobacco stored in the godowns. In

the intervening night between 22

nd

and 23

rd

March, 1988 a fire broke

out in the godowns, allegedly due to electrical short circuit and the

entire stock of tobacco was gutted. The appellant reported the matter

to the present contesting parties, i.e., both the Insurance Company

and the Bank. On 24

th

March, 1988 a Surveyor was appointed by

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Respondent No.1 — Insurance Company, who submitted his report

on 2

nd

April, 1988.

3.However, it appears that on 23

rd

March, 1988 i.e., the date of the

incident, Respondent No.2 — the Bank lodged First Information

Report (FIR) against the appellant firm and its partners resulting in

filing of Criminal Case No.72 of 1988 against them under Sections

380, 420, 423, 436, 457, 484 read with Section 120 (B) of the

Indian Penal Code (IPC), inter alia, alleging that they had

intentionally set fire to the tobacco stocks with a view to lay a false

claim for loss of stocks. After the trial, the accused were acquitted

by the Sessions Judge, Narasaraopet on 22

nd

August, 1991.

Appeal filed by the Bank against order of acquittal was dismissed

by the High Court on 5

th

September, 1992.

4.In the meanwhile, on 14

th

July, 1988, Respondent No.2 — the Bank

preferred a claim (subject matter of the present appeal) with

Respondent No.1 — the Insurance Company for an amount of

Rs.1,32,85,760/-. It seems that the Bank did not pursue the claim.

On 6

th

November, 1992, the appellant asked for the claim form

from the Insurance Company — Respondent No.1. Having failed to

get any response, on 26

th

October, 1995 issued a legal notice to

Respondent No.1. On 4

th

January, 1996, the appellant again asked

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for claim forms but still there was no response. Ultimately, on 21

st

March 1996 the Insurance Company replied to the legal notice,

denying the factum of fire and refused to issue the ‘claim form’ on

the ground that the claim had become time-barred.

5.On 21

st

October, 1997, the appellant filed the complaint before the

Commission. Before the Commission, appellant’s case was that

they had asked for the ‘claim form’ from the insurance company on

6

th

November, 1992, which was not given although Respondent

No. 2 —Bank being a ‘co-insured’ had lodged a claim with the

Insurance Company on 14

th

July, 1988, and they were pursuing

their claim with the Insurance Company on behalf of the appellant.

Since the denial of the Insurance Company in honouring the claim

was received on 21

st

March 1996, the period of limitation to file

complaint would commence from that date and therefore, their

complaint before the Commission was well within time.

6.As noted earlier, the stand of the appellant has not found favour

with the Commission. The Commission has observed that the

cause of action occurred on the intervening night between 22

nd

/23

rd

March, 1988 when the fire broke out but the complaint was filed

only in the year 1997. The first action by the appellant was in

November 1992 i.e., after a gap of 4½ years, when the

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appellant asked for the claim form. The Commission finally held

that both the complaints were barred by limitation and therefore,

could not be entertained. According to the Commission, cause of

action could not be assumed to continue till the date of denial of

the claim. The delay in filing the complaint was obvious in both the

cases and there was not even a prayer or an application for

condonation of delay. Hence the present appeal.

7.Mr. P. Narasimha, learned senior counsel, appearing for the

appellant, argued that the Commission has erred in holding that

the complaint was barred by limitation inasmuch as it failed to

appreciate that the policy in question was a “joint policy” and

Respondent No.2 — Bank was equally responsible to make a

claim for the loss covered under the policy on account of the fire

and as a matter of fact, it did lodge a claim with the Insurance

Company as far back as on 14

th

July, 1988, but failed to pursue the

same, a clear case of dereliction and deficiency in service towards

the appellant was made out for which they cannot be made to

suffer. It was urged that at any rate non-responsiveness of the

Respondent — Insurance Company towards the legal notices

served upon them by both the appellant and the Bank and their

repeated denial to issue the claim forms also amounted to

deficiency in service towards the appellant. It was, thus, pleaded

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that the Commission has erroneously held the claim to be time-

barred when the Bank as a joint beneficiary, had preferred the

claim with Respondent No.1 —Insurance Company within time on

14

th

July, 1988, particularly when because of false complaint by the

Bank, the appellant could not file the complaint. It was asserted

that due to deficiency in service of the Insurance Company as also

the Bank, the appellant has suffered a loss to the tune of Rs.1.35

crores besides facing a civil suit by the Bank for recovery of the

loan, amounting to Rs.3 crores.

8.Mr. M.K. Dua, learned counsel appearing for Respondent No.1 —

the Insurance Company, on the other hand, supported the decision

of the Commission and submitted that the appellant’s complaint

was hopelessly time barred inasmuch as the incident took place on

23

rd

March, 1988 and complaint was filed by the appellant in the

year 1997 i.e., after a lapse of 9 years. It was pointed out that

except for intimating the Insurance Company about the fire

incident, the appellant did not lodge any formal claim, supported by

documents as was required under the terms and conditions of the

Policy. It was thus, pleaded that since no claim was made by the

appellant in terms of the policy of insurance, the question of

deficiency in service did not arise.

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9.The stand of Respondent No.2 — the Bank, in the counter affidavit

is that suit for recovery of Rs. 3.76 crores has already been filed

against the appellant which is now pending before Debt Recovery

Tribunal, Vishakhapatnam and complaint before the Commission

was by way of a counter-blast to the said proceedings. A reference

is also made to the correspondence exchanged between the

appellant and the Bank from 1988 to 1999 to show that there was

no deficiency in service on their part.

10.Thus, the short question for consideration is whether on facts at

hand, the Commission was correct in law in dismissing the

Complaint preferred by the appellant as barred by limitation?

11.Section 24A of the Act bars any fora set up under the Act, from

admitting a complaint, unless the complaint is filed within two years

from the date of which the cause of action has arisen. The

provision expressly casts a duty on the Commission, admitting a

complaint, to dismiss a complaint unless the complainant satisfies

the District Forum, the State Commission or National Commission,

as the case may be, that the complainant had sufficient cause for

not filing the complaint within the period of two years from the date

on which the cause of action had arisen.

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12.Recently, in State Bank of India Vs. B.S. Agricultural

Industries (I)

1

, this Court, while dealing with the same provision,

has held:

“8. It would be seen from the aforesaid provision that it is

peremptory in nature and requires consumer forum to see

before it admits the complaint that it has been filed within

two years from the date of accrual of cause of action. The

consumer forum, however, for the reasons to be recorded

in writing may condone the delay in filing the complaint if

sufficient cause is shown. The expression, `shall not

admit a complaint' occurring in Section 24A is sort of a

legislative command to the consumer forum to examine

on its own whether the complaint has been filed within

limitation period prescribed thereunder. As a matter of

law, the consumer forum must deal with the complaint on

merits only if the complaint has been filed within two

years from the date of accrual of cause of action and if

beyond the said period, the sufficient cause has been

shown and delay condoned for the reasons recorded in

writing. In other words, it is the duty of the consumer

forum to take notice of Section 24A and give effect to it. If

the complaint is barred by time and yet, the consumer

forum decides the complaint on merits, the forum would

be committing an illegality and, therefore, the aggrieved

party would be entitled to have such order set aside.”

[Also see: Union of India & Anr. Vs. British India

Corporation Ltd. & Ors.

2

and Haryana Urban

Development Authority Vs. B.K. Sood

3

.]

13.The term “cause of action” is neither defined in the Act nor in the

Code of Civil Procedure, 1908 but is of wide import. It has different

meanings in different contexts, that is when used in the context of

territorial jurisdiction or limitation or the accrual of right to sue.

1

JT 2009 (4) SC 191

2

(2003) 9 SCC 50

3

(2006) 1 SCC 164

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Generally, it is described as “bundle of facts”, which if proved or

admitted entitle the plaintiff to the relief prayed for. Pithily stated,

“cause of action” means the cause of action for which the suit is

brought. “Cause of action” is cause of action which gives occasion

for and forms the foundation of the suit. (See: Sidramappa Vs.

Rajashetty & Ors.

4

). In the context of limitation with reference to a

fire insurance policy, undoubtedly, the date of accrual of cause of

action has to be the date on which the fire breaks out.

14.In the case before us, as already noted, fire in the tobacco

godown took place on 22

nd

/ 23

rd

March, 1988 and the Bank, in

whose favour the stocks had been hypothecated, was informed

about it by the appellant on 23

rd

March, 1988 itself. Insofar as the

appellant is concerned, the matter rested there till 6

th

November,

1992, when for the first time, the appellant addressed the following

letter to the Insurance Company.

“To

The Branch Manager,

National Insurance Company Limited,

Chilakaluripet.

Sir,

We did business in tobacco in the name and style of

Messrs. Kandimalla Raghavaiah and Company. Our stock

belonging to 1983-84 crop was kept in a key loan to

Indian Bank was insured with your Company.

4

(1970) 1 SCC 186

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Subsequently, a fire accident occurred in the month of

March, 1988 in the premises of the Company and the

entire stock insured was gutted in the fire.

As the said stock was gutted in the fire accident and

the same was insured, we would like to make a claim

with regard to the loss insured by us due to the fire

accident.

So, you are hereby requested to give the claim

forms thereby enabling us to make a claim for the

loss occurred due to the fire accident.

Our request may kindly be considered forthwith”.

(emphasis supplied by us)

15.It is manifest from the letter that till that date the appellant had not

made any claim whatsoever with the Insurance Company for the

loss suffered in the fire on 23

rd

March, 1988. As a matter of fact,

only on 6

th

November, 1992 they, for the first time, asked for supply

of “claim forms” in order to prefer a claim. By that time period of

limitation for the purpose of Section 24A of the Act had expired.

Further, even thereafter, everything was quiet at both ends till 16

th

August, 1995 when the respondent — Bank, seemingly on the

request of the appellant, confirmed to the appellant that they had

preferred claim for the loss on 14

th

July, 1988 (Annexure P-7). On

26

th

October, 1995, the appellant got a legal notice issued to the

Insurance Company — Respondent No.1, narrating sequence of

events leading to their prosecution at the instance of the Bank and

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their ultimate acquittal and dismissal of Bank’s appeal in the year

1992. The relevant portion of the legal notice reads as follows:

“5.And that thereafter my client addressed several

letters to the authorities of National Insurance

Company with a request to send the claim forms to

enable my client to prefer claim under the policy.

6.And that in spite of repeated requests neglecting

the customary services failed to attend and did not

send the claim form on request.”

16.The legal notice was followed by yet another legal notice dated 4

th

January, 1996 which was also on similar lines. Vide reply dated

21

st

March, 1996 to the legal notice, the Insurance Company

refuted the claim made by the appellant. For the sake of ready

reference, the material portion of the reply by the Insurance

Company is extracted below:

“From the material available and from the information

secured, it became evident that your client, unable to

dispose of the old stocks, unable to discharge the

mounting debt to Indian Bank, resorted to

mischievous and criminal acts i.e. shifting the

tobacco stocks from their godowns and intentionally

set fire to the tobacco stocks after substitution by

inferior quality tobacco either wholly or in part with a

view to lay a false claim for loss of the stocks against

my clients. The various methods and acts indulged in

by your clients constitute a flagrant violation of the

terms and conditions of the policy. Probably realizing

that the acts and methods adopted by them, as

stated above, constitute flagrant violation of the

terms and conditions, your clients have given quietus

to the matter by keeping quiet all these years. Your

client is totally disentitled for any claim for alleged

1

1

loss against my client under policy obtained from

them. The claim for loss alleged to have been

sustained by your client, after a lapse of seven

years is totally barred by limitation and is futile in

any respect. Under these circumstances, sending

claim forms to your clients as requested in your

notice does not arise.

My clients further state that in case your client

sustained any loss in the year 1988 under the

scope of the policy, your client should have

established such loss alleged to have been

sustained thereon and pursued (sic) the matter

well within time to enable my clients to act

appropriately instead of asking for issuance of

claim form at such a belated stage.”

(Emphasis supplied)

17.Although it is not clear from the record as to when the said reply

was received by the appellant, but the complaint by the appellant

seems to have been filed before the Commission on or after 24

th

October, 1997.

18.It is, therefore, clear from the aforenoted correspondence between

the appellant and the Insurance Company that cause of action in

respect of the special insurance policy arose on 22

nd

/ 23

rd

March,

1988, when fire in the godown took place damaging the tobacco

stocks hypothecated with the Bank in whose account the policy

had been taken by the appellant. Thus, the limitation for the

purpose of Section 24A of the Act began to run from 23

rd

March,

1988 and therefore, the complaint before the Commission against

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2

the Insurance Company for deficiency in service, whether for non

issue of claim forms or for not processing the claim under the

policy, ought to have been filed within two years thereof. As

noticed above, the complaint was in fact filed on or after 24

th

October, 1997, which was clearly barred by time. It is pertinent to

note that in the complaint before the Commission, though there

was an averment that the Bank had not disclosed to the appellant

whether any amount had been received by them from the

Insurance Company against the claim preferred on 14

th

July, 1988,

but appellant’s categorical stand therein was that it was because of

the pendency of the criminal litigation that they could not make a

claim in respect of the policy for the loss suffered and time and

again they had been requesting the Insurance Company to send

the claim forms, which request was not acceded to by the

Insurance Company, and it shows that the appellant was not

depending on the claim stated to have been made by the Bank

with the Insurance Company.

19.A bare reading of the impugned order shows that all these factual

aspects have been duly taken into consideration by the

Commission and we are in complete agreement with the finding by

the Commission that the filing of claim by the Bank on 14

th

July,

1988, would not have, in any way, helped the appellant. On their

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3

own showing, for the first time, only on 6

th

November, 1992 and

then again on 26

th

October, 1995, the appellant had requested the

Insurance Company to issue claim form to enable them to prefer a

claim which request was declined by the Insurance Company on

21

st

March, 1996. By no stretch of imagination, it can be said that

Insurance Company’s reply dated 21

st

March, 1996 to the legal

notice dated 4

th

January, 1996, declining to issue the forms for

preferring a claim after a lapse of more than four years of the date

of fire, resulted in extending the period of limitation for the purpose

of Section 24A of the Act. We have no hesitation in holding that

the complaint filed on 24

th

October, 1997 and that too without an

application for condonation of delay was manifestly barred by

limitation and the Commission was justified in dismissing it on that

short ground.

20.For the foregoing reasons, we do not find any merit in this appeal.

It is dismissed accordingly with costs.

…………………………………...J.

(D.K. JAIN)

..……………………………………J.

(R.M. LODHA)

NEW DELHI;

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JULY 10, 2009.

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