2026 INSC 1023 Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal No. 7221 of 2025

M/s. New India Assurance Company Ltd. … Appellant

versus

M/s. Hemkund Duplex and Board Pvt. Ltd. … Respondent

with

Civil Appeal No. 11416 of 2025

J U D G M E N T

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 Commission

1

, New Delhi, in

Consumer Complaint No. 66 of 2011, whereby it was directed to pay a

sum of ₹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.

1

For short, ‘the NCDRC’

2

Further, it was directed to pay compensation of ₹3,00,000/- for deficiency

in service, on account of inordinate delay in settling the claim , along with

litigation costs of ₹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 ₹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

₹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

₹14,00,00,000/- and the coverage was from 28.02.2009 to 27.02.2010.

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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 ₹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

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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 deal with the claim

as per the terms and conditions of the policy in view of these findings.

7. The appellant appointed Aditi Consultants Pvt. Ltd. as the final

surveyor. Final survey report dated 13.03.2010 was submitted by it.

Therein, it noted that Anil Kumar, the supervisor, claimed to have seen the

fire at 1.35 pm on 07.05.2009 and he informed Gagandeep Singh, the

Vice President, on his mobile phone. Anil Kumar claimed that a hose pipe

was plugged in to the fire hydrant adjacent to the yard and attempts were

made to extinguish the fire. Gagandeep Singh, the Vice President,

claimed that he c ame to the waste paper yard immediately and on the

way, he tried to call the fire brigade @ 101 from his mobile number but it

did not go through. He then called one Anas in the office on his mobile

and asked him to call the fire brigade using the landline. However, the

landline was not working on that day. Gagandeep Singh claimed to have

somehow traced out the mobile number of the fire brigade officer and

sought help and, thereafter, the fire brigade arrived at the site.

8. Reference was made by Aditi Consultants Pvt. Ltd. to the fire

brigade’s report dated 20.06.2009, wherein it was noted that, though the

fire started at 13.35 hours on 07.05.2009, information was received by the

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fire station from Gagandeep Singh only at 14.25 hou rs. The fire brigade

arrived at the location at 14.36 hours. The distance from the fire station

was stated to be 7 kilometers and the cause of the fire was unknown. The

detailed description, as per the fire brigade’s report, reads to the effect

that the fire was in the waste paper yard where the staff of the factory was

sprinkling water through a hose pipe from a hydrant installed in the factory.

It was noted that the respondent could not provide the cause for the fire

but it was observed that there was no electric connection at the waste

paper yard and, as such, the fire originating from a short circuit was ruled

out; as smoking was prohibited, the possibility of the fire originating from

a beedi/cigarette was also ruled out; there was a delay of one hour in

informing the fire station; the tin shed had tilted and it was noticed in the

depiction of the state of the shed when the fire brigade arrived.

9. It was observed by Aditi Consultants Pvt. Ltd that, ordinarily, when

such a large quantity got burnt, the shed would have gotten destroyed and

would have collapsed from the center, with sheets getting blown away, but

the condition of the tin sheet s did not depict such massive damage, as

many of them had not even darkened. It was also noted that, as per the

investigation, the shed was destroyed with the help of a JCB a few days

prior to the fire. Further, substantial remnants of Hessian bags were

noticed, but no record of the same were available in the books of

accounts. It was, accordingly, concluded that the accurate cause of the

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fire remained unestablished and no evidence had been adduced to hold

that this was an accidental fire. Having said so, Aditi Consultants Pvt. Ltd

computed the net loss for the damaged waste paper at ₹34,59,189/-.

Therefore, with the net loss for the tin shed, computed at ₹11,50,534/-, the

total loss was quantified at ₹46,09,722/-. It was, however, observed that

the respondent had filed a claim which was substantially higher than the

loss suffered as it had manipulated the books of accounts to inflate the

claim, in violation of the condition in the insurance policy with regard to

making a false declaration. The appellant was advis ed to deal with the

claim as per the terms and conditions of the policy.

10. The appellant repudiated the respondent’s claim, vide letter dated

28.06.2010. Therein, it stated that the respondent had tried to manipulate

the books of accounts to inflate the claim, in violation of Policy Condition

No. 06. Referring to the survey report, the appellant stated that the tin

shed had been broken down before the fire; the chance of the fire due to

a short circuit was nil; the fire station was informed about one hour late,

though it was just 6 kilometers away from the factory; and the cause of

the fire was doubtful. It also asserted that the respondent was not able to

sustain the loss claimed; the stock record was not proper; the yield

reported was imaginary; and it could be safely concluded that the books

of accounts were manipulated to take undue advantage, as the

transactions were simply book entries, in clear violation of Policy

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Condition No.8, which spoke of a false declaration made in support of a

claim leading to forfeiture of the benefits due under the policy.

11. Faced with the aforestated facts, the NCDRC opined that as the

cause of the fire was unknown, the onus was not upon the respondent to

prove the cause therefor or the genuineness of the fire. Further , the

NCDRC was of the opinion that there was no deliberate delay on the part

of the respondent in informing the fire brigade. The NCDRC concluded

that there was no reason to doubt the respondent’s claim and benefit had

to be extended to it. It, accordingly, went on to assess the respondent’s

claim on merits with regard to the stock, on the one hand, and the building,

on the other. The claim in this regard, so far as the stock (waste paper)

was concerned, amounted to ₹7.70 crore (affected stock being ₹9.50

crore, less the saved stock of ₹1.80 crore) and for the building, it was

₹0.75 crore. In all, the respondent’s claim was for ₹8.45 crore. However,

the revised details of loss submitted by the respondent on 22.06.2009

indicated that 15,172.1291 metric tons of waste paper stock had been

destroyed, valued at ₹4289.43 per metric ton, aggregating to a loss of

₹6,50,79,847/- along with damages quantified at ₹80,51,250/- in the

context of the building, totaling to ₹7,31,31,897/-.

12. In the context of the claims made by the respondent , the appellant

contended before the NCDRC that the respondent was incurring business

losses and appeared to have been declaring profits by showing income

8

through speculation, not related to trade. Further, it pointed out that the

working capital limit had been enhanced in August, 2008, whereby the

stock level and debtors level increased abnormally, not in agreement with

the books. Further, the stock levels reported in the stock statement were

not reliable and it appeared that the books were being manoeuvred to

avail huge limits and the transactions were just book entries. Various

details were furnished by the appellant with regard to the accounts of the

respondent. However, the NCDRC went on to assess the loss in relation

to the stock and the building, resulting in its final directions, as set out

supra. Aggrieved thereby, the appellant filed Civil Appeal No.7221 of 2025 .

With delay in refiling, the respondent filed Civil Appeal No.11416 of 2025.

13. By order dated 23.05.2025 in Civil Appeal No.7221 of 2025, this

Court stayed the operation of the order passed by the NCDRC, subject to

the appellant depositing a sum of ₹50,00,000/- with the Registry. This

amount was directed to be placed in an interest-bearing fixed deposit with

a nationalized bank for a period of six months with an auto renewal clause.

14. The first and foremost issue that requires to be addressed is

whether the appellant was justified in repudiating the respondent’s claim

at the threshold in its entirety. It is only if the appellant fails on this count

that the need would arise for this Court to evaluate the assessment by the

NCDRC of the loss allegedly suffered by the respondent in relation to its

stock and building.

9

15. On the aforestated crucial preliminary issue, we find that the facts

weigh heavily against the respondent .

R.C. Bajpai, the preliminary

surveyor, was highly critical of the respondent’s claims in his report dated

24.06.2009. He highlighted the fact that the respondent was constantly

changing its stand as to the extent of the loss it had suffered, as it informed

the media of a loss of ₹15 crore while a loss of ₹10 crore was reported to

the appellant but the loss, as per the claim form, was ₹8.45 crore which

was then reduced to ₹7.31 crore. He opined that Anil Kumar appeared to

be a fabricated eyewitness. He noted that there was no electric connection

or other possible cause for origin of the fire. He observed that there was

no possibility of an ignited beedi/ cigarette being the cause as the yard was

located at an isolated place and the workers rarely visited it. He noted that

mostly female labour was deployed at the yard for sorting out the material;

that smoking was strictly prohibited inside the factory compound; and

nobody was found smoking in the entire area. Further, he noted that there

was no sign of heat or smoke on the tin (GI) sheets, except on the sheets

at the back side of the yard. According to him, this confirmed that either

there was no stacking of material in approximately 25% of the area or the

stacking was to a very low height. Lastly, he noted that there was no

conductor due to which the fire could have spread to the duplex bags

stored at a distance of 20 to 25 feet, without having affected the grass in

between, as the grass was found fresh at the time of his physical

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verification. He also noted that, as per the video recording and the

photographs taken at the time of the fire extinguishing operations, the

respondent’s loss minimization efforts were not bonafide as it was found

that its employees were sprinkling water either on the roof or on the

ground outside the yard but not on the fire. He also noted that, had 15,000

metric tons of paper been burnt in that fire, it would have been more

devastating and would have required far more efforts to extinguish it, as

the total structure of the yard would have collapsed due to intense heat.

The other issues flagged by him in the report pertained to the irregularities

in bookkeeping and the accounts as regards the stock and sales. His

conclusion was that there were abnormalities regarding the cause of fire,

collapse of the shed and serious deviations shown by the substantial

decrease in raw material consumption and abnormal increase in yield.

Moreover, on correlation of the records submitted by the respondent and

the actual physical stocktaking, he found that the stock was created in the

books which did not have actual corresponding existence. He said the

quantity of stock found during physical verification was far less than the

book stock and even the purchase bills submitted to substantiate the loss

were a total mismatch, being inconsistent with the material found on

verification. Therefore, considering the several abnormalities in the case,

the surveyor concluded that it needed to be investigated meticulously to

rule out any possibility of a deliberate fire and a hypothetical loss.

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16. The report dated 02.03.2010 of Royal Associates, the investigative

and detective agency, wa s equally adverse to the respondent. It was

noted therein that the respondent could not tell the cause of the fire and

as per the information gathered from the workers and upon inspection of

the factory, it was found that the tin shed was situated in an area away

from the working place and no one used to routinely visit the tin shed. It

noted that, as smoking was strictly prohibited in the factory, there was no

chance of someone throwing ignited material. The tin shed was far away

from the working place and throwing of such material from outside the

factory was not possible. As there was no electricity connection also in the

tin shed, it was opined that the cause of the fire was doubtful. Further, the

agency noted that there seemed to have been no useable stock in the tin

shed, as the factory workers stated that only unusable stock of waste

paper was stored therein. Some of the workers told the agency that such

stock was lying in the godown from even before the taking over of the

factory by the new management. Some said that, after segregation,

unusable raw material was stored in the tin shed. According to the

workers, routinely, stock was unloaded in the two pucca godowns and

from there, after segregation, unusable raw material was shifted to the tin

shed and usable raw material remained in the pucca godowns, wherefrom

it would be shifted to the pulp section as per requirement. The agency also

noted that the affected yard was a waste paper yard and had a huge

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stacking of Hessian bags and the fire mostly concentrated on the area

where the said bags were stored. However, during the physical verification

it was observed that the said Hessian bags had particles of hay and

bagasse (byproduct of sugarcane crushing). Behind this stock, a huge

heap of cuttings of medicine wrappers and cuttings of egg trays and old

waste, coloured and white paper cuttings, were found. Further, while

verifying the stock, it was noted that plastic bags and pieces of rope, in

good quantity, were also found, which were not part of the raw material.

Moreover, the material was found to be very old and it could be seen that

it had been stored since a long time as even cobwebs were observed. The

agency opined that this was dead material and rejected stock. It attempted

to correlate the stock with the purchase bills but failed, as most of the

stock did not match the description in the purchase bills. Discrepancies

were observed upon inspection of the burnt portion of the factory. Tin

sheets on the roof of the affected yard were not bent out of shape by the

fire. It was observed that all iron angles of the roof were tilting in a

particular angle and were not bent out of shape by the fire. No impact of

burning, such as black spots, etc., were found on the tin sheets. The

agency also noted that the fire station had been informed about one hour

after the fire broke out and the respondent had tried to explain this by

claiming that the landline number of P & T was not working and 101 could

not connect from a mobile phone. The agency, however, observed that fire

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station was just 6-7 kms away from the factory but the respondent had not

bothered to send someone to the fire station. The appellant was

accordingly advised to deal with the claim as per the terms and conditions

of the policies, as the intention of the respondent was found doubtful.

17. The final report dated 13.03.2010 of Aditi Consultants Pvt. Ltd. was

just as damaging to the respondent. Its claims were noted, whereby it

came down from ₹ 10 crore to ₹8.45 crore and then to ₹7.31 crore. It was

noted that there was no possibility of any careless throwing of an ignited

beedi/cigarette as the yard was isolated and workers rarely visited it.

Mostly female labour was deployed at the yard for sorting of material, but

they too were not visiting the yard for a few days prior to the fire. Smoking

was strictly prohibited inside the factory. No sign of heat or smoke was

seen on the tin (GI) sheets except on the sheets at the back side of the

yard. This confirmed that either there was no stacking of material in

approximately 25% of the area or the stacking was of very low height.

There was no conductor of fire due to which the fire could have spread to

the duplex bags stored at a distance of 20 to 22 feet without having

affected the grass in between, which was found to be fresh at the time of

the inspection. There was an abnormal delay in informing the fire station

and a suspicious approach in extinguishing the fire. It was pointed out that

the structure had not collapsed after the fire and investigation was needed

to rule out a deliberate fire. It was noted that there was huge stock of fully

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burnt Hessian bags and it was observed that the same were not part of

the raw material but no justification was given by the respondent for such

storage. It was also noted that the books of accounts could not be

correlated with the stock in the yard and the stock of about 12,500 metric

tons was mostly book stock and was not in existence. It was opined that

the material stored in the tin shed/yard was dead and obsolete stock. It

was also noted that there was an abnormal increase in yield and from

May, 2008, the yield of 87% had increased to 95%, i.e., an increase of 8%

continuously for the onward period, which has resulted in accumulation of

huge book stock. Having studied the trend of other paper mills and the

trend of the respondent’s paper mill, it was opined that 8% increase was

abnormal. It was concluded that abnormalities regarding the cause of the

fire, collapse of the shed and serious deviations shown by substantial

decrease in raw material consumption and abnormal increase in yield

were evident. The appellant was accordingly advised to deal with the case

as per the terms and conditions of the policy.

18. At this stage, we may note that the requirement of an insurance

company taking recourse to a licensed surveyor, when an insurance claim

is raised against it, is traceable to Section 64UM of the Insurance Act,

1938

2

. Prior to its amendment in 2015, Section 64UM(2) read thus:

2

For short, 'the Act of 1938'

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‘S. 64UM(2): No claim in respect of a loss which has occurred in India and

requiring to be paid or settled in India equal to or exceeding twenty

thousand rupees in value on any policy or insurance, arising or intimated to

an insurer at any time after the expiry of a period of one year from the

commencement of the Insurance (Amendment) Act, 1968, shall, unless and

otherwise directed by the Authority, be admitted for payment or settled by

the insurer unless he has obtained a report, on the loss that has occurred,

from a person who holds a license issued under this section to act as a

surveyor or loss assessor (hereafter referred to as "approved surveyor or

loss assessor").

Provided that nothing in this sub- section shall be deemed to take away or

abridge the right of the insurer to pay or settle any claim at any amount

different from the amount assessed by the approved surveyor or loss

assessor.’

The ‘Authority’ referred to in Section 64UM of the Act of 1938 is the

‘Insurance Regulatory and Development Authority of India’.

19. In turn, Section 64UM(1-A) of the Act of 1938 states that every

surveyor and loss assessor shall comply with the code of conduct in

respect of their duties, responsibilities and other professional

requirements as may be specified by the regulations made by the

Authority. Section 2(1)(g) of the Consumer Protection Act, 1986,

applicable presently, defined ‘deficiency’ as any fault, imperfection,

shortcoming or inadequacy in the quality, nature and manner of

performance which is required to be maintained by or under any law for

the time being in force or has been undertaken to be performed by a

person in pursuance of a contract or otherwise in relation to any service.

20. We may now note the decisions of this Court in the context of the

aforestated statutory provisions. In New India Assurance Company

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Limited vs. Pradeep Kumar

3

, this Court held that although the

assessment of loss by an approved surveyor is a pre-requisite under

Section 64UM(2) for settlement of a claim of t wenty thousand rupees or

more by an insurer, the surveyor's report is not the last and final word, as

it is not sacrosanct or conclusive and could be departed from. It was

observed that an approved surveyor's report may be the foundation for

settlement of a claim by an insurer in respect of the loss suffered by an

insured but such report is neither binding upon the insurer nor the insured.

This was in keeping with the proviso to Section 64UM(2) above.

21. This edict was affirmed in Khatema Fibres Limi ted vs. New India

Assurance Company Limited and another

4

and the factors that have to

be established to bring the actions of a surveyor within 'deficiency in

service' were summed up. It was held that the Act of 1938, while assigning

an important role to the surveyor, cast an obligation upon him under

Section 64UM(1-A) thereof to comply with the code of conduct. Two things

flow therefrom - (i) that a surveyor is governed by a code of conduct, the

breach of which may give rise to an allegation of deficiency in service; and

(ii) that the discretion of the insurer to reject the report of the surveyor, in

whole or in part, cannot be exercised arbitrarily or whimsically and that, if

so done, there could be an allegation of deficiency in service.

3

(2009) 7 SCC 787

4

(2023) 15 SCC 327

17

22. Earlier, in Sri Venkateswara Syndicate vs. Oriental Insurance

Company Limited and another

5

, this Court had observed that there is

no prohibition in the Act of 1938 for appointment of a second surveyor by

an insurance company but, while doing so, the said company has to give

satisfactory reasons for not accepting the report of the first surveyor and

the need to appoint a second surveyor. It was observed that the scheme

of Section 64-UM(2), (3) and (4) showed that an insurer could not appoint

a second surveyor as a matter of course. It was observed that the insurer

must specify cogent reasons, without which it would not be free to appoint

a second surveyor so as to get a report which would satisfy its interest.

23. However, in the present case, R.C. Bajpai, the first surveyor, had

recorded that the abnormalities of the case needed to be investigated

meticulously to rule out the possibility of a deliberate fire and hypothetical

loss. His tentative assessment of the loss was subject to that finding. He

had, therefore, advocated for further investigation in clear terms.

24. Notably, in United India Insurance Co. Ltd. and others vs.

Roshan Lal Oil Mills Ltd. and others

6

, this Court had observed that the

NCDRC was not justified in ignoring the report submitted by the joint

surveyors appointed under Section 64-UM(2) of the Act of 1938. The

report contained a detailed account of the factors on the basis of which

5

(2009) 8 SCC 507

6

(2000) 10 SCC 19

18

the joint surveyors came to the conclusion that there was no loss caused

on account of the fire and it was on this basis that the claim was rejected.

This Court observed that the said report was an important document

which was placed before the NCDRC but the NCDRC, curiously, had not

considered it. This Court further held that as the claim of the insured was

repudiated by the insurance company on the basis of the joint survey

report, non-consideration of that important document resulted in a serious

miscarriage of justice, which vitiated the judgment passed by the NCDRC.

25. Pertinently, we find that the respondent acknowledged receipt of the

reports of the two surveyors and the investigating agency in its Consumer

Complaint No. 66 of 2011 but, except for baldly stating that the surveyors

and the investigator gave negative reports and asserting its innocence in

the context of the maintenance of the stock taking and books of accounts,

the respondent did not point out any specific deficiency on the part of the

surveyors, in terms of the statutory requirement . Despite the same, the

NCDRC simply brushed aside both the surveyors’ reports, wherein the

genuineness of the respondent’s claims was negated on facts.

26. In New India Assurance Company Limi ted and others vs. Mudit

Roadways

7

, this Court considered an insurance claim arising out of a fire

accident, wherein multiple survey reports suggested different causes for

7

(2024) 3 SCC 193

19

the fire, presenting a perplexing conundrum. The NCDRC had placed

reliance on the judgment of this Court in Canara Bank vs. United India

Insurance Company Limi ted and others

8

, wherein it was observed that

as long as the insured is not the person who caused the fire, the insurance

company cannot escape its liability in terms of the policy. It was, therefore,

declared that where the precise cause of the fire, i.e., whether it was

attributable to a short circuit or any other factor, could not be ascertained

it was immaterial as long as the claimant was not the instigator of the fire.

Thereafter, in Orion Conmerx P rivate Limited vs. National Insurance

Company Limited

9

, this Court observed that, once it is established that

loss was caused due to a fire but there was no allegation or finding of

fraud or that the insured was the instigator of the fire, the cause of the fire

would be immaterial and it would have to be assumed and presumed that

the fire was accidental and the loss would fall within the ambit and scope

of the insurance policy. In effect, if there is reasonable cause to suspect

that the insured may have been the instigator of the fire, the claim put forth

by such insured may, on facts, be liable to be denied on that ground.

27. In that regard, the respondent placed reliance upon a police report,

wherein a Sub-Inspector stated that he had learnt that there was a

sugarcane field behind the respondent’s factory wherein, after reaping the

8

(2020) 3 SCC 455

9

(2026) 5 SCC 445

20

harvest, the labour had lit a fire and there was a possibility that due to the

direction of the breeze, a spark landed in the waste paper yard. This was

supported by the affidavit of one Kailash Chandra, who claimed that he

owned a sugarcane field behind the respondent’s factory. Therein, he

stated that after reaping the harvest, the stubble was set on fire at 12 noon

on 07.05.2009. He stated that there was a possibility that a spark from the

fire could have reached the waste paper yard. However, there is no

evidence of the distance between Kailash Chandra’s sugarcane field and

the respondent’s factory. Further, the photographs relating to the fire lit in

Kailash Chandra’s field show a patch of burnt grass surrounded by green

grass and the magnitude of the fire does not appear to be significant.

28. Significantly, it has also been brought on record by the reports of the

surveyors and the investigative agency that no bonafide attempt was

made by the respondent or its employees to put out the fire. Though the

fire was detected at 1.35 pm on that day, no sincere effort was made to

summon a fire engine immediately. The fire station was just 06-07 kms

away and the fire engine could reach within a span of 11 minutes after

being called. No explanation was offered as to why Gagandeep Singh, the

Vice President, who would have had a vehicle at the factory, did not send

someone either by that vehicle or by an employee’s two-wheeler to inform

the fire station. Admittedly, the fire brigade was informed 50 minutes after

the fire broke out. Further, the reports also record that the fire-minimization

21

efforts by the employees of the respondent were not sincere as they

merely sprinkled water either on the roof or on the ground but not on the

fire itself. These are important factors that weigh against the respondent

in the context of the fire being a genuine one and sincere efforts being

made to fight the fire. Had it been so, these delaying tactics would not

have been adopted. The damage to the tin sheets or rather, the lack of it,

and the lack of damage to the main structure of the tin shed also speak of

the nature of the fire and its extent.

29. The finding that the fire was mostly concentrated around the area

where Hessian bags were stored adds to the suspicion of arson, as there

was no account of these Hessian bags having been purchased as raw

material in such large quantities. Though the respondent attempted to

project in its complaint case that Hessian bags and all the other material

found there were raw material, the final surveyor recorded that it was not

so and when asked about the storage of these bags, the respondent had

no justification to offer. Further, it was found that the material was very old

as cobwebs were also present. The surveyor recorded that, during the

firefighting operations, the branch manager of the appellant reached there

and requested the respondent to increase the pressure of water from the

hydrant pipe and asked him to utilize more hydrants so as to control the

fire, but it was only 20 minutes after his request, that the respondent

agreed to do so. It was only on the appellant's consistent requests that

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arrangements were made to increase the water pressure. The other

hydrant was used only after the fire brigade reached there.

30. Further, the report dated 02.03.2010 of Royal Associates notes that,

as per the statement of Rajiv Aggarwal, General Manager (Finance) of the

respondent, and Gagandeep Singh, its Vice President, the tin shed had

fallen down due to the fire and they had to call the JCB to lift the tin sheets

so that the raw material underneath, which was on fire, could be doused

with water. However, Shamin, the owner of the JCB, got his statement

recorded that he sent the JCB to the respondent’s factory to break down

the tin shed before the fire incident. This statement of the JCB’s owner

was supported by the workers at the respondent’s factory and also by

Narinder Kumar and Anil Kumar, who were nearby shopkeepers. They

stated that the owner of the factory had called for the JCB to get the tin

shed broken down before the fire incident. The investigative agency,

accordingly, noted that the tin sheets were not lifted by the JCB, as

claimed by the respondent, but the tin shed was broken down earlier with

the JCB's assistance.

31. In any event, apart from the possibility of arson or, at the very least,

the respondent’s lack of sincerity in fighting the fire, there are other factors

which decisively tilt the balance against it, viz. the breach of the policy

conditions. In that regard, Policy Condition No. 6 of the fire insurance

policies issued by the appellant to the respondent reads as follows:

23

‘6.(i) On the happening of any loss or damage the insured shall forthwith

give notice thereof to the company and shall within 15 days after the loss or

damage, or such further time as the company may in writing allow in that

behalf, delivered to the company.

(a) A claim in writing for the loss or damage containing as particular an

account as may be reasonably practicable of all the several articles or items

or property damaged or destroyed, and of the amount of the loss or damage

thereto respectively, having regard to the value at the time of the loss or

damage not including profit of any kind.

(b) Particulars of all other insurances, if any.

The insured shall also at all times at his own expense produce, procure and

give to the company all such further particulars , plans, specification books,

vouchers, invoices, duplicates or copies thereof, documents, investigation

reports (internal/external), proofs and information with respect to the claim

and the origin and cause of the loss and the circumstances under which the

loss or damage occurred, and any matter touching the liability or the amount

of the liability of the company as may be reasonably required by or on behalf

of the company together with a declaration on oath or in other legal form of

the truth of the claim and of any matters connected therewith.

No claim under this policy shall be payable unless the terms of this condition

have been complied with.’

Policy Condition No. 8 of the policies reads as under: -

'8. If the claim be in any respect fraudulent , or if any false declaration being

made or used in support thereof or if any fraudulent means or devices are

used by the Insured or anyone acting on his behalf to obtain any benefit

under the policy or if the loss or damage being occasioned by the willful act,

or with the connivance of the Insured all benefits under this policy shall be

forfeited.’

32. On facts, we find that the above two conditions of the insurance

policies were clearly breached by the respondent . Policy Condition No. 6

required the respondent to make an honest and full disclosure of all

relevant aspects while Policy Condition No.8 posited that it make no false

declarations. However, the misstatements made by the management of

the respondent, referred to hereinbefore, categorically demonstrate that

they willfully resorted to making incorrect factual statements to buttress

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the respondent’s insurance claim. If an insured makes false averments to

bolster its claim, contrary to the policy conditions, the insurer would be

lawfully entitled to reject such claim on that ground without further ado. In

this regard, we may also note that the final surveyor recorded the

statements of workers /labour at the respondent’s factory . One Kamal

Singh, Supervisor, stated that the raw material was unloaded into the two

pucca godowns routinely and it was not stocked in the tin shed which had

caught fire. He further stated that the raw material was directly shifted to

the pulp section from the pucca godowns only. These statements were

directly contrary to those of Gagandeep Singh, the Vice President, and

Rajiv Aggarwal, the General Manager, who had said that unloaded raw

material was stocked in the tin shed. The statements of the

workers/supervisors showed that only waste material which was unusable

was stocked in the tin shed and this was the practice since before the

factory was taken over by the new management in 2005. They also

confirmed that, after taking over the factory, the new management did not

unload the raw material into the tin shed and did not lift any raw material

from the tin shed. This evidence, which was not even challenged by the

respondent in its complaint case, clearly demonstrates that false

declarations were made on its behalf by Gagandeep Singh, its Vice

President, and Rajiv Aggarwal, its General Manager, to the effect that

usable raw material was stocked in the tin shed that caught fire, laying

25

foundation for the insurance claim. On the other hand, the statements of

the workers/labour, supported by the finding of the surveyor that the burnt

material was very old and with cobwebs, confirming its vintage, put it

beyond the pale of doubt that a false claim was sought to be projected by

the respondent by declaring that usable raw material was stocked in the

burnt tin shed and not the unusable scrap which had accumulated there

since before the new management took over the factory. Danish and

Sandeep Shami, Accountants, confirmed the version of the workers that

only unusable waste paper, after segregation, was stored in the tin shed

and such segregated unusable waste paper had been destroyed in the

fire. Sandeep Shami also confirmed that the said stock of unusable waste

paper used to be stored in the tin shed from before the factory was taken

over by the new management. All of them confirmed that the said stock

had been lying in the tin shed for a long time.

33. The surveyor also found that the respondent’s raw material

consumption-sales ratio had reduced abnormally, as reflected by the

figures for 2007-08 when compared with 2008-09. The raw material

consumption during 2007-08 was 310.25 lakh metric tons while the same

shot up to 429.51 lakh metric tons for the year 2008-09. Surprisingly, the

sales for the year 2007-08 stood at 960.48 lakh, which rose to 2,226.38

lakh during 2008-09. During the year 2007-08, the raw material to sales

percentage was 32.30%, which fell drastically to 19.29% for the year

26

2008-09. The surveyor recorded that this variation needed an in-depth

investigation and scrutiny as it could be the main reason for the huge book

stock without correlation to the actual raw material on the ground. The

surveyor’s report dated 13.03.2010 recorded the following abnormalities:

The tax audit report indicated that no stock register was maintained by the

respondent. Further, no stock movement register was found and it was

found that the respondent reported the consumable stores level at

₹278.58 lakh from November, 2008 to March, 2009, which was held to be

surprising. No records were available to verify how the consumable stocks

were arrived at. Further, it was found that the respondent was producing

a single item but no standard production mix could be detected from the

consumption of chemical and waste paper, as recorded in the books.

Consumption recorded in the books was found to be arbitrary so as to

maintain book stocks and profitability. The surveyor opined that the

respondent was recording arbitrary consumption in the stock records;

there was no system of recording/weighing the waste paper at the time it

was loaded on the conveyor; and the yield reported was imaginary. These

were all false assertions made by the respondent to press its claim.

34. In the light of the above facts , leaving aside the strong possibility

that this was not an accidental fire or, at the very least, it was not a fire

that the respondent genuinely tried to put out, the repudiation of the

respondent’s claim by the appellant, on the ground that Policy Condition

27

Nos. 6 and 8 stood violated, was clearly sustainable. The NCDRC was

not justified in brushing aside the findings recorded in the two surveyors’

reports and in holding, without basis, that there was no delay on the part

of the respondent in informing the fire station. Similarly, there was no basis

for the NCDRC to have given a clean chit to the respondent, whereupon

it undertook assessment of the loss allegedly suffered by it and in

quantifying the same, far in excess of the quantification by the surveyors.

35. Civil Appeal No. 7221 of 2025 is, accordingly, allowed setting aside

the order dated 19.11.2024 passed by the National Consumer Dispute

Redressal Commission, New Delhi, in Consumer Complaint No. 66 of

2011. In consequence, Civil Appeal No. 11416 of 2025 filed by the

respondent shall stand dismissed. Registry shall return to the appellant

the suitor’s fund amount and the sum of ₹50 lakh deposited by it, along

with the interest accrued thereon, under proper acknowledgement and as

per due procedure.

In the circumstances, parties shall bear their own costs.

..............................., J.

SANJAY KUMAR

..............................., J.

SANJEEV SACHDEVA

September 21, 2026

New Delhi.