New Delhi, Sep 21 The Supreme Court on Monday set aside an order of the National Consumer Disputes Redressal Commission (NCDRC) which had directed an insurance firm to pay Rs 2.4 crore to a company following a fire incident in 2009.
While referring to two conditions of the insurance policies in the case, the apex court said they were "clearly breached" by the company.
The court noted that while one of the conditions required the company to make an honest and full disclosure of all relevant aspects, the other condition posited that it make no false declarations.
"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," a bench of Justices Sanjay Kumar and Sanjeev Sachdeva said.
The top court delivered its verdict on two appeals, including the one filed by the insurance firm challenging a November 2024 order of the NCDRC.
The NCDRC had directed the insurance firm to pay Rs 2.4 crore to the company along with compensation of Rs 3 lakh for deficiency in service and litigation cost of Rs 1 lakh.
The company had also approached the top court with a separate appeal challenging the NCDRC order and the quantum of compensation awarded to it.
While dealing with the appeals, the top court said the "misstatements" made by the management of the company categorically demonstrate that they willfully resorted to making incorrect factual statements to buttress their insurance claim.
"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 (insurance firm), on the ground that policy condition nos. 6 and 8 stood violated, was clearly sustainable," the bench said.
The company had put forth the claim for compensation of Rs 7.31 crore, apart from other damages, on the strength of two fire insurance policies that it had with the insurance firm.
The bench noted that the factory of the company at Najibabad consisted of an open yard and three godowns, and it had insured its stock and buildings with the insurance firm under two separate fire policies. The coverage was from December 30, 2008 to December 29, 2009.
In May 2009, a fire was stated to have broken out in the waste paper yard inside the factory resulting in damage to the raw material and to the tin shed.
The insurance firm repudiated the claim in June 2010 stating that the company had tried to manipulate the books of account to inflate the claim, in violation of one of the policy conditions.
It also said the company had violated the condition in the policy with regard to making a false declaration.
The company then approached the NCDRC which passed the order.
In its verdict, the top court noted that it has also been brought on record by the reports of the surveyors and the investigative agency that no bona fide attempt was made by the company 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," it said.
It also noted that admittedly, the fire brigade was informed 50 minutes after the fire broke out.
While allowing the appeal filed by the insurance firm, the bench set aside the NCDRC's order. It dismissed the separate appeal filed by the company.
