M/S HANIL ERA TEXTILES LTD. versus ORIENTAL INSURANCE CO. LTD. AND ORS.

Citation: [2000] SUPP. 5 S.C.R. 156 · Decided: 29-11-2000 · Supreme Court of India · Bench: M. JAGANNADHA RAO · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
MIS HA NIL ERA TEXTILES LTD. 
v. 
ORIENT AL INSURANCE CO. LTD. AND ORS. 
NOVEMBER 29, 2000 
[M. JAGANNADHA RAO AND K.G. BALAKRISHNAN, JJ.] 
Consumer Protection Act, 1986-Deficiency in Service-Insurance 
Company inspecting Mill premises prior to issuing policy-Charging extra 
C premium for blow room double protection-Premises damaged due to fire-
Blow room remaining intact-Insurance company demanding higher premium 
for entire Mill premises as premium short paid after the accident-National 
Commission dismissing the complaint holding there is no deficiency in 
service-Held, charging premium at a higher rate belatedly is not sustainable-
Insurance company directed to pay claim with interest. 
D 
The appellant took 12 fire insurance policies with the Respondent for 
his Mill premises. These policies were renewed from time to time. Before 
issuing the policies the officials of the Respondent had visited the premises 
of the Appellant and premia payable was fixed after the inspection. The officials 
of the Respondent inspected and verified the blow room in Mill Band they 
E informed the appellant in Nov. 1994 that it attracted a higher premium than 
that charged earlier and accordingly an additional sum was paid by the 
appellant Due to a major fire accident, the stocks, machinery and building in 
Mill B were destroyed except the blow room. The surveyors assessed the 
damage. After that, the Respondent demanded an additional amount in Jan, 
F 1995 towards absence of fire protection as prescribed by the Tariff Advisory 
Committee. The Respondent again made a demand for a huge sum in July 
1995 on the basis that the entire factory building including the blow room 
was a single communicating structure. The appellant did not pay the additional 
amount and contended that the blow room was segregated in all respects and 
the Tariff Advisory Committee approved fire fighting equipment had been 
G installed by them. While fianlising the fire claim the Respondent deducted a 
sum towards short charged premium and demanded the appellant to give an 
undertaking for the deduction. The appellant filed a complaint before the 
National Consumer Commission and sought a direction for payment of the 
difference with interest. The Respondent contended that there is no deficiency 
H in service and there were good reasons for their deduction and that the blow 
156 
HANIL ERA TEXTILES LTD."· ORIENTALINSURANCE CO. LTD. 
J 57 
room was not separated from the main area and the appellant is liable for the A 
additional premium. The Commission held that the enhancement of the 
premium was based on the application of the regulations and it was the duty 
of the Respondent to have inspected and monitored the appellant even prior to 
the incident of fire, but that cannot be said to be a deficiency in Service. The 
Commission held that the appellant was not entitled for any relief and dismissed B 
the complaint 
In Appeal to this Court, the appellant contended that the respondent 
charged a higher !ate of premium for the blow-room and the rest of the area 
was charged less which would indicate that it was segregated from the rest of 
the area, that six fire proof doors had been installed to protect the blow-room C 
area and there fore it was not correct to say that the entire area was a single 
communicating structure. The Respondent contended that the higher rate of 
premium was charged for the blow-room on the assumption that the appellant 
would make it segregated, that even after the functioning of the blow-room 
the separate values were not furnished, that the renewal w~s done on a 
provisional basis, that since the information was provided only in Nov., 1994 D 
and as the respondent had only assumed the segregation, an additional 
premium was demanded and that the blow-room was segregated with fire proof 
doors only after the fire, and therefore additional premium is to be paid. 
Allowing the Appeal, the Court 
E 
HELD : 1. It is of primary importance to note that the fire had not spread 
to the blow-room area. It raises a strong presumption that the blow-room was 
segregated even before accident. The appellant had also produced documents 
to show that they had installed the fire proof doors to protect the blow-room. 
The fact that the respondent demanded a higher rate of premium for the blow- F 
room in Nov., 1994 is indicative of the fact that it was separated from the rest 
of the area. The observations of the representatives of the Loss Pr

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