M/S. MODERN INSULATORS LTD. versus THE ORIENTAL INSURANCE CO. LTD.

Citation: [2000] 1 S.C.R. 1076 · Decided: 22-02-2000 · Supreme Court of India · Bench: S. SAGHIR AHMAD · Disposal: Appeal(s) allowed

Cited by 4 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
c 
MIS. MODERN INSULATORS LTD. 
v. 
THE ORIENTAL JNSURA~CE CO. LTD. 
FEBRUARY 22,2000 
[S. SAGHIR AHMAD A..l\ffi S.N. PHCKAN, JJ.j 
Consumers Protection Act, 1986-·Section 2( l)(g)-lnsurance-
Deficiency in-Terms and conditions of the policy not forwarded to the in-
~·ured-Held, the said tennJ' and conditions ure not binding. 
Consumers Protection Act, 198&-Section 19-Appeafs-Scope 
of-Held, no new facts can be urged. 
The appellant manufactured high tension insulators for transmis-
sion lines. The appellant had taken out an "AU Ris l~ Insurance Policy" from 
D the respondent for Rs. 50 lakhs for the installation of 25 M3 Iillo with 
furniture. The policy covered risks against loss during storage-cum-erec-
tion including triaJ and testing of the insulators. 
E 
F 
The appellant erected the kiln and loaded it with insulators for trial 
and testing. In the process of trial, the complete kiln furniture with 
insulators collapsed on the kiln car and the furniture uot damaged. The 
appellant lodged a claim with the respondent and the surveyors assessed 
the damage of the appellant at Rs. 4,66,873. 
When the respondent failed to settle the claim of the appellant, the 
appellant filed a complaint before the State Consumer Disputes Redressal 
Commission. In its reply to the complaint, the respondent claimed that the 
damaged property was not covered by insur.mce policy. The State Com-
mission allowed the complaint of the appellant. 
G 
Against the order of the State Commission, the respondent filed an 
appeal before the National Consumer Disputes Redressal Commission 
taking a plea that the policy of insurance contained an exclusion clause 
that in the case of second hand/used property, the insurance shall cease 
immediately on the commencement of the test and that the appellant had 
violated the terms and conditions of the policy by using kiln furniture. The 
H appellant denied this and contended that he was supplied only with the 
1076 
MODERN INSUlATORS LTD. v. ORIENTALINSt.:RANCECO. 
1077 
cover note and the schedule of insurance policy and the other terms and A 
conditions including the above mentioned exclusion clause were never 
supplied to him. A Jetter \\Titten by the Branch Manager of the respondent, 
confirmed the claim of the appellant. 
The Nation11l Commission allowed the appeal on the ground that it 
was the equal responsibility of the respondent to call for the terms and B 
conditions of the policy to understund the extent of the risk covered under 
the policy. 
Allowing the appeal, this Court 
HELD : 1.1. The finding of the National Commission is untenable in 
law. A!i the terms and conditions of the standard poJicy wherein the 
exclusion clause was included, were neither a part of the contract of 
insurance nor disclosed to the appellant, the respondent cannot claim the 
benefit of the said exclusion clause. (1079-G] 
c 
D 
1.2. It is the fundamental principle of insurance law that utmost good 
faith must be observed by the contracting parties and good faith forbids 
either party from non-disclosure of the facts which the parties know. The 
insured has a duty to disclose and similarly it is the duty of the insurance 
company and its agent to disclose aU material facts In their knowledge since E 
the obligation of good faith applies to both equally. (1079·F] 
2. It is a settled position of law that in an appeal the parties cannot 
urge new facts. From the pleadings of the respondent before the State 
Commissioa it is found that the respondent pleaded that the property 
damaged was not covered under the Insurance policy. This plea was given F 
a go-by before the National Commission and a new plea was talten up in 
the grounds of appeal that the terms and conditions of the insurance policy 
were violated by the appellant by using used kiln furniture. Allowing the 
appeal on the basis of this new ground is not sustainable in Jaw. [I080·A-HJ 
CIVIL APPELLATE JURISDICflON : Civil Appeal No. 6895 of G 
1997. 
From the Judgment and Order dated 8.1.97 of the National Con-
sumers Disputes Redressal Commi!>l>ion, New Delhi in F.A. No. 595 of 
m1 
H 
1078 
SUPREME COURT REPORTS 
(2000]1 S.C.R. 
A 
Arun Jaitley, M.L. Verma, Rajeev Sharma, Ms. Urmil Narang and 
O.K. Sinha for the Appellant. 
A.K. Raina, G.G. Upadhyay, R.D. Upadhyay and Kr. A.M. Singh for 
the Respondent. 
B 
The Judgment of the Court was delivered by 
c 
PHUKAN, J, This appeal is directed against the order dated 08.01.97 
passed by the National Cons

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