NATIONAL INSURANCE CO. LTD. versus HARJEET RICE MILLS

Citation: [2005] SUPP. 1 S.C.R. 794 · Decided: 25-07-2005 · Supreme Court of India · Bench: R.C. LAHOTI · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
NATIONAL INSURANCE CO. LTD. 
v. 
HARJEET RICE MILLS 
JULY 25, 2005 
B 
[R.C. LAHOTI, CJ. AND P.K. BALASUBRAMANYAN, JJ.] 
· Jam mu and Kashmir Consumer Protection Act, j 987: 
Claim against Insurance Company-Fire caused in godown-Stocked 
C goods lost in fire-Surveyor ~s report based on police investigation, which on 
further investigation reported as perfunctory-Claim resisted by Insurance 
Company as an Insurance fraud stating that fire was caused deliberately-
Held, State Consumer Commission should have given an opportunity. to 
prove investigation report-s. 64-UM of Insurance Act cannot stand in the 
D way of Insurance Company in establishing that the claim was a fraud on the 
Company-High Court failed lo exercise appellate jurisdiction properly so 
as td satisfy itself that no fraud was involved and the claim was genuine cmd 
sustainable-Interference warranted-Case remitted to Sta,te Consumer 
Commission to decide afresh all the questions involved including the cause 
of fire-Insurance Act, I938-:-s.64-UM-Constitution of India-Article 136. 
E 
F 
Respondent-consumer filed a claim against the appellant-Insurance 
Company before the Stat~ Consumer Commission for the loss stated to h~ve 
been caused by an accidental fire in its godown. The Insurance Company 
resisted the claim, inter alia, on· the grounds that the fire was not caused by 
short-circuit but was a deliberate act with a view to make the claim and it was 
a case of an attempted insurance fraud; and that, even otherwise, the loss was 
highly exaggerated. The State Commission allowed the claim. The appeal filed 
by the Insurance Company was dismissed by the Hig'h Court. 
In the present appeal filed by the Insurance Company, it was contended 
G that though the surveyor had reported that the fire was caused by a short-; 
circuit, but the said report was based on a police investigation; which, on a 
further investigation, was reported by the Deputy Superintendent of Police 
as perfunctory; and that the cause of the fire and the goods and .its quantity 
stated to have burnt were to be properly investigated. 
794 
NATIONAL INSURANCE CO.LTD. v. HARJEET RICE MILLS [BALASUBRAMANY AN, J.] 795 
Allowing the appeal and remitting the matter to the State Consumer A 
Commission, the Court 
HELD: l.L The State Consumer Commission sh.ould have given an 
. opportunity to the appellant to prove the investigation report. Section 64 UM 
of the Insurance Act, 1938 cannot stand in the way oft.he insurance company 
in establishing that the claim was a fraud on the company, or that it was a' B 
case of deliberately causing a fire so as to lay the foundation for an insurance 
claim. The Commissien did not apply its mind to the aspect highlighted that 
the first police investigation was reported to be perfunctory and a fresh, 
proper investigation had been recommended. Similarly, the discrepancy in the 
capacity of the godown and the possibility that what was lost was only or mainly C 
paddy husk should have persuaded the Commission to make a proper enquiry 
before deciding to accept the Surveyor's report. [798-B, C) 
1.2. The High Court has failed to exercise its appellate jurisdiction 
properly. It failed to see that it had the duty as the Appellate Authority to satisfy 
itself that .no fraud was involved and that the claim was genuine and sustainable. D 
Adequate primafacie material was available to warrant a prop~r enquiry on 
that question. In this situation, interference is called for in this appeal. 
-
1798-D) 
1.3. Since a proper enquiry. and a fresb decision by the initial authority 
itself is called for, the decisions of the High Court and the State Commission E 
are set aside. In view of the amendment to the Jam mu and Kashmir Consumer 
Protect Act, the claim comes within the limit of the pecuniary jurisdiction of 
the State Commission, which would decide afresh all the questions involved 
including the question of the cause of fire. (798~E, F] 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2431 of2000. 
F 
From. the Judgment and Order dated 12.7.99 of the Jammu and Kashmir 
High Court in C.I.M.A.No. 31 of 1997. 
A.B. Rohatgi and M.K. Dua with him for the Appellant. 
Anoop G. Choudhary and K.K. Mohan with him for the Respondent. G 
The Judgment of the Court was delivered by 
P.K. BALASUBRAMANY AN, J. 1. The National Insurance Company, 
the respondent in a claim before the State Commission under the Jammu & 
Kashmir Consumer Protection Act, is the appellant before us

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