ORIENTAL INSURANCE CO. LTD. versus NATIONAL BULK HANDLING CORPORATION PVT. LTD.

Citation: [2020] 3 S.C.R. 757 · Decided: 12-02-2020 · Supreme Court of India · Bench: MOHAN M. SHANTANAGOUDAR · Disposal: Dismissed

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Judgment (excerpt)

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ORIENTAL INSURANCE CO. LTD.
v.
NATIONAL BULK HANDLING CORPORATION PVT. LTD.
(Civil Appeal No. 10409 of 2016)
FEBRUARY 12, 2020
[MOHAN M. SHANTANAGOUDAR AND
R. SUBHASH REDDY, JJ.]
Insurance – Fidelity Insurance – Respondent is a Collateral
Management Company which stores commodities pledged by farmers,
traders etc., in availing loan from lending banks and other
institutions – In case of any loss of the pledged commodities,
respondent is liable to make good the loss to the lending bank –
Respondent took Fidelity Guarantee Insurance Policy from
appellant-insurance company in respect of the pledged commodities
stored in godowns – Three firms entered into agreements with
respondent for storing commodities including urad and mentha oil
– Urad unauthorizedly removed from the godown – Respondent
took steps to prevent possible loss to oil – 601 barrels of oil were
shifted to another godown – On quality check, it was revealed that
mentha oil was substituted by water in the barrels – Claim lodged
by respondent with appellant – Not accepted – National Commission
allowed claim towards loss of mentha oil but rejected the claim so
far as urad was concerned – Held: Fidelity Guarantee is different
from contingency guarantee – Protection afforded is different than
in normal insurance policies – It is a contract whereby, for a
consideration, one agrees to indemnify another, against loss, arising
from the breach of honesty, integrity or fidelity of an employee or
other person holding a position of trust – Impugned order is assailed
mainly on the ground that the respondent failed to prove involvement
of any of its employees, as such there cannot be any liability on
appellant – Survey report itself indicates involvement of respondent’s
employees in removing 601 barrels of mentha oil stored by the
respondent – It has a specific observation that respondent’s security
guard allowed owner to lift the stock – In the complaint filed by
respondent specific allegation is made about involvement of its staff
– There is a clear involvement of respondent’s employees and other
[2020] 3 S.C.R. 757
757
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SUPREME COURT REPORTS
[2020] 3 S.C.R.
contract employees in substituting the mentha oil barrels with water
– No reason to interfere with the impugned order.
Dismissing the appeal, the Court
HELD: 1.1 Fidelity Guarantee is different from contingency
guarantee. The insurance under it, is for honesty, against
negligence or for being faithful and loyal to its employees. The
protection afforded is different than in normal insurance policies.
It is a contract whereby, for a consideration, one agrees to
indemnify another, against loss, arising from the breach of honesty,
integrity or fidelity of an employee or other person holding a
position of trust. The insurance policy of fidelity guarantee is to
be construed as a policy, intended to protect the assured against
the contingency of a breach of fidelity on the part of a person in
whom confidence has been placed. The impugned order is assailed
mainly on the ground that the respondent has failed to prove
involvement of any of the employees of the respondent-Company,
as such, there cannot be any liability on the appellant-insurance
company. The pledged goods of 601 barrels of mentha oil was
stored in the warehouse. The survey report dated 26.03.2009,
itself indicates the involvement of employees of the respondent-
Company in removing 601 barrels of mentha oil stored by the
respondent-Company. In the complaint filed, specific allegation
is made about involvement of staff of the respondent-Company.
[Paras 9, 10][762 E-F; 762-H; 763 A-D]
1.2 There is a specific observation in the survey report
that the security guard of the respondent-Company had allowed
owner to lift the stock. There is a clear involvement of the
employees of respondent and other contract employees in
substituting the mentha oil barrels with water. Further, it cannot
be said that there is any delay on the part of the respondent in
lodging the claim, so as to accept that there is breach of condition
no. 1 of the policy. [Paras 11, 13 and 14][763 C-D; 763 E-F;
764 B-C]
Food Corporation of India v. New India Assurance Co.
Ltd. & Ors. (1994) 3 SCC 324 : [1994] 1 SCR 939;
Gurshinder Singh v. Shriram General Insurance Co.
Ltd. & Anr. (2020) 2 SCALE 473 – referred to.
Black’s Law Dictionary – referred to.
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Case Law Reference
[1994] 1 SCR 939
referred to
Para 7
(2020) 2 SCALE 473
referred to
Para 7
C

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