SUMIT KUMAR SAHA versus RELIANCE GENERAL INSURANCE COMPANY LTD.

Citation: [2019] 1 S.C.R. 763 · Decided: 30-01-2019 · Supreme Court of India · Bench: UDAY UMESH LALIT · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUMIT KUMAR SAHA
v.
RELIANCE GENERAL INSURANCE COMPANY LTD.
(Civil Appeal Nos. 1299 of  2019)
JANUARY 30, 2019
[UDAY UMESH LALIT AND R. SUBHASH REDDY, JJ.]
Consumer Protection Act, 1986 –  Loss – Calculation of, basis
– Appellant purchased an Excavator in the year 2007 for a total
purchase value of Rs.51.74 lacs and immediately got it insured –
Insurance policy was renewed for the period 22.7.2009 to 21.7.2010
and the sum insured was Rs.46.56 lacs – The Excavator was hired
and was used at a different location and the change of location
was duly intimated – On 3.6.2010, the Excavator was badly damaged
in a fire while it was at such changed location – Surveyor of Insurer
assessed the loss and damage at Rs.25.24 lacs – Complaint filed by
appellant before the State Commission – Appellant submitted that
the Excavator was a total loss and that he was entitled to insured
amount of 46.56 lacs along with interest and compensation –
Appellant’s surveyor assessed loss on “total loss basis” at Rs.41.90
lacs – State Commission allowed the complaint and directed to pay
Rs.41.90 lacs with interest – National Commission partly allowed
respondent’s appeal and directed it to pay Rs.34.17 lacs – On
appeal, held: It was common ground that as a result of fire, the
Excavator was a “total loss” – Both the sides had arrived at a
particular figure to be the real value of the subject matter of
insurance – It was not open to any party to dispute said sum and
contend that the real value was something different from what was
declared by the parties to be the sum insured – If the parties had
agreed and arrived at an understanding, which understanding was
otherwise not vitiated by any misrepresentation, fraud or coercion,
the parties must be held bound by such figure – The Surveyor of the
Insurer worked out depreciation by starting with the figure of Rs.51
lakhs as the cost of a new Excavator and then deducting 32.5% by
way of depreciation assuming the life of Excavator to be 10 years –
The Surveyor of the Insurer disregarded the figure stipulated as
‘sum insured’  – Depreciation has to be always computed keeping
[2019] 1 S.C.R. 763
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SUPREME COURT REPORTS
[2019] 1 S.C.R.
the figure of “sum insured” in mind – The starting figure, therefore,
in this case had to be the figure which was stipulated as “sum
insured” – Since Excavator, after the policy was taken out was used
for eleven months, some reasonable depreciation ought to be
deducted from the “sum insured” – The surveyor appointed by the
insured was right in deducting 10% and in arriving at the figure of
Rs.41.90 lacs – The decision of the National Commission is dismissed
and the judgment and order passed by the State Commission is
restored.
Allowing the appeal, the Court
HELD: 1.   The policy in question indicated that the “year
of make” of the Excavator was “2007” while the policy was for
the period 22.07.2009 to 21.07.2010.  The parties were aware
that the Excavator was purchased in the year 2007 for Rs.51.74
lakhs.  If the contract mentioned the sum insured to be
Rs.46,56,600/- the parties must be deemed to be aware about
the significance of that sum and the fact that it represented the
value of the Excavator as on the date when the coverage was
obtained.  It is not the case of the Insurance Company that there
was any “under insurance” in the instant matter.   On the other
hand, the contention was that as against the sum insured which
was Rs.46,56,600/- the depreciated value was Rs.34,42,500/-.  So
according to the Insurance Company, if at all it was a case of over
insurance.  If going by the idea of receipt of premium, then the
Insurance Company had received more than what according to it
the real value would have justified.  If both the sides, with their
eyes open, had arrived at a particular figure to be the real value
of the subject matter of insurance, it is not open to any party to
dispute said sum and contend that the real value was something
different from what was declared by the parties to be the sum
insured. If both the parties had agreed and arrived at an
understanding, which understanding was otherwise not vitiated
by any misrepresentation, fraud or coercion, the parties must be
held bound by stipulation of such figure.  [Paras 11, 14 and 15][773-
E-F; 776-B-E]
2.1  The Surveyor of the Insurance Company worked the
figure of depreciation by starting with the figure of Rs.51 lakhs
as the cost of a new Excavator and then deducting 32.5% by

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