Oriental Insurance Co. Ltd, New Delhi Vs. M/s. Silk Point, A Proprietorial Concern of Sri Nipul Das having its Office, Assam and Another - Court Judgment

A.M. Sapre, CJ.

This is an intra-court appeal filed by the respondent No.1 of WP(C) No.1952/2009 under Rule 2(3) of Chapter V-A of the Gauhati High Court Rules against the order dated 31.08.2012 passed by the Single Judge in abovementioned writ petition. By the impugned order, the learned Single Judge allowed the writ petition filed by the respondent No.1 herein and issued a writ of certiorari and mandamus against the appellant (respondent No.1 of writ petition) which reads as under: “No other issue survives for consideration. For the aforementioned reasons, this writ petition is allowed. The impugned letters dated 9-2-2009 (Annexure-IX) and 20-2-2009 (Annexure-XIII) issued by the respondents No.2 are hereby quashed. Consequently, the respondents No.1 and 2 are directed to entertain the claim of the petitioner in respect of the Insurance Policy No.321100/48/2009/836 and settle the same in accordance with law. No costs.” So the short question, which arises for consideration in this intra court appeal, is whether learned single judge was justified in allowing the writ petition and in consequence was justified in issuing a writ of certiorari and mandamus in relation to the subject matter of the writ petition At the outset, we may consider it apposite to state that learned Single Judge rightly comprehended the issue which had arisen in the writ petition and rightly dealt with the same by issuing the two writs quoted supra. The issue comprehended by the writ court in the impugned order in the beginning reads as under:

“The legality of the repudiation made by the Insurer-respondent in respect of the claim for indemnification of the damage caused to the shop of the petitioner and the entire goods stocked therein due to the impact created by an explosion, on the ground that such an act of terrorism was not covered by the Insurance Policy, is under challenge in this writ petition.” The facts giving rise to this appeal as stated in the writ petition may be briefly noted. The respondent No.1 herein is the Proprietor of the cloth shop under the name and style of “M/s. Silk Point”, which is located at H.B.Road, Kamarpatty, Guwahati, and is engaged in selling Assamese Cloth such as Pat, Muga, Assam Silk etc. with the loan taken from the respondent No. 2 (Punjab National Bank, Mahabir Market,Guwahati-1) in the year 2005. As required by the Bank-Respondent No.2, the respondent No.1 duly insured his shop and the goods stocked therein with the appellant (Insurer) in accordance with the tie-up arrangement made between the Bank-Respondent No.2 and the appellant. As a consequence, the appellant issued Insurance Policy bearing No.321100/48/2009/836 covering the risk against fire, special perils, burglary, house breaking and money in transit in favour of the Respondent No.1 for the period from 26.9.2008 to 25.9.2009.

On 30.10.2008 at about 11.25 AM a powerful bomb exploded in front of the shop of the Respondent No.1 instantly killing one of its employees and damaging the entire goods stocked in its shop together with the shop due to the impact created by such explosion. The Respondent No.1 informed the Insurer (appellant) about the incident for assessing the damage sustained by him. Siimilarly, the Bank also wrote to them to that effect. However, the appellant by their letter dated 9.2.2009 repudiated the claim on the ground that since no terrorism cover was taken by the Respondent No.1 by paying additional premium and that the FIR, police investigation and survey reports revealed that the damage had been caused by bomb blast, which was in the nature of “an act of terrorism” and hence it was not included among the perils thus insured, and accordingly the same was treated as “No Claim”. It is against this rejection, the respondent No.1 filed the writ petition out of which this appeal arises.

According to the Respondent No.1, the question of not taking terrorism cover did not arise when the appellant never offered to insure an act of terrorism by payment of additional premium. It was the specific case of the Respondent No.1 that when there was no terrorism cover in existence or the same having not been offered to it by the insurer at the time of taking the insurance policy, the insurer-appellant cannot be permitted to repudiate the claim of the Respondent No.1 on such ground. It was also the case of respondent No.1 that the Insurance policy being a comprehensive one covering all kinds of risks including the act of terrorism which was evident from the letter dated 29.1.2009 issued by the Bank with whom the insurer had a tie-up arrangement, the appellant was liable to pay the amount of damage to the respondent No.1 on the strength of policy. It was, therefore, prayed in the writ petition that the impugned letter of repudiation of the claim of the Respondent No.1 was liable to be quashed and the insurer (appellant) should be directed to entertain the claim of the Respondent No.1 and settle the same in accordance with terms of policy and law governing the policy.

The writ petition was opposed by the appellant, who in their affidavit-in-opposition took the stand that the option of availing cover against act of terrorism as a separate peril vested with the Respondent No.1 and not with the appellant: such offer according to the appellant had to come from the Respondent No.1. Since the Respondent No.1 did not choose to take insurance cover against act of terrorism as a separate peril, appellant was not liable to indemnify it for the loss incurred by such act of terrorism. It was contended that while taking the shopkeepers Insurance Policy, the Respondent No.1 could have asked for providing terrorism coverage had it really wanted in which case they would have allowed it to take insurance cover for the act of terrorism on payment of additional premium. It was only after the occurrence of the incident that it sought to claim indemnification by blaming them of not offering terrorism cover. It was contended that the letter dated 20.1.2009 issued by the Bank to the appellant was in the nature of a request to settle the claim of the Respondent No.1 on sympathetic consideration: no assistance could thus be taken by the Respondent No.1 from this letter. It was contended that the mere fact that the proposal form formulated by the appellant had no separate clause for terrorism cover did not mean that there was no provision for terrorism cover. It was pointed out that proposal form of United India Insurance do contain provision for terrorism cover, whereas some Insurance Companies do not have such provision in their proposal form, but that was merely incidental and had no bearing on the case of the Respondent No.1. According to the appellant, while the loss incurred by the Respondent No.1 in the incident was not disputed, the same could not, however, be compensated due to not opting for terrorism cover. It was, therefore, contended that the writ petition had no merit and was liable to be dismissed. The learned Single Judge then framed the following question for determination after setting out the facts. “9. The question to be determined now is, whether it was the duty of the insurer to enquire the existence of clause requiring additional payment of premium for “act of terrorism” or the duty of the insurer to inform the insured about the need to take terrorism cover by payment of extra premium.”

The learned Single Judge then by placing reliance on the law laid down by the Supreme Court in (1987) 2 SCC 654 Skandia Insurance co Ltd vs Kokilaben Chandravadan, (1996) 4 SCC 647 B V Nagaraju vs Oriental Insurance Co Ltd, ( 2000) 2 SCC 734 Modern Insulators Ltd vs Oriental Insurance co. Ltd and ( 2007 ) 4 SCC 105 National Insurance Co. Ltd vs Ishar Das Madan Lal , did not accept the plea raised by the Insurer (appellant herein) and held that since the insurer never informed the insured Respondent No.1 (writ petitioner) about the clause in the contract of insurance requiring them to pay “additional premium” for an “act of terrorism”, the insurer was not entitled to take the benefit of this lapse on their part and, hence, the insured was held entitled to claim enforcement of the policy against the insurer to claim the insured money for the loss caused to him on account of explosion occurred in front of his shop in the light of law laid down by the Supreme Court in aforementioned cases. We consider it apposite to refer to the learned Single judges observations while dealing with this issue in para 9 and 10:

 “9. In the case at hand also, the undisputed fact on record is that the insurer-respondents did not inform the petitioner of the exclusion cause nor was the latter aware of the existence of such a clause. Moreover, the respondent-Bank also in their affidavit corroborated this version of the petitioner. Under the circumstances, the exclusion clause on “act of terrorism”, assuming that there is any, cannot be held applicable to the case of the petitioner. The matter can be looked at from a different angle also. No doubt, the shop of the petitioner was damaged by the splinters of a bomb due to the explosion in the front of the shop of the petitioner vide Fire Attendance Certificate dated 2-5-2009 issued by the Director of Fire Service, Assam Fire Service Organisation, Guwahati (Annexure-IV). The shop and the goods were insured in respect of “Fire and Special Perils”. The term “peril” is defined by P. Ramanantha Aiyars Advanced Law Lexicon, 3rd Edn. as follows: “Peril. ‘Peril means exposure to injury loss, or destruction imminent or impending danger; risk, hazard, or jeopardy. In insurance, any event that causes a loss and which may be included or excluded on an Insurance policy, e.g. an insured peril in a fire policy is fire; and excluded peril is war, (Insurance)”

In Section 1, which is in respect of Building and Contents (Excluding Money and Valuables), the scope of insurance cover is given. The term “Special Peril” means

1. Fire excluding destruction or damage caused to the property insured by

a) (i) its own fermentation, natural heating or spontaneous combustion,

(ii) its undergoing any heating or drying process;

b) burning of property insured by any Public Authority.

2. Lighting.

3. Explosion/Implosion:

Excluding loss, destruction of or damage a) to boilers (other than domestic boilers) economizers or other vessels, machinery or apparatus (in which steam is generated) or their contents resulting from their own explosion/implosion, b) caused by centrifugal forces.

10. Undoubtedly, the shop and goods of the petitioner were destroyed by fire from the explosion which, in turn, was caused by the bomb blast. It may be noted here that the parties had proceeded on the assumption that the bomb blast was, in turn, caused by the act of terrorism. As the bomb blast causing the explosion resulting in the destruction of the shop and goods of the petitioner was caused by the act of terrorism, so argued the learned counsel for the insurer, such destruction caused by the act of terrorism is not covered by the insurance cover. In my judgment, the argument of the insurer-respondents sounds like legalistic hair-splitting. When destruction by explosion by itself is covered by the contract of insurance, I do not think that the cause of the explosion or, for that matter, of the bomb blast is really important; the cause of explosion or the author of the bomb blast which causes the explosion is rather immaterial. The fact remains that the properties admittedly insured by the petitioner have been destroyed/ damaged by the explosion from a bomb blast in front of the shop of the petitioner. There is no evidence that the shop of the petitioner was the target of the act of terrorism. On the contrary, there is every reason to believe that the shop and goods of the petitioner were the unintended or were innocent victims of the act of terrorism. In my judgment, irrespective of the cause of the explosion, the explosion which destroyed the insured properties falls within the four corners of the term “Special Perils” as defined in Section 1 of the Shopkeepers Insurance Policy. In Fire and Motor Insurance by E.T.Hardy Ivamy (1973 Edition) under the heading of “Immateriality of Cause of Fire”, the legal position was sought to be explained in the following manner:

“The object of the contract is to prove for payment of a sum of money, or for some corresponding benefit, to meet a loss or detriment which may be suffered by the insured on the happening of a fire. To carry the investigation, therefore, beyond the cause of the loss, and to cast upon the insured the burden of establishing that the cause of the fire was covered by his contract, would largely defeat this object.

When it is once established that the loss is due to fire within the meaning of the contract, the cause of the fire is, as a general rule, immaterial. The fact that the fire was occasioned by negligence does not exempt the insurer from liability, for one of the objects of the contract of fire insurance, is to prove against the consequences of negligence. It is, therefore, immaterial whether a fire which causes a loss is lighted improperly, or, after being properly lighted, is negligently attended, since the insured both cases is entitled to recover. It is equally immaterial whether the fire is caused by the negligence or servants or strangers, or even by the negligence of the insured himself.” The legal position is succinctly explained by Lord Atkinson, J. in Harris v. Polant, 1841 Kings Bench Division, in the following few words:

“It mattered not whether the property had gone to the fire or the fire had gone to the property. There had been ignition of insured property not intended to by ignited, and the loss fell within the plain words of the policy.” In my judgment, with due respect, the aforesaid observations in the context of English cases are consistent with the principles for construction of beneficent legislation like insurance law. The principles for construing a beneficent legislation such as insurance law also came up for consideration before the Apex Court in Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan, (1987) 2 SCC 654, which was subsequently followed in B.V. Nagaru case (supra), wherein it was held at para 7 of the judgment: (SCC pp.650-651, para 7)

“… When the option is between opting for a view which will relieve the distress and misery of the victims of accidents or their dependants on the one hand and the equally plausible view which will reduce the profitability of the insurer in regard to the occupational hazard undertaken by him by way of business activity, there is hardly any choice. The Court cannot but opt for the former view. Even if one were to make a strictly doctrinaire approach, the very same conclusion would emerge in obeisance to the doctrine of ‘reading down the exclusion clause in the light of the ‘main purpose of the provision so that the ‘exclusion clause does not cross swords with the ‘main purpose highlighted earlier. The effort must be to harmonize the two instead of allowing the exclusion clause to snipe successfully at the main purpose. The theory which needs no support is supported by Carters ‘Breach of Contract vide paragraph 251. To quote: “Notwithstanding the general ability of contracting parties to agree to exclusion clauses which operate to define obligations there exists a rule, usually referred to as the ‘main purpose rule, which may limit the application of wide exclusion clauses defining a promisors contractual obligations. For example, in Glynn v. Margetson and Co.(AC at p. 357), Lord Halsbury, L.C. stated: ‘It seems to me that in construing this document, which is a contract of carriage between the parties, one must in the first instance look at the whole instrument and not at one part of it only. Looking at the whole instrument, and seeing what one must regard … as its main purpose, one must reject words, indeed whole provisions, if they are inconsistent with what one assumes to be the main purpose of the contract. Although this rule played a role in the development of the doctrine of fundamental breach, the continued validity of the rule was acknowledged when the doctrine was rejected by the House of Lords in Suisse Atlantique Societe d Armement Maritime SA v. NV Rotterdamsche Kolen Centrale3. Accordingly, wide exclusion clauses will be read down to the extent to which they are inconsistent with the main purpose, or object of the contract.” It is with these findings, the learned Single judge allowed the writ petition and issued a writ of certiorari in quashing the impugned communication of repudiation and issued mandamus against the appellant directing them to settle the claim in terms of the policy in question which has given rise to filing of this appeal by the insurer. Heard Mr. S Dutta, learned counsel for the appellant. Also heard Mr. GN Sahewalla, learned Senior Counsel and Mr. PK Kalita, learned counsel for the respondents. Learned counsel for the appellant (insurer) mainly reiterated the same submissions, which he had pressed before the learned Single Judge while opposing the writ petition. His main submission was that since the nature of incident which resulted in causing damage to the insured was not covered by the policy of the insurance issued in favour of insured and nor any additional premium was paid by the insured to cover this type of damage caused i.e. due to terrorist act , and hence no benefit of the policy could be claimed by the insured against the appellant in relation to the damage caused to his shop and goods kept therein and hence the writ court was not right in issuing the impugned writs. It is this submission, which learned counsel elaborated with reference to the various definitions and the clauses of the policy. In reply, the learned counsel supported the impugned order and contended that the order passed by the writ court takes a correct view and hence it should be upheld by dismissing the appeal. Having heard the learned counsel for the parties and on perusal of the record of the case, we find ourselves completely in agreement with the reasoning and the conclusion arrived at by the learned single judge and hence we find no merit in this appeal.

In our considered view, learned Single judge rightly comprehended the issue, which had arisen in the writ petition and rightly answered it against the insurer (appellant) by placing reliance on the decisions of the Supreme Court, which had full application to the undisputed facts of the case in hand. Since we concur with the reasoning and the conclusion of the writ court and hence we do not consider it proper to elaborate our reasoning except to the extent necessary. It was not in dispute that firstly, respondent No.1 (writ petitioner/insured) had paid necessary premium and obtained the policy to secure indemnification of their goods kept in its shop, secondly, the policy was in force on the date of the incident and hence it was capable of being enforced against the appellant. Thirdly, the property of Respondent No.1 was damaged due to explosion of bomb which took place in front of its shop which resulted in generating the fire causing total damage to his shop and goods. Fourthly, the appellant did not inform about the exclusion clause relating to act of terrorism in the policy to respondent No.1 and nor was the insured made aware of the existence of any such clause.

Indeed, when the untoward incident of this nature on which the insured had no control took place resulting in catching a fire instantly and causing damage to his insured goods, he could not be deprived of the benefit of policy. The object of the policy was to indemnify the loss sustained by the insured of the goods lost in fire. As mentioned supra, it was an undisputed fact that the goods were lost in fire, which broke out as a result of bomb blast which occurred just in front of his shop. In such a situation, in our considered view, the Respondent No.1 (insured) was entitled to claim the benefit of the policy and claim the loss sustained and the appellant (insurer) had no right to repudiate the claim of the insured (Respondent No.1) arising out of such incident. In the light of these undisputed facts, which are now matters of record, we are of the considered view that the insured was entitled to get the benefit of the beneficial legislation in his favour and the same was rightly given to him by the writ court. Learned counsel for the appellant cited several authorities in support of his submissions and also placed reliance on certain clauses of the policy but having considered the issue keeping in view the law laid down by the Supreme Court in the aforementioned cases, we do not wish to deal with the cases cited at the Bar in detail. They are distinguishable. In the light of foregoing discussion, we are of the considered view that the writ court was fully justified in entertaining the writ petition and issuing the aforementioned two writs against the appellant. The appeal is thus found to be devoid of any merit and hence it is dismissed. No cost.