Summary
The Supreme Court upheld the warehouse operator’s fire-insurance claim, finding that the fire occurred within the insured premises and that repudiation for negligent roof work lacked a sound evidentiary basis. Survey reports were not conclusive and the insurer could not add grounds beyond its repudiation letters. The customs-duty component was directed to be paid to the Customs Department to prevent unjust enrichment.
Issues
- Whether the insurer could defend repudiation on additional grounds raised during the proceedings.
- Whether the burnt warehouse was insured and roof repairs increased the risk so as to terminate cover.
- Whether the survey reports justified attributing the fire to the insured’s negligence.
- Whether the customs-duty component was recoverable and to whom it should be paid.
Provisions considered
- Section 64-UM(4), as reproduced in the judgment, Insurance Act, 1938The requirement for an approved survey assessment did not make its conclusions final or binding; contrary evidence could justify departure. (¶ 42–47)
- General condition 3(a), Fire insurance policyEssential roof repairs to prevent leakage were not, on this record, an alteration increasing the insured risk and terminating cover. (¶ 36–37)
- Sections 22 and 23, Customs Act, 1962The Court distinguished the warehouse custodian from an importer claiming abatement or remission, considering its undertaking and the outstanding duty demand in rejecting unjust enrichment. (¶¶ 51, 53–55)
- Regulation 4, Public Warehouse Licensing Regulations, 2016The licensee’s insurance and payment undertakings supported inclusion of the customs-duty risk; direct payment of that component to Customs avoided enrichment of the custodian. (¶¶ 52, 58)
Held
- An insurer cannot introduce additional grounds for rejecting a claim beyond those stated in its repudiation letter. The two stated grounds concerned the insured location and negligence during roof works. (¶ 31–33)
- Policy documents, the licence, the lease and official communications established that the damaged warehouse was within the insured premises. Necessary roof repairs to address leakage did not themselves establish an alteration increasing insured risk. (¶ 34–37)
- The forensic account linking the fire to welding was inconclusive, inadequately explained the time gap and lacked evidence of sparks falling on stored chemicals. The consistent short-circuit reports better fitted the circumstances; negligence by the insured was not established. (¶¶ 38–41, 46–48, 56)
- An approved surveyor’s report is important but neither sacrosanct nor binding on insurer or insured. Reliance on a survey report derived from the inconclusive forensic findings was unsafe here. (¶ 42–47)
- Applying Canara Bank to this insured fire loss, uncertainty about the precise cause did not allow avoidance of liability where the insured had not caused the fire. The policy claim was upheld on the record. (¶¶ 48–50, 56)
- The custodian’s undertaking and customs demand defeated the unjust-enrichment objection. The customs-duty component was nevertheless to be discharged directly to the Customs Department. (¶¶ 51–55, 58)
Result
Insurer’s appeal dismissed and NCDRC’s award upheld, with the customs-duty component payable directly to the Customs Department. Other legal consequences of upholding the claim to follow. Parties to bear their own costs.