IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD TUESDAY THE NINETEENTH DAY OF APRIL TWO THOUSAND AND ELEVEN HON’BLE SRI JUSTICE B. PRAKASH RAO AND HON’BLE SRI JUSTICE G. BHAVANI PRASAD A.S. No.2159 of 2002 and Cross Objections A.S. No.2159 of 2002: Between: Senior Divisional Manager, New India Assurance Company Limited, Visakhapatnam and others .. Appellants AND Divisional Forest Officer, Logging Division, Narsipatnam, Visakhapatnam District .. Respondent Cross Objections: Divisional Forest Officer, Logging Division, Narsipatnam, Visakhapatnam District .. Cross Objector AND Senior Divisional Manager, New India Assurance Company Limited, Visakhapatnam and others .. Respondents COMMON JUDGMENT: (per G. Bhavani Prasad, J) The appeal and the cross objections are directed against the order and decree in A.O.S. No.23/97/FS before the Agent to Government and Collector, Visakhapatnam, dated 19-06-2002. The parties are referred to herein as they are arrayed in the suit. The plaintiff sought for recovery of Rs.13,49,238/- with interest at 12 per cent per annum on the principal sum of Rs.6,34,338/- from the date of the suit till the date of realization and costs on the strength of the contract of insurance for Rs.12,00,000/- for a period of three months from 31-03-1986 with the defendants covering two forest coupes namely Sadigunta TCWC IV/82-83 and Sadigunta TCWC V/83-84. The plaintiff paid Rs.4,516/- towards premium and the defendants issued cover note No.210916 dated 31-03-1986 and insurance policy No.12583001351761. The forest coupes had a fire accident on 01- 04-1986 due to lighted cigar thrown by a pedestrian. In spite of the Forester Incharge extinguishing the fire with the help of others, wood and fuel worth Rs.6,34,438/- were burnt. The insurance company was informed about the accident on 09-04-1986 and the independent surveyor of the insurance company conducted preliminary and final survey of the accident spot after submission of the claim forms. The defendants delayed settlement of the claim alleging pendency of investigation, shift of jurisdiction, shift of records and not tracing the records. The correspondence went on for over six years from 1986 to 1992 and ultimately by the letter, dated 24-06-1992, the defendant/insurance company repudiated the claim. When the plaintiff asked the insurance company to give reasons and to reconsider its decision, the insurance company informed on 26-08-1992 that the independent surveyor and the independent investigator appointed by it came to the conclusion that there was no adequate proof to ascertain that the loss occurred subsequent to the assumption of risk under the fire policy. The insurance company refused to review its decision and hence, the suit. The defendants resisted the claim in their written statement contending that the plaintiff was not competent to file the suit and that the premium paid was insufficient to cover the risk. The dispute between two Government organizations should be referred to a High Power Committee appointed by the Government and as per the arbitration clause in the insurance agreement, the matter had to be brought before an arbitrator. The claim was time barred from the date of repudiation of the claim and the plaintiff is not entitled to any interest or unliquidated damages. The trial Court proceeded with the suit on the following issues: 1. Whether there was a valid insurance policy of fire to cover the risk at the time of accident ? 2. Whether there was any loss of insured property to the plaintiff, if so, what extent ? 3. Whether the suit was filed within the period of limitation ? and 4. Whether the defendants failed to discharge the contractual obligation, if so, what are the remedies (including the payment of interest claimed by the plaintiff) ? During the trial, P.Ws.1 to 4 and D.W.1 were examined and Exs.A.2 to A.22 were marked. The Agent rendered the impugned order referring to the evidence of the Divisional Forest Officer as P.W.1 reiterating the suit claim and the evidence of the other Divisional Forest Officer as P.W.2. Both P.Ws.1 and 2 denied not paying the complete premium or the suit being barred by limitation and both of them did not go through the report of the surveyor. The then Forest Range Officer deposed as P.W.3 about the fire accident on 01-04-1986, his report on 04-04-1986 and estimation of the loss of timber and fuel in his letter dated 28-06-1986. The Forester Sri Devakrupa present at the time of the accident was said to be on leave on health grounds. He stated that even fire engines cannot go to the spot. P.W.4, a timber maistry by profession, claimed to be present on the spot on 01-04-1986 when the Forester and 20 to 30 others tried to extinguish the fire. The law officer of the insurance company as D.W.1 deposed about the repudiation of the claim on 24-06-1992 and he admitted that no record was filed to show that the accident was prior to the assumption of risk. He did not file the survey report and he was unaware of the issuance of the cover note or the policy. He identified the true copy of policy filed and he stated the fire to be in the early hours of 31-03-1986. He also admitted that the ground for repudiation was not mentioned in the letter, dated 24-06-1992. The learned Agent then referred to the written arguments of both sides. The learned Agent accepted the cover note dated 31-03-1986 and the fire policy Ex.A.4 and that the period of insurance was from 31-03-1986 for three months and hence, there was a valid insurance policy of fire to cover the risk at the time of the accident. The learned Agent also accepted based on Exs.A.11 and A.12 that the loss incurred was of a value of Rs.6,34,338/- as against the insured sum of Rs.12,00,000/-. The learned Agent with reference to the question of limitation referred to Ex.A.10 letter dated 24-06-1992 and Ex.A.9 letter dated 26-08- 1992 from the insurer to the plaintiff and felt that the letter, dated 24-06-1992 was not the final repudiation of the contract, but it was only the letter dated 26-08-1992 and as the letter was received by the plaintiff on 06-09-1992, the limitation of three years under Article 44(b) of the Limitation Act, 1963 starts to run from that date. The learned Agent, hence, considered the suit to be within time. The learned Agent also found fault with the insurer for not processing the claim for about five years in spite of preliminary and final survey being completed by 15-04-1986 to 17-04-1986 as evidenced by Exs.A.13 and A.14. While the defendants were, hence, considered to have failed to discharge their contractual obligations, the learned Agent considered it just and legal to award 12 per cent per annum interest from the date of the accident till the date of the suit. The learned Agent noted that the surveyor of the defendants acknowledged the claim forms only on 29-10-1986 in respect of the accident on 01-04-1986. The defendants wrote on 21-08-1991 that they could not trace the correspondence at their offices and sought for copies and again in Ex.A.18 dated 20-12-1991, they sought for another set of claim forms. As the defendants failed to prove that the fire accident occurred prior to the commencement of the insurance coverage, the learned Agent found the plaintiff to be entitled to the value of the goods lost with interest up to the date of the suit. A decree for Rs.13,49,149/- was granted while refusing further interest till the date of realization, as the plaintiff was adequately compensated. The insurer through its officers filed the appeal contending that the repudiation of the claim was communicated to the plaintiff by a letter dated 24-06-1992 received by the plaintiff on 27-06- 1992 and the suit filed on 23-08-1995 was barred by time. The letter dated 26-08-1992 is only intimating that the defendants were unable to review their decision as requested by the plaintiff. The fire accident was not reported to the police or the fire brigade on 31- 03-1986 and the insurer was informed only after ten days. Even the Insurance Inspector stationed at Narsipatnam was not informed and hence, it ought to have been considered that the plaintiff approached the insurer for the insurance policy only after the damage due to the fire accident. There was no proper account for quantification of the loss and the plaintiff and his staff were negligent in taking any precautionary measures to prevent any fire accident. The policy is subject to reference to an arbitrator and the suit is in violation of the terms and conditions of the policy. No interest at 12 per cent per annum could have been awarded and hence, the appellants desired the impugned order to be reversed. The plaintiff/respondent filed cross-objections contending that interest ought to have been granted from the date of the suit till the date of realization and the entitlement is clear under Section 34 of the Code of Civil Procedure pendente lite and thereafter till realization at least at 12 per cent per annum. Costs also shall follow the event and the order and decree of the learned Agent did not give any reasons for not granting costs. Hence, the cross objections requesting for grant of interest and costs. Heard the learned counsel for both parties. The points that arise for consideration herein are: 1. Whether the suit is barred by limitation ? 2. Whether the fire accident and the consequential damage was during the period of insurance coverage or earlier ? 3. Whether the plaintiff is entitled to interest till realization and costs ? 4. To what relief ? Point No.1: In New India Assurance Co. Ltd. v. B.N. Sainani[1], the Apex Court was considering Article 44(b) of the Limitation Act, 1963, under which the period of limitation was prescribed as three years from the date of occurrence causing the loss or where the claim on the policy of insurance is denied either partly or wholly, the date of such denial. The Apex Court pointed out that the claim in the policy should be lodged within a reasonable time, which would depend on the facts and circumstances of each case and the cause of action arises on the date of denial or repudiation of the policy by the insurer. In the present case, the Division Office of the insurer informed the plaintiff by a letter dated 24-06-1992 that it was ascertained that the loss occurred prior to the commencement of the insurance coverage and therefore, the competent authority has decided to repudiate the claim. The letter further added that the insurer reserved its rights to repudiate the claim on many (any) other grounds other than those stated above. Again the insurer addressed a letter dated 26-08-1992 to the plaintiff referring to a letter dated 20-07-1992 from the plaintiff requesting the insurer to give reasons for their repudiation of their claim. The letter dated 26-08-1992 reiterated that the decision to repudiate the claim was taken after careful consideration of various factors involved as already informed in their letter, dated 24-06-1992. The insurer further stated that they have appointed independent surveyor and independent investigator to examine the matter thoroughly and basing on their observations and remarks, they arrived at the conclusion that there is no adequate proof to ascertain that the loss had occurred subsequent to assumption of risk under the concerned fire policy. What all the insurer had informed in the letter dated 26-08-1992 is that in the light of the above circumstances, they regret to inform that they were unable to review their decision to repudiate the plaintiff’s claim. Thus, the plain grammatical meaning conveyed by the letter dated 24-06-1992 is that the competent authority of the insurer has decided to repudiate the claim, as the data collected by the insurer led to the ascertainment that the loss occurred prior to the commencement of the insurance coverage. The insurer reserving its rights to repudiate the claim on any other grounds other than specified is only by way of abundant caution to have an opportunity to fortify the repudiation on any other grounds also, but the same is no indication of any continuing enquiry or any need for any further enquiry or any vacillation or indecision on the part of the insurer. The letter dated 26-08-1992 is not a letter of repudiation itself but it is only a response to the plaintiff to give reasons for repudiation. The reasons for repudiation were only elaborated and reiterated and what was conveyed was the inability to review the decision to repudiate but not conveying any decision to repudiate through that letter only. In the impugned order, the learned Agent read an uncertainty, doubt and absence of firmness about the cause or reason for repudiation and any such inferences could not have been justifiably drawn from the letter dated 24-06-1992. Similarly, the learned Agent opined that the insurer categorically expressed the final repudiation of the claim in the letter dated 26-08-1992, which construction is opposed to the letter and spirit of the letter which only regretted the inability of the insurer to review its decision to repudiate the claim communicated earlier for the reasons more elaborated in the subsequent letter. As the time from which the period of limitation under Article 44(b) of the Limitation Act 1963 begins to run is from the date of denial of the claim on the policy either partly or wholly, the limitation must be considered to have run from 24-06-1992, the date of letter of repudiation or 27-06-1992, the date of the receipt of the said communication by the plaintiff. In fact, the plaint itself referred to the repudiation of the claim by a letter dated 24-06- 1992, the plaintiff seeking reasons for the same and the insurer furnishing such reasons in the letter dated 26-08-1992 expressing its inability to review the decision to repudiate. Any legal opinion of the Assistant Government Pleader, Narsipatnam in Ex.A.21 cannot alter the nature of the contents of the two letters or the legal consequences that flow from them. Hence, the suit filed on 23-08-1995 is clearly barred by limitation. Point No.2: Admittedly, the insurance coverage under the cover note and the insurance policy were from the afternoon of 31-03-1986 and the fire accident was claimed to have occurred on the very next day 01-04-1986. The payment of premium and the issuance of the cover note on 31-03-1986 were as though the parties had some premonition of a pedestrian likely to be throwing a lighted cigar resulting in the fire accident on the very next day. P.W.1 and P.W.2, the Divisional Forest Officers, held office in the jurisdiction much later and even P.W.3, the then Forest Range Officer reached the accident spot only on 04-04-1986 and not earlier. Sri Devakrupa, Forester, who was the man on the spot, was not examined on grounds of illhealth and it is not known as to why he could not have been examined after return from medical leave or on commission. While the first informant Devakrupa was, thus, not a witness, the Forest Range Officer, P.W.3, informed even the fire department only on 03-04-1986 by a telegram. P.W.4 happened to be a chance witness claiming to have gone to the accident spot on 01-04-1986 to receive payment of his wages as maistry and what all he stated was that the Forester and 20 to 30 people were trying to extinguish the fire by the time he went to the spot on 01-04-1986. His evidence does not rule out the possibility of the fire accident happening on 31-03-1986 itself. Though D.W.1 had no personal knowledge about the events, his claims that the insurer was informed about the accident only after ten days and that even the Insurance Inspector stationed at Narsipatnam was not informed about the accident, were not denied. While there is also no specific evidence as to what precautionary measures were taken by the staff of the plaintiff to prevent any fire accident or what steps were taken since the commencement of the fire to mitigate the damage, on the evidence before the learned Agent, it cannot be said that the probability of the fire commencing on 31-03-1986 itself was ruled out, throwing a grave doubt on the presence or absence of insurance coverage for the damage that occurred under the fire policy in question. Though undoubtedly the insurer defaulted in communicating its final response to the claim within a reasonable time and had ultimately repudiated the claim relating to the fire accident on 01-04-1986 only on 24-06-1992, the delay does not clothe the plaintiff with any legal rights and the claims of the insurer about the independent surveyor and independent investigator finding no adequate proof about the occurrence of the loss subsequent to the assumption of risk under the relevant fire policy cannot be ruled out. As broad human probabilities arising out of the evidence form the basis for any conclusion in a civil cause, the plaintiff cannot be considered to have convincingly proved the accident and loss to be during the period of insurance coverage. Point No.3: It is true that under Section 34 of the Code of Civil Procedure, 1908, the plaintiff would have been entitled to further interest from the date of the suit till the date of decree and from the date of the decree till the date of realization if it was found entitled to the suit claim. It is also true that the plaintiff would have been entitled to the costs of the suit under Section 35 of the Code of Civil Procedure, 1908, if it succeeded in the suit claim, as the principle is that costs shall follow the event, but for any reasons to the contrary. However, as it is concluded that the suit is barred by limitation and the loss or damage were not clearly probablised to be during the period of insurance coverage, the plaintiff fails in the suit claim and hence, any entitlement to pendente lite and post decreetal interest or costs does not arise. Point No.4: In view of the conclusions reached above, the appeal has to succeed and the impugned order and decree have to be reversed, but in the peculiar circumstances of the case involving public agencies on both sides, without costs. Therefore, the order and decree in A.O.S. No.23/97/F5 on the file of the Court of the Agent to Government and Collector, Visakhapatnam, dated 19-06-2002 are set aside and A.O.S. No.23/97/F5 on the file of the Court of the Agent to Government and Collector, Visakhapatnam is dismissed without costs and the appeal is allowed accordingly without costs. _________________ B. PRAKASHRAO, J ____________________ G. BHAVANI PRASAD, J Date: 19-04-2011 Svv [1] AIR 1997 SUPREME COURT 2938