W.P. (C) No. 7569/2007 Page 1 of 33 IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment Delivered on: February, 20th, 2009 W.P. (C) No. 7569/2007 # New India Assurance Limited .... Petitioner Through : Mr. A.S. Chandhiok, Senior Advocate with Mr. Atul Y. Chitale, Ms. Sunaina Dutta, Ms. Shweta Kakkad and Ms. Abhiruchi, Advocates Versus $ Union of India and Others .... Respondents Through : Mr. Yash Mishra and Mr. Vineet Malhotra, Advocates for respondentsno. 1 and 2 Mr. Yashobant Das, Senior Advocate with Mr. Kul Bharat, Advocate for respondent no. 3 CORAM: HON'BLE MR. JUSTICE G.S. SISTANI 1. Whether reporters of local papers be allowed to see the judgment? Yes 2. Whether the judgment be referred to the Reporter? Yes 3. Whether the judgment be reported in the Digest? Yes G.S. SISTANI, J. 1. The lis in the present petition primarily appertains to the quantum of damages assessed in an insurance claim brought against the petitioner, a general insurance company having its head office at Mumbai and branch office at Tirupati. 2. The facts and circumstances leading to the present petition are undisputed and may be outlined as under: 2.1 M/s. J.P. Exports, the respondent no. 3 herein, purchased certain fire policies from the petitioner for insuring the stock of Red Sanders Wood in its godown W.P. (C) No. 7569/2007 Page 2 of 33 located at Andhra Pradesh. On 29.6.1996, an accidental fire broke out at the said premises, the fact of which was communicated by the respondent no. 3 to the petitioner vide a written notice dated 4.7.1996. On account of the loss suffered due to the accidental fire, a claim for damages to the tune of Rs. 40.17 crores was preferred by the respondent no. 3 against the petitioner. This claim, however, was repudiated by the petitioner vide letters dated 21.5.2001 and 1.6.2001, inter alia, on the ground of non-compliance with the terms and conditions of the fire policies. 2.2 Consequently, the respondent no. 3 filed an appeal against the repudiation of its claim before the Insurance Regulatory Development Authority, the respondent no. 2 herein and hereinafter, “the IRDA”. Vide letter dated 31.7.2002, two surveyors were appointed by the IRDA for survey and loss assessment as well as for re-examination of the quantum of damages claimed by the respondent no. 3. Inasmuch as the two surveyors appointed by the IRDA disagreed vastly on the quantum of claim payable by the petitioner, they filed their reports separately - one assessing the claim of the respondent no. 3 at Rs. 21,01,00,000/- and the other at Rs. 2,21,34,819/-. After reviewing the reports filed by the surveyors as well as after seeking the comments of the petitioner and its surveyors on the said review, the IRDA vide order dated 2.6.2003 directed the petitioner to settle the claim at Rs. 2,21,34,819/-. 2.3 Against the order dated 2.6.2003 passed by the IRDA, the petitioner preferred an appeal before the Appellate W.P. (C) No. 7569/2007 Page 3 of 33 Authority constituted by the Union Ministry of Finance, the respondent no. 1 herein. Vide order dated 5.3.2004, the Appellate Authority directed the IRDA to appoint two surveyors for a joint report on the claim for the reason that their existed a substantial difference in the amounts of claim awarded by the previous two surveyors. The direction made in the order dated 5.3.2004 was subsequently re-iterated by the Appellate Authority in its order 30.9.2005, wherein, a further direction was also issued to the petitioner to make payment of Rs. 2,21,34,819/- to the respondent no. 3, which payment was, however, made subject to the findings of the IRDA on the basis of the fresh joint survey report. 2.4 Accordingly, the IRDA appointed two new surveyors, who, in their joint report, submitted on 9.10.2006, assessed the net loss suffered by the respondent no. 3 at Rs. 7,95,50,300/-. However, vide order dated 1.2.2007, the IRDA rejected the assessment made in the joint report and directed the petitioner to make payment of Rs. 2,21,34,819/- to the respondent no. 3. 2.5 The stand taken by the IRDA in its order dated 1.2.2007 was, however, negatived by the Appellate Authority in its order dated 20.6.2007, and consequently, the petitioner was directed to pay a sum of Rs. 7,95,50,300/- less the amount of Rs. 2,21,34,819 already paid on account to the respondent no. 3. 2.6 Aggrieved, the petitioner filed the present petition under Article 226 of the Constitution of India, seeking, inter alia, that the orders dated 5.3.2004 and 20.6.2007 passed by the Appellate Authority be set aside. W.P. (C) No. 7569/2007 Page 4 of 33 3. The respondent no. 3, at the outset of the matter, has a taken a strong objection to the maintainability of the present petition on the ground of lack of territorial jurisdiction. The said apart, the respondent no. 3 has also filed an application seeking vacation of an interim stay that was granted by this Court to the petitioner on the operation of the impugned orders dated 5.3.2004 and 20.6.2007. 4. By this judgment, I propose to dispose of the issue with respect to the maintainability of the present petition as well as the application seeking vacation of the interim stay granted on the operation of the impugned orders dated 5.3.2004 and 20.6.2007. 5. Before dealing with the rival contentions of both parties on the issue of maintainability of the present petition, it will be useful to refer to the provisions of Article 226 of the Constitution of India, reproduced herein below: “226. Power of High Courts to issue certain writs.- (1) Notwithstanding anything in article 32 [***], every High Court shall have powers, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose. W.P. (C) No. 7569/2007 Page 5 of 33 (2) The power conferred by Clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories. (3) Where any party against whom an interim order, whether by way of injunction or stay or in any other manner, is made on, or in any proceedings relating to, a petition under Clause (1), without - (a) furnishing to such party copies of such petition and documents in support of the plea for such interim order; and (b) giving such party an opportunity of being heard, makes an application to the High Court for the vacation of such order and furnishes a copy of such application to the party in whose favor such order has been made or the counsel for such party, the High Court shall dispose of the application within a period of two weeks from the date on which it is received or from the date on which the copy of such application is so furnished, whichever is later, or where the High Court is closed on the last day of that period, before the expiry of the next day afterwards on which the High Court is open; and if the application is not so disposed of, the interim order shall, on the expiry of that period, or, as the case may be, the expiry of the said next day, stand vacated. (4) The power conferred on a High Court by this article shall not be in derogation of the power W.P. (C) No. 7569/2007 Page 6 of 33 conferred on the Supreme Court by Clause (2) of Article 32.” 6. Mr. A.S. Chandhiok, learned senior counsel for the petitioner, has resisted with vehemence the objection raised by the respondent no. 3 to the exercise of jurisdiction by this Court. It is contended that a part of the cause of action leading to the present petition has arisen in Delhi thereby vesting this Court with territorial jurisdiction under clause (2) of Article 226 of the Constitution of India. Learned senior counsel, in this connection, has relied on the following facts: I. The Appellate Authority, whose orders are the subject- matter of the present petition, is located in Delhi; II. The appeal dated 26.6.2003, against the order dated 2.6.2003 of the IRDA, was filed by the petitioner before the Appellate Authority in Delhi; III. The letter of the respondent no. 3, dated 29.12.2003, qua hearing of the appeal made by the petitioner against the orders of the IRDA, was received at the office of the Appellate Authority in Delhi; IV. The reply of the IRDA to the appeal dated 26.6.2003, and the rejoinder of the petition thereto, were both filed before the Appellate Authority in Delhi; V. The proceedings with respect to the appeal dated 26.6.2003 took place before the Appellate Authority in Delhi; VI. The order dated 5.3.2004, disposing of the proceedings with respect to the appeal dated 26.6.2003, was passed by the Appellate Authority in Delhi; W.P. (C) No. 7569/2007 Page 7 of 33 VII. The application dated 18.2.2005, seeking re-call and modification of the order dated 5.3.2004, was filed by the IRDA before the Appellate Authority in Delhi; VIII. The reply to the IRDA’s application dated 18.2.2005 was filed by the petitioner before the Appellate Authority in Delhi; IX. The appeal dated 30.9.2005, against the order dated 5.3.2004, was filed by the IRDA before the Appellate Authority in Delhi; X. The letter of the respondent no. 3, dated 17.2.2007, qua rejection by the IRDA of the re-assessment of the claim done by the new set of surveyors, was received at the office of the Appellate Authority in Delhi; XI. The impugned order dated 20.6.2007, disposing of the proceedings with respect to the letter dated 17.2.2007, was passed by the Appellate Authority in Delhi. 7. Per contra, Mr. Yashobant Das, learned senior counsel for the respondent no. 3, has vehemently argued that neither of the aforementioned facts nor circumstances can be considered as a cause of action, much less a part thereof, for investing jurisdiction in this Court to entertain the present petition. It is contended that if the petitioner is desirous of filing a writ petition, the appropriate High Court holding territorial jurisdiction in the matter would be the Andhra Pradesh High Court inasmuch all substantial, material as well as integral facts and circumstances, constituting the cause of action necessary to decide the present petition, have arisen in the State of Andhra Pradesh. Learned senior counsel, in this connection, has relied on the following facts: W.P. (C) No. 7569/2007 Page 8 of 33 I. The respondent no. 3 has its principle place of business at the Chittoor District of Andhra Pradesh; II. All the fire policies between the petitioner and respondent no. 3 were executed at Tirupati; III. The accidental fire took place at the premises of respondent no. 3 located at the Chittoor District of Andhra Pradesh; IV. The written notice dated 4.7.1996, communicating the fact of the accidental fire to the petitioner, was issued by the respondent no. 3 from its office at the Chittoor District of Andhra Pradesh; V. The Fire Claim Form dated 24.10.1996 was submitted by the respondent no. 3 at the branch office of the petitioner at Tirupati; VI. The survey report dated 31.12.1997, prepared jointly by the two private surveyors appointed by the respondent no. 3, was submitted at the branch office of the petitioner at Tirupati; VII. The letter dated 21.5.2001, stating the grounds for repudiation of the claim of the respondent no. 3, was dispatched from the branch office of the petitioner at Tirupati to the office of the respondent no. 3 at the Chittoor District of Andhra Pradesh; VIII. The letter dated 1.6.2001, stating the additional grounds for repudiation of the claim of the respondent no. 3, was dispatched from the branch office of the petitioner at Tirupati to the office of the respondent no. 3 at the Chittoor District of Andhra Pradesh; IX. The letter dated 31.7.2002, appointing two surveyors for survey and loss assessment as well as for re- examination of the quantum of damages claimed by W.P. (C) No. 7569/2007 Page 9 of 33 the respondent no. 3, was dispatched from the head office of the IRDA at Hyderabad; X. The survey reports, prepared by the two surveyors appointed by the IRDA, were submitted at the head office of the IRDA at Hyderabad; XI. The letter dated 26.2.2003, seeking comments of the petitioner on the review by the IRDA of the quantum of damages assessed by the surveyors, was dispatched from the head office of the IRDA at Hyderabad; XII. The letter dated 7.4.2003 - reminder to the letter dated 26.2.2003 - was dispatched from the head office of the IRDA at Hyderabad; XIII. The order dated 2.6.2003, directing the petitioner to settle the claim at Rs. 2,21,34,819/-, and which also later became the subject-matter of appeal before the Appellate Authority, was passed by the IRDA at its head office at Hyderabad; XIV. The survey report dated 9.10.2006, prepared jointly by the new set of surveyors appointed by the IRDA pursuant to the directions of the Appellate Authority, was submitted at the head office of the IRDA at Hyderabad; XV. The order dated 1.2.2007, rejecting the re-assessment of the claim done by the new set of surveyors, and which also later became the subject-matter of appeal before the Appellate Authority, was passed by the IRDA at its head office at Hyderabad. 8. Learned senior counsel for the respondent no. 3 has further buttressed his argument by relying, inter alia, upon the decision of the Apex Court in State of Rajasthan and Others v. M/s Swaika W.P. (C) No. 7569/2007 Page 10 of 33 Properties and Another1. In this case, the respondent company, whose registered office was at Calcutta (now, Kolkata), was served with a notice issued by the Special Town Planning Officer of Jaipur for acquisition of the former’s immovable property located at Jaipur for the public purpose of a development scheme. In response thereto, the representatives of the respondent company appeared before the Special Town Planning Officer in several hearings, seeking, inter alia, exemption of their said property from acquisition. However, the Special Town Planning Officer, on being satisfied that the land was not needed by the respondent company bona fide, rejected their prayer for its release and recommended that the entire land be acquired by the State of Rajasthan. This was followed by a notification issued by the State of Rajasthan under section 52(1) of the Urban Land (Ceiling and Regulation) Act of 1976, and accordingly, the immovable property belonging to the respondent company came to be vested in the State of Rajasthan free from all encumbrances. The respondent company thereupon filed a petition in the High Court of Calcutta challenging the said notification. The High Court of Calcutta entertained the petition, issued rule nisi and passed an ad interim ex parte prohibitory order restraining the State of Rajasthan and the concerned authorities from taking any steps in terms of the impugned notification. The question before the Supreme Court in appeal was whether the service of the notice issued by the 1(1985) 3 SCC 217. W.P. (C) No. 7569/2007 Page 11 of 33 Special Town Planning Officer at the registered office of the respondent company at Calcutta was sufficient to invest the High Court of Calcutta with jurisdiction to entertain the petition challenging the notification issued by the State of Rajasthan. Speaking for the Bench, A.P. Sen, J. observed in para 8 of the judgment, “[t]he answer to the question whether service of notice is an integral part of the cause of action within the meaning of Article 226 (2) of the Constitution must depend upon the nature of the impugned order giving rise to a cause of action”. It was, thus, observed that the mere service of notice on the respondent company at its registered office at Calcutta could not give rise to a cause of action within that territory, “unless the service of such notice was an integral part of the cause of action”. Observing that it was not necessary for the respondents to plead the service of notice on them by the Special Town Planning Officer of Jaipur for the quashing of the impugned notification issued by the State Government of Rajasthan, the Apex Court finally ruled that inasmuch as “[t]he entire cause of action culminating in the acquisition of the land under Section 52(1) of the Act arose within the State of Rajasthan i.e. within the territorial jurisdiction of the Rajasthan High Court at the Jaipur Bench”, the High Court of Calcutta had no jurisdiction to entertained the petition under clause (2) of Article 226 of the Constitution of India. W.P. (C) No. 7569/2007 Page 12 of 33 9. In similar vein, the decision in Alchemist Ltd. and Another v. State Bank of Sikkim2 has been relied upon to drive home the point that a transaction, in order to invest a High Court with territorial jurisdiction to entertain a petition under clause (2) of Article 226 of the Constitution, must constitute a “part of the cause of action” resulting in the filing of the petition. In this case, the appellant company, whose registered office was at Chandigarh, submitted its formal proposal for a strategic business partnership with the registered corporate office of the respondent bank at Sikkim. Subsequently, the appellant company was informed that its proposal was accepted in principle subject to consideration and approval of the Government of Sikkim. In pursuance thereof, the appellant company, in order to show its bona fides, deposited a sum of Rs. 4.50 crores in a fixed deposit with the respondent bank. However, the appellant company thereafter received a communication whereby it was informed by the respondent bank that the Government of Sikkim had not approved of its proposal. The appellant company, therefore, filed a writ petition before the Punjab and Haryana High Court at Chandigarh. However, the High Court, without going into the merits of the matter, dismissed the writ petition on the ground that the facts which had been pleaded by the appellant company could not be said to constitute a part of cause of action necessary for conferring territorial jurisdiction under clause (2) of Article 226 of the Constitution of India. Upholding the 2(2007) 11 SCC 335. W.P. (C) No. 7569/2007 Page 13 of 33 stand taken by the High Court, the Apex Court observed at para 37, “[i]t is no doubt true that even if a small fraction of the cause arises within the jurisdiction of the court, the court would have territorial jurisdiction to entertain the suit/petition. Nevertheless it must be a part of cause of action, nothing less than that”. As to how the expression “part of cause of action” was to be construed, it was observed, “[f]or the purpose of deciding whether facts averred by the appellant-petitioner would or would not constitute a part of cause of action, one has to consider whether such fact constitutes a material, essential, or integral part of the cause of action”. In other words, “[t]he fact which is neither material nor essential nor integral part of the cause of action would not constitute a part of cause of action within the meaning of clause (2) of Article 226 of the Constitution”. 10. It is, therefore, argued by learned senior counsel for the respondent no. 3 that none of the facts and circumstances pleaded by the petitioner in support of its case can be considered as a part of the cause of action, let alone being a material, essential or integral part thereof, necessary for vesting this Court with the requisite territorial jurisdiction in terms of clause (2) of Article 226 of the Constitution of India. 11. Learned senior counsel for the petitioner, in order to foil the aforesaid argument put forth on behalf of the respondent no. 3, has heavily relied upon the judgment in Kusum Ingots & Alloys Ltd. v. Union W.P. (C) No. 7569/2007 Page 14 of 33 of India and Another3, wherein, the Apex Court, while delving at length on the relevant facts constituting a cause of action, conclusively observed that in para 18 “[t]he facts pleaded in the writ petition must have a nexus on the basis whereof a prayer can be granted. Those facts which have nothing to do with the prayer made therein cannot be said to give rise to a cause of action”. Relying on these observations, it is contended that the prayer made by the petitioner before this Court is singularly directed against the impugned orders dated 5.3.2004 and 20.6.2007, and as the said orders have been passed by the Appellate Authority in Delhi, therefore, at least a part of the cause of action leading to the present petition has certainly arisen within the territorial jurisdiction of this Court. 12. Having submitted that the passing of the impugned orders dated 5.3.2004 and 20.6.2007 by the Appellate Authority in Delhi constitutes a part of the cause resulting in the present petition, learned senior counsel for the petitioner has next invited the attention of this Court to paragraph 10 of the judgment in Kusum Ingots & Alloys Ltd. (supra), wherein, while interpreting clause (2) of Article 226 of the Constitution of India, it was held that “even if a small fraction of cause of action accrues within the jurisdiction of the Court, the Court will have jurisdiction in the matter”. While explaining this point, the decision in Sri Nasiruddin v. State Transport Appellate 3(2004) 6 SCC 254. W.P. (C) No. 7569/2007 Page 15 of 33 Tribunal4 is cited as an illustrative authority, which decision, it is submitted, was described by the Apex Court in Kusum Ingots & Alloys Ltd. as “an authority for the proposition that the place from where an appellate order or a revisional order is passed may give rise to a part of cause of action(,) although the original order was at a place outside the said area” (para 25) and further, in such a case “when the original authority is constituted at one place and the appellate authority is constituted at another, a writ petition would be maintainable at both the places” (para 27). Explaining the rationale behind vesting jurisdiction also in the High Court of the State where the appellate authority is situate, the Apex Court further opined that inasmuch “as (the) order of the appellate authority constitutes a part of cause of action, a writ petition would be maintainable in the High Court within whose jurisdiction it is situate having regard to the fact that the order of the appellate authority is also required to be set aside and as the order of the original authority merges with that of the appellate authority”. It is, thus, contended by learned senior counsel for the petitioner that the passing of the impugned orders dated 5.3.2004 and 20.6.2007 by the Appellate Authority in Delhi has given rise to a part of the cause of action therein, and further, that the said cause of action, though small, is nevertheless integral to decide the present petition, thereby vesting in this Court jurisdiction in terms of clause (2) of Article 226 of the Constitution of India. 4(1975) 2 SCC 671. W.P. (C) No. 7569/2007 Page 16 of 33 13. The submission of the counsel for the petitioner cannot be appreciated when the judgment of Kusum Ingots & Alloys Ltd. is read and understood in its entirety. The short question, it may be recalled, that came up for consideration before the Apex Court in Kusum Ingots & Alloys Ltd. was whether passing of a legislation gives rise to