(1) National Insurance Company Vs. M/s Raj Enterprises & Others IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR : O R D E R : National Insurance Co. Ltd. Vs. Raj Enterprises & Others (S.B. Civil Writ Petition No.2125/2004) DATE OF ORDER : July 4th, 2007 P R E S E N T Hon'ble Mr. Justice Gopal Krishan Vyas _______________________________ Mr.Jagdish Vyas for the petitioner. Mr. S.S. Purohit and Mr. N.K. Chandak for respondents. BY THE COURT : By this writ petition, the petitioner insurance company seeks to challenge the order dated 20.03.2004 passed by the Permanent Lok Adalat (Annex.-3) to the writ petition) whereby the learned Permanent Lok Adalat directed the petitioner insurance company to pay a sum of Rs.5,17,800/- with a further direction to pay interest at the rate of 12% per annum on the claim amount of Rs.2,48,450/- with effect from 21.02.2002 till realization. According to facts of the case, respondent No.1 is involved (2) National Insurance Company Vs. M/s Raj Enterprises & Others in the business of old paper-raddi and bottles etc. and the said firm obtained shop-keepers' insurance policy for a sum of Rs.7,00,000/- from the petitioner insurance company. The policy was valid for the period commencing from 08.11.2001 to 07.11.2002. According to the petitioner, the said policy was issued in the name of respondent No.1 with regard to stock-in- trade stored in shop having Class-A construction, said to be situated near New Sabji Mandi, Bhadwasiya Road, Jodhpur. It is also one of the facts that name of respondent No.2 was also added in the insurance policy being financer of respondent No.1. Respondent No.1 submitted a claim before the petitioner company for loss of Rs.7,06,565.50 ps because the firm suffered loss due to fire which occurred on account of electric short-circuit on 21.02.2002. According to the petitioner, soon after receiving the information regarding the incident of fire, the insurance company immediately appointed authorised surveyor Sanjay Bhandari to assess the loss suffered by the insured firm and Shri Bhandari immediately visited the site for the purpose of survey and submitted his survey report on 05.08.2002. It is submitted by the petitioner insurance company that during the survey, the surveyor found that respondent No.1 suffered loss of Rs.2,58,450/- in respect of the old paper-raddi and further the (3) National Insurance Company Vs. M/s Raj Enterprises & Others firm has suffered loss of Rs.2,79,350/- on account of damage of old bottles; but, as per report of the surveyor, the stock of old bottles was lying in heaps in open place not belonging to respondent No.1 and, so also, there was no boundary wall around the plot where the old bottles were lying in heaps in open place. It is further pointed out that the bottles were not kept in covered area of Class-A construction and the same were lying in open area not belonging to the insured firm. After receiving such report of the surveyor, the petitioner insurance company assessed the over-all circumstances and reached conclusion that the firm is entitled to get a sum of Rs.2,48,450/- after deducting Rs.10,000/- as per excess clause from Rs.2,58,450/- which was assessed by the surveyor on account of loss of old paper-raddi. The petitioner insurance company refused to give compensation in respect of loss caused to old used bottles since the same were lying in open area not belonging to the insured as the same was not covered under the policy. The petitioner insurance company offered respondents No.1 and 2 a sum of Rs.2,48,450/- against full and final settlement of their claim; but, they did not accept the offer made by the petitioner company and preferred petition under Section 22-B of the Legal Services Authorities (Amendment) Act, 2002 (4) National Insurance Company Vs. M/s Raj Enterprises & Others before the Permanent Lok Adalat, Jodhpur. After receiving the notice of the said petition, the petitioner company after again offering the sum of Rs.2,48,450/- to respondents No.1 and 2 against full and final settlement of the claim submitted its reply before the Permanent Lok Adalat. In its reply, it was submitted by the petitioner that respondent No.1 is not entitled to get any compensation in respect of old bottles from the petitioner company in view of the terms of the insurance policy inasmuch as the stock of old bottles lying in heaps in open place not belonging to the firm was not covered under the policy. It was also submitted that since the respondent No.1 refused to accept Rs.2,48,450/- towards full and final settlement of its claim there was no possibility of any mutual amicable settlement of the dispute. It is submitted by the petitioner that the Permanent Lok Adalat, without considering the entire material on record and without any mutual consent of the parties, allowed the petition by going into merit of the case and passed the impugned order. It is contended by learned counsel for the petitioner that the impugned order dated 29.03.2004 is erroneous and contrary to law and facts. A preliminary objection has been raised that the Permanent Lok Adalat has completely failed to look into the (5) National Insurance Company Vs. M/s Raj Enterprises & Others provisions of sub-section (7) of Section 22-C. It is contended that the Permanent Lok Adalat could decide the dispute only in such conditions where the parties have failed to reach an agreement under sub-section (7) of Section 22-C of the Act of 2002. According to learned counsel for the petitioner, sub- section (7) of Section 22-C provides that when Permanent Lok Adalat is of the opinion that there exist elements of settlement which may be acceptable to the parties, it may formulate the terms of a possible settlement of the dispute and give to the parties for their observations. It is argued that in the present case no satisfaction was recorded that there exists elements of settlement and, therefore, in the absence of any satisfaction recorded by the Permanent Lok Adalat it was not proper for the Permanent Lok Adalat to proceed further with the matter to decide the same on merit. It is also argued by learned counsel for the petitioner that from perusal of the reply to the petition, Annex.-2, there exists no elements of settlement which may be acceptable to the parties; and, in the absence of any elements of settlement the respondent No.3 was not competent to decide the matter on merit. Besides the above submission, it is submitted by learned counsel for the petitioner that the Permanent Lok Adalat has not (6) National Insurance Company Vs. M/s Raj Enterprises & Others cared to look into the the policy conditions and, so also, the material available on record because from the perusal of the insurance policy and other documents it is established that the petitioner company has covered the risk of the goods stored in the shop having Class-A construction. The Permanent Lok Adalat has failed to consider the fact that the old bottles were lying in heaps in open place not belonging to respondent No.1 and the same was not covered under the insurance policy. It is further submitted that the Permanent Lok Adalat has erred in law while holding the petitioner company responsible on irrelevant and extraneous considerations. It is submitted that it was not incumbent upon the petitioner company to inform and warn the respondent No.1 not to store the goods in open area. According to the petitioner, the approach of the Permanent Lok Adalat is contrary to basic concepts of insurance and is clearly arbitrary. Respondent No.3 has committed grave error while holding the petitioner company responsible to pay compensation only on the ground that the respondent firm has paid the insurance premium to the petitioner insurance company and the petitioner company is always responsible to pay the compensation for the loss suffered by the insured. According to the petitioner, the respondent No.3 has failed to take note of the fact that contract (7) National Insurance Company Vs. M/s Raj Enterprises & Others of insurance has been entered into in between the parties with certain terms and conditions and both the parties to the insurance contract are liable to abide by the terms and conditions of the policy, therefore, the insurance company has been wrongly held responsible for compensation beyond acceptable elements of settlement. It is prayed by the petitioner that in these circumstances the order passed by the Permanent Lok Adalat deserves to be set aside. In reply to the contention advanced by the petitioner, the learned counsel for the respondent No.1 vehemently supported the order passed by the Permanent Lok Adalat. As to the question of deciding the matter on merit by the Permanent Lok Adalat, learned counsel for the respondent No.1 invited attention of the Court towards judgment of the Division Bench, reported in 2001 WLC (Raj.)123, in which, it has been categorically held by the Division Bench of this Court that the matter can be decided by the Permanent Lok Adalat on merit even without a compromise being arrived at in between the parties, therefore, the argument of learned counsel for the petitioner with regard to deciding the matter on merit by the Permanent Lok Adalat is untenable. While supporting the order passed by the Permanent Lok (8) National Insurance Company Vs. M/s Raj Enterprises & Others Adalat, it is vehemently contended by learned counsel for the respondent No.1 that there is no error on facts or law in the impugned order because there is no dispute between the parties that the respondent firm has suffered heavy loss since the same is supported by survey report dated 05.08.2002 in which the surveyor has categorically given his opinion in the last and operative part of the report that the amount payable to the respondent insured firm is Rs.5,37,800/-. In the report submitted by the surveyor it is categorically mentioned that the respondent firm has suffered losses and details have been given in the report itself; but, on hyper-technical ground the claim of respondent No.1 was denied, therefore, the offer made by the petitioner insurance company for payment of Rs.2,48,450/- was not accepted by respondents no.1 and 2 and, so also, the Permanent Lok Adalat has rightly held that the basis for denial of compensation of Rs.2,79,350/- in respect of loss of bottles by the insurance company is totally baseless because the surveyor has accepted the loss but there is no evidence produced by the insurance company that the bottles were not stored in the area covered under the insurance policy. While considering the surveyor's report the learned Lok Adalat has taken note of the fact that the surveyor has specifically mentioned that respondent (9) National Insurance Company Vs. M/s Raj Enterprises & Others No.1 firm is entitled for compensation of Rs.5,37,800/- and the reason assigned for non-entitlement of compensation for loss of bottles has been found illegal and there is no ground to disbelieve the report of the surveyor. The disputed subject- matter was within the policy conditions and the insurance company was under obligation to prove that the bottles were lying out of the shop in open place. In these circumstances, it is argued by learned counsel for respondent No.1 firm that the firm has suffered loss on account of the fire and the same was assessed by the surveyor of the petitioner insurance company and the surveyor, after taking into consideration the stock and other evidence, held the firm entitled to compensation of Rs.5,37,800/- but it is not acceptable to the petitioner company on hyper-technical ground without any cogent reasons which is totally arbitrary and illegal. Therefore, the permanent Lok Adalat has rightly passed the order for payment of compensation of Rs.5,37,800/- and for interest also. It is, therefore, submitted by learned counsel for the respondent firm that there is no error in the order and the writ petition deserves to be dismissed. I have heard both the parties and carefully gone through the entire record. So far as the contention raised by learned counsel for the (10) National Insurance Company Vs. M/s Raj Enterprises & Others petitioner assailing the legitimacy of the Lok Adalat in deciding the matter on merit of the case is concerned, I am fully satisfied that after the judgment of the Division Bench in Life Insurance Corporation of India Vs. State of Rajasthan & Others, reported in 2005 (1) WLC (Raj.) 123, the learned Permanent Lok Adalat is competent to decide the case on merit even after compromise is not arrived at in between the parties. Therefore, there is no force in the contention of the learned counsel for the petitioner that the Permanent Lok Adalat has decided the matter on merit in contravention of sub-section (7) of Section 22-C of the Act of 2002. On the merit, in this case it is not disputed by the petitioner insurance company that the respondent firm has suffered heavy loss on account of fire and does not dispute the survey report given by their own surveyor Sanjay Bhandari. It is also not disputed by the petitioner company that according to the report of the surveyor he has given categorical finding that a sum of Rs.5,37,800/- is payable to the insured though subject to other terms and conditions of the policy. Now, upon perusal of the policy, vide Section 1 of the policy with regard to building and contents whereunder the company will indemnify the insured in respect of loss or damage of the building/contents mentioned (11) National Insurance Company Vs. M/s Raj Enterprises & Others in the insurance policy by fire, lightening, explosion of gas cylinder or any domestic appliance. While taking shelter of the above Section 1 the petitioner company has denied the insured compensation in respect of loss of old bottles on the ground that the same were lying in open place though surveyor assessed the loss and reached conclusion as to entitlement of the insured firm to receive compensation to the tune of Rs.2,79,350/- for the said loss. In this regard, an important fact is required to be seen that the occurrence of fire took place on 21.01.2002 and the surveyor was appointed by the petitioner company on 22.02.2002. After survey, the surveyor submitted his report on 05.08.2002 i.e., after near about five and a half months of the incident. As per record summoned from the respondents, there is a letter on the record dated 03.08.2002 which is sent by the firm that it agreed to accept compensation of Rs.5,37,800/-. This letter is dated 03.08.2002, two days before the date of the report of the surveyor. The insurance company is relying upon certain observations made in the survey report with regard to the place where the old bottles were lying. In the report, under head, THE CAUSE AND NATURE OF LOSS: it is observed by the surveyor that the whole of the stock (12) National Insurance Company Vs. M/s Raj Enterprises & Others of the old paper Radi lying in the godown reportedly got affected by the fire and water. The stock of old bottles lying in the open area also affected by the fire. The estimated loss reported was for Rs.7,06,575/-. Likewise, under the head, THE PREMISES: it is observed by the surveyor that the firm has rented premises at Plot No.18 & 19 of Ramdev Nagar, Badwasiya Road, Jodhpur. Above Plot is in around 2000 sq. ft. area built up of “A” class construction having a god9own and office premises with boundary wall. In the cofered godown the Insured use to keep old paper Radi of different kinds, whereas the used bottles were kept in open place in other plots or at the roadside. It is further observed by the surveyor under head NOTE that the insurer may take note of the fact that the old paper Radi was kept in covered area whereas the Bottles were lying in the open area not belonging to the insured. The Permanent Lok Adalat observed that survey report was submitted by the surveyor on 05.08.2002 and the vouchers were filed by the surveyor to the company on 03.02.2003; meaning thereby, the occurrence took place in the month of February 2002 and the survey report was filed in August 2002 and vouchers were submitted by the surveyor in February 2003. (13) National Insurance Company Vs. M/s Raj Enterprises & Others Therefore, admittedly, the firm has suffered loss of Rs.5,37,800/- and the firm is entitled to the said amount as per the survey report also. However, on a hyper-technical ground, not proved on record by evidence by the insurer, the full claim of the petitioner as reported by the surveyor has been denied by the petitioner insurance company. It is not disputed by either of the parties or by any document that the said material belonged to the insured firm and was covered under the insurance policy. However, without establishing with proof, upon illegal consideration and extraneous reason, the claim of the insured assessed by the petitioner-insurer's surveyor is being sought to be denied by the petitioner and the same cannot be sustained in law. The Permanent Lok Adalat has rightly observed that it is not proved by any document that the material was lying in open place not belonging to the insured, therefore, in my opinion, the Permanent Lok Adalat has not committed any error while allowing the claim in favour of the respondent No.1. Accordingly, the writ petition is dismissed and award/order dated 20.03.2004 passed by the Permanent Lok Adalat is affirmed. (Gopal Krishan Vyas) J.