Case: NEW INDIA ASSURANCE COMPANY LIMITED Vs. RAJESHWAR SHARMA

2. These appeals arise from a judgment of a Division Bench of the High Court of Jammu and Kashmir dated 28 July 2016. The High Court has affirmed the decision of the Jammu and Kashmir Consumer Disputes Redressal Commission[18]by which an insurance claim was allowed in the amount of Rs. 17.28 lacs. New India Assurance Company Limited, the insurer, failed in its challenge to the decision of the State Commission before the High Court. Cross-objections filed before the High Court by the insured for the grant of interest were also rejected. Hence, there are two appeals: one by the insurer and the second by the insured, against the judgment of the High Court.3. The claim of the insured before the State Commission was that it owns a building known as Patel House which is situated at Akhnoor road, Jammu. The insured claimed that the building was constructed in 1984 with due permission of the municipality. In 1993, additional construction was raised, it is alleged, with the permission of the municipality. According to the insured, on a notice issued under Section 229 of the Jammu and Kashmir Municipal Corporation Act 2000, he had approached the Jammu and Kashmir Special Tribunal which compounded the infraction in 1996. The Municipal Corporation initiated a demolition drive. Apprehending action against his property, the insured instituted a suit in the Court of the First Civil Subordinate Judge, Municipal Magistrate, Jammu where an ad-interim injunction was granted, restraining the Corporation from proceeding, except in accordance with law. The Municipal Corporation demolished the front portion of the building. The insured was carrying on a business of sanitary ware in the premises. As a result of the demolition, the insured claimed that it suffered damage in the amount of Rs. 19.55 lacs.4 The claim before the State Commission was founded on a policy of insurance which was obtained by the insured. The insurance policy contained the following exclusion:V. Riot, Strike, Malicious and Terrorism Damage Loss of or visible physical damage or destruction by external violent means directly caused to the property insured but excluding those caused by:-a) xxxxb) Permanent or temporary dispossession resulting from confiscation, commandeering, requisition or destruction by order of the Government or any lawfully constituted Authority.Relying on the aforesaid exclusion, the insurer repudiated the claim on the ground that the action of demolition was carried out by the municipal authorities and was hence by order of a lawfully constituted authority.5. The State Commission allowed the claim under the insurance policy in the amount of Rs. 17.28 lacs. Litigation costs of Rs. 10,000/- were awarded. The State Commission opined that the order of demolition passed by the Municipal Corporation had not been brought on the record and, in its absence, the exclusion would not operate. In appeal, the High Court affirmed the view of the State Commission, holding that it was incumbent on the insurer to establish that the exclusion contained in the policy of insurance was attracted by placing on record the orders of a lawfully constituted authority by which demolition was ordered. While affirming the view of the State Commission, the High Court held that in the absence of such an order being produced on the record, the insurer was liable to indemnify the loss sustained by the insured.6. The principal basis on which the complaint was allowed by the State Commission has been called into question in these proceedings. The insurer has submitted that it was not in dispute that the demolition was caused by the Municipal Corporation. To substantiate this submission, the insurer relies upon the averments contained in the consumer complaint which are extracted below:5) That after the constitution of the Municipal Corporation, Municipal Corporation had started demolition drive to remove the encroachment and illegal constructions.6) .....7) That the Municipal Corporation in spite of the injunction issued by the Court, demolished the front portion of the building which was duly compounded by the Appellate Court, on 18.04.2003, in violation of the Court order and also in violation of the order already passed compounding the constructions.8) .....9) .....10) That the Municipal Commissioner, Jammu without any authority and taking law into his own hands in violation of the Court order dated 10.04.2003 demolished the front portion of the building and totally damaged the Cabin fitting, display items electric systems etc without any notice to the complainants thereby causing a loss of Rs. 19,55,946/- which estimate was prepared after due inspection by Sh. K R Sharma, Retired Executive Engineer and valuator. The building and the material including Furniture and Fixture etc. were insured by the respondent for an amount of Rs. 1,23,50,000/- for which insurance covers were issued by the respondent vide policy no. 350700/11/02/00119 for the period 03.05.2002 to midnight 02.05.2003. Copy of the estimate is enclosed.11) That the Commissioner, Municipality and Executive Officer to show their loyalty towards the Government in violation of Court order and fully well knowing that the complainants are owners of the land demolished the front portion of the building causing total loss of Rs. 19,55,846/- on 18.04.2003. Besides this, due to the damage to the building, the basement has been rendered useless and has to be dismantled which is going to cause a further loss of Rs. 6,15,422/- to the complainants and the complainants reserve their right to claim the said amount as and when the basement is dismantled.7. In his counter affidavit filed in these proceedings, the Commissioner of the Jammu Municipal Corporation has stated that in order to remove encroachments/projections over public premises including over footpaths, streets and drains, the Municipal Corporation issued a public notice on 25 January 2003 in the daily editions of Kashmir Times and Daily Excelsior. The notice made an appeal for the removal of projections, platforms and encroachments which were not in conformity with the building line provided by the Jammu Master Plan and Prevention of Ribbon Development Act 1953. After the period stipulated in the public notice ended on 31 January 2013 demarcations were carried out in areas where there were encroachments and the encroachers including the private respondents were directed to remove the encroachment. In the meantime, a suit was filed by the insured, Rajeshwar Sharma, before the First Civil Subordinate Judge, Jammu in which the following ad interim order was passed on 11 March 2003:...Issue notice to the defendants to file objections to this application on or before next date of hearing and in the meanwhile subject to objections and till next date of hearing the parties shall maintain status quo on spot. However, in case any violation has been committed by the Plaintiff in the said building the defendants shall take action in accordance with the provisions of law...8. The above order permitted the municipal authorities to take action in accordance with the provisions of law. The Municipal Corporation claims that it removed the new construction raised in the present case on 18 April 2003 which was found to encroach on public land and was causing an inconvenience to the free flow of traffic on Akhnoor road. According to the Municipal Corporation, it had not razed any part of the construction which was carried out in 1985 and 1993 but only the new illegal construction. The Municipal Corporation has also submitted that the building which has been constructed still exists in violation of the Master Plan 1974-1994 and the Master Plan 2021.

Reasoning:
9. We must make it clear at the outset, that we are not in these proceedings entering upon the validity of the action which was adopted by the municipal authorities. A suit is pending before the civil court questioning the legality of the action whereas the counter affidavit indicates, relief for the restoration of the work which was removed has been sought. The issue in the present case is confined to whether the exclusion under the policy of insurance was attracted.10. Both the State Commission as well as the High Court were of the view that the exclusion was not attracted having due regard to the judgment of this Court in National Insurance Company v. Irshad, (2007) 4 SCC 105. This Court has held that where there is an exclusionary clause in an insurance policy, the burden lies on the insurer to establish that the exclusion is attracted. Any ambiguity must be construed in favour of the insured. Purporting to apply this principle, the State Commission and the High Court held that the insurer had failed to establish that there was an order of the Municipal Corporation for carrying out demolition and hence the exclusion was not attracted.11. On this aspect, we find merit in the submission ofthe insurer that there was no dispute about the fact that the demolition was carried out under the authority of the Municipal Corporation.As the averments in the consumer complaint indicate, the insured proceeded on the basis that the Municipal Corporation had carried out the work of demolition. There could be no dispute about the factual position since, as a matter of fact, the insured has instituted a suit for diverse reliefs including a challenge to the action of the Municipal Corporation. Hence the basis on which the claim was allowed is fundamentally flawed.14. We find considerable merit in the submission which has been urged on behalf of the insurer. Clause V of the insurance policy contains an exclusion, where the destruction of the property has been caused by order of the government or any lawfully constituted authority. The expression by order of means under the authority of government or of a lawfully constituted authority. There can be no dispute about the position that the Municipal Corporation is indeed a lawfully constituted authority, being a statutory authority under the Jammu and Kashmir Municipal Corporation Act 2000. From the records as well as from the pleadings before the State Commission, there is no dispute about the fundamental position that the demolition was carried out by the Municipal Corporation. The destruction was hence by order of a lawfully constituted authority. Once this be the position, there can be no manner of doubt that the exclusion under the policy of insurance was attracted.In the present case, there is no ambiguity in Clause V of the insurance policy. The exclusion was clear in exempting the insurer from liability for a loss arising from the destruction of property caused by order of the government or any lawful authority.