Case: National Insurance Co.Ltd Vs. Harjeet Rice Mills

M/s Harjeet Rice Mills, the respondent herein, had insured its stocks with the appellant for the period September 1991 to September 1992. The respondent herein approached the State Consumer Commission with a claim that there was an accidental fire in its godown in the night intervening the first and second January 1992; that the goods stocked were lost in the fire; that the surveyor appointed had estimated the loss at Rs. 8,96,500/on finding that the loss was due to a fire caused by a short circuit; that the appellant had repudiated the claim unjustly; that there was thus deficiency in service and that the respondent was entitled to a sum of Rs. 9 lakhs as the value of the goods lost, to a sum of Rs. 1 lakh as damages for mental agony and for interest at 24% per annum on the entire amount, from the date of the incident of fire. The appellant resisted the claim by contending, inter alia, that the State Commission had no jurisdiction to entertain the claim; that on a further investigation, it was revealed that the fire was not caused bythat it was a deliberate act of causing a fire with a view to make a claim on the insurance policy; that the loss was highly exaggerated since the godown concerned did not have the capacity to take in the quantity allegedly stored and lost; that it was a case of an attempted insurance fraud; that the claim was closed as a no claim; that there was no deficiency in service and that the claim was liable to be rejected.2. The State Commission did not consider the objection to its jurisdiction on merits. It held that the Surveyors report relied on by the claimant has to be accepted and an order for payment out of that amount with interest thereon at the rate of 18% per annum from the date of the loss till the date of payment had to be made. It also held that the claim for compensation had to be denied, since, if granted, the amount awarded would have exceeded its jurisdiction. Thus, the appellant was directed to pay a sum of Rs. 8,96,500/with interest thereon at the rate of 18% per annum from 2.1.1992, till the date of payment. The appellant filed an appeal before the High Court of Jammu & Kashmir. The High Court declined to interfere, essentially stating that the finding of fact arrived at by the State Commission, could not be interfered with in the circumstances of the case. Thus, the appeal was dismissed.

Court's reasoning:
4. We do not think it necessary to go into this question on merits in view of the course we propose to adopt and in view of the amendment to the Act enhancing the pecuniary jurisdiction of the State Commission and the present claim being within that enhanced jurisdiction.We are of the view that the State Commission should have given an opportunity to the appellant before us to prove the investigation report. Section 64UM of the Insurance Act cannot stand in the way of the insurance company in establishing that the claim was a fraud on the company, or that it was a case of deliberately causing a fire so as to lay the foundation for an insurance claim. Similarly, the Commission did not apply its mind to the aspect highlighted that the first police investigation was reported to be perfunctory and a fresh, proper investigation had been recommended. Similarly, the discrepancy in the capacity of the godown and the possibility that what was lost was only or mainly paddy husk, should have persuaded the Commission to make a proper enquiry before deciding to accept the Surveyors report in this case. The High Court, in our view, has failed to exercise its appellate jurisdiction properly. It failed to see that it had the duty as the Appellate Authority to satisfy itself that no fraud was involved and that the claim was genuine and sustainable. We are of the view that adequate prima facie material was available to warrant a proper enquiry on that question. In this situation, we are satisfied that interference is called for in this appeal.7. We are satisfied that the proper course to adopt is to set aside the decisions of the High Court and the State Commission and to remand the claim for a fresh enquiry and decision by the Commission. Since, we are of the view that a proper enquiry and a fresh decision by the initial authority itself is called for, we refrain from discussing the relevant aspects argued before us, so as to ensure that no prejudice is caused to either side. Now that the claim comes within the limit of the pecuniary jurisdiction of the State Commission, we are satisfied that the proceedings can be remanded to the State Commission itself for a proper decision on all the questions involved including the question of the cause of fire.