Paragraph numbers below are the court’s original numbering, recovered from the source text.
18. The Insurance company, on the other hand, stated that the complainants were entitled only to Rs.31,373/- and nothing more.
19. The National Commission considered the question and observed that the complaint relating to the said policy was required to be allowed in part. The Insurance Company was directed to make payment of Rs.31,373/- towards damage to building with interest at the rate- of 12 per cent and the -1 complaints were accordingly disposed of.
20. Being aggrieved by the order passed by the National c Commission, three appeals have been filed by the complainants. The grievance of the complairiants is that though the complainants were entitled to the amount which had been claimed by them, based on evidence and Surveyors' Reports, the National Commission committed an error of fact and of law _;f in not granting the prayer and in not allowing the complaints in their entirety. It was, therefore, submitted that the appeals deserve to be allowed by directing the Insurance Company to pay full amount with interest at the rate of 18 per cent from November 12, 1991 and costs. The prayer was also maqe to pay appropriate amount towards harassment caused to the complainants.
21. Two appeals are filed by the Insurance Company. In 't the appeals, it was contended by the Insurance Company that the National Commission was in error in granting relief in favour of the complainants. The complainants were not entitled to any relief since in absence of the Managing Director and other responsible persons, there was pilferage by intruders and staff members themselves for which the Insurance C_ompany cannot be held liable nor it can be directed to make payment. Similarly, raw materials and stocks had become unfit for human __.. consumption and the complainants were not entitled to the amount claimed by the complainants from the Insurance Company. The amount which was offered by the Insurance Company was adequate and sufficient. The amount on account t– A of poor quality of goods and materials had been rightly >-.. deducted. The order passed by the National Commission,' therefore, deserves interference by allowing the appeals of the Insurance Company.
22. Grindlays Bank has not challenged the order passed by the National Commission. Canara Bank, however, has filed two,appeals by obtaining special leave from this Court against orders passed in Original Petition Nos. 209 of 1994 and 210 r of 1994. It has supported the case of the complainants. c According to the Canara Bank, the claim put forward by the complainants was well-founded and ought to have been allowed in tote by directing the Insurance Company to pay full amount towards loss and damage claimed by the complainants. It, however, submitted that the entire amount to which the complainants were entitled ought to have been ordered to be paid to the Bank in view of the fact that the Insurance Policies had been assigned in favour of the Bank. In law, such an r;_ assignment amounts to transfer of actionable claim in favour of the Bank. The Insurance Company is, therefore, bound to pay the amount to Canara Bank. Reliance in this connection was E placed on behalf of the Bank on Section 38 of the Insurance Act, 1938; Sections 130 and 135 of the Transfer of Property Act, 1882 and a decision of this Court in Chief Executive Officer & Vice Chairman, Gujarat Maritime Board v. Haji Daud Haji Harun Abu & Ors., (1996) 11 SCC 23. It was, F therefore, submitted that appeals filed by the complainants should be allowed but the entire amount in relation to two policies be ordered to be paid to Canara Bank.
23. We have heard the learned counsel for the parties. G Learned counsel for the complainants contended that the National Commission committed an error of fact and of law in not allowing the complaints and tre claims put forward by the complainants in their entirety. It was submitted that the National Commission recorded a finding that the claims were covered >-.. by policies which were operative. Claims were lodged by the KRISHNA FOOD & BAKING INDUSTRY P. LTD. v. NEW 683 INDIA ASSURANCE CO. LTD. & ANR. [C.K. THAKKER, J.] ,..4. complainants on the basis of damage sustained by them. In t· support of such claims, survey was made and Surveyors' Reports were duly forwarded to the Insurance Company. The defence of the Insurance Company that there was pilferage by the intruders as well as by staff members of the complainants was not believed. Regarding adverse affect on raw materials and stocks, the National Commission observed that keeping in view the climatic conditions of Srinagar, it could not be said that the entire stock and raw material was unfit for human consumption. It, therefore, allowed part of the claim of the complainants. Accordii'lg to them, however, the National c Commission was not right in deducting the claim of the complainants. Apart from favourable climatic conditions in Jammu & Kashmir, the National Commission ought to have appreciated the fact that the complainants could not carry on their business activities of preparing biscuits, breads, cakes and other items not because of inaction on their part, but because of terrorist activities and militancy in the area. It was, therefore, not a case of voluntary omission to carry on trade, but it was compulsion that they could not produce goods. It was contended that terrorism was one of the terms covered by the Insurance Policy and since the business could not be carried on because of terrorism, the complainants had to suspend operations of both the units. The complainants cannot be held even partly responsible for such suspension of operation of units and stoppage of business. The National Commission ought to have appreciated these facts and ought to have allowed the claim of the complainants.
24. It was also submitted that in spite of continuous requests by the complainants to the Insurance Company to get the survey done, no action was taken by the Insurance Company for a pretty long time. Moreover, even after the survey was got done by the Insurance Company thro.ugh its own Surveyors and …….. as per their reports, certain amounts were required to be paid, the said amount was also not paid by the Insurance Company. Regarding certain items, there was no response whatsoever A by the Insurance Company. The National Commission also took .>-…. irito account those facts, but allowed the claim of the … – complainants only in p~Ht. Th·e order of the National Commission to tha.t ext~nt, therefore, requires to be modified by granting full claim of the complainants.
25. It was submitted that in the facts and circumstances and entitlement of the complainants for full claim, appeals filed by the Insurance Company are liable to be dismissed. 'r
26. Regarding to appeals filed by Canara Bank, it was c submitted that the appeals are not maintainable. The National Commission was, therefore, wholly right in not directing the Insurance Company to pay the claim amount to the Bank. It was also submitted that such claim lodged by the Canara bank was even otherwise not tenable. It was urged that under Section 3 D of the Jammu & Kashmir Migrants (Stay of Proceedings) Act, 1997, no such claim could have been lodged by the Bank 'K against the complainants by approaching a Civil Court by filing a suit and no order could have been made or a decree could have been passed by a competent Court in view of the E provisions of the said Act. Since no such claim is maintainable in the light of statutory provisions, the Bank cannot by this indirect method, obtain a decree and get it executed which it could not have otherwise got in view of the suspension of such claims. It was, therefore, submitted that both the appeals filed F by the Canara Bank are also liable to be dismissed. -1 .,,, ..
27. The learned counsel for the respondent Insurance Company contended that the National Commission was not ' ' • right in partly allowing the claims of the complainants. It was stated that the Insurance Company got the survey done through G its·surveyors and the amount to which the complainants were found entitled was offered to them. But the complainants wanted ….. more amount and approached the National Commission. It was ,>–., also submitted that from the Survey Reports, it was clearly proved that stocks and raw materials had become unfit for KRISHNA FOOD & BAKING INDUSTRY P. LTD. v. NEW 685 INDIA ASSURANCE CO. LTD. & ANR. [C.K. THAKKER, J.] human consumption. The rNational Commission was, therefore, right in reducing the claim to that extent. According to the counsel, however, the National Commission was not right in observing and recording a finding that there was no pilferage. It was stated that it was not in dispute that after Praneet Sawhney was shot dead by the terrorists, the operation in both the units stood suspended and Managing Director of the Company (Rajendra Kumar Sawhney) left Srinagar and went to Delhi and only employees were there. It was, therefore, –1 obvious that in absence of any responsible officer belonging to Sawhney family, there was pilferage as stated by the c Insurance Company and the National Commission could not have recorded a finding to the contrary. To that extent, therefore, their appeals deserve to be allowed.
28. The learned counsel for the Canara Bank, on the one hand, supported the claim of the complainants and submitted that once the operation of the units became impossible due to . terrorist activities which was covered by a clause in Insurance Policy and the complainants could not carry on business, the National Commission was not justified in rejecting any part of the claim of the complainants. On the basis of survey reports substantial loss to the building, plant, machinery and electricity fittings had been proved and the complainants were entitled to the entire amount. Similarly, with regard to raw materials and stocks, nothing could ·have been deducted by the National Commission as it was impossible for the complainants to carry on production. The only reason why the units could not operate was militancy activities in the area. If it were so, the National Commission was not justified in taking into account the fact as to suspension of business for reduction of claim and consideration of the aspect that certain items were unfit for human consumption and the amount was liable to be reduced.
29. It was, however, submitted that indisputably substantial advance was made to the complainants by the Bank and it was having charge over the property of the Company and of the Mill. It had also a right of lien. It was, therefore incumbent on the KRISHNA FOOD & BAKING INDUSTRY P. LTD. v. NEW 687 INDIA ASSURANCE CO. LTD. & ANR. [C.K. THAKKER, J.] case wherein the complainants did not undertake the activities which were required to be undertaken by them, but they could not operate the units and carry on business. No fault, therefore, can be found against the complainants for suspending the operation of both the units. The complainants obviously cannot suffer because of non-production in the Mill as well as in the Company. The National Commission was, therefore, not right in reducing any amount on the ground that certain stocks and raw materials were unfit for human consumption. It was not '"'"1 intentional or deliberate act on the part of the complainants in stopping production and allowing the stocks and raw materials to get spoiled or damaged and by making them unfit for human consumption. It was because of the militant activities and terrorism that the Company and the Mill could not do business and produce goods. Reduction of amount by the National Commission on that count was, therefore, unjustified and in our opinion, that part of the order requires interference by this Court. 32. As regards pilferage by intruders and staff members, except ipse dixit on the part of the Insurance Company, no material whatsoever has been placed on record in support of such allegation. The National Commission, in our opinion, was justified in not accepting such bare assertion without any evidence or concrete material in support of such plea. In fact, a finding has been recorded by the National Commission that the godowns were 'full' when they were set on fire. 'Watch and …. ward staff were protecting the Mill and the Company. There was also a 'Police post' nearby both the units. Further, the report submitted by Mr. Andrasabi as to pilferage was not reliable. In Shyam Sunder Narang v. United India Insurance Co., (1997) 111 CPJ 599, an adverse comment had been made by the National Commission against the report submitted by Mr. Andrasabi. Hence, in our opinion, the National Commission was right in not believing 'pilferage theory' advanced by the Insurance Company. 33. The matter, however, did not end there. Even before us, nothing has been shown from which such an inference could be drawn by a reasonable and prudent man as to pilferage by intruders or staff members. The National Commission, in our judgment, was wholly right in negativing the contention of the Insurance Company that substantial part of stocks and raw B materials had been taken away by intruders or staff members. No reduction, therefore, could be allowed on that count. 34. The National Commission was also right in observing that no payment was made by the Insurance Company even as per the survey conducted by the Surveyor appointed by the C Insurance Company. Taking into consideration the entire facts and circumstances, in our opinion, the complainants are entitled to claim compensation towards building, plant, machinery and electricity fittings, raw materials and stocks. 35. Accordingly, the complainants are held to be entitled to thefollowing; Policy No. Amount entitled to be awarded in favour of the appellant-insured 113119000249 Rs. 37,78,619/- 113119000312 Rs. 23,79,195/- 113119000313 Rs. 25,81,600/- 35. In view of the fact that the appeals filed by the complainants are allowed, the appeals filed by the Insurance Company must necessarily fail. Accordingly, the appeals filed by the Insurance Company are dismissed. 36. In respect of Policy No. 113119000249, no appeal has been filed by the Grindlays Sank. It was obs-erved by the National Commission in the impugned judgment that the matter >–…. i appears to have been settled between the parties. In any case, H there is no appeal by a financial institution so far as the said KRISHNA FOOD & BAKING INDUSTRY P. LTD. v. NEW 689 INDIA ASSURANCE CO. LTD. & ANR. [C.K. THAKKER, J.] policy is concerned. 37. But as far as the appeals by Canara Bank are concerned, in our opinion, the claim put forward by the Bank is well founded. Section 38 of the Insurance Act reads thus; Section 38 – Assignment and transfer of insurance policies (1) A transfer or assignment of a policy of life insurance, whether with or without consideration may be made only c by an endorsement upon the policy itself or by a separate instrument, signed in either case by the transferor or by the assignor his duly authorised agent and attested by at least one witness, specifically setting forth the fact of transfer or D assignment. … "'T (2) The transfer or assignment shall be complete and effectual upon the execution of such endorsement or instrument duly attested but except where the transfer or assignment is in favour of the insurer shall not be operative as against an in~urer and shall not confer upon the transferee or assignee, or his legal representative, and right to sue for the amount of such policy or the moneys secured thereby until a notice in writing of the transfer or assignment and either the said endorsement or instrument 111111!' itself or a copy thereof certified to be correct by both transferor and transferee or their duly authorised agents have been delivered to the insurer: Provided that where the insurer maintains one or more 0 places of business in India, such notice shall be delivered only at the place in [India] mentioned in the policy for the purpose or at his principal place of business in India. ,..-4 (3) The date on which the notice referred to in sub-section (2) is delivered to the insurer shall regulate the priority of c all claims under a transfer or assignment as between persons interested in the policy; and where there is more than one instrument of transfer or assignment the priority of the claims under such instruments shall be governed by the order in which the notices referred to in sub-section (2) are delivered. (4) Upon the receipt of the notice referred to in sub-section (2), the insurer shall record the fact of such transfer or assignment together with the date thereof and the name of the transferee or the assignee and shall, on the request of the person by whom the notice was given, or of the transferee or assignee, on payment of a fee not exceeding one rupee, grant a written acknowledgement of the receipt of such notice; and any such acknowledgement shall be conclusive evidence against the insurer that he has duly received the notice to which such acknowledgement relates. (5) Subject to the terms and conditions of the transfer or assignment, the insurer shall, from the date of receipt of the notice referred to in sub-section (2)], recognise the transferee or assignee named in the notice as the only person entitled to benefit under the policy, and such person shall be subject to all liabilities and equities to which the transferor or assignor was subject at the date of the transfer or assignment and may institute any proceedings in relation to the policy without obtaining the consent of the transferor or assignor or making him a party to such proceedings. (6) Any rights and remedies of an assignee or transferee of a policy of life insurance under an assignment or transfer effected prior to the commencement of this Act shall not be affected by the provisions of this section. (7) Notwithstanding any law or custom having the force of law to the contrary, an assignment in favour of a person >-…_' KRISHNA FOOD & BAKING INDUSTRY P. LTD. v. NEW 691 INDIA ASSURANCE CO. LTD. & ANR. [C.K. THAKKER, J.] made with the condition that it shall be inoperative or that ,,.4._ the interest shall pass to some other person on the happening of a specified event during the lifetime of the person whose life is insured, and an assignment in favour of the survivor or survivors of a number of persons, shall be valid. 38. Likewise, both the sections, i.e. Sections 130 and 135 of the Transfer of Property Act, 1882 are explicitly clear and they read as under; Section 130 – Transfer of actionable claim a (1) The transfer of an actionable claim whether with or without consideration shall be effected only by the execution of an instrument in writing signed by the transferor or his duly authorized agent, shall be complete and effectual upon the execution of such instrument, and _. "l' thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such notice of the transfer as is hereinafter provided be given or not: Provided that every dealing with the debt or other actionable claim by the debtor or other person from or against whom the transfer would, but for such instrument of transfer as aforesaid, have been entitled to recover or enforce such debt or other actionable claim, shall (save where the debtor or other person is a party to the transfer or has received express notice thereof as hereinafter provided) be valid as against such transfer. (2) The transferee of an actionable claim may, upon the execution of such instrument of transfer as aforesaid, sue or institute proceedings for the same in his own name without obtaining the transferor's consent to such suit or proceedings and without making him a part thereto. Exception.-Nothing in this section applies to the transfer c of a marine or fire policy of insurance or affects the provisions of section 38 of the Insurance Act, 1938. Section 135 – Assignment of rights under policy of insurance against fire Every assignee by endorsement or other writing, of a policy of insurance against fire, in whom the property in the subject insured shall be absolutely vested at the date of the assignment, shall have transferred and vested in him all rights of suit as if the contract contained in the policy had been made with himself. 39. In our opinion, therefore, the submission of the learned counsel for the Bank that as soon as a decree is passed or order is made in favour of the complainants, the Bank is entitled 0 to the said amount is well founded. For such a relief, it is not necessary for the· Bank to become a plaintiff by filing a suit in a competent Court of law and obtain a decree in its favour. It is true that had it been the position, the provisions of 1997 Act would get attracted and such suit would be stayed and no decree could have been passed by a competent Court in E favour of the creditor. But in the light of the statutory provisions in the Insurance Act and in the Transfer of Property Act, the Bank is entitled to the amount directly from the Insurance Company. 40. In our opinion, the learned counsel for the Bank is also right in relying upon the decision in Gujarat Maritime Board. In that case, a similar question came up for consideration before this Court. There one B was financed by A for purchase of vessel. The vessel so purchased was mortgaged in favour of G A. As per the Finance Agreement between the parties, B was required to take out a comprehensive risk insurance policy and assign it in favour of Director of Ports representing Government of Gujarat. The insurance also contained an endorsement in terms of the agreement. The vessel on its voyage sunk in the H sea. B filed a complaint before the National Commission KRISHNA FOOD & BAKING INDUSTRY P. LTD. v. NEW 693 INDIA ASSURANCE CO. LTD. & ANR. [C.K. THAKKER, J.] claiming the insurance amount from the Insurance Company. A brought to the notice of the Commission that it had an interest in the vessel as a mortgagee. The Commission, however, directed the Insurance Company to pay entire amount to B. A approached this Court. This Court held that the directions of the National Commission that the entire insurance amount be paid to B was unsustainable in law. Accordingly, the appeal filed by the Maritime Board was allowed and the order passed by the National Commission was set aside. 41. In our opinion, the point is directly concluded by the c above decision of this Court in Gujarat Maritime Board and the National Commission was not right in rejecting the claim of the Bank. The appeals of the Bank are, therefore, required to be allowed. 42. For the foregoing reasons, the appeals filed by the Insurance Company are ordered to be dismissed. The appeals filed by the complainants are required to be allowed to the extent indicated above with interest at the rate of 9 per cent per annum from the date of filing of complaints before the National Commission, till the date of payment. So far as Appeal concerning Policy No. 11319000249 relating to stocks is concerned, the complainants are entitled to get the entire amount of Rs.37,78,619/- since there is no appeal in respect of the said policy. Canara Bank is not concerned with the said policy. Grindlays Bank has not approached this Court and had supported the complainants before the National Commission. t The two appeals of Canara Bank are in regard to two policies, —-{ 113190000312 and 113190000313, raw materials policy and plant policy. Both the appeals of Canara Bank are allowed and the Insurance Company is directed to make payment to Canara G Bank and not to the complainants in respect of the amount to be paid to the complainants. 43. All appeals are disposed of accordingly with no order as to costs. N.J. Appeals disposed of.