REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4962 OF 2002

KANDIMALLA RAGHAVAIAH & CO. … APPELLANT

VERSUS

NATIONAL INSURANCE CO. & ANR. … RESPONDENTS

J U D G M E N T

D.K. JAIN, J.

1. Challenge  in  this  Appeal  under  Section  23  of  the  Consumer  

Protection Act, 1986 (“the Act”, for short) is to a common judgment  

and order dated 17th April, 2002, passed by the National Consumer  

Disputes Redressal Commission, (“the Commission”, for short) in  

Original Petitions No. 97 of 1996 and 248 of 1997, whereby the  

Commission  has  dismissed  appellant’s  two  complaints  alleging  

deficiency in service against two different insurance companies on  

account  of  non-settlement  of  insurance  claims  made  by  the

appellant, on the ground that both the complaints were barred by  

limitation under Section 24A of the Act.

2. The salient facts giving rise to the appeal are as follows:

The appellant firm was engaged in the business of tobacco at  

Chelakaluripet,  Guntur  District,  Andhra  Pradesh.  They  constructed  

godowns  in  the  premises  of  M/s  Kandimalla  Venkateswarlu  at  

Padripuram,  in  the  same  district  for  storage  of  tobacco.  On  4th  

December,  1987  the  appellant  took  out  a  Fire  Policy  ‘C’  with  the  

National  Insurance  Company  —  Respondent  No.1  in  this  appeal  

(subject matter of O.P. No. 248 of 1997), in the account of the Indian  

Bank – Respondent No.2 herein, against loss or damage by fire etc.  

for a period of 4 months from 4th December, 1987 to 3rd April, 1988 for  

a sum of Rs.1,35,000/- and paid a premium of Rs.17,634/-.  On 8th  

March, 1988 the appellant obtained loan from Respondent No.2 —

Indian Bank by hypothecating the tobacco stored in the godowns. In  

the intervening night between 22nd and 23rd March, 1988 a fire broke  

out in the godowns, allegedly due to electrical short circuit and the  

entire stock of tobacco was gutted. The appellant reported the matter  

to the present contesting parties, i.e.,  both the Insurance Company  

and the Bank.  On 24th March,  1988 a Surveyor  was appointed by  

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Respondent No.1 — Insurance Company, who submitted his report  

on 2nd April, 1988.

3. However, it appears that on 23rd March, 1988 i.e.,  the date of the  

incident,  Respondent  No.2 — the Bank lodged First  Information  

Report (FIR) against the appellant firm and its partners resulting in  

filing of Criminal Case No.72 of 1988 against them under Sections  

380,  420,  423,  436,  457,  484 read with  Section  120 (B)  of  the  

Indian  Penal  Code  (IPC),  inter  alia,  alleging  that  they  had  

intentionally set fire to the tobacco stocks with a view to lay a false  

claim for loss of stocks.  After the trial, the accused were acquitted  

by  the  Sessions  Judge,  Narasaraopet  on  22nd August,  1991.  

Appeal filed by the Bank against order of acquittal was dismissed  

by the High Court on 5th September, 1992.

4. In the meanwhile, on 14th July, 1988, Respondent No.2 — the Bank  

preferred  a  claim  (subject  matter  of  the  present  appeal)  with  

Respondent  No.1  — the  Insurance  Company  for  an  amount  of  

Rs.1,32,85,760/-. It seems that the Bank did not pursue the claim.  

On 6th November,  1992,  the appellant  asked for  the claim form  

from the Insurance Company — Respondent No.1. Having failed to  

get any response, on 26th October, 1995 issued a legal notice to  

Respondent No.1. On 4th January, 1996, the appellant again asked  

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for claim forms but still there was no response. Ultimately, on 21st  

March 1996 the Insurance Company replied to  the legal  notice,  

denying the factum of fire and refused to issue the ‘claim form’ on  

the ground that the claim had become time-barred.   

5. On 21st October, 1997, the appellant filed the complaint before the  

Commission.  Before  the  Commission,  appellant’s  case was  that  

they had asked for the ‘claim form’ from the insurance company on  

6th November,  1992,  which  was not  given although Respondent  

No.  2 —Bank being a ‘co-insured’  had lodged a claim with  the  

Insurance Company on 14th July,  1988,  and they were pursuing  

their claim with the Insurance Company on behalf of the appellant.  

Since the denial of the Insurance Company in honouring the claim  

was received on 21st March 1996, the period of  limitation to file  

complaint  would  commence  from  that  date  and  therefore,  their  

complaint before the Commission was well within time.  

6. As noted earlier, the stand of the appellant has not found   favour  

with  the  Commission.  The  Commission  has  observed  that  the  

cause of action occurred on the intervening night between 22nd/23rd  

March, 1988 when the fire broke out but the complaint was filed  

only in the year  1997.   The first  action by the appellant  was in  

November        1992  i.e.,  after a gap of 4½  years,  when the  

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appellant asked for the claim form. The Commission finally held  

that both the complaints were barred by limitation and therefore,  

could not be entertained. According to the Commission, cause of  

action could not be assumed to   continue till the date of denial of  

the claim. The delay in filing the complaint was obvious in both the  

cases  and  there  was  not  even  a  prayer  or  an  application  for  

condonation of delay. Hence the present appeal.  

7. Mr.  P.  Narasimha,  learned  senior  counsel,  appearing  for  the  

appellant,  argued that the Commission has erred in holding that  

the  complaint  was  barred  by  limitation  inasmuch  as  it  failed  to  

appreciate  that  the  policy  in  question  was  a  “joint  policy”  and  

Respondent  No.2  —  Bank  was  equally  responsible  to  make  a  

claim for the loss covered under the policy on account of the fire  

and as a matter  of  fact,  it  did lodge a claim with  the Insurance  

Company as far back as on 14th July, 1988, but failed to pursue the  

same, a clear case of dereliction and deficiency in service towards  

the  appellant  was made out  for  which  they cannot  be made to  

suffer.   It  was urged that at any rate non-responsiveness of the  

Respondent  —  Insurance  Company  towards  the  legal  notices  

served upon them by both the appellant and the Bank and their  

repeated  denial  to  issue  the  claim  forms  also  amounted  to  

deficiency in service towards the appellant. It was, thus, pleaded  

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that the Commission has erroneously held the claim to be time-

barred  when the  Bank as  a  joint  beneficiary,  had  preferred  the  

claim with Respondent No.1 —Insurance Company within time on  

14th July, 1988, particularly when because of false complaint by the  

Bank, the appellant could not file the complaint.  It  was asserted  

that due to deficiency in service of the Insurance Company as also  

the Bank, the appellant has suffered a loss to the tune of Rs.1.35  

crores besides facing a civil suit by the Bank for recovery of the  

loan, amounting to Rs.3 crores.  

8. Mr. M.K. Dua, learned counsel appearing for Respondent No.1 —  

the Insurance Company, on the other hand, supported the decision  

of  the Commission and submitted that  the appellant’s  complaint  

was hopelessly time barred inasmuch as the incident took place on  

23rd March, 1988 and complaint was filed by the appellant in the  

year  1997  i.e.,  after  a lapse of  9 years.  It  was pointed out  that  

except  for  intimating  the  Insurance  Company  about  the  fire  

incident, the appellant did not lodge any formal claim, supported by  

documents as was required under the terms and conditions of the  

Policy. It was thus, pleaded that since no claim was made by the  

appellant  in  terms  of  the  policy  of  insurance,  the  question  of  

deficiency in service did not arise.

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9. The stand of Respondent No.2 — the Bank, in the counter affidavit  

is that suit for recovery of Rs. 3.76 crores has already been filed  

against the appellant which is now pending before Debt Recovery  

Tribunal,  Vishakhapatnam and complaint  before the Commission  

was by way of a counter-blast to the said proceedings. A reference  

is  also  made  to  the  correspondence  exchanged  between  the  

appellant and the Bank from 1988 to 1999 to show that there was  

no deficiency in service on their part.  

10.Thus, the short question for consideration is whether on facts at  

hand,  the  Commission  was  correct  in  law  in  dismissing  the  

Complaint preferred by the appellant as barred by limitation?

11.Section 24A of the Act bars any fora set up under the Act, from  

admitting a complaint, unless the complaint is filed within two years  

from  the  date  of  which  the  cause  of  action  has  arisen.  The  

provision expressly casts a duty on the Commission, admitting a  

complaint, to dismiss a complaint unless the complainant satisfies  

the District Forum, the State Commission or National Commission,  

as the case may be, that the complainant had sufficient cause for  

not filing the complaint within the period of two years from the date  

on which the cause of action had arisen.

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Generally, it is described as “bundle of facts”, which if proved or  

admitted entitle the plaintiff to the relief prayed for.  Pithily stated,  

“cause of action” means the cause of action for which the suit is  

brought.  “Cause of action” is cause of action which gives occasion  

for and forms the foundation of the suit.  (See:  Sidramappa Vs.  

Rajashetty & Ors.4).  In the context of limitation with reference to a  

fire insurance policy, undoubtedly, the date of accrual of cause of  

action has to be the date on which the fire breaks out.

14.In  the  case  before  us,  as  already  noted,  fire  in  the  tobacco  

godown took place on 22nd /  23rd March, 1988 and the Bank, in  

whose  favour  the  stocks  had been hypothecated,  was informed  

about it by the appellant on 23rd March, 1988 itself. Insofar as the  

appellant is concerned, the matter rested there till  6th November,  

1992, when for the first time, the appellant addressed the following  

letter to the Insurance Company.

“To The Branch Manager, National Insurance Company Limited, Chilakaluripet.

Sir,

We did business in tobacco in the name and style of  Messrs. Kandimalla Raghavaiah and Company. Our stock  belonging  to  1983-84  crop  was  kept  in  a  key  loan  to  Indian  Bank  was  insured  with  your  Company.  

4 (1970) 1 SCC 186

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Subsequently,  a  fire  accident  occurred in  the month of  March,  1988 in  the  premises  of  the  Company and the  entire stock insured was gutted in the fire.

As the said stock was gutted in the fire accident and  the same was insured,  we would like to make a claim  with regard to the loss insured by us due to the fire   accident.

So, you are hereby requested to give the claim  forms thereby enabling us to make a  claim for  the  loss occurred due to the fire accident.

Our request may kindly be considered forthwith”. (emphasis supplied by us)

15.It is manifest from the letter that till that date the appellant had not  

made any claim whatsoever with the Insurance Company for the  

loss suffered in the fire on 23rd March, 1988. As a matter of fact,  

only on 6th November, 1992 they, for the first time, asked for supply  

of “claim forms” in order to prefer a claim.  By that time period of  

limitation for the purpose of Section 24A of the Act had expired.  

Further, even thereafter, everything was quiet at both ends till 16th  

August,  1995  when  the  respondent  — Bank,  seemingly  on  the  

request of the appellant, confirmed to the appellant that they had  

preferred claim for the loss on 14th July, 1988 (Annexure P-7). On  

26th October, 1995, the appellant got a legal notice issued to the  

Insurance Company — Respondent No.1, narrating sequence of  

events leading to their prosecution at the instance of the Bank and  

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their ultimate acquittal and dismissal of Bank’s appeal in the year  

1992. The relevant portion of the legal notice reads as follows:

“5. And  that  thereafter  my  client  addressed  several  letters  to  the  authorities  of  National  Insurance  Company with a request to send the claim forms to  enable my client to prefer claim under the policy.

6. And that  in  spite  of  repeated requests  neglecting  the customary services failed to attend and did not  send the claim form on request.”

16.The legal notice was followed by yet another legal notice dated 4th  

January, 1996 which was also on similar lines. Vide reply dated  

21st March,  1996  to  the  legal  notice,  the  Insurance  Company  

refuted the claim made by the appellant.  For  the sake of  ready  

reference,  the  material  portion  of  the  reply  by  the  Insurance  

Company is extracted below:

“From the material available and from the information  secured, it became evident that your client, unable to  dispose of  the old stocks,  unable to discharge the  mounting  debt  to  Indian  Bank,  resorted  to  mischievous  and  criminal  acts  i.e. shifting  the  tobacco stocks from their godowns and intentionally  set  fire  to  the  tobacco  stocks  after  substitution  by  inferior quality tobacco either wholly or in part with a  view to lay a false claim for loss of the stocks against  my clients. The various methods and acts indulged in  by your clients constitute a flagrant violation of the  terms and conditions of the policy. Probably realizing  that  the  acts  and  methods  adopted  by  them,  as  stated  above,  constitute  flagrant  violation  of  the  terms and conditions, your clients have given quietus  to the matter by keeping quiet all these years. Your  client  is  totally disentitled for  any claim for  alleged  

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loss  against  my  client  under  policy  obtained  from  them.  The  claim  for  loss  alleged  to  have  been  sustained by your client, after a lapse of seven  years is totally barred by limitation and is futile in  any respect. Under these circumstances, sending  claim forms to your clients as requested in your  notice does not arise.

My clients further state that in case your client  sustained  any  loss  in  the  year  1988  under  the  scope  of  the  policy,  your  client  should  have  established  such  loss  alleged  to  have  been  sustained thereon and pursued (sic)  the matter  well  within  time  to  enable  my  clients  to  act  appropriately instead of  asking for  issuance of  claim form at such a belated stage.”

(Emphasis supplied)

17.Although it is not clear from the record as to when the said reply  

was received by the appellant, but the complaint by the appellant  

seems to have been filed before the Commission on or after 24th  

October, 1997.

18.It is, therefore, clear from the aforenoted correspondence between  

the appellant and the Insurance Company that cause of action in  

respect of the special insurance policy arose on 22nd / 23rd March,  

1988, when fire in the godown took place damaging the tobacco  

stocks hypothecated with  the Bank in whose account  the policy  

had  been  taken  by  the  appellant.  Thus,  the  limitation  for  the  

purpose of Section 24A of the Act began to run from 23rd March,  

1988 and therefore, the complaint before the Commission against  

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the Insurance Company for deficiency in service, whether for non  

issue  of  claim  forms  or  for  not  processing  the  claim under  the  

policy,  ought  to  have  been  filed  within  two  years  thereof.  As  

noticed  above,  the  complaint  was  in  fact  filed  on  or  after  24th  

October, 1997, which was clearly barred by time. It is pertinent to  

note that  in the complaint  before the Commission,  though there  

was an averment that the Bank had not disclosed to the appellant  

whether  any  amount  had  been  received  by  them  from  the  

Insurance Company against the claim preferred on 14th July, 1988,  

but appellant’s categorical stand therein was that it was because of  

the pendency of the criminal litigation that they could not make a  

claim in respect of the policy for the loss suffered and time and  

again they had been requesting the Insurance Company to send  

the  claim  forms,  which  request  was  not  acceded  to  by  the  

Insurance  Company,  and  it  shows  that  the  appellant  was  not  

depending on the claim stated to have been made by the Bank  

with the Insurance Company.

19.A bare reading of the impugned order shows that all these factual  

aspects  have  been  duly  taken  into  consideration  by  the  

Commission and we are in complete agreement with the finding by  

the Commission that the filing of claim by the Bank on 14th July,  

1988, would not have, in any way, helped the appellant. On their  

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own showing, for the first time, only on 6th November, 1992 and  

then again on 26th October, 1995, the appellant had requested the  

Insurance Company to issue claim form to enable them to prefer a  

claim which request was declined by the Insurance Company on  

21st March, 1996. By no stretch of imagination, it can be said that  

Insurance Company’s  reply  dated 21st March,  1996 to  the legal  

notice  dated  4th January,  1996,  declining  to  issue the forms for  

preferring a claim after a lapse of more than four years of the date  

of fire, resulted in extending the period of limitation for the purpose  

of Section 24A of the Act.  We have no hesitation in holding that  

the complaint filed on 24th October, 1997 and that too without an  

application  for  condonation  of  delay  was  manifestly  barred  by  

limitation and the Commission was justified in dismissing it on that  

short ground.  

20.For the foregoing reasons, we do not find any merit in this appeal.  

It is dismissed accordingly with costs.

…………………………………...J. (D.K. JAIN)

..……………………………………J.                 (R.M. LODHA)

NEW DELHI;  

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JULY 10, 2009.

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