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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No 378  of 2020 (Arising out of SLP(C) No 1899 of 2020)

(Arising out of SLP(C) D No 47437 of 2018)

Sangrur Sales Corporation                .... Appellant(s)

      Versus

United India Insurance Company Limited & Anr                 ....Respondent(s)

J U D G M E N T

Dr Dhananjaya Y Chandrachud, J

1 Delay condoned.

2 Leave granted.

3 This  appeal  arises  from  a  judgment  and  order  of  the  National

Consumer Disputes Redressal Commission1 dated 7 March 2018.   

4 The appellant obtained a “Standard Fire and Special Perils Insurance

Policy”  from the first  respondent to  cover  his  shop situated at  Gausala

Road, Sangrur.  The shop was insured in the value of Rs 18,00,000 and

the policy was valid from 21 June 2011 to 20 June 2012.  On 29 March

2012,  the showroom in  which the appellant  carried on the business of

1 NCDRC

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sanitaryware collapsed as a result of the work of excavation which was

being carried on in an adjacent plot.  A First Information Report was lodged

on 30 March 2012 at the Police Station, Sangrur and intimation of the loss

was  given  to  the  insurer.   A surveyor  was  appointed.   The  claim was

repudiated by the insurer on 11 May 2012.  This led to the institution of the

consumer  complaint  before  the  District  Consumer  Disputes  Redressal

Forum2, Sangrur.  The District Forum allowed the claim in the amount of

Rs 18,00,000, together with interest at nine per cent per annum from the

date of the institution of the complaint.  The order of the District Forum was

upheld by the State Consumer Disputes Redressal Commission3, Punjab

on 5 May 2016.  However, in a revision filed by the insurer, the NCDRC

reversed the order awarding the claim.

5 Notice was issued in the present proceedings on 22 April 2019.  The

office  report  indicates  that  the  insurer  has  been  served.  There  is  no

appearance on its behalf.

6 The dispute between the parties turns on a construction of clause VIII

(e) of  the policy of  insurance.   Before adverting to the exclusions,  it  is

necessary to extract the relevant part of the insurance policy, which reads

as follows:

“In consideration of the insured named in the Schedule hereto having paid to the United India Insurance Company Limited (hereinafter called the Company) the full premium mentioned in  the said  schedule,  the  company  agrees,  (subject  to  the conditions  and exclusions  contained herein  or  endorsed or otherwise  expressed  hereon)  that  if  after  payment  of  the premium the Property insured described in the said Schedule or any part of the such property to be destroyed or damaged

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by any of the perils specified hereunder during the period of insurance named in the said schedule or of any subsequent period in respect of which the Insured shall have paid and the Company shall have accepted the premium required for the renewal of the policy, the Company shall pay to the Insured the value of the Property at the time of the happening of its destruction or  the amount  of  such damage or  at  its option reinstate or replace such property or any part thereof.”

7 Clause VIII is in the following terms:

“VIII.  Subsidence and Landslide including Rock slide: Loss, destruction or damage directly caused by subsidence of part of  the  site  on which the property  stands or  land slide/rock slide excluding:

a) the normal cracking, settlement or bedding down of   new structures

b) the settlement or movement of made up ground

c) coastal or river erosion

d) defective design or workmanship or use of defective   materials

e) demolition, construction, structural alterations or repair of any property or groundworks or excavations.”

8 Clause  VIII  brings  within  the  purview of  the insured  perils  a  loss,

destruction or damage directly caused by subsidence of a part of the site

on which the property stands or a land slide/rock slide, but excludes, what

is stipulated in sub-clauses (a) to (e) thereafter.   The exclusion in sub-

clause (a) refers to the normal cracking, settlement or bedding down of

new structures.  The exclusion in clause (d) refers to defective design or

workmanship or use of defective materials.  The crucial exclusion is the

one in sub-clause (e)  which has weighed with the NCDRC. Clause (e)

relates to  the demolition, construction or structural alterations or repair of

any property or groundworks or excavations.  

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9 In the present case, the appellant was not engaged in any work of

demolition, construction or structural alterations nor was it engaged in any

repair of its property.  The excavation which was the cause of the loss, was

being carried on in a neighbouring plot and not by the appellant in his own

property.   In  the  absence  of  a  specific  qualification  indicating  that  the

exclusion will apply to an excavation being carried on by a third party, the

reasonable construction of sub-clause (e) of Clause VIII is that it should

apply only to a situation where the excavation is being carried on by the

insured  himself  in  his  own  property.  Significantly,  the  words  “of  any

property”  qualify  the  words  preceding  them  namely,  “demolition,

construction, structural alterations or repair” and not the words that follow.

10 It  is  well-settled  that  in  the  event  that  the  two  constructions  are

possible  or  in  the  event  of  an  ambiguity,  that  construction  which  is

beneficial to the insured should be accepted consistent with the purpose

for which the policy was taken, namely to cover the risk on the happening

of a certain event.  [See in this context, the decision of this Court in United

India Insurance Co Ltd v Pushpalaya Printers4.

11 The NCDRC, in reversing the concurrent views of the District Forum

and the SCDRC, held thus:

“On bare  reading  of  the  above,  it  is  clear  that  as  per  the above  noted  condition,  the  loss  caused  to  the  insured property due to demolition, construction, structural alterations or repair of any property or ground works or excavations is excluded from the risk covered.  On perusal of para 3(b) of the copy of complaint placed on record, it is evident that as per the stand taken by the complainant  on 29.03.2012 the insured  showroom  had  fallen  accidentally  as  a  result  of subsidence and land sliding due to digging work being carried

4 (2004) 3 SCC 694

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out by the neighbour in adjacent plot.  It is also alleged in the said  paragraph  that  a  daily  diary  report  no.54  dated 30.03.2012 regarding the incident was duly lodged with the P.S. Sangrur.  From the aforesaid admission on the part of the complainant, it is evident that loss was caused to the insured because  of  collapse  of  the  insured  building  as  a  result  of excavation  work  being  carried  out  in  the  adjacent  plot resulting in subsidence and land sliding.  Thus, in my view, in view  of  the  above  noted  specific  exclusion  clause,  the petitioner/ insurance company was justified in repudiating the insurance claim.”

12 The error of the NCDRC lies in reading the exclusion in regard to

excavations as being applicable in a situation such as the present where

the cause which resulted in the damage was a work of a third party which

was  carrying  on  an  excavation  in  independent  premises.   It  is  not  in

dispute  that  no  part  of  the  excavation  was  attributable  to  any  act  or

omission on the part of the appellant.  Hence, to read the exclusion, as

being  attracted  in  the  present  case,  would  not  be  to  a  reasonable

construction of the policy of insurance.

13 For  the  above  reasons,  we  allow  the  appeal  and  set  aside  the

impugned judgment and order of the NCDRC dated 7 March 2018.  In

consequence,  we restore  the  order  of  the  District  Forum dated  5  May

2016, as affirmed by the SCDRC.  In the circumstances, there shall be no

order as to costs.  

…………...…...….......………………........J.                                                                     [Dr Dhananjaya Y Chandrachud]

…..…..…....…........……………….…........J.                              [Hrishikesh Roy]   

New Delhi;  January 17, 2020

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ITEM NO.59               COURT NO.8               SECTION XVII-A

              S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS

SPECIAL LEAVE PETITION (CIVIL) Diary No(s).47437/2018

(Arising out of impugned final judgment and order dated  07-03-2018 in  RP  No.  2399/2016  passed  by  the  National  Consumer  Disputes Redressal Commission, New Delhi)

SANGRUR SALES CORPORATION                          Petitioner(s)

                               VERSUS

UNITED INDIA INSURANCE COMPANY LTD. & ANR.         Respondent(s)

(WITH IA No. 61971/2019 - CONDONATION OF DELAY IN FILING, IA No. 61972/2019  -  CONDONATION  OF  DELAY  IN  REFILING  /   CURING  THE DEFECTS)   Date : 17-01-2020 This petition was called on for hearing today.

CORAM :           HON'BLE DR. JUSTICE D.Y. CHANDRACHUD          HON'BLE MR. JUSTICE HRISHIKESH ROY

For Petitioner(s) Mr. Navneet Kumar, Adv. Mr. Vikas Bhadana, Adv. Mr. Mohit Singh, Adv. Mr. Parijat Kishore, AOR

                   For Respondent(s) Mr. Raunak Jain, Adv.                   Mr. A. V. Rangam, AOR

Mr. Buddy A. Ranganadhan, Adv.                      

UPON hearing the counsel the Court made the following                               O R D E R

Delay condoned.

Leave granted.

The  appeal  is  allowed  in  terms  of  the  signed

reportable judgment.

Pending application, if any, stands disposed of.

 (SANJAY KUMAR-I)                (SAROJ KUMARI GAUR)      AR-CUM-PS                           COURT MASTER

(Signed reportable judgment is placed on the file)