New India Assurance Company Ltd. Vs Hemkund Duplex and Board Pvt. Ltd. (Supreme Court of India)
Fire Policy Is Not a Licence to Inflate Loss: False Stock Claims Justify Complete Repudiation—Supreme Court
Summary: The Supreme Court has held that where an insured makes false declarations, misrepresents the nature and quantity of damaged stock and manipulates its books to inflate an insurance claim, the insurer is entitled to repudiate the claim in its entirety. Though a surveyor’s report is neither sacred nor conclusive, a consumer forum cannot casually brush aside detailed findings recorded by statutory surveyors without identifying any arbitrariness, misconduct or deficiency in their investigation.
Facts of the Case
M/s Hemkund Duplex and Board Pvt. Ltd. had taken over a sick industrial unit in 2005 and commenced manufacturing paper boards using waste paper, Hessian bags, packaging materials, egg-tray cuttings and other waste products as raw material. Its factory at Najibabad consisted of an open yard, two pucca godowns and a tin shed.
The company obtained two fire insurance policies from New India Assurance Company Ltd. The stock was insured for ₹13 crore, while the building, plant and machinery were insured for ₹14 crore.
On 07.05.2009, a fire was reported in the waste-paper yard and tin shed. The insurance company was informed on the same day and appointed a preliminary surveyor. The insured lodged its formal claim on 09.05.2009.
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