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ZIP INDUSTRIES PRIVATE LTD. versus THE ORIENTAL INSURANCE COMPANY

High Court of Madras

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Zip Industries Private Ltd. v. The Oriental Insurance Company - C.S.No.1493 of 1988 [2002] RD-TN 389 (21 June 2002)



IN THE HIGH COURT OF JUDICATURE AT MADRAS



DATED: 21/06/2002

CORAM

THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM

C.S.No.1493 of 1988

and

Tr.C.S.No.15 of 2001

Zip Industries Private Ltd.,

rep.by its Director V.K.Jhaver .. Plaintiff in both suits vs

1. The Oriental Insurance Company

Limited, rep.by its Divisional

Manager, City Branch Office No.2

115, Broadway, Madras 600 108.

2. Canara Bank,

rep.by its Branch Manager,

A.N.Street, Madras 1. .. Defendants in both suits For Plaintiff : Mr.K.Bijay Sundar

For Defendants : Mr.Nithiyanandam

for M/s.King & Patridge for D1 Mr.M.Balachandar for D2

:COMMON JUDGMENT



C.S.No.1493 of 1988:

This suit has been filed for a decree for a sum of Rs.19,14,404/- against the first defendant together with interest at 21 per annum on Rs.13,32,404/- from the date of plaint till realisation and for costs.

2. Tr.C.S.No.15 of 2001 This suit has been filed for a decree for a sum of Rs.7,13,936/- against the first defendant, for interest at 21 per annum on Rs.4,96,93 6/- from the date of decree till realisation and for costs.

3. The plaint averments in CS 1493 of 1988 are as follows: The plaintiff is having its factory at No.12, GST Road, Chingleput. They entered into a contract of insurance with the first defendant by taking out a burglary policy under Policy No.41111/44/Misc/2333/( EP)/86 with effect from 8.11.1985 for a period of one year covering the stock and stock in process and stocks lying in the premises of their division microcomparts. The total stocks insured was for Rs.20,00,0 00/- for which Rs.3,625/- was paid towards premium. Since all the stocks were hypothecated with the 2nd defendant, a Bank Clause was incorporated. The 2nd defendant is made as a proforma party, but no relief is made against the 2nd defendant. There was a strike and lock out in its factory from 23.10.85, and it was lifted only on 16.7.1986. In view of the strike and lock out, the management staff and other non-striking staff were not allowed to enter the factory premises. The factory in question is having sufficient personnel to protect the goods in the factory and is having a watchman round the clock. The plaintiff appointed a firm of security services to look after the security of the factory. There were periodical inspection of the stocks by the 2nd defendant's representative. On 18.3.1986, around 2 a.m., the security staff noticed theft from the factory premises, and immediately a police complaint was lodged in the nearest police station. The First Information Report was filed on 19.3.1986 with the police, and the 1st defendant was also informed about the burglary. A Surveyor was appointed by the 1st defendant to investigate the burglary and to give a report. The plaintiff furnished all the necessary records, documents and information to the surveyor. But so far, the plaintiff has not been given any copy of the report. The case originally registered under Ss 457 and 511 IPC by the police was later changed to Ss 457 and 380 IPC. Despite investigation, the police could not recover the stolen property or apprehend the thieves. The police reported the case as undetectable. The total cost of materials burgled from the plaintiff's factory premises is Rs.13,32,404/-. The policy issued by the 1st defendant covers the loss in question, and hence, the first defendant is liable to pay the said sum. There are no grounds for the first defendant to repudiate the claim. Though the plaintiff lodged its claim with the first defendant, the first defendant has not settled the claim till date. The plaintiff is entitled to claim interest at 21 per annum from 1.10.86, the date on which the investigation ought to have been completed and the claim settled. Thus, in aggregate, the plaintiff is entitled to claim a sum of Rs.19,14,404/-. Hence the suit is filed for the abovestated reliefs.

4. In the written statement filed by the first defendant, it is alleged as follows:

It is true that the plaintiff entered into a contract of insurance with D1 as alleged in the plaint. Under the said policy, the first defendant undertook to indemnify the insured in case of any loss, only if the said loss occurred due to any one of the incidents viz. 1) theft of property from the premises described in the schedule to the policy following upon felonious entry of the said premises by violent and forcible means; or 2) theft by a person in the premises who subsequently broke out by violent and forcible means. The first defendant is liable only for the loss due to theft arising out of house breaking or burglary as explained above. Since no such incident has taken place in the plaintiff's premises, the suit deserves to be dismissed. The plaintiff reported the loss and asked the first defendant to issue a claim form. The first defendant at the first instance refused to entertain the claim, since the alleged loss is not payable under the policy, and the same was intimated to the plaintiff vide its letter dated 7.4.1986. Thereafter, the plaintiff's executives met the higher officials of the first defendant on 25.4.86, and during discussion, without prejudice, the first defendant agreed to depute a surveyor. The same was communicated to the plaintiff vide letter dated 9.5.86. M/s. Standard Surveyor's Private Ltd. we re appointe to survey the loss. The Surveyor who investigated the loss, submitted a detailed report to the first defendant on 31.10.1988, ruling out the possibility of the alleged loss. In the opinion of the Surveyor, it is not possible for a person or a group of persons to manually remove more than 3 5 M.T. of stocks through the ventilator within a matter of few hours on the night of 17/18.3.86. At least three lorries would be required to transport the stocks from the factory. It was impossible for any vehicle to come anywhere near the southern wall of the compound. Based on the report of the surveyor, the first defendant repudiated the claim vide letter dated 23.11.1988. Hence, the first defendant is not liable to pay any amount. The policy does not cover the alleged loss in question. It is denied that there are no grounds to repudiate the claim. The repudiation is just and proper as no incident of burglary or house breaking as mentioned above has taken place. There is no cause of action for the suit. The plaintiff is not entitled to claim interest as alleged by them. Therefore, the suit is liable to be dismissed with costs.

5. Plaint averments in Tr.C.S.15 of 2001 are as follows: The plaintiff is having its factory at No.12, GST Road, Chingleput. They entered into a insurance contract with the first defendant by taking out a burglary policy vide Policy No.41111/44/O/Misc.2334/(EP)/86 with effect from 8.11.1985 for a period of one year covering the stock, stock in process and other materials in the factory premises. The total stock insured was for Rs.15,00,000/-, and Rs.2,526/- was paid towards premium. Since the stock in trade and other materials were hypothecated with the 2nd defendant, a Bank Clause was incorporated. The 2nd defendant is made as a proforma defendant, but no relief is made against the 2nd defendant. There was a strike and lock out in its factory from 23.10.85, and it was lifted only on 16.7.1986. In view of the strike and lock out, the management staff and other nonstriking staff were not allowed to enter the factory premises. The factory in question is having sufficient personnel to protect the goods in the factory and is having a watchman round the clock. The plaintiff appointed a firm of security services to look after the security of the factory. There were periodical inspection of the stocks by the 2nd defendant's representative. On 18.3.1986, around 2 a.m., the security staff noticed theft from the factory premises, and immediately a police complaint was lodged in the nearest police station. The First Information Report was lodged on 19.3.1986 with the police about the incident, and the 1st defendant was also informed about the burglary. A Surveyor was appointed by the 1st defendant to investigate the burglary. The plaintiff furnished all the necessary records, documents and information to the surveyor. But so far, the plaintiff has not been furnished with a copy of the report. The case initially registered under Ss 457 and 511 IPC by the police was later changed to Ss 457 and 380 IPC. Despite diligent investigation, the police could not either recover the stolen property or apprehend the thieves. Finally, the police reported the case as undetectable. The total cost of materials burgled from the plaintiff's factory premises is Rs.4,96,936/-. The policy issued by the 1st defendant covers the loss in question, and hence, the first defendant is liable to pay the said sum. There are no grounds for the first defendant to repudiate the claim. Though the plaintiff lodged its claim with the first defendant, the first defendant has not settled the claim till date. The plaintiff is entitled to claim interest at 21 per annum from 1.10.86, the date on which the investigation ought to have been completed and the claim settled, to 31.10.88. Thus, in aggregate, the plaintiff is entitled to claim a sum of Rs.7,13,936/-. Hence the suit is filed for the abovesaid reliefs.

6. The first defendant filed a written statement with the following averments:

It is true that the plaintiff entered into a contract of insurance with D1 as alleged in the plaint, and the total stock insured was Rs.1 5,00,000/- for which premium of Rs.2,525/- was paid. Under the said policy, the first defendant undertook to indemnify the insured in case of any loss, only if the said loss occurred due to any one of the incidents viz. 1) theft of property from the premises described in the schedule to the policy following upon felonious entry of the said premises by violent and forcible means; or 2) theft by a person in the premises who subsequently broke out by violent and forcible means. The first defendant is liable only for the loss due to theft arising out of house breaking or burglary as explained above. As no such incident has taken place in the plaintiff's premises, the suit deserves to be dismissed. The plaintiff reported the loss occurred on 18.3.86 and asked the first defendant to issue a claim form. The first defendant at the first instance refused to entertain the claim, since the alleged loss is not payable under the policy, and the same was intimated to the plaintiff vide its letter dated 7.4.1986. Thereafter, the plaintiff's executives met the higher officials of the first defendant on 25.4.86, and during discussion, without prejudice, the first defendant agreed to depute a surveyor. The same was communicated to the plaintiff vide letter dated 9.5.86. M/s. Standard Surveyor's Private Ltd. were appointe to survey the loss. The Surveyor who investigated the loss, submitted a detailed report to the first defendant on 31 .10.1988, thereby ruling out the possibility of the alleged loss. In the opinion of the Surveyor, it is not possible for a person or a group of persons to manually remove more than 35 M.T. of stocks through the ventilator within a matter of few hours on the night of 17/18.3.86. At least three lorries would be required to transport the stocks from the factory. It was impossible for any vehicle to come anywhere near the southern wall of the compound. Based on the report of the surveyor, the first defendant repudiated the claim vide letter dated 23.11.1988. Hence, the first defendant is not liable to pay any amount, much less the suit claim. The policy does not cover the alleged loss in question. It is denied that there are no grounds to repudiate the claim. The repudiation of the claim is just and proper as no incident of burglary or house breaking as detailed above has taken place. There is no cause of action for the suit. The plaintiff is not entitled to claim interest as alleged by them. Therefore, the suit is liable to be dismissed with costs.

7. In the written statement filed by the second defendant, it is alleged that the account of the plaintiff with the 2nd defendant at its A.N.Street Branch has been transferred to Teynampet Branch, and hence, the plaintiff may be directed to amend the plaint accordingly; that it is an admitted case of the plaintiff that the insurance policy has hypothecation endorsement in favour of the 2nd defendant, and therefore, the amount that may be decreed by the Court should be directed to be paid to the 2nd defendant.

8. On the above pleadings, the following issues were framed: C.S.1493 of 1988:

1) Whether there was burglary in the premises of the plaintiff's factory as alleged in the plaint?

2) If so, what is the loss suffered by the plaintiff? 3) Whether the burglary reported is covered under the policy given by the first defendant?

4) Whether the repudiation of the claim by the first defendant is just and proper?

5) To what relief, if any, the plaintiff is entitled? TR.C.S.15 of 2001:

1) Is the plaintiff entitled to Rs.4,96,936/- being the alleged value of loss said to have sustained by the plaintiff?

2) Is the plaintiff entitled to interest at 21 p.a.? 3) Is the defendant entitled to repudiate the claim for the reasons set out in para 5 of the written statement?

4) Was there not a burglary in the plaintiff's premises resulting in loss of 9035.25 kilograms of brass wire and if so, was not the defendant liable to compensate the plaintiff for the loss in question? 5) To what other relief or reliefs if any, is the plaintiff entitled to?

9. ISSUES 1 TO 5 IN BOTH SUITS: The plaintiff ZIP Industries Pvt. Ltd. has filed these two suits claiming Rs.19,14,404/- and Rs.7,13,936/- respectively from the first defendant alleging that the stocks of the plaintiff were insured with the first defendant insurance company under two burglary policies for a period of one year from 8.11.1985, within which period there was a burglary in the factory premises of the plaintiff, and as per the terms and conditions of the policies, the first defendant is liable to pay the same to the plaintiff. The first defendant insurance company resisted the suit stating that the first defendant was liable only for the loses due to theft arising out house breaking or burglary as found in the terms and conditions contained in the policies issued, but there was no occurrence of burglary, as alleged by the plaintiff; that there was no cause of action for the suit, and the claim made by the plaintiff was only imaginary, and hence, the first defendant is not liable to meet the claim of the plaintiff.

10. On the side of the plaintiff, P.W.1 was examined and Exs.P1 to P29 were marked. On the side of the defendants, D.W.1 was examined and Ex.D1 was marked.

11. Arguing for the plaintiff, the learned counsel would submit that the plaintiff carrying on business in manufacturing and marketing Zip fasteners and components, entered into two contracts of insurance with the first defendant insurance company by taking out two burglary policies with effect from 8th November, 1985 for a period of one year; that all the raw materials like brass, aluminium, CRCA and tapes and zipper components and consumables, spares and scrap items were covered under the said policies; that the copy of the policies are marked as Exs.P1 and P28; that the original policies were submitted along with the claim forms to the first defendant; that as per the policies issued, the plaintiff was paying the premiums regularly; that all the stocks were hypothecated with the second defendant bank, and the same has also been endorsed in the respective policies; that the said policies were in force; that the officials of the second defendant bank used to come for the stock inspection every month; that the plaintiff has also submitted their stock statements to the second defendant, which were verified by the bank officials with the actual goods available; that during the later part of 1985, there were labour problems in the plaintiff company; that the factory was closed from 23.10.1985 to 16.7.1986; that in order to show the actual materials available, the plaintiff has filed Ex.P25 stock register; that during the said closure, the factory was kept closed; that the striking workers did not allow the staff to enter the factory premises; that there was a tight security to take care of the company; that the security personnel were guarding the factory premises even during the night ours; that while so, at about 2.00 A.M. on 18.3.1986, the burglary was noticed by one of the security personnel by name Angappan; that he immediately reported the same to P.W.1, who was a Production Manager; that after informing the higher officials, a complaint was lodged at Chengalpet Town Police Station; that consequent to the s ame, a case was registered; that even after thorough investigation, the police could not detect and filed a final report as shown under Ex.P2; that it is pertinent to note that the police has not found the case of the plaintiff as false; that the factory premises was of an extent of 3 acres of land, and adjacent to the factory, there was an extent of 2 acres; that Ex.P11 is the photographic plan in respect of the factory; that Ex.P12 series are the photographs of the factory premises as well as the stocks therein; that the culprits taking advantage of the strike, have gained entry by breaking open the ventilators situated on the roof and have removed the materials viz. brass, zemac, etc.; that the said incident of burglary was informed to the first defendant insurance company on 4.4.86; that it is true that there was some delay in doing so, which was solely due to agitational attitude of the labourers who prevented the officials and staff to enter into the factory premises; that only after a discussion at different levels through Joint Commissioner of Labour and also directly with the workers and their Union on 25th, 27th and 31st March 1986, the officials of the plaintiff company were allowed to enter the factory for a period of 2 or 3 days, and thus, the officials of the plaintiff and the police entered the premises on 3rd April to know the facts about the burglary and assess the extent of damages, if any; that a surveyor who was appointed by the first defendant insurance company, visited the factory on 5.4.86; that at the time of observation, lot of identification marks were noticed to indicate that the burglars have entered the buildings through the ventilators; that in the case of Micro Comparts, it was observed that the burglars have broken the A.C. gutter of the roof and entered in this department by breaking the gutter; that the surveyor has written Ex.P13 letter to the plaintiff listing out various documents required by them; that in reply to the said letter, the plaintiff wrote a letter on 9.5.86 under Ex.P14 wherein all those documents which were available with them were enclosed; that on 30.4.86, the plaintiff sent a letter to the first defendant enclosing a note in the matter of burglary as requested by them, which is marked as Ex.P15; that following the same, since there was no settlement of the claim, the plaintiff was constrained to send letters on 12.5.86 and 28.1.97; that a copy of the letter dated 12.5.86 is marked as Exs.P16; that on receipt of those letters, the first defendant insurance company informed the plaintiff under Ex.P17 dated 29.1.87 that they had not received the final surveyor report; that since there was enormous delay in submitting the final report by the surveyor, the first defendant wrote a letter on 8.9.87 to the surveyor requesting them to send the report immediately; that a copy of the said letter was marked to the plaintiff; that on 29.2.88, the surveyors asked the plaintiff to furnish a stock register in respect of the various stocks in the factory premises; that in compliance to the same, the plaintiff has sent the various registers to the surveyors on 1.3.88; that Ex.P19 contained the list of documents and records furnished to the surveyors by the plaintiff; that in spite of furnishing all the records and documents as requested by the surveyor and the first defendant, the claims of the plaintiff were not settled by the first defendant; that asking early settlement of the claims, the plaintiff sent Exs.P20 and P21 letters on 8.9.88 and 8.10.88 respectively; that Ex.P22 is the stock statement given by the plaintiff to the surveyors in respect of the quality details of materials for the period from 1.7.85 to 31.10.85, and the comparison price structure of different materials along with various quotations and vouchers were sent under Ex.P23; that the second defendant bank has given a certificate under Ex.P24 containing various credit facilities given to the plaintiff; that the plaintiff by sufficient evidence has proved the incident of burglary; that the defendants have not alleged any fraud or misrepresentation on the part of the plaintiff; and that the first defendant has not questioned the weight or value of the materials available with the plaintiff during the relevant period. Added further, the learned counsel that the surveyor who was appointed by the insurance company, though inspected the premises on 5.4.86, has given his final report only on 31.10.1988, but neither the surveyor nor the first defendant gave any copy of the report to the plaintif till the time of the trial; that the first defendant has not examined the surveyor to speak about the contents of the survey report, and hence the plaintiff's valuable right of cross examination of the surveyor has been taken way, and therefore, the surveyor's report marked as Ex.D1 has got to be rejected outright; that the crime of burglary has been committed during the interval prior to 17/18.3.85 when the same was noticed by the plaintiff's security personnel; that it is not the case of the plaintiff that the properties were stolen one day, and thus, the plaintiff has neither questioned the value nor the weight, and therefore, the plaintiff has proved both the claims; that the repudiation of the claims by the first defendant insurance company was against law and illegal; that the plaintiff has proved the case by acceptable and sufficient evidence, and hence both the suits have got to be decreed.

12. Countering to the above contentions of the plaintiff's side, the learned counsel for the first defendant would submit that it is true that the plaintiff entered into two contracts of insurance with the first defendant, and two policies under Exs.P1 and P28 were issued in favour of the plaintiff; that the said policies were for a period of one year commencing from 8.11.85; that as per the averments in the plaint and the evidence of P.W.1, who was a production manager of the plaintiff company, the workers went on strike even from October 1985; that it is pertinent to note that at the time of entering into the contracts, the plaintiff has not brought the same to the notice of the first defendant, but has suppressed the same; that the suppression of the said material facts has affected the plaintiff's claims; that a reading of the plaint would show that the occurrence of burglary has taken place on 18.3.86; that after the filing of the written statement stating that the burglary in respect of huge tonnes of materials could not have taken place on a single day, it was highly improbable that the plaintiff through the evidence of PW1 has made an attempt to develop its case by stating that the occurrence of burglary has taken place during the period prior to 18.3.86; that according to PW1's evidence, the alleged burglary would have taken place even before the commencement of the policies; that on 27.3.86, the plaintiff approached the first defendant's officials seeking for an endorsement to include some brass items; that the officials of the first defendant have made such endorsements only in good faith; that it is pertinent to note that those items were not included in the original policies; that the plaintiff though got the endorsements on 27.3.86, has not brought to the notice of the first defendant the incident of theft alleged to have either taken place or been noticed on 18.3.86; that the plaintiff for the first time informed the first defendant insurance company about the incident of burglary only on 4.4.86; that a surveyor was immediately appointed on 5.4.86 to survey and assess the loss alleged to have occasioned in the plaintiff's factory; that it is admitted by the plaintiff that the surveyor made his first visit on 5.4.86; that it is not correct to state that any delay was caused by the surveyor in submitting his report either wantonly or de liberately because there were correspondences between the plaintiff and the surveyor as to furnishing of documents and records; that it is pertinent to note that the first defendant has taken steps to get the report from the surveyor as early as possible; that the surveyor who inspected the properties, has given a detailed report and has expressed categorical reasons and the circumstances which would improbablize the alleged burglary; that the said report has been filed by the first defendant as Ex.D1 ; that as per the practice followed, either the surveyor or the insurance company has not given a copy of the report to the plaintiff, but the first defendant has categorically repudiated the claims of the plaintiff; that the contention of the plaintiff's side that Ex.D1 surveyor's report has to be rejected on the ground of non examination of the surveyor is not legally sound and not correct; that the plaintiff has breached the conditions of policies, which would disentitle the plaintiff to sustain its claims; that the plaintiff has not informed the first defendant about the incident of burglary immediately; that P.W.1 has well admitted that there was negligence on the part of the security personnel and action was also taken against them; that taking into consideration that the factory consisted of six sheds and was situated in three acres of land, the security personnel three in number was thoroughly insufficient and inadequate, and thus, the plaintiff has not exercised due care to safeguard the properties covered under the two policies, and under the circumstances, the plaintiff is not entitled for the claims, and both the suits have got to be dismissed.

13. The learned counsel for the second defendant bank would submit that the materials of the plaintiff during the relevant period were hypothecated with the second defendant bank; that in respect of the same, due endorsements have been made in the polices; and that the amount that may be decreed should be directed to be paid to the 2nd defendant.

14. Admittedly, the plaintiff entered into a contract of insurance with the first defendant insurance company by taking out two burglary policies bearing policy Nos.41111/44/Misc/2333/(EP)/86 and 41111/44/ O/Misc.2334/86 respectively with effect from 8th November, 1985 for a period of one year. The xerox copies of the policies are marked as Exs.P1 and P28 respectively. So far as the first policy was concerned, the total stocks insured was for Rs.20,00,000/- for which a premium of Rs.3.625/- was fixed. Under the second policy, the total stocks insured was for Rs.15,00,000/-, and a premium of Rs.2,525/- was fixed. It is also admitted that during the relevant period all the stocks were hypothecated with the second defendant, and a clause in that regard was also incorporated in the policies. The plaintiff has paid the premiums without any default also. There was a strike by the workers in the factory, and following the same, there was a lock out in the factory from 23.10.1985, and it continued till 16.7.1986.

15. As seen above, the specific case of the plaintiff is that during the currency of the aforestated two burglary policies, the materials viz. brass wire, brass wire in process, brass strip, zemac in process and zemac (remelting) worth Rs.13,32,404/- in one case and Rs.4,96,936/- in another claim were burgled from the factory premises; that the same was noticed on 18.3.1986 around 2.00 A.M. by the security staff, who in turn brought to the notice of the Managerial Personnel, who lodged a complaint to the police and made claims before the first defendant; and that since the policies issued by the first defendant covered the loss in question, the first defendant under the terms and conditions of the policies was liable to pay the suit claims. It is a case where the first defendant insurance company has flatly repudiated the claims stating that there was no occurrence of burglary at all. Hence, a duty is cast upon the plaintiff to prove the alleged burglary in order to sustain its claims. At this juncture it would be more appropriate and advantageous also to reproduce the necessary Condition No.1 in the policies, whereby the first defendant has undertaken to indemnify the insured in case of any loss, only if the said loss occurred due to any one of the incidents stated therein.

"1. For the purposes of the Policy the term Housebreaking or Burglary" shall mean:-

(a) Theft of property from the premises described in the Schedule to this Policy following upon felonious entry of the said premises by violent and forcible means or

(b) Theft by a person in the premises who subsequently breaks out by violent and forcible means."

16. As could be well seen from Exs.P1 and P28 policies, the insurance coverage was for a period of one year commencing from 8.11.1985. As per the pleadings, the occurrence of burglary, which formed the basis for the claims, has taken place on the night of 17/18th March 1986 . The Manager of the plaintiff company examined as P.W.1, has stated that at about 2.00 am on 18th March, 1986 one Mr.Angappan, a security personnel reported about the theft; and that he did not know whether Angappan reported the same to the Director or the General Manager; and that they preferred a complaint to the concerned police station authorities. A perusal of Ex.P2 final report would reveal that on the information given by V.Angappan and Pannalal Lakhami at 13.00 hours of 19.3.86, a case under Ss 457 and 511 of I.P.C. was registered by G1 Police Station, Chengalpet Town in Crime No.161/86, and subsequently, it was altered into one under Ss 457 and 380 of I.P.C., and after investigation, the said case was referred as undetected. It is pertinent to note that the plaintiff has not filed even a true copy of the original complaint lodged with the police. But the final report of the police under Ex.P2 would reveal that during investigation the police came to know that there was a labour problem pursuant to the retrenchment of workers; and that the management informed the police that they could not tell when actually the materials worth Rs.15 lakhs as alleged in the report were stolen, and that the same could have been stolen over a period of time. The non production of the original complaint lodged with the police coupled with the above report of the police to drop the case would improbablise the theft on 17/18.3.1986.

17. As found under Exs.P3 and P29 claim forms, the plaintiff under the aforestated insurance policies have made two claims. Under the said claims, the plaintiff company has stated in Clauses 4 and 5 as follows: "4.(a) Date and time of loss : 18.3.'86

(b) When discovered, and : By Security

by whom staff

5.(a) How entry to the premises : By breaking open effected? & forcible entry Which portion of the through venti- premises was entered? lators & window

(Give brief details of how of the factory

exactly the loss occurred premises of Indo-

also specifying overleaf matic Systems Pvt

the articles stolen and Ltd. Detailed

property, if any damaged) note already

given by Indoma- tic Systems Pvt. Ltd." The above contents in the claim forms would go to show that the date and time of loss was on 18.3.1986. Significant it is to note that the plaintiff has not placed a claim before the first defendant insurance company that the loss was sustained by burglary during any period prior to 18.3.1986. Nowhere the plaintiff has averred in the plaint that the materials were stolen over a period of time preceding 17/18.3.1986. Deviating from the claims and t he averments in the pleadings, P.W.1 has stated that the materials were stolen over a period of time and not on one particular day alone; and that they came to know about it only on that particular date. Thus, a new case in respect of the incident of burglary is set up. Admittedly, both the insurance policies were for a period of one year commencing from 8.11.1985. P. W.1 has categorically admitted that theft of materials might have taken place from October 1985 to March 1986. This part of the evidence would go to show that even as per the evidence of P.W.1, the alleged burglary of materials could have taken place even before the commencement of the period covered under the policies. It is quite evident that the plaintiff company was facing labour problems, and the factory was closed from 23.10.1985 to 16.7.1986, during which period the striking workers did not allow the staff or the other workers to enter the factory premises. Even with the court order, the staff who were ready and willing to work, could not enter the premises, and they were prevented from getting entry. During the said period, there was tight security for all the 24 hours manned by hired staff from the security agency and by some staff appointed by the plaintiff company. P.W.1 has candidly admitted that during the said period, there was lock out; that the workers were standing outside the factory in batches all the time; that there was no violent entry by the workers or outsiders on the particular day; that no particular staff was manhandled by unknown persons on that day; and that they came to know about the theft only on that particular date. Taking into consideration the weight of the alleged stolen materials around 17 tonnes of brass and 5.7 tonnes of zemac from one area and 9 tonnes of brass from another area, the theft could not have taken place on a single day. P.W.1 has stated that there was no report by the security staff about the missing of materials on any day prior to 18.3.1986, and there was negligence on the part of the security. But no material is placed before the court that any action was initiated against the security for their negligence.

18. According to the plaintiff, there was burglary by way of breaking open and forcible entry through the ventilators and windows of the factory. P.W.1 has stated that the materials that were lost were inside the godown as well as on the working floor; that the factory has a compound wall around with 8 feet height; that the missing materials were in the two factory sheds and godown; that there were about 2 or 3 ventilators on the roof; and that the height of the roof was about 10 to 12 feet from the ground. But the witness could not say the size of the ventilators even approximately. Under the circumstances, it would be highly impossible for either a person or group of persons to gain entry through the ventilators situated on the roof measuring about 10 to 12 feet above the floor and to remove huge tonnes of stocks, without being noticed by anybody including the security staff. Taking into consideration the weight of the alleged stolen properties, it would require some transport to take the same from the said place. It is not in dispute that the compound wall with a height of 8 feet is situated 100 feet away from the factory premises, and the only main gate of the factory was kept closed and manned with security also. Hence, it would not have been possible for any vehicle to be taken near the factory or the compound wall. Under the tight security round the clock in the factory, it would be highly impossible to remove tonnes of brass and zemac unnoticed by any one. All the above circumstances would clearly improbablise the alleged burglary and the loss of materials through burglary. No one of the securities including the informant to police Mr.Angappan was examined on the plaintiff's side to either narrate or speak any one of the facts related to the alleged theft. Placing much reliance on Ex.D1 surveyor's report, the learned counsel for the first defendant insurance company would stress that the surveyor, after due notice had a thorough inspection of the factory and has given a report stating that the alleged burglary could not have taken place in the factory at all. More than one reason is available to reject Ex.D1 surveyor's report. Admittedly, the surveyor who was appointed by the first defendant insurance company to survey and assess the loss said to have been caused by burglary, has made the first inspection on 5.4.1986, but has given the final report only on 31.10.1988, nearly after a period of 30 months. It is not disputed that the plaintiff has placed all the necessary records and documents to the surveyor for the purpose of the survey and assessment of the loss. Nowhere the surveyor has stated in Ex.D1 that any copy of the survey report was given to the plaintiff. It is pertinent to note that the first defendant insurance company has not given a copy of the said report to the plaintiff, which fact has also been averred in the plaint. The first defendant though marked Ex.D1 survey report, has not chosen to examine the surveyor. Under such circumstances, the court is of the view that the said document cannot lend any support to the defendants' side. However, the plaintiff who have put forth its claim alleging that the materials in the factory were burgled, have not proved the same, which formed the basis for the cause of action for filing the suit.

19. It is an admitted position that there are endorsements of hypothecation in favour of the second defendant Canara Bank on the respective policies. Though the concerned branch of Canara Bank, added as second defendant has filed a written statement, they have not averred anything except the statement as to the said endorsements of hypothecation found in the policy documents. According to P.W.1, the Canara Bank officials used to come for inspection every month, and the plaintiff used to submit their stock statements to the second defendant Bank, and the Bank used to verify the goods in relation to the statements submitted by the plaintiff, and the inspection officials used to submit the inspection reports also. The plaintiff has summoned neither any of their stock statements given to the second defendant nor the inspection reports of the second defendant's Bank officials in order to prove what was the stock available at the time, when the goods were insured. The stock statements filed by the plaintiff and marked as Ex.P25 could not be either given any importance or attached with any evidentiary value, since they are self serving documents. The learned counsel for the plaintiff would submit that a notice was served on the plaintiff's counsel pending the trial for production of the inspection report. In answer to the same, the learned counsel appearing for the second defendant bank would submit that no one document or report is available in the hands of the bank, and all the documents are in the custody of the plaintiff only. Added further, the learned counsel for the 2nd defendant bank that all the materials of the plaintiff were already hypothecated with them; and that an inspection was made on 23.10.85 and in view of the strike and lock out, no inspection was made thereafter. The non production of the inspection report of the second defendant bank officials after verifying the stock available on 23.10.85 would cast a doubt whether the materials as alleged by the plaintiff were actually available in the factory on 23.10.85. The non examination of any bank officials in respect of any inspection made before the commencement of the insurance coverage and during the relevant period and the non production of the aforesaid documents from the second defendant would lead to the adverse inference that had that evidence both oral and documentary, been adduced, the same would be against the case of the plaintiff. From the available evidence, it would be abundantly clear that due to the labour problems, strike and lock out, the factory was closed from 23.10.1985 to 16.7.1986, and the striking workers prevented the staff from going inside the factory, and during the said period, the factory was not opened at all. In the face of the evidence, it would be highly doubtful whether the bank officials would have made inspection of the available materials prior to the commencement of the policies or during the relevant period. Under such circumstances, without any hesitation, it can be stated that the plaintiff has not made available any proof as to the value of the materials available in its hands before the alleged theft.

20. Needless to say, the contract of insurance is a contract of utmost good faith uberrima fides. Both the parties to the contract of insurance must observe good faith towards each other at all stages of the contract. Lord Mansfield, known as the father of English Commercial and Insurance Law has observed thus:

"the underwriter trusts to the insured's representations, and proceeds upon confidence that he does not keep back ay circumstances in his knowledge to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risk as if it did not exist." It is the duty of the insured who seeks to have a policy, to make a full disclosure to the insurance company without being asked of all material facts and circumstances. It remains to be stated that at the time of the said disclosure, the insured knows every thing and the insurance company knows nothing. As stated above, both the insurance policies were taken for a period of one year commencing from 8.11.1985 . P.W.1 has candidly admitted that the strike of the factory started on 23.10.1985, as stated in the plaint, and thus, it would be clear that the fact that the factory of the plaintiff company was under strike has been thoroughly suppressed by the plaintiff when the policies were taken. D.W.1, the Senior Manager of the first defendant insurance company has stated that on 27.3.1986, the plaintiff approached them for an endorsement to include some brass items in the said agreement, and the said endorsement was made on the request of the plaintiff and in good faith. The said endorsement made by the first defendant on 27.3.1986 reads as follows:

"It is hereby agreed and understood that as from inception, the description of property covered under the within mentioned policy shall read as under and not as otherwise stated in the policy:

"On stocks and stocks-in-process of all sorts of raw materials including Brass, Aluminium, CRCA, Tapes, Zippers, Components and parts scrap, M/c.Spares, Consumable stores"

Subject otherwise to the terms, conditions exceptions and limitations of the Policy."

It is an admitted position that the said incident of burglary was not intimated to the first defendant insurance company either immediately or within a week from the date of the incident, but only on 4.4.198 6. It is a matter of surprise to note that the plaintiff, who approached the first defendant and obtained an endorsement, as stated above on 27.3.1986, has not intimated about the alleged burglary. But suppressing the same, the plaintiff has obtained an endorsement on 27.3.1 986. A perusal of the endorsement obtained by the plaintiff on 27.3.1986 would clearly reveal that by the said endorsement, the stocks and stocks in process of all sorts of raw materials including brass and zippers were included, which represent the major part of the alleged burglary. The court is of the considered view that the suppression of material facts by the plaintiff that the factory was kept closed due to strike and lock out from 23.10.1985 at the time of their entering into the contract of insurance with the first defendant on 8.11.19 85; and that the alleged burglary took place on 18.3.1986 while obtaining an endorsement from the first defendant on 27.3.1986 as stated above would not only make the claims of the plaintiff as false, but also would disentitle the plaintiff from making any claim.

21. As rightly pointed out by the learned counsel for the insurance company, the court is able to notice that the plaintiff has breached the conditions stipulated in the policies. Condition No.6 of the polices reads as follows:

"6. The insured shall exercise reasonable care in the selection and supervision of employees and shall take all reasonable precautions to safeguard the property insured and to secure all doors, windows and other openings."

P.W.1 has categorically admitted that it was due to the negligence on the part of the security and action has also been taken against them. From the available materials it could be seen that there were six sheds and godowns in the factory. But only three securities were posted, which would indicate the inadequacy of security. Under such circumstances, it cannot be stated that the plaintiff has exercised expected reasonable care to safeguard the properties insured. As per Condition No.7(a) of the policies, the notice of the alleged burglary should be given not only to the police immediately, but also to the first defendant insurance company by the plaintiff, stating the circumstances of the case. But in the instant case, the alleged incident was brought to the notice of the first defendant insurance company only on 4.4.1986. It is pertinent to note that nowhere it is averred in the plaint as to when this was brought to the notice of the insurance company or the claim was made. The explanation tendered by the plaintiff for such a delay caused in bringing the same to the notice of the insurance company is neither acceptable nor satisfactory, in view of the endorsement obtained by the plaintiff on 27.3.1986. The promise of the insurer to indemnify the insured viz. the plaintiff was subject to the terms, conditions and exceptions of the policies. In view of the breach of the aforesaid conditions, it is highly doubtful whether the plaintiff can sustain its claims.

22. As seen above, the plaintiff has not proved the prime cause of action viz. burglary, upon which the claims are rested. Apart from that, the plaintiff insured cannot sustain and the first defendant insurer can also repudiate the claims on the grounds of non disclosure and deliberate suppression of material facts, which the plaintiff under the contract of insurance based on good faith, is expected to disclose. But the plaintiff has breached the conditions of policies, as stated supra. The court is of the view that the plaintiff is not entitled to the reliefs as asked for. All the above issues in both the suits are answered accordingly.

18. In the result, both the suits are dismissed. In view of the facts and circumstances, the parties shall bear their own costs. Index: Yes

Plaintiff's side Witnesses:

P.W.1 Mr.V.T.Sreedharan

Defendants' side Witnesses:

D.W.1 Mr.P.S.Rameshkumar

Plaintiff's side Exhibits:

Ex.P1 27.3.86 Xerox copy of Insurance Policy

No.41111/44/O/Misc.2334(OP) P2 6.11.86 Certified copy of FIR report given

by police station

P3 Xerox copy of claim form

P4 27.3.86 Xerox copy of memorandum by first

defendant

P5 30.4.86, Correspondence between the plaintiff to 2.5.86, and the defendant

P10 Telegram,

16.6.87

24.7.87 &

25.11.87

P11 Plan

P12 Photographs

series

P13 Surveyor's report

P14 9.5.86 Burglary claim

P15 30.4.86 Note in the matter of burglary

series

P16 12.5.86 Letter to D.M.Oriential Insurance Co. Ltd. P17 29.1.87 Letter from Oriental Insurance Co. Ltd. P18 8.9.87 Letter from Oriental Insurance Co. Ltd. P19 1.3.88 List of documents sent to the surveyor P20 8.9.88 Letter to D.M. Oriental Insurance Co. Ltd. P21 8.10.88 Letter from Oriental Insurance Co. Ltd. P22 3.5.88 Duty details of materials for the period 1.7.85 to 31.10.85

P23 Details about materials

series

P24 14.2.90 Canara Bank's letter

P25 Stock Register

P26 Policy for the period from 18.8.85 to 18.8.86

P27 17.11.01 Notice

P28 Xerox copy of policy

P29 Office copy of the claim

Defendants' side Exhibits:

Ex.D1 Survey Report

21-6-2002

M.CHOCKALINGAM, J.

Judgment in

C.S.No.1493 of 1988 and

Tr.C.S.No.15 of 2001


Copyright

Reproduced in accordance with s52(q) of the Copyright Act 1957 (India) from judis.nic.in, indiacode.nic.in and other Indian High Court Websites

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