'NCDRC Acted As If They Were Experts' : Supreme Court Sets Aside Order Upholding Insurance Claim Repudiation

The Supreme Court, while hearing an appeal challenging a National Consumer Disputes Redressal Commission (NCDRC) decision, expressed its discontent with the NCDRC’s judgment. A Division Bench comprising justices A.S. Bopanna and Dipankar Datta heard the matter. The Bench was surprised to see that members of the tribunal, in the present case, have made observations as they were experts in the disputed matter. The Court observed:

“We are aghast to find that the members, who heard the complaint, have made observations as if they were experts sitting in appeal on the reports of the Loss Assessor and the Experts….It seems to us that the NCDRC made observations in the impugned judgment as if its members were experts in the relevant field and clothed with authority to sit in appeal over the same.”

Facts of the Case

The Appellant (S.S. Cold Storage India Pvt. Ltd.) is engaged in the business of operating a cold storage facility. Among other insurance policies, the Appellant also obtained Refrigerator Insurance Policy from the Respondent (National Insurance Company Ltd.) for potato storage.

In 1997, there was a leakage of ammonia gas in chambers nos. 1 and 2 of the said facility. Accordingly, the Appellant informed the Respondent and subsequently filed a claim as well, regarding 85,956 bags of potatoes, with the Respondent. The Surveyor, appointed by the Respondent, informed the Appellant that this incident had occurred due to decay, wear, and tear; hence the same was excluded as per the Refrigeration Insurance Policy.

In the aforenoted background, the Appellant instituted a complaint before the NCDRC for seeking adequate compensation. Therein, the Appellant placed on record the report of three experts. The reports concluded that “the leakage of ammonia could only be termed as an accidental happening, and that the theory of it being due to normal wear and tear was not correct.”

However, NCDRC observed “the hairline cracks in the pipes, in all probability, had occurred due to wear and tear and gradual deterioration rather than a sudden burst” and declined to grant any relief to the Appellant. Thus, the Appellant filed this present appeal.

Arguments of the Parties

At the outset, Senior Advocate Vijay Hansaria, appearing for the Appellant, contended that it was only after a thorough inspection of premises that the Refrigeration Insurance Policy was issued. Further, Hansaria averred that three experts’ reports have clearly indicated that the cracks were due to an accident, which cannot be attributed to normal wear and tear. He went on to argue that the NCDRC has selectively relied upon the said reports; however, the contents of the reports being inseparable the same could not have been accepted in part and rejected in part.

On the other hand, Yogesh Malhotra, appearing for the Respondent, backed the findings of the NCDRC and argued that the same should not be interfered with. While placing reliance on the Surveyor’s report, he pleaded that the leakage of ammonia was due to normal wear and tear and, thus, was excluded under the Refrigerator Insurance Policy.

Court’s Observations

The contentious issue before the Court was whether the NCDRC was justified in rejecting the complaint of the Appellant, holding that there was no deficiency of service on the part of the Respondent.

The Court observed the fact that Surveyor’s Report was not based on any scientific investigation has not been disputed by the Respondent. The Court also observed that even in the Surveyor’s report, there is no mention of potential wear and tear causes. The Court recorded:

“It is undisputed that the Surveyor did not send the pieces of damaged pipes to an expert or a laboratory to identify cause of the leak. There was neither any oral nor documentary evidence to support the theory of wear and tear. Also, no reason, far less cogent reason, was furnished by the Respondent to arrive at the conclusion that the leakage of ammonia occurred due to simple wear and tear…. More importantly, what is apparent on a perusal of the Surveyor’s Report is an ipse dixit that ammonia gas leaked because of wear and tear of the pipelines in the Chambers, rather than a conclusion drawn on the basis of a process of reasoning having regard to all relevant factors.”

The Court also noted that only a few years before the incident, the facility was inspected to renew policies. Moving forward, the Court scrutinized the experts’ report vis-a-vis the Surveyor’s report and observed:

“It seems all relevant factors were not considered in the proper perspective by the Surveyor, yet, such Surveyor’s Report was relied on by the Respondent to defeat the claim of the Appellant. The report having recorded the ipse dixit of the Surveyor, without any reference to the aforesaid aspects touched upon by the Loss Assessor and the Experts, the same is, in our opinion, not worthy of acceptance.”

Based on the observations mentioned above, the Court held that the leakage of ammonia gas resulted from an unforeseen accident and beyond the Appellant’s control. Therefore, repudiation of the insurance claim amounted to a service deficiency on the Respondent’s part. At last, Court entitled the Appellant to the said insurance claim.

Case Title: S.S. Cold Storage India Pvt. Ltd. v. National Insurance Company Limited, Civil Appeal No. 2042/2012

Citation : 2023 LiveLaw (SC) 619

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