VIKRAM GREENTECH (I) LTD. & ANR. v. NEW INDIA ASSURANCE CO. LTD

Citation: [2009] 5 S.C.R. 437

Court: Supreme Court of India

Bench: D.K. JAIN, RAJENDRA MAL LODHA

Case summary

VIKRAM GREENTECH (I) LTD. & ANR. v. NEW INDIA ASSURANCE CO. LTD.pdf

Judgment text

) [2009) 5 S. C. R. 437 VIKRAM GREENTECH (I) LTD. & ANR. v. NEW INDIA ASSURANCE CO. LTD. (Civil Appeal No. 2080 of 2002) ~--- APRIL 1, 2009 ' ' [D. K. JAIN AND R. M. LODHA, JJ. ] Contract - Contract of insurance - Essentials of - Discussed - Terms of insurance policy to be strictly construed - Insured cannot claim anything more than what is covered by the insurance policy - Strict construction. Insurance - Insurance policy - Construction of - ,,. . _. Reference to proposal form may not only be appropriate but rather essential - However, the surveyors' report cannot be taken aid of nor can it furnish the basis for construction of policy - Such outside aid for construction of insurance policy -- is 1. npermissible - On facts, the two document::. i. e.

the insurance policy and the proposal form made it clear that the comprehensive f/oriculture insurance policy in question covered poly-houses 1-6 which were in existence on the date of issuance of the policy and not poly-houses 7, BA and BB which though in existence at the time of the calamity were not in existence on the date of issuance of the policy - Deeds and Documents - Commercial document. • Appellant No. 1-company, incorporated with the object of setting up a floriculture project in the State of .. Maharashtra, took a comprehensive floriculture insurance policy from respondent-insurance company in respect of poly-houses, irrigation system, cost of cultivation of flowers and input cost from first flowering to the harvest. Severe storms/cyclones caused extensive damage to the poly-houses. For the loss suffered, appellant no.

1 submitted claim with respondent- insurance company and thereafter approached the National Consumer Commission alleging deficiency of service by respondent-insurance company in not settling the claim. Respondent-insurance company admitted that the 8 policy covered poly-houses nos. 1 to 6 but pleaded that the claim on account of damages to poly-houses 7, SA and 88 was not admissible as these poly-houses were not covered under the policy. The National Commission arrived at a finding that at the time of taking policy only six poly-houses were in existence and that there was no evidence or proof to substantiate that the insurance was also covered for poly- houses 7, SA and S8 and consequently held that appellant no. 1 was entitled to claim on account of damages to poly-houses nos. 1-6 only. In appeal to this Court, the question which arose for consideration was whether the comprehensive floriculture insurance policy issued by respondentinsurance company covered poly-houses 7, SA and 88.

Dismissing the appeal, the Court HELD:1. An insurance contract, is a species of commercial transactions and must be construed like any other contract to its own terms and by itself. In a contract of insurance, there is requirement of uberimma fides i. e. good faith on the part of the insured. Except that, in other respects, there is no difference between a contract of insurance and any other contract. The four essentials of a contract of insurance are, (i) the definition of the risk, (ii) the duration of the risk, (iii) the premium and (iv) the amount of insurance. Since upon issuance of insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by . ~ ASSURANCE CO. LTD. ,.. the insurance policy, its terms have to be strictly construed to determine the extent of liability of the insurer. The endeavour of the court must always be to interpret the words in which the contract is expressed by / ~ the parties.

The court while construing the terms of policy is not expected to venture into extra liberalism that may result in re-writing the contract or substituting the terms 1 which were not intended by the parties. The insured t cannot claim anything more than what is covered by the • insurance policy. [Para 15] [444-0-G] .. - (2009] 5 S. C. R. 12. Aggrieved by the dismissal of the complaint with regard to the claim for loss to poly-houses 7, BA and B8, the insured, as stated, is in appeal. 13. We have heard Mr. Vijay Hansaria, learned senior counsel for the appellant and Mr. P. K. Seth, learned counsel for t 8 the Insurance Company. 14. The question that arises for our consideration is: whether comprehensive floriculture insurance policy issued by the Insurance Company to the insured covered poly-houses 7, BA and B8? 15. An insurance contract, is a species of commercial transactions and must be construed like any other contract to its own terms and by itself.

In a contract of insurance, there is requirement of uberimma fides i. e. good faith on the part of the 0 insured. Except that, in other respects, there is no difference between a contract of insurance and any other contract. The four essentials of a contract of insurance are, (i) the definition of the risk, (ii) the duration of the risk, (iii) the premium and (iv) the amount of insurance. Since upon issuance of insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the insurance policy, its terms have to be strictly construed to determine the extent of liability of the insurer. The endeavour of the court must always be to interpret the words in which the contract is expressed by the parties. The court while construing the terms of policy is not expected to venture into extra liberalism that may result in rewriting the contract or substituting the terms which were not intended by the parties.

The insured cannot claim anything more than what is covered by the insurance policy. [General 1 Assurance Society Ltd. Vs. Chandumull Jain and another , 2 Oriental Insurance Co. Ltd. Vs. Sony Cheriyan and United ,, . India Insurance Co. Ltd. Vs. Harchand Rai Chandan Lafl] 1. AIR 1966 SC 1644. 2. (1999) 6 sec 451. 3. (2004) a sec 644. ASSURANCE CO. LTD. [R. M. LODHA, J. ] 16. Document like proposal form is a commercial document and being an integral part of policy, reference to proposal form may not only be appropriate but rather essential. However, the surveyors' report cannot be taken aid of nor can it furnish the. basis for construction of a policy. Such outside aid for construction of insurance policy is impermissible. 17. That the insured submitted proposal to the Insurance ·company for comprehensive floriculture·insurance on January 18,1996 is not in dispute.

The insured furnished particulars for the following components which were to be covered: "A) Polyhouse 1 2 3 4 Total Value of (Rs. in Crores) (1) Steel structure 0. 25 (2) Fabrication 0. 15 , (3) Plastic Grippers 0. 10 (4) Plastic & Fittings charges 0. 50 (5) Cost of constr. For 0. 25 polyhouses,Gutters & other accessories 1. 25 B) Irrigation System (Capacities value and specifications for the following) In lakhs (1) Plasto make system 15. 00 (2) Agricon Associates (Valves & Pipes) 00. 50 (3) Fitting charges 00. 50 (4) Reservoir 04. 00 ELECTRIC MOTOR (1) Electric Motor, 15 HP 3 nos. , 2 HP 01. 00 20 nos. , 20 HP 1no. with pumps, pipes &valves. (2) D. G. set, 2 nos. , POWERICA 04. 00 (Kirloskar), 140 KVA & 1. 25 KVA Transformer, Starters MCL -CTCL & others access 25. 00 (C) Details of flowers planted in Green house or Open Cultivation : Green House Cultivation (i) No. of Green Houses 6 Polyhouses (ii) Area under Green Houses 2.

8 hectares (iii) Area under Open Cultivation No (D) Details of Flowers plants under . cultivation ..... (i) Total area under Floriculture : 2. 8 hectares (ii) Survey/Gat/Hissa No. : 163, 158, 157, 156 148, 149, 147, 164 (iii) Name of the flower plants Dutch Roses under cultivation (iv) Variety Vivaldi,Texas, Konfetti, First Red, Vanilla, Kiss, - Tiamo, Lambada (v) No. of flowers 195500 (vi) Distance between flower plants 14 cm. (vii) Expected date of harvest September 1995 • Input cost (From planting to Rs. 251acs .. ,. to first flowering i. e. 4 months) (ix) Cost of saplings Rs. 70 per plant - i ASSURANCE CO. LTD. [R. M. LODHA, J. ] (E) Cost of cultivation for flowers 25 lacs. (i) No. of flowers 19,55,500. 00 (ii) Input cost from first flowering 25 lacs. to harvest f (iii) Area under Open Cultivation : No" 18.

Based on the said proposal, the Insurance Company issued comprehensive floriculture insurance policy on January 23, 1996 The schedule attached to the said insurance policy is thus: 'SCHEDULE' Insured M/s VIKRAM GREENTECH \ (i) Ltd. ~ (Name and address) Plot No. 99, Sector 24, Rigdi-Pradhikaran PUNE-411044 Policy No. 47/221200/00940 Insured at Surat Proposal Date 18th January, 1996 Name of the Crop Floriculture offered for insurance Period of Insurance 18/01/96 to 17/01/97 __.. Address of the Site of ,: Village : Sanghise, ~ the proposal to be Near Kamshet Railway Station Insured Tai. : Mavai, District: PUNE Total sum Insured Rs. 2 crore Total Premium Rs. 2,20,000/- + 11,000/(s. o. ) ' .. INVENTORY OF THE PROPERTY INSURED (Sections I & Ill Description of the item Rs. Excess Rate Premium with sum Insured Details Rs. Rs. Rs. t .

I POLYHOUSE: (a) Steel Structure 25,00,000/- (b) Fabrication 15,00,000/- (c) Gripper 10,00,000/- (d) Plastic Fitting Charges 50,00,000/- (e) Cutter I (f) Plastic I 25,00,000/- -------------- 1. 25,00. 000/- ,. ,. I IRRIGATION : .. (a) Plasto Make System 15,00,000/- (b) Agricon Associates 50,000/- (Valves & Pipes) (c) Fitting Charges 50,000/- (d) Reservoir 4,00,000/- Ill ELECTRIC MOTOR (a) Electric Motor HP 1,00,000/- (b) Starter-MCL-CICL } (c) Other Assessories, } DG set 2 nos. ,and} Transformers } 4,00,000/" 19. That the aforesaid policy covered the insured for the loss and and/or damage caused by storm/hailstorm/cyclone , over the insured area is not in dispute. The Insurance Company r under the policy also agreed that the sum insured would be equal to the costs of placement of the insured property by new property of the same kind and same capacity; in other words ASSURANCE CO. LTD. [R. M. LODHA, J. ] ) replacement cost. 20. Although, Mr.

Vijay Hansaria, learned senior counsel for the insured strenuously submitted that the Proposal Form did not specify the number of poly-houses and, therefore, all poly- -/ houses including 7, BA and B8 were covered under the policy 8 as they were in existence at the time of calamity that occurred on May 23, 1996 and June 1B/19,1996, we are afraid, the submission of the senior counsel does not merit acceptance. Admittedly, at the time, the policy was taken ( i. e. proposal made on January 1B,1996 and insurance policy issued on January 23,1996), poly-houses 1 to 6 were in existence and poly-houses 7, BA and B8 were not in existence. These polyhouses (7, BA and B8) were completed in March 1996. Moreover it is not correct to say that the Proposal Form does ,. ,. not specify the number of poly-houses. It does. It clearly - __. , mentions six poly-houses.

It is true that six poly-houses are • mentioned in Clause(C) of the Proposal Forln which is with regard to green house cultivation but what is mentioned in '~ respect of poly-houses in Clause(C) is necessarily referable to the number of poly-houses in Clause(A) of the Proposal Form as well. 21. The learned senior counsel for the insured submitted that the entire material for poly-houses 7, BA and B8 had already been received at the time of making proposal and issuance of .......... _, insurance policy and the intention was also to cover the material ........ lying at the site for erection of poly-houses. In this regard, the learned senior counsel sought to refer to the correspondence between the parties and the Surveyors' reports dated October 24, 1996 and October 2B, 1996. He would submit that cost of six constructed poly-houses on the date of making proposal was around Rs. 65-70 lakhs and for the insurance cover of these six po!

y-houses, the insured would not have valued their cost y at Rs. 1. 25 crores and paid premium of Rs. 2,31,000/-. 22. A careful consideration of the Proposal Form that sets out the particulars of the components which were to be covered and the inventory of the property insured (Sections I and II), mentioned in the policy leaves no manner of doubt that what was insured was existing poly-houses on the date of the issuance of policy. It is clear from the proposal and the policy. The two documents admit of no ambiguity and it is clear that six poly-houses covering an area of 2. 8 hectares was covered by the policy. It may be mentioned that Clauses (C)(ii), (D)(i) and (ii) of the Proposal Form mentions Survey/Gat/Hissa no. 163, 158,157,156,148,149,147 and 164 and total area 2. 6 hectares. It is on this area that six poly-houses were existing on the date the proposal was made and policy issued. These six poly-houses were only covered by the policy. 23.

The National Commission concluded thus: " ..... we are unable to accept the contention of the . complainant that only houses 7,8A or 88 were covered under the Insurance Policy in question especially when admittedly, they were non-existent on the date, the policy was taken and policy clearly mentioned the number of poly houses as "Six". In our view the complainant has failed to prove a case based on the material on record ...... " We do not find any error in the conclusion of the National Commission. 24. In what we have discussed above, the appeal is liable to be dismissed and is dismissed with no order as to costs. B. B. B. Appeal dismissed. .. ,