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M/S New India Assurance Co. Ltd. v. M/S Luxra Enterprises Pvt. Ltd.

Civil Appeal · 2019 INSC 607Decided 1 May 2019
Civil Appeal No. 9668 of 2014
Dr. Justice D.Y. Chandrachud · Justice Hemant Gupta

Background

Luxra Enterprises' garment factory was insured for fire risk and suffered a major fire in July 2000. The insurer, New India Assurance, appointed one surveyor after another, a first surveyor who accepted a claim of about Rs. 54.93 lakh, a second who reduced it to about Rs. 24.76 lakh, and a third who recommended total repudiation, before finally repudiating the claim entirely on grounds including alleged irregularities in a letter of credit and a newspaper report linking an associate to an unrelated fraud case. The National Consumer Disputes Redressal Commission ruled in the complainant's favour, accepting the first surveyor's report and awarding Rs. 54,93,865/- with interest; both sides appealed to the Supreme Court: the insurer against the award, and the complainant for additional interest.

Decision Breakdown

The Supreme Court held that an insurer cannot keep appointing fresh surveyors merely until it gets a report favourable to itself: under Section 64UM of the Insurance Act and the Court's own precedent in Sri Venkateswara Syndicate, a second surveyor can only be appointed for cogent, recorded reasons showing the first report was arbitrary or defective. Here, the Insurance Company's own Head Office had objected to the appointment of a second surveyor, and the reasons offered for distrusting the first surveyor's report (an unused letter of credit, an unrelated FIR against a third party) did not hold up on scrutiny. The Court dismissed the insurer's appeal, upheld the Commission's acceptance of the first surveyor's assessment of Rs. 54,93,865/-, and additionally allowed the complainant's cross-appeal by granting 6% per annum interest from the date of filing of the complaint, which the Commission had failed to award.

Lesson Learnt

An insurance company cannot keep shopping for surveyors until it finds one willing to deny or shrink a legitimate claim, once a surveyor's report is fair and reasoned, the insurer must give solid, documented reasons before rejecting it or appointing another.

Official source (sci.gov.in)View Judgment (PDF)

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