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Oriental Insurance Co. Ltd. & Others v/s ELEL Hotels and Investments Ltd.

    Civil Appeal No. 4449 of 2017

    Decided On, 08 February 2019

    At, Supreme Court of India


    For the Appellants: Joy Basu, Sr. Advocate, Ajay Singh, Debasish Mukherjee, Nanak Bose, Vivek Narayan Sharma, Advocates. For the Respondent: Muneesh Malhotra, Manpreet Kaur, Prerana Chaturvedi, Priya Varma, Rajesh Srivastava, Suresh Kumari, Ms. Shubhangi Rathore, Advocates.

Judgment Text

Dr. Dhananjaya Y. Chandrachud, J.

Delay condoned.

2. The respondent constructed a hotel in 1978 in Mumbai. The hotel, which was known as Searock Hotel, was under an Operating Licence Agreement with ITC Limited since 1986. ITC Limited operated the hotel under the licence agreement, on behalf of the respondent.

3. The hotel was insured by the appellants under two insurance policies for a period of twelve months commencing from 1 April 1992:

(i) Fire Policy `A' (also called the Material Damage Policy); and

(ii) A `Consequential Loss Fire Policy'.

4. The insurance cover was for the period from April 1992 until 31 March 1993. The sum insured under the first policy was Rs. 54,86,23,000. The second policy covered an insured value of Rs. 14,73,00,000.

5. On 12 March 1993, there was a bomb blast at Searock Hotel. Extensive damage was caused. Disputes occurred inter se between the respondent and ITC Limited. They were referred to arbitration. Justice H Suresh, a former Judge of the Bombay High Court, who was appointed as sole arbitrator, made his award on 24 May 2005. The arbitral award provided thus:

"(iv) If and to the extent Elel is at law entitled to receive/recover any payments under/in respect of Insurance Policy No.21300/11/93/0019 and Policy No.21300/11/93/0020 for the year 1992- 93, ITC has no objection to Elel receiving such payment from Oriental Insurance Company."

6. The respondent instituted a consumer complaint before the National Consumer Disputes Redressal Commission ("NCDRC") on the ground that its claim under the insurance policy had not been paid and the failure of the appellants to do so amounted to a deficiency of service.

7. The appellants paid an amount of Rs. 7,40,03,927 to ITC Limited thus:

(i) Rs. 1.25 Cr was paid on 01.10.1993;

(ii) Rs. 1.90 Cr was paid on 06.06.1994;

(iii) Rs. 3.00 Cr was paid on 07.03.1995; and

(iv) Rs. 1,25,03,927 was paid on 09.09.1995.

8. During the pendency of the proceedings before the NCDRC, in pursuance of an interim order, an amount of Rs. 5,01,54,393 was paid over by the appellants to the respondent. Following another interim order dated 18 February 2010, a further sum of Rs. 80,99,648 was paid to and received by the respondent.

9. On 28 April 2015, NCDRC disposed of the complaint by directing the appellants to pay interest at the rate of 9% per annum on the amount of Rs. 5,01,54,393 from the date on which the appellants had made payment of the first instalment of the claim under the policy. NCDRC has required the respondent to obtain an NOC from ITC Limited failing which the above amount and the amount of Rs. 80,99,648 shall have to be returned to the appellants.

10. The operative directions of the NCDRC, in its impugned decision dated 28 April 2015 are extracted below:

"(i) In respect of Consequential Loss Fire Policy, (CL Policy), the complainant shall obtain if so required by the opposite party a `no objection certificate' (NOC) from ITC Limited (who were operating the hotel under a valid agreement at the time of loss/damage) regarding the receipt of payment of Rs. 5,01,54,393/- made by the Insurance Company to them in pursuance of the order passed by this Commission on 04.04.2007, failing which the said amount shall be returned by the complainant to the Insurance Company. In case ITC Limited gives no objection, the complainant shall also be entitled to get an interest @ 9% p.a. on the said amount of L5,01,54,393/- from the date the insurance company made payment of first instalment of claim under the said policy.

(ii) Regarding the payment of Rs. 80,99,648/- made by the Insurance Company in pursuance of order dated 10.02.2010 passed by this Commission as balance amount of Rs. 2.81 crore, assessed by the surveyor under the MD Policy, the complainant shall obtain if so required by the opposite party a `no objection certificate' (NOC) from ITC Limited, otherwise the said amount shall also have to be returned to the Insurance Company.

(iii) Regarding their further claim under the MD Policy, the complainant shall be at liberty to agitate the matter before a court of competent jurisdiction and lead evidence in support of their claim in accordance with law."

11. When the present appeal was instituted before this Court, by an interim order dated 4 April 2016, the appellants were directed to deposit a sum of Rs. 2 crores before the NCDRC conditional on which notice was issued. The respondent was permitted to withdraw the amount.

12. The only question which survives before this Court is as to whether NCDRC was justified in directing the payment of interest on the amount of the insurance claim. From the record it is evident that there was no dispute in regard to the liability of the appellants to pay the insurance claim. Though the insurance policies were taken out by ITC Limited, under the consent arbitral award dated 24 May 2005, it accepted that the respondent would be entitled to receive payments under the insurance claims under the two policies from the appellants. The appellants withheld the payment of the claim, though it had been approved under the Consequential Loss Policy on the ground that the insured had failed to produce a receipt in regard to the payment of the licence fee to the respondent. This aspect has been recorded by NCDRC:

"10...The OP Insurance Company have also admitted in the written statement filed by them that the claim with regard to CL Policy was approved for Rs. 12,41,58,320/- out of which a substantial payment of Rs. 7,40,03,927/- was paid to the insured. The balance payment was withheld on the ground that the insured failed to produce the receipt of licensing fee to the complainant. The OP have stated that the balance amount was withheld keeping in view the interest of the complainant only..."

13. There was no reason or justification for the appellants to withhold the payment of the insurance claim, once it had been approved. The ground on which the appellants purported to do so was that ITC Limited had not furnished a receipt for the payment of the licence fee to the respondent. The appellants purported to withhold payment, ostensibly to safeguard the position of the respondent. However, it is evident from the arbitral award that the respondent was entitled to the amount of the insurance claim. Nor, for that matter, have the appellants suggested that since the insurance policy had been taken out by ITC Limited, they had offered to make payment to the insured under the policies. In view of this position and since there is no dispute about the fact that the claim was duly approved by the appellants, the respondent is entitled to be compensated in terms of payment

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of interest. NCDRC cannot be faulted for doing so. Moreover, the direction which has been issued by NCDRC for the respondent obtaining an NOC from ITC Limited does not serve any purpose since under the clear terms of the arbitral award, it is the respondent which is entitled to the insurance claim. 14. We, accordingly, direct that the amount which has been deposited by the appellants in pursuance of the interim order dated 4 April 2016 be withdawn unconditionally by the respondent. The balance that is due and payable towards interest at 9% as ordered by the NCDRC shall be paid over by the appellants to the respondent within a period of two months from today. 15. We, accordingly dispose of the appeal. There shall be no order as to costs.