No Suppression Of Material Facts – SC Upholds Order Of NCDRC Directing Insurer To Compensate The Insured

An appeal was preferred by the Appellant-Insurer against the order of the National Consumer Dispute Redressal Commission (NCDRC). The NCDRC had allowed the claim filed by the Respondent-Insured and directed the Appellant to pay a sum of Rs. 4, 68, 33,840/- towards the loss suffered by the Respondent along with interest at 6% p.a. from the date of filing the complaint till the date of payment.

Senior Advocate Mr. Mahavir Singh appeared for the Appellant while Senior Advocate Mr. Neeraj Malhotra appeared for the Respondent during the proceedings before the Supreme Court.

In this case, the Respondent had obtained a Special Contingent Insurance Policy from the Appellant for the year 2002-2003 that covered the loss of power generation due to loss of hydrology. The risk covered for the year was for Rs. 5 Crores; however the Respondent estimated the loss to be Rs. 8 Crores and wanted to enhance the risk coverage to Rs. 10 Crores.

When the Appellant was not able to obtain reinsurance in the reinsurance market, it informed the Respondent about the same and also to reduce his risk coverage to Rs. 5 Crores. Since the proposal was not accepted by the Respondent, the policy was canceled.

Further, the Respondent raised a claim of Rs.4, 68, 33,840/- for the losses suffered, but the Appellant refused to honor the claim of the former.

The Appellant contended before the Court that the Respondent had fraudulently suppressed the hydrological data of the previous year and was not entitled to make any claim against the Appellant.

While the Respondent contended that without informing him, the Appellant had appointed a surveyor for carrying out a survey and called for a report on the loss of power generation. A report was submitted by the surveyor based on which the claim made by the Respondent was repudiated.

The Apex Court observed, "There was no suppression or non-disclosure by the respondent in suppressing any hydrology data of the previous year, as pleaded by the appellant. The data of the years 1993 to 2002 could not be provided as the same was not available with the respondent and it was also made known to the appellant."

Further, the Bench opined that the findings of the Surveyor were irrelevant to the claim made by the Respondent.

"If they were to examine the hydrology data of the previous year, it was well within the knowledge of the appellant to ask for such data even before entering into contract," the Court held.

Additionally, the Bench noted, "It is not a case of suppression or nondisclosure of data as pleaded, and whatever data was available, the respondent has made known to the appellant. When the appellant was aware of the earlier insurance policy obtained from IFFCO-TOKIO by the respondent, there was no reason for not asking for such hydrology data of the previous year."

"As such, it cannot be said that there was nondisclosure of hydrology data or any fraud from the side of the respondent, as is projected by the appellant so as to repudiate the claim," the Court asserted.

Also, the Bench held, "Further, the cancellation of policy is on the ground that they were not able to reinsure the claim in the re-insurance market for protection of their interest. If there was any suppression or non-disclosure, as pleaded, the appellant would have cancelled only on such ground."

In the light of these observations, the Court dismissed the appeal and directed the Appellant to pay the balance amount due to the Respondent within 3 months.

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