New India Assurance Co Ltd v. M/S Mudit Roadways
Citation: 2023 LiveLaw (SC)
Summary
The Supreme Court has ruled that the cause of a fire in a fire insurance claim is irrelevant as long as the insured party is not held responsible for starting it. This principle is based on the Canara Bank v. United India Insurance Company (2020) 3 SCC 455 decision. The court emphasized that an insurance company’s duty to the insured is more important than the cause of the fire. The NCDRC ordered the insured company to pay over 6 crores for a fire insurance claim with 9% interest within 8 weeks or face 12% interest beyond the specified 8 weeks. The claimant argued that the Customs Act, 1962, only applies to “importers” of insured products, and the court agreed with their argument. The claim’s customs duty component was instructed to be paid directly to the Customs Department.
About the case
The Supreme Court recently ruled that, in a fire insurance claim, it doesn’t matter what caused the fire as long as the insured party isn’t held accountable for starting it. This principle upholds the insurer’s obligation to uphold the provisions of the insurance policy and complete its duties to the insured. It is based on the Canara Bank v. United India Insurance Company (2020) 3 SCC 455 decision.
The Court noted Therefore, it was categorically stated that as long as the claimant did not start the fire, it does not matter what caused the fire—whether it was caused by a short circuit or by any other circumstance. The basic idea that an insurance company’s duty to the insured is far more important was highlighted by this case. Furthermore, it is discovered that the insured warehouse was the site of the fire, and the appellant’s denial is not credible.
The NCDRC ordered the Insurance Company to pay over 6 crores for a fire insurance claim with 9% interest from the claim denial date within 8 weeks, or face 12% interest beyond the specified 8 weeks, in an appeal heard by the Supreme Court bench made up of Justices Hrishikesh Roy and Sanjay Karol. The case concerned a fire that occurred at a warehouse that was insured on March 14, 2018, and the claimant had paid Rs. 44,02,562/-for coverage against fire and the protection of custom bonded goods.Seven of the findings from the numerous investigations point to short-circuiting as the fire’s origin. But the forensic investigation report found that sparks from rooftop welding work might have started the fire instead of a short circuit. This conclusion was supported by the surveyor’s report from M/s. Bhansali & Co. as well. The insured filed a claim for Rs. 6,57,55,155 on October 3, 2018. However, on July 15, 2019, the Insurance Company denied the claim, citing the Customs Act, 1962, which states that the importer alone is responsible for paying customs duty. He maintained that there is no customs tax liability because no bills of entry were submitted and no assessed commodities were destroyed in the fire. The claimant contended that the Customs Act’s Sections 22 and 23, which offer abetment and remission privileges, are only applicable to “importers” of insured products, and the court agreed with them. As a custodian, the claimant serves only as a trustee on behalf of their customers, never taking on the position as an importer or owner of the goods.
The claimant’s ability to include customs duty in the insurance claim depended heavily on this distinction.Considering the aforementioned, the Court denied the Insurance Company’s appeal. The claim’s customs duty component was instructed to be paid straight to the Customs Department.
