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UNITED INDIA INSURANCE CO. LTD V. M/S. HARCHAND RAI CHANDAN LAL (AIR 2004 SC 4794)
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UNITED INDIA INSURANCE CO. LTD V.
M/S. HARCHAND RAI CHANDAN LAL
(AIR 2004 SC 4794)
AUTHORED BY - TANISHKA JAIN
INTRODUCTION
In a person's life, a lot of unforeseen things might happen
that could harm both their lives and their possessions. This prompts a desire
to shield oneself from the losses brought on by such occurrences. This is the
underlying idea of insurance.
Any company, organisation, or
partnership that can be dissolved under the Companies Act of 1956 or the Indian
Partnership Act of 1932 is referred to as a "Insurance Company" under
Section 2(8) of the Insurance Act of 1938. An "insurer" is defined as
any individual, group of individuals, or corporated organisation that conducts
an insurance business under Section 2(9) of the Act.
A basic insurance contract is a legal
agreement between two parties, one of whom is referred to as the
"insurer" and the other as the "insured." In this kind of
agreement, the insurer guarantees the insured party that, in exchange for
payment of a sum of money known as the "premium," he would protect or
hold him harmless against damages brought on by a certain contingent
occurrence. A typical definition of an insurer is an insurance provider, and a
policyholder is the individual who purchases insurance by paying a premium. The
insurer or insurance business promotes the insurance policy via an insurance
contract, which is an invitation to offer. The insured then approaches the
insurer with an offer after viewing the invitation to offer. It becomes into an
insurance contract after the insurer agrees. In this article researcher will analyse
and critically examine the case of “United India Insurance Co. Ltd. v.
Harchand Rai Chandan Lal.[1]” This
case raises important questions about the scope of an insurer's liability and
the interpretation of insurance policy terms in cases of theft and burglary and
interpretation of insurance document. This case comment article will examine
the facts of the case, the legal issues that arose, arguments of the parties,
the implications of the judgment for the insurance industry in India.
FACTS OF THE CASE
In
the present case the respondent purchased a policy from the appellant business
for Rs. 7 lacs against burglary and/or house breaking. The following were the
policy's necessary clauses:
"Subject
to the terms and circumstances set forth herein and otherwise specified herein,
THE COMPANY HEREBY AGREES that if,
(a)
The property indicated below or any portion of it is LOST or DAMAGED as a
result of a BURGLARY and/or HOUSE BREAKING or
(b)
Any damage to the property resulting from a BURGLARY, HOUSE BREAKING, or
attempt at either will be repaired."
The
respondent kept his stock of food grains in “Godown No. 48, Srinagar Colony,
Bharat Nagar, New Delhi”, during the policy's valid period. One of the
respondent's partners discovered that 197 bags of gwar had been stolen. An
F.I.R. was filed at “Police Station Sarai Rohilla” in accordance with “Section
380 of the Indian penal code[2]”.
Due
to the aforementioned loss being caused by theft, the respondent filed a claim
against the appellant corporation under the aforementioned policy. The
appellant business rejected the respondent's claim. In order to file a claim
for the loss of 197 bags of gwar, the respondent went to the “Consumer Disputes
Redressal Forum-II (District Forum)”.
The
appellant firm denied the claim and asserted that the insurance coverage does
not cover theft and covers only burglary. The District Forum overruled the
objection, determined that stealing is included in the definition of burglary,
and ordered the appellant company to pay the respondent's claim within two
months, plus interest at the rate of 15% per year. They also awarded costs in
the amount of Rs. 1,000. The appellant corporation filed an appeal with the
State Consumer Disputes Redressal Commission in protest of the aforementioned
District Forum judgement. The State Commission also upheld the respondent's
claim, holding that, despite how the policy defines the terms "burglary
and/or housebreaking," burglary clearly involves theft.
The
National Consumer Disputes Redressal Commission's ruling in the matter of “National
Insurance Company Ltd. v. Public Type College[3]”
was also cited and taken into account. Hence, the appeal submitted by the
appellant corporation was denied by the State Commission. A revision was
submitted to the National Consumer Disputes Redressal Commission in response to
the State Commission's aforementioned order, which was objected to. By its
contested order, the National Commission upheld the respondent's claim and
rejected revision. Thus, the current special leave appeal.
ISSUES BEFORE THE COURT
·
Whether theft would be included in Burgalary even if
there was no violence or force used?
·
The issue at hand is whether or not the appellant
company's rejection of the respondent's claim was warranted under the policy.
ARGUMENT OF THE APPELANT (INSURANCE
COMPANY)
·
The
counsel for the appellant argued that the claim was disputed because no forced
or violent entry was made into the godown, and that theft is not covered by the
insurance policy.
·
The
counsel for respondent mentioned that such interpretation was made in Halsbury’s
Laws of England. It mentions that in order for the insurance company to be held
responsible for a burglary , there must be prior use of force or violence.
·
It
submitted that they rely on the case of “George and the Goldsmiths and
General Burglary Insurance Association, Limited[4]”
where the court ruled that a policy for loss or damage by burglary and
housebreaking did not cover a theft that occurred when a shop's front door was
shut but not locked, and the thief was able to enter by simply turning the
handle. It was argued that any amount of force, no matter how slight, was
enough to constitute an entry within the meaning of the policy and that the
thief's subsequent actions, such as prising off an iron plate to access
valuables, satisfied the requirement for force. Both the prepositions were
rejected by the court and it held held that the plain reading of the policy
required violence as a condition precedent
ARGUMENT OF THE RESPONDENT (INSURED)
·
The
counsel for respondent argued before the court that the basic definition of
burglary cannot be taken into consideration as theft occurred irrespective of
force.
·
Counsel
for respondent also was of the view that it can be reasonably expected that the
plaintiff desired and demanded insurance coverage for theft, and the
insurance company did insure the property against theft by labelling the policy
"Burglary and House Breaking", which we can do in these proceedings
if we draw on our understanding of what has happened ordinarily.
·
The
counsel also citated various cases to support this contention. It relied on “National
Insurance Co. Ltd. vs Public Type College[5]”
in which national consumer dispute redressal reiterated its view that theft
would be considered within the meaning of Burglary in the policy
·
It
also argued that the definition written in policy cannot be said to be retired
word by word and what is prevalent in common course should be taken into
consideration.
JUDGEMENT OF THE COURT
The court ruled in this case of “United
Insurance Co. Ltd v. M/S Harchand Rai Chandan Lal[6]”
that all parties must abide by the definition stated in the policy. Both
parties are obligated by the conditions of the policy, which constitutes a
contract between them. According to the meaning of the term
"burglary," every theft must be preceded by violence, which means
that access into the premises to commit theft must involve force, assault, or a
threat to the insurer, his employees, or members of his family.Thus, using
"force and violence” is a
pre requirement for burglary and housebreaking Asserting its view court
reiterated the opinions of lordships in the case of “Oriental Insurance Co.
Ltd. v. Samayanallur Primary Agricultural Co-op. Bank[7]”,
in which the interpretation of a burglary insurance policy was in question. The
bank had two insurance policies with Oriental Insurance Company Ltd., one for
cash insurance and the other for burglary insurance. All valuables were to be
kept locked up in a safe that could withstand burglary according to the
applicable requirements of the burglary insurance contract. The issue emerged
during a break-in when jewels were taken from the cashier's cash box, which
wasn't a safe. Lordships in this case clearly ruled that the insurance policy's
terms must be interpreted solely in light of those provisions; no artificially
fantastical interpretation of its language is permitted.
Court also mentioned the judgement in
the case of “Oriental Insurance Co. Ltd. v. Sony Cheriyan[8]” where
their lordships mentioned that, "A contract between the parties is represented
by the insurance policy between the insurer and the insured. The provisions of
the agreement must be strictly interpreted to ascertain the amount of the
insurer's liability because the insurer commits to compensating the loss
incurred by the insured as a result of risks covered by the insurance policy.
More than what the insurance policy covers cannot be claimed by the
insured."
In the end, the court upheld the
appeal and overturned the decision of the State Commission & District Forum
and the “National Consumer Disputes Redressal Commission, New Delhi”.
CRITICAL ANALYSIS OF THE CASE
Insurance policies are meant to
provide protection to the insured against unforeseen events, and the policy
language needs to be interpreted in the
insured's favour. It is the responsibility of the insurance company to clearly
define the terms of the policy and communicate the same to the insured. If the
policy language is vague or ambiguous, this needs to be interpreted in the
insured's favour.
In my opinion, the court was not
correct in its decision to hold the insurance company innocent and not making it
compensate the respondent for the said mentioned policy. I believe that in
common pursuance burglary and theft are often used interchangeably, and it is
not reasonable to expect a common person to understand the technical difference
between the two to segregate the two terms and deny coverage for theft lead to
grave injustice to the insured who might not have understood the technicality
of the insurance terms.
While the judgment of the court is
based on sound legal principles and is in line with the policy objectives of
insurance law, it can be argued that the court's decision puts a significant
burden on insured and undermines the very purpose of insurance.
After
reviewing and analysing the facts and circumstances my views go in consonance
with the decision of National consumer forum in case of “National Insurance
Co. Ltd. v. Public Type College[9]” in which common pursuance and interest of the
insured were taken care and not on the literal meaning of the policy clause.
Article Information
UNITED INDIA INSURANCE CO. LTD V. M/S. HARCHAND RAI CHANDAN LAL (AIR 2004 SC 4794)
Authors: TANISHKA JAIN
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/06/19
- Issue 7
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International Journal for Legal Research and Analysis
- Abbreviation IJLRA
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