M/s. Oriental Fire & General Insurance Co. Limited v. M/s. Haldyn Glass Works Private Limited

9. Mr. Vidyarthi also submitted that the Learned Single Judge in the Impugned Judgement had made specific reference to the judgement of the Hon’ble Supreme Court in the case of 10 (2008) 6 Bom CR 59 Vinod Seth Vs. Devinder Bajaj and Another11 wherein the Hon’ble Supreme Court had set aside a judgement of the High Court granting exorbitant costs and had held in paragraph 45 thereof that there was no mechanism (then existing) so as to levy actual/realistic costs. He submitted that despite referring this judgement, the Learned Single Judge had proceeded to grant actual/realistic costs which was in the teeth of the law laid down by the Hon’ble Supreme Court.

10. Basis the above, he submitted that the present Appeal deserved to be allowed and the Impugned Judgement be set aside.

SUBMISSIONS OF MR.

BEHRAMKAMDIN ON BEHALF OF RESPONDENT NO.1

11. Mr. Behramkamdin at the very outset submitted that the entire basis of the Appellant’s challenge was totally untenable and misconceived. He pointed out that the Respondent’s claim was squarely covered under the Malicious

Damage Endorsement and the Riot and Strike Endorsement which reads thus; “In consideration of the payment of the aftermentioned additional premium it is hereby agreed and declared that the term “damage” as defined under the Riot and Strike Damage Endorsement of this Policy shall extend to include MALICIOUS DAMAGE which for the purpose of this extension shall mean:- Destruction or damage directly caused by the malicious act but excluding any omission of any kind of any person (whether or not such act is committed in the course of a disturbance of the public peace) not being an act amounting to or committed in connection with an occurrence mentioned in Special Conditions 6 of the Riot and Strike Damage Endorsement of this Policy.” AND “In consideration of the payment of Rs….. the aftermentioned premium it is hereby agreed and declared that notwithstanding anything in th within written Policy contained to the contrary the term Damage as defined in this Policy shall extend to include Riot and Strike damage which for the purpose of this endorsement shall mean (subject always to the Special Conditions hereinafter contained). Destruction or damage directly caused by:- (1) The act of any person taking part together with others in any disturbance of the public peace (whether in connection with a strike or lock-out or not) not being an occurrence mentioned in Condition 6 of the Special Condition hereof. (2) The action of any lawfully constituted authority in suppressing or attempting to suppress any such disturbance or in minimising the consequences of any such disturbance. (3) The wilful act of any striker or locked-out worker done in furtherance of a strike or in resistance of a lock out resulting in visible physical damage by external violent means. (4) The action of any lawfully constituted Authority in preventing or attempting to prevent any such act or in minimising the consequences of any such act.” He invited our attention to the CLPs and pointed out that the same specifically indemnified the Respondent against consequential loss from inter alia fire, riots, strikes and malicious damage. Mr. Behramkamdin then submitted that the Respondent had led extensive evidence in support of the fact that it had suffered damage on account of the malicious acts of the workmen. Basis this, he submitted that the Respondent’s claim fell squarely within the CLPs and the repudiation of the same was ex facie wrong and contrary to the express terms of the policies.

12. Mr. Behramkamdin then placing reliance upon a judgement of the Hon’ble Supreme Court in the case of Venkatesh Construction Company Vs. Karnataka Vidyuth submitted that it was well settled that the Appellate Court would not interfere with the findings of the Trial

Court unless the findings recorded by the Trial Court were erroneous or the Trial Court had ignored the evidence on record. He submitted that in the facts of the present case, the Respondent had led ample evidence to show both the material damage as also the consequential loss occasioned on account of the malicious acts of the workmen of the Respondent. He also placed reliance upon a judgement of this Hon’ble Court in the case of Shekoji Bhimrao and Others Vs. Motiram Maruti Maratha and Others13 to submit that the Appellate Court has to be more careful in reversing the judgement of the Trial Court especially when the evidence led by the parties has been accepted by the Trial Court. He submitted that the First Appellate Court would not draw any inference directly opposite to that of the Trial Court in the absence of perverse appreciation of evidence on the part of the Trial Court.

13. In dealing with the Appellant’s contention that appointing a Surveyor under the CLPs would have prejudiced the Appellant, he submitted that such a contention was entirely 13 2007 (1) Mh.L.J. 747 misplaced and legally untenable. He submitted that the Appellant could have appointed a Surveyor expressly stating that the same was being without prejudice to the Appellant’s right to reject the claim. He pointed out that the said Survey Report in fact made explicit that the same was without prejudice to the Appellant’s rights and was subject to the terms, conditions and warranties of the policies issued to the Respondent. Basis this, he submitted that the Appellant’s contention that appointing a Surveyor would amount to a waiver of the Appellant’s right to repudiate the claim was entirely untenable and that the Appellant’s reliance upon the judgement of the Hon’ble Supreme Court in the case of Galada Power and Telecommunication Limited (supra) was entirely misplaced.

14. Mr. Behramkamdin, submitted that the Appellant’s contention that the Respondent’s claim was not payable since there was no declared riot but only a cessation of work on account of labour unrest, which was not covered under the CLPs, was factually incorrect and entirely devoid of merit. First, he pointed out that the Appellant had not even taken this plea in the written statement and therefore no issue on this aspect had been framed. He submitted that it was well settled that a contention that was not taken before the Trial Court could not be raised for the first time in Appeal. In support of his contention, he placed reliance upon a judgement of the Hon’ble Supreme Court in the case of Karpagathachi and Others Vs. Nagarathinathachi14 and B. Leelavathi Vs. Honnamma and Another15. Second, he pointed out that in the facts of the present case the Industrial Court had infact held that the strike of the Respondent’s workmen was an illegal strike and that the workmen had resorted to acts of violence which caused damage to the property of the Respondent. He reiterated that the Respondent had led ample evidence to demonstrate the damage caused on account of the various malicious acts of the workmen. Basis this, he submitted that it was not open for the Appellant to contend that the damage caused to the Respondent’s property was on account of cessation of work and not by the malicious acts of the workmen. 14 (1965) 3 SCR 335

15. He submitted that the Appellant’s reliance upon the judgement of the Hon’ble Supreme Court in the case of Century Textiles and Industries Ltd. (supra) was also entirely misplaced since the claim in the case of Century Textiles and Industries Ltd. (supra) was purely on account of cessation of work/strike by the workmen and not for reduction in turnover, which was caused as a direct consequence of the damage occasioned by the malicious acts of the workmen. It was in these circumstances that he submitted that condition 5 of the riot and strike damage endorsement, would not be applicable to the facts of the present case.

16. Mr. Behramkamdin then distinguished the judgement of the House of Lords in the case of London and Manchester Plate Glass Company Limited (supra) by pointing out that in the facts of the said case the insurance was related to property damage caused by civil commotion or rioting however, the claim was rejected because the insured could not substantiate that the damage had been caused by ‘civil commotion or rioting’. He reiterated that in the present case, the Respondent had infact led ample evidence to demonstrate that the damage was caused solely on account of the malicious acts of the Respondent’s workmen. He pointed out that this evidence had gone uncontroverted. He then submitted that it was this evidence which formed the basis of the Impugned Judgement and therefore the judgement in the case of London and Manchester Plate Glass Company Limited (supra) would be of no help to the Appellant as the same was rendered in a completely different fact scenario.

17. He then submitted that the Appellant’s contention that the repudiation of the claims under the said policies were based on the recommendations of the Surveyor was patently incorrect. He pointed out that the Survey Report was published only in 1991 while the Appellant had rejected the Respondent’s claim under the CLPs in the year 1986 which was well before the report of the Surveyor. He then submitted that it was well settled that a Survey Report was not conclusive, and the findings contained were not conclusively binding on either the insurer or the insured. In support of his contention, he placed reliance upon the judgement in the case of New India Assurance Company Limited Vs. Pradeep Kumar16 which inter alia held viz.

Basis the above, he submitted that the Appellant’s reliance upon the said judgement was entirely misplaced and that the Survey Report was not binding and/or sacrosanct. He submitted that therefore an insurer who adopts a Survey Report which is slipshod always runs the risk of having the same disregarded by a competent Court/Tribunal.

18. Insofar as the Appellant’s contention that the Respondent had committed breach of its warranty, he submitted

16 Judgement dated 09/04/2009 in Civil Appeal No.3253 of 2002 that this alleged breach of warranty was made known to the Appellant only by the Survey Report being furnished to the Appellant which was on 18th July 1991. He submitted that despite the fact that the Appellant had the benefit of this Survey Report they did not raise any such contention in the written statement filed before the Trial Court. He submitted that had the Appellant taken such contention, the same would have been adequately dealt with by the Respondent. He thus reiterated that the Appellant was estopped from now raising defenses which were not raised before the Trial Court.

19. Mr. Behramkamdin in dealing with the Appellant’s contention on the grant of actual costs placed reliance upon Section 35 of the CPC to submit that the grant of costs was at the discretion of the Court under Section 35 to pass such an order granting actual costs. In support of his contention, he placed reliance upon the judgement of the Hon’ble Supreme Court in the case of Salem Advocate Bar Association, T.N. Vs. Union of India17 and pointed out that the Hon’ble Supreme

Court had by placing reliance upon Section 35(2) of the CPC held that the grant of costs was at the discretion of the Court and there was no ceiling to costs that could be applied. He submitted that the interpretation given by the Hon’ble Supreme Court must necessarily be followed since the law laid down by the Hon’ble Supreme Court was binding on all lower courts by virtue of Article 141 of the Constitution of India. He then pointed out that the judgement in the case of Vinod Seth (supra) was of no assistance to the Appellant since firstly, the same was by a two Judge Bench of the Hon’ble Supreme Court as opposed to the judgement in the case of Salem Advocate Bar Association, T.N. (supra) which was by a three Judge Bench and secondly, the same did not address the issue of costs. He pointed out that the issue in the case of Vinod Seth (supra) was as to whether a Court can issue an order inter alia directing a Plaintiff to sign an undertaking to pay damages to the Defendant in the event a Suit filed by such Plaintiff is unsuccessful. He therefore submitted that the findings in the case of Vinod Seth (supra) were wholly immaterial to the present case.

20. Mr. Behramkamdin then submitted that the judgement of this Court in the case of Saga Department Stores Limited (supra) was also misplaced in view of the judgement of the Hon’ble Supreme Court in the case of Salem Advocate Bar Association, T.N. (supra) and that the Learned Single Judge was thus bound by the law laid down in Salem Advocate Bar Association, T.N. (supra). Basis the above, he submitted that the Appeal must be dismissed.

21. We have heard learned counsel for the parties and have considered the rival submissions made as also the case laws relied upon by respective counsel. At the outset, we must note that the submissions made by the learned counsel for the Appellant were essentially twofold (a) the claim under the CLPs was not payable and (b) the order granting actual costs was impermissible. We shall first deal with whether the claim under the CLPs was not payable. i. Firstly, we must note that the entire thrust of the Appellant’s contention that the claim under the CLPs was not payable was premised upon the fact that there was no declared strike and/or riot at the Respondent’s factory, but merely a cessation of work which was specifically excluded under condition 5 of the riot and strike damage endorsement. However, we must note that such a plea was never even raised before the Learned Single Judge nor taken in the written statement filed by the Appellant. Thus, the Appellant cannot now raise such a plea for the first time in the Appeal. We find that the Respondent’s reliance upon the judgements of the Hon’ble Supreme Court in the case of Karpagathachi and Others (supra), B. Leelavathi (supra) and Venkatesh Construction Company (supra) will squarely apply. ii. Secondly, we find that the Appellant’s reliance upon the judgement in the case of Century Textiles and Industries Ltd. (supra) is entirely misplaced and inapplicable to the facts of the present case. The claim in the case of Century Textiles and Industries Ltd. (supra) arose on account of a cessation of work, whereas in the present case the claim arose from the strike and/or malicious damage caused by the acts of the Respondent’s workmen. Thus, in the present case the claim made under the CLPs was on account of reduction in turnover on account of these various malicious acts of the Respondent’s workmen. The CLPs specifically provides for such a claim to be made in case of a reduction in turnover basis any of the grounds set out therein inter alia including fire, riot, strikes and malicious damage. We must also note that in the present case there is in fact a finding of the Industrial Court that the workmen of the Respondent had gone on an illegal strike and had resorted to violence which caused damage to the property of the Respondent. Given this, there can be no manner of doubt that the claim made under the CLPs fell squarely within the terms thereof in particular the fire, riots, strikes and malicious damage extension. Condition 5 of the riot and strike damage endorsement would thus in the present case have absolutely no application. iii. The next submission of the Appellant that the Respondent had committed a breach of warranty also needs only to be stated to be rejected since no such plea and/or contention was ever taken in written statement and has been raised for the first time in the present Appeal. Hence the judgements in the case of Newcastle Fire Insurance Co. (supra) and Hind Offshore Pvt. Ltd. (supra) are absolutely of no assistance to the Appellant. iv. Also, we find the Appellant’s reliance upon the judgement of the House of Lords in the case of London and Manchester Plate Glass Company Limited (supra) to be entirely misplaced and inapplicable to the facts of the present case. We must note that in the case of London and Manchester Plate Glass Company Limited (supra) the insurance claim was related to property damage caused by civil commotion or rioting which was rejected by the Court because the insured in that case could not substantiate that the damage had been caused by civil commotion or rioting. Thus, in the case of London and Manchester Plate Glass Company Limited (supra) the claim was rejected/denied because the insured failed to establish by leading evidence that the damage had infact resulted from civil commotion. In the present case however, the Respondent has led extensive evidence which has been accepted by the Learned Single Judge which conclusively established that the damage and consequent loss caused to the Respondent on account of the various malicious acts of the Respondent’s workmen. These acts consequently directly affected the turnover of the Respondent and thus were covered by the CLPs. Therefore, in the facts of the present case, the Respondent has established by leading evidence both the malicious acts of its workmen and the consequent damage caused and loss occasioned on account thereof. It is thus we find that the judgement of the House of Lords in the case of London and Manchester Plate Glass Company Limited (supra) would be of no assistance to the Appellant. v. We must note that in the present case, the Appellant chose to repudiate the claim of the Respondent under the CLPs without appointing and/or awaiting the report of the Surveyor. While no doubt the Appellant could have done so in its discretion, the Respondent would have every right to challenge/impugn such a decision which is exactly what the Respondent has done in the present case. The Learned Single Judge has after examining the evidence and terms of the FIPs and CLPs, found such a repudiation to be bad in law and unjustified. vi. Additionally, though the Respondents have relied upon a Surveyor’s Report to justify the repudiation, admittedly the Surveyor’s Report is after the repudiation, and it is well settled that such Surveyor’s Report is not conclusive, and the findings do not conclusively determine the merits of the claim under the policy. The Hon’ble Supreme Court has in the case of Pradeep Kumar (supra) accordingly so held. Hence, for all these reasons, we find that the Appellant’s contention that the claim under the CLPs is not payable is patently untenable and thus the Appeal to that extent must fail.

22. Insofar as the challenge to the grant of actual costs is concerned, we find merit in the contention of the learned counsel for the Appellant. Apart from the fact that the Impugned Judgement contains inherent contradictions, we find that reliance placed by the Learned Single Judge upon Section 35 of the CPC to justify the grant of actual costs is infact contrary to the scheme of the law as was then prevailing. Firstly, we must note that at the time when the Impugned Order was passed, Section 35 of the CPC provided as follows, viz.

(c) References under Land Acquisition Act, I of 1894 or appeals, therefrom decided on merits, the amount of Advocate’s fees shall be computed on the amount or value of the subject-matter in dispute in the suit, appeal or reference at the rates specified below:- If the amount or value of the subject-matter in dispute does not exceed Rs. 25,000 at 8 per cent. If such amount or value exceeds Rs. 25,000 but does not exceed Rs. 50,000, on Rs. 25,000 as above and on the remainder at 6 per cent. If such amount or value exceeds Rs. 50,000 but does not exceed Rs. 1,00,000, on Rs. 50,000 as above and on the remainder at 4 per cent. If such amount or value exceeds Rs. 1,00,000 but does not exceed Rs. 5,00,000, on Rs. 1,00,000 as above and on the remainder at 2 per cent. If such amount or value exceeds Rs. 5,00,000 on Rs. 5,00,000 as above and on the remainder at 1 per cent subject to maximum of Rs. 25,000.” In view of the aforesaid it is clear that any costs granted in the Suit could not exceed the above.

23. Secondly, on a careful reading of the judgement of the Hon’ble Supreme Court in the case of Salem Bar Association (supra), we must note that the Hon’ble Supreme Court had held as follows, viz. “37. Judicial notice can be taken of the fact that many unscrupulous parties take advantage of the fact that either the costs are not awarded or nominal costs are awarded against the unsuccessful party. Unfortunately, it has become a practice to direct parties to bear their own costs. In a large number of cases, such an order is passed despite Section 35(2) of the Code. Such a practice also encourages the filing of frivolous suits. It also leads to the taking up of frivolous defences. Further, wherever costs are awarded, ordinarily the same are not realistic and are nominal. When Section 35(2) provides for cost to follow the event, it is implicit that the costs have to be those which are reasonably incurred by a successful party except in those cases where the court in its discretion may direct otherwise by recording reasons therefor. The costs have to be actual reasonable costs including the cost of the time spent by the successful party, the transportation and lodging, if any, or any other incidental costs besides the payment of the court fee, lawyer's fee, typing and other costs in relation to the litigation. It is for the High Courts to examine these aspects and wherever necessary make requisite rules, regulations or practice direction so as to provide appropriate guidelines for the subordinate courts to follow.” Thus from the above, it is clear that the Hon’ble Supreme Court in the said judgement, in any manner, does not hold that the existing rules and/or applicable laws pertaining to the grant of costs as then existing were overridden by the said judgement.

24. Thirdly, we must note that, although the Learned Single Judge has placed reliance upon the judgement of the Hon’ble Supreme Court in the case of Sanjeev Kumar Jain Vs. Raghubir Saran Charitable Trust and Others18 to justify the grant of actual costs, by quoting paragraph 27 thereof, we must note that paragraphs 16 and 17 of the said judgment expressly held as follows, viz.

25. It is crucial to note that Section 35 of the CPC came to be amended in the year 2015 qua commercial disputes. The amended provision reads thus:- “35. Costs. - (1) In relation to any commercial dispute, the Court, notwithstanding anything contained in any other law for the time being in force or Rule, has the discretion to determine: (a) whether costs are payable by one party to another; (b) the quantum of those costs; and

(c) when they are to be paid. ……………….. ………………..” Therefore, it is clear that prior to 2015, costs could only be awarded as long as they were in conformity with the relevant rules governing the same.

26. Hence, for the aforesaid reasons, we set aside the Impugned Judgment insofar as the same grants actual costs to the Respondent. Costs shall be awarded to Respondent No.1 as per Bombay High Court (Original Side) Rules,1980.

27. The Appeal is accordingly disposed of in the above terms.

28. In view of disposal of the Appeal, the Notice of Motion does not survive and is disposed of accordingly. (ARIF S. DOCTOR, J.) (CHIEF JUSTICE)