REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.  83 OF 2023
(@ SLP(C) NO. 9049 OF 2021)
M/s Oswal Plastic Industries               ...Appellant(S)
Versus
Manager, Legal Deptt N.A.I.C.O. Ltd.                   ...Respondent(S)
J U D G M E N T 
M. R. Shah, J.
1. Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment   and   order   dated   20.02.2019,   passed   by   the
National   Consumer   Disputes   Redressal   Commission,   New
Delhi   (hereinafter   referred   to   as   the   NCDRC)   in   First
Appeal No. 207/2015, by which the NCDRC has set aside
the   order   passed   by   the   State   Consumer   Disputes
Redressal   Commission,   Punjab   (hereinafter   referred   to   as
the   State   Commission)   and   has   modified   the   same   to   the
extent   that   the   insurance   company   shall   be   liable   to   pay
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only   Rs.   12,60,000/­   instead   of   Rs.   29,17,500/­,   the
original complainant has preferred the present appeal. 
2. That   the   appellant   herein   obtained   Standard   Fire   and
Special Perils Policy with effect from 02.07.2009. The sum
insured   was   Rs.   2.50   crores.   According   to   the   appellant,
the   policy   was   on   reinstatement   value.   The   policy   was
enhanced   to   Rs.   4.50   crores.   That   during   the   validity
period   of   policy   i.e.,   on   17.10.2009   fire   broke   out   in   the
factory premises resulting into loss of material, stock, and
machinery   of   the   value   of   Rs.   76,64,000/­.   The   surveyor
appointed   by   the   insurance   company   observed/assessed
as   such   the   loss   on   reinstatement   value   basis   at   Rs.
29,17,500/­ and on depreciated value at Rs. 12,60,000/­.
The insurance company despite the reports of the surveyor
and   investigator   repudiated   the   claim.   The   appellant
herein – original complainant filed the complaint before the
State   Commission,   inter­alia ,   seeking   a   claim   of   Rs.
76,64,000/­   together   with   interest.   It   was   the   case   on
behalf   of   the   complainant   that   the   complainant   had
purchased   the   machinery   to   replace   the   damaged
machinery   at   the   cost   of   Rs.   1,34,07,836/­.   The   State
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Commission vide order dated 10.11.2014 relying upon the
surveyor   report   and   the   loss   assessed   by   the   surveyor   on
the basis of the reinstatement value awarded a sum of Rs.
29,17,500/­   together   with   9%   interest   from   the   date   of
repudiation   letter   dated   28.10.2010.   The   State
Commission also awarded Rs. 1 lakh as compensation and
Rs.   11,000/­   as   litigation   expenses.   At   this   stage,   it   is
required   to   be   noted   that   though   the   original   complaint
was   for   Rs.   76,64,000/­,   however,   in   view   of   surveyor
report   and   on   reinstatement   value   determined   at   Rs.
29,17,500/­,   the   State   Commission   awarded   Rs.
29,17,500/­   being   reinstatement   value.   The   order   passed
by the State Commission was the subject matter of appeal
by   the   insurance   company   before   the   NCDRC.   By   the
impugned   judgment   and   order,   the   NCDRC   has   allowed
the said appeal and has modified the order passed by the
State   Commission   awarding   Rs.   12,60,000/­   along   with
interest @ 7% from  Rs. 29,17,500/­ by observing  that the
complainant shall be entitled to the depreciated value and
not the reinstatement value. The NCDRC also set aside the
award of compensation of Rs. 1 lakh. 
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2.1 Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment   and   order   passed   by   the   NCDRC   awarding   Rs.
12,60,000/­ only instead of Rs. 29,17,500/­ i.e., awarding
depreciated   value   and   not   the   reinstatement   value,   the
original complainant has preferred the present appeal.
          
3. Shri   Jay   Savla,   learned   Senior   Advocate   appearing   on
behalf   of   the   appellant   herein   –   original   complainant   has
vehemently   submitted   that   the   impugned   judgment   and
order   passed   by   the   NCDRC   awarding   depreciated   value
and not the reinstatement value is just contrary to Clause
9 of Section 2 of the insurance policy. 
3.1 It is submitted that as such the surveyor assessed the loss
on reinstatement basis at Rs. 29,17,500/­. It is submitted
that therefore, as such the repudiation was rightly held to
be improper. 
3.2 It   is   submitted   that   as   such   the   complainant   had
purchased   the   new   machinery   in   view   of   five   machines
being   gutted   in   fire   and   therefore,   the   State   Commission
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was absolutely justified in awarding Rs. 29,17,500/­ being
reinstatement value on the basis of the surveyor report. 
3.3 Relying   upon   Clause   9   of   Section   2   of   the   policy,   it   is
vehemently   submitted   that   the   complainant   shall   be
entitled to the reinstatement value. It is submitted that the
NCDRC has wrongly reduced the claim to Rs. 12,60,000/­
by mis­interpreting Clause 9 of Section 2 of the policy. It is
submitted   that   as   such   the   said   clause   9   shall   not   have
any   relevance.   It   is   submitted   that   it   only   gives   option   to
the   insurance   company   to   reinstate   or   replace   the
damaged/destroyed   property.   It   is   submitted   that   as   the
company has not reinstated the property, the clause itself
was not applicable.
3.4 It is submitted that as observed and held by this Court in
the   case   of   Canara   Bank   Vs.   United   India   Insurance
Company   Limited   and   Ors.;   2020   (3)   SCC   455 ,
provisions   of   the   policy   must   be   read   and   interpreted   in
such   a   manner   so   as   to   give   effect   to   the   reasonable
expectations   of   all   the   parties.   It   is   submitted   that   it   is
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further held that coverage provisions should be interpreted
broadly and if there is any ambiguity, the same should be
resolved in favour of the insured. 
3.5 Making the above submissions and relying upon the above
decision,   it   is   prayed   to   allow   the   present   appeal   by
quashing   and   setting   aside   the   impugned   judgment   and
order   passed   by   the   NCDRC   and   to   restore   the   order
passed by the State Commission.       
4. Present   appeal   is   vehemently   opposed   by   the   learned
counsel appearing on behalf of the insurance company. 
4.1 It  is  submitted  that   in  the  facts  and  circumstances  of  the
case and on true interpretation of Clause 9 of Section 2 of
the   insurance   policy,   the   NCDRC   has   not   committed   any
error   in awarding   the depreciated value  and  not  awarding
the reinstatement value as claimed by the complainant. 
4.2 It is submitted that as rightly observed by the NCDRC that
the   goods insured were to be replaced on "as is basis" i.e.,
if   the   machinery   is   an   old   machinery,   it   is   to   be   replaced
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by   an   old   machinery   and   therefore,   as   the   actual
reinstatement has not been done by the complainant or by
the insurance company and the money is to be paid to the
insured   on   reinstatement   basis,   one   has   to   find   out   the
value of the machinery on replacement basis i.e., the value
of   the   old   machinery,   which   can   be   calculated   only
through   deducting   the   value   of   the   depreciation   from   the
current value of the machinery.  
4.3 Making the above submissions, it is prayed to dismiss the
present appeal.
    
5. The short question which is posed for consideration of this
Court   is   whether   in   the   facts   and   circumstances   of   the
case   and   on   true   interpretation   of   relevant   clause   of
insurance   policy,   in   case   of   damage   of   the   plant   and
machinery due to fire, the complainant shall be entitled to
the reinstatement value or the depreciated value? 
5.1 While dealing with the aforesaid issue, relevant clause 9 of
Section 2 of the policy is required to be considered, which
reads as under: ­ 
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"9.   If   the   Company   at   its   option,   reinstate   or
replace the property damaged or destroyed, or any
part   thereof,   instead   of   paying   the   amount   of   the
loss or damage, or join with any other Company or
Insurer(s)   in   so   doing   the   Company   shall   not   be
bound   to   reinstate   exactly   or   completely   but   only
as   circumstances   permit   and   in   reasonably
sufficient   manner,   and   in   no   case   shall   the
Company   be   bound   to   expend   more   in
reinstatement than it would have cost to reinstate
such   property   as   it   was   at   the   time   of   the
occurrence of such loss or damage nor more than
the   sum   insured   by   the   Company   thereon.   If   the
Company   so   elect   to   reinstate   or   replace   any
property   the   insured   shall   at   his   own   expense
furnish   the   Company   with   such   plans,
specifications, measurements, quantities and such
other   particulars   as   the   Company   may   require,
and   no   acts   done   or   caused   to   be   done,   by   the
Company   with   a   view   to   reinstatement   or
replacement   shall   be   deemed   an   election   by   the
Company to reinstate or replace.
If   in   any   case   the   Company   shall   be   unable   to
reinstate   or   repair   the   property   hereby   insured,
because   of   any   municipal   or   other   regulations   in
force   affecting   the   alignment   of   streets   or   the
construction   of   buildings   or   otherwise,   the
Company   shall,   in  every  such  case,  only   be   liable
to pay such sum as would be requisite to reinstate
or repair  such property  if the same could lawfully
be reinstated to its former condition."
5.2 On true interpretation and on fair reading of above clause,
firstly   the   option   is   given   to   the   insurance   company   to
reinstate or replace property damaged or destroyed instead
of   paying   the   amount   of   loss   or   damage.   If   the   insurance
company exercises the option of reinstatement or replaces
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the property damaged, the company shall not be bound to
reinstate   completely   or   partly   but   only   as   circumstances
permit   and   in   reasonably   sufficient   manner,   and   in   no
case   shall   the   company   be   bound   to   expend   more   in
reinstatement   than   it   would   have   cost   to   reinstate   such
property   as   it   was   at   the   time   of   the   occurrence   of   such
loss   or   damage   not   more   than   the   sum   insured   by   the
company   thereon.   However,   in   any   case   the   company   is
unable to reinstate or repair the property insured, because
of any municipal or other regulations in force affecting the
alignment   of   streets   or   the   construction   of   buildings   or
OTHERWISE,   in that case,   the company shall be liable to
pay  such sum  as would  be requisite  to  reinstate  or  repair
such   property   if   the   same   could   lawfully   be   reinstated   to
its   former   condition.   Present   is   the   case   dealing   with
second   eventuality,   namely,   the   company   was   unable   to
reinstate or repair the property. The surveyor in its report
determined the loss on the basis of reinstatement value at
Rs.   29,17,500/­   and   on   the   basis   of   depreciated   value   at
Rs.   12,60,000/­.   Though,   the   complainant   claimed   Rs.
76,64,000/­   being   the   value   of   the   new   machinery,
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however,   as   rightly   observed   by   the   State   Commission   as
well   as   the   NCDRC,   the   complainant   shall   not   be   entitled
to the said amount. However, at the same time considering
second   part   of   Clause   9   reproduced   hereinabove,   in   case
company   is   unable   to   reinstate   or   repair   the   property
insured, the insurance company shall be liable to pay such
sum   as   would   be   requisite   to   reinstate   or   repair   such
property   if   the   same   could   lawfully   be   reinstated   to   its
former   condition.   For   the   aforesaid   purpose,   the   report   of
surveyor   wound   be   relevant   evidence   to   consider   the  sum
required   to   reinstate   or   repair.   Therefore,   as   per   second
part of Clause 9 of Section 2 of the policy, the complainant
shall   be   entitled   to   the   reinstatement   value   and   not   the
depreciated   value.   The   NCDRC   has   mis­interpreted   and
mis­read the Clause 9. The NCDRC has seriously erred in
observing   and   holding   that   the   insurance   company   shall
be   liable   to   pay   the   depreciated   value   only   and   not   the
reinstatement value. The State Commission was absolutely
justified   in   awarding   the   reinstatement   value.   The
impugned   judgment   and   order   passed   by   the   NCDRC
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awarding  the depreciated value and not the reinstatement
value is unsustainable for the reasons stated hereinabove. 
6. In view of the above and for the reasons stated above, the
present   appeal   succeeds.   The   impugned   judgment   and
order   passed   by   the   NCDRC   is   hereby   quashed   and   set
aside. The order passed by the State Commission is hereby
restored.   The   complainant   shall   be   entitled   to   Rs.
29,17,500/­ being the reinstatement value with interest @
7%   from   the   date   of   order   of   the   State   Commission   i.e.,
10.11.2014  till  the   actual   payment.   The   present   appeal   is
accordingly allowed. No costs.  
…………………………………J.
                  (M. R. SHAH)
…………………………………J.
 (C.T. RAVIKUMAR)
NEW DELHI, 
JANUARY 13, 2023.
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