:JUDGMENT:

By medium of this Civil First Appeal judgment and decree dated 10.12.2002 passed by Additional District Judge (Bank Cases), Srinagar, is assailed. By virtue of impugned judgment the suit of the plaintiff State Bank of India (respondent No. 1) has been decreed to the extent of recovery of Rs. 6,28,155.55.from defendant insurance company (appellant herein) with interest @ 10% per annum from the date claim was preferred till the filing of the suit. Furthermore future and pendentlite interest @ 8% per annum has also been awarded.

Appellant (defendant NO. 1) aggrieved thereof has preferred the instant appeal.

Learned counsel for the appellant would contend that:

(1) The property insured is not owned by the respondent No. 2 so the policies issued in his favour are void ab-initio, therefore, no claim was allowable.

(2) Even if the appellant company would have been held liable to pay the compensation so far as the loss to the stocks is concerned, still then trial court was not justified to award a decree for Rs. 6,28,155.55.when the surveyor had assessed the stocks at Rs. 3,35,000/ only.

(3) The respondent No. 1 and 2 had failed to co-operate with the surveyor which would also disentitle the respondents from laying any claim against the appellant.

(4) The interest in view of failure of the respondents to cooperate with the surveyor should not have been awarded.

Before adverting to the contentions as raised, the noticing of precise factual matrix which has entangled the parties into the litigation is imperative:

For avoiding confusion, the appellant (Insurance Company), respondent No. 1 (bank) and respondent No. 2 M/S Munshi Assadullah Haji Mushtaq Ahmad (hereinafter shall be referred to as the defendant No. 1, plaintiff and defendant No. 2 respectively).

The defendant No. 2 M/S Munshi Assadullah Haji Mushtaq Ahmad were running business of manufacture and export of shawls, Pashmina, Jamwars and other Kashmiri handicrafts. The said firm situated at Sukalipora had availed loan facilities from the plaintiff i.e cash credit account (lock and key), term loan account and overdraft/packing credit facility, by hypothecating the stocks as existed in the premises of the firm and the godown under the lock and key scheme. The total amount of the loan alleged to have been advanced as on 11.12.1973 is Rs. 9,18,226/. The defendant No. 2 is shown to have executed various documents in favour of plaintiff bank, such as:

1) Agreement for cash credit dated 19th of November, 1970;

2) Agreement of cash credit dated 28th of December, 1971;

3) Mortgage deed as primary security dated 15.3.1971;

4) Mortgage deed as collateral security dated 16.12.2971

The two mortgage deeds by way of collateral security regarding house property were executed by the defendant No. 2 as its owner. The property mortgaged is as under:

1) Land measuring 2 kanals 14 marlas under survey No. 138, khewat No. 134/97 at Zakura Srinagar;

2) Proposed construction of singled storeyed building (Pacca) with double storeyed veranda (now completed);

3) Proposed construction of L shaped single storeyed factory building (now completed);

4) Three storeyed house with tower, veranda and corridor;

5) Additional three storeyed building situated at Sukalipora Nowhatta Srinagar.

As per the allegations contained in the plaint, the two residential house owned by defendant No. 2 with stocks, namely, woolen and Kashmir handicrafts under the lock and key of the plaintiff bank as were mortgaged to the bank were got insured with the defendant No. 1 for a total amount of Rs. 12, 95,000/. In respect thereof, two insurance policies, one under No. CSN/FR/485/73 for an amount of Rs. 2,25,000.and another bearing No. CSN/FR/486/73 for an amount of Rs. 10,70,000.were taken which were duly assigned to the plaintiff bank.

The defendant No. 2 failed to repay the loan amount which had swallowed to Rs. 11,83,084.45.as on 4.6.1975

On 4th of June, 1974, the goods and the buildings covered by above referred insurance policies caught fire and were completely gutted. The plaintiff having prior charge and primary claim over the assets and having been paying the premium to the defendant No. 1 regularly and being the assignee of insurance policies, lodged claim with the defendant No. 1. The defendant No. 1 had deputed its team of surveyors and engineers on 8.4.1974 for assessing the loss. The defendant No. 1 delayed and prolonged the matter which prompted the plaintiff to institute the suit before this court on 4.6.1975, later on it came to be transferred to the trial court.

The defendant No. 1 filed the detailed written statement pleading therein that the defendant No. 2 did not own the houses as were insured. The house covered by policy No. CSN/FR/485/73 was owned by one Mst. Taju Begum w/o Munshi Assadullah and other house belong to Mst. Taja, Rafiqa Begum W/O Late Ab. Rashid and her three minor children and Mushtaq Ahmad defendant. Mushtaq Ahmad had very little share in it so was not the sole proprietor of the entire property. The loss to the tune of Rs. 12,53,000.caused to the insured property has been denied. Non-co-operation of the defendant No. 2 with the surveyor is also pleaded. It is also contended that the stocks were not deteriorated in value. The stocks as were available were valued by J&K Arts Emporium at Rs. 3,38,000, a short while before the alleged fire. The stocks lying in the godown were not as valuable as shown in the account books of the bank. It is also contended that the stocks as were lying in the two buildings were removed before the fire took place, so a fraudulent claim.

The defendant No. 2 in his written statement has pleaded that two houses along with movable property and household items lying therein were mortgaged to the plaintiff bank. It is a fact that the property stated to have been mortgaged did not belong to the defendant No. 2 exclusively. One Haji Assadullah (deceased) was its owner and after his death his legacy has devolved on his legal heirs, therefore, mortgage involving the said property was ineffective. The plaintiff bank was not entitled to receive the insurance claim, however, the plaintiff bank could claim the value of goods which were under its lock and key.

On the basis of respective pleadings of the parties, as many as 17 issued were framed on 6.6.1975 which are reproduced here-under:-

1. Has the plaint been signed and verified by a competent and authorized person (OPP)

2. Did the defendant No. 2 as the sole proprietor of the firm M/S Munshi Assad Ullah Haji Mushtaq Ahmad which was running the business of the manufacture and export of shawls, pashmina and other Kashmiri handicrafts, approach the plaintiff bank for an advancement of loan under various accounts namely, cash credit account to the tune of Rs. 5 lacs, Term loan account to the tune of Rs. 50000/= and over draft/packing credit facility to the tune of Rs. 3,25,399.05 against the security of hypothecation of the stocks as existed in the premises of the firm and the godown situated at sukalipora Srinagar(OPP)

3. Did the aforesaid advancement totaled to Rs. 9,17,826.00 as was so found on 11.12.1973 and this amount was paid by the plaintiff bank to the defendant No. 2 after completing the formalities and executing all the relevant documents, namely, the agreement and the mortgage deeds as mentioned in para 2 of the plaint as primary and collateral securities of the properties; movable and immovable in favour of the bank(OPP)

4. Did the defendant No. 2 own the two residential houses which including the stocks under lock and key of the plaintiff bank were not insured with the defendant No. 1 for an amount of Rs. 12,95,000/(OPP)

5. In case issue No. 4 is not proved are these houses (the subject matter of insurance policies) owned by Mst. Tajo, Rafiqa Begum widow of Abdul Rashid and three minor children and Mushtaq Ahmad(OPP)

6. Is not the defendant No. 1 liable to the plaintiff on that account(OPP)

7. Did the defendant No. 2 fail to liquidate the amount outstanding against him due to the plaintiff bank and therefore the plaintiff has the prior charges and primary claim over the assets of the insurance claims of the defendant No. 2(OPP)

8. Did the defendant no. 2 suffer a loss of stocks of goods worth Rs. 12,53,000/ as a result of the fire that broke out in the buildings in question(OPP)

9. In case issue no. 8 is proved is not defendant no. 1 liable as insurer for this loss and no claim is maintainable against defendant no. 1(OPP)

10. Did the plaintiff and defendant no. 2 fail to cooperate with the surveyors of defendant no. 1 and thus refused to show them the relevant records and did not give the requisite information and in this way the plaintiff and defendant no. 2 suppressed to make the relevant material available in order to make a false and exaggerated claim(OPP & D2)

11. To what claim the insurance are the plaintiff and defendant no. 2 entitled(OPP No. 1)

12. Is the policy issued in favour of defendant no. 2 void, ab-initio because defendant no. 2 had no insurable interest in the property in respect of which policies were taken and therefore no claim is maintainable(OPD No. 1).

13. Were not the stocks lying in the godowns as valuable as ostensibly shown in the books of accounts of the bank(OPD)

14. Did defendant No. 2 manoeuvre the fire so as to claim insurance money from the defendant no. 1 and give it to the plaintiff bank to meet its liabilities(OPD no. 1)

15. Did the plaintiff and defendant no. 2 failed to comply with the requirements of clause 11 of the two policies and therefore they have forfeited their right to make claim to defendant no. 1(OPD.1)

16. Did the defendant no. 2 with the help and connivance of the plaintiff bank remove most of the stocks from the two buildings mentioned above and the stocks the value of which is being now claimed were not there at the time of the fire and therefore the claim made is fraudulent(OPD)

17. To what relief and claim the bank is entitled(OPP)

On 14.9.1977 issue No. 5 and 6 were re-cast as under:

5. In case issue no. 4 is not proved, who are the owners of the houses which are the subject matter of the insurance(OPD)

6. In case issue no. 4 is not proved in affirmative, then is not the defendant no. 1 liable to the plaintiff for the loss under the insurance policy and the plaintiff cannot enforce his claim against the defendant no. 1(OPD)

Subsequently on 9.11.1978 issue No. 18 was framed which is reproduced as under:-

18. Whether the pronote is time barred(OPD.2)

Evidence was led by the parties, however, during trial defendant No. 2 opted not to prosecute the matter.

The learned trial court after appreciating the evidence has recorded findings issue-wise.

No grievance has been projected against the findings returned on issue No. 1, 2 and 3.

While recording findings on issue No. 4, it has been opined that two residential houses and other movable property mentioned therein were insured with defendant No. 1 against an amount of Rs. 12,95,000.which otherwise is not disputed. The dispute is regarding ownership of two residential houses covered by two insurance policies. The learned trial has left the dispute of ownership vis-à-vis two houses to be dealt with in a separate suit as all the parties who have interest in two houses are not the parties to the lis. Furthermore there is no credible proof available on the file so as to record finding on the ownership of two houses. It is also noticed that the surveyor in his detailed report has mentioned that the building insured for Rs. 1,20,000.under policy No. 485 belong to Smt. Taju Begum and other building under policy No. 486/73 belonged to Munshi Assadullah deceased which now shall belong to Mst. Taju Begum, the widow, children of Late Ab. Rashid S/O Assadullah, two daughters of late Assadullah and defendant Mushtaq Ahmad. The said report has been proved which would indicate that the two houses covered by insurance policies do not exclusively belong to Mushtaq Ahmad.

It has also been noticed that Rafiqa Begum W/O Late Ab. Rashid S/O Haji Assadullah had filed an application before the Court of District Judge, Srinagar under the provisions of Guardian & Wards Act, wherein two houses in dispute are also included in the property of the deceased. Leaving the determination of the title of two houses open to be dealt with in a separate suit, learned trial court has further recorded a finding that the stocks under lock and key of the plaintiff bank are proved as being owned by defendant No. 2.The finding recorded in the backdrop of the pleadings and evidence as adduced on perusal is found to be in consonance with law.

The finding recorded on issue No. 5 to the effect that it is not possible to hold as to who are the real owners of the house property, is quite appropriate as in absence of other persons having interest in the property by way of succession were not the parties before the court. Furthermore the question of deciding the title in the suit for recovery of money is not permissible. Learned trial court has rightly left the matter to be decided in a separate suit vis-à-vis ownership of two houses.

While returning finding on issue No. 6, learned trial court has recorded that the building belongs to Munshi Assadullah (deceased) which on his death has devolved on widow, two daughters, Mushtaq Ahmad defendant and children of his another son Mr. Abdul Rashid. Same not being the exclusive property of defendant Mushtaq Ahmad, it is not also clear as to what extent and to what share Mushtaq Ahmad defendant is entitled to. The other co-sharers are not before the Court. The said matter relatable to the shares of the co-sharers in the houses or in the insurance claim amount as shall be found due to them is open to be determined in a separate suit. Learned trial court has concluded that the defendant No. 2 could not hold the insurance company liable for the loss under the two insurance policies to the extent it relates to two residential houses as the two houses are not the exclusive property of defendant Mushtaq Ahmad. When the other co-sharers were not the parties or had not hypothecated their property, how the houses had been hypothecated by the defendant No. 2 exclusively. learned trial court has also recorded finding to the effect that stocks lying in the godown, show room and the shop pledged to the State Bank of India covered by the insurance policies are not claimed by anybody except defendant Mushtaq Ahmad, therefore, loss assessed vis-à-vis said stocks is payable to the plaintiff bank against the liability of the defendant No. 2. To the extent indicated above issue has been rightly decided in favour of defendant No. 1.

So far as issue No. 7 is concerned, findings recorded thereon have not been opposed. Rightly so because admittedly the defendant No. 2 has failed to liquidate the loan amount, therefore, having prior charge and primary claim over the insurance claim of the defendant borrower, it is the plaintiff bank who in fact has been paying the premium amount vis-à-vis the insurance policies from time to time.

Issue No. 8 relates to the determination of the question as to whether defendant No. 2 had suffered the loss worth Rs. 12,53,000.as a result of fire which broke out in the building in question.

It is an admitted fact that two buildings were insured for an amount of Rs. 1,20,000.and Rs. 1,75,000.respectively, the claim on such count on finalization shall be payable to the insured who are Mushtaq Ahmad defendant and other co-sharers but the shares are not specified. The question of entitlement to the compensation as well as question vis-à-vis title over the buildings has been left to be settled in a separate suit; therefore, any amount on such count has not been allowed to be paid to the plaintiff bank.

The stocks lying in the godown, show room and shop have been pledged to the plaintiff bank and same stocks have been insured against an amount of Rs. 9.lacs as is also explicit from the report of the surveyor exhibited as EXDWLC-1/1. The stocks lying in the godown were under the lock and key of the bank. The details of the stocks were not produced by the defendant Mushtaq Ahmad. However, finally from the bank records it was found that the value of the said stocks was Rs. 6,28,155.50/. Though earlier stocks were got assessed through a committee at the instance of the plaintiff bank and valued at Rs. 3,35,000.but same was not acceptable to the plaintiff bank, that is why same was got re-assessed and found to be of the value of Rs. 6,28,155.50. This was the material available from the bank records based on which surveyor had concluded in his report EXDWLC-1/1 that earlier estimated amount of Rs. 3,35,000.shall be payable but he has not given any reason as to why he has accepted the earlier evaluation. The earlier evaluation was got done by the bank itself but not satisfied with the same, again got it evaluated and found it of the value of Rs. 6,28,155.50/.

The contention of the learned counsel for the defendant No. 1 (insurance company) to the effect that if at all claim was acceptable and payable vis-à-vis stocks, same could be restricted only to Rs. 3,35,000.not to Rs. 6,28,155.50 because nothing was placed on record to disprove the recommendation of the surveyor.

Said contention of the learned counsel is repelled by the report of the surveyor itself because the surveyor has entirely based his report regarding assessment of the stocks on the bank records. In the bank records both values i.e Rs. 3,35,000.as well as Rs. 6,28,155.50.were available but the plaintiff bank has clarified that earlier evaluation done through the Committee of J&K Arts Emporium was not acceptable to the bank, that is why the bank got the stocks re-assessed and found value of the stocks as Rs. 6,28,155.50. The re-assessed amount has not been negative by any record so no option but to accept the same. The trial court has rightly appreciated and accepted the same.

The finding recorded on issue No. 15 in the backdrop of the assistance to the surveyor, as required in terms of clause 11 of the insurance police insurance company is cogent.

The records would suggest that when the surveyor could not get co-operation from the defendant No. 2, the plaintiff bank provided all the records and has also furnished relevant information to the insurance company based on which loss to the stocks has been quantified and it is only on that basis surveyor had made recommendations about the loss to the stocks. Therefore, plaintiff bank had every right to get the compensation for loss caused to the stocks lying in the godown on behalf of defendant No. 2.

Counsel for the appellant would contend that awarding interest @ 10% from the date claim was preferred till the filing of the suit was not permissible. The finding recorded on issue No. 17 has been wrongly recorded.

Buttressing the submission learned counsel added that the defendants have not cooperated properly. When they have failed to cooperate, they could not claim interest for the pre-litigation period.

While considering the submission, it is to be borne in mind that under Section 34 of Civil

Procedure Code which governs grant of interest, Court is clothed with discretion. Court can refuse or allow interest. The discretion has to be exercised fairly so that there is no violence to the justice. The power of the Court vis-à-vis grant or otherwise of the interest has been authoritatively set at rest by the Constitutional Bench of the Hon'ble Apex Court in the case captioned Central Bank of India v. Ravindra & Ors, reported in (2002) 1 SCC 367, wherein it has been held that Section 34 confers jurisdiction on the Court to award or not to award interest or to award interest on such rate as it deems fit dehors the contract between the parties. The interest awardable is both pendentlite and post decree.

In the instant case admittedly surveyor has been time and again requesting for cooperation from defendant No. 2. The finding has also been recorded by the learned trial court that there has been slackness on the part of defendant No. 2 in extending cooperation to the surveyor, when it is so the grant of interest for the post-decree period should have been on lower side. Granting of 10% interest per annum for such period is on higher side. Even grant of interest at 8% for the period pendentlite and future is also on higher side. Keeping in view all the circumstances of the case as detailed, 6% interest should have been granted on the recoverable amount of Rs. 6,28,155.50.from the date of lodging the claim with the insurance company till final liquidation. The finding on this issue to this extent is accordingly modified.

In the upshot, in view of the facts of the case, position of the law and the findings recorded by the trial court and for the reasons and circumstances as detailed hereinabove the judgment and decree impugned is maintained except for modification to the extent of grant of interest i.e only 6% interest is allowed from the date claim is lodged until final liquidation of the decretal amount. Appeal to the limited extent succeeds. Decree be drawn accordingly.

Copy of the judgment and decree along with trial court record be sent to the trial court.