2. Brief facts of the case as contended in the complaint are that the complainant is a Public Ltd Company engaged in manufacturing of BOPP Films and BOPET Films, with Head Office in New Delhi and a manufacturing plant in Nashik. The company obtained a Standard Fire & Special Perils Policy from the OP (insurance company) for the safety of its goods. The policy No. 350100/11/12/3400000047 was valid from 01.05.2012, to 30.04.2013, with a total coverage of ₹220 crores. The sum insured for stocks at different plant locations was categorized as on stock of Raw Material, Finished goods at BOPET Plant, BOPP FILM PLANT: ₹55 Cr; Stock of Raw Materials, Finished Goods at BOPET Plant: ₹60 Cr; and Stock of Raw Materials, Finished Goods and Like at BOPP Plant: ₹30 Cr. This cover was increased to Rs. 220 Cr through endorsements, detailing specific cover for raw materials, finished goods, and work-in-progress at various plants.

3. On 27.03.2013, a fire broke out at the manufacturing plant in Nashik, causing extensive damage to stocks/ goods. They reported the incident to the insurer vide email and post on 28.03.2013. Fire brigade was informed and a police complaint was lodged and an FIR was registered. The OP insurer appointed Mr. Pradeep Tambe, a surveyor who inspected the premises and demanded certain records from the complainant. They submitted all required records reflecting the actual loss suffered, vide letter dated 20.12.2013. The surveyor's report dated 25.06.2014 assessed ₹3,20,94,032 as loss. However, he concluded that the loss was outside the policy's coverage scope. On 08.10.2014 the complainant raised objections against the surveyor report, providing a point-by-point rebuttal. They averred that the goods destroyed (e.g., polyester chips and synthetic waste) were covered under the definitions of "finished goods," "raw materials," or "other goods" in the policy. They emphasized that the goods destroyed in the fire are excisable under the Central Excise Rules, 2002 and excise duty was paid on them, as confirmed by a certificate from the Central Excise Dept. The destroyed goods were also recorded in their RG1 Register and audited financial statements as finished goods. Vide letter dated 03.03.2015, the claim was repudiated by OP, upholding the surveyor report. It is the complainant's contention that this decision was unjustified, self-contradictory, and failed to consider the actual loss and policy terms. The OP failed to discharge its obligations under the policy, amounting to a "deficiency in services" and negligence causing significant financial loss, mental agony, and harassment. He sought compensation for loss, damages for mental harassment.

4. Upon notice, the complaint was resisted by the OP by filing their written statement and raising, inter-alia, the preliminary issues that; the OP invokes General Condition No.

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6(ii) of the policy, asserting that the claim is time-barred since no legal action was initiated within 12 months of the claim's repudiation on 03.03.2015. The complaint filed in March 2017 is thus invalid. OP denied the allegations of deficiency of service and contended that the complaint is frivolous and baseless. The service was availed by the complainant for commercial purposes, disqualifying them as a "consumer" under the Consumer Protection Act, 1986. The policy terms are emphasized as binding, and it is argued that the claim pertains to waste material which is not covered by the policy. In the written statement with details of the insured property categories and the exclusions, the OPs contended that waste material affected by fire was not covered. Surveyor's report supports the argument that the affected goods were outside the policy scope. The repudiation of the claim is defended as lawful, bona fide, and based on due diligence. The OP contended that the Complainant's attempts to label waste material as finished goods are efforts to improperly invoke policy coverage to their advantage. Point-by-point responses challenge the factual basis of the Complainant's allegations, the interpretation of the policy, and the validity of the supporting documents. The Opposite Party urged dismissal of Complaint.

5. The Complainant also filed rejoinder to the Written Statement filed by the OP and reiterated the facts of the complaint.

6. Mr. Himanshu Upadhyaya, the learned counsel appearing for the complainant asserted that the insured, Jindal Poly Films Ltd. is a public limited company involved in the manufacturing of BOFF and BOFET films. The company had taken a Standard Fire & Special Perils Insurance Policy from the OP which is a state-owned general insurance company, covering its goods with a total coverage of Rs.220 Crores. A fire broke out at their manufacturing plant on 27.03.2013, and the incident was duly reported to the insurer and the OP insurance company appointed Mr. Pradeep Tambe as surveyor. He conducted the survey on 01.04.2013 and 02.04.2013, confirmed the loss of Rs. 3,20,94,032/- in his report dated 25.06.2014 and acknowledged that excise duty was paid on the destroyed goods. The complainant raised objections against the surveyor's findings, as they were not in accordance with the terms of insurance policy. The surveyor did not adequately appreciate that goods destroyed in the fire were excisable, and they fell under the category of "Other Goods" or "Finished Goods" under the policy, a fact confirmed by excise records. He contended that the Consumer Protection Act protects the rights of consumers and mandates that insurance companies act in good faith. The principle of contra proferentem (ambiguous contracts are to be construed against the party that drafted them) and uberrima fides (utmost good faith). The IRDA Circular dated 20.09.2011 states that genuine claims should not be rejected due to delays in intimation, and rejection must be based on valid grounds. He further contended that the repudiation of claim by the insurance company was unilateral and arbitrary. Such repudiation amounts to deficiency in services, negligence in services, and unfair trade practices under the Act. The complainant is entitled to compensation under the Consumer Protection Act for the financial loss incurred due to the negligence and unfair trade practices of the OP insurer. He sought to allow the complaint in favour of the complainant and direct the opposite party to release the claim amount of Rs.3,20,94,032/- along with interest.

7. Per contra, the learned Counsel for OP vehemently argued that the complainant

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obtained a Standard Fire & Special Perils Policy No. 350100/11/12/3400000047 from 01.05.2012 to 30.4.2013, with a total sum insured of Rs.145 Crores, covering stock and materials at various plants. The sum insured was later increased to Rs. 220 Crores through endorsements, detailing specific coverage for raw materials, finished goods, and work-in- progress (WIP) at various plants. A fire broke out in their waste yard on 27.03.2013, which was isolated from the main plant. On receipt of a report about the incident, the OP appointed Mr. Pradeep Tambe as the surveyor to assess the damage. The surveyor's final report dated 25.6.2014 concluded that the loss was confined to waste material in the waste yard, which was neither covered nor intended to be covered under the policy. A net loss of Rs. 3,20,94,032 was assessed, subject to the terms of policy. Based on the surveyor's findings and after considering the policy terms, vide letter dated 03.03.2015 the OP repudiated the claim, citing that the loss pertained to waste material, which was not under policy cover. The repudiation was done in good faith, and no deficiency in service was found. He asserted that the contract terms are sacrosanct, and claims must be adjudicated strictly according to the policy. The complaint is frivolous, false, and based on baseless assumptions, representing abuse of legal process. The complainant, being a corporate entity, availed the insurance policy for commercial purposes and is not a consumer as defined under the Act, 1986 and the complaint is not maintainable. The decision to repudiate the claim was fair, bona fide and with due application of mind. He argued that this cannot be replaced, unless it is proven to be mala fide and requested that the complaint be dismissed with costs. He relied upon Polymat India (P) Ltd Vs National Insurance Co Ltd (2008) 9 SCC 174; and Khatema Fibres Ltd. Vs. New India Assurance Co. Ltd., 2021 SCC OnLine SC 818 in support of his arguments.

8. We have examined the pleadings and associated documents placed on record and rendered thoughtful consideration to the arguments advanced by the learned counsels for both the parties.

9. The main issue to be determined in the case is whether the stock destroyed in the fire was insured under the policy in question? If yes, what is the liability of the OPs in terms of the policy?

10. The complainant is a public limited company engaged in manufacturing BOPP and BOPET films and had taken Standard Fire & Special Perils Policy No. 350100/11/12/3400000047 from OP insurer. The said policy was issued on 01.05.2012 for a period of one year, from 01.05.2012 to 30.04.2013. The total coverage under the policy was Rs. 220 Cr, specifically covering stocks of raw materials and finished goods located at the complainant's BOPET Plant and BOPP Film Plant. The amount covered under the said policy included a sum insured of Rs.30,00,00,000 for stocks at both BOPET and BOPP Film Plants; Rs. 55,00,00,000 for stocks of raw materials and finished goods at the BOPET Plant; and Rs. 60,00,00,000 for stocks of raw materials and finished goods and the like at the BOPP Plant. These categories were explicitly included in the policy terms, providing for policy cover for the complainant's goods at the premises during the policy period against fire and other perils as specified in the policy.

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11. As per the complainant, a fire broke out on 27.03.2013 at the complainant's manufacturing plant in Mundhegaon, Taluka Igatpuri, Nashik, Maharashtra. As per the complainant, the destroyed goods included polyester chips, which were considered finished goods of the poly plant and raw materials for the film plant. Additionally, synthetic waste such as film waste, coated film waste, and metalized waste was also destroyed. According to the complainant, these goods were recorded as inventories in their books of accounts and were classified as excisable goods under the Central Excise Rules, 2002. According to the assessment made in the survey report, the items destroyed in the fire included non-usable Poly Chips, BOPP waste, BOPET Film Waste, aluminium powder, aluminium cut wire, PVDC coated film waste and metallised waste. On receipt of input about the incident, the OP appointed Mr. Pradeep Tambe as the surveyor, who submitted a detailed report, dated 25.06.2014 which assessed the loss sustained by the complainant as Rs.3,20,94,032. However, the surveyor concluded that the loss fell outside the scope of the policy's coverage, citing misinterpretation of the policy terms. In this regard, the relevant part of survey report is reproduced as hereunder:

"21.00 Liability :

The fire was to the waste stored in waste yard. The risk described in the policy mentions as follows:

To cover, Stock of Raw Materials, Finished Goods, Goods in Process, PKGN Materials and Other Goods pertaining to the insured's Trade used at Poly Plant, BOPET PLANT, Poly Plant, BOPP Film Plant at Nashik.

The Endorsement wording mentions, only the split up of Sum Insured of the stock in the insured's different plants.

In this declaration there is no Sum insured towards any waste, lying in the plant or waste yard.

Even the risk described by the insured clearly indicates that the insured has not intended to declare the waste for insurance purpose.

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The stock burnt was lying at insured's waste yard, normally generated while production and it is clearly shown in the records of the insured at Plant as waste, in my opinion loss/ damage to waste material is outside the scope of coverage sought by and offered to insured, of the Policy o. endorsement issued to & held by the Insured. Therefore in our opinion there is no liability under the Policy."

12. The OP insurer repudiated the claim of the complainant vide letter dated 03.03.2015 based on the surveyor's report, primarily on the ground that the destroyed goods were not covered under the policy. The surveyor observed that the goods destroyed in the fire such as 'polyester chips and synthetic waste like film waste, coated film waste, and metalized waste' were outside the categories defined in the policy. However, the complainant asserted that these goods were covered as finished goods, raw material, or "Other Goods" in the Policy issued.

13. It is the case of the complainant that the destroyed goods held market value and were classified as inventories under the Designated Property Clause and despite these arguments and detailed evidence, including excise records and statutory entries, the OP relied on the surveyor's report without addressing the objections raised. Relevant part of the letter of repudiation is reproduced as hereunder:

"From the above it would be clear that the stock burnt at the open waste yard, for which you have filed the present claim, were admittedly the waste normally generated while production and which stocks were not covered under the policy in question and as such your claim does not fall within the scope of cover of the policy.

We, therefore, agree with the recommendations of the surveyor and regret to inform you that your claim is repudiated as the same do not fall within the scope of cover of the policy of insurance."

14. Admittedly, the burnt material was at the area termed as waste yard. The Surveyor Report reveals that, on receipt of instructions from Insurers, he visited site of the Insured on 02.04.2013 along with Insured's officers and noticed that the site of fire was a 2.4 acre waste yard located at south end point of the plant with masonry wall and barbed wire fence on plant side, well isolated from main plants. While the insured described this waste yard as

"open godown" in the loss intimation letter to the insurers, in all other letters to authorities it was described open waste yard. There was a considerable dry grass grown which was the main reason for spread of fire and waste stored is not easily combustible. At the site there

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was no firefighting system like hydrants pipe line etc. fitted in waste yard. The burnt film waste of various types and kinds and chips were mixed up and charred carbon was found lying and it was not possible to correlate the quantities. Thus, the surveyor examined the production, shifting and sale records to determine the loss. As per the surveyor, there was non-usable recycled poly chips stock of about 447.44 MT lying in Pet Film Plant. These chips were manufactured from Film Waste and accounted for in BOPET Plant. While manufacturing BOPET Film, film waste is also produced and this film waste is recycled in Erena Machine to produce poly chips again to manufacture film. However, some of the chips are rejected for manufacturing and these are called as recycled non usable chips. The stock of recycled non usable chips lying in BOPET Plant lines in jumbo bags were 447.44 MT as on 31.03.2013. He valued the destroyed material as Rs.3,20,94,032/-.

15. It is undisputed that the policy in question was to provide for insurance cover for the Stock of Raw Materials, Finished Goods, Goods in Process, PKGN Materials and Other Goods pertaining to the insured's Trade used at Poly Plant, BOPET Plant, Poly Plant, BOPP Film Plant at Nashik. It is also undisputed that the material destroyed by fire was within the premises of the plant and the same was of specific value as determined by the surveyor. It is merely because the surveyor observed the material located at the premises of the complainant which was named as 'waste yard', he concluded the same to be waste material and outside the scope of the insurance cover, while at the same time, determining its significant value as well as tax liability. At no stage there is anything conclusive that the property destroyed by fire was in fact waste material, other than it being located at the place as stated.

16. The complainant is stated to have submitted all necessary details, calculations and documents that were sought by the surveyor. However, the surveyor concluded that the OP's liability with respect to the policy as 'Nil' for the said reason.

17. Clearly, the complainant had insured its stocks and assets which included Stock of Raw Materials, Finished Goods, Goods in Process, PKGN Materials and Other Goods pertaining to the insured's Trade used at Poly Plant, BOPET Plant, Poly Plant, BOPP Film Plant at Nashik. With specific details and breakdown of calculations provided, clearly, all items impacted in the incident are covered under the policy in question. The terms of the policy are to be strictly interpreted as stated thereat. If the said material is to be excluded from the scope of cover under the policy, it was for the insurer to reasonably establish the same, which is not the case. Thus, the action of the surveyor as well as the Opposite Party in not considering damage occasioned in due compliance of the terms of the policy is untenable.

18. In catena of judgements, the nature of insurance contracts, scope and restraint to be exercised in interpreting the terms of contract are well discussed and crystallized by this Commission and Hon'ble Supreme Court. The Hon'ble Supreme Court in the case of United India Insurance Co. Ltd. Vs M/s Hyundai Engineering & Construction Co. Ltd. & Ors., 2024 LiveLaw 409 has held that :

"16. Insurance is a contract of indemnification, being a contract for a specific

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purpose, Oriental Insurance Co. Ltd. v. Sony Cheriyan ., (1999) 6 SCC 451, which is to cover defined losses, United India Insurance Co. Ltd. v. Levis Strauss (India) (P) Ltd., (2022) 6 SCC 1. The courts have to read the insurance contract strictly. Essentially, the insurer cannot be asked to cover a loss that is not mentioned. Exclusion clauses in insurance contracts are interpreted strictly and against the insurer as they have the effect of completely exempting the insurer of its liabilities, New India Assurance Co Ltd v Rajeshwar Sharma, (2019) 2 SCC 671; Canara Bank v. United India Insurance Co. Ltd., (2020) 3 SCC 455; Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Coop. Bank, (1999) 8 SCC 543.

17. In Texco Marketing P. Ltd. v. TATA AIG General Insurance Company Ltd., Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Coop. Bank, (2023) 1 SCC 428, while dealing with an exclusion clause, this Court has held that the burden of proving the applicability of an exclusionary clause lies on the insurer. At the same time, it was stated that such a clause cannot be interpreted so that it conflicts with the main intention of the insurance. It is, therefore, the duty of the insurer to plead and lead cogent evidence to establish the application of such a clause, National Insurance Company Ltd. v. Vedic Resorts and Hotels Pvt. Ltd., 2023 SCC OnLine SC 648. The evidence must unequivocally establish that the event sought to be excluded is specifically covered by the exclusionary clause, National Insurance Co. Ltd. v. Ishar Das Madan Lal ., 2007 (4) SCC 105. The judicial positions on the nature of an insurance contract, and how an exclusion clause is to be proved, shall anchor our reasoning in the following paragraphs."

19. In CA No.10671 of 2016 in Narsingh Ispat Ltd Vs Oriental Insurance Company Ltd. & Anr 2022 LiveLaw (SC) 443, the Hon'ble Supreme Court while reiterating National Insurance Co Ltd vs Ishar Das Madan Lal (2007) 4 SCC 105 (Para 12) held that the burden is on the insurer to show that the case falls within the purview of exclusion clause. In case of ambiguity, benefit goes to the insured.

20. In the given circumstances, even if there was some ambiguity with respect to the scope of cover under the policy, the same shall be interpreted in favour of the insured as clarified by the Hon'ble Supreme Court in Haris Marine Products versus Export Credit Guarantee Corporation (ECGC) Limited, 2022 SCC OnLine SC 509 wherein it was held that when there is any ambiguity in the terms and conditions of the contract, the court has the discretion to interpret the same in favour of the Insured by applying the principle of 'Contra Proferentem'. The relevant portion of the said judgment is as under:-

"22. Reconciliation of ambiguous terms in commercial contracts has been a contentious issue across jurisdictions. A 2011 decision by the Supreme Court of the United Kingdom (hereafter, "UK Supreme Court") in Rainy Sky SA v. Kookmin Bank was concerned with the interpretation of refund guarantees given by a ship builder to the buyers, and whether the same was triggered when the ship builder started facing financial difficulties and was subjected to a debt workout procedure. Allowing the

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appeal, the UK Supreme Court provided the guiding principle for resolution of such ambiguity, keeping the 'business common sense' as central:

"The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other." (emphasis supplied)

23. This principle was further developed by UK Supreme Court in Arnold v. Britton. The facts were that a 99-year lease specified that service charge of £90 levied every year was subject to 10% increase annually. The lessees submitted that by the end of the lease agreement, the service charge payable would be very high, exceeding the cost of providing the services. The UK Supreme Court refused to depart from the natural meaning of the clause, holding that:

"When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean", to quote Lord Hoffmann in Chartbrook Ltd. v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para

14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. In this connection, see Prenn at pp 1384-1386 and Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen (trading as HE Hansen-Tangen) [1976] 1 WLR 989 (2), 995-997 per Lord Wilberforce, Bank of Credit and Commerce International SA (in liquidation) v. Ali [2002] 1 AC 251, para 8, per Lord Bingham, and the survey of more recent authorities in Rainy Sky, per Lord Clarke at paras 21-30". (emphasis supplied)

24. Thus, a decisive method was suggested to construe the ambiguity of a term used in a commercial contract. This was applied by the UK Supreme Court in Woods v. Capita Insurance.¹⁷ The facts in brief are that the buyer of an insurance company relied on an indemnity clause to recover losses paid in the form of compensation to the customers of

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the insurance company to which the company has mis-sold products. According to the indemnity clause, any complaint to the Financial Services Authority (hereinafter

"FSA") would be indemnified by the buyer. However, the contract did not clearly specify what would happen if the company itself raised a complaint before the FSA. The UK Supreme Court held that a literalist approach to resolving ambiguity in a commercial contract term would yield incorrect results, and a holistic reading was imperative to ascertain meaning of terms agreed to by parties. Dismissing the appeal, the UK Supreme Court finally held that the indemnity clause was in addition to the wide-ranging warranties specified elsewhere in the contract, which was not contrary to business common sense. The agreement might have become a poor bargain for the buyer, but it was not the Court's function to improve that bargain:

"The court's task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. ***

Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type. The iterative process, of which Lord Mance spoke in Sigma Finance Corpn (above), assists the lawyer or judge to ascertain the objective meaning of disputed provisions. On the approach to contractual interpretation, Rainy Sky and Arnold were saying the same thing." (emphasis supplied)

25. On application of the above principle to this Policy, and taking into consideration

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all relevant documents, this Court is of the opinion that the date of loading goods onto the vessel, which commenced one day prior to the effective date of the policy, is not as significant as the date on which the foreign buyer failed to pay for the goods exported, which was well within the coverage period of the Policy. Thus, the claim could not be dismissed simply on such basis, especially given that the date of loading the goods onto the vessel was immaterial to the purpose for which the policy was taken by the appellant.

B. Rule of contra proferentem

26. It is entrenched in our jurisprudence that an ambiguous term in an insurance contract is to be construed harmoniously by reading the contract in its entirety. If after that, no clarity emerges, then the term must be interpreted in favour of the insured, i.e., against the drafter of the policy. In deciding the applicability of a cover note on houses swept away by floods, a Constitution Bench of this Court in General Assurance Society Ltd. v. Chandumull Jain¹⁸ held as follows:

"In other respects there is no difference between a contract of insurance and any other contract except that in a contract of insurance there is a requirement of uberrima fides i.e., good faith on the part of the assured and the contract is likely to be construed contra proferentem that is against the company in case of ambiguity or doubt… (I)n interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves". (emphasis supplied)

21. In view of the foregoing deliberations and after careful perusal of the material on record and the established precedents of the Hon'ble Supreme Court, the complaint is partly allowed as follows:

ORDER

The Opposite Party is directed to pay the Complainant Rs.3,20,94,032/- towards

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There shall be no order as to costs.II.

22. All pending Application, if any, also stand disposed of accordingly.

......................................

SUBHASH CHANDRA

PRESIDING MEMBER

...................................................................................

AVM J. RAJENDRA, AVSM VSM (Retd.)

MEMBER

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