The Supreme Court has set aside a National Consumer Disputes Redressal Commission (NCDRC) order directing New India Assurance Company Ltd. to pay ₹2.40 crore to M/s. Hemkund Duplex and Board Pvt. Ltd. in connection with a fire insurance claim.
A Bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva held that the insurer was justified in rejecting the claim after the record disclosed serious inconsistencies regarding the fire, the stock allegedly destroyed and the manner in which the claim was presented.
Background
Hemkund Duplex and Board had insured its stock and its buildings, plant and machinery under two separate fire insurance policies. A fire broke out on May 7, 2009, in the waste paper yard of its factory at Najibabad.
The company subsequently lodged an insurance claim which was eventually quantified at about ₹7.31 crore. The insurer appointed a preliminary surveyor, an investigative agency and a final surveyor. Their reports raised several concerns, including discrepancies in stock records, uncertainty over the cause of the fire, delay in informing the fire brigade and questions regarding the condition of the tin shed.
The insurer ultimately repudiated the claim, relying principally on alleged false declarations and breaches of Policy Conditions Nos. 6 and 8. The NCDRC, however, rejected the insurer's stand and awarded ₹2.40 crore, along with compensation and litigation costs.
The Supreme Court closely examined the three reports and found that they had identified substantial irregularities. The Court noted that the fire brigade was informed nearly 50 minutes after the fire was detected, despite the fire station being only about 6–7 kilometres away.
The Court also considered evidence concerning the tin shed and the stock stored there. Statements recorded during the investigation indicated that usable raw material was ordinarily kept in the pucca godowns, while unusable waste material was stored in the tin shed. This was inconsistent with statements made by the company's senior officials in support of the insurance claim.
The Bench further observed that the NCDRC had not properly dealt with the detailed survey reports, despite the insured having acknowledged those reports in its consumer complaint.
The Court stated:
"If an insured makes false averments to bolster its claim, contrary to the policy conditions, the insurer would be lawfully entitled to reject such claim on that ground without further ado."
The Court also clarified that surveyor reports are not automatically conclusive. However, where detailed reports identify material irregularities, they cannot simply be disregarded without a proper basis.
The Court examined Policy Conditions Nos. 6 and 8. Condition 6 required the insured to provide relevant particulars and supporting documents concerning the loss, while Condition 8 provided for forfeiture of benefits where a claim involved fraud or false declarations.
After examining the evidence, the Supreme Court held that these conditions had been breached. It found that the insurer's repudiation was sustainable on that basis, irrespective of whether the precise origin of the fire could be conclusively established.
The Court observed:
"The NCDRC was not justified in brushing aside the findings recorded in the two surveyors’ reports."
The Supreme Court allowed Civil Appeal No. 7221 of 2025 and set aside the NCDRC's order dated November 19, 2024. Consequently, Civil Appeal No. 11416 of 2025 filed by Hemkund Duplex and Board was dismissed.
The Court directed that the insurer be returned the ₹50 lakh deposited pursuant to the earlier stay order, along with accrued interest, and directed both parties to bear their own costs.
