S. PARVATHA RAO, J.

( 1 ) THESE two cross appeals are preferred against the judgment and decree of the

learned Subordinate Judge at Nizamabad in O. S. No. 84 of 1980 dated 29-6-1985.

The suit is for recovery of Rs. 60,71,174. 57 ps with future interest at 18% per

annum claimed under three fire insurance policies marked as Exs. A. l to A. 3 and

the learned Subordinate Judge partly decreed the same for a total amount of Rs.

22,70,800-00 with 12% interest from 9-6-1980, the date of presentation of the suit,

and proportionate costs. A. S. No. 213 of 1987 is preferred by the first plaintiff

Company which was the insured under Exs. A. l to A. 3 (hereinafter referred to as

the plaintiff company ). A. S. No. 1423 of 1986 is preferred by the defendants who

represent Oriental Fire and general Insurance Company, the insurer under the said

three policies, and they will be referred to hereafter as the Insurance company. As

the two appeals arise out of the same suit, they are heard together and are being

disposed of by this common judgment. They give rise to questions relating to

salvage and computation of amount payable under fire insurance policies for loss

sustained by the plaintiff company by fire.

( 2 ) THE facts first. The plaintiff company was incorporated in the year 1974. It set

up a solvent extraction plant at its factory premises in Valmiki Nagar in Nizamabad

town for manufacturing rice bran oil from rice bran using hexane as solvent. It had

also godowns and tanks in the said factory premises in which it stored the rice bran

(the raw material), hexane, rice bran oil and deoiled rice bran (the by product ). It

was also exporting de-oiled rice bran produced by it and for that purpose

transported the same to kakinada and stored it in godowns belonging to M/s Sharif

and Sons at Kakinada. For setting up the solvent extraction plant, the plaintiff

company obtained a term loan from the Andhra Pradesh State Financial Corporation

and for that purpose mortgaged its buildings, plant and machinery and others

installations, fixtures and fittings, etc. , to the said corporation. The plaintiff

company obtained various credit facilities from Indian Oversees bank against

hypothecation of rice bran, de-oiled rice bran, etc. , and also from Indian bank

against hypothecation of rice bran, de-oiled rice bran, etc. The said Corporation and

the Banks were insuring the respective properties and goods secured to them on the

account of the plaintiff company.

( 3 ) IT is the case of the plaintiff company that its factory including goods and

properties were insured with the Insurance Company under Exs. A. 1 to A3 policies

for the following amounts against the risk of fire, etc. Ex. A. 1 -Policy No.

4416/5/0/f/1 153-776351, dated 26-10-1978 - Rs. 8,00,000. 00 ex. A. 2-Policy No.

4416/o/0/f/1492-990590 dated 27-12-1978 - Rs. 24,00,000. 00 ex. A. 3 -Policy No.

4416/5/7/f/0333-186937 dated 29-3-1979 - Rs. 31,27,000. 00 according to the

plaintiff company on the early hours of 5-5-1979 there was fire in the godowns at its

factory premises at Valmiki nagar and in that fire (i) 2,237. 36 metric tonnes of rice

bran and 140 metric tonnes of de-oiled bran of the total value of Rs. 20,20,168. 50

covered by Ex. A. 2 policy and (ii) 480 metric tonnes of rice bran pledged with

Indian Bank of the value of Rs. 4,55,738. 20 covered by Ex. A. l policy were

damaged. The plaintiff company claims that the damage of the stock was total and

therefore on that account it is entitled to be paid Rs. 24,75,906. 70 under Exs. A. 1

and A. 2 policies. The plaintiff company also claims Rs. 4,37,600. 00 under Ex. A. 3

policy towards damage to civil works caused at that fire. In addition the plaintiff

company also claims the following sums towards salvage, etc. (i) Salvage expenses

for segregating the damaged stock (contained in 42,873 bags) which the Rs.

2,05,782. 95. plaintiff is entitled to claim under law from the defendants. (ii)

Transport costs for transporting the damaged stocks to Rs. 39,212. 50. the rented

godowns as advised by Surveyor (iii) Godown rent for 12 months (8) days for

42,873 bags at Rs. 2,62,811. 49. Rs. 0. 50 ps per bag per month. The plaintiff also

claims an additional sum of Rs. 24,75,906. 70 ps towards loss incurred by it due to

inordinate delay in settlement of its claims on account of increase in the price of

bran, etc. from 5-5-1979 when fire occurred to the date of filing of the suit. e. , 9-6-

1980. Plaintiff company also claims interest of Rs. 1,73,954. 68 ps from 1-6-1979 to

8-6-1980 on the basis mat the Insurance company ought to have settled it Srclaim

on or before 31-5-1979; however, it restricted this claim of interest only on the

amounts relating to its claim for damage to civil work and for various salvage

expenses totalling Rs. 9,45,406. 94 ps. Thus the total amount claimed by the plaintiff

company in the suit comes to Rs. 60,71,174. 57 ps.

( 4 ) THE Insurance Company resists the main claim of the plaintiff company under

exs. A. 2 and A. 3 policies on the ground that it committed breach of the various

warranties under the said policies. It claims that the fire, if any, was caused by

internal combustion and that the same is not covered by Ex. A. 3 policy. It is the

case of the insurance Company that Ex. A. l policy is restricted to goods that were

stored in the godowns belonging to M/s Sharif and Sons at kakinada only and that

therefore it cannot be invoked in respect of goods in the godowns of the plaintiff

company at Valmiki Nagar. The Insurance Company also disputes the claim of the

plaintiff company that its stocks of rice bran and de-oiled rice bran were totally

damaged because of the fire and states that no details as regards the damage were

submitted by the plaintiff company and that its claims are vague, ambiguous,

arbitrary and exaggerated. The Insurance Company denies that the plaintiff

company is entitled to any amounts for salvage on the various counts claimed and

for the alleged loss on account of delay in the settlement of the claim and for

interest thereon.

( 5 ) INDIAN Overseas Bank was impleaded as third defendant by order dated 22-8-

1981 of the learned Subordinate Judge in. A. Nb. 891 of 1981 and subsequently was

transposed as second plaintiff as per the order of the learned Subordinate Judge in.

A. No. 1634 of 1982 dated 9-12-1982. The plaintiff company in its rejoinder dated

21-8-1981 admits that any amounts payable under Ex. A. 2 policy would have to be

paid to the second plaintiff Bank, which is the second respondent in A. S. No. 1423

of 1986 and the first respondent in A. S. No. 213 of 1987. The plaintiff company is

the first respondent in A. S. No. 1423 of 1986. Defendants 1 and 2 are

Rrespondents 2 and 3 in A. S. No. 213 of 1987. We may also state that Indian Bank

has been impleaded as third respondent in A. S. No. 1423 of 1986 by order dated

16-12-1987 in C. M. P. No. 18539 of 1987 at its instance, and as 4th respondent in

A. S. No. 213 of 1987 by order dated 14-12-1987 in C. M. P. No. 18538 of 1987 also

at its instance.

( 6 ) THE learned Subordinate Judge framed the following seven main issues:1.

Whether the defendants are not liable under the policies of Insurance taken out by

plaintiff 2. Whether the plaintiff contravened the terms of policies and as such not

entitled to payment of any money towards the loss sustained by them 3. Whether

the loss sustained by the plaintiff was not due to fire but to self-heating which is not

covered under the policies 4. Whether the claim of the plaintiff or damages and

loss detailed in paras 6 and 7 of the plaint is sustainable 5. Whether the claim of

the plaintiff for damages on the ground of inordinate delay and consequential loss at

the rate of 100% on account of increase in price of bran is sustainable 6. Whether

the plaintiff has committed breach of warranties and as such no liability arises under

the policies 7. Whether the claim for interest at 18% amounting to Rs. 1,73,954. 68

ps from 1-6-1979 to 8-6-1980 is untenable one additional issue framed on 16-2-

1981 is as follows:"whether the plaintiffs claim is highly exaggerated as can be seen

from his preliminary claim"plaintiff company examined P. Ws 1 to 10 on its side and

got marked Exs. A. 1 to A. 62 and also Exs. X. l to X. 7. The Insurance company

examined D. Ws 1 and 2 and got marked Exs. B. l to B. 38.

( 7 ) THE learned Subordinate Judge held against the plaintiff company on issues

No. 4, 5 and 7 and held against the Insurance company on issue Nos. 2, 3,6 and

additional issue No. 1 of 16-2-1981. On issue No. 1 the learned Subordinate Judge

held partly in favour of the plaintiff company. The learned counsel for the Insurance

Company submits that he is not questioning the finding of the learned Subordinate

Judge on issue No. 3 and therefore we will not deal with that aspect of the matter.

( 8 ) BEFORE the learned Subordinate Judge, the learned Counsel for the plaintiff

company conceded that Ex. A. 2 policy, the original of which is Ex. A. 39, was

assigned in favour of indian Overseas Bank and the amount payable under the

policies may be paid to that Bank. In view of that, the learned subordinate Judge

held that, that Bank was entitled to receive the decretal amount. This is not

questioned before us.

( 9 ) THE learned Subordinate Judge observed that it was not disputed before him

that on the face of Ex. A. 1 policy it did not include the stocks stored at the factory

premises of the plaintiff company at Valmiki nagar and that the plaintiff company

had not pleaded in its plaint that the said policy was intended to cover the stocks at

Valmiki Nagar. He held that in the absence of any such pleading, no evidence in that

regard could be looked into. Even so, after considering the material on record the

learned Subordinate judge held that the evidence adduced by the plaintiff to

company to establish that Ex. A. 1 was intended to include the stocks of de-oiled

rice bran stored at Valmiki Nagar was not believable and that it did not cover the

goods in the godowns at Valmiki Nagar. In a. S. No. 213 of 1987 the plaintiff

company questions this finding. The learned Counsel for the plaintiff company took

us through the evidence relating to this aspect of the matter. Ex. A. 1 policy is dated

26-10-1978. It covers only de-oiled rice bran belonging to the insured while

stored/lying in first/second class godowns belonging to M/s Sharif and Sons situated

at Kakinada. This policy does not include spontaneous combustion risk. On the face

of it, does not cover any of the goods or property of the plaintiff company involved

in the fire at Valmiki Nagar. No objection to this policy was taken by any one prior to

the date of that fire which occurred on 5-5-1979. P. W. 8 was the Manager of indian

Bank, Nizamabad Branch at the relevant time. He stated in his examination in chief

that he instructed the defendant company Inspector to insure for Rs. 8,00,000. 00

including the stocks at nizamabad godowns and that by the time of the accident he

did not receive the policy but only received the cover note and that in the cover note

he saw that the stock of nizamabad was not mentioned and that he immediately

contacted the concerned inspector of the Insurance Company. According to him the

Inspector pleaded oversight and gave a letter of rectification. But in his crossexamination

he admitted that indian Bank had not given instructions or proposal

form for taking out Ex. A. 1 insurance policy and that he received the said policy as

manager of Indian Bank, Nizamabad Branch directly from the Insurance Company.

He also admitted that Ex. A. 1 policy was issued on 26-10-1978 and that he could

not state the actual date of receipt of Ex. A. 1 and whether he received it before 5-

5-1979. However, he admitted that he received a cover note in respect of the said

policy much before the fire accident on 5-5-1979 and that it contained the same

endorsement as in Ex. A. 1. What is important, he stated in his cross-examination

that he scrutinised Ex. A. 1 only after the accident. Ex. X. 7 is the letter dated 9-5-

1979 addressed by one P. Prakash, inspector of the Insurance Company, to its

branch Manager with copy to Indian Bank at Nizamabad; but the contents of this

letter were not proved by examining the said p. Prakash and therefore its contents

cannot be relied upon for what they purported to say. Ex. B. 31 (A. 49) is letter

dated 9-5-1979 addressed by the Indian-Bank to the Branch manager of the

Insurance Company at karimnagar. No reference was made in this to Ex. X. 7. From

Ex. B. 31 it is obvious that only from 14-12-1978 Indian Bank was advancing monies

to the plaintiff company on a key loan in respect of its goods at nizamabad. The

learned Subordinate Judge therefore rightly observed that "the question of insuring

the stocks arises only after the said date, but Ex. A. l was issued on 26-10-1978".

After examining the evidence on record, we do not find any reason for interfering

with the finding of the learned subordinate Judge that Ex. A. 1 did not cover the

stock of the plaintiff company stored in its premises at Valmiki Nagar, when

especially no plea was taken in the plaint that it was intended to include rice bran

stored in godowns at Valmikinagar and that by mistake an omission was made in

including the same in that policy.

( 10 ) A very heavy burden lies on the plaintiff company to establish omission or

mistake in the mentioning of the property insured under Ex. A. 1. more so, after the

fire and after the policy was invoked. Very clinching and compelling evidence is

required to discharge the burden. No such evidence is adduced in the present case.

The property insured under Ex. A. 1 policy was (i) de-oiled rice bran only and not

rice bran or any other stock of plaintiff company; and (ii) de-oiled rice bran stored at

Kakinada in the godown of M/s Sharif and Sons. P. W. 8 admitted that the cover

note contained the same endorsement as in Ex. A. 1. The cover note was dated 14-

8-1978 and P. W. 8 stated that he received it much before the fire accident of 5-5-

1979. Firstly, the fact that no steps were taken immediately on receipt of the cover

note to rectify the position goes very much against the alleged omission. There is no

explanation for not taking immediate steps. Secondly, in Ex. B. 31 no mention was

made about omission of rice bran in the policy. In ex. B. 31 (A. 49 is copy) letter

dated 9-5-1979 addressed by the Manager of Indian Bank it was stated:". . . We

have taken a consolidated policy for Rs. 8,00,000. 00 which covers the stock at

Kakinada as well as godowns in the premises of the factory at Nizamabad. While

taking cover we have intimated to the Inspector this fact from whom the cover note

was obtained. . . . ". But P. W. 8, in his cross-examination, stated:"indian Bank has

not given instructions or proposal form for taking out the insurance policy (Ex. A.

1)". It is surprising that nothing in writing was produced to establish that any such

instructions as claimed on behalf of Indian bank and the plaintiff company were

given to the Inspector. We find it difficult to believe that on such an important

matter the Bank gave only oral instructions. There is yet another inconsistency. In

Ex. X. 7 letter from the Inspector, P. Prakash, it was stated: I was requested by the

Manager, Indian bank, Nizamabad to cover insurance risk to the stock of de-oiled

bran/rice bran stored/ to be stored at Kakinada in the godown of M/s Sharif and

Sons. . . . ". This is hard to believe, because it is not the case of the plaintiff

company mat it was transporting rice bran to Kakinada for export or for any other

reason - it was only transporting de-oiled bran to Kakinada for export.

( 11 ) IN the result we uphold the finding of the learned Subordinate Judge as

regards ex. A. 1 policy and reject the claim of the plaintiff company for Rs. 4,55,738.

20 based on that policy.

( 12 ) IN A. S. No. 1423 of 1986 the Insurance company questions the findings of

the learned Subordinate Judge on issue Nos. 2 and 6. Issue No. 2 relates to the

alleged contravention of the terms of the policies by the plaintiff company and issue

No. 6 relates to the breach of warranties said to have been committed by the

plaintiff company.

( 13 ) SO far as the alleged contravention of the term of the policy is concerned, the

plea taken by the Insurance Company is in its additional written statement and is as

follows:"the defendant submits that goods alleged to have been damaged were not

stored in accordance with the specifications contained in the relevant policies and

therefore the defendant is not liable under the said suit policy". This can have

reference only to Ex. A. 2 policy because Ex. A. 3 policy covers only buildings, plant

and machinery etc. The plaintiff company, in its rejoinder, denies that it suppressed

any particulars with regard to the stocks and the place where they had been stored

and asserted that the goods damaged were properly stored. The Insurance

company has not clearly stated what specifications in the relevant policies were

violated by the plaintiff company in storing the goods. In fact the policy itself is not

specified and we have to presume that the policy referred to is Ex. A. 2 by a process

of elimination. In the absence of any mentioning of the specifications said to have

been contravened and the manner in which they have been contravened, we are

constrained to observe that the plea taken is vague and indeterminate and therefore

does not merit any consideration. Before the learned subordinate Judge the

specification alleged to have been violated was said to be that the goods should be

stored in godowns which were detached. The contention advanced before him on

behalf of the Insurance company seems to be that as the evidence on record

showed that the godowns in which the de-oiled rice bran and rice bran were stored

were not detached, the said specification was violated and therefore the plaintiff

company was not entitled to payment of any amount under Ex. A. 2 policy towards

the loss sustained by it. The said specification is spelt out from item No. 3 under the

heading "property insured". Item No. 3 is as follows:"on de-oiled rice bran, rice bran

stored and/ or lying in the detached godowns of first class construction in the

insured factory premises at Valmikinagar, nizamabad and otherwise occupied as

godown for the storage of non-hazardous goods". We are unable to read any term

or condition in this. If it was intended by the Insurance company that rice bran and

de-oiled rice bran should be stored only in godowns of certain specifications, nothing

prevented it from laying down such a condition in clear terms making it explicit that

violation of that would disentitle the plaintiff company from claiming any relief. The

learned Counsel for the Insurance Company is unable to point out to any such clear

condition or stipulation in Ex. A. 2 policy. Moreover, as the learned subordinate

Judge rightly observed, Ex. A. 2 policy was only a renewal of the earlier policy and it

is not the case of the Insurance company that its Officers ever took any objections

that the godowns were not detached or about their location. The godowns remained

the same from the beginning. In the circumstances, we have to uphold the finding

of the learned Subordinate judge on issue No. 2 for the reasons stated above.

( 14 ) THE Insurance Company contends that the plaintiff company contravened the

warranties in Clauses 1 (a), 12 and 15 and therefore no liability fastens on it. The

said warranties are as follows: during the currency of this policy, it is hereby

warranted that in respect of the property or building (s) to which this insurance

applies or any building communicating therewith: 1 (a ). There are no Kutcha Shed

or Huts within 15 meters of any portion of the premises herein referred to, 12. No

process of manufacture is carried on between the hours of, 9. 30 p. m. and 5. 30 a.

m. (S. T.) 15. Coal, Charcoal, Oil or Firewood only be used as Fuel". The pleas taken

by the Insurance Company in its written statement are (i) mat the plaintiff company

located its mechanical workshop in kutcha sheds/huts within 15 meters of affected

godowns contrary to the prohibition in Clause 1 (a); (ii) that the plaintiff company

was carrying on work in nights contrary to clause 12; and (iii) mat the plaintiff

company was using husk in substantial quantities as fuel in Boiler House contrary to

Clause 15. In the rejoinder, the plaintiff company stated that it did not put up any

kutcha shed/hut for locating its mechanical workshop and that only one shed was

outside the premises made of poles with covering of jute bags and that it was

erected after the fire for resting the workmen engaged for salvage. The plaintiff

company also denied that it carried on work at night. It further stated that the

factory had come to a grinding halt on 11-4-1979 because of shortage of hexane

and that up to the date of fire. e. , 5-5-1979, the factory did not work because of

shortage of hexane. It further stated that Charcoal alone was used as fuel and not

husk and that husk was kept in the factory only for the purpose of mixing it with

high quality bran to reduce the residual oil in the de-oiled bran.

( 15 ) THE learned Subordinate Judge rightly held that the burden was on the

Insurance company to establish the breach of warranties. "as a general principle,

the onus is on the insurers to prove that a condition has been broken, not on the

assured to prove compliance on his part with each and every stipulation".

(Halsburys Law of England, iv Edition, Vol. 25 - Para 439 ). After considering the

evidence on record, the learned Subordinate Judge held that the insurance Company

failed to establish that the kutcha shed existed before the accident and that the

same was within 15 meters. The learned Subordinate Judge also held that condition

15 did not prohibit the plaintiff company from storing husk in its premises and that

even though the Managing Director of the plaintiff company in his evidence as p. W.

2 admitted about the presence of the husk stored in the open, he never admitted

that it was stored within 15 meters of any of the buildings. He also held that as the

factory in fact was not working from 11-4-1979, it could not be held that there was

any violation of condition No. 15 at the time when the accident took place. He also

took the same view as regards the alleged violation of condition No. 12 on the basis

of admission of p. W. 2 in his chief-examination that labourers were engaged in the

night shift also. In that view of the matter, the learned Subordinate judge held that

the Insurance Company could not avoid its liability under Exs. A. 2 and A. 3 policies

on the alleged breach of warranties. The learned Counsel for the Insurance

company contends that the learned subordinate Judge erred in holding as he did.

We do not agree.

( 16 ) WE may point out that the Insurance company had taken this stand of breach

of warranties for the first time in its letter dated 13-12-1980 (marked as Ex. A. 29)

long after the fire accident, based on the report of the surveyors. In the said letter it

did not mention what warranties were contravened. That was stated by it only in its

reply Ex. A. 33 dated 24-5-1980 to Ex. A. 32 lawyers notice dated 9-4-1980 given

on behalf of the plaintiff company. The Survey Report Ex. B. 18 itself was of 13-8-

1979. Thus the stand taken by the Insurance Company on the basis of the alleged

violation of the three conditions appears on the face of it to be belated. It is not the

case of the Insurance Company that the alleged breach of any of these three

conditions caused the fire because it is not disputed by it that the fire was caused by

spontaneous combustion of rice bran due to internal heating. Apart from this, we

also find that the Insurance Company did not discharge its burden to establish that

the plaintiff company violated the three conditions. The contents of the survey

report ex. B. 18 dated 13-8-1979 could not be proved by the surveyor Sri C. A.

Seshadri, who actually conducted the survey because he died. The one witness (D.

W. 2) who spoke for the Insurance Company was its Divisional manager at

Secunderabad, Sri G.. Nehru. He stated in his examination-in-chief that near the

godowns he found some kutcha shed when he visited the factory premises of the

plaintiff company on 6-5-1979 and that it might have been there for some time as

per his impression. He admits that the accident took place due to spontaneous

combustion. He also stated in his cross-examination that he had no data to

determine the age of the kutcha shed which was put up in the factory premises and

that according to his observation it was four or six months old. He also stated that

he had no personal knowledge whether the plaintiff company was using coal or husk

in the boilers. This was all the evidence adduced on behalf of the Insurance

Company. The learned Counsel for the Insurance company relies on Ex. B. 24, which

is a statement of P. W. 2, recorded by the Assistant superintendent of Police on 6-5-

1979. e. , a day after the fire. Therein it was recorded as follows: rice husks,

groundnut husks and coal are used for the purpose of generating the steam". This

was not admittedly a statement taken on oath and it was not proved by examining

the concerned Assistant Superintendent of police who recorded the same. Therefore

it has no probative value. Ex. B. 24 was got marked by putting it to P. W. 2 in his

cross-examination and the only thing elicited from him was that it was a copy of his

statement recorded by the Assistant Superintendent of police, Nizamabad. The

above referred passage was not put to him. The passage by itself does not

categorically state that the plaintiff company was using rice husks and groundnut

husks as fuel for generating steam in its factory at any time. Therefore, basing on

that sentence in Ex. B. 24, we do not find it possible to conclude that the plaintiff

company was using husk as fuel in its factory in violation of condition No. 15.

Moreover, we have also to point out that it does not follow from condition 15, which

states that "coal, Charcoal, Oil or Firewood only be used as Fuel", that there was

imposed by way of a warranty a categorical prohibition of the use of any other

commodity whatsoever as fuel by reading into that condition the words "and no

other fuel shall be used". As regards condition No. 12, the learned Counsel for the

Insurance Company contends that in view of the admission of P. W. 2 in his

examination in chief that 23 days prior to the fire accident when the factory was

working, labour was engaged in the night shift also, it must be concluded that it was

violated. Merely because labour was engaged, it does not follow that process of

manufacture was carried on by the plaintiff company between 9. 30 p. m. and 5. 30

a. m. Condition No. 12 prohibited only the carrying on the process of manufacture

between 9. 30 p. m. and 5. 30 a. m. and not engaging labour during that period.

There is no reliable material on record to establish that the plaintiff company was

carrying on the process of manufacture between those hours. We therefore find that

on the basis of the evidence on record it cannot be held that the Insurance

Company has established that the plaintiff company violated any of the three

conditions. In n. V. Kamat v. AAD. Martins, AIR 1985 SC 1281 [LQ/SC/1985/153] the Supreme Court

held that the burden to prove that there was breach of contract of insurance was

squarely placed on the shoulders of the insurance company, and that it could not be

said to have been discharged by it by a mere question in cross-examination, and

that the insured was under no obligation to furnish evidence so as to enable the

insurance company to wriggle out its liability under the contract of insurance. In the

absence of any clinching evidence, we uphold the finding of the learned Subordinate

Judge on issue No. 6 also.

( 17 ) THIS takes us to the main issues relating to the claim of the plaintiff company

for the losses incurred by it due to the fire and for the expenses incurred by it for

salvage, etc. , dealt with by the learned subordinate Judge under issues 1 and 4.

There is also the additional issue framed on 6-2-1981 in respect of the plea of the

insurance Company that the claim of the plaintiff company is highly exaggerated.

The main plea of the plaintiff company is that on the early morning of 5-5-1979 the

insured stock under Ex. A. 2 policy was ravaged by fire and the damage to the stock

was total, amounting to Rs. 24,75,906. 70 ps. The stock involved is said to be rice

bran of 2237. 36 metric tonnes and de-oiled rice bran of 140 metric tonnes. There is

also the claim of Rs. 4,37,600. 00 in respect of damage to civil works. e. , the

godowns in which the said stocks were at the time of the fire. It is not in dispute

that the plaintiff company informed the Insurance Company about the fire

immediately and that the Insurance Company intum sent its Surveyor along with D.

W. 2 who visited the factory premises at Valmiki nagar on 6-5-1979 (not 7-5-1979

as stated in the plaint) and on 29-64979. It is the case of the plaintiff company that

when the surveyor visited the scene of fire on 6-5-1979, he required segregation of

the stock for assessment of the loss and that the plaintiff company got segregated

the damaged stocks and that since there was a delay in the surveyor coming for

final assessment, the plaintiff company got removed some of the damaged goods to

rented godowns to avoid further damage and that the same was intimated to the

Insurance Company. A reading of paragraph 11 of the plaint indicates that the said

removal of damaged goods to rented godowns, according to the plaintiff, was done

prior to 18/19-6-1979 because it is stated therein "thereafter at the request of the

surveyor the plaintiff met him at Madras with records on 18/19th June, 1979. The

surveyor came for the second survey at nizamabad, on 29-6-1979". According to the

plaintiff company its Managing Director (P. W. 2) met the surveyor at Madras on 7-

8-1979 for final settlement and the surveyor said that he would recommend Rs. 1.

05 lakhs in respect of stocks and Rs. 1. 89 lakhs for building. That was not

acceptable to the plaintiff company. It was thereafter that by letter dated 13-2-1980

the Insurance company refuted the claim of the plaintiff. In the written statement,

the Insurance company has taken the plea that the loss sustained by the plaintiff

company was not due to fire but due to self heating and that the same is "not

covered under the policy" and that therefore it "is not liable under the policy issued

to the plaintiff". The Insurance company put the plaintiff company to strict proof of

the ownership of the goods said to have been lost by it in the fire and denied that

"insured stock were revaged by fire and the damage of the stock was totally

amounting to Rs. 24,75,000/70 ps". It is also the case of the Insurance Company

that even though its surveyor wanted the plaintiff company to segregate the stock

for assessment of loss, the latter did not keep the stock segregated as requested by

the surveyors. It is also denied that the plaintiff company had segregated the

damaged stocks. It alleges that the plaintiff company attempted to mislead the

surveyors by keeping the damaged bags in the periphery while sound bags were

kept inside dishonestly to mislead the surveyors with regard to the extent of the

damage. It also denies that there was any delay in the surveyor coming for final

settlement and that the delay, if any, was caused due to the conduct of the plaintiff

company. The Insurance Company also denied that the plaintiff company "removed

the damaged goods to rented godowns to avoid further damage after intimating the

surveyor" and further alleges that "the goods which were not affected also were

removed without informing the surveyors" and that the plaintiff company "did not

furnish to the surveyors records of such removal". In the additional written

statement the Insurance company has taken the plea that the plaintiff company has

"deliberately suppressed the particulars and the places" where 2237. 36 mt of rice

bran and 140 MT of de-oiled rice bran were stored.

( 18 ) FROM the above it is seen that extreme positions were taken by the plaintiff

company as well as the Insurance Company. According to the plaintiff company the

entire stock of 2237. 36 metric tonnes of rice bran and 140 metric tonnes of de-oiled

rice bran covered by Ex. A. 2 policy of the value of Rs. 24,75,906. 70 ps was totally

damaged in the fire on 5-5-1979 itself. It also claimed Rs. 4,37,600. 00 for damage

to civil works and that some of the damaged stock was removed to rented godowns

to avoid further damage with intimation to the Insurance company. It also claimed

Rs. 5,07,806-00 towards salvage expenses, etc. , for segregation, transport and

godown rent. The insurance Company has sought to avoid all liability on the ground

that certain warranties were breached. We have already held against it on that. The

Insurance Company claims that the loss sustained by the plaintiff company was due

to self heating which was not covered under the policy. We find that this is wholly

untenable plea in view of the undisputable fact that Ex. A. 2 policy covers

spontaneous combustion in respect of items 1 and 3. e. , rice bran and de-oiled rice

bran and stocks under process lying in the factory premises and occupied as oil

extraction plant only up to the value of Rs. 4 lakhs and de-oiled rice bran and rice

bran stored in godowns upto the value of Rs. 16 lakhs. We have already observed

earlier that the learned counsel for the Insurance Company has not questioned the

finding of the learned subordinate Judge in favour of the plaintiff company on issue

No. 3 as regards this aspect of the matter.

( 19 ) BEFORE proceeding further, it is necessary to trace the fundamentals relating

to claims based on insurance policies covering the risk of fire and similar risks. The

following principles are axiomatic:". . . the insurers liability is limited to the actual

loss which is in fact proved. The happening of the event does not of itself entitle the

assured to payment of the sum stipulated in the policy; the event must in fact result

in a pecuniary loss to the assured, who then becomes entitled to be indemnified

subject to the limitations of his contract. He cannot recover more than the sum

insured, for that sum is all that he has stipulated for by his premiums and it fixes the

maximum liability of the insurers. Even within that limit, however, he cannot recover

more than what he establishes to be the actual amount of his loss. The contract

being one of indemnity only, he can recover the actual amount of his loss and no

more, whatever may have been his estimate of what his loss would be likely to be

and whatever the premiums he may have paid, calculated on the basis of that

estimate". Halsburys Laws of england IV Edn. Vol. 25 Para 3. It has also to be

noticed that "it is the duty of the assured to observe the utmost good faith in his

dealings with the insurers throughout", and therefore "the claim which he puts

forward must be honestly made; and, if it is fraudulent, he will forfeit all benefits

under the policy whether there is a condition to that effect or not". In Britton v.

Royal insurance Co. (1866) 4 Fandf 905 at 909 = 176 ER 843 Wills. observed as

follows: "the contract of insurance is one of perfect good faith on both sides, and it

is most important that such good faith should be maintained. It is the common

practice to insert in fire policies conditions that they shall be void in the event of a

fraudulent claim; and there was such a condition in the present case. Such a

condition is only in accordance with legal principle and sound policy. . . if there is a

wilful falsehood and fraud in the claim, the insured forefeits all claim whatever upon

the policy". Even earlier, Pollock C. B. held in Goulstone v. Royal Insurance Company

(1858) 1 Fandf 276 at (279) 175 ER725. "the question now is as to the plea of

fraud. If the claim was fraudulent the plaintiff cannot recover, and if it was not so he

can only recover the real amount of his interest and loss. A fire policy is not as a

marine policy may be, a Valued policy, and the insured recovers only that which he

has really lost". In Champan v. Pole, P. O. (1870) 22 Law times 306 Cockburn, C.. ,

distinguished between fraudulent claim and a mistaken claim and stated the law as

follows, while instructing the jury:"but if you think the defence is made out, and

that, in point of fact, with reference either to the quantity or value of the goods, the

plaintiff knowingly preferred a claim he knew to be false and injust, then he is

entitled to recover nothing. That is one of the conditions in the policy, and the

company are entitled to stand upon the defence. And considering haw exposed they

are to deception and how rarely they are able to establish it by proof, in my opinion

when they have a case in which they are honestly convinced that fraud has been

perpetrated, and that they have sufficient evidence of it to submit to a jury to

establish it, then they are not only fairly entitled, but they are bound to do so. . . . .

. . A man may make a mistake in his claim and it may be quite honestly. If, for

instance, a man either fails to recollect the precise quantity of goods he has on his

premises at the time of the fire, or mistakes the value of those of which he was in

possessions, and thus he presses a claim according to what he believes honestly to

be true, but which may, in the end, turn tout to be mistaken, the only consequence

which ensues is, that inasmuch as the contract of insurance is simply a contract of

indemnity, he can only recover to the extent of the real value of the goods he has

actually lost. You must not run away with the notion that a policy of insurance

entitles a man to recover according to the amount represented as insured by the

premiums paid. It is essentially a contract of indemnity. . . . . . . . Therefore, in all

the cases the only question supposing the claim to be honest - is, what was the real

and actual value of the goods destroyed. But beyond that - although the insured has

not caused the fire-yet, if he has made a fraudulent claim, men, on such a condition

as is contained in this policy, he must fall by the fraud he has thus attempted to

perpetrate, and is not entitled to recover at all". (emphasis supplied) in Varna Silk

Mills (P) Ltd. , v.. T. Commissioner, Ahmedabad AIR 1991 SC 2104 [LQ/SC/1991/392] , the Supreme

Court considered the legal basis for the payment made under an insurance policy on

a claim made, as follows: the money received under the insurance policy in such

cases is by way of indemnity or compensation for the damage, loss or destruction of

the property. It is not inconsideration of the transfer of the property or the transfer

of any right in it in favour of the insurance company, It is by virtue of the contract of

insurance or of indemnity, and in terms of the conditions of the contract. Under an

insurance contract, the assured cannot claim more amount than the sum insured.

The sum insured is the maximum liability of the insurer and the assured secures it

by paying his premium which is accordingly fixed. Even within the maximum limit,

the insured cannot recover more than what he establishes to be his actual loss,

whatever may be his estimates of the loss that he was likely to bear and whatever

the premium he may have paid calculated on the basis of the said estimate. The fact

that while paying for the total loss of or damage to the property, the insurance

company takes over such property or whatever is left of it does not change the

nature of the insurance claim which is indemnity or compensation for the loss. The

payment of insurance claim is not in consideration of the property taken over by the

insurance company, for one is not consideration for the other. It is incorrect to

argue that the insurance claim is the value of the damaged property. The claim is

assessed on the basis of the damage sustained by the property or the amount

necessary to restore it to its original condition. , It is not a consideration for the

damaged property". Thus in that case the Supreme Court held mat payment of

insurance claim by the insurer was not consideration for the taking over of the

salvage by the insured.

( 20 ) THE principle underlying the right or claim of the insurer for salvage is

explained by Lord Esher, M. R. in Dane v. The mortgage Insurance Corporation

(1894) 1 queens Bench 54 at page 61 as follows: by the law of insurance, though

the underwriter directly promises to pay on a certain event, the contract is treated

as one of indemnity; and it follows that, if the assured, who has been indemnified

by the underwriters as on a total loss, saves anything upon the loss, that salvage

must go to the underwriter; otherwise the assured would be more man indemnified.

That is an incident of every kind of insurance which is held by law to be a contract

of indemnity. Therefore, in such a case, if the assured does obtain anything by way

of salvage out of the subject-matter insured, he must account for that to the

underwriter; and, further than that, if anything is obtainable by way of salvage, he

has no right to say to the underwriter that he will not take any step in order to

obtain such salvage, he is bound to assist the underwriter in obtaining it". It is

normal for insurers under fire policies to reserve a right to enter on the premises

affected by fire and retain possession for salvage purposes. The position of an

insurer taking and holding possession of property damaged by a fire under the

provisions of the policy is explained by Lord Moulton in ahmedbnoy Habbibhoy v.

Bombay Fire and marine Insurance Company 107 Law Times reports 668 at page

670 as follows: the provisions in virtue of which it does so are for the purpose of

enabling it to minimise the damage. Inasmuch as it has to bear the loss there is no

one so directly interested in doing everything that is wise for the purpose of making

the best of the situation. It does so in its own interest, not because it is under a

duty to the assured. Its powers are of the nature of a privilage to do that which is

most for its own benefit under the circumstances so as to reduce the loss". But

merely because such a right is reserved, it does not follow mat the insurer is bound

to invoke it and take possession of the premises where fire occurred. The law has

been stated as follows in Halsburys Laws of England iv Edition Vol. 25 paras 666

and 667. "the amount for which the insurers are liable depends upon the extent to

which the insured property is destroyed or damaged, so they are directly interested

in the steps taken to minimise the loss. Although it is the duty of the assured to

minimise the loss, it is not a sufficient protection to the insurers to rely upon it, and

therefore they are entitled to enter and remain on the premises where the fire is

and to take possession of any salvage there. . . . . The powers of the insurers must

be exercised reasonably and in accordance with the terms in which they are

conferred. The insurers must not remain upon the premises for an unreasonable

time or they will be liable in damages. If they take possession of the salvage, it is

their duty to take proper steps to preserve it from further damage and an action lies

against them if the salvage continues to deteriorate. There are no rules as to notice

of abandonment in fire insurance, but on payment of the loss in full the salvage is

transferred to the insurers". E. R. Hardy Ivami in his General Principles of Insurance

Law (V Edition - 1986) at page 473 states the law as regards salvage as

follows:"where, notwithstanding the happening of a total loss, there is a sufficient

amount of salvage which possesses some value, the assured cannot claim both to

receive from the insurers a full indemnity for his loss and to retain the salvage, since

he would thus be more than fully indemnified. It is his duty, therefore, on receiving

payment in full, to hand over to the insurers the salvage. . . . . . Since, however, the

ownership of the salvage may carry with it onerous and expensive responsibilities, a

difficult question arises, as to whether the property in the salvage passes to them as

from the date of the loss by the fact of payment, or whether they are entitled to

exercise an option in the matter so mat the property does not pass to them unless

they think fit to take over the salvage. It is probable that the latter alternative is

correct, and that they may therefore refuse to take over the salvage, if, by so doing,

they would be incurring liabilities to third persons". He refers to what Blackburn.. in

Rankin v. Potter (1873) LR 6 HL 83 said. "there is no notice of abandonment in

cases of fire insurance, but the salvage is transferred on the principle of equity

expressed by Lord Hardwicke in Randal v. Cockran (1748) 1 Ves Sen 98) 27 English

Reports 916 - "that the person who originally sustains the loss was the owner, but

after satisfaction made to him the insurer".

( 21 ) KEEPING the above legal position in view, now we have to consider the extent

of loss suffered by the plaintiff company on the basis of the evidence adduced and

whether it made the claim intentionally exorbitant without disclosing or suppressing

the real facts and whether the salvage was properly segregated and taken care of

by the plaintiff company.

( 22 ) THERE is no doubt that the plaintiff company informed the Insurance

Company about the fire that occurred on 5-5-1979 and that on 6-5-1979 itself a

representative of the Insurance Company. e. , D. W. 2 and one sri Seshadri of

Mehta and Padmasey surveyors Private Limited, surveyors appointed by the

Insurance Company, (Mandp surveyors, for short), visited the factory premises of

the plaintiff company. By letter dated 6-5-1979 (Ex. B. 21) P. W. 2, as managing

Director of the plaintiff company, informed the Station Fire Officer, Fire Station at

Nizamabad that on 5-5-1979 in the early hours fire accident occurred in their factory

and that the same was informed around 4. 20 a. m. to the local fire station and that

the fire units of Nizamabad and Bodhan worked up to 6-5-1979 and left around 8.

25 p. m. He further stated as follows:"the fire services rendered very good services

and completely extinguished the fire. In this accident rice bran bags, de-oiled bran

and asbestos roof sheets of two godowns involved. The property worth of Rs.

30,00,000/- involved in fire. The actual loss has not been assessed, so far the

salvaging work is under progress" (emphasis supplied ). In Ex. B. 24 statement of P.

W. 2 recorded by the Assistant Superintendent of Police on 6-5-1979, it was stated

that the fire was in two godowns and that by the time PW2 came to the spot on 5-

5-1979, the fire brigade was already there and that the fire had been extinguished

at about 10. 30 hours on 6-5-1979. It was also recorded that he (P. W. 2) did not

know how much was the stock at the time when the fire broke out and that he could

not tell also how much of property was damaged. He also stated therein that fire

was first noticed around 4 a. m. on 5-5-1979 by the godown keeper Gangadhar and

chowkidar named Aziz. Neither of them were examined as witnesses in the present

case. In Ex. B. 23 letter dated 9-5-1979 addressed by P. W. 2 on behalf of the

plaintiff company to the Assistant Superintendent of police, Nizamabad, it was

stated that there was stock of 2231 M. T. of rice bran and 140 M. T. of de-oiled bran

and that the damaged material was being salvaged and mat the extent of loss would

be informed after the surveyors complete their assessment. In Ex. B. 1 letter dated

9-5-1979 addressed by mandp Surveyors to the plaintiff company, the surveyors

confirmed that on 6-5-1979 itself the plaintiff company was requested to send a

detailed account of how the damage occurred including minimisation work carried

out and Civil Engineers estimate for repairs to buildings indicating the value of

salvage. It was further stated in the said letter as follows:"regarding the damage to

bran stocks we requested you to proceed with removal and salvaging operations

using minimum water as it would give rise to further heating. The stocks in the two

godowns may be kept separately according to the type of stocks (raw and boiled) of

rice bran, and type of damage, namely, unaffected stocks, water affected (to be

dried), in lumps and disclosed. Loose stocks can be rebagged, weighed and

standardised. Once the results of the salvaging operations are intimated to us and

the above requirements furnished, we will be visiting Nizamabad to finalise the loss

assessment". Ex. B. 2 letter dated 21-5-1979 was the response of the plaintiff

company stating that they were salvaging the goods and would inform Mandp

Surveyors as soon as the operations were completed. Subsequently in ex. A. 4 letter

dated 22-6-1979 P. W. 2 on behalf of the plaintiff company stated that segregated

stocks were lying in the open as the godowns were badly damaged and that they

were experiencing great difficulty to properly protect the huge stocks lying in the

open from the threat of ensuing monsoon and that Mr. Seshadri of Mandp Surveyors

had asked them to arrange for the removal of stocks to a safe place as it would take

a little more time to visit the factory premises and that normal operations could not

be started from 5-5-1979 till date. It is not in dispute that on 29-6-1979 Sri C. A.

Seshadri along with D. W. 2 of the Insurance Company again visited the factory

premises of the plaintiff company at Valmiki Nagar and completed the survey. In Ex.

A. 5 letter dated 16-7-1979 p. W 2 on behalf of the plaintiff company complained to

the Insurance Company that no decision was taken for payment of compensation

even till then and that at least an on account payment of 75% of the claim amount

should be paid immediately to enable them to put the factory and the business on

rails; and then in Ex. A. 6 letter dated 17-7-1979 addressed to Mandp Surveyors p.

W. 2, complaining that no survey report was sent to them, stated:"as advised by

your Director, we have removed some stocks to safe places from the factory

premises since this space was needed to stock fresh stocks. We have heavy export

commitments for which we have to procure fresh stocks and stock them in the same

godowns as the damaged stocks are stocked since there is no other space. The

stocks removed to other premises have not been surveyed when your Director had

last come. Please enlighten in this matter immediately" (emphasis supplied) along

with Ex. A. 7 letter dated 19-7-1979, p. W. 2 on behalf of the plaintiff company sent

estimates for reconstruction of godowns damaged during the fire accident prepared

by an Executive Engineer (Retd) of the government of Andhra Pradesh and once

again requested for on account payment of 75% of the claim amount. This request

for on account payment was again repeated in ex. A. 9 letter dated 28-7-1979

addressed by p. W. 2 on behalf of the plaintiff company to d. W. 2 of the Insurance

Company. Therein it was also stated that segregation of stocks running in thousands

of bags was completed by 12-6-1979 and that the stocks were fast deteriorating and

on account of the delay the salvage had lost its value completely. In ex. B. 5 letter

dated 7-8-1979 Mandp Surveyors informed the Insurance Company that they were

unable to recommend any on account payment. In Ex. B. 18 survey report dated

13-8-1979 Mandp Surveyors assessed the loss on buildings at Rs. 2,04,334-00 and

the loss on stocks at Rs. 2,39,400-00. e. , in all at Rs. 4,43,734-00. In Ex. A. 13

letter dated 11-8-1979 the plaintiff company represented by P. W. 2 claimed a sum

of Rs. 32,22,821. 65 ps, the particulars of which were given as follows:that was

exclusive of damages suffered due to the delay on the part of the Insurance

company and the interest on profits which the plaintiff company would have earned

if the goods had not been lost or if the settlement of the claim was made

immediately. As the difference between the claim made by the plaintiff company and

the loss assessed by the surveyors was considerable, the plaintiff company

nominated a retired Judge of the high Court as arbitrator and required the insurance

Company also to nominate an arbitrator. In Ex. A. 17 letter dated 20-8-1979 the

Insurance Company asked the plaintiff company to defer the reference to

arbitration. On the same day. e. 20-8-1979 by a letter ex. A. 18 addressed to the

Insurance company, P. W. 2 on behalf of the plaintiff company required the

Insurance Company to send a sum of Rs. 1,00,000. 00 as advance for salvage

expenses to be incurred and asked it to arrange to remove the salvage immediately.

It was further stated therein that the salvage stocked in their godowns caught fire

again on 9th, 13th, 14th, 15th and 16th August, 1979 and that on 9th and 13th the

fire was put down by the fire department and that on the remaining three days the

fire was put off locally. It was also stated as follows:"we hold you solely responsible

for all the consequential losses in case the fire spreads to the other property. In

case, we do not hear from you by 27th august, 1979, we are arranging to shift

whatever quantity practically possible to the godowns outside our premises for

which we have to incur the following expenses:- a. Hamali expenses for filling the

bags. b. Cost of gunny bags, c. Hamali expenses for loading the lorry. d. Lorry

freight. e. Hamali expenses for unloading from the lorry. f. Labour expenses for

drying the damaged bran on the platform. g. Platform hire, h. Godown rent". In Ex.

A. 19 letter dated 29-8-1979 addressed to the (Insurance Company, P. W. 2 on

behalf of the plaintiff company further stated as follows: "we have not yet heard

from you. In the meantime we have commenced the shifting of the salvage to the

other premises. You may send your representative to supervise the operations, if

you think it is necessary. Otherwise all the expenses per actual will have to be borne

by you. Some of the stock is against catching fire. This stock has to be disposed off

to save the other stock. The fresh stock and the other factory premises (which is

also insured with you ). Kindly make arrangements to remove these stocks at your

cost. We will wait for a period of one week from the date of this letter. . e. , 2nd

September, 1979. From 3rd September onwards we will remove these stocks and

dump them in Godawari river which is about 40 miles away from the factory. You

will have to bear the following expenses: a. Filling the gunny bags b. Cost of gunny

bags c. Cost of loading the truck d. Transport charges e. Unloading at the Godavari

f. Cost of Labour for throwing the salvage into the river. " (emphasis supplied) then

in Ex. A. 23 letter dated 10-9-1979 P. W. 2 on behalf of the plaintiff company stated

that the salvage operations were progressing at a very brisk space and once again

requested the Insurance Company to remit rs, 1,00,000. 00 to meet salvaging costs.

It is surprising that thereafter the Station fire Officer at Nizamabad in his letter

dated 26-11-1979 marked as Ex. A. 25 stated as follows:"it is informed that on 25-

11-1979 at 19. 20 hours we received a fire call from your end and attended the call.

There we found that the damaged rice bran was burning. This was third time we

attended the fire call of the above damaged bran. It is already damaged in the

major fire accident and from which fire is breaking frequently so that it is a danger

source for the adjacent stock. Hence it is advised to remove the damaged stock

from that godown so that the unaffected stock should be in safe. . . . . . (emphasis

supplied ). Earlier by a letter dated 26-10-1979 (Ex. A24) the Insurance Company

informed that it also nominated another learned Judge as its arbitrator, however,

under protest and without prejudice. Again by letter dated 10-2-1980 (Ex. A. 28)

addressed to the Insurance company, P. W. 2 on behalf of the plaintiff company

stated:"we have repeatedly brought to your notice that the salvage lying in our

godowns is causing great danger to the entire mill and the stocks that are being

manufactured new, since you have not taken any steps so far, we have no other

alternative except to remove the same to the compound in order to protect the mill

and existing stocks. We now request you to proceed instantaneously with the

arbitration proceedings in the interest of justice" (emphasis supplied ). Then the

Insurance Company by a letter dated 13-2-1980 (Ex. A. 29) informed the plaintiff

company that its claim was not tenable in view of the breach of warranties. In Ex. A.

32 notice dated 9-4-1980 issued on behalf of the plaintiff company by its advocate

to the Insurance Company, as regards the damaged stock, it was stated as

follows:"further the cause of the inordinate delay without any reasonable excuse in

settling this claim or even rejecting it and the necessity of keeping the burnt goods

in the same place in which they had been stored in the pre-accident stage, they

have further suffered a loss of Rs. 36,00,000. 00. . . . . " (emphasis supplied ).

( 23 ) THE above referred contemporaneous correspondence discloses that the

plaintiff company did not come out with clear information regarding the actual

damage caused to rice bran and de-oiled bran (dob for short) stored in the

godowns. Even though the fire or combustion was completely extinguished by the

evening of 6-5-1979 and p. W. 2, writing on behalf of the plaintiff company as its

Managing Director, stated that salvage operations and segregation was started soon

thereafter, the correct and full information as regards the exact quantities of rice

bran and DOB damaged were not given to the Insurance Company. Though in the

plaint the plea taken by the plaintiff company was mat "the entire insured stock was

revaged by fire and the damage of the stock was total", the above correspondence

does not support that plea and, on the other hand, establishes that the entire stock

was not affected, and that there was some stock which was wholly unaffected and

some stock which was only partially affected in varying degrees. This is clear from

Ex. B. 21 letter dated 6-5-1979 to the Station Fire Officer, wherein it was stated that

the actual loss had not been assessed and that salvage work was under progress, In

Ex. B. 24 statement of p. W. 2 recorded by the Assistant superintendent of Police on

6-5-179 also it was stated that the fire was in two godowns and that he (PW2) did

not know how much was the stock at the time when the fire broke out and he could

not also tell how much of the property was damaged. In that statement, p. W. 2

also stated that they stopped work from 11th April, 1970 due to the shortage of

hexane, and that when the fire took place there was "heavy stocking of rice bran in

all the four godowns". Even in Ex. B. 23 letter dated 9-5-1979 addressed to the

Assistant superintendent of Police, Nizamabad it was stated that the damaged

material was being salvaged and the extent of loss would be informed after the

surveyor completed his assessment. Even in Ex. A. 4 letter dated 2-6-1979

addressed to the Insurance company, P. W. 2 did not state the details of

segregation and the different quantities of rice bran fully damaged, partially

damaged and wholly undamaged. He only stated that the segregated stocks were

lying in the open as the godowns were badly damaged in fire and that great

difficulty was being experienced to protect the huge stocks lying in the open from

the threat of ensuing monsoon. He also stated as follows:"further the normal

operations could not be restarted from 5th May 1979 till date and farther loss of

time will add to our miseries. . . . . . . . "even in the subsequent letters addressed by

p. W. 2 to the Insurance Company the information regarding the specific quantities

of damaged rice bran was not given even though it was stated that a total loss of

Rs. 28 lakhs was sustained by the plaintiff company on account of damaged stocks

(Ex. A. 5 dated 16-7-1979 and Ex. A. 13 dated 11-8-1979 ). There is no doubt that

the burden is on the plaintiff company to establish the damage caused to the stock

because, as stated by the supreme Court in Vania Silk Mills (P) Ltd. AIR 1991 SC

2104, "the insured cannot recover more than what he establishes to be his actual

loss, whatever may be his estimates of the loss. . . . . . . ". In Ex. A. 33 reply notice

dated 24-5-1980 of the Insurance Companys advocates, specific reference was

made to condition No. 11 of the policy (Ex. A. 39 - original insurance policy of Ex.

A2) and it was alleged that the plaintiff company "did not cooperate with the

surveyors of the insurance Company in assessing the quantum of loss and that in

particular, they did not operate as follows:"1. Your clients have not cooperated with

the surveyors in segregating the damaged stock from the sound stocks. In fact the

damaged bags were kept in periphery while sound bags were inside. 2. Your clients

had removed goods which were not affected by fire without informing the surveyor

and no record of such removal was furnished to them. 3. Your clients have not

produced books of accounts and process records which would have revealed oil

percentages. 4. In not only cooperating with our surveyors and also not producing

books of accounts and other records and also allowing the material to lie at site,

your clients have completely neglected to perform the duties which are implied and

expressed in the policy. Your clients have forfeited the right to claim from our

clients. 5. Our clients are further advised by the surveyors that your clients could not

account to them the full quantity claimed to have been damaged. "

( 24 ) CONDITION No. 11 of the policy, is as follows:"11. On the happening of any

loss or damage, the insured shall forthwith give notice thereof to the Company and

shall within 15 days after the loss or damage, or such further time as the Company

may in writing allow in that behalf, deliver to the Company: (a) a claim in writing for

the loss and damage containing as particular an account as may be reasonably

practicable of all the several articles or items, of property damaged or destroyed,

and of the amount of the loss or damage thereto respectively, having regard to their

value at the time of the loss or damage, not including profit of any kind, (b)

particulars of all other insurances, if any. The insured shall also at all times at his

own expense produce, procure and give to the Company all such further particulars,

plans, specifications, books, vouchers, invoices, duplicates or copies thereof,

documents, proofs and information with respect to the claim and the origin and

cause of the fire and the circumstances under which the loss or damage occurred

and any matter touching the liability or the amount of the liability of the Company as

may be reasonably required by or on behalf of the Company together with a

declaration on oath or in other legal form of the truth of the claim and of any

matters connected therewith. No claim under this Policy shall be payable unless the

terms of this condition have been complied with. "

( 25 ) ON a careful perusal of the evidence on record, bom documentary as well as

oral, we find that the plaintiff company has not adduced clear, cogent and reliable

evidence to establish that the entire stock of rice bran stored in the godowns was

destroyed by fire or combustion on 5-5-1979 and also whether any of the DOB was

in fact destroyed in that fire. The employees of the plaintiff company present at the

time of the fire,. e. , Godown keeper Gangadhar and Chowkidar Azeez were not

examined. Gulam Nabi, who was the incharge Station Fire Officer of nizamabad and

who actually participated in the fire extinguishing operations on 5-5-1979 and 6-5-

1979, also was not examined and only P. W. 3, who was the Station Fire Officer,

nizamabad at that time, who was on leave and who visited the factory of the

plaintiff company on 7-5-1979 was examined. He stated that when he went to the

factory premises on 7-5-1979 he found mat salvage operations were going on. He

further stated as follows:"i found all the stocks of the godowns submerged in water

to a depth of one foot from the ground level. The remaining portion of the stocks

was also drenched. The bags were stored to a height of 10 to 15 Feet in the

godown. Most of the bags of rice bran were torn and the material had come out and

by seeing that I am saying that it was partly burnt and partly damaged. The rice

bran bags were stored in an area of 180 x 50 to a height of 10 to 15 Feet. For the

purpose of verifying whether the fire is completely extinguished or not I went to the

factory premises on 7-5-1979. " (emphasis supplied) p. W. 4 was the Accountant

and the Incharge bank Manager of the Indian Overseas Bank at Nizamabad branch.

He went to the plaintiff companys factory on 5-5-1979 around 7 a. m. He stated in

his cross-examination that he was not in a position to say how much rice bran and

DOB was hypothecated to the bank and that he had not made any physical

verification of the stocks in the godowns of the plaintiff company as it was physically

impossible. He further stated as follows:"in our monthly inspection after seeing the

stocks in the godowns we presume the stocks as given in the statement. But i did

not make any monthly inspection of the plaintiff godown. I have not weighed any

bag to verify its weight at any time. . . . . . . . . . . . . . I do not know whether any

assessment of goods salvaged from fire was made by our bank. "the only other

witness examined on behalf of the plaintiff company who could throw any light is P.

W. 2, the Managing Director of the plaintiff company. He stated that in the big

godown rice bran and DOB were stocked and in the small godown only rice bran

was stocked, and that the stocks in the big godown were hypothecated to Indian

Overseas Bank and the materials stocked in the small godown were pledged with

the Indian Bank. He also stated that the contents of 42,873 bags which were

stocked in various places were completely damaged and that due to the fire accident

he sustained a loss of about Rs. 28 lakhs and that the damages included the stocks

pledged to Indian Overseas Bank, the stocks pledged to Indian Bank and civil works

comprising of a godown in which the stocks of Indian Overseas Bank were

hypothecated and godown in which the stocks of Indian Bank were pledged. In

cross- examination he stated that the Manager of their factory purchased the bran;

but he was also not examined. He also stated that chowkidar Aziz noticed the fire

first and that he was still in service; as already stated earlier, he was not examined.

He stated that the stock of raw rice bran a on 3-5-1979 was 2231. 515 Metric

Tonnes in Ex. A. 35 (a) and that in Ex. A. 34 (a) the balance of DOB was shown as

140. 267 Metric Tonnes as on 3-5-1979. He stated that apart from Exs. A. 34 and 4.

35 the surveyor C. A. Seshadri did not call for any other account books. He also

staled that he could not tell the exact number of labour employed by him for salvage

operations. Thus P. W. 2 takes the bland stand that the entire stock of rice bran and

DOB was destroyed in fire on 5-5-1979. From what he stated in his examination-inchief:

"the surveyor advised me to segregate the damaged stock from the

completely burnt stock. According to his instructions i bagged the damaged stock

after drying it in separate premises. ", it follows that the entire stock was not burnt.

This was on 6-5-1979. He stated that on 29-6-1979 the surveyor C. A. Seshadri and

the Senior Divisional Manager Mr. Nehru (DW2) surveyed the entire stocks in the

premises of the plaintiff company, but they did not visit the stocks which were kept

in different places. He stated that the contents of 42,873 bags which were stocked

in various places were in completely damaged condition. Thus he does not come out

with clear particulars giving quantities of the stock partially damaged and

undamaged. He denied that sound bags of rice bran were deliberately concealed

inside the bags of apparently damaged, and denied that at the time of the accident

there was no DOB stock in the godown and all that stock was shifted to Kakinada

warehouse.

( 26 ) ON the other side is the evidence of d. W. 2 and Ex. B. 18 report of the

surveyor and Exs. B. 6 and B. 7 reports of Italab Private limited engaged by the

surveyor. D. W. 2 was the Senior Divisional Manager of the insurance Company at

Secunderabad. He stated that he visited the factory of the plaintiff company on 6-5-

1979 along with the surveyor C. A. Seshadr. He stated as follows:". . . . . . when I

visited the place I found a lot of smoke and fume emanating from the godowns. . . .

. . . . the heat generated in the godowns was of very high temperature due to which

we could not enter into the godown, and some labourers have been removing the

sound bags to a safer place which is in the rear side of the factory office building.

Only the godowns were affected by the heat. I did not notice any flame when I

visited the accident spot. . . . . There were two godowns, one was small and the

other was bigger. . . . . . . The surveyor asked the laboratory assistant who

accompanied him to take the samples of the affected material and thereafter I and

Seshadri went round the godowns where the material is supposed to be stocked.

Seshadri asked the plaintiffs representative to show the damaged material and the

representative showed certain stocks identifying them to be damaged. Then Mr.

Seshadri wanted the bags to be opened so that he can examine the material. Mr.

Seshadri has pointed out certain bags in 2nd, 3rd and 4th layers to be removed and

opened. When these were opened the material was found to be in sound condition.

Then Mr. Seshadri has pointed out this to the representative of the plaintiffs firm (P.

W. 2) and he has pleaded ignorance. In the first visit, surveyor instructed P. W. 2 to

segregate the spoiled bags from the sound bags. So on the 2nd visit when the

surveyor noticed the sound bags in the middle and the damaged bags on the

periphery, he has pointed out the same to P. W. 2. On that p. W. 2 pleaded

ignorance saying that some sound bags might have been put among the spoiled

ones by mistake by the laborers. Again the surveyor advised p. W. 2 to separate

the sound bags from the stocks. The surveyor could not complete his assessment

because of the failure of P. W. 2 to comply with the instructions given to him by the

surveyor with regard to this segregation of the bags etc. Ex. B. 8 is the surveyors

report. . . . . . Ex. B,6 and B. 7 are the reports of the chemical analyst given by

Italab laboratories. . . . . . . . . The affected bags were damaged in various degrees.

" (emphasis supplied) there was no cross-examination on this part of the evidence

of D. W. 2. The only question put was whether he could give the ratio of the

quantity of sound bags compared to the damaged ones; D. W. 2 stated that he

could not give the ratio. He also stated that exs. B. 29 and B. 30 were the letters

written by the Insurance Companys Counsel to the plaintiff companys Counsel for

production of some documents and that one of the items was to produce the

balance sheets for the years 1977-1980 and that they were not produced. Under Ex.

B. 29, stock registers for the years 1978-79 and 1979-80 were required to be

produced, but they were also not produced.

( 27 ) THERE is no reason to disbelieve D. W. 2 when he stated that the bags of

undamaged rice bran were found on 6-5-1979 and also on the second visit on 29-6-

1979, and that on the second visit Mr. C. A. Seshadri found that segregation of the

stocks of rice bran was not done properly. In fact Ex. B. 1 letter dated 9-5-1979

addressed by the surveyors (Mehta and Padmasey Surveyors Private limited) to the

plaintiff company as already referred to above, required the segregation of stocks as

follows:"the stocks in the two godowns may be kept separately according to the

type of stocks (raw and boiled) of rice bran, and type of damage, viz. , unaffected

stocks, water affected (to be dried), in lumps and discoloured. Loose stocks can be

rebagged, weighed and standarised. Once the results of the salvaging operations

are intimated to us and the above requirements furnished, we will be visiting

Nizamabad to finalise the loss assessment. "in Ex. B. 2 reply dated 21-5-1979 signed

by p. W. 2 on behalf of the plaintiff company it was not denied mat there were no

unaffected stocks; it was only stated that salvaging the goods was being done and

that the surveyors would be informed when those operations were completed.

Though in Ex. B. 4 letter dated 19-7-1979 addressed by Indian overseas Bank to the

Insurance Company it was stated mat "all the stocks have burnt on 5-5-1979", this

is not supported by any material and none of the witnesses examined on behalf of

that bank (P. Ws. 4, 6 and 7) support the said statement. P. W. 4, who was the

incharge Bank Manager of Nizamabad branch upto 10-5-1980, stated in his crossexamination

that he did not know whether any assessment of goods salvaged from

fire was made by the bank. P. W. 7, who was the branch Manager of Nizamabad

branch, stated that he was not present at the time of salvage operations. In his

cross-examination he stated that as regards the extent of damage he came to know

through the officiating Manager (P. W. 4) and that he did not know whether there

were subsequent fire accidents in the plaintiff company.

( 28 ) EX. B. 18 survey report dated 13-8-1979 also supports D. W. 2. This was

signed by mr. C. A. Seshadri on behalf of the surveyors. By the time the present suit

(O. S. No. 84 of 1980) came for trial Mr. Seshadri died. Ex. B. 18 was, therefore,

proved by D. W. I, s. Arunachalam, Director of the surveyor company. He stated

that his colleague mr. C. A. Sheshadri conducted the survey of damage reported by

the plaintiff company through the Insurance Company and that he could identify his

signature in Ex. B. 18 and that Ex. B. 18 bore his signature. He also stated that Exs.

B. 6 and B. 7 were the reports submitted by Italab Private Limited on the samples

collected by its representatives out of the stocks of the plaintiff company reportedly

damaged. In his cross-examination he stated that he knew late c. A. Seshadri since

1973. He identified the signatures of Late Seshadri (Exs. B. 34/a and b. 35/a) in Exs.

B. 34 and B. 35. He denied the suggestion that Late Seshadri had purposely delayed

and denied the claim of the plaintiff Company with an intention to please the

Insurance Company. The learned subordinate Judge was not inclined to accept ex.

B. 18 on the ground that its contents were not proved without any discussion (Para

55 of his judgment ). Though he stated that he discussed about it, we do not find

any discussion (Para 60 ). In para 64 he observed as follows:"it should be noted that

the surveyors report has no value since the contents of the same are not proved.

Only the signature of the surveyor is identified. The report of the chemical analyst

Ex. B. 6 is not duly proved by examining the chemical analyst. It should be noted

that the fire was effected on 5-5-1979 and the chemical analyst alleged to have

visited the factory on 29-6-1979. "in para 67 he again stated that he had already

discussed in issue No. 1 that the surveyors report was not duly proved. The learned

counsel for the Insurance Company mr. T. Dulip Singh relies on Clause (2) of section

32 of the Indian Evidence Act, 1872 which deals with statements of relevant facts by

persons who are dead or cannot be founc made in the course of business. It cannot

be denied that Ex. B. 18 survey report was made in the course of business by a

professional person. Therefore, we do not see how it cannot be relied upon. We find

that the learned Subordinate Judge is not right in not accepting it when the

signature of Seshadri in it was proved by D. W.. He infact relied on it for the

purposes of fixing the value of dob of 140 Metric Tonnes in para 71 observing that

in the absence of any evidence on behalf of the plaintiff company the value

mentioned in Ex. B. 18 had to be taken into consideration. In view of the nonavailability

of Mr. C. A. Seshadri due to his demise, no further proof could be

adduced to prove ex. B. 18. That Mr. C. A. Seshadri visited the factory premises of

the plaintiff company on 6-5-1979 and 29-6-1979 on behalf of the surveyor

employed by the Insurance company was admitted by P. W. 2 himself. P. W. 2 also

admitted having met Mr. C. A. Seshadri of mehta Padmasey Limited in his letter Ex.

A. 4 dated 22-6-1979. D. W. 2 also stated that he was present when the surveyor

Mr. C. A. Seshadri visited the factory premises of the plaintiff company on 6-5-1979

and on the subsequent date, and that Ex. B. 18 was the surveyors report. Exs. B. 6

and B. 7, survey report No. 3101 and Certificate of Analysis of Italab Private Limited

dated 8-8-1979, were referred to and relied upon in Ex. B. 18 survey report, and

that was the reason why they were also produced. Therefore, we cannot ignore Ex.

B. 18.

( 29 ) EX. B. 18 report refers to the larger godown as of irregular shape and to the

smaller godown measuring 52 x 52 with cuddapah slab flooring - they are obviously

exs. A. 38/b and A. 38/c marked in Ex. A. 38 plan. The de-oiled bran godown (DOB

godown for short) referred to in Ex. B. 18 is obviously the De-oiled Meal godown

marked as Ex. A. 38/h in Ex. A. 38 plan. The report states that the large godown

and the small godown were affected in the fire and that the preparatory middle

portion (Ex. A. 38/d in ex. A. 38 plan) and the DOB godown were not affected by

the fire. As regards the occurrence, Ex. B. 18 states as follows:"as reported by Mr

Eswaraiah, clerk (who was staying in the office premises at the relevant time) the

plant was not working since 11-4-1979 due to shortage of hexane. Watchman Azeez

woke him up at about 4 a. m. on 5-5-1979 reportedly noticing fire. Mr. Eswariah,

observing the northern godown full of fumes and the creackling noise of AC sheets,

rang up the fire service. No one could enter the godown. Fire Service from

nizamabad (about 2 KMs. away) reached the spot with one tank and two trailer

pump units. It was dark and stacking did not permit entry of fire fighting men into

the godown. So the fire service sprayed water through the door ways. In the

darkness, the fire service could not presumably decipher what was happening. At

about 7 a. m. fumes were observed in the smaller godown. A vehicle from bodhan

Fire Service (16 miles from valmiki Nagar) also came to assist. When we visited the

spot on the morning of 6th May, 1979 we observed that workers were removing

bran bags from the affected godowns and loading into lorries. Wherever fumes were

being observed, water was being sprayed. We advised the insured to use minimum

quantity of water since water would have the effect of aggravating internal heating

and caking up, hindering the process of removal further. "the cause of the

occurrence was given as internal heating of rice bran due to long storage without

the bags being turned over and heavy stacking and lack of ventilation in the hot

summer of Nizamabad. The report also observed that the bran of light grey turned

dark grey, light brown, dark brown or black at various areas depending upon the

heat developed and that damage to the bran was caused by internal heating which

would have developed gradually over a period of time. It was also stated that the

Fire Service confirmed this conclusion and that Italabs report also supported the

same. It was also stated that due to heat, the bran got caked up and crowbars and

pickaxes were used to remove the bran wherever it was caked up; and that

wherever bags could be removed, lorries were brought to remove the same to other

areas. As regards the damage to the larger and smaller godowns the report stated

that the A. C. sheets were almost completely damaged and that iron trusses and

purlins and some other supports were bent and twisted badly and that the walls of

godown needed minor masonry work. As regards the stocks, it is stated as follows:

"stocks: The Insured claimed that 587. 7 MT of sound stocks had been removed to

the following places:they represented that the remaining bags were all affected. The

so-called affected bags were shown in 5 different stacks as follows: stack 1: This

was in the south-western coiner of the affected large northern godown. It contained

around 11,500 bags. Stack 2: This was in the south-eastern corner in the same

large nothem godown. this contained about 5,400 bags. Stack 3: This was in the

open to the east of the large godown. This stack contained nearly 7,200 bags. Stack

4 and 5: Smaller godown had been completely repaired by the time of our second

visit on 29-6-79 and contained two stacks. They were almost equal, each containing

3,850 bags totalling 7,700 bags approximately. From the foregoing it would be

observed that there were 31,800 bags as against 2,123. 3 MT which should have

been there if the Insureds contention that they had removed only 587. 7 M. T. out

of 2,711 M. T. was true. These bags in fact were not full and weighed only 40 kg. on

an average. Thus the total quantity shown to us at the time of our second visit on

29-6-79 is estimated to be 31,800 x 40 Kg. = 1,272 M. T. The Insured did not make

available workers for removal of top bags. Ultimately when we showed to mr. N.

Ramachandran, then Consultant of the Insured and Mr. G.. Nehru, senior divisional

Manager of the Insurers that there were many sound bags in the bottom layers, a

few workers were made available. By removing some top bags, we were able to

establish that there were sound bags inside in each stack. This went against the

Insureds representation that they had arranged for segregation. "from the damaged

bags, samples were drawn by the representative of Italab private Limited in order

that they could be analysed. A copy of the report of italab Private Limited dated 8th

august, 1979 has been handed over to the Insurers Regional Office. In the absence

of any segregation of the damaged bags from the sound ones, we estimated the

damaged quantity including those washed away by water at 600 MT (15,000 bags ).

Of these 600 MT, there were (i) light brown, (ii) brown to dark brown, (iii) dark

brown to blackish and (iv) black and charred quantities. Taking into account the

reduction in the oil content, the possible extra expenditure involved in extraction

and refining of oil and the reduction in the value of de-oiled bran obtained from the

damaged bran, we have fixed the value of salvage at 30% on the whole of the

damaged stocks nett of salvaging expenses. We have not considered any loss on

DOB (de-oiled bran) as DOB is not susceptible to internal heating. Nor were the

Insured able to produce any damaged DOB stocks. We also observed unaffected

DOB stocks in the de-oiled bran godown occupying the north-western portion of the

affected building. " (emphasis supplied)

( 30 ) THUS there is clear evidence on the side of the Insurance Company that the

entire stock of rice bran was not affected by the fire or combustion due to internal

heating and mat considerable quantities of rice bran stocked in the godowns was

not affected at all, and that the plaintiff company suppressed the actual position to

gain undue advantage claiming that the entire stock of rice bran was destroyed

totally in the fire. As regards the quantities of undamaged, partially damaged and

totally damaged rice bran there is no evidence forthcoming on behalf of the plaintiff

company. The plaintiff company did not take the categorical stand at any time that

the entire stock of rice bran claiming to be 2231. 515 MTs. in the large godown and

480 MTs. in the small godown was totally destroyed and that, therefore, there was

no need for segregation. The very fact that the plaintiff company agreed to

segregate the stocks would mean that there was rice bran which was totally

unaffected or only partially affected. We have already pointed out that in reply to

the surveyors letter Ex. B. l dated 9-5-1979 requiring the plaintiff company to

segregate unaffected stocks etc. , the plaintiff company in its reply Ex. B. 2 dated

21-5-1979 did not deny that there were no unaffected stocks.

( 31 ) WITHOUT proper consideration of the material on record and ignoring Ex. B.

l8 the learned Subordinate Judge assumed that the entire stock of rice bran and

DOB was destroyed. He reasoned as follows in para 67:"it is also not disputed that

the iron girders and trussers are twisted due to the temperature. In view of the said

fire, it also appears to my mind, it is not possible to have any sound bags. The

learned counsel for the defendant relied on the document ex. A. 36 and surveyors

report Ex. B. 18 and stated that the plaintiff removed 587. 7 empty sound stocks to

other places. On perusing the Ex. A. 36 nowhere it was admitted that the sound

bags were shifted. I have already discussed in issue No. 1 that the surveyors report

is not duly proved. It was alleged that the plaintiff concealed the sound bags

underneath the effected bags fraudulently to claim more amount. When the

salvaged property is the property of the defendants company it is not probable that

the plaintiff company concealed the sound bags. It is to be noted that it is open to

the defendants company to take possession of the salvage goods. The plaintiff has

to take steps for preservation of the salvage goods for reasonable period. The

plaintiff has not accepted the salvage and he is only asking to be restored to his

original position before the fire. For the above reasons, it shall be deemed that the

entire properties were damaged and there is no value for the salvage. "

( 32 ) IT is obvious that the learned subordinate Judge assumed without any basis

that the entire stock of rice bran was destroyed totally and that the salvaged

property was the property of the Insurance Company. In the present case, there is

nothing to show that the Insurance company exercised its right to take possession

of the premises of the plaintiff company where fire occurred or that it had taken

possession of the damaged and fully burnt goods. As pointed out by us earlier,

referring to Halsburys, it is only when the insurer takes possession of the salvage

that a duty will be cast on the insurer to take proper steps to preserve it from

further damage and that "on payment of the loss in full the salvage is transferred to

the insurer". That is what Blackburn,. ,. also stated in rankins case (1873) LR 6 HL

83. On the other hand, as held by Lord Esher, M. R. , in danes case (1864 1

Queens Bench 54 at page 61, if anything is obtainable by way of salvage, the

insured has no right to say to the insurer that he will not take any step in order to

obtain such salvage - he is bound to assist the insurer in obtaining it. Condition 12

of the insurance policy, Ex. A. 39, proceeds on the basis of the legal position. It

provides as follows:"12. On the happening of any loss or damage to any of the

property insured by this Policy, the Company may (a) enter and take and keep

possession of the building or premises where the loss or damage has happened, (b)

take possession of or require to be delivered to it any property of the insured in the

building or on the premises at the time of the loss or damage, (c) keep possession

of any such property and examine, sort, arrange, remove, or otherwise deal with the

same, (d) sell any such property or dispose of the same for account of whom it may

concern. The powers conferred by this condition shall be exercisable by the

Company at any time until notice in writing is given by the Insured that he makes no

claim under the Policy or, if any claim is made, until such claim is finally determined

or withdrawn, and the Company shall not by any act done in the exercise or

purported exercise of its powers hereunder, incur any liability to the insured or

diminish their right to rely upon any of the conditions of this Policy in answer to its

claim. If the Insured or any person on his behalf shall not comply with the

requirement of the Company or shall hinder or obstruct the Company in the exercise

of its powers hereunder, all benefit under this Policy shall be forfeited. The Insured

shall not in any case be entitled to abandon any property to the company whether

taken possession of by the Company or not. "from a reading of this condition, it is

clear that it only reserves the various options to the Insurance Company and the

clause at the end provides that the Insured shall not be entitled to abandon any

property to the company in any event. In view of the fact that the Insurance

Company repudiated the claim of the plaintiff company, there is no basis for

assuming that the salvaged property, if any, became the property of the Insurance

company straightaway. At any rate, the plaintiff company as the insured can claim

only for the goods totally destroyed or damaged by the fire. Clause 11 of Ex. A. 39

policy requires the plaintiff company to give the particulars of "all the several articles

or items of property damaged or destroyed". This is an essential step which the

plaintiff company shall have to take for making a claim. For that purpose it will have

to ascertain the unaffected or undamaged portion of the goods, that is, rice bran

and de-oiled bran. That can be done only by proper segregation of the rice bran in

the godowns. In the present case, on the material available, we find that no sincere

effort was made by the plaintiff company for ascertaining and stating truthfully the

quantities of rice bran unaffected, partly affected or damaged and wholly destroyed.

We also find that no proper assistance was also given to the surveyor of the

Insurance company in that regard. On the other hand, the material on record

establishes that the plaintiff company suppressed the fact that considerable quantity

of unaffected rice bran was there and the exact quantity of it.

( 33 ) EX. A. 36 does not bear any date and there is nothing to establish that its

contents are correct. The learned Subordinate Judge himself did not accept the

correctness of its contents. In para 76 of his judgment he observed as follows:"as

per Ex. A. 36 it can be inferred that only 15,785 bags were alleged to have been

transported. As per this document 27,188 bags are lying in the factory premises.

Therefore, the claim of the plaintiff that he transported the bags is not believable

and proved. "he also observed (in para 77) that there was discrepancy regarding the

number of bags removed from the factory premises, that according to P. W. 2 bags

were stocked at various places and shifted to his factory premises subsequently

since the surveyor did not settle his claim, and that the premises in which the stocks

were alleged to have been stocked also belonged to the plaintiffs family concerns. P.

W. 8, one of the signatories of ex. A. 36, stated in his cross-examination that he did

not remember the other members who were present at the time of recording the

statement under Ex. A. 36 and that he could not say when he visited the factory

premises and recorded the statement under Ex. A. 36. P. W. 7, who stated mat he

visited the plaintiff company after 25-5-1979, also stated that he signed Ex. A. 36.

But in his cross-examination he stated that he did not remember the date when he

visited the plaintiff factory after he resumed charge and that with regard to the fire

accident and the extent of damage he came to know through the officiating

manager and that he did not know whether there were subsequent fire accidents in

the plaintiff company. From this it follows that he did not have any personal

knowledge and mat he blindly signed Ex. A. 36 without putting any date on it. P. W.

2 states in his examination-in-chief with reference to ex. A. 36:"as there was no

sufficient space in our factory premises for drying hence we shifted the stocks to

various premises for drying and stocking. In Ex. A. 36 the names of those premises

are mentioned. The contents of 42,873 bags which were stocked in various places

was om completely damaged condition. this was done at the instance of surveyor.

"that means, the entire stock of rice bran was completely damaged, according to P.

W. 2. He did not mention any basis for this. Ex. A. 36 itself does not state anything

about the condition of the rice bran said to be at different places. If the entire

quantity was completely damaged, the plaintiff company could have stated so in

categorical terms at the earliest and that there was no unaffected rice bran or

partially damaged rice bran to be segregated.

( 34 ) WE find convincingly pursuasive evidence to establish that the entire quantity

of rice bran stocked in the godowns of the plaintiff company was not destroyed or

damaged in the fire, that there was considerable quantity of unaffected and

undamaged rice bran, and that information regarding the same was within the

knowledge but was suppressed by the plaintiff company. The plaintiff company

maintained Ex. A. 37 register for Hexane. P. W. 1 was the Inspector of Central

Excise at the relevant time. He stated that Hexane was being used in the plaintiff

companys factory for the purpose of extraction of bran oil from rice bran, that ex.

A. 37 register showed the Hexane purchased by the plaintiff company from time to

time, and that it was signed by his predecessor and stamped. It contains not merely

the details about the daily stock position of Hexane after additions and withdrawals

but also similar information relating to the products produced, that is, rice bran and

de-oiled bran. Ex. A. 37 register was maintained for the period 24-8-1976 to 31-7-

1979 - that is, for a considerable period before and after 5-5-1979. P. W. I stated

that daily drawings and consumption of Hexane was noted in the register and that

Ex. A. 37/a was his signature dated 25-3-1979 at page 74 of the register and Ex. A.

37/b was his signature dated 7-5-1979 at page 78 of the register. We find his

signature also on 9-6-1979 and 29-7-1979 when stocks of hexane were received by

the plaintiff company. P. W. 1 also stated that on 25-3-1979 a tanker of Hexane

came to the plaintiff companys premises for the last time before the accident and

that 3,500 litres of Hexane were shown as available on 7-5-1979. It shows that

11,706 litres of Hexane was received on 25-3-1979 by the plaintiff companys

factory; 11,672 litres of Hexane was received on 7-5-1979; 11,657 litres on 9-6-

1979; 11,804 litres on 26-6-1979; and that 11,773 litres of Hexane was received on

29-7-1979. It also shows mat from 12-4-1979 to 7-5-1979 the stock of Hexane

remained at 3,500 litres and that there were no withdrawals of Hexane during that

period. What is important and relevant is that Ex. A. 37 at page 78 shows that from

8-5-1979 to 27-5-1979 there were regular withdrawals of Hexane averaging at more

than 600 litres per day and even going upto 900 litres some days. On 28-5-1979 the

stock of Hexane came down to 3,100 litres. After Hexane was received on 9-6-1979

again there were withdrawals of Hexane upto 9-7-1979; and again from 14-7-1979

to 18-7-1979 when the stock of Hexane came down to 2600 litres. Ex. A. 37 register

thus conclusively establishes that the plaintiff companys solvent extraction unit

started working right from 8-5-1979 itself. The corresponding daily entries in ex. A.

37 from 8-5-1979 to 27-5-1979 and for the subsequent days when Hexane was

drawn show that rice bran oil and de-oiled bran were being produced and also were

being withdrawn. Thus, for 23 days prior to the fire accident, which occurred on 5-5-

1979, the unit of the plaintiff company did not work, as stated by P. W. 2 in his

evidence, due to lack of Hexane. But P. W. 2, in his cross- examination, stated as

follows:"our factory was closed for about a week or ten days after the accident and

after that it started functioning. We brought fresh stocks and started running and

the company was running till the receiver was appointed by the Court. After the

accident i was maintaining a separate register for the stocks purchased by me but I

have not produced the same in this Court as I am not asked for". But Ex. A. 37

register establishes that right from 8-5-1979 Hexane was being drawn and that rice

bran oil and de-oiled bran were being produced, obviously from rice bran. P. W. 2

did not state from when exactly new stocks of rice bran were being purchased. On

the other hand, he admitted that after the accident separate registers for stocks

purchased were being maintained, and that he did not produce the same in the

Court. He was not right in asserting that he was not asked to produce the same. In

Ex. B. 29 letter dated 28-11-1983 the counsel for the Insurance Company required

the counsel for the plaintiff company to produce, among others, stock registers for

1978-79 and 1979-80; and in Ex. B. 30 dated 8-12-1983 the balance sheets with

profit and loss account and directors report for 1977-78,1978-79 and 1979-80; but

they were not produced. Ex. A. 35 is the stock register for rice bran maintained by

the plaintiff company. It was closed on 3-5-1979 and it bears the signature of Mr.

CA. Seshadri dated 6-5-1979 marked as Ex. A. 35/a. There is no name of any bank

on it. ft shows mat the stock of rice bran as on 3-5-1979 was 2231. 515 MTs

(45,452 bags) and there were no entries after 3-5-1979. Ex. A. 34 is the de-oiled

bran stock register maintained by the plaintiff company. This also does not have the

name of any bank on it. The last entry in this register also was on 3-5-1979 and it

bears the signature of Mr. C. A. Seshadri dated 6-5-1979 (marked as Ex. A. 34/a ).

The closing balance of de-oiled bran was shown as 140. 267 MTs (2378 bags ). This

tallies with the entry in Ex. A. 37 of 3-5-1979 wherein also the closing balance of deoiled

bran was shown as 140. 267 MTs. We will advert to these registers a little

later. It appears that ex. A. 37 register was not furnished to the surveyor. In Ex. A.

15 letter dated 14-8-1979 the surveyor requested the plaintiff company as

follows:"daily issues of rice bran, quantity of oil extracted and DOB received would

be entered from feed to feed in a register or a book. This is the process register that

we wish to see. Kindly arrange for the same urgently. "from this we have to assume

that Ex. A. 37 register was not made available to mr. Seshadri; otherwise, this

register might have also been closed on 3-5-1979. P. W. 2 was obviously not

speaking the truth when he stated that "apart from Exs. A. 34 and A. 35 mr.

Seshadri surveyor has not called for any other account books".

( 35 ) EX. B. 37 register falsifies what P. W. 2 stated in his evidence - that the

factory was closed for about a week or ten days after the accident. It also falsifies

what was stated in ex. A. 4 letter dated 22-6-1979 addressed by p. W. 2 on behalf

of the plaintiff company to the Insurance Company. In that letter it was

stated:"further the normal operations could not be restarted from 5th May, 1979 till

date and further loss of time will add to our miseries. . . . . . . . . Mr. Seshadri has

asked us to arrange for the removal of the stocks to a safe place. . . . . . . . We

therefore earnestly request you to immediately arrange for the survey and assist us

to resume normal business operations" (emphasis supplied ). This letter suggests

that normal operations were not commenced even by 22-6-1979. But from Ex. B. 37

we find that normal operations commenced right from 8-5-1979. We also notice that

there were several corrections in Ex. A. 37 at page 78 in the entries relating to

Hexane stocks between 10-5-1979 and 22-5- 1979 : the withdrawals of Hexane on

the five days between 10-5-1979 and 14-5-1979 were also corrected - from 700 to

400; from 600 to 400 on three days; and from 500 to 300. The burden is on the

plaintiff company to establish with what rice bran it started operating the factory

after the fire. In the absence of any evidence adduced on behalf of the plaintiff

company, it follows that it was operating its solvent extraction unit with the

undamaged, or partly damaged but usable, rice bran available in the stocks said to

have been fully damaged in the fire. It is not the case of the plaintiff company or P.

W. 2 mat fresh stocks of rice bran were purchased immediately after 5-5-1979.

Adverse inference has to be drawn from the non-production of the fresh stock

registers of rice bran and DOB opened after 5-5-1979 inspite of Ex. B. 29 requisition

made by the Counsel for the Insurance Company. It is possible that stocks shown in

Ex. A. 36 as transported to the various mills were in fact consumed in the factory of

the plaintiff company itself for solvent extraction from 8-5-1979. These stocks were

said to have been removed prior to the second visit of mr. C. A. Seshadri,. e. , on

29-6-1979. Exs. A. 41 to A. 48 which purport to claim godown charges establish that

the plaintiff company sought to claim removal of these stocks between 28-5-1979

and 2-6-1979. P. W. 2 admits that those stocks at other places were not shown to

and inspected by mr. C. A. Seshadri: the only possible reason why Mr. C. A. Seshadri

did not inspect those stocks could be, as stated by him in his survey report, Ex. B.

18, that it was represented to him that "587. 7 MTs of sound stocks had been

removed. . . . . . " - the figures given by him (extracted earlier in the judgment) do

not exactly tally with the figures given in ex. A. 36 which shows that 15,685 bags

were transported to the various mills (eight in number) mentioned therein. We

already noticed that DW. 2 also stated that even on 6-5-1979 they saw some

labourers "removing the sound bags to a safer place which is in the rear side of the

factory office building". Therefore, we have to accept the contention of Mr. T. Dulip

Singh that the insured, that is the plaintiff company, and P. W. 2 were not honest

and truthful in claiming that the entire stock of rice bran was wholly destroyed and

became useless and in making exorbitant claims on that basis. The alerting words of

cockburn, C.. , in Chapman v. Pole, P. O. (1870) 22 Law Times 306, referred to

earlier, ring in our ears.

( 36 ) SO far as DOB is concerned, Ex. B. 18 report clearly stated that unaffected

DOB stocks were observed in the DOB godown. e. , de-oiled meal godown, and that

the insured was not able to produce any damaged dob stocks. No positive evidence

had been adduced by the plaintiff company to establish that the DOB stocks were in

fact kept in the large godown except the oral statement of p. W. 2. No good reason

was given as to why dob stocks were moved to the large godown when there was a

separate DOB godown described as de-oiled meal godown (marked as Ex. A. 38/h ).

At page 79 of Ex. A. 37, 273. 076 MTs. was shown as the opening stock of DOB

available on 3-5-1979; 132. 809 MTs. was shown as withdrawn and the balance was

shown as 140. 267 MTs. There were no entries in respect of DOB from 4-5-1979 till

8-5-1979. The fire was said to have occurred in the godowns during the early hours

of 5-5-1979. Under the circumstances, there could be no other reason for not

showing any entries in respect of dob on 4-5-1979 except that the entire stock of

DOB was removed from the godowns of the plaintiff company at Valmiki Nagar. The

dob register, Ex. A. 34, also stops with 3-5-1979 at page 28 and the closing balance

was shown as 140. 267 MTs. (2, 378 bags ). Entries of 1-5-1979 in these registers

also show that there were despatches of 152. 664 MTs. of DOB. It is thus clear from

these registers that there was no closing balance of DOB on 4-5-1979 itself. It

follows that the claim of the plaintiff company in respect of DOB is unsupported by

any material on record. P. W. 2 did not explain on what basis he stated that DOB

was kept in the big godown along with rice bran. He did not state any where in his

evidence the quantity of DOB available in any of the godowns on the morning of 5-

5-1979, except with reference to Ex. A. 34 (a) that the balance of DOB shown as on

3-5-1979 was 140. 267 MTs. Ex. A. 34 stopped with entries on 3-5-1979;butex. A.

37 continued after 3-5-1979 upto 31-7-1979 - from 8-5-1979 onwards, stocks of

DOB were shown. e. , after the plant started working again. This establishes that

the plaintiff company made a false claim as regards DOB also. Suggestion to this

effect was put to PW2.

( 37 ) CONDITION No. 11 of Ex. A. 39 (referred to earlier) requires the insured to

deliver to the Insurance Company "a claim in writing for the loss and damage

containing a particular an account as may be reasonably practicable of all the

several articles or items of property damaged or destroyed, and of the amount of

the loss or damage thereto respectively,. . . . . . . ". In Ex. A. 32 notice dated 9-4-

1980 issued on behalf of the plaintiff company no reference was made to any such

claim. Even in that notice particulars of the property damaged were not given.

Condition 11 makes it incumbent on the plaintiff company to give the specific

quantities of rice bran damaged or destroyed. The object of this condition and the

consequences of not complying with it explained by the Judicial Committee of the

privy Council in Yorkshire Insurance company v. Craine 1922 (2) Appeal Cases 541.

Conditions 11 and 12 of the policies considered in that case were more or less

similar to Conditions 11 and 12 of Ex. A. 39. That Condition 11, to the extent

relevant, was as foilows:"11 -- Occurrenee of Fire. On the happening of any loss or

damage the insured must forthwith give notice in wilting thereof to the Company,

and must within fifteen days after the loss or damage, or such further time as the

company may in writing allow in that behalf, deliver to the Company a claim in

writing for the loss and damage, containing as particular an account as is reasonably

practicable of all the articles or items of property damaged or destroyed, and of the

amount of the loss or damage thereto respectively,. . . . . . . . . . . . . . . . . . . . and

must at all times at his own expense produce and give to the company all such

books. . . . . . . . . . . . . . . . . . . . . . . . . . . . . together with a declaration on oath or

in other legal form of the truth of the claim and of any matters connected

therewith;. . . . . . . . . . . . No amount shall be payable under this policy unless the

terms of this condition have been complied with. "lord Atkinson, speaking for the

Judicial committee, stated the effect of this as follows:"it will be observed that the

claim which, under condition 11, is to be delivered within fifteen days after the loss

or damage or such further time as may be allowed in that behalf, must contain

many things as particulars: (1) an account as may be reasonably practicable of all

the articles or items of property damaged or destroyed, and of the amount of the

loss or damage thereto respectively, and of any other insurances; (2) a declaration

on aoth or in other legal form of the truth of the claim and of any matters connected

therewith. The information required is obviously very full. The truth of it and of all

matters connected with it must be verified by a declaration on oath. One would

suppose that in such a business matter as this insurance, if all the information thus

required was furnished, the company would be able to make up their minds whether

or not the claim was a valid one, and represented a real and genuine loss, although

they might dispute the amount claimed. The penalty inflicted upon the assured in

case all the terms of condition 11 be not complied with is that no amount should be

payable to the assured under the policy of insurance. The company are thus free to

take an objection to the non-performance of any of these terms and refuse to pay

anything to the insured". In the present case, we find that inspite of several

requests made by the surveyor appointed by the Insurance Company, the plaintiff

company did not give the correct particulars about the rice bran totally destroyed

and partly destroyed and falsely claimed that the entire quantity of 2237. 36 MTs.

was destroyed and claimed compensation in respect of that entire quantity under

Ex. A. 39 policy. The effect of fraudulent claim is stated in Halsburys Laws of

England (Vol. 25 at Para 510) as follows:-"the making of a fraudulent claim is a

breach of the duty of good faith and consequently the assured forfeits all benefit

under the policy, whether it contains an express condition to that effect or not". It is

further clarified in para 511 that "a claim which is put forward when the assured

knows that he has suffered no loss or which is supported by false evidence is clearly

fraudulent". This flows from the principle that "the contract of insurance is one of

perfect good faith on both sides, and it is most important that such good faith

should be maintained" (Britton v. Royal Insurance co. (1866) 4 Fandf 905 = 176

English reports 843. Condition 13 of Ex. A. 39 policy, to the extent relevant, is as

follows:"if the claim be in any respect fraudulent, or if any false declaration be made

or used in support thereof, or if any fraudulent means or devices are used by the

Insured or any one acting on his behalf to obtain any benefit under this policy; or, if

the loss or damage be occasioned by the wilful act, or with the connivance of the

Insured;. . . . . . . . . . all the benefit under this Policy shall be forfeited. "

( 38 ) ON the facts of the present case, we do not see why this Condition cannot be

attracted. We may also observe that Ex. A. 35 register shows that very large

quantities of rice bran were being stocked in the godowns from about the middle of

February, 1979. Earlier, the balance stock of rice bran never exceeded 1500 MTs. ,

except for a few days in February, 1977. From March, 1977 to august, 1977 it did

not exceed 1000 MTs. Thereafter upto November, 1978, except during May, June

and July, 1978, it seldom exceeded even 500 MTs. From december, 1978 onwards

stock piling of rice bran commenced going up from 415. 138 MTs. , on 1st

December, 1978 to 2148. 023 MTs. , by 28th February, 1979. It remained above

1800 MTs. , throughout march, 1979. On 20th April, 1979 when the unit stopped

working for shortage of Hexane the stock was 1776. 461 MTs. Thereafter, even

though the unit was not working, stock piling of rice bran continued every day and

by 25-4-1979 the stock crossed 2000 MTs. and by 3-5-1979 it reached 2231. 515

MTs. So much stocks without any issues were never kept in the godowns of the

plaintiff company for so long. e. , from 12-4-1979 till 5-5-1979 when the fire

occurred during the early hours, this supports the cause of the accident given in Ex.

B. 18 survey report that heavy stacking and lack of ventilation in the hot summer of

nizamabad were the responsible factors giving rise to internal heating due to long

storage without the bags being turned over. P. W. 2 had not given any explanation

for stacking so much of rice bran when the maximum daily withdrawals of rice bran

for the unit at no time exceeded 66 MTs. except on one or two occasions. P. W. 2 in

his cross- examination stated as follows:"i am not aware as to how the spontaneous

combustions happen. I can only say that there was a fire. I do not know what is

meant by spontaneous combustion. I do not know the technicality of spontaneous

combustion. The bankers have taken insurance policies at our requisition. I advised

the bankers to take the policies. As far as I know the policy taken by indian

Overseas Bank covers the risk of the spontaneous combustion. The intention was to

cover the fire due to spontaneous combustion. At the instructions of the agent of

the Insurance agent also I included this risk. The then local insurance agent by

name Bhasker rao advised me to cover this risk. . . . . . . . . . . . Q. Did you at least

ask Mr. Bhasker Rao why he wanted you to include this risk also ans. He said the

rice bran will catch fire due to spontaneous combustion also and if this risk is not

covered our claim will not be entertained in the event of accident. I do not know

whether rice bran is considered as hazardous goods. Rice bran is the raw material

for our companys product. "considering that P. W. 2 was a B. E. in mechanical

Engineering and the Managing director of the plaintiff company, it is hard to believe

that he did not know what was meant by spontaneous combustion even after he

was told allegedly by Bhasker Rao that rice bran would catch fire due to

spontaneous combustion and that is was the raw-material for his companys product

and that he should cover that risk also. PW. 3 (Station Fire officer) stated in his

cross-examination that the rice bran bags were stored to a height of 10 to 15 Feet in

an area of 180 x 50 in the godown when he visited the factory of the plaintiff

company on 7-5-1979. In view of the fact that P. W. 2 was made aware of the

hazard of spontaneous combustion to which rice bran was susceptible, and in view

of the fact that even though the unit was not working piling up of the stock was

allowed to be continued after 11-4-1979 also, we are not so sure whether this was

only a negligent act needless of the consequences or a deliberate one to test

whether spontaneous combustion would result in the summer heat of 1979 at

Nizamabad, after insuring the stock tor that cover as well. We have to leave it at

that.

( 39 ) IN view of our finding that the plaintiff company made false and exorbitant

claims under Ex. A. 39 policy and in view of our finding that it had not given correct

information regarding the quantities of rice bran, totally damaged and partially

damaged in the fire or combustion which started on 5-5-1979, and in the absence of

any material placed before the Court for correctly ascertaining the same, we have to

hold that the plaintiff company is not entitled to claim any amount. We, therefore,

set aside the award of Rs. 18,40,800/- by the learned subordinate Judge under Ex.

A. 39 policy towards the total loss of 2231 MTs. of rice bran and 140 MTs of DOB.

( 40 ) UNDER Ex. X. 2 policy (Ex. A. 3 is the xerox copy of the cover note No.

186937) the plaintiff claimed Rs. 4,37,600/- towards damage to civil works. e. , the

large and small godowns. The Insurance Company cannot dispute that damage was

caused to the godowns. Ex. B. 18 report states that damage to the building was

confined to the godowns where rice bran was being stored and that the damage to

the A. C. sheets covering the said godowns was almost complete and that trusses

and purlins and some of the supports were also bent and twisted badly. However, it

points out that the walls needed only minor masonry work. A detailed assessment

was made and the total cost of repairs/replacement was assessed as Rs. 2,49,864/-

and after deducting 10 per cent depreciation and a sum of Rs. 20. 544/- towards

salvage, the loss of insured was arrived at Rs. 2,04,334/ -. The plaintiff company

relies on the evidence of pw. 9 and Ex. X. 3 report given by him. At the relevant

time PW. 9 was working as Civil engineer in the Andhra Pradesh State financial

Corporation. He stated that he inspected the premises of the plaintiff company on

the declarations of his management on 24-5-1979, he examined the damage to the

civil works, and that he gave ex. X. 3 report to that Corporation. In his crossexamination

he admitted that he did not ask the plaintiff about the cost of the

building and that his valuation did not represent the cost incurred by the plaintiff

company in putting that godowns and that he did not take into account the

depreciation for cost of the building affected by fire, and that he prepared Ex. X. 3

report for the purpose of grant of loan to the plaintiff for reconstruction at his

request. The relevant portion of Ex. X. 3 is as follows :- "no damage has been

caused to the machinery part of the factory. All the place is littered with damaged

stocks and the same are being removed at the time of my inspection. The value of

the above structures were valued for Rs. 3. 12 lakhs at the time of making

disbursement. Now to reconstruct the above sheds for 20 with AC sheets will cost

Rs. 4. 30 lakhs as detailed below:no details are given. The plinth area of the small

godown was shown as 2703 Sq. Ft. and that of the large godown was shown as

11,100 Sq. Ft. This estimate was for the reconstruction of the sheds; but the details

and specifications for the reconstruction were not furnished. Moreover the estimate

was only for enabling the Corporation for granting a loan. In fact only Rs. 3. 00

lakhs were sanctioned.

( 41 ) THE learned Subordinate Judge was inclined to treat the value of Rs. 3. 12

lakhs of the structures at the time of making disbursement (. e. , the old godowns)

as the value of only the bigger godown when it was originally constructed. We do

not find any basis for this. Ex. X. 3 refers "to the value of the above structures",

which means both the godowns, not only the larger one. The learned Subordinate

Judge was inclined to assess the damage sustained by the two godowns at Rs. 4. 30

lakhs on the basis of ex. X. 3 as in his view, it disclosed the amount required for

restoring the godowns to their original condition. He rejected the contention

advanced on behalf of the Insurance company that the cover under Ex. X. 2 of Rs. 6.

48 lakhs was on buildings. e. , not merely godowns, but all the civil works. DW. 2

stated that buildings in that policy covered "all civil works. e. , main factory

buildings, office rooms, guest house room godown, compound wall and all other civil

works" and that the factory building, office building and guest house and the

compound wall were not affected by the accident except the godown. The learned

Subordinate Judge was inclined to accept the contention advanced on behalf of the

plaintiff company that all the assets on the premises on civil side were not insured

because the plaintiff company did not find it necessary to do so. The learned

Subordinate judge was impressed by the contention that the policy was first

obtained in the year 1975 and was being renewed from year to year, and mat there

was no increase in the premium amount and that civil assets in 1974 were only

godowns, shed and preparatory section all valued at Rs. 6. 40 lakhs. Even if that

were so, in view of the fact that PW. 9 had clearly stated in his report that the value

of the structures. e. , large godown and the small godown, was Rs. 3. 12 lakhs at

the time of making disbursement, we are of the view that, that must be the value

for which the two godowns must have been insured in 1975. We are, therefore

inclined to take the view that cover under Ex. X. 2 in respect of the two godowns in

question in the present suit cannot exceed Rs. 3. 12 lakhs on the basis of the

evidence produced by the plaintiff company itself.

( 42 ) THE learned Subordinate Judge did not accept the valuation made by the

surveyor on the basis that Ex. B. 18 report was not proved. We have already held

that Ex. B. 18 report cannot be rejected on that ground. Ex. B. 18 gives the full

details in arriving at the cost of repairs and replacement as Rs. 2,49,864/ -. The

plaintiff company had not produced any material to disprove the same. Ex. B. 18

also states that "smaller godown had been completely repaired by the time of our

second visit on 29-6-1979". PW. 2 in his cross-examination also admitted that the

roof of the small godown was replaced with a new one, but had not stated when

that was done. He did not state any thing about reconstructing the walls. He also

admitted that he did not produce any statement or vouchers for incurring the

expenditure for reroofing the small godown (marked as Ex. A. 38/c of the plan Ex.

A. 38 ). He stated that he obtained estimate for larger godown from a Civil Engineer

for reroofing it. It is significant that he did not mention any thing about

reconstructing the walls. The learned Subordinate Judge failed to notice this part of

evidence of PW. 2. He assumed that walls had to be reconstructed as well. There is

no reason to prefer Ex. A. 3 which did not give any details. On the basis of ex. B. 18

survey report we allow Rs. 2,49,864/- towards compensation for damage to the

godowns under Ex. X. 2 policy without any deduction. The plaintiff company will also

be entitled to interest on this sum at 12 per cent per annum from the date of the

suit,. e. , 9-6-1980.

( 43 ) ON issue Nos. 5 and 7, we uphold the findings of the learned Subordinate

Judge. No other view can be taken because of our findings on the claims of the

plaintiff company under Ex. A. 39 policy.

( 44 ) IN the result, the plaintiff company will have a decree only for Rs. 2,49,864/-

together with interest on this sum at 12 per cent per annum from the date of the

suit. e. , 9-6-1980 and with proportionate costs. In other respects the suit shall

stand dismissed. The judgment and decree of the learned subordinate Judge shall

stand modified accordingly. A. S. No. 1423 of 1986 preferred by the Insurance

Company is allowed accordingly in part with proportionate costs. A. S. No. 213 of

1987 preferred by the plaintiff company is dismissed with costs to second and third

respondents.