Calcutta High Court
Saurabh Gupta vs Royal Sundaram General Insurance on 6 August, 2026
Author: Sugato Majumdar
Bench: Sugato Majumdar
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IN THE HIGH COURT AT CALCUTTA
ORIGINAL SIDE
COMMERCIAL DIVISION
Present:
The Hon'ble Justice Sugato Majumdar
CS-COM/91/2024
[OLD NO CS/11/2018]
SAURABH GUPTA
VS
ROYAL SUNDARAM GENERAL INSURANCE
COMPANY LIMITED & ANR.
For the Plaintiff : Mr. Swarnendu Ghosh, Sr. Adv.
Ms. Suchismita Ghosh, Adv.
Mr. Abir Lal Ghosh, Adv.
For the Defendant No. 1 : Mr. Avinash Kankani, Adv.
Ms. Shree Chatterjee, Adv.
For the Defendant No. 2 : Mr. Sayantan Bose, Adv.
Ms. Pooja Chakrabarti, Adv.
Ms. Arti Bhattacharyya, Adv.
Hearing concluded on : 20/07/2026
Judgment on : 06/08/2026
Sugato Majumdar, J.:
The Plaintiff herein instituted the instant suit praying, inter alia, decree for
declaration, permanent injunction, recovery of money and other allied reliefs.
The plaint case may be summarized as follow:
i) The Plaintiff is carrying on a sole proprietorship business of the
name and style of M/s Gupta Infotech having place of business at
54, Ezra Street, B-6, 2nd Floor, Kolkata-700001 within jurisdiction
of this Court. The Plaintiff has his registered office cum workshop
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at Sector-I, SDF(G) Building, Falta SEZ, 24 Parganas (South)outside the jurisdiction of this Court. The Plaintiff carries on
business of manufacturing compact fluorescent lamp and allied
products. The Plaintiff created a good will of business.
ii) The Defendant no. 1 is an insurance company, registered under the
Companies Act, 1956 having its registered office at Vishranthi
Melaram Towers, No.2/319, Rajiv Gandhi, Salai (OMR),
Karapakkam, Chennai. The Defendant no. 2 is a banking company,
carrying on banking business, being incorporated in England,
having one of its office at 19, Netaji Subhas Road, Kolkata-700001,
within jurisdiction of this Court.
iii) The Plaintiff, in usual course of business needed credit facility.
While availing such financial assistance from the Defendant no. 2,
at the insistence and compulsion of the Defendant no. 2 had to
change the insurance company and had to insure his products from
the Defendant no. 1. The Defendant no. 2 acted as agent of the
Defendant no. 1 and forced the Plaintiff to avail of insurance cover
of his goods from the Defendant no. 1. In view of urgent financial
need, the Plaintiff had to avail insurance policy from the Defendant
no. 1. This was in the year 2013. This was a policy of insurance in
respect of fire and burglary. The policy was renewed from time to
time on payment of premiums. The last policy was from
04/09/2015 to 03/09/2016 bearing number YB00013052000102.
This policy is the subject matter of the instant suit (hereinafter
would be referred to as “the said policy”). Sum insured was
Rs.14,50,00,000/-. The Plaintiff paid premium of Rs.1,93,285/-.
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Properties insured were plants, machineries, and stocks in process,
raw materials and finished goods including goods in respect of
which customs duty had been paid.
iv) On 08/06/2016, one office space of the same business house,
caught fire which spreaded and affected the goods of the Plaintiff.
a fire broke out at a different office space of a business house at
Falta other than that of the Plaintiff. This fire damaged the entire
stock and raw materials and/or goods of the Plaintiff resulting in
severe loss and damage to him. The Plaintiff lodged a complaint at
Ramnagar Police Station, Falta intimating the incidence of fire.
The incidence of fire was also reported in a local newspaper.
v) The Plaintiff assessed his loss and damage to the tune of
Rs.10,74,79,736/- and lodged the claim to the Defendant no. 1. The
Defendant no. 1 appointed a surveyor for statutory survey required
for settlement of the claim. The Plaintiff furnished the said
surveyors with all the necessary documents. The surveyors of the
Defendant no.1 assessed loss of the Plaintiff to the extent of
Rs.1,94,46,960/-. There were two survey reports; one is the
original, the other is the supplementary one, both dated
12/05/2017. The Plaintiff got the loss and damage assessed by his
own auditor. The auditor’s report dated 29/03/2017 assessed the
loss as Rs.10,74,79,736/- as above mentioned.
vi) The Plaint contains various grounds of challenge to the Surveyor’s
Report dated 12/05/2017.
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vii) On 20/06/2017, a draft copy of a purported settlement agreement
was handed over to the Plaintiff from the local office of the
Defendant no. 1. The Plaintiff was also asked to contact with the
Chennai office of the Defendant no.1. The Plaintiff along with his
representative visited the Chennai Office of the Defendant no. 1
where the Plaintiff was practically forced to sign the settlement
agreement with assurance that payment of the balance amount
would be dealt with favourably. It was also promised that the claim
settlement amount would be remitted to the Plaintiff by way of
bank transfer. This Settlement Agreement was signed by the
Plaintiff on 23/06/2017. According to the Plaintiff, the settlement
agreement was executed by him under undue influence, by the
Defendant no. 1’s representative. Since the Defendant no.1 was the
insurer of the Plaintiff, the former through its employees were in a
position to dominate the will of the Plaintiff.
viii) Returning back from Chennai, the Plaintiff lodged a complaint in
Ramnagar Police Station, anticipating foul play.
ix) The settlement claim amount of the Plaintiff amounting to
Rs.1,94,46,960/- was remitted by the Defendant no. 1 to the bank
account of the Plaintiff maintained with the Defendant no. 2 within
jurisdiction of this Court.
x) When the claimed and the settled amount, as above mentioned,
had been remitted by the Defendant no. 1 to the Plaintiff’s bank
account, maintained with the Defendant no. 2, it was informed that
the facilities granted to the Plaintiff were suo motu reduced by the
Defendant no. 2 and the amount of Rs.1,94,46,960/- was adjusted
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against the said facility. It is also averred that the account of the
Plaintiff was not bad at all and the Plaintiff had all along been
within the limits granted. This act of the Defendant no. 2 was in
connivance with the Defendant no. 1 with a view to weaken the
financial prospect of the Plaintiff.
xi) Contention of the Plaintiff is that the settlement agreement dated
23/06/2017 executed by and between the Plaintiff and the
Defendant no. 1 is void/voidable as against the Plaintiff.
xii) In the plaint, the Plaintiff raised a claim of Rs.31,51,12,896/-,
particulars of which are as follows :
a) Loss and damage due to : Rs.8,80,32,776/-
b) Loss of reputation and good will : Rs.22,70,80,120/-
________________
Rs.31,51,12,896/-
The Plaintiff also claimed interest at a rate of 18% per annum from
08/06/2016 to 30/11/2017 on the sum of Rs.2,73,84,855/-. Total amount claimed
by the Plaintiff being:
a) Principal claim : Rs.31,51,12,896/-
b) Interest : Rs.2,73,84,855/-
__________________
Rs.34,24,97,751/-
xiii) The Plaintiff, therefore, instituted the instant suit praying for
declaratory decree that the purported settlement agreement dated
23/06/2017 is void/voidable, not binding on the Plaintiff;
perpetual injunction restraining the Defendant no. 1 from giving
any effect and/or further effect to the purported Settlement
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Agreement dated 23/06/2017; decree for Rs.34,24,97,751/- against
the Defendants jointly and /or severally; interest at a rate of 24%
per annum along with other prayers.
The Defendants contested the suit by filing respective written statements.
Contentions of the Defendant no. 1 in the written statement may be
summarized as follow:-
i) The Defendant no. 1 challenged jurisdiction of this Court.
According to the Defendant no. 1 the suit is barred by law, does not
disclose any cause of action.
ii) It is contended that the Defendant no. 1 has different agents
throughout the country. The Defendant no. 2 is such an agent and
the Plaintiff approached the Defendant no. 1 through the
Defendant no. 2 out of his own will and volition. The Defendant
no. 2 did not force the Plaintiff to avail the subject policy. The
Plaintiff continued the policy for several years and, therefore,
cannot raise any objection.
iii) The Defendant no.1 was not aware of any arrangement between the
Plaintiff and the Defendant no. 2.
iv) It is stated by the Defendant no. 1 that the Plaintiff raised false,
frivolous and inflated claims for making illegal gains at the cost of
the Defendant no. 1.
v) The Defendant no. 1 denied and challenged the grounds pleaded by
the Plaintiff to challenge the Surveyor’s report. It was averred that
the report of the Surveyor was correct and based on proper
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assessment. There was a tripartite meeting between the Plaintiff,
the Defendant no. 1 as well as the Surveyor at the office of the
Defendant no. 1 and various issues were discussed. The Plaintiff
never disputed the Surveyor’s report. Most of the stocks of the
Plaintiff were obsolete. It was also denied that the Surveyor’s
Report was erroneous. The Plaintiff accepted the insurance
amount without any demur or protest. The Defendant no. 1 denied
and disputed the Plaintiff’s Auditor’s Report.
vi) The Defendant no. 1 also denied and disputed that the Plaintiff was
forced to arrive at any settlement of claim. The claim amount was
settled at Rs.1,94,46,960/- on consent of the parties. The
allegation of undue influence was also denied and pleaded to be an
afterthought. The Plaintiff acted upon the claim settlement
agreement dated 23/06/2017, derived benefit thereunder;
therefore, the Plaintiff is estopped from challenging the same.
vii) The Defendant no. 1 denied all other allegation and averred that
the Plaintiff is not entitled to the relief prayed for.
The Defendant no. 2 also contested the suit by filing separate statements,
challenging the contentions of the Plaintiff made in the plaint. The sum and
substance of the written statement of the Defendant no. 2 may be summarized as
follow:
a) The Defendant no. 2 challenged the jurisdiction of this Court; it was
also stated that the suit does not disclose any cause of action, barred
by the principle of estoppel, waiver and acquiescence.
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b) The Defendant no. 2 pleaded certain factual aspects of the matter.
On or about 01/02/2012, the Plaintiff approached the Defendant
no. 2 as the sole proprietor of M/s Gupta Infotech for grant of credit
facilities. An application was also filed in prescribed format. On
25/04/2012, the Defendant no. 2 executed a facility letter whereby
credit facilities up to the limit of Rs.12,00,00,000/- were
sanctioned in favour of the Plaintiff. The Plaintiff accepted the
facility letter on 25/04/2012 and conveyed is assent to the terms
and conditions of such facility letter. Grant of such facility was
secured by way of: (a)Guarantee All Money dated April 26, 2012,
(b)Hypothecation Agreement dated April 26, 2012, (c)Mortgage by
way of deposit of title deeds dated April 28, 2012 and 6 th July 2012,
(d)Letters of Security Over Fixed Deposit/set off dated April 26,
2012 and (e)Letter of Indemnity dated April 26, 2012. The Plaintiff
also executed a Master Credit Terms on 26/04/2012 which formed
part and parcel of the documents executed by the Plaintiff, as above
mentioned, following the execution of the Facility Letter dated
25/04/2012. The Master Credit Terms dated 26/04/2012
particularly provided that the borrower, namely, the Plaintiff
should obtain insurance cover over any asset or property specified
by the Defendant no. 2. The Master Credit Terms further provided
that in the event the Plaintiff became entitled to make any claim on
such insurance cover, all money receipts should be applied either in
reinstatement of the relevant asset or towards the repayment of
facilities, as the Defendant no. 2 might elect. A hypothecation
agreement was also executed on 26/04/2012 between the Plaintiff
and the Defendant no. 2 in respect of stocks, book debts and
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movable fixed assets belonging to the Plaintiff or at the Plaintiff’s
disposal or at the Plaintiff’s factory. It also required the Plaintiff to
insure the hypothecated assets comprehensively for loss of damage
caused by fire, theft, lightening, riots, civil commotion, war and for
such further risk that the bank may require, for full market value of
such items and stocks. The insurer should be approved by the
Defendant no.2 and the policy of insurance should be produced
when demanded by them. Accordingly, the Plaintiff was under a
contractual requirement to maintain a fire and burglary insurance
cover with regard to hypothecated goods with an insurance provider
approved by the Defendant. Agreeing with such condition, the
Plaintiff executed the hypothecation agreement on 26/04/2012.
c) Credit Facilities, so granted to the Plaintiff, have been renewed
from time to time on mutually accepted terms and conditions and
on execution of various security documents. The last renewal was
made, as averred, on 07/06/2017. Credit limits were reduced to
Rs.8,50,00,000/- between 02/08/2012 and 07/07/2017. The
Plaintiff accepted the terms and conditions of the facility letters. It
was agreed that all the securities executed pursuant to the previous
facility letters, should remain in full force unless otherwise agreed
between the parties.
d) Execution of the facility letters were followed by execution of
respective supplementary hypothecation agreement contained in
unchanged terms and conditions.
e) The Defendant no.1 is an insurance company approved by the
Defendant no.2. In order to comply with the conditions prescribed
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in the hypothecation agreement, the Plaintiff obtained a combined
fire and burglary policy provided by the Defendant no.1. Defendant
no. 2 acted as an agent of Defendant no.1. The policy provided for a
cover of an amount of Rs.14,50,00,000/- for fire and allied perils
and an amount of Rs.14,50,00,000/- for burglary . The policy was
valid for a period of one year and renewed from time to time,
extended last time on 04/09/2015. No coercion, whatsoever, was
ever exercised by the Defendant no. 2 in respect of the Plaintiff’s
decision to subscribe to the policy of insurance of the Defendant
no.1. It was a contractual requirement that the insurer should be
approved by the Defendant no. 2. Schedule of the policy contained
“Agreed Bank Clause” whereby any sum of money, payable under
the policy to the Plaintiff was to be transferred in the account of the
Plaintiff maintained with the Defendant no.2.
f) From an e-mail dated 25/08/2016, Defendant no. 2 came to learn
from the Plaintiff that there had been a fire in the Plaintiff’s office
premises. The Plaintiff, therefore, sought assistance of the
Defendant no.2 since all the hypothecated stocks were destroyed in
fire.
g) On 27/06/2017, the Defendant no. 2 learnt that an amount of
Rs.1,94,43,816/- had been remitted by the Defendant no. 1 to the
Plaintiff towards settlement of the insurance claim by way of bank
transfer to the account of the Plaintiff maintained with the
Defendant no. 2.
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h) The Defendant no. 2 also received a confirmation from the
Defendant no. 1 from the e-mail dated 28/06/2017. Payment
advice was forwarded also.
i) In accordance with the condition of the hypothecation agreement
and the Master Credit Terms, the settled amount of
Rs.1,94,43,816/- was adjusted against amounts outstanding on
account of credit facilities. Following adjustment of the remitted
amount against the credit facilities, the Plaintiff executed a
supplemental facility letter dated 07/08/2017 in favour of the
Defendant no. 2 whereby the existing limit of credit facility was
reduced in consideration of the amount remitted by the Defendant
no. 1. As a result, total limit of the credit facility became
Rs.6,63,00,000/- . According to the Defendant no.2, the Plaintiff
did not raise any objection in respect of the adjustment of the
insurance claim by the Defendant no.2 against the credit facility.
Following the execution of the supplemental facility letter, a
supplemental hypothecation agreement was executed by the
Plaintiff on 07/08/2017 along with a personal guarantee deed for
the purposes of securing the facility amount.
j) The contention of the Defendant no. 2 is that the instant suit
challenges the legality of purported Settlement Agreement dated
23/06/2017 executed between the Plaintiff and the Defendant no. 1
to which the Defendant no. 2 was not a party; the Defendant no. 2
was neither present nor had any role to play in execution of the
Settlement Agreement or determining the amount payable
thereunder. It is further contended that there is no plea of the
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Plaintiff alleging contravention of the terms of policy document or
security documents between the Plaintiff and the Defendant no. 2.
The insurance claims settlement amount was adjusted in terms of
the contract. The Plaintiff never raised any grievance against the
Defendant No.2. The Plaintiff executed the supplemental facility
letter dated 07/08/2018 on his own volition, after such adjustment
was made without any demur or protest whatsoever; all these
conjugated facts established that allegations raised by the Plaintiff
afterthought. Therefore, the suit is barred by the principle of
estoppel. According to the Defendant no. 2, they are not liable for
payment of any money and the Plaintiff cannot raise any claim of
money against the Defendant no. 2.
k) According to the Defendant no. 2, the suit should be dismissed.
On the basis of rival Pleadings, following issues are framed:
1. Whether this Court has jurisdiction to entertain the suit?
2. Whether the suit is maintainable under the law? Whether
the suit is barred by any law?
3. Whether the suit discloses any cause of action?
4. Whether there was any valid and subsisting insurance
policy between the Plaintiff and the Defendants in
particular the Defendant no.1?
5. Whether the goods of the Plaintiff were damaged in fire?
Whether the fire was attributable to any negligent or any
fault of the Plaintiff?
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6. Whether the Defendant no. 1 duly and properly assessed?
What should be the actual assessment of loss and damage
of the Plaintiff?
7. Whether the settlement agreement dated 23/06/2017 was
duly executed and binding between the parties or whether
the execution of the agreement was vitiated with coercion
or undue influence?
8. Whether the Defendants or any of them was justified in
reducing facilities granted to the Plaintiff?
9. Whether the Defendants either jointly or severally justified
in adjusting a sum of Rs.1,94,46,960/- or any other sum
against the facilities.
10. Whether a relationship of Principal-agent between the
Defendants?
11. Whether the Plaintiff is entitled to the reliefs prayed for?
12. Whether the Defendants jointly and/or severally liable to
the Plaintiff?
13. What other relief or reliefs the Plaintiff is entitled to?
Argument on behalf of the Plaintiff:
1. The principal limb of argument on behalf of the Plaintiff was that it
was known to the Defendant no. 1 or its representative that the sum
of Rs.1.94 crores paid under the settlement was not the fully and
finally settled amount. In the draft settlement agreement, handed
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over to the Plaintiff space for the settled amount of claim was keptblank for such reason. The Defendant no.1 through its
representatives held several meetings to finalize the amount. The
Plaintiff was assured to pay the balance and was called to meet at
the Chennai Office of the Defendant no.1. The Plaintiff was
subjected to duress for signing the settlement deed for a sum of
Rs.1.94 crores, at the Chennai Office.
It was further argued that the Plaintiff adduced oral as well as
documentary evidences with regard to the document dated
23/06/2017 (Ext. B). The Plaintiff’s evidence established that the
Plaintiff had been subjected to duress for signing the deed of
settlement dated 23/06/2017. None of the representative of the
Defendant no.1 who had been present at the meeting held on
23/06/2017 came forward to depose. The witness, Ms. E. K.
Srividya, who deposed on behalf of the Defendant no.1, was not
present at the meeting and her statements on the meeting was
hearsay evidence. To rebut the evidence of the PW-1 the Defendant
no.1 should produce any one of those persons who were present at
the meeting, and who could have stated the facts which happened
therein. But the Defendant no.1 withheld any such witnesses,
failing thereby to produce the best evidence.
The Learned Counsel appearing for the Plaintiff referred to Section
3, Section 60 and Section 114 (g) of the Indian Evidence Act, 1872.
Relying upon the decision of this Court in Sris Chandra Nandy
Vs. Smt. Annarpurna Roy (AIR 1950 Cal 173). The Learned
Counsel argued that hearsay evidence is no evidence. The Learned
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Counsel also referred to a decision of the Supreme Court of India in
Iswar Bhai C. Patel Vs. Harihar Behera & Anr. [(1999) 3
SCC 457] to argue that the evidence which could be and is not
produced, would, if produced, be unfavorable to the person who
withholds the same. Referring to the decision of this Court in Asit
Kumar Das Vs. Kalpana Das [AIR 2007 Cal 160] the Learned
Senior Counsel argued that a fact is disproved normally by the
person who claims that an alleged fact in not true. In the instant
case, the fact of the Plaintiff having given assurance by the
Defendant no.1’s representative has not been disproved. As such
the fact remained proved.
2. The second limb of argument of the Learned Senior Counsel for the
Plaintiff was on the Survey Reports. It was contended that the
amount of Rs.1,74,46,960/- had been arrived at by the Defendant
no.1 on the basis of the Surveyor’s Report and the Supplementary
Report, both dated 12/05/2017 (Ext. D1/3 & Ext. D1/4). The
observations made by the Surveyors in the said reports are
contradictory and inconsistent. It was argued that in Clause 24.13,
the Surveyor had observed that the value of non-
moving/old/obsolete stocks required adjustment. The valuer
deducted huge amount from the book value of the so called non-
moving/slow/obsolete stock. A drastic reduction of the value of the
damaged stocks had been done by the valuer to the extent of 70% to
80%. It was also held that the damaged stock had no commercial
value. The Surveyor deposed as DW-1 and stated in evidence that
deductions had been made applying best judgments. The
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observations made in the supplementary report, based on
documentary evidence produced by the Plaintiff and certified by an
independent Chartered Accountant was totally contrary. It was
contended that there was ongoing productions which should that
damaged stocks were not obsolete or non-moving or old. The
Report of the Surveyor, is, therefore, wrong and the amount of
compensation, worked out as Rs.1,94, 46,960/- was also wrong and
contrary to the records. The claim of the Plaintiff, therefore, is of
Rs.10,14,92,726/- as loss due to fire.
3. So far as the jurisdiction issues are concerned, it was argued that a
portion of the claimed amount, sent to the Defendant no.1, covered
under the fire insurance policy had been wrongfully retained by the
Defendant no.2 within the jurisdiction of this Court. As such, part
of cause of action arose within jurisdiction of this Court. The
Learned Counsel referred to A.B.C. Laminart Pvt. Ltd. & Anr.
Vs. A.P. Agencies, Salem [(1989) 2 SCC 163] to substantiate
the point that receipt of money forms a part of the cause of action.
4. Next it was argued that no case has been made out by the
Defendants that fire broke out due to negligence of the Plaintiff.
Therefore, the suit may be decided in favour of the Plaintiff.
5. Next, it was argued that admittedly there was a principal agent
relationship between the Defendants. However, the principles of
Section 230 of the Indian Contract Act, 1872 will not be applicable
to the benefit of the Defendant no.2, in as much as the Defendant
no.2 did not enter into the contract with the Plaintiff by executing
the facility agreement for or on behalf of the Defendant no.1.
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Admittedly, the Defendant no.2 provided credit facilities to the
Plaintiff. Admittedly, the Defendant no.1 provided fire and burglary
policy to the Plaintiff. Both the agreements were independent and
separate. Under such circumstances, by no stretch of imagination it
can be said that the Defendant no.2 acted on behalf of the
Defendant no.1. The Defendant no.2 was not entitled to unilateral
adjustment of the compensation amount against credit facility
provided pursuant to Clause 12.11 (iv) of the Master Credit Terms
(Ext.21). Under the clause, the Defendant No.2 has the right only to
elect as to whether money received should either be for
reinstatement of the relevant assets or towards the repayment of
such facility. The next is to be done by the borrower. No unilateral
right had been given to the Defendant no.2 to adjust the
compensation money anyway. Furthermore, there was no
outstanding liability with regard to the account of the Plaintiff and,
as such, the Defendant no.2 was not entitled to unilateral
adjustment of the amount received.
Argument on behalf of the Defendant No.1:
The Learned Counsel for the Defendant No.1 addressed mainly on three
issues, namely, the Issue Nos. 1, 6 & 7.
1. So far as the Issue no.1 is concerned which pertains to the
territorial jurisdiction of this Court, it was argued that the
occurrence of fire was outside the jurisdiction of this Court at Falta
SEB, District South 24 Parganas. The settlement agreement had
been handed over to the Plaintiff at Salt Lake City, outside the
jurisdiction of this Court. The settlement agreement dated
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23/06/2017 was executed at Chennai. The reliefs mentioned inpara (a) and (b) of the prayers pertains to the settlement agreement
which had been executed at Chennai. It was further argued that
the plaint failed to disclose any cause of action which arose within
jurisdiction of this Court. Therefore, according to the Learned
Counsel for the Defendant no.1, this Court lacks territorial
jurisdiction to entertain the suit.
2. The second limb of argument of the Learned Counsel for the
Defendant no.1 was related to the binding nature of the settlement
agreement dated 23/06/2017.
It was argued that admittedly the settlement agreement was for
Rs.1,94,46,960/-. It was also admitted in the plaint that on
20/06/2017, a draft copy of the purported settlement agreement
had been handed over to the Plaintiff mentioning that the proposed
settlement would be for the same amount, though alleged that the
Plaintiff had been coerced to accept the settlement amount. From
the draft settlement agreement (Ext.B) it is evident that the parties
adopted the Surveyor’s Report as the full and final settlement of
claim. Clause 6 of the draft settlement agreement stipulated that
payment would be released on submission of no objection
certificate from the Commissioner of Customs and the Bank. The
Defendant No.1 filed GA No.7 of 2024 praying to file additional
documents. In the affidavit-in-opposition, filed therein, the
Plaintiff admitted that he wrote a letter to the customs authorities
dated 21/06/2017 regarding settlement of the issue. Conducts of
the Plaintiff, as argued, showed that the terms and the claim
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amount had been accepted by the Plaintiff. It was further argued
that there were several sitting with the Plaintiff, as appeared in
course of cross-examination of PW-1. Accordingly, it was
submitted that impeccable evidences established that the Plaintiff
had accepted the settlement and is estopped to raise any further
claim. The Learned Counsel for the Defendant no.1 referred to
Section 63 of the Indian Contract Act, 1872 to argue that the claim
of the Plaintiff is bared by the principal of accord and satisfaction.
The Learned Counsel also relied on the decision of the Supreme
Court of India in Lala Kapurchand Godha & Anr. Vs. Mir
Nawab Himayatali Khan [(1962) SCC OnLine SC 412].
Referring to Afsar sheikh & Soleman Bibi [(1976) 2 SCC
142] the Learned Counsel refuted the allegations of undue
influence and coercion.
3. The Learned Counsel for the Defendant no.1 alternatively argued
that the valuation of the claim in terms of the Surveyor’s Report
was correct. It was argued that the policy of insurance was a
market value policy. The assets were insured at the market value,
that is to say, for its actual worth in the market at the relevant point
of time. The entire claim of the Plaintiff of Rs.10,74,79,736/- was
false and fabricated and was based on the market value of goods
procured by the Plaintiff from the year 2013. This fact had been
admitted by the Plaintiff in course of cross-examination. The
Plaintiff based its valuation of CFL components, PCB components
on the basis of purchase price in the financial year 2013-14
onwards. The Plaintiff himself admitted that he had stopped
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manufacturing CFL from the year 2016. The Plaintiff started
manufacturing of LED lights from the year 2014-15. Therefore,
according to the Learned Counsel for the Defendant no.1, stocks,
lying at the premises were dead stocks and had practically of no
value. That is why, the Surveyor depreciated the value of such
stocks. The Surveyor’s Report (Ext.D-1/3) shows that there was
huge accumulation of stock due to non-movement and slow-
movement of raw materials, consequent to slowing down of
production for lack of orders. Productions and sales fell down
suddenly in March, 2015 and there was total stoppage of sale since
February, 2016. It was further revealed that the claim of the
Plaintiff included stocks at basement which were not covered by
the policy of insurance.
4. It was further argued that the certificate of the Chartered
Accountant of the Plaintiff, which had been exhibited, and which
contained value of goods, cannot be relied upon. It was further
argued that the certificate had not been proved as the marker of the
certificate did not appear to depose. It was also argued that, in
course of cross-examination, the Plaintiff admitted that the books
of accounts on the basis of which valuation of stock had been done,
was based on purchase price of the materials from time to time and
not on the basis of the value of the goods at the time of the
incident. In nutshell, it was argued that the claim of the Plaintiff is
false and should be dismissed.
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Argument on behalf of the Defendant No.2:
1. The first limb of argument of the Learned Counsel for the
Defendant no.2 was in respect of the Issue Nos. 1, 2 & 3. It was
submitted that the settlement agreement was executed at Chennai
between the Plaintiff and the Defendant no.1, outside the
jurisdiction of this Court. The Defendant no.2 was not a party to
the said settlement agreement. The Defendant no.1 does not carry
on business within jurisdiction of this Court. The Defendant no.2
being an agent of the disclosed principal, the Defendant no.1, is
not liable for any sum that might or might not be payable under
the policy of insurance. As such no part of cause of action arose
within jurisdiction of this Court. Therefore, according to the
Learned Counsel for the Defendant no.2, this Court lacks
territorial jurisdiction to entertain this suit and the suit should be
dismissed.
2. The second limb of argument was in respect of the Issue No.9, 10
& 12. It was argued that the Defendant no.2 was the agent of the
Defendant no.1, admittedly. The policy of insurance, issued by the
Defendant no.1, was through the agency of the Defendant no.2. It
was also admitted in the plaint that the fact that the Defendant
no.2 acted as the agent of the Defendant no.1 had been disclosed to
the Plaintiff by the Defendant no.2. Section 230 of the Indian
Contract Act, 1872 states that an agent cannot be personally bound
by the contract entered into by him for the principal unless there is
a contract to the contrary. According to the provisions of the
Section 230, such contracts are presumed to exist in three
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situations, as provided therein. None of the situations orconditions existed or pleaded by the Plaintiff. Therefore, the
Defendant no.2 cannot be made liable for any action by the
principal. The Learned Counsel referred to Vivek Automobiles
Ltd. Vs. Indian Inc. [(2009) 17 SCC 657], Marine
Container Services South (P) Ltd. Vs. Go Go Garments
[(1998) 3 SCC 247] and Prem Nath Motors Ltd. Vs.
Anurag Mittal [(2009) 16 SCC 274].
According to the Learned Counsel for the Defendant no.2 the Issue
No.10 ought to be answered affirmatively by holding that there
existed a relationship of agent and principal between the
Defendants and the Issue Nos. 9 and 12 ought to be answered
against the Plaintiff.
3. In respect of the Issue No. 8, it was argued by the Learned Counsel
for the Defendant no.2 that the Master Credit Terms, executed
between the Plaintiff and the Defendant no.2 provided that the
borrower should obtain insurance for any asset or property, as
would be specified by the Defendant no.2 and that in any event,
the borrower would be entitled to make a claim on such insurance
and all monies received should be applied either in reinstatement
of the relevant asset or towards repayment of the facilities as the
Defendant no.2 might elect. The Defendant no. 2 had adjusted the
amount of Rs.1,94,43,816/-, remitted by the Defendant no.1
toward the credit facility availed of by the Plaintiff, in exercise of
the contractual right and such action should not be challenged by
the Plaintiff on any account. Such election, in terms of Clause
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12.11 (iv) by the Defendant no.2 should be an unilateral act and
consent of the Plaintiff was not required. Although it was pleaded
by the Plaintiff that the reduction of the facility was unjustified, no
relief has been claimed in respect of that.
Therefore, according to the Learned Counsel, the Issue No.8
should be decided against the Plaintiff.
Having heard the rival arguments, the disputes should be considered and decided
Issue wise.
Issue No. 1 and 2:
The principal limb of argument of the Learned Counsels for the Defendants
was that this Court has no territorial jurisdiction to entertain the suit. The whole
gamut of argument has been discussed above, therefore, not repeated.
Clause 12 of the Letters Patent empowers this Court to try and determine suits
“if the cause of action shall have arisen, either wholly, or, in case the leave of the
Court shall have first obtained, in past, within the local limits of the ordinary original
jurisdiction…”
In this case Leave of the Court, granted to institute the suit, still stands. The
plea of the Plaintiff is that money was received in his bank account maintained
within the jurisdiction of this Court and further that the Defendant no. 2 retained
money, being the claim amount, remitted by the Defendant no. 1 to the Plaintiff’s
account within jurisdiction, without any authority of the Plaintiff giving rise to the
cause of action against the Defendant no. 2. Even though the Defendants carry on
business outside the jurisdiction of this Court, and the incident of fire took place also
outside the jurisdiction of this Court, definitely, as observed above, part of cause of
action arose within jurisdiction of this Court and the suit was instituted on leave of
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this Court. In A.B.C Laminart Pvt. Ltd. Vs. A.P. Agencies, Salem [(1989) 2SCC 163], referred to by the Learned Senior Counsel for the Plaintiff, the Supreme
Court of India considered the jurisdictional issues in a suit based on contract. It was
held that part of cause of action arises where money is expressly or impliedly payable
under a contract. Relying on the ratio of the decision, it can be concluded that part of
the cause of action arose within jurisdiction of this Court where money had been paid
and allegedly adjusted by the Defendant no.2, which is one of the issues to be decided
by this Court.
There was no argument on other issue of maintainability of the suit in its
form. However, the maintainability of the substantive claims will be discussed below.
So far as the question of whether the suit is barred by law, there was no
argument advanced in this regard.
Issue No. 1 is decided in favour of the Plaintiff.
Issue No. 3:
Issue No. 3 was not argued. Cause of action of the suit is implicit in the plaint
itself. Therefore, this issue is decided in favour of the Plaintiff.
Issue No. 4 and 5:
Issue No. 4 and 5 are taken up together. It is the case of the Plaintiff that there
was a valid insurance policy subsisting between the Plaintiff and the Defendant no. 1.
There is no cavil that the goods of the Plaintiff were destroyed in fire and the
Defendant No. 1 paid claim on account of that fire. What is in dispute is the mode of
assessment and quantum of claim, as between the Plaintiff and the Defendant no. 1.
When the Defendant no. 1 paid compensation to the Plaintiff under the policy of
insurance it stands proved that there was fire accidentally destroying the goods for
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which the Plaintiff was entitled to compensation under the fire insurance policy andthe Defendant no. 1 entertained part of the claim of the Plaintiff and paid
compensation. Payment of compensation under the policy of insurance itself proved
that there was a valid policy existing and the cause of fire was not attributable to any
latches of the Plaintiff. Therefore, these two issues are decided in favour of the
Plaintiff.
Issue No. 6,7,8,9 and 10:
Issue No. 6,7,8,9 and 10 are taken together for consideration since these
issues cannot be considered in isolation as they are connected and related to each
other.
The Issue No. 10 should be addressed first.
Plea of the Plaintiff was that there was a principal-agent relationship between
the Defendants. This was also pleaded by the Defendant no.1 in the written
statement. The Learned Counsel for the Plaintiff argued that there was no agency
between the Defendants. The policy of insurance shows that the Defendant no.2 was
the agent. No agency agreement had been filed. No documentary evidence is there.
The fire policy was executed between the Plaintiff and the Defendant no.1 on
principal to principal basis. Therefore, it is evident that the said policy was not
executed by the Defendant no.1 as agent of the Defendant no.2. In view of pleading,
admitted facts and documentary adduced, it may be concluded that the Defendant
no.2 was the agent of the Defendant no.1 and the later is a disclosed principal,
coming within the ambit of Section 230 of the Indian Contract Act, 1872,
Issue No. 10 is decided accordingly.
Final assessment was made by the Surveyor in a Final Survey Report
(Ext.D1/3) and Supplementary Survey Report (Ext.D1/4).
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A strong argument was made by Mr. Ghosh, the Learned Senior Counsel forthe Plaintiff challenging the assessment of loss made by the Surveyor. The Plaintiff
claimed an amount of Rs.10,74,79,736/-. Net loss was calculated at
Rs.9,68,75,785.44/- paisa. After adjustment of slow moving, old stock and gross loss
came to Rs.9,08,88,773/-. Net loss was assessed as Rs.2,04,70,484/-. After adjusting
policy excess at 5% the amount came to Rs.1,94,46,960/-. Final Survey Report being
Ext.d1/3 stated that Plaintiff had huge stocks of CFL lamps which was non-moving
and CFL market shifted to LED lamps, rendering the stocks as slow, non-moving and
obsolete. The Survey Report noted the statement of the insured that CFL
components were purchased on interaction with buyers for supply of finished goods
but the buyers did not place confirmed order leading to accumulation of stocks. Ages
of the stocks were between 18 months to 24 months. In the Survey Report a
deduction of was made on account of this obsolete non-moving goods/stocks
consisting of CFL and PCB components. The deduction was made to the extent of
Rs.6,90,96,000/-. The reason behind such deduction was that the deduction or
devaluation of stocks was due to aging and obsolesce.
Mr. Ghosh, the Learned Senior Counsel arguing for the Plaintiff pointed out
that in the supplementary report itself, it was noted that Behala unit of the Plaintiff
had been carrying on manufacturing of CFL. It was noted in the supplementary
report that PCB production for CFL and diverse for LED had been going on. This
being the so, according to the Learned Counsel it is wrong observation and
conclusion that CFL stocks were obsolete. Therefore, since this CFL constituted a
part of running stock, should not be treated as obsolesce and deduction of
Rs.6,90,96,000/- should not be made.
PW-1 in his evidence stated that after fire they stopped producing CFL
(question no.349). This is the own statement of the Plaintiff and is direct evidence.
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Standard terms of the policy of insurance contained stipulation that the Insurershould pay to the insured value of the property at the time of happening of its
destruction. It was admitted by PW-1 that the loss claimed by him to the tune of
Rs.10,74,79,736/- was on the basis of purchase price of the materials from time to
time. This admission goes against the main artery of the policy which contemplated
valuation as on the date of incident. The Surveyors followed the policy terms. The
Surveyor’s Report excluded certain stocks at ground floor which were not included in
the policy of insurance. The Surveyors also excluded old and slow moving stocks as
noted above. The Surveyor is of course justified in excluding those stocks which had
been covered by the policy of insurance. In the context of objection of the Plaintiff
the provision of Section 64 UM(4) may be considered:
“64UM. Surveyors or loss assessors.-
(4) No claim in respect of a loss which has occurred in India and requiring
to be paid or settled in India equal to or exceeding an amount specified in
the regulations by the Authority in value on any policy of insurance,
arising or intimated to an insurer at any time after the expiry of a period of
one year from the commencement of the Insurance Laws (Amendment)
Act, 2015 (5 of 2015), shall, unless otherwise directed by the Authority, be
admitted for payment or settled by the insurer unless [it] has obtained a
report, on the loss that has occurred, from a person who holds a licence
issued under this section to act as a surveyor or loss assessor (hereafter
referred to as “approved surveyor or loss assessor”)Provided that nothing in this sub-section shall be deemed to take away or
abridge the right of the insurer to pay or settle any claim at any amount
different from the amount assessed by the approved surveyor or loss
assessor.”
The Reports of the Surveyor come within ambit of the provision. The point of
settlement would be discussed lateron. To rebut the said Reports of the Surveyor,
the Plaintiff did not file any other report prepared by a licensed surveyor or loss
assessor. The aforesaid provision makes it clear that there can be payment either on
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report of a licensed loss assessor or surveyor or by way of a settlement. In absence of
any contrary report, as such, claim cannot be entertained.
The principal argument of the Defendant no.1 was that the Plaintiff, however,
reason full on the assessment of loss, accepted the same when he executed the
settlement agreement. On the contrary, it is Plaintiff’s case that the settlement
agreement was a product of misrepresentation duress, coercion.
The Plaintiff received the Surveyor’s Reports. He was well aware of the
assessed loss of Rs.1.94 crores. From evidence of PW-1, it was clear that he was not
happy with the said “peanut” amount. PW-1 also stated that when the draft
settlement letter had been handed over, the contemplated settlement amount was
about Rs.1.94 crores (Q.374). He was well-aware a priori what the settlement
amount would going to be and the same was in accordance with the Survey Reports.
PW-1 stated althroughout that the Defendants’ representative assured him to
pay the gross loss value. It is neither in pleading nor in evidence, who the
representative was. Whether the representation was binding on the Defendant no.1.
There is no document to establish or suggest that the Defendant no.1 assured the
Plaintiff to settle the claim by an amount higher than the Survey Report. It is most
unlikely that commercial bodies would be willing to settle the claim without offer or
documentation when they would not be relying upon the Survey Report. When it
comes to a settlement, there must be an offer agreeable and accepted by the other
party. No documentation is there. The representative might have said that the claim
might be favourably considered but that’s not acceptance. In this context absence of
particulars of the representee become fatal.
The final agreement is Ext.B and the draft settlement agreement is Ext.D1/2.
Clause 6 of the draft settlement agreement stated that payment shall be released
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upon submission of no objection of consent of Commissioner of Customs and the
Banks. The Plaintiff applied for clearance from the Commissioner of Customs to
obtain the said payment of Rs.1,94,46,960/-. Therefore, it can be said that the
Plaintiff was aware that as per Survey Report assessment of loss and payment of
claim to be settled at Rs.1,94,46,960/-. As noted above, the Plaintiff did not state
who represented and whether such representation was on behalf of the Defendant
no.1, there is no documentary evidence in this regard. Although, Mr. Ghosh, Learned
Counsel for the Plaintiff argued that the Defendant no.1’s witness had no personal
knowledge on what happened inside the Chennai office in the hours preceding the
execution of the settlement agreement this argument is not very impressive. As
discussed above, the Plaintiff had been put on notice in terms of Survey Report that
the claim amount come down to Rs.1,94,46,960/-. There is no documentary
evidence that the insurance company was willing to settle the matter for some higher
amount.
Mr. Ghosh devoted a considerable part of his argument on best evidence
principle submitting that evidence of DW-2, on behalf of the Defendant no.1 was not
direct; that she was not present. As stated above, the quantum of compensation had
been known to the Plaintiff. That was the settled amount. It was observed above,
that there was no documentary evidence that the Defendant no.1 either offered or
accepted settlement at a higher amount. Absence of direct evidence does not give
rise to an adverse presumption. This Court, is of opinion, for reasons aforesaid, that
the Plaintiff failed to establish alleged misrepresentation, fraud or coercion.
The settlement agreement is, therefore, not vitiated or avoidable. Therefore,
the settlement agreement stands and the principle of accord and satisfaction applies.
In National Insurance Co. Ltd. Vs. Boghara Polyfab (P) Ltd. [(2009) 1 SCC 267], the
Supreme Court of India explained that while discharge of contract by performance
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refers to fulfilment of the contract, discharge by “accord and satisfaction” refers to
the contract being discharged by reason of performance of certain substituted
obligations. The agreement by which the original agreement is discharged is the
accord and the discharge of the substituted obligation is satisfaction. A contract can
be discharged by the same process which created it, that is by mutual agreement.
Now in this case the execution of the settlement agreement and receiving of money
by the Plaintiff discharged the parties from mutual obligations under the contract of
insurance
As observed above, the Plaintiff accepted by executing settlement agreement
that the quantum of loss should be Rs.1,94,46,960/-. Therefore, the Plaintiff is
estopped and cannot question the quantum of loss.
Adjustment of application of the claim amount in repayment of overdraft
facility by the Defendant no. 2 is the cause of grievance of the Plaintiff against them.
Credit facility was initially extended to the Plaintiff by the Defendant no.2 in
the year 2012 which had been extended from time to time. Facility letter and the
Master Credit Term were the applicable contracts between the parties. There is no
plea or grievance of the Plaintiff on the terms of the contract. This Master Credit
Term and the facility letter of different dates were adduced in in evidence and are
exhibits herein. Clause 12.11 (a) (iv) states that:
“12.11. Insurance
(a) If the Bank requests, a Borrower shall:
(i) obtain insurance for any asset or property specified by the Bank
(an “Asset”);
(ii) obtain insurance against loss of life or total permanent disability
of the Borrower and/or such other persons as the Bank shall require,
in either case through an insurance company approved by the Bank
(the “Insurer”) on the Bank’s required terms including, without
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limitation the insurance coverage amount, naming the Bank as loss-
payee and endorsing non-cancellation and loss-payee clauses;
(iii) assign or procure the assignment of the relevant insurance to and
deposit or procure the deposit of the insurance documents with the
Bank; and
(iv) in the event that the Borrower becomes entitled to make any
claims on such insurance, promptly do so and apply all monies
received either in reinstatement of the relevant Asset or towards the
repayment of such facility(ies) as the Bank shall elect.”
The relevant Clause invoked by the Defendant No.2 was Clause 12.11. Sub-clauses
mentioned in Clause (a) should not be read and interpreted in isolation. Clauses (i),
(ii) and (iii) states what the borrower should do on request of the bank in relation to
a policy of insurance. This sub-clause (iv) states that in the event the borrower
became entitled to make any claim on such insurance, the borrower should promptly
do so and apply all money receipts either in reinstatement of the relevant assets or to
repayment of such facility and the Bank shall elect (emphasis provided). This
Clause bestows the power of election on the Bank whereas the previous three sub-
clauses contends mandate on the borrower. Clearly, if the Bank elects, the Bank may
apply all money receipts in repayment of such facility; mandate of the borrower or
the acts to be taken by the borrower are contemplated in sub-para 1, 2 and 3 whereas
sub-clause (iv) provides a clause of election. It does not depend on the mandates of
the borrower or his consent as manifest from the express words. When the express
terms were agreed upon by the parties the Court cannot add or modify the same
importing something new which had not been contemplated. Obviously, election or
consent of the borrower was given a go-by. Reason can be understood easily. An
unwilling borrower would try to avoid repayment by withdrawing consent, had the
consent been mandatory leaving the bank with accumulated debt. Since, the consent
of the borrower was not contemplated in this clause, there is no reason to import
such thing in the express term of the Bank. Therefore, Bank was right and acted
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within the four corners of the contract in adjustment of the claim amount against the
unpaid due. One question was raised herein was whether Defendants or any of them
was justified in reducing the facilities granted to the Plaintiffs. No relief is there in
the plaint on this issue. Providing credit facility is a matter of agreement between the
Plaintiff No.1 and the Defendant no.2. Availability of credit depends on various
factors and is outcome of bargain between the parties. Even though alleged, absence
of relief in respect of this shows that the Plaintiff was not about to enforce any claim
in respect of this. Therefore, further adjudicati0n need not be embarked upon.
For reasons aforesaid, this Court comes to the conclusion that the Defendant
no.2 was justified in adjusting the same against the facilities.
Issue Nos. 7, 8, 9 and 10 are decided against the Plaintiff. Issue Nos. 11, 12
and 13 are decided against the Plaintiff and it is the conclusion that the suit is liable
to be dismissed and the Plaintiff is not entitled to any claim or relief as prayed for.
In view of discussion made above and after reaching issue wise conclusion, as
above, it is ordered that the suit be dismissed on merit but without any costs.
The instant suit stands disposed of along with all pending applications, if any.
(Sugato Majumdar, J.)
