The common appellant in these two appeals was the successful bidder in an auction held by the Divisional Forest Officer (Special), Palakad for the right to collect and remove bamboos from Arippara Coupe No.1. A fire broke out in the forest allegedly causing heavy damage not only to the bamboos cut and stored by the appellant/ plaintiff, but also to the forest properties. The forest authorities initiated revenue recovery proceedings against the appellant/plaintiff to realise the balance amount due from him in connection with the auction sale. Therefore, he filed O.S.No.19/1989 before the Munsiff Court, Palakkad praying for a declaration that he is not liable to pay any amount to the Forest Department and also for a decree of permanent prohibitory injunction restraining the Forest Department and the Revenue Recovery Authorities from proceeding against him.
2. Yet another suit, viz., O.S.No.378/1989, was instituted by the appellant/ plaintiff before the Subordinate Judge's Court, Palakkad against National Insurance Co. Ltd., for realisation of a sum of `.24,75,000/- with interest at 18% per annum from March 23, 1987 till date of realisation, alleging that Insurance Company had illegally repudiated his claim for damages caused to the bamboos in the forest fire covered under the policy.
3. The Munsiff Court allowed the suit for injunction in part, restraining the defendants from initiating revenue recovery proceedings to realise the amount shown in the demand notice. However, it was further decreed that the defendants would be at liberty to initiate fresh recovery proceedings against the appellant/ plaintiff after ascertaining the actual amount due from him. The above decree and judgment were affirmed in appeal by the appellate court. Hence the above captioned second appeal.
4. O.S.No.378/1989 filed against the Insurance Company was dismissed by the Subordinate Judge's Court holding that forest fire being an excluded peril under the policy, the Insurance Company shall not be liable to pay any damages to the plaintiff. Hence the appeal A.S.No.149/1996, which has been instituted by the appellant as an indigent, as permitted by this Court.
5. Before we refer to and deal with the various contentions raised by the learned counsel on both sides, it is necessary to refer to the essential facts leading to the two suits a little more elaborately.
6. As mentioned earlier, appellant/plaintiff had obtained the right to collect and remove bamboos from Arippara Coupe No.1, having an extent of 13.81 hectares, of Thekkady Section in Nenmara Special Range for a sum of `.5,90,000/- in an auction held on October 15, 1986. The plaintiff commenced the work after executing an agreement in this regard. He paid a sum of `.59,000/- as security and a further sum of `.1,96,670/- towards the first instalment against the sale price, sales tax, forest benevolent tax, etc. In addition to the above, he had remitted a further sum of `.25,000/- as Earnest Money Deposit along with the bid. The bamboos had to be cut and removed from the forest coupe on or before May 31, 1987. The plaintiff had taken out a Fire Insurance policy from M/s.National Insurance Company Ltd., Coimbatore for a sum of `.20 lakhs. According to the plaintiff, he had felled about 3000 tonnes of bamboos and stored them in the coupe by February, 1987. M/s.Mysore Paper Corporation, Bhadravathi had in fact agreed to purchase the stock of bamboos from the plaintiff in February 1987. But, unfortunately, on March 8, 1987, a fire broke out which lasted for 3-4 days. The entire bamboos were gutted in the fire which could not be doused despite the best efforts. The fire which spread over a square area of about three kilometers not only destroyed the stock of bamboos but also caused extensive damage to the quarters/sheds of the labourers apart from the property of the forest.
7. The fire authorities estimated the loss at `.33 lakhs. It was further found that cause of fire was "sparking due to friction of bamboo trees". In May 1987, the forest authorities directed the plaintiff to deposit the balance two instalments of the bid amount. The request made by the plaintiff to exonerate him from the liability was turned down. In August 1988, a demand notice was issued by the Forest Department directing the plaintiff to pay a sum of `.3,29,361/- towards the dues. Later, in December 1988, an order of attachment was issued in furtherance of the recovery proceedings. It was at that juncture, plaintiff instituted the suit for declaration and prohibitory injunction before the Munsiff Court contending inter alia that he was not at all liable to pay the balance bid amount, since he was frustrated from completing the contract due to reasons beyond his control. The suit was resisted by the Forest and Revenue Recovery authorities contending that the plaintiff was liable to pay the balance bid amount, even though some stock of the bamboos might have been lost in the fire.
8. The trial court decreed the suit in part restraining the forest and revenue authorities from realising the amount shown in Exhibit A4 notice since, according to the court, the amount indicated in Exhibit A4 does not appear to be correct. It was made clear that it would be open to the defendants to initiate fresh recovery proceedings after ascertaining the actual amount due from the plaintiff. In appeal, the above decree and judgment were confirmed by the District Court, Palakkad.
9. The second appeal has been filed challenging the said decree and judgment. The following questions of law have been raised in the second appeal:
"1. Whether the courts below were right in finding that Section 56 of the Contract Act had no application to the facts of the case?
2. Whether the interpretation placed by he courts below of the terms of the contract between the parties contained in Exhibit A1 are sustainable in law?
3. Whether the courts below were right in finding that the out break of fire was in contemplation of the parties and hence there is no frustration of contract?"
10. In the other suit filed by the appellant/plaintiff for realization of money, the Insurance Company, while admitting issuance of a Fire Insurance policy for the stock of bamboos (dried), contended that the policy excluded the peril of accidental fire. It was further contended that "any loss or damage occasioned by or through or in consequence directly or indirectly, whether accidental or otherwise of Forest, Bush and Jungles was excluded from the policy". In short, the defendant- Insurance Company justified its action in repudiating the claim made by the plaintiff.
11. Plaintiff was examined in the case as PW1 and exhibits A1 to A12 were marked on his side. DWs 1 and 2 were examined and Exhibits B1 to B3 were marked on the side of the defendant.
12. The trial court, after considering the oral and documentary evidence available on record, upheld the contentions raised by the defendant and dismissed the suit. The above decree and judgment of the trial court are under challenge in A.S.No.149/1996.
13. We have heard learned counsel for the parties and perused the lower court records.
14. The fate of these two appeals will depend upon one or two clauses in the policy certificate. We will refer to the documents produced by the parties in O.S.No.378/1989, which is the subject matter of A.S.No.149/1996, unless otherwise indicated.
15. It is admitted by the Insurance Company that it had issued Exhibit A12 insurance policy in respect of the bamboos cut and stocked by the plaintiff pursuant to the agreement executed between him and the Forest Department. It is also on record that the Insurance Company had initially issued a cover note on acceptance of the premium amount of `.6,200/- by cheque. The policy covered the period of one year starting from January 1, 1987. The sum assured was `.20 lakhs. Admittedly, the cover note was valid only for a period of two weeks. Exhibit A12 policy certificate was issued by the Company some time later.
16. It is pertinent to note that the policy is described as "FIRE POLICY". The property insured has been described in Exhibit A2 cover note as well as in Exhibit A12 policy certificate as hereunder:
"On stock of Bamboos (dried) kept in open situate at Arippara Coupe No.1 of Thekkady Section in Nenmara Special Range."
In this context, it is also pertinent to note that the policy covered additional risk against "riot and strike and malicious damage risks as per printed endorsement attached to the policy".
17. As has been noticed already, a fire broke out in the forest at about 8 a.m. on March 8, 1987. The Forest authorities were alerted forthwith. According to the plaintiff, the employees of the Forest Department as well as his own workers tried to prevent the fire from spreading, but to no avail. Later, the Fire Force had come to the scene. But, by that time, damage had already been done. The case of the plaintiff was that about 3000 tonnes of bamboos worth more than `.20 lakhs were gutted down in the fire. Plaintiff had also produced Exhibit A3 Fire Report prepared by the Station Officer, Fire Station, Chittur assessing the total damage at `.34,50,000/-. Plaintiff pointed out that in this report, the officials of the Fire Force had noted that the "supposed cause of fire was spark due to friction of bamboo trees".
18. Plaintiff had submitted Exhibit A6 Fire Claim before the Insurance Company on February 25, 1987. However, the claim was repudiated by the Company through its communication dated February 3, 1988, as could be seen from Exhibit A5. Though the plaintiff sought for a further review, the Company, by its communication dated May 6, 1988, stuck to its earlier decision. A copy of the said communication was produced before the court below and marked in the case as Exhibit A7.
19. The Insurance Company repudiated the claim primarily relying on clause 6(f) of the Conditions and Stipulations contained in Exhibit A12 policy certificate. The relevant clause is extracted hereunder:
"This insurance does not cover any loss or damage occasioned by or through or in consequence directly or indirectly, of any of the following occurrence, namely:
(f) Burning, whether accidental or otherwise, of Forest, Bush and Jungles and the clearing of lands by fire.
Any loss or damage happening during the existence of abnormal conditions (whether physical or otherwise) which are occasioned by or through or in consequent, directly or indirectly, or any of the said occurrences shall be deemed to be loss or damage which is not covered by this insurance, except to the extent that the insured shall prove that such loss or damage happened independently of the existence of such abnormal conditions.
In any action, suit or other proceeding whether the company alleges that by reason of the provisions of this condition any loss or damage is not covered by this insurance.
The burden of proving that such loss or damage is covered shall be upon the insured."
20. The contention of the insurance company is that the above clause exonerates the Insurance Company from the liability to pay damages to the plaintiff since the insured property got gutted in a forest fire. The plaintiff, while he was examined before the court below as PW1, vehemently asserted that he had taken all precautionary measures to prevent fire in the coupe. Fire protection belt was provided. Roads were constructed to the coupe which was about 33 kms inside the deep forest. He further stated that the Inspector of the Insurance Company had visited the coupe where the bamboos were stocked before issuing the policy, which was taken since there was a possibility of fire due to friction of bamboo trees or some other reasons. The Inspector had assured him that if a Fire Policy is taken, it would cover the entire risk of any kind of accidental fire. In addition to that, the plaintiff was also advised to pay premium for "malicious damage risk" to cover any other risk or calamities.
21. But, DW2, the Manager of the Insurance Company who had in fact been working as the Inspector referred to by the plaintiff in his evidence, admitted that he had instructed the plaintiff as regards the terms and purpose of the policy. He further admitted that in Exhibit A2 cover note "Forest Fire" was not specifically excluded. According to him, the policy certificate was sent to the plaintiff by registered post sometime later and there was no record to show when actually the certificate was despatched. He denied the suggestion that policy certificate was issued only after the occurrence of the fire. He further admitted that to his knowledge the company had not investigated the cause of fire. He asserted that the fire broke out "from the forest". However, he conceded that he did not know the exact place from where the fire broke out. According to him, it was outside the coupe. While conceding that he did not know the cause of fire, DW2 candidly admitted that fire could have broken out due to various reasons. If somebody casually threw a lighted cigarette/ beedi, fire could have occurred, he admitted.
22. We have referred to the oral testimony of these two witnesses only to highlight the fact that evidence as regards the cause of fire was confined only to the ipse dixit of the parties. But it has to be noticed that the fire had broken out in the coupe and the surrounding forest area. The origin of the fire is not known to anybody. The contention of the insurance company is that the plaintiff is not entitled to get damages since the insured property got gutted in a "forest fire".
23. In this context, the policy document assumes importance. Exhibit A12 is described as "fire policy". Of course, in the said document, there is no specific reference to "forest fire". Clause 6(f), which we have extracted above, only refers to the "burning of forest bush and jungles, whether accidental or otherwise". The above clause, which is in the proverbial small print, will not take us anywhere. It cannot be said that the company did not anticipate the possibility of an accidental fire at the time when it issued Exhibit A12, policy certificate. Coupe No.1 was deep inside the forest; about 33 kms. away from the motorable road. In this context, it is significant to note that Exhibit B1 Proposal Form submitted by the plaintiff, it had been clearly mentioned that stock of bamboos (dried) had been kept in open in coupe No.1 having a total extent of 13.81 hectares. The proposal form also clearly referred to the "fire insurance".
24. The Insurance Company has practically admitted that huge quantity of bamboos had been gutted in the fire. In Exhibit B3 report itself, Sri.Velayudhan, the authorised Surveyor and Loss Assessor deputed by the Insurance Company, had quantified the approximate stock of bamboos available as on the date of the accident as 2930 metric tonnes. The Surveyor had found that the total value of the bamboos lost in the fire would have been `.11,66,307/-. In this "Loss Adjustment Report" (Exhibit B3), the Surveyor had referred to the books of account and other relevant records produced by the plaintiff before him. The plaintiff had a definite case that books of account had never been returned to him by the Surveyor or the insurance company and therefore he could not produce it before the court in the course of trial. The Surveyor, who was examined as DW1, however stated that he had returned the account books to the plaintiff. But he conceded that he had not obtained any acknowledgment in this regard from the plaintiff. Anyhow, the fact remained that the Surveyor had occasion to see the Books of Account, Stock Register, etc. and it was on the basis of those records, he reckoned that about 2930 metric tonnes of bamboo had been gutted and assessed the total loss at `.11,66,307/-, rejecting the claim of the plaintiff that the stock available at the time of the accident was 3474 metric tonnes.
25. Having perused Exhibit B1 proposal form, Exhibit A2 cover note as well as Exhibit A12 policy certificate apart from other materials available on record we have no hesitation to hold that the insurance company was not justified in repudiating the claim by seeking shelter under clause 6(f) of the policy certificate, for the following reason.
26. As has been noticed already, there is nothing on record to indicate that the stock of bamboos got gutted in a forest fire even assuming that the forest fire is excluded from the purview of Exhibit A12 policy certificate. While arriving at this conclusion, we have also kept in view Exhibit A3 Fire Report prepared by the Station Officer, Fire Force, Chittur in which it has been specifically mentioned that the supposed cause of fire was "spark due to friction of bamboo trees". It has to be remembered that the Fire Force had reached the coupe at the earliest point of time. More importantly, it was tacitly admitted by DW2 in his evidence that the company had not deputed any of its officers to investigate about the cause of fire. Therefore, we do not find any reason to discard the entry made by the Station Officer, Fire Station, Chittur in Exhibit B3 report as regards the supposed cause of fire.
27. We find considerable force in the contention raised by Sri.T.R.Ravi, learned counsel for the appellant that a standard Fire policy does not normally contain an exclusion clause. Learned counsel, while taking strong exception to clause 6(f) in Exhibit A12, invited our attention to some passages in Halsbury's Laws of England, Third Edition, Volume 22, wherein it has been stated that the cause of fire may as a general rule be disregarded, unless it arises from an excepted peril (Adelaide S.S. Co.(1923)A.C.292, H.L., at p.308, per Lord Wrenbury) or the fire was lighted by the assured himself for the purpose of destroying the property insured. It is not necessary that the fire should be purely accidental in origin. Fires are frequently due to negligence and one of the objects of a fire policy is to protect the assured against the consequences of negligence (Shaw v. Robberds (1837), 6 Ad. and Ad. and El.75, at p.84, Per Lord Denman, CJ). The policy of fire insurance as its name indicates is intended to protect the assured against the loss caused by fire. If a fire results the policy is plainly applicable unless an exception becomes operative.
28. E.R.Hardy Ivamy in General Principles of Insurance Law, while referring to the construction of exceptions has stated that since exceptions are inserted in the policy mainly for the purpose of exempting the insurers from liability for a loss which, but for the exception, would be covered by the policy, they are construed against the insurers with the utmost strictness. (Cornish v. Accident Insurance Co.(1889), 23, Q.B.D.453). In this decision, Lindley, L.J., held thus:
"In case on the line, in a case of real doubt, the policy ought to be construed most strongly against the insurers; they frame the policy and insert the exceptions. But this principle ought only to be applied for the purpose of removing a doubt, not for the purpose of creating a doubt, or magnifying an ambiguity, when the circumstances of the case raise no real difficulty."
29. Learned counsel for the appellant has also invited our attention to the principles governing exclusion clauses in insurance policies particularly that referring to forest fire contained in Fire Insurance (Law and Practice) by M.B.Gopalan and M.B.Raghavan and also in Law of Insurance by Yudhishthira and S.C.Srivastava.
30. Sri.George Cheiyan, learned counsel for the Insurance Company, has laid heavy emphasis on the clause relating to burden of proof contained under clause 6(f) of Exhibit A12 policy certificate. He submits, while referring to the Text Book on Fire and Motor Insurance by Ivamy, Third Edition, that if a stipulation in a policy is construed as a condition and if it is not fulfilled, either the policy is not valid or the insurers become never liable under it. But, it has to be noticed that the initial burden of proving that a condition in a policy had been broken, always rests on the insurer. The burden shifts only thereafter. As has been held by us in the earlier part of this judgment, the Insurance Company has not been able to establish that it was a forest fire that had caused the damage to the property insured. We have, of course, noticed the stipulation contained in clause 6(f) regarding burden of proof. But, in our view, the burden had never shifted to the plaintiff in the peculiar facts and circumstances of this case. Though learned counsel for the respondent has cited a few decisions before us [(General Assurance Society Ltd. v. Chandmull Jain and another (AIR 1966 SC 1644) The Central Bank of India Ltd., Amritsar v. The Hartford Fire Insurance Co. Ltd. (AIR 1965 SC 1288), United India Insurance Co. Ltd. and others v. Roshan Lal Oil Mills Ltd. and others ((2000) 10 SCC 19), United India Insurance Co. Ltd. v. Harchand Rai (2004 (3) KLT 560(SC)), it is not necessary to refer to those decisions.
31. In the result, it is held that the respondent-Insurance Company in A.S.No.149/1996 is liable to indemnify the appellant/ plaintiff in terms of Exhibit A12 insurance policy certificate. However, since the appellant has not adduced any satisfactory evidence with regard to the actual quantity of bamboos destroyed in the fire and also since we do not find any reason to disbelieve Exhibit B3 "Loss Adjustment Report" prepared by the Authorised Surveyor and Loss Assessor, we hold that the appellant shall be entitled to realise only a sum of `.11,66,307/- with interest at 9% from March 23, 1987 till the date of decree and thereafter with interest at the rate of 7.5% from the date of decree till the date of realisation. A decree is passed accordingly.
32. We have considered the substantial questions law raised by the appellant/plaintiff in the second appeal touching upon Section 56 of Indian contract Act. We are unable to agree with the contentions raised by the appellant in this regard, since, in our view, in the facts and circumstances of the case, it cannot be held that the appellant would stand absolved from the liability to pay the balance bid amount. Therefore, the above contentions raised by the appellant in the second appeal are repelled. The decree and judgment passed by the courts below are affirmed. Since the courts below have concurrently held that the amount quantified by the Forest and Revenue authorities in Exhibit A4 is not correct, respondent in the second appeal has to necessarily ascertain the correct amount payable by the appellant. It will be open to the respondent to initiate fresh recovery proceedings thereafter. Respondent shall afford sufficient opportunity of hearing to the appellant before ascertaining the actual amount due from him. The appeal and second appeal are disposed of in the above terms. Costs would follow the result.