Gujarat HC Upholds Rs 2 Lakh Fire Claim Against Oriental Insurance After Insurer Led No Evidence at Trial
The Gujarat High Court dismissed Oriental Insurance Company's first appeal, holding that an insurer cannot contest liability through technical policy interpretation when it led no evidence at trial.
The High Court of Gujarat at Ahmedabad has dismissed a first appeal filed by The Oriental Insurance Company Limited against a City Civil Court decree directing it to pay Rs 2 lakhs with 8% interest to Pooja Paper Tube Industries for stock destroyed in a factory fire in April 1995. Justice J. C. Doshi, sitting singly, found that the insurer had neither cross-examined the plaintiff's witnesses nor produced any documentary evidence at trial, making its attempt before the appellate court to raise technical objections about the insurance policy's scope untenable. The judgment, dated 17 August 2026, affirms that a technical reading of a proposal form or policy cannot substitute for evidence led at trial.
The Fire, the Policy, and the Trial Court Proceedings
Pooja Paper Tube Industries, engaged in manufacturing PTY, DTY, and POY paper tubes at Village Rajpur, Mehsana Highway, Taluka Kadi, District Mehsana, had insured its stock with Oriental Insurance Company for the period 12 August 1994 to 11 August 1995. The premium paid was Rs 2,616, and Policy No. 141406-11-95-00843 covered risks including fire, theft, and short circuits.
On 14 April 1995, an electrical short circuit occurred at the factory premises, triggering a fire that destroyed stock stored in the godown. Local police were informed, a panchnama was drawn up, and the insurer's Surveyor — P. J. Bhatt and Company — inspected the site and submitted an assessment report. The plaintiff informed the Surveyor by letter dated 19 April 1995.
Pooja Paper Tube Industries filed Civil Suit No. 4508 of 1999 before the City Civil Court, Ahmedabad, claiming Rs 2,24,000 along with interest. An ex-parte decree was initially passed when Oriental Insurance did not appear, but the Trial Court set aside that ex-parte decree on 26 September 2002 in Civil Miscellaneous Application No. 21 of 2002 and restored the suit to its original file.
After the suit was restored, Oriental Insurance filed a Written Statement at Exhibit 59, denying the claim and contending that the fire occurred solely due to the plaintiff's negligence, that the suit was false and frivolous, and that the incident was not covered under the strict terms and conditions of the policy. Despite filing this Written Statement, the insurer did not examine any witness, did not produce any documentary evidence, and did not cross-examine the plaintiff's witnesses during trial.
The plaintiff, by contrast, produced a full body of evidence: a police FIR (Exhibit 14), a letter to Kadi police station (Exhibit 15), the site panchnama (Exhibit 16), the plaintiff's letter dated 19 April 1995 to the Surveyor, a stock statement submitted to Bank of India with whom stocks were hypothecated (Exhibit 18), letters received from Oriental Insurance (Exhibits 19 and 20), the fire claim letter to the Surveyor (Exhibit 21), and further correspondence at Exhibits 22 to 29.
What the Surveyor's Report Said
The Surveyor's report by P. J. Bhatt and Company, appearing at Annexure C of the paper book, recorded substantial damage to stocks of raw materials — Kraft Paper in reel form — lying in the open compound and in the godown. The report noted that the fire had taken place in the open compound and spread to stocks lying in the godown, which was detached from the main factory building. It confirmed that most of the damaged stock was completely destroyed or burnt, and that material stored as paper reels had turned to ashes.
The Surveyor's report also stated: “To the best of our knowledge and information, all the warranties were complied with by the Insureds at the time of Survey.” The report confirmed that the insured held Policy No. 14106/11/95/00843 for Rs 5,00,000 with Oriental Insurance, and that the loss to the same was assessed on behalf of the Insurance Company.
The Trial Court framed three issues: whether the insurer was liable to pay Rs 2,24,000; whether the plaintiff was entitled to interest at 18%; and what final order and decree should follow. It answered the first two issues partly in the affirmative.
In paragraph 15 of its judgment, the Trial Court reasoned from the stock statement at Exhibit 18 that as of 31 March 1995, the finished goods and raw materials were valued at Rs 16,87,666, and the closing stock on 14 April 1995 was Rs 17,28,526. Against that background, the plaintiff's claim that stock worth Rs 2 lakhs was destroyed was treated as credible. The Trial Court decreed the suit for Rs 2 lakhs with interest at 8% from the date of suit till realisation, with costs directed against the defendant.
Oriental Insurance's Grounds in the First Appeal
Oriental Insurance filed the present first appeal under Section 96 of the Code of Civil Procedure, 1908, before the Gujarat High Court, challenging the decree on two grounds.
Counsel Ms. Karuna Rahevar, appearing for the appellant, argued first that the Trial Court had not provided reasons for fixing the quantum of compensation at Rs 2 lakhs and that the impugned judgment was silent on the evidence on which that figure was based. Second, she argued that the terms and conditions of the policy, read with the Surveyor's report, required insured stocks to be stored in a separate building, whereas the fire had occurred within the factory premises.
Ms. Rahevar further contended, drawing from the proposal for purchase of fire insurance, that the Rs 5 lakh sum insured related to “stock and stock in process” and not to stock in a shop, godown, or stock in open, and that the Trial Court had therefore erred in awarding compensation for stock lying in the godown or in closed premises adjacent to the factory. On these grounds, she sought the quashing and setting aside of the impugned judgment and decree and dismissal of the suit.
Ms. Simran Pahwa, appearing for Pooja Paper Tube Industries, supported the decree. She pointed out that the plaintiff had duly insured its stock and stock-in-process for Rs 5,00,000 as per the Proposal Form for Fire Insurance. She contended that the Trial Court had rightly relied on the Surveyor's categorical findings to assess compensation. She pressed the point that no witness was examined on behalf of Oriental Insurance to prove the terms and conditions of the policy, and the insurer had not produced the original proposal form during trial. Since the defendant led neither oral nor documentary evidence to rebut the plaintiff's case, she submitted, the decree was well-founded and the appeal deserved dismissal.
Why the High Court Rejected the Insurer's Arguments
Justice Doshi identified four undisputed facts from the record: the plaintiff had purchased a fire insurance policy covering stock up to Rs 5,00,000; the fire on 14 April 1995 fell within the currency of that policy; the factory premises and underlying stocks were destroyed in the fire and the Surveyor assessed the loss; and Oriental Insurance, after filing its Written Statement, failed to cross-examine the plaintiff's witnesses or adduce any independent evidence.
The court also noted from the trial record that Oriental Insurance's advocate had not even bothered to argue the matter before the Trial Court, despite being given full opportunity. The Trial Court had adjudicated on the basis of the pleadings and the Written Statement on record.
On the core legal point, Justice Doshi held that “technical interpretation of proposal form as well as insurance policy without adducing evidence in that regards is not permissible.” The court further observed that the leaf of policy produced on record covered the risk of stock and stock in progress, and that this condition was sufficient to establish the insurance company's liability for the risk purchased.
The Surveyor's report itself had confirmed that all warranties were complied with by the insured at the time of the survey, and it had assessed the loss. In the complete absence of counter-evidence from the insurer, the High Court found that the Trial Court was right in fastening liability on Oriental Insurance.
On the quantum, the Trial Court's approach of relying on the stock statement at Exhibit 18 and the plaintiff's declaration that stock worth Rs 2 lakhs was destroyed — supported by the panchnama, the Surveyor's report, and extensive correspondence — was not disturbed. Justice Doshi found no reason to interfere with the impugned judgment.
Order
The first appeal was dismissed. Any interim relief granted earlier was discontinued. The record and proceedings were directed to be sent back to the Trial Court concerned. The court further directed that any amount deposited pursuant to the judgment and decree before the High Court or before the Executing Court shall be disbursed to the original plaintiff, Pooja Paper Tube Industries.