ORDER
S.V. Maruthi, J
1. This appeal arises out of a suit in OS No.84 of 1990 on the file of the Additional Subordinate Judge, Tirupathi. The defendant is the appellant. The plaintiff filed the suit for recovery of Rs.5,22,762.50 being the principal and interest due on a policy bearing No.51201/ 01/05849 dated 12-12-1987 and also on additional policy as on 4-11-1987 for an amount of Rs. 1,29,105/- with further interest at the rate of 15 per cent from the date of suit till the date of realisation and also for costs.
2. The averments made in the plaint in brief are as follows:
Originally the plaintiff had M/s. Sri Balajj Dental Laboratory at 90-A, ground floor which is an extension of 70, Gangundramandapam lane, Tirupathi facing into Theerthakatta Street from 19-2-1982 onwards. The owner of the said premises was one J. Nanda Kumar son of J, Srinivasulu. The owner of the premises bearing D No.90 upstairs including the ground floor was Smt. S. Lakshmi wife of Chenga Reddy. The plaintiff soon after taking lease of the said premises, approached the A.P. State Finance Corporation (for short ‘Corporation’) for obtaining a loan for the purchase of equipment for Dental Laboratory and for the alteration of the suit premises with airconditioning and other suitable arrangements to run the laboratory in question. On 7-5-1986 he took a policy for Rs.50,000/- under the policy bearing No.0512201/01/04733 which was later enhanced to Rs.2,50,000/- and the same was again enhanced further to Rs.2,40,000/-towards the premises and for Rs.1,50,000/-towards the scheduled mentioned machinery. The said policy was being renewed periodically. The Corporation was regularly paying the premium on behalf of the plaintiff. The said policy was one of Fire, lightening, explosion, strike, riot and malicious damages etc. He also took another policy insuring the scheduled mentioned article in the suit premises 90/A ground floor for a sum of Rs. 1,29,105 for burglary, house breaking and damages caused to the house etc. While so damage was caused to the scheduled mentioned articles in the scheduled mentioned premises on 12-12-1987 and a crime was registered under Cr. No.80 of 1987, Tirupathi (W) police station under various provisions of IPC. The plaintiff also informed the defendants immediately. The authorised surveyor of the defendant-company surveyed and assessed the damage caused to the articles and the premises.
3. The plaintiff was served with the proceedings of D3 dated 7-12-1989 under miscellaneous claim No. 1822 of 1989 regretting that the plaintiffs claim cannot be sanctioned for the reason that the machinery found in D90/A was not insured and that in the policy premises bearing No.D90 was mentioned. D90 comprises of two floors ground floor and first floor. The plaintiff has no other go except to approach the Doctor to provide alternative space. The plaintiff never had his laboratory in D90 upstairs prior to 12-12-1997. The lease deed of the year 1986 which was submilted before the Corporation at the time of obtaining the loan categorically mentions the premises in which the plaintiff was running the laboratory belonging to J. Nanda Kumar and that it was D No.90/A. He also obtained electricity bill bearing No.6433 for the supply of electricity to D No.90/A and also telephone bearing No.2003 to the said premises, instead of public telephone in the said premises bearing No.3464. After the incident he got his personal telephone shifted to D No.90 upstairs on 23-1-1988. D3 also mentioned that litigation was pending on the date of the policy. The lease hold rights of the premises was mortgaged with the Corporation in 1986. The pendency of the litigation is not a bar to enter into the policy with the insurance company. In view of the repudiation by the defendants the plaintiff issued notice on 9-1-1990 which was required by the defendants on 15-2-1990 with false allegations. The value of the suit for the purpose of Court fee and Rs.5,22,162.50 and the particulars of thevaluation are – Amount due to be payable to the plaintiff under policy No.51201/01/1/ 05849 as on 12-12-1987 for building Rs.2,40,000 for machinery Rs.1,50,000 interest claimed at 15 percent per annum from 12-12-1987 to 19-3-1980 Rs. 1,32,762.50, total comes to Rs.5,22,162.50, hence the suit.
4. The defendants filed a written statement disputing the door number of the premises for which the insurance was paid. It is alleged that D No.90/A first floor is not the premises for which the policy is taken on the other hand the premises for which the policy was taken is D No.90. They admit that the plaintiff obtained a policy bearing No.051201/44/1/004/AD/87, but it is averred that this policy is against risks of burglary and house breaking, the plaintiff has taken the above policy by misrepresenting and by not disclosing the above facts and particulars at the time the policies were obtained the plaintiff was also under an injunction. From the report given by the plaintiff to the policy which was registered as Cr. No.80 of 1987 of Tirupathi (W) police station and that there were negotiations between the plaintiff and one Murali. It is therefore, clear that the plaintiff obtained policy-bearing No.051201/44/1/00480/87 by misrepresenting the facts and by not disclosing the material facts. Since it is a clear violation of condition 2 of the policy the plaintiff is not entitled to the benefit of the policy. The plaintiff has not taken the policy for D No.90/A but he has taken the policy for D No.90. The other allegations made in the plaint are denied. On the basis of the above averments the trial Court framed the following issues:
(1) Whether the plaintiff is entitled to the suit claimed as prayed for?
2) To what relief?
5. The plaintiff examined PWs.1 to 3 and marked the exhibits as A1 to A23 while defendant examined DW1 to 3 and marked Exs. B1 and B8. Ex.C1 and C2 are marked with consent. On the basis of the evidence adduced both documentary as well as oral the trial Court held that the premises that were actually insured were D No.90/A and decreed the suit as prayed for. Aggrieved by the same the present appeal is filed by the defendants.
6. The parties are referred to as appellants and respondents hereafter.
7. The main argument of the learned Counsel for the appellant is that Exs.A9, A10, A23 and B8 which are of fire policy, and the premises for which this policy was taken is Sri Balaji Dental Laboratory, D No.90, Upstairs, T.K. Street, Tirupathi. On the basis of the policy, it is clear that the premises that was insured is D No.90 and not D No.90/A, therefore the findings of the trial Court that the premises that was insured is D No.90/A is contrary to the evidence on record.
8. The respondent is a lessee of the premises and he has mortgaged the lease hold interests to the Corporation. The Corporation took the policy of insurance for the benefit of the respondents, therefore the respondent has no insurable interest in the property and he is not entitled to the amount insured. The ultimate beneficiary being the Corporation it only is entitled to the amount insured.
9. The respondent is guilty of suppressing material facts. There was litigation between the respondent and his landlord and proceedings were pending in the Court and there was an injunction order obtained by him against the landlord and by virtue of the injunction he is continuing in the present premises. The respondents did not bring to the notice of the appellants the pendency of the litigation, had the respondents brought to the notice of the appellant the pendency of the litigation, perhaps the appellant would not have issuedthe policy of insurance, therefore, the respondent is guilty of suppressing material facts. The trial Court decreed the entire amount insured under the fire policy and the burglary policy. The respondents had not adduced any evidence as to the actual loss sustained by him. Since under the policy he is entitled only for the actual loss sustained by him the decree granted to him for the entire insured amount is liable to be set aside. Counsel also submits that the burden of the actual loss sustained is on the respondents and that he has not discharged the said burden. Counsel also submitted that the learned Judge granted interest at the rate of 15 percent while the Supreme Court in United India Insurance Company Limited v. M.K.T. Corporation, , held that the insurer is liable to pay interest at the rate of 12 percent per annum. For all these reasons, the learned Counsel for the appellant submitted that the decree is liable to be set aside and the appeal is to be allowed.
10. While the learned Counsel for the respondent contended that the original policy of the insurance was submitted to the Corporation the defendant wrote to the Corporation directing them to produce the original policy of fire insurance, and the Corporation replied stating that the papers are destroyed. When once the original policy was not forthcoming it is incumbent upon the insurer to produce the copy that was lying with him, to know as to which would disclose the actual premises for which the insurance was taken. Since the appellants have failed to produce the said copy of the policy which is with them the Court should draw an adverse inference. The Counsel also submitted that having regard to the fact that the policy of 1986 was not forthcoming the trial Court relying on the evidence of PWs.1, 2 and 3 and DW2, who was the surveyor, held that the premises which was insured is D No.90/A and not 90, there is no reason why the said finding is to be disturbed.
11. As regards the insurable interest the learned Counsel for the respondent submitted that he has an interest in the property viz., lease hold interest which he has mortgaged and that the interest was insured under the fire policy, therefore when the property was demolished he is entitled for the entire amount insured and there is no obligation on his part to establish the actual damage sustained as he is entitled to the insured amount under the policy. The Corporation has taken the policy for the benefit of the respondent, and therefore, the respondent is entitled for the insured amount and not the Corporation. He also submitted that there is no plea in the written statement that the respondent has no insurable interest and therefore it not entitled for the amount insured.
12. It is next contended that there is no suppression of material facts in the proposal form as there is no column wherein he should disclose the pendency of litigation between him and the landlord. In the absence of a column asking the respondents to furnish such information the question of suppression of material fact does not arise. Learned Counsel also submitted that in the plaint he has claimed and identified the amounts covered by the insurance policy, and that the appellants in their written statement have not denied the claim of the respondent, therefore at this stage, they cannot raise objection for the grant of relief.
13. On the basis of the above contentions the following issues arise for our consideration :
(1) Whether the premise that was insured under the fire policy is D No.90/A or D No.90.
(2) Whether the insured has an insurable interest in the premises insured.
(3) Whether the failure to disclose the pendency of the litigation amounts to suppression of material facts.
(4) Whether it is necessary for the respondents to establish actual loss or is he entitled for the entire sum insured under the policy and what is the interest to which the respondent is entitled.
14. Before referring to the other issues, we would like to refer to the judgment of the Supreme Court in (supra), wherein the Supreme Court held as follows:
“….. In common parlance, when the insured-respondent is deprived of the right to enjoy his money or invest the money in business, necessarily the loss has to be compensated by way of payment of interest by the insurance company, we are informed that as per the directions of the Government of India the appellant-insurance company has no option but to invest the money in the securities specified by the Government of India under which the insurance company is securing interest on investment at the rate of 11.3 per cent per annum. Under these circumstances, the appellant-insurance company is liable to pay interest at 12% per annum from 1-1-1991 till the date of payment.”
15. Therefore, the rate of interest to which the respondent if at all entitled would be at the rate of 12 percent and not 15 percent.
16. The next issue is whether the premises that are insured is D No.90/A or 90. It is true that the trial Court in the absence of the original copy of the insurance policy relying on the oral evidence of PW2 held that the premises actually was insured for D No.90/A. The undisputed fact is DW3 addressed a letter to the Branch Manager of the Corporation for the return of the original policy and the Branch Manager gave a reply stating that it was destroyed. Since the original is destroyed the appellants ought to have produced the copy which was lying with them along with the proposal of insurance. In other words, the best evidence was not produced. In the normal circumstances we would have confirmed the view of the trial Court relying on the oral evidence, however in the light of the view, which we propose to take on other issues, we do not agree with the view of the lower Court.
17. The next question is whether the respondent has an insurable interest in the property. The admitted fact is that the appellant is a lessee and he has mortgaged the lease hold interest to the Corporation. The learned Counsel for the appellant contended that he being not the owner of the property has no insurable interest in the premises insured, therefore they are not entitled for the insured amount. In this context reference may be made to the judgment of the Gnana Sundaram v. Vulcan Insurance Co., AIR 1931 Rangoon 210 (DB). The said judgment explains the meaning of “Insurable interest”. The said judgment reads as follows:
“A man is interested in a thing to whom advantage may arise or prejudice happen from the circumstances which may attend it….. and whom it importeth thatits condition as to safety or other quality shall continue. Interest does not necessarily imply a right to the whole or part of the thing, nor necessarily and exclusively that which may be the subject of privation, but he having some relation to, or concern in the subject of the insurance; which relation or concern, by the happening of the perils insured against, may be so effected as to produce a damage, detriment or prejudice to the person insuring. And where a man is so circumstanced with respect to matters exposed to certain risks and dangers as to have a moral certainty of advantage or benefit but for these risks and dangers, he may be said to be interested in the safety of the thing. To be interested in the preservation of a thing is to be so circumstanced with respect to it as to have benefit from the existence, prejudice from its destruction.”
“only those can recover who have an insurable interest and they can recover only to the extent to which that insurable interest is damaged by the loss. In the course of the argument it has been sought to establish a distinction between a fire policy and a marine policy. It has been urged that a fire policy is not quite a contract of indemnity and that the assured can get something more than what he has lost. It seems to me that there is no justification in authority, and I can see no foundation in reason, for any suggestion of that kind. What is it that is insured in a fire policy? Not the bricks and materials used in the building the house, but the interest of the assured in the subject-matter of insurance, not the legal interest only, but the beneficial interest.”
18. From the passages referred to above, it is clear that the interest need not necessarily be an interest of ownership. It can be an interest other than the ownership also. The facts of the said case are that a suit was filed for recovery of an amount under a insurance policy in respect of a house, and the objection that was raised by the insurance company was that the plaintiff is only an agreement holder and since he has no right of ownership he is not entitled to claim the amount insured. In that context it was held that an interest need not necessarily be a right to the whole but can be a part. A person is interested in the preservation of a thing and such interest can be insured. The learned Judges also held that the insurer can recover an insurable interest and they can recover only to that extent to which that insurable interest is damaged by the loss and not the amount insured as such. In other words the insurer is entitled to the actual loss or damages sustained and not the amount insured. This judgment is an authority for the proposition that insurable interest need not necessarily be whole interest, it can also be a part of the interest. In our considered view, the right to enjoy the property is transferred and the lessee has interest in part in the lease hold properly and he is entitled to continue in possession as long as the lease subsists. His possession should not be disturbed so long as the lease subsists. To enjoy peaceful possession of the premises which he has taken on lease is an interest and it can be said that he is has insurable interest in the property. We, therefore, are of the view that the lease hold interest of a lessee is an insurable interest in the property that is insured.
19. The next question that arises for consideration is whether there is any suppression of material facts. The argument of the learned Counsel for the respondent is in the proposal form there is no column under which the insurer is expected to furnish the pendency of the litigation. In the absence of that column requesting the insurer to furnish particulars relating to the pendency of the litigation, there is no suppression of material fact while the Counsel for the appellant contended that there is a column in the proposal form that “any other related information”, therefore under that column namely “any other related information”, the respondents ought to have furnished the information relating to the pendency of the litigation. The proposal form was not filed, therefore, we are not in a position to ascertain whether the failure to furnish the information relating to the pendency of litigation amounts to suppression of material facts.
20. The next point for our consideration is that whether the insurer is entitled for recovery of the entire insured amount or the actual loss sustained. We have already referred with the above paragraph that under the policy he is only entitled to recover such damages or loss, which he has actually incurred. It is true that the respondent in para 15 of the plaint gave the particulars of the claim and there is no specific denial with regard to the particulars of the claim, but there is a general denial by the appellants in the written statement. We do not propose to go into the oral evidence, at this stage, in the light of the view, which we propose to take. We would like to add that since the copy of the original policy (fire policy) taken in 1986 which is with the appellant has not been produced, which would establish the identity of the property for which the insurance was taken under the fire policy and since the proposal form was not produced which would establish whether the failure to furnish the information relating to the pendency of the litigation amounts to suppression of material fact and since there is no evidence as to the actual damage sustained by the respondents, we are of the view that it is a matter which should be remanded to the trial Court for the purpose of reconsidering the matter afresh. It is open to both the parties to adduce such evidence, which is necessary for the purpose of determining the issues, which are raised in the suit including the amendment of the pleadings.
21. At this stage, we would like to state that in the lower Court the trial was conducted in a perfunctory manner without referring to the real issues that arose for consideration in the suit. In view of the above the appeal is allowed and remanded to the trial Court. The trial Court is directed to dispose of the matter within six months from the date of receipt of a copy of this order and the records. Costs will abide the result of the suit.
22. At this stage, it is represented by the learned Counsel for the respondents that the appellant has deposited 50 percent of the decretal amount towards costs and interests and the respondents have withdrawn the same. The amount should be kept in the deposit with the respondents till the disposal of the matter by the trial Court, and be disbursed in accordance with the result of the suit. The Court fee is directed to be refunded to appellant No.2 on behalf of the appellants.
23. In the result, this appeal is allowed and remanded.