The Gujarat High Court has held that insurance company cannot refuse to pay compensation for loss due to fire merely based on technical interpretation of proposal form and insurance policy without adducing any evidence. [2026 LiveLaw (Guj) 226]

The respondent manufactures Polyester Textured Yarn, Draw Textured Yarn, and Partially Oriented Yarn paper tubes whose stock was insured by the Appellant Insurance Company from 12.08.1994 to 11.08.1995 against a premium of Rs.2,616. The Policy covered risks arising out of fire, theft, and short circuits.

On 14.04.1995, an electrical short circuit allegedly occurred within the respondent's factory premises, where a fire broke out and destroyed the stock stored in the godown. The Surveyor appointed by the Appellant inspected the site and submitted his assessment report, while the police drew up a panchnama during the course of their investigation. Since policy purchased by the respondent was in force on the date of incident, it claimed and demanded loss suffered due to destroy of stock by fire.

However the Insurance Company contested the claim contending that the fire broke out in the factory premises solely due to the negligence and fault of the respondent, thereby the insurer is not liable to pay damages.

The trial court framed issues and permitted both the parties to lead evidence. However on the respondent lead oral and documentary evidence and Insurance Company did not produce any documentary evidence not did it cross examine the respondent. Thus the trial court decreed the respondent's suit granting compensation of Rs.2 Lakhs with interest at rate of 8% from the date of suit till realization of the amount.

Justice JC Doshi observed that no counter-evidence was adduced by the Appellant - Insurance Company to rebut or dispel the evidence led by the respondent.

Perusing the surveyor's report placed, which covers risk of stock and stock in process, the court said that the insurance company is liable to pay compensation.

"The technical interpretation of proposal form as well as insurance policy without adducing evidence in that regards is not permissible. Nonetheless leaf of policy produce on record cover the risk of stock and stock in progress. This condition is sufficient to cover risk and liability of insurance company for risk purchased. In nutshell, learned Trial Court has rightly earmarked liability upon insurance company to pay loss suffered by plaintiff due to fire. Thus, I see no reason to interfere with impugned judgment. Consequently, the first appeal stands dismissed".

The appeal was dismissed.

Case title: THE ORIENTAL INSURANCE COMPANY LIMITED v/s POOJA PAPER TUBE INDUSTRIES

R/FIRST APPEAL NO. 5712 of 2019

Citation: 2026 LiveLaw (Guj) 226

Appearance:

MS KARUNA V RAHEVAR(3818) for the Appellant(s) No. 1

THAKKAR AND PAHWA ADVOCATES(1357) for the Defendant(s) No. 1

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