In Brief
An insurance company (NIACL) issued a fire policy covering machinery with a special Reinstatement Value Clause. When a fire destroyed a 20 Hi Cold Rolling Mill in 1998, the insured claimed Rs 35.08 crores. The insured initially agreed to reinstate the property but failed to do so within the stipulated period and eventually installed a different-capacity machine (6 Hi instead of 20 Hi). The Supreme Court held that the Reinstatement Value Clause was validly part of the policy but was rendered inoperative due to the insured's failure. The claim was correctly settled on depreciation basis at Rs 7.88 crores (applying 60% depreciation to a base value of Rs 20.09 crores) rather than 32% as the NCDRC had ordered. The Court rejected the insured's arguments and upheld the insurance company's settlement.
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