Consumer protection: Criminal acquittal no ground to deny insurance payout

The National Commission observed that the acquittal of the accused due to lack of evidence could not, by itself, lead to the presumption that no theft had occurred

Sushila Devi was the proprietress of a clothing store named Durga Cloth Store, situated on the highway in Orai, Jalaun District, Uttar Pradesh. The shop was insured with Oriental Insurance for ₹12 lakh under a policy valid from February 12, 1996, to February 11, 1997. The policy also included additional coverage of ₹4 lakh to protect against the risk of cloth being stolen or destroyed by fire. 

A theft occurred on the night between July 29 and 30, 1996. The locks were broken open, and clothes and sarees valued at ₹1,49,571 were stolen. The incident was immediately reported to Kotwali Police Station in Orai, where an FIR was registered. A claim was also lodged with the insurer seeking reimbursement for the loss caused by the theft. 

The insurer appointed M. R Agarwal as surveyor, but he failed to complete the assessment of the loss. Subsequently, K. S. Arora was appointed to conduct the survey. According to the survey report, cloth and sarees worth ₹1,37,167 had been lost due to the theft. 

The insurer delayed the settlement of the claim on the grounds that the criminal case was still pending. Later, by an order dated December 7, 1999, all the accused in the criminal case were acquitted due to lack of evidence. The insurer attempted to take advantage of this order and appointed Virender Kumar Sinha to investigate the claim. Sinha reported that the theft had not been proved and that the claim was fake, thereby providing the insurer with a reason to repudiate it. 

Durga Cloth Store (the complainant) approached the District Consumer Redressal Forum, Orai, Jalaun District, alleging deficiency in service on the part of Oriental Insurance and sought a direction to settle the claim along with compensation and costs. The insurer contested the case, arguing that there was an ongoing tenancy dispute pertaining to the shop, because of which a false and fabricated complaint had been made to the police alleging theft. It contended that the claim had therefore been rightly treated as “No Claim” and closed. The insurer further argued that although the repudiation had been communicated to the insured on November 6, 2000, legal action was not taken promptly, and the complaint was filed after it had become time-barred. 

The District Forum observed that the insurer had not provided any explanation for rejecting the survey report and appointing an investigator. It also noted that the surveyor had assessed the loss at ₹1,37,167, while the investigator had labelled the incident as fake without offering any valid reason for reaching a different conclusion. Giving due weight to the survey report, the Forum directed the insurer to settle the claim by paying ₹1,37,167 along with 10 per cent interest, ₹10,000 towards compensation for mental and physical distress, and ₹5,000 towards litigation expenses. 

The insurer appealed to the Uttar Pradesh State Commission, which set aside the order and dismissed the complaint. 

The original complainant then filed a revision petition before the National Commission. 

The National Commission observed that the acquittal of the accused due to insufficiency of evidence could not, by itself, lead to the presumption that no theft had occurred. It accorded weight to the survey report and disregarded the unexplained and unsubstantiated report of the investigator. In its order dated August 20, 2025, the National Commission concluded that the District Forum had rightly decided the complaint in favour of the insured and accordingly restored the Forum’s order, holding the insurer liable to settle the claim. 

The writer is a consumer activist