Consumer Protection: Insurer made to pay claim for sabotage case

NCDRC directs National Insurance to settle sabotage claim, holding delay in FIR not fatal and inferring malicious damage on balance of probabilities

Kesar Enterprises, a limited company engaged in the manufacture and sale of sugar and allied products, had obtained a standard fire and special perils policy from National Insurance Company. The policy, which was valid from July 1, 2016, to June 30, 2017, covered the insured’s establishment and stock at its Bareilly unit. 

On March 12, 2017, the staff discovered leakage of a large quantity of molasses from a tank. They informed the police and excise department, as well as the insurer, and carried out salvage operations to minimise the loss. A preliminary internal inquiry and investigation indicated sabotage through malicious damage to the tank’s valve system. Senior technical and security officers confirmed that someone had deliberately tampered with the discharge valve and associated fittings, and that there was no evidence of any structural defect or mechanical failure. The police investigation also concluded that someone had caused the sabotage, but the police could not identify the culprits. 

The insurer appointed a surveyor. The surveyor estimated the loss of molasses at 25,049 quintals, valued at ₹95,90,790, calculated at the prevailing market rate of ₹500 per quintal for free sale and ₹150 per quintal for levy molasses. The insurer rejected the claim on the grounds of delay in registering the FIR and the lack of credible proof to establish sabotage in guarded premises. 

The repudiation was challenged by filing a complaint before the National Consumer Disputes Redressal Commission (NCDRC or National Commission). The insured asserted that the delay in registering the FIR was due to procedural constraints and that independent as well as internal inquiries had confirmed the sabotage. The complaint stated that the insurer had wrongly repudiated the claim even though the policy covered malicious damage. 

The insurer contested the case. It raised a technical defence that the complaint was not maintainable, as it related to a commercial entity engaged in large-scale business. It also argued that the dispute would involve adjudication of complex questions of fact and would require voluminous evidence, making it inappropriate for the summary procedure adopted under the Consumer Protection Act. 

On merits, it pointed out that the tank had remained unused since 2015 and that the insured had not maintained a logbook. It argued that the possibility of an intruder accessing the pit, unbolting the rusted valve under significant fluid pressure, and escaping undetected was implausible. It also stated that the insured had produced no cogent proof to establish sabotage. The insurer attributed the leakage to the insured’s failure to maintain the tank in proper condition. 

The National Commission observed that the insured had informed the police immediately, and the FIR was registered four days later, after a preliminary investigation. It concluded that the insured could not be faulted for the delay in registering the FIR. The commission concluded that even though there was no tangible evidence of sabotage and the culprits had not been caught, it could infer sabotage based on “preponderance of probabilities”. Hence, it held that the loss was due to a pre-planned conspiracy to cause financial damage, and not to commit theft. 

By its order dated February 11, 2026, delivered by Justice Sudip Ahluwalia for the Bench along with Dr Sadhna Shanker, the National Commission held that the complaint, which sought indemnification of loss and alleged deficiency in service, was maintainable. It ordered the insurer to pay the assessed amount of ₹95,90,790 along with 6 per cent interest from the date of repudiation. It gave a period of three months for compliance, after which interest at 8 per cent would be payable. Additionally, it awarded ₹50,000 as litigation costs.

    

---

The writer is a consumer activist