United India Insurance Co. Ltd vs Sayona Colors Pvt. Ltd - Insurance Claim Dispute

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United India Insurance Co.Ltd vs Sayona Colors Pvt. Ltd on 17 March, 2026

C.A. NO. 6100/2024

2026 INSC 287
REPORTABLE

                                        IN THE SUPREME COURT OF INDIA
                                         CIVIL APPELLATE JURISDICTION

                                       CIVIL APPEAL NO.          6100 OF 2024

    UNITED INDIA INSURANCE CO.LTD.                                               APPELLANT(S)

                                                         VERSUS

    SAYONA COLORS PVT. LTD.                                                      RESPONDENT(S)

                                                         WITH

                                       CIVIL APPEAL NO. 10019         OF 2024

    SAYONA COLORS PVT. LTD.                                                      APPELLANT(S)

                                                         VERSUS

    UNITED INDIA INSURANCE CO.LTD.                                              RESPONDENT(S)

                                                       O R D E R CIVIL APPEAL NO. 6100 OF 2024

                        Heard learned counsel for the parties.

1.              The appellant-Insurance Company is aggrieved by the order
   
   dated                 04.12.2023    passed     by    the     National   Consumer   Disputes
   
   Redressal Commission1, New Delhi in Consumer Complaint No. 171 of
   
   2012, whereby the complaint was partly allowed and the appellant
   
   was Signature Not Verified directed    to    pay   a   sum    of   Rs.3,33,63,642/-    (Rupees   Three Digitally signed by POOJA SHARMA Date: 2026.03.24 Crores Thirty Three Lakhs Sixty Three Thousand Six Hundred and
   

   17:51:46 IST
   Reason:

1 For short, “NCDRC” 1 C.A. NO. 6100/2024 Forty Two) along with interest at the rate of 6% per annum from

08.07.2012, within a period of six weeks, failing which, the rate

of interest would stand enhanced to 9% for the same period, and

Rs.50,000/- (Rupees Fifty Thousand) was directed to be paid

towards litigation costs.
3. The learned counsel appearing for the appellant submitted

that the claim made by the respondent is fraudulent, being

founded on a deliberate act of sabotage resulting in a fire in

the respondent’s godown. It was contended that the fire incident

occurred on 25.03.2011, which the respondent attributed to a

short circuit, pursuant to which a claim of Rs. 28,20,65,797/-

(Rupees Twenty Eight Crores Twenty Lakhs Sixty Five Thousand

Seven Hundred and Ninety Seven) was raised for the alleged loss.

1. It was further submitted that the timing and quantum of

insurance coverage assume significance. Initially, the respondent

had obtained an insurance policy for Rs. 15,00,00,000/- (Rupees

Fifteen Crores), which was enhanced to Rs. 19,00,00,000/- (Rupees

Nineteen Crores) on 07.03.2011. In addition, another policy for

Rs. 17,00,00,000/- (Rupees Seventeen Crores) was obtained for the

period from 28.11.2010 to 27.11.2011. The fire incident occurred

shortly thereafter on 25.03.2011, raising serious doubt regarding

the bona fides of the claim.

2 C.A. NO. 6100/2024

1. The learned counsel further submitted that upon

investigation, the surveyor opined that the fire was not caused

by a short circuit, but appeared to a deliberate human act. This

conclusion was further supported by an independent expert opinion

obtained from Truth Labs.

1. It was also contended that the respondent claimed the

existence of substantial stock allegedly procured shortly prior

to the incident and after enhancement of the insurance coverage.

However, upon verification, the agencies shown to have supplied

the said material, were found to be either non-existent at the

given addresses or were not engaged in the trade of the goods

claimed to have been supplied.

1. It was further urged that the respondent relied upon a

report of the Gujarat Forensic Science Laboratory (GFSL) which

indicated the presence of ethyl alcohol, an inflammable

substance. According to the appellant, the sample sent namely,

parts of the switchboard, had already been burnt, thereby

rendering the sample itself unreliable; therefore, the said GFSL

report cannot be treated as conclusive.

1. It was submitted that a holistic evaluation of all attending

circumstances is necessary to determine whether the fire was

accidental or deliberate. In the present case, the proximity of

procurement of material to the incident, enhancement of insurance 3 C.A. NO. 6100/2024 coverage, and the discovery that the alleged suppliers lacked the

capacity to supply such goods cumulatively establish that the

claim is not genuine.

1. On the aspect of quantification, the learned counsel

submitted that the surveyor’s assessment of loss of

Rs. 3,33,63,642/- (Rupees Three Crores Thirty Three Lakhs Sixty

Three Thousand Six Hundred and Forty Two) merely reflects the

extent of physical damage to the godown and cannot be treated as

an admission of liability. It was contended that if the loss

itself is consequence of a deliberate and fraudulent act, no

claim under the policy would be maintainable, irrespective of the

extent of damage. Accordingly, it was prayed that the impugned

order passed by the NCDRC be set aside.

1. Per contra, the learned counsel appearing for the respondent

submitted that during the subsistence of the insurance coverage,

an accidental fire occurred on 25.03.2011 in the respondent’s

godown due to a short circuit. The incident was duly intimated to

the appellant on the same day and was also recorded with the

local police. It was contended that the respondent suffered a

loss of Rs.28,20,65,797/- (Rupees Twenty Eight Crores Twenty

Lakhs Sixty Five Thousand Seven Hundred and Ninety Seven) that

the GFSL report conclusively establishes that the fire was

accidental in nature.

4 C.A. NO. 6100/2024

1. In response to a query raised by this Court regarding the

authenticity of the alleged suppliers, the learned counsel for

the respondent submitted that the claim was made based on the

actual supplies, and affidavits of such suppliers had been placed

on record. However, it was submitted that the respondent had not

independently verified the actual existence or credentials of

such suppliers.

1. We have considered the rival submissions and perused the

material available on record.

1. It is evident from the record that the present case involves

a fraudulent insurance claim. The respondent enhanced the

insurance coverage and procured an additional policy in close

proximity to the incident, which raises serious doubt regarding

the bona fides of the claim.

1. In this context, the Truth Labs Report establishes, through

GC-MS analysis of fire debris, the presence of hydrocarbon

residues consistent with kerosene in the area identified as the

seat of the fire (Zones IX A and X A). Significantly, such traces

were absent in samples collected from areas away from the origin

of the fire. That apart, the presence of kerosene, a known fire

accelerant, at the seat of the fire clearly indicates that it was 5 C.A. NO. 6100/2024 introduced externally to initiate the fire, thereby ruling out an

accidental cause and pointing toward deliberate arson for gain.

Further, forensic examination of the electrical infrastructure

such as power supply wires, switchboards, and lighting systems,

revealed no evidence of short circuit or electrical malfunction.

The absence of overheating, annealing, or bead formation in the

wiring conclusively negates an electrical cause.

1. Additionally, the conduct of the respondent reinforces the

inference of fraud. There was delay in furnishing samples and

subsequent reliance on fabricated analytical reports, indicating

a clear attempt to mislead the investigation. Thus, the forensic

report concludes that the fire was the result of deliberate human

intervention, with a strong likelihood of it being engineered for

unlawful gain.

1. The Surveyor’s report corroborates the above conclusions. It

reveals material discrepancies between the VAT returns submitted

by the Suppliers of the respondent and those filed with the

Commercial Taxes Department. The alleged suppliers, in whose

names’ invoices were produced to substantiate the claim, were

found to be non-existent or unrelated to the claimed

transactions, and the invoices produced were evidently

fabricated. Notably, the respondent failed to rebut these

findings with credible material.

6 C.A. NO. 6100/2024

1. The investigation further discloses manipulation of accounts

and records with a view to inflate the claim. Both the forensic

and Surveyor reports unequivocally establish violation of policy

conditions, warranting repudiation.

1. In view of the above, it stands conclusively established

that the fire was not accidental but was the result of a

deliberate and orchestrated act of arson.

1. Despite these categorical findings, the NCDRC proceeded to

allow the claim in part merely on the premise that a fire

incident had occurred. Such an approach is legally unsustainable,

as it disregards the overwhelming evidence of fraud and

deliberate misconduct on the part of the respondent.

1. It is a settled principle that fraud vitiates all solemn

acts, and no person can be permitted to take advantage of his own

wrong. In S.P. Chengalvaraya Naidu v. Jagannath (1994) 1 SCC 1 :

1993 SCC OnLine SC 318, this Court held that a judgment or decree

obtained by playing fraud is a nullity in the eyes of law.

Similarly, in A.V. Papayya Sastry v. Government of Andhra Pradesh (2007) 4 SCC 221 : 2007 SCC OnLine SC 317, it was reiterated that

fraud vitiates all judicial acts, whether in rem or in personam.
7 C.A. NO. 6100/2024 21. Applying the aforesaid principles, we are of the considered

view that once it is established that the claim itself is founded

on fraud, the entire edifice of the claim collapses and no relief

can be granted. Quantification of loss cannot override the

foundational requirement of a genuine and bona fide claim.

1. There is no concept of partial or equitable relief in cases

tainted by fraud. Courts and adjudicatory fora cannot grant

compensation merely because some loss is shown to have occurred,

when the claim itself is vitiated by fraudulent conduct. An

insurance contract cannot be used as an instrument of unjust

enrichment. The NCDRC therefore, fell into error in awarding

Rs.3,33,63,642/- (Rupees Three Crores Thirty Three Lakhs Sixty

Three Thousand Six Hundred and Forty two) towards the alleged

loss sustained by the respondent.

1. In view thereof, we have no hesitation in holding that the

respondent is not entitled to any amount under the policy, and

the claim deserves to be rejected in toto.

1. Accordingly, the appeal is allowed. The impugned order

passed by the NCDRC is set aside. The claim of the respondent

stands repudiated. The appellant-Insurance company is absolved of

any liability arising out of the said claim. The amount deposited

by the appellant before the Registry of this Court shall be 8 C.A. NO. 6100/2024 refunded to it, along with accrued interest, within a period of

two weeks from today.

1. Before parting, we deem it appropriate to observe that

fraudulent insurance claims involving staged incidents are not

uncommon and have serious ramifications on the integrity of the

insurance system and public confidence therein.

1. In view of the categorical finding of fraud committed in

relation to the insurance claim by the respondent, we direct the

Commissioner of Police, Ahmedabad, to constitute a Special

Investigation Team (SIT) headed by an officer not below the rank

of Deputy Commissioner of Police, to conduct a comprehensive

investigation into the incident, including the persons involved

in the alleged fraud. The investigation shall be completed within

a period of three months from today and a report shall be

submitted before this Court in a sealed cover. The Commissioner

of Police, Ahmedabad, shall ensure full logistical and

institutional support to the SIT and shall remain responsible for

compliance with these directions.

1. The Registry is directed to list the matter on 21.07.2026 at

2.00 PM before the same Bench, treating it as a tied-up / part-

heard. A copy of this order shall be communicated to the

Commissioner of Police, Ahmedabad, forthwith. 9 C.A. NO. 6100/2024 CIVIL APPEAL NO. 10019 OF 2024

  In view of the order passed in Civil Appeal No. 6100 of

2024, of even date, the present appeal stands dismissed.

1. Pending application(s), if any, shall stand disposed

of.

........................J
( AHSANUDDIN AMANULLAH )

                                      ........................J
                                                ( R.MAHADEVAN )

NEW DELHI
MARCH 17, 2026 10