The Supreme Court has held that the insurance claim filed by Sayona Colors Pvt. Ltd. for the fire that occurred in its godown on 25 March 2011 was fraudulent and based on deliberate arson. A bench comprising Justice Ahsanuddin Amanullah and Justice R. Mahadevan allowed the appeal filed by United India Insurance Co. Ltd., set aside the order dated 04 December 2023 passed by the National Consumer Disputes Redressal Commission which had partly allowed the complaint and directed payment of Rs. 3,33,63,642 along with interest, and rejected the claim in toto. The Court also dismissed the cross-appeal filed by the company.
The bench observed that the respondent company had enhanced its insurance coverage from Rs. 15 crore to Rs. 19 crore on 07 March 2011 and obtained an additional policy of Rs. 17 crore shortly before the fire incident. The timing and quantum of the policies raised serious doubts about the bona fides of the claim. The Truth Labs report, based on GC-MS analysis of fire debris, established the presence of hydrocarbon residues consistent with kerosene at the seat of the fire (Zones IX A and X A), while no such traces were found in samples from other areas. Forensic examination of electrical infrastructure including 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 negated an electrical cause.
The Court further noted that the surveyor’s report and investigation disclosed material discrepancies between the VAT returns submitted by the alleged suppliers and those filed with the Commercial Taxes Department. The suppliers in whose names invoices were produced were found to be either non-existent at the given addresses or not engaged in the trade of the goods claimed to have been supplied. The invoices produced were evidently fabricated. The respondent failed to rebut these findings with credible material. The conduct of the company, including delay in furnishing samples and reliance on fabricated analytical reports, indicated a clear attempt to mislead the investigation. The Court held that the fire was not accidental but the result of a deliberate and orchestrated act of arson for unlawful gain.
The bench emphasised that fraud vitiates all solemn acts and no person can be permitted to take advantage of his own wrong. It observed that 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 fell into error in awarding any amount despite overwhelming evidence of fraud and deliberate misconduct.
Accordingly, the Court set aside the NCDRC order, repudiated the claim in full and absolved the insurer of any liability. The amount deposited by the appellant before the Registry shall be refunded with accrued interest within two weeks. Before parting, the bench observed 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. It directed the Commissioner of Police, Ahmedabad, to constitute a Special Investigation Team headed by an officer not below the rank of Deputy Commissioner of Police to conduct a comprehensive investigation into the incident and the persons involved in the alleged fraud. The investigation shall be completed within three months and a report shall be submitted before the Court in a sealed cover. The matter has been listed on 21 July 2026 at 2:00 p.m. before the same bench.
Case Title:United India Insurance Co. Ltd. vs. Sayona Colors Pvt. Ltd.
Case Nos.: Civil Appeal No. 6100 of 2024 with Civil Appeal No. 10019 of 2024
Date of Judgment: 17 March 2026
Coram: Hon’ble Mr. Justice Ahsanuddin Amanullah and Hon’ble Mr. Justice R. Mahadevan
Click HERE for full Judgment.
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