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by Admin
12 March 2026 9:37 AM
“Where There Is No Resistance, No Immediate Complaint, And Known Creditors Remove Goods – The Incident Cannot Be Treated As Theft Under Insurance Policy”, Andhra Pradesh High Court clarifying the scope of coverage under a Shopkeepers Insurance Policy in cases alleging theft or burglary.
Justice V. Gopala Krishna Rao held that when goods are taken away by known creditors in broad daylight without resistance and the insured fails to prove loss or comply with policy conditions, the incident cannot be treated as theft or burglary under the insurance contract.
Setting aside the trial court’s decree awarding damages to the shop owner, the High Court held that the insurance company had rightly repudiated the claim, as the alleged incident did not fall within the coverage of the policy.
Background of the Case
The respondent-plaintiff was running a cloth business under the name “Monalisa Emporium” in Guntur. To obtain financial assistance as an unemployed graduate, the plaintiff approached Swasakthi authorities, who recommended his case to State Bank of Hyderabad (defendant No.2) for a loan facility.
As part of the loan conditions, the bank insisted that the stocks in the shop be insured, and accordingly the plaintiff obtained a Shopkeepers Insurance Policy from National Insurance Co. Ltd. on 27 November 1990, covering stocks for Rs. 2,25,000, valid until 26 November 1991.
The plaintiff alleged that on 26 October 1991 at about 12:30 p.m., while he was away from the shop, two persons forcibly removed cloth stock worth Rs.1,25,000 from the shop in the presence of his wife, who was managing the shop at that time. According to the plaintiff, the incident was immediately reported to the insurer and the police.
When the insurance company refused to settle the claim, the plaintiff initially approached the District Consumer Forum, which dismissed the complaint on the ground that complicated questions of fact were involved and advised the plaintiff to approach the civil court.
Subsequently, the plaintiff filed O.S. No. 482 of 1996 before the III Additional Senior Civil Judge, Guntur, seeking Rs.1,72,650 as damages from the insurance company.
The trial court decreed the suit against the insurance company. Aggrieved by the judgment, National Insurance Co. Ltd. filed the present appeal under Section 96 of the Code of Civil Procedure, 1908 before the High Court.
Insurance Company’s Defence
The insurance company strongly contested the claim, asserting that no genuine theft had occurred and that the claim was fabricated.
The insurer argued that the plaintiff had purchased cloth on credit from two wholesalers of Chirala, namely M.S.R. Anjaneyulu and Subramanyam, and had failed to clear his dues despite repeated demands. According to the insurer, those merchants visited the shop and took away unsold cloth towards the outstanding debt, and therefore the incident was not a case of theft.
The insurer also pointed out that the alleged incident was reported nearly nine months later, violating the mandatory conditions of the insurance policy requiring immediate reporting and cooperation in recovery of property.
Evidence Before the Court
During the trial, the plaintiff examined himself as P.W.1 and his wife as P.W.2. The wife testified that while she was managing the shop, two persons came and stated that the plaintiff owed them money and then removed the stock, allegedly threatening her.
However, the High Court found several inconsistencies and deficiencies in the plaintiff’s case.
The Court noted that the alleged incident occurred in broad daylight at 12:30 p.m. in a busy commercial locality at Brundavan Gardens on the main road in Guntur. Despite this, no resistance or protest was made by the plaintiff’s wife or the worker present in the shop.
The Court observed that the wife of the plaintiff admitted during cross-examination that the persons who removed the goods were known merchants named Subramanyam and M.S.R. Anjaneyulu.
“Failure to Raise Alarm Indicates Consent Rather Than Theft”
Justice Rao carefully examined the conduct of the persons present at the shop and found it inconsistent with the claim of a forcible theft.
The Court observed that if two persons had indeed forcibly removed a large quantity of cloth stock during business hours, the shopkeepers or neighboring traders would have certainly intervened.
The judgment records:
“There is no whisper in the evidence that the wife of the plaintiff made even minimum resistance or raised any cries to call neighbouring shop people.”
The Court further observed that the worker present in the shop at the time of the incident was not examined as a witness, nor were any neighboring shopkeepers called to corroborate the alleged theft.
From these circumstances, the Court concluded that the conduct of the plaintiff’s wife and the worker indicated consent rather than coercion.
Failure to Prove Loss or Produce Stock Records
The High Court also found that the plaintiff failed to establish the quantum of loss.
Although the plaintiff claimed that stock worth Rs.1,25,000 was removed, he did not produce any inventory of goods or list of stock lost with price details before the trial court.
The Court observed that mere oral testimony of the plaintiff and his wife was insufficient to prove such a substantial loss.
“Failure to Examine Material Witnesses Creates Adverse Inference”
The Court placed particular emphasis on the non-examination of material witnesses.
The complaint itself mentioned that a worker named Siva Narayana was present in the shop during the incident, yet the plaintiff did not examine him as a witness.
The Court held that failure to produce such crucial evidence warranted an adverse inference against the plaintiff.
Police Investigation Declared Complaint False
Another significant factor considered by the Court was the outcome of the police investigation.
The plaintiff had eventually approached the Magistrate Court, which directed the police to investigate the matter. After investigation, the police filed a final report declaring the complaint to be false.
The Court noted that the plaintiff did not file any protest petition challenging the police report, further weakening his claim.
Violation of Policy Conditions
The High Court also examined Condition No. 5 of the Shopkeepers Insurance Policy, which required the insured to immediately report theft to the police and notify the insurer within fourteen days.
The Court found that the FIR showed the police received the complaint only on 21 August 1992, nearly ten months after the alleged incident of 26 October 1991.
The Court observed that such delay violated the policy condition requiring the insured to take all practicable steps to apprehend the culprits and recover the property.
Incident Does Not Constitute Theft or Burglary
After considering the evidence, the High Court concluded that the removal of goods by the two merchants did not amount to theft or burglary within the meaning of the insurance policy.
The Court held:
“The acts of the said two persons who came to the shop at broad daylight do not form part of an act of burglary or theft and do not come within the scope of coverage of the insurance policy.”
The Court further observed that the persons who took away the stock were known creditors of the plaintiff, and therefore the appropriate remedy for the plaintiff, if any, would lie against them and not against the insurance company.
Final Decision of the Court
Allowing the appeal filed by National Insurance Co. Ltd., the High Court set aside the judgment and decree dated 23 November 2005 passed by the III Additional Senior Civil Judge, Guntur.
Consequently, the civil suit filed by the plaintiff seeking Rs.1,72,650 as damages was dismissed. The Court directed that each party should bear its own costs.
The judgment underscores that insurance claims based on alleged theft must be supported by credible evidence and strict compliance with policy conditions. Where goods are removed by known persons without resistance and the insured fails to prove loss or promptly report the incident, the insurer cannot be held liable under a theft or burglary policy.
Date of Decision: 10 March 2026
