-
by sayum
23 May 2026 2:59 PM
“Survey Report Based On Memory Without Measurement Is Mere Guesswork”, Delhi High Court set aside an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, holding that the award was perverse as it relied solely on a defective surveyor’s report while ignoring material evidence placed by the claimant.
Justice Jasmeet Singh observed that although judicial interference with arbitral awards is limited, an award that ignores vital evidence and rests on contradictory material cannot be sustained. The Court held that the surveyor’s report, which formed the foundation of the arbitral award, was unreliable as it was prepared without measurements, inventory, or proper verification and was based largely on memory.
Background of the Case
The petitioner, M/s Cosco Blossoms Pvt. Ltd., a floriculture company exporting flowers to international markets, operated greenhouses spread across 15 acres in Village Goyla, Tauru, Gurgaon (Haryana). These greenhouses were constructed using imported galvanized steel structures and covered with UVA stabilized polyethylene sheets imported from Israel, designed to regulate temperature and sunlight for plant cultivation.
The company had obtained two insurance policies from Oriental Insurance Company Ltd., valid from 07 August 1997 to 06 August 1998. While one policy covered plants and inputs, the dispute concerned the fire and miscellaneous insurance policy covering physical assets such as greenhouse equipment and polyethylene sheets.
On 02 June 1998, a severe storm with high winds and rainfall damaged several greenhouse polyethylene sheets. The directors immediately attempted emergency repairs to prevent further damage to plants. However, another storm struck on 04 June 1998, aggravating the damage.
The petitioner informed the insurer on 05 June 1998, following which the insurer’s surveyor J.K. Sharma inspected the site on 06 June 1998. According to the petitioner, 90 sheets had been damaged and replaced, whereas the surveyor assessed damage only to 14.5 sheets, later rounded to 15 sheets.
A second surveyor later recommended compensation of ₹3,17,935, which the petitioner refused to accept as full settlement. The dispute eventually proceeded to arbitration under the policy’s dispute resolution clause.
The Sole Arbitrator (Justice K.S. Gupta, Retd.) passed an award dated 17 March 2012, granting ₹3,17,935 with 10% interest, accepting the surveyor’s assessment of 15 damaged sheets.
Aggrieved, the petitioner challenged the award before the Delhi High Court under Section 34 of the Arbitration and Conciliation Act, 1996.
Legal Issues and Court’s Observations
The Court examined several legal questions arising from the arbitral award.
The first issue concerned the scope of judicial interference under Section 34 of the Arbitration and Conciliation Act. The Court reiterated that courts do not sit in appeal over arbitral awards and cannot re-appreciate evidence merely because another view is possible. Interference is justified only in limited circumstances such as violation of natural justice, patent illegality, perversity, or conflict with public policy of India.
Referring to Associate Builders v. DDA, Delhi Airport Metro Express v. DMRC, and OPG Power Generation v. Enexio Power Cooling Solutions, the Court emphasised that:
“Section 34 embodies the principle of minimal judicial interference, thereby preserving the foundational precept of the Act—the finality and efficacy of arbitral awards.”
However, the Court clarified that perversity arises where an arbitral tribunal ignores vital evidence or bases its findings on irrelevant or contradictory material.
Evidentiary Value of Surveyor’s Report
A central issue before the Court was the reliance placed by the Arbitrator on the surveyor’s report.
The Court observed that although a surveyor’s report carries statutory recognition under insurance law, it is not conclusive or binding. Citing New India Assurance Co. Ltd. v. Pradeep Kumar and National Insurance Co. Ltd. v. Hareshwar Enterprises, the Court reiterated:
“A surveyor’s report, though statutorily recognised, is only a piece of evidence, is neither sacrosanct nor binding.”
During cross-examination, the surveyor admitted several serious deficiencies in his report. He conceded that he did not calculate the total number of damaged sheets, prepared no inventory, conducted no measurements, and that the report was largely based on memory.
The Court noted that the survey report itself claimed that measurements of each damaged sheet were taken in the presence of representatives of the insured. However, the surveyor’s earlier letter and cross-examination revealed that no such measurements were actually undertaken, creating clear contradictions.
Justice Jasmeet Singh therefore remarked: “A survey report based merely on memory, without proper calculation, verification, inventory preparation or measurements, cannot form the sole basis for determining the quantum of insurance claim.”
The Court described the report as “at best the guesswork of the surveyor.”
Ignoring Material Evidence – Ground of Perversity
Another significant flaw identified by the Court was the arbitrator’s failure to consider the claimant’s evidence.
The petitioner had produced stock registers showing replacement of 90 sheets, along with testimony from several witnesses including the company’s Managing Director and other officials. These documents were maintained in the ordinary course of business.
However, the arbitral award did not analyse this evidence at all.
The Court held that the arbitrator, despite acknowledging that witnesses had testified and were cross-examined, failed to evaluate their evidence even in a single paragraph.
Relying on the principle laid down in Associate Builders v. DDA, the Court stated: “Where an arbitral tribunal ignores vital evidence in arriving at its decision, such decision would necessarily be perverse.”
Consequently, the award—which relied solely on a flawed survey report while disregarding documentary and oral evidence—was held to be legally unsustainable.
Interpretation of “Forthwith” Notice in Insurance Policy
The insurer had argued that the claim was doubtful because the petitioner replaced damaged sheets before informing the insurer, allegedly violating Clause 6(i) of the insurance policy, which required the insured to notify the insurer “forthwith” after loss.
The Court rejected this argument.
The first storm occurred on 02 June 1998, a second storm on 04 June 1998, and the petitioner notified the insurer on 05 June 1998.
The Court held that such intimation clearly constituted compliance with the policy condition, explaining: “In the context of this clause, ‘forthwith’ means ‘as soon as possible’ and in any case within the outer limit of fifteen days.”
Emergency Repairs and Conduct of Insured
The Court also rejected the arbitrator’s view that replacing sheets before the survey inspection cast doubt on the claim.
It recognised the practical realities of floriculture, noting that damaged greenhouse coverings could expose plants to environmental harm and cause extensive losses.
Justice Jasmeet Singh observed: “The nature of damage required immediate restoration and the representatives of the petitioner acted in a manner as every prudent person ought to have.”
Thus, emergency repairs undertaken to prevent further damage cannot be treated as suspicious conduct or a breach of policy conditions.
Alleged Non-Disclosure by Arbitrator Under Section 12
The petitioner had also raised an objection regarding the arbitrator’s alleged relationship with the Managing Director of the petitioner company, arguing non-compliance with Section 12 of the Arbitration and Conciliation Act regarding disclosure of circumstances affecting impartiality.
However, the Court rejected this ground. It noted that the petitioner participated in the arbitral proceedings for years without raising any objection and only requested recusal three days before the award was delivered.
The Court held the allegation to be belated and vague, and therefore declined to interfere on this ground.
The Delhi High Court ultimately concluded that the arbitral award was fundamentally flawed.
The award was based entirely on a defective survey report prepared without measurement or inventory, while material documentary and oral evidence presented by the claimant was ignored altogether. Such an approach rendered the award perverse and contrary to settled principles governing arbitral adjudication.
Accordingly, the Court set aside the arbitral award dated 17 March 2012 under Section 34 of the Arbitration and Conciliation Act, 1996, holding that an arbitral tribunal cannot blindly rely on a surveyor’s report when credible evidence on record points otherwise.
Date of Decision: 12 March 2026
