{"id":708,"date":"2026-08-24T10:45:12","date_gmt":"2026-08-24T10:45:12","guid":{"rendered":"https:\/\/mudralegal.com\/blog\/?p=708"},"modified":"2026-08-24T10:56:48","modified_gmt":"2026-08-24T10:56:48","slug":"m-s-texco-marketing-pvt-ltd-versus-tata-aig-general-insurance-company-ltd-ors-civil-appeal-no-8249-of-2022-supreme-court-of-india-decided-on-9th-november-2022","status":"publish","type":"post","link":"https:\/\/mudralegal.com\/blog\/m-s-texco-marketing-pvt-ltd-versus-tata-aig-general-insurance-company-ltd-ors-civil-appeal-no-8249-of-2022-supreme-court-of-india-decided-on-9th-november-2022\/","title":{"rendered":"M\/s Texco Marketing Pvt. Ltd. versus TATA AIG General Insurance Company Ltd. &#038; Ors. Civil Appeal No. 8249 of 2022 Supreme Court of India Decided on: 9th November 2022"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"708\" class=\"elementor elementor-708\">\n\t\t\t\t<div class=\"elementor-element elementor-element-591f74d3 e-flex e-con-boxed e-con e-parent\" data-id=\"591f74d3\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-69ac1a5f elementor-widget elementor-widget-text-editor\" data-id=\"69ac1a5f\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"color: #000000;\"><\/span><\/p>\n<h4><span style=\"color: #000000;\"><strong>Issues Raised:<\/strong><\/span><\/h4><p class=\"wp-block-paragraph\"><span style=\"color: #000000;\">A company (the appellant) bought a fire insurance policy for a shop located in a <strong>basement<\/strong>. The insurance company (the respondent) inspected the shop and knew it was in a basement, yet they still accepted the premium and issued the policy. When a fire damaged the shop, the insurance company refused to pay, pointing to a &#8220;hidden&#8221; rule (an <strong>exclusion clause<\/strong>) in the contract that said basements were not covered. The shop owner argued that the insurance company acted unfairly by taking their money for a policy they knew could never be used.<\/span><\/p>\n<p><span style=\"color: #000000;\"><\/span><\/p>\n<h4><span style=\"color: #000000;\"><strong>Issues Framed:<\/strong><\/span><\/h4><p class=\"wp-block-paragraph\"><span style=\"color: #000000;\"> The court primarily examined whether an insurance company can use an &#8220;exclusion clause&#8221; to avoid paying a claim when that clause contradicts the very reason the contract was made, especially when the company knew about the situation from the start.<\/span><\/p><p><span style=\"color: #000000;\"><br><\/span><\/p>\n<p><span style=\"color: #000000;\"><\/span><\/p>\n<h4><span style=\"color: #000000;\"><strong>Observations on Issues Framed:<\/strong><\/span><\/h4>\n<p class=\"wp-block-paragraph\"><span style=\"color: #000000;\"><\/span><\/p>\n<ul class=\"wp-block-list\"><p><\/p>\n<li><span style=\"color: #000000;\"><strong>One-Sided Contracts:<\/strong> The court noticed that insurance policies are often <strong>&#8220;adhesion contracts&#8221;\u2014meaning<\/strong>&nbsp;they are &#8220;take-it-or-leave-it&#8221; forms where the consumer has no power to negotiate the terms.<\/span><\/li>\n<p><\/p>\n<li><span style=\"color: #000000;\"><strong>Duty of Fairness:<\/strong> Because these contracts are one-sided, the insurance company has a very high duty to be <strong>fair, honest, and clear<\/strong> about all rules and exclusions.<\/span><\/li>\n<p><\/p>\n<li><span style=\"color: #000000;\"><strong>The Main Purpose Rule:<\/strong> The court observed that an exclusion rule cannot be allowed to &#8220;snipe&#8221; or destroy the <strong>main purpose<\/strong> of the contract. If a rule makes it impossible to ever claim the insurance from the day it is signed, that rule is invalid.<\/span><\/li>\n<p><\/p>\n<li><span style=\"color: #000000;\"><strong>Insurance Company&#8217;s Knowledge:<\/strong> Since the company inspected the shop and knew it was in a basement, they <strong>waived<\/strong> their right to use the basement exclusion clause later. Taking a premium while knowing the policy is &#8220;un-executable&#8221; is an <strong>unfair trade practice<\/strong>.<\/span><\/li>\n<p><\/p><\/ul>\n<p><span style=\"color: #000000;\"><\/span><\/p>\n<h4><span style=\"color: #000000;\"><strong>Sections Interpreted:<\/strong><\/span><\/h4>\n<p class=\"wp-block-paragraph\"><span style=\"color: #000000;\"><\/span><\/p>\n<ul class=\"wp-block-list\"><p><\/p>\n<li><span style=\"color: #000000;\"><strong>Indian Contract Act, 1872:<\/strong> <strong>Sections 17 (Fraud), 18 (Misrepresentation), and 19<\/strong> (how contracts can be cancelled or performed when one party is misled).<\/span><\/li>\n<p><\/p>\n<li><span style=\"color: #000000;\"><strong>Consumer Protection Act, 1986 &amp; 2019:<\/strong> Sections regarding <strong>&#8220;Deficiency in Service&#8221;<\/strong> and <strong>&#8220;Unfair Trade Practice&#8221;<\/strong>.<\/span><\/li>\n<p><\/p>\n<li><span style=\"color: #000000;\"><strong>IRDA (Protection of Policy Holder\u2019s Interests) Regulation, 2002:<\/strong> <strong>Clauses 3 and 4<\/strong>, which legally require insurance companies to explain all terms and provide copies of the paperwork to the customer.<\/span><\/li>\n<p><\/p><\/ul>\n<p><span style=\"color: #000000;\"><\/span><\/p>\n<h4><span style=\"color: #000000;\"><strong>Law Settled:<\/strong><\/span><\/h4>\n<p class=\"wp-block-paragraph\"><span style=\"color: #000000;\"><\/span><\/p>\n<ol class=\"wp-block-list\" start=\"1\"><p><\/p>\n<li><span style=\"color: #000000;\"><strong>The &#8220;Blue Pencil&#8221; Rule:<\/strong> If a specific part of a contract (like an exclusion clause) is illegal or destroys the main goal of the agreement, the court can &#8220;strike it off&#8221; and enforce the rest of the contract.<\/span><\/li>\n<p><\/p>\n<li><span style=\"color: #000000;\"><strong>Disclosure is Mandatory:<\/strong> If an insurance company fails to give the customer a copy of the exclusion rules or fails to explain them, they <strong>cannot<\/strong> use those rules to reject a claim.<\/span><\/li>\n<p><\/p>\n<li><span style=\"color: #000000;\"><strong>No Profiting from Contradictions:<\/strong> An insurer cannot knowingly insure a property that falls under an exclusion, take the premium, and then deny the claim based on that same exclusion.<\/span><\/li>\n<p><\/p><\/ol>\n<p><span style=\"color: #000000;\"><\/span><\/p>\n<p class=\"wp-block-paragraph\"><span style=\"color: #000000;\"><strong>Judgment \/ Directions:<\/strong><\/span><\/p><p><span style=\"color: #000000;\">The Supreme Court <strong>allowed the appeal<\/strong> and ordered the insurance company to pay the claim. The court ruled that the exclusion clause was invalid because it was unfair and the company knew the shop was in a basement when they took the owner&#8217;s money. Finally, the court issued a <strong>word of caution<\/strong> to all insurance companies: they must follow the rules to inform customers properly, or they will lose the right to reject claims based on their &#8220;small print&#8221; exclusions.<\/span><\/p>\n<p><span style=\"color: #000000;\"><\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-147d35a e-flex e-con-boxed e-con e-parent\" data-id=\"147d35a\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-3e34a14 elementor-shape-rounded elementor-grid-0 e-grid-align-center elementor-widget elementor-widget-social-icons\" data-id=\"3e34a14\" data-element_type=\"widget\" data-widget_type=\"social-icons.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<div class=\"elementor-social-icons-wrapper elementor-grid\" role=\"list\">\n\t\t\t\t\t\t\t<span class=\"elementor-grid-item\" role=\"listitem\">\n\t\t\t\t\t<a class=\"elementor-icon elementor-social-icon elementor-social-icon-youtube elementor-repeater-item-a71149e\" href=\"https:\/\/www.youtube.com\/channel\/UCBYhCOJ-ZtiZDCt2NJRz2nA\" target=\"_blank\">\n\t\t\t\t\t\t<span class=\"elementor-screen-only\">Youtube<\/span>\n\t\t\t\t\t\t<svg class=\"e-font-icon-svg e-fab-youtube\" viewBox=\"0 0 576 512\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><path d=\"M549.655 124.083c-6.281-23.65-24.787-42.276-48.284-48.597C458.781 64 288 64 288 64S117.22 64 74.629 75.486c-23.497 6.322-42.003 24.947-48.284 48.597-11.412 42.867-11.412 132.305-11.412 132.305s0 89.438 11.412 132.305c6.281 23.65 24.787 41.5 48.284 47.821C117.22 448 288 448 288 448s170.78 0 213.371-11.486c23.497-6.321 42.003-24.171 48.284-47.821 11.412-42.867 11.412-132.305 11.412-132.305s0-89.438-11.412-132.305zm-317.51 213.508V175.185l142.739 81.205-142.739 81.201z\"><\/path><\/svg>\t\t\t\t\t<\/a>\n\t\t\t\t<\/span>\n\t\t\t\t\t\t\t<span class=\"elementor-grid-item\" role=\"listitem\">\n\t\t\t\t\t<a class=\"elementor-icon elementor-social-icon elementor-social-icon-linkedin elementor-repeater-item-eabfc87\" href=\"https:\/\/www.linkedin.com\/company\/mudra-legal\/posts\/?feedView=all&#038;viewAsMember=true\" target=\"_blank\">\n\t\t\t\t\t\t<span class=\"elementor-screen-only\">Linkedin<\/span>\n\t\t\t\t\t\t<svg class=\"e-font-icon-svg e-fab-linkedin\" viewBox=\"0 0 448 512\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><path d=\"M416 32H31.9C14.3 32 0 46.5 0 64.3v383.4C0 465.5 14.3 480 31.9 480H416c17.6 0 32-14.5 32-32.3V64.3c0-17.8-14.4-32.3-32-32.3zM135.4 416H69V202.2h66.5V416zm-33.2-243c-21.3 0-38.5-17.3-38.5-38.5S80.9 96 102.2 96c21.2 0 38.5 17.3 38.5 38.5 0 21.3-17.2 38.5-38.5 38.5zm282.1 243h-66.4V312c0-24.8-.5-56.7-34.5-56.7-34.6 0-39.9 27-39.9 54.9V416h-66.4V202.2h63.7v29.2h.9c8.9-16.8 30.6-34.5 62.9-34.5 67.2 0 79.7 44.3 79.7 101.9V416z\"><\/path><\/svg>\t\t\t\t\t<\/a>\n\t\t\t\t<\/span>\n\t\t\t\t\t\t\t<span class=\"elementor-grid-item\" role=\"listitem\">\n\t\t\t\t\t<a class=\"elementor-icon elementor-social-icon elementor-social-icon-instagram elementor-repeater-item-6a60f26\" href=\"https:\/\/www.instagram.com\/mudralegal\/\" target=\"_blank\">\n\t\t\t\t\t\t<span class=\"elementor-screen-only\">Instagram<\/span>\n\t\t\t\t\t\t<svg class=\"e-font-icon-svg e-fab-instagram\" viewBox=\"0 0 448 512\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><path d=\"M224.1 141c-63.6 0-114.9 51.3-114.9 114.9s51.3 114.9 114.9 114.9S339 319.5 339 255.9 287.7 141 224.1 141zm0 189.6c-41.1 0-74.7-33.5-74.7-74.7s33.5-74.7 74.7-74.7 74.7 33.5 74.7 74.7-33.6 74.7-74.7 74.7zm146.4-194.3c0 14.9-12 26.8-26.8 26.8-14.9 0-26.8-12-26.8-26.8s12-26.8 26.8-26.8 26.8 12 26.8 26.8zm76.1 27.2c-1.7-35.9-9.9-67.7-36.2-93.9-26.2-26.2-58-34.4-93.9-36.2-37-2.1-147.9-2.1-184.9 0-35.8 1.7-67.6 9.9-93.9 36.1s-34.4 58-36.2 93.9c-2.1 37-2.1 147.9 0 184.9 1.7 35.9 9.9 67.7 36.2 93.9s58 34.4 93.9 36.2c37 2.1 147.9 2.1 184.9 0 35.9-1.7 67.7-9.9 93.9-36.2 26.2-26.2 34.4-58 36.2-93.9 2.1-37 2.1-147.8 0-184.8zM398.8 388c-7.8 19.6-22.9 34.7-42.6 42.6-29.5 11.7-99.5 9-132.1 9s-102.7 2.6-132.1-9c-19.6-7.8-34.7-22.9-42.6-42.6-11.7-29.5-9-99.5-9-132.1s-2.6-102.7 9-132.1c7.8-19.6 22.9-34.7 42.6-42.6 29.5-11.7 99.5-9 132.1-9s102.7-2.6 132.1 9c19.6 7.8 34.7 22.9 42.6 42.6 11.7 29.5 9 99.5 9 132.1s2.7 102.7-9 132.1z\"><\/path><\/svg>\t\t\t\t\t<\/a>\n\t\t\t\t<\/span>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Issues Raised: A company (the appellant) bought a fire insurance policy for a shop located in a basement. 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