National Consumer Disputes Redressal
Aradhna Fabrics Pvt. Ltd. vs United India Insurance Co. Ltd. on 15 April, 2015
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 151 OF 2009 1. ARADHNA FABRICS PVT. LTD. Through Sh. Ashok Avasthi,
Managing Director,
144, Industrial Area-A Ludhiana Punjab ...........Complainant(s) Versus 1. UNITED INDIA INSURANCE CO. LTD. Service to be effected Through its Chairman-cum-Managing Director,
Regd. & Head Office-24,
Whites Road Chennai - 600 014 2. UNITED INDIA INSURANCE CO. LTD. Service to be effected through the Divisional Manager, Divisional Office No. 1, 455, The Mall Ludhiana Punjab ...........Opp.Party(s)
BEFORE: HON'BLE MR. JUSTICE V.K. JAIN, PRESIDING MEMBER
For the Complainant : Mr. S.M. Suri, Advocate For the Opp.Party : Mr. A.K. De, Advocate
Mr. Zahid Ali, Advocate
Dated : 15 Apr 2015 ORDER
JUSTICE V.K. JAIN, PRESIDING MEMBER
The complainant company obtained four policies from the opposite party United India Insurance Co. Ltd., thereby insuring its building, plant, machinery and accessories furniture, fixtures and fittings as well as the stock of yarn / fabrics/clothes, kept in its factory premises at 144, Industrial Area - A Ludhiana. On the night intervening 29/30th April, 2007, a fire broke out in the factory premises of the complainant, causing damage to the building, plant and machinery as well as the stock kept in the factory. The information of fire having been given to the insurance company, S. Soni & Co., were appointed as the surveyors and the Loss Assessors. A claim of Rs.6.68 crores, along with Rs.1.60 lacs towards out of pocket expenses was lodged by the complainant with the insurance company. The surveyor submitted a report dated 08.12.2007, assessing the loss at Rs.5,23,34,842.88 on reinstatement basis and Rs.3,70,30,083.83 on depreciation basis. On receipt of the aforesaid report, the insurance company made part payment of Rs.3.00 crores to the complainant. The surveyor submitted a final report dated 22.10.2008, assessing the loss to the complainant at Rs.5,00,88,091/-. Being aggrieved from the failure to make the balance payment, the complainant approached this Commission on 24.9.2009, seeking the following reliefs:
Direct the opposite party to release the total amount of Rs.5,23,34,842/- (as assessed by the surveyor in surveyor report dated 8.12.2007) and the balance as per the claim amount;
Declare that the silence on the part of the opposite party, not settling the claim, is illegal, biased and malafide in law and these are deficiency in services;
Direct the opposite party to pay the entire claim amount of Rs.6.68 crores as per claim form i.e. as per policies and also the increased in labour and material expenses, which is expected @ 15% to 20% upto the time of filing the complaint to reinstate the building / machineries etc., Grant Special punitive damages;
Pay interest @ 15% after three months from the date of the loss upto the date of payment and special costs.
2. The complaint has been resisted by the insurance company on the ground that after making part payment of Rs.3.00 crores to the complainant, in early 2008, they made payment of Rs.2,00,46,882/- to it vide cheque dated 15.10.2009 and the said payment was accepted by the complainant in settlement of its claim.
3. In view of the stand taken by the insurance company in the reply filed by it, we have heard the learned counsel for the parties on the question as to whether having accepted a sum of Rs.2,00,46,882/- in addition to the interim payment of Rs.3.00 crores from the opposite party, the complainant was estopped from claiming any amount and the complaint is liable to be dismissed or not.
4. It has been contended by the learned counsel for the complainant that since they were not receiving any further payment from the insurance company, they were left with no other option but to accept the offer made by the insurance company. This was also his contention that the payment of Rs.2,00,46,882/- was accepted under protest and on having been pressurised by the insurance company. The learned counsel for the opposite party, on the other hand, contended that there was no compulsion on the complainant to accept the aforesaid amount, particularly when an interim payment of Rs.3.00 crores had already been received by it from the insurance company and in fact the complainant had voluntarily accepted the aforesaid payment of Rs.2,00,46,882/- in full and final settlement of its claim. It was also pointed out by the learned counsel for the insurance company that the amount paid to the complainant was not an arbitrary amount but was exactly the amount recommended by the surveyor vide his report dated 22.10.2008.
5. In National Insurance Co. Vs. Boghara Polyfab Pvt. Ltd. (2009) 1 SCC 267, the surveyor assessed the loss to the insured at Rs.3,18,26,025/- taking the insured sum to be Rs.12.00 crores. When it was pointed to him that the sum insured was only Rs.6.00 crores, the loss was reworked out by him and assessed at Rs.2,34,01,740/-. The respondent however, protested against the loss being reassessed. The respondent issued a discharge voucher in advance acknowledging receipt of Rs.2,33,94,964/- in full and final settlement. The insured alleged that the insurer had forced it to issue an undated voucher informing that no amount would be released till such a voucher was submitted and being in dire financial condition and left with no alternative the insured signed and submitted the said undated voucher. Simultaneously, the insured lodged a complaint with IIRDA, alleging that the insurance company had forced it to accept a lower settlement and since having suffered losses they were not able to pay their supplier resulting in tremendous financial loss and had lost reputation in the market by becoming defaulters, they had yielded to the aforesaid pressure from the insurer. Since the agreement between the parties carried an arbitration clause, the question which arose before the Hon'ble Supreme Court was as to whether the Court should refuse to refer a dispute relating to quantum of compensation to arbitration, on the ground that the petitioner had issued a full and final settlement discharge voucher, though he had contended that he was constraint to issue it due to coercion, undue influence and economic compulsion. After considering the case law on the subject, the Hon'ble Supreme Court inter-alia observed and held as under:
"25. Where one of the parties to the contract issues a full and final discharge voucher (or no-dues certificate, as the case may be) confirming that he has received the payment in full and final satisfaction of all claims, and he has no outstanding claim, that amounts to discharge of the contract by acceptance of performance and the party issuing the discharge voucher/certificate cannot thereafter make any fresh claim or revive any settled claim nor can it seek reference to arbitration in respect of any claim.
26. When we refer to a discharge of contract by an agreement signed by both the parties or by execution of a full and final discharge voucher/receipt by one of the parties, we refer to an agreement or discharge voucher which is validly and voluntarily executed. If the party which has executed the discharge agreement or discharge voucher, alleges that the execution of such discharge agreement or voucher was on account of fraud/coercion/undue influence practised by the other party and is able to establish the same then obviously the discharge of the contract by such agreement/voucher is render void and cannot be acted upon".
50. Let us consider what a civil court would have done in a case where the defendant puts forth the defence of accord and satisfaction on the basis of a full and final discharge voucher issued by the plaintiff, and the plaintiff alleges that it was obtained by fraud/coercion/undue influence and therefore not valid. It would consider the evidence as to whether there was any fraud, coercion or undue influence. If it found that there was none, it will accept the voucher as being in discharge of the contract and reject the claim without examining the claim on merits. On the other hand, if it found that the discharge voucher had been obtained by fraud/undue influence/coercion, it will ignore the same, examine whether the plaintiff had made out the claim on merits and decide the matter accordingly. The position will be the same even when there is a provision for arbitration".
52 (iv) An insured makes a claim for loss suffered. The claim is neither admitted nor rejected. But the insured is informed during discussions that unless the claimant gives a full and final voucher for a specified amount (far lesser than the amount claimed by the insured), the entire claim will be rejected. Being in financial difficulties, the claimant agrees to the demand and issues an undated discharge voucher in full and final settlement. Only a few days thereafter, the admitted amount mentioned in the voucher is paid. The accord and satisfaction in such a case is not voluntary but under duress, compulsion and coercion. The coercion is subtle, but very much real. The "accord" is not by free consent. The arbitration agreement can thus be invoked to refer the disputes to arbitration.
(v) A claimant makes a claim for a huge sum, by way of damages. The respondent disputes the claim. The claimant who is keen to have a settlement and avoid litigation, voluntarily reduces the claim and requests for settlement. The respondent agrees and settles the claim and obtains a full and final discharge voucher. Here even if the claimant might have agreed for settlement due to financial compulsions and commercial pressure or economic duress, the decision was his free choice. There was no threat, coercion or compulsion by the respondent. Therefore, the accord and satisfaction is binding and valid and there cannot be any subsequent claim or reference to arbitration".
54. The discharge voucher form was handed over to the respondent on 21.3.2006. It was signed and delivered to the appellant immediately thereafter acknowledging that a sum of Rs.2,33,94,964/- had been received from the insurer (the appellant) in full and final settlement, and that in consideration of such payment, the respondent absolved the appellant of all liabilities, present and future, arising directly or indirectly, out of said loss or damage under the policy. Admittedly, on the date when such discharge voucher was signed and given by the respondent, the payment of Rs.2,33,94,964/- had not been made. It was made after receiving the voucher. Therefore, at the time of signing the voucher by the respondent and at the time of delivery of voucher by the respondent to the appellant, the contents of the voucher that the said amount had been received, that such amount had been received in full and final settlement of all claims, and that in consideration of such payment, the company was absolved of any further liability, are all false and not supported by consideration".
6. In United India Insurance Co. Ltd. Vs.Ajmer Singh Cotton & General Mills & Ors.(1999) 6 SCC 400, the Hon'ble Supreme Court inter-alia observed and held as under:
"47. 4. The mere execution of the discharge voucher would not always deprive the consumer from preferring claim with respect to the deficiency in service or consequential benefits arising out of the amount paid in default of the service rendered. Despite execution of the discharge voucher, the consumer may be in a position to satisfy the tribunal or the Commission under the Act that such discharge voucher or receipt had been obtained from him under the circumstances which can be termed as fraudulent or exercise of undue influence or by misrepresentation or the like. If an a given case the consumer satisfies the authority under the Act that the discharge voucher was obtained by fraud, misrepresentation, undue influence or the like, coercive bargaining compelled by circumstances, the authority before whom the complaint is made would be justified ing ranting appropriate relief......
5. In the instant cases the discharge vouchers were admittedly executed voluntarily and the complainants had not alleged their execution under fraud, undue influence, misrepresentation or the like. In the absence of pleadings and evidence the State Commission was justified in dismissing their complaints".
The above principles was followed and reiterated in National Insurance Co. Ltd. V. Nipha Exports (P) Ltd. And National Insurance Co. Ltd. V. Sethia Shoes".
7. In New India Assurance Co. Ltd. Vs. Genus Power Infrastructure Ltd. 2015, AIR SCW 67, Civil Appeal No.10784 of 2014, decided on 04.12.2014, the respondent which had issued a discharge voucher to the insurance company took the plea that the insurer had taken undue advantage of the extreme financial difficulties it was facing and pressurised it to sign and submit the discharge voucher accepting the amount offered by the insurance company in full and final settlement of its claim. Rejecting the contention, the Hon'ble Supreme Court held that a bald plea of fraud, coercion, duress or undue influence is not enough and the party who sets up such a plea must prima facie establish the same by placing material which would substantiate the said plea. Noticing inter-alia that the financial condition of the insured was not so precarious that it was left with no alternative but to accept the terms as suggested by the insurer, the Hon'ble Supreme Court held that the discharge was not because of the exercise of any undue influence. Such discharge and signing of letter of subrogation was voluntary and free from any coercion or undue influence.
8. The legal proposition, which emerges from the above referred decisions of the Hon'ble Supreme Court is that though, issue of a discharge voucher accepting a particular amount in full and final settlement of its claim is not conclusive when there are allegations of fraud, undue influence etc., mere bald allegations are not sufficient in this regard and such allegations cannot be accepted by the Court, unless the insured places material before the concerned Court / Forum, which would substantiate the plea of fraud, undue influence etc., taken by him and establish that the discharge voucher executed by him was not voluntary and was in fact a product of exercise of fraud, undue influence, coercion, misrepresentation etc., on the part of the insurer. The onus will be upon the insured to substantiate the plea of fraud, undue influence etc., taken by him. As observed in Boghara Polyfab Pvt. Ltd. (supra) if it is found that there was no fraud, coercion, undue influence, the Court/forum concerned has to accept the voucher as being in discharge of the contract and reject the claim without examining it on merits. If however, it is found that the discharge voucher was obtained by use of fraud, undue influence, coercion etc., it has to be ignored and the claim needs to be examined and decided on merits.
9. In the present case, the complainant was already before this Commission when the discharge voucher came to be executed and submitted by it, to the insurance company. Interim payment of Rs.3.00 crores had already been made to the complainant before it approached this Commission. If the insurance company offered a sum of Rs. 2,00,46,882/- to it and the said offer was not acceptable to the complainant, nothing prevented it from filing an application before this Commission for a direction to the insurance company to make payment of the aforesaid amount of Rs. 2,00,46,882/- without prejudice to the rights and contentions of the parties. Had such a course been adopted by the complainant which was duly represented by a counsel; it would have been possible for this Commission to pass such an order and thereafter adjudicate the claim on merits. That however, was not done and the complainant has not given any explanation for not adopting the aforesaid course of action. The inevitable inference therefore would be that the complainant voluntarily entered into a settlement with the insurance company accepting the amount of Rs.2,00,46,882/- in full and final settlement of its claim.
10. As noted earlier, a part payment of Rs.3.00 crores had already been made to the complainant, before it approached this Commission. Though this complaint was filed in the year 2009 and evidence has already been led by the parties, the complainant has not produced its account books and balance sheet etc., before this Commission to prove that it was in a serious financial difficulty at the time the discharge voucher was executed by it and that but for the aforesaid payment from the insurance company its business would have been ruined or seriously affected. Had the complainant company filed its account books including its balance sheets and the list of its assets and liabilities at the relevant time, this Commission could have been able to know whether it was really in such a difficulty at the time discharge voucher was issued that it was left with no option other than accepting the payment of Rs.2,00,46,882/- in full and final settlement of its claim. Moreover, as noted earlier, there is no explanation form the complainant company for not approaching this Commission for an interim order, directing the insurance company to make payment of Rs. 2,00,46,882/- instead of signing and submitting the discharge voucher to the insurance company.
11. Admittedly, the complainant signed the letter dated 19th October, 2009 to the insurance company only after it had already encashed the cheque of Rs.2,00,46,882/- taken from the insurance company. If the complainant did not voluntarily execute the discharge voucher, it could easily have withheld the encashment of the cheque received from the insurance company for a few days and filed an application before this Commission, seeking permission to encash the said cheque without prejudice to the respective rights and contentions of the parties. Even that course of action was not adopted by the complainant and no explanation is forthcoming for not resorting to such a course of action, despite the complainant being represented by a counsel.
12. Yet another important aspect of this case is that the insurance company paid the entire amount recommended by the surveyor to the complainant. Therefore, it cannot be said that the payment of Rs. 2,00,46,882/- was arbitrary and unjustified. It appears to me that the complainant accepted the offer of the said payment of Rs.2,00,46,882/- and executed the discharge voucher realizing that the offer made to him by the insurance company was a fair offer, being strictly in consonance with the assessment made by the surveyor.
13. Free consent is defined in Section 14 of the India Contract Act, which read as under:
"14. "Free consent" defined Consent is said to be free when it is not caused by- (1) coercion, as defined in section 15, or (2) undue influence, as defined in section 16, or (3) fraud, as defined in section 17, or (4) misrepresentation, as defined in section 18, or (5) mistake, subject to the provisions of sections 20, 21, and 22. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation, or mistake."
Coercion, undue influence, fraud and misrepresentation are defined in Sections 15, 16, 17 and 18 respectively of the Indian Contract Act and reads as under:
15. "Coercion" is the committing, or threatening to commit, any act forbidden by the Indian Penal Code (45 of 1860) or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.
Explanation: It is immaterial whether the Indian Penal Code (45 of 1860) is or is not in force in the place where the coercion is employed.
16."Undue influence" defined (1) A contract is said to be induced by "undue influence" where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another-
(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or
(b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.
(3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other.
Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872).
17. "Fraud defined "Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agents , with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:
(1) the suggestion as a fact, of that which is not true, by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Explanation: Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.
18. "Misrepresentation" defined "Misrepresentation" means and includes-
(1) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains and advantage to the person committing it, or any one claiming under him; by misleading another to his prejudice, or to the prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement."
14. Thus, the consent given by a person would be deemed to be a free consent and would be binding upon the parties to the contract unless it can be shown that it was obtained by exercise of coercion, undue influence, fraud, misrepresentation and mistake as defined in Sections 15, 16, 17 & 18 or by mistake subject to provisions of Sections 20 to 22 of the Indian Contract Act.
15. In the case before us, there was no such relationship between the complainant and the opposite party that the opposite party can be said to be in a position to dominate the will of the complainant company and use that position to obtain an undue influence over the complainant Company. The Insurance Company does not stand in a fiduciary relationship vis a vis the complainant. Clause (b) of Sub- Section (2) of Section 16 concerns an individual whose mental capacity is affected by reason of age, illness etc. and is obviously inapplicable. There is no allegation of concealment of any material fact by the insurance company from the complainant with a view to obtain the consent of the complainant company to the aforesaid settlement. Therefore, Section 17 of the Act is therefore not applicable. There is no allegation of any misrepresentation within the meaning of Section 18 of the Contract Act and, therefore, the aforesaid Section also does not apply.
No case of coercion is made out by the complainant company, since there is no allegation of committing, or threatening to commit, any act forbidden by the Indian Penal Code or unlawful detaining, or threatening to detain, any property, to the prejudice of the complainant, with intention of causing the complainant to enter into any settlement.
16. The learned counsel for the complainant has referred to Naveen Kumar Vs. United India Insurance Co. Ltd. IV (2006) CPJ 241 (NC), New India Insurance Co. V. Kusum Distributors II (2007) CPJ 31 (NC), Oriental Insurance Co. Ltd. Vs. Western Nutrients Ltd. II (2007) CPJ 295 (NC), Karam Industries & Ors. Vs. Oriental Insurance Co. Ltd. IV (2007) CPJ 104 (NC), Amirali A. Mukadam Vs. United India Insurance Co. Ltd. IV (2007) CPJ 234 (NC), Abhay Neelawarne Vs. New India Insurance Co. Ltd. II (2008) CPJ 261 (NC), Oriental Insurance Co. Ltd. Vs. Government Tool Room & Training Centre I (2008) CPJ 267 (NC), National Insurance Co. Ltd. Vs. Vasavi Trader I (2008) CPJ 487 (NC), National Insurance Co. Ltd. Vs. Krishna Rice Mills, II (2008) CPJ 327 (NC) and B.A.G.I.C. Ltd. Vs. Sanjay Sari Emporium, IV (2009) CPJ 127 (NC). I have carefully perused the aforesaid decisions. None of them however, dealt with a case where substantial part payment had been made to the insured before filing the complaint and the discharge voucher was executed on receiving the balance payment, in terms of the report of the surveyor, during the pendency of the complaint before a Consumer Forum. Therefore, no advantage can be derived by the complainant from the aforesaid decisions.
17. For the reasons stated hereinabove, considering the settlement between the parties, the complaint does not survive anymore and is accordingly dismissed. No order as costs.
......................J V.K. JAIN PRESIDING MEMBER