National Consumer Disputes Redressal
Ramdas Sales Corporation vs The New India Assurance Company Ltd. And ... on 10 February, 2016
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 79 OF 2007 1. RAMDAS SALES CORPORATION G-10, Mewad, E.S. Patanwala Complex, Lal Bahadur Shastri Marg, Ghatkopar (W), Mumbai - 400 086 ...........Complainant(s) Versus 1. THE NEW INDIA ASSURANCE COMPANY LTD. AND ANR. New India Assurance Building, 87, M.G. Road, Mumbai - 400 001. 2. M/s. C.P. Mehta & Co. Edena Building (4th Floor), 97 Marine Lines, Mumbai - 400 020 ...........Opp.Party(s) BEFORE: HON'BLE MR. JUSTICE V.K. JAIN, PRESIDING MEMBER HON'BLE DR. B.C. GUPTA, MEMBER
For the Complainant : Mr. Dalip Mehra, Advocate For the Opp.Party : Mr. Nikunj Dayal, Advocate Dated : 10 Feb 2016 ORDER JUSTICE V.K. JAIN, PRESIDING MEMBER (ORAL) The complainant firm, which is engaged in distribution of pharmaceutical products obtained an insurance policy in respect of the stock stored in its godown in Building No.38, Gala Nos.1 & 2, Arihant Complex, Near Kopar Bus Stop, Bhiwandi, District Thane of Maharashtra, to the extent of Rs.6 Crores. The policy was valid for the period from 13.05.2005 to 12.05.2006 and inter-alia covered the stock against loss or damage due to storm, cyclone, flood inundation etc. On 26.07.2005 heavy torrential rains flooded the area in which the godown of the complainant was situated and as a result of the said flooding/inundation, stock worth about Rs.6.2 Crores, which the complainant had stored in above referred godown got damaged/destroyed. On intimation being given to the insurance company, a surveyor was appointed to assess the loss sustained by the complainant. The surveyor inter-alia reported that goods worth Rs.4,62,47,243.61 had been damaged and authorized disposal of the said damaged goods. The remaining goods worth Rs.1,37,52,914.72 were reported to be undamaged. The damaged goods were destroyed through Mumbai Waste Management Ltd., as per the procedure prescribed by Food and Drug Administration of Maharashtra. The surveyor however felt that the value of the stock at risk was Rs.10,21,44,787/-, which included the stock in transit and receivables from the market. Based upon that the surveyor opined that the risk had been under insured and therefore only a sum of Rs.2,52,54,735/- was payable to the complainant. The insurer based upon the report of the surveyor offered the aforesaid amount of Rs.2,52,54,735/- to the complainant in full and final settlement of its claim. The case of the complainant is that since they were in great financial stress at that time and under pressure to pay to their creditors and the insurance company had refused to release the aforesaid amount without taking a full and final discharge from them, they had no option but to execute a discharge voucher accepting the aforesaid amount in full and final settlement of their claim. On receipt of the said discharge voucher, the insurance company released the aforesaid amount of Rs.2,52,54,735/- to the complainant. The complainant is now before this Commission seeking payment of the balance amount of Rs.2,31,42,576/- along with interest and compensation.
2. The complaint has been resisted by the insurance company primarily on two grounds, the first being that having accepted the amount of Rs.2,52,54,735/- in full and final settlement of its claim, the complainant is estopped from claiming any further amount from the insurer. The second plea taken by the opposite party is that not only the stock kept in the godown but also the stock in transit as well as the amount receivable from the market were required to be taken into consideration, for the purpose of deciding whether there was under any insurance or not and if the stock in transit and the market receivable are added to the actual stock kept in the godown, there was under insurance to the extent of 41.26% and therefore the payment made to the complainant was justified, after making deduction on account of under insurance.
3. The learned counsel for the complainant has placed before us a Circular No.IRDA/NL/CIR/Misc/173/09/2015 dated 24.09.2015 issued by Insurance Regulatory Development Authority of India (IRDA) to all the General Insurance Companies, with regard to the use of discharge vouchers in settlement of claim. The said circular reads as under:-
"The Insurance Companies are using 'discharge voucher' or "settlement intimation voucher" or in some other name, so that the claim is closed and does not remain outstanding in their books. However, of late, the Authority has been receiving complaints from aggrieved policyholders that the said instrument of discharge voucher is being used by the insurers in the judicial fora with the plea that the full and final discharge given by the policyholders extinguish their rights to contest the claim before the Courts.
While the Authority notes that the insurers need to keep their books of accounts in order, it is also necessary to note that insurer shall not use the instrument of discharge voucher as a means of estoppel against the aggrieved policy holders when such policy holder approaches judicial fora.
Accordingly insurers are hereby advised as under:
Where the liability and quantum of claim under a policy is established, the insurers shall not withhold claim amounts. However, it would be clearly understood that execution of such vouchers does not foreclose the rights of policy holder to seek higher compensation before any judicial fora or any other fora established by law.
All insurers are directed to comply with the above instructions."
It is contended by the learned counsel for the complainant that in view of the aforesaid circular, which is binding upon the insurer, the plea of estoppel cannot be pressed by it.
4. The learned counsel for the insurance company submits that the aforesaid circular cannot be given retrospective effect by applying it to the present complaint particularly when there is nothing in the circular to give retrospective effect to the directions contained therein. It is also submitted on behalf of the insurer that since the said circular was not issued at the time discharge voucher was obtained and payment was made to the complainant, there was no deficiency on their part in rendering services to the complainant. This is also the submission of the learned counsel for the insurer that the insurance companies are making representation to IRDA to withdraw the aforesaid circular and are also contemplating legal action to challenge the said circular. He also submits that the circular issued by IRDA cannot supersede the decision of the Hon'ble Supreme Court on the subject United India Insurance Vs. Ajmer Singh Cotton & General Mills [(1999) 6 SCC 400] and National Insurance Co. Ltd. Vs. Sehtia Shoes [(2008) 5 SCC 400]. We, however, find no merit in the contention that the said circular is contrary to the above referred decisions of the Hon'ble Supreme Court. If the Insurance Company is aggrieved from the aforesaid circular, a consumer forum is not the appropriate forum to challenge its validity and so long as the said circular remains in force, the insurer, in our opinion is precluded from taking the plea of estoppel on account of execution of the discharge voucher by the insurer.
5. Section 14 (1) of the Insurance Regulatory Development Authority Act, 1999 provides that IRDA shall have they duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business. Sub Section (2) of the aforesaid Section provides that without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority include protection of the interests of the policy holders in the matter of settlement of insurance claims.
6. Section 34 of the Insurance Act, reads as under:-
"Power of the [Authority] to issue directions.-- (1) Where the [Authority] is satisfied that--
(a) in the public interest; or
(b) to prevent the affairs of any insurer being conducted in a manner detrimental to the interests of the policy‑holders or in a manner prejudicial to the interests of the insurer; or
(c) generally to secure the proper management of any insurer, it is necessary to issue directions to insurers generally or to any insurer in particular, he may, from time to time, issue such directions as [it] deems fit, and the insurers or the insurer, as the case may be, shall be bound to comply with such directions:
Provided that no such direction shall be issued to any insurer in particular unless such insurer has been given a reasonable opportunity of being heard.
(2) The [Authority] may, on representation made to [it] or on [its] own motion, modify or cancel any direction issued under sub‑section (1), and in so modifying or cancelling any direction, may impose such conditions as [it] thinks fit, subject to which the modification or cancellation shall have effect.]"
Therefore it was within the competence of the authority to issue appropriate directions with respect to the settlement of insurance claims by the insurance companies if it was satisfied that such directions were necessary in the public interest or to prevent the affairs of the insurance companies being conducted in a manner detrimental to the interest of the policy holders.
7. In any case, so long as the aforesaid circular is not challenged and quashed, it is binding upon the Insurance Company and the validity of the circular cannot be questioned before the consumer forum.
8. We find no merit in the contention that the aforesaid circular cannot be applied in a pending consumer complaint. The very fact that IRDA decided to issue such a direction implies that the practice adopted by the insurers to insist upon execution of a discharge voucher in full and final settlement of the claim before releasing the payment approved by it was found to be objectionable by the Authority and that is why it had to issue direction requiring the insurers, not to use the instrument of discharge voucher as a mean of estoppel against the aggrieved policy holders when they approach a judicial fora. As a result of the aforesaid direction issued by IRDA, the plea of estoppel taken by the opposite party is no more available to it, the said plea being contrary to the direction contained in the circular. Therefore, in our opinion, once the aforesaid circular is issued, it is not open to the insurer to contend at the time of hearing that having executed the discharge voucher in full and final settlement of its claim the complainant is estopped from filing a consumer complaint claiming additional payment from the insurer in respect of the claim subject matter of the discharge voucher. Therefore, we are not inclined to consider the plea of estoppel taken by the opposite party.
9. Coming to the merits of the case, the insurance policy to the extent it is relevant reads as under:-
"The property is situated at:- Building No.38, Gala Nos.1 & 2, Arihant Complex, Near Kopar Bus Stop, Bhiwandi, Dist.Thane-421302.
Description of Risk:
ON STOCK OF PHARMACEUTICALS DRUGS, COSMETICS AND PACKING MATERIALS AND OTHER STOCK LOCATED IN GODOWN AT THE ABOVE ADDRESS"
10. It is crystal clear from a bare perusal the above referred extracts from the insurance policy that the said policy covered only the goods which had been stored in Building No.38, Gala Nos.1 & 2, Arihant Complex, Near Kopar Bus Stop, Bhiwandi, Dist.Thane. Neither the stock in transit nor the market receivables were insured by the opposite party. Therefore, there can be absolutely no justification at all for the insurer to take into account the goods in transit and the market receivables for the purpose of deciding whether there was any under insurance on the part of the complainant or not. Admittedly, if the goods in transit and market receivables are excluded, the value of the goods at risks was only Rs.6,20,00,000/- as against the insured value of Rs.6 crores. The complainant has no objection to an appropriate deduction being made, on account of the value of the goods at risks being Rs.20 lakhs more than the insured value of Rs.6 crores.
11. Admittedly, the total amount payable to the complainant, after making adjustments for under insurance to the extent of Rs.20 lakhs, comes to Rs.4,18,69,233/-. The opposite party having paid only Rs.2,52,54,735/-, the complainant is entitled to the balance amount of Rs.1,66,14,498/- from the insurer.
12. For the reasons stated hereinabove, the opposite party is directed to pay an amount of Rs.1,66,14,498/- to the complainant along with interest on that amount @ 9 % per annum from the date of filing of the complaint till the said amount is paid. In the facts and circumstances of this case, there shall be no order as to costs. The payment in terms of this order shall be made within six weeks. The complaint stands disposed of accordingly.
......................J V.K. JAIN PRESIDING MEMBER ...................... DR. B.C. GUPTA MEMBER