State Consumer Disputes Redressal Commission
Oriental Insurance Co. Ltd. vs Shri Mohanlal Agarwalla, on 18 January, 2003
IN THE STATE CONSUMER DISPUTES REDRESSAL COMMISSION IN THE STATE CONSUMER DISPUTES REDRESSAL COMMISSION MEGHALAYA: SHILLONG CONSUMER APPEAL NO.2(M) OF 1999 Oriental Insurance Co. Ltd. Oriental house, Asaf Ali Road, New delhi-2 and two others. . Appellant -Vs- Shri Mohanlal Agarwalla, Prop., K.C. Rice & Flour Mills P.O. Garobandha, Dist. West Garo Hills . Respondent B E F O R E THE HON'BLE MR. JUSTICE N.S. SINGH, PRESIDENT THE LEARNED MEMBER SHRI R.K. BAWRI For the Appellant : Smt. T. Yangi Advocate For the Respondent : Smt. Smt. P.D.B. Baruah Date of Order : 18.01.2003 O R D E R
R.K. Bawri, Member- The facts of the case in brief are that the Complainant/Respondent insured his residence-cum-office for Rs.1,00,000.00 and household goods etc. for Rs.25,000.00 with the Appellant vide Policy No.322403/11/0001/95/00448 commencing from 9.3.1995 to 8.3.1996 under the fire policy A, which also include risk to 14.7.1995 there was a flash flood which caused damage to the building and household goods of the Complainant/Respondent and he there fore lodged a Claim with the Appellants/ Opposite Parties for a sum of Rs.50,900.00 towards renovation of building and Rs.25,000.00 for loss of household goods and personal effects. Survey and assessment of the damages was conducted and the Appellants/Opposite parties offered a sum of Rs.20, 276.00 on 23.5.1996 which the Respondent/Complainant accepted under protest and thereafter filed a Complaint Petition before the District Forum at Tura, West Garo Hills being C.P. No.7/1996 alleging negligence and deficiency of service on the part of the Appellants/Opposite Parties by no-settlement of claim within a reasonable time frame and by arbitrary and unsatisfactory assessment of the loss.
The appellants/opposite parties challenged the maintainability of the complaint on the ground that the person who signed the complaint, Shri Kanhaiyalal Agarwalla, had no locus standii to institute the complaint as he had not hired the service of the Opposite Parties and that as a third party he had no authority under the Consumer protection Act to file the complaint and that he did not come within the purview of the definition of consumer under section 2(1) (b) and/or under section 12 of the Act. Further the Opposite Parties also contended the sum of Rs.20, 276.00 had already been paid to the Insured as full and final settlement of the claim and the insured has also executed a valid discharge slip and hence no consumer disputes survived. It was also contended by the opposite parties that had the insured been aggrieved by the amount paid to him then he had the right to appoint a Sole Arbitrator as per condition 11 of the policy which he has not done and for this reason too the said complaint petition was not maintainable and liable to be dismissed. The Appellants/Opposite Parties further denied all the allegations made by the complainant and averred that the loss sustained by the insured was meager and that he had exaggerated the loss to make wrongful gain and further stated that there was no deficiency in service on their part.
based on the pleadings of both the parties, the District Forum at Tura, framed the following issues:
Whether there is any cause of action?
Whether the Opposite Parties have arbitrarily reduced the claim assessed by the Surveyor and if so, does this constitute a deficiency of service?
Whether there was undue delay in the settlement of the claim and if so, whether this constitutes a deficiency of service? Whether conditional acceptance/under protest acceptance of a claim amount implies no consumer dispute? Whether the complainant has suffered mental harassment and actual loss of business due to deficiency of service? To what relief(s) is the parties entitled?
During he initial stages of the case 2 preliminary points of law were also raised which were as under:(1)
jurisdiction of the Consumer Forum to entertain the complaint when the remedy of arbitration was available and (2) locus standii of the complainant Shri. Kanhaiya Lal Agarwala who has instituted the case on behalf of the actual consumer Shri Mohanlal Agarwala.
Both these matters were disposed of by the orders of the Forum dated 20.12.1997 holding that the Forum had jurisdiction and that the complainant was maintainable.
Thereafter, upon hearing the parties the District Forum, Tura decided Issue NOs.1,2,3,4 and 5 above in the affirmative and in favor of the complainant and with regard to Issue No.6 determined the loss on account of damage to the building at Rs.34,000.00 and claims to household goods at Rs.20,000.00 and also allowed interest at the rate of 18% p.a. on the assessed amount from 10.10.1995 to 27.3.1996 when the sum of Rs.20276.00 was paid by the Appellants and on the balance sum of Rs.33,734.00 till the date of payment: an amount of Rs.10,000.00 towards compensation for mental agony and harassment and Rs.5,000.00 towards cost of proceedings was also awarded by its order dated 31st October,1998. Aggrieved by this order, the Appellants have come before this Commission in Appeal.
Smt. T. Yangi learned Counsel for the Appellants and Smt. P.D.B. Baruah learned counsel for the Respondent have been heard by us and we have gone through the records of the Forum as well as the Memo of Appeal.
Learned Counsel for the Appellant submits that the Forum caused a serious miscarriage of justice by allowing the Respondent a sum of Rs.20000.00 for household goods without substantial evidence on record and by completely ignoring the fact that the insured had not made any claim for loss/damage of household items before the Insurance Co. but had made the claim before the Forum only as an after-thought.
In order to appreciate the issue in its proper prospective, the findings of the Forum in this regard are reproduced below:
In respect of household goods the surveyor has not assessed any loss. The claimants son has sworn an affidavit repudiating the statement imputed to him by the surveyor and in his testimony on oath stated that list of goods washed away was given to the surveyor. The claimant has also denied on oath having made any statement to the surveyor that his household goods were saved. He quoted the surveyors report which states that the water has risen to a level of 1.6 meters in height inside the office cum residence and was moving with such velocity carrying silt and debris that it created a whirlpool in the building. While the son of the claimant has furnished an affidavit furnished from the surveyor. The claimants son has also stated that the list of household goods was furnished to the surveyor and he has also submitted purchase vouchers and cash/credit memo to the Forum which are available on record towards proof of replacement.
The learned Counsel for the Opposite Party has argued that the claimant has placed himself in the Surveyors position. He has also argued that no survey for re-survey or second survey report was made by the claimant even after the survey report was filed in the Forum. He had submitted that there is no independent supporting evidence to support the affidavit filed by the claimant. Further no list of household goods alleged to have been washed away has been given to the Forum.
It is an admitted fact that there was a flash flood in which water rose rapidly to a height of 1.6 metres which is also average human height. It is therefore absurd to expect that in such a situation, the inmates of a shop/residence will try to save petty household goods when the water is rising around them in a manner to threaten their existence and wash them away. It would therefore be difficult for a person of reasonable prudence to accept the argument that household goods could have been and were saved. The repudiation of the claim for household goods by the O.P. or his agent does not therefore stand scrutiny and amounts to deficient service.
As regards the claim for household goods, vouchers/cash receipts have been submitted for Rs.28, 329.00 and the veracity of those vouchers has not been disputed/challenged by the O.P.. We have already rejected the contention of the O.P. that no loss occurred on account of household goods. We do not have the report of a surveyor to guide us in respect of the loss nor has a list of such goods been furnished to this Forum. We have on record a sworn affidavit and vouchers, neither of which is controverted. Based on this and applying norms of prudence, we are inclined to allow a lump sum of Rs.20, 000.00 towards loss of household goods.
On the part of this Commission we find that the reasoning and conclusions of the Forum are sound and are based on evidence on record which has not been disproved by the Appellants. Besides that, the contention of the Appellants that the complainant had not made any claim for loss/damage of household items is also contrary to the records. The very first intimation letter dated 10.7.1995 submitted by the complainant to the Insurers, barely two days after the floods, states that his office-cum-residence building and household goods had been badly damaged by the floods and requests for deputing a surveyor to assess the loss. The claim form subsequently submitted by the Complainant to the Appellants also clearly states that item Nos. 1 and 5 of the Insurance Policy were destroyed or damaged. The Schedule to the Insurance Policy containing the description of the Property insured indicates at Serial No.1 the Building and at Serial No.5 Household Goods and personal effects.
We are thus compelled to say that, on the face of these documents on record, we feel that it is quite presumptions on the part of the Appellant to allege that the claim for loss of household goods was an after-thought on the part of the Complainant to make wrongful gain.
In view of the above discussion we reject this ground of Appeal raised by the Appellant.
The next ground of Appeal is that the Forum has acted contrary to the settled rules by denying the application of average clause while assessing the damage to the building as per the Surveyors Report. In order to appreciate the matter in its proper perspective it would be beneficial to state the facts relevant to this issue as per the Forum records, even at the cost of some repetition.
The respondent insured his office-cum-Residence Building for Rs.1, 00,000.00 and household goods and personal effects for an additional Rs.25, 000.00, the collective sum insured being Rs.1, 25,000.00 for which an Insurance Policy was issued by the Appellant. The Respondent lodged a claim for Rs.50900.00 on account of flood damage to the building and Rs.25000.00 for loss of household goods and personal effects. The surveyor assessed the loss to the building at the sum of Rs.34000.00 but deducted there from a sum of Rs.6425.00 holding that the Average Clause was applicable and thus assessed the Insurers net Liability at Rs.27575.00. The Surveyor made no assessment of the loss of household goods a, according to him, the Insured had stated that they had been able to save these goods. Against the Surveyors assessment of Rs.27575.00 the Appellant paid only a sum of Rs.20276.00 to the Respondent which was accepted by him under protest and further relief was sought from the forum. The Forum accepted the Surveyors assessment of loss to the building which was Rs.34000.00 but deleted the deduction of Rs.6425.00 made on account of the average clause. The Forum also assessed the loss of household goods on the basis of the Complainants evidence at Rs.20000.00 and thus determined the total sum payable by the Insurers at Rs.54000.00 (i.e. Rs.34000.00 plus Rs.20000.00) and directed the Appellant to pay the balance amount of Rs.20276.00 already paid by them, along with interest, lump-sum compensation and costs.
9. The dispute here is regarding the relief of the aforesaid sum of Rs.6425.00 given by the Forum to the Complainant being the sum reduced by the Surveyor from the assessed loss invoking what is generally known in insurance parlance as the average clause.
The reasoning and conclusion of the Forum with regard to the application of the average clause is quoted below:
Proceeding further with the loss assessed figure, we find that the surveyor has used the average clause to reduce the loss figure. While the use of the concept of average clause has a place I the practices of the insurance industry, in the present case, it does not seem logical. Buildings are insured on historical cost basis while repairs are made on replacement cost basis. There is a significant difference between the two. The value at risk on the insured building will keep on rising on account of general inflation even though no material change may have been made to the building itself. This increase is invariably higher than the 2% annual depreciation charged. This also does not imply that the insurance premium payable must also increase year after year since value at risk is increasing inspite of no changes to the building. To our minds the building was correctly valued for insurance purposes and no further reduction for average clause is necessary.10
Having not been impressed by the reasons given by the Forum for denying to the Appellant the application of the average clause we asked the learned Counsel for the Respondent as to how the reasoning could be supported or substantiated. Upon getting to satisfactory reply we have perused the conditions of the Policy and thereupon we are of the view that although the reasoning of the Forum cannot be held to be sound the conclusion is correct, albeit for different reasons which we shall spell out below:
At the very outset it would be helpful to reproduce Clause No.10 of the Conditions of the Fire Policy A issued by the Appellant which is the condition concerning what is known as the Average Clause. This clause reads thus:
10.
If the property hereby insured shall at the breaking out of any fire or at the commencement of any destruction of or damage to the property by any other peril hereby insured against be collectively of greater value than the sum insured thereon, then the insured shall be considered as being his own Insurer for the difference and shall bear a retable proportion of the loss accordingly. Provided however, that if the sum insured hereby on the property insured shall at the operation of any of the peril insured under this policy or at the commencement of such destruction or damage be not less than 85% (eighty-five percent) of the collective value of the property insured, this conditions shall be of no purpose and effect .
11. From a plain reading f the above condition three aspects of the matter are self-evident:
(a) What is relevant t determine the application or otherwise of this policy condition is the collective value of the property insured under the policy and the collective sum insured thereon, and
(b) Only if the collective value of the insured property is greater than the sum insured thereon under the policy would the Insured bear a retable proportion of the loss, provided however that
(c) If the sum insured on the property is 85% or more of the collective value of the insured property this condition would have no application.
The Insurance Policy clearly shows that the total sum insured on the property is Rs.1,25,000.00 and the premium too has been collected on this sum by the Insurers. Even if the Surveyors assessment of the value at risk i.e. the value of the insured property at Rs.123300.00 is accepted, it cannot be said to be greater than the sum insured which is Rs.125000.00 and as such this policy condition can have no application what so ever . From the surveyors report dated 6.11.95 submitted by Shri Rabindra Dey, Surveyor and Loss Assessor, which is before us, it is evident that the Surveyor has mis-applied the Average Clause by taking the sum insured figure at Rs.1,00,000.00 instead of Rs.1,25,000.00 which is what is actually is as per the Insurance Policy.
We are in no position to ascertain whether the sum insured figure of Rs.100000.00 was mistakenly taken by the Surveyor or whether he took it consciously because the total sum insured as per the Policy was broken up as Rs.100000.00 on account of the building and Rs.25000.00 for household goods and personal effects and the Surveyor considered the value of the building only.
Whatever may be the case, Clause 10 of the Policy conditions requires that the sum insured on the total property under the policy be taken into consideration. The total sum insured is undisputedly Rs.1,25,000.00 inclusive of the sum insured on the household goods and this is the figure that the Surveyor and the Insurance Company ought to have taken for considering the application of the average clause.
12. We are yet to consider one more aspect of the matter. Although the Surveyor made no assessment on account of household goods, as discussed earlier, the Forum assessed and partly allowed the claim of the Complainant on this head to the extent of Rs.20,000.00. Even if this figure is taken into account for the purposes of Clause 10, and added to the value at risk on the building ascertained by the Surveyors i.e. Rs.125000.00. As Discussed above, the average clause has no application if the total sum insured (Rs.125000.00) is 85% or more of the collective value of the insured property (Rs.143000.00). In the instant case the percentage works out to 87.41% which is obviously more than 85% and thus it is clear that, in any view of the matter, the average Clause No.10 has no application and the Insurers could not have deducted the sum of Rs.6425.00 on this account from the assessed loss.
For all the reasons stated above, we hold that the average clause had no application in this case and this ground of appeal ha no force and it is therefore rejected.
13. The Appellants have also assailed the order of the Forum on the ground that, inasmuch as Clause No.11 of the related Insurance Policy provided for Arbitration in cases of dispute regarding the quantum to be paid under the policy, the Complaint Petition was itself not maintainable.
We find that having heard both the sides and gone through the various judgments cited by them, the Forum concluded in its order dated 20.12.1997 as follows:
As regard the first point of law, there is little scope for discussion or doubt. The law in this regard is well laid down by the national Commission {1991 CPJ (D) 203} and in 1991(2) CPR 668. The arbitration clause does not oust the jurisdiction of the Consumer Forum. We therefore dismiss both the objections raised by the Opposite Party and allow the case to proceed ahead.
14. As far as the legality of the decision of the Forum on this issue is concerned we see no reason to disagree. We must also straightaway refer to the provisions of Section 3 of the Consumer protection Act which itself clearly states that The provisions of this act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.
As far back as on 18.10.1989, the National Commission had laid down in the case of commercial officer, Office of the Telecom District Manager, Patna vs- Bihar State warehousing Corp. {1 (1991) CPJ 42} that the existence of the remedy by way of arbitration does not preclude an aggrieved consumer from seeking Redressal before the forums constituted under the C.P. Act, which is a special statute enacted by Parliament for the specific purpose of providing a speedy, cheap and efficacious remedy to Consumers before the special forums created for that purpose.
Furthermore, the Honorable Supreme Court has already laid this matte at rest in its judgment reported in AIR 197 SC 533 (M/S fair Air Engineers Pvt. Ltd. and Anr Vs- N.K. Modi) where at paras 15 & 16 it held as follows:
15. It would, therefore, be clear that the Legislature intended to provide a remedy in addition to the consentient arbitration which could be enforced under the Arbitration Act or the civil action in a suit under the provisions of the Code of Civil Procedure. Thereby, as seen, Section 34 of the Act does not confer an automatic right nor create an automatic embargo on the exercise of the power by the judicial authority under the Act. It is a matter of discretion. Considered from this perspective, we hold that though the District Forums, State Commission and national Commission are judicial authorities, for the purpose of section 34 of the Arbitration Act, in view of the object of the Act and by operation of Section 3 thereof, we are of the considered view that it would be appropriate that these forum created under the act are at liberty to proceed with the matters in accordance with the provisions of the act rather than relegating the parties to an arbitration proceedings pursuant to a contract entered into between the parties. The reason is that the act intends to relieve the Consumers of the cumbersome arbitration proceedings or civil action unless the Forums on their own and on the peculiar facts and circumstances of a particular case come to the conclusion that the appropriate forum for adjudication of the disputes would be otherwise those given in the Act.
16. Considered from this perspective, we hold that this dispute need not be referred to arbitration under clause (12) of the agreement and the matter could be decided on merits by the State Commission itself.
15. After the final word in this regard has been spoken by the highest Court of our country, nothing more needs to be said as far as the law governing the matter is concerned.
We therefore hold that the Arbitration Clause contained in the Insurance Policy is not a bar to the entertainment of a Complaint by Consumer Disputes Redressal Agencies. A Consumer under the C.P. Act has two alternative remedies open to him either to seek arbitration, if the terms of the policy so provide, or to seek Redressal of his grievances through the Consumer Disputes Redressal Agencies constituted under the C.P. Act; the choice and discretion is entirely his own.
In view of the above discussion, the challenge to the maintainability of the Complaint Petition on the ground of existence of an Arbitration Clause in the Insurance Policy, as raised by the Appellant, is rejected outright.
16. The Appellants have also contended before us that the Forum has ignored the case cited by their Counsel before the Forum viz. the Judgment rendered by the Honorable Supreme Court in C.A. 6075-76/1995 and that the rate of interest should not exceed 12% p.a. While it is true that the aforesaid case referred to by the Appellant finds no mention in the order passed by the Forum, we think that the reason is not too far to seek. Even before us the learned counsel for the Appellant could neither give us the name of the parties nor a copy of the judgment nor the full citation of the case, not to speak of taking us through the judgment Barely, on the basis of the C.A. number we too have been unable to have the benefit of perusing the judgment of the Honorable Supreme Court and to apply it to the facts of the case.
17. However, as far as the rate of interest is concerned, we have delved into the matter at length in the order passed by us in C.A.No.16(M)1998 which too was a case between the same parties as are before us in this case.
As stated by us therein the rate of interest leads to oft repeated argument we were of the view that the issue relating to the rate of interest payable by an Insurance Company where deficiency is established needs to be discussed at length in the light of the various judgments of the Honorable Supreme Court as well as the National Commission so that this may be settled as far as this State Commission is concerned and this will also help us in adjudicating upon this submission of the Appellants in this case too.
18. We find that at least upto 3.1.2001, the rate of interest payable as compensation in cases of deficiency in service in Insurance was fairly settled and the Honorable Supreme Court as well as the National Commission had generally upheld the rate of upto 18% p.a. as may be seen from some cases cited below:
a) As far back as on 23.3.1992, in the case of Hindustan Copper Ltd. vs- new India Assurance Co. Ltd. (1992(2) CPR 4) the National Commission awarded interest the rate of 18.
b) The National Commission again awarded interest @ 18% in II (1993) CPJ 160 (NC) (M/s Ajmer Singh Cotton & general Mills vs- The Branch manager, United India Insurance Co. Ltd.)
c) The facts of the case of National Insurance Cop. Ltd.
vs- Jit Ram Shiv Kumar reported in 2001(1) CPC 2 will show that the award of interest @18% made by the National Commission on 15.4.1993 was upheld by the Honorable Supreme Court vide its order dated 23.9.1999 and subsequently reaffirmed by the Honorable Supreme Court in Jit Ram Shiv Kumar vs- National Insurance Co.Ltd. (AIR 2001 Sc 927) on 22.1.2001.
d) In Rajeshwari Upendra Kumar Shah vs- The Oriental Insurance Co. Ltd (1986-1996 Consumer 2308 (NS)) decided on 6.6.1996 the National Commission enhanced the rate of interest from 12% which was awarded by the State Commission to 18%, in accordance with the practice of the National Commission in similar cases.
e) In the case of United India Insurance Co.Ltd vs- fancy Traders (J.T. 2000 (10) SC 337) the Apex Court held that interest at the rate of 18% p.a. as awarded by the State Commission and confirmed by the High Court was justifiable.
f) These cases apart, even for consumer cases relating to deficiency in service in respect of housing flats, the Honorable Supreme Court and national Commission have awarded interest @18%. In Haryana Urban development Authority vs- Rajnish Chander Sharda decided on 12.1.2000 [2000(1)CPC 259] the Honorable Supreme Court upheld the grant of interest @ 18% p.a. by the National Commission.
19. Thereafter, came the judgment of the Honorable Supreme Court in the case of Smti. Kaushnuma Begum and Ors vs- New India Assurance Co. Ltd and others rendered by the Honorable Supreme Court on 3.1.2001 and reported in AIR 2001 SC 485. In this case which arose under the provisions of the Motor Vehicles Act, the Honorable Supreme Court held that:-
Section 171 of the MV Act empowers the Tribunal to direct that in addition to the amount of compensation simple interest shall also be paid at such rate and from such date not earlier than the date of making the claim as may be specified in this behalf. Earlier, 12% was found to be the reasonable rate of simple interest. With a change in economy and the policy of Reserve Bank of India the interest rate has been lowered. That nationalized banks are now granting interest at the rate of 9% on fixed deposits for one year. We, therefore, direct that the compensation amount fixed hereinbefore shall bear interest at the rate of 9% per annum from the date of the claim made by the appellants.
20. Based upon this judgment a fresh controversy has arisen regarding the rate of interest payable in Consumer cases. Persons liable to pay interest, as in the instant case, have started claiming that the lower rate of interest ought to be applied by the Consumer Disputes Redressal Agencies too. However, in our view, this contention is untenable for several reasons. Firstly, as above-mentioned, the K. Begum case (Supra) was decided under the provisions of the Motor Vehicles Act and not under the Consumer Protection Act and the rationale and purpose behind the award of interest under the two Acts being quite different, the judgment could not have necessary application in Consumer cases. Secondly as held by the Honorable Supreme Court in K. Begum (Supra), earlier 12% was found to be a reasonable rate of simple interest i.e. in Motor Accident cases. Even while the rate of 12% was the norm in Motor Accident cases, in Consumer cases the well-settled rate was 18% as will be evident from the cases referred to us earlier. This itself clearly shows that the rates of interest under the two laws have no direct bearing upon each other.
Further, it will be seen that Section 171 of the Motor Vehicles Act provides that the Tribunal may direct that in addition to the amount of compensation simple interest shall also be paid at such rate and from such date, not earlier than the date of making the claim, as may be specified in this behalf. Thus, whenever interest is awarded by the Motor Accident Claims Tribunal, it is under the specific provision of section 171 of the Motor vehicles Act, and such interest is in addition to the amount of compensation. There is no similar provision for payment of interest under the Consumer protection Act. It will now be therefore evident that statutory interest as awarded under the M.V. Act and under the C.P. Act are two separate things altogether and is follows as a corollary that the rates of interest under these two acts are not relatable.
21. With regard to services, Section 14(1) of the Consumer protection Act inter-alia provides that if the Forum is satisfied that any of the allegations contained in the Complaint about the services are proved it shall issue an order to the Opposite Party directing him to do one or more of the following things, namely, (i) under clause (e) of Section 14(1), to remove the defects or deficiencies in the services in question and (ii) under clause (d) of Sec. 14(1), to pay such amount as any be awarded by it as compensation to the consumer for any loss or injury suffered by the consumer due to negligence of the Opposite party.
When the Forum awards interest to a party, such interest is in fact by way of compensation to the Consumer for any loss or injury suffered by the Consumer due to negligence of the Opposite Party, in terms of Sec 14(1) (d) of the C.P. Act as mentioned above as there is no separate provision fort grant of interest under the Consumer protection Act. If interest as generally awarded under the Consumer protection Act were to viewed only in the general sense of being a return or compensation for the use or retention of anothers money, then at most it would only compensate the direct monetary loss suffered by a Consumer but would not compensate the direct monetary loss suffered by a Consumer but would not compensate him for the injury caused to him which is also required to be done as per the provisions of Sec 14(1) (d) of the C.P. Act.
22. It is thus clear that under the Consumer protection Act, as there is no provision for payment of interest, the award of interest at a particular rate is in fact an award of compensation to a Consumer for loss or injury suffered by him due to the negligence of the Opposite Party it is not an award of interest as such. Therefore, under the C.P. Act payment of interest can be said to be the general method and the rate of interest the measure by which the loss and injury is determined and compensation awarded to an entitled consumer by the Consumer Disputes Redressal Agencies.
We are fortified in this conclusion by the decision of the National Commission in Ghaziabad Development Authority Vs- Dr. N. Gupta reported in (2002) 258 ITR 337 wherein at page 345 it was held that:
In the order of the State Commission interest means compensation or damages for delay in construction of the hose or handing over possession of the same causing consequential loss to the complainant by way of escalation in the price of the property and also on account of distress, disappointment faced by him. Interest in the order has been used merely as a convenient method to calculate the amount of compensation in order to standardize it. Otherwise, each case of the allottee will have to be dealt with differently. Nomenclature does not decide the issue.
23. To us it also appears from the judgment referred to below that the Honorable Supreme Court as well as the National Commission themselves were not guided by K. begum (Supra) when deciding cases under the C.P. Act. These are some of the cases decided by the Honorable Supreme Court and National Commission involving the rate of interest which were rendered after the judgment in the K. begum case (Supra):
a. In National Insurance Co. Ltd.
Vs- Sky gems (2002(1) CPR 42 (SC)) decided on 9.1.2002 the Honorable Supreme Court upheld the grant of interest by the National Commission at 18% p.a. b. In Gammon India Ltd. Vs- New India Assurance Co. Ltd. (2002)(3) CPR 141 (NC)) decided on 30.7.2002 the national Commission directed the Insurance Co. to pay interest @ 17.5% to the complainant for having been deprived of its claim for all the period.
c. Similarly, in cases regarding housing flats, the National Commission has upheld the award of interest @ 18% (See: Ghaziabad development Authority Vs- Nahar Singh {2002 (1) CPR 171 (NC)} decided on 28.9.2001 and N. Suryanarayanan Vs- M/s Prudential Engineers, Builders and Ors. {2002 (3) CPR 201 (NC)} decided on 30.5.2002.
24. Thus in view of the latest pronouncements of the Honorable Supreme Court and national Commission, it appears to us that the judgment in the K.Begum case (Supra) had made no change in the position under the Consumer protection Act and that the rate of interest upto 18% p.a. continues to be the norm in cases under the Consumer protection Act where there is proven deficiency in service on the part of Insurance Companies. However it must be borne in mind that this rate of 18% is not sacrosanct and the actual rate at which interest is awarded would depend on the facts and circumstances of each case and would be determined by the Consumer Disputes Redressal Agencies on a rational basis on a consideration of materials produced before them showing the extent of injury suffered and the manner and the extent of the monetary loss caused to the Complainant.
25. In view of the above discussions and upon finding the award of interest at18% to be fair, just and reasonable in view of the facts and circumstances of the case we reject the contention of the Appellants on this count and uphold the decision of the Forum awarding interest at 18% p.a. to the Respondent.
26. Lastly what remains to be decided in this appeal is the grievance of the learned counsel for the Appellant who also submits that the Forum has misconstrued and misinterpreted the law by awarding compensation of Rs.10,000.00 and also interest at the rate of 18% on the amount awarded.
In our opinion, the award of compensation by the Consumer Forum need not be restricted only to one mode i.e. by way of interest. Directions may be either issued only for payment of a determined lump-sum, as the purpose and intent of section 14 (1) (d) of the C.P. Act is to adequately compensate a Consumer for his loss and injury in case of deficiency in service and no specific mode, method or measure is prescribed. To cite two examples-
In the case of Mohd Ishfaq Vs- Dr. Martin DSouza {2002 (2) CPR 151 (NC)} the National Commission while making a direction for payment of a sum of Rs.4 lacs awarded interest from the date of filing the complaint and further directed the Respondent to pay Rs.2 lacs as compensation for mental agony and harassment along with cost of Rs.5000.00.
In the matter of Gora Academy of Education & Anr.Vs- C. Vani & Ors. {2002 (1) CPR 93 (NC)} the District Forum had directed the Respondents to pay interest as well as compensation for mental agony and harassment as also costs. This award was upheld by the A.P. State Commission and again by the National Commission.
We therefore find no infirmity in the order of the District Forum by granting compensation partly by way of interest and partly in lump-sum and find quantum to be air, reasonable and rational and therefore reject this ground of Appeal.
27. Further, although digressing from the issue, it is pertinent to point out here that even if a Consumer Forum were to make an order for payment of (A) A certain claim amount to a complainant under the Consumer Protection Act and (B) Interest on the claim amount, and further (C) Interest on both the above mentioned sums i.e. A+B, after 30 days of the date of order till the date of payment, then such an order would be valid in the eye of law and the order for payment of interest under clause (c) above would not grant to granting interest on interest but would be an interest awarded on delayed payment as was held by the Honorable Supreme Court in M/s Jit Ram Shiv Kumar (Supra).
What we have started in this paragraph have no direct bearing on the case at hand but we mention this position of law to emphasize and focus on the consumer-orientation of the Consumer protection Act as highlighted by the judgment of the Honorable Supreme Court and on its wide ambit towards protection of the interest of consumers and grant of compensation as thought fit in the facts of a particular case.
28. For the reasons, observations and discussions made above, we are of the view that the Appellants could make out no case to justify interference with the impugned order passed by the Forum.
In the result, this Appeal is totally devoid of merit and is accordingly dismissed.
In view of the facts and circumstances of the case we award a sum of Rs. 2500/- to the Respondent herein as costs f this Appeal.
Member President