State Consumer Disputes Redressal Commission
M/S. Indo American. Com Ltd. vs New India Assurance Co. Ltd. on 22 January, 2009
A-100/2004 IN THE STATE COMMISSION: DELHI (Constituted under Section-9 Clause (b) of the Consumer Protection Act, 1986) Date of Decision: 22-01-2009 Complaint No. C-127/2005 M/s. Indo American. Com Ltd. 301/6, Kaushalya Park, Haus Khaz, New Delhi 110016. .. Complainant Through Mr. S.K. Sharma, Advocate Versus 1. New India Assurance Co. Ltd. Branch Office: Through Its Branch Manager, 4th Floor, Bajaj House, 97, Nehru Place, New Delhi 110019. 2. New India Assurance Co. Ltd. Head Office: Through Chairman-cum-Managing Director, 87, MG Road, Fort, Mumbai 400 001. Opposite Parties Through Mr. R.K. Tripathi, Advocate CORAM JUSTICE J.D. KAPOOR, PRESIDENT MS. RUMNITA MITTAL, MEMBER
1. Whether Reporters of local newspapers be allowed to see the judgment?
2. To be referred to the Reporter or not?
JUSTICE J.D. KAPOOR (ORAL)
1. The complainant company is carrying on the business of Full Fledged Money Changer (FFMC) under License No. FFMC.EC.DEL/41/95 granted by the Reserve Bank of India. On expressing interest by the complainant of getting its day to day business risk relating to transaction of money changing, the Opposite Party (in short O.P)-Insurance Company vide its letter dated 12th November 2001 offered a comprehensive premium rates and salient features of the policies through which they intended to cover the risks according to the complainants needs. The complainant vide its letter dated 5th December, 2001categorically requested for inclusion of two features in the policy particularly coverage of risk of forged and dishonoured cheques / pay order / drafts / credit cards and other banking instruments as it was a specific and categorical requirement of the complainant company to get such risks covered in the policy. Accordingly the complainant filled a proposal form issued by the O.P Company and insured itself for the period 09-12-2001 to 08-12-2002 covering a total risk of Rs. 6.00 Crores and covering a single transaction up to a limit of Rs. 30.00 Lakhs. Clause-8 of Schedule to the said insurance policy covered the risks in respect of fraud, forgery with respect to buying selling of foreign currency in exchange of cheques and other banking instruments up to Rs. 30.00 Lakhs.
2. One M/s. Vision Computers projected themselves as a very well reputed and financially sound concern and showed interest in purchasing foreign currency, from the complainant company, as they were often required to buy foreign exchange owing to their extensive traveling. The complainant before entering into any business transaction conducted various personal meetings at Directors level, examined its balance sheet, bank statement and scrutinized volumes of their other dealings before extending them the facility of buying foreign exchange from the complainant company against the company cheques issued by the said Vision Computers. Initially the cheques issued by Vision Computers were honoured by the bank during the period 2nd Jan to 12th Feb 2002. However, from 13th Feb 2002 to 16th Feb 2002 within a span of four days M/s. Vision Computers committed fraud worth Rs. 27,17,590/- and the cheques were returned by the bank with the remarks Account Closed.
3. The O.P-Insurance Company was duly informed vide letter dated 26th March 2002, about the factum of fraud and forgery committed by M/s. Vision Computers and a police complaint was also lodged in this regard. However, the said complaint was clubbed with other similar complaints against Vision Computers and the case was handed over to EOW and final FIR dated 26th March 2002 was registered by P.S. Connaught Place. The complainant again vide its letter dated 3rd April, 2002 requested the O.P-Company to release an amount of Rs. 20.00 Lakhs on ad-hoc basis, however, the O.P-Company informed vide its letter dated 15th April, 2002that they had already appointed Atul Kapoor & Co. for assessing the loss.
4. However, the Surveyor went on asking for different information in a piecemeal manner and also for the same information again and again with the sole intention of delaying the process. On 3rd September, 002 the complainant also informed the O.P-Insurance Company that they had been furnishing all the information sought by the Surveyor again and again and inspite of the same similar queries were being raised by the Surveyor. It was also made clear to the Surveyor that the investigating officer appointed by the O.P-Company Mr. Harish Kumar had inspected the necessary records, books of account, cash register, computer records etc. of the complainant company and also that the complainant company had complied with all the requirements in terms of various circulars of RBI in respect of various transactions entered into between the complainant and M/s. Vision Computers.
5. That vide its letter dated 3rd September, 2002 the complainant clarified to the Surveyor that if he was desirous of obtaining further information from the American Express Bank Ltd the complainant would personally accompany the Surveyor and the relevant information could be sought from the said Bank. Further, that certain queries could be and would be replied to as soon as charge sheet/challan is made available by the police authorities. The complainant also informed the Surveyor that it was not mandatory to retain the copies of Visa and tickets as the foreign exchange had been purchased for business travel. However, the claim form was made available by the O.P-Company to the complainant only on 3-09-2002 and the complainant duly dispatched the filled in form on 5-09-2002 itself. Subsequently vide its letter dated 30th September 2002 the complainant also enclosed a copy of the challan filed by the police authorities before the Metropolitan Magistrate, Delhi and the American Express Bank also clarified vide its letter dated 14-08-2002 that all the Travellers Cheques as referred by the Surveyor in his letter had been enchashed.
6. To a query raised by the Insurance Technical Investigator of the O.P-Company regarding institution of proceeding under Sec. 138 N.I. Act and civil suit, the complainant company informed that civil suit could be instituted only if the O.P-Company pays the court fees and litigation expenses as sizeable amount was involved in preferring the suit and also that the O.P-Company had a right to take action under the Law of Subrogation for which the complainant was ready to cooperate. However, after protracted correspondence, the O.P. company vide its letter dated 5-6-2003 repudiated the claim of the complainant on the basis of report of Surveyor on the ground that the loss caused on account of dishonoured cheques issued by M/s. Vision Computers was not a result of any fraud, forgery and was on account of a wrong decision in having business dealing with Vision Computers and also that the complainant had not adhered to the RBI guidelines. The complainant requested the O.P Company to reconsider his claim in the light of various facts and correspondence and particularly Clause-8 of the Policy and also that if the claim had to be rejected on grounds of non-coverage of risk then there was no need for protracted investigation by the Surveyor and Investigator. However, finally the O.P. company vide its letter dated 23-12-2004 through its AGM informed that they had again reviewed the claim based on all documents and that the policy did not cover the risk of dishonoured cheques, reason being, risks are termed as risks of trade which are not covered under the said policy. Thus, the O.P-Company expressed its regret to entertain the claim of the complainant.
7. As per the complainant, it was entitled for indemnification of the claim in terms of Clause-8 of the Insurance Policy which reads as under:-
Clause-8: Policy is also extended to cover risk of fraud/forgery with respect to travellers cheque/foreign currency notes, purchased Bank Pay Order/drafts and any other banking instruments and Indian currency notes received against sales of foreign currency in the form of cash/travelers cheque up to Rs. 30.00 Lakhs each transit/transaction.
8. Feeling aggrieved of the alleged illegal repudiation of the rightful claim, the complainant has filed the instant complaint claiming indemnification of loss to the tune of Rs. 27,17,590/- alongwith 18% interest, Rs. 5.00 Lakhs compensation and Rs. 1.00 Lakh cost of litigation.
9. While admitting the money insurance policy issued by it for the period in question for a sum of Rs. 30.00 Lakhs, in its defence the O.P-Insurance Company pleaded that as per the report dated 30-11-2002 of the Surveyor the cheques in question were dishonoured by the bank for insufficient funds and therefore, the Surveyor in his report stated that, we are of the view that the loss does not fall within the scope of the policy of insurance under which the claim has been lodged by the insured. It (the surveyor) further observed that M/s. Vision Computers never denied the outstanding due to the complainant and both the parties had entered into an agreement for settlement and even paid to the complainant substantial part of the outstanding amounts. It, therefore, opined that there did not appear to be a case of fraud or forgery but mere dishonour of cheques by way of civil business debt. The Surveyor therefore did not make any assessment of loss allegedly suffered by the complainant.
The O.P-Insurance Company, however, admitted that the Insurance Technical Services submitted its investigation report dated 20-01-2003 that the complainant had recovered a sum of Rs. 7,88,260/- from the total outstanding of Rs. 35,05,580/- on 13-02-2002 and thus the complainant had suffered a net loss of Rs. 27,17,590/- on account of dishonour of cheques. The investigators further reported that since it was part of a gang of criminals who floated companies and duped innocent people in the course of business transactions and since the concerned persons were arrested by the EOW of Delhi Police and were facing trial, the complainant did not file any criminal complaint under Sec. 138 of N.I. Act or suit for recovery as the chances of recovery were remote. The investigator after giving their observations as to the nature of loss alleged by the complainant left it to the O.P-Insurance Company to seek legal advice and to take decision at its end with regard to the admissibility of the claim as per terms and conditions of the policy.
10. As per the O.P-Insurance Company, they considered the claim of the complainant and after perusal of the entire record particularly the survey and investigation reports and full application of mind came to the conclusion that the claim was not payable as per terms and conditions of the policy. Therefore, vide its letter dated 05-06-2003 informed the complainant that the peril resulting in the loss was not on account of fraud of forgery as covered under the money insurance policy, but dishonour of cheques in the course of business transactions, which did not fall within the ambit of policy cover and that the complainant did not take reasonable care as per terms and conditions of the policy and on its own took risk while giving large credits to M/s. Vision Computers without checking its antecedents and without fulfilling the verification of documentary requirements of foreign exchange as per RBI Guidelines.
O.P-Company has thus abjured itself from any deficiency in service or negligence on its part and sought dismissal of the complaint as being without any cause of action.
11. Apart from the above, the O.P-Company has raised the preliminary objection that the complainant is not a legal entity and thus has no locus standi to file the present complaint, in as much as, no document to this effect has been filed and moreover the complaint has also not been filed by an authorized person.
Further the complaint is barred by limitation as the claim was repudiated vide letter dated 05-06-2003 whereas the complaint was filed in September 2005. Also the complainant has committed flagrant breaches of the terms of the policy and did not take reasonable care as per terms and conditions of the policy and on its own took risk while giving large credits to M/s. Vision Computers without checking its antecedents and without fulfilling the verification of documentary requirements of foreign exchange as per RBI Guidelines.
Also the complainant failed to initiate any civil or criminal proceedings against Vision Computers for recovering the amount.
12. However, in rejoinder the complainant has reiterated its claims and allegations and denied the objections raised by the O.P-Company. Both the parties have also filed their respective affidavits in evidence, in support of their respective cases, which are on record.
13. As is apparent from the rival claims and contentions of the parties, the short question arising for determination is, whether the loss was on account of fraud or forgery and was covered under the Money Insurance Policy or not? On the one hand, the OP-Insurance company contends that the dishonouring of the cheque in the course of business transaction does not come within the ambit of the policy as it is neither a case of fraud nor forgery.
Had it been a case of fraud the complainant should have initiated penal proceedings under Sec. 138 of the N.I. Act, which he did not choose to resort to.
14. As against this the counsel for the complainant contends that FIR has been lodged but at the same time the Company delivered the foreign exchange to its client on good faith and it was the person in whose name the foreign exchange was issued played fraud with the complainant by issuing a cheque against the account which had already been closed. Thus, the whole transaction was based upon good faith and that is why it had insured itself with the insurance company under the Money Insurance Policy.
15. Admittedly, the complainant is carrying on the business of FFMC (Full Fledged Money Changer) and possesses a licence for it granted by the Reserve Bank of India. The nature of business of the complainant is such that it involves day to day business risks relating to transaction of money changing and since our economy has accepted the business transactions through cheques and as a large number cheques were being dischonoured as the person in whose favour the cheques are issued accept the cheques in good faith and, therefore, when the business as a whole was being jeopardized affecting the economy itself, the Government brought the Negotiable Instruments Act on the statute book to arrest such frauds being played by people.
16. Merely because a person has more than one remedies or course open does not debar him from seeking the actual benefit from the source which is available to him. Criminal proceedings do not necessarily make up the financial loss suffered by a party. These are penal proceedings. Similarly the proceedings under Sec. 138 N.I. Act are also penal proceedings. There is a provision for fining a person which may not be recovered even if it is double the amount of the cheque in question.
17. It is being suggested that the complainant should have filed a Civil Suit for recovery. It was not such a transaction for which the complainant may have filed a Civil Suit as it was not a civil suit which primarily arises out of promissory notes, deposits etc. It is a pure and simple case of dishonouring of a cheque issued by a party in whom the complainant had faith.
18. Had the nature of business of the complainant been not involving such risks as in the instant case there was no point for the complainant to obtain such a policy which is called the Money Insurance Policy. Insurance policies are obtained to recover such risks which are imminent in the nature of business transactions or dealings, for instance, the person who is a transporter, having a fleet of vehicles always run the risk of damage to the vehicles by accident or theft and, therefore, obtains the policy for covering such risks and in such an eventuality he is entitled for indemnification of loss. He also files a complaint with the police but it is not sure that the vehicle which has been stolen will be recovered. In most of the cases, untraced reports are filed and even if the vehicle is recovered it is necessarily recovered in damaged condition and for that the insured is also entitled for indemnification of the loss to the vehicle.
19. Similarly, business houses and companies obtain insurance policies which are called Infidelity Insurance Policies covering huge losses suffered by them due to the unfaithfulness of their employees. There may be varied kinds of insurance policies, which are available to the consumers. All these are beneficial schemes.
20. The word fraud has been defined in the Indian Penal Code, 1860 as, fraudulently a person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise.
21. In the instant case, had the complainant known that the person to whom he is giving foreign exchange is of no means he would not have parted with such huge amount of foreign exchange. He did so on the bonafide belief that the person who is being given the foreign exchange and issuing the cheque has credibility. It is the person who has issued the cheque that has played the fraud upon the complainant by taking advantage of the good faith knowing that either funds were insufficient or the account had already been closed. If any person knowingly issues a cheque of such a huge amount knowing fully well that no sufficient funds were available, it also comes within the ambit of fraud.
Fraud played by such a person can be inferred from the subsequent event also whether that person has a bonafide intention to make payment by cheque and if he has knowledge that the cheque has been dishonoured due to insufficient funds and therefore his reputation is at stake he would have immediately made the payment.
22. This circumstances of not making the payment to the complainant immediately on knowing that the cheque has been dishonoured for any reason whatsoever including insufficient funds, leads to the inescapable and ineluctable conclusion that it was a pure and simple case of fraud played upon the complainant for which the complainant is entitled for indemnification of loss under the policy obtained by him.
23. Foregoing reasons persuade us to allow the complaint in the following terms:-
i) OP-Insurance Company shall pay the amount of Rs. 27,17,590/-
(Twenty Seven Lacs Seventeen Thousand Five Hundred and Ninety Only) with interest @12% as compensation from the date of filing of the complaint till the date of this order.
ii) OP-Insurance Company shall also pay Rs. 25,000/- as cost of litigation to the complainant.
24. Complaint stands disposed of in aforesaid terms. Payment shall be made within two months from the date of receipt of a copy of this Order.
26. Copy of Order, as per statutory requirement be forwarded to the parties and to the concerned District Forum and thereafter the file be consigned to record.
(JUSTICE J.D. KAPOOR) PRESIDENT (RUMNITA MITTAL) MEMBER HK