National Consumer Disputes Redressal
Sindhudurg District Central vs The National Insurance Co. Ltd. on 14 July, 2011
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI ORIGINAL PETITION NO. 261 OF 2002 1. Sindhudurg District Central Co-operative Bank Ltd. at and Post Kudal, District Sindhudurg, Maharashtra State 2. Shri Vinayak Raghav Ramdas, Manager, Sindhudurg District Central Co-operative Bank Ltd. at and Post Kudal, District Sindhudurg, Maharashtra State .Complainants Versus 1. The National Insurance Co. Ltd., Through : Its Director 3, Middleton Street, Calcutta, West Bengal- 700 071 2. The Maharashtra Government Insurance Fund, through the Director of Insurance, Maharashtra State, Griha Nirman Bhavan, 264, First Floor, Opposite Kalanagar, Bandra (East). Bombay 400 051. Maharashtra State .........Opposite Parties BEFORE: HON'BLE MR. JUSTICE R.K. BATTA, PRESIDING MEMBER HONBLE MR. VINAY KUMAR, MEMBER For the Complainant : Mr. Shridhar Y. Chitale, Advocate For the Opposite Party : Mr. Ram Ashray, Advocate for Mr. S.L. Gupta, Advocate PRONOUNCED ON: 14.07.2011. ORDER
PER MR.VINAY KUMAR, MEMBER This Consumer Complaint was originally filed by Sindhudurg District and Co-operative Bank as the first Complainant and Sri V.R. Ramdas, Manager of the Bank, as the second Complainant. The list of respondents included the National Insurance Company and the Government of Maharashtra Insurance Fund, through the Directorate of Insurance, Maharashtra State. It also had listed six other functionaries of these two respondents, taking the total number of respondents to eight. It was subsequently modified and limited to the two respondents mentioned above. On 13.11.2004 the complaint was dismissed for non-prosecution. Thereafter, in response to an application for restoration, the complaint was restored on 28.7.2005.
2. The Complainant Sindhudurg District Central Co-operative Bank (herein after referred to as the Bank) is a scheduled bank for Sindhudurg District of Maharashtra and undertakes business of accepting deposits and advancing loans to its members. The business of the Bank includes providing of loans to its members on the pledge of gold ornaments deposited by the borrowers.
The business of the Bank at the relevant point of time was covered under an insurance policy from OP-1, National Insurance Company, operational from 01.07.1994 to 30.06.1995.
3. This Bankers Indemnity Insurance Policy was for indemnification of the Bank against losses in respect of fire, burglary, house breaking, theft, robbery or hold up. 40 % of the risk was retained by OP-1, National Insurance Company and the remaining 60% with Government of Maharashtra OP-2. On such sharing of risk between OP-1 and OP-2 as above the Complaint petition states:-
However, for all practical purposes, that was only an internal arrangement of co-insurance as between the Opposite party No.1 and the Maharashtra Government Insurance Fund. In so far as the Opposite Party No.1 was concerned, all services including the payment of liability if any under the said Bankers Indemnity Insurance Policy for entire amount of Rs.3.43 crores or part thereof was to be made by the Opposite Party No.1. Therefore, the claim of the Bank if any under the said Insurance Policy dated 1st July 1994 for Rs.3.43 crores or any part thereof was to be made by the Complainant No.1 with the Opposite Party No.1 and the Opposite party No.1 alone was liable to pay the entire amount due the Complainant No.1 under the said Insurance Policy.
4. Allegedly, between 2nd and 3rd August 1994, a burglary/house breaking took place in the Banda branch of the complainant Bank. Gold ornaments pledged by the customers of the Bank worth Rs.22,87,340/- were stolen. As neither the goods were traced nor the perpetrators of the crime were traced, the Bank had to use its own resources to return the value of the ornaments pledged on the demand of the customers. By the time this consumer complaint was filed, claims of Rs.21,75,276/- (pertaining to 357 out of 365 customers) had been satisfied by the Bank. The Bank made a claim on 7.10.1994 under the insurance policy for the total loss of Rs.22,87,340/-, which according to the Complainant has neither been accepted nor rejected by the OPs.
Alleging this to be a deficiency on the part of the OPs, jurisdiction of this Commission has been invoked.
5. The Complainant has sought refund to the lost amount of Rs.22,87,340/- together with 18% interest from the date of the complaint and compensation of Rs.25 lacs for the hardship undergone by the Complainant. Strangely, the Complaint petition also carries an alternative prayer, seeking 60% of the total loss together with 18% interest from the date of complaint, directly from OP-2, the Directorate of Insurance, Maharashtra State.
6. The case of the Complainant is that the above mentioned pledged ornaments were kept in the security of the strong room in a steel cupboard. All 901 bags containing these ornaments were in the steel cupboard. The strong room as well as steel cupboard had two separate locks each with two separate keys. The Branch Manager and Sub-Accountant both had separate keys to the lock at the entrance of the Banda Branch. But, as per the Complaint petition the keys of the strong room, safe and the steel cupboard was divided in such a manner that they could not be opened by one person and required the presence of both i.e. Branch Manager and the Sub-Accountant.
The gate at the entrance of the Branch was also installed with a burglar alarm (siren).
7. On the fateful day, the Branch was closed at 5.30 p.m., as per normal practice. The steel cupboard as well as the strong room had also been locked with two separate keys.
The next day when the Branch was opened at 10.30 a.m, the two locks of the main entrance of the Branch were found broken. Similarly, the two locks at the entrance of the strong room had also been broken. One side of the steel cupboard was in a broken state and 365 bags of gold ornaments (worth approximate Rs.22,87,340/-) were lost.
The complainant petition states that:-
The other half of the steel cupboard was not open for whatever reasons and with the result thereof, the gold ornaments lying in the other half remained there. Thus, between 5.30 p.m. on 2nd August 1994 and 10.30 a.m. on 3rd August theft and burglary and housebreaking took place firstly by deactivating the siren outside the Bank premises and secondly, by breaking open the locks on the main door, the strong room and the steel cupboard was opened by person or persons who had entered the said Banda Branch premises and have taken away some 365 bags containing pledged gold ornaments out of total 901 bags lying in the said strong room.
8. When the police visited the Branch on the same day, they found weapons tools and broken locks on the main doors and the steel cupboard.
FIR was registered with Banda Police Station. Subsequently four, out of the total seven, officials of the Bank Branch were arrested by the Police. This included the Branch Manager and the Sub-Accountant of the Banda Branch. The Banks gold Valuer was also arrested. All five were charge-sheeted in the court of Chief Judicial Magistrate, Sindhudurg in October, 1995. An independent inquiry was also instituted by the Bank against its own employees. But, it could reportedly not proceed as evidence remained in the custody of the police and the court.
9. The complaint petition also states that the Surveyor appointed by OP-1 estimated the loss at about Rs.16 lacs, which was not acceptable to the Complainants. The Complaint petition carries details of the correspondence between 15.2.1995 and 11.10.1996, to show how the matter has been pursued with OP-1 for settlement of the claim under the policy, though without success. We find from the records that even till 14.10.1999, OP-1/Nationl Insurance Company has written to the Complainant asking for details including progress of criminal proceedings and departmental inquiry, so as to consider the request of the Complainant to treat it as the case of misappropriation.
10. In response to the averments in the complaint petition, OP-1/National Insurance Company, has called it a case of misappropriation by the employees of the Complainant. Under the policy, loss caused by dishonest/criminal acts of the employees, is insured for a sum of Rs.3 lacs. Clause D of the Policy, defines it in the following terms--
D. DISHONESTY By reason of the Dishonest or Criminal act of the employee(s) of the insured with respect to the loss of Money and/or securities wherever committed and whether committed singly or in connivance with others
11. In the response of OP-1 the following other issues are raised a.
A claim of Rs.22,87,8340/- has been made by the Complainant under the Insurance policy, when the book value of the lost ornaments, at the time of pledging in each case, comes to a total only Rs.15,84,370/- only.
b.
According to the police charge-sheet, offences of misappropriation, forgery and some other, under the provisions of the IPC, were committed during the period 9.2.1994 to 3.8.1994, while the insurance policy was taken w.e.f 1.7.1994. Therefore, the cause of action began prior to the inception of the policy. As such, it is not covered under it. According to OP-1, the loss should be covered under another policy taken by the Complainant from New India Insurance Company (not OP-1) as that was the policy current during the period 01.07.1993 to 30.06.1994.
c.
According to OP-1, the matter involves examination of series of documents and complicated questions of law and fact. Therefore, it is prayed that the Commission may direct the Complainant to approach the Civil Court.
d.
The Complainant, it is alleged, has wrongly stated that the Surveyor appointed by OP-1 had assessed the loss at Rs.1584370/-. The present case is one of loss caused by dishonest and criminal acts of some employees of the insured, for which the complainant is covered only for Rs.3 lacs under the policy.
e.
The respondent/OP does not accept the allegation of deficiency in service stating that non-settlement of the claim was due to the insured not informing the Insurance Company about commencement of criminal prosecution of its employees and not responding to the various queries, considered necessary for settlement of the claim.
12. In his rejoinder, the Complainant has explained that the claim of Rs.2287340/- is based on the market value of gold on the day of the loss with Rs.49,294/- added towards making charge of the ornaments.
It is also clarified that proceedings before the Chief Judicial Magistrate Sindhudurg in Criminal Case No.12/1997 have concluded and the accused have been acquitted of the charges framed against them. The decision was pronounced on 30.1.2004. Yet, the insurance claim is not settled.
13. As for the allegation of OP-1 that the Complainant/Bank did not oppose release of the jewelry seized from the Banks authorized valuer, the Complainant informs in his rejoinder that the police could not prove that the ornaments in his possession were from the burglary in question. Hence the bank valuer made an application for return of the ornaments. The court did not issue notice to the Complainant bank on this application. Therefore there was no question of opposing the same by the complainant.
14. Before any assessment of the matter on merits, we need to take a look at two preliminary issues. The first is the question of limitation, raised by learned counsel for the respondents. According to him, the incident took place in 1994 but the consumer complaint was filed in 2000 and therefore, the complaint is barred by limitation. We note that in this case, the complainants filed the claim under the policy, as early as on 7.10.1994, which remained undecided till the filing of the consumer complaint. OP-1 has continued to correspond and seek various clarifications, but not decided the claim. Therefore, it is a clear case where the cause of action continues. The question of limitation does not arise.
15. Secondly, in para 57(e) of the complaint petition, an alternative prayer has been made, seeking a direction to OP-2, the Government of Maharashtra Insurance Fund, to settle 60% of the claim. This prayer needs to be seen together with the complainants own averment in para 6 of the petition. The relevant extract is given in para 3 of this order where, according to the Complainant, the sharing of liability was only an internal arrangement of co-insurance and the claim is to be settled by OP-1/insurance Co, alone. Therefore, we are of the view that this prayer deserves no further consideration.
16. We have perused the records and examined the evidence on record as also heard the opposite counsels. During the course of the arguments, learned counsel for the complainant Bank, referred to the provision in clause A of the insurance policy as directly applicable to the claim of the complainant. Under this clause, the insurer undertakes to indemnify the insured, to the extent of the limit under the policy, any direct loss of money and/or securities sustained ON PREMISES by reason of any Money and/or Securities for which the insured are responsible or interested in, or the custody of which they have undertaken and which now are, or are by them supposed or believed to be or at any time during the period of insurance may be in or upon their own premises (including mobile offices) or upon the premises of the Bankers in any recognised place of safe-deposit or lodged or deposited in the ordinary course of business for exchange conversion or registration with the issuers thereof or with any agents of such issuers or with any person employed to procure or manage the exchange conversion or registration thereof being (while so in or upon such premises or so placed lodged or deposited as aforesaid) lost destroyed or otherwise made away with by Fire Riot and Strike Burglary or Housebreaking Theft Robbery or hold-up whether within or without and whether by the employee(s) of the insured or any other person or persons whomsoever.
Under this clause, it was argued, the insurer would be liable, though the loss may have been caused by some of the employees of the complainant Bank.
17. Learned counsel for the OP/National Insurance Company also argued that criminal prosecution of the concerned employees of the Bank and its Valuer goldsmith, did not succeed as 7 out of 10 witnesses had turned hostile. The Investigating Officer also did not appear before the trial court, despite several opportunities. This led to acquittal of all five accused for want of evidence. It was also argued that there was no opposition from the Complainant to the release of ornaments siezed from the goldsmith cum-Valuer of the Bank. The counsel stressed that it was for the Bank, as the custodian of the stolen jewelry, to seek the assistance of the owners thereof to establish whether the recovered jewelry was part of the stolen pieces or not.
18. The report of the Surveyor appointed by OP-1 also refers to the liability of the insurer under Clause A of the policy. However, on the post event state of the strong room, the report of the surveyor brings out fact which speak for themselves a.
The siren wire connecting the locker cupboard was found to have been cut.
b.
There were six drawers/boxes on the left hand side of the cupboard. Only the 1st, 3rd and 4th drawer had been pried open. Of the total 14 big bags, 13 were in these three drawers. They were stolen.
c.
Drawer Nos 2nd, 5th and 6th did not contain any articles. They were not broken/force-opened.
d.
Six drawers on the right hand side were fully left untouched.
19. At the end of his report dated 7.1.1995, the surveyor has assessed the loss as Rs.15,84,370, which was the value of the lost jewelry on the respective dates they were pledged to the Bank. The correspondence between the complainant Bank and theOP-1, insurance Company shows that as of 1.11.1995, OP-1 was considering on-account payment of 60% of the claim amount. (letter No 270803/iup/95/222 dated 1.11.1995 from Mr I.U.Pathan, Branch Manager, iup/srg to the Head Office of the complainant Bank.)
20. OP-1 has denied the allegation of deficiency of service but has not explained, with supporting evidence, the reasons for non-settlement of the claim filed on 7.10.1994. The report of the surveyor was submitted on 7.1.1995. Its findings/recommendations are clear. It finds policy Clause-A applicable to the claim. It has observed As per our inquiries and examination of various documents/records, the incident of house breaking appears to be genuine. It has determined the loss as Rs.15,84,370/- and has concluded that the loss falls within the scope of the policy and there is no breach of any policy condition. Yet, the claim is neither accepted nor repudiated. Decision in the criminal case before the Chief Judicial Magistrate was pronounced on 31.1.2004 and the records show that OP-1/insurance Co. is aware of the outcome. Even if the accused had been convicted, instead of being acquitted, the liability of OP-1 under policy Clauses A and D would have remained unaltered. We have examined the applicability of these Clauses in earlier paras of this order. Therefore, in our view there is no acceptable justification for non-decision on the claim under the policy. It is accordingly, held to be a clear case of deficiency of service.
21. In the counter affidavit of the respondents, it is claimed that this case does not fall within the policy Clause A and D of the policy. It is called a case of misappropriation and dishonest and criminal act on behalf of the employees of the complainant. No reasons are detailed in explanation of this argument and therefore, it cannot be accepted. In any case, a plain reading of the two Clauses A and D, examined in earlier parts of this order, would show that in this case Clause A will apply as it deals with loss caused whether by employee(s) or any other person. If the prosecution of the employees of the complainant Bank had resulted in their conviction, Clause D would have applied. The insurance policy, in the present case, covers risk under Clause A up to Rs. 3 Crores.
22. Some of the issues raised by the respondents are based only on the charges framed against the accused and no other independent evidence. We find from the judgment of the Chief Judicial Magistrate, Sidhudurg, in Regular Criminal Case No.12/1997 that all the issues raised against the accused were decided in the negative. Therefore, the same issues can not be allowed to be pressed further in the present proceedings.
23. On the basis of the examination above, we come to the conclusion that failure to decide the claim of the complainants under the policy, amounts to deficiency in service on the part of the OP-1. The complaint is allowed. OP-1, National Insurance Co, is directed to pay the claim for the amount of loss determined by the surveyor i.e. Rs.15,84,370/- together with simple interest of 6%, with effect from the date of the consumer complaint filed in this Commission. This amount shall be paid within a period of three months.
Failing this, interest at 9% will be payable for the period of delay. Under the circumstances of the case, there are no orders as to cost.
.
(R.K.BATTA, J.) PRESIDING MEMBER ..
(VINAY KUMAR) MEMBER S/-