State Consumer Disputes Redressal Commission
Ashwani Handa vs The Oriental Insurance Company Limited ... on 24 September, 2013
FIRST ADDITIONAL BENCH
STATE CONSUMER DISPUTES REDRESSAL COMMISSION,
PUNJAB,
DAKSHIN MARG, SECTOR 37-A, CHANDIGARH.
Consumer Complaint No.89 of 2012.
Date of Institution: 10.10.2012.
Date of Decision : 24.09.2013.
Sh. Ashwani Handa S/o Sh. Sardari Lal Handa, R/o House No.2260/12,
Gali No.7, Gandhi Nagar, Ludhiana.
.....Complainant.
Versus
1. The Oriental Insurance Company Limited, Regd. & Head Office
A-25/27, Asaf Ali Road, New Delhi-110002, through its Chairman-
cum-Managing Director.
2. The Oriental Insurance Company Limited, opposite HDFC Bank
Limited, Chandigarh Road, Samrala-141114 (Ldh.) through its
Branch Manager.
3. The Oriental Insurance Company Limited, Branch Office SCO
No.109-110-111, Surendra Building, Sector 17-D, Chandigarh-
160017.
4. State Bank of India, Branch Ladhowal, through it s Branch
Manager.
....Opposite Parties.
Consumer Complaint U/s 17 of the
Consumer Protection Act, 1986.
Before:-
Shri Inderjit Kaushik, Presiding Judicial Member.
Shri Vinod Kumar Gupta, Member.
.................................................... Present:- Sh. Varun Baanth, Advocate, counsel for the complainant.
Sh. Navin Kapur, Advocate, counsel for opposite parties No.1-3.
Sh. K.S. Arya, Advocate, counsel for respondent no.4. Consumer Complaint No.89 of 2012 2 INDERJIT KAUSHIK, PRESIDING JUDICIAL MEMBER Sh. Ashwani Handa, complainant (hereinafter called "the complainant") has filed this complaint U/ 17 of the Consumer Protection Act, 1986.
2. Facts in brief as are made out from the pleadings of the complainant are that the complainant is totally illiterate person and was constructing the house for his livelihood at Ludhiana. The complainant applied for a loan vide application dated 25.05.2010 and got sanctioned a housing loan to the tune of Rs.35.00 lacs (Rupees Thirty Five Lacs) from opposite party no.4 vide Arrangement Letter dated 28.06.2010. The said loan was taken by the complainant for construction of the house on Plot No.1, Gold City, B/side BSNL Tower, Village and Post Office, Bhatian Bet.
3. As per the above Arrangement Letter, there was an insurance clause and the house was to be comprehensively insured for the market value, covering fire, flood etc. The loan amount was disbursed by opposite party no.4-bank in four equal installments and every installment was payable according to stage of completion of construction. In the month of June, 2011, the complainant approached opposite party no.4 to release the 4th and final installment on completion of building. Opposite party no.4 released the final installment by the end of June, 2011 after verifying the final stage of construction and after getting the final completion certificate from qualified architect and engineer.
4. Opposite party no.4 has sanctioned the loan and its primary interest was to secure the loan and get the insurance from opposite parties no.1 to 3 to get the house insured. The house of the complainant was got insured against 'Standard Fire and Special Perils Consumer Complaint No.89 of 2012 3 Policy' for a sum of Rs.40.00 lacs. The premium was paid directly by opposite party no.4-bank to opposite parties no.1 to 3. All the necessary documents were signed by the complainant as per the direction of opposite party no.4. As per the Agreed Bank Clause, the house/flat shall be comprehensively insured for the market value, covering fire, flood etc. in the joint names of the bank and the borrower and it clearly proves that the building was comprehensively insured against the perils mentioned above.
5. On 06.08.2011, the building fell down at about 7.00-8.00 a.m. due to rain and storm, causing flood. The opposite parties and the local police were immediately informed about the accident. DDR was also registered in the Police Station, Ludhiana on 11.08.2011. The statement of the contractor was also recorded in the Police Station. The loss to the tune of Rs.50.00 lacs was caused due to falling of the lanter. Sh. Mahinder Singh, neighbour of the complainant gave his affidavit to prove these facts and he intimated the complainant. The Sarpanch of the village also gave the certificate. All these documents prove that due to rain and storm, flood occurred and water got accumulated in the basement, resulting in the collapse of the building. The opposite party bank wrote a letter dated 07.09.2011 to opposite parties no.1 to 3 to settle the claim of the complainant, but no response was received.
6. The complainant was informed vide letters dated 20.06.2012 and 23.08.2012 that opposite parties no.1 to 3 have found in their investigation that there was no protection wall around the basement and the water was standing upto 5 to 6 feet high and the claim is not admissible, as the construction is not covered under the insurance policy. Opposite parties no.1 to 3 repudiated the genuine claim of the complainant, by ignoring the Agreed Bank Clause and Consumer Complaint No.89 of 2012 4 other clauses and the action of opposite parties no.1 to 3 is not justified. Opposite parties were well aware about the stage of construction and disbursement of loan and the construction was almost complete and the major amount of loan has been paid. The repudiation was illegal. The complainant was constructing the house after taking loan, but due to this incident, he has not only lost the house, but also paying the interest on the loan amount and the cost of construction has increased many folds. The repudiation of claim on the part of opposite parties no.1 to 3 amounts to deficiency in service and unfair trade practice and for that, the complainant is required to be compensated.
7. It was prayed that the opposite parties may be directed to pay the insured amount to the tune of Rs.40.00 lacs with interest @ 18% p.a. w.e.f. 06.08.2011 till payment, compensation of Rs.10.00 lacs towards escalation in the building material and Rs.5.00 lacs as compensation and Rs.1.00 lacs as litigation expenses.
8. In the written version filed on behalf of opposite parties no.1 to 3, preliminary objections were taken that the complaint is not maintainable in the present form and the complainant has got no locus standi to file the same. The complainant is not a consumer under the Act. No cause of action has arisen in favour of the complainant against the opposite parties. There is no deficiency in service. The complaint is liable to be dismissed only on account of mis-joinder and non-joinder of necessary parties. The complaint is not maintainable for want of jurisdiction and is time barred.
9. The claim of the complainant was rightly rejected vide letters dated 20.06.2012 and 23.08.2012. Intricate questions of law and facts are involved and the civil court is competent. The complainant has not come to the Commission with clean hands and has suppressed the Consumer Complaint No.89 of 2012 5 material facts, such as having obtained the survey report from opposite party no.2 by way of seeking under RTI Act, 2005 and has concealed the actual reason of loss and the complaint is liable to be rejected.
10. On merits, it was submitted that opposite party no.4 approached opposite party no.2 for issuance of Standard Fire and Special Perils Insurance Policy in respect of residential building located at Plot No.1, Bhatian Bet, Gold City, Ludhiana, for a sum of Rs.40.00 lacs i.e. Rs.35.00 lacs on building built of first class construction and Rs.5.00 lacs on furniture and fixtures as per the proposal form filled by the complainant and opposite party no.2 issued the insurance policy No.233407/11/2012/46 effective from 25.07.2011 to 24.07.2021 in the name of the complainant. The same was issued with a lien of opposite party no.4 as a Banker/Financier in terms of 'Agreed Bank Clause'. The complainant proposed for the policy after understanding all the terms and conditions, clauses and limitations contained therein prior to issuance of policy. It was admitted that the intimation of loss was sent by the complainant to opposite party no.2. DDR No.5 dated 11.08.2011 was lodged with the Police Station and the claim bill was submitted, but no affidavit of the contractor was attached or supplied to the answering opposite parties. The contractor has mentioned that he is still constructing the house and the contract is still with him.
11. The loss did not occur as a direct result of rain or storm, whereas the loss occurred due to increased level of sub soil water and its penetration into the basement which peril is not covered under the policy. Intimation regarding the repudiation was sent to the complainant vide letters dated 20.06.2008 and 23.08.2012. The decision was taken after due application of mind, based upon the documents available with the answering opposite parties, including the investigation report dated Consumer Complaint No.89 of 2012 6 04.01.2012 of M/s Royal Associates as well as survey report dated 25.01.2012 of Col. Chandra Prakash (Retd.). The complainant had obtained the insurance policy for the risk which had already occurred prior to the commencement of the policy, to secure the amount, payable towards the repayment of loan to opposite party no.4. The complainant lodged DDR on 11.08.2011 and intimated opposite party no.2 on 11.08.2011 in respect of the loss allegedly occurred on 06.08.2011 and there was an inordinate delay in sending the intimation and reporting the matter with the police. The house was under construction/erection. The policy was issued on good faith. The complainant has tried to obtain the claim fraudulently. No unfair trade practice was adopted. All other allegations of the complaint were denied and it was prayed that the complaint may be dismissed with costs.
12. In the written version filed on behalf of opposite party no.4, preliminary objections were taken that the complaint has been the borrower of the answering opposite party, who availed the housing loan to the tune of Rs.35.00 lacs on 28.06.2010. The answering opposite party has nothing to do with the dispute, if any, between the complainant and opposite parties no.1 to 3 and the complaint against the answering respondent is misconceived and is liable to be rejected. No relief has been claimed against the answering opposite party.
13. The said loan was grated in terms of various loan documents executed between the complainant/borrower and the bank and the disbursement was done as per the terms and conditions of the said documents. The complainant is liable to make repayment of the loan amount in terms of the loan documents executed in this regard. There is no deficiency in service on the part of the answering opposite party and there is no cause of action against the answering opposite Consumer Complaint No.89 of 2012 7 party and the answering opposite party has been illegally impleaded. The complaint is bad for mis-joinder of parties.
14. On merits, it was submitted that the housing loan facility is granted by the answering opposite party under certain terms and conditions, provisions and guidelines stipulated in this regard for the benefit of the complainant and the needy customer. Upon receipt of the loan application from the complainant, after due deliberation, the modalities of the housing finance and its repayments were finalized by the bank in terms of the guidelines provided in this regard. Accordingly, various loan documents were executed and the terms and conditions are binding on the parties. The opposite party bank has fairly acted in this matter at every stage. Insurance clause is for the benefit of the borrower under the terms and conditions of the related documents. The bank being financial institution can only provide the capital, paving way for the smooth progress. The bank is not the controlling or supervisory authority over the project. As and when the letter was received, it was forwarded to the concerned opposite party for necessary action. Other allegations were denied and dismissal of the complaint was prayed with costs.
15. Learned counsel for the complainant tendered affidavit of the complainant as Ex.CW1/1 along with Ex.C-1 to Ex.C-10, photographs Ex.C-11/1 to Ex.C-11/9 and Ex.C-12.
16. Learned counsel for opposite parties no.1 to 3 tendered affidavit of Sh. Ram Avatar, Deputy Manager of opposite parties no.1 to 3 as Ex.OP-RA, affidavit of Col. Chandra Prakash (Retd.) as E.OP-RB and affidavit of Sh. Kashmira Singh as Ex.OP-RC along with documents Ex.R-1 to R-4.
Consumer Complaint No.89 of 2012 8
17. Learned counsel for opposite party no.4 tendered affidavit of Sh. Satnam Singh, Branch Manager of the opposite party no.4-Bank.
18. We have heard and considered the arguments advanced on behalf of the parties and have gone through the entire record carefully.
19. The complainant applied for loan vide application dated 25.05.2010 and a housing loan to the tune of Rs.35.00 lacs was sanctioned by opposite party no.4 vide 'Arrangement Letter and Home Loan' Ex.C-1 and in the said letter Ex.C-1, under the head 'Insurance', it was provided as follows:-
"The house/flat shall be insured comprehensively for the market value, covering fire, flood etc. in the joint names of the bank and the borrower. Cost of the same shall be borne by you."
20. The 'Standard Fire and Special Perils Policy' Ex.C-2 was issued by opposite party no.3 in the name of the complainant and the period of insurance was from 25.07.2011 to midnight of 24.07.2021 and the premium along with service tax stamp duty was paid. The sum assured was Rs.40.00 lacs.
21. The photographs Ex.C-11/1 to Ex.C-11/9 prove that the building was constructed. As per version of the complainant, on 06.08.2011 at about 7.00-8.00 A.M. due to heavy rain, storm, flood was caused and the building fell down and DDR Ex.C-4 was lodged by the complainant vide DDR No.5 dated 11.08.2011, wherein he mentioned that he has suffered a loss of about Rs.50.00 lacs. Statement of contractor Sh. Vinod Kumar was also recorded in the police station. Ex.C-6 is the affidavit of Mahinder Singh S/o Sh. Bal Singh, who stated on oath that the complainant was constructing his 'kothi' on the rear Consumer Complaint No.89 of 2012 9 side of his house and due to heavy rain and storm and collection of water, the building fell down on 06.08.2011 at about 7.30 A.M. Ex.C-7 is the declaration given by the Sarpanch of Gram Panchayat, Bhatian Bet, Tehsil and District Ludhiana, supporting the version of the complainant that the house of the complainant fell down due to heavy rains, storm on 06.08.2011 at 7.30 A.M. Opposite party no.4-Bank wrote letter Ex.C- 8 to the Branch Manager of opposite party no.2, mentioning that Rs.35.00 lacs housing loan was sanctioned on 28.06.2010 in favour of Sh. Ashwani Handa and out of Rs.35.00 lacs, Rs.34.25 lacs has already been disbursed, but the building fell down on 06.08.2011 and the complainant intimated the bank on 19.08.2011 and submitted the policy to the bank on 05.09.2011. Ex.C-9 is the letter vide which, it was stated that there was no protection wall around the basement and the water was standing upto the height of 5 to 6 feet in the basement which caused the collapse of the house. The claim is not admissible as the building was under construction and is not covered under the insurance policy and the claim is liable to be repudiated and the same was repudiated vide letter Ex.C-10.
22. The version of opposite parties no.1 to 3 is that the loss did not occur as a result of rain or storm, but due to increase of sub soil water and its penetration into the basement and as per the survey report dated 25.01.2012 of Col. Chandra Prakash (Retd.), the claim was not payable.
23. The version of opposite party no.4-bank is that the complainant availed the housing loan to the tune of Rs.35.00 lacs on 28.06.2012 and disbursement of the same was done as per the terms and conditions of the documents. The complainant is liable to make repayment of the loan amount in terms of the loan documents. The Consumer Complaint No.89 of 2012 10 investigation report is Ex.R-3 and under the head 'Findings", in Para-5, it was observed as follows:-
"5. Insured got sanctioned housing loan from State Bank of India, Ladhowal. Amount of Rs.35 lacs was sanctioned as loan, which was disbursed to insured in four installments i.e.
29.06.2010, 12.03.2011, 30.06.2011. As per bank record, inspection of under construction house was conducted by bank officials on 27.07.2010, 29.09.2010, 11.10.2010, 18.01.2011, 12.03.2011 and 30.06.2011, but copies of these inspection report were not provided to us."
24. Under the head 'Opinion', it was observed as follows:-
"So, it seems that the insured is hiding things and do not want the actual date of loss to be disclosed. Insured was asked that why under construction house was got insured, he could not reply. Insured has also not submitted proposal form. Moreover, insured himself and others confirmed in their statement that house was under construction at the time of incidence. Under construction house could not be insured. Insurer may consider admissibility of liability under policy as per terms and conditions of the policy."
25. The surveyor Col. Chandra Prakash (Retd.) vide his report dated 25th January, 2012 Ex.R-4 under the head "Detail of Valuation for Construction", calculated the total value of the building as Rs.58,56,400/- on the basis of the assessment made by the architect, but the surveyor remarked that the building has been completed upto 80% and the 20% of the building was still to be undertaken. The cost of construction of the building upto the time of collapse comes to Rs.46,85,120/-. The surveyor further assessed the Average Assessed Consumer Complaint No.89 of 2012 11 Gross Loss to the tune of Rs.47,89,543/- and after considering the salvage, depreciation, under insurance, excess clauses, assessed the loss to the tune of Rs.36,24,773/-, but lastly concluded that the house under construction could be covered, but neither the insured nor the banker had opted to purchase the insurance policy pertaining to the house under construction and the claim is not payable.
26. The vital question to be decided is whether the building under construction was covered or not?
27. The 'Standard Fire and Special Perils Policy' Ex.R-1 describes the location of the risk i.e. Plot No.1, Bhatian Bet, Gold City, Ludhiana. Fire Provisional Cover Note dated 25.07.2011 describes the description of risk as follows:-
"Rs.40,00,000/- on entire Residential Building Built of Ist Class construction, including Boundary walls being the property of the insured situated at above said address, subject to Agreed Bank Clause."
28. Section-II of Ex.R-1 (relevant portion) provides as follows:-
"The company agrees (subject to the Conditions and Exclusions contained herein or endorsed or otherwise expressed hereon) that if after payment of the premium the Property insured described in the said Schedule or any part of such Property be destroyed or damaged by any of the perils specified hereunder during the period of insurance named in the said schedule or of any subsequent period in respect of which the Insured shall have paid and the Company shall have accepted the premium required for the renewal of the policy, the Company shall pay to the Insured the value of the Property at the time Consumer Complaint No.89 of 2012 12 of the happening of its destruction or the amount of such damage or at its option reinstate or replace such property or any part thereof."
29. Sheet No.13 of Section-II of 'Standard Fire and Special Perils Policy' Ex.R-1 (relevant portion) provides the events of loss as follows:-
"Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation Loss, destruction or damage directly caused by Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood or Inundation excluding those resulting from earthquake, Volcanic eruption or other convulsions of nature. (Wherever earthquake cover is given as an "Add on cover", the words "excluding those resulting from earthquake volcanic eruption or other convulsions of nature" shall stand deleted."
30. The Agreed Bank Clause provided at Sheet No.70 (relevant portion) of Ex.R-1 provides as follows:-
"It is hereby declared and agreed:-
i. That upon any monies becoming payable under this policy, the same shall be paid by the company to the bank and such part of any monies so paid as may relate to the interests of other parties insured hereunder shall be received by the Bank as Agents for such other parties."
31. From the above discussion, it is clear that the opposite party Insurance Company shall pay the insured value of the property at the time of the happening of its destruction to the bank and nowhere it is mentioned that the insurance shall be effected after the completion of Consumer Complaint No.89 of 2012 13 the construction. As per the terms and conditions of the said policy, the damage or destruction way of storm, flood and inundation, destruction or damage directly caused by storm etc. is covered. As per the said policy Ex.R-1, Sheet No.17 under clause 6(i), it is provided as follows:-
"6(i) On the happening of any loss or damage, the insured shall forthwith give notice thereof to the company and shall within 15 days after the loss or damage, or such further time as the Company may in writing allow in that behalf, deliver to the Company."
32. The complainant vide letter Ex.C-3 intimated the opposite party Insurance Company regarding the loss as well as lodged the claim and the same was received on 11.08.2011 as per the stamp of the opposite party Insurance Company on this application. As discussed above, the opposite party Insurance Company appointed Investigator Royal Associates and the Surveyor Chandra Prakash (Retd.) and the Surveyor has attached with the report Ex.R-4, the detail of purchase invoices of material and labour utilized and has made the grand total of Rs.52,46,367/-. As stated above, after reducing the value of salvage, depreciation, under insurance, excess, the adjusted loss was calculated to be Rs.36,24,773/-.
33. The complainant has got sanctioned the loan of Rs.35.00 lacs out of which Rs.34.25 lacs was disbursed before the building fell down on 06.08.2011. The entire amount is payable to the opposite party no.4 i.e. State Bank of India, Branch Ladhowal.
34. Accordingly, the complaint is allowed and opposite party no.2 is directed to pay the amount of Rs.36,24,773/- as assessed by the surveyor vide order Ex.R-4, to opposite party no.4-State Bank of Consumer Complaint No.89 of 2012 14 India. Opposite party No.4 shall adjust the same against the loan amount of the complainant.
35. Opposite party no.2 is directed to comply the order within 45 days of the receipt of copy of the order.
36. The arguments in this complaint were heard on 11.09.2013 and the order was reserved. Now the order be communicated to the parties.
37. The complaint could not be decided within the stipulated timeframe due to heavy pendency of court cases.
(Inderjit Kaushik) Presiding Judicial Member (Vinod Kumar Gupta) Member September 24, 2013.
(Gurmeet S)