State Consumer Disputes Redressal Commission
Kehsav Sehkari Bank Ltd. vs M/S. Oriental Insurance Co. Ltd. on 28 November, 2008
IN THE STATE COMMISSION: DELHI IN THE STATE COMMISSION: DELHI (Constituted under Section-9 Clause (b) of the Consumer Protection Act, 1986) Date of Decision: 28-11-2008 Complaint No. C-304/2000 Kehsav Sehkari Bank Ltd. Having their Office at 6428-29, Block-8, Arya Samaj Road, Dev Nagar, Karol Bagh, New Delhi. .. Complainant Versus M/s. Oriental Insurance Co. Ltd. 720-Indra Prakash Building, 21-Barakhamba Road, New Delhi. . Opposite Party Through Ms. Deepa Chacko, 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. Complainant is engaged in the business of Banking. It purchased a Banker Blanket Policy (Bankers Indemnity Policy Insurance) from the Opposite Party (in short O.P) for the insured sum of Rs. 10.00 Lacs against forgery and dishonesty by its employees.
2. On 6-10-1998, five cheques sent for clearing were not cleared by the UCO Bank, Service Branch, Paharganj, New Delhi on the ground that the same were out of date and some fraud was involved. The UCO Bank retained these cheques for investigation. However, Mr. S.P. Jain and Mr. V.K. Agarwal, officers of the complainant bank in connivance with the account holder withheld this information from the complainant. Similarly these officers also withheld the letter dated 10-11-1998 received from UTI regarding fraudulent encashment of their US 64 Dividend Warrants at the branch of the complainant. This fraud was discovered by the complainant on 12-01-1999 and Mr. S.P. Jain and Mr. V.K. Aggarwal were issued Show Cause Notices and admitting their lapses they tendered resignation. Subsequently FIR was also lodged with the police and the concerned officials were removed from service w.e.f. 31-07-1999 and 20-10-1999 respectively. While going through the Statement of A/c of M/s. Vetan Bhogi Sehkari Samiti Limited, it was found that it had been given credit by fraud and forgery and because of the fraud and dishonesty committed by Mr. S.P. Jain and Mr. V.K. Aggarwal, the complainant was defrauded to the tune of Rs. 14,45,000/-.
3. OP-Insurance company was accordingly informed who appointed a Surveyor but they failed to settle the claim of the complainant till the filing of the complaint in November 2000 and subsequently vide letter dated 2-7-2001 the OP repudiated the claim.
4. In its defence, OP took the plea that the loss which occurred to the complainant bank was not due to any fraud or dishonesty on the part of its employees but only due to their negligence and inefficiency in opening the account in question and in dealing with the same, which is clear from the Show Cause Notice and Service Termination Letters wherein only various irregularities and incompetence on their part were mentioned and they were never charged with any fraud or dishonesty. Even the FIR lodged was against the two persons who had opened the account in question and no FIR was lodged against the two officers concerned nor was any attempt made to make recoveries from them.
Since there being no element of fraud and dishonesty on the part of the two officers of the complainant the matter is not covered by the policy in question and is exempted by exemption clause-b of the policy.
5. OP-Insurance company has further relied upon Clauses 3,6 and 8 of the policy in support of repudiation of the claim which relates to reasonable care, claims/procedure and right to recoveries. As per the OP the complainant violated these conditions because it failed to exercise reasonable care in the opening and operation of the account in question, information to the police and to the OP was delayed and no attempt was made to make recoveries from the two erring officials.
6. With regard to the Surveyors Report dated 15-01-2000 it is averred by the OP that according to the Surveyor the claim fell under Sec. C of the policy relating to Forgery or Alteration but they finally opined that it was covered under Sec. D relating to dishonesty. Thus as per the OP company the Surveyor had totally ignored the clear information on record and the numerous lapses committed by the complainant which amount only to negligence and hence the report of the Surveyor was not acted upon by the O.P.
7. As is apparent from the conspectus of rival claims and contentions of the parties, the report of the Surveyor Dated 15-1-2000 was not accepted by the OP mainly for the reason that the Surveyor totally ignored the documents on record and the complaints lodged by the complainant as to its negligence and wrongly observed that matter was covered by Sec. (c) relating to forgery and alteration but finally the Surveyor said that it was covered under Sec. (d) relating to dishonesty. In this regard the OP relied upon clauses 3, 6, and 8 of the policy for repudiating the claim of the complainant as these clauses provide as under:-
3. Reasonable Care- The insured shall take all reasonable steps to safeguard the property insured against any accident, loss or damage and to secure all doors, windows and other openings and all safes, strong rooms etc.
6. Claims procedure- The insured shall upon the occurrence of any event giving rise or likely to give rise to a claim under this policy:
a) Lodge forthwith a complaint with the police and take all practicable steps to recover the property lost and to apprehend the guilty person and take appropriate departmental action against him.
b) Give immediate notice thereof to the Company and shall as soon as possible thereafter furnish the company at the insureds own expense detailed particulars of the amount of the loss or damage together with such explanations and evidence to substantiate the claim as the company may reasonably require.
8. Right to Recoveries- Any amount which but the acts or defaults on which the claim shall be found, would have become payable by the insured to the employee in respect of whom a claim is made hereunder or any other money which shall be due to such employee from the insured shall be deducted from the amount payable this policy and that all moneys estates and effects of such employee in the hands of or received or possessed by the insured and all claims which may be or may prior to the settlement of the claim become due from the insured to the employee and also all moneys or effect which shall come into the possession or power of the insured for or on account of such employee in respect of whom any claim shall be made on this policy shall be applied by the insured in and towards making good the amount under this claim under this policy in priority to any other claim of the insured upon such moneys estate or effects. The company shall without thereby being held to admit any claim be entitled at any time in the companys own or the insureds name to take steps for the recovery of any property claimed for and the insured shall be bound to give the company all information and reasonable assistance in so doing. The insured may also be required as a condition of any settlement to procure and give to the company a valid legal title to the property settled. Any money recovered after settlement of any claim shall be the property of the company not exceeding, however, the amount paid by the company.
8. The main lapse on the part of the complainant as contended by the OP-Company is that it did not take reasonable care nor had it complied with the procedure relating to right of recovery and therefore disentitled itself. The policy in question was a Bankers Indemnity Insurance Policy, which included loss accruing on account of conduct of the employees. In common parlance, it is a policy covering the risk due to infidelity by employees.
9. The grounds resorted to by the OP for rejecting the claim were on the face of it unjust and uncalled for. There was neither any lack of reasonable care nor non-compliance of the procedure as to the right of recovery. The fraud perpetrated by the employee amounts to infidelity of the employee. Unless and until the malafide or connivance or conspiracy of the insured is proved in causing imaginative or hypothetical loss by showing them as actual loss the insurer cannot take the benefit of Clauses 3, 6 and 8 of the policy.
10. In the instant case, the fraud was discovered by the complainant on 12-1-1999. Pursuant to that the complainant issued a Show Cause Notice to its employees SP Jain and VK Aggarwal. Admitting their lapses and negligence they tendered resignation, so much so the complainant also lodged FIR with the police and they were removed from service on 31-7-1999 and 20-10-99 respectively. It was while perusing and scanning the account of M/s. Vetan Bhogi Sehkari Samiti Limited, it was found that it had been given credit by fraud and forgery and because of the fraud and dishonesty committed by Mr. S.P. Jain and Mr. V.K. Aggarwal, the complainant was defrauded to the tune of Rs. 14,45,000/-. The OP-Insurer was immediately informed on 11-9-1999 about the fraud committed by the employee of the complainant causing the above-referred loss.
11. Consequently the OP appointed Surveyor and inspite of the Surveyor having given the report that the loss was covered under Sec. (d) relating to dishonesty of the staff which may also involve forgery or fraud as contemplated by Sec. (c) and having assessed the loss to the tune of Rs. 14,42,1000/- and recommended for Rs. 6.00 Lacs after reducing the amount arising out of excess clause as per the policy, the claim was repudiated. They also recommended deduction of Rs. 60,000/- out of Rs. 10.00 Lacs, the insured amount, i.e. the amount that covered the risk.
12. The contention of the counsel for the O.P that it was negligence of the employee causing losses is of no avail and therefore exclusion clause (a) was of no avail because of the losses due to fraud and forgery of the employee, so much so FIR was registered on 11-1-1999 by UTI and aforesaid employees were arrested as the police allowed registration of FIR by UTI.
13. Had it been a case of only negligence on the part of the employees so much loss would not have occurred as the documents produced sufficiently show that it was a case of fraud and forgery.
14. Counsel for the OP has further contended that the Surveyor had assessed the loss to the tune of Rs. 69,000/- by applying excess clause which provides that the insured shall bear the first 25% of each loss or 2% of the basic sum insured which ever is higher. However, this clause is handwritten and does not form part of the original policy or original contract. If such clauses are applied then the very purpose and object of the policy covering the risk would stand defeated. Against the actual loss of 14.00 Lacs the Surveyor reduced it to Rs. 69,000/- and further it was reduced to Rs. 60,000/- on the premise of excess clause with regard to insured amount of Rs. 10.00 Lacs.
15. Even if we apply such clauses still the fact remains that interpretation of every beneficial legislation or statutory contract has to be provided and receive beneficial interpretation. If there are two or more interpretation possible, the interpretation which goes in favour of the consumer and protects his interests has to be acted upon and no other interpretation. We have also come down heavily upon such service providers like the insurance company as to their mind set and their whimsical and arbitrary conduct in harassing the consumers and forcing them to seek legal remedy by approaching the Forums little realizing that legal remedies are becoming expensive and costlier day by day and going beyond the reach of middle class people and, therefore, to force a poor consumer to seek legal remedy in itself is a cause of harassment, mental agony, injury, emotional suffering, humiliation and adding insult to injury for which the company has to compensate the consumer.
16. Otherwise the very object of a beneficial contract would be rendered meaningless and without any advantage. The contract of insurance is for the benefit of the insured and not the other way around. It is beyond comprehension that after having assessed the actual loss of 14.00 Lacs against covering risk of Rs. 10.00 Lacs exclusion clause would have such an element of unfairness that too to such an extent that it would be reduced to Rs. 60,000/-. Even if such a clause was not written in hand, it was a highly unconscionable clause of contract and was wrongly applied while assessing the entitlement of the complainant.
17. Even if we apply the excess clause of 2%, deduction has to be from the whole amount and not item wise as the loss has to be assessed as a whole and therefore the clause providing that the insured shall bear the first 25% of each loss under items (a) to (e) or 2% of the basic sum insured which ever is higher, does not apply as we have held that clause (a) to
(e) are not applicable in the instant case and as such the complainant is entitled for the entire risk covered.
18. In view of the foregoing reasons, we hold the OP guilty of deficiency in service for wrongly rejecting the claim of the complainant for which it was entitled to and allow the complaint in the following terms:-
i) OP shall pay Rs. 10.00 Lacs towards the actual loss suffered by the complainant against the policy.
ii) OP shall pay Rs. 50,000/- as lump sum compensation for mental agony and harassment.
iii) OP shall also pay Rs. 10,000/- as cost of litigation.
19. Complaint is disposed of in aforesaid terms. Payment shall be made within two months from date of receipt of a copy of this Order.
21. Copy of Order as per statutory requirement be forwarded to the parties and thereafter the file be consigned to record.
(JUSTICE J.D. KAPOOR) PRESIDENT (RUMNITA MITTAL) MEMBER HK