National Consumer Disputes Redressal
United India Insurance Co. Ltd. vs M/S Sona Spices Pvt. Ltd. on 14 September, 2010
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 331 OF 2002 (Against the order dated 22.07.2002 in Complaint Case No. 55 of 2001 of the U. T. Chandigarh State Consumer Disputes Redressal Commission, Chandigarh) United India Insurance Co. Ltd. SCO No. 357-358, Sector 35/B Chandigarh through ......... Appellant Its Branch Manager, Versus M/s Sona Spices Pvt. Ltd. Head Office House No. 3141, Sector 20/D, Chandigarh ......... Respondent Its Director Sh. G. L. Jindal BEFORE: HONBLE MR. JUSTICE R. C. JAIN, PRESIDING MEMBER HONBLE MR. SURESH CHANDRA, MEMBER For the Appellant : Mr. K. L. Nandwani, Advocate For the Respondent : Mr. Maibam N. Singh, Adv. with Mr. G. L. Jindal, (Director of M/s Sona Spices Pvt. Ltd. Dated: 14th September, 2010 ORDER
JUSTICE R. C. JAIN, PRESIDING MEMBER Aggrieved by the order dated 22.7.2002 passed by the UT Chandigarh State Consumer Disputes Redressal Commission, Chandigarh in complaint No. 55 of 2001, the United India Insurance Company Limited (opposite party) has filed the present appeal. By the impugned order, the State Commission has partly allowed the compliant filed by M/s Sona Spices Private Limited and has directed the insurance company to pay a sum of Rs.2,10,207/- in terms of the assessment made by the Surveyor, M/s Duggal Gupta and Associates to the complainant, besides a sum of Rs. 30,000/- on account of harassment and deficiency in service and a cost of Rs.5,000/- with the stipulation that the amount shall be payable within a period of two months from the date of receipt of copy of the order, failing which, the amount shall carry interest @10% per annum.
2. The complainant, M/s Sona Spices Private Limited had filed a complaint seeking recovery of a sum of Rs.8,20,000/-( Rs. 7 lakh as the insurance claim suffered due to the loss or damage of his stock with interest @18 % per annum; Rs.50,000/- as compensation on account of loss in business due to the non-payment of the insurance claim; further a sum of Rs.50,000/- as compensation on account of harassment and a sum of Rs.20,000/- as cost of litigation), on the averments and allegations that the complainant had taken a Fire Policy C in the sum of Rs. 7 lakh from the opposite party-insurance company in respect of his factory premises, which is located at 746, Industrial Area, Phase-1, Chandigarh covering the building, plant and the stocks hypothecated with the State Bank of India.
During the currency of said policy, a fire broke out in the factory of the complainant on 22.3.1999, which was extinguished by the Fire Services of UT Chandigarh. The police and the insurance company were informed about the incident. The Insurance Companies i.e. New India Assurance Company Limited and the United India Assurance Company Limited appointed a joint Surveyor, namely, M/s Duggal Gupta and Associates and Loss Assessors, Chandigarh to assess the loss suffered by the complainant.
The above named surveyor, who visited the factory premises and on going through the claim, assessed the total loss at Rs.4,69,670.50 paise, out of which Rs.4,52,670/- was on account of the loss to the stocks. Since the loss was covered under the two policies, one issued by New India Assurance Company Limited and another by United India Insurance Company Limited, the Surveyor worked out the liability to pay the compensation by the New India Assurance Company Limited at Rs.2,65,238/- and in respect of United India Assurance Company Limited at Rs.2,04,432/-. The Surveyor assessed the said loss without prejudice to the insurance liability and subject to policy terms and conditions. It would appear taking note of certain observations and findings made by the above named Assessor and Surveyor, the opposite party-insurance company appointed another Surveyor/Investigator, M/s Consolidated Services Pvt. Ltd., which submitted investigation/re-assessment report on 17.8.2000 in which the said Surveyor/Investigator pointed out that there was grave doubt in respect of three bills issued by M/s Rajinder Kumar & Co. in the sum of Rs.2,38,809/-, Rs.1,36,240/-, Rs.6,13,303/- as also about certain bills issued by M/s Aggarwal Plastico Industries. Despite that, the Surveyor assessed the net loss at Rs.2,31,536/- but made an observation that the insured has attempted to avail a higher benefit under the policy by exaggerating his stock level by entering bogus purchases from M/s Aggarwal Plastico Industries and M/s Rajinder Kumar & Co. and advised the insurance company to repudiate the insureds claim going by the provisions of condition No. 8 of the fire policy in question. The insurance company accordingly repudiated the claim.
Aggrieved by the same, the complainant filed the complaint, which was resisted by the insurance company on the same very ground on which it had earlier repudiated the claim. Before the State Commission, the complainant led the evidence by producing his own affidavit while the insurance company filed the affidavit of Mr. Sanjeev Duggal of M/s Duggal Gupta and Associates as also the affidavit of the Senior Divisional Manager. On consideration of the evidence and material, the State Commission partly allowed the complaint as above.
3. It is pertinent to note that the appeal was earlier answered by this Commission vide order dated 30.1.2003 and the appeal was dismissed with the modification of the order of the State Commission by observing as under:-
In the order under appeal, the State Commission found that the report of M/s Duggal Gupta, the first surveyor had not been shown to be in any way defective or not acceptable and, therefore, it is only this report which could be legally taken into consideration for assessing the loss etc. claimed by the respondent.
Considering the ratio of the said decision, we are not inclined to take a view different from that taken by the State Commission in the matter. In our view, the impugned order barring the portion awarding Rs.30,000/- on account of harassment caused and interest, does not call for interference in exercise of powers under Section 21(a)(ii) of the Act. To be noted that in terms of impugned order, the respondent was held entitled to interest @10% per annum till payment in case the award amount was not paid within two months. While issuing notice by the order dated 20.9.02, the execution proceeding was stayed, on appellants depositing the amount awarded by State Commission with the Registrar of this Commission by means of a bank draft within four weeks which has since been deposited. In our opinion, in the facts and circumstances of case, award of Rs.30,000/- separately on account of harassment caused was unjustified. Further, FDR was taken for the amount deposited by the appellant pursuant to said order dated 20.9.02 and taking note of this deposit, the part of order awarding interest @10% per annum deserves to be deleted. Accordingly, part of order under appeal on both the said counts is set aside.
For the foregoing discussion, the appeal is dismissed with the said modification leaving the parties to bear their own costs. Out of deposited amount, the respondent will be paid Rs.2,15,207/- plus interest accruing thereon while balance be refunded to the appellant.
4. Aggrieved by the said order of this Commission, the United India Insurance Company Limited filed civil appeal No. 1688 of 2005 in the Supreme Court. The said appeal was decided by the Supreme Court vide order dated 22.10.2009 and the matter has been remanded back to this Commission for deciding the appeal afresh by making the following observations :-
The National Commission in the impugned order has observed that the State Commission had found the report of the first surveyor M/s Duggal Gupta & Associates not to be shown to be in any way defective or not acceptable. Learned counsel for the appellant has invited our attention to the said report dated 7.9.1999 of M/s Duggal Gupta & Associates. He has pointed out that at pages 33 & 42 of the report, the first surveyor has cast serious doubts on the version presented by the complainant. Moreover, in the second report of M/s Consolidated Surveyors (P) Ltd. Dated 17.8.2000, it had been stated that the insured has attempted to avail a higher benefit under the policy by exaggerating his stock level by entering bogus purchases.
This second report has not been considered by the National Commission.
In view of the above, without expressing any opinion on the merits of the dispute, we accept this appeal, set aside the impugned order of the National Commission and remand the matter to the National Commission for a fresh decision in accordance with law, expeditiously, after considering the evidence on record and hearing the parties concerned. No costs.
We are informed by the learned counsel for the appellant that it has paid the amount awarded to the claimant and he has prayed that it should be refunded to the insurance company. We are of the opinion that the said amount paid by the appellant to the respondent shall be subject to the fresh decision of the National Commission and this prayer may be made to the National Commission.
In these circumstances, the appeal is once again before us for a fresh decision.
5. We have heard Mr. K. L. Nandwani, learned counsel representing the appellant-insurance company and Mr. Maibam N. Singh, learned counsel representing the respondent and Mr. G. L. Jindal, Director of the respondent/company at length and have given our thoughtful consideration to their respective submissions.
6. As noticed above, in the opening part of the order, the factual position in regard to the insurance policy and peril being not in dispute, the only question which is required to be considered and answered is as to whether the repudiation of the claim by the insurance company on the ground that the complainant by raising fraudulent claim, had disentitled itself from claiming any compensation whatsoever in terms of clause 8 of the terms and conditions of the policy or he can still be granted compensation at least to the extent as assessed by the Surveyor (as has been done by the State Commission), which will be deemed to have been accepted by the complainant, he having not challenged the order of the State Commission by filing any appeal before this Commission.
7. Mr. K. L. Nandwani, learned counsel for the appellant would assail the impugned order awarding compensation of Rs.2,10,207/- to the complainant primarily on the strength of the legal maxim Uberrima fides, which means that the contract of insurance is based on utmost good faith of the parties. In this connection, he submits that the insured complainant has lodged an exaggerated claim to the extent of Rs.7 lakh based on fake/unsubstantiated bills issued by M/s Rajinder Kumar & Co. and M/s Aggarwal Plastico Industries, which could not be verified. Accordingly, he submits that the complainant has committed fraud by lodging such an exaggerated claim, which disentitled him for any amount whatsoever going by the provisions of clause 8 of the terms and conditions of the policy, which reads as under:-
8. If the claim be in any respect fraudulent or if any false declaration be made or used in support thereof or if any fraudulent means or devices are used by the insured or any one acting on his behalf to obtain any benefit under the policy or if any loss or damage to occasioned by willful and/or with the connivance of insured, all the benefits made under the policy shall be forfeited.
8. To support his contention, Mr. Nandwani has placed reliance upon a decision of the Supreme Court in the case of Baurao Dagdu Paralkar vs. State of Maharashtra and others 2005(7) SCC 605 in which the Honble Supreme Court had occasion to consider the effect of fraud in a contract and other proceedings by observing as under:-
The expression "fraud" involves two elements, deceit and injury to the person deceived. Injury is something other than economic loss, that is, deprivation of property, whether movable or immovable or of money and it will include and any harm whatever caused to any person in body, mind, reputation or such others. In short, it is a non-economic or non-pecuniary loss. A benefit or advantage to the deceiver, will almost always call loss or detriment to the deceived. Even in those rare cases where there is a benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied.
By "fraud" is meant an intention to deceive; whether it is from any expectation of advantage to the party himself or from the ill will towards the other is immaterial. A "fraud" is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage.
Fraud is a conduct either by letter or words, which includes the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter.
It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad.
Section 17 of the Contract Act, 1982 defines fraud as act committed by a party to a contract with intent to deceive another.
From the dictionary meaning or even otherwise fraud arises out of the deliberate active role of the representator about a fact which he knows to be untrue yet he succeeds in misleading the representee by making him believe it to be true. The representation to become fraudulent must be of fact with knowledge that it was false.
But "fraud" in public law is not the same as "fraud" in private law. Nor can the ingredients, which establish "fraud" in commercial transaction, be of assistance in determining fraud in Administrative Law.
"Fraud" in relation to the statute must be a colourable transaction to evade the provisions of a statute.
Suppression of a material document would also amount to a fraud on the court. Although negligence is not fraud but it can be evidence on fraud.
"Fraud"
and collusion vitiate even the most solemn proceedings in any civilized system of jurisprudence. Fraud and justice never dwell together. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res judicata.
9. Reliance was also placed upon another decision of the Supreme Court in the case of Oriental Insurnace Co. Ltd. vs. Samayanallur Primary Agricultural Coop. Bank 1999 (8) SCC 543 wherein the Supreme Court examined the question in regard to the strict nature of the terms and conditions of an insurance policy and by doing so, the State Commission held that the terms and conditions of the insurance policy has to be construed with reference only to the stipulation contained in it and no artificial meaning can be given to the words appearing in it. There cannot be possibly any quarrel with the proposition of law laid down in the above said authorities and going by the very strictly interpretation of the provisions of clause 8 of the terms and conditions of the policy, perhaps it can be said that a claimant forfeits his right of any claim under the policy, once it is found to be based on fraudulent or false declaration or fraudulent means.
The question is as to how far the said legal position help the appellant-insurance company in the present case. In our view, none of these authorities to lay down that even in case where the claimant insured raised an inflated claim, which he has not been able to substantiate or which in the opinion of the insurer is exaggerated or based on some doubtful material like bills etc., in that situation, the insured should be non-suited altogether even qua the part of the claim which the company has itself found to be genuine or beyond suspicion.
10. In our view, it would be wholly unjust to the insured to deprive him even of his legitimate claim to which he is entitled once peril under the policy has been admitted by the insurance company. In any case, the reports of two Surveyors merely cast suspicion over the genuineness of the bills issued by M/s Rajinder & Co. and M/s Aggarwal Plastico Industries. Suspicion howsoever strong, it may be, cannot take place of proof.
Apart from the above, it would appear that the appointment of second surveyor, M/s Consolidated Services Pvt. Ltd. by the insurance company without disclosing any reason for discarding the report of first Surveyor, M/s Duggal Gupta, was also hit by the provisions of Section 64-UM(1) as has been held by the Supreme Court in the case of Sri Venkateswara Syndicate vs. Oriental Insurance Company Ltd. 2010 II CPJ 1 (SC). In that case, the Supreme Court held that due importance is given to the report of the Surveyor appointed by the insurance company under the provisions of Section 64 UM of the Insurance Act, 1938. Sufficient ground should be given to disagree with assessment made by the first Surveyor before appointing another Surveyor/Investigator.
11. Having considered the matter from all possible angles and the reports of both the Surveyors, we are of the opinion that the impugned order passed by the State Commission awarding compensation of Rs,2,10,207/- based on the report of Surveyor, M/s Consolidated Services Pvt. Ltd. is justified. However, the direction to pay a sum of Rs.30,000/- on account of harassment and deficiency in service was not warranted particularly when the State Commission has awarded interest @10% per annum, which, in our view is also on higher side.
In the result, the appeal is partly allowed, while upholding the order passed by the State Commission to the extent and in so far as it as granted a sum of Rs.2,10,207/- as compensation as also direction to pay a sum of Rs.5,000/- as cost is concerned, is upheld. Direction to pay compensation in the sum of Rs.30,000/- on account of harassment and deficiency in service is hereby set aside. Similarly, direction to pay interest @10% per annum is also modified to the extent that interest shall be payable @6% per annum w.e.f. the date two months after the date of passing the impugned order. The parties to bear their own cost in these proceedings.
Sd/-.J. ( R. C. JAIN ) PRESIDING MEMBER .Sd/-...
(SURESH CHANDRA) MEMBER Naresh/9-a