National Consumer Disputes Redressal
United India Insurance Co. Ltd. vs Khairati Ram Salwan & Anr. on 15 December, 2015
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI REVISION PETITION NO. 1588 OF 2013 (Against the Order dated 31/01/2013 in Appeal No. 1111/2009 of the State Commission Punjab) 1. UNITED INDIA INSURANCE CO. LTD. REGIONAL OFFICE,
8TH FLOOR, KANCHANJUNGA BUILDING,
BARA KHAMBA ROAD, NEW DELHI ...........Petitioner(s) Versus 1. KHAIRATI RAM SALWAN & ANR. S/O SHRI MAST RAM,
R/O 372 MODEL TOWN AMRITSAR PUNJAB 2. ICICI BANK LTD., THROUGH ITS BRANCH MANAGER, MALL ROAD BRANCH, AMRITSAR PUNJAB ...........Respondent(s)
BEFORE: HON'BLE DR. B.C. GUPTA, PRESIDING MEMBER
For the Petitioner : For the Respondent :
Dated : 15 Dec 2015 ORDER
APPEARED AT THE TIME OF ARGUMENTS
For the Petitioner
Mr. Satpal Dhamija, Advocate
For Respondent No. 1
Mr. Vivek Verma, Advocate
For Respondent No. 2
Mr. Nitish Negi, Advocate
PRONOUNCED ON : 15th DECEMBER 2015
O R D E R
PER DR. B.C. GUPTA, MEMBER This revision petition has been filed under section 21(b) of the Consumer Protection Act, 1986 against the impugned order dated 31.01.2013, passed by the Punjab State Consumer Disputes Redressal Commission (hereinafter referred to as "the State Commission") in First Appeal No. 1111 of 2009, Khairati Ram Salwan Vs. United India Insurance Co. Ltd. & Anr., vide which, while accepting the said appeal, the order dated 20.03.2009, passed by the District Consumer Disputes Redressal Forum, Amritsar in Consumer Complaint No. 654/2008, dismissing the said complaint, was set aside.
2. Briefly stated, the facts of the case are that the complainant/respondent no. 1, Khairati Ram Salwan filed the consumer complaint in question, saying that he purchased a truck bearing no. PB02 AS 9865 of Tata, Model 4018, which was insured with the opposite party (OP1), United India Insurance Co. Ltd., vide policy no. 200302/31/07/01/00002020 and premium amount of ₹ 33,265/- was paid vide cheque no. 753853, drawn on opposite party no. 2 (OP2), ICICI Bank Ltd. on 31.07.2007. The said truck was badly damaged in an accident on 17.08.2007 and he spent a sum of about ₹ 1,77,000/- on its repairs. However, when he submitted claim to that amount with the Insurance Company, he received a letter from them dated 29.08.2007, saying that the cheque given by him was dishonoured by the OP2 Bank as the signatures on the cheque differed with the specimen signatures maintained by the Bank. The complainant/respondent no. 1 stated that at that time, there were sufficient funds in his account, and also there was no mismatch of signatures, but even then, the cheque was dishonoured due to the negligence of OP2 Bank. He served a legal notice on OP1 for the settlement of his claim, but to no effect. Alleging deficiency in service against both the opposite parties, the complainant/respondent no. 1 filed the consumer complaint in question.
3. The complaint was contested by OP1 in their written reply before the District Forum, saying that there was no deficiency in service on their part, because the cheque carrying the premium amount was dishonoured by the OP2 Bank. They had informed the complainant/respondent no. 1 about dishonouring of cheque and cancellation of policy in question. According to them, the cover note issued by them became void on the dishonour of the said cheque, and hence, there was no contract of insurance between the parties and so, they were not liable to pay any compensation. The OP2, ICICI Bank Ltd. also contested the complaint, saying that the cheque was not honoured because the signatures on the cheque did not match with the specimen signatures of the complainant/respondent no. 1 and hence the same were returned to OP1 on 03.08.2007, just after three/four days. There was, therefore, no deficiency in service on their part as well. The District Forum, after considering the contentions of the parties, concluded that the signatures on the cheque completely differed, with the specimen signatures maintained by the Bank. They also concluded that it was the duty of the complainant/respondent no. 1 to ensure that the premium of the insurance policy was duly paid to the Insurance Company in an appropriate manner. The District Forum dismissed the said complaint. The complainant/respondent no. 1, however, challenged the said order by way of an appeal before the State Commission, which has been allowed, vide impugned order. Being aggrieved from its order, the Insurance Company is before me, by way of the present revision petition.
4. During pendency of the said revision petition, it was stated that the complainant/respondent no. 1, Sh. Khairati Ram Salwan had since died. His legal representatives were ordered to be impleaded, vide order dated 01.12.2014.
5. During hearing before me, the learned counsel for the petitioner, Insurance Company stated that under Section 64 VB of the Insurance Act, 1938 read with Section 25 of the Indian Contract Act, 1972, the contract of insurance became void ab-initio, because the cheque for the amount of premium got dishonoured. The learned counsel stated that it was their usual practice to issue a cover note, following the receipt of premium by way of cheque and so, the said cover note was issued on 31.07.2007, but the said cover note was subject to realisation of the said cheque. When the said cheque got dishonoured, the contract of insurance became void and they had duly informed the complainant/respondent no. 1 about the same. The learned counsel alleged that there was malafide intention on the part of the insurer to present a cheque with different signatures, because he simply wanted to take advantage of the cover note issued by the Insurance Company at the time of inspection at a check-post etc. He never wanted to pay the premium amount to the Insurance Company. However, when the vehicle met with an accident, he lodged a claim for obtaining the sum assured under the insurance policy, otherwise he would have continued to ply the vehicle on the strength of the cover note itself and without paying the premium in question. In support of his arguments, the learned counsel has drawn attention to an order passed by the Hon'ble Supreme Court in National Insurance Co. Ltd. vs. Seema Malhotra & Ors., AIR 2001, Supreme Court, 1197, saying that the facts of the case in question were exactly similar to the facts in the case quoted. When the cheque got dishonoured in the said case (although due to insufficient funds), the learned Court held that an agreement made without consideration was void under Section 25 of the Indian Contract Act. Further, it was also held that the insurer was liable to cancel the policy even if it had issued a cover note, in case the insurer failed to encash the cheque for premium. It has been categorically stated in the said judgment that when a cheque is given towards payment of premium or part of premium, such a contract consists of 'reciprocal promise' on the part of the insured. The Insurance Company was, therefore, not liable to make any payment to the insured in the present case. The learned counsel has also drawn our attention to an order passed by this Commission in Divisional Manager, Oriental Insurance Co. Ltd. Vs. Sanjay Kumar Panigrahi, as reported in IV (2004) CPJ 29 (NC). This Commission relying on the decision of the Hon'ble Supreme Court in National Insurance Co. Ltd. vs. Seema Malhotra (supra), stated that the Insurance Company was justified in refusing to pay the claim amount if the cheque for premium got dishonoured.
6. Per-contra, the learned counsel for the complainant/respondent no. 1 stated that there was sufficient amount in the account of the complainant/respondent no. 1, but despite that, the OP2 Bank dishonoured the said cheque on the ground that the signatures of the same differed from the specimen signatures with the Bank. While doing so, no report of any finger-print expert was taken by the Bank. Further, the Bank informed the Insurance Company about the dishonour of the cheque on 03.08.2007. It was the duty of the Insurance Company to inform the complainant immediately about the dishonour of the cheque, so that they could have paid the premium amount again or they could have gone to some other company for getting the insurance done. However, the OP1 informed them after many days i.e. on 29.08.2007 and hence, there was clear deficiency in service on their part. The State Commission had rightly concluded that there was deficiency on the part of the OP1, because of unexplained long delay in sending information about the dishonour of the cheque. Since the complainant/respondent no. 1 had no knowledge about the dishonour of the cheque on the date of the accident, the policy should be deemed to be valid on that day and hence, the complainant/respondent no. 1 is liable to get the amount of the claim. The learned counsel also denied that there was any malafide intention on their part in issuing cheque with different signatures.
7. The learned counsel for OP2 Bank stated that as observed by the District Forum in their order, the signatures on the cheque were completely different from the specimen signatures and hence, the District Forum as well as the State Commission concluded that there was no negligence on their part because of the dishonour of the cheque. Regarding the finger-print expert etc., the learned counsel stated that there was no such demand for appointing a finger-print expert from the complainant/respondent no. 1 or the Insurance Company and hence, no such expert was appointed to compare the signatures. The Bank had duly informed the Insurance Company on 03.08.2007, i.e. only after 3-4 days of receiving the cheque and hence, there was no deficiency of service on their part.
8. In reply, the learned counsel for the Insurance Company has drawn attention to a copy of the document dated 03.08.2007, sent by the Bank to them regarding the dishonour of the cheque. The said document is stated to have been received by the Insurance Company on 20.08.2007. The learned counsel stated that because of late receipt of the document from the Bank, the Company could not have informed the complainant/respondent no. 1 about the dishonour of the cheque earlier and hence, there was no deficiency on their part.
9. I have examined the entire material on record and given a thoughtful consideration to the arguments advanced before me.
10. The facts of the case make it very clear that the Insurance Company issued cover note in question following the receipt of the premium amount of ₹ 33,235/-, by means of a cheque from the complainant/respondent no. 1 drawn on the OP2 Bank. After issuing the cover note, they sent the cheque to the Bank for realisation of the premium amount. The said cheque was, however, dishonoured because the signatures on the same differed with the specimen signatures of the complainant/respondent no. 1 with the Bank as stated on the cover note itself. The Insurance Company was well within its rights to cancel the policy because of the dishonour of the cheque. It has been clearly held by the Hon'ble Supreme Court in National Insurance Co. Ltd. vs. Seema Malhotra (supra) that even if the Insurance Company had issued a cover note, it was entitled to cancel the policy if it failed to encash the cheque for premium. It has also been stated in the said judgment that when an insured gives a cheque towards payment of premium or part of premium, such a contract consists of 'reciprocal promise'. It is very clear, therefore, that the contract of insurance became void, once the cheque was dishonoured.
11. The main point for consideration in the case is whether the policy can be stated to be in force on the day of incident, because intimation about dishonour of the cheque was not given to the complainant/respondent no. 1, or the Insurance Company received such intimation from the Bank on 20.08.2007, although the accident had taken place on 17.08.2007. It is true that the Bank sent a communication to the Insurance Company on 03.08.2007, intimating them about the dishonour of the cheque on account of difference in signatures of the drawer, but the said intimation was received by them on 20.08.2007 and communicated to the complainant/respondent no. 1 on 29.08.2007. Following the ratio of the judgments given in National Insurance Co. Ltd. vs. Seema Malhotra (Supra) and Divisional Manager, Oriental Insurance Co. Ltd. Vs. Sanjay Kumar Panigrahi (Supra), it can be safely concluded that the insured is not liable to be given the claim amount under the insurance policy, because the said policy became void ab-initio because of the dishonour of the cheque. It shall not be legally justifiable to hold that the insurance policy was valid till intimation about the dishonour of cheque was given to the complainant/respondent no. 1. By no stretch of imagination, the insurance policy can be stated to be in force for a period of certain days, during which the matter regarding realisation of the premium amount remained under correspondence between the Insurance Company and the Bank. There is no valid reason, therefore, to agree with the conclusion arrived at by the State Commission that there was deficiency in service on the part of the petitioner as they withheld information about the dishonour of the cheque from the complainant/respondent no. 1 for a number of days and that the insurance policy was valid on the day the accident took place. It is held, therefore, that there was no valid contract between the parties, because an agreement made without consideration is void under Section 25 of the Indian Contract Act and further under Section 65 of the said Act, when a contract becomes void, any person, who has received any advantage under the said contract is bound to restore it to the person from whom he received it.
12. It may further be stated that there was absolutely no deficiency on the part of the OP2 Bank, because they found the signatures of the drawer different from the specimen signatures maintained by them and then, immediately sent intimation to the Insurance Company, though received by them late. There was no request made with the Bank on behalf of the complainant/respondent no. 1 or the Insurance Company to appoint a finger-print expert to examine the signatures. It is held, therefore, that the Bank has no liability towards the insured in any manner.
13. Based on the discussion above, it is held that the impugned order passed by the State Commission is not based on any sound legal reasoning and the same is ordered to be set aside. This revision petition is, therefore, allowed and the order passed by the District Forum, dismissing the consumer complaint in question, is restored.
14. The amount deposited by the petitioner with the State Commission as per the orders of this Commission shall be released to them alongwith interest accrued, if any.
...................... DR. B.C. GUPTA PRESIDING MEMBER