National Consumer Disputes Redressal
National Insurance Co. Ltd. vs Bicholim Urban Co-Operative Bank Ltd. on 10 April, 2018
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 465 OF 2009 (Against the Order dated 07/07/2009 in Complaint No. 13/2003 of the State Commission Goa) 1. NATIONAL INSURANCE CO. LTD. Registered Office at 3, Middleton Street, Kolkata - 700 071, West Bengal ...........Appellant(s) Versus 1. BICHOLIM URBAN CO-OPERATIVE BANK LTD. Through its Managing Director Having its Central Office at "Nandanvan" Bicholim 2. The Managing Director, Sh.S.R.Parrikar, Dhavali, Ponda, Goa 3. The Bicholim Urban Co-operative Bank Ltd., Central Office at "Nandanvan", Bicholim, Goa ...........Respondent(s)
BEFORE: HON'BLE MR. PREM NARAIN,PRESIDING MEMBER
For the Appellant : Ms. Anjali Bansall, Advocate For the Respondent : : Mr. Sreenath S., Advocate
Dated : 10 Apr 2018 ORDER
This appeal has been filed by the appellant, National Insurance Company Ltd. against the order dated 7.7.2009 passed by the State Consumer Disputes Redressal Commission, Goa Panaji (for short, State Commission') in CC No.13/2003.
2. Brief facts of the case are that the respondent, Bicholim Urban Cooperative Bank Ltd. had taken a Banker's Indemnity Policy from the appellant insurance company which was valid from 1.4.1999 to 31.3.2000. Due to fraud committed by the Branch Manager of the respondent/complainant Cooperative Bank, the complainant filed an insurance claim under the policy. After receiving the insurance claim, the insurance company appointed a surveyor who submitted his report dated 29.3.2001 and he assessed the loss of Rs.27,94,034/-. Then a chartered account was appointed by the appellant to look into the matter and he submitted his report dated 18.5.2002 wherein the liability was fixed as NIL. Accordingly, the claim was repudiated. Thereafter, the complainant filed a consumer complaint No.13/2003 before the State Commission. The complaint was resisted by the appellant on the ground that many conditions of the policy have been flouted by the insured bank. There was no dual control and only one person, namely, the Branch Manager carried out all the transactions and financial operations.
3. The policy stipulates rotation of employees, whereas the same branch manager worked for 10 years on the same post. It was also alleged that the same employee was involved in another fraud case relating to National Saving Certificates (NSCs) and as per the conditions of the policy, this person should not have been given the job of Branch Manager, Incharge of the financial transactions and operations. Based on these grounds, it was requested to dismiss the complaint. However, the State Commission after considering all the aspects allowed the complaint as under:-
"The opposite party is directed to pay to the complainant a sum of Rs.32,86,367.50 with interest @ 9% per annum from 11-11-1999 till final payment, within a period of 60 days from this order."
4. Hence, the present appeal.
5. Heard the learned counsel for the parties and perused the record.
6. Learned counsel for the appellant argued that the condition precedent to liability clearly states that dual control shall be established and maintained for the handling of cash and all types of securities, negotiable and non-negotiable instruments etc. In the present case, only the Branch Manager was doing all the transactions and there was no dual control for any of the transactions. Similarly, the other condition was that there should be job rotation for the employees, whereas the same person was continuing for a long time for doing all the operations. Moreover, this employee was already involved in one fraud case regarding NSCs, wherein no action was taken against the employee as he agreed to deposit the total amount of NSCs. This also happened in the year 1999 and in spite of the fact that fraud committed by the employee had come to the notice of the respondent bank, no action was taken against the employee, rather he was continued on the same post and same resulted into further frauds. Apart from violation of so many conditions, it was argued by the learned counsel for the appellant that in the bank's claim form which was submitted by the respondent, clearly it was stated that period of occurrence of loss spread over 3 years 1995-96, 1997-98 and 1998-99. The discovery of loss was dated 25.4.1999. Period of insurance was only from 1.4.1999 to 31.3.2000. It is thus, amply clear that period of loss does not fall within the period of the policy. Hence, from this aspect also, no claim becomes payable. It was further argued that as per the policy conditions, the respondent bank was required to take departmental action against the delinquent employees and to recover the amount from them. Though there are certain dues which were payable to the employees and the same have been forfeited by the respondent, yet the respondent bank is not ready to adjust the same against the loss. The insurance company is only liable to indemnify the net loss that is finally not recoverable.
7. Learned counsel for the appellant further stated that the State Commission has awarded amount of Rs.32,86,367.50 alongwith 9% p.a. interest, whereas this figure is neither recommended by the surveyor nor was claimed by the complainant. Thus, there is no justification for awarding Rs.32,86,367.50 to the complainant under the policy. Learned counsel further mentioned that the claim form was sent on 11.11.1999 whereas the loss was discovered on 25.4.1999, thus, the claim was submitted after about 7 months which itself entitles the insurance company to repudiate the claim on the ground of delay in intimation. It is true that the surveyor appointed by the insurance company initially assessed the loss as Rs.27,94,034/-, however when the chartered accountant was appointed to look further into the matter, he has come up with his report that the liability becomes NIL. Thus, on the basis of this report only, the claim was repudiated. It was further stated that the report of the surveyor is an important document which should be taken into account for deciding the claim. The report of the surveyor cannot be brushed aside without any cogent reason. In this regard, the learned counsel referred to the judgment of Champalal Verma Vs. Oriental Insuranc Company Ltd., III(2008) CPJ 93(NC). This Commission has held that the surveyor's report is to be given due weightage and consumer fora cannot go into the quantum of loss. The learned counsel further referred to the judgment passed in Pradeep Kumar Sharma Vs. National Insurance Company, II (2008) CPJ 158 (NC), wherein this Commission supported the view that surveyor's report cannot be brushed aside and it is an important document to be considered while deciding the claim.
8. It was further stated by the learned counsel that State Commission has allowed the interest from the date of loss, whereas the interest should be awarded only from the date of filing of the complaint. Learned counsel for the appellant also argued that the clause of Policy Excess clearly states that Rs.50,000/- was to be deducted as policy excess in each loss in respect of each dishonest and criminal act. In the present case, the loss has occurred over a long period. So each loss is to be considered as a separate dishonest and criminal act. In the present case dishonest and criminal act has been done many times and therefore, for each fraud Rs.50,000/- needs to be deducted and thus, the amount of claim would be reduced to a great extent. Learned counsel placed reliance on the decision of this Commission in New India Assurance Company Vs. Trilochan Jane, FA No.321 of 2015 decided on 9.2.2009.
9. On the other hand, the learned counsel for the respondent/complainant stated that the whole purpose of the banker's indemnity policy was to hedge risk of frauds committed by the employees of the organization. If the claims are repudiated on such grounds, then the whole purpose of taking such a policy will be frustrated. It was argued by the learned counsel that repudiation letter dated 14.6.2002 does not mention any of the grounds mentioned by the learned counsel for the appellant before this Commission. In fact, a dual control was always there and this aspect was not taken by the appellant in the written statement filed before the State Commission. The supervisor of the concerned Branch Manager in his evidence has clearly stated that the matter involving National Saving Certificates was only a procedural mistake on the part the employee and it was not a fraud committed by that employee. The first surveyor appointed by the insurance company assessed the loss as Rs.27,94,034/- and accordingly, that amount becomes payable in any case to the respondent bank. The second surveyor/investigator, who is a chartered accountant was only appointed to nullify the report of the main surveyor. The State Commission has considered all these aspects and then it has reached to a figure of Rs.32,86,367.50 which has been awarded to the complainant. It is wrong to say that no enquiry was conducted by the respondent bank. The fact is that the service of the responsible employee has already been terminated and all his terminal dues have been forfeited by the respondent bank. However, it was argued that the same cannot be adjusted against the loss which is to be indemnified by the insurance company.
10. I have given a thoughtful consideration to the arguments of both the parties and have examined material on record. I have seen the reports of the surveyor and the chartered accountant. The surveyor has assessed the loss at Rs.27,94,034/- whereas the chartered accountant has found in his report that the loss has been reflected mainly in the accounts of (A) Gurukrupa Polymers, (B) Suryakant Tople (C) Suhas Keni/Suhas Karekar and (D) Chandrakant Gad, but certain amounts have been deposited in these four accounts and some financial instruments have been recovered by the respondent bank. These amounts roughly balance the loss in these accounts and thus the actual loss is nil. The Investigator/Chartered Accountant has not clarified in his report as to who had deposited these amounts. Even the learned counsel for the appellant could not explain as to how the chartered accountant has found out nil liability. Until it is clarified that who had deposited these amounts in these four accounts, reliance cannot be placed on the report of the chartered accountant.
11. Moreover, it is not understood as to how the frauds were not detected during the years of 1995-96, 1997-98 and 1998-99. The respondent is a financial institution and must be preparing its annual balance-sheet as well as profit and loss account. Therefore, the logic of clubbing the loss of frauds committed by the employees in different years at one occasion is not clear. At the most, it can happen that fraud committed in a financial year will go unnoticed during the financial year and will be detected only in the next year, but it should not go beyond the end of the next financial year because by that time the profit and loss account as well as the balance-sheet of the previous financial year would be ready. If the respondent bank has not kept pace for preparing and maintaining the balance-sheet as well as the profit and loss account, the burden to indemnify the loss of previous years cannot be shifted to the insurance company. Thus, at the most, loss occurred in the last financial year i.e. 1998-99 can be considered in the year 1999-2000 for which the policy was operative. The learned counsel for the respondent was asked to state the year-wise loss occurred, however he expressed his inability to reply the same. Thus, if same pace of fraud over time is assumed, the loss in financial year 1998-99 would be to the tune of one third of the total loss. I agree with the assertion of the learned counsel for the appellant that report of the surveyor is an important document to be relied upon while deciding the compensation for the loss. No cogent reasons have been placed by the learned counsel for the respondent for discarding the loss assessed by the surveyor. So the total loss cannot be taken to be more than that assessed by the surveyor which amounts to Rs.27,94,034/- and its one third would be Rs.9,31,345/- .
12. However, the Chartered Accountant has reported that some part of terminal dues of the employees may be considered for adjustment under the insurer's share for indemnification. This amount has been assessed at Rs.1.50 lakhs for two employees Mr. Sureshchandra R. Kapdi and Mr. G.B. Kamat who have been found guilty by the bank. I do not agree with the assertion of the learned counsel for the bank that these amounts cannot be adjusted against the insured amount as these amounts belong to the bank as the bank has forfeited these amounts from the terminal dues of the employees. As the conditions of the policy are very clear and indemnification will be done only of that loss which is the net loss after adjusting the recoverables.
13. Based on the above discussion, the appeal is partly allowed and the appellant is directed to pay Rs.7,81,345/- (Rs.9,31,345 - Rs.1,50,000/- ) only to the complainant/respondent instead of Rs.32,86,367.50 as ordered by the State Commission and the interest @ 9% p.a. shall be payable from the date of filing of the complaint i.e. from 13.6.2003 and not from 11.11.1999. No order as to costs for this appeal.
...................... PREM NARAIN PRESIDING MEMBER