State Consumer Disputes Redressal Commission
State Bank Of India vs United India Insurance Co. Ltd. & Anr. on 10 March, 2026
IN THE NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
AT NEW DELHI
CONSUMER COMPLAINT (OP) NO. 90 OF 2004
With
IA nos. 2908 of 2025, 1455 of 2019 (waiver of Costs, condonation of delay in filing the
rejoinder)
State Bank of India Complainant
Versus
United India Insurance Co. Ltd., & Anr. Opposite parties
BEFORE:
HON'BLE MR JUSTICE A P SAHI, PRESIDENT
HON'BLE MR BHARATKUMAR PANDYA, MEMBER
For the Complainant Mr Joy Basu, Sr Advocate with Mr Rajiv
Kapur, Mr Anoop George and Ms Riya
Sood, Advocates
For the Opposite parties Mr A K De, Mr P R Sikka and Ms Ananya
De, Advocates for OP 1 to 3
Ms Chandini Sharma and Mr Krishan Kumar,
Advocate for OP 4
NONE for OP 5
Mr Sandeep Mohapatra, with Mr Mrinmayee
Sahu, Advocates for OP 6
PRONOUNCED ON 10/03/2026
ORDER
1. This complaint relates to a claim of indemnification under a Fire Insurance policy acquired from the United India Insurance Company Ltd., by the complainant State Bank of India (in short, 'the SBI') for the stocks Page 1 of 84 and assets of M/s Sattal Wollens Pvt., Ltd., that had originally joined as a co-complainant. It was pointed out lateron on 19.12.2005 that the Company had under gone liquidation and an official liquidator had already been appointed. Accordingly, the Bank moved an IA through Dy no.743 on 15.04.2000, praying that since the Company had under gone winding up proceedings before the High Court of Madhya Pradesh and an Official Liquidator Mr Arvind Shukla was appointed on 27.01.2003, therefore the Company can no longer be represented by its erstwhile Director, hence, the official liquidator deserves to be brought on record. Accordingly, the said application was allowed by the following order of 19.12.2005 which is extracted herein under:
Heard. Learned counsel for the petitioners relies upon two judgments namely (i) Harsolia Motors vs National Insurance Co. Ltd., reported in 2005 Vol. I (NC) 27; and (ii) Allahabad Bank vs Canara Bank and Another (200) 4 SCC 406.
Learned counsel for the petitioner has filed an application seeking permission to amend the memo of parties along with amended memo of parties.
Application is allowed. Let amended memo of parties be taken on record. Issue notice on the fresh address, as prayed, returnable on 23.05.2006."
2. Memo of parties were amended, and the Bank became the sole complainant whereas M/s Sattal Wollen Mills was transposed as respondent no.6 through the official liquidator.
3. Mr Joy Basu, learned Sr Counsel along with Mr Rajiv Kapur have advanced their submissions on behalf of the complainant, Mr A K De has advanced his submissions on behalf of the United India Insurance Company Ltd., and Mr Mahapatra has advanced his submissions on behalf Page 2 of 84 of the official liquidator, Mr Krishan Kumar, has appeared for the Madhya Pradesh Financial Corporation and there is no representation on behalf of the 5th Respondent.
4. With the aforesaid array of parties, the complaint alleges that there was a huge loss in a fire in the factory at Chiktyabad, Dhar, M P on 29.09.1994. The risk of the said fire was covered under a fire insurance policy that was valid for the period 12.01.1994 to 31.01.1995.
5. A preliminary survey was conducted by M/s Manmall Kasliwal and Sons on 29.09.1994 and a preliminary survey report was filed on 05.10.1994. M/s Batawadekar and Company were appointed as final surveyor who also tendered a preliminary report on 29.10.1994 which is extracted herein under:
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6. The same surveyor entered into a correspondence with the complainant's Company as well as with intimation to the insurance company regarding demands of documents, audio and video visual cassettes. Yet, according to the surveyor the material was not provided causing delay as stated in the letters that have been placed on record. The insurance company on 16.03.2000 called upon the SP Fire Brigade, Indore to provide a copy of the fire brigade report. The insurance company had also called upon the complainant to file documents and it appears that the final survey report was tendered on 28.04.1999 which is extracted herein under:
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7. A perusal of the same indicates that the preliminary surveyor report has also been supplemented by an addendum with a request to be read in continuation of the preliminary survey report dated 29.10.1994.
8. It appears that another investigator namely M/s Om Nityanand Enterprises was instructed by the insurance company to process the claim file in respect of certain correspondence exchanged between the complainant and the insurance company and the said investigator dispatched a letter on 06.10.2000 requesting for an interaction. According to the insurance company the complainant did not co-operate and therefore a reminder was sent by the insurance company on 12.07.2001. The said investigator is stated to have sent a letter on 08.03.2001 calling upon the complainant to furnish information including that which was based on the survey report of another surveyor appointed by the complainant namely Mr Mirchandani. The complainant responded to Om Nityanand through a reply dated 07.08.2001, but the investigator wrote back that proper answers had not been provided.
9. The said investigator tendered his report on 14.06.2002, the same is extracted herein under:
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10. The insurance company vide letter dated 30.10.2003 repudiated the claim on the ground that it was fraudulent and therefore, should be treated as "no-claim". The repudiation is extracted herein under:
Re: Fire Claim No.190203/US/94-95 Policy No. 190203/11/13/16/647/94 Date of Loss 28.09.1994 Insured Saatal Woolens Pvt.Ltd, Dhamnod (MP) Inspite of reminders/letters and lapse of two years you did not reply or submit the required information/documents. This clearly indicates that you have deliberately not parted with the relevant information which could have been easily provided. Moreover you have also suppressed material fact by not disclosing that the factory vas already referred to BIFR.
Therefore we have treated your claim as 'NO CLAIM by invoking condition No.6 (11) of the Fire policy which reads as under
"In no case whatsoever shall the Company be liable for any loss or damage after the expiry of 12 months from the happening of the loss damage unless the claim is the subject of pending action or arbitration, it being expressly agreed and declared that if the Company shall disclaim liability for any claim hereunder and such claim shall or within 12 calendar months from the date of the disclaimer have been the subject matter of a suit in a court of law then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder."
The reasons for invoking the above condition are as below:-
A) Fire allegedly took place in woolen factory at Chiktyabad, Dhar, MP on 28.09.94 at 18:45 hrs due to short circuit in the electrical motor of Garnet Machine as per survey report. After intimation of loss surveyors M/s Manmall Kasliwal & Sons were deputed on 29.09.94 for preliminary survey. The preliminary Surveyors submitted its preliminary survey report on 05.10.94. The report pointed out non receipt of estimate of loss from the Insured, After receiving the preliminary survey report final surveyor M/s Bhatwadekar & Co, vas deputed on 07.10.94. The surveyor visited the site on 07.10.94 and 08.10,94 for inspection. After inspection, the surveyors submitted preliminary report with the comment that insured has not submitted the estimate of loss though the surveyors had asked for relevant documents on 10.10.94 itself within one month of the said loss.Page 51 of 84
C) Surveyors again requested for documents and meeting to finalise the claim amount on 06.03.95 but did not succeed in getting the estimate.
Subsequently surveyors again requested you for relevant documents and also asked for a meeting through various correspondence on dates (01.06.95, 14.07.95, 08.12.95). But Surveyors could not get any reply from you, Finally Insured replied to the surveyor vide a letter on 23.08.96 1.e, after a lapse of almost 2 years with a report of a consultant MR. M.G. Mirchandani stating that plant and machinery had been damaged totally and estimated value of damaged item is around 5.3 crores. However, insured could neither submit the desired documents like quotations, information on life expectancy of machines, depreciation etc. nor fixed meeting with the said consultant even after a lapse of 4 years.
Above facts and circumstances indicate malafide intention on your part for preferring a fraudulent claim. Therefore your claim is treated as "No claim".
11. The bank apart from having filed this complaint that was moved on 27.10.2004 had also initiated recovery proceedings under the Sarfaesi Act. In the Sarfaesi Proceedings the bank had impleaded the Insurance Company as defendant no.7. On 16.07.2001 the Presiding Officer passed an order directing the insurance company to pay the insurance claim, if not paid to the plaintiff Bank as per the terms of the policy. The said order is extracted herein under:
Suit for recovery of Rs.3,31,53,648.64 JUDGMENT (Delivered on 16.7.2001)
1. The suit came to be registered as Transfer Application on the basis of the receipt of the record of the Civil Suit No. 2A/97 from the Court of the District Judge, Dhar (M.P.)
2. The facts in brief are that the defendant No. 1 is a Private Limited Company of which defendant No. 2 to 4 are/or have been the Directors. That on the request of defendant No. 1, the plaintiff Bank sanctioned Cash Credit Limit of Rs. 35 lacs, Bills Limit of Rs. 20 lacs, Bank Guarantee of Rs. 5 lacs and Medium Term Loan of Rs. 36 lacs to defendant No. 1 and in consideration thereof, the defendant No. 1 through its Directors executed requisite loaning documents and Page 52 of 84 agreed to pay interest at the agreed rate. That the aforesaid credit facilities were also enhanced from time to time and for the enhanced limits also the defendant No. 1 to 4 executed requisite loaning documents. That the defendant No. 2 to 4 executed guarantee agreement to secure the credit facilities granted to defendant No. 4 from time to time. That it is a further security, the defendant No. 1 had credited equitable mortgage over their immovable property by depositing title deeds on pari-passu basis in favour of the plaintiff Bank and defendant No. 5. That the Plaintiff Bank got the assets of defendant No. 1 issued with the defendant No. 1 and on 20.8.94 a fire in the defendant No. 1 factory had broke out for which claim was lodged with defendant No. 7 which has not been settled by the defendant No. 7 till date. That after availing the credit facilities, the defendant No. 1 to 4 acknowledged their debt from time to time. That the defendant No. 1 had become sick for which the BIFR had recommended for the winding up of defendant No. 1. Since the defendant No. 1 to 4 failed to liquidate their accounts despite of several requests and Legal Notice, the Plaintiff Bank filed the present Suit for recovery of Rs. 3,31,53,648.64 against the Defendants in the Court of the District Judge, Dhar.
3. In response to summon issued to the Defendants, the Defendants appeared through their Counsel except Defendant No. 5. The defendants, expect defendant No. 1 and 6, did not file their reply/counter-affidavit as required u/r 12 of DRT (Procedure) Rule 1993, read with Regulation 21 of DRT Regulation of Practices, 1998.
4. The only point for consideration before me is as to whether the plaintiff Bank is entitled to recover a sum of Rs.3,31,53,648.64 with interest and costs from the defendant No. 1 to 4 as prayed by them.
5. On behalf of the Bank there is evidence of AW-1 Shri B.M. Baherwani, Aw-2 Shri Shridhar Sane and Sw-3 Shri Ashwani Jain on affidavit. The Aw-1 has identified the documents Ex. A-1 to A-15 and AW-2 identified the documents Ex. A-47 to A-75. The affidavit of AW-
3, corroborates the affidavit of AW-2 and he further identified the documents Ex. A-16 to A-24 and A-44 to A-46. These witnesses of the Bank identified the documents Ex. A-1 to A-75 in support of the claim of the Bank and they proved the averments in the plaint. The defendant No. 1 through one Shri D.K. Dixit claiming to be the Director of Defendant No. 1 has filed an affidavit but has failed to file any documentary proof towards his claim to be the Director of Defendant No. 1, thus the affidavit of Shri D.K. Dixit has no substance in the eye of law nor the same can be read in evidence. The defendant No. 2 to 4 has failed to file any evidence in support of Page 53 of 84 their written statement in rebuttal. Therefore, there is no reason disbelieve the evidence adduced by the Plaintiff Bank. Thus the plaintiff succeed and the following order:
ORDER In the result the plaint if allowed, declaring that the plaintiff Bank is entitled to recover a sum of Rs. 3,31,53,648.64 with costs from the Defendant No. 1 to 4 jointly and severally. The Bank is entitled to recover interest at the contractual rate from 9.11.95 till the realization of the outstanding dues. The Bank may press into service independent rights for the sale of hypothecated goods without waiting for any orders of this Tribunal. The sale of mortgage proper is restricted in the terms and conditions of the agreement between the plaintiff Bank and Defendant No. 5. The Defendant No. 7 is directed to pay the Insurance claim, if not paid, to the Plaintiff Bank as per the terms of the Policy. The defendant No. 1 to 4 are debarred from transferring, alienating or otherwise dealing with or dispose off the hypothecated/mortgaged properties without the prior permission from this Tribunal. Costs includes the Advocate Fee also as per rules prevailing in the State. Prepare and submit the Recovery Certificate. Inform the parties.
12. The order in the Sarfaesi proceedings has become final.
13. We have mentioned these facts as the Insurance Company has come up with a defence in the present proceedings that the amount of indemnification, if any held to be a liability on the Insurance Company, then in that event keeping in view the provisions of the Recovery of Debts due to Bank and Financial Institutions Act, 1993, read with the provisions of the Companies Act, the amount should be paid to the Official Liquidator who has already taken over the assets of the Company as, the sole authority to deal with the assets of the Company including any indemnification if awarded, is the Liquidator, OP no. 6, herein. The submission is that the amount should not be disbursed to the complainant Bank.Page 54 of 84
14. During the pendency of this complaint, these facts were taken notice of and on 13.09.2006, the following order was passed:
Heard the learned counsel for the parties.
Undisputedly, the State Bank of India has taken the Fire Insurance Policy 'C' on account of 'Sattal Woollens Pvt. Ltd. (hereinafter referred to as the company) for the period between 12.1.1994 and 31.1.1995. Undisputedly, there was fire on 29.9.1994.
A Panchnama was prepared. Fire Brigade gave a certificate that the fire was due to electric short circuit. The surveyor of the insurance company made his observation regarding the fire on 10.10.1994 and the claim made by the company was forwarded on 10.1.1995. As per the preliminary survey report dated 19.10.1994, the loss was estimated at Rs.75 lakhs to 80 lakhs. Thereafter, the insurance company received the final report on 28.4.1999. However, the entire copy of the final survey report is not produced on record but at the same time, the complainant has produced on record the letter dated 30th June 2000 written by 'Sattal Woollens Pvt. Ltd.' to the Chairman & Managing Director of the insurance company wherein it is stated that as per the final survey report, the amount payable is Rs.1.10 crores but the same was not acceptable to the insured. At the time of hearing of this complaint, learned counsel appearing on behalf of the State Bank of India submitted that till the matter is finally disposed of, insurance company should be directed to pay at least the admitted amount of Rs.1.10 crores to the complainant. It is his contention that the claim was lodged in the year 1994 and on one or other ground, the insurance company failed to pay the said amount.
Considering the fact that the matter is likely to be delayed, the insurance company is directed to pay the a sum of Rs.1.10 crores with interest at the rate of 9% from 1.1.1995 till 1.10.2006 and deposit the same with the State Bank of India on or before 15.10.2006. The Branch Manager of the State Bank of India would file an undertaking that in case, if the complaint is dismissed for any technical ground as stated in the repudiation letter, the Bank would refund the said amount with interest at the rate of 9% from the date of deposit till its payment.
Fix for final disposal on 24th May 2007.
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15. The above-mentioned order was challenged by the Insurance Company before the Apex Court in a Special Leave Petition that was dismissed on 22.01.2007.
16. Learned counsel informs that in terms of the said order the Insurance Company has paid the amount referred to in the said order which has been received by the complainant Bank.
17. Mr Basu, learned Sr Counsel for the Bank has urged that in the background above, the complainant bank is entitled to receive the entire indemnification amount and he has proceeded to contest this complaint after pointing out the deficiencies in the survey reports as also the letter of repudiation.
18. Mr Basu contends that the main grounds taken to oppose the claim are that the Bank would not fall within the definition of the word "Consumer", as the policy was taken in the name of the Company and therefore there was no privity of contract between the Bank and the Insurance Company as the services were provided for the insurance of the assets of the Company on a premium paid by the insured. Even though this issue was initially contested by Mr A K De, yet after arguments that were advanced it would be evident that the fact that the Bank is entitled to pursue this complaint is not seriously disputed.
19. The contentions which were raised have been recorded in the order dated 08.08.2025 which is extracted herein under: Page 56 of 84
1. At the outset, Mr. Mahapatra appearing for the Opposite Party No.6 who is the Official Liquidator has prayed that noting his absence on 4th February, 2025 the Commission had imposed a cost of Rs.25,000/- and that the same would be a matter of personal imposition on the learned counsel as such he prays that the same may be waived.
2. We have heard learned counsel for all the parties and we are satisfied that the learned counsel had genuinely sought an adjournment on the previous occasion and consequently the imposition of cost of Rs.25,000/- vide order dated 4th February, 2025 is waived.
3. The arguments commenced today on behalf of the Complainant Bank by Mr. Joy Basu, learned Senior Counsel who has given a brief outline of the case contending that a fire policy was issued in favour of the Bank for securing the assets of M/s Sattal Woolen Pvt. Ltd., Dharampuri District, Dhar, Madhya Pradesh. He pointed out that the said unit had taken a loan from the Bank and was also co-financed by the M.P. Financial Corporation and the M.P. Industrial Development Corporation. It may be pointed out that even though the said parties had been served, no one has appeared on behalf of the said Financial and Industrial Development Corporation today.
4. Mr. Basu submits that the unit had witnessed failure and was therefore subject to rehabilitation proceedings before the BIFR. It is at that stage that the complainant Bank obtained a policy on 19th January, 1994 that was jointly issued in the name of the complainant Bank as the first name on account of M/s Sattal Woolen Pvt. Ltd. A copy of the policy is Annexure-P1 (page 32) and the duration of the said policy was from 12.01.1994 to 11.01.1995. It is a fire insurance policy.
5. Unfortunately, a fire occurred on 28th September, 1994 and therefore the Bank being the insured as well as the beneficiary under the policy was entitled to claim indemnification. On receipt of the information a spot surveyor M/s Kasliwal was appointed and simultaneously M/s Bhatwadekar & Company was also appointed the surveyor. A claim form was tendered that has been filed as Anneuxre-P4 (page 39).
6. The spot survey report was filed by M/s Kasliwal on 05.10.1999 which is however not on record. However, Mr. Bhatwadekar & Company the surveyor conducted the preliminary survey and tendered a preliminary survey report on 29.10.1994 that has been enclosed at page 131. Mr. Basu points out that the said preliminary survey report entails all the details of the incident as also the loss suffered.
7. Some communication ensued between the unit and the surveyor regarding information and details including documents that were supplied. The cause of loss has been indicated to be a short Page 57 of 84 circuit and the preliminary survey report also records that the entire status of the unit was maintained as intact during the survey.
8. Mr. Basu contends that the surveyor took almost more than five years to tender the final survey report on 28th April, 1999. A copy of the final survey report is Annexure-P-27 page 213.
9. Mr. Basu points out that this survey was preceded by the communication referred to above for which has invited the attention of the Bench to the letters dated 07.03.1995 (page 43) sent by M/s Bhatwadekar & Company seeking the information that was sought, the Bank's letter dated 19.12.1999 (page 44) whereby the Bank intimated about the status of the policy repeated by the letter dated 21st Mary, 1995 (page 45).
10. He then points out that on 10th May, 1996 (page 47) the Insurance Company sent a reply to the Bank clearly noting that the Bank had a lien on the insurance. On 27th January, 1997 the Bank again sought information whereafter a letter was also despatched by the Bank to the surveyor on 6th February, 1997. With the aid of these documents it is pointed out that all papers and documents that were necessary were tendered to the surveyor and he has then read out the final survey report to urge that the surveyor has categorically recorded not only the availability of the documents but also the discussion that were carried out regarding the loss and the assessment on the basis thereof.
He submits that the surveyor categorically recorded that the claim was admissible and that there was no breach of the terms of the policy and therefore the damage suffered was payable.
11. Mr. Basu therefore contends that the said survey report ought to have been honoured in its entirety but he submits that the surveyor had incorrectly made deductions on account of under insurance.
12. For this he submits that there was no question of any under insurance to be applied inasmuch as the policy had been issued after a complete pre inspection of the unit at that stage when it was undergoing rehabilitation proceedings before the BIFR and therefore the Insurance Company was well aware about the status of the entire existing assets of the unit. He therefore contends that there was no valid reason to apply the under insurance but nonetheless once the report had been submitted in 1999 there was no reason for the Insurance Company to have withheld any payment of the admissible claim. It may be pointed out that the final survey report rounded of the net payable claim to the tune of Rs.1,09,92,227/-.
13. He then points out that the survey report having reached the Insurance Company in the background above ought to have resulted in the reimbursement of the indemnification amount yet the Insurance Company for reasons best known to it chose to appoint an Page 58 of 84 Investigator by the name of Om Nityananad Enterprises on 26th September, 2000 who tendered some report on 16th June, 2002.
14. The Insurance Company without any reference to any such Investigation report straight away repudiated the claim after almost nine years of the incident on 30th October, 2003. The letter of repudiation is Annexure P-25 (page 89).
15. Mr. Basu contends that the Insurance Company cannot be permitted to travel beyond what is stated in the letter of repudiation in view of the law laid down by the Apex Court in the case of Galada Power & Telecommunication Ltd. vs. United India Insurance Co. Ltd. (2016) 14 SCC 161, Saurashtra Chemicals Limited vs. National Insurance Company Limited, (2019) 19 SCC 7 and New India Assurance Co. Ltd. & Ors. vs. Mudit Roadways, 2023 SCC OnLine 1532 and therefore any reasons pleaded beyond the record are unsustainable. He submits that the first reason given is that the unit did not supply or give any reply to the required information and the documents that were sought. He submits that this recital is totally against the report of the surveyor dated 28th April, 1999 of M/s Bhatwadekar & Co. which is the basis of proceeding with the repudiation. He submits as pointed out above that the final survey report categorically records that all the information was collected, documents were received and discussions were held whereafter the estimation was carried out. He further submits that the claim form did indicate the estimates, and even assuming though not admitting that the information of estimation was not complete, even otherwise it is the estimation made by the surveyor which was available and no fault has been found with it in the letter of repudiation. Consequently, to allege non-supply of information or required documents is against the evidence on record and is unacceptable.
16. He then submits that there was no suppression of any material fact regarding the factory having been subjected to BIFR proceedings inasmuch as the Insurance Company had conducted a pre inspection and was aware of the said status. This reason was not even made the basis of the denial of the claim by the surveyor. To the contrary the claim has been held to be admissible and no such objection was ever taken at any stage. He therefore submits that the grounds of repudiation are untenable.
17. He further points out that the repetitive recital of the estimate or the desired documents like quotations etc. being not available is contrary to the recital in this final survey report dated 28th April, 1999. As a matter of fact, the final surveyor has clearly indicated the quotations that were made available and have been mentioned categorically by the surveyor in his report. It is therefore urged that the repudiation cannot be sustained at all. Page 59 of 84
18. Mr. Basu points out that even if the Insurance Company had appointed an Investigator by the name of Om Nityanand, its report or otherwise any reference to it cannot be entertained as it does not form the basis of repudiation.
19. He has then pointed out that the Bank being the insured as mentioned in the policy documents as well as the claim form, and also being a beneficiary, is clearly a consumer within the meaning of the Act for which he has invited the attention of the Bench to paragraph 2 of the complaint. He therefore submits that it is in this background that the Bank alongwith M/s Sattal Woolens Pvt. Ltd. had instituted this complaint as originally filed but later on with the unit having undergone liquidation proceedings, it is the Official Liquidator who has taken over charge, and consequently an amendment in the memo of parties was sought whereby the complainant No.2 was transposed as opposite party No.6 in the complaint.
20. The amended memo was accordingly filed and for that he has invited the attention of the Bench to the order passed by this Commission on 19th December, 2005 whereby the application for accepting the amended memo has been allowed. He submits that the said order has become final and therefore the transposition is complete. Accordingly, the complainant is maintainable on behalf of the Bank as a consumer keeping in view the rights and liabilities of the parties and also the fact that the policy categorically recites that it is subject to an agreed Bank clause. He therefore contends that the complaint is very much maintainable on behalf of the Bank and to further support his contention he has pointed out to the order passed by this Commission on 13th September, 2006 whereby directions were issued to the Insurance Company to pay Rs.1.10 crores being the amount calculated by the surveyor together with interest @ 9% from 01.01.1995 till 01.10.2006 on the undertaking that if the complaint fails on any ground as stated in the repudiation letter the Bank would refund the same. Mr. Basu points out that pursuant to the said order the said payment has been received by the Bank.
21. Mr. Basu pointed out that the said order dated 13th September, 2006 was challenged by the Insurance Company in Special Leave Petition before the Apex Court that was dismissed on 22nd January, 2007 and he points out that the said order has already been filed on record alongwith the reply of the Official Liquidator. We have noticed the same. Mr. Basu therefore contends that with all this on record he would proceed further to demonstrate the surviving interest of the Bank and the entitlement of the Bank to receive the indemnification amount as the claim is well established in law.
22. Mr. De, and Mr. Sikka have appeared for the Insurance Company. Since the arguments could not conclude today, let the matter be listed on 26.09.2025.
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20. The case was then again heard on 26.09.2025 when the following order was passed recording the submissions of Mr Kapur raised on behalf of the Bank as also the submissions raised by Mr De on behalf of the insurance company the same is extracted herein under:
Mr. Kapur, learned counsel for the complainant has advanced his submissions by inviting our attention to the judgments that have been cited on behalf of the complainant in a compilation a copy whereof has also been handed over to the learned counsel for the opposite parties.
While responding to the submissions on behalf of the Insurance Company regarding the locus of the Bank to maintain the complaint, Mr. Kapur has cited the order of the State Commission, Tamilnadu in the case of S. Pushpa Devi Jamad vs. the New India Insurance Company Ltd. (1993) II CPJ 1053, paragraphs 7 & 8. He has then taken us through the order of the State Commission, Orissa in the case of Bizi Industries vs. State Bank of India (1995) III CPJ 380, paragraphs 4 and 6. The contention raised is that the policy that was acquired and was issued by the Insurance Company was in the name of the Bank itself and subject to agreed Bank clause as a result whereof the Bank had taken the Insurance Policy and had also paid premium for the same. The contention therefore is that it is not only that the Bank was the insured but the Bank also had an insurable interest in the coverage keeping in view the status of the property of the company which had already gone into liquidation. The assets being hypothecated, the Bank has a first charge. Learned counsel submits that in spite of the fact that the company had been liquidated and was under the charge of the Liquidator yet this Commission proceeded to pass an order on 19.12.2005 whereby it allowed the transposition of the Liquidator as the opposite party No.5 who is also represented by a counsel and has appeared online even today. It is therefore submitted that there is no opposition to the maintainability of the complaint by the liquidator inasmuch as the complaint is only seeking to secure the interest of the company as well as the collateral interest of the Bank.
He then points out that it is not only the judgments but also the statutory provision under Section 2 (1) (d) (i) of the Consumer Protection Act, 1986 which provides the definition of the word "Consumer" and includes any user of any goods or the services for consideration paid which clearly applies to the facts of the present case where it is the Bank which had paid the entire consideration of the premium to the Insurance Company and has secured the service of insurance coverage. He therefore Page 61 of 84 submits that on all counts the Bank has the locus to maintain this complaint.
Advancing his submissions he has invited the attention of the Bench to the decision of the Supreme Court in the case of Allahabad Bank vs. Canara Bank & Anr. (2000) 4 SCC 406 to urge that in the said case it was held that there is no requirement of any prior permission by the Bank for instituting any proceedings under the Company Law but advancing his submissions he has pointed put that closure to the present dispute in a consumer complaint, the observations made and the law enunciated by the Apex Court in the case pf Canara Bank vs. United India Insurance Co. Ltd. (2020) 3 SCC 455, paragraphs 18-23 as well as 36- 39 are fully attracted. With the aid of these paragraphs, Mr. Kapur urges that in the present case also there is an agreed Bank clause where it was considered by the Apex Court in the said decision and while enunciating the law it has been held that the Insurance Policy itself envisages that there are third party interests including the Bank itself. In such circumstances the present issue is squarely answered through the said decision as also the statutory provisions and consequently it cannot be said that the Bank does not have locus to maintain the complaint or cannot make an insurance claim from the Insurance Company.
Mr. De, learned counsel appearing for the Insurance Company submits that there are other issues as well but he contends that this issue will also have to be dealt with keeping in view the fact that the company had gone into liquidation much prior to the filing of the complaint itself which fact had not been adequately disclosed in the complaint nor was there any permission from the Liquidator who had taken over the assets of the Company for the institution of the present complaint. He therefore submits that the complaint could not have been filed by the Bank without there being any permission or any authorization with regard to the claim in question as the Liquidator ought to have been made a complainant alongwith the Bank even if any such claim was being raised by the Bank against the assets of the Company. He then submits that it has also to be taken care of that the amount which became payable under the insurance coverage is an indemnification of the losses of the assets of the company and as such any indemnification therefore has to be routed through the Liquidator and cannot be directly received by the Bank which might be disadvantageous to the other secured creditors of the company. He further submits that even if it is assumed that the claim is liable to be allowed then in that event also the proceeds cannot be claimed solely by the Bank and consequently this issue needs to be addressed as well.
He then submits that the Insurance Policy indicates the sum insured at Rs.2,19,62,000/- The quantum therefore as claimed by the complainant in no way can exceed the said amount for two reasons. Firstly, the amount as indicated in the policy cannot exceed the sum Page 62 of 84 mentioned therein and even otherwise the surveyor, has appropriately taken note of the under insurance part while making the calculations inasmuch as it is the complainant's own case that the losses suffered by them were over and above Rs.5/- crores which they have themselves brought on record through the report of another assessor M/s Mirchandani who has valued the losses over and above Rs.5/- crores. He therefore submits that taking a coverage of Rs.2,19,62,000/- is clearly reflective of the under insurance and therefore the Surveyor was justified in recording deductions to that effect.
He submits that there are other issues as well which shall be answered and he prays for an adjournment today.
Let matter come up once again on 09.10.2025.
21. Arguments on behalf of the Bank were proceeded once again when Mr Basu on rejoining on 09.10.2025 made the following submissions is extracted herein under:
1. Mr. Joy Basu, learned senior counsel advanced his submissions on behalf of the complainant Bank urging that the policy had been issued after an inspection had been made with the visit of the officers of the Insurance Company and assessing the condition and valuation of the articles insured under the policy. This fact has been stated in paragraph 36(ii) of the complaint. This according to Mr. Basu has not been denied in the written statement and he has invited the attention of the Bench to paragraph 38 of the written statement of the respondent Insurance Company filed on 12.09.2006. It is urged that this specific fact of the policy having been issued after the pre-inspection have not been specifically denied. It is further submitted that no evidence affidavit has been filed on behalf of the OPs - 1 to 3. The sum insured is Rs. 2.19 crores and the premium has been paid commensurate to the said sum insured. Thus, there is a presumption of the existence of the items commensurate to the sum insured value as there was a pre-inspection by the Insurance officials.
2. He further submits that the Bank had first charge and he points out that the Insurance Company cannot decline the claim of the Bank in as much as the Bank had an insurable interest and the policy itself had a Bank covered clause. Thus, the Bank has rightly filed the complaint being a beneficiary.
3. Mr. Basu has then urged that the Bank had filed recovery Suit No. 2A/1997 before the learned District Judge, Dhar for the recovery of Rs. 3,31,53,648.64 which was later on transferred to the Debt Recovery Tribunal at Jabalpur numbered through Transfer Application Page 63 of 84 No. 72 / 1998. In the said proceedings, the OP Insurance Company was impleaded as Respondent No. 7. The DRT in the said proceedings passed orders on 16.07.2001 and acknowledged the rights of the Bank to recover the amount and to give effect to the same, specifically directed the Insurance Company that was arrayed as defendant no. 7 to pay the insurance claim to the plaintiff Bank as per the terms of the policy.
4. Mr. Basu therefore submits that the contention raised by Mr. De that the assets of indemnity under the insurance coverage should be paid to the official liquidator, cannot be raised as a plea as the order of the DRT dated 16.07.2001 is binding and had been passed prior to the filing of the present complaint. The order of the DRT has been filed as Annexure P-21 (page 44 of the paperbook).
Mr. Basu submits that even otherwise the Bank having the first charge, is entitled to recover the debt as per the definition of a Debt under section 2(g) of the 1993 Act. He further submits that a perusal of the provisions of Section 17, 18, 19 (19) and 34 clearly demonstrate that there is no legal bar under the1993 Act preventing or prohibiting the recovery of any such dues and to the contrary, the same facilitates such recovery of debt as the 1993 Act has an overriding effect and it does not mention the provisions of the Companies Act that is not included. He has also invited the attention of the Bench to Section 446 of the then existing Companies Act to urge that even if the official liquidator has taken over the assets of the Company and no other suitor any other process would be available, yet the provisions of the 1993 Act which is also a special Act empowers the realisation of such recovery of debts even in respect of the Companies which have gone under liquidation which is clearly evident from the provisions of Section 19(19) of the Act.
5. Mr. Basu submits that in these circumstances, there is no question of the complaint not being maintainable by the Bank and the Insurance Company cannot avoid payments to the Bank as the Bank is also a beneficiary. He has then urged that even though the initial claim was for Rs. 4,48,24,331/-, yet the consultant Mr. Mirchandani gave his third opinion and assessed the loss after inspection of the site to the tune of Rs. 5,30,18,617/-. It is for the said reason that the aforesaid changes were brought about towards the claim but unfortunately the final surveyor, in spite of having assessed the loss for Rs. 2,33,23,280/-reduced it after proportionate deductions to the tune of Rs. 1,09,19,960/- only. Mr. Basu submits that even the said amount was not being paid and therefore orders were passed on 13.09.2006 by this Commission directing the Insurance Company to make the payments on an undertaking to be given by the Bank that the same would be subject to the outcome of this litigation. He therefore submits that the dispute therefore now remains only with regard to the quantum and even assuming for the sake of arguments that the total insured sum is of Rs. 2.19 Crores, the complainant is entitled to the aforesaid entire sum insured without any deductions. Page 64 of 84
6. He also submits that the arguments regarding under insurance is incorrect and does not hold water.
7. He submits that on a perusal of the survey report, it is more than clear that the loss and the cause of the loss all stands confirmed and in the absence of any doubt, the entire claim is clearly payable.
8. Mr. De, learned counsel for the Insurance Company questioned the locus of the Bank, but at the same time was unable to dispute the fact that the official liquidator has been made a party in the present proceedings and has supported the claim of quantum even though the official liquidator claims the payment to be made to him. Mr. De submits that the repudiation was justified and even otherwise the Bank cannot maintain the complaint even if it is assumed that the losses are liable to be paid.
9. Learned counsel for the Official Liquidator, Mr. Mahapatra also advanced his submissions, but it was urged by Mr. De that he has to substantiate his contentions further.
10. In order to conclude the arguments on behalf of the contesting parties, let the matter be listed on 04.11.2025.
22. Mr De then advanced his submissions on 26.01.2026 that is extracted herein under:
1. Mr. De, learned counsel for the opposite parties no. 1 to 3, has advanced his submissions in rejoinder contending that even if the Bank is treated to be a 'consumer', yet the amount of liability if payable has to be channelized through the liquidator and is not directly payable to the Bank. For this, he has relied on the provisions of the Recovery of Debts and Bankruptcy Act, 1993 as well as the provisions of the Companies Act to urge that when a company has undergone liquidation, then it is only through the liquidator that the assets are to be redistributed.
2. He has then urged that the surveyor has indicated partial damage only and therefore the claim of entire loss is unsustainable in the light of the pleadings on record. He has also urged that the complainant in its rejoinder in paragraph-16 has referred to the fact that the Insurance Company should have at least accepted the amount as calculated by the final surveyor and therefore the claim of entire loss stands diluted by this assertion.
3. He has also pointed out to the amounts that were originally claimed, and has compared the same with the amount in the complaint to urge that this fluctuation in the figures also doesnot entitle the complainant to claim the entire loss merely because there is an allegation about there being a pre-inspection before giving the policy.Page 65 of 84
4. He has further pointed out that the claim was repudiated on account of non-cooperation of the complainant and even otherwise the claim was made long thereafter on the basis of the report of one Mr. Mirchandani, hence the claim was rightly repudiated by the Insurance Company.
5. He has then urged that no finality can be attached to the order of the Debt Recogery Tribunal dated 16.07.2001 and secondly the claim has been repudiated on 30.10.2003 thereafter which was well within the authority of the Insurance Company to do so. He therefore submits that any claim made by the complainant was rightly considered as inadmissible by the Insurance Company.
6. The arguments have to be concluded and therefore he prays that the matter may be taken up on some other date.
7. As agreed between the learned counsel for the parties, let the matter be listed on 09.02.2026 and Mr. Basu may respond to the same so that the matter is brought to a close.
23. Finally on 09.02.2026 Mr De concluded his argument urging that even if the Bank has the status of a consumer and the complaint is maintainable, is not entitled to receive any amount of indemnification. He makes this submission without prejudice to the arguments that the repudiation letter dated 30.10.2003 is based on valid grounds. He further submitted that this is not a case of total loss and there is a huge variation in the claim by the complainant itself at different stages that too even based on an alleged private surveyor's report Mr Mirchandani, that is neither credible and was submitted after two years. He points out that there was a total non-cooperation by the complainant in tendering the documents which was a clear breach of the terms and conditions of the policy.
24. The complainant in his claim had claimed an amount of Rs.4.67 crores, whereas this amount was inflated in the complaint to the tune of Page 66 of 84 Rs.5.49 crores. It is also urged that the calculations made are also erroneous in as much as in the present case, the principles of Under Insurance is categorically attracted in as much as according to the complainant themselves, the value of goods was far higher as against the insured amount mentioned in the policy. He therefore submits that Under Insurance has been rightly invoked by the surveyor and consequently, no amount is payable to the complainant, even if it is indemnifiable, keeping in view the submissions raised on the strength of section 19 (9) of the Sarfaesi Act 2002 read with the provisions of Companies Act that the amount has to be received by the liquidator and not by the complainant Bank. He has justified the calculations of under insurance as extensively recorded in the surveyor's report and to support his submissions has referred to the submissions advanced and recorded in the previous hearing.
25. Summing up his argument, Mr Basu urged that the interplay between the provisions of Companies Act and RDB Act, the terms of the policy, the pleadings and the statutory status all confirm the claim of the Bank as a 'Consumer" as it has secured its interest. The calculations made by the private surveyor of the Wollen Company is liable to be disbursed.
26. Mr De, however, submitted that the calculation Chart which has been handed over at the conclusion of the hearing is not at all acceptable. The chart which was handed over by Mr Basu is extracted herein under: Page 67 of 84
WITHOUT UNDER INSURANCE WITH UNDER INSURANCE
1. 2. 3. 4
Particulars Amount Particulars Amounts
(Rs) (Rs)
A Building 3,70,240 A Building 3,70,240
B (i) Machinery 2,38,23,280 B (i)Machinery 2,38,23,280
(ii) Salvage (-) (5,00,000) (ii)Salvage(-) (5,00,000)
C A+B 2,33,23,280 2,33,23,280
C Under Insurance (1,24,03,320)
(-) (53.18%)
1,09,19,960
Less (-) (7500)
1,09,12,460
D Excess (-) (2500) D Excess (-) (2500)
E Total 2,33,20,780 E Total 1,09,92,227
27. He submits that the calculations made without under insurance is quite near the amount mentioned in the policy which is Rs.2,19,62,000/-. The contention of Mr De is therefore, is that a huge variation referred to and the tailoring of the calculations itself speak that the claim is based on an incorrect representation.
28. We have heard the learned counsel for the parties and at the outset it may be recorded that admittedly the definition of the word 'consumer' under Section 2 (d) (II) read as under:
"consumer" means any person who--
(ii) hires or avails of any service for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such service other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person, but does not include a person who avails of such service for any commercial purpose.
Explanation.--For the purposes of this clause," "commercial purpose"
does not include use by a person of goods bought and used by him Page 68 of 84 exclusively for the purpose of earning his livelihood, by means of self- employment;
(b) the expressions "buys any goods" and "hires or avails any services" includes offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing.
29. A Consumer can be a complainant in terms of Section 2 (b) of the Act. The purpose of the transaction is indemnification under a contract of insurance. Such a claim of indemnification, therefore has been held to be amenable to the jurisdiction of the Consumer Fora in the decisions of Vs. National Insurance Co. Ltd., vs Harsolia Motors (2023) 8 SCC 362.
30. The question is as to whether the Bank itself had hired the service of insurance or not. There is no dispute that the address of the insured mentioned in the policy is State Bank of India, Branch GPO Indore, Madhya Pradesh c/o Account AYC M/s Sattal Wollen Mills. The policy also endorses the following words "subject to agreed bank clause/ policy conditions/ warranties as per the form". The Bank had therefore, clearly initiated the insurance policy in order to secure the assets and is also as per the Bank Clause a beneficiary in the event of any such contingencies arising under the risk clause of the policy. The premium consideration has been disbursed by the Bank. We are therefore, of the opinion that the Bank is a 'consumer' in terms of the provisions of the Act on the facts of the present case and the method through which the policy came into existence. We therefore, find the complaint to be maintainable on behalf of the Bank and in fact, Mr De, learned counsel for the Insurance Company did not contest this matter any further. The fact that the Page 69 of 84 insurance company had been directed to pay the insurance claim to the Bank by the order of the Presiding Officer in the Sarfaesi Proceedings under the order dated 16.07.2001 as quoted above, the Bank is a direct beneficiary of the insurance claim with an insurable interest. Apart from this as noted above, this Commission itself has recognized the status of the Bank and released the payment to the bank vide order dated 13.09.2006 that is yet another confirmation of the said status of the bank as a complainant, more so, when the Insurance Company filed a Special Leave Petition against the same that was dismissed on 22.01.2007.
31. The next issue which is needs to be addressed is the objection taken by Mr De to the entitlement of the Bank to receive indemnification amount, if any, awarded by this Commission. Reference has been made to Section 19 (9) of the Companies Act. Mr De has relied on the amended provisions of the said Section which is extracted herein:
19. Where a certificate of recovery is issued against a company as defined under the companies Act, 2013 (18 of 2013) and such company is under liquidation, the Tribunal may by an order direct that the sale proceeds of secured assets of such company be distributed in the same manner as provided in Section 326 of the Companies Act, 2013 or under any other law for the time being in force.
32. This section refers to section 326 of Companies Act 2013. In this regard we find that the contention of Mr Basu to be correct that the said amended provisions would not apply, keeping in view the fact that firstly the law under the 1993 Act as existing on the date of lis would be applicable. He therefore, submits that the amended provisions were not in existences in 2004. Any reference to the provisions of section 529 A of Page 70 of 84 the Companies Act which is even though parameteria to Section 326 of the Companies Act, 2013 would not alter the status. Nonetheless, the provisions of 1993 Act were different where the applicability of the Act did not exclude the provisions of the Companies Act and the 1993 Act had an overriding effect.
33. While submitting on the over-riding effect of the Act, Mr Basu in our opinion also rightly contends that the provisions of 1993 Act had an over- riding effect as a result where of an adjudication regarding distribution of assets that have been subjected to recovery proceedings would be squarely covered by the orders passed under the 1993 Act and it is the Presiding Officer who shall be sole adjudicator in this respect. He has therefore, rightly relied on the judgment of the Apex Court to substantiate his submissions. A bare reading of the judgment of the Allahabad Bank vs Canara Bank and Anr., (2000) 4 SCC 406 has clarified this position and framed the questions in paragraph 13 as follows:
From the aforesaid contentions, the following points arise for consideration:
(1) Whether in respect of proceedings under the RDB Act at the stage of adjudication for the money due to the Banks or financial institutions and at the stage of execution for recovery of monies under the RDB Act, the Tribunal and the Recovery Officers are conferred exclusive jurisdiction in their respective spheres?
(2) Whether for initiation of various proceedings by the Banks and financial institutions under the RDB Act, leave of the Company Court is necessary under Sections 537 before a winding up order is passed against the Company or before provisional liquidator is appointed under section 446(1) and whether the Company Court can pass orders of stay of proceedings before the Tribunal, in exercise of powers under section 442?Page 71 of 84
(3) Whether after a winding up order is passed under Section 446 (1) of the Company Act or a provisional liquidator is appointed, whether the Company Court can stay proceedings under the RDB Act, transfer them to itself and also decide questions of liability, execution, and priority under section 446 (2) and (3) read with sections 529, 529A and 530 etc. of the Companies Act or whether these questions are all within the exclusive jurisdiction of the Tribunal?
(4) Whether, in case it is decided that the distribution of monies is to be done only by the Tribunal, the provisions of section 73 CPC and sub- clause (1) and (2) of section 529, section 530 of the Companies Court also apply - apart from section 529A - to the proceedings before the Tribunal under the RDB Act?
(5) Whether in view of provisions in section 19(2) and 19(19) as introduced by Ordinance 1/2000, the Tribunal can permit the appellant Bank alone to appropriate the entire sale proceeds realised by the appellant except to the limited extent restricted by section 529A? Can the secured creditors like the Canara Bank claim under section 19(19) any part of the realisations made by the Recovery Officer and is there any difference between cases where the secured creditor opts to stand outside the winding up and where he goes before the Company Court?
(6) What is the relief to be granted on the facts of the case since the Recovery Officer has now sold some properties of the company and the monies are lying partly in the Tribunal or partly in this Court?
34. It then went on to define debt in paragraph 18 of the Act which is extracted herein under:
Section 2(g) as amended by Ordinance 1/2000 defines 'debt' as meaning any liability which is "claimed" as due from any person to a Bank or financial institutions. It includes the liability and interest in cash or otherwise, whether secured or unsecured or whether payable under a decree or order of any civil Court or otherwise and subsisting, and legally recoverable on, the date of the application filed to the Tribunal.
35. It then discussed the exclusive jurisdiction of the Debt Recovery Tribunal and for that it would be appropriate to quote paragraph 19 to 25 of the said judgment.
19. The initial question is as to the jurisdiction of the Tribunal under Sections 17 and 18 of the RDB Act in the matter passing the order of adjudication and to what extent it is exclusive. The next question will be whether the jurisdiction of the Recovery Officer is Page 72 of 84 also exclusive for purposes of execution of the adjudication order passed by the Tribunal. (i)adjudication by Tribunal: Does the Tribunal have exclusive jurisdiction?
20. We shall refer to Sections 17 and 18 in Chapter III of the RDB Act which deal with adjudication of the debt.
"Section 17: Jurisdiction, powers and authority of Tribunals -
(1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.
(2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act.
Section 18: Bar of Jurisdiction- On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority ( except the Supreme Court, and a High Court exercising jurisdiction under Article 226 and 227 of the Constitution) in relation to the matters specified in Section 17."
It is clear from Section 17 of the Act that the Tribunal is to decide the applications of the Banks and Financial Institutions for recovery of debts due to them. We have already referred to the definition of 'debt' in Section 2(g) as amended by Ordinance 1/2000. It includes "claims" by Banks and financial institutions and includes the liability incurred and also liability under a decree or otherwise. In this context Section 31 of the Act is also relevant. That section deals with transfer of pending suits or proceedings to the Tribunal. In our view, the word 'proceedings' in Section 31 includes an 'execution proceedings' pending before a Civil Court before the commencement of the Act. The suits and proceedings so pending on the date of the Act stand transferred to the Tribunal and have to be disposed of "in the same manner" as applications under Section 19.
21. In our opinion, the jurisdiction of the Tribunal in regard to adjudication is exclusive. The RDB Act requires the Tribunal alone to decide applications for recovery of debts due to Banks or financial institutions. Once the Tribunal passes an order that the debt is due, the Tribunal has to issue a certificate under Section 19(22)(formerly under section 19(7)) to the Recovery Officer for recovery of the debt specified in the certificate. The question arises as to the meaning of the word 'recovery' in Section 17 of the Act. It appears to us that basically the Tribunal is to adjudicate the liability of the defendant and then it has to issue a certificate under Section 19(22). Under Section 18, the jurisdiction of any other court or authority which would otherwise have had jurisdiction but for the provisions of the Act, is ousted and the Page 73 of 84 power to adjudicate upon the liability is exclusively vested in the Tribunal. (This exclusion does not however apply to the jurisdiction of the Supreme Court or of a High Court exercising power under Articles 226 or 227 of the Constitution). This is the effect of Sections 17 and 18 of the Act.
22. We hold that the provisions of Sections 17 and 18 of the RDB Act are exclusive so far as the question of adjudication of the liability of the defendant to the appellant Bank is concerned. (ii) execution of Certificate by Recovery Officer: Is his jurisdiction exclusive
23. Even in regard to `execution', the jurisdiction of the Recovery Officer is exclusive. Now a procedure has been laid down in the Act for recovery of the debt as per the certificate issued by the Tribunal and this procedure is contained in Chapter V of the Act and is covered by Sections 25 to 30. It is not the intendment of the Act that while the basic liability of the defendant is to be decided by the Tribunal under Section 17, the Banks/Financial institutions should go to the Civil Court or the Company court or some other authority outside the Act for the actual realisation of the amount. The certificate granted under Section 19(22) has, in our opinion, to be executed only by the Recovery Officer. No dual jurisdictions at different stages are contemplated. Further, section 34 of the Act gives overriding effect to the provisions of the RDB Act. That section reads as follows: "Section 34 (1): Act to have over-riding effect- (1) Save as otherwise provided in sub- section (2), the provisions of this Act shall effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. (2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 ( 15 of 1948), the State Financial Corporations Act, 1951 ( 63 of 1951), the Unit Trust of India Act, 1963 ( 52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 ( 62 of 1984) and the Sick Industrial Companies ( Special Provisions ) Act, 1985 ( 1 of 1986)." The provisions of section 34(1) clearly state that the RDB Act overrides other laws to the extent of 'inconsistency'. In our opinion, the prescription of an exclusive Tribunal both for adjudication and execution is a procedure clearly inconsistent with realisation of these debts in any other manner.
24. There is one more reason as to why it must be held that the jurisdiction of the Recovery Officer is exclusive. The Tiwari Committee which recommended the constitution of a Special Tribunal in 1981 for recovery of debts due to Banks and financial institutions stated in its Report that the exclusive jurisdiction of the Tribunal must relate not only in regard to the adjudication of the liability but also in regard to the execution proceedings. It stated in Annexure XI of its Report that all "execution proceedings" must be taken up only by the Special Tribunal under the Act. In our opinion, in view of the special procedure for recovery prescribed in Chapter V of the Act, Page 74 of 84 and section 34, execution of the certificate is also within the exclusive jurisdiction of the Recovery Officer.
25. Thus, the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of the Tribunal and the Recovery Officer and no other Court or authority much less the Civil Court or the Company Court can go into the said questions relating to the liability and the recovery except as provided in the Act. Point 1 is decided accordingly.
36. With regard to the over-riding effect of the Act over the Companies Act, the same has been discussed in paragraph 26 to 31 and it has been held that the jurisdiction of tribunal is exclusive then the Company Court cannot utilize the power against the Tribunal Recovery Officer. Mr Basu has then read the interpretation part as discussed by the Apex Court in the context of "Special Laws vs Special Laws". Paragraph 40 of the judgment is extracted herein under:
40 Alternatively, the Companies Act, 1956 and the RDB Act can both be treated as special laws, and the principle that when there are two special laws, the latter will normally prevail over the former if there is a provision in the latter special Act giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely, section 34. A similar situation arose in Maharashtra Tubes Ltd. Vs. State Industrial and Investment Corporation of India (1993(2) SCC 144) where there was inconsistency between two special laws, the Finance Corporation Act, 1951 and the Sick Industries Companies (Special Provisions) Act, 1985. The latter contained Section 32 which gave overriding effect to its provisions and was held to prevail over the former. It was pointed out by Ahmadi, J. that both special statutes contained non-obstante clauses but that the "1985 Act being a subsequent enactment, the non-obstante clause therein would ordinarily prevail over the non-obstante clause in Section 46-B of the 1951 Act unless it is found that the 1985 Act is a general statute and the 1951 statute is a special one".
Therefore, in view of section 34 of the RDB Act, the said Act overrides the Companies Act, to the extent there is anything inconsistent between the Acts.
Page 75 of 84
37. Undoubtedly, with the enunciation of law indicated above, the order passed by the Debt Recovery Tribunal in the present case on 16.07.2001 directing the insurance company to pay the indemnified amount to the Bank therefore attains finality. Neither the official liquidator can claim any immunity from the law and therefore, the entire argument of Mr Mahapatra for the official liquidator also stands answered in the same terms, as the order passed by the tribunal will bind the Insurance Company. The RDB Act 1993 have an over-riding effect over all other Acts. Apart from this, the principles of res judicata, the binding effect as well as the finality of orders also comes into play and the insurance company cannot shield its liability on the pretext of an argument that the indemnified amount should be paid to the official liquidator. This argument is clearly in teeth of what has been indicated above, hence, the contention of the learned counsel for the insurance company as well as the learned counsel for the official liquidator are both unacceptable.
38. We may point out that Mr Basu has also rightly relied on the same judgment where the presence of the agreed Bank clause in an insurance policy, the Bank becomes entitled to the payment as it relates to the interest of other parties. The agreed bank clause coupled with the directions of the Debt Recovery Tribunal as noted above makes the bank a beneficiary of the services of indemnity offered under the contract of insurance and, therefore, would stand included in the definition of the word 'consumer' as defined under Section 2 (d) (ii) read with Section (O) of the Consumer Protection Act, 1986, as would be applicable in the Page 76 of 84 present case that was instituted under the said act. Apart from the fact that the Bank had been remitting the insurance premium, it is also evident that the insurance coverage was extended through a pre- inspection of the premises. Consequently, in other terms, the Bank also has an insurable interest in the reported loss.
39. Consequently, for all the aforesaid reasons above, the complainant Bank is a 'consumer' as defined under the Act and is therefore, the complainant under Section 2 (b) of the 1986 Act. The complaint clearly relates to the services of insurance the indemnity whereof was receivable by the Bank. It is for the said reason that this Commission passed an order on 13.09.2006 quoted herein above directing the payment of the amount assessed by the surveyor in his report dated 28.04.1999.
40. Coming to the merits of the contention the Insurance Company got an investigation conducted and the report of the investigator dated 14.06.2002 has been extracted herein above. This report nowhere finds any mention in the letter of repudiation dated 30.10.2003. We have been unable to gather as to why the report of the investigator M/s Om Nityanand Enterprises has not even been remotely referred to in the repudiation letter. There is no explanation to that effect. Even otherwise the law on this subject is well settled and has been rightly pointed out by Mr Basu that the stand of the Insurance Company cannot travel beyond the letter of repudiation. Reference, be had to the judgments in the case of National Insurance Company Ltd., vs Boghara Polyfabes Pvt. Page 77 of 84 Ltd., in Civil Appeal no. 5733 of 2009 (Arising out of SLP (c) no.12056 of 2007) decided on 18.09.2008 and other judgments and the latest pronouncement of the Apex Court in the case of New India Assurance Co. Ltd., vs Mudit Roadways in Civil Appeal no. 339 of 2023 decided on 24.11.2023.
41. What is more revealing is that the repudiation letter on the one hand nowhere refers to the report of the investigator dated 14.06.2002. Yet, it has treated the claim of the complainant as "no claim". We may point out that it was only the investigator who had recommended that the claim was allegedly fraudulent. On the other hand, what we find that the letter of repudiation mentions the preliminary survey report after inspection on 07.10.1994 and 08.10.1994. It may be pointed out that the incident of fire had occurred on 28.09.1994 and after the visit by the surveyor the estimate of loss had been requested for from the complainant. The preliminary surveyor's report dated 29.10.1994 was tendered estimating a preliminary loss of Rs.82 lakh. These facts are available from the report of the final surveyor dated 28.04.1999 which has been extracted herein above. The repudiation letter refers to only the final surveyor's communication namely, that of M/s Bhatawadekar, and the dates of correspondence recited in the letter of repudiation also indicate the communication of M/s Bhatawadekar and the complainant. It is thus evident that the repudiation is only based on the final survey report dated 28.04.1999 and any communication prior to that, and not on Page 78 of 84 the report of the investigator dated 14.06.2002 which seems to have been case aside and given up.
42. The investigator M/s Om Nithyanand came to be appointed later on who tendered his report on 14.06.2002 which nowhere finds mention in the letter of repudiation dated 30.10.2003. It is surprising to note that the investigator has gone to the extent of labelling M/s Bhatawadekar as having colluded with the complainant.
43. We find the observations of the investigator to be strange and unworthy of any credit is as much as coming to the incident of fire itself had occurred on 28.09.1994, the surveyor in his final report has categorically mentioned that the cause of loss was traced to a short circuit in one of the motors. The said conclusion has been recorded under the heading 'cause of loss'. The Insurance Company has been unable to dislodge the same and we may once again point out that the letter of repudiation dated 30.10.2003 refers to the said loss. Not only this it also mentions that a spot survey was conducted by M/s Manmall Kasliwal and Sons who tendered a report dated 05.10.1994, where after the main surveyor was appointed namely M/s Bhatawadekar who tendered their preliminary survey report on 29.10.1994 and then the final survey report dated 28.04.1999. Nowhere has the incident of fire been doubted by the insurance company. The observations made by the investigator was therefore, practically tailored in his report dated 14.06.2002 and Page 79 of 84 therefore, in our opinion has rightly not been relied on by the insurance company to repudiate the claim.
44. The recital contained in the letter of repudiation of condition no. 6 (11) of the fire policy is totally misplaced in as much as the surveyor has in his report dated 28.04.1999 indicated the submission of the preliminary survey report with an estimated loss of Rs.80 lakhs and after various visits the complainant had been called upon for giving his concurrence. It has been recorded that after one year the complainants under a covering letter tendered a technical report from one Mirchandni, a Consultant raising a claim of Rs.4,67,78,557/-. It has been noted by the surveyor that Mr Mirchandni was also a technical appraiser appointed by BIFR for looking into recasting/ revamping of insured's operation. The surveyor has said that the opinion submitted by the Consultant could not be taken lightly or rejected but scrutinsed the said reported items wise in respect of loss building/ plant and machinery and has also indicated that finally a meeting was arranged on 03.12.1998 when certain discussions took place and differences were sorted out. The discussions were protracted, nonetheless, all the documents pertaining to the claim of damage and the assessment were discussed along with the quotations and the expenses incurred by the insured which has been referred to categorically in paragraph 4 of the 5th page of the report of the surveyor extracted herein above. We have pointed this out for the reason that one of the main concerns expressed by the Insurance Company in the letter of repudiation is that the complainant had deliberately not parted with the relevant Page 80 of 84 information regarding the factory being under BIFR. The factory was already under BIFR when the insurance was taken and it was after pre- inspection only then the insurance coverage was extended, and this fact of BIFR proceeding has been noted by the surveyor. Therefore, to say that there was any suppression of information is without any justification. The duration of the policy was from 12.01.1994 to 11.01.1995. It was the status of the factory as existing on that day that has been categorically mentioned in the insurance policy. Thus to say that there was any suppression of either any information or non-supply of document, does not seem to be justified at all.
45. Mr De, however, has urged that the entire claim was exaggerated and there were variations made by the complainant himself asking for different amount at different stage and in such circumstances the claim was certainly based on a complete in correct information being tendered to the insurance company.
46. From the report of the surveyor dated 28.04.1999, we find, that the surveyor has indicated that the insured had presented their claim for an amount of Rs.4,67,78,557/- and had after obtaining a technical assessment report, revised to Rs.5,30,18,617/- and after scrutinizing the same the assessment was worked out and was assessed to the tune of Rs.3,30,42,798/-.
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47. The sum insured was Rs.1,99,00,000/-. The market value of the loss had been computed by the surveyor to the tune of Rs.4.25 crores and as such under insurance was applied.
48. We may point out that the total loss assessed after deduction of salvage was Rs.2,33,23,280/- . With this loss assessment as compared to the computed market value of Rs.4.25 lakh an under insurance of Rs.46.82% was applied and the payable amount was computed at Rs.1,09,19,960/- in respect of the loss of machinery. On the claim for loss of building after making an assessment the payable amount was assessed at Rs.82,267/-. Consequently, after adding the amount the net claim payable was calculated at Rs.1,09,92,227/-. We may once again point out that it is the said amount which has been disbursed to the complainant under the interim orders of this Commission dated 13.09.2006.
49. Mr Basu urged that there is no justification for applying under insurance but at the same time, we have to take into account that the sum insured was Rs.1,99,00,000/- for the plant and machinery and the building for Rs.18 lakh whereas the market value of the losses was pegged at Rs.4.25 crores.
50. An under insurance can be applied provided the ingredients thereof are available. In the instant case the surveyor in his report has computed a market value at Rs.4.25 lakhs and is based on a calculation that have been appended along with the survey report, we have not been able to find out any error in the said calculation in the background of the total Page 82 of 84 sum insured in the policy. The estimated preliminary loss was of only Rs.82 lakh, the calculation made by the Consultant of the complainant Mr Mirchandani has also been analyzed by the surveyor and it is, thereafter, the total loss was assessed at Rs.2,33,23,280/-. The question is of the under insurance having been applied by the surveyor.
51. In our opinion, as indicated above, the percentage of under insurance is applied in ratio of the total loss assessed as compared to the market value of the lost goods. No error could be pointed out so as to compute a different percentage and therefore, in our opinion, the under insurance seems to have been rightly applied. With the aforesaid calculations, the payable amount calculated at Rs.1,09,92,227/- seems to be justified.
52. We, therefore, allow this complaint to the said extent, holding the insurance company to be deficient by repudiating the claim on an incorrect ground. It is already on record that an amount of Rs.1,10,00,000/- together with interest has been disbursed on 13.09.2006. The said disbursal had been challenged before the Apex Court by the Insurance Company but the same was permitted, subject to the outcome of the present complaint. It is also intimated that the Insurance Company has already paid the amount which has been received by the Bank. We therefore, find the said disbursal to have satisfied the decree in terms of the order passed by us today and, hence, no further Page 83 of 84 amount remains payable. The complaint is accordingly allowed on the above terms.
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[ A P SAHI, J ] PRESIDENT ............................................ [ BHARATKUMAR PANDYA ] MEMBER satish Page 84 of 84