National Consumer Disputes Redressal
The National Insurance Company Ltd. vs M/S Hari Om Marketing on 1 November, 2011
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI First Appeal No. 216 of 2009 (From the order dated 19.03.2009 in Complaint Case No. 06 of 2005 of the Gujarat State Consumer Disputes Redressal Commission, Ahmedabad) The National Insurance Company Ltd., Appellant Regional Office 1 124 Cannaught Circus New Delhi versus M/s Hari Om Marketing Respondent A proprietorship Concern Represented by Proprietor Shri Jitendera B Gehlot C/1/284, Phase No. 1 Near Neelkanth Mahadev GIDC Naroda Ahmedabad First Appeal No. 431 of 2009 (From the order dated 19.03.2009 in Complaint Case No. 06 of 2005 of the Gujarat State Consumer Disputes Redressal Commission, Ahmedabad) M/s Hari Om Marketing Appellant A proprietorship Concern Represented by Proprietor Shri Jitendera B Gehlot C/1/284, Phase No. 1 Near Neelkanth Mahadev GIDC Naroda Ahmedabad versus 1. The National Insurance Company Ltd., Respondents Division V (301800) 2nd Floor Jaswant Chamber Laldarwaja Ahmedabad 380 001 2. The Chief Officer (Authorized Officer) UCO Bank UCO Bhavan Nr Sanyas Ashram Ashram Road Ahmedabad 380 009 BEFORE HONBLE JUSTICE MR. R C JAIN PRESIDING MEMBER HONBLE MR SURESH CHANDRA MEMBER For the Insurance Company Mr. Abhishek Kumar, Advocate For Hari Om Marketing Mr H N Dave, Advocate For UCO Bank Mr Sarfaraz Khan, Advocate PRONOUNCED ON 1st November, 2011 ORDER
PER SURESH CHANDRA, MEMBER Feeling aggrieved by the order dated 19.03.2009 passed by the State Commission, OP No. 1, i.e. the National Insurance Company Ltd., has filed the present appeal no. 216 of 2009 impugning the same. The Complainant i.e. M/s Hari Om Marketing, Ahmedabad has also filed a cross appeal no. 431 of 2009 against OP No. 1 as well as OP No. 2 i.e. the UCO Bank, Ahmedabad. For the sake of convenience, the parties in this case are being referred to by their nomenclature in FA No. 216 of 2009 except OP No. 2 Bank, which is referred to as OP No. 2. By its impugned order passed in complaint No. 6 of 2005 filed by the Respondent/ Complainant, the Consumer Disputes Redressal Commission, Gujarat State, Ahmedabad (in short the State Commission) has directed as under:
Complaint is partly allowed.
Opponent No.1 shall pay Rs.5,13,412/- with interest @ 9% per annum from the date of repudiation letter and also pay Rs.5000/- towards cost, mental agony etc., to the complainant. Complaint against opponent No. 2 is dismissed.
2. The Respondent who is a proprietor of a partnership concern namely Hari Om Marketing with its head office at C/1/284 GIDC, Naroda, Ahmedabad, is a dealer trading in wheat, wheat products, maida, cattle feeds etc. He secured financial assistance from OP 2 Bank through cash credit facility to the tune of Rs.65 lakh around July 2002 under Account No. CC 82489. The said cash credit facility was sanctioned by the OP Bank and was fully secured by way of hypothecation of goods lying in the godown as well as at the Registered office of the Respondent. As per the policy of the OP Bank, insurance cover was obtained on behalf of the Respondent firm from the Appellant Insurance Company and all formalities were completed duly by the OP Bank and premium was paid to the Appellant Insurance Company. The godown of the Respondent was situated at GIDC, Naroda, Ahemdabad, but later on the Respondent drew the attention of the OP Bank that the Respondent firm was also storing its hypothecated goods in the godown situated at Neelkanth godown at Gandhidham. In view of this OP 2 Bank informed the Appellant Insurance Company (OP No.1) about it and an endorsement to this effect was got incorporated in the insurance policy from the Appellant Insurance Company vide endorsement dated 27.05.2004, the policy period being from 02.04.2004 to midnight of 01.04.2005. The Respondent firm had stocks in the godown at Gandhidham for about Rs.37,25,000/-. The fire in question took place on 03.06.2004 and the goods lying at the godown at Gandhidham got damaged badly and turned into ash. The Insurance Company was accordingly informed about the incident of fire and the loss caused on account of this. The claim was registered by FAX message dated 09.06.2004 and the Respondent also filed a police complaint at the Gandhidham Police Station. The Respondent firm made a claim with the Appellant Insurance Company for Rs.45 lakh. The Appellant Insurance Company appointed M/s Kirj Consultants to whom necessary information and papers were furnished in regard to the incident of fire and the claim. Later on M/s G P Dave and Sons, Marine Technologist, Fire Marine, Engineering Assessors were appointed by the Appellant Insurance Company to investigate and submit the report for the loss caused to the Respondent. After scrutinizing the papers furnished, Respondent carried out laboratory testing of the damaged wheat, a report of salvage was sent by the investigators to M/s Kirj Consultants vide letter dated 06.10.2004. In spite of furnishing what ever information was called for by the surveyor and the loss assessors, the Appellant Insurance Company came to the conclusion vide letter date 24.12.2004 that claim lodged by the Respondent firm cannot be entertained for the reasons that the damage has occurred in open compound while risk under the policy is of closed godown and also there is no coverage for the spontaneous combustion under the policy and since the spontaneous combustion has happened which has resulted into charring so there was no actual ignition resulting into fire and therefore, the claim and liability was totally repudiated.
3. OP Bank also issued notice on 08.10.2004 under the provisions of Section 13 (2) of the Securitisation Act, to which a reply was sent by the Respondent/ complainant and OP Bank did not take serious note of the contention raised by the Respondent/ complainant in the reply. This lead to filing of a Consumer Complaint No. 6 of 2005 by the Respondent firm before the State Commission against both the Insurance Company and the Bank claiming an amount of Rs.41,05,773/- with interest. The claim of the complainant against OP Bank was on the ground of negligence in obtaining insurance cover and pursuing the matter with the Appellant Insurance Company as per the policy requirement. Various documents were filed by the Respondent firm before the State Commission in support of their claim which was resisted by OP Insurance Company. It was submitted on behalf of the Insurance Company that endorsement in the policy does not show that the stocks lying in the Neelkanth godown in Gandhidham is covered for spontaneous combustion. Policy was issued for the covered godown and the premium was also paid accordingly, but the complainant had failed to give address of the Neelkanth Godown while making application for endorsement in the policy. In the circumstances, the Insurance Company had presumed that Neelkanth godown is in Ahmedabad because the place of godown was not mentioned in the application dated 27.04.2004. OP Bank in its affidavit pleaded that since the complainant had committed breach of the condition, recovery proceedings were initiated by the Bank and hence, the complaint against the OP Bank was with malafide intentions. It was further pleaded that the Bank is not liable for getting the claim approved and the complainant is liable to pay the outstanding dues under the credit facilities granted to him by the Bank.
4. Based on the documents filed and the averments made by the parties before it, the impugned order in question came to be passed by the State Commission. Vide its order, the State Commission has held that the Respondent/ complainant had approached both the OP Bank as well as the OP 1 Insurance Company for making necessary endorsement in the insurance policy, by which necessary changes were made by the Appellant Insurance Company by insuring goods lying in the godown at GIDC Naroda, Ahemedabad upto 12 lakh and Neelkanth godown upto Rs.38 lakh. Endorsement is effective from 27.05.2004 by which the stocks worth Rs.38 lakh lying in the Neelkanth godown is covered in the policy. It is observed by the State Commission that even though the name and address of the additional godown were not shown in the letter of the OP Bank, endorsement in the policy was made by OP Insurance company in view of the letter written by the Respondent firm to the OP Bank as well as the OP Insurance Company. Both the investigators as well as the surveyors in their reports have not stated any-where that Neelkanth godown situated at Gandhidham is not covered under the policy. For these reasons, the State Commission has held that OP Insurance Company cannot be allowed to say that Neelkanth godown situated at Gandhidham Kutch is not covered under the policy. As regards the plea of damage by Spontaneous Combustion, the State Commission has observed that the classification of the goods in the policy was solids which are moderately or slightly combustible and the rate applicable are given in the policy itself and hence, the contract between the parties covers damages because of combustion. As regards rates to be charged, it was open for the Insurance Company to charge premium according to the terms and conditions of the policy and charging less or higher premium will not affect the terms and conditions of the policy. The State Commission by its well-reasoned order has upheld the damage of the goods belonging to the complainants firm being covered by the policy but only partly accepted the claim to the extent of Rs.5,12,412/- with interest @ 9% per annum from the date of repudiation along with Rs.5000/- towards cost to the complainant. The State Commission dismissed the compliant against the OP Bank.
5. We have heard the learned Counsel for the Appellant and the Respondent no.1. None has appeared for OP Bank which has been included as Respondent in the cross - appeal filed by the Complainant firm for enhancement of compensation amount. It has been reiterated on behalf of the Appellant Insurance Company that neither the goods lying at the Neelkanth godown, which is an open space, are covered by the policy, nor the damage of goods through combustion are covered as per the terms of the policy. The contention of the learned Counsel for the Appellant Company is that the policy was issued for the covered godown and the premium was paid accordingly and since the Respondent failed to give address of the Neelkanth godown while making application for the endorsement in the policy, it was presumed that Neelkanth godown is in Ahmedabad. It was submitted that in case the address had been indicated as Gandhidham - Kutch, which is an earthquake zone the Insurance Company might have called for additional premium to cover the risk of earthquake. The Respondent complainant suppressed the material fact with regard to the location of Neelkanth godown and thereby a fraud was practiced by the firm while getting the endorsement for the Neelkanth godown. In the circumstances, the Insurance Company cannot be saddled with the liability. It has also been argued that the complainant failed to take the insurance cover for Neelkanth godown, Gandhidham initially but included through an endorsement much later, which smacks of malafide intention. Besides this, it was also argued on behalf of the Appellant company that the terms and conditions in the Insurance Policy mentioned only slight combustion which cannot be taken to include damage by spontaneous combustion.
6. Learned Counsel for the Appellant Company has placed reliance on the ratio laid down by the Apex Court in the case of Oriental Insurance Co. Ltd., vs Munimahesh Patel (2006) 7 SCC 655 and P C Chacko and Ors vs Chairman, Life Insurance Corporation of India and Ors. (2008) 1 SCC 321.
7. On the other hand, the learned Counsel for the Respondent firm has submitted that both the aspects regarding coverage of Neelkanth godown as well as damage through combustion have been dealt with in great detail in the impugned order passed by the State Commission. However, taking into consideration the fact that the Respondents firm had suffered heavy loss on account of this incident of fire, the amount of compensation awarded by the State Commission was woefully inadequate and required suitable enhancement. Learned Counsel has vehemently denied that there was any suppression of material fact by the Respondent firm in regard to the endorsement of Neelkanth godown in the policy. He has further submitted that in the absence of any suppression being found on the part of the insured, the ratio laid down by the Apex Court in the case relied upon by the learned Counsel for the Appellant Company would not be applicable and hence, the plea taken by the Appellant Company needs to be rejected.
8. Having carefully considered the submissions made before us and after perusing the documents placed on record, we find that there is no doubt regarding inclusion of Neelkanth godown in the insurance policy through the endorsement done by the Appellant insurance company. It is to be noted that the Insurance Company while endorsing the value of the stocks to be covered at the two godowns respectively at GIDC Naroda and Neelkanth godown, has specifically mentioned that the endorsement in question is being carried out as per the application received from the insured firm. It has also not been claimed any where by the Insurance Company that in the letter of the insured firm the address of Neelkanth godown has not been mentioned. In view of this, we do not accept the allegation of the Insurance Company regarding any suppression of material fact in regard to the address of Neelkanth godown by the insured firm. In fact, the peculiar facts and circumstances of this case do indicate that there was sort of an omission on the part of the appellant Insurance Companys officials in not taking note of the address of the Neelkanth godown which was mentioned by the respondent/complainant in its letter requesting for inclusion of Neelkanth godown in the policy. It is not in dispute that even though this letter was addressed to the OP Bank but a copy thereof was endorsed to the Insurance Co. The officials of the appellant Co. not only endorsed and included the Neelkanth godown on the policy but also took notice of the valuation of the stocks kept in that godown through their endorsement. However, they omitted to take notice of the address of Neelkanth godown already available in the letter of the respondent. They also did not make any effort, as would normally be expected in such situations, to ascertain the specific address and location of the Neelkanth godown which came to be covered through the endorsement in question. Having failed to do so, the plea of presuming that Neelkanth godown is in Ahmedabad only now being taken by the appellant Insurance Co. cannot be accepted. In this context, our attention has been drawn to the order dated 9.12.2009 of this Commission passed in the Oriental Insurance Co. Ltd. & Anr. Vs. M/s P.R. Automobiles and Oil & Anr. (F.A. No.278 of 2004) by which the appeal of the Insurance Co. was allowed and the impugned order of the State Commission accepting the claim of the complainant was set aside. It has been argued that applying the ratio of that order, since the address of the Neelkanth godown is not endorsed on the policy, the claim of the respondent herein in respect of the loss occurred at the Neelkanth godown is liable to be rejected. We have gone through the order of this Commission but the facts and circumstances of the present case are entirely different inasmuch as in that case in spite of the claim of the complainant regarding endorsement about the change of address, the Insurance Co. asserted that the intimation regarding shifting of the premises had been received by it after the occurrence of the incident and since there was no endorsement on the policy in this regard, the plea taken by the Insurance Co. was accepted by this Commission while setting aside the order of the State Commission. On the other hand, in the present case, the request about the endorsement of Neelkanth godown was not only received by the Insurance Co. but the endorsement had actually been made on the policy before the incident of fire along with valuation of the stock covered but while doing so, the Insurance Co. failed to take note of the address of the godown notified by the respondent/complainant. In view of this, the ratio of M/s P.R. Automobiles and Oils case (supra) shall not be applicable to the facts and circumstances of the present case.
9. So far as submission regarding Neelkanth godown being an open space, hence, not being covered by the policy and it being charged under the covered godown rates is concerned, it is seen that the insured firm has described it as godown. It was open for the Insurance Company to have inspected the place being proposed for inclusion in the policy by way of endorsement before it was carried out. On its part, the complainant firm cannot be said to have suppressed any material fact in this regard simply because it did not mention that it was an open godown. It may be relevant to observe that the word godown in common parlance unless a different meaning is indicated specifically, does not exclude open godown. That different rates may be chargeable for open godown for goods stored in open space as compared to those stored in covered godown is entirely a different issue. Therefore, simply mentioning the word godown would not tantamount to suppression of material fact as understood in the common parlance.
10. We also agree with the finding of the State Commission in regard to the fact that the classification of goods contained in the Policy Cover taken by the complainant does indicate coverage of stocks that are moderately or slightly combustible because of the specific words contained in the policy in question. It was for the Insurance Company to charge premium according to the terms and conditions of the policy and general exclusion clause contained in the standard fire and special peril policy cannot be made applicable in the present case, in contravention of what is specifically agreed to between the parties and contained in the present policy cover. Besides this, it may also be interesting to go through the exclusion clause referred to and relied upon by the appellants company for repudiating the claim under that clause. The relevant clause is contained in para 1 of the standard terms and conditions and the same is reproduced below:-
Fire Excluding destruction or damage caused to the property insured by
a) (i) its own fermentation, natural heating or spontaneous combustion.
(ii) its undergoing any heating or drying process.
b) burning of property insured by order of any Public Authority.
11. It would emerge from a careful reading of the aforesaid para that while the damage/loss on account of fire is allowed, the destruction or damage caused to the property insured by its own fermentation, natural heating or spontaneous combustion is excluded by this general clause. It is thus clear from the words used in the para that only destruction or damage caused by own fermentation, natural hearing or spontaneous combustion is excluded. In other words, as long as there is outbreak of fire and there is loss/damage to the property insured, it shall be covered irrespective of the reason leading to such fire because fire by itself is not excluded. In this view of the matter, we find that the general exclusion clause relied upon by the insurance co. shall not apply to the present case. It may be relevant to mention here that there are goods and commodities where the possibility of such loss/damage cannot be ruled out such as molasses, oilseeds, etc. where there can be damage or destruction by its own fermentation, natural heating or spontaneous combustion without outbreak of fire. In such cases, the exclusion clause can be made applicable if the damage/destruction has taken place on account of acts named in the clause but without outbreak of fire. It is, therefore, not uncommon to see that depending on the nature of goods/commodities, the companies do take policy which specifically cover not only fire but destruction or damage caused on account of own fermentation, natural heating or spontaneous combustion as well. In the present case, it is important to note that while there is an indication regarding the covered stocks being moderately or slightly combustible, the exact cause of fire is not known. In this context, the following observations made by the surveyor, G.P. Dave and Sons in their report dated 30.9.2004 are quite relevant:-
Cause of loss The exact cause of fire could not be established. The cargo of water damaged wheat is not that in-flammable in nature that any external media viz. carelessly thrown burning matchstick, bidi, cigarette or spark from labourers stove (chulha) nearby could set it on fire. Thus, cause of fire could be attributed to spontaneous combustion (self ignition) of the cargo owing to the heat generated within heaps of water damaged wheat by metabolism and growth of microbes and insects.
(Emphasis provided by us) It is also to be noted that the cargo of organic (manure-based) fertilizer was lying in the same plot. The same upon decomposition may evolve gases which are inflammable and the same might be the cause of out break of fire. However, how did the fire spread to the cargo of what and why was the cargo of wheat lying on tope of the heap of manure and partly admixed with it still remains unexplained.
12. In view of the above, it is clear and established beyond doubt that there was outbreak of fire but its cause could not be established. This being the position, even if the applicability of the general exclusion clause as pleaded by the counsel for the appellant Co. is considered, two things will have to be established beyond doubt to repudiate the claim of the complainant on this ground. Firstly, it will have to be established that the damage was caused by spontaneous combustion and secondly, it will also have to be established that the entire damage was on account of that spontaneous combustion alone and not because of the moderately or slightly combustible nature of the goods covered which might have contributed to the outbreak of fire. Since none of the two aspects are established beyond doubt by the surveyors report, we cannot accept the arguments of the appellants counsel to support the repudiation of the claim. Mere suspicion or doubt cannot take the place of proof.
13. In view of what has been stated above, we are of the considered view that there was outbreak of fire and the loss which took place to the goods belonging to the Respondent firm at the Neelkanth godown in that fire was duly covered by the Insurance policy with effect from the date of endorsement. So far as the extent of damage is concerned we find that the assessment done by the surveyor and accepted by the State Commission in its impugned order is reasonable and fair. We have gone through the reports of the surveyor namely M/s Kirj Consultants and M/s G P Dave and sons and we find that the same have been prepared after careful scrutiny of the documents produced by the parties and position obtaining on the spot. No evidence has been produced before us by the Respondent which would justify our interference with the findings of the State Commission in this regard. Under the circumstances, the impugned order of the State Commission is upheld and the two appeals filed by the original complainant and OP No.1 Insurance Company are hereby dismissed with no order as to cost.
[ R C Jain,.J ] Presiding Member .
[ Suresh Chandra ] Member satish