State Consumer Disputes Redressal Commission
M/S.Jayshree Industries, Jaipur vs National Insurance Co. Ltd. & Ors. on 27 August, 2012
BEFORE THE STATE CONSUMER DISPUTES REDRESSAL COMMISSION, RAJASTHAN, JAIPUR COMPLAINT CASE NO: 20/2008 M/s. Jaishree Industries through Prop.Maya Devi Chotiya r/o Plot No. 409-A, Ekta Path, Vidyut Nagar, Ajmer Road, Jaipur ( Raj.) ..........Complainant Vs. 1. National Insurance Company Ltd. Head office-3, Middleton Street, Kolkatta through General Manager. 2. The Br. Manager , VI, H-1/H-2 V.K.Complex , Near Laxmi Mandir Cinema Sahkar Marg, Jaipur. 3. State Bank of Bikaner & Jaipur through its Br.Manager, Sudarshan Pura, Industrial Area 22 Godam, Jaipur ( Raj.) ....Non-petitioners Date of order 27.08.2012 Before: Hon'ble Mr.Justice Ashok Parihar- President Mr.Anil Kumar Mishra- Member
Mrs.Sunita Ranka-Member Mr.M.L.Vyas.............Counsel for the complainant Mr.Vizzy Agarwal.......Counsel for non-petitioner no. 1 & 2 Mr.Alok Garg..........Counsel for non-petitioner no.3 2 BY THE STATE COMMISSION
1. The present complaint has been filed by the complainant u/s 17 of the Consumer Protection Act,1986 for damages to the extent of Rs. 45 lacs for the loss of its goods and stock consequent to fire which took place in its premises.
2. The brief facts pertaining to the present complaint are that the complainant firm M/s.Jaishree Industries ( hereinafter referred to as ' the complainant ' ) has been carrying its business on Plot no. 215, Sunder Nagar, Ajmer Road, Jaipur in the vicinity of Plot no. A-89, where M/s. Vaibhav Craft Pvt. Ltd. is located. The complainant's business has been financed since the year 2000 by the non-petitioner no.3 The State Bank of Bikaner and Jaipur ( hereinafter referred to as ' the bank ' ) . The bank has extended cash credit limit and over draft facility to the complainant against the hypothecation of its entire stock lying in the godown of the complainant. The bank is having a Bancassurance tie-up agreement with the non-petitioner no. 1 & 2 , the National Insurance Company ( hereinafter referred to as ' the Insurance Company' ) under which the bank got the goods and stock of the complainant insured since the year 2000. The proposal forms for taking the insurance were prepared and signed by the bank on behalf of the complainant and the premium was deducted from the cash credit account of the complainant firm. The complainant got two Standard Fire and Special Peril Policies for an amount of Rs. 2o lacs and Rs. 25 lacs respectively. The first policy was for a period from 27.12.2005 to 26.12.2006 and the second policy was for a period from 21.03.2006 to 20.03.2007. A fire broke out at around 0030 to 0045 a.m on the intervening night of 30.09.2006 and 1.10.2006 in the godown of the complainant, which engulfed 3 the entire stock. The fire was so intense that it could be controlled at around 8 a.m. on 01.10.2006 with the help of 16 fire brigades. The entire stock of the complainant firm was burnt and converted into coal. M/s. S.K.Bakliwal & Co., the surveyor determined the loss to the extent of Rs. 50,84,709/- but after deducting 12.5% VAT , the damage was brought down to Rs. 40,99,272/- and again after deducting some other amounts, the claim was put down to Rs. 31,69.722/-. The complainant submitted its claim for the loss and damages and sent many reminders to the Insurance Company but no action was taken for 17 months and ultimately the Insurance Company vide its letter dated 04.02.2008 repudiated the claim of the complainant on the ground that the subject matter and the premises of the complainant were not covered under the policy. The bank officials inspected and verified the stock physically every month and the bank worked as an agent of the Insurance Company in getting the stock insured for the complainant. The Insurance Company repudiated the claim on techenical ground that the address of the complainant firm was given by the bank as 89- A, Sunder Nagar, Ajmer Road, whereas the stock was in fact lying at Plot no. 215, Sunder Nagar, Ajmer Road, which is in the vicinity of Plot no.A-89 . The proposal forms were filled up and signed by the bank officers after physically inspecting and verifying the stock. The officers of the Insurance Company were also liable to inspect and verify the stock of the complainant before issuing the policies and hence the claim of the complainant cannot be repudiated on technical ground that the stock and premises, where the fire took place, was not insured. Therefore, the complaint be allowed.
3. The non-petitioner no. 1 & 2, the Insurance Company denied the allegations made in the complaint and submitted that 4 the complainant firm was not carrying its business since the beginning at Plot no. 215 and the place of business of the complainant had been given out to be at Plot no.A- 89 , Sunder Nagar, Ajmer Road, Jaipur and at no point of time before the occurance of the fire on 01.10.2006 the place of business of the complainant had been stated to be anything other than A- 89 , Sunder Nagar,Ajmer Road. In the proposal forms and in the insurance policies since the very beginning, the complainant had given its address and place of business as Plot no.A- 89 and it never informed either the bank or the Insurance Company about change of place of business from Plot No. A-89 to Plot no. 215. From the very beginning, the complainant had been dealing in with the manufacturing of wooden furniture but it changed its business from manufacturing to the trading of wood, plywood and leminates, etc. but this fact was also not brought in notice of the Insurance Company till date. The place of business of the complainant in its registration certificate, in electric connection, in income tax returns, audit reports, CST and VAT returns has consistently be shown to be as Plot no. A- 89 and not Plot no. 215, where the fire took place. The place of fire and the stock which was kept at Plot no. 215 has not been covered by the insurance policies and hence the claim of the complainant has rightly been repudiated by the Insurance Company. Therefore, the complaint be dismissed.
4. Non-petitioner no.3, the bank also supported the reply submitted by the Insurance Company and stated that in all the policies and all other documents of the complainant, the place of business and the stock has been shown to be at Plot no. A- 89,Sunder Nagar, Ajmer Road and not at Plot no. 215. The complainant never brought in notice of the bank about change of 5 place of its business and the policies continued to show the address as Plot no.A- 89 as place of business of the complainant. There is no privity of contract between the bank and the Insurance Company though the bank submitted the proposal forms on behalf of the complainant before the Insurance Company and got the insurance policies. The bank also deducted the premium from the account of the complainant. The stock in premises at Plot no. 215 was not insured but the stock at Plot no. A- 89 was insured. The bank is not liable to pay any amount to the complainant as the bank is not at fault in any way. Hence, the complaint be dismissed.
5. We have heard the arguments of both the parties and carefully perused the entire record, affidavits and interrogatories and their replies submitted by both the parties.
6. It is an admitted position that the complainant firm had started its business of manufacturing of wooden furniture in the year 2000 at the address A-89 Sunder Nagar,Ajmer Road, Jaipur and shifted its business in the year 2001 at Plot no. 215 Sunder Nagar, across the road. The complainant firm was given a cash credit limit by the bank, which was increased from time to time. The complainant firm also got two insurance policies i.e. Ex.2 for Rs. 20 lacs for a period 27.12.05 to 26.12.06 and Ex. 3 for Rs. 25 lacs for a period 21.03.06 to 20.03.07 through the bank under Bancassurance tie-up agreement with the Insurance Company. It is also an admitted position that a fire broke out on the mid night of 30.09.2006 and 01.10.2006 and the entire stock of the complainant firm at Plot no. 215 was gutted in fire. The complainant informed the Insurance Company in the early hours of 01.10.2006 and eight fire brigades were deployed in extinction of the fire. S.K.Bakliwal & Co., a Chartered Accountant Firm 6 was appointed as surveyor which submitted its report Ex. 6 dated 02.5.07 and initially assessed the loss at Rs. 40,99,272/-, but brought it down to Rs. 31,69.722/- after deductions on various counts, but the Insurance Company vide its letter Ex. 12 dated 04.02.2008 repudiated the claim of the complainant on the ground that " the premises and the subject matter of the fire are not covered under the within mentioned policies". After serving the legal notice Ex. 15 dated 19.08.08 the complainant filed the present complaint.
7. The main contention of the non-petitioners is that the place where the fire took place i.e. Plot no. 215 was not covered under the policies and hence the claim was rightly repudiated. In this regard, it is an admitted position that the proposal forms for the aforesaid two policies were filled in by the bank on behalf of the complainant and it got the policies from the Insurance Company. Since the year 2000, the address of the complainant firm in the proposal form and the policies were mentioned as " A-89" but it is alleged by the complainant that it shifted its business in the year 2001 from A-89 to Plot no. 215 and it was the duty of the bank to get the address changed in the insurance policies. From the proposal forms Ex. 4 R-37 and R-50, it is evident that the proposal forms, on behalf of the complainant, were filled in and signed by the bank. The proposal forms show that storage of stock outside the industrial risk was also covered. The column pertaining to this effect bears an endorsement of " yes". Ex. R-41, a letter dated 18.02.05 from the Zonal office of the bank to the Branch Manager also shows that under the head " 2 "
Position of storage, possession and charge" the stock stored in the showroom, shop, factory shed and godown of the unit and the banks' charge was covered under the risk of the policy and under 7 the head " 8 ' Insurance - all hypothicated stock with the bank were insured for full value against all the prescribed risks. So te entire stock of the complainant wherever it was lying, ws covered under the insurance policies. Therefore, the contention of the non-petitioners that the stock of the complainant firm lying at Plot no.215, where the fire took place ,was not covered under the policy, does not sound good.
8. It is pertinent to mention here that the bank officers inspected the site and physically verified the stock every month and six times from 10.4.06 to 22.9.06, which is evident from Ex. R-42. When the stocks were physically verified and inspected by the bank, then it was the boundened duty of the bank to have mentioned in the proposal forms the place of stock of the complainant firm at Plot no. 215 instead of A-89. As the Bank got the insurance policies for the complainant under the Bancassurance tie-up agreement with the Insurance Company, and the Bank officers visited the site every month and got the stock physically verified at Plot No. 215, then it was the responsibility of the Bank to get the necessary rectification done in the address of the complainant firm in the policies. The complainant cannot be put to any loss on account of negligence, carelessness and laches of the Bank by way of repudiation of the complainant's claim solely on the technical ground that the place of incident i.e. Plot no. 215, where the fire took place, was not covered under the aforesaid policies, particularly when the entire stock of the complainant was insured. For the sake of arguments too, if it is assumed that address of the stock in the two aforesaid insurance policies was mentioned as "A- 89", even then from the proposal forms Ex.. 4 ( R-37 and R-50 ) and letter of the bank Ex. R-41 it 8 is clear that the entire stock which was stored in the showroom, shop, factory shed or godown of the complainant's unit was insured by the two insurance policies Ex. 2 & 3. When the bank officers inspected the site and physically verified the stock vide Ex. R-42 , they found that the complainant's unit was running satisfactorily with adequate stock. Thus, it cannot be said at any stretch of imagination that the stock of the complainant firm lying at Plot no. 215 was not covered by the insurance policies and repudiation of the claim solely on this ground that the premises in the subject matter of the fire was not covered under the above mentioned policies, is not at all justified.
9. From the audit report Ex. 5 of the complainant firm, it appears that on 31.3.06, the stock of the complainant's firm was worth Rs. 52,39,126/-. The surveyor appointed by the Insurance Company, submitted his elaborate report Ex. 6 on 02.05.07. The surveyor went to the place of incident at Plot no. 215 and not at Plot no. A-89 and did the evaluation of the loss at that place due to the fire . In response to the querries made by the surveyor from the bank, the bank vide its letter Ex. R-40 dated 19.4.07 admitted that it had financed the unit as a Small Saving Industry of the complainant on 01.03.2000 for manufacturing of wooden furniture. Initially, the complainant firm was manufacturing the wooden furniture but later on it started trading activities in Mica, plywood, plyboard and ACP sheets which too, were used in manufacturing of wooden furniture. The bank also opined that the manufacturing of wooden furniture and trading in Mica, plyboard and ACP sheets was of the same nature and the risk factor was almost same. The bank also got the policies renewed annually for the aforesaid activities. The bank further informed the surveyor in 9 the aforesaid letter that their intentions were clear to get the stock insured against the risk and the items were same as in the manufacturing. The bank admitted that the policy should have been got insured for trading activity also but it escaped their attention and the policies were renewed every year as they were issued initially. The bank also appreciated the functions of the complainant firm as satisfactory and the firm never sought over draft and used the cash credit limits judiciously. In the end, the bank requested the surveyor that the claim may be considered as the unit had suffered loss and the bank finance was under stake. The Bank also suggested that necessary corrections in the policies may please be made after claim, as it was a genuine case and Bank's tie up agreement was under cross selling with the Insurance Company. Thus, it is evident that bank admitted that they got the stock of the complainant firm insured for the place at Plot no. 215 where the fire took place.
10. From the measurement and the volume of the stocks, the surveyor in his report Ex. 6 estimated the value of the stock at Rs.40,99,271/- and after deducting 10% for dead stock, estimated the value of the damaged burnt stock to be Rs. 36,89,345/- and after deducting 12.5% VAT and other deductions for salvage and debris removal, he assessed the loss to the tune of Rs. 31,69,722/- and recommended for sanction of the aforesaid claim.
11. Despite the surveyor's report, the Branch Office of the Insurance Company vide its letter Ex.R-44 dated 27.6.07 recommended for repudiation of claim of the complainant on the basis that fire took place on Plot no. 215, where the address of the insured was given as Plot no. A-89 and that the complainant firm had changed the business form manufacturing of wooden furniture 10 to that of trading. But a joint note Ex. 25 (B) dated 20.07.07 of the Divisional Office of the Insurance Company considered the claim of the complainant firm as genuine one and recommended to settle the claim for Rs. 31,69,722/- after allowing the permission for rectifying the policies after claim by issuing post claim endorsement in respect of - (a) correction in subject matter of insurance and (b) correction in address of premises i.e. Plot no. 215 in place of Plot no. A-89 and A-89 (S) as mentioned in the policies. The joint note was prepared by the Sr. Branch Manager, Dy.Manager and Sr.Divisional Manager of the Insurance Company and in its report they observed that there had been a bonafide mistake at the time of taking the insurance cover by the Bank and the insured was not aware of the contents and address mentioned in the policies. They also observed that the denial of liability only on this ground can affect their tie up relationship with the State Bank of Bikaner & Jaipur from where they were getting handsome premium of more than Rs. 20 crores p.a. The joint note also mentioned that as per Sec. E of All India Fire Tariff page no. 97 , '' the bank was duty bound to notify the change of ownership or alteration or increase of hazards to the Insurance Company. There had been a mistake on part of the Bank in giving the address of the complainant's firm at Plot no. A89 instead of Plot no. 215 and that a high premium was charged for storage risk.Though the complainant firm had started trading in Mica, plyboard and ACP sheets instead of manufacturing of wooden furniture, but they ( Insurance Company) were supposed to honour the interest of the bank, even if some breach of condition no.3 of the policy was made by the insured without knowledge of the Bank. It cannot be said that the complainant firm concealed any fact about change of their 11 business but as observed earlier, it is clear that manufacturing of wooden furniture and trading in Mica, plyboard and ACP sheets, which are also used in manufacturing of wooden furniture, are almost identical in nature and it cannot be said to be a change of business.
12. Moreover, it is also evident that the bank officers had been inspecting and verifying the site and the stock almost every month, which is clear from Ex. R-42. Thus, the bank officers were well aware of the alleged change of nature of business by the complainant firm from the manufacturing of wooden furniture to that of trading in the business though both are of the same nature. The aforesaid joint note Ex. 25 (B) dated 20.7.07 was submitted for necessary action and approval to the regional office.
13. At the Regional Office of the Insurance Company, three officers; i.e. the Asstt. Manager, the Manager and the Chief Regional Manager recommended to the Regional Claims Committee (RCC ), a claim of Rs. 23,77,292/- after deducting 25% non-standard claim from the recommendations made by the joint committee approving the claim for an amount of Rs. 31,69,722/-. In the RCC, two officers - Mr.S.K.Raja, the Manager and Dr.S.Kaushik, Chief Regional Manager approved the aforesaid claim of the complainant firm for an amount of Rs. 23,77,292/- but Mr. S.C.Pandiya, the Regional Manager dissented from the recommendation of two other officers, one of whom i.e. Dr.S.Kaushik was senior to him. Mr. Pandiya vide his dissenting note Ex. R-45 dated 12.11.07 disapproved the claim of the complainant firm on the ground that the premises ( Plot no. 215 ), where the fire took place was not covered by the policy and that the complainant firm had changed its business from manufacturing 12 of wooden furniture to that of trading in Mica, plyboard and ACP sheets. On the basis of dissenting note of Mr. S.C. Pandiya, the Dy.General Manager of the Insurance Company repudiated the claim of the complainant firm and the Insurance Company vide its letter Ex. 12 dated 04.08.08 repudiated the claim.
14. Thus, from the documents submitted by both the parties, it is evident that vide a joint note Ex. 25, both the Insurance Company as well as the Bank were in favour of granting relief and approve the claim of the complainant on the basis of the report of the surveyor. There is no report either of the surveyor or on behalf of non-petitioners to show that the complainant firm was running its business at Plot no. A-89 instead of Plot no. 215, where the fire actually took place. The surveyor also gave its report on the basis of loss due to fire at Plot no. 215, where the stock of the complainant firm was kept. Despite strong recommendation of three senior officers of the Insurance Company vide their report Ex. 25 (B) dated 20.07.07 , the recommendations Ex. 25 (C ) dated 24.10.07 of three other senior officers of the regional office of the Insurance Company, and the recommendation of two officers of the RCC, one of whom was Chief Regional Manager, the claim of the complainant firm was repudiated on techenical grounds in a very casual, mechanical and routine manner by the Insurance Company vide its letter Ex. 12 dated 04.02.08 solely on the basis of a dissenting note of Dr.S.C.Pandiya, the Regional Manager , a member of the RCC. The Insurance Company should always take positive approach in considering such cases in the larger interest of the Company and we are of the opinion that the Insurance Company arbitrarily, erroneously and illegally repudiated the claim of the complainant 13 firm and they were not justified in doing so. The repudiation and rejection of claim by the Insurance Company amounts to deficiency in service and therefore, the present complaint deserves to be allowed.
15. Looking to the facts and the report Ex. 6 of the surveyor, the gross -stock which was assessed by the surveyor after physical verification of stock registers and the site was estimated to be Rs. 40,99,271/- and after deducting 10% as the dead stock he determined the damage to the extent of Rs. 36,89,345/- but he deducted 12.5% VAT, 4% salvage and 1% on account of removal of debris and ultimately estimated the loss to the extent of Rs.31,69,722/- only. In our view, the 12.5% VAT should not have been deducted by the surveyor as the VAT is applicable only in case the goods or stock are sold to any customer. The amount of 4% salvage and 1% on account of debris removal could not have been deducted by the surveyor, as the entire stock was burnt to ashes and nothing was left on the site. So the deduction of 12.5% on account of VAT, 4% on account of salvage and 1% on account of debris removal could not have been deducted by the surveyor. Thus, in our view, the complainant is entitled as per Ex. 6, the report of the surveyor to get as compensation an amount of Rs. 36,89,345/- the actual loss ot stock and damage caused to it on account of fire, which took place on the intervening night of 30.09.2006 and 01.10.2006. The non-petitioners are liable to indemnify the complainant for the aforesaid amount.
15. Therefore, for the aforesaid reasons, the complaint of the complainant firm is allowed. The complainant is entitled to get Rs.36,89,345/- ( Rupees Thirty six Lac Eighty Nine Thousand Three hundred and Forty five ) from the non-petitioners jointly 14 and severally. The complainant shall also be entitled to get 9% interest on the aforesaid amount from the date of filing of the complaint. The complainant is also entitled to get Rs. 30,000/- ( Rupees Thirty thousand ) as compensation for mental agony and cost of the proceedings. The non-petitioners are directed to make the payment of the aforesaid amount to the complainant within one month from the date of the order.
Member Member President nm