National Consumer Disputes Redressal
Godavari Grameena Bank And Anr. vs Teja Poultry Farm And Anr. on 14 February, 2005
Equivalent citations: IV(2005)CPJ97(NC)
ORDER
M.B. Shah, J. (President)
1. The complainant, M/s. Teja Poultry Farm, filed O.P. No. 53 of 1997, before the District Forum, West Godavari, Eluru, against the petitioners and the New India Assurance Co. Ltd. praying grant of Rs. 3,S5,015/- towards damages with interest at the rate of 12% p.a. for the damages suffered by it because of cyclone which occurred on 6.11.1996 and 7.11.1996 damaging the sheds constructed for maintaining the live stock (poultry birds). The complainants have also prayeu for a compensation of Rs. 50,000/-.
2. It is submitted that on the basis of the application of the complainant Godavari Grameena Bank (petitioner) sanctioned a loan of Rs. 11,30,000/- covering a unit of 10,000 birds and that the complainant received an advance loan of Rs. 5,00,648.50 ps. from the Bank; as per the terms of the loan the Bank was required to take a comprehensive policy to cover the risk to sheds in which the poultry farm was established and that the Bank undertook to pay the premium towards the sheds and the live stock. For this purpose, the Bank deducted an amount of Rs. 5,810.7- on 7.5.1996 and paid the same to the Insurance Company. The insurance cover was obtained on 16.10.1996. The sheds and the live stock were blown away by the cyclonic wind on 6th and 7th November, i996. The sheds were completely damaged. For the live stock the Insurance Company paid Rs. 60,000/- as damages but repudiated the claim for the sheds.
3. It is the contention of the petitioner Bank that the comprehensive policy was taken to cover the risk of the sheds in which the poultry farm was to be located. Undisputedly, at the time of giving loan an amount of Rs. 5,810/- was deducted on 7.5.1996 towards premium for the live stock and that it was paid to M/s. New India Assurance Co. Ltd. On 16.10.1996 a further sum of Rs. 848./- was debited to the account of the complainant towards premium for the sheds. On 6.11.1996 the sheds were damaged due to the cyclone. That occurred or the intervening night ot 6th and 7th November, 1996 damaging the live stock and the sheds completely. It is also contended that the petitioner Bank had entered into 'Grameena Package Master Policy Agreement' with the Insurance Company on 11.4.1996, and as per the terms of Clause 7 of the said agreement, the Bank debited the insurance premium of Rs. 848/- to the account of the complainant on 16.10.1996 and sent it to the Insurance Company on 4.11.1996 along with the other premium.
4. The main defence of the Insurance Company is that the statement dated 31st October, 1996 was received by the Dowleswaram Branch on 18.11.1996, i.e., after the cyclone and that the premium was sent in the monthly statement dated 25.11.1996. As there is non-compliance of specific condition in the agreement and also non-compliance of Section 64VB of the Insurance Act, the Insurance Company is not liable to pay any amount.
5. The District Forum found that there was deficiency in service on the part of the Bank in not sending the premium account as per the clause in time, hence, the Bank (petitioner) was directed to pay Rs. 3,85,015/- with interest at the rate of 12% p.a., and compensation of R:;. 10,000/-. It was also held that there was no deficiency in service on the part of the Insurance Company.
6. It is also not disputed that the amount of Rs. 3,85,0157- is directed to be credited in the account of the complainant on the basis of the loss to the sheds suffered by the complainant, as assessed by the Surveyor appointed by the Insurance Company. Before the District Forum, admittedly no dispute was raised with regard to the assessment of loss. But, the dispute was 'whether the bank was liable to pay the damage or the Insurance Company' as it was contended by the Insurance Company that it had not received the premium.
7. The main contention of the Insurance Company is that the Grameena Bank (petitioner) has not complied with the Grameena Package Master Policy Agreement, particularly, Clauses 7 and 12.
8. It is also pointed out that admission of Surveyor and loss assessor was without prejudice to the rights and contentions of the Insurance Company and it does not create any right in favour of the complainant.
9. For appreciating the aforesaid contentions we would refer to some parts of the Grameena Package Master Policy Agreement, which are as under:
"This Master Policy Agreement is entered into between M/s. Godavari Grameena Bank, Rajahmundry (hereinafter referred to as "Bank" which expression shall apply to its Branches and other constituents) and M/s. New India Assurance Company Ltd., Dowleswaram Branch under Rajahmundry D.O. (hereinafter referred to as "Company" which expression shall apply to its Branches and other Constituents).
1. (A) Scope of agreement:
Subject to the terms and conditions of the policy applicable to the respective assets/properties, this agreement covers all the beneficiaries of M/s. Godavari Grameena Bank and all assets financed through its various branches in East and West Godavari Districts, both fresh as well as renewals of existing policies."
...
"This agreement shall be valid for a period of three years from 1.4.1994 to 31.3.1997."
"All the borrowers and assets financed by various branches of the Bank in East and West Godavari Districts, during the currency of this agreement shall have to be insured. Replacements as and when introduced are to be informed to the Insurance Company for coverage."
It, inter alia, covers "H. Poultry sheds, Fish Prawn Bunds :
Fire, lighting, riot and strikes, malicious damage, impact, storm, cyclone, typhoon, tempest, hurricane, tornado, flood, inundation, and other applicable allied perils."
Clauses 7 and 12 are as under:
"7. Payment of Premium:
Upon disbursement of loan, the Bank shall debit loanee/borrower's account with the premium amount for the period required at the rates given under Para 4 of this agreement and shall send credit advice in respect thereof to its Head Office. The company shall open its current account with Head Office of the Bank in which the premium, basing on credit advices received from various branches of the Bank, shall be credited on the same date appearing on credit advice (to avoid violation of provisions of Section 64VB of Insurance Act). On the last working day of each month the Head Office of the Bank shall furnish the statement of account along with pay order for the total premium drawn in favour of the Company to Dowleswaram Branch."
8. Commencement of Risk:
Under the Master Policy risk automatically attaches from the time the animal is purchased at the shandy/place of purchase or from the time the loan is disbursed.
"12. Procedure for operating this scheme :
The Company shall supply blank certificate-cum-proposal-cum-schedule forms (Annexure-I) in quadruplicate to all the branches of Bank. The Bank shall post duly filled in Annexure-I with all details of advances made in the month along with other relevant certificates as may be applicable, original with one copy to the company another copy to Head Office of the Bank. On receipt of the schedule the company shall issue one endorsement per month per branch and send original to the respective branches. One set of the standard terms, conditions, exceptions, etc., applicable to each type of policy shall be made available to all the branches of the Bank. There is no need to attach the terms and conditions to each and every endorsement. A reference to the clause applicable shall be made in the covering sheet of the endorsement."
10. From the aforesaid it can be stated that:
(i) the agreement covers all beneficiaries of the Bank and all assets financed through its various branches;
(ii) for the period between 1.4.1994 and 31.3.1997 all borrowers and the assets financed by the various branches of the Bank were required to be insured. Insurance coverage included poultry sheds, fish, prawn, bunds.
11. The main dispute is with regard to payment of premium. For this purpose Clauses 7 and 12 required to be dismissed.
Clause 7 can be divided as under-
(i) the Bank shall debit borrower's account with the premium amount for the period required at the given rates;
(ii) the Bank is required to send credit advice in respect thereof to its head office at Rajahmundry;
(in) the Insurance Company was required to open its current account with the head office of the Bank. In the said account the premium received from various branches of the Bank was to be credited. This credit was to be given on the basis of credit advice appearing on the same date.
(iv) on the last working day of each month, the head office of the bank was required to furnish the statement of account along with the pay order for the total premium drawn in favour of the company, to the Dowleswaram Branch.
In the present case, undisputedly the insurance premium for the sheds was deducted from the loan account on 16.10.1996 (A-6 of the passbook of the complainant).
(v) Ex. B-3 is the credit voucher dated 16.10.1996 of the petitioner for a sum of Rs. 3,000/- towards the insurance premium as credited to the Insurance Company.
(vi) Ex. B-4 dated 31.10.1996 is the proposal-cum-schedule-cum-certificate form part of the Grameena Package Master Policy showing the particulars of the property to be covered by the premium of Rs. 3,000/- and Item No. 2 is in respect of sheds of the petitioner for which premium of Rs. 848/- was mentioned. Upto this step, there is no dispute.
12. The dispute arises with regard to the next step, i.e., sending of cover note on 4.11.1996 by the Bank. Further, Ex. D-18 is a copy of 3rd respondent's current account with head office of the Grameena Bank at Rajahmundry, which mentions that on 14.11.1996 amount of Rs. 3,000/- from Purushottampalli branch was credited in its account. It is also pointed out that the Insurance Company received proposal-cum-schedule-cum-certificate only on 18.11.1996.
13. The District Forum from these facts arrived at the conclusion that the petitioner No. 1 created records by ante dating the credit advices. It also observed that there was no reason for the petitioner No. 1 not to deduct the premium for the sheds, at the same time when the premium for live stock was deducted and debited the same to the account of the complainant. The District Forum, therefore, observed that there is non-compliance of Section 64VB of the Insurance Act and the Insurance Company is not liable to reimburse the complainant, but the petitioners are liable to reimburse. The same is confirmed by the State Commission.
14. In our view, it would be difficult to accept the findings recorded by the District Forum and the State Commission, as:
(i) The Godavari Grameena Bank branch has issued credit voucher dated 16.10.1996. That voucher is for a sum of Rs. 3,000/- in favour of the Insurance Company towards premium. For this, there is no dispute.
(ii) Secondly, as per the 'Scope of Master Policy Agreement' subject to the terms and conditions of the policy it covers assets and properties financed through its various branches. The Bank is required to deduct the premium as soon as the loan is given. After deduction of the premium the main requirement is that the Bank is required to give credit to the company basing on the date of the credit advices, i.e., to say, the credit of the amount shall be in favour of the Insurance Company on the same date of the credit advice so as to avoid violation of provisions of Section 64VB. Section 64VB, inter alia, contemplates that unless the premium is received or is guaranteed to be paid in such manner and within such time as may be prescribed, no insurer shall assume any risk in India.
However, when the scheme of the agreement entered into by the Insurance Company contemplates that even though the amount is not received by the Company and is guaranteed to be paid by the Bank in the prescribed manner and within time, there is no bar in assuming the risk. In the present case the scheme itself contemplates that on behalf of the Insurance Company the branch of the Bank which gives the loan has to deduct the premium. That means, the premium is accepted by the said Bank on behalf of the Insurance Company.
15. The next step is with regard to the giving of credit to the Insurance Company. As per the scheme, each Bank is required to send credit advice to its head office at Rajahmundry where the Insurance Company was required to open its current account. The premium so received was to be credited on the basis of credit advice giving retrospective date on the basis of the credit advice. As stated above, the credit voucher dated 16.10.1996 was sent prior to the occurrence of cyclone. That a credit voucher is dated 16.10.1996 in favour of 'Rajahmundry Head Office account' for a sum of Rs. 3,000/-, wherein it is specifically stated that it is towards insurance premium for 'AAA A/cs' credited to New India Assurance Co. Ltd. with M/s. Godavari Grmeena Bank. Admittedly, the proposal-cum-schedule-cum-certificate forming part of the Grameena Package Master Policy was sent on 31.10.1996 wherein the property of the complainant was included and premium deducted was Rs. 848/-.
16. Further, as per Clause 12 of the agreement the Insurance Company was required to supply blank certificate-cum-proposal-cum-schedule forms to all branches of the Bank. It nowhere provides that the Bank was required to post such forms before a particular date. If there is some delay in sending the form it would not absolve the Insurance Company from its liability. There is on record Ex. B-9 which is a monthly statement dated 25.11.1996 wherein it is mentioned that a sum of Rs. '3,000/- received from the petitioner No. 1 Bank on 16.10.1996 and it has been credited to the current account of the Insurance Company. As the contract is based upon the deduction and acceptance of premium by the Bank on behalf of the Insurance Company, the only requirement is Insurance Company should be given credit of such amount with retrospective date based upon tin? credit advice, Further, if there is some error in interpreting such complicated clauses by the officers of the Bank, it cannot be said that the Insurance Company is not liable to reimburse the amount. For collecting premium, Bank acts as an agent of Insurance Company.
17. In any case, if there is vagueness in the contract, it cannot be construed for the benefit of the Insurance Company. Otherwise, the whole purpose of taking insurance coverage is frustrated.
18. The law on the subject is well established. In the case of United India Insurance Company Ltd. v. Pushpalaya Printers, , the Apex Court observed that where the words of a document are ambiguous, they shall be construed against the party who prepared the document, and this rule applies to the contract of insurance. The Court relied upon the decision of the Constitution Bench in General Assurance Society Ltd. v. Chandmull Jain, , wherein the Constitution Bench has held that in a contract of insurance there is requirement of uberrima fides, i.e., to good faith on the part of the assured and the contract is likely to be construed contra proferentem, that is, against the company in case of ambiguity or doubt.
19. In this view of the matter, even though some delay/mistake might have been committed by the Bank in sending the Annexure-I as provided in Clause 12, it would not mean that the Insurance Company is not liable to reimburse the Bank. The simple reason is, the Bank more or less is acting as an agent of the Insurance Company and the premium received by it was to be credited by giving retrospective date on the basis of the credit advice.
20. In the result, the revision petition is allowed. The order passed by the State Commission confirming the order passed by the District Forum is modified and it is held that Insurance Company would be liable to reimburse the complainant for the amount ordered to be paid and also for the costs. If the amount as ordered by the District Forum is paid by the Bank to the complainant, the Insurance Company shall reimburse the same to the Bank. The Revision Petition is allowed to the aforesaid extent. There shall be no order as to costs.