State Consumer Disputes Redressal Commission
Prem Vashisht vs Punjab National Bank on 7 June, 2024
1
STATE CONSUMER DISPUTES REDRESSAL COMMISSION,
UNION TERRITORY, CHANDIGARH
Consumer Complaint No. 33 of 2003
Date of Institution 17.09.2003
Date of Decision 07.06.2024
Mrs. Prem Vashisht wife of Shri V. K. Vashisht, Sole Proprietor, M/s.
Kalyani Sales Company, Opposite Railway Road Shed, Railway Road,
Chandigarh.
Complainant.
Versus
1] The Punjab National Bank through its Branch Manager, Sector 4.
Panchkula 134112 (Haryana).
2] New India Assurance Company Limited, Divisional Office-III
through its Senior Divisional Manager, SCO 37-38, Sector 17/C.
Chandigarh.
...Opposite Parties.
Argued by:
Sh. Neeraj Pal Sharma, Advocate for the complainant.
Sh. Ajay Sapehia, Advocate for opposite party No.1.
Sh. Raj Kumar Bashamboo, Advocate for opposite Party No.2.
Consumer Complaint No. 37 of 2003
Date of Institution 17.10.2003
Date of Decision 07.06.2024
Sh. V. K. Vashisht, Sole Proprietor, M/s. Chandigarh Sales Company,
Opposite Railway Road Shed, Railway Road, Chandigarh.
Complainant.
Versus
New India Assurance Company Limited, Divisional Office-III through its
Senior Divisional Manager, SCO 37-38, Sector 17/C, Chandigarh.
...Opposite Party.
BEFORE: JUSTICE RAJ SHEKHAR ATTRI, PRESIDENT.
MR. RAJESH K. ARYA, MEMBER
Argued by:
Sh. Neeraj Pal Sharma, Advocate for the complainant. Sh. Raj Kumar Bashamboo, Advocate for the opposite party.2
PER RAJESH K. ARYA, MEMBER By this order, we propose to dispose of the afore-captioned two consumer complaints bearing No.33 of 2003 and 37 of 2003, as the issues involved therein, except minor variations, here and there, of law and facts are the same.
2] These consumer complaints bearing No.33 of 2003 and 37 of 2003 were filed by the respective complainants, who are husband and wife, before this Commission on 17.09.2003 and 17.10.2003 respectively. The same were dismissed by this Commission vide orders dated 09.03.2004 as the complainants were held to be not consumers within the meaning of Section 2(1)(d)(i) & (ii) of Consumer Protection Act 1986.
Aggrieved against the said orders, the complainants approached Hon'ble National Consumer Disputes Redressal Commission, New Delhi by filing First Appeals No.134 of 2004 and 135 of 2004. The said appeals were decided by Hon'ble National Consumer Disputes Redressal Commission, New Delhi vide common order dated 20.08.2004 dismissing both the appeals by upholding the orders of this Commission. Thereafter, the complainants approached Hon'ble Supreme Court of India by way of filing Civil Appeal No.5355 of 2007 and No.5356 of 2007. The Hon'ble Apex Court vide order dated 09.08.2023, while setting aside the orders of this Commission and that of Hon'ble National Commission, restored the complaints to this Commission for consideration of the matters on merits and in accordance with law. On receipt of certified copy of order by this Commission, notices were issued to both the parties and after giving adequate opportunities to both the parties to file their written arguments, both the matters were finally reserved for orders on 06.05.2024 after hearing oral arguments.
3] However, the facts are being culled from the Consumer Complaint bearing No.33 of 2003 titled 'Mrs. Prem Vashisht Vs. The Punjab National Bank & another', as under:-
Brief facts (CC/33/2003):-
4] The complainant was running the business of selling coal in which she was self- employed and was carrying her livelihood for the last 25 years. She was an income tax payee as an individual assessee. In order to arrange sufficient financial resources for running the business of buying and selling coal, she approached Opposite Party No.1- Punjab National Bank (for short hereinafter referred to as PNB), which offered to 3 finance the complainant to the extent of 75% of the total working capital/cash credit limit and in order to protect its own interest, PNB had taken a fire policy from the Opposite Party No.2- New India Assurance Company Limited (for short hereinafter referred to as the Assurance Company) from time to time. The last policy, which was taken prior to the incident of fire was in the shape of a temporary cover note No.2K/055966 issued on 1.11.2002. This policy was valid from 1.11.2002 to 31.10.2003 for a total sum of insurance being Rs.1 Crore of the stores and stocks relating to the business of the complainant were to remain comprehensively insured against all risks at full value.
5] It has been further stated that Opposite Party No.1 was under
an obligation to ensure that the stocks of the complainant were duly insured against all possible risks. The premium of a sum of Rs.41,669/- was duly debited from the account of the complainant by PNB vide copy of statement of account for the relevant period, Annexure C-4. The complainant alleged that the regular policy of insurance was not issued by Opposite Party No.2 and its copy was not supplied ever to the complainant till 8.9.2003. It was on 8.9.2003 that on the request of the complainant, Opposite Party No.1 - PNB supplied a copy of policy covering the risk. The grievance of the complainant was that the Opposite Party No.2 had covered the risk for the building to the tune of Rs.1 Crore and the stocks/contents had not been insured at all. The premium received by the Opposite Party No.2 - Assurance Company in lieu of the said policy had been shown as Rs.64,000/- whereas Opposite Party No.I had debited the account of the complainant to the tune of Rs.41,669/- only. The other grievance of the complainant was that no exclusionary clause as stated in the Insurance Policy was ever supplied to the complainant by the opposite parties. The complainant as a part of her obligation supplied stocks statement on monthly basis to Opposite Party No.1-PNB and the last such statement was supplied on the status of stock/coal as on 31.1.2003 vide Annexure C-6. 6] It has further been stated that fire incident took place in the premises/godown of the complainant on 7.2.2003 in which the entire stock of the godown was turned to ashes. A report was lodged with the local police vide DDR No.34 dated 7.2.2003 and intimation of the same was also sent to the Assurance Company as well as PNB Opposite Party No.1 vide letter dated 9.2.2003. A telephonic message was also sent to 4 Opposite Party No.2 on 8.2.2003. As many as three units (fire tenders) of the Chandigarh fire services were pressed into service to douse the fire. The copies of the DDR, intimation to the Opposite Party No.2 dated 9.2.2003 and occurrence report of the Chandigarh Fire Service were placed on record as Annexures C-7, C-8 and C-9. The Assurance Company immediately deputed a Surveyor Mr. Vijay Jindal of M/s. Citi Surveyors Pvt. Ltd., Chandigarh on 8.2.2003 for the assessment of damages. The complainant further alleged that the conduct of the surveyor aforesaid did not appear to be bonafide to her and she appointed an independent Surveyor on 1.4.2003 for the assessment of the loss occurred in the incident of fire. The independent Surveyor after thorough survey of the entire loss submitted his report on 10.4.2003, Annexure C-10, to the complainant wherein the loss was assessed at a sum of Rs.77,25,183/-. The Surveyor deputed by the Assurance Company required certain documents from the complainant vide letter dated 9.2.2003, Annexure C-11, which were supplied. Opposite Party No.2 requisitioned the last stock position from the Opposite Party No.1 -
PNB and the same was supplied vide letter dated 10.4.2003, Annexure C-12. The surveyor of the Assurance Company again requested for certain documents, which had already been supplied vide letter dated 24.9.2003, Annexure C-13. The claim of the complainant was, however, not settled till July 2003. Opposite Party No.1 issued a letter dated 10.7.2003, Annexure C-14, to Assurance Company for settlement of the claim of the complainant. However, the Assurance Company did not settle the claim and it vide its repudiation dated 20.8.2003, Annexure C- 15, informed the complainant that her claim was not payable as the loss had occurred due to spontaneous combustion, which was not covered under the fire policy issued to Opposite Party No.1 to cover the risk to the stock/coal of the complainant.. The complainant has alleged that the act of Opposite Party No.1 in neglecting to insure the stock of the complainant against all risks and the conduct of Opposite Party No.2 in repudiating the claim on the ground of spontaneous combustion was not covered under the aforesaid policy and it amounted to deficiency in service. It has been stated that a great deal of unnecessary harassment and agony was caused to the complainant.
Relief Claimed:-
57] Hence, this complaint was filed claiming payment of a sum of Rs.77,25,183/- assessed as loss suffered by the complainant in the incident of fire and also claimed interest @18% per annum from 7.2.2003 till realization. A sum of Rs.50,000/- has been claimed as compensation for harassment besides a sum of Rs. 11,000/- as costs of litigation.
Reply of Opposite Party No.1:
8] Opposite Party No.1, in its written statement, has pleaded that it got inured stocks well in time within limitation, which was evident from the cover note issued by the Development Officer of the Assurance Company. It has further been stated that cover note No.055966 was issued on 1.11.2002, Annexure OP-1/1. It has further been stated that it was not for the first time that Assurance Company insured the stocks and issued cover note and policy because the cover note itself depicts that even prior to it, the stocks of coal were lying insured with the said Company and there was no default or negligence on its part regarding the payment of premium of the policy. Opposite Party No.1, however, has supported the contention of the complainant that the repudiation of the claim by the Assurance Company was on irrelevant grounds and was not valid and proper. Allegations of deficiency in service or negligence on the part of opposite party No.1, were, however, categorically denied. It has further been stated that the complainant executed a loan agreement and thereby hypothecated the goods and stocks, Annexure OP-1/3. It has further been stated that under Clause 7(a) of the loan agreement, it was the duty of the borrowers to get the insurance done and in view of the law laid down by the Hon'ble Punjab and Haryana High Court in the case reported in Recent Civil Reports 2003 (4) Page 396, PNB was not responsible and the complaint against PNB was not maintainable. It was, however, admitted that the stocks of coal were lying hypothecated with the Bank. It has further been stated that it was voluntary action on the part of the complainant company. In other aspects, the averments made by the complainant regarding the incident of fire were admitted and not disputed.
Reply of Opposite Party No.2:
9] Opposite Party No.2, in its written statement, has stated that a Surveyor was appointed after the claim was lodged and the said Surveyor submitted his report. It has further been stated that it was 6 found during investigation that no incident of fire took place and thick smoke/fog was coming out of the coal stock due to spontaneous combustion, which was not covered by the policy in question. It has further been stated that the stock of coal was got insured and cover note was issued. It has further been stated that due to inadvertence, the word "building" has been written in the cover note. It was pointed out that the claim was not repudiated on the ground that the risk covered is that of the building and not that of the stock. Referring to the report of the Surveyor, it was stated that the report clearly pointed out that it was a case of spontaneous combustion without fire and as such, the claim was not payable under the terms and conditions of the policy of insurance. The repudiation of the claim was thus defended.
Brief Facts:-
Consumer Complaint No.37 of 2003 - Sh. V. K. Vashisht Vs. New India Assurance Company Limited:
10] In this complaint i.e. CC/37/2003, Sh. V.K. Vashisht, being the sole proprietor of Chandigarh Sales Company, entered in to a Cash Credit Hypothecation Agreement with the Union Bank of India, in terms of which, against the hypothecation of the stocks (Coal), he was accorded a Cash Credit limit of Rs.71 Lakhs . In terms of the said Cash Credit Agreement, the stores & stocks were to remain comprehensively insured against all risks at full at party's cost. In pursuance thereof, the opposite part took out a Fire Policy for the stocks of the complainant vide cover note dated 24.10.2002 for the period 24.10.2002 to 23.10.2003 for the value of cover of Rs.66 Lakhs, Annexure C-2 and cover note was accordingly issued. Premium of Rs.77,700/- was charged. In terms of Risk Coverage of the said Policy, the risk of "Spontaneous Combustion" was also specifically covered on receipt of extra premium by the opposite party as under:-
"On stock of Coal, lying store and open (Risk covered against Fire, R/s Fld, spontaneous combustion." It is the case of the complainant that no copy of insurance policy was ever provided to him by the opposite party till date. It is the case of the complainant that on account of a fire incident on 07.02.2003, the entire stock of the complainant was reduced to ashes, as apparent from the copy of DDR, Annexure C-4. Intimation was given to the opposite party the same day telephonically and also vide letter dated 08.02.2003, 7 Annexure C-5. The opposite party appointed a surveyor (Vijay Jindal) for assessment of loss on 09.02.2003, who visited the premises and gave his report, Annexure C-7. The Surveyor vide final report dated 14.05.2003, Annexure R-2, opined the loss of Rs.25,08,464/- only. The complainant also appointed an independent Surveyor (Navneet Kakkar) for assessment of loss on account of the wayward conduct of Opposite party's surveyor and the independent Surveyor assessed the loss at Rs.59,29,975/-, Annexure C-7). However, the opposite parties vide letter dated 15.09.2003, Annexure C-10, repudiated the claim on the following reason:-
"Since no flame omitted to the reported fire loss to the coal stocked at insured coal yard, further the statement of insured to the police authority, fire brigade and to M/s Citi Surveyor stating that thick fog/smoke was coming out of coal out of coal stock lying at the stock yard located in Village Dariya, Chandigarh, thus we repudiate the claim....."
11] The parties led evidence in support of their respective cases. 12] We have heard the learned Counsel for the parties and have also gone through the documents and evidence on record and the written arguments very carefully.
Observations/findings of this Commission:
13] It is not in dispute that the coal lying in the building premises, in question, was reduced to ashes on account of a fire incident on 07.02.2003 i.e. during the validity of a Fire Policy for the period from 01.11.2002 to 31.10.2003, vide Cover Note, Annexure C-3 and the total sum assured was Rs.1 Crore. It is the case of the complainant that policy was never supplied to her by the opposite parties prior to the reporting of the fire loss incident. It was further her grievance that opposite party No.2 wrongly repudiated the claim on the report of its surveyor solely on the ground that since it was a case of spontaneous combustion, which it could have got covered under payment of extra premium. It is further the grievance of the complainant that Opposite Party No.1 ought to have got the stocks covered lying in the building. On the other hand, the plea of opposite party No.1 is that it inadvertently mentioned the word 'building' only while getting the insurance policy.
However, it is the claim of opposite party No.1 that it kept on updating 8 the stock statements with opposite party No.2 from time to time and there is no negligence on its part. However, the claim of opposite party No.2 that it got the claim investigated from its own surveyor, who assessed the total loss of Rs.48,27,080.10 , however, after considering the terms and conditions of the policy, the surveyor recommended that the loss is not payable as the risk of spontaneous combustion was not covered under the policy as much as it was a Fire Policy. 14] From aforesaid contentions and respective claims of the parties, the following questions arise for consideration in CC/33/2003 of this Commission:-
i. Whether Opposite Party No.1 - PNB was bound to ensure that the stock of coal of the complainant was insured against all perils and whether by not getting it so insured, there is any deficiency on the part of opposite party No.1? ii. Whether the insurance policy and its specific exclusions were ever supplied to the complainant by either of the opposite parties? If not, whether the same amounts to waiver of the applicability of the exclusion clause of spontaneous combustion?
iii. Whether a Fire Coverage Policy, wherein the loss has occasioned on account of a fire, may be resulting from spontaneous combustion; same is covered within the meaning of a 'Fire' under the aegis of the said policy? iv. In case the claim is found payable, to what extent it would be payable by Opposite Party No.2?
Whereas in CC/37/2003, apart from above issues, the only distinguishable point is the ground on which the claim has been repudiated. In this case, the claim has been repudiated as no flames emitted to the reported fire loss to the coal stock. As such, in this case, the issue, which crop up for considerate of this Commission, is:-
v. Whether the occurrence of visible flames is a sine qua non for applicability of the clause/risk coverage under a Fire Policy which also specifically includes a separate Rider covering "Spontaneous Combustion?"
Issue (i)"
Whether Opposite Party No.1 - PNB was bound to ensure that the stock of coal of the complainant was insured against all perils and whether by 9 not getting it so insured, there is any deficiency on the part of opposite party No.1?
15] To decide this issue, it is apposite to look into the terms and conditions of the Hypotecation of goods to secure a demand cash credit, Annexure OP-1/3, placed on record by opposite party No.1 itself. Clause 7(a), being relevant, in this context is, inter-alia, extracted hereinbelow:-
"(a) That all the security as aforesaid wherever situate shall be insured by the Borrowers against fire risk and as and when required by the Bank against the war, riots and civil commotion risks and/or risk of any other description with some insurance company approved by the Bank to the full market value of such security in each case irrespective of the balance due against the Borrowers, and that the said policies shall be taken out in the name of the Bank or in the joint names of the Bank and the Borrowers with the bank clause and that all policies and receipts from premia paid on such insurance shall be delivered to the Bank. Should the Borrowers fail on demand being made by the Bank to insure or to deliver the policies or receipts for premia as aforesaid, the Bank shall be at liberty, but not bound to effect such insurance at the risk, responsibility and cost of the Borrowers in such insurance companies as the Bank in its absolute and unfettered discretion, thinks fit and to an extent of the full market value of the security of the which the Bank shall be the sole judge........."
Thus, from bare perusal of the aforesaid clause, we find that it was the duty of the complainant to obtain the insurance policy but liberty was also with the Bank - Opposite Party No.1 to effect such insurance at the risk, responsibility and expenses of the borrower i.e. the complainant. In the instant case, it has been admitted by Opposite Party No.1 that it inadvertently left the stock of coal to get insured under the policy and only mentioned the word 'building'. In our considered view, once the Opposite Party No.1 - Bank chose to arrange the insurance, it implicitly agreed that the insurance should encompass all hypothecated assets securing the credit facilities. This obligation included ensuring that the entire stock (coal in this case) within the building was insured against all risks, such as spontaneous combustion, by paying any additional 10 premiums required. However, Opposite Party No.1 - Bank did not fulfill this obligation by failing to cover the coal against spontaneous combustion. That would constitute part of services Opposite Party No.1 - Bank was rendering to the borrower/complainant. Our view is supported by the judgment of Hon'ble Supreme Court of India in Canara Bank Versus M/s Leatheroid Plastics Pvt. Ltd.', Civil Appeal No.4645 of 2019 decided on 20.05.2020. Thus, we hold Opposite Party No.1 - Bank deficient in rendering service to this extent to the complainant.
Issue (ii):
Whether the insurance policy and its specific exclusions were ever supplied to the complainant by either of the opposite parties? If not, whether the same amounts to waiver of the applicability of the exclusion clause of spontaneous combustion?
16] It is the stand of the Opposite Party No.2 that the necessary copy of the policy of insurance was supplied to opposite party No.1 - Bank on the very first instance. However, Opposite Party No.1 - Bank in Para 4 of its reply has stated that the Insurance Company has not issued the insurance policy well in time to the Bank authorities and even failed to supply any copy to the insured company i.e. the complainant. It may be stated here that it is the inter se matter between the opposite parties with regard to supply or non-supply of insurance policy alongwith its terms and conditions and the complainant is not to suffer on this account. It was required of Opposite Party No.1 - Bank, after effecting insurance, to supply copy of the insurance policy alongwith its terms and conditions to the complainant forthwith as it took the liberty to get the insurance effected on behalf of the complainant - borrower. In the absence of any documentary evidence brought on record by both the opposite parties to establish that the insurance policy and its terms and conditions were ever supplied to the borrower - complainant, we hold both the opposite parties deficient in this regard. In this view of the matter, when the specific exclusions were not supplied to the complainant, the same amounted to waiver of the applicability of the exclusion clause.
Issue (iii):-
Whether a Fire Coverage Policy, wherein the loss has occasioned on account of a fire, may be resulting from spontaneous combustion; same is covered within the meaning of a 'Fire' under the aegis of the said policy?11
17] To arrive at a right decision, it is apposite to understand the meaning of 'spontaneous combustion'. According to 'Wikipedia', Spontaneous combustion or spontaneous ignition is a type of combustion which occurs by self-heating (increase in temperature due to exothermic internal reactions), followed by thermal runaway (self heating which rapidly accelerates to high temperatures) and finally, autoignition. In case of coal, its spontaneous combustion is a common concern within the coal stockyard and inter-burden layers in coal mines. It is a process of self-heating without the application of external heat. When coal comes in contact with oxygen, the oxidation process starts and heat is produced. However, in the instant case, the claim of the complainant has been repudiated by Opposite Party No.2 - Assurance Company vide repudiation letter dated 20.08.2003, Annexure C-15, on the ground that the risk of spontaneous combustion is not covered under the policy as it was only a Fire Policy and the said risk could have been covered by paying extra premium. It is not the case of opposite party No.2 that no flames were seen or there was no fire but the sole ground taken to repudiate the claim is that the risk of spontaneous combustion was not covered under the policy. Firstly, we would like to mention here that when the explicit terms and conditions of the policy including exclusions were not supplied to the complainant, then the same cannot be made applicable to the claim so filed by the complainant. In our view the approach of Opposite Party No.2 - Assurance Company in repudiating the genuine claim of the complainant is erroneous and contrary to law. As we have already held above, when Opposite Party No.1 - Bank chose to take out insurance on assets pledged as security for a loan, it was its responsibility to ensure that the insurance is comprehensive and covers all potential risks, including any specific risks associated with the type of assets (spontaneous combustion) in question by paying additional premium. When copy of insurance policy was not supplied to the complainant borrower, then how would she come to know, whether the stocks lying in the building were insured against all potential risks, including any specific risks associated with the type of assets. Had it been brought to her knowledge by either of the opposite parties on getting the stocks insured immediately after effecting the insurance, by supplying copy thereof, then she would be in a position to 12 immediately ask Opposite Party No.1 or Opposite Party No.2 to take cover against spontaneous combustion by paying additional premium. However, it was never brought to her notice at any stage by either of the opposite parties.
Another aspect of the matter (in CC/33/2003):
18] Referring to Clause (I) of the Standard Fire and Special Perils Policy (Material Damage), i.e. "Fire" Excluding destruction or damage caused to the property insured by (a) (i) its own fermentation, naturally heating or spontaneous combustion...", Counsel for the complainant argued that a plain reading of this would reveal that damage by fire and loss sustained due to fire could not be avoided by Opposite Party No.2 even if the cause of fire was spontaneous compensation. He further argued that even if it is conceded that the cause of fire was spontaneous compensation, Opposite Party No.2 cannot escape its liability. He vehemently argued that this is so because ultimately, the loss was due to fire. In support of his argument, he cited decision of the Five Member Bench of Hon'ble National Commission in the case of Murli Agro Products Ltd. versus Oriental Insurance Company Ltd., I (2005) CPJ 1 (NC) wherein it had been held that whether the cause of fire was spontaneous combustion or not was irrelevant as long as there was a fire.
19] On the other hand, Counsel for Opposite Party No.2 argued that in the case of Murli Agro Products Ltd. versus Oriental Insurance Company Ltd. (supra), the complainant had taken additional insurance cover for spontaneous combustion; however, in the matter in hand, no additional cover had been taken. It may be stated here that we have already held in the earlier part of our order that once Opposite Party No.1
- Bank chose to arrange the insurance, it implicitly agreed that the insurance should encompass all hypothecated assets securing the credit facilities. This obligation included ensuring that the entire stock (coal in this case) within the building was insured against all risks, such as spontaneous combustion, by paying any additional premiums required, which Opposite Party No.1 - Bank failed to fulfill. Not only this, similar issue came up before Hon'ble National Commission in the case of M/s P.P. Agro Industries Vs. National Insurance Co. Ltd. & 2 Ors., II (2021) CPJ 291 (NC), wherein under identical exclusion, the claim arising out of loss due to spontaneous combustion was repudiated on the 13 ground that it was not covered under the policy. The Hon'ble National Commission, after detailed discussion, held in Paras 18 to 20 as under:-
"18. It is useful at this stage to have a very close look at the relevant policy provisions. Clause (I) of the policy, mentioned and relied upon by both the learned counsels during their arguments, reads as below:-
I "Fire Excluding destruction or damage caused to the property insured by
i) its own fermentation, natural heating or spontaneous combustion
ii) its undergoing any heating or drying process."...
.........
A plain reading of the policy reveals that what has been unambiguously insured is damage to the insured property on the happening of its destruction or damage by any of the perils specified in the policy, the first of which has been reproduced ad verbatim above viz. I. FIRE. It is clear that any damage or loss to the property by the occurrence of FIRE is liable to be the subject of lawful claim of insurance. What is meant by the sentence in the policy starting with "Excluding..." is precisely what it says viz. if there is destruction or damage by its own fermentation, natural(ly) heating or spontaneous combustion, then this would not be covered under the policy. This cannot be construed to mean that destruction to property by happening of a fire, understood as fire in common parlance, visible, obvious to the naked eye, would stand excluded because the cause of fire was found to be spontaneous combustion.
19. It is precisely this which has been articulated clearly by the Commission in it's order in the case of Murli Agro Products Ltd. versus Oriental Insurance Company Ltd.(supra), para 13 (a) thereof, which reads as below:
"13. For the reasons stated hereinafter we are not inclined to take any different view:
(a) Firstly, undisputedly, if the damage to the property is because of the 'fire, for any reason', there is insurance coverage. The exclusion clause does not provide that loss or damage caused by fire on account of spontaneous combustion is excluded. Reading the term as it is, it can be held that what is excluded is loss or damage caused by spontaneous combustion which may or may not cause fire or flame.
20. A reasonable interpretation of the policy clause under discussion above would be that any damage caused 14 due to spontaneous combustion, in which, visible fire has not occurred, would be covered by insurance only if an additional cover by paying extra premium had been taken for spontaneous combustion. This however cannot be taken to mean that damage caused due to fire per se would stand excluded if the origin of such fire lay in spontaneous combustion. Origin of Fire would be quite immaterial as long as the factum of Fire was not in dispute and the factum of damage and loss of property was established. Perhaps the only exception to this would be an allegation of arson:
however, in the case in hand, there is no such allegation." Thus, applying the ratio of the judgment in M/s P.P. Agro Industries Vs. National Insurance Co. Ltd. & 2 Ors., (supra), Opposite party No.2 is very much liable to pay the genuine claim of the complainant. It (Opposite Party No.2) by repudiating the said claim is certainly deficient in rendering service and also indulged into unfair trade practice. Thus, we hold that the claim is payable by Opposite Party No.2. 20] Now the question arises, to what extent the claim is payable by Opposite Party no.2. The complainant has placed on record the report of its independent Surveyor i.e. Kumar Surveyors Pvt. Ltd., who after thorough survey of the entire loss, vide his report dated 10.4.2003, Annexure C-10, assessed the loss at a sum of Rs.77,25,183/-
after deducting Rs.10,000/- as excess clause under the policy. On the other hand, the Surveyor i.e. Citi surveyors Pvt. Ltd. deputed by Opposite Party No.2 - Assurance Company assessed the loss to the tune of Rs.48,27,080.10 vide its report dated 14.05.2003, Annexure R-2. We have carefully gone through both the survey reports. The difference in both the calculations is with regard to the affected quantity of coal. In the survey report submitted by the complainant, Annexure C-10, the affected quantity of coal stocks is given as 2477.16 M.T whereas in the later surveyor's report, Annexure R-2, it is assessed as 1651.44 M.T. Per se the assessment made by the surveyor deputed by Opposite Party No.2 is vague and not sustainable keeping in view the factual position on record. Clearly the closing stock at the time of loss lying at the affected premises was 2724 MT. This fact stands corroborated from the documentary evidence led on record by the complainant in terms of Annexures C-6 and C-12. Annexure C-6 is the stock statement for the 15 period ending 31.01.2003 of the stock belonging to the complainant, which were hypothecated as security with Opposite Party No.1 - PNB wherein the quantity of stock i.e. coal was 2724 M.T. and rate is mentioned as Rs.3,550/- P.M.T Annexure C-12 is the information/letter dated 10.04.2003 qua stock position sent by Opposite Party No.1 - PNB to Opposite Party No.2 - Assurance Company, on request so made by Opposite Party No.2, wherein the total value of security is mentioned as Rs.96,70,200/- and the Quantity of coal is mentioned as 2724 M.T @ Rs.3,550/- P.M.T. This stock statement was duly verified Opposite Party No.1 - Bank and sent to Opposite Party No.2 - Assurance Company at the time of getting the insurance cover, as admitted by the Counsel for both the parties at the time of arguments and the documents also say so. Thus, we are of the view that the figure of the affected quantity of coal stocks taken or arrived at by the Surveyor of Opposite Party No.2 in its report, Annexure R-2 is totally wrong and against the record and the stock statement for the relevant period. Thus, the report of independent Surveyor i.e. Kumar Surveyors Pvt. Ltd., dated 10.4.2003, Annexure C- 10, placed on record by the complainant, who assessed the loss at a sum of Rs.77,25,183/- after deducting Rs.10,000/- as excess clause under the policy is accepted being based on thorough verification of records, inspection on site and DDR/FBR Report. Surveyor Report of Opposite Party No.2, Annexure R-2 stands rejected being vague and against factual position on record. In this view of the matter, we are of the opinion that Opposite Party No.2 is liable to indemnify the loss to the extent of Rs.77,25,183/- as assessed by Kumar Surveyors Pvt. Ltd. vide its report dated 10.4.2003, Annexure C-10 alongwith interest from the date of repudiation.
Issue (v):-
Whether the occurrence of visible flames is a sine qua non for applicability of the clause/risk coverage under a Fire Policy which also specifically includes a separate Rider covering "Spontaneous Combustion?"
21] This issue is no longer res integra in view of dictum laid down by Hon'ble National Commission in case titled Consumer Education and Research Society & Anr. Vs. IFFCO-Tokio General Insurance Co. Ltd. & Anr., II (2012) CPJ 142 (NC). In this case, the claim was repudiated because there was no fire and the molasses got burnt due to spontaneous combustion. The Hon'ble National Commission, after taking 16 note of its various judgments in the case of M/s. Roshanlal Oil Mills Ltd. v. M/s. United India Insurance Co. Ltd., 1(1992) CPJ 293 (NC), Saraya Sugar Mills Ltd. v. United India Insurance Co. Ltd., II(1996) CPJ 6 (NC) and Murli Agro Products Ltd. v. Oriental Insurance Co. Ltd., I(2005) CPJ 1 (NC) and definition of 'Fire' as given in Chambers 20th Century Dictionary and Concise Oxford Dictionary, observed that fire need not necessarily be accompanied by flame. Fire is a form of heat energy which cause smouldering, burning, heating, melting and perhaps some few more words. The Hon'ble National Commission held in Paras 13 and 14 as under:-
"13. For the reasons stated hereinafter we are not inclined to take any different view:
(a) Firstly, undisputedly, if the damage to the property is because of the fire, for any reason, there is insurance coverage. The exclusion clause does not provide that loss or damage caused by fire on account of spontaneous combustion is excluded.
Reading the term as it is, it can be held that what is excluded is loss or damage caused by spontaneous combustion which may or may not cause fire or flame.
(b) Secondly, for the peril which is excluded, namely, the spontaneous combustion, insurance coverage is given, i.e. to say, if the insured property is destroyed or damaged by spontaneous combustion the Insurance Company is liable to pay to the insured the value of the property. Therefore, it can be stated that it is agreed that insurance coverage is given for spontaneous combustion which could be Item 7, as per the policy which covers damage by such items namely fire, lighting, explosion, etc.
(c) Thirdly, recovery of additional premium indicates the nature of the contract that subsists between the parties. That contract cannot be of giving insurance coverage only in case of damage by fire. If that contention is accepted, the object and purpose of payment of additional premium is frustrated. Recovery of additional premium indicates acceptance of risk by the Insurance Company for the perils contemplated. This aspect, to some extent, is discussed while considering the premium in general in Halsburys Laws of England, Vol.25 (fourth edition), pr.440, wherein it has been, inter alia, observed:
..In making their assessment insurers normally work on the basis of an average of their previous experience of comparable risks, increasing or perhaps reducing the figure according to their estimate as to whether the graph of the risk is tending or likely to rise or fall. The 17 rate of premium in fact charged may give rise to important inferences. The materiality of a representation which has been made may be inferred from a reduced rate of premium being charged.
Similarly, ignorance on the part of the insurers of some matter supposed to be well known may be inferred if they charge no more than the ordinary rate of premium, while an exceptionally high rate of premium may be indicative of their acceptance of the risk as hazardous without requiring disclosure of the precise facts making it so.
In the case of Hanil Era Textiles Ltd. Vs. Oriental Insurance Co. Ltd. & Ors. (2001) 1 SCC 269, the Apex Court has referred the aforesaid paragraph from the Halsburys Laws of England and has, inter alia, observed that when the premium is thus demanded and collected at a higher rate, it is an indication regarding the nature of the contract that subsists between the parties, namely, that the insurer was aware of the higher risks involved.
(d) Fourthly, if the contract is vague, the intention of the contracting parties is to be gathered from the surrounding circumstances or the nature of the contract. In the present case, considering nature of contract it is clear that additional premium was taken from the insured so as to cover loss or damage to the property by spontaneous combustion.
Therefore, also, Insurance Company is liable to pay the damage suffered by the Complainant because of spontaneous combustion.
14. Therefore, acceptance of additional premium for spontaneous combustion leaves no doubt that insured accepted to cover the said risk. Otherwise, there was no necessity for taking additional premium."
The Hon'ble National Commission further held in Para 17, interalia, that ".......... The policy, in the present case, is not a simplicitor fire policy, but a comprehensive policy covering various perils including fire. By taking additional premium, risk by one part of the exclusion clause is given insurance coverage, namely, for loss caused by its own fermentation, natural heating or spontaneous combustion. The result is damage due to above causes is given insurance coverage. Therefore, if the insured property is damaged by natural heating, the insurance company is bound to pay the loss suffered by the assured. In this view of the matter, we are not required to consider further scientific or chemical meaning of the word Fire and or Spontaneous Combustion, which, inter alia, in simple words provides that in some articles even at the ambient 18 temperature oxidization process may start and lead to spontaneous heating."
22] Further Para No.22 and 23, being relevant, are extracted here-in-below:-
"22. Further, it is settled law that contract of insurance is based upon good faith. It is the duty of the insurers and their agents to disclose all material facts within their knowledge since obligation of good faith applies to them equally with the assured [(Re. M/s. United India Insurance Co. Ltd Vs. M.K.J. Corporation, (1996) 6 SCC 428)]. If the insurance coverage was not extended even by taking additional premium for the damage caused by spontaneous combustion/natural heating which may not result in fire, it ought to have been clearly stated.
23. Secondly, if the contract is vague, benefit should be given to the insured. The exclusion term of the insurance policy must be read down so as to serve the main purpose of the policy that is to indemnify the damage caused due to fire. [(B.V.Nagaraju Vs. M/s. Oriental Insurance Co. Ltd.) (1996) 4 SCC 648)]."
23] Not only above, the Hon'ble National Commission further in case titled 'Oriental Insurance Co. Ltd. Versus Oceanic Solvent Industries', I (2018) CPJ 174 (NC), has held in Para 8 as under:-
"8. To begin with, the policy taken by the respondent was not insurance policy only against standard fire but also a special peril policy. As per the endorsement for add-on of Spontaneous Combustion, the policy shall extend to include loss or damage by fire only of or to the property insured caused by its own fermentation, natural heating or spontaneous combustion. Hence the policy cover loss or damage by fire only of the property or loss or damage to the property insured caused by spontaneous combustion. The surveyor also in his report has admitted that stock was charred. Dictionary meaning of word charred is " partially burnt so as to blacken the surface". In the definition of Lamb Alvin R as given above, he clearly states that combustion may be rapid and then it is what we commonly known as 'burning' which is accompanied by the very rapid production of heat and flame but it can also be very slow, with a much slower and smaller production of heat and no flame. The combustion / burning is in all cases very slow at first, but if 19 the small amount or heat generated does not at all escape, the rate of combustion may increase until the ignition point, or kindling temperature is reached. At that point, the substance actually burns or bursts into flames. The respondent in its letter dated 05.12.2009 has stated that there was a spontaneous combustion and charring and because he took the immediate remedial action, the stock was not allowed to proceed to the stage of ignition. That does not mean that stock was not damaged due to charring by spontaneous combustion. The State Commission is correct that appellant has not produced any detailed policy condition which would show that only damage caused due to fire caused by spontaneous combustion is covered and that spontaneous combustion is also covered only if there are flares and smoke. An opportunity was given by me to counsel for the appellant to show any such clause or explanation in the insurance policy and she has failed to do so."
Further, as already discussed in the preceding part of the judgment, in M/s P.P. Agro Industries Vs. National Insurance Co. Ltd. & 2 Ors., (supra), the Hon'ble National Commission in Para 20 has specifically held, interalia, that "........This however cannot be taken to mean that damage caused due to fire per se would stand excluded if the origin of such fire lay in spontaneous combustion. Origin of Fire would be quite immaterial as long as the factum of Fire was not in dispute and the factum of damage and loss of property was established. Perhaps the only exception to this would be an allegation of arson: however, in the case in hand, there is no such allegation." Similar view is held by Hon'ble National Commission in case "Oriental Insurance Company Limited Versus Sukhdev Singh & Anr.', III (2010) CPJ 400. Further in New India Assurance Co. Ltd. Versus Taj Sugar Works & Anr., II (2002) CPJ 43 (NC), the question before Hon'ble National Commission "Whether spontaneous combustion equivalent to fire?" was answered in 'Yes'. Similar was the view held by Hon'ble National Commission in Saraya Sugar Mills Ltd. Versus United India Insurance Co. Ltd., II (1996) CPJ 6 (NC).
24] In this view of the matter and keeping in view the law cited above, we are of the considered opinion, that the Opposite Party - New 20 India Assurance Company Limited wrongly, illegally and arbitrarily repudiated the rightful and genuine claim of the complainant vide repudiation letter, Annexure C-10. In our considered opinion, the opposite party is liable to indemnify the loss and pay the claim. After analyzing each and every aspect of the matter and the valuation reports placed on record by the complainant and the opposite party, we are of the considered view that the report of Surveyor appointed by the opposite party is vague and not well based. However, we accept the valuation of the independent surveyor of the complainant vide its report dated 12.03.2003 assessing the loss to the tune of Rs.59,29,975/- based on true appreciation of each and every record including the stock statements etc. and correct methodology adopted in arriving at the valuation of net loss suffered by the complainant. Therefore, in this complaint, the opposite party is liable to pay the aforesaid amount of Rs.59,29,975/- to the complainant alongwith interest from the date of repudiation.
25] This is a typical case where consumer/complainant is suffering for more than two decades and she being the sole proprietor has been unnecessarily put to mental agony and harassment. Due to abovesaid incident of fire, the complainant lost the entire wealth and her business has totally been ruined. However, salt has been added to her miseries by the opposite parties by putting her into this prolonged litigation. One can very well imagine the plight of the complainant in such a situation. It is settled law that the Consumer Commission should award adequate compensation to compensate the consumers for the harassment, agony and loss faced by him/her. It may also be stated here that Consumer Protection Act has been made to safeguard consumer rights. This Act is regarded as the 'Magna carta' (everyone is subject to the law, even the king, and guarantees the rights of individuals, the right to justice and the right to a fair trial) in the field of consumer protection for checking unfair trade practices, 'defects in goods' and 'deficiencies in services' and it works and protects consumers even in situations where they do not know their rights. In the case titled as Lucknow Development Authority v. M K Gupta (1994) 1 SCC 243, the Hon'ble Supreme Court discussed about the extent of the jurisdiction of the Consumer Fora to award just and reasonable compensation for the harassment and agony suffered by a consumer. In the peculiar facts and circumstances of the case, we are of the 21 considered opinion, if we award an amount of Rs.2 Lakhs each (in both these complaints) as compensation for mental agony and harassment suffered by the complainant for all the years together on account of deficiency in rendering service and adopting unfair trade practice on the part of the opposite parties, that will met the ends of justice.
Relief granted by this Commission in Consumer Complaint No.33 of 2003 - Mrs. Prem Vashisht Vs. The Punjab National Bank & anr.:-
26] For the reasons record above, consumer complaint No.33 of 2003 is partly accepted with cost in the following manner:-
i) Opposite Party No.2 - The New India Assurance Company Limited is directed to pay the claim amount of Rs.77,25,183/- alongwith interest @9% p.a. from 20.08.2003 i.e. the date of repudiation, within a period of 45 days from the date of receipt of a certified copy of this order, failing which, thereafter, the said amount shall carry 3% penal interest i.e. 12% p.a. (9% p.a. plus (+) 3% p.a.), from the date of passing of this order, till realization.
ii) Opposite Parties No.1 & 2 are, jointly and severally, directed to pay compensation of Rs.2 Lakhs for causing mental agony and harassment and also cost of litigation to the tune of Rs.35,000/-, to the complainant, within a period of 45 days, from the date of receipt of a certified copy of this order, failing which, the said amounts of Rs.2 Lakhs and Rs.35,000/-, shall carry interest @9% p.a. from the date of passing of this order, till realization. Relief granted by this Commission in Consumer Complaint No.37 of 2003 - Sh. V. K. Vashisht Vs. New India Assurance Company Limited:-
27] Similarly, consumer complaint No.37 of 2003 is partly accepted with cost. The Opposite Party - The New India Assurance Company Limited is directed as under:-
i) to pay to the complainant the claim amount of Rs.59,29,975/- alongwith interest @9% p.a. from 15.09.2003 i.e. the date of repudiation, within a period of 45 days from the date of receipt of a certified copy of this order, failing which, thereafter, the said amount shall carry 3% penal 22 interest i.e. 12% p.a. (9% p.a. plus (+) 3% p.a.), from the date of passing of this order, till realization.
ii) to pay compensation of Rs.2 Lakhs for causing mental agony and harassment and also cost of litigation to the tune of Rs.35,000/-, to the complainant, within a period of 45 days, from the date of receipt of a certified copy of this order, failing which, the said amounts of Rs.2 Lakhs and Rs.35,000/-, shall carry interest @9% p.a. from the date of passing of this order, till realization.
28] Pending applications in both these complaints, if any, stands disposed of accordingly.
29] Certified copies of this order be sent to the parties free of charge forthwith and one copy thereof be placed in the connected case file.
30] Files be consigned to Record Room after completion.
Pronounced 07.06.2024 [RAJ SHEKHAR ATTRI] PRESIDENT (RAJESH K. ARYA) MEMBER Ad/-
23STATE COMMISSION (Complaint Case No.33 of 2003) Argued by:
Sh. Neeraj Pal Sharma, Advocate for the complainant. Sh. Ajay Sapehia, Advocate for opposite party No.1. Sh. Raj Kumar Bashamboo, Advocate for opposite Party No.2.
Dated 07.06.2024
ORDER
Vide our detailed order of the even date, recorded separately, both the consumer complaints i.e. this complaint bearing No.33 of 2003 and connected complaint bearing No.37 of 2003 have been partly accepted with costs.
(RAJESH K. ARYA) (RAJ SHEKHAR ATTRI)
MEMBER PRESIDENT
Ad
24
STATE CONSUMER DISPUTES REDRESSAL COMMISSION, UNION TERRITORY, CHANDIGARH Consumer Complaint No. 37 of 2003 Date of Institution 17.10.2003 Date of Decision 07.06.2024 Sh. V. K. Vashisht, Sole Proprietor, M/s. Chandigarh Sales Company, Opposite Railway Road Shed, Railway Road, Chandigarh.
Complainant.
Versus New India Assurance Company Limited, Divisional Office-III through its Senior Divisional Manager, SCO 37-38, Sector 17/C, Chandigarh.
...Opposite Party.
BEFORE: JUSTICE RAJ SHEKHAR ATTRI, PRESIDENT.
MR. RAJESH K. ARYA, MEMBER Argued by:
Sh. Neeraj Pal Sharma, Advocate for the complainant. Sh. Raj Kumar Bashamboo, Advocate for the opposite party. PER RAJESH K. ARYA, MEMBER Vide our separate detailed order of the even date, recorded in Consumer Complaint bearing no.33 of 2003 titled as 'Mrs. Prem Vashisht Vs. The Punjab National Bank & Anr.', this complaint has been partly accepted with costs.
2] Certified copy of the order passed in Consumer Complaint bearing no.33 of 2003 titled as 'Mrs. Prem Vashisht Vs. The Punjab National Bank & Anr.' be placed on this file.
3] Certified copies of the order passed in Consumer Complaint bearing No.33 of 2003 alongwith this order be sent to the parties free of charge.
4] File be consigned to Record Room after completion.
Pronounced 07.06.2024 [RAJ SHEKHAR ATTRI] PRESIDENT (RAJESH K. ARYA) MEMBER Ad/-25