JUSTICE V.K. JAIN, PRESIDING MEMBER (ORAL)

          The complainant No.1/appellant No.1 is a cooperative bank, being run by complainant No.2 / appellant No.2 society.  The appellants / complainants had obtained an insurance policy from the respondent which inter-alia insured them against misappropriation of funds by their employees. The case of the complainants / appellants is that a fraud in the bank was committed in the years 2003-04 to 2006-07 which came to their knowledge on 08.5.2007. On receipt of the letter disclosing the fraud, they directed the concerned Branch Manager to investigate the matter.  He submitted a report which reached the bank on 09.7.2007.  He was asked to reinvestigate the matter to identify the guilty officials.  Consequently, the Branch Manager submitted an investigation report, which was received by appellants / complainants on 17.8.2007.  However, intimation of the loss was not given to the insurer nor was the matter reported to the police for years together.  The case of the appellants / complainants is that they were awaiting the special audit report before reporting the matter to the police and that the special audit was completed only on 20.7.2010.  The loss was reported to the insurer on 12.3.2010.

2.      Vide letter dated 24.6.2011, the insurer drew the attention of the appellants / complainants to the Condition No.1 of the policy which required them to give notice in writing to the insurer immediately upon the occurrence of any loss / damage and noted that the loss had been reported after a gap of three years which amounted to breach of expressed policy condition, making the claim voidable.  The appellants / complainants however, were asked to give reasons which prevented timely intimation of the claim to the insurer.  The aforesaid letter was replied by the appellants vide letter dated 19.7.2011.

3.      Since the claim was not paid, the complainants / appellants approached the concerned State commission by way of a consumer complaint.

4.      The complaint was resisted by the insurer on several grounds, including that it was barred by limitation and that the complainants had committed breach of the terms of the insurance policy by not giving immediate intimation of the loss to the insurer.  It was claimed that in view of Para No.1 of the insurance policy, the complainants were not entitled to any payment, they having failed to intimate the alleged loss to the insurer, immediately after it had come to their knowledge.  It was also claimed that even otherwise the liability of the insurer could not exceed Rs.1,80,627/-, that being the extent of the loss due to embezzlement in the year 2006-07.

5.      The State Commission having dismissed the complaint on the ground that it was barred by limitation prescribed in Section 24 A of the Limitation Act, the complainants/appellants are before this Commission.

6.      It is not in dispute that as per the terms and conditions of the insurance policy taken by the appellants / complainants, they were required to give immediate intimation of the loss to the insurer.  It is also not in dispute that the alleged loss came to the knowledge of the appellants / complainants on 08.5.2007.  Even the names of the culprits had come to its knowledge by 09.7.2007.  The intimation of the loss to the insurer was given only on 12.3.2010.  Thus, there was a delay of more than two years and ten months in reporting the loss to the insurer.  No satisfactory explanation was given by the complainants / appellants for the abnormal delay of more than two years and ten months in reporting the loss to the insurer.  The case of the appellants / complainants is that they were awaiting the special audit report which they received only on 20.7.2010.   I fail to appreciate how the appellants / complainants could be justified in not reporting the loss to the insurer without first receiving the special audit report.  They had come to know of the loss on 08.5.2007 and even the identity of the officials responsible for the loss by 09.7.2007.  Therefore, the loss should have been reported to the insurer on 08.5.2007 itself and in any case, on 09.7.2007.  That having not been done, the complainants / appellants committed breach of a mandatory term of the insurance policy.

          The requirement of the reporting the loss to the insurer is not a mere formality, the purpose of such report being to enable the insurer to investigate the matter independently and take appropriate action to safeguard its interest.  Had the complainants / appellants reported the loss to the insurer immediately after it had come to know of the same, the insurer could have investigated the matter at a time when the evidence would be still available.  The insurer could also have reported the matter to the police or atleast it could have prevailed upon the complainants / appellants to report the loss, which also constituted a criminal offence, to the concerned police station.  That having not been done, and in fact even an FIR having not been lodged soon after the embezzlement was detected, the complainants / appellants have only themselves to blame for creating a situation, where the insurer stood relieved of all its obligations to reimburse them under the insurance policy on account of the abnormal delay in reporting the loss to it.  For this reason alone, the order passed by the State Commission did not call for interference by this Commission in exercise of its appellate jurisdiction.

7.      A perusal of the letter sent by the insurer to the complainants / appellants on 24.6.2011 would show that the insurer had taken a specific stand that the complainants had committed breach of the policy condition No.1 by intimating the loss to them after a gap of three years.  Though, an opportunity was given to the complainants to explain the reasons which precluded timely intimation of the loss to them, the breach of condition No.1 of the policy was clearly intimated. The aforesaid letter gave a cause of action to the complainants to file a consumer complaint.  The complaint before the State Commission therefore, ought to have been instituted within two years of receiving the letter dated 24.6.2011. The complaint however, came to be filed only on 23.1.2015, after a delay of almost one year and seven months.  Though, an application seeking condonation of the said delay was filed, there is absolutely no satisfactory explanation for condoning such an abnormal delay.  As noted earlier, the complainants were made aware of the loss as early as on 08.5.2007.  Even the name of the culprits came to their knowledge after about two months, in July, 2007.  Even on receipt of the letter of the insurer dated 24.6.2011, they did not bother to approach the State commission for more than 3 ½ years.  The complainants, in my opinion were not justified in waiting for as much as more than 3 ½ years after receiving the letter dated 26.6.2011 alleging breach of condition No.1 of the insurance policy by the complainants.  This view taken by the State Commission on the application seeking condonation of delay in filing the consumer complaint therefore, does not call for interference by this Commission in exercise of its appellate jurisdiction. 

8.      For the reasons stated hereinabove, the appeal is hereby dismissed with no order as to costs.