IN THE CONSUMER DISPUTES REDRESSAL COMMISSION, TTAYAM
Dated, the 28th day of April, 2022.
Present: Sri. Manulal V.S. President
Smt. Bindhu R. Member
Sri. K.M. Anto, Member
C C No. 171/19 (Filed on 21-10-2019)
Petitioner : Mathew Varghese,
S/o. Varghese,
Vellakottil House,
Gandhinagar P.O.
Kottayam
. (Adv. Avaneesh V.N.)
Vs.
Opposite parties : 1) Canara Bank,
Representing Branch Manager,
Kidangoor Branch,
Kidangoor P.O. Kottayam.
(Adv. Siby Vettoor)
2) New India Assurance Company
Limited. Rep. by its
Divisional Manager,
Pala.
(Adv. P.G. Girija)
O R D E R
Smt. Bindhu R. Member
The complaint is filed under Section 12 of Consumer Protection Act, 1986.
The brief of the complainant’s case is as follows.
The complainant who was running the business of sanitary wares, tiles and granites under the name and style G & M Traders has taken overdraft facility from the 1st opposite party bank. As per rule, the stocks should be insured for getting the OD facility. Thus the 1st respondent submitted a proposal form to take insurance policy for the stocks with the 2nd opposite party. Accordingly on 7.6.2018 the stocks were inspected by the bank authorities and it was found that the stocks for Rs.1.30 Crores was kept in the shop and go downs. On8.6.18 the 1st respondent submitted proposal for insurance before the 2nd respondent and the policy was released from 18.06.18 to 17.06.2019 having policy no.76250011180100000165 for a sum insured of Rs.2,00,00,000/- out of that the coverage for the stock was for Rs.1,35,00,000/-.
On 16.8.18 the tiles in the godown No. XIII/362, opposite to the shop of Kidangoor grama panchayath were damaged due to flood in the locality. A total loss of Rs.11,47,955/- was occurred and a claim was submitted for the amount. Immediately after the receipt of the claim a surveyor was appointed by the 1st opposite party and he submitted a report assessing the loss only to Rs.3,53,281/-after deducting salvage value of 20%. The survey report was filed after months violating the regulations of IRDA and not conclusive.
A letter dated 17/4/19 was received by the complainant on 20.4.19 stating that as the complainant did not mention the door number of the go down, they could not admit the claim and hence the same was repudiated. The proposal form was submitted by the 1st respondent after inspecting the shop and godowns on 07-06-18 and it is their duty to furnish the correct details in the proposal form. Only after the inspection, the 1st respondent had enhanced the OD facility given to the complainant and it is their duty to furnish correct details to the 2nd opposite party. It is also the duty of the 2nd respondent to inspect the stock before issuing the policy. After receiving the premium amount from the complainant the 2nd respondent repudiated the claim on flimsy ground.
The repudiation of the policy claim by the 2nd opposite party and the no mentioning of the correct details in the proposal form by the 1st respondent are deficiency in service which is to be compensated.
Upon notice both the opposite parties appeared before this commission and filed version.
The 1st opposite party contested the case by stating that the 1st opposite party is not the concerned party to submit the proposal for the insurance. The insurance against the OD /advance stocks need to be insured for which the 2nd opposite party has to take the proposal and insure accordingly. The 1st opposite party being the financier issued funds for keeping the insurance live, after deducting it from the complainant. The said insurance policy stands in the name of registered address of the complainant firm and naturally it should cover the stocks in the go down which is kept too. But due to oversight of the insurance company the door no of the godown was not incorporated in the policy. It should have been covered under the policy, for which 1st opposite part in no way responsible for the clerical errors happened from the 2nd opposite party.It is not the 1st opposite party to repudiate the insurance claim of the complainant. The 1st opposite party insisted to get the Overdraft insured and the inspection done by them was to ensure the value of the stocks against their facility. Insurance is a matter between the complainant and the 2nd opposite party. There is no service lapse on the part of the 2nd opposite party as they deducted the premium amount from the account of the complainant according to the instruction of the complainant and rendered prompt service on banking. If at all the 2nd opposite party take a defence of agency relationship with the 1st opposite party the primary responsibility of insurance and claim settlement vests with the 2nd opposite party only. Hence the complaint is liable to be dismissed.
The second opposite party has filed its version contending that admitting the proposal for Standard Fire and Special Peril policy signed by the 1st opposite party insuring the stock of sanitary goods in the building no 4/9 of G.M. Traders Highway Road, Kidangoor, Kottayam for a total sum of Rs.1.95 Crores. On the basis of this proposal form a standard fire and special peril policy was issued in the name of Canara Bank, Kidangoor A/c. Mathew Varghese for a period from 18-06-2018 to 17-06-19.As per this policy building and stock of sanitary wares, tiles, granites in the sanitary shop cum godown named G &M Traders in room no 4/9 pg highway, Kidangoor is insured. The policy sum insured is not Rs.2,00,00,000/- as averred in the complaint but it is Rs.1,95,00,000/-.The averment that the complainant suffered a loss of Rs.11,47,955/- due to flood is not correct. On inspection the surveyor found that the G & M Traders was functioning in the building bearing number 4/9. But the surveyor found that the G &M Traders is having four godowns in different places at Kidangoor at about a distance of 150 M. One of them is in the form of a shed with Door no. XIII/362.This godown is not insured with the second opposite party as it was not specified in the proposal form on the basis of which policy is issued. The alleged damages of Rs.11,47,955/- is caused to the stock in Door no XIII/362 and not to the insured premises with door no.4/9.The survey report is prepared bonafide based on the standard criteria for assessing the loss. Since the door no XIII/362 was not insured, the complainant’s claim was repudiated. As per condition no 3 of standard fire and special perils policy clause attached it is mandatory on the party of the insured to inform the insurer the correct door number and location of the risk. Otherwise the insured is not liable to make good the loss. So there is no deficiency of service on the part of the 2nd opposite party and the repudiation is reasonable and based on the policy.
The complainant has filed proof affidavit along with Exhibits A1 to A5. The 1st opposite party has filed Proof affidavit with no documents. The 2nd opposite party has filed proof affidavit along with Exhibit B1 to B4. Dw1 was examined from the part of the 1st opposite party and DW2 from the part of the 2nd opposite party.
On a detailed examination of the evidence on record and the pleadings of both the parties we frame the following issues:
- Whether there is deficiency of service on the part of the opposite parties?
- If so what are the reliefs?
Point no 1
As per the complaint, the 1st opposite party granted an overdraft facility over the stocks kept by him and insisted him to take an insurance policy covering the stocks. Thus the 1st opposite party gave a proposal to the 2nd opposite party and 2nd opposite party issued a Standard Fire and Special Perils Policy. Subsequently the complainant had to suffer loss on his stocks under the OD due to flood but the policy claim was repudiated by the 2nd opposite party on the ground of some mistakes in the proposal form.
Now, according to the complainant the bank authorities inspected the stock of the complainant on 7.6.18 and assessed that altogether stock of 1.30Crores were kept in the shop and godowns. On the very next day the 1st respondent submitted a proposal form to the 2nd respondent and the 2nd respondent issued a policy as admitted. Thereafter on a claim put forward by the complainant of Rs.11,47,955/- towards the loss of stock in flood, the 2nd opposite party though appointed a surveyor, repudiated the claim as the numbers without mentioning the door number of the godown and the shop where the entire stock is kept in the proposal form. The stock in the shop number given in the proposal form only was insured and hence the complainant was not entitled for the policy amount.
The 1st opposite party admits in its version that they deducted the premium amount from the account of the complainant and paid to the 2nd opposite party. The 1st opposite party bank puts the responsibility on the 2nd opposite party insurance company that the insurance policy stands in the name of registered address of the complainant firm and naturally it should cover the stocks in the go down which is kept too. But due to the oversight of the insurance company the door no of the godown was not incorporated in the policy.
Whereas the 2nd opposite party’s contention is that when the surveyor visited the complainant’s premises, there was no room no as 4/9.But the G & M Traders was having four godowns in different places at Kidangoor at about a distance of 150 Mtre. The door no XIII/362 was not insured where the alleged damage of Rs.11,47,955/- was caused.
On a perusal of Exhibit A1 proposal form, it is seen that in the column of risk location address room no 419 is written which can be read as 4/9 also. Ongoing through the said document, we find that the proposal form is not properly filled up. Most of the columns in the form are left blank. All other columns are left blank regarding the details of the stocks and occupancy .The proposal form is signed by the manager, Kidangoor branch of 1st opposite party Canara Bank as the proposer. Dw1 has categorically stated that proposal form was signed by her.
Here, from Exhibit A1 prima facie it is seen that 1ST opposite party handled it very carelessly. The 1st opposite party being a responsible financial institution had granted an overdraft facility over the stocks of the complainant after inspecting the site of occupation. They very well knew that an Overdraft facility for an amount above Rs.2,00,00,000/- was granted to the complainant. In order to protect this amount of the bank, they insisted the complainant to take an insurance policy over the stock amounting to Rs.1,35,00,000/-. Thus great care and caution was required when the bank personals put forward the A1 proposal form to the 2nd opposite party.
The 1st opposite party in its version and affidavit contended that even if the 2nd opposite party alleges vicarious liability on the 1st opposite party as an agent of it, they are not liable. In the B1 policy certificate itself the 1st opposite party has been shown as the insured. The 1st opposite party insisted for the stocks to be insured only to protect them from any mishap causing the loss of the stock which in turn would affect the repayment of OD. As an insured, the 1st opposite party is bound to disclose all the details of the shop and godowns the stock in which were mortgaged with them. Moreover, even at the time of receipt of the policy certificate, the 1st opposite party has not identified that the entire stock was not insured under the said policy.
So we find that in this aspect of the incorrect proposal form and consequent policy issuance is a clear deficiency of service and mere negligence on the part of the 1st opposite party.
Further Exhibit A3 is the stock statement given by the complainant to the 1st opposite party. In A3 statement it is noted that “if there are more than one godown, details are to be given godown-wise. Mention full address/es of the Godowns”. Even then no such details have been furnished in the statement. But the 1st opposite party had not raised any objection in accepting this. Later when Exhibit A4 stock inspection report was prepared by one Padmakumari P.S, Manager of the 1st opposite party the column address of the godown is written only as Kidangoor. To the 9th column of the same document that “whether stocks adequately insured and policy in force” –it is answered as “Yes”. No verification has been done whether the stocks in all the godowns were insured or not. No details of the godowns are also given. So in this document also we see the gross negligence on the part of the 1st opposite party.
The DW1, who was the Manager of the 1st opposite party deposed that the complainant had one retail shop and 3 godowns. Only after inspecting the godowns and stock OD was released. Again she admitted that all the details must be shown in the insurance proposal form. The entire stock against the Over Draft is to be insured because all the products won’t be stocked in the showroom. She admits that no godown number is shown in the A1 proposal form.
No document regarding the Over Draft has been produced by the 1st opposite party. This is a wilful suppression of material facts by the 1st opposite party. During the cross examination she deposed that “OD sb kw_-Ôn¨ ^b-ep-IÄ higher officials t\mSv tNmZn-¨n«v lmP-cm-¡mw. ^b-en sImSp-¯n-cn-¡p¶ door No.4/9 BtWm? (Q) 419 F¶mWv (A) asämcp door number epÅ shop \pw OD sImSp-¯n-«n-Ã? (Q) Total Stock \mWv OD \evIp-¶-Xv (A). 419 AÃmsX atä-sX-¦nepw godown se stock OD bn DÄs¸-Sp-¯n-bn-«ptm? (Q) Dv (A) OD bn DÄs¸-Sp-¯n-bn-«pÅ aäv godowns sâ number HmÀ½-bn-Ã. aq¶v godwns Dw Hcp retail shop Dw OD bn DÄs¸-Sp-¯n-bn-«p-v. A1  H¸n-Sp-t¼mÄ 419 door no. Ds¶v verify sNbvXmWv H¸n-«-Xv. AXv am{Xta insure sN¿m³ Dt±-in-¨n-cp-¶pÅq F¶v ]d-bp-¶p.(Q) Aà (A).
Dw1 has categorically stated that OD is released against total stock and that stock should be insured. Again in the re-examination DW1 deposed that there was no OD against the building no 13/362 as per Ext.A5. But no agreement of OD or any other document to prove this has been produced before us. On perusal of Ext.A5, it is seen that it is the repudiation letter insured by the 1st opposite party in which we can see that there is no policy coverage to the stock in Door No.XIII/362 and not that there is no OD is there against the stock therein.
DW2 is one Satheesan.S, who was the Divisional Manager of the 2nd opposite party who affirmed that the room no. insured is 419.The 4/9 shown in the policy may be due to some clerical mistake.
From the deposition of DW1, it is inferred that 1st opposite party has committed unforgivable carelessness and negligence in insuring the stock of the complainant.
Exhibit B4 is the report of the surveyor who inspected the stock of the complainant and assessed the loss. In B4, initially he states that he had visited the shop room no 4/9. Later he describes the location of the stock as “ It is understood that the shop building is situated at the place of Kidangoor on the left side of Ettumanoor-Pala Highway bearing door numbers XIII/414,415,416,417,419 (Parangattu building)in Kidangoor Grama panchayath. The shop has four more godowns to store the tiles. One godown is a shed bearing door no XIII/362.The other three godowns are with door numbers Xiii/605,606,607 & 608.In addition to the above there are two godowns situated on the side of old EP road side with door numbers XIII 148,149,150 and XIII/570The flood water affected the godowns on the Highway side only. From Exhibit B3, the GST certificate, we understand that the door no of the shop is 419A.
In Canara Bank vs M/S Leatheroid Plastics Pvt Ltd. on 20 May, 2020 Hon’ble Supreme court held that
“14. Turning to clause 9 of the respective deeds/agreements, we find that it was the duty of the respondent to obtain the insurance policy. But liberty was with the bank also to effect such insurance at the risk, responsibility and expenses of the borrower only to the extent of the value of the securities as estimated by the bank. In the event of rejection of the claim wholly or in part irrespective of the fact as to whether the claim was made by the bank or the borrower, the bank’s responsibility ceased. What emerges from a plain reading of clause 9 of the respective documents is that the duty to effect insurance was with the borrower, and the bank could not be held responsible if there was any loss or damage to the hypothecated assets which was not adequately covered by insurance taken by the borrower. Bank also would not remain responsible if the claim was rejected, whether in whole or part thereof. But the question that arises for adjudication in this appeal is that if the bank themselves effected the insurance and left significant part of hypothecated assets out of it without any intimation to that effect to the borrower, could such omission be held to be a lapse on the part of the bank? Going through the said two clauses, in our opinion, their proper construction would be that once the bank exercised the liberty to effect the insurance, it was implicit that such insurance ought to have covered the entire set of hypothecated assets, against which the credit facilities were extended. The bank could absolve themselves from any obligation in the event the claim was rejected wholly or in part. If, however, the bank in exercise of their liberty effected the insurance, then it became their obligation to cover the entire set of hypothecated assets. The clause under which liberty is given to the bank to effect insurance starts with the phrase – “The bank is at liberty and is not bound to effect such insurance……” The employment of the adjective “such” in this clause demonstrates that if the bank effected insurance, that policy would have to carry the features which a borrower’s policy would have covered as per the terms of the deeds or agreements. The borrower’s liability in such a situation to repay to the bank could arise in the event of rejection of the claim or part thereof, such claim arising on account of loss/damage to the hypothecated assets. But the grievance of the borrower here is that though the bank effected such insurance, part of the hypothecated securities was left out from the coverage. It was a case of underinsurance. We have already construed the relevant clauses to mean that if the bank had exercised liberty to effect insurance, it was their duty to take out policies covering the entire set of hypothecated assets. That would constitute part of services the bank were rendering to the borrower. Effecting insurance was not their absolute obligation. But such obligation they had taken it upon themselves. The contractual terms also envisaged bank’s option or liberty to take up such obligation.
15. This being the position of law, in our opinion, the Commission was right in holding that the complainant had suffered loss because of inaction and negligence on the part of the Bank. This constituted deficiency in service. Any loss arising out of such deficiency was compensable under the provisions of the Consumer Protection Act, 1986. Before the Commission, certain decisions of the Commission were relied upon. The bank sought to distinguish these decisions, again relying on certain order of the Commission. But we have considered this case independently, on its own factual basis and accept the view of the Commission. The position could have been different in the event the Bank had alerted borrower at the time of effecting the policy that the entire set of assets was not being covered by the policies being effected by them. No such case has been made out. On the other hand, the Bank remained silent to the two letters of the respondent seeking particulars of the policy. The bank’s stand that the policies and statements were made available to the Directors of the respondentCompany is also not backed by any material. No particulars thereof has been furnished. We also do not find any reason as to why once the Bank had exercised their liberty or option for effecting insurance chose not to cover the entire set of hypothecated assets.
From the above discussed evidence and pleadings, we are of the considered opinion that the 1st opposite party has committed dereliction of duty which amounts to deficiency in service on the part of them. In releasing an OD of such a huge amount the opposite party has not taken the necessary keenness warranted by their establishment to protect the interest of the customer. The 1st opposite party is established by law in India for rendering necessary financial support to the public at large. The 1st opposite party has some social and legal obligations in fulfilling their duties. Here in the case on hand, we do not see the required eagerness or some kind of obligation on the part of the 1st opposite party.
Hence point no one is found against the 1st opposite party.
Point 2
The complainant has stated that he had a loss of 11,47,955 due to the damage of the tiles in the godowns which was not substantiated by any documentary or other evidence. The only document before us regarding the loss is Exhbt. B4 survey report. In the survey report the surveyor has assessed the loss as Rs.3,53,281.00. Due to the deficient act of the 1st opposite party, the 2nd opposite party denied the insurance and hence the complainant has lost the chance to be indemnified against the loss. Hence we are of the opinion that the 1st opposite party is liable to compensate the complainant for the full assessed amount.
In the light of above discussion, we allow the complaint and the 1st opposite party is directed to
1. Give Rs.3,53,281/- to the complainant with an interest @ 9% p.a. from the date of repudiation of policy ie.17.04.2019 till realization.
2.The 1st opposite party is directed to give 20,000/- towards compensation and 5000/- towards litigation cost.
Order shall be complied within a period of 30 days from the date of receipt of Order. If not complied as directed, the compensation amount will carry 9% interest from the date of Order till realization.
Pronounced in the Open Commission on this the 28th day of April, 2022
Smt. Bindhu R. Member Sd/-
Sri. Manulal V.S. President Sd/-
Sri. K.M. Anto, Member Sd/-
Appendix
Witness from the side of opposite party
Dw1 – Soumya R. Prabhu
Dw2 – Satheesan S.
Exhibits marked from the side of complainant
A1 – Copy of proposal form
A2 – Copy of policy for the period of 25-06-17 to 24-06-17
A3 – Copy of stock statement
A4 – Copy of stock inspection report
A5 - Copy of letter dtd.17-04-19 issued by 2nd opposite party
Exhibits marked from the side of opposite party
B1 – Copy of proposal form
B2 – True copy of policy
B3 -Copy of GST registration certificate
B4 – Copy of survey – report-Kerala flood report dtd.08-04-2019
By Order
Assistant Registrar
