Tamil Nadu

StateCommission

A/298/2019

The Branch Manager, M/s. United India Insurance Co Ltd, Catholic Centre, First Floor, No.64, Armenian Street, Chennai 600 001. - Complainant(s)

Versus

M.P.Mohan dass, No.29/3, Old No.14/1, Second Street, Parameswari Nagar, Adayar, Chennai 600 020. - Opp.Party(s)

M/s.Nageswaran & Narichania

04 Feb 2022

ORDER

IN THE TAMIL NADU STATE CONSUMER DISPUTES REDRESSAL COMMISSION, CHENNAI.

 

Present:                       Hon’ble Thiru Justice R.SUBBIAH       ... PRESIDENT

                                      Tmt. Dr. S.M.LATHA MAHESWARI  ... MEMBER

F.A. No.298 of 2019

(Against the Order, dated 20.08.2019  of the DCDRC,

                                Chennai  (North) , in C.C. No.58 of 2018)                                                    

                                                                        Orders pronounced on: 04.02.2022

            

The Branch Manager,

M/s.United India Insurance Co. Ltd.,

Catholic Centre, First Floor,

No.64, Armenian Street,

Chennai 600 001.                                                                                      ...Appellant / Opposite Party

vs.

M.P.Mohandass,

No.29/3, (Old No.14/1),

2^nd Street,

Parameswari Nagar,

Adyar, Chennai 600 020.                                                                       …Respondent / Complainant

 

 Counsel for Appellant     :M/s.Nageswaran & Narichania

 Counsel for Respondent :Mr.M.P.Mohandass

          This  First Appeal came up for final hearing on 22.12.2021 and, after hearing the arguments of both sides and perusing the materials on record and having stood over for consideration till this day, this Commission passes the following:-

                                                                                                O R D E R

R.Subbiah, J. - President.

             Aggrieved by the Order, dated 20.08.2019, passed by the District Consumer Disputes Redressal Forum, Chennai (North), in partly allowing C.C. No.58 of 2018, in favour of the respondent herein/complainant/insured, by directing the appellant herein/Opposite Party/Insurance Company to pay Rs.2,79,000/- towards the claim amount, Rs.30,000/- towards compensation for mental agony and Rs.5,000/-towards costs, the Insurance Company has come up with the present First Appeal before this Commission.

             2. For the sake of convenience, the parties shall be referred to herein, as per their nomenclature before the District Forum.

             3. The case of the complainant, as projected in the complaint before the District Forum, in brief, is as follows:-

               The complainant had started a Wooden Manufacturing Unit in the year 1982, at No.67, Tiny Sector, Guindy Industrial Estate, Ekkaduthangal, Chennai-600032.   The Unit under the area consisting of 2000 sq. ft. of Industrial Shed in the land measuring about 2400 sq. ft., was covered by brick walls on all sides, leaving the main entrance and side open. For developing the manufacturing activity, the Unit thereafter was transferred in the name of Mrs.M.Jayanthi, wife of the complainant. Subsequently, along with manufacture of wooden furniture, a new trade of Injection Moulded Plastic Items came to be pursued in the Unit.  Such modification in the nature of business was after an order, dated 09.08.2010, from the Small Industries Development Corporation (hereinafter referred to as the SIDCO). The complainant had insured the said Unit with the Opposite Party by obtaining a Standard Fire and Special Perils Policy (hereinafter referred to as SFSP Policy), dated 14.03.2012, with validity from 14.03.2012 to 13.03.2013, vide Policy No.010503/11/11/11/00000281.

             While so, on 29.02.2012 at about 10.15 P.M., the complainant was informed by a neighbour that his Unit was under fire.  Before they could reach the premises, the entire Unit with machinery was destroyed by fire, whereupon, the incident was timely informed to the Opposite Party on 30.10.2012 and to other authorities including the SIDCO, TNEB and Corporation of Chennai.  The Manager of the Opposite Party, while informing the complainant that one Mr.Kothandaraman was appointed as Surveyor to present a Report, instructed the complainant to fix an independent Surveyor on his own, since a Report by such Surveyor would be necessary for further verification.  Accordingly, the complainant engaged an expert Engineer/Mr.Poornachandran, who visited the premises on 30.10.2012 and presented a Report, dated 31.10.2012, estimating the total loss as Rs.15,51,155/-.

             The Surveyor appointed by the Opposite Party had sought for certain documents from the complainant and those documents were also furnished.  After the incident, the complainant had put up a new shed for manufacturing purpose and the same was insured by him with the Opposite Party under SFSP Policies, covering the period between 14.02.2014 and 28.09.2017. 

             Since there was considerable delay on the part of the Surveyor in giving the Report, by letter, dated 29.01.2018, the complainant insisted upon the Opposite Party to settle the claim amount at the earliest,  however, there was no reply at all by the Opposite Party.  The matter was pending from October, 2012, and the lull on the part of the Opposite Party exhibited utter slackness, hence, the complainant issued a legal notice, dated 23.02.2018, calling upon them to settle the claim amount/compensation.  While so, by letter dated 09.03.2018, the Opposite Party repudiated the claim by stating among other things that the property in question was transferred in the name of the complainant’s wife on 09.08.2010 itself by the SIDCO, however, the policy was taken in the name of the complainant, thereby, there is no insurable interest to the complainant.  Aggrieved by such repudiation, the complainant approached the District Consumer Forum, Chennai North, by filing C.C. No.58 of 2018, seeking to direct the Insurance Company/Opposite Party to pay the claim amount of Rs.3,10,000/- under the policy in question, to pay Rs.5,00,000/- as damages for mental agony, and Rs.10,000/- towards costs of the complaint.

             4. The Opposite Party filed a Version, wherein, they admitted about the SFSP Policy taken by the complainant, however, stated that the description of risk being storage of non-hazardous goods, it was subject to warranty that the goods of category I, II, III Coir waste and Coir fibre are not stored therein.  The complainant lodged a claim for the loss suffered due to an alleged fire accident at the insured premises on 29.10.2012.  Mr.J.Kothandaraman, Surveyor and Loss Assessor, appointed to survey  the insured property, after detailed investigations, found in his Report, dated 23.09.2015, that the insured building was a semi-constructed building and, after so finding, he assessed the damage and quantified the loss at Rs.79,147/-. The Surveyor had also made a specific observation that the complainant had stored plastic scrap classified under category III of hazardous goods, breaching the warranty and further, the description of risk as per the policy being ‘building occupied as godown’, the insured carried on manufacturing activity, which, again is a breach of conditions stipulated in the Policy.   Upon investigation of various factual aspects, it came to surface that the property was transferred in the name of Mrs.M.Jayanthi/wife of the complainant way back on 09.08.2010 by the SIDCO, while so,  the Insurance Policy was taken by the complainant in his own name.  The complainant/insured never informed the Insurance Company of such change in ownership, which is a clear breach of condition No.3 of the Policy.

             Further, the Civil Engineer appointed by the complainant had valued the building at Rs.15,51,155/- after applying depreciation, but, the complainant had insured the building for Rs.3,20,000/-, hence, there is under-insurance to the tune of Rs.12,31,155/-. As per General Condition No.1, the Policy shall be voidable in the event of mis-representation, mis-description or non-disclosure of any material particular.  On that basis and also by invoking condition No.3 of the Policy, the claim of the complainant was repudiated by letter, dated 09.03.2018.  Also, the complainant did not co-operate with the Surveyor by failing to furnish the documents in time.  The delay in processing the claim was due to non-furnishing of requisite documents and other particulars by the complainant regarding the claim.  By stating that the claim is not maintainable at all, both factually and legally, the Opposite Party sought for dismissal of the complaint.

             5.  The complainant filed Proof Affidavit and marked 18 documents as Exs.A1 to A18, while the Opposite Party marked the Survey Report as Ex.B1.  The District Consumer Forum, by the impugned order dated 20.08.2019, held that the transfer indicates only the Proprietorship and not the property; that the subsequent policies issued to the complainant in the year 2017 clearly indicates the Opposite Party’s acceptance of ownership; that, if there was a fault in the ownership in view of the transfer, the Opposite Party would not have admitted rest of the policies, as such, there is no question of ownership and it is only transfer of proprietrix concern only, which does not require any intimation to the Opposite Party.  After so holding, the District Forum partly allowed the complaint and issued the directions, as stated above.  Aggrieved by the same, the Insurance Company has preferred this Appeal.

             6.  Learned counsel for the Insurance Company would point out at the first instance that, while the insurance coverage is very specific to non-hazardous goods subject to a Warranty that goods of Category-I, II, III Coir waste and coir fibre are not stored in the Unit, the Survey Report revealed storage of plastic scrap classified under category-III of hazardous goods, thereby, there is a clear breach of warranty. Although the Civil Engineer appointed by the complainant valued the building at Rs.15,51,155/-, admittedly, the building was insured only for Rs.3,20,000/-, which is a clear indication of under-insurance, thereby, breach of condition No.1 of the policy is glaringly apparent.   By next pointing out that the property was transferred to Mrs.M.Jayanthi, wife of the complainant, way back on 09.08.2010, subject to the condition that the transferee/M.Jayanthi shall utilize the premises for industrial activity related to injection moulded plastic items, it is submitted that such name transfer as well as change in the trade/business activity was never informed by the complainant, which is a clear act of breaching condition No.3 of the Policy.  While so,  the District Forum miserably failed to appreciate the vital aspects viz., non-disclosure regarding transfer of ownership/proprietorship, undervaluation of the property and change in the business activity.  According to the learned counsel, the District Forum unfortunately overlooked the same, callously proceeded to find fault with the insurer and wrongly fastened the liability upon the Insurance Company, thereby, the impugned order is vitiated.  Learned counsel stressed that the District Forum failed to exhibit the expected degree of seriousness on the conduct of the complainant in violating the warranty related to storage of hazardous goods under category-III.  Inasmuch as the repudiation order is based on detailed investigations done on various core segments by the Surveyor, sound reasoning and logical conclusions, the impugned order passed by the District Forum, suffering from blatant flaws and erroneous conclusion, needs absolute interference by this Commission, he pleaded ultimately.

             7. Countering the above submissions, learned counsel for the complainant would argue that the Surveyor of the Insurer wrongly presumed that the Property stood transferred to M/s.Jayanthi, for, the Order, dated 09.08.2010, issued by the SIDCO makes it clear that Proprietrix alone changed and not the property, thus, the property still stands in the name of the complainant.  Although the Engineer engaged by the complainant valued the building for Rs.15,51,555/-, since the Policy taken was only for Rs.3,20,000/-, the District Forum, in terms of the value reflected in the Policy, rightly proceeded to direct for payment of Rs.2,79,000/-.  Inasmuch as the District Forum has properly analysed the issues involved in a right perspective to reach the ultimate conclusion, there is no scope for interference at all.  The impugned order perfectly being in order, the present First Appeal has to be dismissed, he pleaded.

             8.  Having regard to the rival submissions advanced on either side,   the only issue now requires adjudication in the present First Appeal by this Commission is,

        “whether the District Forum, before fastening the liability upon the Insurer on the main ground of delayed repudiation, has considered and discussed, in the light of various documents marked, the crucial points viz., change in proprietorship as well as change in nature of business and storage of hazardous goods in the Unit contrary to the policy conditions & warranty”,

so as to either sustain or set aside the impugned order under challenge.

             9.  In this regard, it is pertinent to advert at the first instance here that the SFSP Policy, dated 14.03.2012, marked as Ex.A4, was admittedly obtained by the complainant in his own name/Mr.M.P.Mohandoss.  Two vital aspects mentioned in the said Policy are in respect of coverage of risk and  description of risk.  While the former specifies “Storage of Non-hazardous goods subject to warranty that goods of Category I, II, III, Coir Waste, Coir Fibre, Caddies are not stored therein”,  the latter sets out “Building occupied as godown”.  As such, the Policy clearly provides for risk coverage only in respect of non-hazardous goods as against a warranty that there shall not be storage of any hazardous good falling under Category-I, II, III, etc.  Similarly, the Unit in question is shown as ‘Godown’ which expressly means a ‘storage facility’ and not even implicitly any ‘Manufacturing Unit’.

             Having noted the above details, before examining as to whether there was breach of Policy Conditions/warranty, let us look into Ex.A3/letter of the SIDCO, wherein, it is stated as follows:-

            “ … the  above allottee has requested to transfer the above T.S. (Tiny  Shed) to his wife, Tmt.M.Jeyanthi to function the Unit under the same name and style of M.M.Furniture  Works.

            As requested by the above allottee, the transfer of the Tiny Shed No.67 to Tmt.M.Jeyanthi as Proprietrix of the firm is hereby accepted, …………

            …………

            2. Transferee shall utilise the premises only for approved industrial activity which at present is ‘injection Moulded Plastic Items’. ”

A careful reading of the above letter/Order issued by the SIDCO makes it abundantly clear that the complainant herein, being the original allottee of the tiny shed/Wooden Manufacturing Unit called M.M. Furniture Works in the year 1982, had sought for transferring the said Unit in the name of his wife/Mrs.M.Jayanthi.   The  said Order is also specific that the request of the complainant in transferring the Unit to his wife as “PROPRIETRIX OF THE FIRM” was accepted.  Also, utilization of the premises by the transferee was approved only for “industrial activity” related to “Injection Moulded Plastic Items’.  

              From the above collective details, we could see without any difficulty that the change in proprietorship (from the name of the original allottee/complainant to that of his wife/Mrs.Jayanthi) and in the nature of business (from Wooden Manufacturing Unit to manufacture of Injection Moulded Plastic Items) admittedly took place in 2010 itself, that is, about a couple of years prior to taking the Policy in question.  That being so, quite strangely, while taking the Policy, the complainant projected himself as the insured in spite of the fact borne out by records that, at his request, the proprietorship of the Unit itself was transferred about a couple of years in the name of his wife by the SIDCO. Further, he described the Unit to be a Building occupied as Godown, which again is falsified by Ex.A3, wherein, it is mentioned that the premises is approved only for industrial activity related to ‘Injection Moulded Plastic Items”.  In other words, when the original allotment in the name of the complainant and the subsequent transfer of such allotment in the name of the complainant’s wife by the SIDCO is very specific for the approved “manufacturing activity” in the Unit and when it also exhibits change of business from ‘wooden manufacturing unit’ (before transfer) to manufacture of ‘injection moulded plastic items’ (after transfer), to say that the building was meant for storage/godown facility is at best a farce.

              In line with the above aspects, the Survey Report, dated 22.09.2015 marked as Ex.B1,  is quite categoric that there is a breach of warranty.  Relevant portion therefrom in that regard is apt to be quoted below:-

        “11. Breach of Warranty

        The insured found to have breached the warranties and conditions of policy and they are as follows:-

        i) The insured kept plastic scrap classified under Category III of hazardous goods breaching the warranty.

        ii) The description of risk as per policy ‘is building occupied as godown’ whereas the Insured carried on manufacturing activity.”

A conjoint reading of Exs.A3 and A4 as well as Ex.B1 would  undoubtedly spell out that, at the time of taking the policy, the complainant did not inform the Insurer about the change of Proprietrix and also the change regarding the nature of business, which not only amounts to non-disclosure of material particulars but also clear violation of condition No.3 (c) of the Policy that runs to the effect that the insurance ceases to attach as regards the property affected unless the insured, before occurrence of any loss or damage, obtains the sanction of the company, if the interest in the property passes from the insured otherwise than by will or operation of law. Also, very importantly, he “mis-described” the Building as Godown while, as per the own case of the complainant himself, after transfer, they also engaged in the new trade of Injection Moulded Plastic items.  Apart from that, the Report of the Surveyor revealed storage of Plastic Scrap, classified as hazardous goods under Category-III, which finding is not denied by the complainant/insured.   As such,  all the aforesaid acts of the insured undoubtedly amount to breach of warranty & condition No.3 and also condition No.1 of the Policy running to the effect that the Policy shall be voidable in the event of mis-representation, mis-description or non-disclosure of any material particular.

                         10.  In the light of the above discussion, a perusal of the impugned order shows that, very unfortunately, the District Forum has taken up a futile exercise to record a finding about the ownership of the complainant over the property, when, in fact, the property neither belongs to the complainant nor his wife, for, the records self-speak that it is nothing but an allotment given by the SIDCO in the year 1982,  in favour of the complainant  to run a Wooden Manufacturing Unit in the allotted space and such allotment came to be transferred  at his request by the SIDCO in the name of the complainant’s wife, about two years before taking the Policy. Neither the SIDCO allotted the space for use as godown or storage facility, since their order is very specific that the Unit is intended for industrial activity, nor the complainant and his wife used it as a godown, as it is the case of the complainant that he was running a manufacturing unit there. While so, the District Forum miserably deviated itself by refraining from delving into the core issues as pointed out above and, in a way,  dragged itself to pointlessly dive into the issue of ownership of the Property so as to record the ultimate findings against the Insurance Company.   The sole reason given by the District Forum to hold against the Insurer for deficiency in service is that the repudiation letter/Ex.A18, dated 09.03.2018, is highly belated.   Although, as per the Insurance Regulatory and Development Authority, repudiation cannot be made after a long time, in our considered view, having regard to the peculiar facts and circumstances of the present case, such technical reason is not hefty enough to dilute the outweighing factor viz., clear breach of  the  Warranty as well as  policy condition Nos.1 and 3, rendering the policy itself void because of clear instances of mis-representation, mis-description and non-disclosure of material particulars, as adverted to above.  To put it otherwise, running a manufacturing unit after insuring the place as Godown and storage of hazardous goods  there-at,  when the policy coverage is not for “hazardous goods” and  “manufacturing unit”, are clear instances of breaching the policy conditions/warranty that can never be justified for the reason of delay in repudiation.  Therefore, when the complainant himself, by his own acts, rendered the Policy absolutely voidable, cannot be allowed to succeed on the ground of delay in repudiation having regard to the specific counter-claim that the complainant contributed for such delay by belatedly submitting the documents required by the Surveyor.  At any rate, in a case of this nature, mere delay cannot be a premium to validate the Policy, which had already become void. Looking at any angle, we hardly see any justification whatsoever to sustain the impugned order passed by the District Forum, which totally misdirected itself in delving into irrelevant issues rather than focussing upon core points; as such, the said order suffers from nullity.

             11.  In the result, the First Appeal stands allowed and the impugned Order, dated 20.08.2019,  passed by the District Forum, in C.C. No.58 of 2018, is hereby set aside by holding that there is a flagrant breach of Policy Condition Nos.1 and 3/Warranty by the complainant, amounting to  mis-representation, mis-description and non-disclosure of material particulars, which rendered the Policy void; as such, the repudiation order of the Insurance Company is perfectly in order. No costs.                            

S.M.LATHA MAHESWARI                                                                            R.SUBBIAH, J.

MEMBER                                                                                                          PRESIDENT.