C.C. No. 98/2009

The complainant namely M/s. Bahubali Traders (P) Ltd. obtained a Fire & Special Perils policy from OP-1 namely M/s. Cholamandalam MS General Insurance Co. Ltd. in respect of stock of raw material and finished jute products in the premises of Nuddea Jute Mill at Chetan Sett Street in Kolkata, for a sum insured of ₹ 2 crores, which was later increased to ₹ 6.5 crores. The complainant obtained credit facility of ₹5 crores in respect of stock of raw jute kept at the aforesaid premises. No credit facility was taken from ICICI Bank in respect of finished jute products. Raw jute stock was pledged by the complainant with ICICI Bank by executing Pledge Agreement with the said bank on 29.08.2005.

2. The complainant entered into an agreement with Central Warehouse Corporation (CWC) for managing/operating the warehouse, where the raw jute and finished jute products had been stored. Under the said agreement, the warehouse area/premises was handed over to CWC, clause 11 of the said agreement, to the extent it is relevant reads as under:-

"11. The modalities of receipt of storage and delivery of the pledged goods shall be as follows:-

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Under no circumstances delivery will be allowed by CWC or delivery will be taken by the party without obtaining proper authorization letter/proper delivery orders issued on CWC by ICICI Bank.

(f) At the time of delivery of stocks the Warehouse Receipt issued by CWC at the time of receipt of stock shall have to be produced along with proper delivery order/authorization letter. No stock shall be delivered unless and until the Warehouse receipt is produced.

(g) xxx

(h) In case there is no balance quantity of stock for lifting available against the authorization letter/delivery orders issued by ICICI Bank, CWC is hereby fully empowered by virtue of this Agreement to prevent from physically lifting any quantity from Warehouse area/premises since the same shall be treated as unauthorized. The Mill will also reassures its commitment not to allow lifting any quantity of stock by the party from the Warehouse area/premises without obtaining proper authorization letter/delivery order.

(i) CWC shall maintain necessary and proper registers and records for the goods received, stored in the Warehouse area/premises and delivered from the Warehouse area/premises as per procedure of CWC. All receipt of stock/deliveries shall be duly acknowledged and countersigned by authorized officers of M/s, Bahubali Traders (P) Ltd. (Unit Nadia Jute Mills Co. Ltd.). CWC shall also provide Stock Statement of transactions of the goods to M/s. Bahubali Traders (P) Ltd. (Unit Nadia Jute Mills Co. Ltd.) indicating the quantity received, quantities delivered on each day against a particular day/month as well as the quantity delivered against the Authorization letters/delivery orders and the balance stock remaining in the Warehouse area/premises in the custody of CWC on weekly basis.

(j) xxx

(k) CWC will have complete administrative control and supervision in management of the Warehouse area/premises and storage of the goods and disinfestations service will be extended against separate payment to maingain quality of stocks by M/s, Bahubali Traders (P) Ltd. (Unit Nadia Jute Mills Co. Ltd.)"

3. The said agreement was amended w.e.f. 27.06.2006 vide addendum dated 01.10.2005, whereby the agreement between the complainant and CWC was extended to 10,000 M.T., comprising 5000 M.T. jute and 5000 M.T. finished products.

C.C. No. 135/2009

4. The complainant namely M/s. Coastal Vyapaar (P) Ltd. obtained a Fire & Special Perils Policy in respect of raw jute and its finished products kept at its premises at 4-D, Chetan Street, Kolkata for the period from 05.07.2006 to 04.07.2007, for a sum assured of Rs.6,25,00,000/-, in respect of stock of raw material and finished jute products. The above referred complainant had also obtained credit facility from ICICI Bank against pledge of the goods of M/s. Bahubali Traders (P) Ltd. as its own goods pursuant to a Memorandum of Understanding dated 22.06.2006 between M/s. Bahubali Traders (P) Ltd. and M/s. Coastal Vyapaar (P) Ltd. The finance obtained by M/s. Coastal Vyapaar (P) Ltd. from ICICI Bank against purchase of those goods was made available by it to M/s. Bahubali Traders (P) Ltd. which was to pay, to M/s. Coastal Vyapaar (P) Ltd. additional interest @ 2% per annum over and above the interest which the said company had to pay to ICICI bank.

C.C. No. 98/2009 and C.C. No. 135/2009

5. In an incident of fire which broke out in the night of 16.08.2006, the stock of finished jute products kept in the warehouse was damaged/destroyed. Separate claims were lodged with the insurer by M/s. Bahubali Traders (P) Ltd. and M/s. Coastal Vyapaar (P) Ltd., the claim of M/s. Bahubali Traders (P) Ltd. being for ₹ 3 crores and the claim of M/s. Coastal Vyapaar (P) Ltd. being for ₹75 lacs. M/s. Mehta & Padamsey Surveyors Pvt. Ltd. were appointed by the insurer, to conduct an inquiry and assess the loss. The incident of fire was also reported to the concerned police station, which submitted a final report dated 01.02.2008 before the concerned Additional Chief Judicial Magistrate. The insurer also appointed a private investigator to inquire into the matter.

6. The surveyors, vide their final report dated 26.11.2007, assessed the loss to M/s. Bahubali Traders (P) Ltd. @ ₹1,83,81,851/-. The loss to M/s. Coastal Vyapaar (P) Ltd. is stated to have been assessed @ ₹62,06,113/-. The investigator M/s Rayworth Detective Agency in its report dated 30.06.2007 inter-alia reported as under:-

"Whereas statements has been obtained from various individuals, the only finding was that the keys of the said godown used to remain with the security guards at the main gate. Whereas this does not mean that there is a hidden agenda for such an act, however unlawful, this might be one of the reasons for the CWC officers not presenting themselves for the enquiry process.

My only finding and suspicion is that the Keys of the said godown were with the Bahubali management at the time when the fire took place. They had complete access to the said godown, when the fire took place. Also please note that there was a lot of rumours that when the fire took place, only 10% to 15% finished jute goods were there in the said godown, the remaining being end products / caddies which were at much lower value in monetary terms. However my enquiry could not justify or reveal the same. Moreover, by the time I visited the mill, the said godown was completely cleared and there was not even a trace of fire debris at that place/said godown. Some of the debris/burnt finished goods were removed and kept separately in a separate godown and it was shown to me. My enquiry drew a blank as far as this aspect was concerned due to two reasons; firstly, I was never given access inside the mill when it was very much necessary for me to visit and secondly the time factor, i.e. I was able to visit the mill nearly after nine months after the fire took place in the said godown and / or eight months after my appointment. This is not to suggest that an unholy nexus existed but only that the matter should have been looked into at the appropriate time and / or within a reasonable time frame. Since a forensic expert has already looked into the matter at that time, I need not comment on it any further.

In preparing this report, some assumptions and presumptions has been made to a conclusion and is based on information gathered from different sources."

7. Since the claim was neither paid nor repudiated by the insurer, the complainants approached this Commission impleading the insurer, CWC and ICICI as the opposite parties in the complaint.

8. In its reply, the insurer has inter-alia pleaded that there was no raw jute in the godown at the time of fire and as far as finished goods were concerned, the same had been stored by the complainant unauthorizedly and contrary to the agreement with CWC. It is also pleaded in the written version filed by the insurer that only the pledged stock could have been stored in the warehouse under the management of CWC and the stock pledged with ICICI Bank comprised only raw jute and not its finished products. Thus, the case of the insurer appears to be that the finished goods which were damaged/destroyed in the fire were not covered under the insurance policy.

9. I have perused the insurance policy issued by OP No.1 to M/s. Bahubali Traders (P) Ltd. as well as insurance policy issued by it to M/s. Coastal Vyapaar (P) Ltd. Both the policies expressly insured not only the raw jute but its finished product as well. There was no stipulation/term in the insurance policy which prevented the insured from storing the finished jute product in the warehouse managed by CWC. Though only raw jute was pledged by M/s. Bahubali Traders (P) Ltd. while taking credit facility from ICICI Bank, the insurance policy did not restrict the scope of the insurance to only those goods which had been pledged with ICICI Bank. The insurance coverage extended to the raw jute as well as the finished jute products, kept in the CWC warehouse. In fact, as far as M/s Coastal Vyappar (Pvt.) Ltd. is concerned, it had pledged not only the raw jute but also the finished jute products with ICICI Bank.

10. As noted earlier, the agreement between M/s Bahubali Traders (P) Ltd. and CWC permitted storage of note only raw material but also the finished jute products in the said warehouse. Though, initially the agreement between M/s. Bahubali Traders (P) Ltd. and CWC is stated to be only in respect of jute to be stored in the warehouse, it is not in dispute that at the time the fire took place, the said agreement covered not only the raw material but also the finished jute products. Therefore, in my opinion, though only raw jute was pledged by M/s. Bahubali Traders (P) Ltd. with ICICI Bank, insurer was to reimburse it in respect of the loss on account of damaged/destruction of the finished jute products as well.

11. The learned counsel for the insurer drew my attention to the police report dated 01.02.2008 wherein it was stated that the keys of godown which were supposed to be in the custody of CWC, were handed-over to the complainant, though according to official of CWC, it was done only for smooth running of the mill. However, there is no evidence produced by the insurer or collected by the police to prove that keys of the godown had been handed-over by CWC officials to the employees of the complainant. The aforesaid allegation contained in the police report dated 01.02.2008 is emphatically denied by the CWC, which is represented by a counsel. Since, police did not charge-sheet any person, the aforesaid allegation made in the police report was never adjudicated. The police report does not indicate on the basis of whose statement they had arrived at the aforesaid finding that the keys of the godown used to be in the custody of the employees of the complainant. Had any witness been named, it would have been possible for this Commission to summon that person as a witness and verify the allegation made in police report in this regard. In the absence of any legally admissible evidence to prove that the keys of the godown used to be with the complainant, the charge made in the police report remained in the realm of allegation only and does not stand substantiated.

12. Though the investigator reported that keys of the godown used to remain with the security guard at the main gate, no statement recorded by investigator had been produced by the insurer to prove that keys of the godown used to remain with the security guard. In the absence of said evidence, the report of the investigator in this regard, cannot be said to be legally admissible evidence and cannot be accepted.

13. The investigator also reported that there were rumors at the time fire took place, that only 10% to 15% finished goods were there in the godown, though his inquiry could not justify or reveal the same. In the absence of any evidence to prove that only 10% to 15% of finished goods were there in the godown at the time of fire, suspicion raised by the investigator cannot result in rejection of the claim. Had the insurer been able to prove that only 10% to 15% finished goods were there in the godown at the time of fire, the rejection of the claim could have been justified.

14. It was noted by the investigator that by the time he visited the mill, the godown was completely cleared and there was no trace of fire debris, though some debris of the finished goods had been removed and kept separately in a separate godown which was shown to him. The aforesaid observation of the investigator, who visited the site much much later, is of no avail to the insurer since the loss suffered by the complainants has been duly verified and assessed by none other than the surveyors appointed by the insurer.

Moreover, the investigator himself declined to suggest any unholy nexus and also noted that forensic expert had already looked into the matter at the relevant time. Therefore, in my opinion, the report of the surveyor also cannot justify the rejection of the claim

15. Though the insurer has taken a primarily objection that complaint is barred by limitation, I find no merit in the contention since the claim was never repudiated at any point of time before the institution of the present complaint and prescribed period of limitation starts from the date when the claim is repudiated.

16. It was contended by the learned counsel for the insurer that neither complainant nor CWC or ICICI Bank supplied all the required documents to the insurer/surveyor. He has drawn my attention in this regard to the letter dated 20.03.2008 sent by the insurer to CWC, ICICI Bank and the complainants. However, in its reply to the consumer complaint, CWC has expressly stated that they have furnished desired information to the surveyor/insurer. CWC has also annexed to its written version, a copy of letter dated 06.02.2009, sent to the insurer with reference to their letter dated 14.11.2008. Vide aforesaid letter dated 06.02.2009, CWC has sent the required documents as requested by the insurer. The aforesaid letter purports to have been duly received by the insurer on 06.02.2009.

17. It is therefore, evident that all the requisite documents were duly provided to the insurer by CWC on 06.02.2009. Vide its letter dated 26.04.2008, M/s. Bahubali Traders (P) Ltd. had duly replied to the letter of the insurer dated 20.03.2008, responding to all the points raised in the letter of the insurer. The copies of procurement and invoices for raw jute were Annexure - I to the said letter. The copy of memorandum of understanding, addendum and letter dated 29.06.2006 were also annexed to the aforesaid letter of the complainant. It was also stated in the said letter that they had not issued any letter to CWC claiming damages/recovery against loss/damage to the goods while in their custody as the stock were insured by them directly with the insurer. The complainant M/s. Bahubali Traders (P) Ltd. also stated in the aforesaid letter that there was no raw jute pledged with the bank. The stock position was sent as Annexure – III-A to the letter, whereas monthly statement showing movement of the stock were enclosed as Annexure – III-B. Account of the stock of the finished goods as on the date of loss was enclosed as Annexure – IV-B, whereas copy of the stock of finished goods pledged with the bank was enclosed as Annexure – IV-B. The monthly statement of stock of finished goods godown wise was enclosed as Annexure IV-C. The copies of sale invoices were enclosed as Annexure VI whereas the claim form and claim bills were enclosed as Annexure V. I, therefore, find no merit in the contention that the complainant failed to supply the required documents to the insurer. In fact vide letter dated 13.05.2008, the insurer acknowledged the receipt of the aforesaid enclosures, though, they stated that they were yet to receive response from the financer i.e. ICICI bank and CWC. As noted earlier CWC provided the requisite documents vide its subsequent letter dated 06.02.2009. It has also to be kept in mind that as per the agreement with CWC, no goods could have been received in or delivered from the warehouse without proper authorization. CWC was also required to maintain registers and record of all the goods received in and delivered from the warehouse, which was under its management and control. The insured therefore was not in a position to unauthorizedly remove the goods from the warehouse. As far as ICICI bank is concerned, even if it failed to provide any document required by the insurer, the complainant cannot blamed for the said inaction on the part of the bank, when it has provided all the requisite documents necessary for the processing of the claim. What is more important in this regard is that the surveyor appointed by the insurer was able to assess the loss to the complainant, meaning thereby that all the documents which were necessarily required for the assessment of the loss had been duly submitted and considered by the surveyor.

18. In his assessment the surveyor had deducted 12.5% of the assessed loss, as the value of the salvage. The case of the complainant is that the said salvage was of no value and in fact the cost of removing the salvage from the mill was more than the value of the salvage itself. It is also contention of the learned counsel for the complainant that the permission to remove salvage came at very belated stage and the salvage got deteriorated further, in the meanwhile thereby, thereby becoming incapable of fetching any price in the market.

During the course of the arguments, I specifically asked the learned counsel for the complainant as to whether they are in a position to deliver salvage in its existing condition to the insurer. He however expressed his inability to deliver the said salvage to the insurer. No evidence has been produced by the complainant to prove the actual value at which it had disposed of the said salvage. In these circumstances, when the complainant has not produced any evidence to prove that the price at which the salvage was disposed by it, I have no hesitation in accepting the reduction of 12.5% made by the surveyor towards the value of the salvage and therefore, it is only the net amount after deduction of the value of the salvage which could be paid to the complainant.

19. For the reasons stated hereinabove, I hold that the complainant has been able to prove the loss to the extent assessed by the surveyor. However, despite the said finding, I am unable to direct payment of any amount by insurer to the complainant because admittedly the complainant had not obtained the requisite Fire License in terms of section 12 of the West Bengal Fire Services Act, 1950 for storing the goods in the warehouse where the said goods were got damaged/destroyed. Section 12 of the West Bengal Fire Services Act, 1950 reads as under:-

"12. Bar to use of premises for storing or processing hazardous substances without license - No premises in any area where this Act is in force shall be used for the purpose of storing or processing at any material point of time hazardous substances beyond such quantity as may be prescribed unless the owner or occupier thereof shall have previously been granted a license by the Collector."

20. Schedule-I of the West Bengal Fire Services (Fire License) Rules, 2004, framed in exercise of the powers conferred by section 10(2), section 12, section 13, section 14(2), section 15(2), 18, 19 and 38 of the West Bengal Fire Services Act, 1950 clearly shows that jute is a hazardous substance and only 1870 kg of the aforesaid product was exempt from fire license. Any quantity above 1870 kg could be stored only on obtaining the requisite license in terms of section 12 of the West Bengal Fire Services Act, 1950, from the concerned Collector. It is an admitted position that the prescribed license had not been obtained and the quantity stored in the warehouse was much more than the exempted, the said quantity being as much as 5000 M.T. whereas the exempted quantity was only 1870 kg which comes to 1.876 M.T.

21. It is contended by the learned counsel for the complainant that this was not the term of the insurance policy that the insured would obtain a fire license in terms of West Bengal Fire Services Act, 1950 in respect of the insured goods and therefore, storing the said goods without requisite license does not constitute a breach of any term of the insurance policy. The contention is that unless there is a breach of the term and condition of the insurance policy, the insurer cannot repudiate the claim. The learned counsel for the insurer on the other hand has relied upon the decision of the Hon’ble Supreme Court in Narinder Singh Vs. New India Assurance; Company, IV (2018) CPJ II (SC). In Narinder Singh (supra) it was found that the vehicle which had been duly insured with the respondent – New India Insurance Co., had not been registered after the expiry of the temporary registration. The Hon’ble Supreme Court, noticing the requirement of the registration of the vehicle prescribed under section 39 of the Motor Vehicle Act, held that no person can drive the motor vehicle in any public place without any valid registration granted by the registering authority and the temporary registration in terms of section 43 of the said Act was valid only a period not exceeding one month which could be extended only in a case where temporary registration is granted in respect of chasis to which body has not been attached and the same is detained in a workshop beyond the said period of one month for being fitted with a body or unforeseen circumstances beyond the control of the owner. The Hon’ble Supreme Court held that using a vehicle on public road without any registration was not only an offence punishable u/s. 192 of the Motor Vehicle Act but also a fundamental breach of the terms and conditions of the policy’s contract. The learned counsel for the insurer submits that motor insurance policy in respect of a vehicle, which is a standard policy, also does not contain a term requiring the insured to drive a vehicle without certificate of registration nor does it contain a general clause requiring the insured not to commit breach of any provision of the Motor Vehicle Act. His contention is that when a claim on account of loss due to accident of a vehicle can be denied on the ground that vehicle was not registered in terms of section 39 of the Motor Vehicle Act, a claim in respect of loss on account of fire also cannot be allowed when the goods are stored without obtaining the requisite license required under a statutory enactment. I find merit in the contention and relying solely upon the decision of Hon’ble Supreme Court in Narinder Singh (supra), I hold that though the claim otherwise stands proved to the extent recommended by the surveyor, the same cannot be allowed as the complainant had not obtained the requisite license in terms of section 12 of the West Bengal Fire Services Act, 1950 for storing jute products which are hazardous goods in the godown where the fire damaged/destroyed those goods. It would also be pertinent to state here that requirement of obtaining a license for storing hazardous goods in a warehouse cannot be said to be only a technical requirement since such a license can be issued only after ensuring that all the necessary firefighting measures have been provided in the warehouse. Had the complainant obtained the requisite fire license, it could have been inferred that it had provided the requisite fire safety measures in the warehouse where the hazardous goods were stored by it. Though, the insurer did not ask the insured to produce the said license before issuing the insurance policy or at any time thereafter, the same would be of no consequence since a contract of insurance is based upon utmost faith and therefore, the insurer would have no reason to even suspect that the insured would not comply with the statutory requirement of obtaining a fire license for storage of the hazardous goods in a warehouse.

22. The decision of this Commission which the Hon’ble Supreme Court upheld in Narinder Singh (supra) was based upon an earlier decision of this Commission in Kaushalendra Kumar Mishra vs. Oriental Insurance Co. Ltd. (2012) 2 CPJ 189 (NC). In Kaushalendra Kumar Mishra (supra), the insurance claim in respect of motorcycle snatched from its driver was rejected on the ground that the vehicle was not registered and the said non-registration violated section 39 of the Motor Vehicle Act. The District Forum rejected the above contentions of the OP/Insurance Company and held that use of the vehicle without registration was a matter to be dealt under the Motor Vehicles Act, but the insurer and the insured are bound by the terms of the contract between them. In the absence of a specific condition in the policy that if the owner does not get the vehicle registered within a period of seven days of its purchase, the Insurance Company will not be liable to pay for the loss of the vehicle, it was not proper to repudiate the claim on this ground.

The order passed by the District Forum allowing the complaint having set aside by the State Commission, the complainant approached this Commission by way of a revision petition. Allowing the revision petition and dismissing the complaint, this Commission had held that use of the vehicle in violation of the law itself will take it beyond the protection of the policy and therefore, the insurance company was justified in repudiating the claim.

23. For the reasons stated hereinabove, I hold that the complainant committed breach of an inherent fundamental term of the insurance policy, by storing hazardous goods without obtaining the license required under section 12 of West Bengal Fire Services Act, 1950. The complaints are therefore dismissed, with no order as to cost.