1.            The present Appeal has been filed against the Order dated 20.08.2007 passed by the State Consumer Disputes Redressal Commission, Rajasthan at Jaipur (hereinafter to be referred to as “State Commission”) in Complaint No. 9 of 2006, whereby the Complaint filed by the Complainant was partly allowed and Respondent, Iffco Tokio General Insurance Company Ltd. (hereinafter referred to as the “the Insurance Company”) was directed to pay to the Complainant a sum of ₹17,69,260/- towards loss suffered by it due to damage to the furniture stocks lying at its godown at Bhiwandi, along with interest @ 9% p.a. from the date of repudiation of claim, i.e. 30.03.2006 till realization.

2.            Brief facts of the case as narrated in the Complaint are that the Complainant, a proprietorship concern, which is dealing in the business of imported office furniture and having its Head Office at Jaipur and offices-cum-godowns at different parts of the country, obtained an Insurance Policy, namely, “Trade Protector Policy” from the Appellant Insurance Company through Opposite Party No.3, its Respondent No.2 herein for a sum of ₹75,00,000/- for the period from 25.07.2005 to 24.07.2006 covering the risk to its stock of imported furniture lying at the following locations:-

(i)            H-181, Malviya Nagar Industrial Area, Jaipur;

(ii)           843/1, Ghitorni Mehrauli-Gurgaon Road, New Delhi;

(iii)          17, 4th Block, 80 Ft. Road, Koramangala, Bangalore;

(iv)         3 Town Centre, Saki Naka, Andheri Kurla Road, Andheri East Mumbai-59; and

(v)          Building No.16, Licence Premises No.3, Ground Floor, Shri Compound, Kooper Bhiwandi..

3.            A sum of ₹34,641/- as premium was paid by the Complainant to the Agent and immediately they issued a cover note to the Complainant along with proposal form and proposal sheet dated 23.07.2005. In pursuance to the said Cover Note, an Insurance Policy dated 01.08.2005 for ₹75,00,000/- was issued by the Insurance Company in favour of Complainant for the aforesaid period covering all the five locations.

4.            Unfortunately, on 26.07.2005 at about 10-11 A.M. there was unpredicted heavy rain about 944 mm continuously for more than 18-24 hours in Mumbai and nearby areas as a result of which the godown situated at Building No.16, License Premises No.3, Ground Floor, Shri Compound, Kooper Bhiwandi was fully drowned in flood/water inundation. The entire furniture stocks lying in the said godown was badly damaged due to slush and dirt on being remained in the water log for 12 to 15 hours. Upon intimation, the Insurance Company appointed a Surveyor and loss Assessors, namely, M/s. Parimal R. Shah & Company, Mumbai to assess the loss. All the documents along with colour photo prints as demanded by the Surveyor, were supplied and a claim of ₹31,91,704/- (₹25,27,514 at godown of Bhiwandi + ₹6,64,190/- at showroom at Mumbai) was submitted by the Complainant. The Surveyor submitted its final report on 07.01.2006 assessing the net loss to the tune of ₹17,69,260/- as under:-

Loss Assessment

5.            However, the Insurance Company, vide its letter dated 30.03.2006, repudiated the claim as under:-

“With reference to your captioned claim, we wish to inform you that the insurance policy which was granted to you for the period 25th July 2005 to 24th July, 2006 as a renewal of the earlier policy of Bajaj Allianz for the period 25th July, 2004 to 24th July, 2005 provided coverage for property stored at only 4 locations at Jaipur, Mumbai, Bangalore and Delhi.

The alleged damages suffered by you were in respect of property located at Building No.16, Premises No.3, Ground Floor, Shree Arihant Compound, Vill. Kooper, Bhiwandi, which was not insured under the aforesaid policy on the date of loss.  Accordingly, we regret to state that the claim is not tenable under the policy and we are closing our file as “No Claim”. 

6.            Alleging deficiency in service on the part of the Insurance Company in repudiating its legitimate claim, the Complainant filed a Complaint before the State Commission, Rajasthan praying a direction to the Insurance Company to pay (i) ₹25,27,514/- towards the costs of the furniture lying at Bhiwandi godown; (ii) ₹5,51,115/- towards rent of godown for keeping the destroyed furniture; (iii) ₹3,00,000/- as interest for 9 months at the market price on amount of loss and (iv) ₹3,00,000/- for loss of business. In total a sum of ₹36,78,729/- was claimed.

7.            Upon notice, the Insurance Company contested the Complaint raising a preliminary issue that the Complainant was not a “Consumer” within the meaning of Section 2(1)(d) of the Act because it was involved in commercial activities at a large scale. On merits, it was pleaded that the claim was based on fabricated documents regarding coverage of the godown at Bhiwandi where loss had occurred as in collusion with one of the employees of the Insurance Company, the Complainant had managed to obtain an endorsement regarding the coverage of said godown in addition to four locations of godowns at Jaipur, Mumbai, Bangalore and Delhi covered under the policy; previously, the Complainant had obtained a Trade Protector Policy form Bajaj Allianz General Insurance Co. Ltd. valid for the period from 25.07.2004 to 24.07.2005 covering the risk to the goods lying at its godown located at four locations i.e. Jaipur, Mumbai, Bangalore and Delhi and in renewal of the said policy only, the Insurance Company had issued the policy covering the aforesaid locations valid from 25.07.2005 to 24.07.2006; adjudication in the Complaint required elaborate evidence and as such the case could not be decided under the summary proceedings under the C.P. Act; the required premium was charged based on the four locations; the claim of the Complainant was rightly repudiated as the goods lying at godown at Bhiwandi were not covered under the insurance policy and;  there was no deficiency in service on the part of the Insurance Company and the complaint is liable to be dismissed.

8.            The Agent/Respondent No.2 herein by filing separate written version, contended that it had acted as mere agent of the Insurance Company and since the Policy in question was issued by the Insurance Company covering the risk of five locations, the Insurance Company was liable to indemnify the loss suffered by the Complainant on account of damage to the goods due to flood/water inundation; the Complaint against them was liable to be dismissed.

9.            On appraisal of evidence led by the Parties in support of their respective claims, the State Commission rejected the preliminary objection regarding the maintainability of the complaint holding that when the policy in question was taken that may be for commercial purpose, but risk was covered as per policy and therefore, for all purposes the complainant was a “consumer”. On merits, after discussing in detail the relationship of the Agent and the Principal in the light of various provisions of the Contract Act, it came to the conclusion that principal, i.e. the Insurance Company was liable for the agent’s fraud acting within the scope of his authority, whether the fraud was committed for the benefit of the principal or for his own benefit and accordingly allowed the complaint with the aforesaid directions. The State Commission observed as under:-

“32.        In the present case, the cover note was issued by the agent and thereafter, in pursuance of the said cover note, the policy in question was issued by the Opposite Party No. 1 Insurance Company and therefore, the agent had acted within the scope of his authority and when this being the position, if any misrepresentation or fraud was committed by the agent in getting the godown at Bhiwandi included as fifth place of location of risk in the cover note as well as in the policy in question, for that principal (Opposite Party No.1 Insurance Company) is liable, especially when it had not taken any action nor made any investigation or rescinded or cancelled that cover note and policy after having come to know that a collusion or connivance had taken placed between agent or one of its employees and complainant for getting the godown at Bhiwandi included as fifth place of location or risk in cover note as well as in the policy in question.

33.          For the reasons stated above, it is held that apart from four locations of risk, namely, Jaipur, Mumbai, Bangalore and Delhi, godown at Bhiwandi was also included as fifth place of location of risk in the cover note as well as in the policy in question and in including godown at Bhiwandi as fifth place of location of risk in the cover note and policy in question, if there was any misrepresentation or fraud committed by the agent or one of employees of opposite party no.1 insurance company, for that, the complainant should not suffer and the opposite party no.1 insurance company is liable to indemnify the loss suffered by the complainant as godown at Bhiwandi where the furniture were damaged due to flood water, was insured with the opposite party no.1 under the policy in question and the Opposite Party No.1 Insurance Company has repudiated the claim of the Complainant in an arbitrary manner and without any basis and thus, the repudiation of the claim of the Complainant was not justified and it amounted to deficiency in service on the part of the Opposite Party No.1.”

10.          Aggrieved by the Impugned Order, the Appellant Insurance Company has filed the present Appeal before this Commission.

11.          Mr. P.K. Seth, learned Counsel appearing for the Appellant Insurance Company has strenuously argued that in the risk coverage was for only four godowns located at Delhi, Bangalore, Jaipur and Mumbai but with the help of Agent and an employee, the Complainant got fabricated endorsement of fifth location at Bhiwandi, which was not ratified by the Insurance Company, therefore, they are not liable to pay insurance claim for the loss occurred at Bhiwandi.  The State Commission erred in appreciating the fact that the alleged employee was no longer in the service of the Insurance Company and the Agent was not authorised by the Insurance Company to issue any such insurance policy.  Regarding adverse inference taken by the State Commission on the presumption that the Insurance Company had not taken any action or any investigation or cancelled the policy after having come to know that the fraud has been taken place, it was submitted that the Insurance Company came to know about the fraud for the first time only when they were served with the Notice of the Complaint by the Hon’ble State Commission along with copy of complaint and annexures including the said fabricated endorsement.  It was submitted that there was no deficiency in service on their part and it was prayed that the Order passed by the State Commission be set aside and their Appeal be allowed.

12.          Per contra Mr. Sanjay Gupta, learned Counsel for the Respondent No.1/Complainant supported the Order passed by the State Commission as according to him the State Commission had passed a well-reasoned and justified order, which is based on a correct and rightful appreciation of evidence and material available on record and does not call for any interference.

13.          Despite service of notice on the Respondent No.2, the agent of the Insurance Company, remained unrepresented.  Accordingly, we have heard Mr. P.K. Seth, Learned Counsel appearing for the Insurance Company and Mr. Sanjay Gupta, Learned Counsel for the Respondent No.1/Complainant, perused the averments made in the Complaint, Written Version and have given a thoughtful consideration to the various pleas raised by the Parties.

14.          From the perusal of the Cover Note dated 23.07.2005 and the Trade Protector Policy issued by the Appellant Insurance Company, it is clear that Building No. 16, License Premises No. 3, Ground Floor, Shri Compound, Kooper Bhiwandi (the location where loss had occurred) is mentioned as location of risk covered under the Policy in question and there is no dispute that that both the documents are signed by same duly constituted Attorney for and on behalf of the Appellant Insurance Company.   It is also not in dispute that the during the currency of the Policy, i.e., on 26.07.2005 there was heavy rain in Mumbai, due to which the godown situated at Bhiwandi was fully drowned in flood water, which caused loss to the Complainant Company.  The Surveyor appointed by the Appellant Insurance Company after inspecting the site assessed the net adjusted loss to the tune of ₹17,69,260/- vide his final survey report dated 07.01.2006.   It is also not in dispute that the policy in question came into force on 25.07.2005 and incident of loss had occurred due to heavy rain in Mumbai and nearby areas on 26.07.2005, which clearly proves that sufficient time was not available with the Complainant to fabricate the documents showing godown at Bhiwandi as fifth place of location of risk under the cover note as well as Policy in question.  

15.          The State Commission has rightly dealt with issue and passed a well-reasoned Order by observing as under:-

“26.        In the present case, the cover note attached with proposal form and sheet covering the risk of five locations including godown at Bhiwandi where the loss had occurred, was issued by the agent of the opposite party no. 1 Insurance Company and thereafter, in pursuance of that cover note, the opposite party no. 1 Insurance Company had issued the policy in question (Annex. A/1B) consisting of pages from 26 to 32 covering the risk of five locations including godown at Bhiwandi and all pages of the policy bear the signatures of same duly constituted Attorney.  Therefore, the agent of the opposite party No. 1 Insurance Company was having authority to issue cover note and he has acted within the scope of his authority. 

27.          Sections 196 to 200 of the Contract Act relate to ratification of acts done by one person on behalf of another but without his knowledge or authority.  An act done by an agent in excess of his authority may also be ratified.

28.          In this case, since the policy and cover note issued by the agent on behalf of the opposite party no. 1 Insurance Company including godown at Bhiwandi as fifth place of location of risk have not been rescinded meaning thereby they would be treated as ratified by the opposite party no. 1 Insurance Company.

Misrepresentation or fraud by agent

29.          Section 238 of the Contract Act provides that misrepresentation made or frauds committed by agents acting in the course of their business for their principals, have the same effect on agreements made by such agents as if such misrepresentations or frauds had been made or committed by the principals.

30.          The application of section 238 of the Contract Act requires that to make the principal liable, the misrepresentation or fraud must be committed by the agent in the course of business or employment, i.e., falling within the scope of authority of the agent.

31.          A principal is liable for the agent’s fraud acting within the scope of his authority, whether the fraud is committed for the benefit of the principal or for the benefit of the agent.

32.          In the present case, the cover note was issued by the agent and thereafter, in pursuance of the said cover note, the policy in question was issued by the Opposite Party No. 1 Insurance Company and therefore, the agent had acted within the scope of his authority and when this being the position, if any misrepresentation or fraud was committed by the agent in getting the godown at Bhiwandi included as fifth place of location of risk in the cover note as well as in the policy in question, for that principal (Opposite Party No.1 Insurance Company) is liable, especially when it had not taken any action nor made any investigation or rescinded or cancelled that cover note and policy after having come to know that a collusion or connivance had taken placed between agent or one of its employees and complainant for getting the godown at Bhiwandi included as fifth place of location or risk in cover note as well as in the policy in question.”

16.          We do not find any reason to interfere with the well-reasoned Order passed by the State Commission.  Consequently, the Impugned Order passed by the State Commission is upheld and the Appeal is dismissed being devoid of merit.  Keeping in view the facts and circumstances of the case, there shall be no order as to costs.