SMT. RAVI SUSHA: PRESIDENT

Complainant has filed this complaint U/s 35 of Consumer Protection Act 2019, seeking to get an order directing the opposite parties :-

1. To pay an amount of Rs.41,97,400/- to the complainant towards the loss and damages caused to the insured items
2. To pay an amount of Rs.7,00,000/- to the complainant which was paid to the opposite party  No.1 as interest of the OD loan
3. To pay an amount of Rs.5,00,000/- towards compensation for the mental agony and hardship caused to the complainant
4. Cost of the proceedings of the complaint.

Brief facts of the case are that complainant is doing the business of the sale of cement, Iron and steel pipes, roofing sheets and allied items and furniture in the building with Nos. AP-XI/545, AP-XII/407 and AP-XII/408 at New Bazar, Karuvanchal, Kannur having D&O License for the business and GST registration certificate.  Complainant pleaded that he had obtained a business loan of Rs.45,00,000/- from 1^st OP and the stock and inventories and the building was hypothecated  with OP No.1 bank.  It is pleaded that OP No.1 bank had arranged one Insurance policy from OP No.2 Insurance company w.e.f. 28/09/2018 to 27/09/2019.  Covering the stock of the complainant hypothecated with OP No.1 for an amount of Rs.85,00,000/- and a sum of Rs.12,638/-  was deducted from the account of the complainant by the OP No.1.  Complainant pleaded that OP No.1 had collected the documents like lease agreement, GST Certificate, list of stocks and Inventories, etc.  There after the officials of the OPs made joint inspection of the building bearing Nos. APX1/545, AP-XII/407 and AP-XII/408 and stocks and inventories kept in the building before granting the insurance coverage.  Complainant further submitted that after issuing policy certificate by OP No.2 to OP No.1, OP1 kept the policy document in their possession.  After repudiating the claim only the complainant received the copy of policy.  Due to heavy rain, the premises of the complainant submerged and the stock of the premises got damaged.  Complainant lodged claim with OP No.2, which came to be repudiated by the OP No.2 Insurance company on the ground that the location whether stock was kept and when the flood took place was not covered under the insurance policy.  According to the complainant the OP No.1 bank had given the loan against the stock stored in the premises room No.XI/545 where the flood affected and thus the stock in room No.XI/545 was clearly insured.  It was also pleaded the shop rooms No.XII/407, 408 which the Insurance company is supposed to have insured is not capable of holding the stock of the business.  It could hold  only to display the samples of roofing sheets, different types of pipes, bolt, screw etc. and another shop room is used as the office room and counter. Room No.XI/545 was used as godown for stocking the insured items.  Since the claim was repudiated.  The complainant sustained a huge loss of Rs.41,97,400/- in the flood and inundation as loss and damages of the inventories and stock.  The OPs are liable to compensate the complainant for the loss and damaged sustained by him.  The complainant also had to pay an amount of Rs.7,00,000/- as interest for the overdraft loan availed form the 1^st OP.  On 30/06/2020 the complainant issued a lawyer notice to the OPs calling upon Ops to consider the claim of complainant at the earliest and to redress his grievances considering the actual loss and damages suffered by the complainant.  The OPs received the notice issued by the complainant but so far they have not taken any steps to redress the grievances of the complainant.  Hence the complaint.

            After receiving notices, OPs 1 and 2 filed separate written version stating their contentions.

            OP No.1 stated that the complainant had availed an insurance coverage of his stock in trade from General Insurance company OP NO.2.  As per the terms  of Hypothecation of goods agreement executed by the complainant on 28/10/2014 in favour of the OP the complainant has to insure all the hypothecated goods against fire risk and any other risk as may be necessary and required by the financing bank and also  to submit the insurance policy certificate in time periodically.  Accordingly this OP as finance extended support to the complainant to get his stock in trade insured with the OP No.2.  The stock statements submitted by the complainant in form NO.98 to this OP confirm that the stock in trade covered by insurance coverage is under the building No. AP No. 12/407 and 408 New Bazar, Karuvanchal, Kannur District.  This is evident from the insurance policy No.220591821111100152 dated 28/09/2018.  The said insurance policy also shows that this OP is only finance with no liability to indemnify the complainant in any event.  The stock statement submitted by the complainant do not reveal the claim of the complainant is genuine.  The complaint will have to show that the goods claimed to have been damaged was covered by the insurance.  The allegation of the complaint that the officials of both the OPs made joint inspection of the building No. AP XI/545 before granting insurance coverage is false and concocted.  This OP is an unnecessary party to the claim.  There is no privity of contract between the complainant and this OP and not repudiating each and every allegation in the complaint.  This OP is not liable to pay anything and the complainant had to realize it from the insurer.  So it is humbly prayed that the complainant may be dismissed in limini with compensatory cost to this OP.

            OP No.2 filed version stating that  the liability of the Insurance company shall be as per the terms and conditions of the policy as agreed to by the parties only if the property insured described in the schedule is destroyed by the flood during the period of Insurance mentioned.  OP2 admitting the incident as stated by the complainant and also the claim application about it, the contention of the OP 2 insurance company was the shop room No.XI/545 where the stock damaged by the flood was not covered by the insurance policy and as such the insurance company would not be liable to accept the claim OP No.2 bank submitted that the hypothecation agreement dated 28/10/2014 executed by the complainant himself confirms that all the stock in trade is stocked at door No AP No.12/407 and 408 and there is no liability of the bank and hence it cannot be burdened with any compensation.  It is therefore prayed that this Hon’ble forum may be pleased to dismiss the complaint with costs to this OP.

Complainant filed his chief affidavit and documents.  He has been examined as Pw1, and the documents have been marked as Ext.A1 to A20.  The Advocate commissioner’s report was marked as Ext.C1.  The Advocate commissioner was examined s Pw2 on the side of complainant.  OP No.1 has not adduced any evidence.  OP No.2 Insurance Company submitted the policy in dispute, which was marked as Ext.B1.  After that the learned counsels of complainant and OPs 1 and 2 filed their written argument notes.  Learned counsel of complainant and OP No.1 also made oral argument.

The issue which has arisen for consideration is, whether the claim of the complainant in respect of damage to the insured items ‘stock’, stored at Room No. AP:XI-545, Karuvanchal, Kannur, not covered by the Insurance policy be allowed?

We have perused the records and the submissions of parties.

Complainant’s case is that he is doing the business of the sale of cement, Iron and steel pipes, roofing sheets and allied items and furniture in the building with                     Nos. AP-XI/545, AP-XII/407 and AP-XII/408 at New Bazar, Karuvanchal, Kannur having D&O License for the business and GST registration certificate.  Complainant pleaded that he had obtained a business loan of Rs.45,00,000/- from 1^st OP and the stock and inventories and the building was hypothecated  with OP No.1 bank.  It is pleaded that OP No.1 bank had arranged one Insurance policy from OP No.2 Insurance company w.e.f. 28/09/2018 to 27/09/2019.  Covering the stock of the complainant hypothecated with OP No.1 for an amount of Rs.85,00,000/- and a sum of Rs.12,638/-  was deducted from the account of the complainant by the OP No.1.  Complainant pleaded that OP No.1 had collected the documents like lease agreement, GST Certificate, list of stocks and Inventories, etc.  There after the officials of the OPs made joint inspection of the building bearing Nos. APX1/545, AP-XII/407 and AP-XII/408 and stocks and inventories kept in the building before granting the insurance coverage.  Complainant further alleged that after issuing policy certificate by OP No.2 to OP No.1, OP1 kept the policy document in their possession.  After repudiating the claim only, the complainant received the copy of policy.  Due to heavy rain, the premises of the complainant submerged and the stock of the premises got damaged.  Complainant lodged claim with OP No.2, which came to be repudiated by the OP No.2 Insurance company on the ground that the location whether stock was kept and when the flood took place was not covered under the insurance policy.  According to the complainant the OP No.1 bank had given the loan against the stock stored in the premises room No.XI/545 where the flood affected and thus the stock in room No.XI/545 was clearly insured.  It was also pleaded the shop rooms No.XII/407, 408 which the Insurance company is supposed to have insured is not capable of holding the stock of the business.  It could hold  only to display the samples of roofing sheets, different types of pipes, bolt, screw etc. and another shop room is used as the office room and counter. Room No.XI/545 was used as godown for stocking the insured items.  Since the claim was repudiated, complainant filed this complaint.

On the other hand OP2 Insurance company pleaded that the liability of the Insurance company shall be as per the terms and conditions of the policy as agreed to by the parties only if the property insured described in the schedule is destroyed by the flood during the period of Insurance mentioned.  OP2 admitting the incident as alleged by the complainant and also the claim application about it, the contention of the OP 2 insurance company was the shop room No.XI/545 where the stock damaged by the flood was not covered by the insurance policy and as such the insurance company would not be liable to accept the claim OP No.1 bank stated that the hypothecation agreement dated 28/10/2014 executed by the complainant himself confirms that all the stock in trade is stocked at door No AP No.12/407 and 408 and there is no liability of the bank and hence it cannot be burdened with any compensation.

The learned counsel of complainant submitted that the contention of OPs regarding non-covering of the premises is not maintainable.  According to complainant the shop rooms AP No.12/407 and 408 which OP NO.2 claim to have insured is not capable of holding the stock insured.  Further pleaded that the OP No.1 bank had hypothecated the stock stored in the building AP No.12/407 and 408 and APXI/545 of the complainant where the flood affected and thus the stock was clearly insured and hence the allegation of the Insurance company (OP No.2) against the complainant in this regard is false.  To support his contention, he submitted Ext.A10 Joint inspection report of the surveyor and Insured.  In which it is revealed that place of survey as M/S Universal Associated, No. AP XI/545/ Karuvanchal, Kannur,  Insured M/s Universal Associates.  It is also stated that Approx stock washed away (GP & GI Pipes) Rs.19,00,000/28500 Approx.  Mild steel wet and rust damaged as Rs.24,50,000/50,000. The complainant, therefore, contended that premises insured includes No APCI/545 also and the flood washed away the stock kept in the said shop room and got damaged, and hence his claim should have been admitted by the Insurance company(OP No.2).

It is to be noted that OP No.2 has appointed surveyor to assess the damage of insured stock, and quantum of loss etc.  But OP No.2 failed to produce the survey report before the commission to substantiate their contention and findings of the surveyor.    Therefore Ext.A10 can be believed and can be accepted as loss happened to the complainant due to heavy rain as alleged.

We can see that under the policy in question Ext.B1-A1, the risk location was “universal Associated, Door No.AP/12/407/408.  New bazaar, Karuvanchal”. Insured items stock and stock in process.  Sum insured Rs.85,00,000/-, warranty applicable stock lying adjacent in open, stocks stored in shops.

            The learned counsel of complainant submitted a ruling of Division bench of Hon’ble High court of Kerala, Reported in 2017(1) KHC 317.  In which Hon’ble High court held the at “a policy can be avoided for misrepresentation or non disclosure however misrepresentation or non disclosure should be material one and it must have induced the insurance company to make the policy in favor of the insured in a case where there was an inadvertent mistake and no misrepresentation or intentional non disclosure, rejection of claim cannot be justified”.  It is also held that  -insurance- mistake in building number of premises – rejection of claim – weather proper –when there is enough evidence on record to show that plaintiff was conducting business in the address of the new premises where the fire accident occurred and said address is  known to the insurer and the mistake regarding building number shown in the policy proposal  was not aimed at causing any loss to the insurer or gaining an advantage to the insured, it cannot be said that rejection of the claim was proper (Reported in 2017 (1) KHC 317).  Here in the present case there is no misrepresentation or non disclosure on the part of the complainant.  On the other hand the complainant furnished documents containing the building number of the buildings.  (Ext. A6, 7 & 8)  The omission/inadequate service on the part of the OPs.  Hence the OPs are in no way justified in rejecting the claim of the complainant.

            Here OP No.1 contended that the hypothecation agreement dated 28/10/2014 executed by the complainant himself confirms that all the stock in trade is stocked at door No. AP No.12/407 and 408 situated at New Bazar Karuvnchal, Kannur.  Complainant has strongly opposed the said contention of OP No.1.  In such a situation OP No.1 should adduce evidence and submitted the hypothecation agreement before the commission.  The learned counsel of complainant submitted a judgment of Hon’ble Supreme court, Vidhyadhar V Manikrao and Another.  (1999 KHC 1091) in which it is hold by Hon’ble Apex court that “where a party to the suit does not appear in the witness box, an adverse inference would arise against him.”  Further held that where a party to the suit does not appear in the witness box and states his own case on oath and does not offer himself to be cross examined by the other side, a presumption would arise that the case setup by him is not correct.

            Here any one appeared from the side of OPs 1and 2 to give evidence after submitting her documents like hypothecation agreement submitted before OP NO.1, further survey report.  Mere production of policy schedule is not sufficient to discard the pleadings of the complainant.  Here complainant raised another pleading that before issuing policy, a joint inspection was done by the manager of OP No.1 and the representative of OP No.2 Insurance Company.  OPs opposed the said contention of the complainant.  This contention of OPs cannot be believed.  Normally prior to issuing policy, especially for a huge an amount, it is the duty of Insurance Company and the bank, to inspect the insured item and its value etc.  As such in this case also representatives of OPs 1 and 2 had conducted joint inspection and assessed the stock and inventories insured by the complainant.  The Advocate Commissioner, in the report C1 specifically stated that Room No. APXII/407, is 22 feet long and 20 feet wide and room AP XII 408 is 22 feet long and 10 feet wide.  Further in witness box, the Advocate commissioner (PW2) deposed that 408 നമ്പർ മുറി ഓഫീസ് കൌണ്ടർ ആയിട്ടും  407 സാധനങ്ങൾ ഡിസ്പ്ലെ ചെയ്യുന്ന മുറിയും ആണ്.  545 നമ്പർ മുറി ഗോഡൌൺ ആയി ഉപയോഗിക്കുന്നു.  545 മുറിയിലെ സാധന സാമഗ്രികൾ 407,408 മുറിയിൽ വെച്ച് കച്ചവടം ചെയ്യാൻ സാധിക്കില്ല”.  It is also reported that Room No. APXI/547 is having long of 23.3 meter and a width of 11 meters (70*33 feet).  In C1 report it is also reported that Room NO.APXI/545/ is using as the godown for keeping he insured item stock and inventories.  In such a situation, we can presume that the complainant had included that Room No APXI/545/ n the hypothecation agreement.

            The Hon’ble Supreme court held that in Canara Bank V leathered Plastic Pvt. Ltd. (2020KHC 6397) (submitted by complainant.)  “Under Insurance by bank ie non-insuring of whole of the hypothecated assets of the borrower by the ban-commission was right in holding that the complainant had suffered loss because of inaction and negligence on the part of the bank- Any loss arising out of such deficiency was compensable under the provision of the Consumer Protection Act, 1986.”

            In the instant case, as held above by the Hon’ble Apex court, the OP No.1 bank should have exercised their liberty or option for effecting insurance chose not to cover the entire set of hypothecated assets to issue a  policy having insured value Rs.85,00,000/-.  So clear deficiency in service on the part of bank OP NO.1 in proposing to include the godown building Room No.APXI/545.

            Another pleading of the complainant that he came to know about the non-inclusion of the said godown building AP XII/545 only on getting policy document after het repudiation letter of his claim by OP No.2 Insurance company.  The complainant raised the said allegation in the complainant itself.  This allegation was opposed by  both OPs.  OP No.2 claimed that they had sent the policy documents just after its inception itself.  Though, Ext.B1 shows that a letter attached with policy document about sending the information given to the complainant   about the insured items, etc. no acknowledgment letter or material evidence submitted to show that such information was received by the insured.  Onus of proof that policy documents having terms and conditions of policy were supplied to the Insured lies upon the Insurance company. Plea of the Insurance company that in the cover note itself it is mentioned that any discrepancy in the document, can be informed Op Company for rectifications or its website, cannot be believe.  It proves that Insurance Company, did not supply the policy document with cover note.  OP No.1 bank also failed to submit any document to establish that the policy document was supplied to the insured.

            The plea of the OPs to the effect that only the shop NosXII/407,408  is covered by the insurance company is not corroborated by any documents like statement made by the OP bank to which the complainant was furnishing the stock statements because in these stock statements there was no mention of location of the stock made by the complainant or hypothecation agreement.  No evidence except policy document, is put up by the OPs to dispute or contradict the allegation made by the complainant.  Since, upon issuance of the Insurance policy, the insurer under takes to indemnify the loss suffered by insured.

            Hence in view of the judgment of  Hon’ble KHC 2017(1) KHC 317,  it is held that “Insurance- mistake in building number of premises –Rejection of claim.  Whether proper - when there is enough evidence on record to show that plaintiff was conducting business in the address of the new premises where the fire accident occurred and said address is known to the Insurer and the mistake regarding building number shown in the policy proposal was not aimed at causing any loss to the insurer or gaining an advantage to the insured, it cannot be said that rejection of the claim was proper.”

            In the instant case through Ext.C1 commissioner’s report it is proved that complainant is running business in the Room No APXI/545 at New Bazar, Karuvanchal, and thorough Ext.A10, it is proved that the surveyor conducted inspection on the said room and assessed the loss of stock kept in Room AP No.XI/545  as 4197400 means Ops 1 and 2 had know lodge that the insured items were stocked in the particular room and it was mistakenly avoided to include in the proposal form (not produced).  So the above said decision of Hon’ble High Court of Kerala is squarely applicable in this case.

            In view of the aforesaid discussion and the settled position in law, we are of the view that there is deficiency in service on the part of OPs 1 and 2.  Hence complainant is entitled to get the claim amount with compensation.  We are not inclined to allow the prayer number   b)  in the complaint as there is no evidence substantiating the said allegation and more over receiving OD loan is the option of the complainant.

            In the result complaint is allowed in part.  Opposite parties 1 and 2 are directed to pay Rs.41,97,400/- the amount assessed by the survey Ext.A10 to the complainant.  Together with Rs.1,00,000/- towards compensation of the mental agony.  Opposite parties are also directed to pay Rs.10,000/- towards cost.  Opposite parties 1 and 2 are jointly and severally liable to pay the awarded amount within one month from the date of receipt of the certified copy of this order. Failing which the amount Rs.41,97,400+Rs.1,00,000/- will carry interest 7% per annum from the date of order till realization.  Complainant can execute the order as per provision in Consumer Protection Act 2019.

Exts

A1- Photo copy of Insurance policy

A2- Claim repudiation letter dated 18/10/2019

A3- Copy of lawyer notice dated 30/06/2020

A4(series)- Postal receipts (2 in No.)

A5(series)- Acknowledgment card (2 in No.)

A6- Registration certificate issued by GST Registration Department dated 17/07/2018

A7- D&O License issued by Secretary Alakode Panchayat dated 04/12/2018

A8- License issued by Secretary Alakode Panchayat dated 11/04/2019

A9- Certificate issued by Velladu Village Officer dated 23/09/2019

A10- Joint inspection report dated 20/08/2019

A11- Certificate issued by Alakode Panchayat dated 04/09/2019

A12- Copy of complaint is CC58/2021(Certified copy)

A13- Version of OP1 is CC58/2021(Certified copy)

A14- Version of OP2 is CC58/2021(Certified copy)

A15- Certified copy of  Insurance policy No.22059192111000048

A16- Stock summary from 01/04/2019 to 09/08/2019

A17- List of materials destroyed in the flood

A18- List of materials washed away in the flood

A19- Photograph at building AP XII 545 during the flood.

A20- E-mail communication between the officials of the office & the complainant

C1- Commission report.

B1- Copy of policy

Pw1- Complainant

PW2-Vasantha M – Witness of complainant

      Sd/                                                                          Sd/                                                     Sd/

PRESIDENT                                                                   MEMBER                                                   MEMBER

Ravi Susha                                                               Molykutty Mathew                                     Sajeesh K.P

(mnp)

/Forward by order/

Assistant Registrar