IN THE CONSUMER DISPUTES REDRESSAL COMMISSION, KOTTAYAM
Dated this the 30th day of June 2023
Present: Sri.Manulal.V.S, President
Smt.Bindhu.R, Member
Sri.K.M.Anto, Member
CC No. 19/2021 (Filed on 28/01/2021)
Complainant : Rueben Terrin S/o Terrin Jose,
Proprietor, Big C, Athen Arcade,
M.C Road, Thellakom
Rep. by Power of Attorney Holder
Terrin Jose S/o K.T. Joseph,
Kuncharakkattil House,
Arumanoor P.O, Kottayam – 686 568.
(By Adv: Amala Treesa Antony &
Kurian George)
Vs.
Opposite parties : 1. The Branch Manager,
New India Assurance Company Ltd.,
Ettumanoor Branch Office,
Eden’s Shopping Centre, Pala Road,
Ettumanoor, Kottayam - 686 531.
(By Adv: P.G. Girija)
2. The Branch Manager,
South Indian Bank Limited,
Athirampuzha Branch,
Athirampuzha P.O, Kottayam - 686 562. (By Advs: Anie.C.Kuruvilla &
Seethal Susan Thomas)
.
O R D E R
Sri.Manulal.V.S, President
Complainant is the proprietor of M/s Big C, which is engaged in the distribution and sale of electronic goods, home appliances, furniture etc. and has retail showroom at Thellakom. The complainant is represented by his father who is the authorized Power of Attorney holder of the complainant. A showroom which was functioning at Kallissery was closed down in April 2018. The complainant had availed a cash credit loan facility of Rs. 5,00,00,000/- on 31-01-2018 from the second opposite party in the name of his proprietary concern creating security interest with respect to the stock in the Godown at Thellakom towards primary security. At the time of sanctioning the loan, the second opposite party insisted the complainant to insure the stocks of the complainant with the first opposite party who is the channel partner of the second opposite party. Complainant accepted it and all the work for getting the policy from the first opposite party was done by the second opposite party. It stocks all types in the showroom at Thellakom functioning at Door No. X/243 and Kallissery functioning at Door No. 11/343 A, B, C, D were insured with the first opposite party against the fire and allied perils vide policy 76250211170100000177 for a sum of Rs.6,20,00,000/-. The godown of Big C was functioning in Door No. X/420 of Athirampuzha Grama Panchayath and the stock in the said godown was insured with the first opposite party vide Policy No.76250211170100000179 for an amount of Rs. 2,10,00,000/- for a period from 6-11-2017 to 5-11-2018. The premiums for the aforesaid policies were paid to the first opposite party by the second opposite party by deducting the amounts from the complainant’s credit loan account.
The showroom at Kallissery was closed in April 2018 and the stocks therein were transferred to the godown at Thellakom. A request for enhancement of Policy No. 76250211170100000179 taken for the Thellakom Godown was made and the first opposite party after making the verification enhanced the insured sum to Rs.6,50,00,000/-.
Fire broke out on 24-05-2018 in the godown of the Complainant. On informing the Fire & Rescue Department, fire extinguishers reached the godown and extinguished the fire. Opposite Parties were also informed of the fire. First Opposite Party appointed a Surveyor, who inspected and assessed the loss due to fire. The claim, however, was repudiated by the opposite party stating that non-conformity of the identity of the building in the policy with the identity of the building where loss sustained and as to the legality of operating in the building due to the absence of any license for operating as a godown in the insured premises. The third reason stated for the repudiation of the claim is that the authorities could not find the actual reason of the actual cause of fire. According to the complainant he came to know about the differences in the address when he received the repudiation letter. It is averred in the complaint that the policy was obtained by the second opposite party without giving him an opportunity of choosing his insurer. It is further averred in the complaint that he had properly furnished the address of the risk location in Policy No. 76250211170100000177 to the 2nd opposite party who negligently furnished the address in Policy No.76250211170100000177 in the proposal form of Policy No.76250211170100000179. According to the complainant the second opposite party is instrumental to the loss suffered by the complainant on account of repudiation of the legitimate claim citing difference in the address of the risk location. It is submitted in the complaint that the complainant had all necessary licence and registration for operating a godown in the building and the same was provided to the first opposite party and the first opposite party had issued the policy after verifying and confirming the legality of all the documents relating to the business of the complainant. Though the Police Department and Electrical Inspector could not find the exact reason for the fire, the Fire and Rescue Department had given electric short circuit as the cause for fire in its initial report. According to the complainant all the reasons given by the first opposite party for repudiating the claim is invalid and illegal. The illegal repudiation of claim and inordinate delay in settling the claim of the complainant by the first opposite party is deficiency in service on their part. The mistake in the address of the godown in the insurance policy is only because of the negligence of the second opposite party and is deficiency in service of their part. Hence the complaint was filed before this Commission with the following prayer :-
(a) Direct the opposite parties to pay an amount of Rs.6,50,00,000/- .with interest@ 12% from 24-05-2018 till realization. (b) Award compensation of Rs.4,00,00,000/- for Mental agony and financial loss caused to complainant (c) Award Rs. 1,00,000/- as the cost of the complaint.
Upon notice opposite parties appeared before the Commission and filed separate versions.
Version of the first opposite party is as follows:
According to the first Opposite Party, a Standard Fire and Special Perils Policy was issued in the name of Big C to cover stock kept in Door No. X/120 in Athirampuzha Panchayath alone was insured with the first opposite party for an amount of Rs. 2,10,00,000/-. As per the policy, the stock in godown building No. X/120, Athen Arcade, Thellakom, Athirampuzha is insured in the name of M/s.South Indian bank as financiers. The averments in the complaint that the Policy No.76250211170100000179 was issued and further enhanced the sum insured Rs.6,50,00,000/- is true. The contract of indemnity is entered in good faith based on the details given by the second opposite party. The policy was issued as per details furnished by the financier M/s. South Indian Bank Athirampuzha, and the same is modified for enhancing the sum insured twice on 14-11-2017 by 1.20 crores and on 30-4-2018 by 3.20 crores and the bank Manager had given statement that he has inspected the godown on 29-01-2018. The complainant and the second opposite party has to give evidence regarding the stock at the time of fire and the building number and regarding the permission for the godown from local authorities since the insurance is based on the requirement of second opposite party. The claim is repudiated since the insured building number is incorrect, lack of data of stock as per insured value and lack of data regarding stock transfer from other shops in books or system.
On receipt of claim an initial survey was conducted by Surveyor K.J. Philip on 24-05-2018. Then, the regional office of the first opposite party appointed another Surveyor Jayaraman & Co. for a detailed survey and they inspected the premises on 30-05-2018, 1-06-2018 and 21-06-2018 and assessed the loss and submitted the final survey report on 18-05-2020. The complainant submitted an exorbitant claim for Rs.6,50,00.000/- without any basis. The Policy No.76250211170100000179 was availed for the building X/120, Athen Arcade, Thellakom, Athirampuzha. The first opposite party issued the policy in the address declared in the proposal form. The Bank has not disputed the location address mentioned in the policy at any point of time. The complainant assured the first opposite party that he had required GST registration and has the No Objection Certificate from the Department of Fire and Rescue. The godown had no license as per Municipal Records. The Police and the Department of Electrical Inspectorate could not find any reason for the fire. The identity/address of the insured premises where the loss occurred is not in conformity to that stated in the policy schedule. The complainant has not complied with the requirement of the surveyor to segregate and make available the identifiable damaged appliances to verify its presence in the godown in reference to the list of items offered by the complainant. Despite the surveyor’s appeal to the complainant to make available the damaged appliances which would realize considerable value due to its metallic scrap contents, it was not complied by the complainant thus denying an opportunity for the surveyor to ascertain the actual realization of salvage value. The second opposite party bank has not formally confirmed the stock position when sought for enhancement to the sum insured. The second opposite party has not confirmed from the insured whether they have formally acquired proper licenses from the authorities to operate as godown as it was confirmed that the insured do not have license from Ettumanoor Municipality besides licence from Fire Force as well. The report from Electrical Inspectorate has completely ruled out possibility of short circuit, besides the final report from police too is inconclusive leading to the conclusion that it is not a case of accidental fire. The accounting records especially the GSTN Forms were verified which showed anomalies on purchase and stock transfers said to have been made from their Chengannoor Branch/Showroom and the Thellakom Branch/Showroom. Among the various anomalies and non compliance of the insured over requirements enabling the surveyor to assess the loss, as per Condition No. 1 under Section B, this policy shall be void in the event of mis-representation, mis-description or non-disclosure of any material particular.
The surveyor has assessed the loss to Rs.1,67,23,288/- based on purchase bills and data on the salvage left at the premises for the purpose of assessing the loss. The stock in the godown consisted of the buy-back items collected during exchange of electronic/household items which has no value and that is also claimed as stock of original goods. The accident was happened exactly 23 days after the enhancement of the sum insured. The cause of fire is also doubtful and there is misrepresentation and non disclosure from the part of insured regarding the stock and the cause of tire. The stock which was kept in another building of Athirampuzha Panchayath is not insured. There is no basis for claim of Rs. 6,50,00,000/-. There is no deficiency in service on the part of the first opposite party.
Version of the second opposite party as follows:
Second opposite party admitted that the complainant had availed a cash credit loan facility of Rs.500 lakhs from the second opposite party on 30-03-2017 by way of take over the existing cash credit limit with Catholic Syrian Bank of Rs.450 lakhs ie., with an enhancement of Rs. 50 lakhs. On request of the parties the second opposite party had enhanced the cash credit limit the Rs.600 lakhs on 31-01-2018 by creating security interest on entire current assets of the firm and mortgage of two items of immovable property as collateral security. The party was availing the insurance coverage directly for many years by themselves. Separate policies were taken by him for showrooms and godown. At the time of taking over the cash credit facility from the CSB and even while enhancement of the cash credit facility from the second opposite party by the complainant, the insurance policy for his godown and showroom were taken directly by the complainant. By taking the insurance policy directly, he has to pay less insurance premium other than taking it through the financier.
After the enhancement of the existing over draft limit of 500 lakhs to 600 lakhs the second opposite party conducted an external stock audit during the month of February and March 2018. At that time the second opposite party noticed that the insurance amount covered by the policies was not adequate to cover the stocks in the showroom and godown. As the part preferred to take the policy on his own the second opposite party directed the complainant to take an enhanced insurance cover, covering the value of the entire stock and goods. On this the complainant took the insurance policy on his own by paying the insurance premium through AXIS Bank vide Cheque No.011654 for Rs. 3,816/- on 30-04-2018. So the averment in the complaint that the premiums for the policies were paid to the first opposite party by the second opposite party by deducting the amounts from the complainant’s cash credit loan account is false.
It is admitted that on 24-05-2018 a massive fire broken in the godown of the firm and the entire stocks in the godown were destroyed. The incident of the fire was immediately informed to the first and second opposite parties by the complainant and the first opposite party has inspected the site on that day itself. Later the first opposite party appointed an external surveyor for assessing the loss. The surveyor demanded several documents from the second opposite party and all these documents were given to the surveyor without any delay for helping the complainant. But it was understood that there was heavy delay in finalizing the survey report even after receiving the forensic report. While so after two years in the month of September 2020 the second opposite party received insurance claim repudiation letter from the insurance company. It is understood that the claim was repudiated by the insurance company stating that non-conformity with the identity of the buildings to which loss sustained. The non conformity of the building number is not the fault of the second opposite party as the second opposite party neither taken insurance policy nor paid the insurance premium from the complainant’s account maintained with the second opposite party. The averment in the complaint that the complainant had properly furnished the address of the risk location in Policy No.76250211170100000179 to the second opposite party who negligently furnished the address in 76250211170100000177 in the proposal form of Policy No.76250211170100000179 are false. It is true that the insurance company issued the policy after collecting the relevant documents and after inspecting the spot. So the difference in the building Nos. may be due to the inadvertence on the part of the insurance company and for which the repudiation done by the insurance company is quite illegal.
The second opposite party had sanctioned many loans for the restructuring of the cash credit limit in order to prevent the account turning to NPA. Eventhough the second opposite party had given many relaxations the complainant was not co-operative and he had routed the entire sales of their firm though other banks. Since the account has turned to NPA the second opposite party started initial proceedings under SARFAESI Act. So the complainant has no cause of action against the second opposite party and no reliefs are liable to be granted against the second opposite party.
Evidence part of this case consists of Deposition of PW1 and DW1 and Exhibits A1 to A7 and Exhibits B1 to B22.
On evaluation of complaint, version and evidence on record we would like to consider the following points.
Whether there is any deficiency in service or unfair trade practice on the part of the opposite parties? (2) If so what are the reliefs and costs?
POINT Nos.1 & 2 :-
Complainant is the proprietor of M/S Big C, which is engaged in the distribution and sale of electronic goods, home appliances, furniture etc. and has retail showroom at Thellakom. The complainant had availed a cash credit loan facility of Rs.5,00,00,000/- on 31-01-2018 from the second opposite party in the name of his proprietary concern creating security interest with respect to the stock in the Godown at Thellakom towards primary security.
The stocks of all types in the showroom at Thellakom functioning at Door No. X/243 and Kallissery functioning at Door Nos. 11/343 A, B, C, D were insured with the first opposite party against the Fire and Allied perils vide Exhibit B7 Policy bearing No.76250211170100000177 for a sum of Rs.6,20,00,000/- for the period from 6-11-2017 to 5-11-2018. According to the complainant the godown was functioning in Door No.X/420 of Athirampuzha Grama Panchayath and the stock in the said godown was insured with the first opposite party vide Policy No. 76250211170100000179 for an amount of Rs. 2,10,00,000/- for a period from 6-11-2017 to 5-11-2018. When the showroom at Kallissery was closed in April 2018, the stocks therein were transferred to the godown at Thellakom. Upon request for enhancement of sum insured in Policy No.76250211170100000179 taken for the Thellakom Godown, the first opposite party after making the verification enhanced the insured sum to Rs.6,50,00,000/ vide Exhibit B2 policy.
There is no dispute on the fact that on 24-05-2018 a massive fire broken in the godown of the firm and the entire stocks in the godown were destroyed. The claim of the complainant was repudiated by the first opposite party for the reason since the insured building number is incorrect, lack of data of stock as per insured value and lack of data regarding stock transfer from other shops in books or system.
Exhibit A2 is the Certificate of Registration for BIG C under Kerala Value Added Tax Rules 2005. On perusal of Exhibit A2 we can see that there was an endorsement on Exhibit A2 that the new godown is w.e.f 26-11-2010 Green Field Plaza Building, Building No. X/420 (B) M.C. Road, Ettumanoor. The agreement for rent which is entered between the defacto complainant and the building owner is produced and marked as Exhibit A3. On perusal of Exhibit A3 we can see that the building owner has rented out a shed which bearing No. X/420(B) of Ettumanoor Grama Panchayath to the defacto complainant for the purpose of godown of the BIG C. However on perusal of Exhibit B2 Standard Fire & Special Peril Policy bearing No. 76250211170100000179 we can see that location is Thellakom, Ettumanoor, Kerala and the description of property is as Stock of Furniture & Home Appliances at Door No. X/120, situated at Athen Arcade, Thellakom Athirampuzha Panchayath occupied as godown. Exhibit B15 is the letter issued by the Secretary of Ettumanoor Municipality to Branch Manager of the first opposite party. In exhibit B15 it is stated that the Municipality has not issued any licence to a godown in the name and style of Big C in Thellakom area. It is pertinent to note that in Exhibit B16 letter issued by the Station officer of Fire and Rescue, Kottayam, B19 FIS, B20 FIR, B21 Scene Mahazar and in B22 Final Report the number of the building was not stated. During the cross examination PW1 deposed that the building bearing No. X/120 is also insured.
As seen from the above, the policy was issued for a specific location with certain calculation of risk whereas the stock was located in another location having several other high risk causing factors.
According to the complainant the second opposite party who negligently furnished the address in 76250211170100000177 in the proposal form of policy No. 76250211170100000179. However in B4 letter which is issued by the complainant to second opposite party it is stated that “ ku¯v C´y³ _m¦v Xcp-¶-Xn \n¶pw- Xm-c-X-tay\ Ipd-ª-\n-c¡v \yq C´ym Ajp-d³kv I¼\n enan-äUv, Gäp-am-\q-cnse Hm^okÀ {io.-kp-tcjv IpamÀ.Pn hmKvZm\w sNbvXn-cp-¶p. At±lw t\cnÂh¶vv tÌm-¡v, tKm-Uu¬ apX-em-bh ]cn-tim-[\ \S¯n VAT, cPn-kvt{S-j³ ]IÀ¸v, hmSI DS¼Sn ]IÀ¸v F¶nh hm§n-b-Xn-\p-tijw am{X-amWv R§Ä¡v C³jp-d-³kv t]m-fnkn X¶n-cp-¶-X’v.
During cross examination PW1 who is the Power of Attorney holder of the complainant would depose that Exhibit B1 policy was taken during when the loan was with the Catholic Syrian Bank. He further deposed that he did not remember that whether Exhibit B2 is directly taken from the first opposite party by the complainant. He would depose before the Commission during the cross examination that the premium amount of Rs.13,816/- has been paid by him through a cheque drawn from his account which is maintained with the Axis Bank. On perusal of Exhibit B5 statement of loan account which is maintained by BIG C with the second opposite party we cannot see any deduction from the said account towards the premium of insurance policy Thus it is clear from the evidence that the impugned policy has been taken by the complainant directly from the first opposite party.
The next question which arises for our consideration in this case is as to whether the complainant disclosed a cause of fire, which he knew or reasonably believed to be correct, to the insurer. The case of the complainant is that the fire in his godown broke down in the early hours of 24-05-2018. In Exhibit B12 claim form submitted to the insurer, the complainant expressly has to declare that the cause of fire. Even in the complaint, the complainant has expressly alleged in Para 5 of the complaint that in the early hours of 24.05.2018, there was a major fire at the insured premises of the complainant, on account of short-circuit as per initial report from the Fire Force Department. Thus, a specific cause of fire was declared to the insurance company though, the complainant, in case, he was not aware of the cause of the said fire, could have stated so in the claim submitted to the insurance company. Even after the repudiation of the claim, the complainant did not change his stand and maintained before this Commission that the fire had broken out on account of short circuit in his premises. It would be pertinent to note here that in the repudiation letter, the insurer had disputed the cause of fire being short-circuiting and quoted extensively from the letters from Police, Fire Force and Electrical Inspectorate in this regard. Despite that the complainant did not come out with an alternative cause of fire nor did it take the stand that the cause of the fire could not be ascertained by it or could be other than short circuiting.
The learned counsel for the complainant relied mainly upon Exhibit A6 Initial Report of the Fire Department in support of his contention that the fire was actually caused due to short circuiting in the godown premises of the complainant. We have carefully examined Exhibit B17, the report of the Electrical Inspector, Kottayam dated 5-07-2018. The said report gives electric short circuit is not a possible cause of fire. Further in Exhibit B18 which is the report of the Assistant Director (Chemistry) and Scientific Officer (Physics) of Forensic Science Laboratory, Thiruvanthapuram clearly states that signs indicative of electric short circuit could not be detected on the metallic wires. There is no evidence of the Fire Department having actually investigated the cause of the fire or having taken opinion of a laboratory or an expert. In Exhibit A6, it only opined that the said fire could possibly be on account of short- circuiting.
No expert such as an Electrical Engineer was engaged by the complainant to visit the godown and ascertain the cause of fire. There is no evidence of the complainant having requested the insurer to appoint an expert to visit the site of fire and give an expert opinion as regards the cause of the said fire. Even after the rejection of the claim, the complainant did not examine any expert before us to establish that the fire in the insured premises was actually caused or could be caused due to electric short-circuiting. Since this is not the case of the complainant that cause of fire is not known or could not be reasonably ascertained and the facts and circumstances of the case rule out any reasonable possibility of the fire having been caused due to short-circuiting, there is no escape from the inference that the said fire was either a wilful act of the complainant or an act committed in connivance with it. Therefore, the insurance company was entitled to forfeit all the benefits which were available to the complainant under the policy taken by it.
As per Condition No.1 under Section B General Conditions, the policy shall be void in the event of mis-representation, mis-description and non-disclosure of any material facts. The complainant claimed that the entire stock in the godown was damaged due to fire and he claimed Rs.6,50,00,000.00. Though the complainant produced A5 stock statement it doesn’t bear the signature and designation of the person prepared it. He did not produce any stock register or purchase bill to substantiate his claim. The complainant did not produce any document to prove that second opposite party bank has formally confirmed the stock position when sought for enhancement to the sum insured. The complainant did not produce any documents to show that he had acquired proper licenses from the authorities to operate as godown as it was confirmed that the insured do not have license form Ettumanoor Municipality besides licence from Fire Force as well.
It was submitted that the claim was manipulated, fabricated and bogus. A contract of insurance is a contract of ubberrima fide based on good faith. If the claim of the insured is fraud, it is sufficient ground to repudiate the claim.
It was also submitted that the claim of the complainant was repudiated as the complainant violated important terms and conditions of the insurance policy. It was also submitted that complainant violated the principle of uberrima fide.
The claim was, therefore, repudiated by the first Opposite Party/Insurance Company vide Exhibit A7. The claim was rightly repudiated due to mis-representation/mis-declaration regarding the location risk as well as non-disclosure of facts and circumstances material to the risk as was clearly and elaborately brought out by the surveyor.
In view of the above discussion, we find that there is a gross violation, suppression and misrepresentation of material information regarding the location of the unit. The Opposite Party/Insurance Company rightly repudiated the claim of the complainant based on the detailed report of the surveyor. The complainant failed to establish any deficiency in service on the part of the opposite parties. We, therefore, find no merit in the complaint and the same is hereby dismissed.
Pronounced in the Open Commission on this the 30th day of June, 2023
Sri.Manulal.V.S, President Sd/-
Smt.Bindhu.R, Member Sd/-
Sri.K.M.Anto, Member Sd/-
APPENDIX :
Witness from the side of the Complainant :
PW1 - Terrin Jose
Witness from the side of Opposite Parties :
DW1 - Asha Rose Thomas
Exhibits from the side of the Complainant :
Ext. A1 - Special Power of Attorney dated 03/09/2016
Ext.A2 - Copy of Sales Tax Registration Certificate
Ext.A3 - Copy of Rent Agreement of Godown between
the complainant and one Sri.M.V. Joseph
Ext.A4 - Copy of PolicyNo.76250211170100000179
Ext.A5 - Copy of Stock Statement dated 23/05/2018
Ext.A6 - Copy of Initial Report from the Fire & Rescue
Department
Ext.A7 - Copy of Repudiation letter issued by the 1st opposite
party dated nil
Exhibits from the side of Opposite parties :
Ext.B1 - Copy of Policy No.76250211160100000080 taken by
the complainant with CSB, Kalathipadi Branch
Ext.B2 - Copy of Policy No.76250211170100000179 with
Copy of Premium Receipt
Ext.B3 - Copy of Policy No.76250246190100000036 from
31/12/2019 to 30/12/2020
Ext.B4 - Copy of letter issued by the complainant to the 2nd
Opposite party
Ext.B5 - Copy of relevant page of Inward Register
Ext.B6 - Copy of Repudiation letter issued by the 1st opposite
party to the 2nd opposite party
Ext.B7 - Copy of Policy No. 76250211170100000177 from
06/11/2017 to 05/11/2018
Ext.B8 - Copy of Statement of Accounts for the period
01/11/2017 to 30/11/2017
Ext.B9 - Complainant’s letter dated 30/04/2018 addressed to the
Ist opposite party
Ext.B10 - Complainant’s letter dated 11/04/2018 addressed to the
Ist opposite party
Ext.B11 - Copy of PolicyNo.76250211170100000179 from
06/11/2017 to 05/11/2018
Ext.B12 - Copy of Fire Insurance Claim Form
Ext.B13 - Copy of Fire Claim Preliminary Survey Report
dated 26/05/2018 prepared by K.J. Philip
Ext.B14 - Copy of Final Survey Report prepared by Jayaraman &
Company dated 18/05/2020
Ext.B15 - Copy of letter issued by the Secretary, Ettumanoor
Municipality to the first opposite party
Ext.B16 - Copy of letter No.C/32/2020 dated 14/01/2020 issued by
Station Officer, Fire & Rescue Station. Kottayam to the
Ist opposite party
Ext.B17 - Copy of the report of the Electrical Inspector, Kottayam
dated 5-07-2018
Ext.B18 - Copy of Report of the Assistant Director (Chemistry)
and Scientific Officer (Physics) of Forensic Science
Laboratory, Thiruvanthapuram
Ext.B19 - Copy of First Information
Ext.B20 - Copy of FIR
Ext.B21 - Copy of Scene Mahazar
Ext.B22 - Copy of Final Report
By Order,
Sd/-
Assistant Registrar
