Per Justice Mr.R.C. Chavan, Hon’ble President
This complaint filed by a company doing business in shares and securities makes out a grievance that opponent/Insurance Company did not honour its commitments under the policy of insurance taken out by the complainant.
2. The complainant had obtained Insurance Policy named “Trading Member Indemnity Policy” which was exclusively made for trading members of the National Stock Exchange (NSE) for indemnifying the insured for loss sustained in action in good faith upon written instructions or advices from the clients in respect of securities which are counterfeit, forged, fraudulently altered or lost or stolen. This Insurance Policy bearing No.120000/48/97/001 bearing Certificate No.97/677 was issued by the opponent for a period from 01/06/1996 to 31/05/1997. The complainant’s client Mridula Securities had sold shares in the regular course of business which were returned by the NSE with declaration that the endorsement was forged. Out of these shares 1700 shares of State Bank of India are the subject matter of this dispute. The complainant filed a claim before the opponent/Insurance Company on 10/05/1997. The complainant also lodged F.I.R. with the concerned Police Station. By letter dated 21/05/1997 the opponent appointed M/s.P.P. Shah & Co. as Surveyor. The complainant claimed to have renewed the policy for further period from 01/06/1997 to 31/05/1998 by paying huge premium of `2,00,008/- and also made a further payment of `1,40,829/- to the opponent. The surveyor assessed the claim for a net amount at `8,87,230/-. The Surveyor sought further clarification from the complainant as to why the complainant had not considered the advertisement published on 02/07/1996 in the Financial Express while trading shares which was subject matter of an armed dacoity dated 24/06/1996. The complainant replied that as a Broker they had taken all the care and acted bonafide and in good faith. The complainant claims that they continued to receive bad deliveries from their client Mridula Securities. Surveyor, by letter dated 05/01/1999 informed that bad deliveries received upto 13/05/1998 were assessed at `2,88,574/-. The opponent informed the NSE by Interim Report that the complainant’s claim had been approved for `4,04,799/- and cheque for this amount was received by the complainant. The opponent however rejected the claim in respect of loss on account of 1500 shares of State Bank of India. Second interim payment of `2,00,795/- was made to the complainant after deducting `1,60,191/- towards 600 shares of State Bank of India. Third interim payment was also made. The opponent informed by letter dated 08/12/2000 that the complainant had dealt in the stolen shares and therefore, complainant’s claim could not be settled. The complainant, therefore, issued a notice to the opponent on 10/03/2002 calling upon the opponent to make payment of `6,53,530/- being the value of 2300 shares of State Bank of India with interest @ 18% p.a. Since the opponent did not comply, the complainant eventually filed the complaint claiming a sum of `5,83,768/- towards value of 2250 shares with interest @ 18% p.a. from the date of actual loss till payment of the amount.
3. After the complaint was admitted and notice was issued, the opponent/Insurance Company filed its written version on 28/11/2002. The Insurance Company denied that there was any deficiency in service. It was stated that the case involved complicated question and intricacies and the complainant was itself responsible for the loss sustained. It was stated that the complainant was bound by the terms of the policy of the insurance and the complainant had to transact its business with due care and skill which the complainant did not do and therefore, the opponent/Insurance Company repudiated the claim specifically stating that the shares involved in the an armed dacoity of 24/06/1996 was the subject matter of the complaint, in respect of which newspaper advertisement was published on 02/07/1996 in the Financial Express. The opponent admitted having made various interim payments to the complainant which were payable under the policy. However, the opponent claimed that in respect of claim which was made in the complaint, the complainant had failed to show the professional skill and were negligent and therefore, it could not be said that they had acted in good faith in respect of those shares, justifying the opponent’s refusal to honor the claim made. It therefore prayed for dismissal of the complaint with costs.
4. The complaint and written response gave rise to following points for our determination and our findings thereon are recorded serially.
Point Finding
(i) Does the opponent prove that it is not Yes
liable to indemnify the complainant in view of
Section 3 of Trading Members Indemnity
Insurance Policy, the complainant having failed
to show that the complainant acted in good faith
while dealing with stolen shares?
(ii) What order? Complaint is
dismissed.
REASONS
5. Section 3 of the policy reads as under :-
“SECTION 3 : COUNTERFEIT SECURITIES
Indemnity is afforded to be Assured under this Section for losses sustained by reason of the Assured having in good faith acted upon written instructions or advices or having received Securities which are or become the property of the Assured which prove to be :
(i) Counterfeit; or
(ii) forged as to signature; or
(iii) fraudulently altered; or
(iv) lost or stolen.
Mechanically reproduced facsimile signatures shall be treated the same as hand-written signatures.”
6. It will be clear from reading of Section 3 that the insured is entitled to be indemnified only if the insured shows that he had acted in good faith in respect of securities which were stolen. In this case, there is no dispute, and it cannot be disputed, that the securities in question, in respect of which claim was made were stolen. Likewise, it is not disputed that in respect of those stolen securities an advertisement was issued and duly published in the Financial Express on 02/07/1996. Learned Counsel for the complainant submitted that the Financial Express is not widely circulated newspaper and in any case the advertisement contained several entries of number of share certificates printed in fine print and therefore, the complainant should not have been expected to keep a track of all those numbers. He also submitted that Stock Exchange itself, which also should have noted the advertisement, did not notice this and therefore, the complainant could not be blamed for the bad deliveries.
7. As rightly pointed out by the Learned Counsel for the opponent/Insurance Company, the complainant is not a lay person. It is a company dealing in the shares. Therefore, it is not open for the complainant to claim that they did not notice the advertisement in the Financial Express in respect of loss of shares and did not care to read the share certificates numbers, even if it is presumed that they were in fine-print. A layman can argue that he could not notice the number of shares which were part of an armed dacoity and therefore, dealt with those securities, but surely not a Stock Broker. Therefore, the complainant must blame itself for not being diligent in noting down the number of shares which formed part of an armed dacoity and allowing itself to be duped by being made to trade in those shares. Therefore, this is a clear case of complainant having acted negligently ruling out its claim of having acted in good faith. Consequently, the opponent/Insurance Company must be held to have been justified in repudiating the claim in respect of the shares made by the complainant. In view of this, we answer point No.1 in affirmative and pass the following order :-
-: ORDER :-
1. Consumer complaint is dismissed with cost quantified at `5,000/- to be paid to the opponent/Insurance Company.
2. Copies of the order be furnished to the parties.
Pronounced
Dated 29th October 2013.
