Sri. G.V.Balasubramanya<br /> Member,<br /> <br /> 1. The complainant, a Corporation constituted under the Companies Act, had given a term loan to M/s Dunford Fabrics situated at Basavanapura in Nanjangud Taluk. The said M/s Dunford Fabrics became a defaulter and hence it was taken over by the complainant. The custody of the plant and machinery is with the complainant since then.<br /> <br /> 2. The complainant had engaged the services of the second opposite party to guard the assets of M/s Dunford Fabrics. The assets had been insured against burglary, fire and special perils with the first opposite party. <br /> <br /> 3. There was a burglary at the insured premises on 8.2.2004. Plant and machinery worth Rs.4 lakhs was stolen. The theft was reported by the security guards of the second opposite party to the complainant who asked them to lodge a police complaint immediately. However, the written complaint was filed on 14.2.2004 after ascertaining the details and completing certain formalities. The police filed a C report after carrying out investigations.<br /> <br /> 4. The complainant informed the first opposite party about the theft and submitted all the documents along with the claim under the policy on 24.5.2004. However, the claim was repudiated on the grounds that the complainant had failed to take reasonable steps to protect the insured assets and that it was not clear whether the burglary occurred during the policy period.<br /> <br /> 5. The complainant has submitted that reasonable care had been taken by him to protect the assets of the unit since the assets were taken over 7 ½ years back. While admitting that the window panes were it is stated that the Corporation can not spend lakhs of rupees on a closed unit to replace the window panes, particularly when the sale process is on. It is, also, pointed out that the burgled items cannot be shifted through windows. <br /> <br /> 6. The complainant has disputed the first opposite party’s contention that the theft did not occur during the policy period. He has pointed out that (a)the date of theft has been established, (b)there is evidence of forced entry and (c)there is a C report of the police. In the presence of these facts such a contention of the first opposite party is not tenable. <br /> <br /> 7. The complainant has contended that the report of the surveyor appointed by the first opposite party can not be believed in view of the fact that he is appointed and paid by the first opposite party.<br /> <br /> <br /> 8. The complainant had taken steps through news paper for service of notice to the second opposite party. However, as he failed to appear on the day appointed for that purpose he was placed ex parte.<br /> <br /> 9. The defences of the first opposite party are manifold. It is stated that the complainant did not give them the list of items at M/s Dunford Fabrics at the time of their taking over. It is, also, stated that at the time of taking the policy, the complainant did not reveal the condition of the items that were being insured, such act amounts to suppression of material facts. <br /> <br /> 10. The first opposite party has flatly disputed the theory of theft. It is alleged that the complainant did not inform them about the theft immediately. It is, also, alleged that the complainant had not taken sufficient measures to safe guard the assets taken over by them and instead, by not carrying out repairs to doors and windows, an easy access was created to commit theft.<br /> <br /> 11. The first opposite party says that the machineries insured were rusting and had only scrap value at Rs.4 per kilogram. It is contended that under these circumstances the complainant should have given the weight of the insured machineries to show that they could have been carried away by the burglars on their heads. <br /> <br /> 12. The first opposite party has, also, alleged a nexus between the complainant and the second opposite party. Finally, it is alleged that the complainant was willfully negligent.<br /> <br /> 13. From the contentions of the parties on record the following points arise for our consideration:<br /> <br /> a) Whether the complainant proves that the first opposite party has rendered deficient service by repudiating his insurance claim?<br /> <br /> b) Whether the first opposite party proves that the repudiation is proper?<br /> <br /> c) What order or relief?<br /> <br /> 14. The above points have been answered by us as under:<br /> <br /> Point 9(a): In the negative<br /> <br /> Point 9(b): In the affirmative<br /> <br /> Point 9(c): As per final order <br /> <br /> <br /> <br /> REASONS<br /> <br /> 15. POINTS 9(a) & 9(b):- Both parties have filed a number of documents to substantiate their respective contentions. These have been referred to appropriate places.<br /> <br /> 16. The complainant has filed the mahazar dated 13.3.1998 drawn when the Corporation took over the assets of M/s Dunford Fabrics. It is through this document the complainant wants to show that the burgled items were there at the time of taking over the unit. The mahazar has been drawn by the officials of the complainant Corporation in the presence of some officials of State Bank of India. <br /> <br /> 17. The theft is alleged to have taken place on 8.2.2004. But the FIR has been registered on 20.5.2004 i.e. over three months later. This delay has been explained in the FIR as due to change in the company providing security at the unit. The second opposite party was responsible for providing security at the unit by virtue of an agreement dated 18.2.2002 with the complainant. The complainant entered into an agreement on 20.2.2004 with another security agency named M/s SMS Security Systems. We do not know under what circumstances the services of the second opposite party was terminated by the complainant. <br /> <br /> 18. The report of Shri.K.S.Prasanna, an investigator appointed by the first opposite party gives a wealth of information. This gentleman visited the unit on 18.2.2004, ten days after the theft, on the instruction of the first opposite party to investigate the claim arising out of the alleged theft. Shri.Prasanna was informed at the unit that the security was now being managed by a new agency with effect from 11.2.2004. It is he who has revealed that the proprietor of the second opposite party filed a C.Mis No.66/04 on 14.2.2004. He has, also, reported that the Nanjangud rural police informed him that the FIR was not filed as they were yet to receive the names and addresses of the security guards who were on duty before the theft. This implies three things. Firstly, that the complainant has informed about the theft to the first opposite party within a reasonable time. Secondly, that the second opposite party did file a police complaint [though a C.Mis] and thirdly that there was no unholy nexus of any sort between the complainant and the second opposite party. <br /> <br /> 19. The change in the security agency by the complainant around the time when the alleged theft took place has been highlighted by the first opposite party. Shri.Prasanna says that the new security agency M/s SMS Security Systems took over from 11.2.2004. The agreement between M/s SMS Security Systems has been executed on 20.2.2004 while the stamp paper used for the agreement has been purchased on 25.2.2004. The learned counsel for the first opposite party has pointed that this agreement can not be believed as the stamp paper on which this has been executed is dated 25.2.2004. We are not much concerned about this as this is a subsequent event. However, the complainant has not come out with any explanation as to why no action was taken against the second opposite party soon after the theft came to light on 8.2.2004. After all, the agreement between them has a clause which makes the second opposite party liable for any loss of property in the premises. Except a C.Mis filed by the proprietor of the second opposite party agency the complainant himself did not file any complaint about theft until after 3 months from the date of the alleged theft. Nor did the complainant take any action against the second opposite party in terms of the agreement between themselves. The complainant apparently allowed the second opposite party to go Scot free. It is even more suspicious that it took almost 3 months for the complainant to file the police complaint. This delay has been explained in the FIR as due to change in the security agency. We are afraid such an explanation is not acceptable. <br /> <br /> 20. As aforesaid the report of Shri.Prasanna is a document worth relying upon and we have given due weightage to it simply because he has unwittingly highlighted the lapses of both the complainant as well as the first opposite party. He has reported that the theft of the machineries could not have happened over night. The machineries alleged to have been stolen are so huge and weighty that they could not have been removed over night without a gas gutting device and without any noise. He is clear that at one or two persons can commit such a theft but not without the connivance of the security guards. <br /> <br /> 21. Shri.Prasanna has given a crystal clear picture about the security guards. He says that the guards were not paid properly by the agency and they slowly established links with the local people mainly the ex employees of the unit. Thus began the work of removing the parts of machinery and material from the premises. It started in 1999. Hence, it is not as if the theft took place over night. Shri.Prasanna further says that the guard who gave this information in writing for fear of Court proceedings. This is understandable. Thus, he is clear that the burglary has not taken place in one night. <br /> <br /> 22. A photo copy of the C report has been filed by the complainant. It is undated. It is not even known whether the complainant brought this to the notice of the first opposite party. At this stage it is necessary to quote the general conditions subject to which the insurance policy had been issued to the complainant. The relevant portion states as under <br /> <br /> “Upon the happening of any event giving rise or likely to give rise to a claim under this policy <br /> (a)The insured shall give immediate notice thereof in writing to the nearest office with a copy to the policy issuing office of the company as well as lodge forthwith a complaint with the police. <br /> (b)The insured shall deliver to the company, within 14 days of the date on which the event shall have come to his knowledge, a detailed statement in writing, of the loss or damage with an estimate of the intrinsic value of the property lost and the amount of damage sustained. <br /> (c) The insured shall tender to the company all reasonable information, assistance and proofs in connection with any claim hereunder.<br /> <br /> 23. As aforesaid the entire chain of events is suspicious. Though we are not casting any aspirations on anybody we can certainly conclude that the complainant as a Corporation has not acted diligently or responsibly which in insurance parlance is called “good faith”. The burden of proving good faith is initially on the insured who represents that the goods he is insuring is of a particular quality and value. Obviously, the complainant who is the insured in this case did not bother to check whether the machineries he was insuring were there in the premises or not. If the insured insures something which is not at all there, then he is deemed to have misled the insurer. <br /> <br /> 24. The damning statement made by Shri.Prasanna is that on his trying to locate the address of the second opposite party he found that no such agency existed at the given address. This once again exhibits the negligence on the part of the complainant. If the complainant employees a security agency without confirming its antecedents can it be said that he has acted “bonafide” and in “good faith”? Was he wise in entrusting security to such an agency? In fact, he does not even say that after employing the second opposite party he ever went near the unit periodically to check whether everything was in order. This appears to be case of fence eating the crop and the owner of the crop not taking sufficient steps to safe guard himself. <br /> <br /> 25. Insurance companies deal with public money. Hence, they have a duty as well as responsibility to guard themselves against fictitious/illegal/untenable claims. Thus, we find several clauses in the policy which are meant to protect the insurer. Apart from the clauses quoted above it is worth while quoting a few more. For example the exclusion clause reads “The company shall not be liable in respect of loss or damage where any inmate or member of the insured’s household or of his business staff or any other person lawfully in the premises in the business is concerned in the actual theft or damage to any of the articles or premises or where such loss or damage have been expedited or any way assisted or brought about by any such person or persons”[emphasis supplied].<br /> <br /> 26. The aforesaid clause of good faith has been explained under the heading “reasonable care” in the general conditions. It says, “The insured shall take all reasonable steps to safeguard the property insured against accident, loss or damage”. Apparently, the complainant did not visit the unit since its seizure in 1999. Nobody from the complainant’s office even bothered to have a look at the assets after its seizure. This is the indirect conclusion that the first opposite party’s investigator Shri.Prasanna has come to. His conclusions are based on solid grounds. Firstly, he says that such huge machineries could not have been removed in one day without attracting the attention of the security guards and the removed such articles could not have been transported without huge transport vehicles. The complainant has neither disputed this report nor filed any counter to the effect that their security guards tried to stop the theft on that night and got injured. This further strengthens the report of Shri.Prasanna that the security guards befriended the local people and connived with them in commission of theft over a period of time. Mere appointment of a security agency will not absolve the complainant of his duty under the insurance policy. Unless he proves that he visited the premises of M/sDunford Fabrics at regular premises and ascertained the antecedents of the security agency before and after their appointment he can not claim to have acted in “good faith”. These facts coupled with the fact that the complainant failed to file a police complaint of theft for 3 months clearly prove the lapses on the part of the complainant. The most important witness in our opinion was Shri.Prasanna whom the complainant could have cross examined. But no such attempt was made. When the complainant has failed to show that he has acted in good faith he is not entitled to claim any relief. Therefore we answer point 9(a) in the negative and 9(b) in the affirmative. <br /> 27. Before we conclude we have to point out that the complainant has sought to club two distinctive remedies against the opposite parties in one compliant. While the complaint against the first opposite party has arisen out of repudiation of the insurance claim, the complaint against the second opposite party may arise of the agreement dated 18.2.2002 which is a distinct cause. These remedies can not be clubbed. With these observations we proceed to pass the following order:<br /> ORDER<br /> <br /> A. Complaint is dismissed<br /> B. No costs.<br /> C. This order is without prejudice to the right of the complainant to seek his remedy under the agreement with the second opposite party.<br /> D. Give a copy of this order to both parties according to Rules.<br />