NATIONAL INSURANCE CO. LTD. V. M/S. JAISHREE INDUSTRIES & ANR.

National Consumer Disputes Redressal Commission, New Delhi

First Appeal No. 629/2012

Judgment Date:
18-09-2018

NATIONAL INSURANCE CO. LTD. ..Petitioner

M/S. JAISHREE INDUSTRIES & ANR. ..Respondent

Bench:
{HON'BLE JUSTICE MR. PREM NARAIN, PRESIDING MEMBER }

Citation:

First Appeal No. 601 of 2012 and First Appeal No.629 of 2012 have been filed by the appellant, State bank of
Bikaner and Jaipur (now State Bank of India) and National Insurance Company Ltd. respectively against the order
dated 27.8.2012 passed by the State Consumer Disputes Redressal Commission, Rajasthan (for short, ‘State
Commission’) in CC No.20 of 2008.

2. Brief facts of the case are that the respondent no.1/complainant has taken the cash credit facility from the
State Bank of Bikaner and Jaipur/OP-3. The stocks were insured under insurance policy given by the National
Insurance Company Ltd./OP-1 and the policy was valid from

14.2.2004 to 13.2.2005 and the sum insured was Rs.8,00,000/-. It is mentioned in the policy that property is
situated at above address and this address is given as A-89, Sunder Nagar, Ajmer Road, Jaipur, Rajasthan – 302
006. This policy was renewed from 18.2.2005 to 17.2.2006 with sum assured as rs.8,00,000/- only and risk
location as A-89, Sunder Nagar, Ajmer Road, Jaipur. The policy was further renewed from 21.3.2006 to 20.3.2007.
In this policy also it is mentioned that the property is situated at A-89, Sunder Nagar, Ajmer Road, Jaipur,
Rajasthan – 302 006. However, in this policy the sum insured has been increased to Rs.25,00,000/- and
description of risk insured shown as “Wooden Furniture”. Another policy was taken from 27.12.2005 to

20.12.2006 for Rs.20,00,000/- basically to cover saw mills (including timber merchants premises where sawing is
done).

3. During the night of 30.9.2006 and 1.10.2006 a fire broke out in the godown of respondent no.1. The claim
was submitted before the insurance company. However, the insurance company repudiated the claim on 4.2.2008
on the ground that the surveyor has intimated that the stocks were kept at Plot No.215, Sunder Nagar, Ajmer
Road, Jaipur and these stocks were not insured under the policy. The complainant then filed a consumer
complaint bearing CC No.20/2008 before the State Commission. The insurance company/OP-1 resisted the
complaint by filing the written statement stating that the proposal for insurance was only in respect of property

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 NATIONAL INSURANCE CO. LTD. V. M/S. JAISHREE INDUSTRIES & ANR.

situated at Plot No. A-89, Sunder Nagar, Ajmer Road, Jaipur, whereas the fire broke out at Plot No.215 and
therefore, the stocks kept at Plot No.215 were not covered under the insurance policy. Hence, the insurance
company has rightly repudiated the claim. On this basis, the complaint was requested to be dismissed.

4. OP-3 Bank also filed written statement stating that the Bank obtained the insurance policy on the address
given by the complainant in the loan application and therefore, there is no deficiency on the part of the bank
too and it was requested to dismiss the complaint. The State Commission vide its order dated 27.8.2012 allowed
the complaint as under: “15. Therefore, for the aforesaid reasons, the complaint of the complainant firm is
allowed. The complainant is entitled to get Rs.36,89,345/- (Rupees Thirty Six lac Eight Nine Thousand Three
Hundred and Forty Five only) from the non-petitioners jointly and severally. The complainant shall also be entitled
to get 9% interest on the aforesaid amount from the date of filing of the complaint. The complainant is also
entitled to get Rs.30,000/- (Rupees Thirty Thousand) as compensation for mental agony and cost of the
proceedings. The non-petitioners are directed to make the payment of the aforesaid amount to the complainant
within one month from the date of the order.”

5. Hence, the OP-1 insurance company as well as OP-3 bank have preferred these appeals before this
Commission.

6. Heard the learned counsel for the parties and perused the record.

7. Learned counsel for the insurance company stated that the insurance company issued the insurance policy
on the basis of proposal form. For the policy of Saw Mills, in the proposal form against the column Location of
Risk to be covered “A-89, Sunder Nagar, Ajmer Road, Jaipur” is mentioned. Learned counsel for the insurance
company further stated that all documents like IT Returns and Rent Agreement give the same address as “A-89,
Sunder Nagar, Ajmer Road, Jaipur”. In all legal documents on the basis of which the bank has taken the policy
on behalf of the complainant same address is there. So even if there is some fault of address, the bank would
be responsible and not the insurance company as the job of the insurance company is only to insure the
properties as given in the proposal form. It was argued that the State Commission has taken this to be an
admitted fact that the complainant started his business in 2000 and shifted his business to Plot No.215 Sunder
Nagar, Ajmer Road, Jaipur” in 2001 whereas, there is no such admission on the part of the insurance company.
Learned counsel for the insurance company stated that the observation made by the State Commission in
Paragraph -14 of the judgment cannot be regarded as a justification for ordering payment of insurance claim to
the complainant. This para reads as under: “ 14. Thus, from the documents submitted by both the parties, it is
evident that vide a joint note Ex.25, both the insurance company as well as the bank were in favour of granting
relief and approve the claim of the complainant on the basis of the report of the surveyor. There is no report
either of the surveyor or on behalf of the non-petitioners to show that the complainant firm was running its
business at Plot No.89, instead of Plot No.215, where the fire actually took place. The surveyor also gave its
report on the basis of loss due to fire at Plot no.215, where the stock of the complainant firm was kept. Despite
strong recommendation of three senior officers of the insurance company vide their report Ex.25(B) dated
20.07/07, the recommendations Ex.25(C) dated 24.10.07 of three other senior officers of the regional office of the
insurance company and recommendation of two officers of the RCC, one of whom was Chief Regional Manager,
the claim of the complainant firm was repudiated on technical grounds in a very casual, mechanical and routine
manner by the insurance company vide its letter Ex.12 dated 04.02.08, solely on the basis of a dissenting note of
Dr. S.C. Pandiya, the Regional Manager, a member of the RCC. The insurance company should always take
positive approach in considering such cases in the larger interest of the Company and we are of the opinion that
the insurance company arbitrarily, erroneously and illegally repudiated the claim of the complainant firm and they
were not justified in doing so. The repudiation and rejection of claim by the insurance company amounts to
deficiency in service and therefore, the present complaint deserves to be allowed.” It was further argued that
internal recommendation of some officers of the insurance 8. company and the bank does not mean anything if
the matter is finally decided and repudiated at a higher level. This insurance company is a public sector
undertaking and hierarchy system of decision making is there. The question to be considered should be whether
the repudiation is against the law. If the premises where the fire broke out is not insured, then how the
insurance company can pay the claim? Learned counsel for the insurance company has relied upon the decision

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in . National Insurance Company Ltd. vs Vinod Puri and another, I (2014) CPJ 341 , wherein the revision petition
filed by the insurance company has been allowed on the basis (NC) of the fact that the machinery was lying in
the godown which was about 30 ft. away from the shop. The relevant portion of the judgment reads as under:
“10. Insurance Policy clearly shows that only the plant, machinery and stock lying in the shop was insured.
Therefore, the petitioner was justified in repudiating the claim of the respondent in respect of the loss caused to
the plant, machinery and stock lying in the godown due to fire.” . It was further submitted that the
complainant has not filed any document to prove that he 9 ever informed about change of address either to the
bank or to the insurance company. All the policies were sent to the bank because the insurance company was
getting proposal form from the bank. There was no relationship of principal and agent between the insurance
company and the bank as there was no such agreement signed between the insurance company and the bank.
There was only a tie up which only meant that the insurance company was insuring property against the loans
sanctioned by the bank. The complainant was free to have taken the insurance of his stocks from any other
insurance company.

10. The learned counsel for the insurance company emphasized that the terms of the policy are to be
construed as they are and they are not to be interpreted differently. Nothing can be presumed while interpreting
the policy contract. Learned counsel for the insurance company relied upon the judgment in Suraj Mal Ram
Niwas Oil Mills Private Limited Vs. United India wherein it has been Insurance Company Ltd. and another, (2010)
10 Supreme Court Cases 567, observed as under: “23. Similarly, in Harchand Rai Chandan Lal’s case (supra), this
Court held that: The terms of the policy have to be construed as it is and we cannot add or subtract something.
Howsoever liberally we may construe the policy but we cannot take liberalism to the extent of substituting the
words which are not intended.”

11. Learned counsel for the appellant bank/OP-3 stated that the loan documents clearly mention the address as
A-89, Sunder Nagar, Ajmer Road, Jaipur and no document was ever given to the bank for either change of
address or relating to Plot No.215 prior to the date of fire. The bank in its written statement has clearly stated
that the bank did not have any knowledge about Plot No.215. The learned counsel stated that the State
Commission has observed that the bank officials have visited and verified the stocks of the complainant every
month which were kept at Plot No.215 and therefore, it was the duty of the bank to get the address changed in
the policy. Learned counsel submitted that the complainant was supposed to present the stock statement every
month, however, no stock statement has been presented to the bank stating the stock kept at Plot No.215. As the
plots are not easily recognizable and identifiable and plot numbers are not clear on the ground, even if bank
officials inspected the stock, they were not sure where the stocks are kept. They were under the impression that
the stock is lying on the address given in the loan agreement. It was the duty of the complainant to inform
about change in address or to have submitted stock statement clearly mentioning the placement of stock. It is
true that the bank had recommended the insurance company on 20.8.2007 that the stock burnt in fire which
broke out on Plot No.215 was the stock of the complainant, however, the following is also mentioned in the
same letter: “ As per our records, the unit is situated at A-89 whereas the borrower was keeping their stocks at
Plot No.215 where our officials have verified the stock from time to time but no identification no. are marked on
plots, which caused confusion. we have been verifying the stocks time to time where it was damaged due to the
fire. We confirm that the stocks were lying at the place of fire and belonged to M/s Jai Shree Industries were
physically verified.”

12. From the above letter also, it is clear that until the complainant informed about the change of address,
there was no occasion for the bank officials to find out that the stocks being inspected by them were lying at
Plot No.215. It was further pointed out that the State Commission has mentioned that the bank officials
inspected six times between 10.4.2006 to 22.9.2006 but the fact is that all these dates are after the policy was
already issued and moreover as the Plot nos. were not clearly identifiable, the bank officials did not know the
location of the stock whether it was at Plot No.215. Thus, there was no question of sending any intimation to the
insurance company regarding change of address.

13. Learned counsel for the bank further argued that the bank is not in the insurance business and is not an
insurer, therefore, even if the insurance claim has been repudiated by the insurance company, no liability

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regarding insurance claim lies on the bank. Accordingly, no deficiency to indemnify loss can be attributed to the
bank. The basic responsibility as per loan agreement lies on complainant to insure the stocks on which credit
has been given. However, in the interest of recovery of loan, the bank has taken this policy so that if there is
any loss, the complainant should not suffer and the bank should also be in a position to recover the loan. This
cannot mean that the bank has insured the stocks. The insurance claim has to be dealt under the conditions of
the insurance policy issued by the insurance company.

14. It was further argued by the learned counsel for the bank that so far as the bank is concerned, the
complainant is not a consumer qua the bank. The cash credit facility has been taken for commercial purpose and
therefore, the complaint is not maintainable against the bank. So far as the insurance company is concerned, the
claim of insurance by the complainant is maintainable before a consumer forum. However, no claim is
maintainable against the bank before the consumer forum as the complainant has obtained the services of the
bank for commercial purpose. Nowhere in the complaint, the complainant has pleaded that he is a consumer as
he is not engaged in this business for earning his livelihood through self-employment. In fact, the complainant
has a turn over of roughly 5 crores, meaning thereby, he is running a business of large scale. To substantiate
his assertion, the learned counsel referred to the profit and loss account of the complainant for the year ending
31 March, 2006 wherein st the profit of Rs.24,04,380/- has been shown. To support his arguments, the learned
counsel relied upon the judgement of this Commission in Kishore Kumar Kochar Vs. State Bank of Bikaner ,
wherein it has been held as & Jaipur, Consumer Case No.98 of 2005 decided on 15.9.2015 under: “For the
following reasons, we are unable to locate substance in these arguments. The term ‘discounting facility’ clearly
means that the loan was to be obtained by the complainant. This is an admitted fact that no application for loan
was ever moved. However, it stands established beyond reasonable doubt that we are dealing with a commercial
transaction. The complainant himself admits in his complaint that he is engaged in the business of international
trade of food-grains, etc. As per new definition of the word ‘consumer’, the complainant is not a ‘consumer’, as
such.”

15. Learned counsel for the Bank has further relied upon the judgement of this Commission in , wherein it
has been held as under: Ajay Kumar Singh Vs. Canara Bank, decided on 18.8.2015 “7. I have carefully perused
the record. I do not find merit in the contention of the petitioner. At the outset it may be mentioned that
admittedly the complainant had opened an account with cash credit facility with the opposite party bank in
respect of his trading business. Thus, the services of the bank availed by the complainant are in relation to a
commercial purpose.”

16. It was further argued by the learned counsel that the State Commission has not given any clear findings
that the bank was deficient on any account but has fastened liability jointly and severally alongwith the
insurance company. The bank has not sanctioned any facility for Plot No.215 and therefore, bank is not concerned
about any activity on Plot No.215.

17. Learned counsel for the bank further stated that the loan sanction letter mentions the address as “A-89,
Sunder Nagar, Ajmer Road, Jaipur”. The bank never received any communication from complainant informing that
they have changed their business location from “A-89, Sunder Nagar, Ajmer Road, Jaipur” to Plot no. 215,
Sunder Nagar, Ajmer Road, Jaipur”. No request was ever made by the complainant for change of address in the
loan documents. In fact, the bank was acting as an agent of the complainant for getting the insurance on behalf
of the complainant from the insurance company. Thus, it is totally wrong to allege that bank was working as an
agent of the insurance company. 18 On the other hand, learned counsel for the complainant stated that there
was tie-up between . the bank and the insurance company and therefore, the bank is an agent of the insurance
company. In the policy issued, there is a code number that is mentioned and that is the code number of the
bank as an agent. The office address of the complainant is “A-89, Sunder Nagar, Ajmer Road, Jaipur” but the
business is being conducted from Plot No.215 Sunder Nagar, Ajmer Road, Jaipur. Even this fact has been
recorded by the surveyor in its report. The surveyor has clearly stated that since beginning the complainant is
doing business from Plot No. 215. It was further argued by learned counsel that even in the Joint Note dated
20.7.2007, wherein the officers of the insurance company and the bank participated, the following has been
observed: “We have observed that there is a bona fide mistake occurred at the time of taking insurance cover by

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the bank and the insured was not aware of the contents and address mentioned in the policies. The denial of
liability only on this ground can affect our Tie-up relationship with SBBJ, Jaipur from where we are getting very
handsome premium of more than Rs.30 crores per annum.”

19. The above observation in the meeting where both parties were present clearly reveals that mistake was on
the part of the bank and the insurance company was inclined to indemnify the loss. The bank was debiting
premium amount from the loan account of the complainant and no copy of the policy was ever supplied to the
complainant and the same was even never shared with the complainant. The learned counsel for the complainant
stated that the bank has admitted the following in its reply to the questionnaire raised by the insurance company
: Reply to this question is that no such understanding was arrived at with complainant and the Bank. The policies
used to be received by us from your company. Your company never sent policies to the complainant firm. No
occasion arose to give either original or copy to the complainant firm prior to the damages caused by fire.

20. After the meeting of bank officials and the officers of the insurance company, the claim was recommended
on non-standard basis to the tune of Rs.23,77,292/- by the Chief Regional Manager of the insurance company and
the file was sent to the head office on 16.11.2007. However, the claim was repudiated from the head office on
the ground that the location of risk is not the same as mentioned in the policy. The report of the joint committee
was not accepted by the head office of the insurance company, whereas the officers of the insurance company
and bank had accepted their mistake and recommend for payment of the insurance claim. One thing is clear that
the liability has not been denied at least till the level of the Chief Regional Manager.

21. As stated earlier that there is a relationship of principal and agent between the insurance company and the
bank, therefore, both are liable for compensating the loss. In this regard, the learned counsel pointed out
towards the reply submitted by the bank in respect of the interrogatories wherein the following has been stated:
“Yes, State bank of Bikaner and Jaipur had a banc assurance tie up with the National Insurance Company under
which Bank gets its clients insured availing CC limit from the Bank. Hence Bank also got stock of Jai Shree
Industries insured whose proposal forms were prepared by Bank.”

22. In support of the above arguments, learned counsel has relied upon the judgment of the Hon’ble Supreme
Court in , Delhi Electric Supply Undertaking Vs. Basanti Devi and another , wherein it has been observed as
under: AIR 2000 SC 43 11. In the present case, we are not concerned with the insurance agent. It is not the
case of the Life Insurance Corporation that the DESU could be permitted as an insurance agent within the
meaning of the Insurance Act and the regulations. The DESU is not procuring or soliciting any business for the
Life Insurance Corporation. The DESU is certainly not an insurance agent within the meaning of the aforesaid
Insurance Act and the regulations but the DESU is certainly an agent as defined in section 182 of the Contract
Act. The mode of collection of premium has been indicated in the scheme itself and employer has been assigned
the role of collecting premium and remitting the same to the Life Insurance Corporation. As far as the employee
as such is concerned, the employer will be agent of the Life Insurance Corporation. It is a matter of common
knowledge that insurance companies employ agents. When there is no insurance agent as defined in the
regulations and the Insurance Act , the general principles of the law of agency as contained in the Contract Act
are to be applied.

12. Agent in section 182 means a person employed to do any act for another, or to represent another in
dealings with third persons and the person for whom such act is done, or who, is so represented, is called the
principal. Under section 185 , no consideration is necessary to create an agency. As far as Bhim Singh is
concerned, there was no obligation cast on him to pay the premium direct to the Life Insurance Corporation.
Under the agreement between the Life Insurance Corporation and the DESU, premium was payable to the DESU
who was to deduct it every month from the salary of Bhim Singh and to transmit the same to the Life Insurance
Corporation. The DESU had, therefore, implied authority to collect premium from Bhim Singh on behalf of the
Life Insurance Corporation. There was, thus, valid payment of premium by Bhim Singh. The authority of the
DESU to collect premium on behalf of the Life Insurance Corporation is implied. In any case, the DESU had
ostensible authority to collect premium from Bhim Singh on behalf of the Life Insurance Corporation. So far as
Bhim Singh is concerned the DESU was the agent of the Life Insurance Corporation to collect premium on its

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behalf.

23. Learned counsel for the complainant has further relied upon the judgement of this Commission in Central
Bank of India and another Vs. Smt. Heera Soni and others, decided on , wherein it has been held as under:
4.11.2004 “14. The Hon’ble Supreme Court further observed that the authority of DESU to collect premium on
behalf of LIC was implied. In any case, DESU had ostensible authority to collect premium and so far the
employee was concerned, DESU was an agent of LIC to collect premium on its behalf.

15. Accordingly, we hold that Central Bank of India was acting as an Agent having implied authority of the LIC
of collecting the insurance premium from the employees. The moment the amount was deducted from the salary
of employees by the Central Bank it would be deemed to have been paid to the Life Insurance Corporation.
Failure on the part of the agent having an implied authority to receive premium on receipt by deduction from the
salary coupled with failure to deposit the same with LIC could not lead to lapse of the policy by any stretch of
imagination.”

24. The learned counsel for the complainant further stated that the bank has admitted that their officers were
inspecting the stocks at Plot No.215 as would be clear from the following reply of the bank given in respect of
the questionnaire : We replied you on 20-08-2007 in clear terms of above query that, “The unit is located in
Sunder Nagar, Ajmer Road, Jaipur and plot had been allotted by a society. As per our records, the unit is
situated at A-89 whereas the borrower was keeping their stocks at Plot No.215 where our officials have verified
the stock from time to time but no identification number are marked on plots, which caused confusion. We have
been verifying the stocks time to time where at it was damaged due to the fire. We confirm that the stocks were
lying at the place of fire and belonged to M/s. Jai Industries were physically verified. Since sanction of limit, the
same address is mentioned. We, as a banker can assure you again that the unit had actually suffered loss and
the proprietrix is of high integrity. As far as the number of plot is concerned, we may state that the number
advised by the surveyor may be correct but we have been visiting the same sight for inspection, as there has
been no marking of plot numbers being a scatterly populated colony. Above both referred letters are there on the
record. Further all stocks of the firm concerned wherever lying including in transit were under insurance with
your insurance company.”

25. Learned counsel further stated that in the proposal form, though the location of risk is mentioned as “A-89,
Sunder Nagar, Ajmer Road, Jaipur”, however, in the same proposal form, the following is also mentioned:
DETAILS ABOUT BUSINESS COVERED AT THE INSIURED LOCATION: The insured property is Please Tick
Yes/No Residence, Office, Shops Hotels etc. - Industrial/Manufacturing risks Mfg. of wooden furniture Storages
outside industrial risks Yes

26. It was argued that as per this entry in the proposal form, the stocks kept at Plot No.215 were also covered.
The learned counsel further mentioned that bank in its letter dated 19.4.2007 has clearly stated that the monthly
inspection was done by the Deputy Manager and quarterly inspection was done by the Branch Manager at the
expense of the firm. The learned counsel wanted to infer that the complainant firm was paying for the inspection
of the bank officers and they were frequently inspecting the stocks, however, they obtained the policy on a wrong
address. The Branch Manager in its reply to questionnaire by the insurance company has stated the following:
“Yes, initially when the agreement was executed on 2.3.2000 the place of business was A-89, Sunder Nagar,
Ajmer Road, Jaipur . Subsequently the business of firm had shifted to Plot No.215, Sunder Nagar, Ajmer Road,
Jaipur. M.s, Vaibhav Crafts Pvt. Ltd. started their business at A-89, Sunder Nagar, Ajmer Road, Jaipur which is
also insured with your company through us. However, as the surveyor observed the correspondence address of
complainant firm remained the same although the firm shifted to and carried on business from plot no.214, since
year 2001.”

27. On the basis of the above admissions by the branch manager of bank, it is clear that the business was
shifted from “A-89, Sunder Nagar, Ajmer Road, Jaipur” to Plot No.215, Sunder Nagar, Ajmer Road, Jaipur in the
year 2001.

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28. It was strongly argued by the learned counsel for the complainant that the negligence on the part of the
opposite parties is to be compensated properly. In this regard, learned counsel for the complainant relied upon
the decision in Rajkot Municipal Corporation Vs. Manjulben Jayantilal , wherein it has been observed : Nakum
and others, (1997) 9 SCC 552 “15. Negligence would include both acts and omissions involving unreasonable
risk of having done harm to another. The breach of duty must cause damage. How much of the damage to be
compensated by the defendant should be attributed to his willful conduct and how much to his willful negligence
or careless conduct or remissness in performance of duty, are all relevant facts to be considered in a given act
or omission in adjudging duty of care. The element of carelessness or the breach of duty and whether that duty
is towards plaintiff or class of persons to which the plaintiff belongs are important components in tort of
negligence/ Negligence would, therefore, mean careless conduct in commission or omission of an act, whereby
another to whom the plaintiff owed duty of care has suffered damage.” 29 I have carefully considered the
arguments advanced by the learned counsel for the parties . and have examined the material on record. In the
present case, the State Commission has found joint and several liability of both the OPs. Both OPs/appellants
herein have filed separate Appeals No.601/2012 and 629/2012. So far as the liability of the insurance company is
concerned, the insurance company has repudiated the claim on the ground that the risk location mentioned in the
policy is not the same where the accident of fire took place. In my opinion, this is a sufficient reason for
repudiation of the claim as this Commission has already taken similar view in . Otherwise also, National
Insurance Company Ltd. vs Vinod Puri and another(supra). the conditions and terms of insurance are to be
interpreted exactly in the manner they are described in the policy and in all the policies, the address of risk
location is given as A-89, Sunder nagar, Ajmer Road, Jaipur. The ruling of the Hon’ble Supreme Court given in
Suraj Mal Ram Niwas Oil Mills Private Limited Vs. United India Insurance Company Ltd. and another (supra) are
important in this regard. Similarly Hon’ble Supreme Court in the following matters has already taken similar view
that conditions and terms of the insurance policy cannot be interpreted differently by the courts as against the
manner in which they are actually entered into the contract of policy by the parties: ( it was a) In General
Assurance Society Ltd. Vs.Chandmull Jain, [1966 ] 3 SCR 500, held as under :- 17.” …In interpreting documents
relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is
expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the
parties have not made it themselves.” it has been (b) in Vs. II(1999) CPJ 13 (SC ), Oriental Insurance Co. Ltd.
Sony Cherian observed as follows:- “16. The insurance policy between the insurer and the insured represents a
contract between the parties. Since the insurer undertakes to compensate the loss suffered by the insured on
account of risks covered by the insurance policy, the terms of the agreement have to be strictly construed to
determine the extent of liability of the insurer. The insured cannot claim anything more than what is covered by
the insurance policy. That being so, the insured has also to act strictly in accordance with the statutory
limitations or terms of the policy expressly set out therein.”

30. The facts of interim recommendations by a committee of officers of the insurance company and the bank
and even forwarding of those recommendations by the Chief Regional Manager to the Head Office do not make
the situation different if the insurance company has repudiated the claim after getting orders form the Head
Office. I agree with the contention of the learned counsel for the insurance company that there is a hierarchy in
administration of the insurance company and final orders of the highest authority shall only be valid.

31. Coming to the arguments of the learned counsel for the appellant bank that the complainant is not a
consumer qua the bank, it is observed that Section 2(o) of the Consumer Protection Act, 1986 includes the
services of bank and in the light of the judgement of this Commission in M/s. Harsolia Motors Vs. M/s. National
Insurance Company Ltd. [F.A. No.159 of 2004 and others, , it is clear that services of the bank will be covered
under Section 2(o) of decided on 3.12.2004] the Consumer Protection Act, 1986. Therefore, Complainant would be
deemed to be a consumer even though the complainant has obtained the credit facility from the bank.

32. It is also seen that the State Commission has awarded a compensation of Rs.36,89,345/- whereas the
surveyor had assessed the loss to the tune of Rs.31,69,722/- only. Moreover, the State Commission has given
weightage to the report of the committee of officers of the insurance company and the bank which recommended
for settling the claim on non-standard basis for Rs.23,77,292/- but the State Commission has awarded
compensation of Rs.36,89,345/- for which there was no justification.

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33. Now coming to the deficiency on the part of the bank, it is clear that bank was taking the policy on
behalf of the complainant and was even filing the proposal form before the insurance company without getting
the signature of the complainant, though the amount of premium was being debited to the loan account of the
complainant. Even after receiving the policy document from the insurance company, the same was not shared with
the complainant, neither copy of the same was sent to the complainant. The complainant also never tried to get
copy of the insurance policy from the bank and in all the papers available with the bank, the address is
mentioned A-89, Sunder Nagar, Ajmer Road, Jaipur. At no point of time the complainant submitted an application
for change of address from A-89, Sunder Nagar, Ajmer Road, Jaipur. to Plot No.215, Sunder Nagar, Ajmer Road,
Jaipur. It is true that the bank officials inspected the stock kept at Plot No.215, Sunder Nagar, Ajmer Road,
Jaipur. It has been argued that the plots were not clearly identifiable and therefore, there was no question of
believing that the stocks were not kept at the risk location. The complainant also never submitted any statement
of stocks to the bank mentioning that the stocks are kept at Plot No. 215, Sunder Nagar, Ajmer Road, Jaipur.
Thus, there was no occasion for the bank to believe that the stocks were not kept at the risk location and were
kept at some other place. The Branch Manager in reply to an interrogatory of the insurance company has
admitted that originally when the agreement was executed, the business of the complainant was being run from
A-89, Sunder Nagar, Ajmer Road, Jaipur. whereas it was shifted to Plot No.215, Sunder Nagar, Ajmer Road, Jaipur
in the year 2001. Obviously, the original stand of the bank was to support the complainant so that he gets the
claim and bank ensures its repayment of loan by this process and that is why, the bank had written letter dated
20.7.2007 to the insurance company supporting the claim of the complainant. Even if one takes this admission at
its face value, though there was no record with the bank on the basis of which the branch manager would have
stated this, but even then the admission could not have been used to make changes in the proposal form without
any written request or any written proof submitted by the complainant. Thus, it cannot be said beyond doubt
that the bank officials knew about the change of risk location but did not purposely or knowingly intimate the
same to the insurance company. The deficiency of the bank lies mainly in obtaining the policy without informing
the complainant or even without getting any signatures of the complainant on the proposal form as well as in not
sharing the policy and its details with the complainant even after getting the policy document from the insurance
company. The complainant had every right to know the details of the policies that were taken by the bank to
secure the hypothecated stocks.

34. From the above examination, it is clear that the bank was deficient in the aspect of obtaining the policy
and not sharing the policy with the complainant though some sort of contributory negligence is also attributable
to the complainant as he never tried to get the policy document or the details of the policy from the bank or
from the insurance company. Keeping these two aspects in mind, I am of the view that in any case the bank
cannot be burdened with the whole policy amount or amount as assessed by the surveyor. However, the bank is
definitely responsible to compensate the complainant for the deficiency as observed above. Accordingly, in my
view, in the facts and circumstances of the present case, an amount of Rs.8 lakhs would be reasonable
compensation to the complainant to be paid by the bank.

35. Based on the above discussion, First Appeal No. 629 of 2012 filed by the insurance company is allowed
and the order of the State Commission is set aside qua the insurance company. So far as First Appeal No.601 of
2012 filed by the bank is concerned, this appeal is partly allowed and appellant bank is directed to pay a
compensation of Rs.8,00,000/- (Rupees Eight Lakhs) to the complainant alongwith interest @ 8% p.a. from the
date of order of the State Commission i.e. 27.8.2012 till actual payment. It is made clear that if any repayment
amount of loan is due against the complainant , this amount shall be adjusted towards recovery of that amount.
If the amount is adjusted then the bank shall give a letter to this effect to the complainant within a period of 45
days from the date of this order. If only part amount is to be adjusted, the remaining amount shall be paid to
the complainant within a period of 45 days from the date of this order. The order of the State Commission dated
27.8.2012 stands modified accordingly. ...................... PREM NARAIN PRESIDING MEMBER

Printed For: Aditya Sharma 09-06-2021 On: 08:43:PM