Oral Order: (Per Hon?ble Justice D. Appa Rao, President)
1) This is a complaint filed u/s 17 of Consumer Protection Act against the insurance company claiming Rs. 28,52,679/- covered under the policy with interest and costs.
2) The case of the complainant in brief is that it is a partnership firm. It entered into a contract with R2 M/s. National Highway Authority of India for construction of four lining at National Highway No. 31 in the State of Bihar. As per the terms it had to take jointly an insurance policy along with R2 to cover the risk of construction work, and accordingly took a policy valid from 18.9.2001 to 17.9.2004. The premium was to be paid in quarterly instalments. While so, in the month of July, 2002 there were unprecedented rains resulting in devastating floods causing extensive damage at work site resulting in huge loss of granular sub-base material and damage to the embankment constructed by the complainant. It has lodged a claim on 27.7.2002 for Rs. 70 lakhs. On that M/s. S. K. Mazumdhar a licensed surveyor was appointed who conducted preliminary and final survey assessed the loss at Rs. 28,52,679/-. Despite several letters it did not settle the claim and ultimately repudiated on the ground that the cheque issued for payment of the premium was dishonoured and that the premium was due on 18.6.2002. In fact the said fact was not brought to its notice. It was only after a lapse of 32 months such a plea was taken. When verified, it came to know that all the cheques were encashed. The repudiation was unjust, and therefore it claimed the amount assessed by the surveyor with interest and costs.
3) R1 insurance company resisted the case. It alleged that the complainant is not a consumer and is not entitled to invoke the provisions of the Consumer Protection in view of the admitted status of the complainant and the nature of business in which it is involved and the policy for which it was taken. The claim stands forfeited 3 months after repudiation. The claim was repudiated for non-compliance of statutory provisions of Section 64-VB of Insurance Act as there was non-payment of instalment amount. Therefore it cannot be said that there was deficiency in service. The policy was obtained on behalf of the complainant under the A/c of M/s. Lanco Rani Joint Venture as the contract work was a joint venture. The complainant firm did not pay the instalment due on 18.6.2002 before the due date. Three cheques issued for Rs. 1,42,807, Rs. 1,42,808/- and Rs. 3,33,115/- on 2.7.2002, 3.7.2002 and 25.7.2002 respectively were realized subsequent to the floods. The second cheque Dt. 3.7.2002 was dishonoured by the banker. It was brought to the notice of the complainant. Thereupon at its request it was again presented and was realized on 30.7.2002 after the damage had occurred. The surveyors after conducting the survey assessed the net loss at Rs. 28,52,679/-. Since the premium was not paid within time and in violation of Section 64-VB of the Insurance Act the claim was repudiated. Earlier C.D. No. 46/2005 filed before this Commission in respect of subsequent claims, they were in question before the National Commission in F.A No. 320/2007 Therefore, it prayed for dismissal of the complaint with costs.
4) The points that arise for consideration are :
i) Whether the complainant is entitled to any amount covered under the policy? If so, to what amount?
ii) Whether there was any violation of Section 64-VB of the Insurance Act and therefore not entitled to any amount?
iii) To what relief?
5) It is an undisputed fact that the opposite party insurance company issued Contractors All Risks insurance policy covering materials or items supplied by principal and for surrounding property particularly construction of four lining of Km. 419.000 to Km. 447.000 of Purenea Goyakota section of NH-31 - EW 12 in the State of Bihar valid from 27 .9.2001 to 26. 9.2004 evidenced under Ex. B1 (Ex. A5).
6) The complainant is a registered firm evidenced under Ex. A1 acknowledgement issued by the Registrar of Firms. The said partnership was constituted under Ex. A2 Deed of Partnership between M/s. Lanco Infratech Ltd., a company registered under the Companies Act and M/s. Rani Constructions Private Ltd., another company registered under the Companies Act. They entered into a partnership in order to carry on the business and more so set up as a joint venture in conformity with pre-qualification issued by M/s. National Highways Authority of India. While so by letter Dt. 21.7.2002 (Ex. A6) it has informed that heavy rains have inundated the project sites, stores and yards at various locations on the above section of NH-31, causing substantial loss of material and damages to property. On that the insurance company appointed Sri S. K. Mazumdar, a licensed surveyor to assess the loss. Though the complainant had received the said report evidenced under Ex. A7, it did not choose to file the said report.
7) It is curious to note that the insurance company also did not file the Surveyor Report. When the insurance company did not settle the claim notices were issued evidenced under Exs. A9 & A10 followed by legal notice Ex. A13 alleging that though three years had elapsed settlement was not made. The insurance company issued a reply under Ex. A12 Dt. 20. 4. 2005 alleging that the complainant did not pay the premium instalment due on 18.6.2002 before the due date and three cheques issued in respect of fourth quarterly instalment were realized belatedly. Apart from it Sri S. K. Mazumdar conducted the survey both preliminary and final and submitted his respective reports Dt. 12.8.2002 and 23.12.2002 assessing the net loss at Rs. 28,52,679/-. Finally it repudiated the claim on the ground that the instalment due on 18.6.2002 was received after the due date and it was violation of Section 64VB of Insurance Act. rendering all claims up to next instalment not payable and as such the claim was repudiated.
8) It is not the case of the insurance company that the amount paid towards premia was not encashed. Though it was alleged that the cheques that were presented were bounced but on re-presentation they were encashed. We reiterate that the cheques were encashed and the amounts were realized. The insurance company ought not to have presented the cheques when it had received the claim prior to realization of the amount in order to invoke Section 64 VB of the Insurance Act. Having realized the amount and having processed the claim, it ought not to have rejected it by invoking Section 64 VB of the Insurance Act. Section 64 VB of the Insurance Act reads as follows:
No risk to be assumed unless premium is received in advance.
64VB. (1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.
(2) For the purposes of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer.
Explanation. ~ Where the premium is tendered by postal money‑order or cheque sent by post, the risk may be assumed on the date on which the money‑order is booked or the cheque is posted, as the case may be.
(3) Any refund of premium which may become due to an insured on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be paid by the insurer directly to the insured by a crossed or order cheque or by postal money‑order and a proper receipt shall be obtained by the insurer from the insured, and such refund shall in no case be credited to the account of the agent.
(4) Where an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit with, or despatch by post to, the insurer, the premium so collected in full without deduction of his commission within twenty‑four hours of the collections excluding bank and postal holidays.
(5) The Central Government may, by rules, relax the requirements of sub‑section (1) In respect of particular categories in insurance policies.
9) At no stretch of imagination, this provision can be invoked having received the premium. Even assuming that this provision could be invoked at no time, the insurance company informed the complainant that the cheques were dishonoured. It was only after a lapse of 32 months that too after the complainant made the claim this plea was raised. Having encahsed the cheques, they cannot turn round and resort to Section 64VB of the Insurance Act. The said provision postulates that the said fact can be taken into consideration on the date of presentation of cheques but not the date of encashment.
10) Consistently the National Commission as well as Supreme Court observed that the insurance companies must settle or repudiate the claims within a reasonable time. In S. Kaur Vs. Oriental Insurance Company Ltd. reported in 1994 (1) CPJ 179 it was held that the insurance company must settle or repudiate the insurance claim within a reasonable time, say 3 months, and any delay beyond that period would amounts to deficiency of service.
11) The Supreme Court in United India Insurance Company Ltd. Vs. M.K.J. Corporation reported in III (1996) CPJ 8 (SC) held that a reasonable time of two months would be justified for the insurance company to take a decision whether the claim requires to be settled or rejected in accordance with the policy. It was a case where the insurance company had taken five months for taking a decision to reject the claim. It was held that it was unjustified.
12) In Nayayuga Engineering Company Vs. The Branch Manager, United India Insurance Company Ltd. reported in 2008 (2) CPR 107 (NC) the National Commission held that the insurance company cannot take three years to repudiate the claim. Section 64 UM (32) of the Insurance Act envisages a reasonable time for repudiation of a claim. Repudiation by the insurance company after almost three years cannot be said to be a reasonable period. It was held that it amounts to deficiency in service.
13) At the cost of repetition, we may state that the complainant had informed the insurance company that it had sustained loss. Evidently the complainant was doing contract works and the policy was taken for covering the risks sustained during the work. The insurance company contended that since it was for a commercial purpose this Commission has no jurisdiction to adjudicate the matter. The complainant relied a decision in Harsolia Motors Vs. National Insurance Company Ltd. reported in I (2005) CPJ 27 (NC). The National Commission opined that hiring of services of insurance company by complainants which are carrying on commercial activities cannot be held to be a commercial purpose. The policy is taken for reimbursement or indemnity for loss which may be suffered due to various perils. There is no question of trading or carrying on commerce in insurance policy. Therefore it would come within the purview of the Consumer Protection Act. It was also opined that commercial purpose means goods purchased or services hired should be used in activity directly intended to generate profit which is the main aim of commercial purpose. Where goods purchased or services hired in activity which is directly not intended to generate profit, it would not be commercial purpose. Therefore, it was opined that it comes under the purview of the Consumer Protection Act.
14) Unfortunately, we do not have the facts in the above decision to state whether it was prior to the amendment to the Consumer Protection Act. As originally enacted in 1986, in the Consumer Protection Act, only as regards ?goods? if they are purchased for commercial purpose, such buyer of goods was excluded from the definition of ?Consumer?. In so far as ?service receiver? was concerned, even if the service receiver was engaging in vast scale commercial activity, such service-receiver was still a ?Consumer? under the pre-2003 Consumer Protection Act, 1986. After 15.3.2003, even the person who avails
services for ?commercial purpose? is excluded from the definition of ?Consumer?, subject to the explanations clause. Undoubtedly, the very object of the original Act in excluding ?goods used for commercial purpose? and the 2003 Amendment in excluding the ?Service rendered for commercial purpose? is to ensure that the services rendered for commercial purpose does not attract the C.P. Act. The very purpose of insuring the plant and machinery or stocks by a company engaged in manufacture, trade or business can only be for a commercial purpose. It is in support of the commercial endeavour and to ensure that the company?s business activity is not impaired by such perils insured against.
15) In fact the Supreme Court in a latest judgement in Kartnataka Power Transmission Corporation Vs. Ashok Iron Works Pvt. Ltd. reported in 2009 CTJ 233 (SC) (CP) after considering the facts in the said case opined that in view of the fact that the expression ?but does not include a person who avails of such services for any commercial purpose? inserted in Section 2(1)(d)(ii) by the Act 62 of 2002 is not applicable in the facts and circumstances of the present case since the controversy relates to the period prior to amendment.? Giving clue in a way that if it is for commercial purpose it would not attract the definition of ?consumer? under the Consumer Protection Act.
16) Recently the National Commission in NCDRC Bar Association (Regd) Vs. Davinder Malhotra & Ors. In R.P. No. 2916/2008 observed that the decisions of National Com
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mission are binding on all the State Commissions. 17) In the light of decision of the National Commission in Harsolia Motors Vs. National Insurance Company Ltd. reported in I (2005) CPJ 27 (NC) which we have earlier adverted to, we are of the opinion that the case on hand does not hit by amendment, and therefore amenable to the jurisdiction of the Consumer Protection Act. 18) A perusal of the entire record would disclose that the insurance company has not taken any interest even in filing the report of the surveyor under which he assessed the net loss at Rs. 28,52,679/-. What all the complainant asked was to settle the claim as per the loss assessed by the surveyor at Rs. 28,52,679/-. Obviously, the insurance company did not controvert the loss assessed by the surveyor by filing the report nor showing as to how report of the surveyor cannot be accepted. The only contention raised was that the complainant did not pay the premium by due date and as such was not liable to pay the amount by virtue of Section 64 VB of the Insurance Act which we have earlier adverted to. Since no reason whatsoever was assigned for denial of the claim except the above objection which was not tenable, the complainant was undoubtedly entitled to the amount assessed by the surveyor. 19) In the result the complaint is allowed in part directing the insurance company to pay Rs. 28,52,679/- with interest @ 7.5% p.a., from the date of claim viz., 27.7.2002 till the date of realization together with costs of Rs. 5,000/-. Time for compliance four weeks.