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Judgment
CHALLENGE in this Revision Petition, under Section 21(b) of Consumer Protection Act, 1986 (for short "the Act"), by the Complainant Company is to the common order dated 15.09.2008 passed by the Rajasthan State Consumer Disputes Redressal Commission, Circuit Bench at Jaipur (for short "the State Commission") in Appeal No. 946 of 2006. By the impugned order, the State Commission dismissed the Appeal and confirmed the order of the District Forum dismissing the Complaint. The brief facts as stated out in the Complaint are that:
THE Complainant M/s. Modern Insulators Limited obtained three Fire Insurance Policies for a period of three months from 02.04.2001 to 01.07.2001 and the premium was 40% of the annual premium for the said period. Before the expiry of the said policy, the Complainant Company made a request to the Opposite Party for replacing the short term policy by an annual policy but the Insurance Company charged full annual rate and did not give the rebate of 15% in the premium, which they had charged while issuing the cover note for the short term policy. The Complainant pleaded that the replacement of the policy was sought much before the expiry of the short term policy and the amount of premium was already deposited on 29.06.2001. The Complainant averred that the Company is entitled to the refund of amount as per Rule 10.1.2 of the General Rules and Regulations framed by the Tariff Advisory Committee, Mumbai, but the Insurance Company had not acceded to their request and therefore, the Complainant approached the District Forum seeking direction to the Insurance Company for pro -rata refund of the amount and also for payment of compensation as under: a) Excess amount of premium = Rs. 7,83,009.00
b) Loss of interest on the amount @ 21% = Rs. 95,918.00 (from 1.8.2001 to 28.2.2002)
c) The complainant has to seek the service of consultancy firm and also has incurred heavy expenditure in making correspondence, in meeting officers of the respondent etc. The claim of compensation on this count is assessed at Rs. 50,000/ -
d) Compensation for loss of time and inconvenience at the cost of office work. Compensation assessed on this count comes to Rs. 5,00,000.00
e) Mental injury and harassment to the complainant Rs. 1,00,000/ -.
The Insurance Company filed their written version admitting that in all the cases, short term policies were taken for three months for which 40% of the annual rate was charged as the premium amount. The Opposite Party had averred that all the policies were being replaced by new annual policies and in case of cancellation of short term policy, the premium has to be retained at the applicable short period scale as per Clause 10.1.4. As the matter required clarification, the same was sent to the Tariff Advisory Committee which stated that the request of the Complainant cannot be acceded to as per the Rules.
THE Insurance Company had filed the rates for short term insurance and also the Rules prescribed under Clause 8 of the General Rules and Regulations which read as follows: RATES FOR SHORT PERIOD INSURANCE
Polices for a period of less than 12 months shall be issued at the rates set out hereunder:
Where the policies are sought to be cancelled, the relevant Clause is Clause -10, which reads as under: -
"10. RULES FOR CANCELLATIONS
For Cancellation of insurance policy
10.1 At the option of the insured" -
10.1.1 Retention of premium shall be at Short Period Scale for the period the policy has been in force, subject to the retention of minimum premium by the Insurer.
10.1.2 During the currency, if a policy is replaced with the same insurer by a new annual one covering the identical property, refund of premium may be allowed on pro -rata basis at the original rates for the sum insured replaced.
10.1.3 For the sum insured not replaced, refund must be calculated after charging premium at short period scale on such sum for the time the insurance has been in force subject to retention of the minimum premium by the insurer.
10.1.4 In case of short period policies, premium shall be retained at the applicable short period scale."
THE Insurance Company contended that Clause 10.1.4 was very clear that in case of short term policies, premium shall be retained at the applicable short period annually and that extension of short period policy has not been permitted as per Clause 8 of the General Rules and Regulations. The State Commission while dismissing the Appeals preferred by the Complainant Company observed as follows: "Clause 10.1.2 may appear to be slightly ambiguous, but if this Clause is read with Clause 10.1.4 the position becomes very clear. Prima facie the request of the complainant found favour with the Insurance Company and, therefore, the representation was sent to the Tariff Advisory Committee for clarification. The Tariff Advisory Committee which laid down these Rules did not agree with the contentions raised by the complainant and therefore, the request for refund thereof was turned down. We feel that the observations of the Tariff Advisory Committee were as per the provisions of General Rules and Regulations and therefore, if refund by the Insurance Company has not been allowed, it cannot be said that there was deficiency in service.
For the foregoing reasons, we find no merit in all these appeals and all the four appeals are dismissed."
AGGRIEVED by this order, the Complainant Company preferred this Revision Petition.
LEARNED Counsel appearing for the Petitioner Company submitted that for the fire schedule policy for the period of three months from 01.05.2001 to 31.07.2001, the Insurance Company charged premium @ 40% of the annual premium instead of 25% of the annual premium and, therefore, a premium of Rs. 20,82,805/ - was paid on the total sum of insured sum of Rs. 4,34,9218,300/ -. The policy was classified as standard fire and perils policy. On 13.06.2001, before the expiry of the short term policy, the Petitioner herein requested the Insurance Company for extension of the policy covering the period from 01.05.2001 to 30.04.2002. The request letter reads as follows: June 13, 2001
The New India Assurance Company Ltd.
Anand Bhavan, 1st Floor,
Sansar Chand Road,
Jaipur
Kind Attn: Mrs. Reena Bhatnagar - Sr. Divisional Manager
Sub: Non receipt of Fire Schedule Policy
Ref: Your Cover Note No. 0400065 dtd. 1.5.2001
Dear Madam
We are in receipt of your above referred cover note as well as letter dated 22 May 2001. It appears that you have not gone through Sheet No. 9 of Tariff Advisory Committee - Under Section 1 correctly. Under the Heading No. 20 of Voluntary Deductibles it is clearly mentioned that "the discounts are applicable under the Standard Fire and Special Perils Policy as well as for the add -on covers". This clearly establishes that discounts are applicable on add -on cover of earthquake also. Therefore premium amount sent by us for covering insured value of Rs. 450 Crores is correct. Surveyor Mr. Rakesh Narulla has also forwarded to you status report on FEA discount which you must have received by now. You are, therefore, requested to send policy for sum insured of Rs. 450 Crores for the period from 1st May 2001 to 31st July 2001 immediately on receipt of this letter.
We would like to take further policy for the period of one year after 31st July 2001 and would like to seek for refund of extra premium paid to the extent of 15% for initial coverage for three months for which premium is charged @ 40% on account of short period policy. You are requested to give your clear cut opinion about the same so that we are charged for correct premium for one full year from 1st May 2001 to 30 April 2002 having taken insurance initially for three months with 40% premium and taking further policy for full one year and seeking for refund of extra premium paid on initial policy. We require your clarifications in this regard to take appropriate decision at our end.
Please treat the same as most urgent.
Thanking you,
Yours faithfully,
For Modern Petrofils
(A Unit of Modern Syntex (I) Ltd.
IT is evident from this letter that during the coverage period of three month policy itself, the Petitioner Insurance Company had requested for extension of the policy from 01.05.2001 to 30.04.2002. Another letter was addressed to the Insurance Company on 23.06.2001 which reads as follows: Dated: 23.06.2001
The New India Assurance Company Ltd.
Anand Bhavan, First Floor,
Sansar Chand Road,
Jaipur
Kind Attn: Mrs. Reena Bhatnagar - Sr. Divisional Manager
Dear Madam
Please refer our earlier letter dated 13 June 2001 as well as telephonic talk undersigned had with your officials yesterday, we are still awaiting for clarification on issuance of insurance policy in respect to Fixed Assets to the extent of Rs. 450 Crores for the period upto 31st July 2001.
Also mode of payment and coverage for further period of nine months with premium amount equivalent to annual premium only should be charged either by way of extending same policy for further period of nine months or by taking new policy with charging of pro -rata premium for nine months and refund of extra 15% payment made in the existing policy taken for the period of three months. Please contact your R.O./H.O. and get the clarification at the earliest. Under no circumstances premium amount should exceed annual premium payable for sum insured of Rs. 450 Crores, which please note and clarify immediately.
Thanking you,
Yours faithfully,
For Modern Petrofils
(A Unit of Modern Syntex (I) Ltd.
IT is evident from the second para of this letter that the Petitioner Company was seeking coverage for a further period of nine months with the premium amount equivalent to annual premium either by way of extending the same policy for a further period of nine months or by taking a new policy by charging pro rata premium for extra nine months. It is crystal clear in this letter that the Petitioner company was seeking extension for a period of nine months as the short term period policy expired on 31.07.2001. On 25.06.2001, the Respondent Insurance Company addressed a letter to the Petitioner herein stating that ''pro rata refund could be allowed on policy if it is replaced by an annual policy with the same insurer and same sum insured''.
LEARNED Counsel appearing for the Respondent Insurance Company submitted that a letter dated 10.07.2001 was addressed to the Tariff Advisory Committee which reads as follows: 10.07.2001
Tariff Advisory Committee,
Universal Bldg., 4th Floor,
Asaf Ali Road,
New Delhi
Kind Attn.: Mr. Z.U. Islam, Manager
Re: Renewal of Short Period Policy by an Annual Policy
Dear Sir,
One of our clients M/s. Modern Petrofils, Baroda obtained a Std. Fire policy for three months in which the premium was charged on short period scale. This policy was obtained for the period 01.05.2001 to 31.07.2001. The client is now inclined to take annual policy from 01.08.2001 to 31.07.2002.
The clients have requested for refund of difference of pro -rata & short period rates on the short period policy on the premise that the policy is now being renewed in continuity for a full period of one year after the expiry of short period cover.
According to us an analogy can be drawn from the rules of cancellation as amended in new AIFT General Rule No. 10.1.2 where during the currency period if the policy is replaced with the same insurer by a new annual one covering identical properties refund of premium can be allowed on pro -rata basis on the original policy for the Sum Insured replaced.
Kindly advise whether it would be in order to consider the above refund on the above lines.
Thanking you.
Yours faithfully
REGIONAL MANAGER
THE Tariff Advisory Committee vide their letter dated 19.07.2001 informed the Insurance Company that their request cannot be acceded to. Thereafter, the Insurance Company sent a letter dated 25.07.2001 informing the Petitioner Company which reads as under: Dated: 25.07.2001
M/s. Modern Petrofils,
N.H. No. 8, Vill. Bamangam,
Taluka Karjan
Dist. BARODA - 391210
Re: Refund of premium on Schedule Fire Policy
Dear Sirs,
We refer to your FAX dtd. 19.07.2001 and would wish to apprise that the premium on short period policy availed by you from 01.05.2001 to 31.07.2001 has been charged on prevailing short period scales as per provisions of the current Tariff. The same can therefore not be interpreted as excess premium charged.
We were given to understand, that you now propose to renew this short period policy for the same sum insured for a period of one year. We have already made a reference to TAC to consider refund of difference of short period & pro -rata scales, as similarly provided under the recently introduced provisions of mid -term cancellation of Std. Fire policies.
At present however we cannot be certain about the response from TAC because the issue would have implications on All India basis, which as we understand may require some deliberations before a final decision is taken. We are nevertheless making continued efforts to obtain a reply as early as possible.
In the meanwhile we look forward to your continued patronage & we would be glad to serve your policies for the forthcoming policy period.
Thanking you,
Yours faithfully
(A.P. Mittal)
REGIONAL MANAGER
It is an admitted fact that the short term policy was upto 31.07.2001 only. It can be seen from the correspondence that the Tariff Advisory Committee had informed the Respondent Insurance Company vide their letter dated 19.07.2001 that the request cannot be acceded to, but the Insurance Company did not state so in their letter dated 25.07.2001 which was addressed to the Petitioner Company. They only stated that they cannot be certain about the response from TAC because the issue would have implications. The learned Counsel for the Petitioner submitted that in view of these letters, they nurtured a legitimate expectation that the Insurance Company would still come up with a favourable response. It was only on 22.08.2001 that the Respondent informed them that they would not be able to consider their request for extension of the existing policy. The said letter reads as follows: 22 August, 01
JRO:FTD:RB:08 -01
JAIPUR D.O.I.
Re: Renewal of Short Period Policy by an Annual Policy
We refer to your letter dtd. 25.06.2001 addressed to M/s. Modern Petrofils with a copy to us for taking up the matter with T.A.C.
We are now in receipt of a reply from T.A.C. expressing their inability to accede to our request.
Under the circumstances we regret, we would not be able to consider refund of difference of short period and pro -rata scales on short period policy held by the clients.
(A.K. SHARMA)
DY. MANAGER
WE note that Rule 10.1.2 reads as follows: 10.1.2 During the currency, if a policy is replaced with the same insurer by a new annual one covering the identical property, refund of premium may be allowed on pra -rata basis at the original rates for the same insured replaced.
WE find force in the contention of the Petitioner Company that inspite of the Insurance Company having knowledge of the refusal of the Tariff Advisory Committee on 19.07.2001 itself, the Insurance Company belatedly informed the Petitioner Company, i.e., only on 29.08.2001. In the meantime, the short term policy of the Petitioner Company had come to an end on 31.07.2001 and immediately they were constrained to obtain a fresh policy for a period of one year from the same Insurance Company. Keeping in view the facts and circumstances of the case that during the subsistence of the existing short term policy, admittedly vide repeated correspondence with the Respondent Insurance Company, the Petitioner had sought for extension of the current short term period policy for another period of nine months which is evident in their letter dated 13.06.2001 and also in their correspondence dated 23.06.2001, we are of the considered view that in the instant case, Rule 10.1.2 squarely applies as the Petitioner Company had sought for replacement of the short term policy during its currency, with the same insurer, by a new policy covering identical property and therefore, refund of premium had to be allowed on pro rata basis at the original rates for the sum insured replaced.
KEEPING in view the communication and also the Rules for cancellation, we are of the view that Rule 10.1.2 applies and hence this Revision Petition is allowed; order of the State Commission is set aside and the Insurance Company is directed to refund the premium on pro rata basis as prescribed under Rule 10.1.2 of General Rules and Regulations. We also award costs of Rs. 10,000/ -. This direction shall be complied with within four weeks from the date of receipt of copy of this order, failing which the amount payable would attract an interest @ 9% p.a.