NATIONAL INSURANCE CO LTD vs Mittal Enterprises

THE complainant, Sita Ram Mittal, who is carrying business under the name and style of Mittal Enterprises, had taken cash credit limit at Rs.6,00,000/ - from UCO bank which was later enhanced to Rs.25,00,000/ - in the year 2005 -06. According to the complainant, at the aforesaid time, his stock was kept in a godown at Village Bibiwala as well as in his shop at Court Road, Bhatinda. This is also the case of the complainant that UCO bank used to purchase insurance policies, one in respect of stock lying in the godown and the other in respect of the stock lying in the shop. This is also his case that vide letter dated 07 -01 -2008 he had informed the insurance company that the entire stock kept in the godown had been shifted to the shop, but despite that, the policy was obtained in respect of godown at Bibiwala, which had no stock. No policy was taken by the bank for the year 2009 -10 in respect of the stock which had been kept in the shop.

IN the night intervening 17/18 -01 -2010 a fire broke out in the shop of the complainant. Intimation having been given to the insurance company, Mr. Pramod Mittal was appointed as a surveyor but the survey was refused on the ground that the stock kept in the shop was not insured with the insurance company, the policy in respect of the shop having not got renewed after 25 -04 -2009. According to the complainant stock worth Rs.27,35,881/ - got burnt in the fire which broke out in his shop and all the purchase bills and books were also destroyed.

TWO complaints were filed before the District Forum, one against UCO Bank claiming an amount of Rs.9,23,000/ -, that being the value for which the stock kept in the shop of the complainant was got insured for the year 2008 -09 but was not got insured for 2009 -10 and the other against both, the UCO Bank as well as the National Insurance Co. Ltd. seeking payment of Rs.17,85,000/ -, that being the sum assured in respect of the stock which used to be kept in the godown of the complainant, but was later shifted to his shop. The complaint was opposed by the insurance company inter alia on the ground that the complainant had not purchased any policy for the stock lying in his shop, for the year 2009 -10. The insurance company denied having received intimation regarding shifting of the stock lying in the godown to the shop.

THE UCO Bank disputed the case of the complainant that it had been purchasing insurance policies for the stock kept in the shop and godown of the complainant. According to the bank, it was for the complainant to get the stock insured from an insurance company approved by the bank. It was also claimed by the bank that insurance policy was being purchased by the complainant, though the premium was being paid by them to the insurance company as per his instructions, debiting the amount of the premium to his account. The bank denied having received a letter dated 07 -01 -2008 from the complainant.

VIDE its order dated 31 -01 -2011, passed in the complaint seeking payment of Rs.9,23,000/ -, the District Forum directed the opposite party UCO Bank to pay a sum of Rs.5,00,000/ - to the complainant as compensation and cost. The other complaint, however, was dismissed by the District Forum vide its order dated 09 -02 -2011.

BEING aggrieved from the order passed by the District Forum on 09 -02 -2011, the complainant approached the concerned State Commission by way of an appeal. Being aggrieved from the order of the District Forum dated 31 -01 -2011, UCO Bank approached the concerned State Commission by way of an appeal. Since the complainant was dissatisfied with the compensation awarded to him he also preferred an appeal assailing the order of the District Forum.

VIDE its order dated 24 -07 -2014, the State Commission allowed the appeal filed by the complainant against the order of the District Forum dated 09 -02 -2011 dismissing the complaint seeking payment of Rs.17,85,000/ - and directed the opposite parties i.e. the National Insurance Co. Ltd. and the UCO Bank to pay a sum of Rs.17,85,000/ - to the complainant along with compensation amounting to Rs.1,00,000/ - and cost of litigation amounting to Rs.11,000/ -. By a separate order passed on the same date the State Commission dismissed the appeal filed by UCO Bank against the order of the District Forum dated 31 -01 -2011 and allowed the appeal filed by the complainant by directing payment of a sum of Rs.9,23,000/ - to him by the bank along with interest at the rate of 12% per annum, compensation amounting to Rs.1,00,000/ - and cost of litigation amounting to Rs.11,000/ -.

BEING aggrieved from the order dated 24 -07 -2014, the insurance company is before us by way of Revision Petition No.4107 of 2014 whereas the UCO Bank is before us by way of Revision Petition No.4247 of 2014 and Revision Petition No.4245 -4246 of 2014.

THE grievance of the complainant is that since the stock kept in the godown had been shifted by him to the shop and due intimation of the said shifting had been given to the bank vide letter dated 07 -01 -2008, the bank which had been obtaining insurance policies in respect of the shop as well as godown should instead of obtaining renewal of the policy in respect of godown have not only got the insurance policy in respect of the shop renewed for the year 2009 -10 but also have obtained it for a higher amount of Rs.9,23,000/ - + Rs.17,85,000/ -.

THE first question which arises for our consideration in these petitions is as to whether the insurance policy in respect of the stock kept in the shop of the complainant was required to be obtained by the complainant or by UCO Bank. It is not in dispute that as per the agreement between the complainant and the bank it was for the complainant to obtain an insurance policy in respect of the stock hypothecated with the bank from an insurance policy duly approved by the bank in this regard. The case of the complainant is that despite the aforesaid term contained in his agreement with the bank, it was UCO Bank and not he which had been obtaining the insurance policy from National Insurance Co. Ltd. and since the policies used to be kept in the bank he was not even aware of the date on which they were going to expire. It is bank''s own case in the reply filed by it that the premium for the policies used to be paid by it and debited to the account of the complainant. This is also the case of the bank that the insurance policies were required to be obtained from the insurer approved by the bank. We fail to appreciate how the complainant could have been taking the insurance policies when the premium for the said policies used to be paid by the bank and the policies were used to be kept in its custody. If the complainant was to take the insurance policies, he would have directly paid the premium to the insurance company instead of asking the bank to pay the same and then debit it to his account. The case of the insurance company in this regard is that it was the bank which had been taking policies from it. A perusal of the letter dated 19 -02 -2010 sent by the insurance company to the complainant would show that they had an MOU with UCO Bank upto March 2009 and they (bank) did not get the insurance policies renewed from them since they entered into MOU with another insurance company namely Reliance Insurance Company. The aforesaid letter from the insurance company clearly shows that it was the bank and not the complainant which had been taking the policies and getting it renewed from the insurance company. In its reply filed before the District Forum the insurance company stated that the complainant had purchased two insurance policies from it through its banker UCO Bank, one for the godown stock and the other for the stock kept in the shop. It was also stated in the reply that the policies used to be supplied by the insurance company to the complainant through the bank. It is, thus, quite clear that despite the terms of the agreement between the bank and the complainant, it was the bank which had been taking the insurance policies and getting the same renewed by paying the premium to the insurance company, though the said premium used to be debited in the account of the complainant. Hence, considering the past practice between the parties it was for the bank and not for the complainant to obtain renewal of the insurance policies for the year 2009 -10. As noted earlier, the policies used to be sent by the insurance company to the bank. This is not the case of the bank that they were delivering the said policies to the complainant. Obviously the policies used to be retained by the bank with itself. Hence, the complainant would not even be aware of the date on which the policies were going to expire. Therefore, the complainant had no occasion to obtain their renewal directly from the insurance company. Considering the past practice the complainant was justified in assuming that the insurance company would be obtaining renewal of the policy and debiting the premium to his account. Therefore, he was not expected to keep track of the said policies and obtain renewal before they were to expire. The bank, therefore, was clearly deficient in rendering the services to the complainant by not obtaining renewal of the insurance policy in respect of the stock kept in the shop of the complainant for the year 2009 -10.

THE next question which arises for our consideration is as to whether the bank was under an obligation to obtain policy for the year 2009 -10 for a higher insured amount comprising Rs.9,23,000/ - being the value of the stock which used to be kept in the shop and Rs.17,85,000/ - being the value of the stock which was allegedly shifted by the complainant from the godown to his shop. According to the complainant the intimation of shifting the stock from the godown to the shop was given by him to the bank vide handwritten letter dated 07 -01 -2008. The case of the bank is that the aforesaid letter was never received by it and, therefore, there was no question of their requesting the insurance company to issue a policy for the higher insured value of Rs.9,23,000/ - + Rs.17,85,000/ -. In his affidavit filed before the District Forum Shri P.K. Grover, Branch Manager, UCO Bank specifically stated that the letter dated 07 -01 -2008 has been manipulated, forged and fabricated by the complainant and it does not bear the stamp of the bank which has been forged and fabricated. He claimed that even the handwriting in the letter is not of that of the complainant. He reiterated that neither the complainant issued nor did they receive the aforesaid letter dated 07 -01 -2008. In view of the stand taken by the bank, the complainant was required to prove the purported signature of the bank official as well as the seal of the bank on the letter dated 07 -01 -2008. The complainant, however, did not even disclose the name of the bank official who allegedly received the letter dated 07 -01 -2008 in the branch. In the absence of disclosure of the name of the bank official, it was not possible for the bank to examine the said official to prove that the letter dated 07 -01 -2008 does not bear his initials. The complainant had account with the bank for a number of years. He must have received several documents bearing the seal of the bank. No expert was examined by him to prove that the seal bearing on the letter dated 07 -01 -2008 tallied with the seal of the bank on the documents available with him. There is no explanation from the complainant either for not disclosing the name of the official who purportedly received the letter dated 07 -01 -2008 from him or for not examining an expert to prove that the seal on the letter dated 07 -01 -2008 was genuine seal of UCO Bank, Bhatinda. In view of the affidavit of the Branch Manager coupled with the aforesaid circumstances we have no hesitation in holding that the aforesaid letter dated 07 -01 -2008 was never delivered by the complainant to the bank. Therefore, the bank did not even come to know that the complainant had shifted all his goods from the godown to his shop.

IT was contended by the learned counsel for the complainant that admittedly the hypothecated stock used to be checked by the bank officials from time to time and, therefore, having noticed higher stock in the shop the bank officials ought to have obtained insurance for the value of the entire stock kept in the shop at the relevant time which included the stock which had been shifted from the godown to the shop. We, however, are not inclined to accept the aforesaid contention. The duty of the bank officials at the time of inspection was to verify whether the stock kept in the shop, which had been hypothecated with the bank, was still available in the shop or had been removed from there. They were under no obligation to value the entire stock available in the shop of the complainant at the time of inspection and obtain a policy for the entire stock. If the complainant had shifted the stock kept in the godown to his shop it was for him to request the bank to obtain insurance for a higher amount comprising the value of the entire stock available in his shop. This was more so considering that the premium for the insurance policy was to ultimately go from the pocket of the complainant and not from the pocket of the bank. At no stage the complainant requested the bank to obtain insurance for an amount higher than Rs.9,23,000/ - in respect of the stock kept in his shop. The bank in our opinion, therefore, was required to obtain policy, for the stock kept in the shop, only for Rs.9,23,000/ -, for the year 2009 -10 and not for higher amount.

THE learned counsel for the complainant contended that an adverse inference ought to be drawn against the bank for not producing the relevant register in which the letters received by the bank would be entered. Reliance in this regard is place upon the decision of the Hon''ble Supreme Court in Gopal Krishnaji Vs. Mohd. Haji Latif, 1968 AIR(SC) 1413 As noted earlier by us the bank has examined the Branch Manager who has clearly stated that the letter dated 07 -01 -2008 was never received by them and the seal bearing on the aforesaid document is a forged seal. Considering the emphatic deposition of the Branch Manager coupled with the failure of the complainant not only to name the bank official who allegedly received the aforesaid letter but also to examine an expert to prove the seal on the aforesaid letter, we are not inclined to accept the case of the complainant with respect to delivery of the aforesaid letter to the bank.

IT would, thus, be seen that as far as the National Insurance Company is concerned, since admittedly no insurance policy was obtained from it for the year 2009 -10 in respect of the stock kept in the shop, no liability can be fastened upon it for the loss of the stock which got destroyed or damaged in the fire and consequently the order of the State Commission directing payment of Rs.17,85,000/ - by the insurance company along with compensation and cost of litigation cannot be sustained.

COMING to the liability of the bank, since the bank was deficient in rendering services to the complainant by not obtaining renewal of the insurance policy in respect of the stock kept in the shop of the complainant it has to reimburse the complainant to the extent he would have been reimbursed by the insurance company had the bank taken renewal of the insurance policy in respect of the stock valued at RS.9,23,000/ - for the year 2009 -10. This is complainant''s own case that the total value of the stock kept in his shop, at the time fire broke out was Rs.27,35,881/ -. The insurance policy in respect of the stock kept in the shop was limited to Rs.9,23,000/ -. Since the stock kept in the shop at the time fire broke out was much more the insured value, the complainant was under an obligation to pay additional premium and obtained enhancement of the insured amount to Rs.27,35,881/ -. That having not been done, it was a case of under insurance and consequently the liability of the insurance company would be proportionately reduced. The underinsurance in this case comes to about 66.26%. Therefore, the liability of the insurance company in this case would be 33.74% of the insured amount of Rs.9,23,000/ -, which comes to Rs.3,11,420/ -. The UCO Bank is, therefore, directed to pay the aforesaid amount of Rs.3,11,420/ - to the complainant along with interest at the rate of 9% per annum from the date of filing of the complaint till the date of payment. The orders passed by the District Forum and the State Commission stand modified and all the revision petitions stand disposed of accordingly.