ORIENTAL GENERAL INSURANCE CO. LTD. vs KARNAL CARD BOARD INDUSTRIES

THIS is an appeal against the order passed by the Consumer Disputes Redressal Commission, Haryana at Chandigarh in Complaint Case No. 30/92 by which it directed the present Appellant-Oriental General Insurance Co. Ltd. who were Opposite Party in the complaint filed by the present Respondent M/s. Karnal Card Board Industries to pay to the Complainant Rs. 92,143.75 with interest at the late of 18% w.e.f. 1st September, 1985. Feeling aggrieved the Opposite Party has filed this appeal.

THE facts leading to this appeal are that the Complainant Firm has taken out in Insurance Policy for one year in the sum of Rs. 3 lakhs on 14th May, 1985 for material/stocks within the factory premises. A sum of Rs. 655/- as premium was duly paid by the Oriental Bank of Commerce (with whom the aforementioned stocks and materials were hypothecated) on behalf of the Complainant Firm and later on a sum of Rs. 132/- was paid as additional premium. The Complainant Firm is a Partnership Firm carrying on its business of manufacturing card board at village Chirao (District Karnal), raw material whereof is waste paper, parali, baggasse etc. On 18th May, 1985 at 1 p.m. a disastrous fire broke out within the factory premises which could only be extinguished by 7.30 p.m. by two Fire Brigades urgently summoned at the spot. Intimation about the above incident was immediately lodged with the Insurance Company and lateron a regular claim was also filed. The Insurance Company appointed Shri D.S. Rattan and Naresh K. Gupta Surveyors who after visiting the premises and making full enquiries assessed the loss at Rs. 1,31,000/- and odd. The survey report was submitted to the Insurance Company. It was the further case of the Complainant that thereafter they approached the Insurance Company for making the payment but they prolonged the matter on one pretext or other and vide letter dated 2nd January, 1991 (nearly six years after the fire) informed the Complainant that the loss suffered by them was not covered under the policy but nevertheless asked for further proves that the stock in open was not insured. The refrain of the defence was that only stock in process was covered and no other material.

IN support of the complaint, an affidavit of Shri Tejinder Pal Singh Mann, a partner of the Firm was placed on the record before the State Commission. He was cross-examined at length on behalf of the Insurance Co. without making the least dent in his testimony. In rebuttal the Insurance Co. put in the affidavit of Shri J.K. Bhaskar, the Senior Divisional Manager. A communication by the Surveyor � Shri D.S. Rattan to the Insurance Co. dated 19th October, 1985 was also brought on the record by the Insurance Co. as an addendum to the Surveyor''s report which established that by clerical error the quantum of the loss had been wrongly assessed and the correct figure was only Rs. 92,143.75. It may be mentioned here that no serious challenge was made to this document on behalf of the Complainant.

AFTER consideration of the record and the submissions advanced on behalf of the parties, the State Commission came to the conclusion that the stock stored in the factory premises was also covered under the cover note issued by the Insurance Co. and further the Insurance Co. was guilty of deficiency in rendering service as the claim of the Complainant was not decided for so many years. It accordingly directed the Insurance Co. to pay Rs. 92,143.75 with interest at the rate of 18% per annum w.e.f. 1st September, 1985. The amount was ordered to be paid within one month from the date of the order failing which action under documents. Even thereafter no redress was offered to the Complainant forcing it to knock the door of the State Commission on 11th June, 1992 seeking the relief of the assessed loss of Rs. 1,31,000/-. In the counter filed by the Insurance Company as many as five preliminary objections were taken but only the objection about the complaint being time barred was pressed. This preliminary objection was rejected by the State Commission by a speaking order dated 8th September, 1992 and the matter was not carried any further.

ON merits it was pleaded that the Oriental Bank of Commerce with whom the relevant stock was hypothecated had not been impleaded as party. The factum of the insurance was admitted with the clarification that only the material in process was insured. The factum of fire having taken place and the Surveyor having been appointed by the Insurance Company and survey report was admitted. The qualified plea was that the stock and waste paper etc. were lying in the open and the stand was that this was not covered by the policy and consequently was not duly insured. The delay or blame for the settlement or repudiation of the claim was sought to be shifted to the shoulders of the Complainant for not having persued the matter and the plea was that the file was closed on 31st December, 1987 and the Complainant had not chosen to get the case reopened for a long time. It was in terms pleaded that the proposal form filled up by the Oriental Bank of Commerce on behalf of the Complainant Section 27 of the Consumer Protection Act was to be initiated.

FEELING aggrieved, the Insurance Company has come before us by way of this appeal. As we intend to affirm the order of the State Commission We do not intend to discuss in detail the submission advanced on behalf of the parties. Those have been discussed at length by the State Commission. There can be no dispute upon the point that Insurance Co. has been very sluggish in deciding the case of the Complainant. In reply to a letter issued by the Oriental Bank of Commerce with whom the stock was hypothecated, the Insurance Co. wrote a communication dated 27th February, 1991. The opening part thereof which re-speaks the cavalier manner with which the insured''s claim was being treated by the Opposite Party deserves notice in extenso: "We are in receipt of your letter dated 19.10.91 followed by reminder dated 13.2.91 in connection with above claim and are surprised to note that this loss pertains to the year 1985 and no correspondence has been exchanged by you or the party after 1986 as such we could not lay our hands on the claim file which has consigned to the records."

The insured was still kept on tenter hooks by asking them to furnish in the meantime fresh documents like a copy of the hypothecation deed entered into between the Bank and the party regarding insured''s requirements before the inception of the risk on the 14th May, 1985. It would appear that after February, 1991, the Insurance Company again relapsed in total inactivity till roused by the filing of the present complaint.

IT may be mentioned here the Insurance Company tried to shift the delay of settlement or repudiation of the claim to the shoulders of the Complainant for having not pursued the matter with them and the plea was that the file was closed on 31st December, 1987 and the Complainant had not chosen to reopen the case for a long time. It is not the case of the Insurance Company that the insured or the Bank concerned was informed about the closing of the claim file on31st December, 1987. As noticed above, when the case was not settled for a long time, the Bank wrote letters to the Insurance Co. which were replied by the latter vide letter dated 27th February, 1991. Merely because the insured or the Bank did not take steps to rouse the Insurance Co. to settle the claim it does not mean that the Insurance Co. was entitled to slumber over the claim. If it wanted to repudiate the claim on the ground that the stocks lying in the open in the factory premises were not insured it ought to have informed the insured or the Bank. It may be mentioned here that the proposal form for insurance was submitted by the Bank. Hence the plea of the Insurance Co. that the delay in the non-settlement of the claim was due to the inaction of the Complainant or Bank has no force.

THE next question that arises is whether the raw stock lying in the factory premises was covered under the risk of insurance. The cover note issued by the Insurance Co. on 14th May, 1985 specify the description of risk to the tune of Rs. 3.00 lakhs as follows: "Rs. 3,00,000/- on stock of all types of raw material used for manufacture of cardboard industries, finished and semi-finished or in process the property of the insured under lien in force of Bank, whilst stored and /or lying in the process situated at Kaithal Road, Karnal."

The aforesaid language is clear and clearly the risk covered was stocks of all types of raw material used for manufacture of card board. It was intended to cover all the property of the insured which was under lien to the Bank. It is not in dispute that the Bank''s lien operated on all the raw materials in the factory and not finically with regard to what may be labelled as stocks in process, the precise meaning whereof could not be explained by the learned Counsel for the Insurance Company.

REPORT of the Surveyor Mr. D.S. Rattan dated 8th June, 1985 described the factory premises in the following terms : "The factory building on the side where digesters were located was encompassed by boundary wall having an entrance through the gate about 16 ft. in width. The enclose was of almost rectangular shape about 200 ft. lg. and 130 ft. in width with additional 70 ft. x 90 ft. area just on the right side of entrance forming one composite storage area."

[t is not in dispute that raw materials were stocked within the factory premises. The aforesaid description would bring the said stock clearly within the language employed in the cover note.

THE Appellant has also filed copy of the proposal forum and risk for Rs. 3.00 lakhs was sought to be covered "on stock and stock in process." Thus the risk was sought to be covered on all the stocks lying in the factory premises. In the light of the above discussion we hold that the stocks lying in the factory premises cannot be said to be stock lying in the open and therefore Insurance Company''s pleas that only stock in process was insured cannot be upheld.

IN view of the above observations we do not find any force in the present appeal and dismiss the same with costs which we assess at Rs. 2,000/-.