SHITAL CORPORATION vs BRANCH MANAGER, PUNJAB NATIONAL BANK

COMPLAINANT is a partnership firm, and it has filed this complaint to recover Rs. 12.95 lacs from the opponents.

THE complaint is based on the following facts. THE complainant carries on business of manufacturing road signs and traffic safety devices and it has a factory on Jhuhapura Road at Ahmedabad. THE complainant had taken loan/ advance facility from Relief Road Branch of Punjab National Bank (Bank for short), opponent No. 1 herein. THE complainant had hypothecated its goods lying in its godown to secure the loan. THE godown was under the control of the Bank. In other words, the lock and key of the godown were with the Bank. It is alleged that under the agreement entered into between the complainant and the Bank, the Bank paid Rs. 1,559/- to Oriental Insurance Company Ltd., opponent No. 2 herein (Insurance Company for short), to insure the goods lying in the godown. According to the complainant the insurance premium of Rs. 1,559/- was paid on December 5,1992. It may be mentioned here that the goods lying in the godown were already insured under two insurance policies issued by the Insurance Company. However since the complainant received additional goods worth Rs. 8.5 lacs through Jaipur Golden Transport Company and these goods were also hypothecated with the Bank and delivered at the aforesaid godown. It was therefore that additional insurance cover was taken by payment of the premium of Rs. 1,559/- as aforesaid. There were communal disturbances in Ahmedabad city in December, 1992. During these disturbances, on December 7,1992, the aforesaid godown and goods lying therein were brunt to ashes by a violent mob. However, the complainant came to know about the destruction of its godown and goods only through news media and the godown site could not be visited for 4 to 5 days because of curfew imposed by the Police Authorities. The Police Authorities lodged complaint with regard to the incident in which the complainant''s godown was burnt on December 12,1992. In the course of investigation to offence registered on the basis of the complaint, the Police drew up a Panchnama of the godown which was destroyed in fire. The Panchnama disclosed that there was total loss of the property.

Since the goods in the godown were insured, the complainant approached the Bank. The Bank informed the complainant that it had paid premium to the Insurance Company on December 5,1992 by sending pay slip of the premium amount by post to the Insurance Company. The Insurance Company however, returned the pay slip of Rs. 1,559/- alongwith the letter dated December 17,1992 stating to the effect that before the receipt of the Bank Letter and the pay slip the loss of the goods sought to be insured was already reported.

THE Insurance Company appointed a Surveyor to assess the loss suffered by the complainant. It is alleged that the Insurance Company did not supply a copy of the report of the Surveyor to the complainant. THE complainant made representation to the Insurance Company to review its decision to return the premium of Rs. 1,559/-. It is submitted that the complainant produced all the necessary documents before the Surveyor for assessment of the loss suffered by it. However, on May 20,1993 the complainant received letter from the Insurance Company stating to the effect that claim voucher of Rs. 3,94,464/- was sent alongwith the letter in full and final settlement of its claim. In reply the complainant wrote letter dated May 25,1993 to the Insurance Company stating to the effect that the amount of Rs. 3,94,464/- was not acceptable to it because the claim which it had made was of Rs. 12.95 lacs. THE Insurance Company however did not pay the claim as requested by the complainant. It is, therefore, that the complainant has filed this complaint for recovery of Rs. 12.95 lacs from the Bank and Insurance Company. Both the Bank and Insurance Company have filed written statements resisting the complaint. They have denied the allegation of deficiency in service made by the complainant. It is submitted on behalf of the Bank that it was not under any obligation to insure the complainant''s godown and the goods lying therein. It was the duty of the complainant to insure the goods which were hypothecated or pledged with the Bank. The Bank had however, insured the goods under two insurance policies as the complainant had failed and neglected to do so. When fresh goods arrived, the Bank issued pay order for Rs. 1,559/- for payment of premium to the Insurance Company to cover the risk of the goods which had arrived. It may be recalled that according to the complainant goods worth Rs. 8.5 lacs which were received through Jaipur Golden Transport Company were delivered at the godown in custody of the Bank. It was to insure these goods that the Bank issued pay order of Rs. 1,559/- in favour of the Insurance Company as stated above. It is submitted that the Bank was not under obligation to insure the said goods. The Insurance Company however did not accept the premium. It is submitted that the Bank could not be blamed for the action of the Insurance Company. It had taken steps to insure the goods though it was under no obligation to do so. There was, therefore, no deficiency in service on its part.

THE Insurance Company has submitted that premium of Rs. 1,559/- to insure the goods as aforesaid was received by it on December 17, 1992. Since by that time the goods for which the cover was sought were already destroyed in fire the premium was returned to the Bank. It is submitted that the Insurance Company considered the complainant''s claim under two insurance policies which were earlier issued and after receiving the report of the Surveyor, offered to pay Rs. 3,94,464/- to the complainant in all and final settlement of its claim. THE complainant however, refused to accept the said payment. Under these circumstances it could not be said that there was any deficiency in service on the part of the Insurance Company. It may be mentioned here that during the pendency of the complaint, the amount of Rs. 3,94,464/- which was offered to the complainant as aforesaid was deposited in this Commission by the Insurance Company and the complainant was permitted to withdraw this amount. The controversy in this complaint is confined to the additional insurance which was sought by the Bank from the Insurance Company by paying premium of Rs. 1,559/- under the pay order. Exhibit 26/1 is the letter dated 5.12.92 addressed by the Bank to the Insurance Company alongwith which pay order for Rs. 1,559/- was sent. It is submitted on behalf of the complainant that since the premium was sent to the Insurance Company by post of December 5, 1992, under Section 64 VB of the Insurance Act, the premium should be deemed to have been received by the Insurance Company on the said dated i.e., December 5,1992. Therefore, the risk should be assumed to have been covered on and from December 5,1992. This allegation of the complainant is not supported by the evidence on record. Relevant entries from the despatch register of the Bank which are at page 105 shows that the aforesaid letter dated 5.12.92 alongwith which the pay order was sent, was despatched to the Insurance Company on December 7,1992. It appears that though the letter was written by the Bank on December 5, it was not despatched till December 7, December 6 being holiday on account of Sunday. The letter could not have been despatched by post before 11.00 a.m. on December 7,1992. The incident in which the complainant''s godown was destroyed by fire had taken place at 9.30 a.m. on December 7,1992. It would thus appear that even before pay order of the premium was despatched, the goods sought to be covered by Insurance were destroyed. However, the premium by pay order was received by the Insurance Company on December 7,1992. The Insurance Company did not accept the premium and returned the pay order to the Bank. Contract of insurance is a bilateral contract and it was open to the Insurance Company to refuse to accept the Bank''s proposal for additional insurance or coverage. The Bank could not have brought about a contract with the Insurance Company unilaterally by merely dispatching insurance premium by post to the Insurance Company. In our opinion Section 64 VB of the Insurance Act is not applicable to the facts of the present case for two reasons, namely : (1) The premium was despatched by post by pay order after the destruction of the goods sought to be covered, and (2) The proposal for the insurance made by the Bank was not accepted by the Insurance Company. Similar view had been taken by the National Consumer Disputes Redressal Commission in National Insurance Company Ltd. v. J.J. 749, Pattarai Perumbandure, Primare Agricultural Co-Op. Bank, First Appeal No. 463 of 1992, decided on July 26,1993. In our opinion, therefore, the Insurance Company was fully justified in refusing to accept the aforesaid Rs. 1,559/-. Under the circumstances the complainant or the Bank was entitled to claim indemnification only under two existing policies. So far as these two policies are concerned, the Insurance Company offered to pay to the complainant Rs. 3,94,464/- as per the assessment made by the Surveyor. It was the complainant who refused to accept this amount in full and final settlement of its claim. As stated above the said amount was deposited by the Insurance Company in this Commission and it has been withdrawn by the complainant. The complainant has failed to prove that it is entitled to claim anything more than the aforesaid amount from the Insurance Company under the said two insurance policies. We, therefore, hold that there was no deficiency in service on the part of the Insurance Company. It was then urged on behalf of the complainant that in any case the Bank is liable to make good the loss suffered by the complainant because it was guilty of deficiency in service by not insuring the goods in time. It is submitted that under the agreement between the complainant and the Bank, the Bank was under an obligation to insure the goods which were hypothecated or pledged with it. There is no substance in this contention. The complainant has not produced any agreement under which the Bank was under an obligation to insure the goods which were hypothecated or pledged with it. On the contrary there is documentary evidence to prove that the Bank was under no obligation to insure the goods. Trust receipt which is on page 80 is executed by the complainant in favour of the Bank and in this trust receipt, the complainant has undertaken to cover the goods by insurance against all risks and hold the policy or policies on behalf of the Bank. The agreement between the Bank and the complainant begins on page 81. Clause 9 of the agreement clearly provides that all securities should be insured against fire risks by the borrowers i.e., complainant. It also provides that if the borrowers fail to insure the goods, the Bank would be at liberty, but not bound, to effect such insurance at the expense of the borrowers or the complainant. Thus the Bank was under no obligation to insure the goods which were hypothecated or pledged with it by the complainant. It however, had insured the goods under two insurance policies and it has also despatched premium alongwith letter to the Insurance Company for additional coverage in respect of goods which were delivered after two insurance policies were taken from the Insurance Company. The Bank had insured the goods under the two insurance policies and sought further insurance by payment of premium of Rs. 1,559/- not because it was under obligation to do so but because the complainant failed to insure the goods. Therefore, even assuming for the sake of argument that there was delay on the part of the Bank in sending insurance premium to the Insurance Company for additional cover, it could not be held guilty of deficiency in service. It was the duty of the complainant to insure the goods in time. The Bank insured the goods to secure repayment of loan or advance made to the complainant. In our opinion therefore, the Bank could not be held guilty of deficiency in service and the complainant is not entitled to claim from the Bank, the loss suffered by it on account of destruction of godown and the goods lying therein by fire. This complaint, therefore, deserves to be dismissed against both the Bank and the Insurance Company.

IN the result, this complaint is dismissed. The complainant shall pay to each of the opponents namely the Bank and the INsurance Company, cost of Rs. 2,500/-. Complaint dismissed with costs.