United India Insurance Co. Ltd. vs Madan Lal Mantoo

Full and final discharge by the financing Bank would absolve the appellant-Company from all liabilities is the view point projected by the

appellant in this appeal, which is preferred against the decision given by the State Commission, constituted under the J. & K. Consumer Protection

Act of 1987.

Before noticing the point of view put across by the appellant, the facts in brief be noticed.

It is not in dispute that the business premises belonging to the respondent suffered damage in a bomb blast. Claim was lodged. Surveyor

assessed the loss at Rs. 44,089/-. The appellant-Company however, examined the report of the surveyor and was of the view that the claim was

sustainable to the extent of Rs. 29,532/-. This amount was paid to the State Bank of India as it was the State Bank of India, which had paid the

premium for and on behalf of the respondent. Needless to mention that the State Bank of India had given financial (sic) entitled to the

reimbursement of the financial assistance given by it. The premium which was paid was debited to the account of Madan Lal complainant. The

complainant was however, not satisfied with the settlement arrived at between the company and the Bank. As the surveyor had assessed the

amount at Rs. 44,059/- he pleaded that he is entitled to the balance of the amount. This view found favour with the State Commission. A direction

has been given to pay a sum of Rs. 14,527/- to the complainant. Interest has also been allowed. This is at the rate of 18%. Interest has also been

allowed on the amount already received by the complainant through the Bank. This is from the date of loss till the payment was received by the

State Bank of India.

The basic argument which is urged is that in terms of the policy, the conditions whereof have been enumerated in the order passed by the

Commission, the complainant was not entitled to any other further amount. The two conditions on which reliance has been placed are being noticed

below :

That upon any, monies becoming payable under this policy the same shall be paid by the company to the bank and such part of any money, so

paid as may relate to the interests of other parties insured here-under shall be received by the Bank as agent for such other parties;

That the receipts of the Bank shall be a complete discharge of the company therefore and shall be binding on all parties insured hereunder.

Two questions which arise are (i) as to whether the clauses on which the reliance has been placed would stand in the way of the complainant and

(ii) as to whether the printed pro forma was in fact part of the insurance policy.

What is placed on the record is that the pro forma of the aforesaid policy. In this a separate leaflet has been inserted. As to whether this was

part of the policy which had in fact been issued has not been established. The second question would be as to whether the two clauses on which

the reliance has been placed would stand in the way of the complainant in getting adjudication when amount stands received by the Bank.

Counsel for the appellant submits that the Bank having received the payment would debar the complainant to make any further claim. Reliance is

being placed on a decision given by the Tamil Nadu State Consumer Disputes Redressal Commission, Madras in case P.K. Malaichamy v. Bank

of Madurai Ltd. (1994) 3 CPJ 84. A further reliance is being placed on a decision given by Bihar State Consumer Dispute Redressal Commission,

Patna in the case Nayak Mills v. National Insurance Co. Ltd., Samastipur II (2000) CPJ 371, wherein it was held that where the Bank has

obtained an insurance cover then the Bank is a necessary party to the proceedings which may be taken by the person who had received the

financial assistance from the Bank. So far as the first case is concerned that is no authority for the proposition put across by the appellant. In that

case that Bank filed a suit for recovery of the loan. Some payment was made to the Bank. The complainant filed a complaint alleging that the Bank

has received low value. As civil suit was pending, the issue was not settled, but the view expressed was that the complainant can contend in the

Civil Court that there was a collusion between the Bank and the insurer and the settlement was not in accordance with law. Therefore, to say that

once the Bank has received the amount without the knowledge challenge that transaction would not be apt.

Again the view expressed by Bihar State Consumer Commission (supra) is not an authority for the proposition which is put across by the

appellant.

In the objections preferred by the Insurance Company it has not been pleaded that the complaint cannot proceed in the absence of State Bank

of India. Had such an objection been taken at an earlier stage, this procedural lacuna could have been taken care of. The appellant having

abandoned this plea cannot raise this plea in appeal.

The question therefore, which really requires to be gone into is as to whether the payment made to the Bank which was less than what was

assessed by the surveyor would debar the respondent-complainant from approaching the forum created under the Act of 1987,

After having heard the learned counsel for the parties, we are of the opinion that the cases referred to above are only authorities for the

proposition that in case any amount is found payable and if the Bank gives a receipt then that would be a valid discharge qua that payment only. As

to what would be mention by the term ""money becomes payable under this policy"" is a matter which requires serious consideration. Is it the

determination as may be made by the Insurance Company of its own without reference to the complainant or is a determination made by an

authority other than the Insurance Company.

We are of the opinion that the money which is found to be payable would not represent the money which is found payable by the appellant-

company of its own, but which is ultimately found to be payable by the matter by any other forum or authority judicial or quasi-judicial which is

competent to give a decision. It is only when final determination is made and an amount has been found to be payable and that amount is paid to

the Bank and the Bank Issues a receipt then that payment would be a valid payment and its receipt by the Bank is to be taken as a discharge for

the liabilities of the persons making the payment. In the present case the amount payable would be the amount which became payable after

determination was made by the State Commission and not what was found to be payable on its own by the Insurance Company. There is nothing

on the record that payment which was made to the Bank was after due notice to the complainant and he had consented to this arrangement.

Therefore, to say that the complainant was debarred from raising a claim is an argument which cannot be accepted. Two authorities on which

reliance has been placed are clearly distinguishable.

The appellant-Insurance Company was aware of the fact that the surveyor had settled the claim for Rs. 44,049/-. The appellant-Insurance

Company chose to pay Rs. 14,527/- to the State Bank of India. There is nothing on the record that the appellant-Insurance Company brought this

fact to the notice of the State Bank of India i.e. the surveyor has assessed a higher amount and the amount what is being offered is a lesser amount.

If this be the position can it be said that a valid discharge was given or could it be given. In this regard it would be apt to refer to the statement of

law as contained in Corpus Juris Secundum Vol. 46. Certain paragraphs are relevant and are being quoted :

Payment to an assignee of the policy will operate as a discharge if made without notice of any fraud or illegality in the assignment. However, if the

assignment is void, payment by insurer to the assignee, with knowledge of the facts, will not operate as a discharge, and the assignor or his

personal representatives may recover the amount of the policy from insurer.

Page No. 137

xxxxxxx A partial payment under such a clause is a partial defence to a subsequent action on the policy, but it has been held that insurer cannot

fully discharge its obligation by paying to one other than a representative of insured's estate less than the full amount due, and obtaining a release

from such person.

At page 137, it is stated :

An agent authorised to receive payment of loss has no authority to receive less than full payment thereof, ""McLanahan v. Marine Ins. Co. DCMD

282 F 240, affirmed, CC 290 F 685

At page 141, fact of partial payment has been noticed and what has been said is being reproduced below :

Payment to the proper person fully discharges insurer's liability under the policy, in the case of payment of the entire amount due, or in the case of

partial payment to the extent of the amount paid.

In the aforementioned statement of law is taken note of then it becomes apparent that the insurance company was supposed to bring on record

and prove it as a fact that the State Bank of India was informed about the fact that the surveyor has settled the claim for a higher amount, but lesser

amount is being offered. Such is not the position (sic) something which is akin to concealment of facts. Payment made in these circumstances

cannot be said to be a valid payment.

However, with regard to interest the rate of interest should be 12%. This would be payable two months after the surveyor submitted its report.

This would apply to the liability as created by the State Commission and would also supply to that amount which was paid by the Insurance

Company of its own to the Bank. The amount which has become payable would be deposited with the Registrar (Judicial) of this Court.

It is thus concluded-

i) Payment of insurance premium was no doubt made by the State Bank of India but this was on behalf of the complainant and this amount was

duly debited to the account of the complainant:

ii) That a loss did take place. Surveyor had assessed the amount. The appellant-company made payment of lesser amount to the State Bank of

India;

iii) It is not the case of the appellant-company that the State Bank of India was made aware of the fact that the surveyor had settled for a higher

amount;

iv) The complainant rightly lodged the complaint. The plea that payment made to the State Bank of India, the complainant was rightly negatived.

This is because-

a) complainant was not privy to this transaction;

b) loss was sustained by the complainant and not by the State Bank of India and, therefore, the complainant had a right to contend that the

payment was not proper;

v) The amount payable would be the amount which came to be settled by the forums under the 1987 Act or as may be settled by (sic);

vi) Rate of interest would be 12% per annum and would be payable as indicated above.

There is thus no merit in this appeal.

A copy of this order shall be sent to the State Bank of India. Local Head Office. Sector 17, Chandigarh.

If any amount is payable by the complainant to the State Bank of India, then the payment would be made to the Bank and not to the

complainant. State Bank of India would lodge its claim with the Registrar (Judicial) of this Court.

This appeal is accordingly found to be without any merit and is disposed of with the aforementioned modification vis-a-vis the rate of interest.