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Judgment
V.K.Jain, Presiding Member
The complainant took a Stock Brokers Indemnity Insurance Policy from the OP for a sum insured of Rs.1 Crore, for the period from 01.06.2000 to 31.05.2001. The case of the complainant is that one of its employees namely Mr. N.R. Rajan placed several orders with the National Stock Exchange in the name of several clients of the complainant without knowledge of such clients and caused loss of more than Rs.29,00,000/- to the complainant.
Vide letter dated 18.10.2000, the complainant informed the insurer about the aforesaid unauthorized transactions done by Mr. N.R. Rajan and requested the insurer to provide a copy of the policy as well as the claim form. It was also stated in the aforesaid letter that the complainant had not received the details of the policy number or a copy of the policy and therefore, was unable to provide the same. There was no response from the insurer to the aforesaid letter dated 18.10.2000. The complainant then wrote a letter dated 01.11.2000 to the insurer, referring to its earlier letter dated 18.10.2000 and again seeking a copy of the policy as well as the claim form. Again, there was no response from the insurer to the letter dated 01.11.2000.
It appears that thereafter, the representative of the complainant had visited the office of the insurer and had discussions with its officers. Pursuant thereto and referring to the letter of the complainant dated 01.11.2000, the insurer requested the complainant to send the documents at the earliest possible, in order to enable it to proceed further in the matter. Vide letter dated 22.03.2001, the complainant informed the insurer that subsequent to lodging the initial claim, they had discovered a further loss of Rs.2,06,789.36/- on account of the same employee having colluded with the client of the complainant and requested the insurer to take this as additional claim for infidelity of the staff in collusion with the client. Mr. Rawat submits that the letter dated 22.03.2001 was not received by the insurer and the complainant has not filed any acknowledgement of receipt of the said letter by the insurer. Since the claims were not paid, the complainant approached this Commission by way of this Consumer Complaint filed on 06.01.2003 seeking payment of Rs.27,98,161.76/- with interest and compensation.
Before filing the written version to the complaint, the insurer repudiated the claim vide its letter dated 04.06.2004, which to the extent it is relevant, reads as under:
The competent authority has repudiated your claim since the same falls within the Exclusions No. A(6) of the Policy which reads as under:-
"Trading by Insured or his employees in his own name or any other name(s). Any liability or loss directly or indirectly arising out of or resulting from trading by or on behalf of any employee(s) of the insured in documents actual or fictitious whether or not within the knowledge of the insured and whether or not acting within the scope of authority given by the insured.
It is agreed however, that this exclusion will not apply to any loss or liability in respect of physical loss/take/forged/stolen securities actually delivered/received even on account of the transaction of the insured provided insured himself is not involved on the same"
The complaint has been contested primarily on the ground on which the claim has been repudiated.
As held by the Hon'ble Supreme Court in Galada Power and Telecommunication Limited Vs. United India Insurance Company Ltd. & Anr. (2016) 14 SCC 161, the insurer cannot be allowed to travel beyond the repudiation letter issued by it. The insurer therefore cannot contest the claim on a ground which was not the ground of repudiation.
In view of the above referred authoritative pronouncement of the Hon'ble Supreme Court, the insurer cannot be allowed to travel beyond the grounds given in the repudiation letter dated 04.06.2004, the said ground being that the claim was covered under exclusion A(6) of the insurance policy.
Mr. Rawat submits that the complainant has failed to make out a case of infidelity on the part of an employee and therefore, the alleged loss to the complainant is not covered under the insurance policy even if the exclusion is not taken into consideration. However, the said contention cannot be considered since this was not a ground taken in the letter of repudiation dated 04.06.2004.
The case of the complainant, as noticed earlier, is that the policy document was never received by it. If the policy document itself was not received by the complainant, there will be no question of the complainant receiving the terms and conditions applicable to the policy. It is crystal clear from a perusal of the Consumer Complaint that the complainant pleaded that it had not received all the policy document and has claimed that even policy number was not known to it and that was the reason the policy number was not given in the letters dated 18.10.2000 and 01.11.2000. In the written version, the insurer has not specifically pleaded that the policy document was sent to the complainant not has the insurer filed any document evidencing the dispatch of the policy document to the complainant or receipt of the said document by it.
In any case, the policy document itself being dated 01.12.2000, there is no way this document could have been sent to the complainant by the date the insurance cover commenced or even on or before the letters dated 18.10.2000 and 01.11.2000 were sent by it to the insurer. It is thus evident that the policy document and/or the terms governing the policy were not sent to the notice of the complainant before the alleged loss happened. Since the exception clause referred in the repudiation letter was never brought to the notice of the complainant before the loss happened, the rejection of the claim relying upon the said exclusion clause was wholly misplaced and untenable in law. An insured cannot be bound by a term of the policy which he had no occasion even to know. Moreover, even on receipt of the letter dated 18.10.2000 and 01.11.2000, the insurer did not claim that the terms and conditions of the policy had been brought to the notice of the complainant or were otherwise supplied to it before the commencement of the policy or before the alleged loss to the complainant happened. The policy number is referred for the first time in the letter of the insurer dated 07.03.2001. I therefore, have no hesitation in holding that the repudiation of the claim relying upon clause A(6) of the insurance policy was not justified.
The next question which arises for consideration is as to what amount if any, the complainant is entitled from the insurer towards re-imbursement of the loss alleged to have been sustained by it on account of the transaction executed by its employee on behalf of certain clients of the complainant but without any authority or any instructions from them. In order to prove the alleged loss, the complainant was required necessarily to prove the following:
(i) Certain transactions were executed by Mr. Rajan with National Stock Exchange on behalf of the clients of the complainant.
(ii) The said transactions were executed by Mr. Rajan without instructions or authorization from the concerned clients of the complainant.
(iii) The complainant had actually suffered loss in the transactions executed by Mr. Rajan on behalf of clients of the complainant.
(iv) The alleged losses were not passed on by the complainant to the clients on whose behalf these transactions purported to be executed.
The complainant has not produced any client on whose behalf the transactions were allegedly executed by Mr. Rajan nor has the complainant filed affidavit of any of them to prove that the transactions were executed without any instructions or authority from them. In fact, the complainant has even alleged connivance between it and its employee. No record of the stock exchange has been proved by the complainant to prove the precise loss in the above referred transactions. In order to succeed, the complainant was necessarily required to prove not only the execution of the transactions but also the actual loss alleged to have been suffered by it. In fact even the details of the transactions alleged to have been executed by Mr. Rajan on behalf of the clients of the complainant have not been given in the Consumer Complaint nor has the complainant given any break-up of the loss alleged to have been suffered by it in each of those transactions. In the absence of the above referred evidence and materials, it is not possible for this Commission to quantify the loss alleged to have been suffered by the complainant on account of the transactions alleged to have been executed by Mr. Rajan at National Stock Exchange without authority or instructions from the persons on whose names the transactions were executed or in connivance with them. Though the insurer had appointed a surveyor to assess the loss alleged to have been suffered by the complainant, this was done after institution of the Consumer Complaint. It is evident from a perusal of the survey report that the surveyor did not examine either the record of the stock exchange to verify the alleged loss nor did he examine any of the clients on whose behalf the transactions were allegedly executed on the floor of the National Stock Exchange. The assessment made by the surveyor was based solely upon the ledgers produced by the complainant before him. In these circumstances, I have two options. The first option is to direct the complainant to produce evidence before this Commission to prove the loss alleged to have been suffered by it, by producing the record of the stock exchange and by examining the clients on whose behalf the transactions were allegedly executed or filing their affidavit by way of evidence. The second option would be to remit the matter back to the surveyor to assess the loss to the complainant, on the basis of such additional evidence as the complainant may deem appropriate and after verifying the information so provided by the complainant from the record of the National Stock Exchange and after examining the clients on behalf the transactions were allegedly executed. The learned counsel for the complainant submits that since the transactions happened about twenty years ago, it may not be possible for the complainant to produce those clients before the surveyor. In my opinion, it would be sufficient if the complainant provides the last known addresses of those clients to the surveyor. It would then be for the surveyor to contact them, record their statements and verify the claims. If the work is assigned to the surveyor instead of this Commission taking the task upon itself, the claim can be decided much faster.
For the reasons stated hereinabove, the complaint is disposed of with the following directions:
(i) The assessor who had earlier examined the claim of the complainant and if for some reason, he is not available, some other surveyor nominated by the insurer shall verify the claims of the complainant in terms of this order. In particular, the surveyor shall verify the alleged loss to the complainant from the record of the National Stock Exchange if such a record is available. The addresses of the clients on whose behalf the transactions were allegedly executed by Mr. Rajan, shall be provided by the complainant to the insurer within three weeks from today alongwith all contact details including their telephone numbers and e-mail address if any.
(ii) The complainant shall give particulars of each and every transaction executed by Mr. Rajan on behalf of the clients of the complainant and without authority or instructions from them or in connivance with them to the insurer, alongwith the loss alleged to have been suffered by it in each such transaction. The surveyor shall try to contact those clients and examine them with respect to the alleged loss to the complainant.
(iii) The assessment in terms of this order, shall be made by the surveyor within four months from the insurer receiving a copy of this order.
(iv) If the surveyor finds any amount payable by the insurer to the complainant, in terms of this order, the said amount shall be paid by the insurer within one month of such an assessment alongwith interest on that amount @ 9% per annum with effect from six months from the date of lodgment of the claim, the time period of six months being available to the insurer to decide the claim in terms of Regulation 9 of the Insurance Regulatory and Development Authority (Protection of Policyholders' Interests) Regulations 2002.
(v) No order as to costs.