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Judgment
Heard Mr. Sameer Nandwani, Advocate, for the complainant and Mr. A.K. De, Advocate, for the opposite party.
M/s. Metro Tyres Limited (the Insured) has filed above complaint for directing United India Insurance Company Limited (the Insurer) to pay (i) Rs.2.19/- crores with interest @24% per annum from the date of loss till the date of payment, as insurance claim, (ii) Rs.50/- lacs, as compensation for mental agony and harassment, (iii) Rs.10/- lacs, as the costs of the litigation and (iv) any other relief, which is deemed fit and proper, in the facts and circumstances of the case.
The facts, as stated in the complaint and emerged from the documents attached with the complaint, are as follows:-
(a) M/s. Metro Tyres Limited (the Insured) was a company registered under the Companies Act, 1956. Apart from other business, the Insured trades in sales of fans under the Brand name ORTEM and sewing machines. The Insured had its branch office at 66, Bentink Street, 1st Floor, Bowbazar, Kolkata-69. The business of the Insured in eastern zone of India was managed and controlled through Kolkata branch office. In 1986 one Dr. Ajit Kumar was appointed as an employee at Kolkata branch. He was promoted as Assistant General Manager on 28.04.2006 and Deputy Vice President on 07.02.2008. He resigned on 15.04.2008, but the Insured did not accept it. One Samir Bhushan Ghosh Majumdar, was appointed as an Assistant Marketing Manager on 05.06.2000. He was promoted as Marketing Manager on 28.04.2006.
(b) United India Insurance Company Limited (the Insurer) is a public sector insurance company and used to provide different types of insurance services to the public. The Insured obtained Fidelity Guarantee Insurance Policy No.200800/46/08/13/ 00000503 from the Insurer for the period of 01.02.2009 to 31.01.2010, for the sum assured of Rs.3/- crores, which was a renewal of earlier policy.
(c) The Corporate Office of the Insured had been receiving various complaints regarding poor recovery of the dues by Kolkata office. Then a team was constituted and sent for the audit of account of Kolkata office. In internal audit, it was found that a dues of Rs.285.11 lakhs was recoverable in the fans division and Rs.11.71 lakhs dues, recoverable in sewing machine division from various dealers. Then a meeting was called for in the corporate office with the two officers namely, Samir Bhushan Ghosh Mjumdar and Dr. Ajit Kumar, for 29.09.2008. The meeting was attended by Samir Bhushan Ghosh Mjumdar as a representative of Kolkata branch on 29.09.2008, which was held in presence of Rummy Chhabra, Managing Director, Amit Seth, Vice President and Samir Bhushan Ghosh Mjumdar, Marketing Manager of Kolkata branch. In the meeting it was noticed that as on 31.08.2008 Rs.285.11 lakhs was recoverable in the fan division and Rs.11.71 lakhs dues was recoverable in sewing machine division. Samir Bhushan Ghosh Mjumdar, Marketing Manager gave a break up of aforesaid amount as follows:-+
Bad Debts
Rs.32.54 lakhs (fans)
Rs.3.31 lakhs (sewing machine)
Slow Recovery
Rs.23.31 lakhs (fans)
Rs.5.67 lakhs (sewing machine)
Collectable Amount
Rs.90.51 lakhs (fans)
Rs.2.13 lakhs (sewing machine)
Pending Discount
Rs.136.75 lakhs (fans)
(d) In the meeting Samir Bhusan Ghosh Mjumdar suggested that in respect of bad debts, the details of the names of the dealers would be collected up to 31.03.2009 and a recovery plan would be initiated in this respect. The amount of dues shows as slow recovery was found 50% amount is recoverable. The detail of list had to be supplied and collection plan of Rs.40 lakhs had to be made before 31.03.2009. An amount of Rs.50 lakhs had to be collected from 01.04.2009 and 30.06.2009. The dues in the head of “pending discount” had to be reconciled/verified with the circular/letter available in branch office.
(e) As assured in the meeting dated 29.09.2008, the collection of Rs.40 lakhs has to be made before 31.03.2009, but no progress in this respect was found after the meeting dated 29.09.2008. When the required cooperation could not be received from Samir Bhushan Ghosh Mjumdar and Dr. Ajit Kumar then an application under Section 156 (3) Cr.P.C. was filed before Chief Metropolitan Magistrate, Kolkata for directing the concerned Police Station to register FIR against Samir Bhushan Ghosh Majumdar and Dr. Ajit Kumar as well as Ayan Karmakar, Dipak Karmakar (both partners of Kalpataru Electronics at Gobardange, station Road, Kali Tala, North 24 Pargana) and Ashok Laha, Proprietor of M/s. Shipur Radio Services at 36 Shivpur Road, Howrah. Chief Metropolitan Magistrate, Kolkata vide order dated 20.04.2009 directed the concerned Police Station to register the FIR and investigate the case. Then FIR No.121, under Section 406 ,420, 467, 468, 471, 477, 120B, 34 I.P.C. was registered on 25.04.2009 at police station Bowbazar Kolkata, against those persons.
(f) The Insured lodged insurance claim before the Insurer 03.07.2009 in respect of loss committed by fidelity of its employees. The Insurer appointed Bararia & Associates, as surveyor on 27.08.20098. The surveyor asked the complainant to submit a detailed claim form as well as the documents to assess the loss. The Insured submitted insurance claim of Rs.21918723.52 on 30.10.2009. After survey, the surveyor submitted his report dated 02.02.2010. In this report the surveyor observed that the claim was in respect of pending discount amount and bad debts. This was a normal business loss and therefore, the claim in this respect was not tenable under the terms and conditions of the policy. Rs.130.75 lakhs has to be credited to the customer’s account on account of various discounts which may pertain to number of years and was fraudulent claim liable to be repudiated. The claim pertaining to the shortage of the stock of Rs.1146693/- stands a very fragile ground and liable to be repudiated. R.2480462/- dues against Kalpataru Electronics falls in the category of employees fidelity, but as the insured is taking proceeding against the partners of Kalpatru Electrionics as such the claim in this respect was also not tenable. Receivable of Rs.17791168.52/- were alleged to a very old and not verified from the documents produced by the Insured. The claim was liable to be repudiated under Proviso No.iii.
(g) After submission of the report of the surveyor, the papers were put up before the competent authority, who by letter dated 13.10.2010 repudiated the claim on the ground that more than one loss due to fraud committed by an employee is not payable. In the present case, the claim was accumulated of several individual acts of the employees on several dates, such accumulated loss cannot be claimed under the policy. Dr. Ajit Kumar was not named in the list of employee in the policy, as such, for his fraudulent act the claim was not maintainable. The Insured filed a representation on 25.10.2010, which was rejected on 21.03.2011. Then this complaint was filed on 10.09.2012 claiming deficiency in service.
The Insurer filed its written reply on 17.05.2013, in which, the material facts relating to the business of the Insured, issue of the insurance policies and losses as mentioned in the complaint, have not been denied. It has been stated that the surveyor in his report dated 02.02.2010 made following observations:-
“a) M/s. General Radio Store- The letter was returned by post office with the note: The firm is abolished.
b) M/s. Batanagar sales Emporium- The letter was returned by post office with the note: Not Found.
c) M/s. Shibam Electronics- The letter was returned by post office with, the note: party left.
d) M/s. Sperlite- Against balance of Rs.178469.00, shown by the insured outstanding against this party. It is pertinent to note that the opening balance due to Metro Tyres shown in the books of accounts submitted to us by the party was Rs.101907/-. The obvious inference is that the account is disputed for a period much prior to the once claimed by the insured that is the year 2004-05. Moreover it is also observed that the party has credited discounts year wise in its records which is not reflected in the books made available by the insured. This has resulted into widening the gap between the two accounts. In our opinion, the dispute pertains to the account and not to any fraud or embezzlement as claimed by the insured.
e) M/s. Kalpataru Electricals – Both written and personal representations were made to the party for producing the books and records but they stated their inability to produce the records owing to the matter being sub-judice. Vide replied letter dated 18.11.2009 they declined to submit the records. The contents of this letter is reproduced as under:
Dear Sir,
Please refer to your letter dated 07.11.2009.
Perhaps you don’t know that a false Criminal Case has filed against us by your above named party for the self-same period and as such we cannot help you in this regard without the Ld. Court’s Order.”
As amply demonstrated above the sundry debtors Accounts in excess of Rs.100000/- also fall fair and square within the purview of disputed accounts and clearly not within the terms and conditions of the policy under which the present claim is lodged. Disputed accounts may have become bad debts but certainly not fit to be termed synonymous with fraudulent accounts. The resultant dispute may have let to the accounts rendered bad debts which is a normal business loss well outside the purview of the insurance policy.
In view of the fact that a substantial amount Rs.8279425.00 is involved (as claimed by the insured) we thought it fit to approach the Income Tax Officer, Ward 50 (1)/Kolkata having assessment jurisdiction over the assesses (Kalpataru Electricals) to get the year wise details pertaining, to outstanding from the Income Tax Returns filed by the said assesses. The Officer, Mr. Arun Kumar Saha partly acceded to our request and produced the Income Tax Return for the 2006-07 relevant to assessment year 2007-08. While both the opening and closing balances did not match owing to the fact that there were disputes with respect to discount earned and credited year wise in the accounts for the party whereas Metro Tyres it appears did not give credit to such discounts in their accounts. The purchases made by the party tallied with the sales shown by Metro Tyres to the tune of Rs.9445326/-. The obvious inference is that the dispute in the balance is on account of a number of issues like discount, sales returns etc. which is persisting for a number of years even prior to 2004-05 that is the year since when the insured is pressing for the present loss.
We requested the Insured to submit year wise copy of Audit Report which we have perused in totality. The observations made in the said report along with year wise substantial amounts written off as Bad debts clearly speaks of the loss as normal business loss and to say least not the loss which is tenable under policy in question.”
YEAR
Provision/Bad Debts
Note pertaining to Confirmation of Debtors, etc.
Note pertaining to fraud
2004-05
7775800
Debit and Credit balances of Sundry Debtors are Subject to confirmation Reconciliation and Adjustments, if any
According to the Information and explanations given to the Auditor no Fraud on or by the Company has been Noticed of Reported During the period covered by Audit.
2005-06
7374393
Debit and Credit balances of Sundry Debtors are Subject to confirmation Reconciliation and Adjustments, if any
According to the Information and explanations given to the Auditor no Fraud on or by the Company has been Noticed of Reported During the period Covered by Audit.
2006-07
8006370
Debit and Credit balances of Sundry Debtors are Subject to confirmation Reconciliation and Adjustments, if any
According to the Information and explanations given to the Auditor no Fraud on or by the Company has been Noticed of Reported During the period Covered by Audit.
2007-08
7084519
Debit and Credit balances of Sundry Debtors are Subject to confirmation Reconciliation and Adjustments, if any
According to the Information and explanations given to the Auditor no Fraud on or by the Company has been Noticed of Reported During the period Covered by Audit.
2008-09
10402067
Debit and Credit balances of Sundry Debtors are Subject to confirmation Reconciliation and Adjustments, if any
According to the Information and explanations given to the Auditor no Fraud on or by the Company has been Noticed of Reported During the period Covered by Audit.
It has been submitted that the company was not liable to reimburse more than one loss of an employee. The claim was rightly repudiated. There was no deficiency in service.
The Insured filed his Rejoinder Reply on 11.02.2014, in which, the facts stated in the complaint were reiterated. The Insured filed various documentary evidence and Affidavit of Evidence of Gurbax Rai. The Insurer filed documentary evidence and Affidavit of Evidence of Satish Sharma, Dy. Manager. Both the parties filed their written synopsis.
We have considered the arguments of the counsel for the parties and examined the record. In the repudiation letter, the Insurer found that name of Dr. Ajit Kumar was not mentioned as an employee in the list supplied by the Insured at the time of obtaining insurance policy. The complainant has filed list of the employees as supplied along with insurance policy. In this list at the branch of Kolkata, the names of 31 employees have been mentioned, in which Dr. Ajit Kumar has not been mentioned. Probably due to reason that Dr. Ajit Kumar has already submitted his resignation on 15.04.2008 as admitted by the complainant.
The present insurance claim has been filed under the Fidelity Guarantee Insurance Policy No.200800/46/08/13/ 00000503 which was effective for a period of 01.02.2009 to 31.01.2010. The policy provides as follows:
“Now this Policy witnesseth that subject to the terms provisos, exceptions conditions and definitions contained herein or endorsed or otherwise expressed hereon the Company agrees to indemnify the Insured against a direct pecuniary loss sustained by reason of any act of fraud/dishonesty committed on or after the date of commencement of this policy and during uninterrupted service with the Insured and discovered during the continuance of this policy or within twelve calendar months of the expiration thereof and in the case of death, dismissal or retirement of the Employee within twelve calendar months of such death, dismissal or retirement whichever of these events shall first happen.”
Under the Insurance Policy, the loss sustained by a reason of any act of fraud/dishonesty committed on or after the date of commencement of the policy and during uninterrupted service with the Insured and discovered during continuation of this policy or within twelve calendar months of the expiration of it is payable. From the minutes of meeting dated 29.09.2008, it is fully proved that all outstanding dues were prior to 31.08.2008 i.e. before the commencement of the policy. None of the claim as lodged on 03.07.2009 had arisen during continuance of the policy, therefore, the claim was not payable under this insurance policy and repudiation letter does not suffer from any illegality.
ORDER
In view of the aforesaid discussions, we do not find any illegality in the repudiation letter. The complaint has no merit and it is dismissed.