M/S. Modern Jewellers vs New India Assurance Co. Ltd

This first appeal has been filed by the appellant M/s. Modern Jewellers against the order dated 28.08.2012 of the State Consumer Disputes Redressal Commission, Maharashtra, (in short 'the State Commission') passed in Complaint Case No.CC/07/114.

Brief facts of the case are that the complainant is appellant herein and opposite party is respondent herein. During validity of a Jewellers' Policy, the shop of the complainant was burgled and ornament worth Rs.42 lakh were stolen. FIR was lodged and, because the accused could not be traced, the case was closed. Opposite parties were informed of the incident immediately. Surveyor was appointed who submitted his report. However, the claim was repudiated by the Insurance Company on the ground of breach of policy condition namely 3(a) of the exclusion clause of the policy para 2. Being aggrieved, complaint was filed before the State Commission claiming total amount of Rs.49,82,058/-. The State Commission directed the opposite party to pay the complainant Rs.12,00,000/- together with interest @9% p.a. from the date of filing of complaint till realization. Undisputed facts are that the complainant subscribed to the insurance policy issued by insurance Company to provide insurance cover to the valuables at the business premises of the complainant with sum assured of Rs.42 lakh.

The theft/burglary that occurred on the crucial night in between July 26, 2005 and July 27, 2005 and the loss as assessed by the surveyor is not in dispute. Only point disputed by the Insurance Company is that the safe in the shop premises was not damaged and there was no mark of burglary either on wall or on the face of the safe. In short the repudiation of the insurance claim was mainly based on "absence of physical marks on the safe". Contention of the insurance company was disproved by the complainant with physical demonstration at the shop premises by the expert appointed by the Insurance Company. On 29.09.2004, the appellant/complainant takes jewellers Block Policy No.112800/46/04/00226 for the period 30.09.2004 to 29.9.2005 from the respondent opposite party. Insurance claim citing breach of condition 3(a) pertaining to 'Entrustment' of property; and para 2 (b) of exclusion clause dealing with 'loss to property due to mysterious circumstances by contending that there were no visible forcible marks on the door of the safe and the number lock was found intact and not broken. In May, 2006 to October 2006 various representation are made by the appellant/complainant to respondent. In July 2006- January 2007, the appellant/complainant takes up the said issue with Government of India, Directorate of Public Grievances. On 06.02.2007, Government of India, Directorate of Public Grievances write to the Chairman of the respondent/Insurance Co. and directs them to appoint an Investigator. On 17.07.2007, the appellant/complainant files a consumer complaint. On 26.10.2007, the respondent/opposite party files written statement. However, the respondent suppresses the fact that in response to GOI letter dated 06.02.2007, an Investigator was appointed who had given a favourable report and had concluded that the loss was caused by insured peril.

It was also mentioned that an experiment was conducted by the representative of Godrej and Boyce in the presence of investigator to demonstrate how the safe can be forced open even in the locked condition using a sharp object without the safe sustaining any visible physical damage to the door and the safe body. The said report of the Investigator is suppressed by the respondent. In November, 2007, appellant/complainant files rejoinder and submits that the report of the Investigator appointed by the Respondent Co. has not been filed by the respondent along with their written version and prays that the respondent be directed to file the same forthwith. In January, 2008, the respondent files affidavit of evidence but does not produce a copy of the Investigator's report. In July, 2008, the appellant/complainant files additional affidavit of evidence and files with it a copy of Investigation Report dated 01.10.2007 issued by the Investigator appointed by the respondent Insurance Co. which conclusively concludes that the loss was covered by the insured peril.

Heard the learned counsel for the parties and perused the record.

Learned counsel for the appellant states that though the State Commission has allowed the complaint and had directed the Insurance Company to pay Rs.12,00,000/-, the complainant/appellant is aggrieved by the fact that the total loss in the theft was about Rs.42,00,000/- and the complainant is entitled to get the same from the Insurance Company. The State Commission has clearly observed in its judgment that by not settling insurance claim, Insurance Company has incurred deficiency in service. However, the State Commission has only allowed the insurance amount i.e. mentioned in the policy for the cash and jewellery insured kept in the locked safe.

Learned counsel stated that Section I of the policy is applicable wherein the total insured amount is Rs.40,00,000/-. Out of this Rs.40,00,000/- , Rs.28,00,000/- is for the ornaments kept on the display window and remaining Rs.12,00,000/- is for ornaments kept in the locked safe. During the night, the complainant was required to keep all the jewellery in the locked safe as per the Special Warranty, which reads as under:-

"Warranted that all property including cash and currency notes whilst at the premises specified in the schedule shall be secured in locked safe of standard make at all times out of business hours. ........"

It was argued by the learned counsel that if under the special warranty, the insured is required to keep all the stuff in the safe and if all the stuff is stolen, then obviously the total jewellery of the shop has been stolen and the complainant would be entitled to get the compensation for the total policy amount and it should not be limited only to the amount of insurance specified against the locked safe. It was argued by the learned counsel for the appellant that due to above special warranty, all the stuff was kept inside the locked safe and that is why the surveyor has given its finding that all the trays containing the total jewellery can be fitted into the locked safe thereby, justifying the claim of the complainant. Accordingly, the surveyor has assessed the loss and recommended the claim of Rs.27,42,641/- for settlement. In support of his contention, learned counsel referred to the following judgment of the Hon'ble Supreme Court:-

United India Co. Ltd. Vs. M/s. Orient Treasures Pvt. Ltd., Civil Appeal No.2140 of 2007, decided on 13.01.2016 (SC). It has been held that:

"45) Firstly, as mentioned above, if the burglary had taken place during day time in business hours in respect of the items kept in display window or out of safe, the appellant was liable to compensate the respondent for the entire loss suffered by them treating the stolen items as insured items under the policy. In other words, if the burglary had taken place during business hours then item kept in display window or those lying out of safe were covered under the policy.

46) Likewise, if the burglary had taken place during night in relation to the items kept in the safe, then also the appellant was liable to compensate the loss suffered by the respondent in burglary treating the stolen items as insured items under the policy."

The State Commission has rejected this recommendation of the surveyor without giving any reason. Position of law is very clear that the surveyor report cannot be brushed aside without any cogent reason. The complainant is entitled at least to the assessed and recommended amount by the surveyor.

Learned counsel for the appellant further stated that now the opposite party is supporting the decision of the State Commission that the claim has to be limited to Rs.12,00,000/- only as the jewellery in the locked safe was insured for only Rs.12,00,000/-. However, this objection was neither raised in the repudiation letter nor in the written statement filed by the opposite party. Therefore, the opposite party does not have any right to raise the same at the stage of appeal. It was further pointed out by the learned counsel that the claim has been repudiated by the Insurance Company mainly on two grounds. The first ground is the alleged violation of condition No.3(a) of the policy and it has been stated in the repudiation letter that a breach has been observed with respect to condition precedent to liability of maintaining proper records of piecewise purchase and sale. With respect to this condition, the surveyor has clearly stated in its surveyor report that all purchaser and sale bills have been verified. This leaves no room for doubting the stock available on the day of theft as assessed by surveyor. The learned counsel referred to the following judgments:-

(i) New India Assurance Co. Ltd. Vs. Bharat Watch Co., I (1998) CPJ 88 (NC). It has been held that:

"8. After going through the records and hearing the parties we are of opinion that the submissions of the appellant cannot be accepted merely because the stock register was not maintained. The Surveyor was not entitled to disbelieve the lists of goods as well as of other remaining stock prepared by the complainant. As noticed above, the complainant had produced vouchers and cash memos which were signed by the Surveyor as well as by Shri Uppal. The complainant has supplied the details of the stolen stock of watches to the Surveyor who had signed the same on 16th August, 1991. A photo copy of the same has been produced on record at page 61 of the paper book. Photo copies of some other lists have also been produced. The State commission has discussed the matter in detail. We do not find any infirmity in their order."

(ii) Ashoka Tyre House Vs. Oriental Insurance Co. Ltd., I (2004) CPJ 82 (NC). It has been held that:

"Therefore, the matter hinges as to whether the stock register was essential to decide the claim. The complainant admitted that he does not maintain a physical stock register. However, he maintains General Ledger of Sales and Purchases from which the value of stocks as on a particular date can be decided. There are various methods by which stock can be assessed. It is not essential that a physical stock register has to be there. The complainant has correctly argued that the Insurance Company is fully aware of the method of account keeping of the complainant but still they issued him the insurance policy and even for the subsequent periods after the theft, they have insured his stocks."

On the basis of the above judgments, learned counsel for the appellant argued that even if the stock register was not available, but the surveyor has reached to a conclusion about stocks available on the date of theft on the basis of purchase and sale bills and the same cannot be disputed.

On the other hand, learned counsel for the respondent Insurance Company stated that the jewellery in the locked safe was insured only for Rs.12,00,000/-. Hence in any event the complainant is not entitled to receive more than 12,00,000/- as he has claimed loss of jewellery kept in the locked safe only. In this regard, learned counsel further stated that the contract cannot be interpreted differently by any court. To support his argument, learned counsel for the respondent referred to the following judgments:

(i) In General Assurance Society Ltd. Vs.Chandmull Jain & Anr., AIR 1966 SC 1644 (V 53 C 327), it was held as under:-

11." ...In interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves."

(ii) Export Credit Guarantee Corpn. Of India Ltd. Vs. Garg Sons International, II (2013) CPJ 1 (SC). It has been held that:-

"8. It is a settled legal proposition that while construing the terms of a contract of insurance, the words used therein must be given paramount importance, and it is not open for the Court to add, delete or substitute any words. It is also well settled, that since upon issuance of an insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the policy, its terms have to be strictly construed in order to determine the extent of the liability of the insurer. Therefore, the endeavour of the Court should always be to interpret the words used in the contract in the manner that will best express the intention of the parties. (Vide: M/s. Suraj Mal Ram Niwas Oil Mills (P) Ltd. v. United India Insurance Co. Ltd., (2010) 10 SCC 567).

The insured cannot claim anything more than what is covered by the insurance policy. "...the terms of the contract have to be construed strictly, without altering the nature of the contract as the same may affect the interests of the parties adversely." The clauses of an insurance policy have to be read as they are...Consequently, the terms of the insurance policy, that fix the responsibility of the Insurance Company must also be read strictly. The contract must be read as a whole and every attempt should be made to harmonize the terms thereof, keeping in mind that the rule of contra proferentem does not apply in case of commercial contract, for the reason that a clause in a commercial contract is bilateral and has mutually been agreed upon. (Vide : Oriental Insurance Co. Ltd. v. Sony Cheriyan AIR 1999 SC 3252; Polymat India P. Ltd. v. National Insurance Co. Ltd., AIR 2005 SC 286; M/s. Sumitomo Heavy Industries Ltd. v. Oil & Natural Gas Company, AIR 2010 SC 3400; and Rashtriya Ispat Nigam Ltd. v. M/s. Dewan Chand Ram Saran AIR 2012 SC 2829)."

(iii) National Insurance Co. Ltd. Vs. Jila Sahkari Kendriya Bank Maryadit, II (2013) CPJ 122 (NC). It has been held that:-

"17. Policy of insurance is a contract between the insured and the insurer and the terms and conditions of the policy of insurance are binding upon the parties. Terms and conditions of the policy are required to be read with reference to the stipulations contained in the policy. Non-observance of the terms of the policy can vitiate the policy and absolve the insurance company of its liability to indemnify the loss. In the present case, as per terms and conditions of the policy, two guards with fire arms were required to escort the cash in transit exceeding Rs.10 lakh. Admittedly, when on 28.12.02, the Branch Manager of the Respondent Bank was carrying the sum of Rs.65,00,000/- for Chhura and Gariaband branches of the Respondent Bank, no armed guard was accompanying the cash in transit. As per the investigation/survey conducted by the Appellant Insurance Company the robbed cash was in transit without there being any guard for the safe transfer of huge amount of Rs.65,00,000/-. There was breach of policy condition by the Respondent in sending the cash without any guard in terms of clause 4 (b) of the policy. Since, there was breach of the fundamental condition of the policy, the insurance Company was justified in repudiating the claim of the Respondent and was not liable to indemnify the insured."

In the back drop of the above judgments, the learned counsel pointed out that in present case, the contract of insurance clearly shows that under condition precedent to liability, there is one condition that the insured shall keep a daily record of the property(quality and value) both on the premises and entrusted to any persons covered under the Policy. It was submitted by the learned counsel for the respondent that the surveyor has clearly stated in his report that there was no stock register kept by the insured as required under the condition precedent to liability. The surveyor has clearly stated under the heading 4.6 VERIFICATION OF BOOKS OF ACCOUNTS that the cash book was not produced before the surveyor for verification and stock register with piecewise detail is not maintained by the insured. Maintenance of the piecewise stock register is a condition precedent to liability as per terms and conditions of the policy. As this condition has been violated, the liability cannot be taken by the Insurance Company.

The second point of repudiation has been the condition 2(b) in proviso to Section IV, which reads as under:-

"(2) (b) Loss of &/or damage to property insured due to mysterious circumstances/disappearance or unexplained reasons."

Learned counsel argued that it was found that there was no mark of forcible opening of the locked safe and moreover the number lock was intact. It is not possible to open the locked safe without opening the number lock, therefore, this remains mysterious as to how the locked safe was opened without disturbing the number lock. This plea was taken in the written statement by the opposite party, which reads as follows:-

"The said claim was repudiated by the opp. Parties as early as on 26.6.2006, giving reasons and as per the policy condition Exclusion Clause 3 A the said claim was not payable. There are various discrepancies as follows. As there was no proper stock record of piece wise purchase and sale, and also as per 2 B of the Exclusion of the policy, on physical verification. No forcible marks were found on the door of the safe, and the Number lock WAS INTACT, and NOT BROKEN. The number/code lock of safe was found intact, and all the jewellery found missing. Without opening the safe number lock, the Top lock of safe could not be opened. It is mysterious as to how safe was opened. There was NO physical and outside damage to the safe, and No external marks of force on the door of the safe. There is NO logical explanation as to how the safe was opened. As such it is a case of loss due to mysterious circumstances or unexplained reasons. The Opp Party refer to and reply upon the repudiation letter, And the opp parties rely upon the same. The said claim was also reconsidered. However, the same was not payable. Ex. "A"

These discrepancies are also there apart from the fact that the insured/complainant has failed to take proper care of the property as required under the terms and conditions of the policy."

Learned counsel further pointed out that due to violation of the condition precedent to liability and under the exclusion clause 2(b), the claim was rightly repudiated and the same is not payable. As the State Commission has allowed the claim of Rs.12,00,000/- and the Insurance Company has not filed any appeal against that order, the Insurance Company cannot request for dismissing the claim of the complainant. However, in the circumstances, the appeal definitely needs to be dismissed as no amount is payable in fact. As the position of stock cannot really be verified as there was no stock register maintained by the complainant, no additional claim is justified.

Learned counsel for the respondent further stated that the surveyor has concluded that the insurer's liability cannot be engaged due to his report at para 4.20, which reads as under:-

"4.20. Our Observations

A. RE: Safe

The safe was about 8-9 years old. It has no manufacturer's name on it. As per insured it was purchased locally from M/s. Jay Rathod Fabricator at Dahiasar. As per our observation safe and locks of the safe are not of standard make."

As per condition of the policy, the locked safe has to be of a standard make, however this was a locally made safe and therefore, the basic condition of the insurance was violated. Hence, no claim becomes payable to the complainant.

I have given a thoughtful consideration to the arguments advanced by the learned counsel for the parties and examined record. First of all, it is seen from the repudiation letter that no ground of locked safe not being of a standard make has been taken in the repudiation letter and therefore, at the stage of appeal, the Insurance Company cannot raise the issue of standard make of locked safe. However, it is seen that the condition precedent to liability clearly states the following:-

Conditions Precedent to Liability

1) Book Keeping that the insured shall keep a daily record of the property (quality and value) both on the premises and entrusted to any persons covered under the Policy, Such record shall be deposited in a secured place in the insured premises, Preferably a copy be maintained at a place other than the insured's business premises."

From the above condition, it is clear that this condition was required to be met as pre-condition for any liability on the Insurance Company, but the same has not definitely been met as the insured did not maintain the stock register. Neither the cash book nor stock register was presented before the surveyor but he has assessed the loss on the basis of purchase and sale bills. As the stock register was not maintained, so it cannot be said beyond doubt that whatever material was purchased was kept in the shop and was not taken out of the shop. Clearly the stock register was to be maintained on the basis of the purchase and sale bills. Until these entries tally, the availability of the stock on the date of theft cannot be determined with certainty, therefore, it is doubtful as to what amount of jewellery was lying in the display window, which was kept in the locked safe on the date of incident. In these circumstances, as the uncertainty prevails over actual stock on the date of theft, the State Commission seems to be right in ordering the payment of only Rs.12,00,000/-, which was the insurance amount for the jewellery kept in the locked safe. Obviously, the complainant cannot draw benefit out of his own negligence for not keeping the proper cash book and proper stock register.

The judgments cited by the learned counsel for the appellant particularly in the matter of New India Assurance Co. Ltd. Vs. Bharat Watch Co.,(supra) & Ashoka Tyre House Vs. Oriental Insurance Co. Ltd. (supra) are the orders passed by this Commission in specific cases, which relate to watches, tape recorders, T.V sets etc. in New India Assurance Co. Ltd. Vs. Bharat Watch Co. (supra) and tyres in Ashoka Tyre House Vs. Oriental Insurance Co. Ltd. (supra). Obviously, there is difference between these items and precious material of gold. The method of approximation can be accepted for goods like watches, tape recorders and tyres, but this method cannot be relied upon in the case of theft of gold and jewellery. Moreover, here, the requirement of the stock register is not only for calculating the stock on the day of accident, but the requirement of stock register is a pre-condition which must exist before any liability can be accepted by the Insurance Company. In the light of the established position of law as laid down by the Hon'ble Supreme Court in General Assurance Society Ltd. Vs.Chandmull Jain & Anr.,(supra) and Export Credit Guarantee Corpn. Of India Ltd. Vs. Garg Sons International (supra), contractual obligations of the parties in a contract of insurance are to be interpreted as agreed by the parties in the contract. It means that no modification in these terms can be even constructively assumed on the basis of facts and circumstances. In the present case, thus the basic condition precedent to liability has been clearly violated, hence in the interest of the complainant I do not see any reason to interfere with the order passed by the State Commission.

Based on the above discussion, I do not find any merit in the appeal and therefore, the appeal No.664 of 2012 is dismissed.