Oriental Insurance Co. Ltd vs Hashmukhlal Manilal Shah & 2 Ors

This revision petition has been filed under section 21(b) of the Act 1986 in challenge to the Order dated 20.12.2011 of the State Commission in appeal no. 54 of 2011 arising out of the Order dated 23.12.2010 of the District Commission in complaint no. 504 of 2007.

We have heard the learned counsel for the opposite party no. 1 Bank of Baroda (BoB) (the respondent no. 3 herein) and the learned counsel for the opposite party no. 2 The Oriental Insurance Co. Ltd. (the petitioner herein). No one is present for the complainants (the respondents no. 1 and no. 2 herein).

We have also perused the record, including inter alia the Order dated 23.12.2010 of the District Commission, the Order dated 20.12.2011 of the State Commission, the petition, the affidavit dated 11.01.2022 of the bank (BoB) and the application dated 12.01.2022 of the insurance co.

The revision petition has been filed with self-admitted delay of 13 days. However, in the interest of justice, to provide fair opportunity to the petitioner insurance co., to decide the matter on merit, the short delay is condoned.

Brief facts, relevant for disposal of the petition, are that the complainants (husband and wife) had taken a mediclaim policy from the insurance co. for the period from 25.05.2007 to 24.05.2008. They paid the premium of Rs. 4,949/- by way of a cheque dated 23.04.2007 issued by the complainant no. 1 (husband) in favour of the insurance co. drawn on his bank (BoB). The insurance co. deposited the cheque with its bank The Hongkong and Shanghai Banking Corporation Limited (HSBC). When the cheque was presented to the complainant no.1’s bank (BoB) through clearing on 29.05.2007, the complainant no. 1’s account had a balance of Rs. 46,551/- i.e. sufficient balance was available in his account to honour the cheque. The bank (BoB) debited the amount of Rs. 4,949/- from the complainant no. 1’s account on 29.05.2007. Thereafter it found that the cheque had been presented through the ‘high value clearing’ mode which was applicable only on cheques amounting to Rs. 1 lakh or more. On noticing that the cheque had been presented through a wrong mode in clearing, the debit entry was then reversed and the amount of Rs. 4,949/- credited back into the complainant no. 1’s account. And the cheque was returned with the remark ‘Refer to Drawer’. On 05.06.2007 the bank (BoB) deducted an amount of Rs. 79/- from the complainant no. 1’s account in lieu of ‘service charges’. As per the information provided in writing by the insurance co. on the basis of its record, the date on which the cheque was returned back to it by its bank (HSBC) was 30.05.2007, the date on which it received the returned cheque was 07.06.2007, the date of cancellation of the insurance policy and of informing the complainants was also 07.06.2007, however while sending the information “by mistake” the name of the insured was mentioned as “Jalpaben H. Shah” instead of “Hasmukhbhai M. Shah” (i.e. the complainant no. 1).

The District Commission vide its Order of 23.12.2010 dismissed the complaint. The complainants preferred appeal before the State Commission.

The State Commission made its holistic and comprehensive appraisal of the case in the exercise of its appellate jurisdiction and vide its impugned Order of 20.12.2011 held the insurance co. and the bank jointly and severally liable for ‘deficiency in service’ and ‘unfair trade practice’. The award made by the State Commission is reproduced below:

ORDER

Appeal No. 54/2011 is approved.

Order, in complaint no. 504/2007, passed by Consumer Disputes Redressal Forum Panchmahal, on 23-12-2010 is hereby cancelled.

Respondent No. 1 and 2 are hereby jointly and severally, held liable for the deficiency in service and unfair trade practice.

Respondent No. 1 – Bank to immediately deposit the premium of Rs. 4949/- in Respondent No. 2 – Oriental Insurance Company.

Respondent No. 1 have deducted Rs. 79/- from the appellant’s account on 5-6-2007 being the service and the same be given a credit and to pay interest @ 9% on Rs. 79/- from 5-6-2007 till date of giving the credit.

Appellant to submit the mediclaim papers to the Respondent no. 2 as early as possible, if not produced.

Insurance Company of the Respondent No. 2 to take a decision within the prescribed time limit as per the settlement procedure of IRDA about the rules of policy condition of that period after considering the appellant’s policy no. 1046/2008, in force, for the period from 25-5-2007 till 24-5-2008.

Respondent no. 1 and 2 to pay separately to the appellant an amount of Rs. 3,000/-towards mental torture.

Respondent no.1 and 2 to pay to the appellant an amount of Rs. 1,000/- towards costs.

No order is passed as regards expenses of the appeal.

(As per the translated copy provided by the insurance co. with its petition)

Learned counsel for the insurance co. submits that the cheque vide which the premium was paid was not honoured by the complainant no.1’s bank (BoB), as such the premium was not received. Since the premium was not received the policy was cancelled. Intimation was sent to the complainant no. 1, though by mistake his name was wrongly written. The submission is that the liability if any can only be fixed on the bank (BoB) which had dishonoured the cheque, the insurance co. was only following the normal practice of cancelling the policy if the premium was not received.

Learned counsel for the bank (BoB) submits that the cheque in question was routed through “high value clearing” mode which was meant only for cheques of Rs. 1 lakh and above. The amount of the cheque was first debited from the complainant no.1’s account by mistake. However when it came notice that the “high value clearing” mode had been erroneously adopted the debit entry was reversed and the cheque was returned with the remark ‘Refer to Drawer’. The bank (BoB) was only following the prescribed procedures. The submission is that the liability if any can only be fixed on the insurance co. and on its bank (HSBC) for erroneously using the “high value clearing” mode, the bank (BoB) was only adhering to the applicable procedures.

To our mind, in so far as the complainants are concerned they had duly paid the premium of Rs. 4,949/- for the policy by cheque. The cheque issued by the complainant no. 1 (husband) did not suffer from any lacuna as could be attributable to the complainant no. 1, that is, it did not suffer from any shortcoming, fault or imperfection due to any mistake on the part of the complainant no. 1 like overwriting or mismatch in words and figures or incompleteness or mismatched signatures or clerical mistake or any oversight etc. And sufficient balance of Rs.46,551/- to honour the cheque was well available in his account with the bank (BoB) when the cheque was presented for collection. As such the complainants, on their part, had duly discharged their duty of paying the premium through a valid cheque prior to the commencement date of the policy. And the insurance co. had accepted the cheque.

A consumer is not concerned with the way and manner in which the insurance co. or its bank (HSBC) further gets the cheque collected through clearing from his bank (BoB). A consumer is also not concerned with the way and manner of its bank (BoB)’s internal functioning apropos collection / clearing. The only onus on him is that the cheque should not suffer from any shortcoming, fault or imperfection as may be attributable to him and sufficient balance should be available in his account to honour the cheque when presented for collection.

The insurance co. had deposited the cheque with its bank (HSBC) for collection. Though it was not directly concerned with the mode adopted by its bank (HSBC) for collection, but if its bank (HSBC) erroneously used the “high value clearing” mode and due to this count the cheque was returned by the complainant no. 1’s bank (BoB), the insurance co. could not have shifted the onus on its policy – taker who was never at fault, its policy – taker could not have been put to trouble or prejudice and loss or injury for any mistake by the insurance co.’s own bank (HSBC). If the insurance co. had any cause against its bank (HSBC), or for that matter against the complainant no. 1’s bank (BoB), it was free to bring action against them as per the law, but it could not have shifted the prejudice and loss to its policy - taker.

Furthermore, if premium was paid by cheque, and, for whatever reason, the cheque was dishonoured, the insurance co. was duty – bound to forthwith inform its policy – taker of the same. The onus was on the insurance co. to inform the complainants / complainant no. 1 forthwith that the policy had been cancelled because the cheque issued by the complainant no. 1 had been dishonoured, the purpose being to enable the policy – taker to take and adopt timely remedial measures (when his bonafides were beyond reproach).

In the instant case, as per the averment in writing by the insurance co., it received back the cheque on 07.06.2007 and on the same day itself it cancelled the policy. It has also been averred that intimation was also sent to the policy-taker on the same day i.e. 07.06.2007 itself. Even taking such efficiency at its face as stated by the insurance co. (that it cancelled the policy on the same day that it received back the cheque and also intimated the policy-taker on the same day), such efficiency is not visible in the self-admitted mistake of sending the information to another name and not to the name of the complainant no. 1. When the name itself was erroneous, the question of having duly intimated the policy - taker does not arise and stands answered in the negative (that the intimation was not duly given to the complainant no. 1). It is an admitted fact that the intimation was sent to another name, that is, not in the name of the complainant no. 1. That being so, there was in fact no intimation given to the complainant no. 1 / complainants at all. It cannot be that if the cheque is returned because of some procedural problem on the part of its bank (HSBC), the insurance co. cancels the policy unilaterally to the detrimental prejudice and loss of the policy - taker and does not take diligence enough to even intimate the policy - taker that his policy has been cancelled (and thereby does not enable the policy – taker to take timely remedial measures).

The manifest arbitrary highhandedness and (misplaced sense of) unaccountability adopted by the remiss insurance co., putting its consumer to trouble & prejudice and loss & injury, clearly falls within the meaning of ‘deficiency’ and ‘unfair trade practice’ under section 2(g) and section 2(r) of the Act 1986.

At the end of the bank (BoB), it is evident that the cheque issued by the complainant no. 1 did not suffer from any shortcoming, fault or imperfection as may be attributable to the complainant no. 1. And sufficient funds to honour the cheque were well available in his account. However the bank (BoB) dishonoured the cheque and returned it with a bald remark, ‘Refer to Drawer’, without stating any reason as to why it was being referred to the drawer. Whatever procedural problem existed between it (BoB) and the designated clearing house (whichever bank it may be) and the insurance co.’s bank (HSBC), the complainant no. 1 was in no way concerned or responsible. It (BoB) thereby put its consumer to trouble & prejudice and loss & injury (as well as to embarrassment per se of a dishonoured check) for no fault of his. The Bank (BoB) could have taken up the procedural requirements with the clearing house and with the other bank involved (HSBC) and satisfied the procedural requirements without returning the cheque. When there was no shortcoming, fault or imperfection at the end of its customer in relation to the cheque issued by him and there were quite sufficient funds in his account to honour the cheque, his cheque could not have been callously returned with a generalised bald remark ‘Refer to Drawer’ without stating any reason for such reference and by completely ignoring its duty of duly honouring its customer’s cheque when presented. Instead of satisfying the procedural requirements with the concerned agencies i.e. clearing house and the insurance co.’s bank (HSBC), it rather chose to put its customer to prejudice and loss. The complainant no. 1 was the consumer of the bank (BoB). He had no concern or responsibility in respect of any other agency or operator with which and in whichever manner its bank (BoB) interacted with in the conduct of its banking operations. A consumer is not expected to have knowledge of and carries no concern towards the internal or backend or external operations of his bank, the same are the bank’s responsibility and not of its consumer. His relationship was only with his bank and not with any other agency or operator with which his bank interacted with during the course of its business or in the process of conducting its transactions. If the bank (BoB) had any cause against the clearing house or the insurance co.’s bank (HSBC), it was free to bring action against them as per the law, but it could not have shifted the prejudice or loss to its consumer. The only concern and responsibility of the consumer was that there should have been no shortcoming, fault or imperfection attributable to him in relation to the cheque issued by him and there should have been sufficient funds in his account when the cheque was presented for collection. The complainant no. 1 cannot be faulted with in this regard. The internal or backend operations and the entire mechanism under which its bank (BoB) conducted its banking businesses did not concern the complainant no. 1 and nor was the complainant no. 1 responsible for it in any manner.

The arbitrary highhandedness and (misplaced sense of) unaccountability adopted by the bank (BoB), putting its consumer to trouble & prejudice and loss & injury (as well as to embarrassment per se of a dishonoured cheque), clearly falls within the meaning of ‘deficiency’ and ‘unfair trade practice’ under section 2(g) and section 2(r) of the Act 1986.

With regard to another submission of learned counsel for the bank (BoB) that the deduction of Rs. 79/- from the complainant no. 1’s account as ‘service charges’ on 05.06.2007 was in relation to some other transaction, we find that there is nothing on record to substantiate this submission. If at all this deduction was due to some other transaction it should have been so mentioned in its version before the District Commission. But this argument was not raised even before the appellate forum i.e. the State Commission. We do not feel it necessary to again examine this question of fact in revisional jurisdiction after a finding of fact has been duly recorded by the State Commission by appraising the evidence and with reasons recorded.

There is nothing on record to show that either the insurance co. or the bank (BoB) conducted any inquiry to fix responsibility or made any effort to inculcate systemic improvement for future. They both rather chose to brazen out their deficiency and unfair & deceptive inequity by taking recourse to hackneyed institutional defence.

We have no hesitation in agreeing with the State Commission that both the insurance co. as well as the bank (BoB) are jointly and severally liable for ‘deficiency in service’ and ‘unfair trade practice’. Both terms are plainly defined in the Act itself. In respect of ‘unfair trade practice’ we may elaborate that the list provided under section 2(r) of the Act 1986 is illustrative and not comprehensive or exhaustive. That is to say, an unfair method or unfair or deceptive practice, as may be judiciously determined, on facts and reason, on fair and objective appraisal of the evidence and material on record, would qualify as ‘unfair trade practice’ within the meaning of Section 2(1)(r) .

We note no jurisdictional error or material irregularity. Nor do we note any occasioning of miscarriage of justice. In the facts of the case the award made by the State Commission (reproduced in para 6 above) appears fair and reasonable, and meets the scales of equity.

We however find that though the State Commission has made a complete and apt appraisal, which cannot be faulted, it has omitted to take the necessary corrective steps in regard to the manifest ‘unfair trade practice’. The facts which have come out from the record show no fault of the consumer at his end, his cheque was superciliously dishonoured and his policy unilaterally cancelled for reasons which were beyond the realm of his activity or conduct and were absolutely beyond his arena of responsibility. The systemic glitches and the procedural flaws which took place on the part of the insurance co. and the bank (BoB) had nothing to do with the consumer. The ‘unfair trade practice’ inherent in the functioning of the insurance co. and the bank (BoB) is writ large and can simply not be blissfully ignored with apathy. It has to be addressed, it has to be remedied, and curative steps are certainly needed to avert the recurrence of the same kind of prejudice & trouble and loss & injury that may be caused to honest bonafide consumers for reasons which are certainly not attributable to them. We therefore deem it appropriate and necessary to make the following directions:

(i) The chief executive (i.e. the chairman or managing director or director in-charge of the affairs of the company or director in-charge of the subject-matter, whichever member of the board of directors he may be) of the insurance co. is ordered under section 39(1)(g) of the Act 2019 (corresponding section 14(1)(f) of the Act 1986) to forthwith discontinue such ‘unfair trade practice’ as is evinced in this case and to pass instructions down the line to all its offices and branches that in cases where a cheque issued in respect of premium is dishonoured by a bank and the policy is consequently cancelled, intimation thereof should be forthwith given to the policy – taker at his correct name and address and proof of the policy - taker having received the information should be kept on record.

(ii) The chief executive (i.e. the chairman or managing director or director in-charge of its affairs of the bank or director in-charge of the subject-matter, whichever member of the board of directors he may be) of the bank (BoB) is ordered under section 39(1)(g) of the Act 2019 (corresponding section 14(1)(f) of the Act 1986) to forthwith discontinue such ‘unfair trade practice’ as is evinced in this case and to pass instructions down the line to all its offices and branches that in cases where a cheque is presented and when there is no shortcoming, fault or imperfection in the cheque as may be attributable to the customer and when there are sufficient funds available in the customer’s account to honour the cheque when presented for collection through clearing, if there is any procedural problem within the bank or with its clearing house or with some other bank, with which the customer has no concern or responsibility, the same should be taken up with the concerned agency / bank and aptly addressed but the cheque should not be dishonoured due to procedural problems or requirements internal to the bank’s functioning and with which the customer has nothing to do and nor should the cheque be returned with a bald remark of ‘Refer to Drawer’ without stating any reason for such reference back.

(iii) The insurance co. and the bank (BoB) are directed to comply with these directions within 90 days and to file their respective reports-in-compliance with the District Commission.

(iv) For the ‘unfair trade practice’ per se , a cost of Rs. 1 lakh each is imposed on the insurance co. through its chief executive and the bank (BoB) through its chief executive, of which Rs. 50 thousand each shall be deposited in the ‘Consumer Legal Aid Account’ of the District Commission and Rs. 50 thousand each shall be paid to the complainant no. 1 by way of ‘payee’s a/c only’ bank draft within a period of 45 days.

In case of failure or omission to comply with the State Commission’s award and / or with the directions made by this Commission in para 15 above, the District Commission shall undertake execution, for ‘enforcement ’ and for ‘penalty ’, as per the law.

Both learned counsel make similar submissions that the insurance co. and the bank (BoB) are public sector units and as such cost may not be imposed.

We but find no justification for dispensing with the cost. It is a natural consequence to ‘unfair trade practice’. Additionally, we also see the way and manner in which the case, which originated in 2007, has been procrastinated till 2022, for about 15 years, and the way and manner in which the revision petition, filed in 2012, has been procrastinated for about 10 years, with meritless institutional defence against ordinary husband – wife consumers. However it is made explicit that the insurance co. and the bank (BoB) are free to recover the cost from their respective functionaries responsible, in accordance with their respective applicable rules and procedures.

The Registry is requested to send a copy each of this Order to all parties in this petition and to their learned counsel as well as to the District Commission immediately. The stenographer is also requested to upload this Order on the website of this Commission immediately.

The learned counsel are requested to bring a copy each of this Order to the notice of the respective chief executives of the insurance co. and the bank (BoB). The Registrar is also requested to send a copy each of this Order to the chief executives of the insurance co. and the bank (BoB).