SHRI LAXMI COTTON TRADERS LTD. vs CENTRAL WAREHOUSING CORPORATION

THIS Original Petition under Section 21 of the Consumer Protection Act, 1986 by M/s. Shri Laxmi Cotton Traders Limited, the complainant, is directed against Central Warehousing Corporation and its Regional Manager and Manager (for short called CWC) and M/s. National Insurance Co. Ltd. (for short called Insurance Co.)

THE complainant has filed a very detailed complaint running into 107 pages with true copies of the documents marked as annexure (103 in number). CWC as well as Insurance Company have filed their respective versions supported by documents. Admitted facts have been culled out of the pleadings and documents of the parties to the extent necessary for the disposal of the case. THE facts which are not in dispute given rise to the complaint are these. THE complainant is an existing Co. within the meaning of the Companies Act, 1956 with its Registered office at Bombay carrying on business of purchase and sale of cotton. CWC is a statutory authority constituted under Section 3 of the Central Warehousing Act, 1962, amongst others, running warehouses for the storage of agricultural produce, seeds, manure, fertilizers, agricultural implements and notified commodities offered by individuals, co-operative societies and other institutions (Section 11). For these services CWC charges storage and other charges. THE Insurance Company is a subsidiary of the General Insurance Corporation and carries on the business, inter alia, insurance of the goods. CWC has obtained from time to time a floater policy for the total value of the goods which was at Rs. 2,700/- Crores at the relevant time warehoused in its godowns all over the country. THE depositors of the goods are, however, free to have their own insurance policy. THE complainant had deposited with CWC 1075 fully pressed cotton bales from 7.4.91 to 6.6.91 and the total market value of the said goods declared in the warehouse receipts issued by CWC was Rs. 45,56,150/-. On the night of 7.6.91 and the morning of 8.6.91, a fire broke out in A-3 compartment of the godown at Central Warehouse, Adilabad. On account of the fire, the entire stocks stored therein numbering 5076 cotton bales, including 1075 belonging to the complainant, and some other dead stock stored in A-3 compartment was completely destroyed. Pursuant to the occurrence of the fire and the loss of goods stored being covered under the Floating Policy, CWC lodged the claim with Insurance Company whose officers visited the godown in question and concluded their own survey CWC informed the complainant about the fire accident on 8.6.91 and the loss of 1075 bales of pressed cotton deposited by the complainant. THE complainant lodged its claim vide claim dated 1.7.91 with CWC to make payment to the complainant of the sum of Rs. 45,56,150/- within 15 days failing which CWC would be label to pay any interest at the rate of 21% from the date of loss of goods to the time of realising payment by the complainant. THE complainant had also served legal notice dated 18.7.91 on Insurance Company which informed the complainant that there was no insurance contract between them and the complainant may take up the matter with CWC. Some of the warehouse receipts of the goods deposited by the complainant had been pledged with the Sangli Bank Ltd. who in turn lodged their claim. CWC informed the complainant of the fact of lodging of the claim by the Sangli Bank Ltd. in respect of those warehouse receipts which were also included in the claim of the complainant. The complainant wrote to CWC that for the warehouse receipts pledged with the Sangli Bank Ltd., the money should be paid to them and for the warehouse receipts which were in possession of the complainant the claim should be paid to the complainant. CWC informed the complainant that it was their own internal arrangement and the complainant was called upon to get the receipts discharged as the contract between the complainant and CWC is that the depositor at the time of taking the delivery or receiving compensation for the goods, is bound to surrender the warehouse receipts free from any charge.

Cwc received on 19th December, 1991 a sum of Rs. 60 lakhs from the Insurance Company as part payment towards the loss suffered in the said fire and credited in the account of Cwc on 27.12.91. Cwc disbursed that amount in the proportion of their claim to the 8 depositors, whose goods had been destroyed in the fire. Cwc in its letter dated 10.1.92 had released a sum of Rs. 23 lakhs towards part payment on pro-rata basis and called upon the complainant to get the warehouse receipt discharged from the said Bank. The complainant after payment got the discharge certificate and thereafter Cwc paid a sum of Rs. 23 lakhs on 20th January, 1992 and the amount was realised by the complainant on 27.1.92. Similarly on receipt of another installment of Rs. 45 lakhs on 27.10.92 from the Insurance Company, Cwc paid a sum of Rs. 20,28,000/- on 9.11.92 to the complainant who realised the payment on 19.11.92. Cwc received another payment of Rs. 3.04 lakhs from the Insurance Company on 31st March, 1993. Cwc offered to the complainant on 13.5.93 the payment of the last instalment of Rs. 2,28,150/- on complete discharge in favour of Cwc. The payment could be made by Cwc only on surrender of warehouse receipts which was not done by the complainant as Cwc wanted clear discharge from the complainant who did not want to waive the claim of interest for the delayed payments and indemnification against the losses suffered. Ultimately Cwc sent the last payment of Rs. 2,28,150/- to the complainant by a Bank draft by registered post on 20.7.93. These facts have been taken from the records and are not in dispute.

THE complainant alleged that on 8th June, 1991 on account of gross negligence of CWC a fire took place in the compartment of the warehouse of CWC in which the goods of the complainant were stored and as a result of which those goods were completely destroyed, that CWC as a result became liable to pay to the complainant that sum of Rs. 45,56,150/- being the full value of the goods as stipulated in the terms and conditions appearing on the reverse of the warehouse receipts, that despite the negligence on the part of the CWC as a result of which the goods were destroyed, CWC failed to settle the claim of the complainant in full for 25 months from the date of incident and that consequently the complainant suffered substantial business losses and was unable to meet its financial commitments resulting in an adverse loss of reputation and goodwill in the market. It is pleaded that due to negligence and deficiency in service the complainant was deprived of its working capital of Rs. 45.56 lakhs for an unduly unjustifiable long period of time, that the complainant made demands for settlement of claim through several legal notices, reminders, registered letters, telegrams, phone calls to officers of CWC and made personal visits and that the complainant most specifically elaborate the agony and the mental torture that the complainant was made to go through to get its claim settled with CWC. It is further pleaded that the claim of the complainant should have been settled immediately especially when the value of stocks destroyed by the fire was not disputed or in any case within three to four weeks, and that it was not dependent upon the settlement of the insurance claim of CWC by the Insurance Company. It is submitted that CWC gave no information with regard to the status of the claim with Insurance Company to the complainant except by merely stating that the matter was being followed up with Insurance Company and the claim of the complainant would be settled when claim of CWC is settled and that there is also no reasonable or justifiable explanation either by CWC or by Insurance Company as to why Insurance Company did not settle the claim of CWC within a reasonable time. THE complainant has claimed in the complaint the reliefs for the grant of interest of Rs. 10,46,459/-, damages for delayed payment on account of loss suffered to the extent of Rs. 50,02,000/-, damages on account of loss of reputation assessed at Rs. 1,00,00,000/-, damages for mental agony quantified at Rs. 50,00,000/- besides small claims under other heads, in all a total claim of Rs. 2,14,29,705/-. Cwc in its written version has taken preliminary objections namely, (i) that the complainant is not a consumer within the scope of Section 2(1)(d) of the Act, and (ii) that the alleged delay in the payment of compensation cannot be said to be a service deficiently performed. It is pleaded that on the night of 7.6.91 and the morning of 8.6.91, a fire broke out in A-3 compartment Of the godown at Central Warehouse, Adilabad. One reason attributed to the fire was the metal straps tied to the cotton bales developed friction and generated sparks which could have been responsible for the fire, where the summer temperatures reach beyond a scorching 47 degrees centigrade. Self-combustion could also be another cause of the fire. It was contended that fire was a ''Vis major'' and naturally beyond the control of the Cwc. It is pleaded that Cwc had obtained a floater policy for the total value of goods warehoused in its godown all over the country and had an identical policy for the financial year 1991-92 and therefore to make good the loss of the complainant a claim was lodged immediately with the Insurance Company whose officers visited the godown in question and conducted their own enquiry and survey of the loss that had occurred. It is pleaded that the issue of early payment of the value of the goods was taken up with the Insurance Company time and again and payments received were passed on to the complainant and other depositors immediately on receipt on prorata basis. Cwc has thereafter given the payments received from the Insurance Company which has already been noticed in the admitted facts.

THE Insurance Company in its written version has taken a preliminary objection that there is no contractual relationship between the complainant and the Insurance Company and there can be no liability of the Insurance Company in this case. THE Insurance Company submits that there has been no delay on its part in settling the claim with CWC and contends that it is not bound to give any explanation to the complainant as there is no privity between the Insurance Company and the complainant. The case came up for final hearing on 9.2.96 when arguments were heard and closed. Learned Counsel for the parties undertook to file list of dates within a period of two weeks from that date. The complainant as well as CWC have filed the same. We have gone through the voluminous record and have noticed the relevant admitted facts in the earlier part of this order. We shall now deal with the rival contentions. There is no merit in the preliminary objection of CWC that the complainant is not a consumer. The objection is that the complainant who is a Company registered under the Companies Act, not being a voluntary consumer organisation is not a person as defined under the Act and therefore not entitled to approach this Commission. By virtue of definition contained in Section 2(1)(d) consumer means any person who hires or avails of any service for consideration. The word ''person'' has been defined in Section 2(1)(m) to include : (i) a firm whether registered or not; (ii) a Hindu undivided family; (iii) a cooperative society; (iv) every other association of persons whether registered under the Societies Registration Act, 1860 or not. This definition in the Act is inclusive and thus resort may appropriately be had to the General Clauses Act to ascertain the meaning of expression "person". A person is not only a natural person but also a person created under a statute such as a Company incorporated under the Companies Act. A Company is a legal entity under the provisions of Companies Act, 1956. The word person is not defined in the Companies Act, but by virtue of the definition contained in Section 3(42) General Clauses Act, 1897, it shall include any Company or association or body of individuals. Thus a person within the scope of Consumer Protection Act shall include a Company. A consumer under the Act is not necessarily an individual or a natural person, but also a company or partnership by virtue of the definition contained in the General Clauses Act, as also Sections 2(1)(m). A body of any persons forming an association in pursuance of a common purpose and acting jointly are ''persons'' within the extended definition and are consumers within the ambit and scope of the Act.

THE second preliminary objection is inter-connected with the merits. On the night of 7.6.91 and on the morning of 8.6.91 a fire broke out in A-3 compartment of the godown at Central Warehouse, Adilabad. On account of the fire, the entire stocks stored therein numbering 5076 cotton bales were completely destroyed including 1075 bales belonging to the compiainant and 2351 bales belonging to the Cotton Corporation of India. United India Insurance Company Ltd. Hyderabad had insured the stocks belonging to M/s. Cotton Corporation of India. THE said Insurance Company deputed Mr. M.N. Ramakrishnan, Principal Surveyor of M/s. J.B. Boda Surveyors Pvt. Ltd., Hyderabad for surveying and assessing the loss. THE survey was made by this Surveyor on 9.6.91 and again on 12.6.91. Subsequently on receiving instructions from National Insurance Company Ltd., New Delhi which covered the stocks of the complainant under the floating policy Shri S.N. Nanda of M/s. S.N. Nanda & Co. was appointed as Surveyor who visited the site of accident on 12.6.91. CWC lodged formal claim with the Insurance Company on 21st August, 1991 for loss/damage to the stocks including that of the complainant. CWC vide its letter dated 13th September, 1991 (Annexure RA-2) by making a reference to the claim submitted alongwith letter dated 21.8.91, stated that as the stocks stored were completely destroyed and would be treated as total loss, a request was made to the Insurance Company to make 75% of the claim of Rs. 1,15,33,522.35 as ad hoc payment pending finalisation of the survey report. Both the aforesaid Surveyors jointly conducted a detailed study/analysis with regard to the proximate cause for the outbreak of fire at site on 23rd and 24th September, 1991. A joint survey report dated 8.11.91 was made by the said Surveyors. THE copy of the survey report is on the record. THE said Surveyors recorded the factum of the insured claim which included claim for the loss of 1075 bales of F.P. cotton belonging to the complainant valued at Rs. 45,56,150/-. THE Surveyors verified the mentioned records submitted by the insured at their Adilabad office. On verification of stock registers, the quantity of stocks stored in A-3 compartment as claimed by the insured were found to tally. Based on the verification of record and the information collected, the insurer''s liability was assessed by the Surveyors as likely to be around Rs. 1,10,00,000/- subject to their precise scrutiny of records pertaining to the valuation of stocks because it was All India Floater Declaration Policy and Condition No. 8 was attracted reading as follows : "If the stocks hereby insured on all India basis as well as on each location shall at the time of loss be collectively of greater value than the stock thereon, then the insured shall be considered as being his own insurer for the difference and shall bear a rateable proportion of the loss accordingly."

THE Surveyors called upon CWC to furnish details in regard to stock position in all the godowns insured under the policy as on 8.6.91, duly certified by a Chartered Accountant on the receipt of which the Surveyors would give the final report. However, since there was representation from CWC for on account payment, the Surveyors recommended an amount of Rs. 60 lakhs being paid as an interim payment to the insured. After the receipt of the survey report by the Insurance Company, CWC wrote a letter dated 12th November, 1991 making a reference to the report given by the Surveyors and requested the Insurance Company to settle the claim for Rs. 1.16 crores lodged with the Insurance Company alongwith relevant documents in support thereof. CWC sent another letter dated 28th November, 1991 (RA-2) informing the Insurance Company that CWC had received legal notices from the affected depositors claiming interest for the late payment and giving notices to the Insurance Company that such liability would automatically attach to the Insurance Company for the inordinate delay in settlement of the claim. THE Insurance Company acknowledged letter dated 12th November, 1991 in the letter dated 23rd December, 1991 and assured CWC that the Insurance Company had been according the highest priority to the matters pertaining to CWC but remarked that the Insurance Company could act only after necessary proof had been provided of the extent of loss. It was further pointed out that some information regarding the stocks of depositors in the warehouse was provided to the Surveyors after a considerable wait, as a result they could not submit their report. It was mentioned that on account payment of Rs. 60 lakhs had been made in the shortest possible time on receipt of the survey report. THE fact remain that the claim of CWC was not settled by the Insurance Company within a reasonable period of six months. The Insurance Company has chosen to lean only on the non existence of the contractual relationship between the complainant and the Insurance Company and had not furnished factual information in this regard as to why the insurance claim of CWC was not settled for a considerable period after on account payment of Rs. 60 lakhs. It is evident from the copy of the joint interim survey report dated 8.11.91 that on verification of stock registers, quantity of stocks stored in A-3 Compartment as claimed by the insured were found to tally. The Surveyor thus found that 1075 bales of F.P. cotton belonging to the complainant valued at Rs. 45,56,150/- were destroyed in the fire. The only information that was required by the Surveyor was pertaining to the value of stocks in all the godown of CWC with regard to the terms contained in above quoted condition No. 8 of the policy. Even without the furnishing of that information, the Surveyors found based on their verification of records and the information collected upto that time, the insurer''s liability was likely to be around Rs. 1.10 crores. It is clear from the said letter dated 23.12.91 that the information regarding the stocks of depositors in the warehouse had by then been provided to the Surveyors. The record is bereft of any information as to why the claim of CWC was not settled by the Insurance Company. We are not called upon in this case to pronounce upon the deficiency in service of the Insurance Company qua CWC, but prima facie it is writ large on the record.

So far as the complainant''s loss of goods worth Rs. 45,56,150/- is concerned, it bears repetition that the joint Surveyors had verified stock registers etc. and found the quantity stored in A- 3 Compartment as claimed by CWC found to tally. The extent of loss of the complainant was clearly established and became payable on its ascertainment by the Surveyors appointed by the Insurance Company. CWC had claimed the loss of the complainant on the basis of the deposit receipts issued by it on the basis of which the claim was lodged with the Insurance Company. On the ascertainment of the loss of the complainant, the claim became payable to the complainant immediately. The only defence put forward by CWC is that as a matter of practice, CWC compensates the loss to the depositors as and when CWC is compensated by the Insurance Company. A warehouse keeper who maintains a warehouse and makes it available to depositors on payment of charges, acts as a bailee undertaking to take possession of the goods and to exercise reasonable care in looking after them. He is liable, in the absence of express stipulation, for the safe custody of the goods entrusted to his care and if the goods are damaged or destroyed by fire, then he is liable in law of duty in not taking car of the goods that no fire could destroy them. CWC is liable in this case for not properly taking care of the goods which were destroyed by fire the cause of which has not been established on record. CWC had taken out a policy of insurance for all the goods stored in the warehouse from Insurance Company but the complainant was stranger to the contract of insurance. The Insurance Company did not concede to settle the claim at the complainant though lodged rightly on the ground that there was no contractual relationship between them and there is no hiring of service for consideration to give jurisdiction to this Commission to grant any relief against the Insurance Company. But so far as CWC is concerned, the joint survey was completed on 8.11.91 and it was established that the loss suffered by the complainant was Rs. 45,56,150/-.

DUE to the fact that there was extensive loss of deposited cotton bales made by eight depositors under several warehouse receipts aggregating to Rs. 1.16 crores and its verification from stock register, depositor ledger and for the extent of loss and also verification of loss by the Surveyors of the Insurance Company, we would consider a period of 6 months to be a reasonable period during which the claim of the complainant should have been settled by CWC. The first instalment of Rs. 23 lakhs we would consider had been paid within a reasonable period. For the settlement of the remaining claim, the facts established above disclose deficiency in service on the part of CWC. CWC may have been pursuing its claim with Insurance Company but there is nothing on record that the complainant had either agreed or was bound to await the settlement of the claim of CWC by the Insurance Company. The complainant had sent several notices to CWC for settlement of the claim and had in the first legal notice claimed interest on account of delayed payment of compensation. The complainant is thus entitled to grant of relief of interest as compensation on the two subsequent delayed payments at the rate of 18% per annum from 8.12.91 till the date of payment. Award of interest at the rate of 18% per annum would constitute sufficient compensation for the mental agony and inconvenience to which the complainant was subjected to on account of delay in settlement of the claim. So far as other items of claims arc concerned there is no evidence on record to substantiate the same. Except for the bald assertion in the claim petition which is supported by affidavit, there is no evidence corroborating or quantifying the alleged loss in business or reputation. The award of compensation by Consumer FORA can be made only on well recognised principles governing the quantification of damages and compensation. The compensation can be quantified only on a rational basis on a consideration of documentary and /or oral evidence produced showing the extent of loss suffered and to the extent loss has been caused by the opposite party''s default or resulting or emanating as a direct result of negligence of CWC. The complainant''s claim for other items fails as unsubstantiated.

IN the result, we grant to the complainant interest at the rate of 18% per annum on the sum of Rs. 20,28,000/-from 8.12.91 to9.11.92 and on Rs. 2,28,150/- from 8.12.91 to 20.7.93 amounting to Rs. 4,03,106/- (Rs. 3,36,620 +66,486) as and by way of compensation. This amount should be paid by CWC to the complainant within two months from the date of receipt of a copy of this order failing which it shall carry interest at the rate of 18% per annum from the date of the order till realisation. The complainant is awarded costs against CWC assessed at Rs. 5,000/-. The complaint against the INsurance Company is dismissed leaving the INsurance Company to bear its own costs. Complaint allowed with costs.