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Judgment
V.K. Jain, Presiding Member
[1] The complainants who are in the business of selling medicines obtained cash credit facility from the appellant Surat People Cooperative Bank Ltd., hypothecating their stock in favour of the said bank. The stock hypothecated with the bank was got insured with opposite party No.3, New India Assurance Company Ltd. The insurance policy was obtained for Rs.60,00,000/- for the period from 21-08-1998 to 2001-02 giving location of the premises of the insured as 12/1123-24, B1 Basement, Meghdoot Apartments, Dr. Bhakka Street, Shahpore, Surat. It is an admitted case of the parties that the aforesaid policies were obtained by the petitioner bank and not directly by the complainants. The insurance company purporting to act on the request of the insured vide letter dated 08-11-2001, increased the insurance cover by Rs.25,00,000/- on payment of extra premium. For the year 2002-03, the insurance company issued a policy of Rs.60,00,000/- at the address SPCB, HO, B205, Plot No.17/B, Village Kankar, Tal Mandi, Surat. A separate policy for Rs.25,00,000/- was issued for the said year at the previous address 12/1123-1124, B1 Basement, Meghdoot Apartments, Dr. Bhakka Street, Shahpore, Surat. Vide its endorsement dated 28-08-2002 and purporting to act at request of the insured, the address of the premises of the insured in respect of the policy of Rs.60,00,000/- was changed to 12/1123-1124, B1 Basement, Meghdoot Apartments, Dr. Bhakka Street, Shahpore, Surat. It is not known whether a different address in the policy for Rs.60,00,000/- for the year 2002-03 was recorded by the insurance company of its own on account of some mistake in its office or it was changed on account of some mistake on the part of the appellant bank while seeking insurance cover for the said year. It is, however, not in dispute that the complainant requested the insurance company to change its address in the aforesaid policy. For the year 2003-04, the insurance company again issued policy at the address SPCB, HO, B205, Plot No.17/B, Village Kankar, Tal Mandi, Surat for Rs.60,00,000/- though the address in the policy for Rs.25,00,000/- was maintained as 12/1123-1124, B1 Basement, Meghdoot Apartments, Dr. Bhakka Street, Shahapore, Surat. No endorsement changing the address of the insured in the policy of Rs.60,00,000/- for the year 2003-04 was issued by the insurance company and there is no evidence of either the complainant or the bank having sought such a change/amendment. For the year 2004-05 no change in the address of the insured was made in the policy for Rs.25,00,000/- but the address in the policy for Rs.60,00,000/- was recorded as SPCB, HO, B205, Plot No.17/B, Village Karanj, Tal Mandi, Surat. No change in the aforesaid address was carried out by the insurance company and there is no evidence of either the complaint or the bank having sought any such change. In the policy of Rs.60,00,000/- for the year 2005-06 the address of the insured was recorded as 12/1123-1124, B1 Basement, Meghdoot Apartments, Dr. Bhakka Street, Shahapore, Surat and STFI Cover was excluded while issuing the said policy. The policy of Rs.25,00,000/- was also issued at the same address. For the year 2006-07 the policy of Rs.60,00,000/- was issued at the address 12/1123-1124, B1 Basement, Meghdoot Apartments, Dr. Bhakka Street, Shahpore, Surat, without STFI Cover. The same continued to be the position in the policy for Rs. 25 lacs.
[2] There were heavy flood in river Tapi on 07-08-2006 causing water to enter the basement of the premises where the insured goods had been stored and the complainants claimed to have sustained damages to the extent of Rs.78,66,857/- on account of the aforesaid floods. The insurance company paid the claim of Rs.23,75,000/- under the policy of Rs.25,00,000/- but declined to make any payment under the policy of Rs.60,00,000/- on the ground that the hypothecated stock had not been insured against STFI perils. Being aggrieved from the refusal of the insurance company to pay the claim the complainants approached the concerned State Commission by way of a complaint. The bank as well as the insurance company were impleaded as the opposite parties in the said complaint.
[3] The bank admitted in its reply that STFI perils had not been covered in respect of the policy of Rs.60,00,000/- for the year 2006-07. It was stated by the bank that a part of the premium was returned to it by the insurance company. The bank claimed to have credited the said amount in the account of the complainants.
[4] The insurance company contested the complaint on the ground that STFI cover in respect of the policy of Rs.60,00,000/- was not granted by them and, therefore, a cheque of Rs.992/- was returned to the bank without any objection either from the bank or from the complainants and having not covered the goods against STFI perils they were not liable to make any payments to the complainants.
[5] Vide its order dated 14-02-2014 the State Commission directed the appellants i.e. the bank and its Branch Manager to pay a sum of Rs.53,66,877/- to the complainants along with interest at the rate of 9% per annum, compensation quantified at Rs.25,000/- and cost of litigation quantified at Rs.5,000/-. Being aggrieved from the order passed by the State Commission the bank and the Branch Manager are before us by way of this statutory appeal.
[6] The impugned order has been assailed by the learned senior counsel for the appellant on the grounds that (i) the appellant bank having proposed insurance cover for Rs.85,00,000/- with STFI cover, the insurance company could not and should not have excluded the STFI cover in the policy of Rs.60,00,000/-, particularly when the said cover was included in the policy of Rs.25,00,000/-; (ii) having accepted the premium for Rs.85,00,000/- with STFI cover, the insurance company could not have excluded the said cover in the policy of Rs.60,00,000/-; (iii) since it was for the complainant and not for the bank to obtain the insurance cover in respect of the stock hypothecated with the bank, no deficiency on the part of the bank is made out and (iv) the complainant having been provided with a copy of the insurance policy in question and the amount refunded by the insurance company on account of exclusion of STFI cover having been credited to their account, no deficiency on the part of the bank in rendering services to the complainant is made out. He also submitted that the complainant was not a consumer of the bank for the purpose of taking the insurance cover and no premium for the said service was paid to the bank. The learned counsel for the complainant while contending that the insurance company could not and should not have excluded the STFI cover in the policy of Rs.60,00,000/- contended that if no deficiency on the part of the insurance company is made out, the bank should be held deficient in rendering services to the complainant since it is the bank and not the complainant which had been taking insurance cover in respect of the stock hypothecated with the bank and the complainant was not informed by the bank that STFI cover had been denied by the insurance company in respect of policy of Rs.60,00,000/-. He also submitted that the complainant was a consumer of the bank even for the purpose of obtaining the insurance policy since the bank had agreed to obtain the insurance cover. He also submitted that the consideration for whole spectrum of services which the bank had to render to the complainant including obtaining insurance cover in respect of the hypothecated stock was paid in the form of interest to the bank on the credit facilities extended by it to the complainant.
The learned counsel for the insurance company submitted that since the address in the insurance policy of Rs.60,00,000/- for the year 2004-05 was different from the address given in the proposal for the year 2005-06 the insurance company was entitled to treat the said proposal as a fresh policy and deny the STFI cover in its discretion. He also submitted that the insurance company was not obliged in law to accept the entire proposal submitted to it and, therefore, could deny the STFI cover while granting the remaining protection to the insured. According to him it was a commercial decision taken by the insurance company to deny STFI cover in the monsoon season, in the premises situated in a basement. He also pointed out that there was no protest either from the bank or from the complainant to the exclusion of STFI cover in the policy of Rs.60,00,000/- for the year 2005-06. He also pointed out that the STFI cover was excluded also in the subsequent policy i.e. the policy for the year 2006-07 for Rs.60,00,000/-. As regards the policy of Rs.25,00,000/- he submitted that since there was no change of the premises, the insurance company did not exclude the STFI cover. He maintained that in any case the insurance company cannot be held liable for the risk which it never covered, during the relevant period.
[7] A perusal of the proposal submitted by the bank to the insurance company for the year 2004-05 would show that the bank had sought insurance cover, including STFI peril, to the extent of Rs.85,00,000/-. A sum of Rs.29,038/- was paid to the insurance company towards premium for the said year. The premium paid to the insurance company included premium for STFI cover. The proposal form filed by the insurance company would show that the entire proposal submitted by the bank was not accepted by the insurance company and STFI cover was denied in respect of policy cover of Rs.60,00,000/-. Consequently, the premium payable by the insured was reworked by the insurance company and a figure lesser than the amount paid by the bank was arrived at. Though the case of the appellant as well as the complainant is that the insurance company, while renewing the policy for the year 2004-05, could not have excluded STFI cover, no rule or regulation mandating the insurance company to accept the entire proposal in toto has been brought to our knowledge. The learned counsel for the appellant relied upon Section 1 of the General Rules & Regulations framed by Tariff Advisory Committee, Mumbai which came into force on 31-03-2001. The said regulation, to the extent it is relevant, provides that it is permissible to exclude storm, tempest, flood and inundation group of perils and/or riot, strike, malicious and terrorism damage perils at inception of the policy only, by deleting the relevant perils from the policy. Even if the aforesaid regulation is taken to be applicable and binding on the insurance company, it does permit deletion of STFI peril, when a new policy is issued. We are in agreement with the learned counsel for the insurance company that since the address given in the proposal form submitted by the bank for the year 2004-05 was different from the address contained in the insurance policy of Rs.60,00,000/- for the year 2003-04 the policy issued in pursuance of the said proposal can be said to be a fresh policy and consequently the insurance company was entitled to exclude the STFI cover, while accepting the proposal. It would be pertinent to note that the policy of Rs.25,00,000/- for the year 2003-04 carried the same address which was mentioned in the proposal submitted by the bank for the year 2004-05 and the insurance company did not delete STFI peril while renewing the said policy for the year 2004-05. In fact, submission of a fresh proposal for the year 2004-05 also supports the case of the insurance company that a new policy was required for the year 2004-05 and that is why the said proposal was submitted. Otherwise, the policy could have been renewed merely by paying premium for the year 2004-05. More importantly, there was no protest either from the bank or from the complainant to the exclusion of the STFI clause in the policy of Rs.60,00,000/- for the year 2004-05. If the bank or the complainant wanted the policy only with STFI cover they ought to have protested against exclusion of the said peril in the insurance policy of Rs.60,00,000/- issued by the insurer for the year 2004-05. That having not been done, the inevitable inference would be that they had accepted the deletion of the STFI clause. It would be pertinent to note here that no loss was sustained by the complainant in the year 2004-05 when the STFI peril came to be excluded for the first time in the policy of Rs.60,00,000/-. The loss by the complainant came to be suffered in the year 2005-06. Admittedly, STFI peril was excluded even in the policy of Rs.60,00,000/- for the year 2005-06. There is no evidence from the bank or the complainant having sought renewal of the policy of Rs.60,00,000/- for the year 2005-06 with STFI cover. If the exclusion of STFI cover in the policy of Rs.60,00,000/- for the year 2004-05 was not acceptable to them, they would asked the insurance company before issue of the said policy to renew the policy for the year 2005-06 with STFI cover. Having accepted the policy for Rs.65,00,000/- without STFI cover, the Bank and the complainants are estopped from questioning the terms of the said policy.
[8] In support of their contention that the insurance company could not have modified the proposal submitted by the bank for the year 2004-05, the learned counsel for the bank has relied upon the decision in Orient Treasures Vs. United India Insurance, 2007 4 CPJ 146 (NC); Vikram Greentech (I) Ltd.& Anr. Vs. New India Assurance Co. Ltd., 2009 5 SCC 599; New India Assurance Co. Ltd. Vs. M/s. Cosboard Industries Ltd., FA No.98 of 2007 decided on 06-08-2014. The learned counsel for the complainants, on the other hand, relied upon the decision in Biman Bose Vs. United India Insurance,2001 1 SCC 477. However, in none of the aforesaid judgments it has been held that the proposal submitted to an insurance company seeking insurance against fire and allied perils even if accepted in past is binding upon the insurance company in toto. What binds the parties is an accepted proposal. If it is accepted partly, only the accepted part of the proposal binds the insurer and the insured. The learned counsel for the complainant has also referred to the decision of the Hon''ble Supreme Court in United India Insurance Vs. Manubhai,2008 2 CPJ 43 SC. The aforesaid decision relates to renewal of a mediclaim policy and does not contain any such legal proposition which would be of any help to the complainant. A contract is complete only when a proposal is accepted and the acceptance is communicated to the proposer. Section 4 of the Indian Contract Act to the extent it is relevant provides that the communication of an acceptance is complete, as against the proposer when it is put in a course of transmission to him, so as to out of the power of the acceptor and as against the acceptor when it comes to the knowledge of the proposer. If we proceed on the basis that since the proposal submitted by the bank was not accepted by the insurance company in toto, the issuance of the policy without STFI cover amounted to a counter offer, the bank accepted the said counter offer by not only retaining the insurance policy sans the STFI cover without any protest but also accepting the excess premium which the insurance company refunded to it on account of the exclusion of the STFI cover. The proposal for issuing the insurance policy for Rs.85,00,000/- with the STFI never culminated into a contract since it was not accepted by the insurance company in toto. On the other hand the exclusion of the STFI cover as far as policy of Rs.60,00,000/- is concerned culminated into an agreement on account of the bank, acting on behalf of the insured, accepting the said policy without any protest and also encashing the cheque which the insurance company had sent to it towards refund of the excess premium on account of the exclusion of the STFI clause in the policy of Rs.60,00,000/-.
[9] As far as Biman Bose is concerned, a perusal of the aforesaid decision would show that when the mediclaim policy of the appellant who at that time was litigating with the insurance company fell due for renewal, the insurance company declined to renew the said policy. He thereupon filed a writ petition challenging the order of the insurance company refusing to renew the mediclaim policy. Noting that the insurance company had refused to renew the policy of the appellant on the ground of his past conduct in litigating with it the Hon''ble Supreme Court disapproved the act of the insurance company and held that it could not have refused to renew the said policy, merely because the appellant had approached a consumer forum. In this context, it was held that the general insurance companies had acquired the trappings of the State being other authorities, under Article 12 of the Constitution and, therefore, were required to satisfy the requirement of reasonableness and fairness while dealing with its customers. In this context it was noticed that if an insurance company refuses to renew the mediclaim policy on extraneous and irrelevant considerations, any disease which an insured had contracted during the period when the policy was not renewed would not be covered under a fresh insurance policy in view of the exclusion clause in respect of pre-existing diseases. It was further observed that upholding the refusal to renew the policy on extraneous considerations would result in the insurance company depriving the claim for treatment of diseases which have appeared during the relevant time and will further deprive the insured, for all time to come, to cover those diseases under an insurance policy, by virtue of the exclusion clause. The aforesaid decision is clearly inapplicable to a case of commercial insurance. In any case, not only the address given in the proposal for the year 2004-05 was different from the address given in the policy of Rs.60,00,000/- for the year 2003-04 the bank as well as the complainant accepted the exclusion of the STFI clause without any protest and even thereafter did not ask the insurance company to include the STFI cover while issuing the policy of Rs.60,00,000/- for the year 2005-06. We, therefore, have no hesitation in holding that having not covered STFI peril for the year 2005-06 the insurance company is not liable to make any payment under the policy of Rs.60,00,000/- to the insured.
[10] In support of his contention that despite the provisions contained in the loan agreement enabling it to obtain the insurance cover the bank was not under a legal obligation to obtain the renewal of the policy, the learned counsel for the appellant has relied upon the decisions of the Hon''ble Supreme Court in HDFC Vs. Kumari Reshma, 2015 3 SCC 679 and Central Bank of India Vs. Jagbir Singh, 2015 5 Scale 303. The learned counsel for the complainant on the other hand has referred to the decisions of this Commission in Indian Overseas Bank Vs. Sheba, 2014 1 CPJ 262(NC). In Reshma , the complainant was advanced a loan for purchase of a vehicle and a hypothecation agreement was executed by him in favour of the bank. As per the terms of the agreement the owner of the vehicle was responsible to insure the same on his own cost. The bank was required to get the vehicle insured, in case the borrower failed or neglected to get the vehicle insured. The owner deposited a sum of Rs.6,444/- with the dealer of the vehicle, though he was required to pay Rs.9,444/-. He obtained possession of the vehicle without insurance. The vehicle met with an accident and the tribunal awarded the claim against the financier bank as well. It was contended on behalf of the bank that since the possession and control of the vehicle was with the borrower, he having obtained in a clandestine manner without paying the insurance amount, the bank could not be fastened with a statutory liability. Allowing the appeal filed by the bank the Hon''ble Supreme Court inter alia held as under:
"In the instant case, the predecessor-in-interest of the appellant, centurion bank, was the registered owner along with respondent No.2. The Respondent No.2 was in control and possession of the vehicle. He had taken the vehicle from the dealer without paying the full premium to the insurance company and thereby getting the vehicle insured. The High Court has erroneously opined that the financier had the responsibility to get the vehicle insured, if the borrower failed to insure it. The said term in the hypothecation agreement does not convey that the appellant financier had become the owner and was in control and possession of the vehicle. It was the absolute fault of the Respondent No.2 to take the vehicle from the dealer without full payment of the insurance. Nothing has been brought on record that this fact was known to the appellant financier or it was done in collusion with the financier. When the intention of the legislature is quite clear to the effect, a registered owner of the vehicle should not be held liable if the vehicle is not in his possession and control and there is evidence on record that the Respondent No.2 without the insurance plied the vehicle in violation of the statutory provision contained in Section 146 of the 1988 Act, the High Court could not have mulcted the liability on the financier."
It is pointed out by the learned counsel for the complainant that in Reshma , the bank had never get the vehicle insured at any point of time whereas in the present case it is only the bank which had from the very beginning got the hypothecated stocks insured with the insurance company. He also pointed out that the bank had been obtaining the insurance cover without a default on the part of the complainant in taking the said insurance. According to the learned counsel, since the bank had taken it upon itself to insure the hypothecated stock from the very beginning the complainant could not have apprehended that the bank will not obtain the insurance cover or will accept the insurance for the year 2004-05 and 2005-06 without STFI cover. He also submitted in this regard that the insurance policy was always kept by the bank in its custody and, therefore, the complainant was not even aware of the date on which the said policy was going to expire.
In Jagbir Singh , the vehicle was initially insured as required under the Motor Vehicle Act but no premium of insurance was paid by the complainant after 25-05-2005. The vehicle met with an accident on 24-09-2007 resulting in death of one person. The Motor Accident Claim Tribunal granted compensation against the driver and owner of the vehicle which was not insured at the time it met with an accident. The owner then filed a complaint before the District Forum seeking payment of the amount awarded against him by the tribunal, from Central Bank of India on the ground that the bank was liable for the legal consequences resulting from not getting the insurance renewed. Ruling in favour of the bank the Hon''ble Supreme Court inter alia held as under:
"In the present case, as the facts have been unfurled, the appellant bank had financed the owner for purchase of the vehicle and the owner had entered into a hypothecation agreement with the bank. The borrower had the initial obligation to insure the vehicle, but without insurance he plied the vehicle on the road and the accident took place. Had the vehicle been insured, the insurance company would have been liable and not the owner."
Referring to some of its earlier decisions the Hon''ble Supreme Court observed and held as under:
"On a careful analysis on the principles stated in the foregoing cases, it is found that there is a common thread that the person in possession of the vehicle under the hypothecation agreement has been treated as the owner. Needless to emphasise, if the vehicle is insured, the insurer is bound to indemnify unless there is violation of the terms of the policy under which the insurer can seek exoneration."
The Hon''ble Supreme Court accordingly set aside the order passed by this Commission in favour of the complainant and dismissed the complaint filed by him. It is pointed out by the learned counsel for the complainant that even in Jagbir Singh , the bank had not obtained the insurance cover at any point of time. In his submission, considering that by taking the insurance cover of its own without even asking the complainant to obtain it, the bank had taken upon itself the obligation to keep the goods insured and, therefore, the decisions in Reshma and Jagbir Singh are clearly distinguishable.
[11] However, in the present case we need not go into the question as to whether the renewal of the insurance cover was required to be obtained by the bank or by the complainant. Admittedly the bank had applied to the insurance company seeking insurance cover of Rs.85,00,000/- with STFI cover. It is alleged in para 2 of the reply filed by the appellant before the State Commission that one copy of the policy was given to the complainant and the premium amount which was returned back by the insurance company was debited to their account. According to the bank the complainant could have inquired from them as to why the said premium amount had been returned by the insurance company. In corresponding para 2 of the rejoinder filed by them the complainants did not specifically deny having received the copy of the insurance policy of Rs.60,00,000/- for the year 2004-05, though they vaguely denied the averments made in para 2 of the reply. A factual averment, if not specifically denied, is deemed to have been admitted. The pleadings of the parties, therefore, contain an admission on the part of the complainants that the insurance policy for the year 2004-05 was actually received by them. It is also not denied by the complainants that the amount refunded to the bank by the insurance company was credited by the bank in their account. On receipt of the copy of the insurance policy, the complainants came to know that STFI cover had not been granted by the insurance company, for the year 2004-05, in the policy of Rs.60,00,000/-. Despite that the complainants did not either themselves take up the matter with the insurance company or ask the bank to take it up with the insurer. If the complainants wanted STFI cover for the year 2004-05 in the policy of Rs.60,00,000/- nothing prevented them either approaching the insurer directly for obtaining the STFI cover or even a new policy from another insurance company, which might be willing to cover their stock against the said perils. That having not been done the inevitable inference is that the complainants had accepted the insurance policy for Rs.60,00,000/- for the year 2004-05 without STFI cover. That also explains why they did not approach the bank to find out why the amount representing the excess premium had been credited to their account. The complainants, in our opinion, have only to blame themselves for accepting the insurance policy of Rs.60,00,000/- for the year 2004-05 without STFI cover. Admittedly, the complainant did not write to the insurance company asking it to include STFI cover while renewing the said policy of Rs.60,00,000/- for the year 2005-06. They did not even ask the bank to write to the insurance company to include STFI cover in the insurance policy of Rs.60,00,000/- for the year 2005-06. The premium paid by the bank to the insurance company for the year 2005-06 did not include the premium for the STFI cover. Hence, there is no escape from the conclusion that the complainants had accepted the insurance of Rs.60,00,000/- without STFI cover not only for the year 2004-05 but also for 2005-06, in which the loss took place. We, therefore, have no hesitation in holding that having given the copy of the policy of Rs.60,00,000/- for the year 2004-05 to the complainant and having credited the excess premium received from the insurance company to their account the appellant bank cannot be said to be deficient in rendering services to the complainant.
[12] The learned counsel for the appellants has also referred to the decision in Life Insurance Corporation of India Vs. Raja Vasireddy Komalavalli Kamba, 1984 2 SCC 719 and the learned counsel for the complainants has referred to the decisions in Ranjan Prakash Vs. D. Manager, 2011 8 Scale 240; United India Insurance Vs. MKJ,2001 1 SCC 477; Kashmir Singh Vs. Punjab National Bank, 2015 1 CPJ 240(NC); Delhi Electric Supply Undertaking Vs. Basantidevi, 2000 1 GLH 244 and LIC Vs. Raja Vasi Reddy, 1984 AIR(SC) 1014 However, none of the above referred judgments apply to the facts of the case before us.
[13] For the reasons stated hereinabove the impugned order is set aside and the complaint is consequently dismissed. No order as to costs.