VIPIN KUMAR GAUTAM vs ORIENTAL INSURANCE CO. LTD..

A composite application for instituting an enquiry and for payment of compensation has been filed by Shri Vipin Kumar Gautam (applicant hereafter) under Sections 36B(a) and 12B of the MRTP Act, 1969. The applicant has alleged therein that the Oriental Insurance Company Limited (R-1 hereafter), Shri A.K. Malhotra, its Manager (R-2 hereafter) and Shri V.P. Singhal of V.P. Singhal & Co. (R-3 hereafter), licensed Surveyor appointed by the Controller of Insurance under the Insurance Act, 1938 have indulged in the certain unfair trade practices attracting Section 36A and Section 36A(1)(ii) and (iv) of the MRTP Act inflicting on him loss and damage as a consequence. He has also claimed compensation for the loss and injury suffered by him under Section 12B of the Act. On the basis of his application, the Commission issued a Notice of Enquiry (NOE) on 9th November, 1993. The averments of the applicant in his complaint-cum-compensation application are briefly as under:

R-1 is an Insurance Company engaged in the business of insurance and in particular, insurance of vehicles, in consideration of which, it charges insurance premium on the vehicle owners. Thus R-1 is rendering service to consumers namely vehicle owners. R-2 is the Manager of R-1, R-3 is the licensed surveyor for R-1 appointed by the Controller of Insurance under the Insurance Act, 1938. The applicant was the owner of a white coloured Maruti Van with the Registration No. DNH 3913. In the month of October, 1991 he renewed the insurance policy relating to the said car to be effective from 20th October, 1991 up to 19th October, 1992 in the Branch Office of R1 in Chandni Chowk, Delhi of which R-2 was the Manager. The vehicle was insured for an amount of Rs. 1,23,000/including the cost of Rs. 3,000/- of a stereo system installed in the vehicle. The applicant paid an amount of Rs. 1,846/- towards the premium after securing a deduction with regard to "no claim bonus" that had accrued to him on account of the fact that no previous claim had been made by the applicant on the insurance policy.

On 29th June, 1992, the vehicle was stolen from the house of the applicant, upon which, he informed the police which registered a case under Section 379 of the Indian Penal Code. On the very next day, the applicant informed R-2 of the theft of the car and requested for a claim form which was given to him. Duly filling in the form, he submitted it to R-2 on 7th July, 1992 informing the latter that the. market value of the car was Rs. 1,35,000/- and that of the stereo Rs. 4,200/-. On that day itself R2 informed the applicant that R-2 had been appointed as the Surveyor in the case.

THE applicant on 13th July, 1992 handed over photo-copies of the Registration Certificate, insurance policy and other connected papers alongwith the key of the vehicle but no receipt was given to him by R-2. Later he furnished the final report of the police and other documents of R-3 as required by the latter. He apprised R2 about the developments and requested him to follow up the matter with R-3 to settle his claim. According to the applicant, who secured a certificate regarding the condition of the car from Modern Service Station (Workshop) Pvt. Ltd., Janpath, New Delhi, the vehicle was in an excellent condition around 20th June, 1992 with its estimated value being not less than Rs. 1,25,000/-. Not receiving any response for more than a month of the theft of the vehicle, he reminded R-l through a telex in early August, 1992. R-l advised him to contact R-2. A meeting took place on 11th August, 1992 at which R-2 and R-3 were present in addition to Shri S.K. Bhatia, Divisional Manager of R-l and the applicant. At the meeting, the respondents (or their representatives) arbitrarily decided to settle the claim at Rs. 1,00,000/- for the vehicle and Rs. 1,200/- for the stereo. The applicant was informed that if he was agreeable, he may send his concurrence in writing. The applicant states that he was not informed of the basis of this arbitrary settlement. Even though the respondents were duty bound to pay the insured amount of Rs. 1,23,000/- he was offered a much lower compensation than what was agreed to in the insurance policy. However, the applicant according to his application was forced to agree to the proposal of the respondents by writing a letter on 12th August, 1992.

ABOUT 5 days later, R-2 informed the applicant that the latter''s signatures in the Proposal Form and Registration Certificate did not tally with the signature in the Claim Form. Upon this, the applicant clarified and confirmed his signature in the office of R-2. After this the applicant was made to collect some forms from the office of the RTO, New Delhi and complete some formalities. Ultimately on 16th September, 1992 the applicant received a cheque for Rs. 1,01,200/- from R-2. The applicant has alleged that the respondents have failed to discharge their legal obligation to pay the insured amount to him, that they have settled the payable amount arbitrarily, that the applicant has been put to "unnecessary harassment" and expenditure and that the respondents have indulged in unfair trade practices attracting Section36A and Section 36A(1)(ii) and (iv) of the Act. He has prayed for the institution of an enquiry against the respondents and also for a direction to the respondents to pay him the difference between the insured amount and the actual amount paid besides compensation for mental agony, medical expenses, cost etc. He has also claimed interest on the amount not paid to him in terms of the insurance policy. Summarising the charges a Notice of Enquiry was issued on 9th November, 1993 calling upon the respondents to defend themselves against the charges and to put in their appearance in the Commission.

R-1 and R-2 furnished a detailed reply to the NOE. R-3 submitted a separate reply. Their replies are summarised herein below: Reply of R-1 and R-2 1. Under Section 64U of the Insurance Act, 1938, a Tariff Advisory Committee has been established to control and regulate the rates, advantages and terms and conditions that may be offered by insurers (like R-l) in respect of General Insurance business. It has been stipulated that such rates, advantages, terms and conditions will be binding on the insurers and that their breach is a contravention of the provisions of the Insurance Act, 1938 and will attract punitive action. With the previous approval of the Government, the Controller of Insurance has the power to permit any insurer to offer rates, advantages, terms and conditions different from those fixed by the Tariff Advisory Committee. Every decision of the Tariff Advisory Committee (TAC for brief) is valid, after and to the extent it is ratified by the Controller of Insurance. 2. The TAC has laid down standard forms of policy to be issued by the Insurance Companies (like R-l) and it is not permissible to deviate from them. For comprehensive motor insurance, the TAC has prescribed a standard form of policy which has been adopted in the case of the applicant. 3. The applicant submitted a Proposal Form, in which, he has given his estimated value of the car as Rs. 1,20,000/and that of the stereo as Rs. 3,000/-. On the basis of the applicant''s estimated value, the premium payable was calculated and charged on the applicant. Earlier, when the insurance policy was issued for the period 20th October, 1990 to 19th October, 1991 (the previous year) the estimated value given by the applicant was Rs. 1,02,145/- for the car and Rs. 3,000/- for the stereo. 4. Under the terms & conditions of the insurance policy, in the event of a total loss, the insured is entitled to the sum insured or the market value of the subject matter of insurance, whichever is less. The independent Surveyor (R-3) assessed the market value of the car on the date of the loss at Rs. 1,00,000/- and the depreciated value of the stereo at Rs. 1,200/-. The applicant during his discussions with R-3 in the presence of R-2, felt satisfied about the assessment of the Surveyor and in pursuance of the same, gave his letter of consent for the settlement of the claim at Rs. 1,01,200/-. This is in line with condition 3 of the insurance policy. 5. The applicant was paid the assessed amount of Rs. 1,01,200/-. 6. The policy of insurance is a contract of indemnity and the insured is entitled to recover a sum commensurate with the loss, he or she has sustained. The insurer is bound to pay, no more than the actual value of the subject matter of insurance. 7. The applicant''s estimated value of the vehicle and the stereo is not "the agreed value" of the vehicle and the stereo. It represents only the maximum extent to which R-l''s indemnity could be extended. 8. The insurer''s liability is no more than the actual loss sustained by the applicant. The actual loss is ascertained by an independent Surveyor, in this case R-3. R-3 assessed the market value of the vehicle, which was also accepted by the applicant. 9. No unfair trade practice has been indulged in by the respondents. They have fully complied with the terms & conditions of the insurance policy which is a contract between the applicant and R-l. 10. The insurance policy and its terms & conditions are statutory in character, as the same have been laid down by the Tariff Advisory Committee. They cannot be violated. The Controller of Insurance is the ex-officio Chairman of the TAC. The forms of insurance policy, thus have the approval of the Central Government acting through the Controller of Insurance.

IN case of a dispute or difference over the quantum of loss, the same has to be referred to arbitration, in terms of condition 7 of the insurance policy. The applicant has not made any reference for arbitration and thus there is no dispute between the parties over the quantum of loss sustained. Reply of R-3 1. R-3 is a licensed Surveyor appointed by the Controller of INsurance under the INsurance Act, 1938. 2. R-3 is a Surveyor for R-l. 3. R-3 submitted its report dated 26th July, 1992. The applicant gave his consent to the valuation on 12th August, 1992. On this basis, R-l settled the claim. After the pleadings were completed the following were framed: 1. Whether the respondent has indulged in unfair trade practice by paying Rs. 1,02,000/- against the insured sum of Rs. 1,23,000/- as per the insurance policy? 2. Whether the applicant has suffered any loss or damage by reason of such practice ? 3. Whether the applicant is entitled to any amount of compensation as a result of such loss or damage, if any, suffered by the applicant ? 11. Both the parties agreed and filed their affidavit and counter-affidavit in evidence. The applicant filed his own affidavit alongwith supporting documents. On behalf of R-l and R-2 Shri Jacob John, Manager of R-l filed his affidavit in evidence.

The Tariff Advisory Committee was impleaded as a proforma respondent to assist the Commission. The TAC submitted a note through Mr. S.M. Suri, its Counsel. The said note has been taken on record. We gave a hearing to Dr. V.K. Aggarwal, Advocate for the applicant and Mr. Jitender Sharma, Sr. Advocate for R-l and R-2 who was assisted by Ms. Gunwant Dara and Mr. G.N. Rathi, Advocates.

The main controversy is not on facts or the circumstances surrounding the matter of the theft of the vehicle or the matter of the contents of the insurance policy. The question is whether the insurer namely R-l should pay to the applicant the insured amount indicated in the insurance policy or the value of the car and stereo as assessed by the Surveyor R-3.

AN important legal issue has been raised by the respondents that the complaint cum compensation application itself is not maintainable for the reason that in terms of Section 36D(3) of the MRTP Act, the Commission cannot pass an order of "cease & desist" as the alleged trade practice is expressly authorised by law for the time being in force. Section 36D(3) reads as follows: "No order shall be made under Sub-section (1) in respect of any trade practice which is expressly authorised by any law for the time being in force." It is the contention of Mr. Jitender Sharma, Sr. Advocate for R-1 and R-2, that the stipulations of the Tariff Advisory Committee regarding the rates, advantages and terms & conditions are statutory in character as the said Committee has been established under Section 64-U(1) of the Insurance Act, 1938 and that the said stipulations are binding on all insurers like R-l. The TAC has made its written submissions through Mr. S.M. Suri, its Counsel. This has been done with the leave of the Commission. According to the said written submissions, the following emerge: 1. TAC is a statutory body with the Controller of Insurance, as its Chairman. 2. TAC is enjoined to control and regulate the rates, advantages and terms & conditions that may be offered by insurers (like R-l) in respect of General insurance business. 3. Section 64-UC of the Insurance Act, 1938 gives power to the TAC to regulate rates, advantages and terms & conditions that may by offered by insurers. 4. Only with the previous approval of the Central Government, the Controller of Insurance may permit any insurer to offer rates, advantages etc. different from those fixed by the TAC. 5. The decisions of the TAC are final in terms of Section 64 UC (4) of Insurance Act,1938. 6. Where an insurer is guilty of breach of any rate, advantage, terms & conditions fixed by the TAC, it will be deemed to have contravened the provisions of the Insurance Act, 1938. 7. Motor insurance policy is a contract of indemnity and condition No. 3 in the insurance policy is in accord with the principle of indemnity. 8. The insured''s estimated value which is determined by the insured himself is the maximum limit of the indemnity. The insurer, at its option, may assess the amount of daim at the time of loss or damage and settle the claim subject to the condition that the assessed loss does not exceed the insured''s estimated value namely the sum insured. This is to ensure that the insured does not make a profit out of the loss.

MR. Jitender Sharma, Sr. Advocate for R-1 and R-2 argued that the TAC has laid down standard forms of policy to be issued by the Insurance Companies like R-l and that it is not permissible to deviate from the said standard forms. He added that as the terms & conditions and the insurance policy are all laid down by the TAC in terms of the statutory power conferred on it by the Insurance Act, 1938, the alleged trade practice stands "expressly authorised" by law in force, thus inviting the provisions of Section 36D(3) of the MRTP Act. Thus, he submits, that the trade practice in question namely determining the liability by R-1 by following the stipulations of the TAC cannot be challenged before this Commission. We agree with MR. Jitender Sharma, Sr. Advocate for R-1 and R-2 that both the said respondents have to follow the stipulations of TAC and that the mere fact of following the stipulations of TAC cannot be challenged as unfair trade practice as such a trade practice is authorised by law. The question that survives now is whether the Surveyor namely R-3 and subsequently R-1 and R-2 have followed the laid down procedure without deviation. This is relevant in the context of all the three respondents being obliged to honour their representations to the police about the methodology of assessing and determining the claim. At the outset, we would like to state that merely because the applicant agreed to the valuation report of R-3 by giving a letter of consent dated 12th August, 1992, it should not stand in the way of his claim and that the principles of equity, justice and good conscience should be allowed to play a role in consumer interest. It is a fact that persons like the applicant, after going through trials and tribulations with a gargantuan public enterprise, out of sheer helplessness, sign papers and documents in order not to prolong their agony. The applicant very eloquently has lamented at paras 17 and 18 of his complaint application, as to why he had to give his consent letter. He has even given a graphic description in para 26 thereof, of how he had become sick after the vehicle had been stolen and he could not get his insurance money for a very long time. But we would not like to peg our decision in favour of the applicant only for the reasons of the sufferance and pain, he had undergone (narrated in great detail in his complaint cum compensation application) but as noted earlier on grounds of equity, justice and good conscience. The applicant''s consent letter dated 12th August, 1992, we would like to stress, should not be held against him, in this adjudicatory effort.

REVERTING to the question posed by us earlier namely whether R-3 prepared the survey report in accordance with the laid down procedure and whether R-l and R-2 honoured their representations regarding the procedure, we have two documents relevant for analysis. The first document is the standard insurance policy of R-l which says that for all parts of the car except for rubber, nylon and plastic parts, they and battery, the rate of depreciation is 15% if the age of the car is between 2 and 3 years. This is provided in item 2 of Section 1 of the insurance policy. The other document is the Surveyor''s report which has adopted rates of depreciation @ 15% for the first year, 19% for the second year and 7.5% for the balance third year. It is the argument of Dr. V.K. Aggarwal, Advocate for the applicant that if the rate of depreciation had been adopted @ 15% as provided in the insurance policy (as the age of the car is between 2 and 3 years) the value of the car would have been assessed as Rs. 1,28,350/-. By adopting rate of depreciation for 3 years at a decreasing rate for the 3 years the value of the car has been assessed by the Surveyor as Rs. 1,06,850/-. Similar is the case with the stereo as it should have been depreciated at just 15% , in which case its value would be Rs. 2,550/-.

AN argument advanced by Mr. Jitender Sharma, Sr. Advocate for R-l and R-2 is that the rate of depreciation stipulated is only in respect of parts replaced and not the whole of the car. We are unable to see any clause or condition in the insurance policy which separately provides for rate of depreciation for the whole car. In this case, the car has been stolen. As the rate of depreciation is given for all parts of the car except some rubber, nylon and plastic parts and tyre and battery, it stands to reason that the rate for the depreciation for the whole car should 15% as all the parts of the car make up the car itself. Giving some provision for tyre, battery and rubber, nylon and plastic parts of the car for which the rate of depreciation is a flat 50%, it will be correct to assume that the value of the car should have been assessed at about Rs. 1,20,000/- which is the insured amount. For the stereo, the assessable value will be as noted earlier Rs. 2,550/-. The total value of the car and stereo put together will therefore aggregate to Rs. 1,22,550/-. This will be in accord with the rates of depreciation represented in the insurance policy by R-1. R-3''s assessment in our view, is in deviation of what is represented in the insurance policy. Dr. Aggarwal, Advocate for the applicant drew our attention to a certificate given by Modem Service Station (Workshop) Pvt. Ltd. (Annexure VIII-A of the complaint application) and stated that according to the valuation shown therein, the car would have fetched not less than Rs. 1,25,000/- excluding accessories, in the open market in June-July, 1992. There was no rebuttal of this by the Sr. Advocate for the respondents at the time of arguments but suffice it to say that we need not even go to the valuation done by some third party. Even on the strength of our analysis above, the car should have been valued at Rs. 1,20,000/-.

Some decisions were cited by both the parties. But it is not necessary to go into the same as we are of the view that the respondents by not following the rates of depreciation as stipulated in the insurance policy have not honoured their promise, thus attracting Section 36A as well as 36A(1)(ii) and (iv) of the Act. In the premises, we conclude that the respondents have indulged in the unfair trade practice by not following the represented policy relating to depreciation and by paying to the applicant an amount lower than what was due to him. The first issue is answered in the affirmative against the respondents. Obviously, the applicant has suffered loss and damage as a consequence of the aforesaid unfair trade practice. The second issue is also answered in the affirmative. The respondents are directed to case the aforesaid unfair trade practice and not to repeat the same in future. They shall file an affidavit in compliance within 6 weeks of the date of this order. The applicant is entitled to compensation because of the loss and damage suffered by him as a consequence of the aforesaid unfair trade practice. He is entitled to the difference between Rs. 1,22,500/- which we have assessed as due to him and the actual amount paid of Rs. 1,22,500/- which we have assessed as due to him and the actual amount paid of Rs. 1.01.200/- namely Rs. 21,300/- with interest at 18% per annum from 16th September, 1992 up to the date of payment (16th September, 1992 is the date on which he received the initial claim amount from R-2). He is allowed cost of Rs. 1,000/-. For the mental agony and harassment, we allow a lump sum of Rs. 2,000/-, R-1 shall pay the aforesaid amounts to the applicant within 6 weeks from today and file an affidavit in compliance within the same time frame. Enquiry disposed of.