NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
Arjandas Brijlal & Company
A registered Partnership Firm
Having its office at
1822 Khari Baoli,
Through its partner
Shri Sunil Khurana … Complainant
The Oriental Insurance Co. Ltd.
Having its registered office at
HON’BLE MR. JUSTICE M.B. SHAH,
MRS. RAJYALAKSHMI RAO, MEMBER
For the Complainant : Mr. D.P. Poplai, Advocate
For the Opp. Party : Mr. P.K. Seth, Advocate
PER MRS. RAJYALAKSHMI RAO, MEMBER
This case illustrates how fraud can be committed with the active participation of the officers of the Insurance Company.
Thereafter, as the claim for loss was made by the Complainant, fraud came to light, Dua was suspended, removed from the service and prosecuted, and the claim of the Complainant was repudiated on the following grounds.
“i) The Cover Note No.544795 was obtained by you
at with malafide intentions, after the loss had already occurred at Kandla, due to cyclone.
ii) The said act on your part was in connivance with Shri R.P.S. Dua, A.A.O. (D) as he could not issue the said Cover Note.
iii) The Premium cheque No.372511 dated 9.6.98, was also returned immediately and not accepted by the Company as not allowed to be deposited in the Accounts books of Company.
iv) The Cover Note referred to above issued by A.A.O. (D) was not accepted and was treated as cancelled, immediately when being brought to the notice of Divisional Office Karnal and intimation to this effect, was sent immediately to you as well as your Bankers, namely M/s. Canara Bank.”
Hence, the complaint is filed.
In our view, there is no doubt that the Complainant has committed fraud with the Insurance Company, and, therefore, not only the complaint is required to be dismissed, but at the same time, he is required to pay adequate costs and compensation to the Insurance Company.
It is difficult to
believe that a big businessman having export business from
“Past , the cyclonic storm made its presence felt with high
winds and light drizzle. It did not rain
hard. Around , the wind suddenly reversed direction. The
The storm lasted till . Thereafter the tides receded by , but not before inundating vast areas with 2 to 3 mtrs of water damaging properties and killing hundreds of people.”
The aforesaid report as well as the media report leave no doubt that from
morning there was cyclonic
storm at the
This would undoubtedly reveal that the stock must have been damaged extensively prior to Therefore, the alleged cover note obtained by fraud would be of no consequences and void. With these remarks we would refer to a few facts.
This is a complaint filed by M/s. Arjandas Brijlal Company against the opposite party, the Oriental Insurance Company Ltd. alleging deficiency in service for repudiating the claim.
Brief facts of the case are:
The Complainant is a partnership firm
engaged in the business of rice millers and exporters, exporting Indian rice,
for the last 30 years. In the course of
its business the Complainant has insured stock of Basmati rice lying in the godowns of Kandla Port Trust at Gandhidham for export shipments. On 9th June, 1998, the Complainant
approached Mr. R.P.S. Dua, Assistant Administrative
Officer (Development) (A.A.O. (D) of the Oriental Insurance Company Ltd.
(hereinafter referred to as the Insurance Company) for securing an insurance
cover for a sum of Rs.2 crores for the rice bags
which were lying at Kandla Port. Mr. Dua initially informed the Complainant that he needs to get
the approval of the Regional Office of the Insurance Company at
On the same day, there was
unprecedented cyclone followed by rain, tidal waves and flooding at Kandla port area. The Complainant informed the Divisional
Office of the Insurance Company at Karnal by telegram
on 12.6.1998 that they had suffered heavy losses caused to their insured stocks
of rice lying at
The Complainant vide letter dated 22.6.1998 called upon the Insurance Company to depute its Surveyor within 24 hours of receipt of the same, failing which the Complainant would have the loss assessed by the local Surveyor - Lloyds at Kandla at the risk and responsibility of the Insurance Company and further conveyed that the cargo would be disposed of as per circular issued by the Kandla Port Trust.
requests and reminders by the Complainant, the Insurance Company failed to
depute its Surveyor and hence Complainant got the survey conducted by M/s. G.P.
Dave & Sons, approved Surveyors at Gandhidham,
who conducted the survey on 24.6.1998 at the godowns
where their consignment was stocked. After
the inspection, the Surveyors submitted their report dated
In order to mitigate the losses, the Complainant segregated the remaining affected stocks and the bags which were either in sound condition or partly damaged and transported them to its mill at Taraori for salvaging operations for repolishing, sorting, repacking of the partly damaged rice. In this process, 1120 bags were found to be totally damaged and unfit for exports. Adding 6212 bags which were destroyed by the order of the Kandla Port Authorities earlier the total loss came to 7332 bags.
It is only on 14.7.1998, the Regional Office of the Insurance Company finally appointed M/s. K.D. Kohli & Company Pvt. Ltd. as Surveyors to survey the reported damage caused to the stocks of rice of the Complainant insured under the aforesaid Cover Note dated 9.6.1998. The Surveyors issued to the Complainant a letter bearing No.July-2/98/8-404/98 dated 20.7.1998 which was received by the Complainant on 28.7.1998 that they would like to inspect the damaged stocks.
On receipt of this letter the Complainant replied on 29.7.1998 itself explaining the situation, that since the Insurance Company did not appoint a Surveyor earlier in order to minimize the losses and also to remove the affected stocks as per the orders of the Kandla Port Trust and State Public Health Authorities they had already appointed a Surveyor and conducted the salvage operations. The Surveyor of the Insurance Company replied on 31st July, 1998 that they intend to visit the mills of the Complainant at Taraori, for inspection of the stocks transferred from Kandla Port to assess the present status, and called for further information and documents to establish the presence of stocks at Kandla Port prior to the occurrence of the damage and suggested that their visit to the mills at Taraori could be possibly made on 1st August, 1998, when they would discuss the matter regarding the claim of the Complainant.
Aggrieved by the alleged repudiation of the claim, the allegations made by the Insurance Company in their letter of repudiation, the Complainant replied vide letter dated 12.8.1998 which is reproduced as under:
“Without prejudice to the above, we totally deny all the allegations made in your letter and state as under, in reply :-
i) We were not aware of any loss to our cargo at Kandla at the time of obtaining the Cover Note.
ii) Shri R.P.S. Dua has been signing the Cover Notes issued to us for the last many years.
iii) We deny having received premium cheque No.372511 dated 9.6.98 alleged to have been returned to us.
iv) While totally denying your contention of having cancelled the Cover Note as unaccepted, we wish to invite your kind attention to our telegram/fax message of 22.06.98 asserting/reiterating our contentions.”
Accordingly, on 3.9.1998 a claim was lodged for Rs.1,40,90,725/- with the Insurance Company alongwith all the relevant documents. It is also contended that the repudiation by the Insurance Company is illegal, malafide and untenable and that the Complainant had observed utmost good faith in their transaction and that there has been no concealment or any misrepresentation, whatsoever. It is averred that a substantial business of insurance has been placed with the Insurance Company without any claims arising out of such insurance except for the instant claim and that eventually the claim has arisen due to damages to the goods. The Insurance Company is evading its liability for payment of legally payable claims and made unwarranted and false allegations against the Complainant. In this complaint the Complainant claimed total value of the claim of Rs.1,14,90,725/- with 18% p.a. from 5.10.1998 upto the date of filing this complaint till the date of payment alongwith pendente lite and future interest @18% p.a. and further compensation of Rs.one lakh for mental torture.
The Complainant gave the sequence of events on the crucial day of 9.6.1998, which are as follows :
At about on 9.6.1998 Shri Sunil Khuranna, partner of
the Complainant firm talked from
(ii) It is contended by the Complainant that this Cover Note was unconditional and unqualified and hence was a binding contract. It is argued by the Complainant that Insurance Company is estopped from challenging that no valid Cover Note was issued to the Complainant as they appointed M/s. K.D. Kohli & Company on 15.6.1998 to survey the loss at Kandla.
(iii) The contention
of the Insurance Company that Dua had no authority to
issue the Cover Note is untenable and misconceived as Complainant’s firm was
getting insurance cover regularly since 1991 and that during last two years
received opposite party’s cover notes for over Rs.10 Crores
all signed by Mr. Dua. This fact has been admitted by Mr. Dua in his affidavit.
The plea of the Insurance Company that Mr. Dua
had issued the cover notes without approval of his seniors or that he had not
acted in accordance with their directions are all false and concocted
story. Mr. Dua had never been prohibited from issuing the cover notes
but had only been asked to keep the proposal in abeyance and keep it under
consideration. If media reports and
warnings of the Metrological Department were known to Mr. Dua
regarding impending Cyclone he could have not issued the Cover Note. Although Kandla is a
cyclone prone port and it is well known that all warnings of Metrological
Department do not always come true and that the cyclones which are expected to
hit a port sometimes do not touch or pass by the port. Hence, trucks of goods were accepted by the Kandla Port Trust even upto
was learnt from the authorities and eyewitnesses that, every thing was normal
in Kandla in the morning of
averred that this noting by Surveyors of Insurance Company has not been taken
into consideration which has adversely affected their claim. The Complainant submitted that they were not
aware that the cyclone would hit the
(iv) The rice stocks held at Kandla were intact and there was no damage to the stocks, nor any part of it was destroyed prior to the making of the proposal as alleged by the opposite party. The daily stock reports seen by Capt. S. Kochhar & Company confirmed the latest stock position at 18161 bags of rice in their reports dated 9.6.1998 and 10.6.1998. It is averred by the Complainant that the proposal for insurance was made honestly and bonafide without any knowledge of any alleged loss/damage by a cyclone. There was neither breach of the principle of uberrima fides nor any misrepresentation by the Complainant.
(v) On 12.6.1998 the Complainant informed the Insurance Company and followed up through reminders dated 16.6.1998 and 22.6.1998 and the O.P. did not respond to the same.
(vi) The Insurance Company submitted that they have acted as per Surveyor’s alleged interim report dated 5.8.1998 which show that the Surveyor has gone beyond the scope and ambit of their authority to give an opinion as to validity of the cover note and hence the Complainant contended that it cannot be relied upon. It is submitted that the duty of a Surveyor is only to survey the loss/damage caused to the insured goods. In the repudiation letter dated 11.8.1998 there was no mention of any interim survey report by the opposite party.
(vii) It is further submitted that Insurance Company made an attempt to resile its liability arising out of the valid insurance cover note and made Mr. Dua a scapegoat for the same. Mr. Dua in his affidavit stated that he was at the office of the Complainant from about 4.00 p.m. to 6.00 p.m. Mr. Dua has been prosecuted for criminal charges of cheating, breach of trust, fraud, falsification of documents etc. by the Insurance Company, was subjected to disciplinary action, and has been dismissed from the service. The Complainant averred that apparently there is a quid pro quo for giving such affidavit dated 13.9.2002 by Mr. Dua on assurance of his reinstatement as a price for such an affidavit.
(viii) No affidavit has been filed by Mr. S.P. Singh Pasricha, the Senior Divisional Manager at Karnal and Shri R.N. Kaul, Manager, Regional Office, Chandigarh, if the Insurance Company who were alleged to have been dealing with the case, to substantiate the statements of Mr. Dua. The Complainant submitted that they are entitled to the claim of Rs.1,14,90,725/- alongwith interest at the rate of 18% p.a. from 5.10.1998 and with compensation of Rs. 1 lakh for the alleged deficiency in service of the opposite party.
Submission by the Insurance Company:
Learned Counsel for the Insurance Company submitted that on 9th
June, 1998, the Complainant was in touch with Mr. R.P.S. Dua
at for insurance of
stocks of rice worth Rs.2 crores lying at
Thereafter, Mr. Kaul tried to contact the Sr. D.M. at his residence at and his call was returned back at and he once again instructed not to issue any cover note to the Complainant. He further informed the Sr. D.M. that in the evening news bulletin on the television there was reports of a cyclone at Kandla. The Sr. D.M. tried to contact Mr. Dua who was not available and hence he left a message on his pager that he should contact Sr. D.M. immediately. Despite having received the pager message Mr. Dua could not contact Sr. D.M. but called on him at his residence on 10.6.1998 at about Mr. Dua then informed that he had already issued a cover note bearing No.544795 to the Complainant and collected the premium amount on the previous evening itself. When the Sr. D.M. asked him why did he give the cover note in spite of his repeated instructions and directions to the contrary, Mr. Dua offered no explanation or answer. The Sr. D.M. asked Mr. Dua to collect the original cover note from the Complainant and thereafter reminded and directed him a number of times, but he did not do so.
Mr. Dua showed Sr. D.M. a proposal dated 9.6.1998 stating that the goods from the proposer/Complainant were intact. It is argued that this document was created and forged after the issuance of the cover note and that the veracity of this document is suspected. It is submitted by the Learned Counsel, if this document existed earlier and if Mr. Dua had possession of it on 9.6.1998 and he deliberately hid it from the concerned officers, i.e. from the Sr. D.M. and from Mr. Kaul, it is argued that Mr. Dua must have done in collusion criminal conspiracy with the Complainant for some illegal gain. It is averred that concealment of this document and Mr. Dua’s action and inaction as mentioned above constituted criminal breach of trust and betrays the motives to support a false claim against the Insurance Company.
In the alleged cover note issued by Mr. Dua at on 9th June, 1998 it is written “subject to inspection of the stock by the authorized surveyor, conducted by the insurer”. The Complainant had represented to the insurer that the insurable goods were safe and intact at whereas he had the knowledge that the goods had already been lost/damaged at by the cyclonic storm. However, it was vital information which was concealed and the motive was to cheat and defraud the Insurance Company by fraudulent means.
Learned Counsel for the Insurance Company contended
that all the media reports including the Door Darshan
news in English and Hindi and other regional languages had been repeatedly
warned about and monitored the cyclonic storm brewing in the
“From the copy of covernote
provided to us by
It is argued that the factum of issuance of the cover note constituted a concluded contract, then the same would have no legal effect since its performance was frustrated by the unfolding of events prior to its coming into effect. The said contract could not be enforced against the company because it was frustrated. Frustration of contract means that “where existence of a specific thing is, either by terms of contract or in contemplation of parties, necessary for performance of a promise in the contract, duty to perform promise is discharged if thing is no longer in existence at time of performance.”
In the present case the contract was frustrated
because the insurable interest did not exist before the contract could come
into effect. The cover note which was
issued at on
The cover note was procured through criminal conspiracy with Mr. Dua. It is in breach of the principle of Uberrima fies and violative of relevant legal provisions. The Complainant acted in breach of uberrima fides, i.e. the breach of utmost good faith, absolute candour and honesty, concealing nothing, with which a contract must be made. If there is vital breach of faith and concealment of material fact, the contract can be unilaterally rescinded and can be deemed to be void ab initio.
We have heard both the parties and perused the record carefully.
Firstly, the Complainant had referred to the Joint Survey
Report made by Mehta & Padamsey Surveyors Pvt.
Ltd. wherein at page 108 quotation has been taken as
to what was the condition of the weather in the morning of
It is very clear from this statement that cyclone hit by and lasted upto
Secondly, the crux of the entire case is based on the meeting between the Complainant and Mr. R.P.S. Dua when the crucial cover note has been issued. It is very important to note as to how and when the file moved. We elaborate on this issue as under:
(a) Mr. Dua admitted upon the repeated insistence of the Complainant and in view of his long-standing good relations with them after receiving a telephone call from the Manager, Mr. Shashi at about 1.00 p.m., he visited Complainant’s office at 4.15 p.m. He admitted that he issued the cover note between and the risk coverage was subject to inspection of the stock by the authorized surveyor of the insurance company. On the insistence of the Complainant he mentioned that the cover note was issued at
(b) That he struck off noting on stock inspection at the
instance of the Complainant. Further, he admitted that :
“I obliged them in the sound knowledge that the cover would in any case not be effective till such time that the stocks had actually been inspected. In other words, if at the time of subsequent inspection by authorized surveyor, the stocks did not exist in the condition in which they were represented to me, the risk cover would not be operational.”
(c) That, he
was unaware of the cyclone conditions in the Kandla
and that it was only later that evening Mr. Dua
discovered from television news that a massive cyclonic storm struck the
“That I would not have issued
the cover note had I known that a cyclonic storm had devastated
We also rely on the
affidavit filed by Shri S.P. Singh Pasricha, who was the then Divisional Manager of the Insurance
Company to whom Mr. Dua sought approval to issue the
alleged cover note. Mr. Pasricha by letter dated 30.9.1998 had written to the
Station House Officer, Police Station City, Karnal, Haryana registering the complaint of FIR against Mr. Dua, Mr. Pushpinder Khuranna and Mr. Sunil Khurana
(partners of the Complainant) alleging criminal breach of trust in supporting a
false claim against the Insurance Company and for the criminal conspiracy
between these parties to defraud Insurance Company. In his affidavit he stated that on
“He informed me that the said Proposer Company was insisting for urgent immediate issue of cover note as their bankers were to be given a copy of the covernote. He sought my approval and permission for issuance of a cover note.”
Further Mr. Pasricha also stated that he received a call from Mr. Kaul and called Mr. Dua and instructed him not to issue any cover note.:
“I directed him to not to issue a cover note
as desired by the proposer especially in view of
media reports of the climatic conditions prevailing off the coast of
Gujarat. However, at the said Mr. Dua again approached me stating that he had received a
message from the Tarori office of the said proposer company in connection with the proposal. In his presence, at about
5.00 p.m. I sought the advice of Mr. R.N. Kaul,
Manager, Regional Office,
Mr. Pasricha submitted that he returned the cheque for Rs.71,072/- issued by the Complainant towards the premium and intimated that cover note has been cancelled. Although, this intimation was sent through courier and registered A.D., both letters were returned since Complainant refused to accept them on 12.6.1998 and 13.6.1998. Mr. Dua later stated that the proposal form from the Proposer/Complainant stated that the goods were intact and was submitted by him in the Divisional Office on 10.6.1998. Regarding this document Mr. Pasricha in his affidavit stated as under:
“I suspect the veracity of this document. I do not believe it existed on the date mentioned in it. It was created later on. However, if it did exist earlier and if Mr. Dua had possession of it on 09.06.98 then he deliberately concealed it from me and from Mr. Kaul. His reason for concealment of this document and his action and inaction as above-stated is a grave offence under the Company rules and constitutes criminal breach of trust and other criminal offences.”
In this case, it is apparent on the face of the record that the Complainant and Mr. Dua, an officer of the Insurance Company were fully aware of the climatic conditions and the cyclonic storm in Kandla at the time of issuance of cover note. Mr. Pasricha clearly stated on affidavit that Mr. Dua was with him till on 9.6.1998. There is discrepancy in the timing stated by Mr. Dua and the Complainant as to where was Mr. Dua at as the Complainant states that he was in his office and Mr. Pasricha stated that Mr. Dua was with him till whereas Mr. Dua stated that :
“Q. In the last para of cover note, you have written “Subject to inspection of the stock by the Authorised Surveyor conducted” After that you have made cutting and initialled. Have you also made cutting of those words in original c/note and initialled it.”
A. Yes, cuttings in original cover note were made and initialled.”
Mr. Dua stated that he issued the cover note between to and further admitted that he mentioned the time of issuance of cover note at on the instructions of the Complainant. In view of the discrepancy in time as statement given by all the three concerned parties at that relevant time, and in view of Mr. Dua’s admission that he consciously changed the time of issuance of cover note at the instance of the Complainant, we have every reason to believe the statement made by Mr. Pasricha.
If this is the case then it is a common
The Complainant has committed fraud and is not entitled for the claim. Hence, there is no question of any deficiency in service by the Insurance Company. Further the Complainant procured alleged cover note through misrepresentation and unfair trade practice.
In view of the aforesaid discussion, this complaint has no merit. Hence, it is dismissed. The Complainant shall pay Rs. one lakh as cost to the Insurance Company which is required to litigate and defend at the instance of the Complainant.