NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
DCM Shriram Consolidated Limited Complainant
7th Floor,
7, Tolstoy Marg,
Vs.
National Insurance Co. Ltd. Opposite
Party
Division No.1,
4,
42, Janpath,
BEFORE:
HONBLE MR. JUSTICE M.B.SHAH,
PRESIDENT
DR.
P.D. SHENOY, MEMBER
Mr.
Anuj Bansal, Advocates
For the Opposite Party : Mr. Joy Basu,
Advocate
Dated
M.B.SHAH, J. PRESIDENT.
This complaint is filed by M/s.
D.C.M. Shriram Consolidated Ltd., praying for a
direction to the Insurance Company to refund additional premium of Rs.26,68,530/- (Rs.25,00,000/- and Rs.1,68,530/- paid by the
Complainant on 26.3.1996 and 20.6.1996 respectively) which the Complainant was
required to pay under undue influence and coercion, with interest at the rate
of 24% p.a. from the date of its collection.
Undisputedly,
the Complainant was taking fire insurance policy for over 30 years only for his
three factories/plants, namely, (i) Cement; (ii)
Caustic Soda, Calcium Carbide & P.V.C.; and (iii) fertilizers, which are
located side-by-side within the same compound at
A
fire broke out on 26.4.1995 in the caustic soda plant/factory which according
to the Complainant has caused loss to the tune of Rs.7.5 Crores. This claim
included a part of the damages caused to the fertilizers plant/factory due to
the fire which broke out in Caustic Soda plant.
The
Insurance Company entertained the claim and after due processing, it was
finally settled at Rs.5,92,40,583/-. However, pending
finalisation, the Insurance Company paid Rs.1.75 Crores on 7.6.1995.
Before settling the claim the
Insurance Company pointed out
that the insurance cover taken out for fertilizers plant against
fire, flood risk was irregular, as the flood risk could not have been extended
to one plant only, i.e. the fertilizers plant factory and the Complainant ought
to have taken out the policies covering flood risk in respect of all the plants
together, as these plants are located within one compound/complex. Thereafter, the claim was finally settled in
the month of March, 1996, but payment was not made.
Despite the settlement of the
claim the Insurance Company failed to release the said amount and the sum of
Rs.4,17,40,453/- was released on compliance of unjustified demand to pay a sum of Rs.25 lakhs and Rs.1,68,530/- as
premium. Insurance Company raised this demand for additional premium by
contending that the Complainant ought to have taken insurance policies for
flood for the remaining two factories. As the Complainant Company was in
financial crisis due to fire, the Complainant paid the said amount. That
additional premium was collected for 3 years prior to 1994-95.
It is contended by the
Complainant that when no coverage for flood risk was extended with regard to
the remaining two policies it was totally unjust, arbitrary and unfair on the
part of the Insurance Company to collect premium retrospectively. Thereafter,
the Complainant wrote a number of letters for refund of the said amount. As the same was not refunded this complaint is filed.
Prima facie, it appears that
the demand and recovery made with retrospective effect by the Insurance Company
amounting to a sum of Rs.26,68,530/- towards premium
in respect of the policies which were not at all issued, is on the face of it
unjustifiable. The Complainant was squeezed, as they were in need of money, to
pay the said amount before getting the amount of Rs.4 Crores and odd.
The
Insurance Company does not dispute the deposit of the aforesaid amount, but it is contended that because of the mistake on the part of their Officer, they have charged the additional premium as a corrective
measure; but the same is in accordance with the tariff provisions and
provisions of the Claims Management
Guide. It is sought to be contended that
as per Part-III Tariffs, Section 10 which provides for special perils
storm, cyclone, typhoon, tempest hurricane, tornado, flood and inundation
perils, cover is required to be granted
only if the entire property in one
complex/compound/location covered under the Fire Policy C' is extended.
The Insurance Company relied upon Part-III Tariffs :
Section 10 Special Perils. Clause (a) of General Clauses of the said tariff
rules reads as under:
(a) Storm, Cyclone,
Typhoon, Tempest Hurricane, Tornado, Flood and Inundation Perils cover to be
granted only if the entire property in one complex/compound/location covered
under Fire Policy C' is extended to cover this risk and the Sum Insured for this extension is identical
to the Sum Insured against the risk covered under Fire Policy C'
It is
contended that the Complainant has not taken flood policies for the properties
situated within the same complex/compound which are covered under the Fire Policy C'
. Therefore, as a corrective action additional
premium was collected for the entire property which was located in one complex/compound. It is submitted that as per the Fire Claims Management Guide premium for the
last three years policies is required to be
recovered.
Findings:
In
our view, the
aforesaid submission is without substance.
Firstly, if Section 10 of
Special Perils was applicable, it was the duty of the Insurance Company
to grant insurance coverage for flood
also for other policies. On the contrary, the said Section provides that it is
the duty of the Insurance Company to follow the said special rules. If they do not follow the same, it cannot be
said that insured is liable to pay the same after a lapse of three years.
Further, in case where the
insurance premium is not paid for the other premises, then it would be
difficult for the complainant to claim any compensation in case of loss
with regard to the said premises. No
Insurance Company would reimburse the insured for the premises for which no
insurance coverage is granted.
The aforesaid clause directs the
Insurance Company to grant cover for flood etc. for all the premises which are
in one complex/compound. Clause 6 of the
said Rules specifically provides However, it is made clear that DCC/RCC have no authority to rectify the
policy. This means that if insurance
coverage is not granted with regard to other premises, then subsequently no
claim can be entertained and policy could not be rectified.
However, Insurance Company
relied upon clause 6.3 which, inter alia,
provides as under:
There are
cases where incorrect rates are charged under the policy and which does not
merit consideration as non-standard claims.
In these cases, correct rates are to be charged not only under the
affected policy but also for the past there years from the date from which such
rate is applicable. Such cases which
involve incorrect rating, fall within the guidelines of
GIC and Section 64 VB of Insurance
Act.
This
clause only requires that in case where incorrect rates are charged under the
policy which does not merit consideration as non-standard claims, correct rates
are to be charged not only under the rectified policy but also for the past
three years. In this case, there is no
question of non-charging of the correct premium, because insurance coverage was
taken only for one premises.
In
this view of the matter, it is not necessary to discuss the provisions of
Section 64 UC in the present case. If
there is alleged mistake, the Insurance Company has to suffer, but the insured
cannot be compelled to pay premium for which he had not taken insurance
coverage.
Hence,
this complaint is allowed. The Insurance
Company is directed to refund the amount of Rs.26,68,530/-
with interest at the rate of 9% per
annum from the date of its recovery till its payment. The Insurance Company shall also pay Rs.20,000/- as costs, to be deposited with the NCDRC
Bar Association Legal Aid Fund.
Sd/-
..J.
(M.B.SHAH)
PRESIDENT
Sd/-
(P.D.
SHENOY)
MEMBER