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SUPREME COURT OF INDIA
S. ABDUL NAZEER, DEEPAK GUPTA, JJ.
Canara Bank – Appellant
Versus
United India Insurance Co. Limited And Others – Respondent
Civil Appeal No. 1043-1203 of 2020 (@SLP (Civil) No. 24774-24782, 25957-25964, 25137-25148, 25235-25244, 25535-25543, 25325-25331, 26077-26085, 26494-26504, 25714-25722, 25343-25349, 31449-31518 of 2018)
Decided On : 06-02-2020
(a) Consumer Protection Act, 1986 - Section 27A - Concurrent finding of facts by State and National Commission - Cannot be challenged in proceedings u/s 27A. (Para 13)
(b) Interpretation - Insurance policy - While exclusion part should be construed narrowly, coverage provisions should be interpreted broadly - Ambiguity should be resolved in favour of the insured - Policy should be read as a whole and the interpretation should further expectations of parties as also the business realities - Interpretation should be commercially sensible - Presently the tripartite agreement and the policy indicates that intention of the parties was that they would be compensated by the insurance company in case of any untoward loss. (Para 21)
(c) Consumer Protection Act, 1986 - Section 2(d) - Consumer - Also includes beneficiaries who may be a person other than the person who hires or avails of services - Beneficiaries need not be party to contract of insurance - Instantly, the farmers are consumer. (Para 25, 26, 27)
(d) Insurance Policy - Clause 5 - Exclusion - Goods held in trust etc - Instantly goods not held in trust or on commission - Kept in the cold store on payment of rent by farmers - Present case not excluded. (Para 32, 33)
(e) Insurance Policy - General conditions 1 - Policy only voidable for misrepresentation or misdescription - Insurer not taking any step to void the policy for three years - Insurance company ought to verify and find out who was the owner of the goods - It could not presume that all the goods belong to the cold store - It cannot be permitted to raise such objection at this stage. (Para 36)
(f) Insurance Policy - General conditions 8 - Fraud - Tripartite agreement between farmers, bank and cold store - Bank not signing some of these - Insurer alleging fraud - None of the parties disputing the agreements - Contention of insurer rejected. (Para 40)
(g) Insurance policy - Non disclosure of material facts - Original policy of 2011 not brought on record - Insurer should have asked insured to fill in all columns - For any column left blank resulting in non disclosure of material facts insurer should have taken steps to rectify the same or avoid the policy - Insurer doing nothing - Insurer liable to indemnify cold store - Framers entitled to get amount payable under the policy. (Para 44)
Facts of the case:
The claimants-farmers had stored their agricultural produce in a cold store run by a partnership firm under the name and style of Sreedevi Cold Storage. These farmers also obtained loans from Canara Bank. The loan was advanced by the Bank to each one of the farmers on security of the agricultural produce stored in the cold store. The cold store was insured with the United India Insurance Company Limited. A fire took place in the cold store on the night intervening 13.01.2014 and 14.01.2014. The entire building of the cold store and the entire stock of agricultural produce was destroyed.
The farmers issued notice to the insurance company in respect of the plant, machinery and building but this claim was repudiated by the insurance company on the additional ground that the farmers had no locus standi to make the claim as the insured was the cold store and not the farmers. Since the claims of the farmers were either rejected or not answered, they filed claim petitions against the cold store, the Bank and the insurance company in which the primary relief claimed was the value of the agricultural produce as on the date of fire and interest thereupon and each of the farmers also claimed damages of Rs. 1,00,000/- per head. There were 91 claim petitions filed and in most of them the agricultural produce was Byadgi Chilli. In a few petitions, the agricultural produce was Dabbi Chilli, Guntur Chilli, Bengal Gram, Coriander (Dhania), Jwar etc.
The farmer, the Bank, and the cold store were parties to the tripartite agreement. The plant and machinery of the cold store was insured for Rs.5 crores and the stocks were insured for Rs.30 crores.
The insurance company resisted the complaint mainly on the ground that the 'farmers' were not 'consumers' within the meaning of Consumer Protection Act, 1986.
The State Consumer Disputes Redressal Commission held that the farmers had proved that the fire took place on account of electrical short circuit and no element of human intervention or use of kerosene was found. The State Commission also found that as per the tripartite agreement entered into between the farmers, the Bank and the cold store, it was mandatory for the cold store to insure the goods so hypothecated by the farmers with the Bank. The insurance company was held liable to pay the amount to the farmers.
An appeal was filed before the National Commission which concurred with the findings of the State Commission and held that the farmers are consumers. However, it partly allowed the appeal of the insurance company and reduced the interest from 14% per annum to 12% per annum. As far as the appeals filed by the Bank were concerned, the National Commission held that in the peculiar facts of the case where the farmers had suffered substantial losses, the principal amount of loan advanced by the Bank would be remitted by the insurance company to the Bank but the other amount i.e. interest and damages, would be given to the farmers. It was also held that there was no deficiency of service on behalf of the Bank and the costs imposed on the Bank in some of the cases were set aside.
Finding of the Court:
Insurer is liable to indemnify cold store and the framers entitled to get amount payable under the policy.
Result: Appeals disposed of.
Certainly. Based on the provided legal document, here are the key points:
The findings of fact by the State and National Commissions are conclusive and cannot be challenged under section 27A of the Consumer Protection Act (!) .
Insurance policies should be interpreted broadly regarding coverage provisions to align with the expectations of the parties and the business realities, while exclusion clauses should be construed narrowly. Ambiguities should be resolved in favor of the insured (!) .
The definition of 'consumer' under the relevant Act is broad and includes not only the person who directly hires or avails of services but also beneficiaries who may be other than the person who entered into the contract, provided the services are availed with approval (!) (!) .
The 'consumer' also includes beneficiaries who benefit from the insurance policy, even if they are not parties to the contract of insurance. This interpretation applies to the farmers who stored produce in the cold store and are deemed consumers (!) .
The insurance policy is not necessarily void or voidable solely because the goods were held in trust or on commission; in this case, the goods were held in exchange for consideration (rent), which does not qualify as holding 'in trust' (!) .
The policy's provisions regarding misrepresentation or nondisclosure only render the policy voidable, not automatically void, especially if the insurer does not take action within a specified period (!) .
The insurer's liability is not excluded by the presence of extraneous ignitable substances or allegations of arson unless clear evidence shows intentional misconduct by the insured. The conclusion that the fire was accidental and caused by a short circuit is a factual finding that cannot be challenged (!) .
The policy's terms should be interpreted strictly concerning the insurer's obligations, but also in a manner that aligns with the reasonable expectations of the insured and beneficiaries, recognizing that coverage should be interpreted broadly (!) (!) .
The policy's exclusion clauses, such as those excluding goods held in trust or on commission, are not applicable here because the goods were stored by the farmers under a contractual bailment for consideration (!) (!) .
The non-disclosure of certain material facts, such as the ownership of goods or details in proposal forms, does not automatically void the policy unless the facts are material and would influence the insurer's decision. In this case, the non-disclosure was not deemed material enough to nullify coverage (!) (!) .
The contractual relationship and the intent of the parties, as evidenced by the tripartite agreement and the insurance policy, support the conclusion that the farmers and beneficiaries are entitled to claim indemnity from the insurer (!) (!) .
The insurance company is liable to pay the value of the goods as reflected in warehouse receipts, along with interest, and the bank's dues should be settled accordingly. The interest and amount payable are to be calculated based on the original loan and the value of goods at the time of storage (!) (!) .
The bank's role in the process was limited but includes the obligation to provide accurate account statements. The bank cannot claim interest at the contractual rate if the delay was due to procedural lapses (!) (!) .
The insurer's liability extends to indemnifying the insured (cold store) and the beneficiaries (farmers), with the understanding that the policy covers the risk of fire caused by accidental short circuits or other covered perils (!) (!) .
The policy's terms regarding the amount payable specify that the insurer is liable to pay the value of the goods at the time of destruction or damage, as evidenced by warehouse receipts, rather than speculative market values (!) (!) .
The insurer is liable to pay the amount of the claim, and the amounts due to the bank and farmers are to be settled as per the directions provided, including interest calculations and deposit timelines (!) (!) .
The appeals are disposed of according to the directions, with no order as to costs, and pending applications are also disposed of accordingly (!) .
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JUDGMENT :
DEEPAK GUPTA, J.
Leave granted.
2. All these appeals are being decided by one common judgment since they arise out of a common order dated 08.06.2018 of the National Consumer Disputes Redressal Commission, New Delhi, hereinafter referred to as 'the National Commission'.
3. Briefly stated the facts of the case are that most of the claimants, hereinafter referred to as 'the farmers', had grown Byadgi Chilli Crop during the year 2012-2013. Some of the farmers had some other crops. These farmers had stored their agricultural produce in a cold store run by a partnership firm under the name and style of Sreedevi Cold Storage, hereinafter referred to as 'the cold store'. These farmers also obtained loans from Canara Bank, hereinafter referred to as 'the Bank'. The loan was advanced by the Bank to each one of the farmers on security of the agricultural produce stored in the cold store. The cold store was insured with the United India Insurance Company Limited, hereinafter referred to as 'the insurance company'. A fire took place in the cold store on the night intervening 13.01.2014 and 14.01.2014. The entire building of the cold store and the entire stock of agricultural produce was destroyed.
4. After the fire, the cold store, which had taken out a comprehensive insurance policy, raised a claim with the insurance company but the claim of the cold store was repudiated by the insurance company mainly on the ground that the fire was not an accidental fire. The farmers had also issued notice to the insurance company in respect of the plant, machinery and building but this claim was repudiated by the insurance company on the additional ground that the farmers had no locus standi to make the claim as the insured was the cold store and not the farmers. It was further pleaded that Condition No.8 of the insurance policy had been violated, and that there was no privity of contract between the farmers and the insurance company. Since the claims of the farmers were either rejected or not answered, they filed claim petitions against the cold store, the Bank and the insurance company in which the primary relief claimed was the value of the agricultural produce as on the date of fire and interest thereupon and each of the farmers also claimed damages of Rs. 1,00,000/- per head. There were 91 claim petitions filed and in most of them the agricultural produce was Byadgi Chilli. In a few petitions, the agricultural produce was Dabbi Chilli, Guntur Chilli, Bengal Gram, Coriander (Dhania), Jwar etc. However, this will not have any material impact on the decision of these cases. The details containing the name of the claimants, the nature of the produce, number of bags and quantity thereof, rate, and number of kilograms have been set out in Para 7 of the judgment of the National Commission which we are not reproducing for the sake of brevity.
5. In the claims filed it was pleaded that the cold store while levying the general charges had also charged the insurance premium paid by it. It would be pertinent to mention that a tripartite agreement had been entered into by each one of the farmers while taking a loan from the Bank and hypothecating the agricultural produce which was stored in the cold store. The farmer, the Bank, and the cold store were parties to the tripartite agreement. The cold store issued a warehouse receipt giving the particulars of the crop stored, the value thereof and also the date of the tripartite agreement. For the period in question i.e. from 2012-2013 till the occurrence of fire, the cold store was admittedly insured with the insurance company. The plant and machinery of the cold store was insured for Rs.5 crores and the stocks were insured for Rs.30 crores.
6. The case of the farmers was that in terms of the tripartite agreement, the cold store had got the stocks insured from the insurance company. The fire was an accidental fire and, therefore, in terms of the policy, the insurance company was liable to pay the amount of va
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