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2009 Supreme(Del) 96
IN THE HIGH COURT OF DELHI
SANJIV KHANNA
GAMMA INVESTMENTS - Appellant
Versus
NATIONAL INSURANCE COMPANY LTD. - Respondent
CS(OS) No. 1445 of 2002
Decided On : 23-01-2009
Ms. Anuradha Mukherjee, advocate.
Mr. Trideep Pais and Mr.L.K.Tyagi , advocates.
The main legal point established in the judgment is the interpretation of the insurance policy terms, including the applicability of the sections I and II, the reasonable care clause, and the SEBI guidelines, and their influence on the court's decision.
Headnote:
Insurance Policy - Stock Brokers - Section I, Section II - The court discussed the terms of the insurance policy, including the sections I and II, and their applicability to the plaintiff's claim. It highlighted the requirement for transactions to be conducted and recorded on the National Stock Exchange, the reasonable care clause, and the interpretation of the SEBI guidelines. The court found in favor of the plaintiff, holding the defendant liable to pay and indemnify the plaintiff for the loss.
Fact of the Case:
The plaintiff, a partnership firm engaged in stock broking, filed a suit against the defendant, an insurance company, for recovery of losses covered by the policy and interest. The plaintiff suffered losses due to rejected share transfers and sought indemnity under the insurance policy.
Finding of the Court:
The court found in favor of the plaintiff, holding the defendant liable to pay and indemnify the plaintiff for the loss covered by the insurance policy. The court also awarded pre-suit interest and future interest to the plaintiff.
Issues: The issues included the validity of the plaintiff's claim, the interpretation of the insurance policy terms, the calculation of the loss suffered by the plaintiff, and the applicability of the indemnity limit under the policy.
Ratio Decidendi: The court interpreted the insurance policy terms, including the requirement for transactions to be conducted and recorded on the National Stock Exchange, the reasonable care clause, and the interpretation of the SEBI guidelines. It held that the defendant was liable to pay and indemnify the plaintiff for the loss covered by the insurance policy.
Final Decision: The plaintiff was awarded a decree of Rs. 24,75,000 against the defendant under the insurance policy, along with pre-suit interest and future interest at 12% per annum until payment is made. The plaintiff was also entitled to costs.
1. Gamma investments (hereinafter referred to as the plaintiff) is a partnership firm engaged in the business of stock broking. National Insurance Company Ltd., the defendant is an insurance company which had on payment of premium issued ‘stock brokers’ indemnity insurance policy’, Exh. P-1 for the period 1st June, 2000 to 31st May, 2001 in favour of the plaintiff. The plaintiff has filed the present suit for recovery of Rs.46,22,795.30 against the defendant on account of loss covered by the policy and Rs.14,02,036.82 towards interest. Plaintiff has also claimed damages for pain and suffering amounting to Rs.1 lac.
2. The plaintiff, had sold 7,96,900 shares of M/s. Jindal Vijayanagar Steel Ltd. (hereinafter referred to as the shares, for short) as a broker for their clients Mr.Gunjan Jain and Mr.Vishnu Kumar. These shares were subsequently lodged for transfer but the Registrar of M/s.Jindal Vijayanagar Steel Ltd. refused to register the transfer on the ground that they were partly paid up shares and the sticker of ‘fully paid up’ affixed thereon was forged.
3. The plaintiff lodged police complaints, Exh. PW 1/2 and PW 1/3, and FIR(s) was registered against Mr.Gunjan Jain and Mr.Vishnu Kumar. They were arrested.
4. The plaintiff was required to make good and replace the forged/bad delivery of shares with new shares. The plaintiff replaced and purchased new shares of M/s Jindal Vijaynagar Steel Ltd. from the market and in this process suffered losses. They made claim(s) under the policy which was rejected. The plaintiff also approached Ombudsman and National Consumer Disputes Redressal Commission but their claim was not entertained on the ground of lack of jurisdiction.
5. The defendant has repudiated the claim of the plaintiff on two grounds (1) the transaction was done without following and complying with the guidelines of the Security and Exchange Control Board of India (SEBI, for short) and (2) there was breach of requirement to take reasonable care. In the written statement it is also stated that as per policy the liability of the defendant is limited to Rs. 25 lacs.
6. On the basis of the pleadings of the parties, the following issues were framed on 22nd September, 2004: ‘1. Whether the plaintiff is registered partnership firm and the suit instituted by a authorised person on behalf of the plaintiff’ OPP. 2. Whether the clam of the plaintiff in the present suit is not maintainable in view of the preliminary objection No.1 taken by the defendant in the written statement in regard to the non-compliance of the condition precedent by the plaintiff’ OPD. 3. Whether the defendant has validly repudiated the claims raised by the plaintiff under the Insurance Policy’ OPD. 4. If issue No.3 is answered in affirmative whether the defendant was entitled to seek any further clarification after submission of a joint survey report from only one of the surveyors, if so, to what effect’ OPD. 5. Whether the plaintiff has suffered any loss after February 21, 2001, and if so, to what amount the defendant is liable to compensate the plaintiff for the same’ OPD. 6. Whether the plaintiff is entitled to damages, if so, to what amount’ OPD. 7. Whether the claim of the plaintiff would be limited to the amount of Rs.25 lacs in view of the stipulations in the policy’ OPP 8. Whether the plaintiff is entitled to any interest, if so, at what rate and on what amount and for what period’ OPP. 9. Relief.’
7. The plaintiff has produced one witness Col. (retd.) G.S. Gujral-PW.1 and the defendants have examined three witnesses Mr. J.N. Vats DW-1, Sr. Divisional Manager of the defendant, Mr.Dinesh Kr. Jain, DW-2, Surveyor working with M/s.Mehta and Padamsey Surveyors Pvt. Ltd. and Mr.Shyamal Bhadra DW-3, Surveyor working with M/s. Bhadra and Associates Pvt. Ltd.
ISSUE NO.1
8. PW-1, Col. (retd.) G.S. Gujral has proved Form-B issued by Registrar of Firms, Government of NCT of Delhi, Exhibit PW1/1, stating inter alia, that the firm M/s. Gamma I
