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2011(2) CPR 382 (NC)
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION,
NEW DELHI
R.C. Jain, Presiding Member and Anupam Dasgupta, Member
M/s. Crown Consultants (P.)
Ltd. —Complainant
versus
Oriental Insurance Company Ltd. through
its Regional Manager, & Anr. —Opp. Parties
Complaint Case No. 121 of 1999
Decided on 31.5.2011
Counsel for the Parties:
For the Complainant:Mr. Sukumar Pattjoshi, Advocate.
For the Opposite Parties:Mr. P. K. Seth, Advocate.
IMPORTANT POINT
Deficiency in service cannot be alleged without attributing fault, imperfection, shortcoming or inadequacy in quality, nature and manner of performance.
Headnote:(i) Consumer Protection Act, 1986—Sections 2(1)(g), 2(1)(o) and 21 read with Section 24-A—Insurance—Loss sustained in business in capital market—Complainant suffered loss of Rs. 43,05,932/- in a set of share purchase and sale transactions and lodged claim for indemnification under insurance policy—Claim was filed well beyond specified period of 30 days from date of discovery/awareness of loss due to share trades carried out by complainant—There is ample evidence of lack of even ordinary good faith in conduct of complainant—It did not comply with regulatory requirements of NSE in doing trades—It failed to exercise due diligence and care in executing very large trades on behalf of a very new client without any margin money—Complainant not only did not display utmost good faith in its conduct but also failed to discharge burden of proof in respect of its claim—No deficiency in service on part of Insurance Company in repudiating complainant’s insurance claim—Complaint dismissed. (Paras 23 and 24)
(ii) Insurance Act, 1938—Section 45—Insurance contract—Doctrine of utmost good faith must pervade entire range of conduct of both assured/insured and insurer all through life of insurance contract. (Paras 20 and 21)
(iii) Consumer Protection Act, 1986—Sections 2(1)(g), 2(1)(o), 3 and 21—Deficiency in service—Consumer Fora derive jurisdiction to adjudicate such matters only on the ground of deficiency in service on part of insurer—Deficiency in service cannot be alleged without attributing fault, imperfection, shortcoming or inadequacy in quality, nature and manner of performance which is required to be performed by a person in pursuance of a contract or otherwise in relation to any service—Burden of proving deficiency in service is upon the person who alleges it. (Para 22)
Anupam Dasgupta, Member—The complainant in this case is a private limited company owned and managed by one Chandaliya family, with registered office in Mumbai and engaged in stock broking. In that capacity, the company became a member of the National Stock Exchange of India Ltd. (NSE) and started its trading operations at that Exchange in October 1995 from its online terminal at Pune. The complaint pertains to the alleged deficiency in service on the part of opposite party no. 1, the Oriental Insurance Company Ltd. (hereafter, ‘OP 1’) in repudiating, without justification, the complainant’s claim for indemnification of the loss of Rs. 43.06 lakh approximately. The complainant claims it suffered this loss because of ‘deception by an unidentified person’ in the course of its stock broking business, which was a peril covered by an insurance policy availed of by the complainant from OP 1. The prayer in the complaint, however, is for award of a sum of Rs. 66, 30,500/-. This sum includes the alleged loss of Rs. 43,05,032/-, interest on the said amount @ 18% per annum for the period 01.07.1996 to 30.04.1999 and cost of Rs. 30,000/- on travel, etc., in pursuing the repudiated insurance claim and compensation of Rs. 1 lakh towards harassment and mental agony. In addition, the complainant has prayed for subsequent interest on the above-mentioned sum @ 18% per annum from the date of filing the complaint upto realisation. Opposite party no. 2 (hereafter, ‘OP 2’) is the foreign re-insurer of OP 1 and has chosen not to be represented in these proceedings.
2. The undisputed facts are few. In view of the various risks faced by its members in the business of trading in stocks as well as the directives of the Securities and Exchanges Board of India (SEBI) in that context, the NSE was looking out for an obligatory insurance policy for all its members. When OP 1 offered a product that appeared suitable to cover such risks, the NSE negotiated the policy cover sometime during 1995 and required that all its member stockbrokers avail of the said policy and pay the requisite premia directly to OP 1. The stock trading at the NSE was based almost ab initio on computer-assisted online trading, with the authorised computer terminals at the premises of the member stockbrokers being linked to the central computer (server) of the NSE for viewing, with due authorisation, the continuously quoted prices for buying and selling of listed stocks and executing the trades based thereon. The clients of the individual member stockbrokers would contact them, including on telephone, and, give instructions for purchase/sale of stocks. Based on their instructions, the authorised trader of the member stockbroker would bid for purchase/sale of the specified stocks at those prices (or, thereabouts). The authorised trader would execute the trades of purchase/sale of the stocks when the prices displayed by the central server of the NSE on the screen of the member broker’s computer terminal(s) would match the bid prices. Given this nature and modality of operation, there were clearly several types of possible errors of omission and commission in such trading. Hence, the insurance policy negotiated by the NSE with OP 1 provided for covering the member brokers against such risks, subject to the conditions and exclusions specified in the terms and conditions of the policy. The complainant’s cover was for indemnification of loss because of the specified perils to the extent of Rs. 25 lakh for any one event (or loss) during the period 19.10.1995 – 31.05.1995. As the amount of the premium payable by a member was dependent on the member’s turnover, the complainant paid a higher supplementary premium at a subsequent stage during the year. The complainant, however, suffered a loss of Rs. 43,05,932/- in a set of share purchase (and sale) transactions on behalf of one of its clients during 01-03.05.1996 and lodged a claim for indemnification under the above-mentioned insurance policy
