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NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
V.K. Jain, Presiding Member
Citizen Cooperative Bank Ltd. – Complainant
versus
United India Insurance Company Ltd. and Ors. – Opp. Parties
Consumer Case No.81 of 2007
Decided on 10.7.2019
Counsel for the Parties:
For the Complainant:Mr. Amalpushp Shroti, Advocate
For the Opp. Parties:Mr. Maibam N. Singh, Advocate
IMPORTANT POINT
Where there has been breach of a policy which was a condition precedent to liability of insurer under the policy, insurer is not liable to pay any amount to complainant.
Headnote:
Consumer Protection Act, 1986—Section 21—Insurance— acts of fraud and embezzlement committed by employees of complainant bank—There is no evidence of any office order/circular having been issued by bank requiring rotation of employees handling money and/or securities after a specified time period—Had such an order been issued but not implemented by CEO of bank, bank would not have been guilty of committed breach of such condition of policy—Considering purpose behind such a stipulation which is based upon a prudent public policy, bank should have been rotating employees handling money and/or securities after they have been in a position for a specified period—One of purposes behind adopting a rotational policy is that a person should not be able to develop vested interests on account of his being in a position for an unreasonably long period—Complainant bank committed breach of mandatory term of insurance policy—Since there has been breach of a policy which was a condition precedent to liability of insurer under the policy, insurer is not liable to pay any amount to complainant bank despite loss suffered by it during policy period—Consumer complaint dismissed.
Held: The case of the insurer is that Mr. Kamlesh Patel was working as a cashier right since 1992 whereas the case of the complainant is that he was working as cashier during the period from 1.9.1997 to 22.3.2005. In his affidavit available on page 146 of the paper-book (Part -I) Mr. Kamlesh Patel has interalia stated on oath that he was posted as cashier with the principal branch of the bank since 1992. Be that as it may, the fact remains that on 30.6.2004 when the policy period commenced, Mr. Patel had been posted as cashier with the same branch of the bank for more than six years. Though the policy condition did not require rotation of the employees handling money and/or securities after a particular period considering the purpose behind such a stipulation, an employee handling money and/or securities should have been shifted from the position held by him, after a reasonable period. Even if a period of five years computed from 1.9.1997 is taken as a fair and reasonable period for the purpose of rotation, it is evident that the bank, as an institution, had not been rotating the employees handling money and/or securities. There is no evidence of any office order/circular having been issued by the bank requiring rotation of the employees handling money and/or securities after a specified time period. Had such an order been issued but not implemented by the CEO of the bank, the bank would not have been guilty of committed breach of the aforesaid condition of the policy.
The contention of the learned counsel for the complainant is that the policy period having commenced only on 30.6.2004 and the embezzlement / fraud having been detected during the policy period itself, it cannot be said that the bank had committed breach of the above-referred condition since a reasonable time from the date of commencement of the policy had not expired. I, however, find myself unable to accept the said contention. Considering the purpose behind such a stipulation, which is based upon a prudent public policy, the bank should have been rotating employees handling money and/or securities after they have been in a position for a specified period. The bank, at least on the receipt of the insurance policy, came to know that it was required to rotate the employees handling money and/or securities and that this was a condition precedent for the liability of the insurer under the policy taken by it. The complainant bank also knew that Mr. Patel had been in the position of the cashier for at least more than six years, on the date the policy was received by it. Therefore, the complainant bank in order to confirm to the aforesaid policy condition should have immediately rotated Mr. Patel as well as other employees handling money and/or securities who had been on the same position for more than a reasonable period. Had such a rotation been done immediately after receipt of the insurance policy, a major part of the loss suffered by the complainant bank could have been easily avoided. One of the purposes behind adopting a rotational policy is that a person should not be able to develop vested interests on account of his being in a position for an unreasonably long period. In case he is shifted from that position, after he has put a reasonable period in that position, his successor would be in a position to identify the lapses on the part of his predecessor-in-interest and bring the same to the notice of the concerned authorities. Therefore, in my opinion, the complainant bank committed breach of the of the aforesaid mandatory term of the insurance policy by not rotating Mr. Patel from the position of the cashier. In fact the contention of the learned counsel for the insurer is that such a condition is included any insurance policy obtained by a bank the condition being based upon the directions issued by RBI, though such directions have not been placed on record. It is also an admitted position that the complainant bank was required to and has been obtaining the insurance policy right from the time it started functioning as a cooperative bank. Therefore, if such a condition was a part of the policies taken by the complainant bank for the previous years, it would show that the bank had continuously been committing breach of such conditions by keeping the employees holding sensitive positions in the same posts for an unreasonably long period.
For the reasons stated hereinabove, I hold that since there has been breach of a policy which was a condition precedent to the liability of the insurer under the policy, the insurer is not liable to pay any amount to the complainant bank despite the loss suffered by it during the policy period. The consumer complaint is, therefore, dismissed with no order as to costs. (Paras 13 to 15)
Result: Complaint dismissed.
ORDER
V.K. Jain, Presiding Member
The complainant before this Commission is a cooperative bank presently under liquidation. It is alleged in para 2 of the complaint that this is a statutory obligation of the bank to get its premises as well as its employees insured and ever since it has been established the bank has been taking insurance.
2. The complainant took an insurance policy from the OP, namely, United India Insurance Co. for the period from 30.6.2004 to 29.6.2005. Though the policy was issued on 5.7.2004, it was effective from 30.6.2004. The sum insured under the policy was as under:-
| “Sl. No. | Cover | Sum Insured (Rs) |
| 1. | Basic Sum Insured | 7,00,000.00 |
| 2. | Additional SI on premises | 2,27,00,000.00 |
| 3. | Additional SI on Transit | 95,00,000.00” |
3. The case of the complainant is that it suffered a loss of Rs.2,34,56,944.59 during the policy period on account of acts of fraud and embezzlement committed by its employees. The said embezzlement is alleged to have been committed by three persons, namely, the CEO of the bank – Mr. Hargovind Yadav, its Branch Manager - Mr. Sanjay Kakkad and the then Cashier - Mr. Kamlesh Patel, all of whom are alleged to have acted in conspiracy with each other, in order to defraud the bank.
4. A claim under the insurance policy was lodged by the complainant with the insurer. The claim, however, came to be rejected vide letter dated 16.2.2005 which to the extent it is relevant, reads as under:-
“There are certain substantial violations and breach of policy conditions observed by the surveyor during the assessment and investigation into the claim. The papers as submitted by the bank in support of the claim to the surveyor too reveals the violations as certified by the surveyor, these are-
1. Conditions precedent to liability states as under:-
“There should be job rotation for employees handling money &/or securities”
The bank was being run contrary to the guidelines of Reserve Bank of India which requires rotation of the job more particularly of the persons who are handling money &/or other securities. It has been observed that Shri Kamlesh Patel was working as Cashier since 1992 and no job rotation was done.
2. It has been observed that you have violated Condition No.3 (Reasonable Care) of the policy which are precedent to the liability. (Reasonable care has not been taken in monitoring the activities of the bank and the provisions for maintaining proper books of accounts have also been found violated.)
3. Exception(c) of the policy states as under:
Losses resulting wholly or partially from the wrongful act or default of any Directors or Partners of the insured other than salaried.
However, in this case two Directors Shri Gyaneshwar More and Shri Dayabhai Patel were involved. It has been observed that losses were wholly and partially resulted from negligence and/or omission on the part of Directors other than salaried.
4. The bank was engaged in non-banking activities like purchase of non-banking assets etc., which is against the banking licence granted to you by RBI whereby violation of Section 6 of The Banking Regulations Act, 1949 also.
5. That it has been observed that you failed to prove that the alleged loss was within the policy period and not within the retroactivity period of cover (meaning thereby loss not discovered within the period of insurance are not payable). The onus of proving that the loss has taken place during the currency of policy lies on the insured which has not been proved, no liability attaches to us under the policy. There are certain dates provided by the bank but all these dates are outside the preview of the policy referred above. The losses pertaining to the earlier period falling under the Retroactive Clause shall be payable by respective insurer at that time (proviso C of the policy.)
6. That it has been observed that
