Judicial Analysis Court Copy Headnote Facts Arguments Court observation

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
Subhash Chandra, Presiding Member and
AVM J. Rajendra, AVSM VSM (Retd.), Member
Oriental Insurance Co. Ltd. – Petitioner
versus
M/s. Agarwal Stores and Anr. – Respondents
Revision Petition No.282 of 2017
(Against the Order dated 07/06/2016 in Appeal No. 54/2012 of the State Commission Jharkhand)
Decided on 1.1.2025

Advocates:
Counsel for the Parties:
For the Petitioner:Mr. Vinod Trisal, Advocate
For the Respondent No.1: Mr. Satish Kumar Agarwal, Proprietor
For the Respondent No.2: Nemo

IMPORTANT POINT
Under-insurance – Under-insurance occurs when the insured value of goods is less than their actual value. In such case also, if all insured goods are destroyed, the policyholder is still entitled to claim the full insured amount but not more, regardless of the actual higher value of the goods.

Headnote:
Consumer Protection Act, 1986 – Section 21(b) [Consumer Protection Act, 2019 – Section 58(1)(b)] – Revision – Services – Insurance – Repudiation of Claim – Under-insurance occurs when the insured value of goods is less than their actual value. In such case also, if all insured goods are destroyed, the policyholder is still entitled to claim the full insured amount but not more, regardless of the actual higher value of the goods. However, while the actual value of goods is higher and only part of the insured goods is lost, the principle of averaging out applies and the claim is proportionate to the insured value compared to the actual value. Therefore, the ‘Average Clause’ is applicable when not all insured goods are destroyed. In any case, if all insured goods are destroyed, as in this case, the Average Clause is deemed inapplicable – On facts, an insurer is within its right to apply the principle of averaging out when all the goods are not destroyed. However, in the present case the entire insured stocks were stated to have been destroyed – Petition dismissed. [Paras 7 to 14].
Result: Petition dismissed.

ORDER

AVM J. Rajendra, AVSM, VSM (Retd.), Member—This Revision Petition has been filed under Section 21(b) of the Consumer Protection Act, 1986 (the “Act”) against impugned order dated 07.06.2016, passed by the Jharkhand State Consumer Disputes Redressal Commission, Ranchi (‘State Commission’) in FA No.54 of 2012, wherein the Appeal filed by the Complainant was allowed in part and granted lump sum of Rs.3 Lacs and modified the Order dated 20.03.2012, passed by the District Consumer Disputes Redressal Forum, Lohardaga (“District Forum”) in CC No. 01/2010.

2. For convenience, the parties are referred to as stated in the original Complaint before District Forum. Oriental Insurance Co. Ltd. is referred to as OP-3 & 4 (Petitioner herein), Agarwal Stores through its Sole Proprietor is referred to as the Complainant (Respondent No.1 herein) and Gramin Bank through Branch Manager is denoted as OP-1 & 2 (Respondent No.2 herein) respectively.

3. Brief facts of the case, as per the Complainant, are that he operates a business under the name “Agarwal Stores” on College Road, Lohardaga, dealing in motor parts, electronics, and electrical goods. He availed a Cash Credit Limit loan of Rs.2,00,000 from OP-1 (the Bank) to support his business. Bank insured the shop through OP-3 (the Insurer). On the night of 15-16.09.2009, a fire broke out in the Complainant’s shop, causing damage to stocks valued at approximately Rs.4,00,000. The fire was controlled with the help of neighbours and the fire brigade. He informed the Bank (OP-1) and the insurance company (OP-3). OP-3 appointed a surveyor to assess the damage and the surveyor visited the site on 18.09.2009, took photographs and prepared a list of the damaged goods. Despite the damages are established, OP- 3 and 4 rejected the claim. Being aggrieved, the complainant filed a consumer complaint before the District Forum seeking Rs.4,00,000 as compensation for financial loss and Rs.1,00,000 for interest on the loan and mental agony.

4. In their reply before the District Forum, OPs-1 and 2 (Bank) confirmed that it sanctioned the complainant’s Cash Credit Limit of Rs.2,00,000 and arranged insurance coverage of the shop for Rs.4,00,000, later revised to Rs.3,00,000. The Bank promptly informed the insurance company about the fire incident. The Bank, however, contends that the complainant irregularly maintained his loan account and had an outstanding amount of Rs.2,08,380. They denied responsibility for the insurance claim and alleged that he directly approached OP-3 for settlement without their involvement. The OP-3 and 4 (Insurer) argued that the complaint is not maintainable under the Consumer Protection Act, as the insurance contract is subject to strict terms and conditions. The complainant acted in bad faith, attempting to mislead by staging the fire after moving useful items from the shop and burning old parts to create an illusion of loss. The insurance company contended that the complainant violated policy terms, making him ineligible for compensation. They also state the claim remains pending before the competent authority, dismissing any allegations of deficiency in service.

5. The learned District Forum vide Order dated 20.03.2012, allowed the complaint with the following order:—

“15. Taking into consideration the above, the claim of the complainant is partly allowed and the O.P.No.3 and 4 are directed to pay to the complainant a sum of Rs.51,000/- being the amount of compensation for the loss of the goods due to fire in the shop of the complainant within- 30 days from the date of this order, leaving the parties to bear their own costs.”

6. Aggrieved by the Order of the District Forum, the Complainant filed an Appeal No. 54/2012 before the learned State Commission. The State Commission vide order dated 07.06.2016 allowed the Appeal in part and modified the Order of the District Forum, as follows:—

“12. Now the question is whether the surveyor’s report should be relied or not?

13. It is no

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