IMPORTANT POINT
Insurance – Collapse of building – Where policy in question is for reinstatement, Complainant is entitled for Reinstatement Value of similar building.

JUDGMENT

AVM J. Rajendra, AVSM VSM (Retd.), Member—This Consumer Complaint has

been filed under Section 21 of the Consumer Protection Act, 1986 (for short “the Act”) against the Opposite Party seeking to direct the

O.Ps:—

(A) That, it be held that the OPs have rendered deficient service to the Complainant within the meaning of the Consumer Protection Act, 1986;

(B) That, it be held that the OPs adopted Unfair Trade Practice within the meaning of the Consumer Protection Act, 1986;

(C) That, the OPs be directed to pay to the Complainant an amount of Rs.10,04,97,831/- towards loss caused to the Complainant due to collapse of insured building due to insured peril;

(D) That the OPs be directed to pay to the Complainant interest @15% on the said amount of Rs.10,04,97,831/- from 20th August 2016 till the amount is paid by the Insurance Co.;

(E) That, the OPs be directed to pay to the Complainant Rs.10 lakhs towards mental harassment caused by the OPs.;

(F) That the OPs be directed to pay to the Complainant cost of Complaint of Rs.7.50 lakhs;

(G) Any other relief be granted to the Complainant which this Commission may deem fit in the interest of justice and fair play;

2. Brief facts of the case, as per the Complainant, are that he is the owner of a residential building named “Vira Sadan” at 41/49, Maulana Azad Road, Near Nagpada Junction, Mumbai 400008. The property is a Ground + 2 Floors structure occupied by tenants at the time of the collapse incident. This building was offered as collateral security to Bank of Maharashtra in connection with credit facilities sought by his son, Mr. Ketan Vira, for his company M/s KP Packaging Ltd, in which the Complainant serves as a Director. As part of the credit facility approval process, Bank of Maharashtra required such immovable properties and fixed assets being mortgaged to be valued by the Bank’s approved valuer. Thus, the documents related to the purchase of “Vira Sadan” were submitted to the Bank, and the property was accepted as collateral security for credit facilities to be granted to M/s KP Packaging Ltd. To ensure the enforceability of the security provided, Bank of Maharashtra caused a structural audit of the building through their independent valuer, who furnished a Structural Report dated 02.04.2014, that the property was structurally sound with a remaining useful life of 15 years, barring any natural calamity. Based on this assessment, the Bank accepted the collateral security and released the credit facilities to the company. As per the mandate of the Bank, the Complainant had approached the Opposite Parties (OPs) to insure the building. After conducting their due diligence, including verification of the building’s status with Bank of Maharashtra, OPs issued a Standard Fire and Special Perils Policy for a Sum Insured of Rs.9,86,34,000 for period from 28.07.2015 to 27.07.2016. The policy specifically insured the residential building “Vira Sadan” against various perils as stated thereat. The policy schedule explicitly mentioned the interest of “various financial institutes as listed in Annexure II” and specifically identified “Bank of Maharashtra” as the entity that had provided credit against the building’s collateral.

3. On 25.06.2016, due to heavy rain and inundation of water around in the gully, which caused percolation of water into the building’s foundation, a portion of the insured building unexpectedly collapsed and was immediately evacuated by all tenants as a safety precaution. The next day i.e. on 26.06.2016, the remaining building also collapsed. Notably, the collapse occurred without any prior signs of structural distress. The OPs were promptly notified of both collapse events on 25.06.2016, and 27.06.2016, respectively, as the building collapsed in two separate phases. After the incident, the Complainant approached Mumbai Building Repairs & Reconstruction Board (MBR & R Board), a unit of the Maharashtra Housing & Area Development Authority (MHADA), which serv