1.      The Appellant filed the instant Appeal u/s 19 of the Consumer Protection Act, 1986, (the Act”), against the Order dated 16.11.2017 passed by the State Consumer Disputes Redressal Commission, Goa (“State Commission”) in CC No. 67 of 2016, wherein the State Commission partly allowed the Complaint directing the Appellant/OP to pay Rs.19,18,786 along with interest @ 9% per annum from date of filing of the complaint till actual realization and Rs.5,000 as costs.

2.      As per report of the Registry, there is 74 days delay in filing this Appeal. For reasons stated in IA/4566/2018, the delay is condoned.

3.      For convenience, the parties in present matter are hereinafter referred to as per position held in the Consumer Complaint.

4.      Brief facts of the case, as per the complainant are that the complainant firm sought and obtained indemnity against various risks, including loss of money in transit, loss of money in safe, infidelity of cash-carrying personnel, and assault on premises, by obtaining insurance from OP. The first policy, No. 270905/48/12/7600000147, was effective from 16.05.2012 to 15.05.2013, and the second policy, No. 270905/48/13/7600000159, was effective from 20.05.2013 to 19.05.2014. Both provided for a total coverage of Rs.2,51,00,000/- for the specified risks. The complainant employed one Mr. Haridas Mali as the branch-in-charge of its Barshi depot, with responsibilities such as order management, inventory and replenishment management, local deliveries, transport management, cash and bank operations, bank deposits, withdrawals, credit handling, and accounting for cash collections from customers and depositing them into the form’s authorized bank account.

5.      During the subsistence of the policy, Mr. Mali was found guilty of embezzling funds, resulting in a quantified loss of Rs. 19,18,786/-, an act covered under the policy as ‘infidelity of a cash-carrying person.’ The complainant submitted a claim to OP, along with all necessary documents, seeking indemnification for the loss. Despite repeated requests and follow-ups, OP delayed in addressing the claim, eventually appointed one Mr. JC Bhansali, a Surveyor and Loss Assessor to evaluate the loss. Mr. Bhansali conducted a survey and, in his report dated 10.10.2014, confirmed that the complainant suffered Rs.19,18,786/- loss due to the employee’s misappropriation. However, he erroneously limited the OP’s liability to Rs. 1,00,000/-. In a letter dated 06.01.2015, the OP attempted to restrict its liability to Rs. 1,00,000/-, offering this amount as full and final settlement of the claim. The complainant disputed this limitation and, in a reply dated 24.03.2015, demanded OP to settle the claim for the full amount of Rs. 19,18,786/-. The OP persisted in its attempt to settle for Rs.1,00,000/-, prompting the Complainant to issue a  notice on 01.09.2016, demanding payment of the claimed amount. Although the OP received the notice, no action was taken. Consequently, the Complainant filed the present complaint.

6.      In its response before the State Commission, the OP contended that the complaint was not maintainable and should be dismissed in limine and further contended that the cause of action arose in Barshi, Maharashtra, placing the jurisdiction with the Barshi State Forum, and that the complaint exceeded its pecuniary jurisdiction. The OP denied any deficiency in service and contended that the complaint pertains to misappropriation, and thus, fell outside the scope of the insurance policy. The alleged misappropriation by Mr. Haridas Mali, whom the Complainant claimed was an employee, did not constitute "infidelity of a cash-carrying person" as defined under the terms of the insurance policy. The loss described was cumulative, which occurred over an extended period, rather than a single, isolated act of dishonesty that the policy would cover. The Complainant failed to produce any evidence to substantiate that Mr. Haridas Mali was indeed employed and his terms and conditions of employment and duties. Without such evidence, the OP asserted inability to address the scope of the claim and liability of OP. While a surveyor was appointed and a report was submitted, the surveyor's assessment was not binding. The surveyor misinterpreted the terms and conditions of the policy and OP had not accepted the surveyor's conclusions as an admission of liability.

7.      As regards the amount in dispute, the OP contended that the policy in question, while providing total coverage of Rs.2,51,00,000/-, did not extend this coverage to a single claim. The policy is restricted to a maximum of Rs. 1,00,000/- for any individual claim, and only if such a claim was made within the stipulated time frame. Their stand to pay Rs. 1,00,000/- did not signify acceptance of the Complainant's broader claim, but rather was in line with the policy's limitations.

8.      The learned State Commission vide order dated 16.11.2017 partly allowed the complaint with the following observations:

“The claim of Rs. 19,18,786/- made by the Complainant is supported by the report of the surveyors and assessors appointed by the OP. Hence the Complainant is entitled to the amount of Rs. 19,18,786/-. The Complainant has prayed for the said amount along with interest of 21% from the date the said amount was due and payable. The Complainant has not produced any evidence showing that they are entitled for interest at the high rate of 21%. In our view the simple interest at the rate of 9% per annum from the date of Complaint till actual realization would be just and reasonable.

The Complainant has further claimed compensation of Rs.5,00,000/- towards mental torture and suffering and for costs. The Complainant is a private limited company and thus a corporate entity. It is rightly submitted by the Lr. Counsel for the OP that the Complainant, being a Company, though a juristic person, cannot claim compensation for mental torture. In the case of "Wipro Limited Vs. Toppers Multimedia (P) Limited & Others", reported in [I (2000) CP] 39 (NC)], the Hon'ble National Commission has held that the Complainant, a limited Company, being a corporate entity was not entitled to compensation for mental torture; more so when reasonable interest on the cost of computer hardware package supplied to it is allowed by way of overall compensation. In the present case also reasonable interest has been allowed. Therefore, we hold that the complainant is not entitled for compensation for mental torture.

In the result, we pass the following:

1. The Complaint is partly allowed.
2. The OP shall pay to the Complainant an amount of Rs. 19,18,786/- along with simple interest at the rate of 9% per annum from the date of filing of Complaint till actual realization.
3. The OP shall pay an amount of Rs. 5,000/- to the Complainant towards costs of litigation.”

9.      Being aggrieved by the State Commission order dated 16.11.2017, the OP filed this Appeal No. 361 of 2018 seeking:

“In view of the peculiar facts and circumstances of the case and the submissions of the appellant the complaint is liable to be dismissed with costs.

The Commission may pass any other or further orders(s) as deem fit and proper in the circumstances of the case.

It is prayed accordingly.”

10.    The Appellant mainly raised the following issues in the Appeal:

1. The State Commission erred in interpreting pecuniary and territorial jurisdiction and the infidelity clause of the policy. It failed to correctly limit the liability of the insurer to Rs. 1,00,000/-. The Commission should have recognized that only one claim was preferred by the Complainant, thereby restricting the insurance company's liability to Rs.1,00,000/-.
2. The State Commission should have recognized that the case involved acts of fraud and misappropriation, which fell outside the policy coverage. Consequently, the Commission ought to have dismissed the Complaint on the grounds that such acts were not insurable events under the said policy.
3. The State Commission failed to acknowledge that the OP promptly attended to the claim by appointing a surveyor, who assessed the loss and submitted a report on 10.10.2014. Later, the OP offered Rs.1,00,000/- in full and final settlement of the claim. In light of these actions, there was no deficiency in service within the meaning of the Act, 1986.
4. The State Commission should have declared that the alleged misappropriation did not fall within the ambit of the insurance policy's coverage and dismissed the complaint.

11.    Upon notice of memo of appeal, the Respondent/Complainant filed their reply and appreciated the order of Ld. State Commission and prayed to dismiss the appeal as being devoid of merit.

12.    In his arguments, the learned counsel for the OP reiterated the reply before the State Commission and the grounds of Appeal. He asserted that the State Commission committed errors in interpreting several critical issues such as the pecuniary jurisdiction, territorial jurisdiction and the infidelity clause of the insurance policy, which limited the insurer's liability to Rs.1,00,000/- per loss. The State Commission should have recognized that the Appellant/ OP liability cannot exceed Rs.1,00,000. He further, argued that the Commission failed to appreciate that the terms of the insurance policy must be strictly construed. The State Commission failed to acknowledge its lack of territorial jurisdiction, given that the cause of action arose in Barshi, specifically at Dhage Mala, Opp. Matru Mandir, Kuruduwadi Road, Barshi (Maharashtra). Thus, the complaint should have been filed before the appropriate Commission with territorial jurisdiction. The complaint involved fraud and misappropriation by an employee of the Complainant, rather than infidelity as claimed. Therefore, the Commission ought to have dismissed the complaint. Even assuming it was a case of infidelity, the counsel argued that the Commission should have declared that pursuant to the letter dated 23.05.2014, the liability of OP was limited to Rs.1,00,000/- under the policy terms and conditions. The Commission erred in disregarding the Surveyor's Report, which is typically considered authoritative and should only be set aside for compelling reasons. The Surveyor, after reviewing all relevant materials, assessed the loss at Rs.1,00,000/-, that was rightly offered by the OP to the Complainant. He relied on the following judgments to support their contention:

A. Oriental Insurance Co. Vs Sony Cheriyan(AIR 1999 SC 3252)

B. United India Insurance Vs. M/s Harchand Rai Chandan Lal (JT 2004(8) SC 477)

C. Vikram Greentech (I) Ltd. Vs. New India Assurance Co. Ltd. ((2009) 5 SCC 599)

D. Oriental Insurance Company Vs Mehta Wool Store (2007) CPJ 317 (NC))

E. Sikka Papers Ltd. Vs. National Insurance Co. (2009) 7 SCC 777) f) BL Agarwal Vs National Insurance Co. Ltd (1992) NC)

13.    Per contra, the learned counsel for the complainant reiterated the facts from the complaint and argued that the OP noted the loss as Rs.19,18,786/-, and the insurance liability was erroneously limited to Rs.1,00,000/-. This restrictive interpretation was in contradiction to the terms of insurance contract providing cover for Rs.2,51,00,000. The policy term was from 20.05.2013 to 19.05.2014, applied to all transactions where cash was recovered, carried, and deposited into the insured's account. He argued that the OP’s assertion that the coverage was confined to Rs.1,00,000/- for a single transaction loss within a 48-hour period defeated the broader intent and purpose of the policy, undermining its effectiveness. They affirmed the findings of the State Commission with regard to jurisdiction, averring that the contention of lack of territorial jurisdiction was never raised by OP and that the Complainant's claim fell within the pecuniary jurisdiction. The State Commission rightly dismissed OP’s attempt to limit liability to Rs.1,00,000, as the losses resulting from the employee’s continued infidelity occurred over a period of time and were fully covered by the policy. The doctrine of contra proferentem was applicable, favouring their interpretation of the policy, supported by the rulings in United India Insurance Co. Ltd. v. Pushpalaya Printers, (2004) 3 SCC 694; National Insurance Co. Ltd. v. Ishar Das Madan Lal, (2007) 4 SCC 105; BHS Industries v. Export Credit Guarantee Corporation Ltd. & Anr. (2015) 9 SCC 414; and Manmohan Nanda v. United India Assurance Co. Ltd. (2022)4SCC582. He also relied upon Gurshinder Singh v. Shriram General Insurance Co. Ltd., (2020) 11 SCC 612 and Naramadaben Maganlal Thakker v. Pranjivandas Maganlal Thakker, (1997) 2 SCC 255. He further asserted that the fidelity insurance was intended to indemnify the insured against losses caused by employee dishonesty. A harmonious interpretation of the policy’s clauses, reflecting the parties' true intent, was required. Thus, he sought that the order of the Ld. State Commission be upheld.

14.    I have examined the pleadings and associated documents placed on record and rendered thoughtful consideration to the arguments advanced by learned counsels for both the parties.

15.    The main issues to be determined are two-fold. Firstly, whether the infidelity clause includes misappropriation of funds? Secondly, whether the infidelity clause of the insurance policy limits the insurer's liability to Rs.1,00,000/- only?

16.    It is undisputed that the fidelity guarantee insurance policy, obtained by the complainant, was in effect during the relevant period. Fidelity insurance covers honesty, protection against negligence, and ensures employees' faithfulness and loyalty. The coverage provided by such a policy is distinct from that of standard insurance policies. In Oriental Insurance Co. Ltd. v National Bulk Handling Corporation Pvt. Ltd., (2020) 3 SCALE 467, decided on 12.02.2020 the Hon’ble Supreme court explained the object of  fidelity insurance as follows:

“It is a contract whereby, for a consideration, one agrees to indemnify another, against loss, arising from the breach of honesty, integrity or fidelity of an employee or other person holding a position of trust. In Black’s Law Dictionary, fidelity insurance is explained as under:

“Fidelity Insurance- Form of insurance in which the insurer undertakes to guarantee the fidelity of an officer, agent or employee of the assured or rather to indemnify the latter for losses caused by dishonesty or a want of fidelity on the part of such person.”

As such, the insurance policy of fidelity guarantee is to be construed as a policy, intended to protect the assured against the contingency of a breach of fidelity on the part of a person in whom confidence has been placed.”

17.       Giving the above a purposive interpretation, it is clear that loss due to fraud or a misappropriation of funds by the person handling cash squarely falls within the insurance claim policy. Thus, I find no merit in the arguments of the OP that the policy in question does not include a misappropriation of funds by the employee, as such stand would defeat the very purpose of the policy. Further, it is undisputed that the surveyor appointed by OP, after thorough scrutiny of the insured's financial records, cash collection receipts, and related police reports, determined that the insured suffered a loss of Rs.19,18,786 due to the misappropriation by an employee over a period of time. OP acknowledged vide letter dated 06.01.2015, that the subject policy extended coverage up to Rs.1,00,000 for employee infidelity in cash handling, and issued a full and final settlement voucher. Thus, the OP cannot now contest non-production of documents regarding the terms of service of Mr. Haridas Mail, which were already reviewed and concluded by the surveyor. Further, the policy has no exclusion for fraud or misappropriation by employees handling cash. 

18.    As regards liability towards payment of claim, it is undisputed position that the complainant and the OP have entered into the subject insurance contract valid from 20.05.2013 to 19.05.2014, which included insurance against loss of money collected by and in the personal custody of the Insured or authorised employee/s of the Insured whilst in transit to the premises or bank within a period not exceeding 48 hours from the time of collection or vice-versa. The prescribed limit of any one loss was Rs.1,00,000.

19.    It is also undisputed position that the complainant vide letter dated 23.05.2014 notified the loss of Rs.19,18,786 cash due to infidelity of their employee Mr. Haridas Mali who was responsible for collection of money/cash of the company from the market and deposit the same in the Bank of Maharashtra (Barshi branch), and filed a claim for Fidelity Insurance under the subject policy. They also filed a complaint against the accused and notified the same to the insurer. On the claim being limited to Rs.1,00,000 while letter dated 06.01.2015 the complainant filed CC No. 67 of 2016 before State Commission contending that the discovery with respect to loss of Rs.19,18,786 was made during August 2013 in the course of internal audit carried out by the company. The said audit was carried out internally and periodically by the company, generally at the interval of 4 to 6 months to ensure that the correct trade outstanding in the market and reconcile the same. It is the assertion of the complainant that, as part of the internal audit the loss was detected. On ascertaining from Mr. Haridas, the person responsible for collecting the dues from the market, he admitted that of the amounts so collected, he used on an average Rs.20,000 to Rs.25,000 for his personal purposes, and deposited the balance in the complainant’s bank account. He thus showed infidelity and betrayal of trust. Mr. Haridas assured them that he would repay the money and had given an undertaking along with 6 post-dated cheques drawn on IDBI Bank valid till 12.02.2014. With the hope of recovery of loss based on his undertaking, they gave him another chance on humanitarian grounds. However, he failed to do so and the cheques issued by him were dishonored. Thereafter, they filed an FIR and informed the insurer vide letter dated 23.05.2014. Therefore, Rs.19,18,786 loss to the complainant due to infidelity of Mr. Haridas Mali is undisputed. This occasioned during March to August 2013 and was detected during an internal audit in August 2013. Thereafter, the complainant adopted certain process to recover the amount from Mr. Haridas Mali. On failure of the same, an FIR was filed and a claim for Rs.19,18,786 under the said policy was preferred.

20.    Admittedly, the complainant obtained infidelity insurance cover with respect to the cash that is to be recovered from the market and Mr. Haridas Mali is one such individual who engaged for collection of cash from the market and depositing either with the complainant or in the complainant’s Bank account. The main issue to be determined is whether such loss allegedly occasioned to the complainant on account of infidelity of Mr. Haridas Mali is within the scope of the contract entered into between the parties? And if so, what is the extent of liability of the insurer/OP in this regard?

21.    It is an uncontested position that the alleged loss occasioned during March 2013 to August 2013. Thereafter, certain steps to recover the amount from Shri Haridas were taken by them and, in the absence of fruitful results, the loss was reported on 20.05.2014 to the insurer/OP. It is also the admitted position of the complainant that the said Mr. Haridas Mali had been regularly collecting the cash payable to the complainant from the market and short deposited the same in the account to the extent of Rs.20,000 - 25,000 from such daily cash collections and used for personal purposes.

22.    Section 1C of the Insurance Policy dated 27.11.2014 provides insurance cover for money (other than described in 1A and 1B) collected by and in the personal custody of the Insured or authorised employee/s of the Insured whilst in transit to the premises or bank within a period not exceeding 48 hours from the time of collection or vice-versa. The prescribed limit of any one loss was Rs.1,00,000. It is the contention of the complainant that these transaction have occasioned from March 2013 to August 2013 and the cumulative loss was to the extent of Rs.19,18,786 and the entire amount is within the scope of the policy. However, it is clear that from the policy itself that the limit of any one loss with respect to Section 1C is Rs.1,00,000. And further, such loss ought to be reported within a period not exceeding 48 hours.

23.    It is the claim of the complainant that there has been multiple losses which accumulated to Rs.19,18,786 over a period of time. Admittedly, this cash loss was discovered during internal audit of the complainant firm. Clearly, it is a choice of the complainant to choose such a policy and seek protection against infidelity of employees to the extent desired. The complainant chose a limit of Rs.1,00,000 per transaction. At the same time, such loss shall be reported to the OP within 48 hours. Admittedly, the loss occasioned over a period of six months in multiple transactions, averaging between Rs.20,000 to Rs.25,000 from the cash collections, allegedly by Mr. Haridas Mali. There is a failure on the part of the complainant in exercising such reasonable care with respect to the insured cash and discover the loss in time and report within the time prescribed in the policy. Citing the ground of internal audit being conducted once in six months and thus the discovery of cash loss was made six months later is not only untenable but also verges to negligence in taking reasonable steps in securing the insured cash. It was in fact incumbent on the complainant to discover the loss within reasonable time. Failure to detect short depositing of cash, while being aware of the amount due to be collected from the market and the amount that was actually deposited in the Bank, which could have been easily done, cannot be a ground for belated reporting of loss. At the same time, the policy sought and obtained by the complainant limits the cover to Rs.1,00,000 per loss transaction, which shall be reported within a period of 48 hours. If the same individual is allowed to misappropriate cash repeatedly, as has been done, it again verges to negligence on part of the complainant in not taking adequate care of cash insured.

24.    The learned counsel for the complainant also vehemently argued that there is ambiguity with respect to terms of contract and, therefore, ambiguity shall be presumed in favor of the complainant. Such argument is untenable because the policy is very clear with respect to the contingency of loss, time duration within which it is to be reported and the maximum cover allowed. It is the prerogative of the complainant who sought and obtained the present insurance policy, with the limit of Rs.1,00,000 per one loss. The complainant had chosen the policy as envisaged with open eyes and paid premium. The OPs cannot be made liable to provide for insurance cover for which no premium is paid. Therefore, after due consideration of the entire facts and circumstances of the case the stand of the insurer to accept the claim and limit the payment to Rs.1,00,000 is fair and appropriate, while admittedly the loss per transaction was only between Rs.20,000 - Rs.25,000.

25.       In view of the aforesaid discussions, the learned State Commission erred in appreciating the scope of the policy and presuming the cumulative liability on the opposite party/insurer. Therefore, the order of learned State Commission dated 16.11.2017 is set aside and the Appeal No. 361 of 2018 is allowed.

26.    There shall be no order as to costs.

27.    All pending Applications, if any, also stand disposed of accordingly.