Dr. SADHNA SHANKER, MEMBER

1.       The present appeal has been filed under Section 19 of the Consumer Protection Act, 1986 (for short “the Act”) by M/s Agarwal Ginning & Pressing Pvt. Ltd. (hereinafter referred to as the ‘complainant’) assailing the Order dated 30.06.2014 passed by the State Consumer Disputes Redressal Commission, Maharashtra (hereinafter referred to as the “State Commission”) in complaint No. 21 of 2011 whereby the complaint was dismissed.

2.       We have heard the learned counsel for the appellant – complainant and the learned counsel for the respondent (hereinafter referred to as the ‘insurance company’) and perused the record including inter alia the Order dated 30.06.2014 of the State Commission and the memorandum of appeal.

3.       This Commission, vide its order dated 14.10.2014, had condoned the delay of 37 days in filing the appeal.

4.       The facts, in brief, of the case are that the complainant, who is engaged in the business of cotton ginning, pressing and related trading, obtained an insurance policy for the sum insured of Rs. 3,00,00,000/- from the insurance company for the period from 03.12.2009 to 02.05.2010. It is alleged that the complainant, vide communication letter dated 02.11.2009, had appointed the respondent no. 2 – M/s Sachin’s Lifestyle Insurance Brokers Pvt. Ltd. (hereinafter referred to as the ‘insurance broker’) as its ‘direct insurance broker’ for getting competitive insurance deals and was authorised to negotiate with the insurance companies, get the competitive premium quote, to pay insurance premium and get it reimbursed after making available the copy of the insurance policy. It is further submitted that the complainant got two insurance policies from other two insurance companies i.e. Oriental Insurance Company Ltd. for the sum insured of Rs. 1,00,00,000/- covering the period from 04.01.2009 to 03.05.2010 and from United India Insurance Company Ltd. for sum insured of Rs. 1,00,00,000/- for the period from 24.11.2009 to 23.04.2010. It is alleged that all three insurance policies from three different companies including the insurance company were obtained by the insurance broker to cover the risk of stock of cotton from the said Ginning and Processing Factory.  It is alleged that in order to obtain the insurance policy in question the complainant had instructed the insurance broker for obtaining the policy covering the risk of Rs.3,00,00,000/- on 03.12.2009. Accordingly, the insurance broker had finalized the proposal with the insurance company through FAX as well as email on 03.12.2009 and the physical copy of the proposal form, without the signature of the complainant, was handed over in the office of insurance company by insurance broker on 04.12.2009. It is further submitted that the insurance broker had maintained CD account with insurance company for debiting the premium amount. However, due to technical error, the premium could not be debited from CD account and therefore, on the instruction of the insurance company, the amount of premium of Rs. 1,18,009/- was paid through the cheque and accordingly, the policy was issued for the period from 03.12.2009 to 02.05.2010. It is further alleged that on 04.12.2009 at about 11.45 a.m., a fire was noticed to the stock of the raw cotton and immediately necessary arrangement for extinguishing the said fire was made. The fire brigade of the Municipal Council Pandharkawada and also fire fighter from Yavatmal and Wani were called and after a lot of efforts, the fire was under control at 5.15 p.m. The police from Pandharkawada had recorded the incident of fire at serial no. 29 dated 04.12.2009 and prepared panchanama. The insurance company was informed about the said fire and was asked to take steps for submitting the claim intimation to the insurance company. Upon receiving the intimation of the said incident, the insurance company appointed a preliminary surveyor, who submitted the preliminary survey report on 30.12.2009. The final surveyor submitted the final report on 23.10.2010, who assessed the net loss to the tune of Rs. 70,25,680/-. The insurance company vide its letter dated 04.11.2010 had repudiated the claim.

5.       Being aggrieved by the repudiation made by the insurance company, the complainant filed a complaint before the State Commission alleging deficiency in service and claiming an amount of Rs.50,21,035/- along with interest @ 18% per annum from the date of loss i.e. 04.12.2009 till realization and further claiming a compensation of Rs. 5,00,000/- towards deficiency in service and Rs.50,000/- towards cost. 

6.       The State Commission, vide its order dated 30.06.2014, dismissed the complaint observing that the policy in question could not be treated as valid contract between the complainant and the insurance company and the complainant cannot be considered as entitled for the claim under the said policy.

7.       Being aggrieved by the impugned order dated 30.06.2014 of the State Commission, the complainant has filed the present appeal before this Commission.

8.    Before us, learned counsel for the complainant argued that it is not in dispute that the policy in question was issued without any protest and demur and at the time of submission of the proposal form and as per general business practice, the insurance company was maintaining CD account of insurance broker and used to maintain the advance amount received from insurance broker. It is further submitted that as there was a problem in accessing such CD account of the insurance broker, and therefore as a general trade practice it was advised by insurance company to issue a personal cheque when he was already in receipt of premium amount from the complainant. It is further alleged that the valid insurance policy was issued in the name of the complainant after accepting the proposal form and cheque. Therefore, the repudiation made by the insurance company on the grounds mentioned in the repudiation letter is illegal, false and frivolous.

9.       Further, it is argued that it is not in dispute that insurance company was in receipt of duly completed proposal form on 03.12.2009 vide Fax and email and the insurance company issued policy for the period from 03.12.2009 at 12.55 to 02.05.2010 midnight on 04.12.2009 and as per the instruction of the insurance company, the fresh cheque bearing no.966090 dated 03.12.2009 towards premium was tendered. Accordingly the insurance policy was generated in the name of the complainant and it was handed over to the insurance broker at about 11:00 am. It is further argued that since the insurance policy was issued by insurance  company, hence, it is estopped from raising an objection i.e. that the cheque was issued by the broker on 04.12.2009 which is back dated and hence it cannot be considered for affecting the insurance claim from 03.12.2009, especially when the same was carried out as per the instructions of insurance company.

10.     Further, it was argued that the insurance company has taken the shelter of Section 64VB by wholly misinterpreting it. On a bare perusal of the section, it becomes evident that once the payment is made, i.e. in cash or promised to be made i.e. vide cheque or money order, the risk may be assumed. The insurance company has stated that the cheque reached the scroll at about 1.44 p.m. on 4.12.2009 and hence the policy cannot be affected from 03.12.2009 whereas the necessary details required for generating insurance policy were already filled in the system on 03.12.2009. It is put on record by the complainant that the scroll date is 3.12.2009 which itself falsifies the claim raised by the insurance company and only the change of instrument regarding payment of premium was effected in the scroll at the time of issuing the policy on 04.12.2009. The copy of the scroll is placed on record along with the copy of complaint. Thereafter, the insurance policy was issued for the period from 03.12.2009 to 02.05.2010 at about 11:00 a.m.

11.     Further, it was submitted that the contract of insurance was concluded by the payment of premium and as aforementioned the policy was issued by 11 am before the time when the fire broke out, the complainant was fully covered by the insurance policy. The insurance company is estopped from raising the grounds as the same were not objected to at the time of issuance of policy and were advised by the officers of insurance company.

12.   Further, it was argued that as per Regulation 2(1)(e) of Insurance Regulatory and Development Authority (Insurance Brokers) Regulation 2002, which specifically defines ‘direct broker’, the insurance broker was direct broker as per license by the IRDA and the Regulation 3 of said Regulation clearly provides ‘Functions of a direct broker’ which authorises the insurance broker to do all activities on behalf of client including negotiation of premium, payment of amount, submission of proposal and required documents etc. Hence, the question of insurable interest does not arise in present case as the insurance broker  being direct broker is always statutorily empowered to make the payment of premium. Even otherwise, the insurance company has never objected to the procedure adopted by the insurance broker. The documents on record i.e. account statement of broker along with details of various insurance policies issued at the instance of insurance broker are placed on record. It shows that the insurance company has issued several insurance policies by accepting the insurance premium through insurance broker.

13.     Further, it is argued that the preliminary surveyor undertook the preliminary survey from 05.12.2009 to 07.12.2009 and after the enquiry with various authorities and local persons, he submitted his preliminary survey report. The survey report specifically confirmed the occurrence of fire at 11:30 a.m. on 04.12.2009, which is based on enquiry with police officers, revenue officers as well as fire fighters from Wani & Yavatmal. The panchnama was also prepared in respect of the incident by police officers, therefore it is not in dispute that the loss is caused on account of fire that took place at about 11:30 to 11:45 am on 04.12.2009 after the policy is issued.

14.     Further, the final survey/loss assessment report assessing the loss to the tune of Rs. 70,25,680/- was submitted by surveyor on 20.01.2010. He apportioned the liability of the insurance companies in proportion of the insurance cover under respective policies. The liability of insurance company being 50% as against insurance cover of Rs.3,00,00,000/- is assessed to Rs.35,12,840/-, the liability of United India Insurance Company is assessed to Rs.23,43,361.71 i.e. 33.34% of total loss as against the insurance cover of Rs.2,00,00,000/- whereas the liability of Oriental Insurance Company is assessed to Rs.11,70,478.29 i.e. 16.66% of total loss as against the insurance cover of Rs.1,00,00,000/-. Therefore, the say of the insurance company that there was no insurance cover at the time of fire, particularly when the insurance contract was concluded and the insurance policy shows the period of insurance cover including the time of loss, is incorrect.

15.     The learned counsel for the insurance company rebutted the claims made by the complainants and argued that  the unsigned proposal form of the policy was sent via Fax and E-Mail to the insurance company by insurance broker on 03.12.2009 at 08:05p.m., i.e. after the working hours were over. It was further submitted that the insurance broker had affected the insurance policy himself, that too after being aware of the afore stated incident of fire. Also, the physical proposal form submitted by insurance broker at the insurance company's office on 04.12.2009 was not signed by the complainant.

16.  Further, it was argued that the cheque issued for the payment of the premium was post-dated i.e. 04.12.2009, while the proposal form was submitted on 03.12.2009. Hence, the cheque was not received by the insurance company by the time the incident of fire took place i.e. at about 11:00 a.m. against which the claim has been raised by the complainant.  Further, the scroll entry for the cheque received against the premium of the policy was made at 01:44 p.m. on 04.12.2009 by the insurance company while the alleged incident had already taken place at about 11:00 am on the same day and the said entry was made in the name of insurance broker and not the complainant. It is pertinent to note that the entry made in the log book of the fire brigade clearly mentions the date of the incident as 03.12.2009. However, the same has been overwritten as 04.12.2009.

17.     Further, it was argued that the complainant had availed two more policies from 04.11.2009 to 03.05.2010 and 24.11.2009 to 23.04.2010 from Oriental Insurance Co. Ltd. and United India Insurance Co. Ltd. for Rs.1 crore and 2 crores respectively. These Proposals were duly signed and submitted by the complainant. However, the instant proposal submitted was unsigned and submitted without the consent of the complainant. The premium cheque was also issued by the insurance broker from his own account in the name of the insurance company which is a third party cheque and issued by a party having no insurable interest in the insured property other than the commission receivable through the instant transaction. 

18.     Further, it was submitted that State Commission vide order dated 30.06.2014 rightly concluded that the premium received by the insurance company was post receiving the intimation about the incident of fire, hence, a claim instituted prior to the receipt of the premium cannot be accepted under the provisions of Section 64 VB of the Insurance Act, 1938.

19.   Upon careful consideration of the facts and the evidence available on record, it is seen that the insurance company repudiated the claim of the complainant on four grounds. The repudiation letter of the Insurance Company is produced as under:

“1) Proposal for insurance was not submitted by you. The unsigned proposal was submitted by broker M/s Sachin Lifestyle Insurance Broker Pvt Ltd without your consent.

2) The premium cheque was also issued by the broker from his own account in the name of National Insurance Company Limited which is a third party cheque and does not have any insurable interest in the property of M/s Agrawal Ginning and Pressing Factory Pvt Ltd, other than the commission to be paid by us.

3) The client has not proposed for insurance as well as not paid the premium and hence the contract of insurance is not effected.

4) It is clear that the cheque was issued by the broker on 04.12.2009 which is back dated and hence it cannot be considered for affecting the insurance from 3-12-2009.”

First ground for repudiation was that the proposal for insurance was not submitted by the complainant. The unsigned proposal was submitted by insurance broker without the complainant’s consent. It is an admitted fact that the proposal form was unsigned, but that it was submitted without complainant’s consent cannot be accepted as the insurance company has not produced any evidence to prove this contention. So the insurance company cannot work on assumption without any evidence that the consent was not taken. Therefore, this limb of the repudiation does not hold good ground.

20.     The second ground for repudiation is that the premium cheque was also issued by the broker from his own account in the name of National Insurance Company Limited. This represents a third party cheque and does not have any insurable interest in the property of the complainant other than commission to be paid. It is evident from the record that the cheque in question was from the personal account of the broker. It has been argued that he is a “direct broker” as per license by IRDA and under the Insurance Regulatory and Development Authority (Insurance Brokers) Regulation 2002, the direct broker can do all activities on behalf of client including negotiation of premium, payment of amount, submission of proposal and required documents etc. hence, the question of insurable interest does not arise in the present case as the insurance broker, being direct broker, is always statutorily empowered to make the payment of premium.  However, it is seen that the procedure for payments from the direct broker that was adopted was through his CD account. It is the contention that the said CD account was not working and the broker was advised by the Insurance Company to give a cheque from his personal account. However, the State Commission in its order has recorded that two cheques bearing no. 966083 dated 02.12.2009 and 966089 dated 03.12.2009, each amounting to Rs.1,00,000/- were deposited in the CD account of the broker with the insurance company and it has recorded the finding as under:

“Therefore the contention of the complainant and also of the broker that due to technical difficulty the amount of premium was not debited against the CD account, cannot be sustained and hence not accepted.”

21.     This finding has not been controverted at any stage. Hence, it is clear that the payment was made by the broker not in the normal course of his business through his CD account but through a personal cheque which amounts to third-party payment and there is no privity of contract between the insurance broker and the insurance company and he has no insurable interest in the property of the complainant i.e., the insured. Therefore, this ground of repudiation is sustained.

22.  The third ground of repudiation flows from second ground. In this case the payment has been made by a third party and therefore there is no contract between the complainant and the insurance company. Hence, in absence of any valid insurance contract, no question of liability on the part of the insurance company arises.

23.     As regards ground no. 4 in the repudiation letter, it is clear that there is no valid insurance contract, hence, no question of date of contract retains any relevance.

24.  It is seen from the order of the State Commission that the State Commission has taken cognizance of the Insurance Company’s investigation report that the policy in question was obtained fraudulently by the complainant in collusion with the insurance broker. It is a settled principle of law that the insurance companies cannot go beyond the grounds stated in repudiation letter, therefore, any information that came to the insurance company after its repudiation letter is of no relevance here.

25.     It is seen from the transactions that ground no.2 and 3 of the repudiation are borne out from the record and there is no privity of a concluded insurance contract between the complainant and Insurance company. Therefore, the repudiation made by the insurance company on the ground that the premium cheque issued by the insurance broker is third party cheque and does not have any insurable interest in the property of M/s Agrawal Ginning and Pressing Factory Pvt. Ltd. and that the client had not proposed for insurance as well as not paid the premium and hence the contract of insurance is not effected, is correct and is sustained.

26.     In view of the above discussion, we are of the opinion that the State Commission has passed a well-reasoned order and the same is upheld.

27.  Accordingly, the first appeal, being without merit, is dismissed. All pending applications, if any, stand disposed of.