BEFORE THE KARNATAKA STATE CONSUMER DISPUTES REDRESSAL COMMISSION, BANGALORE. (ADDL. BENCH)

DATED THIS THE 25^th DAY OF JULY, 2023

PRESENT

SRI RAVI SHANKAR, JUDICIAL MEMBER

SMT. SUNITA C.BAGEWADI, LADY MEMBER

CONSUMER COMPLAINT NO.498/2017

Mr.S.M.Prakash

S/o Mahadeva Swamy,                                  … Complainant/s

Proprietor of M/s. Chethan

Industries, Arkalgud Fort,

Hassan Road, Arkalgud

Hassan District – 573 201

(By Sri.P.P.Jayakumara, Advocate)

V/s

1.      The Manager,

          Union Bank of India,

          Gorur branch, Gorur,

          Hassan District

.. Respondent/s

2.      The Branch Manager,

          The New India Assurance Co.Ltd,

          Branch office: Chandan complex,

          Harshamahal Road, Hassan City,

          Hassan District – 573 201

(OP No.1-By Sri.Sathyanarayana, Advocate)  

(OP No.2- By Sri.C.R.Ravishankar, Advocate)

O R D E R

BY SRI.RAVISHANKAR, JUDICIAL MEMBER

This complaint is filed by the complainant against the Opposite Party Nos.1 to 2 alleging deficiency in service in not settling the claim towards loss suffered to the small scale industry due to fire and prayed for compensation to the tune of Rs.40.00 lakhs and litigation cost of Rs.10,000/-, in the interest of justice and equity.

2. The brief fact of the complaint is that the complainant in order to start his Micro and Small Enterprises had approached the 1^st Opposite Party for financial assistance to the tune of Rs.1.00 crores. The complainant intended to establish production of paper cups, paper plates and other products. He made an application on 27-12-2012 with the 1^st Opposite Party for loan by providing required documents. Upon the request and receipt of the documents, the 1^st Opposite Party assured to provide a loan to the tune of Rs.1.00 crores. Anyhow the 1^st Opposite Party had not sanctioned the entire loan but partly sanctioned the loan. At the time of sanction of the loan at the instance of the 1^st Opposite Party, he insured the said factory premises with the 2^nd Opposite Party by covering the risk of fire and other perils vide policy bearing No.67240111150100000124, he paid an amount of Rs.18,930/- towards premium, the assured  amount of Rs.1,17,00,000/-. After receipt of the premium, the 2^nd Opposite Party issued the above said policy, which is valid from 23-7-2015 to 22-07-2016. The complainant after receipt of the loan amount and established by spending his own money and developed the industry. He had purchased flat printing machine, paper cup making machine, paper plat making machine, stabilizer, Air compressor, UPS computer and other equipments, hoping the 1^st Opposite Party is going to sanction a remaining loan amount. Such being the case, he received information that on 21-9-2015 the said industry set ablaze at 5.30 a.m. On account of this, the entire industry was burnt and the entire machinery and other equipments were damaged. The same was immediately reported to the 1^st Opposite Party and the police complaint was also given to the Arkalgud police station. The complainant has also informed the KEB, Arkalgud Sub-division to report the incident.  

The complainant further alleged that due to fire incident non over fabrics, paper cup materials, 10 can printing inks, ready materials, bags, bag making machine, ultra sonic swearing machine cum making machine, stabilizer and electrical penal board and entire building were burnt causing considerable loss. The report of the Asst. Executive Engineer, KEB Arkalgud is also substantiated the true facts. The said officials have reported the fire incident took place on account of short circuit in the power, after incident Fire Brigade Force had also rushed to the spot and extinguished the fire and the same was reported accordingly.

The complainant being insured with the 2^nd Opposite Party had claimed for compensation by virtue of the policy through the 1^st Opposite Party. After receipt of the claim form, the 2^nd Opposite Party has repudiated the claim   without any reason; hence the Opposite Parties no.1 and 2 have rendered deficiency in service in not settling the claim. The complainant had suffered financially and mentally due to fire accident, he was unable to repay the loan due to fire accident. The 1^st Opposite Party has started recovery of the loan and further they have proceeded to file a recovery proceeding before the Debts Recovery Tribunal vide O.A.No.217/2017. The complainant was not able to pay the loan due to fire, the 2^nd Opposite Party being indemnified the entire industry is liable to pay the loss, but instead of settling the claim, the 2^nd Opposite Party repudiated the claim which amounts to deficiency in service. The Opposite Parties are liable to pay compensation to the tune of Rs.40.00 lakhs. Hence, prays for a direction against the Opposite Parties no.1 and 2 to pay the compensation as prayed above, in the interest of justice and equity.       

3. After service of notice, the Opposite Party Nos.1 and 2 have appeared through their counsel and filed separate version.

4. The 1^st Opposite Party in his version has contended that, the complaint is not maintainable before this commission. Admittedly, the insurance policy is obtained for “Commercial Purpose” and in this regard the Hon’ble National Commission has held that any dispute with respect to commercial transaction is not maintainable in ground the complaint is liable to be dismissed.

The complainant has not approached this commission with clean hands and he has suppressed several material and vital facts and he is not entitled to get any amount as claimed as damages and compensation for deficiency in service on the part of this Opposite Party. There is no any deficiency in service on the part of this Opposite Party. The complainant has filed this complaint with a malice intention only to avoid the payment of the loan liability to this Opposite Party. This Opposite Party has already filed a suit in O.A.No.217/2017 before Debts Recovery Tribunal, Bengaluru for recovery of Rs.53,49,395/- together with interest dues if any. The complainant in order to avoid the said liability and filed this false complaint and hence prays for dismissal of the complaint.

The 1^st Opposite Party further contended that, they have sanctioned a term loan of Rs.30.00 lakhs and cash credit of Rs.12.00 lakhs to him on the terms and conditions as stipulated in the credit sanction intimation dated 18.4.2013. The complainant agreed to the same and had acknowledged the said credit sanction intimation, then only availed the said facilities from this Opposite Party. The plant, machineries and other equipments are hypothecated to the bank as well as the property was mortgaged to this Opposite Party bank towards the said loan. To safeguard the interest of both borrower and banker, this Opposite Party has insisted for insurance in order to cover the risk accordingly the complainant obtained the insurance policy from the 2^nd Opposite Party.

This Opposite Party further contended on 21-9-2015 the complainant reported that there was a fire and due to fire the stocks were burnt etc. On receipt of the said information this Opposite Party sincerely and promptly made a claim with the 2^nd Opposite Party while processing the said claim, the 2^nd Opposite Party made a detailed investigation and found that the fire was not due to short circuit and the complainant falsely claiming the compensation without any reasons, for which the 2^nd Opposite Party has repudiated the claim.

The 1^st Opposite Party further contended that this Opposite Party has promptly intimated to the 2^nd Opposite Party on 6-10-2015 upon the intimation, the 2^nd Opposite Party has appointed a surveyor, he had visited the spot on 14-11-2015 and give a detailed report including the cause of fire. Basing on the said report, the 2^nd Opposite Party had repudiated the claim. Therefore, there is no any liability cast upon them to pay any compensation as claimed by the complainant as there is no any deficiency in service. Hence, prays for dismissal of the complaint against them.    

5.  The 2^nd Opposite Party in his version has contended that, they have issued a policy bearing No.672401111 50100000124 for a period from 23-7-2015 to 22-7-2016 covering the risk with respect to building, super structure, plant, machinery and accessories, stocks and stocks in process for the total sum of Rs.1.17 crores by collecting the necessary premium. The insurance policy was issued under certain terms and conditions and also limitations stipulated in the insurance policy, the said terms and conditions and limitation are all binding upon both the complainant and this Opposite Party.

The 2^nd Opposite Party further contended that they have received information that M/s. Chethan Industry, Hassan Road, Arkalgud had a fire accident and damages were caused the plant, machinery and stocks were damages and claim form with certain documents were also submitted to this Opposite Party for settlement of the claim in terms of insurance policy.

The 2^nd Opposite Party further contended that on receipt of the claim of fire accident this Opposite Party took up personal investigation through Mr.Srinivas, Bengaluru an IRDA approved investigator who visited the spot, conducted detailed enquiry survey and spot inspection and submitted detailed report. The surveyor has opined that the fire accident was not due to electrical short circuit. Even as per the report of the electrical inspector dated 16-1-2016 there was no short circuit in the electrical installations, the MCC fuse, cut out is in good condition. The Surveyor further made observation that when there was no short circuit the fire must have originated from the top of the machinery, the short circuit cannot take place simultaneously at many places, the factory was closed and that no person will go home sleep by switching on the machinery. There was no much damages caused to the building, except smoke effect as a result of fire, there was no spreading of fire, there was no damage to the building, plant, machinery and stocks.  The further enquiry and investigations made by the investigator revealed that;

• The Opposite Party no.1 Corporation Bank, Gorur Branch, Hassan sanctioned loan for machinery and raw materials to the complainant on 18-4-2013 in a sum of Rs.30.00 lakhs for machinery and Rs.5.00 lakhs for raw materials.
• The complainant is a technician, conducting ITI training centre in the first floor building with an electrical lab and also having his residence, he is well versed in the electrical circuit and system.;
• The machineries installed were all of China make, supplied from Gujarat, there is no service provider;
• The Opposite Party no.1 Corporation Bank financed the industry of the complainant, after installation of machinery, the complainant started the manufacturing the variety of bags, rejections were more and the complainant could not sell the manufactured items;
• The complainant had not paid the loan installments and also interest to bank for several months and the loan account had become non-operative.
• There was only minimum stock, there was no production activity, no purchasers of the products, no sales and no stock of materials;
• The factory unit was almost closed, but reported to be operating for few days with 3 labours.
• The activities of the factory was a one man show of the complainant;
• The super structure has not been plastered.
• The complainant is not financially sound, he was not doing business, interest on loan was accumulating, he was unable to pay interest on the loan to the bank.

6. In the above background the investigator has given opined that the complainant himself has advocated the fire, as the fire was not continuous and only partial damage is caused, the adjacent portions are absolutely sound. On the basis of the said detailed report, the claim of the complainant comes under exclusion clause of the insurance policy and this OP no.2 has repudiated the claim. The repudiation made by this Opposite Party no.2 is basing on the report given by Electrical Inspector and surveyor. Hence, there is no deficiency in service on the part of this Opposite Party no.2. The complainant had filed this complaint to gain wrongfully, hence prays for dismissal of the complaint.      

7. The complainant filed affidavit evidence and marked documents as Exs.C1 to C18.  The Opposite Party No.1 and 2 did not come forwarded to file any affidavits in support of their defence.

8.      Heard.

9. On perusal, the following points will arise for our consideration;

(1)     Whether the complainant has proved deficiency in service on the part of Opposite Parties?

(2)     Whether the complainant is entitled to the reliefs as sought?

(3)     What Order?

10. The findings to the above points are;

                   (1)     In the affirmative

                   (2)     In the affirmative

(3)     As per final Order.

R E A S O N S

Point Nos. (1) & (2):

11. On perusal of the pleadings, affidavit evidence and documents produced by the complainant, there is no dispute that, the complainant established on small scale industry called M/s. Chethan Industries, Hassan Road, Arkalgud city to produce paper plates, paper cups and other items by availing a loan from the 1^st Opposite Party bank, the 1^st Opposite Party bank sanctioned a loan to the tune of Rs.30.00 lakhs and provided cash credit to the tune of Rs.12.00 lakhs. After obtaining the loan, it is not in dispute that, the complainant had obtained insurance policy covering the risk of firing and other occurrence from the 2^nd Opposite Party vide policy bearing No.67240111501000000124 which is valid from 23-7-2015 to 22-07-2016, during the policy in force, the said industry caught fire on 21-9-2015 at about 5.30 a.m. immediately upon the information given by the neighbour, the complainant informed the police and electrical departments for immediate action. Accordingly, the fire extinguished by Fire Brigade Force department. After that the KEB officials also inspected the spot and given a report. There afterwards being policy holder the complainant claimed for compensation towards the loss due to fire.

12. The Opposite Party no.2 after receipt of the claim appointed one surveyor called Srinivas from Bengaluru who is an IRDA approved surveyor. The said surveyor after inspection of the spot had given report that the fire was not due to electrical short circuit and it is man-made incident and submitted a report suggesting not to pay the any compensation. Basing on the said report, the Opposite Parties have repudiated the claim of the complainant. We noticed here that, the Opposite Parties No.1 and 2 have not filed any affidavit in support of their defence, the 2^nd Opposite Party being the insurer not produced any materials in support of their defence. Survey report was not produced before this Commission for perusal. Mere denial through their repudiation letter is not sufficient to consider the complainant is not entitled to get any compensation.

13. On the other hand, the complainant had produced the policy copy marked as Ex.C1, premium receipt marked as Ex.C2, loan sanction letter marked as Ex.C3, application for credit facilities marked as Ex.C4, Credit sanction intimation letter marked as Ex.C5, Police acknowledgement marked as Ex.C6, spot mahazar of Fire Brigade Force marked as Ex.C7, legal notice of complainant marked as Exs.C8 and C9, repudiation latter of Opposite Party No.2 marked as Ex.C10, Postal acknowledgment receipts marked as Exs.C11 and C12, Reply notice  marked as Ex.C13, postal acknowledge receipt marked as Ex.C14, legal notice of complainant marked as Ex.C15, letter of Opposite Party no.2 marked as Ex.16, surveyor letter dated 14-11-2015 marked as Ex.C17 and Opposite Party no.2 reply letter dated 30-5-2017 marked as Ex.C18 to establish his case.

14. It is an admitted fact that, the industry of the complainant damaged due to fire, the cause of fire was not known to the 2^nd Opposite Party. The Electrical Inspector has given report stating that the said fire was not due to any electrical short circuit and admits that the fire was caught to the entire industrial premises along with machinery and other equipments etc. The policy issued by the 2^nd Opposite Party cover the fire accident it does not mention the said fire accident shall be by only electrical short circuit. The insurance policy covers the risk of fire may be for any other reasons. Though the fire was not due to short circuit it may be for some other reasons, but when the fire accident is covered.

15. The 2^nd Opposite Party being indemnify is liable to indemnify the loss suffered by the complainant. Merely basing the report the fire was not caused by short circuit, the 2^nd Opposite Party has repudiated the claim which according to us definitely amounts a deficiency in service. The 2^nd Opposite Party ought to settle the claim, instead of that had repudiated the claim on flimsy grounds. The complainant is entitled to get the compensation towards loss suffered. Further a claim of Rs.40.00 lakhs was not challenged by the 2^nd Opposite Party, they have not chosen to file any affidavit or any documents before this commission except filing version. Therefore, we are of the opinion that, the complainant is entitled to get compensation as claimed in the complaint to the tune of Rs.40.00 lakhs. As such the complaint is allowed against the 2^nd Opposite Party.

16. The complaint against the 1^st Opposite Party is liable to be dismissed that they are only a financier and provided a loan to establish the industry. There is no any with respect to the claim made by the complainant towards loss due to fire. As such the complaint against the 1^st Opposite Party is liable to be dismissed.   Accordingly, proceed to pass the following:- 

O R D E R

The complaint is allowed with cost of Rs.25,000/-

The 2^nd Opposite Party is directed to pay compensation of Rs.40.00 lakhs towards loss suffered due to fire accident to the complainant.   Further the 2^nd Opposite Party is directed to pay compensation of Rs.2.00 lakhs towards deficiency of service to the complainant

Further the 2^nd Opposite Party is directed to comply the above order within 30 days from the date of receipt of this order.  Failing which, the payable amount shall carry interest @9% p.a. from the date of default till realization. 

The complaint filed against the 1^st Opposite Party is dismissed.

Send a copy of this order to both parties.

Lady Member                                             Judicial Member

Jrk/-