TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 1577
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....IAL LEAVE PETITION (CIVIL) NO. 25343-25349 OF 2018), CIVIL APPEAL NO. 1134-1203 OF 2020(@SPECIAL LEAVE PETITION (CIVIL) NO. 31449-31518 OF 2018) NAZEER, S. ABDUL AND GUPTA, DEEPAK, JJ. JUDGMENT Deepak Gupta, J. Leave granted. 2. All these appeals are being decided by one common judgment since they arise out of a common order dated 08.06.2018 of the National Consumer Disputes Redressal Commission, New Delhi, hereinafter referred to as 'the National Commission'. 3. Briefly stated the facts of the case are that most of the claimants, hereinafter referred to as 'the farmers', had grown Byadgi Chilli Crop during the year 2012-2013. Some of the farmers had some other crops. These farmers had stored their agricultural produce in a cold store run by a partnership firm under the name and style of Sreedevi Cold Storage, hereinafter referred to as 'the cold store'. These farmers also obtained loans from Canara Bank, hereinafter referred to as 'the Bank'. The loan was advanced by the Bank to each one of the farmers on security of the agricultural produce stored in the cold store. The cold store was insured with the United India Insurance Company Limited, hereinafter referred to as 'the ....
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....ed, the value thereof and also the date of the tripartite agreement. For the period in question i.e. from 2012-2013 till the occurrence of fire, the cold store was admittedly insured with the insurance company. The plant and machinery of the cold store was insured for Rs. 5 crores and the stocks were insured for Rs. 30 crores. 6. The case of the farmers was that in terms of the tripartite agreement, the cold store had got the stocks insured from the insurance company. The fire was an accidental fire and, therefore, in terms of the policy, the insurance company was liable to pay the amount of value of the agricultural produce stored with the cold store as on the date of fire and was also liable to pay interest on the amount payable. The insurance company resisted the complaint mainly on the ground that the 'farmers' were not 'consumers' within the meaning of Consumer Protection Act, 1986, hereinafter referred to as 'the Act'. It was also claimed that there was no privity of contract between the farmers and the insurance company because the policy was taken by the cold store and not by the farmers. It was alleged that the entire story of loans was a false story. On merits, any conce....
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....e from six months from the date of the incident till the date of realisation. One complaint being Complaint No.597 of 2015 was dismissed. In some of the complaints, the Bank was also held jointly and severely liable to pay the costs of Rs. 10,000/- whereas in a large number of cases the complaint against the Bank was dismissed. 9. Aggrieved by the aforesaid judgment dated 28.04.2017 of the State Commission, an appeal was filed before the National Commission. By the impugned judgment, the National Commission concurred with the findings of the State Commission and held that the farmers are consumers. It held that the insurance company was aware of the fact that the goods were held in trust. It further held that there is no evidence to show that the fire was not an accidental fire or that the fire had been started by the owner of the cold store. However, it partly allowed the appeal of the insurance company and reduced the interest from 14% per annum to 12% per annum. The farmers had also filed appeal claiming that in terms of the insurance policy they should have been paid the value of the goods as on the date of fire. However, this claim was rejected basically on the ground that th....
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....th the State Commission and the National Commission have come to the conclusion that the fire was an accidental fire and occurred due to a short circuit. These are pure findings of fact which, in our view, cannot be challenged in these proceedings. However, since lengthy arguments were addressed by Shri P. P. Malhotra in this behalf, we shall deal with the same. At the outset, we may note that the electrical inspector, the police investigation team and the forensic science laboratory (FSL) have all come to the conclusion that the fire took place due to a short circuit. The concluding portion of the report of the FSL reads as follows:- "From the above examination, the following observations have been made 1. Presence of combustible materials like thermocol (which are used to insulate the walls) pillars, wooden partitions and the grains stored inside the building could have enhanced the spread of fire. 2. The congested space in the building might have accelerated the smoldering fire. 3. The fire might have originated at the sixth floor front side of the building. But it was not possible to locate the exact place of origin of fire since the complete building was involved in fir....
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....hoddy manner in which M/s. Truth Labs conducted the investigation. There can be no proper investigation of a fire if the investigating agency does not even try to find out what is the nature of construction of the building which has been destroyed in the fire. M/s. Truth Labs has clearly stated that the observation that fire took place on account of extraneous ignitable fire accelerants, is based on the chemical analysis report which shows presence of hydro carbons in the debris. It is apparent that M/s. Truth Labs, for reasons best known to it, did not analyse the material used for construction because if it had done so, it would have realised that hydro carbons would be present when thermocol or bitumen are burnt. Thermocol is basically a rigid plastic foam material which is derived from petroleum and natural gas by-products. Bitumen is a semi-solid hydrocarbon product produced from crude oil. Both thermocol and bitumen are derivatives of petroleum products and hence are hydrocarbons by their very nature. Therefore, presence of hydrocarbons would be natural when a fire takes place. The presence of hydro carbon could not lead to a conclusion that kerosene oil had been used to igni....
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....erence to the definition given in other laws. It is a matter of contract and in terms of the contract the relation of the parties shall abide and it is presumed that when the parties have entered into a contract of insurance with their eyes wide open, they cannot rely on the definition given in other enactment...." 19. Reliance was placed on Raghunath Rai Bareja v. Punjab National Bank (2007) 2 SCC 230 wherein it was held: "58. We may mention here that the literal rule of interpretation is not only followed by judges and lawyers, but it is also followed by the layman in his ordinary life. To give an illustration, if a person says "this is a pencil", then he means that it is a pencil; and it is not that when he says that the object is a pencil, he means that it is a horse, donkey or an elephant. In other words, the literal rule of interpretation simply means that we mean what we say and we say what we mean. If we do not follow the literal rule of interpretation, social life will become impossible, and we will not understand each other. If we say that a certain object is a book, then we mean it is a book. If we say it is a book, but we mean it is a horse, table or an e....
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....ract 22. One of the main grounds of attack to the judgments of both the State Commission and the National Commission on behalf of the insurance company is that the farmer is not a consumer insofar as the insurance company is concerned. The contention is based on the ground that the insurance policy is admittedly only between the insurance company and the cold store. It is further urged by Shri Malhotra that the claim of the cold store for damage to the building, plants and machinery was repudiated by the insurance company on 16.09.2015. The cold store has not challenged the repudiation. Thereafter, all the complaints have been filed through one counsel which indicates that they have been orchestrated by the cold store itself. It is also submitted that the tripartite agreement is not relevant as far as the insurance company is concerned since the insurance company is not a signatory to the tripartite agreement. It is further contended that the coverage for the goods was only for the goods owned by the cold store and not by the farmers who are in the nature of third parties. It is contended that in some cases the tripartite agreement has not even been signed by the Bank. 23. On the....
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....ivity of contract between the insurance company and the claimants. The definition of consumer under Section 2(d) quoted hereinabove is in 2 parts. Sub-clause (i) of Section 2(1)(d) deals with a person who buys any goods and includes any user of such goods other than the person who buys such goods as long as the use is made with the approval of such person. Therefore, the definition of consumer even in the 1st part not only includes the person who has purchased but includes any user of the goods so long as such user is made with the approval of the person who has purchased the goods. As far as the definition of the consumer in relation to hiring or availing of services is concerned, the definition, in our view, is much wider. In this part of the section, consumer includes not only the person who has hired or availed of the services but also includes any beneficiary of such services. Therefore, an insured could be a person who hires or avails of the services of the insurance company but there could be many other persons who could be the beneficiaries of the services. It is not necessary that those beneficiaries should be parties to the contract of insurance. They are the consumers no....
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....is Court held that the Kottayam Bank was not only not a party to the deed but was also not a beneficiary under the contract. In our opinion, the Consumer Protection Act clearly provides that a beneficiary of the services, other than the insured is a consumer under the Act. General Exclusion Clause No.5 31. It has been urged that there is violation of Clause 5 of the policy under the heading of General Exclusion wherein losses of certain types have not been covered. The said clause reads as follows:- "5. Loss, destruction or damage to bullion or unset precious stones, any curios or works of art for an amount exceeding Rs. 10000/- goods held in trust or on commission, manuscripts, plans, drawings, securities, obligations or documents of any (illegible) stamps, coins or paper money, cheques, books of accounts or other business books, computer systems records, explosives unless otherwise expressly stated in the policy." 32. The argument raised by Shri Malhotra is that since the goods were held in trust by the cold store, the insurance company is not liable. We are not at all impressed with this argument. This is not a case where the goods were deposited only on the basis of trust....
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....on. Even otherwise, we are of the view that the submission made on behalf of the insurance company is without any substance. The policies of insurance clearly show that the premises was separately insured for Rs. 5 crores and the stock in trade were insured for Rs. 30 crores. This insurance was taken not only for the year when the fire took place but was renewed for 3 long years. The insurance policy had an Agreed Bank Clause which reads as follows:- "(1) AGREED BANK CLAUSE: It is hereby declared and agreed:- (i) That upon any monies becoming payable under this policy the same shall be paid by the company to the bank and such part of any monies so paid as may relate to the interests of other parties insured hereunder shall be received by the Bank as Agents for such other parties. (ii) That the receipts of the Bank shall be complete discharge of the company thereon and shall be binding on all the parties insured hereunder." 36. The aforesaid clause itself clearly indicates that it was agreed by the insurance company that upon any amount being payable under the policy in question, the same would be paid to the Bank and the amount so paid "may relate to the interests of other....
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....ewed at least twice. Therefore, the policy was in existence for 3 years and it is in the 3 rd year that the fire took place. If the insurance company chooses not to even write a letter to the insured or take any steps to verify the value of the goods and ownership of the goods, it cannot now turn around and urge that it was not aware about the nature or ownership of the goods. Fraudulent Claim 38. The insurance company also contends that the whole scheme is fraudulent and that no farmer in his right senses would store agricultural produce for such a long time. This argument is totally baseless. 39. Byadgi Chilli is the major component of the goods that were stored in the cold store. It is a very famous variety of chilli and is produced in two types - dabbi and kaddi. One of the main uses of this chilli is not only as an item of food but as an item to extract red colour pigment which is used in the manufacture of lipsticks, nail polishes, and other cosmetics etc. The material extracted is called oleoresin, which is a red oil extracted from the pods. Many cold stores have been constructed in the area where this chilli is grown because if these chillies are stored at a low temperatu....
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.... the requisite information was not supplied. The column requires listing out the parties who have an insurable interest including financial institutions. Since the policy had a bank clause, the name of Canara Bank should have been mentioned in column 5. That was not there. If the insurance company while accepting the proposal form does not ask the insured to clarify any ambiguities then the insurance company after accepting the premium cannot now urge that there was a wrong declaration made by the insured. In case the insured had written that there were no persons who had an insurable interest, the position may have been different but leaving out the column blank does not mean that there was some misdeclaration of facts. We are, therefore, clearly of the view that the judgment of this Court in Satwant Kaur Sandhu's case (supra) is not applicable to the facts of the present case. 43. As already held above, the insurance company itself could have also taken some initiative in the matter. To make a contract void the non-disclosure should be of some very material fact. No doubt, it would have been better if the Bank and the insured had given at least 1 tripartite agreement to the insu....
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....42 because even after paying off the dues of the Bank, some amount of the value of the goods along with interest thereupon will be payable to the farmers. Whether there was a deficiency in service on the part of the Bank 47. It was urged on behalf of the insurance company that there is deficiency of service by the Bank and, in fact, it was argued that the Bank connived with the farmers because it did not get the valuation of the products done properly and further, it took no steps to sell the agricultural produce after one year which liberty it had in terms of the tripartite agreement. We find no force in this argument. As already pointed out above, the value of Byadgi chillies which was the major agricultural produce stored in the cold store rises the longer it is kept in the cold store. Therefore, the Bank could have taken a commercial decision not to sell the produce because the product was not deteriorating in any manner and its value was not diminishing. 48. The State Commission had held that there was deficiency on behalf of the Bank in rendering services but the National Commission held otherwise. We are of the view that the Bank was remiss to a limited extent. When the B....
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.... property be destroyed or damaged by any of the perils specified hereunder during the period of insurance named in the said schedule or of any subsequent period in respect of which the insured shall have paid and the Company shall have accepted the premium required for the renewal of the policy, the Company shall pay to the insured the value of the property at the time of the happening of its destruction or the amount of such damage or at its option reinstate or replace such property or any part thereof." 51. The highlighted portion of the aforesaid clause leaves no manner of doubt that the insurance company in consideration of the premium received had agreed to either reinstate the goods or replace the same or pay to the insured the value of the property at the time of happening of its destruction or damage. The State Commission and the National Commission had rejected the claim of the farmers in this regard on the ground that the variety-wise periodic report of the Bengaluru market, produced by the farmers, showed that the range between minimum and maximum price for Byadgi and Guntur chillies etc. is very vast and to arrive at an average price would mean construing that all the ....
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....nd accepted by the Bank, which on the basis of such surety advanced the loan. 55. In view of the aforesaid discussion, we are of the view that the Bank shall be entitled to recover the principal amount advanced by it to each one of the farmers along with the simple interest at the rate of 12% per annum from the date of advancing of loan till repayment thereof. The insurance company is liable to pay the value of goods as reflected in the warehouse receipts of each farmer along with simple interest at the rate of 12% per annum from the date of fire till payment of the amount. The dues of the Bank till the date of fire will have to be first determined and, thereafter, the excess will be payable to the farmer along with the interest. 56. To clarify the issue we take the example of the first farmer- Thippa Reddy at Sr. No.1, in whose Account No.1425844005736, the loan of Rs. 10,00,000/- was sanctioned on 30.08.2011. The insurance company has worked out his outstanding on the date of incident at Rs. 13,57,307/- whereas the value of the goods was 2,00,2000 as per the warehouse receipt. If we calculate simple interest at the rate of 12% per annum on Rs. 10,00,000/- from 30.08.2011 till 1....