TMI Blog2020 (2) TMI 1577X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is much wider - It is not necessary that those beneficiaries should be parties to the contract of insurance. They are the consumers not because they are parties to the contract of insurance but because they are the beneficiaries of the policy taken out by the insured. The farmer had agreed to pay consideration to the cold store and, therefore, the goods were not held in trust per se but the goods were held by cold store as bailee of the goods for consideration. The possession of the farm produce was handed over by the bailor, i.e. farmer to the cold store i.e. the bailee, in terms of the contract. There may be inter se rights and liabilities between the farmer and the cold store but it cannot be said that the goods we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ON (CIVIL) NO. 20393 OF 2018) WITH CIVIL APPEAL NO. 1043-1051 OF 2020(@SPECIAL LEAVE PETITION (CIVIL) NO. 24774-24782 OF 2018, - - - Dated:- 6-2-2020 - CIVIL APPEAL NO. 1052-1059 OF 2020 (@SPECIAL LEAVE PETITION (CIVIL) NO. 25957-25964 OF 2018), CIVIL APPEAL NO. 1060-1071 OF 2020 (@SPECIAL LEAVE PETITION (CIVIL) NO. 25137-25148 OF 2018), CIVIL APPEAL NO. 1072-1081 OF 2020 (SPECIAL LEAVE PETITION (CIVIL) NO. 25235-25244 OF 2018), CIVIL APPEAL NO. 1082-1090 OF 2020 (@SPECIAL LEAVE PETITION (CIVIL) NO. 25535-25543 OF 2018), CIVIL APPEAL NO. 1091-1097 OF 2020 (@SPECIAL LEAVE PETITION (CIVIL) NO. 25325-25331 OF 2018), CIVIL APPEAL NO. 1098-1106 OF 2020 (@SPECIAL LEAVE PETITION (CIVIL) NO. 26077-26085 OF 2018), CIVIL APPEAL NO. 1107-1117 OF 2020(@SPECIAL LEAVE PETITION (CIVIL) NO. 26494-26504 OF 2018), CIVIL APPEAL NO. 1118-1126 OF 2020(@SPECIAL LEAVE PETITION (CIVIL) NO. 25714-25722 OF 2018), CIVIL APPEAL NO. 1127-1133 OF 2020(@SPECIAL 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral produce was Dabbi Chilli, Guntur Chilli, Bengal Gram, Coriander (Dhania), Jwar etc. However, this will not have any material impact on the decision of these cases. The details containing the name of the claimants, the nature of the produce, number of bags and quantity thereof, rate, and number of kilograms have been set out in Para 7 of the judgment of the National Commission which we are not reproducing for the sake of brevity. 5. In the claims filed it was pleaded that the cold store while levying the general charges had also charged the insurance premium paid by it. It would be pertinent to mention that a tripartite agreement had been entered into by each one of the farmers while taking a loan from the Bank and hypothecating the agricultural produce which was stored in the cold store. The farmer, the Bank, and the cold store were parties to the tripartite agreement. The cold store issued a warehouse receipt giving the particulars of the crop stored, 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 machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uit and no element of human intervention or use of kerosene was found. The State Commission also found that as per the tripartite agreement entered into between the farmers, the Bank and the cold store, it was mandatory for the cold store to insure the goods so hypothecated by the farmers with the Bank. The insurance company was held liable to pay the amount to the farmers. The State Commission assessed the value of the goods by taking the value as reflected in the warehouse receipts issued at the time of taking of loan and did not accept the plea of the farmers that they should get the market value of the goods as on the date of fire. The Bank was also held deficient in service. The cold store and the insurance company were held jointly and severely liable and were directed to pay the value of the agricultural produce hypothecated with the Bank to the farmers/claimants as on the date of tripartite agreement together with the interest at the rate of 14% per annum payable 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fire in question was not an accidental fire. It is also contended that the farmers were not consumers and therefore the consumer fora have no jurisdiction to decide the dispute. He next contends that there is no privity of contract between the farmers and the insurance company. According to him, a contract of insurance is to be strictly construed between the parties to the contract. He submits that there was no insurable interest of the farmers and the tripartite agreement entered between the Bank, the farmers and the cold store was never disclosed to the insurance company. He further submits that there is non-disclosure of important facts by the cold store (insured) and, as such, the insurance company is not liable. He also urged that the liability of the insurance company is excluded by virtue of General Exclusion Clause 5 and General Condition no.1 and General Condition no. 8 of the insurance policy. Whether the fire was an accident? 13. As far as this issue is concerned, both 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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruction, hydro carbons would obviously be present. On the other hand, M/s. Truth Labs mainly relied upon the presence of hydro carbons to come to the conclusion that the fire had not occurred spontaneously and on account of electrical short circuit but occurred on account of extraneous ignitable fire accelerants such as kerosene. The conclusions of M/s. Truth Labs were based on some inspection and chemical analysis carried out by a team headed by Dr. R. Srinivas. Admittedly, this report of Dr. R. Srinivas was never furnished to the parties nor was placed before the State Commission. Interestingly, when Mr. G. V. H. V. Prasad, Director of M/s. Truth Labs was put a specific query whether the walls of the ground floor and the top floor and the inside portion of the cold store along with 169 pillars were constructed by sandwiching bitumen and thermocol between the concrete in order to raise the level of insulation, he replied that he was not aware of how the Cold Storage was built . This clearly shows the shoddy 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person who caused the fire, the insurance company cannot escape its liability in terms of the insurance policy. We reject the contention of the insurance company that the fire was ignited by the use of kerosene and hence it is not liable. Rule of Strict Interpretation 17. It has been submitted on behalf of the insurance company that the terms of the insurance policy should be construed strictly and since only the insurance company and the cold store (insured) were parties to the contract of insurance, the insurance company will not be liable to pay any claim to the farmers. Various authorities were cited by both sides. 18. In United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal (2004) 8 SCC 644 this Court held as follows:- 9 .It is settled law that terms of the policy shall govern the contract between the parties, they have to abide by the definition given therein and all those expressions appearing in the policy should be interpreted with reference to the terms of policy and not with reference 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interpreted broadly and if there is any ambiguity, the same should be resolved in favour of the insured. On the other hand, the exclusion clauses must be read narrowly. The policy and its components must be read as a whole and given a meaning which furthers the expectations of the parties and also the business realities. According to us, the entire policy should be understood and examined in such a manner and when that is done, the interpretation becomes a commercially sensible interpretation. As far as the present case is concerned, if we read the tripartite agreement along with the terms of the policy it is obvious that the Bank insisted that the stock be insured. The farmers were told that they would pay the premium. The cold store while fixing the rent obviously factored the premium into the rent. It was obvious that the intention of the parties was that they would be compensated by the insurance company in case of any untoward loss. Whether the farmers are consumers and the issue of privity of contract 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or (ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person ; 25. The definition of consumer under the Act is very wide and it not only includes the person who hires or avails of the services for consideration but also includes the beneficiary of such services who may be a person other than the person who hires or avails of services. 26. Taking the issue of privity of contract, we are of the considered view that as far as the Act is concerned, it is not necessary that there should be privity 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 Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, definitely a consumer and we uphold the orders of both the Commissions that the complaint under the Act is maintainable. 29. Shri Malhotra in support of his argument relied upon the judgement of this Court in M. C. Chacko v. The State Bank of Travancore, Trivandrum (1969) 2 SCC 343 wherein the appellant as Manager of High Land Bank, Kottayam, had an overdraft account with the Bank. The father of the appellant had executed letters of guarantee in favour of Bank agreeing to pay the amounts due to the Bank under the overdraft agreement subject to a limit of ₹ 20,000/-. The Court held:- 10. Even if it be granted that there was an intention to create a charge, the Kottayam Bank not being a party to the deed could enforce the charge only if it was a beneficiary under the terms of the contract, and it is not claimed that the Bank was a beneficiary under the deed Ext. D-1. The suit against M.C. Chacko must therefore be dismissed. 30. We are of the view that this judgment has no relevance to the case before us. This 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 Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This policy shall be voidable in the event of misrepresentation, mis-description or non- disclosure of any material particular. xxx xxx xxx 8. If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof or if any fraudulent means or devices are used by the insured or anyone acting on his behalf to obtain any benefit under the policy or if the loss or damage be occasioned by the willful act, or with the connivance of the insured, all benefits under this policy shall be forfeited. 35. The contention of Shri Malhotra is that the insurance company was not informed by the Bank, the cold store or the farmers that the farm produce or the insured goods belong to the farmers and therefore the policy is voidable. At the outset, we may note that misrepresentation or misdescription only makes the policy voidable. The insurance company never chose to declare the policy void for 3 long years when it was in existence and, at this stage, cannot be permitted to wriggle out of its liability by taking this objection. Even otherwise, we are of the view that the submission made on behalf of the insurance company is without any substance. The pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was covered for a sum of ₹ 30 crores and premium was charged accordingly. A prudent insurance company before issuing a policy of such a heavy amount, must or at least should have ascertained the value and the nature of the goods. The insurance company before us is one of the largest nationalised insurance companies and a presumption has to be drawn that it must have verified the details before insurance policy was issued. If verification had been done by a visit to the cold store, it could have been easily found out who are the owners of the stock. In case, the insurance company has chosen not to verify the stock it cannot take advantage of its own negligence. The principle of uberrima fides has no application because the cold store had declared all necessary facts. The bank clause clearly indicated that the goods were hypothecated/pledged to the Bank. Therefore, the insurance company now cannot turn around and claim that the names of the owners were not supplied to it at the time of insurance. We also cannot lose sight of the fact that the insurance policy was renewed at least twice. Therefore, the policy was in existence for 3 years and it is in the 3 rd year that the fire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that: 25. The upshot of the entire discussion is that in a contract of insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept or not to accept the risk is a material fact . If the proposer has knowledge of such fact, he is obliged to disclose it particularly while answering questions in the proposal form. Needless to emphasise that any inaccurate answer will entitle the insurer to repudiate his liability because there is clear presumption that any information sought for in the proposal form is material for the purpose of entering into a contract of insurance. 42. At the outset, we may mention that the initial insurance policy was taken in the year 2011, if not earlier, and that proposal form was very material. The same has not been produced by the insurance company before us. Thereafter, it was only renewal of the policy. Furthermore, if a column is left blank, again the insurance company should have asked the insured to fill in the column. There is no wrong information given in the proposal form though it may be true that all the requisite information was not supplied. The column requires listing out the parties who have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruv Mehta, learned senior counsel for the Bank submits that since the farmers are claiming benefit of the policy, they cannot urge that the bank clause is not applicable. It is further submitted by him that the National Commission has to decide questions on the basis of legal considerations and equitable considerations or equity has no role to play in such matters. On the other hand, it has been urged by Dr. Rajeev Dhavan that the bank clause is only a processual clause. 46. We cannot accept the submission of Dr. Dhavan that the bank clause lays down only a process. The insurance policy is a contract and the amount has to be paid as per the terms of the contract. In our view, the National Commission could not have ordered that the interest on the amount payable to the farmers should not be paid to the Bank till the liabilities of the Bank are paid out. Arguments have been addressed before us that this Court may exercise its power under Article 142 of the Constitution of India to ensure that justice is done to the farmers. We feel that there is no need to invoke the jurisdiction under Article 142 because even after paying off the dues of the Bank, some amount of the value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim interest at the contractual rate. We are therefore, of the view that the Bank would be entitled to charge simple interest right from the date of grant of loan at the rate of 12% per annum. The amount of claim payable: 50. The farmers in their appeal have claimed that in terms of the policy of insurance the value of the goods was to be assessed on the date of fire and the value was not to be assessed as mentioned on the date when the goods were stored in the cold store. In this regard, we may make reference to the opening portion of the insurance policy wherein the insurance company has agreed to insure the goods. Relevant portion of the insurance policy reads as follows:- IN CONSIDERATION of the insured named in the schedule hereto having paid to the United India Insurance Company Limited (hereinafter called the Company) the full premium mentioned in the said schedule. The Company Agrees (Subject to the conditions and exclusions contained herein or endorsed or otherwise expressed hereon) that if after payment of the premium the property insured described in the said schedule or any part of such property be destroyed or damaged by any of the perils specified hereunder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is period is so high that without exactly knowing what was the quality of agricultural produce, it would not be possible to ascertain what was the price on the date of fire. To give an example, Byadgi chillies have a price range of ₹ 3,200 per quintal to ₹ 17,300 per quintal i.e. ₹ 32 per kilogram to ₹ 173 per kilogram. There is no way for any Court to determine what the exact price would have been without having the benefit of the quality of produce. Unfortunately, even in the warehouse receipts there is no gradation or reflection of the quality of the produce. 54. We, therefore, affirm the decision of the National Commission that the value of the goods as reflected in the warehouse receipts should be taken to be the value on the date of fire. We may add that this value is not very different from the median value for most of the products. We rely upon the value given in the warehouse receipts because that was the value which was given by the farmers, not knowing that their product is going to be burnt, and was accepted by the cold store, which must have known the value of the product in the local market and accepted by the Bank, which on the basis of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing simple interest @ 12% p.a. up to 13.01.2014 i.e. payable by 14.01.2014 after adjusting the payments which the Bank may have received in the loan account. 3. The Bank in the statement of accounts shall also set out the amount due with the aforesaid rate of interest up to 30.04.2020. 4. The aforesaid statement be filed before the State Commission on or before 02.03.2020. 5. That thereafter, the State Commission in each appeal shall determine the amount payable to the farmer by calculating it in terms of the clarification given above i.e. after adjusting the amount due to the Bank as on 14.01.2014. This exercise be completed on or before 31.03.2020. 6. Out of the aforesaid amount, the Insurance Company shall pay the amount of loan along with simple interest at the rate of 12% per annum from the date of advancement of loan to the date of payment directly to the Bank. 7. Thereafter, the insurance company shall deposit the amount payable to the farmers with the State Commission on or before 30.04.2020. 58. All appeals are disposed of in the aforesaid terms. No order as to costs. Pending application(s), if any, shall also stand(s) disposed of. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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