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New India Assurance Co. Ltd. v. Ram Avtar

National Consumer Disputes Redressal Commission

Nov 11, 2013

Judgment

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Summary of Opinion: National Consumer Disputes Redressal Commission — First Appeal No. 141 of 2009

Factual and Procedural Background

The appeal arises from a complaint before the Delhi State Consumer Disputes Redressal Commission ("State Commission") in which Ram Avtar (Respondent/Complainant) alleged that his Tata Sumo vehicle, financed by M.G.F. India Ltd. and insured by New India Assurance Co. Ltd. (Appellant/Insurance Company), was stolen on 24 February 1998. An FIR under Section 379 IPC was lodged at Police Station Seemapuri, Delhi on the same date. The Respondent submitted a claim form to the Appellant on 20 March 1998 and asked that an investigator be appointed. The Appellant appointed an investigator who raised queries and reported anomalies; the Appellant repudiated the claim by letter dated 19 March 1999. The Respondent's grievance to the Appellant's grievance cell was rejected. The Respondent then filed a complaint before the State Commission seeking Rs. 5,35,000/- (including Rs.4,65,000/- as the insured value, Rs.50,000/- for mental anguish, and Rs.20,000/- as litigation costs). The State Commission allowed the complaint, found deficiency in service by the Appellant, and directed the Appellant to pay (i) the insured value of the vehicle less 5% as depreciation, (ii) Rs.50,000/- as compensation for mental agony and trauma, and (iii) Rs.10,000/- as litigation costs, and to take steps to transfer ownership of the vehicle in the Appellant's name. The Appellant filed this First Appeal challenging the State Commission's order.

Legal Issues Presented

Whether the insured's delay in informing the insurance company about the theft (written intimation provided 35 days after the theft) justified repudiation of the claim under the terms of the insurance policy.
Whether the provision in the insurance policy requiring immediate written notice to the insurer is mandatory (a condition precedent) or merely directory (not fatal to the claim).
Whether inconsistencies and alleged anomalies in the insured's statements (including alleged commercial use contrary to hypothecation terms and other contradictions) affected the genuineness of the theft claim and justified repudiation.

Arguments of the Parties

Appellant's Arguments (New India Assurance Co. Ltd.)

The insurance policy required the insured to give immediate written intimation of theft; the Respondent informed the Appellant only approximately one month after the theft (written intimation given 35 days later), breaching the policy terms.
The investigator's inquiries revealed serious reasons to doubt the genuineness of the claim, including contradictions in the Respondent's statements (e.g., the Respondent's claim that the vehicle was stolen while his brother was admitted to hospital was inconsistent with the investigator's finding that the brother had died nine months earlier).
Enquiries showed the vehicle was being used for hire or reward (commercial use) contrary to the hypothecation clause, and that the Respondent's asserted business (a soap factory) and financial status were contradicted by investigations.
The Respondent did not reply to the insurer's letter of 12 February 1999, which pointed out anomalies and requested clarifications; therefore, the repudiation of the claim was justified.
Cited authority: The Appellant relied on a line of precedents including the Hon'ble Supreme Court judgment in Oriental Insurance Co. Ltd. v. Parvesh Chander Chadha (Civil Appeal No. 6739 of 2010) to argue that policy terms are binding and delayed intimation can be fatal to a claim.

Respondent's Arguments (Ram Avtar)

The Respondent contended he had orally informed an officer of the Appellant about the theft on the same date as the theft and denied that the claim was bogus or fabricated.
He asserted that the vehicle was purchased for personal use (not for hire) and that the State Commission, on the basis of evidence, had rightly allowed the complaint.
The Respondent sought dismissal of the Appellant's First Appeal and maintaining of the State Commission's award.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Oriental Insurance Co. Ltd. v. Parvesh Chander Chadha (Civil Appeal No. 6739 of 2010)	Establishes that terms and conditions of an insurance policy are binding on the parties; delayed intimation of theft (without satisfactory explanation) is a breach of policy and can deprive the insurer of the legitimate right to conduct inquiry and recover the vehicle, justifying repudiation.	The National Commission followed this Supreme Court authority, held that the policy clause requiring immediate written notice is mandatory (not merely directory), found no admissible evidence of timely oral intimation by the Respondent, and applied the precedent to set aside the State Commission's order allowing the complaint.

Court's Reasoning and Analysis

The National Commission conducted a fact-focused analysis and applied the cited legal authority as follows:

Undisputed facts: The vehicle was insured from 19.08.1997 to 18.08.1998; the alleged theft occurred on 24.02.1998; an FIR was lodged on the same date. It was also undisputed that written information to the Appellant insurer was given 35 days after the theft.
On the question of delay, the Respondent orally asserted before the National Commission that he had informed an officer of the Appellant on the date of theft, but he produced no evidence to substantiate that contention (no name of the official, no evidence presented before the State Commission or this Commission, and the complaint did not mention such oral intimation).
The Court examined the policy terms which expressly required that "Notice shall be given in writing to the Company immediately upon the occurrence of any accident or loss or damage and in the event of any claim..." and concluded that this requirement was binding on the insured.
Rejecting the State Commission's characterization of the notice clause as "directory," the National Commission found that the Supreme Court in Parvesh Chander Chadha had already considered and decided that delayed intimation without adequate explanation is a grave lapse that can justify repudiation because the insurer is thereby deprived of the opportunity to investigate and recover the vehicle.
Given the absence of admissible evidence of timely notice and the precedent from the Supreme Court, the National Commission held it could not accept the State Commission's conclusion that the delay was immaterial. The National Commission therefore concluded that the State Commission's order was incorrect and set it aside in its entirety.
Although the Appellant had advanced other factual points (investigator's report noting contradictions and possible commercial use), the decisive legal basis for allowing the appeal was the failure to comply with the policy's immediate notice requirement and the controlling Supreme Court authority on the subject.

Holding and Implications

Holding: The First Appeal is allowed and the order of the State Commission is set aside in toto. The National Commission held that the insured's failure to give immediate written notice as required by the insurance policy justified the repudiation of the claim, following the Supreme Court's decision in Parvesh Chander Chadha. No order as to costs was made.

Implications:

Direct effect on the parties: The State Commission's award in favour of the Respondent/Complainant was vacated and the Appellant/Insurance Company's repudiation of the claim was upheld by this Commission. The complaint allowed by the State Commission stands set aside.
Broader implications: The National Commission applied existing Supreme Court authority and did not purport to create new law; the decision reinforces that an insured's compliance with an insurance policy's immediate written notice requirement is mandatory where the precedent so holds.

Show all summary ...

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION

NEW DELHI

FIRST APPEAL NO. 141 OF 2009

(Against the Order dated 27/11/2008 in Complaint No. 170/2001 of the State Commission Delhi)

1. NEW INDIA ASSURANCE CO. LTD.

Registered & Head Office, New India Assurance Building, 87, Mahatma Gandhi Road, Fort

Mumbai - 400 001

Maharashtra

2. NEW INDIA ASSURANCE CO. LTD.

Also at J-129, Kirti Nagar New Delhi - 110 075

3. NEW INDIA ASSURANCE CO. LTD.

Also at Delhi Regional Office-I, Jeevan Bharti Building, Connaught Circus

New Delhi ...........Appellant(s)

Versus

1. RAM AVTAR

S/o Sh. Khachuri Mal, Resident of 4/420, Bhola Nath Nagar, Shahdara

Delhi - 110 032 ...........Respondent(s)

BEFORE:

HON'BLE MR. JUSTICE D.K. JAIN, PRESIDENT HON'BLE MRS. VINEETA RAI, MEMBER For the Appellant : Mr. P.K. Seth, Advocate For the Respondent : Mr. A.K. Verma, Advocate Dated : 11 Nov 2013

ORDER

PER VINEETA RAI

This First Appeal has been filed by New India Assurance Co. Ltd., Appellant herein and Opposite Party before the Delhi State Consumer Disputes Redressal Commission (hereinafter referred to as the State Commission) against the order of that Commission which had allowed the complaint filed against it on grounds of deficiency in service by Ram Avtar, Respondent herein and Complainant before the State Commission.

2. In his complaint before the State Commission, Respondent/Complainant had contended that his Tata Sumo vehicle which was financed by M.G.F. India Ltd. and insured by Appellant/Insurance Company for a period of one year i.e. from 19.08.1997 to 18.08.1998, was stolen on 24.02.1998 when it was parked near Guru Teg Bahadur Hospital, Shahdara, Delhi. Respondent/Complainant on the same date lodged an FIR under Section 379 IPC at Police Station Seemapuri, Delhi. On 20.03.1998 Respondent/Complainant also submitted a claim form to the Appellant/Insurance Company and requested that an Investigator be appointed to look into the case of theft of the insured vehicle. On receipt of this information, Appellant/Insurance Company appointed one Sanjeev Nijhawan as Investigator, who sought certain clarifications of the theft of the insured vehicle which were replied to by the Respondent/Complainant. However, despite this, vide letter dated 19.03.1999 Appellant/Insurance Company unjustifiably repudiated the claim, after which Respondent/Complainant made a complaint to the Grievance Cell of the Appellant/Insurance Company, which was also rejected. It was further contended that the Police also could not recover the stolen vehicle and sent an untraced report on 25.05.1998. Being aggrieved by the deficiency in service on the part of Appellant/Insurance Company, Respondent/Complainant filed a complaint before the State Commission seeking a total compensation of Rs.5,35,000/- from the Appellant/Insurance Company, which included Rs.4,65,000/- being the insured value of the vehicle, Rs.50,000/- on account of tension and mental agony and Rs.20,000/- as litigation costs.

3. Appellant/Insurance Company, on being served, filed a written rejoinder denying the allegation that the claim was wrongly rejected. It was stated that the Respondent/Complainant informed the Appellant/Insurance Company about the theft of the vehicle only on 30.03.1998 i.e. approximately one month after the vehicle was allegedly stolen which was against the terms and conditions of the insurance policy which required the Insuree to give immediate intimation about the theft. The Investigator appointed by the Appellant/Insurance Company to enquire into the nature, cause, circumstances and genuineness of the claim after conducting the necessary enquiries concluded that there were serious reasons to doubt the genuineness of the claim. It appeared that the Respondent/Complainant took almost one month to give intimation about the alleged theft with

a view to hide various facts and avoid detection of the fraud played by him on the Appellant/Insurance Company. Specifically it was contended that the Respondent/Complainant's contention that the vehicle was stolen outside Guru Teg Bahadur Hospital, where his brother was admitted for treatment, was not correct because the brother had actually expired 9 months prior to the theft. Further, it came to light during enquiries made by the Investigator that the vehicle which was hypothecated by the Respondent/Complainant in favour of M.G.F. India Ltd. had a specific clause that it could not be used for hire or reward whereas enquiries revealed that it was being used for hire and reward i.e. for commercial purpose and not for his personal use. In fact, the enquiries also revealed that the Respondent/Complainant was not running a soap factory and had a very modest financial status. The above facts were communicated to the Respondent/Complainant by the Appellant/Insurance Company vide letter dated 12.02.1999 specifically bringing to his notice the various anomalies and contradictions found in the statements made by him from time to time. It was also pointed out that the inordinate delay in informing the Appellant/Insurance Company about the theft of the vehicle was clearly against the terms and conditions of the insurance policy, according to which information about the theft should have been immediately conveyed to the Appellant/Insurance Company. Respondent/Complainant, however, did not reply to this letter and, therefore, the claim was rightly repudiated by the Appellant/Insurance Company.

4. The State Commission, after hearing the parties, allowed the complaint and held the Appellant/Insurance Company guilty of deficiency in service. In its detailed order, the State Commission inter alia concluded that the delay in informing the Insurance Company was not a ground for rejecting the claim since this provision in the insurance policy was of a "directory nature" and not a mandatory requirement. The relevant part of the order of the State Commission is reproduced:

"20. The provision of informing the insurance company or lodging the report with the police immediately after the occurrence is of directory nature and not of mandatory nature. What is relevant and material for adjudicating the claim whether the theft had taken place or not and whether the occurrence took place within the subsistence of the insurance policy or not. The grounds raised are confused and immaterial and not to be taken into consideration as the insurance cover is against the theft of the vehicle.

21. Once a criminal offence takes place and a report is lodged with the police, the

police is the only statutory authority to investigate the case and no other authority and the final report of the police has to be acted upon. Some delay of few days in intimating about the information and lodging the claim by the insured to the appellant-company cannot form a ground for doubting the theft or burglary. If the insurance company finds that the report lodged by the insured was false it can always approach the police u/s 182 of the Cr.P.C.

22. As regards the objection that the vehicle was being used as a commercial vehicle and not a private vehicle, the facts of each and every case have to be scrutinized and scanned on its own. It was a simple case of theft of vehicle and not a case where the breach of some provisions of Motor Vehicle Act were committed and if at all this was a case, the complainant could have been prosecuted under the Motor Vehicle Act but cannot deny the insurance claim covering the risk of theft."

The State Commission, therefore, directed the Appellant/Insurance Company to pay to the Respondent/Complainant (i) the insured value of the vehicle less 5% as depreciation value; (ii) Rs.50,000/- as compensation towards mental agony and trauma and (iii) Rs.10,000/- as litigation costs. The State Commission also directed the Respondent/Complainant to take necessary steps to transfer the ownership of the vehicle in the name of the Appellant/Insurance Company.

5. Hence, the present First Appeal by the Appellant/Insurance Company.

6. Counsel for the parties made oral submissions.

7. Counsel for the Appellant/Insurance Company contended that the State Commission erred in allowing the Respondent/Complainant's complaint despite accepting the fact that the Respondent/Complainant had taken almost a month to inform the Insurance Company about the theft of the vehicle by observing that the provision in the insurance policy requiring the Insuree to immediately inform the Insurance Company was of a directory nature and not of mandatory nature. On the other hand, it is well settled through a catena of judgments (including of the Hon'ble Supreme Court in Oriental Insurance Co. Ltd. V. Parvesh Chander Chadha rendered in Civil Appeal No. 6739 of 2010) that an insurance policy being a contract between the two parties, its terms and conditions are binding on both parties. Therefore, in accordance with the terms and conditions of the insurance policy, Respondent/Complainant was required to immediately inform the Appellant/Insurance Company about the theft of the insured vehicle, which he failed to do. Respondent/Complainant also had not been able to successfully refute various contradictions and anomalies regarding the facts of the theft as also his financial status,

which further lent credence to the fact that the claim was not genuine.

8. Counsel for the Respondent/Complainant on the other hand stated that the Respondent/Complainant had orally informed an officer of the Appellant/Insurance Company about the theft of the vehicle on the same date and denied that he had filed a bogus and fabricated claim. It was further reiterated that the vehicle was purchased by the Respondent/Complainant for his personal use. The State Commission on the basis of credible evidence produced before it had rightly allowed his complaint. The present First Appeal may, therefore, be dismissed.

9. We have heard the submissions made by the Counsel for the parties and also considered the evidence on record. The fact regarding the vehicle being insured by the Appellant/Insurance Company for a period from 19.08.1997 to 18.08.1998 is not in dispute. It is also an admitted fact that although an FIR was lodged with the Police on the same date, information in writing was conveyed to the Appellant/Insurance Company 35 days after the theft of the vehicle. When we specifically asked the Counsel for the Respondent/Complainant whether there was any plausible explanation for this delay, he stated that the information about the theft was conveyed to the Appellant/Insurance Company orally on the same date. However, we note that this fact was not mentioned in the complaint and no evidence to support this contention was produced either before the State Commission or before this Commission; not even the name of the official to whom the complaint was purportedly made was stated. We have perused the terms and conditions of the insurance policy and we note that the relevant provision inter alia reads as follows :

"CONDITIONS

1. Notice shall be given in writing to the Company immediately upon the occurrence of any accident or loss or damage and in the event of any claim and thereafter the insured shall give all such information and assistance as the Company shall require."

Thus, as per the terms and conditions of the insurance policy, the Insuree was required to immediately inform the Appellant/Insurance Company about the theft of the vehicle which he admittedly failed to do. We are unable to accept the finding of the State Commission that this provision in the insurance policy is not mandatory but directory in nature since this issue is squarely covered and decided by the Hon'ble Supreme Court in Parvesh Chander Chadha (supra), in which case also pursuant to a vehicle having been stolen between 18.01.1995 and

20.01.1995 an FIR was lodged with the Police on 20.01.1995 but the Insuree did not inform the Insurance Company immediately about the incident as required under the terms and conditions of the insurance policy. The relevant part of the judgment of the Hon'ble Apex Court is as follows :

"Admittedly, the respondent had not informed the appellant about the alleged theft of the insured vehicle till he sent letter dated 22.5.1995 to the Branch Manager. In the complaint filed by him, the respondent did not give any explanation for this unusual delay in informing the appellant about the incident which gave rise to cause for claiming compensation. Before the District Forum, the respondent did state that he had given copy of the first information report to Rajender Singh Pawar through whom he had insured the car and untraced report prepared by police on 19.9.1995 was given to the said Shri Rajender Singh Pawar, but his explanation was worthless because in terms of the policy, the respondent was required to inform the appellant about the theft of the insured vehicle. It is difficult, if not impossible, to fathom any reason why the respondent, who is said to have lodged First Information Report on 20.1.1995 about the theft of car did not inform the insurance company about the incident. In terms of the policy issued by the appellant, the respondent was duty bound to inform it about the theft of the vehicle immediately after the incident. On account of delayed intimation, the appellant was deprived of its legitimate right to get an inquiry conducted into the alleged theft of vehicle and make an endeavor to recover the same. Unfortunately, all the consumer foras omitted to consider this grave lapse on the part of the respondent and directed the appellant to settle his claim on non-standard basis. In our view, the appellant cannot be saddled with the liability to pay compensation to the respondent despite the fact that he had not complied with the terms of the policy."

10. Respectfully following the above judgment of the Hon'ble Supreme Court, we are unable to accept the order of the State Commission that the claim was wrongly repudiated and, therefore, set aside the same in toto. The present First Appeal is, accordingly, allowed. No order as to costs.

......................J

D.K. JAIN

PRESIDENT

......................

VINEETA RAI

MEMBER