The Aryavarth Express
Agency (New Delhi): In a significant judgment, the Supreme Court has set aside an order passed by the National Consumer Disputes Redressal Commission (NCDRC) which had rejected an insurance claim filed by M/s. Kozyflex Mattresses Private Limited, a private company engaged in the manufacture and sale of coir foam mattresses, pillows, cushions, and other coir by-products. The apex court has remanded the case back to the NCDRC for fresh consideration, directing the commission to provide an opportunity to the insured company to rebut the reports relied upon by the insurer, SBI General Insurance Company Limited, in repudiating the claim.
The case pertains to a Standard Fire and Special Perils Policy (Material Damage) obtained by Kozyflex Mattresses Private Limited from SBI General Insurance Company Limited for the period from March 28, 2013, to March 27, 2014. The policy covered the plant, machinery, and stock of the insured company’s manufacturing unit located in Vizianagaram, Andhra Pradesh. On the intervening night of April 13 and 14, 2013, a massive fire incident took place in the manufacturing unit, causing extensive damage.
The insured company informed the insurer about the fire accident and the losses suffered on April 15, 2013. The insurer appointed a surveyor, Professional Surveyor & Loss Adjustor Pvt. Ltd., to assess the damage. The surveyor inspected the factory premises on April 16 and 17, 2013, and conducted subsequent inspections in May and July of the same year. The insured company submitted an insurance claim for a total sum of Rs. 3.31 crores, which included Rs. 40,11,152 for the building, Rs. 1,08,47,435 for plant and machinery, and Rs. 1,87,72,489 for stock.
However, the insurer appointed two independent investigators, Mr. Kalahasti Satyanarayana and Mr. K. Jagannadha Sastry, to verify the documents submitted by the insured company in support of its claim. The investigators submitted their reports, noting that the purchase of machinery and stock claimed by the insured company were mere paper and money transactions done with the intention to siphon money from the State Bank of Hyderabad and the National Small Scale Industries Corporation Ltd., and that there had been no actual sale or purchase of such machinery and stock.
Based on the reports of the investigators and the surveyor, who concluded that the claim was fraudulent and based on fabricated documents, the insurer repudiated the claim by invoking Clause 8 of the General Terms and Conditions of the policy, which allowed forfeiture of all benefits under the policy if the claim was found to be fraudulent or if any false declaration was made in support thereof.
Aggrieved by the repudiation of its claim, the insured company filed a complaint before the NCDRC, alleging deficiency in service on the part of the insurer. The insurer contested the complaint, raising preliminary objections regarding the maintainability of the complaint and the jurisdiction of the NCDRC. The insurer argued that the insured company, being a body corporate, was not a consumer within the meaning of the Consumer Protection Act, 1986, and that the insurance policy was taken for commercial purposes, which did not entitle the insured to invoke the jurisdiction of consumer forums.
The NCDRC, after considering the submissions and evidence presented by both parties, upheld the repudiation of the claim by the insurer and dismissed the complaint filed by the insured company. The commission relied on the reports of the investigators and the surveyor, which had concluded that the claim was fraudulent and based on fabricated documents.
Dissatisfied with the NCDRC’s order, the insured company filed an appeal before the Supreme Court under Section 67 of the Consumer Protection Act, 2019. The apex court, after hearing the arguments advanced by both parties, set aside the NCDRC’s order and remanded the case back for fresh consideration.
The Supreme Court rejected the preliminary objections raised by the insurer regarding the maintainability of the complaint and the jurisdiction of the NCDRC. The court held that the definition of ‘person’ under the Consumer Protection Act, 1986, was inclusive and not exhaustive, and a liberal interpretation had to be given to the statute, being a beneficial legislation. The court also noted that the inclusion of the word ‘company’ in the definition of ‘person’ under the Consumer Protection Act, 2019, indicated that the legislature had realized the incongruity in the unamended provision and had rectified the anomaly.
Regarding the objection that the insurance policy was taken for commercial purposes, the Supreme Court distinguished the present case from the judgments relied upon by the insurer, stating that the policy in question was a Standard Fire and Special Perils Policy (Material Damage) covering the risk of fire and other perils, and the claim was filed for indemnifying the insured for the damage caused in a fire accident at the insured premises.
The Supreme Court took note of the insured company’s plea that copies of the surveyor’s report and the investigators’ reports were not provided timely, and thus, the insured did not get a proper opportunity to rebut the same. The court observed that this pertinent plea was not specifically refuted by the insurer in its counter-affidavit.
Consequently, the Supreme Court directed the NCDRC to provide the insured company an opportunity to file its rebuttal or objections to the affidavits and reports submitted by the insurer before reconsidering the complaint on merits. The court clarified that its observations in the judgment should not prejudice the decision of the consumer case on remand.
