Facts pertaining to the case
In this case the Hindustan Safety Glass Works Ltd., the respondent, had signed two policies with the National Insurance Company, the appellant in this case, for one year on 29th August, 1990 which were renewed for another year subsequently. The first insurance policy was for Rs. 4.9 lakhs which was covering the risks in Calcutta on office building, residential quarters and canteen etc.. The second insurance policy was for a sum of about Rs. 5.7 crores which was covering the risks in its factory/works in Calcutta on building, machinery, finished and semi finished stocks, store, wiring and fittings etc. Damage or loss resulting due to flood and inundation was covered by the policies.
Due to strong and continuous rain in Calcutta on the 6th of August, 1992, a significant amount of rain water was accumulated inside and around the insured’s factory/works. Insured started that raw materials, stocks and goods, furniture, and other items were severely damaged. The insured submitted claims on the 7th and 8th of August, 1992, in accordance with the two policies he had taken out with National Insurance , claiming a total value of roughly Rs. 52 lakhs for damage he had sustained.
On 24th September, 1992 the National Insurance appointed N.T. Kothari & Co. as its surveyor and the survey was carried out. On 11th November, 1993 N.T. Kothari & Co. submitted its report specifying that the insured had suffered a loss of approximately Rs. 24 lakhs.
However, the National Insurance Company did not find this report clear and it did not approve the report and rather appointed Seascan Services (WB) Pvt. Ltd. as a surveyor on the insured’s loss or damage. On 23rd November, 1994 it submits it’s report estimating the insured’s loss or damage to be around Rs. 26 lakhs. The insured’s damage or loss was decreased to around Rs. 24 lakhs by an addendum issued on 10th February, 1995.
However, National Insurance Company did not pay anything to the insured even after two survey reports that showed the insured’s loss. Thus, on 22nd April, 1996, the insured notified the National Insurance Company that its claim had not been settled and that the loss or damage claimed was in the amount of Rs. 52 lakhs, and that this amount should be paid.
National Insurance gave no reply to this notice and consequently, the insured filed a complaint under the provisions of the Consumer Protection Act, 1986 to the National Commission demanding an amount of Rs. 52.32 lakhs as well as an amount of roughly Rs.1.81 lakhs as the expenses incurred for the purpose of loss minimisation. The insured also demanded an interest at the rate of 18 percent per year, with effect from 6th December, 1992, four months after the flood occurred.
The notice which was provided by the insured to the National Insurance Company in 1996 was given reply after five years after the complaint was lodged with the National Commission on 22nd May, 2001.
Contention presented by the National Insurance Company
In response to the complaint the National Insurance Company raised following objections :
- The complaint was barred by condition no. 6(ii) of the policies that reads as follows: “In no case whatsoever shall the company be liable for any loss or damage after the expiration of 12 months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration: it being expressly agreed and declared that if the company shall disclaim liability for any claim hereunder and such claim shall not within 12 calendar months from the date of the disclaimer have been made the subject matter of a suit in a court of law and the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder.”
Thus, the aforesaid condition leads to the conclusion that National Insurance would not be liable for any loss or damage 12 months after the event due to which loss or damage to the insured was caused, unless the claim is the subject matter of a pending action or arbitration. The counsel for National Insurance Company submits that the expression ‘pending action’ must refer to action instituted in a court of law.
- The complaint was barred by limitation as it was filed on 13th August, 1996, but the loss/damage to the insured properties occurred in August, 1992. According Section 24-A of the Consumer Protection Act, 1986, the District Forum, the State Commission or the National Commission shall not admit a complaint unless it is filed within two years from the date on which the cause of action has arisen. Since the complaint was filed to the National Commission on August 13, 1996, but the loss or damage occurred on August 6, 1992, the insured’s claim was barred by limitation. As a result, the National Commission could not have accepted the complaint because it was lodged beyond the stipulated period of two years from the date on which the cause of action had arisen.
- The alleged loss was caused by the accumulation of dust and moisture on the stocks that were left unattended pursuant to the lock out in the factory that began on 3rd May, 1991, rather than by inundation/flood.
- Neither of the two survey findings can be used to justify payment of the claimed amount.
Decision of National Commission
All of the contentions of the National Insurance Company were rejected by the National Commission and the insured was awarded Rs. 21,05,803.89 plus interest at 9% per annum from May 11, 1995, three months after Seascan Services (WB) Pvt. Ltd. issued the addendum (the second surveyor). The insured was also given a sum of Rs. 20,000.
The National Insurance filed an appeal to the Hon’ble Supreme Court. However, the Supreme Court, after hearing the arguments, dismissed the appeal and upheld the National Commission’s decision.
Judgement of the Hon’ble Supreme Court
The supreme court stated that the occurrence that resulted in the insured’s loss or damage happened on 6th August, 1992, when the insured’s raw materials, stocks, furniture, and other items were damaged owing to heavy persistent rain in Calcutta. On the next day, the insured filed a claim with National Insurance. As a result, National Insurance appointed N.T. Kothari & Co. to assess the loss of the insured, and after more than a year it provided a report. After that National Insurance appointed a second surveyor which almost took one year to submit its report and then gave an addendum to that report thereby taking one year in to submit its report along with the addendum.
The Supreme Court stated that the National Insurance itself took more than two years to survey the loss suffered by the insured. Thus, the entire delay was caused by the National Insurance and cannot affect the claim of the insured, especially when the insured had filed a claim within time. To make matters worse, the insured’s claim was only rejected by National Insurance on 22nd May, 2001, after the complaint was lodged.
The Supreme Court further stated that the courts must necessarily take a pragmatic view of the consumer rights, owing to the fact that it is the customer who is put at a disadvantage when it comes to goods or service providers. To address this issue, Parliament passed the Consumer Protection Act of 1986, which is a beneficial piece of legislation. The provision of limitation in the Act cannot be construed strictly in order to disadvantage a consumer in a case where a supplier of goods or services is directly responsible for the delay in settling the consumer’s claim.
As a result, the Supreme Court concluded that there is no error in the of the National Commission and no case is made out by National Insurance to interfere with the order passed by the National Commission . Thus, the appeal is without any merit and is accordingly dismissed.
The question of the consumer rights and protection was involved in the case of National Insurance Company Ltd. V. Hindustan Safety Glassworks Ltd. The main goal of the Consumer Protection Act of 1986 which was replaced by the Consumer Protection Act, 2019 was to address the issue of the protection of consumers and to safeguard consumers and to protect their interest against various types of exploitation like unfair trade practices and to provide quick relief to consumer grievances.
The decision of the Hon’ble Supreme Court in this case demonstrates that the judiciary maintains the main goal of the Consumer Protection Act that provides utmost protection to consumers and ensures the rights of consumers.
- National Insurance Co. Ltd. V. Hindustan safety glass works Ltd. (2017) 5 SCC 776.
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