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Supreme Court of India
Oriental Insurance Company Ltd. vs National Bulk Handling … on 12 February, 2020Author: R. Subhash Reddy
C.A.No.10409 of 2016 1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10409 OF 2016
Oriental Insurance Co. Ltd. …Appellant
vs.
National Bulk Handling
Corporation Pvt. Ltd. …Respondent
J U D G M E N T
R.SUBHASH REDDY,J.
1. This civil appeal is filed under Section 23 of the
Consumer Protection Act, 1986, by the opposite party,
in Consumer Case No.2 of 2010, filed before the
National Consumer Disputes Redressal Commission, New
Delhi, aggrieved by the judgment and order dated
22.06.2016. The above said complaint is disposed of by
Signature Not Verified
impugned order, directing the appellant-opposite party
Digitally signed by
MEENAKSHI KOHLI
Date: 2020.02.12
to pay a sum of Rs.3,46,87,113/- (Rupees Three Crores
15:40:56 IST
Reason:
Forty Six Lakhs Eighty Seven Thousand One Hundred and
C.A.No.10409 of 2016 2
Thirteen) to the respondent-complainant as per the
insurance policy with interest @ 9% per annum with
effect from six months from the date of lodgement of
the claim, till the date of payment.
2. The respondent-complainant is a Collateral
Management Company, which undertakes to store the
commodities pledged by the farmers, traders and
manufacturers etc., in availing loan from lending banks
and other institutions. In case of any loss of the
pledged commodities, the respondent-complainant is
liable to make good the loss to the lending bank. The
respondent-Collateral Management Company, took
Fidelity Guarantee Insurance Policy from the appellant-
opposite party, in respect of the pledged commodities
stored in warehouses/godowns at several places.
3. The three firms namely S.K. Sales Corporation,
Navbharat Commodities and Navbharat Agro Products,
entered into agreements with the respondent-complainant
for storing commodities including urad and mentha oil
in their warehouse at Gadarpur in District Udham Singh
Nagar, Uttarakhand. The respondent-Company was
appointed as the Collateral Manager for the said
C.A.No.10409 of 2016 3
commodities, which has deployed security guards hired
by it from the security agency, besides its own field
staff. Coming to know that on 06.11.2008, the stored
commodity of urad was unauthorizedly removed from the
godown, which was pledged to HDFC Bank, the respondent
dispatched a team of its officers to investigate the
same. The report dated 16.11.2008 of the investigating
agency revealed certain omissions and commissions by
the concerned employees of the respondent in connivance
with the borrowers. Coming to know of such unauthorized
removal of urad, the respondent has taken steps to
prevent further possible loss to oil and wheat. 601
barrels of oil were shifted to a godown at Bazpur,
where a quality check was conducted. On making such
quality check, laboratory report revealed that the
mentha oil was substituted by water in the barrels.
Thereupon, claim was lodged by the respondent with the
appellant on 08.11.2008 and further a complaint was
also lodged at the Police Station upon which, an FIR
was registered on 19.11.2008.
4. The respondent-complainant made a claim with
appellant, alleging that the commodities were
C.A.No.10409 of 2016 4
removed/substituted in connivance with the employees
which was an act of infidelity covered by the insurance
policy taken by it. It is alleged that the employees
have committed criminal breach of trust, with a view to
cause loss to the banks and the complainant. When the
claim was not accepted, the respondent-complainant
approached the National Commission, claiming an amount
of Rs.4,17,84,213/-(Rupees Four Crores Seventeen Lakhs
Eighty Four Thousand Two Hundred and Thirteen). The
said claim included loss of stock of urad payable to
HDFC Bank for an amount of Rs. 70,97,100/-
(Rupees Seventy Lakhs Ninety Seven Thousand One
Hundred) and further loss of Rs. 3,46,87,113/-(Rupees
Three Crores Forty Six Lakhs Eighty Seven Thousand One
Hundred and Thirteen Only) payable to State Bank of
India for the stock commodity of mentha oil. The said
claim was contested and opposed by the appellant-
opposite party. By considering the submissions on both
sides and other relevant material placed on record, the
National Commission, by impugned order, allowed the
claim of Rs.3,46,87,113/- along with interest @ 9% per
C.A.No.10409 of 2016 5
annum towards the loss of mentha oil but at the same
time rejected the claim so far as urad is concerned.
5. We have heard Sri. Vishnu Mehra, learned counsel
appearing for the appellant-Company and Sri. C.U.
Singh, learned senior counsel appearing for the
respondent-complainant. Learned counsel for the
appellant, by taking us to the material placed on
record and the impugned order, mainly contended that
the respondent-complainant has failed to prove that any
employee is involved in removing/substituting mentha
oil with water in 601 barrels, which was stored in the
godown. It is submitted that even as per the
investigation reports, seals were intact, as such, in
absence of any finding with regard to tampering of
seals, there is no basis for the claim of the
respondent-complainant. Further it is stated that as
per the terms of the contract of insurance, the claim
was not made immediately. As such, respondent has
violated the terms and conditions of the contract of
insurance. It is submitted that National Commission
fell in error in allowing the claim of Rs.3,46,87,113/-
towards the loss of mentha oil, as claimed by the
C.A.No.10409 of 2016 6
respondent- complainant. It is further submitted that
even in the impugned order, the National Commission did
not name any employee of the respondent, who was
allegedly involved in substituting the mentha oil with
water. Thus, it is submitted that the impugned order is
fit to be set aside, by allowing the appeal.
6. On the other hand, Sri. C.U. Singh, learned senior
counsel, by referring to the survey report of the
appellant-Company and other material, has submitted
that even as per the survey report of the appellant-
Company, the commodity of mentha oil was removed, by
substituting with water, by the borrowers, in
connivance with employees. Further, it is submitted
that on the complaint made by the respondent, the
owners of the commodity who have pledged the goods to
the bank and also the employees of the respondent, were
charge-sheeted for offences under Sections 420, 406,
405, 415, 427 of the Indian Penal Code and the case is
pending trial. It is submitted that the survey report
itself indicates involvement of the employees of the
respondent, as such, claim is covered by the insurance
policy. It is submitted that after filing of the
C.A.No.10409 of 2016 7
complaint, when the claim is repudiated, such rejection
order also is questioned by way of amendment. It is
submitted that when the impugned order is read in
entirety with regard to urad and mentha oil, it is
clear that the warehouse Supervisor Mr. Narender Yadav
and security guard Mr. Ram Singh were involved in
removal/substitution of mentha oil with water.
7. Learned counsel by taking us to the survey report,
has also submitted that the survey report itself
indicates for prosecuting borrowers as well as
employees of the respondent, as such, there is no basis
for the allegation of the appellant that employees were
not involved. It is submitted that when it has come to
light that mentha oil was substituted by water, 100 per
cent sampling was undertaken, which was completed on
12.11.2008 and the investigation report was submitted
to the respondent-complainant on 14.11.2008 and the
matter was reported to the insurer on 18.11.2008, as
such, there is no violation of condition no.1 of the
policy. Learned counsel, explaining the scope of
Fidelity Guarantee Insurance Policy, has placed
reliance on a judgment of this Court, in the case of
C.A.No.10409 of 2016 8
Food Corporation of India Vs. New India Assurance Co.
Ltd. and Others1 and a recent judgment of this Court
dated 24.01.2020, in the case of Gurshinder Singh Vs.
Shriram General Insurance Co. Ltd. & Anr.2
8. Upon hearing the learned counsels on both sides
and on perusal of the impugned order and other material
placed on record, we do not find any merit in any of
the contentions advanced by learned counsel for the
appellant. The aforesaid judgments relied on by
learned counsel for the respondent, though relate to
insurance claims, but the issues decided in the
aforesaid judgments, have no direct bearing on the
issues which arise for consideration in this case.
9. It is not in dispute that the insurance policy for
fidelity guarantee was in force during the relevant
time, which was obtained by the respondent-complainant.
Fidelity Guarantee is different from contingency
guarantee. The insurance under it, is for honesty,
against negligence or for being faithful and loyal to
its employees. The protection afforded is different
than in normal insurance policies. Precisely, it is a
1 (1994) 3 SCC 324
2 C.A. No. 653 of 2020
C.A.No.10409 of 2016 9
contract whereby, for a consideration, one agrees to
indemnify another, against loss, arising from the
breach of honesty, integrity or fidelity of an employee
or other person holding a position of trust. In Black’s
Law Dictionary, fidelity insurance is explained as
under:
“Fidelity Insurance- Form of insurance in which
the insurer undertakes to guarantee the fidelity of an
officer, agent or employee of the assured or rather to
indemnify the latter for losses caused by dishonesty or
a want of fidelity on the part of such person.”
As such, the insurance policy of fidelity guarantee is
to be construed as a policy, intended to protect the
assured against the contingency of a breach of fidelity
on the part of a person in whom confidence has been
placed.
10. The impugned order is assailed mainly on the
ground that the respondent has failed to prove
involvement of any of the employees of the respondent-
Company, as such, there cannot be any liability on the
appellant-insurance company. It is not in dispute that
the pledged goods of 601 barrels of mentha oil was
C.A.No.10409 of 2016 10
stored in the warehouse. The survey report dated
26.03.2009, itself indicates the involvement of
employees of the respondent-Company in removing 601
barrels of mentha oil stored by the respondent-Company.
Immediately, after confirmation and 100 per cent
sampling, it was disclosed that in all the barrels, the
mentha oil was substituted with water, a complaint was
lodged by the respondent-complainant on 18.11.2008
before the Gadarpur Police Station. In the complaint
filed, specific allegation is made about involvement of
staff of the respondent-Company.
11. There is a specific observation in the survey
report that the security guard of the respondent-
Company had allowed Mr. Sanjeev Chhabra(owner) to lift
the stock. Referring to the complaint made by the
respondent-Company to the Police, a request is made to
take action against owners as well as the employees
namely Mr. Narender Singh Yadav, who was the Warehouse
Supervisor, Cluster Head Mr. Anil Saxena, Warehouse
Executive Mr. Aneesh Mohd. and Security Guard Mr. Ram
Singh for committing crime under various Sections of
the Indian Penal Code. If the entire material is taken
C.A.No.10409 of 2016 11
into consideration, it is clear that there is a clear
involvement of the employees of respondent and other
contract employees in substituting the mentha oil
barrels with water. It is also argued by learned
counsel for the appellant that during the inspection,
seals were found to be intact but it does not make any
difference in as much as 100 per cent sampling proved
that all barrels which were earlier filled with mentha
oil, were substituted with water.
12. There is yet another contention advanced by
learned counsel for the appellant that there was a
delay in lodging the complaint, as such, it is in
violation of condition no.1 of the contract of
insurance. It is clear from the impugned order and
other material placed on record, when it has come to
the notice of the respondent, that mentha oil was
substituted by water in the barrels, respondent
undertook 100 per cent sampling, by sending the samples
drawn from the barrels to the laboratory and such
sampling was completed only on 12.11.2008 and the
investigation report came to be submitted to the
respondent-Company on 14.11.2008. Before that
C.A.No.10409 of 2016 12
respondents were not aware of mentha oil substituted by
water in all the barrels. Thereafter, claim was made
before the appellant on 18.11.2008.
13. In that view of the matter, it cannot be said that
there is any delay on the part of the respondent in
lodging the claim, so as to accept that there is
breach of condition no. 1 of the policy.
14. For the aforesaid reasons and in view of the
findings recorded in the impugned order, we do not find
any merit in this appeal, so as to interfere with the
same. The appeal is, accordingly, dismissed with no
order as to costs.
……………………………………………………………………J
(MOHAN M. SHANTANAGOUDAR)
……………………………………………………………………J
(R. SUBHASH REDDY)
NEW DELHI;
February 12, 2020
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