21 years after fire reduced coal stock to ashes, insurance firm told to cough up Rs 1.36 crore

Ramkrishan Upadhyay

Chandigarh, June 13

In a significant judgment, the State Consumer Disputes Redressal Commission, Chandigarh, has directed an insurance company to pay the claim amount of over Rs 1.36 crore, along with interest at the rate of 9% per annum, to a city couple for the loss caused in a fire incident.

The commission also directed the insurance company to pay a compensation of Rs 2 lakh and Rs 35,000 as cost of litigation each to husband and wife for causing mental agony and harassment by rejecting their claim without any valid reason.

In complaints filed before the commission through counsel Neeraj Pal Sharma, Prem Vashisht and her husband VK Vashisht stated that they had been into coal trade for the past 25 years through different firms. To arrange sufficient financial resources for running the business, they approached Punjab National Bank (PNB), which offered finance to the extent of 75% of the total working capital/cash credit limit. In order to protect its own interest, PNB bought fire policies from New India Assurance Company Limited from time to time.

They said a fire incident took place in their godown on February 7, 2003, in which the entire stock was reduced to ashes. The insurance company and the bank were intimated about the incident the next day. The loss of the two firms was pegged at over Rs 1.36 crore.

The insurance company did not settle their claims and rejected them for various reasons. They alleged that the act of the bank in neglecting to insure the stock against all risks and the conduct of company in repudiating the claims on various grounds amounted to deficiency in service.

On the other hand, the bank claimed it had got the stocks insured well in time within limitation, which was evident from the cover note issued by development officer of the insurance company. The firm also denied the allegations against it.

After hearing of the arguments, the commission comprising Raj Shekhar Attri, president, and Rajesh K Arya, member, directed New India Assurance Company Limited to pay the claims to the tune of over Rs 1.36 crore, along with interest at the rate of 9% per annum from August 20, 2003, to the complainants.

Couple fights long legal battle

• The couple fought a long legal battle to seek justice. Initially, they had filed complaints before the consumer commission in 2003. However, the panel dismissed the complaints as it did not hold them consumers within the meaning of Section 2(1)(d)(i) & (ii) of the Consumer Protection Act-1986.
• Aggrieved against the orders, they approached the National Consumer Disputes Redressal Commission, but it too dismissed the appeals.
• Thereafter, the complainants approached the Supreme Court of India. The apex court, in its order dated August 9, 2023, set aside the orders of the commission and returned the complaints to the state commission for consideration of the matters on merit.