M/S. Krishna Food & Baking Industry P. Ltd. vs . M/S. New ·India Assurance Co. Ltd. & Anr.

3

C.K. THAKKER, J.

1. All these appeals have been filed

against a common judgment and order dated June

01, 2001 passed by the National Consumer

Disputes Redressal Commission (`National

Commission' for short) in Original Petition No.

194 of 1994 and companion matters. These

appeals are filed under Section 23 of the

Consumer Protection Act, 1986 (hereinafter

referred to as `the Act').

2. To appreciate the controversy raised

in the present appeals, few relevant facts may

be stated.

3. M/s Krishna Flour and Oil Mills

(`Mill' for short) is a partnership firm while

M/s Krishna Food and Baking Industry Pvt. Ltd.

(`Company' for short) is a company registered

under the Companies Act, 1956 as applicable to

the State of Jammu & Kashmir. Both the units

were located in Nawab Bazar, Srinagar, in the

State of Jammu & Kashmir. Both were sister 4

concerns. Rajendra Kumar Sawhney was Chairman

of the Company as also main partner of the

Mill. The Company was dealing in manufacturing

bread, biscuits, cakes and other bakery items.

It is the case of the complainants that during

the period of disturbances caused by militancy

in early nineties of the last century, Mr.

Praneet Sawhney, only son of Rajendra Kumar

Sawhney was shot dead by the terrorists on

March 27, 1990 in his office. Immediately

thereafter, operations of both the units were

suspended and the complainants had to migrate

to Delhi. It was stated that there was `watch

and ward staff' as also some other personnel

who looked after the premises and stocks and

raw materials lying in the units. It was also

stated in the complaints that the complainants

were able to transfer records from Srinagar to

Delhi.

4. According to the complainants, they

had obtained three separate insurance policies

from M/s New India Assurance Co. Ltd. 5

(`Insurance Company' for short), the details of

which are as under;

S No. Policy No. Sum Case No. Items covered Assured

1. 112119000249 Rs.40 194/94 Stock of Wheat, Wheat Lakh Products and Packing material and Goods of like nature of Krishna Flour & Oil Mills

2. 113119000312 Rs.25 210/94 Stocks of Raw Material Lakh like Flour, Maida, Ghee, chemicals etc. in godowns belonging to Krishna Food & Baking Industries

3. 113119000313 Rs.53 209/94 Plant & Machinery Lakhs installed in Krishna Food & Baking Industries.

(a) Factory Building Rs.21 lakhs

(b) Electric fittings Rs.4 lakhs

(c) Plant & Machinery Rs.28 lakhs

5. It was the say of the complainants

that in the morning of November 12, 1991,

certain terrorists attacked the Company as well

as the Mill and set them on fire. Substantial

damage had been caused to building, plant,

machinery and electricity fittings; the raw

materials lying in the units were destroyed

stocks which were in both the units were also

either destroyed or substantially damaged. In 6

view of the insurance coverage, a demand was

made by the complainants to the Insurance

Company to get the survey done and to pay the

amount of loss sustained by the complainants.

The Insurance Company, however, did not do

anything in the matter for quite long time.

The complainants got the survey done through

their surveyors and demanded the amount to

which they were entitled to. The Insurance

Company, however, did not make payment which

constrained the complainants to approach

National Commission by filing three complaints

being Complaint Nos. 194, 209 and 210 of 1994.

6. The prayer made in the complaints and

the demand in respect of policies and sums may

be summarized thus;

S No. Policy No. Sum Complaint Items covered Assured No. 1. 112119000249 Rs.40 194/94 Stock of Wheat, Wheat Lacs Products and Packing material and Goods of like nature of the Mills. (`Wheat Policy') 2. 113119000312 Rs.25 210/94 Stocks of Raw Material Lakhs like Flour, Maida, Ghee, chemicals etc. in godown belonging to Baking Industry. (`Raw Material Policy') 7

3. 113119000313 Rs.53 209/94 Plant & Machinery Lakhs installed in Baking Industry. (`Plant Policy')

(a) Factory Building Rs.21 lakhs

(b) Electric fittings Rs.4 lakhs

(c) Plant & Machinery Rs.28 lakhs

7. The Insurance Company repudiated the

claim of the complainants. At a belated stage,

survey had been carried out by the Insurance

Company through its Surveyors wherein it was

observed that substantial damage had not been

caused to building, plant, machinery and

electricity fittings and the complainants were

not entitled to the amount demanded by them

under the said head. The Insurance Company also

assessed the damage to the building, plant,

machinery and electricity fittings to the

extent of Rs.31,373/- and nothing more.

8. With regard to raw-materials and

stocks, the amount was substantially curtailed

by the Insurance Company inter alia on the

grounds that the stocks were perishable in 8

nature and had become unfit for human

consumption and the same had been badly

affected by bacterial growth. It had become

worthless at the time of mishap in 1991. It

was also contended that in absence of proper

`watch and ward staff', there was pilferage of

stocks and raw materials by intruders as well

as by staff members of the complainants'

Company and Mill. It was, therefore, submitted

that the complainants were not entitled to the

amount claimed in the complaints.

9. The National Commission went into the

merits of the matter and held that the

complainants were entitled to certain reliefs.

With regard to stocks kept in the godown of the

Mill, it observed that it was covered by policy

No. 1131190000249. The policy was for an amount

of Rs. forty lakhs and premium of Rs.5,814/-

was paid. The claim put forward by the

complainants was for Rs.37,78,618/-. According

to the complainants, the stocks which were

lying in the units were as under;

9

Commodity Quantity Rate Amount (Rs.) Wheat 2138.48 Qtls. Rs.400/Qtl. 8,55,392 Maida 4676 Bags (90 Kg.) Rs.450/bag 21,04,200 Krishna 271 Bags (80 Kg.) Rs.400/bag 1,08,400 Bhog Atta Super 5952 Bags (10 Kg) Rs.55/bag 3,27,360 Fine Atta Bran 2090 Bag (10 Kg) Rs.100/bag 2,09,000 Bardana (Total value as per 1,74,267 (Packing Books) Material) Total 37,78,619

10. The National Commission held that

surveyors of the complainants had prepared a

report and submitted to the Insurance Company,

but the claim was repudiated on the ground that

there were no stock worth its while as there

was pilferage since the units remained closed

for about twenty months. It was also contended

by the Insurance Company that the stock was not

fit for human consumption. The final survey

report at the instance of the Insurance Company

recommended to settle the claim of the

complainants at Rs.5,18,619/-. The figure was

communicated by the Insurance Company to the

complainants.

11. The National Commission noted that

respondent No. 2 Grindlays Bank supported the 10

case of the complainants and prayed that the

amount claimed by the complainants be given to

them as the complainants executed mortgage

documents in the favour of the Bank.

12. The National Commission considered the

evidence of Mr. Ghulam Rasool Wani, the only

witness examined on behalf of the complainants

who was an illiterate staff member. On behalf

of the Insurance Company, two surveyors, Mr.

Andrasabi and Mr. A.K. Gupta were examined. The

Insurance Company also examined Mr. V.K. Malik

and Mr. M.R. Grover. The National Commission

considered the relevant documentary and oral

evidence and observed that the risk was covered

by the terms and conditions of the insurance

policy. It also held that the units could not

work in view of militancy in the area and the

units were required to be closed down. It

believed the case of the complainants that

there was terrorist attack on both the units on

November 12, 1991 and the militants set on fire

the units. It further recorded a finding that 11

there was no evidence whatsoever to conclude

that there was pilferage either by the

intruders or by the staff members of any of the

units. It, however, held that stocks were

worthless, and as such, the complainants were

not entitled to the amount claimed. According

to the National Commission, an amount of

Rs.5,18,619/- as recommended by the surveyors

of the Insurance Company was a reasonable

figure and ought to have been accepted by the

Insurance Company. Accordingly, it held that

the complainants were entitled to the said

amount.

13. With regard to the raw material, it

was covered by policy No.1131190000312 and the

coverage was for Rs. 25 lakhs. Premium of

Rs.4,821/- was paid and the policy was

subsisting.

14. The break up given for such claim was

as under;

Raw Materials Rs. 11,52,248-00 Packing Materials Rs. 05,40,079-00 Interest @ 18% Rs. 08,66,471-00 12

------------

TOTAL Rs. 25,58,798-00 ------------

15. Thus, according to the complainants,

total loss in respect of raw materials and

allied perils was to the extent of Rs.

25,58,798/-. On the said claim, the Insurance

Company appointed three investigators, i.e. Mr.

Hamdani, Andrasabi and Adarsh Associates. The

surveyors, in their report, narrated the facts

and circumstances of the case and left the

amount of valuation of raw materials to the

opposite party. In a subsequent report,

however, they gave a figure of Rs.4,33,122/-

for settlement of the claim and asked the

complainants whether they were ready to accept

the amount. Upon the query by the complainants,

however, the Insurance Company, instead of

giving response to the query, repudiated the

claim vide letter dated April 19, 1995 on the

ground that there was pilferage and hence, the

Insurance Company was not liable. Moreover, 13

though there was destruction of raw material

due to fire in the units, since the raw

materials were unfit for human consumption, the

complainants' claim was not well-founded. It

was, therefore, held that the complainants were

not entitled to the claim.

16. The National Commission considered the

question and observed that there was no

pilferage and taking into account the weather

condition in Srinagar, it could not be held

that the raw materials had become worthless or

unfit for human consumption. Considering the

reports, it was held by the National Commission

that as per the Surveyors Report at the

instance of the Insurance Company, the

claimants were entitled to Rs.4,53,122/-.

17. In respect of building, plant,

machinery and electricity fittings, the claim

was covered by policy No.1131190000313. It was

for Rs. 53 lakhs. The break-up was as follows; 14

i) Factory Building Rs. 21,00,000

ii) Electric fittings including Rs. 4,00,000 Transformer etc.

iii) Machinery of all kinds used for Rs. 28,00,000 Manufacture of Biscuits, Bread etc. Rs. 53,00,000

---------------

18. The Insurance company, on the other

hand, stated that the complainants were

entitled only to Rs.31,373/- and nothing more.

19. The National Commission considered the

question and observed that the complaint

relating to the said policy was required to be

allowed in part. The Insurance Company was

directed to make payment of Rs.31,373/- towards

damage to building with interest at the rate of

12 per cent and the complaints were accordingly

disposed of.

20. Being aggrieved by the order passed by

the National Commission, three appeals have

been filed by the complainants. The grievance

of the complainants is that though the

complainants were entitled to the amount which

had been claimed by them, based on evidence and 15

Surveyors' Reports, the National Commission

committed an error of fact and of law in not

granting the prayer and in not allowing the

complaints in their entirety. It was,

therefore, submitted that the appeals deserve

to be allowed by directing the Insurance

Company to pay full amount with interest at the

rate of 18 per cent from November 12, 1991 and

costs. The prayer was also made to pay

appropriate amount towards harassment caused to

the complainants.

21. Two appeals are filed by the Insurance

Company. In the appeals, it was contended by

the Insurance Company that the National

Commission was in error in granting relief in

favour of the complainants. The complainants

were not entitled to any relief since in

absence of the Managing Director and other

responsible persons, there was pilferage by

intruders and staff members themselves for

which the Insurance Company cannot be held

liable nor it can be directed to make payment. 16

Similarly, raw materials and stocks had become

unfit for human consumption and the

complainants were not entitled to the amount

claimed by the complainants from the Insurance

Company. The amount which was offered by the

Insurance Company was adequate and sufficient.

The amount on account of poor quality of goods

and materials had been rightly deducted. The

order passed by the National Commission,

therefore, deserves interference by allowing

the appeals of the Insurance Company.

22. Grindlays Bank has not challenged the

order passed by the National Commission.

Canara Bank, however, has filed two appeals by

obtaining special leave from this Court against

orders passed in Original Petition Nos. 209 of

1994 and 210 of 1994. It has supported the case

of the complainants. According to the Canara

Bank, the claim put forward by the complainants

was well-founded and ought to have been allowed

in toto by directing the Insurance Company to

pay full amount towards loss and damage claimed 17

by the complainants. It, however, submitted

that the entire amount to which the

complainants were entitled ought to have been

ordered to be paid to the Bank in view of the

fact that the Insurance Policies had been

assigned in favour of the Bank. In law, such an

assignment amounts to transfer of actionable

claim in favour of the Bank. The Insurance

Company is, therefore, bound to pay the amount

to Canara Bank. Reliance in this connection was

placed on behalf of the Bank on Section 38 of

the Insurance Act, 1938; Sections 130 and 135

of the Transfer of Property Act, 1882 and a

decision of this Court in Chief Executive

Officer & Vice Chairman, Gujarat Maritime

Board v. Haji Daud Haji Harun Abu & Ors.,

(1996) 11 SCC 23. It was, therefore, submitted

that appeals filed by the complainants should

be allowed but the entire amount in relation to

two policies be ordered to be paid to Canara

Bank.

18

23. We have heard the learned counsel for

the parties. Learned counsel for the

complainants contended that the National

Commission committed an error of fact and of

law in not allowing the complaints and the

claims put forward by the complainants in their

entirety. It was submitted that the National

Commission recorded a finding that the claims

were covered by policies which were operative.

Claims were lodged by the complainants on the

basis of damage sustained by them. In support

of such claims, survey was made and Surveyors'

Reports were duly forwarded to the Insurance

Company. The defence of the Insurance Company

that there was pilferage by the intruders as

well as by staff members of the complainants

was not believed. Regarding adverse affect on

raw materials and stocks, the National

Commission observed that keeping in view the

climatic conditions of Srinagar, it could not

be said that the entire stock and raw material

was unfit for human consumption. It, therefore, 19

allowed part of the claim of the complainants.

According to them, however, the National

Commission was not right in deducting the claim

of the complainants. Apart from favourable

climatic conditions in Jammu & Kashmir, the

National Commission ought to have appreciated

the fact that the complainants could not carry

on their business activities of preparing

biscuits, breads, cakes and other items not

because of inaction on their part, but because

of terrorist activities and militancy in the

area. It was, therefore, not a case of

voluntary omission to carry on trade, but it

was compulsion that they could not produce

goods. It was contended that terrorism was one

of the terms covered by the Insurance Policy

and since the business could not be carried on

because of terrorism, the complainants had to

suspend operations of both the units. The

complainants cannot be held even partly

responsible for such suspension of operation of

units and stoppage of business. The National 20

Commission ought to have appreciated these

facts and ought to have allowed the claim of

the complainants.

24. It was also submitted that in spite of

continuous requests by the complainants to the

Insurance Company to get the survey done, no

action was taken by the Insurance Company for a

pretty long time. Moreover, even after the

survey was got done by the Insurance Company

through its own Surveyors and as per their

reports, certain amounts were required to be

paid, the said amount was also not paid by the

Insurance Company. Regarding certain items,

there was no response whatsoever by the

Insurance Company. The National Commission

also took into account those facts, but allowed

the claim of the complainants only in part.

The order of the National Commission to that

extent, therefore, requires to be modified by

granting full claim of the complainants.

25. It was submitted that in the facts and

circumstances and entitlement of the 21

complainants for full claim, appeals filed by

the Insurance Company are liable to be

dismissed.

26. Regarding to appeals filed by Canara

Bank, it was submitted that the appeals are not

maintainable. The National Commission was,

therefore, wholly right in not directing the

Insurance Company to pay the claim amount to

the Bank. It was also submitted that such

claim lodged by the Canara bank was even

otherwise not tenable. It was urged that under

Section 3 of the Jammu & Kashmir Migrants (Stay

of Proceedings) Act, 1997, no such claim could

have been lodged by the Bank against the

complainants by approaching a Civil Court by

filing a suit and no order could have been made

or a decree could have been passed by a

competent Court in view of the provisions of

the said Act. Since no such claim is

maintainable in the light of statutory

provisions, the Bank cannot by this indirect

method, obtain a decree and get it executed 22

which it could not have otherwise got in view

of the suspension of such claims. It was,

therefore, submitted that both the appeals

filed by the Canara Bank are also liable to be

dismissed.

27. The learned counsel for the respondent

Insurance Company contended that the National

Commission was not right in partly allowing the

claims of the complainants. It was stated that

the Insurance Company got the survey done

through its surveyors and the amount to which

the complainants were found entitled was

offered to them. But the complainants wanted

more amount and approached the National

Commission. It was also submitted that from

the Survey Reports, it was clearly proved that

stocks and raw materials had become unfit for

human consumption. The National Commission was,

therefore, right in reducing the claim to that

extent. According to the counsel, however, the

National Commission was not right in observing

and recording a finding that there was no 23

pilferage. It was stated that it was not in

dispute that after Praneet Sawhney was shot

dead by the terrorists, the operation in both

the units stood suspended and Managing Director

of the Company (Rajendra Kumar Sawhney) left

Srinagar and went to Delhi and only employees

were there. It was, therefore, obvious that in

absence of any responsible officer belonging to

Sawhney family, there was pilferage as stated

by the Insurance Company and the National

Commission could not have recorded a finding to

the contrary. To that extent, therefore, their

appeals deserve to be allowed.

28. The learned counsel for the Canara

Bank, on the one hand, supported the claim of

the complainants and submitted that once the

operation of the units became impossible due to

terrorist activities which was covered by a

clause in Insurance Policy and the complainants

could not carry on business, the National

Commission was not justified in rejecting any

part of the claim of the complainants. On the 24

basis of survey reports substantial loss to the

building, plant, machinery and electricity

fittings had been proved and the complainants

were entitled to the entire amount. Similarly,

with regard to raw materials and stocks,

nothing could have been deducted by the

National Commission as it was impossible for

the complainants to carry on production. The

only reason why the units could not operate was

militancy activities in the area. If it were

so, the National Commission was not justified

in taking into account the fact as to

suspension of business for reduction of claim

and consideration of the aspect that certain

items were unfit for human consumption and the

amount was liable to be reduced.

29. It was, however, submitted that

indisputably substantial advance was made to

the complainants by the Bank and it was having

charge over the property of the Company and of

the Mill. It had also a right of lien. It was,

therefore incumbent on the National Commission 25

to uphold the claim of the Bank by directing

the Insurance Company to pay the amount to the

Bank directly and not to the complainants. The

counsel submitted that the provisions of

Section 38 of the Insurance Act, 1938 and

Sections 130 and 135 of the Transfer of

Property Act are clear on the point. The point

is also covered by a decision of this Court.

The National Commission was, therefore, wrong

in rejecting the prayer of the Bank and both

the appeals of the Bank should be allowed.

30. Regarding the provisions of 1997 Act,

it was submitted that the contention of the

complainants is ill-founded. This is not a

case wherein the Bank becomes a plaintiff and

in that capacity, it files a suit against the

complainants-defendants for recovery of amount.

Once there is an `actionable claim' and the

Bank is having charge over the property of the

complainants, it ipso facto entitles the Bank

to recover such amount directly from the

debtor, i.e. Insurance Company. The 1997 Act 26

has no application to such cases. It was

asserted that as on date, the amount to which

the Bank is entitled and the complainants are

liable to pay, exceeds Rs. five crores. The

Bank, therefore, has right to get the entire

amount to which the complainants are held

entitled to. It was, hence, submitted that the

appeals filed by the Bank deserve to be

allowed.

31. Having heard the learned counsel for

the parties and having gone through the records

and proceedings as also the judgment of the

National Commission, it is clear that the

complainants were able to establish the claims

put forward by them. It is not in dispute by

and between the parties that the Insurance

Policy covered several acts including terrorism

and fire. It has come in evidence and has been

believed by National Commission that the son of

the Managing Director was killed in March, 1990

by terrorist attack. It is in the light of the

said incident that the Managing Director had to 27

leave Srinagar and to return to Delhi. It was

because of the said incident that the operation

of both the units was suspended. Thus, it was

not a case wherein the complainants did not

undertake the activities which were required to

be undertaken by them, but they could not

operate the units and carry on business. No

fault, therefore, can be found against the

complainants for suspending the operation of

both the units. The complainants obviously

cannot suffer because of non-production in the

Mill as well as in the Company. The National

Commission was, therefore, not right in

reducing any amount on the ground that certain

stocks and raw materials were unfit for human

consumption. It was not intentional or

deliberate act on the part of the complainants

in stopping production and allowing the stocks

and raw materials to get spoiled or damaged and

by making them unfit for human consumption. It

was because of the militant activities and 28

terrorism that the Company and the Mill could

not do business and produce goods. Reduction

of amount by the National Commission on that

count was, therefore, unjustified and in our

opinion, that part of the order requires

interference by this Court.

32. As regards pilferage by intruders and

staff members, except ipse dixit on the part of

the Insurance Company, no material whatsoever

has been placed on record in support of such

allegation. The National Commission, in our

opinion, was justified in not accepting such

bare assertion without any evidence or concrete

material in support of such plea. In fact, a

finding has been recorded by the National

Commission that the godowns were `full' when

they were set on fire. `Watch and ward staff'

were protecting the Mill and the Company. There

was also a `Police post' nearby both the units.

Further, the report submitted by Mr. Andrasabi

as to pilferage was not reliable. In Shyam

Sunder Narang v. United India Insurance Co., 29

(1997) 111 CPJ 599, an adverse comment had been

made by the National Commission against the

report submitted by Mr. Andrasabi. Hence, in

our opinion, the National Commission was right

in not believing `pilferage theory' advanced by

the Insurance Company.

33. The matter, however, did not end

there. Even before us, nothing has been shown

from which such an inference could be drawn by

a reasonable and prudent man as to pilferage by

intruders or staff members. The National

Commission, in our judgment, was wholly right

in negativing the contention of the Insurance

Company that substantial part of stocks and raw

materials had been taken away by intruders or

staff members. No reduction, therefore, could

be allowed on that count.

34. The National Commission was also right

in observing that no payment was made by the

Insurance Company even as per the survey

conducted by the Surveyor appointed by the

Insurance Company. Taking into consideration 30

the entire facts and circumstances, in our

opinion, the complainants are entitled to claim

compensation towards building, plant, machinery

and electricity fittings, raw materials and

stocks.

35. Accordingly, the complainants are held

to be entitled to the following;

Policy No. Amount entitled to be awarded in favour of the appellant-insured 113119000249 Rs. 37,78,619/-

113119000312 Rs. 23,79,195/- 113119000313 Rs. 25,81,600/-

35. In view of the fact that the appeals

filed by the complainants are allowed, the

appeals filed by the Insurance Company must

necessarily fail. Accordingly, the appeals

filed by the Insurance Company are dismissed.

36. In respect of Policy No. 113119000249,

no appeal has been filed by the Grindlays Bank.

It was observed by the National Commission in

the impugned judgment that the matter appears

to have been settled between the parties. In

any case, there is no appeal by a financial 31

institution so far as the said policy is

concerned.

37. But as far as the appeals by Canara

Bank are concerned, in our opinion, the claim

put forward by the Bank is well founded.

Section 38 of the Insurance Act reads

thus;

Section 38 - Assignment and transfer of insurance policies (1) A transfer or assignment of a policy of life insurance, whether with or without consideration may be made only by an endorsement upon the policy itself or by a separate instrument, signed in either case by the transferor or by the assignor his duly authorised agent and attested by at least one witness, specifically setting forth the fact of transfer or assignment.

(2) The transfer or assignment shall be complete and effectual upon the execution of such endorsement or instrument duly attested but except where the transfer or assignment is in favour of the insurer shall not be operative as against an insurer and shall not confer upon the transferee or assignee, or his legal representative, and right to sue for the amount of such policy or the moneys secured thereby until a notice in writing of the transfer or 32

assignment and either the said endorsement or instrument itself or a copy thereof certified to be correct by both transferor and transferee or their duly authorised agents have been delivered to the insurer:

Provided that where the insurer maintains one or more places of business in India, such notice shall be delivered only at the place in [India] mentioned in the policy for the purpose or at his principal place of business in India.

(3) The date on which the notice referred to in sub-section (2) is delivered to the insurer shall regulate the priority of all claims under a transfer or assignment as between persons interested in the policy; and where there is more than one instrument of transfer or assignment the priority of the claims under such instruments shall be governed by the order in which the notices referred to in sub-section (2) are delivered.

(4) Upon the receipt of the notice referred to in sub-section (2), the insurer shall record the fact of such transfer or assignment together with the date thereof and the name of the transferee or the assignee and shall, on the request of the person by whom the notice was given, or of the transferee or assignee, on payment of a fee not exceeding one rupee, grant a written acknowledgement of the receipt of such notice; and any such 33

acknowledgement shall be conclusive evidence against the insurer that he has duly received the notice to which such acknowledgement relates.

(5) Subject to the terms and conditions of the transfer or

assignment, the insurer shall, from the date of receipt of the notice referred to in sub-section (2)], recognise the transferee or assignee named in the notice as the only person entitled to benefit under the policy, and such person shall be subject to all liabilities and equities to which the transferor or assignor was subject at the date of the transfer or assignment and may institute any proceedings in relation to the policy without obtaining the consent of the transferor or assignor or making him a party to such proceedings.

(6) Any rights and remedies of an assignee or transferee of a policy of life insurance under an assignment or transfer effected prior to the commencement of this Act shall not be affected by the provisions of this section.

(7) Notwithstanding any law or custom having the force of law to the contrary, an assignment in favour of a person made with the condition that it shall be inoperative or that the interest shall pass to some other person on the happening of a specified event during the lifetime of the person whose life is insured, and an assignment in favour of the survivor 34

or survivors of a number of persons, shall be valid.

38. Likewise, both the sections, i.e.

Sections 130 and 135 of the Transfer of

Property Act, 1882 are explicitly clear and

they read as under;

Section 130 - Transfer of actionable claim (1) The transfer of an actionable claim whether with or without consideration shall be effected only by the execution of an instrument in writing signed by the transferor or his duly authorized agent, shall be complete and effectual upon the execution of such instrument, and thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such notice of the transfer as is hereinafter provided be given or not:

Provided that every dealing with the debt or other actionable claim by the debtor or other person from or against whom the transfer would, but for such instrument of transfer as aforesaid, have been entitled to recover or enforce such debt or other actionable claim, shall (save where the debtor or other person is a party to the transfer or has received express notice thereof as hereinafter provided) be valid as against such transfer.

35 (2) The transferee of an actionable claim may, upon the execution of such instrument of transfer as aforesaid, sue or institute proceedings for the same in his own name without obtaining the transferor's consent to such suit or proceedings and without making him a part thereto.

Exception.-Nothing in this section applies to the transfer of a marine or fire policy of insurance or affects the provisions of section 38 of the Insurance Act, 1938.

Section 135 - Assignment of rights under policy of insurance against fire Every assignee by endorsement or other writing, of a policy of insurance against fire, in whom the property in the subject insured shall be absolutely vested at the date of the assignment, shall have transferred and vested in him all rights of suit as if the contract contained in the policy had been made with himself.

39. In our opinion, therefore, the

submission of the learned counsel for the Bank

that as soon as a decree is passed or order is

made in favour of the complainants, the Bank is

entitled to the said amount is well founded.

For such a relief, it is not necessary for the

Bank to become a plaintiff by filing a suit in 36

a competent Court of law and obtain a decree in

its favour. It is true that had it been the

position, the provisions of 1997 Act would get

attracted and such suit would be stayed and no

decree could have been passed by a competent

Court in favour of the creditor. But in the

light of the statutory provisions in the

Insurance Act and in the Transfer of Property

Act, the Bank is entitled to the amount

directly from the Insurance Company.

40. In our opinion, the learned counsel

for the Bank is also right in relying upon the

decision in Gujarat Maritime Board. In that

case, a similar question came up for

consideration before this Court. There one B

was financed by A for purchase of vessel. The

vessel so purchased was mortgaged in favour of

A. As per the Finance Agreement between the

parties, B was required to take out a

comprehensive risk insurance policy and assign

it in favour of Director of Ports representing

Government of Gujarat. The insurance also 37

contained an endorsement in terms of the

agreement. The vessel on its voyage sunk in

the sea. B filed a complaint before the

National Commission claiming the insurance

amount from the Insurance Company. A brought

to the notice of the Commission that it had an

interest in the vessel as a mortgagee. The

Commission, however, directed the Insurance

Company to pay entire amount to B. A

approached this Court. This Court held that the

directions of the National Commission that the

entire insurance amount be paid to B was

unsustainable in law. Accordingly, the appeal

filed by the Maritime Board was allowed and the

order passed by the National Commission was set

aside.

41. In our opinion, the point is directly

concluded by the above decision of this Court

in Gujarat Maritime Board and the National

Commission was not right in rejecting the claim

of the Bank. The appeals of the Bank are,

therefore, required to be allowed. 38

42. For the foregoing reasons, the appeals

filed by the Insurance Company are ordered to

be dismissed. The appeals filed by the

complainants are required to be allowed to the

extent indicated above with interest at the

rate of 9 per cent per annum from the date of

filing of complaints before the National

Commission, i.e. from the date of payment. So

far as Appeal concerning Policy No. 11319000249

relating to stocks is concerned, the

complainants are entitled to get the entire

amount of Rs.37,78,619/- since there is no

appeal in respect of the said policy. Canara

Bank is not concerned with the said policy.

Grindlays Bank has not approached this Court

and had supported the complainants before the

National Commission. The two appeals of Canara

Bank are in regard to two policies,

113190000312 and 113190000313, raw materials

policy and plant policy. Both the appeals of

Canara Bank are allowed and the Insurance

Company is directed to make payment to Canara 39

Bank and not to the complainants in respect of

the amount to be paid to the complainants.

43. All appeals are disposed of

accordingly with no order as to costs.

............................................................J. (C.K. THAKKER)

......................................................J. (D.K. JAIN) NEW DELHI,

November 07, 2008.