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Beneficiaries who can take benefit of the insurance availed by the insured will come under definitio


CORAM: Two judge bench comprising of Justice S. Abdul Nazeer and Justice Deepak Gupta.

The brief facts of the case are that some farmers had stored their agricultural produce in a cold store and a loan was obtained from a Canara Bank which was secured by the agricultural produce stored in the said cold store. The cold store was insured in an insurance company. A fire destroyed the entire building of the store and the agricultural produce. The cold store claimed compensation from the insurance company which was repudiated stating that the fire was not accidental. The farmers also issued notice to the insurance company which was repudiated stating that they had no locus standi and privity of contract to make the claim. It was countered by stating that there was tripartite agreement between the framers, Bank and the cold store. In terms of that agreement, the cold store got their stocks insured from the insurance company and thus the latter was liable to pay the amount with the interest. The insurance company claimed that the farmers are not ‘consumers’ within the meaning of the Consumer Protection Act, 1986. The insurance company challenged the very genuineness of the tripartite agreement before the Karnataka State Consumer Dispute Redressal Commission. This commission made the insurance company liable to pay compensation to the farmers as the latter has proved that the fire was not on account of human intervention. Aggrieved by this judgment an appeal was made to the National Commission which also confirmed that the farmers are consumers. Thus an appeal was filed by the insurance company before this court.

The counsel for the insurance company contended that the fire was not an accidental one and the farmers were not consumers and thus the consumer fora has no jurisdiction to decide the dispute. Also it was contended that there was no privity of contract between the framers and the insurance company. It was contended that a contract of insurance should be strictly construed between the parties to the contract. Also there is no insurable interest of the farmers and the tripartite agreement. There is non-disclosure of the important facts and the insurance company was not liable.  The liability of the insurance company is excluded by General Exclusion Clause 5 and General Condition no.1 and General condition no.8 of the insurance policy. The counsel also kept an argument that the terms of the insurance policy should be construed strictly because the parties to the contract of insurance are insurance company and the cold store. The judgments of United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal , Raghunath Rai Bareja v. Punjab National Bank and Suraj Mal Ram Niwas Oil Mills (P) Ltd. v. United India Insurance Co. Ltd.

It is also urged that the claim of the cold store was repudiated by the insurance company. Also the tripartite agreement is not relevant as far as the insurance company as it is not a signatory to the agreement. Also in some cases it is contended that the agreement is not signed by the Bank.

The counsel for the farmers contended that paid rent to the cold store included the insurance. Also the cold store held the goods as bailee on behalf of the farmers where the crops were given on contractual bailment. Also according to the terms of the tripartite agreement, the store was bound to take insurance. In that the crops were separately insured from the premises. It was also contended that the insurance company was aware of the fact that the insurance policy was for the benefit of the farmers.

The court analyzed the definition of the term “consumer” u/s 2(d) of the Act. According to this it was held that the term is very wide to include the person who hires or avails any service for consideration. As far as the issue of privity of contract is concerned that court viewed that there is no necessity of privity of contract between the insurance company and the claimants. The farmers are consumers of the insurance policy as they are the beneficiary of the policy. With regard to the tripartite agreement, the stocks are the security with the bank and the latter has only insisted on insuring the stock. Thus the farmers are beneficiary under the policy and so can be called as consumer. M. C. Chacko v. The State Bank of Travancore, Trivandrum was referred by this court.

The court observed that the contention of the insurance company that there was fraudulent scheme was baseless. Thus this court viewed that the insurance company is liable to indemnify the cold store under the insurance policy. As the farmers are the beneficiaries, they are entitled to get the amount payable under the policy. This court feels that the bank cannot claim interest at the contractual rate. Also the decision of the National Commission is affirmed regarding the value of the goods. Thus the bank is entitled to recover the principal amount with the interest.

Thus in view of the above observations, the court dismissed the appeal with some directions.




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