Fire Accident – Framers Produce was destroyed in cold storage – Insurance Claim – Whether the farmers are consumers under the Act ? ‘the farmers’, had grown Byadgi Chilli Crop during the year 2012­2013. Some of the farmers had some other crops. These farmers had stored their agricultural produce in a cold store run by a partnership firm under the name and style of Sreedevi Cold Storage, hereinafter referred to as ‘the cold store’. These farmers also obtained loans from Canara Bank, hereinafter referred to as ‘the Bank’. The loan was advanced by the Bank to each one of the farmers on security of the agricultural produce stored in the cold store. The cold store was insured with the United India Insurance Company Limited, hereinafter referred to as ‘the insurance company’. A fire took place in the cold store on the night intervening 13.01.2014 and 14.01.2014. The entire building of the cold store and the entire stock of agricultural produce was destroyed. -but the claim of the cold store was repudiated by the insurance company mainly on the ground that the fire was not an accidental fire – Since the claims of the farmers were either rejected or not answered, they filed claim petitions against the cold store, the Bank and the insurance company in which the primary relief claimed was the value of the agricultural produce as on the date of fire and interest thereupon and each of the farmers also claimed damages of Rs.1,00,000/­ per head..- The insurance company resisted the complaint mainly on the ground that the ‘farmers’ were not consumers’ within the meaning of Consumer Protection Act, 1986,- apex court held the fire was an accidental fire and occurred due to a short circuit. These are pure findings of fact which, in our view, cannot be challenged in these proceedings. – The definition of consumer under the Act is very wide and it includes beneficiaries who can take benefit of the insurance availed by the insured. As far as the present case is concerned, under the tripartite agreement entered between the Bank, the cold store and the farmers, the stock of the farmers was hypothecated as security with the Bank and the Bank had insisted that the said stock should be insured with a view to safeguard its interest. We may refer to the penultimate clause of the tripartite agreement which reads as follows:­ “WHEREAS the Third Party has agreed to insure the produce/goods stored in the cold storage to indemnify the produce in case of any casualty or accident by any means to cover the risk and also to cover the loan amount to avoid loss at the cost of the Second Party till the release order or repayment of the loan amount.” The aforesaid clause in unambiguous terms binds the cold store to insure the goods, to indemnify the produce, to cover the risk and cover the loan amount. This insurance policy has to be taken at the cost of the second party which is the farmer. Therefore, there can be no manner of doubt that the farmer is a beneficiary under the policy. The farmer is, therefore, definitely a consumer and we uphold the orders of both the Commissions that the complaint under the Act is maintainable.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1042 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 20393 OF 2018)
CANARA BANK …APPELLANT(S)
Versus
M/S UNITED INDIA INSURANCE CO.
LTD. & ORS. …RESPONDENT(S)
WITH
CIVIL APPEAL NO. 1043­1051 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 24774­24782 OF 2018
CIVIL APPEAL NO. 1052­1059 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 25957­25964 OF 2018)
CIVIL APPEAL NO. 1060­1071 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 25137­25148 OF 2018)
CIVIL APPEAL NO. 1072­1081 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 25235­25244 OF 2018)
CIVIL APPEAL NO. 1082­1090 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 25535­25543 OF 2018)
CIVIL APPEAL NO. 1091­1097 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 25325­25331 OF 2018)
1
CIVIL APPEAL NO. 1098­1106 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 26077­26085 OF 2018)
CIVIL APPEAL NO. 1107­1117 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 26494­26504 OF 2018)
CIVIL APPEAL NO. 1118­1126 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 25714­25722 OF 2018)
CIVIL APPEAL NO. 1127­1133 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 25343­25349 OF 2018)
CIVIL APPEAL NO. 1134­1203 OF 2020
(@SPECIAL LEAVE PETITION (CIVIL) NO. 31449­31518 OF 2018)
J U D G M E N T
Deepak Gupta, J.
Leave granted.

  1. All these appeals are being decided by one common judgment
    since they arise out of a common order dated 08.06.2018 of the
    National Consumer Disputes Redressal Commission, New Delhi,
    hereinafter referred to as ‘the National Commission’.
  2. Briefly stated the facts of the case are that most of the
    claimants, hereinafter referred to as ‘the farmers’, had grown
    2
    Byadgi Chilli Crop during the year 2012­2013. Some of the
    farmers had some other crops. These farmers had stored their
    agricultural produce in a cold store run by a partnership firm
    under the name and style of Sreedevi Cold Storage, hereinafter
    referred to as ‘the cold store’. These farmers also obtained loans
    from Canara Bank, hereinafter referred to as ‘the Bank’. The loan
    was advanced by the Bank to each one of the farmers on security
    of the agricultural produce stored in the cold store. The cold store
    was insured with the United India Insurance Company Limited,
    hereinafter referred to as ‘the insurance company’. A fire took
    place in the cold store on the night intervening 13.01.2014 and
    14.01.2014. The entire building of the cold store and the entire
    stock of agricultural produce was destroyed.
  3. After the fire, the cold store, which had taken out a
    comprehensive insurance policy, raised a claim with the insurance
    company but the claim of the cold store was repudiated by the
    insurance company mainly on the ground that the fire was not an
    accidental fire. The farmers had also issued notice to the
    insurance company in respect of the plant, machinery and
    building but this claim was repudiated by the insurance company
    3
    on the additional ground that the farmers had no locus standi to
    make the claim as the insured was the cold store and not the
    farmers. It was further pleaded that Condition No.8 of the
    insurance policy had been violated, and that there was no privity
    of contract between the farmers and the insurance company.
    Since the claims of the farmers were either rejected or not
    answered, they filed claim petitions against the cold store, the
    Bank and the insurance company in which the primary relief
    claimed was the value of the agricultural produce as on the date of
    fire and interest thereupon and each of the farmers also claimed
    damages of Rs.1,00,000/­ per head. There were 91 claim petitions
    filed and in most of them the agricultural produce was Byadgi
    Chilli. In a few petitions, the agricultural produce was Dabbi
    Chilli, Guntur Chilli, Bengal Gram, Coriander (Dhania), Jwar etc.
    However, this will not have any material impact on the decision of
    these cases. The details containing the name of the claimants, the
    nature of the produce, number of bags and quantity thereof, rate,
    and number of kilograms have been set out in Para 7 of the
    judgment of the National Commission which we are not
    reproducing for the sake of brevity.
    4
  4. In the claims filed it was pleaded that the cold store while
    levying the general charges had also charged the insurance
    premium paid by it. It would be pertinent to mention that a
    tripartite agreement had been entered into by each one of the
    farmers while taking a loan from the Bank and hypothecating the
    agricultural produce which was stored in the cold store. The
    farmer, the Bank, and the cold store were parties to the tripartite
    agreement. The cold store issued a warehouse receipt giving the
    particulars of the crop stored, the value thereof and also the date
    of the tripartite agreement. For the period in question i.e. from
    2012­2013 till the occurrence of fire, the cold store was admittedly
    insured with the insurance company. The plant and machinery of
    the cold store was insured for Rs.5 crores and the stocks were
    insured for Rs.30 crores.
  5. The case of the farmers was that in terms of the tripartite
    agreement, the cold store had got the stocks insured from the
    insurance company. The fire was an accidental fire and, therefore,
    in terms of the policy, the insurance company was liable to pay the
    amount of value of the agricultural produce stored with the cold
    store as on the date of fire and was also liable to pay interest on
    5
    the amount payable. The insurance company resisted the
    complaint mainly on the ground that the ‘farmers’ were not
    ‘consumers’ within the meaning of Consumer Protection Act, 1986,
    hereinafter referred to as ‘the Act’. It was also claimed that there
    was no privity of contract between the farmers and the insurance
    company because the policy was taken by the cold store and not
    by the farmers. It was alleged that the entire story of loans was a
    false story. On merits, any conceivable objection which could be
    taken was taken. The insurance company went to the extent of
    denying that the claimants were farmers or they had produced the
    agricultural produce or that they had stored it in the cold store. It
    was also alleged that the Bank was negligent as it did not take any
    step to recover the amount due for more than two years. The case
    of the insurance company is that nobody in his right mind would
    store agricultural produce for such a long period of time.
    Therefore, the very genuineness of the tripartite agreement was
    challenged. The other main ground taken was that the fire was
    not an accident and there was no spontaneous combustion on
    account of electrical short circuit. According to the insurance
    company, there was an element of arson involved and the cold
    store seems to have been deliberately set on fire.
    6
  6. The stand of the cold store was that the fire was accidental
    and that since the stock was insured, the amount was payable by
    the insurance company. The Bank supported the claim of the
    farmers with the caveat that the amount should be paid to it so
    that it could set it off against the loans advanced to the farmers.
  7. The Karnataka State Consumer Disputes Redressal
    Commission at Bangalore, hereinafter referred to as ‘the State
    Commission’ vide judgment dated 28.04.2017 held that the
    farmers had proved that the fire took place on account of electrical
    short circuit and no element of human intervention or use of
    kerosene was found. The State Commission also found that as per
    the tripartite agreement entered into between the farmers, the
    Bank and the cold store, it was mandatory for the cold store to
    insure the goods so hypothecated by the farmers with the Bank.
    The insurance company was held liable to pay the amount to the
    farmers. The State Commission assessed the value of the goods
    by taking the value as reflected in the warehouse receipts issued
    at the time of taking of loan and did not accept the plea of the
    farmers that they should get the market value of the goods as on
    the date of fire. The Bank was also held deficient in service. The
    7
    cold store and the insurance company were held jointly and
    severely liable and were directed to pay the value of the
    agricultural produce hypothecated with the Bank to the
    farmers/claimants as on the date of tripartite agreement together
    with the interest at the rate of 14% per annum payable from six
    months from the date of the incident till the date of realisation.
    One complaint being Complaint No.597 of 2015 was dismissed. In
    some of the complaints, the Bank was also held jointly and
    severely liable to pay the costs of Rs.10,000/­ whereas in a large
    number of cases the complaint against the Bank was dismissed.
  8. Aggrieved by the aforesaid judgment dated 28.04.2017 of the
    State Commission, an appeal was filed before the National
    Commission. By the impugned judgment, the National
    Commission concurred with the findings of the State Commission
    and held that the farmers are consumers. It held that the
    insurance company was aware of the fact that the goods were held
    in trust. It further held that there is no evidence to show that the
    fire was not an accidental fire or that the fire had been started by
    the owner of the cold store. However, it partly allowed the appeal
    of the insurance company and reduced the interest from 14% per
    8
    annum to 12% per annum. The farmers had also filed appeal
    claiming that in terms of the insurance policy they should have
    been paid the value of the goods as on the date of fire. However,
    this claim was rejected basically on the ground that the farmers
    had failed to show that the chilli and/or other produce stored is of
    the same class and characteristics as reflected in the Variety­wise
    Periodic Report of the Bengaluru Market for different commodities.
    As far as the appeals filed by the Bank were concerned, the
    National Commission held that in the peculiar facts of the case
    where the farmers had suffered substantial losses, the principal
    amount of loan advanced by the Bank would be remitted by the
    insurance company to the Bank but the other amount i.e. interest
    and damages, would be given to the farmers. It was also held that
    there was no deficiency of service on behalf of the Bank and the
    costs imposed on the Bank in some of the cases were set aside.
  9. Before this Court, appeals have been filed by the insurance
    company, the farmers, the cold store and the Bank.
  10. We have heard Shri P.P. Malhotra, learned senior counsel
    appearing for the insurance company, Dr. Rajeev Dhavan and Shri
    Gopal Shankaranarayanan, learned senior counsel appearing for
    9
    the farmers, Shri Sajan Poovayya, learned senior counsel
    appearing for the cold store and Shri Dhruv Mehta, learned senior
    counsel appearing for the Bank.
    Appeals of the Insurance Company
  11. Shri P.P. Malhotra, learned senior counsel appearing for the
    insurance company raised several issues for consideration of this
    Court. One of the contentions raised by him is that the fire in
    question was not an accidental fire. It is also contended that the
    farmers were not consumers and therefore the consumer fora have
    no jurisdiction to decide the dispute. He next contends that there
    is no privity of contract between the farmers and the insurance
    company. According to him, a contract of insurance is to be
    strictly construed between the parties to the contract. He submits
    that there was no insurable interest of the farmers and the
    tripartite agreement entered between the Bank, the farmers and
    the cold store was never disclosed to the insurance company. He
    further submits that there is non­disclosure of important facts by
    the cold store (insured) and, as such, the insurance company is
    not liable. He also urged that the liability of the insurance
    company is excluded by virtue of General Exclusion Clause 5 and
    10
    General Condition no.1 and General Condition no.8 of the
    insurance policy.
    Whether the fire was an accident?
  12. As far as this issue is concerned, both the State Commission
    and the National Commission have come to the conclusion that
    the fire was an accidental fire and occurred due to a short circuit.
    These are pure findings of fact which, in our view, cannot be
    challenged in these proceedings. However, since lengthy
    arguments were addressed by Shri P. P. Malhotra in this behalf,
    we shall deal with the same. At the outset, we may note that the
    electrical inspector, the police investigation team and the forensic
    science laboratory (FSL) have all come to the conclusion that the
    fire took place due to a short circuit. The concluding portion of
    the report of the FSL reads as follows:­
    “From the above examination, the following
    observations have been made
  13. Presence of combustible materials like thermocol
    (which are used to insulate the walls) pillars, wooden
    partitions and the grains stored inside the building
    could have enhanced the spread of fire.
  14. The congested space in the building might have
    accelerated the smoldering fire.
  15. The fire might have originated at the sixth floor
    front side of the building. But it was not possible to
    11
    locate the exact place of origin of fire since the
    complete building was involved in fire.
  16. An electrical short circuit may have initiated the
    fire.”
    The insurance company relies upon the findings given by a
    company namely Truth Labs and those of Rank Surveyors Private
    Limited, which read as follows:­
    “Based on a thorough and in­depth inspection of the
    incident site, forensic examinations, field
    investigations, documentary evidence analysis and
    personal evidence obtained, it is concluded that the
    fire occurred in M/s. Sree Devi Cold Storage, Billary
    on the intervening night of 13/14th January 2014.
    a. Was not due to spontaneous combustion on
    account of bacterial/chemical fires.
    b. Was not due to electrical failure caused by short
    circuit.
    c. And was on account of extraneous ignitable fire
    accelerants such as kerosene used deliberately for
    ignition, initiation, propagation and burning of
    stocks in the cold storage through human
    intervention.
    d. Based on the motive, means and opportunity to
    carry out such malicious acts the possibility of the
    involvement of management in such a nefarious act
    cannot be ruled out.”
  17. We may note that it is not disputed that in the construction
    of the cold store, the temperature was maintained by insulating
    the walls of the cold store. Bitumen (coal tar) and Thermocol were
    12
    used for providing insulation. The FSL found that in a fire which
    takes place in a building where such material is used for
    construction, hydro carbons would obviously be present. On the
    other hand, M/s. Truth Labs mainly relied upon the presence of
    hydro carbons to come to the conclusion that the fire had not
    occurred spontaneously and on account of electrical short circuit
    but occurred on account of extraneous ignitable fire accelerants
    such as kerosene. The conclusions of M/s. Truth Labs were based
    on some inspection and chemical analysis carried out by a team
    headed by Dr. R. Srinivas. Admittedly, this report of Dr. R.
    Srinivas was never furnished to the parties nor was placed before
    the State Commission. Interestingly, when Mr. G. V. H. V. Prasad,
    Director of M/s. Truth Labs was put a specific query whether the
    walls of the ground floor and the top floor and the inside portion of
    the cold store along with 169 pillars were constructed by
    sandwiching bitumen and thermocol between the concrete in order
    to raise the level of insulation, he replied that ‘he was not aware of
    how the Cold Storage was built’. This clearly shows the shoddy
    manner in which M/s. Truth Labs conducted the investigation.
    There can be no proper investigation of a fire if the investigating
    agency does not even try to find out what is the nature of
    13
    construction of the building which has been destroyed in the fire.
    M/s. Truth Labs has clearly stated that the observation that fire
    took place on account of extraneous ignitable fire accelerants, is
    based on the chemical analysis report which shows presence of
    hydro carbons in the debris. It is apparent that M/s. Truth Labs,
    for reasons best known to it, did not analyse the material used for
    construction because if it had done so, it would have realised that
    hydro carbons would be present when thermocol or bitumen are
    burnt. Thermocol is basically a rigid plastic foam material which
    is derived from petroleum and natural gas by­products. Bitumen
    is a semi­solid hydrocarbon product produced from crude oil.
    Both thermocol and bitumen are derivatives of petroleum products
    and hence are hydrocarbons by their very nature. Therefore,
    presence of hydrocarbons would be natural when a fire takes
    place. The presence of hydro carbon could not lead to a conclusion
    that kerosene oil had been used to ignite the fire.
  18. The National Commission has also dealt in detail with this
    issue and has come to the conclusion that M/s. Truth Labs visited
    the burnt cold store on two occasions and collected samples on
    both the occasions. It, however, decided to send 12 samples
    14
    collected only in the second visit for analysis. Interestingly, the
    controlled samples were collected from a plastic bag containing
    (fresh unaffected) chillies found in the burnt stock of the affected
    premises. The controlled samples did not show presence of hydro
    carbons and hence, the assumption that the presence of hydro
    carbons in the remaining samples was not relatable to thermocol
    and tar. There is no explanation why the samples taken on the
    first visit were not sent for analysis. It is also difficult to believe
    that in a building which has been totally gutted in a fire, there
    would be one plastic bag containing (fresh unaffected) chillies
    found in the burnt stock. It is possible that these unburnt chillies
    may have been introduced later on. Therefore, we cannot place
    any reliance on the report of M/s. Truth Labs.
  19. In any event, neither in the report of M/s. Truth Labs nor in
    the other reports by the insurance company is there anything to
    show that the insured had set the cold store on fire. Whether the
    fire took place by a short circuit or any other reason, as long as
    insured is not the person who caused the fire, the insurance
    company cannot escape its liability in terms of the insurance
    policy. We reject the contention of the insurance company that
    15
    the fire was ignited by the use of kerosene and hence it is not
    liable.
    Rule of Strict Interpretation
  20. It has been submitted on behalf of the insurance company
    that the terms of the insurance policy should be construed strictly
    and since only the insurance company and the cold store (insured)
    were parties to the contract of insurance, the insurance company
    will not be liable to pay any claim to the farmers. Various
    authorities were cited by both sides.
  21. In United India Insurance Co. Ltd. v. Harchand Rai
    Chandan Lal1
    this Court held as follows:­
    “9….It is settled law that terms of the policy shall
    govern the contract between the parties, they have to
    abide by the definition given therein and all those
    expressions appearing in the policy should be
    interpreted with reference to the terms of policy and
    not with reference to the definition given in other
    laws. It is a matter of contract and in terms of the
    contract the relation of the parties shall abide and it
    is presumed that when the parties have entered into
    a contract of insurance with their eyes wide open,
    they cannot rely on the definition given in other
    enactment….”
    1 (2004) 8 SCC 644
    16
  22. Reliance was placed on Raghunath Rai Bareja v. Punjab
    National Bank2
    wherein it was held:
    “58. We may mention here that the literal rule of
    interpretation is not only followed by judges and
    lawyers, but it is also followed by the layman in his
    ordinary life. To give an illustration, if a person says
    “this is a pencil”, then he means that it is a pencil;
    and it is not that when he says that the object is a
    pencil, he means that it is a horse, donkey or an
    elephant. In other words, the literal rule of
    interpretation simply means that we mean what we
    say and we say what we mean. If we do not follow
    the literal rule of interpretation, social life will
    become impossible, and we will not understand each
    other. If we say that a certain object is a book, then
    we mean it is a book. If we say it is a book, but we
    mean it is a horse, table or an elephant, then we will
    not be able to communicate with each other. Life will
    become impossible. Hence, the meaning of the literal
    rule of interpretation is simply that we mean what
    we say and we say what we mean.”
  23. Reliance was also placed on the following paragraph in Suraj
    Mal Ram Niwas Oil Mills (P) Ltd. v. United India Insurance Co.
    Ltd.3
    :
    “26. Thus, it needs little emphasis that in construing
    the terms of a contract of insurance, the words used
    therein must be given paramount importance, and it
    is not open for the court to add, delete or substitute
    any words. It is also well settled that since upon
    issuance of an insurance policy, the insurer
    undertakes to indemnify the loss suffered by the
    insured on account of risks covered by the policy, its
    terms have to be strictly construed to determine the
    extent of liability of the insurer. Therefore, the
    endeavour of the court should always be to interpret
    2 (2007) 2 SCC 230
    3 (2010) 10 SCC 567
    17
    the words in which the contract is expressed by the
    parties.”
  24. The principles relating to interpretation of insurance policies
    are well settled and not in dispute. At the same time, the
    provisions of the policy must be read and interpreted in such a
    manner so as to give effect to the reasonable expectations of all the
    parties including the insured and the beneficiaries. It is also well
    settled that coverage provisions should be interpreted broadly and
    if there is any ambiguity, the same should be resolved in favour of
    the insured. On the other hand, the exclusion clauses must be
    read narrowly. The policy and its components must be read as a
    whole and given a meaning which furthers the expectations of the
    parties and also the business realities. According to us, the entire
    policy should be understood and examined in such a manner and
    when that is done, the interpretation becomes a commercially
    sensible interpretation. As far as the present case is concerned, if
    we read the tripartite agreement along with the terms of the policy
    it is obvious that the Bank insisted that the stock be insured. The
    farmers were told that they would pay the premium. The cold
    store while fixing the rent obviously factored the premium into the
    rent. It was obvious that the intention of the parties was that they
    18
    would be compensated by the insurance company in case of any
    untoward loss.
    Whether the farmers are consumers and the issue of privity of
    contract
  25. One of the main grounds of attack to the judgments of both
    the State Commission and the National Commission on behalf of
    the insurance company is that the farmer is not a consumer
    insofar as the insurance company is concerned. The contention is
    based on the ground that the insurance policy is admittedly only
    between the insurance company and the cold store. It is further
    urged by Shri Malhotra that the claim of the cold store for damage
    to the building, plants and machinery was repudiated by the
    insurance company on 16.09.2015. The cold store has not
    challenged the repudiation. Thereafter, all the complaints have
    been filed through one counsel which indicates that they have
    been orchestrated by the cold store itself. It is also submitted that
    the tripartite agreement is not relevant as far as the insurance
    company is concerned since the insurance company is not a
    signatory to the tripartite agreement. It is further contended that
    the coverage for the goods was only for the goods owned by the
    cold store and not by the farmers who are in the nature of third
    19
    parties. It is contended that in some cases the tripartite
    agreement has not even been signed by the Bank.
  26. On the other hand, on behalf of the farmers, it is submitted
    that they paid rent to the cold store which included the element of
    insurance. It is submitted that the crops were given on
    contractual bailment to the cold store for a valuable consideration
    and, therefore, the cold store held the goods as a bailee on behalf
    of the farmers. It is also submitted that in terms of the tripartite
    agreement, the cold store was bound to take out an insurance
    policy and the crops and the premises were separately insured and
    the insurance was renewed every time for a period of 3 years. It is
    also submitted that insurance company was aware that the
    insurance policy had been taken for the benefit of the real owners
    i.e. farmers.
  27. To decide these issues, it would be apposite to refer to the
    definition of ‘consumer’ under Section 2(d) of the Act, which reads
    as follows:­
    “2 Definitions. ­ (1) In this Act, unless the context
    otherwise requires,­
    xxx xxx xxx
    (d) “consumer” means any person who, ­
    20
    (i) buys any goods for a consideration which has
    been paid or promised or partly paid and partly
    promised, or under any system of deferred payment
    and includes any user of such goods other than the
    person who buys such goods for consideration paid
    or promised or partly paid or partly promised, or
    under any system of deferred payment, when such
    used is made with the approval of such person, but
    does not include a person who obtains such goods
    for resale or for any commercial purpose; or
    (ii) hires or avails of any services for a consideration
    which has been paid or promised or partly paid and
    partly promised, or under any system of deferred
    payment and includes any beneficiary of such
    services other than the person who hires or avails of
    the services for consideration paid or promised, or
    partly paid and partly promised, or under any
    system of deferred payment, when such services are
    availed of with the approval of the first mentioned
    person…;”
  28. The definition of consumer under the Act is very wide and it
    not only includes the person who hires or avails of the services for
    consideration but also includes the beneficiary of such services
    who may be a person other than the person who hires or avails of
    services.
  29. Taking the issue of privity of contract, we are of the considered
    view that as far as the Act is concerned, it is not necessary that
    there should be privity of contract between the insurance company
    and the claimants. The definition of consumer under Section 2(d)
    quoted hereinabove is in 2 parts. Sub­clause (i) of Section 2(1)(d)
    21
    deals with a person who buys any goods and includes any user of
    such goods other than the person who buys such goods as long as
    the use is made with the approval of such person. Therefore, the
    definition of consumer even in the 1st part not only includes the
    person who has purchased but includes any user of the goods so
    long as such user is made with the approval of the person who has
    purchased the goods. As far as the definition of the consumer in
    relation to hiring or availing of services is concerned, the definition,
    in our view, is much wider. In this part of the section, consumer
    includes not only the person who has hired or availed of the
    services but also includes any beneficiary of such services.
    Therefore, an insured could be a person who hires or avails of the
    services of the insurance company but there could be many other
    persons who could be the beneficiaries of the services. It is not
    necessary that those beneficiaries should be parties to the contract
    of insurance. They are the consumers not because they are parties
    to the contract of insurance but because they are the beneficiaries
    of the policy taken out by the insured.
  30. The definition of consumer under the Act is very wide and it
    includes beneficiaries who can take benefit of the insurance availed
    by the insured. As far as the present case is concerned, under the
    22
    tripartite agreement entered between the Bank, the cold store and
    the farmers, the stock of the farmers was hypothecated as security
    with the Bank and the Bank had insisted that the said stock should
    be insured with a view to safeguard its interest. We may refer to the
    penultimate clause of the tripartite agreement which reads as
    follows:­
    “WHEREAS the Third Party has agreed to insure the
    produce/goods stored in the cold storage to
    indemnify the produce in case of any casualty or
    accident by any means to cover the risk and also to
    cover the loan amount to avoid loss at the cost of the
    Second Party till the release order or repayment of
    the loan amount.”
  31. The aforesaid clause in unambiguous terms binds the cold
    store to insure the goods, to indemnify the produce, to cover the
    risk and cover the loan amount. This insurance policy has to be
    taken at the cost of the second party which is the farmer.
    Therefore, there can be no manner of doubt that the farmer is a
    beneficiary under the policy. The farmer is, therefore, definitely a
    consumer and we uphold the orders of both the Commissions that
    the complaint under the Act is maintainable.
  32. Shri Malhotra in support of his argument relied upon the
    judgement of this Court in M. C. Chacko v. The State Bank of
    23
    Travancore, Trivandrum4 wherein the appellant as Manager of
    High Land Bank, Kottayam, had an overdraft account with the
    Bank. The father of the appellant had executed letters of
    guarantee in favour of Bank agreeing to pay the amounts due to
    the Bank under the overdraft agreement subject to a limit of
    Rs.20,000/­. The Court held:­
    “10. Even if it be granted that there was an intention
    to create a charge, the Kottayam Bank not being a
    party to the deed could enforce the charge only if it
    was a beneficiary under the terms of the contract,
    and it is not claimed that the Bank was a beneficiary
    under the deed Ext. D­1. The suit against M.C.
    Chacko must therefore be dismissed.”
  33. We are of the view that this judgment has no relevance to the
    case before us. This Court held that the Kottayam Bank was not
    only not a party to the deed but was also not a beneficiary under
    the contract. In our opinion, the Consumer Protection Act clearly
    provides that a beneficiary of the services, other than the insured
    is a consumer under the Act.
    General Exclusion Clause No.5
  34. It has been urged that there is violation of Clause 5 of the
    policy under the heading of General Exclusion wherein losses of
    4 (1969) 2 SCC 343
    24
    certain types have not been covered. The said clause reads as
    follows:­
    “5. Loss, destruction or damage to bullion or unset
    precious stones, any curios or works of art for an
    amount exceeding Rs.10000/­ goods held in trust or
    on commission, manuscripts, plans, drawings,
    securities, obligations or documents of any (illegible)
    stamps, coins or paper money, cheques, books of
    accounts or other business books, computer
    systems records, explosives unless otherwise
    expressly stated in the policy.”
  35. The argument raised by Shri Malhotra is that since the goods
    were held in trust by the cold store, the insurance company is not
    liable. We are not at all impressed with this argument. This is not
    a case where the goods were deposited only on the basis of trust.
    The goods were kept in the cold store on payment of rent by the
    farmer. This is not a case envisaged under Exclusion Clause 5
    quoted hereinabove. These goods were also not held on
    commission. Shri Rajeev Dhavan, learned senior counsel appearing
    for the farmers submits that the relationship between the farmer
    and the cold store was of bailor and bailee. He submits that the
    crops were given on contractual bailment to the cold store for
    consideration.
    25
  36. In the present case, as pointed out above, the farmer had
    agreed to pay consideration to the cold store and, therefore, the
    goods were not held in trust per se but the goods were held by cold
    store as bailee of the goods for consideration. The possession of the
    farm produce was handed over by the bailor, i.e. farmer to the cold
    store i.e. the bailee, in terms of the contract. There may be inter se
    rights and liabilities between the farmer and the cold store but it
    cannot be said that the goods were held ‘in trust’. The goods were
    also not held ‘on commission’. No commission was payable and
    only rental was paid. Therefore, we reject this argument on behalf
    of the insurance company.
    General Condition Nos. 1 & 8:
  37. Shri Malhotra has placed reliance on Condition Nos. 1 & 8 of
    Part B of the General Conditions of the Insurance Policy:­
    “(B) GENERAL CONDITIONS:
  38. This policy shall be voidable in the event of
    misrepresentation, mis­description or nondisclosure of any material particular.
    xxx xxx xxx
  39. If the claim be in any respect fraudulent, or if
    any false declaration be made or used in support
    thereof or if any fraudulent means or devices are
    used by the insured or anyone acting on his behalf
    to obtain any benefit under the policy or if the loss
    26
    or damage be occasioned by the willful act, or with
    the connivance of the insured, all benefits under this
    policy shall be forfeited.”
  40. The contention of Shri Malhotra is that the insurance company
    was not informed by the Bank, the cold store or the farmers that
    the farm produce or the insured goods belong to the farmers and
    therefore the policy is voidable. At the outset, we may note that
    misrepresentation or misdescription only makes the policy voidable.
    The insurance company never chose to declare the policy void for 3
    long years when it was in existence and, at this stage, cannot be
    permitted to wriggle out of its liability by taking this objection.
    Even otherwise, we are of the view that the submission made on
    behalf of the insurance company is without any substance. The
    policies of insurance clearly show that the premises was separately
    insured for Rs.5 crores and the stock in trade were insured for
    Rs.30 crores. This insurance was taken not only for the year when
    the fire took place but was renewed for 3 long years. The insurance
    policy had an Agreed Bank Clause which reads as follows:­
    “(1) AGREED BANK CLAUSE:
    It is hereby declared and agreed:­
    (i) That upon any monies becoming payable under
    this policy the same shall be paid by the company to
    the bank and such part of any monies so paid as
    may relate to the interests of other parties insured
    27
    hereunder shall be received by the Bank as Agents
    for such other parties.
    (ii) That the receipts of the Bank shall be complete
    discharge of the company thereon and shall be
    binding on all the parties insured hereunder.”
  41. The aforesaid clause itself clearly indicates that it was agreed
    by the insurance company that upon any amount being payable
    under the policy in question, the same would be paid to the Bank
    and the amount so paid “may relate to the interests of other
    parties”. The said amount would be received by the Bank as agent
    for other parties. Therefore, the insurance policy itself envisaged
    that there were interest of other parties and not only the Bank and
    the insured. Therefore, it was for the insurance company to verify
    and find out who was the owner of the goods. It could not presume
    that all the goods belong to the cold store. The assumption of the
    insurance company that it had insured the goods belonging to the
    cold store itself has no factual basis. It is a well­known fact that
    cold stores are constructed in such a way that there are many
    compartments in the cold store. Any person can deposit a small or
    large amount of goods to be kept in cold store. Normally, it is the
    goods of third parties which are stored in a cold store and,
    therefore, we are dealing with a policy of insurance whereby the
    premises and the stock and goods in a cold store have been
    28
    insured. The natural corollary would be that the insurance
    company should have known that the goods belong to the third
    parties. From the policy of insurance, we find that in respect of
    description of risk, the insurance covers “Stock of Guntur
    Chillies/Byadigi Chillies/Other variety Chillies, Jawar Seeds,
    Bengal Garam, Red Gram, Tambrind, Coriander Seeds & Other
    pulses.”
  42. This stock in trade was covered for a sum of Rs.30 crores and
    premium was charged accordingly. A prudent insurance company
    before issuing a policy of such a heavy amount, must or at least
    should have ascertained the value and the nature of the goods.
    The insurance company before us is one of the largest nationalised
    insurance companies and a presumption has to be drawn that it
    must have verified the details before insurance policy was issued.
    If verification had been done by a visit to the cold store, it could
    have been easily found out who are the owners of the stock. In
    case, the insurance company has chosen not to verify the stock it
    cannot take advantage of its own negligence. The principle of
    uberrima fides has no application because the cold store had
    declared all necessary facts. The bank clause clearly indicated
    that the goods were hypothecated/pledged to the Bank. Therefore,
    29
    the insurance company now cannot turn around and claim that
    the names of the owners were not supplied to it at the time of
    insurance. We also cannot lose sight of the fact that the insurance
    policy was renewed at least twice. Therefore, the policy was in
    existence for 3 years and it is in the 3rd year that the fire took
    place. If the insurance company chooses not to even write a letter
    to the insured or take any steps to verify the value of the goods
    and ownership of the goods, it cannot now turn around and urge
    that it was not aware about the nature or ownership of the goods.
    Fraudulent Claim
  43. The insurance company also contends that the whole scheme
    is fraudulent and that no farmer in his right senses would store
    agricultural produce for such a long time. This argument is totally
    baseless.
  44. Byadgi Chilli is the major component of the goods that were
    stored in the cold store. It is a very famous variety of chilli and is
    produced in two types – dabbi and kaddi. One of the main uses of
    this chilli is not only as an item of food but as an item to extract
    red colour pigment which is used in the manufacture of lipsticks,
    nail polishes, and other cosmetics etc. The material extracted is
    30
    called oleoresin, which is a red oil extracted from the pods. Many
    cold stores have been constructed in the area where this chilli is
    grown because if these chillies are stored at a low temperature of 4
    to 6 degree Celsius, the colour and purity is maintained and it also
    increases the amount of oleoresin which can be extracted from
    chilli by about 30% to 40%. As such the farmers took a
    commercial decision to store the chillies because after storing it,
    the value would go higher.
  45. The insurance company also urged that some of the tripartite
    agreements are not signed by the officials of the Bank. It is urged
    that this shows that the agreements cannot be relied upon. We
    are not at all in agreement with this submission. As long as the
    parties to the tripartite agreement i.e. the Bank, the farmer and
    the cold store, are not disputing the correctness of the agreement,
    there is no reason why we should not accept the same to be a
    genuine document.
    Non­disclosure of material facts:
  46. It has been urged on behalf of the insurance company that
    while submitting the proposal form on 21.03.2013, the cold store
    had not listed out the names of the parties who had an insurable
    31
    interest including the financial institutions. It is, therefore,
    submitted that the cold store deliberately did not disclose the fact
    that the produce belonged to the farmers. Shri Malhotra placed
    reliance on the judgment in Satwant Kaur Sandhu v. New India
    Assurance Co. Ltd.5 wherein it was held that:
    “25. The upshot of the entire discussion is that in a
    contract of insurance, any fact which would
    influence the mind of a prudent insurer in deciding
    whether to accept or not to accept the risk is a
    “material fact”. If the proposer has knowledge of
    such fact, he is obliged to disclose it particularly
    while answering questions in the proposal form.
    Needless to emphasise that any inaccurate answer
    will entitle the insurer to repudiate his liability
    because there is clear presumption that any
    information sought for in the proposal form is
    material for the purpose of entering into a contract
    of insurance.”
  47. At the outset, we may mention that the initial insurance policy
    was taken in the year 2011, if not earlier, and that proposal form
    was very material. The same has not been produced by the
    insurance company before us. Thereafter, it was only renewal of
    the policy. Furthermore, if a column is left blank, again the
    insurance company should have asked the insured to fill in the
    column. There is no wrong information given in the proposal form
    though it may be true that all the requisite information was not
    5 (2009) 8 SCC 316
    32
    supplied. The column requires listing out the parties who have an
    insurable interest including financial institutions. Since the policy
    had a bank clause, the name of Canara Bank should have been
    mentioned in column 5. That was not there. If the insurance
    company while accepting the proposal form does not ask the
    insured to clarify any ambiguities then the insurance company after
    accepting the premium cannot now urge that there was a wrong
    declaration made by the insured. In case the insured had written
    that there were no persons who had an insurable interest, the
    position may have been different but leaving out the column blank
    does not mean that there was some misdeclaration of facts. We are,
    therefore, clearly of the view that the judgment of this Court in
    Satwant Kaur Sandhu’s case (supra) is not applicable to the facts
    of the present case.
  48. As already held above, the insurance company itself could
    have also taken some initiative in the matter. To make a contract
    void the non­disclosure should be of some very material fact. No
    doubt, it would have been better if the Bank and the insured had
    given at least 1 tripartite agreement to the insurance company but,
    in our view, in the peculiar facts of this case, not disclosing the
    tripartite agreement or the names of the owners cannot be said to
    33
    be such a material fact as to make the policy void or voidable. We
    are clearly of the view that there is no fraudulent claim made.
    There is no false declaration made and neither is the loss and
    damage occasioned by any wilful act or connivance of the insured.
  49. In view of the above discussion, we are clearly of the view that
    the insurance company under the insurance policy is liable to
    indemnify the cold store with regard to the value of goods and since
    the farmers are the beneficiaries, they are entitled to get the amount
    payable under the policy. However, this will obviously be subject to
    the bank clause which we have already referred to above.
    34
    Appeal of the Bank
  50. The Bank has raised objections to the interest portion of the
    amount being given to the farmers. Otherwise it supports the case
    of the farmers. Reliance has been placed on the bank clause
    already quoted above and it is submitted that the direction of the
    National Commission to pay the interest to the farmers is against
    the Agreed Bank Clause in terms of which the money is to be paid
    to the Bank till the outstandings of the Bank are covered. Shri
    Dhruv Mehta, learned senior counsel for the Bank submits that
    since the farmers are claiming benefit of the policy, they cannot
    urge that the bank clause is not applicable. It is further submitted
    by him that the National Commission has to decide questions on
    the basis of legal considerations and equitable considerations or
    equity has no role to play in such matters. On the other hand, it
    has been urged by Dr. Rajeev Dhavan that the bank clause is only
    a processual clause.
  51. We cannot accept the submission of Dr. Dhavan that the
    bank clause lays down only a process. The insurance policy is a
    contract and the amount has to be paid as per the terms of the
    contract. In our view, the National Commission could not have
    35
    ordered that the interest on the amount payable to the farmers
    should not be paid to the Bank till the liabilities of the Bank are
    paid out. Arguments have been addressed before us that this
    Court may exercise its power under Article 142 of the Constitution
    of India to ensure that justice is done to the farmers. We feel that
    there is no need to invoke the jurisdiction under Article 142
    because even after paying off the dues of the Bank, some amount
    of the value of the goods along with interest thereupon will be
    payable to the farmers.
    Whether there was a deficiency in service on the part of the
    Bank
  52. It was urged on behalf of the insurance company that there is
    deficiency of service by the Bank and, in fact, it was argued that
    the Bank connived with the farmers because it did not get the
    valuation of the products done properly and further, it took no
    steps to sell the agricultural produce after one year which liberty it
    had in terms of the tripartite agreement. We find no force in this
    argument. As already pointed out above, the value of Byadgi
    chillies which was the major agricultural produce stored in the
    cold store rises the longer it is kept in the cold store. Therefore,
    the Bank could have taken a commercial decision not to sell the
    36
    produce because the product was not deteriorating in any manner
    and its value was not diminishing.
  53. The State Commission had held that there was deficiency on
    behalf of the Bank in rendering services but the National
    Commission held otherwise. We are of the view that the Bank was
    remiss to a limited extent. When the Bank issues loans against
    the hypothecation of goods, as in the present case, and insists that
    the goods should be insured to safeguard its outstandings then a
    duty lies upon the Bank to inform the insurance company of the
    policy. If both the Bank and the insurance company had done
    what would be expected of good financial institutions, there would
    have been no needless litigation. The matter has dragged to this
    stage only because the names of the farmers were not mentioned
    in the policy or because the tripartite agreement was not handed
    over to the insurance company. The Bank, as a prudent financial
    institution, should have insisted that the tripartite agreement
    should also be handed over to the insurance company. Therefore,
    we feel that there is some level of deficiency on behalf of the Bank.
  54. In view of the aforesaid, we feel that the Bank cannot claim
    interest at the contractual rate and is not entitled to claim interest
    37
    at the contractual rate because the farmers have been driven
    through a long drawn litigation which could have been easily
    avoided if the Bank had itself sent the copy of the tripartite
    agreement to the insurance company or insisted that the insured
    should send the same to the insurance company. We accordingly
    hold that the Bank cannot claim interest at the contractual rate.
    We are therefore, of the view that the Bank would be entitled to
    charge simple interest right from the date of grant of loan at the
    rate of 12% per annum.
    The amount of claim payable:
  55. The farmers in their appeal have claimed that in terms of the
    policy of insurance the value of the goods was to be assessed on the
    date of fire and the value was not to be assessed as mentioned on
    the date when the goods were stored in the cold store. In this
    regard, we may make reference to the opening portion of the
    insurance policy wherein the insurance company has agreed to
    insure the goods. Relevant portion of the insurance policy reads as
    follows:­
    “IN CONSIDERATION of the insured named in the
    schedule hereto having paid to the United India
    Insurance Company Limited (hereinafter called the
    Company) the full premium mentioned in the said
    38
    schedule. The Company Agrees (Subject to the
    conditions and exclusions contained herein or
    endorsed or otherwise expressed hereon) that if after
    payment of the premium the property insured
    described in the said schedule or any part of such
    property be destroyed or damaged by any of the
    perils specified hereunder during the period of
    insurance named in the said schedule or of any
    subsequent period in respect of which the insured
    shall have paid and the Company shall have
    accepted the premium required for the renewal
    of the policy, the Company shall pay to the
    insured the value of the property at the time of
    the happening of its destruction or the amount
    of such damage or at its option reinstate or
    replace such property or any part thereof.”
  56. The highlighted portion of the aforesaid clause leaves no
    manner of doubt that the insurance company in consideration of
    the premium received had agreed to either reinstate the goods or
    replace the same or pay to the insured the value of the property at
    the time of happening of its destruction or damage. The State
    Commission and the National Commission had rejected the claim of
    the farmers in this regard on the ground that the variety­wise
    periodic report of the Bengaluru market, produced by the farmers,
    showed that the range between minimum and maximum price for
    Byadgi and Guntur chillies etc. is very vast and to arrive at an
    average price would mean construing that all the chillies are of
    standard quality. According to the National Commission, this
    39
    would be a speculative exercise based on the assumption that the
    entire quantity of chillies is of the same class and characteristic.
  57. At the time when the farmers deposited the goods with the cold
    store there were handed over warehouse receipts which not only
    gave identity of the agricultural produce but also reflected the
    quantity of the agricultural produce and its market value on the
    date when this produce was stored in the cold store. However, the
    quality of the produce is not reflected in the warehouse receipts.
  58. Though we hold that in terms of the clause discussed above
    the insurance company is liable to pay the value of the goods as
    on the date of the fire, we feel that the National Commission was
    right when it came to the conclusion that it was not possible to
    award an amount based on the variety­wise periodic report of the
    Bengaluru market. This is the only evidence produced by the
    farmers and brought to our notice to support their contention.
    The National Commission is right that the difference between
    minimum price for which this product was sold during the period
    14.12.2013 to 14.01.2014 and the maximum price for the same
    agricultural produce during this period is so high that without
    exactly knowing what was the quality of agricultural produce, it
    40
    would not be possible to ascertain what was the price on the date
    of fire. To give an example, Byadgi chillies have a price range of
    Rs. 3,200 per quintal to Rs. 17,300 per quintal i.e. Rs.32 per
    kilogram to Rs.173 per kilogram. There is no way for any Court to
    determine what the exact price would have been without having
    the benefit of the quality of produce. Unfortunately, even in the
    warehouse receipts there is no gradation or reflection of the quality
    of the produce.
  59. We, therefore, affirm the decision of the National Commission
    that the value of the goods as reflected in the warehouse receipts
    should be taken to be the value on the date of fire. We may add
    that this value is not very different from the median value for most
    of the products. We rely upon the value given in the warehouse
    receipts because that was the value which was given by the
    farmers, not knowing that their product is going to be burnt, and
    was accepted by the cold store, which must have known the value
    of the product in the local market and accepted by the Bank,
    which on the basis of such surety advanced the loan.
  60. In view of the aforesaid discussion, we are of the view that
    the Bank shall be entitled to recover the principal amount
    41
    advanced by it to each one of the farmers along with the simple
    interest at the rate of 12% per annum from the date of advancing
    of loan till repayment thereof. The insurance company is liable to
    pay the value of goods as reflected in the warehouse receipts of
    each farmer along with simple interest at the rate of 12% per
    annum from the date of fire till payment of the amount. The dues
    of the Bank till the date of fire will have to be first determined and,
    thereafter, the excess will be payable to the farmer along with the
    interest.
  61. To clarify the issue we take the example of the first farmerThippa Reddy at Sr. No.1, in whose Account No.1425844005736,
    the loan of Rs.10,00,000/­ was sanctioned on 30.08.2011. The
    insurance company has worked out his outstanding on the date of
    incident at Rs.13,57,307/­ whereas the value of the goods was
    2,00,2000 as per the warehouse receipt. If we calculate simple
    interest at the rate of 12% per annum on Rs.10,00,000/­ from
    30.08.2011 till 14.01.2014, it works out to Rs.2,84,712/­
    approximately. Obviously, if the farmer has paid any amount
    towards the loan that will also have to be adjusted but for the sake
    42
    of clarification, we are assuming that no amount has been paid.
    Therefore, with effect from 14.01.2014, the insurance company
    shall be liable to pay interest on 10,00,000/­ at the rate of 12%
    per annum to the Bank and shall also be liable to pay a sum of
    Rs.7,17,288/­ along with interest at the rate of 12% per annum
    from 14.01.2014 till payment to the farmer.
  62. In view of the above, we dispose of the appeals with the
    following directions:
    1.That the insurance company shall be liable to pay to
    each one of the farmers the value of his goods to be
    assessed as per the rate mentioned on the warehouse
    receipts when the goods were stored in the Cold Store
    in terms of our direction given hereinabove along with
    interest at the rate of 12% per annum from the date of
    fire till payment or deposit thereof.
    2.That the Canara Bank shall file certified statements of
    accounts before the Karnataka State Consumer
    Disputes Redressal Commission showing the principal
    amount of loan advanced to each farmer and the
    amount due to the Bank by calculating simple interest
    43
    @ 12% p.a. up to 13.01.2014 i.e. payable by 14.01.2014
    after adjusting the payments which the Bank may have
    received in the loan account.
    3.The Bank in the statement of accounts shall also set out
    the amount due with the aforesaid rate of interest up to
    30.04.2020.
    4.The aforesaid statement be filed before the State
    Commission on or before 02.03.2020.
    5.That thereafter, the State Commission in each appeal
    shall determine the amount payable to the farmer by
    calculating it in terms of the clarification given above i.e.
    after adjusting the amount due to the Bank as on
    14.01.2014. This exercise be completed on or before
    31.03.2020.
    6.Out of the aforesaid amount, the Insurance Company
    shall pay the amount of loan along with simple interest
    at the rate of 12% per annum from the date of
    advancement of loan to the date of payment directly to
    the Bank.
    44
    7.Thereafter, the insurance company shall deposit the
    amount payable to the farmers with the State
    Commission on or before 30.04.2020.
  63. All appeals are disposed of in the aforesaid terms. No order
    as to costs. Pending application(s), if any, shall also stand(s)
    disposed of.
    …………………………….J.
    (S. Abdul Nazeer)
    …………………………….J.
    (Deepak Gupta)
    New Delhi
    February 06, 2020
    45