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.

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.
2. 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’.
3. 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.  
4. 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
5. 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.
6. 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
7. 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.
8. 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. 
9. 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.
10. Before this Court, appeals have been filed by the insurance
company, the farmers, the cold store and the Bank. 
11. 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
12. 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?
13. 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
1. 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.
2. The congested space in the building might have
accelerated the smoldering fire.
3. 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.
4. 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.”
14. 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. 
15. 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.
16. 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
17. 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. 
18. 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
19. 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.”
20. 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.”
21. 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
22. 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.
23. 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. 
24. 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…;”
25. 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.
26. 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. 
27. 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.”
28. 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.
29. 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.”
30. 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
31. 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.”
32. 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
33. 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:
34. Shri Malhotra has placed reliance on Condition Nos. 1 & 8 of
Part B of the General Conditions of the Insurance Policy:­
“(B) GENERAL CONDITIONS:
1. This   policy   shall   be   voidable   in   the   event   of
misrepresentation,   mis­description   or   nondisclosure of any material particular.
xxx          xxx xxx
8. 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.”
35. 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.”
36. 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.”
37. 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
38. 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.
39. 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. 
40. 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:
41. 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.”
42. 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. 
43. 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. 
44. 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
45. 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. 
46. 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
47. 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.
48. 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.
49. In view of the aforesaid, we feel that the Bank cannot claim
interest at the contractual rate and is not entitled to claim interest
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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:
50. 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
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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.”
51. 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
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would be a speculative exercise based on the assumption that the
entire quantity of chillies is of the same class and characteristic.
52. 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. 
53. 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
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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.
54. 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.
55. 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. 
56. 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
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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. 
57. 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. 
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7.Thereafter,   the   insurance   company   shall   deposit   the
amount   payable   to   the   farmers   with   the   State
Commission on or before 30.04.2020.
58. 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
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