Case: ORIENTAL INSURANCE COMPANY LTD Vs. NATIONAL BULK HANDLING CORPORATION PVT. LTD

2. The respondent-complainant is a Collateral Management Company, which undertakes to store the commodities pledged by the farmers, traders and manufacturers etc., in availing loan from lending banks and other institutions. In case of any loss of the pledged commodities, the respondent-complainant is liable to make good the loss to the lending bank. The respondent-Collateral Management Company, took Fidelity Guarantee Insurance Policy from the appellant- opposite party, in respect of the pledged commodities stored in warehouses/godowns at several places3. The three firms namely S.K. Sales Corporation, Navbharat Commodities and Navbharat Agro Products, entered into agreements with the respondent-complainant for storing commodities including urad and mentha oil in their warehouse at Gadarpur in District Udham Singh Nagar, Uttarakhand. The respondent-Company was appointed as the Collateral Manager for the said commodities, which has deployed security guards hired by it from the security agency, besides its own field staff. Coming to know that on 06.11.2008, the stored commodity of urad was unauthorizedly removed from the godown, which was pledged to HDFC Bank, the respondent dispatched a team of its officers to investigate the same. The report dated 16.11.2008 of the investigating agency revealed certain omissions and commissions by the concerned employees of the respondent in connivance with the borrowers. Coming to know of such unauthorized removal of urad, the respondent has taken steps to prevent further possible loss to oil and wheat. 601 barrels of oil were shifted to a godown at Bazpur, where a quality check was conducted. On making such quality check, laboratory report revealed that the mentha oil was substituted by water in the barrels. Thereupon, claim was lodged by the respondent with the appellant on 08.11.2008 and further a complaint was also lodged at the Police Station upon which, an FIR was registered on 19.11.20084. The respondent-complainant made a claim with appellant, alleging that the commodities were removed/substituted in connivance with the employees which was an act of infidelity covered by the insurance policy taken by it. It is alleged that the employees have committed criminal breach of trust, with a view to cause loss to the banks and the complainant. When the claim was not accepted, the respondent-complainant approached the National Commission, claiming an amount of Rs.4,17,84,213/-(Rupees Four Crores Seventeen Lakhs Eighty Four Thousand Two Hundred and Thirteen). The said claim included loss of stock of urad payable to HDFC Bank for an amount of Rs. 70,97,100/- (Rupees Seventy Lakhs Ninety Seven Thousand One Hundred) and further loss of Rs. 3,46,87,113/-(Rupees Three Crores Forty Six Lakhs Eighty Seven Thousand One Hundred and Thirteen Only) payable to State Bank of India for the stock commodity of mentha oil. The said claim was contested and opposed by the appellant- opposite party. By considering the submissions on both sides and other relevant material placed on record, the National Commission, by impugned order, allowed the claim of Rs.3,46,87,113/- along with interest @ 9% per annum towards the loss of mentha oil but at the same time rejected the claim so far as urad is concerned.

Reasoning: 8. Upon hearing the learned counsels on both sides and on perusal of the impugned order and other material placed on record, we do not find any merit in any of the contentions advanced by learned counsel for the appellant. The aforesaid judgments relied on by learned counsel for the respondent, though relate to insurance claims, but the issues decided in the aforesaid judgments, have no direct bearing on the issues which arise for consideration in this case9. It is not in dispute that the insurance policy for fidelity guarantee was in force during the relevant time, which was obtained by the respondent-complainant. Fidelity Guarantee is different from contingency guarantee. The insurance under it, is for honesty, against negligence or for being faithful and loyal to its employees. The protection afforded is different than in normal insurance policies. Precisely, it is a contract whereby, for a consideration, one agrees to indemnify another, against loss, arising from the breach of honesty, integrity or fidelity of an employee or other person holding a position of trust10. The impugned order is assailed mainly on the ground that the respondent has failed to prove involvement of any of the employees of the respondent- Company, as such, there cannot be any liability on the appellant-insurance company. It is not in dispute that the pledged goods of 601 barrels of mentha oil was stored in the warehouse. The survey report dated 26.03.2009, itself indicates the involvement of employees of the respondent-Company in removing 601 barrels of mentha oil stored by the respondent-Company. Immediately, after confirmation and 100 per cent sampling, it was disclosed that in all the barrels, the mentha oil was substituted with water, a complaint was lodged by the respondent-complainant on 18.11.2008 before the Gadarpur Police Station. In the complaint filed, specific allegation is made about involvement of staff of the respondent-Company. If the entire material is taken into consideration, it is clear that there is a clear involvement of the employees of respondent and other contract employees in substituting the mentha oil barrels with waterIt is clear from the impugned order and other material placed on record, when it has come to the notice of the respondent, that mentha oil was substituted by water in the barrels, respondent undertook 100 per cent sampling, by sending the samples drawn from the barrels to the laboratory and such sampling was completed only on 12.11.2008 and the investigation report came to be submitted to the respondent-Company on 14.11.2008. Before that respondents were not aware of mentha oil substituted by water in all the barrels. Thereafter, claim was made before the appellant on 18.11.200813. In that view of the matter, it cannot be said that there is any delay on the part of the respondent in lodging the claim, so as to accept that there is breach of condition no. 1 of the policy.