Singareddy Ramana Murty                              ----- Appellant
                                       Vs.
M/s National Insurance Co. Ltd. & Ors.             ----- Respondents

Before: Hon'ble Mr. Justice J.K.Mehra, Presiding Member, Mrs. Rajyalakshmi Rao, Member, Mr. B.K.Taimni, Member.

J.K.Mehera, J. Presiding Member.

     This appeal is directed against the order of the State Consumer Disputes Redressal Commission, Andhra Pradesh, rejecting the complaint filed by the Appellant herein. The facts in brief are that Appellant had insured his fishing boat No. KKD 1606 with the Respondent Insurance Co. for a sum of Rs. 3,40,000/- for the period 21.10.1988 to 20.10.1989 which sunk on 12.12.1988 due to heavy and high velocity cyclone winds. Appellant informed the Respondent Insurance Company on the very next day, i.e. 13.12.1988. The vessel could not be refloated in spite of all efforts. The salvage operations were conducted in the presence of the officers of the Insurance Company and they could bring to shore only some wood pieces and the engine could not be brought as it is, and hence it was dismantled and some parts of it were brought to shore. The Insurance Company appointed Surveyors, M/s J.B.Boda Surveyors Pvt. Ltd., who submitted their report on 26.6.89, assessing the damage as per cost assessment and computing the total assessed loss at Rs. 2,82,700/-. It was found that Rs. 21,500/- for the salvage charges were paid by the Complainant. It is to be mentioned here that the Insurance Company settled the claim at Rs. 1,95,633/- and the Complainant accepted the amount under protest. The Complainant, immediately, after receipt of the amount, wrote a letter to the Insurance Company informing them the amount of Rs. 1,95,633/- being accepted under protest, which letter was replied to by the Insurance Company vide letter dated 23.4.1990 mentioned therein that they are accepting the claim for Rs. 3,40,000/-. In view of this development, the complainant filed a complaint before the State Commission seeking a direction to the Insurance Company to make the balance payment with interest at the rate of 18% p.a., with damages of      Rs. 1 lakh.

     Before the State Commission, the Insurance Company has taken the stand that the Complainant is not entitled to Rs. 3,40,000/- as the policy could not be settled on total loss basis, as the Complainant failed to effect repairs, and after negotiations the matter was fully and finally settled by paying an amount of Rs. 1,95,633/-. This plea of the Insurance Company was rebutted by the Complainant by stating that the consent letter for full and final settlement from him was obtained by misrepresentation, fraud or coercion or by exercising undue influence. The State Commission on examination of various documents produced before, the letters referred to in course of hearing, returned the finding that there was no evidence on record to show that the Complainant signed the settlement due to any misrepresentation, fraud or coercion or undue influence, and, hence, there was no deficiency in service, and dismissed the complaint. Now, the Complainant has come in appeal before us. It appears the State Commission lost sight of the principle of insurance which is to indemnify and not to try to bargain after ascertainment of the extent of loss. The Insurance Company must give good reasons to the insured for depriving him of the amount of loss ascertained by the surveyor or part thereof. No such correspondence is brought to our notice.

     Heard Counsel for both sides and liberty was given to the parties to file their written submissions. We have also gone through the written submissions accompanied by the judgments of this Commission. In the light of the law on the subject as discussed hereunder the impugned order cannot be upheld. In fact, there appears to be no evidence of any alleged negotiations, before the State Commission, which has come to that conclusion. The relevant portion of which reads as under:

     "There is no controversy as to the incident that the fishing boat ran aground and extensive damage was caused. The dispute relates to only with regard to quantum of loss suffered. While as the Complainant claims that he is entitled for payment of Rs. 3,40,000/- on a constructive loss, the Opposite Party submits that the loss was assessed on repair basis and as the Complainant failed to effect repairs, after negotiations the matter was fully and finally settled by payment an amount of Rs. 1,95,633/- to the Complainant. It is, therefore, not open to the Complainant to claim any further amount under the Policy".

    On this point, we would like to examine the provisions of law and the recent pronouncement of the Supreme Court in the case of United India Insurance Co. Ltd. Vs. Ajmer Singh Cotton and Jute Mills & Ors. reported as (1999) 6 SCC 400. Before proceeding to deal with the controversy, it will be appropriate to notice how the terms 'coercion' and 'undue influence' have been defined under the Contract Act. They read as under:

"Coercion: 'Coercion' is the committing, or threatening to commit, any act forbidden by the Indian Penal Code (45 of 1860) or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement".

"Undue influence: (1) A contract is said to be inducted by 'undue influence' where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.

(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another -

(a) Where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or

(b) Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.

(3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall be upon the person in a position to dominate the will of the other.

Nothing in the sub-section shall affect the provision of Section 111 of the Indian Evidence Act, 1872 (1 of 1872)".

     It cannot be disputed that the Insurance Company is the dominant party when it goes to the settlement of the claims and it is very often in a position to dominate the will of insured. A party who is faced with the situation like a disaster and who is cash starved on account of calamity that has befallen it, is not in a position to resist the pressure of the Insurance Company to sign the receipts on the dotted lines in order to receive whatever payment is becoming available to it. Such receipt will have no meaning if the party has immediately refuted it and repudiated its receipt or discharge voucher if the circumstances show that the party protested soon after signing.

     The case of (i) M/s P.K.Ramaiah & Co. Vs. Chairman & Managing Director, National Thermal Power Corporation, reported as (1994) 3 SCC 126 and (ii) Nathani Steel Ltd. Vs. Associated Constructions, reported as (1995) 3 SCC 324 were decided under Law of Arbitration and related to settlements voluntarily arrived at.

     A situation like this came up before the Hon'ble Supreme Court as in the aforesaid case when the Hon'ble Supreme Court, in the case of United India Insurance Co. Ltd. Vs. Ajmer Singh Cotton & Jute Mills & Ors. reported as (1999) 6 SCC 400 at 402, held down as under:

     "The mere execution of the discharge voucher would not always deprive the consumer from preferring claim with respect to the deficiency in service or consequential benefits arising out of the amount paid in default of the service rendered. Despite execution of the discharge voucher, the consumer may be in a position to satisfy the Tribunal or the Commission under the Act that such discharge voucher or receipt had been obtained from him under the circumstances which can be termed as fraudulent or exercise of undue influence or by misrepresentation or the like. If in a given case the consumer satisfies the authority under the Act that the discharge voucher was obtained by fraud, misrepresentation, undue influence or the like, coercive bargaining compelled by circumstances, the authority before whom the complaint is made would be justified in granting appropriate relief. However (sic so), where such discharge voucher is proved to have been obtained under any of the suspicious circumstances noted herein above, the Tribunal or the Commission would be justified in granting the appropriate relief under the circumstances of each case".

     A reference may be made to the case of S.Vellinayagam & Co. Vs. New India Assurance Co. Ltd. 1992 (1) CPR 808 also.

     In the case of National Insurance Co. Ltd. vs. Lal Chand Jain & Sons, 1997 (5) CTJ 5, this Commission had observed as under:
     "In case where the claim has been quantified and offered, the Complainant may have been compelled to give a valid discharge to the Insurance Company who may have coerced the Complainant into accepting the settlement of the claim unwillingly or involuntarily. The Insurance Company will not disburse the amount unless discharge voucher in full and final settlement without protest is given by the insured. The Complainant may have no option but to accept the amount offered due to financial constraints or other compelling reasons. The insured may lodge a protest immediately on receipt or soon thereafter".

     In the light of the above legal position and keeping in view the law laid down by the Hon'ble Supreme Court in the case of Ajmer Cotton and Jute Mills (Supra), the impugned order cannot be sustained and is set aside. There is no justification for paying Rs. 1,95,633/- as against Rs. 2,82,700/- which was the amount assessed by the Surveyor. We, therefore, direct that the respondent should pay a total of Rs. 2,82,700/- minus the salvage. The Insurance Company, Respondent before us, will also be liable to pay interest at the rate of 9% p.a. on the aforesaid balance amount from two months after the date of Surveyor's report till the date of payment. It should pay the amount after allowing credit for the amount already paid. The appeal is disposed in the above terms. However, in the facts and circumstances of the case, there will be no order as to costs.