Insurance Company must represent the dishonoured cheque in Bank

Gayatridham Phase II, a cooperative housing society, had taken a Standard Fire and Special Perils Insurance Policy from New India Assurance. The policy covered the building and residential flats for a total sum of over ~2 crore. At the time of renewal, the Society remitted the premium on July 22, 2005, through a cheque of Rs. 18,910 drawn on The Thane District Central Cooperative Bank. On receipt of the cheque, the policy was renewed. Just few days, on July 26, 2005, the Society suffered heavy damage due to incessant rain and floods, for which it lodged a claim of Rs. 43 lakh. A surveyor was appointed to assess the loss. Meanwhile, the insurance company neither sanctioned nor repudiated the claim. Instead, a letter dated October 4, 2015, was sent intimating that the policy stood cancelled from the date of inception, as the premium cheque had been dishonoured by the bank due to insufficient funds. The Society appointed an architect’s report to quantify the loss, which came to Rs. 43,47,503. The Society filed a complaint before the Maharashtra State Commission against the insurance company, as well as the bank for claiming this amount. The insurance company took a stand that since the policy had been cancelled at the inception due to dishonouring of the premium cheque, it was not liable. The Society argued that the cheque ought to have been represented again. The insurance company disputed this, saying that it was under no obligation to represent the cheque as the cheque-return memo did not advise it. The bank said it had sought re-presentation despite sufficient funds in the Society’s account because of floods and blamed the insurance company for not having re-presented the cheque later. Both bank and insurer denied their responsibility and blamed each other. Also, since both the insurer and Society had not produced the Surveyor’s report and the report of the Society’s architect was unacceptable, as he was not a licensed surveyor, the Society would be entitled to merely claim compensation for deficiency in service. Accordingly, by its order of November 15, 2016, delivered by Narendra Kawde for the Bench along with Justice Bhangale, the State Commission indicted both the insurance company as well as the bank and told to pay a compensation of Rs. 5 lakh to the Society for deficiency in service. This amount was directed to be paid within 60 days. Else, it would carry interest at 9% per annum. Additionally, costs of Rs. 25,000 were also awarded.