C. Viswanath, Presiding Member
1. The present Complaint is filed under Section 21(a)(1) of the Consumer Protection Act, 1986.
2. The Complainant is a private limited company engaged in the business of export of garments and the Opposite Party is a Government of India enterprise engaged in the business of providing export credit insurance facilities to exporters and banks in India.
3. The case of the Complainant is that it had availed credit insurance from the Opposite Party on 14.01.2008 for exports made to M/s 4004, USA, under a Single Buyer Exposure Policy bearing No. 0560000397 with a loss limit of Rs.4 crores. The Policy was valid from 08.01.2008 to 31.07.2009. During the subsistence of the Policy, the buyer defaulted in payments and applied for insolvency in Chapter 11 Court of the United States of America. Under terms of the Policy, the Opposite Party was to reimburse the loss caused to the Complainant due to default of the buyer. The Complainant raised claim for Rs.2,53,57,029/-, vide two letters dated 06.09.2008 for 8 bills, which remained unpaid by the buyer. The Opposite Party approved the claim in respect of 4 bills only amounting to Rs.82,08,295/- and denied the claim in respect of other 4 bills, vide letter dated 24.10.2008. The sole reason given by the Opposite Party for denial was that the invoices were drawn in the name of ‘Texport Clothing Industries’ (“TCI”)’, which according to the Opposite Party was a different entity from “TIPL”, who was issued the Policy and thus outside the scope of the Policy. Even after repeated requests to consider the claim of the Complainant, the Opposite Party, vide letter dated 30.05.2011 rejected the claim of the Complainant by stating that the shipments made by TCI were not covered under the ambit of the Policy issued to the Complainant. The Complainant after exhausting other remedies approached this Commission with the following prayer:-
“(a) That ECGC be directed to compensate the Complainant for the amount of Rs.1,20,77,329 (Rupees One crore Twenty lakhs Seventy Seven thousand Three hundred and Twenty Nine only) being the insured percentage of 80% of the claimed amount of Rs.1,50,96,661/- (Rupees One crore Fifty lakhs Ninety Six thousand Six hundred and Sixty One only) being owed to them under the Single Buyer Exposure Policy.
(b) That ECGC be directed to pay interest at the rate of 12% p.a. on the amount so claimed from 6th September 2008 until realisation of the amount.
(c) That the costs of this Complaint be provided for.
(d) Any other relief which this Honourable Commission may deem fit and proper.”
4. The Opposite Party resisted the Complaint by filing the written statement on the ground that the Complainant was a Private Limited Company and engaged in commercial activities and therefore, did not fall within the definition of consumer under Section 2 (1) (d) of the Consumer Protection Act, 1986. The transaction between the parties was commercial in nature and not of a service provider and consumer.
5. On merits, it was contended that the Complaint was not maintainable and the same was liable to be dismissed as there was no privity of contract between the Opposite Party and the Texport Clothing Industries. The Complainant filed the claim for the loss suffered by Texport Clothing Industries. The claim of the Complainant was duly examined and upon scrutiny it was observed that Texport Clothing Industries was a separate entity and had nothing to do with the contract of Insurance and hence, the claim was rejected by the Opposite Party, vide letter dated 24.10.2008. In the proposal form dated 07.08.2008 filled by the Complainant, it was declared in Column No.8 that it had no sister concern. Texport Clothing Industries is not entitled to derive any benefit from the Opposite Party and the present Complaint was nothing but an abuse of process of law.
5. Heard the Learned Counsel for both the Parties and carefully perused the record. Learned Counsel for Complainant submitted that the illegal denial of the claim amounted to deficiency in service by the Opposite Party. The ground taken by the Opposite Party for denial was contrary to law. The Opposite Party had overlooked facts establishing that the Complainant TIPL and TCI were the same legal entity. The entire business of TCI was taken over and amalgamated into TIPL. TCI was a Partnership Firm, until it was acquired by TIPL through slump sale under the Agreement to sell dated 09.01.2006. Due to TCI being an EOU, certain mandatory government regulations which were required to be followed after the takeover of TCI by TIPL. The directives in the EXIM Policy of the Ministry of Commerce, Government of India mandated for TIPL to maintain a distinct name and have separate accounts for its 100% EOU Division. The said Directive reads as follows:
“6.32. Distinct Identity
If an industrial enterprise is operating both as a domestic unit as well as an EOU/EHTP/STP/BTP unit, it shall have two distinct identities with separate accounts, including separate bank accounts. It is, however, not necessary for it to be a separate legal identity, but it should be possible to distinguish the import and export or supplies affected by the EOU/EHTP/STP/BTP units from those made by the other units of the enterprise.”
It was submitted that invoices were raised as a matter of compliance with the said Directive, but all the legal rights pertaining to all transactions by TCI were held by TIPL, pursuant to the acquisition under the abovementioned Agreement to Sell. Income tax assessment for TIPL and TCI were made under a single PAN Number. The Complainant was also entitled to claim exemption of profits and gains of TCI under Section 10(B) of the Income Tax Act. Nationalized Banks, Administrator of the Buyer and Reserve Bank of India recognized the Complainant and TCI as a single entity. TCI was not only controlled by TIPL, but was a division of TIPL, i.e. part and parcel of TIPL. All export documentation, including the Bills of Exchange had always been drawn by TIPL and the export proceeds upon realizations were credited to the account of TIPL.
6. Learned Counsel for the Opposite Party submitted that the Complainant was a Private Limited Company and engaged in commercial activities and therefore, was not a “Consumer” under Section 2 (1) (d) of the Consumer Protection Act, 1986. Further, the transactions between the parties were commercial in nature and not of a service provider and Consumer. The claim before the Consumer Forum was not maintainable.
7. On merits, the Learned Counsel submitted that the Complaint was not maintainable and liable to be dismissed as there was no privity of contract between the Opposite Party and the Texport Clothing Industries. The Policy was issued in the name of the Complainant TIPL. The Complainant filed the claim for the loss suffered by Texport Clothing Industries. The Complainant had no locus standi to file the claim on behalf of TCI. The Opposite Party observed that Texport Clothing Industries was a separate entity and had nothing to do with the contract of Insurance and hence, the claim was rightly rejected by the Opposite Party, vide letter dated 24.10.2008. In the proposal form dated 07.08.2008 filled by the Complainant, it was declared in Column No.8 that it had no sister concern. Texport Clothing Industries was not entitled to derive any benefit from the Opposite Party. The Complaint has no merit and deserves to be dismissed.
8. Brief fact of the case is that Complainant obtained a service of Credit Insurance from the Opposite Party, for exports made to M/s. 4004 Inc. USA under Single Buyer Exposure Policy bearing No. 0560000397, effective from 08.01.2008 and valid up to 07.01.2009 with loss limit of Rs.4 Crores. Owing to the default by the Buyer towards payment to the Complainant, the Complainant raised claim, vide two letters dated 06.09.2008, with respect to 8 bills for an amount of Rs.2,53,57,029/-. While the claim towards four bills with Rs.82,08.295/- was accepted, the remaining claim amounting to Rs.1,50,96,661/- was denied. The reason for denial of the claim was that ‘Texport Clothing Industries’ was separate entity from the Complainant ‘Texport Industries Private Limited’, who was issued the Policy.
9. The crux of the matter is the name of the Company by which bills were drawn was different than the Company which was issued the Policy. The Opposite Party repudiated the claim on the ground that the bills produced by the Complainant were in the name of TCI and the Policy was issued in the name of TIPL. The Insurance Company having no privity of contract with TCI denied payment for the bills issued in their name. The Opposite Party/Insurance Company was not given intimation about amalgamation of TCI with the Complainant TIPL. Even in the proposal form, the Complainant had not disclosed this fact to the Insurance Company. In reply to the question whether the Complainant had any sister concern, in column No.8 of the proposal form, the Complainant had written “N.A” instead of disclosing the name of Texport Clothing Industries (TCI). While taking the Insurance Policy, it was mandatory on the part of the Complainant to disclose the name of TCI to the Insurance Company, which they failed to do. Non- disclosure of a fact or circumstance would guide the Insurer in deciding whether or not to grant a cover. In case there is any misstatement or non-disclosure on the part of the assured while making the proposal or at any stage, the Insurer would not be liable for the claim on such Policy. The Complainant had also not disclosed the name of TCI anywhere in the proposal form thereby deprived the Opposite Party/Insurance Company to take appropriate decision regarding issuance of Insurance Policy on the basis of the true and complete facts.
10. In the facts and circumstances of the case, I am of the view that the Opposite Party/Insurance Company was justified in denying the claim in respect of 4 bills on the ground that the invoices were drawn in the name of ‘export Clothing Industries. The Opposite Party acted bonafidely and admittedly approved the claim in respect of 4 bills which were in the name of the Complainant TIPL. The Complainant failed to establish that there was any deficiency in service on the part of the Opposite Party. The Complaint, thus, fails and is dismissed with no order as to costs.
