ORDER
Rajyalakshmi Rao, Member
1. The present appeal is filed by the Oriental Insurance Co. against the order dated 9,1.1996 of the State Commission, Delhi in Complaint No. C-342/ 1993 wherein the complaint was allowed. The brief facts of the case are:
Shri B.K. Sethi respondent No. 1 (the complainant) is a Chairman and Managing Director of M/s. Indu Video Films Pvt. Ltd. The company obtained the loan from Delhi Finance Corporation (respondent No. 2) and for repayment of the loan, residential house No. B-120, A and B, Malviya Nagar, New Delhi was mortgaged to Delhi Finance Corporation as collateral security. The said house is owned by Smt. Sushila Devi Sethi and Shri Mohan Lal Chopra, mother and uncle of Shri B.K. Sethi, respondent No. 1. Delhi Finance Corporation vide its proposal dated 27.11.1990, approached the Oriental Insurance Company to issue two insurance policies, one covering the risk of plant and machinery of M/s. Indu Video Films Pvt. Ltd. situated at A-9, Okhla Industrial Area Phase-1 to the extent of Rs. 27,10,149/- and the other to the extent of Rs. 15,00,000/- in respect of residential building at Malviya Nagar.
2. It is the case of the respondents that they sought a Fire policy-‘C’ in respect of the plant and machinery and Fire policy-‘A’ in respect of residential property. However, Oriental Insurance Company issued one composite policy as Fire policy-C covering the plant and machinery as well as the residential property. During the validity of the insurance, the residential property suffered some damage due to earthquake. The claim of Rs. 3,96,060/-preferred by M/s. Indu Video Films Pvt. Ltd. was repudiated by the Insurance Co. Thereafter Shri B.K. Sethi, CMD, M/s. Indu Video Films Pvt Ltd. filed a complaint before the State Commission claiming Rs. 1,86,000/- which is the amount of damage assessed by Surveyor appointed by the Insurance Co. and refund of excess premium of Rs. 7,500/- illegally charged for the residential property. The State Commission held in favour of the complainant and directed payment of the claim of Rs. 1,86,000/- as well as refund of excess premium of Rs. 7,500/- and costs of Rs. 5,000/-. The present appeal is against the above order.
3. The argument of the Insurance Co. is that the policy issued as regards both plant and machinery as well as residential property is Fire policy-C which covers only fire, riot, strike and does not cover the risk of earthquake. Another argument is that the residential property belongs to the relations of Shri B.K. Sethi, CMD of the insured company and that since these relations have no proprietary interests in the company, there is no insurable interests in the said residential property. The State Commission rejected both these arguments. It is further held that the Oriental Insurance Company conceded that if a person approaches the Insurance Company and asks for Fire Policy in respect of a residential house, it is only Fire Policy-A, which covers earthquake, issued. The State Commission held that while in the proposal, the Delhi Finance Corporation asked for issuance of two policies, Fire Policy-C in respect of Plant and Machinery and Fire Policy-A in respect of residential property, the Insurance Company due to apparent mistake issued a combined Fire Policy-C in regard to both. The State Commission also held that the Insurance Premium for the residential property is 65 p. per Rs. 1,000/- and Rs. 5.62 per Rs. 1,000/- in respect of industrial or commercial premises. It held that because of the combined policy wrongly issued by the Insurance Company, they charged higher premium of Rs. 5.53 per Rs. 1,000/- even for the residential portion of the proposal. They have, therefore, ordered refund of the same.
4. On behalf of the appellants the same arguments have been advanced before us. In addition, they have challenged the observation of the State Commission that the question of insurable interest should have been raised by the Insurance Company at the time of issuance of the insurance policy. They argued that an insurance is granted on the representations made by the insured and the Insurance Company cannot go into the correctness of the facts stated in the proposal form. In a contract of good faith, representations/facts stated by the party seeking insurance are taken to be correct.
5. We have carefully considered the arguments and examined the case record. The State Commission has passed a well reasoned order. Its conclusions are based on the facts that; (a) the proposal for issuance of insurance policies was separate and further for residential property (upto the value of Rs. 15 lakhs) and for the plant and machinery (upto the value of about Rs. 27 lakhs) at a different location. Further there is specific finding by State Commission on that objection with following observation. “A careful perusal of the letter dated 2.7.1990 shows that Delhi Financial Corporation wrote to the Insurance Company to issue insurance policy for a specified amount and proceeded to specifically maintain that the said policy was to cover residential building to the extent of Rs. 15 lacs. This is clear case of mistake on the part of the Insurance Company when it was specifically brought to its notice in proposal letter that insurance to the extent of Rs. 15 lacs was to be in respect of residential building the Insurance Company was bound to issue insurance policy in form ‘A’; (b) that the residential property has been insured by the Insurance Company without any objection before issuance of policy; (c) that due premium has been paid on the residential portion by complainant and same was accepted by the respondent; (d) an authority on insurance, E.R. Hardy Ivamy in his treatise “Law Relating to Insurance” has clearly held that “Insurable interest is not however confined to the interest arising from ownership….. It need not, therefore, be a legal interest, an equitable or beneficial interest of any kind being equally insurable”.
6. The Delhi Financial Corporation took the policy on behalf of the complainant as the property was mortgaged to it. Hence, it cannot be said that the Delhi Financial Corporation was not having any interest in the property. Further, the proposal form and the letter are the basis of contract of insurance. If any mistake is committed by the officers of the Insurance Company, insured cannot suffer, on the contrary action is required to be taken against the concerned defaulting officer. Hence, in our view, the reasons recorded above by the State Commission cannot be faulted.
7. In the result, the appeal is dismissed. There shall be no order as to costs.