Team Code% & '

In The District Consumer Forum

University Institute of Legal Studies, Intra Department Moot Court Competition 2 !"

Ashok Kumar Complainant v# Mr. X, $espondent ! IBI Bank $espondent 2

Memorial For Complainant

Table of Contents
ST(T)M)*T +F ,U$ISDICTI+*######################################################################################## iii ID)*TIFIC(TI+* +F C+*T)*TI+*S############################################################################### iv ST(T)M)*T +F F(CTS#########################################################################################################v SUMM($- +F ($.UM)*TS##############################################################################################vi ($.UM)*TS (D/(*C)D################################################################################################### ! !# (S0+1 IS ( C+*SUM)$%################################################################################################# ! 2# $)S2+*D)*T *+# ! i#e#, M$# 3 IS LI(&L)################################################################### ' 2#!# U*F(I$ T$(D) 2$(CTIC)%##################################################################################### ' 2#2# $)S2+*D)*T *+#! 0(S F$(UDUL)*TL- MIS$)2$)S)*T)D F(CTS%########4 a5 False statement of fact% ############################################################################################### 6 75 Induces the other party to contract%############################################################################# 6 c5 *ot free consent########################################################################################################### 8 2#"# 2$I*CI2L) +F U&)$$IM() FID)I IS (22LIC(&L) 0)$)%###############################9 2#'# FIDUCI($- $)L(TI+*S0I2 )3IST)D################################################################# ! a5 Duties of a Fiduciary##################################################################################################!2 75 Duty of Loyalty######################################################################################################### !2 c5 Duty to Disclose $elevant Facts and $ender (ccounts#############################################!2 d5 Duty of Due Care#######################################################################################################!2 2#4# S2)CI(L 1*+:L)D.) $).($DI*. SU&,)CT################################################ !" 2#6# )ST+22)L%#################################################################################################################!4 "# &(*1 IS (LS+ LI(&L)%##################################################################################################!; "#!# &(*1 IS /IC($I+USL- LI(&L)%##########################################################################!; "#2 D)FICI)*C- I* S)$/IC)%####################################################################################### 2! a5 Unfair Deductions######################################################################################################2! 75 Delay in refunding premium%#################################################################################### 2' '# &(*1 (*D I*/)STM)*T M(*(.)$ ($) ,+I*TL- (*D S)/)$L- LI(&L)%###26 2rayer#######################################################################################################################################"!

Index Of Authorities
LIC of India v# Sheela Devi, II <!99!5 C2, 822 <0ar5############################################################## 2 Smt# 2ushpa Meena v# Shah )nterprises !99 $LT 2art III, 49################################################2 CC=!;8!= 9 ############################################################################################################################## 2 Commissioner of Income Ta>, (#2#, v# Ta? Mahal 0otel, Secundera7ad, (I$ !982 SC !6;<!8 5#################################################################################################################################### ' I <2 ;5 C2, "!9 *C ################################################################################################################ ' (von Insurance plc v# S@ire Fraser LtdA2 B ! (ll )$<Comm5 48", A2 B CLC 664 #########6 Smith v# Chad@icC<!;;'5 9 (ppCas !;8, at p#!96, and (von Insurance pls /s# S@ire Fraser LtdA2 B!(ll )$<Comm5 48"################################################################################################# 6 2eeC /s# .urney########################################################################################################################6 &appu $a@ther (7dul 1assim $a@ther v# State of 1erala, (I$ !96' 1er# ! 9###################### ; Mrs# )liDa7eth Maud &aines v# $am Sahai Sethi, (I$ !9' Lah# 4 4 #################################### 9 (I$ !948 M#2# 22"##################################################################################################################! Mr# MaheshCumar 2remchand Shah# v# United India Insurance Co# Ltd# ##############################! Thigpen v# LocCe, "6" S#:#2d 2'8, 24" <Te># !9625##############################################################! $amesh v# M=s (gro Company, ############################################################################################## !! 2aul v# *orth############################################################################################################################ !! 2 !!<'5$C$<Civil5""6 ########################################################################################################## !! Sadhu 1umar v# &anC of India, 2 ! <'5$C$<Civil5466 ########################################################!2 Tirupati Te>Cnit Limited <T#T# Ltd#5 v# 0a7i7 &anC Limited and +rs# ###################################!2 &urdett v# Miller###################################################################################################################### !2 Cf# DomingueD v# &racCey )nters########################################################################################### !2 Indian evidence (ct, !;82####################################################################################################### !" Scha@el /S# $eadeA!9!"B 2 I$ ;!##########################################################################################!" A!948B ! :L$ "8 ################################################################################################################## !" &ishnoi v# S&I##########################################################################################################################!' 0edley &yrne v 0eller#############################################################################################################!' (I$ 2 2 $a?# 4 4###################################################################################################################!' 0edley &yrne E Co Ltd v 0eller E 2artners Ltd A!96'B (C '64###########################################!4 0em *oluni ,idah v# Isolyne (I$ !962 SC !'8!####################################################################!4 .ovindsa Marotisa v# Ismail (I$ !94 *ag 22###################################################################### !4 Sohu Madho Das v## MuCund $am (I$ !944 SC ';!, '92F ##################################################!4 Draupadi &eherani v# Sama7ri &ehera (I$ !94; +ri 2'2###################################################### !4 &angalore Development (uthority v# $# 0anumaiah (I$ 2 4 SC "6"!##############################!4 $#S# Madamappa v# Chandramma (I$ !964 SC !;!2, !;!4#################################################!6 Dhiyan Singh v# ,ugal 1ishore (I$ !942 SC !'4################################################################## !6 )mperor v# Maha $am IL$ ' (ll "9"################################################################################### !6 0em *olini v# Isolyne (I$ !962 SC !'8!############################################################################## !6 Satish 1umar $ao v# .oraChpur University (I$ !9;! (ll "88############################################## !6 .u?arat State Financial Corp# v# Lotus 0otels 2vt# Ltd# (I$ !9;2 .u? !9;###########################!6 $#S# Maddanappa v# Chandramma (I$ !964 SC !;!25######################################################### !6 Loon 1aran v# ,ohn and Co#, (I$ !968 (ll# " ;, "!!#############################################################!; Motilal Chandnoo Lal v# .olden To7acco Co#, (I$ !948 M#2# 22"#######################################!; 2asupati .ouri v## &rinda7an 1han, IL$<!94!5 ! Cal# ;2F##################################################### !; Central &anC of India /s# 2ravin ,ag?ivan .osalia# II <2 25 C2, '62% 2 2 <!5 C2$ i

''9<Mah5################################################################################################################################# !9 )lof 0ansson <I5 2vt# Ltd# /s# 2rithivi Softech Ltd################################################################ !9 ,ayaCrishna Trading Co# and others /s# 1andsamy @eaving factory and Co#########################2 Mohindru /s# ICICI &anC, (I$ 2 " SC "!!######################################################################## 2 <2 45 ' SCC 4" ###################################################################################################################2! Umedilal (ggar@al /s# United India (ssurance Co# Ltd#, I<!99!5 C2, "<4,65######################2! *e@ India (ssurance Co# Ltd# /s# /ipro )lectronics 2vt# Ltd###############################################2! Mantora +il 2roducts <25 Ltd#, 1anpur /s# +riental Insurance Company Ltd#, I<!99!!5 C2, "2" <"265 <*C5######################################################################################################################## 2' Sudhir 1umar and others v# &ureau of Indian Standards####################################################### 2' S#I# Strong E LiD :illiams, Tort La@, +>ford University 2ress#############################################26 M#2# State $oad Transport Corporation v# (7dul $ahman, (I$ !998, M2 2';,####################28 2arthasartyhy Chetty E co# vs# .a?apathi *aidu E co#, IL$ '; Mad# 8;8############################# 2; 1ishalal Shrilal 2at@a /s# Union +f India, (I$ !96 M2 2;9 at p# 29 ###############################29 Chesire and Fifoot, La@ of Contract, !9'" )d########################################################################29

BOOKS, ARTICLES, JOURNALS, TREATISES AND DIGESTS: !5 Consumer 2rotection (ct, !9;6 25 Code of Civil 2rocedure, !9 ; "5 Insurance (ct, !9"; '5 Indian Contract (ct, !;82 45 Indian )vidence (ct, !;82 65 Sale of .oods (ct, !9" 85 $eports of cases argued and determined in the Court of (ppeals and Court of )rrors of South Carolina, on appeal from the courts of la@, /olume '# ;5 San?iva $o@Gs Commentary on The Indian Contract (ct, !;82 (nd Tenders, <(CT *+# I3 +f !;825, Delhi La@ 0ouse, !!th )dition, 2 95 LeaCes La@ of Contracts, /ol# I, )dition II, 2 ! 5 StoryGs La@ of Contracts, /ol# !, )dition III, 2 8# ;# 9,

!!5 Mindy ChenH:ishart, Contract La@, Indian )dition, II )dition, 2 ! !25 M#C# &handari, ILa@ of ContractI, (shoCa La@ 0ouse, *e@ Delhi <India5, Third )dition 2 ;# 9# !"5 $atanlal and Dhira?lal, The La@ of )vidence, 2"rd )dition, 2 ! !'5 T(-L+$, Contract (ct, !2th )dition, 2

ii

STATEMENT OF JURISDICTION

In accordance @ith Section !! of Consumer 2rotection (ct, !9;6 Complainant su7mits to the 0onI7le District Consumer Disputes $edressal Forum the dispute regarding violation of consumer rights, as the total amount involved is less than $upees 2 laChs#

iii

IDENTIFICATION OF CONTENTIONS

! "#et#er A$#o% i$ a &on$'mer( )! "#et#er Mr! * i$ +'ilt,( -! "#et#er Ban% i$ lia.le( /! "#et#er Mr! * an0 Ban% are 1ointl, an0 $e2erel, lia.le( 3! "#et#er Mr! A$#o% i$ entitle0 to &ompen$ation(

iv

STATEMENT OF FACTS

!# (shoC 1umarH ( $etired Chief )ngineer from State services and a resident of Chandigarh# 2# (shoC retiredH ,uly, 2 ! , $eceived a good amount of retiral 7enefits on +cto7er, 2 ! # "# (shoC returned the earlier investment of a dead locC period of " years# $eceived $s#2'," # $efund @as credited on 8th +cto7er, 2 ! #
th

'# (shoC purchased the ne@ policy on ! of $s#4 ,

+cto7er, 2 ! # +ne time Investment

4# (shoC received the ne@ policy document 7y registered post on 22nd +cto7er, 2 ! # 0e @as shocCed to find out that the policy @as not a one time investment rather an every year investment for ! years# 6# (shoC returned the policy @ith a reJuest of refund on 2" rd +cto7er, 2 ! and mentioned in his letter addressed to the 7anC that he @as misled that it is a one time investment policy# 8# $eJuest @as acCno@ledged 7y I&I &anC on 2;th +cto7er, 2 ! # ;# *othing @as heard from the &anC till three months# 9# (shoC forced to send a strong reminder to the head office and M$# 3 on "! st ,anuary, 2 !!# ! # (shoC received $s#';,4 from the &anC on "rd Fe7ruary, 2 !!#

SUMMAR4 OF ARGUMENTS

"#et#er A$#o% i$ a &on$'mer( In the case at 7ar, complainant has opted for Investment 2lan and has paid his first premium to sho@ his 7ona fide interest and 7eing so, acting on the assurance of $espondent *o# !, he had signed a cheJue of $s# 4 , as a toCen to avail services from I&I 7anC after signing the prescri7ed form for purchasing said insurance scheme# It is amply clear he had purchased that policy for his old age security and not for any commercial purpose and hence is a consumer# "#et#er Mr! * i$ +'ilt,( Mr# 3 has resorted to unfair trade practice on account fraud and misrepresentation# 0e has special Cno@ledge regarding the su7?ect, therefore Mr# (shoC acted on his advice and suffered losses# There @as 7reach of trust# There e>isted fiduciary relationship 7et@een 7oth of them, as result Mr# 3 asserted undue influence on Mr# 3# "#et#er Ban% i$ lia.le( Since the respondent no. 1 was agent of respondent no.2 therefore the respondent no. 2 will be liable for the acts of respondent no.1 and will be liable to refund the amount of deductions with interest. As mandated by IRDA, if the policyholder is not satisfied with it, or feels that he has been cheated, and wish to cancel the policy, the insurer will be liable to return paid premiums. The only deductions that can be made by the insurer for i. cost incurred during health chec !up, ii.charges towards stamp duty and iii. mortality charge for interim period. In addition to these deductions. There has been negligence on part of respondent no. 2 in refunding the amount of premium.

vi

 "#et#er Mr! * an0 Ban% are 1ointl, an0 $e2erel, lia.le( Complainant has suffered loss on account of unnecessary deductions, dedcuted 7y respondent no#2# Firstly complainant suffered loss @hen respondent no# ! advised complainant to deinvest in earlier policy and later on @hen @rong insurance policy @as issued fraudulently complainant suffered loss# Moreover, even on the cancellation of policy the premium amount @as refunded " months and 6 days latter# So, it is contended that the respondent no# ! and respondent no# 2 ?ointly and severly lia7le# "#et#er Mr! A$#o% i$ entitle0 to &ompen$ation! There @as a difference 7et@een the contract agreed and signed 7y the complainant and respondent no# ! and the policy document received 7y the complainant from respondent no# 2# (s the terms and conditions of the former contract @ere not @ritten or e>ecuted 7y the latter policy document, there @as a 7reach of contract on part of the respondent no# 2 # 0ence, the complainant is entitled to demand for compensation under Section 8" i#e#, due to 7reach of contract e>ercised 7y respondent no# 2#

vii

ARGUMENTS AD5ANCED

! T6AT MR!AS6OK IS A CONSUMER: KConsumerL! means any person @ho purchases goods or hires any service for a consideration @hich is not for commercial purpose# In the case at 7ar, complainant has opted for Investment 2lan and has paid his first premium to sho@ his 7ona fide interest and 7eing so, acting on the assurance of $espondent *o# !, he had signed a cheJue of $s# 4 , as a toCen to avail services from I&I 7anC after signing the prescri7ed form for purchasing said insurance scheme# 2 It is amply clear he had purchased that policy for his old age security and not for any commercial purpose and hence is a consumer# In addition to this, the moment the contractual relationship is esta7lished a su7stantive right as a potential user of services is vested in a consumer# 2olicy holder @ho pays the premium is a consumer of potential services availa7le to him from the life insurance corporation#" The meaning of the @ord IserviceI has 7een e>panded 7y e>tending it Ito facilities in connection @ith insuranceI @hich is a @ide ranging activity in day to day life in the modern times# The provision of Ifacilities in connection @ith insuranceI has 7een specifically included @ithin the scope of the e>pression IserviceI 7y the definition of the said @ord contained in Section 2<!5<o5 of the (ct# 0aving regard to the philosophy of the Consumer 2rotection (ct and it is avo@ed o7?ect of providing cheap and speedy redressal to consumers
! Section 2<d5, Consumer 2rotection (ct, !9;6 % i# 7uys any goods for a consideration @hich has 7een paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person @ho 7uys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment @hen such use is made @ith the approval of such person, 7ut does not include a person @ho o7tains such goods for resale or for any commercial purposeF or

ii# Ahires or avails ofB any services for a consideration @hich has 7een paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any 7eneficiary of such services other than the person @ho Ahires or avails ofB the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, @hen such services are availed of @ith the approval of the first mentioned person A7ut does not include a person @ho avails of such services for any commercial purposeB# 2 2age " of the factsheet# " Definition of clause <o5 appearing in su7Hsection<!5 of Section 2 of the Consumer 2rotection (ct, !9;6

affected 7y the failure on the part of persons providing service for consideration, the insurance disputes @ill 7e covered 7y the e>pression IinsuranceI occcuring in section 2<!5<d5# :henever there is a default or negligence in regard to such settlement of an insurance that @ill constitute a IdeficiencyI in the service on the part of the insurance company, it @ill 7e perfectly open to the concerned aggrieved consumer to approach the $edressal Fora under the (ct seeCing appropriate relief# ' It is @ell settled that @hen the e>pression MCommercial 2urposeG has not 7een defined in the (ct, its common parlance meaning should 7e given and according to that a commercial purpose is that purpose, the o7?ect or aim of @hich is to maCe profit# 4 ( contract of insurance @ill 7e concluded only @hen the party to @hom an offer has 7een made accepts it inconditionally and communicates his acceptance to the person maCing the offer# 6 In the case of Col. Iqbal Inder Singh Vs. Kotak Mahindra Old Mutual Life Insurance Company7, the complaint an aged retired person of 64 years age, come into consumer relation ith !"#$, through its agent !"#% ho approached him repeatedly to sell their short term sa&ing plan, for ' years (y in&iting in&estment from complaint. )he agent e*plained to him on loose sheets the hole scheme and (enefits. +e opted for this short term sa&ing plan. +e agreed and purchased a policy in early ,une, $--6. )he proposal form, in fine print in .nglish language as filled (y the agent himself, so that complainant, in filling the same may not commit mistakes. )he loose sheets in the hand of agent are anne*ed ith the affida&it of complainant and ith his complaint. +e in /eptem(er, $--0, found that the policy issued in short term sa&ing plan, as not for ' years. It as found for %- years ith lia(ility to pay premium of 1s.2-,---3# e&ery si* month, and not 1s.2-,---3# annual as e*plained to him. O !" # 4onsumer 5orum condemned this act and misconduct of !"#% 6 !"#$ and held that )his is a fit case for handing it o&er to police and directe 7elhi "olice to record an 5I1, (ased on complaint in this case and other facts produced (y complainant in this case3 on record, and e*amine the matter to prosecute the !"#% 6 !"#$, for &arious offences of cheating, forgery etc.

' 8I4 of India v# /heela 7e&i, II <!99!5 C2, 822 <0ar5# 4 /mt. "ushpa Meena v# /hah .nterprises !99 $LT 2art III, 49# 6 Dr# ,#*# &aro@alia, Commentary on Consumer 2rotection (ct, !9;6, 4 th )dition, Universal La@ 2u7lishing Co# 2vt# Ltd#, 2g# 2'' 8 CC=!;8!= 9

5orum held !"#$, guilty of deficiency in ser&ice perfection leading to harassment of this senior 4iti9en in his old age and directed:# a; !"#$ to return entire premium or other sum recei&ed from complainant ith an interest of %$< from date of acceptance of his reply. (; to pay 1s.%.-- lakh as compensation for deficiency (y committing fraud and cheating, inclusion of litigation e*penses. So, it is clear from the facts of the case that Complainant falls under the am7it of @ord KconsumerL defined under Consumer 2rotection (ct, !9;6 and therefore can claim compensation under the ?urisdiction of District Forum#

"

)! T6AT RES7ONDENT NO! )! !

i!e!, MR! * IS LIABLE!

UNFAIR TRADE 7RACTICE:

Unfair Trade 2ractice H The (ct; says that, unfair trade practice means a trade practice @hich, for the purpose of promoting the sale, use or supply of any goods or for the provison of any service, adopts any unfair method or unfair or deceptive practice# 9 The meaning of the term Iunfair trade practiceI has 7een enlarged 7y the 2arliament 7y including maCing of statement giving false representation#! +n a careful analysis of IUnfair Trade 2racticeI defined in M$T2 (ct !!, it is Juite clear that the trade practice @hich is undertaCen 7y the company for the purpose of prompting the sale, use or supply of any goods or for the provision of any service=services adopts one or more follo@ing practices and there7y causes loss or in?ury to the consumers of such goods or service @hether 7y eliminating or restricting competition or other@ise @ould amount to Iunfair trade practiceI# Su7 clause <!5 of clause <r5 of su7Hsection <!5 of section 2 of the consumer protection act deals @ith the false and misleading representation or statement, @hether orally or in @riting or 7y visi7le representation @hich is included in the definition of the @ord Iunfair trade practiceI# In A a9 =s. 1BI%$ it @as held that a complaint in respect of Kunfair trade practiceL is held
; Consumer 2rotection (ct, !9;6 9 <!5 The practice of maCing any statement, @hether orally or in @riting or 7y visi7le representation @hich <i5 falsely represents that the goods are of particular standard, Juality, Juantity, grade, composition, style or modelF <ii5 falsely represents that the services are of a particular standard, Juality or gradeF <iii5 falsely represents any reH7uilt, secondHhand, renovated, reconditioned or old goods as ne@ goodsF <iv5 represents that the goods or services have sponsorship, approval performance, characteristics, accessories, uses or 7enefits @hich such goods or services do not haveF <v5 represents that the seller or the supplier has a sponsorship or approval or affiliation @hich such seller or supplier does not haveF <vi5 maCes false or misleading statement concerning the need for, or the usefulness of, any goods or servicesF <vii5 gives to the pu7lic any @arranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not 7ased on an adeJuate or proper test thereofF <viii5 maCes to the pu7lic a representation in a form that purports to 7e a @arranty or guarantee of a product or of any goods or servicesF or a promise to replace, maintain or repair an article or any part thereof or to repeat or continue a service until it has achieved a specified result, if such perported @arranty or guarantee or promise is materially misleading# ! 4ommissioner of Income )a*, A."., v# )a> Mahal +otel, /ecundera(ad, (I$ !982 SC !6;<!8 5 !! Section "6( of the Monopolies and Trade $estrictive (ct# !2 I <2 ;5 C2, "!9 *C

'

maintaina7le under the C#2# (ct, !9;6# 2#2# $)S2+*D)*T *+#! 0(S F$(UDUL)*TL- MIS$)2$)S)*T)D F(CTS% The founding principle of contract is a simple one% (greement is @hat the parties have settled on through a communicative process 7et@een them# (s every agreement has to 7e reduced to maCing the offer and its acceptance, another @ay of e>pressing this is to settle on @hat @as offered and @hat @as the communication surrounding the offer# (n actiona7le misrepresentation is an unam7iguous false statement of fact made to claimant and @hich induces the claimant to enter into the contract @ith the statement maCer#
!"

Misrepresentation comprises the la@ relating to the effect on a contract<and hence the partiesG positions5 @here that contract @as entered into on the 7asis of a false statement made during the course of contractual negotiations# ( contract made as the result of a misleading representation is, su7?ect to the limitations, voida7le at the instance of the person to @hom the misrepresentation @as made<the misrepresentee5# !' During the course of negotiations leading to the conclusion of a 7inding agreement, one or other of the contracting parties may maCe a statement or give an assurance calculated to produce in the mind of the other party a 7elief that facts e>ist @hich render the proposed 7argain advantageous to the interests of the other party# !4 For a claim 7ased on Fraud!6 to succeed, there must have 7een an unam7iguous, false statement of e>isting fact, @hich induced the claimant to enter into the contract# !8
!" ,ill poole, Contract La@, 2 !!, 8th )dition, 2g "!6 !' ,# &eatson, (#&urro@s and ,# Cart@right, (nsonIs La@ of Contract, 29 th )dition, +>ford University 2ress, p#299 !4 I(id. p#!"" !6 S)CTI+* !8 H Indian Contract (ctHFraud defined #Fraud means and includes any of the follo@ing acts committed 7y a party to a contract, or @ith his connivance, or 7y his agent, @ith intent to deceive another party thereto or his AagentB , or to induce him to enter into the contract% <!5 the suggestion, as a fact, of that @hich is not true, 7y one @ho does not 7elieve it to 7e trueF <25 the active concealment of a fact 7y one having Cno@ledge or 7elief of the factF <"5 a promise made @ithout any intention of performing itF <'5 any other act fitted to deceiveF <45 any such act or omission as the la@ specially declares to 7e fraudulent# !8 Chesire, Fifoot E Furmston, La@ of Contract, !4th )dition, 2 6, +>ford University 2ress, p# ""

a5 False statement of fact% That the statement is Msu7stantially correctG and the difference 7et@een @hat @as represented and the correct position have induced complainant to maCe the contract# !; In the present case, respondent no. % made a fraudulent misrepresentation that policy is one time in&estment plan (ut indeed it as a regular in&estment plan for %- years. 1espondent no. % as clearly a are of this fact that the in&estment plan time in&estment plan is a sheer case of Misrepresentation. 75 Induces the other party to contract% )he representation must (e material% $epresentation made in this case has induced complainant to contract as it is material# Mr# 3 has represented a fact @hich has positively influenced complainant, considering entering the contract, to decide positively in favour of doing so#!9# I5act that policy is one time in&estment plan is material one as on the (asis of this representation complainant purchased that policy. +e can?t ha&e the intention of in&esting in a %-#%2 years plan retired man aged a(out 62 years.@ Kno n to the representee% @)he fact that the policy is not a one time in&estment plan as ith lia(ility of 1s.2-,---3# e&ery year as he as an old as a regular one for %- years. 7espite possessing such kno ledge, him making the complainant understand that it is a one

&ery much in the kno ledge of respondent no. % i.e., in&estment manager (ut he purposely misrepresented this fact so that he could sell that policy as the insurance (rokers are paid certain proportion of the policy as commission.$-I Intended to (e acted upon% To 7e actiona7le, a misrepresentation must 7e intended to 7e acted upon#2! 1espondent no. % intended complainant to act upon the fraudulent misrepresentation that the policy is one time in&estment plan and for the same purpose he e&en ad&ised the complainant to dein&est in earlier policy and in&est that amount in the said
!; A&on Insurance plc v# / ire 5raser 8tdA2 B ! (ll )$<Comm5 48", A2 B CLC 664 !9 /mith v# 4had ick<!;;'5 9 (ppCas !;8, at p#!96, and (von Insurance pls /s# S@ire Fraser LtdA2 )$<Comm5 48" at p# 6"" 2 Section ! , Insurance (ct !9";# 2! "eek /s# Aurney B!(ll

plan. Actually acted upon% $epresentee must have acted in good faith on the representation made# 0o@ever mere fact that the representee fails to taCe advantage of an opportunity to disco&er the truth, such a person still @ill 7e induced 7y the misrepresentation# In $edgrave /S# 0urd
22

, it @as held that the contract could 7e rescinded for the misrepresentation# Significantly, a

fraudulent misrepresentation @ill 7e considered to have induced the contract even if it is not the only factor to have contri7uted to the decision to enter the contract# I 4omplainant acting on the ad&ice and fraudulent misrepresentation first dein&ested in the former plan and in&ested that amount ith some addition in the said ne in&estment plan after signing the prescri(ed form for the purchase of the said policy and handed o&er the cheBue in regard to the premium of policy as full and final payment to respondent no.%. I Lord DiplocC o(ser&ed that the follo@ing proposition%H NChere the intended &ictim of @conspiracy to defraud@ is a pri&ate indi&idual the purpose of the conspirators must (e to cause the &ictim economic loss (y depri&ing him of some property or right, corporeal or incorporeal, to hich he is or ould or might (ecome entitled. )he intended means (y hich the purpose is to (e achie&ed must (e dishonest. )hey need not in&ol&e fraudulent misrepresentation such as is needed to constitute the ci&il tort of deceit. 7ishonesty of any kind is enough. N $espondent no#! occupied a position in @hich he @as e>pected to safegaurd, or not to act against, the financial interests of another# 0e a7used that position dishonestly, intending 7y that a7use to maCe gain or cause loss#2" c5 *ot free consent Consent is an act of reason, accompanied @ith deli7eration, the mind @eighing as in a 7alance, the good and evil on each side# (nd, therefore, it has 7een @ell remarCed 7y an a7le commentator upon the la@ of nature and nations, that every true consent supposes three things%
22 <!;;!5 2 ChD ! 2" 1ingsley *apley, Serious Fraud% Investigation and Trial, 'th )dition, 2 !2, pg# !#22

Firstly, a 2hysical 2o@erF Secondly, a moral po@erF and Thirdly, a serious and free use of themF (nd hence it is, that if consent is o7tained 7y meditated imposition, circumvention, surprise or undue influence, it is to 7e treated as a delusion, and not as deli7erate and free act of the mind# For although the la@ @ill not generally e>amine into the @isdom or prudence of men disposing of their property, or in 7inding themselves 7y contracts, or 7y of their acts, yet it @ill not suffer them to 7e entrapped 7y the fraudulent contrivances, or cunning, or deceitful management of those @ho purposely mislead them#2' In the present case the consent for the purchase as induced (y fradulently misrespresented fact that the policy as one time in&estment plan as informed (y the manager (ut indeed it as a regular plan for hich premium as to (e paid 1s. 2-,---3# per year for %- years hich as &ery much pre>udice to the interest of 4omplainant. It is upon this general ground, that there is a ant of rational and deli(erate consent, that the contracts and other acts of idiots, lunatics, and other persons, non#compotes mentis, are generally deemed to (e in&alid in courts of .Buity. )he usage of the reason is the first reBuiste to constitute the o(ligation of a promise, conseBuently incapa(le of making.$2 In order to constitute fraud, it is @ell Cno@n, that the person maCing the statement must have 7een a@are of the falsity of the statement#26 In the present case it the policy as in the kno ledge of respondent no. % that the term of the policy as for %- years (ut he told the complainant that as one time in&estment plan. 4omplainant ne&er agreed for the re&ised plan, hich cannot (e thrust upon him. )here (eing no ad#idem, there is no contract. )here is nothing to dis(elie&e the complainant ho is already 62 years of age as he can?t hich idiots, mad men and infants are

2' StoryIs )Juity ,urisprudence, ;th )d#, /ol# !, Sec# 22", 2# 2!;F 24 I(id.2# 2!9F 26 Bappu 1a ther A(dul Kassim 1a ther v# /tate of Kerala, (I$ !96' 1er# ! 9 at p# !!2

ha&e the intention of in&esting in %-#%2 years plan ith lia(ility of 1s.2-,---3# e&ery year. It is o(&ious that Bank !fficial3 !fficers, ha&e misused their position ith this old man, and ithout his kno ledge signed proposal in his name gi&ing consent for a re&ised plan. It is clearly gi&en in the proposition that the complainant signed the prescri(ed form for the purchase of one time in&estment plan only. )hat agent of IBI Bank ha&e changed data, record and indulged in fa(rication for promoting (usiness, to ha&e innocent complainant. In India, Section !8, Contract (ct, read @ith Section !9 permits a contract to 7e avoided @hen 7ased on representations, made 7y one of the parties or his agent @hen these are Cno@n to 7e false 7y the person maCing#28 Fraud means and even includes the suggestion as to a fact of that @hich is not true 7y one @ho does not 7elieve it to 7e true and the active concealment of a fact 7y one having Cno@ledge or 7elief of the fact# 2; S)&I (ct29 empo@ers S)&I to register and regulate @orCing of Investment (dvisors and such other intermediaries @ho may 7e associated @ith securities marCet in any other manner# If a person is an advisor, he @ould 7e su7?ect to the Investment (dvisors $egulationsF and @ould reJuire a much higher level of Jualifications# 0e @ould act as an advisor to the investor on all financial products# 0e @ould receive all payments from the investor and there @ould 7e no limits set on these payments#" 2#"# 2$I*CI2L) +F U&)$$IM() FID)I IS (22LIC(&L) 0)$)% rongful gain, out of

Mere silence as to facts liCely to affect the @illingness of a person to enter into a contract is not fraud, unless silence is in itself eJuivalent to speech, or @here it is the duty of the person Ceeping silent to speaC as in the cases of contracts u7errimae fidei H <contracts reJuiring utmost good faith5# Certain types of contract impose a duty of disclosure irrespective of the nature of the relationship 7et@een the parties# They are called contracts u77errimae fidei <of utmost
28 2; 29 " Mrs. .li9a(eth Maud Baines v# 1am /ahai /ethi, AI1 %D4- 8ah# 4 4 at 2# 4 ;# Section !8 of Indian Contract (ct, !;82# Section !! <25<75 S)&I guidelines

goodfaith5, and the most common e>ample is the contract of insurance# The duty to disclose can 7e imposed upon the insurer as @ell as the insured as demonstrated in cases such as Motilal 4handnoo 8al =s. Aolden )o(acco 4ompany"!# +o e&er, the only remedy a&aila(le to the insured is to rescind the contract and reco&er their premium hich Eseems hopelessly inadeBuate?. )his is another e*ample of the la hen the insurer is at fault, the insured is still ill ha&e little impact on the insurer'$. In the hereas the outcome (eing (iased to ards the insurer as, e&en Epenalised se&erely?, to the insured. 4ertain types of contract impose a duty of disclosure irrespecti&e of the nature of the relationship (et een the parties. )hey are called contracts u((errimae fidei Fof utmost goodfaith;, and the most common e*ample is the contract of insurance. ''

present case the insurer as under the duty to disclose the nature of the policy (eing issued

2#'#

FIDUCI($- $)L(TI+*S0I2 )3IST)D

(n Investment manager, @ho @as a fiduciary had a duty of undivided loyalty to the complainant#"' This duty has 7een 7reached 7y a variety of types of misconduct that do not involve negligence# (s a result, the reach of fiduciary duty can 7e proven @ithout the use of e>pert testimony in the case#"4 In this fiduciary duty case the manager, as a fiduciary, has the 7urden of proving that he or she has acted appropriately#"6 (n advantage of a 7reach of fiduciary duty claim over a negligence claim or a 7reach of
"! "2 "" "' (I$ !948 M#2# 22" at p# 22"# <Smith, 2 6, pg# 2'95 Mr. Maheshkumar "remchand /hah # v# Gnited India Insurance 4o. 8td. Fiduciary $elationship, Khttp%==@@@#pli#edu=productOfiles=7ooCsamples=494Osample8#pdfL, (ccessed on !!# 2#2 !" at 4#'4 2M# "4 (nderson E Steele, Fiduciary Duty, Tort and Contract% ( 2rimer on the Legal 2ractice 2uDDle, '8 SMU L# $)/# 2"4, 2'9 <!99'5# "6 )higpen v# 8ocke, "6" S#:#2d 2'8, 24" <Te># !9625#

contract claim is that in many 7reach of fiduciary duty cases the plaintiff is not limited to compensatory damages# )he client may reco&er any profit of the accountant#fiduciary regardless of a&aila(le.'7 ( fiduciary relationship e>isted Kas there has 7een a special confidence reposed in Mr# 3 @ho, in eJuity and good conscience, is 7ound to act in good faith and @ith due regard for the interests of the complainant reposing the confidence#L "; Manager has fiduciary duties to complainant @ho have contractual# )here e*isted contractual o(ligations (et een respondent and the complainant. 1espondent had (een ad&ising complainant for the last %- years. )here de&eloped trust (et een (oth the parties. Both the parties entered into contract after signing prescri(ed form for purchase of said insurance policy. Since Mr# 3 rendered Financial and Investment advice there e>isted fiduciary relationship as held in the case of The Institue of Chartered (ccountants of India /s# ShaunaC 0# Satya "9# +ere the respondent used to pro&ide in&estment ad&ice to the complainant for the last %years, as a conseBuence of hich complainant de&eloped trust on the respondent and therefore he acted on the ad&ise of the respondent leading to loss. )rusting respondent, complainant agreed to the terms of insurance as orally e*plained to the him and signed prescri(ed form for the purchase of said insurance scheme. Chich later on as found to (e a regular in&estment plan reBuiring to pay 1s. 2-,---3# for %- years. It does not seem to logical for a man of 62 years of age to in&est in %-#%2 years of in&estment. )his is the fraud committed on the part of (ank and its officials. +anding o&er the cheBue to respondent no. % for encashment clearly sho s that there e*ist ficuciary relationship (et een teh parties. 4(n accountant may 7e a fiduciary @here he or she renders personal financial, investment, or ta> advice to a client# I (n accountant @as held to have a fiduciary relationship @ith a client for @hom the
"8 "; "9 ' 1amesh v# M3s Agro 4ompany, "aul v# Horth 2 !!<'5$C$<Civil5""6 2roposition 2g# 2

hether the (reach of fiduciary duty caused the client any in>ury or

hether

the contractual e*pectations of the client

ere met. In addition, puniti&e damages may (e

!!

accountant provided e>tensive 7usiness advisory services over a course of seven years in addition to accounting and ta> services'!# K( fiduciary relation e>ists 7et@een t@o persons @hen one of them is under a duty to act or to give advice for the 7enefit of another upon matters @ithin the scope of the relation#L a; 7uties of a 5iduciary :here an accountant is a fiduciary he or she is su7?ect to a num7er of fiduciary duties# These include a duty of loyalty, a duty to disclose relevant facts and to render accounts, a duty of due care, and a duty to maintain client confidences# (; 7uty of 8oyalty :here an accountant is a fiduciary he or she o@es a duty of loyalty to the other party to the relationship regarding matters @ithin the scope of the relationship# '2 In general, the duty of loyalty reJuires the fiduciary to act solely for the 7enefit of the person to @hom the duty is o@ed @ith respect to all matters @ithin the scope of the fiduciary relationship# c; 7uty to 7isclose 1ele&ant 5acts and 1ender Accounts :here an accountant is a fiduciary he or she has a duty to disclose all relevant facts as to matters @ithin the scope of the fiduciary relationship# In a case, an accountant @as found to have 7reached his fiduciary duty 7y deli7erately giving misleading investment advice# d; 7uty of 7ue 4are :here an accountant is a fiduciary he or she o@es a duty of due care to the other party to the relationship# Thus, an accountant @ho is a fiduciary 7ecause another relies upon him or her for financial or investment advice must e>ercise care in maCing recommendations to the other person''# 1espondent should ha&e (een loyal to the complainant in this particular case. Belie&ing respondent, complainant acted on his ad&ice ithout e&en confirming its authenticity. )hus,
'! '2 '" '' /adhu Kumar v# Bank of India, 2 ! <'5$C$<Civil5466 )irupati )e*knit 8imited F).). 8td.; v# +a(i( Bank 8imited and !rs. Burdett v# Miller 4f. 7omingue9 v# Brackey .nters
'"

!2

it clearly pro&es that there e*isted fiduciary relationship (et een (oth them. 1espondent should ha&e told him a(out the true terms and conditions of the policy instead of making false representation for earning re ard points or commission as paid to the insurance (rokers under section %- of the Insurance Act. (ccording to section ! !'4, if there e>ists a fiduciary or Juasi fiduciary relationship 7et@een the parties to the transaction the onus of proving the 7ona fides of the transaction is upon the adversary @ho has 7een 7enefited under the transaction# Since 7y reason of such relationship one can e>ert undue influence on the other the dominant party has to uphold the transaction and not the servient party# The servient party 7eing entirely in the hands of the dominant party cannot prove the mala fides of the transaction# The dominant party has possession of materials in connection @ith the transaction# The dominant party has possession of materials in connection @ith the transaction# 0e may supress them and conceal the circumstances under @hich the transaction came in e>istence# S+ onus lies upon him clear the conscience of the court#

2#4#

S2)CI(L 1*+:L)D.) $).($DI*. SU&,)CT

:here the person maCing the statement has special Cno@ledge of the su7?ectHmatter of the contract, or holds themselves out as having such Cno@ledge, the courts may also 7e more @illing to treat the statement as a term of the contract# ( party may hold himself out as having special Cno@ledge 7y suggesting that there is no need to checC the accuracy of the statement made#'6 In +scar Chess Ltd# /s# :illiams,'8 a private seller represented his car to 7e a !9'; Morris# It @as infact a !9"9 version of the same model, @orth su7stantially less# The statement of the carGs age @as held not to 7e a term# The private seller had no special Cno@ledge and had relied on the registration 7ooC for his 7elief# :hen a customer invests in securities, the 7anCer acts as an advisor# The advice can 7e given officially or unofficially# :hile giving advice the 7anCer has to taCe ma>imum care and
'4 Indian evidence (ct, !;82 '6 Scha@el /S# $eadeA!9!"B 2 I$ ;! '8 A!948B ! :L$ "8

!"

caution# 0ere, the 7anCer is an advisor, and the customer is a client# '; :e have seen that headley &yrne has 7een regarded as the progenitor of the principle of Kassumption of responsi7ilityL, @hich has no@ 7een e>tended 7eyond lia7ility for statements# In this case4D it as decided that a Bank can (e lia(le for a negligent information supplied ithout consideration to a regular client. In Kapfunde & A((ey Hational "lc and another the 4ourt held that a duty of care ill generally (e o ed to the person to hom a statement is made and ho relies on it.2In the case of A&inash &s. 8I4 of India2%, it @as o7served that: I...... it is difficult to identify a compelling reason care &is#a#&is the trustees (eneficiariesI. It is clear from 0edley &yrne that for a duty of care to arise in respect of speech or @riting, something more is reJuired than in the straightfor@ard case of physical damage caused 7y an act @here, generally speaCing, foreseea7ility of harm @ill 7e sufficient# This is very largely 7ecause a statement is liCely to cause economic loss rather than physical harm and the risC of crushing lia7ility is e>acer7ated 7y the fact that information is liCely to 7e disseminated among a large num7er of persons even if it @as originally addressed only to a small group# In our present case also, respondent as ad&ising complainant from the last ten years. hy, in addition to the duty of skill and hich the la has

hich the third parties ha&e accepted, or

imposed upon them, third parties should also o e a duty of care directly to the

1espondent as e*pertise in his su(>ect ha&ing a great kno ledge regarding Insurance and other in&estment schemes. Moreo&er respondent intended complainant to rely on the ad&ice gi&en (y him, clear from the fact that he pressed upon complainant to dein&est in his earlier policy and in&est that amount in ne in&estment scheme, It as held in the case of Aaloo 8td FIn liB; 6 !thers & Bright Arahame Murray Fa firm; and another, that hen the auditor @intends@ that the third party, a particular identified person, ill rely on it, then the auditor ill (ear the conseBuences of his ad&ice. Acting on the assurance of respondent i.e., in&estment manager, that the old in&estment policy did not ha&e any gro th prospects,
'; '9 4 4! Bishnoi v# /BI +edley Byrne v +eller !99; :L ! ''2;' <C( <Civ Div55 AIR 2""2 Ra#. $"$

!'

complainant dein&ested in his earlier in&estment policy and in&ested that amount in ne policy prescri(ed (y the respondent hich led to loss of 1s. 7--3# to complainant. .enerally the claimant must sho@ that advice @as given in circumstances in @hich it @as reasona7le to rely on that advice, such as in the conte>t of a professional relationship# 42 2#6# )ST+22)L%

.stoppel2'% :hen one person has, 7y his declaration, act or omission, intentionally caused or permitted another person to 7elieve a thing to 7e true and to act upon such 7elief, neither he nor his representative shall 7e allo@ed, in any suit or proceeding 7et@een himself and such person his representatives, to deny the truth of that thing# Chen one party has (y his declaration, act or omission, intentionally caused or permitted another person to (elie&e a thing to (e true and to act upon such (elief, estoppel operates. 24 5acts of the present case clearly states that the respondent made the complainant to (elie&e that the policy as one time in&estment plan hich in reality as regular in&estment plan. 22 According to /ection %%226, there is a rule of e&idence (y hich a person is not allo ed to plead the contrary of a fact or state of things hich he has formely asserted as e*isting. 27 /o, here complainant is not only entitled to premium amount only (ut also to deductions along ith e*emplary compensation. The respondent 7y his @ord or conduct made a promise to complainant in uneJuivocal and clear terms intending to create legal relations Cno@ing or intending that it @ould 7e acted upon 7y the complainant to @hom the promise @as made and it @as so acted upon 7y the complainant, therefore promise is 7inding on the respondent# 0e @ill not 7e entitled to go 7acC on the promise made#4; )stoppel is 7ased on eJuity and good conscience and the o7?ect is to prevent fraud and secure ?ustice 7et@een the parties 7y promotion of honesty and goodfaith and 7y preventing
42 4" 4' 44 46 48 +edley Byrne 6 4o 8td v +eller 6 "artners 8td A!96'B (C '64# Section !!4 of )vidence (ct +em Holuni ,idah v# Isolyne (I$ !962 SC !'8!# 2roposition pg# 2 Indian )vidence (ct !;82 Ao&indsa Marotisa v# Ismail (I$ !94 *ag 22F /ohu Madho 7as v## Mukund 1am (I$ !944 SC ';!, '92F 7raupadi Beherani v# /ama(ri Behera (I$ !94; +ri 2'2# 4; Bangalore 7e&elopment Authority v# 1. +anumaiah (I$ 2 4 SC "6"!#

!4

from them appro7ating and repro7ating at the same time# 49 &efore an estoppel can arise there must 6 % a5 First, There should 7e a representation of an e>isting fact distinct from mere promised future made 7y one party to the other, 75 Secondly that the other part 7elieving it must have 7een induced to act on the faith of it and c5 Thirdly that he must have so acted to his detriment# All the a(o&e mentioned essentials adeBuately apply to our present case and therefore respondent is guilty. Moreo&er, .stoppel is a rule of ci&il actions. 6! To raise a plea of estoppel the declaration, act or omission must 7e made @ith the intention of causing or permitting another person Mto 7elieve a thing to 7e true and act upon such 7elief# 62 )stoppel cannot 7e pleaded 7y a party @ho is an author of a forged document relied upon 7y him to plead estoppel#6" If a man, either in e>press terms or 7y conduct, maCes a representation to another of the e>istence of a certain state of facts @hich he intends to 7e acted upon in a certain @ay, and it 7e acted upon is that @ay, in the 7elief of the e>istence of such a state of facts, to the damage of him @ho so 7elieves and acts, the first is estopped from denying the e>istence of such a state of facts#6'

)ssential elements are64% d5 $epresentation or a statement to 7e acted upon, e5 (ction on the faith of such statement and in the manner intended, and
49 6 6! 62 6" 6' 64 1./. Madamappa v# 4handramma (I$ !964 SC !;!2, !;!4# 7hiyan /ingh v# ,ugal Kishore (I$ !942 SC !'4 .mperor v# Maha 1am IL$ ' (ll "9"# +em Holini v# Isolyne (I$ !962 SC !'8!# /atish Kumar 1ao v# Aorakhpur Gni&ersity (I$ !9;! (ll "88# Au>arat /tate 5inancial 4orp# v# 8otus +otels "&t. 8td# (I$ !9;2 .u? !9;# 1./. Maddanappa v# 4handramma (I$ !964 SC !;!25

!6

f5 $esultant pre?udice or detriment to the person acting# 0ere the correctness of the policy document is in issue and it @ill not suffice to prove the signature or hand@riting of the complainant on the policy document as acceptance of offer# 66

66 Section 6! of Indian evidence act

!8

-! T6AT BANK IS ALSO LIABLE:

"#!# &(*1 IS /IC($I+USL- LI(&L)%

A+ent an0 prin&ipal 0e8ine0 9: #(n agent is a person employed to do any act for another or to represent another in dealings @ith third persons# The person for @hom such act is done, or @ho is so represented, is called the principal# It is 7ased on the general principle JKui 5acit per Alium facit per seL @hich means that the act of an agent is act of the principal . In an agency one person<principal5 employs another person<agent5 to represent him or to act on his 7ehalf, in dealings @ith third person# The act of the agent 7inds the principal in the same manner in @hich he @ould 7e 7ound if he doees that act himself# The agent may 7e e>pressely or impliedly authrorised to do an act on 7ehalf of the principal# E;plainin+ t#e 0e8inition o8 a+ent a$ $tate0 in $e&tion <), D#a2an J! O.$er2e09<: JAccording to this definition, an agent ne&er acts on his o n (ehalf (ut al ays on (ehalf of another. +e either represents his principal in any transactions or dealings ith a third person, or performs an act for the principal. In either case, the act of the agent ill (e deemed in la to (e not his o n (ut of the principal. )he crucial test of the status of an agent is that his acts (ind the principal.L The contract of agency is of fiduciary character#
69

It is 7ased on a confidence reposed 7y the

principal in the agent# (gency is founded on a contract, either e>press or implied, 7y @hich one of them parties confides to the other the management of some 7usiness to 7e transacted in his name or in his account, and 7y @hich the other assumes to do the 7usiness and to render an account of it#8 +ne of the important feature of an agency is, open person is employed to transact the 7usiness of another for a recompense or recompensationF the recompense may 7e either a fi>ed amount mutually settled, or may 7e fluctuating and may even 7y uncertain, as in case of indents#
68 6; 69 8 Section !;2, Indian Contract (ct, !;82 8oon Karan v# ,ohn and 4o., (I$ !968 (ll# " ;, "!!# Motilal 4handnoo 8al v# Aolden )o(acco 4o., (I$ !948 M#2# 22" at p# 22"# "asupati Aouri &.# Brinda(an Khan, IL$<!94!5 ! Cal# ;2F

!;

In the case of Haseem Bano and !rs =ersus 8.I.4. !f India and !rs.7% The facts of the case @ere that )mployee tooC out insurance policy under Salary Saving Scheme of the L#I#C# First t@o premiums @ere paid 7y employee# 0e issued authoriDation in favour of employer to deduct monthly instalment of premium from his monthly salary# )mployer not acting as an insurance agent of the L#I#C# under the Insurance (ct, 7ut only as an agent under Section !;2 of the Contract (ct under the general principle of la@ of agency# )mployee had no reason to dis7elieve that employer @ould not act as an agent of L#I#C# and ?eopardiDe the policy# It @as the sole responsi7ility of the employer to collect premium and remit it to the L#I#C# )mployer defaulted# 0eld, L#I#C# cannot escape from the conseJuences ensuing from acts of commission or omission of the employer acting as its agent under the general principle of agency# $raud committed by agent for collecting deposits under scheme%liability of bank )he 8ia(ility as denied (y (ank, held that the agents ere ser&ants of (ank and

relationship of master and ser&ant e*isted, and hence (ank as lia(le for the fraudulent act of the agent and as lia(le to refund the amount ith interest. 7$. /ince the respondent no. % as agent of respondent no.$ therefore the respondent no. $ ill (e lia(le for the acts of respondent no.% and ill (e lia(le to refund the amount of deductions ith interest. In an agency one person<principal5 employs another person<agent5 to represent himself or to act on his 7ehalf, in dealings @ith the thrird person# The act of the agent 7inds the principal in the same manner in @hich he @ould 7e 7ound if he does that act himself# 8" It as held that, 4ontracts entered into through an agent, and o(ligations arising from acts done (y an agent, may (e enforced in the same manner, and ill ha&e the same legal conseBuences, as if the contracts had (een entered into and the acts done (y the principal in person.&' Since the contract of life insurance @ere entered into 7y respondent no#! i#e# (gent of respondent no# 2, therefore the it @ill 7e considered as if the contract @as entered into 7y respondent no#2 itself#:3 It @ill have same legal conseJuences as if it has 7een entered into 7y

8! 82 8" 8' 84

2 '<"5 M20T "4; Central &anC of India /s# 2ravin ,ag?ivan .osalia# II <2 $#1# &angia, 2g# '!4 Section 226, Indian Contract (ct, !;82 .lof +ansson FI; "&t. 8td. =s. "rithi&i /oftech 8td

25 C2, '62% 2

2 <!5 C2$ ''9<Mah5

!9

7anC itself#:9 (n agent, having an authority to carry on a 7usiness, has authority to do every la@ful thing necessary for the purpose, or usually done in the course, of conducting such 7usiness# && The negligence @as solely on the part of Mr# 3 7ut this does not discharge 7anC from its lia7ility as /icarious lia7ility is derived from the relationship of master and servant or implied authority @hich is popularly Cno@n as Ncourse of employmentN# In the case of M./. Are al =s. 7eep 4hand /ood, School teachers entrusted @ith the duty to taCe care of the children @hile on picnic spot along a river H Teachers acted in rash and negligent manner resulting in death of children 7y dro@ning in the river H The School esta7lishment cannot escape from the Ivicarious lia7ilityI only 7ecause the negligence @as e>clusively and personally attri7uted to the teachers concerned in the criminal proceedings#

An Insurance (roker is an agent ho has an authority to negotiate the sale of insurance on (ehalf of his principal i.e, (ank, ith a third person. +e merely makes the t o parties to hene&er any transaction materialises through enter a contract. +e gets his commission 70

his efforts.7D /o, in the present case, respondent no. % i.e., In&estment manager is an agent of respondent no. $ i.e., Bank, acting in the official intercourse of (usiness and therefore (ank is &ery much lia(le for the act of his agent. It is the duty of Investment mananger to advice his clients regarding investment decisions in the due course of that duty respondent furnished negligent advice @here it @as possi7le for respondent to foresee the conseJuences of his advice and moreover respondent made fraudulent misrepresentation a7out the policy leading to loss to complainant# Moreo&er there is a clear pro&ision() that Misrepresentations made, or frauds committed, (y agents acting in the course of their (usiness for their principals, ha&e the same effect on agreements made (y such agents as if such misrepresentations or frauds had (een made, or committed (y the principals. In the case of 8I4 &s. "hatangi 7e&i it as held that payment to agent is payment to principal. /o +anding o&er the cheBue to

86 ,ayaCrishna Trading Co# and others /s# 1andsamy @eaving factory and Co# 88 Sction !;;, Indian Contract (ct, !;82 8; Section ! of Insurance (ct# %1"& 'insurance agent( means an insurance agent licensed under section )2 *+ + +, who recei-es or agrees to recei-e payment by way of commission or other remuneration in consideration of his soliciting or procuring insurance business *including business relating to the continuance, renewal or re-i-al of policies of insurance,. 89 Mohindru /s# ICICI &anC, (I$ 2 " SC "!!# ; Section 2";, Indian Contract (ct, !;82

Mr. X for encashment amounts to handing o&er the premium amount to Bank. In the case Aneeta +ada =s. M3s Aodfather )ra&els 6 )ours "&t. 8td. 0%# It as held that 4ompany must itself (e made an accused # 4ompany is the principal offender # "rosecution cannot (e launched against persons responsi(le for conduct of (usiness of company for act of Mr.s X. "#2# D)FICI)*C- I* S)$/IC)% ithout prosecuting the company itself. /o, it is clear from facts of the case that (ank is also lia(le

The term MserviceG;2 means service of any description @hich is made availa7le to potential users and includes the provision of facilities in connection @ith 7anCing, financing, insurance, transport, processing, supply of electrical or other energy, 7oard or lodging or 7oth, entertainment, amusement or the purveying or ne@s or other information, 7ut does not include the rendering of nay service free of charge or under a contract of personal service# KDeficiencyL;" means any fault, imperfection, shortcoming or inadeJuacy in the Juality, nature and manner of performance @hich is reJuired to 7e maintained 7y or under any la@ for the time 7eing in force or has 7een undertaCen to 7e performed 7y a person in pursuance of a contract or other@ise in relation to any service# :henever, there @as a default of negligence in regard to such settlement of an insurance that @ill constitute a MdeficiencyG in the service on the part of the Insurance Company and it @ill 7e perfectly open to the concerned aggrieved consumer to approach the $edressal Forums under the (ct seeCing appropriate relief# ;' It @as laid do@n that @henever there @as default or negligence in regard to service that @ill constitute Mdeficiency in serviceG on the part of the insurer and it @as perfectly open to the aggrieved party for seeCing appropriate relief under the (ct# ;4 a; Gnfair deductions

(s consumers, at times @e regret 7uying products at the later stages# This is generally
;! ;2 ;" ;' ;4 <2 45 ' SCC 4" Section 2<!5<o5, Consumer 2rotection (ct, !9;6 Section 2<!5<g5 Umedilal (ggar@al /s# United India (ssurance Co# Ltd#, I<!99!5 C2, "<4,65# *e@ India (ssurance Co# Ltd# /s# /ipro )lectronics 2vt# Ltd#

2!

7ecause as a matter of fact, @e start analyDing the product only after @e have paid for it# (n advantage comes @ith life insurance policies to ena7le users to decide @hether they @ish to continue @ith the current policy or return it# This time duration is generally of !4 days, @ith in @hich a consumer have to taCe a decision# It is Cno@n as freeHlooC period# (s mandated 7y I$D(, a policyholder has the right to revie@ policy terms and conditions for !4 days from the date of receipt of policy# If the policyholder is not satisfied @ith it, or feels that he has 7een cheated, and @ish to cancel the policy, the insurer @ill 7e lia7le to return paid premiums# The only deductions that can 7e made 7y the insurer for i. cost incurred during health check#up, ii.charges to ards stamp duty and iii. mortality charge for interim period. In addition to these deductions. 06 )herefore no other deductions are to (e made. In this case no charges for medical e*amination ere spent, no stamp duties ere paid (y the respondent company. )here policy clause that deductions ere proportionate to the stock market

fluctuations as in contradiction to official I17A circular 07. )he purpose of 5ree look period is to pro&ide insured a chance to check hether the policy is as per the terms promised or not. If the policy is not as per promised term then the insured can get the policy cancelled. +ere the main moti&e is to pro&ide insured a chance to cancel the policy if not satisfied and if undue deductions are made from the premium amount then main purpose gets &anBuish. 5ree look period starts from date of recei&al of policy document. 2rovisio 6<25 of the I$D(<2rotection of 2olicy 0olders Interests5 $egulations, 2 2

mandates all Life Insurance Companies to provide the insured @ith an option to revie@ the terms and conditions of the policy, and in case if he disagrees to the same, to return the policy @ithin a period of !4 days from the date of receipt of policy docuemnts# +n e>ercising the option, he shall 7e entitled to a refund of premium paid su7?ect to deduction of proportionate risC preimium for the period of cover and certain other costs pertaining to stamp duty and medical e>amination of the proposer#
;6 I$D(=LIF)=CI$=!"=2 ;8 I$D(=LIF)=CI$=!"=2 9 9

22

:hile this provision of free looC is also to 7e availa7le in health insurance policies and such other policies issued 7y life insurance companies @here there is a deferred coverage of risC, in vie@ of the a7sence of risC cover in such policies during the free looC period, all life insurance companies are here(y directed not to deduct any proportionate risk premium in cases here the insured e*ercises the option of returning the policy ithin the free look period. 00 (ll life insurance companies are advised to ensure due complaince @ith the provisions contained in the Circular, as any failure to do so @ould render them lia7le to appropriate acion under the provisions of I$D( act, and Insuance (ct, !9"; and the regulations frmaed thereunder# Insurance $egulatory and Development (uthority <I$D(5 had come out @ith the concept of IfreeHlooC periodI @hich allo@ed a customer 7uying a ne@ life insurance cover to revie@ the policy @ithin !4 days from the receipt of the document# The facility @as later e>tended to health insurance t@o year ago# It @as primarily done to ensure that the policyholder did not get shortchanged from @hat she @as initially promised and 7ring in transparency in the @ay insurance @as sold in the country# If a ne@ customer feels that the policy does not include all the clauses promised @hen it @as sold either 7y the agent or 7y the company, the insured can return the policy @ithin t@o @eeCs and the insurer @ill have to return the premium paid, after deducting proportionate risC premium for the period of cover and certain other costs pertaining to stamp duty and medical e>amination of the proposer# The refusal of the respondent=insurance company to refund the full amount of the premium paid 7y the appellant on the unutilised portion of the total coverage mentioned in the policies is clearly illegal# The conduct of the respondent=insurance company in refusing to honour its o7ligation for maCing the refund fully undou7tedly constituted a Ideficiency in serviceI and the *ational Commission set aside the vie@ e>pressed 7y the State Commission that since the case relates to the return of premium paid on the insurance policies Iit does not come under the ?urisdiction of the

;; I$D(=LIF)=CI$=!"=2

2"

Consumer 2rotectio (ctI#;9 Moreover, acting on the advice of respondent no# !, complainant deinvested in his earlier policy leading to loss of $s# 8 75 7elay in refunding premium: to the complainant

It is clear from the facts of the case that he made a reJuest for cancellation, a day after receival of policy document i#e#, on 2" rd +cto7er 2 !! <@ithin !4 days of free looC period5# &ut the amount of premium @as refunded " months after the acCno@ledgment of reJuest despite the 7anC accepting the reposnsi7ility of refunding the money at the earliest, @hich is negligent on part of respondent no# 2 and the main cause of stocC marCet fluctuation deductions# 0ad the policy 7een cancelled @ithin !4 days there @ould have 7een no deductions and thus there @ould have 7een no loss to the complainant# The complainant made a reJuest for cancellation of policy on 2" rd +cto7er and his reJuest @as acCno@ledged on 2;th +cto7er,2 !!# *o ans@er @as received for three months and a reminder letter @as sent to the respondents, as a result, received the refund on "#2#2 !! i#e#, " months and 6 days after the reJuest for cancellation# There has 7een negligence on part of respondent no# 2 in refunding the amount of premium# Inordinate delay in refund of application money is not ?ustified# 9 (fter already have 7een suffered a loss of $s# 8 monetary loss of $s# !,4 , complainant has suffered a greater @as due to the

# The complete monetary loss of $s# 2,2

negligence of the respondents# ItIs not ?ust the monetary loss he had to suffer, 7ut 7eing an old man, he had to @itness the harrassment and taCe overHstress of not only sending the reJuest letter 7ut also having to send a strong reminder# It has 7een 2 years and he still has not 7ought another old age security policy due to his fear as he could not 7ear the fraud again# 0e @as entitled to get the interest charged on his deposit of $s# 4 , for " months 7ut instead of receiving such interest, he @as refunded a deducted amount @hich @as due to stocC marCet fluctuations# These stocC
;9 Mantora +il 2roducts <25 Ltd#, 1anpur /s# +riental Insurance Company Ltd#, I<!99!!5 C2, "2" <"265 <*C5# 9 Sudhir 1umar and others v# &ureau of Indian Standards

2'

marCet fluctuations @ere due to $espondent *o# 2# In the case of Tata Infotech Ltd# v# Collector of Customs9!, no ans@er @as furnished 7y respondent to e>plain delay in refunding money# 0eld respondent lia7le to pay interest at !2P p#a# To petitioner# 0e @as e>pecting to derive 7enefits and security in his old age, 7ut he failed and ?ust had to suffer the mental trauma# It @as held in the case of 8I4 of India =s. "./. Aggar al, that @here the refund of premium @as made after ' months, there is deficiency in service on part of the 7anC#

9! 2

' <!!!5 DLT !8;

24

'# BANK AND IN5ESTMENT MANAGER ARE JOINTL4 AND SE5ERL4 LIABLE: It is possi7le for several people simultaneously to 7e lia7le for the same damage# For instance, an employer and employee may 7oth 7e lia7le to the victim of a tort, either due to vicarious lia7ility or 7ecause 7oth have primary lia7ility# ,oint tortfeasors @ere those @ho acted @ith a common design and caused an in?ury# Several tortfeasors each acted independently, 7ut all contri7uted to the in?ury# :here there are ?oint or several tortfeasors, the claimant can decide @hether to sue one of them, all of them, or any com7ination of them# If the claimant is successful against more than one potential defendant, those defendants can asC the court to allocate the lia7ility 7et@een them# The court @ill usually allocate the lia7ility on some other 7asis# For instance, if the claimant o7tains ?udgment against 7oth an employer and an employee and the employee cannot afford to pay damages, the court may order the employee to pay the full amount# 92 (s in the present case, complainant has suffered loss on account of unnecessary deductions, dedcuted 7y respondent no#2# Complainant used to act on the advice of respondent no# ! as a conseJuence of @hich he suffered losses, Firstly complainant suffered loss @hen respondent no# ! advised complainant to deinvest in earlier policy and later on @hen @rong insurance policy @as issued fraudulently complainant suffered loss# Moreover, even on the cancellation of policy the premium amount @as refunded " months and 6 days latter# So, it is contended that the respondent no# ! and respondent no# 2 ?ointly and severly lia7le# It @as held in the case of *ilmadhu7 MooCer?ee v# DooCeeram 1hottah 9" that to constitute a ?oint lia7ility the act complained of must 7e ?oint and not separate# The ?oint lia7ility arises under three circumstances%H a5 (gency, @hen one person employs another to do an act @hich turns out to 7e a tort# 75 /icarious lia7ility i#e#, lia7ility arising from relations, as master and servant, principal and agent, guardian and @ard etc# c5 ,oint actionH @here t@o or more persons com7ine together to commit an act
92 S#I# Strong E LiD :illiams, Tort La@, +>ford University 2ress, p# ";4 9" <!;8'5 !4 &eng L$ !6!

26

@hich amounts to a tort# In the present case there e>isted not only agency relationship 7et@een respondent no# ! and respondent no# 2 7ut the tort @as committed against the complainant ?ointly 7y 7oth the respondents and hence ?ointly and severly lia7le# Since, the damages cannot 7e apportioned so as to a@ard one sum against one defendant and another against the other defendant, though they may have 7een guilty in uneJual degree# 9'

9' M#2# State $oad Transport Corporation v# (7dul $ahman, (I$ !998, M2 2';, p# 24"

28

4# T6AT MR! AS6OK IS ENTITLED FOR COM7ENSATION FOR

BREAC6 OF CONTRACT:=3
:hen the consent of one of the parties is not free consent, i#e#, it has 7een caused 7y one or the other of the a7ove stated factors, the contract is not a valid one# :hen consent to an agreement is caused 7y coercion, undue influence, fraud or misrepresentation, the agreement is a contract voida7le at the option of the party @hose consent @as so cause# /ection 7'D6 is confined to cases here a contract is (roken (y a failure or refusal to

perform it. A (reach occurs here a party repudiates or fails to perform one or more of the o(ligations imposed upon the respondent (y the contract. D7 )here as a difference (et een the contract agreed and signed (y the complainant and respondent no. % and the policy document recei&ed (y the complainant from respondent no. $. As the terms and conditions of the former contract ere not ritten or e*ecuted (y the latter policy document, there as a (reach of contract on part of the respondent no. $ . +ence, the complainant is entitled to demand for compensation under /ection 7' i.e., due to (reach of contract e*ercised (y respondent no. $. Section 8" of Indian Contract (ct is the general one governing all cases of 7reach of contract, resulting in loss of damage to one of the contracting parties# This section deals @ith compensation for loss or damages caused 7y 7reach of contract# :hen a contract has 7een 7roCen, the party @hen suffered 7y such 7reach is entitled to receive, from the party @ho has 7roCen the contract, compensation for any losse damages caused to him there7y, @hich naturally arose in the usual course of things from such 7reach# 9; Section 8" of the contract act is declaratory of the Common La@ as to damages# The la@ imposes an o7ligation or implies the terms that upon 7reach of contract, damages must 7e paidF that also provided in plain terms 7y the section# 99 It is essential that a person @ho claims damages for 7reach of contract should have performed or @as ready to perform his
94 96 98 9; Section !9 and !9 ( Indian Contract (ct, !;82 Indian Contract (ct 2arthasartyhy Chetty E co# vs# .a?apathi *aidu E co#, IL$ '; Mad# 8;8# San?iva $o@Is, Commentary on The Indian Contract (ct, !;82 and Tenders, Delhi La@ 0ouse, !2 th )dition, p# ! '6 99 San?iva $o@Is, Commentary on The Indian Contract (ct, !;82 and Tenders, Delhi La@ 0ouse, !2 th )dition, p# ! '8

2;

part of the o7ligation arising under the contract# It is the fundamental principle of damages for 7reach of contract that these are a@arded to place the in?ured party in the same position in @hich he @ould have 7een, had he not sustained the in?ury of @hich he complains# KDamageL may 7e defined as the disadvantage @hich is suffered 7y a person as a result of the act or default of another#! ( 7reach occurs @here a party repudiates or fails to perform one or more of the o7ligations imposed upon him 7y the contract# ! ! ( fiduciary @ho 7reaches his or her fiduciary duty to another is su7?ect to tort lia7ility to the other for any harm caused 7y the 7reach of duty# In addition, in an appropriate case the fiduciary may 7e lia7le for punitive damages and=or pre?udgment interest# ! 2 a; 42< o&er and a(o&e principal amount: )he complainant must get 1s. $$,2-- i.e., 42< o&er and a(o&e 1s. 2-,---. (; 8itigation charges: +e also had to hire and a&ail the ser&ice of a reno ned Ad&ocate. +e deser&es to get compensated for the litigation charges paid (y him i.e., 1s. $2,---. c; Monetary loss of pre&ious purchased in&estment plan: +e suffered a monetary loss of 1s. 7-- hen he as penalised (y respondent no. % for hich he must (e compensated an eBui&alent amount. d; Monetary loss due to negligence of respondent $: +is ne*t monetary loss of 1s. %,2-- as due to negligence on part of respondent no. $. )here is no &alid reason for him recei&ing >ust 1s. 40,2-- instead of the complete principal amount of 1s. 2-,---. +e is (ound to recei&e 1s. %,2--. e; Mental trauma: Being an old man, he had to undergo harrassment, mental trauma and agony instead of recei&ing the e*pected retirement (enefits. Mental relief should (e a&ailed (y him 2-,---.
! 1ishalal Shrilal 2at@a /s# Union +f India, (I$ !96 M2 2;9 at p# 29 # ! !Chesire and Fifoot, La@ of Contract, !9'" )d#, p# ";2 ! 2Fiduciary $elationship, Khttp%==@@@#pli#edu=productOfiles=7ooCsamples=494Osample8#pdfL, accessed on !!= 2=2 !" at 4#'6 2M

as entitled to get

42< o&er and a(o&e the principal amount as per the agreed terms. +ence, he

hich can (e done (y pro&iding him

ith 1s.

29

f;

.*emplary charges: .*emplary charges should (e charged against respondent no. $ as this ill (e a strict arning and alertness for them not to repeat this. )his ill also set an e*ample in the eyes of others to (e careful hile taking decisions regarding purchasing policies.

If any other relief is to 7e provided, the consumer Fora have to protect the interests of consumers and @ould 7e @ithin their rights, if any deficiency in service is noticed from the facts disclosed in the complaint sent 7y them 7ut @hich the consumer had failed to formulate and articulate in the complaint# ! "

! "

United Insurance Co# Ltd# /s# Mohan Lal and sons, I<!9925 C2, !64 <!665 <*C5% !992

"

7ra,er

:herefore, in the light of the issues raised, arguments advanced, reasons given and authorities cited, it is hum7ly prayed 7efore the 0onI7le District Consumer Disputes $edressal Forum% !# That the present complaint 7e allo@ed# 2# That the respondents shall 7e held lia7le as charges have 7een proved against them# "# Complainant shall 7e given $s# !,'9,8 =H for compensating the damages#

(nd any other relief that this 0onG7le Forum may 7e pleased to grant in the interest of ?ustice, eJuity and good conscience#

Counsel for Complainant

"!