National Consumer Disputes Redressal
Feather Foam Enterprises Pvt. Ltd. vs New India Assurance Co. Ltd. on 2 February, 2010
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI ORIGINAL PETITION NO.28 OF 2001 Feather Foam Enterprises Pvt. Ltd., Having its Registered Office at C-55, Preet Vihar, Vikas Marg, Delhi-110 092 Through Director Complainant Versus 1. New India Assurance Co. Ltd. Having its Registered Office at New India Assurance Building 87, Mahatma Gandhi Road, Fort Mumbai 400001 Through Chairman & Managing Director 2. The New India Assurance Co. Ltd. Having its Branch Office at A-74, Main Road, Kanti Nagar (Krishana Nagar), Delhi-110 051 Through Branch Manager Opposite Parties BEFORE: HONBLE MR.JUSTICE K.S.GUPTA, PRESIDING MEMBER HONBLE MRS. RAJYALAKSHMI RAO, MEMBER For the Complainant : Ms. Sunita Harish, Adv. For the Opposite Parties : Shri A.K. Raina, Adv. Dated the__2nd Feb.,2010 ORDER
JUSTICE K. S. GUPTA, MEMBER Complaint was filed, inter alia, alleging that the complainant had taken Fire policy C bearing No. 1132030306888 for the period from 29.3.1998 to 28.3.1999 for its factory at Survey No. 257, Saily Umar Kui Road, Silvassa, Dadra & Nagar Havelly covering the Foaming Section building, installed FFF, machinery and stocks in process for Rs. 1,82,00,000/- and premium of Rs. 81,126/- at the rate of 4.40% per milli was paid to the opposite party-Insurance Co. Complainant had taken another Fire Policy C bearing No. 1132030306889 for the said period covering the risk to the Cutting and Curing Unit Building, installed FFF, electrical installations, machinery, stock in process, packing material and DG sets of Rs. 2,06,00,000/- and paid the premium of Rs. 72,308/- at the rate of Rs. 3.40% per milli. It was alleged that a fire broke out in the insured premises on the intervening night of 12.4.98 and 13.4.98 causing extensive damage to the buildings, plant, machinery, stock in process and finished goods. Opposite party appointed surveyor. Vide letter dated 10.8.1998, the Opposite party-Insurance Co. informed the complainant of the approval of on account payment of Rs. 1,75,00,000/-towards the claim lodged. However, rate for the current and preceding three years was unilaterally increased to 7.30% per milli and an adjustment cheque therefor in the sum of Rs. 3,41,524/- was required to be sent by the complainant to the opposite party.
Vide letter dated 11.8.98, the complainant protested the levy of enhanced premium. Alongwith letter dated 12.8.1998, the Insurance Co. after deducting the said amount of Rs. 3,41,524/- sent a pre-receipted voucher of Rs. 1,73,70,234/- for payment of Rs. 1,70,28,710/- to the complainant. It was mentioned in the letter that payment will be released only on receipt of payment voucher. Complainant at no point of time had consented to the charging of higher premium. It was further alleged that after completion of restoration work at the factory, alongwith letter dated 7.1.99 the complainant sent item-wise bills together with necessary and supporting documents to M/s. P.C. Gandhi & Associates and M/s. S.G. Kumar & Co., joint surveyors for settling the amount of final claim. Insurance Co. handed over a cheque of Rs. 1,24,90,070/- dated 17.9.99 to the complainant without any covering note. Vide letter dated 22.9.99, the complainant asked the opposite party to furnish the basis of payment of the said amount as it had made claim of Rs. 487.48 lakhs. In reply to this letter, the complainant received letter dated 27.9.99 justifying the deductions made and payment of Rs. 1,24,90,070/- as full and final settlement. Vide letter dated 28.10.99 which was followed by the letters dated 29.11.99 and 29.12.99 the complainant pointed out that the said higher rate was not applicable with retrospective effect and in 1995 even the plant was not in existence. By the letter dated 14.1.2000 the opposite party tried to justify the deductions made. Vide letter dated 13.4.2000 the complainant asked for early settlement of claim. Vide letter dated 19.4.2000 the opposite party refused to refund the amounts illegally charged. Attributing deficiency in service, direction was sought to be made to the opposite party-Insurance Co. to pay amount of Rs. 50,93,654/- together with interest, the details whereof have been given in para No. 25 of the complaint. In addition, compensation of Rs. 5 lakhs was further claimed.
Para-25 Particulars Amount (Rs.)
(a) Balance unpaid claim : 27,17,648.00
(b) Premium wrongly collected for the years 1995, 96 & 97 : 4,67,988.00 ( c) Differential rate of re-instatement premium on pro-rata basis : 79,527.00 ________________ Total : 32,65,163.00
(d) Interest @ 24% p.a. on an amount of Rs. 32,65,163/- w.e.f. 12.8.98 to 10.12.2000 (28 months) 18,28,491.00 _________________ Grand Total : 50,93,654.00 __________________ Complaint was contested by filing written version by the opposite party-Insurance Co. It was alleged that on account payment of Rs. 1,73,70,234/- was made to the complainant on 12th August, 1998 and remaining amount of Rs. 1,24,90,070/- was paid on 17th September, 1999 in full and final settlement of the claim and the complaint is, therefore, liable to be dismissed on this sole ground. Issuance of two insurance policies in question and fire having occurred on the intervening night of 12/13th April, 1998 were not denied. It was, however, stated that the two policies were subject to reinstatement value clause. On being informed of the fire the answering opposite party appointed M/s. P.C. Gandhi & Associates as preliminary surveyor who submitted the report on 21st April, 1998. Thereafter, said M/s. P.C. Gandhi & Associates and M/s. S.G. Kumar & Co. were appointed as joint surveyors. Joint surveyors submitted the interim survey report on 8th June, 98 and an on account interim payment of Rs. 1,75,00,000/- was recommended by the joint surveyors to the complainant. Joint surveyors pointed out that the foaming section of the factory and the cutting and curing section were communicating with each other, whereupon the Insurance Co. referred the matter to the Tariff Advisory Committee (TAC). In the report dated 22.7.98, TAC observed that two sections of the factory which were insured under two separate policies were communicating with each other through a passage not conforming with the committees rules for segregation and, therefore, the risk would be relatable under tariff item Foam plastic manufacturing and/or covering plants without warranty at the rate of 7.30% per milli. Against pre-receipted voucher of Rs. 1,73,70,234/- payment of the said recommended sum on account was made after deducting Rs. 3,41,524/-to the complainant. On 2nd April 1999, the joint surveyors submitted final report wherein they provided two alternatives. Amount of Rs. 3,29,07,537/- was recommended on alternative-I and Rs. 3,01,89,889 was recommended on Alternative-II subject to charging reinstatement premium and correction of premium rate for the current policies and the policies for the last three years. It was denied that deductions of Rs. 3,41,524/- was made illegally. It was further stated that by the letter dated 11th August, 1998 the complainant had asked for the reasons in change in rate of premium. In response to complainants letter dated 22nd September 1990 by the letter dated 22nd September, 1990 the answering opposite party informed the complainant the basis for settling the claim. Receipt of complainants letters dated 29th November 1999 and 29th December, 1999 was admitted. Again by the letter dated 14th January, 2000 the Insurance Co. stated the reasons for reduction in claim amount and collection of the additional premium. Allegation regarding deficiency in service was emphatically denied. It was asserted that the complainant is not entitled to the amount prayed for.
Opposite partys letter dated 27th Sept., 1999 written with reference to the complainants letter dated 22.9.99 which has bearing on the controversy between the parties need be referred to. Omitting immaterial portion, the same reads thus:
We may inform you that the undersigned visited you alongwith Ms. H.S. Arya immediately on receipt of your above claim file duly approved by our Head Office. We had fully explained you how the net payable amount has been arrived at.
We are giving hereunder the concise summary of the above claim
1. Claim approved by H.O. as per alternative No. 2 of survey report Rs. 3,01,89,889.00
2. Less reinstatement of S.I. of Rs.
3,01,89,889/- @ 7.30%o (-5%) on pro-rata basis Rs. 2,00,100.00 ____________________ Rs.
2,99,89,000.00
3. (-) Reinstatement of S.I. on stock of Rs. 6456603/- @ 0.50%o (-5%) for spontaneous combustion on pro-rata basis Rs.
2,932.00 ___________________ 2,99,86,768.00
4. (-) premium chargeable for correction of rates for 3rd year Rs. 1,26,464.00 _____________________ Rs.
2,98,60,304.00
5. Less premium chargeable on policy No. 11/6888, 11/6889, 6352, 6353, 5797, 5798 as per our letter dated 10.8.98 and your letter dt. 11.8.98 Rs. 3,41,524.00 _____________________ Rs.
2,95,18,780.00
6. Less already paid on A/c payment vide cheque No. 415302 dt. 20.8.98 Rs. 1,70,28,710.00 ____________________ Balance Rs. 1,24,90,070.00 _____________________ The balance payment of Rs. 1,24,90,070/- has been paid vide our cheque No. 686819 dt. 17.9.99 as full and final payment.
Having heard Ms. Sunita Harish for the complainant and Shri A.K. Raina for the opposite party and having considered the pleadings of parties, mainly the following points arise for determination:
i) Whether opposite party/Insurance Co. was justified in deducting amount of Rs. 3,41,524/- towards short charged premium as disclosed at Sl. No. 5 in the letter dated 27th Sept., 1999 and Rs.
79,527/- towards differential rate of reinstatement premium on pre-rata basis?
ii) For which year the amount of Rs. 1,26,464/- as at Sl. No. 4 of the said letter was charged by the Insurance Co.?
iii) Whether payment of Rs. 2,98,60,304/- was made by the Insurance Co. as full and final settlement of the claim as alleged?
Points at (i) and (ii) above are being taken up together for discussion. Premium at Rs. 4.40% per milli was charged by the opposite party in respect of policy No. 1132030306888 for Rs. 1,82,00,000/-. Rate of premium charged in respect of another policy No. 1132030306889 for Rs.
2,06,00,000/- was Rs. 3.40% per milli.
These rates were enhanced to Rs. 7.30% per milli and deduction of Rs. 3,41,524/- was made towards short charged premium etc. while making on account payment of Rs. 1,75,00,000/- based on the report dated 22nd July, 1998 of the Tariff Advisory Committee by the Insurance Co. Copy of this report is placed at pages 107 to 109 of the paper book.
Discussion made under headings (5)- Insurance Status and (9) Rating being material, is reproduced below:-
(5) Insurance Status The risk is insured with New India, Delhi Regional Office-II.
Following policies were reported to have been issued, i.e. Policy No. 32030306888 for Rs. 1.82 crores and policy No. 32030306889 for Rs. 2.06 crores. The rate charged on first policy was Rs. 4.40%o + .50% for spontaneous combustion where the rate charged for second policy was Rs. 3.40%o + .50% for spontaneous combustion.
The second policy was issued for cutting and curing department which is communicating with the foaming department through a passage not conforming with Committees rules for segregation. (The ratio of length to width of passage is 1:3 instead of 3:1 required under the rules).
9) Rating The risk is rateable under Tariff Item Foam Plastic manufacturing and/or converting Plants without warranty at the rate of Rs. 7.30 %o.
In all probabilities the inspection of the complainants factory prior to the issuance of two policies in question may have been made by the officials of Insurance Co. and that inspection would have revealed that the ratio of length to width of the passage was 1:3 instead of 3:1 necessitating charging of premium @ Rs. 7.30% per milli, still the opposite party chose to charge the premium of Rs. 4.40% /3.40% per milli. Opposite party, therefore, cannot take advantage of the wrong committed by it in charging premium at the said rates.
Further, said report of TAC came to be made much after the commencement of two policies and it is not shown that the rules referred to under the said heading (5) Insurance Status was brought to the notice of the complainant at any point of time before July 1998.
Thus, in our view based on TAC report the Insurance Co. cannot claim payment of premium at the said enhanced rate nor could it have made deduction towards short charged premium and differential rate of reinstatement on pro-rata basis for the current year i.e. 1998-99 and the preceding three years. In the decision in Hanil Erea Textiles Ltd. vs. Oriental Insurance Co. Ltd. & Ors. 2001 CTJ 313 (Supreme Court)(CP) it was held by the Apex Court that the recovery of premium at enhanced rate cannot be made from the insured after the lapse of the period of the policies. Insurance Co. is, thus, additionally not entitled to recover premium at enhanced rate of the lapsed policies for the years 1997-98 and 1996-97. During the course of arguments it was pointed out that policy nos. 11/6888 and 11/6889 referred to at Sl. No. 5 of the letter dated 27th Sept., 1999 were for the year 1998-99, policy Nos. 6352 and 6353 were for the year 1997-98 and policy Nos. 5797 and 5798 pertained to the period 1996-97. This covers deduction of the said amount of Rs. 3,41,524/-.
In the complaint it is alleged that Silvassa Plant was not even in existence in 1995. It is admitted in written version by the Insurance Co. that correction premium rate etc. was charged for the current policy and for the policies of last three years. Obviously, amount of Rs. 1,26,464/- pertained to the year 1995-96. If the plant itself was not in existence in 1995 and no policy for the year 1995-96 was purchased, the opposite party-Insurance Co. could not have legally charged the aforesaid amount towards correction of premium rate as shown at Sl. No. 4 in the above letter dated 27th September 1999. As a corollary to the said discussion, it must follow that Insurance Co. was not entitled to make deduction of Rs. 79,527/- as shown in para No. 25 of the complaint towards differential rate of reinstatement premium on pro-rata basis.
This brings us to point No. (iii) above. It was pointed out by Ms. Harish, Adv. that after receipt of two amounts the complainant wrote letters dated 28.10.99, 29.11.99, 29.12.99, 29.1.2000 and 13.4.2000 to the opposite party-Insurance Co. for making payment of the balance claim amount and it was only through the letter dated 19.4.2000 that the Insurance Co. finally declined to look at the balance claim made on the ground that claim was settled at Rs. 3,01,89,889/- as full and final settlement. According to her second payment of Rs. 1,24,90,070/- cannot be considered as full and final payment as alleged. Reliance was placed on the decision in Oriental Insurance Co. Ltd. & Ors. Vs. Government Tool Room & Training Centre I (2008) CPJ 267 (NC). This Judgment was rendered by this Commission taken note of the ratio of the decision in United India Insurance Co. Ltd. vs. Ajmer Singh Cotton & General Mills & Ors. (1999) 6 SCC 400. It was held that mere execution of discharge voucher and acceptance of insurance claim would not estop the insured from making further claim from the insurer. On given facts we find considerable merit in the submission advanced that the said second payment can not be treated as having been made towards full and final settlement of the claim as alleged by the opposite party-Insurance Co.
Survey report dated 2.4.1999 would show that the net loss assessed on Alternative-I was Rs. 3,29,07,537/- while on alternative-II it was Rs. 3,01,89,889/-. Para No. 8 of the report notices that damaged block cutting machine was found installed in the foaming block whereas it was insured under the policy covering cutting and curing block. This was in violation of the terms of policy. Complainants claim on alternative-II had thus been rightly settled by the Insurance Co. on alternative-II for Rs. 3,01,89,889/-. It may be stated that in para No. 25 of the complaint the balance unpaid claim is shown as Rs. 27,17,648/- presumably taking the loss of Rs. 4,87,48,000/- for which final claim bill was submitted by the complainant. Complainant is entitled to the net loss as assessed by the joint surveyors on alternate II instead of on basis of the final claim submitted. For the foregoing discussion, it must follow that the complainant is entitled to balance total amount of Rs. 5,47,515/- (Rs. 3,41,524+ Rs. 1,26,464+79,527) which was illegally deducted while making payment to it. This amount should have been paid alongwith amount of Rs. 1,24,90,070/- on 17.9.1999. Since complainant has been deprived of the use of this amount all these years by the opposite party, it is entitled to interest which we quantify @ 9% p.a. w.e.f. 17.9.99 till realisation.
Resultantly, the complaint is partly allowed with direction to the opposite party-Insurance Co. to pay amount of Rs. 5,47,515/- alongwith interest @ 9% p.a. from 17.9.1999, to the complainant. Opposite party will pay cost of Rs. 15,000/- to the complainant.
Awarded amount shall be paid within two months hereof.
J. (K.S.GUPTA) PRESIDING MEMBER (RAJYALAKSHMI RAO) MEMBER vs