National Consumer Disputes Redressal
M/S. Mayur Uniquoters Ltd. vs New India Assurance Co. Ltd. & Anr. on 5 September, 2024
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 405 OF 2012 (Against the Order dated 23/05/2012 in Complaint No. 13/2010 of the State Commission Rajasthan) 1. M/S. MAYUR UNIQUOTERS LTD. Through its Authorized Signatory Shri Nikhil Saxena, 4th Floor, Lakshmi Complex, M.I. Road, JAIPUR RAJASTHAN ...........Appellant(s) Versus 1. NEW INDIA ASSURANCE CO. LTD. & ANR. Through its Chairman, Registered Office at: 87, MG Road, FORT MUMBAI, 2. NEW INDIA ASSURANCE COMPANY, Regional Office at Nehru Place, Tonk Road, JAIPUR ...........Respondent(s)
BEFORE: HON'BLE MR. JUSTICE A. P. SAHI,PRESIDENT HON'BLE DR. INDER JIT SINGH,MEMBER FOR THE APPELLANT : MR. SANJIV ARORA, ADVOCATE WITH MR. SHUBHAM ARORA, ADVOCATE FOR THE RESPONDENT : MR. ABHISHEK K. GOLA, ADVOCATE WITH MR. ANSHUL MEHRAL, ADVOCATE Dated : 05 September 2024 ORDER DR. INDER JIT SINGH, MEMBER
1. The present First Appeal (FA) has been filed by the Appellant against Respondents as detailed above, under section 21(a)(ii) of Consumer Protection Act 1986, against the order dated 23.05.2012 of the State Consumer Disputes Redressal Commission, Rajasthan (hereinafter referred to as the 'State Commission'), in Consumer Complaint (CC) 13/2010 inter alia praying for setting aside the order dated 23.05.2012 passed by the State Commission.
2. The Appellant was Complainant and the Respondents were OPs in the said CC/13/2010 before the State Commission. Notice was issued to the Respondents on 27.08.2012. The parties filed their Written Arguments/Synopsis on 14.05.2019 (Appellant) and on 22.12.2023 (Respondents) respectively.
3. Brief facts of the case, as emerged from the FA, order of the State Commission and other case records are that: -
The Appellant/complainant, who is a manufacturer of coated textiles and is engaged in the transit of coated textile, has taken a Marine Cargo Open Policy No. 33102/21/08/02/00000001 on 31.03.2008 from the Respondents/Opposite Party to cover their goods for Rs.40 crore for the indemnified transit as well as for securing transaction of their goods. The term of the policy was from 01.04.2008 to 31.03.2009. The sum insured of Rs.40 Crores in the policy has been regularly enhanced from time to time starting from starting from 01.04.2008 till 31.03.2009 as per the need of their business and of the Financial Year 2008 - 2009 the insurance cover was raised upto the tune of Rs. 162 Crores. On 26.09.2008, a consignment of 16,000 kg of Pathalate Plasticizers worth Rs.15,92,727/- from M/s KLJ Plasticizers Ltd. located at Sili Silvasa, which was to be transported to the complainant company located at Village Jaitpura, Jaipur. During transit from Sili Silvassa to Jaipur, an accident took place where the lorry tanker fell into Canal causing damage to the Lorry Tanker, injuries to the driver and the cargo loaded in the lorry tanker was totally destroyed causing huge losses to the complainant. It came to the knowledge of the complainant company on 27.09.2008 that accident has taken place. The Respondent/Insurance Company was intimated on the same day. On 27.09.2008, preliminary survey was conducted by one Shri Gautam Desai, appointed by the Insurance Company. Thereafter, another Surveyor C.L. Dhamija & Company was appointed on same date by the Respondents to whom the report was submitted by the earlier Surveyor. On 29.09.2008 the sum insured was further enhanced by Rs.40 Crores in addition to previous sum insured of Rs.80 Crores. On 19.11.2008, the sum insured was further enhanced by Rs.40 Crores in addition to previous sum insured of Rs. 120 Crores. The complainant suffered the loss of Rs.15,92,727/- in the said accident. The said raw material was duly purchased and subsequently owned by the complainant company was totally destroyed. The complainant gave various representations to get the claim of the complainant company. The said claim was the only claim raised by the company in 14 years of their relationship. On 22.12.2008, the Complainant submitted the complete details of their declaration and explained the entire facts for the exclusion of the invoices which were included by the complainant company in its statement due the inadvertence. On 25.03.2009, sum insured was enhanced to Rs. 2 crores in addition to previous sum insured of Rs.160 Crores. The Insurance Company repudiated the claim by letter dated 30.03.2009 stating in the said letter that on 25.09.2008 the branch office of the Respondent has recorded the negative balance of Rs.7,20,971/- in the sum insured of the complainant and also stated that due to prior exhaustion of the sum insured, the subject policy lapses and becomes ineffective. Hence, the complainant filed complaint before the State Commission.
4. Vide Order dated 23.05.2012, the State Commission has dismissed the complaint. Appellant has challenged the Order dated 23.05.2012 of the State Commission mainly on following grounds:
(a) The State Commission has failed to consider the basic argument of the complainant that once the insurance company has accepted the premium and has enhanced/increased the sum insured even after the loss dated 26.09.2008 and has accepted the declarations and issued the certificates treating the policy valid and subsisting, then how the insurance company can repudiate the claim on the ground that there was negative balance on the date of loss. It is mentioned on the face of the Policy Schedule "This insurance is to remain in force for a period of 12 months i.e., from 1-4-2008 to 31-3-2009 unless the sum insured is previously exhausted by declaration." The moment sum insured is exhausted the policy comes to an end. Had it been so, then it was not within the authority of the Insurance Company to accept further premium under an ineffective policy, whereas the insurance company has accepted premium for enhancement and issued endorsements to that effect, which means the Policy remained in force till 31st March, 2009. Under the circumstances the action of the Insurance Company becomes illegal. Since such legal position has not been considered by the Fora below despite taking such ground in very clear words in the pleading together with filing supporting documents, certificates issued by the company for the month of September, 2008 and subsequent thereto up till 31.03.2009, the last day of coverage in the policy.
(b) The State Commission erred in appreciating that the insurance contract is a bilateral document and both the parties have reciprocal obligations and duties. The utmost good faith is one of the fundamental principal of the contract of insurance and it is applicable for both sides i.e., Insurer as well Insured. At one place when it is the duty of Insured to keep adequate balance of sum insured in the policy before making any declaration of goods in transit, then on the other hand the insurance company also has equal obligation to see and ensure that at the time of accepting any declaration, there is sufficient balance of sum insured is available under the Policy. If the insurance company has adopted the practice to get the monthly declarations for the sales and purchases so made and issued certificate on monthly basis then the insurance company is bound by its conduct if by the end of the month, there was sufficient credit balance in the policy then company cannot deny the claim on the ground that on a particular date there was a negative balance and incidentally loss is on the same date or thereafter. For the sake of arguments it be treated that despite negative balance the declaration was made then it was well within the authority of the insurance company to decline to accept such declaration. But if company has accepted the same without any reservation or protest, then company is stopped from saying that they have accepted the same in good faith and if claim comes they are not liable. It is a settled position of law that no one can take benefit of his own wrong. If company is at fault to accept such declaration then it is liable to indemnify the insured, if there is a claim for such particular consignment especially in the facts of the matter when policy started for 40 Crores was allowed to be enhanced to Rs.162 Crores by charging premium and there is no loss of premium to the insurance company.
(c) It is not the defence of the insurance company that they ever intimated on 25.09.2008 that the policy stand ineffective due to exhaustion of the sum insured. It is also not their defence that at the time of accepting the cheque dated 27.09.2008 for the enhancement on 29.09.2008 they were unaware that the policy was ineffective. Although they are duty bound to know about what is the balance sum insured under the policy before accepting any premium for the enhancement. When they themselves are not aware then how they can blame to the insured saying that to cover up the loss, immediately cheque for enhancement was given. It is submitted that at no point of time before accepting the cheque on 29.09.2008 respondent have intimated regarding the negative balance. As such now they cannot take benefit after accepting the premium and coverage under the policy.
(d) The State Commission had kept only two points for its consideration while deciding the complaint namely whether the OP is guilty of deficiency in service in repudiating the claim and the other is that whether the opposite party is guilty of deficiency of service of refusing to permit the complainant to withdraw previous declarations? Whereas core question involved in the matter is what is the effect of accepting the premium for enhancement from time to time and issuance of monthly declarations. The State commission ought to have considered such aspect of the matter. The Forum below preferred to ignore the vital aspect of the matter what is the effect of negative balance as on 25.09.2008. the moment, the State Commission concluded that there was a negative balance on 25.09.2008 the policy becomes ineffective in view of the policy conditions then what is the effect of taking premium and enhancing the sum insured and how insurance company can accept and receive the premium against an ineffective policy and whether the insurance company can retain such premium when they themselves concluded that on 25.09.2008 there was negative balance. Even then not returning the premium and cancelling the policy immediately by itself is a "deficiency" in service of the insurance company. The State Commission erred in holding that "we hold that opposite party has rightly repudiated the claim, as on 25.09.2008 the complainant had no balance of the sum assured available to them. Complainant has not disputed this factual aspect. It was very much within the knowledge of the complainant that on 25.09.2008 it had no balance." Such conclusion is contrary to record, is apparent from the bare perusal of the pleadings that the complainant has disputed this aspect that too vehemently. Because the conclusion of the Forum below that "it is further confirmed by the fact that it applied for enhancement in sum assured, the very next day i.e. on 26.09.2008." However, prior to that on 23.07.2008 sum insured was enhanced by Rs.40 Crores in routine and on 29.09.2008 sum assured was enhanced by Rs. 40 Crores then again on 19.11.2008 sum insured was enhanced by Rs. 40 Crores then thereafter even on 25.03.2009 sum insured was enhanced by Rs. 2 Crores. When the original policy was of Rs. 40 Crores and 3 times it was enhanced by Rs. 40 Crores each time, then can it be concluded that to get the claim amount complainant applied for enhancement.
(e) It is not the case of the insurance company that on receiving the intimation of the loss they immediately communicated that the policy was ineffective then how the complainant will know that there is some problem or there is a negative balance in the policy. If the situation was such then there was no occasion for the insurance company to appoint a surveyor or register a claim under the ineffective policy. They themselves treated the same as a valid policy. But later on for the reasons best known to them they repudiated the claim.
(f) The conclusion of the Forum below holding that complainant cannot withdraw previous declared consignments with the aid of Section 31 (3) of Marine Insurance Act, the insurance policy does not contemplate any such provisions where the consumed or the utilised consignments could be withdrawn to cover the subsequent claims. The said conclusion is bad in law for the simple reason that even in common law or law of contract if any error comes to knowledge, same can always be rectified. Rather Section 72 of the Indian Contract Act has specific provision in this regard. Further Section 31(3) of the Marine Insurance Act, takes care of such eventuality which provides that an omission or erroneous declaration may be rectified even after loss has taken place, provided the omission or declaration was made in good faith. When law provides such an authority of rectification even after loss then holding otherwise by the State Commission cannot be termed as right interpretation or conclusion. The State Commission has wrongly concluded that the provisions of the Marine Insurance Act, 1963 do not apply here i.e. in the instant matter for the reasons so mentioned in the impugned order. It is submitted that when we read Section 2 (e) and Section 4 (2) and its explanation conjoining each other, it is clear that in the word "marine time perils" the perils those may be designated by the policy shall also be "marine time perils" in the context of the inland transit those are not incidental to sea voyage and are independent by themselves. The explanation makes it clear that adventure analogues to marine adventure includes an adventure where any ship, goods or other movables are exposed to perils incidental to local or inland transit. Here the words "goods or other immovable" are important. Further sub-clause (ii) of Section 4 makes it clear that any adventure analogous to marine time adventure is covered by the policy in the form of marine policy. The provisions of this Act in so far as applicable shall apply thereto. In view of the above legal position the admission in the reply so made by the insurance company becomes important wherein it has been admitted in para wise reply Para No. 3 "that the complainant took transit insurance as per their requirement as such marine cargo open policy Nо. 330102/21/08/02/00000001 was issued for Rs.40 Crores on receipt of premium Rs.44,945/- for the limit of per location and transit Rs.50 Lacs, for anywhere in India (warehouse to warehouse) and vice versa by mode of transit rail, road and air for the raw materials, semi-finished and products (as per the list provided by the complainant)". In view of above, Marine Insurance Act, 1963 is very much applicable in relation to the instant dispute.
(g) The State Commission erred in declining the arguments that if any of the above declarations are withdrawn, their claim will be covered. It is submitted that the first reason that the declaration given for the invoices those were dispatched before 31.03.2008 i.e. before the commencement of policy in dispute have wrongly been declared under the present policy, which ought to have been treated in previous policy wherein sum insured balance was available. It is submitted that it is a most bona-fide error as it is undisputed in marine insurance that risk is covered the moment dispatch is made whether it is for the purchase by the seller for the insured or the insured has sold. In both the ways the starting point of the journey is crucial, therefore, any declaration for the March dispatch can, by no stretch of imagination, can be adjusted in the sum insured of the policy which started from April 1st. If wrongly that declaration has been made then same is a bona-fide omission or erroneous declaration. Not accepting the said argument is bad on facts as well as on law. Because likewise, not treating the factory gate sales out of the scope of coverage in the policy by the State Commission is also against the conditions of the contract as the goods sold and delivered to the purchaser, the Complainant had no insurable interest therein and when delivery is made at the factory gate where the question of marine transit comes into play and as per the policy conditions in absence of insurable interest, no risk can be covered under the policy. As such the declarations so made, in any case, were erroneously made in good faith are liable to be withdrawn from the declarations so made even after the loss.
(h) The purchases made on CIF basis whether it is inland purchase or import both ways it is covered under the policy of the seller who has charged insurance premium for the sold goods. As such the purchaser becomes the beneficiary under the policy and goods remained insured up till delivered to the warehouse of the purchaser. As such, such purchases so included in declarations have been erroneously declared in good faith and are required to be allowed to be withdrawn from the declarations. Not accepting such contentions and arguments despite the fact that necessary material is there on record to prove that the suppliers had marine policy in their name for such consignments, is bad in law. Because in any such type of erroneous declarations are allowed to be withdrawn from the sum insured then the lost consignment is covered in the policy. Such arguments are without prejudice to the contentions that there was a valid and subsisting policy on the date of loss.
(i) The conclusion by the State Commission that there is no evidence to prove the facts. It is submitted that the facts mentioned in the survey reports, conclusion of the surveyor of assessment of the loss and the report of Mr. Vishal Gupta, Chartered Accountant by itself is a sufficient material to conclude that how much the loss has been suffered by the Appellant / Complainant company. Further the Appellant / Complainant has filed not only the invoice but also the copy of the HDFC pay voucher of Cheuqe No. 627885 by which payment has been made of the relevant invoice and the bank statement of account showing that the said cheque has been debited to the account of complainant company. Such is supported by the affidavit. To prove the CIF purchases, the policies of the said suppliers have been filed on record. Those are the sufficient proof of the fact that the sales so made by them were covered under their policy. As such related declarations for such purchases have been made erroneously in good faith and must have been allowed to be withdrawn as requested by the complainant.
(j) The State Commission has relied on the policy conditions and has held that "condition of policy do not contain any provision which enables the complainant to withdraw previous declarations." It is submitted that respondent company has only issued the schedule of policy and have never issued complete policy on format having all the terms, conditions and exceptions to the policy. Nowhere on the face of the Policy Schedule, it is mentioned that the Dispatches once declared either wrong or right, will not be considered for deletion. When no signed policy terms, conditions and exceptions have been filed or have been issued then how such conclusions can be arrived at by the State Commission in absence of the complete policy on record. The insurance company has treated the policy valid throughout the year i.e. from 01.04.2008 to 31.03.2009 and have declared unused sum insured available after the relevant declaration then how they can claim or take the defence that on a particular day when the loss has taken place, there was a negative balance. The company has to take one step that either policy was ineffective or it was subsisting and valid. When they have taken enhancement premium and treated policy subsisting and valid then they are stopped from taking any other defence to repudiate the claim.
(k) The defence of the insurance company that they were bound to accept all the declarations so made in terms of the policy and bonafidely they have accepted the same and thereby have tried to cover up the lapses on their part. It is submitted that it was their duty before accepting every declaration to verify as per their record what is the position of the sum insured balance. If they fail in their duty, then they are precluded to take benefit and cannot act prejudicial to the interest of the insured.
(l) The impugned order is based on conjectures and surmises and State Commission has committed illegality in passing such an order. The impugned order is not only erroneous but is bad in law also and based on misconception. The State Commission has misread and misinterpreted the available material.
5. Heard learned counsel of both sides. Contentions/pleas of the parties, on various issues raised in the FA, based on their FA/Reply, Written Arguments, and Oral Arguments advanced during the hearing, are summed up below.
5.1 The Appellant has repeated most of the contentions, which are stated in para 4 above under grounds, hence the same are not repeated here.
5.2 On the other hand, the Opposite Party/Insurance Company contended that there is no deficiency in service on the part of the Respondent in any way or the manner nor the Appellant has any cause of action against the Respondent, as such the Appeal filed by the Appellant is not maintainable against the Respondent under law. The appellant a public limited company dealing in textiles got an open marines (Cargo) insurance policy for Rs.40 Crores with liberty to enhance the sum insured by paying the additional premium. The policy was for the sum of Rs.40 Crores and the term of the policy was from 01.04.2008 to 31.03.2009. The consignment of 16000 Kgs of Phthalate Plasticizers (DOP) Chemicals was on its way to complainant's factory from Sillisilvassa (Maharashtra) when the lorry met with an accident. The chemical it carried split over. The complainant intimated the incident to the Respondent. The Respondent on receiving the intimation of loss deputed surveyors for the assessment of loss. That on receiving survey report and analyzing the various documents submitted by the appellant the claim of the appellants was repudiated on the ground that on the date of the alleged accident, the appellants had negative balance of the sum assured. Aggrieved by the repudiation of claim by the respondent the appellants filed a complaint before the State Commission. The contention of the respondent was that the policy issued by it was an open Marine Insurance Policy, the complainant was required to declare the consignment on their dispatch and arrivals and that the amount was considered to be consumed or utilized by the appellant under the policy. On the basis of the declaration made by the appellant, the respondent found that on 25.09.2008, there was negative balance which means the declaration to the tune of Rs.7,20,971/- were made in excess of sum assured. It was the practice of the appellants to file the monthly declarations which showed utilization amount and the balance available to them. The appellants, however, on 26.09.2009 requested for enhancement by paying extra premium, but the respondent maintained that there was no balance as on 25.09.2008 i.e. the date of accident as such the respondent is not liable for any loss. It is further contended that the appellant in order to bring the damaged consignment under the cover of the policy sought to withdraw declaration made by it from April 2008 to September 2008 stating that these declarations were erroneously made. The respondent refused this request and stated that the consumed and utilized amount cannot be withdrawn under the policy conditions on the date of the occurrence of loss. It was further contended that the State Commission after hearing the complainant held that the respondent is not guilty of any deficiency of service and the repudiation of claim made by the respondent was justified. The State Commission held that on the date of the accident i.e. on 25.09.2008 the complainant has no balance of sum assured available to them and the complainant has not disputed the factual aspect. It was very much within the knowledge of the complainant that on 25.09.2008 it has no balance. It is further confirmed by the facts that it applied for the enhancement of the sum assured the very next date i.e. on 26.09.2008. Therefore, no deficiency on the part of the Respondent was proved. It was further contended that the State Commission considered the second point raised by the Appellant also. The second point was whether the respondent was guilty of deficiency in service by refusing to permit the complainant to withdraw previous declaration. The respondent relied upon the provision of the Marine Insurance Act, 1963. The contention of the complainant/appellant was the purchase made before the 30.03.2008, were erroneously declared under the current policy cover. The complainant stated that the details of the dispatches which were said to be factory gate sales and for which the buyers had taken insurance themselves, there was no need for the complainant to declare these consignments amounting to Rs.69,52,368/- and Rs.41,32,569/- respectively. Regarding the imported consignment, it was stated that these were on CIF basis and the insurance was taken by the sellers and inadvertently the complainant made these declarations. It was contended that if any claim is withdrawn, the claim of the complainant will come under the policy. It is also contended by the Respondent that the complainant relied upon the provisions of sec.2 (e) 4(2) and the explanation appended to it and section 31(3) of the Marine Insurance Act, 1963. These provisions have no application in the present case. These provisions apply to Sea Voyage. The complainant placed reliance on the judgment of the Calcutta High Court in AIR 1971 Cal. 494, and in II (2000) ACC 69 of the Madras High Court. The State Commission after appreciating these judgments held that these judgments were not passed in the Consumer Cases and secondly the facts in these cases differ from the one in the present case. Section 2(e) defines the Marine perils, which is limited to perils in navigation of Sea. The State Commission observed that the explanation in section 4(2) on which emphasis is given does not mean that it includes the inland Transportation by Road also. The State Commission observed that 'we are unable to accept the explanation that it includes inland transit by Road above provisions mean only such perils which would be covered in a Martine policy by Sea Voyage'. The loss during the inland transit by road does not come under the ambit of the above provisions of marine insurance act and as right held by the State Commission are not covered accordingly. Section 31 is regarding floating policy by ship or ships where the names of the ship or ships are to be declared by subsequent declaration. The State Commission has interpreted the provisions of section 31 and section 31 (3) which provides for declaration of consignment in order to dispatch or shipment, any erroneous declaration can be rectified the State Commission held that only declaration made erroneously in good faith can be rectified. It nowhere states that declaration for the last six months may be withdrawn. The state commission observed that 'we do not think all earlier declarations were made erroneously in good faith, so we are of the opinion that the complainant cannot withdraw previous declared consignment with the aid of section 31 (3)the insurance policy does not contemplate any such provision where the consumed or the utilized consignment should be withdrawn to cover the subsequent claims'. It is further contended by the Respondents that the State Commission has further held that there is no evidence produced by the complainant as to how after six months it can be believed by the insurance company that all the sales were factory gate sales. The affidavit of the Buyers or the evidence that they arranged, the insurance for them, is not on record. The State commission has also observed that the contention of the complainant that they were not required to declare these consignments which were done erroneously, as CIF includes insurance also, cannot be accepted as the complainant have produced certificate of supplies, which state these consignment were covered under their insurance separately. The State Commission observed that why should complainant pay for insurance to its suppliers again when it has an open insurance policy in force. This shows that the suppliers insurance was up to the port only as contented by the respondent. It is also contended by the Respondent that the State Commission also denied accepting the contention of the complainant that the details related to purchase of previous years were wrongly declared in the current policy. The said consignment started from between 26.03.2008 to 31.03.2008 from place like Faridabad, Baroda, and Daman, Malaysia and arrived in the month of April, 2008. The previous policy expired on 31.03.2008. They could not have declared under the previous policy as the consignment arrived in April, 2008. Complainant wanted to safeguard these consignments till their arrival. New policy was effective from 01.04.2008 so these included in April, 2008 declaration. Looking it from all angles the claim made by the complainant was not maintainable and was rightly repudiated by the respondent. The State Commission has rightly held so and dismissed the complaint filed by the complainant. The present appeal is therefore not maintainable under law and deserves to be dismissed under law.
6. Three main issues which arise for our consideration in the present case are:
6.1 Can the Insured, in the absence of any specific provision in the policy, withdraw previous declarations on the ground(s) of these having been made erroneously. The Insured have submitted following categories of declarations, which it claims to have been made erroneously, and hence want to be excluded from the balance sum assured available as on the date of incident.
(a) Certain sales, which the insured claims to be factory gate sales, and hence were not required to be declared under the said policy, but were declared erroneously.
(b) Certain purchases/consignments received by the insured, which the insured claims, were on CIF (Cost, Insurance & Freight) basis, where insurance has been paid by the supplier, hence the insured was not required to declare these under the policy in question, but were declared erroneously.
(c) Certain purchases, which were made during the previous financial year i.e. till 31.03.2008, and movement of these consignments started between 26.03.2008 to 31.03.2008 from various places, but arrived at insured's place during current financial year i.e. during April 2008, the insured contents these were required to be included in the declarations of previous year (2007-08) as movement of these started during the previous year, but were wrongly declared during the current financial year (2008-09) as these arrived at insured's place during April 2008 (2008-09).
(d) It is to be noted that insured asked for withdrawal of certain declarations falling in the above stated categories on 22.12.2008 only i.e. after a gap of about eight months, and more importantly, after the date of accident/loss (26.09.2008). The basic objective was to ensure a positive balance of sum assured as on 26.09.2008, as otherwise, according to the Insurance Company, as on the date of accident/loss (26.09.2008), the insured was having a negative balance of Rs.7,20,971/-, due to which the claim of Rs.15,92,727/-, the loss, was repudiated. The sum total of declarations which the insured wanted to be withdrawn amounted to more than Rs.1.00 Crore which if allowed will make the balance sum assured as on date of accident/loss positive and more than the amount claimed.
6.2 Secondly, insured/appellant has relied upon provisions of Section 2 (e), 4 (2) and explanation appended to it and Section 31 (3) of the Marine Insurance Act, 1963 stating that this section provides that an omission or erroneous declaration may be rectified even after loss has taken place, provided omission or declaration was made in good faith. Appellant contended that State Commission has wrongly interpreted Section 2 (e) and 4 (2) and its explanation conjoining each other; contending further that Sub-clause (II) of Section 4 makes it clear that any adventure analogous to marine time adventure is covered by the policy in the form of marine policy. The insured relied on judgement of Hon'ble Supreme Court in "New India Assurance Co. Ltd. Vs. Hira Lal Ramesh Chand and others and Ratan Chand Deep Chand and others" in appeal nos. 4306-4307 of 2003 decided on 13.06.2008. However, the Insurance Company contends that provisions of Marine Insurance Act have no application in the present case, these provisions apply to sea voyage only, Section 2 (e) defines the Marine perils, which is limited to perils in navigation of Sea, explanation in Section 4 (2) on which emphasis is given does not mean that it includes the inland transportation by road also, the loss during inland transit by road does not come under the ambit of above provisions of Marine Insurance Act, Section 31 is regarding floating policy by Ship or Ships, where names of the ship or ships are to be declared by subsequent declaration.
6.3 In this regard State Commission in its order has observed as follows:
"4. Second question is whether the opposite party guilty of deficiency in service by refusing to permit the complainant to withdraw previous declarations.
On this point the complainant has relied on the provisions of Marine Insurance Act 1963. We would summarily give details of the declarations which were sought to the be withdrawn.
vide Annexure 13 Complainant gave details of purchases made before 31.3.2008. They say that purchases of Rs.45,09,443 were erroneously declared under the current policy cover.
ii) vide Annexure 14 and 15 it gave the details of despatches which were said to be factory gate sales and buyers had taken insurance themselves, and there was no need for the complainant to declare these consignments amounting to Rs.69,52,368 and Rs 41,32,869 respectively.
iii) Annexure 16 it gave the details of imported consignments stating these were on CIF basis and insurance was taken by the sellers and they inadvertently made these declarations.
5. Thus learned counsel argues that if any of the above declarations are withdrawn, their claim will be covered.
6. The learned counsel for complainant has relied on the provisions of sec.2(e), 4(2) and Explanation appended to it and Sec.31(3) of the Marine Insurance Act 1963. The learned counsel for the opposite party has strongly contended that above provisions have no application in the present case. These provisions apply only to sea voyage. Learned counsel for complainant has cited two judgements AI/R 1971 Calcutta 494 Gaya Muzaffurpur Roadways Co. Vs fort Gloaster Industries Ltd. And II(2000) ACC 69 of Madras High Court in Ravichandran Transports Vs. United India Insurance Co. Ltd. We have our reservations on the principles laid down in these judgements as these judgements were not passed in 'consumer dispute' and facts of cases also differ. Sec.2(e) defines the "maritime perils" which is limited to perils in the navigation of sea. In our opinion the Explanation in Sec.4(2) on which great emphasis has been given by learned counsel, does not mean that it includes the inland transportation by road also- it states - "An adventure analogous to a marine adventure includes an adventure where any ship, goods, or other moveables are exposed to perils incidental to land or inland transit" In our opinion it should mean that perils which by chance can happpen to inland transit, such perils would also be covered in a marine policy by sea voyage. We are unable to accept that Explanation that it includes inland transit by road. Sec.31 is regarding floating policy by ship or ships where the names of ship or ships are to be declared by subsequent declarations. The declarations referred in Sec.31(3) means only the declarations as defined in Sec.31(2). Section 31(3) provides for declarations of consignments in order of dispatch or shipment, any erroneous declaration can be rectified. Complainant gets no help from this provision. Only declarations made erroneously in good faith can be rectified. It no where states that declarations for last six months may be withdrawn. We do not think all earlier declarations were made erroneously in good faith. So we are of the opinion that complainant cannot withdraw previous declared consignments with the aid of sec.31(3). The insurance policy does not contemplate any such provision where the consumed or utilised consignments could be withdrawan to cover subsequent claims.
7. Now if we go to the averments of complainant we would say that there is no evidence to prove the facts. As regards details given in Annexure-14 and Annexure-15, how after six months insurance company would believe that all these sales were factory gate sales. No evidence has been produced. Affidavits of buyers or evidence that they arranged insurance for them is not there. Annexure 16 produced by the complainant bears the details of consignment received on CIF basis. The complainant submits that they were not required to declare these consignments, which were done erroneously, as CIF includes insurance also which means insurance was paid by supplier. This contention cannot be accepted as complainant has produced certificates of suppliers which state that these consignments were covered under their insurance policy.
However, they charged the complainants for insurance separately. Now why should complainant pay for insurance to its suppliers again, when it has an open insurance policy in force. This shows that suppliers insurance was upto port only, as contended by the insurance company. Plea of the complainant that details as mentioned in Annexure-13 related to purchases of previous year, but were wrongly declared in the current policy. We are not inclined to accept this contention even. These consignments started between 26.3.08 to 31.3.08 from places like Faridabad, Baroda, Daman, Malaysia and arrived in the month of April 2008. The previous policy expired on 31.3.08. They could not have declared under previous policy, as consignments arrived in April 2008. Complainant wanted to safeguard these consignments till their arrival. New policy was effective w.e.f. 1.4.08 so these were included in April 08 declaration.
8. In view of the above discussion the complainant cannot succeed on this count also. We hold that provisions of Marine Insurance Act 1963 do not apply here. Complainant has not proved facts of the complaint by any evidence with regard to details given in Annexure 13, 14, 15 and 16. Conditions of policy do not contain any provision which enables the complainant to withdraw previous declarations. There is no deficiency in service on part of the insurance company. We accept the contention of the insurance company that amount already declared is treated as consumed and utilised. Exclusion of certain despatches as detailed in Art 13, 14, 15, 16 cannot be considered after six months after occurrence of claim.
Hence, the complaint fails, is hereby dismissed. We leave the parties to bear their own costs.
6.4 Relevant provisions of the Marine Insurance Act, 1963 are reproduced below:
"2. (a) "contract of marine insurance" means a contract of marine insured as defined by Sec.3 xxx 2(d) "marine adventure" includes any adventure where-
(i) any insurable property is exposed to maritime perils;
(ii) the earnings or acquisition of any freight, passage money, commission, profit or other pecuniary benefit, or the security for any advances, loans, or disbursements is endangered by the exposure of insurable property to maritime perils;
(iii) any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property by reason of maritime perils;
2(e) "maritime perils" means the perils consequent on, or incidental to, the navigation of the sea, that is to say, perils of the seas, fire, war perils, pirates, rovers, thieves, captures, seizures, restraints and detainments of princes and people, jettisons, barratry and any other perils which are either of the like kind or may be designated by the policy xxx
3. Marine insurance defined- A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses incidental to marine adventure.
4. Mixed sea and land risks-(1) A contract of marine insurance may, by its express terms, or by usage of trade, be extended so as to protect the assured against losses on inland waters or on any land risk which may be incidental to any sea voyage.
(2) Where a ship in course of building, or the launch of a ship, or any adventure analogous to a marine adventure, is covered by a policy in the form of a marine policy, the provisions of this Act, in so far as applicable, shall apply thereto, but, except as by this section provided, nothing in this Act shall alter or affect any rule of law applicable to any contract of insurance other than a contract of marine insurance as by this Act defined.
Explanantion-"An adventure analogous to a marine adventure" includes an adventure where any ship, goods or other movables are exposed to perils incidental to local or inland transit.
xxx
31. Floating policy by ship or ships-(1) A floating policy is a policy which describes the insurance in general terms, and leaves the name or names of the ship or ships and other particulars to be defined by subsequent declaration.
(2) The subsequent declaration or declarations may be made by endorsement on the policy, or in other customary manner.
(3) Unless the policy otherwise provides, the declarations must be made in the order of despatch or shipment. They must, in the case of goods, comprise all consignments within the terms of the policy, and the value of the goods or other property must be honestly stated, but an omission or erroneous declaration may be rectified even after loss or arrival, provided the omission or declaration was made in good faith.
(4) Unless the policy otherwise provides, where a declaration of value is not made until after notice of loss or arrival, the policy must be treated as an unvalued policy as regards the subject-matter of that declaration."
6.5 While we are of the considered view that in the absence of any specific bar in the policy to withdraw any declaration erroneously made, the insured/Appellant is entitled to withdraw such declaration, but such withdrawals have to be made within a reasonable time frame. In the present case, as such withdrawals were sought after a long gap, i.e. during December 2008 only, that too only after knowing about the negative balance as on the date of loss and with the obvious objective of bringing the balance as on date of loss to a positive figure to cover the loss amount/claim, we feel that Insurance Company was justified in declining such withdrawals. Request for withdrawals pertaining to dispatches made in March, 2008 was delayed by more than 8 months during the currency of a 12 month policy, hence does not seem to be justified even if these were erroneously made. Same holds true for request for withdrawal of declaration pertaining to factory gate sales and CIF purchases which were also sought to be withdrawn only after coming to know about the negative balance as on the date of loss. Had the issue of negative balance as on date of loss and consequent repudiation of claim not arisen, possibly the insured/Appellant may not have made any such request for withdrawal during the currency of the policy, even if these were erroneously made. Possibly, in the previous years, Appellant has not done any such withdrawals on similar grounds. Had the insured made such request for withdrawal of so called erroneously made withdrawals before the date of loss, we could have perhaps considered such requests, if found admissible on merits. Hence, we do not consider it necessary to go into merits, whether such declaration which were factory gate sales or CIF purchase or pertained to earlier years, were indeed erroneously made, as these issues would require consideration based on evidence. State Commission has, on merits also, stated that there is no sufficient evidence to establish the contentions of insured in this regard. As regards start and end time of risks, we do see merit in the contention of insured that risk start with the start of consignment from its origin and ends with its arrival at destination. Hence, in a situation where insurance policy is issued on financial year basis, if a consignment starts on any date in the previous financial year but ends in the next financial year, the insured is justified in covering it in the previous financial year as it ought to obtain insurance on or before the start of consignment. Hence, even if there is no valid policy for subsequent year, the risk will remain covered till the consignment reaches its destination, even if it happens to be on a date after the end of financial year. Hence, insured's contention to exclude all such consignments which started in the previous year from the current year appears justified, but we could have considered these on merits, if the insured had withdrawn these at least before the date of loss.
6.6 A careful reading of the provision of Marine Insurance Act cited show that these provisions are applicable to sea voyage and to voyage by land if these are incidental to sea voyage. Maritime perils also include perils as may be designated by the policy. But if we accept contentions of Insurance Company about non applicability of Marine Insurance Act, it would mean that a Marine Cargo Policy should cover only the sea voyage and voyage by land incidental to sea voyage. Hence, consignments transported fully by land should not be covered under a Marine Cargo Policy but under a general insurance policy. But it is not the case of Insurance Company that voyage by land alone is not covered under the said Marine Cargo Policy. If Insurance Company is covering a fully land voyage/consignment under a Marine Cargo Policy, the insured is justified in contending that provisions of Marine Insurance Act are applicable to such only by land consignments too, and we are in agreement with such contentions.
6.7 Third contention of the insured is that the policy envisage enhancement of sum assured from time to time during the policy period (i.e. 01.04.2008 to 31.03.2009) as per need of the business. The initial sum assured as on 01.04.2008 was Rs.40 Crores, it was got enhanced to Rs.80 Crores as on the date of accident/loss and further by Rs.40 Crores to Rs.120 Crores on 26.09.2008 (i.e. after one day of date of accident/loss itself). Again on 19.11.2008, the sum assured was enhanced to Rs.160 Crores and as on 25.03.2009, the sum assured was enhanced by Rs.2 crores. The claim has been repudiated on the grounds that as on 25.09.2008 i.e. a day prior to the date of accident/loss (26.09.2008), the sum assured was negative. The contention of the insured is that once the Insurance Company accepted the premium and has enhanced/increased the sum insured even after the date of loss dated 26.09.2008 and has accepted the declaration and issued certificates treating the policy valid and subsisting, then Insurance Company cannot repudiate the claim on the ground that there was a negative balance on the date of loss. The policy in question was valid for one year i.e. from 01.04.2008 to 31.03.2009, unless the sum insured is previously exhausted by declaration. The moment sum insured is exhausted, the policy comes to an end. Had it been so, then, it was not within the authority of the Insurance Company to accept the premium for enhancement and issue endorsements to that effect, which means the policy remained in force till 31.03.2009. It is also contended by the Insured that Insurance Company never informed them about the negative sum insured, either on any date prior to the date of loss or on the date of loss or on 29.09.2008, while accepting a cheque dated 27.09.2008 for enhancement of the sum assured.
6.8 The Insurance Company, on the other hand has contended that balance sum assured on the date of loss was negative, subsequent enhancement of sum assured after the date of loss does not entitle the insured to claim of loss, such enhanced sum will be effective from the date of such enhancement only.
6.9 We have carefully gone through the policy document. The policy in question, as the title shows, is a Marine Cargo (Open Policy). Policy issued on 31.03.2008 with sum insured as Rs.40 Crores. The policy covers the defined items/risks "from warehouse to warehouse basis". The policy also covers an additional intermediatery storage period of 90 days at Transporter/Airline/Railway/Courier/Postal Godown over and above the scheduled time allowed in the normal policy to cover goods which remain uncleared. A total premium amount of Rs.44,944/- for this policy was received by the Insurance Company vide receipts dated 31.03.2008 and the policy period was from 01.04.2008 to 31.03.2009. Policy covers all risks of inland transit, rail or road. The policy states as follows "The Insurance is to remain in force for a period of 12 months i.e. 01.04.2008 to 31.03.2009 unless the sum insured is previously exhausted by declaration" Hence, going by the strict interpretation of the above stated clause, if on any day during the currency of 12 months validity of the policy, the sum insured is exhausted by declaration, the policy does not remain in force i.e. it comes to an end. Hence, to cover any risk thereafter, there has to be a fresh policy. Now if the insurer chooses to accept premium for enhancing the sum insured despite such a policy not remaining in force/having ended, in the absence of any specific mention in the endorsement issued by the Insurance Company, it is to be presumed that such enhancement is w.e.f the date when it fell below the required amount. If the Insurance Company's intention was not to cover the risk from the period sum insured became negative/zero till the date of its enhancement, it ought to have stated so specifically in the policy/endorsement for enhancement. Not stating so and accepting premium for such enhancement, knowing fully well that sum insured have already become zero/negative on a prior date leading to ending of the policy, amounts to reviving the policy w.e.f. the date the sum insured becomes zero/negative and accepting such premium w.e.f. such previous date. During the hearing, when a specific query was put to the Learned Counsel of Respondent/Insurance Company whether the Insurance policy in question ended/did not remain in force the day sum insured become zero/negative, he answered in the negative notwithstanding the specific provision in the policy cited above. Further, when asked whether accepting premium and issuing endorsement for the same on 27.09.2008 amounted to issuing a fresh policy, he answered in the negative, submitting further that the policy in question, with the acceptance of premium for enhancement of sum insured on 27.09.2008, will remain valid till 31.03.2009 only. It was admitted that in the policy document or in the endorsement dated 27.09.2008, there is no mention that for the period when sum insured becomes zero/negative till the next premium for enhancement of sum insured is accepted, risk is not covered. It is to be noted that as per policy, the declaration is to be furnished within 15 days from the date of shipment in case of imports or arrival of ship whichever is earlier. Further, it was admitted by both sides that as per prevailing practice, insurer was filing declaration on monthly basis only i.e. after the close of each month. Hence, the accounting of declaration/its consideration was to be done on monthly basis. The practice was not unilateral, it was obviously with the consent/acceptance of the Insurance Company.
6.10 It is also to be noted that it is not that as if this was first ever request for enhancement of premium during the currency of the policy and as if it was only to take care of negative balance on the date of loss. Even earlier, during the currency of policy, the appellant has been seeking enhancement of sum assured limit. The first endorsement during the currency of the policy in question was issued on 24.07.2008, enhancing the sum insured from Rs.40 crores to Rs.80 crores and the endorsement states the effective date as 23.07.2008, and the payment receipt is dated 23.07.2008. Second request for enhancement from Rs.80 crores to Rs.120 crores is dated 29.09.2008 vide which a cheque dated 27.09.2008 was sent towards premium. The requisite endorsement in this regard, enhancing the sum insured from Rs.80 crore to Rs.120 crore i.e. by Rs.40 crore, was issued on 29.09.2008, with effective date as 29.09.2008. Hence, it is the contention of the Insurance Company that from 26.09.2008 i.e. date of loss till 28.09.2008, risk was not covered, as the sum insured on 25.09.2008 i.e. day prior to the date of loss was negative, and hence policy was not in force. There was another enhancement of sum insured by Rs.40 crore, leading to total sum insured to Rs.160 crore w.e.f 19.11.2008 and another enhancement by Rs.2 crore, leading to total sum insured to Rs.162 crore w.e.f. 25.03.2009.
7. Considering that Insurance Company have chosen to accept premium for enhancement of sum insured under a policy, which as per its specific terms, stood not in force on the date sum insured became zero/negative, and there being no provision in the policy to revive an expired policy, and there being no specific mention in the endorsement dated 29.09.2008 that risk is not covered from the period 25.09.2008 to 28.09.2008, relying on judgement of Hon'ble Supreme Court in Canara Bank Vs. United India Insurance Co. Ltd. & Ors. (2020) 3 SCC 455, wherein it was held that 'Insurance Policy must be read holistically so as to give effect to reasonable expectations of all the parties including the insured and the beneficiaries- it must be interpreted in a commercially sensible manner- coverage clauses to be read broadly, and ambiguity, if any, to be resolved in favour of insured-exclusions to be read narrowly', we hold that with the acceptance of premium for enhancement of sum insured on 29.09.2008, such sum insured is deemed to have been enhanced w.e.f. the date it became zero/negative. Hence, as on the date of loss, the sum insured is to be treated as having been enhanced. Hence, on this count itself, the action of Insurance Company in repudiating the claim on the ground that sum insured on the date of loss was negative, cannot be sustained. Hence, we hold that on this issue, State Commission went wrong in observing/holding that sum assured on the date of loss was zero/negative and that Insurance Company was justified in repudiating the claim on this ground. Hence, even if Insurer cannot withdraw the declarations made earlier, on account of reasons mentioned in preceding paras, even if made erroneously, the Insurer will become entitled to the claim of loss.
8. In view of the foregoing, the FA filed by the appellant/complainant is allowed, repudiation letter dated 30.03.2009 of the Insurance Company and the impugned order dated 23.05.2012 of the State Commission are set aside. Complaint is allowed with following directions:
(i) OP Insurance Company to pay the insurance claim of Rs.15,92,727/- to the Complainant/Appellant within 45 days of date of this order along with interest @9% p.a. w.e.f. date of complaint till the date of actual payment, failing which, amount payable at the expiry of 45 days of this order, shall carry interest @12% p.a. w.e.f expiry of 45 days till the date of actual payment.
(ii) Considering that the appellant/complainant has been contesting this appeal for the last about 12 years, OPs shall also pay litigation cost of Rs.3 lacs to the Complainant, which should also be paid within 45 days of date of this order, failing which, it will carry interest @12% p.a.
(iii) Liability of OP-1 & OP-2, which are different offices of the same Insurance Company viz. New India Insurance Company, shall be joint and severally.
9. The pending IAs in the case, if any, also stand disposed off.
.........................J A. P. SAHI PRESIDENT ................................................ DR. INDER JIT SINGH MEMBER