National Consumer Disputes Redressal
M/S.Maya Appliances Pvt. Ltd vs United India Insurance Company Ltd. on 6 November, 2006
NCDRC NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI ORIGINAL PETITION NO. 62 OF 1998 M/s.Maya Appliances Pvt. Ltd. Rep. by its Director T.T. Varadarajan No.8-B Boat Club Road 1 Avenue CHENNAI 600 028. Complainant Versus United India Insurance Company Ltd. Rep. by its Director & General Manager 24 Whites Road CHENNAI 600 014. Opposite Party BEFORE : HONBLE MR. JUSTICE M.B. SHAH, PRESIDENT MRS. RAJYALAKSHMI RAO, MEMBER For the Complainant : Mr. Krishnamani, Sr. Advocate, Ms. Aparna Mukherjee Vasu, Ms.Pooja Dhar and Mr.Joseph Pookkatt, Advocates For the Opp. Party : Mr.A.K. Raina, Advocate 06.11.2006 O R D E R
M.B. SHAH, J., PRESIDENT It is the case of the complainant that it is a small-scale manufacturer of mixies, coffee-makers and other home appliances. On 23.9.1996, the complainant insured its plant, machinery, testing equipment, tools, accessories, stocks of raw materials, work in process, finished goods and office equipment in the factory with the opp.party insurance company for a sum of Rs.1,70,00,000/- against the risk of fire by paying a premium of Rs.35,950/-.
Unfortunately, on 25.12.1996, a major fire broke out in the complainants factory which caused extensive damage. Immediately the insurance company was informed. Within one or two days, joint surveyors were appointed by the insurance company. It is the say of the complainant that the complainant has rendered all the assistance to the surveyors so that the claim could be settled at the earliest.
Because of that, on 31.12.1996, the surveyor submitted an exhaustive list of articles which were damaged/destroyed due to fire. Despite getting this report, final valuation was not worked out with the said speed. The complainant was required to request/pray for some interim relief. On that basis, the insurance company paid a sum of Rs.50,00,000/- to the complainant on 20.3.1997.
On receipt of the said amount on 29.3.1997, the complainant wrote a letter to the insurance company thanking them for releasing the interim relief towards the claim for a sum of Rs.1,25,00,000/- against the stock. However, it was mentioned that in all total claim was for a sum of Rs.1,49,00,000/-. In that letter, it was specifically mentioned that three months have elapsed after the fire and the complainant was expecting full payment because most of the suppliers of the complainant were insisting for payment and they were not prepared to extend the credit facility for an unlimited period. It was also pointed out that the complainant was required to pay penal interest on overdue payments to the suppliers. The complainant, therefore, requested the insurance company to settle the claim in the first week of April 1997. Despite the letter, there was no response. Thereafter, the complainant wrote repeated letters and the learned counsel, Ms.Aparna Mukherjee, who handled the matter at Chennai states that as many as 20 reminders were sent to the officers of the insurance company and most of the reminders were sent through her.
Thereafter, the complainant also pointed out that they were entitled to have reimbursement of a sum of Rs.9,18,647.33 which was the MODVAT as per the certificate issued by the Central Excise Authorities.
It is the say of the complainant that to their surprise, in May 1997, the surveyors raised belated queries which revealed that they had not bothered to pursue the various records furnished to them in December 1996 and also the item-wise survey prepared by them with regard to the items which were damaged or were destroyed due to fire. Again, many more letters were issued and thereafter in August 1997 the surveyor virtually informed the complainant that unless it was consented to reduce the claim amount in writing, no settlement could be finalized. Faced with no other option, the complainant agreed to accept a sum of Rs.1,25,04,625/- for the loss of raw materials, stock in process and finished goods and a sum of Rs.12,06,503/- for the loss of furniture, fixtures, computers, machineries, tools etc. They also claimed MODVAT sum of Rs.9,18,647/-.
Finally, on 16.10.1997 the insurance company paid a sum of Rs.77,71,960/-. After receiving the said amount, this complaint is filed for recovery of the balance amount.
In the said complaint, no doubt, the claim is for a sum of Rs.13,57,816/- with interest at the rate of 18% p.a. and also interest at the rate of 18% p.a. for delay in releasing a sum of Rs.77,71,960/-. In addition, the complainant has claimed a compensation of Rs.25,75,650/- for the loss caused to the complainants business etc. At the time of hearing of this matter, learned counsel, Ms.Aparna Mukherjee, appearing on behalf of the complainant confined the claim to the MODVAT amount and interest at the rate of 18% for delayed payment. She submitted that there was no justifiable ground for not releasing the amount of Rs.77,71,960/- in the month of March 1997 because the surveyors visited the factory premises immediately and noted down the loss suffered by the complainant. The only thing which was required to be done was its valuation. They could have done it easily. She, therefore, submits that for this delay the complainant has suffered immensely because the creditors or the suppliers were pressing for the payment and the complainant was required to make an alternative arrangement for paying the same by taking loan with interest rate which was more than 18% p.a. She, therefore, submits that on the basis of the law laid down by the Apex Court, at the most, insurance company can be given 4 months time for settlement. In any case, she submitted that this was the law on the basis of various judgements in England and in this country. She further submitted that now the said law is crystallized by passing The Insurance Regulatory and Development Authority (Protection of Policyholders Interests) Regulations, 2002. Regulation 9 provides the time limit during which the claim of the insured is to be settled. It gives step by step procedure and the maximum time-limit does not exceed 5-6 months as per the said procedure. She, therefore, submits that for the delay in making payment, the insured should be adequately compensated.
At the outset, we would state that Clauses (1) to (4) of Regulation 9 prescribe the time limit during which the claim is required to be processed and finalized.
Thereafter, Clause (5) provides that after receipt of the survey report or the additional survey report, the insurer is required to settle the amount within a period of 30 days. That has not been done in the present case. Further, Clause 6 of Regulation 9 specifically provides that if there is delay in payment, the insurance company shall pay the same with interest which is 2% above the bank rate. The relevant Clause (6) is as under :
(6) Upon acceptance of an offer of settlement as stated in sub-regulation (5) by the insured, the payment of the amount due shall be made within seven days from the date of acceptance of the offer by the insured.
In the case of delay in the payment, the insurer shall be liable to pay interest at a rate which is 2 per cent above the bank rate prevalent at the beginning of the financial year in which the claim is reviewed by it.
On facts, for the MODVAT amount of Rs.9,18,647/-, the complainant has relied upon the certificate dated 18.7.2000. The complainant has also pointed out the same in the year 1997 to the insurance company by its letter dated 30.12.1997.
The authenticity of the said certificate is not disputed. However, learned counsel Mr.Raina, appearing for the insurance company submits that the insurance company required the said certificate in the year 1996, and, as the same was not produced, the payment of the amount was deferred. He, therefore, submits that for the delay, no interest should be awarded.
In our view, the complainant has submitted all the relevant records to the surveyor. The MODVAT facility would be accounted with the Central Excise, and, for this purpose, attention of the insurance company was drawn at the earliest, and, in any case, by writing a letter on 31st December 1997. Undisputedly, this amount remained with the insurance company. Till today, the insurance company has not bothered to pay the same to the complainant.
Hence, for the said default/deficiency compensation for the said delay in paying the amount, is required to be given. It is to be stated that the complainant was a small-scale unit which started production and suffered a heavy loss because of the accidental fire for which the complainant had taken the insurance coverage. In such eventuality if the claim is not settled at the earliest, a small-scale unit would be crippled and cannot restart its business within a reasonable time. Not only that, the persons in the Management would be pressurized by the creditors and suppliers of the raw materials to pay the amount due. It is the say of the complainant that in such a situation, compensation should be assessed by keeping in mind the yardstick of interest at the rate of 18% p.a. which was prevailing at the relevant time.
Considering the aforesaid submissions, in our view, the complainant is entitled to recover Rs.9,18,647/- with interest at the rate of 12% from 1.7.1997 (i.e. after 6 months from the date of fire).
As far as the delay in making the payment of Rs.77,71,960/- is concerned, no doubt, there is delay of 4 to 5 months in making the said payment, i.e., the amount was paid to the complainant on 17.10.1997, however, in our opinion, it would not be appropriate to give any direction for making payment of interest on the said sum because the insurance company paid the same before the filing of the complainant in the consumer fora.
In the result, the complaint is partly allowed. The insurance company is directed to pay a sum of Rs.9,18,647/- with interest at the rate of 12% from 1.7.1997 - this interest is a reasonable yardstick for measuring compensation - and also to pay Rs.25,000/- as cost of litigation, within a period of 6 weeks from today.
The complaint stands disposed of accordingly.
Sd/-
.J. ( M.B. SHAH) PRESIDENT Sd/-
(RAJYALAKSHMI RAO) MEMBER /sra/ 20 / Court-1