National Consumer Disputes Redressal
M/S. Pescados Sebel Exports Pvt. Ltd. vs M/S. United India Insurance Co. Ltd. on 23 May, 2019
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 126 OF 2010 1. M/S. PESCADOS SEBEL EXPORTS PVT. LTD. Represented by Its Director Mr. P.V. Viju.,
18/1555, Pallichal Road, Cochin, Ernakulam Kerala - 682 005. ...........Complainant(s) Versus 1. M/S. UNITED INDIA INSURANCE CO. LTD. Rep. by the Branch Manager,
Branch Off. III,
'Sharanya',
Ground Floor,
Hospital Road Ernakulam Kerala - 682 011 ...........Opp.Party(s)
BEFORE: HON'BLE MR. PREM NARAIN,PRESIDING MEMBER
For the Complainant : Mr. Alias M. Cherian, Advocate For the Opp.Party : Mr. Maibam N. Singh , Advocate
Dated : 23 May 2019 ORDER
This Consumer Complaint has been filed by the complainant M/s. Pescados Sebel Exports Private Ltd. against the Opposite Party, M/s. United India Insurance Company Ltd.
2. Brief facts of the case are that the complainant is a Company engaged in export of Frozen Seafood. The complainant has a factory, Ice Plant, Cold Storage, Freezing Unit at Thondi in Ramanad District in Tamil Nadu. The complainant has taken insurance coverage for the factory, stock in the cold storage, machineries etc. from the opposite party/ Insurance Company. The opposite party is giving the insurance coverage for the complainant right from the purchase of the factory in the year 2002. On 26.12.2004 and in the succeeding days, the stock in the cold storage of the complainant was damaged allegedly due to bursting of pipe and overflowing of condenser water tank of the cold storage. The entire stock worth Rs.2.26 Crores was damaged beyond consumption and use. The matter was informed to the Insurance Company and they deputed their surveyors. The surveyors inspected the factory, verified the records and conducted local enquiries regarding the cause of damage, quantity of goods and the value of damaged goods. Since the goods were of perishable nature and since it was damaged so badly, as per the direction of the local health department of the government of Tamil Nadu, the goods were taken out of the cold storage and were buried. The burial of the goods was conducted in the presence of the surveyors and health authorities. The complainant submitted claim for the insurance coverage. The surveyors found and reported that the goods were damaged beyond consumption, the complainant had the quantity of stock as claimed by the complainant and it was also found that the value of the goods was at Rs.2.26 crores. The respondent was reluctant to take any decision on the claim of the complainant for nearly 2 years. Hence the complainant approached the Hon'ble High Court of Kerala, for a direction to the respondent to take a decision on the insurance claim. When the opposite party received notice from the Hon'ble High Court of Kerala, the opposite party repudiated the claim. The opposite party repudiated the insurance claim taking a too technical stand that the reason for damage of the goods is change in temperature in the cold storage which is an excluded peril under the policy. Since the writ petition was already pending before the Hon'ble High Court of Kerala in the matter, the complainant amended the writ petition and challenged the repudiation of the insurance claim in the writ petition. When the writ petition came up for hearing, the complainant sought permission of the Hon'ble High Court of Kerala to withdraw the writ petition and challenge the repudiation of the claim before this Commission. The Hon'ble High Court permitted the complainant to withdraw the writ petition with liberty to challenge the repudiation of the insurance claim before the appropriate forum.
3. Aggrieved by the repudiation letter dated 10.10.2006 and on the basis of liberty granted by the Hon'ble High Court of Kerala, the present complaint has been filed with the following prayers:-
"1. To pass an order in favour of the complainant directing the respondent to pay an amount of Rs.2,25,99,450 with 18% interest from 26.12.2004 till the date of realization being the insurance claim amount for the loss of the goods sustained by the complainant.
2. To pass an order in favour of the complainant directing the respondent to pay an amount of Rs.10,00,000/- as compensation for mental agony and pain suffered by the complainant for the deficiency of the service on the part of the respondent.
3. To grant such other reliefs which are deemed fit and proper in the facts and circumstances of this case.
4. To grant the cost of the complainant for these proceedings from the respondent."
4. The complaint has been resisted by the opposite party/insurance company by filing the written statement. It has been contended that the peril of storm tempest, inundation etc. resulting from earthquake is not covered. As tsunami is a result of earthquake, any loss resulting from tsunami is not covered. The case of the complainant is covered under Exclusion Clause Nos.4 & 6 of the policy as well as under the General Condition No.8. It has been stated that Exclusion Clause No.6 is clearly applicable in the present case. The damage to the stock has occurred due to change of temperature in the cold storage and therefore, the present case is not covered as the temperature was not maintained for about 4-5 days and nobody was there to look after the plant. The points raised in the repudiation letter were also reiterated which include the following:-
"On 06.01.2005, you reported to this office, that the stock got damaged due to seepage of water inside the cold storage by the bursting of a pipe underneath the cold storage and the goods have became rotten.
As per the annual report ending on 31.03.2003, you had taken over all assets and liabilities of M/s. Oceanic Products w.e.f. 10.4.2002 including inventory stocks worth Rs.1,05,37,500.
You were declaring your stock position to the bank on a monthly basis. Copies of declaration made available from the month of June'02 indicate the declaration value on a lumpsum basis up to September'02 w.e.f. October'02 separate values are declared for stocks in two different locations (Cochin & Thondi).
In July'03, the entire stock is seen declared at Cochin only, Further in February'04 the entire stock is declared at Thondi. The stock transfers are not supported by adequate documentation and as such the existence of entire stock at Thondi at the time of loss is not established.
The unit rates for stocks are seen without any change from June'02 till the time of loss in Dec 2005. Uniform basis of valuation is adopted by you, during a long period of about 30 months.
The shelf life of frozen marine products varies from products to products (9 to 12 months under optimum storage conditions) whereas the affected marine products were being reportedly stored for more than 24 months and as such the stocks were not worthy of exports and did not carry any commercial/market value at the time of loss."
5. Both the parties led their evidence by way of their affidavits.
6. Heard the learned counsel for the parties and perused the record. Learned counsel for the complainant stated that the plant was not closed, however, there was water inside the cold storage through bursting of pipe and accordingly the stock was damaged. Even the surveyor has affirmed 5mm of water inside the cold storage. Learned counsel stated that the claim was filed on 05.01.2005, however, the Insurance Company did not take any decision even after 10 months. The complainant approached the Hon'ble High Court of Kerala for issuing directions to the Insurance Company for taking a decision. Meanwhile, the Insurance Company issued repudiation letter dated 10.10.2006. Vide order dated 11.01.2010 Hon'ble High Court of Kerala dismissed the writ petition as withdrawn with liberty to complainant to challenge the repudiation at the appropriate forum. Hence the present complaint has been filed in the year 2010. This Commission has already condoned the delay in filing the present complaint vide its order dated 22.2.2011. Learned counsel argued that even the surveyor has not stated with certainty that the AC plant was closed for some time, which would be clear from the following observation of the surveyor:-
"After considering all above factors, 'without prejudice' we opine that the cause of Loss/damage sustained to the insured's Frozen Sea food kept in their cold storage could be reasonably attributed to stoppage of AC plant for several hours (probably for a duration of ground 6 days) resulting in change of temperature within the cold storage from minus to plus and this in turn leading to spoilage of the frozen contents stored therein."
7. The surveyor in his report has clearly assessed loss of Rs.2,25,89,450/-. Management of the complainant had informed the bank on 29.12.2004 with respect to the position in this regard. Before disposing the rotten stock, the bank was also informed on 01.01.2005. It was further argued by the learned counsel that the temperature recorder has continuously worked even when all staff had left the premises. As the paper sheet was not changed, it has recorded minimum and maximum temperatures on the same sheet six times for six days. Hence it is certain that the Air-conditioning had not stopped. It was stated by the learned counsel that surveyor has observed the following in this regard:-
"As the insured, he could reach the premises only on 1-1-05 after the Tsunami on 26-12-04, and next visit to the plant was only on 5-1-05 when visited along with Bank Manager. As already stated earlier, it is very clear from the insured's letter addressed to the Dist. Collector, Bank officials etc that the stock had been found damaged even during their first visit to the plant on 1-1-2005 itself. Inspite of the above, the insured switched on the plant on 1-1-05 and kept it in working till the visit of preliminary surveyor on 11-1-05, with the record sheet fixed on the reorder only on 5-1-05, during their second visit.
Therefore, it is clear that the insured have re-started the AC plant immediately on return to the factory on 1-1-05 and the recorder sheet was made operational during their visit on 5-1-05. The 6 recordings noted on the sheet represents the recordings from 5-1-05 to 11-1-05. The record sheets of 26-12-04 and the sheets from 16-12-04 to 24-12-04 are enclosed with this report as Annexure-XVI. In our opinion, the above exercise was carried out by the insured, in order to establish that the plant was not stopped after the Tsunami on 26-12-04, though the insured has observed the stock in damaged/perished condition during their first visit to the plant on 1-1-05. Inspite of the above they switched on the plant on 1-1-05 and kept it in working condition till the visit of the preliminary surveyor on 11-1-05 and even thereafter. This could be seen from the electricity bill of the insured for January 2005."
8. It was further argued by the learned counsel for the complainant that in the present case the surveyor has submitted his final report roughly after two years of the incident, whereas IRDA guidelines are very clear that the surveyor should submit his report within six months. Thus, clearly there is a deficiency of service on the part of the Insurance Company.
9. On the other hand, learned counsel for the opposite party stated that the stock was 21 month to 30 months old as would be clear from the observations of the surveyor:-
Brief Note The insured's company was established during February 2002.
The first and last purchases of the Trade items are on 3-6-02 & 17-7-03 respectively.
The first export was on 4-7-02 and the last export date was on 27-3-03. Totally there had been 17 Nos. of exports worth around Rs.2 ½ Crores approximately.
Based on the inspection of the records it is noted that the insured was holding a stock from June 2002 to March 2003 (i.e. the age of stock is 21 months to 30 months) During discussions with the insured we enquired about the reasons for holding the stock such a long time without effecting exports, we were informed that they were facing financial problems as their bank did not sanction the funds for exports, inspite of repeated assurance from them. A letter submitted by the insured stating the reason for stock holding for a long period is enclosed.
Though, almost 85% stock of sea food/meat product had been already removed from the cold storage for destruction, we scrutinized the preliminary survey report and also worked out the storage capacity of the cold storage volumetrically after considering the size of cartons, number of cartons etc. stored inside the cold storage, based on which we are of the opinion that the above stock could have been kept in the cold storage at the time of the occurrence."
10. The learned counsel mentioned that this stock was of no use as it could not have been exported and it was already a dead stock. The learned counsel stated that the same has been confirmed by the letter dated 24.2.2006 addressed to Insurance Co. Ltd. from The Marine Products Export Development Authority, where the following has been clearly mentioned:-
"(b) The shelf life of frozen marine products varies from product to products. (9 to 12 months under optimum storage conditions)"
11. Learned counsel stated that the story put by the complainant is that the water came in the cold storage from bursting of pipe. The complainant clearly knew that his case cannot be covered under any of the perils against which the policy has been taken, therefore, the complainant fabricated the story of damage of stocks due to leakage of water inside the cold storage by bursting of pipe. The surveyor has clearly observed in his report that the story of leakage of water inside the cold storage due to bursting of pipe is not true.
12. Learned counsel for the Insurance Company further stated that in the temperature recorder inspite of 16 recordings only 6 recordings were found. Learned counsel for the Insurance Company further argued that the surveyor has analysed the electricity bills for the relevant periods and has observed that the analysis of electricity bill does not prove that the AC plant was in operation. It was stated that upto 27.12.2004 the consumption of electricity was 22000 unit whereas upto 19.01.2005 the consumption was only 4000 unit. This clearly speaks that the plant was not running. As no log book was maintained for AC plant, the actual position of running of AC plant could not be known.
13. I have given a thoughtful consideration to the arguments advanced by the learned counsel for the parties and examined the material on record. Though there are many grounds for repudiation of the claim given in the repudiation letter dated 10.10.2006, but the main point of repudiation is the Exclusion Clause wherein it is mentioned that loss of stock due to change of temperature in the cold storage is not covered. First of all, it is to be seen whether loss/damage due to tsunami is covered under the policy. Clearly peril of cyclone, tempest, flood, inundation etc. are covered if not caused by earthquake. Clearly, the tsunami is caused by the earthquake inside the sea, therefore, clearly any damage due to tsunami is not covered under the present policy. The next question comes that due to warning and fear of tsunami and due to instructions from the local administration, the plant was closed and all the employees and the officers of the company left the place from 27.12.2004 till 01.01.2005 whether in such situation the Insurance Company is liable to pay the claim of damaged stocks. There was nobody inside the plant to operate the plant. The damage was first known on 01.01.2005. Thus, it is clear that the damage has happened during the period of 27.12.2004 to 01.01.2005. Damage due to desertion of the employees is clearly not covered under the policy. It is also a question to be considered if the plant can run without any employee for five days why can't it be run without employee at other occasions.
14. The surveyor has reported that the claim filed by the complainant is on the basis of leakage of water inside the cold storage due to bursting of pipe. It is seen that the peril of 'bursting /or over flowing of water tanks, apparatus and pipes' is covered under the policy. However, the surveyor has critically analysed this peril and has found that this peril is not attracted in the present case. In fact the surveyor has observed the following:-
"CAUSE OF LOSS/DAMAGE:
The insured, as per claim form occurrence report and a letter dated 1-3-05 stated mainly two reasons, which has resulted in damages to the stocks of Frozen Sea food. They are:-
(a) As per the claim form submitted by the insured dated 5-1-2005, the stock was damaged due to seepage of water into the cold storage by bursting of a pipe and overflowing in the cooling condenser water tank situated at the side of cold storage. It was reported by the Directors that 4 Nos pipes connected to the old cooling condenser tank might have burst due to raise of water and resultant pressure created within the tank. This condenser tank and pipes are the components of the old Refrigeration system. A tube well was connected to the cooling condenser tank that was in use till 2003, prior to installation of the present plant. Four pipelines were running to the bottom portion of the cold storage, which was used for the earlier plant. The water was not coming out of the tube well earlier. The summarized that due to the pressure in the sea, the water entered into the tube well with great pressure and in turn forced the water to come out with great pressure leading to the water level being raised in the tank with full force, which in turn had entered into the pipes running at the bottom of the cold storage, resulting in the pipe being burst and damaged the stock. These pipes had been already closed by the authorities of the firm on completion of preliminary survey by surveyor Sri C.A. Kurian on 11th & 12th January 2005.
In order to establish the above, the closed end of these pipes were broke open and the collection tank was filled with water. As there were no seepages observed into the cold storage even after opening the end of the pipes, the nearby room (pump house situated at the rear wall of the cold storage) was also filled with water upto a height of 1.5' (just above the level of floor of the cold storage). Even then no seepages of water were noticed inside the cold storage room floor or from the pipes and also these said pipes were not running at the bottom of cold storage. Hence, it was totally ruled out that the cause of damage to the stock was due to bursting of a pipe and subsequent seepage of water, as claimed by the insured. The findings were recorded by Minutes and signed by the Directors in our presence. (Minutes in original enclosed as Annexure-XIII) However, the Directors informed us that they are still in search of the cause of seepage of water and would be informed to us on identifying. Accordingly, we returned from Thondi on 22nd January 2005.
(b) Subsequently, we were informed by the insured vide their letter dt. 1-3-05 that, seepage of water through another pipe situated at the rear LH side of the cold storage (South-West corner of the cold storage) was noticed, which was a defrost water drainage pipe of the old system. Letter enclosed as Annexure-XIV.
Thereafter, we once again visited the insured's plant on 2nd /3rd May 2005 and on our inspection, we observed a hole on the wall, of around 6 cm dia.at the rear LH side of the cold storage in line with the floor of the cold storage. But there were no indications of any bursting of the pipes any where in the vicinity in the plant and also as there is no pipes running within the cold storage, there is no question of busting the pipes within the cold storage.
It may please be noted that our second visit to the plant was on 2/3rd May 2005, almost after 3 months from the date of our first visit. We never observed such a hole within the cold storage and also the insured had never reported about such bursting of a pipe during our first visit. This is evident from the Minutes signed by the directors, in which it has been clearly stated that "the cold storage was totally cleaned and wiped out and no such seepage-have been noticed inside the cold storage" (Please refer our Annexure-XIII). Therefore, in our opinion, the hole have been deliberately made by the insured to establish the seepage of water into the cold storage, as they had no other reason to prove their claim other than bursting of pipes. As such even this reason stated by the insured for loss/damage to stock was also totally ruled out."
15. From the above finding of the surveyor, it is not acceptable that any water leaked inside the cold storage. The surveyor has also pointed out that when the AC plant did not work the moisture inside the cold condense condensed and that is why droplets were seen on the roof of the cold storage. The explanation given by the surveyor seems to be logical. No convincing proof/evidence has been filed by the complainant to prove that there was some leakage of water inside the cold storage due to bursting of pipe. Moreover, it is also not clear, why did the water on the floor of the cold storage due to leakage of water due to bursting of pipe remain confined to 5 mm as water was running continuously and there was high pressure in the water due to high waves in the sea due to tsunami. It is clear finding of the surveyor that the whole plant was shut down when all the employees deserted the plant and perhaps they did the right thing. It was apprehended that tsunami may damage the plant and water may enter the plant, so to protect the plant and machinery it was perhaps necessary to shut down the whole plant. However, the sea water did not enter the cold storage, but by that time the stocks was already damaged due to shut down of the plant. The complainant has tried to show that all other machinery of the plant were shut down except for the AC plant. This assertion of the complainant is not supported by the finding of the surveyor. The complainant is relying on the recordings of the temperature recorder. It has been argued that there are six recordings on one sheet and that clearly shows that the cold storage was under operation during the period when plant was deserted by the employees. The surveyor has not accepted this contention and has given clear analysis of the recordings of the temperature recorder as follows:-
"Based on our inspection of the record sheets made available by the insured and also from the information provided by the preliminary Surveyor and insured, the record sheet was mounted on the recorder on 26-12-04 and was not changed thereafter. The plant and recorder was found working on 11-1-05 by the preliminary Surveyor Sri C.A. Kurian. The temperature recordings were found over run on this sheet and 6 recordings were noted. The average of the recording were found to be between (minus) -18◦ C to -20 ◦C on normal working and decreased to (minus) -10◦ C at the time of defrosting. The recordings from 16-12-04 to 24-12-04 were also inspected and found to be similar as above.
It may please be noted that, if the plant was working from 26-12-04 to 11-1-05, without changing the record sheet, there could have been 16 recordings as against 6 recordings seen on sheet. From the above, it is very clear that the plant has worked only for 6 days from 26-12-04 to 11-1-05. Therefore, next question is that which are those 6 days the plant has worked from 26-12-04 to 11-1-05.
As per the insured, he could reach the premises only on 1-1-05 after the Tsunami on 26-12-04, and next visit to the plant was only on 5-1-05 when visited along with Bank manager. As already stated earlier, it is very clear from the insured's letter addressed to the Dist. Collector, Bank officials etc. that the stock had been found damaged even during their first visit to the plant on 1-1-2005 itself. Inspite of the above, the insured switched on the plant on 1-1-05 and kept it in working till the visit of preliminary surveyor on 11-1-05, with the record sheet fixed on the recorder only on 5-1-05, during their second visit.
Therefore, it is clear that the insured have re-started the AC plant immediately on return to the factory on 1-1-05 and the recorder sheet was made operational during their visit on 5-1-05. The 6 recordings noted on sheet represents the recordings from 5-1-05 to 11-1-05. The record sheets of 26-12-04 and the sheets from 16-12-04 to 24-12-04 are enclosed with this report as Annexure XVI. In our opinion, the above exercise was carried out by the insured, in order to establish that the plant was not stopped after the Tsunami on 26-12-04, though the insured has observed the stock in damaged/perished condition during their first visit to the plant on 1-1-05. Inspite of the above, they switched on the plant on 1-1-05 and kept it in working condition till the visit of the preliminary Surveyor on 11-1-05 and even thereafter. This could be seen from the electricity bill of the insured for January 2005."
16. The bills of electricity for the period before 27.12.2004 and after this date also give some indication of running of the plant. The learned counsel for the Insurance Company has clearly stated that upto 27.12.2004, 22000 units have been consumed whereas till 19.1.2005 the total consumption is 4000 units. This also gives indication that the plant did not continuously run from 27.12.2004 to 19.01.2005. This analysis of the learned counsel for the Insurance Company was not objected to by the learned counsel for the complainant during the arguments.
17. On the basis of the above discussion, it is clear that the plant did not work from 26.12.2004 to 31.12.2004 and it was restarted on 1.1.2005 or 5.1.2005. This period of shut down of the plant was sufficient to cause the damage to the stocks. Clearly, damage to stocks occurred due to change in temperature in the cold storage and the same is covered under the Exclusion Clause No.6 under the policy and therefore, this Exclusion applies in the present case. Moreover, the contention of complainant that the damage occurred due to seepage of water due to bursting of pipe is not substantiated on the basis of the surveyor report. I do not find anything in the report of the surveyor in this regard, which creates any doubt or suspicion in the conclusion reached by the surveyor. Thus, the claim filed by the complainant has not been established.
18. In the result, complaint filed by the complainant is not substantiated and consequently Consumer Complaint No.126 of 2010 is dismissed.
...................... PREM NARAIN PRESIDING MEMBER