National Consumer Disputes Redressal
Krishna Cold Storage (P) Ltd., Mr. Mr. ... vs General Manager (Technical) New ,India ... on 17 May, 2006
NCDRC NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI ORIGINAL PETITION NO. 267 OF 1997 Krishna Cold Storage (P) Ltd. Melapatla Ward, Punganur Municipality, Chittoor District, Andhra Pradesh, Represented by its Managing Director Shri G. Krishna Reddy Complainant Versus 1. General Manager (Technical), New India Assurance Co., 87 M.G. Road, Bombay-400 003 2. The Regional Manager, New India Assurance Co. Ltd., Surya Towers, Sardar Patel Road, Secunderabad-500 003 3. The Divisional Manager, New India Assurance Co. Ltd., Post Box No.27, Nehrunagar, Cuddapah 516 002 4. The Branch Manager, New India Assurnce Co. Ltd., Branch Office, 10-1/8-6 Prakasam High Road, Chittoor 517 001 Opposite Parties BEFORE : HONBLE MR. JUSTICE M.B. SHAH, PRESIDENT MRS. RAJYALAKSHMI RAO, MEMBER For the Complainant : Mr. Mr. M.N.Krishnamani, Senior Advocate with Mr. D.Bharat Kumar, Advocate. For the Opposite Parties : Mr. Neeraj Singh, Advocate for M/s. J.R.Midha & Co., Advocates. Dated: 17th May, 2006 O R D E R M.B. SHAH. J., PRESIDENT M/s. Krishna Cold Storage (P) Ltd. has filed this complaint and prayed that M/s New India Assurance Co. Ltd. (hereinafter referred as the Insurance Company) be directed to pay Rs.85,20,700/- towards the loss sustained by the Complainant for deterioration of potatoes stored in the cold storage. It has been mentioned that the Complainant suffered loss due to deterioration of the potatoes for a sum of Rs.75,60,000/- and for machinery Rs.9,60,700/-. The total quantity of potatoes stored in the cold storage was 1,890 tonnes valued at Rs.4 per kilogram and its total value as on 25.4.1995 was Rs.75,60,000/-. The deterioration has taken place because of erratic power supply, frequent failures of power supply from the A.P. State Electricity Board. To meet this problem, the Complainant Company put 82 KVA diesel generator set to maintain cooling system of the cold storage within the specified level of temperature from time to time. Power supply became erratic from the end of April to June, 1994. Further, the 60 HP compressor motor covered under the machinery breakdown Policy was damaged because of fluctuations in power supply between May and June 1994 Despite this, the Complainant took immediate steps to run the cold storage unit by replacing the damaged compressor motor with a stand-by motor. It has also been pointed out that there was a total failure of power from public distribution system by the A.P. State Electricity Board from 30th May, to 3rd June, 1994 resulting in complete 24 hour black out in the entire Chittoor District. The generator also broke down due to frequent failure of power supply. Therefore, the potatoes stored in the godown deteriorated. The Complainant came to know about the deterioration of potatoes stocks only on 4th June, 1996. when one of the farmers from Kolar District in Karnataka State came to take delivery. Immediately, the Complainant informed the Insurance Company, i.e. Branch Manager of the Insurance Company, Chittoor, by letter dated 6th June, 1994. The Complainant, thereafter, took prompt action/steps in informing all the farmers who stored their stocks to take delivery so as to minimise the loss. This was also reported in the local newspapers. Simultaneously, the District Revenue and Health and Agricultural authorities of Andhra Pradesh and Karnataka States visited the cold storage and after due inspection directed the Complainant to remove the deteriorated stocks to avoid health hazards. The Insurance Company appointed M/s. J.B.Boda Surveyors to assess the loss. They visited the cold storage by 11.6.1994 and after inspecting the damaged stocks and scrutinising the records of the cold storage unit they directed the Complainant to destroy the stock of deteriorated potatoes. The Surveyor gave an interim report dated 16.7.1994. Therein, under the heading our inspection and finding it is observed that: We attended at M/s. Krishna Cold Storage, Punganur on 10th June 1994 and sighted that approximately 30 to 40 tons of rotten potatoes were lying outside the cold storage in the open land and emitting putrid odour. These were said to be unloaded from Chamber A, 1st floor, and labourers were seen to be engaged in unloading stock, simultaneous segregating and rebagging of saleable potatoes. Plant consists of 2 Compressors ( type Frick India ) operating on Ammonia Refrigerant, driven by Electrical Motors & Operating on Main Power Supply 440-V. A standby Diesel Generator is available to supply emergency power supply in case of Main Supply Failure and is capable of taking the full load required. Stock receipt Registar maintained by Insured was inspected by us. Between 24.2.94 & 10.3.94, 1598 bags ( 89,155 TONNES ) Seed Tamarind was loaded into the Cold Room. Between 16.2.94 & 02.4.94, 38,157 bags ( 1,890 TONNES ) Potatoes were loaded into the Rooms. OUR INVESTIGATIONS We understand that on 27th April 1994, the Divisional Office, Buddapah, arranged for a PreInsurance Inspection of the risk at M/s. Krishna Cold Storage, Punganur. The pre-survey was carried out on 29.4.94 by the appointed Surveyor, Mr. V. Baliah Chetty of Madanapalle and the Risk Inspection Survey Report was issued on 3.6.94 which was subsequently forwarded to the Divisional Office. As per the Survey Report, the Refrigeration Plant was satisfactory and Chamber Temperatures maintained between 3 to 4C. The Survey Report indicates full capacity of the Cold Storage to be 2100 tonnes. We visited the Office of the Assistant Engineer, APSED Substation, Madanapalle and also the 135 KVA Station at Madanapalle. As the Insured had stated that Power Supply was affected due to failure of the Southern Power Grid, we made enquiries. Grid failure had been reported in all leading Newspapers. A 33 KVA line from the 135 KVA Station leads to Madanapalle Municipal Area and another 33 KVA line to Punganur Area Via the Madanapalle Substation. Supply breakdown timings as noted from their respective Logs are as per enclosed Annexures. Frequent power interruptions were noted especially on 2nd & 3rd June 1994, though no continous spell of hours was, seen. ( REFER ANNEXURE D & E ). However, Insured has been requested to obtain breakdown details from the APSEB, Punganur Substation, from where we had not been able to obtain details during our visit. CAUSE OF LOSS The Cold Rooms were maintained at Temperature higher than desired level as evidenced from temperature Log Book for a number of days prior to the reported loss. There was no breakdown of Refrigeration Plant nor of the Standby Diesel Generator, though frequent and heavy, power cuts from the Main APESB Supply was reported. Cooling capacity of the Cold Storage is yet to be confirmed for which we have to revisit Insureds Premises, once the deteriorated Stock is removed from Chamber and the same confirmed to us by Insured. Therefore the actual cause of the rise in temperature at the cold storage leading to deterioration of the stock is yet to be determined. ASSESSMENT OF LOSS Claim Form and supporting documents are not yet received by us. Copy of Insurance Policy is also awaited. However, our Preliminary Estimate of damage to the Stock of Potatoes is around Rs.34 Lakhs as per market value on that date. After deducting shrinkage, Rottage, estimated salvage, estimated Under Insurance and excess, net loss is anticipated to be around Rs.25 Lakhs. Liability of the Insurance Company, if any, would be known on completion of our further investigation. Final Survey Report: In the final survey report dated 18.4.1995 they have assessed the loss for the deterioration of potatoes as under: Loss Assessment: Total quantity of potatoes stored in Total quantity of Potatoes stored in Unit-1 at the time of event Less: Quantity salvaged 18,900 Quintals 4,500 quaintals Quantity totally deteriorated 14,400 Quintals Insured value for above Rs.400/- per quintal Rs.57,60,000 Market value for above Rs.275/- per quintal Market value being lower, the loss as per the relevant provision of the policy is assessed as Rs.39,60,000 Less : Shrinkage at 5% of insured value Less : Rottage at 5% of insured value Rs.39,60,000 Rs. 2,88,000 Rs. 2,88,000 Gross Loss Less Excess at 20% on Gross Loss as per endorsement to policy Rs.33,84,000 Rs.6,76,800 Net Loss Rs.27,07,200 Probable Cause of Loss: The insured as per letter dated 27.3.1995 attached to claim form attributed the cause of loss due to frequent failures of power supply over 1-1/2 months, frequent problems to Genset, frequent switch over between mains and genset, insufficient capacity of genset, burnt compressor motor. We opine that deterioration of stock occurred due to rise and maintenance of high temperature in chambers as evidenced from the temperature log book for a number of days prior to reported detection of loss. However, there is no evidence to confirm if the rise in temperature of the cold storage No.1 was caused due to any machinery breakdown or power failure. Repudiation: Despite the Survey Reports the claim of the Complainant was repudiated by the Insurance Company by its letter dated 20th November, 1995. Damage to stocks of Potatoes We are in receipt of your claim under the policy bearing No. 4461120334025 and after carefully examining the reports of the Surveyors and the entire material placed before us and after making thorough investigations we are satisfied that there is no liability for us to pay any compensation for the following among other grounds: .1. The alleged loss was not attributed to any of the risks mentioned in the policy; .2. The public power supply was the result of the failure of the grid by reason of over drawing the power by A.P.S.E.B. which is a deliberate act on the part of the public power supply authorities. .3. Under the conditions of the policy the insured has to utilise his generating capacity to the full extent and maintain the temperature. You have not utilised the same to the full extent to keep the plant in the normal temperature. .4. No steps were taken to maintain the required temperature. .5. The reason for the alleged deterioration of stocks was due to high temperature for a considerable length unconnected with accidental power failure. .6. You have violated warranty No.3 in regard to pre-cooling the stock meant for storage, warranty No.5 providing thermometer readings dry bulb and wet bulb temperatures on all floors with each chamber, warranty No.6 (2) Maintenance of maximum temperature conditions during the loading and subsequent storage period. Warranty No9, warranty No.12 and Warranty No.13(A) were also violated. 7. In view of the above reasons and for the other reasons which are relevant we are satisfied that there is no liability under the policy. We, therefore, hereby repudiate the claim as there is no liability for us to pay any compensation. Contentions of the Complainant: Some relevant dates: April, 1994 The Complainant applied for obtaining Deterioration of Stock (DOS) Policy. 23 & 30, Aprl.94 Premium of Rs.63,504/- was paid. 18.5.1994: As contended by the Complainant Representative of the Insurance Company visited the cold storage, machinery and stock stored in the cold storage and the policy was issued after satisfying themselves that the cold storage was working as per the standards laid down by the insurers and also the stocks were maintained at required temperatures. 1-3/6/1994 The event (i.e. deterioration) took place. 4.6.1994. Deterioration was noticed. 16.7.1994. Preliminary survey report 2.8.1994. Policy dated 18.7.1994 was delivered to the Complainant. 18.4.1995. Final survey report was filed. 20.11.1995. Finally, the Insurance Company repudiated the claim. The main contention of the Complainant is that the policy was supplied after the occurrence of peril. Copy of the policy dated 18.7.1994 depicting the conditions and exclusions was issued to him only on 2.8.1994, i.e. after the occurrence of the peril. Copy of the proposal form was also not given to him. In present proceedings the same was only given to him on 8.3.2006 i.e. after lapse of 12 years. In the proposal form, the columns were filled in by someone other than the Complainant. No cover note was given. - Hence, he is not aware of the exclusion clauses and the conditions of the policy with regard to maintenance of temperature, etc. - Hence, the Insurance Company cannot take shelter under the exclusion clauses. Findings: Admittedly, the Complainant has taken insurance policies for : (a) fire, for fixed assets; (b) certain machinery against machinery breakdown policy for a sum of Rs.9,60,700/-, w.e.f. 25.5.1994 to 24.5.1995; and, (c) a policy for the stocks of potatoes stored in the cold-storage unit against deterioration of the stocks due to machinery breakdown w.e.f. 25.5.1994 to 24.10.1994 for a sum of Rs.75,60,000/-. The aforesaid insurance policies were issued by the Respondent No.4 after due inspection of machinery and stocks by the representative of the Insurance Company, who visited the cold storage unit on 18.5.1994 along with an independent Surveyor to satisfy himself about the condition of the cold storage machinery and the stocks stored in the cold storage. The stock of potatoes policy is extended to cover loss arising out of accident, failure of electricity supply as per endorsement attached to the said policy. As per the interim report dated 18.7.1994 Surveyors have noted that a standby diesel generator was available to supply emergency power in case of main supply failure and was capable of taking full load required. Further, as per Surveyors, it was mentioned by the Complainant that power supply was affected due to failure of the Southern Power Grid, and that was found correct by the Surveyors on holding enquiries and they have stated that grid failure had been reported in all leading newspapers. Supply breakdown timings as noted from their respective Logs are as per enclosed annexures. Frequent power interruptions were noted especially on 2nd and 3rd June, 1994 though no continuous spell of hours was seen. Further, the Complainant has taken insurance policy for the building, machinery including generator, etc. for a sum of Rs.44,20,000/-, mentioning the interest of their financiers of A.P. Finance Corporation under the fire insurance policy-C. For this, there is no claim. Hence, it is apparent that the loss was due to erratic power supply and complete power failure for 24 hours on 30.5.1994 to 3.6.1994 in the entire Chittoor District. From the facts stated above, in our view, the repudiation of the claim is totally unjustified. Undisputedly, the Complainant has applied for having insurance coverage for deterioration of stock in April, 1994. Premium was paid at the end of April, 1994. Thereafter, before granting insurance coverage inspection was carried out by the representative of the Insurance Company along with an independent Surveyor and, thereafter, insurance cover was granted. Within a few days, there was erratic power supply. As found by the Surveyor, there was frequent power interruptions, especially, on 2nd and 3rd June, 1994. Noboubt, they have noted that they were not in a position to find out continuous spell of interruption of power supply. They have also found that there was frequent and heavy power cuts from the main APSEB supply and that is the cause of the loss. They have assessed the loss by preliminary survey at Rs.25 lakhs, and as per final survey report, they have arrived at the conclusion that the loss assessed was at Rs.27,07,200/-. In this view of the matter, it cannot be said that the Insurance Company was justified in repudiating the claim. One of the grounds in the repudiation letter is to the effect that the public power supply was the result of the failure of the grid by reason of over drawing the power by APSEB which is a deliberate act on the part of the public power supply authorities. This reason, in our view, on the face of it, is absurd. Even if the APSEB, i.e. the power supply Company has over drawn the power, it is not the fault of the Complainant. In any set of circumstances, it is for the Insurance Company to establish that the act of overdrawing by the APSEB was deliberate. There is nothing on record to show that the Electricity Board did something deliberately for not suppling power in Chittoor District. There is also no dispute that the insurer was having a generating set. Further, endorsement to the policy specifically provides that insurance coverage was extended to cover loss arising out accidental failure of public electric supply. The relevant provision is as under: Attached to and forming part of refrigeration plant (stocks) policy No. 4461120334025 extended to cover losses arising out of accidental failure of public electric supply: 1. In consideration of payment of an additional premium of Rs._______ it is hereby declared and agreed that this insurance is extended to cover damage to the potatoes stocks as a result of rise in temperatures in the cold storage chambers arising out of accidental failure of electric supply at the terminal ends of the electricity service feeders at the said premises directly due to sudden and unforeseen damage to property at a power station, receiving station, sub-station or other part of the electricity distribution system of public electricity not occasioned by or happening through or in consequence directly or indirectly of any of the following occurrences namely: (f) deliberate acts of the supply undertaking for whatever reason. 2. Provided that the Company shall not be liable for any loss unless the duration of each such failure exceeds eight hours. From the preliminary survey report it is apparent that there was power failure exceeding more than 8 hours in two days at least, i.e. on 2nd and 3rd June, 1994. It is also pointed out that after the submission of the preliminary survey report the Surveyors took a long time and submitted the final report on 18th April, 1995. This speaks volumes how the surveyors have changed their stand from preliminary survey to final survey. The Insurance Company has also not produced on record inspection and survey report which was carried out prior to issuance of the policy effective from 25th May, 1994. The learned Counsel for the Insurance Company submitted that the Complainant had not maintained proper temperature in the cold storage. In our view, when there was sudden non-supply of power during the particular period by the Electricity Board, it cannot be said that the Complainant is at fault. In the present case, as stated above, inspection and pre-survey was carried out before granting insurance coverage by the representative of the Insurance Company along with an independent Surveyor. At that time everything was alright. This inspection and survey report is not produced on record by the Insurance Company. Within a few days, i.e. at the end of May, 1994, there was erratic power supply for which the Complainant cannot be held responsible. Hence, the contention raised by the Insurance Company by quoting warranties have no relevance in deciding liability of the Insurance Company. Further, as stated by the Insurance Company, after the event also the Company recovered full payment of premium on 31st August, 1994. This also reveals that the Insurance Company accepted its liability. Otherwise, there was no question of accepting the remaining premium. In view of the aforesaid discussion, we hold that the claim made by the Insurance Company was totally unjustified. In this view of the matter, we allow this complaint and direct that the Insurance Company shall pay a sum of Rs.27,07,200/- as the loss assessed by the Surveyor with interest at the rate of 9% p.a. from 1st January, 1995, i.e. after 6 months from the date of occurrence of the loss, till the date of its payment. The Insurance Company is directed to pay the said sum within a period of 6 weeks from today. The Insurance Company is also directed to pay Rs.50,000/- compensation for harassment and agony suffered by the Complainant. Sd/- ..J. (M.B.SHAH) PRESIDENT Sd/- ..
(RAJYALAKSHMI RAO) MEMBER