National Consumer Disputes Redressal
M/S. Jagdamba Foods Ltd. vs National Insurance Co. Ltd,&Anr.; on 8 December, 2015
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 18 OF 2002 1. M/S. JAGDAMBA FOODS LTD. TARAORI -132 116 KARNAL HARYANA ...........Complainant(s) Versus 1. NATIONAL INSURANCE CO. LTD,&ANR. DIVISION NO XXIII PALIKA BHAVAN SECTOR XIII R.K.PURAM NEW DELHI - ...........Opp.Party(s)
BEFORE: HON'BLE MR. JUSTICE J.M. MALIK, PRESIDING MEMBER HON'BLE DR. S.M. KANTIKAR, MEMBER
For the Complainant : Mrs. Priya Kumar, Advocate
Along with Mr. Rohit Gandhi &
Ms. Tanya Tiwari, Advocates For the Opp.Party : Mr. Kishore Rawat, Advocate
Dated : 08 Dec 2015 ORDER
JUSTICE J.M. MALIK, PRESIDING MEMBER
1. The cautious seldom err. This is a unique case filed as back as on 15.01.2002, wherein the complainant wants to be compensated for his own mistake and the OP indulges in an exercise of shirking and fudging rather than confronting the issue. This is a unique case of contributory negligence. There will be no case on this earth, if the people are honest, truthful, reasonable and just.
2. In this complaint, M/s. Jagdamba Foods Limited, Taraori, Karnal, the complainant, has claimed compensation in the sum of Rs.13 crores 17 lakhs, along with interest @ 24% p.a. i.e. Rs.7.79 crores amount towards destruction of stock, compounded interest at the rate of 24% p.a. amounting to Rupees 5.38 crores, 24% future interest and costs of the proceedings for the insured damaged stocks.
3. The complainant company deals in the manufacturing and trading of frozen food products like peas, cauliflower, carrots, beans, mushroom, ladies-finger, litchi juice, mango pulp, etc. For this purpose, the products have to be processed through various stages, have to be passed through various treatments and stored. Thereafter, the said products are sent/exported to various places. Various machines for creating pulp-juice are required. The complainant has high-capacity chambers and had installed very highly sophisticated six machines in chambers which maintained the temperature of the products at 18* celcius for maintaining the quality of freezing of frozen foods as required by the International standards. For its business, the complainant imported several machines along with their respective warranties which were installed in the year 1995-96. The complainant obtained Insurance for the machinery break-down and the fire cover policy. However, the machinery break-down policy and the fire policy are not the subject matter of the present complaint. The claim for these articles was repudiated and upheld by State Commission and National Commission.
4. The subject matter of this case is stocks. On 01.12.1998, the OP wrote to the complainant that the stocks worth Rs.5.00 crores would be insured against a premium amount of Rs.2,49,375/-. The complainant was also informed that Sh. Ajay Gupta, the Engineer of OP had carried out inspection on 26.11.1998 for the purposes of giving the insurance cover. Copy of the letter dated 01.12.1998 has been appended as Annexure - F. On 12.01.1998, the complainant sent a letter stating that they wanted a cover of risk with immediate effect and a cheque in the sum of Rs.2,49,375/- was also sent, copy of the letter is proved on record as Annexure - G. The complainant sent letter dated 17.03.1999 stating that they did not receive the cover note. Copy of the said letter is attached with the complaint as Annexure - H. On 30.03.1999, the OP sent a letter saying that they have received a premium of Rs.2,49,375/- and the stock had been insured worth Rs.5.00 crores. Copy of the said letter is appended as Annexure - I. On 05.04.1999, the complainant again wrote a letter saying that it needed an enhancement of insurance cover by Rs.2.00 crores, with immediate effect and a cheque in the sum of Rs.77,614/- towards premium was also appended along with the said letter which was encashed. Copy of the letter dated 05.04.1999 has been placed on record as Annexure - J. It is alleged that the OP1 did not send either the cover note or the policy. The insurance policy was not sent till the filing of this complaint.
5. On 06.07.1999, at 1.00AM, one, Sh. Sanjeev of complainant company noticed that the compressors had tripped. There was sparkling in the cable trench cable of LT room and the flames were rising quite high. The short-circuit had damaged the main cables from the change-over switch of compressor as well as the compressor. The complainant tried to find the said cables from the local market, but the ready stock of the required specification was not available. Thus, the burnt portion of the cables were removed by cutting off and then rejoined again to restore the direct electric supply which was done successfully on the evening of 07.07.1999. Despite the restoration of the electric supply, it transpired that the compressors were not taking the load upto their capacity. The complainant tried its best to run the compressors at their optimum working condition. The Engineer of Maintenance of Refrigeration System was also called, who inspected and tried his best to run the compressors, but was not able to do so.
6. On the morning of 08.07.1999, the suppliers of the said compressors, i.e., M/s. Sabore of Poona were informed. They checked the plant and gave their report indicating that the relay printing cards of all the four compressors were damaged and required replacement. It also came to light that the relay cards would have to be imported from the manufacturers' plant of Denmark and it was likely to take one week to ten days. The report was placed on the record as Annexure - K. The Branch Office of the Insurance Company at Panipat was informed about the above said incidence vide copy of letter dated 08.07.1999, which, has been marked as Annexure - L.
7. A Surveyor was appointed and certain documents were submitted vide letter dated 11.08.1999, its copy has been placed on record as Annexures - MN. On 26.07.2000, the OP2 dismissed/rejected the claim under the Machinery Break-down (MBD) Policy, on the ground that the instructions of User Manual were violated and there was negligence in running the unit, properly, thus endangering the entire plant. The condition No.2 and obligation as per Clause 5(a) of the said policy were violated. Copy of the said letter has been placed on record as Annexure - O. A copy of the Stock Statement from 01.06.1999 to 30.06.1999 which was sent to the Bankers showing the Hypothecation of stocks was placed on record as Annexure - R. The Statement showing the Opening Stock as on 05.07.1999, just before the incident is appended hereto as Annexure - S. Letter was written on 09.07.1999 as required under the Insurance policy to the Sr.Divisional Manager of OP1. Its copy has been placed on record as Annexure - T. An application was also sent for deputing a Surveyor vide letter dated 09.07.1999. The Surveyor was informed vide letter dated 13.07.1999. A copy of the minutes of meeting dated 12.07.1999 and letter dated 13.07.1999 have been placed on record as Annexures - V & VI, respectively. Thereafter correspondence was exchanged among the Protocol Surveyor, Engineers Pvt. Ltd., and the complainant. The complainant also sent its claim for claiming damages for Rs.7.79 crores, plus incidental expenses which claim was made on the basis of mutual loss of stocks. Copy of the claim form is marked as Annexure - Z1. The complainant made several requests to settle the matter, but all the efforts made by the complainant, did not ring the bell.
DEFENCE :-
8. The OP has enumerated the following defences. The Surveyors and Loss Assessors were appointed who had submitted their various reports. Their observations, run as follows :-
"a) CVT had damaged much before March 1998.
b) Insured did not follow instructions given by the manufacturer and put local transformer in place of CVT and made Unisab-II Panels of all the 4 Compressors to run through that only. As the CVT only could provide precise constant voltage of 220 V to panels, so the local transformer was no match in any way to CVT. Page no. 1 of Site Visit Service Report dated 06.04.98 clearly stated that CVT of Panel was isolated.
c) Due to absence of CVT, the two Relay Print Cards of High Stage Compressors got damaged in March 1998 itself and Auto Mode function went out of order. These Cards were not got replaced and Compressors made to run manually. These Cards being Multi Layer ones, had components on both sides and could not be repaired. Hence replacement was suggested by the supplier Co. Insured totally ignored that too.
d) As per the report of Mr. N. Kumaran from M/s Sabroe Refrigeration, during his visit between 04.04.98 to 06.04.98, the Unit was being run on DG set and voltage was fluctuating between 360 V to 450 V. Further, since CVT too was missing, the High Voltage surge damaged those two Cards of High Stage Compressors indicating gross negligence on the part of Insured.
e) Due to fire on 08.07.99, high voltage again managed to escape and reach remaining two Cards of Low Stage Compressors because CTV had not been installed even by then and there were no means for the high voltage to get trapped. The Compressors however, were not damaged mechanically/electrically, but only their Auto Mode Function had stopped due to damage to Relay Print Cards of Unisab-II Panels. These Cards had very sophisticated and sensitive components which were to be operated through CVT only as slight high voltage surge was sufficient to damage the components. Insured on the other hand had totally ignored the service engineer guidelines given earlier during damage to Cards of High Stage Compressors and operated Low Stage Compressors also without CVT.
f) It has been established that 2 Cards were damaged prior to Insurance. Therefore, the question of liability of the Insurers were confirmed to 2 Cards only which were damaged on 08.07.99 due to fire in main cable.
g) Since Insured had not put CVT which is mandatory for these highly sensitive Panels, due to this act of the Insured, breach of condition of the policy "a" of clause no. 5, under heading- "Obligations" of the Insured, has taken place. The Policy condition is as under:
"The Insured shall take all reasonable steps to maintain the Insured property in efficient working order and to ensure that no item is habitually or intentionally overloaded. The Insured shall fully observe the manufacturers' instructions for operating inspection and overhaul as well as Government Statutory Municipal and all other binding regulations in force concerning the operation and maintenance of the Insured Plant and Machinery".
h) The Insured neither replaced nor informed Insurers about the previous breakdown and Clubbed the old breakdown in March 1998 of 2 Cards with new breakdown on 08.07.99 for another 2 Cards.
Due to this act of the Insured, breach of condition of the policy, under point 2 under heading -"Conditions" has taken place. The Policy condition is as under:
"if a Claim is in respect of fraudulent or if any false declaration is made or used in support thereof or if any fraudulent means or devices are used by the Insured or any one acting on his behalf to obtain any benefit under this policy or if a claim is made and rejected and no action or suit is commenced within three months after such rejection or in case of arbitration taking place as provided herein within three months after the arbitrator or arbitrators or umpire have made their award all benefit under this policy shall be forfeited".
i) Hence the claim is not tenable under the terms & conditions of the MBD Policy".
9. The Insurance Company accordingly repudiated the claim under the MBD Policy vide its letter dated 26.07.2000. The OP alleged that the complainant had violated the instructions of User Manual and also it was showing utmost negligence in running the unit properly, thus endangering the entire plant. As there was violation of condition No.2 of the insurance policy and the complainant failed to fulfill the obligations as per Clause 5 of the MBD Policy, hence the claim was repudiated.
10. Since the claim under the MBD Policy had been repudiated, the question of liability under the Destruction of Stocks (DOS) Policy does not simply arise. There is a nexus between the MBD Policy and the DOS Policy. The admission of liability under the MBD Policy is a condition precedent for liability under the DOS Policy. The insurance company is also of the opinion that there was improper maintenance of the plant and machinery due to the complainant, which is a breach of condition No.3 of the DOS policy. The said condition runs as follows:-
"3. The Refrigerating Plant and equipment shall throughout the currency of this Policy be insured with the Company against Breakdown and that admission of liability under the Machinery Breakdown Policy shall be a condition precedent to liability under this Policy".
Again, loss minimization measures were not taken up prudently by the insured, leading to breach of Condition No.3 of the DOS Policy. The stocks damaged prior to the reported mishap would, in any case, be beyond the purview of the policy and most importantly since the claim under the MBD Policy had been repudiated, the question of liability in DOS Policy did not arise.
11. The relationship between the complainant and the insurer - insurance company would be governed by the terms and conditions of the DOS Policy, though, the admission of liability under MBD Policy is a pre-condition for acceptance of the liability under the DOS Policy. The complainant did not co-operate with the Surveyor. Even the claim form had been filed after a long delay by the complainant and only after repeated requests, the same was submitted. However, the claim form was not submitted till 24.01.2000, as observed by the Surveyors. It is further submitted that adequate, expeditious and prudent steps could have been adopted to ensure that the loss is minimized. All the other allegations have been denied.
SUBMISSIONS AND FINDINGS :
12. The key argument urged by the counsel for the Complainant was that the policy conditions were not given to the complainant. Learned counsel argued that it is difficult to fathom why did the Insurance Company shy away from sending the policy to them.
13. Mr. A.S.N. Murthy, Manager OP was put on interrogatories. His interrogatories at Sr. Nos. 6 & 7 run as follows:-
"Q6. It is correct that the policy documents were not prepared even up to 30.03.1999? If no, please specify with reference to official noting and furnish copies of such noting of the date when the policy was prepared?
Ans. Yes
Q.7. Was the copy of policy containing the terms and conditions delivered to the complainant. If yes, please specify when the copy of the policy delivered/handed over to the complainant. Please specify the date, mode and manner in which the policy documents were delivered/handed over to the complainant. Please also provide the copy of the documents indicating the delivery/handing over of the said policy and acknowledgment of the receipt by the Complainant?
Ans. Our DO-XXIII had vide their letter dated 31.3.1999 advised the Complainant that the Policy documents were in course of preparation. A copy of such prepared Policy is on file. It therefore, follows that the same was delivered or dispatched to the Complainant. As to when, which mode or what manner, I am not in a position to comment upon. However, as per practice, once the policy is prepared, the same is delivered to the insured along with complete terms and conditions of the policy. It is not necessary that acknowledgement of the receipt of the policy by the insured is taken by the company.
14. Counsel for the Complainant also invited our attention towards Para No. 8 of the affidavit dated 30.07.2014, filed by Sh. A.S.N. Murthy of the Insurance Company. In para No. 14, he mentions:-
"14. It is also denied that the insurance policy and the cover note was not issued to the complainant. The policy was issued immediately on receipt of the premium and once the complainant sought for the enhancement in the sum insured, the endorsement was also issued immediately. It is difficult to fathom that the complainant would remain silent for more than six months if the policy document is not received. As a matter of fact, in the endorsement which was issued for enhancing the sum insured clearly gave the policy number. Once the policy number is allotted, there is no reason for the insurance company not to issue the policy. The contention of the complainant that the policy of insurance along with terms and conditions was not issued by the respondent is falsified by reading para 28 of the complaint. If the policy conditions were not issued to the complainant, how could he be aware about the condition of the policy for sending immediate information to the respondent. In any case, the claim has to be proceeded on the basis of the terms and conditions of the policy".
The 'but and ben' stance set up by this witness goes a long way to evanesce the value of the OP's case.
15. The attention of this Commission was invited towards the schedule. This is not signed by any officer. Then there is National Insurance Company Limited's endorsement, which purports to have been signed by Sr. Divisional Manager. Nobody can read the name of the Senior Divisional Manager. His name is not printed under his name. His designation does not bear seal under his signatures. In between the signature there is a seal of the National Insurance Company dated 23.02.2000. It may be recalled that the proposal/start of the Insurance pertains to January 1999. In a number of cases it has been noticed that the Insurance Policy, terms, conditions, and exclusion clauses are not furnished to the policy holders. It exposes the sloth and callousness on the part of the insurance companies. The higher authorities are prone to turn a Nelson's eye to the indiscipline in their companies rather than taking the bull by horns.
16. The Complainant sent a letter to OP on 12.01.1999, its relevant extract runs as follows:-
"You are requested to issue the cover note with immediate effect for the said coverage and send us the policy in due course".
17. On 17.03.1999, the complainant wrote to the Sr. Divisional Manager, National Insurance Company Ltd. The relevant para runs as follows:-
"Kindly refer to our letter dated 13th Jan.,1999 with the cheque of Rs.2,49,375/- against the Insurance risk coverage under DOS policy.
This is very surprising that yourself had not issued the DOS policy whereas the premium was paid on 12/1/99 as per your letter dated 1/12/98. Even today we had not received the cover note.
Kindly look into the matter personally and arrange to send the cover note and DOS Policy at an urgent basis without any further delay".
18. The O.P. sent a letter on 30.03.1999, which runs as follows:-
"In reference to the above we confirm having received your premium cheques for Rs.2,49,375/- vide our letter No. 10809 dt. 13.1.99, which covers your stock up to a sum insured of Rs.5,00,00,000/- (Rupees five crores only) at Shamgarh, Karnal against the terms and conditions of our Deterioration of Stock (other than Machinery) Policy our Policy documents are in course of preparation and will be sent to you shortly.
Thanking you, Yours Faithfully".
19. The Complainant made another request vide letter dated 05.04.1999. Although, it is an admitted fact that the complainant received the DOS policy before the incident, yet, the deficiency on the part of the OP stands established. The policy must be sent at the nick of time. No opportunity must be given to raise genuine or lame excuses. It also goes to show that the Insurance Company is terribly remiss in discharge of its duties.
20. Now we turn to the question whether the O.P. is liable to pay the amount claims by the Complainant? Learned counsel for the Opposite Party vehemently argued that the case filed by the complainant in the connected matter was dismissed by the State Commission and confirmed by the National Commission. In the said complaint, the complainants sought compensation in the sum of Rs.11,32,000/- for the loss occasioned to their refrigeration plant due to break-down of the cables/electric parts of the machinery on 06.07.1999. The repudiation made by the OP on the ground that the complainant had violated Condition No. 1 of the Insurance Policy and failed to fulfill its obligation as per Clause 5A of the policy. Learned counsel for the OP stressed that this is a connected policy and for the reasons detailed by the State Commission and National Commission, this case regarding the stocks would not lie. It would stand automatically dismissed, as it is dependent upon the main break down of cables/electric wires, as per condition No. 3, already cited above.
21. Counsel for the OP has also invited our attention towards Para No. 14 of the State Commission's order dated 14.01.2001, wherein it was mentioned:-
"14. Annexure R-2 dated 24.2.2000 is copy of survey report of Sh. Rajev Marwaha. It is also mentioned in the report that on 6.7.99 a major fire occurred in the main cable due to which short circuit of relay cards, the compressors stopped functioning in auto mode as there was no CVT with the Unisab-II Panel and direct connection had been taken through the local made transformer".
22. Counsel for the OP also referred to Condition No. 3 of the Deterioration Stock Policy, which is reproduced as follows:-
"The best ENDEAVOURS OF THE insured shall be used to save and protect the goods from damage at and after the time of the Accident and the Insured shall take all reasonable steps whereby the damage may be avoided or diminished and in case the insured shall fail in these respects the Company will not be liable for damage resulting from such failure." As for quantification of loss that could have been minimized, it is the job of the surveyor appointed in the claim and not that of the respondent".
23. This must be borne in mind that this is an Insurance Policy of a Cold Storage. The considerations for the same are somewhat different from the other Insurance Policies. At the same time, it must be borne in mind that both the policies i.e. policy of Deterioration of Stock and Insurance Policy regarding the Refrigerating Plant and Equipment, are two different policies. The condition No. 3 only mentions that it was incumbent for the complainant to get the Insurance Policy in respect of Refrigerating Plant and Equipment Policy and there is no condition that the fate of this case shall depend upon the repudiation of Refrigerating and Equipment Etc. Both are different. However, we have to see whether the repudiation of the Refrigerating and Equipment leaves some impact in this policy as well.
24. The relevant extracts of the Surveyor's report are reproduced as follows:-
"Subsequent Course of Action:
We reached the insured's plant on the morning of 10th July and noted that 02 truck-loads containing 17 tons of goods had already been despatched to Delhi for sale storage".
It further mentions:-
"However, it was noted that considerable quantities were being segregated as damaged since the temperature of these stocks had increased considerably and had started emitting fuel smell.
3) We have strongly advised the insured to speed-up the segregation/shifting operations in order to minimize the loss. We have further requested the insured to shift the high value/fast-perishing goods on priority.
We further wish to state that even at the time of writing this report, our representatives are present at the plant to supervise & record the salvaging operations of about 1700 tons of goods still lying inside the chambers".
25. The Surveyor did not recommend the payment of loss, but assessed the loss as follows:-
"a) The assessment of the loss is being done merely to limit the quantum of loss and has no bearing what-so-ever on the insurer's liability.
The shrinkage and other losses have already been taken care-of while considering the PRODUCT YIELD.
Now, Total Value at Risk as on 06.07.99 (as Calculated above) = Rs.4,38,27,360.00 Less Value of Saved Stocks = Rs. 11,60,128.00 ___________________________________________________ Total = Rs. 4,26,67,232.00 _____________________________________________________ _____________________________________________________ Therefore, COST OF GOODS DAMAGED = Rs. 4,26,67,232.00 Excess
As per the terms of the policy, 10% of the above amount is deductible under Excess Clause.
Therefore, NET ASSESSED AMOUNT =Rs.(4,26,67,232 - 42,66,723) = Rs.3,84,00,509/-".
26. Keeping in view all the facts and circumstances, we find that due to negligence, inaction and passivity on the part of the complainant itself, the above said loss took place. This is a matter of contributory negligence and more fault lies at the doors of the complainant. It should have rectified the machines, in time, so that other losses could not have occurred. In the result, we grant one-third of the Net Assessed loss, made by the Surveyor, (i.e., Rs.3,84,00,509 x 1/3), which comes to Rs.1,28,00,170/-, (Rupees One Crore Twenty-Eight Lakhs, One Hundred Seventy only), approximately. The OP is directed to pay the said amount to the complainant, within a period of 90 days' from the receipt of copy of this order. It will also pay interest @ 6% p.a., from the date of institution of this case, till its realization. There shall be no order as to costs.
......................J J.M. MALIK PRESIDING MEMBER ...................... DR. S.M. KANTIKAR MEMBER