State Consumer Disputes Redressal Commission
M/S. Sks Ispat And Power Ltd. vs Oriental Insurance Co. Ltd. on 18 March, 2026
IN THE NATIONAL CONSUMER DISPUTES REDRESSAL
COMMISSION AT NEW DELHI
RESERVED ON: 14.01.2026
PRONOUNCED ON: 18.03.2026
CONSUMER COMPLAINT NO. 396 OF 2018
M/S SKS ISPAT AND POWER LTD.
CORPORATE AND REGISTERED OFFICE:
501-B, 5TH FLOOR,
ELEGANT BUSINESS PARK,
JB NAGAR, ANDHERI - KURLA ROAD,
ANDHERI (EAST), MUMBAI- 400059.
WORKS OFFICE:
VIL SILTARA,
(NEAR INDUSTRIAL GROWTH CENTRE PHASE-II),
RAIPUR (C.G.) - 493111.
MOB. NO.9893694255, 9893694269 ... Complainant
Versus
THE ORIENTAL INSURANCE CO. LTD.,
REGD. OFFICE: ORIENTAL HOUSE, PB NO.7037,
A-25/27, ASAF ALI ROAD,
NEW DELHI-110 002.
THROUGH ITS CHAIRMAN -CUM - MANAGING DIRECTOR
Phone No.4033452, 1800118485, 33208485
REGIONAL OFFICE:
3, R.K. PLAZA, RING ROAD NO.1,
NEAR PRAKASH SWIMMING POOL,
PACHEDI NAKA, RAIPUR-492001.
Phone No.0771-4255382, 4255385
DIVISIONAL OFFICE:
3, R.K. PLAZA, RING ROAD NO.1,
NEAR PRAKASH SWIMMING POOL,
PACHPEDI NAKA, RAIPUR-492001.
Phone No.0771-4255382, 4255385
Policy No.191300/11/2014/67
'FIRE INDUSTRIAL ALL RISK POLICY' ...Opposite Parties
CC/396/2018 Page 1 of 26
BEFORE:
HON'BLE AVM JONNALAGADDA RAJENDRA, AVSM, VSM (Retd)
PRESIDING MEMBER
HONBLE MR. JUSTICE ANOOP KUMAR MENDIRATTA, MEMBER
For the Complainant (s): Mr. Sarvesh Bisaria, Mr. Anand Prakash,
Mr. Nishant Bhardwaj, Ms. Varsha Arya,
Mr. Darsh Bansal and
Mr. Satbeer Prajapati, Advocates
For the Opposite Party (s): Mr. Amit Kumar Singh and
Ms. Rokosieno, Advocates
JUDGMENT
AVM JONNALAGADDA RAJENDRA, AVSM VSM - MEMBER
1. The present Consumer Complaint has been filed under Section 21 of the Consumer Protection Act, 1986 (for short "the Act") against the Opposite Parties (OPs) seeking the following:
A. Hold the Respondents guilty of deficiency in service to its consumer;
B. Hold the Respondents guilty of unfair trade practice upon its consumer;
C. Hold that repudiation of genuine claim lodged for losses and damages suffered by complainant with respondents as wrong and direct the respondents to pay the claim amount of Rs.4,85,00,000/-(Rupees Four Crore Eighty Five Lakhs Only towards cost installation and transportation of the TG Stator and Rotor 25 MV to the Complainant;
D. Direct the respondents to pay the amount of Rs. 5 Crores as damages and compensation on account of mental pain. agony, sufferings, on account of suffrage because of time and money invested and for deficiency in services, delays, and lapses, unfair trade practice;
E. Award costs, expenses, travelling expenses, lawyers fee incurred in these proceedings and otherwise in connection to the Complainant which is computed at Rs. 25 Lakhs; and F. Award interest at 18% p.a. from the date of claim till the date of payment;
G. Pass such other directions, orders and reliefs as this Commission may deem fit under the facts and circumstances of the case, in the interest of justice and equity."CC/396/2018 Page 2 of 26
2. Brief facts of the case, as per the complaint, are that the complainant had been purchasing insurance policies from OPs through its Divisional Office-III for its integrated Steel Plant at Siltara, Raipur (C.G.). In continuation of the same, he obtained a Fire Industrial All Risk Policy bearing Policy No.191300/11/2014/67 for the period 18.05.2013 to 17.05.2014 from the OPs and the premium of Rs. 46,37,187 was paid. The sum insured under the said policy was Rs.540 Crores, covering the buildings, plant and machinery, electrical items and breakdown machinery. On 14.03.2014 at about 11:10 PM, while the power plant was in operation, loss occurred due to heavy flashing in the 25 MVA Turbo Generator Set installed in Unit-1. The loss was intimated to the OP by e-mail. This Turbo Generator was manufactured by BHEL, Hyderabad, and was of 31,250 KVA, 25,000 KW capacity. On receipt of the damage claim, the OP appointed Shri Ramesh Agrawal, an IRDA-
licensed surveyor, who conducted spot inspection on 24.03.2014 and submitted a preliminary survey report noting breakdown of the unit and stator earth fault. M/s BHEL, Hyderabad inspected the Turbo Generator on 24.03.2014 and the minutes of meeting were recorded, wherein the repair and rewinding of stator and rotor were proposed. The complainant's technical team analysed the damage on 26.03.2014 and reported dislocation of a core strip causing puncture of stator coil insulation. M/s BHEL, Jabalpur, initially issued an offer on 27.03.2014 for repair and rewinding, and subsequently advised replacement of the stator due to GVPI manufacturing process. The options for supply of new stator and rotor were communicated by BHEL vide letter dated 25.04.2014. M/s Sanjay Dwivedi & Associates, who was appointed as final surveyor, had ascertained the damage and circumstances thereto and submitted the report dated 17.03.2015 assessing net liability at Rs.1,26,36,400, against the claimed amount of Rs. 4,23,45,000. Upon CC/396/2018 Page 3 of 26 objection raised by the complainant, the net liability was reassessed to be as Rs.1,73,84,421 vide addendum report dated 08.06.2015. M/s BHEL in its technical report dated 06.01.2016 noted that the Turbo Generator was running satisfactorily since commissioning. Thereafter, the OP obtained investigation reports from Shri Sanjeev Aggarwal and M/s J. Basheer & Associates, and also sought an expert opinion from Shri VG Chorghade, Consultant (Power). They opined that the claim was genuine. Notwithstanding the clear case of damage and admission of the claim under the policy by the surveyor as well as the expert engaged by the OP itself, the OP issued a pre-repudiation letter dated 11.04.2016. The complainant submitted specific replies dated 02.05.2016 and 26.08.2016 to the same. The complainant also addressed grievances to OP and to IRDAI regarding delay in settlement of the claim. However, the OP repudiated the claim vide letter dated 24.01.2017. The complainant alleged that while the loss was accidental and covered under the policy, the claim was delayed for about three years without issuance of a claim number, and that the repudiation amounted to deficiency in service and unfair trade practice by the OP.
3. Upon notice, the complaint was resisted by the OP by filing its written version, contending that the claim of the Complainant was rightly repudiated vide letter dated 24.01.2017 by invoking General Exception No.5 of the policy, which excluded the liability for deterioration or wear and tear arising from normal use. It was contended that as per BHEL's quotation dated 27.03.2014, failure of a single stator coil could have been repaired at the site itself for Rs.7,36,600 and, therefore, replacement of the entire Turbo Generator was unjustified. The complainant suppressed material facts by not disclosing that it had sought quotations from BHEL for repair and replacement of stator and CC/396/2018 Page 4 of 26 rotor in November 2013 itself, i.e. much before the alleged date of loss. It was further contended that the complainant intimated the OP of the loss with delay, and even prior to such intimation had invited an engineer from OEM BHEL without informing the OP or the preliminary surveyor. The preliminary survey conducted by Shri Ramesh Agrawal revealed no physical damage to the rotor. The minutes of meeting dated 24.03.2014 with OEM BHEL indicated that the fault was confined to a single stator slot and that the rotor IR value was abnormally low, pointing towards deterioration over time, rather than an accidental breakdown. The OP relied upon the final survey report dated 17.03.2015 and addendum dated 08.06.2015 of M/s Sanjay Dwivedi & Associates, and the expert opinion of J. Basheer & Associates, to contend that the nature of failure fell within the policy exclusion relating to normal wear and tear. The OP Insurer denied that J. Basheer & Associates was appointed as a second surveyor, and it was asserted that the appointment was only for expert opinion on admissibility of the claim and did not attract Section 64-UM(5) of the Insurance Act, 1938. It was contended by the OP that a pre-repudiation letter dated 11.04.2016 was issued to the complainant granting opportunity to contest the same with necessary justifications for the issues raised by the surveyor and OP. But the complainant failed to reasonably rebut the grounds raised therein. Consequently, after due consideration of the claim and the terms of the policy, the complainant's claim was repudiated. The repudiation was a considered decision, which is within the scope of the policy. The OP denied deficiency in service, unfair trade practice or delay in claim settlement, and contended that the claim was to be inadmissible under the terms of the insurance policy and based on suppression of material facts, and prayed for dismissal of the complaint.
CC/396/2018 Page 5 of 264. The Complainant filed Rejoinder and evidence on Affidavit and relied on certification of corporation of complainant company and Memorandum and Articles of Association (Ex. CW1/1), extracts of MOM of the BOD dated 12.08.2017 (Ex. CW1/2), insurance policy purchased by complainant (E. CW 1/3), preliminary survey report of Mr. Ramesh Aggarwal dated 24.03.2024 (Ex.CW1/4), MOM held by complainant and BHEL Hyderabad on 24.03.2014 (Ex. CW.1/5), analysis done by team of expert engineers on 26.03.2014 (Ex. CW1/6), offer letter by M/s BHEL dated 27.03. 2014 (Ex.CW1/7), email dated 26.03.2014 from S.J Reddy to Shri. Bipin Jain (Ex. CW 1/8), letter dated 25.04.2014 (Ex. CW 1/9), Mr. Sanjay Dwivedi & Associate's final survey and assessment report dated 17.03.2015 (Ex. CW1/10), addendum report of Sanjay Dwivedi & Associates dated 08.06.2015 (Ex.CW 1/11), email dated 07.01.2016 sent by M/s BHEL to M/S SKS Ispat, along with copy of technical report dated 06.01.2016 (Ex. CW1/12), investigation report of surveyor Shri Sanjeev Aggarwal dated 08.03.2016 (Ex. CW 1/13), expert opinion dated 30.03.2016 by J Basheer and Associates (Ex. CW1/14), pre repudiation letter dated 11.04.2016 (Ex. CW 1/15), letter dated 02.05.2016, reply to pre repudiation letter (Ex. CW 1/16), comments by M/S Sanjay Dwivedi & Associates 23.05.2016 (Ex. CW1/17), reply dated 26.08.2016 to OP (Ex. CW1/18), comments and opinion of VG Chorghade Consultants dated 09.08.2016 (Ex. CW 1/19), letter dated 28.09.2016 to OP grievance cell (Ex. CW 1/20), letter dated 26.10.2016 (Ex. CW1/21), letter dated 18.11.2016 (Ex. CW 1/22), emails between the complainant and the consumer affairs Dept IRDAI (ex CW 1/23), letter dated 14.12.2016 by OP (Ex CW 1/24), mails with BHEL (Ex. CW 1/25), repudiation letter dated 24.01.2017 (Ex. CW 1/26) and profile from website as is available of M/S J. Basheer & Associates to show that they are expert surveyor of marine etc. only (Ex CW 1/27).
CC/396/2018 Page 6 of 265. The OPs filed their evidence on Affidavit and relied on the policy along with terms and conditions (Ex. RW 1/1), preliminary survey report dated 28.03.2014 (Ex. RW1/2), final survey report dated 17.05.2015 and addendum report dated 08.06.2015 (Ex. RW 1/3), expert opinion dated 18.09.2015 by J Basheer and Associates (Ex. RW 1/4) and claim repudiation letter dated 24.01.2017 (Ex. RW 1/5).
6. The learned counsel for complainant reiterated the facts and background of the complaint and asserted that the complainant had been holding the Fire Industrial All Risk Policy with the OP for over five years and regularly paid yearly premiums. For the policy period from 18.05.2013 to 17.05.2014, the Plant and Machinery were insured for Rs. 5.40 Crores, with machinery breakdown cover specifically taken as an add-on. Thus, the machinery breakdown was a covered peril under the policy. The learned counsel asserted that it was not in dispute that a breakdown occurred on 14.03.2014 during the currency of the policy and that the loss was immediately intimated to the OP. Pursuant to which on 24.03.2014, the OP had appointed an independent surveyor. The engineers from BHEL also inspected the site and recommended repair of the stator and rotor, which was accepted by the complainant. It was further asserted that M/s BHEL, in terms of the minutes of meeting dated 24.03.2014, issued an offer for repair and rewinding at a cost of Rs. 5,04,64,650, and thereafter advised stator replacement vide e-mail dated 26.03.2014. He further argued that M/s Sanjay Dwivedi & Associates, appointed by the OP as surveyor, initially assessed the loss at Rs.1,26,36,400. Upon objection by the complainant, the surveyor found merit in the objections and submitted an addendum report dated 08.06.2015, revising the assessed loss to Rs.1,73,84,421. He asserted that under the Insurance Act and applicable Regulations, the claim CC/396/2018 Page 7 of 26 could not have been repudiated, particularly when the surveyors appointed by the OP had categorically recorded that an accident had in fact occurred resulting in machinery breakdown. He asserted that the claim repudiation was arbitrary and bad in law. He further contended that after the surveyor had recommended settlement of the claim, the OP acted arbitrarily and with legal malice by appointing investigators in a predetermined manner to reject the claim, as was evident from the e- mails placed on record. He relied on S.S Cold Storage India Pvt. Ltd Vs National Insurance Company Ltd 2023 SCC OnLine SC 944; Liberty Videocon General Insurance Company Ltd Vs. Uma Bai Dhankar and Ors. Revision petition No. 735 of 2018 Date of Decision 11.06.2024; National Aluminum Company Limited Vs. Oriental Insurance Co. Ltd and Anr Consumer Case No. 2159 of 2016, Date of Decision 15.08.2024; Vasantiben Alias Varshaben Laxman Dafada Vs. Bajaj Allianz Life Insurance Company Ltd & Anr, Revision Petition No. 1737 of 2017, date of decision 07.11.2024; and Cement Corporation of India Vs. ICICI Lumbard General Insurance Co. Ltd Civil Appeal No. 205 of 2016, Date of Decision 16.12.2025 in support his arguments.
7. On the other hand, the learned counsel for OP reiterated the facts mentioned in their written statement and evidence and asserted that the complaint was filed with the sole objective of harassing the OP and coercing payment of amounts to which the complainant was not entitled, amounting to an abuse of the process of law. He argued that the alleged loss was intimated with delay only on 21.03.2014. Upon intimation, a preliminary survey conducted by Shri Ramesh Agrawal recorded no physical damage to the rotor and noted the involvement of an OEM BHEL engineer. He asserted that the complainant had engaged the OEM engineer even prior to intimating the OP or the CC/396/2018 Page 8 of 26 surveyor and failed to disclose the same, raising serious doubts regarding transparency of the claim. The investigations revealed neglect and improper maintenance of the Turbo Generator. Despite persistently low insulation resistance (IR) values being projected and recorded as well as prior maintenance issues, the complainant continued to operate the machinery, thereby aggravating the damage. The material facts regarding requests made to OEM BHEL in November 2013 for repair or replacement of stator and rotor were deliberately suppressed, indicating pre-existing defects and misuse of the insurance policy. The minutes of meeting dated 24.03.2014 with OEM BHEL revealed that the fault was localised to Slot No. 74 of the stator and was capable of on-site repair. The rotor insulation resistance was far below the OEM-prescribed minimum of 40 KΩ, and in the absence of physical damage or short-circuiting, the condition reflected gradual deterioration due to prolonged operation without adequate maintenance. He asserted that the repair of a single stator coil, as per OEM BHEL's quotation, would have cost only Rs. 7,36,600, rendering replacement of the entire Turbo Generator unjustified. He relied on internal correspondence, including the e-mail dated 12.04.2014, recording that rotor IR values had fallen to 20 KV as early as December 2010, which was not disclosed at the time of lodging the claim. The insulation failure which is attributable to negligent maintenance could not be treated as an accidental electrical breakdown covered under the policy. The claim was thus rightly repudiated vide letter dated 24.01.2017 by invoking General Exception No.5, excluding liability for deterioration and wear and tear. They further contended that expert opinions obtained by OP supported repudiation and attributed the damage to deterioration rather than accident. He argued that the opinion of Mr. VG Chorghade lacked comprehensive analysis and did not address material findings recorded CC/396/2018 Page 9 of 26 by other experts, rendering it unreliable. He contended that surveyor reports carry significant evidentiary value and cannot be disregarded without cogent reasons and relied upon the principle of strict construction of insurance contracts as reiterated by the Hon'ble Supreme Court, OP could not be fastened with liability beyond the express terms of the policy. The learned counsel relied on Sri Venkatashewara Syndicate Vs. Oriental Insurance Co Ltd., (2009) 8 SCC 507; Rotex Automation Ltd Vs. United India Insurance Co. Ltd, 2015 SCC OnLine NCDRC 41; Diamond Ply. Put. Ltd. Vs. United India Insurance Co. Ltd, SCC OnLine NCDRC 1816; Roshan Lal Oil mills Ltd and Ors, (2000) 10 SCC 19; Oriental Insurance Co. Ltd Vs. Pavan Enterprises and Anr I(2016) CPJ 503 (NC); Khatema Fibres Ltd Vs New India Assurance Company Ltd. and Another 2021 SCC OnLine SC 818; Vikram Greentech (I Ltd. v. New India Assurance Co. Ltd., (2009) 5 SCC 599; and Suraj Mal Ram Niwas Oil Mills (P) Ltd. v. United India Insurance Co. Ltd., (2010) 10 SCC 567 in support of his arguments and sought the complaint to be dismissed.
8. We have examined the pleadings and associated documents placed on record and rendered thoughtful consideration to the arguments advanced by the learned Counsels for both the parties.
9. The primary issue to be decided in the present case are:
A. Whether the breakdown occurred on 14.03.2014 and the consequent loss claimed by the complainant are within the scope of the policy?
B. Whether the complainant reported the incident to OP in time? C. Whether the claim was duly ascertained by the OP? D. Whether the claim repudiation was within the scope of the policy?CC/396/2018 Page 10 of 26
10. It is an admitted position between the parties that the complainant had held a valid Fire Industrial All Risk Policy No. 191300/11/2014/67 for the period from 18.05.2013 to 17.05.2014, with specific machinery breakdown add-on cover. It is undisputed that the incident occasioned on 14.03.2014 during the subsistence of the policy, wherein the 25 MVA Turbo Generator Set installed in Unit-1 of the Complainant power plant suffered heavy flashing and breakdown. The loss was intimated to the OP by e-mail dated 21.03.2014 and on 24.03.2014 the OP appointed Shri Ramesh Agrawal, IRDA-licensed surveyor to conduct a spot inspection. He submitted a preliminary survey report noting that the Turbo Generator was in breakdown condition and that the stator phase was showing earth fault. Relevant part of the said report is as below:
"Findings:
1. The Unit nos. noted in Breakdown Condition Not Running.
2. The Turbo-Generator was noted is Dismantled Condition, with Rotor Removed.
3. The Text indicated that Stator Y-Phase was showing Earth short, Phase to phase were showing some resistance."
11. On the same day i.e. 24.03.2014 the OEM M/s BHEL, Hyderabad, inspected the Turbo Generator and a Minutes of Meeting was recorded, discussing the scope for repair and rewinding of stator and rotor. Thereafter, the Complainant's technical team analysed the damage on 26.03.2014 and reported dislocation of a core strip, which punctured the stator coil insulation. Relevant part of the said report is as below:
"Physically seen that one of the core strips dislocated from its position & came out a little, its knife edge eroded the coil insulation & led to a puncture of Stator Coil, a Photograph of the local fault attached herewith for ready reference. ...
The thermal stress causes very fast aging of insulation between laminations at the end-parts of the stator. An insulation breakdown can occur, thus generating stator core faults.CC/396/2018 Page 11 of 26
These effects might damage the stator core by breaking down the insulation layer between laminations and thus providing a closed path for a fault current. Such faults are relatively rare but when they occur."
12. Based on the Minutes of Meeting, M/s BHEL, Jabalpur, issued an offer dated 27.03.2014 for repair and rewinding. Later, M/s BHEL, vide e-mail dated 26.03.2014, advised replacement of the stator due to the GVPI manufacturing process, while agreeing to rewinding of the rotor. Options for supply of new stator and rotor were communicated by M/s BHEL vide letter dated 25.04.2014, relevant part of which is as below:
"Thank you for sending the requirement. In our opinion the Generator stator cannot be rewound as it is manufactured by a GVPI (Global Vacuum. Pressure Impregnation) process. It is not possible to go for complete rewinding of Stator as coil removing will lead to core damage.
Our advice will be for a new stator instead of rewinding. However in case of minor damage, it can be partially rewound. For Rotor rewinding, we are forwarding a separate offer as it is possible to rewind the Rotor. It may please be noted that we had given an offer for spare Rotor previously."
13. The final surveyor appointed by OP, namely M/s Sanjay Dwivedi & Associates, submitted the final survey report dated 17.03.2015, determining the Net Liability as Rs.1,26,36,400. Relevant part of the said report is as below:
"1.3 Now on receipt of all documents from insured and their due. verification, we are pleased to issue our report as under. 1.4 We have visited insured's place again for checking the in process reinstatement of damaged stator and rotor on 03/03/2015.
1.5 Prior to us, the preliminary survey was carried by M/s Ramesh Agarwal, who has given his report no. RKA/086/2013 dated 28/03/2014, We have considered the preliminary surveyor's report while assessing the loss. ...CC/396/2018 Page 12 of 26
5.0 DATE OF LOSS Date of loss falls within the period of insurance. ...
6.5 In this case, the loss is to a 25MW power plant called as TG Set 1, in the insured's list of machinery. The insured is having two more TG Set having capacity of 30 MW each. As such the insured is having total 85 MW production through 3 nos. TG set.
...
8.0 THE INCIDENCE It was reported by Mr. Bipin Jain, Director Maintenance of M/s SKS Ispat at the time of Survey that on 14/03/2014, 25 MW G Set was running at 24.6 MW. All of sudden a huge sound was heard by field operator and simultaneously the 25 MW TG set got tripped at around 23.10 hrs. 8.2 During tripping Flash over was seen inside the generator. 3.3 In response to the incidence the electrical team of the insured reached the site and TG stator was Inspected and some serious technical problem was found. ...
8.5 On opening of the top cover of stator on 20/03/2014, top coil no.11 (anticlockwise from top looking from the turbine set) found to be failed at about 350mm Inside and y phase showing earth.
8.6 As per him, the cause of breakdown may be failure of insulation.
...
11.0 CAUSE OF BREAKDOWN 11.2 On all examination it was observed. that because of failure of insulation, the winding got short and thus the breakdown occurred.
11.3 The failure of insulation is a electrical breakdown an insured peril under the subject policy and not under exclusion, hence underwriters are liable to indemnify the insured for losses sustained."
14. Upon objection by the complainant, an addendum report dated 08.06.2015 was issued, revising the net assessed loss to Rs. 1,73,84,421/-. Relevant part of the said report is as below:
CC/396/2018 Page 13 of 26"Thus we had considered cost of repair of rotor as Rs 75 Lac. The insured has now provided quotation for repairs of rotor, which was provided to them much earlier by repairer M/s BHEL and as per this, the repair cost of rotor was Rs 19902700 & whereas we have considered the repair cost as Rs 75 Lac only, net of salvage.
...
5.0 RECOMMENDATIONS 5.1 The above amount of Rs. 17384421 (Rupees One Crore Seventy Three Lac Eighty Four Thousand Four Hundred and Twenty One Only) Is the net liability of the underwriters subject to admission of liability by Insurers, and terms & conditions, limitations and warranties of the policy under reference."
15. Importantly, neither the final survey report nor the addendum concluded that the loss was excluded under the policy. Rather, the loss was assessed and quantified as admissible. Further, BHEL issued a technical report dated 06.01.2016, forwarded by e-mail on 07.01.2016, stating that the Turbo Generator had been running satisfactorily since commissioning. Relevant part of the said report is as below:
"5.0 BHEL Recommendations:-
51 TG Stator:-
i): Core damage was observed at fault location.,
ii) The 10 stator was manufactured by GVPI (Global Vacuum Pressure Impregnation) process. The entire core and winding will form like a monolithic structure after GPl process. ill) Core repair of TG stator, manufactured through VPI process, requires coil removal for attending the repair work. Coil removing will lead to longer core damage.
iv) The cost of the material involved in the repair of TG stator will be almost equal to that of a new stator. However man-
hours required for repair will be more than that of making a new IG stator,
v) In view of the above, BHEL recommended for new TG stator instead of rewinding the damaged stator considering the cost, time cycle and quality of the job.
...
6.0 Probable causes of failure:-
6.1 TG Stator:-CC/396/2018 Page 14 of 26
1) Physically, it is observed that one of the core lamination got dislocated from its position and came out a little. Its knife edge might have damaged the coil insulation and led to puncture of the stator coil insulation.
2) Stator magnetic circuits of turbo generators are subject to electrical, thermal and vibratory stresses. Especially the stator core ends are severely stressed due 1o presence of the stray magnetic field induced by the currents in the end winding.
3) This magnetic field has an axial component which penetrates perpendicularly in the front part of the laminations.
The transverse magnetic field induces in-plane eddy currents in the first/end laminations of the packet leading to extra losses and overheating.
4) These effects might damage the stator core by breaking down the insulation layer between laminations. This might have resulted in puncturing the slot wall insulation which has led to stator earth fault. Such faults are very rare.
6.2 TG Rotor:-
1) Consequent to the stator earth fault, Turbo Generator rotor has also developed single earth fault, which couldn't be physically located. Such earth fault of rotor is accidental and very rare.
2) The Turbo Generator rotors are designed and manufactured with great care to work trouble free for 25 - 30 years. The present condition of this Rotor can happen from accidental damages"
16. It is to be noted that OP further appointed J. Basheer & Associates Insurance Surveyors and Loss Assessors and relied on their expert opinion, which vide their report dated 30.03.2016 held as under: "OUR OBSERVATIONS / COMMENTS :
1) The Incident and the observation made by OEM during Joint Inspection. on 24/03/2014, without the presence of Surveyor, was fault in Slot No. 74 (Top Bar - Y Phase, Bottom Bar - R Phase) in the STATOR. The Rotor winding to Shaft IR Value showing only 10 KS. (as against minimum reading should be of 40 K at which warning alarm will activate and tripping of TG will take place as per OEM's O&M Manual).
...
17) Wear & Tear damage of a Rotor due to low IR Value, the Insured found to have requested the OEM BHEL for Repair / CC/396/2018 Page 15 of 26 Replacement Quotation as on 23/11/2013 and the same was claimed as Accidental Damage in Mar. 2014 and the Surveyor, without verifying the facts had Assessed the Loss towards Rotor which was run down of Insulation Resistance over a period of operation and Recommended Net Amount of Rs. 1,73,84,421/- towards Rotor & Stator.
18) From the e-mail Correspondences of the insured dt.
12/04/2014, it is amply ear that the subject 25 MW TG Set was perpetually failing / having breakdowns, which could be due to manufacturing defects / boo maintenance/ Wear & Tear, over a period of operation.
19) The poor performance of Generator was found to be much prior to the alleged Incident.
20) As per the Shift Log Book, there was no entry of breakdown of 25 MW Stator. Only on 15/03/2014, it is indicated as the subject No. 1 TG Set as Shutdown and not mentioned as any 'Breakdown' or 'Shutdown' due to any breakdown. CONCLUSION:
...
The nature of failure as brought out in the Survey Report and Insured's E-mail dt. 22/11/2013 & 12/04/2014, it is clearly evident that the Loss would fall within the General Exception at Srl.No.5 of Machinery Breakdown covered under IAR Policy. Srl. No. 5, under General Exceptions describes as under:
The Company shall not be Liable under this policy in respect of Deterioration of or wearing away or wearing out of any part of any Machine caused by or naturally resulting from normal use or exposure."
17. The aforementioned opinion was, however, subsequently examined by the very surveyor appointed by the OP, namely M/s Sanjay Dwivedi & Associates, who vide clarification dated 23.05.2016, categorically reaffirmed that the damage was accidental in nature. The surveyor expressly relied upon the technical report of M/s BHEL, rejected the inference of wear and tear drawn by the investigator, and reiterated that the rotor and stator were healthy prior to the incident, as evidenced by the Turbo Generator operating continuously at more than 24 MW from 10.03.2014 to 14.03.2014. The surveyor also clarified that CC/396/2018 Page 16 of 26 low insulation resistance values, by themselves, did not establish wear and tear, particularly when the OEM had opined that such faults were accidental and rare. Relevant portion of the said report is as under:
"Now we have been provided soft copy of Investigation Report No. JBPL/034/2015-16 dated 30/03/2016 of M/s 3. Basheer & Associates, and we have been asked to give our views on the same. We give below our comments:
1. Physical Damage to the Rotor - As per OEM (BHEL) inspection report that "such earth fault of rotor is accidental and very rare. These rotors are designed and manufactured with great care to work trouble free For 25-30 years. The present condition of rotor can happen from accidental damage only." This accident happened when TG set was in full load operation and the reason of accident was "FLASH OVER".
This "Flash Over" incident is although rare but technically acknowledged by all reputed TG set manufacturers as one of the serious reason for such accidents. As this TG set was running on full load from 10/03/2014 i.e. producing more than 24 MW, the healthiness of stator and rotor cannot be doubted rather it can be convincingly stated that both stator and rotor were in fully sound and O.K condition, that's why, this TG set was continuously producing (in al 3 shifts) more than 24MW from 10/03/2014 to 14/03/2014. So, we once again re-confirm that rotor was in healthy condition at the time of the accident and post accident condition happened only because of this incident, and technically confirmed by M/s. BHEL. ...
4. Low IR Value of rotor - The observation of the investigator that low IR value indicates insulation resistance drop due to wear and tear is not supported by any documentary evidence. On the contrary, the investigator himself has stated on page 28 that as per Technical Report dated 06/01/2016 of OEM, SHEL such earth fault is accidental and very rare and that the present condition of this rotor can happen from accidental damages only. As HEL and manufactures and experts in their field, their opinion should be given due weightage. They have very clearly mentioned that "the present condition of this rotor can happen from accidental damages only".
...
CC/396/2018 Page 17 of 268. Preliminary Surveyor- Only 1 coil damaged - The survey report by preliminary surveyor was for damage seen provisionally only. OEM, BHEL have seen the damage practically and they are the experts in their field. Preliminary surveyor or investigator cannot over-rule the findings of the experts. We as final surveyors agree with the technical report and views of BHEL. We reiterate that the damages considered by us in our reports were accidental and we have recommended only for the damages falling within the purview of the subject policy.
9. Overhaul by OEM at every 2 years - The investigator has himself observed that the TG sets were being overhauled by some outside agency.
...
We would like to add as under to elaborate on cause of loss. (1) The subject TG set is of 2005 make. As per BHEL, useful life of such TG Set is 25-30 years. The present breakdown occurred in March, 2014, i.e., within 10 years of manufacture. (II) As per OEM BHEL Technical Report dated 06/01/2016, one of the core lamination got dislocated and its knife edge might have damaged the coil insulation and punctured the stator coil insulation. Magnetic circuits and vibratory stresses also contribute to breaking down the insulation layer. As per report, such faults are very rare. (il) The Technical Report further states that the Turbo Generators rotors are designed and manufactured with great care. The present condition of this Rotor can happen from accidental damages only. ...
BHEL is a Central Government Public Sector Unit providing indigenously manufactured Power Plants. Government of India has declared BHEL as "Maharatna CPSE" and in this category, there are only 07 CSE's and BHEL is one of them. Their turnover last year was more than Rs.31000 crores and the net profit as Rs. 1419 crores. This clearly explains the status of insured's repair bill in total turnover of BHEL. So, imagining that that BHEL manipulated in this case is highly immature and non professional attitude."
18. It is also a matter of record that the OP had also obtained an expert opinion from Shri VG Chorghade, Consultant (Power), vide report dated 09.08.2016, wherein the claim was opined to be genuine and fit for settlement. Relevant portion of the said report is as under:
CC/396/2018 Page 18 of 26"In case of this machine the FAULT and Damages that have occurred have occurred is very UNFORTUNATE.
1. In my opinion the Claim is Genuine and be settled at the cost of the insured for.
2. On going through the reports I find that the Salvage value of the Generator is on much lower side."
19. Despite the incident being examined and evaluated by multiple independent surveyor/experts consistently reiterating the incident at the premises of the Complainant, damage, evaluation of the loss and the liability of the insurer, the OP chose to rely upon General Exception No. 5 relating to deterioration and wear and tear and repudiated the claim vide letter dated 24.01.2017. Perusal of the repudiation letter reveals that it was largely based upon assumptions regarding maintenance and prior correspondence, without dealing with categorical findings of the final surveyor, the BHEL technical reports or the clarifications issued by the surveyor after considering the investigator's report. Relevant part of the said letter is reproduced below:
"2. From the nature and history of damages as narrated by you in your mail dated 12/04/2014 it is amply clear that the turbo generator would not have been properly maintained and periodically overhauled by OEM BHEL.
...
6. The nature and failure as brought out in the survey report and your email dated 22/11/2013 and 12/04/2014, it is clearly evident that the loss would fall within the General Exception No 5 of the Machinery breakdown covered under IAR policy. General Exception No 5 describes as under "The Company shall not be liable under this policy in respect of deterioration or wearing out any part of any machine caused by or naturally resulting from normal use or exposure.
Hence based on the above observations the Competent Authority has decided to repudiate your claim."
CC/396/2018 Page 19 of 2620. It is well settled that although an insurer is not bound to accept a surveyor's report mechanically, such report carries substantial evidentiary value and cannot be brushed aside without cogent and convincing reasons. In Sri Venkateshwara Syndicate v. Oriental Insurance Company Limited, (2009) 8 SCC 507, decided on 24.8.2009, the Hon'ble Supreme Court observed that:
"22. ... We also add, that, under this Section the insurance company cannot go on appointing Surveyors one after another so as to get a tailor made report to the satisfaction of the concerned officer of the insurance company, if for any reason, the report of the Surveyors is not acceptable, the insurer has to give valid reason for not accepting the report. Scheme of Section 64-UM particularly, of sub-sections (2), (3) and (4) would show that the insurer cannot appoint a second surveyor just as a matter of course. If for any valid reason the report of the Surveyor is not acceptable to the insurer may be for the reason if there are inherent defects, if it is found to be arbitrary, excessive, exaggerated etc., it must specify cogent reasons, without which it is not free to appoint second Surveyor or Surveyors till it gets a report which would satisfy its interest. Alternatively, it can be stated that there must be sufficient ground to disagree with the findings of Surveyor/Surveyors. There is no prohibition in the Insurance Act for appointment of second Surveyor by the Insurance Company, but while doing so, the insurance company has to give satisfactory reasons for not accepting the report of the first Surveyor and the need to appoint second Surveyor."
21. In New India Assurance Company Limited v. Sri Buchiyyamma Rice Mill and Anr (2020) 12 SCC 105, Hon'ble Supreme Court held:
"17. While determining whether the appointment of a second or successive surveyor is justified, one must take into consideration the necessity of doing so and it must be weighed in the context of relevant facts and circumstances including the deficiencies or omissions in the report of the first surveyor. Each case must be independently considered based on relevant facts and circumstances. There ought to be cogent reasons for appointing a second surveyor."CC/396/2018 Page 20 of 26
22. We would also like to refer to S.S. Cold Storage India Pvt. Ltd. v. National Insurance Company Limited, 2023 INSC 689, decided on 08.08.2023, wherein the Hon'ble Supreme Court discussed multiple authorities on the issue where multiple reports of surveyors and experts were present:
"15. The proper approach in a case of the present nature where there are multiple reports of surveyors and experts has been outlined in a catena of decisions of this Court. Presently, we wish to advert to the decisions cited by the parties. a. United India Insurance Company Limited vs. Kantika Colour Lab and Others, where this Court held that simply the happening of a covered event did not entitle the insured to claim reimbursement of the amount stated in the policy, and that only upon proof of actual loss could the insured claim reimbursement to the extent the same were established.
b. United India Insurance Co. Ltd. and Others vs. Roshan Lal Oil Mills Ltd and Others, where this Court remanded the matter back to the NCDRC as due consideration was not placed on the joint survey report of the relevant incident on the basis of which the insurer had repudiated the claim of the insured; and that non- consideration of this important document resulted in a serious miscarriage of justice and vitiated the judgment of the NCDRC. c. Sikka Papers Limited vs. National Insurance Company Limited and Others, where this Court observed that a surveyor's report was not the final word, and that there must be legitimate reasons for departing from such a report.
d. Sri Venkateswara Syndicate vs. Oriental Insurance Company Limited and Another where this Court expounded on the duties of a surveyor, and the due importance to be given to his assessment. It was also observed that an insurance company was not bound by a surveyor's report, but also could not go on appointing surveyors one after the other so as to get a tailormade report to its satisfaction. Further, in the case that it did appoint a second surveyor, satisfactory reasons for the same needed to be provided. It was also laid down that if the surveyor's reports were prepared in good faith and with due application of mind - in the absence of any error or ill motive-the insurer was not expected to reject the same, and in the event of an arbitrary rejection of a surveyor's report, the courts could intervene and correct the error committed by insurer while repudiating the claim of the insured.CC/396/2018 Page 21 of 26
e. New India Assurance Company Limited vs. Pradeep Kumar where it was observed that a surveyor's report was not the last and final word. Further, it was not that sacrosanct that it could not be departed from, and that though it could be the foundation/basis of the settlement of a claim, it was not binding upon the insurer or the insured.
f. New India Assurance Co. Ltd. vs. Luxra Enterprises (P) Ltd and New India Assurance Co. Ltd. vs. Sri Buchiyyamma Rice Mill, where this Court relied on Sri Venkateswara Syndicate (supra) to observe that a surveyor's report may be rejected only due to the report containing inherent defects, it being arbitrary, excessive, and exaggerated, or any such cogent reasons before the appointment of another surveyor.
g. National Insurance Company Ltd. vs. Hareshwar Enterprises (P) Ltd and Others where this Court, relying on Pradeep Kumar (supra), observed that while the assessment of loss by an approved surveyor was a prerequisite for settlement of the claim, it was not the last and final word.
Further, it was not that sacrosanct so as not to warrant a departure if necessary. Further, the report was not binding on either party, and could be taken on as evidence until more reliable evidence was brought on record to rebut the contents of the surveyor's report.
h. Khatema Fibres Ltd. vs. New India Assurance Company Ltd. where this Court, while discussing the scope of the expression deficiency, stated that the appellant should be able to establish either that the surveyor did not comply with the code of conduct in respect of its duties, responsibilities, and other professional requirements or that the insurer acted arbitrarily in rejecting the whole or a part of the surveyor's report. It also reiterated the dicta of Pradeep Kumar (supra) as discussed hereinabove. Further, this Court held that a consumer forum, which was primarily concerned with an allegation of deficiency in service, cannot subject the surveyor's report to forensic examination. Once it was found that there was no inadequacy in the quality, nature, and manner of performance of the duties and responsibilities of the surveyor, and that the report is not based on adhocism or vitiated by arbitrariness, then the jurisdiction of the forum to go further would stop."
CC/396/2018 Page 22 of 2623. In view of the admitted existence of a valid Fire Industrial All Risk Policy, including the cover for machinery breakdown for the period 18.05.2013 to 17.05.2014, the breakdown occasioned on 14.03.2014 is during the subsistence of the policy. Further, with due regard to the above deliberations, we are of the considered view that the damage and the consequent loss claimed by the Complainant is within the scope of the policy. This finding is founded upon contemporaneous documentary and technical material placed on record, including the preliminary survey conducted by Shri Ramesh Agrawal on 24.03.2014 which recorded that the Turbo Generator Set was in breakdown condition with stator earth fault; the Minutes of Meeting dated 24.03.2014 with the OEM M/s BHEL, Hyderabad, recording the details of inspection of the damaged Turbo Generator immediately after the incident; the final survey report of M/s Sanjay Dwivedi & Associates dated 17.03.2015, which specifically recorded that the date of loss fell within the period of insurance and that the failure of insulation resulting in electrical breakdown constituted an insured peril under the policy and not an excluded peril; the technical report of M/s BHEL dated 06.01.2016, forwarded by e-mail dated 07.01.2016, which attributed the failure to accidental insulation breakdown and recorded that such faults were rare and accidental; and expert engaged by the OP Shri VG Chorghade, Consultant (Power), opined vide report dated 09.08.2016 that the claim was genuine and fit for settlement.
24. The cumulative appreciation of the said material reveals that the proximate cause of loss was an accidental machinery breakdown and not deterioration or wear and tear arising from normal use, and that the consequent loss is, therefore, covered under the policy.
CC/396/2018 Page 23 of 2625. As regards the issue whether the incident was reported in time, it is a matter of record that the Complainant reported the incident had occasioned on 14.03.2014 and it was intimated to the OP by e-mail dated 21.03.2014. The OP acted upon the said intimation by appointing the preliminary surveyor on 24.03.2014 and by participating in the joint inspection with the OEM on the same date, as reflected in the preliminary survey report and the Minutes of Meeting dated 24.03.2014. The OP has not placed any material on record to demonstrate that any prejudice was caused on account of the interval between the date of loss and the date of intimation. In the absence of proof of prejudice, we hold that the requirement of timely reporting stands duly complied with.
26. As discussed above, the repudiation of the claim vide letter dated 24.01.2017 invoked General Exception No. 5 relating to deterioration and wear and tear. However, the final survey report dated 17.03.2015 and the addendum report dated 08.06.2015 did not consider the tenability of invoking any exclusion clause. On the contrary, it recorded that the failure of insulation resulting in electrical breakdown was an insured peril under the policy. The technical report of the OEM dated 06.01.2016 further recorded that the present condition of the rotor could happen from accidental damages only. The clarificatory report of the final surveyor dated 23.05.2016 expressly rejected the inference of wear and tear drawn by the investigator and reaffirmed that the breakdown was accidental in nature. In the face of such consistent technical findings, we hold that the reliance placed by the OP on General Exception No. 5 was misconceived. Clearly, the claim was duly ascertained by the OP's first surveyor. As discussed above, the record demonstrates that the OP caused a preliminary survey to be conducted on 24.03.2014; appointed M/s Sanjay Dwivedi & Associates as final CC/396/2018 Page 24 of 26 surveyor, who submitted the final survey report dated 17.03.2015 and the addendum report dated 08.06.2015 quantifying the admissible loss; obtained the technical report of the OEM M/s BHEL dated 06.01.2016; procured the investigator's report of M/s J. Basheer & Associates dated 30.03.2016; sought and obtained the clarificatory comments of the final surveyor dated 23.05.2016 on the investigator's report; and further obtained an independent expert opinion from Shri V.G. Chorghade, Consultant (Power), dated 09.08.2016. The said sequence of steps, extending over two years, clearly establishes that the complainant's claim was subjected to a multiple and comprehensive evaluation processes by the OP.
27. In the present case, the OP Insurer failed to demonstrate any legally sustainable basis for discarding the findings of its own appointed final surveyor and the expert, who consistently held the loss to be accidental and covered under the policy. The reliance on the wear and tear exclusion, in the face of detailed technical findings to the contrary is, therefore, misplaced. The allegation of suppression of material facts by the Complainant regarding prior correspondence with BHEL has also not been substantiated, as there is no material to show that any alleged non-disclosure altered the nature of the risk or rendered the claim inadmissible. Suppression, to defeat a claim, must be material, intentional and causative of prejudice, which has not been established in the present case. The claim remained under consideration from March 2014 and was ultimately repudiated only on 24.01.2017, that is to say after about two years and 10 months, despite the availability of surveyor assessments and expert opinions recommending settlement. Such prolonged processing, followed by repudiation without adequate justification, clearly amounts to deficiency in service on the part of OP.
CC/396/2018 Page 25 of 2628. As regards the claim and the liability of OP Insurer, it is undisputed the claim of the complainant was Rs.4,23,45,000. M/s Sanjay Dwivedi & Associates, the final surveyor vide report dated 17.03.2015 determined the Net Assessed Loss as Rs.1,26,36,400 and upon objection by the complainant, the Net Liability was reassessed as Rs.1,73,84,421 vide addendum report dated 08.06.2015. Other than repudiation of the claim on the grounds deliberated above, the OP did not contest the Net Assessed Loss determined by the surveyor and the addendum report dated 08.06.2015.
29. In view of the foregoing and after due consideration of the entire facts and circumstances of the case, including the arguments advanced by the learned counsels for both the parties, the deficiency in service on the part of the OP Insurer in delay in consideration of the claim as well as the claim repudiation are manifest. The OP is, therefore, directed to pay Rs.1,73,84,421 to the complainant, along with simple interest @ 8% per annum from 21.09.2014 (i.e. from the date six months after the reporting the incident) till final payment. This payment shall be made within 60 days from the date of this order. In the event of delay, the interest liability for delayed period shall be @12% per annum.
30. OP shall also pay the complainant Rs.40,000 as costs of litigation.
31. All pending Applications, if any, are also disposed of accordingly.
......................................................... (AVM J. RAJENDRA, AVSM, VSM (RETD.) PRESIDING MEMBER ......................................................... (ANOOP KUMAR MENDIRATTA, J) MEMBER /Hitaishee CC/396/2018 Page 26 of 26