National Consumer Disputes Redressal
Morinda Coop. Sugar Mills Ltd. vs New India Assurance Co. Ltd. And Ors. on 12 September, 2001
ORDER
B.K. Taimni, Member
1. This complaint has been filed by the complainant M/s. Morinda Co-operative Sugar Mills Ltd., Morinda Punjab alleging deficiency on the part of respondent-Insurance Company.
Brief undisputed facts are that there was a valid insurance cover for Rs. 20 Crores to cover the losses caused by fire, flood, storm, tempest, inundation, cyclone and earthquake, in the stocks of sugar of all kinds of sugar in gunny bags. There was a valid policy effective from 2.3.1994 to 1.3.1995 for which premium was paid. There was fire in the godowns of the factory on 2.3.1994 at about 3.20 p.m. Immediate action was taken by the complainant company to inform the police, call Fire Brigade and to inform the respondent. A claim amounting to Rs. 1,83,63,340/- plus Rs. 4.50 Lakhs as expenses was preferred by the complainant before the respondent Company. Surveyor appointed by the respondent Company gave his report on 28.3.1994 and informed the petitioner Company of the estimated loss of Rs. 155.79 Lakhs. This report had three qualifications and one query. Qualifications were, (1) entire stock of affective godown being "free-sale" as declared by Sugar Directorate, New Delhi, and secondly, if the Sugar Directorate does not grant the relief as free sugar for the affected godown, the loss worked out i.e. Rs. 155.79 Lakhs shall be reworked on the basis of levy/free sugar proportion basis, and thirdly that above details of loss shall be subject to terms and conditions of the insurance policy, and the query was, to submit Bills for the claim of Rs. 4.50 lakhs as 'other' expenses, in order to verify them. The complainant gave a copy of the letter from the Ministry of Food, Government of India on the question of levy/free sale sugar. On 24.8.1994, respondent Company informed the complainant of the settlement of claim at Rs. 1,04,23,533/-, which was accepted under protest by the complainant vide its letter dated 3rd/7th September, 1994 and again asking the respondent to pay the difference between the claim preferred by them and the amount now admitted to be payable by the respondent Company. Since no final settlement was forthcoming, respondent Company again asked the same Surveyor to revisit the factory and discuss the whole issue with them and submit a report. After visit and discussion, which the Surveyor held in the Company, respondent Company once again wrote to the complainant on 23.9.1994 giving details of arriving at the figure of Rs. 1,04,23,533/- paid to the complainant against his insurance claim. The details broadly are as under :
2. On receipt of these details a legal notice was given to the Insurance Company. No reply to the notice in on record. This was followed by filing a complaint before the Commission praying for an award of Rs. 99,89,384/- (Rs. 79,29,807/- being the difference between the claim preferred and amount given, plus Rs. 20,59,577/- as interest for the period @ 24% from 2.3.1994 to 31.3.1995), Rs. 4.50 lakhs for meeting the overhead expenses and Rs. 6 lakhs as damages. In his written statement the respondent rebutted the claim mainly on the ground that the complainant is estopped from filing the complaint after having accepted the offered amount of Rs. 1,04,23,533/- as full and final settlement of the claim. An effort is also made to take the ground that since this is a quantum dispute; the matter should gc to arbitration within the terms and conditions of policy. In the rejoinder filed by the complainant, all the points were rebutted/cleared. In all, three affidavits have been filed by both the parties in evidence, two from the complainant's side that of Chief Accounts Officer and that of Accounts Clerk of the complainant Sugar Cooperative Mills and one affidavit from the respondent side that of Senior Divisional Manager of the respondent Company.
3. In their almost identical affidavits filed by the complainant's side, it has been stated that the letter dated 13.4.1994 from Government of India clearly states that the Government would only have good sugar and not the damaged sugar.
4. The Regional Manager of the complainant Company conveyed its disagreement on accepting Rs. 1,04,23,533/- as full and final settlement vide their letter dated 4.7.1994. It is also stated that complainant mill had conveyed its agreement to have Rs. 155.83 lakhs against their demand of Rs. 1,83,63,340/-and that the respondent Company decided to pay Rs. 1,04,23,533/- without giving any specific details as to the grounds of reduction to this amount. It is also stated that a blank receipt was issued to be signed by the complainant mill thereafter respondent Company handed over the cheque on 2.9.1994 which was protested immediately.
5. In its affidavit the Senior Divisional Manager reiterates all the points mentioned earlier in the reference to the reply filed by the respondent i.e. that acceptance of cheque by the complainant was in full and final settlement.
6. The learned Counsel for the complainant Mr. Garg argued that without going in the undisputed question of facts, it is relevant to mention that the complainant accepted the amount of Rs. 1,04,23,533/- and immediately thereafter on 3/7 September, 1994 protested and asked for payment of the balance amount. At no stage he accepted this as full and final settlement. Since protest was communicated within less than a week; we cannot be estopped from filing the complaint for claiming the remainder amount He also argued that the Company had lost goods worth Rs. 1,83,63,340/-, nothing could be deducted from this and balance amount be awarded to the complainant with interest, damages and costs as prayed, as no grounds have been shown for any deduction at all by the respondent. The Surveyor has also estimated the damages at over Rs. 1.55 crores. This is essential to restore the health of the Co-operative Sugar Mills which is owned by small farmers. On the other hand it was argued by learned Counsel for the respondent Company Mr. S.K. Paul that once having accepted the amount in full and final settlement, the complainant cannot file the complaint to get any relief from this Commission. Details of deductions from the estimated amount of damages has also been made available which is as per terms of policy. The complainant Company is not entitled to any relief, hence the complaint need to be dismissed.
7. We have gone through the material on record and heard the argument. Before going further, it is necessary to address the main issue raised by the respondent i.e. of the estopped on the complainant to file this complaint before this Commission. We see that after going through the laid down procedure and internal processes the respondent Company gave the cheque on 2.9.1994 amounting to Rs. 1,04,23,553/- and the letter from the Managing Director of the complainant Mill is dated 3rd/7th September, 1994 which states... "...Since you have refused to issue us the cheque without any precondition, we have decided to accept your payment though under coercion and duress because huge amount is involved and payment is already delayed...". This is by now well settled that if protest is lodged within the shortest possible time, then payment cannot be said to be accepted in full and final settlement. We shall be begging the question, were the complainant to wait till the year 2001 for the whole amount to be paid. Insurance Company is not worried what happens to the other party. In our view the complainant Mill did the right thing to accept whatever was offered to keep the Mill going and yet retaining the right to stake the claim for the remaining amount. We do not feel any merit in this ground. We are also aware that as per the conditions of the policy, dispute in quantum of amount of liability need to go for arbitration, but we find it too late in the day to refer it for Arbitration after six years of the case pending with us.
8. The main grouse of the complainant is on the quantum of relief. According to him he had filed a claim for loss of sugar worth Rs. 1,83,63,340/- and also claimed Rs. 4.50 lakhs for overhead expenses. From the affidavit of Shri Jasbir Singh, Chief Accounts Officer of complainant Mill it appears that the complainant agreed to have Rs. 155.83 lakhs against the actual claim of over 1.83 crores. It shall be relevant to see as to how the respondent Company reached the figure of Rs. 1,04,23,533/-. There are two main deductions - one amounting to Rs. 19,01,510/-on account of difference of valuing the sugar on the basis of ratio of free sale to levy sugar and another Rs. 39,32,950/- on account of under insuring the sugar by about Rs. 6.73 crores.
9. In order to see the rationale for the first deduction, we have to see the letter dated 18.4.1994 issued by Ministry of Food, Directorate of Sugar, Government of India. It states -- "...your mill will have to supply levy sugar @ 40%. However the damaged sugar can be sold in open market to bulk consumers.... Permission for selling the damaged sugar as a part of free sale sugar released to you, may be obtained from the Directorate" (Emphasis supplied). In order to appreciate the nuance involved, a brief is necessary on the point of free sale/levy sugar. All the sugar produced by any sugar factory is released on instruction of Government of India. The whole stock is divided in to 'Levy' and 'Free Sale' sugar at the ratio of 40 : 60 respectively. Levy sugar is released through the Public Distribution System at somewhat subsidised rate. It is only against this that sugar is released for sale in free market. The rates are different. It is made clear in the first report of the Surveyor dated 28.3,1994 that stocks have been valued at free sale price and shall need to reworked if part of it has to go for levy purposes. The letter from the Directorate of Sugar makes it amply clear that, (1) levy shall have to be paid @ 40%; and (2) only good stocks shall be supplied under levy sugar; and (3) permission to sell damaged sugar in open market as part of free sale sugar may be obtained from the Directorate. This leaves no doubt at all in our mind that 40% of the stocks in the godown have to be valued at levy sugar price which is always lower than the free market sale sugar price. We find nothing wrong in this deduction which is for law of the land.
10. The second deduction is on account of under insurance. Declaration Clause 4, which form part of the insurance policy reads as under:
"If after occurrence of a loss it is found that the amount of the last declaration previous to the loss is less than the amount that ought to have been declared, then the amount which would have been recoverable by the insured shall be reduced in such proportion as the amount of the said last declaration bears' to the amount that ought to have been declared."
11. Important point to note in this is that if amount of insurance cover is found to be less than the declaration previous (Emphasis supplied) to the loss, then there shall be reduction in proportion to the short amount declared. In this instant case, policy cover is for Rs. 20 crores and Surveyor estimated the stocks at proportionate Free Sale : Levy Sugar price and arrived at stocks valued at Rs. 26.73 i.e. under insurances by 25.17% and it is by this percentage from the total amount, that deduction has been made i.e. 25.17% of the value of stocks of Rs. 1,39,32,950/ - except for a bland denial there is no material on record to rebut that stocks were not of the volume or value. Two affidavits filed by the complainant Mill does not refer to the point at all. The sock figures were supplied by them, there is no dispute about the number of bags damaged. This is substantiated by the fact that complainant Mill was agreeable to accept Rs. 155.83 lakhs in full settlement. This figure is arrived at by valuing a certain stock at a certain price with qualifications i.e. of its being available for free sale only and secondly figure is subject to conditions of policy. It is under these two qualifications that deductions have been made and cannot be faulted.
We find ourselves unable to see any merit in the case of the complainant.
The complaint is dismissed. In the facts and circumstances of the case no order on costs.