National Consumer Disputes Redressal
Manager, Legal Deptt, N.A.I.Co. Ltd. vs M/S. Oswal Plastic Industries on 20 February, 2019
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 207 OF 2015 (Against the Order dated 10/11/2014 in Complaint No. 13/2011 of the State Commission Punjab) 1. MANAGER, LEGAL DEPTT, N.A.I.CO. LTD. DRO-I, RG CITY CENTRE, 2ND 3RD FLOOR, LSC ROAD, BLOCK-B, LAWRENCE ROAD, DELHI-110035 ...........Appellant(s) Versus 1. M/S. OSWAL PLASTIC INDUSTRIES THRU ITS PROPRIETOR, MRS. MONIKA JAIN, W/O. MR. SUNIL JAIN, PLASTIC INDUSTRIES, V & PO JASPALON, DORAHA, DISTT. LUDHIANA PUNJAB ...........Respondent(s)
BEFORE: HON'BLE MR. PREM NARAIN,PRESIDING MEMBER
For the Appellant : Mr. S.D.Wadhwa , Advocate For the Respondent : Mr. Manish Joshi, Advocate
Dated : 20 Feb 2019 ORDER
The appeal has been filed by the appellant Manager, Legal Deptt. New India Assurance Company Ltd. against the order dated 10.11.2014 passed by the State Consumer Disputes Redressal Commission, Punjab, (in short 'the State Commission') in Consumer Complaint No.13/2011.
2. Brief facts of the case are that the respondent/complainant took a fire and special perils policy for his industrial establishment on 27.6.2009 and got the sum assured enhanced with effect from 02.07.2009 by an endorsement on the policy. The total policy was for Rs.2.5 crores with the following details:-
"Rs.30,00,000/- on insurance of entire building including Boundary wall above Plinth Level situation at above address.
Rs.1,45,00,000/- insurance of entire Machinery including Gen Set, &/or Spare Parts &/or Accessories &/or Electricals whilst fitted &/or installed &/or lying therein.
Rs.75,00,000/- Category I Stocks on Stocks of all kinds of Polythene Bangs, & /or Granules &/or Paper napkins &/or Raw Material used for the manufacturing of the same &/or Finished, Unfinished, Semi Finished goods of the insured's trade &/or Packing Material whilst stored &/or lying &/or in process."
3. A fire broke out in the premises of the industrial shed on 17.10.2009 where four extruder and bag making machines were kept along with some raw material. The total raw material and these machines got damaged in the fire. The police and the Fire Brigade Department were informed and the fire was controlled by the fire tenders. Insurance Company was also informed and a surveyor was appointed. The surveyor assessed the loss of Rs.29,17,500/- on reinstatement basis and Rs.12,60,000/- on depreciation basis as against the claim submitted by the insured for Rs.1,34,07,836/-. However, the Insurance Company repudiated the claim on 28.10.2010 on the ground that:-
"1. Three machines were shifted from Ludhiana to the building in course of construction and one was removed from the existing manufacturing block to the building in the course of construction for the purpose of fabrication therein. All these machines are not covered under the aforesaid fire and special perils policy obtained by you which is an operational policy. The machinery under erection and building in course of construction are subject matter of project insurance policy which incidentally you have not obtained.
2. That the incident of fire does not appear to be an accidental fire as the old damaged stock and waste material not relevant to the machines was stored around the machines. When the machines were not in working order and no power connection was provided, no electric fittings were installed, then what was the urgency of staking raw materials around the machines and waste material that too which has not relevance to the trade. The Surveyor has observed that: "The circumstances in which the fire broke out, the way the machines were stored in the building under construction along with raw material and waste material does not appeal and is not justified". Hence, they have recommended for repudiation of the claim.
3. That you have committed breach of the terms & conditions of the policy since as per condition No.3 of the fire and special perils policy obtained by you, the machines stored in the open sky in the building under construction are not covered under the insurance policy obtained by you as not such endorsement has been passed and attached with the policy and you have not applied for any such endorsement. Condition No.3 is reproduced as under:-
Under any of the following circumstances, the insurance ceases to attach as regards the property affected unless the insured, before the occurrence of any loss or damage, obtains the sanction of the company signified by endorsement upon the policy by or on behalf of the Company.
"If the trade or manufacture carried on be altered, or if the nature of the occupation of or other circumstances affecting the building insured or containing the insured property be changed in such a way as to increase the risk of loss of damage by insured perils"
4. You have failed to establish a legal relationship to the damaged machines as neither purchase bills could be produced nor the exact source and the date of purchase could be authenticated by you."
4. Aggrieved by the repudiation of the claim, the complainant filed a consumer complaint bearing No.13 of 2011 before the State Commission. The complaint was resisted by the opposite party Insurance Company on several grounds. The Insurance Company took the preliminary objection that the matter would involve a lot of evidence which was not possible in the summary proceedings under the Consumer Protection Act, 1986 and therefore, the matter cannot be heard by the State Commission and the remedy before the complainant was to go to a Civil Court. On merits it was stated that the fire was caused by the complainant and the complainant had changed the coverage of risk by putting the machines and the raw material in a shed which was under construction and which was open to the sky. The learned State Commission, however, after considering the evidence on record and after hearing the parties, allowed the complaint vide its order dated 10.11.2014 as under:-
"In view of the above discussion, we allow the complaint with a direction to the OPs as under:-
(i) Pay a sum of Rs.29,17,500/- alongwith interest @9% p.a. from the date of repudiation letter i.e. 28.10.2010 till the date of payment;
(ii) Pay Rs.1 lac as compensation for not passing the due compensation and compelling the complainant to file the complaint as a result of his harassment; and (iii) Pay Rs.11,000/- as litigation expenses." 5. Hence the present appeal. 6. Heard the learned counsel of both the parties and perused the records.
7. The learned counsel for the appellant stated that both the surveyor as well as the investigator have not given any cause of fire and therefore, it is apprehended that the fire was caused deliberately by the complainant as there was no electric connection in the shed where the machines were kept and the machines were also not connected to any electrical lines and the machines were not operational. The raw material kept there was also not spontaneous and therefore, fire due to spontaneous combustion is also ruled out. The possible cause of fire as stated by the complainant is the dropping of a firecracker from outside as the shed where the machinery was kept was open to sky. As the walls where quite high dropping of a live cracker was not possible and the only possibility that can be thought of is foul play by the complainant.
8. It was further argued by the learned counsel for the Insurance Company that the State Commission has allowed the claim of Rs.29,17,500/- on the basis of the survey report where the surveyor has assessed the loss of Rs.29,17,500/- on reinstatement basis and for Rs.12,60,000/- on depreciation basis. In this regard it was stated by the learned counsel that though the surveyor in his report has assessed the loss, however, he has clearly recommended repudiation of the claim vide his letter dated 29.09.2010 submitting clarification on some of the queries raised by the Insurance Company.
9. The report of the surveyor is an important document which cannot be brushed aside without any cogent reasons as the surveyors are appointed under the Insurance Act, 1938. The survey report forms the basis for settlement of the insurance claim. In the present case the surveyor has clearly recommended repudiation of the claim on the ground of violation of the conditions of the policy as mentioned above. It was further sated by the learned counsel for the Insurance Company that the State Commission has allowed the claim on reinstatement basis without mentioning any reason for the same. Surveyor has clearly stated in his report that reinstatement of the machinery was not done by the complainant till submission of the report of the surveyor. The order of the State Commission also does not mention whether the reinstatement was done by the complainant. Thus, there cannot be any question for allowing the insurance claim on the basis of reinstatement. In fact the damaged machines were not purchased by the complainant from any seller rather they were manufactured locally and there were no purchase bills available for the same. From this angle also claim cannot be allowed on reinstatement basis because the value of machines cannot accurately be ascertained for deciding the reinstatement value.
10. On the other hand, the learned counsel for the respondent/complainant stated that there was a total loss of Rs.1,34,07,836/- and the surveyor has assessed very low amount. The surveyor has not properly assessed the loss to the stocks as well as to the building.
11. The learned counsel further stated that indemnification under the policy is on the reinstatement basis and therefore, surveyor has assessed the loss on the reinstatement basis as well. State Commission has allowed the claim on reinstatement basis as per the condition of the policy and there is no error in the order of the State Commission in this regard. Neither the surveyor nor the investigator have concluded that there has been any foul play in the incident of fire. Thus, the repudiation of the claim is totally based on presumptions on the part of the Insurance Company. As per the policy, the loss due to fire of any kind is covered except for the loss if the fire is caused by spontaneous combustion. The surveyor has clearly stated that the raw material is not of the quality that fire may be caused due to spontaneous combustion. Hence, even if the cause of fire is not known the loss is to be indemnified. Clearly, the Insurance Company is bound to indemnify the loss due to fire. Thus, there is no error in the order of the State Commission and the appeal needs to be dismissed.
12. I have given a thoughtful consideration to the arguments advanced by both the parties and have examined the material on record. Both the surveyor and the investigator have clearly stated in their reports that no foul play has been observed and no mala fide intent can be imputed on the complainant in respect of the cause of fire. Thus, the assertion of the Insurance Company that the fire was result of the foul play by the complainant cannot be accepted and the State Commission has rightly dismissed this contention of the Insurance Company. In the policy the peril of fire is covered and the only exceptions mentioned in this peril are the following:-
I "Fire Excluding destruction or damage caused to the property insured by
a) i) its own fermentation natural heating or spontaneous combustion.
ii) its undergoing any heating or drying process.
b) burning of property insured by order of any Public Authority."
13. Clearly none of the exclusions mentioned against the peril of fire are attracted in the present case as the surveyor has clearly given finding that the nature of the raw material was such that it cannot initiate fire due to spontaneous combustion. Hence clearly loss is to be indemnified by the Insurance Company in the present case. It is now an accepted principle of law that report of the surveyor has to be taken into consideration while settling the insurance claim and the report of the surveyor cannot be brushed aside without any cogent reasons. The surveyor has assessed the loss in two different ways i.e. on reinstatement basis and on depreciation basis. In the present case the surveyor has clearly stated in his report that the reinstatement was not done till submission of his report. Even the State Commission has not recorded anything about reinstatement in its order. Even then the State Commission has allowed claim on reinstatement basis. The reinstatement value clause in the policy reads as follows:-
"9. If the Company at its option, reinstate or replace the property damaged or destroyed, or any part thereof, instead of paying the amount of the loss or damage, or join with any other Company or Insurer(s) in so doing the Company shall not be bound to reinstate exactly or completely but only as circumstances permit and in reasonably sufficient manner, and in no case shall the Company be bound to expend more in reinstatement than it would have cost to reinstate such property as it was at the time of the occurrence of such loss or damage nor more than the sum insured by the Company thereon. If the Company so elect to reinstate or replace any property the insured shall at his own expense furnish the Company with such plans, specifications, measurements, quantities and such other particulars as the Company may require, and no acts done or caused to be done, by the Company with a view to reinstatement or replacement shall be deemed an election by the Company to reinstate or replace.
If in any case the Company shall be unable to reinstate or repair the property hereby insured, because of any municipal or other regulations in force affecting the alignment of streets or the construction of buildings or otherwise, the Company shall, in every such case, only be liable to pay such sum as would be requisite to reinstate or repair such property if the same could lawfully be reinstated to its former condition."
14. From the above, it is clear that the goods insured are to be replaced on "as is basis" i.e. if the machinery is an old machinery it is to be replaced by an old machinery. As the actual reinstatement has not been done by the complainant or is not being done by the Insurance Company and the money is to be paid to the insured on reinstatement basis, one has to find out the value of the machinery on replacement basis i.e. the value of the old machinery. Clearly, the value of old machinery can be calculated only through deducting the value of depreciation from the current value of the machinery. As no bills were produced by the complainant for the purchase of the machinery and in fact the machinery has been locally manufactured, the surveyor has contacted the local manufacturers and has found out the current price of the affected machinery and for replacing the existing machinery with the similar type of old machinery, one needs to get the value by deducting the depreciation from this price. This has exactly been done by the surveyor in assessing the loss on depreciation basis. Thus, in my view, under the provision of the reinstatement clause as given in the policy, the claim is actually to be indemnified on the basis of loss assessed by the surveyor on the basis of depreciation and not on the basis of price of the machinery as has been done by the surveyor under the assessment of loss on reinstatement basis. In my view the surveyor has erred in this regard.
15. The Insurance Company has also objected to the claim on the basis of violation of condition No.3 of the Insurance policy. A perusal of condition No.3 shows that if the insured property is subjected to greater risk without any intimation to and an endorsement by the Insurance Company then the Company would not be liable to indemnify the claim. It is true that the three machines were brought from Ludhiana and one machine was locally taken out and put in the shed under construction. It is the claim of the complainant that after getting these three machines from Ludhiana, the value of sum insured was got enhanced and endorsement was obtained from the Insurance Company which is not disputed by the Insurance Company. The Insurance Company accepted the change and made necessary endorsement on the policy and then it did not bother to see where these machines would be kept. Under the circumstances, now it is not open to the Insurance Company to raise the issue of keeping the machine in the shed under construction and thereby increasing the risk under the policy. Moreover, the whole building including the boundary wall is covered under the policy and similarly all the machines whether fitted or installed or lying therein are covered under the policy. As these machines were lying in the shed under construction which was open to sky, it cannot be said that the machines were fit for operation or they were lying there because they were unfit for use. In the circumstances, at the most, the Insurance Company may be directed to indemnify the loss on the basis of the assessment of loss done by the surveyor on depreciation basis as explained above.
16. The State Commission also awarded a compensation of Rs.1,00,000/- to the complainant for harassment. However, the Hon'ble Supreme Court in Sikka Papers Limited Vs. National Insurance Company Limited and Ors., (2009) 7 SCC 777, has observed the following:-
"19. By way of footnote, we may observe that claim of Rs.10,00,000/- made by the complainant for mental harassment is wholly misconceived and untenable. The complainant is a company and, therefore, claim for mental harassment is not legally permissible. It is only the natural person who can claim damages for mental harassment and not the corporate entity."
17. As the respondent/complainant is not a natural person, the respondent/complainant is not entitled to compensation of Rs.1,00,000/- in the light of the above observation of the Hon'ble Supreme Court.
18. Based on the above findings, the appeal filed by the Insurance Company is partly allowed and the order of the State Commission dated 10.11.2014 is modified to the extent that the Insurance Company shall be liable to pay only Rs.12,60,000/- (rupees twelve lakhs sixty thousand only) instead of Rs.29,17,500/- as ordered by the State Commission. This amount will be paid along with 7% interest per annum from the date of order of the State Commission i.e.10.11.2014 till actual payment. The order of the State Commission in respect of the award of compensation of Rs.1,00,000/- is set aside. However, the order of the State Commission in respect of award of Rs.11,000/- as cost of litigation is maintained. No order as to costs for this appeal.
...................... PREM NARAIN PRESIDING MEMBER