National Consumer Disputes Redressal
Ecgc India Ltd. (Formerly Known As ... vs Sar Auto Products Limited on 23 November, 2023
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 57 OF 2016 (Against the Order dated 30/10/2015 in Complaint No. 85/2013 of the State Commission Gujarat) 1. ECGC INDIA LTD. (FORMERLY KNOWN AS EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD.) THROUGH THE BRANCH MANAGER, "NIRMAL" 2ND FLOOR, OPP. COMMISSIONER'S BUNGLOW, 7 RAMKRISHNANAGAR CORNER, RAJKOT-360001 GUJARAT ...........Appellant(s) Versus 1. SAR AUTO PRODUCTS LIMITED 50-E, BHAKTINAGAR INDUSTRIAL ESTATE, RAJKOT-GUJARAT-360002 ...........Respondent(s)
BEFORE: HON'BLE MR. SUBHASH CHANDRA,PRESIDING MEMBER HON'BLE DR. SADHNA SHANKER,MEMBER
FOR THE APPELLANT : MR. BHARAT SANGAL, SR. ADVOCATE WITH
MS. BABITA KUSHWAHA, ADVOCATE FOR THE RESPONDENT : MR. ADITYA V. SINDIG, ADVOCATE
Dated : 23 November 2023 ORDER
DR. SADHNA SHANKER, MEMBER
1. This appeal has been filed under section 19 of the Consumer Protection Act, 1986 in challenge to the Order dated 30.10.2015 of the State Commission in complaint no. 85 of 2013, whereby the complaint of the complainant was allowed and the appellant - insurance company was directed to pay an amount of Rs. 44,29,580/- along with interest at the rate of 9% per annum and compensation of Rs. 5000/- towards mental agony as also litigation cost of Rs. 3,000/- to the complainant.
2. We have heard the learned counsel for the appellant - insurance company (hereinafter referred to as the 'insurance company') and the learned counsel for the respondent - complainant (hereinafter referred to as the 'complainant') and perused the record including the State Commission's impugned Order dated 30.10.2015 and the memorandum of appeal.
3. The appeal has been filed with reported delay of 51 days.
In the interest of justice, inter alia considering the reasons given in the application for condonation of delay, the delay in filing the appeal is condoned.
4. The brief facts leading to the present appeal, as culled out from the complaint, are that the complainant obtained an insurance policy of shipments (comprehensive risks) from the insurance company for the exports/shipments, which the complainant made during the course of its business. The policy was valid for the period from 01.11.2009 to 31.10.2011. The said policy covers the non-payment of the agreed consideration by the overseas party due to commercial risks and political risks. The policy specifically covers the failure of the buyer to pay the insured. The complainant received an order from M/s Khambati International LLC for auto products valuing at Rs. 58,79,077/- on Documents against Acceptance (DA) 60 days terms. The bills of exchange were raised against the buyer for the payment of US Dollars $128,645.00. The goods were manufactured and exported by the complainant to the buyer on 20.03.2010. The buyer accepted the original documents on 60 days DA basis and cleared the consignment at the destination and received the goods in good and acceptable condition. Thus, the buyer accepted to make the payment of $128,645.00 on due date i.e. 19.05.2010. The payment terms were for 60 days (DA). . The goods were delivered by the complainant to the buyer. As per the agreement, the complainant was obligated to deliver the goods to the overseas buyer and in turn the buyer was bound to make the payment of $128,645.00. The invoice/bill of exchange was sent through bank and was duly accepted by the overseas party. Upon dispatch of the goods the obligation on the part of the insured was performed. On acceptance of the documents from the overseas bank, the title of the goods passed on to the overseas buyer. It is alleged that the buyer failed to make the payment of the consignment on due date i.e. 19.05.2010. It is alleged that the complainant and its bank made all the efforts to realize the due payment from the buyer, but only part payment of Rs. $32,785/- was made by the buyer. The overseas buyer also wrote a letter dated 11.11.2011 to the complainant claiming that he was facing severe financial crisis. As the overseas buyer failed to make remainder of the payment inspite of acknowledging his liability, the complainant filed a claim with the insurance company. The insurance company repudiated the claim vide its letter dated 28.05.2013 on the following grounds:
Ref: Your claim on account of Non-Payment by Ms. Khambati International, UAE- Dubai.
We regret to inform you that the Corporation has regretted it's liability towards payment under the above claim due to following reasons-
That correspondence and documents namely Policy Holder's lawyer's emails, payment evidence by buyer's shipment to Policy Holder, etc. provided by the buyer in support of their refusal to accept any further liability regarding the balance outstanding payment against the unpaid invoice under the claim; and
2. The claim was lodged with a delay of 7 (seven) months.
5. Aggrieved by the repudiation by the insurance company, the complainant filed a complaint before the State Commission. The State Commission vide impugned Order dated 30.10.2015 allowed the complaint and directed the insurance company to pay an amount of Rs. 44,29,580/- along with interest at the rate of 9% per annum. Compensation of Rs. 5000/- towards mental agony and litigation cost of Rs. 3,000/- were also awarded.
6. Aggrieved by the said Order of the State Commission, the insurance company filed the instant appeal before this Commission.
7. Learned counsel for the insurance company submitted that the fundamental principles of insurance law were ignored by the State Commission while passing the impugned order. Moreover, the State Commission had not only held the rejection of complainant's case unlawful, but it in fact substituted its opinion on the reasons discussed by the insurance company's officers in the File-Notings for rejecting the claim. He further submitted that such an exercise of power under a summary jurisdiction is beyond the scope of powers exercised by Forums constituted under the Consumer Protection Act. Further, substitution of subjective opinion formed by the State Commission during appreciation of information received under Right to Information is also in violation of the terms and conditions of the Insurance Policy, which were required to be construed strictly as per law. He further submitted that it is a settled position of law discussed by the Apex Court in its decision in case of " Muneer Enterprises v Ramgad Minerals & Mining Ltd" reported in 2015 (5) SCC 366, that the file-notings by the Administrative officers cannot always be given the effect of having sanction of law as the same are equivalent to a discussion on the administrative decision at hand.
8. He further submits that an overview of the relevant terms and conditions of the policy to the complainant and the corresponding breaches that it committed of such clauses is important and Clause 8 of the Policy deals with the monthly declarations which the insured is required to submit of the shipments it makes during the continuance of the Policy. The said Clause requires Declarations of two kinds: One, of the shipments made on monthly basis, second, of the payments which are overdue of the shipments so made. He further submits that the complainant was in breach of second part of Clause 8 i.e. Clause 8(b) when it filed Declaration of Overdue Payment on the buyer, M/s Khambati International, UAE, beyond the 30 days period specified in the said Clause and a delay of about 27 days absolved the insurance company of any liability as per clause 19(b) of the Policy. It is also submitted that the complainant was required to make a claim with respect to defaulting buyer within a period of two years from the due date of payment on the export made. The complainant has not denied the said stipulation. He has also submitted that clause 19(d) of the same policy excludes the liability of the insurer from payment in case of violation of the above stipulation of filing the claim. It is an admitted fact that the due date of payment of shipment made on M/s Khambati International UAE was 19.05.2010 and it is also a matter of record that the claim with respect to default in payment of this shipment was made only on 31.12.2012. Given the above clause, admittedly, the complainant filed its claim with respect to the defaulting buyer with a delay of more than seven months and therefore the Corporation's liability of paying the gross invoice value with respect to concerned shipment was excluded by a specific provision of the policy. There are specific exclusions to the risks which have been agreed to be insured by the insurance company. Clause 2(d) of the policy is relevant in this regard, which is reproduced as under:
(2) EXCLUSIONS TO THE RISKS INSURED'
The Corporation shall not be liable to be insured in respect of any loss the insured may suffer, the proximate cause for which is a risk other than any of those specifically listed under the 'Risks Insured' herein above. Without limiting the generality of the aforesaid, losses arising out of any of the following causes are specifically excluded from the purview of cover under this policy, i.e. any loss that arises from
.......
.......
(d) Failure or refusal on the part of the buyer to accept the goods and/or to pay for the whole or any of it due to his claim that-
(1) he is justified in withholding payment of the contract price or the gross invoice value or any part thereof by reason of any payment, credit, set-off or counterclaim; and/or that-
(ii) he is excused from performing his obligations under the contract including his obligations to pay, for any reason whatsoever, including but not limited to disputes or allegations relating to the quality, quantity, specifications, delivery schedule, etc. of the goods supplied to him by the insured whether or not such disputes relate to past or current shipments;
unless the insured has, for the amount of his loss, obtained a final judgment enforceable against the buyer from a competent court of law in the buyer's country provided however that the Corporation may, at its sole discretion and on being satisfied that the allegations or claim or the dispute raised by the buyer as aforesaid is not tenable or justified in the light of information gathered by or made available to it, agree in writing to waive this exclusion,"
9. Learned counsel for the insurance company further submitted that it is noteworthy that as part of exercise of considering even though a belated Claim filed by the complainant w.r.t. M/s Khambati International, insurance company wrote an email dated 01.02.2013 to the buyer, M/s Khambati International itself asking for the reasons for non-payment regarding the concerned shipment. Thereafter, Officer of the Debt Collection Agency, MAH International received an email dated 19.03.2013 from Finance Dept. of the Buyer Company stating that they have amicably settled the outstanding dues payable to M/s Sar Auto Products, India. Further, on 25.03.2013, the Debt Collection Agency received an email claiming that a settlement has been arrived at between the concerned exporter and buyer. On 29.03.2013, the insurance company sought clarification with respect to the mail sent by Buyer's office to the office of Debt Collection Agency and particularly asked for the settlement claimed to have been arrived between the complainant exporter and the buyer. On 30.03.2013, the Finance Department of Buyer, M/s Khambati International UAE confirmed in an email to the insurance company that they have reached a settlement agreement with complainant. In the said letter, the buyer attached a copy of several documents which it claimed was sufficient for the purpose of settlement under the UAE laws.
In support of the case, learned counsel for the insurance company cited a plethora judgments of Hon'ble Supreme court and this Commission, which are as under:
M/s BHS Industries vs. ECGC (2015) 9 SCC 414 EGCG of India Ltd. Vs. Garg Sons International (2014) 1 SCC 686 M/s Maya Overseas Pvt. Ltd. vs. ECGC, O.P. No. 287 of 1997 decided on 24.09.2004 Life Insurance Corp. of India vs. Asha Goel & Anr. (2001) 2 SCC 160 Oriental Insurance Co. Ltd. vs. Sony Cheriyan (1999) 6 SCC 451 M/s Surgichem Product India Pvt. Ltd. & Anr. Vs. ECGC & Anr, O.P. No. 170 of 1997 decided on 23.10.2008
10. Relying on the aforesaid judgment, he submits that in any insurance contract the terms and conditions of the policy are to be construed and observed strictly.
11. Learned counsel for the complainant submitted that there is no delay in submission of the monthly declaration of overdue payment as the bill of exchange and bill of lading stated that the payment became due on Document Acceptance 60 DA. The bill of lading is dated 20.03.2010 and the declaration is dated 15.06.2010. Further, he admits that there is delay of 07 months in filing the claim and in this regard, he relied on the IRDA circular dated 20.09.2011 which states that insurers must satisfy themselves that the delayed claim would have been otherwise rejected even if it had been reported on time. He further submits that as per the information received under the RTI Act, 2005, the dealing officers who processed the claim have in fact recommended the claim. The Manager also recommended the claim. However, the insurance company had rejected the claim illegally and there is gross deficiency in service.
12. The main issue in this appeal for consideration is whether the repudiation of the claim is correct or not.
13. As regards the first ground of repudiation given by the insurer is concerned, it is seen that in this case the insurer had contacted the buyer in UAE on its own asking for the reasons for non-payment regarding the concerned shipment. The buyer had responded to the Debt Collection Agency stating that they have amicably settled the outstanding dues payable to the complainant and they have exchanged all correspondences and also attached several documents which it claimed was sufficient for the purpose of settlement under UAE laws. The email dated 30.03.2013 of the buyer sent to the insured is as follows:
"Dear Mr Vishal, We have reach to settlement agreement with M/s SAR AUTO as mentioned in our earlier mail to Mr Christian (mail dtd 25/03/2013). As you can see point No 5 in agreement SAR AUTO has some particular intention to keep it confidential. To keep ourselves secured, we had taken through written confirmation from AL BAHAR ADVOCATE which they provide us via mail dtd 22nd Nov 2011.
As a part of agreement we have submitted agreement to AL BAHAR and paid amount of US$ 5000 on behalf of SAR auto against settlement.
To keep ourselves secured we have taken Mr Virani Signature on our payment voucher which is printed on our letter head and signed by Mr Shreyas Virani, we have issued him cheque in personal name which cleared in due course from our bank account. Copy of bank statement attached herewith for easy reference. We have Mr Virani Signature on Invoice and packing list too. All these original voucher remain with us as proof of final settlement.
Attachment List:
1) Payment voucher copy signed by Mr Virani (Bank statement copy also attached)
2) Al bahar mail copy which confirm the settlement (Mail sent to Khambati as well as SAR auto)
3) Invoice and Packing List copy which signed by Mr Virani
4) BL copy and AL BAHAR confirmation that they forward BL to SAR auto. (Mail sent to Khambati as well as SAR auto) As per UAE law this documents is enough for settlement and M/s Al Bahar nor M/s SAR Auto can deny agreement done in UAE court Please note that we are very transparent in all our deal and will provide you best possible support in these manner.
Regards, Regards S. Nabil Nawaz"
14. It is seen that the State Commission in its Order has relied on the views expressed in the notings of the officers of the insurer on file that have been received by the complainant through RTI to disregard this settlement / information received from the original buyer. The State Commission came to the conclusion that the settlement was of a dubious nature without looking into the material before it. Before this Commission also, the complainant also has relied on the notes received by them in the RTI applications with regard to the refusal on the part of the buyer to pay on account of settlement, and did not bring any evidence to contradict the contents of the email submitted by the buyer to the insurance company.
15. As regards, the evidentiary value of administrative notes, learned counsel for the insurance company has relied on the Hon'ble Supreme Court judgments in the case of Muneer Enterprises vs. Ramgad Minerals & Mining Ltd. reported in 2015 (5) SCC 366 and Shanti Sports Club vs. Union of India (2009) 15 SCC 705. In the case of Shanti Sports (supra), it has been held that "notings recorded in official file merely represent expression of opinion by the particular individual - Such noting/opinion, even if recorded by competent authority on merits of matter under consideration, cannot be termed as decision of Government unless it is sanctified and acted upon by issuing an order in accordance with Arts. 77(1) and (2) or Arts. 166(1) and (2) of the Constitution and is communicated to the affected persons - Notings and/or decisions in official file can always be reviewed/reversed/overruled or overturned - In absence of any order passed in said manner, these do not confer any right or adversely affect right of any person - Hence, such notings and/or decisions in file can neither be challenged in court nor be a basis of seeking relief".
16. Similarly in the latest decision of the Hon'ble Supreme Court in the case of Union of India vs. Indian Navy Civilian Design Officers Association and another 2023 STPL 1961 SC it has been held as under:
"It may be noted that a noting recorded in the file is merely an expression of opinion by a particular officer, and by no-stretch of imagination such nothing could be treated as a decision of the Government."
17. It is a settled principle of law that administrative notings cannot be substituted for decision making and can only be used as a support for proving matter. In the case at hand, clause (1) of the repudiation clearly applies since the complainant has neither before the State Commission nor before this Commission brought any evidence to rebut the settlement claim of the buyer. Only relying on noting on the file of the insurer cannot prove his case that the settlement was not a valid one. The State Commission's finding based on reliance on RTI notings in this regard is not legally sustainable. Clause (d) of the insurance contract clearly applies in this regard and the repudiation is found to be correct on this ground.
17. As regards the repudiation on the ground of delay, it is seen that the delay in filing the Declaration of Overdue Payment under clause 8(b) of the policy was filed with a delay of 27 days, which has been contested by the complainant. As regards the delay in filing the claim, the complainant has relied on the IRDA circular. The recent judgment of the Hon'ble Supreme Court in Gurshinder Singh vs. Shriram General Insurance Company Limited and another (2020) 11 SCC 612 has held that repudiation on the ground of delay could be taking a hypertechnical view if the claim is a genuine one. Since there is claim of settlement on behalf of the buyer, which was not controverted by the insured before any forum, it cannot be said that the claim of insurance is a genuine one. On the ground of delay also, the State Commission's findings cannot be upheld.
18. In view of the above, the appeal is allowed and the Order dated 30.10.2015 of the State Commission is set aside.
...................................... SUBHASH CHANDRA PRESIDING MEMBER ............................................. DR. SADHNA SHANKER MEMBER