Telangana High Court
M/S Spectrum Power Generation Limited vs M/S United India Insurance Company ... on 2 January, 2025
THE HON'BLE THE CHIEF JUSTICE ALOK ARADHE
AND
THE HON'BLE SRI JUSTICE J.SREENIVAS RAO
COMMERICAL COURT APPEAL No.26 OF 2022
JUDGMENT:(Per the Hon'ble Sri Justice J. Sreenivas Rao) This appeal has been filed aggrieved by the judgment and decree dated 05.10.2021 in C.O.S.No.134 of 2017 (old O.S.No.451 of 2008) passed by the Special Court for trial and disposal of Commercial Disputes at Hyderabad (hereinafter referred to as 'the Special Court') invoking the provisions of Section 13 of the Commercial Courts Act, 2015 (hereinafter referred to as 'the Act').
2. The appellant is the plaintiff and respondents are the defendants in C.O.S.No.134 of 2017. For the sake of convenience, the parties herein are referred to as they arrayed in the suit before the Special Court.
3. Heard Ms.Meenakshi Aurora, learned Senior Counsel appearing for Mr.M.Naga Deepak, learned counsel for the appellant, and Mr.A.Venkatesh, learned Senior Counsel appearing for Mr.Srinivas Rao Pachwa, learned counsel for respondent Nos.1 and 2.
3. Brief facts of case:
3.1. The plaintiff - Spectrum Power Generation Limited has filed suit in O.S.No.451 of 2008 before the III Additional Chief Judge, City Civil Court, Hyderabad, seeking the following reliefs: 2
"(a) Declaring that the insurance claim comprising of material damage and Business Interruption losses preferred by the plaintiff relating to the Steam Turbine Generator incident which occurred on 05.11.2002 at the facility is admissible under the IAR Policy No. 050100/11/02/059/2002 dated 31.07.2002 pertaining to the period from 01.07.2002 to 30.06.2003; and consequently, direct the defendant Nos.1 to 3, to jointly and severally pay the plaintiff the sum of Rs.166,88,71,981/- (Rupees One hundred Sixty Six Crores Eighty Eight Lakhs Seventy One Thousand Nine hundred and Eighty One only) being Material Damage loss and Business Interruption loss suffered by the plaintiff.
(b) Direct the defendant Nos. 1 to 3 jointly and severally to pay the plaintiff a sum of Rs.1,00,000/- as consequential damages.
(c) Direct the defendant Nos. 1 to 3 jointly and severally to pay pendente lite interest @ 12% p.a. or such higher rate as this Court may decide from the date of filing of the suit till the date of decree on the amount of Rs 166,88,71,981/-.
(d) Direct the defendants 1 to 3 to pay future interest @ 12% p.a. or such higher rate as this Court may decide from the date of decree till the realization of the amount.
(e) To award costs of the suit."
3.2. The said suit was transferred to the Special Court and it was renumbered as C.O.S.No.134 of 2017. In the above said suit, it is averred that the plaintiff Company is registered under the provisions of the Companies Act, 1956 on 26.10.1992 and the main object is that to generate, harness, develop, accumulate, distribute and supply 3 electricity by setting up thermal power plants by using liquid, gaseous or solid fuels for the purpose of light, heat etc., The plaintiff had entered into an Operation and Maintenance Agreement (for short, 'O & M Agreement') on 14.03.1995 and thereafter, it had entered Amended and Restated Power Purchase Agreement (for short, 'PPA') dated 23.01.1997 with the erstwhile Andhra Pradesh State Electricity Board (A.P.S.E.B.) and subsequently the same was changed into Andhra Pradesh State Transmission Corporation (APTRANSCO), for the purpose of generating electricity from the operations of all Gas Turbines and Steam Turbines. The plaintiff was operating 208 MW combined gas based power station at Kakinada of Andhra Pradesh State and the facility comprises of three Gas Turbines and one Steam Turbine Generator (for short 'STG') and the commercial operations were commenced on 19.04.1988. The plaintiff further averred that defendant No.1 is the lead insurer, defendant Nos.2 and 3 are the co- insurers, defendant No.4 is the Contractor for operation and maintenance of the facility and defendant No.5 is the original manufacturer of the equipment.
3.3. The plaintiff further averred that it has originally entered into an O & M Agreement with defendant No.4 for operation of the facility on 14.03.1995 and purchased an Industrial All Risk Policy (for short 'IAR Policy') in the joint names of the plaintiff, defendant Nos.4 and 5 for 4 coverage of Rs.854.24 crores. The said IAR Policy was issued on 31.03.1998 and the same was renewed from time to time till 30.06.2005. The relevant IAR Policy for the period between 01.07.2002 to 30.06.2003 is IARP No.050100/11/02/059/2002 dated 31.07.2002. In the O & M Agreement between the plaintiff and defendant No.4, there was a condition that the plaintiff shall obtain various insurance policies in the names of the plaintiff, defendant Nos.4 and 5 for insurance cover for property as well as for indemnifying against the loss of business interruption. The condition 13.2 in the O & M Agreement stipulates that the "insurance shall cover real and personal property at the facility and the site on a 100% replacement costs basis against all risks of direct physical loss or damage to facility and cover shall include business interruption and extra expense cover for loss of revenues and any additional and continuous expenses".
3.4. The plaintiff further averred that Section I of the IAR Policy provides for an insurance cover for the material damage to the insured property of the facility due to accidental, physical loss, destruction or damage for any reason other than the reasons specifically excluded and Section II of the IAR Policy made a provision for business interruption risks/consequential losses arising out of the shutdown of machines/units to facilitate repairs/replacements due to the damages 5 caused to the facility and the causes for the same are with reference to the causes mentioned in Section I of the IAR Policy. 3.5. The Plaintiff also averred that defendant No.4 had been observing an abnormal increase in the Thrust Pad Temperature of the STG for the past few weeks before 05.11.2002 and the original equipment manufacturer i.e., defendant No.5 had recommended defendant No.4 to conduct a detailed wear particle analysis by drawing an oil sample from the STG and to collect the oil sample from the nearest point of the drain point. It is also averred that a detailed inspection was conducted by defendant No.5 and found that Rotor Shaft of the STG and the damaged part was sent to M/s. ABB Aisthom Works, Vadodara for repair and STG was shut down on 05.11.2002. According to the plaintiff, repair works of the damaged Rotor Shaft completed by M/s.ABB Aistom Works and the Rotor Shaft reached to the plaintiff site on 23.10.2003 and finally the STG was put to operate on full load with the grid on 17.12.2003 after gap of 13 ½ months. 3.6. The plaintiff further averred that defendant No.4 through letter dated 06.11.2002 forwarded the report on the above incident to the plaintiff notifying the same to the insurance company and the plaintiff has forwarded the same to defendant No.1 with letter dated 07.11.2002. On receipt of the said communication, defendant No.1 along with Surveyor M/s. NVP Sharma Associates Private Limited 6 visited the site on 15.11.2002 and higher officials of defendant No.1 visited the site along with another Surveyor M/s. Mentha & Padamsay Private Limited on 28.11.2002 and 29.11.2002. The Surveyors visited the site on 18.12.2002 for collection of information and data relating to the loss estimate. Accordingly, the plaintiff furnished entire information to the Surveyors and sought for release of on account payment pending final settlement for claims for losses caused to the STG. On 21.01.2003 a meeting was held between the Regional Manager of defendant No.1 and officials of the plaintiff at Hyderabad for settlement of issue relating to on account payment and the Regional Manager of defendant No.1 has assured the plaintiff that on account of loss to the STG would be released shortly. 3.7. Thereafter, the plaintiff submitted several letters on 21.03.2003, 26.03.2003 and 02.05.2003 for furnishing the copy of the interim survey report, however, defendant No.1 has not furnished the same, on the other hand rejected the claim of the plaintiff through letters dated 13.05.2005 and 09.11.2005. Questioning the above said rejection letters, the plaintiff filed W.P.No.2195 of 2006 before the High Court of Andhra Pradesh at Hyderabad. In the said writ petition, the plaintiff sought interim direction in W.P.M.P.No.2195 of 2006 directing defendant No.1 to furnish the interim survey report and pursuant to the interim direction dated 07.02.2006, defendant No.1 furnished the 7 interim survey report dated 05.02.2003 to the plaintiff. Despite of recommendation made in the survey report, defendant No.1 has not made payments to the plaintiff, as such, the plaintiff addressed letters dated 12.11.2003, 11.12.2003 and 22.01.2004. After 2½ years, defendant No.1 rejected the insurance claim made by the plaintiff for the damage to the STG through letter dated 13.05.2005. Thereafter, the plaintiff addressed a letter dated 31.05.2005 to defendant No.3 seeking for views and opinion on rejection of insurance claim. Accordingly, defendant No.3 in its letter dated 17.06.2005 opined that IAR Policy covers all risks except those covered in the exclusions and the unintentional errors of defendant No.4 in the course of business are within the coverage of policy.
3.8. When defendant No.1 failed to consider the claims, the plaintiff filed suit claiming an amount of Rs.166,88,71,981/- against defendant Nos.1 to 3 towards its insurance claim for material damage and loss suffered due to the business interruptions and Rs.1,00,000/- towards consequential damages and pendente lite and post decretal interest on the above said amount @ 12% per annum and costs.
4. Defendant No.1 filed written statement denying the averments made by the plaintiff inter alia contending that the original insurance policy was issued in the year 1998-99 to the plaintiff and renewed periodically, as the sole insured, and later in terms of the O & M 8 Agreement dated 14.03.1995, the names of defendant Nos.4 and 5 were included as co-insured or joint injured parties. Defendant Nos.4 and 5 have no insurable interest in the subject of insurance and defendant No.1 had issued policy after considering all the terms and conditions of O & M Agreement and strictly subject to their rights synchronizing with the rights of the plaintiff. It is further averred that defendant Nos.4 and 5 are exclusively liable as per the terms and conditions of O & M Agreement and the same was referred in the letter dated 28.08.1998 as well as reply letter dated 09.09.1998 regarding inclusion of names of defendant Nos.4 and 5.
4.1. It is also averred that the IAR Policy was issued in the joint names of the plaintiff, defendant Nos.4 and 5 only basing on the representation made by the plaintiff regarding O & M Agreement and the same proves through correspondence. It is further averred that admissibility of the liability under Section I of the policy, the plaintiff will be entitled for claiming the insurance under Section II of the policy. The right to sue for the plaintiff survives till expiry of 12 months from the date of disclaiming the liability as per the condition 5
(ii) of IAR Policy and as the disclaimer was made on 13.05.2005 by defendant No.1, the plaintiff shall exercise the right to file the suit within 12.05.2006, failing which it shall be considered that the plaintiff has abandoned the claim. It is averred that as per clause 5(ii) 9 of the IAR Policy, even right of defendant No.4 to make any claim stood expired after lapse of 12 months of the incident and the suit is bad for non-joinder of financier/banker as the benefit if any payable is only to the banker and not to the plaintiff, as per the terms of the IAR Policy. Defendant No.1 further averred that the IAR Policy does not cover the liability of the Contractor (defendant No.4) under O & M Agreement. The liability arising out of wilful negligence or wilful act by the plaintiff or anyone acting on behalf of the plaintiff is excluded from the cover and as defendant No.4 is acting on behalf of the plaintiff, the liability out of wilful act or wilful negligence of defendant No.4 stands excluded.
4.2. Defendant No.1 also averred that the damage occurred due to the wilful negligence of the employees of defendant No.4 and as such, damage falls within the exclusion clause of the policy and therefore, defendant No.1 is not liable to indemnify the loss. As per the terms and conditions of O & M Agreement, any negligence on the part of defendant No.4 will render the policy exception effective and operable and thereby disentitle any of the insured, the right to make the claim under the policy. Accordingly, defendant No.1 rightly rejected the claim of the plaintiff.
4.3. Defendant No.1 further averred that in order to check the functioning of the facility, defendant No.5 has suggested, drawing of 10 sample for wear particle analysis from the near point to the bearing, contrary to the suggestion, instead of drawing sample from nearest point of bearing, staff of the plaintiff has drawn sample from flushing box by opening it, which resulted in splashing out of oil and the cover of flushing box could be fixed after some time and the damage occurred to the rotor shaft of the STG and the same is purely negligence on the part of the staff of the plaintiff only. Defendant No.1 addressed a letter to Surveyors asking them to clarify the issues relating to method of collection of sample and surveyors gave clean chit to the engineers who had drawn the samples.
4.4. Defendant No.1 also averred that the observation of the Surveyors giving clean chit to the employees of defendant No.4 is not correct. The Surveyors in their previous reports have stated that the wear particle analysis was carried out with the help of electronic microscope by examining the samples drawn from purifier strainer drain, during pre-accident and post-accident situation. The employees of defendant No.4 are supposed to have well acquainted with all features of the STG and the features of flushing box and velocity of return oil in it. In the letter dated 07.11.2002, the plaintiff has not stated anything about meeting in the morning or deliberations and they have not given any reasons for not mentioning about the facts in the said reporting letter and also averred that survey report dated 11 05.02.2003, the report given by Mr.Raju was extracted which makes it clear that he has drawn oil sample by wilful negligent act. 4.5. Defendant No.1 also averred that as per clause 13.2.2 of the O & M Agreement, defendant No.4 is responsible for direct physical loss or damage to the facility and the said liability of defendant No.4 is not subject matter of the IAR Policy. As per clause 3.2.10 of the O & M Agreement, defendant No.4 shall adhere to all the safety precautions in operating the facility and qualified safety representatives are to be employed for the purpose of running the facility by taking all the precautions.
4.6. Defendant No.1 further averred that as per 22.1 of the O & M Agreement, defendant No.4 is not entitled to any damages which arise out of any other contract or written agreement between the plaintiff and third parties including erection contract and defendant No.4 being the erection contractor, it is also debarred from making any claim. The plaintiff has suppressed the material facts regarding the incident in the plaint and there is no obligation to honour the insurance claim made by the plaintiff in the absence of proper survey report, in view of Section 64 UM (2) of the Insurance Act. The role of surveyor is only to assess the loss and not to decide admissibility of liability. The interim survey report is not conclusive one. Basing on the interim survey report, the plaintiff is not entitled to make any claim against defendant 12 No.1, especially, the plant between 05.05.2003 to 17.12.2003 was not in operation only on account of the failure of the repairer in properly affecting the repair and defendant No.1 cannot be made accountable for the same.
4.7. Defendant No.1 further averred that the property at the site was insured, the liability of defendant No.4 under O & M Agreement is not the subject matter of the insurance at all and nowhere in the policy, it is stated that there is negligence on the part of the operator i.e. defendant No.4, it is termed as a risk covered under the policy. The loss is occurred due to non-adhering of the safety programme by defendant No.4 as per clause 3 and 3.2.10 of the O & M Agreement. He further stated the suit is filed beyond limitation and the same is liable to be dismissed and also for non-joinder of banker/financier as a party to the suit.
5. Defendant No.3 filed written statement denying the claim of the plaintiff and also letter said to have been issued by it to the plaintiff giving opinion on admissibility of the claim of the plaintiff. According to defendant No.3, being a co-insurer, it has to be abide by the decision of the lead insurer i.e. defendant No.1 and it is the responsibility of defendant No.1 to admit or deny the claim of the plaintiff. It is further stated that they adopted all the contentions of the written statement of defendant No.1.
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6. Defendant No.4 has supported the claim of the plaintiff under the IAR Policy and stated that the incident is the subject matter of the claim by the plaintiff and further stated that there is no negligence on the part of the plaintiff or on the part of its employees in operation of the facility and the claim of the plaintiff does not fall under any of the exclusion clauses and the IAR Policy is an independent and separate contract and it cannot be read in conjunction with the terms of O & M Agreement. He further stated that the plaintiff has rightly claimed the amount in the suit and the same is to be allowed.
7. Defendant No.5 filed written statement stating that the trial Court has no jurisdiction to entertain the suit as the plaintiff do not have office or carry on business within the jurisdiction of the trial Court and the suit is liable to be dismissed on the ground of jurisdiction alone.
8. Basing upon the pleadings of the respective parties, the trial Court framed the following issues:
1. Whether the Plaintiff is entitled for recovery of the amount as prayed for?
2. Whether the Plaintiff is entitled for consequential damages as prayed for?
3. Whether the Plaintiff is entitled to pendente lite and future Interest as claimed?14
4. Whether the defendants 1 to 3 are jointly and severally liable to pay the claims made by the plaintiff in the suit?
5. Whether the rejection of the insurance claim of the Plaintiff under all insurance risk policy by defendant No.1 is misconceived, improper, illegal, untenable and against the provisions of all Insurance risk policy?
6. Whether the defendant No.1 has correctly relied on the O & M contract for rejection of the claim of the plaintiff under the all insurance risk policy?
7. Whether the plaintiff sought an endorsement for Including the defendants 4 and 5 as insured in the Industrial all risk policy, dt.31-7-2002 on account of the O & M Contract between the plaintiff and the defendants 4 and 5?
8. Whether the plaintiff's right to sue was abandoned on account of breach of policy condition No.5(ii) as contended by the defendants 1 and 2?
9. Whether the suit filed by the plaintiff is maintainable in respect of reported loss resulting operation of the machine by the O & M contract?
10. Whether the suit filed by the plaintiff is not maintainable for non joinder of necessary party on account of the agreed bank clause as found in industrial all risk policy?
11. Whether the plaintiff is entitled to claim any amount on behalf of defendant No.4, O & M Contract in view of the clause 17.6 of the O & M contract?
12. Whether the loss caused by the plaintiff due to acts of the O & M Contractor is covered under the industrial all risk policy?15
13. Whether the negligent and wilful acts and mal-operation of the O&M Contractor exclude the peril under the industrial all risk policy?
14. Whether the findings of the survey report is binding on the defendant No.1 U/s, 64-UM of the Insurance Act?
15. To what relief?
9. On behalf of the plaintiff, PWs.1 and 2 were examined and Exs.A.1 to A.60 documents were marked and on behalf of the defendants, DWs.1 and 2 were examined and Exs.B.1 to B.90 documents were marked.
10. The trial Court taking into consideration the oral and documentary evidence on record and after hearing the parties decreed the suit in part and directed defendant No.1 (lead insurer), defendant Nos.2 and 3 (co-insurers) to pay, in proportion to their respective liability under the IAR Policy i.e., 70%, 10% and 20% respectively, an amount of Rs.17,79,49,946/- with interest @ 12% per annum from 12.05.2003 till the realization of the suit debt and directed the defendants to pay a sum of Rs.2,38,15,070/- towards costs of the suit to the plaintiff and rest of the claim of the plaintiff is dismissed by its judgment and decree dated 05.10.2021.
11. Aggrieved by above said judgment and decree, the plaintiff filed the present appeal.
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12. Submissions of the learned counsel for the appellant/plaintiff:
12.1. Ms.Meenakshi Aurora, learned Senior Counsel representing Mr. M.Naga Deepak, learned counsel for the appellant/plaintiff submitted that the trial Court without properly appreciating the oral and documentary evidence on record dismissed the suit and not granted the relief in respect of the business interruption loss for the period of 407 days. She further submitted that in the interim survey report/Ex.A.12 = Ex.B.43, it is specifically mentioned that the plaintiff sustained Rs.24.66 crores towards business interruption loss for 105 days. In such circumstances, the trial Court ought to have decreed the suit in toto.
12.2. Learned counsel also submitted that as per Section II of IAR Policy, when the business carried by the insurer was interrupted consequent to the occurrence of damage to the STG as a consequence to the material damage under Section I of Ex.A.5 policy. The insurer is entitled to claim amount in respect of business interruption loss. The Court below without properly considering the conditions mentioned under Ex.A.5 erroneously rejected the claim of the plaintiff in respect of business interruption loss.
12.3. Learned counsel further submitted that the trial Court failed to appreciate that the business interruption loss is a natural/obvious 17 consequence of material damage. Therefore, denying the claim of business interruption loss after duly adjudicating the material damage claim in favour of the plaintiff is contrary to the evidence on record.
She also submitted that the trial Court ought to have considered that the steam turbine damage and its consequent shut down (material damage), the plaintiff incurred revenue losses, as in a combined cycle plant (comprising of Gas Turbines and Steam Turbine) electricity is produced by the gas turbine exhaust contains lots of amount and waste heat, which is recovered by the heat recovery steam generator. She further submitted that the trial Court has not appreciated Ex.A.13, wherein it is specifically mentioned that the loss of about 50% in the electricity production capacity of the plaintiff's Combined Cycle Power Plant due to the Steam Turbine Damage and its consequential shut down. She also submitted that basing upon the very same material and oral documents adduced by the parties, the trial Court decreed the suit in respect of the material damages, however, dismissed the claim insofar as the business interruption loss in the absence of any reasons, much less valid reasons. 12.4. Learned counsel vehemently contended that defendant Nos.1 and 2 have not placed any evidence denying the claim of the plaintiff in respect of the business interruption loss even though the plaintiff proved its initial burden by adducing oral and documentary evidence. 18 In such circumstances, the trial Court ought to have decreed the suit in toto. She submitted that defendant Nos.1 and 2 have not filed appeal or cross-appeal in respect of granting decree in favour of the plaintiff for an amount of Rs.17,79,49,946/- in respect of claim of material damage/loss along with interest and the same has become final. She further submitted that defendant No.1 has not furnished the survey report in spite of repeated reminders. At that stage, the plaintiff filed W.P.No.2195 of 2006 and only pursuant to the interim order dated 07.02.2006, defendant No.1 furnished the interim survey report and the defendants have not taken any steps to conduct final survey to determine the business interruption loss. 12.5. In support of the aforesaid submissions, reliance has been placed on the decisions of the Supreme Court in M/s.Bihari Ganga Hydro Power Ltd. v. New India Assurance Co.Ltd., 1, Uttar Bharat Hydro Power Private Limited v. Oriental Insurance Co. Ltd. and another 2 , United Phosphorous Limited vs. United India Insurance Company Ltd., 3, Wilson Home Appliances v. New India Assurance Co. Ltd. and another 4, Sikka Papers Limited v. National Insurance Company Limited and others 5 , Sri Venkateswara Syndicate v. Oriental Insurance Company 1 2020 SCC Online 1093 2 2022 SCC OnLine NCDRC 758 3 2019 SCC OnLine Bom 391 4 2020 SCC OnLine NCDRC 493 5 (2009) 7 SCC 777 19 Limited and another 6 , and National Insurance Company Limited v. Hareshwar Enterprises Private Limited and others 7.
13. Submissions of learned counsel for the defendants/respondents:
13.1. Per contra, Sri A.Venkatesh, learned Senior Counsel, submitted that the plaintiff has not made any pleading in the plaint in respect of business interruption loss. He further submitted that the burden lies upon the party who approaches the Court to prove the claim by adducing evidence. The plaintiff has not discharged the burden and not proved the factum of sustaining business interruption loss by adducing any evidence. In the absence of pleading/evidence, the plaintiff is not entitled to claim any relief, much less the relief of business interruption loss. The trial Court after considering the contentions of the parties and after going through the oral and documentary evidence on record rightly passed the judgment and decree by giving cogent findings.
13.2. Learned Senior Counsel further submitted that the trial Court has given a specific finding that mere claiming material damage loss does not entitle the plaintiff to claim the loss due to business interruption. The plaintiff has failed to prove the actual loss suffered by it due to interruption in the business due to the material damage. 6
(2009) 8 SCC 507 7 (2021) 17 SCC 682 20 He further submitted that the interim survey report/Ex.A.12 = Ex.B.43 do not contain any details regarding the loss on account of business interruption and the said document is not conclusive proof and basing on the said report, the plaintiff is not entitled to claim any amount under the business interruption loss. The trial Court rightly held that the said document Ex.A.12 = Ex.B.43 is not a conclusive document. 13.3. He further submitted that the trial Court has given a specific finding that the plaintiff has not filed any income tax statement and other such statement to establish that it sustained business interruption loss for a period of 407 days and also held that the plaintiff has not filed any iota of evidence including income tax returns for the previous years to prove the factum of sustaining business interruption loss. He further submitted that the trial Court rightly rejected the claim of the plaintiff in respect of the business interruption loss and decreed the suit in part and there are no grounds in the appeal filed by the plaintiff.
14. In view of the rival contentions raised by the respective parties and material on record, the following points that emerge for consideration in this appeal are:
(i) Whether the judgment and decree passed by the trial Court in part for an amount of Rs.17,79,49,946/-, out of an amount of Rs.166,88,71,981/- and dismissing the rest of the claims is sustainable under law?21
(ii) Whether the judgment and decree passed by the trial Court is in accordance with law?
(iii) Whether the plaintiff is entitled any relief in this appeal? If so, what relief?
Analysis :
Point Nos.(i), (ii) and (iii):
15. Admittedly, the plaintiff filed suit on 31.05.2008 against the defendants declaring that the insurance claim comprising of material damage and business interruption loss relating to the STG incident which occurred on 05.11.2002 at the facility is admissible under the IAR Policy dated 31.07.2002 pertaining to the period from 01.07.2002 to 30.06.2003 and consequently, direct defendant Nos.1 to 3 to pay a sum of Rs.166,88,71,981/- being material damage loss and Business Interruption loss and claiming an amount of Rs.1,00,000/- as consequential damages along with interest @ 12% p.a. and other reliefs. The trial Court after taking into consideration the oral and documentary evidence adduced by the respective parties decreed the suit in part directing defendant Nos.1 to 3 to pay an amount of Rs.17,79,49,946/- in proportionate to their respective liability under Ex.A.5 - IAR Policy dated 31.07.2022 with interest @ 12% p.a. from 12.05.2003 till the realization along with costs of Rs.2,38,15,070/- and the rest of the claim of the plaintiff especially in respect of the business interruption loss was dismissed holding that the plaintiff has 22 not produced any evidence that the plaintiff sustained the business interruption loss during the said period.
16. The contention of the learned counsel for the plaintiff is that once the trial Court has come to the conclusion that the plaintiff is entitled to claim in respect of material damage under Ex.A.5, the trial Court ought to have decreed the suit in respect of the business interruption loss under the very same Ex.A.5. Mere decreeing the suit in respect of material damage, the plaintiff is not entitled to seek the claim under business interruption loss in the absence of establishing the claim by producing necessary evidence, especially the burden lies upon the plaintiff to prove the claim that the plaintiff sustained business interruption loss for the period from 01.07.2002 to 30.06.2003.
17. It is pertinent to mention that the plaintiff relying upon the interim survey report under Ex.A.12 dated 05.02.2003 has made claim under the business interruption loss, especially when the defendants are disputing the same and the said interim survey report is not final and not a conclusive report. The plaintiff has not taken any steps prior to institution of suit or subsequent to filing of suit for conducting survey and submission of final survey report, on the other hand the plaintiff filed application, vide I.A.No.1 of 2024, in the present appeal 23 seeking appointment of surveyor to compute the business interruption loss after lapse of nearly more than 22 years.
18. Insofar as the contention of the learned counsel for the appellant that pursuant to the interim surveyor report under Ex.A.12, the trial Court ought to have directed the defendants to pay an amount of Rs.24.66 crores is concerned, the document under Ex.A.12 itself was disputed by defendants Nos.1 and 2 on the ground that the said document is not conclusive proof and it is only interim survey. It is pertinent to mention that the trial Court has given specific finding in respect of Ex.A.12 holding that in the absence of any final survey report, the same cannot be taken into consideration and the plaintiff is not entitled to claim business interruption loss pursuant to the interim survey report as the same is not conclusive one.
19. It is also pertinent to mention that the interim survey which was conducted by the surveyor is only for limited purpose and subsequent to that no final survey was conducted by defendant Nos.1 and 2 and the plaintiff has not made any effort to conduct final survey or produced any other evidence that the plaintiff sustained business interruption loss for the period from 01.07.2002 to 30.06.2003. In such circumstances, this Court is of the considered view that the trial Court has rightly not considered Ex.A.12-interim survey report to grant business interruption loss in favour of the plaintiff. 24
20. It is pertinent to mention that the plaintiff has addressed Ex.A.35 and Ex.A.36 for payment of insurance for business interruption loss. Defendant No.1 has rejected the claim of the plaintiff under Exs.A.37 and A.38 and also not considered the vouchers and other documents sent by the plaintiff in support of the expenditure incurred by it on the ground of non-coverage of the IAR Policy. According to combined statement Ex.A.27, the entire claim in which Sl.No.8 relates to claim on account of business interruption for Rs.101,97,57,237/-. However, the plaintiff has not placed any evidence to support the claim on the loss of amount of business interruption is based on Ex.A.35, Ex.A.36 and Ex.A.4 documents.
21. In Bihari Ganga Hydro Power Ltd. (supra), the National Consumer Disputes Redress Commission citing the Supreme Court's decisions in United India Insurance Co. Ltd. v. Pushpalaya Printers, (2004 CTJ 421 (Supreme Court) (CP)) and a Constitution Bench of Supreme Court in General Assurance Society Ltd. v. Chandumull Jain ((1966) 3 SCR 500), held that commission under an industrial all-risk insurance policy, a claim for business interruption caused by machinery breakdown is valid even without a separate material damage claim, provided the breakdown is indemnifiable. It is a settled legal principle that in insurance contracts, uberrima fides (utmost good faith) requires the assured to act in good faith and contra 25 proferentem rule, i.e., against the insurer. This ensures that any ambiguity or term capable of multiple interpretations is resolved in favor of the insured, aligning with the policy's purpose of providing risk coverage and ensuring fairness.
22. In Uttar Bharat Hydro Power (P) Ltd. (supra), the National Consumer Disputes Redressal Commission held that while the complainant failed to notify the business interruption loss within the required timeframe, the insurer's exclusion of 42 days in calculating the business interruption loss was unjustified, as the plant had been operational before the flood. The complainant was entitled to a business interruption period of 77 days for loss calculation. The principle of fair assessment in insurance contracts was emphasized, ensuring that insured parties are compensated in alignment with the policy's intent to indemnify reasonable losses.
23. The National Consumer Disputes Redressal Commission in Wilson Home Appliances (supra), and the Supreme Court in Sri Venkateswara Syndicate (supra), and Sikka Papers Ltd. (supra) held that while insurance companies are required to appoint surveyors for claims exceeding Rs 20,000 or more, the surveyor's report is not binding or conclusive. It was emphasized that the survey report cannot be disregarded without valid reasons and insurers cannot repeatedly appoint surveyors to suit their preferences. It further held that Sikka 26 Papers Ltd., relying on the judgment of Supreme Court in New India Assurance Co. Ltd. v. Pradeep Kumar ((2009) 7 SCC 787), confirmed that the insurer may settle the claim for the loss suffered by insured at any amount or pays to the insured an amount different from the amount assessed by the approved surveyor. The report, therefore, is not the final word and can be departed from by the insurer.
24. In National Insurance Co. Ltd., (supra), the Supreme Court held that while a surveyor's report holds statutory recognition and is essential in insurance claims, it is not sacrosanct and can be contested by other evidence, such as an investigation report. Referring to decision of Supreme Court in National Insurance Co. Ltd. v. Harjeet Rice Mills (2005) 6 SCC 45, the Supreme Court further held that insurers should be given an opportunity to present an investigation report, especially when the nature of the incident is disputed. The Court concluded that the surveyor's report, if credible and addressing crucial aspects like stock loss, can serve as the primary basis for the claim, even in the presence of a delayed investigation report, provided it inspires confidence in the adjudicating forum.
25. The judgments relied upon by the learned counsel for the plaintiff are not applicable to the facts and circumstances of the case on hand on the ground that the plaintiff failed to notify the business 27 interruption loss within the required timeframe and it has not produced any documentary evidence about the business interruption loss and the trial Court, after considering the oral and documentary evidence and hearing the parties, passed the judgment and decree with cogent findings in respect of each issue.
26. It is pertinent to mention that the trial Court specifically held that the plaintiff has not adduced any evidence to prove that the plaintiff could not supply the electricity under Power Purchase Agreement (PPA) nor any demand made by APTRANSCO for supply and failure to supply the electricity and further held that Ex.A.12-survey report does not contain any details regarding the loss on account of business interruption except only made claim under Ex.A.35 and Ex.A.36. The trial Court further held that the above said documents containing two papers with one table in each paper with calculations. The first one is regarding the increase in fuel cost and in column No.13 of it, they have shown Rs.19.70 crores as the receivable amount lost on account of STG shutdown. The another page containing another table with calculation shows incentive amount lost for the period between 19.04.2002 and 19.04.2023 and in column No.15 an amount of Rs.14.89 crores was shown. The above said two sheets with calculations are not supported by any other documents to show that the figures mentioned in the two tables are correct and also stated that 28 there is no indication in the tables as to whether the amount mentioned is in "Rupees" or "Lakhs" or "Crores". The trial Court had inferred the amounts in the above columns as Rs.19.70 crores and 14.89 crores because of the claim made by the plaintiff and mentioning of the very same figures in the plaint.
27. The trial Court further held that the plaintiff filed statement with calculation of units billed and the net amount of bill from 10.11.1999 to 10.11.2003 and another table with calculation of incentives earned. The tables of calculations annexed to Ex.A.36 are not signed and they are not supported by any other documents and there is no information as to who did the said compilation and the basis for the said compilation in the calculation tables annexed to Ex.A.35 and Ex.A.36 and further held that the plaintiff is under an obligation to file proof profit and loss statements, income tax statements and other such statements which it has submitted to the government authorities or taxing authorities to prove its revenue for previous years and it did not do so. It is also held that the plaintiff did not file any audit report or at least the documents evidencing the business transaction through which revenue was gained and the unsigned calculation tables annexed to Ex.A.35 and Ex.A.36 has not taken into consideration for the purpose of determination of the loss on account of revenue and 29 further held that basing upon Ex.A.35 and Ex.A.36, the claim of the plaintiff cannot be considered as proved that it sustained revenue loss.
28. It is also pertinent to mention that the trial Court by analyzing oral and documentary evidence on record passed the impugned judgment by giving cogent findings in respect of each issue and decreed the suit in part. Hence, we are of the considered opinion that the trial Court has rightly decreed the suit filed by the plaintiff for Rs.17,79,49,946/- with interest and costs and dismissed the rest of the claims. Accordingly, point Nos.(i), (ii) and (iii) are answered.
29. For the foregoing discussion, we are, therefore, not inclined to disturb the findings of the trial Court. We, therefore, find no merit in this appeal and the same is liable to be dismissed.
30. In the result, the appeal is dismissed. There shall be no order as to costs.
Miscellaneous applications, if any pending, shall stand closed.
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ALOK ARADHE, CJ
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J.SREENIVAS RAO, J
Date: .01.2025.
mar/pgp