National Consumer Disputes Redressal
Bbf Industries Ltd. vs United India Insurance Co. Ltd. & Anr. on 1 June, 2022
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 115 OF 2012 1. BBF INDUSTRIES LTD. Village Bhamian Kalan, Tajpur Road, Ludhiana ...........Complainant(s) Versus 1. UNITED INDIA INSURANCE CO. LTD. & ANR. 108, Surya Tower, 3rd Floor, Mall Road, Ludhiana 2. M/s. S. Soni & Co. 1047/16, Hari Singh Nalwa Street, Karol Bagh, New Delhi - 110 005. ...........Opp.Party(s)
BEFORE: HON'BLE MRS. JUSTICE DEEPA SHARMA,PRESIDING MEMBER HON'BLE MR. SUBHASH CHANDRA,MEMBER
For the Complainant : Ms Anjalli Bansall, Advocate For the Opp.Party : Ms Suman Bagga, Advocate
Dated : 01 Jun 2022 ORDER
JUSTICE DEEPA SHARMA, PRESIDING MEMBER
1.This complaint is filed for a claim of Rs.3,06,54,018/- alongwith interest @ 21% p.a. from 25.07.2008 till the date of actual payment and for Rs.1.00 crore towards mental harassment and also claiming cost of litigation in respect of Consequential Loss ( fire) policy bearing no. 201100/11/07/07/00000364 ( hereinafter referred to as 'Policy No.2').
2. The brief facts of the case as narrated by the complainant in the complaint are that it is a Company incorporated under the Companies Act, 1956 having its registered office at Village Bhamian Kalan, Tajpur Road, Ludhiana. Complainant vide its resolution dated 05.05.2011 of the Board of Directors authorized Shri V Krishnan to file the present complaint. It is submitted that the company was set up in the year 1996 and had a turn over of Rs.253 crores for the financial year 2010-11 and was having about 285 employees and is dealing in the business of manufacturing high quality printed cartons, corrugated cartons, card board packing, corrugated packing, plastic packing and polythene packing, plastic injection and blow moulding products and also has one of its factory / manufacturing in Unit-I and II at Plot No. 15-18 Industrial Growth Centre, Samba, Jammu & Kashmir. With respect of these two units, the complainant purchased two insurance policies from Opposite Party No.1-United India Insurance Company ( hereinafter referred to as the 'Insurance Company'). One insurance policy was Standard Fire and Special Perils Policy bearing No.201100/11/07/11/00000363 ( hereinafter referred to 'Policy No.1') which was valid for the period from 29.10.2007 to the midnight of 28.10.2008 having insurance cover of Rs.60,00,06,000/-. The complainant also purchased Consequential Loss ( Fire) Policy which has been termed as Policy No.2 and was valid for the same period i.e. midnight of 29.10.2007 to midnight of 28.10.2008 for a total sum of Rs.15 crores. Policy No.2 covered loss and damages suffered by the complainant on account of destruction and damage in the business premises and if for that reason the business could not be carried out at the said premises, then the insurance company would pay the consequential loss which has been occurred to the complainant on account of such interruption or interference. In July, 2008, there was a huge agitation against the Government's move to acquire land belonging to Amarnath Shrine Board in various areas of Jammu and Kashmir and such agitation also happened in the city of Samba. There were protest rallies, strikes and riots. There was a curfew imposed by the Government in the various areas of the State including Samba. On 25.07.2008 at around 10.30 a.m., mob of around 200-250 persons armed with lathis and stones gathered at the factory of the complainant and insisted upon the complainant to close the factory and, thereafter, rioting started and they entered into the factory and damaged the property of the complainant and also put their stock to fire. Unit No.1 was, thereafter, closed and angry mob also entered into the Unit No.2 and also damaged the machinery and the stocks lying there and also burnt them. Due to damage to the units, the work in the factory was completely stopped and no production or manufacturing activities were possible. This disruption continued till 31.08.2008. Thereafter, it took seven days to restore the plant and start production and the production could start only on 08.09.2008 and this fact is also admitted by the insurance company in its survey report dated 23.03.2010. Since the complainant had suffered huge loss due to stoppage of the production and the manufacturing activities, complainant vide letter dated 25.07.2008 filed a claim to the insurance company under Policy No.1. The insurance company appointed surveyor and the surveyor in its report dated 03.03.2009 calculated the loss to the tune of Rs.1,42,88,101 and the matter under Policy no.1 was settled at Rs.1,32,93,663/- which was duly paid to the complainant. Vide letter dated 05.04.2009. A claim of Rs.3,06,54,018/- for loss of profit was submitted by the complainant to the insurance company under Policy no.2. Upon receiving the said claim, the insurance company appointed the Surveyor who submitted its report dated 23.03.2010. In its report, the surveyor only considered loss for six days from the period 01.09.2008 and did not consider the period between 25.07.2008 to 31.08.2008. The contention that said period is not covered under the policy is incorrect. It is submitted that denial to compensate complainant for the loss of said period is baseless and fallacious. It is also contended that insurance company has also done computation incorrectly. It has calculated contribution at 11.368% wherein this factor ought to have been 14.41%. For arriving at the figure of 11.368%, the insurance company has taken into consideration clause 7 of Policy No.2 and had failed to take into account the rider to the definition of Standard Turnover as mentioned in Policy No.2. It has also failed to take into consideration the trend of business which it was required to consider as per terms of Policy no.2. It is submitted that complainant had an average growth of approximately 20% in Revenue during the financial year of the incident. As regards the profit of the complainant for the financial year 2007-2008. it was Rs.44,90,77,445/- and for the year 2008-2009 it was Rs.64,58,17,190/-. This clearly shows increase in the business trend of the complainant. It is further submitted that despite the repeated communications, the insurance company did not provide them the copy of the surveyor report and they had to write to the Divisional Manager and Sr.Divisional Manager of the insurance company. Complainant learnt on 17.06.2010 that the insurance company had rejected its original claim and have assessed it only to the tune of Rs.14.00 lakhs which was contrary to the terms and conditions of the insurance policy. The complainant wrote several letters claiming sum of Rs.3,06,54,018/- from the insurance company for the loss to be calculated under Policy no.2. On these contentions, the present complaint has been filed.
3. The complaint is contested by the Insurance Company. It is not disputed that a mob attacked the plant of the complainant on 25.07.2008 and damaged the machinery and material and torched the plant and it remained un-operational and it was cleaned, repaired and the production could start only on 08.09.2008. It is also not disputed that a claim filed by the complainant under Policy No.1 was assessed and approved to the tune of Rs.1,32,93,663/- which was accepted by the complainant. It is also not disputed that insurance company had received the claim for a sum of Rs.3,06,54,018/- towards loss of profit under Policy No.2 and surveyor was appointed who visited the premises of the complainant and conducted the survey and verification on site. It is submitted that surveyor in its report had observed that the plant was totally shut due to agitation of the political parties and curfew was imposed in the area and for that reason the complainant was unable to either get the plant and machinery repaired or to start the production due to non availability of labour. The plant was finally opened on 01.09.2008 and, thereafter, repair work was done and the production started w.e.f. 08.09.2008. It is contended that surveyor had observed that the main cause of loss was closure of the plant due to riots and curfew in the area. For that reason, the surveyor did not consider period of interruption due to riots and strike i.e. 25.07.2008 to 31.08.2008 as the same was not covered under Policy No.2. It only considered the actual restoration period i.e. 7 days from 01.09.2008 to 07.09.2008 as actual interruption period for loss assessment. On the basis of the record, the surveyor assessed the loss for the actual interruption period at Rs.14,19,523/-. It is further submitted that Policy No.2 contains an exclusion clause and has relied on the following clause:
"It is hereby declared and agreed that the insured shall bear the amount of loss as computed hereunder or admissible under the policy:
In respect of a policy insuring reduction in turnover, the amount equivalent to the rate of Gross Profit applied to the Standard Turnover for seven days.
In respect of a policy insuring reduction in output, the amount equivalent to the rate of Grass Profit applied to the Standard Output for seven days."
First of all loss amount should be calculated in line with the steps given in the specification under CL (Fire) Tariff and from this assessment of indemnity, monetary value of 7 days loss should be deducted."
4. It is contended that as per this clause, since the business was interrupted only for 6 days, the claim of the complainant under Policy no.2 was not payable and claim was closed as 'NO CLAIM' . It is contended that complaint is without any cause of action and liable to be dismissed. It is also contended that as per clause 5 of Policy No.1 with regards to riots, strike and malicious damage, the cessation and interruption of any process or operations due to riots and strike are excluded but not damage to the property due to riots and strike. It is submitted that since the cessation of work of the complainant during the period 25.07.2008 to 31.08.2008 was due to cessation of work on account of violence or riots, the complainant is not entitled for any claim. His claim was rightly rejected as was not covered under the policy. It is further contended that surveyor had correctly calculated the contribution @ 11.368% based on various parameters which is clear from the detailed discussion by the surveyor in its report. It is further contended that claim of the complainant that complainant is entitled to contribution of 14.21% is wrong. The claim of the complainant which has projected turnover of 130,00,000/- is wrong and not admissible since the loss of profit policy indemnifies only actual business loss incurred and future projected turnover are not accounted. On these contentions it is submitted that claim of the complainant is liable to be rejected.
5. Parties led their evidences and have submitted their written submissions.
6. We have heard the arguments and perused the relevant record.
7. The admitted facts as emerges from the pleadings of the parties and evidence on record clearly shows that complainant had purchased two policies. Policy No.1 was Standard Fire and Special Perils Policy having insurance cover of Rs.60,00,06,000/-. Policy No.2 relates to Consequential Loss ( fire) Policy having an insurance cover of Rs.15 crores. That on or about July 2008, there was a public agitation against the Government due to their move to acquire the land belonging to Amarnath Shrine Board in Jammu & Kashmir including the city of Samba where the complainant's premises is situated. Rioting took place and in the said rioting on 25.07.2008 at about 10.30 a.m., angry mob of about 200-250 people entered the factory of the complainant and did vandalism and destroyed the property and also set the stocks lying there on fire. It is also a fact that due to lockdown in the area, all the factories including the factory of the complainant remained closed till August 31, 2008 and it was on 01.09.2008 that complainant could open its factory and got the damaged machinery repaired and the production could be started only on 08.09.2008. For the damage in the factory due to rioting, he filed a claim under policy No.1 and the opposite party settled the claim for Rs.1,32,93,663/- which is accepted by the complainant and was duly paid to it. So claim of the complainant regarding damage to its stock and property and machinery due to rioting was accepted and due compensation under Policy no.1 was paid to the complainant.
8. Complainant put up a claim for the Consequential Loss alleging that he was entitled under this policy for the Consequential Loss which had occurred to him due to stoppage of the production and the business due to the damage caused to the machinery by the rioting. He on 05.04.2009 put up a claim of Rs.3,06,54,018 for the loss of profit. Pursuant to that claim, the insurance company appointed a surveyor on 23.03.2010. The surveyor submitted its report and confirmed the fact that production was disrupted on 25.07.2008 and the plant could be restarted only on 08.09.2008. The surveyor while calculating the consequential loss to the complainant excluded the period between 25.07.2008 to 31.08.2008 and opined that the complainant was entitled for damage for the period 01.09.2008 to 08.09.2008. Thereafter, from these 7 days of loss of business, under Policy No.2, the opposite party deducted one day being Sunday i.e. holiday and arrived at a conclusion that there was a loss of profit for 6 days. Taking recourse to the exclusion clause wherein it was held that if the business was interrupted only for 6 days, then the loss under Policy no.2 was not payable, it closed the claim of the complainant as 'NO CLAIM'.
9. The complainant has argued that the rejection of his claim as 'NO CLAIM' amounts to unfair trade practice and amounts to deficiency in service because the factory remained closed for 45 days from 25.07.2008 to 08.09.2008 and he had suffered loss during this period. It is also argued that complainant had taken terrorism cover under both the policies after paying additional premium and that is why his claim under Policy No.1 was approved by the insurance company. It is further argued that the terms of the policy put a duty upon the complainant to minimize the losses and if the complainant would have opened its factory in the prevailing situation on or after 25.07.2008, the crowd would have again did rioting and would have further damaged the factory and in discharge of its duty under the policy, it had kept its factory closed as atmosphere outside was that of rioting. It has relied on clause 3 of Policy No.2 under LOSS OF PROFIT (FIRE) POLICY-GROSS REVENUE BASIS SCHEDULE, which reads as under:
"3. On the happening of any Damage in consequence of which a claim is or may be made under this policy, the insured shall:
(a) xxxxxxxx
(b) With due diligence do and concur in doing and permit to be done all things which may be reasonably practicable to minimize or check any interruption of or interference with the business of to avoid or diminish the loss.
( c) xxxxxxxx "
10. It is further argued that surveyor had gone beyond its brief. He was assigned the job of quantifying the loss and was not authorized to opine that the period from 25.07.2008 to 31.08.2008 is not covered under the policy. It is further argued that since the loss has occurred due to visible physical damage by external violence which was caused to the insured property, the exclusion clause is not applicable. It is submitted that the insurance company has relied on the exclusion clause only with the intention to defeat the just claim of the complainant. It is further argued that said clause refers to property damaged and not to Consequential Loss caused due to interruption / interference in the business of the complainant and that property cannot be substituted with profit. It is further argued that premium of the terrorism cover was also paid by the complainant and rejection of his claim amounts to making the policy meaningless for which the insurance company has taken extra premium. It is further argued that al-though the loss to the complainant was approximately Rs.3.00 crores which is just and payable even if one accepts the calculation done by the surveyor for the loss of 6 days and applying it on 45 days for the period 25.07.2008 to 07.09.2008 then the loss is of about 1,06,46,422/- and it is argued that this sum be awarded alongwith interest @ 24% w.e.f. 08.09.2008.
11. On the other hand, it is argued on behalf of the insurance company that though as per the surveyor report, the plant was totally shut due to agitation of the political parties and curfew was imposed in the area due to which the complainant was unable to get the plant and machinery repaired or to start production, the complainant was entitled for the loss of 7 days of opening of the plant since the plant was closed due to rioting and curfew in the area. It is contended that actual interruption period of loss assessed is from 01.09.2008 to 07.09.2008 and the surveyor has rightly assessed the loss for the actual interruption period at Rs.14,19,523/-. It is further argued that Policy No.2 contains compulsory time exclusion clause which clearly says that if the loss is for less than 7 days, the insured is not entitled for any claim under the said policy. It is argued that since the business of the complainant was interrupted and was assessed for 6 days, nothing was payable under Policy No.2. It is argued that complainant is not entitled for any Consequential Loss for the period 25.07.2008 till 31.08.2008 because under clause 5 of Policy No.1, the loss of or visible damage is defined as being directly caused by external violence but excluded those caused by total or partial cessation of work or the retardation or interruption or cessation of any process or operations or omissions of any kind. It is argued that any process or omission due to riot and strike are excluded but not the damage to the property due to riots and strike. It is further argued that claim of Rs.3.00 Crores as raised by the complainant is excessive and is contrary to the books of accounts furnished by it to the Surveyor. It is further argued that turn over on which the complainant is relying is for the subsequent period while the calculation is done for the profits done during the previous year to the date of incident. On these contentions, it is submitted that complaint is liable to be rejected.
12. From the above arguments, it is apparent that opposite party had considered the claim of the complainant for the Consequential Loss occurred to him due to damage to its machinery etc. on 25.07.2008 and concluded that complainant was entitled for the claim under Policy No.2 only for the period 01.09.2008 to 08.09.2008 i.e. for 7 days. The opposite party had deducted Sunday from these 7 days stating that no production was to be done on Sunday since it is a holiday for the labour and factory remains closed and thus reached to the conclusion that complainant was entitled for the claim only for 6 days. Taking recourse to the exclusion clause, it rejected the claim as 'NO CLAIM' on the ground that since the claim is only for 6 days under the Exclusion clause, he was not entitled to be redeemed for the loss. The complainant has claimed that he is entitled to be compensated under policy No.2 from the date on which his property was damaged and till the date he could start production i.e. from 25.07.2008 to 08.09.2008 alleging that he could not have opened his factory which was damaged in rioting and for which he was covered under Policy No.1 and was duly compensated under the said policy, immediately after 25.07.2008 because had he opened it due to prevailing conditions in the area i.e. rioting and curfew, there was a risk that the rioters would have damaged the property further. Under Clause 3 of Policy No.2, he was duty bound to preserve the property by securing it from any other loss. Clause 3 of Policy No.2 which is LOSS OF PROFIT (FIRE) POLICY-GROSS REVENUE BASIS SCHEDULE, reads as under:
"3. On the happening of any Damage in consequence of which a claim is or may be made under this policy, the insured shall:
(a) xxxxxxxx
(b) With due diligence do and concur in doing and permit to be done all things which may be reasonably practicable to minimize or check any interruption of or interference with the business of to avoid or diminish the loss.
( c) xxxxxxxx "
13. From bare reading of this clause, it is apparent that for claiming consequential loss due to damage, he was required to preserve the property as it is and secures it from any subsequent damage. The expression used in this clause is ' to minimize or check any interruption of or interference with the business of to avoid or diminish the loss.' From bare reading of this expression, it is apparent that clause enjoins upon the complainant a duty to take all necessary action feasible under the circumstances to avoid or diminish the further loss. It is not in dispute that there was a curfew in the area and there were rioters who had on earlier occasion i.e. 25.07.2008 committed vandalism and destroyed and put on fire the stocks and damaged machinery forcing complainant to close the factory. Therefore, the complainant had to keep the factory closed during that period i.e. from 25.07.2008 to 31.08.2008 as the situation was tensed and rioting and vandalism and protest were going on and in these circumstances the only option available to the complainant was to keep the factory closed in order to avoid any further damage. The complainant while doing so has only adhered to the terms and conditions of the Policy No.2. There is no dispute to the fact that Policy No.2 also covers the consequential loss to business on account of the damage to the factory due to terrorism activities for which he was covered under Policy No.1 and under Policy No.1 he has been duly compensated for such damages to the insured property. Learned counsel for the insurance company has relied on Clause 5 of the Policy No.1, which reads as under :
"V. Riot, Strike and Malicious Damage : Loss of or visible physical damage or destruction by external violent means directly caused to the property insured but excluding those caused by:
(a) total or partial cessation of work or the retardation or interruption or cessation of any process or operations or omissions of any kind;
(b) Permanent or temporary dispossession resulting from confiscation, commandeering, requisition or destruction by order of the Government or any lawfully constituted Authority;
( c ) Permanent or temporary dispossession of any building or plant or unit or machinery resulting from the unlawful occupation by any person of such building or plant or unit or machinery or prevention of access to the same;
( d) Burglary, housebreaking, theft, larceny or any such attempt or any omission of any kind of any person( whether or not such act is committed in the course of a disturbance of public peace) in any malicious act.
If the Company alleges that the loss / damage is not caused by any malicious act, the burden of proving the contrary shall be upon the insured."
14. It is argued by the learned counsel for the insurance company that as per clause 5 of Policy No.1, the losses occurred due to partial cessation of work or interruption or for any other reason enumerated from sub-clause (a) to (d) of Clause 5 of Policy no.1 are excluded from the entitlement of the insured towards damages.
15. We have given our thoughtful consideration to the arguments of learned counsel. We are not in consonance with this argument for the reason that though clause 5 of Policy No.1 have certain exclusion clauses which excludes the entitlement of the losses enumerated in the exclusion clauses due to destruction of the property or due to any other reason, policy no.2 duly covers the consequential losses occurred due to the damage to the property which is covered under policy No.1. It is not in dispute that the damage to the property / stock suffered by the complainant was duly covered under policy No.1 and for that the complainant was duly compensated. Moreover, on bare reading of this provision, it is apparent that this clause relates to the damage to the "property" and does not relate to the loss of the "profit" due to destruction of property. Policy No.2 duly covers the loss of profit due to destruction of the property for the reasons covered under Policy No.1. Now, there is no dispute that the complainant could not have started its business due to the destruction to its machinery and stock which was indisputably covered under Policy No.1 and for which he was duly compensated and in compliance and honouring the terms and conditions of Policy No.2, he kept his factory closed and made no effort to open it with the intention to minimize the further loss / damage to the property on account of prevailing situation at that time as terrorist activities / rioting activities were continuing and atmosphere was charged in that area. It is not in dispute that damage to the property happened on account of his opening the factory in that charged situation.
16. From the discussion, it is apparent that had the complainant opened its factory, further damage would have occurred to the stock and other machineries and in order to reduce the damages, he by force had to keep its factory closed and could not repair the machineries and could not start the production. It is not a case where the insured kept its factory closed due to the riots in the area due to the curfew and started functioning only on lifting of the curfew. It is a case whether factory was opened and functioning when the rioters vandalized it and damaged the machinery and set the stock on fire and by force it had to close the factory and kept it closed in order to minimize the losses as per the terms and conditions of the policy. He had bought policy No.2 with intention to claim compensation for the losses which had occurred due to the reasons beyond his control and for which he was covered under policy No.1. If the arguments of learned counsel is accepted then it would render the Policy No.2 redundant. Policy No.2 is independent of policy No.1 and it is bought with the intention to cover the losses which occurs due to the reasons which were duly covered under policy No.1. Clause 5 would have been applicable in the cases where policy No.2 had not been in existence or where insured had not taken such a policy. Policy No.2 is extension of policy no.1 and covers consequential losses occurred for the reasons covered under policy no.1. It is apparent that due to the reasons for which complainant has been compensated under policy No.1, the loss if any suffered by the complainant for subsequent period till he could start the factory, are duly covered under Policy No.2 because this consequential losses were suffered by him due to the damages to the property which was duly covered under policy no.1. The Policy No.2 is also named as Consequential Loss Policy.
17. We, therefore, held that under Policy No.2, the complainant is entitled for the consequential loss of business of 45 days i.e. for the period 25.07.2008 to 08.09.2008. The complainant has submitted that he is entitled for sum of Rs. 1,06,46,422 /-. He has also calculated this figure adopting the formula, the surveyor has formulated in its report. The opposite party has not suggested any figure nor it has contended that amount arrived at, by the complainant is not covered on the formula laid down by the surveyor in its report. We are satisfied that this figure is in consonance with the surveyor report. We, therefore, award a sum of Rs. 1,06,46,422/- to the complainant alongwith interest @ 9% p.a. from the date of submission of claim i.e. 05.04.2009 till its realization. Cost of Rs.1,00,000/- ( Rupees One Lakh only) is also awarded towards cost of litigation.
18. With these directions, the present Complaint stands disposed of.
......................J DEEPA SHARMA PRESIDING MEMBER ...................... SUBHASH CHANDRA MEMBER