National Consumer Disputes Redressal
M/S. Consulting Engineering Services ... vs Oriental Insurance Company Ltd. on 11 August, 2015
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 4 OF 2003 1. M/S. CONSULTING ENGINEERING SERVICES INDIA PVT. LTD. 57 NEHRU PLACE MANJUSHA BUILDING 05TH FLOOR NEW DELHI ...........Complainant(s) Versus 1. ORIENTAL INSURANCE COMPANY LTD. Through Sr. Divisional Manager,
Division Office, No. 6 (Code No. 211600), 57, Manjusha Building, 2nd Floor, Nehru Place New Delhi - 19 2. The Oriental Insurance Co. Ltd. Regd. Office. Oriental House, P No. 7037, A 25/27, Asaf Ali Road, New Delhi - 110 002. ...........Opp.Party(s)
BEFORE: HON'BLE MR. JUSTICE AJIT BHARIHOKE, PRESIDING MEMBER HON'BLE MRS. REKHA GUPTA, MEMBER
For the Complainant : Mr. Jivesh Chandrayan, Advocate For the Opp.Party : Mr. Mohan Babu Agarwal, Advocate
Dated : 11 Aug 2015 ORDER
Complainant is a private limited company engaged in the business of consultancy in the area of infrastructure projects and naval projects etc. Complainant had obtained a professional indemnity policy from the opposite party insurance company with the indemnity limit of Rs.58 lacs per claim per annum on payment of insurance premium of Rs.45,480/-. The insurance policy was valid for the period w.e.f.05.03.1986 to 04.03.1987.
2. The complainant vide agreement dated 13.11.1985 entered into a contract of consultancy service of architectural, structural, civil engineering and pre contract quantity / surveying service in the design and supervision of Eid Prayer Platform and Sea wall, Alshattie, Salalah with government of Sultanate of Oman. Pursuant to the contract, the complainant undertook the design supervision and the quantity survey jobs for the aforesaid project which was completed in June 1986.
3. That in July and August 1986 due to high waves during monsoon season, a serious corrosion in the beach opposite to the sea wall was caused which resulted in the damage to the structure of the project. As a consequence, Sultanate of Oman sent a communication dated 23.11.1986 holding the complainant responsible for the damage caused. The complainant apprehending a possibility that a claim may be filed in future by Sultanate of Oman sent a written intimation in this regard vide letter dated 01.12.1986 to the opposite party by UPC.
4. That the Sultanate of Oman filed a suit against the complainant for recovery of damages caused due to the inferior design suggested by the complainant. The complainant resisted the suit but the concerned Court / Authority decreed the claim of Sultanate of Oman and directed the complainant to pay RO 1,247, 439 ( Indian Rupee 9,62,64,868) with interest @ 6% from the date of registration of suit till realisation. The complainant in the meanwhile kept the opposite party informed about the progress and development of the law suit.
5. The complainant challenged the order of the Court of original jurisdiction in appeal. The Appellate Court instead of deciding the appeal referred the matter to the Expert Committee for re-examination of the case. Being aggrieved, the complainant filed a petition / appeal before his Excellency Minister of Diwan, Palace Muscat praying for sympathetic consideration. His majesty contested the petition and waived the penalty imposed on the complainant subject to the complainant foregoing its payment from Diwan of Royal Court. Thus, after setting of the professional fee payable to the complainant, the matter was settled for a sum of Rs.65,98,645/-.
6. That the complainant thereafter filed an insurance claim seeking indemnification to the tune of Rs.58.00 lacs. The opposite party, however, repudiated the claim on the ground that complainant had undertaken a wet project in the Sultanate of Oman and as such the insurance claim pertaining to the said project was outside the scope of insurance cover. The claim was, however, rejected on the plea that complainant has violated general condition no.1 & 2 of the insurance policy.
7. The opposite party resisted the complaint. In the written statement, the opposite party admitted that the Court decree was passed against the complainant by the Oman Court. While admitting the insurance cover extended to the complainant, the opposite party justified the repudiation of claim on the ground that complainant in violation of general condition no.1 of the insurance contract failed to give immediate notice to the opposite party regarding issue of damages raised by the Government of Oman with regard to the alleged deficiency in the designs of construction of Eid platform and the sea wall. It is alleged that the intimation regarding the claim filed by the Oman authorities was given to the opposite party much later on 25.08.1992. The opposite party also took the plea that the complainant had violated general condition no.2 of the insurance contract which casts an obligation on the complainant not to admit liability in respect of any claim pertaining to the subject project without the consent of the insurance company in writing. It is also pleaded by the opposite party that as per the exclusion clause in the insurance contract, the insurance company is not liable for any loss or damage caused to the insured in respect of a 'wet project' and since the decree passed by the Court against the petitioner was in respect of wet project, the opposite party was justified in repudiating the claim.
8. In support of his case, the complainant has filed evidence in the form of affidavit of Shri Bajrang Prasad, Company Secretary of the complainant company. In rebuttal, the opposite party have filed affidavit evidence in the form of affidavits of Dalbir Singh, Manager, Head office, Oriental Insurance Company, Barakhamba Road, Delhi. The opposite party has also exhibited copy of report of expert committee appointed by the Court in Oman, copy of the policy, copy of the repudiation letter dated 03.09.2002, copy of letter dated 05.08.1992 issued by the insurance company and another letter dated 14.09.1992 written by the insurance company to the complainant.
9. We have heard the parties and perused the record. Annexure 'B' is copy of the relevant insurance policy. It provides that subject to the terms, exceptions, limits and conditions contained in the policy and the schedule which are based on a proposal and declaration, the insurance cover is extended subject to the payment of premium. The schedule attached to the insurance policy describes the nature of work for which the indemnity upto Rs.58.00 lacs per annum and per claim as under:
"Design and planning of Civil Engineering works but excluding work of tunnelling, river projects, docks or any other wet projects in Sultanate of Oman."
10. On reading the above it is clear that insurance contract between the parties extended the insurance cover for design and planning of civil engineering works. It categorically excluded work of tunnelling, river projects, docks or any other wet projects in Sultanate of Oman.
11. It is contended on behalf of the opposite party that opposite party was justified in repudiating the claim because the subject work undertaken by the complainant was 'wet project' which is explicitly excluded from the insurance contract. Learned counsel for the complainant on the contrary has contended that the project undertaken by him was to design, plan and supervise construction of Eid prayer platform and sea wall which cannot be termed as 'wet project' and, therefore, the insurance company was justified in repudiating the claim.
12. The question is what is meant by "Wet Project"? The term "Wet Project" is not defined in the insurance contract. We, therefore, have to go by the common man's definition of Wet Project. Wet Project to our mind is a water related project relating to water treatment, water resource management, flood management, coastal protection from the sea waves, hydro power etc. Common examples of Wet Projects could be new construction or renovation of a water related structure, storm-surge barriers, bridges over the rivers and seas and tunnels installation etc.
13. On perusal of memorandum of agreement dated 13.10.1985 entered into between the complainant and the Sultanate of Oman, it is clear that complainant was assigned with a contract of architectural, structural, civil engineering and pre contract quantity / surveying service of Eid Prayer Platform and Sea wall, Alshattie, Salalah. Clause 3.4 of the memorandum of agreement provides as under:
"3.4 The Scope of Work covers but is not limited to:
DESIGN
A. The preparation, within the initial Budget Sum, of such preliminary drawings, estimates and other engineering documents to enable the proposals for the construction of the Works to be submitted for approval by the Client, including as may be necessary:
1) A survey or surveys of the site;
2) Investigation of available date or information;
3) Advice to the Client as to the necessity for special investigations of conditions of subsoil tide or weather and arranging for boring tests, trial pits, testing piling, models or other investigations agreed to be necessary;
4) Consultation with any other consultant appointed by the Client regarding any engineering matters related to the Works;
5) The making of such modifications in the Preliminary drawings and estimates of the Works in connection with the aforesaid constructions as may be approved by the Client."
14. On reading of the above clause particularly A (3), it is clear that it was the job of the complainant to advise Sultanate of Oman with special investigations of conditions of subsoil tide or weather and arranging for boring tests, trial pits, testing piling, models or other investigations agreed to be necessary. From this, it is evident that project undertaken by the complainant was 'wet project' particularly when the complainant was assigned the job of designing and supervising, construction of eid prayer platform at the sea side and also to construct the sea wall. The purpose of sea wall was to protect the Eid prayer platform from the sea waves. Admittedly, after the completion of project, some damage was caused because of sea waves and, therefore, Sultanate of Oman filed a suit for damages in the State of Oman against the contractor.
15. Admittedly, the said suit was decreed against the complainant and he was called upon to pay a sum of RO.1,247,439.00 with 6% interest from the date of repudiation of suit till the final settlement. On perusal of the decree of the Oman Court, which is annexure - F to the complaint, it is apparent that the Oman Court sought the expert opinion and on the basis of said report, allowed the claim of State of Oman. Relevant portion of the observations made in the decree are reproduced as under:
"One of the opinions is that the project which was agreed upon with the defendants according to the contract dated 13.10.85 was to construct a sea wall which may resist serious winds, waves, storms and natural factors. This fact is clearly stated in the text of the first part of the contract that the project is Eid Prayer Platform and sea wall at the beach in Salalah and Clause No.3 which provides for the scope of works to include architectural, engineering, civil, constructional engineering, mechanical and electrical services. Fourth para of the above mentioned Clause 3 provides for that, scope of work shall include survey of the site, investigation of the available information/data, expression of advice to the employer whenever required especially regarding the underground nature of the soil, tide and flow, weather and to prepare the arrangements for inspection through experimental pits and drilling tests, samples and other investigations which may be agreed upon as important. The supervision includes preparation of any additional plans, designs and drawing which are considered to be necessary. The design of the disputed wall was based on wrong calculations for the expected sea waves action that the maximum level of the sea, in the worst position was 1.85 meter. The design of wall foundations was prepared according to the said calculations whilst the information obtained by the defendants on 21.1.1986 confirmed that the maximum level for the sea was 2.80 meters. The defendants knew this information after a short time from the submission of the design but despite of this fact the defendants did not make any revision or amendments to the foundations to increase the depth of the foundations to 2.80 meter. If the defendants did so, the results would be positive and no damage would have taken place in the wall. Hence the design prepared by the defendants for the sea wall ( subject of the dispute) was defective and contravening the technical specifications, the agreement and principles of the engineering profession."
16. From the above, it is clear that the complainant was required to construct a sea wall which could resist serious winds, waves, storms and natural factors which clearly mean that project in question was 'wet project' and excluded from the insurance contract as per the terms provided in the schedule attached in the insurance policy reproduced above. Thus, in our view, the opposite party was justified in repudiating the insurance claim on the ground that claim was excluded from the insurance contract.
17. The second ground for repudiation of insurance claim is that complainant in violation of condition no.2 of the insurance contract has settled the dispute with Sultanate of Oman without the written consent of the insurance company.
18. In order to appreciate this contention, it would be useful to have a look on condition no. 2 of the insurance contract which reads as under:
"2. The Insured shall not admit liability of settle or make or promise any payment in respect of any claim which may be the subject of therewith, without the written consent of the Company which shall be entitled to take over and conduct in the name of the Insured the defence and/or settlement of any such claim, for which purpose the Insured shall give all the information and assistance that the Company may reasonably require."
19. On reading of the above, it is clear that condition no.2 prohibits complainant from admitting any liability or to settle the dispute with Sultanate of Oman without consent in writing from the insurance company. In the instant case, there appears to be violation of the aforesaid condition as evident from the case set up by the complainant in the complaint. Relevant allegations are reproduced as under:
"(m) On 8.5.94, the complainant filed an appeal no.50/94 before Appellate Court of Oman challenging the Royal Decree dated 30.3.1994 and after prolonged hearing the appeal Court instead of deciding the matter referred to the Committee of experts for re-examination of the case and did not decide the matter.
(n) The Complainant filed a petition/appeal on 10.4.1995 to His Excellency, Minister of Diwan, the Palace, Muscat, Sultanate of Oman for sympathetic consideration of this appeal. His Majesty decided the Petition and waived the penalty imposed on the Complainant subject to the Complainant/insured foregoing their demands from the Diwan of Royal Court vide communication dated 24.1.2001. The Director General of Project and Maintenance Affairs duly certified that the case was settled for an amount of RO 85,507,900 (Rupees 65,98,645/- i.e. Sixty Five Lakhs Ninety Eight Thousand Six Hundred and Forty Five only) that the amount which was due to the complainant as professional consultancy fees against Diwan of Royal Court which was set of against the court-Decree in favour of Diwan of Royal Court. His Majesty had given an enormous relief to the Complainant as against decree for an enormous amount of RO 1,247,439 by waiving the amount of RO 1,161,932. The copy of the communication order dated 24.1.2001 is annexed and marked as Annexure-'H'."
20. On reading of the above allegations, it is clear that after suffering a decree for damages, the complainant preferred an appeal but later on he moved a mercy petition to his Excellency, Minister of Diwan, the Palace, Muscat, Sultanate of Oman on 10.04.1995 and got waiver of the penalty imposed by the trial court subject to his foregoing the demands from Sultanate of Oman. It is evident that after getting the said relief, the complainant did not pursue his appeal against the decree passed by the Court. There is nothing on the record to suggest that petitioner sought written consent from the insurance company to accept the aforesaid waiver of penalty granted to him on the basis of his mercy petition instead of pursuing his appeal. This conduct of the complainant obviously is clear violation of condition no.2. Therefore, on this count also, repudiation of insurance claim to the complainant is justified.
21. It may not be out of place to mention that indemnification clause of the insurance contract reads as under:
"The company hereby (hereinafter called "the company") agrees to indemnify the Insured up to but not exceeding in the aggregate
1.the indemnity stated in the Schedule for any sum or sums which the Insured may become liable to pay arising from any claim or claims made against him during the period stated in the Schedule as a direct result of any negligent act, error, or omission in the conduct and execution of the activities defined in the Schedule;
2. the costs and expenses incurred with the Company's written consent in defence and/or settlement of any claim. However if a payment in excess of the amount of indemnity available under this insurance has to be made to dispose of a claim, the Company's liability in respect of such costs and expenses incurred shall be such as the amount of indemnity available under this insurance bears to the total amount paid to dispose of the claim."
22. On reading of the above, it is obvious that as per the insurance contract, the opposite party had agreed to indemnify the complainant for the sum or sums which he may become liable to pay arising from any claim or claims made against him during the currency of insurance contract. This clause does not provide for indemnification of the complainant for non payment of his remuneration under the contract with Sultanate of Oman.
23. In view of the discussion above, it is clear that pursuant to the mercy petition filed by the complainant, the penalty / damages imposed upon him by the Oman Court was waived subject to his giving up the claim against the Sultanate of Oman. Therefore, the insurance claim for reimbursement of the remuneration under the contract with Sultanate of Oman is not covered and on this count also, the insurance company was justified in repudiating the claim. Therefore, we are of the view that insurance company has rightly repudiated the claim of the complainant. Thus, there being no deficiency on the part of the insurance company, complaint is dismissed.
......................J AJIT BHARIHOKE PRESIDING MEMBER ...................... REKHA GUPTA MEMBER