National Consumer Disputes Redressal
Sri Senthil Andavar Industries vs Tamil Nadu Industrial Investment And ... on 7 August, 2006
Equivalent citations: 2(2007)CPJ67(NC)
ORDER
S.N. Kapoor, J. (Presiding Member)
1. In this matter a short question arises for our consideration : "Whether the Tamil Nadu Industrial Investment Corporation was under an obligation to get the properties duly insured and having failed in discharging the obligation is liable to pay for the loss caused due to storm"?
2. There is no dispute about the fact that the complainant/ appellant had taken loans of Rs. 8.55 lakh initially and further Rs. 6.00 lakh to build a factory and erect machinery from the O.P. No. 1. As per the agreement, the complainant and the Tamil Nadu Industrial Investment Corporation both were required to ensure that appropriate Insurance Policy for building and machinery was taken. However, since beginning, the policy was being taken by Tamil Nadu Industrial Investment Corporation and the amount was being debited in the account of the complainant after directly paying the premium to the Insurance Company, Thus, the amount paid towards premium was recovered from the complainant.
3. There was storm and heavy rain on 2.6.1992 and the factory building collapsed and the machinery was fully damaged. The appellant/complainant allegedly suffered loss to the tune of Rs. 11.00 lakh, and informed both the opposite parties/respondents. The Insurance Company informed the complainant that they had taken 'C' Policy and loss due to storm was not covered. Since the responsibility of taking policy rested with the respondent/ Tamil Nadu Industrial Investment Corporation and they failed to take the policy, it was claimed that TIIC was liable to compensate the loss. Accordingly, a complaint was filed claiming that the opposite parties were liable to pay compensation under different heads amounting to Rs. 11,13,604 with interest thereon @ 24% p.a. from 2.6.1992 till payment.
4. The Tamil Nadu Industrial Investment Corporation contested the matter, inter alia, on the ground that there was prevailing custom to get the insurance policy in favour of the complainant and the complainant/appellant was aware of the nature of the policy. In terms of Clause 6A of the terms and conditions of sanctioning financial assistance to the complainant that "the borrower shall insure as required by the Corporation for the gross book value of the mortgaged properties against loss or damage by fire, riot (riot and strike), civil commotion and other risks, etc., and on the basis of other terms as per Clause 11 of the Deed of Undertaking, the borrower/complainant was supposed to get the properties insured". As such, the Tamil Nadu Industrial Investment Corporation was not liable.
5. The Insurance Company contested the matter, inter alia, on the grounds that there was no privity of contract between the parties and since the risk of loss due to storm and heavy rains was not covered under the insurance policy, the Oriental Insurance Company was not liable to pay any damages. There was no negligence on their part. It was duty caste upon the appellant and Tamil Nadu Industrial Investment Corporation about taking appropriate type of insurance cover. As such, the Insurance Company was not liable to pay any amount.
6. We have heard the learned Counsel for the parties and gone through the record.
7. Before proceeding further, it would be worthwhile to refer to various clauses relating of the terms and conditions of sanction of financial assistance relating to the point in question.
8. Clause 6(c) reads as follows:
During the currency of the loan, the Corporation will automatically renew the policies with the respective Insurance Companies and debit the premium to borrowers account which will attract interest at applicable rate, the expenses so incurred shall be recovered from the party/concern. The concern should agree to pay the necessary premium amount as demanded by the Corporation together with interest on the due dates.
(Emphasis supplied)
9. Clause (c) categorically stipulates that during the currency of the loan, the Corporation will automatically renew the policies with the respective Insurance Companies.
However, Clause 11 of the Deed of Undertaking reads as follows:
That the Borrower shall at its own expense keep the properties hereby agreed to be mortgaged and marketable and good condition and shall insure and keep the same insured and the amount received in pursuance of any claim under the said insurance policies shall be first appropriated in or towards liquidation of interest, commitment charges and prepayment of premium and the balance towards the principal amount of the loan.
(Emphasis supplied)
10. Clause 6 of the Deed of Hypothecation is in the following terms:
The said machinery and equipment hereby hypothecated to the TIIC shall be kept at the borrower's risk and expense in good condition and shall be fully insured against loss or damage by fire, explosion, riot and civil commotion and war emergency risks with such Insurance Companies as shall be approved in writing by the TIIC under a policy or policies which shall be assigned to the TIIC and if so required by the TIIC the said machinery and equipment shall be fully insured against all or any of the following losses namely losses by Flood, Earthquake, Cyclone, Typhoon, Hurricane, Lightning, will or act of enemies, Act of God or such other risks as may be required by the TIIC. The borrower shall deliver the policy or policies of such insurance to the TIIC and duly and punctually pay all premia and other monies necessary for effecting and keeping on foot such insurance and produce the receipts for all such payments to the TIIC on demand and will keep TIIC indemnified against all loss or damage to the said machinery and equipment from any cause whatsoever.
(Emphasis supplied)
11. The following terms and conditions of the policy of Automatic Insurance Scheme are also relevant:
3. Comprehensive Polices for SSI industries:
Criteria for eligibilty under the scheme (details of the scheme have already been circulated to Regional/ Branch Offices by H.O. on 21.2.1986) are:
(i) Original investment in equipment and machinery does not exceed Rs. 5 lakh; and
(ii) The total sum insured on the risk does not exceed Rs. 10 lakh.
Risk covered : Fire, riot,strike,malicious damage,
explosion/implosion aircraft damage,
impact damage, flood, tempest storm,
inundation, cyclone, hurricane,
tornado, earthquake, volcanic
eruption, etc.
Premium: Rs. 1 per Rs. 1,000 covered.
In other words Rs. 100 per
every lakh of rupees covered.
The minimum premium for policies under this category has since been reduced to Rs. 15 per policy from the erstwhile Rs. 30 per policy. Regional/ Branch Offices may examine the scope and bring all cases of sanctions upto Rs. 7.5 lakh under this category straightaway.
4. For cases of other SSI industries and medium and large scale units financed by us, the normal schemes of insurance shall apply. All the same, these policies also shall cover under automatic insurance scheme in the same way as the other category.
12. That sub-paras (ii) and (iii) of Clause 6 relating to General Instruction--Accounting Procedure of the Automatic Insurance Scheme provided as under:
(ii) All Branch Managers will get in touch with the Branch/ Divisonal Offices of all the four Insurance Companies in their area and get familiarised with the scheme. In case of lack of communication from the Regional/Divisional Offices of Insurance Companies to their respective branch/field offices, Branch Managers may please get in touch with Head Office, so that necessary follow-up action would ensure at this end.
(iii) It shall be the endeavour of the Branch Offices to ensure that:
(a) the scheme comes into effect as from 1.1.1987;
(b) the insurance cover is available for all the securities of the Corporation;
(c) number of policy covers now available for a single unit are consolidated in due course; and
(d) the maturity date of all the policies falls on the same day viz., 1 October of every year.
(Emphasis supplied)
13. It is apparent from a reading of Clause 6(c) of terms and conditions of sanction of loan relied upon by TIIC will automatically renew the policies. According to Automatic Insurance Scheme, Branch Manager was to ensure that insurance cover was available for all the securities of the Corporation and they are consolidated in due course. The concern of the complainant had to agree to pay the necessary premium amount as demanded by the Corporation. It is thus evident that though initial policy could be taken by the complainant, but renewal of the policies was duty of the Corporation. It is also evident that according to TIIC Automatic Insurance Scheme of September 17, 1986 risk in respect of "Storm, inundation, cyclone, hurricane, and tornado" was also required to be covered amongst other risks. It is evident that there is contradiction in various provisions. But, conduct of the Corporation in getting the policy renewed is in tune with Clause 6(c) referred to hereinabove. Both taken together would lead us to hold that TIIC represented by conduct also that it would get the policy renewed in terms of requirement of the Corporation, and they by their own conduct are estopped from challenging the plea of the complainant/appellant in this regard.
14. During the course of arguments, the learned Counsel for the Insurance Company had produced Insurance policy indicating that schedule of the insurance policy would not cover storm, cyclone, hurricane, tornado, etc. for TIIC had only taken policy 'C'. The policy was taken for the complainant by depositing the total sum of Rs. 40,955 on account of the complainant/appellant as well as 14 other concerns. The policy 'C would cover only the following risk:
1. Fire
2. Lightning
3. Explosion/implosion but excluding loss of or damage to boilers (other than domestic boilers), economisers or other vessel, machinery or apparatus in which steam is generated or their contents resulting from their own explosion/implosion.
4. Impact by any Rail/Road vehicles or animal.
5. Aircraft and other aerial and/or space devices and/or articles dropped therefrom, excluding destruction or damage occasioned by pressure waves caused by such devices.
6. Riot, strike and malicious damage as per clause printed hereon.
15. The policy was not comprehensive to cover all the risks as is required under Clause 3 of the Automatic Insurance Scheme.
16. Seeing pleadings of O.P. No. 2, insurer, it appears that for several past years it is only the Tamil Nadu Industrial Investment Corporation taking policies. Since it is evident that the Branch Manager could also get policy renewed and the Tamil Nadu Industrial Investment Corporation would make payment for the premium to be paid to cover the risk for the complainant-appellant. It is also apparent that if proper instructions were given by TIIC and were properly implemented by the concerned Branch, particularly, in terms of Automatic Assurance Scheme, the present situation would have never arisen.
17. Since, the borrower as well as the Manager, Tamil Nadu Industrial Investment Corporation both could take insurance policy and since the concerned Branch Manager, Tamil Nadu Industrial Investment Corporation had taken this responsibility by getting proper comprehensive cover of insurance for machinery and building in terms of Clause 6(c) and under Automatic Insurance Scheme, O.P. 1 on itself to ensure renewal of the policy and has failed to take appropriate policy after such representation by conduct. Respondent could neither escape the charge of deficiency in rendering service nor can it escape its liability to pay for the loss of storm, tornado.
18. As regards compensation, according to copies of the insured before the Surveyor, there were incessant rains in and around Y. Othakkadai right from 2.30 p.m. on that day. As about 5.20 p.m., the rain accompanied by a storm lashed and it caused violent disturbance of the atmosphere. The wind blew vehemently which caused damage to several trees and telephone posts. The insured's industry got collapsed. According to the Surveyor's report, loss was caused due to storm on 2.6.1992.
19. The Surveyor has mentioned in his report as under:
We held detailed and discreet inquiries with the Insured's personnel, watchman and some of the personnel in the Agricultural College and neighbours. We have carefully inspected the site of damage occurrence and neighbouring place where trees and telephone posts were uprooted. We are of the opinion that the damage to the building and machinery was caused by the storm blown at about 5.30 p.m. on 2.6.1992. Since it was a lone building surrounded by open agricultural field, the impact of the storm on the building was open agricultural field, the impact of the storm on the building was very severe and caused collapse of the building. The fall of building debris has resulted damage to machinery including Furnace.
20. The term 'Storm' and 'Hurricane 'have been defined in Concise Oxford Dictionary Revised 10th Edition as under:
'Storm' means -- A violent disturbance of the atmosphere with strong winds and usually rain, thunder, lightning, or snow.
'Hurricane' means--A storm with a violent wind, in particular a tropical cyclone in the Caribbean.
20. In Indian context thus 'Storm' and 'Hurricane' both are synonymous and as such, the TIIC was supposed to take insurance policy to cover the loss caused by fire, riot, strike, malicious damage, explosion/implosion aircraft damage, impact damage, flood, tempest storm, inundation, cyclone, hurricane, tornado, earthquake, volcanic eruption, etc. in terms of Automatic Insurance Scheme.
21. According to Surveyors report summary of loss of the insured hurricane in cyclone and to make in terms of Automatic Insurance Scheme was as under:
Loss assessed on Building - Rs. 2,34,057.02
Loss assessed on Machinery - Rs. 1,68,225.60
_______________
Rs. 4,02,282.62
Less: Policy Excess - Rs. 2,500.00
Rs. 3,99,782.62
_______________
Net Loss Assessed (Say) - Rs. 3,99,783
_______________
22. In view of the above, loss to the tune of Rs. 3,99,782.62 was caused due to failure of the concerned Branch Manager, Tamil Nadu Industrial Investment Corporation to take appropriate policy to cover the risk of storm or hurricane. The Tamil Nadu Industrial Investment Corporation is liable to adjust this amount of Rs. 3,99,382.62 as on 15.9.1992, the date of the Surveyor's report and not to claim any interest on this amount for subsequent period. In case the loan has been cleared, the respondent is directed to pay Rs. 3,99,782.62, with the same rate of interest as was charged on the amount by TIIC within six weeks. However, it would not adversely affect their claim in respect of rest of the amount of the loan payable by the complainant/appellant as on 15.9.1992 till payment.
23. In the aforementioned facts and circumstances of the case, the appeal is allowed in above terms. Parties to bear their own cost.