National Consumer Disputes Redressal
M/S. Polyplex Corporation Ltd. vs National Insurance Co. Ltd. & Ors. on 7 April, 2017
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 145 OF 2011 1. M/S. POLYPLEX CORPORATION LTD. B-37, Sector-1, Noida Gautam Budh Nagar- 201 301 ...........Complainant(s) Versus 1. NATIONAL INSURANCE CO. LTD. & ORS. 3, Middleton Street, Kolkata - 700 071. 2. NATIONAL INSURANCE CO. LTD REGIONAL OFFICE, 56, RAJPUR ROAD, DEHRADUN uTTARAKAHAND 3. NATIONAL INSURANCE CO LTD. DIVISIONAL OFFICE, SADAR BAZAR SHAHJAHANPUR - 242 001 U.P 4. NATIONAL INSURANCE CO LTD. BRANCH OFFICE, MADHUBAN BUILDING, STATION ROAD, PILIBHIT - 262 001 5. INSURANCE REGULATORY & DEVELOPMENT AUTHORITY PARISHRAM BHAWAN. 3RD FLOOR, BASHEER BAGH, HYDERABAD - 500 004. ...........Opp.Party(s)
BEFORE: HON'BLE MR. JUSTICE V.K. JAIN,PRESIDING MEMBER
For the Complainant : Mr. R. Santhanam, Advocate For the Opp.Party : Mr. Yogesh Malhotra, Advocate
Mr. Rajneesh Kumar, Advocate
Mr. Udit Grover, Advocate
Dated : 07 Apr 2017 ORDER
JUSTICE V.K. JAIN (ORAL)
The complainant company obtained an insurance cover from the OP, in respect of its fixed assets and stock as well as in respect of machinery breakdown. The said policy also covered the loss of profit on account of breakdown of the machinery. The policy was valid from the period from 01.04.2005 to 31.03.2006 and pertained to the office and works of the complainant at Khatima in Uttarakhand. The complainant is engaged in manufacture of polyester film in the aforesaid plant. The report of the surveyor M/s A.K. Govil & Associates shows that Rotary UPS Systems were installed in the aforesaid factory of the complainant for supporting the load during the main outrages. The UPS was running normally till 8 pm on 16.11.2005, when the input power failed. When the DG Operator went to start the DG Sets to take changeover of non-UPS loads, he found that UPCL input breaker had got tripped. When he came back for DG starting, smoke had filled inside the UPS cabin and he could not go near UPS panel for checking. In the meanwhile, DGs started and UPS load shifted to those DGs. When the UPS panels were opened after normalizing the plant, the choke was found burnt. The incident was reported to the Indian representative of the manufacturer of the UPS namely M/s Piller. The technical report of the manufacturer, being technical report no. 2006-035 in respect of the damaged choke, to the extent it is relevant, reads as under:
First failure on site
On 31 May, 2005, a trouble occurred at the Polyplex Khatima UPS Installation.
The mains breaker of the input panel for the UPS UBT 1670 tripped. When the breaker was re-closed heavy smoke was coming out of the UPS cabinet and the unit was stopped by the operator.
First investigation
Investigation showed that the internal choke L1 was damaged. There were burnt regions in the center log of the choke.
On site repair and recommissioning
The choke was replaced on site and the unit was recommissioned in June 2005.
The cooling of the choke was improved by permanently operating two fans instead of one fan. A heat run test was successfully performed with the customers load for 20 hours.
Second failure on site
On the 16 Nov, 2005 again smoke was detected coming out of the UPS cabinet and the unit was stopped by the operator.
This time the damage to the choke was much bigger. Also the surrounding components in the mains/load cabinet and transformer cabinet were affected.
As the damage could not be repaired on site the unit was disassembled and the mains/load cabinet, the transformer cabinet and the rectifier/inverter cabinet were shipped to Germany.
Investigation
The damaged choke was sent back to the choke manufacturer for disassembly and investigation. The investigation showed that several metal sheets of the middle leg of the iron core of the choke were loose and had cut the isolation of the winding. This caused a short circuit in the choke and led to the burning.
A final root cause for the loos metal sheets could not be determined. Possibly the mechanical stability of the iron core was affected during transportation.
Repair of the unit
For the repair of the unit a complete new mains/load cabinet and a transformer cabinet have been built/ the rectifier /inverter cabinet has been disassembled and all components have been cleaned.
7. Countermeasure
To prevent a future reoccurrence of the problem several improvements have been done:
The losses of the affected choke L1 have been reduced from 22 kW to 17 kW.
The mechanical stability of the iron core of the choke has been improved by additional cross-ties.
The original fan box has been replaced by a new box with two more powerful fans. A single fan is now sufficient to produce the required air flow. The second fan is for redundancy in case of a failure of the first fan.
Additional guide plates have been applied to the choke to optimize the air flow through the windings.
The choke has been equipped with a temperature sensor and a temperature monitoring relay. The relay is linked into the control of the unit and will initiate a bypass transfer in case of an over temperature."
2. The surveyor M/s A.K. Govil & Associates after completing the survey assigned to them, submitted a report dated 31.03.2008, assessing the loss of profit of Rs.156.518 lacs. The computation of loss made by the surveyor reads as under:
Material Damage
(Rs./Lacs)
As per claim travelling expenses bill
1.000 Difference in freight 9.000 Total 10.000 Less: Disallowed expenses 10.000 0.000 Less: Excess 0.000 Adjusted loss 0.000 (A) Increased Cost of Working As per Annexure 160.140 Less: Excess 3.622 Adjusted Loss 156.518 (B) Total Adjusted Loss (A+B) 156.518 It would thus be seen that the assessment made by the surveyor was restricted to the loss of profit on account of disruption of business for three days. The cost of repair of the machine was borne by the manufacturer M/s Piller.
Later on, the assessment of loss was reduced by the surveyor M/s A.K. Govil & Associates at Rs.100.360 lacs.
3. However, even the aforesaid amount was not paid by the insurer to the complainant and an expert namely M/s Dr. S.N. Mitra, was appointed to give opinion on the basis of the documents made available to him by the insurer. In his opinion, Dr. Mitra concluded as under:
"On going through above facts, the Undersigned is in the firm opinion that the loss as caused is due to Defective Material or Workmanship, gradual deterioration, deformation or distortion over a period / passage of time and falls within the excluded causes under the policy which reads as:-
"Faulty or Defective Design Materials or Workmanship, Inherent vice, latent Defect, Gradual Deterioration, deformation, deformation or distortion or Wear and Tear"
Since the undersigned had no opportunity to go through the design aspects/ parameters as such it would not be possible to comment anything on the design of the Choke. Moreover, this Manufacturer as we gathered from the correspondence that they have supplied Choke to the UPS Manufacturer who have exported about 100 such UPS globally and there was no claim / less reported to them on the function Choke.
This report is computed on the basis of various documents supplied by the Underwriter only without getting any opportunity to inspect the damaged equipments. Site of operation and discussion with various interested and concerned personnel and issued without any prejudice."
4. Based upon the report of Dr. S.N. Mitra, the claim was repudiated by the insurer vide letter dated 01.12.2012 which to the extent, it is relevant reads as under:
"On perusal of various document report and facts available on the record it was observed that the loss as caused is due to "defective materials, workmanship, gradual deterioration, deformation or distortion over a period/passage of time and falls within the excluded cause under the policy which reads as :
"Faulty or Defective Design Materials or Workmanship, Inherent vice, latent Defect, Gradual Deterioration, deformation, deformation or distortion or Wear and Tear"
Your claim is repudiated by the competent authority under exclusion clause No. 1-A under section 1 of material damage of the policy."
5. Being aggrieved from the repudiation of the claim, the complainant is before this Commission seeking payment of Rs.155.14 lacs, the original amount assessed by the surveyor M/s A.K. Govil & Associates alongwith interest on that amount.
6. The complaint has been resisted by the insurer primarily on the grounds on which the claim had been repudiated i.e. faulty or defective design materials or workmanship, inherent vice, latent defect, gradual deterioration, deformation or distortion or wear and tear. The insurer has also taken a preliminary objection that since the insurance policy to the extent the loss of profit is claimed, was taken for a commercial purpose, this Commission lacks the jurisdiction to entertain the complaint.
7. The first question which arises for consideration is as to whether the complainant can be said to be a consumer as defined in Section 2(1)(d) of the Consumer Protection Act or not. It has been held by this Commission in Harsolia Motors Vs. National Insurance Co. Ltd. I(2005) CPJ 27 (NC) decided on 03.12.2004 that since an insurance policy is taken for reimbursement or for indemnity for the loss which may suffer on account of insured perils, the services of the insurer cannot be said to have been hired or availed for a commercial purpose and therefore, this Commission does possess the requisite jurisdiction to entertain a consumer complaint wherever a defect or deficiency in the services rendered by an insurer is made out.
The learned counsel for the OP states that as far as the loss of profit is concerned, the claim would not be covered by the decision of this Commission in Harsolia Motors (supra). I however, find no merit in this contention. In Harsolia Motors (supra), this Commission upheld the plea that the insurance policy is availed for indemnifying the loss which the insured may suffer and therefore, the services of the insurer are availed for protection and not for making profit. It is immaterial whether the loss is on account of destruction or damage of a product or it is on account of the insured being deprived of the profit, which it would in the normal course have made, by use of the insured product. So long as the reimbursement on account of loss of profit is one of the products of the insurance policy, it remains covered by the decision in Harsolia Motors (supra). Therefore, I find no merit in the contention that the insurance policy to the extent it pertains to reimbursement on account of the loss of profit, cannot be the subject matter of a consumer complaint.
8. Coming to the merits of the case, the only issue which arises for consideration in this complaint is as to whether the damage to the choke of the UPS happened on account of some faulty or defective design or workmanship etc. or not. As noted earlier, the choke of the UPS was repaired by the manufacturer M/s Piller to whom it was sent in Germany, without taking any charges from the complainant for the said repairs. The report of the manufacturer shows that besides repairing the choke, they had also carried out several improvements therein in order to prevent recurrence of such incidents in future. The aforesaid report does not indicate any defect either in the product or in its designing. The report shows that several metal sheets of the metal leg of the iron core of the choke were found to be loose and they had cut the isolation of the winding, resulting in short-circuit in the choke. The manufacturer could not identify the root cause for the loose metal sheets but expressed a possibility of the mechanical stability of the core having been affected during transportation. The aforesaid possibility of the mechanical stability of the iron core getting affected during transportation, in my view, cannot be said to be a firm finding of any defect in the choke. The metal sheets could also have become loose on account of factors other than the mechanical stability of the iron core being affected during transportation. In the absence of a firm and determinative finding, it would be difficult to say that only a manufacturing or designing defect in the choke had led to the incident in which a short circuit in the choke happened and led to the burning. A perusal of the report of Dr. S.N. Mitra, consultant engaged by the insurer shows that he had 'noted' two findings from the report of the manufacturer, the first finding being that the mechanical stability of the iron core was affected during transportation and the second finding being that the vibration due to fan may have impacted the stability of the choke. On a perusal of the report of the manufacturer, I find that they did not record a firm finding to the effect that the mechanical stability of the iron core was actually affected during transportation, they only having expressed a possibility of the mechanical stability of the iron core having been affected during transportation. In fact, the expert of the insurer himself ruled out the possibility of mechanical stability of the iron core being affected due to transportation on page 3 of his report. As regards the second finding noted by him from the report of the manufacturer, I feel that he has misread the said report since no finding that the vibration due to fan might have affected the stability of the choke has even been noted in the said report. It would be pertinent to note here that the opinion of Dr. Mitra is based entirely upon the documents supplied to him by the manufacturer including the report of the manufacturer and he had no opportunity to inspect the damaged/burnt choke or to have discussion with the engineer or the manufacturer.
9. Though the manufacturer made several improvements to the choke at the time of its repair in Germany, making those improvements by itself does not prove that the choke when manufactured by them, was defective or had any defect in its designing or workmanship. Those improvements do not prove any inherent or latent defect in the choke which was supplied as a part of the UPS to the complainant. The expert Dr. Mitra inferred defect in the manufacture of the choke on the premise that the reasons given by the manufacturer for loosening of the metal sheets were not correct. Even if it is presumed that the loosening of metal sheets could not have happened during transportation of the iron core, that by itself would not establish any deficiency or defective design in the material or workmanship in the machine nor can a finding of any latent or inherent defect can be drawn only on account of the inability of the manufacturer to find out the true cause of the loosening of the metal sheets which had resulted in short circuiting in the choke and had led to the burning. Though the manufacturer while repairing the choke improved the mechanical stability of the iron core by additional cross-ties, the original fan box was replaced by a new box with two more powerful fans, additional guide plates were applied to the choke to optimize the air flow through the windings, the choke was equipped with a temperature sensor and a temperature monitoring relay, the aforesaid improvement which were aimed at preventing the recurrence of such an incident in future, by themselves do not lead to the inference that the choke when initially manufactured, had a defective design or was the product of a defective workmanship or that it had some latent or inherence defect in it. The insurer therefore, was wholly unjustified in repudiating the claim on the aforesaid ground.
10. In the facts and circumstances stated hereinabove, I hold that the complainant is entitled to reimbursement of the loss of profit suffered by it on account of the complainant having incurred additional cost in having to generate power through the use of DG sets during the period the choke remained unusable. The assessor had initially estimated loss of profit of Rs.156.518 lacs which was later reduced to Rs.100.360 lacs. The learned counsel for the complainant on instructions restricts the claim to the amount of Rs. 100.360 lacs finally assessed by the surveyor. The complaint is therefore, disposed of with the following directions:
(1) The OP shall pay a sum of Rs.100.360 lacs to the complainant. (2) The OP shall pay interest on the aforesaid amount of Rs.100.360 lacs to the complainant @ 9% per annum w.e.f. 01.04.2008 till the date of payment, since the interest is being pressed from the aforesaid period. (3) In the facts and circumstances of the case, there shall be no order as to costs. (4) The payment in terms of this order shall be made within three months from today. ......................J V.K. JAIN PRESIDING MEMBER