State Consumer Disputes Redressal Commission
M/S. Global Ispat Pvt. Ltd., vs The Oriental Insurance Company on 4 December, 2012
BEFORE THE GOA STATE CONSUMER DISPUTES REDRESSAL COMMISSION, PANAJI GOA C.C. No. 01/11 M/s. Global Ispat Pvt. Ltd., A private Limited Company, Registered with the Registrar of Companies at Panaji having its registered office and its factory at M-18&19 Cuncolim Industrial Estate, Cuncolim, Slacete, Goa. ..Complainant V/s. The Oriental Insurance Company Limited through the Divisional Manager, (GOA) having Divisional Officer at 3rd Floor, Gouveia Chambers, Helidoro Salgado Road, Panaji-Goa. .Opposite Party Complainant is represented by Adv. Shri. N. A. Takkekar. O.P is represented by Adv. Shri. E. Afonso. Coram: Shri. Justice N.A. Britto, President Smt. Vidhya R. Gurav, Member Dated: 04/12/2012 ORDER
[Per Justice Shri. N. A. Britto, President] By complaint filed on 21/01/11, the complainant seeks to recover from the O.P., a sum of Rs. 99,48,635/-.
2. The complainant manufactures steel ingots and has its factory at M-18 & 19 in Cuncolim Industrial Estate, Cuncolim, Goa.
3. The complainant had obtained from the O.P., the insurer, a standard Fire and Special Perils Policy for the period from 13/4/09 to 12/4/10. The said policy had an addendum, so to say, which stipulated that in consideration of payment of additional premium, the O.P., notwithstanding what was printed in the exclusions of the policy to the contrary, that the insurance on stock of sponge Iron, Coal & Charcoal of the policy would extend to include loss or damage by fire only of or to the property insured caused by its own fermentation, natural heating or spontaneous combustion.
4. On 4/7/09 at about 17.30 hrs there was a dreadful explosion in the complainants said factory causing extensive damage to the factory premises, roof of the shed, machinery and according to the complainant, to stock of sponge iron as well and injuries to over 50 workers and death of two, on account of which a crime under No. 34/2009 was registered against the directors of the Complainant on the same day under sections 336, 337, 338, 304-A r/w 34 I.P.C. The explosion was due to spillage of molten metal in the pool of water, besides the furnace.
5. The factory was sealed by the police on 6/7/09 and thereafter was re-opened on 10/07/09 after orders were obtained from the Lr. JMFC, Margao, on complainants application dated 9/7/09. The complainant reported the incident to the O.P. on the same day and the O.P. got a preliminary survey done by a local surveyor by name M &M Associates on the same day, regarding which no whisper has been made by either of the parties.
Shri. Vijay Kumar S. Saokar was then appointed as Surveyor cum Loss Assessor by the Regional office of the O.P. at Pune who conducted a survey on 5/7/09 and then carried out a joint inspection on 6/7/09 alongwith Mr. Yeshwant Singh the General Manager of the complainant.
6. The complainant wrote a letter to the O.P. on 13/07/09 regarding loss being caused to the stock of sponge iron lying in their factory on account of heavy rain water and seeking their advice so that the loss could be minimized. The letter was replied by the O.P. on the same day by stating that the complainant was already requested to use the said stock for consumption, at the earliest to prevent damages due to rain water. The said Surveyor Shri. Saokar also wrote to the complainant on the same day reiterating that there was no damage to sponge iron, due to the explosion.
6.1. By another letter dated 10/08/09 the complainant informed the O.P. to permit them in writing to shift the stock of damaged sponge iron, after proper weighment and under their authorised supervision. The complainant then by its letter dated 20/07/09 submitted estimate of loss to the extent of Rs. 95,61,894/- and revised the same subsequently on 22/08/09 to Rs. 99,48,635/-. Loss by way of sponge iron itself was estimated at Rs. 75,64,000/-.
6.2. The complainant was informed by the Surveyor by letter dated 13/07/09 that there was no damage to the sponge iron due to the explosion and again by letter dated 6/9/02 that as per policy terms and conditions the claim for sponge iron will not get admitted under the peril of explosion.
6.3. The final report was prepared by the said Surveyor Shri. Vijay Kumar S. Saokar on or about 5/09/09 assessing the gross loss caused to Rs. 13,87,500/-and to Rs. 7,09,556/- as net loss payable under the policy for damage to fixed assets only. He reiterated that sponge iron was not damaged due to explosion.
6.4. By their letter dated 8/10/09 the O.P. forwarded to the complainant a discharge voucher for Rs. 7,08,967 in full and final settlement of the claim of the complainant. The complainant received the letter and the voucher but returned the discharge voucher to the O.P. on 09/10/09 stating that the said amount of Rs. 7,08,967/- was not acceptable to them against the claim of Rs. 99,48,635/-. We are unable to understand why the complainant did not accept the said sum under protest.
7. The case of the complainant is that their factory remained closed for nearly a month from 04/07/09 due to the said explosion and initially from 4/7/10 to 10/7/10 due to the closure by the police. The complainant stated that by their letter dated 13/07/09 they thought fit to inform the O.P. about the danger that was posed to the storage of sponge iron and Mr. Saokar had promptly replied stating that there was no damage to the sponge iron and that they should consider the suggestion given in letter dated 05/07/2005. According to the complainant, Mr. Saokar did not even inspect the sponge iron after his first visit nor make any attempt to determine the damage and he wrongly reached the conclusion that the sponge iron was not damaged merely because the same was covered in tarpaulin. According to the complainant, they got the sponge iron heap tested by SGS India Pvt. Ltd., who have found the ferrum content reduced to 36.57%. According to the complainant, the O.P. neglected to salvage the sponge iron from the site by not letting the complainant to know what to do with it in time which has rendered the sponge iron completely unusable.
The complainant stated that Shri. Saokar vide his letter dated 19/09/09 maliciously stated that the cause of loss of sponge iron is being altered by the complainant from time to time. According to the complainant, the complainant has maintained that the proximate cause of loss of a sponge iron is the explosion, which set in motion reoxidization due to water seepage from the broken roof and fire, being the consequent causes of the explosion right from the beginning and that it was the bounden duty of the O.P. to take the sponge iron stock out of the premises and salvage the same.
According to the O.P. the surveyors report is vague and does not justify as to why their estimates are disputed. According to the complainant, by their notice dated 06/11/09, they called upon the O.P. to either recalculate the assessments taking into account the estimate given by the complainant or to appoint a new independent surveyor to conduct a fresh survey and investigate into the matter and prepare a fresh estimate which notice was replied on 08/12/09 refusing to permit a reassessment. The case of the complainant is that the loss assessed by the surveyor is very meager sum of Rs. 13,87,500/- which was further reduced after depreciation to a sum of Rs. 7,09,556/-.
8. On the other hand, it is the case of the O.P. that the said Shri. V. S. Saokar a duly licenced surveyor and loss assessor was appointed to assess the loss caused under the provisions of the Insurance Act, 1938 who by his report dated 06/09/09 assessed the net loss at Rs. 7,09,556/-. The O.P. stated that they disclaimed their liability for rest of the claim by their letter dated 8/10/09 which was acknowledged by the complainant on 9/10/09 and the complaint which has been filed on 21/01/11 is not maintainable as the claim is deemed to have been abandoned by the complainant on 08/10/10 and the complainant ought to have filed the complaint within 12 months from the date of the disclaimer and as such the complaint which has not been filed within 12 months of disclaimer needs to be dismissed. According to the O.P., the sponge iron was not damaged and that the complainant wrote the letter of loss of the sponge iron only to fabricate evidence. According to them, it was the duty of the insured to act as a prudent uninsured and do everything that was required to be done to minimize the losses and prevent further losses. O.P. stated that the job of the surveyor was only to assess the loss directly caused due to alleged incident on 04/07/09 and the O.P. has only to reimburse the loss assessed by the surveyor and the loss assessed in terms of the conditions of the policy and it is a duty of the insured to act as a prudent uninsured and do all that is required to be done to minimise the losses and to prevent further losses. The O.P. stated that by letter dated 05/07/09, the surveyor only suggested to the complainant to use the sponge iron covered by tarpaulin so as to prevent the same being damaged. According to the O.P., there was seepage of water prior to the explosion which is evident from the fact that the sponge iron was covered by tarpaulin and pool water was found near the furnace which resulted in explosion due to fall of molten iron on water.
9. The complainant in support of the complaint filed self serving affidavit of one of its directors by name Mr. Kushal Abhay Agarwal.
The O.P. filed the affidavits of Divisional Manager Ms. Jyothi Kamat dated 15/11/11 and 13/04/12 and also affidavit of the said surveyor Shri. V. S. Saokar alongwith his final report dated 5/09/09. The complainant has not filed the evidence of any expert not even an affidavit of Shri. Yeshwant Singh, General Manager who was present at the time of inspection which was carried out by said Shri. Saokar on 06/07/09. The report of Shri. Saokar, the Insurance Surveyor and Loss Assessor is admittedly obtained under the provision of Section 64-UM of the Insurance Act, 1938 and his conclusion is in tune with the defence of the O.P. that the sponge iron was not damaged by the explosion. The conclusion is based on the fact that there was presence of rain water found near the furnace which was the cause of the accident and the sponge iron was otherwise also covered with tarpaulin. That conclusion appears to be reasonable and cannot be simply brushed aside. However, we hasten to add that we do not propose to go into the merits of the case of the complainant, in view of the formidable objection taken on behalf of the O.P with reference to Clause 6(ii) of the general conditions of the policy in question. It reads as follows:
6(ii). In no case whatsoever shall the Company be liable for any loss or damage after the expiry of 12 months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration; it being expressly agreed and declared that if the company shall disclaim liability for any claim hereunder and such claim shall not within 12 calendar months from the date of the disclaimer have been made the subject matter of a suit in a court of law then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder (emphasis supplied).
10. There is no dispute that the explosion took place on 04/07/09 and the claim made by the complainant was partly accepted by the O.P. on 08/10/09. In other words, the claim was partly rejected. Therefore, the complainant ought to have filed the complaint within 12 calendar months from 08/10/09 i.e. on or before 8/10/10 but the complaint has been filed only on 21/01/11. The complainant could have accepted the amount tendered by the O.P. leaving the balance to be made subject matter of the complaint.
11. Shri. N. A. Takkekar, the Lr. Advocate on behalf of the complainant, would refer to the dictionary meaning of the word abandonment and would submit that the complainant did not abandon or relinquish its claim because the complainant after 08/10/09 sent a legal notice to the O.P. on 6/11/09 calling upon the O.P. to recalculate the assessment of loss taking into account the estimate given by the complainant or appoint a new independent surveyor. According to the Shri. Takkekar, the legal notice was replied to by the O.P. on 08/12/09.
According to him, 12 months would expire, after the expiry of 30 days from 06/11/09 and therefore the complaint filed is in time. Shri. Takkekar has referred to New India Assurance Company Ltd., vs. Zuari Industries Limited and ors., 2009 (9) SCC 70, for the meaning of proximate cause and has submitted that the facts of this case are akin to the fact of that case. Referring to M/s. Fair Air Engineers Pvt. Ltd., & anr., vs. N.K. Modi, AIR 1997 SCC 533. Lr. Adv. would submit that the C.P. Act, 1986 provides for additional remedy to the consumers. Lr. Adv. Shri. Takkekar has tried to distinguish the decisions, relied upon on behalf of the O.P., but in our view, the same are un-distinguishable as far as facts of this case are concerned.
12. On the other hand, Shri. E. Afonso has also referred to the same definition of abandonment and has submitted that the complainant not having preferred his claim before this Commission within 12 months from 08/10/09 has thereby relinquished or abandoned its claim. Shri. Afonso would next submit that by sending a legal notice the complainant could not have extended the period of 12 calendar months and in this regard Shri. Afonso has placed reliance on Tayal Enterprises vs. United India Insurance Co. Pvt., 2007 STPL (CL) 529 NC, wherein it is stated by the National Commission that it is well settled law that the correspondence does not extend the period of limitation as laid down by law. Shri. Afonso has placed reliance on the case of Vulcan Insurance Co. Ltd., vs. Maharaj Singh & anr., 1976 (1) SCC 943 and National Insurance Co. Ltd., vs. Sujir Ganesh Nayak & Co. & anr., 1997 (4) SCC 366 and has submitted that the ratio of all the above decisions is that the complaint having not been filed within the stipulated time under the policy, the same would not be maintainable.
13. There is no dispute that at present Section 24A of C.P. Act, 1986 provides for a limitation period of 2 years for filing a complaint and with reference thereto the Apex Court in State Bank of India vs. B.S. Agricultural Industries, AIR 2009 SCC 2210, has held that it is for the Court to determine the question as to whether the suit is barred by limitation or not irrespective of the fact that as to whether such a plea has been raised by the parties; such a jurisdictional fact need not be even pleaded. The Apex Court has further held that as a matter of law, the consumer forum must deal with the complaint on merits only if the complaint has been filed within two years from the date of accrual of cause of action and if beyond the said period, by showing sufficient cause for the delay and delay condoned.
14. The controversy raised is no longer res integra and has been decided by the Apex Court atleast in three decisions. Clause 6(ii) of the policy is a deeming provision. If the claim is not made or a complaint is not filed within 12 calendar months, the claim for all purposes is deemed to be abandoned or the right to make such a claim is deemed to be relinquished. It cannot be extended subsequently by correspondence. The case of Vulcan Insurance Co. Ltd., 1976 (1) SCC 943, was cited before the Apex Court in Sujir Ganesh Nayak & Co. & anr., (supra) and both the cases were again cited in Himachal Pradesh State Forest Co. Ltd., vs. United India Insurance Co. Ltd., 2009 (2) SCC 252. In fact, this case of Himachal Pradesh State Forest Co. Ltd., dealt with the very clause 6(ii) of the policy with which we are concerned with.
14.1. In Vulcan Insurance Co. Ltd., (supra) there was clause 13 which provided for legal proceedings to be commenced within 3 months from the date of such rejection and it was held by the Apex Court in para 23 that:
We do not propose, as it is not necessary, to decide whether the action commenced by Respondent No. 1 under Section 20 of the Act for the filing of the arbitration agreement and for appointment of arbitrators was barred under Clause 19 of the policy. It has been repeatedly held that such a clause is not hit by Section 28 of the Contract Act and is valid.Respondent No. 1
was ill advised to commence an action under section 20 instead of instituting a suit within three months of the date of repudiation to establish companys liability.
14.2. It was argued in Sujir Ganesh Nayak & Co. & anr., (supra) that the above observation was in the nature of obiter dicta and did not lay down the correct law and it was held by Apex Court, through three Lr. Judges, that even if the said observation were in the nature of obiter dicta, they proceeded on a correct reading of the clause. The Apex Court also took note of Food Corporation of India vs. New India Assurance Co. Ltd., 1994 (3) 324 and held that:
On a plain reading of this restriction clause, it is clear that if the appellant desired to enforce its rights under the contract, it should do so within six months of the termination of the contract and if it failed to do so within six months of the termination of the contract and if it failed to do so its right under the contract would extinguish. It was, therefore imperative for the appellant to lodge its claim with the Insurance Company within the period of six months to assert its rights failing which the right would stand forfeited.
It was further held that the suits were barred under the restriction adverted to since they were admittedly filed after the rights stood extinguished on the expiry of six months after the Insurance Company repudiated the demands.
14.3. In Himachal Pradesh State Forest Co. Ltd., (2009) 2 SCC 252, the cases of Vulcan Insurance Co. Ltd., (supra), Food Corporation of India vs. New India Assurance Co. Ltd.,(supra) and National Insurance Co. Ltd., vs. Sujir Ganesh Nayak & Co. & anr., (supra) have again been considered by the Apex Court and it has been noted that in Sujir Ganesh Nayak & Co. & anr., (supra) to which primary reference was made by the learned counsel for the parties that while dealing with an identical situation where a contract contained a provision prescribing a period of limitation shorter than that prescribed by the Limitation Act, it was held that the contractual provision was not hit by Section 28 as the right itself had been extinguished. It was contended before the Apex Court that in the light of certain observation in Food Corporation of India case (supra) the observation in Sujir G. Nayaks case (supra) were required reconsideration, but the Hon. Supreme Court found no merit in that plea for the reason that in Sujir G. Nayak case, Food Corporation of India case was specifically considered and Vulcan Insurance Co.s case too had been relied upon.
14.4. Thereafter, the Hon. Supreme Court referred to condition 19 in Sujir G. Nayaks case which provided that the Company would not be liable for loss or damage from happening of loss or damage unless the claim was the subject of pending action or arbitration and held that while construing that provision vis--vis Section 28 of the Contract Act and the cases cited above and several other cases, in addition, it held that:
16. From the case law referred to above the legal position that emerges is that an agreement which in effect seeks to curtail the period of limitation and prescribes a shorter period than that prescribed by law would be void as offending Section 28 of the Contract Act. That is because such an agreement would seek to restrict the party from enforcing his right in Court after the period prescribed under the agreement expires even though the period prescribed by law for the enforcement of his right has yet not expired. But there could be agreements which do not seek to curtail the time for enforcement of the right but which provide for the forfeiture or waiver of the right itself if no action is commenced within the period stipulated by the agreement. Such a clause in the agreement would not fall within the mischief of Section 28 of the Contract Act. To put it differently, curtailment of the period of limitation is not permissible in view of Section 28 but extinction of the right itself unless exercised within a specified time is permissible and can be enforced. If the policy of insurance provides that if a claim is made and rejected and no action is commenced within the time stated in the policy, the benefits flowing from the policy shall stand extinguished and any subsequent action would be time-barred. Such a clause would fall outside the scope of Section 28 of the Contract Act.
This, in brief, seems to be the settled legal position. We may now apply it to the facts of this case.
19. The clause before this Court in Food Corpn. case extracted hereinbefore can instantly be compared with the clause in the present case.
The contract in that case said that the right shall stand extinguished after six months from the termination of the contract. The clause was found valid because it did not proceed to say that to keep the right alive the suit was also required to be filed within six months. Accordingly, it was interpreted to mean that the right was required to be asserted during that period by making a claim to the Insurance Company. It was therefore held that the clause extinguished the right itself and was therefore not hit by Section 28 of the Contract Act. Such clauses are generally found in insurance contracts for the reason that undue delay in preferring a claim may open up possibilities of false claims which may be difficult of verification with reasonable exactitude since memories may have faded by then and even ground situation may have changed.
Lapse of time in such cases may prove to be quite costly to the insurer and therefore it would not be surprising that the insurer would insist that if the claim is not made within a stipulated period, the right itself would stand extinguished. Such a clause would not be hit by Section 28 of the Contract Act.
21. Clause 19 in terms said that in no case would the insurer be liable for any loss or damage after the expiration of twelve months from the happening of loss or damage unless the claim is subject of any pending action or arbitration.
Here the claim was not subject to any action or arbitration proceedings. The clause says that if the claim is not pressed within twelve months form the happening of any loss or damage, the Insurance Company shall cease to be liable.
There is no dispute that no claim was made nor was any arbitration proceeding pending during the said period of twelve months. The clause therefore has the effect of extinguishing the right itself and consequently the liability also. Notice the facts of the present case. The Insurance Company was informed about the strike by the letter of 28/04/1977 and by letter dated 10/05/1977. The insured was informed that under the policy it had no liability. This was reiterated by letter dated 22/09/1977.
Even so more than twelve months thereafter on 25/10/1978 the notice of demand was issued and the suit was filed on 2/6/1980. It is precisely to avoid such delays and to discourage such belated claims that such insurance policies contain a clause like Clause 19. That is for the reason that if the claims are preferred with promptitude they can be easily verified and settled but if it is the other way round, we do not think it would be possible for the insurer to verify the same since evidence may not be fully and completely available and memories may have faded. The forfeiture Clause 12 also provides that if the claim is made but rejected, an action or suit must be commenced within three months after such rejection; failing which all benefits under the policy would stand forfeited. So, looked at from any point of vie, the suit appears to be filed after the right stood extinguished. That is the reason why in Vulcan Insurance case while interpreting a clause couched in similar terms this Court said:
23. It has been repeatedly held that such a clause is not hit by Section 28 of the Contract Act.
Even if the observations made are in the nature of obiter dicta we think they proceed on a correct reading of the clause.
In the light of the fact that Food Corpn. Case has been considered in Sujir Nayak case, no further argument remains in the matter, as Clause 6(ii) and Condition 19 are, in their essence, pari materia.
14.5. The Hon. Supreme Court, therefore has held that in the light of the fact that Food Corporation case has been considered in Sujir G. Nayak case, no further argument remains in the matter, as Clause 6(ii) and Condition 19 are, in their essence, pari materia. We have already noted that it is this very clause 6(ii) which came for consideration in Himachal Pradesh State Forest Co. Ltd., (supra).
15. In the case at hand the complainant was required, in terms of clause 6(ii) of the general conditions of the policy, to prefer the claim within 12 calendar months from the date of the disclaimer or else the claim for all purposes was deemed to have been abandoned or the right extinguished and the liability ceased. The complainants claim is deemed to have been abandoned on completion of 12 months from 08/10/09 and it could not have been revived or extended by sending a legal notice. The complaint therefore, deserves to be dismissed, as not having being filed within the period stipulated by clause 6(ii) of the policy and as per the law laid down by the Apex Court in various decisions cited hereinabove and ending with Himachal Pradesh State Forest Co. Ltd., (supra).
16. In the circumstances therefore we have no other option but to dismiss the complaint, but considering the facts, with no order as to costs.
[Smt. Vidhya R. Gurav] [Justice Shri. N. A. Britto] Member President