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Showing contexts for: constructive loss in M/S Deccan Charterers Pvt Ltd vs The New India Assurance Company on 29 September, 2021Matching Fragments
3. Being aggrieved by the said Award, the plaintiff has preferred the above suit stating that the Award passed by the 1st and 2nd respondents is against the law, biased and therefore, liable to be set aside. It is further, stated that having found that Surveyor report was not proper, substituting their own views without there being any Com.A.S.152/2018 evidence, by relying upon fictitious and notional IRDA guidelines. The Award is against the public policy and evidence on record. Since, 1st and 2nd respondents were earlier employees of the insurance company, they tried to protect the insurance company by their impugned Award and the reason assigned by then is improper and there is no proper basis for assessment of loss. The endorsement of the policy is very clear that if the cost assessment report of the aircraft is more than 75% of the agreed value, then, the Aircraft is to be considered a constructive total loss and the plaintiff is entitled to full insured value of the Aircraft. The 1 st and 2nd respondents yielded to the representation of the insurer and considered the wrongful estimation of the survey in arriving that the cost of the repair of the aircraft, thereby depriving plaintiff full value of the Aircraft. The conduct of the 1st and 2nd respondent was apparently colluded as demonstrated by the observation of the third respondent who has refused to become a party to such miscarriage of justice. The Arbitral Award is a miscarriage of justice and they having failed to notice that the Surveyor who first rejected the claim without realising that the causes given by him to reject the Com.A.S.152/2018 claim was neither sustainable in law or on under contract, waling an extra mail to deny that the aircraft was constructive total loss as the cost of repair as explained in the estimates was in excess of 75% of the agreed value of the aircraft. The Award is in conflict between the parties and Award is opposed to public policy and against the evidence adduced and the conduct of the Arbitrator is also biased. Accordingly, it has prayed for setting aside the Award.
4. The defendant has filed objection statement stating that the application is not maintainable and liable to be dismissed in limine. It is further contended that suit is false, frivolous and is filed without any merits. There is no cause of action for the arbitration suit as defendant complied the Award already, no grounds are made out to set aside the Award as required under Section 34 (2) of the Act. The plaintiff has failed to furnish proof that it was in any manner incapacitated and the agreement was not valid under law and that proceedings before the Tribunal was in accordance with the law and that the present suit is motivated to have more gain for the plaintiff, which it is not entitled as per law and Com.A.S.152/2018 terms of insurance policy. Without prejudice to the above contention, the defendant has stated further that the averments made by the plaintiff in para No.3 are correct about hard landing, conducting of survey, loss, etc. It is further admitted that the lodging of claim, conducting of Arbitration proceedings, etc. It has also admitted that the insurance policy covered, damages caused to the aircraft on constructive total loss. It has admitted about damages caused to the aircraft, intimation to Aviation Regulatory Authority and to it. It has also admitted about assessment of damages by the Sq. Ldr Kapil Mohan to assess the damages and conducting survey by the Surveyor on 2.12.2014, etc. It is also admitted that the plaintiff has filed final estimation for Rs.8,92,17,320/- and the 1st defendant assessed liability at Rs.5.08 crores as per the terms of the insurance policy. However, it has denied about total loss and endorsement in the policy and other aspects. It has admitted about acceptance of the plaintiff of the offer and settlement and payment made to Syndicate Bank. The defendant has communicated the same to the plaintiff and plaintiff in order to gain wrongfully has filed the present case. It has also Com.A.S.152/2018 admitted about present suit is filed on account of payment to the Syndicate Bank by the defendants. It has paid the amount to the Syndicate Bank by obtaining consent of the plaintiff. This is second round of litigation to gain wrongfully nothing else. It has paid the amount as per the Award and there is nothing to decide further. The plaintiff wants to gain more by way of approaching this Court and same cannot be entertained. Accordingly, it has prayed for dismissal of the suit.
Point No.2 :- As per the final Order for the following reasons.12
Com.A.S.152/2018 REASONS
8. POINT NO.1 : Learned counsel for the plaintiff would argue that the Award passed by learned Arbitrators against the facts of the case, terms of the contract of Insurance policy and also the ground reality. He would further argue that non-consideration of material facts, such as, the amount paid by the plaintiff towards labour costs and removing aircraft from the run way, hangar charges and other miscellaneous charges as stated by way of report of the Surveyor and the Arbitrators by considering the report submitted by the Surveyor appointed by the respondents is nothing, but, helping the respondents to reduce the quantum of compensation, which ought to have been granted by considering constructive total loss. Ofcourse, there is no dispute about the accident met by the aircraft, i.e., PILATUS VT- DAR on 28.11.2014, at 3.35 pm, at Guwahati Airport and had sustained major damage towards important parts, due to improper landing and the respondents attribute negligence on the part of the Pilot, co-Pilot in landing of the aircraft on the relevant date and time. The main contention of the plaintiff as could be seen from the plaint averments that the Arbitral Com.A.S.152/2018 Tribunal consisting of 1st and 2nd respondents with majority opinion passed the Award without there being any evidence, by relying upon the fictitious notional IRDA guidelines, the reliance of IRDA guidelines without understanding the basic reality in getting the aircraft completely repaired and when the policy provides for considering total loss upon the requirement of repairs, which exceeds 75% of the agreed value and by reduction of the same by the Surveyor and acceptance of the loss report by the respondents No.1 and 2 in their majority opinion is against the public policy of India, resulting in impugned Award. The respondents have not considered the assessment for computation of loss on the basis of contract of policy only to deny the claim. Further, though, it was agreed for cash on repair payment on the basis of the Survey Report and offer made by the respondents, when it was brought to the notice of the plaintiff that the amount will be paid to financier i.e., Syndicate Bank, then, the plaintiff withdrew the acceptance and emphasised for considering total loss on the basis of various reports submitted by the Pratt & Whitney Canada to whom the engine was sent for OEM, on 17th April 2015 and report of the said Com.A.S.152/2018 Pratt & Whitney is also very clear and the same has been claimed by the claimant in the report made in the claim petition. On the other hand, the Surveyor appointed by the respondent i.e., Sqn. Ldr. Kapil Mohan (Retired), who submitted the report and his report is against the ground reality, who recommended to close the file. The repair estimation submitted by M/s Tantacle Aero logistic Pvt. Ltd., Bengaluru, discloses that it requires estimated cost of 19,51,113 US$ and the Surveyor observed about violation of Pilot Warranty policy, which will not come in the way of constructive total loss as contended in the Arbitral Tribunal. The report submitted by the Surveyor is only to help the respondent, who is under the mercy of the respondents to help and to reduce the approximate loss sustained. Ofcourse, the estimation was also submitted by Pratt & Whitney Canada, which also discloses total amount payable of US$ 8,61,844/- for their estimate, after opening the engine in the presence of officials of the plaintiff to find out the actual damage caused to the engine, propeller, etc. Learned Arbitral Tribunal without considering the documents submitted by the plaintiff, i.e., report of Prat & Whitney Canada and subsequent Com.A.S.152/2018 report of M/s Air Charter Services Pvt Ltd., regarding the condition and engine over hauling, etc. Therefore, learned counsel for the plaintiff would argue that the reason assigned by the 1st and 2nd respondent for reduction of the claim, though there is damage is more than 75% and merely considering the report of the Surveyor, without considering the contention of the plaintiff made payment directly to the Bank, which made the plaintiff to suffer a lot and not in a position to repair the aircraft or reuse it. According to him, when the claimant had agreed to receive the amount directly by furnishing the Bank account, but, the defendant insisted for no objection from the Banker and ultimately paid the amount to Syndicate Bank. Therefore, the plaintiff is not in a position to get the aircraft repaired as it requires huge amount, besides the hangar charges and other charges at the Airport and it is now beyond economic repairs. So, when it becomes total scrap, then what is the purpose of taking policy with agreed value of Rs.9 crores. If this is the tendency of the insurer to deprive the insured of the claim for the loss, then, it is against the law relating to insurance. In the said connection, he took the Court to the Award, wherein, 1 st and Com.A.S.152/2018 2nd respondents have confirmed and 3rd Arbitrator i.e., 4th respondent has upheld the claim of the claimant and given a dissent note in the Award. The 3rd Arbitrator has assigned reasons holding that it is total loss and payment of money to the Bank made the plaintiff to lose the aircraft as company is not in a position to repair it and very purpose of taking out insurance policy found to be negated/nullified. He took the Court to ink Page No.37 and page No.20 of the Award, wherein, it is stated by the Arbitrators that if the net payable loss as per assessment exceeds 75% of the agreed value, then, aircraft will be declared as BER (Beyond Economical repair). From the above, it can be seen that surveyor informed the claimant that net loss assessment will be the basis to decide whether the claim is eligible for CLT and not to the estimation. Further, he took the Court to contention raised before the Tribunal by the claimant by way of Written Argument dated 15.8.2017, wherein, the plaintiff herein had contended that the surveyor had reduced the estimate cost and disallowed the costs of some of the spare parts, etc., from the estimate and the Arbitrators referred to the e-mail, dated 29.7.2015, sent to Mr. Khan of the claimant, wherein, it Com.A.S.152/2018 is stated that "I would like to inform that the repair estimate or the document prepared by the Surveyor to assess any loss. Based on the loss assessment, based on the estimate the aircraft is declared as BER, if the net costs of the repair exceeds 75% of the agreed value of the aircraft. In the present case, Deccan has not even submitted the repair scheme for PILATUS based on which the repairer i.e., ACS prepared the structure repair estimate. He referred to the joint meeting held at Institute on 24.8.2015, which discloses that if the insured decides to repair the aircraft, then after the repairs, with the proof of payment to various vendors and if the aircraft loss sustained less than 75% of the agreed value, the settlement would be done on the basis of the actual cost and if insured decides not to repair the aircraft, then the settlement would be done based on the estimate only. So, the respondents waited for repair estimate from OEM authorised structure repairer and to find out the final loss and if it exceeds 75% of agreed value for the purpose of BER. When, the report of Pratt & Whitney, reveals the cost of repair, which is more than 75%, how could the Surveyor reduced the same, so as to make it less than 75% of the Com.A.S.152/2018 claim. It is nothing, but, to help the respondents and wash up their hands. So, this fact is against the terms of the contract and non-consideration of the materials placed before the Arbitrator, itself goes against the Award on the ground of public policy as contended in the suit. The Arbitral Tribunal has not given any reason, simply accepted the report of the Surveyor and reduced the estimate and paid the amount to financer, which is against the basic law of insurance. The question of making payment to the Bank will arise only, if it is total loss, then, ofcourse, the interest of the financier has to be protected. Here, by treating the loss and making payment to the Bank, then, how could plaintiff get it repaired, the very purpose of taking insurance policy is defeated.
These latter words are missing in Section 34, given the legislative scheme of the Arbitration Act, 1996. For all the aforesaid reasons, with great respect to the learned Single Judge, it is not correct in law and therefore stands overruled".
12. So, according to learned counsel for the plaintiff, when the Arbitrators i.e., Respondent No.2 and 3 solely relying upon Surveyor report, who deducted the amount out of the estimated bill of Rs.8,93,17,320/- without there being any basis and allowed the claim of Rs.5,96,16,554/- as loss on cash in lieu repair basis is highly incorrect and it is a mistake committed by the Surveyor and learned Arbitrators respondent No.2 and 3 blindly believed the report and there was no occasion for the plaintiff to testify the report. In a situation like this, when the respondents No.2 and 3 being Com.A.S.152/2018 the erstwhile employees of the respondent No.1 company acted against the interest of the plaintiff with bias and therefore, the said aspect has to be decided as held in the case decided as stated supra. He has also cited the decision in the case of Kinnari Mullick and another Vs. Ghanshyam Das Damani , reported in (2018) 11 SCC 328, wherein, it was held that "for the limited purpose, the Court acting under Section 34 can get further, particulars by sending the award back to the arbitrators with a direction to assign reason and to send it back. The latest decision in this regard, is in the case of Smt. Padma Mahadev and others Vs. M/s Sierra Constructions Private Limited, dated 22nd March 2021 by the Division Bench of High Court of Karnataka, wherein, their lordships have specifically stated when the Court acting under Section 34 can set aside the Award, when there is a patent illegality or by rejecting the claim and also assigning reason, why the quantum of loss is reduced by the Surveyor, so as to help the insurance company, i.e., respondent No.1. With the help of these two decisions, he would further argue by referring the various documents produced before the Arbitral Tribunal by referring to the detail Com.A.S.152/2018 report submitted to DGCA at Annexure-II, dated 29 th November 2014, intimated the same and the 1st respondent was also intimated about the accident and after intimating the DGCA, the respondent appointed a Surveyor to assess the loss, who conducted survey and submitted his report. The plaintiff herein made available the estimate prepared by a Pratt & Whitney, a Canada Company, when the engine was sent to it for preparing estimate and the said company submitted the estimate at 1.06 Million US $ to 1.9 Million US $. The Surveyor who submitted report on 28.2.2015, concluded that aircraft and engine could be repaired at most lower cost and he verified the policy and submitted report that claim cannot be allowed as there is breach of Pilot Warranty. Subsequently, upon submission of the documents and right of the plaintiff to use the aircraft with Pilot having sufficient experience, then, the Surveyor and defendant moved for settlement by cash in lieu of repairs at Rs.5,96,16,554/-. He would further argue that though it was accepted on the ground that the amount would be paid to the plaintiff to the account furnished for deposit of the amount. But, the defendant paid the amount directly to the financier Com.A.S.152/2018 i.e., Syndicate Bank, Bengaluru, though, it is not a total loss. Further, Syndicate Bank, has also written letter to the insurance company to consider it as total loss. When the plaintiff expressed its desire to get it repaired if amount is paid to it, the same was not considered by the defendant and therefore, the acceptance was withdrawn by issuing a subsequent mail. The claimant had also sent the estimation given by Pratt & Whitney Canada to the Surveyor, who without there being any basis reduced the quantum or repair estimate from US $ 733,044.18 to US $ 483,107.60, though the engine has run only for 147.9 hours as against the life of 5,000 hours. It is further argued that the respondent Nos. 2 and 3 blindly accepted this and reduced the loss sustained and paid the amount directly to the Bank and now there is no question of repairing the aircraft as nothing is received by the plaintiff. If the respondent No.1 had paid the amount to plaintiff directly, he would have repaired the same and paid the loan amount to the Syndicate Bank. The defendant was not prepared for total loss or get it repaired and give it to the plaintiff. So, somewhere here, the arbitrators appear to have acted arbitrarily, so as to help the Com.A.S.152/2018 insurance company, which is against the terms of the insurance policy and attracts the ratio laid down in the decision in the case of National Highways Authority of India stated supra. It appears from the report of the Surveyor that it has disallowed the labour cost, cost of shifting the aircraft from the runway, VAT, service tax, 10% of escalation charges, parking charges, hangar rental charges, cost of obtaining Bank particulars. He has disallowed all the above claims and ultimately paid the amount to Bank, which is the main grievance of the plaintiff. Now, the Court has to see what is the loss incurred in the business contract which is necessary to know whether there is any violation of terms and conditions. The clause No.1 under the Hull and aircraft repair, insurance policy states that "in respect of any claim on equipment that become payable on the basis of a total loss, settlement shall be made to, or to the order of the contract party. In respect of any other claim, settlement shall be made with such party as may be necessary to repair the equipment unless otherwise agreed after consultation between the insurers and the insured and were necessary under the terms of the contract, the Contract party/parties". Such payment Com.A.S.152/2018 shall only be made provided there are in compliance with all applicable loss and regulations. The constructive Total Loss endorsement reads as " When the cost of repair of the damage to the insured aircraft together with the cost of salvaging and /or Transportation from the place of accident to the place of repair and returned to service be estimated at 75% or more of the agreed value of the aircraft, the insured and the insurer may be mutually agreed to declare a constructive total loss and the insurer shall pay the agreed value of the aircraft less the net value of the aircraft in its damaged condition. This latter value shall be fixed by experts or by sale as may be mutually agreed by the insured and the insurers". With the help of these two endorsements, he would argue that when the 1st respondent is not prepared to get the aircraft repaired and made airworthy and when it is not ready to take it as salvage by treating it as constructive total loss, then, the merely relying upon the surveyor report, who reduced the estimate amount arbitrarily appears to be improper and it appears that the same has been done in collusion with the defendant to protect the insurance company. When it appears from the records that the Com.A.S.152/2018 Arbitrators have not properly conducted arbitration or considered the documents placed before the Court and simply accepted the report of the Surveyor, then, it amounts to non- consideration of material documents, which also come in the purview of Section 34(2) of the Act. They cannot simply pay some amount and wash of their hands.