Elel Hotels And Investments Ltd vs ORIENTAL INSURANCE CO

THIS consumer complaint, CC No. 53/2006 has been filed under section 21 of the Consumer Protection Act, 1986 before this Commission by M/S Elel Hotels and Investment Limited, Searock 9th Floor, BJ Road, Band Stand, Bandra (W), Mumbai 400 050 against the respondent/Opposite Party (OP) the Oriental Insurance Company Limited, stating that the OP Company should be directed to grant them relief on account of damage done to their Hotel during the incident of multiple bomb blasts at Bombay on 12.03.1993. The complainant stated that the OP Insurance Company had issued two insurance policies in respect of Searock Hotel at Bombay for 12 months period from 01.04.1992, as per the following details: - (1) Fire Policy ''A'' (hereinafter called Material Damage or MD Policy)

i) Policy No. 21300/11/93/0019

ii) Name of Insured under Policy : M/S WG Hotel Searock Sheraton

iii) Sum Insured : Rs.54,86,23,000/ -

iv) Policy Period : 01.04.1992 to 31.03.1993

(2) Consequential Loss ''Fire Policy'' (called CL Policy)

i) Policy No. 21300/11/93/0020

ii) Name of Insured under Policy : M/S ITC Ltd, A/c WG Hotel Searock Sheraton

iii) Sum Insured : Rs.14,73,00,000/ -

iv) Policy Period : 01.04.1992 to 31.03.1993

ON 12.03.93 at about 3.20 pm, there was an explosion in room No. 1840 of the Hotel on the 18th Floor which was a part of many bomb blasts that took place in Bombay on that day. The bomb blast caused extensive material damage to the building, furniture, fixtures, interiors, electric works etc. as a fire broke out following the explosion in room No. 1840. As a consequence of the damage, the business of the hotel ceased completely and there was need for restoration/reconstruction of the same. This loss also triggered a claim under the CL Policy. Both the losses under CL and MD Policies were notified to the OP on 13.03.1993.

IT has been stated that the said hotel building was constructed by the complainant M/S Elel Hotel and Investment Limited in the year 1978 and fitted with all necessary contents, infrastructure to make it a fully -operational hotel. However, the complainant had entered into an operating licence agreement with M/S ITC Limited (ITC) in 1986 whereby the latter was given rights to operate the Hotel on behalf of the complainant. There was subsequently a dispute between the complainant and ITC, leading to filing of arbitration suit No. 3885/1993, before the High Court of Judicature at Bombay. The Hon''ble High Court passed an order on 29.03.1994 in the said suit, by which a court receiver was appointed for the purpose of carrying out repairs at the Hotel and to take steps to recover the insurance money and make the same available to the petitioners M/S Elel Hotels and Investment Limited to carry out the repairs. By 4th April 1994, the said Court Receiver appointed M/S Parelkar and Dallas as architects to supervise the restoration work of the Hotel and also to assess the MD Claim arising from the bomb blast damage. All correspondence issued by M/S Parelkar and Dallas in relation to the assessment of loss was addressed to or copied to the surveyor and the OP. It has been stated that the CL claim was assessed and the OP''s liability was quantified on 30.11.1994 at Rs. 12,41,58,320/ -. Out of this amount, a sum of Rs. 7,40,03,927/ - was released by the OP to M/S ITC, but the balance amount of Rs. 5,01,54,393/ - was withheld by the OP in respect of the lease rent payable by the complainant to M/S ITC under the operational licence agreement of 1986. After the Consumer Complaint in question was filed, the balance amount was released by the OP in pursuance of an interim order dated 04.04.2007, passed by this Commission during hearing of the complaint. The case of the complainant is that there was no justification on the part of the OP insurance Company to withhold the said amount and in their prayer clause to the complaint, they stated that the amount of Rs. 5,01,54,393/ - on the CL claim should also be paid alongwith interest @18% p.a. from 30.11.94 till the date of filing the complaint and further to pay interest @18% p.a. from the date of filing the complaint till realisation. Regarding the MD Claim, the case of the complainant is that on the basis of preliminary report of the surveyor on 20.03.1993, an ''on account'' payment of Rs. 1crore was made by the OP on 10.04.1993. However, the surveyors appointed by the Insurance Company took an extraordinary long time of 13 years to finalise the claim and that also after direction was issued by this Commission after the filing of the consumer complaint that the assessment should be completed based on the documents supplied by the complainant. The OP in their letter dated 25.07.94 to the surveyors had acknowledged the fact that the complainant was a ''lessor'' in the case and hence they should not have withheld the payment for such a long time. The complainant have further stated that in the Arbitration Award given on 24.05.2005 by Hon''ble Justice H. Suresh (Retd.), it was stated as follows: -

"3) Declared that (iv) if and to the extent Elel is at law entitled to receive/recover any payments under/in respect of insurance policy No.21300/11/93/0019 and Policy no. 21300/11/93/0020 for the year 1992 -93, ITC has no objection to Elel receiving such payment from Oriental insurance Company."

M /S Parelkar and Dallas had submitted their report on MD loss on 5.04.1995 giving a claim figure of Rs. 13.91 crores, which included damage to building, plant and machinery, furniture and fixtures etc. However, after considering the report of the M/S Parelkar and Dallas, the OP made a payment of Rs. 1 crore on 24.05.95. The OP Insurance Company should have finalised the claim based on the report of M/S Parelkar and Dallas, which were an independent and licensed loss assessors and were bound to produce an impartial report. M/S Parelkar and Dallas kept the OPs and the surveyors advised at various steps of the claim and reply to the clarifications sought by them from time to time in respect of MD Claim. The complainant also wrote to the OP on various occasions to release the claim. However, till the date of filing the complaint, the OP released a sum of Rs. 2 crore only. Further, following another interim order of this Commission during the pendency of the proceedings on 18.02.2010, a further sum of Rs. 80,99,648/ - was received making it a total sum of Rs. 2.81 crores which was the figure determined by the surveyor in their final report. The complainant has prayed that in respect of the MD Claim, a sum of Rs. 11.95 crores should be paid to them alongwith interest @18% p.a. from 05.04.1995 till the date of filing this complaint, and then further interest @18% p.a. from the date of complaint till realisation.

THE complaint has been resisted by the OP Insurance Company taking the plea that the Insurance Policies in question were taken by M/S ITC Limited, one in the name of M/S WG Hotel, Searock Sheraton and the other in the name of M/S ITC Limited A/c WG Hotel Searock Sheraton and the name of the complainant does not find mention anywhere. There was, therefore, no privity of contract between the OP and the complainant and hence, they were not liable to pay any amount to the complainant. Regarding the compromise award passed in the arbitration proceedings between the complainant and M/S I.T.C. Limited, the stand of the OP is that M/S ITC had no objection to M/S Elel Hotels and Investment Limited receiving payment from the Insurance Company, provided the complainant M/S Elel Hotels and Investment Limited was entitled to receive/recover any payments ''under law''. In the present case, the complainant is not entitled to receive any amount from the OP ''under law'' and hence, they cannot take the benefit of the Arbitration Award. The OP have stated that if the building was owned by the complainants and they had interest in the same, they should have taken the Policies in their name in order to claim the loss. The agreement between M/S ITC Limited and the complainant for giving the premises on licence had also not been filed on record. Further, the wording of the Arbitration Award between M/S Elel Hotels and Investment Limited and M/S ITC indicates that no claim of any nature whatsoever were remaining outstanding between M/S Elel Hotels and M/S ITC and hence, the reasonable presumption was that M/S ITC had already paid to M/S Elel Hotels and Investment Limited regarding the damage caused to the building during bomb blast, as under the licence agreement they were to restore the building to M/S Elel Hotels and Investment Limited in the same condition at the time of handing over the possession. Regarding the payments which already stand made to the complainant, the case of the OP is that the said payments were made ''without prejudice'' and hence, they do not create any right in favour of the complainants to get the claim from them. The OPs have also stated in their written reply to the complaint that the complaint involves disputed questions of facts and requires detailed evidence, both oral and documentary. The complainant was depending upon the report of M/S Parelkar and Dallas, Architects but the said report was based on assumptions only and not physical verification and hence, could not be accepted. The claim was to be restricted only to items which were damaged during bomb blast and not for the expenses of refurnishing the hotel. The rates of particular items were to be considered on the date of loss and not at the current rates. The surveyors appointed by the OP had rightly assessed the loss for material damage as Rs. 2,81,13,903/ -. However, for effective decision of the complaint, detailed evidence would be required to be produced by both the parties and since complicated questions of facts were involved, the proper forum to adjudicate upon the issue would be the Civil Court and hence, the complaint should be dismissed.

THE OP have further taken the plea that there was no intention on their part to delay the payment of claim. Hence no deficiency in service could be attributed to the OP. The claim with regard to CL Policy was approved for Rs. 12,41,58,320/ - and substantial payment of Rs. 7,40,03,927/ - was paid to the insured in the year 1995 itself. The balance payment could not be made as the insured failed to produce the receipt of payment of licensing fee to the complainant. However, after the consent award was passed in the dispute between the insured and the complainant in 2005, the balance payment of Rs. 5,01,54,393/ - was offered to the complainant. Regarding the Material Damage claim, an amount of Rs. 2 crores was already paid by way of ''on account'' payment. The assessment with respect to the MD claim could not be finalised by the surveyors because of non -cooperation of the insured and the complainant. On the directions of this Commission, the surveyors finalised their report on the basis of the documents submitted by the insured and the complainant vide their report dated 29.09.2007 assessing the loss at Rs. 2,81,13,903/ -. The balance payment of Rs. 80,99,648/ - was offered to the complainant by the OP before this Commission without prejudice and then the payment was made as per orders of the Commission. The OP stated that since there was no privity of contract between them and the complainant, they were not liable to make any payment to the complainant.

BOTH the parties were given adequate opportunity to lead evidence in support of their respective versions. Affidavits by way of evidence have been filed by both the parties which are on record. The detailed arguments of the learned counsel for both the parties were also heard.

THE core issue that arises for our consideration is whether the complainant M/S Elel Hotels and Investment Limited can be denied payment under the insurance policies in question by the OP taking the plea that there was no privity of contract between the complainant and the OP and hence, the complainant was not a consumer vis - -vis the said insurance company. It has not been denied anywhere that the said hotel was constructed by the complainant in the year 1978 but it was being run by M/S ITC Limited under some operational lease agreement. Following certain differences between the complainant and M/S ITC Limited, there were arbitration proceedings before the Bombay High Court in which the arbitration award has already been announced by the Arbitrator so appointed. The complainant have quoted from the report of the surveyor dated 30.11.94 in the Consequential Loss (CL) Report that the insurer vide their letter dated 25.07.94 had informed them that the name of the insured under the Material Damage Policy should be read as under: - "M/S ITC Limited a/c WG Hotel Searock Sheraton as nominee and M/S Elel Hotel and Investment Limited as lessor."

THE OP on the other hand says that the said letter dated 25.07.94 carried a clarification only that the complainant was a lessor of the property, but it did not confer any right on them to obtain the claim. It has also been contended by the learned counsel for OP that the said policies were not taken for the benefit of the complainant but were taken for the benefit of M/S ITC Limited so that it could claim reimbursement for any amount which it may have to pay to the lessor of the property for the damage caused to the property or to the fittings, fixtures, furnishing etc. provided therein during subsistence of lease and hence, the complainant could not be said to be a beneficiary of the aforesaid policy. However, in the arbitration award, it has been stated that ITC had no objection to M/S Elel Hotels and Investments Limited, receiving payment from the Insurance Company if it was otherwise entitled in law to receive/recover any payment under the policy. M/S ITC Limited also admitted the complainant as a lessor as stated already. The OP Insurance Company have also admitted in the written statement filed by them that the claim with regard to CL Policy was approved for Rs. 12,41,58,320/ - out of which a substantial payment of Rs. 7,40,03,927/ - was paid to the insured. The balance payment was withheld on the ground that the insured failed to produce the receipt of licensing fee to the complainant. The OP have stated that the balance amount was withheld keeping in view the interest of the complainant only. The said withheld amount was ordered to be released in favour of the complainant vide order dated 04.04.2007 of this Commission, although, the payment was to be made without prejudice to the rights and contentions of the parties. It is clear from these facts that the insurance company have already admitted their liability of making payment of Rs. 12,41,58,320/ - under the CL Policy but the only issue is whether the aforesaid payment is to be made to M/S ITC Limited or to the complainant before us. Since the insured M/S ITC Limited has not been made a party to the present proceedings by way of co -complainant or a proforma respondent, it shall be appropriate that the complainant should obtain, if so required by the insurance company, a ''No Objection Certificate'' from M/S ITC Limited regarding acceptance of the balance amount of Rs. 5,01,54,393/ -. On their failure to obtain such a certificate, they shall have to return the said balance amount back to the Insurance Company.

IT may further be stated that the Insurance Company have themselves admitted that the balance payment was withheld on the plea that M/S ITC Limited had not produced proof of having paid the lease rent to the complainant. The insurance company have used the said money for a number of years and hence it would be in the interest of justice that the insurance company should pay an interest @9% p.a. on the said balance amount to the complainant from the date the previous amount of Rs. 7,40,03,927/ - was released to M/S ITC Limited. This shall, however, be subject to obtaining the certificate as stated above.

IN so far as the claim for Material Damage is concerned, the case of the Insurance Company is that their surveyors could not finalise their reports because of non -cooperation on the part of the complainant and the insured. To our mind, this stand of the Insurance Company does not represent a healthy/proper business practice on their part, as a reputed insurance company and more so, such a company in public sector cannot be expected to take an unusual long time in taking a final decision on the claim filed by the insured. In case, the necessary documents are not submitted, the Insurance Company is free to ask the insured to provide the necessary documents/information in a time -bound manner, failing which the report can be finalised in the absence of such material. In the present case, the surveyor finalised their report after a direction was given by this Commission to settle the issue based on the material provided to them. The surveyor has made assessment to the tune of Rs. 2,80,99,648/ -. Out of this amount a sum of Rs. 2 crore already stood paid by the OP Insurance Company as ''on account'' payment. The balance amount of Rs. 80,99,648/ - was paid in compliance of order dated 18.02.2010 passed by this Commission without prejudice to the rights and contentions of the parties. As stated in the preceding paragraphs, regarding the CL Policy, it shall be appropriate that the complainant obtains, if so required by the insurance company, a ''no objection certificate'' from M/S ITC Limited regarding the acceptance of this balance amount of Rs. 80,99,648/ - as well. On their failure to do so, it shall be obligatory on them to return the said amount to the OP Insurance Company.

FURTHER , there are serious disputes between the parties as regards the material damage caused due to bomb blast in the building of the Hotel. According to the complainant, the loss suffered by them was to the extent of Rs. 11.95 crores, whereas according to the surveyor, the damage to the material does not exceed Rs. 2,81,13,903/ -. The surveyor has given a detailed report in support of the assessment of damage made by him and his findings, in our view, cannot be said to be wholly arbitrary or unreasonable so as to merit outright rejection. No evidence has been led by the complainant before us to establish the loss suffered on account of damage to the material. Considering the nature of the articles involved, the number of varied nature of those articles and other surrounding circumstances, it is not possible for a consumer forum adopting summary procedure for adjudication of the complaints filed before it to record the voluminous evidence which would be required to independently assess the loss on account of destruction of, or damage to various articles which were subject matter of the material damage policy. In order to arrive at an appropriate decision in this regard, the court/forum called upon to independently assess the loss to the insured, will have to ascertain the acquisition as well as the replacement price of the large number of articles such as furniture, carpets, electrical fittings and fixtures etc. which are alleged to have been destroyed or damaged due to bomb blast. Neither of the parties have produced the requisite evidence in this regard, nor is it possible for a consumer forum to record such voluminous evidence in summary procedure under the provisions of Consumer Protection Act, 1986. It shall, therefore, be appropriate that if the claimant, in question, is asked to lead appropriate evidence before appropriate court of competent jurisdiction to establish their claim regarding the material damage part.

TO sum up, based on the discussion above, this consumer complaint is decided with the following directions: - (i) In respect of Consequential Loss Fire Policy, (CL Policy), the complainant shall obtain if so required by the opposite party a ''no objection certificate'' (NOC) from M/S ITC Limited (who were operating the hotel under a valid agreement at the time of loss/damage) regarding the receipt of payment of Rs. 5,01,54,393/ - made by the Insurance Company to them in pursuance of the order passed by this Commission on 04.04.2007, failing which the said amount shall be returned by the complainant to the Insurance Company. In case M/S ITC Limited gives no objection, the complainant shall also be entitled to get an interest @9% p.a. on the said amount of Rs. 5,01,54,393/ - from the date the insurance company made payment of first instalment of claim under the said policy.

(ii) Regarding the payment of Rs. 80,99,648/ - made by the Insurance Company in pursuance of order dated 10.02.2010 passed by this Commission as balance amount of Rs. 2.81 crore, assessed by the surveyor under the MD Policy, the complainant shall obtain if so required by the opposite party a ''no objection certificate'' (NOC) from M/S ITC Limited, otherwise the said amount shall also have to be returned to the Insurance Company.

(iii) Regarding their further claim under the MD Policy, the complainant shall be at liberty to agitate the matter before a court of competent jurisdiction and lead evidence in support of their claim in accordance with law.