M/S. Hi-Tech Plastics Through Its Director vs United India Insurance Company Ltd

This first appeal has been filed by the appellant, M/s. Hi Tech Plastics, through its Director against the impugned order dated 23.10.2013 passed by the State Commission, Bihar Patna (for short, 'State Commission') in CC No.11/2010.

Brief facts of the case are that appellant/complainant on 13.12.2006 placed purchase order with Windsor machine Ltd., Kolkata for purchase of Micro Processor controlled Hydro Mechanical Type Double Colour Injection Moulding machine, Model "Sprint 850 TC" with injection Unit 13300 and 1310 for manufacturing plastic chairs and other articles at Patna. On 27.12.2006 M/s. Windsor Machines Ltd. sent proforma invoice showing cost of machine at Rs.1,07,97,696/- including taxes. The appellant requested the United India Insurance Company Ltd. to issue transit insurance policy covering the risk of damage of the machine during transit from Chhatral (Gujarat) to Patna. On 1.6.2007, insurance company issued All Risk Transit Insurance Policy No.210200/21/07/01/00000001 effective from 6.45 PM on 1.6.2007. The machine was entrusted to Carrier for transportation from Chhatral to Patna. As the machine was big, it was decided to transport in two parts. Locking Unit weighing 34 tones and Injection Unit weighting 18 tones were loaded separately on 7.6.2007. On 11.6.2007, Truck Trailer No. HR -38E - 0426 having "Locking Unit" met with road accident near Manik Pur in Etawa District (UP) when excel of the trailer got broken and trailer truck turned turtle with loaded locking unit. Information about accident was given to local police. Another Truck Trailer No.NL 01A-9335 having "Injection Unit" met with road accident near Didarganj causing extensive damage to machine.

Insurance company and M/s. Windsor Machines Ltd were informed about the accident by the appellant. On 20.6.2007 Engineer Mr Alpesh Shah of M/s. Windsor Machines Ltd examined the damaged machine and found it completely damaged having no chance of further repairing. On 27.7.2007 Surveyor Mani Bhushan Singh submitted preliminary survey report to the insurance company regarding damage of both the units. Both the units were sent back to Chhatral (Gujarat) in consultation with surveyor Mr. Mani Bhushan and Engineer Mr. Alpesh Shah for dismantling and further assessment. On 3 1.2007 claim form was submitted to respondent no.2. On 2.8.2007 anther surveyor namely M/s. Trans Ocean Marine & General Survey Agency, Ahmedabad, surveyed both the machines and found extensive damage in both the machines. The surveyor submitted the report on 10.8.2007. The carrier issued damage certificate with respect to both the units. M/s. Windsor Machines Ltd sent Estimate Invoice dated 31.10.2007 with respect to the cost to be incurred with respect to the damaged machines for the purpose of its repair amounting to Rs.89,56,433/-. On 11.12.2007, M/s. Trans Marine Ocean surveyor made certain queries and the complainant provided all the details. On 4.2.2008 the final survey report by M/s. Trans Ocean Marine and General Survey was submitted.

The surveyor assessed the salvage value at Rs.10 lakhs and it opined that the locking unit trailer should have been a low bed one although there was no such instruction from the insurance company. On 16.5.2008 the complainant requested the insurance company to settle the dispute. The insurance company did not decide the claim for a long time. However, the claim was repudiated on 3.11.2009. The complainant then preferred Complaint Case No.11/2010. The complaint was resisted by insurance company by filing written statement. However, the State Commission allowed the consumer complaint and ordered the insurance company to pay Rs.97,97,696/- in all which shall be paid within two months from the date of passing of the order, failing which interest @ 8% per annum shall be counted thereafter for the purpose of payment.

Dissatisfied with the order of the State Commission, the complainant has preferred this appeal.

Heard the learned counsel for the parties and perused the record.

Learned counsel for the appellant stated that there is a delay of 26 days in filing the present appeal. However, in the circumstances mentioned in the application for condonation of delay, it was prayed that the delay may be condoned.

6 . Learned counsel for the appellant stated that the appellant is aggrieved by the order of the State Commission as the State Commission has not allowed interest on the awarded amount of Rs.97,97,696/- and no compensation has been awarded. Learned counsel stated that reasons given in paragraph 37 of the impugned order for not allowing interest @ 12% per annum are not only erroneous but are against the facts. It is a wrong assumption of the State Commission that the appellant did not suffer loss. Obviously the installation of machinery and thereby the production got delayed. Similarly, the State Commission has assumed that the appellant must have received some rebate from the manufacturer of the machine. But, this assumption is not correct. The learned counsel asserted that interest cannot be denied to the complainant on the basis of assumptions. The State Commission has itself observed that "receipts by which the damaged machines were sent back to factory premises and receipt in respect of purchase of new machine has also brought on record. In such situation there is no ambiguity in respect of purchase of new machine in place of the old damaged machine by the complainant." The learned counsel asserted that it is clear from the above observation that a new machine was purchased subsequent to the damaged machine being sent back to factory premises at Gujarat for assessment by surveyor.

In such situation it was incumbent upon the State Commission to have allowed interest @ 12% per annum from six months after the date of loss in terms of IRDA Regulation, 2002. It was further stated that the sub regulation 5 of Regulation 9 of IRDA (Protection of Policyholders' interests ) Regulations, 2002 Notification dated 16.10.2012 provides that on receipt of survey report if the insurer decides to reject the claim under the policy shall do so within the period of 30 days from the receipt of survey report. It further provides that in no case the settlement of claim should exceed six months from the date of loss. In the present case the insurance company took almost 2 years 6 months to repudiate the claim after the date of loss. Thus the appellant is entitled for the interest with effect from 16.12.2007 in terms of Regulation, 2002. Learned counsel for the appellant further stated that the Hon'ble Supreme Court in the case of United India Insurance Company Ltd. Vs. M.K.J. Corporation reported in 1996(6) SCC 428 has laid down a principle that interest @ 12% per annum should be allowed from two months after the date of submission of survey report.

Learned counsel for the respondent no.1 stated that there is no agreement between the parties to pay interest alongwith insurance claim. It is discretion of the court to grant interest alongwith main relief. In this regard, learned counsel relied upon the judgment in New India Assurance Company Ltd. Vs. Protection Manufacturers Private Limited, (2010) 7 SCC 386, wherein it is held as under:

"The submissions made on behalf of the respondent company for enhancement of the same are rejected as we are of the view that such exercise of discretion was just and equitable in the absence of any agreement between the parties regarding payment of interest or quantum thereof."

The State Commission has given clear reasons for not awarding interest @ 12% p.a. In this regard, learned counsel referred to the following observation of the State Commission :

"37. The complainant has been able to procure and got installed the same type of machine in his factory at Patna and so no pecuniary loss could be said to have been sustained by the complainant. Moreover, we do not find anything from the record so as to hold that the complainant has not been given any rebate by manufacturer of the said machine to the complainant, so the salvage as assessed by the surveyor, of course, cannot be disbelieved but the complainant has not specifically stated that he purchased the same machine on the same price."

The learned counsel for the respondent insurance company further stated that the complainant is not an individual and is a firm, therefore, no compensation can be awarded to the complainant for mental agony and harassment.

I have given a thoughtful consideration to the arguments advanced by both the learned counsel for the parties and perused the material on record.

The Registry has reported the delay of 26 days in filing the present appeal. As the delay is only of 26 days, the delay is condoned on the grounds mentioned in the application for condonation of delay.

Coming to the Insurance Regulatory and Development Authority Notification dated 16.10.2002, the following has been referred:

"5. On receipt of the survey report or the additional survey report, as the case maybe, an insurer shall within a period of 30 days offer a settlement of the claim to the insured. If the insurer, for any reasons to be recorded in writing and communicated to the insured, decides to reject a claim under the policy, it shall do so within a period of 30 days from the receipt of the survey report or the additional survey report, as the case may be.

6 . Upon acceptance of an offer of settlement as stated in sub-regulation (5) by the insured, the payment of the amount due shall be made within 7 days from the date of acceptance of the offer by the insured. In the cases of delay in the payment, the insurer shall be liable to pay interest at a rate which is 2% above the bank rate prevalent at the beginning of the financial year in which the claim is reviewed by it."

From the above, it is brought out that if the insurance company accepts the report of the surveyor and claim is settled, then the claim is to be paid within 7 days from the date of settlement. However, if there is a delay then interest is to be paid as per these regulations. In the present case, the insurance company has repudiated the claim and therefore, prima facie this regulation was not applicable at that time. Whether these regulations will be applicable when a court order is passed is a separate question. Hon'ble Supreme Court in New India Assurance Company Ltd. Vs. Protection Manufacturers Private Limited (supra) has observed that the rate of interest is a matter of discretion of the concerned court. The order of the Hon'ble Supreme Court in United India Insurance Company Ltd. Vs. M.K.J. Corporation (supra), pertains to the view of the Hon'ble Supreme Court expressed in 1996 whereas the view of the Hon'ble Supreme Court in New India Assurance Company Ltd. Vs. Protection Manufacturers Private Limited (supra) appears to be more recent given in the year 2010. Hence, I am inclined to accept the later view in the matter.

As there is no specific provision for ordering interest in the Consumer Protection Act, 1986 and it is only the compensation that can be allowed under Section 14(1)(d) of the Consumer Protection Act, 1986 however in Ghaziabad Development Authority Vs. Balbir Singh , reported in 2004 (5) SCC, 65 decided on 17.3.2004, the Hon'ble Supreme Court has taken a view that interest is also in the form of compensation. For deciding the pecuniary jurisdiction, the value of goods and service alongwith compensation claimed has to be considered. From the prayer of the complaint, it is seen that the complainant has reduced his claim from Rs.1,07,97,696/- to Rs.97,97,696/- with a view to bring the complaint within the jurisdiction of the State Commission. If in place of compensation claimed, interest is added to the value of goods and services, the total claim could have crossed Rs.1 crores and thus, the State Commission would not have had the pecuniary jurisdiction to decide the present complaint. From this perspective also, the interest @ 12% cannot be allowed in the present case, otherwise the whole order passed by the State Commission shall become invalid as having been passed without jurisdiction. Therefore, it is in the interest of the complainant that interest @ 12% is not pressed.

So far as the demand of the complainant for compensation of Rs.1.5 lakhs is concerned, I agree with the contention of the learned counsel for the respondent that the appellant is not an individual and therefore compensation cannot be paid to the complainant for mental agony and harassment in the light of the judgment of the Hon'ble Supreme Court in Sikka Papers Limited Vs. National Insurance Company Limited and Ors., (2009) 7 SCC 777, wherein it has been held :-

" Insurance- Terms and conditions specified in insurance policy- Binding effect- Insurance policy not covering parts of machinery which were required to be replaced due to normal wear and tear-Held, Insurance Company while assessing claim, rightly excluded those parts- Insurance Act, 1938,- S. 64-UM- Surveyor/Loss assessor's report- Weightage to be given- Held, Though not the last word, yet there must be legitimate reason for departing from report- No infirmity found in surveyor's report and therefore held, Insurance Company rightly admitted claim as per the report."

Based on the above discussion, I do not find any force in the appeal filed by the appellant. Accordingly, the First Appeal No.882 of 2013 is dismissed.