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Judgment
Heard Mr. Punit Taneja, Advocate, for the complainant and Mr. Amit Kumar Singh, Advocate, for the opposite party.
National Insurance Company Limited (the Insurer) repudiated the insurance claim of M/s. Ratnagiri Gas & Power Pvt. Ltd. (the Insured), vide letter dated 10.03.2010, submitted under Industrial All Risk Policy No.251100/11/08/3400000018, effective from 20.05.2008 to 19.05.2009, for coverage of Rs.2150 crores, for Block-III, of the industrial unit, for the material damage of STG#3X in the incident occurred on 18.06.2008, which was challenged by the Insured in above complaint. This Commission allowed above complaint, vide judgement dated 05.04.2022, holding that the loss had occurred due to accidental damage, caused due to entering of foreign object debris in steam turbine STG#3X, which was an insured peril. As neither the surveyor nor the Insurer assessed the loss, as such, this Commission awarded the claim of Rs.166147643/- along with interest, which was the estimate of repair of the damaged turbine, submitted by General Electric, USA (the manufacturer of the equipment) and claimed by the Insured. The Insurer challenged the order of this Commission in Civil Appeal No.4592 of 2022. Supreme Court remitted to this Commission for determination of quantum of compensation, giving liberty to the parties, to adduce its evidence, vide order dated 05.08.2022.
When the case was listed before this Bench on 27.09.2022, both the parties were given four week time to file their evidence in respect of quantum of the compensation, with short synopsis. The complainant filed its documents with short synopsis on 10.11.2022 and additional documents with short synopsis on 15.12.2022. The opposite party filed its documents with short synopsis on 04.11.2022 and additional documents including a fresh survey report dated 17.01.2023 with short synopsis on 06.02.203. When the case was listed on 06.3.2023, the complainant again took time for filing reply to short synopsis of the opposite party, which was filed on 21.03.2023. Thereafter, the arguments were heard on 27.03.2023.
The Insured submitted its claim before the surveyor for Rs.166147643/-, vide email dated 13.08.2008 (pg.238), which was in four heads i.e. Rs.25278350/- for Dismantling & Inspection, Rs.51885829/- for Procurement of Spares, Rs.46456912/- for Repairing of Diaphragms and Rs.42526552/- for Site Service for Reassembly, along with the documents in proof of it. Along with additional written synopsis, the Insured has filed another summary of bills pertaining to repair of STG # 3X for the purpose of insurance claim, in which, Rs.169237788/- has been claimed and in support of this claim all the papers have been filed. After remitting the issue for quantification of compensation, the Insured filed this very claim and supporting documents before the surveyor also as the Insurer has asked the surveyor to submit fresh report in respect of quantification of loss. The surveyor in its Final Survey Report Part II dated 17.01.2023, did not raise any doubt in respect of fresh summary of claim and the documents filed in proof of it rather accepted it and has assessed the net payable loss on its basis. The Insurer also does not dispute the fresh summary of loss and documents submitted in its proof rather raised objection in respect of admissibility of the claim, which is not within the jurisdiction of this Commission for consideration at this stage. Therefore, we also accept the fresh statement of the claim.
The surveyor, in Final Survey Report Part II dated 17.01.2023, has deducted Rs.12281354/- as “Tax Deduction at Source” from the total claim. The surveyor further deducted 50% on the ground that the Insured has not established that how many blades of rotor were actually damaged by “foreign object debris” and there was no justification to carryout change of all the nozzles. The surveyor further deducted 20% for underinsurance, Rs.2.68 lacs, for salvage, and Rs.9/- crores under excess clause and assessed the liability as NIL.
We have considered the arguments of the counsel for the parties and examined the record. The contract of insurance is a contract of indemnity of loss as such it cannot be treated as an income. Supreme Court in Marybong & Kyel Tea Industries Ltd. Vs. Commissioner of Income Tax, (1997) 4 SCC 188, held that even if in repair some new parts were used in the machinery, under insurance claim, it cannot be considered as “capital gain” for the purpose of income tax. As such deduction of Rs.12281354/- as “Tax Deduction at Source” from the total claim by the surveyor is illegal.
Supreme Court in Sikka Papers Limited Vs. National Insurance Company Limited, (2009) 7 SCC 777, has extracted the explanation of “underinsurance” from the dictionary of Insurance (2nd Edn.) by C. Bennet as “underinsurance occurs when the amount of insurance is less than the full value of the property insured”. It leads to partial loss/claims being scaled down by average”. In Sikka Papers’s case, Supreme Court found that diesel generator set and alternator were purchased by the Insured for Rs.4525000/- and insurance cover was obtained for Rs.3500000/- as such there was underinsurance.
Underinsurance has to be examined on the date of loss. In the present case, Insurance coverage was for Rs.2150 crores, for Block-III. Rs.169237788/- was the repair bills of STG # 3X. The surveyor applied underinsurance for the reason that the Insured has claimed Rs.2869.57 crores for loss of GT 2A (Block II) occurred on 19.01.2008, which was a similar plant. The surveyor did not find that the value of the insured good was more than the sum insured. The sum insured is much more than the claim as such underinsurance is not applicable.
Section-I- Material Damage of the policy provides as “The Insurer will pay to the Insured the value of the property at the time of happening of its accidental physical loss or destruction or damage or at its opinion reinstate or repair such property or any part thereof.” The claim is based upon the bills of repair submitted by the manufacturer of the equipment. STG#3X was dismantled during 24.07.2008 to 28.07.2008, in presence of the surveyor. The surveyor vide emails dated 29.07.2008 and 04.08.2008, acknowledged and verified its damages. The technical expert of the manufacturer is the best person to say that what parts were damaged and required repair/replacement. The surveyor in its Final Survey Report Part II dated 17.01.2023, has observed that there was no justification to change all the nozzles and values to carry repairs of diaphragm. This observation of the surveyor is based upon conjectures and surmises and not on the basis of any technical report. Deduction of 50% under this head is illegal.
However, deduction of Rs.2.68 lacs for salvage and Rs.9/- crores under excess clause is according to the insurance policy. Therefore, we assess net loss payable as Rs.78969788/- (Rs.169237788- Rs.90000000- Rs.268000).
By order dated 05.08.2022, we were directed to record our findings within six months. However, the parties took time in filing their documents as such, delay has occurred. We regret for it. The parties are given liberty to file certified copy of this order before Supreme Court. The Registrar shall also send a certified copy of this order to Supreme Court in Civil Appeal No.4592 of 2022 National Insurance Company Limited Vs. M/s. Ratnagiri Gas & Power Pvt. Ltd., forthwith.