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Judgment
Subhash Chandra, Presiding Member
This is a complaint under Section 21 (a) (i) of the Consumer Protection Act, 1986 (in short, ‘the Act’) alleging deficiency in service in the repudiation of the claim filed under a Special Contingency Insurance Policy (SCIP) obtained by the complainant from the opposite party in respect of a mini hydel supply project operated by the complainant.
In brief, the facts of the case are that the complainant was operating a mini hydel power project at Kabini Dam Site in Beechanahalli, H.D. Kote Taluk, Mysore District, Karnataka with an installed capacity of 20 MW for which purpose it had entered into a Power Purchase Agreement with the Karnataka Power Transmission Corporation Ltd. on 28.08.2001. The project was based upon supply of water from the Kabini Dam. The complainant was offered a tailor made Special Contingency Insurance Policy covering all risks of failure of hydrology resulting or incurred due to failure of monsoon or deficit rainfall or non-availability of required quantum of water for power generation of Rs.10 crores at a premium of Rs.9,72,000/-. This Policy No. 072200/46/03/00052 dated 23.09.2003 covered a period from 12.09.2003 to 11.09.2004. The policy was renewed for a further period of one year from 13.09.2004 to 11.09.2005 vide Policy No. 072200/46/04/00052 at the same premium of Rs.9,72,000/-.
The complainant submits that he provided monthly generation data at periodical intervals to the opposite party. According to the complainant, for the period ending 29.02.2004, the generation was 21.33 million units (approx.) against the projection of 49.43 million units (approx.) leaving a shortfall in generation of 28.10 million units. This shortfall has been stated to be due to lack of water for the hydro based power project and, therefore, as per the Special Contingency Insurance Policy a claim for Rs.3,15,23,083/- was preferred on 05.11.2004. The respondent vide his letter dated 17.02.2005 intimated inability to admit the claim on the ground that rainfall during the policy period throughout India was normal. The complainant has submitted that the non-admission of the claim even without appointing a surveyor and on the basis of the national rainfall average without reference to the local conditions in the catchment area is a premediated and deliberate attempt to repudiate a legitimate claim.
The complainant submits that it appointed an independent agency viz. TATA Consulting Engineers (TCE) in May, 2004 to do an assessment of the hydrology of the Kabini Dam. It is submitted that the TCE vide its report dated 11.05.2004 reported that 2003-04 was hydrologically the poorest year when the surplus flow from the Kabini Dam was at the lowest.
Following meetings with the opposite party, the complainant was informed that one Mr. D. Shrinivas had been appointed as surveyor to assess the loss incurred. Information sought by the surveyor was provided to him by the complainant and the surveyor submitted a report to the opposite party. The claim of the complainant was repudiated by the opposite party vide letter dated 03.11.2006 on the basis of the surveyor’s report that “liability under the policy does not arise since the government had not declared failure of monsoon in Karnataka especially in the catchment area at Kabini”.
Following further meetings and requests with the opposite party including a request to appoint an independent surveyor from outside the State by the complainant, the opposite party appointed one Mr. Supriyo Kar as surveyor. Information desired by this surveyor was also shared with him by the complainant. The report of this surveyor has not been shared with the complainant although the opposite party has informed the complainant that the observations and recommendations of the second surveyor cannot be considered since they are based on a monthly analysis of inflow of water into the dam. The repudiation of the claim was reiterated against which the complaint is before this Commission with the following prayer:
a. pass an order directing the respondent to grant the complainant’s insurance claim of a sum of Rs.3,15,23,083/- (Rupees Three Crores Fifteen lacs Twenty Three Thousand and Eighty Three only) with interest @ 24% per annum with effect from 5th November 2004 i.e. the date of submissions of the claim by the complainant till date of realization of the same;
b. Pass an order directing the Respondent to pay to the Complainant a sum of Rs.50 Lakhs as compensation for the deficient service on part of Respondent;
c. Pass an order directing the Respondent to pay to the Complainant a sum of Rs. 50 Lakhs for harassment perpetuated by the Respondent on the complainant on account of non-payment / non-finalization of the dues of the complainant;
d. Grant costs in favour of the Complainant; and
e. Any other and further relief as may be deemed fit in the light of the facts and circumstances of the present complaint.
The complaint was resisted by way of written version by the opposite party. The opposite party has denied any deficiency of service and has relied upon the report of the first surveyor Mr. D. Shrinivas dated 14.10.2006. It has been stated that the government had not declared failure of monsoon during the policy period 2003-2004 and that as per statistics, the monsoon was good and inflow of water was normal although the generation of power declined due to restricted outflow of water from the dam. It was contended that lower generation without failure of monsoon due to reduced outflow of water was not covered within the scope of the policy. It was stated that the inflow into the Kabini dam was 2973 Mcum. from 12.09.2003 to 11.09.2004 which can be considered to be a very good flow and the average annual surplus flow was 2545 Mcum. whereas the quantum of water utilised for power generation was 1339 Mcum. It was contended that the policy conditions stipulated that loss of gross profit arising from interruption in power generation due to insufficiency of water following failure of monsoon and loss arising due to scanty rainfall does not fall under the ambit of the policy. It was submitted that the second surveyor Mr. Supriya Kar in his report dated 23.04.2008 assessed the loss for Rs.1,98,08,636/- but the assessment was erroneous as it was based on month-wise shortfall in rainfall whereas the policy covered loss of gross profit arising from interruption in power generation due to failure of monsoon / failure of hydrology resulting solely and exclusively by deficit rainfall during the entire policy period. It was contended that as per the report of Meteorological Department there was no shortfall of rain during the policy period and, therefore, the repudiation was justified.
Parties led their evidence and filed their rejoinder and written submissions. I have heard the learned counsel for both the parties and perused the records carefully.
Policy in question was a Special Contingency Insurance Policy which was offered by the opposite party as a tailor made policy to the complainant to cover risk related to power generation based upon the inflow of water into a dam that was served entirely by rain water. There is no dispute that the policy was renewed against the payment of premium due. The formal repudiation of the claim dated 03.11.2006 was preceded by a letter dated 17.02.2005 conveying that liability under the policy does not arise on account of normal rainfall in the country. A surveyor was appointed only at the urging of the complainant, who had also appointed an independent agency viz. TCE to study the issue of hydrology of the Kabini dam. Following the repudiation of the claim, at the insistence of the complainant, the opposite party appointed a second surveyor whose report was rejected by them on the ground that the assessment was based on month-wise data analysis whereas the policy covered the gross generation of power.
The repudiation is based upon rainfall being normal but release of water from the dam being less. The letter of the opposite party dated 17.02.2005 issued prior to the appointment of a surveyor reads as under:
We have referred the matter along with all the papers submitted by you to our higher office. On scrutiny of papers submitted by you our Technical Department has come out with the observation stating that the claim will trigger under the policy only when the business carried on by the insured is interrupted on or interfered with, in consequences of failure of Hydrology resulting solely and exclusively by deficit rainfall. You will appreciate that the rainfall during policy period throughout India barring very few places is more than normal as per the reports published by Meteorological Department from time to time. This being the case the question of failure of Hydrology resulting solely and exclusively by deficit rainfall during the policy period does not arise.
Therefore, we regret for our inability to admit the claim and proceed further in the matter.
There is no dispute that the surveyor, D. Shrinivas was appointed subsequently. The formal repudiation dated 03.11.2006 based on the surveyor’s report reads as under:
Further to our letter re. 072200/Fire Claims/399/2006-07 dated 29.05.2006 expressing our inability to reconsider the admissibility of the claim under the policy. Based on the documents submitted by you, we had requested Shri D. Srinivas, Surveyor to examine the documents and convey us the considered opinion.
The surveyor has submitted his opinion stating that the liability under the policy does not arise, hence we regret our inability to consider the claim.
In view of the above, it would be useful to consider the policy itself which records the objective of the policy to be that:
If after payment of the premium, the business carried on by the insured is interrupted on or interfered with, in consequence of failure of hydrology resulting solely and exclusively by deficit rainfall, then the company will pay to the insured the amount of loss resulting from said interruption or interference in accordance with provisions contained herein.
It is clear that the policy would apply only if there was deficit rainfall which led to failure of hydrology.
The exclusion clause of the policy reads as under:
The intention of the policy is to cover loss of generation arising out of failure of monsoon. If the water is available, but the priority is given for irrigation through discharge of water from left and Right Bank canal, thereby preventing flow of water through penstock, loss arising from such diversion of water is not covered.
The risks covered under the policy are recorded as under:
THIS POLICY COVERS LOSS OF GROSS PROFIT ARISING FROM INTERRUPTION IN POWER GENERATION DUE TO INSUFFICIENCY OF WATER FOLLOWING FAILURE OF MONSOON. HENCE THE LOSS ARISING DUE TO SCANTY RAINFALL DOES NOT FALL UNDER THE AMBIT OF THE POLICY.
The report of the first surveyor states that while the failure of monsoon is covered, scanty rainfall is not covered under the policy. It is, however, significant to note that this report also records that while the catchment area may have received less rainfall it cannot be failure of rainfall. The report then proceeds to discuss the semantics of “scanty”, “deficit” and “failure”. The surveyor interprets “deficient to be insufficient in quantity/force” and “scanty to be in sufficient”. This semantic interpretion does not take away from the fact that the rainfall in the catchment area was less irrespective of the overall monsoon. It also records that “Spatial distribution of rainfall is highly variable”.
As per Section 64 UM of the Insurance Act, 1938 and as held by Hon’ble Supreme Court in the case of Sri Venkateswara Syndicate Vs Oriental Insurance Co. Ltd. (2009) 8 SCC 507, the appointment of a surveyor is mandatory in cases of claims exceeding Rs.20,000/-. The insurer has the discretion to accept or reject the report of the surveyor for reasons to be clearly provided. The Hon’ble Supreme Court as held in Sri Venkateswara Syndicate (supra) that the appointment of surveyors cannot be done merely to obtain a favourable report by the insurer. In the present case the repudiation of the claim of the complainant has been done on the basis of the report of first insurer. Once the second insurer had been appointed, as also contended by the complainant, the report of the first surveyor should not have been considered. From the report of the second surveyor dated 23.04.2008 it is seen that rainfall during the policy period was indeed varied and the inflow of water in the dam was uneven. The report of TCE has also concluded similarly. Accordingly, the claim of the complainant has been found to be valid by the second surveyor whose report needs consideration for Rs.1,98,08,636/-. The opposite party has chosen to disregard the report of the second surveyor on the ground that the data has been considered on month to month basis whereas the insurance cover relates to a gross generation figure. This contention of the opposite party does not appear valid in view of Sri Venkateswara (supra) that while it is open to either accept or reject a surveyor’s report, it is not open to it to select surveyors for a favourable report that suits them. Having appointed a second surveyor, the report of the first surveyor should not have been considered. Even otherwise, the conclusion of the first surveyor that there was no failure of monsoon in Karnataka especially records in the very second line that “The catchment area might have received less rainfall/water, but this cannot be termed as monsoon failure but the same is addressed as less rainfall.” Therefore, the report of the first surveyor itself is not categorical and admits that there may have been less rainfall in the catchment area. The claim of the complainant requires to be read conjunctively with the objective of the policy and the actual data with regard to the rainfall recorded and the inflow in the reservoir. The complainant has provided an independent assessment by M/s TCE which records as under:
d) It is noted that there are significantly poor inflow years in both 10 year periods considered. While 1987-88 was the hydrologically poorest years (flow available – 782 Mcum) in the first 10 year period, year 2003-04 was the hydrologically poorest year (flow available 615 Mcum) in the other 10 year period. There are no significant changes (like new projects, diversions, etc.) taking place in the catchment of Kabini river. We do not expect any major change in the hydrology of the year. While long term flow availability is expected to remain unchanged, year to year variations in inflows can be expected.
A letter dated 10.08.2007 from the Executive Engineer, In charge of Kabini Dam for recording the inflow of water in the dam which states that:
This is to certify that we have released water in the month of October – 2003 only for 5 days that too at the rate of 500 Cusecs for maintaining the water level considering the lean period.
The above has been carried out due to lesser rainfall than anticipated during the Monsoon period.
As these documents record that 2003-2004 was not a good year in terms of inflow of water into the reservoir, the report of the second surveyor appears to be more realistic in its assessment. It also excludes the inflow for the month of October, 2003 and has calculated the loss in generation on that basis. On the other hand, the efforts of the opposite party appear to be based upon its initial position, even without the technical inputs of its own surveyor, that the rainfall across the country had been normal and hence had stated in its letter dated 17.02.2005 that the claim was inadmissible.
In view of the above, the contentions of the complainant are valid and justifiable and need to be considered as against the arbitrary and perverse conclusions arrived at by the opposite party. The complaint is liable to be allowed. Accordingly, the complaint is allowed for a sum of Rs.1,98,08,636/- along with interest @ 6% p.a. from the date of submission of the claim i.e. 05.11.2004. In addition litigation cost of Rs.1 lakh is also awarded to the complainant. The order be complied within eight weeks.
The Consumer Complaint is disposed off with this order.