Nirma Limted vs United India Insurance Co. Ltd

Ram Surat Ram Maurya, Presiding Member

Heard Mr. Vinay Mathew, Advocate, for the complainant and Ms. Sonia Malhotra Kumar, Advocate, holding brief of Mr. Vineet Malhotra, Advocate, for the opposite party.

Nirma Limited (the Insured) has filed aforementioned complaint for directing United India Insurance Company Limited (the Insurer) to pay (i) Rs.2587516/-, i.e. the balance insurance claim, (ii) Rs.25/- lacs, as compensation for mental pain and harassment, (iii) Rs.35/- lacs, as the costs incurred in obtaining various reports from the experts, (iv) Rs.41639893/-, the amount of interest @18% per annum on total claim of Rs.92064516/- as assessed by the Surveyor w.e.f. 11.10.2003 to 29.03.2006 and from 30.03.2006 on the balance amount of Rs.2587516/-, (v) interest @18% per annum from 01.12.2007 till the payment on the amount payable to the complainant and (vi) any other relief, which is deemed fit and proper, in the facts and circumstances of the case.

The facts, as stated in the complaint and emerged from the documents attached with the complaint, are as follows:-

(a) The Insured was a company, incorporated under Companies Act, 1956 and engaged in the business of manufacture and sale of toilet soap, detergent and solar salt. Soda ash is a major raw material for the aforesaid products. The Insured established a soda ash plant, having production capacity of 420000/- tonnes per year at Kalatalav, district Bhavnagar, Gujarat, in the year 2000. Soda ash process is exothermic in nature, as such for cooling down, large quantity of cooling water is required to be circulated. In the absence of perennial source of sweet water at Kalatalav, a Reserve Osmosis Plant and Vacuum Evaporation Plant have also been set up. Need of Cooling Water, Reserve Osmosis Plant and Vacuum Evaporation Plant are fulfilled by the sea water. The Insured constructed a sea water Intake Well at the mouth of Malcolm Channel, a part of the gulf of Cambay, incurring Rs.3050/- lacs and commissioned it, in December, 1999. On the top of the Well, RCC platform was constructed over which pump house was built up, in which 4 vertical pumps and 8 horizontal pumps of high capacity were installed with complete electrical fitting and pipes, for supply of the water.

(b) The Insured obtained Fire Industrial All Risk Policy i.e. Policy No. 060300/11/02/01252, from the Insurer, for Building (sum of Rs.72025/- lacs), Machinery Breakdown (sum of Rs.48000/- lacs) and Loss of Profit (sum of Rs.7500/- lacs), for the period of 10.07.2002 to 09.07.2003.

(c) On 09.10.2002 at 5:50 pm, the operators of the pump observed tension in the rubber bellows of all the vertical pumps in the Intake Well. By the time the pumps were shut down, Intake Well began titling towards creek. Hence all the vertical pumps bakers were raked out. At about 7:00 pm, it was noticed that Intake Well had moved approximately 2.5 mtrs away from its existing position. After some time, Intake Well and pump house collapsed. The Insured informed the Insurer about the aforesaid damage on telephone immediately and made insurance claim of Rs.25/- crores on 11.10.2002.

(d) The Insurer appointed V. Gopala Krishnan, Chennai, for survey and assessment of the loss on 11.10.2002, who surveyed the spot on 13.10.2002 and submitted Preliminary Survey Report dated 16.10.2002, mentioning that cause of loss could be attributed to sea erosion, falling in exclusion clause of the Policy. The Surveyor demanded various papers. The Insured, vide letter dated 14.10.2002, supplied those papers to the Surveyor. The Surveyor again vide letter dated 23.10.2002 demanded some more papers and information. The Surveyor visited the site on 06.11.2002 and 07.11.2002 and discussed the matter. The Insured, vide letter dated 08.11.2002, supplied those papers/information to the Surveyor, including letter of SMPS Consultant dated 29.10.2002 along with copy of sketch and design data in respect of the constructional features. The Surveyor, again vide letter dated 25.11.2002, demanded various papers. The Insured, vide letter dated 29.11.2002, supplied Soil Investigation Report to the Surveyor. The Insured, vide letter dated 16.12.2002, informed that video photography & Still photography was not possible and he would submit a manual inspection report. Senior Divisional Manager of the Insurer, vide letter dated 27.12.2002, informed that the papers relating to loss Intake Well and pump house had been supplied but he demanded papers for loss of profit. The Surveyor again wrote a letter dated 11.01.2003 stating that contour map in the area (prior to the construction of well) along with various levels and distances, the site plan of the area of Gulf of Cambay and the Malcolm Channel along with certain details were required. The Insured, vide letter dated 03.02.2003, replied that he had already supplied letter of SMPS Consultant dated 29.10.2002 along with copy of sketch and design data. He again supplied contour map in the area prior to the construction of well. The Surveyor was delaying his report, the Insured therefore wrote a letter dated 27.02.2003, for interim payment of 75% of the claim. The Surveyor, vide letter dated 28.02.2003, demanded an “Off Shore Surveyor’s report” for assessing the loss of pumps/equipment, which was supplied on 04.03.2003. The Surveyor sought for expert opinion. The Surveyor, vide letter dated 23.04.2003, informed that loss was caused due to faulty design and coastal erosion as such the claim was not payable. The Insured, vide letter dated 01.05.2003, demanded expert opinion.

(e) The Insured therefore (i) sought for an expert opinion from Madras Institute of Technology for carrying out the failure studies, (ii) obtained satellite imaginaries, (iii) carried out bathymetry studies through Chetan Engineering, (iv) organise diverse and concluded physical verification of loss through J.B. Boda & Aquanaut Diving Services, (v) obtained report of Mr. A.F. Vyas, Ex-G.M.B. Senior Official, (vi) obtained report of M/s. S.N. Bhode & Associates, Mumbai, (vii) obtained report of Prof. P.S. Rao, Head of Gyatri Engineering College, Visakhapatnam and (viii) obtained report of Dr. P.P. Patel, Head of Geological Department of M.S. University.

(f) The Insured requested the Insurer to reconsider the matter. The Insurer then appointed Mehta & Padasey Pvt. Ltd. Kolkata as Joint Surveyor on 23.07.2003. Mehta & Padasey Pvt. Ltd., vide letter dated 21.04.2004, demanded some papers from the Insured, which were supplied on 17.05.2004. Again long period was taken in submitting report. The Insured wrote a letter dated 24.01.2005 to settle the claim. Mehta & Padasey Pvt. Ltd. wrote letter dated 14.06.2006, asking the Insured to examine the work-out of the damages. The Insured submitted his objection vide letter dated 04.07.2005 to the work-out of the damages. Mehta & Padasey Pvt. Ltd. submitted their Final Report dated 25.11.2005, assessing total loss of Rs.92064516/-.

(g) The Insurer examined Final Report dated 25.11.2005 and raised an objection, relating to special excess clause in the policy, which was 7.5%. Mehta & Padasey Pvt. Ltd. then issued a corrigendum dated 15.03.2006 and after applying 7.5% excess clause, determined the loss to Rs.89641766/-. The Insurer, vide letter dated 29.03.2006, sent a cheque of Rs.89477000/- to the Insured, which was en-cashed on 31.03.2006, under protest. The Insured vide letter dated 02.01.2007, demanded balance amount along with interest. The Insured vide letter dated 11.09.2007, informed that interest was not payable and final survey report was awaited. This complaint was filed on 10.12.2007, complaining deficiency in service.

The insurer filed its written reply on 26.11.2010 and contested the matter. The material facts, as stated in the complaint, have not been denied. It has been stated that Mehta & Padasey Pvt. Ltd. submitted their report dated 25.11.2005, assessing total loss of Rs.92064516/-, in which 5% was deducted towards excess clause. The Insurer examined report dated 25.11.2005 and pointed out that excess clause in the policy was 7.5%. Then Mehta & Padasey Pvt. Ltd. issued a corrigendum dated 15.03.2006 and after applying 7.5% excess clause, determined the loss to Rs.89641766/-. The Insurer, vide letter dated 29.03.2006, sent a cheque of Rs.89477000/- to the Insured, which was en-cashed on 31.03.2006. The Insured has given his objection vide letter dated 11.09.2007. After expiry of such a long period, the objection was not maintainable. As soon as the Insurer was informed, about the incident, the Insurer appointed Mr. V. Gopala Krishnan, Chennai, for survey and assessment of the loss on 11.10.2002, who surveyed the spot on 13.10.2002 and submitted Preliminary Survey Report on 16.10.2002. In spite of repeated reminders, the requisite papers were not supplied to Mr. V. Gopala Krishnan. Therefore, he took time in submitting survey report. The Surveyor, vide letter dated 23.04.2003, informed that loss was caused due to faulty design and coastal erosion as such the claim was not payable. On the request of the Insured, the Insurer appointed Mehta & Padasey Pvt. Ltd. Kolkata as Joint Surveyor on 23.07.2003, who assessed the loss on 25.11.2005 and issued corrigendum dated 15.03.2006. The Insurer immediately made payment vide cheque dated 29.03.2006, which was accepted. The Insured is claiming difference amount in report dated 25.11.2005 and final payment made on 29.03.2006. This difference in amount has been caused due to wrong application of excess clause. The policy provides 7.5% excess clause, while in report dated 25.11.2005, 5% excess clause was applied. As such demand in this respect is not maintainable. The Insured is claiming Rs.35/- lacs towards the expenses in obtaining various reports. The Insured, at his own, obtained these reports, as such, he cannot claim these expenses from the Insurer. The Insured took time in supplying documents/information to the Surveyor as such delay had occurred. The Insurer is not liable to pay interest as delay was caused by the Insured. There is no deficiency in service on the part of the Insurer and the complaint is not maintainable.

The Insured filed his Rejoinder Reply on 26.07.2011, in which, the material facts as stated in the complaint were reiterated. The Insured filed Affidavit of Evidence of Ajay Khushu. The Insurer filed Affidavit of Evidence of Satish Sharma, Deputy Manager. Both the parties filed their short synopsis.

I have considered the arguments of the counsel for the parties and examined the record. The Insured, vide Prayer clause (a), claimed Rs.2587516/-, which is difference amount in the report dated 25.11.2005, assessing loss to Rs.92064516/- and final payment of Rs.89477000/-. The Insurer stated that the policy provides 7.5% excess clause, while in report dated 25.11.2005, 5% excess clause was applied. When this mistake was pointed out to the Surveyor, then he issued a corrigendum dated 15.03.2006 and payment was made accordingly vide cheque dated 29.03.2006. A perusal of the insurance policy shows that excess clause was 7.5% or Rs.500000/-,whichever is higher. As such, relief (a) is not payable. The counsel for the opposite party raised a preliminary objection relating to the pecuniary jurisdiction of this Commission. Section 21 of the Consumer Protection Act, 1986 provides that complaint where the value of the goods or services and compensation, if any, claimed exceeds rupees one crore. In the present case, not only the differences of loss as assessed by the surveyor was claimed, but also the compensation and interest were also claimed, which together exceeds rupees one crore, therefore, this Commission has pecuniary jurisdiction.

The Insured claimed Rs.35/- lacs towards the expenses in obtaining various reports. The Insured, as his own, obtained these reports, as such, he cannot claim its expenses from the Insurer, which are otherwise not payable in the insurance policy.

A perusal of the letter dated 30.03.2006 (Annexure-P-27) shows that the amount of the cheque was accepted under protest. As such, this complaint for interest is maintainable. The counsel for the Insurer relied upon the judgments of Supreme Court in Polymat India (P) Ltd. Vs. National Insurance Company Ltd., (2005) 9 SCC 174 and National Insurance Company Ltd. Vs. Nipha Exports Pvt. Ltd. (2006) 8 SCC 156 and submitted that interest was not payable as there was no delay on the part of Insurer. However, in these cases, the claim was prior to coming in to force of The Insurance Regulatory and Development Authority (Protection of Policyholder’s Interest) Regulations, 2002, as such these case will have no application.

Regulation 9 of The Insurance Regulatory and Development Authority (Protection of Policyholder’s Interest) Regulations, 2002 directs the Surveyors to submit their Survey Report within 30 days and in any case within 45 days, from the date of his appointment. The Insurer has been directed to make settlement within 30 days of receipt of Surveyor’s report. Regulation 9 (6) provides as follows:

Regulation-9(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 seven days from the date of acceptance of the offer of by the insured. In case of delay in the payment, the insurer shall be liable to pay interest at a rate which is 2 per cent, above the bank rate prevalent at the beginning of the financial year, in which the claim is reviewed by it.

In view of this statutory provision, the Insured is entitled to interest @ 9% per annum after six months of the loss.

The counsel for the opposite party submitted that only in cases of delay in payment after acceptance an offer of settlement the interest is payable under Regulation 9(6). In the present case, there is no delay in payment after offer of settlement. This argument is not liable to be accepted inasmuch as the maximum period for settlement as provided in Regulation 9 is six months. If any delay occurs, then after six months the interest is payable under Regulation 9(6) aforesaid.

ORDER

In view of the aforesaid discussions, the complaint is partly allowed. The opposite party is directed to pay interest @9% per annum from 09.04.2002 till 31.03.2006, on Rs.89477000/- and from 01.04.2006 till the date of payment on the amount of interest so worked out, within two months from the date of delivery of this judgment.