Rotex Automation Ltd vs UNITED INDIA INSURANCE CO LTD

THIS cases was remanded by the Hon''ble Apex Court with the direction to decide, "Whether, the complainant was entitled to damages on account of "Loss of Profit" (in short, ''LOP'') -.

THIS is a claim made by Rotex Automation Ltd., the complainant, against United India Insurance Co. Ltd., the OP, with the following prayers : - "i) Rs.11,087/ - for damage to the plants and machineries; ii) Rs.57,71,000/ - for loss of profit as explained in the petition So total loss comes to Rs.58,88,000/ - plus interest at the rate of 18% from Jan, 1998 to June, 2001 which will make total loss of Rs.1,04,65,420 (Rs.57,82,000/ - + Rs.46,83,420) b) direct the respondent company to pay the aforesaid amount of Rs.1,04,65,420/ - with further interest @ 18% from July, 2001 till its realisation. The complainant has also claimed damages in the sum of Rs.5,00,000/ -. This complaint was filed before this Commission as back as on 14.09.2001.

THE facts germane to this case are as follows. The complainant has its factory at Vadodara, Gujarat, where, it transacts the business of manufacturing valves, pneumatic elements, etc. In order to safeguard the interest of the complainant, against all the natural risks, including the risk against the strike by the workers, the complainant company had started buying insurance policies from the OP, right from 1983 and LOP (Loss of Profit), from 1997. The complainant obtained insurance policies from United India Insurance Co. Ltd., the OP, from 1993 to 1997. It has never claimed any loss under the aforesaid policies. For the period from 10.03.1997 to 09.03.1998, the complainant purchased two policies, i.e., Main Fire Policy and Loss of Profit Policy, after paying premium of Rs.64,842/ - and Rs.31,899/ - covering the risk of Rs.3,16,00,000/ - and Rs.2,17,00,000/ -, respectively. In the month of March, 1997, the complainant had to dismiss 4 -5 employees for their fraudulent conduct. The entire work force of the complainant went on strike, w.e.f. 22.03.1997 and damaged the plant and machinery. Consequently, there was no production at all, from 22.03.1997 to 16.04.1997. The complainant had to suffer heavy loss. On 16.04.1997, the workers resumed their duty. On account of threat by the dismissed employees, a number of workers left the company and a number of workers adopted ''go -slow'' policy and continued the act of damaging the plant and machinery. Due to this, the complainant could produce production of inferior quality. The goods delivered to the buyers were rejected causing heavy loss to the complainant and the complainant could not achieve the targeted production.

THE Certificate prepared by Sh. Shrikant S. Shah and Co, Chartered Accountants, showing the loss, calculated at Rs.57,71,000/ - was annexed as Annexure B. The complainant company had to replace the damaged parts and plant and machinery, during June -July, 1997. The Balance Sheet (Annexure C colly), dated 31.03.1997, reveals those parts which have been replaced, vouchers and details for repairing works. Again, Chart, Annexure -D, was filed to show the targeted production during the relevant period and the compensation paid to the retrenched workers during the relevant period.

THEREAFTER , the insurance company appointed Shailesh Shah and Associates, as its Surveyor. The complainant co -operated with the Surveyor and furnished all the documents. The Survey report has been called into question because it did not report that there is no loss to the main property or did not state that the complainant did not claim the compensation for the damage to the property. The Surveyor did not dispute the factum of strike. He has not disputed, but has admitted the damage to the property. He did not deny the consequential loss due to damage of the property and did not advise the OP for grant of award of these claims. After the lapse of more than 3 years, i.e., April, 2000, for the first time, the OP, vide its letter dated 24.04.2000, came out with a new story that Complainant''s LOP policy does not become operative since no loss was claimed under the main fire policy "C", due to damage to the property. In response to the said letter, reply was sent on 15.05.2000, wherein it has specifically referred to the original claim letter dated 20.05.1997, wherein it was very much described about the damage to the property. No further reply was sent and that letter should be deemed to have been admitted. Copies of those letters have been placed on record as Annexure E (Colly). Copy of FIR was sent to the OP vide letter dated 02.06.2000. However, the OP, after expiry of five months, on 17.11.2000, repudiated the claim on the ground that conditions of LOP policy have not been complied with. The complainant made repeated representations thereafter but those did not ring the bell. It is explained that after receipt of the FIR, on 02.06.2005, no further query was made and the claim was repudiated, abruptly.

IN their written version, the OP has enumerated the following defences. No deficiency on the part of the OP can be attributed. The attitude of the complainant was non -cooperative towards the Surveyor and despite repeated requests and various letters from the Surveyor, calling upon the complainant to furnish the required documents and information or have meeting for the discussion, the complainant went on delaying to furnish the requisite information and documents or to have a meeting with the Surveyor. Consequently, there was delay in submitting the report by the Surveyor. The Surveyors submitted their report on 22.10.1999 to the Insurance Company, OP. Subsequently, it transpired that the loss was not payable under the consequential loss fire policy obtained by the complainant. The loss as claimed by the complainant occurred on account of the jamming of screw ball assembly resulting the screw ball coming out of the packing. The repudiation is valid. The alleged loss was not covered under the LOP policy. It is explained that on receipt of the Survey report, as per the requirement of Section 64 -UM of Insurance Act, the said report as well as the relevant documents were examined thoroughly and a final decision repudiating the policy was taken. All other allegations have been denied.

WE have heard the counsel for the parties and have gone through their written synopses. As a matter of fact, this case was finally decided by the previous Bench, on 17.11.2004. It was observed, as under : - "It is pertinent to mention that by aforesaid letter dated 20.05.1997, claim was lodged with opposite party -insurance company only in regard to damage caused to the machineries and plant by the workers under fire "C" policy. Admittedly, complaint is silent in regard to lodging of claim for loss of profit under LOP policy nor did the complainant file and prove claim letter in respect of that loss. In the absence of pleading to the said effect there was hardly any occasion for the opposite party to have denied lodging of claim for loss of profit under LOP policy in the written version. In this backdrop, the complainant cannot take advantage of the surveyor having recommended payment of certain amount towards loss of profit under the said policy. Complainant is, therefore, not entitled to any amount towards loss of profit".

At the end, it was further observed, as under : - "In the report dated 28.10.1999, the surveyor has not separately recommended payment for the damage caused to machineries and plant by the workers. Though, in said two repudiation letters, the claim for damage to machineries and plant had not been specifically refuted, still, payment thereof was not made to the complainant. Opposite party was, thus, deficient in service and complainant is entitled to payment of said amount with interest which we quantify at 9% p.a., after two months of lodging of claim, on 20.05.1997. Consequently, while partly allowing complaint with cost of Rs.5,000/ - the opposite party is directed to pay amount of Rs.11,087/ - with interest @ 9% p.a., w.e.f. 20.07.1997, till realisation, to the complainant. Rest of the claim is declined".

AGGRIEVED by the above said order, an appeal was preferred by the complainant, before the Hon''ble Apex Court. The Hon''ble Apex Court was pleased to remand the case and made the following observations : - "We have carefully perused the impugned order of the National Commission. The said judgment states that there is nothing to show that any claim was made for loss of profit under the LOP policy. On this basis, the claim for loss of profit has been rejected by the National Commission. In this connection, we have perused the original complaint filed before the National Commission. In paragraph VII of the complaint, it had been clearly mentioned that there was an original claim dated 20.05.1997, and a reference to this effect was made in the appellant''s company reply dated 15.05.2000 when the insurance company vide its letter dated 26.04.2000 had alleged that no claim for loss of profit had been made.

However, the very fact that a surveyor was appointed and the surveyor in his report had reported that loss was due to the strike in the appellant''s company showed that the appellant -company had made a claim in respect of both the policies, viz., fire policy as well as LOP policy".

COUNSEL for the OP vehemently argued that the above said order passed by the Hon''ble Supreme Court has mentioned the facts wrongly due to inadvertence. This argument does not appear to be sound. Para VII of the complaint is reproduced here, as under : - "That thereafter the Respondent company appointed a surveyor M/s. Sailesh and Co. and the said Surveyor had undertook investigation and had gone into great details and also procured from the petitioner company number of documents and materials and then thereafter the said surveyor after considering the terms of the insured policies had assessed the loss and submitted a report to the respondent company, but the said surveyor has never said that there is no loss to the main property and also not said that the petitioner have not claimed the compensation for damage to the property. So the surveyor has not disputed the factum of strike, not disputed rather not denied damage to the property and also not advised the respondent company for not granting award of any claim. Even though, after a lapse of more than three years, i.e., April, 2000, for the first time, the respondent company by its letter dated 26.04.2000 came out with a new story that petitioner company''s LOP policy does not become operational since no loss is claimed under the Main Fire Policy C, due to damage to the property. Now to this letter, the petitioner company immediately replied vide its letter dated 15.05.2000 in great details wherein it is specifically referred the original claim letter dated 20.05.1997 wherein it was very much described the damage to the property. Now to this letter, respondent company has never submitted its reply much less controverted the contents of the said letter dated 15.05.2000. So in other words, the respondent company has directly or indirectly accepted the contents of the two letters dated 20.05.1997 and 15.05.2000. Copies of above referred communications letters by the petitioner and respondent herein are annexed herewith and marked as Annexure E (colly)".

THE claim application made by the complainant also runs, as follows : - "We have already informed to you that our workers are on strike from 22nd March, 1997. They resumed the work after signing an undertaking on 16th April, 1997. Thereafter, the workers went on reducing the production and indulged in damaging the machines and the material components. Last three weeks the workers are not producing anything at all. The severely damage machines are : -

CNC machine VD40 2. Vertical milling machine 3. Capstan CNC Machine VC40:

The foundation bolts of the pallet changer were loosened due to which the sliding arrangement to the main machine is misaligned with a result bearings, seals, tapper bushes, pins, etc., found damaged. Vertical milling machine: Gear box for feed drive is damaged. Resulting in to stopping table movement. Capstan: Headstock drive is damaged. This will need dismantling and realigning of gears, etc., and replacement if found damaged. The batch of components that were being manufactured since 16th April, 1997 were not only less in quantity but also poor in quality. A large number of components were rejected. Our agents and sales engineer as inform us about deliberate use of faulty / damaged components in the products being despatched to the customer. We bring to your kind notice the damages as listed above.

Sd/ - For Rotex Manufacturers and Engineers Pvt. Ltd. (Rajesh Shah) Managing Director ''''.

COUNSEL for the complainant submits that there was a strike by the workers of the complainant and the workers had damaged the plant and machinery, as a result of which, there was a loss to the main properties and also there was a consequential loss of profit to the complainant company, due to non -production/production of inferior products. The insurance was immediately apprised of the loss, by the complainant. The Surveyor assessed the loss of profit to the tune of Rs.23,00,000/ -, approximately. It was further argued that the Surveyor advised the insurance company that since no claim lied under insurance fire policy, the loss of profit policy does not become payable. Under these circumstances, the claim of the complainant was repudiated. It was explained that letter dated 20.05.1997 and 15.05.1997 were never rebutted. There was inordinate delay of about three years'' in sending the repudiation letter. The Surveyor report was not considered carefully by the insurance company. The insurance company ought to have pointed out to the Surveyor that the damages to the plant and machineries were different, then, the loss claimed on account of jamming of screw ball assembly resulting in screw ball coming out of the packing.

IT is further contended that the complainant is entitled not only to the loss of Rs.23 lakhs, but to Rs.46,00,000/ -. The complainant has placed reliance on the Expert''s evidence which is annexed as Annexure -K. One, Sh. Shrikant S. Shah, Chartered Accountant, who has 18 years'' experience at that time and who is also doing editing work as well, advises the complainant on taxation. He came to the conclusion that the complainant had suffered the loss to the extent of Rs.57 lakhs. It is lastly submitted that Rs.57,00,000/ - with interest @ 18% p.a., from the date of cause of action, i.e.,, 20.05.1997, be granted in favour of the complainant.

AT another place, the complainant submitted in his written arguments, the following claim : - "The crux of the objections are, the surveyor had not considered rising trend of the past years performance of the insured company, which is mandatory under the policy terms which is at page 40,Part -III. This rising trend in terms of turnover of sale and gross profit rate is explained, as under : -

JUDGEMENT_216_LAWS(NCD)4_2015.htm

ON the other hand, the counsel for the OP has cited the celebrated authority reported in United India Insurance Co. ltd. Vs. Harchand Rai Chandanl Lal, 2004 8 SCC 644, wherein its para No.14, runs, as follows : - "14. Therefore, it is settled law that the terms of the contract have to be strictly read and natural meaning be given to it. No outside aid should be sought unless the meaning is ambiguous".

THE learned counsel for OP also pointed out that due importance should be pinned with the report to the Surveyor. In this context, he has cited the celebrated authority, reported in United India Insurance Co. Ltd. Vs. Roshanlal Oil Mills Ltd., and Ors., 2000 10 SCC 19 and has invited our attention towards para No.7 of the said judgment. He has also referred to other judgments reported in Sikka Papers Ltd. Vs. National Insurance Co. Ltd., and Ors., decided by the Hon''ble Apex Court on 29.05.2009 in Civil Appeal No.6527/2002, Sri Venkateswara Syndicate Vs. The Oriental Insurance Co. Ltd., and Anr., decided on 24.08.2009 in Civil Appeal No.4487/2004. He has further referred to the following judgments of this Commission. (1) Manmandir Synthetics Pvt. Ltd. Vs. New India Assurance Co. Ltd., 2005 4 CPJ 6 NC, decided on 27.04.2005, Oriental Insurance Co. Ltd., Vs. P. Kandasamy and Anr., 2006 4 CPJ 170 NC, decided on 10.02.2006, B.D. Gupta Vs. Divisional Manager, United India Insurance Co. Ltd. and Ors., RP No.1437 of 2009, decided on 01.05.2009, from the Indian kanoon website. FINDINGS :

WE find some force in the arguments advanced by both the parties. It is well settled law that a Surveyor''s report has significant evidentiary value unless it is proved otherwise, while both the parties have failed to do so in the instant case. The report given by the Surveyor has to be given due value. The report given by a private Chartered Accountant carries exiguous value. A private Surveyor /Chartered Accountant appointed by a party, is an interested witness. His report cannot be equated with the report of the Surveyor. He may not be a guileless witness. Consequently, we agree with the counsel for the OP that we will strictly follow the report of the Surveyor.

THE Surveyor has come to the conclusion that the loss under the LOP policy is upto Rs.23.00 lakhs. In addition to the relief given to the complainant, we direct the OP to pay Rs.23,00,000/ - to the complainant. Succinctly stated, the OP will pay to the complainant, costs in the sum of Rs.5,000/ - and pay the amount of Rs.11,087/ - with interest @ 9% p.a., w.e.f. 20.07.1997, till realisation, as ordered by the previous Bench. In addition, the OP will pay a sum of Rs.23,00,000/ - to the complainant, with interest @ 9% p.a., w.e.f. 20.07.1997, till its realisation.

LAST , but not the least, there is inordinate delay in deciding this matter. The OP took about three years'' to decide this case. It is incumbent upon the OP to decide the case within six months from the date it receives the claim. However, the counsel for the OP submits that the complainant took time in extending co -operation to the OP/ Surveyor. Consequently, the delay took place. Even if this allegation is true to some extent, the other factual situation cannot be glossed over. The survey report is dated 22.10.1999 and the date of repudiation of the claim is, 17.11.2000. There is a difference of about one year and one month. The counsel for the OP could not explain the same. Consequently on this account, we impose costs in the sum of Rs.3,00,000/ - upon the insurance company, OP, out of which, Rs.1,00,000/ - will be paid directly to the complainant, through demand draft, and the remaining amount, i.e., Rs.2,00,000/ - will be deposited with the Consumer Welfare Fund established by the Central Government under Section 12 (3) read with Rule 10(a) of the Consumer Protection Act, 1986, of the Central Excise Act, 1944, by way of demand draft, drawn in favour of Pay and Accounts Officer, Ministry of Consumer Affairs, payable at New Delhi, within 90 days from today, failing which, both the amounts (i.e. Rs.1,00,000/ - and Rs.2,00,000/ -) will carry interest @ 9% per annum, till their realization.

TO make the things easier, the OP -Insurance Company can deposit the amount with the Registrar of this Commission, who will further transmit the demand draft to the concerned Ministry.