SKY GEMS vs National Insurance Co. Ltd

THE Complainant-petitioner exported two consignments of precious stones (emeralds) to U.K. THEse were insured under two policies with the Opposite Party Insurance Co. against loss for 85,740.55 (CIF value + 10% ). THE two consignments were lost in transit on 10th September, 1990 and the Complainant Insured lodged a claim on 23.1.1991 for the replacement cost of the goods viz. 25% higher than the CIF value + 10% for which it was insured. THE amount claimed from the Insurance Co. was 1,07,175.69 on 23rd January, 1991;

THE complainant has alleged that the Opposite Party -Insurance Co. has delayed settlement of claim on one pretext or the other causing thereby business loss to the complainant due to ruduced imports and corresponding reduced exports because of the inability to make payments due to non-availability of funds. THE complainant has pleaded that in consequence, he could not make overseas payments, could not import raw material and had to keep orders pending worth Rs. 1.5 crores. According to him there was loss of profits due to decline in exports in 1990-91, 1991-92 and 1992-93 avoidable payment of interest on bank loans and avoidable travel expense. During the period their claim has not been settled, they have also suffered due to variation in the exchange rates to the extent of Rs. 24.00 lakhs. Consequently, the complainant claimed reliefs in para 36 of his complainant as under: (i) 1,07,175.69 + interest thereon. (ii) 50,000 as damages by way of interest at 25% on the above amount from January, 1991. (iii) Rs. 1,77,250.00 as damages.

Details of his claims are given in para 2935 of his complainant but cannot be readily reconciled with the amounts claimed finally in para 36 of his petition. He has also asked for award of costs.

THE Opposite Party-Insurance Co. was willing to settle the claim of the complainant for Rs. 28,09,481/- on both the policies. In other words the Opposite Party-Insurance Company was willing to settle the claim in terms of Indian rupees but not in foreign currency on the ground that the insurance charges on the shipment in question had to be borne by the Complainant Insured and that he was not making the payment on behalf of any non-resident or that he was defraying insurance charges on the shipment on account of overseas buyer of the goods in terms of the Foreign Exchange Regulation regarding payment of the premium. The Opposite Party-Insurance Company has also raised the question that rate of premium charged (0.395%) was actually found to be not in compliance with the Market Agreement (0.60%) resulting in an undercharge of Rs. 17.20. This question of short premium has been raised while processing the claim.

THE stand of the Opposite Party-Insurance Co. for settling the claim in terms of Indian currency was challenged by the Complainant before this Commission. He maintained that it was the legal obligation of the Opposite Party Insurance Company to settle the claim in terms of Pounds Sterling for the following reasons: (i) THE insurance policies clearly state "claim payable at London". (ii) Declared invoice value and the insured value of the consignments was in terms of Pounds Sterling. (iii) In the declaration as exporter before Exchange Control, the full export value of the consignments has been declared in terms of Pounds Sterling. (iv) THE Commissioner of Income-tax, Jaipur in his order of 31st March, 1992 granting extension of time for assessment has taken the expected sale proceeds of these two consignments in terms of Pounds Sterling. (v) M/s. W.K Webster & Co. who were nominated by the Opposite Party Insurance Co. to pay the claim in London, had stated in their communication of 22nd October, 1991 to the Solicitors of the Complainant that a Letter of Credit (obviously from a Bank in U.K.) was available with them for claim settlement purposes; only they were awaiting written authority from the Principals in India to make the payment of the amount involved.

The above facts leave no room for doubts whatsoever that the liability of the Insurance Company-Opposite Party under the policy of insurance was to settle the claim in terms of Pounds Sterling. 11 would appear that the object of the Foreign Exchange Regulation regarding payment of premium is only to ensure that where the insurance charges on a shipment are actually paid by the exporter inter alia, on behalf of an Overseas buyer of goods, the premium is included in the invoice value and he recovers the payment so made from the buyer. This has no bearing on the question whether liability of the Insurance Company is in terms of Indian or Foreign currency. There is truth in the allegation of the complainant that the Respondent Insurance Company has deliberately delayed for nearly two years the payment of his claim on one pretext or another which are wholly untenable, the claim on the policies having been made in January, 1991 & that in consequence the business of the complainant has suffered due to lack of funds and he has had to incur avoidable interest on bank credit & penal interest on packing credit from his Bankers.

HOWEVER, the claim for consequential loss of business and therefore, of profits on the possible exports in 1990-91, 1991-92, 1992-93 is speculative.

HIS claim for replacement value of the goods under the policy of insurance is not tenable as the policy of insurance is a policy of indemnity and fluctuations in the value of goods insured is not covered. The complainant''s claim for loss is, therefore, to be limited to the insured value on which he paid premium, i.e. - CIF + 10%. His claim for interest on the above amount and the loans that he had to raise to meet the cash shortage would be offset by the interest which is being allowed on the amount due under the insurance policies.

The reply of the Opposite Party Insurance Company is silent on the claim of the complainant regarding loss of Rs. 24 lacs due to variation in the exchange rates. The basis on which the complainant has made this claim is not available in the complaint. Since the complainant has claimed the amount due on the Insurance Policies in terms of Pounds Sterling, the question of loss due to exchange rates variation does not arise.

THE reply of the opposite party is silent on the claim of the complainant for reimbursement of interest of Rs. 65,000/- on packing credit. This is allowed. We, therefore, direct as under: (i) THE amount of the claim allowed is CIF 85,740 +10% or 94,314. (ii) Interest in Pounds Sterling on the amount (1) above at the rates of interest on commercial borrowing in vogue in U.K. from time to time commencing from January, 1991 to the end of December, 1993. (iii) Avoidable interest on Bank Packing Credit amounting to Rs. 65,000/-. (iv) THE opposite party Insurance Company is entitled to adjust the undercharge in premium amounting to Rs. 17.20 lacs and the Pounds Sterling equivalent of the sum of Rs.20,000/- received as compensation from postal authorities. (v) Compensation amounting to Rupees Fifty Thousand only will be paid to the complainant for the avoidable delay in the settlement of his claim under the policies of insurance. (vi) THE complainant is also allowed costs amounting to Rs. 10,000/-.

Appeal allowed.