TEXMACO LIMITED vs NEW INDIA ASSURANCE CO. LTD.

THIS is a complaint under the Consumer Protection Act, 1986 (in short the Act) filed by the Texmaco Ltd. which has a cement division situated at Yerraguntla, Cuddapah District in Andhra Pradesh. The complainant purchased two D.G. sets from Finland which were insured for all Marine Transit risks by the suppliers, towards material, own damage losses from their ware house to the ware house of the complainant for cost, insurance and freight only for Rs. 3,10,45,200/-. As the insurance cover granted by the foreign insurers did not include the customs duty payable by the complainant to the Government of India on arrival of the imported generators at the Indian Port, the complainant obtained a Custom Duty Insurance Policy from the Respondent, the New India Assurance Co. Ltd., (for short the Insurance Company) on 3rd January, 1990 on the two imported D.G. sets for a sum of Rs. 1.10 Crores and paid Rs. 20,000/- towards consideration as premium. The 2 D.G. sets were dispatched by the suppliers on 6.12.1988 and those sets arrived at the factory site of the complainant in a damaged condition. The complainant intimated the loss to the suppliers'' representative, foreign insurance company and the respondent insurance company. After due inspection by the Surveyor of the foreign insurance company it was found that only one D.G. set had been damaged in transit. The surveyor and the manufacturer''s representative felt that there was no need to replace the entire D.G. set and the same could be repaired by importing some vital parts. The complainant agreed for repairs to the damaged D.G. set because of acute power shortage in the State of Andhra Pradesh and also to save foreign exchange and to avoid time consuming process in obtaining permission again from the Reserve Bank of India and other Government authorities for importing the entire new D.G. set. The foreign insurance company settled only the damage claim in favour of the suppliers by paying the cost of damaged parts imported for the purpose of repairs. The complainant imported the parts required for repairs worth Rs. 10,94,864/- and paid custom duty ranging from 135% to 194% in an amount of Rs. 21,24,036/-. Out of these amounts a small portion was disallowed by the surveyors. The complainant lodged a claim with the Respondent for Rs. 21,23,722.20 paise under the aforesaid Custom Duty Police on the basis of actual duty paid by them on the imported parts required for repairing the damaged D.G. set. As per the surveyors the total cost of replaced imported parts worked out to Rs. 8,03,635 and recommended that the claim may be settled at 35% of the above value amounting to Rs. 2,81,372.00 only. The customs duty payable on a whole new D.G. set is 35% of C.I.F. value and on the spares at 135 to 194 per cent depending upon the type of the imported parts. According to the complainant the parts imported by the complainant are not spares but are essential replacements to repair a newly imported D.G. set. The D.G. set was damaged in January 1989. The survey report was submitted to the Respondent Insurance Company on 2nd September, 1989. The offer to settle the loss for Rs. 2,81,217/- was made by the Company on 30th April, 1990 though the actual duty levied on the parts was Rs. 21,24,036/- and all this amounts to deficiency of service and unfair trade practice adopted by the Insurance Company in settling the claim. The complainant prays that the Insurance Company be asked to settle and pay their claim for Rs. 21,23,772.20 paise with interest at the rate of 18% from 12th May, 1989 (on which date the custom duty was paid on the spare parts) till payment.

THE Insurance Company contested the complaint and filed a counter. Two preliminary objections were taken but it is not necessary to reproduce them as those were not urged before us. On merits it is pleaded that Customs Duty Insurance granted by insurer as per the Duty Insurance Clause is always related to the C.I.F. value of the consignment. The sum insured under the policy will always relate itself as percentage of the C.I.F. value and the sum insured under the policy is fixed accordingly and also the consideration (premium) for the contract of insurance is also collected on the sum insured so fixed. The indemnity available to the insured in the event of a claim recoverable under the policy would be in the same percentage, of C.I.F. value for which the duty is declared for insurance. The Duty Insurance clause clearly states that "This insurance is on increased value of cargo by reason of payment of Customs duty at the port of the destination and is subject to the same clauses and conditions as the Cargo or insurance and to pay the same percentage of Duty payable (excluding charges and expenses) as may be paid thereon" which means that the insured is entitled for an indemnity to the extent of same percentage of amount declared as sum insured and also paid under Duty Policy. It is only logical that when Customs Duty Policy was sought by the insured which is directly related as a percentage of C.I.F. value of the entire machinery even the components of the said machinery also enjoy the same percentage of indemnity, in relation to the C.I.F. value. If, as per the regulation of customs duties, a higher duty is payable when the components/spares are to be re-imported it is only a future contingent liability which does not form subject matter of the Duty Policy which is covering the duty payable on the original import of the entire machinery. In fact, there was no delay in processing the claim of the petitioner. The matter was referred to the head-office of the Insurance Company for consideration as per the request of the complainant and was thoroughly examined at all levels in view of the objections and the claim of petitioner and no sooner it was found that the claim for Rs. 2,82,217/- was payable towards the claim of the petitioner the same was offered to the claimant. The complainant filed a rejoinder to the counter and pleaded that if the intention of the Insurance Company was to restrict their liability on percentage basis irrespective of actual payment made by the complainant, they ought to have inserted the same wording as that of storage-cum-erection policy limiting the respondent''s liability on percentage basis. (It may be mentioned that the complainant has also taken such a policy from the Insurance Company). It was further pleaded that when the claimants had got the D.G. set insured for C.I.F. value taking the sum insured as per the Customs Duty payable for the D.G. set, when there was damage in transit to the set not resulting in total loss the insurers are liable to pay the actual duty levied by the customs authorities on the parts since they are not spares imported by the complainant. Even against the levy made by the customs authority fixing a higher slab of customs duty treating the imported parts as spares, the complainant has preferred an appeal for refund before collector of Customs, which is still pending and they are agreeable to refund the excess amount levied (to the Insurance Company) in case they succeed in their appeal.

IN the present case, both the parties have been heard at length. There is a dispute between the parties about the interpretation of the various clauses of the Customs Duty Insurance Policy. There is an annexure attached to the said policy under the heading "Increased Value" and "Duty" Insurance Tariff (Contd.). "About the Duty Insurance Clause it is mentioned the insurance is on increased value of cargo by reason of payment of Customs Duty at the port or place of destination and is subject to the same clauses and conditions as the insurance on cargo and to pay the same percentage of duty payable (excluding charges and expenses) as may by paid thereon, but excluding claims in the part thereof."

ACCORDING to the Insurance Company, they are liable to pay the Customs Duty on the imported parts at the same rate which is payable on the whole D.G. set. This interpretation was conveyed to the claimant vide letter dated the 30th October, 1990. The relevant portion of the letter reads as follows : "We have again studied the papers and would reiterate that liability of the cargo and duty insurers is only restricted to proportionate insured value of the parts replaced plus proportionate duty insured value of the parts replaced plus proportionate duty as originally declared or proportionate duty as was paid (whichever is less). While it is true that you had to pay duty on the part replaced more than the duty originally insured, we cannot pay for the additional duty originally insured, we cannot pay for additional duty paid by you as our liability is only restricted to the proportionate duty in fact insured and on which premium was paid. If the wordings of the Duty Insurance Clause are examined it would be quite clear that the Duty Insurance is on increased value of the cargo by reason of payment of Customs Duty at the port of destination and the Duty Insurance makes it clear the insurer has to pay the same percentage of duty payable as may be paid thereon. The words "the same percentage of duty payable as may be paid thereon" postulates that we will be liable to pay the same percentage of duty on the import of the replacement as was paid earlier on the import of machinery and we will not be liable to the increased duty on the spare parts."

On the other hand the complainant relies upon condition No. 4 of the same instrument which reads as follows : "This is not a valued policy as defined in the Marine Insurance Act. Claims under this policy are payable on the basis of actual duty paid or on the basis of the sum insured which ever is less." According to the contention of the complainants the Respondents are liable to pay actual custom duty paid on the replacements imported for getting required the damaged D.G. set.

AFTER consideration of the documents on the file we have come to the conclusion that the contention of the Insurance Company is correct. The Customs Duty Policy was taken by the complainant in respect of the whole D.G. sets and not in respect of the different components assembled to make the whole D.G. set. That policy was taken by the insured after the consignment of the two whole D.G. sets had left the port of despatch. As ill luck would have it, one of the D.G. sets was damaged in transit and for the repairs of the same parts had to be imported. The customs authority treated those parts as spares and charged higher customs duty as per regulations. As it was an entirely different consignment, the Insurance Company cannot be made liable to pay the actual customs duty paid on those spares though those might have been imported for repair of the damaged D.G. set which had been got insured for actual duty under the original Customs Duty Policy. Therefore, the Insurance Company is liable to pay the custom duty of the spares at the same percentage at which they were liable to pay on the whole D.G. set. Accordingly we hold that the claimant is not entitled to recover the actual duty paid by them on the spare parts imported for repairing the damaged D.G. set.

THE Insurance Company is prepared to settle the claim at Rs. 2,81,217/- which is 35% of the customs duty paid on the parts. We award this amount to the complainants against the respondent. Insurance Company. There had been some delay in the settlement of the claim. This delay is mostly due to the correspondence of the complainants made with the Insurance Company. Hence, we do not allow any interest on the above amount. The complainants will also be entitled to the costs of the present proceedings from the Respondent Insurance Company which we assess at Rs. 1,000/-.