BEFORE A.P STATE CONSUMER DISPUTES REDRESSAL COMMISSION AT HYDERABAD

C.C.NO.71 OF 2010

Between:

M/s Bollineni Castings and Steel Ltd.,
(formerly M/s B.Seenaiah and Compnay
(Projects Ltd.,) having its works at Suryapalem
Village, Podalakuru Mandal, Nellore District
and having its registered office at 6-2-913/914
1^st Floor, Progressive Towers, Khairatabad,
Hyderabad-004 rep. by its Executive Director
N.Babu Rao ( As per orders dt.19.9.2001
in CCIA No.126/20)

                                                                        Complainant

        A N D

1.   Cholamandalam Ms General Insurance Co.Ltd.,
having its registered and Head Office at Dare House
2^nd Floor NSC Bose Road, Chennai-001 rep. by
its Managing Director

2.   Cholamandalam Ms General Insurance Co., Ltd.,
having its Branch Office at 6-3-698/3, 1^st Floor
Venkat Plaza-Ii, Panjagutta, Hyderabad-082
rep. by its Regional Manager

                                                                        Opposite parties

Counsel for the Complainant          M/s K.N.Lakshmi

Counsel for the opposite parties     M/s A.Ramakrishna Reddy

QUORUM:   SRI R.LAKSHMINARASIMHA RAO, HON’BLE MEMBER

AND

SRI THOTA ASHOK KUMAR, HON’BLE MEMBER

  TUESDAY THE SEVENTH DAY OF AUGUST

TWO THOUSAND TWELVE

Oral Order (As per Sri R.Lakshminarasimha Rao, Hon’ble Member)

***

1.            The complaint is filed seeking direction to the opposite parties no.1 and 2 to pay differential cost of `80,75,142/- under insurance policy bearing number EMB/00000/494/000/01 and `5.00 lakh towards compensation and interest @18% p.a. from 18.08.2008 till the date of filling the complaint and costs of the complaint.

2.             The averments of the complaint are that the complainant company is engaged in power generation project like using biomass as the main output and possesses power generation unit with capacity of 7.5 MW at Suryapalem village, Podalkauru Mandal, Nellore District. The breakdown of the machinery would cause total breakdown of the Unit and consequently it adversely affects power generation. The complainant-company insured the machinery under two insurance policies,”Machinary breakdown insurance policy” and ‘Machinary Loss of Profit Policy’. The first mentioned policy covers the risk on machinery and its material. The second policy covers loss of profit arising out of breakdown of the machinery. The complaint is filed pertaining to dispute under second policy. The claim under MB policy was settled and there is no any dispute pertaining to it.

3.             The complainant-company has been obtaining the insurance policies from the opposite parties every year. The complainant-company obtained MB policy bearing number EB/000000/493/000/01 for the period from 1.07.2007 to 30.06.2008 and the MLOP policy for the same period by paying premia of `6,60,003/- and `5,57,045/- respectively. There was breakdown in the Unit of the complainant-company on 15.07.2007 to the 7.5 MV Turbo generator set which was incorporated in the list of machinery in the schedule of the policy. The breakdown of the generator was intimated to the second opposite party. The second opposite party deputed M/s Puri Crawford and Associates India Pvt. Ltd to assess the loss and damage caused to the machinery. The surveyor submitted interim report on 20.12.2007 recommending release of ‘on account payment’ totaling to `1,40,00,000/- i.e., `40,00 lakh and `1.00 crore to the complainant –company.

4.             The surveyor filed final report on 31.03.2008 pertaining to the claim under the two insurance policies. The second opposite party released one crore on 10.11.2007 out of which `40,00,000 for MB policy claim and `60,00,000/- for MLOP policy claim. On 26.12.2007 the second opposite party released `1.50 crore out of which `1.00 crores for MB policy claim and `50,00 lakh under MLOP policy claim.

5.             The surveyor assessed total loss at `1,95,02,635/- and observed in his report that the power plant of the insured has come to a completed stoppage. Out of the assessed loss of `1,95,02,635/- the opposite parties finalized the claim at `1,93,61,000/- leaving the marginal amount from the assessment made by the surveyor. As such the complainant-company had not disputed the amount. In respect of the claim under MLOP policy, the surveyor filed interim report recommending release of `50.00 lakh.  The sum assured under the insurance policy is `7.00 crores. The surveyor in his final report estimated the loss at `1,27,60,653/- which does not reflect the actual and minimum loss of profit the complainant-company incurred. The opposite parties made final settlement of the claim for `1,04,43,230/- which is very much less than already diminished assessment made by the surveyor. The opposite parties informed the complainant that as per the interim report of the surveyor, an amount of `5,56,770/- was paid in excess and they would not want to recover the amount. The surveyor’s report also suffers from shortcomings.

6.             The complainant-company submitted final claim for `2.76 crores. In the surveyor’s report there are no adverse comments about the damage caused, cost of the breakdown and the extent of damage caused. The surveyor observed that the generation remained totally interrupted from 19.40hrs on 15.07.2007 till 21.07 hours on 29.02.2008 for 229.060 days as per calculation made by them. The surveyor observed that the delay was on account of worker’s strike at the suppliers’ premises from 1.10.2007 to 2.11.2007 and in remittance of payment by the insured to the suppliers which prolonged the delivery schedule. For the delay of 32 days the surveyor had nto reckoned profit falling back on exclusion clause in the policy. The profit for the said period works out to the amount of `49,45,732/-. Clause 8(a)of the insurance policy cannot be applied as the strike was not at the premises of the insured but at the premises of the suppliers. Hence the amount on the count cannot be deducted.  The difference amount of `67,06,485/- should have been assessed by the surveyor and paid by the opposite parties.

7.             On receipt of letter dated 18.08.2008 from the opposite parties, the complainant addressed letter dated 25.10.2008 disputing the settlement of claim and intimating its non-acceptance and further stating that they would furnish their claim with all details to the opposite parties. On 20.11.2009 the complainant addressed letter to the opposite parties disputing the claim and to that letter dated 20.11.2009 the complainant enclosed annexured claiming `80,75,142/- from the opposite parties. The opposite parties addressed letter dated 6.01.2010 rejecting the claim. The opposite parties committed deficiency in service by rejecting the claim to pay actual loss of profit.

8.             The opposite parties resisted the claim on the premise that the complaint is not maintainable since the action has been intimated after expiry of the period by which it has been discharged from liability under the policy. The complainant reported the breakdown of the Turbo generator set on 15.07.2007 which was the subject matter of the claim under the Machinery Breakdown Policy and Machinery Loss of Profits policy. The complaint is filed in respect of the loss of profits policy. The machine was restored on 29.02.2008 for which period 15.07.2007-29.02.2008, the complainant company claimed loss of profit.

9.             The opposite parties made payments of `60,00,000/- on 10.11.2007 and `50,00,000/- on 24.12.2007 towards the claim on the basis of interim report of the surveyor. One year from the end of indemnity period claimed expired on 28.02.2009. Three months from the date of payment expired on 23.03.2009. There was no admission of any further liability.  The complaint should have been filed before 28.02.2009. The complaint is filed on 7.05.2010. The opposite parties had confirmed on 18.08.2008 that no further amount was payable, furnishing detailed basis for its calculation.

10.            The opposite parties released periodical payments and substantial amounts of `4,03,00,000/- based on surveyor’s recommendation. Repairs had been completed by 29.02.2008, final payment could not be made earlier. The surveyor submitted his final report on 31.03.2008 assessing loss for the amounts of `1,95,02,635 under machinery breakdown policy and `1,27,60,653/- under loss of profit policy and the opposite parties finalized the amounts. As `1,93,61,000/- and `1,04,43,230/-. By 24.12.2007 the opposite parties paid amount of `3,50,00,000/-. The assessment made by the surveyor is not conclusive and the opposite parties are entitled to vary the amounts when it found that the surveyor had not made proper calculations in accordance with the facts presented by the records. On 18.08.2008 the opposite parties confirmed that  nor further amount is payable to the complainant. An excess payment was made against the loss of profits policy. The loss of profit policy while covering loss due to interruption of business, restricts liability of the insurance company on the basis of normal repair period in terms of exclusion clause.

11.            The time set for restoration and commissioning of the Turbo Generator Set was 15.12.2007, as per the terms of the repair order issued by the complainant to tis repairer , the work was delayed due to delay in payment by the complainant and strike in supplier’s premises .Both the reasons fall within the exclusion clause and the relevant period attributable for the same has to be deducted in calculating the interruption period.

12.            The surveyor while calculating the indemnity period incorrectly taken gross profit at 1.2506% instead of 1.0519%. The gross profit has to be worked out after adjusting manufacturing expenses during the previous year as per balance sheet of the complainant. The opposite parties had revised the calculations as under:

13.            The opposite party having found that the Surveyor had not taken into account repairs and maintenance expenses and the power charges, gas and diesel expenses which were reflected in the balance sheet of the complainant, the same was duly adjusted by them in working out the loss.

14.            Further, the opposite party found that the Surveyor had considered internal consumption at 15% only, ignoring the fact that it had gone upto 25% and 24% in June and July 2007 itself from 11% to 16%.  The complainant was found to have acquired casting and power division during the previous year which had commenced commercial operations in the middle of 2006-2007.  The power plant had been set up mainly to serve as captive consumption for adjoining casting plant of the company as per Director’s report of Annual Accounts.  In view o such reason for increase in internal consumption, prior to the loss, the opposite party found no scope for reduction of the same in reasonable future and therefore the adjustment of 25% based on actual consumption figures preceding the loss was fully justified and applied in making final calculations. Thereby Surveyor’s assessment warranted reduction.

15.            The opposite party therefore submits that it was found necessary to revise the assessment by the Surveyor from `1,27,07,294/0 to `1,04,43,230/- as explained in detail in the annexure to its letter dated 18.8.2008 addressed to the complainant confirming that no further amount was payable.  The opposite party craves leave to refer to the same as part and parcel hereof. 

16.            The opposite party submits that the profit that might have been earned during a period  when the business was interrupted is a matter of assumption and conjecture  The policy, while granting loss of profits cover, intends to provide relief subject to certain restrictions such as “normal repair period ”gross profit, expenses and other calculations.  The complainant cannot ignore the stipulations in the policy and claim for full interruption period or ignore expenses for calculating rate of profit and calculations based on the same. 

17.            The opposite party submits that it had given full basis for its calculation on 18.8.2008 itself.  The complainant apparently found no reason to dispute the calculation of the opposite party.  After more than one year and three months, on 20.11.2009, the opposite party was surprised to receive a letter purporting to raise certain differences over the basis of settlement.  The inordinate delay in the complainant’s correspondence would itself demonstrate that it was only a speculative attempt to reopen a settled claim. If really such substantial amount being claimed was payable, the complainant would not have kept silent for such a long period.  It is pertinent to mention that payments had been made ever earlier by the opposite party long prior to its confirmation dated 18.8.2008 of no further amount being due.  Clearly, the complainant had no valid claim for further payment and having received the entire amount long back, had reverted to the claim in speculative attempt.  By then the further claim itself was barred and the opposite party discharged from liability in view of condition (p) of the policy. 

18.            The Executive Director  of the complainant has filed his affidavit and the documents,ExA1 to A9. On behalf of the opposite parties , the Senior Manager (Claims) filed his affidavit but no documents.

19.            The counsel for the complainant as also the counsel for the opposite parties have written arguments.

20.            The points for consideration are:

i)             Whether the complaint is filed within the period of limitation?

ii)           Whether the complainant is entitled to claim the amount?

iii)          To what relief?

21.            POINT NO.1:        The objection as to limitation is raised on the premise that the claim should be subject matter of proceedings within one year from the end of indemnity period and if filed later it should be within three months from the date of payment of admission of liability by the opposite party. Clause (p) of the insurance policy reads as under:

p)  in no case whatever shall be Company be liable in respect of   any claim under this policy after expiry of –

                i)          One year from the end of the indemnity period or if later

ii)         Three months from the date on which payment shall have been made or a liability admitted by the company covering the Accident giving rise to the said claim unless the claim is the subject of pending action or arbitration.        

22.            The loss under the insurance policy was occurred on 15.07.2007.  The indemnity period would expire on 28.02.2009. The payment of `60,00,000/- was made on 10.11.2007 and `50,00,000/- on 24.12.2007. Three months from the date of payment would expire on 23.03.2008. The complaint ought to have been filed on 28.02.2009.  The complaint was filed on 7.05.2010. The learned counsel for the opposite parties would contend that the claim was not filed within the period of limitation. He has relied upon the following decisions:

i)             H.P.State Forest Company Ltd vs Untied India Insurance Company Ltd I(2009)CPJ 1(SC).

ii)           National Insuance Co. Ltd. V. Sujir Ganesh Nayak and Co. and another reported in AI 1997 Supreme Court, 2049

iii)          Sudmalal Madwani vs New India Assurance Company Ltd II(2007)CPJ 144(NC).

iv)         New India Assurance Company Ltd vs Gouru Padma  I(2010)CPJ 254 (NC).

23.            In H.P. State Forest Company it was held that the claim has to be processed within 12 months from the date of loss and if nto pressed in the stipulated period, the insurance company cannot be held liable to pay the amount. The  Supreme Court held that :

6.       In view of the above observations, we find that the second issue with regard to the implications of clause 6 (ii) of the policy vis-`-vis Section 28 is really academic, but as the learned counsel for the parties have addressed us on this score, we have chosen to deal with it as well. We see from the order of the Commission that it has relied upon Sujir Ganesh Nayak's case (supra) to hold that the complaint could not be entertained as being time barred. The counsel for the appellant had, however, argued before the Commission as before us, that as Section 28 of the Contract Act had undergone significant amendments, the aforesaid judgment required a re-appraisal. This submission had been rejected by the Commission by observing that it was bound by the judgment in Sujir Ganesh Nayak's case and that the appellant could agitate the question as to its correctness before the Supreme Court. The matter was, accordingly, adjourned by us to enable the parties to find out if the amendment had, indeed, been made and, if so, to what effect. During the resumed hearing, the learned counsel for the appellant candidly admitted that the amendment had been made but had thereafter been repealed and the matter would, thus, have to be examined under Section 28 of the Contract Act, as originally placed. We have, accordingly, chosen to deal with this matter under that provision.

7. It would be clear from the above prefatory note that the  discussion would involve an appreciation of Clause 6(ii) of the Policy and Section 28 of the Contract Act. Both these clauses are reproduced below:

6(ii) In no case whatsoever shall the company be liable for any loss or damage after the expiration of 12 months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration: it being expressly agreed and declared that if the company shall declaim liability for any claim hereunder and such claim shall not within 12 calendar months from the date of the disclaimer have been made the subject matter of a suit in a court of law then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder.

Section 28.  Agreements in restrain of legal proceedings void- Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent.

Savings of contract to refer to arbitration dispute that may arise Exception 1 - This section shall not render illegal a contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.

Savings of contract to refer questions that have already arisen. Exception 2 - Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration.

24.            In Sujir Nayaks case, the Supreme Court held that the claim has to be preferred within 12 months from the date of loss and in para 22 of the judgment it was observed thus:

22.       Clause 19 in terms said that in no case would the insurer be liable for any loss or a damage after the expiration of twelve months from the happening of loss or damage unless the claim is subject of any pending action or arbitration. Here the claim was not subject to any action or arbitration proceedings. The clause says that if the claim is not pressed within twelve months from the happening of any loss of damage, the insurance company shall cease to be liable. There is not dispute that no claim was made nor was any arbitration proceeding pending during the said period of twelve months. The clause therefore has the effect of extinguishing the right itself and consequently the liability also. Notice the facts of the present case. The insurance company was informed about the strike by the letter of 28.4.1977 and by letter dated 1.5.1977. The insured was informed that under the policy it had not liability. this was reiterated by letter dated 22.9.1977. Even so more than twelve months after on 25.10.1977 the notice of demand was issued and the suit was filed on 2.6.1980. It is precisely to avoid such delays and to discourage such belated claims that such insurance policies contain a clause like clause 19. That is for the reason that if the claims are preferred with promptitude they can beeasily verified and settled but if it is the other way round, we do not think it would be possible for the insurer to verify the same since evidence may not be fully and completely available and memories may have faded. The forfeiture clause 12 also provides that if the claim is made but rejected, an action or suit must be commenced within three months after such rejection; failing which all benefits under the policy would stand forfeited. So, looked at from any point of view, the suit appears to be filed after the right stood extinguished. That is the reason why in Volcan Insurance case (supra) while interpreting a clause couched in similar terms this court said: " It has been separately held that such a clause is not his by Section 28 of the Contract Act." Even if the observations made are in the nature of obiter dicta we think they proceed on a correct reading of the clause.

25.            In Sudamalal’ s decision it was held that the complaint has to be filed within two years where the insurance company has not repudiated the claim. In paras 4 and 5 of the order it was held that:

4.         We are unable to appreciate as to how after filing the claim for compensating him for the cost of repairs in 1994, for the first time, the petitioner writes to the respondent only after 5 years in June, 1999? There is no material brought on record, as to what did he do for 5 years when the claim was not getting settled as also he was praying for recovery of the expenditure of Rs.1.5 lakh spent on repairs of the vehicle. Admittedly, the case of the petitioner is that if letter of repudiation was issued on 6.10.1994, then where was the justification for issuing another letter in November,1994? We are still unable to appreciate as to what was the petitioner/ complainant doing for 5 years, if the claim was not settled? Even if we presume that the claim was not repudiated but then for five long years, the petitioner should have taken some action for settlement of claim. The law envisages the period of limitation to be counted from the date of cause of action. In this case, even if it is presumed that letter of repudiation was not issued, then the five years should start from the date of accident or at best from the date of filing the claim (both in 1994) which was not getting settled. Nothing has been brought on record that anything was done for 5 long years before filing this complaint.

5. Innocuous effort is made that in another case, the Commissioner for Workmen's Compensation, Raipur, had settled the claim through a compromise between the parties, i.e., the Insurance Company, it is from there that they became aware that the Insurance Company has not settled their claim. If we see that order, we find that, that case was registered in 1994 and order was passed by that Court on 8.8.2001. It has got no bearing whatsoever with 1999, i.e., the year in which the complaint was filed before the District Forum.

26.            In Gouru Padma’s decision, the National Commission has set aside the order of this Commission that cause of action in view of the letter issued by the insurance company is a continuous cause of action  and the complaint was not time barred. It was held thus:

12.    State Commission has held that the letter dated 15.3.2002 shows that there was a continuous cause of action and, therefore, the Complaint was not time-barred.  State Commission has clearly erred in holding so.  The claim of the respondent had been repudiated by the appellant on 6.9.2000.  In the letter dated 15.3.2002, the appellant had merely reiterated its letter of repudiation dated 6.9.2002.  The letter dated 15.3.2002 will not live a fresh cause of action as it was simply a reply to the letter received by the appellant-Insurance Company on 14.2.2002 written by the respondent.  The appellant, at no stage, had neither reopened the case regarding respondent’s claim nor it had acknowledged the right of the appellant to receive the compensation.  The complaint filed on 3.10.2002 was clearly time-barred as two years from the date of repudiation of claim on 6.9.2000 had already expired.  Section 24A of the Consumer Protection Act, 1986 (hereinafter referred to as ‘the Act’ for short) provides that Consumer Fora shall not admit a complaint unless it is filed within 2 years of the date on which cause of action had arisen.  Section 24A(2) of the Act provides that the complaint can be entertained after the period specified in Sub-section (1), if the complainant satisfies the Consumer Fora that he had sufficient cause for not fililng the complaint within the prescribed period.  In the present case, no application was filed by the respondent seeking condonation of delay in filing the complaint.  Complaint is liable to be dismissed on the ground of limitation.   

27.            In the light of the ratio laid in the aforementioned decisions and on application of the same to the facts of the case on hand, we  hold  that the complaint is not filed within the period of limitation. Hence, the complaint is liable to be dismissed.

28.            POINTS NOS 2 & 3:     In view of the finding that the complaint is not filed within the period of limitation, the discussion under these points is no more required  or necessary.

POINT NO. 4: In the result the complaint is dismissed. The parties shall bear their own costs.

                                                                        MEMBER

                                                                        MEMBER

                                                                   Dt.07.08.2012

KMK*

APPENDIX OF EVIDENCE

WITNESSES EXAMINED

For complainant                                                  For opposite parties

     NIL                                                                      NIL

EXHIBITS MARKED

For complainant

Ex. A1       Machinery Breakdown Insurance Policy (M. B. Policy) No.

EMB-00000493/000/01 along with premium receipt, dated 30.06.2007

Ex. A2       Machinery Loss of Profits Insurance Policy (MLOP Policy) No. EMB-00000494/000/01 along with premium receipt, dated 30.06.2007

Ex. A3       Final report submitted by the Surveyors to the Opposite Parties regarding breakdown of the machinery of complainant’s company on machinery insurance policy No. EMB-00000493/000/01, dated 31.03.2008

Ex. A4       Final reports submitted by the Surveyors to the Opposite Parties regarding breakdown of the machinery of complainant’s company on machinery insurance policy No. EMB-00000494/000/01, dated 31.03.2008

Ex. A5       Final settlement letter sent by the opposite parties to the complainant’s company, dated 18.08.2008

Ex. A6       Letter sent by the complainant’s company to the opposite parties disputing the claim along with annexure, dated 20.11.2009

Ex. A7       Letter sent by the complainant’s company to the opposite parties enclosing rfsettlement of claim pertaining to the complainant’s company, dated 25.10.2008

Ex. A8       Letter sent by the Opposite parties to the complainant’s company rejecting complainants claim along with postal cover, dated 06.01.2010.

Ex.A9        Statement of estimated loss along with claim form submitted by complainant to the opposite parties, dated 01.11.2007

For opposite parties

NIL

                                                                        MEMBER

                                                                        MEMBER