JUSTICE DEEPA SHARMA, PRESIDING MEMBER

1.       The present First Appeal is filed against the order dated 12.04.2013 of State Consumer Disputes Redressal Commission Gujarat ( in short, the State Commission) passed in Consumer Complaint No. 56 of 2008, whereby the complaint of the respondent was partly allowed.

2.       The admitted facts of the case are that complainant no. 2 is a registered company engaged in the work of installation of different types of water treatment plants in various parts of India.  Kerela Minerals and Metals Limited ( KMML) had entered into an agreement with complainant no.2 for installation of desalination plant located at Shankarmangal Chavara, for its captive use for providing clean drinking water to the people residing in that area.  As per the agreement, complainant no. 2 was to carry out all works relating to desalination plant, namely, its design, basic engineering procurement, manufacturing of design and fabrication, drawing, fabrication, inspection and shop testing, painting, packing and forwarding, supply of parts etc.  This work was on the turn-key basis.  Since the contract awarded to respondent no.2 was of the nature of turn-key, it involved various types of risks and, therefore, complainant approached the appellant for the insurance policies and filled the form.  It purchased two policies, one being Storage cum Erection Insurance Policy in the name of Doshian Exchange and Chemical Industries for the water treatment site at Kollam for sum of Rs.29,25,00,000/- which included the risk of earthquake and the damages that would be caused during the testing period of two months.  In addition to that policy, a policy called Standard Fire and Special Perils in the name of Doshian Limited was also taken wherein the risk of building and building in course of construction and the stocks were insured.  The Standard Fire and Special  Peril policy ( hereinafter referred to as ‘SFSP’) was issued for the period 04.07.2006 to 31.12.2006.

3.       The case of the complainant is that for the purpose of making arrangements of the essential process and intake system  and sump etc for the purpose of desalination plant, the area of water shall have to be covered for a length of 3-4 kilometers, wherein the land of 750 mm from the ground level upto the top of pipe was to be covered and that all these facts were within the knowledge of insurance company.  It is further contended that desalination plant was spread over three kilometers length of the property of the complainant from Kollam where the water was accumulated  and the process for making drinking water through drainage pump and ventilation system was done and on 19.10.2006 upon preparing the concrete mixture, the process of constructing / making the sump flooring was going on when suddenly the water flow came from behind, due to which the embankment (dam) made of earth got broken and as a result, the large scale of water was spread over the entire area.  The mud got stored on the floor of the entire site and it resulted in a huge loss to the construction process and, therefore, it needed reconstruction, as a result the civil work which was going on at the site as well the civil work  which was completed alongwith the materials kept on the spot, got destroyed and the complainant suffered large scale of damages. The insurance company was informed. Immediately, the appellant appointed the Surveyor D Prasad at Kollam, who after visiting the site, prepared a preliminary report and calculated the damages to the tune of Rs.80.00 lakhs.  The insurance company instead of going by the report of first surveyor, appointed another Surveyor Sh. N Velayutham in violation of the guidelines of the Regulatory.  The site was again visited on 21.11.2006.  In order to figure out the damage, the complainant was advised by the surveyor to pump out the accumulated water which was not possible for the respondent no.2 and, thereafter, he measured the depth of the water after asking one employee of the respondent no.2 to enter into the water.  The water came upto the neck of that employee.  He calculated the total loss of Rs.86.00 lakhs. The complainant also supplied all the details  indicating that all the civil work to the tune of Rs. 86,93,000/- was completed and though it was represented that 5% of supervision charges was paid thereon, still  surveyor did not initiate any further proceedings.   Finally, the insurance company repudiated the claim after much delay on the ground that the site where the damages had been caused is situated at a distance of about three kilometres from the site under the agreement and hence it was not included in the insurance policy.  Claim was filed alleging that this act amounts to deficiency in service.

4.       The appellant in its reply had not disputed that damages had been caused to the complainant no.2 due to flood at Kollam.  Their contention is that since the damages had not occurred at the place for which the policy had been taken but it had occurred at a distance of three kilometers from the project site of KMML, the claim was not liable to be paid.

5.       On the basis of pleadings of the parties, the State Commission framed the following issues:

1.       Whether the complainant applicant proves that he is the consumer of the opponent and that under the insurance policy agreement entered into by him with the opponent insurance company, whether he is entitled to claim the damages as prayed for in the complaint on account of the kutcha earthen embankment made at the site of Desalination plant having been broken alongwith the interest thereon?

2.       Whether the opponent proves that since the place of damages caused is away at a distance of three kilometers from the place mentioned in the insurance policy and therefore on account of change of place, under the agreement, the complainant concealed true facts and raised claim and therefore, the complaint is liable to be dismissed with costs?

3.       What order?

6.       The parties led their evidences before the State Commission and after  hearing the arguments and considering the evidence on record, the State Commission vide impugned order dismissed the contentions of the appellant that policy did not cover the site where the damages had occurred due to flood.

7.       This order is impugned before me on the ground that policy Standard Fire and Special Perils Policy included ‘loss at the property of KMML at Sankarmangal Chavara, Kollam, which covered the risk of building in course of construction and the description of the property included ‘building(s), Category I stocks, stock various type of machinery pertaining to insured trade’ and that since the property did not fall in the area of Sankarmangal Chavara and Kollam at a distance of three kilometers, the same was not covered under the policy.

8.       Counsel for complainant no.2 has argued that the very nature of the agreement with KMML, which was relating to desalination of water,  the job of complainant no.2 was to set up and building the plant for conversion of salinated water to drinkable water by desalinating it.  For that purpose, they had to do everything necessary for the said purpose.  It is submitted that this plant also included the water source which was at a distance of 3 km and that at the time when the policy was taken, the insurance company was aware of that fact.  It is submitted that project also included the work at the site from where the water was to be drawn.  It was argued that the plant was spread over upto three kilometer.  Although the names of other villages which were falling within the three kilometer area were not mentioned in the policy but the limit of the plant included the source of water where intake water system was needed to be installed, since without installing the intake water system, water could be brought to the plant for desalination.  It is also argued that even the surveyor had in his report stated that EAR policy was covering the entire work site.  It is also argued that at the time when the proposal form was filled by respondent no.2, the entire work site was insured and that the proposal form has not been produced by the insurance company intentionally. 

9.       I have given my thoughtful consideration to the rival contentions and perused the various documents filed alongwith the present appeal.  The only ground on which the claim was rejected by the appellant is that site where the loss had occurred was not insured.  The entire work site including the area where the losses had occurred, is spread over to area of three kilometres length of the property of the complainant from Kollam and there is no dispute that area was also part of the project which was awarded to respondent no.2 by KMML i.e. for desalintation of work.  The water was also to be drawn from that part of the area and to be brought on the place where machinery for its desalination was to be fixed. Without making provision for carrying the water to the place where desalination is to be done, the project could not have been completed by respondent no.2. The insurance had been taken by respondent no.2 for desalination plant of KMML which included construction and erection work at site for the entire area of the said plant and that entire area of the site is spread to over three kilometres area.   The insurance was not of any particular building but the insurance was given for the work which under the contract had been given to the respondent no.2 for completion.  The argument of the learned counsel for the appellant that site was not covered under the policy is of no fallacious.  Even their own surveyor had so admitted in its report that this three kilometer area is part of the entire site which was given to the respondent no.2 for establishing the desalination plant.  Since the appellant covered the risk relating to the building in the course of construction, the civil work which was already undertaken and completed but the construction suffered damages due to flood was covered under the policy as a risk factor.  The State Commission has rightly allowed the complaint.  The ground taken by the appellant is meritless.

10.     The next argument of counsel for the appellant is that  Supreme Court has in various cases held that company cannot be said to have suffered mental agony and, therefore, compensation awarded by the State Commission towards mental agony is wrong exercise of jurisdiction and order of State  Commission to this effect needs to be set aside. Counsel for respondent no.2 has argued that amount of Rs.1.00 lakh is granted not only towards the mental agony but also towards undue delay.  It is argued that the appellant had not acted promptly and had wrongly rejected the claim, which had caused loss and, therefore, respondent no.2 be compensated for such delay.  The appeal is partly allowed.

ORDER

(i)      The Appellant is directed to pay to complainant / respondent no.2 i.e. Doshian Limited a sum of Rs.80,00,000/- ( rupees eighty lakhs only ) together with interest @ 9% p.a. from 01.12.2006 till realization.

(ii)      The appellant shall pay a sum of Rs.25,000/- ( rupees twenty five thousand only) towards delay and cost of litigation;

(iii)     The awarded amount shall be paid within 30 days from this order.