BEFORE THE A.P STATE CONSUMER DISPUTES REDRESSAL COMMISSION: HYDERABAD
C.C.NO. 46 OF 2008
Between:
M/s Kasargod Power Corporation Ltd.,
6-3-1109/A/1, III Floor, Nava Bharat Chambers
Raj Bhavan Road, Somajiguda,
Hyderabad-82 rep. by its General Manager(Operations)
Complainant
A N D
M/s The Oriental Insurance Company Ltd.,
City Branch Office-VII, Jain Estate
Parklane, Secunderabad-500 003
Rep. by its Branch Manager
Opposite party
C.C.NO. 47 OF 2008
Between:
M/s Kasargod Power Corporation Ltd.,
6-3-1109/A/1, III Floor, Nava Bharat Chambers
Raj Bhavan Road, Somajiguda,
Hyderabad-82 rep. by its General Manager(Operations)
Complainant
A N D
M/s The Oriental Insurance Company Ltd.,
City Branch Office-VII, Jain Estate
Parklane, Secunderabad-500 003
rep. by its Branch Manager Opposite party
Counsel for the Complainant Sri V.Gourisankara Rao
Counsel for the Opposite party Sri Bhaskar Poluri
QUORUM:
SRI SYED ABDULLAH, HON’BLE MEMBER,
AND
SRI R.LAXMINARASIMHA RAO, HON’BLE MEMBER
WEDNESDAY, THE TWELFTH DAY OF MAY,
TWO THOUSAND TEN.
Oral Order: (Per Sri R.Laxminarasimha Rao, Hon’ble Member)
The complaints are filed u/s 17 of C.P. Act seeking direction to the opposite party, M/s oriental Insurance Company Limited Secunderabad to pay a sum of Rs.69,91,919/- and Rs.68,89,623/- with interest @ 18% per annum, an amount of Rs.one lakh towards compensation and Rs.25,000/- towards costs. As the facts and circumstances and the grounds of repudiation of the claims are similar in nature, both the complaints are being disposed of by a common order. C.C.No.46 of 2008 is taken as the lead case for the sake of discussion.
The averments of the complaint are that the complainant, a public limited company was incorporated under Indian Companies Act with the main objective to install power projects to generate electricity. The complainant installed one of their projects at Bare Village, Kasargod District Kerala. The complainant has got insured the plant and machinery accessories and electrical, furniture, fixtures and fittings etc with the opposite party vide industrial all risks insurance policy bearing No.431800/IAR/1001 for Rs.103,27,89,500/- for the period from 21.4.2004 to 20.4.2005. The complainant has paid premium an amount of Rs.36,53,238/-. The policy was renewed periodically for the said insurance amount. The complainant entered into operation and maintenance agreement with M/s Caterpillar India Private Limited Chennai for the purpose of maintenance of the power project as plant operator. M/s Caterpillar India Private Limited is the manufacturer of the plant and machinery. The policy was renewed for the third year from 21.4.2006 to 20.4.2007 for a sum of Rs.100,51,29,500/-. The complainant paid an amount of Rs.31,74,059/- towards premium for material damage and Rs.3,70,854/- towards business interruptions. On 5.3.2007 there was a breakdown in the plant and machinery. B2 cylinder head and B Bank Turbo Charger got damaged. The complainant submitted claim which was registered as claim no.F/2007/08 under IAR policy no.IAR/2007/29. The value of the parts damaged and the value of the spare parts required was estimated by the complainant at Rs.69,91,919/-.
M/s Caterpillar Commercial Private Limited submitted a report stating that the damaged spares were required. On 26.4.2007 the complainant furnished all the necessary documents to the opposite party. On 12.9.2007 the complainant submitted representation to the opposite party to settle the claim along with the earlier claim pertaining to breakdown dated 28.11.2006. The IAR policy was renewed for a further period of 12 months from 21.4.2007 to 20.4.2008 for the amount of Rs.101,51,29,500/-. The opposite party issued policy bearing No.431301/IAR/2008/40. Another breakdown of the plant occurred on 17.5.2007. A-1 Cylinder and A Bank Turbo Charger got damaged for which a separate claim was lodged and registered by the opposite party as claim no.F/2008/02 under IAR policy No.IAR/2008/40. The opposite party has not settled the claim. On 24.10.2007 the complainant submitted another representation to settle the claim. On 30.1.2007, 11.3.2008 and 22.4.2008 the complainant had sent reminders to the opposite party to settle the claim.
The opposite party repudiated the claim no.F/2007/08 and claim no.F/2008/2002 on the ground that when the first incident happened on 5.3.2007 the O&M Operator M/s Caterpillar India Private Limited have not alerted themselves and not taken preventive steps for the incidental loss on 17 .5.2007 which was construed gross negligence on the part of O&M operator amounting to implied infringement of exclusion A excluded clauses 2(i)of the policy. The opposite party held the O&M Operator M/s Caterpillar India Pvt. Ltd., responsible to make good the loss in view of the provision 10.2 u/s 10 of Operations and Maintenance Agreement. The opposite party has assigned the reason that insurable assets were declared greatly in order to avail benefit of low premium and benefits of the IAR policy as also higher claim payments. The complainant entered into operation and maintenance agreement with M/s Caterpillar India Pvt. Ltd., by paying huge consideration. The operator was prompt and followed protocol and procedure as per the original equipment manufacturers manuals. There was negligence on the part of the operator. On 9.3.2007 the opposite party paid Rs.42,49,536/- towards the claim pertaining to breakdown date 28.11.2006. The opposite party refused to pay the claim amount and furnish copy of the surveyor’s report and thereby committed deficiency in service. Hence, the complaint.
The opposite party has filed counter denying the averments of the complaint. The opposite party being a state within the meaning of article 12 of the Constitution has the obligation protecting the public exchequer and the opposite party oblivious of its obligation has filed the ill drafted counter and was careless enough to adduce any evidence.
The General Manager, Operations of the complainant company P.Satyanarayna Raju, has filed his affidavit and got marked Exs.A1 to A17. A representation dated 5.6.2008 has been marked twice as Ex.A12 and A17. Therefore, the number of exhibits is corrected as Exs.A1 to A17.
Ex.A1 is the Industrial All Risks Policy No.431301/IAR/2007/29 for the period 21.4.2006 to 20.4.2007. Ex.A2 is the claim form relating to breakdown of the machinery on 5.3.2007. Ex.A3 is the claim bill for Rs.69,91,919/-. Exs. A4 and A5 are the Failure Report. Ex.A6 is the letter dated 7.3.2007 issued by M/s Catarpillar Commercial Private Limited. Ex.A7 is the Representation dated 12.9.2007 of the complainant company to the opposite party. Ex.A8 is the Representation dated 24.10.2007 of the complainant company to the opposite party. Ex.A9 is the Representation dated 30.1.2008 of the complainant company to the opposite party. Ex.10 is the Representation dated 11.3.2008 of the complainant company to the opposite party. Ex.11 is the Representation dated 22.4.2008 of the complainant company to the opposite party. Ex.A12 is the representation dated 5.6.2008. Ex.A13 is the repudiation letter dated 12.5.2008 in respect of claim no.F/2007/08 and F/2008/02. Ex.A14 is the representation dated 20.6.2008. Ex.A15 is the representation dated 7.7.2008. Ex.A16 is the repudiation letter dated 12.5.2008 in respect of claim no.F/2007/29. Ex.A17 is the authorization issued in favour of the complainant.
The points for consideration are:
1) Whether the complainant is entitled to file the complaint?
2) Whether there was deficiency in service on the part of the opposite parties?
3) To what relief?
POINTS NO.1 AND 2 In view of the interdependence of discussion on these two points, they have been taken together. The opposite party has denied all the averments of the complaint. Hence, the onus of proof is on the complaint to prove the averments of the complaint. The complainant is a company. Whose main object is to install power projects for generation of electricity. The complainant had installed one such power project at their village Kasargod District in the state of Kerala. The complainant has stated that it had entered into operation and maintenance agreement with M/s Caterpillar India Pvt. Ltd., Chennai. The complainant has stated that it had been obtaining Industrial All Risks Insurance Policy from 21.4.2004. The IAR bearing No. 431800/IAR/1001 was issued for the sum assured Rs.103,27,89,500/- for the period from 21.4.2004 to 20.4.2005. The IAR policy bearing 431301/IAR/2007/29 was issued for the sum assured of Rs.100,51,29,500/- for the period from 21.4.2006 to 20.4.2007. The IAR policy issued was the policy NO.431301/IAR/2008/40 for the sum assured Rs.101,51,29,500/- for the period from 21.4.2007 to 20.4.2008. Thus though the complainant has stated the insurance policy has been renewed from time to time regularly, the different periods commencing from 2004 to 2008 with a break for the year 2005 does indicate that the insurance policy was not renewed from time to time.
The complainant has lodged claim under Ex.A2 in respect of the break down of machinery on 5.3.2007. Two separate claims were said to have been lodged in respect of breakdown in the plant and machinery wherein B2 cylinder Head and B Bank Turbo Charger got damaged on 5.3.2007 and A1 cylinder and A Bank Turbo charger got damaged on 17.5.2007, a claim form, Ex.A2 is placed on record. The claim for Rs.69,91,919/- is relating to the claim No.F/2007/08 under IAR Policy No.IAR/2007/29 and the claim for Rs.68,89,623/- is in regard to the claim No. no.F/2008/02 under IAR policy No.431301/IAR/2008/40. The opposite party has repudiated both the claims on 12.5.2008 by issuing Ex.A13, repudiation letter on the grounds that when the first incident happened on 5.3.2007, the O&M Operation M/s Caterpillar India Pvt. Ltd., had not taken any preventive steps for possible avoidance of identical loss that occurred on 17.5.2007 and as such it was so occurred on account of gross negligence on the part of the operation and maintenance operator. The other grounds of the repudiation of the claim are that the same O&M Operation was involved in the spares procurement and effecting repairs as a result of which key information on the gross negligence was not brought out fully which amounts to implied infringement of the exclusionary clause of the insurance policy.
The opposite party had assigned the reason that the O&M Operator is responsible to make good the loss vide provision 10.2 u/s 10 of Indemnity of Operation and Maintenance Agreement for the reason of gross negligence on their part. Finally, it was concluded in the repudiation letter that the complainant had issued letter dated 19.4.2005 and similar other letters declaring the value of the insurable assets as above Rs.100 crores which is belied by the annual reports for the relevant period. The complainant had declared the value of the assets excessively than the actual value in order to avail the benefits available under IAR policy which according to the opposite party are no.1 low premium for machinery break down cover, 2. higher claim payments. As there was misrepresentation of the facts by the complainant in breach of condition no.1 of the policy, the two claims were held not tenable.
The complainant, in all has lodged three claims for the three IAR policies obtained from the opposite party. Insofar as the first claim relating to the break down that occurred on 28.11.2006, this complaint is not filed claiming any amount thereunder. The other two claims, as aforesaid were repudiated for the reasons assigned in Ex.A13. The O&M Operator has assessed the loss and issued failure report Ex.A4, opining that the smoke was noticed from B2 cylinder and heavy load fluctuation and high exhaust gas temperature at all cylinder was observed. M/s Caterpillar, KPCL Pvt. Ltd., has prepared the list of damaged parts. The list was annexed to the failure report submitted by M/s Caterpillar Pvt., ltd. The letter dated 7.3.2007 Ex.A6 issued by M/s Caterpillar Commercial Pvt. Ltd., Bangalore supports the ground of repudiation that the complainant has replaced the parts drawn from their inventory. It does support the ground of repudiation that the same O&M Operator was involved in the spare procurement and effecting repair because of which key information on gross negligence was not fully brought out.
The opposite party has relied upon the exclusionary clause of the insurance policy Ex.A1. The exclusions in para 2 of the insurance policy read as under:
A EXCLUDED CLAUSES
1. This policy does not cover damage to the property insured caused by’
i) Faulty or defective design materials are workmanship inherent
vice, latent defect, gradual deterioration, deformation or
distortion or wear and tear
ii. Interruption of the water supply, gas, electricity or fuel
systems or failure of the affluent disposal systems to and
from the premises
Unless damage by a cause not excluded in the policy ensues and then the insurer shall be liable only for such ensuing Damage.
i. Collapse or cracking of buildings
ii. Corrosion, rust, extremes or changes in temperature, dampness, dryness, wet or dry rot fungus, shrinkage, evaporation, loss of weight, pollution, contamination change in colour, flavour, texture or finish action of light vemrmin insects marring or scratching.
iii. Unless such loss is caused directly by Damage to the property, insured or to premises containing such property by a cause not excluded in the policy
i. larceny
ii. acts of fraud dishonesty
iii. disappearance unexplained or inventory shortage misfillling or misplacing of information shortage in supply or delivery of materials or shortage due to clerical of accounting error.
i. Coastal or over erosion
ii. Normal settlement or bedding down of new structures
2. Damage caused by or arising from the date of complaint
i. any willful act or willful negligence on the part of the insured or any person acting on his behalf
ii. cessation of work delay of loss of market or any other consequential or indirect loss of any kind or description whatsoever.
The opposite part has relied upon the General Conditions of the insurance policy in support of the repudiation of the claim. The general conditions material to the present case are extracted hereunder:
GENERAL CONDITIONS
1. This policy shall be voidable in the event of misrepresentation, misdescription, non-disclosure of any material particular.
3. Under any of the following circumstances the insurance
ceases to attach as regards the property affected unless
the insured, before the occurrence of any loss or damages
obtains the sanction of the company signified by
endorsement upon the policy by or on behalf of the
company.
The complainant has not denied that the complainant had declared excess value in order to avail the benefits available under IAR policy. The benefits available as stated by the opposite party are, low premium for machinery breakdown and higher claim payments. The over declaration was stated to have been made by the complainant according to the opposite party in support of which the opposite party relies upon the gross block available in annual report wherein it was said to have been mentioned that Rs.10 crores for building and Rs.25 crores towards stocks. Basing on the entries of annual report the opposite party had repudiated the claim. The complainant has not denied the fact of misrepresentation and mis-description as also non-disclosure of material particulars which the opposite party has made the basis of repudiation in its repudiation letter. The complainant submitted that the official of the opposite party had inspected the plant and renewed the insurance policies. We have already held that it is not the renewal of the insurance policy as there was a break in obtaining the policy for the year 2005-2006. it is pertinent to note that the opposite party has not denied that it has stated the value of the building and machinery in excess of actual value. In other words the opposite party has repudiated the claim on the ground that the complainant has misrepresented the value of the machinery and the building and stated excessive amount than what was mentioned in the annual report. In the circumstances we do not find any arbitrary element in repudiation of the claim by the opposite party.
The complainant has filed the complaint basing on the industrial all risks policy, Ex.A1 issued by the opposite party. The complainant has issued letter dated 20.6.2008 requesting the opposite party to appoint an arbitrator. The request for the appointment of arbitrator was made invoking the arbitration clause under the policy condition no.12. This arbitration clause was invoked by the complainant relating to the claim no.F/2007/29.
The insurance policy contains a clause that in case of any difference of opinion between the parties as to the quantum to be paid under the policy, all the questions in the matter to be referred to the decision of an arbitrator. The complainant has invoked the arbitration proceedings. Thereafter the complainant has filed this complaint without further proceeding with the arbitration proceedings. There has been no satisfactory explanation forthcoming from the complainant in regard to approaching the different fora for the very same purpose of the amount claimed under the insurance policy. Therefore, in regard to the claim No.F/2007/29, the arbitrator alone is entitled subject to the provisions of the Arbitration and Reconciliation Act, 1996 and also in accordance with law including the Limitation Act. It is also pertinent to note that the complainant has received the amount under the claim form F/2007/29 towards full and final satisfaction of the claim and as such it cannot re-agitate the matter before the arbitrator or this Commission.
Insofar as the claim No.F/2007/08 and F/2007/02 are concerned, we have already held that the opposite party has rightly repudiated the claim of the complainant. The opposite party has misrepresented the fact relating to the value of the building and machinery, plant. The contract of insurance is based on the principle of ubberima fide whereunder both parties to the contract have to disclose the material particulars which form the basis or the issuance of the insurance policy The complainant not only misrepresented but also gave a mis-description the value of the plant and the building in order to obtain the benefits mentioned in repudiation letter Ex.A13. The non-disclosure or mis-description of the facts particularly relating to the subject matter of the insurance policy goes to root of the matter and consequently lead to the inference that the contract of insurance is rendered void. In the circumstances the complainant company has not established any deficiency in service on the part of the opposite party. Once no deficiency in service is established, the complainant cannot touch the jurisdiction of the Consumer Forum by invoking the provisions of the Consumer Protection Act. As such the complaint is devoid of any substance and liable to be dismissed.
POINT NO.3 in the result the complaints C.C.No.46 of 2008 and C.C.No.47 of 2008 are dismissed. There shall be no order as to costs.
Sd/-
MEMBER
Sd/-
MEMBER
Dt.12.05.2010
KMK*
APPENDIX OF EVIDENCE
WITNESSES EXAMINED FOR
COMPLAINANTS OPPOSITE PARTIES
None None
DOCUMENTS MARKED
For complainants in C.C.No.46 of 2008
Ex.A1 Industrial All Risks Policy
Ex.A2 Claim form relating to breakdown of the
machinery on 5.3.2007.
Ex.A3 Claim bill for Rs.69,91,919/-.
Exs. A4
and A5 Failure Reports.
Ex.A6 Letter dated 7.3.2007 issued by M/s Catarpillar Commercial
Private Limited.
Ex.A7 Representation dated 12.9.2007
Ex.A8 Representation dated 24.10.2007
Ex.A9 Representation dated 30.1.2008
Ex.10 Representation dated 11.3.2008
Ex.11 Representation dated 22.4.2008
Ex.A12 Representation dated 5.6.2008.
Ex.A13 Repudiation letter dated 12.5.2008
x.A14 Representation dated 20.6.2008.
Ex.A15 Representation dated 7.7.2008.
Ex.A16 Repudiation letter dated 12.5.2008
Ex.A17 Authorization of the Board of Directors dt.15.7.2008
For opposite parties
NIL
For complainants in C.C.No.47 of 2008
Ex.A1 Industrial All Risks Policy
Ex.A2 Claim form relating to breakdown of the
machinery on 5.3.2007.
Ex.A3 Claim bill for Rs.69,91,919/-.
Exs. A4
and A5 Failure Reports.
Ex.A6 Letter dated 7.3.2007 issued by M/s Catarpillar Commercial
Private Limited.
Ex.A7 Representation dated 12.9.2007
Ex.A8 Representation dated 24.10.2007
Ex.A9 Representation dated 30.1.2008
Ex.10 Representation dated 11.3.2008
Ex.11 Representation dated 22.4.2008
Ex.A12 Representation dated 5.6.2008.
Ex.A13 Repudiation letter dated 12.5.2008
x.A14 Representation dated 20.6.2008.
Ex.A15 Representation dated 7.7.2008.
Ex.A16 Repudiation letter dated 12.5.2008
Ex.A17 Representation dated 5.6.2008
Ex.A18 Authorization of the Board of Directors dt.15.7.2008
For opposite parties
NIL
MEMBER
MEMBER
