AVM J. RAJENDRA, AVSM, VSM (RETD.) MEMBER

1.      The present First Appeal has been filed under Section 19 of the Consumer Protection Act, 1986 (hereinafter referred to as “the Act”) against the Order dated 16.04.2019 passed by the State Consumer Disputes Redressal Commission, Delhi, (hereinafter to be referred as “the State Commission”), in Consumer Complaint No. 267 of 2011, wherein the Complaint filed by the Complainant (Respondent herein) was allowed.

2.      For the sake of Convenience, the parties in the present Appeal being referred to as mentioned in the Complaint before the State Commission. The Complainant “M/s. Forech India Ltd.” is a Company engaged in business/trade of manufacturing and sale of rubber conveyor belts and other rubber products. While the "IFFCO Tokio General Insurance Co. Ltd.” is referred to as the Opposite Party/ Insurer (OP in short) in this matter.

3.      Brief relevant facts of the case as per the Complainant are that he Complainant acquired two machines from Leyland Rubber Component Ltd, Lancashire (UK), for £120,000 (pounds) and insured the machinery through the OP/insurer under a “Marine Cargo Policy” with a sum assured of Rs.1,90,00,000. The policy covered the goods during transportation from the UK warehouse to the Complainant's facility in Rai, Sonipat, Haryana, via sea, rail or road. The vendor, namely Leyland Rubber Component Ltd., dispatched goods in 9 containers under a single liner Bill of Lading dated 23.06.2007, reached the Inland Container Depot, Tughlakabad on various dates as stated below:

4.      Due to the single Bill of Lading, all nine containers had to be cleared together, which occurred on 26.10.2007. While transporting, two trucks, HR38P1709 (carrying container TRIU 0782577) and HR38P1805 (carrying container AMFU8761735), met with accidents on 27/28.10.2007 near Red Fort, Delhi, and on 28.10.2007 in Sonipat, respectively. The damaged goods were reported to the police and the OP appointed M/s. ILAS Consultant Pvt. Ltd. to assess the loss. Repairs, costing ₹17,56,080 were undertaken by vendors M/s. Padam Drive and Modern Engineering Works, and the bills were sent to the OP for reimbursement vide letter dated 11.12.2008. However, the OP repudiated the claim, stating that the goods arrived at Mundhra Port on 15.07.2007, which, according to them, exceeded the 60-day coverage period from arrival at the destination port.

5.      The Complainant contested the repudiation, highlighting that the last container reached ICD Tughlakabad on 16.10.2007, making the 60-day period applicable from that date. Despite legal notice dated 16.07.2011, the OP has not made any payment to the Complainant. Being aggrieved by the repudiation of Marine Cargo insurance claim, the Complainant filed a consumer complaint before the State Commission seeking as under: -

(i) Produce the survey report of the surveyor for perusal of the Hon’ble Commission and to provide a copy thereof  to the complainant company.

(ii) Pay an amount of Rs.28,97,530/- along with interest pendentilite and future thereon @12% p.a. may be declared payable to the complainant by the OP and the OP may be directed to the said amount to the complainant Company within 30 days of the order of this Hon’ble Commission.

(iii) Cost of the complainant may be awarded in favour of the complainant Company; and

(iv) Pass such further order or orders as may deem fit and proper in the circumstances of the case”

6.      In the reply, the OP resisted the complaint both on technical grounds as well as on merits and contended that the complaint was time barred and the claim also fell outside the coverage scope of the insurance. The OP alleged that the Complainant had violated several terms and conditions of the insurance policy. Most crucially, they failed to disclose that the machinery purchased was second-hand. According to the OP/Insurer, this non-disclosure constituted the suppression of material facts, rendering the claim invalid and non-payable.        

7.      The State Commission partly allowed the complaint with the following Order: -

“15. Having regard to the discussion done and the legal position explained the complaint succeeds and the repudiation letter issued by the OP is set aside. Accordingly, the OPs. are directed to approve the claim preferred by the complainant. The OP is directed to pay the claim amount within two months from the date of receipt of the copy of this order.”

8.      Being aggrieved by the impugned order, the Appellant filed this present Appeal no. 1037 of 2019 with the following prayer:

a. Allow the present First Appeal.

b. Set aside the order of the Ld. State Consumer Dispute Redressal Commission, Delhi dated 16.04.2019 passed in C.C. No. 267 of 2011 and allow the Appeal of the Appellant.

c. Pass any further order(s) as this Hon’ble Court may deem necessary.

9.      In the Appeal, the Appellant mainly raised the following issues:

1.  The State Commission failed to examine the objections of the Appellant and did not consider correct starting date for counting 60 days and determined that these 60 days would be counted from the date the containers were received, without providing any reason for this decision.
2.  The Appellant contended that the contract terms were clear and unambiguous. Clauses 8.1.1, 8.1.2, and 8.1.3 are distinct and need no interpretation. The clause 8.1.03, which stated "whichever shall first occur," was not considered in the State Commission's order.
3.  In the legal notice the respondent claimed Rs. 17,56,080 and in the complaint the claim was Rs. 28,97,530. Despite this, the State Commission mechanically directed the appellant to pay the claim without proper consideration.
4.  The complaint was not maintainable due to amendment of Section 2(1)(d)(ii) of the Act. The Harsolia Motors case, relied upon by the State Commission was under challenge before the Supreme Court and stayed.
5.  The State Commission ignored surveyor's observations, indicating that the insured party did not provide necessary information, leading to incomplete assessment of the loss.

10.    Upon the notice on the memo of Appeal, the Respondent / Complainant has not filed any reply/objections. Nonetheless, the Respondent asserted that the Appellant rejected the original insurance claim for repair by the Respondent Company to the tune of Rs.17,56,080 wrongly, illegally, and arbitrarily, on the wrongful pretext and wrong interpretation of clause 8.1.3 of the policy which amounts to deficiency in service and unfair trade practice.

11.    In his arguments, the learned counsel for the Appellant/OP reiterated the grounds of Appeal and argued that the Respondent does not qualify as a consumer under Section 2(1)(d) of the Act because the vessel was used for commercial purposes, specifically to transport the respondent's shipment from Lancashire Port to Mundra Port. Further, under Clauses 8.1.1, 8.1.2, and 8.1.3 of the insurance policy clearly define the period of coverage. According to these clauses, insurance begins when goods leave the warehouse and ends 60 days after completion of unloading at the final port of discharge, which in this case is Mundra. As the vessel arrived at Mundra on 15.07.2007, the Respondent's claim on 26.10.2007 exceeded the 60-day limit. Thus, the contract is amply clear and there is no ambiguity in interpretation of the clause. He further argued that Respondent intentionally withheld crucial information about the machines, revealing in the surveyor's report that they were from 1969-70 and had been used. The surveyor also pointed that the Respondent's Legal Notice claimed Rs. 17,56,080, whereas the consumer complaint cited Rs. 28,97,530. Despite these inconsistencies and the surveyor's observation that the respondent did not allow an assessment of repair estimates or parts examination, the impugned order mechanically approved the claim without due consideration. The surveyor's report indicated a significant alteration in parts, implying that entirely new fabricated parts had been used, further complicating the matter. He relied upon the following judgment in support of his arguments: -

a) Economic Transport Organization, Delhi v. Charan Spinning Mills Private Ltd., (2010) 4 SCC 114 in Para-52.

b) BHL Industries v. Export Credit Guarantee Corporation Ltd., (2015) 9 SCC 414 at Para-31 and 35.

c) Sikka Papers Limited v. National Insurance Company Limited and Ors., (2009) 7 SCC 777 at Para-21.

d) Ashish Kumar Jaiswal v. ICICI Lombard General Insurance Ltd. & others. 2017 (1) CPJ 529 NC at Para 13.

e) Satwant Kaur Sandhu v. New India Assurance Co. Ltd., (2009) 8 SCC 316 at Para-18.

12.    On the other hand, the learned Counsel for the Respondent reiterated the facts stated in the complaint and the Affidavit of evidence filed before the State Commission. He asserted that the State Commission directed the Appellant (OP/Insurer) to settle the Respondent's claim within two months from the Order dated 16.04.2019. According to established legal principles, when there are two possible interpretations of the terms of an insurance policy, the interpretation favoring the insured party should be adopted, not the one favoring the insurer. He cited the following judgments of Hon’ble Supreme Court in support his Arguments:-

a) Skandia Insurance Co. Ltd. Vs. Kokilaben Chandravadan & Ors., (1987) 2 SCC 654.

b) Shashi Gupta vs LIC of India (1995) 1 SCC 754.

c) LIC vs Raj Kumar Rajgharia & Ors. (1999) 3 SCC 465;

d) United India Insurance Co. Ltd. Vs Pushpalaya Drifters (2004) 3 SCC 694.

13.    We have examined the pleadings and associated documents placed on record and rendered thoughtful consideration to the arguments advanced by the learned Counsels for both the Parties.

14.  The primary issue in this case appears to be the dispute in interpretation of the scope and terms of the insurance policy for transportation of goods from Lancashire Port to Mundra Port and thereafter to the final destination.

15.    As regards lapse of insurance cover post 60 days, the Appellant asserted that the insurance began when goods left the warehouse and ended 60 days after completion of unloading at the final port of discharge, which in this case is Mundra, and that the vessel arrived at Mundra on 15.07.2007. Thus, the Respondent's claim on 26.10.2007 exceeded the 60-day limit. As regards the issue from when the 60 days shall count, the Appellant contended that the count of 60 days will commence from 23.06.2007. As the accident of the truck conveying the container occasioned on 27-28.10.2007, the policy was not in force as 60 days have since lapsed. Thus, the claim is not payable. On the other hand, the complainant asserted that the period of 60 days shall commence from the date cleared by customs i.e. 26.10.2007. Therefore, as on the date of the accident of the trucks the policy was subsisting. Therefore, the claim is liable to be paid.

16.    In this regard perusal of the Insurance Policy, including Claude-8 of the same makes it evident that operation of the policy after the lapse of 60 days is prohibited. However, the commencement of the count of 60 days would be from the date the containers were received. Thus, the 60 have not lapsed as on the date of the accident and, therefore, the Appellants are liable under the contract to pay the claim due.

17.    As regards the contention that the crucial input pertaining to used nature of the machine insured was not notified to the OPs, it is undisputed that the documentation in respect of the contents of the containers has been duly notified by the Complainant to the Insurer and all relevant authorities. At no stage it has been alleged that any information which is not factual was supplied by the Insured. There is nothing on record to establish that any such information was sought from the Insured and the same was denied to the Appellant. In these circumstances, it cannot be held that there has been any violation of the terms of policy by the Complainant in this regard.    

18.    It is also clear that the terms and conditions of the subject insurance policy were drafted by the Appellant insurance company. Therefore, if the terms of the policy are vague and lead to two or more interpretations, the benefit of such doubt should go in favour of the insured and not the insurance company. It is settled position of law in catena of judgements of the Hon'ble Supreme Court that in situations where two or more interpretations of the terms of policy are possible, the interpretation which is in favour of the insured is to be accepted.

19.    In terms of the Surveyor Report dated 02.03.2009, the loss claimed by the consignee was Rs.17,56,080 towards the repair cost of the 11D Banbury Mixer & 2 Calendar (Part of Roller Head) as per the details of the bills mentioned and the salvage value of the scrap is Rs.22,000. Therefore, the net claim is Rs.17,34,080.  

20.    In view of the foregoing deliberations and on careful perusal of material on record, the present F.A. No. 1037 of 2019 is disposed of, with modification of the Order of the learned State Commission dated 16.04.2019 as follows:

ORDER

21.    The Appellant/Opposite Party is directed to pay the Complainant/ Respondent Rs.17,34,080 along with interest thereon @ 8% from 15.07.2019 i.e two months from the date of receipt of order of the learned State Commission, within a period of one month from the date of this Order. In the event of delay beyond one month, the interest applicable for such additional period shall be @ 12% per annum.

22.    There shall be no order as to costs. All pending Applications, if any, stand disposed of accordingly. The Registry is directed to release the statutory deposit amount, if any due, in favour of the Appellant after compliance with this order.