1.       The present Complaint is filed under Section 21(a)(1) of the Consumer Protection Act, 1986.

2.       Case of the Complainant is that it is a Company engaged in the business of manufacturing of cement. Opposite Party No.1 is Insurance Company having its registered Office at Oriental House, A-25/27, Asaf Ali Road, New Delhi-110002 and Opposite Parties Nos.2 & 3 are Regional and Branch Offices respectively of Opposite Party No.1. The Complainant installed heavy Roller Press for crushing/grinding raw material for manufacturing cement. In order to insure the said rollers, the Complainants took “Industrial All Risk Policy No.242103/11/2007/00059” covering the risk of fire, machinery break down and FLOP (Fire Loss of Profit). The sum insured was Rs.114,87,28,000/- and the Policy was valid from 26.05.2006 to 25.05.2007.  

3.       On 22.05.2007, Engineer Incharge of the Complainant observed abnormal sound from the fixed roller. Thereafter, the plant was immediately stopped for inspection and during inspection set material (clinker powder) was seen on the non-drive end side of fixed roller and water leakage was also seen from the sealed area. After cleaning the area, cracks were seen on the shaft surface through which water was leaking. On further inspection, circumferential crack was seen, which was visible with naked eyes, confirming the crack through the shaft wall. On 22.05.2007 itself, the Complainant intimated Opposite Party No.2 over phone and the Complainant was advised to lodge their claim. The Complainant lodged claim, vide letter dated 22.05.2007, with Opposite Party No.2 and also sent a copy to Opposite Party No.3.  In the said letter, the Complainant requested for appointment of a Surveyor, for assessment of loss. Opposite Party No.1 appointed M/s Insurance Technical Services, as Surveyors for conducting survey and assessment of loss, who visited the factory site on 25.05.2007 and 26.05.2007 and, vide letter dated 26.05.2007, asked the Complainant to furnish certain documents/information which the Complainant had  already provided. The Complainant, however, again provided the documents/information sought by the Surveyor. The Complainant, vide letter dated 20.10.2008, followed by reminder dated 25.03.2009, requested the Opposite Parties to settle the claim expeditiously. The Surveyor, vide email dated 03.05.2009, again sought further documents which were supplied by the Complainant, vide letter dated 07.05.2009. The Surveyor, vide emails dated 07.02.2011 and 04.10.2011, again asked for more documents, which were supplied by the Complainant, with replies dated 04.03.2011 and 15.10.2011 respectively. To the utter shock of the Complainant, letter dated 19.10.2012 was received from Opposite Party No.2 stating that the claim of the Complainant was repudiated on the ground that break down took place due to deterioration over a period of time. Alleging deficiency in service on the part of the Opposite Parties, the Complainant filed the instant Consumer Complaint with the following prayer: -

“a)        This Hon’ble Commission may be pleased to admit this Complaint.

b)          Hold that there was deficiency in service on the part of the Opposite Parties in providing services.

c)           Direct the Opposite Parties to pay an amount of Rupees 2,46,54,377/- being the cost of the new roller (less salvage) alongwith interest pendentelite at the rate of 18% per annum from the date of the loss (22.05.2007) till the date of payment to the Complainant.

d)          Direct the Opposite Parties to the Complainant the cost of the instant litigation.

e)           Direct the Opposite Parties to pay to the Complainant damages to the tune of Rs.50,00,000/-.

 f)          Direct the Opposite Parties to pay the Complainant a sum of Rupees 25,00,000/- for harassment and mental agony.

g)          Impose punitive damages to the Opposite Parties for fraudulently and maliciously refusing to honour the Complainant’s legitimate insurance claim and providing grossly deficient services; and

h)          Pass such other or further order/orders as this Hon’ble Commission may deem fit and proper in the facts and circumstances of the case.”

4.       The Opposite Parties contested the Complaint by filing the written statement on the ground that the Complainant was not a “Consumer” under Section 2 (1) (d) of the Consumer Protection Act, 1986 as they were engaged in commercial activity. The Complainant had not disclosed the material facts and played fraud and the Complaint was not maintainable.

5.       On merits, it was stated that on receiving the intimation of roller break down, the Opposite Parties appointed Surveyor who visited the factory between 25^th to 27^th May, 2007 and discussed the issues with the technical and insurance staff of the Complainant. The Surveyor observed that the moving roller press failed by fatigue mechanism. It was also observed that the roller press did not break down due to sudden and unforeseen condition but it was due to phenomenon being developed over a period of time. Gradual deterioration, deformation or distortion or wear and tear was excluded from the Policy. On the basis of the Survey Report dated 26.06.2012, the Insurance Company, vide letter dated 30.08.2013, repudiated the claim being not tenable. It was further stated that the Complainant tried to cheat the Insurance Company by suppressing material and vital facts. Hence, the Complaint was not maintainable and liable to be dismissed.

6.       Heard the Learned Counsel for the Complainant and carefully perused the record. Learned Counsel for the Complainant submitted that the claim of the Complainant was repudiated on the basis of the Survey Report. The Survey Report in itself was not an independent report and it was based on an inconclusive report of National Metallurgical Laboratory (NML), Jamshedpur dated 10.01.2008, which did not examine the subject Roller Press and gave the report relating to a different Roller Press. Surveyor wrongly observed that no preventive measures were taken by the Complainant to prevent the loss. Surveyor failed to consider that certain devices like Magnetic Separator, Alarm and Tripping Limits were installed as preventive tools. Surveyor ignored the important aspect that the Technical Engineer Incharge of the Cement Factory physically inspected the damage and confirmed sudden crack. Experts from KHD also confirmed the damage as instantaneous and not due to wear and tear. Surveyor also ignored the ultrasonic report which showed a sudden spike in the Graph, indicative of accident related crack. The demand for conducting fatigue test was raised by the Surveyor first time on 04.10.2011, after expiry of 53 months from the date of incident. Fatigue test is done to check the operational life of any metal part. In the instant case, the damaged machine had operated for 28,811 working hours against the stipulated life of 70,000 working hours. The Surveyor Report was based on conjectures and surmises Learned Counsel submitted that even fatigue test did not fall under exclusion clause of the Policy. Learned Counsel relied on the judgment of this Commission in M/s Raj Kamal & Co. vs. M/s United India Insurance Co. Ltd. decided on 21.10.2016.

7.       The Opposite Parties were proceeded ex-parte, vide order dated 30.12.2022, as none appeared on their behalf despite granting last opportunity. The Opposite Party, however, filed written arguments. The Opposite Party raised a preliminary issue relating to the maintainability of the Consumer Complaint stating that the Complainant was not a “Consumer” as it was engaged in commercial activity. It was also stated that the Complainant had also played fraud with this Commission by not disclosing material and vital facts. The issue relating to fraud can be adjudicated by a Civil Court and not by this Commission in summary jurisdiction.

8.       On merits, it was submitted that the Surveyor wanted to conduct fatigue test on the damaged roller. The matter was taken up with the Complainant, who informed that the damaged roller had already been disposed off in routine salvage disposal. The Surveyor observed that that the Roller Press failed due to fatigue mechanism. Failure of the Roller Press occurred over a period of time because of fatigue mechanism. It was stated that gradual deterioration, deformation or distortion or wear and tear was excluded from the Insurance Policy. As per Special Condition of the Policy, the Complainant was required to submit mandatory documents regarding cost of reinstatement or replacement etc., which they did not do. Magnetic Separator and metal detector were not sufficient tools to protect the Roller Press. On 26.11.2006 also similar incident occurred with the Roller Press. It is not possible that the same incident would occur twice. The Complainant disposed off the salvage without conducting the fatigue test, thereby violated the fundamental principle of Insurance. The Opposite Party, therefore, considered the fatigue test report conducted by National Metallurgical Laboratory, Jamshedpur (NML) on a different Roller Press in the previous incident. The Complainant had also filed excessive and exaggerated claim without any documentary evidence. It was stated that the Complaint was liable to be dismissed.         

9.       So far as maintainability of the Complaint is concerned, this Commission in Harsolia Motors v National Insurance Company Ltd. [I (2005) CPJ 26 (NC)] held that a contract of insurance is a contract of indemnity and, therefore, there is no question of commercial purpose in obtaining insurance coverage. In view of law laid down by Hon’ble Supreme Court, the Complainant is a “Consumer” and the Complaint is maintainable.

10.     Another contention of Opposite Parties is that the Complainant had not disclosed material facts and played fraud with the Opposite Parties. As the Complaint involves complicated questions of fact and law, it cannot be adjudicated in a summary proceeding under Consumer Protection Act, 1986. Hon’ble Supreme Court in CCI Chambers Coop. HSG. Society Ltd. v. Development Credit Bank Ltd., Appeal (Civil)  7228 of 2001 observed as follows:

“It cannot be denied that Fora at the national level, the State level and at the district level have been constituted under the Act with the avowed object of providing summary and speedy remedy in conformity with the principles of natural justice, taking care of such grievances as are amenable to the jurisdiction of the Fora established under the Act. These Fora have been established and conferred with the jurisdiction in addition to the conventional Courts. The principal object sought to be achieved by establishing such Fora is to relieve the conventional Courts of their burden which is ever-increasing with the mounting arrears and whereat the disposal is delayed because of the technicalities. Merely because recording of evidence is required, or some questions of fact and law arise which would need to be investigated and determined, cannot be a ground for shutting the doors of any Forum under the Act to the person aggrieved.”  

From the above, it is clear that even if some questions of fact and law are involved, this cannot be a ground for shutting the doors of the Consumer Forum. Moreover, we find that the facts of the case are clear and no complicated question of fact or law is involved. The Complainant claimed reimbursement of Insurance claim, which involved no complicated question of law. This Commission is, thus, fully competent to adjudicate the instant Consumer Complaint.

11.     It is admitted that on the date of incident, the Policy was valid. The incident of loss was also admitted by the Parties. The only dispute which remains is the cause of damage to the Roller Press and the quantum of loss sustained by the Complainant.

11.     According to the Complainant, the loss occurred due to hard metal large size grinding ball having entered causing sudden jerk and impact to create a crack on the shaft. The Opposite Party, however, repudiated the claim on the ground that the damage to the Roller Press was due to fatigue mechanism (ageing effect). After the incident, the Complainant got inspection of the Roller Press by Technical Experts from KHD Humboldt Wedag GmbH, Germany (supplier of the Roller Press), who, vide report dated 25.06.2007, clearly stated that ‘ageing effect/fatigue failure’ has been categorically overruled as the equipment was commissioned only in 1997 and these types of parts have a long life-span. Report of KHD Humboldt Wedag dated 25.06.2007 reads as follows:-

“Ageing effect:

That is overruled as the mill was commissioned in 1997 and these types of parts are designed for a long life operation, except the reconditioning of wear ring surface, this failures from the shaft end is accidentally.”

From the aforesaid Expert Report, it is clear that the ageing effect of the Roller Press was overruled. Further, the Insurance Company before issuance of the Policy got pre-insurance Survey of the Roller Press by United Technical Services, Udaipur on 06.02.2003. In the said report the condition of the Roller Press is written as “apparently good.” In the pre-insurance Survey report of United Technical Services against the column “obsolescence if any” it is written as “NA.” The Insurance Company issued the Policy on the basis of the report wherein it was stated that obsolescence was not applicable. It is, thus, clear that before issuance of the Policy the Rolling Press was in good condition and thereafter only the Insurance Company issued the Insurance Policy.

13.     The Opposite Party repudiated the claim on the basis of the Survey Report, which reads as follows: -

“…

3)      By these reasons, it is being conveyed that the insured did not find out seriously, the exact reason of the loss, even if it is taken for argument sake, that the engineer visited the plant in June 2007.

4)      If the reason is taken in the face value, it means that the Magnetic Separator and the metal detector are not sure protector of the Rollers, as big metal pieces are likely to pass thru’ the line any time and give a high stress to the roller, which will fail in operation.”

          Thus these type of losses can take place any time.

5)      Since no positive preventive measures have been taken till date the insurers are under constant risk of this nature, which is inevitable rather than sudden and unforeseen.

6)      The insured have not given insurers a chance to consider eliminating the failure possibility due to fatigue failure, this making it more positive to assume that the loss has taken place over a period of time as described in details on Page 11, citing the reasons given by Fatigue Test carried out by National Metallurgical Laboratory, Jamshedpur in the previous loss, under similar conditions.”

The Surveyor observed that the Complainant had not been serious about the exact reason of loss. In this regard, it is relevant to mention that to ascertain the cause of loss, the Complainant had deputed M/s KHD Humboldt Wedag GmbH, Germany (supplier of the Roller Press) who, vide report dated 25.06.2007, observed that  the loss might be due to inadequate clearance between rollers, passing of large size metal grinding ball through the roller during operation. Relevant part of the report reads as follows: -

“May be due to inadequate clearance between rollers, passing of large size metal grinding ball (> 50 mm dia.) through the roller during operation may result in sudden jerk and high impact, which may create crack on shaft.

Though we have the magnetic separator and metal detector on line, due to occasional high quality of materials flow and possible submerged position of the metal piece inside the material bed, it could not be detected by the detector, which has moved into the circuit and finally passed through the roller, causing the damage.”

The observation of the Surveyor that the Complainant did not seriously find out the cause of loss is not well founded.

14.     Regarding the cause of loss, the Surveyor had relied on the test report of National Metallurgical Laboratory (NML), Jamshedpur dated 10.01.2008 conducted on another Roller Press and not on the Roller Press in question. The report of NML, Jamshedpur dated 10.01.2008 regarding the cause of loss, therefore, cannot be relid.

15.     As seen above, the Complainant was asked to furnish documents on several dates. The Complainant was asked to furnish documents, vide letter dated 26.05.2007, 03.05.2009, 07.02.2011 and 04.10.2011, though each time the Complainant had sent the required documents/information. The Surveyor’s approach was not appropriate as he went on seeking documents on different dates. It was only, as late as 04.10.2011 after expiry of 53 months from the date of the accident, that the Surveyor wanted to conduct the fatigue test on the damaged Roller Press by which time the Complainant had already disposed of the salvage. The Surveyor based his report on National Metallurgical Laboratory Report dated 10.01.2008 which did not examine the subject Roller Press and gave a report relating to a different Roller Press. It is not understood as to how and why the Surveyor has been harping on the issue when Laboratory nominated by them, had conducted fatigue test. The Complainant got the damage confirmed as instantaneous and not due to wear and tear by expert from KHD. A sudden spike in the graph was noticed in the ultrasound report, indicative of accident related crack. Damaged machine had operated only for 28,811 working hours against an expected life of 70,000 working hours. Even pre-insurance Survey of the Roller Press was got done by the Insurance Company by United Technical Services, Udaipur on 06.02.2003 and the Roller Press was found “apparently good.” The Surveyor’s Report is not based on proper evidence but more on conjectures and surmises and, therefore, he arrived at a wrong conclusion.

16.     As regards the assessment of loss, the Complainant made a claim of Rs.2,46,54,377/- excluding salvage. The Surveyor visited the Insured premises between 25^th & 27^th May, 2007 and discussed with the concerned Engineering and Finance Department Officials of the Insured Company regarding the reported loss. The Roller needed for reinstatement/replacement was requisitioned from the Insured’s under construction plant, being established at Kushkheda 40 kms away from the Insured’s present plant. Surveyor had taken the price at the time of loss as well as the rate of Euro for arriving at the assessment. He has also noted that the Policy did not provide for deductions due to depreciation, if the reinstatement expenses had already been incurred by the Insured. Excess clause and salvage was also duly deducted while arriving at the net loss. The Surveyor considered the freight charges, custom duty, clearing charges and other cost and arrived at gross assessed loss of Rs.2,08,47,708/- and assessed the net loss of Rs.1,79,54,382/-. The Complainant has not challenged the assessment made by the Surveyor. In the absence of any evidence contrary to the assessment made by the Surveyor, we accept the assessment duly made by the Surveyor.

17.     In the result, the Complaint is partly allowed. Opposite Parties are directed to pay an amount of Rs.1,79,54,382/-. to the Complainant with 9% interest from the date of repudiation of claim till realization. The order be complied within two months. There will be no order as to costs.