Punjab

Ludhiana

CC/20/348

Steelman Rolling Mills (P) Ltd - Complainant(s)

Versus

Tata AIG General Insurance Co.Ltd - Opp.Party(s)

G.S.Sikka Adv.

05 Jul 2024

ORDER

DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, LUDHIANA.

                                                Complaint No:  348 dated 11.12.2020.                                                       Date of decision: 05.07.2024. 

Steelman Rolling Mills (P) Ltd., G.T. Road, Jugiana, Ludhiana through its Director Gurkanwal Singh.

                                                                                      ..…Complainant

                                                Versus

1. Tata AIG General Insurance Company Ltd., Regd. Office at 15^th Floor, Peninsula Business Park, Tower-A, Ganpatirao Kadam Marg, Lower Parel, Mumbai 400013 through its Chairman.
2. Tata AIG General Insurance Company Ltd., Branch Office 1/F, Dashmesh Complex, SCO 668, Pakhowal Road, Ludhiana through its Branch Manager.
3. The In-charge, Tata AIG General Insurance Company Ltd., B-19/89/6, 3^rd Floor, Lodhi Tower, Mall Road, Ludhiana.                                                                                                                      …..Opposite parties 

Complaint Under Section 35 of the Consumer Protection Act, 2019.

QUORUM:

SH. SANJEEV BATRA, PRESIDENT

MS. MONIKA BHAGAT, MEMBER

 

COUNSEL FOR THE PARTIES:

For complainant             :         Sh. G.S. Sikka, Advocate.

For OPs                          :         Sh. Rajeev Abhi, Advocate.

 

ORDER

PER SANJEEV BATRA, PRESIDENT

1.                Shorn of unnecessary details, the facts of the case are that the complainant firm is a registered company under the Companies Act and its Director Sh. Gurkanwal Singh has been authorized to file the present complaint vide resolution dated 16.10.2020. The complainant company obtained insurance policy No.2270189284 from the OPs having validity from 14.05.2019 to 13.05.2020 with coverage of Fire and Special Perils Building for Rs.10,000,000/-, contents Rs.40,000,000/- and Burglary Stock for Rs.40,000,000/- on payment of premium of Rs.40,120/-. The complainant stated that the agents of the OPs inspected the factory before issuing the policy  and assured the complainant that the insurance policy will cover entire loss to building, plant, machinery, raw material in all respects.

                   The complainant further stated that on 13.12.2019 due to heavy rain, the shed of factory building was collapsed. However, there was no loss of life as no workers were present at the time of loss and only security personals were present there. OPs were intimated regarding loss who deputed surveyor to assess the loss. The surveyor orally estimated the loss to the building around Rs.37/38 Lakhs. The complainant lodged the claim with the OPs for Rs.13,27,797/- after adjusting salvage etc. and completed all the formalities etc. as required by the OPs but the claim was not settled despite repeated requests and demands. On 17.06.2020, the Ops declined the claim on the ground that “Steel Plants/Integrated Steel Plants, Hot/Cold Rolling, Metal Smelting, Metal Extraction or Processing & Furnaces: are not covered under the policy. At the time of issuance of the policy, the representative of the Ops never told the complainant that the claim on account of loss of Steel Plants/Integrated Steel Plants, Hot/Cold Rolling, Metal Smelting, Metal Extractions or Processing & Furnaces are not covered with the intention to cause harassment to the complainant and to get insurance premium/gain wrongfully. The complainant further stated that the name of the company is Steelman Rolling Mills (P) Ltd. and by giving copy of Article of Association to the insurance company, it was made clear to the OPs before issuance of the policy. The OPs never supplied the copy of insurance policy. According to the complainant, the repudiation of the claim is illegal, arbitrary, based on conjectures and surmises due to which the OPs have caused a wrongful loss to the complainant. The complainant has suffered mental pain, agony and harassment due to non-payment of the genuine claim which amounts to deficiency in service on the part of the OPs. The complainant issued a legal notice dated 14.08.2020 to the OPs but no reply was received.  Hence this complaint, whereby the complainant has prayed for issuing direction to the OPs to pay the claim of Rs.13,27,797/- along with interest as well as compensation of Rs.3,00,000/- and litigation expenses of Rs.22,000/-.

2.                Upon notice, the OPs appeared and filed written statement and assailed by complaint by taking preliminary objections on the grounds of maintainability; the complainant being stopped by its own act and conduct; suppression of material facts; lack of jurisdiction; the complainant is not a consumer being a commercial organization etc. The OPs stated that after the receipt of the claim, it was duly registered, entertained and processed. The complainant had obtained My Business My Choice – Package policy from them bearing No.2270189284 valid from 14.05.2019 to 13.05.2020 where it has been stated that “The Company is liable hereunder only in respect of those coverage’s stated for each of which the sum insured/limit of liability is specified hereinafter and the premium due thereon is received by the company:-

Coverage Section		Particulars of Insured Interest	Sum insured/limit of indemnity (Rs.)	Premium (Rs.)
A   B	Fire and Special Peril Burglary	Building Refer Annexure ‘A’ Contents Refer Annexure ‘A’ Contents Refer Annexure ‘B’	10,000,000 40,000,000 40,000,000	6,000 24,000 4,000
Gross Premium Special discount sectional discount Net Premium UGST/SGST@9% CGST@9% Total amount (Rounded off) GSTIN: 03AABCT3518Q1Z6				34,000.00 0.00 34,000.00 3060 3060 40,120.00

CONDITIONS

          Subject to the following additional conditions/warranties to be read with the wording of the policy (and Riders referred if any) hereto.

COVERAGE SECTION A (FIRE AND SPECIAL PERILS)

• Local Authority Clause
• Reinstatement value clause (Not applicable for stocks)
• Designation of Property Clause
• Warranted that locations having kutcha construction i.e. structures consisting of walls and/or roofs of wooden planks/thatched leaves and/or grass/hay/bamboo/plastic/asphalt cloth/canvas/tarpaulin and the like, stand excluded under the policy.
• Warranted that occupancies involved in manufacturing and/or storing and/or processing hazardous materials such as paints, chemicals, plywood, wooden furniture etc. are not covered. However, if the manufacturing and/or storing and/or processing of hazardous materials such as paints, chemicals, plywood, wooden furniture etc. are incidental to the manufacturing process/storage, this exclusion will not apply."

Warranted that steel plants/integrated steel plants, hot/cold rolling. metal smelting, metal extractions, ore processing and furnaces are not covered under this policy."

The OPs further stated that in Annexure 'A' to coverage section 'A' attached to and forming part of policy No.22701892840000 under the head Occupancy: Manufacturing of iron rods (no hot/cold rolling).

Sr. No.	Risk Description	First Loss Limit (%)	Sum Insured (Rs.)
1.	Stocks		40,000,000.00
	Total sum insured		40,000,000.00

As per policy excess clause is 5% of the claim amount subject to the minimum of Rs. 10,000/-. The claim was lodged on 13-14.12.2019 regarding the damage to the building due to lightening, heavy wind storm accompanied with rainfall. Immediately on the receipt of the claim, M/s. Proclaim Insurance Surveyors & Loss Assessors Pvt. Ltd., an independent IRDA Licensed Surveyor and Loss Assessor, 2^nd Floor, Fortune Chamber, SCO 16-17, Feroze Gandhi Market, Ludhiana was appointed to inspect the premises and assess loss. The said surveyor visited the premises personally and thereafter, vide mail dated 23.12.2019 had called upon the complainant to provide information/documents, which is reproduced as under:-

• Brief write-up about your premises/business set-up i.e.:
• Date of incorporation/commencement, with list of all premises forming part of your business operations.
• Type of factory/business running within affected building premises, nature of occupation and manufacturing/trading activities carried out.
• MOA/AOA of the firm.
• Details of bankers with hypothecations against your premises (i.e. building, stock etc.) along with copies of credit/loan sanction letter/enhancement/renewal.
• Dimensioned layout plan of your building/affected premises.
• CCTV footage in pen drive.
• Business registration details/proof (if & as applicable), with copies of:
• Pollution Certificate, (if & as applicable)
• Sale/registry deed and property tax/MC receipt (if & as applicable)
• SME/MSME/PSIEC/Dept. of Industries, commerce registration, Udyog Aadhar, etc. (if & as applicable).
• Claim form, duly filled, along with copy of cancel cheque and final claim bill with offer for salvage. Kindly retain the salvage of all items till further/final verification or settlement or any further written confirmation by us or the insurance company w.r.t. disposal of such items.
• Partnership deed of the firm.
• Valuation report (self or by banker)
• Total area of the safe shed (self-estimate in your letter head).
• Year wise capital addition of building, since inception (Depreciation charts, since inception).
• Self-declaration that:

• No other insurance policy is availed to cover any of your properties inside the premises.”

The complainant had supplied the aforesaid documents/ formation. The said surveyor had personally inspected the premises, took the photographs and other documents and thereafter prepared his final survey report dated 31.12.2019 under his signatures and submitted the same with the opposite party assessing the loss to Rs.13.27,797/- and clearly stating that the loss is not covered under the policy by stating under the head Policy Liability in column No.4, 5 and 6 as under:-

"4.Breach of following warranty is observed:

Warranted that Steel Plants/Integrated Steel Plants, Hot/Cold Rolling, Metal Smelting, Metal Extraction, Ore Processing & Furnaces are not covered under this policy.

5.Difference in occupancy is observed:

Manufacturing of iron rods (no hot/cold rolling)-as per policy.

Manufacturing of iron rods (hot rolling) - as per ACTUAL at site.

6. The loss is physical & unforeseen in nature & occurred due to lightning/ heavy windstorm accompanied with rainfall, however, liability under the policy does not attach, in our opinion, due to above mentioned observations (breach in warranty and different occupancy).

We accordingly issue our independent survey report along with consented assessment (Rs.13,27,797/-)on without prejudice basis, subject to final decision of the Insurance company on the policy liability."

                   The OPs further stated that after the receipt of the survey report dated 31.12.2019 and after scrutinizing the documents placed in the claim file and after due application of the mind by their officials in terms of the insurance policy, the complainant was served with the show cause notice vide Email dated 19.02.2020 whereby stating that “after the receipt of the survey report, as per available facts it is noted that reportedly on 13^th December 2019, lightning/heavy windstorm, accompanied with rainfall struck the said premises due to which portion of its building shed structure made of MS (roof, truss/channels/sheets) got collapsed/damaged/affected. It is further noted that actual occupancy is manufacturing of iron rods (hot rolling) whereas occupancy mentioned on policy preferred by you is manufacturing of iron rods (no hot/cold rolling). We have also observed that policy does not cover Steel Plants/Integrated Steel Plants, Hot/Cold Rolling, metal smelting, metal extraction, ore processing & furnaces. Policy warranty reproduce as mentioned below for your ready reference:-

Warranted that Steel Plants/Integrated Steel Plants, Hot/Cold Rolling, Metal Smelting, Metal Extraction, Ore Processing & Furnaces are not covered under this policy.

In view of the above facts we do not find liability attached with policy, hence we are moving file towards declination. Final decision will be convey with you shortly."

                   Thereafter claim of the complainant was repudiated as no claim vide Email dated 17.6.2020 on the grounds that the claim do not fall within the purview of the policy for the reasons detailed in the email dated 17.6.2020 which is re-produced as under:-

"We are in receipt of the survey report, post scrutiny the same it is noted that reportedly on 13th December 2019, lightning /heavy windstorm, accompanied with rainfall struck the said premises due to which portion of its building shed structure made of MS (roof, truss/channels/sheets) got collapsed/damaged /affected. It is further noted that actual occupancy is manufacturing of iron rods (hot rolling) whereas occupancy mentioned on policy preferred by you is manufacturing of iron rods (no hot/cold rolling). We have also observed that policy does not cover Steel Plants/Integrated Steel Plants, Hot/Cold Rolling, metal smelting, metal extraction, ore processing & furnaces. Policy warranty reproduce as mentioned below for your ready reference:-

Warranted that Steel Plants/Integrated Steel Plants, Hot/Cold Rolling, Metal Smelting, Metal Extraction, Ore Processing & Furnaces are not covered under this policy.

In view of the above facts we do not find liability attached with policy.

The foregoing declination of insurer's liability is issued based on the facts as presently known. We reserve the right to extend or modify this declination, should additional facts or circumstances become known to us.

In case you need any further clarification or assistance, please feel free to contact us."

The OPs further stated that the claim of the complainant has rightly been repudiated as no claim and the grounds of repudiation are legal, valid, enforceable and are in accordance with the terms and conditions of the insurance policy. The OPs further stated that M/s. Steelman Rolling Mills Pvt. Ltd. is a commercial organization and running the said company to earn huge profits and not to earn livelihood. As such, the complainant is not a consumer nor this Commission has jurisdiction to adjudicate the present complaint.

                   On merits, the OPs reiterated the crux of averments made in the preliminary objections and factual submission of the case. The OPs have denied that there is any deficiency of service and have also prayed for dismissal of the complaint.

3.                In evidence, Sh. Gurkanwal Singh, Director of the complainant company tendered his affidavit as Ex. CA and reiterated the averments of the complaint. The complainant also placed on record documents Ex. C1  to Ex. C85 and closed the evidence.

4.                On the other hand, the counsel for the OPs tendered affidavit  Ex. RA of Sh. Amit Chawla, Chief Manager of the OPs as well as affidavit Ex. RB of Sh. Pradeep Kumar, Branch Head of Proclaim Insurance Surveyors and Loss Assessors Private Limited, Chandigarh along with documents Ex. R1 to Ex. R70 and closed the evidence. 

5.                We have heard the arguments of the counsel for the parties and also gone through the complaint, affidavit and annexed documents and written statement along with affidavit and documents produced on record by both the parties.

6.                Admittedly, the complainant company obtained a Fire and Special Peril and Burglary Insurance policy from the OPs for the period from 14.05.2019 to 13.05.2020 having variable coverage for different type of building contents and stocks. The policy has been named as My Business My Choice Package, the schedule of which is Ex. C4 was conveyed to the complainant. However, the OPs have also placed copy of schedule along with welcome letter Ex. R67.

                   In the wee hours of 13.12.2019, due to incessant rain, lightening and heavy wind storms, the mojor part of building of building collapsed. Intimation Ex. C5 along with photographs Ex. C6 to Ex. 8G were given to the OPs. A claim was lodged with the OPs and an E-Claims Notification is Ex. C9 was issued. On the receipt of the claim, the OPs appointed M/s. Proclaim Insurance Surveyors & Loss Assessors Pvt. Ltd., an independent IRDA Licensed Surveyor and Loss Assessor. The surveyor demanded certain documents from the complainant. The surveyor submitted immediate loss advice on 17.12.2019 and gave its final report on 31.12.2019 Ex. R3. The surveyor, in its report, mentioned that part of the building shed structure collapsed and its metal structure (roof, truss/channels) got twisted, deformed, sheared, pressed, misaligned and dented while roofing asbestos/cremented sheets got cracked, broken and damaged. He declared the cause of loss as ‘Act of GOD’ and lightning/heavy windstorm. He carried out detailed independent assessment and assessed the loss to be Rs.13,27,797/-.

7.                On the receipt of the report, the OPs intimated the complainant vide Email dated 19.02.2020 Ex. R2 expressing its intention that they are in the process of declining the claim. Operative part of Email Ex. R2 is reproduced as under:-

“With reference to captioned, we are in receipt of survey report, as per available facts it is noted that reportedly on 13^th December 2019, lightning/heavy windstorm, accompanied with rainfall struck the said premises due to which portion of its building shed structure made of MS (roof, truss/channels/sheets) got collapsed/damaged/affected. It is further noted that actual occupancy is manufacturing of iron rods (hot rolling) whereas occupancy mentioned on policy preferred by you is manufacturing of iron rods (no hot/cold rolling). We have also observed that policy does not cover Steel Plants/Integrated Steel Plants, Hot/Cold Rolling, metal smelting, metal extraction, ore processing & furnaces. Policy warranty reproduce as mentioned below for your ready reference:-

Warranted that Steel Plants/Integrated Steel Plants, Hot/Cold Rolling, Metal Smelting, Metal Extraction, Ore Processing & Furnaces are not covered under this policy.

In view of the above facts we do not find liability attached with policy, hence we are moving file towards declination. Final decision will be convey with you shortly."

 

8.                Vide Ex. C10 = Ex. R68, the complainant was informed regarding rejection of the claim, operative part of which is reproduced as under:-

"We are in receipt of the survey report, post scrutiny the same it is noted that reportedly on 13th December 2019, lightning /heavy windstorm, accompanied with rainfall struck the said premises due to which portion of its building shed structure made of MS (roof, truss/channels/sheets) got collapsed/damaged /affected. It is further noted that actual occupancy is manufacturing of iron rods (hot rolling) whereas occupancy mentioned on policy preferred by you is manufacturing of iron rods (no hot/cold rolling). We have also observed that policy does not cover Steel Plants/Integrated Steel Plants, Hot/Cold Rolling, metal smelting, metal extraction, ore processing & furnaces. Policy warranty reproduce as mentioned below for your ready reference:-

Warranted that Steel Plants/Integrated Steel Plants, Hot/Cold Rolling, Metal Smelting, Metal Extraction, Ore Processing & Furnaces are not covered under this policy.

In view of the above facts we do not find liability attached with policy.

The foregoing declination of insurer's liability is issued based on the facts as presently known. We reserve the right to extend or modify this declination, should additional facts or circumstances become known to us.

In case you need any further clarification or assistance, please feel free to contact us."

 

9.                Now the point of determination arises whether the OPs were justified in repudiating the claim of the complainant?

10.              Perusal of letters Ex. R2 as well as Ex. C10 = Ex. R68 shows that eh OPs have mainly invoked the exclusion clause contained in the coverage Section A (Fire and Special Perils). As per Ex. R67, exclusion clause of the policy terms and conditions which has been produced and relied upon by the OPs, reads as under:-

• Warranted that locations having kutcha construction i.e. Structures consisting of walls and/or roofs of wooden planks/thatched leaves and/or grass/hay/bamboos/plastic/ asphalt cloth/canvas/tarpaulin and the like, stand excluded under the policy. (herein called as ‘First Clause” for the sake of convenience)
• Warranted that Steel Plants/Integrated Steel Plants, Hot/Cold Rolling, Metal Smelting, Metal Extraction, Ore Processing & Furnaces are not covered under this policy. (herein called as ‘Second Clause” for the sake of convenience)

However, in the schedule Ex. C4 supplied to the complainant, the “Second Clause” has not been mentioned. It implies that the terms and conditions which were not part of original policy and was introduced later on, that too unilaterally, cannot bind the complainant and the same cannot be invoked to deny otherwise genuine claim of the complainant. The contract of insurance is binding upon the parties and its terms and conditions would prevail. Therefore, nothing can be added or subtracted for assigning different meaning to the words mentioned in the policy. In this regard, reference can be made to 1996(6) SCC 428 in United India Insurance Company Ltd. Vs M.K.J. Corporation whereby the Hon’ble supreme Court of India has made the following observations:-

“It is a fundamental principle of Insurance Law that utmost good faith must be observed by the contracting parties. Good faith forbids either party from concealing (non-disclosure) what he privately knows, to draw the other into a bargain, from his ignorance of that fact and his believing the contrary. Just as the insured has a duty to disclose, similarly, it is the duty of the insurers and their agents to disclose all material facts within their Knowledge, since obligation of good faith applies to them equally with the assured. The duty of good faith is of a continuing nature. After the completion of the contract, no material alteration can be made in its terms except by mutual consent. The materiality of a fact is judge by the circumstances existing at the time when the contract is concluded.”

 

11.              With regard to the “First Clause” which warrants exclusion for location having kutcha construction. In the present case, as observed by the surveyor, the part of the shed/building was collapsed which was made of metal structure i.e. roof, truss/channels/sheets. Certainly, it was not a structure which consisted of wooden planks, thatched leaves, bamboos or plastic etc. So the first clause also cannot be come to rescue of the OPs in revoking the claim of the complainant. 

12.              Seeing from the other angle, that the officials of the OPs were aware that the complainant company is a limited company and is carrying on the business as per objects mentioned in the Memorandum and Articles of Association Ex. C2, which is reproduced as under:-

“1. To carry on the business of manufacturing, processing, casting including Malleable casting, forging including cold forging, founder, rolling, re-rolling including cold rolling, Metalergests, moulding, hessing, drawing, smiths, grinding, importing, exporting, buying, selling, dealing in whole sale or retail, all kinds of iron steel, scrap of all kinds alloy steels ferrous and non-ferrous, metallic and non-metallic, ingots, billets, bars, all kind of casting & forging, strips sheets, pipes, tubes, and all kind of re-rolling products i.e. flats, angles, round, square, hexagons rails, joints, birder, channels, patti, steel strips sheet plates deformed bars, plain, cold twisted bars, bright bars and all kind of wire and wire products.

2. To put, install, take on hire on lease or rent all kind of induction, furnace, Arc furnace tube mills, wire-drawing machine, hammers, heavy and light power press and all kind of casting, forging melting and rolling and re-rolling plant and machinery.”

 

13.              The agents of the company must have paid visit to inspect the building/shed before issuing the policy and it was well within their knowledge that the complainant company also includes the manufacturing of iron rods of different type. Subsequently, by its unilateral act, the company excludes the steel plant, hot/cold rolling, metal smelting, metal extraction, ore processing and furnaces from the policy. This very exclusion clause abridges the main object of the policy and it clearly amounts adoption of unfair trade practice on the part of the company. In 2022 LiveLaw (SC) 937 in M/s. Texco Marketing Pvt. Ltd. Vs TATA AIG GIC Ltd. and others passed by the Hon’ble Supreme Court of India, appellant secured a Standard Fire & Special Perils policy which was meant to cover a shop situated in the basement of the building. However, exclusion clause of the contract specifies that it does not cover the basement. The appellant continued to pay the premium promptly. The shop met with fire accident for which the appellant raised a claim. The claim was repudiated by respondent No.1  taking the umbrage under the exclusion clause. The Hon’ble Supreme Court partly allowed the appeal and observed in para No.37 of the judgment:-

 “37.Once it is proved that there is a deficiency in service and that respondent No. 1 knowingly entered into a contract, notwithstanding the exclusion clause, the consequence would flow out of it. We have already discussed the scope and ambit of the provisions under the Indian Contract Act, 1872. Even as per the common law principle of acquiescence and estoppel, respondent No. 1 cannot be allowed to take advantage of its own wrong, if any. It is a conscious waiver of the exclusion clause by respondent No. 1.”

 

Thus, the OPs were not justified in repudiating the claim of the complainant. The Surveyor as per his report dated 31.12.2019 Ex. R3 while carrying out the detailed independent assessment, summaries the loss as under:-

Description	Amount Rs.
Gross Loss Assessed	3645090
Depreciation	1214908
Loss Assessed	2430182
Salvage	1032500
Net Loss Assessed	1397682
Under Insurance	0
Adjusted Loss	1397682
Less. Excess	69884
Net Adjusted Loss	1327797

 

The complainant has not raised any objections to the said assessment report Ex. R3 nor filed any replication or rejoinder to rebut the contentions of the OPs in this regard. As such, in view of the facts and circumstances, it would be just and appropriate if the OPs are directed to pay Rs.13,27,797/-, the loss assessed by the surveyor as per his report Ex. R3 dated 31.12.2019 within 30 days from the date of receipt of copy of order along with composite costs of Rs.20,000/-.

14.              As a result of above discussion, the complaint is partly allowed with direction to the OPs to pay Rs.13,27,797/-, the loss assessed by the surveyor as per his report Ex. R3 dated 31.12.2019  within 30 days from the date of receipt of copy of order failing which the complainant shall be held entitled to interest @8% per annum from the date of order till actual payment. The OPs shall also pay composite costs of Rs.20,000/- (Rupees Twenty Thousand only) to the complainant. Compliance of the order be made within 30 days from the date of receipt of copy of order. Copies of order be supplied to parties free of costs as per rules. File be indexed and consigned to record room.

15.              Due to huge pendency of cases, the complaint could not be decided within statutory period.

 

 

(Monika Bhagat)                              (Sanjeev Batra)               Member                                         President  

Announced in Open Commission.

Dated:05.07.2024.

Gobind Ram.