DEEPAK INDUSTRIES LIMITED vs National Insurance Co. Ltd.

THIS complaint has been filed against No. 1 National Insurance Company Ltd. and No. 2 Associated Road Carriers Ltd., New Delhi in respect of damage to the consignment which was insured with No. 1 during transportation by No. 2 from Ernakulam to the New Allenberry Works, Faridabad on the ground of deficiency in service on account of rejection of the claim filed by the complainant for reimbursement of the damage caused to the consignment which was covered by transit insurance with No. 1.

THE facts of the case are not in dispute. Briefly stated the New Allenberry Works, Faridabad placed an order for the supply of an HMT CNC Turning Centre STC 25 machinery which was despatched from Ernakulam on 12th of February, 1990. On receipt of the despatch advice the New Allenberry Works approached the Faridabad Office of the Insurance Company on 14-2-1990 for issue of a policy for covering any loss or damage during transit. THE requisite premium was paid and the said policy was issued on 14.2.1990. However, the risk coverage has been shown to be from 12.2.1990 during transit from Ernakulam to Faridabad. It is alleged by the complainant that on receipt of the consignment at Faridabad although the packing was outwardly undamaged, on opening the package it was discovered that the machinery had been damaged during transit. THErefore, immediately information was sent to the Insurance Company as well as to M/s. H.M.T. Ltd. who both deputed their personnel to check the damage. THE insurer also appointed a Surveyor to make an assessment of the damage and the said damage was assessed at Rs. 4,55,671/-. Accordingly a claim was filed with the company but the said insurer repudiated the claim on the ground that it had not been established that any damage was caused to the machinery during transit. THE complainant has stated that the claim has been unjustifiably rejected by the insurer and hence they are liable to pay the assessed amount alongwith interest and compensation for harassment and mental agony to the complainant. Notice was issued to the Opposite Parties, who denied their liability for any damage. The main stand taken by the Opposite Party No. 2 was that the consignment was delivered to the complainant in sound condition and utmost care and safety had been exercised during, the journey and there was no negligence or carelessness on the part of the carrier in this case. It is significant to observe that this point was not contested by the complainant and no evidence was led to show that any negligence of the carrier had resulted in damage to the machinery. The complainant, therefore, pursued its claim against the insurer only.

In support of the complaint the complainant examined Shri Kuldev Raj Kakkar, Asstt. Manager of the complainant and Shri Phool Chand Bhotra, power of attorney holder of the complainant, who in their evidence stated that the machine when inspected at the Ernakulam Workshop of H.M.T. was in proper working condition and had got damaged only during transit, since on opening the boxes at Faridabad extensive damage was found to the machine. Copies of various documents includeing the insurance cover were also placed on record.

THE Opposite Party had examined Shri Dinesh Kumar, Asstt. Administrative Officer, Faridabad, who deposed that on receipt of the claim a Surevyer was appointed and the matter was referred to the Flead Office, in whose jurisdiction only the claim could be decided. However the Head Office rejected the claim and the party was informed accordingly. Since it was considered necessary to examine evidence of the supplier M/s. H.M.T. Ltd. also, Shri K.D. Sharma and Shri G.A. Pillai were also examined at length. Additional evidence on behalf of Opposite Party No. 1 was placed in the shape of affidavit of Shri M.C. Dev, Administrative Officer, Divisional Office, New Delhi, who also stated that since the party had opened the boxes before the Surveyor could examine the packages, therefore, they were not entitled to claim anything from the Insurance Company. He also stated that it could not be believed that such a damage was caused by jerks and jolts only. Since goods were received at destination in sound and good conditions the insurer has all the reasons to believe that it was not a case of loss in transit, therefore, the claim was rejected. In support of the complaint, Mr. R.K. Aggarwal, the authorised representative of the complainant has argued very forcefully that it is a clear case of loss in transit, and is fully covered by the insurance cover provided by the insurer. At the time of receipt at Faridabad although the packages were outwardly in sound condition, on opening the same extensive damage was found in the machine and information was immediately sent to the insurer and to the supplier also. The Surveyor appointed by the insurer had also come to the conclusion that the said damage had taken place due to jerks and jolts during transit. Hence the insurer was clearly liable to reimburse the damage to the complainant. He stated that the cover note was issued on 14.2.1990 but it clearly states that the insurance is effective from the time of despatch on 12.2.1990 and therefore any damage during transit including loading and unloading is covered under the insurance policy. He referred to an authority of the Delhi State Consumer Disputes Redressal Commission, III (1993) CPJ 1622, Pawan Exports (Pvt) Ltd. v. The Oriental Insurance Co. Ltd. in support of his contention that the transit includes loading and unloading also. He referred to the terms of the policy in clause (5) which clearly stipulates that the insurance attaches from the time the goods leave the warehouse or place of storage at the place named herein for the commencement of the transit, continues during the ordinary course of transit and terminates either on delivery to the consignees or other final warehouse or place of storage at the destination named herein. Since Ernakulam and Faridabad are clearly mentioned in the cover note it is quite obvious that the risk is covered from the warehouse of the supplier till its unloading in the complainant''s Works at Faridabad. Therefore, the insurer is totally wrong in repudiating the claim of the complainant.

ON the other hand the learned Counsel for the insurer argued that the Insurance Company is not liable to pay the damage in this case because of the provisions of Section 64-VB of the Insurance Act, 1938. It is worthwhile here to reproduce the said provision:- (1) "No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner. (2) For the purposes of this Section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer."

He has argued that since the cover note was issued on the 14th of February, 1990 but the goods had been despatched on 12.2.1990, the insurer was quite right in repudiating the claim as no valid insurance cover was issued. The learned Counsel did not cite any precedent or ruling in support of his contention that the provisions of this Section entitle the insurer to repudiate the claim altogether. A bare reading of this provision shows that the insurer may not assume risk from the date prior to the payment of premium but it cannot be interpreted to mean that the insurance was invalid or illegal. It is quite clear that the insurer was informed that the goods had left the supplier''s warehouse on the 12th of February, 1990 and the same fact is mentioned in the cover note. In fact a reading of Sub-section (2) of the above referred Section clearly shows that the insurer may not assume the risk earlier than the date on which the premium has been paid. Therefore, at the most it can be argued that the Insurance Company was not liable for any damage which might have occurred to the consignment prior to 14.2.1990. But in that case a heavy burden would lie on the insurer to prove that the damage had actually occurred between 12.2.1990 and 14.2.1990. Not an iota of evidence has been placed on record in this regard. It is not even the case of the insurer that the damage had so occurred. All through their case has been that the type of damage noticed in this case could not have occurred during transit. Therefore, this argument is of no avail to the insurer. Further it is worthwhile to mention the provisions of clause 8.2 of the Insurance Policy which allow the insurer to assume risk from an earlier date on the basis of the promise of payment of premium in due course. The relevant portion reads as follows:-- 8.2. "Subject to 8.1 above, the assured shall be entitled to recover for insured loss occurring during the period covered by this insurance, notwithstanding that the loss occurred before the contract of insurance was concluded, unless the assured were aware of the loss and the underwriters were not."

This clause of the Insurance Policy is quite categorical on the point that the insured may claim loss occurring during the period covered by the policy, notwithstanding the fact that the loss had occurred before the contract of insurance was concluded, unless the assured was aware of the loss and the underwriter was not. It has neither been argued nor is it in the province of this jurisdiction to hold this clause to be violative of the Insurance Act. Prima facie clause (1) of Section 64-VB clearly sanctions such a stipulation on the part of the insurer to be within the four corners of the Insurance Act. Hence we have no hesitation in holding that this argument of the insurer is devoid of merit.

THE other points taken up by the insurer deserves only brief mention. THE insurer had questioned locus standi of the complainant M/s. Deepak Industries in filing this claim. However, as pointed out by the authorised representative of the complainant in the correspondence with the Insurance Company they clearly mention the complainant to be proprietor of New Allenberry Works and this fact was never challenged either in the pleadings or by any evidence to the contrary. In any case since the New Allenberry Works are shown to be the insured party and are having a separate account the insurer would have discharged its liability in case the payment of the claim is made to them. This objection of the Opposite Party, therefore, need not be taken seriously.

THE other argument of the learned Counsel that the decision of the insurer having been taken after due consideration and thus there was no deficiency in service deserves to be only noticed and rejected. It is well settled in this jurisdiction that if the reasons given by the insurer are arbitrary or unjustified, it would be a clear case of deficiency in service. It is enough to mention the observations of the National Commission in II (1991) CPJ 189 (NC) ''Life Insurance Company of India, A.P. v. Shri Bhavanam Srinivas Reddy: THErein it has been categorically concluded as under:- "Thus, it is clear that the jurisdiction of the statutory Redressal Forums to conduct an adjudication into the complaint is in no way affected by the unilateral repudiation of the contract of insurance by the insurer. In the decision rendered by this Commission in the New India Assurance Company Ltd. v. M/s. Vipro Electronics Pvt. Ltd. Revision Petition No. 12 of 1990 (Reported in I (1991) CPJ 335 (NC)=(1991 CPC 57) it has been held that the mere fact the insurer had repudiated his liability in respect of the claim put forward by the insured does not operate to take away the jurisdiction of the Redressal Forums constituted under the Act to investigate into the complaint filed by the insured."

The only point that needs to be explained in detail is the stand of the Insurance Company that there is no proof that the damage had occurred during transit. It has been argued that at the time the consignment was received in Faridabad, there was no damage to the packing and it had been clearly admitted by Shri K.D. Sharma, an Expert of the H.M.T. that the type of damage noticed on the machine could not have occurred without some damage to the packing also. This appears to be an argument of desperation only. It is quite clear that damage had occurred to the machines and the said damage was assessed by the independent Surveyor appointed by the Insurance Company. Thus, it is quite clear that damage had occurred and it is upto the insurer to show that the damage had occurred at any time prior to the despatch of the machinery or due to any mishandling or negligency on the part of the insured at the time of the opening the packages at Faridabad. Although the Evidence Act is not strictly applicable in such cases, it is well settled rule of evidence that the onus of proving a fact would rest on a party whose case would fail in the absence of any such evidence. In the present case it has been proved by the complainant that when boxes were opened, the machine was found to be in a damaged condition and the surveyor had also examined and made an assessment of such damage. Since the exact cause of damage has not been determined the only assumption in such a case would be that the damage had occurred during transit. The observation of the Surveyor Arun Sharma in his report that the damage was due to jerks and jolts during transit are quite significant. It is not unusual for the Insurance Companies to appoint Investigators to find out the detailed facts in cases where there is some doubt about the claim made by the insured. It is not enough in this case merely to argue that it cannot be believed that the damage could not have occurred during transit since there is no accident to the vehicle while bringing machines to Faridabad. It would be necessary for the Insurance Company to have the matter investigated in detail to find out exactly how and where the damage occurred. In the light of the evidence given by the H.M.T. functionaries as well as of the officers of the insured it is quite clear that the machinery was despatched in good condition. Even if it could be argued that the damage had occurred during loading or unloading of the consignment, in that case also it would be upto the insurer to prove the said allegation. No such proof is forthcoming and even if, it is assumed that damage was due to mishandling during loading and unloading, as pointed out by the authorised representative of the complainant, even such damage would be covered by the insurance policy. The only ground on which this claim could be repudiated would be on account of, loss or damage attributed to willful misconduct of the insured. There are no such allegations in the present case. There is also an exclusion clause regarding loss or damage caused by insufficient or unsuitable packing. There is no evidence in this regard also. Merely crossexamining persons who supervised the packing does not give any clue or indication of insufficient or unsuitable packing. In fact it has been clearly asserted by Shri G.A. Pillai that the packing was proper and the machine was in good condition at the time of packing. The mere allegation to the effect that damage due to jerks in transit could only have occurred due to insufficient or unsuitable packing is not enough. The insurer has to put up some proof in this regard. In the absence of any such evidence the assertion of the insurer has necessarily to be rejected. Therefore, it is not possible to hold in favour of the Insurance Company that the damage was either due to misconduct of the insured or due to insufficient or unsuitable packing. These are the only exclusion clauses which could allow the insurer to repudiate the claim.

The repudiation letter issued by the insurer to the insured is as follows:- "We regret to inform you that the Head Office has repudiated the claim on account of violation of 64-VB of the fact that this is a transit loss & it has not been established also." As discussed earlier the insurer cannot take shelter under the provisions of Section 64VB of the Insurance Act. It is quite clear on the facts and circumstances of this case that the loss to the machinery had occurred somewhere during transit and how it was upto the insurer to get the matter investigated to find out the exact cause of damage in case it has to take shelter under any of the exclusion clauses. The burden of proof is heavily on the insurer to show that the damage was of such a nature that it would not be covered under the terms of the policy issued by by the insurer.

IN view of the above discussion it has to be held that the insurer was not justified in repudiating the claim of the complainant. Accordingly Opposite Party No. 1 National INsurance Company Ltd. is directed to pay to the New Allenberry Works a sum of Rs. 4,55,671/- as assessed by the Surveyor alongwith interest at 18% from date the loss was reported to the insurer viz. 23.2.1990 till the date of payment within two months, failing which they would be liable for action under Section 27 of the Consumer Protection Act, 1986. Complaint allowed.