MARKETING FEDERATION LTD. vs Oriental Insurance Co. Ltd.

THIS complaint has been filed by the complainant Chhotanagpur Adivasi Co-operative Marketing Federation Ltd., Ranchi in short ''Veg-Fed'' alleging deficiency in service on the part of the opposite party-Oriental Insurance Co. Ltd.

IT is the case of the complainant that they had obtained two policies from the Opposite Party one was a Machinery Breakdown (MB) Policy and the other was for Deterioration of Stocks (DOS) of Potato Seeds stored in the complainant''s Cold Storage for the period 16.4.1999 to 5.11.1999. For DOS the policy cover was Rs. 25.00 lakhs covering 2,500 quintals of potato in 50 kgs. pack each (25,000 Bags) valued at Rs. 200/- per quintal. This policy was issued on 19.4.1999. The Complainant again asked for enhancement of the covered amount by Rs. 10.00 lakhs on 28.5.1999 for which premium amounting to Rs. 8,821/- by cheque dated 28.5.1999 was sent to the Opposite Party on 26.4.1999. On account of sudden break-down of Amonia Gas Pipe, resulting in raising the temperatures within the chambers, damage was caused to potato seeds stored in the cold storage. Matter was reported to the Opposite Party on 4.5.1999 and 13.5.1999. Two Surveyors were appointed by the Opposite Party who have given their reports. At the clarifications additional documents sought by the Surveyor/Opposite Party, were supplied yet by a letter dated 9.5.2000, claim was repudiated on unsustainable grounds. IT is in these circumstances that this Complaint has been filed alleging deficiency in service on the part of the Opposite Party seeking following reliefs : (a) grant of compensation to the complainant to the tune of Rs. 35,00,000/- (Thirty five lacs of rupees) in terms of the relief as claimed for including compensation and compound interest; and (b) grant any other relief or reliefs as this Hon''ble Commission may deem fit and proper in the circumstances of the case.

In the written version filed by the opposite party they have refuted the allegation of deficiency in service and reiterated the grounds of repudiation of the claim given out in the letter dated 9.5.2000.

No rejoinder was filed by the complainant. One and three affidavits by way of evidence were filed by the complainant and opposite parties respectively. Arguments were heard.

IN our view, before going any further, it is necessary to go into the whole question of grounds of repudiation. The contents of the letter dated 9.5.2000 issued by the opposite party, repudiating the claim of the complainant, is reproduced below : (1) You had no requisite Licence from the Horticulture Department to operate the cold storage, Proviso (i) of the insurance policy is, therefore, not satisfied by you. (2) You had not reported the damage to the pipe line immediately after the occurrence. The provisions condition 6(a) of the Machinery Break-down Policy are, therefore, violated by you and there is no admissible claim under the Machinery Break-down Policy. (3) We refer to Proviso (iii) of the D.O.S. Policy where no claim is admissible unless the claim under Machinery Break-down Policy is paid or liability admitted therefor. (4) The provisions of the Proviso (v) of the D.O.S. policy have not been complied with by you. (5) While making request on 28.5.1999 for increase in sum insured, you were in the knowledge of the break-down on 26.4.1999 and the consequent deterioration of stock. You had concealed this fact from the company and have obtained increase in sum insured. There is, therefore, a breach of good faith on your part. (6) It is found that Hygrometer was not installed in any of the chambers and hence, no wet bulb temperature could be recorded. There is, therefore, a breach of policy warranty No. 5. (7) There is breach of warranty 6(ii) inasmuch as the temperature has been recorded beyond 590F. (8) There is a breach of warranty 9 of the policy as immediate information in the manner required by the warranty, was not given. (9) You had taken no steps to control the deterioration of stocks not for removal of the affected stocks and for the prompt disposal of the stock, even when the company agrees to indemnify you for the necessary and reasonable expenses incurred in this regard. There is, therefore, a breach of warranty No. 10 of the policy. (10) The intimation of the occurrence has not been given in accordance with the condition 4 of the policy. (11) The policy contains condition 2 which clearly states that compliance with the conditions and warranties of the policies, is the condition precedent to liability of the company. IN view of the aforesaid, we regret that the claim reported by you is not admissible under the policy and the liability in respect thereof is hereby repudiated.

Authorities of Bihar Government have replied to each of the factor taken to repudiate the claim. We deal with the salient points. About there being no licence to run the cold storage. We see that as per record the complainant had applied for a licence to the Competent Authority on 13.3.1999 and the licence was issued on 10.8.1999. Policy was issued on 16.4.1999 and the factum of application having been made and there being no licence at that time was within the knowledge of the insurers at the time of issuing insurance cover. This ground in our view appears to be an after thought to escape the liability now hence does not in our view, merit any consideration. We find no merit in this contention. On the point of not adhering to several conditions of policy after perusal of material on record, we have to agree with the complainant that since they were never supplied to the Veg Fed, these conditions, which the opposite party kept with itself, cannot be enforced to the disadvantage of the complainant. The principle of ''good faith'' invoked by the opposite party holds good for both parties. If a condition is not supplied/received out to the other party it cannot be invoked later on. Question of good faith shall arise only when the other party is aware of the terms. In this instance, it is the opposite party whose good faith is suspect. We see no merit on this point of repudiation of the claim in terms of conditions which were never supplied to the complainant.

ANOTHER ground advanced repudiation is that claim under D.O.S. policy can be invoked only if the claim is accepted under the M.B. Policy. In the instant case unrebutted case of the complainant is that claims were preferred under both the policies and whereas claim under D.O.S. Policy has been repudiated, no view of the opposite party in the claim under M.B. Policy has been taken/communicated to the complainant which we find in itself is a deficiency on the part of opposite party. In these circumstances, opposite party cannot be permitted to take umbrage under this condition. Next point made is about late reporting of the incident to the opposite party. For this purpose opposite party relies on Clause 6 of the Machinery Breakdown Policy Duties following an accident. We see no such condition in D.O.S. Policy. As discussed earlier, these terms and conditions of both MB & DOS Policies were never given to the complainant. If they were not given, neither can they be treated as part of this contract nor can knowledge of these terms by the complainant be assumed. We see no merit in this ground either. Opposite party has to pay for his irresponsible and unexplained conduct as to why policy along with terms and conditions were not issued in time. It is also alleged by the opposite party that the bags of potato fell from the stock on the Amonia Gas Pipe on account of negligence of the complainant. We see no material to support argument of the opposite party. The report of the Surveyor Satish Saran & Associates in its report states that "allegedly few bags full of potatoes accidentally fell on the Gas Pipe Line". No act of negligence is alleged against the complainant . We see no merit on this ground.

AS per material on record we see that there are two Surveyor Reports - One by Mohan Varma and other by Satish Saran & ASsociates. The first Surveyor estimates the loss at Rs. 9,28,500/- which is approximate and goes on to add that "further survey to establish the exact loss is not ruled out".

THE second Surveyor whose detailed report is on record has estimated the loss at Rs. 29,18,340/- subject to terms of the policy. As per record we see that policy cover was issued on 10.4.1999 for Rs. 25.00 lakhs. Quantity indicated in this was 12,500 quintals. These facts are admitted facts available with the parties and there is no dispute. Incident in this factory happens on 26.4.1999 which allegedly is reported to the opposite party on 4.5.1999. Second intimation is sent by hand, yet this reaches to the opposite party on 31.5.1999. Letter dated 4.5.1999 which is on record does not show as to how this was sent certainly, not under registered cover and not a word about damage to potatoes. We find this letter as unacceptable. The incident happened on 4.5.1999. Potatoes have been damaged - yet they have the temerity to write to the opposite party a letter dated 28.5.1999 asking them to increase the policy cover under D.O.S. by another Rs. 10.00 lakhs and enclose a cheque paying the premium. Formal intimation of loss reaches the opposite party two days later. One cannot but agree with the opposite party that withholding information of loss and praying to cover it by requesting for enhancement in the policy cover is a deliberate and calculated move to cover the loss which had already occurred and information about which is consciously being withheld, thus, hitting at the very roots of good faith of taking an insurance policy for indemnification of loss.

It is very unfortunate that a public body should indulge in such a malpractice. In these circumstances, there is no way we can accept the enhanced limits of policy. So far, purposes of dealing with the instant case, insurance policy has to be seen to cover Rs. 20.00 lakhs under D.O.S.

IN the light of the above discussions, while we see no merit in the grounds for repudiation we also do not see any merit in the claim of complainant to the limit of Rs. 35.00 lakhs. Under these circumstances, we direct the opposite party to settle the claim of the complainant Rs. 22.50 lakhs based on policy cover of Rs. 25.00 lakhs after providing for shrinkage (5%) and Rottage (5%) along with interest @ 9% from the date of filing the complaint i.e. 23.2.2001 till the date of payment which must be made within six weeks of passing of this order. The parties are left to bear their own costs. Complaint disposed of.