ORIENTAL INSURANCE Company Limited vs PREM PRINTING PRESS

THIS is an appeal against the judgment and order dated 16.3.1998 passed by District Consumer Forum- II, Lucknow in Complaint Case No. 738/94.

BRIEFLY stated the facts alleged in the complaint are as follows : M/s. Prem Printing Press approached the opposite party, the Insurance Company for getting their photo composing machine insured under the Electronic Equipment Insurance Policy. In response to his request the Insurance Company deputed technical expert to inspect the said machine before accepting the proposal. Accordingly the machine was inspected by Mrs. Neeru Sood, technical expert. A detailed report was prepared by technical expert on 14.5.1992. On the basis of this report the opposite party was satisfied and asked the complainant to deposit the payment of Rs. 28,262/- which was paid by the complainant to the opposite party but neither the cover note nor the policy was ever issued to the complainant in spite of the fact that the amount of the premium had been credited in the account of the opposite party. The insurance for the machine was of the value of Rs. 6.00 lacs. In September, 1992 the machine started giving some trouble and the fact was intimated to the branch office of the opposite party. At the same time the complainant requested M/s. Kohli Graphic System Private Ltd., New Delhi, the authorised service centre in India and approved by the opposite party to check the fault in the said machine. The said M/s. Kohli Graphic System found the Photo Deck CRT of the machine defective and irreparable. The complainant reminded the opposite party along with the service certificate of M/s. Kohli Graphic System which showed the photo deck CRT of the said machine as defective vide their letter dated 21.9.1992. In response to this request the branch office of the opposite party asked the complainant not to get the said machine repaired until the Surveyor of the opposite party surveys the machine and the complainant was asked to submit estimate of the repairs of the said machine. The complainant furnished all the required information and documents to the opposite party and further requested that the Press may be allowed to get the machine repaired as some urgent security work of Government of India was to be completed within the prescribed time but there was no response. To the utter surprise of the complainant the opposite party on 30.3.1993 informed the complainant that the Competent Authority had repudiated the claim as the loss fell within the special exclusion (i) of Section 1 under Electronic Equipment Insurance Policy and the file was closed as no claim. The complainant aggrieved of this action of the opposite party made a representation to the effect that after six months of lodging of the claim the plea taken by the opposite party in rejecting the claim was not justified and reconsideration of the claim was requested to the opposite party. In another letter the complainant also informed the opposite party that other Insurance Company, M/s. New India Assurance Company Ltd. Delhi had paid the claim of the same part of the machine to another insured person. It was also represented to the opposite party that their technical expert Mrs. Neeru Sood had not excluded this part of the machine nor had she mentioned in her report that the part could not be covered under the insurance and therefore, the complainant had been put to harassment. The opposite party promised to review the matter. On 28.2.1994 the opposite party informed the complainant in response to various representations, that there was no ground to change their earlier decision. The complainant then sent a legal notice dated 16.4.1994 through its Counsel to the opposite party to settle the claim within 30 (thirty) days. It was alleged by the claimant that all the laws and rules for insurance are the same for all the subsidiaries of the General Insurance Corporation. The ex-parte communication of the decision of the opposite party in rejecting the claim lodged by the complainant is arbitrary as the claim for the same part has been passed and paid by M/s. New India Assurance Company Limited, New Delhi to another insured. It was unbecoming for the opposite party in rejecting the claim without getting the loss/damage surveyed by technical expert or Surveyor as during the course of pre-acceptance inspection this particular part of the machine was not said to have been excluded from the coverage under the policy. The complainant had been suffering a huge loss in his business from the first week of September, 1992 when the aforesaid part of the machine was damaged and due to which the machine had not been functioning. A claim was, therefore, lodged before the District Consumer Forum for payment of the claimed amount and the damage, a compensation of Rs. 1 lac and cost of proceedings were also claimed.

In the written version before the District Consumer Forum, the opposite party stated that the Varityper Machine of the complainant was insured as a whole under the Electronic Equipment Insurance Policy for a period from 5.6.1992 to 4.6.1993 with the terms and conditions of the insurance policy which are the basis of contract between the complainant and the opposite party. The insurance is always done on utmost good faith of both the parties and has to be followed by both of them. The insurance policy was sent to the insured by post. After due investigation and getting the said machine surveyed through the qualified Surveyor Sri V.K. Kapoor and on the basis of his report submitted on 16.11.1992 and as per terms of the insurance policy the claim was repudiated on 30.3.1993 which was duly conveyed to the complainant. The notice allegedly sent by the complainant on 16.4.1994 was received by the head office of the opposite party while the matter was being dealt with at Lucknow under the guidance of the head office and the grievance cell of the opposite party at Delhi in order to satisfy the complainant directed the concerned office for expediting the complaint. It was not known to the opposite party as to under what circumstances the claim of the similar machinery part was settled by another Insurance Company, New India Assurance Company since the damage alleged to have been caused to the machine comes under the Special Exclusion Clause under Section 1(i) of the policy, the claim was repudiated. The complainant is running the printing business through his Varityper Machine along with printing press on commercial basis to earn profit and therefore, the complaint is not maintainable. The complaint was also barred by time. The opposite party had taken prompt action after due survey and enquiry and the claim of the complainant was not found tenable under the terms and conditions of the insurance policy. There was no deficiency of any sort in rendering the services to the complainant. The opposite party got the machine as a whole insured under the specific policy (Electronic Equipment Policy) with specific terms and conditions which is the basis of the contract between the complainant and the opposite party. If there was any manufacturing defect the same could not have been covered under the insurance policy. The CRT of the machine was defective and the complaint is liable to be rejected. It was also contended that as per Condition No. 7 of the policy the complaint has not been lodged within three months of the repudiation of the claim.

THE District Consumer Forum after hearing both the parties decreed the claim of the complainant and directed the opposite party to pay the complainant an amount of Rs. 1,13,543/- along with interest @ 18% p.a. w.e.f. 8.4.1993. A compensation for an amount of Rs. 5,000/- and Rs. 2,000/- as cost of proceedings was also awarded to the complainant. THE Forum further ordered that in the event of non-payment in time further interest @ 2% per month shall be payable on the entire amount. We have heard the arguments of the learned Counsel for the two parties. The learned Counsel for the appellant has argued that the loss as reported pertains to the damage of CRT (Cathode Ray Tube), the component of the machine consisting of glass and tube, which was not covered and specifically included in exclusion clause (i) given in the policy under the Electronic Equipment Insurance Policy It was further argued by him that the claim has to be brought before the Court of law within 3 calendar months of the date of information of the repudiation and since the complainant failed to do so the claim should be treated as abandoned and therefore, the same is barred by time.

THE learned Counsel for the respondent has argued that after the claim was repudiated a number of representations were filed and it was only on 28.2.1994 the opposite party informed the complainant that Cathode Ray Tube (CRT) was excluded from the insurance cover, therefore, finding no alternative the complaint was filed before the District Consumer Forum. Written arguments were also filed by the respondent and it was stated that the survey was done on 1.11.1992 and Surveyor had assessed the loss to the tune of Rs. 2,11,000/- but the claim was repudiated. Repudiation was made on 28.2.1994. Legal notice was sent to the opposite party on 16.4.1994 and a reply was received on 9.5.1994. THE complaint which was filed on 6.8.1994 is, therefore, not time-barred. THE technical expert of the opposite party prior to the acceptance of proposal of insurance did not exclude the photodec CRT from the insurance claim. It was also argued that in this case the service of the Insurance Company was hired for a consideration and the case does not relate to buying of the goods. THErefore, the complaint was maintainable before the District Forum. A perusal of the evidence goes to show that there is no dispute in regard to the policy, the premium of which had been paid to the opposite party by the complainant and the policy was in regard to the electronic equipment. The dispute between the two parties is that the claim was covered under the Special Exclusion Section and that the complaint has been filed after the expiry of the period of three months as provided under Clause VII of the policy. In regard to the first point of dispute it is pertinent to point out that the consultant had been asked to examine the feasibility of the insurance of the machinery part in question. The consultant had inspected the electronic equipment system and found it in sound condition and in satisfactory working order. It was also pointed out by the consultant that the insurance cover desired by the proposers may be granted. The equipment in question among others was Varityper Machine (CRT Machine) the value of which was assessed at Rs. 7 lacs. As per the letter of the complainant to the opposite party, the insurance policy was to be issued against the break down of Varityper Phototype setting computer system which was to cover the cost of repairs of the damaged parts, cost of the parts and charges of the engineer who was supposed to attend the breakdown. On the basis of this report the opposite party''s technical expert Mrs. Neeru Sood had submitted her technical report. It was suggested in the report that the electronic items be insured on present day replacement value. It was also recommended that the policy be subjected to imported machinery endorsement. On the basis of that report the premium for the policy was remitted by the complainant which was accepted by the opposite party. If there had been any doubt in the mind of the Insurance Company then they were at liberty not to have accepted the premium. It was on 9 9.1992 that the complainant informed the opposite party that the insured item Varityper Photo Composing Machine was giving some problem while exposing. A representative of the Insurance Company, was, therefore, required to be deputed. M/s. Kohli Graphic System, New Delhi was also requested to depute their engineer who checked the machine and found the photodec CRT defective and irreparable. The opposite party on 23.9.1992 acknowledged the report of M/s. Kohli Graphic System and asked the complainant not to get the machine repaired till it has been surveyed by the engineer of Insurance Company. Later on the opposite party repudiated the claim stating that the loss comes under the Special Exclusion (i) of Section 1 of the policy.

A perusal of the format of the policy under electronic equipment will reveal that special exclusion through Section 1 has been defined as follows : "Loss or damages to bulbs, valves, tubes, ribbons, fuses, soals, belts, wires, chains, rubber tyres, exchangeable tools, engraved cylinders, objects made of glass, porcelain of ceramics, sieves or fabrics or any operating media (lubricating oil, fuel, chemicals)."

A perusal of the copy of the schedule of the policy will reveal that electronic items covered under the insurance policy in question were Varityper Machine, Work Station Machine comprising single disk drive, visual display unit and key board etc., items like constant voltage transformer, air conditioner are also included. When we compare these insured items with once including in the Special Exclusion to Section 1 we find that the items mentioned in the exclusion are minor in nature and are mere insignificant parts of the main item insured The item insured were of very high value and the items suggested in the special exclusion list are bulbs, tubes, fuses, ribbon, etc. A perusal of the Surveyor''s report submitted by Sri Kapoor to the opposite party, reveals that the affected item is Varityper 6810 Machine an imported item purchased in 1989 which was a special purpose computerised proto-typer setting machine. The machine consists of CRT screen, mirror and lens configuration and a paper feeding mechanism. Once the copy composing is completed on the screen, text can be sent to the photo-unit where it is type set. Digital information is also loaded into the system. On the CRT screen, a vertical beam of light moves from left to right across the character which are reflected above the screen. The photo-unit configuration allows to type set in excess of 175 news papers lines, 9 point size per minute. This description of the insured machine given by the Surveyor is entirely different from the items included in the special exclusion in Section 1 of the policy. In a case of damage to the machine which cannot be repaired as per report of the engineer approved by the opposite party, CRT of the machine as per report of Surveyor required to be replaced. The Surveyor further reported that the machine was non-operative and it was subsequently replaced by another CRT arranged on loan. Therefore, the damaged CRT needs replacement. The Surveyor also found the voltage stabilizer unit as satisfactory and therefore, assessed a loss of Rs. 2,11,000/-, after deducting depreciation, etc. the gross estimated loss was of Rs. 1,22,000/-. The Surveyor further found that the damage to the CRT machine is beyond the scope of policy and the loss does not appear to be tenable. We are not in agreement with the opinion given by the Surveyor.

As discussed above the Surveyor has himself admitted in his report that the damaged machine is insured against Item No. 1 of the schedule of policy for Rs. 6,78,342/-. Since the main part of the insured machine has been damaged and as discussed above it does not come in the Special Exclusion to Section 1 of the policy, therefore, it can be safely held that the claim was not covered under Special Exclusion Section 1. This is further strengthened by the fact that New India Assurance Company Limited with regard to a certain claim of similar type had allowed the insurance claim of the insured towards machinery break-down photodec CRT of composing machine (Page 45 of the paper book filed by the respondent). The appellant, Oriental Insurance Company and the New India Assurance Company Ltd. are two of the four subsidiaries of the General Insurance Corporation of India and uniform norms are required to be adopted by both the subsidiary companies in settlement of such claims. We, therefore, find that the item insured by the respondent should not have been included in the exclusion list for which a huge premium was charged.

THE appellant has contended that the complaint had been filed after the expiry of period of 3 months and therefore, it was barred by time. THE basis of this argument is para 7 of the General Condition of Policy Which lays down that "it is also hear by further expressly agreed and declared that if the Company shall disclaim liability to the insured for any claim hereunder and such claim shall not within 3 calendar months from the date of such disclaimer have been made the subject-matter of the suit in a Court of law, then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder". In this case the claim was lodged before the Insurance Company on 9.9.1992. Repudiation was done by the opposite party on 30.3.1993, after about 6 months. Thereupon the respondent made representations on 12.4.1993, 12.5.1993 and 4.8.1993. The opposite party on 6.8.1993 wrote to the complainant to bear with the Company till such time a decision was made. Reminder was sent by the complainant on 4.2.1994. The opposite party in reply stated that the matter was being taken up. This reply is dated 11.2.1994. Opposite party in its letter dated 28.2.1994 informed the complainant that there was no good ground to change their earlier decision. On 16.4.1998 a legal notice was given to the opposite party by the complainant and the complainant was informed that the matter was being taken up. (Copies of paper from SI. Nos. 30 to 44 of the paper book filed by the respondent). No communication was received till 5.8.1994 and the complaint was filed on 6.8.1994.

IN the matter relating to Food Corporation of INdia v. New INdia Assurance Company Limited & Ors., in Civil Appeal No. 5354 of 1990 reported in (1994) 3 SCC page 324, it was held by the Apex Court that the terms of the agreement should not be so construed as to bar the remedy of suit. Cause of action arises only on insurance refusal to indemnify the insured. It was further held by the Hon''ble Court that agreement limiting time for assertion of rights by laying claim in terms of agreement but not for enforcement of right in Court was not void and purpose of prescribing such time limit is to put the other side on notice and not to restrict the statutory period of limitation. In this case the CRT machine of the complainant was insured with the Insurance Company and when the machine was damaged claim was lodged and the same was repudiated on the ground of exclusion which was arbitrary. The complainant made several representations and he was assured by the opposite party to wait for a decision and final decision communicated on 28.2.1994 was the confirmation of repudiation and thereafter on 16.4.1994 a legal notice was given to the opposite party. The opposite party thereupon gave an assurance to the complainant that the matter was under examination on 9.5.1994. Complaint before the Forum was filed on 6.9.1994. The aforesaid principle laid down by the Hon''ble Court has again been followed in case of National Insurance Company v. Sujir Ganesh Nayak & Company & Ors., (1997) 4 SCC page 366.

WITH respect to the question of limitation it has also to be seen as to whether the complainant knows that the period of limitation for filing the complaint is three months from the date of repudiation. Unless the complainant know this fact he cannot be blamed for it. The complainant in para 4 has alleged that neither the cover note nor the policy was ever issued to the complainant in this respect. The answer to this assertion is that the policy was sent by post. The burden lies on Insurance Company to prove that the policy was received by the complainant before the repudiation was made by the Insurance Company. Unless this fact is proved it cannot be said that complainant had knowledge about the limitation for filing the complaint within a period of three months. This is one of the terms mentioned in the policy and policy was not received by the complainant hence it cannot be said that the complainant knew about the limitation.

WE, therefore find that the plea raised by the opposite party that the complainant should have filed the claim within 3 months of disclaimer made by them carries no force. In view of the above discussions we find that the opposite party who had taken huge amount as premium for insuring the electronic equipment of the complainant and repudiated the claim on filmsy ground was deficiency in service which resulted in loss to the complainant and therefore, conclusion arrived at by the District Consumer Forum is quite justified. The District Consumer Forum has decreed the claim for Rs. 1,13,543/- along with interest @ 18% per annum w.e.f. 8.4.1993. A compensation for Rs. 5,000/- and cost of proceedings of Rs. 2,000/- Were also awarded.

Now the question of rate of interest arises. Learned Counsel for the Insurance Company has argued that the interest should be fixed at the rate of 12% per annum. In support of his argument he has placed reliance on the case of United India Insurance Company Ltd. v. M/s. MKJ Corporation, III (1996) CPJ 8 (SC)=1996-1999 CONSUMER 4781 (NS), in which it was held that the rate of interest in the case of Insurance Company should be 12% per annum. However, the learned Counsel for the complainant has argued that the interest should be awarded at the rate of 18% per annum in view of the decision of the Hon''ble Supreme Court in case of United India Insurance Company Limited v. Fancy Traders, VII (2000) SLT 365=JT 2000 (10) SC 337. The Hon''ble Supreme Court in this case has held that the interest at the rate of 18% per annum is justifiable. The order of the Hon''ble Supreme Court is very short and is being reproduced below : ORDER 1. Leave is granted. 2. Heard learned Counsel for the parties. 3. The net loss caused to the respondent due to fire was assessed at Rs. 4,72,146/- but the applicant paid only a sum of Rs. 2,75,146/- to the Bank of the respondent. The balance amount together with interest at the rate of 18% was ordered to be paid to the respondent by the State Commission. 4. Having regard to the facts and circumstances of the case, the High Court also did not interfere with the rate of interest awarded by the State Commission, we find no justification for our interference in the matter under Article 136 of the Constitution. 5. The appeal is accordingly dismissed. There shall be no order as to costs."

IN a more recent case, National INsurance Company v. Ram Sheo Kumar, Civil Appeal No. 3110/1993, along with Appeal No. 4430/1993 decided on 23rd September, 1999, the Hon''ble Apex Court had also considered the quantum of interest which should be awarded in the case of INsurance Company. IN that case before the Apex Court, it was held that the repudiation of the claim by the INsurance Company was wholly mala fide. It was held that all the risks were covered by the insurance policy. The ship which was carrying the goods was lost on the high seas. Before the Hon''ble Supreme Court it was contended that the Commission was not justified in awarding the interest at the rate of 18% per annum to the respondent. The Hon''ble Supreme Court repelled the contention of the INsurance Company about the rate of interest in the following words : "So far as the question of quantum of interest is concerned, we see no infirmity in the order passed by the Commission except. that the order of the Commission requires a little alteration so that the date 6.12.1987 is altered to 12.8.1987 in consonance with the judgment of the Commission itself."

Thus in view of the latest decision of the Hon''ble Supreme Court, it is now clear that the interest at the rate of 18% per annum is to be paid by the Insurance Company when it is found that the deficiency is on behalf of the Insurance Company.

ON the basis of above discussion the rate of interest payable by the Insurance Company to the complainant is 18% per annum. However, the penal interest of 2% per month is struck down as the interest at the rate more than 18% p.a. cannot be awarded. The appeal is liable to be dismissed accordingly. ORDER The appeal is dismissed and the judgment and order of District Consumer Forum-II Lucknow, is confirmed with the modification that interest @ 2% per month awarded is struck down. The appellant shall also pay to the respondent a cost of Rs. 3,000/-. Let copy as per rules be made available to the parties. Appeal dismissed with costs.