SEHGAL KNITWEARS IMPORTERS EXPORTERS vs UNITED INDIA INSURANCE COMPANY Limited

THOUGH the complaint was filed against four of the opposite parties, however notice of the complaint was issued to opposite party No. 2, United India Insurance Company, Branch Office, Ludhiana. Opposite party No. 1 was also shown as the Insurance Company aforesaid with registered office at Madras. Opposite parties Nds. 3 and 4 were the foreign buyer and the shipping agency. No relief was claimed against opposite parties Nos. 3 and 4 in the complaint. In the original complaint compensation calculated in US dollar for the loss suffered was claimed, the complainant was thus called upon to file amended complaint giving equivalent amount in Indian currency. It was done.

M/s. Sehgal Knitwears Importers & Exporters of Ludhiana, a registered partnership firm filed the complaint through Mukesh Sehgal, its partner. They are doing the business of imports and exports of hosiery items and to cover the risk of goods supplied to foreign buyers, they had taken an insurance policy in the sum of Rs. one crore from the opposite party, the aforesaid Insurance Company on November 22, 1993 (Annexure C-l). Under the policy goods to be sent from Ludhiana to any place in the world were covered. On March, 14,1994,126 cartons of wool blended blankets were to be supplied to opposite party No. 3, M/s. Asha International, Ukrane (Russia), as per Contract No. 01 / AA/94, Invoice No. SK/254/94 dated July 2, 1994 was issued in the name of opposite party No. 3 for 126 cartons valuing 38000 US $ (copy of the invoice Annexure C-2). Copy of the list of the articles despatched by the aforesaid cartons is Annexure C-3. The consignment was sent to Bombay for shipment to Russia through Trade Wing Carrier of India (Transporter) vide GR No, 099102 dated July 2,1994 for onward delivery to M/s. Greatway Transport Company (Clearing Agent at Bombay). The goods did not reach Bombay in time and the ship left the Port without such goods. The same were unloaded at Bombay and kept in the warehouse of the Transporter-Dynamic Warehousing Corporation, in village Bhiwandi, Bombay. Ultimately the goods were sent to Ukrane by ship from Bombay. A sum of Rs. 5,752/- was paid to the Clearing Agent and Rs. 22,514/- as octroi before the taking the consignment from the warehouse on November 11,1994. The goods were consigned by ship vide Bill of Lading No. BOM/KEV/004 dated 19.11.1994 issued by Ukranian Danumbe Shipping Company (Vide Annexure C-4). The buyer was informed accordingly. Ordinarily the consignment was to reach there in December, however it actually reached on March 28, 1995 and that too without original seal. The Customs Authorities informed opposite party No. 3 about the shortage and certificate was issued in this respect (copy Annexure C-4/A) by Customs Authorities. The container was found short of 35 cartons of wool blended blankets. Thus shipping Company was informed about the shortage and further requested to settle the claim vide letter dated April 1,1995 (Annexure C-5). A reminder was issued on May 20, 1995 (Annexure C-6). The complainant was informed about the shortage on telephone and the same was brought to the notice of opposite party No. 2, the Insurance Company with the request to depute the Surveyor but to no effect. The survey was conducted by Insurance Company of Ukrane and vide report Annexure C-7 loss to the tune of US $ 19352.28 was assessed. The shipping company was informed. The total shortage of 35 cartons and 91 cartons was found to be 829 pieces, as confirmed by Chamber of Commerce and Industries, Ukrane vide letter dated June 19, 1995 (Annexure C-8). Thus total loss of the complainant was stated to be 19352.28 US $. 125 US $ were paid to Chamber of Commerce and Industries. The Insurance Company was called upon to settle the claim, vide letter dated June 19, 1995 (Annexure C-9). The delivery was taken by the foreign buyer-opposite party No. 3 on June 7, 1995 in order to avoid further demurrage charges. Thereafter all the documents were despatched to the complainant by the foreign buyer alongwith survey report for lodging the claim with the Insurance Company. It may be noticed that after issuance of bill of lading, the Insurance Company issued Insurance Certificate No. 002171 on November 28,1994 to the effect that the consignment referred to above sent to opposite party No. 3 had been insured (copy Annexure C-10). The claim was lodged by the complainant on January 16,1996 (Annexure C-11). Several reminders were issued to the Insurance Company but with no effect. On January 17,1997 the complainant was informed by the Insurance Company that the matter was under process (Annexure C-12). All the documents required were sent by the complainant to the Insurance Company vide letter Annexure C-13. The Insurance Company vide their letter dated June 17,1997 rejected the claim (copy Annexure C-15). This led the complainant to file present complaint before this Commission alleging deficiency in rendering service on the part of the Insurance Company in illegally rejecting the claim and not settling the claim under the terms and conditions of the policy. Different grounds taken for rejection of the claim were refuted in the complaint.

The Insurance Company contested the complaint and submitted their reply denying any deficiency on their part in rejecting the claim. Preliminary objections were taken that the claim was bona fide rejected on material collected vide Annexure C-l6. The complainant committed breach of conditions of the insurance policy. The risk was covered for transit of consignments through rail/road/air from Ludhiana to any place of the world. The transit of the consignment through ship was not covered in the insurance policy. The survey was not got done through the Insurance Company. The blended blankets were not covered under the policy of the insurance and only the hosiery goods and leather goods were covered. The blended blankets do not fall under the definition of hosiery goods and leather goods. The delivery of the consignment was taken after 70 days of arrival at destination. Taking into consideration all the aforesaid facts the claim was rightly repudiated. The complaint was malafide filed by the complainant. Complicated questions of law and facts were involved, which were outside, the summary jurisdiction of the Commission. It was not explained as to why delivery could not be taken for 70 days. The complainant firm was not registered under the Indian Partnership Act and the complaint was not filed by registered partner. It was not explained as to how a sum of Rs. 7,74,120/- had been calculated as claimed in the amended complaint. Both the parties produced their evidence on affidavits and documents. On behalf of the complainant reliance was placed on all the documents filed alongwith the complaint. On behalf of the Insurance Company affidavit of Bal Kishore, Manager of the Insurance Company was filed alongwith copy of the insurance policy Annexure R-1 accompanied by a performa of Institute War Clauses (Cargo). The following questions require consideration : (i) Whether the repudiation of the claim by the Insurance Company vide Annexure C-15 is illegal and arbitrary ? . (ii) How much compensation, if any, the complainant is entitled to from the Insurance Company ? (iii) Relief.

Question No. 1 :

THERE are various questions which had been raised on which the decision of this question depends. Some of the questions would be deemed to have been covered under the policy as the Insurance Company had issued a certificate of insurance with respect to 126 cartons which are in dispute. Such questions being : (a) Whether risk after transit is covered by the policy ? (b) Whether wool blended blankets are covered under the terms of the policy ?

While making reference to the insurance policy Annexure R-1, learned Counsel for the Insurance Company argued that the risk by rail/ road/air only was covered. Further relying upon the insurance policy it is stated that the goods covered under the policy were hosiery goods or leather goods and not wool blended blankets. He has referred to the definition of hosiery as given in the dictionary "The Concise Oxford" page 570. It defines hosiery as stockings and socks; knitted or woven underwear". It is to late for the Insurance Company to raise these points at the time of repudiation of the claim when these facts were brought to the notice of the Insurance Company for issuing the Insurance Certificate as without the same the goods could not be sent. It was the Shipping Corporation''s bill of lading on the basis of which the insurance certificate was issued. The Insurance Company fully knew that the goods were to be transported through ship and that they were wool blended garments. Once the Insurance Company had issued the insurance certificate enabling the transhipment of the goods to Russia, the risk of such goods stood covered and the Insurance Company is estopped by their own act and conduct from raising such pleas at the later stage. The repudiation of the claim on these grounds was nothing but arbitrary. It was open to the Insurance Company to claim extra premium, if an objection had been raised that such goods were not covered under the policy already taken by the complainant or that the risk of the goods for which the certificate of insurance was issued was not covered under the terms and conditions of the policy or were not hosiery goods as such.

THE contention of learned Counsel for the Insurance Company is that the loss was not got assessed from the Surveyor appointed by the Insurance Company rather after getting the loss assessed amount was claimed. Reliance was placed on the report of the Surveyor who had already assessed the loss. This contention again cannot be accepted. It was open to the Insurance Company when claim was lodged to get the loss assessed at their own level. Otherwise, Surveyor''s report was only a piece of evidence on which the complainant relied for determination of his loss. Inaction on the part of the Insurance Company when the claim was lodged in not getting the loss assessed per se amounts to deficiency in rendering service. It was argued that there was delay of 70 days in taking the delivery by foreign buyer from the port after arrival of the goods there and thus the risk was not covered under the policy. There is no merit in this contention. The short arrival of the goods came to be noticed. The moment the container landed at the port by the Customs Authorities. They prepared the necessary documents and informed the party i.e. foreign buyer who subsequently informed the complainant. It was open to the Insurance Company to make inquiry at their own level as to the number of cartons which were missing at the time of arrival of the goods at Ukrane. All these matters could be verified from the documents prepared by the Port Authorities/ Customs Authorities in Russia. The complainant relies upon such documents in this complaint and we find no ground to ignore the same. The Insurance Company took an arbitrary decision in repudiating the claim. The question No. 1 is therefore decided against the Insurance Company holding that the repudiation of the claim was arbitrary and not based on material and was not bona fide. Question No. 2 : During the arguments, a photocopy of letter issued by the Chief Manager, Foreign Department, State Bank of Patiala so far issued giving the comparative rate of US $ in rupees prevalent on March 27, 30 and 31, 1995 was produced. It is not necessary to refer to the same as in the amended complaint by that conversion the amount claimed has been stated to be Rs. 7,74,120/-. It has not been shown that this figure is not in accordance with the Exchange Rate. Apart from the aforesaid amount the complainant is also entitled to Rs. 5,000/- paid to the Chamber of Commerce and Industries and Rs. 2,000/- to the Surveyor. Thus the total amount payable to the complainant was Rs. 7,81,120/-.

IN the complaint interest at the rate of 24% per annum was claimed by the complainant. However, Supreme Court in United INdia INsurance Company v. M.K.J. Corporation, III (1996) CPJ 8 (SC), has held that against the nationalized insurance companies compensation by way of interest should not be more than 12% per annum. Thus, on the amount aforesaid Rs. 7,81,120/-, the complainant will also be entitled to interest at the rate of 12% per annum allowing three months time from the date of lodging claim till payment. This question is also decided accordingly.

FOR the reasons recorded above, this complaint is allowed with the direction to the Insurance Company to pay a sum of Rs. 7,81,120/- with 12% per annum interest thereon with effect from the date three months after lodging of the claim till payment alongwith Rs. 10,000/- as costs of litigation. Before parting with the judgment reference be made to an application filed on behalf of the complainant for summoning Bal Kishore, Manager of the Insurance Company alongwith record of tine Insurance Company. This application is rejected having been filed at the time of arguments when both the parties had already led their evidence and case was adjourned 3-4 times for arguments. Furthermore, it is not considered necessary for proper decision of the complaint to prolong the proceedings as the decision has already been made on merits as above. Complaint allowed. ______________