(1.) The present Consumer Complaint has been filed under Section 21 of the Consumer Protection Act, 1986 (hereinafter referred to as the Act) by M/s. Mangalam Organics Limited, Mumbai (hereinafter referred to as the Complainant Company) against The New India Assurance Company Limited (hereinafter referred to as the Opposite Party Insurance Company).
Brief facts as narrated in the Consumer Complaint are that the Complainant Company M/s. Mangalam Organics Limited (earlier known as Dujodwala Products Limited in the year 1981 and subsequently known as Allied Colloids Pvt. Ltd. in the year 1992) is engaged in the manufacture of Terpene Products such as Camphor Technical, Camphor A Grade, Camphene, Isoborneol, Dipentene, Sodium Acetate Trihydrate, Camphor Oil, Pine Oil, Pine Tar, Resin Products such as Terpene Phenolic Resin, Penta Ester Gum, Glycerol Ester Gum, Alkyl Phenolic Resin, Phenol Formaldehyde Resin, Gum Rosin etc.The Complainant Company is an ISO certified Company and is a Government recognized Export House with customers in Europe, USA, Africa and Middle East.The Factory of the Complainant Company comprised of various departments for the storage, production and Office.One Block of the Factory was used for Resin Plant for manufacture of various Resin Products and other Block comprises of a Camphor Plant used for the manufacture of Camphor Products.The Complainant Company obtained three Insurance Policies, i.e., Standard Fire Policy No. 11080011150100000168, the Declaration Policy No. 11080011150200000001 and Loss of Profits during Business Interruption Period Policy No. 11080011150500000002 valid from 01st May 2015 to 30th April 2016 from the Opposite Party Insurance Company for covering the risk of Building (Super Structure / Plinth and Foundations), Plant and Machinery (P&M), Furniture, Fittings, Fixtures ("FFF"), Stock and Stock (Work-in-progress) at the Factory and also the Loss of Profit (LOP) during the business interruption period.During the currency of the Insurance Policies on 22 June 2015, due to short-circuit there was a major fire accident at about 12:30 hours in the Resin Plant located in the Factory.Upon noticing the fire, the power supply of the entire Factory was isolated and the Plant Operations, including the Boiler Line, Chilling Plant and other Common Utilities were completely shut down as the path of the power cables, the boiler pipelines and the other utility lines moved close to the origin of fire at the Resin Plant.The fire which broke out in the Resin Plant reached the Common Utilities connected to the Camphor Plant.Having no alternative arrangement to cool off the Camphor Plant, maintain the temperature and to prevent the possibility of an explosion, resulting from the exothermic heating of the material charged in process at the various Reactors at the Camphor Plant, the Complainant Company was compelled to drain out Work-in-Progress (WIP) items in the Reactors, Columns and Pipelines to avoid fire/explosion in the Camphor Plant.It is the case of the Complainant Company that if drain out of Work-in-Progress was not done, the Camphor Plant would have also caught fire and it would have lead to an enormous loss to the tune of Rs. 80 - Rs. 100 crores. The Opposite Party Insurance Company was informed about the fire incident on 22nd June, 2015, who appointed M/s. Allied Insurance Surveyors and Loss Assessors Pvt. Ltd. (hereinafter referred to as the First Surveyor) to assess the loss. The First Surveyor visited the Factory to assess the loss, where Surveyor was categorically informed that to avoid possibility of a major catastrophe taking place in Camphor Plant and the damage to common utility pipelines, the Camphor Plant and the Sodium Plant were shut down. Requisite information / documents were provided to the First Surveyor. The Complainant Company informed the Opposite Party Insurance Company that the Resin Plant would take approximately 9 months to get into Operation as it would require redesigning of Equipment, Fabrication, Installation, Commissioning of the Plant and the Structure on which the Equipment is to be installed would also be replaced and it would require huge amount and therefore, the Complainant Company requested Opposite Party to release Rs. 7.5 crore on an adhoc basis to restart the restoration of the Plant. The Complainant Company had to retain the salvage for Rs. 83 lakhs as the highest bidder refused to purchase the salvage due to falling prices of iron and steel and due to which the claim was delaying. The Surveyor issued an Interim Survey Report dated 29.01.2016 vide which he recommended an on-account payment of Rs. 2 Crores towards ad-hoc payment of the claim. The Opposite Party Insurance Company made a payment of Rs. 24_lakh on 11th March 2016 and after repeated requests, another sum of Rs. 1.76 Crore was also released on 31.05.2016 making total ad-hoc payment of Rs. 2 Crores. The Complainant Company requested the Opposite Party Insurance Company to process the claim at the earliest as it is facing financial crisis. The Complainant Company also requested extension of time to complete the reinstatement process. The Complainant Company stated that on 20.12.2016, i.e., after more than 18 months of loss, the Opposite Party Insurance Company informed that their claim under the Business Interruption Policy, i.e., Loss of Profit Policy (LOP) No. 11080011150500000002 would be assessed by another Surveyor, i.e., Mr. Sunil J. Vora (hereinafter referred to the "Second Surveyor") and directed the Complainant Company to provide all the documents to the Second Surveyor for assessing their claim. Necessary / requisite documents were again provided to the Second Surveyor. The Second Surveyor, who was appointed to assess the LOP Claim, submitted its Survey Report on 22nd Feb. 2018 and worked out net claim at Rs. 8,37,42,418.28 (Rupees Eight Crore Thirty Seven Lacs Forty Two Thousand Four Hundred and Eighteen and Twenty Eight paisa) against the claimed amount of Rs. 17,00,00,000/- (Rupees Seventeen Crores only) towards Loss of Profit by the Complainant Company. The said Final Survey Report was challenged by the Complainant Company alleging certain discrepancies in the said Report, but in vain. It is alleged that the Opposite Party Insurance Company on 25.10.2018 arbitrarily and unilaterally credited a sum of Rs. 4,66,43,644/- (Rupees Four Crore Sixty Six Lacs Forty Three Thousand Six Hundred Forty Four only) in the account of the Complainant Company towards full and final settlement of the LOP Claim. The Complainant Company requested the Opposite Party Insurance Company to review the loss assessment as according to the Complainant Company the amount offered was much reduced and without assigning any appropriate reasons for such drastic reduction in the claim amount. But getting no response from the Opposite Party Insurance Company, alleging deficiency in Service and Unfair Trade Practice on the part of the Opposite Party Insurance Company, present Complaint has been filed seeking the following reliefs:-
"a. Declare that the Complainant Company suffered deficiency-in-service and Unfair Trade Practices from the Opposite Party hereinabove.
b. Declare that the Complainant Company is entitled to the full claim amount of Rs. 17,00,00,000/- (Rupees Seventeen Crore only) for the actual loss suffered and covered under the insurance policies;
c. Declare that the Opposite Party unilaterally and arbitrarily credited a partial sum of Rs. 4,66,43,644/- (Rupees Four Crores Sixty Six Lacs Forty Three thousand and Six Hundred Forty Four only) towards alleged full and final settlement of insurance claim of the Complainant Company;
d. Direct the Opposite Party to pay to the Complainant Company the balance amount of Rs. 12,33,56,356/- (Rupees Twelve Crore Thirty Three Lacs Fifty Six Thousand Three Hundred Fifty Six only);
e. Direct the Opposite Party to pay to the Complainant Company interest at the rate of 18% per annum from the date of intimation of loss till the date of actual payment.
f. Direct the Opposite Party to also pay to the Complainant Company compensation to the tune of Rs. 10 Lacs for causing harassment and mental agony in pursuing its legitimate claim;
g. Direct the Opposite Party to pay costs of the present proceedings to the Complainant Company;"
Upon Notice, the Opposite Party Insurance Company contested the Complaint and filed its Written Statement.In the Written Statement, the Opposite Party Insurance Company denied all the averments and allegations contained in the Complaint which were contrary to the submissions made by it or in the report submitted by the Surveyor.It was stated that the Claim of the Complainant has been assessed in accordance with the terms and conditions of the Insurance Policy by a reputed, experienced, Govt. Licensed firm of Surveyor and the admissible amount has been credited in the account of the Complainant in full and final settlement of the Claim.Therefore, there is no deficiency in service on the part of the Opposite Party Insurance Company.It was also stated that M/s. Allied Insurance Surveyors and Loss Assessors Pvt. Ltd. (First Surveyor) were appointed by them for inspection, verification and assessment of material damaged under Fire Policy Nos. 11080011150100000168 and 11080011150200000001 and they did not attempt any verification and assessment of loss under Loss of Profit Policy No. 11080011150500000002.M/s. Sunil J. Vora and Associates were appointed to inspect, verify and assess the loss under Loss of Profit Policy No. 11080011150500000002 after submission of Claim under Loss of Profit Policy by the Complainant Company.It was further stated that M/s. Sunil J. Vora and Associates submitted its report on 21.05.2018 and an Addendum to it was submitted on 09.08.2018, vide which the Surveyor had assessed the Net Claim at Rs. 4,66,84,760/- (Rupees Four Crore Sixty Six Lacs Eighty Four Thousand Seven Hundred and Sixty only) which was accordingly paid to the Complainant Company towards full and final settlement of the Claim.Therefore, there is no unfair trade practice or deficiency in service on their part.It was prayed that the Consumer Complaint be dismissed.
We have heard Mr. Vivek Jain, learned Counsel for the Complainant Company and Mr. S.M. Tripathi, learned Counsel for the Opposite Party Insurance Company.
Mr. Vivek Jain, learned Counsel appearing for the Complainant Company has submitted that the Loss of Profit during Business Interruption Period Policy provides two components which would determine the loss under the Policy, i.e., Maximum Indemnity Period of 12 months and Gross Profit earned.In the present case, the Insurance Company has considered Maximum Indemnity Period of only 253 days whereas 12 months should be considered as the delay caused in reinstatement was not attributable to the Complainant.The reinstatement was not possible without disposal of salvage.The Surveyor issued tender for disposing salvage on 14.10.2015 but it could not be disposed off.Finally, the Complainant Company has to purchase the salvage on 21.01.2016 for expediting the claim.In this way, seven months were lost from the date of incident and only 5 months were left for reinstatement.
He further submitted that the Plinth and Platform over which the Resin Plant had been erected was comprehensively damaged and for re-erection of the Platform of Resin Plant, substantial time was taken, therefore, they should be provided full 12 months period for reinstatement.In this regard, they have already sent various letters dated 13.06.2016, 24.06.2016, 30.06.2016 and 04.07.2016 to the Insurance Company, but in vain.
He further submitted that the Insurance Company changed the Surveyor and appointed M/s. Sunil J. Vora and Associates to assess the claim towards Loss of Profit Policy after more than 18 months of the incident and due to the delay of appointment of authorized Surveyor by the Insurance Company the period of indemnity had expired, therefore, the Complainant Company should be given full 365 days period as provided under LOP Policy.But on the contrary, without considering the aforementioned reasons which were not attributable to the Complainant, the Surveyor and the Insurance Company has fixed the time period under LOP as 253 days whereas it should be 12 months, i.e., 365 days period of reinstatement as provided by the LOP Policy.Regarding the second Component, i.e., Gross Profit earned by Resin Plant, he submitted that their Factory comprises of two independent manufacturing plants - Plant of Camphor and Plant of Resin Products.He submitted that the Resin Plant is an independent Entity as its operation, raw material and finished goods is distinct and isolated by Camphor Plant.Therefore, while calculating the loss departmental clause should not be considered and Gross Profit of Resin Plant should be considered.He further submitted that the profitability of the Resin Plant was distinct from the Camphor Plant and both cannot be mixed to determine and indemnify the Loss of Profit caused to a single plant, i.e., Resin Plant.The fire incident took place in Resin Plant without having any damage or affect to independent Camphor Plant, which can be inferred from Interim Survey Report dated 29.01.2016, Letter dated 04.02.2017 by Surveyor admitting the said fact, Interim Survey Report dated 22.03.2017, Cost and Audit Report duly certified by Cost Accountant of the Resin Plant and the Final Survey Report dated 21.05.2018.He further submitted that even after applying Gross Profit determined by Surveyor for 366 days alongwith growth factor of 10% and after deduction of under insurance and excess of 7 days, they are entitled for Rs. 12,73,19,983/-, whereas the Insurance Company has arbitrarily deposited Rs. 4,66,43,644/- (Rupees Four Crore Sixty Six Lacs Forty Three Thousand Six Hundred Forty Four only) in the account of the Complainant Company towards full and final settlement of the LOP Claim. Relying on the Judgment of the Hon'ble Supreme Court in the case of "United India Insurance Co. Ltd. vs. Orient Treasures (P) Ltd. [(2016) SCC Online SC 32]", he submitted that the contract of insurance is a contract of adhesion and as such the terms of such contract if ambiguous, should be interpreted in a manner wherein the balance of convenience is in favour of the Insured. He prayed that the Consumer Complaint be allowed and reliefs as sought in the Consumer Complaint may kindly be awarded.
Mr. S.M. Tripathi, learned Counsel appearing for the Opposite Party Insurance Company submitted that the LOP Business Interruption Policy was issued in standard format covering the standing charges and Net Profit as defined in the Specification on Turnover Basis.There is no ambiguity in the Policy and therefore, rule Contra Proferentum is not applicable.
He further submitted that Resin Plant and Camphor Plant both used common utilities such as power, boiler steam feet etc.The Complainant did not maintain segmented records for the operation of their distinct Plants.The ascertained rate of gross profit 15.6919% was relevant to all the Complainant's operational plants at the affected location, consolidated at the enterprise level.The Complainant had produced a Cost Accountant's Report showing the profitability of each of their Plants alongwith break-up of contribution for each of their plant operations, but CA Report was not based on the basis of each item of expense of common overheads ascertained and allocated to each plant on periodical basis.It was prepared only as one-time exercise and the allocation of overheads expenses would be arbitrary and a mere guess work.This is not in accordance with the terms of the Policy.The consideration of the annual turnover, the standard turnover, the shortage in turnover and rate of gross profit on departmental basis is not correct.The Policy was issued for consolidated sum insured of Rs. 30 crores for all the plants and does not contain a department wise sum insured to be applicable to each of the plants separately. He further submitted that the Surveyor in its report erred in ascertaining the loss of gross profit of Resin Plant on the basis of Cost Accountant's report on departmental basis allocation and applying the average condition.The Surveyor cannot rewrite the contract for the Parties.The Surveyor corrected its report and issued Addendum Report dated 09.08.2018 which contained the amount of loss assessed in accordance with the terms and conditions of the Policy.
He further submitted that the Complainant Company has not disclosed the date from which the permission to rebuild the unit was given to it by Authorities.The delay in receiving permission of the Investigating Authority to commence reinstatement cannot be attributed to the insurers.Such delay is one of the factors in determining the effective period of indemnity and cannot enhance insurer's liability by extending the period of interruption.
He further submitted that the Complainant Company filed its claim form only on 19.01.2017 and requisite documents were submitted upto Feb. 2018.The LOP claim becomes ascertainable only after the indemnity period is over and the business comes back to normalcy and documents are provided to surveyors because it is only then that the shortfall in turnover can be ascertained and quantum of loss assessed.The small delay in surveyor's appointment therefore does not affect the amount of loss.He referred the Surveyor's letter dated 17.02.2018 for the reasons why the interruption period cannot be extended to 12 months.He further submitted that the 7 Reactors in Resin Plants were damaged in the incident.The Complainant Company reinstated only 2 Reactors in November 2015.For two Reactors Purchase Orders were issued in October 2016 and Purchase Order for Pastillator was issued in April 2017 and installed in October 2017.The other Reactors had not been commissioned.This shows that the Complainant did not act with due diligence in its efforts to restore damage and therefore, as per Condition No. 3 of the Policy, the Complainant Company is not entitled for claim under Policy. The alleged paucity of funds by the Complainant cannot be a ground to omit or delay in compliance with its obligations under the Policy.He further submitted that the Surveyor in its report has clarified the reasons for taking the period 253 as period of indemnity in this case.
He further submitted that vide Surveyor Report dated 21.05.2018 read with Addendum Report dated 09.08.2018, the Surveyor had assessed the loss at Rs. 6,10,96,721/-, which after application of under-insurance, excess clause and deduction of premium for reinstatement of sum insured, comes to Rs. 4,66,44,644/- and this amount has been fully paid to the Complainant. Relying upon the Judgment of the Hon'ble Supreme Court in "Sikka Papers vs. National Insurance Company (III 2009 CPJ 90 SC)", he submitted that the compensation for harassment cannot be claimed by Corporate Bodies. He further submitted that the loss assessed by the Surveyor in accordance with the terms conditions and provisions of the Policy has been duly paid to the Complainant and no further amount is payable to them.The Insurance Company is not indulged in any deficiency of service or unfair trade practice and prayed that the Complaint Case be dismissed.
We have given thoughtful consideration to the various pleas raised by the learned Counsel for the Parties and have perused the averments made in the Complaint, Written Version as also the documents filed by the respective Parties.
For deciding the issue regarding the payment of the full claimed amount of Rs. 17 Crores for the actual loss covered in the Insurance Policy we deem it appropriate to refer to the various relevant clauses of the terms and conditions of the Loss of Profits during Business Interruption Period Policy No. 11080011150500000002, which was valid from 01.05.2015 to 30.04.2016.It is not in dispute that under the Business Interruption (Fire) Policy No. 11080011150500000002 issued on 01.05.2015 the risk which was insured was related to Standing Charges and Net Profit (12 months 7 days Gross Profit Turnover Basis) and the Insured Business was Rs. 30,00,00,000/- (Rupees Thirty Crores only).Under the heading Return of Premium, it has been provided as under:-
"The full premium for the selected sum insured based on estimated Gross Profits shall be chargeable under all Consequential Loss (Fire) Policies in advance."
Under 'Specification J - Alternative Basis Clause', it has been provided as under:-
"It is agreed and declared that, whenever found necessary, the term "Output" may be substituted for the term "Turnover" and for the purpose of this Policy "Output" shall mean the sale value of goods manufactured by the "Insured" in the course of the business at the premises, Provided that :
(a) Only one such meaning shall be operative in connection with any one occurrence involving damage (as within defined).
(b) If the meaning set out above be used, memo No. 1 shall be altered to read as follows:
Memo 1 : If during the INDEMNITY PERIOD goods shall be manufactured other than at the premises for the benefit of the business either by the Insured or by others on the Insured's behalf, the sale value of the goods so manufactured shall be brought into account in arriving at the OUTPUT during the INDEMNITY PERIOD."
(Emphasis Supplied by us) Under the heading 'Accumulated Stock Clause', the following has been provided:-
"Where the insured maintains sufficient stock of finished goods from time to time as a matter of business policy, the Insurers may, at their discretion, attach the following Clause to the Consequential Loss (Fire) Policy issued on Turnover Basis :-
"In adjusting any loss, account shall be taken and an equitable allowance made if any shortage in turnover due to the damage is postponed by reason of the Turnover being temporarily maintained from accumulated stocks of finished goods in the Insured's warehouses."
Under the heading 'Departmental Clause', the following condition has been provided:-
"If the business be conducted in departments, the independent trading results of which are ascertainable, the provision of Clause(a) and (b) of Item I shall apply separately to each department affected by the damage except that if the Sum Insured by the said item be less than the aggregate of the sum produced by applying the rate of gross profit for each department of the business (whether affected by the damage or not) to the relative Annual Turnover thereof, the amount payable shall be proportionately reduced."
Under the 'Consequential Loss Insurance Specifications', 'Specification A - Insurance on Gross Turnover Basis', Computation of Insurance on Gross Profit on Turnover Basis has been provided, which reads as follows:-
The insurance under Item No. 1 is limited to loss of Gross Profit due to (a) Reduction in Turnover and (b) increase in Cost of Working and the amount payable as indemnity thereunder shall be:-
(a) IN RESPECT OF REDUCTION IN TURNOVER : the sum produced by applying the Rate of Gross Profit to the amount by which the Turnover during the Indemnity Period shall, in consequence of the Damage, fall short of the Standard Turnover.
(b) IN RESPECT OF INCREASE IN COST OF WORKING : the additional expenditure (subject to the provisions of Memo 2) necessarily and reasonably incurred for the sole purpose of avoiding or diminishing the reduction in Turnover which but for that expenditure would have taken place during the Indemnity period in consequence of the Damage but not exceeding the sum produced by applying the Rate of Gross Profit to the amount of the reduction thereby avoided.
Less any sum saved during the Indemnity Period in respect of such of the Insured Standing Charges as may cease or be reduced in consequence of the Damage:
Provided that if the Sum Insured by this item be less than the sum produced by applying the Rate of Gross Profit to (where the Indemnity Period exceeds 12 months insert 'times' as may be appropriate e.g. for 18 months insert one and a half times) the Annual Turnover, the amount payable shall be proportionately reduced."
Under the 'Departmental Clause', following has been provided:-
'As reproduced in Para 17'
In the Policy, 'Gross Profit', 'Net Profit' and 'Turnover' has been defined as follows:-
"GROSS PROFIT - The sum produced by adding to the Net Profit the amount of the Insured Standing Charges, of if there be no Net Profit the amount of the Insured Standing Charges less such a proportion of any net trading loss as the amount of the Insured Standing Charges bears to all the Standing Charges of the business.
NET PROFIT - The net trading profit (exclusive of all capital receipts and accretions and all outlay properly chargeable to capital) resulting from the business of the Insured at the premises after due provision has been made for all Standing and other charges including depreciation, but before the deduction of any taxation chargeable on profits.
TURNOVER - The money paid or payable to the Insured for goods sold and delivered and for services rendered in course of the business at the premises."
The 'Standard Turnover has also been defined as follows:-
"STANDARD TURNOVER - The Turnover during that period in the twelve months immediately before the date of the damage which corresponds with the Indemnity Period."
From a conjoint reading of the aforesaid clauses of the terms and conditions of the Business Interruption (Fire) Policy, we find that under the 'Alternative Basis' clause, the term 'Output' can be substituted by the term 'Turnover' and under the 'Departmental Clause' if the business is conducted in Departments, the Independent Trading Results which are ascertainable, the Policy will cover such Departmental Independent Trading Results.The determination of Gross Profit on Turnover Basis has also been laid down in the terms and conditions of the Loss of Profits during Business Interruption Period Policy.Thus, the Business Interruption (Fire) Policy issued by the Opposite Party Insurance Company provides for taking the Trading Results of a Department where the fire has occurred and also takes into consideration the Turnover.Admittedly, the Complainant Company is having two independent Manufacturing Blocks in the same campus, viz.. the Resin Plant for manufacturing of various Resin Products and another Block comprising of Camphor Plant used for manufacturing of Camphor Products.The fire occurred in the Resin Plant and, therefore, the Loss of Profits during Business Interruption Period has to be worked out in respect of the Resin Plant alone and that too on the basis of the Turnover of the Resin Plant only and the Turnover / Groff Profit of the Camphor Plant has no bearing at all and cannot be included or taken into consideration while computing the Loss of Profit on account of Interruption of manufacturing in the Resin Plant due to fire.It has also come on record that in the Cost and Audit Report, the Cost Accountant had worked out the loss suffered by the Resin Plant for a period of 12 months at approximately Rs. 17 Crores (Rupees Seventeen Crores only).We are in full agreement with the said Report.Thus, the Opposite Party Insurance Company was not at all justified and should not have determined the Loss of Profit during Business Interruption Period by taking into account the Turnover / Gross Profit of the Camphor Plant as the Complainant Company had suffered Loss of Profit in respect of the Resin Plant alone.
In view of the foregoing discussions, we are of the considered opinion that the Complainant Company has made out its case for allowing the Complaint and is entitled for payment of Rs. 17 Crores as claimed by it and the action of the Opposite Party Insurance Company in paying only a sum of Rs. 4,66,43,644/- (Rupees Four Crore Sixty Six Lakh Forty Three Thousand Six Hundred Forty Four only) was not justified.We accordingly direct the Opposite Party Insurance Company to pay the balance amount of Rs. 12,33,56,356/- (Rupees Twelve Crores Thirty Three Lakh Fifty Six Thousand Three Hundred Fifty Six only) alongwith interest @12% p.a. with quarterly rest w.e.f. 22.06.2015 till the date of realization to the Complainant Company within a period of six weeks from today failing which the Opposite Party Insurance Company will be liable to pay interest @15% p.a. with quarterly rest.The Opposite Party Insurance Company shall also pay a sum of Rs. 10 lakh towards costs of litigation to the Complainant Company.The Complaint is hereby allowed in above terms.