BEFORE:

HON’BLE MR. SUBHASH CHANDRA, PRESIDING MEMBER

HON’BLE DR. SADHNA SHANKER, MEMBER

For the Appellant                Mr Animesh Sinha, Advocate 

For the Respondent             Mr Madhurendra Kumar, Advocate

ORDER

PER SUBHASH CHANDRA

1.     This first appeal under Section 19 of the Consumer Protection Act, 2019 (in short, ‘the Act’) assails the order dated 02.01.2017 of the Telangana State Consumer Disputes Redressal Commission, Hyderabad (in short, ‘the State Commission’) in Complaint case no.160 of 2014 by allowing the complaint and directing opposite party no.1/respondent no.1 to pay Rs.56,90,848/- with interest @ 9% per annum from 02.12.2010 till realization with cost of Rs.5,000/- within four weeks.

2.     IA No.4836 of 2017 is an application praying for condonation of delay of 60 days which is condoned in the interest of justice for the reasons stated in the IA.

3.     We have heard the learned counsel for the parties and have carefully considered the material on record.

4.     The relevant facts of the case, in brief, are that respondent no.1 had proposed to set up an integrated sugar complex with 5000 TCD sugar plant with 24 MW co-generation power plant and 50 KLPD distillery in Tumkur Village, Yadgir District, Karnataka. The respondent engaged an agency to construct two MS Molasses Tank and obtained a Storage-cum-Erection Insurance Policy from the appellant for the period 01.11.2009 to 30.04.2011 for a sum of Rs.2,50,00,000/- (in short, ‘the policy’) covering the entire project. The work was to commence from December 2009 and by October/ November 2010 the erection of one of the tank had already reached the final stage and the second tank was complete upto 60%. However, due to heavy rains in October/ November 2010 the work was stopped. Vide letter dated 08.11.2010 the respondent informed the appellant that the Molasses Tanks were damaged.

5.     A surveyor was appointed by the appellant to survey and assess the loss on 10 and 11.11.2010 in the presence of the appellant. As per the preliminary survey report dated 15.11.2010 by the surveyor, it was stated that the exact cause of the loss could not be ascertained for which a detailed study was required. The surveyor therefore approached the Geotechnical Division, Department of Civil Engineering, JNTUH College at Hyderabad for a detailed study.

6.     After visiting the site with the surveyor on 27.11.2010, 01.12.2010 and 02.12.2010 to undertake soil investigation to assess the ground condition and analyze the design parameters and workmanship on the project, Expert submitted his report dated 16.12.2010. It was stated in this report that the workmanship was very poor in understanding the guidelines and implementing them in field practice. It was also stated that “water has gone inside and caused the field of soil to settle below the slab during the rainy season due to poor compaction levels in the filled up soil”. Based on this Expert Report the surveyor submitted his final report dated 06.03.2012, attributing failure of the foundation of molasses tank to defective design and bad workmanship. As both these conclusions fell under the “Exclusions Clause” of the insurance Policy, the appellant vide letter dated 31.07.2012 repudiated the insurance claim of the respondent.

7.     The respondent approached the State Commission through CC no.160 of 2014 alleging deficiency in service by the appellant and six other Banks and prayed for Rs.99,52,965/- with interest @ 12% from the date of the complaint till realization along with Rs.25,000/- for mental agony and hardship. The complaint came to be disposed of on contest by the appellant (the bank being held to be a proforma party).  The State Commission allowed the complaint for Rs.56,90,848/- with interest @ 9% per annum and Rs.5000/- as cost. This order is impugned before us.

8.     It is the case of the appellant that the State Commission had erred in concluding that the respondents were entitled to be compensated since the claim of loss was specifically excluded as per Exclusion Clause 1 (d) of the insurance Policy whereby the company was not liable for loss or damage due to faulty design, defective material or casting, bad workmanship other than faults in erection. It was contended that the State Commission’s  order was contrary to the final Survey Report dated 06.03.2012 and the findings of the Expert’s Report dated 16.12.2010 which had held that the loss occurred due to bad workmanship and defective design. It was also contended that the impugned order had incorrectly recorded that the documents did not state that the damage was due to faulty design and bad workmanship. It was argued that the final survey report and special experts report were both on record before the State Commission and that both these documents had specifically stated that damage was due to faulty design and bad workmanship. The State Commission had concluded that the damage was due to heavy and incessant rain which was an act of God. It was contended that the surveyor had concluded that the damage was due to rain on account of defective construction and bad workmanship and therefore, the State Commission’s conclusion was incorrect. The appellant also submitted that the State Commission had wrongly cast aspersions on the appointment of such an expert, since under Section 64 UM of the Insurance Act 1938, appointment of special Expert was permitted. Reliance was placed of Regulation 13 (1) (p) “that duties and responsibility of a surveyor and loss assessor” under the Insurance Surveyors and Loss Assessors (Licensing, Professional Requirement and Code of Conduct) Regulation, 2000 of the Insurance Regulator and Development Authority of India (IRDA) dated 20.11.2000 which permitted the same. It was also contended that the respondent had objected to the appointment of a special Expert. It was further prayed that the impugned order be set aside.

9.     Per contra, it was submitted by the respondent that they engaged a reputed engineer company, M/s Swaminathan Associates, Coimbatore for assessing the architectural and structural consultancy service work on 23.09.2008. Soil exploration work was entrusted to M/s F S Engineers Pvt., Ltd., Chennai and the contract of civil works for construction for 2 molasses tanks of diameter 24 meter and height of 10 meter of 4500 cu meter volume and 6000 tonnes of molasses storage capacity was given to M/s Asia (Chennai) Engineering Company Ltd., Chennai. It was contended that after the rains in October/ November 2010, a bulge (ballooning) in the foundation of the center of the tank had been noticed as a result of which the RCC Shell foundation and center RCC Pillar had been distorted due to penetration of water and thereafter, M/s Professional Surveyors and Loss Assessors were appointed to assess the loss. After the inspection in November and December 2010, a claim for loss was submitted to the appellant and based on their inspection a claim was filed. The report also states that the damage was occasioned due to penetration of water as there was heavy rainfall for about three months in 2010.

10.   According to the respondent, the appellant adopted dubious methods to reject the claim. As per IRDA Regulations, the surveyor was required to release the preliminary report within 7 days which was not done. The surveyor also did not seek permission of the complainant before appointing a special Expert and their findings and Survey Report were not provided. The repudiation of the claim dated 31.07.2012 stating that compaction criteria was not satisfactory and the structural connectivity between the RCC Slab and RCC circular wall and RCC Slab was not properly constructed was contested. It was contended that no opportunity was provided to file any objection which was against the principles of natural justice. According to the respondent the policy excluded willful act or willful negligence by the insured or his representative. The letter of repudiation however, did not establish this exclusion. It was also submitted that the exclusion in Section 1 (d) relating to faulty design, bad workmanship could not be interpreted in an omnibus manner but should be related to a willful act or willful negligence. It was argued that the repudiation was frivolous and not valid. It was also contended that the indemnity guaranteed under the policy, which was an all risk policy, included perils due to acts of God and therefore, repudiation of his claim amounts to deficiency of service. Respondent relied on the affidavit of evidence filed by appellants officer that the surveyor who admitted that the claim was admissible.

11.   The letter of repudiation dated 31.07.2012 reads as under:

Since the cause of loss could not be ascertained, surveyors have taken the services of experts on soil technology/ structural engineering to ascertain the proximate cause of loss. They have obtained the expert opinion from M/s JNTUH College of Engineering, Hyderabad. Based on that opinion and on their own observations the surveyor has opined as below:

1. The degree of compaction of the filled up soil in and around the tank area based on the test results was 82% as against the requirement of 95% as per tank structural drawings. As per records the compaction of the soil was between 95.32 to 99.87% at MT 2 location. However, details of MT s locations details are not available. Hence, considering our test results, the compaction criteria is not satisfying and it could be concluded poor workmanship;
2. The structural connectivity between the RCC slab and RCC circular wall was not proper also the RCC slab is not supported by any ring beams or cross beams. This indicates improper design in the structural supports of Molasses tanks.

Further, surveyor opined that the failure of the molasses tank foundations is attributed to defective design and bad workmanship and both these fall under exclusions of the above policy.

12.   The State Commission has held as under:

        27.     The policy was obtained by the complainant for storage cum erection, for which the OP No.1 collected the total premium of Rs.9,65,262/- which includes the policy excess @ 5% towards storage and erection claims and @5% towards testing period claims. Admittedly, at the time of erection of the molasses tanks, the mishap took place thereby causing damage to the two molasses tanks. From the terms and conditions of the schedule of the policy, it is clear that the OP no.1 company indemnified the insured against sudden and unforeseen physical loss of or damage to the property insured. Under general exclusions, it excluded the ‘willful act or willful negligence of the insured or of his responsible representative. In this regard, we may state that the complainant was carrying out the installation work of the molasses tank, which is not yet completed and which was stopped on account of festivals and incessant heavy rains. Had the work been completed and the tanks commissioned, the negligence could have been attributed to the responsible representatives, in fact it was at incomplete stage. And the damage occasioned to the molasses tanks was on account of water logging due to heavy and incessant rains, which is beyond the control of human element, which is nothing but an act of god.

13.    From the foregoing it is evident that the claim has been repudiated on the basis of Surveyor’s Report which relied upon the expert’s Report to conclude that the claim was not admissible under the Exclusion Clause provided under Section 1 (d) of the policy which reads as under:

        The company shall not, however be liable to:

(d)     Loss or damage due to faulty design, defective material or casting, bad workmanship other than faults in erection. This exclusion shall be limited to the items immediately affected and shall not be deemed to exclude loss damage to other insured items resulting from such excluded perils

14.   As held by the Hon’ble Supreme Court in the case of Sri Venkateswara Syndicate Vs. Oriental Insurance Company Ltd. & Anr., in CA No. 4487 of 2004 dated 24.08.2009, (2009) 8 SCC 507, the report of a Surveyor under the Insurance Act, 1938 is an essential requirement for claims above Rs 20,000/- and is equally binding on both parties to the contract. It has also held by the Hon’ble Supreme Court in New India Assurance Co. Ltd. Vs. Pradeep Kumar, (2009) 7 SCC 787, that unless the report of the surveyor is established to be arbitrary or perverse the same requires to be considered. In the instant case, there is a specific provision that loss or damage due to faulty design or bad workmanship shall be excluded under the liability of the Insurance Company.

15.   The State Commission has concluded that heavy rains were responsible for the damage of the RCC structures relating to molasses tanks under construction and therefore, the claim was liable to be indemnified by the insurance company/ appellant. The surveyor’s Report itself makes a note of the heavy rain. However, based on the above, the Expert Report which has been prepared by an Expert from an established Civil Engineering Institute after conducting soil compaction tests to determine that compaction was only 82% against 95% required as per the structural drawing. Compaction of soil was also between 95.32 to 99.87% at the location of the second molasses tank. Therefore, it was concluded that the compaction criteria not being satisfied, it could be concluded that there was bad workmanship for structural connectivity between the RCC slab and RCC Circular Wall was not proper as there were no ring beams or cross beams which indicates improper design in the structural supports of the molasses tanks. Thus, while the rain may have been contributing factor, the conclusion based upon the Expert Opinion that there was improper workmanship of poor structural design cannot also cannot be denied.

16    In view of the discussion above, the surveyor was well within his rights to obtain as provided in the IRDA guidelines referred to above, the opinion of a special Expert. The conclusion of the State Commission that the damage was only on account of an act of God cannot be sustained. We do not find any merit in the contention of the respondent that appointment of the Expert was without his permission or notice since the respondent had assisted the Expert in the inspection. The Expert visited the site on several occasions and no objection to the same was also made by the respondent.

17.   In the light of the foregoing discussion, we find that the appeal has merit and is accordingly allowed and the impugned order is set aside. There shall be no order as to costs.

18.   Pending IAs, if any, stand disposed of by this order.