DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION,

ROPAR

M/s Sandhu Forgings, Behind Aarti Steel Limited, Opp. Kanin India, Focal Poinit, Ludhiana, through its partner Pritpal Singh Sandhu.                                                 

                                                                         …..Complainant

                                        Versus

1. Shri Ram General Insurance Company Limited, Regional Office, SCO 18019, Third Floor, Jhandu Tower, Ludhiana 141003 through its Regional Manager.
2. Shri Ram General Insurance Company Limited, Head Office, E-8, EPIP, RICCO Industrial Area, Sitapura, Jaipur, Rajasthan- 302202 through its Managing Director. 

                                                                  ……Opposite Parties

                        Consumer complaint under Section 12 of the                                 Consumer Protection Act, 1986 (old)

QUORUM:

                Sh. S.K. Aggarwal, President

                Mrs. Ranvirkaur, Member

                Sh. Ramesh Kumar Gupta, Member

PRESENT:

        For the complainant      :  Sh. Varun Gobind Sharma

        For the OPs                     :  None

ORDER:

The complaint has been filed by the complainant against the Ops with the avermentsthat the complainant has been running the business of manufacturing of Engineering Goods, under the name and style of M/s Sandhu Forgings for earning his livelihood with his partner Sh. Pritpal Singh Sandhu. The complainant had purchased the Friction Hammer Machinery from Charika Industries, for consideration of Rs.38,17,800/- vide invoice No.262 dated 09.03.2015. The complainant availed the services of OPs for the insurance of the said machinery under the business protector policy vide policy No.105029/48/17/000141 with cover note dated 16.11.2016 for a period of 16.11.2016 to 15.11.2017and paid Rs.36,900/- as premium for insured value of Rs.25,00,000/- for each kind of perils i.e. fire, burglary, house breaking and machinery breakdown as described in the policy.On 28.03.2017, the complainant found some problem in the said machinery and he immediately called the engineer of the supplier/manufacturer of the machinery i.e. Charika Industries, who inspected the machinery and reported that the anvil and tup in the machinery have broken down and the same are required to be replaced.And on the same day, the complainant reported the same and lodged the claim with the OP and also submitted all the necessary documents for passing the claim. In reply vide email dated 09.06.2017, the OPs falsely repudiated the claim of the complainant on the basis of some tariff code No.209716 and recommended the non coverage of insured machinery parts like Tup and Anvil. By reading the contents of the said email, the complainant suffered a shock. Neither in the insurance policy nor in the proposal form, the OPs never mentioned about tariff code and non-coverage of insured machinery parts. Even, at the time of insurance, the OPs told him that the machinery is insured from all aspects as mentioned in the policy schedule. Ops deputed the surveyor, who visited the spot and demanded AMC of Machine, Service Engineer report depicting cause of loss, replacement quotation of machine and fresh quotation of machine from the complainant. The complainant vide email dated 23.09.2017 sent the final estimate with photographs to the surveyor of the OP and surveyor also advised the complainant leave the issue of coverage of such parts on the OP only. On 22.10.2017,  the assessment report was emailed by the surveyor which was subject to admission of liability under the policy but the surveyor report was not appreciated and rebutted by the complainant vide email dated 06.11.2017 and 09.11.2017. The complainant got served a legal notice dated 26.12.2017 through his counsel.Lastly alleging deficiency in service and unfair trade practice on the part of the Ops with prayer for issuance of following directions:-

1. To pay the claim amount of Rs.17,25,160/- on account of breakdown of the machinery;
2. To pay Rs.25,000/- as deficiency in service ;
3. To pay Rs.25,000/- as loss of profit due to non production of goods, along with interest @ deems fit by this Hon’ble Commission;
4. To pay Rs.20,000/- as litigation expenses.    

2. Upon notice, the opposite parties No.1 & 2 appeared and filed written statement taking preliminary objections to the effect that the complainant is not maintainable as the Plant and Machinery insured was being used for commercial purpose by the insured and complainant is not a consumer of the Ops.andthat the present complaint is frivolous and not tenable at law. On Merits it is submitted that M/s Sandhu Forgings had availed a Business Protector Policy for the period 16.11.2016 to 15.11.2017 from the OPs thereby covering the Plant & Machinery against the perils covered under the Policy No. 105029/48/17/000141 for the sum insured as detailed in the Policy Schedule. That the benefits under the policy are governed by the terms and conditions of the Policy. That a claim for damage to friction Hammer Anvil & TUP was intimated by the Complainant to the Insurance Company which was duly registered at Claim No. 10000/48/17/C/000378 and the claim was allotted to IRDA approved independent surveyor namely “Proclaim Insurance Surveyors and Loss Assessors Private Limited” for survey of Loss assessment in the said claim as per Policy term and conditions. That with regard to the liability of the Insurance Company under the Policy the surveyor has presented their opinion to the Insured/Complainant stating that as per MBD Tariff the coverage is mentioned as Hammer excluding TUP and Anvil (Code 209716) and as per section-V of the policy the claim was governed by the MBD Tariff and hence the loss to Anvil/TUP is not covered as per tariff wording.That the surveyor on the insistence of the Complainant undertook the survey of the Machine and as such the surveyor left the issue of liability to be decided by Insurance Company and assessed the loss to the machinery vide its report dated 30.11.2017. That upon receiving the survey report and in terms of the Policy Terms and Conditions and keeping the Machine Breakdown Insurance Tariff as reference guide the official of the Insurance Company after through application of mind rejected the claim of the Complainant vide its setter dated 10.01.2018, interalia stating as under;

“This has reference to the captioned claim lodged by you. On perusal of the surveyors report and documents submitted it is noted that damage to the friction hammer anvil & TUP is prima facia not covered under the policy of insurance issued to you. As per the erstwhile MBD Tariff which is being used as a reference point for underwriting of products in India wherein machinery breakdown coverage is to be offered to the insured. As per the Tariff under Code 209716 which covers the friction hammers proposed for insurance it is expressly stated that TUP and Anvil is to be excluded. It is also to be noted that attending surveyor vide his email dated 09.06.2017 had already conveyed you about non coverage of the damaged items and it was only on your insistence that the surveyor sort permission from us to assess the said loss without prejudice to the admissibility of the claim.

         In view of the foregoing therefore, we regret that we are not able to consider this claim.”

      Lastly denying any deficiency in service on the part of OPs a prayer for dismissal of the complaint has been made.

3. In support of his case, ld. counsel for the complainant has placed on record affidavit of  Sh. Pritpal Singh Sandhu partner,M/s Sandhu Forgings, Copy of partnership deed is Ex.C-1, Copy of invoice is Ex.C-2, Copy of Business Protector Policy is Ex.C-3, Copy of intimation of claim (email) dated 28.3.2017 is Ex.C-4, Copy of (email) dated 10.6.2017 is Ex.C-5, Copy of policy proposal form is Ex.C-6, Copy of (email) dated27.6.2017 is Ex.C-7, Copy of AMC is Ex.C-8, Copy of Finalestimate is Ex.C-9, Copy of Fresh price quotation is Ex.C-10,Copy of (email) dated23.9.2017 is Ex.C-11, Copyof       (email)dated22.10.2017 is Ex.C-12, Copyof  (email)dated6.11.2017 is Ex.C-13, Copyof(email)dated9.11.2017 is Ex.C-14, Copyofnotice        dated26.12.2017is Ex.C-15, CopyofLetter dated 10.1.2018 is Ex.C-16, copy of authorisation letter dated 20.06.2018 as Ex.C-17.
4. In rebuttal, ld. counsel for the OPs has tendered in evidence affidavit of Sh. Amandeep Sharma, Senior Legal Executive,Shriram General Insurance Company Limited, Head Office, E-8,  RICCO Industrial Area, Sitapura, Jaipur, Branch Officeat S.C.O. 178-FIRST FLOOR SECTOR 28-c Chandigarh as Ex-RA,  along with various documents Ex.R1 to Ex-R4.
5. We have heard the counsel for the complainant as none appeared on behalf of OP Nos.1 and 2. We have also gone through the record of the case carefully.
6. Admittedly, the complainant i.e. M/s Sandhu Forgings has purchased the Friction Hammer Machinery from Charika Industries, for consideration of Rs.38,17,800/- vide invoice No.262 dated 09.03.2015, Ex.C-2 and availed a Business Protector Policy for the period 16.11.2016 to 15.11.2017 from the OPs thereby covering the Plant & Machinery against the perils covered under the Policy No. 105029/48/17/000141, Ex.C-3, for the sum insured Rs. 25,00,000/- as detailed in the Policy Schedule. On 28.03.2017, the complainant noted some

problem in the said insured machinery and immediately called

the engineer of the supplier/manufacturer of the machinery i.e.Charika Industries, who inspected the machinery and reportedthat the anvil and tup in the machinery have broken down and

the same are required to be replaced. On the same day, the complainant lodged the claim, Ex.C-4, with the OP and also

submitted all the necessary documents for passing the claim.

7. On receipt of claim for damage to friction Hammer Anvil & TUP by the Complainant, the Ops duly registered the Claim vide No. 10000/48/17/C/000378 and the claim was allotted to IRDA approved independent surveyor namely “Proclaim Insurance Surveyors and Loss Assessors Private Limited” for survey of Loss assessment in the said claim as per Policy term and conditions. Surveyor visited the site, assessed the loss to the machinery vide its report dated 30.11.2017,Ex-R3.
8. Upon receiving the survey report OPs rejected the claim of the Complainant vide its Letter dated 10.01.2018, Ex-R4 interalia stating as under;

“As per the erstwhile MBD Tariff which is being used as a reference point for underwriting of products in India wherein machinery breakdown coverage is to be offered to the insured. As per the Tariff under Code 209716 which covers the friction hammers proposed for insurance it is expressly stated that TUP and Anvil is to be excluded.

         In view of the foregoing therefore, we regret that we are not able to consider this claim.”

9. As per, Ex-R4, Ops have themselves admitted as under:-

“As per the erstwhile MBD Tariff which is being used as a reference point for underwriting of products inwherein machinery breakdown coverage is to beoffered to the insured.”

In the instant case as per Business Protector Policy Schedule,Ex-C3, detail as under:-

10. In the preliminary objections Ops have taken the plea that complainant is not maintainable as the Plant and Machinery insured was being used for commercial purpose by the insured and complainant is not a consumer of the Ops. We have gone through Consumer Protection Act and have observed that the definition of ‘consumer’ has been defined in Section 2(1)(d) of the  C.P. Act, 1986 and the same reads as under:-

(d) "consumer" means any person who—

(i)  buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly prom¬ised, or under any system of deferred payment and includes any beneficiary of such services other than the person who 'hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services for any commercial purposes;

Explanation.— For the purposes of this clause, “commercial purpose” does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment.”    

In other words, if the buyer of goods uses them himself, i.e., by self-employment, for earning his livelihood, it would not be treated as a "commercial purpose" and he does not cease to be a consumer for the purposes of the Act. The explanation reduces the question, what is a "commercial purpose", to a question of fact to be decided in the facts of each case. It is not the value of the goods that matters but the purpose to which the goods bought are put to. The several words employed in the explanation, viz., "uses them by himself', "exclusively for the purpose of earning his livelihood" and "by means of self-employment" make the intention of Parliament abundantly clear, that the goods bought must be used by the buyer himself, by employing himself for earning his livelihood.”that the purpose for the purchase/hire of goods or services are of paramount importance when deciding the question of inclusion of a person within the meaning of “consumer” in the Act. If the purpose of the purchase/hire of the goods or services is for the sole purpose of earning a livelihood by way of self-employment, then the person would fall within the meaning of a “consumer” even though the said activity would be a commercial activity. Hence in the instantcase complainant is a consumer.

11. It is clear from Ex-C3 that as per cover note of the policy Section V-Machinery Breakdown premium calculated on sum insured,onRs. 25,00,000/-. It is well settled that a contract of insurance is contract “uberrima fides” and there must be complete good faith on the part of the assured or the insurer. The assured or insurer are thus under a solemn obligation to make full disclosure of facts which may be relevant for the insured or insurer to take into account at the time of issuance of policy and while making a disclosure of the relevant facts, the duty of the insured or insurer to state them correctly cannot be diluted.Any fact which goes to the root of the contract of insurance and has a bearing on the risk involved is of paramount importance. Once the insurer calculated the premium in the event of acceptance of the risk, and accepts the same then the insurer is under lawful obligation to perform its duty. It is the duty of the insurer to set out information on the cover note relevant to risk factor/insurability. The system of adequate disclosures helps buyers and sellers of insurance policies to meet at a common point and narrow down the gap of information asymmetries. This allows the parties to serve their interests better and understand the true extent of the contractual agreement.
12. As observed and held by Hon’ble Supreme Court in the   case   of  Canara   Bank   Vs.   United   India   Insurance Company   Limited   and   Ors.;   2020   (3)   SCC   455, provisions of the policy must be read and interpreted in such   a   manner   so   as   to   give   effect   to   the   reasonable expectations of all the parties. It is further held that coverage provisions should be interpreted broadly and if there is any ambiguity, the same should be resolved in favour of the insured.
13. We have gone through the policy in question and have observed

that the policy is for indemnity insurance, theOps agreeing ‘to indemnify or compensate the insured by payment or, at the option of the company, by replacement, reinstatement or repair in respect of the defined event occurring during the period of insurance… up to the sums insured, limits of indemnity, compensation and other amounts specified’.

        1. SUM INSURED-

        It is the requirement of this Insurance that the Sum Insured shall be equal to the cost of replacement of the insured property by new property of the same kind and same capacity which shall mean its replacement cost including freight and customs duties, if any, and erection costs.

2. BASIS OF INDEMNITY

No deduction shall be made for depreciation in respect of parts replaced except for (i) wear and tear parts and (ii) parts for which manufacturers have specified a fixed life for use and the like but the value of any salvage will be taken into account.

Policies containing express undertakings to pay replacement value are increasingly common, and there can be no doubt that, subject to the sum insured, the insured is entitled to what it actually costs to replace the lost property by equivalent new property. These “new for old” policies were no doubt a major inroad into the traditional principle of indemnity, but it goes without saying that insurers demand higher premiums for such cover”. Put differently, the insured is entitled to receive the value of the loss based on replacement value of equivalent new property, not the actual value of the property insured at date of the loss, but subject to the maximum of the insured value under the policy. That machinery breakdown insurance provides a security cover to the machines used by factories and industries. This insurance covers accidental breakdown and physical damage of the machinery, the cost of repairs or replacement of the damaged machine parts. It is the requirement of the Insurance that the Sum Insured shall be equal to the cost of replacement of the insured property by new property of the same kind and same capacity which shall mean its replacement cost including freight and customs duties, if any, and erection costs.

14. The surveyor in its report determined the loss on the basis of Gross Assessed valueatRs.17,25,160/-, Net Assessed Value at Rs. 12,44,505/-, Net Adjusted Loss at Rs. 7,15,811/-, Ex-R3.  Though,   the   complainant   claimed   Rs. 13,80,000/-, Ex-C9,   being   the   value   of   the   new   “CHARIKA Anvil suitable for 1 Ton Hammer”, the complainant shall not be entitled to the said amount. However, at the same time considering provision (2. Basis of Indemnity Ex-R1) of the policy reproduced hereinabove, in case company is unable to reinstate or repair the property insured, the insurance company shall be liable to pay such sum as would be requisite to reinstate or repair such property if the same could lawfully be reinstated to its former condition. For the aforesaid purpose, the report of surveyor wound be relevant evidence to consider the sum required to reinstate or repair. Therefore, as per provision (2. Basis of Indemnity, Ex-R1) of the policy, the complainant shall be entitled to the reinstatement value and not the depreciated value. In view of the above and for the reasons stated above, the   complainant shall   be entitled   to   Rs. 13,80,000/- being the reinstatement.
15. In view of above discussion, We are of the considered opinion that Ops have wrongly repudiated the clam of the complainant and is not as per law. Ops did not discharge the onus of proving  that the  damage  caused  to   the  insured  Machinery  is excluded in the policy.AsOps have failed in performing their legal duty towards the complainant, there is a deficiency  inservice on the part of Ops and the complainant is entitled for the claim and the present complaint is allowed partly and Ops are liable jointly or severally as under:-

1. To pay the amount of Rs. 13,80,000/- along with   interest @ 9% per annum from the date of       repudiation i.e. 10.01.2018within a period of 30      days from the date of receipt of free certified copy of         this order, failing which the aforesaid amount will     carry interest @ 12% per annum till actual         realization. 
2. To pay Rs. 50,000/- as compensation.
3. To pay Rs. 25,000/- as loss in profit, deficiency in service and litigation expenses.
4. The OP is further directed to comply with the order         within the period of 30 days from the date of receipt of certified copy of this order.Free certified copies of    this order be sent to the parties, as per rules. The        file be indexed & consigned to the Record Room.

Pronounced on : 21.12.2023

                                           (Ramesh Kumar Gupta)                   (Ranvir Kaur)                (S.K. Aggarwal)

                                                         Member                                           Member               President