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Lokesh Machines Ltd.... v. New India Assurance ...

National Consumer Disputes Redressal Commission

Jul 1, 2022

Judgment

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Case Summary: NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION — Consumer Case No. 29 of 2004

Factual and Procedural Background

The complainant, M/s. Lokesh Machines Ltd., a public limited company engaged in manufacture of machine tools, imported a Portal Machining Center from the Federal Republic of Germany with financial assistance from IDBI. A Marine Cargo Specific Voyage Policy was taken from New India Assurance Co. Ltd. (opposite party) on 29.01.2001 for coverage of Rs. 5.7 crores (CIF) and Rs. 30 lacs for customs duty. The consignment, packed in 11 packages, was shipped from Hamburg on 03.03.2001 and arrived at Chennai Sea Port on 25.04.2001. While unloading, Package No. 5/11 slipped from a forklift and fell.

The insured reported suspected damage to the insurer on 02.05.2001. The insurer appointed M/s. Suvega Surveyors (survey conducted 02.05.2001–05.05.2001) who submitted a Survey Report dated 07.05.2001 describing physical damage and noting the package had been dropped on the wharf when a forklift was used instead of a crane. The consignments remained in a bonded warehouse at Chennai until 03.12.2001 because of customs-related issues and were thereafter shifted to Hyderabad.

The insured later sent the damaged consignment back to the manufacturer in Germany for repairs on the manufacturer's advice; repairs were done and the consignment returned to India on 20.08.2003. The insurer repudiated the claim by letter dated 20.03.2003 on grounds including that the insured had moved the machinery from Chennai without informing the insurer, that the insured failed to minimize loss, and that there had been an unreasonable delay in intimating the loss (loss being intimated on 12.10.2002).

The insured filed this complaint on 22.04.2004 claiming monetary compensation (Rs. 20,836,791/- with interest, Rs. 30 lacs as compensation for mental agony, costs of litigation, and other relief). The opposite party filed a written reply raising repudiation grounds and preliminary objections (including that the complainant is not a "consumer" under the Act and that the complaint was not maintainable).

Legal Issues Presented

Whether the damage to Package No.5/11 occurred during the period of transit covered by the Marine Cargo Specific Voyage Policy.
Whether the insurer validly repudiated the claim on grounds of delay in intimation, alleged cessation of coverage after storage at the bonded warehouse in Chennai, and the insured's alleged failure to minimize loss.
Whether the survey report dated 07.05.2001 (prepared by the surveyor appointed by the insurer) establishes liability of the insurer.
Applicability of Regulation 9 of The Insurance Regulatory and Development Authority (Protection of Policyholder's Interest) Regulations, 2002 regarding timelines for survey report submission, settlement and interest on delayed payments.

Arguments of the Parties

Complainant's Arguments

The damage to the consignment (Package No.5/11) was established by the Survey Report dated 07.05.2001 prepared by M/s. Suvega Surveyors, which recorded torn packing, visible cracks and bends, oil leakage, and deep scratches; the report stated the package was dropped from 4 to 5 feet while being shifted on the wharf using a forklift instead of a crane.
The insurer was informed immediately after the suspected damage (letter dated 02.05.2001) and the insurer's appointed surveyor inspected and prepared a report; the insurer's repudiation ignored that report and was thus unfair.
The damage occurred at Chennai during discharge and therefore within the policy period; delay in transporting the consignment from Chennai to Hyderabad was due to customs procedures and did not cause the initial damage nor absolve the insurer of liability.
The complainant incurred repair costs and other expenses (repair charges, transit insurance, freight, survey fee, and customs duty up to the policy limit) and claimed entitlement to specified sums (the court summarized entitlement as Rs. 15,914,120/-).

Opposite Party's Arguments

The insurer contended that after the consignments were landed and stored at the bonded warehouse at Chennai until 03.12.2001, insurance coverage ceased upon storage and that the consignments were transported to Hyderabad between 06.12.2001 and 12.10.2002.
The insurer asserted material facts in the survey reports and argued that the insured withheld the Suvega Surveyors' report dated 07.05.2001 and that Mr. Ashok Vidyarthi (surveyor appointed later) could not assess loss because it was not proved before him that the consignment was damaged during transit.
The insurer highlighted delay in intimation of the loss (loss intimated on 12.10.2002) and argued the insured failed in its duty to minimize the loss; on those grounds the claim was repudiated by letter dated 20.03.2003.
The insurer raised preliminary objections that the complainant was not a "consumer" within the meaning of the Consumer Protection Act, 1986, that the complaint was not maintainable, and that the complaint involved complicated questions of fact unsuitable for summary proceedings before the Commission.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court reviewed the documentary record, the survey reports, and the parties' submissions. The court placed particular weight on the Survey Report dated 07.05.2001 prepared by M/s. Suvega Surveyors (the surveyor initially appointed by the insurer), which recorded visible physical damage (torn cardboard, crack and bend in the slide frame, bent bracket of plunger pump, oil leakage, and deep scratches). That report also recorded that the package had been landed sound from the vessel and was damaged on the wharf when a forklift — instead of the clearly indicated crane — was used to lift and move the package, resulting in a drop from 4–5 feet. The court treated that report as proof that damage occurred in the course of transit at Chennai.

The court criticized the insurer's conduct in ignoring or failing to produce the Suvega Surveyors' report in its repudiation decision. The opinion notes there was "no reason" given for the report not being submitted to the insurer and that the insurer had no valid basis for ignoring it. On the factual matrix, the court concluded the damage occurred during the transit covered by the policy because the final port of discharge was Chennai and the damage occurred at Chennai while the policy was in force.

The insurer's reliance on the period the consignments remained in the bonded warehouse at Chennai and the subsequent delay in transporting goods to Hyderabad was held to be irrelevant to the insurer's liability for the damage proved by the survey. The court found that the insured had informed the insurer about the damage and that the insurer's own surveyor had inspected the goods. Consequently, clauses referenced by the insurer regarding the duty of the assured to minimize loss did not apply to negate liability for the damage that occurred at the port.

The court also considered Regulation 9 of the Insurance Regulatory and Development Authority (Protection of Policyholder's Interest) Regulations, 2002, which prescribes timelines for surveyors to submit reports and directs insurers to settle within prescribed periods; it records that interest becomes payable in cases of delay. The court used the regulatory framework when addressing interest due on the award.

On the basis of these findings, the court concluded that the insured proved damage occurring during transit and that the insurer's repudiation was not justified by the reasons it gave. The court proceeded to quantify the complainant's entitlement (the opinion sets out amounts claimed and which were accepted) and to award interest and a limited time for compliance.

Holding and Implications

Final Holding: The complaint was partly allowed. The Commission directed the insurer to pay Rs. 15,914,120/- to the complainant along with interest at 9% per annum from April 2003 until actual payment. The insurer was ordered to comply with the payment within two months from the date of the judgment.

Implications:

Direct effect: The insurer (New India Assurance Co. Ltd.) is required to make the specified monetary payment plus interest to M/s. Lokesh Machines Ltd. and to do so within the two-month compliance period set by the Commission.
Interest: Although the opinion discusses Regulation 9 of the IRDA (Protection of Policyholder's Interest) Regulations, 2002 (which prescribes timelines and provides for interest in case of delay), the court awarded interest at a specified rate of 9% per annum from April 2003 until payment. The opinion does not elaborate on setting any broader legal precedent beyond the facts of this case.
No new precedent articulated: The judgment applies the facts, the insurer-appointed survey report, and applicable regulatory provisions to resolve the dispute; the opinion does not purport to create or announce a general legal principle beyond the outcome of the present dispute.

Show all summary ...

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION

NEW DELHI

CONSUMER CASE NO. 29 OF 2004

1. M/S. LOKESH MACHINES LTD.

REP. BY ITS MANAGING DIRECTOR, SHRI. M.

LOKESWARA RAO., B-29, EEIE STAGE II,

BALANAGAR,

HYDERABAD - 500 037. ...........Complainant(s) Versus

1. NEW INDIA ASSURANCE CO. LTD.

THE BRANCH MANAGER.,

HABSHIGUDA BRANCH,

HYDERABAD - 500 007.

2. THE NEW INDIA ASSURANCE CO. LTD.

THE REGIONAL MANAGER

5th FLOOR, SURYA TOWERS, S.P. ROAD, SECUNDERABAD - 500 003. ...........Opp.Party(s)

BEFORE:

HON'BLE MR. C. VISWANATH,PRESIDING MEMBER

HON'BLE MR. JUSTICE RAM SURAT RAM MAURYA,MEMBER

For the Complainant : Mr. C.N. Moorthy, Advocate : Mr. V. Sridhar Reddy, Advocate

For the Opp.Party : Mr. P.K. Seth, Advocate

Dated : 01 Jul 2022

ORDER

Heard Mr. C.N. Moorthy, Advocate, for the complainant and Mr. P.K. Seth, Advocate, for1.

the opposite parties. M/s. Lokesh Machines Limited has filed above complaint for directing the opposite parties2.

to pay (i) Rs.20836791/- along with interest @18% per annum from the date of the claim till the date of actual payment, (ii) Rs.30/- lacs, as compensation for mental agony and harassment, (iii) cost of litigation and (iv) any other relief, which is deemed fit and proper in the circumstances of the case.

The facts as stated in the complaint and emerged from the documents attached with it are as3.

follows:-

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(a) The complainant was a public limited company, registered under Indian Companies Act, 1956 and engaged in manufacture of machines tools and accessories and serving prestigious customers viz TELCO, Ashok Leyland, L&T Johndeere, Mahindra & Mahindra, Escort, Bajaj Auto and Honda Motors etc. To cater the increasing needs of its customers in the automobile industry and also as a part of expansion, the complainant company intended to import a Portal Machining Center with financial assistance from IDBI under Export Promotion Capital Goods License from Federal Republic of Germany.

(b) When the machine was ready for dispatch at manufacturer's premises in Federal Republic of Germany, the complainant took Marine Cargo Specific Voyage Policy from New India Assurance Company Ltd. (the opposite party) on 29.01.2001, for coverage of Rs.5.7 crores, on the Cost, Insurance and Freight value and Rs.30/- lacs on custom duty. The parts of the machine were securely packed in 11 consignments and shipped from Hamburg Port, Federal Republic of Germany on 03.03.2001 and arrived at Chennai Sea Port, India on 25.04.2001. While unloading from the vessel at Channai Sea Port, Package No.5/11 containing the Milling and Boring Head slipped from the forklift and fallen down.

(c) Suspecting damages, the Insured immediately reported to the Regional Office of the Insurer through letter dated 02.05.2001. The Insurer appointed M/s. Suvega Surveyors, Chennai to survey and assessment of the loss on 02.05.2001. The surveyor inspected the damaged package from 02.05.2001 to 05.05.2001 and submitted Survey Report dated 07.05.2001, stating that (i) One large cardboard box was found torn, though the contents of smaller packed cardboard boxes (containing some accessories) were in sound condition. (ii) A crack and bend were visible on the top portion of the Slide Frame. (iii) Bracket of Plunger Pump (0600/R2-1) found bent. (iv) Oil leakage was observed as seen by the oil soaking on the bottom wooden plank. (v) Cross Rail Guide found grooved (deep scratch) at the bottom. He observed that due to bend and crack in the frame of the slide, assembly may not be practicable with other section without rectification. Functional damage to any other component or components could be identified only at the time of testing the machining Centre after assembly. He further noticed that during inquiry from Steamer Agents, it was gathered that Package No.5/11 was landed sound from the vessel on 26.04.2001. While shifting the package on the wharf on 30.04.2001, the port crew damaged the wooden case as forklift was used for lifting and moving on wharf instead of crane (as clearly marked by the shippers on the wooden case) and the package was dropped from 4 to 5 feet height.

(d) As advised by the surveyor, the Insured obtained Certificate of Landing Remarks from Madras Port Trust. The machine was shifted to Customs Bonded Warehouse, Thiruvottiyur, near Chennai till 03.12.2001, pending resolution of the duty issue with the Custom Authorities. After resolving custom issue by the Custom Authorities, the packages were shifted to Hyderabad to the Insured facility during 03.12.2001 to 06.12.2001. All the necessary precautions were taken in shifting the machine from Sea Port to Customs Bonded Warehouse and thereafter to the warehouse of the Insured at Balanagar.

(e) The Insured informed the manufacturer of the machine i.e. M/s. Adolf Waldrich Coburg about the damage. The representative of the manufacturer in India inspected the machine at Hyderabad and on 18.10.2002 advised to ship back the machine to Federal Republic Germany for carrying out repairs. The Insured shipped back the damaged consignment to M/s. Adolf Waldrich Coburg, who repaired the damaged parts and shipped back to India on 20.08.2003.

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(f) The Insurer intimated the loss and submitted claim on 12.10.2002. Then the Insurer appointed Mr. Ashok Vidyarthi, Secunderabad another surveyor on 16.10.2002, who submitted his Preliminary Survey Report dated 06.11.2002, without supplying its copy to the Insured. Thereafter, the Insurer, vide letter dated 20.03.2003, repudiated the claim of the Insured on the ground that the machine was shifted from Chennai without any information to the Insurer while the policy coverage was from the warehouse of commencement of transit to warehouse where transit terminated. It was duty of the Insured to minimise loss. The Insured has failed to intimate loss till 12.10.2002, for no reason as such caused unreasonable delay.

(g) The Insured gave a representation dated 17.04.2003, giving explanations of the grounds of repudiation. When the Insurer did not give any response to the representation, then this complaint was filed on 22.04.2004, claiming deficiency in service.

The opposite party filed its written reply on 19.11.2004 in which, the material facts have not4.

been denied. It has been stated that from the Survey Reports it was revealed that consignments reached to Chennai from Hamburg on 23.04.2001 and were cleared from vessel on 26.04.2001. It remained in the bonded warehouse at Chennai till 03.12.2001. The Insured retained Survey Report dated 07.05.2001 of M/s. Suvega Surveyor and it was never forwarded to the Insurer. The consignments were transported to Hyderabad from 06.12.2001 to 12.10.2002. Loss was intimated to the Insurer on 12.10.2002. The Insurer then appointed Mr. Ashok Vidyarthi, as the surveyor on 16.10.2002. Mr. Ashok Vidyarthi could not assess the loss as it was not proved before him that the consignment was damaged during transit. After storing the consignment at bonded warehouse Chennai, the insurance coverage ceased. Mr. Ashok Vidyarthi submitted his Survey Report dated 06.11.2002. Then the papers were put up before the competent authority, who after considering entire materials on record, vide letter dated 20.03.2003, repudiated the claim of the Insured. Preliminary issues that the complainant was not a consumer as defined under Consumer Protection Act, 1986 and the complaint is not maintainable and complaint involved complicated issues of facts, which cannot be determined in summary proceeding, have also been raised. The complainant filed Rejoinder Reply on 19.11.2004, in which, the facts stated in the5.

complaint were reiterated. The complainant filed Affidavit of Evidence of M. Lokeswara Rao and various documentary evidence. The opposite party filed Affidavit of Evidence of N.V. Bijja, an officer of the Insurer, Askok Vidyarthi, the surveyor and S. Suvarna Raju, Senior Branch Manager and various documents. Both the parties filed their short synopsis. We have considered the arguments of the counsel for the parties and examined the record.6.

The complainant took Marine Cargo Specific Voyage Policy No.610409/21/00/00197 from the opposite party on 29.01.2001, for coverage of Rs.5.7 crores, on the packed consignments and Rs.30/- lacs on custom duty. The insurance extends from Hamburg Germany to Warehouse Chennai through vessel and from Chennai to Warehouse Balanagar, Hyderabad through road. The parts of the machine were securely packed in 11 consignments and shipped from Hamburg Port on 03.03.2001 and arrived at Chennai Sea Port, India on 25.04.2001. While unloading from the vessel at Channai Sea Port, Package No.5/11 containing the Milling and Boring Head slipped from the forklift and fallen down. Suspecting damages, the Insured reported to Regional Office of the Insurer vide letter dated 02.05.2001. The Insurer appointed M/s. Suvega Surveyors, Chennai to survey on 02.05.2001. The surveyor inspected the damaged package during 02.05.2001 to 05.05.2001 and submitted Survey Report dated 07.05.2001. In the repudiation letter dated 20.03.2003, the Insurer has totally ignored the Survey Report dated 07.05.2001. In the written reply filed in this complaint, the Insurer blamed the Insured that he had withheld the report dated

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07.05.2001. The conduct of the Insurer in this respect is not fair. The Insurer appointed M/s. Suvega Surveyors for survey. There is no reason for M/s. Suvega Surveyors, for not submitting his report to the Insurer. No valid reason has been assigned for ignoring it. M/s. Suvega Surveyors in Survey Report dated 07.05.2001, reported that (i) One large7.

cardboard box was found torn, though the contents of smaller packed cardboard boxes (containing some accessories) were in sound condition. (ii) A crack and bend were visible on the top portion of the Slide Frame. (iii) Bracket of Plunger Pump (0600/R2-1) found bent. (iv) Oil leakage was observed as seen by the oil soaking on the bottom wooden plank. (v) Cross Rail Guide found grooved (deep scratch) at the bottom. He observed that due to bend and crack in the frame of the slide, assembly may not be practicable with other section without rectification. Functional damage to any other component or components could be identified only at the time of testing the machining Centre after assembly. He further noticed that during inquiry from Steamer Agents, it was gathered that Package No.5/11 was landed sound from the vessel on 26.04.2001. While shifting the package on the wharf on 30.04.2001, the port crew damaged the wooden case as forklift was used for lifting and moving on wharf instead of crane (as clearly marked by the shippers on the wooden case) and the package was dropped from 4 to 5 feet height. From this report damage to the consignment in Package No.5/11 during transit is proved as transit continued up to warehouse of the Insured at Balanagar, Hyderabad. Only assessment of loss remained, which had to be decided after report of manufacturer.

In repudiation letter dated 20.03.2003, it has been mentioned that the machinery remained8.

in the warehouse at Chennai for seven and half months. According to the Insured, he had applied for concessional rate of duty and was pursuing the issue with custom authorities, the consignments were stored at Thiruvothiyur bonded warehouse, within the jurisdiction of custom authorities as the decision of custom authorities was delayed. After custom clearance, the goods were transported to Balanagar. Duration of the Policy was from the commencement of the transit till the expiry of sixty days after completion of discharge over side of the goods from the overseas vessel at the final port of discharge. Final port of discharge was Chennai. The damage occurred at Chennai sea port, within the period of validity of policy. Delay in transporting of goods from Chennai was not relevant as the Insurer was duly informed about the damage and the surveyor appointed by the Insurer has submitted his survey report.

Various clauses of Terms and Condition relating to Duty of Assured to minimise loss has9.

been referred in the repudiation letter. In the present case, damage was caused as the consignment had fallen down from 4 to 5 feet height, while unloading from the vessel at the sea port Madras. No further damage occurred due to delay in transporting consignment from Chennai or Thiruvothiyur as such this clause was not applicable. Repudiation letter is based upon irrelevant consideration.

From Survey Report dated 07.05.2001, the damage in the consignment was proved. The10.

Insured informed the manufacturer of the machine i.e. M/s. Adolf Waldrich Coburg about the damage. The representative of the manufacturer in India inspected the machine at Hyderabad and on 18.10.2002 advised to ship back the machine to the manufacturer for repairing. The Insured shipped back the damaged consignment to M/s. Adolf Waldrich Coburg, who repaired the damaged parts and shipped back to India on 20.08.2003. As such repairing cost was liable to be reimbursed under the insurance policy. The Insured has claimed Rs.12760000/- as repair charges,

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Rs.46000/- as transit insurance, Rs.104520/- as fright, Rs.3600/- as Survey fee, which are payable. The Insured claimed Rs.5046739/- as custom duty but sum insured was Rs.30/- lacs as such only Rs.30/- lacs is payable. The Insured was entitled to Rs.15914120/- .

Regulation 9 of The Insurance Regulatory and Development Authority (Protection of11.

Policyholder's Interest) Regulations, 2002 directs the Surveyors to submit their Survey Report within 30 days and in any case within 45 days, from the date of his appointment. The Insurer has been directed to make settlement within 30 days of receipt of Surveyor's report. Regulation 9 (6) provides as follows:

Upon acceptance of an offer of settlement as stated in sub-regulation (5) by theRegulation-9(6).

insured, the payment of the amount due shall be made within seven days from the date of acceptance of the offer of by the insured. In case of delay in the payment, the insurer shall be liable to pay interest at a rate which is 2 per cent, above the bank rate prevalent at the beginning of the financial year, in which the claim is reviewed by it.

After expiry of six months, the Insurer is liable to pay interest at a rate which is 2 per cent, above the bank rate prevalent at the beginning of the financial year, in which the claim is reviewed by it. In the present case, six month has to be counted from

12.10.2002.

O R D E R

In view of the aforesaid discussion, the complainant is partly allowed. The Insurer is directed to pay Rs.15914120/- along with interest @9% per annum from April, 2003 till the date of actual payment. This order shall be complied within a period of two months from the date of this judgment.

......................

C. VISWANATH

PRESIDING MEMBER

......................J

RAM SURAT RAM MAURYA

MEMBER

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