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New India Assurance Co. Ltd. v/s Tulsi Cotton Mills Pvt. Ltd.

    Revision Petition No. 3966 of 2014 in FA No. 135 of 2012

    Decided On, 03 January 2019

    At, National Consumer Disputes Redressal Commission NCDRC

    By, MEMBER

    For the Petitioner: R.B. Shami, Advocate. For the Respondent: Manish Singhvi, Satyendra Kumar, Advocates.

Judgment Text

Anup K. Thakur, Presiding Member

1. This Revision Petition No. 3966 of 2014 filed by the petitioner/OP-New India Assurance Co. Ltd. (hereinafter OP) challenges the order dated 8.7.2014 of Rajasthan State Consumer Disputes Redressal Commission, C/B at Jodhpur (State Commission) in First Appeal No. 135/2012. Vide this order, the appeal of the respondent/complainant-Tulsi Cotton Mills Pvt. Ltd. (hereinafter complainant) was allowed and the order dated 13.6.2012 of the District Forum in CC No. 77 of 2011, dismissing the complaint, was set aside.

2. Very briefly, the complainant had business in textiles at Pali, and had been getting insurance cover from the OP for many years. It had obtained a Marine Cargo Open Insurance Policy for the period 22.8.2009 to 21.8.2010 for a sum assured of Rs. 5 crores, subsequently increased via endorsements on various dates to Rs 25 crores, to cover the risk of transportation of its consignments, from “Pali and anywhere in India” to “anywhere in India (sales consignments only)”, comprising clothes, fabrics, by rail/road. The goods were being sent from Pali to Kolkata through Inland Transport Pvt. Ltd., the carrier/transporter (carrier hereafter). On 13/14.2.2010, a fire took place in the godown of the carrier at Strand Road, Kolkata, causing destruction of the complainant’s consignments meant for various consignees. This was intimated in writing to the OP on 22.2.2010 at their Regional Office, Kolkata; the said office appointed M/s. Kothari, Surveyor and Investigator, on 23.2.2010 to survey and assess the loss. According to the complainant, the value of goods destroyed was Rs. 34,25,286. As per the carrier company’s non-delivery certificate, loss of those consignments which arrived at the godown from 8.2.2010 to 13.2.2010 i.e. the period of 7 days preceding the fire, was Rs. 18,45,763. As per the survey report dated 31.5.2010, the total loss was Rs. 34,14,506 , and after excluding the loss on account of goods which had arrived at the godown before 7 days of the fire, valued at Rs. 15,68,743, the loss was Rs. 18,45,763. A claim of Rs. 18, 45,763 and Rs. 33,719, fee paid to the surveyors, i.e., Rs. 18,79,482 was filed with the OP, vide letter dated 7.7.2010, along with the original survey report. OP sought clarifications and these were provided. Vide letter dated 13.2.2011, it was clarified to the OP that the complainant’s business was to meet demands comprising one to three-four bales of its main product, saree, received from buyers in Kolkata, on a continuous basis, and that it had no depot or storage godown of its own and that it was the carrier’s godown where the goods were kept on behalf of the consignees. A reminder vide registered letter dated 18,4.2011 to Regional Manager of the OP also failed to elicit a reply. The complainant then filed a complaint before Insurance Regulatory Development Authority (IRDA) on 29.4.2011. However, on 20.5.2011, the OP finally responded and repudiated the claim entirely, citing violation of policy conditions. The complainant filed a consumer complaint No. 77/2011 before the District Forum, Pali seeking claim amount of Rs 18,79,482 ( claim plus surveyor fees) with interest from 15.4.2010 and some compensation.

3. This complaint was strongly contested vide a written reply. It was held that the insurance policies were issued subject to certain conditions. It held that a wrong meaning was attached to the terms and conditions in the policy to the effect that after arrival of goods at the carrier’s godown, the insurance cover remained good up to seven days. It was further held that the fire incident on 13/14.2.2010 was only intimated after a delay of 8 days i.e. on 22.2.2010. It was still further argued that the claim was rightly rejected vide letter dated 2.5.2011, grounds 1 and 2 of which read as under:

“1. As per Insurance Act, the insurance terminates on delivery to any other warehouse whether prior to or at destination which the insured may elect for storage other than in ordinary course of transit or for allocation or distribution. In this case also the consignees were using the transporter’s godown as further distribution/sell. Hence, the coverage of policy ceased at the time of goods unloaded in godown.

2. As per the available ‘statement of goods burnt” at Kolkatta the goods dispatched in the months of April 2009 to December 2009 and January 2010 to date of loss were also lying at the same godown. It clearly shows that consignees were using the above godown as storage of their goods for all the time hence, our cover ceased as soon as goods reached at the above godown.

As per the Marine Act, if the insured elects to use a part of warehouse for storage, this would be outside the ordinary course of transit and the same is not covered under the policy.”

4. The OP maintained that the destination of the goods was Kolkata where the complainant did not have its own godown or depot and was therefore using the godown of the transporter to store its goods. Besides, the fact that the complainant dispatched goods from April 2009 to December, 2009 and January 2010 till the date of fire and that the same were kept in the same godown for such a long period, further proved that the carrier’s godown was being used for storage, If so, as soon as the goods arrived at the godown, the risk cover automatically terminated. Therefore, on the date of fire, there was no risk coverage of the goods kept in the said godown. Further, the carrier had a fire policy insurance cover of Rs. 7.5 crores from the Oriental Insurance Company Ltd. and the damaged goods were goods held in trust in its godown. So this insurance cover could be used by the complainant to recover its losses. Still further, the Marine Open Policy required the insured to declare each and every dispatch without any exception. The complainant however was in default as it had not declared dispatches worth Rs. 2,95,18,237, as per the second surveyor, B.K. Modi’s report dated 8.2.2011. The OP also submitted that every dispatch of goods had to be declared, within 15 days of the date of dispatch, a condition which was also flouted as revealed in the second surveyor report. Still further, as per conditions of the insurance policy, all dispatches should have been made on GIF. + 10% extra basis, a condition that was not observed. On all these grounds, the OP repudiated the claim vide letter dated 20.5.2011

5. We heard learned Counsel for both the parties.

Counsel for the petitioner-OP took us through the Marine Open Policy, emphasizing Clause 5 of Annex.B attached to the Policy, which is reproduced as under:


This insurance attaches from the time the goods leave the warehouse and/or the store at the place named in the policy for the commencement of transit and continues during the ordinary course of transit including customary transshipment, if any.

(i) until delivery to the final warehouse at the destination named in the policy, or

(ii) in respect of transits by Rail only or Rail or Road, until expiry of seven days after arrival of the railway wagon at the final destination railway station, or

(iii) in respect of transit by road only until expiry of 7 days after arrival of the vehicle at the destination town named in the policy.

Whichever shall first occur.”

(a) According to the Counsel, grounds for repudiation vide letter dated 20.5.2011 were essentially based on this policy provision. Thus, ground No. 1 of repudiation was that coverage ceased on delivery i.e. at the time goods were unloaded in the carriers godown at Kolkata. Ground No. 2 was that the available statement of goods dispatched to Kolkata showed dispatches from April 2009 to December, 2009 and from January 2010 to the date of loss, lying at the same godown, clearly showing therefore that the complainant was using this godown as storage for its goods. In ground No. 3, the argument was that all damaged goods in the godown were already covered under insurance of Rs 7.5 crores taken by the carrier with Oriental Insurance Company. Counsel further argued that the goods were transported to Kolkata on FOB basis, which was in violation of the policy which required declaration on CIF basis, and which further supported the contention that godown was being used for storage. Other violations were failure to declare dispatches of the value of Rs. 2,95,18,237, and failure to declare each and every dispatch within 15 days. It was explained that as the first Surveyor M/s. Kothari had only assessed the loss but had not verified the declarations required to be made under the Marine Open Policy of each and every dispatch without any exception, the second surveyor-B.K.Modi was appointed, to look at this aspect. His report found that the insured had indeed violated this condition.

(b) As for the order of the State Commission, Counsel submitted that its observation that no party had admitted using the godown as storage, and that there was no iota of evidence in this regard was clearly erroneous as it did not take into account the complainant’s letter dated 13.2.2011 which admitted that the complainant had no godown at Kolkata and that it was using the carriers godown for storage on its own and the consignees’ behalf.

(c) Finally, the learned Counsel for the OP concluded by making the case that Clause No. 5 of the insurance policy, which describes the duration of the validity of the insurance cover during transit, when read carefully, makes it clear that there was a violation in the instant case. The point made was that the terms used in Clause 5(iii) was “the destination town named in the policy?’. In the instant case, this was Kolkata. Therefore, insurance cover seized the moment goods reached the carriers godown at Kolkata. The surveyor assessed the loss at Rs. 34,14,506 and determined the net maximum liability of the Insurance Company at Rs. 18,45,763. However, this was always subject to the terms and conditions of the policy, and the competent authority had correctly repudiated the claim on the ground of violation of policy conditions.

6. Counsel for the respondent/complainant started his arguments by first stating what was not in dispute viz. that the fire had taken place and that there was extensive damage of goods. The main point was the meaning and interpretation attached to Clause No. 5 of the insurance policy (reproduced in para 3 above).

(a) According to the Counsel, Sub-clauses (i), (ii) and (iii) are mutually exclusive. A plain reading of Sub-clause (i) says that the policy is valid until delivery to the final warehouse at the destination named in the policy. Counsel for respondent submitted that it is clear that the words used are “final warehouse at the destination”, and not just anywhere else. Sub-clause (iii) reads that insurance is valid in respect of ‘transit by road only’ until expiry of 7 days after arrival of the vehicle at the destination town named in the policy. Counsel for respondent argues that a plain reading of the two sub-clauses makes it clear that insurance was valid for seven days after it had reached the carriers godown in Kolkata, the destination town named in the policy.

(b) Counsel for respondent further submitted that it is clearly mentioned in the policy that the basis of valuation was CIF + 10% extra. Therefore, raising this question of the value being on FOB basis as suggested by the petitioner-Insurance Company, is wrong. It cannot be. Further, godown where the goods were stored belonged neither to the complainant nor to the consignee(s); it was just an intermediate stop between the complainant and the consignee(s). Therefore, the insurance cover was valid. He further argued that the surveyor report had clearly established the damage and loss which had taken place due to the fire. It had also concluded, in para 8 of its report, that there was sufficient balance of sum insured for each relevant day of dispatch viz. 3.2.2010, 4.2.2010, 5.2.2010, 6.2.2010 and 8.2.2010 He argued that there was little point in arguments over this as the surveyor’s report was crystal clear, so why not just accept it? Counsel for the complainant closed his arguments with the plea that insurance cover was valid and it very much covered the fire incident and the consequent loss in the period under reference.

7. We have also carefully gone through the documents. We are inclined to agree with the order of the State Commission vide which the order of the District Forum has been set aside, and Insurance Company has been directed to pay an amount of Rs. 18,45,763 with 9% interest p.a. from the date of filing of the complaint and also consolidated amount of Rs. 25,000 as compensation for rnental agony and costs, for reasons discussed below.

8. It is abundantly clear to us that this case depends completely of the condition 5 of insurance in Annexure B attached to the Marine Cargo Open Policy. This deals with DURATION of the validity of insurance. Before we discuss this, a brief recap of admitted facts however may be in order.

9. The admitted facts are that the complainant was using the services of the carrier company for sending goods to various consignees in Kolkata. These goods were being kept in a godown that belonged neither to the complainant nor to any consignee(s). It was however being used by the complainant for in- transit storage and belonged to the carrier company. The carrier company had its own insurance policy to cover the stock of goods lying in this godown. When the fire occurred on the night of 13/14.2.2010, the goods in the godown belonging to the complainant were destroyed. The Insurance Company appointed surveyor assessed the loss of the complainant to the tune of Rs. 34,14,506. Out of this loss, the value of goods that had arrived before 1.2.2010 was excluded and a net loss of Rs. 18,45,763 was arrived at, this being the value of goods lost in the fire which had come to the godown from 8.2.2010 to 13.2.2010 i.e. 7 days prior to the fire.

10. The complainant, in a letter dated 13.2.2011, responding to a query from the OP about storage and use of the earner’s godown at Kolkata had very clearly explained that the nature of his business, involving meeting intermittent demands of Sarees depending upon the season (festival etc.) and comprising normally a few bales, was to make dispatches on a continuous and regular basis, but in a piecemeal manner, to Kolkata. For this, there was no depot or storage godown as such, only the carrier’s godown which kept the goods on behalf of both the consignor and the consignees. This letter dated 13.2.2011, has been presented differently by the Counsel. For the OP, this letter means that the complainant has admitted that the carrier’s godown is being used as a storage godown; if so, this godown is the final destination; and if so, the moment the goods are unloaded at the godown, the insurance cover ceases. To the complainant, it means nothing of the sort: The carriers godown is but a stop between the goods as they reach Kolkata and till they are collected by the consignees, i.e. very much in the “ordinary course of transit”. For better appreciation, we again reproduce Clause 5 below:


5. This insurance attaches from the time the goods leave the warehouse and/or the store at the place named in the policy for the commencement of transit and continues during the ordinary course of transit including customary transshipment, if any.

(i) until delivery to the final warehouse at the destination named in the policy, or

(ii) in respect of transits by Rail only or Rail or road, until expiry of seven days after arrival of the railway wagon at the final destination railway station, or

(iii) in respect of transit by road only until expiry of 7 days after arrival of the vehicle at the destination town named in the policy.

Whichever shall first occur.”

A plain reading suggests that insurance commences from the time the goods leave the place mentioned in the policy, namely Pali, and continues during the ordinary course of transit including customary trans-shipment, if any, (i) until delivery to the final warehouse named in the policy or, (ii).... (iii) ...until the expiry of 7 days after the arrival of the vehicle at the destination town named in the policy.

Now, considering (i), it is clear that there is no final warehouse mentioned in the policy. This is so because none exists. And this is so because the nature as well as the demands of the complainant’s business perhaps did not require an independent godown. If so, it is not understood why the OP is making seemingly desperate efforts to infer, one way or the other, that the carrier’s godown is in fact the godown answering to the description “final warehouse”. If this aspect of the marine cargo policy was so critically important, we fail to understand why the OP did not apparently make any effort to bring in clarity at the time of offering the policy itself, specially when admittedly, the complainants and the OP have a relationship going back a few years. In fact, this itself could qualify as an unfair trade practice as it almost amounts to selling a policy by misrepresentation, with the finer points and nuances a secret, only to be brought out and used as necessary, to deny the benefit of the policy. Indeed, this line of argument lends respectability to a view oft tak

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en in a lighter vein that the golden business principle of the insurance sector is to cover every risk and event under the sun except the one that actually happens!! We are confident that this is not so and would urge the insurance sector to distinguish a genuine loss and compensate rather than resort to narrow technicalities that defeat the very purpose of taking an insurance policy. Considering (ii), it is clear from the policy that the journey under insurance cover is one from anywhere (includes Pali) to anywhere (includes Kolkata), and therefore simply means that the goods once they reach Kolkata, the destination town, are covered for a period of 7 days. So, the moment the goods are unloaded at the carrier’s godown in Kolkata, the 7 days period commences. In the face of this, the OP’s arguments do appear to stretch technicalities to an unsustainable limit, taking away the very notion of an insurance policy being an instrument to provide an umbrella of certainty to a business and thereby play a critical role in enabling genuine businesses to take prudent risks and flourish. 11. In view of the discussion above, we are of the considered opinion that the State Commission has not erred in its appreciation of facts and law. We do not find any infirmity nor any material irregularity in the reasoning and logic in the order of the State Commission. Consequently, this revision petition is dismissed on merit and the State Commission’s order dated 8.7.2014 in FA No. 135/2012 is upheld. We direct that this order be complied with within thirty days of the receipt of this order. We further direct that the amount kept with the District Forum by way of deposit for stay by the petitioner be now released by the District Forum as may be required to satisfy the compliance of the State Commission’s order. 12. No order as to costs which the parties may themselves bear. Revision Petition dismissed.