NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION

NEW DELHI

ORIGINAL PETITION NO. 263 OF 1999

GLORIOUS PLASTICS LTD.

........ Complainant (s)

Vs.

 

NATIONAL INSURANCE CO. LTD. & ANR.

........ Opposite party(ies)

 

BEFORE:

 

               HON'BLE MR. JUSTICE M. B. SHAH, PRESIDENT

               HON’BLE MR. JUSTICE K.S.GUPTA,  MEMBER              

 

For the Complainant                    :    Mr.Kedar Nath Tripathi,. Advocate 

For the Opposite party                      :   Ms. Sakshi Mittal & Mr. V. Singh, Advocates

 

Dated the 18th September, 2008

 

ORDER

 

M.B.SHAH, J. PRESIDENT.

Heard the Ld. Counsel for the parties. 

The insured M/s Glorious Plastics Ltd. has filed the complaint against National Insurance Company Ltd. for reimbursement of a sum of Rs.80 Lakh for the loss suffered by it and for a sum of Rs.16,80,000/- towards interest lost as on 18th August, 1989.   It is not disputed that the complainants have insured their assets consisting of tools, machinery, accessories and stocks for the period from 31st July, 1995 to 30th July, 1996.  On 4th August, 1995 a major fire broke out at the garment factory situated on the first floor of the building which consisted of ground floor and one storey.  For extinguishing fire on the floor of the building where the garment factory was, the Fire Brigade spread water continuously, but before the fire could be controlled, the roof of the building consisting of steel trusses, purlins and A.C.Sheets was substantially damaged and the entire first floor was exposed to open sky unprotected.  On the ground floor, complainant was manufacturing industrial components and audio cassettes by injection molding process.  Due to excessive use of water, the flooring of the first floor was also damaged leading to seepage and leakage of water on the ground floor factory of the complainants.  At the relevant time, the factory compound was already surrounded by water accumulated due to excessive rain.  This prevented the Fire Brigade from draining out the water, as a result of which the entire machinery, tools and accessories of the complainants factory remained submerged under water.

          On the basis of the claim, on 8th August, 1995 Surveyors from M/s.R.N.Thacker and Company visited the site.  He inspected the premises, confirmed the incident, obtained the details of insurance and made inquiries regarding the loss suffered by the complainants.

          Repeatedly, the complainant himself and through its agent Mr.H.K.Shah, made enquiries from the Insurance Company as well as the Surveyor.  Special efforts were made to find out the policy and finally, on 23/11/1995 the same was found.  Thereafter, while testing the machinery, the moulds which are essentially machined out of Mild Steel or Oil Hardening Non-Shrinking Steel presented a major problem in cleaning/restoring.  A number of trials were attempted and ultimately, it was found that those tools and accessories have become unserviceable and therefore, a total loss.  A request was made to the Surveyor to visit the site to inspect the defective tools, accessories and machineries and assess the loss.  As the Surveyor did not visit till then, a letter was written to the Insurance Company on 6th March, 1996.  After two months, the Surveyor made a telephonic enquiry but did not visit the factory premises.  After 4 months, i.e. on 12.9.1996, the surveyor wrote a long letter to the complainants making an attempt to cover up his long neglect of the claim.  Repeated correspondence has been produced on record.  Finally, as nothing was done by the Insurance Company, on 18th August, 1999, this complaint was filed.

          Admittedly, there is no specific letter of repudiation of the claim.  However, in the written version, Insurance Company has given reasons for not settling the claim.  Thereafter, on 13th March, 2001, Divisional Manager of the Insurance Company informed the complainants “However, we regret to note that inspite of our best efforts, you have not complied with our request and hence we are constrained to close the file treating the same as “NO CLAIM” which please note”.  It is the say of the complainants that they had submitted all the necessary documents to the Surveyor.

 

Submissions

                   In this view of the matter, the learned Counsel on behalf of the Complainant submitted that:

(i).     the Surveyor, for unknown reasons, after visiting the factory premises on 8th August, 1995 failed to submit his assessment report within a reasonable time;

(ii).     Non-assessment of loss by the Surveyor for the moulds is contrary to the well established trade practice that in plastic industries moulds are part and parcel of the machineries;

(iii).    In support thereof, he relied upon the opinion of the Tariff Advisory Committee which is binding on the Insurance Company;

(iv).    There was no justifiable reason for the Insurance Company to linger on the assessment or non-assessment of the loss suffered by the Complainant for years together;

(v).    He submitted that even the Insurance Company repeatedly reminded the Surveyor to assess the loss and submit survey report. In support thereof he referred to the letter written by the Manager of the Insurance Company that he was dissatisfied  by non-submission of survey report by the Surveyor. 

He,wrote a letter on 27th January, 2000 to the Surveyor wherein it has been mentioned as under:

 

“Dear Sir,

            RE:   Fire loss on 04.08.95 –

                             A/c. M/s. Glorious Plastics Ltd.,

                            Situated at Mumbai

The aforesaid claim has been assigned to you for survey and assessment.  However, in the absence of completion of the survey, Insured unhappy with the service, approached Consumer Court claiming Rs.80 Lacs plus interest on the grounds of deficiency of service.

In order to sort out the matter amicably a meeting between the Insured alongwith the Officials of the Underwriting Office and Officials from RO was organized on 21.01.2000 when the following were preset:

1)         Mr. Ajay Podar )    Representing

2)     Mr. Umes Kumar )    Insured.

1)         Mr. S. Sinha Ray, D. M., DO-VIIL

1)         Mr. S. B. Jadhav, A.O.,   )  From

2)         Mr. S. B. Kotian, A.O.     )  RO

At the outset, the DM of DO-VIII gave a brief resume of the pending claim and informed the Insured that the surveyors could not assess the loss because you have not furnished the necessary documents to the surveyors.  In this connection Insured produced as documentary evidence copies of several letters sent to you with the information such as:

1)          Loss of tools/machinery accessories as shown under the heading “Gross Block” in their balance sheet as on 31.03.95.

2)          List of tools/machinery accessories damaged;

3)          List of tools/machinery accessories not damage;

4)          List of repairs carried out by them.

This letter of the Insured’s addressed to you have been acknowledge by you while receiving and also the same has been dispatched to our underwriting DO with due acknowledgement.  This information has been furnished to you by the Insured vide their letter dated 22.12.98.  In the light of the above we do not understand why the assessment was not completed as yet.  In case, however, you needed further information you could have sought the same from the Insured, whereas there is no correspondence in their file showing any of your further requirements.

You are, therefore, requested to let us know why the assessment is pending in spite of all the information submitted by the Insured to you as per Insured’s submission.  Moreover you will appreciate the claim is very old and we cannot keep the same pending by making provision for the outstanding claims year after year.  Please treat the matter as urgent and let the DO have your reply with supporting documents for enabling them to take appropriate decision without any further delay”.

 

          Thereafter, on 1st February, 2000 again Divisional Manager of the Insurance Company requested the Surveyor to submit his report.  The relevant part of the letter is as under;

“Ref:     Pending Survey Report

                   We refer to our earlier letter dated 18.1.2000 and subsequent meeting we had with our client at our Regional office on 21.1.2000 in presence of the concerned Fire Department Officer.  We understand that insured has already submitted the documents to your office, long back and as such we fail to understand, why the report (assessment) not yet submitted to us.

Please note due to the above reason, our position become very awkward and the concerned client has filed a Petition before the National Consumer Disputes Redressal Commission on 10th Dec., 1999 for which we have to reply the reason for non-settlement.

In view of the above, you are once again requested to submit your report without any further loss of time.”

 

                    As against this, the learned Counsel for the Insurance Company submitted as under:

 

.A.     No loss suffered by the Complainant:

 

                   The fire occurred in the first floor occupied by another party. During the visit of the Surveyors on 7.8.1995, the flooring of the first floor premises was found to be unaffected. The Complainant had informed the Surveyor that the Complainant would check the machine and inform the Surveyor accordingly, because the Complainant was under the suspicion that because of the water used for extinguishing the fire, the machinery would have been damaged. But, the Complainant did not inform the Surveyor even on 16.8.1995 when a telephonic conversation was exchanged between the Surveyor and the Complainant.  Further, the Complainant did not convey the Insurance Company the estimated loss, as is evident from his letter dated 23.11.1995.

 

.B.     Even after nine months  the Complainant did not cooperate with the Surveyors:

(a).    even after the inordinate delay of nine months from the date of loss in making the claim, the Complainant did not cooperate with the Surveyors. The Complainant did not submit all the documents even after an inordinate delay of more than 3 years in complying with the requirements of the Surveyors and that too in piecemeal;

 

(b).    The Complainant did not submit documents for a period of one year, and, for the first time, the Complainant sent some documents  on 13.1.1998, i.e. after two years and five months and that too not as required by the Surveyors.  Thereafter the Insurance Company wrote letter dated 8.12.1997 and 18.8.1998, but the Complainant did not bother to supply the documents as required by the Surveyors. The opposite party once again by letter dated 19.8.1998 requested the Complainant to comply with the requirements of the Surveyors to enable them to process for preparation of the survey report.  Thereafter, by letter dated 13.3.2001 it was brought to the notice of the Complainant that the Surveyor had not received the required documents. Thereafter, the Surveyors submitted their report dated 29.6.2001 assessing the loss at Rs.20,203/-.

 

.C.     Claim with regard to loss of moulds clearly falls under the exclusion clause (i)(iv).

(i).     The loss which is mainly in respect of moulds, clearly falls under the exclusion clause (i) and (iv) of the policy.

(ii).     In interpreting documents relating to a contract of insurance the duty of the court is to interpret the words in which the contract is expressed by the parties and it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves.

(iii).    the circular of the Tariff Advisory Committee is dated 30.6.1998, which cannot be given retrospective effect.

(iv).    After the completion of the contract, no material alteration can be made in its terms except by mutual consent.

(v).    The Complainant has failed to prove the loss and also the amount of loss on moulds, as is established from the cross examination of Mr.Ajay Poddar, Director of the Complainant Company.

(vi).    The Complainant’s net loss is Rs.20,203/- as assessed by the Surveyors.

(vii).   There is no averment as to why the Complainant remained silent for nine months after the occurrence of the peril.

 

.D.     The terms of the contract have to be construed strictly without altering the nature of the contract as it may affect the interest of parties adversely. Reliance is placed by the opposite party on the following decisions:

(i).     General Insurance Society Ltd. Vs. Chandmull Jain & Anr. AIR 1966 SC 1644

(ii).     Polymat Industries Pvt. Ltd. Vs. National Insurance Co. Ltd. AIR 2005 SC 286;

(iii).    Oriental Insurance Co. Ltd. Vs. Samayanallur Primary Agricultural Coop. Bank, (1999) 8 SCC 543

 

.E.     The circular of the TAC (Tariff Advisory Committee) sought be be relied upon by the Complainant is dated 30.6.1998 and cannot be given retrospective effect. In the instant case the alleged occurrence is of August, 1995.

 

.F.     After the completion of the contract, no material alteration can be made in its terms except by mutual consent. Reliance is placed on United India Insurance Co. Ltd. Vs. M.K.J. Corporation, (1996) 6 SCC 428.

 

Findings:

 

Survey Report:

 

                    For deciding the controversy, we would first refer to the survey report. Some portion thereof as quoted in their written version, is as under:

 

          The occurrence:

          As reported, on Thursday the 3rd August, 1995, at about 6.00 pm, the factory of M/s innovation Garments Ltd., and the office of M/s.Neoluxe Laminates (both on the first floor) were closed and locked by them and nobody slept inside.

The keys were with the gate office.

On Friday the 4th August, 1995, at about 5.30 am, a whatchman on his rounds noticed smoke coming out from an air-conditioner in the office of M/sNeoluxe Laminates.

The Watchman immediately raised an alarm and ran to inform the supervisor in the plastic blow-moulding factory of the insured, which was on the ground floor of the building and which was working at that time.

Immediately, the watchman and the supervisor ran to the main gate and phoned up the fire brigade. In the meantime, the fire had spread and smoke was coming out from various sides of the first floor. The fire brigade arrived shortly, broke down the entrance shutter and started fire fighting.

The fire had spread swiftly, covering up furniture, etc. in the office of M/s. Innovation garments Ltd.

The fire was abated by about 6.30 am and was controlled and extinguished soon thereafter by firemen with 8 lines of 8 motor pumps.

However, the entire office of M/sNeoluxe Laminates and almost the entire factory of M/s. Innovation Garments Ltd. except for a small room on the southern end were caught up and were gutted.  

The Bombay Fire Salvage Corps of the loss Prevention Association of India ltd., also attended and rendered etc., on the ground floor with 24 tarpaulins.

A copy of the report from the Bombay Fire Salvage Corps is enclosed herewith.

The Bhoiwada Police had attended at the site and the matter was recorded at the police station.

A copy of the entry recorded in the Bhoiwada Police Station Diary, along with the English translation thereof are enclosed herewith.

A Police Panchanama was also made at the site.

          A copy of their Panchanama along with the English translation thereof are enclosed herewith.

 

          THE CAUSE:

          The fire is believed to have been caused by an electrical short-circuit in the office of M/s.Neoluxe Laminates, on the first floor of the main building.”

 

“We received instructions from the insurers on 7.8.1995 along with a copy of the above mention to survey and assess the said loss.

          We visited the insured’s above mentioned premises on 8.8.1995 and met there Shri Pavan Podar. During the visit the entire first floor with the roof and contents therein we found to have been severely burnt / damaged.

          The machinery/accessories in the insured’s premises on the ground floor were found to have been covered by tarpaulins, bearing Fire Salve Corporations thereon and belonging to them.

          The insured had suspected their machinery/accessories on the ground floor to have been damaged by water used for extinguishing the fire.

          We were informed that the factory compound had already been surrounded by water accumulated due to excessive rain, as a result of which their machinery, tools and accessories remained submerged under water.

          We were shown the water marking along the walls.

          We were informed by Shri Pavan Podar that if the loss would not be significant they would not press for the claim.

          On 14th May, 1996, Shri Ajay Podar informed us that they wanted to prefer the claim and on that very day they submitted their claim on moulds and dies.

          On the same day we informed Shri Ajay Podar  that the loss claim was on moulds and dies was not justifiable.

 

          THE ASSESSMENT OF LOSS:

          (1)     Tools & Accessories (Moulds/dies)       Rs.39,23,376.00

          (2)     Cost of repairs to machines                 Rs.  6,39,539.00

          (3)     Machinery & Accessories                    Rs.57,50,000.00

                   (Moulds/dies)                                     

 

          The claim statements to have that effect is enclosed herewith.

          The insured have submitted quotations for these (Moulds/Dies) from M/s. Vasco & M/s. Tharaghandi Industries.

          On examining these quotations they clearly show that these items are moulds.

          On examining the “Schedule No.6” “Fixed Assets” of the Insured’s balance sheets it was found that they have declared their “Machinery” and “Moulds/Dies” as under:

         

 

 

 

Year

Item No.

Assets

Net Block Value

(In Rs.)

1993

(i)

Machinery

7,15,175.56

 

(k)

Moulds and Dies

9,32,328.54

1994

(i)

Machinery

4,87,190.91

 

(k)

Moulds and Dies

41,03,175.45

1995

(i)

Machinery

2,97,745.72

 

(l)

Moulds and Dies

91,34,816.62

1996

(i)

Machinery

7,28,362.23

 

(l)

Moulds and Dies

10,85,140.27

 

 

          Copies of the “Schedule No.6” “Fixed Assets” are enclosed herewith.

          A careful examination of the insured’s claim show that the major part of the claim comprises of loss/damages to moulds and dies.

          It is thus necessary to examine whether the moulds and dies are covered under the above mentioned policy.

          The above mentioned policy issued to the insured clearly shows that following items are covered.

          (1)     tools & Accessories                   Rs.     30,00,000.00

          (2)     Machinery & Accessories Rs.     50,00,000.00

          (3)     Stock & Stock in process           Rs.       5,00,000.00

                                                                   ________________

                                                                   Rs.     85,00,000.00

                                                                   ===============

 

          Thus, it is clear that mould and dies are not covered under the policy.

          Further examination of the policy shows that under “Exclusions””

          This insurance does not cover unless otherwise expressly stated in the policy, loss or damage to

(iv)            Manuscript, plans, drawings or designs, patterns, models or moulds.

The insured have reported that the factory compound had already been surrounded by water accumulated due to excessive rain, as a result of which their machinery, tools and accessories remained submerged under water.

That period was peak monsoon period and there was flooding in the low lying areas of city Mumbai and its suburbs.

Since the insured is claiming on account of flood it is necessary to examine the scope of cover in the above mentioned policy.

On examining the above mentioned policy issued to the insured, it clearly shows that the risks due to fire, lightening, explosion/implosion, impact, damage, air craft damage, riot, strike, malicious and terrorist damage risks have been covered.

Storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation risks are not indicated in the policy.

It is further strengthened by the fact that additional premium chargeable under the tariff for this additional risks has also not been paid/charged.

Since the insured is pressing hard for settlement, we are without prejudice, assessing the loss, as under:

Item                                                            Amount

Electric motors                                Rs.    13,024.00

Electric motors                                Rs.      6,237.00

Electric motors                                Rs.      3,545.00

Electric motors                                Rs.      2,400.00

Electric motors                                Rs.      3,655.00

                                                          ____________

                                                          Rs.    28,861.00

Less: Depreciation at 30%             Rs.      8,658.00

                                                          ____________

Insured’s net loss                            Rs.    20,203.00

                                                          =============

 

          From the aforesaid survey report it is apparent that a devastating fire had taken place on the first floor of the building, in which the insured was having his factory on the ground floor.

          The Bombay Fire Salvage Corps of the loss Prevention Association of India Ltd., has also submitted its report. The fire was abated and controlled by firemen with 8 lines of 8 motor pumps. The cause of fire as stated by them is short-circuit. He visited the premises on 8th August, 1995. At that time also the insured have claimed that the machines and dies/moulds on the ground floor of the factory have been damaged by water used by fire brigade to extinguish the said fire which seeped from wooden floorings.

          During the visit, the entire first floor roof and contents therein were found to have been severely burnt/damaged. The insured had suspected their machinery/accessories on the ground floor to have been damaged by water used for extinguishing the fire.

           They were also informed that factory compound had already been surrounded by water accumulated due to excessive rain as a result of which the machinery, tools and accessories remained submerged under water.

          They have assessed the loss only for electric motors at Rs.20,203/-.

          Ld. counsel appearing on behalf of the Insurance Company submitted that claim for the mould or die is not covered in view of specific Exclusion Clause. The aforesaid survey report would also establish that the Surveyor has assessed the loss by not taking into account the loss suffered by the Complainant for the moulds, on the ground that moulds are excluded as per the insurance policy.

 

Effect of clarification/opinion of the Tariff Advisory Committee:

 

          Therefore, the first question which would require consideration is whether in view of the clarification made by the Tariff Advisory Committee on 30th June, 1998, the insured is entitled to get its benefit ?

Firstly, it is settled law that opinion given by the Tariff Advisory Committee  is binding to all the Insurance Companies.

The opinion dated 30th June, 1998 given by the Tariff Advisory Committee qua the moulds used by the plastic manufacturers is as under:

Sub:  Moulds for Plastics Goods Manufacturing-

          Clarification

 

          Fire Policy ‘C’ excludes loss or damage to manuscripts, plan, drawings or designs, patterns, models or moulds unless otherwise expressly stated in the policy.

          In this connection we have received a representation from Indian Plastic Federation, Calcutta, OPIPET, GSPMA, IPI, OPPI, AIPMA – various Associations representing Plastic manufacturers with a specific query as to whether plastic injection moulds are covered under the heading plant and machinery or not.  They have further contended with supporting arguments that moulds should be treated on par with machinery as it is an integral part of the machine.

Secretariat’s views:

          Moulds are usually required to be made to customer specifications and have intrinsic value.  Very often, moulds are replaced depending upon the end product.  Hence all moulds other than one used in the machine are kept separately.  Unless otherwise these are specifically included, the loss or damage to the mould is not covered.

 

In our opinion the intention of this condition is not to exclude loss or damage to the mould which is in the machine as an integral part.

         

A clarification may, however, be made that the condition will not apply for the moulds which form an integral part of the machine.

         

Submitted for consideration.”

 

          Thereafter, on 30.6.1998, the Tariff Committee informed the insurance companies to amend the Exclusion Clause in fire policies A, B and C by deleting the words “patterns, models or moulds” appearing therein.  The insurance companies were further requested to advise their  operating offices suitably in that regard pending reprinting of relevant sheets of All  India Fire Tariff.

 

          The next question which requires consideration is whether the said clarification or meaning would apply to the policy which was taken in July, 1995.

          The Exclusion Clause, in the policy, at the relevant time was:

“This insurance does not cover

i)                   unless otherwise expressly stated in the policy, loss or damage to

iv)              manuscripts, plans, drawing or design, patterns, models or MOULDS.”

Learned counsel appearing on behalf of the complainant highlighted the opinion expressed by the Secretariat of the Tariff Board, which is as under :

In our opinion the intention of this condition is not to exclude loss or damage to the mould which is in the machine as an integral part.

         

A clarification may, however, be made that the condition will not apply for the moulds which form an integral part of the machine.”

 

          The learned Counsel for the Complainant, therefore, submitted that the direction by the Tariff Advisory Committee to amend the Exclusion Clause made it clear by deleting certain words would not mean that deletion has taken place after 30th June 1998 and MOULDS were not covered prior to that date.  It is his contention that the intent and purpose of clarification would be defeated if it is meant for giving only prospective effect.

          It is true that the Tariff Advisory Committee has advised to suitably amend the Exclusion Clause by its order dated 30.6.1998.  At the same time, the Secretariat has specifically clarified that for the plastic industries, MOULDS were covered by the insurance policy because they are integral part of the machinery.

 

          In our view, the said opinion  of the Tariff Advisory Committee only clarifies the existing position and, therefore, there is no question of any retrospective or prospective operation of the said clarification.  The reason is that MOULDS used in industries for manufacturing plastic goods are all-throughout covered by the insurance policies, as it is integral part of machinery.  Because, the Tariff Advisory Committee has specifically stated that in plastic industries moulds are the integral part of the machinery. Thereafter, they have issued a clarification to the effect that “the condition will not apply for the moulds which form an integral part of the machine”. The existing contract of the insurance is required to be understood accordingly. In view of the aforesaid clarification by the Tariff Committee it hardly lies in the mouth of the Insurance Company that moulds are not covered in the present case. 

          At this stage, we would state that even with regard to the statutory provision, clarification would have retrospective effect because it clarifies the position which already exists.  Therefore, by the Tariff Committee’s clarification it is made clear that qua plastic industries moulds are integral part of the machine and hence not to be equated with the moulds which are used in other industries.  The exclusion clause may be applicable to other industries, but for plastic industries, it is part and parcel of the machinery and/or is usually required to be made as per customer’s specification. 

          Further, clarification may require consideration, whether it is retrospective or prospective. But, stating meaning of a word does not require any further consideration, i.e. whether it is retrospective or prospective, because that is the meaning which is understood all throughout.

                   In the present case, the Tariff Advisory Committee held that ‘mould’ is an integral part of the ‘machinery’ in the plastic industry. That means, it is machinery and hence insurance cover which is applicable to the machinery would be applicable.

                    Hence, it is highly improper on the part of the Insurance Company, after Tariff Committee’s clarification, to contend that moulds are not part and parcel of the machinery.

The law with regard to clarification:

          It is settled law that even amendment of the law if it is clarificatory or declaratory in nature it would have retrospective effect. 

          The Court in Shri Chaman Singh & Anr. Vs. Srimathi Jaikaur, (1969) 2 SCC 429 observed:

“… It is well settled that if a statute is curative or merely declares  the previous law retroactive operation would be more rightly ascribed to it than the legislation which may prejudicially affect past rights and transactions”.

 

          Dealing with the contention that the ‘Acetic Anhydride’ manufactured by the assessee sold to drug manufacturers for using it for manufacturing drugs can be considered to be drug intermediate in exemption notification, the Apex Court in the case of Collector of Central Excise, Guntur Vs. Andhra Sugar Ltd., Venkata Rayapuram, (1989) Supp 1 SCC 144, referred to the Government’s view that this requirement of end-use though not built into the exemption notification is not only implied but also becomes imperative in a situation where the produce has uses other than a drug intermediate whereas the exemption is limited only to drug intermediate that is when the produce is used as a drug intermediate. And held in para 5 as under:

 

“5. It appears that the same principle was reiterated in the case of In re Shasun Chemicals (Madras) P. Ltd. (1982) ELT 786.  It is well settled that the meaning ascribed by the authority issuing the notification, is a good guide of a contemporaneous exposition of the position of law. Reference may be made to the observations of this Court in K. P. Varghese v. ITO (1981) 4 SCC 173. It is a well settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon it at the time of its enactment and since, by those whose duty has been to construe, execute and apply the same enactment.”

            The same would be the position in the present case, because the clarification or the directions issued by the Tariff Advisory Committee  are binding to the insurance companies. Therefore, while interpreting the term of the policy weight has to be given to the Tariff Advisory committee’s clarification that moulds in plastic industries were/are part and parcel of machinery.

          Similar is the direction the case of State of Tamil Nadu Vs. Mahi Traders & Ors. (1989) 1 SCC 724, dealing with interpretation of Central Sales Tax Act, 1956, the Court observed that opinion rendered on meaning of statutory expressions by the concerned department at the initial stage when the statute came into force can be given effect to in interpreting the provision s of the statute if not shown to be clearly wrong. While discussing this aspect, in para 8 it is held as under:

“8. It has been pointed out by this Court in Desh Bandhu Gupta v. Delhi Stock Exchange Association Ltd. (1979) 4 SCC 565 and K.P. Varghese v. ITO (1981) 4 SCC 173  that a contemporaneous exposition by the administrative authorities is a very useful and relevant guide to the interpretation of the expressions used in a statute. Considering that the above clarification was sought for at the earliest point of time when a doubt arose as to the scope of the expression used by the statute and given after considering the technicalities of the processes employed in the manufacture of finished leather by the department fully conversant with this branch of trade and in the context of the provisions of this very statute, the terms of the statute can well be construed by reference to such exposition, in the absence of anything in the statute to indicate the contrary. Indeed, “such interpretation should be shown to be clearly wrong before it is overturned”.

          Similarly, in Union of India & Ors. Vs. S. Muthyam Reddy, (1999) 7 SCC 545, the Court observed that declaratory amendment would have retrospective operation. Further, an amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect. [Re. Zile Singh Vs. State of Haryana, (2004) 8 SCC 1].

          Considering the aforesaid settled law, in our view, clarification given by the Tariff Advisory Committee that molds in the plastic industries are integral part of machinery, no question of excluding the moulds while giving the insurance cover would arise. In these set of circumstances, it is to be held that the clarification given by the Tariff Advisory Committee is binding even the insurance policy which was taken in the year 1995 and the fire took place in August, 1996, as it merely clarifies the existing position that moulds are part and parcel of the machinery.

          In this view of the matter, the contention of the learned Counsel Mr.Mehra, that the terms of the contract are to be interpreted on the basis of the words used therein deserves no further consideration and the judgment cited by him in support of thereof does not require any further consideration. As there was doubt as to whether the moulds used by the plastic industries would be covered by the exclusion clause, the Tariff Advisory Committee clarified that in an insurance cover by the plastic industry ‘moulds are integral part of the machinery’ and to be treated as such. This clarification was sought by the plastic industries from the Tariff Advisory Committee and that clarification is binding to the insurance companies.

 

Insurance premium on the basis that moulds are part of machinery:

 

          Further, in support of this claim, insured has stated that one Mr.H.K.Shah acting as an agent of the Insurance Company approached him for effecting fire insurance of Plant and Machinery and accessories worth about a Crore of Rupees safe guarding them from the risk of fire.  After discussion, the valuation of the machinery tools and accessories was made as under:

          ”Tools & Accessories                     Rs.30,00,000.00

Machinery & Accessories             Rs.50,00,000.00

Stocks                                              Rs.5,00,000.00

 

Total                                              Rs.85,00,000.00

The above break-up also included the cost of Moulds, which amounts to almost 90% of the total value of the Tools, Machinery and Accessories insured under the policy.  The opposite Insurance Company accepted this valuation and the break-up and the same have been incorporated in the policy issued by them and only thereupon was the premium payable calculated and charged from the Complainant Company.

I say that therefore the Complainant had insured its assets consisting of Tools and Accessories and machinery and accessories and stocks with the Opposite Party no. 1, through the Opposite Party no. 2 having its office at Mumbai.  The O.P. No.2, issued the Insurance Policy bearing No. 250800/II/Complainant3115376/95, for the period from 31.7.95 to 30.7.96, which pertains to the relevant period of loss.  The said insurance policy was delivered to the Complainant Company only on 27/11/95 after more than four months of the execution of the cover note covering all risks from 31.7.95 to 30.7.96.  The Complainants are the consumers of the services rendered by the Opposite Parties under the Insurance Policy.

I say that the Insurance Company charged the premium on all the items at Rs.36,713/-.  If it was the intention of the Insurance Company to exclude the Moulds from the scope of the coverage then the sum Insured would have reduced to Rs.8,50,000/- only and premium would have been merely Rs.3,671/-.  It is therefore clear that the Insurance Company accepted the understanding reached between their Agent Shri H. K. Shah and the Complainant Company”. 

 

 

         

The Insurance Company had not filed any affidavit of H.K.Shah, the agent of the Insurance Company, denying the aforesaid statement. In any case, denial by some other persons subsequent to the occurrence of peril caused to the premises would have no  effect because, in the present case, 90% of the machinery in the factory of the insured consist of moulds. The insurance cover is mainly for tools and accessories, machinery and accessories for a sum of Rs.80 lakhs. This would establish that if moulds are not covered by the insurance policy there was no question of paying premium for such a large amount. Therefore, the subsequent assertion of the Insurance Company cannot be relied.

          Further, it is to be stated that if moulds are not covered then, the Insurance Company ought to have repudiated the claim in the year 1996 itself or the surveyor ought to have submitted the report in the year 1996. But, the surveyor delayed it for years together and thereafter, on one pretext or the other, he avoided submission of the report despite the warning given by the Manager and the Chief   Manager   of   the    Insurance Company.      He submitted the report when the Insurance Company pointed out that a complaint was filed before the Consumer Fora, he hesitantly submitted the report stating that the insured was not entitled to any compensation for the loss suffered on account of moulds, by ignoring the Tariff Advisory Committee clarification.

 

          In this view of the matter, in our view, the insured is entitled to reimbursement for loss suffered by him for the moulds.

 

Delay in submitting the claim form:

 

                    Next, it is contended by Mr.Mehra, learned Counsel for the Insurance Company that there was delay on the part of the Complainant in lodging the claim. This submission is without any substance because immediately after the fire, the Insurance Company appointed the Surveyor who visited the site on the 8th August, 1995. Therefore, it cannot be said that the insured has not lodged the claim within the prescribed time limit.  It is true that exact amount was not claimed by the insured by insisting that the surveyor has to assess the loss. That was not done by the surveyors. Therefore, only in March 1996, he lodged a formal claim. But, that would not mean that his claim is not required to be entertained even though it is genuine,  because information was given at the earliest to the insurance company; the Insurance Company appointed surveyor on 7th August, 1995; and, he visited the site on 8th August, 1995. At that time also the insured has informed the surveyor that he has suffered loss to his tools and machinery. 

 

Relevant documents not produced by the insured:

                   Further, the contention of the Insurance Company or the Surveyor that the insured has not produced the relevant documents is baseless. In the letter dated 27.1.2000 written by the Manager of the Insurance Company to the surveyor it has been specifically stated that to sort out the matter amicably a meeting between the insured along with the officers  of the Insurance Company was organized. In that letter it has been specifically stated that the insured produced as documentary evidence  copies of several letters sent to the surveyor with the information such as:

.1.     Loss of tools/machinery, accessories as shown under the heading “Gross Block”in their balance sheet as on 31.3.1995;

.2.     List of tools/machinery accessories damaged;

.3.     List of tools/machinery accessories not damaged;

.4.     List of repairs carried out by them.

          On the basis of the said information the Manager informed the surveyor that there was no reason why the assessment was not computed. He specifically asked the surveyor to let them know why the assessment was pending in spite of all the information submitted by the insured to him as per the insured’s submission.  The Divisional Manager also wrote a similar letter dated 1.2.2000 wherein it has been specifically averred that the insured has already submitted the documents to the office of the surveyor long back.

                   Therefore, the contention of the learned counsel that the insured has not submitted the relevant documents to the surveyor is without any substance and is apparently an after thought contention.

          Admittedly, in the present case, the Insurance Company has not repudiated the claim. However, in the written version it has been pointed out that by letter dated 8th December, 1997 written to the complainant that the Insurance Company stated that it would be constrained to treat the claim as ‘no claim’ if the complainant fails to submit various documents required by the surveyor.

 

          However, as stated above, in order to sort out the matter amicably, a meeting between the insured along with the officers of the Insurance Company and officials from RO was organized on 21.1.2000. The Manager as well as the Chief Manager and the persons who were sitting in the meeting  were satisfied that the insured had submitted the relevant documents and the surveyor was required to assess the loss. Therefore, there is no question of disentitling the insured to recover any amount from the Insurance Company on the ground that the insured has not submitted the relevant documents.

 

 

No loss suffered by the complainant:

                   Lastly, the learned Counsel for the Insurance Company submitted that the insured has not suffered any loss. In our view, this submission is without any basis. The insured has produced the documentary evidence to establish that the moulds were affected by water would be of no consequence  in plastic industries.

 

Conclusion:

                    For the reasons stated, it is apparent that the complainant is entitled to have reimbursement for the loss suffered by him to the moulds, when loss admittedly not assessed by the surveyor.

                   In this set of circumstance, it is difficult for us, in this complaint, to assess the loss suffered by the complainant. Hence, the Insurance Company is directed to appoint another competent surveyor for assessing the loss on the basis of the documents which are produced on record.

 

                   Meantime, the Insurance Company is directed to reimburse the complainant the sum of Rs.20,203/- with interest at the rate of 12% p.a. from 1.8.1996, i.e. after one year from the date of the incident till its payment.

                   The Insurance Company is directed to submit the assessment report within a period three months from today.

 

……………………………..J.

( M.B. SHAH )

PRESIDENT

 

 

……………………………..J.

( K.S. GUPTA)

MEMBER