United India Insurance Company Ltd vs Kantika Colour Lab & Ors

for a sum of Rs.53 lakhs. The policy covered loss against all

risks including damage/breakage, theft pilferage, road risk 3

and non-delivery etc. The insurance was extended to cover

SRCC as per limits and conditions of the Marine Policy.

4. The case of the owner-respondent no.1 is that the

machines suffered damage on account of mishandling in the

course of transportation from Mumbai to Hardwar. A damage

certificate issued by respondent no.7 acknowledged that the

damage to the machines had occurred during transportation.

Respondent no.1 accordingly lodged a claim for a sum of

Rs.55 lakhs against the appellant company and the Carrier-

respondent no.7 in this appeal. A preliminary survey of the

damage to the machines was ordered by the appellant

company and conducted by Shri Ajay Kumar Arora, who

submitted a report stating that while Printing Machine QSS

1923 had suffered damage, there was no apparent damage

to the Film Processor QSF-V50 which machine outwardly

appeared to be in sound condition.

5. The appellant-company then appointed Shri Vinod

Sharma licensed Surveyor to survey the machine and assess 4

the loss as required under Section 64UM of the Insurance

Act 1938. Shri Sharma submitted a report dated 17th April,

1999 after the machines were inspected by Shri Amit Bose,

the Technical Director and Engineer of M/s Satyam

Equipment Services Ltd. In his report Shri Sharma opined

that the damage/loss to the machine was repairable and

assessed the same at Rs.5,76,730/-. The report

categorically stated that there was no damage to the Film

processor QSF-V50 which was found to be in working

condition. Accepting the said report, the appellant company

offered an amount of Rs.5,76,730/- to respondent no.1

towards compensation which the said respondent refused to

accept. Instead respondent no.1 filed complaint No.153 of

1999 before the National Consumer Disputes Redressal

Commission, New Delhi, claming an amount equivalent to

the cost of the machines which according to the respondent

were a total loss on account of the damage suffered by

them.

5

6. The appellant-company contested the claim and took

several objections to the maintainability of the complaint

including the objection that the complaint raised complicated

questions of law and fact which could not be tried under

Consumer Protection Act. It was also alleged that damage

suffered by the machine was repairable and that the loss

was limited to Rs.5,76,730/- which the company had offered

to make good.

7. In support of its complaint the respondent-company

examined Shri Pradeep Kumar Sharma, one of its partners.

The statement of Shri Taposh Dev, Senior Sales and Service

Engineer was also recorded, on behalf of the manufacturing

company who too was arrayed as a party respondent.

Depositions of Shri Vinod Sharma, Surveyor and Shri Amit

Bose, Technical Director of M/s Satyam Equipment Services

Pvt. Ltd. examined on behalf of the appellant-company,

were also recorded.

6

8. By its order dated 1st May, 2001 the National

Commission allowed the claim made before it and held the

appellant-company as also the Carrier to be jointly and

severally liable to pay a sum of Rs.53 lakhs together with

interest @ 10% p.a. for the period commencing two months

after the second Surveyor's report was submitted till the

actual payment of the claim is made. The Commission

directed surrender of the salvage to the Insurance Company

against payment of its claim within eight weeks. The

complainant was also held entitled to costs of Rs.10,000/.

9. The present appeals call in question the correctness of

the above order. While Civil Appeal No.6337 of 2001 filed

by the Insurance Company assails the order passed by the

National Commission in its entirety, Civil Appeal No.6975 of

2001 filed by the owner challenges the said order to the

extent it awards interest @ 10% p.a. only instead of the rate

at which the insured claims to have borrowed money from

the bank for the purchase of the machines in question. 7

10. Appearing for the appellant-Insurance Company

Mr. Vishnu Mehra, learned counsel, strenuously argued that

the National Commission had committed a palpable error in

awarding Rs.53 lakhs towards compensation for the damage

caused to the machine insured with the appellant for its

transportation from Mumbai to Hardwar. He contended that

the order passed by the National Commission proceeded on

an erroneous assumption that the damage suffered by the

machine had rendered the same unusable hence a total loss.

The material available on record argued the learned counsel

clearly established that it was only the printer process QSS-

1923 that was damaged and not the film processor QSF-

V50. The latter was in fact found to be in perfect condition

and in use at the time of the survey. It was also argued by

Mr. Mehra that the damage caused to the printer model

QSS-1923 was repairable and that the report of the

Surveyor had assessed the cost of the repair at

Rs.5,76,730/- which amount alone was payable to the

insured. It was alternatively submitted that even if this 8

Court were to hold that the entire printer model QSS-1923

was rendered useless on account of the damage caused to

it, the maximum that could be claimed by the insured was

the replacement cost of the said machine and no more.

11. On behalf of respondent-claimant it was contended by

Mr. R.P. Bhatt, learned senior counsel, that while there was

no apparent damage to the film processor QSF-V50, the fact

that the printer model QSS-1923 had suffered damage

raised a reasonable apprehension in the mind of the insured

that the impact which the machine had suffered in the

course of transportation may have damaged even the film

processor QSF-V50. It was submitted that merely because

the film processor QSF-V50 was found to be in working

condition did not rule out the possibility of the machine

giving trouble in future.

12. As regards the damage to printer model QSS-1923 it

was argued by Mr. Bhatt that the manufacturers had clearly

ruled out any possibility of repairs to the machine in India. It 9

was also submitted that the expenses on repairs which could

be carried out only in Japan would be far more than the

price of a brand new machine making it unwise to insist on

repairs. The manufacturer had also ruled out the possibility

of any such repairs being satisfactorily carried out either by

M/s Satyam Equipment Services Ltd. or by any other agency

in India.

13. The Surveyor report submitted by Shri Vinod Sharma

certifies damage to the printer model QSS-1923 which

comprises two distinct sections, namely, (1.A) Paper

Processor and Dryer Section and (1.B) Printer Section. The

report records the damage in the following words:

"1. PRINTER MODEL QSS-1923

1.A. PAPER PROCESSOR AND DRYER SECTION

Chemical tank broken, Roller transportation gone out of alignment, replansher system were broken, processor came out of the base completely, all processor racks damaged. As such complete Tank Unit & Rack Unit requires replacement in addition to Resetting of complete Processor.

10 1.B. PRINTER SECTION

Many parts were found displaced from original setting and screws also came out. It requires Resetting of Machine along with replacement of Monitor Unit which was found damaged. Since the machine i.e. paper processor & printer requires resetting, there will be requirement of imported wires & some gears & metal spares."

14. In so far as film processor QSF-V50, is concerned the

report specifically states that there is no apparent damage

to the said machine, no matter the insured apprehends that

the same may also have been damaged from inside which

fact can be verified only when the machine is tested. The

report further states that at the time of the second visit to

Hardwar along with the engineer of M/s Satyam Equipment

Services Ltd. the film processor QSF-V50 was found to have

been already tested by the supplier's engineer and the tank

of the machine was found filled with chemicals. Around 40-

50 number of empty Film rolls were found lying on the spot.

The report certifies that the machine was in working 11

condition. The following passage from the report is in this

regard relevant:

"On our second visit on 24.02.99 alongwith Engineers of M/s Satyam Equipment Services Ltd. we found that Film Processor had already been testified by the Suppliers Engineers. The tanks of the machine was found filled with Chemicals and around 40-50 No. of empty Film Rolls were lying there, as the same were informed to be developed on the machine. The Insured informed that though this machine is working at present but chances are there that later on its PC Board may have to be changed. The Insured could not explain the reasons for replacement of PCB, at a later stage. Once it is found working in good condition."

15. In his deposition before the National Commission

Shri Vinod Sharma, Surveyor and author of the report

reiterated that the film processor QSF-V50 was not found

damaged upon inspection at site. He refuted the suggestion

made to him that the machines were totally damaged.

16. We may at this stage refer to the deposition of

Shri Taposh Dev, Senior Sales and Service Engineer of

respondent no.2 the manufacturer of the machines in 12

question. In the affidavit filed by the said witness it is, inter

alia, stated that a thorough visual inspection of the

machines in question was made by the engineers of

respondent no.2 company and a report based on the said

inspection submitted on 21st December, 1998. The witness

on the basis of the said inspection report stated that Noritsu

QSS-1923 printer process was subjected to a strong impact

from the sides during transit from Mumbai to Hardwar

resulting in severe damage, especially to the Paper

Processor & Dryer Section thereof. The mechanical

alignment and the optical accessories also had been badly

affected. The witness also stated that it was not economical

to undertake such repair work on account of the high cost

involved in the same especially when the repair may not

exclude the possibility of any future complications arising in

the working of the machines. The witness also referred to

manufacturer's letter dated 7th January, 1999 informing the

insured about the price of Noritsu QSS-1923 Printer Process

and QSF-V50 Film Processor after deducting the value of the 13

optional accessories. According to the witness the price of

Printer Process QSS-1923 works out to Singapore $ 62,100.

The witness asserted that M/s Satyam Equipment Services

Ltd. were appointed as authorized sales representatives

during early 1996 but since their services were not found to

be satisfactory the agreement between the parties was

terminated. He has further stated that respondent no.2-

company had not trained any engineer to repair the Printer

Process QSS-1923.

17. Not much has been extracted from the witness in

cross-examination who has stuck to his version that the

machine is not at all repairable, and that the cost of getting

the machine repaired in Japan would be much more than the

cost of a new machine.

18. Two aspects stand out from the above evidence.

Firstly, it is clear that the damage has been caused only to

the printer model QSS-1923 and not to the film processor

QSF-V50 which was found to be in working condition and 14

about which there was only an apprehension and no more

that its working may run into difficulty in future. We,

however, see no real basis for such an apprehension. In any

case in the absence of proved damage affecting the

performance of the machine, it is difficult to assume that the

film processor was also damaged either wholly or in part so

as to call any repair or replacement of the said machine.

19. Contracts of Insurance are generally in the nature of

contracts of indemnity. Except in the case of contracts of

Life Insurance, personal accident and sickness or contracts

of contingency insurance, all other contracts of insurance

entitle the assured for the reimbursement of actual loss that

is proved to have been suffered by him. The happening of

the event against which insurance cover has been taken

does not by itself entitle the assured to claim the amount

stipulated in the policy. It is only upon proof of the actual

loss, that the assured can claim reimbursement of the loss

to the extent it is established, not exceeding the amount

stipulated in the contract of Insurance which signifies the 15

outer limit of the insurance company's liability. The amount

mentioned in the policy does not signify that the insurance

company guarantees payment of the said amount regardless

of the actual loss suffered by the insured. The law on the

subject in this country is no different from that prevalent in

England; which has been summed up in Halsbury's Laws

of England - 4th Edition in the following words:

"The happening of the event does not of itself entitle the assured to payment of the sum stipulated in the policy; the event must, in fact, result in a pecuniary loss to the assured, who then becomes entitled to be indemnified subject to the limitations of his contract. He cannot recover more than the sum insured for that sum is all that he has stipulated for by his premiums and it fixes the maximum liability of the insurers. Even with in that limit, however, he cannot recover more than what he establishes to be the actual amount of his loss. The contract being one of indemnity only, he can recover the actual amount of his loss and no more, whatever may have been his estimate of what his loss would be likely to be, and whatever the premiums he may have paid, calculated on the basis of that estimate."

20. The other aspect that is established is that printer

model QSS-1923 has been extensively damaged and the 16

manufacturing company has no arrangement in this country

for carrying out the repairs to the damaged machine. The

Insurance Company's version that M/s Satyam Equipment

Services Ltd. undertakes the repairs does not appear to us

to be acceptable specially when the manufacturing

company's authorized representatives has in no uncertain

terms denied the competence of the M/s Satyam Equipment

Services Ltd. to undertake any such repairs. Such being the

position, the National Commission was, in our opinion,

justified in holding that the printer processor model QSS-

1923 being extensively damaged requires complete

replacement.

21. The question, however, is as to what is the cost of such

replacement. Shri Taposh Dev, has referred to letter dated

7th January 1999 addressed by the manufacturing company

to the insured M/s Kantiak Colour Lab and stated that the

price of a brand new printer processor model QSS-1923,

works out to Singapore $62100. We see no reason why the

said amount can not be awarded to the insured by way of 17

compensation for the damage caused to the machine.

Besides the cost of the machines the insured would also be

entitled to the customs duty component paid on the import

of the said machine. From the Surveyor's report submitted

by Mr. P.M. Patel and Co. it is evident that the invoice value

of the goods comprising the printer processor and the film

processor was Singapore $ 104000 with an assessable value

of Rs.27,36,292/-. A sum of Rs.21,32,776/- was on that

value paid towards customs duty on the import of the said

equipment. The duty payable on a machine valuing

Singapore $ 62100 would, therefore, come to

Rs.21,32,776X62100/104000=Rs.12,73,513.36.

22. To sum up the total amount payable to the insured by

way of compensation for the damage caused to the machine

in question would work out to rupees equivalent of

Singapore $ 62100 at the exchange rate prevalent as on the

date of this judgment plus a custom duty component of

Rs.12,73,513.36 rounded off to Rs.12,74,000/-. The sum

total of the two figures would be payable with interest @ 18

10% p.a. for the period mentioned in the National

Commission's order. We make it clear that keeping in view

the bank rate of interest prevalent during the relevant

period we see no reason to award a higher rate of interest

as claimed by the insured appellant in Civil Appeal No.6975

of 2001.

23. In the result Civil Appeal No.6337 of 2001 succeeds in

part and to the extent that the appellant-company and the

carrier M/s Super Road Lines shall be liable jointly and

severally to pay the rupee equivalent of Singapore $ 62100

at the exchange rate prevalent on the date of this order

besides a sum of Rs.12,74,000/- towards customs duty paid

by the insured on the import of the damaged machine. The

amount so determined shall earn interest @ 10% p.a. as

observed above.

24. The amount awarded in favour of the insured-

respondent no.1 in Civil Appeal No.6337 of 2001 shall be

paid upon surrender to the appellant Insurance Company of 19

the printer process model QSS-1923 comprising the

damaged Printer Process machine (1.A and 1.B) within two

months from today. Civil Appeal No.6975 of 2001 filed by

the insured is, however, dismissed.

25. We make it clear that if the insured has already

received directly or through its bank any part of the amount

awarded by the National Commission it shall refund the

excess, if any received by it or paid on its behalf to the bank

within a period of two months failing which the excess

amount so received but not refunded shall also earn interest

in favour of the insurance company @ 10% p.a. from the

date the period of two months hereby granted expires.

26. Parties are left to bear their own costs.

.................................J. (D.K. JAIN)

.................................J. (T.S. THAKUR) New Delhi May 6, 2010