United India Insurance Co. Ltd vs M/S Saifco Cements Private
2023 Latest Caselaw 954 j&K/2

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                                                            Sr. No.02
                                                             Regular Cause List
   IN THE HIGH C0URT 0F JAMMU & KASHMIR AND LADAKH
                      AT SRINAGAR

                             FAO(D) No.2/2019
                              CM(3713/2019)

UNITED INDIA INSURANCE CO. LTD.                       ...Appellant(s)/Petitioner(s)

Through: Ms. Rifat Khalida, Advocate
                                     Vs.

M/S SAIFCO CEMENTS PRIVATE                                       ...Respondent(s)
LIMITED

Through: Mr. Sami Yaqoob, Advocate

CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE M.A. CHOWDHARY, JUDGE

                           O R D E R (ORAL)

17-08-2023

N.KOTISWAR SINGH, CJ

01. Heard Ms. Rifat Khalida, learned counsel appearing for the appellant-

Insurance Company Limited and Mr. Sami Yaqoob, learned counsel

appearing for the respondent-claimant.

02. The present appeal has been filed challenging the order/judgment

passed by J&K State Consumer Disputes Redressal Commission,

Srinagar (hereinafter referred to as "Commission") on 15.03.2019 in

Complaint No.73/2015. The said complaint was filed by the present

respondent-claimant alleging deficiency in service after his entire claim

for payment of insurance of certain machines insured by the present

appellant-Insurance Company was not entertained.

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03. The case of the respondent-claimant before the Commission was that

he had purchased certain machines namely, HDD Machine (ZT-18)

comprising of Drilling Rig ZR-18 with its tools, accessories,

attachments and spares including DIGITRAK F5 system which were

insured with the appellant-Insurance Company for Rs. One Crore. The

negotiated price for the said machine was Rs.1, 19, 70,000/- which was

inclusive of VAT and CST but exclusive of transportation and Octori

on 28th September, 2013. Unfortunately, during the devastating floods

of September, 2014, all the machineries of the respondent-complainant

suffered damages because of which the petitioner incurred huge loss.

Accordingly, the respondent-claimant submitted a claim before the

appellant-Insurance Company.

04. During the subsistence of the said insured policy, the appellant-

Insurance company, accordingly, on being notified appointed a

Surveyor. The respondent-complainant submitted an estimated loss to

the Surveyor which stood at Rs.62.58 lacs. The Surveyor after making

necessary survey, verification and examining the losses suffered by the

present respondent-claimant, assessed the loss to be of Rs.25,53,932/=

after making necessary deductions on account of "depreciation" as well

as "under insurance" to the extent of 25% and 36.87% respectively.

05. According to the appellant-Insurance Company, the Insurance

Company paid the aforesaid assessed amount as per the assessment

made by the Surveyor. However, the insured-complainant being

aggrieved by the deductions made on account of "depreciation" to the

extent of 25% and on account of "under insurance" to the extent of

FAO(D) No.2/2019 CM(3713/2019) Page |3

36.87%, approached the Insurance Company which was rejected by the

Insurance company. Accordingly, alleging deficiency in service the

petitioner approached the Commission, which fact has been denied by

the appellant-Insurance Company.

06. Be that as it may, the respondent-claimant approached the Commission

alleging excessive deductions on the aforesaid counts i.e., on account

of "depreciation" of value of machines, and "under insurance". The

Commission took up the matter and came to the conclusion that

applying depreciation at the rate of 25% appears to be excessive and

reduced it to 15% only. Similarly, as regards "under insurance" the

Commission also held that deduction of 36.87% was excessive and

again reduced it to 15%, and accordingly, directed payment of their

remaining amount in addition to the amount already paid to the insurer

along-with interest at the rate of 7% from the date of insurance and also

imposing a litigation charge of Rs.30,000/- vide impugned order dated

15.03.2019 passed by the Commission.

07. The appellant-Insurance Company being aggrieved by the aforesaid

decision in reducing the percentage of deductions on account of

"depreciation" as well as on account of "under insurance" and also

against the direction to pay interest from the date of insurance has

approached this Court.

08. Ms. Rifat Khalida, learned counsel appearing for the appellant-

Insurance Company submits that as far as the issue of depreciation of

machine is concerned, the Surveyor who was appointed by Insurance

Regulatory and Development Authority (IRDA) was fully competent

to make that assessment. As regards the life span of the machinery,

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there is nothing arbitrary about such assessment made by the Surveyor

that the life span of the machine is only for about 4 years. If that is so,

the deduction of 25% on account of depreciation of value of the

machine cannot be said to be illegal and unreasonable.

09. On the other hand, learned counsel for the respondent-claimant submits

that there is no basis on which the Surveyor has made the assessment

that life span of the machine is only 4 years. To the same effect the

Commission had also made such an observation.

10. As regards the issue of depreciation of the value of the machines, we

have gone through the impugned order. The Commission has relied

upon the evidence produced by the respondent-complainant in his own

communication dated 07.04.2015 that was certified by the DCI India

Private Limited i.e., manufacturing company that the life span of

Digitrak is 8 to 10 years. It has not been brought to our notice as to

whether the appellant-Insurance Company had disputed this evidence.

In absence of any challenge or disputation as regards the genuineness

of the said communication as certified by the manufacturer of the

machine that the life span of Digitrak is 8 to 10 years, we have no reason

to ignore the same. We are also of the view that it is the manufacturer

who is in the best position to say about the life span of machines which

are being manufactured by it. The Commission appears to have relied

upon this communication mentioning the certification by the DCI India

Private Limited, manufacturer of machines. In-fact nothing has been

mentioned as on what basis the Surveyor made the decision that

depreciation will be 25% and life span of the machine would be only 4

years. We accordingly, are also of the view that the life span of machine

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is 8 to 10 years. If that is so, the deduction of value of depreciation by

the Commission at the rate of 15% from the 25% as assessed by the

Surveyor does not appear to be irrational and not based on any

evidence.

11. Under the circumstances, we are not inclined to re-appreciate the

evidence and the material on record, as we do not find such finding by

the Commission to be arbitrary or irrational.

12. Accordingly, we uphold the decision of the Commission in reducing

the percentage of deduction on account of depreciation of value of

machine at the rate of 15% contrary to 25% as given by the Surveyor.

13. Coming to the second issue about the "under insurance", it has been

submitted by the appellant-Insurance company that the said assessment

was made by the Surveyor on the basis of quotations received from the

manufacturing company at the time of making assessment and since the

Surveyor found that the value of the machinery was Rs.1,58, 40252.87/-

at that time which is higher than the value of machine which the insurer

had shown to have purchased in 2013, there was a reasonable basis for

the Surveyor to hold that the insurer had not insured the machine at the

proper value of the machineries. Thus, the deduction at the rate of

36.87% is appropriate. Learned counsel for the petitioner, however, has

urged before us that the report which was prepared by the Surveyor was

unreasonable as he relied on quotations of the current year when the

survey was made, by ignoring the fact that the machines were actually

purchased early in 2013 and hence, there was no element of the

evaluation of the machines.

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14. As regards this issue, what we have noted is that the Commission also

accepted the plea of insurer by observing that the complainant-insured

had placed on record various invoices in respect of the cost of machines

which comes to Rs.1, 19, 70,000/-. The Commission also noted that as

per the circular issued by the Tariff Advisory Committee, 15% of the

sum insured is required to be deducted on account of "under insurance".

Accordingly, the Commission took the view that the "under insurance"

had to be assessed on the basis of value of machinery which the

Commission accepted to be of Rs.1, 19, 70,000/- and not on the basis

of invoice price quoted by the manufacturer at a later point of time of

assessment made by the Surveyor.

15. We are also of the view that the Surveyor could not have acted upon

the price of the machinery prevalent at the time of survey, inasmuch as,

what is required to be assessed is the price which the insurer had

actually claimed to have paid is Rs.1, 19, 70,000/- when he purchased

the machineries.

16. In absence of any disputation to the aforesaid claim made by the insurer

that he had paid the aforesaid amount of Rs. 1,19,70,000/- in 2013,

there was no reason for the Surveyor to rely upon the current price of

the machinery. The matter would have been otherwise, if the insurer

had failed to provide the documents of the price he paid when he

purchased in 2013 in which event, the Surveyor would have been

entitled to resort to the course of action adopted in asking for quotation

of price from manufacturer at the time of assessment.

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17. We are also of the view that the reliance on the circular issued by the

Tariff Advisory Committee by the Commission for deducting on

account of "under insurance" 15% cannot be said to be improper.

18. Accordingly, we are also of the opinion that reducing the deduction by

the Commission at the rate of 15% on account of "depreciation", as

well as "under insurance" at the rate of 15%, instead of 25% and

36.87% respectively, as assessed early by the Surveyor, appears to be

appropriate. However, as regards the direction to pay interest at the rate

of 7% from the date of insurance, we are of the view that the insurer

cannot make any claim before the loss occurred and as such, the interest

has to be paid from the date of loss i.e., 28-09-2013. Thus, he will be

entitled to interest from 1st October, 2013 at the rate of 7% as decided

by the Commission.

19. As regards the submission that of litigation charges of Rs.30,000/- is in

a higher side, we are of the view that the said plea also is not acceptable

for the reason that the respondent-claimant had to incur huge expenses

for redressal of his grievances.

20. Accordingly, we do not find any merit in this petition and the same is

accordingly dismissed, subject to the observations, about the date from

which interest is payable.

21. Disposed of accordingly.

                (M.A. CHOWDHARY)                   (N. KOTISWAR SINGH)
                       JUDGE                            CHIEF JUSTICE

SRINAGAR
17-08-2023
Shameem H.

               Whether the order is reportable:         Yes/No

FAO(D) No.2/2019
CM(3713/2019)