Indian Sugar Exim Corporation Limited Vs. M/S. United India Insurance Co. Ltd. and Another - Court Judgment

SooperKanoon Citationsooperkanoon.com/1146012
CourtNational Consumer Disputes Redressal Commission NCDRC
Decided OnJul-05-2013
Case NumberOriginal Petition No. 328 of 2000
JudgeJ.M. MALIK, PRESIDING MEMBER & THE HONOURABLE MR. VINAY KUMAR, MEMBER
AppellantIndian Sugar Exim Corporation Limited
RespondentM/S. United India Insurance Co. Ltd. and Another
Excerpt:
consumer protection act, 1986 - section 11, 12 - insurance of goods – damaged - insurance claimed – the entire consignment was shipped to india and received at mangalore port – the complainant had obtained a marine insurance policy – damaged was caused due leakage of the godown roofs – damage is established – court held, the insurance company is directed to pay a sum of rs.59,24,963/- within 90 days. (paras 2, 4, 5, 9, 20) comparative citation: 2013 (3) cpr 154 vinay kumar, member m/s. indian sugar and general industry export import corporation has filed this complaint in the year 2000. in the course of the proceedings ma/1428/2009 was filed informing that the complainant had changed its name to m/s indian sugar exim corporation ltd. the application was allowed on 15.12.2009 and necessary amendment in the memo of parties permitted. in the proceeding of 19.11.2012, it was observed that negotiations for compromise between the parties were in progress. the matter was therefore adjourned to 2.1.2013 directing that in the event of no compromise being reached, the parties would file their written arguments. the matter was finally heard on day to day basis and reserved for order on 16.1.2013. background 2. the consumer dispute arises out of import of 13,800 mt of white sugar by the complainant from switzerland in 1994. the entire consignment was shipped to india and was received at mangalore port. the complainant had obtained a marine insurance policy to cover the shipment. it was effective from 13.4.1994, initially for a period of 60 days. subsequently, the terms of the policy got extended to 1.11.1994, with three extensions in between. case of the complainant 3. the cargo vessel mv scotian express left eemshaven port in netherland on 28.4.1994 and arrived at mangalore port on 26.5.1994. discharge of the entire cargo of 13,785 (mts) of sugar was completed by 3.7.1994. as per para 7 of the complaint petition, œsubstantial quantity of sugar bags were found progressively to be partly wet and stained in all hatches of the vessel apart from bursting of many bags. it would be also evident from perusal of date-wise summary of discharge as recorded in annexures-a and b of annexure-8 herein that; heavy rain was experienced right from first day of discharge upto the date of final discharge, namely, 3rd july 1994. a copy of certificate issued by indian meteorological department station: panambur dated 6th december 1994 certifying the recorded rain fall during the months of may, june, july and august 1994 is annexed herewith and marked as annexure-9.? 4. in the above background of damaged conditions of the goods, the complainant appointed m/s. superintendence company of india pvt. ltd. (hereinafter referred to scpl) to inspect the condition of the cargo in the vessel and to supervise its discharge therefrom. simultaneously, op-1/ insurance company appointed a surveyor (op-2) for the same purpose. the report of op-2 (annexure 12) gives full details of unloading of 13800 (mts) of sugar between 26.5.1994 and 3.7.1994. in this report op-2 clearly mentions that:- œduring discharging we observed that lots of bags were wet stained/discoloured in-side the holds and the same were discharged alongwith the sound bags since it was difficult to segregate the wet stained/discoloured bags inside the hold.? the report of the surveyor (op-2) has also noted the details of the total discharge of 13800 mts (annexure 12) as follows:- no. of sound bags     271,266 no. of cut/torn bags    1109 no of wet stained/ discoloured bags 3625 total no. bags discharged   276,000 the complaint petition states that the complainant is entitled to compensation on the basis of the facts contained in the above report of the surveyor/op-2. 5. the goods were stored in hired transit godowns of mangalore port trust. the process of unloading and stacking was completed between 26.5.1994 to 3.7.1994. it is the case of the complainant that in this period mangalore received very heavy rain fall. despite coverage of the stocks, top and bottom, with tarpaulins sheets, further damage to the stocks occurred from leakage of the godown roofs. also, excessive rains continued through the months of june and july. 6. the complainant was advised by op-2 to segregate the damaged cargo, but according to the complainant it was not possible as the godowns were packed and there was no space to take up the segregation exercise of such a huge quantity. moreover, with incessant rain any such exercise, involving movement of stocks from one godown to another would have exposed them to further damage by rain. allegedly the complainant also informed the ops that due to heavy rain it was not possible to move the stocks to other regions in the country. he was advised to take action keeping in view clauses of 16 and 18 of the policy. the first dealt with reimbursement of expenditure incurred for averting or minimising loss and protecting the rights of the underwriter against third parties. the second required the complainant to act with reasonable despatch under all circumstances within its control. 7. the complaint petition states that by 22.10.1994, in all 77414 bags of sugar were segregated , with re-bagging to the extent necessary and 3870.70 mts of sound sugar was despatched. details of these deliveries made between 10.8.1994 and 22.10.1994 are shown in annexure 42 to the complaint. complaint petition also shows that joint survey of the remaining stocks”198353 bags-- was done and its report of 22.11.1994, signed by the representatives of both sides showed that it largely comprised either partly wet or fully wet bags. but, the total weight of these 198353 is accepted to be 9917.65 mts in the complaint. this was based on analysis of 6000 bags as a joint exercise taken by both.  8. the complaint petition also seeks to make out a case that when sugar is damaged by rain it is not only moisture but also factors like loss of lustre and caking etc. that need to be taken into consideration. allegedly, after 198353 bags of sugar were sold @ of rs.9875 per mt, the picture of final loss became clear. therefore on 16.9.1995 a claim under the policy was made for rs.707.83 lakhs. in response, op-1/ united india insurance company made an offer of rs.44,24,963/- only on 8.5.1998, which was declined by the complainant. the prayer of the complainant is to award an amount of rs.707.83 lakhs with 24 % interest from the date of the claim i.e. 16.9.1995.  response of the opposite parties 9. per contra, in the written statement filed on behalf of op-1, it is stated that the entire unloading operation was personally supervised by the surveyor/ op-2 between 26.5.1994 to 3.7.1994. the ws accepts that the cargo has suffered water damage during the voyage and many bags were found to be wet/stained/discoloured at the time of unloading. intermittent rains had continued during the entire period of unloading and the discharged cargo was stored in godowns with œroofs full of holes?. the written response strikes a note similar to that in the complaint petition when it comes to effect of continued heavy rain fall and repeated damage to the godown roofing on the sugar stocks stored therein. allegedly, the complainant failed to take prompt action to save goods from suffering further rain damage in the godowns. 10. it is the case of the insurance company that while the surveyor had repeatedly demanded segregation of sound stocks from the damaged ones in the godown, the complainant was unwilling to take up the exercise, on the ground of high cost of the operation and offered to do the same at the time of delivery. however, the delivery operation itself came to a stop after 23.10.1994 with the despatch of 77414 bags of the sugar to various destinations. 11. as stated in the ws of the op/united india insurance company ltd., an attempt was made to settle the claim on non-standard basis, due to failure of the complainant to segregate the damaged stocks from the sound ones and failure to take timely action to minimize the loss. the total loss was quantified by op-2 to be of the order of 288.127 mts, for which a total compensation rs.44,24,963 was offered to the complainant on 8.5.1998, against the claim of rs.707,83,101.96. apparently, the offer was declined. according to the ops, there was no deficiency of service in rejection of a very large claim of rs.707,83,101.96. arguments advanced by the two sides 12.  before the national commission the case of the complainant has been argued by learned advocates, mr buddy ranganathan, advocate and mr a k de, advocate has argued the case of the united india insurance co. they have been heard extensively, over several days, with reference to documents brought on record. we have also considered the written arguments filed on behalf of the two sides. 13. coming to the core of their arguments, mr ranganathan argued that damage to the stocks and resultant loss suffered by the complainant are not denied by the insurer. but against a loss of rs 707.8 lakhs, the insurance has assessed the loss as rs 58.99 lakhs only. even here, op-1 has deducted 25% in the name of non-standard settlement of the claim. this was not acceptable to the complainant. further, he referred to the joint exercise of november 1994 which segregated 6000 bags for analysis. learned counsel argued that the report of the surveyor/op-2 itself mentions that out of 6000 bags 5789 were found to be water stained externally, a fact that by itself would show that damage to the stocks was extensive. he referred to test results of the stocks (on parameters of polarisation, moisture, colour etc) at the time of loading for india and compared them to the results of analysis of samples drawn on 2.12.1994 and claimed that water had affected the quality (sale value) of the stocks. 14. reacting sharply to the above, learned counsel for the op/insurance coy, mr. a.k.de, argued that a series of correspondence has taken place between the surveyor appointed by the insurance and the insured on precisely the same concern i.e. need to protect the stored stocks against further damage from continued rain. but, the complainant did not take action for speedy repair of the leaking godowns or for segregating damaged stocks from good ones. nor was action taken for prompt disposal as a measure against further damaged in continued storage. the delivery of sugar stocks started only on 10.08.1994 and came to an abrupt stoppage since 23.10.1994. by then only 77414 bags, as against import arrival of 27,0000 bags, had been delivered to different destinations. it has been strongly argued on behalf of the respondent/insurance company that lab analyses of samples taken from 6000 bags segregated in november, 1994, showed that despite external damage to the packaging, moisture and sucrose content as well as colour of sugar were within the stipulated limits. the assessment of total loss being limited to 288.127 mt against the total quantity of 13800 mt was based on the above mentioned test results. mr. a.k.de, argued that the complainant base his case only on the extent of external damage to the bags and not on actual condition of the sugar within. therefore, the claim of the complainant for rs.707.83 lakhs is exaggerated, misconceived and untenable. the insurer cannot be held liable for loss caused by failure of the complainant to take prompt action in protection and disposal of the stocks. the evidence on record 15. damage during storage at mangalore port, caused by continued rains and leaking godown roofs, is not denied. para 19 of the affidavit evidence of mr v k jain, manager (commercial) of complainant coy accepts it. but it also goes on to add that the godowns were packed and there was no space to undertake the exercise of stock segregation. but, the claim that ops had agreed that it could be done at the time of delivery, is denied by the ops. 16. the two sides eventually undertook an exercise of segregating 6000 bags in november 1994 and analysed the contents with the help of sgs goa. (annexures 54 and 55). the content analysis of water affected bags showed their moisture content as follows” partially stained bags 0.16% fully stained bags 0.25% further, in december 1994, while the complainant was in the process of moving 1700 mt (34000 bags) of sugar to orissa, op-2 got them analysed. as per his report of 23.5.1995, re-bagging resulted in 118 bags of water damaged sugar and 33,882 bags of sound quality cargo. therefore, his report stated that the condition of sugar was not as bad as to require disposal on œas is where is? basis. the final assessment of loss was given by the surveyor in june 1995, as follows:- 1. amount of cargo lost due to cut/torn bags discharged from the vessel 7.950 m.t. 2. based upon the %age of damages noticed on the 34,000 bags the loss in respect of the balance cargo of 1,98,427 bags (9921.350 m tons). 34.433 m.t. 3. further depreciation allowed on 9,829,766 m.ts at 2.5% based on analysis. 245.755 m.t. total loss of cargo 288.127 m.t. 17. while the ops have relied on the report of the insurance surveyor, the complainant has relied upon the report of their expert agency, superintendence co. of india pvt. ltd (scpl). it talks about delivery of stocks soon after recession of the monsoon and details segregation and despatch of 77414 (3870mt) between 17.8.1994 and 22.10.1994. scpl report of 8.8.1995 states that on the basis of careful visual examination made on 3.10.1994 and excluding 7185.9 mt of stocks lying in two port sheds, œthe entire remaining quantity of 2721.95 mt were completely damaged/wet/moistured conditioned and contents thereon not free flowing and therefore advised our client to dispose of the above stock immediately on as is where is condition to avoid to avoid further losses/damages.? significantly, this opinion was based on visual examination of 2721.95 mt (corresponding to 54439 bags) stocks. scpl also relies on segregation of 2000 bags on 23.10. 1994 and 6000 bags on 22.11.1994, jointly with op-2. its conclusion that over 99% of the remaining stock of 197667 bags (approximately 9883 mt) were damaged, is based on external appearance of stocks. on the other hand, the insurance surveyor has gone further and based its conclusions on content analyses of sucrose, moisture and polarisation percentages in the stock of sugar. scpl report refers to these analyses reports and merely states that moisture content was above permissible limits. in the affidavit evidence of the complainant it is alleged that it was the result of selective sampling. 18. affidavit evidence of mr s k sharma, deputy manager, has been produced on behalf of the insurer,op-1. its main thrust is on the contention that despite repeated requests and reminders from the surveyor, the complainant did not segregate the stocks. allegedly, this failure of the complainant œfurther aggravated the loss and had the soaked bags been separated from the sound one, the moisture would not have affected the sound bags/or the moisture content in cargo would have been minimal.? however, 6000 bags were segregated in november 1994, as part of content evaluation exercise. it also refers to analysis of samples drawn on 2.12.1994 and states that, œit was noticed that the moisture and sucrose contents were found to be within stipulated limits and colour of sugar was also within specification.? 19. observations and conclusions a. it is not the case of the complainant that it was not aware that the cargo would arrive into magalore port during heavy monsoon season. but when the cargo arrived, the complainant did nothing more than storing it in unsafe conditions and waiting for the monsoon season to pass. b. some damage had already occurred while in the ship hold itself. but it was only 4734 bags out of 276000 as reported by insurance surveyor and not questioned by the complainant. admittedly, (para 9 of the complaint) these 4734 damaged bags were re-bagged into 3428 standard bags. thus, the net loss before leaving the ship would come to 1203 standard bags out of 276000 i.e. 0.43%. c. viewed only from external impact on packaging, the above report of the insurance surveyor (preliminary report of 6.10.94 and not followed by a final report) would show the loss of 65.20 mt out of 236.70 mt i.e. 27.54% of the wet or damaged bags, which was acceptable to complainant. d. complainant has taken conflicting stands by first claiming that there was no space in the godowns to take up stock segregation and then arguing that its proposal of 25.7.1994 for stock segregation remained pending with op-2 till 31.10.1994. e. the results of tests to bring out content analyses of sucrose, polarisation and moisture, has been dismissed by the complainant as outcome of selective sampling. as per the affidavit evidence of complainant, fresh sampling was done on 2.12.1994. but, its results are called patently tainted, without showing how does it become tainted, even if it is somewhat different from another analysis. f. in aug-oct 1994, segregation of 77414 bags with re-bagging, produced 77414 bags of 50 kg sugar. in all 3870.70mts.even a subsequent report of 13.12.1994 from the complainant to op-2 shows that 33972 bags after rebaging produced 33882 bags of sugar. both stocks were moved out for sale. these results would go against complainants claims of extensive damage to the content of externally damaged bags. g. admittedly, the complainant wished to undertake stock segregation at the time of their despatch from mangalore. but, till december 1994, only about 111,296 bags were attended to. another 8000 bags were segregated as part of a joint evaluation exercise. there is nothing to show that the balance stock, about 170,704 bags, were also segregated. clearly, it is a case of action by the complainant which was too little and too late. h. in the rejoinder filed on behalf of the complainant in september, 2009, a reference is made to segregation and re-bagging of 34000 bags of sugar. admittedly, re-bagging produced 33882 standard bags of 50 kg each. but, the stocks were not despatch to orissa admittedly for want of a buyer. it is not the case of the complainant that the responsibility for disposal of stocks rested with the op. therefore, the complainant has only itself to blame for its resultant predicament. i. claim under the policy was lodged on 11.9.1995. the settlement offer from the ops came only on 21.5.1998. even if a reasonable processing time of three months is allowed, ops response was delayed by two years. j. correspondence on record shows that high cost involved in segregation of stocks was one of the reasons why segregation was deferred by the complainant. this cost is admitted by op-1 in the settlement offered, which raises a question as to why it was not agreed earlier. k. it needs to be observed that the claim of rs 708.83 lakhs made by the complainant includes interest claimed at 24%. the interest amount itself comes to rs 326.4 lakhs. 20. to conclude, details examined above establish that some damage had already been caused to the consignment before unloading at mangalore port. it is also evident that further damage was caused by improper storage after unloading. for the latter, major part of responsibility must lie at the door of the complainant itself. further, the complainant has failed to establish its claim for a large settlement of rs 708.83 lakhs. the attempt of the insured to make external condition of the sugar bags as the basis for determination of loss has rightly been rejected by the insurer. however, the failure of the insurer to consider reimbursement of the cost of segregation of stocks is held to be a deficiency of service. it was eventually accepted, though partly, in the proposed settlement, as re-bagging cost for 197739 bags. secondly, inordinate delay in proposing the settlement itself is held to be another deficiency of service on the part of op-1. we therefore deem it just and equitable to allow the following, in addition to the settlement of rs 44,24,963 offered by op-1 to the complainant on 8.5.1998-- i. compensation for delay in proposing settlement of the claim rs eight lakhs. ii. compensation for delay in acceptance of the cost of segregation rs five lakhs. iii. litigation cost of rs two lakhs. the entire amount of rs 59,24,963 shall be paid by op-1 within a period of three months, computed from 90 days after presentation of the claim to the insurer on 16th september 1995, with interest of 8% per annum. period of delay, if any, shall carry additional interest of 3% per annum.
Judgment:

Vinay Kumar, Member

M/s. Indian Sugar and General Industry Export Import Corporation has filed this complaint in the year 2000. In the course of the proceedings MA/1428/2009 was filed informing that the Complainant had changed its name to M/s Indian Sugar Exim Corporation Ltd. The application was allowed on 15.12.2009 and necessary amendment in the memo of parties permitted. In the proceeding of 19.11.2012, it was observed that negotiations for compromise between the parties were in progress. The matter was therefore adjourned to 2.1.2013 directing that in the event of no compromise being reached, the parties would file their written arguments. The matter was finally heard on day to day basis and reserved for order on 16.1.2013.

BACKGROUND

2. The consumer dispute arises out of import of 13,800 MT of white sugar by the Complainant from Switzerland in 1994. The entire consignment was shipped to India and was received at Mangalore Port. The Complainant had obtained a marine insurance policy to cover the shipment. It was effective from 13.4.1994, initially for a period of 60 days. Subsequently, the terms of the policy got extended to 1.11.1994, with three extensions in between.

CASE OF THE COMPLAINANT

3. The Cargo vessel MV Scotian Express left Eemshaven Port in Netherland on 28.4.1994 and arrived at Mangalore Port on 26.5.1994. Discharge of the entire Cargo of 13,785 (mts) of Sugar was completed by 3.7.1994. As per para 7 of the complaint petition, œsubstantial quantity of sugar bags were found progressively to be partly wet and stained in all hatches of the vessel apart from bursting of many bags. It would be also evident from perusal of date-wise summary of discharge as recorded in Annexures-A and B of Annexure-8 herein that; heavy rain was experienced right from first day of discharge upto the date of final discharge, namely, 3rd July 1994. A copy of Certificate issued by Indian Meteorological Department Station: Panambur dated 6th December 1994 certifying the recorded rain fall during the months of May, June, July and August 1994 is annexed herewith and marked as Annexure-9.?

4. In the above background of damaged conditions of the goods, the Complainant appointed M/s. Superintendence Company of India Pvt. Ltd. (hereinafter referred to SCPL) to inspect the condition of the Cargo in the vessel and to supervise its discharge therefrom. Simultaneously, OP-1/ insurance company appointed a Surveyor (OP-2) for the same purpose. The report of OP-2 (Annexure 12) gives full details of unloading of 13800 (mts) of sugar between 26.5.1994 and 3.7.1994. In this report OP-2 clearly mentions that:-

œDuring discharging we observed that lots of bags were wet stained/discoloured in-side the holds and the same were discharged alongwith the sound bags since it was difficult to segregate the wet stained/discoloured bags inside the hold.?

The report of the Surveyor (OP-2) has also noted the details of the total discharge of 13800 MTs (Annexure 12) as follows:-

No. of sound bags     271,266

No. of cut/torn bags    1109

No of wet stained/ discoloured bags 3625

Total no. bags discharged   276,000

The complaint petition states that the Complainant is entitled to compensation on the basis of the facts contained in the above report of the Surveyor/OP-2.

5. The goods were stored in hired transit godowns of Mangalore Port Trust. The process of unloading and stacking was completed between 26.5.1994 to 3.7.1994. It is the case of the complainant that in this period Mangalore received very heavy rain fall. Despite coverage of the stocks, top and bottom, with tarpaulins sheets, further damage to the stocks occurred from leakage of the godown roofs. Also, excessive rains continued through the months of June and July.

6. The Complainant was advised by OP-2 to segregate the damaged cargo, but according to the Complainant it was not possible as the godowns were packed and there was no space to take up the segregation exercise of such a huge quantity. Moreover, with incessant rain any such exercise, involving movement of stocks from one godown to another would have exposed them to further damage by rain. Allegedly the Complainant also informed the OPs that due to heavy rain it was not possible to move the stocks to other regions in the country. He was advised to take action keeping in view Clauses of 16 and 18 of the Policy. The first dealt with reimbursement of expenditure incurred for averting or minimising loss and protecting the rights of the underwriter against third parties. The second required the Complainant to act with reasonable despatch under all circumstances within its control.

7. The complaint petition states that by 22.10.1994, in all 77414 bags of sugar were segregated , with re-bagging to the extent necessary and 3870.70 MTs of sound sugar was despatched. Details of these deliveries made between 10.8.1994 and 22.10.1994 are shown in Annexure 42 to the complaint. Complaint petition also shows that joint survey of the remaining stocks”198353 bags-- was done and its report of 22.11.1994, signed by the representatives of both sides showed that it largely comprised either partly wet or fully wet bags. But, the total weight of these 198353 is accepted to be 9917.65 MTs in the complaint. This was based on analysis of 6000 bags as a joint exercise taken by both.

 8. The complaint petition also seeks to make out a case that when sugar is damaged by rain it is not only moisture but also factors like loss of lustre and caking etc. that need to be taken into consideration. Allegedly, after 198353 bags of sugar were sold @ of Rs.9875 per MT, the picture of final loss became clear. Therefore on 16.9.1995 a claim under the policy was made for Rs.707.83 lakhs. In response, OP-1/ United India Insurance Company made an offer of Rs.44,24,963/- only on 8.5.1998, which was declined by the Complainant. The prayer of the Complainant is to award an amount of Rs.707.83 lakhs with 24 % interest from the date of the claim i.e. 16.9.1995.

 RESPONSE OF THE OPPOSITE PARTIES

9. Per contra, in the Written Statement filed on behalf of OP-1, it is stated that the entire unloading operation was personally supervised by the Surveyor/ OP-2 between 26.5.1994 to 3.7.1994. The WS accepts that the cargo has suffered water damage during the voyage and many bags were found to be wet/stained/discoloured at the time of unloading. Intermittent rains had continued during the entire period of unloading and the discharged cargo was stored in godowns with œroofs full of holes?. The written response strikes a note similar to that in the complaint petition when it comes to effect of continued heavy rain fall and repeated damage to the godown roofing on the sugar stocks stored therein. Allegedly, the Complainant failed to take prompt action to save goods from suffering further rain damage in the godowns.

10. It is the case of the Insurance company that while the Surveyor had repeatedly demanded segregation of sound stocks from the damaged ones in the godown, the Complainant was unwilling to take up the exercise, on the ground of high cost of the operation and offered to do the same at the time of delivery. However, the delivery operation itself came to a stop after 23.10.1994 with the despatch of 77414 bags of the sugar to various destinations.

11. As stated in the WS of the OP/United India Insurance Company Ltd., an attempt was made to settle the claim on non-standard basis, due to failure of the Complainant to segregate the damaged stocks from the sound ones and failure to take timely action to minimize the loss. The total loss was quantified by OP-2 to be of the order of 288.127 MTs, for which a total compensation Rs.44,24,963 was offered to the Complainant on 8.5.1998, against the claim of Rs.707,83,101.96. Apparently, the offer was declined. According to the OPs, there was no deficiency of service in rejection of a very large claim of Rs.707,83,101.96.

ARGUMENTS ADVANCED BY THE TWO SIDES

12.  Before the National Commission the case of the complainant has been argued by learned Advocates, Mr Buddy Ranganathan, Advocate and Mr A K De, Advocate has argued the case of the United India Insurance Co. They have been heard extensively, over several days, with reference to documents brought on record. We have also considered the written arguments filed on behalf of the two sides.

13. Coming to the core of their arguments, Mr Ranganathan argued that damage to the stocks and resultant loss suffered by the complainant are not denied by the insurer. But against a loss of Rs 707.8 lakhs, the insurance has assessed the loss as Rs 58.99 lakhs only. Even here, OP-1 has deducted 25% in the name of non-standard settlement of the claim. This was not acceptable to the complainant. Further, he referred to the joint exercise of November 1994 which segregated 6000 bags for analysis. Learned Counsel argued that the report of the Surveyor/OP-2 itself mentions that out of 6000 bags 5789 were found to be water stained externally, a fact that by itself would show that damage to the stocks was extensive. He referred to test results of the stocks (on parameters of polarisation, moisture, colour etc) at the time of loading for India and compared them to the results of analysis of samples drawn on 2.12.1994 and claimed that water had affected the quality (sale value) of the stocks.

14. Reacting sharply to the above, learned counsel for the OP/insurance coy, Mr. A.K.De, argued that a series of correspondence has taken place between the Surveyor appointed by the insurance and the insured on precisely the same concern i.e. need to protect the stored stocks against further damage from continued rain. But, the Complainant did not take action for speedy repair of the leaking godowns or for segregating damaged stocks from good ones. Nor was action taken for prompt disposal as a measure against further damaged in continued storage. The delivery of sugar stocks started only on 10.08.1994 and came to an abrupt stoppage since 23.10.1994. By then only 77414 bags, as against import arrival of 27,0000 bags, had been delivered to different destinations. It has been strongly argued on behalf of the respondent/Insurance Company that lab analyses of samples taken from 6000 bags segregated in November, 1994, showed that despite external damage to the packaging, moisture and sucrose content as well as colour of sugar were within the stipulated limits. The assessment of total loss being limited to 288.127 MT against the total quantity of 13800 MT was based on the above mentioned test results. Mr. A.K.De, argued that the complainant base his case only on the extent of external damage to the bags and not on actual condition of the sugar within. Therefore, the claim of the Complainant for Rs.707.83 lakhs is exaggerated, misconceived and untenable. The insurer cannot be held liable for loss caused by failure of the Complainant to take prompt action in protection and disposal of the stocks.

THE EVIDENCE ON RECORD

15. Damage during storage at Mangalore Port, caused by continued rains and leaking godown roofs, is not denied. Para 19 of the affidavit evidence of Mr V K Jain, Manager (Commercial) of complainant coy accepts it. But it also goes on to add that the godowns were packed and there was no space to undertake the exercise of stock segregation. But, the claim that OPs had agreed that it could be done at the time of delivery, is denied by the OPs.

16. The two sides eventually undertook an exercise of segregating 6000 bags in November 1994 and analysed the contents with the help of SGS Goa. (Annexures 54 and 55). The content analysis of water affected bags showed their moisture content as follows”

Partially stained bags 0.16%

Fully stained bags 0.25%

Further, in December 1994, while the complainant was in the process of moving 1700 MT (34000 bags) of sugar to Orissa, OP-2 got them analysed. As per his report of 23.5.1995, re-bagging resulted in 118 bags of water damaged sugar and 33,882 bags of sound quality cargo. Therefore, his report stated that the condition of sugar was not as bad as to require disposal on œas is where is? basis. The final assessment of loss was given by the Surveyor in June 1995, as follows:-

1. Amount of cargo lost due to cut/torn bags discharged from the vessel 7.950 M.T.

2. Based upon the %age of damages noticed on the 34,000 bags the loss in respect of the balance cargo of 1,98,427 bags (9921.350 M tons). 34.433 M.T.

3. Further depreciation allowed on 9,829,766 M.Ts at 2.5% based on analysis. 245.755 M.T.

Total loss of cargo 288.127 M.T.

17. While the OPs have relied on the report of the Insurance Surveyor, the complainant has relied upon the report of their expert agency, Superintendence Co. of India Pvt. Ltd (SCPL). It talks about delivery of stocks soon after recession of the monsoon and details segregation and despatch of 77414 (3870MT) between 17.8.1994 and 22.10.1994. SCPL report of 8.8.1995 states that on the basis of careful visual examination made on 3.10.1994 and excluding 7185.9 MT of stocks lying in two Port Sheds, œthe entire remaining quantity of 2721.95 MT were completely damaged/wet/moistured conditioned and contents thereon not free flowing and therefore advised our client to dispose of the above stock immediately on as is where is condition to avoid to avoid further losses/damages.? Significantly, this opinion was based on visual examination of 2721.95 MT (corresponding to 54439 bags) stocks. SCPL also relies on segregation of 2000 bags on 23.10. 1994 and 6000 bags on 22.11.1994, jointly with OP-2. Its conclusion that over 99% of the remaining stock of 197667 bags (approximately 9883 MT) were damaged, is based on external appearance of stocks. On the other hand, the Insurance Surveyor has gone further and based its conclusions on content analyses of sucrose, moisture and polarisation percentages in the stock of sugar. SCPL report refers to these analyses reports and merely states that moisture content was above permissible limits. In the affidavit evidence of the complainant it is alleged that it was the result of selective sampling.

18. Affidavit evidence of Mr S K Sharma, Deputy Manager, has been produced on behalf of the insurer,OP-1. Its main thrust is on the contention that despite repeated requests and reminders from the Surveyor, the complainant did not segregate the stocks. Allegedly, this failure of the complainant œfurther aggravated the loss and had the soaked bags been separated from the sound one, the moisture would not have affected the sound bags/or the moisture content in cargo would have been minimal.? However, 6000 bags were segregated in November 1994, as part of content evaluation exercise. It also refers to analysis of samples drawn on 2.12.1994 and states that, œIt was noticed that the moisture and sucrose contents were found to be within stipulated limits and colour of sugar was also within specification.?

19. OBSERVATIONS AND CONCLUSIONS

a. It is not the case of the complainant that it was not aware that the cargo would arrive into Magalore Port during heavy monsoon season. But when the cargo arrived, the complainant did nothing more than storing it in unsafe conditions and waiting for the monsoon season to pass.

b. Some damage had already occurred while in the ship hold itself. But it was only 4734 bags out of 276000 as reported by insurance surveyor and not questioned by the complainant. Admittedly, (para 9 of the complaint) these 4734 damaged bags were re-bagged into 3428 standard bags. Thus, the net loss before leaving the ship would come to 1203 standard bags out of 276000 i.e. 0.43%.

c. Viewed only from external impact on packaging, the above report of the Insurance Surveyor (preliminary report of 6.10.94 and not followed by a final report) would show the loss of 65.20 MT out of 236.70 MT i.e. 27.54% of the wet or damaged bags, which was acceptable to complainant.

d. Complainant has taken conflicting stands by first claiming that there was no space in the godowns to take up stock segregation and then arguing that its proposal of 25.7.1994 for stock segregation remained pending with OP-2 till 31.10.1994.

e. The results of tests to bring out content analyses of sucrose, polarisation and moisture, has been dismissed by the complainant as outcome of selective sampling. As per the affidavit evidence of complainant, fresh sampling was done on 2.12.1994. But, its results are called patently tainted, without showing how does it become tainted, even if it is somewhat different from another analysis.

f. In Aug-Oct 1994, segregation of 77414 bags with re-bagging, produced 77414 bags of 50 kg sugar. In all 3870.70MTs.Even a subsequent report of 13.12.1994 from the complainant to OP-2 shows that 33972 bags after rebaging produced 33882 bags of sugar. Both stocks were moved out for sale. These results would go against complainants claims of extensive damage to the content of externally damaged bags.

g. Admittedly, the complainant wished to undertake stock segregation at the time of their despatch from Mangalore. But, till December 1994, only about 111,296 bags were attended to. Another 8000 bags were segregated as part of a joint evaluation exercise. There is nothing to show that the balance stock, about 170,704 bags, were also segregated. Clearly, it is a case of action by the complainant which was too little and too late.

h. In the rejoinder filed on behalf of the Complainant in September, 2009, a reference is made to segregation and re-bagging of 34000 bags of sugar. Admittedly, re-bagging produced 33882 standard bags of 50 kg each. But, the stocks were not despatch to Orissa admittedly for want of a buyer. It is not the case of the Complainant that the responsibility for disposal of stocks rested with the OP. Therefore, the complainant has only itself to blame for its resultant predicament.

i. Claim under the policy was lodged on 11.9.1995. The settlement offer from the OPs came only on 21.5.1998. Even if a reasonable processing time of three months is allowed, OPs response was delayed by two years.

j. Correspondence on record shows that high cost involved in segregation of stocks was one of the reasons why segregation was deferred by the complainant. This cost is admitted by OP-1 in the settlement offered, which raises a question as to why it was not agreed earlier.

k. It needs to be observed that the claim of Rs 708.83 lakhs made by the complainant includes interest claimed at 24%. The interest amount itself comes to Rs 326.4 lakhs.

20. To conclude, details examined above establish that some damage had already been caused to the consignment before unloading at Mangalore Port. It is also evident that further damage was caused by improper storage after unloading. For the latter, major part of responsibility must lie at the door of the complainant itself. Further, the complainant has failed to establish its claim for a large settlement of Rs 708.83 lakhs. The attempt of the insured to make external condition of the sugar bags as the basis for determination of loss has rightly been rejected by the insurer. However, the failure of the insurer to consider reimbursement of the cost of segregation of stocks is held to be a deficiency of service. It was eventually accepted, though partly, in the proposed settlement, as re-bagging cost for 197739 bags. Secondly, inordinate delay in proposing the settlement itself is held to be another deficiency of service on the part of OP-1. We therefore deem it just and equitable to allow the following, in addition to the settlement of Rs 44,24,963 offered by OP-1 to the complainant on 8.5.1998--

i. Compensation for delay in proposing settlement of the claim Rs eight lakhs.

ii. Compensation for delay in acceptance of the cost of segregation Rs five lakhs.

iii. Litigation cost of Rs two lakhs.

The entire amount of Rs 59,24,963 shall be paid by OP-1 within a period of three months, computed from 90 days after presentation of the claim to the insurer on 16th September 1995, with interest of 8% per annum. Period of delay, if any, shall carry additional interest of 3% per annum.