TEXMACO LIMITED Vs. NEW INDIA ASSURANCE CO LTD

JUDGEMENT

(1.) THIS is a complaint under the Consumer Protection Act, 1986 (in short the Act) filed by the Texmaco Ltd. which has a cement division situated at Yerraguntla, Cuddapah District in Andhra Pradesh. The complainant purchased two D.G. sets from Finland which were insured for all Marine Transit risks by the suppliers, towards material, own damage losses from their ware house to the ware house of the complainant for cost, insurance and freight only for Rs. 3,10,45,200/-. As the insurance cover granted by the foreign insurers did not include the customs duty payable by the complainant to the Government of India on arrival of the imported generators at the Indian Port, the complainant obtained a Custom Duty Insurance Policy from the Respondent, the New India Assurance Co. Ltd., (for short the Insurance Company) on 3rd January, 1990 on the two imported D.G. sets for a sum of Rs. 1.10 Crores and paid Rs. 20,000/- towards consideration as premium. The 2 D.G. sets were dispatched by the suppliers on 6.12.1988 and those sets arrived at the factory site of the complainant in a damaged condition. The complainant intimated the loss to the suppliers' representative, foreign insurance company and the respondent insurance company. After due inspection by the Surveyor of the foreign insurance company it was found that only one D.G. set had been damaged in transit. The surveyor and the manufacturer's representative felt that there was no need to replace the entire D.G. set and the same could be repaired by importing some vital parts. The complainant agreed for repairs to the damaged D.G. set because of acute power shortage in the State of Andhra Pradesh and also to save foreign exchange and to avoid time consuming process in obtaining permission again from the Reserve Bank of India and other Government authorities for importing the entire new D.G. set. The foreign insurance company settled only the damage claim in favour of the suppliers by paying the cost of damaged parts imported for the purpose of repairs. The complainant imported the parts required for repairs worth Rs. 10,94,864/- and paid custom duty ranging from 135% to 194% in an amount of Rs. 21,24,036/-. Out of these amounts a small portion was disallowed by the surveyors. The complainant lodged a claim with the Respondent for Rs. 21,23,722.20 paise under the aforesaid Custom Duty Police on the basis of actual duty paid by them on the imported parts required for repairing the damaged D.G. set. As per the surveyors the total cost of replaced imported parts worked out to Rs. 8,03,635 and recommended that the claim may be settled at 35% of the above value amounting to Rs. 2,81,372.00 only. The customs duty payable on a whole new D.G. set is 35% of C.I.F. value and on the spares at 135 to 194 per cent depending upon the type of the imported parts. According to the complainant the parts imported by the complainant are not spares but are essential replacements to repair a newly imported D.G. set. The D.G. set was damaged in January 1989. The survey report was submitted to the Respondent Insurance Company on 2nd September, 1989. The offer to settle the loss for Rs. 2,81,217/- was made by the Company on 30th April, 1990 though the actual duty levied on the parts was Rs. 21,24,036/- and all this amounts to deficiency of service and unfair trade practice adopted by the Insurance Company in settling the claim. The complainant prays that the Insurance Company be asked to settle and pay their claim for Rs. 21,23,772.20 paise with interest at the rate of 18% from 12th May, 1989 (on which date the custom duty was paid on the spare parts) till payment.

(2.) THE Insurance Company contested the complaint and filed a counter. Two preliminary objections were taken but it is not necessary to reproduce them as those were not urged before us. On merits it is pleaded that Customs Duty Insurance granted by insurer as per the Duty Insurance Clause is always related to the C.I.F. value of the consignment. The sum insured under the policy will always relate itself as percentage of the C.I.F. value and the sum insured under the policy is fixed accordingly and also the consideration (premium) for the contract of insurance is also collected on the sum insured so fixed. The indemnity available to the insured in the event of a claim recoverable under the policy would be in the same percentage, of C.I.F. value for which the duty is declared for insurance. The Duty Insurance clause clearly states that "This insurance is on increased value of cargo by reason of payment of Customs duty at the port of the destination and is subject to the same clauses and conditions as the Cargo or insurance and to pay the same percentage of Duty payable (excluding charges and expenses) as may be paid thereon" which means that the insured is entitled for an indemnity to the extent of same percentage of amount declared as sum insured and also paid under Duty Policy. It is only logical that when Customs Duty Policy was sought by the insured which is directly related as a percentage of C.I.F. value of the entire machinery even the components of the said machinery also enjoy the same percentage of indemnity, in relation to the C.I.F. value. If, as per the regulation of customs duties, a higher duty is payable when the components/spares are to be re-imported it is only a future contingent liability which does not form subject matter of the Duty Policy which is covering the duty payable on the original import of the entire machinery. In fact, there was no delay in processing the claim of the petitioner. The matter was referred to the head-office of the Insurance Company for consideration as per the request of the complainant and was thoroughly examined at all levels in view of the objections and the claim of petitioner and no sooner it was found that the claim for Rs. 2,82,217/- was payable towards the claim of the petitioner the same was offered to the claimant.

(3.) IN the present case, both the parties have been heard at length. There is a dispute between the parties about the interpretation of the various clauses of the Customs Duty Insurance Policy. There is an annexure attached to the said policy under the heading "Increased Value" and "Duty" Insurance Tariff (Contd.).