Top Court dismisses original complaint filed by Tata Steel before NCDRC; upholds Insurance Company's decision of settling claim at Rs 7.88 crore
Justices Surya Kant & K.V. Vishwanathan [30-04-2024]

Read Order: New India Assurance Company Ltd. Through its Manager v. M/s Tata Steel Ltd [CIVIL APPEAL NO. 2759 OF 200]

LE Correspondent

New Delhi, May 8, 2024: While considering a case of insurance claim raised by Tata Steel, the Supreme Court has held that the claim was rightly settled by the New India Assurance Company by determining the loss amount payable at Rs 7.88 crore after applying 60 per cent depreciation.

The Insured had taken an insurance policy from NIACL for the entire machinery and equipment of its mill by paying a premium of Rs.62,09,655. The policy was for the period 29.09.1998 to 28.09.1999. According to the Insured, due to a fire accident, the Cold Rolling Mill fitted with imported equipment was fully destroyed resulting in a loss of Rs. 35.08 crores. The incident of fire was intimated to NIACL on 12.12.1998 itself. 

A claim for Rs. 35.08 crore was filed which was based upon the quotations received from various manufacturers of the said machinery and the complete details of cost for replacing and/or repairing the machines. The Insured also pleaded that since the running of the company was important, it got a 6 Hi Cold Rolling Mill installed in its unit and commenced production by spending Rs.29.60 crores apart from excise duties.

Admittedly, based on the interim report of the surveyors, a sum of Rs.4,92,80,905/- was released in favour of the Insured by NIACL. According to the Insured, though it lost more than Rs. 25 crores, in view of the persistence from the Insurance Company, it gave consent for receiving Rs.20.95 Crores as net adjusted loss to avoid loss of time. According to the Insured, since no response was forthcoming and the balance amount was not released, Consumer Complaint was filed by the Insured before the NCDRC.

The four civil appeals before the Top Court arose out of the proceedings before the National Consumer Disputes Redressal Commission (NCDRC).

The grievance pleaded by the Insured/Complainant was that the compensation awarded ought to have been greater because, according to it, the base figure on which the depreciation of 32% was computed should have been Rs.28 Crore and not Rs.20,09,95,000. The claim was that the amount payable by NIACL should have been Rs. 18.91 Crores.

On the issue of whether the memorandum consisting of the Reinstatement Value Clause was a part of the policy, the Division Bench of Justice Surya Kant & Justice K.V. Vishwanathan rejected the argument of the Insured that the memorandum containing the Reinstatement Value Clause was not part of the policy. This was for the reason that before the NCDRC in the written statement filed by the NIACL, it was specifically pleaded as the Reinstatement Value Clause issued along with the policy was not attached to the same.

For the Insured, NIACL did not completely repudiate the claim. Instead faced with the letters of the Insured admitting to the value at Rs.20.95 Crores and the letter of M/s Flat Products of 28.06.2001 throwing up their hands and informing the Insured about them having lost their expertise, NIACL resorted to settling the claim under the opening clause of the policy by agreeing to pay the Insured the value of the property at the time of the happening of the destruction under the Depreciation Method. 

Noting that the surveyors had offered justification in their response for providing depreciation at the rate of 60% and the Additional Affidavit also clarified the established practice, the Bench noticed that the base figure of Rs.20.09 crore was kept intact. Thus, the Bench set aside the finding of the NCDRC that the practice adopted in the instant case was not a healthy practice by the NIACL and upheld the percentage of depreciation at 60%. 

The Bench also opined that there was no breach of Regulation 9(3) of the IRDA (Protection of Policyholders Interests) Regulations, 2002 which provides the procedure to be followed in respect of a general insurance policy.

Clarifying that the judgment in Oswal Plastic Industries v. Manager, Legal Deptt N.A.I.C.O. Ltd., had no application to the facts of the present case, the Bench held that the NIACL rightly ordered the settlement of the claim stating the loss amount as Rs.7.88 Crores and ordering the balance amount of 2.88 crores be paid after adjusting the on account payment. 

Thus, allowing the Civil Appeal of NIACL, the Bench held that the claim was rightly settled by the NIACL which determined the loss amount payable at Rs.7.88 crores after applying 60% depreciation.