Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICITION

CIVIL APPEAL NO. 6337 OF 2001

United India Insurance Company Ltd. …Appellant

Versus

Kantika Colour Lab . & Ors. …Respondents

(With Civil Appeal No.6975 of 2001)

J U D G M E N T

T.S. THAKUR, J.

1. These  appeals  under  Section  23  of  the  Consumer  

Protection Act, 1986 arise out of an order dated 31st May,  

2001  passed  by  National  Consumer  Disputes  Redressal  

Commission, New Delhi, whereby Original Petition No.153 of  

1999 filed  by respondent  no.1  has  been allowed and the  

appellant-company held liable to pay to the said respondent  

a sum of Rs.53 lakhs with interest @ 10% p.a. jointly and

severally  with  the  Carrier  M/s  Super  Road  Lines  towards  

compensation for the damage which machines entrusted to  

the  later  suffered  in  the  course  of  transportation  from  

Mumbai to Hardwar.

2. Respondent No.1-Kantika Colour Lab imported one set  

of  Noritsu  QSS-1923  printer  process  and  QSF-V50  film  

processor from Japan. The machines arrived at Mumbai on  

1st November, 1998 and were entrusted to M/s Super Road  

Lines  for  onward  transportation  to  Hardwar  under  L/R  

No.005495  dated  20th November,  1998.  A  pre-dispatch  

survey  conducted  by  the  Surveyor  confirmed  that  the  

machines were in sound condition at the time of dispatch  

from Mumbai.

3. To secure the machines against any possible damage  

respondent No.1-the owner of the machines obtained from  

the appellant Insurance Company a transit insurance policy  

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

risks including damage/breakage, theft pilferage, road risk  

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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  

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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.   

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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.

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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.   

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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  

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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  

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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.

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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  

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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  

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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  

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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  

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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  

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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  

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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  

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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 @  

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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  

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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

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