Chalna Marine Products Ltd (Appellant)
Reliance Insurance Ltd and others (Respondents)
ATM Afzal CJ
Mustafa Kamal J
Latifur Rahman J
Md. Abdur Rouf J
Bimalendu Bikash Roy Choudhury J
December 11, 1997.
The Insurance Act (IV of 1938), Section 47B
The Code of Civil Procedure, 1908 (V of 1908), Section 34
The failure of power supply in the freezing plant is in fact failure of public power supply as per endorsement number 903 of DOS Policy, consequently causing damage of huge quantity of shrimp kept stored in the freezing plants which the respondents are liable to compensate. Restoration of the power line within seventeen hours in the manner not helping restoration of the power in the cooling plants is no restoration in the eye of law. The plaintiff appellant is entitled to the statutory interest under section 47B of the Insurance Act 1938 and the High Court Division not granting the same met a mistake. Thus, judgment of the trial court granting the relief be restored. ……………………..(17 & 18)
Mahmudul Islam, Senior Advocate, instructed by Md. Aftab Hossain, Advocate-on-Record — For the Appellant and Petitioner (In both the appeals and petitions.)
AR Yusuf, Senior Advocate, instructed by Sharifuddin Chaklader — For the Respondents (In both the appeals and petitions.)
Civil Appeal No. 76 of 1997
Civil Petition for Leave to Appeal No. 236 of 1997.
Latifur Rahman J.- This appeal by the plaintiff-appellant by leave is from the judgment and decree of a Division Bench of the High Court Division passed in First Appeal No. 126 of 1995 on 2-12-96 allowing the appeal in part and modifying the decree of the trial Court. First Court of Subordinate Judge, Khulna passed in Money suit No. 3 of 1992 which decreed the plaintiff’s suit in full for Taka 2,35,17,569.00 with interest at the rate of 5% above bank rate on monthly rest till realisation to the extent that the suit was decreed without costs for Taka 1,29,34,662.40 with interest at the rate of 5% above bank rate on monthly rest from the date of signing of the decree by the High Court Division till realisation.
2. The plaintiff-appellant has a freezing plant at Chalna Bazar Khulna established in 1986 and the appellant has been engaged in processing, storing and exporting shrimps and prawns to foreign countries. For carrying on the business, the appellant obtained loans from respondent bank against pledge and hypothecation of shrimps and prawns kept in the cold storage of the appellant. The Appeallant took two insurance respondents Nos. 1-2 to cover risks of (i) loss or deterioration of stock arising out of incidents including failure of public power supply (Dos Policy) and (ii) loss due to machinery (MBD Policy) and the policies were renewed 13-4-92. Later, to cover the risk of flood and cyclone, the appellant took another policy called Fire Policy, which was valid upto 15-5-92.
3. On 18-5-91 there was a cyclone in the area and public power supply failed from 6.00 PM of 18-5-91. The public power supply was restored at 11-00 AM of 19-5-91 but that cold storage could not be operated as it getting supply only in two out of three phases whereas for operating the factory supply in all the three phases is required. The appellant informed the respondent’s bank and also the Executive Engineer of the Power Development Board for immediate restoration power supply and the said authority deputed engineer and technicians and power supply in 3 phases was restored only at 2-00 AM of 23-5-91, that is after 102 hours from the failure of power at 6 PM of 18-5-91. As a result of the said failure there was serious damage to the stock of shrimps and prawns. The respondent-bank on 21-5-91 and 23-5-91 informed respondent Nos. 1-2 about the incident. Respondent Nos. 1-2 deputed two separate surveyors for assessing the extent of damage and the surveyors visited the factory of the appellant on 25-5-91 and undertook the work of survey. On 27-5-91 the surveyors took from the total stock of 5309 master cartons of shrimps and prawns 10 samples at random and sent it to the Deputy Director, Quality Control and Fish Inspection Department of the Government for Laboratory tests. On 28-5-91 the said Deputy Director submitted report to the effect that all the samples were tested and found to be unfit for human consumption and export and advised destruction of the decomposed shrimps and prawns immediately. Because of decomposition of the stock of shrimps and prawns there was heavy pressure from the Health Department and also from the public for destruction of the damaged stock of shrimps and prawns and for non-destruction of the damaged shrimps and prawns the manager of the factory was prosecuted and fined by the magistrate. On 28-5-91 the surveyors instructed the appellant to start reprocessing the stock and prevent further deterioration of the stock and accordingly reprocessing was started and 3515 master cartons of damaged shrimps and prawns were segregated and destroyed up to 30-5-91 and another 716 master cartons of damaged shrimps and prawns were segregated and destroyed upto 20-6-91. On 30-5-91 the surveyors prepared and signed a minute stating that they presumed the damage to be 55% of the total stock to which the appellant disagreed and the appellant’s note of dissent was recorded in the minute and the surveyors suggested that final decision on this question would be taken after a discussion between the insurer, the insured and the surveyors. But the discussion never took place as respondent Nos. 1-2 avoided the discussion. Out of the total 5309 master cartons 4231 master cartons were damaged and were destroyed upon reprocessing and accordingly, on 1-6-91 and 27-6-91 the appellant lodged a claim with respondent Nos. 1-2 for Taka 2,35,17,569.00 being the price of the shrimps and prawns of 4231 Master cartons. Respondent Nos. 1-2 did not settle the claim and ultimately by letter dated 12-10-91 repudiated the claim of the appellant entirely contending that the loss was not covered by the terms of the DOS Policy. Hence the suit.
4. Respondent Nos. 1-2 entered appearance in the suit and filed written statement contending, inter alia, that public power supply was restored at 11-00 AM of 19-5-9 1 which was disrupted for only 17 hours and well within the ‘no claim’ period of 24 hours: that the continued failure was not due to public power supply but due to faults in the underground cable within the premises of the appellant and it was the responsibility of the appellant to rectify it and hence the claim of the appellant is not covered by the policy: that the claim of the appellant is not covered by the policy also because any loss or damage caused directly or indirectly by cyclone and flood is an excepted risk under the DOS policy under which the claim is being made: that the appellant cannot also claim because the appellant fraudulently refrained from immediately intimating respondent Nos. 1-2 about the incident though immediate intimation to the insurer was a condition of the policy and respondents No. 1-2 received the intimation for the first time on 23-5-91: that the destruction of the alleged damaged cartons under instruction of the Public Health Department and alleged complaint of the public are all manipulated by the appellant to defraud respondent Nos. 1-2 and to make unlawful gain. Respondent Nos. 1-2 however did not challenge the valuation of the stock of shrimps and prawns and of the damaged cartons given in detail in the schedule referred to in, and appended to the plaint.
5. The learned Subordinate Judge recorded the evidence adduced by five witnesses of the plaintiff-appellant and three witnesses of defendant- respondent Nos. 1-2, and both sides exhibited number of documents including two survey reports produced by both the sides and upon consideration of the oral and documentary evidence decreed the suit of the appellant in full for an amount of Taka 2,35,17.569.00 being the price of 4231 master cartons of damaged shrimps and prawns with Costs against respondent Nos. 1-2 and also directed payment of interest on the decretal sum in terms of section 47B of the Insurance Act, 1938.
6. Appeal being filed by respondent Nos. 1-2 before the High Court Division, the learned Judges of the High Court Division allowed the appeal in part and reduced the amount of the decree to Taka 1,29,34.622/40 being 55% of the amount claimed by the appellant in the suit. The High Court Division further modified the decree of the Trial Court by allowing interest at the statutory rate from the date of the decree passed by the High Court Division by ignoring the provisions of section 47B of the Insurance Act.
7. Leave was granted on the submissions of the learned Advocate for the plaintiff-appellant to consider the following submissions:
“First, the High Court Division acted upon an erroneous assumption of facts in dealing with the issue of quantum of damages. The total number of master cartons in the freezing plant was 5309. The plaintiff did not file the suit for loss or damage in respect of total number of master cartons but for loss or damage of 4232 master cartons. The remaining undamaged master cartons were exported by the plaintiff. In assessing, the damage to the extent of 55% of the total number of cartons the learned Judges erroneously counted 55% of 4232 master cartons instead of 5309 master cartons ignoring even the surveyors’ final report on this issue of quantum of damages.
Secondly, the learned Judges of the High Court Division failed to notice that the final report of the surveyors were not conclusive in nature and it was a tentative assessment made on 30-5-91 with a clear observation that in order to ascertain the quantum of damages a discussion between the insurer, the insured and the surveyors was necessary which never took place. The High Court Division did not assign any reason as to why the final survey report should be accepted as a dependable one.
Thirdly, the learned Judges of the High Court Division while disposing of an appeal on fact in a very perfunctory manner disregarded the positive evidence of PWs 2-5 who categorically deposed that the damaged 4232 master cartons were destroyed under instruction of public health department and upon receipt of complaint from the public and wrongly held that the plaintiff manipulated all these evidence to defraud the defendants with a view to making an unlawful gain. The evidence on record has not been duly considered in consequence of which the trial Court judgment was wrongly reversed.
Lastly, the learned Judges of the High Court Division illegally reduced the claims interest of the appellant by allowing interest from the date of their own decree ignoring mandatory provision of section 47B of the Insurance Act which displaced the discretion conferred on the court under section 34 of the Code of Civil Procedure, thereby depriving the appellant of its statutory right to get interest at the statutory rate for more than five years.”
8. Mr. AR Yusuf, learned Advocate appearing for the defendant-insurance company-respondent submits that regard being had to the fact and evidence on record that public power supply was restored within 17 hours including supply to two phases of the cold storage, further regard being had to the that Endorsement 903 in the policy provided failure for 72 hours and further regard being had the fact that the supply to the third phase of the storage could not be resumed due to underground cable fault which was the responsibility of insured to rectify it was within the premises of the insured and further regard being had to the fact that the insured had agreed to pay PDB for such rectification, the learned Judges of the High Court Division wrongly held that the underground cable in the premises was part of the power system of PDB upon an erroneous reference to and interpretation of Rules 38 and 39 of the Electricity Rules. He next submits that again having regard to the general exclusion Clauses of the contract of insurance as contained in 7(d) of DOS Policy which expressly excludes any loss or damage directly or indirectly caused by or arising out of or aggravated by cyclone etc, the learned Judges of the High Court Division totally misread and misinterpreted the exclusion clause and other terms and conditions of the contract of the insurance and thereby misinterpreted the contract of insurance and wrongly allowed plaintiffs claim of insurance.
9. Mr. Yusuf’s main plank of argument is one of total repudiation of the insurance claim of the plaintiff on the basis of Ext. 1 and 1(ka), namely BMD Policy and DOS policy issued by the defendants wherein from the exclusion clause attributed the failure of public power supply was attributed directly or indirectly to cyclone. Further public power supply was restored within 17 hours. Therefore, the loss or damage suffered by the plaintiff was due to underground cable fault in its premises that is not a failure of public power supply.
10. The plaintiff filed the suit for loss or damage of 4234 master cartons that were damaged and destroyed out of a total stock of 5309 of master cartons. The trial Court found that the survey report stated that the loss was to the extent of 55% of the total stock. The learned Judges of the High Court Division relied on the said report of the surveyors, but wrongly modified the decree of the trial Court reducing the claim which is not 55% of the total stock but 55% of the amount claimed by the appellant in the plaint. This was, in fact, an erroneous assumption of fact regarding the quantum of damages from a wrong perspective without properly appreciating the case of the appellant which resulted in a serious error in the decision resulting in the modification of the amount decreed by the trial Court. The surveyor’s final report on which the High Court Division relied clearly shows that the damage was 55% of 5309 master cartons .The learned Judges of the High Court Division found that there was no dispute about the number of cartons or value of the contents and also found that the plaintiff was entitled to get compensation to the extent of 55% of the stock but wrongly calculated 55% of 4232 of master cartons which does not cover 55% of the total stock, but only 55% of the amount claimed in the suit .The learned Judges of the High Court Division were proceeding under assumption that the claim amount represented the price of the total stock and consequently wrongly modified the decree.
11. With regard to the question of decomposition of shrimps and prawns, which necessitated the immediate destruction of decomposed stock due to public health hazards and public pressure, a number of documents have been flied by the plaintiff from relevant authorities of the Government. The oral evidence of PWs 2-5 was also of great significance in this regard. The learned Judges of the high Court Division without adverting to the material evidence on record held that in hot haste before the completion of survey report the plaintiff destroyed the stock of shrimps and prawns. In one sentence the learned Judges of the High Court Division held that “the evidence of PWs 2-5 did not inspire any confidence”. This is indeed a perfunctory assessment of the evidence on record by a court of fact and consequently the modification of the trial Court’s judgment has been done in a slipshod manner.
12. Mr. AR Yusuf, of course, did not raise any argument with regard to the question of immediate destruction of the decomposed shrimps and prawns by the plaintiff.
13. From the relevant voluminous letters and the survey reports it is apparent that the final report of the surveyor was a tentative assessment made on 30-5-91 subject to discussion between the parties including the surveyors to ascertain the quantum of damages but in reality no such meeting was ever held. Mr. Yousuf also does not make any point out of this survey report as because his main claim is total repudiation of the claim as not covered by the two insurance policies.
14. It is not disputed that public power supply failed at 6-00 PM on 18-5-91 and the plaintiffs freezing plant was without power supply upto 2-00 AM of 23-5-91. Admittedly public power supply was restored within 17 hours on 19-5-91 at 11-00 AM in two phases instead of three phases and, as such, the plaintiffs power supply was restored only at 2-00 AM on 23-5-91. It is on record that the Engineer of PDB after sustained effort, detected fault in the 11 KV underground cable within the premises of the factory and after rectification of the same power supply was restored in three phases.
15. Mr. Yusuf’s main argument is that due to underground cable fault inside the factory the power supply was disrupted and it was not a case of failure of public power supply as two phases were restored and the power could not be restored in the plant due to underground cable fault which is not a failure of public power supply and on that plea the entire claim was rightly repudiated.
16. Both the trial Court and the learned Judges of the High Court Division concurrently found that the cable upto the delivery point in the factory premises is owned by Power Development Board, shortly PDB, and it is the responsibility of the PDB to repair the line and restore defect. Both the courts below on a scrutiny of the evidence found nothing in support of the allegation of the defendant that the underground cable was damaged by the cyclone. It is true that the initial cause was the cyclone, but even after repairs public power supply could not be restored. Therefore, the cyclone was not the proximate or immediate cause of this fault. Rule 29.4 of Rules and Rates for the supply of electricity as approved by the Ministry of Energy and Mineral Resources, Government of Bangladesh reads as follows:
29.4 underground service lateral
“29-4-1 As and when the connection of the consumer’s electrical facilities with the Board’s electric line is made by the underground service lateral, the Board will install and own this service lateral upto the delivery side terminal of the circuit breaker panel and/or metering unit within the consumer premises for electricity use. In this case, the location for installing such circuit breaker panel and/or metering devices with accessories, shall be, in principle, selected by agreement between the consumer and the Board at the shortest possible distance from the Board’s support or branching point as deemed most appropriate and at a place where the installation of underground service lateral proves safe and does not cause expensive outlay or special construction work. The consumer will bear the expenses of such underground service lateral for electricity use.”
From the above Rule it is clear that Power Development Board will install and own this underground service lateral upto the delivery side terminal circuit breaker panel and or metering unit within the consumer’s premises for electricity use. As per this rule the expenses of such underground service lateral for electricity use will be borne by the owner/ consumer. Thus it cannot be said that underground 11 KV line is a private line of the plaintiff. Further 11 KV Line is a highly powerful line of the PDB and as per this rule the Board owned under-ground lateral service for the supply of electricity. The learned Judges of the High Court Division also held that as per other rules of the Electricity Rules the underground cable is the part of the power supply line owned by Power Development Board.
17. According to the defence of the respondent as set up in the written statement, the failure of power supply was caused by cyclone that affected the area on 18-5-91. The General condition No. 7(d) DOS policy clearly stipulates that defendant No. 1 not liable for loss or damage directly or indirectly caused by or arising out of or aggravated by, amongst others by perils by cyclone or other natural causes. It is only on the above plea that the plaintiff’s claim was repudiated. Furthermore, failure of public power supply continued for 17 hours and the free time under the policy is 24 hours and in the endorsement No.903 it is 72 hours. As such the plaintiff has no claim as public power supply was restored only after 17 hours during which no deterioration takes place in the freezing plant. The defendants have not adduced any evidence to show that 11 KV underground cable in which fault was detected and which caused continuation of failure of public power supply to the plaintiffs freezing plant was not owned by PDB. It is not disputed that due to fault in the underground 11 KV cable, power supply could not be restored by PDB until 2 AM of 23-5-91 and consequently, the stock of shrimps and prawns was damaged. No evidence either oral or documentary was adduced to substantiate that the cable fault caused by cyclone. On this point, the defendant contention is fallacious because in one breath it contended that public power supply was restored only after 17 hours and in another breath it contented that the power supply in the freezing plant was disrupted due to damage caused to 11KV underground cable by cyclone. The respondents in its letter dated 12-10-91 repudiated the claim only on ground that the failure of public power supply caused directly by cyclone on 18-5-91. It is an afterthought of the defendant to avoid the payment of claim on the plea that public power supply restored within 17 hours and the fault in underground cable cannot be attributed as public power failure. Thus, the plea that public power supply was restored within 17 hours and therefore as per endorsement No.903 the claim of the plaintiff is not maintainable is nothing but a belated attempt to avoid the claim. Hence, the argument advanced by Mr. Yusuf that the underground cable fault in the premises is attributed directly or indirectly due to cyclone cannot be accepted. Further, we also find that the failure of power in the freezing plant is in fact failure of public power supply as per endorsement No. 903 of DOS Policy. Consequently, the main argument of Mr. A R Yusuf cannot be accepted.
18. In “The Insurance Act, 1938” there has been an amendment by Ordinance No. XXV in 1970 wherein section 47B has been incorporated which allows granting of interest. This granting of interest is under the statute itself which the appellant is entitled under the law. Section 47B of the Insurance Act in fact displaces the discretion of the court conferred under section 34 of the Code of Civil Procedure of granting decree for interest. As per section 47B(1) the insurer is saddled with interest on late settlement of claim. Sub-section 2 of section 47B reads as follows:
“The interest under sub-section (1) shall be payable for the period during which the failure continues and shall be calculated at monthly rates at the rate of five percent higher than the prevailing bank rate.”
Hence, the plaintiff-appellant is entitled to the statutory interest under section 47B of the Insurance Act, 1938. The learned Judges failed to notice that the appellant is entitled to this statutory interest under the law and the court has no discretion in the matter.
Consequently, the appeal is allowed without any order as to costs and the judgment and decree of the trial Court is restored. Civil Petition for Leave to Appeal No.236 of 1997 is dismissed.
Source: 50 DLR (AD) (1998) 100