NCDRC Sets Aside Turbine Insurance Repudiation, Awards Rs 3.05 Crore to Power Company
NCDRC holds IFFCO-Tokio's 2012 repudiation of a machinery breakdown claim invalid, finding the insurer had knowledge of the rotor swap through broker communications and pre-inspection, and directs fresh assessment of the loss of profit claim.
The National Consumer Disputes Redressal Commission, New Delhi, has allowed a consumer complaint filed by M/s Satyamaharishi Power Corporation Ltd. against IFFCO-Tokio General Insurance Co. Ltd., declaring the insurer's repudiation of a machinery breakdown claim dated 26 March 2012 to be invalid. The bench of Justice A.P. Sahi, President, and Mr. Bharatkumar Pandya, Member, directed the insurer to pay Rs 3,05,63,535 with interest at 6% per annum from the date of repudiation, and separately directed a fresh survey to assess the consequential loss of profit claim. The order, pronounced on 4 May 2026, concludes a complaint that was first instituted in 2012 and heard across multiple sittings between 2024 and 2026. The central question was whether the insurer's ground of material non-disclosure, specifically, the installation of a second-hand rotor from a sister concern, was sustainable on the evidence.
The Turbine, the Rotor Swap, and the Claim
The complainant, Satyamaharishi Power Corporation Ltd. (SMPCL), operates a power plant at Guntur, Andhra Pradesh. It is a subsidiary of Velcan Energy SA, France. A sister concern, Rithwik Power Project Ltd. (RPPL), operated a separate plant at Khammam, Andhra Pradesh, under a different subsidiary of the same parent.
In July 2008, the 11-stage rotor of the turbine at the Guntur plant was damaged. Around the same time, RPPL at Khammam had replaced its own 11-stage rotor with a 20-stage rotor, leaving the 11-stage rotor spare. A decision was taken to assess whether the spare Khammam rotor could be installed at Guntur. Both rotors were sent to Turbo Machinery Engineering Industries (TMEI) in Hyderabad for a compatibility test. TMEI certified that the two rotors were of identical specifications and that the spare rotor from Rithwik could be installed at the Guntur plant.
Marine transit policies were taken from IFFCO-Tokio for the movement of both rotors to Hyderabad. The Khammam rotor, instead of returning to Khammam after the TMEI assessment, was diverted to Guntur and installed in the complainant's turbine. A Machinery Breakdown and Material Loss of Profit (MLOP) Policy was issued by IFFCO-Tokio on 10 March 2009, following a pre-inspection by the insurer's risk engineer, Mr. Markandeyulu, whose report was dated 11 March 2009. The turbine ran for approximately four and a half months before a breakdown occurred on 22 July 2009.
SMPCL lodged a claim for indemnification. The insurer repudiated the claim on 26 March 2012, alleging suppression of the fact that a second-hand rotor from a sister concern had been installed. The complainant had earlier filed CC No. 66 of 2012 before the Commission, but withdrew it with liberty to refile after the repudiation was issued. Consumer Complaint No. 197 of 2012 was then filed.
The Complainant's Case
Senior Counsel Mr. Joy Basu, appearing for SMPCL, advanced the case across multiple hearing dates. His core submission was that the insurer had full knowledge of the rotor swap through the broker, IFFCO-Tokio's own officials, and the pre-inspection process.
He pointed to a chain of communications in December 2008 and January 2009 between the broker (Opposite Party No. 2, M/s Peraj Insurance Broker Pvt. Ltd.) and IFFCO-Tokio, in which the movement of the Rithwik rotor to the Satyamaharishi plant was discussed. He identified Ms. Shaina Taneja as the IFFCO-Tokio official who handled all four policies, the two marine transit policies, the erection policy, and the machinery breakdown policy, and who was copied on or sent several of the relevant communications. He argued that the erection policy issued in the name of RPPL on 19 February 2009, for which the premium was paid by SMPCL, was itself evidence that the insurer knew the rotor was being installed at Guntur.
Mr. Basu contended that the pre-inspection by Mr. Markandeyulu, who visited the site on four occasions and submitted his report on 11 March 2009 after a test run from 4 March to 10 March 2009, confirmed the rotor's fitness. The Machinery Breakdown Policy came into effect only after this pre-inspection, meaning the insurer had assessed the very equipment it later claimed was undisclosed.
On the surveyor's competence, Mr. Basu argued that the initial surveyors, Mr. Sreenivasu and Mr. Bhise, were Category C surveyors who were not authorised to assess a loss of the magnitude involved, and that the final surveyor, Mr. Bhatawadekar, had not visited the site and had reproduced their reports without independent assessment. He also relied on a root cause analysis conducted by Cobham, U.K., an agency engaged by the surveyor himself, which confirmed that none of the policy exclusions were attracted and that the breakdown was not caused by the rotor.
On quantum, the complainant's own surveyor, M/s Rank Surveyors Pvt. Ltd., assessed the machinery breakdown loss at Rs 4,08,60,259 and the consequential loss of profit at approximately Rs 3,05,63,535. Mr. Basu also argued that the insurer had not produced any proposal form, and that the burden of proving non-disclosure lay on the insurer, which it had not discharged.
The Insurer's Defence
Counsel for IFFCO-Tokio, Mr. Saurav Agrawal, contested the complaint on several grounds. His central argument was that the rotor swap was an internal arrangement between two sister concerns that was never formally communicated to the insurer.
He argued that the marine transit policies were issued for specific routes, the Khammam rotor was covered only for transit to Hyderabad and back to Khammam, and the Guntur rotor was covered only for transit to Hyderabad and back to Guntur. The diversion of the Khammam rotor to Guntur was a deviation from the policy terms, undertaken without any transit policy for the new journey and without informing the insurer.
Mr. Agrawal maintained that the broker was not an agent of the insurer. He relied on the IRDA (Insurance Brokers) Regulations, 2002 to argue that brokers act on behalf of their clients, not the insurer, and that knowledge of the swap by the broker could not be imputed to IFFCO-Tokio. He also relied on Section 182 of the Indian Contract Act on the definition of agency.
He disputed the authenticity of several communications relied on by the complainant, including the mail dated 12 December 2008, which he said was not on TMEI letterhead and had no official affidavit in support. He argued that the decision to swap the rotors was taken only on 20 February 2009, and that no communication prior to that date could establish prior knowledge on the part of the insurer. He further contended that the Khammam rotor was itself defective, it had been replaced at Khammam due to defects, and the breakdown at Guntur occurring shortly after installation was consistent with a defective rotor having been installed.
On the erection policies, Mr. Agrawal argued that both were taken by RPPL for coverage at Khammam, not for the installation at Guntur, and that SMPCL had never taken its own erection policy for the rotor installed at its plant. He submitted that the complainant could not claim as a beneficiary under a policy taken by a different entity.
How the Commission Reasoned
The Commission examined the chain of communications in detail. It found that the broker's affidavit, which admitted the communications and confirmed they had been transmitted to the insurer, had not been contradicted or rebutted by IFFCO-Tokio. The Commission held that the authenticity of the mails exchanged between the broker and the insurer could be presumed in the absence of any contrary evidence.
On the pre-inspection, the Commission found that Mr. Markandeyulu had visited the site on four occasions and had submitted his report on 11 March 2009 confirming the turbine was in good running condition. The Machinery Breakdown Policy was issued only after this report. The Commission found it significant that the insurer had not filed an affidavit from Mr. Markandeyulu stating that he had been uninformed about the rotor swap, and that the surveyor Mr. Bhatawadekar had not sought any clarification from Mr. Markandeyulu despite noting his presence in the interim report.
On the Cobham report, the Commission found that the TMEI compatibility report had been confirmed by Cobham, U.K., an agency deployed by the surveyor himself, and that no defect had been found in the rotor. The turbine had run for approximately four months after installation without any defect. The Commission held that the surveyor's observation about the absence of OEM confirmation was misplaced in this context.
The Commission addressed the broker's status directly. It found that the broker's communications were official transmissions of information, regulated under the IRDA Insurance Brokers Regulations, 2002, and that the broker had filed an affidavit detailing all correspondence at every stage of the three transactions. The Commission held that the information given through the broker, together with the pre-inspection by Mr. Markandeyulu and the mail communications from IFFCO-Tokio's own official Ms. Shaina Taneja, established on a preponderance of probabilities that the insurer had knowledge of the rotor swap when issuing the policy.
On the policy terms, the Commission found that clause 2.4(b) of the Machinery Breakdown Policy provided for repudiation only where a claim was found to be fraudulent or a false declaration had been made in support of the claim. There was no clause permitting repudiation on the ground of non-disclosure of a material fact at the pre-inception stage. No proposal form had been produced by the insurer. The Commission held that the repudiation did not satisfy the terms and conditions of the policy and was therefore unsustainable.
The Commission also found that the repudiation letter of 26 March 2012 did not specify any condition of the policy that had been violated, and that the insurer could not travel beyond the scope of that letter. The surveyor's report, which had been prepared by Category C surveyors and reproduced without independent site inspection, was found to be not in conformity with IRDA Regulations. The Commission held that the surveyor had omitted to take into account the pre-inspection report and the Cobham confirmation, and that the assessment proceeded on surmises.
Outcome
The Commission declared the repudiation dated 26 March 2012 invalid and held the claim indemnifiable. On quantum, the Commission awarded Rs 3,05,63,535, the amount assessed by the complainant's own surveyor, M/s Rank Surveyors Pvt. Ltd., noting that while the insurer's surveyor had assessed a higher figure of Rs 3,37,66,160 for the machinery breakdown, it was appropriate to award the amount as assessed by the complainant's surveyor. The Commission directed that this sum be paid together with interest at 6% per annum from the date of repudiation, i.e., 26 March 2012, within three months from the date of the order. In default, the rate of interest was directed to stand enhanced to 9%.
On the MLOP claim, the Commission noted that the insurer's surveyor had not assessed the loss of profit at all, having recommended repudiation of the machinery breakdown claim. Since the machinery breakdown repudiation had been declared invalid, the Commission directed the insurer to place all material before a surveyor for assessment of the loss of profit claim within six months from the date of the order, with the surveyor authorised to call for any further information from the complainant as necessary. The final decision on the loss of profit claim was directed to be communicated to the complainant accordingly.
The complaint was allowed on these terms.