National Consumer Disputes Redressal
M/S. Munish Petro Foam vs Oriental Insurance Company on 19 April, 2024
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 828 OF 2015 (Against the Order dated 21/04/2015 in Complaint No. 74/2013 of the State Commission Haryana) 1. M/S. MUNISH PETRO FOAM THROUGH, ITS SOLE PROPRIETOR, SHANKAR LAL SHARMA, S/O. SH NAND LAL R/O. PATEL NAGAR, NEAR LITTLE ANGEL SCHOOL, SONEPAT, HARYANA ...........Appellant(s) Versus 1. ORIENTAL INSURANCE COMPANY THROUGH ITS BRANCH MANAGER, HAVING ITS BRANCH OFFICE AT: 204-R MODEL TOWN, ATLAS ROAD, NEAR SUBHASH CHOWK, SONEPAT ...........Respondent(s)
BEFORE: HON'BLE MR. JUSTICE A. P. SAHI,PRESIDENT
FOR THE APPELLANT : MR. J.B. MUDGIL, ADVOCATE FOR THE RESPONDENT : MR. PANKAJ SETH, ADVOCATE (THROUGH VC)
MS. SHIVANI MANGLA, ADVOCATE (THROUGH VC)
Dated : 19 April 2024 ORDER
JUSTICE A.P. SAHI, PRESIDENT
1. The appeal questions the correctness of the order of the State Consumer Disputes Redressal Commission, Haryana dated 21.04.2015 in CC/74/2013, whereby the complaint of the appellant has been partly allowed in respect of an insurance claim. The claim was in respect a fire incident arising out of a policy contending that the claimant has suffered a loss of Rs.65,69,400/- of stocks and building as well as machinery. The claim was insured and according to the complainant was indemnifiable as there was no dispute with regard to the status of the policy issued by the respondent/ Insurance Company. The policy categorically insured building, plants and machinery and stock under a special fire and perils policy that was valid from 17.03.2012 to 16.03.2013.
2. The fire occurred on 17.04.2012 and a police report was lodged. The fire station people also arrived and doused the fire. The goods, however, could not be saved and there was a total loss for which a claim form was submitted. 3. On intimation the Insurance Company appointed a surveyor, who visited the spot on 19.04.2012, after noting down the damages and discussing the matter with the complainant. The surveyor called for certain documents in respect of the claim. According to the appellant/ complainant the entire information was tendered regarding the loss of stocks, machinery and building, which was well within the sum insured covered under the policy referred to above. The total sum insured under the policy on all three heads was Rs.80,00,000/-, Rs.32,00,000/- for plant and machinery, Rs.8,00,000/- for building and Rs.40,00,000/- for stocks. The surveyor conducted a detailed survey and submitted a report. The cause of the incident was discussed in paragraph 6, which is extracted herein under:
"6. ABOUT THE INCIDENT:
It has been reported to us Mr. Shankar Lal Sharma, Proprietor of the insured concern that till 4.00 p.m. on 17.04.2012 the work in the factory was going on as usual. Around 6-7 workers were working in the factory. All of a sudden, a fire originated due to short circuit in the motor of the cutter machine. The workers raised hue and cry and tried to control the fire with the help of facilities available in house. In the process of fire extinguishing, one of the workers Mr. Prahlad also suffered burn injuries. In the mean time fire brigade was also informed and four fire Tenders reached the site within 20 minutes. The fire was controlled by them with the help of the all present within 3 hrs."
3. The police report, fire brigade report was discussed and the cause of loss was delineated in paragraph 11, which is extracted herein under:
"11. CAUSE OF LOSS :
The police report describes Electric Short Circuiting as the cause of fire. However, we made discreet enquiries, close investigations and examined the eyewitnesses i.e. staff of the insured company to establish the cause of loss.
All possible causes of fire have been analyzed and are discussed as under:-
i. Carelessly discarded cigarette/bidi butt:
The cause of loss due to carelessly discarded Cigarrette/ Bidi butt cannot be ruled out as smoking is a common phenomenon in Haryana and particularly among the workers. The captioned unit was not running properly and only repair work of old mattresses was carried out and therefore no senior responsible person is posted there. As such, it might be a possibility that some worker might have carelessly discarded a Bidi Butt which might have ignited the fire.
ii. Spontaneous Combustion:
The possibility of this is also ruled out as the stock of insured lying in the captioned factory, comes under non-existent category of spontaneous combustion. Thus a fire due to spontaneous combustion is ruled out.
iii. Malafide intention:
The possibility of fire due to this cause cannot be ruled out as the insured has started another unit at Murthal and as per the investigator, all machines from the captioned unit were shifted to the new unit and the insured has placed the order for installation of new machines. Moreover, the insured has also claimed a large quantity of stock as lying in the factory and damaged in the fire. The stock has been shown as purchased through bogus purchases. As such in might be possible that the insured, in order to get rid of the junk lying in the factory and availing an undue claim from the underwriters might have engineered the fire.
iv. Ignition from glowing ember The possibility of this cause is also ruled out as no source of glowing ember was found near the site of fire. Thus the possibility of this cause of fire is very remote.
v. Electric Short Circuiting We minutely inspected the electric fittings and electric cables installed in the insured factory premises particularly in the area around the place where fire broke out. The possibility of fire due to electric short circuiting cannot be ruled out.
We, after inspection of the site of fire are of the opinion that the fire at the insured's factory was engineered by the insured with malafide intentions of cheating the insurance company. As such the claim of the insured is not payable."
4. The possibility of fire due to electric short circuit was not ruled out. But on inspection, the surveyor gave contradictory observations and a suspicion that the fire was generated and intentional.
5. The report further details the inspection that were carried out and upon verification the entries in the accounts, the mode of transportation of rickshaw and other documents were somewhat found by the surveyor to be fake to an extent. Even the purchases were doubted as some of the bills were not reflecting the correct status of the sellers and it has also been observed that the addresses provided on the invoices were not traceable. The observations made are extracted herein under:
"Upon minute verification of the purchase invoices it was observed that M / s Munish Poly Product was a sister concern of the insured and therefore proper entries have been made in their accounts. The mode of transportation is Ricksaw and therefore no GR is available. As such , these purchases cannot be proved to be fake, but we are of the opinion that these are mere book entry and not a genuine sale and purchase transaction.
The purchases claimed from M / s Jai Kanshi Industries, M / s Aggarwal Trading Company and M / s Gulab Trading Company are not authentic and hence are fake. The addresses printed on the invoices are not traceable. We made our best efforts to locate these firms at Panipat, but were not able to do so. The address printed on the invoices are fictitious. As in case of Aggarwal Trading Company, GT Road, Panipat, the stretch of GT Road in Panipat is almost 15 Kms and the exact location of the firm cannot be pinpointed. These invoices even does not bear any telephone No. TIN no too is missing from these bills. As such, in view of these observations, the purchases of the insured cannot be proved to be genuine and hence are bogus and have been reflected just to cheat the insurance company and avail a fake claim."
6. Further investigations with regard to the loss of machines was assessed but it was observed that the debris lying at the site did not equate with the huge claim made. The observations to that effect are extracted herein under:
"The insured has also claimed the loss of machinery for Rs. 31,95,000.00 and the same too is on a very higher side. The estimate includes loss of Horizontal Cutting Machine, Vertical Cutting Machine, Boiler, Rebounding Plant, Foam grinding machine, Piling Machine etc. But surprisingly the debris lying at the site of fire does not equate with the huge estimate submitted by the insured. The insured has submitted the quotation of machinery issued by M / S Kwality Enterprises, Sonepat. Upon closer inspection of the quotation, it has been observed that M/s Kwality Enterprises is a Supplier of all kinds of Foam Goods and not a manufacturer or supplier of machineries."
7. The investigations were also conducted with regard to the loss of machinery and it was observed by the surveyor in paragraph 14.5 as follows:
"14.5 The insured has not submitted the detailed estimate of loss of machinery and instead has submitted a Consolidated Estimate wherein the loss of stock has been claimed for Rs. 22,31,400.00. Therefore the assessment of loss has been carried out on the basis of physical inspection of stock carried out by us and the rates are based upon the purchase invoices submitted by the insured and cross verified from open market."
8. It has also been observed in paragraph 14.3 that an investigation was carried out through M/s. Royal Associates that has led them to believe that fake purchase bills had been submitted. The said observation in clause 14.3 is extracted herein under:
"14.3 The investigator M/s Royal Associates have carried out detailed investigations of the insured's claim and has concluded that the insured has breached the policy condition by submitting fake purchase bills and they have also established that No Manufacturing activity apart from that of pillow manufacturing was being carried out in the captioned plant."
9. On the loss of stock, after having assessed the aforesaid facts certain particulars were noted with the rates of the items that were supposedly lost in the fire and the surveyor came to the conclusion that a loss of Rs.1,15,000/- has been suffered as stocks were destroyed during the fire. Under the heading of loss of machinery a depreciation of 50% was applied after having observed that there were some discarded machines lying in the plant and on inquiry, it was found that the machines were not in working conditions. It was also informed that only repair of old mattresses and manufacturing of pillows was being carried out in the factory. An information was also gathered that these machines were insured in the year 2000 and were very old, as such a depreciation of 50% was appropriate and after deducting salvage value, the machinery loss was assessed at Rs.5,70,868/-.
10. Coming to the loss of building after detailing the description the entire loss on that head was assessed at Rs.1,51,202/-. Since there was an excess clause in the policy to the extent of 5% the net assessed loss on all heads by the surveyor was Rs.7,95,216/-. The summary of loss and the conclusions drawn by the surveyor are extracted herein under:
15. SUMMARY OF LOSS:
Gross Loss Net Loss Loss of Stock 122800.00 115000.00 Los of Machinery 1375000.000 570868.00 Loss of Building 568377.00 151202.00 2066177.000 837070.00 Less: Policy Excess 5% 41854.00 Net Assessed Loss 7,95,216.00
16. CONCLUSION:
The insured has manipulated his books of accounts and submitted fake Purchase Invoices to avail an undue claim, therefore the underwriters may invoke condition No.8 of the standard fire policy and may repudiate the claim.
The condition No. '8' of the Fire Policy is reproduced as under:
If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof or if any fraudulent means or devices are used by the insured or any one acting on his behalf to obtain any benefit under the policy or if the loss or damage be occasioned by the willful act, or with the connivance of the insured, all benefits under this policy shall be forfeited."
11. The surveyor had also relied on the investigation carried on by the detective agency, M/s. Royal Associates, who verified the purchase bills from some firms from where the stocks are alleged to have been purchased. The findings given by the investigator are as follows:
"Insured has submitted purchase bills of Gulab Trading Co. Panipat, Jai Kanshi Industries Panipat, Aggarwal Trading Co. Panipat. Address of Gulab Trading Co. is written as Railway Road Panipat, but when we visited Railway road Panipat, no such firms was found at that road. Address on purchase bill of Jai Kanshi Industries is mentioned Barsat Road Noorwala, but at that road no such firm is found in existence address of Aggarwal and Trading Co. (G.T. Road Panipat was also found fake. Interestingly telephone is not written on any of the bills, which shows that all the bills are fake. Insured also submitted some bill of Janta Fabric Store Salempur Delhi. We visited Slempur and tried to find out Janta Fabric Store, but no such shop was found on that area. Mr. Sachin Arora, Shopkeeper of that area confirmed that there is no such shop in the name of Janta Fabric Store in that area. So All the bills of Janta Fabric Store are also fake."
12. The statement of workers involved with the said factory were also taken and a special reference with regard to the cause of fire appears to have been made by Mr. Asraf Mukhija to the effect that the fire had broken out due to the falling of a candle, which in time spread over and the foam was burnt. Again the statement indicated that only pillows were manufactured in the factory with some repairs of old mattresses.
13. Another peculiar fact was noted that the copies of electricity bills were not provided to demonstrate that work was carried out in the factory with the help of electricity. It was therefore doubted and observed that the cause of fire could not have been short circuit.
14. After the submission of the said survey report, the claim was repudiated by the Insurance Company on 01.07.2013 and the repudiation letter is extracted herein under:
"To M/S Manish Petro Farm Village Shadipur, District Sonipat.
Sub: Repudiation of your claim No.261600/11/2013, Policy No.261600/11/012/949, Fire Loss.
Dear Sir, We refer to your claim in respect of the above:- On a careful perusal of your claim and documents provided by you and the details obtained by the Oriental Insurance Company Ltd. after deputing the investigator, loss assessor and surveyor, it is submitted that your claim is not payable on the grounds of placing wrong facts. The Insurance Company got assessed the loss by deputing licenced surveyor, but as per the report of Investigating and detective agency namely Royal Associates, the Insurance Company found that you placed wrong facts with the purpose to take claim.
In view of the principles of uberium fides, the claim under the policy becomes void and ab initio on account of misrepresentation or suppression of the material facts. You misrepresented and suppressed the material facts by not disclosing the true facts. Not only this you submitted fake purchase bills and in this way violated the terms and conditions of the policy.
It is submitted that the Oriental Insurance Company thoroughly considered your claim after taking each and every aspect in consideration and found that you also have violated the terms and conditions of the policy and in this way not entitled to get any claim as per the terms and conditions of the policy and your claim is not payable.
It is submitted that on a careful perusal of your claim and the details obtained by the company, the company has taken a decision to repudiate the claim on the grounds mentioned below:-
1. You were asked to submit all purchase sale bills for the last six months before fire along with the three years balance sheets, income tax returns, sales tax returns and vat returns, but you did not provide anything to the investigator. After various requests, you provided few purchase bills of three four firms, but to a great surprise, all these bills were found fake. Addresses of the firms return on purchase bills provided by you found fake and in this way, you with malafide intention by providing fake bills violated the terms and conditions of the policy.
2. In investigation, the Insurance Company found that cause of fire is unknown. As per your statement, you received phone call from your neighbourer about fire in factory and at that time you were sitting in your new factory. It is very strange that why your workers not informed you about the fire in the factory. As per your statement, the fire broke out due to short-circuit, but as per the statement of your worker, fire broke out due to lighting from a candle. So cause of fire is doubtful and clearly shows that you deliberately did not place true facts before the Insurance Company.
3. As per statement of your mechanic of machine manufacturer, the machines were not in working conditions and these were sold before fire. So, it is clear that machines, which were insured, were already sold by you. So your claim for machinery is not valid.
4. Amount of claim lodged by you is based on wrong facts and not correct. In investigation, it came out that manufacturing work for mattresses was not carried out in your factory as claimed by you. Only pillows and that is also from wasted piece of foam were manufactured in the factory and mattresses were repaired only. There was no new stock of raw material stored in the factory. You deliberately and intentionally did not provide the electricity bills to show that factory was running and manufacturing was carried out in the factory.
5. You failed to prove copies of purchase bills of machines in investigation and as per the statements of workers, it revealed that there were only three fold machines, which were not working properly, lying in the factory. In investigation the Insurance Company found that b and most of the material of the factory in question was shifted by you in the new factory and in this way, there was no raw material and finished stock was lying in the factory and only old material, waste and items for repair were lying there.
A contract of insurance is one of the utmost good faith and the burden lies heavily on the insured to disclose the material and true facts for his claim, but you produced the fake bills and did not provide the documents and other clear facts to the Insurance Company in favour of your claim. On the other hand, the Insurance Company after investigation found that your claim is not genuine and your stock statement is manipulated.
The Oriental Insurance Company who is a prudent trustee of public fund is not bound to recognize the claim based on wrong facts and hence, taken a decision to repudiate the claim in good faith after proper application of mind on the grounds mentioned above. Hence, your claim is repudiated.
Please note that in case, you proceed further in this matter, the same shall be defended by the company at your cost and risk.
Yours faithfully Sd/-
Divisional manager, Oriental Insurance Company, Divisional Office, Sonipat."
15. Aggrieved, the complainant approached the State Commission and filed the complaint that has given rise to the present appeal. The State Commission assessed the complaint on the basis of the material on record and then came to the conclusion that the complainant had not been able to prove its entire claim but came to the conclusion that the incident of loss as indicated by the surveyor deserves to be accepted. Consequently, the claim of Rs.65,69,400/-made by the complainant was rejected but at the same time the assessment of the loss made by the surveyor was accepted and a sum of Rs.7,95,216/- was awarded together with Rs.50,000/- for harassment and Rs.5,000/- as litigation expenses.
16. Learned counsel for the appellant has urged that once the loss has been assessed and the surveyors report has been accepted then the erroneous findings of the surveyor ought to have been also rejected with a direction to make good the entire loss of building, machinery and stocks as claimed by the complainant. It is urged that interest is not awarded and the claim was reduced only to the extent of the surveyor's report, which did not reflect the exact loss suffered by the complainant.
17. Learned counsel submits that all bills and documents were tendered and the evidence was supported by the affidavit of the complainant. There was nothing on record to demolish the same and hence the present appeal has been filed for an enhanced compensation to the extent as set up in the original claim.
18. The appeal has been opposed by Mr. Seth, learned counsel for the Insurance Company contending that no evidence was led and whatever material was placed on record was not worth believing. Nonetheless, the Insurance Company has not filed any appeal against the findings recorded by the State Commission and has paid the decretal amount in its entirety. It is submitted that no enhancement deserves to be granted as the evidence was deficient in respect of the loss of stocks, machinery and building and the claim was not founded on genuine documents. The investigator's report and the surveyor's report therefore do not suffer from any infirmity and there is no material to doubt the credit worthiness of the surveyor's report and the investigators findings.
19. Having heard learned counsel for the parties, what can be seen is that the documents, which were placed in respect of the stocks were sought to be verified by the investigator, and the purchase bills as indicated in the report were found to be fake as the firm from where the purchases are alleged to have been made were not found to be genuine. No contradictory evidence was led by the complainant to demonstrate the same including the affidavit or any such evidence of those shop owners from whom the complainant had purchased the items. In the absence of any such evidence the findings of the investigator and the reliance placed by the Insurance Company on the same as well as the surveyor's report cannot be doubted.
20. Coming to the machinery part, one significant illustration is of a quotation given of Rs.31,95,000/- from M/s. Quality Enterprises. The very letter head of the said quotation indicates that they are suppliers of all kinds of foam goods etc. It is not understood as to how a supplier of foam and mattresses can be presumed to be also either a manufacturer or distributor or supplier of machines that are meant for the manufacturing process. The surveyor has doubted the same and no evidence was led by the complainant to demonstrate that M/s. Quality Enterprises were genuine suppliers of machinery. In this regard no evidence was supplied to substantiate the stand taken by the complainant to prove that the quotation was genuine.
21. It is in these circumstances that the surveyor made an assessment on the basis of material whatever was available and then granted a depreciation of 50% to arrive at a reasonable amount against the loss of machinery.
22. The findings therefore recorded by the surveyor could not be demolished by any cogent evidence by the complainant nor any evidence was led to substantiate the claim, as such, the State Commission proceeded to assess the loss on the basis of whatever material was available and has awarded a compensation, which in the opinion of this Commission can be termed as a just compensation.
23. However, there is one issue which has not been taken care of by the State commission is that while awarding the claim no interest has been extended on the amount payable. The date of loss is 17.04.2012. The duration of the policy was very much valid on the said date, when the fire broke out. Consequently, in the background that the Insurance Company has not filed any appeal, and has accepted the impugned order, the interest is also liable to be paid to the complainant on the amount awarded by the State Commission.
24. Accordingly, the appeal is partly allowed and the order of the State Commission is modified only to the extent that the appellant/ complainant will be entitled to interest @ 6% to be paid by the Insurance Company on the amount awarded by the State Commission of Rs.7,95,216/-. The interest shall be payable from the date of loss i.e., 17.04.2012 till the date when the said amount was actually disbursed and paid by the Insurance Company to the complainant.
25. The appeal is accordingly partly allowed.
.........................J A. P. SAHI PRESIDENT