State Consumer Disputes Redressal Commission
Design Sangarh vs The New India Assurance Co. Ltd. on 27 February, 2018
Daily Order IN THE STATE COMMISSION: DELHI (Constituted under Section 9 of the Consumer Protection Act, 1986) Date of Decision:27.02.2018 Complaint Case No. 28/2011 In the matter of: M/s The Design Sangrah D-119, Hosiery Complex Phase-II, Noida Distt.GautamBudh Nagar UP-201305 Through its Proprietor Sh. Rakesh B Sadh .........Complainant Versus The New India Assurance Co. Ltd. Having its Divisional Office-312300 902-905, Hemkunt House 9th Floor, Rajendra Place New Delhi-110008 Service be effected through its Divisional Manager/Legal Manager Deputy Manager ..........Opposite Party CORAM N P KAUSHIK - Member (Judicial) 1. Whether reporters of local newspaper be allowed to see the judgment? Yes 2. To be referred to the reporter or not? Yes N P KAUSHIK - MEMBER (JUDICIAL) JUDGEMENT
Complainant is a proprietorship firm with its factory/office at D-119 Hosiery Complex Phase-II Noida District GautamBudh Nagar (U.P.). Complainant had taken three insurance policies from M/s New India Assurance Company Ltd. (in short the OP) for safeguarding of its stocks, building, finished and semi-finished raw materials. Complainant was doing the business of production of garments. Policies were known as 'Standard Fire' and 'SpecialPerilsPolicy'. First policy covered the building for a sum of Rs. 41,00,000/-, plant, machinery and accessories of Rs. 2,70,000/-. It was valid for the period from 30.12.2006 to 29.12.2007. Second policy covered stocks for Rs. 45,00,000/-. It was valid for the period from 09.02.2007 to 08.02.2008. Third policywas covering the risk of pressing tables and sewing machines for Rs. 2,00,000/- and was valid for the period from 10.04.2007 to 09.04.2008.
On 21.04.2007 at about 10:15 am,a fire broke out on the first floor of the factory. Fire was extinguished by five fire tenders after working for 4-5 hours. Storeroom on the first floor, fabric, finished goods, stocks and samples got completely burnt.Office equipment, ACs, computers, some record, furniture, fixture and fittings also got damaged/burnt. On the same day, OP was informed of the incident. On 23.04.2007 OP was requested to appoint a surveyor to assess the loss and settle the claim. OP appointed M/s R L Aggarwal Surveyors Pvt. Ltd. to inspect the premises and assess the loss. Surveyor accompanied by his officials visited the factory premises on 01.05.2007, 07.05.2007, 28.05.2007, 08.08.2007, 15.10.2007, 22.10.2007 and 02.02.2008. On 22.05.2007, complainant lodged its claim for an amount of Rs. 44,63,003/- with the OP. Vide its report dated 31.05.2007,Fire Brigade Officer assessed the loss to Rs. 37,00,000/-. Complainant submitted that the surveyor demanded certain documents on 28.04.2007 which were provided vide letter dated 22.05.2007. Complainant contended that the stock register got burnt in the fire and the surveyor was informed of it. Copies of the stock statement submitted to Punjab National Bank and pertaining to the period 2006-07 and from 01.04.2007 to 31.09.2007 were supplied to the surveyor. Surveyor vide his initial report dated 05.02.2008 assessed the loss at Rs. 35,64,750/-. OP on 25.06.2008 asked for production of the stock register for the year 2007-08. Complainant vide its letter dated 26.06.2008 informed the OP that the production of documents including stock register was beyond his control.
Complainant came to know that the OP had appointed second surveyor named M/s R N Sharma and Company to assess the claim. M/s R N Sharma and Company vide its letter dated 03.02.2009 demanded records from the OP. Complainant vide its letter dated 14.02.2009 apprised the OP of the guidelines of the IRDA for settling the claim within thirty days of the initial report of the surveyor. Vide its letters dated 08.05.2009 and 11.05.2009, complainant submitted the requisite documents to the second surveyor M/s R N Sharma and Company. OP vide its letter dated 12.11.2009 repudiated the claim stating that there was violation of condition nos. 6(i)(b) and 8 of the fire policy. OP in its written version admitted the factum of breakout of the fire due to shortcircuit. In relation to the report of the fire brigade officer assessing the loss to Rs. 37,00,000/-, OP stated that the same was not highly relevant. Similarly the contention that the fire took place on first floor only, saving the ground floor, again was not of much concern to the OP. OP however admitted the intimation of loss having been given to it by the complainant. It also admitted 'safety certificate dated 28.06.2006' sent to the complainant by the fire brigade department.
OP admitted that the complainant informed the surveyor of the stock statement (for the initial year ending 31.03.2007 and the period for 01.04.2007 to 30.09.2007) having been burnt in fire. OP submitted that the surveyor could not further transmit the said information to the insurer perhaps due to inadvertence. OP further submitted that it was for that reason that the insurer was compelled to call for the said fundamental and core information from the complainant. OP further submitted that the complainant was duty bound to obtain the information from his banker and furnish it to the OP instead of directing the surveyor to approach the banker for this purpose. Contention of the OP is that the stock statement submitted to the bankers by the insured generally does not reflect the true picture of the stock insured. For this reason, OP wanted the primary evidence of stock possession (or secondary evidence in lieu thereof) thus enabling it and its surveyor to have a true picture of the stock.
Now coming to the question of delay of more than nine months in submission of the initial report by the first surveyor, OP submitted that the complainant did not extend wholehearted cooperation to the surveyor.
OP submitted that the assessment of loss made by the first surveyor was far from satisfactory and based on fabricated statements/documents of stocks manipulated by the insured. OP relied upon the letter dated 12.12.2008 written to it (OP) by its divisional manager.
In response to the allegation of the appointment of the second surveyor M/s R N Sharma and Company, OP submitted that it was its prerogative to seek second opinion.
Complainant filed rejoinder reiterating the averments made in the complaint. Parties filed their affidavits towards evidence. Written arguments too were filed.
Arguments were addressed at length by the counsel for the complainant Sh. Ajay Sondhi and Counsel for the OP Sh. S D Wadhwa.
Before proceeding0 further, it may be mentioned here that the OP repudiated the claim (vide letter dated 12.11.2009) stating that the same was being done under condition nos. 6(i)(b) and 8 of the Fire Policy. The said conditions are reproduced below:
Condition No. 6(i) (b) "The insured shall also at all times at his own expense produce, procure and give to the Company all such further particulars, plans, specification books, vouchers, invoices, duplicates or copies thereof, documents, investigation reports (internal/external) proofs and information with respect to the claim and the origin and cause of the loss and the circumstances under which the loss or damage occurred, andany matter touching liability or the amount of the liability of the Company as may be reasonably required by or on behalf of the Company together with a declaration on oath or in other legal form of the truth of the claim and of any matters connected therewith.
No claim under this policy shall be payable unless the terms of this condition have been complied with."
Condition No. 8:
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.
In its written arguments, OP admitted that the first surveyor carried out physical verification of the sound stock, verification of the record and held detailed discussions on assessment of loss. First surveyor assessed the loss at Rs. 35,64,749/- (loss of stock of Rs. 30,98,764/- and that of building ofRs. 4,65,985/-). This assessment was reached by the first surveyor against the loss of Rs. 45,00,000/- which was claimed by the insured.
OP submitted that its branch office as per letter dated 12.12.2008 addressed to its Divisional Office expressed its dissatisfaction over the first surveyor's report. Clarification given by the first surveyor on visit to the site with the official of the insurer on 20.06.2007 was found vague. Bank stock statement of July 2007 was found to be not tallying with the stock register. OP argued that there was thus non-compliance of condition no. 6(b). First surveyor gave detailed clarification to the divisional office of the insurer but when asked to reconsider the assessment of loss, surveyor declined by giving unconvincing justification. It was in the aftermath that it was thought fit to depute the second surveyor on 03.02.2009 for re-verification of the stock register and other records.
OP referred to the opinion/comments/report of the second surveyor dated 29.06.2009. Second surveyor referred to the statement under section 44AB of the Income Tax Act formingpart of the balance sheet. Under point no. 28B, complainant had allegedly stated:
"As per the management and considering the nature of items involved it is not feasible to maintain such records (quantitative details of the principle items of raw materials, finished products and byeproducts) and accordingly quantitative details of principal items is not furnished".
OP submitted that in the absence of quantitative details in the balance sheet, it was evident that no stock register was being maintained. Contention of the OP is that the stock register for the year 2007-08 appeared to have been prepared to submit the claim. Such register could not be relied upon as the quantities of opening stock was not available with the insured. In the absence of authenticity of the opening stock quantities, the quantities of the closing stock (immediately before the fire) could not be established. For this reason, OP did not agree with the report of the first surveyor.
OP has argued that the audited balance sheet for the year 2007-08 did not show loss of stock and building. Second surveyor thus concluded that either the loss was nominal or there was no loss at all. OP thus relied upon the report of the second surveyor.
Ld. Counsel for the OP relied upon the case of the United India Insurance Co. Ltd. v. Om Printers & Stationers,II (2008) CPJ 155 (NC). In the said case the Hon'ble National Commission observed that in the absence of receipts it was difficult to accept loss in regard to machinery or any amount having been spent on repairs. A careful perusal of the said case shows that the Hon'ble National Commission also did not approve the way of surveyors being appointed one after the other. In the present case the claim has not been made on the basis of the amounts spent on the repair of the machinery. Case law is, therefore, not attracted.
OP placed reliance upon the case of Sahib Exports India v. New India Assurance Company Ltd., III (2011) CPJ 297 (NC). In the said case it was observed that the second surveyor had given adequate explanation in the stock positionon the date of incident. It was observed that the OP had not justified in resorting to the 'average clause'. The case in hand does not pertain to a resort to the 'average clause'. Reliance is also placed by the OP on the case of United India Insurance Company Ltd. and Ors.v. RoshanLalOil Mills Ltd. and Ors.,(2000) 10 Supreme Court Cases 19. It related to the controversy of spontaneous combustion resulting into fire. Contention that the incident was not covered by the policy was not accepted. The case cited is not applicable to the controversy in question. In the case of Nav Bharat International Ltd.v. National Insurance Company Ltd. and Anr. III (2011) CPJ 518 (NC),Hon'ble National Commission held that the report of the second surveyor was based on scientific costing of stocks which were damaged while report of the previous surveyor could not be said to be so scientific. It was also observed that indemnification could be claimed only to the extent of the actual loss. One could not be allowed to make capital out of tragedy. It was also held that the insurance company was required to give satisfactory reason for not accepting thereport of the first surveyor. The case law rather supports the complainant. Reliance is also placed by the OP on the case of New India Assurance Company Ltd. v. Protection Manufacturers Pvt. Ltd.,III (2010) CPJ 40 (SC). It was held in the said case that there was no material to support the theory of arson projected by M/s J Basheerand Associates. Appointment was motivated and intended to benefit the appellant insurance company. Case law is of no avail to the OP. OP has also cited the case of Durga Industries v. M/s Oriental Insurance Company Ltd., 1986-2008 CONSUMER 14332 (NS). In the said case complainant had not appeared in meetings held by the surveyor to clarify the issues. There is no such controversy in the present case. The case of Nikon Systems (P) Ltd.v. National Insurance Company Ltd., I (2011) CPJ 222 (NC) relied upon by the OP lays down that the insurance company was entitled to appoint the surveyor as the OP had given reasons for his appointment. In the present case no reasons for the appointment of the second surveyor are disclosed either in the pleadings or in the correspondence relied upon by the OP. The case law cited does not help the OP.
Sole question that arises for consideration in the present case is whether there was sufficient ground for the OP to appoint M/s R N Sharma and Company seeking its opinion in the matter. It may be mentioned here that M/s R N Sharma and Company did not act as a full fledged surveyor. It also did not visit the site. It simply gave its opinion on the basis of the documents. At the cost of repetition it may be mentioned here that while makingthe appointment of M/s R N Sharma and Company, OP had not given any reasons for its appointment or on discarding the report of the first surveyor i.e. R L Aggarwal. Complainant has heavily relied upon the case of Sri Venkateswara Syndicate v. Oriental Insurance Company Ltd. and Anr., (2009) 8 Supreme Court Cases 507. Para 22 of the judgment is relevant and the same is reproduced below:
"22......The Joint Surveyors by their reply letter dated 12.1.2000 had stated that they did not consider an investigation into the purchases necessary although they stated that the insurer may cause and/or carry out any investigation as necessary. We intend to extract only that portion of the reply, which may be relevant for the purpose of knowing why the insurer thought it fit to appoint Chartered Accountants for verification of the accounts of the insured firm :
"(2). The doubts on procurements and need for investigations (irrespective of cash or credit purchase) would arise only if the stock position as claimed did not tally with the available physical evidence. Even if purchases are proved against actual payment, the physical evidence after the incident, the single most important factor in such situations can necessitate further enquiries and investigation. That kind of a situation never arose in this particular incident as the physical evidence and the extent of damage to the building were supportive of the quantum of stocks claimed to have been held. Our local enquiries did not show any evidence other than an accidental fire. In the circumstances, we do not, from our survey and assessment point of view, consider an investigation into the purchases too essential.
Nevertheless, as insurers with privy to the contract, we note that you may cause and/or carry out any investigation as necessary."
[Emphasis is supplied by us] Reliance is also placed by the complainant on the case of HundiLal Jain Cold Storage and Ice Factory (P.) v. Oriental Insurance Company Ltd., (2005) II CPJ 17 (NC). Para 11 of the judgment being relevant in the present context is reproduced below:
"11....Further, the Insurance Company instead of settling the claim, delayed its payment on one pretext of the other by appointing Surveyors one after another and putting the Complainant in a situation where he was required to sell his properties and make the payments to the farmers whose potatoes were stored in the cold storage. This practice of appointing Surveyors one after the other, cannot be justified. The relevant norms for 'service by insurer to the insured', as stated in Denis Riley, Consequential Loss Insurance and Claim, 4thEdn., 1977, London, Sweet & Maxwell, at paragraph 389, are:
effective protection of the interest of the insured;
insurer's duty to make diligent application of mind to the terms of the policy and the relevant materials and to accept the claim of the insured unless the insured has clear evidence of the breach of a condition on the part of the insured;
onus of proof of breach of conditions by insured is on the insurer; and prompt settlement and payment of claim."
Similar was the view of the Hon'ble National Commission in the case of RavindraNathFruit Canning Industries (P.) Ltd.v. United India Insurance Co. Ltd.&Anr.,I (2006) CPJ 98 (NC). Relevant portion of the judgment is given below:
"29.....However, the learned Counsel for the Insurance Company relied upon the decision rendered by the Apex Court in National Insurance Co. Ltd. Vs. Harjeet Rice Mills, (2005) 6 SCC 45. In that case, the insured had taken an insurance policy from the Insurance Company for the stocks in the rice mill. The insured claimed compensation on the ground of damage by fire for which it approached the State Commission. The Insurance Company raised the contention that it has no jurisdiction and also pointed out that further investigation was necessary. One of the main defences of the Insurance Company was that fire was not accidental and the Insurance Company has no liability under the policy. It was pleaded by the insured that on the basis of police investigation, the surveyor has reported that fire was caused by short circuit. As against that subsequent police investigation and the investigation by the DSP, it was reported that earlier investigation was perfunctory and that the cause of fire has to be properly investigated and fresh investigation was called for. The insurer engaged a private investigator to investigate and that agency reported that fire might not have been caused by short circuit and that it could have been arson or deliberate attempt to make the insurance claim. In the background of the said facts, the Court observed that the State Commission ought to have given an opportunity to the Insurance Company to prove the investigation report and in establishing that the claim was a fraud on the company. The Court also observed that the State Commission did not apply its mind to the aspect highlighted that the first police investigation was reported to be perfunctory and a fresh proper investigation had been recommended. In this set of circumstances, the matter was remanded for fresh inquiry and decision by the State Commission.
30......In the present case, the situation is altogether different. The first Surveyor was sent by the Insurance Company on the spot during the fire itself. He has submitted his report as stated hereinafter. Similarly, second surveyor was also appointed to assess the loss and he visited the site after one day of the accidental fire. Both have reported that the cause of fire was short circuit. They have submitted exhaustive survey reports after taking into consideration the books of accounts and other relevant documentary evidence. Thereafter, the insurance company, not satisfied with the said survey reports, appointed an investigator. After a detailed investigation he also arrived at the conclusion that fire was due to electric short circuit. He has also verified the books of accounts, recorded some statements and assessed the loss. Despite these three reports, the insurance company selected and appointed one retired Additional Inspector General, (Prisons), as Investigator, on 2.3.1998, i.e. after a lapse of around 9 months, who has submitted his report, it appears, as desired by the insurance company. And, therefore, in our view, this attitude of the insurance company is totally frustrating and unjustifiable.
Now, we would now refer to the survey and investigation reports:
(ii) Survey & Investigation Reports:
A. Preliminary Survey Report of Gunasekhar, dated 12.9.1997:"
Coming to the case in hand though the stock register for the year 2007-08 was not produced before the first surveyor, complainant relied upon the balance sheet for the period from 01.04.2007 to 31.03.2008. It shows an amount of Rs. 89,11,733/- appearing against the loans and advances. Group summary of the 'loan and advance' attached to the balance sheet shows Rs. 44,63,003/- received against the insurance claim. Statement of loans and advances also shows the amount of Rs. 44,63,003/- as refundable. Insurance claim refundable under the head 'building' is shown as Rs. 9,68,115/-. Likewise under the head 'fire' surveyor equipment and stock Rs. 20,374/- and Rs. 34,74,514/- respectively appear. First surveyor, therefore, based his findings on this document. Complainant also submitted copies of the stock statement furnished by it to Punjab National Bank for the period 2006-07 and from 01.04.2007 to 31.09.2007. Complainant also filed audited bank balance sheet.
Fire brigade department assessed the loss to the tune of Rs. 37,00,000/-. OP did not raise any objection to the same at any point of time.
In the absence of any reasons given by the OP for appointment of the second surveyor for opinion, this Commission is left with no option but to discard the opinion of the second surveyor. Complainant is, therefore, entitled to the amount of loss as assessed by the first surveyor. OP is, therefore, directed to pay to the complainant an amount of Rs. 35,64,749/-alongwith interest @ 12% p.a. w.e.f. the date of repudiation of the claim till the date of its realization. The aforesaid payment shall be made by the OP to the complainant within a period of sixty days from today failing which the amount shall carry interest @ 18% p.a. Complaint is accordingly disposed of.
Copy of the orders be made available to the parties free of costs as per rules and thereafter the file be consigned to Records.
(N P KAUSHIK) MEMBER (JUDICIAL)