State Consumer Disputes Redressal Commission
Rinku Sharma vs New India Assurance Co. Ltd. on 5 January, 2009
IN THE STATE COMMISSION:DELHI IN THE STATE COMMISSION: DELHI (Constituted under Section 9 of The Consumer Protection Act, 1986) Date of Decision: 5th January, 2009 Complaint Case No. C-52/2006 Rinku Sharma, - Complainant Sole Proprietor, Through Jai Durga Industries, Ms. Deepa Chacko, 106-107, Old Housing Board Colony, Advocate. Panipart 132103 Haryana. Versus New India Assurance Co. Ltd. -Opposite Party Through Its Divisional Manager, Through C-30, Community Centre, Mr. M.K. Kapoor, Phase-I, Naraina, New Delhi 110028. Advocate. CORAM: JUSTICE J.D. KAPOOR, PRESIDENT MS. RUMNITA MITTAL, MEMBER
1. Whether Reporters of local newspapers be allowed to see the judgment?
2. To be referred to the Reporter or not?
JUSTICE J.D. KAPOOR, PRESIDENT (ORAL) The complainant in the present complaint as per allegations is the sole proprietor of a company named Jai Durga Industries engaged in the business of carded wool, carpet yarn, woolen yarn and other handloom products etc. The complainant had taken a Fire Insurance Policy No. 320200/11/02/0459 valid for the period from 31-03-2003 to 30-03-2004 for a sum of Rs. 50,00,000/- from the Opposite Party (in short O.P) New India Assurance Co. Ltd. covering the stock of carded wool, woolen yarn, blankets, table mats etc. stocked at the business premises of the insured at E-45, Industrial Area, Panipat, against fire and allied risks. The requisite premium of Rs. 15,750/- was paid by the complainant and accepted by the O.P-Insurance Company.
2. That on 16-05-2003 a fire broke out in the premises of the complainant destroying the entire stocks and also damaging the building of the premises. The fire brigade was informed who controlled the fire and the local police was also informed of the incident. Intimation of the fire was also given to the O.P who appointed M/s. Alka Gupta & Associates as Surveyors to inspect and assess the loss. On 17-05-2003 itself the Surveyor visited the premises and inspected the premises and took photographs of the godown and burnt stock. All the requisite documents as required by the Surveyor were supplied by the complainant including the audited Balance Sheet as on 31-03-2003. However, on 21-05-2003 another Surveyor Mr. R.G. Verma, deputed by the OP visited the premises of the complainant without even informing the complaint about the reason for appointing the second Surveyor. However, the complainant again supplied all the documents as required by the second Surveyor. To the utter shock of the complainant, the OP deputed yet another Surveyor, i.e. the third Surveyor M/s. R.N. Sharma & Co. to whom apart from other documents the audited accounts as on the date of fire, i.e. 16-05-2003 were also supplied by the complainant on demand. On 23-05-2003 both the first and second Surveyors carried out a joint survey.
3. That thereafter Mr. R.G. Verma, Surveyor had himself verified the purchase bills of goods from many parties and found that the bills were genuine and after taking all the documents like accounts, balance sheet, purchase bills, sales bills, cash book etc. submitted his report dated 26-05-2003 a copy of which was provided to the complainant on demand, inter alia, describing the incident as under:-
3.4 Three fire engines arrived at about 11.00 pm and started operation of extinguishing the fire. The fire was so severe that the fire engines had to go for re- filling several times. By about 4.30 am the fire was more or less controlled.
3.5 The stocks of carded wool, wool yarn and rugs continued to bun.
There were flames even at the time of our investigation on 21-05-2003.
3.6 Almost whole of the godown building, raw material and finished goods were gutted in fire.
4. As per the allegations of the complainant the said Surveyor also reported that each and every entry in the purchase bills, sales bills with ledger, cash book, bank statement, Parites Ledger, and raw and finished material were found correct and the details were also verified from the Sales Tax Officer.
The Surveyor Mr. R.G. Verma in his report dated 26-05-2003 gave his findings that:-
i) It is a clear case of spread of fire from one godown to another.
ii) The cause of fire is electric short circuit.
iii) The evidence available points the fire to be accidental in nature.
iv) The cause of loss is covered in the policy and the claim falls within the scope of fire and special perils policy.
v) Financial health of insured was good.
vi) We have verified relevant books of accounts concerning purchase/sales/payments and found them to be satisfactory.
5. The grievance of the complainant is that even after the report submitted by the second Surveyor as mentioned above, the O.P Insurance Company asked M/s. RN Sharma and Co. to conduct yet another third survey and vide its letter dated 20-04-2004 the OP-Company has repudiated the claim of the complainant, though the complainant was entitled for indemnification of loss amounting to Rs. 47,63,174.00.
6. On the above premises the complainant has claimed a sum of Rs. 47,63,174.00 towards loss suffered in the fire alongwith interest @18% from the date of filing of the complaint with Rs. 1.00 Lac as compensation for harassment and mental agony, as well as, cost of litigation of Rs. 30,000/-
7. However, in its defence, the OP Insurance Company while admitting the policy covering damages to the tune of Rs. 50.00 Lakhs has contended that intimation to the fire brigade was given on 17-05-2003 and the local police was informed on 19-05-2003 exactly after three days of the occurrence of fire on 17-05-2003 at 23.00 hrs. As per normal practice after the visit of the Surveyor Alka Gupta the OP had appointed RG Verma Chartered Accountant to thoroughly investigate the authenticity of the circumstances under which the fire had occurred and that R.G. Verma had nothing to do with the assessment of loss which was primarily the job of independent Surveyor & Assessor and thus there was no question of appointing a second Surveyor. Further that after the spot survey RN Sharma & Co was appointed to survey and assess the loss keeping in view the spot survey report and the terms and conditions of the policy who had submitted their report on 31-03-2004 stating that the existence of the firm, godown, goods and business dealings and records were doubtful and no clear cut cause of fire could be established and manipulation of fire cannot be ruled out and the fire could not have occurred due to electric short circuit. However, the exact cause of fire could not be ascertained but the possibility of manipulation is not ruled out. The delay in informing the police after three days of the incident which was ostensibly an attempt by the complainant to delay or avoid the investigation by local police has not been explained. The Fire Report by the Fire Department bearing No. 109 describing the extent of fire has been marked as Medium. The documentary evidence to support the claims of loss are not genuine. And the manner in which the so-called suppliers of the complainant had mentioned in their statements to the investigator that once the claim of the complainant is settled they would get their outstanding amounts reflect that either they are a party and partner with the insured in sharing the insurance proceeds or they have actually not sold anything to the insured and they seemed to be relaxed as no financial stakes were involved. Considering all the above facts the claim was repudiated vide letter dated 20-04-2004.
8. The complainant has filed its rejoinder and affidavit in evidence reiterating its claims and contentions against the OP Insurance Company and refuting the averments raised by the O.P. in their written statement. The O.P. has also filed its affidavit in evidence in support of their contention. The same are on record.
9. We have accorded careful consideration to the rival claims and contention of the parties and have also perused the documents on record. At the outset it may be mentioned that the Surveyor M/s R.N. Sharma & Co. assessed the loss to the tune of Rs. 24,78,000/-
though the report of the surveyor was not furnished to the complainant. What was conveyed to the complainant was repudiation letter. The repudiation letter dated 20th April 2004 spells out the following grounds for rejecting the claim:-
(i) You have failed to establish the cause of fire as stated by you.
(ii) The supporting documents you have produced, are found to be fabricated and as such we are unable to honour the liability as per condition No. 1, 6 & 8 of Standard Fire and Special Perils Insurance Cover Policy which clearly states that Condition No.1 : This policy shall be voidable in the event of misrepresentation, misdescription or non-disclosure of any material particular.
Condition No. 6 : On the happening of any loss or damage the insured shall forthwith give notice thereof to the Company and shall within 15 days after the loss or damage, or such further time as the company may in writing allow in that behalf, deliver to the Company.
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 occasional by the willful act, or with the connivance of the insured, all benefits under the policy shall be forfeited.
10. As is apparent, the main reasons for repudiation of the claim were firstly that the complainant failed to establish the cause of fire as stated by it; secondly the supporting documents produced by the complainant were found to be fabricated. Shri R.G. Verma, who was a Chartered Accountant was appointed to investigate the veracity of the version of the complainant as to the cause of fire. He verified from the Police also with regard to the report lodged by the complainant as well as from the Fire Brigade. His conclusions in this regard are as under:-
5. ABOUT POLICE REPORT It was reported to Police Station, Kachcha Camp, Panipat, by Mr. Rinku Sharma, Proprietor of M/s Jai Durga Industries on 1`9-05-2003 at 6.15 p.m. that the godown of M/s Jai Durga Industries situated E-45, Industrial Area, Panipat caught fire on 16-05-2003 at 10.30 P.M. in the night. The cause of fire was short circuit. The Despondent was informed over the phone by his neighbour who also informed the Fire Brigade. The Fire Brigade arrived in time and were able to control fire after labouring for 4-5 hours.
The fire had spread to the adjoining godowns of M/s Tarang Enterprises and M/s Maa Jagdamba Traders.
The entire stock therein was burnt to ashes. The stock consisted of carded wool, thread, blankets, table mats, fabric bags, carpets, papers, bed sheets, mat etc. the building was also badly damaged. Nobody is responsible for the accident. The cause of accident is short circuit.
5.1 ABOUT FIRE BREGADE REPORT As per Fire Brigade report No. 109 incident of fire had taken place on 16-05-2003 as per Mr. Satya Narayan, Officer Incharge. M/s Maa Jagdamba Traders, M/s Jai Durga Industries and M/s Tarang Enterprises at #-45, Industrial Area, Panipat were involved in the fire. The time of call was 11.00 P.M. and time of arrival at incident was 11.04 P.M. The size of the godowns were 60 x 20 feet for M/s Tarang Enterprises.
60 x 30 feet for M/s Jai Durga Industries 30 x 30 feet for M/s Maa Jagdamba Traders.
The cause of fire is mentioned as electric sparking. The items affected were carding wool, synthetic, blankets, yarn, carpet paper, dairies, table mat, shawl etc. Time and date of leaving fire was 02:15 A.M. on 17-05-2003 and total time employed was 3 hours 30 minutes.
11. Once a report was lodged with the police, the OP-Insurance Company was, though entitled to appoint investigator to look into the circumstances but it was final report of the Police which was statutory authority to enquire into the incident which has to be relied and acted upon. A person who has been a Chartered Accountant was not fully equipped to investigate into such aspect. In the instant case even the Fire Brigade report was categorically examined by the aforesaid investigator.
12. If any person misrepresents or misdescribes any occurrence like the fire or theft to the police and the Insurance Company gets equipped with details of such misrepresentation or misdescription it should always bring it to the notice of the police so as to facilitate the police to file final report u/s 173 of the Cr. P.C. as it is the police who has the control for converting any report into FIR or not.
FIR only sets the machinery in to action to investigate.
13. Meaning of F.I.R. itself is first information report. Whenever any person goes to the police station and informs about any occurrence or any offence for the first time to the police and if his version is recorded by the police, may be in any form, it attains the character of F.I.R. for the purpose of insurance claim.
14. In the instant case the report was lodged on the day of occurrence but the police did not convert the information into an F.I.R. and it was only on an application moved by the complainant on 19-05-2003 that the report was converted into F.I.R. and investigation was conducted.
15. So far as insurance contract is concerned, the report with the police without its being converted into FIR is sufficient for insurance claim. It is misconceived notion that unless and until insured files the FIR, he is not entitled for any claim. For any event or occurrence of criminal offence no parallel investigation can be allowed. Police is the only statutory authority to investigate into criminal offence as prescribed by the Code of Criminal Procedure. No other authority can usurp this power and function. The Insurance Company has to present its case before the police after it finds that a false report has been lodged or the information has been fabricated or forged or misrepresented or misdescribed. The report of such an investigator cannot have precedence over the final report by the police or even by the Fire Brigade. The report of the Fire Brigade establishes the taking place of the fire and also the cause thereof and the steps taken by them.
16. So far as police is concerned, it goes into the investigational aspect of a criminal offence. It is only in those cases where no report is lodged with the police of any offence or occurrence that the Insurance Company may appoint its investigator to look into the veracity of version of the insured.
17. Another clause of the contract of insurance was condition No.8 i.e. If the claim be in any respect found fraudulent, or if any declaration is found false or used in support thereof if any fraudulent means or devices are used by the insured or anyone 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 the contract are not available and shall be forfeited. In the instant case the Surveyor appointed by the OP-Insurance Company itself assessed the loss to the tune of Rs. 24,78,000/- meaning thereby all the documents produced by the complainant in support of the loss were neither found fabricated nor the claim was found fraudulent nor was any false declaration made or used in support thereof nor was loss or damages occasioned by the willful act or with the connivance of the insured.
18. Surveyors are appointed by the Insurance Companies in whose integrity and competence they repose faith. Ordinarily reports of the loss assessed by the surveyors should be accepted unless it suffers from the element of misconduct or malafide or extraneous consideration or against record. However, if the Insurance Company finds material deficiencies in the report of the Surveyor it may appoint another surveyor for verifying the loss. But in the instant case no such surveyor was appointed so far as assessment of loss was concerned.
19. However, the OP has tried to take advantage of certain confusing remarks of the Surveyor who assessed the loss as spelt out in para 8 and 9 of item No.8 (page 149) - Analysis of Books of Account. Let us assume that there were some deficiencies in these records but the OP was not entitled to reject the report of the Surveyor without providing any reason or without appointing another Surveyor to get these deficiencies or confusions or contradictions rectified. In the instant case no such step was taken by the OP-Company.
20. It is contended by the learned counsel for the OP that the insured had no sound financial condition as it did not justify that the complainant had done such a huge business within two months from t he start of business. The complainant started a fresh business on 14th March 2003 whereas the fire broke out on 16th May 2003 and since it was a new business and most of business transactions were cash transactions it does not stand to reason that the suppliers had given such huge credit and complainant had assured suppliers that they will receive their amount of sales once the insured gets its insurance claim reflect that they are hand in glove with the insured in sharing the insurance proceeds and they have actually not sold any thing to the insured.
Further that the complainant started the business with Rs. 1.45 lacs and it is not convincing that such a huge business could have been started and the suppliers could not give any supportive documents as evidence that the goods have actually been delivered to the insured.
21. OP cannot take advantage of aforesaid circumstances as it was for the supplier to see whether they should give huge credit to the complainant or not. No supplier would take such risk of giving goods without any security or even otherwise being not assured about the credibility of the person concerned. The investigator appointed by the OP verified all the stock register, Sales Tax returns and also fortified from the cash books as per the report of the Chartered Accountant. Moreover, if at all there were any contradictions it was for the suppliers qua the complainant and not qua the OP with regard to the transactions.
22. However, the following chronological events make out a case of deficiency in service on the part of the OP-Company in rejecting the claim of the complainant particularly as to the amount of loss assessed by their own Surveyor.
23. On 16th May 2003 the fire broke out in the godown and report was lodged with the Police on the same day. On 17th May 2003 intimation was given to the OP-Insurance Company and on that day itself Fire Brigade came and extinguished the fire and found the cause of fire short circuit and report was registered at the Fire Station. On 19th May 2003 report was lodged by the police after complainant moved an application in which cause of fire was given to be a short circuit. On 17th May 2003 itself the OP-Insurance Company appointed M/s Alka & Associates as spot surveyors and she visited the site on the same day and found heaps of fire still in the godown and smoke was coming out of burnt material and the G.I. sheet of the roof had fallen down. Balance sheet for the year ending 31-03-2003 and the income tax returns were given by the complainant. It was only on 4th February 2004 i.e. after inordinately long delay the OP appointed investigator R.G. Verma, Chartered Accountant. He not only verified the report lodged with the police but also incident register of the Fire Brigade and the incident of fire was found to be correct. On 25th July 2003 the test report of Meritorious Lab was obtained. As per report the fibre was tested and found to be highly flammable.
Stock verification was done by the investigator. He verified all the sale bills, sales ledger, stock records/registers, sales tax return etc. He also verified from the suppliers who confirmed selling the goods to the complainant. The investigator also visited the purchaser and verified the cash ledger, balance sheet of suppliers firms. Final survey report of R.N. Sharma & Co. was submitted on 31-03-2004. He worked out loss on the basis of burnt material to the tune of Rs. 24,78,000/-
less Rs. 10,000/- towards excess.
24. The cumulative effect of the aforesaid circumstances make out a case of deficiency in service and in our view the complainant has not satisfied as to the actual loss being Rs. 47,63,174/- as the amount of loss assessed by the Surveyor was verified from various documents produced by the complainant and documents supplied by the suppliers as well as verified from the sale bills, ledger, balance sheet, income tax return etc..
25. In the result, we allow the complaint in the following terms:-
(i) OP shall pay Rs. 24,68,000/- towards the actual loss assessed by the surveyor.
(ii) OP shall pay Rs. 2,00,000/- as compensation for mental agony, harassment and other losses suffered by the complainant.
(iii) OP shall pay Rs. 10,000/- as cost of litigation.
26. Aforesaid payment shall be made within two months from the date of receipt of this order.
27. Complaint is disposed of in aforesaid terms.
28. A copy of the order as per statutory requirements be forwarded to the parties free of charge and thereafter the file be cosigned to Record Room.
29. Announced on 5th January 2009.
(Justice J.D. Kapoor) President (Rumnita Mittal) Member jj