National Consumer Disputes Redressal
Kendriya Khadi Vastragar vs United India Insurance Co. Ltd. on 3 December, 2015
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 26 OF 2007 1. KENDRIYA KHADI VASTRAGAR MD,MADHYA PRADESH KHADI GRAMODYOG BOARD 74, ARERA HILLS Madhya Pradesh-462011 BHOPAL ...........Complainant(s) Versus 1. UNITED INDIA INSURANCE CO. LTD. REGIONAL OFFICE-2 nd FLOOR BLOCK-2, PARYAWAS BHAWAN ARERA HILLS JAIL ROAD, Madhya Pradesh-462011 BHOPAL ...........Opp.Party(s)
BEFORE: HON'BLE MR. JUSTICE V.K. JAIN, PRESIDING MEMBER
For the Complainant : Mr. Prashanto Chandra Sen, Advocate
Mr. Shivanshu Singh, Advocate For the Opp.Party : Ms. Sonia Malhotra, Advocate
Dated : 03 Dec 2015 ORDER
HON'BLE MR. JUSTICE V.K. JAIN, PRESIDING MEMBER (ORAL)
The complainant before us is a unit of Madhya Pradesh Khadi Gramodyog Board, which is a Government organization. The complainant had obtained a Standard Fire and Special Perils Policy from the opposite party to the extent of Rs.1,28,00,000/- in respect of its godown at Sector 2C, Industrial Estate, Govindpura, Bhopal, for the period from 29.12.2002 to 28.12.2003. A fire broke out in the premises of the complainant in the night intervening 5th/6th July 2003, damaging the goods and material stored in the gown. According to the complainant, the total value of the stock kept in the godown at that time was Rs.1,34,68,382.53. On intimation being given to the Insurance Co., a surveyor was appointed to inspect the premises and make an assessment of the loss suffered by the complainant. The surveyor assessed the loss to the complainant at Rs.35,46,328/-. No payment however, was made to the complainant. Being aggrieved, the complainant is before this Commission seeking a payment of Rs.11031219.57 along with interest and compensation and cost of litigation, etc.
2. The complaint has been resisted by the opposite party inter alia on the ground that that the fire broke out as a result of deliberate act of some individuals who were entrusted to maintain the record of the complainant and the complainant had failed to take reasonable steps to safeguard the insured property against any loss or damage, it having posted a suspended employee Mr. Padma Murthy at the store where the fire allegedly broke out.
3. Vide order dated 14.9.2015, the complainant was directed to file the audit report and audit certificate issued to it by the Office of Accountant General of M.P. for the year 2003-04, along with an affidavit disclosing therein the value as per the aforesaid audit report and audit certificate of the stock which got destroyed/damaged in the fire that occurred on 5.7.2003. The complainant filed affidavit of its authorized representative Mr. Ajeet Kumar Prajapati stating therein that the value of the stock as on 31.3.2003 was Rs.119.29 lakhs and after deducting the wholesale commission which the complainant was charging, the value of the said stock came to Rs.104.32 lakhs. It was further stated in the affidavit that the figures of stock in the balance sheet were based on the actual physical stock verification by the Dy. Director of the Board. A copy of the balance sheet for the year 2002-03 was filed as Annexure-1 to the affidavit. He further stated that the above value of the stock as on 31.3.2003 had also been affirmed by the audit report of the Principal Accountant General (Civil and Commercial) Madhya Pradesh dated 17.1.2006 which was conducted for the period April 1998 to March 2005. A copy of the said report is Annexure-2 to the affidavit. He further stated in the affidavit that the value of the stock in the godown after the fire was arrived at Rs.108.53 lakhs, on verification of the stock carried out by the Stock Verification Commission formed by the Head Office of the complainant under the supervision of a Dy. Director and the surveyor was also present for the said verification. The Annexure-2 to the above referred affidavit clearly shows that the audit report was submitted by the Office of the Principal Accountant General (Civil and Commercial Audit) Madhya Pradesh to the complainant.
4. Since the above affidavit did not disclose the sales and purchase made between 1.6.2003 to 5.7.2003, the complainant was directed to file an affidavit along with supporting documents disclosing the value of the stock which was sold between 1.6.2003 to 4.7.2003. The complainant filed another affidavit dated 28.9.2015 stating therein that they had already submitted the details of the stock to the surveyor which included the sale/purchase made between 1.6.2003 to 4.7.2003. It was also stated in the said affidavit that sale of Rs.400216.50 was made between 1.4.2003 to 4.7.2003.
5. Since the complainant is a Government organization and its accounts book have since been audited, there is no reason to disbelieve the accounts book maintained by the complainant and accordingly I have no hesitation in accepting the case of the complainant that the value of the stock in the godown at the time of fire was Rs.108.53 lakhs. This according to the complainant was also the valuation accepted by the surveyor.
6. During the course of hearing my attention was drawn to Annexure-J15 to the report of the surveyor which clearly shows that the total value of the stock in the godown at the time the fire broke out was Rs.1,08,53,002.88 out of which, stock worth Rs.26,72,372.61 remained unaffected by the fire, stock worth Rs.8,132,450.27 was damaged due to smoke/water whereas the stock worth Rs.48,180/- was badly damaged.
7. A perusal of the assessment of loss made by the surveyor shows that as per physical inventory which was conducted in his presence, by a tem appointed by the Board, the book value of the stock was worked out at Rs.1,08,53,002.88 as detailed in Annexure-J 15 to his report. He added a sum of Rs.5 lakhs to the aforesaid figure on the ground that some stock which had been badly burnt could not have been recorded thereby raising the total value to be Rs.1,13,53,002.88. After deducting the value of the undamaged stock, which was found to be Rs.26,72,372.61, the book value of the remaining stock was worked out at Rs.86,80,630.27. Since the above referred valuation included commission, which the complainant was adding on the purchase price, the net figure was arrived by the surveyor at Rs.73,31,313.10.
8. There is no dispute between the parties as regards the book value of the stock which was affected due to fire. The only disputed question in this regard is as to how much deduction should be made from the aforesaid amount on account of some of the stock being old, dirty and damaged stock. The surveyor noted in this regard that the stock verification list of 2001-02 and 2002-03 had remarks like (1) cut and torn, (2) Old and Dirty, (3) Old. Dirty. Cut and torn (4) Old Damaged (5) Spotted (6) _______ years old & Dirty (7) Due to cut and torn. Dirty. Need price reduction at _____% (8) Effected / damaged due to insects. The surveyor noted that another government organization, namely, M.P. State Textile Corporation Ltd. which had closed down its shops known as Avanti, had disposed of its stock in the market at a price which on an average basis worked out to be 17.93%. He noted that the complainant had been purchasing and selling some stock every year and, therefore, the entire stock could not be said to be old and damaged. He noted that as per the statement submitted by the complainant to its bank during March 2003 to May 2003, the percentage of the fresh stock was 41.59 whereas the percentage of the old stock was 58.49. Taking the value of the entire damaged stock at Rs.73,31,313.10, he worked out the value of the fresh stock at Rs.30,43,228/-, the said amount being 41.51% of Rs.73,31,313.10. However, only 17.95% of the book value of the old/dead stock was taken by him as the prevailing value of the said stock. During the course of hearing before me, there was no dispute that the value of the fresh stock out of the damaged stock may be taken at Rs.30,43,228/- as per the assessment made by the surveyor. The dispute was only with respect to value of the old/dead stock out of the stock which had got affected by the fire. The surveyor, as noted earlier, took the value of the said old/dead stock at 17.95% of its book value on the ground that Avanti sold its stock at about that much percentage of the value of the stock when it decided to close its shops. In my view, the surveyor was not justified in taking only 17.95% of the book value of the old/dead stock as its value at the time the fire broke out. It has to be kept in mind that the acquisition cost of the goods also increases with the passage of time and, therefore, if the goods were purchased at say price 'X' in the year 2000, their acquisition cost in the year 2003 will be 'X+' and not 'X'. Moreover, there is no material on record to show that the dead/old stock which were stored in the godown of the complainant was in the same condition as the stock which Avanti had sold while closing its shops. More importantly, the sale made by Avanti was a clearance sale on account of its decision to close its shops whereas the complainant was not seeking to sell its old/dead stock by way of a clearance sale. But for the fire, the complainant would have tried to sell the old/damaged stock at its own terms, in due course. Therefore, the surveyor was not justified in taking 17.5% of the book value of the said stock as its value on the date the loss was caused. The most important thing in this regard is that not the whole of the old/dead stock was damaged. There is no indication in the report of the surveyor as to the percentage of the damaged stock in the old/dead stock. Though damaged stock will fetch much lesser price if sold in the market the same cannot be said about the old but undamaged stock. Considering all the facts and circumstances of the case, in my opinion, a deduction of 20% from the book value of the old/dead stock would be justified for the purpose of working out the loss to the complainant. After deducting 20% out of Rs.42,88,085/- which was the book value of the old/dead stock, the balance comes to Rs.34,30,468/-.The value of the damaged stock, therefore, works out to be Rs.64,73,696/- (Rs.30,43,228/- + Rs.34,30,468/-).
9. The surveyor has made a deduction of Rs.3 lakhs on account of salvage value of the damaged stock. I find no reason to interfere with the made by the surveyor in this regard. The surveyor allowed salvaging charges amounting to Rs.22,854/- to the complainant. The aforesaid figure does not call for any interference. The surveyor also allowed Rs.6,435/- for halogen lamps and Rs.5,025/- for the pedestal fans, etc. which were damaged in fire. He also allowed a sum of Rs.8,275/- towards rent for waterproof tents and a sum of Rs.800/- towards video shooting. The total salvaging expenses, therefore, worked out by him at Rs.43,389/-. The aforesaid figure does not call for any interference. The surveyor has also adjusted excess at Rs.10,000/- as per the terms of the policy. That amount is liable to be deduced from the amount found payable to the complainant.
10. The principal amount payable to the complainant, therefore, will be as under:-
(i)
Cost of the fresh stock damaged/destroyed in fire
=
Rs.30,43,228/-
(ii) Cost of the old/damaged stock, after making a deduction of 20% from the said cost = Rs.34,30,468/-
(iii) Salvaging expenses Less value of salvage (-) Less policy excess (-) = = = Rs.43,389/-
Rs.3,00,000/-
Rs.10,000/-
Net amount payable to the complainant = Rs.62,07,085/-
11. The complaint is, therefore, disposed of with a direction to the opposite party to pay the aforesaid amount of Rs.62,07,085/- to the complainant, within four weeks, along with simple interest at the rate of 9% p.a. from the date of complaint, till the date of payment. No order as to costs.
......................J V.K. JAIN PRESIDING MEMBER