National Consumer Disputes Redressal
Nikon Systems (P) Limited vs National Insurance Co. Ltd. on 1 February, 2011
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI ORIGINAL PETITION NO. 241 OF 2002 1.Nikon Systems (P) Limited, D-47-48, Sector 7, Noida (U.P) Complainant Versus National Insurance Co. Ltd., Through its Branch Manager, E/13, Hauz Khas Market, New Delhi. Opposite Party BEFORE : HONBLE MR. JUSTICE R.C. JAIN, PRESIDING MEMBER HONBLE MR. S.K. NAIK, MEMBER For the Complainant(s) : Mr. Jeevan Prakash, Advocate For the Opposite Party(s) : Mr. Yogesh Malhotra, Advocate PRONOUNCED ON:_01.02.2011 JUSTICE R.C. JAIN, PRESIDING MEMBER Alleging deficiency in service on the part of the opposite party National Insurance Co. Ltd. in not settling its insurance claim under a Fire Insurance Policy C, M/s Nikon System Pvt. Ltd. (complainant) has filed the present complaint claiming a sum of Rs.34,40,486/- towards the indemnification of the loss as assessed by the Surveyor alongwith interest @ 24% per annum from 13.10.1999, i.e. three months after the incidence of fire till its payment and a sum of Rs.2 lakh towards mental torture, agony, harassment, besides the cost of litigation. 2. We may first briefly notice the undisputable facts. The complainant, a private limited company, is engaged in the business of export of home furnishings. It has its office and works at D-47-48, Sector 7, Noida (U.P.) and in order to cover the risk by certain perils, in particular the peril of fire, the complainant had taken a Fire Insurance Policy C in the sum of Rs.48,50,000/- for the period from 11.09.1998 to 10.09.1999 with the coverage of building, fixtures, fittings, furniture, plant & machinery, stocks of textile fabrics, polyfil, cotton made-ups and other items of the stock at the above-named factory of the complainant. It is alleged that on 13.7.1999, at about 4:30AM, fire broke out in the factory of the complainant and despite the fire brigade and police having been informed, the fire spread and completely damaged the stocks of raw materials, finished as well as semi-finished goods, fixtures, furniture, fittings, plant & machinery and the building. According to the complainant, it suffered a huge loss to the tune of Rs.45 lakh on that count. Insurance Company being informed of the said loss in the fire incident appointed a surveyor, Mr. Atul Gupta, FCA (Surveyor & Loss Adjuster) who conducted the preliminary survey between 15.7.1999 to 17.7.1999 and thereafter sought certain details from the complainant which were duly provided. On a consideration of the entire material, the above-named surveyor assessed the net loss at Rs.34,40,486/- which was acceptable to the complainant but the Insurance Company did not make the payment and the complainant was compelled to file the present complaint. 3. It would appear that during the pendency of the present complaint and for certain reasons to be noted hereinafter, the Insurance Company appointed another surveyor, namely, M/s Atul Kapur & Co., who on consideration of the report of the previous surveyor, Mr. Atul Gupta and taking into account several other factors as also the report of a Chartered Accountant, however, assessed the loss at a lower value, viz. Rs.22,61,606/-. It is not in dispute that Rs.22 lakh stands paid to the complainant during the pendency of the complaint, i.e., Rs.10 lakh on 15.1.2003 and Rs.12 lakh on 16.7.2004 as duly recorded in the orders dated 18.12.2002 & 28.5.2004 respectively. In this way, the claim of the complainant stands partially satisfied and the present complaint is now restricted only to the balance amount and compensation for the delay in settling the claim. 4. The question, answer to which will decide the entitlement of the balance amount claimed by the complainant is as to whether the Insurance Company was justified in appointing the second surveyor, it having already appointed Mr. Atul Gupta who had assessed the loss and if so, which of the reports of the two surveyors should be accepted and will form the correct basis for deciding the insurance claim of the complainant. 5. We have heard Mr. Jeevan Prakash, Advocate, learned counsel representing the complainant and Mr. Yogesh Malhotra, Advocate for the Insurance Company and have given our thoughtful consideration to their respective submissions, besides carefully going through the entire record. Learned counsel for the complainant has gravelly criticized the action of the Insurance Company in appointing the second surveyor, M/s Atul Kapur & Co. as arbitrary, malafide and tainted with an oblique motive to obtain a report favourable to them so that the net assessment of loss as assessed by the first surveyor could be substantially reduced. On the other hand, Mr. Yogesh Malhotra has strongly contended that the appointment of the second surveyor was necessitated in the facts and circumstances of the case because their exist several discrepancies in the report of the first surveyor, Mr. Atul Gupta and, therefore, he was asked to clarify the same before the appointment of the second surveyor. The Insurance Company in the first instance sought clarifications from the first surveyor in regard to the following discrepancies:- 1. The assessment has been done by relying upon the stock shown in the balance sheet as at 31.3.99 but this balance sheet had been finalized about 2 months after the loss. Thus the figures of stock shown therein need re-verification as they could have been manipulated. This is particularly important since the stock shown on this date was disproportionately higher than the earlier trend which was as under 31.3.1997 31.3.1998 31.3.1999 Stock value (in lacs) 7.89 9.95 44.43 2. Opening stock is assumed to be in the insureds factory. Stock lying with fabricators as on 31.3.99, not reduced their claim amount. 3. Copies of purchase bill and fabricator register not available. 4. Income tax returns, tax audit report, notice to income tax returns etc. not available. 5. All the stocks received from the fabricators are assumed to be on the first floor and it seems that packing of the material and all other items associated with fabrication are on the ground floor. Whereas as per the assessment drawn up, all the stock received from the fabricator are assumed to be on first floor where the fire occurred. In view of the substantial damaged caused by the fire and also the presence of fire brigade personnel, Police report should have been made available. Hence this matter may be thoroughly investigated. 6. No newspaper cutting available to substantiate the occurrence of loss. 7. Surveyor has not taken into account the stock lying with the fabricator as on date of loss. The surveyor has valued the finished and semi-finished goods clearly. Whereas we feel that the valuation of semi finished goods and finished goods should have done separately. 8. Details of stock valuation for the period 31.3.1998 not enclosed as Annexure to the balance sheet Style wise quantity allowed do not tally with the quantity in stock. As per the documents attached with the report e.g. Balance Valued as Linda 8000 9500 9. Building rate also needs to be reconfirmed. 10. Photographs of CPU/Fax and AC not provided by the surveyor as proof of loss. 11. The Process Chart has been made available but it does not show which work was done on which floor. 12. The cost of electrical items as given in question at 18.7.99 of Electrician, Mewa Ram and Noor Electricals is very high. It needs to be clarified. 13. The cost of electrical items as given in quotation at 18.7.99 of Electrician, Mewa Ram and Noor Electricals is very high. It needs to be clarified. 6. It would appear that after/ on receipt of the said communication, the first surveyor called upon the complainant to furnish certain information and documents which were not furnished by the complainant. It would further appear that getting no satisfactory response on the above aspects, the Insurance Company appointed the second surveyor, M/s Atul Kapur & Co., who submitted a report dated 10.10.2002 making the following observations and re-assessment of the loss as under:- 2.0 OUR OBSERVATIONS 2.1 We studies the entire claim file and observed that in our view various matters (including the following) had not been adequately clarified and needed further scrutiny and many of these would possibly have an impact on the assessment of the loss: i) The survey report of Mr. Atul Gupta was based on the assumption that the entire quantity of stock as on 31.3.99 was available at the site of loss (i.e. the insureds factory). However, we observed that the insured had various fabricators and as per the survey report various stocks were also lying with the fabricators on the date of loss. This indicated that similarly a substantial quantity of stocks would also be lying the fabricators on 31st March, 1999 and these should be reduced to arrive at the quantities damages. However, despite our best efforts, the information has still not been provided by the insured. ii) There was an apparent discrepancy in the assessment of Mr. Atul Gupta as the quantity allowed as damaged for stocks of Linda 6 patti curtains was assessed based on 9,500 pieces while the maximum quantity of this item available with the insured on date of loss was only 8,000 pieces. Thus there was an apparent over assessment of 1,500 pieces for this item. There also appeared to be an error of similar quantity in stocks of Linda-5 patti curtains. In order to further confirm the above, we requested the insured to provide their fabricator registers/other stock records but they have not provided the same and have chosen not to co-operate with us, as detailed later. Thus this report restricts the loss for Linda 6 patti curtains to 8,000 pieces. iii) The assessment report of Mr. Atul Gupta mentions that the loss for stocks includes semi-finished as well as finished goods. However, the rates allowed are apparently for finished goods alone and no reduction has been made for reduced value of semi-finished goods. Similarly the sales rates have been based on the purchase order copies, rather than the sales bills. In the absence of proof/details/co-operation from the insured, a reduction of 10% has been made in this report (from the purchase order rates) to provide for above including the presence of semi-finished goods. iv) The insureds factory consisted of ground as well as 1st floors and the survey report of Mr. Atul Gupta stated in para 6.1 that during my visit to the site, it was observed that the 1st floor of the building was badly affected by the fire. This seemed to indicate that the ground floor was relatively unaffected and in fact list of remaining stocks indicates that packing materials, etc. were found intact after the fire on the ground floor. In light of the above, it needed to be clarified as to how no appreciable stocks of raw materials/finished goods were left unaffected at the ground floor. Accordingly, we asked the insured to provide a floor-wise activity chart to enable us to clarify whether any activity like packing/dispatch, etc. was being carried out at the ground floor, which would possibly require stocks to be placed on that floor. However, despite our repeated follow up the insured did not provide us the same. v) The survey report of Mr. Atul Gupta indicated the gross profit rate to be about 33% and the assessment was made accordingly. Based on the above GP rate, the value at riskfor stocks as per the memorandum trading account came to about Rs.45.78 lacs and not Rs.36.04 lacs as indicated in the survey report of Mr. Atul Gupta. Accordingly, in the absence of suitable clarification from the insured (in view of their non-cooperation), this report is based on the value at risk for stocks calculated. vi) The survey report of Mr. Atul Gupta included Rs.86,782/- for replacement of roof, as claimed by the insured. However, the photos did not seem to indicate any structural damage to the roof. Even our discussions with Mr. Atul Gupta, and thus this report excludes the above amount. vii) The estimates provided by the insured (based on which the assessment had been done by Mr. Atul Gupta) were apparently on the higher side for some items. In order to re-confirm the same, we requested the insured to provide us the bills for repairs to building which they had in fact undertaken. However as the insured has not provided the same a reduction of 10% is being made from the estimates, for the purpose of this report. viii) In respect of the loss assessed for plant, this included only working tables on which stocks were kept. The survey report of Mr. Atul Gupta had assessed the loss for such tables @ over Rs.10,400/- per table. This appeared to be rather high in view of the simple nature of the table and in the absence of bills evidencing their value. As the insured has failed to provide any support for the cost tables @ Rs.2,500/- per table, as the same appeared to be reasonable particularly since these tables were only functional and would have ordinary wood and no workmanship. ix) Despite our repeated requests the insured did not co-operate with us in providing purchase bills to evidence year of purchase of various damaged items. In view of the above, a depreciation of 50% has been charged in this report, for such items. x) The survey report of Mr. Atul Gupta is based on the construction rate of Rs.250/- per sq.ft. but since the construction was of RCC this appeared to be low, and the value at risk for building as per this report is based on the rate of Rs.350/- per sq.ft. Similarly the depreciation charged for RCC construction @ 2.50% p.a. appeared to be high and the same has been restricted to 1.5% p.a. on the building. xi) The calculation of values at risk of other assets has also been revised in this report based on the figures in the balance sheet 3.0 OUR EEFORTS FOR FINALISATION 3.1 In order to clarify the issues apparent on the file (including those indicated above), we studied the file in great detail and after discussing the same with the underwriters we visited the insured. We met their main Director, Mr. Ramesh Mehta first on 24th April, 2002, after fixing a suitable appointment with him. 3.2 Before discussing the matter any further, he requested us to show him a copy of our appointment letter (which was done) and asked us to provide him a written letter confirming our appointment. Accordingly, in the insureds office itself, we made out a letter dated 24.4.2002 addressed to the insured seeking his co-operation in the matter. 3.3 Thereafter, the details of the cases were discussed with Mr. Mehta and he also showed us some of their computerized records. However, he insisted that the entire information sought by us had already been submitted by them to the earlier surveyor (Mr. A. Gupta). In order to clarify the matter we spoke to the underwriters and after their consent we contacted Sh. Atul Gupta to confirm whether he had any further documents/information available with him, in which case we need not seek the same from the insured. The entire issue was discussed with Mr. Atul Gupta and he confirmed that none of the information/documents sought by us were available with him. In fact, he also offered to ask the insured to co-operate with us in providing the required information/documents. Hence this report is being issued after discussing the same with Mr. Atul Gupta, the surveyor who had assessed the loss. 3.4 Since the required information/clarifications were not available with Mr. Atul Gupta, we again contacted the insured and confirmed the position to him and sought his co-operation for providing the required documents. Mr. Mehta informed us that we should first send him a letter of our requirements and so our letter dated 07.5.2002 was sent to the insured by fax as well as courier, which listed out the details required. 3.5 In response to our letter we were surprised to receive a Regd. letter dated 21.5.2002 from one Mr. Jeevan Prakash (Advocate), indicating that the insurers should settle the claim immediately based on the survey report of Mr. Atul Gupta. Though a copy of this letter was also marked to the insurers, we also brought the matter to the attention of the Divisional Office concerned vide our personal meeting as well as letter dated 23.5.2002. Vide this letter we had sought further instructions from the insurers in the matter. 3.6 However, as we did not ear from the insurers for some time, we again discussed the matter with the underwriting DO and as per discussions, we again issued another letter dated 2.8.2002 to the insured, again requesting him to co-operate with us and provide the information / documents required vide our earlier letter dated 7.5.2002. However, we have still not heard from the insured thereafter and thus it appears that they are not interested in co-operating with us any further. 4.0 RE-ASSESSMENT ON THE LOSS 4.1 In view of the above, we are releasing this report with an indicative provisional re-assessment based on the information / documents available. This is however subject to the insured submitting / providing the required information / documents, as detailed above in our letter dated 7.5.2002. 4.2 Based on the above, as detailed in attached Annexures, the provisional re-assessed loss has been calculated in the attached Annexure0 to be Rs.28,95,657.65 (Twenty Eight Lacs Ninety Five Thousand Six Hundred & fifty Seven & paise Sixty Five only), as against Rs.36,42,592/- assessed in the survey report of Mr. Atul Gupta. 6.0 ADJUSTED LOSS 6.1 Based on the above re-assessment, the adjusted loss has been calculated in attached Annexure-10 to be Rs.22,61,606/- (Twenty Two Lacs Sixty One Thousand Six Hundred & Six Only), as against Rs.34,40,486/- determined by Mr. Atul Gupta in his report. 7. In order to reconcile the two reports, a meeting of the two surveyors was held and based on their discussion, a joint final report dated 14.1.2004 was filed assessing the net loss at Rs.22,18,393/-. The said report is material and is as under:- ATUL KAPUR & COMPANY ATUL GUPTA Surveyors & Loss Assessors Surveyors & Loss Adjuster A-419, Som Datt Chambers-I House NO.B-49, Sector-36 Bhikaji Cama Place, New Delhi-110066 NOIDA-201303 Ph.26164334, 26102608 Ph.95120-2579443 LICENCE NO.SLA-11361 LICENCE NO.SLA-2492 VALID UPTO 15.09.2005 VALID UPTO 29.03.2008 ------------------------------------------------------------------------------------------------------
The Sr. Divisional Manager Dated:
14th January, 2004 National Insurance Co. Ltd.-DO-23 Palika Bhawan, New Delhi Strictly Without Prejudice Dear Sir, Re: Fire loss under policy #360902/11/11/98/3217, A/c M/s. Nikon Systems (P) Ltd., Delhi In connection with the above, in continuation of our earlier letter dated 27th October, 2003, we were informed by your office that despite reminders to the insured and follow up for considerable time, the insured has failed to provide any co-operation and even the minimum documents / records suggested in our above stated letter have not been provided by the insured. In the light of the above, we have no option but to assume that the stocks of the insured lying with the fabricators on 1st April, 1999 were of similar value as the stocks shown by the insured to be lying with fabricators on the date of loss.
After considering the above and other factors mentioned in our separate reports dated 18th July, 2000 and 10th October, 2002, we have now jointly examined the issue and conclude that since no further documents / information is forthcoming from the insured, the net adjusted loss would amount to Rs.22,18,393/- (Rs. Twenty Two Lacs Eighteen Thousand Three Hundred & Ninety Three Only) as detailed in Annexure 10 attached. The details of this joint assessment are attached at Annexures 1 to 9 attached.
This report is issued strictly without prejudice.
For Atul Kapur & Company Sd/- Sd/-
Atul Kapur Atul Gupta B.COM (HONS.), FCA, AIII, B.COM (HONS.), FCA, AIISA AIIISA, DCA
8. The question as to whether an insurer has the right to appoint a second surveyor despite receipt of a report of an earlier surveyor, is no longer res integra and has been answered by the Supreme Court in its decision in the case of Sri Venkateswara Syndicate vs. Oriental Insurance Co. Ltd. & another, (2009) 8 Supreme Court Cases 507. Section 64 UM of the Insurance Act, 1938 has been interpreted as under:-
There is no prohibition in the Insurance Act, 1938 for appointment of second surveyor by the insurance company, but while doing so, the insurance company has to give satisfactory reasons for not accepting the report of the first surveyor and the need to appoint second surveyor. Scheme of Section 64-UM particularly, of sub-sections (2), (3) and (4) would show that the insurer cannot appoint a second surveyor just as a matter of course. If for any valid reason the report of the surveyor is not acceptable to the insurer maybe for the reason if there are inherent defects, if it is found to be arbitrary, excessive, exaggerated, etc., it must specify cogent reasons, without which it is not free to appoint the second surveyor or surveyors till it gets a report which would satisfy its interest. There must be sufficient ground to disagree with the findings of surveyor/surveyors. The Insurance Act only madates that while settling a claim, assistance of a surveyor should be taken but it does not go further and say that the insurer would be bound by whatever the surveyor has assessed or quantified; if for any reason, the insurer is of the view that certain material facts ought to have been taken into consideration while framing a report by the surveyor and if it is not done, it can certainly depute another surveyor for the purpose of conducting a fresh survey to estimate the loss suffered by the insured.
The proviso to sub-section (2) of Section 64-UM retains the right of the insurer to settle a claim for an amount different from that assessed by the surveyor. This proviso impliedly permits an insurer to obtain a second or further report where considered appropriate or expedient in the circumstances of a case, based upon which the claim could be settled for a different amount than as assessed earlier. Surveyor/surveyors are appointed by the insurance company under the provisions of the Insurance Act and their reports are to be given due importance and one should have sufficient grounds not to agree with the assessment made by them. The insurance company cannot go on appointing surveyors one after another so as to get a tailor-made report to the satisfaction of the officer concerned of the insurance company; if for any reason, the report of surveyors is not acceptable, the insurer has to give valid reason for not accepting the report. The option to accept or not to accept the report is with the insurer. However, if the rejection of the report is arbitrary and based on no acceptable reasons, the courts or other forums can definitely step in and correct the error committed by the insurer while repudiating the claim of the insured. We hasten to add, if the reports are prepared in good faith, with due application of mind and in the absence of any error or ill motive, the insurance company is not expected to reject the report of the surveyors.
9. In view of the above legal position, there is no escape from the conclusion that insurer has all the right to appoint a second surveyor but insurer must give valid reasons for doing so. Therefore, the contention of the complainant that the insurance company had no right to appoint a second surveyor is devoid of any merits and is liable to be rejected. In the case in hand, the Insurance Company had given valid reasons why in the first instance, they felt it necessary to seek certain clarifications in view of the discrepancies appearing in the report of the first surveyor and thereafter took a conscious decision to appoint a second surveyor. The report submitted by the second surveyor is a well reasoned report which takes into account several discrepancies existing in the report of former surveyor and after reconciling the same, they have assessed the net loss at Rs.22,18,393/-. This assessment of the loss made by the second surveyor was even agreed to by the first surveyor after they had a joint meeting. That would clearly show that the net loss assessed by the second surveyor can be said to be the loss assessed by both the surveyors. In that view of the matter, the earlier assessment of loss at Rs.34,40,486/- made by the first surveyor has lost its sanctity and cannot form the basis for determination of compensation. In our view, the Insurance Company has done no wrong in accepting the second report of the surveyor. The Insurance Company has already paid a sum of Rs.22 lakh to the complainant during the pendency of the complaint. Therefore, they are liable to pay the balance amount of Rs.18,393/-
to the complainant.
10. It is, however, noticed in this case that the whole process of finalization of the assessment of loss through the second surveyor has taken unduly long time for which the complainant needs to be suitably compensated. In our view, even in a case where the second surveyor/investigator needs to be appointed, the action should be prompt and the exercise should be completed expeditiously, say latest within a period of 6 months. In our view, it would adequately meet the ends of justice, if the complainant is awarded interest @ 9% per annum for the delay in making the payment of the claim. Keeping in view the peculiar facts and circumstances of the case, we consider that interest should be payable after 6 months from the date of peril, viz, w.e.f. 15.01.2000. The interest shall be payable on Rs.22,18,393/- @ 9% per annum in the following manner:-
(i) On Rs.22,18,393/- from 15.1.2000 to 14.1.2003
(ii)On Rs.12,18,393/- from 16.1.2003 to 16.7.2004 And
(iii)On the balance amount, viz.,18,393/- from 17.7.2004 till its payment.
11. In the result, the complaint is partly allowed with a direction to the opposite party Insurance Company to pay Rs.22,18,393/- with interest @ 9% per annum in the above manner within a period of six weeks. Parties are left to bear their own costs.
.Sd/-..
(R.C. JAIN, J.) PRESIDING MEMBER Sd/-
( S.K. NAIK) MEMBER Anjana/Court2