National Consumer Disputes Redressal
Amline Textile Private Limited vs United India Insurance Co. Ltd. on 15 July, 2011
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER COMPLAINT NO. 455 OF 2002 Amline Textile Private Limited ... Complainant (s) A company registered under the Companies Act having registered Office at 1105, Tulsiani Chambers 212 Nariman Point, Mumbai-400 021 Vs. United India Insurance Co. Ltd. ........ Opposite Party(ies) Union Co-operative Insurance Building 5th Floor, Sir P.M. Road, Fort, Mumbai-400 001 BEFORE: HONBLE MR. JUSTICE R. C. JAIN, PRESIDING MEMBER HONBLE MR. S. K. NAIK, MEMBER For the Complainant : Mr. Harish Malhotra, Sr. Advocate with Mr. B.K. Khurana, Advocate For the Opposite Party(ies) : Mr. Vishnu Mehra, Advocate, Dated, the 15th day of July, 2011 ORDER
PER JUSTICE R.C.JAIN, PRESIDING MEMBER Amline Textile Pvt. Limited, a company incorporated under the Companies Act has filed this complaint against the opposite party- United India Insurance Company Limited alleging deficiency in service on the part of the insurance company in not settling the insurance claim under the insurance policy in question and rather repudiated the same on wholly untenable premise. For the said deficiency in service , the complainant claimed compensation of Rs.5,34,24,060/- with interest @ 18% p.a. from 21.08.2001 till its actual payment besides claiming damages @ 9,00,000/- per month which the complainant claims to have suffered due to non release of the insurance amount.
2. In nutshell, the case of the complainant is that it is a company engaged in the business of manufacturing of yarn having its work at village Rakholi, Union Territory of Dadra & Nagar Haveli where they had installed their five texturising machines besides several other machines and plants. In order to safeguard their plant, equipments and stock of material costing more than nine crores, complainant had taken two insurance policy in the sum of Rs.8.23 crores ( Rs. 7,73,00,000/- and Rs.50,00,000/-). During the currency of the said policy, on the night of 13.03.2001, there was a fire incident in the said factory of the complainant as a result of which most of the machinery, plant, building and raw material were gutted in fire and severelly damaged. Out of five texturising machines, three texturising machines were totally destroyed and remaining two machines were badly damaged beyond repairs besides the other machines. Information about the incident was immediately passed on to the opposite party- insurance company on 14.03.2001 itself. The insurance company appointed M/s Mehta & Padamsey Pvt. Ltd. as their surveyors who submitted a preliminary report after obtaining certain information from the complainant-company.
Fire claim in the sum of Rs.7,81,21,903/- was formally filed with the insurance company on 26.04.2001. The surveyor M/s Mehta & Padamsey Pvt. Ltd.obtained various information and documents. The insurance company, thereafter, also appointed M/s Bhatwadekar and Co. as joint surveyor with M/s Mehta & Padamsey Pvt. Ltd and joint surveyors who on consideration of the relevant material and after making detailed survey and adjustment submitted a joint report dated 21.08.2001 assessing the loss of the complainant at Rs.5,34,24,060/-. According to the complainant, the joint surveyors obtained their (complainants ) consent for settlement of claim for a sum of Rs.5,34,24,060/- which was given by the complainant, although the loss suffered by the complainant was more than Rs.7 crore.
That despite the assessment of the loss by the joint surveyors to the above extent and the complainant-company giving its consent, the opposite party insurance company did not make the payment of the said amount as a result of which the complainant has suffered monetary loss to the extent of Rs.9,00,000/- per month. Hence the complaint.
3. It would appear that by the time of filing of the complaint, the opposite party had neither paid the claimed amount either as per the claims submitted by the complainant or the assessment made by the joint surveyors but once they were noticed by this Commission on the complaint filed by the complainant company, the insurance company resisted the complaint by filing the written version raising several preliminary objections with regard to the maintainability of the present complaint on the premise that complainant is not a consumer within the meaning of section 2 (1) (d) of the Consumer Protection Act, 1986 ( in short, the Act); complaint is barred by virtue of clause 6 (ii) of the Insurance Policy. On merits factum of the complainant having taken two insurance policies in the above sum as also having suffered loss due to fire in their factory is not disputed. It is also not disputed that joint surveyors had filed a report assessing loss of the complainant at Rs. 5.34.24.060/-. In para 2 of the written version it is pleaded that claim of the complainant was repudiated by the insurance company by a reasoned communication dated 06.06.2003.
It is maintained that for the reasons stated in the said communication and going by the stipulation contained in clause 6 (ii) of the Terms and Conditions of the policy, the complainant is not entitled to indemnification of the loss purportedly suffered by them. Liability to pay the claimed amount or any other amount is specifically denied.
4. In the rejoinder, complainant-company has denied and controverted various preliminary objections on the strength of which complaint is stated to be non maintainable.
As regards the repudiation of the claim of the complainant, for the reasons given in the said communication dated 06.06.2003, the complainant- company has stated that ground set up in the communication are wholly untenable and are nothing but a device culled out to deny the genuine claim of the complainant in respect of the loss suffered by them which the opposite party-insurance company is liable to indemnify to the complainant. In support of its case, the complainant has filed supporting affidavit of R.S.Kuwelker.
On the other hand, insurance company has filed affidavit of G.K.Pattewar, Deputy Manager. Besides, parties have relied upon the documentary evidence mainly consisting of the joint surveyors report of M/s Bhatwadekar and Co. & M/s Mehta & Padamsey Pvt. Ltd and the correspondence exchanged between the surveyors with the complainant and certain certificates issued by the police authorities of Dadra & Nagar Haveli.
5. We have heard Mr. Harish Malhotra, Advocate, learned counsel representing the complainant and Mr. Vishnu Mehra, Advocate, learned counsel representing the opposite party insurance company have considered their respective submissions.
6. In the present case, the controversy between the parties has been narrowed to a great extent because the factum of the opposite party having issued two insurance policies in order to cover the risk of machinery, plant, buildings and stocks lying at the complainants work at village Rakholi, Union Territory of Dadra and Nagar Haveli and that fire had occurred in the said premises on the night of 13.03.2001 is not in dispute.
It is also not disputed that joint surveyors M/s Bhatwadekar and Co. & M/s Mehta & Padamsey Pvt. Ltd were appointed who on consideration of all the relevant circumstances and material provided to them had assessed the net payable loss at Rs. 5,34,24,060/- after making adjustments as per the terms and conditions of the policy.
It also appears that complainant had given its consent to the settlement of their claim in the sum of Rs.5,34,24,060/- but still for the reasons which were not disclosed by the insurance company uptil the filing of their written version, the payment of the said amount was not made. The reasons for not making the payment has come out in the written version filed by the opposite party which was given in the letter, which has not been filed but its contents are extracted in para 8 of the written version, which we would like to reproduce as under:
1. After thoroughly examining the record on our file, we have come to a conclusion that you have failed to prove the cause of fire. You will appreciate that the burden to prove the cause of loss/fire is squarely on you and unfortunately you have failed to discharge the said burden.
In this respect we may invite your attention to the specific condition No.6 (i) of the Fire Policy which is extracted below for ready reference.
6(i) 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
(a) a claim in writing for the loss or damage containing as particular an account as may be reasonably practicable of all the several articles or items or property damaged or destroyed, and of the amount of the loss or damage thereto respectively, having regard to there value at the time of the loss or damage not including profit of any kind.
(b) Particulars of all other insurances, if any The insured shall also at all times at its 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, and any matter touching the 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.
2. You will appreciate that you have not given to us any proof with respect to the origin and cause of the fire and the circumstances under which the loss or damage occurred. Even the surveyors have not been able to ascertain the origin and cause of the fire.
We are constrained to say that even the Fire Brigade report on our file does not indicate the origin and cause of fire. In this view of the matter the policy condition No.6, as extracted above, is squarely attracted according to which No claim under this policy shall be payable unless the terms of this condition have been complied with.
3. You are fully aware of non-compliance of the all important policy condition.
Instead of discharging the burden as contemplated in condition No.6 of the policy, you have prematurely approached the Honble National Consumer Disputes Redressal Commission alleging deficiency in service against us whereas the fact of the matter is that you have till date not complied with the specific terms and conditions of the policy as contemplated under condition No.6 and are thus not entitled to claim any amount under the terms and conditions of the policy and accordingly we are constrained to treat your case as NO CLAIM under condition No.6 of the policy as extracted above.
4. Without prejudice to the above and without admitting any liability, we are also constrained to say that having regard to the fact that as per your own showing the fire brigade arrived at the spot within 15-20 minutes of its alleged occurrence and started extinguishing the same, your claim that as a result of this all the machinery, plant, building and raw material et. were gutted in fire and severely damaged is clearly a misstatement and your claim is highly exaggerated/inflated and is liable to be reassessed/re-worked out.
5. You will appreciate that though by virtue of the provisions of section 64 UM (2) of the Insurance Act, 1938, no insurance claim amounting to Rs.20,000/- or more can be settled by an insurer without obtaining a report from a duly licensed surveyor, yet it may be appreciated that the proviso to sub-section (2) of section 64 UM leaves it open to the insurer to settle a claim for a different amount. Section 64 UM (2) is extracted below for ready reference:
Section 64-UM. Licensing of surveyors and loss assessors.
(2) No claim in respect of a loss which has occurred in India and requiring to be paid or settled in India equal to or exceeding twenty thousand rupees in value on any policy of Insurance, arising or intimated to an insurer at any time after the expiry of a period of one year from the commencement of the Insurance (Amendment) Act, 1968, shall, unless otherwise directed by the Controller, be admitted for payment or settled by the insurer unless he has obtained a report, on the loss that has occurred, from a person who holds a licence issued under this Section to act as a surveyor or loss assessor (hereinafter referred to as approved surveyor or loss assessor Provided that nothing in this sub-section shall be deemed to take away or abridge the right of the insurer to pay or settle any claim at any amount different from the amount assessed by the approved surveyor of loss assessor.
6. You will thus appreciate that the assessment made by the surveyors is not binding on us and it is open to us to pay or settle the claim at any amount different from the amount assessed by the surveyors.
7. In view of the above stand of the insurance company, the crucial question which awaits consideration and decision is as to whether insurance company was justified in repudiating the claim of the complainant on the ground that complainant has not furnished the case of the fire and the circumstances under which the loss or damage had occurred which the insured was required to establish, according to clause 6 of the terms and conditions of the policy. Since the above condition was not fulfilled, the claim is not payable. In order to support the plea of the insurance company in regard to the repudiation of the claim, Mr. Vishnu Mehra has urged that repudiation of the claim by the insurance company is for valid reasons and the insurance company cannot be said to have committed any deficiency in service in repudiating the insurance claim of the complainant in the present case. On the other hand, Mr. Harish Malhotra, Senior Advocate, learned counsel for the complainant has controverted the said submission and contended that the insurance company has repudiated the claim on wholly untenable / non existent ground as sufficient material was produced before the surveyors and the insurance company to show that the origin of fire was an electric short circuit.
In this regard, our attention has been invited to the joint final surveyors report of M/s Bhatwadekar and Co. & M/s Mehta & Padamsey Pvt. Ltd dated 27.08.2001. We have carefully perused the said report. In para 6 of the said surveyor report, the surveyors under the heading cause has stated as under:
Cause: It is presumed that fire occurred due to electric short circuit since it was noticed near the main electrical panel area and the panel was severely damaged. It was apparent from the translated copy of the FIR lodged by Mr. A.G. Chandnani and employee of the Insured stated that I guess that cause of fire may be due to short circuit or spark in the electric cable wire.
8. It is pertinent to note that while making the said observations, the surveyors had not expressed any suspicion or overt-act. Had there been any suspicion of any kind, the surveyors would have made further investigation into the cause of fire. Not only this that the joint surveyors have found electric short circuit as the most probable cause of fire, the same is further fortified by a certificate dated 23.06.2003 issued by the chief of Police, Dadra and Nagar Haveli Silvassa to the complainant which we would like to reproduce here:
To The Manager Amline Textiles Limited S.No. 16/1 Rakholi, Dadra and Nagar Haveli Refer your letter dated 19.06.2003 regarding final report of accidental fire case no. 6/ 2001.
In this connection it is to submit that the said accidental fire case No.6/2001 has been investigated by the Police and the Investigation papers sent to the Sub-Divisional Magistrate for approval.
The Sub-Divisional Magistrate Silvassa has approved and also there is no foul play has been noticed in the above accidental fire case No.6/2001. And cause of fire was due to the electric short circuit. This letter is issued for the purpose of insurance claim purpose.
Chief of Police Dadra and Nagar Haveli Silvassa.
9. A bare perusal of the above communication should not leave any doubt in anybodys mind that the cause of fire was due to electric short circuit and the investigation made by SDM Silvassa and the police found no foul play in the said accidental fire which report has ultimately been approved by the concerned authorities viz. SDM Silvassa.
10. Besides we have two fire certificates, one dated 15.03.2001 of the Station Fire Officer, Dadar & Nagar Havelli, Silvassa and other dated 20.03.2001 from the Station Fire Officer, Daman. Both these fire authorities have confirmed that fire which had taken place at the factory of the complainant was attended to by their fire officer and brought under control.
11. It would appear that still not satisfied with the cause of fire, the insurance company appointed investigator by the name of Vardhman and Company to find out the cause of fire. As regards the cause of fire in its report dated 09.05.2001, Vardhman and Company stated it could not be ascertained. However, electric short circuit cannot be ruled out. Various observations made in this investigation report are, however, relevant which tend to show that in all probabilities the cause of fire was electric short circuit.
The report itself concludes as under:
1. The electrical short circuit seems to be the main probable cause of this fire.
2. Details of machineries in both the Companies were all documented and no machines has ever been shifted to the other factory either prior to or after the loss.
3. Proper procedures were followed in disposal of salvage and the receipts have been accounted fully.
4. The statutory auditors of the insured were not related to any Director/any promoters of the insured and the Auditors report were all accepted by the concerned authorities without any doubt.
5. Both the companies- Holding company and the Subsidiary Company were all insured with the United India Insurance Company Limited in 1980 and 1995 respectively and only one claim was lodged by the insured with United India Insurance Co. in respect of the machinery damage at Amline Textiles Limited and no other claim was ever lodged with any other insurance companies.
6. The complaint filed by Mr. S.K. Sharma on 21.12.2001 was found to be completely baseless and without any substance and the police authorities were satisfied that the fire was accidental and no machine had ever been shifted either prior to or after the fire loss.
12. Loss Prevention Association of India Ltd., Mumbai also investigated the matter and submitted its report dated 13.03.2001. In the said report, the said association after a detailed investigation of the spot has given the cause of fire as under:
CAUSE OF FIRE Considering the fact that Amline management had good industrial relationship with employees, the cause of arson is ruled out.
The purpose of malicious damage could not be substantiated and hence not considered further.
The chances of fire starting due to left out smoking material is also another probable cause of fire. This aspect was discussed with Amline management and they ascertained that bringing smoking materials inside the factory premises was strictly prohibited and that every employee was checked for smoking material.
Hence, this case of fire initiation was not considered further.
Considering all the causes for this major fire accident, the electrical cause seem to be the most probable cause of this fire.
.
We may also take note of the observations made by the officials of the said Association during their visit as under:
OBSERVATIONS DURING THE SITE VISIT
1. Tube lights were installed in the affected POY storage area on the beams.
2. The electrical panels in the other areas were inspected and were found that the electrical installation were generally carried out as per applicable standards.
3. No body was present in the POY storage when the incidence happened. In another factory of Amline textiles Ltd., a person is engaged to take rounds in the factory to look out for hazards.
4. An equilizer ( a harmonics filtering equipment) was located in the corner of room no.5 area, the power for which was fed from the electrical panel located in the affected POY storage area.
The probable electrical causes that could have resulted in the fire loss are listed below:-
a. The fire damage (blackened POY storage ceiling) was seen maximum under one of the RCC beams, sparks from the choke of the tube light installed in the ceiling above the POY storage could have initiated the fire. Although Amline management stated that the stack height was restricted to 4 feet. If, in case, the POY stack touched the tube light / choke, there is a possibility that POY catches fire due to heat or radiation heat. Considering lack of storage space and quantity of material available in the factory on 13th March 2001, this possibility cannot be ruled out.
b. The other probable electrical causes could be short circuit or fault in equilizer junction box or equilizer itself or the electrical panel located in the POY storage area or the cables installed in cable trays. However, from the evidences available at the site and discussion with insured are not enough to ascertain any of the above probable causes.
5. It was reported that only one cable joint existed in the factory premises which is located underground, near the DG area.
6. A re-wirable fuse switch was found on the wall in the main process
13. A careful consideration of the above reports should leave no doubt in anybodys mind that in all probabilities, the fire was caused due to electric short circuit. In any case the police, Loss Prevention Association of India Ltd, and the investigator have in no uncertain terms ruled out the possibility of any foul play in the matter. Still surprisingly and for the reasons not easy to comprehend, the insurance company took a decision not to settle the claim of the complainant even as per the assessment of loss made by the joint surveyors. Under these circumstances, complainant was constrained to file the present complaint and it was only at that stage that insurance company sought to repudiate the claim on the strength of clause 6 of the terms and conditions of the policy. To say the least, this repudiation / defence plea put forth by the insurance company in order to repudiate the claim is wholly untenable if we look into the entire sequence of events and the various circumstances noted by different agencies involved in the matter. The insurance company was expected to consider the said report and material which in our opinion it has failed to do. Keeping in view the entirety of the facts and circumstances and the material placed on record viz., the report of the joint surveyors , the investigator Loss Prevention Association of India Ltd., police authorities and fire service authorities, the defence put forth by the insurance company is nothing but a sham one. An insurer who has entered into an agreement with the insured to indemnify the insured of any loss occasioned to him due to any peril covered under the policy, is expected to consider the claims in a dispassionate manner based on the facts and circumstances and the evidence and material brought before it rather than denying the claim on untenable / imaginary / whimsical grounds. It is high time that the insurance companies settle the claim of the insured promptly and in just and reasonable manner. In the case in hand, we are constrained to note that the insurance company has not done a service to the insured / consumer and rather has done dis-service by repudiating the claim despite there being overwhelming material brought on record in regard to the circumstances in which the huge loss was occasioned to the complainant. We are of the clear view that the opposite party-insurance company has committed deficiency in service firstly by not settling the claim of the complainant within a reasonable time and thereafter denying the same on wholly untenable grounds.
14. Having held as above, the ultimate question which remains to be considered is as to what should be the compensation which can be legitimately awarded to the complainant for the loss occasioned to them. In this connection, we may simply note that originally the complainant had laid a claim of Rs.7,81,21,903/- under different heads but as soon as the joint surveyors had submitted their final report dated 27.08.2001 assessing the total net payable loss at Rs.5,34,24,060/-, the complainant had accepted the same and even communicated their consent to settle the claim on the said sum vide their letter dated 21.08.2001. The joint surveyors had made the said assessment of loss on consideration of various factors and after making several deductions on account of depreciation etc. and after a thorough probe made from the account books of the complainant company. Although in the written version, the claim even to the said extent was stated to be excessive and exaggerated but during the course of this submissions, Mr. Mehra made no submission in regard to the assessment of net loss to the extent of Rs.
5,34,24,060/-. In the present complaint, the complainant has been fair in restricting its claim to the said amount and has claimed interest @ 18% w.e.f. 21.08.2001 i.e. report of the joint surveyors besides claiming certain compensation due to the loss in business. Keeping in view the assessment made by the joint surveyors, we have no hesitation to hold that the complainant is at least entitled to the said amount of Rs.5,34,24,060/- towards their insurance claim under the policies issued by the opposite party.
15. As the insurance company failed to settle the claim and pay the said amount within reasonable period, we are of the view that complainant needs to be compensated by awarding interest for the period they were deprived of their legitimate claim. Considering the enormity of the claim and that joint surveyors and investigators were appointed, we are of the view that insurance company ought to have settled the claim of the complainant latest within a period of nine months of the peril which took place on 13.03.2001 i.e. by the end of 2001. Since it was not done, we are of the view that it would adequately meet the ends of justice if we call upon the opposite party also to pay interest @ 9% p.a. on the amount of Rs.5,34,24,060/- w.e.f. 01.01.2002 till the date of payment. The complainant is also entitled to cost of the present proceedings which we quantify at Rs.50,000/-.
16. In the result, the complaint is partly allowed and the opposite party-insurance company is directed to pay a sum of Rs.5,34,24,060/- (Rupees Five Crores Thirty Four Lakh Twenty Four Thousand and Sixty only) alongwith interest @ 9% p.a. w.e.f. 01.01.2002 till its payment.
Payment shall be made within six weeks from the date of this order failing which rate of interest shall stand enhanced to 12% p.a. w.e.f. date of default. The complainant is also entitled to cost of the present proceedings which we quantify at Rs.50,000/-.
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(R. C. JAIN, J.) PRESIDING MEMBER .Sd/-
(S. K. NAIK) MEMBER Am