National Consumer Disputes Redressal
Oriental Insurance Co. Ltd. vs M/S. Himachal Pharmaceuticals Ltd. on 22 September, 2016
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 474 OF 2009 (Against the Order dated 28/08/2009 in Complaint No. 8/2007 of the State Commission Himachal Pradesh) 1. ORIENTAL INSURANCE CO. LTD. Through Manager, A-25/27, Asaf Ali Road New Delhi - 110 002 ...........Appellant(s) Versus 1. M/S. HIMACHAL PHARMACEUTICALS LTD. Through its Managing Partner, Sh. B.M. Sood Kandrori, Pathankot Kangra Himachal Pradesh ...........Respondent(s)
BEFORE: HON'BLE DR. B.C. GUPTA,PRESIDING MEMBER
For the Appellant : Mr. Ajay Singh, Advocate For the Respondent : Mr. Dinesh Malhotra, Advocate
Dated : 22 Sep 2016 ORDER
This first appeal has been filed under Section 19 read with Section 21(a)(i) of the Consumer Protection Act, 1986 against the impugned order dated 28.8.2009, passed by the Himachal Pradesh State Consumer Disputes Redressal Commission, Shimla (hereinafter referred to as the 'State Commission'), vide which, while allowing the consumer complaint filed by the respondent, the appellant insurance company was directed to pay a sum of Rs.20.19,689/- alongwith interest @ 12% per annum from 1.4.2006 for the loss sustained by the respondent in a fire incident in the factory.
2. The facts of the case are that the respondent/complainant M/s. Himachal Pharmaceuticals Ltd. is a partnership concern, based at Kandrori, Pathankot, District Kangra, Himachal Pradesh and are engaged in the manufacture and sale of pharmaceutical drugs. The complainant obtained a fire standard policy from the appellant insurance company for the period from 13.4.2005 to 12.4.2006, covering their factory, building and machinery for 82 lakhs, stocks of medicines as Rs.90 lakhs, Rs.20 lakhs for administrative block and Rs.26 lakhs for extraction plants, the total amount being Rs.2.11 crores. It is stated that fire broke out in the complainant's unit on 25.10.2005, and intimation about the incident was given to the insurance company on 26.10.2005, and a report was also lodged with the local police. The factum of fire was also confirmed through a certificate issued by the Pradhan of the Local Gram Panchayat. According to the complainant, the loss suffered by them was to the tune of Rs.20,19,689/- as per the following details:
1. Loss Rs. 17,40,000/-
2. Loss to Laboratory chemicals Rs. 31,390/-
3. Loss to Electrical & Testing equipments Rs. 33,645/-
4. Loss to Glass apparatus Rs. 1,79,408/-
5. Loss to Glass apparatus in boxes Rs. 5,246/-
6. Loss to building, colour, paint, tiles electricity fitting Rs. 30,000/-
___________ Total Rs.20,19,689/-
____________
3. A surveyor was appointed by the insurance company who visited the spot and also had detailed correspondence with the complainant for supply of the relevant documents. After making detailed enquiry and considering the documents supplied by the complainant, the surveyor made a net assessment of Rs.1,07,447.47 only against the claim of Rs.20.19 lakhs submitted by the complainant. The details of the assessment made by the surveyor is as follows:
Loss of Chemicals Rs.27,164.20 Loss of Electrical & Testing Instruments Rs.15,716.25 Loss to Glass Apparatus Rs.66,067.02 Loss to Building Rs.15,000.00 Loss: Depreciation @ 40% Rs. 6,000.00 Rs. 9,000.00 Loss to Stock Rs. 0.00 Total Rs.1,17,947.47 Less: Salvage lumpsum for scrap of glass etc. Rs. 500.00 Balance Rs.1,17,447.47 Less: Excess as per policy Rs.10,000.00 Net assessment Rs.1,07,447.47
4. The surveyor stated in his survey report dated 15.1.2007 submitted to the insurance company that the complainant had failed to submit all relevant documents to him, especially those concerned with stocks and price of chemicals. The surveyor concluded that the claim for loss to stocks was not admissible. The insurance company, relying upon the report of the surveyor offered a sum of Rs.1,07,447.47 to the complainant, which was not accepted by them. The consumer complaint in question was then filed by the complainant, seeking directions to the appellant insurance company to pay a sum of Rs.20,19,689/- as claimed by them alongwith interest @ 18% per annum from the date of the incident i.e. 25.10.2005 till payment. The complainant also demanded a sum of Rs.2 lakhs as compensation for mental harassment and Rs.35,000/- as cost of litigation.
5. The complaint was resisted by the insurance company by filing a written statement before the State Commission in which they stated that the complainant was a defaulter of the Oriental Bank of Commerce and the loan taken by him had been declared as Non-performing Asset (NPA). The OP also stated that due to lack of information and various discrepancies in the documents and accounts provided by the complainant to the surveyor, the assessment of loss got delayed and also the actual loss suffered by the complainant did not tally with the claimed loss. The stock statements were not submitted by the complainant after 31.7.2004 when the account was declared as NPA. As per the latest stock statement dated 31.7.2004, an amount of Rs.1,05,94,221/- was depicted. The fire took place more than one year after submission of the latest stock statement. The insurance company stated that the loss had been calculated on the basis of the factual position on record and hence, there was no deficiency in service on the part of the insurance company.
6. The State Commission after taking into account the averments made by the parties, passed the impugned order dated 28.8.2009, in which they stated that they were satisfied with all documents which had been supplied by the complainant to the surveyor. The State Commission allowed full amount claimed by the complainant i.e. Rs.20,19,689/- and also awarded interest @ 12% per annum from 1.4.2006 till payment. It is against this order that the present appeal has been made by the OP insurance company.
7. During arguments, it was pointed out by the learned counsel for the appellant insurance company that the order passed by the State Commission was erroneous in the eyes of law, because the State Commission had not advanced any reason for discarding the report submitted by the surveyor and allowing the complaint in toto. The learned counsel stated that the complainant had failed to furnish the stock statement since July, 2004. Moreover, the complainant had explained to the surveyor that fire brigade was not called after the incident, and the fire was extinguished by their own efforts. As per the version of the complainant, the fire occurred when their chemist was working in the laboratory and a 20 ltr. flask containing the chemical methoxsalene broke during lifting and fell down on heating mental qualifier. The person present on the spot used water and sand to control/extinguish the fire and they were able to do the same in about 20 to 30 minutes. The learned counsel further argued that as per the report made to the police, the loss was stated to be between 8 to 10 lakhs.
8. The learned counsel pointed out that as per the sale book, the insured had issued only five sale bills during the year and last sale bill was at sl. no.5 dated 26.10.2005 for Rs.44,300/-. The surveyor had also brought out in his report that the authenticity of the sale of Taxus Extract and rate/value thereof was not established in the absence of any documentary evidence/purchase bills, detailed cost sheet with documents, sale bills/evidence for receipt of payment against such sale bill. The surveyor also brought out that the stock register of chemicals depicted only the value-wise record, but the item-wise details were not mentioned therein. The surveyor also stated that the main items for which claim had been made could not be classified as stock items, as the product was at research stage. The insurance company had, therefore, rightly placed reliance on the report submitted by the surveyor.
9. Per contra, learned counsel for the respondent has drawn attention to the order passed by the State Commission, saying that the said Commission had made it clear that the required documents had been supplied by the complainant to the surveyor. The contention made by the OP insurance company and the surveyor that the requisite record had not been made available to the surveyor was therefore not justified. The learned counsel also submitted that the OP were prepared to make payment to them for about 8 to 10 lakhs, but the same was not acceptable to them. The learned counsel argued that at the time of issuing the insurance policy, the OP insurance company had satisfied themselves with regard to the stocks and their value. The order passed by the State Commission was therefore, in accordance with law and should be upheld.
10. In support of his arguments, learned counsel for the respondent has drawn attention to a number of orders passed by the Hon'ble Apex Court in New India Assurance Company Ltd. vs. Zuari Industries Ltd. 2009(9) SCC 70, Sri Venkateswara Syndicate Vs Oriental Insurance Company Limited & Anr., 2009 (8) SCC 507 etc. The learned counsel has also drawn attention to the orders passed by this Commission in Jagdish Singh vs. National Insurance Company, 1994(1) CPJ 172, Branch Manager, New India Assurance Company Ltd. vs. Vimal 1999(2) CPJ 34 and Padmasri Tobacco Company vs. New India Assurance Company Ltd., 2002(2) CPJ 96.
11. I have examined the entire material on record and given a thoughtful consideration to the arguments advanced before me.
12. The main issue for consideration in the matter is with regard to the claim filed by the complainant for loss of stocks amounting to Rs.17.40 lakhs, out of total claim of Rs.20,19,689/-. The details of the amount of Rs.17.40 lakhs have been given in para 7.1.8 of the report of the surveyor as follows:
Loss of stocks (12.7 Kgs semi finished After Column Taxol Rs.1524000.00 @ Rs.1.20 lacs per kg) 10 Kg Methoxsalen @ Rs.20,000.00 per Kg Rs. 200000.00 2 Kg Chrysarobin @ Rs.8000.00 per kg Rs. 16000.00
13. It is made out that the complainant demanded a sum of Rs.15.24 lakhs on one item only, i.e. semi-finished After Column Taxol weighing 12.7 kgs. priced at Rs.1.20 lakhs per kg. In survey report, the surveyor has extensively dealt with the claim of the complainant on the three items of stock mentioned above.
14. The surveyor has stated in his report that on the main item Taxol, the insured had stated the following to arrive at a rate of Rs.1.20 lakhs per kg.
Taxus extract 60 Kg Rs.6000.00 Rs.360000.00 Chemicals Rs.816035.00 (lumpsum) Fuel Rs. 73000.00 (lumpsum) Labour and other incidental charges Rs.275000.00 (lumpsum)
15. The surveyor has stated that they requested the insured to provide them copies of earlier stock register of the item Taxol alongwith copies of purchase bills of Taxus Extract. However, the insured failed to provide the said stock record and the relevant documents. The surveyor has observed;
However the insured failed to provide the copies of old stock records and also did not clarify the fact as to whether this was extracted by their concern or bought from others. Copies of purchase bills for taxus extract or for leaves from which it was extracted were also not provided. The insured only referred to depiction of this item in bank stock statements.
16. The surveyor concluded that the authenticity of sale Taxus Extract and rate/value thereof had not been established. Regarding the component of chemicals valued at Rs.8,16,035/- in respect of Taxol. The surveyor stated that only value-wise record was maintained and not quantitative details for chemicals had been maintained by the insured. The surveyor then concluded that the insured was trying to develop some product and was doing some kind of research work, wherein the commercial/stock value of the final product could not be determined. The surveyor also concluded that the said product would have value only if research/ development of the product was successful, which was however not established from the circumstances of the insured. Accordingly, the surveyor concluded as follows:
This proves that this product was in Research Stage and cannot be classified as a stock item. Moreover its value, if any is undeterminable keeping in view that it was under development stage wherein the costs could not be determined and even it is not sure at this stage whether final outcome could be marketable. Moreover in the case of the insured even the cost of the product is not determinable as the insured is not maintaining any records and has not submitted the cost evidence of Taxus Extract as well as the consumption evidences of chemicals and fuels etc. Moreover the sales realizations of the related products are also not proved.
Thus under the circumstances the loss/claim of the insured on account of Taxol is not established.
17. After examining the claim on Methoxsalene, the surveyor stated that the insured failed to establish the quantity of the item in hand before the loss with them. Regarding Chrysarobin, the surveyor stated that this item was not appearing in the detail of stocks in hand, as on 25.10.2005, as provided to them on the date of visit and was found to be incorporated afterwards manually by the insured. Accordingly, the surveyor did not recommend claim, regarding the loss of stock made by the claimant.
18. In the impugned order, the State Commission observed that they were satisfied with the relevant documents which were supplied by the complainant to the surveyor. The State Commission have however, not discussed the details as brought out in the report of the surveyor and have not given their findings, whether the information/documents supplied by the complainant were sufficient to substantiate the claim made by them. For example, on the observation of the surveyor that in respect of certain items, the stock register reflected the value of the stocks and not item-wise details, the State Commission had not gone into the details at all. While passing the impugned order, it was incumbent upon the State Commission to have analysed in depth the points raised in the report of the surveyor before reaching their conclusion that the entire amount claimed by the complainant was admissible. The State Commission have observed in their order as follows:
On an overall examination of the whole case, we are prima facie satisfied that the complainant has been able to establish its case regarding extent of loss sustained due to the fire that took place in its Unit on 25.10.2005, and as a result, it sustained loss in the sum of Rs.20,19,689/- which is supported from the material on the complaint file and there is nothing to rebut the same. Likewise conclusions arrived at by the Surveyor in Annexure R.1 cannot be upheld, therefore no benefit can be derived by the opposite party from this document.
19. It is not understood as to how the State Commission reached the conclusion that the complainant had been able to establish its case regarding incident of loss sustained due to fire on 25.10.2005 and that the claim of Rs.20,19,689/- is supported from record. The State Commission should have gone into the details worked out by the surveyor at each item and given the conclusion whether the valuations arrived at by the surveyor in respect of such items were justified or not.
20. The learned counsel for the complainant has placed reliance on an order passed by the Hon'ble Supreme Court in "Sri Venkateswara Syndicate Vs Oriental Insurance Company Limited & Anr., 2009 (8) SCC 507 in support of his arguments. It has been observed however in the said order of the Hon'ble Apex Court as follows:
The assessment of loss, claim settlement and relevance of survey report depends on various factors. Whenever a loss is reported by the insured, a loss adjuster, popularly known as loss surveyor, is deputed who assess the loss and issues report known as surveyor report which forms the basis for consideration or otherwise of the claim. Surveyors are appointed under the statutory provisions and they are the link between the insurer and the insured when the question of settlement of loss or damage arises. The report of the surveyor could become the basis for settlement of a claim by the insurer in respect of the loss suffered by the insured. There is no disputing the fact that the Surveyor/Surveyors are appointed by the insurance company under the provisions of 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.
21. It is amply made clear in the above judgment of the Hon'ble Apex Court that the report of the surveyor is the basis for consideration or otherwise, of the claim and there should be sufficient ground not to agree with the assessment made by the surveyor. While dealing with the consumer complaint, therefore, the State Commission should have carefully gone into the detailed report submitted by the surveyor in this case and then recorded their findings if there were valid and sufficient reasons to disagree with the same. In any case, the State Commission should not have allowed the entire sum claimed by the complainant in a mechanical manner, but based their conclusion on the basis of certain logical analysis of the same. The order passed by the State Commission is therefore, perverse in the eyes of law and deserves to be set aside.
22. It is further stated that the main component of the claim filed by the complainant is with regard to loss of stock valued at Rs.17.40 lakhs. Out of this figure, a sum of Rs.15.24 has been demanded for one item Taxol @ 1.20 lakh per kg. As agitated already, the surveyor reached the conclusion that the product was in research stage and cannot be classified as a stock item and it was not possible to determine its value as well. The surveyor also stated that the complainant had not submitted evidence of Taxus Extract as well as consumption evidence of chemicals or fuels etc. It is stated however, that it may not be justified to reject the claim made by the complainant for the stocks altogether. Whatever material, whether it was at research stage or as a final product, was lying at the premises of the claimant at the time of incident of fire, has to be evaluated in a proper manner. In the interest of justice, it is felt necessary that the claimant should be provided another chance to prove his claim with regard to the quantity and value of the material lying at their premises as stocks at the time of incident. The OP insurance company should make detailed evaluation, rather than rejecting the claim altogether and decide admissibility of such claim, after taking into account the evidence provided by the complainant.
23. With the above observations, it is deemed fit to remit the case back to the State Commission with the direction that they should decide the matter again, after giving the parties a chance of being heard again after filing documentary evidence etc., if any, and then take decision keeping into account the specific points raised in the report of the surveyor. The final figure for payment of the claim of the complainant should then be arrived at and the necessary orders passed accordingly.
24. Based on the discussion above, this appeal is allowed and the order passed by the State Commission is set aside. The matter is remitted back to the State Commission for taking a decision afresh, after carrying out the detailed analysis as stated above.
25. Parties are directed to appear before the State Commission on 18.10.2016.
...................... DR. B.C. GUPTA PRESIDING MEMBER