National Consumer Disputes Redressal
M/S. Durga Intermediates vs United India Insurance Co. Ltd. on 6 September, 2022
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 287 OF 2014 1. M/S. DURGA INTERMEDIATES Through it's Proprietor Smt. B.H. Durga, Registered Office, Sy. No. 298, Plot No. 1-173/1/a, Phase I, IDA., Jeedimetla, Hyderabad - 500 055, Telangana ...........Complainant(s) Versus 1. UNITED INDIA INSURANCE CO. LTD. V,2/A Vengalrao Nagar, Hyderabad - 500 038. ...........Opp.Party(s)
BEFORE: HON'BLE MR. JUSTICE RAM SURAT RAM MAURYA,PRESIDING MEMBER
For the Complainant : Ms. Anjali Bansall, Advocate For the Opp.Party : Ms. Nanita Sharma, Advocate
: Mr. Faeek-ul-Farooq, Advocate
Dated : 06 Sep 2022 ORDER
1. Heard Ms. Anjali Bansall, Advocate, for the complainant and Ms. Nanita Sharma, Advocate, for the opposite party.
2. M/s. Durga Intermediates (the Insured) has filed above complaint for directing M/s. United India Insurance Company Limited (the Insurer) to pay (i) Rs.23295983/- with interest @24% per annum, from 16.05.2010 till the date of payment, as the insurance claim, (ii) Rs.10/- lacs, as the compensation for financial loss, mental agony and harassment, (iii) cost of litigation; and (iv) any other relief, which is deemed fit and proper, in the circumstances of the case.
3. The facts, as stated in the complaint and emerged from the documents attached with the complaint, are as follows:-
(a) M/s. Durga Intermediates (the complainant) (the Insured) was a proprietorship firm and engaged in the business of manufacture and sale of bulk drug intermediates, potassium sulphate and sodium sulphate, methylethylidene etc. using materials with a flash point below 32'C. Its factory was located at Sy.No.298, Plot No.1-173/1-A, Pipe Line Road, Phase-1, I.D.A., Jeedimelta Village, Qutbullapur Mandal, Ranga Reddy, Hyderabad, in which, 14 reactors were installed for manufacture. Stock of raw materials, finished, semi-finished goods including packing materials were stored there.
(b) The United India Insurance Company (the Insurer) is a Public Insurance Company and engaged in the business of providing different types of insurance services to the general public. The Insured obtained 'Standard Fire and Special Perils Policy' No.050500/11/09/11/00001040, for a sum of Rs.6.82/- crores (i.e. Rs.1.32/- crore on Building, Rs.3.41/- crores on Plant, Machinery & Accessory, Rs.27.50/- lacs on Lab, R & D Equipment, Rs.5.50/- lacs on Furniture, Fixtures etc., Rs.1.21/- crore on Stock of raw materials, finished semi-finished goods including packing materials and Rs.5.50/- lacs on Job Work Stock), lying in factory premises, for a period of 25.12.2009 to 24.12.2010, from the Insurer.
(c) On 16.05.2010 around 7:45 hours, a blast took place in the vacuum distillation assembly, due to malfunctioning of a valve, which erupted fire, in the factory premises of the Insured. The erupted fire spread to other areas, where solvents such as acetone, petroleum, ether ect. were stored. As the solvents used in the factory were highly inflammable, the fire spread all over the factory premises instantly and took devastating nature, in which, factory building, fixtures, plant & machinery and stocks were burnt and damaged. In this mishap, 4 workmen died on the spot, 4 workmen and one outsider were burnt/injured. P. Pravinder Rao, Sub-Inspector of Police lodged FIR No.336/2010, u/sec. 304-A, 337, 338, 285 IPC and sec. 3 & E.S. Act, 1908 on 16.05.2010 at 13:30 hours at Police Station Jeedimelta of the incident. Inspector of Factories, Jeedimelta Circle also filed a criminal complaint (registered as S.T.C. No. 109 of 2010) before concerned Magistrate on 30.06.2010, in which, Smt. B.H. Durga, the proprietor of the Insured confessed her guilt and convicted by the order dated 17.03.2011.
(d) The insured informed the Insurer about fire incident and consequent loss. The Insurer appointed P.S. Ramnathan, Coimbatore, as the surveyor, who inspected the factory premises of the Insured, took photographs of affected building, plant & machinery, stock and verified the loss. The Insured submitted various papers for assessment of loss to the surveyor. As directed by the surveyor, the Insured submitted a claim form on 18.08.2011, on printed proforma, claiming Rs.53742937/-, which included Rs.1.21/- crore, for own Stock and Rs.55/- lacs for Job Work Stock.
(e) The Insurer appointed M.V. Radhakrishnan on 14.09.2011, to investigate the genuineness of the papers of own Stock and Job Work Stock. M.V. Radhakrishnan, after investigation, submitted his investigation report dated 28.11.2011, in which, he could verify the loss of total stock to Rs.4806143/- as against Rs.17643041/- claimed by the Insured. He further submitted that payment to third parties for Job Work Stock, for which Rs.55/- lacs was claimed by the Insured, was not proved. When the Insured was confronted with the fact that her claim for stock was exaggerated and based on fabricated papers and salvage of approximately of Rs.54/- lacs was disposed by her, then she gave a Consent Letter dated 29.12.2011, for Rs.23295983/- as full and final settlement of her claim. The surveyor submitted Final Survey Report dated 31.05.2012, stating that the loss had occurred due to accidental fire (an insured peril) and recommended to settle the claim for Rs.23295983/- as agreed.
(f) Then all the papers were examined by the competent authority of the Insurer. Senior Divisional Manager of the Insurer, vide letter dated 18.07.2012, sought papers of renewal of (i) Municipal Trade Licence and (ii) Pollution Control Board and the papers relating to Licence obtained under Factories Act, 1948 for running factory. The Insured vide letter dated 19.07.2012, replied that as the Insured had taken licence from Department of Industry as such Municipal Licence was not required; The Insured applied for renewal of licence of Pollution Control Board on 23.10.2010, which had not been processed; and Factory Department had permitted for installation of 9 reactors but 14 reactors were installed. The Insurer, vide letter dated 24.09.2012, demanded Licences of Industry Department and Inspector of Factory under Factories Act, 1948. The Insured vide letter dated 24.09.2012, replied that Factory Department had sanctioned Building Plan of the factory on 27.03.2006 and renewal fee was deposited vide Challan dated 26.12.2009.
(g) The Insurer again, vide letter dated 08.11.2012, sought for various clarifications. The Insured, vide letter dated 21.11.2012, replied that initial permission was granted for installation of 9 reactors but 14 reactors were installed as per need. The Insured, vide Letter dated 31.12.2012, informed that Factory Building Drawing was approved by Factory Inspector on 18.03.2006 and Factory Licence fee was paid up to 31.12.2010. After considering all the papers, the Insurer, vide letter dated 22.01.2013, repudiated the claim on the ground of violation of Condtions-1, 6 & 8 of Terms and Condition of the policy namely that (i) Factory was being run without any licence from Factory Department, for running the factory. (ii) Licence of Pollution Control Board expired on 31.03.2010. (ii) Municipal Trade Licence was for carrying trade and not for manufacture. (iv) The claim was exaggerated and based upon fabricated papers; and (v) The Insured was manufacturing hazardous chemicals without licence and permission and without taking any safety measure.
(h) The Insured vide letter dated 28.01.2013, demanded for Investigator Report and Report of Inspector of Factory. Thereafter, the Insured made representations dated 07.02.2013 and 08.04.2013. The Insurer, vide letter dated 29.05.2013 informed that her claim had been repudiated; if she was not satisfied she may approach to Insurance Ombudsman. The Insured approached Grievance Cell on 22.05.2013. The Insured made a representation to Chairman of the Insured on 11.03.2014 and filed this complaint on 07.08.2014, claiming deficiency in service on the part of the Insurer.
4. The Insurer filed its written reply on 10.12.2014 and contested the complaint. The facts of obtaining 'Standard Fire and Special Perils Policy No.050500/11/09/11/00001040, for a sum of Rs.6.82/- crores for a period of 25.12.2009 to 24.12.2010, from the Insurer and incident of blast and consequent fire on 16.05.2010 around 7:45 hours, due to malfunctioning of a valve, which erupted fire, in the factory premises of the Insured, appointment of the surveyor and the Investigator and their reports and repudiation of claim vide letter dated 22.01.2013 are not disputed. It is stated that the Insurer appointed M.V. Radhakrishnan on 14.09.2011, to investigate the genuineness of the papers of own Stock and Job Work Stock. M.V. Radhakrishnan, after investigation, submitted his investigation report dated 28.11.2011, in which, he could verify the loss of total stock to Rs.4806143/- as against Rs.17643041/- claimed by the Insured. He further submitted that payment to third parties for Job Work Stock, for which Rs.55/- lacs was claimed by the Insured, was not proved. When the Insured was confronted with the fact that her claim for stock was exaggerated and based on fabricated papers and salvage of approximately of Rs.54/- lacs was disposed by her, then she gave a Consent Letter dated 29.12.2011, for Rs.23295983/- as full and final settlement of her claim. Deputy Chief Inspector of Factories visited the spot after the incident and submitted a letter dated 07.06.2010 to Assistant Commissioner of Police, Hyderabad informing that the Insured was running factory without having a licence from Factories Department and without adopting required safety measure. The Insurer, vide letters dated 18.07.2012 and 24.09.2012, demanded the papers of renewal of (i) Municipal Trade Licence and (ii) Pollution Control Board and the papers relating to Licence obtained under Factories Act, 1948 for running factory. But these papers were not supplied. As such the claim was repudiated. There was no deficiency in service on the part of the Insurer.
5. The Insured filed Rejoinder Reply on 20.02.2015, documentary evidence and Affidavit of Evidence of K. Srinivasa Rao, the Manager and Affidavit of Admission/Denial of Documents of Smt. B.H. Durga. The Insurer filed Affidavit of Evidence of Rakesh Kumar, Assistant Manager and Affidavit of Admission/Denial of Documents of Mathiut Singh. Both the parties filed their short synopsis.
6. I have considered the arguments of the counsel for the parties and examined the record. The Insurer repudiated the claim, vide letter dated 22.01.2013, on the ground of violation of Condtions-1, 6 & 8 of Terms and Condition of the policy namely that (i) Factory was being run without any licence from Factory Department, for running the factory. (ii) Licence of Pollution Control Board expired on 31.03.2010. (ii) Municipal Trade Licence was for carrying trade and not for manufacture. (iv) The claim was exaggerated and based upon fabricated papers; and (v) The Insured was manufacturing hazardous chemicals without licence and permission and without taking any safety measure. Clauses 1, 6 & 8 of General Conditions of Standard Fire and Special Perils Policy are quoted below:-
"1. The policy shall be voidable in the event of misrepresentation, mis-description or non-disclosure of any material particular.
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) 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 loss or damage thereto respectively having regard to their 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 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 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.
8. If the claim be in any respect fraudulent, or in any false declaration be made or used in support thereof or 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 occasioned by the wilful act, or with the connivance of the insured, all benefits under this policy shall be forfeited."
7. The Insured claimed Rs.17643041/- for its own Stock and stock of Job Work. The Insurer appointed M.V. Radhakrishnan to investigate the genuineness of the papers/claim of own Stock and Job Work Stock. The Investigator, after investigation, submitted his Report dated 28.11.2011, in which, he could verify the loss of total stock to Rs.4806143/- as against Rs.17643041/- claimed by the Insured. He further submitted that payment to third parties for Job Work Stock, for which Rs.55/- lacs as claimed by the Insured, was not proved. When the Insured was confronted with the fact that her claim for stock was exaggerated and based on fabricated papers and salvage of approximately of Rs.54/- lacs was disposed by her, then she gave a Consent Letter dated 29.12.2011, for Rs.23295983/- as full and final settlement of her claim. In the complaint also, the Insured has not challenged the findings of the Investigator. Exaggeration of the claim and filing of fabricated papers are proved. As such violation of clauses-1, 6 and 8 of General Condition is proved.
8. The Insurer, vide letters dated 18.07.2012 and 24.09.2012, demanded the papers of renewal of (i) Municipal Trade Licence and (ii) Pollution Control Board and (iii) Licence obtained under Factories Act, 1948, for running factory. But these papers were not supplied. The Insured in representations dated 07.02.2013 and 08.04.2013 (pages-96 & 108 of the complaint) admitted that it was true that they were running factory without any valid licence as on date of loss. But they took plea that they had applied for permission of Inspector of Factories, when the factory was re-commissioned, who asked to obtain a report of Civil Structural Engineer regarding stability of structure. They had been in touch of Civil Structural Engineer for obtaining certificate of stability of the structure. They have also deposited renewal fee. Inspector of Factories had not stopped them from running the factory.
9. As against their own admission that they had no licence for running the factory as required under Factories Act, 1948 and Andhra Pradesh Factories Rules, 1950, in the representations dated 07.02.2013 and 08.04.2013, a false and misleading statement has been made paragraph-3 of the complaint that the Insured had obtained all the licences, including licence under Factories Act, 1948. The Insured obtained Order No. D.Dis.D1/JM/24053/2005 dated 18.03.2006, from Director of Factories, A.P., approving Layout Plan of the Factory. Rule 4 (6) of Andhra Pradesh Factories Rules, 1950, imposes a restriction of running factory without obtaining licence in this respect. After completion of construction of the factory, the Insured applied for Registration and Grant/Transfer of Licence and Notice of Occupation in January, 2009 (page-29 of the complaint), on which, the Insured was required to obtain "Certificate of Stability" of the structure from Civil Structural Engineer, which could not be obtained till the date of incident. Although it is alleged that renewal fee was deposited on 26.12.2009 but "Certificate of Stability" of the structure was a necessary document for issue of licence, which had not been provided. The form for licence to run the factory was incomplete as such the provision of deemed issue of licence will not apply. In the application form, itself it has been specifically mentioned that form should be sent one month prior to commencement of manufacturing process. Finding of the Insurer that the factory was run without having licence for running factory under Factories Act, 1948, does not suffer from any illegality.
10. Inspector of Factories, Jeedimelta Circle filed a criminal complaint (registered as S.T.C. No. 109 of 2010) before concerned Magistrate on 30.06.2010, of this incident, in which, Smt. B.H. Durga, the proprietor of the Insured confessed her guilt and convicted by the order dated 17.03.2011. As such it is proved that the Insured was running factory without having licence to run and without adopting safety measure as required under Andhra Pradesh Factories Rules, 1950. Supreme Court in United India Insurance Company Limited Vs. Sushil Kumar Godara, 2021 SCC OnLine SC 844, held that if the Insured was violating the law then insurance benefit is liable to be forfeited, irrespective of the fact that cause of loss had no relevance to such violation of law.
ORDER
In view of the aforesaid discussions, the complaint is dismissed.
......................J RAM SURAT RAM MAURYA PRESIDING MEMBER