National Consumer Disputes Redressal
M/S. A.R. Fuels Pvt. Ltd. vs National Insurance Co. Ltd. & Anr. on 23 January, 2017
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 312 OF 2009 (Against the Order dated 30/06/2009 in Complaint No. 24/2007 of the State Commission Rajasthan) 1. M/S. A.R. FUELS PVT. LTD. - ...........Appellant(s) Versus 1. NATIONAL INSURANCE CO. LTD. & ANR. Branch Office Khaitan Bhawan, M.I. Road Jaipur Rajasthan 2. BANK OF BARODA Branch Manager, VKI Industrial Area Jaipur Rajasthan ...........Respondent(s) FIRST APPEAL NO. 382 OF 2009 (Against the Order dated 30/06/2009 in Complaint No. 24/2007 of the State Commission Rajasthan) 1. NATIONAL INSURANCE CO. LTD. Through Manager,
Delhi Regional Office-I, Jeevan Bharti Tower-II, Level-IV, 124, Connaught Circus New Delhi - 110 001 ...........Appellant(s) Versus 1. A.R. FUELS PVT. LTD. Through Managing Director, 33, Lal Singh Judo Colony, Narain Nagar, Gopalpura Bye Pass Jaipur Rajasthan ...........Respondent(s) BEFORE: HON'BLE MR. PREM NARAIN,PRESIDING MEMBER For the Appellant : Mr. Hemant Malhotra, Advocate Mr. K.T.S.Kalra, Advocate Mr. Sukhbir Singh, Advocate Mr. Pankaj Malhotra, Advocate For the Respondent : For the Respondent No.1: Mr. Sandeep Bisht, Advocate For the Respondent No.2: Mr. Pankaj Singhal, Advocate Dated : 23 Jan 2017 ORDER
1. By way of the present cross appeals, the parties seek to assail the order dated 30.06.2009 passed by the Rajasthan State Consumer Disputes Redressal Commission, Jaipur in Complaint Case No. 24/2007.
2. The brief facts of the case are that the complainant Company is involved in the business of manufacturing coal using raw materials such as mustard husk, saw dust, ground nut shell etc., which are directly procured from the suppliers and stored in the godown of the complainant. During the course of its business, the complainant had vailed business loans from the O.P. No.2, which had sanctioned a cash credit limit of Rs.10 lakhs and term loan of Rs. 20 lakhs. As required by O.P. No. 2 and as a prudent business organization, the complainant insured it's factory for Rs. 30,00,000/- only with O.P. No.1 under Policy No. 3701111/11/06/310000055, with period of validity being 31.5.2006 to 30.5.2007. The risk cover given by the O.P. No.1 was for the Stock of Ground Nut Cell, Mustard Husk, Saw Dust'. On 18.10.2006, there was an outbreak of fire in the factory premises of the complainant resulting in a loss of stock worth Rs.25,00,000/-. The information of the outbreak of fire was duly informed to the O.P. Nos. 1 and 2 , and the District Administration. The government fire brigades were engaged to extinguish the fire. The complainant lodged the FIR on 19.10.2006. The complainant gave O.P. No.2 all information in writing. Meanwhile, the complainant presented his claim to the O.P. No.1 regarding loss from fire and enclosed all the relevant documents. O.P. No.1 appointed a surveyor, who made frequent visits to the factory premises of the complainant Company. Meanwhile, the complainant's Managing Director made frequent visits to the office of O.P.No.1 to receive claim for Rs.22,21,842/- only on account of actual loss suffered by the complainant Company which was assessed and computed by the Complainant on the basis of the actual purchase price of the raw materials/stock as per the statements and records which were duly submitted by the complainant to the O.P. No. 2 from time to time. Subsequently, the Surveyor report was submitted on 26.02.2007 and the loss assessed was Rs. 5,94,186/-. However, on 16.05.2007, the claim of the complainant was rejected by the O.P. No.1 and one of the reasons for the rejection was that the complainant failed to produce the essential documents before the O.Ps. and the cause of loss was stated to be spontaneous combustion and the policy was not extended for the same.
3. Aggrieved by the rejection of claim by O.P. No. 1, the complainant approached the State Commission by filing consumer complaint No.24/2007. The State Commission vide order dated 30.06.2009 held as follows:-
"24. For the reasons stated above and in view of the discussions made above, this complaint deserves to be allowed against opposite party no.1, the Insurance Company in the manner that the complainant is entitled to get a sum of Rs.5,94,186/- the amount as assessed by the surveyor appointed by the insurance company alongwith interest at the rate of 9% p.a. from the date of filing of the complaint i.e. 30.8.2007 till the payment is made and apart from this the complainant is also entitled to get a sum of Rs.25,000/- as cost of litigation.
Accordingly, this complaint filed by the complainant is allowed against the opposite party no.1, the Insurance Co.in the manner and the opposite party no.1 the National Insurance Co. Ltd., Br. Office Khaitan Bhawan, M.I.Road, Jaipur is directed to pay to the complainant a sum of Rs.5,94,186/- the amount as assessed by the surveyor for the loss of goods due to fire alongwith interest at the rate of 9% p.a. from the date of filing of the complaint i.e. 30.8.2007 till the payment is made and also a sum of Rs.25,000/- as cost of litigation but the complaint against opposite party no.2 shall remain dismissed".
4. Aggrieved by the aforesaid order, cross appeals have been filed by both parties i.e. the complainant and O.P. No.1 before this Commission.
5. Heard the parties and perused the record. For identification purposes, the parties will be referred to as the complainant and the opposite party No.1 and 2.
6. The learned counsel for the complainant stated that the surveyor appointed by the Insurance Company has assessed the loss as Rs.5,94,186/-, whereas, the actual loss was for Rs.22,21,842/- as was claimed by the complainant. First of all, it was asserted by the learned counsel that the contention of the Insurance Company that fire was due to spontaneous combustion, which is excluded, is not borne out by the facts of the case. It was also stated that risk coverage under the policy was for mustard husk, saw dust and ground nut cell (perhaps it should be shell) and none of these items catch fire due to spontaneous combustion. The Insurance Company has not filed or produced any literature, which claims that spontaneous combustion can occur in these raw materials. The surveyor in his report has wrongly mentioned and added the word 'hey' along with husk, which is his own creation of mind and is not a subject matter of the policy. There was no hey present in the stock and that is why it was not covered under the policy also. The learned counsel also produced some literature from Wikipedia showing that sometimes 'hey' can catch fire due to spontaneous combustion, but this is not the cause in the present dispute because no hey was required to be put in the stock and the same was not covered under the policy. The surveyor has nowhere specifically mentioned that hey was also kept with the husk, whereas, he knew that they are separate things and are distinguishable. The surveyor in his affidavit dated 26.08.2007 has also clearly stated that it was a hay fire caused by spontaneous heating. He has also enclosed two articles on hay fire along with his affidavit. The learned counsel raised the question that why the surveyor has referred to a hay fire when there was no hay in the storage and neither the policy covers hay nor it is required as a raw material. Thus, story of fire produced by spontaneous combustion has been an imaginary thought of the surveyor for which no evidence has been adduced by the Insurance Company.
7. The complainant also emphasised that the stocks of the complainant's company were hypothecated to the bank and regular statements were submitted to the bank. However, the State Commission has not considered these statements while arriving at the figure of loss. Apart from this, the surveyor has only assessed the loss on valuation of the stock (mainly the purchase price) and the transportation cost has not been taken into account, which also involved huge amount of money. The learned counsel further mentioned that the fire in question continued on the spot for several days and could be controlled with great difficulty, therefore, the observation of the surveyor that he did not find the burnt material on the spot as per the claim of the appellant was illogical, impracticable and unbelievable.
8. It was also pointed out by the counsel for the complainant that because of the material covered under the policy not being susceptible to catch fire due to spontaneous combustion, the fire may have been caused by any other reason like throwing some Beedi or cigarette. In this regard, he also mentioned that surveyor also in his report has stated that the cause of fire given by the labourers is that fire took place as a result of Beedi, Cigarette on the husk/hay. Thus, it cannot be categorically said and even the surveyor has not categorically stated so that the fire was definitely caused by spontaneous combustion. The learned counsel further stressed that when the cause of fire is not conclusively known, it cannot be covered under the exclusion without any proof. In this regard, the counsel referred to the case of The National Insurance Company Ltd. Vs. M/s. Hari Om Marketing And M/s. Hari Om Marketing Vs. The National Insurance Company Ltd.; First Appeal No. 216 of 2009 and 431 of 2009, wherein this Commission has held as follows:-
" 11. It would emerge from a careful reading of the aforesaid para that while the damage/loss on account of fire is allowed, the destruction or damage caused to the property insured by its own fermentation, natural heating or spontaneous combustion is excluded by this general clause. It is thus clear from the words used in the para that only destruction or damage caused by own fermentation, natural hearing or spontaneous combustion is excluded. In other words, as long as there is outbreak of fire and there is loss/damage to the property insured, it shall be covered irrespective of the reason leading to such fire because fire by itself is not excluded. In this view of the matter, we find that the general exclusion clause relied upon by the insurance co. shall not apply to the present case. It may be relevant to mention here that there are goods and commodities where the possibility of such loss/damage cannot be ruled out such as molasses, oilseeds, etc. where there can be damage or destruction by its own fermentation, natural heating or spontaneous combustion without outbreak of fire. In such cases, the exclusion clause can be made applicable if the damage/destruction has taken place on account of acts named in the clause but without outbreak of fire. It is, therefore, not uncommon to see that depending on the nature of goods/commodities, the companies do take policy which specifically cover not only fire but destruction or damage caused on account of own fermentation, natural heating or spontaneous combustion as well. In the present case, it is important to note that while there is an indication regarding the covered stocks being moderately or slightly combustible, the exact cause of fire is not known.
12. ..... it is clear and established beyond doubt that there was outbreak of fire but its cause could not be established. This being the position, even if the applicability of the general exclusion clause as pleaded by the counsel for the appellant Co. is considered, two things will have to be established beyond doubt to repudiate the claim of the complainant on this ground. Firstly, it will have to be established that the damage was caused by spontaneous combustion and secondly, it will also have to be established that the entire damage was on account of that spontaneous combustion alone and not because of the moderately or slightly combustible nature of the goods covered which might have contributed to the outbreak of fire. Since none of the two aspects are established beyond doubt by the surveyor's report, we cannot accept the arguments of the appellant's counsel to support the repudiation of the claim. Mere suspicion or doubt cannot take the place of proof".
9. The Complainant has further submitted the following judgements in support of his case:-
(i) Consumer Education and Research Society & Anr. Vs. Iffco-Tokio General Insurance Co. Ltd. & Anr. II(2013) CPJ 142(NC);
(ii) Roshan Lal Oil Mills Ltd Vs. United India Insurance Co. Ltd., III(2008) CPJ 137(NC);
(iii) Saraya Sugar Mills Ltd. Vs. United India Insurance Co. Ltd., II(1996) CPJ 6(NC). In all these three cases, this Commission had allowed the claim for spontaneous combustion.
10. On the other hand, the learned counsel for the opposite party No.1 stated that Section II Clause (I) (a)(i) clearly specifies exclusion of Fire due to spontaneous combustion. The surveyor appointed by the Insurance Company has clearly stated in his report under the column 'Proximate Cause of Loss' that in the freshly mustered crop hay, always gasses formation remained a continuous process and soon when came in contact in showers/rain/wet due to water, the hay became wet and such moisture provided a very suitable environment for the growth and multiplication of temperature that may have reached upto 130 F to 140 F which after multiplication increased upto 175 F. In such a situation, the fire took place at number of patches. Due to this technical reason the fire which was developed spontaneously further enveloped large portion of hay. Based on the surveyor's report, letter dated 16.05.2007 was sent to the complainant informing that his claim was closed due to following reasons:-
"Since the proximate cause of loss was spontaneous combustion & policy was not extended same hence said claim is beyond the scope of the policy and stand repudiated."
11. It was vehemently argued by the learned counsel for the opposite party No.1 that when this case is clearly covered under the exclusion in the policy itself, then the claim cannot be allowed in any form. Surveyor was duty bound to assess the loss, however, he has clearly stated the following:-
"XII. Liability of Insurer We have assessed loss of the extent of Rs.5,94,186.00/- subject to terms & condition of policy. Now this is upto insurer to decide their liability, as it is a spontaneous combustion & as per policy in reference the spontaneous combustion is not covered."
12. Thus, the learned counsel asserted that the surveyor has clearly opined that the claim was not payable as per the terms and conditions of the policy. The repudiation by the Insurance Company is thus, totally justified. The learned counsel for the Opposite Party No.1 has submitted the following judgements in support of his arguments:-
(i) H.C. Saxena Vs. New India Assurance Co. Ltd. & Anr., I (2012) CPJ 420 (NC) "10. Besides the above observations, the official surveyor has also given comparative assessment in respect of each item in his report which would indicate as to why the extent of damage, according to him is to the tune of Rs. 42,276/- only. In such a situation, it was for the petitioner to furnish necessary information to the official surveyor deputed by the respondent-company. We do not see anything wrong in the petitioner to have approached a Surveyor to assess the loss but it does not mean that the information required by the other Surveyor officially deputed by the insurance company in terms of the provisions of law should not be furnished. In fact, when the complainant/petitioner had already received the report of the first Surveyor and was in the know of the basis of assessment, he was in a better position to convince the official Surveyor to assess the loss in the manner which the complainant considered appropriate but rather than doing so, he chose to simply rely on the report of the private Surveyor. The District Forum committed grave error in discarding the assessment done by the official surveyor without giving adequate reasons for such a view. We agree with the counsel for the respondent that the report of the Surveyor appointed under the provisions of law is an important document and cannot be brushed aside without any compelling evidence to the contrary"
(ii) Chanan Preet Singh Vs. United India insurance Co. Ltd. & Ors., I (2012) CPJ 341(NC) "12. The report of the Surveyor is an important, valuable and reliable document and cannot be brushed aside lightly without any material to the contrary on record. Thus, it is clear that the Surveyor's Report is admissible and according to the Surveyor's Report, the appellant/complainant suffered loss of Rs. 1,43,750. In the insurance policy, the value of the vehicle in question was mentioned as Rs. 7,25,000 at the time of the insurance, therefore, it is established that the Insured Declared Value of the vehicle in question is Rs. 7,25,000".
(iii) Nakipuria Oil Mills Vs. National Insurance Co. Ltd. & Ors, II (2013) CPJ 637 (NC) "9. We agree with the view taken by the State Commission that the Surveyor had given detailed reasons in his report to assess the loss at Rs. 7,08,675. The report of the Surveyor is a vital and important piece of evidence and the same cannot be ignored or discarded in the absence of any evidence to the contrary showing that the loss was more than what had been assessed by the Surveyor. Appellant failed to adduce any evidence to substantiate that the loss suffered by it was more than what was assessed by the Surveyor. Onus to prove that the loss was more than what had been assessed by the Surveyor was on the appellant which it failed to discharge by leading cogent evidence. In the absence of any evidence to prove that the loss was more than what was assessed by the Surveyor, the report submitted by the Surveyor cannot be ignored or rejected.
We do not find any infirmity in the order passed by the State Commission. For the reasons stated above, we do not find any merit in this appeal and dismiss the same leaving the parties to bear their own costs".
(iv) Sri Venkateswara Syndicate vs. Oriental Insurance Company Limited & Anr", (2009) 8 SCC 507, wherein the following has been observed:
"31. The assessment of loss, claim settlement and relevance of survey report depends on various factors. Whenever a loss is reported by insured, a loss adjuster, popularly known as loss surveyor, is deputed who assesses 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.
32. There is no disputing the fact that the 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. We also add, that, under this Section 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 the surveyors is not acceptable, the insurer has to give valid reason for not accepting the report."
(v)United India Insurance Co. Ltd. and Others v. Roshan Lal Oil Mills Ltd. and Others, (2000) 10 SCC 19 "7. The appellant had appointed joint surveyors in terms of Section 64-UM(2) of the insurance Act, 1938. Their report has been placed on the record in which a detailed account of the factors on the basis of which the joint surveyors had come to the conclusion that there was no loss or damage caused on account of fire, was given and it was on this basis that the claim was not found entertainable. This is an important document which was placed before the Commission but the Commission, curiously, has not considered the report. Since the claim of the respondent was repudiated by the appellant on the basis of the joint survey, the Commission was not justified in awarding the insurance amount to the respondent without adverting itself to the contents of the joint survey report specially the factors enumerated therein. In our opinion, non-consideration of this important document has resulted in serious miscarriage of justice and vitiates the judgment passed by the Commission. The case has, therefore, to be sent back to the Commission for afresh hearing."
13. On behalf of the Opposite Party No.2, the learned counsel stated that O.P. 2 supports the claim of the complainant.
14. I have carefully considered the arguments advanced by both the parties and have gone through the records. The repudiation of the Insurance Company is based on Section II Clause (I) (a) (i), which reads as follows:-
"I. Fire Excluding destruction or damage caused to the property insured by
(i) Its own fermentation, natural heating or spontaneous combustion."
15. It is an admitted fact that the risk covered under the policy is coal/coke/charcoal ball & briquettes Manufacturing. Description of risk is on stock of ground nut cell, mustard husk, and saw dust. It is clear from this list that 'hay' is not covered in the description of risk. The surveyor has introduced the word 'hay' along with 'husk' in his report while mentioning his observations and also while giving the proximate cause of fire. However, the surveyor has not objected to the storage of 'hay', which was not a covered item under the description of risk under the policy as no such objection is seen from the report of the surveyor, though the surveyor was aware that 'hay' is a prone material for spontaneous combustion as he has filed some literature in respect of 'hay fires prevention and control' along with his affidavit dated 26.08.2008. Thus, it becomes clear that the word 'hay' has been introduced in his report by the surveyor just to confuse the issue and to generate ideas for repudiation of the claim. He has not considered the other clue given to him by the labourers for proximate cause of the fire. His observation in respect of proximate cause of fire reads as follows:-
"Proximate Cause of Loss:
The cause of the fire given by the labour is that fire took place as a result of Beedi, Cigarette on the husk/hay.
However, we carefully examined the cause of fire and noticed that in the freshly mustered crop hay always guesses formation remain a continue process and soon when came in contact in showers/rain/wet due to water the hay become wet and such moisture provide a very suitable environment for the growth and multiplication of temperature may reached upto 130 F to 140 F which after multiplication increased upto 175 F. In such a situation the fire took place at number of patches. Due to this technical reason the fire which was developed spontaneously further enveloped large portion of hay. We have also been informed by the insured that small fires number of time took place during the year, however they themselves control it at their level. This statement of the insured also strengthen our above conclusions on the proximate cause of loss."
16. From the above observations, it clearly comes out that some of the local labourers had expressed the apprehension that the fire may have been caused by Beedi or Cigarette, which was not considered by the surveyor and he has not categorically disproved the occurrence of such a cause.
17. From the above examination, it is clearly brought out that the finding of the surveyor that fire was a result of spontaneous combustion cannot be sustained as a definite cause of fire to give the advantage of the exclusion cause in the policy to the Insurance Company. The three judgments referred to by the learned counsel for the complainant viz (i)Consumer Education and Research Society & Anr. Vs. Iffco-Tokio General Insurance Co. Ltd. & Anr.(supra) (ii)Roshan Lal Oil Mills Ltd Vs. United India Insurance Co. Ltd., (supra) and (iii)Saraya Sugar Mills Ltd. Vs. United India Insurance Co. Ltd., (supra) relate to the cases, where the additional premium has been paid for the spontaneous combustion, whereas, in the instant case no such additional premium has been paid. Thus, the facts being different, these judgments are not directly applicable to the present case, though they establish that insurance claim can be settled even in such cases. The case of The National Insurance Company Ltd. Vs. M/s. Hari Om Marketing And M/s. Hari Om Marketing Vs. The National Insurance Company Ltd.; (supra) clearly supports the case of the complainant.
18. So, from the above analysis, it is clearly brought out that the claim is covered under the policy. Now its quantum is to be determined. Under the Insurance Act, 1938, the Insurance Companies are authorised and duty bound to appoint surveyors/loss assessors and in this particular case also a surveyor was appointed and he submitted his report dated 26.02.2007 to the Insurance Company. The complainant has claimed a sum of Rs.22,81,842/-, whereas, the surveyor has assessed the loss of Rs.5,94,186/-. The surveyors have technical knowledge and are conversant with specific methods of survey and their report is generally accepted until there are cogent reasons to dispute the same.
19. The judgments referred to by the learned counsel for opposite party No.1 have clearly established that the report of the surveyor's survey is an important document for settlement of the claim and cannot be brushed aside without any cogent reasons. Further, the Hon'ble Supreme Court in Sikka Papers Limited Vs. National Insurance Company Limited and Ors., (2009) 7 SCC 777, has laid down that:-
"Insurance Act, 1938,- S. 64-UM- Surveyor/Loss assessor's report- Weightage to be given- Held, Though not the last word, yet there must be legitimate reason for departing from report- No infirmity found in surveyor's report and therefore held, Insurance Company rightly admitted claim as per the report."
20. The complainant has not been able to show in detail any discrepancy or major shortcoming in the report of the surveyor and hence, no ground is made out to ignore the surveyor's report so far as it relates to the assessment of the loss.
21. From the above discussion, I find that the State Commission has rightly appreciated the facts, evidence and the law in the present case and I feel no need to interfere with the order dated 30.06.2009 passed by the State Commission. Accordingly, both the appeals i.e. First Appeal No.312 of 2009, M/s. A.R. Fuels Pvt. Ltd. Vs. National Insurance Co. Ltd. & Anr. and First Appeal No.382 of 2009, National Insurance Co. Ltd. Vs. M/s. A.R. Fuels Pvt. Ltd. are dismissed having no merits.
...................... PREM NARAIN PRESIDING MEMBER