National Consumer Disputes Redressal
M.K.U. Private Ltd. vs United India Insurance Company Limited on 21 February, 2019
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 132 OF 2008 1. M.K.U. PRIVATE LTD. 13 Gandhi Gram G.T. Road, Kanpur ...........Complainant(s) Versus 1. UNITED INDIA INSURANCE COMPANY LIMITED ARIF CHAMBERS, 1st & 2nd FLOOR, KAPOORTHALA COMPLEX, ALIGANJ, LUCKNOW - 226 020 2. SHRI G.SRINIVASAN CHAIRMAN-CUM-MANAGING DIRECTOR, UNITED INDIA INSURANCE COMPANY LIMITED, REGIONAL OFFICE KAPOORTHALA COMPLX, 1st AND 2nd FLOOR, KAPOORTHALA COMPLEX, ALIGANJ, LUCKNOW -226 020 3. THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY Parishram Bhavan 5-9-58B 3rd Floor Bashir Marg Hyderabad-500004 4. UNION OF INDIA SERVICE THROGH SECRETARY,
MINISTRY OF FINANCE, DEPARTMENT OF ECONOMIC AFFAIRS, JEEVAN DEEP BUILDING, PARLIAMENT STREET, NEW DELHI - 110 001. ...........Opp.Party(s)
BEFORE: HON'BLE MRS. JUSTICE DEEPA SHARMA,PRESIDING MEMBER
For the Complainant : Shri Venkatesh, Mr. Varun
Singh and Mr. Somesh
Srivastava, Advocates For the Opp.Party : Mr. Kishore Rawat and
Mr. Prashant Bhardwaj, Advocates
Dated : 21 Feb 2019 ORDER
1. The present Complaint, Under Section 21 of the Consumer Protection Act, 1986 (for short "the Act"), has been filed stating therein that the Complainant, earlier known as M. Kumar Udyog Private Limited, is now known as M. K. U. Private Limited w.e.f. 24.06.2016, purchased an insurance coverage vide policy No.000001/11/3/00355 (Fire Floater Policy) valid for the period 24.08.2003 to 23.08.2004 securing the stocks lying at 4, Gandhi Gram, G.T. Road, Kanpur for the sum of Rs.3 Crores. Another insurance policy known as Standard Fire and Special Perils Policy No.08251/11/03/00570 valid for the period from 05.02.2004 to midnight of 04.07.2004 was purchased for a sum of Rs.1,12,00,000/- securing the stock lying at 4, Gandhi Gram G.T. Road, Kanpur. A fire broke out at 4, Gandhi Gram, G.T. Road, Kanpur on 02.06.2004. It caused substantial loss and damage to the insured property of the Complainant and the loss of stock was estimated at ₹98,77,00,000/- and the other claimable expenses were calculated at ₹80,000/-. The intimation of the fire including the statement of loss suffered was sent to the Insurance Company, Opposite Party No.1 on 03.06.2004. The Opposite Party No.1 appointed M/s S. K. Ahuja & Associates as authorised surveyor for assessing the loss and damages suffered by the Complainant. The Surveyor took the services of M/s R. Singh and Associates, Chartered Accountant for verifying the data. The Chartered Accountant submitted his report on 23.03.2005. The Surveyor also submitted his report on the same day, i.e., 25.03.2005 assessing the loss at ₹75,08,888/-. Thereafter, on 15.09.2005, Opposite Party No.1 appointed the second Surveyor/Investigator, namely, Lt. Col. D. P. Jairath for investigating the claim. It was contended that he was appointed without any reasonable/sufficient justification. The second surveyor submitted its preliminary investigation report on 30.09.2005 and recommended a thorough investigation in view of certain observations made by him in his report. He, thereafter, submitted his detailed report on 26.06.2006. A copy of the said report was never given to the Complainant Company. Certain letters were written by the Complainant to Opposite Party No.1 for settling his claim without further delay but no heed was paid by Opposite Party No.1. Various letters were also sent to the Insurance Regulatory Development Authority (Opposite Party No.3) who also failed to resolve the situation. The Complainant then filed a Writ Petition being Civil Miscellaneous Application No.40823 of 2007 before the Allahabad High Court. The Writ Petition was disposed of vide order dated 31.08.2007 by Allahabad High Court directing the Opposite Party No.1 to take a definite decision within a period of three months on the claim of the Complainant from the date of receipt of the order. On 12.07.2007, the second investigator issued an addendum report stating therein that he had not considered the underinsurance aspect in his reassessment. Ministry of Finance sent a letter dated 24.09.2007 intimating the Complainant that the matter had been taken up with the Opposite Party No.1 and the Opposite Party No.1 had informed them that as per the CAG report, an excess amount of ₹10,07,101/- had been paid by the Opposite Party No.1 while settling an earlier claim of the Complainant Company on 05.09.2002 and that this amount needed to be recovered. That till the CAG query was cleared, the claim of the Complainant Company could not be processed. Similar objection was raised by the Opposite Party No.1 in its letter dated 18.10.2007. Vide letter dated 05.12.2007, Opposite Party No.1 informed the Complainant that their claim dated 02.06.2004 had been approved for a sum of ₹46,56,551/- as per the second Surveyors/investigators report and after deduction of an amount of ₹10,07,101/- pursuant to CAG query, a sum of ₹36,49,450/- was payable to the Complainant. The Complainant Company once again filed a Writ Petition being Civil Miscellaneous Writ Petition No.20968 of 2008 before the Allahabad High Court. The Writ Petition was disposed of vide order dated 24.04.2008 with liberty to the Complainant to file a representation before the Opposite Party No.3 (IRDA) for the same controversy raised in the Petition. A legal notice dated 26.08.2008 was sent to the Opposite Party No.1 demanding a compensation of ₹1,16,30,978/-. The legal notice was not replied by the Opposite Party No.1. Hence, the present Consumer Complaint has been filed.
2. In the Complaint, it is prayed by the Complainant that a sum of ₹75,08,888/- as assessed by the authorised surveyor, towards the loss suffered by the Complainant, be awarded to it. A compensation of ₹10,00,000/- be awarded towards harassment. Legal expenses and other costs incurred should be awarded to the extent of ₹29,06,763/- along with simple interest @ 11% (prevailing bank rate 9% + 2%) as per IRDA (Protection to Policy Holders' Interest Regulations 2002) from the date of consent letter dated 24.03.2005 till 30.09.2008 along with pendetelite and future interest be also awarded.
3. The claim is contested by Opposite party No.1 and filed Written Version. The liability to pay the claim to the Complainant is not disputed. It is further contended that the Opposite Party No.1 has approved the claim of the Complainant to the tune of ₹46,56,551/- which has already been communicated to it vide letter dated 05.12.2007. It was further contended that the Opposite Party No.1 is also liable to deduct from this amount a sum of Rs.10,07,101/- which had been paid in excess while settling the earlier fire claim dated 02.03.2002 in terms of the letter of CAG. It was contended that there was no deficiency in service on the part of the Opposite Party No.1. It was further contended that the second Surveyor was appointed in order to reassess the loss since the earlier surveyor had omitted to consider certain vital facts. Based on the reassessment report of the investigator, the amount was approved by the Respondent Company. It is also contended that the Complaint is not maintainable because the Complainant is not a "consumer" within the meaning of Section 2(1)(d) of the Act since the service of Opposite Party No.1 has been availed for "commercial purposes". It is also contended that since the Complaint involves disputed questions of facts and require detailed evidence, both oral and documentary, the Complaint is not maintainable before the Consumer Forum and is liable to be rejected. It was also contended that the necessity for appointing second surveyor had arisen because the first surveyor appointed by Opposite Party No.1 submitted its report on 25.03.2005 and on examining the said report, it was found that there was great variation in the gross profit ratio for three years, i.e., for the period from 2001 to 2004 and that the Complainant had not maintained any record in registers for rejection as well as rectification and the cost record has not been kept separately and thus, the surveyor was unable to work out the actual cost of finished products at different stages. The Chartered Account therefore took approach of applying the gross profit ratio in order to fix the cost of the finished goods lost in the fire and due to great variance in the gross profit ratio, the Chartered Accountant adopted it at 10.06%. Also the surveyor's assessment was mainly based on the inventory prepared. The items of stocks reduced to ashes or burnt badly could not be counted or verified and could only be weighed. The salvage of the previous insurance claim was still in the books of account of the insured till the year 2003 to 2004 and therefore, there was a possibility of the same being included in the debris of the present fire. The surveyor had also not taken the details of rejected boots/shoes and there was every possibility that the said rejected items formed part of the debris. The goods lying in the bond room did not tally with the challan and the Complainant had infact shown lesser quantity lying in the bond room and above all the Surveyor had not stated the cause of fire as well. It was in light of these discrepancies in the report of the surveyor coupled with the fact that there was an earlier fire in the year 2002 for which the insured amount was paid, the Opposite Party thought it fit to get the matter further investigated and hence, appointed Lt. Col. D.P. jairath (Retd.) on 15.09.2005 to investigate into the claim and the letter dated 15.09.2005 to this effect was sent to him. On 30.09.2005, the said investigator submitted preliminary investigation report based on a thorough investigation. He also made certain observations in the said report highlighting discrepancies in the records of the Complainant with regard to the quantity of shoes in the bond room which was not affected by the fire and its impact on the final assessment. Accordingly, vide letter dated 26.06.2006, the second surveyor was instructed to proceed to make further enquiries in detail into the matter and this fact was also brought to the notice of the Complainant, who had acknowledged it in his letter of October 2005. The detailed report was submitted on the same day. In his report, the second surveyor had stated that the assessment of loss calculated by the first surveyor was incorrect. He had also dealt and verified and investigated the records of the insured in great detail. The investigator also considered the quantity of goods kept in the bond room and thereafter reassessed the loss at ₹50,95,048/-. After receiving the report of the investigator, the claim was re-examined. Since the investigator had not considered the under insurance aspect in his reassessment, he submitted an addendum report on 12.07.2007. While the Opposite Party No.1 was in the process of finalising the claim of the Complainant, it also received a query from CAG on 12.11.2007 relating to the earlier claim of the Complainant of the year 2002 and informed that an excess amount of ₹10,07,101/- had been paid to the Complainant while settling the said claim. The Opposite Party No.1 took up the matter with the CAG and sent a note dated 12.11.2007 justifying the settlement of the earlier claim. The claim to the Complainant could be settled only after clearing the query of CAG. A Writ Petition was filed by the Complainant in the meanwhile and pursuant to the directions of the Hon'ble High Court, the Opposite Party No.1, since had not received any reply from CAG, offered the amount to the Complainant after deducting the recoverable amount of ₹10,07,101/-. The Complainant was also requested to return the discharge voucher of ₹36,49,450/- (₹46,56,551 - 10,07,101).
4. Parties led their evidences by way of affidavits and have also submitted their written submissions.
5. I have heard the arguments and perused the relevant records.
6. It is argued on behalf of the Complainant that the Complainant accepted the report dated 25.03.2005 of the first surveyor who assessed the damages suffered by the Complainant to the tune of ₹75,08,888/-, still for no reasons, the claim was substantially reduced by Opposite Party No.1. No clarification was sought from the legally appointed first surveyor about his report and unjustifiably appointed second surveyor and that there is substantial unjustified delay in finalising the claim and the Complainant had to seek directions from the Hon'ble High Court of Allahabad by filing the Writ Petition. Despite that the claim was not finalised. It is further argued that the contention of the Opposite Party No.1 that the Complainant is not a Consumer within the meaning of Section 2(d)(i) of the Act is meritless in view of findings of this Commission in the case of "Harsolia Motors vs. National Insurance Co. Ltd., I (2005) CPJ 27 (NC)". It is argued that the Complainant is not getting benefitted or earning any profit from the Insurance policy and it is thus not outside the purview of definition of "Consumer" and therefore, is a consumer and its claim is maintainable. Its claim cannot be rejected on the ground that the case involves complicated questions of fact and require extensive evidence. It is submitted that Section 13(4) of the Act confers the same power of investigation on the consumer courts as are enjoyed and exercised by the Civil Court. Reliance is also placed on the findings of the Hon'ble Supreme Court in the case of " CCI Chambers Cooperation Housing Society Limited vs. Development Credit Bank Limited (2003) 7 SCC 233". It is further argued that the appointment of Lt. Col. D. P. jairath (retd.), as the second Surveyor was in violation of the provision of the Insurance Act 1938 since no reasons for his appointment had been given at the time of his appointment and at no point of time, any clarification was sought from legally appointed surveyor. It is further argued that in terms of Section 64 UM (3) of the Insurance Act 1938, the power to appoint a second surveyor lies with IRDA and not with the insurer, i.e., the Opposite Party No.1. Reliance is also placed on the findings of Hon'ble supreme Court in " New India Assurance Company Limited vs. Protection Manufacturers Private Limited (2010) 7 SCC 386." It is further argued that in terms of Clause (9) of IRDA (Protection of Policy Holders' Interest Regulations 2002) the Opposite Party No.1, on receipt of the legally appointed surveyor's report, if found the report incomplete, was required to intimate the same to the legally appointed surveyor within 15 days with request to furnish additional report on the basic issues but Opposite Party No.1 has not done so, and thus has acted in violation of the said Clause. Reliance is also placed on the findings of Hon'ble Supreme Court in the case of "Sri Venkateswara Syndicate Vs. Oriental Insurance Company Limited & Anr. (2009) 8 SCC 507" and it is argued that the Hon'ble Supreme Court in the said order has discussed in detail the scope of Section 64 UM of the Insurance Act and has clearly held that the second surveyor can be appointed only when the first surveyor's report is not acceptable to insurer on account of either inherent defects in it or that it is arbitrary, excessive, exaggerated etc. and that while appointing a second surveyor the insurer has to give cogent reasons for rejecting the report of first surveyor and without which it is not free to appoint a second surveyor. It is argued that in the present case, no reasons have been given by the Opposite Party No.1 for rejecting the report of legally appointed surveyor and appointing second surveyor namely Lt. Col. D. P. jairath (retd.). It is further argued that this Commission has followed the judgment of Hon'ble Supreme Court in Venkateswara Syndicate's case (supra) in number of cases including the case titled as "New India Assurance Company Limited vs. Balbir Singh, First Appeal No.628 of 2018 decided on 02.04.2013" and "Sona Ceramic vs. New india Assurance Co. Ltd., Consumer Complaint No.399 of 2002 decided on 01.05.2015" and has clearly held that the Insurance Company has to give sufficient grounds to disagree with the findings of the surveyor. It is also argued that in the case of "National Insurance Company Limited vs. New Patiala Trading Company, Revision Petition No.488 of 1998", this Commission in its order dated 08.02.2002 has clearly held that a second surveyor cannot be appointed to counter or contradict or rebut the report of the first surveyor. It is further argued that vide letter dated 15.09.2005, the Opposite Party No.1 had authorised Lt. Col. D. P. jairath (retd.) to investigate into the cause of loss and not the quantity and therefore, Lt. Col. D. P. jairath (retd.) was not justified in re-examining the claim and doing the entire investigation afresh. It is further argued that the Opposite Party No.1 had appointed a second surveyor on a feeble premise that the cause of loss/fire was not addressed by the first surveyor in his report but the perusal of the first surveyor report clearly shows that the cause of fire had been looked into, investigated and thereafter, the conclusion drawn by the first surveyor in its report. He assigned the cause of fire to the short circuit. It is submitted that the Insurance Company had appointed Lt. Col. D. P. Jairath (retd.) in various matters with the sole intention to get favourable reports and he always serves the interest of insurer and that a CVC has been filed into the conduct of the Insurance Company in appointed Lt. Col. D. P. Jairath (retd.) as second surveyor in the original Writ Petition No.128 of 2000 titled as M/s U.P. Corporation Federation Limited vs. National Insurance Company Limited, by this Commission. Even otherwise the copy of the report of Lt. Col. D. P. Jairath (retd.) was also not given to the Complainant. It is further contended that the query raised by CAG relates to a different claim altogether and therefore, has no impact on the present claim of the Complainant. On this argument, learned Counsel for the Complainant submitted that the claim be allowed.
7. It is argued on behalf of Opposite Parties No.1 and 2 that it is not a case of deficiency in service or negligence or delay. The claim was approved as per the report of independent licensed surveyor who submitted his report on verifying the records, and assessed loss of sum of ₹46,56,551/- and it was communicated to the Complainant. The insurer is liable to deduct the amount of ₹10,07,101/- which has been paid in excess while settling an earlier claim dated 02.03.2002 of the complainant pursuant to the report of CAG. It is further argued that there were valid reasons for appointing investigator Lt. Col. D. P. Jairath (retd.). It is argued that the detailed reasons for appointing Lt. Col. D. P. Jairath (retd.) has been given in Para IV of the Written Statement. Relying on the findings of the Hon'ble Supreme Court Venkateswara Syndicate's case (supra), it is argued that there is no bar in appointing a second surveyor/investigator if there are valid reasons for doing so. Reliance is placed specifically on para 23 of the said judgement. It is submitted that the argument of the complainant that second surveyor could not have been appointed without the permission of IRDA and without recording reasons prior to appointment of investigator, has no merit in view of the findings of Hon'ble Supreme Court in the case of Venkateswara Syndicate's case (supra). It is submitted that the plea taken by the complainant relating to appointment of second surveyor is an afterthought since no such objection was raised by the Complainant when the second investigator was appointed by the Insurance Company. It is further argued that there is no force in the contention and argument of the complainant that the second investigator was appointed only to investigate the cause of loss and not the quantity of loss, in view of the contents of the letter appointing him, which clearly shows that he was directed to investigate along with the cause of loss, the other aspects relevant to the claim. It is further argued that the first surveyor was not categorical in its findings with regard to cause of fire. It is further argued that the second surveyor Lt. Col. D. P. Jairath (retd.) has gone into every aspect of claim and given cogent and detailed reasons to show as to why the assessment of the earlier surveyor was not correct. That he has also given detailed reasons while arriving at the final assessment figure. It is further argued that an amount of ₹36,49,450/- has been paid to the insured after deducting the amount of ₹10,07,101/- on account of CAG query, which would be paid to the insured when the CAG query is cleared out. It is submitted that since the entire amount stands paid, nothing remains unpaid and the claim is liable to be rejected.
8. I have given thoughtful consideration to the contentions of the parties and the arguments of the learned counsel for the parties and the evidences led by the parties and documents produced on record.
9. Since the Opposite Party had admitted its liability to the tune of ₹36,49,450/-, vide order dated 09.02.2010, this Commission had directed the Opposite Party No.1 to pay the amount of ₹36,49,450/- to the Complainant. It was paid by Opposite Party No.1 to the Complainant through cheque No.195242 dated 26.03.2010. This payment was made without prejudice to the rights and contentions of the parties and subject to outcome of the Complaint.
10. The Respondent has admitted the fact that the Complainant had suffered the losses due to the fire broken out in its godown on 02.06.2004, by admitting its liability towards the losses to the tune of ₹46,56,551/-. The quantum of the loss assessed by the insurer, however, has been disputed by the Complainant. Admittedly, the insurer had appointed two investigators to investigate the claim of complainant. It first appointed M/s S.K. Ahuja & Associates as authorised surveyor who submitted his report on 25.03.2005 assessing loss at ₹75,08,888/-. The insurer, however, was not satisfied with this report and appointed second surveyor/investigator Lt. Col. D. P. Jairath (retd.) vide letter dated 15.09.2005 who had reduced the claim to ₹46,56,551/-. The Complainant has challenged the appointment of second surveyor on various grounds. First is that the insurer had no authority to appoint it and secondly, there was no occasion to appoint a second surveyor since the report of the authorised surveyor was comprehensive covering all aspects and thirdly, that the appointment of second surveyor was done with the sole intention to deny the lawful claim of the Complainant and to procure a favourable report. The main argument of the Opposite Party, the insurer, as regards the appointment of second surveyor concerned, is that it is within its right to appoint a second surveyor; that the surveyor report does not bind them and that since the first surveyor did not enter into various aspects of the claim and had not given findings on that, the necessity of second surveyor arose and the reasons to appoint second surveyor had clearly been given in the Written Version as well as in the affidavit of witness.
11. The sole issue before this Commission therefore is whether the appointment of second surveyor/investigator, in the facts and circumstances of the case, was justifiable/permissible or not. The authority on this issue is Venkateswara Syndicate's case (supra) in which the Hon'ble Supreme Court has at length discussed the relevant provisions of the Insurance Act and the Regulations made therein and has held as under:
"30. The Insurance Regulatory Authority (`IRDA' for short) has formulated Insurance Surveyors and Loss Assessors (Licensing, Professional Requirements and Code of Conduct) Regulations, 2000, which regulate the licensing and the work of surveyors. These regulations stipulate that the surveyor shall investigate, manage, quantify, validate and deal with losses arising from any contingency and carry out the work with competence, objectivity and professional integrity by strictly adhering to the Regulations.
31. 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 17damage 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 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 concerned officer 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.
33. 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 may be 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 second Surveyor or Surveyors till it gets a report which would satisfy its interest. Alternatively, it can be stated that there must be sufficient ground to disagree with the findings of Surveyor/Surveyors. There is no prohibition in the Insurance Act for 18 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.
34. Section 64 UM(2) of the Insurance Act 1938, reads that:
"64-UM (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 intimates to an insurer at any time after the expiry of a period of one year from the commencement of the Insurance Act 1968 shall, unless otherwise directed by the Authority, 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 license issued under this Section to act as a surveyor.
35. In our considered view, the Insurance Act only mandates that while settling a claim, assistance of surveyor should be taken but it does not go further and say that the insurer would be bound 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.
36. In the present case, the insurer has stated in the counter affidavit filed before the National Commission and even before us, why the appointment of second Surveyor was necessitated and also has given valid reasons for appointing second Surveyor and also has assigned valid reason for not accepting the report of Joint Surveyor. The correspondence between the insurer and the Surveyors would indicate the particulars differed by the insurer for differing with the assessment of loss made by the Surveyors.
37. 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, 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.
12. The Hon'ble Court has clarified that although, the insurer is not bound by the report of the surveyor and can appoint a second surveyor but the same has to be done for cogent reasons recorded at the time of appointing the second surveyor. The Hon'ble Supreme Court has clearly held that "there is no prohibition in the Insurance Act 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/necessity to appoint second surveyor". The Hon'ble Supreme Court has clearly envisaged that the reasons for rejecting the report of the first surveyor and the reasons for appointing the second surveyor has to be given at the time of appointing the second surveyor since the expression used is "while doing so".
13. The second surveyor in the present case was appointed vide letter dated 15.09.2005. The letter has been placed on record as Annexure R-6 by the insurer, Opposite Party. The same is reproduced as under:
Re: Fire Loss on 2nd June, 2004- Insured M/s M Kumar Udyog Pvt. Ltd.
With reference to above fire claim, we advise you to carry out the detailed investigation on the following issue and submit the report within 15 days from the receipt of this letter.
Cause of Loss Any other aspect relevant to claim/investigation We also below the details of the claim and claimant : M/s M Kumar Udyog Pvt. Ltd.
13, Gandhi Gram, G.T. Road, Kanpur 208007 Tel: 512-2403626, 2401335 1:UII Co., BO-1, 17/13, The Mall Kanpur under DO-1, Kanpur 2:UII Co., BO-4, 119/536, Tripathi Market, Sant Nagar Chouraha Gumti No.5, Kanpur 208012 under DO-3, Kanpur Loss due to fire at insured's factory on 2nd June, 2005.
Investigation fee will be ₹10,000/- plus actual expense for this case.
Pl. call on us for any further information in above regard.
14. From the perusal of this letter, it is apparent that the Opposite Party No.1, i.e., the insurer has not given any reason for rejecting the report of the first surveyor. The letter does not even record the factum of rejection of report of first Surveyor. No document showing rejection of report of first surveyor and reasons for the same, has been produced on record by the insurer. No reasons showing the necessity of further investigation or enquiry into the claim by appointing the second surveyor is also given in this letter. Directions only were issued to the second surveyor to investigate into the cause of loss and any other matter relevant to claim/investigation. It was only in the Written Version that for the first time, the insurer, the Opposite Party No.1 has given reasons for rejecting the report of the first surveyor and these reasons are missing in the letter dated 15.09.2005. It therefore is clear that the Opposite Party No.1, the insurer has failed to give satisfactory reasons for not accepting the report of the first surveyor and the need of appointing the second surveyor vide letter dated 15.09.2005.
15. The Hon'ble Supreme Court in the case of Sri Venkateswara Syndicate's case (supra) has also clearly held that the insurer cannot appoint a second surveyor just as a matter of course and has to give valid reasons as to why the report of the surveyor was not acceptable. The report of first surveyor can be rejected only if there are inherent defects in the report or that it is found arbitrary, excessive or exaggerated. The Hon'ble Court has also held that since the surveyors are appointed under the provisions of the Insurance Act, their reports are to be given due importance and there has to be sufficient grounds for not agreeing with the assessment made by them. The Hon'ble Court has held that the Insurance Company cannot go on appointing surveyors one after another in order to get a report to their satisfaction. There has to be valid reasons for not accepting the report of the surveyor. The Hon'ble Court has further held that "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 reports of the surveyors. It is not the case of the Opposite Party No.1 that the first surveyor had not applied its mind and had any ill motive or committed any error because nothing is shown in the letter dated 15.09.2005 appointing the second surveyor.
16. For the first time, the reasons for appointing second surveyor is given by insurer in its Written Version. One of the reasons is that the first surveyor has not shown the cause of loss. Learned counsel for the complainant has drawn my attention to the Para 14 of the report of the first surveyor and has argued that he has made comprehensive analysis as to the origin of fire and its impact and has given its findings that the fire had occurred due to short circuit. It is also argued that in view of this finding, it cannot be said that no investigation into the cause of fire had been made by the first surveyor. It is further brought to my notice that even the second surveyor has opined that the cause of fire was short circuit. The report of the first surveyor dated 25.03.2005 discusses all the aspects relating to the incident of fire. It had taken stock details of the site, information given to the police stations, the fire tenders used for extinguishing the fire, the report of fire brigade, property damage as per the fire brigade report and also the measures taken to douse the fire. It has also considered the copy of the fire brigade report which is annexed as Annexure VI. It was only after considering these materials that in para 14 he has concluded as under:
"Analysis as to the origin of fire and its impact.
The case of fire in this case is settled i.e. short circuit but the origin of ignition was our concern and, therefore, an attempt was made by us to find the fact.
Initially the Insured were not specific about point of short circuit. They talked about the short circuit in the generator room from where the fire spread to material godown and elsewhere. The reports published in various newspapers also referred to the fire having originated from the generator room. The Fire Station Report also refers to short circuit as the cause of fire.
We have inspected the Generator room where two generators of 82.5 KVA and 125 KVA, installed in the enclosure were found in damaged condition with their wires / cables completely burnt. We also found the naked electric wire of main supply line passing through the generator room with its insulation completely in damaged condition.
It is worthwhile to note here that at the time of fire the power supply was on as certified by the local KESCO Feeder Station. It was switched off only on receipt of information of fire incident in the factory. The enquiries made on the spot during the survey also confirmed this fact. Thus the theory of shirt circuit in the generator is ruled out and report about it published in the newspapers is based on hearsay.
COPY OF KESCO Feeder Station Report enclosed in Annexure-13 On further probe made into the cause of fire and discussions held with the insured's representative it came to our notice that there were loose wire fittings for light and fans inside the godown. It appears that the short circuit occurred due to electrical faults in the hanging wires in the godown and its spark fell on the materials lying on the ground and the fire migrated from electric wiring in godown to generator room also causing damage to two generators and main cable wire. It was in fact the location of the generator room that the people took it for granted that the short circuit occurred in the generator.
Thus the circumstances as detailed above go in favour of the short-circuit having occurred in the wire hanging inside the godown due to electric fault though it was difficult to certify because of the total destruction of wiring inside the godown.
Generally a fire in a warehouse stocked with a variety of combustible materials will burn more fiercely and longer than a wire in a factory which may contain non combustible materials. In this case the combustibility indicates how easily ignitable and how quickly the materials and goods are burnt.
As regards, the intensity of fire, it is important to mention here that the raw material godown situated adjacent to the generator room had considerable quantity of highly inflammable materials like chemicals and solvents that added the fire. The rapidity with which the fire spread in no time and engulfed the entire godown gives credence to the presence of flammable chemical in the raw material godown. The heat generated in the godown was so severe that the upper floor containing passage to processing room just above the materials godown was also badly heated and goods in process got burnt. Some of the goods though not burnt but were scorched and charged resulting in loss of quality of products. The fire accompanied with thick smoke came so sudden that the people ran helter skelter raising alarm and running for safety. Initially some attempts were made to fight the fire but in vain. Ultimately, local units of fire brigade had to be requisitioned to tackle the situation and then the fire could be controlled after 5 hours struggle."
17. The letter of appointment of second surveyor does not show any reason as to why this report of the first surveyor on the cause of fire is rejected and why there was need of fresh investigation into cause of fire.
18. Since the report of first surveyor on the issue of cause of fire is very extensive and is based on elaborate investigation into the matter, there exists no reasons to reject it. The argument that first surveyor did not give in his report, the cause of fire, is thus not tenable. This therefore cannot be a ground for rejection of his report and this act of insurer is thus not justifiable. The second surveyor was also directed to investigate into 'any other aspect relevant to claim/investigation' which is a very vague direction and it envisages a direction to restart the investigation into the matter afresh. This is ordered to be done without giving any reasons for rejecting the report of first surveyor. It is also evident that there is no order rejecting the report of the first surveyor and no clarification also sought from the first surveyor on any aspect which he had investigated. Vide this letter dated 15.09.2005, the second surveyor was appointed without disclosing any reason of such appointment.
19. The reasons given subsequently in the written version are as under :
"On receipt of the report of the Surveyor and the Chartered Accountants the claim was processed by the company. On examining the said reports, it was found that there was a great variation in the gross profit ration for the years 2001-02, 2002-03 and 2003-04 which was 2.06%, 12.59% and 10.50% respectively for the three years. It was also found that no records in register for rejection as well as rectification are kept. Further it was found that the company did not maintain separately the cost records and therefore the company was not able to work out the actual cost of finished products at different stages. The Chartered Accounts therefore, took approach of applying the gross profit ration in order to fix the cost of finished goods lost in the fire. In view of the great variance in the gross profit ration, the Chartered Accountant took the G.P. ratio at 10.06%. It was also found that the surveyor's assessment was mainly based on the inventory prepared items of stocks reduced to ashes or badly burnt cannot be counted or verified. At best could be weighed. Further as the salvage of the previous insurance claim was still in the books of account of the insured till the year 2003-04, the possibility of the same having been included in the debris of the present fire cannot be ruled out. The surveyors had no taken the details of the rejected boots / shoes and there was every possibility that the said rejected items formed part of the debris. The goods lying in the Bond Room did not tally with the challans and in fact the complainant had shown lesser quantity lying in the Bond Room. There were several discrepancies which were seen in the report of the surveyor. The surveyors had not stated the cause of fire as well. Coupled with the above anomalies, the company was also conscious of the fact that there was an earlier fire claim in the year 2002 which was paid and therefore the respondent insurance company thought it fit to get the matter investigated."
20. From the report of the first surveyor it is apparent that he had taken stock of nature of the damages in detail and also examined the witnesses and perused the registers, considered the work force and the shift and construction lay out and manufacturing process, books of account, procedure for procurement of sale orders, procedure for sale and issuance of raw materials, the purchase orders, the material issues, material procedure for production, procedure for job work, procedure for inspection, discharge and thereafter calculated the GP rate and had also given the reasons for adopting the GP ratio at 10.65 for unit -II for the year 2003-2004 as well as for other goods and while assessing the loss he had clearly stated that he had received the claim bill of ₹98,91,203/-. However, after analysis, he found that the cause of loss is fire again by short circuiting is covered under the policy. He assessed the loss as under:-
Analysis as to the origin of fire and its impact.
The case of fire in this case is settled i.e. short circuit but the origin of ignition was our concern and, therefore, an attempt was made by us to find the fact.
Initially the Insured were not specific about point of short circuit. They talked about the short circuit in the generator room from where the fire spread to material godown and elsewhere. The reports published in various newspapers also referred to the fire having originated from the generator room. The Fire Station Report also refers to short circuit as the cause of fire.
We have inspected the Generator room where two generators of 82.5 KVA and 125 KVA, installed in the enclosure were found in damaged condition with their wires / cables completely burnt. We also found the naked electric wire of main supply line passing through the generator room with its insulation completely in damaged condition.
It is worthwhile to note here that at the time of fire the power supply was on as certified by the local KESCO Feeder Station. It was switched off only on receipt of information of fire incident in the factory. The enquiries made on the spot during the survey also confirmed this fact. Thus the theory of shirt circuit in the generator is ruled out and report about it published in the newspapers is based on hearsay.
COPY OF KESCO Feeder Station Report enclosed in Annexure-13 On further probe made into the cause of fire and discussions held with the insured's representative it came to our notice that there were loose wire fittings for light and fans inside the godown. It appears that the short circuit occurred due to electrical faults in the hanging wires in the godown and its spark fell on the materials lying on the ground and the fire migrated from electric wiring in godown to generator room also causing damage to two generators and main cable wire. It was in fact the location of the generator room that the people took it for granted that the short circuit occurred in the generator.
Thus the circumstances as detailed above go in favour of the short-circuit having occurred in the wire hanging inside the godown due to electric fault though it was difficult to certify because of the total destruction of wiring inside the godown.
Generally a fire in a warehouse stocked with a variety of combustible materials will burn more fiercely and longer than a wire in a factory which may contain non combustible materials. In this case the combustibility indicates how easily ignitable and how quickly the materials and goods are burnt.
As regards, the intensity of fire, it is important to mention here that the raw material godown situated adjacent to the generator room had considerable quantity of highly inflammable materials like chemicals and solvents that added the fire. The rapidity with which the fire spread in no time and engulfed the entire godown gives credence to the presence of flammable chemical in the raw material godown. The heat generated in the godown was so severe that the upper floor containing passage to processing room just above the materials godown was also badly heated and goods in process got burnt. Some of the goods though not burnt but were scorched and charged resulting in loss of quality of products. The fire accompanied with thick smoke came so sudden that the people ran helter skelter raising alarm and running for safety. Initially some attempts were made to fight the fire but in vain. Ultimately, local units of fire brigade had to be requisitioned to tackle the situation and then the fire could be controlled after 5 hours struggle.
21. The consent of the insured was also taken and annexed with the report and thereafter he proceeded to assess the loss by two bills. The report of the first surveyor is quite extensive covering all the relevant material and datas and there is nothing on record to suggest even by an iota of evidence that the report is ill motivated or procured or not based on the investigations etc. done at the spot immediately after the accident of fire. The grounds for rejection taken for the first time in the written version are thus not justifiable.
22. The another argument and contention of learned counsel for the Insurance Company is that the insured is not a consumer within the meaning of section 2(1)(d) of the Act since it is dealing in the commercial activities. This argument of the opposite party has no merit in view of the findings of this Commission in "Harsolia Motors vs. National Insurance Co. Ltd., I (2205) CPJ 27 (NC)". The Hon'ble Supreme Court in Harsolia Motors's case case held as under:
"Applying the aforesaid test we have to find out two things:
(i) whether goods are purchased for resale or for any commercial purpose? Or
(ii) whether the services are availed for any commercial purpose?
Therefore, the two fold classification is commercial purpose and non-commercial purpose.
If the goods are purchased for resale or for commercial purpose then such consumer would be excluded from the coverage of Consumer Protection Act, 1986. Such illustration could be that a manufacturer who is producing one product A' , for such production he may be required to purchase articles, which may be raw-material, then purchase of such articles would be for commercial purpose. As against this, the same manufacturer if he purchases a refrigerator, a television or an air-conditioner for his use at his residence or even in his office, it cannot be held to be for commercial purpose and for this purpose he is entitled to approach the consumer forum under the Act.
Similarly, a hospital which hires the services of a medical practitioner, it would be a commercial purpose. But, if a person avails of such services for his ailment it would be held to be not a commercial purpose.
Further, from the aforesaid discussion, it is apparent that even taking wide meaning of the words for any commercial purpose it would mean that goods purchased or services hired should be used in any activity directly intended to generate profit. Profit is the main aim of commercial purpose. But, in a case where goods purchased or services hired in an activity which is not directly intended to generate profit, it would not be commercial purpose.
In this view of the matter, a person who takes insurance policy to cover the envisaged risk does not take the policy for commercial purpose. Policy is only for indemnification and actual loss. It is not intended to generate profit.
23. Since the insured has failed to prove the policy was taken to generate profit, this argument is therefore rejected and it is held that the complainant is a consumer within the meaning of section 2(1)(d) of the Act. The other argument of the opposite party is that the matter involves complicated question of law and fact and therefore the complaint should be rejected. It is apparent from the above discussion that there are no complicated questions of law and facts involved in this matter. Even if there are complicated questions of law and facts involved in the matter, per se which is not the case still the Complaint cannot be rejected. The commissions are within their jurisdiction to entertain such complaints. It has been so held in " Dr. J. J. Merchant And Others vs. Shrinath Chaturvedi, (2002) 6 SCC 635, (para 19)" wherein the Hon'ble Supreme Court has clearly held that the Commission under the Act retains the power vested in Civil Courts to examine the witness in terms of Section 13(4) read with order 18 of CPC also in the case of CCI Chambers's case (supra), the apex count has clearly held as under:
"10. In our opinion the decision arrived at by the NCDRC is premature. The Commission ought to have issued notice to the respondent and taken its pleadings on record. Only when the pleadings for both parties were available should the Commission have formed an opinion as to the nature and scope of enquiry, i.e., whether the questions arising for decision in the light of the pleadings of the parties required a detailed and complicated investigation into the facts which was incapable of being undertaken in a summary and speedy manner. Then the Commission could have justifiably formed an opinion on the need of diring away the complainant to the Civil Court. Mere complicated nature of the facts and law arising for decision would not be decisive."
Thus, this argument of the insurer is untenable and has no merit.
24. The complainant has also disputed the deduction of sum of ₹10,07,101/- by the opposite party on account of a CAG query in respect of the earlier settled claim of the complainant relating to previous fire. It is submitted that if any amount is recoverable under old claim which was settled, the same cannot be done in this way and the opposite party can take legal recourse for the same. The opposite party has failed to show me any authority empowering them to deduct any money pursuant to a query of CAG relating to earlier settled claim of different incidents of fire from the present claim. I therefore hold that the deduction made is illegal and unjustifiable. The opposite party is however free to take legal recourse in respect of any money paid in excess under the old claim.
25. In view of the above discussion, I allow the Complaint. It is directed that the opposite party shall pay sum of ₹75,08,888/- the loss assessed by the first surveyor in his report dated 25.03.2005 alongwith pendent lite and future interest on this sum @ 11% per annum. The sum of ₹36,49,450/- which has been paid during the pendency of the present complaint shall be deducted from the above awarded sum. The interest is payable on the awarded sum till the date the sum of ₹36,49,450/- was deposited pursuant to the directions of this Commission and there after the interest is leviable on the balance amount till its realisation.
26. From the fact and circumstances of these case it is apparent that although the first surveyor had determined the claim of the complainant way back in March 2005, the opposite party failed to take any decision as to the claim of the complainant and the complainant had to approach the High Court of Allahabad by way of Writ Petition seeking direction to complete the process and to take decision on his claim, which directions were issued and the opposite party was directed to complete the assessment of the claim within three months. However, despite such directions the claim was neither determined nor paid within that period and the insurer instead proceeded to deduct the sum of ₹10,07,101/- as per query of CAG on the ground that the sum was paid to the insured while settling the previous claim. This act of the insurer is unwarranted and deplorable. The Complainant has certainly suffered not only financially but it also certainly caused mental harassment to him. I therefore award a compensation for mental harassment etc. at ₹5 Lac and a sum of ₹25,000/- towards legal expenses. This amount shall be paid within two months of the date of order failing which it shall carry simple interest @ 9% p.a. from the date of order till realization. The Complaint stands disposed of in the above terms.
......................J DEEPA SHARMA PRESIDING MEMBER