National Consumer Disputes Redressal
M/S. Gamy Pharmaceuticals vs Senior Divisional Manager, United ... on 29 January, 2024
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 2204 OF 2017 1. SURESH PHARMA Represented By its Managing Partner Sri K Atrddi Suresh Kumar (Chaitanyapuri P.S. Limits) H. No. 1-39/6, Ground Floor, Prabhath Nagar, Chaitanyapuri HYDERABAD - 500 060. ...........Complainant(s) Versus 1. SENIOR DIVISIONAL MANAGER, UNITED INDIA INSURANCE CO. LTD. & 2 ORS. Divisional Office No. 2, Ramalaya Building, S.D. Road, SECUNDERABAD - 500 003. 2. THE REGIONAL MANAGER, UNITED INDIA INSURNCE CO. LTD., Regional Office, 3-5-817 & 818, Old MLA Quartners, HYDERABAD - 500 029. 3. THE GENERAL MANAGER, UNITED INDIA INSURANCE CO. LTD., Fire Technical Head Office, 24, Whites road, CHENNAI - 600 014. ...........Opp.Party(s) CONSUMER CASE NO. 2205 OF 2017 1. M/S. GAMY PHARMACEUTICALS REPRESENTED BY ITS MANAGING PARTNER SRI. KATREDDI SURESH KUMAR.
H.NO.-1/39/6, GROUND FLOOR, PRABHATH NAGAR, CHAITANYAPURI. HYDERABAD-500060 ...........Complainant(s) Versus 1. SENIOR DIVISIONAL MANAGER, UNITED INDIA INSURANCE CO. LTD. & 2 ORS. DIVISIONAL OFFICE NO.2, RAMALAYA BUILDING, S.D. ROAD. SECUNDERABAD-500003 2. THE REGIONAL MANAGER. REGIONAL OFFICE-3-5-817 AND 818, OLD MLA QUARTERS. HYDERABAD-500029 3. THE GENERAL MANAGER. FIRE TECHNICAL HEAD OFFICE,24, WHITES ROAD. CHENNAI-600014 TAMIL NADU ...........Opp.Party(s)
BEFORE: HON'BLE MR. SUBHASH CHANDRA,PRESIDING MEMBER
FOR THE COMPLAINANT : MR G RONALD RAJU, ADVOCATE WITH
MR PAWAN KUMAR RAY, ADVOCATE FOR THE OPP. PARTY : MR AMIT KUMAR SINGH, ADVOCATE WITH
MS CHUBALEMLA CHANG, ADVOCATE
Dated : 29 January 2024 ORDER
1.This consumer complaint under section 21(A)(i) of the Consumer Protection Act, 1986 (in short, the 'Act') alleges deficiency in service in delay in repudiation of a claim under the Standard Fire and Special Perils Policy (in short, the 'Policy') issued by the opposite party and seeks settlement of the claim preferred with compensation and other costs. This order will also dispose of Consumer Complaint No. 2205 of 2017 which relates to a similar claim of insurance at the same premises on another floor involving the same parties. For the purposes of convenience, the facts are taken from complaint no. 2204 of 2017.
2. The facts, according to the complainant, are that it is engaged in the manufacture of pharmaceutical products under licence from the Department of Drugs Control Administration, Government of Andhra Pradesh. A Standard Fire and Special Perils Policy for the period 18.06.2014 to 17.06.2015 was obtained covering stocks for Rs 2,00,00,000/- and building for Rs 1,50,00,000/- from the opposite party. Opposite party no. 4/ State Bank of Hyderabad sanctioned loan renewal and enhancement of working capital limit from Rs 1,00,00,000/- to Rs 1,40,00,000/- on 08.12.2014 and Rs 14,00,000/- as overdraft. On 26.01.2015 a fire broke out in the premises of the office-cum-godown and the Fire Brigade was summoned to douse the fire. FIR No. 42/2015 was lodged with Chaitanyapuri Police Station, Hyderabad. The Drug Inspector inspected the premises on 29.01.2015. The opposite party no.1/insurance company deputed a surveyor (M.J. Basheer) on 02.02.2015. Requisite information was shared with the surveyor by the complainant and the fire debris left undisturbed. Inspection was also done by Truth Labs, a forensics laboratory at the instance of the surveyor.
3. Complainant states that while the Police and Fire Departments were of the opinion that the cause of fire was an electrical short circuit, on 05.11.2015 the opposite party repudiated the claim of Rs 2,22,36,413/- on the basis of the report of the surveyor and Truth Labs which concluded that the fire was extraneously induced through ignitable fire accelerants around the stock inspection table on the ground floor. The report of the surveyor was not provided, though the report of Truth Labs was provided on request to the complainant which indicated that burnt debris which was tested at Lucid Laboratories which detected presence of hydrocarbons, alcohol and other major ingredients. The complainant contests the repudiation on grounds of arbitrariness and scientific arguments stating that the cause of fire has been wrongly concluded to be externally ignited and relies upon the report dated 26.01.2015 filed by the Police Station to the Metropolitan Magistrate, Cyberabad that the cause of fire was a short circuit. He also relies upon his letter dated 18.01.2016 to opposite party 1 that the drugs distributed by it contained hydrocarbons as an ingredient and contests the report of Truth Labs. Complainant states that due to initiation of proceedings under SARFEASI Act by the Bank, personal assets were sold to discharge the loan of Rs 1,69,41,464/- in a One Time Settlement of Rs 1,60,00,000/- for both the firms, Viz., M/s Suresh Pharma and M/s Gamy Pharmaceuticals. Alleging deficiency in service on part of the opposite party, complainant is before this Commission praying that the opposite party no.1 be directed to:
(i) pay Rs 2,22,36,413/- with interest @ 24% p.a. towards loss due to the fire from the date of repudiation (05.11.2015);
(ii) pay Rs 13,19,966/- with interest @ 24% p.a. towards damages to the building from 05.11.2015;
(iii) pay Rs 10,00,000/- to the complainants as damages for deficiency in service;
(iv) pay costs of the complaint; (v) any other relief deemed fit and justified.
4. Upon notice, the complaint was resisted by the opposite party by way of a reply. It was stated that J. Basheer & Associates were appointed surveyors to assess the loss on 27.01.2015 who physically inspected the premises on 28.01.2015. A forensic report was felt necessary to establish the cause of the fire and hence Truth Labs was engaged who collected samples after due intimation to and in the presence of the complainant which was not objected to. Their report concluded that the fire was caused by ignitable fire accelerants. Surveyors noted that stocks in the godown had expired, ranging from periods up to 7 years ago or were expiring within 1 to 2 months. Unsold stocks of 8 to 10 months were also noted. The conclusion drawn was that presence of outdated stocks constituted suppression of material facts which was violative of condition no. 1 of the Policy. Stock inventory details were also not shared by the complainant with the surveyor despite notices and meeting which was a violation of condition no. 6. The surveyor's report dated 25.09.2015 assessed a non-payable loss of Rs 7,17,627/- based on information provided to them. The claim was held to be non-admissible as being fraudulent and violative of conditions 1,6 and 8 of the Policy and repudiated on 05.11.2015.
5. According to the opposite party the claim is based on misrepresentation and non-disclosure and is fraudulent which cannot be adjudicated in a summary manner before this Commission. Deficiency in service is denied and mal fide is alleged. It is averred that the complaint was barred by limitation. The report of the surveyor is argued to be valid and based on evidence. The report of the Electricity Department as to short circuit being a probable cause of fire is discounted on the ground that there was no forensic examination done by them. The complaint is therefore prayed to be dismissed with costs.
6. Parties led their evidence and filed rejoinder, affidavit, and evidence as well as short synopsis of arguments. I have heard the learned counsel for the parties and carefully considered the material on record.
7. Learned counsel for the complainant argued that it had the requisite approvals to carry on the wholesale business of sale and distribution of pharmaceutical products by way of a licence and insurance cover which covered the stock available on the insured premises. The fire was stated to be an accidental occurrence due to an electrical short circuit as per the report of the Electrical Department, Fire Brigade, Drug Inspector and Police Department. The letter of repudiation was challenged on the ground that it was based on the report of a forensic laboratory whose investigtion was not warranted since the cause of the fire had been established as accidental by several governmental agencies. It was also argued that the test reports of Sipra Labs, Hyderabad and TOU Pharma obtained by the complainant indicated that the presence of hydrocarbons in certain pharmaceutical products was natural. The conclusions of Truth Labs were challenged on the ground that petro-products including drugs, medicines, detergents, plastics and other products stocked had presence of hydrocarbons too. The report of Lucid Laboratories Pvt. Ltd. on which Truth Labs based its report was also challenged on the ground that the samples contained medicines which had presence of hydrocarbons which were not genuinely analysed. The complaint was therefore justified and reliefs sought justified.
8. Per contra, learned counsel for the opposite party no. 1 argued that the repudiation of the claim was justified on the basis of the surveyor's report which established the claim as fraudulent as the cause of the fire was not accidental. The complainants did not object to the collection of samples by Truth Labs for forensic testing and cannot object to it at this stage. The surveyor's findings that apart from some of the stock of medicines that had expired over seven years ago and some were due for expiry within the next two months, there was also unsold stock found in the fire debris. Non destruction of expired stock of medicines established malicious intent and its non disclosure was violation of condition no. 1 of the Policy as it amounted to suppression of material facts. The complainant also failed to provide necessary documents to the surveyor according to the surveyor's report, including inventory details, despite the same being asked for through several letters or produce documents even in meetings. The surveyor's report is based on IT returns, invoices, stock registers and relevant account books according to the opposite party. The loss is valued at Rs 7,17,627/- but is not admissible being violative of conditions 1,6 and 8 of the Policy. Opposite party relies upon Hon'ble Supreme Court's judgments in United India Insurance Co. Ltd. Vs. Roshan Lal Oil Mills Ltd. & Ors., in CA No. 2339 of 1992 decided on 27.07.1999, (2000) 10 SCC 19 and Khatema Fibres Ltd. VS. New India Assurance Co. Ltd. & Anr. (2021) SCC OnLine SC 818 to argue that a surveyor's report carries significance and cannot be brushed aside unless complete perversity is established by way of contradictory evidence which can be done before a civil court. Reliance is also placed upon Suraj Mal Ram Niwas Oil Mills (P) Ltd. Vs. United India Insurance Co. Ltd., (2010) 10 SCC 567 wherein the Hon'ble Supreme Court held that the rights and obligations in a contract of insurance are governed by the terms of the contract and have to be strictly construed without exception on the ground of equity. It was contended that issues of fraud and forgery cannot be agitated in summary proceedings before this Commission as held by it in Reliance Industries Ltd. Vs. United India Insurance Co. Ltd., I (1998) CPJ 13 (NC).
9. The letter of repudiation dated 05.11.2015 sets out the reasons for rejection of the claim as under:
A standard Fire and Special Perils Policy no.050281/11/14/11/00000044 for the period 18.06.2014 to 17.06.2015 was issued to you with a Sum Insured of Rs.2,00,00,000/- covering stocks of medicines and Rs.1,50,00,000/- covering building with the risk location being H NO. 1-39/6 Ground Floor, Prabhath Nagar, Chaitanyapuri, Hyderabad - 500 060.
You have made a claim of Rs.2,22,36,413/- for damages to stocks and Rs.14,00,000/- for damages to building due to the fire occurring on 26.01.2015. Upon receiving the intimation regarding the fire incident from you, we have appointed the surveyors, M/s J Basheer and Associates Insurance Surveyors and Loss Assessors Pvt. Ltd., Mumbai.
The Surveyors have visited the site of loss and their preliminary observations form part of their survey report. Their report also details their observations regarding the insufficiency of submitted documents and regarding your clarifications in respect of the points raised by them.
You are aware that samples of the ashes were taken from the site of fire. These samples were sent to M/s Truth Labs at Hyderabad for scientific examination.
After their examination, M/s Truth Labs, have in their report, opined that the fire in the premises was Not an account of electrical short circuit, Not on account of any chemical or industrial process failures bus an account of extraneously induced fire through use of ignitable fire accelerants which initiated fire in the stocks on and around stock inspection/checking table in the ground floor, as clearly indicated in the burnt debris samples subjected to GC - MS analysis.
The report also states that the fire so initiated by deliberate means was allowed to spread to the other parts of the premises in a selective manner through physical means.
The report concludes that the fire was a deliberate fire carried out through human intervention by persons having the means, motive and opportunity.
Based on their physical inspection and the report of M/s Truth Labs, the surveyors have concluded that the incident cannot be deemed to be accidental in nature as the cause of fire was due to arson by interested party with mala fide intention of availing pecuniary benefit.
In this connection, we draw your attention to condition no.8 of the policy issued to you which states that:
"if the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof or if 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 willful act, or with the connivance of the insured, all benefits under the policy shall be forfeited."
In view of the findings of the surveyors, the report of M/s Truth Labs and as per condition no.8 of the policy, we regret to inform you that no payment can be made in respect of your claim for losses in the subject incident and we are closing your file as repudiated.
[ Emphasis added ]
10. Counsel for the complainant has relied upon the judgment of this Commission in CC no.359 of 2013 decided on 01.05.2023 in M/s Flowtex Products vs M/s United India Insurance Co. Ltd., wherein it was held that on the basis of the Hon'ble Supreme Court's decision in Canara Bank vs United India Insurance Co. Ltd., (2020) 3 SCC 455
17. In any event, neither in the report of M/s Truth Labs nor in the other reports by the Insurance Company is there anything to show that the insured had set the cold store on fire. Whether the fire took place by a short circuit or any other reasons, as long as insured is not the person who caused the fire, the insurance company cannot escape its liablity in terms of the insurance policy. We reject the contention of the insurance company that the fire was ignited by the use of kerosene and hence, it is not liable.
11. Complainanat argued that it was held by this Commission that forensic laboratory (M/s Truth Labs) it failed produce any cogent evidence to show that the insured had set the factory on fire. Further relying on the judgment of the Supreme Court in the case of New India Assurance Company Limited vs Pradeep Kumar (2009) 7 SCC 787 it had been held that the surveyor's report is not a final word and it is not binding upon the insured or insurer since it is not so sacrosanct that it cannot be departed from although it is a pre-requisite for settling a claim of Rs.20,000/- or more. In addition, complainant relied upon the Hon'ble Supreme Court in M/s Isnar Aqua Farms vs United India insurance Co. Ltd., in Civil Appeal no.1077 of 2013 decided on 08.08.2023 which upheld the levy of interest @ 10% as just and equitable considering the prevalent bank interest rates in financial year 1995-96. The facts of the instant case being different and pertaining to 2015-16, the award of a higher rate of interest is not considered viable.
12. From the foregoing it is evident that the repudiation of the claim by the opposite party is based on the surveyor's conclusion, based on evidence on the site, documents made available and forensic investigations, through M/s Truth Labs. The complainant has not disputed that the stocks were expired or were expiring. However, the opposite party has given no credence to the contentions that the presence of pharmaceuticals products and other material in the godown comprises of petro products which had a content of hyrdro carbon which could have been detected in the tests by M/s Truth Labs. There is no cogent or direct evidence brought by the opposite party to prove that the complainant was responsible for the ignition of the fire. The stocking of the material which were covered under the terms of the insurance policy in force may have been ignitable because their inherent nature. This fact would have been considered by the opposite party while extending the insurance cover which was validly in force. The repudiation of the claim was on the basis of the fact that the fire was accidental and was attributable to the opposite party by the surveyor on the basis of the forensic examination by M/s Truth Labs therefore, cannot be considered as it is not supported by cogent or direct evidence and is rather based on surmise and conjecture. The law laid down by the Hon'ble Supreme Court in Pradeep Kumar (supra) and Canara Bank (Supra) are relevant in the case in hand. In the absence of any evidence to establish direct nexus of responsibility for the cause of the fire to the insured, the conclusion of the surveyor cannot be accepted as held by the Hon'ble Supreme Court in Canara Bank (Supra). The issue of concealment of material facts also does not lie since neither the proposal form nor the renewal form has been brought on record. Therefore, the contention of the opposite party does not sustain. In delay and deficiency in service on the part of the insurance company is settling the complainant's claim fairly and in a timely manner warrants that it prays interest on the amount payable.
14. In the facts and circumstances of the case and for the foregoing reasons, the complaint is found to have merits and is liable to succeed. The same is accordingly allowed.
The opposite party is directed to pay an amount of Rs.2,22,36,413/- towards loss of stock and Rs.13,19,966/- towards loss on account of damage to the building with interest @ 6% from 05.11.2015 till the date of this order; and The order shall be complied within eight weeks failing which the rate of interest will be 9%.
11. Consumer complaint no.2205 of 2017 is also disposed of in the above terms.
12. All pending IAs, if any, are also stand disposed of by this order.
...................................... SUBHASH CHANDRA PRESIDING MEMBER