National Consumer Disputes Redressal
Star Chemicos vs Oriental Insurance Co. Ltd on 8 December, 2006
NCDRC National Consumer Disputes Redressal Commission New Delhi. ORIGINAL PETITION No. 352 of 2001 Star Chemicos Complainant (s) Versus Oriental Insurance Co. Ltd Opposite Party (ies) BEFORE: HONBLE JUSTICE SHRI K S GUPTA, PRESIDING MEMBER HONBLE DR.P.D.SHENOY, MEMBER. For the Complainant : Shri K K Singh, Advocate For the Opposite Party : Shri Vishnu Mehra, Advocate Ms Sakshi Mittal, Advocate Dated the 8th December, 2006. ORDER
DR.P.D.SHENOY, MEMBER The case of the complainant is that it was engaged in business of manufacturing and trading of menthol and allied products for the last three years and for the year 1999-2000 the plant and machinery was insured for a sum of Rs.3,25,000/- and stock of menthol for Rs.16 lakhs. Keeping in view the regular increase in prices of menthol and highly inflammable nature of menthol, the complainant enhanced the secured insurance cover for the stock for Rs.35,25,000/- on 16.08.1999. The price of menthol was Rs.1100/- per kg. The stock available was 2950 kg, making a total value of Rs.32,45,000/-.
On 23rd/24th October, 1999 at about 01.00 A M the factory premises caught fire due to short circuit which was controlled by the fire brigade after two hours. Immediately, thereafter the complainant informed the Insurance Company and their banker about the said fire. The complainant also submitted a claim under the following heads :
1. Finished Product Rs.23,15,750/-
2. (2950 kg @ 785.00/ kg)
3. Plant and Machinery Rs. 3,25,000/-
4. Furniture Rs. 3,350/-
5. Wiring and Switches Rs. 6,168/-
6. Accessories Rs. 8,831/-
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Total Rs.26,59,099/-
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Despite appointment of surveyor and continuous correspondence the claim was not accepted and the Insurance Company issued repudiation letter on 02.05.2000. The complainant filed a complaint before the National Commission for award of Rs.26,59,099/- with interest @ 24% per annum till realization and also compensation for harassment and business loss to the tune of Rs.05.00 lakhs.
Submissions of the ld Counsel for the complainant :
Soon after the fire accident, the complainant has immediately informed the Insurance Company and the banker. The company submitted the stock statement duly verified by the Punjab National Bank for 30.07.1999, 30.08.1999 and 30.09.1999 alongwith the prices of Menthol for the month of July, August, September and October 1999 which was compiled on the basis of prices published in the newspaper and also copy of the special report of the fire brigade which doused the fire which had mentioned the cause of fire as short circuit. The Insurance Company unjustifiably has repudiated the claim on five grounds :
No manufacturing activities for two months prior to the alleged fire accident Policy enhancement was obtained by fraudulent coverage Not supplied stock register in support of the claim Not supplied the declaration and returns filed with the Excise Department Not complied with the Sales Tax registration.
The learned Counsel for the complainant submitted that these are flimsy grounds because, as the prices of menthol was going up and they had adequate stock and there was no necessity to produce more to accumulate further stock as it is an expensive material. Enhanced coverage was obtained because the prices were going up day by day which was reflected in the newspaper report and has been tabulated and submitted to the Insurance Company. The complainant submitted letters from the bank relating to stocks and its valuation. As this is a new company and its total production was within the limit and there was no need to get a certificate from Excise Department. They had already approached the Sales Tax authorities for registration number, hence these charges are frivolous. The special report of the fire force is very crystal clear and it has mentioned that the accident took place due to short circuit.
The extract of the special report of the fire force reads as follows :
(i) Damaged property (Approx.) : 40,00000/-
(ii) Loss of property (Approx) : 30,00000/-
(iii) Property saved by rescue team (Approx) : 10,00000/-
(iv) Cause of fire : Electric Short Circuit Amar Ujala newspaper has also reported about the accidental fire. The surveyors have not cooperated with the complainant and asked for several records unnecessarily and have alleged that he has not produced the relevant records, hence, the complaint may be allowed and compensation as prayed may be granted.
Submissions of the learned Counsel for the Insurance Company :
It is the responsibility of the complainant to prove his case that there was accidental fire and which has resulted in loss of stocks which was kept in the factory premises by adducing solid evidence. Mere submissions of bank statements is not adequate.
The enquiries and investigations conducted by Shri P C Shukla for Surveyors India indicated the following :
1. There was no manufacturing activity for last two months and finished good stocks in 60 bags total 3000 kgs, was lying in the work-shed since July 1999. There was no production of menthol after July 1999.
1.
Regarding storage of finished goods for such a long time Mr Agnihotri asserted that market rate of menthol in the open market were expected to rise during festival season, therefore, they were going to sell this material at Sambhal on coming Monday.
2. There was no stock of raw material and in process at the time of fire.
3. Insured is maintaining cash book, ledger, stock register, purchase register, sale bill but all these books/ records for the financial year in question burnt in fire as kept in the same block.
4. Insured firm is also filing sales tax return (quarterly) and their last income tax return filed for the year 1997-98.
It was possible for the complainant to reconstruct the register if they were burnt in the fire on the basis of the supporting documents which he has not done. Secondly, he has not submitted the Sales Tax Return and Income Tax Return filed for the relevant period. In the cross examination of the complainant Mr Shailendra Agnihotri has stated that his firm maintains all the books of account. These records were available with his Chartered Accountant. If that is so he could have obtained the record from the office of his Chartered Accountant and submitted the same to the surveyor which he has not done. As he has not produced the stock register and the Sales Tax and Excise Returns, the complainant could not substantiate the loss. Even till date the books of account are not furnished. In the report submitted by the surveyor Mr Shukla he has concluded that :
In view of the facts and circumstances of loss discussed above, the claim required in depth investigation on all aspects. Regarding books of accounts insured has manifested that all the books pertaining to the financial year in question were burnt as kept in the premises at the time of fire. During our detail physical inspection we did not find debris of the alleged books of account.
Mr Bhatia and Company, Surveyor and Loss Assessors has stated that :
The insured was requested to let us have the books of accounts for the unit, on which he first stated that these have been burnt in the fire. On questioning as to where these were kept and if burnt, these should have some residue, but the insured could not prove the burning of the books. We informed him that he has no grounds to make this point acceptable in view of the non operation of the unit since July 1999 and more so there is no staff appointed by the insured to write books of accounts in the factory premises. On this he stated that he has the books of accounts at his residence. He was requested to take us to his residence, on which he agreed. On reaching half way, he stopped and said that although the books of accounts are with him, he would first like to consult his Chartered Accountant and then produce the books of accounts for our verification. He requested for one weeks time for the purpose. He was allowed one week to submit all the needed record and the books of accounts.
Mr Bhatia has submitted the report on an affidavit and he was not cross examined, accordingly his evidence has gone un-rebutted. Further Mr Dilbagh Singh, Manager of Oriental Insurance Company has inter-alia mentioned in his reply on oath to the interrogatories filed by the complainant as follows :
The complainant had requested for a policy of Rs.16,00,000/- to cover their stocks and the same was issued as per request for a period of one year from 16.08.1999 to 15.08.2000 with a fresh policy number. This is clearly suggestive of the fact that fresh stocks were inducted and a policy for a period of one year was required. The earlier policy also covering the stocks was for the period of one year from 11.03.1999 to 10.03.2000 with a different policy number. The complainant accepted the 2nd policy for the period 16.08.1999 to 15.08.2000 as such without any objection and did not ask for any rectification. Thus, it is evident that the two policies bear different numbers and are for different period. I may, however, add that there was no reach for the complainant to take another policy as they were not carrying out any manufacturing activity since June 1999 and no fresh stocks were either purchased or intended to be purchased.
FINDINGS :
The analysis of this case instead of providing answers to the dispute raises many questions.
The complainant had requested for enhancement of the insured amount to Rs.16 lakhs which is clearly suggestive of the fact that fresh stocks were inducted as the prices of raw materials had increased in the market.
The cause of fire raises doubts as has been clearly stated. The observation of Shri P C Shukla is relevant in this connection that the insured factory was closed at the time of fire and no production activity but as per insured the electric circuit remain energized due to a lamp near Ganesh Lakshmi Murthy. There was no electrical installation above the stacks/ heaps of bags containing menthol and only one electric line is passing through the back wall on south. The fuse kit for the main incoming was totally burnt/ melt. The switch board for light and fan was badly damaged. In view of the circumstances of the fire, condition of electrical installation, it is very difficult to pin point the cause of fire at this stage, therefore, it needs further investigation.
The fire force has given special report wherein they have given the cause of fire as Electric Short Circuit. They have not given the detailed reasons for the same. They have indicated some lumpsum figures for loss of property, the basis of which they have not been indicated by them. The only document produced by the complainant in support of the stocks is a banks statement for the month ending 30.09.1999 which reads as follows :
1.
Menthol Crystal Rs.24,02,775/-
2. High C P Crystalized Menthol (Flakes Rs. 2,31,575/-
TOTAL Rs.26,34,350/-
Similar statements were given for the previous month. The complainant has not produced relevant records to consider his case as is evident from the affidavit submitted by Shri Bhatia, the final surveyor who has arrived the following conclusions :
(1) As per the policy conditions, the insured is required to complete the needed formalities within days of the incident, but it is more than 120 days now, the insured has not furnished any supporting document for the amount claimed.
(2) There is a total non co-operation from the insured in submitting the documents called for.
(3) The insured has no record to furnish e.g. purchase record, sales record, stock record etc. and has been taking time to generate the record so as to meet the insurance requirement.
(4) He has not turned back to the unit after the fire as was evident from the registered letter returned undelivered and also the statement of the landlord.
(5) Even the fire report has not been collected by the insured from the fire brigade for submission.
(6) The cause of the fire as short circuit is very much disputed as it is not believable for the following reasons :
(a) The insured had visited the factory at about 10 p m i.e. just before 2 hours of the fire when he had no work to perform there and no processing was going on which needed supervision.
(b) The stock was kept about 15 feet away from the wiring complex which could cause short circuit.
(c) The contents were packed in 5 kg polythene bags and then 10 such bags were tightly packed in gunny bags they no room for vapours to come in contact with any burning material in the vicinity.
(d) The freezers which are very near to the wiring complex are safe and have only smoke layer on it.
(e) He had not been paying rent and electricity charges to the landlord who was pressing hard.
(f) He had started defaulting in making payments to the Bank as was evident from the outstanding against him.
(g) There were practically no activities right from September 1998 and the sum insured for the stock was worth Rs.16 lakhs. In August 1999, the insured increased the sum insured to Rs. 32 lakhs in spite of the fact there were no activities being carried out by the insured. This was admitted by the insured in writing that no activities were being carried w.e.f June 1999.
(h) There was no board outside the premises right from the beginning. Just one day before the fire a board indicating the name of the firm M/s Star Chemicos was fixed outside the portion occupied by the insured.
Obviously, it was for claim purposes.
(i) The firm has been operating right from September 1997 and like wise had been kept close when the processing was on and all the electrical equipment operating and still nothing happened when the product used to emit vapours. How and under conditions a fire can erupt when all the electrical equipment was closed and no processing was on and more so the material kept in the premises was tightly packed.
(j) The insured had one permanent staff who had been turned off just a few days before the incident of fire so as to leave clue for getting past information.
(7) The circumstantial evidences makes us believe that the insured has deliberately set the unit on fire to claim from the Insurance and that was why the insurance cover was enhanced from Rs.16 lakhs to Rs.32 lakhs just months prior to the incident when practically there was no change in the stock held by the insured right from September 1998.
(8) There is contradiction of stock statement submitted to bank and the stock declared to be with the insured at the time of incident.
His evidence has gone un-rebutted as he was not cross-examined. In view of the above analysis it is difficult to accept the claim of the complainant. Accordingly the original complaint is dismissed. The complainant is directed to pay Rs.5000/- as costs, which shall be deposited with the Consumer Legal Aid account maintained by this Commission.
J [ K S Gupta ] Presiding Member .
[ P D Shenoy ] Member rsk