National Consumer Disputes Redressal
United India Insurance Co. Ltd. vs Ambuja Laboratories Ltd on 4 March, 2024
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 270 OF 2017 (Against the Order dated 25/10/2016 in Complaint No. 73/2003 of the State Commission Andhra Pradesh) 1. UNITED INDIA INSURANCE CO. LTD. REGIONAL MANAGER, REGIONAL OFFICE, 8TH FLOOR, KANCHANJUNGA,M BUILDINGS 18, BARAKHAMBA ROAD, NEW DELHI ...........Appellant(s) Versus 1. AMBUJA LABORATORIES LTD REP. BY ITS DIRECTOR, DR. S. PRAKASH REDDY, REGD. & ADMIN OFFICE AT. D NO. 5-9-1112, CHURCH ROAD, GUNFOUNDRY, HYDERABAD ...........Respondent(s)
BEFORE: HON'BLE MR. SUBHASH CHANDRA,PRESIDING MEMBER HON'BLE AVM J. RAJENDRA, AVSM VSM (Retd.),MEMBER FOR THE APPELLANT : MR PRADEEP GAUR ALONG WITH MS SWETA SINHA ADVOCATES FOR THE RESPONDENT : MR K MARUTHI RAO, ADVOCATE Dated : 04 March 2024 ORDER PER SUBHASH CHANDRA
1. This appeal under Section 19 of the Consumer Protection Act, 1986 (in short, the 'Act') challenges the order dated 25.10.2016 of the State Consumer Dispute Redressal Commission, Telangana, Hyderabad (in short, the 'State Commission') in Consumer Complaint no. 73 of 2003 pursuant to this Commission remanding the matter to the State Commission vide orders dated 17.02.2016 in FA No. 81 of 2007 filed by the appellant herein and FA No. 338 of 2007 filed by the respondent.
2. The relevant facts of the case, in brief, are that the respondent company had availed a Fire and Special Perils Policy (in short, the 'Policy') from the appellant on 11.10.2000 which was valid till 10.10.2001 for a sum of 72,00,000/- comprising Rs 2,00,000/- for building, Rs 30,00,000/- for machineries and accessories and Rs 40,00,000/- for stock (which was hypothecated to State Bank of India). On 25.03.2001 a fire occurred on the insured premises and a claim for Rs 54,96,575/- was preferred by the respondent. A surveyor (M/s Tacconns & Co.) was appointed by the appellant on and visited the premises on 25.03.2001 to 28.03.2001 who reported that the fire was on account of a short circuit and assessed the loss at Rs 43,67,317/- after deducting Rs 3,34,452/- towards depreciation, Rs 4,52,348/- towards under insurance and Rs 41,600/- towards salvage vide report dated 18.06.2001. On 08.03.2002, the appellant appointed Mr Zuber Ali Khan as an investigator. Appellant submitted that the respondent's Managing Director withdrew the claim on 11.03.2002 through his daughter. This is contested by the other Directors of the respondent company on the ground that the withdrawal was not authorized by the Board and should therefore not be considered. According to the report of the investigator, the claim was not admissible under the General Conditions of the Policy since it was based on misrepresentation and documents that were false and fabricated from non-existent companies. Against the repudiation of the claim dated 19.03.2002, the respondent approached the State Commission in CC 73 of 2003 which was allowed on contest vide order dated 03.11.2006 directing the appellant herein to pay Rs 43,67,317/- with interest @ 9% to the respondent. Both parties approached this Commission in Appeal which were remanded to the State Commission vide order dated 17.02.2016 for consideration afresh. The State Commission reaffirmed its previous finding vide order dated 25.10.2016 which is impugned before us by the appellant praying to:
(i) Call for the record of CC titled Ambuja Laboratories Ltd vs United India Insurance Company Ltd. from the Hon'ble State Commission, Telangana at Hyderabad;
(ii) Accept the present appeal and set aside the impugned order dated 25.10.2016 passed by the Hon'ble State Commission, Telangana at Hyderabad thereby dismissing the complaint of the complainant with cost and to hold that there is no deficiency in service on the part of appellant insurance company (iii) Allow the cost throughout in favour of the appellant (iv) Pass such other or further order(s) as may be deemed fit and proper in favour of the appellant insurance company and against the respondent in the interest of justice.
3. We have heard the learned counsel for the parties and given thoughtful consideration to the submissions and material on the record.
4. The finding and the impugned order of the State Commission reads as below:
9. It is to be noted that, without considering the Survey Report stated above, the opposite parties have appointed one Mr Zuber as an investigator to investigate into the matter. The complainant company has specifically stated that the said investigator submitted his report after the alleged investigation without notice to them. The opposite parties did not adduce any evidence to rebut this claim. As per the said investigation report dated 08.03.2002 under Ex. B14 the claim of the complainant company was based on false and fabricated documents and that actual value of the damaged raw material was only worth Rs 10,00,000/- but the complainant company claimed the same at Rs 35,00,000/- and that the invoices and bills pertaining to the transactions between the complainant company and one Ridhi Siddhi Enterprises, Pramnik Traders Co., M/s Vipul Trading Co., M/s R.V. Chem, Progress Shipping Centre, M/s Arunodaya Enterprises and Beta Engineers were not genuine. To rebut this allegation and to establish the claim, the complainant company has filed necessary affidavits of the competent persons under Ex. A41 to A45 with regard to the said transactions. It is also to be noted that the amounts covered by some of the bills were paid through the bank of the complainant company. This fact is evident from some of the letters addressed by the bank under Ex. A34, A35, A38 to A40. No doubt, the opposite parties have filed copies of letters from the Sales Tax Department, Mumbai and Daman under Ex. B1 to B5, B8, B9 and B12 but no affidavits of evidence of the personnel concerned of the said department have been placed on record. It is also significant to note that the opposite parties did not assign any reason which necessitated them to appoint an investigator without discarding their own surveyors report already on record. On the other hand, they suppressed the said surveyor's report which is a material piece of evidence. All these facts and circumstances certainly cast a doubt about the attitude and conduct of the opposite parties in discarding a valid claim of the complainant company. In this view of the matter we find no reason to accept the documentary evidence under Ex. B1 to B12 filed and relied on by the opposite parties but the same have to be disregarded.
10. The surveyor, M/s Taccons and Co., in its report Ex. A6 has given all the necessary particulars with regard to the value of damage and come to a conclusion with sound reasons. Therefore, the same has to be accepted and relied on. As per the said report, the complainant company has sustained a damage and loss to the tune of Rs 43,67,317/-. When the same was covered by a valid insurance policy, repudiating the same, in our considered opinion, certainly amounts to deficiency in service. With regard to the letter of withdrawal of claim addressed by Mr P.V. Krishna Reddy, Managing Director of the complainant company, this Commission has already held as unsustainable under section 291 of the Companies Act and the same was also confirmed by the Hon'ble National Commission. Therefore, the same need not be adjudicated once again. For all these reasons the closing of the claim of the complainant company by the opposite parties through the letter Ex. A30 is an act of illegality. In view of the afore discussion we hold the complainant is entitled for a sum of Rs 43,67,317/- with a reasonable interest thereon towards compensation.
11. In the result, the complaint is allowed directing the opposite parties jointly and severely to pay to the complainant company a sum of Rs 43,67,317/- with interest @ 9% per annum from the date of closure of the claim, i.e., 19.03.2002 till the date of realization with costs of Rs 10,000.
Time for compliance: 4 weeks.
5. The appellant contended that the respondent was not a 'consumer' under the ambit of the Consumer Protection Act, 1986 as it was a registered company operating for profit. The learned counsel for the appellant submitted that the claim of the respondent was investigated in detail by the surveyor/investigator, Mr. Zuber with respect to the bills for the plant and machinery and the stocks and had concluded, on the basis of the investigation, that the bill of purchase of machinery was fake and the companies stated to have been supplying the material were found to be non-existent. Accordingly, as per the General Conditions of the Policy, the claim was not admissible due to misrepresentation, misdescription and non-disclosure of material facts and therefore, the damages claimed were not payable. It was also contended that the loss assessed in respect of machinery was Rs 5,52,159/- which included the Spectra Photometer for Rs 5,16,955/-. However, the quotation obtained from M/s Beta Engineering, Mumbai dated 09.04.2001 was found to be a false document. The invoices raised by Riddhi Siddhi Enterprises dated 11.01.2001, 25.01.2001 and 16.08.2001 were also found to be incorrect documents since they had been obtained from firms that were not in existence. The bills of M/s Vipul Trading were also not found to be genuine since the Sales Tax details did not match and the documents were found to be those of M/s Pramnik Trading Co. The bills submitted by the insured relating to M/s RV Chem and M/s Arunodaya Enterprises were also found to be not genuine as per information furnished by the concerned sales tax authorities. It was therefore concluded that the insured had submitted fabricated false bills of Rs 46,32,723/- comprising of Rs 5,16,159/- of M/s Beta Engineering, Rs 8,53,904/- of Riddhi Siddhi Engineering, Rs 7,86,772/- pertaining to Vipul Trading Co., Rs 4,34,405/- of RV Chem and Rs 20,41,483/- of Arunodaya Enterprise. The claim had been withdrawn according to the appellant by the managing director of the insured vide letter dated 11.03.2002 The State Commission had erred in not considering the investigation report as well as the claim withdrawal while proceeding to pass the impugned order. The reaffirmation of its previous order was also argued to be erroneous since the matter had not been reexamined afresh as directed by this Commission. It was therefore contended that the claim had been rightly repudiated and that the appeal be allowed.
6. Per contra, the learned counsel for the respondent argued that the fire incident was admitted by the appellant to be due to a short circuit, which was a covered peril under the Policy. It was submitted that all information relating to price variation and other details including turnover sought by the surveyor, M/s Tacconns & Co. had been provided and they had assessed the loss to be Rs 43,67,317/- after accounting for depreciation, under insurance and salvage. The Managing Director had pursued the early settlement of the claim vide his letters dated 20.07.2001 and 08.08.2001 which were not denied. The letter withdrawing the claim stated to have been handed over by the daughter of the MD is contested as having been issued without authority of the Board or consent of the other partners. The M.D. had subsequently requested the re-opening of the claim on 20.06.2003. The State Bank of India with whom the stocks were hypothecated had also requested for settlement of the claim on 04.04.2002 with reminders on 09.08.2002 and 21.05.2003. It was argued that the claim be ordered to be allowed with interest @ 9% as ordered by the State Commission by setting aside the repudiation letter dated 19.03.2002. It was contended that the complaint had been held as maintainable by this Commission vide order dated 17.02.2016 as the appellant/insurance company had failed to substantiate that the MD was authorized to withdraw the complaint and this order had attained finality as it had not been challenged. The issue of maintainability of the complaint was therefore no longer an issue. The only issue on which the matter was remanded to the State Commission was the quantum of compensation. It was further contended that the appellant had not assigned any reasons for the appointment of the investigator who conducted his investigations without notice to the respondent. According to the respondent, it had produced bills/invoices that were bona fide documents and that the necessary affidavits had been produced to this effect. With regard to the machinery, it was submitted that the Bank had advanced a loan for its purchase to the extent of 75% and released the payments directly. It was submitted that the Bank was also undertaking regular plant and stock inspections and hence the issue of fabrication of the claim was not acceptable.
7. The preliminary contention of the appellant that the respondent does not qualify to be considered a 'consumer' has been considered. In the light of the judgment of the Hon'ble Supreme Court in M/s Harsolia Motors Vs. M/s National Insurance Co. Ltd. & Ors., in Civil Appeal nos.5352 - 5353 of 2007 decided on 13.04.2023, it is evident that this contention does not sustain since the Policy in question was clearly obtained to indemnify the respondent from risks and not for the purpose of making profits. It is also evident from the foregoing discussion that the claim of the insured respondent has been found to be admissible by the surveyor appointed by the appellant on the ground of a covered peril. This Commission has also held the claim to be maintainable vide its order dated 17.02.2016. The loss surveyor appointed by the appellant (M/s Tacconns & Co.) had assessed the claim to be admissible for Rs 43,67,317/-. The reason for the appointment of an Investigator (Mr Zuber Ali Khan) has not been brought on record by the appellant. In the case on hand, no reasons for the appointment of an investigator is brought on record. Instead, reliance is placed on the findings of the investigator to challenge the assessment of loss worked out by the surveyor appointed initially by the appellant. The respondent has challenged the conclusions of the investigator on grounds that it had no opportunity to clarify issues raised and that it had produced affidavits from the firms to justify transactions for the basis of the claim. It has also relied upon the fact that the State Bank of India to whom the stocks were hypothecated for the loan had also sought early settlement of the claim since it was aware of the transactions to justify the genuineness of the claim.
8. In Sri Venkateswara Syndicate Vs. Oriental Insurance Company Limited & Anr, in Civil Appeal No. 4487 of 2004 decided on 24.08.2009, (2009) 8 SCC 507 the Hon'ble Supreme Court while laying down that under Section 64 UM of the Insurance Act, 1938 the appointment of a surveyor in all insurance claims exceeding Rs 20,000/- is a mandatory requirement and that the report of the surveyor needs to be accorded due importance, held that:
"There is no prohibition in the Insurance Act, 1938 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 to appoint second surveyor. 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 maybe if there are inherent defects in it, if it is found to be arbitrary, excessive, exaggerated, etc., it must specify cogent reasons, without which it is not free to appoint the second surveyor or surveyors till it gets a report which would satisfy its interest. There must be sufficient ground to disagree with the findings of surveyor/surveyors....
.....The insurance company cannot go on appointing surveyors one after another so as to get a tailor-made report to the satisfaction 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."
(Emphasis added) The Apex Court also held in New India Insurance Co. Ltd. Vs. Pradeep Kumar, (2009) 7 SCC 787 decided on 09.04.2009 that the report of a surveyor although an essential ingredient in the settlement of a claim is not so sacrosanct that it cannot be disregarded or deviated from on the grounds of arbitrariness or perversity as below:
15. The object of the aforesaid provision is that where the claim in respect of loss required to be paid by the insurer is Rs.20,000/- or more, the loss must first be assessed by an approved surveyor ( or loss assessor) before it is admitted for payment or settlement by the insurer. Proviso appended thereto, however, makes it clear that insurer may settle the claim for the loss suffered by insured at any amount or pay to the insured any amount different from the amount assessed by the approved surveyor (or loss assessor). In other words although the assessment of loss by the approved surveyor is a pre-requisite for payment or settlement of claim of twenty thousand rupees or more by insurer, but surveyor's report is not the last and final word. It is not that sacrosanct that it cannot be departed from; it is not conclusive. The approved surveyor's report may be basis or foundation for settlement of a claim by the insurer in respect of the loss suffered by the insured but surely such report is neither binding upon the insurer nor insured.
As per guidelines of the Insurance Regulatory & Development Authority (IRDA), the insurance companies are required to specifically indicate reasons for appointing surveyors after the report is received or reasons for the need for an investigator in a claim of insurance.
9. From the foregoing discussion and the facts on record, it is evident that the respondent has not brought on record any reasons for the appointment of an investigator. Appointment of an investigator or surveyor in order to obtain a favourable report has been deprecated by the Hon'ble Supreme Court even though Section 64 UM mandates appointment of a surveyor in all cases of claims exceeding Rs.20,000/-. In this case, no reasons for the appointment of an investigator are brought on record. The ground of withdrawal of the claim has already been settled by this Commission vide its earlier order and therefore, cannot be considered.
10. In view of the foregoing, in the facts and circumstances of this case, we are not convinced with the submissions of the appellant and do not find any reasons warranting any interference in the order of the State Commission. The appeal is dismissed as being without merits. Order of the State Commission is affirmed. Appellant is directed to comply with the order of the State Commission dated 25.10.20216 in CD no.73 of 2003 within a period of four weeks as directed. Pending IAs, if any, stand disposed of with this order.
...................................... SUBHASH CHANDRA PRESIDING MEMBER ................................................................................... AVM J. RAJENDRA, AVSM VSM (Retd.) MEMBER