National Consumer Disputes Redressal
M/S Sumit Chemicals Pvt. Ltd., vs M/S National Insurance Co. Ltd., on 18 April, 2023
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 10 OF 2014 1. M/s SUMIT CHEMICALS PVT. LTD., Head Office: 111/230, Harsh Nagar, KANPUR - 208012. ...........Complainant(s) Versus 1. M/s NATIONAL INSURANCE CO. LTD., Through its Senior Divisional Manager, Divisional Office No. III, G.T. Road, 111A/6, Ashok Nagar, KANPUR - 208012. ...........Opp.Party(s) BEFORE: HON'BLE MR. SUBHASH CHANDRA,PRESIDING MEMBER For the Complainant : Mr S M Tripathi, Advocate For the Opp.Party : Mr Niraj Singh, Advocate Mr Dev Hans Kasana, Advocate Dated : 18 Apr 2023 ORDER The complainant which is a private limited company engaged in the business of manufacturing of various chemicals has filed this complaint under section 21 of the Consumer Protection Act, 1986 (in short, 'the Act') alleging deficiency in service relating to a claim under Fire Insurance Policy by which the claim was settled for a lower amount than claimed by the opposite party.
2. The relevant facts of the case according to the complainant are that it had obtained a fire insurance policy no. 451600/11/11/3300000091 dated 23.01.2012 for the period 13.12.2011 to 12.12.2012 covering building, boundary wall, plant and machinery (including accessories) and furniture, fixtures and fittings for its unit at 50 Uptron Estate, Panki Industrial Area, Site no.1, Kanpur against fire and allied perils for various sums totaling to Rs.5,25,00,000/- against a payment of Rs.34,745/- towards insurance premium. Another fire insurance policy on floater basis bearing no. 451600/11/11/3300000092 dated 23.01.2012 for the period 13.12.2011 to 12.12.2012 covering stock of raw materials, goods in process, including the finished, unfinished goods, zinc related chemicals and packaging material were also covered for fire and allied perils for a sum of Rs.8,00,00,000/- against an insurance premium of Rs.58,238/-. The insured property was hypothecated to Canara Bank. On 17.01.2012 at around 06.00 am a fire incident in the second floor of the insured factory was noticed. Fire brigade was informed about the same and the fire was controlled after about 12 hours with the use of several fire engines. The opposite party was also informed and they deputed M/s Surveyors India on 17.01.2012 itself to conduct the preliminary survey and assess the loss. Another surveyor, Mr Vinod Sharma, was appointed on 18.01.2012 who visited the site on 19.01.2012. The details sought were provided by the complainant. A claim form for Rs.11,63,38,758/- was submitted to the opposite party. The complainant requested the surveyor for release of 75% of the insured amount as an interim on account payment on 24.01.2012. The request was repeated on 29.02.2012 and on 02.03.2012 Canara Bank was also requested to intervene with the opposite party on their behalf. Further efforts were made by way of letters dated 28.02.2012 and 31.03.2012, in view of the severe financial loss being experienced. It is submitted by the complainant that the entire factory, building, plant and machinery and stocks had been destroyed resulting in complete close down of the factory. As the complaint was not settled by July 2012, the opposite party was again requested on 06.08.2012 to expedite the approval and the surveyors were also requested to expedite their report. On 06.09.2012 and 26.09.2012 further information and documents sought by the surveyor were provided to them. On 08.05.2013 the opposite party conveyed that the claim has been approved for Rs.5,98,44,082/- subject to submission of proof of deposit of Rs.23,65,526/- towards CENVAT. The complainant submits that Rs.26,31,955/- was deposited on 09.05.2013 and the proof of deposit was conveyed to the opposite party.
3. The complainant submits that since the delay in the settlement had caused considerable financial loss and he was incurring Rs.45,000/- per day interest on the bank loan, the discharge voucher sent by the opposite party was signed on 24.05.2013 in order to receive whatever amount was being offered towards the claim. Thereafter, the complainant sought details of calculations of the settlement amount and the opposite party on 30.05.2013 conveyed only the amount assessed on buildings, plant and machinery, stocks without the working details. The complainant wrote to the opposite party for the balance amount on the ground that the surveyor had not accepted the loss on many items and deducted amounts arbitrarily which was not accepted by the opposite party through some correspondence between May 2013 and October 2013. Thereafter, the complainant had asked and obtained a copy of the report of the surveyor under the Rights to Information Act.
4. The complainant contends that the surveyor has made arbitrary and unjustified deductions while assessing the loss. It is stated that the salvage value was reduced by Rs.65,61,000/- against the minimum quotation of Rs.1,00,01,113/-. Rs.50,000/- has been deducted for civil items arbitrarily. The quotations by suppliers for plant and machinery have not been considered on the ground that the machinery were self-fabricated. Opening balance of Rs.26,70,490/- for machinery was rejected, on the ground that the ledger account was not made available despite the figures appearing in the audited balance. While the estimated life of the plant and machinery was for 20 years, the surveyor has estimated it at 10 years and applied a very high rate of depreciation while assessing the loss. While assessing the loss on stocks, the surveyor had deducted the purchase of Rs.34,23,107/- on 15.01.2012 and 16.01.2012 and held them to be doubtful, while stating that the purchases were confirmed by the supplier. For the finished goods, assessment is made on the basis of cost or market value whichever is lower, which according to the complainant is correct. The assessment of stocks disregarded payment of VAT which is erroneous and 10% has been deducted on the grounds of dead stocks. The surveyor is alleged to have wrongly deducted an excess of 5% has been made for which there is no provision in the policy. The complainant is before us with the following prayer:
A sum of Rs.4,12,80,937/- being the balance amount of claim for loss of damage to the insured property as a result of the said fire on 17.01.2012;
A sum of Rs.84,349/- towards the fire-fighting expenses paid by complainant to the fire brigade;
A sum of Rs.11,00,000/- towards debris removal expenses incurred and paid by the complainant;
An amount of Rs.3,04,203/- towards salvage advertisement expenses paid as required by the surveyor;
A sum of Rs.2,40,827/- paid by complainant towards security of salvage pending its disposal with the concurrence of the surveyors;
Interest @ 12% per annum on the said amount of Rs.4,30,10,315/- from 17.01.2012 upto the date of this complaint and thereafter upto the date of realization;
A sum of Rs.5,00,000/- towards harassment caused to the complainant in entering into avoidable correspondence and consequent expenses;
The cost of this litigation;
Any other or further relief as this Hon'ble Commission find fit.
5. The complaint was resisted by way of written statement by the opposite party on 30.07.2014. The complaint is stated to be not maintainable as there had been full and final settlement of the complainant's claim for Rs.5,98,44,082/- after execution of the unqualified discharge voucher. It was stated that as per the judgment of the Hon'ble Supreme Court in the case of Ajmer Singh Cotton General Mills vs United India Insurance Co. Ltd., (1999) 6 SCC 400 the insured was not entitled for any relief after the voucher was executed voluntarily and no protest note was attached to it. It is also stated that the complainant does not make any allegation that the discharge voucher was executed under the influence or by fraud as held by the Hon'ble Supreme Court in New India Assurance Co. Ltd., vs Sri Venkata Padmavathi R & B Rice Mills (2000) 10 SCC 334. It is submitted that the Hon'ble Supreme Court and this Commission in a catena of judgments have held that the surveyor's report is a binding document and a claim settled on the basis of the surveyor's report does not require interference. Reliance is placed on this Commission's order in Champaklal Verma vs Oriental Insurance Company Ltd., III (2008) CPJ 93 which held that the report of the surveyor is to be given due weightage and consumer fora cannot go into the question of quantum which cannot be dealt in summary proceedings. The complaint is said to be untenable and the claim to be manipulated. It is contended that this Commission had held in M/s R S Metals Pvt. Ltd., vs New India Assurance Co. Ltd., 1 (1993) CPJ 1 (NC) that remedies under the Act should not be misused for lodging a false complaint on the basis of fabricated evidence and harass a person who supplied the goods or rendered services.
6. On merits, it is argued that the surveyor's final report dated 01.12.2012 had assessed the loss to the building at Rs.51,18,652/-, plant and machinery at Rs.90,97,503/- and stocks at Rs.4,87,77,616/- totaling to Rs.5,98,44,082/-. It is submitted that against the sum insured of Rs.13,20,00,000/- under the two policies, the gross loss was Rs.9,60,54,212/-. The opposite party submits that the assessment of net loss is based upon the huge difference of cost capitalized in books of account and cost of construction which has been calculated by the surveyor on the basis of RBI inflation factor to calculate the cost of reconstruction as on the date of loss. The depreciation has been assessed on the market value basis since the insured had taken the reinstatement clause in the policy for the building. Salvage value of Rs.55.93 lakh has been considered for plant and machinery based upon the steel scrap rate. It is stated that the entire plant and machinery collapsed and it was not possible to verify the damaged machinery initially. Almost all the major items of the plant and machinery were totally damaged and in burnt condition. However, since the machinery was fabricated, the claim has been assessed at the capitalized value to which RBI inflation factor was added to calculate the value of machinery at risk on the date of fire not the quotation obtained for similar machinery obtained by the insured. The opening balance of Rs.26,70,490/- for plant and machinery was not considered as no ledger account was available. The loss was assessed on market value basis since the insured requested for the same although the insured had taken the policy on reinstatement basis. The life of the machinery is justified to be 10 years and depreciated at 10% based on their experience with chemical plants. As regards stocks, it was stated that stocks in the affected unit were totally burnt and could not be inventorised. Therefore, reliance was placed on the books of accounts, stock records and excise records of the insured for the loss assessment. Purchase verification was sought to be done from the suppliers for confirmation of purchase for the last quarter. No purchase transaction was found which was not confirmed by the representatives of the suppliers. However, some purchases were found to have been made immediately before the loss which were excluded as no documents such as receipt on site were available. An amount of Rs.34,23,107/- was therefore, excluded as being 'doubtful'. Net loss of stocks was estimated at Rs.4,87,77,616/-.
7. As the discharge voucher had been signed voluntarily in full and final settlement it is stated that the complaint is misconceived and unsustainable and is liable to be dismissed.
8. Parties have led their evidence by way of affidavit and filed their written synopsis of arguments. I have heard the learned counsel for both the parties and have given careful consideration of the materials on record.
9. Learned counsel for the complainant has essentially argued that the discharge voucher in the settlement of the claim of Rs.5,98,44,082/- was signed by him on 24.05.2013 under financial duress since the claim had not been settled for a period of eight months calculated from the date of filing of claim (08.09.2012) and date of denial to settle claim (08.05.2013) and he was incurring interest liability of Rs.45,000/- per day apart from complete shut down of operations of his factory. He has relied upon the circular no. IRDA/NL/CIR/Misc/173/09/2015 dated 24.09.2015 of the Insurance Regulatory and Development Authority of India (in short, ' the IRDA') which states that the insurers shall not use the instrument of discharge voucher as a means of estoppel against the aggrieved policy holders when such policy holder approaches judicial fora and insurers are advised as under:
"Where the liability and quantum of claim under a policy is established, the insurers shall not withhold claim amounts. However, it should be clearly understood that execution of such vouchers does not foreclose the rights of policy holder to seek higher compensation before any judicial fora or any other fora established by law."
10. Reliance is also placed of this Commission's order in the case of National Insurance Co. Ltd., vs Giriraj Proteins IV (2012) CPJ 151 (NC) which held that the report of the surveyor was not the last and the final word or conclusive proof but cannot be ignored if it is perverse or arbitrary based on inferences or surmises and/ or suspicion. It was held that execution of discharge voucher is a wrong practice followed by the insurance companies in not paying single pie without discharge voucher and amounts to coercive bargaining as the insured has no option but to sign the discharge voucher. It was also held that mere execution of discharge voucher and acceptance of insurance claim will not estop the insured from making further claim. He has also relied on the following judgments which are as under:
New India Assurance Co. Ltd., vs Kohinoor Sizing Factory II (2006) CPJ 237 (NC);
Niharika Maurya vs Chief Manager, New India Assurance Co. Ltd., and Ors., II (2011) CPJ 241 (NC);
Central Water Transport Corporation Ltd., vs Tarun Kanti Sengupta (1986) 3 SCC 156; and Oriental Insurance Co. Ltd., vs Government Tool Room and Training Centre I (2008) CPJ 267 (NC)
11. The complainant has also relied on this Commission's order in Mullangie Spintex Pvt. Ltd., vs New India Assurance Co. Ltd., and Ors., I (2007) CPJ 363 (NC) which held that compensation received from under financial compulsion and coercion and awarded further compensation with 12% interest. It is argued that the claim has been admitted by the opposite party but has been based upon the surveyor's report which was not shared with him and had to be obtained under the Right to Information Act to ascertain the details after the discharge voucher had been signed by him, since he was under considerable financial stress. It is also argued that the settlement of the claim for the reduced amount is based upon the surveyor's report which has arbitrarily deducted various amounts and it has allowed his claim. Therefore, his acceptance of the discharge voucher falls under the category of acceptance under protest and he should not be estopped from seeking redressal prayed for.
12. Per contra, the opposite party has argued that the claim was settled by way of discharge voucher signed by the complainant and in view of this Commission's order in New India Assurance Co. Ltd., vs S S Enterprises 2022 SCC Online NCDRC 461 which relied upon the order of the Hon'ble Supreme Court in United India Insurance Co. vs Ajmer Singh General Mill (1999) 4 SLT 590 which held that a complaint is not maintainable after the receipt of the full and final payment except in case of fraud, coercion, undue influence and misrepresentation which had to be specifically pleaded and proved. Reliance of this order had also been placed in the judgment of Bhagwati Prasad Pawan Kumar vs Union of India [(2006-03 PLD 76 (SC)], wherein the Hon'ble Supreme Court has held that protest of non-acceptance must be conveyed before the cheque is encashed which had not been done. Reliance is also placed on the judgment of the Hon'ble Supreme Court in ONGC Mangalore Petrochemicals Ltd., vs ANS Constructions Ltd., (2018) 3 SCC 373 which had held that the party which executes discharge voucher and alleges that the execution of such voucher or agreement to have been on account of fraud/ coercion/ undue influence by the other party but is not able to establish such a claim, then it is not open to the courts to refer the dispute of arbitration.
13. He has also relied upon the judgment of the Hon'ble Supreme Court in National India Assurance Company Limited vs Genus Power Infrastructure Limited (2015) 2 SCC 424 which held that a bald plea of fraud, coercion, duress or undue influence is not enough and party who set up such pleas must prima facie establish said allegation by way of material.
14. It is apparent from the records that the opposite party has taken eight months from the date of filing of the claim (08.09.2012) till the date of repudiation (08.05.2013) as against the prescribed period of 30 days. It is also evident that the full details of the surveyor's report were not shared with the complainant who had to apply for the same under the Right to Information Act. The complainant has averred that he was incurring cost on account of interest per day of Rs.45,000/-, this has not been disputed by the opposite party. The opposite party has stated that in its written submissions that the entire factory and plant and machinery had been totally destroyed and even the stocks could not be inventorised on account of fire. The plea of coercion is therefore, not a bald plea but one that is based on facts. It is evident from the record that the complainant had been repeatedly pursuing the matter with the opposite party to expedite the settlement of his claim. It is therefore, manifest that the complainant was under severe financial stress and it therefore, had little or no option but to accept the compensation that was offered by the opposite party, in this case ofRs.5,98,44,082/-. It has been held by the Hon'ble Supreme Court in the case of Central Water Transport Corporation Ltd., vs Tarun Kanti Sengupta (1986) 3 SCC 156, that;
"where a man has no choice or rather no meaningful choice but to give consent to contract or sign on the dotted line in prescribed or other forum or to accept set of rules as part of contract, however, unfair, unreasonable and unconscionable, a clause in that contract may be, the courts will not enforce and will when called upon to so, strike down as unfair and unreasonable clause in a contract entered into between the parties who are not equal in bargaining power".
15. It is evident from the records that the complainant did not accept the settlement and that he lodged a protest immediately after receiving the compensation of Rs.5,98,44,082/- on 24.05.2013 by email on 30.05.2012 the letter of protest. It is also evident, that in order to lodge a protest he required the details of the calculations that were done by the surveyor which were not made available to him by the opposite party until he invoked the Right of Information Act. It is only thereafter he has been able to file this complaint after seeking clarification from the opposite party with respect to the same. It is therefore, manifest that the complainant has accepted the discharge voucher on account of financial stress or in the absence of the full details of calculation by the surveyor. Under such circumstances lodging of protest would not have been possible and it would be unfair and unjust to non-suit the complainant on the grounds of estoppel for these reasons.
16. Therefore the complainant has filed the complaint at the first opportunity he got to seek redressal of his grievances and is therefore maintainable.
17. As to the question of compensation, from the record it is apparent that the surveyor has not allowed various items of claim. In a catena of judgments the Hon'ble Supreme Court and this Commission have held that despite the essentiality of surveyor's report under section 64 UM of the Insurance Act, 1938, the surveyor's report is not the last and the final word if it is arbitrary or unjustified. In the instant case, the report notes that no purchase transaction was found that was not confirmed by the representative of the suppliers. However, it has excluded the stocks of Rs.34,23,107/- as being doubtful. Similarly, it had disregarded the opening balance of Rs. 26,70,490/- for the plant and machinery on the grounds that no ledger account was available and instead assessed the loss on plant and machinery on the basis of 10 year life and 10% deprecation based upon their experience for chemical plants. It has also considered the compensation on market value basis and not reinstatement basis (as per the policy terms) stating that it was at the request of the complainant.
18. The claim of the complainant is for payment of Rs.11,63,38,758/- for stocks, plant, machinery and factory building. As per the surveyor's report dated 01.12.2012 an amount of Rs.5,98,44,082/- has been the assessed loss. However, as per the policy terms and conditions the complainant is entitled to sum insured in two policies which amounts to Rs.5,25,00,000/- + Rs.8,00,00,000 = Rs.13,25,00,000/-. As admitted by the opposite party, the loss was estimated at Rs.9,60,54,212/-
19. The complainant has prayed for payment of the balance amount of his claim for damage along with interest @ 12% per annum along with various expenses towards fire fighting, debris removal, debris security and salvage removal along with Rs.5.00 lakh for harassment. Cost of litigation has also been claimed although unquantified.
20. The complainant has received vide discharge voucher dated 24.05.2013 a sum of Rs.5,98,44,082/- as full and final settlement. However, this amount was accepted by the complainant under protest as is evident from his e-mail dated 30.05.2013 addressed to the opposite party. The opposite party has not disputed the claim of loss of the complainant incurred on account of the fire accident on 17.01.2012. The issue here is only on the quantum of the claim accepted and settled by the opposite party.
21. Considering the amount of Rs.5,98,44,082/- was accepted under protest on 24.05.2013, and the opposite party states that loss was assessed at Rs. 9,60,54,212/- the claim of the complainant is now for Rs.3,62,10,130/- (Rs.9,60,54,212 - Rs.5,98,44,082/-).
22. As held by the Hon'ble Supreme Court in New India Assurance Co. Ltd. Vs. Pradeep Kumar (2009) 7 SCC 787:
"...the assessment of loss by the approved surveyor is a prerequisite 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 the basis or foundation for settlement of a claim by the insurer of the loss suffered by the insured but surely such report is neither binding upon the insurer not insured."
(Emphasis added)
23. The complainant has also accepted the settlement of his claim under protest as is evident from the e mail dated 30.05.2013 to the complainant. It is evident that there had been considerable delay in the settlement of the claim which was filed on 08.09.2012, i.e., after a period of eight months. Since the settlement of the claim has been accepted under protest, it cannot be held that the settlement was of concord and satisfaction. Delay in settlement of claim clearly constitutes financial coercion in the instant case. As per the Insurance Regulatory and Development Authority of India circular no.IRDA/ NL/ CIR/ Misc/ 173/ 09/2015 dated 24.09.2015, it has been clearly mentioned that "insurers shall not use the instrument of discharge voucher as a means of estoppel against the aggrieved policy holders when such policy holder approaches judicial fora". In view of the foregoing, I find merit in the complaint which is liable to succeed.
24. For the aforesaid reasons, the complaint is allowed. The opposite party is directed to pay the complainant a sum of Rs.3,62,10,130/- along with interest @ 6% per annum from the date of discharge voucher i.e. 25.05.2013 within a period of two months failing which the rate of interest shall be 9% till realization. In addition, Rs.3.00 lakh towards harassment and Rs.2.00 lakh litigation cost will also be paid by the opposite party to the complainant.
25. The complaint is disposed of in the above terms.
...................... SUBHASH CHANDRA PRESIDING MEMBER