National Consumer Disputes Redressal
North India Coating Pvt. Ltd. vs M/S. United India Insurance Company ... on 27 November, 2020
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 83 OF 2008 1. NORTH INDIA COATING PVT. LTD. 358,2nd Floor, Tarun Enclave, Pitampura Delhi - 110 034 ...........Complainant(s) Versus 1. M/S. UNITED INDIA INSURANCE COMPANY LIMITED Divisional Office no.24, 501, (5th Floor) Kailash Building, 26, K.G. Marg, New Delhi Delhi - 110 001 ...........Opp.Party(s)
BEFORE: HON'BLE MR. PREM NARAIN,PRESIDING MEMBER HON'BLE MR. C. VISWANATH,MEMBER
For the Complainant : MR. RANJAN KUMAR For the Opp.Party : MR. KISHORE RAWAT
Dated : 27 Nov 2020 ORDER
PER MR PREM NARAIN, PRESIDING MEMBER
This consumer complaint has been filed by North India Coating Pvt., Ltd., against the opposite party - United India Insurance Company Ltd., alleging deficiency on the part of the opposite party.
2. The brief facts of the case are that on 02.07.2005 a fire broke out in the insured premises of the complainant as a consequence of which entire plant and machinery and the building shed got damaged along with loss of stocks. FIR was lodged and intimation was given to the OP - Company. Complainant lodged claims with the opposite party-company under two policies one being for plant, machinery and building and another being for stock. The present complaint is in respect of the claim submitted for the loss of stocks. A claim of Rs.3,98,37,691/- was filed by the complainant under this policy. On 28.12.2005, final survey report was submitted by the surveyor to the opposite party. The opposite party had approved the claim for Rs.1,28,51,129/- and paid this amount in two instalments on 07.06.2006 and 23.06.2006. Complainant has alleged deficiency in service as the surveyor in his report has wrongly deducted/ excluded castor oil worth Rs.2,33,17,850/- on the ground that payment for such purchase was not made in cash rather it was adjusted with the debtors' accounts. Deduction for other purchases worth Rs.15,44,286.76 has been made by the surveyor on the ground that since the deduction for the castor oil was made, so materials used in addition to castor oil are also to be ignored. Treating these deductions as wrong deduction, the present consumer complaint has been filed, wherein the complainant has sought the following reliefs:
(i) The opposite party insurance company to pay compensation in the tune of Rs.3,98,37,691/- as claimed in paragraph 9 of the complaint;
(ii) The opposite party to pay an interest at the rate of 18% per annum from 30.06.2008 (date of filing of the complaint), pendentlite and future interest till the claim is fully satisfied and paid to the complainant;
(iii) To pay a sum of Rs.1,50,000/- towards cost and expenses incurred in filing of this complaint;
(iv) The opposite party by way of an ad interim injunction order to pay an amount of Rs.2,48,62,136.76 to the complainant; and
(v) And pass such other and further orders, as this Hon'ble Commission may deem fit and proper in the facts and circumstances of this case.
3. The complaint has been resisted by the insurance company by filing written statement. It has been stated that the amount assessed by the surveyor has already been paid to the complainant and the complaint has been filed for the amount which has been disallowed by the surveyor. The insurance company has agreed with the report of the surveyor and, therefore, this amount cannot be paid. It has been requested to dismiss the complaint.
4. Both the parties have filed their evidence by way of affidavits which have been taken on record.
5. Heard the learned counsel for both the parties and pursued the record. The learned counsel for the complainant stated that the complainant was kept in the dark and was never given the surveyor's report despite repeated requests and reminders. A copy of the same has been given to the complainant only on 20.09.2007 when the same was asked for under the RTI Act. It was the mandatory duty of the opposite party to have given the copy of the surveyor's report as per regulation 9 (2) of the Insurance Regulatory and Development Authority (Protection of Policyholders' Interests) Regulations, 2002. The opposite party orally informed the complainant that there was a deduction of Rs.2.48 crore from the assessed loss by the surveyor but the complainant could know about the illegal deduction only after he was given a copy of the surveyor's report on 20.09.2007. The deduction has been given effect under the following heads:
Material
Deduction
Castor oil
Rs.2,33,17,850/-
Other Materials used along with castor oil in the production of process oil, alkyd resin and alkyd varnish
Rs.15,44,286.76
6. The rationale behind the first mentioned deduction, as per the report, was the fact that the purchases of castor oil were adjusted against the monies due from the debtors of the complainant. For this reason, the surveyor concluded that the castor oil could best be called "goods held in trust for third parties/ debtors of complainant" or "goods received for job work purposes" and thus was ousted from protection under the policy. The rationale behind the second mentioned deduction was that since the payment with respect to purchase of castor oil was to be deducted, the purchase of materials used along with castor oil in preparation of process oil, alkyd resin and alkyd varnish was also to be ignored.
7. The learned counsel for the complainant argued that the report itself finds everything in order and all the purchases and sales were found to be genuine by the surveyor himself. All books and records were found to be supported by bills/ invoices with due payment of all the taxes as observed by the surveyor as follows:
"Excise Return:
The insured had provided the copies of excise returns for the period April 2004 to June 2005. We have verified the same and found that quantity shown in the return tallied the RG-1, stock register. Thus, the excise returns and RG - 1 stock register are found to be both authentic.
Purchase:
The insured had provided all the purchase bills with ledger for the period 01.04.2004 to 02.07.2005. We have verified the same and found that they were properly entered into the purchase ledger.
8. It has been stated that system of adjustment of creditor's' payments with debtors' receivables was followed on account of financial crunch and also because the creditors and debtors were in the same industry. An understanding was reached with the creditor to purchase the goods on credit and then to sell/ supply the finished products to parties of creditors' choice. Even the surveyor's report acknowledges the logic in the system being followed. It is to be noted that such a system of payment adjustment is adopted as per the business accounting standards and is not prohibited by the Income Tax Act, Sales Tax Act, Excise Act or under any other law in force. Even income tax authorities had assessed the case of the complainant in the same fashion. Relevant laws in force do not treat such goods as goods under job work on the basis of payment adjustment. In fact the possibility of the goods being held for 'job work purposes' is completely ruled out. This is for the reason that the complainant's factory being excisable was required to receive materials on proper job work challan for conducting any job work activity. Also the complainant was required to maintain a statutory job work register as required under the Central Excise Act and allied rules. The fact that there is no mention of any job work activity in the balance sheet of the complainant or its excise records proves the non-existence of any such activity.
9. It has been further argued that the presumption of goods being held in trust is equally hypothetical. This is because, had the goods been held in trust, they wouldn't be reflected in the sales tax returns filed by the complainant. There were proper purchase and sales bills, duly supported with statutory inward and outward forms on which applicable sales tax had been paid to sales tax authorities and the value of the same was properly declared to all statutory authorities including Excise and Sales Tax Department. The surveyor has found that the purchase of castor oil to the tune of Rs.2,33,17,850/- has been adjusted against the sale/ supply of goods worth Rs.2,05,78,322/- to the debtors. Without prejudice, it is submitted by the learned counsel that even if this assessment is taken to be true, then also, the castor oil deemed to be "held in trust", if at all, would be of Rs.27,39,528/- (the difference of two figures mentioned above). This amount could at the maximum be deducted, going by the hypothesis of "goods held in trust", depicted in the surveyor's report.
10. After deducting purchases towards castor oil, the surveyor has also deducted certain other purchases with respect to other raw materials used along with castor oil in the manufacturing of process oil, alkyd resin and alkyd varnish. Such deduction is to the tune of Rs.15,44,286.76. It has been argued that the report first assumes that castor oil from October 2004 to February 2005 was not used in the production of process oil, alkyd resin and alkyd varnish as its purchases for the relevant period were adjusted against debtors' account. The report then makes another preposterous assumption that since castor oil was not used (hypothetically), other raw materials were also not used for the manufacturing of the above mentioned products. There could not be more erroneous premise to deduct the legitimate purchases of other raw materials which are to the tune of Rs.15,44,286.76.
11. The complainant received the two part payments of Rs.60,61,340/- and Rs.67,89,789/- on 07.06.2006 and 23.06.2006 respectively totalling to an amount of Rs.1,28,51,129/-. The learned counsel stated that the complainant had never given full and final payment discharge to the opposite party on the receipt of the above said two payments.
12. It has been further stated that in the letter dated 14.05.2008, the opposite party has taken shelter of a completely new ground for rejecting the claim of the complainant which was never taken note of in the surveyor's report. The reason given in this rejection letter is quite contrary to reasons given earlier in surveyor's report for making illegal deduction of Rs.2.48 crore. For the first time, the opposite party came up with the reason that the shops from which the castor oil was claimed to have been purchased were not in existence or sealed. The surveyor's report did not make mention of any such fact but deducted the amount only on one count which was the adjustment of purchases against debtor's account. The complainant is not concerned whether the shops from where purchases were made are sealed or non-existent, the fact that there were valid purchases made is well supported by the purchase bills which are also verified and authenticated by the surveyor. Thus, the plea of shops being not in existence or sealed cannot be sustained. However, it is pertinent to mention here that at the relevant time many business houses were closed or sealed pursuant to the Hon'ble Supreme Court's order when sealing drive was in full flow.
13. After receiving the report of the surveyor on 20.09.2007 under RTI Act, the complainant immediately wrote to the opposite party a letter dated 28.09.2007 and conveyed its discontentment over the deducted amount. The very fact of immediately reporting the matter to the opposite party reflects upon the genuine motive of the complainant. Prior to writing the letter, there was no occasion for the complainant to object to the surveyor's report as the same was not made available by the opposite party despite repeated requests. Thus, the bona fides of the complainant regarding raising the objection through the letter after about 15 months from receipt of payment are beyond question and there has been no delay in lodging the protest as alleged by the opposite party.
14. The learned counsel for the complainant relied on the judgment of this Commission in the case of New India Assurance Co. Ltd., vs M.s Uni Ply Industries decided on 16.07.2013 in RP No. 342 of 2013, to emphasise that the surveyor's report cannot be accepted as the last word and as gospel truth. It was argued that if the surveyor's report is not correct and is against the law, the same may be discarded. The learned counsel for the complainant further relied on the judgment of the Hon'ble Supreme Court in the case of R L Kalathia and Co. vs State of Gujarat in Civil Appeal no. 3245 of 2003 decided on 14.01.2011 to reiterate that even after the final discharge and acceptance of payment, the issue of balance claim can be raised and agitated.
15. Learned counsel for the complainant has stated that in a similar matter namely Mullangle Spintex Pvt., Ltd., vs New India Assurance Co. Ltd., and Ors., decided on 23.02.2007 - I (2007) CPJ 363 (NC) this Commission has ordered payment over and above the loss assessed by the surveyor. It has been argued that similar order may be passed in the present case.
16. On the other hand, the learned counsel for the opposite party/ insurance company has stated that after seeking clarification from the surveyor, the claim was approved and the amount was paid in the account of the complainant with Corporation Bank as well as with the Small Industries Development Bank of India in full and final settlement of the claim after deducting the reinstatement premium and after the claim disbursement vouchers were executed by the above-said financial institutions.
17. After over 15 months of the payment of the claim, the complainant vide letter dated 28.09.2007 for the first time represented to the insurance company that the surveyor has wrongly disallowed the amount of Rs.2.48 crore.
18. Though such a belated representation and that too after the amount was paid to the Financial Institutions in full and final settlement required no consideration, still the respondent company referred the matter to the surveyor for comments. The surveyor in the clarification dated 12.12.2007 reiterated and justified the stand in disallowing the purchases to the tune of Rs.2.48 crore. The said amount was disallowed as the said quantity was never purchased by the complainant and the adjustments were made in the accounts of debtors against the creditors which was completely incorrect and wrong adjustment. The same were disallowed by the surveyors as they were not treated as genuine purchases. Further, on investigation it was revealed that the debtors were found non-genuine having no existence. The investigation further revealed that one of the creditors mentioned in the representation letter of the insured, Indian Agro Products, was sealed by the Sales Tax Authorities on 28.04.2004 and therefore, the sales purported to be made by them were fake. The notice of sealing by the Sales Tax Authorities was found pasted in the premises of said Indian Agro Products, meaning thereby that they cannot carry out business from any premises whatsoever under the Sales Tax laws. In so far as the other two creditors are concerned, namely Neha Enterprises and Geeta Enterprises, the same did not exist. That being so, the debtors shown in the records of the complainant were fake in as much as no sales were made though Sales Tax returns were filed.
19. It has also been pointed out by the learned counsel for the opposite party that the complaint is not maintainable as the claim of the complainant has been settled and payment made into the two accounts of the complainant maintained with the Corporation Bank and with SIDBI. The payment to the above said two financial institutions was in terms of the Bank Clause attached to the policy. At that point of time, the complainant did not object to the payment received and it would thus be deemed that the payment was received without any coercion or pressure and in full and final settlement of the claim. In view of the above, the complainant is estopped from claiming any further amount.
20. It was argued by the learned counsel for the opposite party that if the claim is fraudulent or the bills submitted by the insured are found to be fake, the total claim can be rejected, however, in the present case, the insurance company has taken a lenient view and has disallowed only the non-genuine bills/ claim. In this regard, the learned counsel for the opposite party relied upon the judgments of this Commission in the case of Raj P U Foam Industries vs National Insurance Company Ltd., and Ors., decided on 11.12.2015 in CC no. 168 of 2008 [ II (2016) CPJ 277 (NC) ] and in the case of Anjal Garments vs Oriental Insurance Company decided on 12.02.2015 in CC no. 109 of 2007 [ III (2016) CPJ 28 (NC) ].
21. We have carefully considered the arguments advanced by the learned counsel for the parties and have examined the material on record. So far as the question of final settlement of the claim is concerned, it is seen that the claim has been settled by the insurance company with two financial institutions namely., the Corporation Bank and the Small industries Development Bank of India and they have signed the discharge voucher as full and final payment. However, it has been claimed by the complainant that the complainant has not executed any voucher for the full and final settlement. It is now a settled law that the complainant can file a case even after he has received the payment and has signed the voucher for such payment. The Insurance Regulatory and Development Authority (IRDA) vide Circular No. IRDA/NL/CIR/Misc.,/173/09/2015 dated 24.09.2015, has issued instructions to all the General Insurance Companies that even if the voucher has been signed, it should not be taken as a ground to oppose the claim filed by the complainant in a court of law. The Circular reads as under:
"The Insurance Companies are using 'discharge voucher' or "settlement intimation voucher" or in some other name, so that the claim is closed and does not remain outstanding in their books. However, of late, the Authority has been receiving complaints from aggrieved policyholders that the said instrument of discharge voucher is being used by the insurers in the judicial fora with the plea that the full and final discharge given by the policyholders extinguish their rights to contest the claim before the Courts.
While the Authority notes that the insurers need to keep their books of accounts in order, it is also necessary to note that insurer 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.
Accordingly insurers are hereby advised as under:
Where the liability and quantum of claim under a policy is established, the insurers shall not withhold claim amounts. However, it would 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.
All insurers are directed to comply with the above instructions."
22. Moreover, the learned counsel for the complainant has stated that after receiving the payment in the complainant's bank account, the complainant could not file any representation or protest immediately because the surveyor's report was not supplied by the opposite party and same has only been given to the complainant when demanded under RTI Act. As soon as the report was supplied in the year 2008, representation was given to the insurance company and the insurance company replied to that letter on 14.05.2008. This becomes the cause of action and therefore, the complaint was filed on 30.06.2008. Thus, the complaint has been filed within the time limit prescribed under the Consumer Protection Act, 1986. As the claim was partly approved by the insurance company and the representation of the complainant was decided on 14.05.2008, we are of the view that the complaint has been filed in time and there is no delay in filing the complaint.
23. Now coming to the merits of the case, it is seen that major amount out of Rs.2.48 crore has been disallowed by the surveyor on the ground that the purchases have been shown on credit from the creditors and payment has been adjusted out of the payments to be received from the debtors. There are no agreements or MOUs signed between the creditors and the debtors whose accounts have been adjusted. Thus, it is not clear as to on whose instructions these amounts have been shown adjusted. Even no separate letters have been produced as written by the creditors or the debtors to the complainant company for such adjustment. If the finished goods prepared from the raw materials supplied by the creditors were actually sold to the debtors, then the goods should not exist in the factory premises, therefore, there can be no loss of these goods. From this aspect also, these materials shown as adjusted against the debtors cannot be taken into consideration for assessing the loss. Moreover, certain creditors have been found to be non-genuine or their shops have been found to be sealed during the period of alleged supply of raw material from these creditors. Clearly these are the forged documents as the creditors were not eligible to supply the raw materials during that time. Thus, the whole story of adjustment of creditors by the debtors has been framed to inflate the claim of the insurance. The complainant company has tried to cover up these non-existent receipts of materials from paper payments through adjustments and by making these entries in their Sale Tax returns to give it a genuine colour. Obviously, the Sale Tax Department would be interested in getting the revenues from the businessmen and would not investigate whether the payments are genuine. It seems that the complainant has tried to shed off some amount in the form of tax to get sizeable amount of insurance claim. Though, it has been stated by the learned counsel for the complainant that such type of accounting is not barred under law, but the fact is that the complainant has not filed any document to prove its assertions. There are various accounting codes for companies and the law prescribes various formats of accounts which are required to be kept by a company. Even if the accounts are correctly kept as per law, but if the accounts are forged and are based on forged bills and invoices, then, the surveyor is fully competent for not accepting the same.
24. So far as the assertion of the learned counsel for the complainant regarding adjustment of Rs.2,33,17,850/- of the creditors amount with Rs.2,05,78,322/- of the debtors account is concerned, it seems that the surveyor has mentioned these figures from the account books of the complainant and this does not seem to be a creation of the surveyor. This statement submitted by the surveyor is regarding the "value of castor oil purchases found to be adjusted otherwise than by payments in cash or through Bank". In this statement, the surveyor has mentioned the value of purchases adjusted against the debtors' accounts. As the adjustment of creditors account with debtors account is not a normal process, the surveyor has accepted the figures provided by the complainant itself and accordingly an amount of Rs.2,33,17,850/- has been found adjusted against the debtors account. Accordingly, we do not see any merit in the assertion of the learned counsel for the complainant in this regard.
25. So far as the rejection of an amount of Rs.15,44,286/- is concerned, we agree with the assertion of the learned counsel for the insurance company that when the purchase of the main raw material of castor oil becomes doubtful, the other ingredients used in preparation of the finished products like process oil etc., cannot be allowed to be considered for payment under the insurance claim and even their purchases is also liable to be treated as doubtful. Thus, the surveyor has rightly deducted this amount also from the claim of the complainant.
26. Based on the above discussion, we are of the considered view that the surveyor has rightly disallowed the amount of Rs.2.48 crores in the final assessment of the loss. Accordingly, we do not find any merit in the present consumer complaint, and consequently, consumer complaint no. 83 of 2008 is dismissed.
...................... PREM NARAIN PRESIDING MEMBER ...................... C. VISWANATH MEMBER