National Consumer Disputes Redressal
M/S. Gupta Synthetics Ltd. & Anr. vs New India Assurance Co. Ltd. & Anr. on 29 March, 2016
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 236 OF 2010 1. M/S. GUPTA SYNTHETICS LTD. & ANR. 326, Sardar Gruh Building, 198, Lokmanya Tilak Road, Near Crawford Market Mumbai-2, & its Corporate Office at. 101, Trivid Chambers, 1st Floor, Opp. Fire Brigade, Ring Road Surat-395002 Gujarat 2. Mr. MOHANH NANDKISHORE GUPTA INDIA INHABITANT Director Of The Complainant No. 1, Having his Office at 326, Sardar Gruh Building, 198, Lokmanya Tilak Road, Near Crawford Market Mumbai-400002 ...........Complainant(s) Versus 1. NEW INDIA ASSURANCE CO. LTD. & ANR. New India Assurance Building, 87, M.G.Road, Fort, Mumbai-40000 2. M/S., A.P. PHADKE & CC. 3, Kundan Appartment, Natwar Nagar, Road No. 4, Jogeshwari (E) Mumbai-400060 ...........Opp.Party(s) BEFORE: HON'BLE MR. JUSTICE V.K. JAIN, PRESIDING MEMBER HON'BLE DR. B.C. GUPTA, MEMBER
For the Complainant : Mr. D. Varadarajan, Advocate For the Opp.Party : Mr. Vishnu Mehra, Advocate with Ms. Sakshi Gupta, Advocate Dated : 29 Mar 2016 ORDER JUSTICE V.K. JAIN, PRESIDING MEMBER The complainant No.1 which is a company incorporated under the provisions of the Companies Act, 1956 and is engaged in the manufacture of the POY and other yarn in its factory on plot No.28, Survey No. 259/1/1, Navnit Shah Industrial Estate, Dadra, Silvassa, obtained a Standard Fire and Special Perils Policy from the opposite party New India Assurance Company Ltd. to the extent of Rs.1,88,57,46,411/-. The said policy inter-alia covered the stock as well as a temporary shed made of Tarpaulin in the said factory premises and being used for the purpose of storing the finished products. A fire allegedly broke out in the aforesaid shed in the factory premises of the complainant on 30.6.2008 and the finished goods kept therein as well as the shed itself allegedly got destroyed in the said fire. The intimation of the alleged loss having been given to the insurance company on the same day, Mr. G.K. Jadhav was appointed as the preliminary surveyor to inspect the factory, whereas, M/s. A.P. Phadke & Company were appointed as the surveyors to assess the loss suffered by it. The insurer also appointed M/s. Rajdeep Consultants Insurance Investigators and M/s. Kunjal Shah & Company, Chartered Accountants to examine the account books etc. of the complainant. The claim form was submitted by the complainant on 14.7.2008, along with the profit and loss account for the year 2006-07 and provisional profit and loss account for the year 2007-08. The Surveyor, M/s. A.P. Phadke & Company submitted their final survey report to the insurer on 30.5.2009. The copy of the said report was not simultaneously supplied to the complainants. According to the complainant, the copy of the said survey report as well as the copies of the investigation report and the stock verification report submitted by M/s. Kanjal Shah was obtained by them under the provision of Right to Information Act.
2. Vide letter dated 09.12.2009 the insurer repudiated the claim primarily on the following grounds:
The complainants itself had carried out downward revision of the claim bills / estimated loss;
The quantity of the stock (typed as quality) was not supported / substantiated by accounts;
There was pile up of stock just before the fire which was not consistent with the power consumption / order book / market conditions. Bottom yard did not figure in the quality-wise stock maintained in the account books of the complainant;
Some of the residues of the packing material found in the debris did not match with the description of the stock given in the account books. Circumstantial evidence of the fire was absent and The report of the Forensic Laboratory had confirmed doubts regarding scale / duration and cause of fire.
The insurer alleged breach of General Conditions No.1, 6 (i) (b) read with condition No.8 of the insurance policy taken by the complainant. Being aggrieved, the complainant is before us by way of this complaint.
3. The case of the complainant is that the fire broke out in the temporary shed which it was using for storing the stock of the finished product being manufactured by it. During the course of hearing before us, it was not disputed by the insurer that the finished stock as well as the shed in which the same was allegedly stored were duly insured under the policy taken by the complainant. In the intimation sent to the insurer on 30.6.2008 itself, the complainant alleged that though the cause of the loss was not known at that time, it might have happened from electric pole outside the temporary structure. Thus, the cause of fire suspected in the said intimation was short-circuiting in the electric pole, installed outside the temporary structure in which the finished stock was stored. A meeting was held on 02.7.2008, two days after the alleged fire in which two Directors of the complainant company namely Shri Shyam Sunder Gupta and Mohan Gupta participated. The surveyors as well as the representative of the insurance company were also present in the said meeting. The surveyors were informed presumably by the Directors of the complainant company that the fire started from the light pole in the North-West corner of the shed. Thus, though in the intimation dated 30.6.2008, the complainant did not give a confirmed cause of fire and only a suspicion was expressed that the fire might have happened from the electric pole outside the temporary structure, the information given in the meeting dated 02.7.2008 was a categorical intimation as regard the cause of the fire. Though, the insured is not under a contractual or legal obligation to identify the cause of fire and convey the same to the insurer, once the insured comes out with a specific cause of fire it must, if disputed by the insurer, prove that the fire had happened on account of the cause stated by it.
4. No technical evidence has been led by the complainant to prove that there was a short-circuiting in the electric pole outside the temporary shed or that the fire had otherwise started from the said pole. On the other hand, the report dated 12.09.2008 given by the Scientific Officer-Cum-Asstt. Chemical Examiner, Government of Gujarat, Regional Forensic Laboratory Surat, who examined a burnt wire which the police had lifted from the spot and sent to the said Laboratory, shows that there was no sign of short-circuiting on the said burnt wire. The report was sent by the Laboratory directly to the concerned police station. The surveyor had also collected the remnants from the debris and forwarded the samples of damaged yarn cone/spools, plastic bags used for packing the yarn cones/spools and ash to Textile Laboratory and Research Centre, Ministry of Textiles, Government of India, with a request to test and analyse the said samples. The surveyor also sought opinion of the laboratory on a number of other points referred in para 1.5 of the said report. It was reported by the laboratory that all the samples had normal and respective melting point. It was also noted that the carbon content of the said samples was comparable to the control sample. It was reported that a polyethylene sheet used for covering the yarn cone was not deformed physically or chemically due to fire and there were no symptoms of any burning in the samples. The laboratory therefore, opined that the polyethylene sheets were not affected by fire.
Noticing that there were quite a few cones/spools lying in the debris with unburnt plastic bags used as packing, the surveyor sought explanation for the said phenomenon from laboratory. In the opinion of the laboratory even if yarn pile was consisting of 50% polyester stock, there should have been a release of huge sooth, and once in air, the sooth should have deposited on the surrounding wall and other structure in the vicinity. It was noticed from the photographs that there was no such deposit on the surrounding structure. The laboratory however noticed that during burning synthetic materials such as polyester and nylon enormous heat is released. The average value of energy released in the tested sample was calculated to be 2142 joules per gram of material. It was further stated that even if 70% of the claimed material was burnt, atleast 1374 MT of material would get burnt, releasing atleast 294310 million joules of energy which would be sufficient to melt iron but there was no effect on the metal bridge including cable trays and cables, which were running very close to the accident site. It was also noticed from the photographs that the cement base of the platform had no cracks at any free space though cement cannot withstand such a huge heat.
Another query of the surveyor was whether such huge quantity of yarn could burn in 7 ½ hours. The laboratory noticed that the recovered remnant consisted of 51 MT of damaged yarn, 7.5 MT of corrugated packing material and 43 MT of ash, making a total of 101.5 MT of material. After making deduction in the moisture content the weight of the final yarn remnant was calculated to be 41 MT, meaning thereby that 98% of yarn material was burnt. It was opined that if such quality of yarn pile is burnt in the absence of abundant oxygen, atleast 40 MT ash should have been present but in this case, the burnt material contained not only the yarn but also the packing and packaging material.
The next query of the surveyor was as to whether this incident was a result of short-circuiting at one single point and the fire could spread to the entire store area so rapidly, particularly when the fire fighting operations was on. Noticing that there was incessant rain when the material was burning and assuming that the shed and surrounding area had become completely wet, and further noticing that no flammable material were kept in the premises, it was reported that yarn do not have flash point at lower temperature and even the paper boxes, because of prevailing wet condition do not catch fire material.
The laboratory further reported that when polyester burns, it release large sooth, a dark black fume, and when nylon burns it shrinks and leaves no crushable hard mass. On a scrutiny of the photographs it was found that the surrounding areas were unaffected by the fire. As noticed earlier, no deposit of sooth was found on the surrounding structure.
5. The surveyor inspected the distribution board inside the main plant from which a temporary connection of light fitting was reportedly given. The said board did not reveal any sign of short-circuiting. Thus, the alleged short-circuiting was not substantiated either by the Forensic Science Laboratory or by Textile Laboratory & Research Centre, Government of India, Ministry of Textiles. The same was the opinion of the surveyor A.P. Phadke & Co. As noticed earlier, no expert evidence such as the opinion of an electrical engineer has been led by the complainant to prove the alleged short-circuiting. Under these circumstances, we see no reason to take a contrary view and accordingly hold that the alleged short-circuiting was not the cause of the fire.
Though, the insured is not under an obligation to investigate and disclose the cause of fire to the insurer, in our opinion, once the insured comes out with a particular cause of fire, it must establish the said cause when disputed by the insurer and if the insured fails to do so, we will not be unjustified in presuming that the fire in which the material allegedly got burnt was not an accidental fire. In the facts and circumstances of the case, it appears to us that the fire, which erupted in the factory premises of the complainant, was not an accidental fire. If this is so, it would be a cause of playing fraud upon the insurer by attempting to obtain claim on the basis of the false averments and if such an attempt is made, the insurer stands relieved of all its obligations under the insurance policy.
6. Admittedly, vide claim form dated 14.7.2005, the complainant had lodged a claim, alleging damage to the stock weighing 1963116.86 Kg. (about 1963 MT) valued at Rs.25,70,20,922.01 which was allegedly kept in 53955 boxes. Vide letter dated 20.11.2008, the surveyor intimated the complainant that it was crystal clear that almost entire quantity damaged by fire and made available to them was of bottom yarn. It was further stated that the complainant had thus failed to justify its claim for the loss of the fresh yarn. Responding to the aforesaid letter, the complainant submitted a claim invoice for Rs.20,63,96,939/- segregating the quantity and the amount of the bottom yarn burnt in the fire and maintaining that out of total quantity of 1963.117 MT, only 7.74 MT of POY packed in 474 boxes was bottom yarn and the remaining material was fresh yarn. It was further stated in the said letter that after analysing and deriving the quantity of the total bottom yarn lying in the factory, they had reduced the physical quantity left in the packing department and dispatch section and the remaining quantity had been identified as polyester bottom yarn burnt on the date of fire. Thus, the total quantity of the burnt stock in the said letter was maintained at about 1963 MT.
7. The report of the surveyor shows that a perusal of the stacking pattern indicated by the complainant on a diagram revealed that they had not shown any space for movement of workers as well as the boxes. Also they had not left any space at the entrance. The dimension shown in the diagram were also found to be wrong. The dimension in the diagram were 95ft x 76 ft. whereas the dimension later agreed and accepted after joint measurements were 84.95 ft x 69.86 ft. Though the insured had not given the dimension of the boxes, the surveyor took the said dimensions examining the dimensions of the boxes prominent in number in the claim statement. The surveyor was of the opinion that in the storage pattern indicated by the complainant it would be impossible for the workers to retrieve a particular variety of the goods per the dispatch instructions. The surveyor felt that the one pallet could have only three boxes at one level and the number of levels ought to be 22-24, whereas the insured had indicated the same to be 66 to 72. It was also noticed that in the monsoon shed within the same compound the insured has stored 8-10 boxes irrespective of height of the shed and inside the factory building also the maximum number of boxes in the stack was 12. The surveyor further noticed that the lowest levels in the stacks were in crumpled condition and if more number of boxes was attempted to be kept, the stack would neither hold nor stand erect. Based upon the joint measurement of storage area and the size of the pallet and boxes, the surveyor prepared a stacking diagram which they sent to the complainant. Thereafter, a joint meeting was held in which the insured agreed in principle that space for movement was necessary and agreed to an unsigned stacking pattern reducing the movement space which the surveyor had taken at 10 ft to 5 ft.. They also agreed that the storage area was 5.938 sq. ft. as against the initial claim of 7,220 sq. ft. Accordingly, the surveyor prepared a fresh stacking diagram and sent the same to the insured on 05.01.2009. The number of pallet and boxes at lower layer were worked out to 570 to 1710 respectively in the said revised stacking pattern. The insured vide its letter dated 19.3.2009, accepted the said stacking pattern and revised its claim to 34,200 boxes as against the initial claim of 53,955 boxes.
8. Vide letter dated 05.3.2009, the surveyor referring to the joint meeting held on 28.2.2009, sent the fresh stacking diagram based on the measurement of boxes and pallets to the complainant. As noted earlier, the number of pallets and boxes had been worked out to be 578 and 1734 respectively as per the said diagram. It was further stated in the said letter that in the meeting, the complainant and the surveyor had agreed that the number of boxes per pallet would be three. The complainant was asked to inform as to whether the quantities of pallets per layer was acceptable to it. Vide letter dated 19.3.2009, the complainant informed the surveyor that it could revise the claim bill, taking the measurement as per his drawing i.e. 1710 boxes in one layer, with a final claim of 34200 boxes in 20 layers. Thus, the total quantity alleged to have been burnt in the fire was reduced by the complainant from 53955 to 34200 boxes. Vide letter dated 20.4.2009; the complainant informed the surveyor that they had already confirmed and agreed to accept claim loss calculation on revised measurement. They however, maintained that the height of the stack was 20 ft. In this regard, they stated that they had shown Punjab type of load body vehicles carrying 16 ft. height upto distance of 1000 plus kilometres without damaging the goods.
9. It would thus be seen that the initial claim lodged by the complainant was for loss of yarn kept in 53955 boxes which it later reduced to 34200 boxes. The report of the surveyor shows that the pro-rata quantity in 34200 boxes comes to 1244.344 MT. The fact that the complainant itself agreed to a substantially reduced quantity of the yarn alleged to have been damaged in fire clearly shows that the initial claim lodged with the insurer was fraudulent. Had that not been the position, the complainant would not have agreed to a substantial downward revision of the quantity from 1963.116 MT to 1244.344 MT. It was contended by the learned counsel for the complainant that since the surveyor was not agreeing to the quantity initially claimed by the complainant, they had no option but to accept the reduced quantity suggested by the surveyor and therefore, acceptance of the reduced quantity would not show that the initial claim was fraudulent. We however, are unable to accept the contention. There is nothing in the letters of the complainant dated 19.3.2009 and 20.4.2009 to indicate any kind of pressure upon it by the surveyor. If the complainant had given correct quantity of the damaged stock in the initial claim, which came to be filed two weeks after the fire, and therefore must be based upon proper verification of the stock with the help of the account books etc., there could be no plausible reason for it to accept the said downward revision of the quantity and value of the damaged stock. Moreover, there is no averment in the complaint that the surveyor had pressurized the complainant to agree to the aforesaid downward revision of the quantity of the damaged stock and had told it that if the said revised quantity is agreed by the complainant, the payment for the said revised quantity would be recommended by him to the insurer. The very fact that eventually the surveyor did not at all recommend any payment to the complainant is yet another indicator that there was no such promise held out by him to the complainant.
10. Even otherwise, having considered the report of the surveyor, along with the report of the Textile Laboratory and Research Centre, Ministry of Textiles, Government of India, we are of the considered view that the quantity of the yarn stored in the shed in which fire allegedly broke out, could not have been 1963.117 MT, kept in 53955 boxes. As noted earlier, the diagram submitted by the complainant did not show any space for movement of workers as well as the boxes nor had any space been left in the said diagram at the entrance of the shed. We are in agreement with the surveyor that the complainant was not likely to stack the boxes without leaving any space for movement of workers as well as for removing the boxes. As rightly noticed by the surveyor, if the yarn of a particular variety is to be taken out for dispatch, it would not be possible to do so if there is no space kept for movement of workers as well as retrieving the boxes, while stacking the boxes. Therefore, any prudent person, while storing the boxes, would keep enough space for the movement of workers and will not keep the boxes upto the level of ceiling since in such a case, it would not be possible to take out particular boxes, if required for the purpose of dispatching the goods of that variety. The practice of the complainant in storing only 8-10 boxes in the monsoon shed erected in the same compound and not more than 12 boxes in the stacks inside the factory building is also a clear indicator that the complainant would not have kept as many as 20 boxes in one stack.
11. Though, the complainant showed truck loaded with 15 boxes in a stack to the surveyor, it was noticed by the surveyor that there was full support to all the boxes upto the height of 7 boxes from all sides and all the rows of boxes had been tied. Horizontal support had also been given at the centre of the truck, by wooden strip. Such an arrangement would obviously prevent the stacks from toppling. No such support was however, provided in the shed in which the boxes containing the damaged yarn were allegedly stored. This is also not the case of the complainant that the rows of boxes in the shed had been tied or that horizontal support had been provided to them. Therefore, the stacking of upto 15 boxes in a truck in the aforesaid manner would not lead to the inference that the boxes in the shed also could have been loaded to the extent of 15-16 boxes in each stack.
12. More importantly, even the size of the shed given by the complainant was found to be incorrect. The dimensions of the shed shows in the diagram filed by the complainant were 95ft x 76 ft, whereas the dimensions later agreed and accepted by it after joint measurement were 84.95 ft. x 69.86 ft. The said wrong dimensions obviously also led to an inflated number of boxes alleged to have been stored in the shed which would mean that the stock shown by the complainant was higher than the actual stock stored therein. Noticing that the top cover was slanting for discharge of rain water and the height of the two sides was 16 ft, the surveyor estimated the height of slanting sides to be 18 ft and 13 ft, which would mean that the storage height of 13 ft. He found that not more than 12 boxes could have been kept in each stack, considering the aforesaid height. Even in the quotation given by the person from whom the Tarpaulin sheet was taken by the complainant, the height of the shed was given as 14-15 ft. The preliminary surveyor Mr. G.K. Jadhav reported in his report dated 01.7.2008, that Mr. Rajput of the complainant had informed him that the height of the shed was 12 ft. The Textile Laboratory and Research Centre, Ministry of Textiles, Government of India, inter-alia reported that in case 20 boxes weighing 36 kg. each were stacked, one over the other, it is highly probable that the lower layer boxes should have collapsed due to the weight from the top and external pressure from all the sides. It was further reported that in such a situation there is high probability that the lower layer cone should have burst and once the yarn cone is subjected to such an enormous pressure for long duration, it may become unfit for textile application. In the opinion of the said laboratory, storage of 20 boxes one above the other therefore, may not be possible. It was also reported by the said laboratory that when yarn is stored for future use it is important to take care that the yarn cone should not get damaged due to mechanical force and also from microbial attack. It is therefore, necessary to provide the in between space for good ventilation to provide the fresh air to the boxes in the core of pile. In the absence of any space in between, there is no scope to remove the yarn cone of required quality and quantity. Therefore, it is quite evident that the complainant gave an inflated quantity of the stock in the claim form submitted to the insurer on 14.7.2008.
13. The surveyor obtained electricity bills for the period April 2007 to June 2008. The production quantity per month was also noted by the surveyor from the Excise records. It was found by him, considering the production and consumption of power, that average production per unit of the electricity consumed was 0.655 kg, but, suddenly in April 2008, the production per unit went up to 1.064 kg, resulting an increase of 62.44% in the production per unit of the electricity. The surveyor felt that the said phenomenon defied all technical parameters and such production per unit was not at all possible. He found that the number of units consumed in March and April was more or less identical whereas the production was shown as 2,307.530 MT in March and 4,131.877 MT in April, resulting in increase of 79.06% using almost the same quantity of electricity. The surveyor deduced that the production could not be more than 2,272.269 MT, on average of 0.655 kg of production per unit of electricity. In this regard, the surveyor also noticed that in May and June 2008 also the average production per unit was even less than the annual average of 0.655 kg. As per the report of the surveyor, the insured had inflated its production and thereby inflated the closing stock as on the date of the loss, leading to inflation of the quantity claimed. It was also verified by the surveyor that in the area in which the factory of the complainant was situated, there was almost uninterrupted power supply, as a result of which, the insured was not required to use DG set frequently to run the plant. The expenses incurred on electricity power and diesel fuel were obtained by the surveyor from the record and he found that the insured had bought 11 KL diesel every month and the same was the quantity purchased in April 2008. It is therefore obvious that the abnormally higher production in April 2008 could not be by running DG set. In this regard, the surveyor further noticed that the sales were declining from September 2008 to April 2008 and therefore there could be no reason for increase in production in April 2008 to the extent shown in the record filed by the complainant. According to the surveyor, the total stock on the date of the loss could be 829.922 MT and since the insured had declared the quantity of undamaged stocks to be 726.406 MT, the maximum burnt quantity could be 103.516 MT.
It was contended by the learned counsel for the complainant, during the course of hearing that some workers had taken leave in March 2008 and that is why the production was lower in that month. However, neither the names of the workers, who allegedly took leave, have been given nor their leave record has been produced. The affidavits of the said workers have also not been filed by the complainant. In the absence of such an evidence, mere bald contention of the counsel cannot be accepted.
14. The learned counsel for the complainant relied upon the panchanama prepared by the Excise Department to substantiate the quantity claimed by the complainant. The report of the surveyor would show that on scrutiny of the panchanama, it came to be revealed that just two officials had completed the entire process of counting the physical stock not damaged by fire obtaining list of total stock and comparing it with the physical stocks to arrive at the burnt stocks, in just four hours. In the opinion of the surveyor, this was not humanly possible since a team of 15 to 20 persons, which also comprised the representatives of the insured could not take even 5% inventory of the undamaged stocks in five hours. Therefore, it was not humanly possible for the two officials of the Excise Department to take full inventory in just 4 hours.
When the surveyor met the Superintendent of the Excise Department and sought clarification on the issues raised in his letter dated 15.11.2008, which he delivered to the Excise Superintendent, he responded vide letter dated 11.12.2008 and also forwarded the stock records obtained during the course of panchanama dated 1.07.2008. A scrutiny of the said record revealed that Excise record was nothing but copy of Excise register in which the denier wise details of the yarns were not available but despite that Excise Department officials had certified denier wise stock destroyed by fire. Thus, the stock details taken by Excise officials were different from the details certified by them. The Superintendent of the Excise Department himself informed vide his letter that his officers had not certified anything such as quality and quantity of destroyed goods, and had only taken the figures and records produced by the complainant, while preparing the panchanama. In view of the aforesaid glaring facts, it is not possible for us to rely upon the quantity of the stock shown in the above referred record of the Excise Department. This becomes important in the light of the fact that the complainant itself had reduced the quantity of the yarns alleged to have been damaged in the fire, thereby putting a serious question mark on the correctness and authenticity of the said Excise record.
15. Clause 8 of the insurance policy reads as under:
"8. 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 wilful act, or with the connivance of the insured, all benefits under this policy shall be forfeited".
In the claim form the complainant inter alia declared that the details appended thereto were a full, true and correct statement of the loss sustained by it. Since the complainant made a claim which was atleast partly false and fraudulent, the actual quantity of the yarn stored in the shed in question, being substantially less than the quantity which practically could have been stored therein. Consequently, the amount claimed by it was substantially inflated. By the said act, the complainant contravened Clause 8 of the insurance policy as a result of which all the benefits available to the complainant under the policy came to be forfeited. The insurer in such a case is not liable to make any payment at all to the insured.
16. For the reasons stated hereinabove, we are of the considered view that since the claim submitted by the complainant was at-least partly fraudulent, all the benefits, which were available to the complainant under insurance policy taken by it stood forfeited and consequently, the insurer is not liable to make any payment to it. The complaint is therefore dismissed with no order as to costs.
......................J V.K. JAIN PRESIDING MEMBER ...................... DR. B.C. GUPTA MEMBER