National Consumer Disputes Redressal
M/S Sona Spices Pvt. Ltd. vs The New India Assurance Co. Ltd. on 8 July, 2011
Challenge in this appeal is to the order dated 31 NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI First Appeal No. 609 of 2006 (From the order dated 3.06.1997 in Complaint Case No. 26 of 1996 of the U.T. Chandigarh State Consumer Disputes Redressal Commission) M/s Sona Spices Pvt. Ltd. Appellant Head Office:3141, Sector No.20/D Chandigarh (Through its Director Mr. G.L. Jindal) Versus The New India Assurance Co. Ltd. Respondent Local Branch Office: Sector-17 Chandigarh BEFORE HONBLE JUSTICE MR. R C JAIN, PRESIDING MEMBER HONBLE MR SURESH CHANDRA, MEMBER For the Appellant : Mr. S.K. Sharma, Advocate For the Respondent : Mr. A.K. Singh, Mr. G. Choubey, Mr. Mahesh Kumar, Advocates PRONOUNCED ON 08th July , 2011 ORDER
PER SURESH CHANDRA, MEMBER Challenge in this appeal is to the order dated 31.6.1997 passed by the Consumer Disputes Redressal Commission, U.T. Chandigarh (State Commission for short). Vide its impugned order, the State Commission has partly accepted the complaint filed by the complainant. Appellant herein is the complainant and respondent Insurance Co. was the OP before the State Commission.
2. The appellant carries on the business of spices in the name and style of M/s Sona Spices Pvt. Ltd., 746, Industrial Area, Ph-II, Chandigarh. The complainant took a loan for Rs.9,50,000./- from the State Bank of India and for that purpose, the appellant/complainant had insured the stocks of raw-material and/or spices of all kinds of condiments, other stocks of products of like nature, semi-finished goods and machinery etc. lying on the premises at 746, Industrial Area, Ph-II, Chandigarh. The appellant/complainant paid the premium and the policy was valid from 20.12.1994 to 20.12.1995 and accordingly the respondent Insurance Co. had issued the insurance policy. It was on the intervening night of 20/21.5.1995 that there was occurrence of fire. Some employees working in the appellants Co. conveyed the information regarding the occurrence of fire to the appellant who rushed to the premises of the factory where besides the spices, curry powder and other packing material were also destroyed due to occurrence of fire. The occurrence of fire is supported by a certificate issued by the Chief Fire officer, U.T. Chandigarh dated 29.5.95 and a DDR bearing no.59 of 21.5.95 was also recorded at the police station of Sector 31. The respondent Insurance Co. appointed a surveyor to assess the loss on account of the fire who recommended a net claim of Rs.64,316/- in favour of the insured subject to terms and conditions of the insurance policy. The appellant/complainant, however, lodged the complaint before the State Commission claiming an amount of Rs.8,21,795/- being the loss suffered in the incident of fire; compensation amounting to Rs.50,000/- on account of the resources/amount not being available in business due to non-settlement of the claim; interest @ 18% p.a. and Rs.5,000/- as cost of litigation. Against this claim, the State Commission allowed only a sum of Rs.64,316/-. Not satisfied by the partial acceptance of the claim, the present appeal has been filed by the complainant for allowing the total claim made by the appellant before the State Commission including compensation, cost and up-to-date interest.
3. We have perused the record and heard the counsels for the appellant and the respondent for the Insurance Co. The occurrence of fire is not under dispute. However, the surveyor who was appointed to investigate and assess the loss has made the following recommendations:-
I have assessed a loss ofRs.7,35,258/- to the best of my knowledge and explanation given to me during my visit to factory premises of insured and also from the documents and records produced before me. After deduction for dead stock, non-maintenance of records, application of average clause, non-insured stock of packing material etc., the net claim of Rs.64,316/- is recommended to the insured subject to the terms and conditions of Insurance policy.
4. In his report dated 12.2.1996 (a copy of which has been placed on record by the respondent Co.), the surveyor has pointed out that the insured did not produce any record such as cash book, ledger, stock records, purchase books, sales book etc. for verification and said that all the records have been burnt in the fire. He has submitted few duplicate purchase bills to consider the purchase price of burnt items and there is no documentary evidence of stock of spices and packing material lying at the time of fire. It is further stated that the insured has only provided for verification the stock statements submitted by him to the bank for the cash credit limit but no stock records were produced for cross verification. As per the stock statement submitted to the bank by the insured on 20.5.1995, the total value of the stock lying in the factory of the insured at the time of fire was Rs.8,98,280/-. The value of the stock left after the fire as per stock statement submitted to the Bank on 22.5.1995 works out to be Rs.76,485/-. Against the claim of loss for the burnt stock of Rs.8,21,795/- made by the appellant, the surveyor assessed the loss to the insured at Rs.7,35,258/- being the loss of stock of spices and packing material due to fire in the factory of the insured. After excluding the estimated value of loss of the packing material of Rs.5,94,290/-, the assessed loss in respect of the value of the stock of spices including the raw-material was Rs.1,40,968/-. While the surveyor excluded the assessed loss in respect of the packing material altogether on the ground that the same is not covered by the conditions of the policy, the surveyor applied a deduction of 32% on account of dead inventory, i.e, Rs.45,110/-; 25% of the balance amount or Rs.23,965/- on account of non-maintenance of accounts of stock records and an amount of Rs.7,577/- under the average clause thereby recommending a net claim of Rs.64,316/- to be allowed to the complainant subject to terms and conditions of the insurance policy. During the course of arguments, learned counsel for the appellant has submitted that exclusion of the value of the stock of the packing material for assessment of the admissible amounts recommended by the surveyor and eventually accepted by the respondent company is wrong since the terms of the policy very much covered the stock of packing material also. He contended that even though the words packing material do not specifically figure in the policy, it is well understood in common parlance that packing material is clubbed with raw-material and it forms an essential ingredient for the manufacture of goods particularly in the case of items like spices. He submitted that on the day of occurrence of incident of fire, the stock of the packing material was quite substantial and exclusion thereof from the assessment of loss has left the balance claim of Rs.1,40,968/- only on account of the spices. He further submitted that from the assessed value of the spices lost in fire, the surveyor has further made deductions on account of dead inventory, non-maintenance of accounts and stock register and averaging clause which have reduced the claim substantially to a meager figure of Rs.64,316/-. He contended that 2% per annum deduction on account of dead inventory in respect of the manufacturing activity of spices which is a food item is absolutely unjustified and unacceptable because in the case of spices, the manufacturing time is minimal and the movement of finished goods is quite fast because of the danger of both the raw-material and the finished goods becoming unfit for human consumption. Such a deduction on account of dead inventory and obsolescence may be alright in respect of items like furniture, rolling stock etc. but not in respect of food items like spices. So far as the deduction on account of the alleged non-maintenance of the financial records is concerned, learned counsel submitted that the records pertaining to the stock had been burnt in the fire and due intimation/submission regarding this had already been made before the surveyor. Even then, whatever bills and the stock statements could be procured were presented before the surveyor. In such a situation, it was wrong on the part of the surveyor to apply deduction of 25% from the assessed value of the stock of spices for calculating the admissible claim to the appellant. Learned counsel for the appellant, therefore, submitted that the exclusion of the assessed value of the packing material and the deductions on account of the dead inventory and non-maintenance of accounts and stock records etc. must be added back to the amount of claim of Rs.64,316/- allowed by the State Commission based on the surveyors report and total claim at least to the extent of assessment done by the surveyor, i.e., Rs.7,35,258/- after deducting the amount of Rs.7,577/- on account of average clause, should be allowed to the appellant along with compensation of Rs.50,000/-, cost of litigation and interest @ 18% on the amount of the claim.
5. On the other hand, learned counsel for the respondent Insurance Co. submitted that the State Commission has rightly relied on the report of the surveyor which is an important piece of evidence and, as held by the National Commission in several judgements, the same must be followed unless there is a valid and cogent reason to the contrary. He submitted that even though the surveyor has rightly made a fair assessment in respect of the value of packing material lost during the incident of fire, the same will have to be excluded from the amount of admissible claim because the packing material is not covered under the insurance policy. He further submitted that the packing material may be incidental to the nature of the trade but since in this case the packing material is not specifically covered under the terms and conditions of the policy, the same cannot be allowed to be included in the amount of the admissible claim. He argued that the attempt on the part of the complainant to read the packing material within the term raw materials is highly misconceived and erroneous and hence the contention of the appellant should be rejected. Regarding the deductions on account of dead inventory and non-maintenance of records, learned counsel submitted that the same is based on the well-accepted practice adopted in such cases by the surveyors and there should not be any objection to the application thereof in the present case as well. He, therefore, submitted that there is no substance in the appeal and the impugned order deserves to be confirmed.
6. Having considered the submissions of the parties, three issues that arise before us for consideration are in respect of admissibility of the loss on account of packing material, applicability of deduction on account of dead inventory and deduction on account of non-maintenance of accounts and stock register. So far as the question of coverage of packing material is concerned, we have to consider the same with reference to the conditions given in the concerned policy. The relevant condition is reproduced below: -
On stocks of raw material and/or spices of all kinds and condiments other stocks of products of like nature, semi finished goods/finished goods and/or machinery belonging to the insured and under lien to above-mentioned bank whilst lying / kept / arranged / stored machinery installed at 746, Industrial Area, Ph-II, Chandigarh built of first class construction and used for manufacturing spices and other food products.
7. Plain reading of the condition contained in the policy clearly indicates that packing material as such is not covered by this policy. We have also taken into consideration the dictionary meaning of the words raw materials but, unfortunately for the appellant, the same cannot be taken to include the packing material by any stretch of imagination. To be noted that unless a material has nexus with the actual manufacturing process which would make it an integral part of the process of manufacturing, it cannot be termed as raw material. Packing material, which is used to package the manufactured items cannot be categorized as raw material required for the manufacturing of the items as such. The loss on account of the packing material, therefore, will have to be excluded from the admissible claim and we do not find any infirmity in this regard in the view taken by the State Commission. Simply because the packing material was also being included in the stock statements submitted by the appellant to the bank for cash credit purposes will not make any difference so far as the insurance policy is concerned. The contention of the appellant in this regard, therefore, is not acceptable. So far as the deduction @ 2% p.a. and on that basis 32% in the present case since the factory has been in existence for the last 16 years is concerned, we find force in the submission made on behalf of the appellant. To be noted that in the present case it is a factory which manufactures spices which is an item of food and hence both raw-materials as well as finished products involve minimal time in the manufacturing and the stock. The movement of goods here for obvious reasons is much faster. The surveyor, therefore, was not justified to apply the same yardstick in respect of the dead inventory as is applicable in the case of capital goods and the other items which are not food items unlike in the present case. Similarly, we find that the circumstances in which the appellant could not produce the books of accounts and the stock registers have been duly explained and having done so, it would be unreasonable and unfair if the appellant is penalized again on this ground by deducting 25% of the assessed loss simply because the same could not be produced before the surveyor. In view of this, the deductions on account of both these items would be wrong and to this extent, the State Commission erred in accepting the recommendation of the surveyor while partly accepting the complaint. Barring these two deductions which need to be disallowed, we find that the surveyor has made a fair assessment and there is no reason to modify the same. Consequently, we proceed to modify the impugned order in terms of the following directions:-
(i) The claim in respect of the loss on account of packing materials has been rightly dismissed by the State Commission and the same finding is confirmed.
(ii) The deductions on account of dead inventory and non-maintenance of accounts cannot be allowed from the amount of assessed loss.
(iii) Since the packing material and loss on account thereof are totally excluded from the purview of the insurance policy, it would be inappropriate to apply the average clause because the total value of the covered goods on the day of the incident of fire would come to much less than the insured value. Deduction of Rs.7,577/- in this regard will be impermissible.
(iv) Keeping in view the above, the appellant/complainant shall be entitled to get a claim of Rs.1,40,968/-
along with interest @ 9% from the expiry of two months from the date of submission of the report of the surveyor, i.e, from 1.5.1996 till actual payment. The interest shall be calculated after giving adjustment to the amount of claim, already released by the Insurance Co.
8. The appeal is partly allowed and the impugned order stands modified in terms of the aforesaid directions. There shall no order as to costs.
[ R C Jain, J ] Presiding Member .
[ Suresh Chandra ] Member SS/