State Consumer Disputes Redressal Commission
M/S C.K. Electronics Pvt. Ltd. vs New India Assurance Co. on 25 May, 2017
Daily Order STATE CONSUMER DISPUTES REDRESSAL COMMISSION, U.T., CHANDIGARH Consumer Complaint : 166 of 2016 Date of Institution : 27.04.2016 Date of Decision : 25.05.2017 M/S C.K. ELECTRONICS PRIVATE LIMITED, PREVISOUSLY LOCATED AT D-124, PHASE- VII, S.A.S. NAGAR, INDUSTRIAL AREA, MOHALI CURRENTLY LOCATED AT A-71, 3rd Floor, PHASE -1, ASHOK VIHAR, DELHI-110052 THROUGH ITS DIRECTOR SH. C. K. KOTHARI. .........Complainant Versus 1. NEW INDIA ASSURANCE CO., NEW INDIA ASSURANCE BUILDING, 87, MG ROAD, FORT, MUMBAI- 400001 through its Managing Director/Authorized Representative. 2. NEW INDIA ASSURANCE CO. , REGIONAL OFFICE, SCO. 36-37, SECTOR 17-A, CHANDIGARH through its Chief Regional Manager/Authorized Representative. 3. NEW INDIA ASSURANCE CO. DIVISIONAL OFFICE (MOHALI) SCO. 46-47, PHASE - II, S.A.S. NAGAR, MOHALI Chief Divisional Manager/Authorized Representative. ..........Opposite Parties Complaint under Section 17 of the Consumer Protection Act, 1986. BEFORE: JUSTICE JASBIR SINGH (RETD.), PRESIDENT. SH. DEV RAJ, MEMBER.
MRS. PADMA PANDEY, MEMBER.
Argued by:
Sh. Arjun Sheoran and Mrs. Neha Sonawane, Advocate for the complainant.
Sh. J. P. Nahar, Advocate for the Opposite Parties.
PER DEV RAJ, MEMBER The facts, in brief, are that the complainant, a private limited company incorporated on 21.12.1999, purchased a "Standard Fire and Special Perils Policy No.35230011120100000055 (Annexure C-3) from the opposite parties, which was valid for the period from 12.6.2012 to 11.2.2013, after paying a premium of Rs.8,171/-; total sum insured was Rs.72,50,000/- . It was stated that the complainant has been carrying its operations for assembling of colored T.V. sets, LCDs and LED TV sets since 23.12.1999 and used to employ about 9 tradesmen of electronic discipline to undertake assembly and testing of the TV sets. It was further stated that the complainant had installed capacity to assemble about 80,000 T.V. sets per month. It was further stated that the complainant was possessing the Central Excise Registration Certificate, PAN Card, Entitlement Certificate for VAT exemption, registration number issued by Excise and Taxation Commission (Annexure C-4 colly).
. It was further stated that the complainant was enjoying 100% sales tax exemption till 22.12.2009 and thereafter was obliged to pay 3.5% sales tax for the period between 23.12.2009 to 22.12.2012 as per the policy of the Government of Punjab. It was further stated that the complainant initially started the production of Black and White TV sets of Brand Salora, whereafter, it started assembling color TV of Salora Brand in 2001. It was further stated that thereafter due to consistent high quality performance of assembling TV sets production, the complainant company started assembling TV sets of popular brands like Videocon, Panasonic, T-Series, Beltex, Westen, SBL etc. It was further stated that the complainant company carried out its work in a work shed owned by one Smt. Sukhwinder Kaur wife of Sh. Sukhdev Singh in a plot area of 22500 Sq. ft. out of which the work shed used for production was of 32 ft. x 70 ft. and store room was 32 ft x 18 ft, as per layout plan of building (Annexure C-4A). It was further stated that since the complainant company was dealing in assembling of high value electronics, it got a Standard Fire and Specific Perils Policy No.35230011120100000055 dated 12.6.2012, which insured building @Rs.10 lakhs, plant, machinery to the extent of Rs.8 lakhs, furniture, fittings, fixtures, and other contents to the extent of Rs. 4,50,000/-. Stocks in process to the extent of Rs.50 lakhs were also insured. It was further stated that the total sum insured was Rs.72,50,000/-. It was further stated that it was assured that all claims would be properly handled and best consumer services would be provided. It was further stated that on 26.8.2012, which happened to be Sunday, at about 10:00 A.M. in the morning, a fire erupted in the premises of the complainant situated at D-124, Phase VII, Industrial Area, Mohali. It was further stated that the fire apparently occurred due to short circuit in the switch board fitted inside the production hall. It was further stated that being Sunday, the production hall was locked from outside. It was further stated that the fire was discovered by Sh. Sukhdev Singh, husband of the owner of the plot, who lived nearby in Mohali and who informed the fire brigade and police station. It was further stated that the fire was brought under control by four fire brigade units at about 2:00 PM on 26.8.2012 itself. It was further stated that by the time the fire was extinguished, the contents and items under production inside production hall had been reduced to ashes and completely destroyed. It was further stated that the plant and machinery, TV under assembly, stock of packing material, furniture, fittings and fixtures kept/installed in the workshed had also been completely burnt. It was further stated that two computers containing official documents of the plant kept inside the office, which was located inside the work shed, were also fully burnt. It was further stated that the extent of the damage was accounted by the fact that thermocol sheet and card board boxes which were used for packing the TV sets got burnt and the fire spread to destroy the assembled and non-assembled TV sets. It was further stated that the said fire also damaged the RCC roof slab and other cemented works. It was further stated that a fire service report by the Fire Station/Municipal Corporation, S.A.S. Nagar, Mohali was also issued on 11.9.2012 (Annexure C-6). It was further stated that the Director of the Company Sh. C.K. Kothari and other Directors were present in Delhi at the time of the incident and, accordingly, visited their devastated factory thereafter. It was further stated that Branch Head of Opposite Parties No.2 and 3 were duly intimated about the fire by the complainant vide e-mail and letter dated 27.8.2012 (Annexure C-7). It was further stated that it was requested that a surveyor be appointed on urgent basis for assessment of loss and claim be processed. It was further stated that in continuation to the same, the complainant also informed Excise Officer, Range-I, Phase-V, Mohali and the Superintendent, Excise Department, Range-1, Mohali, Officer Department of Phase-1, Mohali and other authorities regarding the fire. It was further stated that the opposite parties through its Regional Manager, Sh. Jagdish Kumar duly appointed Col. Chandra Parkash, a Class A "Surveyor" on 28.8.2012 to survey the burnt factory of the complainant, who visited the factory accompanied by above said Regional Manager, Jagdish Kumar on 29.8.2012. The complainant has placed on record copy of letter dated 29.09.2012 written to the surveyor and forwarding letter dated 06.11.2012 regarding the claim bill of the damage occurred, as Annexure C-7A (Colly), wherein the total claim was stated to be Rs.65,54,595/-. It was further stated that the surveyor came out with its report dated 4.2.2013, wherein he recommended that instead of the assessed loss of Rs.65,97,595/-, an adjusted loss of Rs.48,20,481/- was the net claim liability. It was further stated that the surveyor also observed that the loss due to the fire , suffered by the insurer, is covered under the policy conditions and hence, it is payable. It was further stated that the surveyor in his comprehensive surveyor report dated 4.2.2013 (Annexure C-8) recommended to the opposite parties to settle the claim by payment of Rs.48,20,481/- to the complainant company. It was further stated that the amount of loss adjudged was at a lower level than anticipated/suffered. It was further stated that the Insurance Company deputed J. Dhawan and Associates, C.As. in April 2013 to verify the record related to the claims. It was further stated that the complainant-company was informed of the same on 29.04.2013 through an email. It was further stated that the said C.As, adopted a completely negative approach to the whole process and were hell-bent upon denying the claim of the complainant company. It was further stated that the complainant also approached the Insurance Ombudsmen, Chandigarh vide complaint dated 20.7.2013, which was returned by the office of Insurance Ombudsmen, Chandigarh vide letter dated 29.8.2013 (Annexure C-9 colly). It was further stated that the above C.As submitted their reports bearing Nos.JD/NIA/7085 dated 24.6.2013, JD/NIA/7216 dated 5.9.2013, JD/NIA/7239 dated 17.9.2013 and JD/NIA/770 dated 11.4.2014 (Annexures C-10, C-11, and C-12 respectively). It was further stated that due to the completely hyper technical and negative approach of the C.A, Jagdish Dhawan and Associates, the attitude of the Opposite Parties-Insurance Company completely changed and it started questioning the completely fair claim of the complainant - company. It was further stated that a meeting was held on 7.2.2014 in the cabin of Sh. Karan Singh at Regional Office of the Opposite Parties - Insurance Company at Chandigarh, which was chaired by Sh. R. K. Jain, Regional Manager of the opposite parties. It was further stated that the said meeting was also attended by the surveyor Col. Chandra Parkash who was asked to clarify the following points:
Balance sheet supplied to me by the insured was different from one supplied by Sh. Dhawan.
Why "Zero" inventory was shown in the balance sheet prepared as per the ROC format when your claim for the opening balance of the next financial year.
It was further stated that the Surveyor, Col. Chandra Parkash provided a response to the aforesaid points vide letter dated 10.2.2014 addressed to the Chief Regional Manager, Regional Office, New India Assurance Co. Ltd., Chandigarh, wherein he explained that the complainant had given same balance sheet as provided to the surveyor as to one Sh. Jagdish Singh Dhawan, who was asked to verify the account. It was further stated that Sh. Dhawan had asked the complainant to provide him with the additional balance sheet prepared as per the format of the Registrar of Companies, which was provided to him by the complainant. It was further stated that the Surveyor clearly informed Opposite Party No.2 that he had never asked for ROC, balance sheet. It was further stated that the surveyor in his letter dated 10.2.2014 (Annexure C-15) further submitted that the complainant-insured had not manipulated the accounts and had recommended that the complainant's case of fire loss should be settled at the earliest to give relief to the complainant-insured who was under severe financial constraint. It was further stated that the above clearly showed that the discrepancies pointed out by the report of the C.A. Jagdish Dhawan and Associates were misconceived and baseless. It was further stated that thereafter the Non-Motor Claim Hub of Opposite Party No.2 again wrote to the Surveyor Col. Chandra Parkash vide letter dated 11.2.2014 (Annexure C-16) seeking further point-wise reply to their queries. It was further stated that in response to the above said queries, the surveyor wrote to the Chief Regional Manager of the OP -Company vide letter dated 24.2.2014 (Annexure C-17) giving a detailed point-wise reply and the surveyor concerned recommended that the claim be granted.
It was further stated that despite the detailed clarifications by the surveyor, the opposite parties rejected the claim of the complainant company vide letter dated 28.4.2014 (Annexure C-18) on the basis of the faulty, biased, arbitrary and illegal report of the C.A., Jagdish Dhawan and Associates. It was further stated that illegal/arbitrary rejection of the insurance claim by the opposite parties has led to a lot of mental harassment and economic loss to the complainant company and its Directors and their families. It was further stated that the business of the complainant company was completely destroyed and the dream of its Directors to rebuild it were shattered and the complainant company production has ceased.
10. Alleging deficiency, in rendering service, and indulgence into unfair trade practice, on the part of Opposite Parties, the complainant filed the instant complaint under Section 17 of the Consumer Protection Act 1986 (in short 1986 Act) seeking directions to the Opposite Parties to pay the insurance claim, as assessed by their surveyor, in the sum of Rs.48,20, 481/- alongwith interest @24% per annum from 26.8.2012; award compensation of Rs. 20,00,000/- on account of causing financial risk, hardship, mental agony, harassment, emotional disturbance caused to the complainant due to the actions/omissions and also award compensation for financial loss due to the loss of production since the time of rejection of the insurance claim of the complainant besides payment of Rs. 55,000/- as litigation expenses.
11. The Opposite Parties, in their written statement, took up certain preliminary objections to the effect that the complainant has not approached the Commission with clean hands as it suppressed the material fact that the complainant maintained two set of books, one for submitting to the tax authorities and the other to the surveyor for claiming the loss allegedly occurred on 26.08.2012; that the complaint involves recording of detailed evidence & production of voluminous records, which cannot be done in a summary procedure under the Act and the proper remedy lies with the Civil Court, where elaborate evidence can be led by the complainant to prove his case and, as such, the complainant be directed to approach civil court and that the complainant has forfeited his right to file the present complaint as per Condition No.6 of the Policy.
12. On merits, it was admitted that Policy No.35230011120100000055 was issued for the period from 12.06.2012 to 12.02.2013 and the claim was payable as per the terms and conditions of the Insurance Policy (Annexure R-1). It was further stated that DDR and Fire Brigade Report and paper cuttings are matter of record. It was admitted that loss was intimated to the Opposite Parties and the Surveyor was deputed to assess the loss. It was also admitted that Surveyor Col. Chandra Parkash and the Regional Manager, Sh. Jagdish Kumar visited the site of loss. It was also admitted that the surveyor had assessed the loss for Rs.48,20,481/- vide his survey report dated 04.02.2013 and findings of the surveyor are not binding on the Opposite Parties. It was denied that the complainant suffered the loss much more than the loss assessed by the surveyor, as the space available in the work-shed was not sufficient to contain the huge stock shown to be burnt in the alleged fire. It was further stated that this necessitated the investigation by a person having accounting knowledge and so, M/s J. Dhawan & Associates, the Chartered Accountants were deputed to report on the books of accounts. It was further stated that the complete record was allegedly burnt in the fire and the books of account were constructed on obtaining the documents from various sources and the surveyor had commented in his survey report that the documents were submitted by the complainant in mid January 2013 and, thus, the survey report was released on 04.02.2013.
13. It was admitted that the Chartered Accountants submitted their reports dated 24.06.2013, 05.09.2013, 17.09.2013 and 11.04.2014. It was further stated that in report dated 24.06.2013, it was mentioned under the heading Preamble of the case that the insured purposely maintained huge closing stock before the date of loss inspite of being aware of fact that electronic goods would become obsolete after short period of time, supportive purchase bills not accompanied by the consignment note/GR, sales/purchase bills not verified and copy of balance sheet and profit and loss do not show the same trends and they proceeded to examine the case on these points. It was further stated that the CAs also observed that insured provided DDR No.12 dated 26.08.2012, which was placed in the file, which showed the loss to the insured amounting to Rs.20 Lacs which was later amended to Rs.60 Lacs. It was further stated that the insured approached the Punjab Fire Service for increasing the quantum of loss from Rs.60 Lacs to Rs.70 Lacs, which showed the insured intention to inflate the loss. It was further stated that the CAs also observed that on checking bills of material dispatched to various locations in a truck, number whereof was provided to CAs, all the earlier serial no. were found blacken and new serial nos. printed on the sales invoices and the insured till date has not provided the GR for the sale of goods, which (GR/consignment notes) were required to check the number of units the insured dispatched to the sellers.
14. It was further stated that the insured did not provide the copies of GRs because it fabricated the record to inflate the inventory and also tried to manipulate the accounting records. It was further stated that the insured has not done any sales after the fire as mentioned by the surveyors and insured. It was further stated that the VAT was also applied on the sale of scrap also. It was further stated that the insured had issued the last invoice serial No.114 before the date of fire and after the fire loss, the insured closed down its business and has not done any business and also filed application for settlement of the loss to the insurer on depreciation basis. It was further stated that how the complainant was able to issue 76 invoices after the incident of fire, which clearly showed that the insured had suppressed his sales record to inflate the stocks on the date of fire. It was further stated that the CAs also observed that the insured filed balance sheet on 07.12.2012 with ROC, which differ from the balance sheet submitted to the surveyor. It was further stated that the inventory as on 31.03.2012 and 31.03.2011 is amounting to NIL as per Page No.1 of balance sheet and Page No.5 of Form 23AC submitted to the Registrar of Companies, Chandigarh, whereas the balance sheet submitted to the surveyor, on the basis of which, he assessed the loss, the inventory as on 31.03.2012 was Rs.28,45,321/-, which meant that the insured inflated inventory/stock amounting to Rs.28,45,321/-. It was further stated that in report dated 05.09.2013, the CAs observed that on analyzing receipts from the sundry debtors and payments to the sundry creditors, it was revealed that the insured received Rs.14,77,173/- on account of sales from 01.04.2012 to 25.08.2012 whereas he made sales of Rs.4,23,06,856/- as per trading account without VAT. It was further stated that the CAs also observed that the insured issued only one cheque of Rs.18,200/- to Videotex India (P) Ltd. from 01.04.2012 to 25.08.2012 (date of fire) and were cash withdrawal for the expenses of his factory whereas the insured had made purchases of same period amounting to Rs.42168696/- as per trading account without excise duty and VAT, which clearly showed that the insured was doing job work type. It was further stated that in report dated 17.09.2013, the CAs observed that the insured had made sales after the fire and provided the VAT returns. It was further stated that CAs requested the complainant for VAT return for the quarter ending September 2012, December 2012 and March 2013 and found that insured has been able to achieve good turn over despite the fire. It was also observed that the huge turn over achieved by the insured after the fire clearly showed that the machinery of the insured was in good condition as he had done the manufacturing activity in his factory. It was further stated that in report dated 11.04.2014, after taking into account the replies sought from the surveyor, it was observed that the surveyor was unable to file reply on volumetric analysis of complete inventory and justify how all the stock could be stored in the premises with the plant and machinery installed therein. Stock Turnover Ratio was zero in the Tax Audit Report whereas in 2011, it was 0.08. It was further stated that the surveyor clarified that finished stock as on 31.03.2012 was NIL so the ratio was zero, which meant that the Stock Turnover Ratio would be zero in Tax Audit Report for the FY 2010-2011 but instead showed 0.08 times. It was further stated that the insured showed the finished goods stocks as on 31.03.2011 as Rs.50,63,067.00 and ratio 0.08 times and also authenticated by the surveyor, which clearly meant that the insured maintained two sets of books of accounts to mislead the insured. It was lastly stated that the Opposite Parties rightly repudiated the claim vide letter dated 28.04.2014 explaining the reasons therein. It was further stated that neither there was any deficiency, in rendering service, on the part of Opposite Parties, nor they indulged into unfair trade practice. The remaining averments, were denied, being wrong.
15. The complainant, in support of its case, submitted affidavit of Sh. Chander Parkash Kothari, its Authorized Representative, by way of evidence, alongwith which, a number of documents were attached.
16. The Opposite Parties, in support of their case, submitted affidavit of Sh. Tarsem Chand, their Manager and power of attorney holder, by way of evidence, alongwith which, a number of documents were attached.
17. We have heard the Counsel for the parties, and have gone through the evidence and record of the case, carefully.
18. An objection was raised by the Counsel for the Opposite Parties that the complainant forfeited its right to file the present complaint as per Condition No.6, which reads thus:-
"(ii) In no case whatsoever shall the Company be liable for any loss or damage after the expiry of 12 months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration; it being expressly agreed and declared that if the Company shall disclaim liability for any claim hereunder and such claim shall not within 12 calendar months from the date of the disclaimer have been made the subject matter of a suit in a court of law then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder."
In support of his objection, Counsel placed reliance upon the judgment rendered by Hon'ble Supreme Court in case titled National Insurance Co. Ltd. Vs. Sujir Ganesh Nayak & Co. & Anr., 1997 (II) CPJ 1 (SC) and H. P. State Forest Company Ltd. Vs. United India Insurance Co. Ltd., I (2009) CPJ 1 (SC). In the former case, it was held that if the Policy of insurance provided that if a claim is made and rejected and no action is commenced within the time stated in the policy, the benefits flowing from the policy shall stand extinguished and any subsequent action could be time barred. It was further held that such a clause would fall outside the scope of Section 28 of the Contract Act. The Counsel stated that same view was reiterated in H. P. State Forest Company Ltd. Vs. United India Insurance Co. Ltd.'s case (supra).
19. On the other hand, Counsel for the complainant argued that the complaint filed was within limitation. The Counsel placed reliance upon M/s Indraprastha Gas Ltd. Vs. New India Assurance Co. Ltd. & Ors., 2014 SCC Online NCDRC 735; Real Lamintes Pvt. Ltd. Vs. The New India Assurance Co. Ltd. (2001 SCC OnLine NCDRC : [2001]NCDRC 7 and Union of India and another Vs. Indusind Bank Limited and another , (2016) Supreme Court Cases 720. The Counsel emphasized that the Hon'ble National Commission in M/s Indraprastha Gas Ltd. Vs. New India Assurance Co. Ltd. & Ors.'s case (supra), In Paras 11 and 12 held as under:-
"11. Clause 6 (ii) of the insurance policy on which reliance was placed by the learned counsel for the insurance company, to the extent it is relevant reads as under:-
"(ii) In no case whatsoever shall the Company be liable for any loss or damage after the expiry of 12 months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration; it being expressly agreed and declared that if the Company shall disclaim liability for any claim hereunder and such claim shall not within 12 calendar months from the date of the disclaimer have been made the subject matter of a suit in a court of law then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder."
12. As far as the first part of the aforesaid clause is concerned, this in our opinion applies to a case where the insured does not lodge a claim with the insurance company within a period of 12 months from the happening of the loss or damage. Since admittedly, claim in the case before us was lodged within 12 months of the fire taking place, first part of the above referred clause would not apply. As far as the second part of the above referred clause is concerned, though it does stipulates a period of 12 calendar months from the repudiation of the claim, to approach a Civil Court by way of a Civil suit, the said clause in our view is void being contrary to the period of limitation prescribed in Section 24-A of the Consumer Protection Act, which prescribes a limitation of 2 years from the date of accrual of the cause of action.
Section 28 of Indian contract Act to the extent it is relevant for our purpose, reads as under:-
"[Every agreement,-
(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to that extent.]"
Since the above referred term contained in the insurance policy which is a contract between the insurer and the insured, restricts the right of the claim to enforce its statutory right within the time stipulated in Section 24-A of the Consumer Protection Act by reducing the limitation period within which the consumer aggrieved from a defect or shortcoming in the services rendered by a service provider can approach a consumer forum, it is void to the aforesaid extent. Reference in this regard may be drawn to the decision of this Commission in Sujata Chemicals vs. United India Insurance Co. Ltd., I (2007) CPJ 158 (NC). In the aforesaid case, clause 12 of the aforesaid policy issued by United India Insurance Company Ltd. contained an identical clause except that the period of limitation prescribed in the said policy was 3 calendar months as against the period of 12 calendar months prescribed in the policy issued by the complainant before us. The complaint having not been filed within three calendar months from the date of repudiation the question which arose before this Commission was as to whether it was maintainable or not. Referring to Section 28 of the Indian Contract Act and relying upon the earlier decision of this Commission in New India Assurance Co. Ltd. Vs. K. A. Abdul Hameed & Anr., II (2005) CPJ 54 (NC), the plea taken by the insurance company was rejected by this Commission. During the course of the judgment, this Commission also referred to the decision of the Hon'ble Supreme Court in National Insurance Co. Ltd. Vs. Sujir Ganesh Nayak & Co. & Anr., (1997) 4 SCC 366 where the Supreme Court had declared the law as under:
"Curtailment of the period of limitation is not permissible in view of Section 28 but, extinction of right itself unless exercised within a specified time is permissible and can be enforced.""
20. Further in Real Lamintes Pvt. Ltd. Vs. The New India Assurance Co. Ltd.'s case (supra), before the Hon'ble National Commission, the respondent - Insurance Company raised bar of Condition No.4(iii) of the insurance policy, which was as under:-
"in no case whatsoever shall the Company be liable for any loss of damage after the expiration of 12 months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration; it being expressly agreed and declared that if the Company shall disclaim liability for any claim hereunder and such claim shall not within 12 calendar months from the date of the disclaimer have been made the subject matter of a suit in a court of law then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder."
21. The Hon'ble National Commission held interalia, as under:-
".....As noted above, there is no dispute after the amendment of Section 28 of the Contract Act, clause 4(iii) has no validity. We therefore allow the appeal and set aside the order of the State Commission.
State Commission had dismissed the complaint on the ground of bar of limitation and did not go into the merits of the case. Accordingly, this matter will go back to the State Commission for its decision on merit. First Appeal is disposed of as above. In the circumstances, we leave the parties to bear their own costs."
22. In view of aforesaid, the objection raised by the Counsel for the Opposite Parties does not sustain and the same stands rejected.
23. The next objection raised by the Opposite Parties, in their written statement was that adjudication of complaint required production of voluminous record and taking/giving of evidence, which could not be done in a summary procedure under the Act. It was further stated that proper remedy was with the Civil Court where elaborate evidence can be led. It may be stated here that the insurance is one of the specified services under the Act and the consumers have a right to avail this remedy. The objection taken by the Opposite Parties is for the sake of objection, and to delay and deny the claim. No justified reasoning and ground to relegate the matter to the Civil Court has been put forth by the Opposite Parties.
24. It is evident from record that the complainant, a private limited company incorporated under the Companies Act, 1956 (Annexure C-1), had been obtaining the Insurance Policy from the Opposite Parties since 28.07.2001 till 11.02.2013. The value of the stock, plant & machinery, raw material, furniture fixtures, building in the insurance policies obtained from time to time, except in respect of Policy for the period 12.06.2011 to 11.06.2012, are indicated in Annexure C-20. The Insurance Policy for the period 12.06.2010 to 11.06.2011 covered risk of Rs.22.50 lacs. The policy for the period 12.06.2012 to 11.02.2013, during the subsistence of which, the loss in question occurred, covered loss of the following description and value:-
Sr. No. Items(s)/Description Value (Rs.)
1.
Stocks and stocks in process 50 Lacs
2. Plant & machinery & Accessories 8 Lacs
3. Furniture fittings & fixtures 4.50 Lacs
4. Buildings- Super structure 10 Lacs Total 72.50 Lacs The complainant has averred that it did not lodge any complaint uptil 2012. The insured was in the business of assembling TV units and as per averment in the complaint, it had the installed capacity to manufacture/assemble 80,000 T.V. Sets per month. On 26.08.2012, which was Sunday, at around 10 A.M., a fire erupted in the premises at D-124, Phase VII, Industrial Area, Mohali. The husband of landlady of the building informed the fire brigade and Police Station. Four fire brigades were put in operation to extinguish the fire, which was brought under control on the same day at about 2.00 P.M. There is, thus, no dispute that the goods of the complainant were burnt. The incident was reported in the newspapers. The Opposite Parties were intimated of the incident and loss on 27.08.2012. The complainant lodged claim with the Opposite Parties for a sum of Rs.65,54,595/-. The Opposite Parties appointed Col. Chandra Parkash (Retd.), A-Class Surveyor to investigate and look into the claim. The complainant has averred that it submitted all the relevant documents to the Surveyor though most of the documents were burnt. The Surveyor submitted report (Annexure C-8) on 04.02.2013, in which, he recommended to the Opposite Parties to settle the claim by payment of Rs.48,20,481/-. The Opposite Parties, in their written statement, have stated that the Chartered Accountants, appointed by them, observed that the insured provided DDR No.12 dated 26.08.2012, which showed the loss to the insured amounting to Rs.20 Lacs, which was later amended to Rs.60 Lacs. The insured approached the Punjab Fire Service for increasing the quantum of loss from Rs.60 lacs to Rs.70 lacs, which showed the insured's intention to inflate the loss.
25. The observations/findings of the Surveyor in his report, as extracted below, are relevant qua the claim of the complainant in question:-
"16. COMPARISON OF BALANCE SHEETS OF LAST THREE YEARS.
Liability 2009-10 2010-11 2011-12 Assets 2009-10 2010-11 2011-12 Share Capital 514500 514500 514500 Profit & Loss A/c 2479150 2477921 3784585 Duties & Taxes 69829 319121 242280 Car 229369 137621 101991 Sundry Creditors 14180289 Computer 194117 144101 86461 Expenses payable 202655 Furniture & Fixtures 103197 84518 69220 Rent payable 48851 Office Equipments 21383 30961 26655 Provisions (Others) 194215 97322 Plant & Machinery 404081 347873 299484 Trade Creditors 44425643 10106948 Tools & Equipments 102212 87994 75754 Loan (EMI) 70170 4170 Bank Balance 1693759 160853 312887 Cash 170537 262183 2334 Loan & Advances 2278420 1599728 Closing Stock 6554789 5063067 2845321 Sundry Debtors 31043406 645241 7035208 Government Due 548675 Total 45274420 11042061 15188575 Total 45274420 11042061 15188575 16.1 Analysis:
Salient features of comparative statement of balance sheets are discussed as under:-
Insured's share capital has remained constant at Rs.5,14,500/- against the total amount reflected on credit and debit side of the balance sheet for the maximum amount of Rs.4,52,74,420/- to minimum of Rs.1,51,88,575/-. The insured's own investment was a pittance compared to the total investment involved.
The insured had wisely taken an insurance policy to cover the probability of occurrence of loss due to any mishap upto Rs.72.50 lacs.
The insured had gradually reduced Sundry creditors to Rs.1,41,80,289/- in year 2011-12 from an amount of Rs.4,44,25,643/-. This highlights the confidence of the investors/clients in the good will created by the insured and their faith in his business acumen and his integrity.
There is no other specific feature in the balance sheet requiring highlighting.
17.1 Analysis
a) the insured had the highest sales/turnover of stocks during the period 01.04.2009 to 31.03.2010. The sales volume had enhanced upto Rs.17,22,86,432/- during this financial year. Subsequently during the period 01.04.2012 to 26.08.2012 the sales volume had come down to Rs.4,23,06,856/-. This sale volume has been attained during the period of 4 months and 25 days (0.403 years) upto the date of fire. At the same rate, by computation, even the sales volume for the complete year would have been Rs.10,31,047.40.
b) 100% VAT exemption was allowed from 14.12.1999 to 23.12.2009. There was a very high quantum of sales and hence the gross profit percentage was 1.026036. During last quarter of the year, when fire occurred, the prevailing VAT exemption was 3.5% + 10% surcharge. This scheme was inforce upto 23.12.2012 hence there was increase in sales during the last quarter of the year to avail of the concessional VAT available till then.
c) Gross profit had fluctuated widely during this period. It was highest i.e. 1.923458% for the period upto 26.08.2012, i.e. the date of fire and the least during the year ending 31.03.2011, which was 0.1788311%. The reason for this variation was sudden decrease of demand due to market recession. The maximum GP for the period is just before fire, which does not reflect the correct state of affairs as many of the production expenses are incurred during the last quarter; of the financial year. Performance for a short period of 4 months 25 days cannot be a true indicator of business performance over a period of one year.
19. TRADING ACCOUNT UPTO DATE OF FIRE Gross Profit:
The credit and debit side of the trading account must be equal to each other. On the credit side the sales figures stand reflected. The cost of closing stock is arrived at by physically counting the stock. The addition of the above two items must equal to debit side. The gross profit is the difference between the credit side and addition of opening stock, purchases and expenses on the debit side.
Mathematically Gross profit= Sales + closing stock-(opening stock + purchases + expenses) CREDIT SIDE By Sales: Sales are excluding excise duty but includes expenses in connection with sales. The sales amount arrived at would automatically include profit earned on sales during the period.
By Closing Stock: This is the most important head which requires very accurate and correct compilation to arrive at the actual gross profit loss suffered by a enterprises. The debit and credit side must be balanced. The closing stock is arrived at by physically counting of the stocks held on the last day of financial year. The closing stock is also worked out just before fire to arrive at the quantum of stocks held. The fire loss is arrived at by comparing the physical cost of inventory held after fire. This inventory is quantified and costed which when substracted from the inventory held just before fire, gives actual loss suffered by the company.
19.2 Compilation of Trading Account - just before fire.
Trading account prepared by CA and authenticed by him for the period 01.04.2012 to 25.08.2012 (date of fire) is tabulated as under:-
Particulars Amount (Rs.) Particulars Amount (Rs.) To Opening Stock 28,45,321.00 By Sales 4,23,06,856.00 To Purchases 4,21,68,696.00 By Closing Stock 42,53,363.00 Direct Expenses 6,34,154.00 Gross Profit 9,12,048.00 Total 4,65,60,219.00 Total 4,65,60,219.00
21. CLAIM BILL OF THE INSURED.
The insured has submitted his claim bill dated 29th September 2012 as under:-
a) Building (Super Structure) = Rs.8,99,751.00 10,00,000.00 On lease
b) Stocks Burnt in fire = Rs.44,53,344.00 50,00,000.00 Incl. excise
c) Plant, Machinery & Accessories = Rs.7,63,000.00 8,00,000.00
d) Furniture, Fixture & Other items = Rs.4,38,500.00 4,50,000.00 Total = Rs.65,54,595.00 72,50,000.00 Debris Removal charges = Rs.43,000.00 (Details & bills attached.
It is anticipated that the Indemifiable loss will reduce to some extent after detailed scrutiny of documents made available by the insured."
26. The Surveyor in Para 24 assessed the loss qua damage to building observing that the sum insured was under insurance.
27. The Surveyor, in Para 25.3 has given details of loss qua stocks damaged in fire inclusive of all taxes in the sum of Rs.42,49,525/-.
28. Qua plant and machinery, under Section III, the surveyor assessed the depreciated cost of damage/burnt plant and machinery in the sum of Rs.3,07,134/-. The surveyor observed that the sum insured for plant and machinery was Rs.8 Lacs while the depreciated cost of all items was Rs.4,46,836/- and the sum insured adequately covered the depreciated cost of items burnt/damaged and hence, under insurance was not applicable.
29. While assessing loss under head 'Furniture, Fixture & Fittings', under Section IV, the Surveyor in Para 27.2 assessed depreciated cost of damage/burnt furniture, fixtures & fittings in the sum of Rs.2,83,217/-. The surveyor observed that there was no under insurance qua this item also.
30. The Surveyor in his report, assessed the net claim liability to the tune of Rs.48,20,481.00. The summary of loss assessed by the Surveyor at Page 30 of the report (Page 82 of the file) is extracted hereunder:-
"30. SUMMARY OF ASSESSED LOSS.
Gross loss (for levy of survey fee) Depreciated assessed cost Claim Bill Building 7,10,219.00 5,56,030.00 8,99,751.00 Stock 42,49,525.00 42,49,525.00 44,53,344.00 Plant and Machinery 10,69,503.00 3,07,134.00 7,63,000.00 FF&F & Other contents 5,33,377.00 2,83,217.00 4,38,500.00 Debris Removal 43,000.00 Grand Total 65,62,624.00 53,95,906.00 65,97,595.00
31. ADJUSTED LOSS Item Building Stock Plant & Machinery FF&F Other contents Total Assessed loss on depreciated loss basis 556030.00 4249525.00 307134.00 283217.00 5395906.00 Less Salvage
-24000.00
-16248.00
-14000.00
-12280.00
-66528.00 Depreciated Loss after salvage 532030.00 4233277.00 293134.00 270937.00
-
Under Insurance factor 0.435275 Nil Nil Nil
-
Loss after under insurance 231579.00 4233277.00 293134.00 270937.00 5028927.00 Total amount of Loss after under insurance 5028927.00 Less Excess as per policy @5% of the claim amount 251446.00 Total 4777481.00 Add cost of debris removal allowed maximum upto 1% of the claim amount.
Insured has claimed Rs.43,000/- (receipt enclosed) 43000.00 Net Claim Liability 48,20,481.00 The insurers may consider settling the claim accordingly. The loss due to fire suffered by the insured is covered under the policy condition, hence, it is payable. Consent letter of the insured is attached."
31. From the aforesaid, it transpires that against the claim of Rs.65,54,595/-, the Surveyor assessed the net claim liability in the sum of Rs.48,20,481/-. The insurance cover was for four different heads viz. (1) stock, (2) building, (3) plant & machinery, (4) furniture & fixtures and the loss assessed by the Surveyor under different heads varies to a great extent. While loss assessed in respect of stock was Rs.42,33,277/- against the insured value of Rs.50 Lacs; for other three heads viz. building, plant & machinery, furniture & fixtures, insurance cover for which was in the sum of Rs.22.50 Lacs (Rs.10.00 Lacs + Rs.08.00 lacs + Rs.4.50 Lacs), the payable amount assessed was Rs.7,95,650.00 less excess as per Policy @5%. In %age terms, assessed loss for stocks is 80% of the amount of claim, whereas for building, plant & machinery, furniture & fixtures, it is 33% of the claim amount.
32. The Surveyor submitted report on 04.02.2013. Thereafter, the Opposite Parties appointed M/s J. Dhawan and Associates, Chartered Accountants to verify the accounts and all other relevant records pertaining to the insured claim, who submitted report dated 24.06.2013 (Annexure R-2) available at Page 251 to 262. The following paras from the report of Chartered Accountants, being relevant, are extracted hereunder:
"Why there is clerical error by police department only in the amount of Loss (Rs. 60 lacs) by the Police where as this the statement of Mr.Chander Kant Kothori Director C.K.Electronics Private Limited. Later on when the insured approached the Punjab Fire Service for copy of Fire report on 11.09.2012 again the quantum of loss increased from Rs.60 lacs to Rs.70 lacs (Rs. 10 lacs increased).
The above mentioned facts, DDR and fire report clearly showed the insured's intention to inflate the Loss.
However, the loss has been finally assessed by the surveyor for Rs.48,20,481.00. The details as follows :-
Particulars Assessed Loss Rs.
Adjusted Loss Rs.
i.
Building 556030.00 231579.00 ii.
Stock 4249525.00 4233277.00 iii.
Plant & Machinery 307134.00 293134.00 iv.
FFF & other Contents 283217.00 270937.00 5395906.00 Total Amount of Loss after under insurance 5028927.00 Less Excess as per policy @5% 251446.00 Total 4777481.00 Add : Cost of debris removal allowed 43000.00 Net Claim Liability 48,20,481.00 E. Verification of Purchases/Sales Bills & VAT returns etc. The insured claimed the loss of stock amounting to Rs.44,53,344.00 which seems on much higher side of the actual loss to the insured on following facts :-
The surveyor obtained the copies of the purchases and sales bills from 01.04.2012 to 25.08.2012 as on date of fire. The surveyor obtained the copies of returns filed with Excise & Taxation Department. The balance sheet for the last three years was also obtained from the insured. The surveyor never asked for the copy of GR which should be accompanied with purchase bill and sales bills through which the material transported and mentioned about the no of pieces/contents of the invoices.
Analysis of Sales and Purchases :
After receiving the file we started verifying the VAT return with the concerned departments. We checked the purchases from 01.04.2012 to 25.08.2012 with the VAT return submitted by the insured to the department.
The insured provided us the truck no of vehicles in which the matrial was dispatched to various locations. We checked the bills and found that all the earlier serial no. blacken and new serial no. printed on the sales invoices. The insured till date has not provided the GR for the sales of goods. We required these GRs/Consignment Note to check the no. of units the insured dispatched to the sellers.
The surveyor calculated the loss on the basis of quantity at the site after adjustment of the purchases and sales as per invoices in number of units.
The copies of sales invoices were provided from which source question is still unanswerable.
The Insured provided two type of sales invoices i.e. computerized and manual prepared copies. The type of invoices provided by the insured clearly shows that these are available with insured which he claims to have burnt and provided the same to the surveyor. The Insured did not provide the copies of GR's because he fabricated the record to inflate the inventory. The basic mistake the insured done in the invoice on 25.08.2012 before the date of fire are as follows :-
Party Name Invoice No. Date of dispatch Time of Invoice Amount Rs.
Westway Electronics Ltd.114
25.08.12 11.46.41 a.m, 881591.00 Oscar International Limited 113 25.08.12 2.00 p.m. 328455.00 The analysis of the above sample invoices created doubts and confirm that the insured tried to manipulate the accounting records.
The insured has not done any sales after the fire as mentioned by the surveyors and insured. The VAT also applied on the sale of scrap also. The insured has issued sales Invoices no. 191 & 192 dated 15.12.2012 for sale of scrap. Whereas as per the sales record provided to surveyor, the insured has issued the last invoice serial no. 1124 before the date of fire. After the fire loss the insured closed down their business and has not done any business even filed application for the settlement of loss to the insurer on the depreciation basis. Then, how were they able to issue the 76 invoices after the incent of fire ? Thus, it appears the insured had suppressed his sales record to inflate the stocks on the date of fire.
As such the copy of Sales bills, as placed in the file cannot be treated as authentic or legally acceptable.
xxxxxxxxx The insured later provided some of GRs/Consignment Note of purchases after lot of persuasion. After the receipt of the documents, we went to different location of ICC barrier to check the entries of purchases at entry point and confirm the correctness of the purchases. We were unable to verify the correctness of purchase GR's of the Insured due to details not provided in GRs. So the possibility by the insured inflating the stock by showing higher purchases may be noted.
Analysis of Inventory/Stocks The insured made purchases, after receiving the material manufactured finished goods in his factory. Then dispatch the finished goods i.e. sales to dealers as per buyers instructions. The insured used to do this type of business which leave hardly any inventory at the premises of the insured because these customer not leave any inventory for use of the Insured.
It means that the insured has nil stock after dispatch of consignment. It created the doubt in our mind that when insured used to dispatch the same number of units which have been received from supplier. However the huge inventory remained with the insured in reducing price regime of electronic goods due to obsolete technology.
We started our investigation to get the information regarding this issue. The insured got annoyed with this issue. We filed the application with Excise and Taxation department for the record. We were unable to get the certified records from Punjab Excise and Taxation department. The insured is registered under the company act 1956. The insured company is private limited and having two directors. We viewed the insured company profile in the public viewing documents and were shocked to see the figure of inventory as on 31.03.2011 and 31.03.2012 which were Nil. We immediately applied for the certified copy of balance sheet with ROC. The insured filed this balance sheet on07.12.2012 with ROC, differ from the Balance sheet submitted by the Insured to the Surveyor.
The certified copy of the Form 23AC and Balance sheet as on 31.03.2012 is placed with this report as annexure A The inventory as on 31.03.2012 & 31.03.2011 is amounting to Nil as per the page no.1 of balance sheet & Page No.5 of Form 23 AC submitted to Registrar of Companies-Chandigarh. Whereas the balance sheet submitted to the surveyor and surveyor assessed the loss on the basis of that balance sheet, the inventory as on 31.03.2012 is amounting to Rs.28,45,321.00. It means the insured inflated the inventory/stock amounting to Rs.28,45,321.00 as on date of fire to get the maximum benefit of the insurance amount.
This clearly showed that the insured provided the manipulated accounting records records to the surveyor to get the maximum benefit from the insurer.
4. CONCLUSION :-
I. As discussed above there is clear cut breach of policy condition no. 06-(I)-a. which are as follows :-
On the happening of any loss or damage the insured shall forthwith give note thereof to the company and shall within 15 days after the loss or damage, or such future time as the Company may in writing allow in that behalf, deliver to the company A claim form in writing for the loss or damage containing as particular an account as may be reasonably practicable of all the several articles or items or property damaged or destroyed and of the amount of loss or damage thereto respectively, having regard to their value at the time of loss or damage not including profit of any kind. The Insured has not provided the details of loss with surveyor as referred under item no. 3C.
II. Nevertheless, on the basis records (as produced) collected by surveyor, information collected, requisite inquiries conducted and scrutiny of documents made by us, we are of the considered opinion that the accounts and records as submitted by the insured in support of their claim cannot be fully relied upon and don't portray a true and fair picture of the state of affairs.
Since the insured has fabricated the accounts by an ulterior motive to obtain undue benefits from the insurer, hence conditions no.08 of the Standard Fire and special Perils Policy which read as under, also becomes operational :-
"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 occasioned by willful act, or with the connivance of the insured, all benefits under this policy shall be forfeited."
III. Since the insured has fabricated the purchases/sales recorded and not providing copy of GR's to the Surveyor to get maximum claim from insurer.
This report is being issued without prejudice and for the consideration of the Insurers. Claim Folder received from the office is being returned.
The items checked pertaining to the claim and commented by us are in the folder itself and no copy of being attached.
Thanking you and assuring you of our best professional services."
33. Thereafter, on advice of the Opposite Parties, the Chartered Accountants submitted another report dated 05.09.2013 (Annexure R-3) wherein, inter-alia, it was mentioned that insured inflated the inventory/stock amounting to Rs.28,45,321/- as on date of fire to get the maximum benefit of the insurance claim.
34. In subsequent report dated 17.09.2013 (Annexure C-22/R-4), the Chartered Accountants acknowledged that insured provided Form 23 ACA and copy of VAT20 for the Financial Year 2009-2010, 2010-2011 and 2011-2012 .
35. Thereafter, Col. Chandra Prakash (Retd.), Surveyor in his letter dated 10.02.2014 (Annexure C-15) to the Chief Regional Manager of the Opposite Parties, after meeting under the Chairmanship of Sh. R. K. Jain, Regional Manager, clarified position with regard to points, on which, he was asked to orally clarify. The Surveyor, in his letter dated 10.02.2014, addressed to the Chief Regional Manager of the Opposite Parties stated as under:-
The insured had supplied balance sheet for the last three years duly authenticated by his Chartered Accountant, which was filed with the Income Tax Authorities. The insured had also supplied VAT and Excise Returns etc. As per balance sheet, which was provided to the surveyor by the insured the closing stock was Rs.28,45,321/-. The Insured had also provided the item-wise list of stocks duly costed as held on 31.03.2012. The fire had occurred on 26.08.2012. The insured did not know that a fire will occur on 26.08.2012, therefore, the trading account was prepared by the CA of the insured to ascertain the stocks held just before i.e. as on 26.08.2012. The opening balance reflected in this trading account was closing stock of the previous year i.e. of 31.03.2012. Regarding reasoning for providing different balance sheet to the surveyor and to the Chartered Accountants, the surveyor clarified that the insured had given the same balance sheet as provided to him and to the Chartered Accountants also. The surveyor has stated that Sh. Jaswant Singh Dhawan had asked the insured to provide him additional balance sheet prepared as per the format of Registrar of Companies and the same was provided to them (Chartered Accountants). The Surveyor has stated that he did not ask for ROC balance sheet. The surveyor has clarified that the difference between two balance sheets is in the format, which is provided. There is no difference in amounts reflected against various heads. He in his letter dated 10.02.2014 tabulated comparison of assets mentioned in both the balance sheets as under:-
31.03.2010 31.03.2011 31.03.2012 Closing Stock Finished Goods 65,54,789/-
50,63,067/-
NIL Others Nil Nil 28,45,321 Total Closing Stock 65,54,789/-
50,63,067/-
28,45,321 Total Sales 17,22,86,432/-
6,37,63,512/-
20186627 Stock Turnover Ratio 65,54,789 50,63,067 0 17,22,86,432 6,37,63,512 20186627 =0.038 =0.0794 =0.00 "The closing stock as on 31.03.2012 did not consist of any finished goods. Hence, the stock in trade has been taken as "Zero". From above, it will be seen that in the closing of year 31.03.2010 and 2012 (2011) the insured's company was holding finished goods stock of Rs.65,54,789/- and 50,63,067/- respectively.
The reason for having stock turnover ratio of "Zero" as on 31.03.2012 is that in the closing stock held there was no holding of finished good stock."
The Surveyor has stated that the insured supplied balance sheets for the last three years duly authenticated by his Chartered Accountant, which he has filed with the Income Tax Authorities. The insured had also supplied VAT and Excise Returns etc. As per balance sheet, which was provided by the insured to the Surveyor, the closing stock was Rs.28,45,321/- and the insured had also provided item-wise list of stocks duly costed, as held on 31.03.2012. The surveyor had started that the opening balance of Rs.28,45,321/- stood reflected in the trading account. The surveyor clarified that the presentation of figures in different formats did not change the basic nomenclature of entries. He has stated that the stocks will always remain stock, which may consist of raw materials, semi-finished material, used in assembling or finished goods. The surveyor has given comparsion of assets mentioned in both the balance sheets in a tabulated format, which is extracted hereunder:-
Balance sheet as on 31.03.2012 (As per Income Tax Requirement) Submitted to me Balance sheet as on 31.03.2012 (As per Registrar of Company's format) Submitted to Sh. Jaswant Singh ASSETS ASSETS Car 1,01,991.00 Fixed Assets Computer 86,461.00 Tangible Assets 6,59,565.00 Furniture & Fixture 69,220.00 Office Equip.
26,655.00 Current Assets Plant & Machinery 2,99,484.00 Trade Receivable 70,35,208.00 Tools & Equipments 75,754.00 Cash and Cash Equivalent 3,15,221.00 Bank Balance 3,12,387.00 Other Current Assets 33,93,996.00 Cash 2334.00 Closing Stock 28,45,321.00 Sundry Debtors 70,35,208.00 Government Due 5,48,675.00 Total 1,14,03,990.00 Total 1,14,03,990.00 The Surveyor has observed that inspite of different balance sheets having been handed over to Sh. Jaswant Singh Dhawan and to him, there was no difference between the amount of total assets as reflected in the above two balance sheets. Further the balance sheet prepared as per ROC Format, which was handed over to Sh. Jaswant Singh Dhawan, the 'Other Current Assets' of Rs.33,93,996/- were inclusive of 'Closing Stock' of Rs.28,45,321/- and 'Government Dues' of Rs.5,48,675/-. The Surveyor has further stated that since there was no column pertaining to 'Closing Stocks' in the ROC Balance Sheet format, the insured had decided to put the item of closing stock under head "Other Current Assets". The surveyor in his aforesaid letter also categorically stated as under:-
"While finalizing the assessment, I have considered all aspects in-depth, having a bearing on closing stock of Rs.28,45,321/-. In the interest of justice and fair play, it is submitted that the insured had not manipulated the accounts. The insured used to stay in Delhi and visit Mohali only when required. He was in Delhi when fire had occurred on 26.08.2012. He was informed of the fire incident by his landlord. He had single handedly attended to multifarious activities relating to fire incident and collection of documents from various sources, for lodging this claim."
36. On careful perusal of the surveyor report and the observations/findings of the Chartered Accountants, in their report, it transpires that the findings of the surveyor are detailed and specific whereas observations made by the Chartered Accountants are not specific. At Page 258 of the file, the Chartered Accountants mentioned that the insured provided two types of sale invoices i.e. computerized and manually prepared copies. It has been stated that the insured did not provide the copies of GRs and he fabricated the record to inflate the inventories. Referring to table at Page 259, the Chartered Accountants have stated that on 25.08.2012 at 11.46.41 A.M., invoice in the sum of Rs.8,81,591/- was issued and also on the same date viz. 25.08.2012 at 2 P.M, another invoice in the sum of Rs.3,28,455/- was issued. It is stated that the above invoices created doubt that the insured tried to manipulate the accounting records. The finding of the Chartered Accountants is apparently not well based because the aforesaid invoices in the sum of Rs.12.10 lacs reduced the inventory of the insured. Had these invoices not been issued, the claim of the complainant could have been more to the extent of Rs.12.10 lacs. At Page 260, it has been stated that an application was filed with the Excise and Taxation Department to see the record and they were unable to get the record from Punjab Excise and Taxation Department. No blame can be attributed to the complainant on this count. The Chartered Accountants have primarily relied upon the balance sheet filed by the complainant Company on 07.12.2012 with ROC alleging the balance sheet submitted by the insured to the surveyor differs from the balance sheet as on 31.03.2012 filed with the Registrar Companies. The Surveyor clarified the position in his letter dated 10.02.2014 (Annexure C-15). As per balance sheet submitted to the surveyor, the inventory as on 31.03.2012 was amounting to Rs.28,45,321/-. The Chartered Accountants observed that as the inventory/stock on 31.03.2012 was Rs.28,45,321/-, the inventory/stock which was in the sum of Rs.28,45,321/- was inflated. The mere fact that the complainant had inventory of Rs.28,45,321/- would not mean that for all times to come, the inventory could not be more than Rs.28,45,321/-. The closing stock/inventory on 31.03.2010 and 31.03.2011 was Rs.65,54,789/- and Rs.50,63,067/- respectively. As would be seen from paras extracted from the report of the surveyor, the inventory of the complainant has been even much more than the inventory as on 31.03.2012 and the inventory which it had at the time of occurrence of fire. Not only this, inventory/stocks valuing Rs.12.10 lacs were issued by the complainant a day prior to the fire, thereby reducing the liability of loss to that extent. Further the observation of the Chartered Accountants at Page 261 of the file that the accounts and records, as submitted by the insured in support of its claim cannot be fully relied upon and do not portray true and fair picture of state of affairs, is not specific and is without reference to relevant documents, on the basis of which, the observation has been made.
37. The Insurance Company vide its letter dated 28.04.2014 (Annexure C-18) repudiated the claim. The contents of repudiation letter aforesaid reads thus:-
"With regard to the above claim we wish to inform you that Col. Chandra Prakash, Surveyor and loss Assessor was deputed to conduct the survey of the reported loss and assess the amount of loss The surveyor Col. Chandra Prakash submitted his final survey report no.FS/CP/10/2012 dated 4.2.2013. After receipt of the report J. Dhawan and Associates, Chartered Accountant was deputed by the competent authority to verify certain records related to the claim.
J. Dhawan and Associates submittd his report nos.JD/IA/7085 dated 24/6/2013, JD/NIA/7216 dated 5/9/2013 and JD/NIA/7239 dated 17/9/2013 and JD/NIA/7770 dated 11/4/2014 and has observed the following:-
1. You have failed to justify the storage of complete inventory based on volumetric analysis.
2. You have maintained two sets of books of accounts to mislead us.
3. As per the Central Excise Return ERI submitted by you, you were not having any stocks on the closing of the year as well as at the end of every month. It was clearly understood that you were not having any inventory on 31/3/2012.
4. The inventory as on 31.3.2012 is nil as per Page no.1 of balance sheet and page no.5 of Form 23AC submitted by you to ROC-Chd, whereas the inventory shown in the balance sheet submitted by you to the final surveyor is amounting to Rs.28,45,321/-. It clearly shows that you have maintained two sets of accounts and provided the favorable accounting records to the final surveyor to get the maximum benefit for the insurer.
On the basis of the above observations, it may be submitted that you have inflated the inventory/stocks amounting to Rs.28,45,321/- to get the maximum benefit of the insurance claim amount. By such an act and conduct you have committed breach of condition no.8 of the subject policy which reads as under:-
"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 willful act or with the connivance of the insured, all benefits under this policy shall be forfeited."
In view of the facts mentioned above, the competent authority has repudiated your claim, which please note."
38. As is evident from the pleadings of the Opposite Parties, after submission of report by the Surveyor (who was an approved A Class Surveyor, having 25 years experience), appointed by the Insurance Company (Opposite Parties), it appointed J. Dhawan and Associates, Chartered Accountant to verify certain record relating to the claim. Perusal of aforesaid letter, vide which the claim was repudiated, reveals that the claim was rejected based upon the report of Chartered Accountants appointed after receipt of report of the surveyor. The surveyor appointed by the Insurance Company was one of its approved surveyors, who submitted a detailed report giving reasoning for each issue. The Surveyor also clarified on each doubt expressed by the Chartered Accountant. There was no justification, whatsoever, for ignoring the report of the Surveyor and appointing J. Dhawan and Associates, Chartered Accountants.
39. In National Insurance Co. Ltd. Vs. New Patiala Trading Company, Revision Petition No.488 of 1998, decided on 8.2.2002, the National Commission held as under:-
"Scheme of Section 64UM, particularly of sub-section (3) and (4), would show that insurer cannot appoint second surveyor just as a matter of course. If the report of the surveyor or loss assessor is not acceptable to the insurer it must specify reasons but it is not free to appoint second surveyor. Appointment by the insurer of a second surveyor itself would be a reflection on the conduct of the first surveyor. Surveyor or loss assessor is duty bound to give a correct report. If the insurer-Insurance Co. finds that surveyor or loss assessor has not considered certain relevant points or has considered irrelevant points or for any other account it has reservation about the report, it can certainly require the surveyor or loss assessor to give his views and then come to its own conclusion, but insurer cannot certainly appoint a second surveyor-cum loss assessor to counter or even contradict or rebut the report of the first surveyor."
40. Further in New India Assurance Co. Ltd. Vs. Balbir Singh, II (2013) CPJ 325 (NC), the National Commission held, in Paras 9, and 11 inter-alia, as under:-
"As pointed out by the Counsel for the Respondent-Complainant and as recorded by the State Commission in its detailed order, this Commission as also Hon'ble Supreme Court of India have adversely commented on the practice of some Insurance Companies in appointing one Surveyor after another without giving reasons for not accepting the report of the first Surveyor. Specifically Hon'ble Supreme Court in Sri Venkateswara Syndicate v. Oriental Insurance Co. Ltd. & Anr., II (2010) CPJ 1 (SC)=II (2010) SLT 664, has inter alia observed as follows:
"We may also add, that, under this section the Insurance Company cannot go on appointing Surveyors one after another so as to get a tailormade report to the satisfaction of the concerned officer of the Insurance Company, if for any reason, the report of the Surveyors is not acceptable, the insurer has to give valid reason for not accepting the report. Scheme of Section 64-UM particularly, of Sub-sections (2), (3) and (4) would show that the insurer cannot appoint a second surveyor just as a matter of course (Emphasis supplied by us). If for any valid reason the report of the Surveyor is not acceptable to the insurer may be for the reason if there are inherent defects, if it is found to be arbitrary, excessive, exaggerated etc., it must specify cogent reasons, without which it is not free to appoint second Surveyor or Surveyors till it gets a report which would satisfy its interest."
10. xxxxxx
11. Apart from this serious deficiency on the part of the Appellant-Insurance Company in appointing a second Surveyor without giving any reasons for rejecting the report of its own first Surveyor, we note that the Appellant-Insurance Company is also guilty of deficiency in service in taking six long years to settle the Respondent-Complainant's claim as per the report of the second Surveyor. Appellant's contention that Respondent-Complainant had not been cooperating with it is not backed by any evidence on record. We, therefore, see no infirmity in the order of the State Commission, which had allowed the Respondent-Complainant's complaint in toto and had directed the Appellant-Insurance Company to settle the Respondent-Complainant's claim in terms of the findings of the first Surveyor i.e. for an amount of Rs.7,10,307"
41. Further in Salem Textiles Ltd. Vs. United India Insurance Co. Ltd., II (2013) CPJ 444 (NC), the National Commission held that there is no provision in Insurance Act to appoint second surveyor or an unlicensed investigator. The investigator can be appointed only if claim is found to be fraudulent.
42. In Sikka Papers Limited Vs. National Insurance Company Limited, (2009) 7 Supreme Court Cases 777, it was held that, no doubt, the report of the Surveyor is not the last word, yet there must be legitimate reason, for departing from the same. In Dabirudin Cold Storage Vs. New India Assurance Company Ltd. & Ors., I (2010) CPJ 141 (NC), it was held that the Surveyor's report, being an important document, cannot be easily brushed aside. In R.R. International Vs. New India Assurance Co., 2013(1) CPJ 486 : 2013(1) C.P.R. 221, the Hon'ble National Commission, in Paras 15 to 17, held as under:-
"15. Learned Counsel for the opposite party placed reliance on III (2009) CPJ 81 (SC) : II (2010) SLT 664 : (2009) 8 SCC 507, Sri Venkateswara Syndicate Vs. Oriental Insurance Co. & Anr., in which it was held by Apex Court that the proviso to sub-section (2) of Section 64-UM of the Insurance Act permits an insurer to obtain a second or further report where considered appropriate or expedient in the circumstances of the case based upon which the claim could be settled for a different amount than as assessed earlier. In the same judgment it has also been observed that insurer cannot appoint a second surveyor just as a matter of course. If for any valid reason the report of the surveyor is not acceptable to the insurer, may be for the reason, if there are inherent defects, if it is found to be arbitrary, excessive, exaggerated, etc., it must specify cogent reasons without which it is not free to appoint the second surveyor or surveyors till it gets a report which would satisfy its interest. It was further observed that for any reason, the insurer is of the view that certain material facts ought to have been taken into consideration while framing a report by the surveyor and if it is not done, it can certainly depute another surveyor for the purpose of conducting a fresh survey to estimate the loss suffered by the insured. It was also observed that reports of surveyors are to be given due importance and one should have sufficient grounds not to agree with the assessment made by them.
The insurance company cannot go on appointing surveyors one after another so as to get a tailor-made report to the satisfaction of the officer concerned of the insurance company. If the reports are prepared in a good faith, with due application of mind and in the absence of any error or ill motive, the insurance company is not expected to reject the report of the surveyors.
16. In the light of the above judgment of Hon'ble Apex Court, the insurance company certainly has a right to appoint second surveyor but second surveyor can be appointed only for the valid and cogent reasons with the allegation of non-application of mind, error or ill motive in preparation of report by the first surveyor. In the present case opposite party has not placed any document containing cogent and valid reasons and imputing error, ill motive, non-application of mind by the first surveyor in preparing report. In such circumstances, there was no occasion for the opposite party to appoint second surveyor in disregard of first surveyors report. In such circumstances, the aforesaid citation does not support to the opposite party but rather supports to complainant. Learned Counsel for the opposite party also placed reliance on III (2005) CPJ 6 (SC) : V (2005) SLT 503 : 2005 (5) SCALE 606, National Insurance Co. Ltd. Vs. Harjeet Rice Mills, in which Hon'ble Apex Court while setting aside order of High Court remanded the matter to the State Commission for proper decision on all the questions and de novo investigation. This case is not applicable to the case in hand and does not help to the cause of opposite party for appointment of second surveyor.
17. On the other hand, learned Counsel for the complainant placed reliance on III (2002) CPJ 194 (NC) New India Assurance Co. Ltd. Vs. Chitramala TV Repair Centre, in which it was held that State Commission rightly observed that there was no justification for appointment of second surveyor by the Insurance Company. He also placed reliance on III (2003) CPJ 24 (Pb. St. Comm., Chandigarh) United India Insurance Company Ltd. Vs. Sindhi Sweets & Ors., in which it was held that where no reasons were assigned for appointment of second surveyor, report of first surveyor is to be relied on. He also placed reliance on III (2003) CPJ 709 (J&K St.Comm., Srinagar) Manohar Nath Pandita Vs. Oriental Insurance Co. Ltd., in which it held that as there was no justification for appointment of second surveyor and second surveyor was deputed deliberately to over shadow the report of first surveyor, report of first surveyor is to be relied on. Thus, it becomes clear that in the absence of any cogent and valid reasons for appointment of the second surveyor, report of second survey which has been conducted after 19 months of loss cannot be relied on to restrict the claim of complainant to the tune of loss assessed by second surveyor."
No cogent reasons, which necessitated appointment of Chartered Accountants have been brought, in absence of which, the Opposite Parties were not free to appoint the Chartered Accountants/Second Surveyors.
43. Now the question, which falls for consideration, is, as to whether the Opposite Parties were right in not relying upon the report submitted by the Surveyor and were right in relying upon the observations of J. Dhawan and Associates, Chartered Accountants. The first reason for denial of claim is that the insured failed to justify the storage of complete inventory based on volumetric analysis. The dimensions of the shed are clearly on record, note of which was also taken by the surveyor as well as Chartered Accountants. The Opposite Parties, in their written statement in Para No.12, while denying that the complainant did not suffer loss much more than the loss assessed by the surveyor, also stated that the complainant did not suffer loss as assessed by the surveyor as the space available in the work shed was not sufficient to contain the huge stock shown to be burnt in the alleged fire. The report of J. Dhawan and Associates, Chartered Accountants indicate that the work shed was of 32 ft. x 72 ft. and store was of 32 ft. x 18 ft. and height of the shed was 14 ft. x 9 inches. Thus, the Chartered Accountants were well aware about the dimensions of the work-shed and on the basis of the area of the premises, in which the complainant was undertaking the operations, the Chartered Accountants on the basis of formula for such matters, could indicate, as to what amount of inventory in the premises could be stored. When they did not carry out this exercise, the observation made is not sound. The Chartered Accountants appointed by the Opposite Parties, while holding that on the basis of volumetric analysis, the work-shed did not justify storage of complete inventory, were bound to return a finding as to how much inventory the work-shed could store. The Opposite Parties asked the surveyor to give volumetric analysis of complete inventory and justify that how all the stocks can be stored in the premises with plant & machinery installed therein. This question to the surveyor was raised by the Opposite Parties after more than a year after the surveyor had submitted his report on 04.02.2013. Therefore, the contention of the Opposite Parties in absence of cogent evidence that the work-shed was not sufficient to contain the huge stock, shown to be burnt in the alleged fire, lacks credence.
44. As regards maintaining two sets of books of accounts, the case of the complainant is that the observation made is without any basis. The surveyor has clarified that balance sheet on a separate format was to be submitted to Registrar of Companies and the information furnished in that format is only as per the columns of the format.
45. The third reason in the repudiation letter is that the complainant was not having any inventory on 31.03.2012. The fire broke out on 26.08.2012. It is alleged that the insured inflated the inventory/stock amounting to Rs.28,45,321/- as on date of fire to get the maximum benefit of the insurance claim. The reasoning given is not on sound footing. As per report of the Chartered Accountant itself, two invoices in the sum of Rs.12.10 lacs were issued one day prior to the incident of fire. This amply proves that the inventory of the insured was reduced to Rs.12.10 lacs one day before the fire. Even, if it is assumed that there was no inventory on 31.03.2012, the observation is of no significance. If there was no inventory on 31.03.2012, it would not mean that there would be no inventory subsequently also, on 26.08.2012.
46. It may be stated here that Opposite Parties moved an application for placing on record letter dated 29.04.2013 as Annexure R-8, addressed by the Opposite Parties to the complainant, copy whereof was already supplied to the Counsel for the complainant. The document, being an important document, has been taken on record. It may be noted from the repudiation letter that the claim of the complainant was not repudiated on the ground of non-production of GRs. The surveyor, in his report, taking into account numerous factors, recommended the claim of the complainant. Further in view of the fact that most of the record was burnt, and position discussed in the foregoing paras, non-production of GRs should not be a ground to deny the claim of the complainant in toto.
47. As already stated above, the Insurance Cover, which was for a total sum of Rs.72.50 Lacs included insurance cover for building, plant and machinery and furniture & fixtures in the sum of Rs.22.50 Lacs. The insured lodged claim for loss under the aforesaid three heads in the sum of Rs.8,99,751/-, Rs.7,63,000/- and Rs.4,38,500/-, totaling Rs.21,01,251/-. The surveyor appointed by the Opposite Parties assessed loss in the sum of Rs.7,95,650/- less 5%, which constituted around 34% of the assured sum in the sum of Rs.22.50 lacs. The Chartered Accountants appointed by the Opposite Parties did not return any finding qua recommendations made by the surveyor for a sum of Rs.7,95,650/- less 5%. The observations of Chartered Accountants, by no stretch of imagination, qua assessment of loss in the sum of Rs.7,95,650/- less 5% = Rs.7,55,868.00 hold good. Therefore, the Opposite Parties are bound to accept the findings of the Surveyor to the above extent insofar as loss assessed by the Surveyor on account of damage to building-super structure, plant & machinery and furniture, fixtures & fittings is concerned. It means that on receipt of report by the Chartered Accountants, the Opposite Parties proceeded to repudiate the claim even without looking into the aspect, as to whether the Chartered Accountants have disputed the claim qua building, plant & machinery and furniture & fixtures.
48. As already stated above, the Surveyor has already clarified each and every doubt expressed by the Chartered Accountants. At the same time, we feel that idea is to ensure that the insured gets genuine claim and he is not allowed to make exaggerated claim. The Opposite Parties have stated that in the initial DDR, the insured had stated that the loss was in the sum of Rs.20 Lacs, which was later amended to Rs.60 Lacs. It has also been stated that the insured approached Punjab Fire Service for increasing the quantum of loss from Rs.60 Lacs to Rs.70 Lacs. All this shows that there was an attempt on the part of the complainant to inflate/exaggerate the claim. At the same time, we do not find any justified reason to brush aside the report of the surveyor qua claim for the stocks in toto. Therefore, imposition of 1/3rd cut in respect of claim recommended by the Surveyor qua stocks (Rs.42.33 lacs) would be justified.
49. In view of aforesaid discussion, the complainant is held entitled to the following amount of claim:-
I.
1.
Building = Rs.2,31,579.00
2. Plant & machinery = Rs.2,93,134.00
3. Furniture, fixtures & fittings.
= Rs.2,70,937.00
4. Total = Rs.7,95,650.00
5. Less excess as per Policy @5% of the claim amount.
= Rs.39,782.00
6. Total = Rs.7,55,868.00 II.
1. Claim qua damage to stocks assessed by the surveyor.
= Rs.42,33,277.00
2. Excess as per Policy @5% of the claim amount.
= Rs.2,11,664.00
3. Balance amount = Rs.40,21,613.00
4. Less 1/3rd = Rs.13,40,538.00
5. Balance payable = Rs.26,81,075.00 III.
Total Payable
1) For Building = Rs.7,55,868.00
2) Stock = Rs.26,81,075.00
3) Cost of debris removal = Rs.43,000.00 = Rs.34,79,943.00
50. In view of above discussion, the Opposite Parties are held liable to pay an amount of Rs.34,79,943/- (say Rs.34,79,950/-) to the complainant alongwith interest @9% p.a. (simple) w.e.f. 04.04.2013 (i.e. two months from the date on which the surveyor submitted his report dated 04.02.2013), till actual realization.
51. Since the complainant is a Limited Company, therefore, question of award of compensation on account of mental agony and physical harassment does not arise.
52. No other point, was urged, by Counsel for the parties.
53. For the reasons recorded above, the complaint is partly accepted, with costs. The Opposite Parties are jointly and severally directed as under:-
To pay the amount Rs.34,79,950/-, to the complainant, alongwith interest @9% p.a. (simple), w.e.f. 04.04.2013 till actual payment. To pay cost of litigation, to the tune of Rs.40,000/- to the complainant. The payment of awarded amounts mentioned at Sr. Nos.(i) & (ii), shall be made by the Opposite Parties to the complainant, within a period of 02 (two) months from the date of receipt of a certified copy of this order, failing which, the amount mentioned at Sr. No.(i) shall carry penal interest @12% p.a. (simple), instead of @9% p.a. (simple), from the date of filing this complaint and interest @9% p.a. (simple), on the amount mentioned at Sr. No.(ii), from the date of filing of this complaint, till realization.
54. Certified Copies of this order be sent to the parties, free of charge.
55. The file be consigned to Record Room, after completion.
Pronounced.
25.05.2017 [JUSTICE JASBIR SINGH (RETD.)] PRESIDENT (DEV RAJ) MEMBER (PADMA PANDEY) MEMBER Ad