National Consumer Disputes Redressal
M/S. Prerana Agro Industries vs Oriental Insurance Co. Ltd. & Ors. on 5 September, 2019
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 201 OF 2003 1. M/S. PRERANA AGRO INDUSTRIES C/o Prerana Infotech,
Opp. Shankarmattam Visakhapatnam - 16 Andhra Pradesh ...........Complainant(s) Versus 1. ORIENTAL INSURANCE CO. LTD. & ORS. ORIENTAL HOUSE ,PB NO. 7037 , A25/27 ASAF ALI ROAD NEW DELHI 110002 2. SENIOR BRANCH MANAGER ORIENTAL INSURANCE CO. LTD. GAJUWAKA , OLD GAJUWAKA JN. VIZAG -26 A.P. 3. BRANCH MANAGER ANDHARA BANK GAJUWAKA BRANCH VISAKHAPATNAM ...........Opp.Party(s)
BEFORE: HON'BLE MR. DR. S.M. KANTIKAR,PRESIDING MEMBER HON'BLE MR. DINESH SINGH,MEMBER
For the Complainant : For Complainant : Mr. Avrojyoti Chatterjee, Advocate
Mr. Rajiv S. Roy, Advocate
Mr. Abhijit Roy, Advocate
Ms. Jayasree Saha, Advocate For the Opp.Party : For Opposite Parties 1 and 2 : Mr. Sreenath S., Advocate
For Opposite Party No. 3 : Mr. Balraj Dewan, Advocate
Ms. Sundri, Advocate
Dated : 05 Sep 2019 ORDER
Hon'ble Mr. Dinesh Singh, Member
1. We heard learned counsel for the complainant firm - M/s Prerana Agro Industries, the opposite parties no. 1 and 2 - insurance co. and the opposite party no. 3 - bank, and perused the material on record.
2. The dispute relates to repudiation of a claim under fire insurance policies (two nos.).
3. As averred by the complainant firm:
It obtained a fire insurance policy, "Fire Policy C", from the insurance co. on 28.02.2000 for its "building", in which its factory and godown were situated, and its "machinery". The assured amount was Rs.19,50,000/-.
It started its operations of "processing raw cashew" on 25.03.2000.
It obtained a "Key Cash Credit" loan from the bank.
It purchased 600 bags of raw cashew nuts, each bag containing 80 kg of raw cashew nuts, for Rs. 27,84,000/- (70% "provided by the banker" and 30% "complainant's own capital"; 600 x 80 = 48,000 kg).
As per the Key Cash Credit Stock Register of the bank it had "48,000 (600 bags of 80 kg. each)" of "raw cashew" in its godown on 30.04.2000 which was "checked and seized" by the bank. (n.b.: evidently, "seized" is a clerical mistake, and has to read as "sealed".)
It took a second fire insurance policy, "Fire Policy C", from the insurance co. on 02.05.2000 for its "Stocks of cashew both raw and finished worth Rs. 30,00,000/=". The assured amount was Rs.30,00,000/-.
The total assured amount was Rs.49,50,000/- (Rs. 19,50,000/- under the first policy + Rs. 30,00,000/- under the second policy).
The complainant firm's "building", in which its factory and godown were situated, was set on fire, allegedly by "some unknown offenders / miscreants" on 02 / 03.12.2000, causing loss of raw cashew nuts (Rs. 27,84,000/-) and damage to the "building" and "electricals etc" (Rs. 85,000/-).
4. It claimed Rs. 28,69,000/- (Rs. 27,84,000 against the first policy + Rs. 85,000 against the second policy) from the insurance co.
5. The insurance co. repudiated the claim vide its letter dated 12.06.2003.
6. The complainant firm filed a complaint before this Commission on 19.12.2003, alleging deficiency in service on the part of the insurance co. and the bank.
7. The claim made in its complaint before this Commission is as below:
S. No.
Claim of the complainant firm in its complaint before this Commission
Amount claimed
1.
Loss of stock (raw cashew) incurred by the complainant due to fire (Policy No. 2001/6008):
Rs. 27,84,000/-
2.
Loss / damage to the building by fire (Policy No. 2000/132):
Rs. 1,12,000/- #
3.
Interest on Rs. 28,96,000/- (S. No. 1 and 2 above) from 01.01.2001 to 01.11.2003 @ 18.9% (16.4% + 2.5% penal interest):
Rs. 20,96,529/-
4.
Total loss of profit with interest:
Rs. 39,12,970/-
5.
Compensation for negligence of the opposite parties in delaying the matter:
Rs. 5,00,000/-
6.
Compensation for loss of reputation and mental agony:
Rs. 10,00,000/-
7.
Loss of business to competitors due to reduced scale of production for 3 years:
Rs. 25,00,000/-
Total claim (S. No. 1 to 7 above):
Rs. 1,29,05,499/-
# As per the "FIRE INSURANCE CLAIM FORM" dated 11.12.2000 the "Net loss" claimed with respect to policy no. 2000/132 is Rs. 85,000/-. The difference of Rs. 27,000/- [1,12,000 (-) 85,000] is unclear, and has not been explained by the complainant firm.
8. The chronology in the case is as below:
Date of obtaining insurance policy ('Fire Policy C') for building and machinery, premium paid and sum insured:
28.02.2000
(valid from 28.02.2000 to 27.02.2001)
Rs. 10,354/-
(Policy No. 2000/132)
Rs. 19,50,000/-
Date of start of operations of "processing raw cashew" by the complainant firm:
25.03.2000
Date of availing 'Key Cash Credit' loan from the bank:
30.04.2000
Date of obtaining insurance policy ('Fire Policy C') for stocks of cashew both raw and finished in godown (under lock and key of the bank), premium paid and sum insured:
02.05.2000
(valid from 02.05.2000 to 01.05.2001)
Rs. 13,766/-
(Policy No. 2001/6008)
Rs. 30,00,000/-
Date of fire in the complainant firm:
02/03.12.2000
Date of FIR (FIR no. 72 of 2000):
03.12.2000
Date of despatch of complaint to Additional Judicial First Class Magistrate, Yellamanchilli:
03.12.2000
(P.R.C. no. 17 of 2001)
Dates of entrustment of survey and survey / inspection by one Mr. D.S. Prasad Babu, surveyor of the insurance co.:
03.12.2000
03.12.2000
(late in the evening)
04.12.2000
05.12.2000
09.12.2000
Date of entrustment of survey and survey / inspection by one Mr. S.A. Rao, surveyor of the bank:
05.12.2000
06.12.2000
07.12.2000
09.12.2000
Date of recording of confessions (in the presence of mediators) and arrest of K. Appalaraju (brother of the managing partner of complainant firm), K. Sreenivas (watchman of the complainant firm) and K. Ramana (managing partner of the complainant firm):
18.12.2000
Date of report of the one Mr. S.A. Rao, surveyor of the bank:
07.03.2001
Date of filing of charge-sheet by police:
21.08.2001
Date of committal to the District and Sessions Court (Sessions Case no. 233 of 2001):
16.10.2001
Date of commencement of trial in Sessions Case no. 233 of 2001 before the Assistant Sessions Judge:
01.05.2002
Date of judgment in Sessions Case no. 233 of 2001 before the Assistant Sessions Judge:
27.05.2002
Date of report of the one Mr. D.S. Prasad Babu, surveyor of the insurance co.:
11.07.2002
Date of investigation report of one Sisir & Ravi Associates, Chartered Accountants, engaged to conduct an in-depth study of the books of accounts and the documents with a view to corroborate the loss as conceived from the physical inspection:
29.08.2002
Date of supplementary report of the one Mr. D.S. Prasad Babu, surveyor of the insurance co.:
30.05.2003
Date of repudiation of claim by the insurance co.:
12.06.2003
Date of filing of complaint before this Commission (O.P. no. 201 of 2003):
19.12.2003
Date of investigation report of Phantom Detective Agency Pvt. Ltd. (a private detective agency):
22.03.2005
Date of final arguments before this Commission:
01.07.2019
9. The principal evidence relied upon by the complainant firm is:
(a) The Key Cash Credit Stock Register of the bank, which reflects that it had "48,000 (600 bags of 80 kg. each)" of "raw cashew" in its godown on 30.04.2000 which was "checked and seized" by the bank (n.b.: evidently, "seized" is a clerical mistake, and has to read as "sealed").
(b) The survey report dated 07.03.2001 of the bank's surveyor, one Mr. S. A. Rao, which concludes that "the insured property of 48000 kgs (600 bags) of Raw cashew is burnt in the arsonal fire (Malicious fire) due to malicious intent of some unknown miscreants" and assesses the loss as "the cost of material gutted in fire is 48000 X 58 = Rs.27,84,000.00" + "the repair assessment is limited to Rs.60,000.00 on L.S. basis" = "Total Loss works out to Rs.28,44,000.00.".
(c) The judgment dated 27.05.2002 in sessions case no. 233/2001, whereby the accused, the managing partner of the complainant firm, the brother of the managing partner of the complainant firm and the watchman of the complainant firm, were acquitted of charges under sections 436 (Mischief by fire or explosive substance with intent to destroy house, etc.), 420 (Cheating and dishonestly inducing delivery of property), r/w 114 (Abettor present when offence is committed) of the IPC.
10. The principal evidence relied upon by the insurance co. is:
(a) The survey report dated 11.07.2002 of the insurance co.'s surveyor, one Mr. D. S. Prasad Babu, which concludes that "As such the physical loss examined by me at the insureds raw material godown (The cost of 8 bags of raw cashew nuts + godown building) is Rs. 92,540.82Ps." and that "In my opinion, based on the above analysis the insured have violated the policy warranties, conditions and the they had breached the utmost good faith which is the basis of insurance contract."
(b) The investigation report dated 29.08.2002 of chartered accountants engaged by the insurance co., one Sisir & Ravi Associates, Chartered Accountants, which concludes that "The insured does not have any record in support to show the physical existence of raw material. And the stock registers submitted though they reveal the quantity of stocks held as per the books either under KCC or OCC, nothing is there to prove whether they physically existed. In other words it is not possible to conclude from the registers how much stocks were physically inside the godown and how much were outside the godown at the time of fire."; and "we are unable to confirm whether the books produced before us are the same as the once seized by the police immediately after the fire, implying we are not able to confirm without reasonable doubt that, the books produced before us reflect to true position of the transaction before the fire accident."; and "the insured by his own admission in writing confirms that the payments shown in the cash book do not represent the actual payments made towards purchases on the respective days."; and "in any case correctness of the books of accounts does not imply that the purchases were physically made and stocks were physically available at the time of fire, hence due weightage should be given to the physical inspection done by the surveyors at the time of the fire accident."
(c) The supplementary report dated 03.05.2003 of the insurance co.'s surveyor, the one Mr. D. S. Prasad Babu, which concludes and clarifies that "Based on the above conclusion that in case the insureds alleged to have been kept 600 bags (48,000 Kgs) of cashew complete (raw material), there would have been generation of temperature more than 1000°C, resulting in melting of MS Pipe purlins, internal walls damage/breakages, thick smoke deposits should have been there within the four sides of the walls upto the top, the flames should have been caused almost breakages to AC Sheets of the godown, extensive damages to the building, wall plastering and these cement plastering should have been given way, in most of the cases when a godown was subjected to severe flames or temperatures, the strength of the godown will be weakened if somebody touches with slight force, that particular wall, area will automatically collapse etc. contrary to this there were no meltings of MS pipes, few AC Sheets were broken and these pieces were scattered on the debris, other features as stated above were not present in the insureds claim etc., for more details kindly verify photographs about the condition of walls, smoke deposits, etc. I have also indicated in my detailed survey report at Page No. 14 under the heading conclusion that to make believe the insurers, other Governmental agencies it was a malicious act but actually the insureds own persons might have climbed the godown top and broken some of the sheets, poured diesel/kerosene on the cut shells after replacing sound stocks."
(d) The terms and conditions of the subject fire insurance policies, "Fire Policy C", which inter alia state that:
CONDITIONS
1. THIS POLICY shall be voidable in the event of misrepresentation, misdescription or non-disclosure of any material particular.
- - - - -
5. On the happening of loss or damage to any of the property insured by this policy the Company may:
a) enter and take and keep possession of the building or premises where the loss or damage has happened.
b) take possession of or require to be delivered to it any property of the insured in the building or on the premises at the time of the loss or damage.
c) keep possession of any such property and examine, sort, arrange remove or otherwise deal with the same.
d) sell any such property or dispose of the same for account of whom it may concern.
The powers conferred by this condition shall be exercisable by the Company at any time until notice in writing is given by the insured that he makes no claim under the policy or if any claim is made until such claim is finally determined or withdrawn and the Company shall not by any act done in the exercise or purported exercise of its powers hereunder, incur any liability to the insured or diminish its rights to rely upon any of the conditions of this policy in answer to any claim.
If the Insured or any person on his behalf shall not comply with the requirements of the Company or shall hinder or obstruct the Company in the exercise of its powers hereunder, all benefits under this policy shall be forfeited. The insured shall not in any case be entitled to abandon any property to the Company whether taken possession of by the Company or not.
6. 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.
- - - - -
11. The insurance co., vide its letter dated 12.06.2003, repudiated the claim, inter alia stating that "As per the above findings, it is apparent that the loss is neither accidental nor due to malicious act. There is no conclusive proof that the quantity as claimed by you would have been in actual existence on the date of loss and you have failed to prove the same in spite of the repeated reminders from the Surveyor." and "Hence, we regret to inform you that the Competent Authority has repudiated the claim."
12. On 03.07.2018, after hearing arguments in part, this Commission passed the following Order:
Dated : 3rd July, 2018
ORDER
Part arguments heard. Arguments on behalf of the Complainant are completed.
The learned counsel for the Insurance Company submits that they have investigated the matter through a private detective agency.
The report be placed on record and let the arguments progress further.
The learned counsel for the Opposite Parties No. 1 and 2 is directed to file proper application along with report within two weeks with advance copy to the Complainant and the Opposite Party No. 3.
The Complainant and the Opposite Party No. 3 may file their response to the application.
List the matter for final arguments on 08.08.2018.
13. The confidential investigation report dated 22.03.2005 of the insurance co.'s private detective agency, one Phantom Detective Agency Pvt. Ltd., filed in compliance of this Commission's Order dated 03.07.2018, concludes that "Basing on the our investigation we found that the Original FIR was replaced and on the basis of the above findings we are concluding that insured intentionally removed the cashew nut bags from the godown with out the knowledge of the bankers and banker also not aware of the removal of the material from the KCC godown and they did not seal the lock of the godown and there is no proper checking system adopted by the bankers in checking Prerana Agro Industries, and there is no proof of incoming material and out going material from the godown because there is no system of gate pass or register maintain by the management of M/s. Prerana agro Industries. Basing on this we can conclude that there is no proper maintenance of the book of records regarding material in the godown and insured himself agreed that he only arranged people to set fire to their industry to claim the insurance and before setting the fire he removed the cashew nut bags from the industry but also the statements given by the main evidence it is revealed that M/s prerana Agro industries used to keep the cashew nut covers in the bags and stock in the godown, like wise the management of the prerana Agro industries removed the stock from the godown and staked with the shells of the cashew nut and set fire intentionally."
14. We heard the arguments of learned counsel of all parties, and appraised and weighed the evidence.
15. We note that:
(i) As averred by the complainant firm, its "building" (in which its factory and godown were situated) was set on fire allegedly by "some unknown offenders / miscreants" on 02 / 03.12.2000; and the "offenders / miscreants" tied the "watch man" and burnt the building.
(ii) Its managing partner lodged an FIR on 03.12.2000 with the police against "Some unknown persons".
(iii) The first information report dated 03.12.2000 filed by the managing partner of the complainant firm was recorded under sections 444 (Lurking house-trespass by night), 342 (Punishment for wrongful confinement), 436 (Mischief by fire or explosive substance with intent to destroy house, etc.), 427 (Mischief causing damage to the amount of fifty rupees), r/w 34 (Acts done by several persons in furtherance of common intention) of the IPC against "Some unknown persons".
(iv) After investigation, the police, but, filed a charge-sheet under sections 436 (Mischief by fire or explosive substance with intent to destroy house, etc.), 420 (Cheating and dishonestly inducing delivery of property), r/w 114 (Abettor present when offence is committed) of the IPC against the managing partner of the complainant firm, brother of the managing partner of the complainant firm and watchman of the complainant firm.
(v) The survey report dated 11.07.2002 of the insurance co.'s surveyor, the one Mr. D.S. Prasad Babu, shows in-depth survey and appraisal, and is well-reasoned:
REF: SR: PB: OIC: FIRE:58:2002. 11th July, 2002
This report is issued without Prejudice and Subject to the terms, condition and warranties of the policy.
SURVEY REPORT
As per the instructions received from M/s. Oriental Insurance Company Limited, Divisional Office-I, Dabagardens, Visakhapatnam-530 020, the undersigned had proceeded to the insureds factory, M/s. Prerana Agro Industries situated at Dhuppituru Village, Atchutapuram Mandal, Visakhapatnam District, in order to inspect the alleged burnt raw cashew nut stocks that were stored in the godown, godown building and also to assess the loss reported to have been taken place on account of malicious act that was committed by some unknown miscreants on the mid night of 2nd December, 2000 or in the early hours of 3rd December, 2000.
The survey was entrusted to me on the late evening of 3rd December, 2000 and the same was carried out by me on 3rd, 4th, 5th, 9th December, 2000 at the factory premises in the presence of the insureds Managing partner, Branch Manager of M/s. Andhra Bank, SSI Branch, Gajuwaka, District Fire Officer, Visakhapatnam, Station Fire Officer, Yelamanchali and also held detailed discussions with Sri. D.Ravi Babu, Circle Inspector who happened to be investigating officer, S. I., Station Writer of Achutapuram Police Station. During the course of my investigations, I have also visited Yelamanchali Police Station on 26th December, 2000, 8th May, 2001, 10th November, 2001 in order to have detailed discussions with the investigation officer and to know the status of court case. I have also contacted the District Fire Officer, Visakhapatnam, Station Fire Officer, Yelamanchali, the officials of Zonal Office of M/s. Andhra Bank, Seethammadhara, Visakhapatnam, SSI Branch of the bankers.
During the course of my survey / detailed examination on the debris, I have collected sound, damaged Cashew nuts, Sound cut shells samples that were collected by me at the insureds premises and approached the laboratories of M/s. J. B. Boda Surveyors Private Limited, Visakhapatnam and Andhra University, Visakhapatnam to have their analysis.
I now append herein below my detailed survey / investigation report for the consideration of the underwriters.
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BACKGROUND: M/s. PRERANA AGRO INDUSTRIES having their sales Branch Office at Visakhapatnam, established their cashew processing unit at Survey No. 425, Dhuppituru Village, Achutapuram Mandal, Visakhapatnam District with the financial assistance obtained from M/s. Andhra Bank, specialised SSI Branch, Gajuwaka, Visakhapatnam - 530 026 and after installation of necessary plant and machinery, commenced their commercial operations on 25th March, 2000. The bankers have sanctioned term loan of Rs. 14.5 lakhs, OCC Rs. 7.5 lakhs, Key cash credit Rs. 20,00 lakhs thus an amount of Rs. 42.00 lakhs can be treated as financial limits.
The firm is partnership having two partners namely Mr. P.K. Sinha, Mr. K. Ramana and Mr. K. Ramana who is the Managing partner of the unit. Xerox copy of Partnership Deed collected from the insureds is placed as ANNEXURE-A to the report (for more details kindly refer).
As per the project report prepared by the unit submitted to the bankers to get the loan, they have mentioned that the installed capacity of unit for processing of 800 Kgs of cashew nuts per day and the normal recovery will be around 25% i.e, 200 Kgs per day thereby they have projected the annual processing for 300 days will be around 240 tons of raw cashew nuts. In the project report they have covered lot of aspects such as source of machinery, manufacturing process, land and buildings, cost of project, cost of production, breakeven analysis, projected balance sheet and cash flow, the detailed project report collected from the bankers is placed as ANNEXURE-B to the report.
DETAILS OF INSURANCE POLICIES: M/s. Andhra Bank, SSI Branch, Gajuwaka, who are the financiers of the unit have obtained Fire Polices from the Branch Office of M/s. Oriental Insurance Company Limited, Gajuwaka, as per details given below:
01. The raw materials i.e., cashew nut, finished products which were stored in godown situated at unit location insured for a sum of Rs. 30.00 lakhs under KCC Loan for the period from 2nd May, 2000 to 1st May, 2001 vide insurers policy No. 432205/6008/2001.
02. The buildings including plinths and foundations, plant and machinery that were installed at the insureds premises were insured for a sum of Rs. 20.00 lakhs for the period from 28th February, 2000 to 27 February, 2001 vide insurers policy No. 432205/192/2000 including FST, EQ Perils.
Xerox copies of insurance policies collected from the bankers are placed as Annexure-C to the report.
DETAILS OF OCCURRENCE: It was reported by Mr. Kundrapu Sreenivas, night watchman of the insureds factory to Yelamanchali Fire Station that during mid night of 2nd December, 2000 or in the early hours of 3rd December, 2000 some unidentified persons came to the factory and tied his hands, legs and pasted a plaster on the mouth while he was sleeping on the cot and those persons set ablaze the cashew nuts godown and throughout the night the godown was under fire. Xerox copy of letter written by the night watchman to the Fire Station is placed as ANNEXURE-D to the report.
MANAGING PARTNER LETTER TO ACHUTAPURAM POLICE STATION: Mr. Kundrupu Ramana, Managing Partner of the unit was at his Visakhapatnam Residence had received a telephone call from the unit on 3rd December, 2000 at around 6 AM that the raw materials storage godown was under fire and immediately he had also informed through telephone to the Fire Station and by that time he could reach the unit which is approximately 40 Km away from his residence, some labour were pouring water and on his enquiry from the night watchman that during the midnight of 2nd December, 2000 or early hours of 3rd December, 2000 some unidentified persons had entered the factory premises, tied the legs, hands of the watchman who was sleeping on the cot and burnt the godown. The Managing Partner have informed to the police station on 3rd December, 2000 at around 15.00 hours and the concerned police station had registered the case vide their FIR No. 72/2000, dated 3rd December, 2000 registered under section 447, 342,436, 427 IPC. Xerox copy of the Police FIR which is collected by me from their station records is placed as ANNEXURE-E to the report.
The insureds Managing Partner had also intimated to the police that they have obtained KCC loan from M/s. Andhra Bank, SSI Branch, Gajuwaka for a sum of Rs. 27,84,000/- out of which 70% of the amount is provided by the bankers, 30% is their own capital. He had also further stated in the complaint letter that they have stored 600 bags of cashew nuts which were weighing 48,000/- Kgs and as per the procedure of KCC loan, stocks were under the custody of the bankers, the godown is located within their factory premises. He had also informed to the police that due to malicious act that was committed by some unknown offenders, total stocks which were amounting to Rs. 27,84,000/- were completely gutted in the fire accident, requested for detailed investigation.
As per the information gathered that the Managing Partner of the unit had first given message to the Branch Manager of M/s. Andhra Bank and the said manager had also inspected the unit on the afternoon of 3rd December, 2000 and after their initial inspections, the bankers have informed about the fire accident suffered by their borrowers unit to the underwriters, requested for deputation of surveyor for assessment of loss. Consequent to the instructions received from the insurers, I have taken up the subject survey assignment. The bankers have also sent their written communication to the underwriters vide their letter No. 1051/18/147/298, dated 6th December 2000 wherein informed that cashew nuts weighing 48,000 kgs of value at Rs. 27,84,000/- was totally gutted and also the godown building including electricals were burnt and damaged. Later on the bankers have also submitted completed claim form to insurers on 11th December, 2000 wherein they have estimated the loss for a sum of Rs. 28,69,000/-. Copies of original claim intimation letter, claim form which are collected from the underwriters office are placed as ANNEXURE-F to the report.
DETAILS OF SURVEY / FIELD ENQUIRIES: I have received telephonic instructions from the underwriters on the evening of 3rd December, 2000 at around 18.00 hours about the subject fire accident, without losing time, immediately rushed to the insureds factory premises, reached at around 19.30 hours, since it was night time, I could observe only flames are emanating from the godown followed by huge smoke. I could contact one or two persons belonging to the unit and I could not have discussions with the watchman, Managing Partner at that time, probably they might have left the unit. However it was gathered that based on the complaint given by the insureds Managing Partner to the Achutapuram Police Station, being the major loss, Yelamanchali Circle Inspector had visited the unit on the afternoon of 3rd December, 2000, completely seized the factory records i.e., raw materials purchase register, process stock register, finished products records, sales records, etc., thereby I could not verify the same.
I am now furnishing some important points for the underwriters consideration.
01. As stated supra, I have visited factory premises on the late evening of 3rd December, 2000, conducted initial inspections on the burnt stocks, damaged godown and I have also visited on 4th December, 2000 along with Bank officials with godown keys since it was a KCC type loan. I have taken photographs on the alleged burnt stocks, available debris only through window and also on the broken piece of AC Sheets, on the pool of kernel oil, the same are placed as ANNEXURE-G to the report.
02. The available police officials have not allowed the Andhra Bank officials to open the lock of the rolling shutter as per the directives of higher police officials, in their investigating officer presence only, the lock of the godown have to be opened. As such I could not do any detailed inspections on the alleged burnt stocks on 4th December, 2000 and once again I have visited the insureds factory on 05.12.2000, in the presence of investigating officer of the police department, Narasipatnam DSP and with the help of fire tender that was again requisitioned by the police to cool the rolling shutter temperatures, inside stock temperatures etc., the fire people have used water and controlled the temperatures, thereby I have entered and conducted inspections on the debris that was available inside the godown. The quenching operations that are conducting by the fire personnel on the rolling shutter, due to heat effect, the rolling shutter could not be easily lifted by the insureds labour even after open the godown lock and also just after opening of the rolling shutter of the godown, I have carefully noted the following observations.
a) I have observed few quantities of scattered full cashew nuts in semi burnt condition just behind the rolling shutter. The subsequent area is full of steam and hot vapours restricting our entry into the godown, immediately to reduce the hot vapour, in order to facilitate our entry into the godown, water was again sprinkled by fire service people, the same was requested by police officials. As and when the environment is permissible for entry, we have entered into godown and observed the grey ash at maximum locations and charred carbonaceous matter in the godown.
b) Photographs taken by me on the available debris through window, during quenching operations by the fire fighting personnel, the condition of the side walls, carbonaceous matter, few cashew nuts which are in fully blackened condition, condition of godown roofing, side walls, etc., the same are placed as ANNEXURE-H to the report.
c) As it was observed just after opening the rolling shutter, few quantities of cashew nuts are in burnt condition, similarly if the entire godown was having 600 bags or 48,000 kgs raw cashew nuts are available, the total godown must be filed up with this matter, contrary to this maximum locations only grey ash was available, leading to suspicion about the genuineness of the claim and the total available debris which was not at all supporting the insureds claim and in fact it as fully burnt cut shells matter only.
03. I have also take photographs on the alleged debris of the burnt raw case nuts. The debris was filled in gunny bags, weighment was done by insureds staff in the presence of police, fire department officials, Andhra Bank Officials, they are requested to preserve all the (33) bags which were weighing 1874.50 Kgs, till disposal of claim by the underwriters. Photographs taken by the during the weighment exercises, collection of debris which was mixed with water used by the fire services, some of the debris was formed as thick paste on the floor of the godown etc., which are placed as ANNEXURE-I to the report. The fire services have used water on the morning of 3rd December, 2000 to attend the call, again used water on the morning of 5th December, 2000, finally godown was opened nearly after 60 hours from the reported fire mishap.
04. During the course of my visits to the insureds unit on 4th, 5th December, 2000, the watchman, Mr. Kundrapu Srinivas was available for discussions, all through he was maintained that on the night of 2nd December, 2000 or in the early hours of 3rd December, 2000 while he was sleeping on the cot, some unidentified persons had entered in the unit, tied his hands, legs, plastered mouth etc., the same information he was furnished to the police, fire departments about the cause of fire. He had also stated that on the morning of 3rd December, 2000 at around 6 AM, Mr. Lalam Sanyasi Rao who was working as Labourer-cum-boiler operator as usual visited the unit to attend the duty, noticed heavy smoke from the godown and the ropes / plasters that was found on the mouth of the watchman was removed by him and later on fire tender reached from Yelamanchali.
05. On my close examination, the godown was constructed with well burnt bricks with cement mortar, AC Sheet roofing was done on the trusses, one opening was provided to enter inside the godown through a rolling shutter and boiler room was also constructed with the same type of construction, roof was extended. I have noticed some of the AC Sheets were in broken condition, pieces were scattered on the floor of the debris, up to some extent side walls were having smoke deposits, rolling shutter had also suffered heat damage. The boiler room is also received some heat damage. Photographs taken be me to show the location of the unit, raw material godown, boiler room, process block, etc., the same are placed as ANNEXURE-J to the report. Xerox copies of approved building plan along with valuation report prepared on the assets of the unit by Prof. A. Janaki Rao, Chartered Engineer, collected by me which are placed as ANNEXURE-K to the report.
I have taken measurements of the godown, the same are as follows:
a) Length-19' 6" Width-25' 3", centre height - 16', side height - 12' .6"
The measurements of the boiler room, administrative office, main process block are tallied as per the approved plan.
05. I have once again visited to the insureds factory on 09.12.2000, with a view to examine records, procurement registers for the raw material (cashew nuts), sales records etc., since all the records were seized by police investigating officer on 3rd December, 2000 itself, still the original records are with Yelamanchali Circle Police Station. I have visited Atchutapuram Police Station on 9th December, 2000, the available officials have stated that Mr. Kundrapu Srinivas, watchman of the unit was arrested by Yelamanchali C.I. and immediately I have proceeded to Yelemanchali Police Station, contacted Mr. D. Ravi Babu, C.I., discussed about the case. The C.I. had not allowed me to examine the factory records, he had stated that when once their investigation work is over, then they can show me and they have also not allowed me to take photo copies on the unit records. However, I have requested the police officials, before handing over of the records to the insureds, I want to collect the same from the police station after giving proper acknowledgement to the insureds.
06. After completion of my four visits to the insureds factory, I have sent detailed RPAD letters / Courier to them on 10th December, 2000, 2nd January, 2001, 6th February, 2001, 11th July, 2001, 27th August, 2001 & 16th January, 2002, wherein lot of information / documents were called by me in order to have detailed study about the insureds transactions, profit and loss accounts, cause of fire accident etc., all copies of these letters were marked to the insurers, D.O.I, B. O. Andhra Bank, Gajuwaka.
07) In all my correspondence, I was suggesting the insureds, as and when the Yelamanchili Police Station, Atchutapuram Police Station have agreed to handover the documents / record that were seized by them for the purpose of their investigation, I will collect the same from the police station after giving acknowledgment to them. Contrary to this the insureds MD had collected all the records from the police station without giving information to me and approached to my office with the records and I have refused to accept the same since in my opinion they might have meddled the documents after collection from the police station.
08) Immediately, I have sent a detailed RPAD letter to them on 27th August, 2001, calling their views, opinion, why they have collected the records from the police station without giving information to me and after receipt of this letter, the insureds were silent. Since the claim is pending more than one year, I have sent final RPAD letter to them on 16th January, 2002, wherein clearly informed that unless they furnish all the required documents / clarifications on or before 30th January, 2002, I shall close my file.
After receipt of my final RPAD Letter, they have sent a detailed register letter dated 28th January, 2002, copy of this letter was marked by them to the insurers D.O., B. O., Andhra Bank, Gajuwaka, contents of their letter are misleading and certain remarks passed by them against me are highly objectionable, regrettable.
09) Copies of all my RPAD / Courier letters sent to the insureds dated 10th December, 2000, 2nd January, 2001, 6th February, 2001, 11th July, 2001, 27th August, 2001 & 16th January, 2002, for the sake of clarity and good order, once again the same are placed as ANNEXURE-L along with original postal acknowledgement cards / courier receipts to the report. In response to my number of letters, the insureds have furnished some documents under cover of their letter dated 28th January, 2002, 11th March, 2002, the same are placed as ANNEXURE-M to the report.
10) I have also sent detailed Courier /RPAD Letters to M/s. Andhra Bank, Gajuwaka who are the financiers of the unit, on 8th December, 2000, 2nd January, 2001, 6th February, 2001, 11th July, 2001, 27th August, 2001, copies of all these letters, are already marked to the insurers D.O.I., Gajuwaka Branch, however copies of my letters once again placed as ANNEXURE-N to the report along with original postal acknowledgement cards. The Bankers have furnished some of the documents under cover of their letters dated 18th January, 2001, 19th April, 2001, 10th September, 2001, the same are placed as ANNEXURE-O to the report and till today they could not furnish their clear views on the following points:
a) The locks that were put to the godown rolling shutter does not having any seals.
b) Since the stocks were financed by them under KCC Type Loan, I could not see any watchman deployed by them to protect their stocks which were reported to have been stored at the time of occurrence.
c) Apart from above, the type of precautions taken by them to protect their stocks.
d) The type of claim lodged by the insureds and the quantum of reported loss, I feel the technical team of the financiers have to conduct some basic enquiry about the cause of fire and unfortunately they could not offer any comments.
e) M/s. Andhra Bank, Gajuwaka, instead of offering their views, opinion, unfortunately they have sent a letter to me on 10.09.2001 copy of this letter was marked to the insurers, D.O.I, B. O., Gajuwaka, which may kindly verified by the underwriters.
11) As stated supra, I am doing correspondence to the insureds unit, Andhra Bank, Gajurwaka, and in the meantime the police officials had arrested the S/Sri. Kundrapu Appla Raju who is the brother of the Managing Partner, Kundrapu Srinivas, Watchman, Kundrapu Ramana, Managing Partner on 18th December, 2000. Mr. Kudrapu Appala Raju, Mr. K. Srinivas had given their confessional statements which are recorded by the police officials in the presence of mediators in which they have confessed that they themselves set fire to the raw materials storage godown on the midnight of 2nd December, 2000 by pouring diesel / kerosene through roof of the godown after removing of the asbestos sheets as per the instructions of the Managing Partner of the Unit. They have also disclosed to the police officials that MD of the Unit had removed part of the stock of cashew nuts from the storage godown during night times. Based on the confessions made by them, the investigation officer had arrested Mr. Kundrapu Ramana, Managing Partner on 18th December, 2000 at around 13.00 hours at their factory and got recorded his confessional statement in the presence of mediators, wherein he had disclosed that as per his advices only his brother, watchman had created the fire.
Based on the above confessional statements made by above three persons, the investigation officer had charge sheeted them and put them at Yelamanchali Sub Jail. the same was published in Eenadu news paper on 21st December, 2000. I have collected the news paper clipping, then sent registered letter to the Zonal Manager of M/s. Andhra Bank on 11th April, 2001, clearly communicated about the subject fire accident, other details etc., requested them to carryout their internal departmental investigation since lot of their funds are involved in the unit fire accident and also requested them to provide their investigation report, technical officer opinion about the cause of reported fire whether it was created fire by the Managing Partner, his employees or malicious act that was committed by some unknown offenders.
I have also mentioned the above information, unit in-charge intensions etc., also to Branch Manager of Andhra Bank through my RPAD Letter dated 11th July, 2001. Unfortunately, the bankers Zonal Office, Branch Officer are very much silent and they have never bothered to attend this important point and failed to initiate any internal investigation, clear views about the fire accident even through their funds to the tune of Rs. 30. 00 Lakhs are involved in the fire accident. On this important point, in my opinion, the bankers have failed to provide this vital information apart from their failure to provide their clear views which are already mentioned at point No. (10: a,b,c,d,e,).
12) I have also sent detailed RPAD Letters to M/s. Andhra Bank Zonal Office, 2nd January, 2001 & 11th April, 2001, wherein I have communicated to them the status of the claim, copies of the letters have already marked to insurers D.O. I, B. O., Gajuwaka, once again the same are placed as ANNEXURE-P along with postal acknowledgement cards to the report.
13) As stated supra, the insureds Managing Partner had collected original records from the police station without giving any information to me. But all my correspondence to the insureds, I was mentioning that they have to collect all the records from the police station in my presence so that the same can be obtained from the Managing Partner of the Unit, after giving proper acknowledgement, contrary to this they had collected the records, giving conclusion that they might have meddled the records, on these points, I have sent a detailed letter to the Andhra Bank, Gajuwaka on 22nd August, 2001 seeking their clear intervention and what are the reasons for the Managing Partner had acted like that, instead of the cooperating with me on this issue, unfortunately they have sent a reply on 10th September, 2001, contents which may be noted by the underwriters.
14) The bankers have provided me certified copy of their Zonal Office Inspection Report, wherein they have stated that their technical officer had visited the insureds unit on 18th September, 2000 based on some anonymous complaints, letters, allegation made by some people over telephone against the Managing Partner, the unit functioning, misappropriation of stocks, other irregularities etc. they have concluded in their report that such complaints are false and there was no truth in it. But the report also further says the physical verification of KCC Stocks there was no truth in it. But the report also further says the physical verification of KCC Stocks could not be done since the raw material godown is stacked with cashew bags. Here after receipt of such calls, letters, in my opinion, the bank officials might have insisted the unit labour to check at least some 20 to 30 bags on a random basis after cut open the bags whether actually the bags are filled with raw cashew nuts or cut shells thus by not doing this vital exercise, simply physical stock verification could not be conducted is not at all convinced to me and even if they could conduct such detailed inspections, something must have definitely be surfaced, here the bank officials would have taken extra care in conducting detailed examination.
15) As per the completed claim form furnished by the bankers to the insurers Branch Office on 11th December, 2000, they have mentioned that the total 600 bags of raw cashew nuts which were stored at the insureds godown under KCC type loan was fully gutted and based on the Borrower's Statement prepared as on the closing day of business on 28th April, 2000 that they are holding 48,000 Kgs of raw cashew nuts procured from the farmers at a rate of Rs. 58/- per Kg, thus valued at Rs. 27,84,000/-, thus they have taken this statement is the basis and preferred their claim on stocks.
16) The bankers have also furnished Borrower's Statements for the months of April, 2000 to December, 2000, the KCC details are, mentioned only in April, 2000 statement but not in other statements. On a close perusal of the statements for the period from May, 2000 to December, 2000, they have mentioned only the position of OCC Stocks, subsequent procurement of raw materials accounted on OCC Stocks, Stocks in Process, Finished Stocks, Consumables, Sundry Debtors, which may be noted.
On my enquiry from the bankers, Managing Partner of the Unit, they have stated that KCC Loan is normally allowed when materials are available abundantly at cheaper prices to enable the units to enjoy cost benefit, stocks are taken under pledge by the bank i.e., in the instant case they are stored in a godown under lock and key of the bank. The godown building belongs to the unit only. As and when borrowers requires raw materials, they make payments and draw the stocks sometimes alternate materials are put in instead of making payment the bank officials visits the godown, open the locks, makes entry in the godown card kept in the godown allows the party to draw stocks and locks up the godown.
The bankers have stated that based on anonymous complaints, telephone calls, their Zonal Office Technical Officer had visited the unit on 18th September, 2000 and satisfied the stocks are available as per records including quantities. The Managing Partner of the unit had stated that they have never drawn the raw cashew nut bags from the godown and managing the unit of the raw stocks procured under OCC limits and accordingly they are claiming the total procurement cost of 48,000 Kgs of raw materials with godown damage.
17) During the course of my investigation, I have contacted the CI, Yelamanchili Police Station who is the investigation officer of the case on 9th December, 2000, 26th December, 2000, 8th May, 2001, 10th November, 2001 to find out the status of their investigation. I have sent detailed letters to the police station dated 10th December, 2000 & 2nd January, 2001 wherein requested them copy of their final investigation report, copies of these two letters were already marked to the insurers, D.O.I, Gajuwaka Branch, once again the same are placed ANNEXURE-Q to the report.
18) During the course of my investigation, I have contacted District Fire Officer, Station Fire Officer, Yelamanchili and requested them copy of their fire service attendance certificate, their opinion about the cause of fire etc., since the bankers, unit had not furnished fire service attendance certificate, I have sent a detailed RPAD Letter to AP Fire Services, Yelamanchali on 30th January, 2002, requested for copy of their fire attendance certificate. Based on my request, they have furnished copy of Certificate No. 48 / 2000, dated 6th February, 2002 wherein clearly informed that estimate of loss as reported by the Proprietor is Rs. 28,66,500/-, about the cause of fire, they have stated it could be suspected arson as per the report given by Watchman, Managing Partner of the Unit and they have also mentioned in their remarks column that they have requested Atchutapuram Police Station for proper investigation about the cause of fire. Copies of my letters along with postal acknowledgement card, fire service attendance certificate are placed ANNEXURE-R to the report.
19) During the course of my number of visits to the insureds unit, Mr. P.K. Sinha, the other Partner was not available for discussions. It was gathered from the Managing Partner that Mr. P. K. Sinha is presently staying in Mumbai and he is not an active in supervising the function of the unit.
CONFORMATION OF FIRE ACCIDENT BY LOCAL NEWS PAPERS: The local district editions of Eenadu, Vartha, dated 4th December, 2000 wherein they have mentioned the subject fire accident, regarding cause of fire it could be due to malicious act that some unidentified persons might have entered inside the factory, created the fire after tying the legs, hands of the watchman, pasting the plaster on his mouth who was sleeping on a cot on the night of 2nd or early hours of 3rd December, 2000 and the extent of loss could be Rs. 26.00 lakhs towards the cost of 600 bags of raw cashew nuts which were stored in the raw materials storage godown. The original paper clippings are enclosed as ANNEXURE-S to the report.
Again, the district edition of Eenadu on 21st December, 2000 had published a news item about the arrest of Unit M.D. and all his intentions, how they have created the fire in order to cover up the losses since the unit had experienced heavy losses immediately within a short period. The original paper clipping dated 21st December, 2000 is placed as ANNEXURE-T to the report.
THE POLICE CASE AND THE COURT JUDGEMENT: As stated supra, the investigation officer had charge sheeted the Managing Partner, his brother, night Watchman based on their confessional statements in the presence of mediators and altered the Sections from 447, P 42, 436, 427 to 420, 436 IPC based on the following points.
a) During the course of their visit on 5th December, 2000 to the insureds unit, in the presence of Bank, Fire Department officials, they have burnt one 80 Kg., Bag of raw cashew nut by pouring kerosene, in fact this activity was also witnessed and photographed by me, the same are placed as ANNEXURE-U to the report. While burning this 80 Kg bag, they have estimated the debris weight was 4.5 Kg, as such the total available debris inside the godown should be 2700 kgs as against this they have mentioned the weight of debris was 1750 Kgs.
b) Due to this weight difference, they have suspected that the insureds might have carefully shifted 200 bags from the godown while using duplicate key during night times and in order to cover up the losses, he had burnt the godown in order to get claim from insurance company.
c) The police officials have also mentioned that they seized duplicate key from the insureds Managing Partner, plastic can from the unit, other material objects as an evidence to their charges against the three accused persons and they have also recorded their confessional statements about their crime in the presence of mediators.
d) The police officials had also sent godown locks, duplicate key, that were collected form the scene of offence to the Asst. Director, Forensic Science Laboratory, Hyderabad for examination.
Even though the police officials have charge sheeted the accused persons that they have created the fire after shifting nearly 200 bags from godown to outside, the case has finally disposed in the Court of Assistant Sessions Judge, Yelamanachali, after hearings between the Public Prosecutor and advocates of the three accused persons on 27th May, 2002, the judgment had gone in favour of the three persons stating the prosecution could not prove the charges against the accused persons based on the following reasons.
i ) The confessional statements issued by three accused persons admitting their crime which were recorded by the police in the presence of mediators, finally the mediators have turned hostile and they have not supported the police in the court. They have also rejected that the duplicate key was not seized from the Managing Partner.
ii) The Fire Officer, Bank Manager evidences had not against the accused persons. Similarly the Forensic Lab Report is also not supporting the prosecution.
iii) The sessions judge opined that the investing officer is not the direct witness, for more details refer the judgement report, the same is placed as ANNEXUERE-V to the report.
In my opinion the, the police department had taken their own approach to build the case against the Unit Managing Partner, his brother, night watchman, ultimately could not stand in the court of law.
CAUSE AND NATURE OF FIRE ACCIDENT: After making initial four visits to the insureds unit, close examination of the available debris, greyish ash on the godown floor before opening the rolling shutter, approximately 8 bags of cashew nuts are in burnt condition in front of the rolling shutters and also inside the godown. But they have reported that inside 600 bags of cashew nuts (raw stocks) were gutted in the fire accident in the midnight of 2nd or early hours of 3rd December, 2000 due to malicious act.
Keeping in view of my above keen observations (for more details, kindly refer Point Nos. 1 to 4 , 10), I am not convinced about the cause of fire as stated by them could be due to malicious act and I have collected the samples of sound raw cashew nuts, cut shells, burnt / charred cashew nuts from the insureds factory and taken them to the laboratory of M/s. J. B. Boda Surveyors Pvt. Ltd. Visakhapatnam to conduct analysis by them on certain parameters like the percentage of moisture, loss on ignition, characteristic ash colour on the above samples. The samples were also taken to the Andhra University Laboratory for examination on the parameters.
After collection of M/s. J. B. Boda Lab Report, coupled with my close examination on the condition of inside godown, immediately after opening of the rolling shutter on 5th December, 2000, I came to conclusion that the insureds version about the malicious act is not correct, based on the following points.
a) I have thoroughly examined various pros and cons of the total burning of the consignment resulting in greyish ash although the dissipation of heat from the originated spot is not uniform which in other words is not sufficient to completely burnt the whole consignment. Hence, I have collected the cut shells and requested the lab to carryout a pilot scale analysis by burning cut shells looking for the characteristic ash colour. The characteristic ash colour for the completely burnt sound cashew nuts (raw material) was blackish whereas the cut shells gave a relatively discoloured ash at the same temperature.
b) Prolonged heating of any substance would convert it into blacking (first phase), burning (second phase) and then ashing (final phase). The lighter the substance the rapid is the ash formation.
Cut shells-grey colour ash at 600 ° C, sound cashew nuts-blackish at 600 ° C.
c) The characteristic ash generated by burning the cut shells gave a colour which is not entirely black as observed in case of burning sound raw cashew nut, this evidence that only few quantities of raw cashew nuts were stored inside the godown, those were only changed to blackish, available immediately after opening the rolling shutter and most of the area in the godown was having only ash. This indicates that the insured have systematically removed the sound cashew nut bags (raw materials), utilized for the manufacturing process, replaced them with cut shells packed in gunnies and finally created the fire.
d) During the course of my investigations that it was gathered that immediately after setting up of the industry, the sales tax authorities have conducted some raids, insured have paid heavy penalties and also the insureds have supplied considerable quantities of finished stocks to the dealers, since they were not paying amounts to him, leading to a thinking that to cover up the losses incurred by them, in my opinion, the insured have created the artificial fire after systematically removing the sound raw cashew nut bags from the godown in the phased manner, replacing with cut shells packed in gunny bags and also the insureds might have used duplicate keys of the godown locks and committed the above act since the original keys of the locks are with the Andhra Bank, Gajuwaka Branch.
e) In my opinion, the main idea of the insureds to replace the sound raw cashew nut bags with cut shells which are as waste materials, collected from the process block, then filling the same in gunnies, store them in godown, in case any inspection officials visits from the bank for verification of stocks, counting of bags etc., the total number of bags may be tallied as per the bank records thereby they can escape from the suspicion of the bankers.
e) Since the insureds had preferred the claim in the month of December, 2000, court judgement copy provided to me in the month of June, 2002, thus they had run the unit for a period of 18 months, in order to know the details of transactions, I have sent a detailed RPAD Letter to the insureds on 28th June, 2002 (enclosed as ANNEXURE-W along with postal acknowledgement card) wherein I have requested them to furnish certified copies of monthly Bank stocks statements attested by Bankers, sales tax returns attested by concerned authorities.
Similarly for the above period, I have requested them to make a detailed statements indicating month wise purchase of raw materials, production of finished products, disposal of the finished product, balance stocks position. The valuation requires mainly on procurement of raw materials, sale of finished product. After preparing these statements, I have informed them that I shall visit their office to examine the records, summarised statements accordingly I have visited insureds Visakhapatnam Branch Office on 4th July, 2002, their Managing Partner had stated that their claim mainly relates to KCC Stocks but not OCC Stocks, thus they have informed me that they cannot share the information with me. I have also requested the balance sheet for the financial year 2001-2002, if prepared, they have stated that the balance sheet is under preparation.
f) In my opinion, even if the bankers, unit furnish me the transactions for the above period also cannot be taken into cognisance since as already stated supra, the insureds might have systematically replaced the sound raw cashew nut bags with cut shells packed in gunny bags mostly in night times and the production under taken by them on these unauthorized lifting of stocks may not reflect in the production records i.e. without accounting the production of these KCC stocks, insureds might have disposed the finished stocks (cashew kernels) to the dealers thus by doing so they can avoid payment of sales tax and the dealers also can get finished product at cheaper rate.
The original lab reports issued by M/s. J. B. Boda Surveyors Private Limited, Dept. of Civil Engineering, Andhra University, Visakhapatnam, are placed as ANNEXURE-X to the report.
Detailed study made by me on the letter written by the insureds watchman to the fire station, police investigations, FIR, court judgment, fire service attendance certificate, the insureds attitude for the collection of original records from the police station without my knowledge in spite of repeated requests through registered letters, not taking proper safety precautions by the bankers, finally based on my careful examination of the insures unit on number of days, coupled with analysis reports issued by the above labs, I am not convinced the insureds claim about malicious act and in fact the insureds had systematically replaced the raw cashew nuts, filled the godown with cut shells which were packed in bags, carefully damaged some of the AC sheets, poured diesel / kerosene on the cut shells bags but they have intentionally kept, burnt approximately 8 bags of cashew nuts to make believe that the total raw material 600 bags were gutted in the fire accident.
In my opinion, it is not at all an accident fire, in fact it was a created, artificial fire to cover up the losses faced by the unit immediately within short period after opening the same.
CONCLUSION: The insurers have appointed me to conduct survey and to analyse about the proximate cause of fie, sequence of events that led to the claim, admissibility of liability based on my physical inspection coupled with enquiries with the concerned agencies. Similarly I have done detailed analysis on the insureds claim, sent number of registered / courier letters to the bankers Zonal Office, Branch Office, Police Department, Fire Department, insureds office and also collected samples on the debris available from the godown approached the labs of M/s J.B.Boda Surveyors Private Limited, A.U. Engineering College and offered my opinion about the insureds claim, concluding that it was not at all a malicious act as reported by the insureds Managing Partner, Watchman to all concerned, in fact it was a created fire to get the compensation from the insurers.
The analysis done by me about the insureds fictitious claim purely based on the above to the best of my knowledge and ability, offered the same for the underwriters consideration. Now as a loss assessor I am also assessing the loss since I have observed only 8 bags of cashew nuts (raw material) weighing around 640 Kgs. in charred / burnt condition, even these bags were not at all involved in accidental fire, to make believe the insurers, other Governmental agencies the insureds themselves had burnt these 8 bags, however the cost of 640 kgs of raw cashew nuts works out to Rs. 37,120/- (the procurement cost of raw materials per kg Rs. 58/-) as per bank statement 28th April, 2000).
Similarly to make believe the insurers, other Governmental agencies it was a malicious act but actually insureds own persons have climbed the godown top and broken some of the sheets, poured diesel / kerosene on the cut shell bags. However, I have observed the godown in damaged condition, I am offering assessment of loss. The insureds have furnished godown estimate issued by Sri K. Sasidhar, Civil Engineer for Rs. 1,12,000/-, the same is placed as ANNEXURE-Y along with plan to the report. The estimate had also covered the damages suffered by boiler room. On a close scrutiny of the estimate, the civil engineer had indicated the material cost towards earth work, foundation, RR Masonary, Brick work for the entire super structure, plastering of the walls etc., these items cannot be considered and also corresponding labour charges. I have seen rolling shutters, trusses, AC Sheets, etc., are in damaged condition, these only needs replacement along with labour charges. Now I am offering assessment of loss on the raw materials storage godown and boiler room for the underwriters examination.
- - - - -
As such the physical loss examined by me at the insureds raw material godown ( The cost of 8 bags of raw cashew nuts + godown building) is Rs. 92,540.82Ps. (Rupees ninety two thousand five hundred forty and eighty two paise only).
In my opinion, based on the above analysis the insured have violated the policy warranties, conditions and the they had breached the utmost good faith which is the basis of insurance contract.
Sd/-
D.S. Prasad Babu
Encl: As stated above, photos along with negatives.
(emphasis supplied)
(vi) The investigation report dated dated 29.08.2002 of the chartered accountants, engaged by the insurance co. to conduct an in-depth study of books of accounts and other related documents to corroborate the loss as conceived from the physical inspection, shows in-depth analysis, and is well-reasoned:
Ref. INV/OIC/VSP/PAI Date: 29.08.2002
PART-A
Investigation Report
PREAMBLE
1.0 The Claim:
M/s PRERANA AGRO INDUSTRIES, a Cashew processing unit had preferred a claim for loss of stocks in an accidental fire that took place in the midnight of 2nd December 2000. The claim preferred is for Rs. 28.69 lakhs. ( 27.84 lakhs + 0.85 lakhs).
2.0 Instructions:
Upon claim intimation, Mr. D.S. Prasad Babu, an independent surveyor from Vishakhapatnam was deputed by the underwriters to conduct the preliminary and final survey. The surveyors after conducting a detailed physical inspection of the fire effected premises and after generally examining the books of accounts and related documents, in consultation with the underwriters felt it prudent to engage a Chartered Accountant to conduct an in depth study of the books of accounts, and the documents, with a view to corroborate the loss, as conceived from the physical inspection.
At this juncture, pursuant to the instructions of the Senior Divisional Manager, Divisional Office 1, Vishakhapatnam, we have undertaken the assignment. The scope of work was an " in depth study of the books of accounts" and to comment on the veracity of the same. Our observations are enumerated as below.
- - - - -
16.0 Conclusion
After scrutinizing the books of accounts of the insured, analyzing the documents and the information furnished by the insured and gathered by us, inspecting the factory premises, discussing with the suppliers and customers during our investigation, we are of the opinion that
< > insured does not have any record in support to show the physical existence of raw material. And the stock registers submitted though they reveal the quantity of stocks held as per the books either under KCC or OCC, nothing is there to prove whether they physically existed. In other words it is not possible to conclude from the registers how much stocks were physically inside the godown and how much were outside the godown at the time of fire.< > are unable to confirm whether the books produced before us are the same as the once seized by the police immediately after the fire, implying we are not able to confirm without reasonable doubt that, the books produced before us reflect to true position of the transaction before the fire accident.
The insured by his own admission in writing confirms that the payments shown in the cash book do not represent the actual payments made towards purchases on the respective days.
In any case correctness of the books of accounts does not imply that the purchases were physically made and stocks were physically available at the time of fire, hence due weightage should be given to the physical inspection done by the surveyors at the time of the fire accident.
This report is given without any prejudice.
For Sisir And Ravi Associates
Sd/-
Partner
(emphasis supplied)
(vii) The supplementary report dated 30.05.2003 of the insurance co.'s surveyor, the one Mr. D.S. Prasad Babu, gives cogent clarifications, and is well-reasoned:
REF: PB: OIC: 144:2003 30th May, 2003
M/s Oriental Insurance Company Limited
Regional Office DEPT: FIRE CLAIMS
6-3-871, "Snehalatha", P.B. No. 45
Greenlands Road, Begumpet
HYDERABAD - 500 016
Dear Sirs,
Sub: Claim under Policy Nos. 432205/6008/2001 & 132/2000-Reported Fire Accident to Raw Material Storage Godown, Godown Stocks on midnight of 02.12.2000 or in the early hours of 03.12.2000-Insured: M/s Andhra Bank-A/c Prerana Agro Industries, Vishakhapatnam
Ref. (i) My Survey Report No. SR:PB:OIC:FIRE:58:2002, dated 11th July, 2002.
(ii) My detailed letters dated 26th December, 2002, 25th January, 2003 & 5th February, 2003.
***
I am in receipt of your letter dated 12th May, 2003 along with its enclosure, the same was carefully studied by me and now I am offering the following clarifications for your consideration.
01. As per the chemical analysis report dated 7th April, 2003, issued by M/s. Indian Institute of Chemical Technology, Hyderabad, the Gross calorific value of Cashew complete . . . 5835 Cal/g, Cashew nut . . . 6590 Cal/g, Cashew shell . . . 5390 Cal/g.
From the reported calorific value of all forms of cashew, it is evident that cashew is also similar to thermal coals as far as fuel value is concerned. Thermal coals generally becomes ash at 800°C and this is the reason for burning the coal samples at 800°C in ash determinations. (Ref: BS:1016). Therefore, being in the same range of calorific value, cashew will also burnt at the same temperature leading to ashing of the material. Hence when the cashew shell is fully burnt a temperature in the region of 850°C to 1000°C is generated. Moreover few hundreds of calories variation is allowed in the analysis, hence 445 Cal/g difference between complete cashew and cut shells do not make much difference in the heat yield.
Considering the calorific values supplied by M/s. IICT, Hyderabad as more precise, the burning of complete cashew would have resulted in more heat liberation than the cashew shells burning which inturn would have cashew more extensive to the building.
02. Based on the above conclusion that in case the insureds alleged to have been kept 600 bags (48,000 Kgs) of cashew complete (raw material), there would have been generation of temperature more than 1000 ° C, resulting in melting of MS Pipe purlins, internal walls damage/breakages, thick smoke deposits should have been there within the four sides of the walls upto the top, the flames should have been caused almost breakages to AC Sheets of the godown, extensive damages to the building, wall plastering and these cement plastering should have been given way, in most of the cases when a godown was subjected to severe flames or temperatures, the strength of the godown will be weakened if somebody touches with slight force, that particular wall, area will automatically collapse etc. contrary to this there were no meltings of MS pipes, few AC Sheets were broken and these pieces were scattered on the debris, other features as stated above were not present in the insureds claim etc., for more details kindly verify photographs about the condition of walls, smoke deposits, etc. I have also indicated in my detailed survey report at Page No. 14 under the heading conclusion that to make believe the insurers, other Governmental agencies it was a malicious act but actually the insureds own persons might have climbed the godown top and broken some of the sheets, poured diesel/kerosene on the cut shells after replacing sound stocks.
I hope the above clarifications would meet with your requirements, should you need any further information, the same shall be pleased to furnish upon hearing from you.
Thanking you Yours faithfully Sd/-
D.S. PRASAD BABU Copy to M/s Oriental Insurance Company Limited, DOI, Vishakhapatnam.
M/s Oriental Insurance Company Limited, Branch office, Gajuwaka, Vishakhapatnam Encl: The Xerox copies of extracts of BS 1016:Part 3: 1973 (emphasis supplied)
(viii) The repudiation letter dated 12.06.2003 from the insurance co. is a self-contained and self-speaking reasoned communication:
Dept.: Fire claims Dt. 12.06.2003 M/s. Prerana Agro Industries M/s D. No. 47-10-33/1, 2nd floor Ramniketan Building Near Diamond Park Regd. Post Ack. due Dwarakanagar Visakhapatnam - 530016 Re : Fire claim No. 2002/10001 under policy Nos. 432205/09/0/F/2001/6008 & F/2000/132 - Date of loss 02/03-12-2000.
On scrutiny of the claim papers submitted by you, the Independent Surveyor's Report submitted by the Surveyor and the In vestigation Report submitted by the Chartered Accountants, the following discrepancies are observed:
1. During the inspection on the date of loss, the surveyor has observed very little quantity of cashew nuts in burnt condition. Most of the area of the affected building was filled with grey ash and charred carboneous matter which might have been generated by burning the cut shells and not of raw-cashew nuts, which only indicates that very little stock of raw-cashew nuts have been stored by you. The Laboratory Report clearly reveals the same.
2. The Surveyor has observed little damage to the building and opined that the damage to the building would have been more severe, had that much stock of raw-cashew nuts were brunt.
3. You have admitted that the payments shown as made in the cash book, did not reflect the actual payments as it was said to be made in instalments on the other days than that shown in the cash book. This proves that the books and records maintained by you were not reflecting the true picture.
4. The investigators who were appointed to verify the books of accounts certified that you didn't have any record to actually show the physical existence of stocks though yours as well as bank statements reveal the stock position. The investigators opined that the authenticity of the books could not be confirmed as you have obtained direct possession of the records from the Police without the knowledge of the surveyor.
5. The Surveyor has a number of times requested you not to take possession of the Accounts Books seized by the Police Authorities after the occurrence. The possession of Account Books should have been taken in the presence of the Surveyor. Contrary to the several requests of the Surveyor you have directly took over the Accounts Books without informing him and tampered the same. Hence, he was not able to find the veracity of your Account Books.
As per the above findings, it is apparent that the loss is neither accidental nor due to malicious act. There is no conclusive proof that the quantity as claimed by you would have been in actual existence on the date of loss and you have failed to prove the same in spite of the repeated reminders from the Surveyor.
Hence, we regret to inform you that the Competent Authority has repudiated the claim.
This is for your kind information.
Yours faithfully, Sd/-
Branch Manager, C. C. to M/s. Andhra Bank, SSI Branch, Gajuwaka, Visakhapatnam for information C.C. to DO-I, Visakhapatnam for information in response your letter of date.
(emphasis supplied)
(ix) The confidential investigation report of the insurance co.'s private detective agency, asked for vide this Commission's Order dated 03.07.2018 after hearing part arguments, and which is subsequent to the repudiation letter dated 12.06.2003, shows in-depth investigation, and is well-reasoned:
Ref. No. 4/FIRB/HRO/2000/22/ 05 Date: 22.MAR.2005 Visak/ OIC/ 2001 / 3 To, The Regional Manager Kind Attn : Mr. Kumar The Oriental Insurance Company Limited, Regional Office, Begumpet, Hyderabad. CONFIDENTIAL Investigation report into the fire Accident Occurred at M/s. Prerana Agro Industries. Date of Loss : 02-02-2000 Duppituru Vllage, Atchutapuram Policy No. 432205/8/0/11/20016008&001/192 Claim No. 432205/F/2002/10001. Insurer: The Oriental Insurance Company limited, Divisional Office-1, Visakha patnam.
Sub: Fire Accident Occurred In M/s. Prerana Agro Industries, Dhuppituru Village.
This is with reference to our personal discussions we had with you in connection with the above alleged fire loss occurred in the above Agro Industries. We give our observations upon our investigation on cause of loss, genunity of the stock burnt and other related aspects.
About the Incident:
This is under stood that M/s. Prerana Agro Industries met with fire loss on 02/3-12-2000 in the midnight. At the time of the loss, watchman of M/s. Prerana Agro Industries was very much present near the premises.
Our Investigation .
On receipt of your instructions a group of our investigators left for Visakhapatnam accident spot, and started our investigation.
Enquiry about the insured There is a partner ship deed made on 29th April, 1999 between Mr. Prem Kumar Sinha, S/o Sri Rajendra Prasad, Aged about 37 years, R/o 20-3-5/C, Sivajyothi Nagar, Tirupathi-01.
And Mr. Kundrapu Ramana S/o Kundrupu Demullu, Aged about 28 years, R/o Bhogapuram-II, Achutapuram Post, Visakhapatnam dist, to carryout the business under the name and style of M/s. Prerana Agro Industries.
About Bankers Andhra Bank (SSI Branch) Gajuwaka, Visakapatnam-26 given Financial assistance to M/s. Prerana Agro Industries (to run the cashew nuts business) an amount of Rs. 42.00/- Lakhs (Term loan Rs. 14.5 Lakhs + OCC Rs. 7.5 Lakhs + KCC 20.00// Lakhs) and they have obtained the policy from the branch office of M/s the Oriental Insurance Company limited, Gajuwaka, Visakapatnam.
KCC Loan Rs. 30.00 Lakhs - Period 02-05-2000 to 01-05-2001 Building and Plant for Rs. 20.00 Lakhs - Period 28.02.2000 to 27-02-2001 Enquiry with Achutapuram Police Station and witnesses Our investigator approached Achutapuram Police Station and discussed with them and verified the documents and collected all the documents and verified the things, we came to know that on 3-12-2003 at around 3: 00 P.M one person Mr. Kundrapu Ramana S/o Demullu, Age : 30 years, Occ: Proprietor, Prerana Agro Industries, r/o Duppituru Village, Achutapuram, and given a written complaint stating that he is a having a cashew nuts processing unit Name; Prerana Agro Industries, and the same was started on 25-03-2000, in this unit Mr. A.S. Nagaswararo working as a Manager, K. Eswararao, as Accountant, and Mr. K. Srinivasu as watchman, and about 80 workers are working in his unit. And he has taken a K.C.C. loan Rs. 27,84,000/- from Andhrabank, gajuwaka (S.S.I Branch) out of this total loan he has taken 70% from the bank and remaining 30% his own) for the total price he kept 600 bags of cashew nuts (4,800 K.g.s) kept in the gowdown under the supervision of the Andhra Bank, and on 03-12-2000 in the morning hours at around 6:00 A.M he has received phone call from the processing unit saying that the gowdown was caught fire and after receiving the message he went to the factory from vijag and find that the some workers are trying to control the fire and then he has informed to the fire station and they controlled the fire, on his enquiry at the unit he came to know that on 2/3-12-2000 night at around 2:30 A.M some people are entered in to the factory and tied the hands and legs of the Kundrapu Srinu (Watchman) and intentionally fire the godown and the total material in the gowdown gutted in to fire, and cost of the material is Rs. 27,84,000/- and requested them to enquiry the same.
On receiving the complaint from the proprietor of the Prerana Agro Industries Achutapuram Police officials registered a case in crime No: 72/2000, U/s 447,342,436, 427, R/w 34 and took up the investigation.
During the course of investigation it appears that as per the scene of offence, the offenders used a ladder and claimed the roof of the godown, caused breakage of asbestos sheets, poured some combustion fuel to cause mischief and there after ignited the chew nuts bags. And prior to this the offenders tied the night watchman to the cot, and did this offence.
Later the fire services personal while extinguish the fire, they broke some of the asbestos sheets in order to put off the flames and fire as the keys of the godown are with the Andhra bank Officials further Sri P. Srinivas S/o Vasudeva Rao, Age; 43 years, Occ: Manager S.S.I. Branch, Andhra Bank, Gajuwaka, r/o Sethammadhara, C-6, Navadeep Apartments, Visakhapatnam brought the godown keys and opened the godown, and found that the cashew nut bags in the godown completely burnt and the ashes were collected in 30 bags and weighed the same its weigh is 1,750 Kgs. on that they have burned a sample bag of cashew nuts and weighed the ash and found that the weight is 4.5 Kgs.
Observation: It was reported by the managing partner of the Prerana Agro Industries that the total bags stored in the godwon is 600 bags (600 x 80 = 48,000 Kgs.) it means the total weight of the ash should be 600 X 4.5 Kgs = 2,700 Kgs. But the total weight came only 1,750 Kgs, it is the important point to conclude t hat at the time of fire there is no much stock as claimed by the Mr. Kundrupu Ramana Managing Partner of the M/s Prerana Agro Industries.
The Police officials seized the burnt ashes, and a Horse man modern Product 8 levers Regd. No: 287839 T 26 70 MM its beneath P46214 (a Brass lock) and its two keys godrej Freedom seven levers aluminum lock from the front shutters of the godown and a godrej Freedom seven levers aluminum lock from the southern side of the shutter of the godwon and its two keys from the manager of the Andhrabank, Gajuwaka.
And then they tried to secure the presence of the Managing Director of the factory Mr. Kundrupu ramana, and the Watch Man Kundrupu Sreenivas, but both of them are not available and came to know that the the are in absconding, and the company is under loss, then they formed a special team to trace the M.D. of the factory and the night watch man as it was revealed that some of the bags from the godown was removed prior to the occurrence of the fire incident.
And also it was found that the godown was not sealed by the bank Authorities and no frequent checks being done by them which also helped a lot for the bags from the godown by the culprits.
Observation: there is no seal to the godown ( Lock Seal) it means there is a negligence by the bank officials and they are not bother about the stock, and they have no idea whether the stock removed from the godown or not, according to the circumstantial evidence it is revealed that that the stock is removed prior to the fire broke out in the M/s. Prerana Agro Industries.
Alteration of the sections: Initially, on the basis of the complaint given by the insured, Achutapuram Police Station officials registered a case on Crime No: 72/2000, Under Sections 447, 342, 436, 427 r/w 34 IPC, but during the course of investigation, they found that the M/s Prerana Agro Industries is running in losses, and the ash of the debris and basing on the circumstantial evidence, they have arrested the brother of the insured, Mr. Kundrapu Appala Raju S/o Late Domullu, and Mr. Kondrapu Srinivas (Alias Srinu) S/o Appala Swamy, and recorded their confessional statements, both of them confessed that they them selves set the fire to the raw storage, godown on the night of 2/3-12-2000 at 12 P.M by pouring diesel through roof of the godown on the instructions of Mr. Kundrpur Ramana S/o Lage Domulu, in order to claim the insurance, by Mr. Kundrapu Ramana. They also disclosed that Mr. Kondrapu Ramana, Managing Director of the M/s Prerana Agro Industries removed the part of the stock of cashew nut bags from the raw storage godown during the nights.
On the basis of the confessional statements given by Sri Kundrapu Appala Raju, and Kundrapu Srinivas, police officials arrested the Managing director Mr. Kundrapu Ramana on 18-12-2000 and recorded his confessional statements in the presence of mediators, which disclosed that Mr. Kondrapu Ramana directed his brother Mr. Kondrapu Appala raju, and set fire of the storage godown, and also confessed that he drew the half of the stock of cashew bags preior to the occurance of the fire by using the false key and finally made burnt the godown through Mr. Kudrapu Appala Raju, and Kondrapu Srinivas (watch man) in order to claim the insurance claim.
On the basis of the confessional statements given by the Managing Director Mr. Kondrapu Ramana, his brother Mr. Kondrapu Appala raju , and the watchman Mr. Kondrapu Srinivas, police officials altered the sections to 420, 436, r/w 34 IPC from 447, 342, 436, 427, r/w 34 IPC in crime No: 72/2000 of the Atchutapuram Police Station. Against the Managing Director Mr. Kundrapur Ramana S/o Late Domullu, age: 30 years, Proprietor of M/s. Prerana Agro industries, Dupituru, R/o Muralinagar, Visakhapatnam, Mr. Kundrapu Appala raju S/o Late Domullu, and brother of K. Ramana, Occ: Cultivation, Duppituru village, R/o Bhogapuram, and Mr. Kundrupu Srinivas (alias : Srinu) S/o Applaswamy, Age: 35 years, Occ: Night Watchman in M/s Prerana Agro Industries, Dupituru, R/o Konepalem Village. As all of these persons committed this offence in furtherance of their common intention in order to claim the insurance.
On 18-12-2000 the police officials received a credible information that Mr. Kundrapu Appala Raju and Mr. Kundrapu Sreenivas both the accusers in this case are moving at Ramannapalam village as the in-laws of Mr. Kundrapur Appala Raju are the residents of that village, immediately police officials of the Yallamanchali Police station Rural, and collected the mediators Mr. Dharimireddy Sanyasinaidu S/o Ramulu, age : 25 years, Caste; Velama, Teacher in Atchutapuram, Residential School, R/o Konapalem Village and Mr. Dharmireddy Satyanarayana S/o Appalakonda, Age: 28 years, Caste: Velama, Teacher in U.P. School, Appannapalem, R/o Ramannapalem and proceeded to Ramannapalem Village and arrested the accused person and mediators identified them as Kundrapu. Appalaraju, Mr. Kundrapu Sreenivas then questioned them separately. Mr. Kundrapu. Appala Raju revealed that and voluntarily confessed that he is the resident of Duppituru Village and they are four brothers and three sisters.
1. Kondrapu Satyanarayana
2. Kondrapu. Ramana
3. Kundrapu. Appalaraju
4. Kundrapu. Venkai Naidu
5. Pyla.Nagaratnam W/o Sreeramamurthy.
6. Pyla Mani W/o Ramulu.
7. Veechalapu. Lakshmi W/o Matyalu.
Their lands are in combined and they are living together and his second brother Mr. Ramana established a Cashew-Nut factory at duppituru Village, and sustained severe losses in the factory and the factory is under losses, and his brother came to his house on Saturday morning that is on 02-12-2000 and told him to set fire of their cashew factory in order to claim the insurance and went away. He agreed to set fire of the factory and had a talk with the night watchman Mr. Kundrapu. Srinivas, and both of them discussed how to set the fire in the after-noon of Saturday at Atchutapuram Junction. Then he purchased a Plaster for Rs. 3/- Sai Maruthi Medical Stores. Later at about 6 P.M him-self and watch man Mr. Sreenu hatched a plan, that how to set fire to the factory, he had dinner and came back to the factory at 10:00 P. M in the night and discussed till 12 P.M. in the mid-night, and they both went to generator room, and picked up 10 liters diesel can intended for the Generator, and watch-man Sreenu carried the 10 litters diesel can and went to raw storage godown and kept the 10 liters diesel oil can at the raw storage godown and they both brought a wooden ladder and placed the same in front of the raw storage godown. He claimed up the storage godown with the help of the wooden ladder and night watch-man Sreenu also claimed the wooden ladder and handed over him the diesel oil can and he placed the diesel can on the roof of the storage godown forcibly removed asbestos sheet and poured the diesel oil on the cashew bags and lightened a match stick and threw it on the cashew bags.
Immediately, the flame came out and both of them came down to the office room and made the night watch man Sreenu to sleep on the coir-cot, tied the night watch-man hands with the help of black electrical wire that he brought from his house and tied the legs of the night watch man with the help of plastic pale rose colour rope that was found in the office room. Then he pasted the plaster on the mouth of the night watch man that he purchased at Sai Maruthi Medical stores. Atchutapuram and Appala Raju went away to his house. On the next day morning around 6 A.M one Mr. Lalam Sanyasirao of Bhogapuram (V) came to factory and un-tied the ropes. Later on he went to the house of the brother of M.D. Mr. Kondrapu Satyanarayana and told him that the some offenders set the factory. Later police came to the factory and weighed the debris of the burning ashes and suspected them. On that day both of them had hidden in Ramannapalem Village. And he further confessed that earlier he gave statement to police as they planned that he was tied and set fire to the godown by the offenders and it was not correct. On 17-12-2000 morning in the early hours while they set out to go to Visakhapatnam and waiting for bus at Ramannapalem Junction, then the police Officials arrested them.
Further Mr. Kundrapu Appala Raju and Kundrapur. Sreenivas (Alias Srinu) confessed to the police officials that they will show the diesel oil can if follow with them, and about the stock of the cashew-Nut bags, the night watch man Mr. Kondrapu Srinivas Confessed that their Managing Director Mr. Kondrapu. Ramana, draw the cashew nut bags from the storage godown during the nights, by opening the lock and he was lured that he will be given some thing after claiming the insurance.
These all the statements recorded by the police officials duly attested by the mediators mentioned above. And taken the signatures of the accused there it self.
At about 12.45 P.M on 17-12-2000 accused lead the police officials and mediators to cashew factory. Prerana Agro Industry, Duppituru, there they found Mr. Kondrapu. Ramana (Accused-3) then police officials arrested Mr. Kondrapu. Ramana at the factory and he confessed that he is residing at Muralinagar, Visakhapatnam with his family members. They are four brothers and three sisters and they all liging together and lands are in combined. He started the Prerana Agro Industry at Dupituru on 25-03-2000 and one Mr. P.K. Sinha of tirupathi is only the finance partner. He took finance if Rs. 42 Lakhs from Andhra Bank, Gajuwaka. (Rs. 20/- Lakhs as key loan, Rs. 14.5 Lakhs as term loan, Rs. 7.5 Lakhs as working capital) He mortgaged their combined lands 12 acres, situated at Duppituru and Bhogapuram Panchayats and 266 yards house site located at kailasapuram, Visakhpatnam. He took the key loan in the month of April 2000 and purchased 600 bags of cashew bags for Rs. 27.84 Lakhs with the key loan along with his capital in which 70% belongs to the bank and 30% belongs to him and he stocked the said bags in the storage godown and the keys are with the bank officials. Bank officials checking the godown periodically. His factory Manager is Mr. A. Nageswararao and the accountant is Mr. K. Esawara Rao and the night-Watchman is Mr. Kundrapu Srinivasa and at about 80 workers are working in their factory and on 03-12-2004 morning around 7 Am, his brother Mr. Kondrapu. Satyanarayana telephoned him to Visakhapatnam and informed that some un-known offenders burnt the factory, immediately he started and came to the factory and by that time fire service personnel and police personnel putting off the fire. On further Cross-examination He confessed that he went to the house of his brother on 02-12-200 (Saturday) morning and told him that the factory is running under losses and told his brother to set fire the godown so as to claim the Insurance and he returned to Visakhapatnam. As planned his brother Mr. Kondrapu. Appala Raju, and Night-watch Man Mr. Kondrapu. Srinivas burnt the godown on the mid Night of 02-12-2000 and they kept it in the secret with out the knowledge of any one. During the police enquiry, the shortage of debris of burning ashes created a suspicion over him and on that he went to Visakhapatnam and told to his Brother Mr. K. Appla Raju and Night-Watchman Mr. K. Srinivas to hide in neighboring villages.
But also he confessed the fact to the police as the factory is running under severe losses, he removed about 200 bags of cashew from the godown by using false key during nights about three months back and converted the same as nuts (finished goods). Then one Mr. Nagraju, and Mr. Mahapatrudu of Visakhapatnam came and took 181 tins each 11 kgs worth Rs. 4 lakh for sale later when he asked him about the cost of the said cashew nuts they deceived and declined. He told the same fact to the village elders and Mandal President of Rambilli lalam. Bhaskar Rao and also informed to the Police of Visakhapatnam II town Police and Police also enquired the matter. As his factory under losses and in order to claim the insurance hew drew the part of the stock and made burnt the factory with the help Mr. Kundrapu Appala raju, and Kundrupu. Srinivas.
On that the police officials asked the Mr. Kondrupu. Ramana about the false Key, and Mr. Kondrupu. Ramana picked up the office key from the office drawer and produced to the Police officials and the same key used to draw the cashew bags from the godown, then the police officials seized the false key from Mr. Kondrapu. Ramana in-front of mediators and taken attestation from them. Further they questioned Kondrapu. Appala Raju, and Kondrapu. Srinivas about the diesel can on that both of them lead the police officials to the generator room where Mr. Appala Raju went to the generator room and produce the black color 10 liters plastic can and produced to the saying the same can which contain 10 liters diesel that was used for setting the fire of the godown, then he seized the black color 10 liters plastic can under the cover of mediators report attested by the mediators. But also police officials informed to Mr. Kondrapu. Raman and arrested him for alleged involvement in this fire accident case.
Then the Police Officials ascertained and the signature of mr. Kondrapu. Ramana on the mediators report and they brought the accused to the police station and kept in the police station lock up and after using necessary recorded and due search. Then he informed the arrest of the accused to the brother of Mr. Kondrapu. Appala Raju to Kandurpu. Satyanarayan of Duppituru Village. The accused did not complain any ill treatment at the hands of police officials.
Then they submitted the alternation memo to the Court altering section 420, 436, r/w 34, IPC against the accused (Original section: 447, 342, 427 IPC) The seize material objects have forwarded to RFSL, Visakhapatnam for the lab test Visakhatnam. And send the accused to the judicial remand for 15 unto compellation of the investigation.
Further in the court the accused acquitted in the court because of the withdrawal of the witnesses.
In our investigation we came to know that Mr. Kundrapu. Apparao S/o Ramaswamy, Mr. Kondrapu. Peidanna S/o Ramulu, Mr. Lalam. Ramana. S/o Adimurthy who are the eye witness to the fire accident in the Prerana Agro Industries went to Police station to give their evidence about the incidence, but they did not take their evidence and asked them to give in written as requested by the concern police officials they gave in the written statement and came back, but the police officials did not did not call them for witness, later on three of them went to concern court and met the concern judge, and told him that they came for to give the evidence, but the concern police officials did not allow them to give the evidence, and finally on 01.06.2002 they sent a registered letter to The Oriental Insurance company through Mr. Kumar, Advocate, Anakapalle, stating that they are aware of the illegal acts committed by the Kondrapu Ramana S/o domallu, Mr. Kondrapu. Appala Raju S/o Domallu, Mr. Kondrapu. Srinu S/o Appala Raju.
For the same we met them and discussed with them separately and combainedly they said that they will come and give the evidence, and they requested that they will come to the vizag to give the statements, the reason they said that they don't want to any disturbances while giving the statements.
Summary of the statement of Sri. Kondrapu. Ramaswamy Mr. Kundrapu. Ramaswamy S/o Late. Kondrapu. Venkunaidu, age: 70 years, Occ: Surpanch and agriculture, R/o Bhogapuram, Atchutapuram, Visakhapatnam given a written statement which was dictated by him and written by his son Mr. Kondrapu. Nageswara Rao, he stated that his others son Mr. Kondrapu. Ramana S/o Demullu, has started a Cashew not factory in Duppituru in the year of 2000, the company was financed by the Andhra bank, after that frequently, Mr. Kondrapu. Satyanaryana and his brother Konrapu. Ramana used to tell him that their company was running in losses.
On Dt. 2/3-12-2000 night his brothers son of Mr. Kondrapu. ramana factory M/s. Prerana Agro industries was gutted in the fire on knowing the thing he went to the factory and saw that the fire fighting officials came to there and controlled the fire, since the factory was in outskirts of (Between) Bhogapuram and Duppiture he made enquires about the incident and three persons negative of their village came to him they are Mr. Kondrapu. Apparao S/o China Ramaswami, Age: approx.: 35 years, Mr. Kondrapu. Pidenna S/o Ramulu, Mr. Lalam. Ramana S/o Adimurthy came to him and informed him that on 02-12-2000 night at around 11.00 P.M in the night they are going to their fields to set the water on the way they found that on the cashew nuts godown of Mr. K. Ramana, Mr. Kondrapu AppalaRaju and Kondrapu Srinivasrao were damaging the top (Asbestos) of the godown and the Kondrapu Ramana who stood there has given the diesel can to pour in the godown and set fire to the godown.
Then he called the Kondrapu. Satyanarayana, and enquired him about the incident, he informed him that the company was under losses, with the bank money his brother Mr. Kondrapu. Ramana has done some thing, if factory godown set fire they will get the Insurance money in that intention they filled the godown with the covers of cashew nut bags, and set fire to the company by his brothers Mr. Kondrapu. Ramana, Mr. Kondrapu. Appala Raju, and Mr. Kondrapu. Srinuvasa rao with a plan.
And also informed him that he also stood as guarantor to the bank later on police officials inquired into the matter and arrested Mr Kondrapu. Ramana and others.
The eye witness of the incident Mr. Kondrapu. Apparao and others met the police officials and informed about the incident, but they asked him that they will call them later on, and they went to the court to give their evidence but there also they have not taken their evidence, the same thing Mr. Kondrapu. Apparao and others came to him and informed the same, then he went along with them and sent a letter through an Advocate Mr. P.K. Kumar of Anakapally, on 01-06-2002 to the oriental Insurance company limited through regd post.
And also he stated that, in the year of 2000 Mr. Kondrapu Ramana has purchased two acres of land near atchutapuram main road, on the name of his sister, its cost about twenty five lakhs and sold out the same recently, but also Mr. Kondrapu. ramana has purchased 0.50 cents of land near Atchutapuram junction at gajuwaka road, and 0.12 cents of land at poodimadaka village in the year of 2001 and 2002.
Statement of the eye witness Further, Mr. Kundrapu. Apparao S/o Kondrapu. China Ramaswamy Age: 35 years, R/o Bhogapuram, Occ: Agriculture, Mr. Kondrapu. Peidanna S/o Ramulu, Age: 40 years, R/o Bhogapuram, Mr. Lalam. Ramana. S/o Adimurthy, Age: 28 years, Occ: Agriculture, R/o Bhogapuram, has given a statement stating that on 02-12-2000 night at around 11.00 P.M three of them went to their fields to set the water to their agriculture fields at that time of going they found that Mr. Kondrapu Appala raju is damaging the top of the Prerana Agro Industries godown at that time Mr. Kondrapu. Ramana who stood there given a diesel can to Mr. Kondrapu. Srinivasa rao both Mr. Kondrapu. Appala Raju and Srinivasa rao poured the diesel in the factory godown and set fire to the godown, the same they informed to their Surpanch Mr. Kondrapu. Ramaswami and to the police officials and later on to the concern judge in the court, but none of the officials called them for the evidence. And they stated that Mr. Kondrapu. Ramana S/o Demullu intentionally set the fire to his industry godown by filling the godown with the covers of cashew nut bags.
Conclusion:
Basing on the our investigation we found that the Original FIR was replaced and on the basis of the above findings we are concluding that insured intentionally removed the cashew nut bags from the godown with out the knowledge of the bankers and banker also not aware of the removal of the material from the KCC godown and they did not seal the lock of the godown and there is no proper checking system adopted by the bankers in checking Prerana Agro Industries, and there is no proof of incoming material and out going material from the godown because there is no system of gate pass or register maintain by the management of M/s. Prerana agro Industries. Basing on this we can conclude that there is no proper maintenance of the book of records regarding material in the godown and insured him self agreed that he only arranged people to set fire to their industry to claim the insurance and before setting the fire he removed the cashew nut bags from the industry but also the statements given by the main evidence it is revealed that M/s prerana Agro industries used to keep the cashew nut covers in the bags and stock in the godown, like wise the management of the prerana Agro industries removed the stock from the godown and staked with the shells of the cashew nut and set fire intentionally.
- - - - -
Truly, Sd/-
Vijaya Bharathi, Managing Director " Issued without prejudice"
(emphasis supplied)
(x) In respect of the complainant firm's averment that "Raw Cashews worth Rs. 27,84,000/-" were "under lock and key" of the bank it is pertinent that :
(a) The survey report dated 11.07.2002 of the insurance co.'s surveyor, the one Mr. D.S. Prasad Babu, inter alia states that:
a) The locks that were put to the godown rolling shutter does not having any seals.
b) Since the stocks were financed by them under KCC Type Loan, I could not see any watchman deployed by them to protect their stocks which were reported to have been stored at the time of occurrence.
c) Apart from above, the type of precautions taken by them to protect their stocks.
and
b) Due to this weight difference, they have suspected that the insureds might have carefully shifted 200 bags from the godown while using duplicate key during night times and in order to cover up the losses, he had burnt the godown in order to get claim from insurance company.
c) The police officials have also mentioned that they seized duplicate key from the insureds Managing Partner, plastic can from the unit, other material objects as an evidence to their charges against the three accused persons and they have also recorded their confessional statements about their crime in the presence of mediators.
and
d) During the course of my investigations that it was gathered that immediately after setting up of the industry, the sales tax authorities have conducted some raids, insured have paid heavy penalties and also the insureds have supplied considerable quantities of finished stocks to the dealers, since they were not paying amounts to him, leading to a thinking that to cover up the losses incurred by them, in my opinion, the insured have created the artificial fire after systematically removing the sound raw cashew nut bags from the godown in the phased manner, replacing with cut shells packed in gunny bags and also the insureds might have used duplicate keys of the godown locks and committed the above act since the original keys of the locks are with the Andhra Bank, Gajuwaka Branch.
(extracts from the said survey report)
(b) The confidential investigation report dated 22.03.2005 of the insurance co.'s private detective agency, the one Phantom Detective Agency Pvt. Ltd., inter alia states that:
Observation: there is no seal to the godown (Lock Seal) it means there is a negligence by the bank officials and they are not bother about the stock, and they have no idea whether the stock removed from the godown or not, according to the circumstantial evidence it is revealed that that the stock is removed prior to the fire broke out in the M/s. Prerana Agro Industries.
Alteration of the sections: Initially, on the basis of the complaint given by the insured, Achutapuram Police Station officials registered a case on Crime No: 72/2000, Under Sections 447, 342, 436, 427 r/w 34 IPC, but during the course of investigation, they found that the M/s Prerana Agro Industries is running in losses, and the ash of the debris and basing on the circumstantial evidence, they have arrested the brother of the insured, Mr. Kundrapu Appala Raju S/o Late Domullu, and Mr. Kondrapu Srinivas (Alias Srinu) S/o Appala Swamy, and recorded their confessional statements, both of them confessed that they them selves set the fire to the raw storage, godown on the night of 2/3-12-2000 at 12 P.M by pouring diesel through room of the godown on the instructions of Mr. Kundrpur Ramana S/o Late Domulu, in order to claim the insurance, by Mr. Kundrapu Ramana. They also disclosed that Mr. Kondrapu Ramana, Managing Director of the M/s Prerana Agro Industries removed the part of the stock of cashew nut bags from the raw storage godown during the nights.
On the basis of the confessional statements given by Sri Kundrapu Appala Raju, and Kundrapu Srinivas, police officials arrested the Managing director Mr. Kundrapu Ramana on 18-12-2000 and recorded his confessional statements in the presence of mediators, which disclosed that Mr. Kondrapu Ramana directed his brother Mr. Kondrapu Appala raju, and set fire of the storage godown, and also confessed that he drew the half of the stock of cashew bags preior to the occurance of the fire by using the false key and finally made burnt the godown through Mr. Kudrapu Appala Raju, and Kondrapu Srinivas (watch man) in order to claim the insurance claim.
and But also he confessed the fact to the police as the factory is running under severe losses, he removed about 200 bags of cashew from the godown by using false key during nights about three months back and converted the same as nuts (finished goods). Then one Mr. Nagraju, and Mr. Mahapatrudu of Visakhapatnam came and took 181 tins each 11 kgs worth Rs. 4 lakh for sale later when he asked him about the cost of the said cashew nuts they deceived and declined. He told the same fact to the village elders and Mandal President of Rambilli lalam. Bhaskar Rao and also informed to the Police of Visakhapatnam II town Police and Police also enquired the matter. As his factory under losses and in order to claim the insurance hew drew the part of the stock and made burnt the factory with the help Mr. Kandrapu Appala raju, and Kundrupu. Srinivas.
On that the police officials asked the Mr. Kondrupu. Ramana about the false Key, and Mr. Kondrupu. Ramana picked up the office key from the office drawer and produced to the Police officials and the same key used to draw the cashew bags from the godown, then the police officials seized the false key from Mr. Kondrapu. Ramana in-front of mediators and taken attestation from them. Further they questioned Kondrapu. Appala Raju, and Kondrapu. Srinivas about the diesel can on that both of them lead the police officials to the generator room where Mr. Appala raju went to the generator room and produce the black color 10 liters plastic can and produced to the saying the same can which contain 10 liters diesel that was used for setting the fire of the godown, then he seized the black color 10 liters plastic can under the cover of mediators report attested by the mediators. But also police officials informed to Mr. Kondrapu. Raman and arrested him for alleged involvement in this fire accident case.
and Conclusion:
Basing on the our investigation we found that the Original FIR was replaced and on the basis of the above findings we are concluding that insured intentionally removed the cashew nut bags from the godown with out the knowledge of the bankers and banker also not aware of the removal of the material from the KCC godown and they did not seal the lock of the godown and there is no proper checking system adopted by the bankers in checking Prerana Agro Industries, and there is no proof of incoming material and out going material from the godown because there is no system of gate pass or register maintain by the management of M/s. Prerana agro Industries. Basing on this we can conclude that there is no proper maintenance of the book of records regarding material in the godown and insured him self agreed that he only arranged people to set fire to their industry to claim the insurance and before setting the fire he removed the cashew nut bags from the industry but also the statements given by the main evidence it is revealed that M/s prerana Agro industries used to keep the cashew nut covers in the bags and stock in the godown, like wise the management of the prerana Agro industries removed the stock from the godown and staked with the shells of the cashew nut and set fire intentionally.
(extracts from the said confidential investigation report)
(xi) In respect of the managing partner of the complainant firm, the brother of the managing partner of the complainant firm and the watchman of the complainant firm being acquitted of charges under sections 436 (Mischief by fire or explosive substance with intent to destroy house, etc.), 420 (Cheating and dishonestly inducing delivery of property), r/w 114 (Abettor present when offence is committed) of the IPC it is pertinent that:
(a) The first information report was filed by the managing partner of the complainant firm and was recorded under sections 444 (Lurking house-trespass by night), 342 (Punishment for wrongful confinement), 436 (Mischief by fire or explosive substance with intent to destroy house, etc.), 427 (Mischief causing damage to the amount of fifty rupees), r/w 34 (Acts done by several persons in furtherance of common intention) of the IPC against "Some unknown persons".
However, on investigation, the police, but, filed a charge-sheet under sections 436 (Mischief by fire or explosive substance with intent to destroy house, etc.), 420 (Cheating and dishonestly inducing delivery of property), r/w 114 (Abettor present when offence is committed) of the IPC against the managing partner of the complainant firm, brother of the managing partner of the complainant firm and watchman of the complainant firm.
(b) The report dated 11.07.2002 of insurance co.'s surveyor, the one Mr. D.S. Prasad Babu, inter alia states that:
i) The confessional statements issued by three accused persons admitting their crime which were recorded by the police in the presence of mediators, finally the mediators have turned hostile and they have not supported the police in the court. They have also rejected that the duplicate key was not seized from the Managing Partner.
(extracts from the said survey report)
(c) The confidential investigation report dated 22.03.2005 of the insurance co.'s private detective agency, the one Phantom Detective Agency Pvt. Ltd., inter alia states that:
Further in the court the accused acquitted in the court because of the withdrawal of the witnesses.
In our investigation we came to know that Mr. Kundrapu. Apparao S/o Ramaswamy, Mr. Kondrapu. Peidanna S/o Ramulu, Mr. Lalam. Ramana. S/o Adimurthy who are the eye witness to the fire accident in the Prerana Agro Industries went to Police station to give their evidence about the incidence, but they did not take their evidence and asked them to give in written as requested by the concern police officials they gave in the written statement and came back, but the police officials did not did not call them for witness, later on three of them went to concern court and met the concern judge, and told him that they came for to give the evidence, but the concern police officials did not allow them to give the evidence, and finally on 01.06.2002 they sent a registered letter to The Oriental Insurance company through Mr. Kumar, Advocate, Anakapalle, stating that they are aware of the illegal acts committed by the Kondrapu Ramana S/o domallu, Mr. Kondrapu. Appala Raju S/o Domallu, Mr. Kondrapu. Srinu S/o Appala Raju.
and The eye witness of the incident Mr. Kondrapu. Apparao and others met the police officials and informed about the incident, but they asked him that they will call them later on, and they went to the court to give their evidence but there also they have not taken their evidence, the same thing Mr. Kondrapu. Apparao and others came to him and informed the same, then he went along with them and sent a letter through an Advocate Mr. P.K. Kumar of Anakapally, on 01-06-2002 to the oriental Insurance company limited through regd post.
And also he stated that, in the year of 2000 Mr. Kondrapu Ramana has purchased two acres of land near atchutapuram main road, on the name of his sister, its cost about twenty five lakhs and sold out the same recently, but also Mr. Kondrapu. ramana has purchased 0.50 cents of land near Atchutapuram junction at gajuwaka road, and 0.12 cents of land at poodimadaka village in the year of 2001 and 2002.
Statement of the eye witness Further, Mr. Kundrapu. Apparao S/o Kondrapu. China Ramaswamy Age: 35 years, R/o Bhogapuram, Occ: Agriculture, Mr. Kondrapu. Peidanna S/o Ramulu, Age: 40 years, R/o Bhogapuram, Mr. Lalam. Ramana. S/o Adimurthy, Age: 28 years, Occ: Agriculture, R/o Bhogapuram, has given a statement stating that on 02-12-2000 night at around 11.00 P.M three of them went to their fields to set the water to their agriculture fields at that time of going they found that Mr. Kondrapu Appala raju is damaging the top of the Prerana Agro Industries godown at that time Mr. Kondrapu. Ramana who stood there given a diesel can to Mr. Kondrapu. Srinivasa rao both Mr. Kondrapu. Appala Raju and Srinivasa rao poured the diesel in the factory godown and set fire to the godown, the same they informed to their Surpanch Mr. Kondrapu. Ramaswami and to the police officials and later on to the concern judge in the court, but none of the officials called them for the evidence. And they stated that Mr. Kondrapu. Ramana S/o Demullu intentionally set the fire to his industry godown by filling the godown with the covers of cashew nut bags.
(extracts from the said confidential investigation report)
(d) Liability for a criminal offence and liability for a civil wrong are different from each other, the objective of criminal law is to punish, the objective of civil law is to compensate, they essentially differ in their context and consequence.
(e) In the present facts and evidence of the case, acquittal in the criminal case filed by the police against the managing partner of the complainant firm, brother of the managing partner of the complainant firm and watchman of the complainant firm (after investigation on the FIR lodged by the managing partner of the complainant firm) does not validate or substantiate the averment that the fire was caused by "Some unknown persons" or validate or substantiate the quantum of loss averred.
16. There are too many questions in the claim made by the complainant firm with the insurance co.
17. The facts and evidence in an insurance claim have to speak of utmost good faith, of good conscience and clean hands. If the facts and evidence speak otherwise, if there is reasonable doubt on the claim's bonafide, a well-surveyed and well-investigated repudiation by the insurance co. cannot be reversed.
18. In the instant case, the survey reports (two nos.) of its surveyor, the investigation report of its chartered accountants and the confidential investigation report of its private detective agency provide fair basis for the repudiation of the claim by the insurance co.
19. The instant claim bespeaks of malafide, substantively and substantially, there is clear thread of 'fraud'.
Malafide and fraud vitiate the claim.
20. Consumer protection fora are not meant for malafide fraudulent expeditions, especially so by firms and especially moreso when such expeditions are aimed at defrauding public monies (the insurance co. being a public sector unit of the government).
21. The complaint, being patently misconceived and totally bereft of merit, is dismissed.
...................... DR. S.M. KANTIKAR PRESIDING MEMBER ...................... DINESH SINGH MEMBER