National Consumer Disputes Redressal
United India Insurnace Co. Ltd. vs M/S. Vishesh Creations on 4 January, 2023
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 591 OF 2022 (Against the Order dated 17/03/2022 in Complaint No. 53/2019 of the State Commission Punjab) 1. UNITED INDIA INSURNACE CO. LTD. REGIONAL MANAGER, REGIONAL OFFICE, 8TH FLOOR, KANCHANJUNGA BUILDING 18, BARAKHAMBA ROAD, NEW DELHI ...........Appellant(s) Versus 1. M/S. VISHESH CREATIONS THROUGH ITS PARTNER, SH. VIPUL KAPOOR, UPPAL FARMS, OPP. APOLLO PROCESSORS, P.O. CENTRAL JAIL, AJNALA ROAD, AMRITSAR ...........Respondent(s)
BEFORE: HON'BLE MR. SUBHASH CHANDRA,PRESIDING MEMBER
For the Appellant : Mr Pradeep Gaur, Advocate For the Respondent : MR. UPDIP SINGH
Dated : 04 Jan 2023 ORDER
PER MR SUBHASH CHANDRA
1. This First Appeal has been filed under the Consumer Protection Act, 1986 (in short, the 'Act') assailing the order of the State Consumer Dispute Redressal Commission, Punjab, Chandigarh (in short, 'State Commission') in order dated 17.03.2022 in complaint no. 53 of 2019 .
2. The brief facts of the case, as stated by the appellant, are that respondent firm who is in the business of embroidery of fabric and dress material had taken a Standard Fire and Special Perils Policy (in short, the 'Policy') from the appellant for the period 21.11.2017 to 20.11.2018 in respect of the building for Rs 70,00,000/-, machinery for Rs 1,50,000/- and stock-in-trade for Rs 65,00,000/-. It is averred that due to a fire on 30.06.2018 in the building, the Schiffli Embroidery Machine Model EPOCA-5 was extensively damaged. On discovering the fire, an employee, Subhash Chand, extinguished the fire with fire extinguishers within 30-40 minutes. There was no reason, therefore, to summon the fire brigade but a report was lodged with the police station and the appellant was informed the same day. The police lodged DDR No.030 on 03.07.2018. The appellant appointed J.S. Malhotra, Surveyor & Loss Assessor who inspected the insured premises on 30.06.2018 and 02.07.2018 and prepared a preliminary report dated 10.07.2018. The appellant appointed Supreme Testing Lab & Forensic Evidence Protection Technology Pvt., to prepare a forensic report. The site was inspected again by one Purushottam Sharma and Mrs. Mahua Chakraborty on 13.07.2018 who submitted a final report on 06.08.2018 stating that the fire was due to short circuit in the internal circuits of the machine and that the fire had originated within the machine. The appellant thereafter appointed Rajan Sharda, a Chartered Accountant as surveyor to assess the loss. He visited the location on 09.07.2018 and reported that as per forensic report, the origin of the fire lay within the machine which is excluded as per clause 7 of the Policy. He, therefore, did not recommend any liability. Based on the report of the surveyor, S Rajan Sharda, the claim of the respondent was repudiated by the appellant on 15.10.2018.
3. After some correspondence, the respondent filed a consumer complaint no. 53 of 2019 in the State Commission, Chandigarh claiming compensation with interest. The State Commission, vide order dated 17.03.2022, allowed the complaint and awarded the respondent a sum of Rs 23,94,989/- after deducting Rs 10,000/- and 5% under the excess clause from the sum of Rs 25,31,041/- along with interest at the rate of 6% from the date of repudiation of claim till realization along with Rs 35,000/- as compensation for harassment, mental agony and litigation expenses. This order has been impugned by way of this First Appeal. An application for condonation of delay in filing the appeal under Section 5 of the Limitation Act read with section 51 (1) Proviso (i) of the Act to condone the delay of 116 days in the filing of this appeal has also been filed. The ground for seeking condonation is stated to be consultation between the counsels and preparation of documents. The appellant is before this Commission with the following prayer:
(i) Call for the record of CC no. 53 of 2019 titled as M/s Vishesh Creations vs United India Insurance Co. Ltd., from the State Commission, Punjab;
(ii) Accept the present appeal and set aside the impugned order dated 17.03.2022 passed by the State Commission, Punjab or in the alternative to further dismiss the complaint of the complainant and to hold that there is no mental agony and harassment on the part of appellant insurance company;
(iii) Allow the cost throughout in favour of the appellant and against the respondent; and
(iv) Pass such other or further order (s) as may be deemed fit and proper is passed in favour of the appellant insurance company and against the respondent in the interest of justice.
4. The appeal has been contested by the respondent by way of written submissions. The respondent has stated that whether the delay of 117 days in filing appeal can be condoned for which the grounds taken in delay application which are not justified. The appellant has wrongly repudiated the genuine claim of the respondent firm on sole ground that the source of fire that took place at the insured premises on 30.06.2018 was within the Schifflie Embroidery Machine EPOCO5 and thus as per the terms and conditions of the insurance policy the said claim was closed as 'No claim'. The onus is upon the insurance company to prove that the claim of the insured falls under the exclusion clause of the insurance policy. Surveyor has clearly stated that after preliminary physical inspection that the survey report and the forensic expert report relied upon by the appellant are absolutely vague and self-contradictory report. The surveyor had made wrong observations in his report that there were no sign of fire flames observed on the damaged machine. However, in preliminary report dated 10.07.2018 of Engineer J S Malhotra clearly stated that "the wooden frame lying near the machine to cover the trunch had been found completely burnt and the EPOCA 05 machine found badly affected due to fire and heat". Respondent has also stated that survey report dated 27.08.2018 the surveyor on the basis of vague and stereotyped forensic investigation report, the surveyor has made the observation that the claim of the respondent is not payable since the cause of fire is within the machine, whereas the said surveyor did not even bother to consider the report of the Electronic expert. Respondent has further stated that the forensic report on the basis of which final survey report has been prepared indicates that the cause of fire might be short circuit and that possible cause could not be considered. It is mentioned that circuits in the machine were found to be intact. The respondent has sought copies of the reports from the appellant after the repudiation of the claim, they supplied the fresh forensic report dated 22.10.2018 which different conclusions than the previous report. The clearly shows that appellant has opted unfair trade practice merely to repudiate the genuine claim of the respondent. Therefore, the appellant is liable for deficiency in service.
5. Respondent has also contended that electronic expert technician of the embroidery machine, i.e., Mr Deepak Chauhan of Garima Electronics Inc., in his affidavit has clearly stated that the cause of fire is external to machine and has happened because of external wiring of the lighting system of the factory on the rear side of the machine adjacent to the shuttle drive. It is further observed that the electrical panel of the machine did not have any visible sign of burn/ smoke either internal or external.
6. Respondent has relied upon the order of the National Commission in the case of Oriental Insurance Company vs Delhi Assam Roadways Corporation - 2016 (3) CLT 571, wherein it was held that;
"since the insurance company is relying upon the exclusion clause the onus lies squarely upon the insurance company to establish the requirements of the exclusion clause."
He also relied upon the order of this Commission in the case of New India Assurance Co. Ltd., vs Dr M M Krishan - 2011 (2) CPJ 301, wherein it has been held that;
"while we agree that generally the surveyor's report is an important document and is to be relied upon unless it is arbitrary and biased, in the instant case, their appears to be adequate evidence for us to conclude that the surveyor's report was biased and the loss suffered by the respondent was not correctly assessed".
He has further relied upon the judgment of the Hon'ble Supreme Court in the case of The New India Assurance Co. Ltd., vs Pradeep Kumar - 2009 (4 ) CPJ 46 has held that:
"Although the assessment of loss by the approved surveyor is pre-requisite for payment or settlement of claim, but surveyor's report is not the last and final report. It is not the sacrosanct that it cannot be departed from; it is not conclusive - approved surveyor's report may be basis or foundation for settlement of a claim by the insurer in respect of the loss suffered by the insured but surely such report is neither binding upon the insurer nor insured".
7. I have heard the learned counsel for both the parties and perused the material on record carefully. Learned counsel for the respondent also filed his written submissions along with copies of case laws cited in support of his arguments.
8. The appellant's case is that Rajan Sharda was appointed the Surveyor and Loss Assessor and his report dated 27.08.2018 states that there were contradictions regarding the source of sparking due to the short circuiting. The surveyor obtained the opinion of a forensic expert regarding the source of sparking and fire. Supreme Testing Lab and Forensic Evidence Protection Technology Pvt. Ltd. was appointed as an independent forensic investigator for this purpose. Its report clearly states that the source of fire was within the machine and that the outside wiring to the machine was intact. The surveyor also examined the electric circuits inside the machine and found that the wire cables inside were intact. Damage was observed to plastic parts which had melted due to heat. The surveyor computed the loss at Rs 4,51,884/-. The surveyor in his report concluded, on the basis of the forensic investigation, that the origin of fire was from within the machine. Accordingly, as per clause 7 of General Exclusions to the policy, the loss to the machine was not payable as only loss due to external fire was admissible. The appellant also submitted that Purushottam Sharma and Mrs Mahua Chakraborty also inspected the premises and the machinery for forensic investigation on 13.07.2018. It is submitted that the e mail dated 16.08.2018 of Shri Rajan Sharda with attachment of report of Supreme Testing Lab the date of report was wrongly indicated as 23.06.2018. It is averred by the appellant that as per the report of Supreme Testing Lab they concluded that the fire was due to the short circuit in the internal circuits of the machine and that the fire had started inside the machine.
9. It is argued by the appellant that the State Commission has seriously erred in ignoring the settled principles of law that the report of the surveyor has to be relied upon unless otherwise proved and had also erroneously passed an unjust order rejecting the surveyor's assessment without recording the reason while allowing the claim. The grounds for the present appeal are that the State Commission did not appreciate the settled law and passed a non-speaking order ignoring the guidelines of the IRDA. Reliance has been placed on the judgment of the Hon'ble Supreme Court in United India Insurance Company Vs Harchand Rai, AIR 2004 SC 4794 wherein it was held that the terms of the policy have to be construed as it is and the Apex Court cannot add to or to subtract from it. It is contended that however liberally one may construe the policy, there is no scope to substitute the words which are not intended. Appellant has also relied upon Ms. Shahnayad Dastur Vs The New India Assurance Company Ltd CC/264/ 2012 of the District Forum, wherein it has been held that insurance policy documents being a contract have to be read strictly and it is the duty of the court to interpret the words in which the contract is expressed by the parties because it is not for the court to make a new contract. It was also submitted that as per Iffco Tokyo General Insurance Co. Ltd. Vs. Beena Raghav in RP no. 3217 of 2014 decided on 27.02.2015 it was held by the National Commission that the report prepared by a surveyor was of significant evidentiary value which cannot be dismissed and ignored without giving valid reasons. It was also contended that as per the judgment of the Hon'ble Supreme Court in Khatema Fibres Ltd. Vs. New India Assurance Co. Ltd. Civil Appeal no.9059 of 2018 it had been laid down that:
"Once it is found that there was no inadequacy in the quality, nature and manner of performance of the duties and responsibilities of the surveyor in a manner prescribed by the Regulations as to their code of conduct and once it is found that the report is not based on ad hocism or vitiated by arbitrariness, then the jurisdiction of the Consumer Forum to go further would stop."
10. In response, the respondent has contended that the delay of 116 days in filling the application is not justified since the reasons for the same cannot be accepted. On merits, it has been argued that the appellant has wrongly repudiated its genuine claim on the sole ground that the source of the fire that took place occurred within the embroidery machine and was covered under the exclusion clause of the Policy. It is submitted that as held by this Commission in Oriental Insurance Company Ltd Vs Delhi Assam Roadways Corporation 2016 (3) CLT 571, the onus lay upon the insurance company to establish the requirements of the exclusion clause since it was relying upon the exclusion clause which the appellant has failed to do since the surveyor's report and the forensic expert report relied upon by the appellant are vague and self-contradictory.
11. It is submitted by the respondent that the first surveyor, JS Malhotra had made wrong observations in his report that there were no signs of fire observed on the damaged machine. These observations stated to be are contradictory to the observations in the preliminary report dated 10.07.2018 which clearly states, after preliminary physical inspection, that "the wooden frame lying near the machine to cover the trench had been found completely burnt and the EPOCA 05 machine found badly affected due to fire and heat". It is also contended that the surveyor did not consider the report of the technician of the manufacturer of the machine who has specifically stated that the machine has inbuilt protection from short circuits by way of electronic protection. A major discrepancy in the report of the surveyor and the forensic expert has been pointed out by the respondent in that the forensic report itself mentions in its conclusion that "the cause of fire might be short circuit" while it also records that circuits in the machine were found intact. The final survey report dated 27.08.2018 also mentions that "the forensic report clearly state and conclude that source of fire is within the machine". It is alleged by the respondent that the survey report dated 27.08.2018 is a document which has been prepared subsequently and ante dated whereas the final forensic report is dated 22.10.2018.
12. The respondent relies upon the order of this Commission in New India Assurance Co. Ltd. Vs. Dr. M.M. Krishnan 2011 (2) CPJ 301 which held that "while we agree that generally the surveyor's report is an important document and is to be relied upon unless it is arbitrary and biased, in the instant case there appears to be adequate evidence for us to conclude that the surveyor's report was biased and the loss suffered by the respondent was not correctly assessed". Reliance is also placed upon the judgment of the Hon'ble Supreme Court in The New India Assurance Co. Ltd. Vs. Pradeep Kumar 2009 (4) CPJ 46 SC which held that "a surveyors report is not the last and final word - it is not that sacrosanct that it cannot be departed from; it is not conclusive. Approved surveyor's report maybe the basis or foundation for settlement of a claim by the insurer in respect of the loss suffered by the insured but surely such a report is neither binding upon the insurer nor insured".
13. It is also argued by the respondent that no technical reasoning or justification has been provided to prove that the source of fire might be within the said machine by the surveyor. It is alleged that the surveyor has clearly manipulated the observations of the forensic report to conclude that the cause of fire is within the machine and that the forensic report dated 22.10.2018 has findings and conclusions which are in complete contradiction to the earlier report. Since the machine in question is a complex electronic machine neither the surveyor nor the forensic expert had the technical knowledge or competence to determine whether the fire originated within the machine or not. On the other hand the manufacturer of the machine i.e. Saurer Textile Solutions Pvt. Ltd. had issued a certificate dated 16.11.2018 clarifying that the machine had in built precautionary mechanisms to provide the best possible protection for electronic short circuits and, therefore, no incident of fire directly with the machines electronic components had ever been noticed.
14. Respondent has also argued, on the basis of the affidavit of Deepak Chauhan of Garima Electronic Inc., that the cause of fire was external to the machine due to short circuit caused by external wiring of the lighting system of the factory on the rear side of the machine, adjacent to the shuttle drive. The said affidavit also records that the electrical panel of the machine did not have any visible sign of burn or smoke either internal or external. The respondent has, therefore, contended that the repudiation letter dated 15.10.2018 is perverse and the appeal be dismissed with costs.
15. The State Commission has allowed the complaint filed before it holding as under:
20. From the above, the survey report submitted by Sh.Rajan Sharda, B.Com. (Hons.) F.C.A. Surveyor & Loss Assessor was based upon the Forensic investigation report of the forensic expert i.e. Supreme Testing Lab and Forensic Evidence Protection Technology Private Limited (STEP). The said forensic expert visited the insured premises on 13.07.2018 and submitted his final report of investigation, vide Ex.C-13 dated 23.06.2018, (However the date was corrected as 23.08.2018, as per affidavit of Purushottam Sharma, CEO, Ex.OP-11) with the following remarks:
"The cause of fire might be the short circuit in the internal circuit of the machine."
21. As per the above report, it is evident that investigator was not sure that the fire originated has within the machine. Again the same investigator/forensic expert on the basis of the same visit on 13.07.2018 submitted a final report of investigation, vide Ex.C-20 dated 28.08.2018 with the following remarks:
"The cause of fire is due to short circuit in the internal circuit of the machine. Hence, the fire start inside the machine."
23. Again the Investigator submitted final report of investigation dated 22.10.2018 on the same visit of 13.07.2018 with the following observations:
"The cause of fire is due to short circuit in the internal circuits of the machine. Hence the fire start inside the machine."
24. The Forensic investigator submitted report dated 28.08.2018 and 22.10.2018 without revisiting the premises, therefore, the reports were without collecting any additional evidence from the insured premises. No reason of submitting the said reports dated 28.08.2018/22.10.2018 after the finalization of the survey report has been explained as the survey report was submitted by Sh.Rajan Sharda on 27.08.2018, vide Ex.OP-6.
25. We are of the opinion that the subsequent final report of investigator dated 28.08.2018 and 22.10.2018 were framed by the investigator i.e. Supreme Testing Lab & Forensic Evidence Protection Technology Private Ltd. (STEP) without revisiting the insured premises and without any explained reason only to strengthen the repudiation of claim by surveyor/opposite party- Insurance Company. As the final report of investigator dated 23.08.2018 was not a conclusive report to evident that 'origin of fire is from within the machine' as accepted by the surveyor.
26. Also, the surveyor overlooked the report of the spot surveyor J.S.Malhotra, Surveyor and Loss Assessor who visited the insured venue itself on the date of incident i.e. 30.06.2018 and observed as under:
"on further checking the wooden frame lying near the machine to cover the trench had been found completely burnt and the EPOCA 05 machine found badly affected due to fire and heat."
The complainant firm has placed an expert report of Deepak Chauhan of Garima Electronics Inc. who is well qualified BE Electronics and Communication stating that the fire incident which occurred is external to machine as per certificate issued by him vide Ex.C-9 dated 01.07.2018. The said expert also submitted a statement before the Bench in an cross-examination on dated 14.02.2020 as under:
"At about 2:30/3:00PM I reached the factory and inspected the control panel since my function was just relating to control panel including electric equipments, there was no fire trail on the panel, thereafter then I observed that one of the wooden plank has already burnt which was kept on side."
27. The said Deepak Chauhan further observed in para Ex.CW-1/A that these machines have fire proof circuiting and the MCB trips immediately in case of any short-circuit or any kind of electronic / electrical malfunctioning in the unit. These machines have a separate UPS and MCB which does not allow short circuiting or related malfunctioning. Also the manufacturer of the machine M/s Saurer Embroidery, vide Ex.C-21 dated 16.11.2018 reported that their machines have the best possible protection for electrical short circuits and therefore they never noticed any incident of fire directly with their machines, electronic components.
28. The report of Subhash Chander, Ex.C-4 pertains to the fact that he was in the bath room and somebody said him about the smoke coming out of the machine to which he stated that machine was on fire. The surveyor Rajan Sharda has also held in his report that they asked the supervisor to open the panel compartment. The compartment was opened and the wire cables moving inside the machine circuit were intact. The damages observed to plastic parts which had melted due to heat. From the above, it is evident that the short circuiting did not happen in the machine as the wire/ cables were found intact. It is only heat transferred from fire in the cable trench adjoining the machine due to short circuit that affected the wooden frame and subsequently the plastic parts resulting smoke coming out of the machine as observed by the first witness Subhash Chand.
28. In view of the above discussion, the conclusion drawn by the surveyor without looking into the report of spot surveyor and final report of investigator dated 23.08.2018 that the origin of fire was within the machine is not justified. Therefore, the repudiation of claim dated 15.10.2018 is not in order and the complainant-firm is entitled to reimbursement of claim on account of damage to the machine, in question.
29. The complainant-firm lodged the claim vide claim form for fire and allied perils, Ex.OP-5 as per estimate for Rs.25,31,041/-. The surveyor in his report stated that the insured submitted the invoices of parts purchased along with proof of payment. The invoices submitted were all studied and found in order. However, the surveyor after deducting GST, 80% depreciation on parts assessed the loss to Rs.4,85,666/-. The surveyor has not explained any terms and conditions of policy, vide which GST and depreciation can be deducted. Without any provision in the policy, the surveyor is not justified in deducting GST and 80% depreciation.
30. We are of the opinion that if there are some flaws in the surveyor's report, it is not binding upon the insured/insurer. We are further fortified with the judgment of the Hon'ble Supreme Court reported in (2009) CPJ 46 (SC) titled "New India Assurance Company Limited v. Pardeep Kumar" wherein it has been laid down that surveyor's report is not the last and final word. It is not that sacrosanct that it cannot be departed from; it is not conclusive. The approved surveyor's report may be basis or foundation for settlement of a claim by the insurer in respect of the loss suffered by the insured but surely such report is neither binding upon the insurer nor insured.
31. In view of the discussions above, the complainant-firm is entitled to claim of Rs.25,31,041/- after deducting value of salvage Rs.10,000/- as worked out by the surveyor and 5% excess clause as per policy terms.
32. Sequel to the above discussions, the complaint filed by the complainant filed by the complainant is allowed and following directions are issued against the opposite party:
i) to pay Rs.23,94,989/- (after deduction of Rs.10,000/- and excess clause 5% from Rs.25,31,041/-) along with interest at the rate of 6% from the date of repudiation of claim till realization;
ii) to pay Rs.35,000/- as compensation on account of mental agony and harassment as well as litigation expenses.
16. The appellant's case is that the fire which damaged the machine was caused from within the machine itself. It is contended that while a fire itself is covered for liability under the Policy, a fire from within the machine itself is excluded and therefore the Policy does not apply to the instant case.
17. Admittedly, the Schiffli Embroidery machine was damaged due to a fire in the insured premises. The claim of the respondent is essentially for the damage to this machine as it was located in the insured premises. The key issue is whether the origin of the fire was internal in the machine or external to it. In view of the fact that the report of the surveyor is not categorical and states that the fire 'might' have originated in the machine, this ground for repudiation of the claim is not justifiable. Repudiation on a more categorical determination of a ground for it is essential when a claim is being repudiated. Surveyor's report is based on a forensic investigation. The report which concludes that the origin of the fire 'might' have originated in the machine. Unless this conclusion is tentative is also contrary to the fact noted by the forensic report and the surveyor that the circuitry within the machine was found to be intact. It also ignores the fact that the external parts of this machine had been burnt on account of proximity tranche in which the electric wire was installed and which has been stated on affidavit by Mr Deepak Chauhan of Garima Electronics Inc., that short circuit had occurred here. When the forensic reports itself states that internal circuitry was found intact in the machine, the conclusion that the source of fire lay within the machine cannot be corroborated. For this reason, I find that the appellant has not been able to justify its reliance on the exclusion clause vide clause 7. The appellants reliance on the surveyor's report and his contention that the same cannot be accepted. Although an approved surveyor's report in the assessment of loss is a pre-requisite for payment or settlement of the claim of Rs.20,000/- or more by the insurer as per section 64 UM of the Insurance Act, 1938 the Hon'ble Supreme Court in Pradeep Kumar (supra) has held that the report is not sacrosanct or binding which cannot be departed from.
18. There is also merit in the contention of the respondent that the surveyor was not technically qualified to assess the nature of the fire as he was a Chartered Accountant and not a technical person.
19. In view of the foregoing, it is evident that the surveyor has incorrectly ascertained, by his own admission, a possible cause of the fire which caused damage to the Schiffli Embroidery machine on account of accidental fire. Appellant has not been able to justify the reasons for excluding the claim under the policy for which the onus lies upon him entirely.
20. In view of the foregoing, the appeal fails and is accordingly dismissed. Order of the State Commission is affirmed.
...................... SUBHASH CHANDRA PRESIDING MEMBER