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Judgment
C. Viswanath, J
Brief facts of the Case are as follows:-
According to the Complainant, it is a wholly owned subsidiary of SEB International SAS, France and was originally incorporated as "Maharaja Whiteline Industries Limited" on 02.09.2005. The Complainant obtained a "Standard Fire & Special Perils Policy - Floater Policy No. 212203/11/2014/26" from the Opposite Party, from 15.04.2013 to 14.04.2014, towards insurance of stocks of all kinds of Electrical, Electronics, Home Appliances, Common Goods like Washing Machine, Fridge, Mixer Grinder, Hand Blenders, Electrical Kettles, Coolers, A.C. Food Processors and other similar goods pertaining to the trade of the Complainant for a sum insured of Rs.20,00,00,000/-. It was submitted that the Complainant provided each and every information to the Insurance Company as sought in the proposal form at the time of obtaining the insurance policy. Among other information and related documents, the Complainant provided the list of the godowns, which was duly acknowledged by the Insurance Company.The Complainant also declared the location and addresses of all 20 godowns. The Insurance Policy was a floater policy, covering goods which were easily moveable and lying in different godowns of the Complainant spread across India. In utter violation of Regulations 4 and 7 of the Insurance Regulatory and Development Authority (Protection of Policy Holders Interests) Regulation 2002, the Insurance Company neither provided a copy of the proposal within a period of 30 days from the date of acceptance of the proposal nor a copy of the policy bond, including its terms and conditions to the Complainant. It provided only a cover note. The Complainant, through various letters, asked the Insurance Company to provide copy of the proposal form, including the policy and terms and conditions, however, in vain. The Complainant filed an application under RTI Act, 2005, vide dated 07.08.2015. The Insurance Company, vide its reply dated 07.09.2015, provided a copy of the Insurance Policy to the Complainant, which was duly received in the office of the Complainant on 25.09.2015. However, in the letter dated 07.09.2015, the Opposite Party mentioned that the copy of the proposal was annexed, but no such copy of the proposal form was annexed therewith.
On 09.07.2013, at around 6:45 pm, due to heavy rain, there was water logging on the road attached to Godown at 52-A and 52-C, Nangloi Extension, Najafgarh Road, Water Tank, Nangloi, New Delhi -110041 and water entered the godown, causing huge loss to the goods of the Complainant. The Complainant, vide letter dated 10.07.2013, informed the Opposite Party, that due to heavy flood material lying in the godown situated at 52A-C, Nangloi Extension, Najafgarh Road, Near Water Tank Nangloi, New Delhi-1100041 got affected because of water entering the godown on 09.07.2013. The Complainant requested the Insurance Company to register the claim and depute a Surveyor at the earliest. Thereafter, Surveyor M/s S. Soni & Co., was appointed by the Insurance Company to ascertain the nature and the value of the loss suffered by the Complainant. On 16.07.2013, an inspection of the damaged goods in the godown of the Complainant was conducted by the Surveyor. On 04.08.2013, physical inventory of the goods was concluded by the Surveyor. Total value of damaged stocks was assessed at Rs.74,91,829/-. On 13.08.2013, necessary documents/information as sought by the Surveyor from the Complainant were duly supplied to the Surveyor. The Surveyor accepted the claim of the Complainant to the extent that it had suffered a loss of Rs.67,00,741.24/- on account of water logging, due to flooding of the godown. The Surveyor's report categorically recorded that he verified all the relevant documents and information, including the fact that the stock records had been maintained properly, and accounts and inventory were in order.
It was alleged by the Complainant that neither the salvage value of the damaged stocks, i.e. Rs.31,00,000/- as obtained in e-auction nor Rs.2,91,786/- as obtained in sealed tenders was recovered and both the auctions were cancelled by the surveyor M/s S. Soni & Co. under the directions of Insurance Company. An insurance claim salvage is the portion of property that has no use, but has only scrap value and insurance company takes the possession of the same after paying the claim for the loss. Complainant has no objection to deliver the possession of the salvage of the damaged stocks to the Insurance Company on payment of the insurance claim to the Complainant. The Complainant is entitled to the total value of the loss suffered and assessed by the surveyor, more particularly in view of the fact that the salvage has no sealable value. The Complainant had neither interfered in the conduct of e-auction nor in inviting the physical tenders after cancellation of e-auction. On 20.07.2015, the Insurance Company repudiated the claim of the Complainant on incorrect grounds. Hence, the Complaint was filed.
Alleging deficiency on the part of Opposite Party, a Complaint was filed before this Commission under Section 21 of the Consumer Protection Act, 1986, praying relief as under:-
Pass an order directing to the Opposite Party Insurance Company to pay the insurance claim of Rs.96,59,269/-.
Pass an order directing the Opposite Party Insurance Company to pay and amount of Rs.1,40,477/- towards publication of notice inviting tender for physical auction of the salvage.
Pass an order directing Opposite Party Insurance Company to pay an amount of Rs.5,60,000/- towards rent paid for the storage of the damaged stocks and further Rs.35,000/- per month and such further charges as may be incurred by Complainant till possession of salvage is taken by Opposite Party.
Pass an order directing the Opposite Party to pay to the Complainant to pay an amount of Rs.10,00,000/- towards the damages for acute mental harassment, torture, agony caused to the Complainant and deficiency in service on the part of the Opposite Party Insurance Company.
Pass an order directing the Opposite Party to pay pendent elite and future interest @12% p.a. on the aforesaid amount till and full final recovery.
Pass an order directing Opposite Party to pay the cost of litigation accruing to the Complainant in pursuing the present claim.
Pass any other or further order(s) which the Hon'ble Commission deem fit and proper in the interest of justice, equity and good faith.
The Complaint was contested by the Opposite Parties by filing Written Statement in which it was contended that this Commission had no pecuniary jurisdiction to entertain and try the present Complaint, in as much as the principal amount claimed in the present Complaint was less than Rs.1 Crore. It was submitted that the Insurance Company after scrutiny of the claim documents and examining the facts and circumstances of the case and the terms of insurance cover and further due application of mind came to the conclusion that the claim was not payable. As such no deficiency of service or negligence could be attributed on the part of the Opposite Parties. The present Complaint was not maintainable within the provisions of the Consumer Protection Act.
As per survey investigation report, it is evident that the Complainant concealed the following material facts at the commencement and/or during the currency of policy.
a. The Auditors of the Complainant have declared the Company as "Sick Industrial Unit" as per "Sick Industries Repeal Act 2003" as accumulated losses at the end of financial year 2013 was equal to or exceeded the entire net worth of the company.
b. The affected Godowns in which the goods were stored were located below the level of road approaching the building. The two feet wall constructed in front of the Gate of the building was not sufficient as it was already much below the level of road and the water entered the Godown within few hours of rain. The Complainant was well aware that the level of Godowns had decreased below the ground level, because repeated construction of the Road in front of the Godowns and the water could easily enter the Godowns.
c. The Surveyors have also pointed out that the Complainant entered into a collaboration with a MNC to run the business which was also not disclosed to the insurer and the interest of the collaborators in the risk insured could not be ascertained.
d. The Premises in which the goods were stored should be legally occupied as an owner or under the contract of lease/rent agreement etc. by the insured, but the Complainant could not establish either of the two above, and the Surveyors as mentioned in their report, were provided only with Electricity bill as ownership proof, which was not sufficient.
As per policy conditions, the insured is required to act as if he is uninsured, during the policy period but the Complainant acted in an unreasonable and careless manner and no reasonable precautions were taken in advance to protect the stock, resulting in the loss and damage of the stock. Further, there was a gross violation of condition No.1 and 3 of the policy of insurance which read as under:
Policy Condition No.1 - ................... This policy shall be voidable in the event of misrepresentation, mis-description or non-disclosure of any material particular.
Policy Condition No.3 .......... Under any of the following circumstances the Insurance ceased to attach as regards the property effected unless the Insured, before the occurrence of any loss or damage obtains the sanction of the Company signified by endorsement upon the policy or on behalf of the Company:-
i. If the trade of manufacture carried on be altered, or if the nature of occupation of or other circumstances affecting the building insured or containing the insured property be changed in such a way as to increase the risk of loss or damage by the insured perils.
ii. If the building Insured or containing the Insured property becomes unoccupied and so remains for the period more than 30 days.
iii. If the interest in the property passes from the Insured otherwise than by will or operation of law.
iv. Investigators were not provided with the stock register and details of damaged goods. So, the proper investigation could not be carried out due to non-cooperation by your authorized representatives. As such it is also violation of condition No.6 of the policy which read as under:
Policy Condition No.6 .................i.) on the happening of any loss or damage the insured shall forthwith give notice thereof to the Company and shall within 15 days after the loss of damage, or such further time as the company may in writing allow in that behalf, deliver to the Company:
a. xxxxxxx
b. Particulars of all other insurances, if any, the Insured shall also at all times at his own expense produce, procure and give to the Company all such future particulars, plans, specification, books, vouchers, invoices, duplicates or copies thereof, documents, investigation reports (internal/external), proofs and information with respect to the claim and the origin and the cause of the loss and the circumstances under which the loss or damage occurred, and any matter touching the liability or the amount of the liability of the Company as may be reasonably required by or on behalf of the company together with a declaration on oath or in legal form of the truth of the claim and of any matters connected therewith. No Claim under this policy shall be payable unless terms of such condition have been complied with.
The Complainant was engaged in commercial activities and had taken the insurance policy for commercial purposes, was not a Consumer and thus the present petition was not maintainable under the provisions of the Consumer Protection Act. It was in alternative, submitted that the Surveyor had assessed the loss at Rs.19,76,403/- and the Complainant in any case is not entitled to any amount over and above the said amount. It was further submitted that while arriving at the assessment of loss, the Surveyor had deducted Rupees Thirty One Lakhs towards the salvage value as per the maximum bid received in the e-auction. The Complainant, however, disposed of the salvage by a public auction on 02.12.2016 for Rs.7.22 lakhs after permission was sought from this Hon'ble Commission. The said value cannot be considered for the purposes of the claim as the salvage value has considerably reduced with the passage of time in as much as the loss had taken place on 09.07.2013 and the salvage was disposed on 02.12.2016. It was, therefore, prayed to dismiss the Complaint with costs.
Heard the Learned Counsels of the Complainant as well as the Opposite Parties. Also carefully perused the record.
The Complainant company obtained "standard fire and special peril policy" - floater policy 212203/11/2014/26 from the Opposite Party Insurance Company for all 20 godowns. On 09.07.2013 due to heavy rain there was water logging on the road and water entered the godown causing loss of goods of the Complainant and the matter was informed by the Complainant to the Insurance Company on 10.07.2013. The Insurance Company appointed a surveyor and he inspected the premises and goods. The Company also appointed Royal Associates to investigate the matter, who submitted their report on 18.01.2014. The Surveyor after scrutinizing the record of the Complainant and seeking clarifications on various aspects and after verification of all documents submitted report on 26.12.2014. Based on the Investigation Report and Surveyor Report, the OP Insurance Company repudiated the claim, vide letter dated 20.07.2015.
The issue for consideration is as to whether the Complainant can be said to be a consumer as defined in Section 2(1)(d) of the Consumer Protection Act or not. It has been held by this Commission in Harsolia Motors v. National Insurance Co. Ltd. I, (2005) CPJ 27 (NC) decided on 03.12.2004 that since an insurance policy is taken for reimbursement or for indemnity of the loss which may be suffered on account of insured perils, the services of the insurer cannot be said to have been hired or availed for a commercial purpose, this Commission does possess the requisite jurisdiction to entertain a Consumer Complaint wherever a defect or deficiency in the services rendered by an insurer is made out. In view of the above, the Complaint is held maintainable.
In the present case, the compensation claimed is more than Rs.1 crore. In deciding the pecuniary jurisdiction we are governed by "Ambrish Kumar Shukla & Ors. Vs. Ferrous Infrastructure Pvt. Ltd., CC No. 97 of 2016 dated 7.10.2016 and based on the compensation claimed by the Complainant, the Complaint meets the pecuniary jurisdiction of this Commission and hence Complaint is held maintainable.
The Opposite Party alleged that certain facts have been concealed by the Complainant. The company has been declared as a sick unit and also had entered into collaboration with an MNC to run the business which was not disclosed to the Insurer. The interest of collaborator in the risk insured could not be ascertained.This matter was discussed by the surveyor with the representative of the insured and it has been explained that they have made collaboration with a multinational firm to run the company. The Surveyor on verification of the electricity bill provided by the Complainant, noticed that the same is for the affected location and was covered under the Policy. The grounds of non-disclosure/concealment for the repudiation of the claim are not tenable as they do not relate to any material information which would be of any consequence and effect the risk involved or claim made. There is no fraud or undue benefit involved. The surveyor has fully gone into the whole matter, verified all books of accounts as well as the stocks and arrived at his own calculation of loss.
The Complainant had taken adequate precautions for the safety of stocks stored in the godown. The Surveyor in his report clearly stated that even though the insured had constructed a wall upto 2 ft. in front of the gate, the water level outside was much higher and water entered the godowns causing damage. The Complainant had taken reasonable precaution to protect his stocks from loss and damage. The investigator also stated that the loss seemed to be genuine and assessment may be carried out by the Surveyor.
The Surveyor stated in his report that the insured is maintaining records on centralized SAP package which is an authentic ERP System for inventory and accounts. They are maintaining a stock register with inwards, outwards and closing stock with value and quantity details of each item. The Surveyor also cross-checked the stock register randomly with the stock transfer analysis and with the sale and purchase bills and found that the insured had properly maintained the stock records. The insured had been making payment against purchase through bank only and the report proves the authenticity of the purchase. The insured provided sales ledger account from 01.04.2013 to 09.07.2013 along with major sales and stock transfer invoices. The Surveyor verified the same and found it to be correct.
The insured provided details of damage items and their loss claim statement and on valuation of damage stocks the Surveyor arrived at a given loss of Rs.67,00,741.24 and net loss of Rs.19,76,403.20.
The Surveyor in his assessment of dead and slow moving stock has made a deduction of 1% on items falling under the category of 3 months or less, 25% deduction for the items falling under the category of one year or more and 50% deduction for the items falling under the category of 2 years or more and 75% deduction for the items falling under the category of 3 years or more. I am unable to agree with the assessment of dead stock made by surveyor.The items stored are not perishable commodities or even agricultural produce which would have a short shelf life and would deteriorate fast. A prudent person would not believe that Electronics and electrical goods would depreciate quickly and therefore, it would be reasonable, just and fair to deduct 1% of the assessed loss towards dead stock. Moreover, it is seen that the surveyor in the very same report while assessing the 'Value at Risk' takes the dead stock factor as 1%.
While arriving at the assessment of loss, the Surveyor had deducted a sum of Rs.31 lakh towards salvage value as per the maximum bid received in the e-auction. However, this e-auction was not accepted by the Surveyor as well as the Opposite Party Insurance Company. In order to obtain a better salvage value, sealed tenders were invited in which only one bidder participated for a sum of Rs.2,91,786/-. Since the amount was less, the same was cancelled and finally the Complainant recovered Rs.7,20,000/- towards salvage value after sale was conducted as per the directions of this Commission.
It is thus seen that the higher amounts of Rs.31 lakh taken as salvage value by the Surveyor, was only a notional value obtained in the e-auction which was not approved by the Insurance Company as well as the Surveyor. The non-acceptance of Rs.31 lakh obtained in e-auction cannot be attributed to the Complainant and the responsibility squarely rests with the Insurance Company and hence cannot be accepted. Finally at the behest of this Commission, the Complainant in Public Auction recovered only Rs.7,22,000/- towards salvage value, which is to be deducted in arriving at the net loss.
Net loss is arrived at as follows:-
Gross Loss assessed by Surveyor
Rs.67,00,741.24
Less uncovered stocks
Rs.4,59,456.72
Total Gross Loss
Rs.62,41,284.52
Less Dead Stock etc. (1%)
Rs.62,412.84
Net Loss
Rs.61,78,871.68
After applying average of 86.70%
Rs.53,57,081.74
Less 5% Excess
Rs.2,67,854.09
Net Adjusted Loss:
Rs.50,89,227.65
Less Salvage Value
Rs.7,22,000.00
Net Amount Payable
Rs.43,67,277.65
In view of above, the complaint is partly allowed. The Opposite Party is directed to pay a sum of Rs.43,67,227.65 towards claim of the Complainant alongwith compensation in the form of simple interest @9% p.a., with effect from the date of repudiation of the claim till realization, within 8 weeks from the date of pronouncement of this order. There shall be no order as to costs.