M/s Jaydatta Ginning And Pressing Factory vs ICICI Lombard General Insurance Company Limited & Anr

Heard Mr. Uday B. Dube, Advocate, for the complainant, Mr. D. Varadarajan, Advocate, for the opposite party-1 and Mr. Amol V. Deshmukh, Advocate, for opposite party-2.

M/s. Jaydatta Ginning and Pressing Factory (the Insured) has filed above complaint, for directing ICICI Lombard General Insurance Company Limited (the Insurer) to pay (i) Rs.39019803/- with interest @12% per annum from the date of incident till the date of payment, towards insurance claim; (ii) Rs.25/- lakhs, as compensation for mental agony and harassment; (iii) Rs.one lac, as litigation costs; and (iv) Any other relief, which is deemed fit and proper in the facts and circumstances of the case.

The facts as stated in the complaint and emerged from the documents attached with it, are as follows:-

(a) M/s. Jaydatta Ginning and Pressing Factory (the Insured) was a proprietorship concern and Navnath Vithoba Nagergoje was its sole proprietor. The Insured was engaged in the business of Trader and Commission Agent, having licence under Maharashtra Agriculture Produce Marketing Committee Act, 1963 since 2010-2011. The Insured established a modern factory for ginning and pressing cotton at Gat No.941, Nagar Jamkhed Road, Post Pokhari, Taluka Ashti, District Beed with the financial assistance of Nagar Urban Co-operative Bank Ltd., who had sanctioned a Term Loan of Rs.12000000/- on 04.10.2010 and Cash Credit Facility of Rs.12000000/-, sanctioned on 28.04.2014, which was enhanced to Rs.18000000/- on 30.12.2014.

(b)  Nagar Urban Co-operative Bank Ltd. had a tie up with ICICI Lombard General Insurance Company Limited (the Insurer), which was an Insurance Company and used to provide insurance services to the general public. The Insured took “Standard Fire and Special Perils Insurance Policies”, i.e. (i) Policy No.1001/68600453/03/, for the period of 31.12.2014 to 30.12.2015, for a sum of Rs.2000000/-, for building, (ii) Policy No.1001/68600454/03/, for the period of 31.12.2014 to 30.12.2015, for a sum of Rs.5500000/-, for building, (iii) Policy No.1001/63385702/04/, for the period of 31.12.2014 to 30.12.2015, for a sum of Rs.18000000/-, for Plant & Machinery, (iv) Policy No.1001/90433527/00/, for the period of 07.05.2014 to 06.05.2015, for a sum of Rs.12000000/-, for stock and (v) Policy No.1001/99251250/00/, for the period of 14.01.2015 to 13.01.2016, for a sum of Rs.12000000/-, for stock, from the Insurer.

(c) The factory was closed on 13.04.2015, in day time due to heavy rains and storm. Around 21:00 hours, the workers tried to start factory and filled the cotton in the press box. The operator turned the box for pressing. During pulling down, the door-less (press-head) got stuck up and jammed, due to which, the factory could not run in night also. The operators and fitters went to sleep in their rooms in the factory premises. Around 1:10 hours on 14.04.2015, the operators and the fitters heard noise and came out from their rooms and saw that entire platform of ginning had caught fire. They immediately informed the proprietor Navnath Vithoba Nagergoje. The proprietor informed the fire incident at his factory premises to the police station Ashti and Fire Service Station Jamkhed on telephone. In the meantime, the workers of the factory and local residents tried to douse the fire by sprinkling water through the hydrant system of the factory. In the meantime, fire tender came on the spot, which could douse the fire till 11:00 hours on 14.04.2015.

(d) On written information of the proprietor, FIR No.02/2015 was registered at 21:45 hours on 14.04.2015 at police station Ashti. Investigating Officer of the police inspected the spot on 15.04.2015 and prepared spot inspection memo. He took samples of the burnt stock from 10 different places and recorded Panchnama mentioning that about 1200 quintals raw cotton and 130 bundles of finished cotton were burnt. The police sent 10 samples of the burnt stock for forensic examination to Regional Forensic Science Laboratory, Aurangabad.  Tehsildar Ashti submitted a report to the Collector relating to the fire incident in the factory of the Insured on 16.04.2015. Electrical Engineer, Department of Industry, Energy and Labour, Vidyanagar (P), Beed also inspected the factory premises of the Insured and submitted his report dated 27.04.2015 that the fire was initiated due to short circuit as there was fault in the internal wiring and one panel. Grampanchayat, Jamkhed issued certificate dated 16.04.2015 of the fire incident. Agricultural Product Market Committed issued Certificate dated 22.05.2015. Forensic Science Laboratory, Aurangabad, submitted Forensic Examination Report dated 26.08.2015, stating that petroleum hydrocarbon residues were negative in the samples. The police submitted Final Report dated 24.01.2016, for closure of the case.

(e) The Insured informed the Insurer about the fire incident in his factory and consequent loss on 14.04.2015. In order to ascertain cause of fire, the Insurer appointed ‘Truth Labs, Hyderabad’ as Investigator on 15.04.2015. Dr. T.S.N. Murthy, Director Technical and G.J. Bhaktha Swaroop, Scientific Officer of Truth Labs inspected the factory premises of the Insured on 17.04.2015 and 18.04.2015. They recorded statement of the witnesses, took photographs and collected samples for forensic examination. After forensic examination reports of the samples as well as on examination of other documents, Truth Labs submitted its report dated 07.07.2015, stating that the incident of fire occurred at the factory premises of the Insured due to human intervention by igniting ginned cotton with hydraulic lubricant oils readily available in the ginning mill, thereby initiating, propagating and burning of the entire flammable materials by someone who has the motive, means and opportunity to carry out malicious act.

(e) The Insurer appointed ‘Kamal Biyani Associates, Engineer, Surveyor and Valuers, Pune’ as the surveyor on 14.04.2015, who inspected the affected site on 14.04.2015. He took photographs, recorded statements of the witnesses and prepared inventories. The surveyor submitted Preliminary Survey Report dated 27.04.2015. The surveyor demanded various papers as a proof of the incident and for assessment of the loss. The Insured supplied some documents for assessment of loss. The surveyor again, vide letter dated 02.05.2015, demanded some more papers. The Insured supplied some more papers on 01.06.2015, 21.08.2015 and 18.09.2015. The Insured claimed Rs.2399262.41 for Building, Rs.21924221/- for Machinery, Rs.9069487/- for Raw cotton and Rs.5617915/- for Finished cotton (total Rs.39010885.41). The surveyor, vide letter dated 18.11.2015, asked for certain clarifications, which were replied on 26.11.2015.

(f)  The surveyor submitted Final Survey Report dated 23.04.2016, stating that fire was not accidental and was stage managed. Since inception of the factory, it was given on job work basis to Manjeet Cotton and Sai Cotex. Term Loan of Rs.12000000/- was foreclosed on 23.04.2014 and in May, 2014. The Insured obtained Cash Credit Facility of Rs.12000000/- on 28.04.2014, which was enhanced to Rs.18000000/- on 30.12.2014. In May, 2014, the Insured withdrew Rs.1.2 crores from this account although it was not a crop season for the cotton. According to the Insured, Rs.9867473/- were given to the middlemen as advance for purchase of cotton, which was purchased in January, February and March, 2015. Advance payment before sowing the crop was not acceptable. When the farmers were known to the Insured, payments to middlemen create doubt. In statement of the account, the Insured has mentioned that Rs.4029253/- had to be paid for purchase of raw cotton. For this reason also advance payment was not required. Stock Audit dated 03.02.2015, shows that closing stock of Rs.10337500/-. While in Books of Account, total stock of Rs.3348313/- was shown. Stock Audit shows closing stock on 31.03.2015 of Rs.17697600/-, while in balance sheet it was shown as 00. As per sales record, 100 bales each were sold on 07.03.2015 and 08.03.2015, vide Invoice Nos.118 & 119. In manual weighbridge register two lots were dispatched on 15.03.2015 and 17.03.2015 and in computerized weighment register two more lots dispatched on 16.03.2015. The production of the bales as shown in January, 2015, February, 2015, March, 2015 and April, 2015 were not matching with electricity consumption during this period. The surveyor opined that the claim was based upon fabricated papers. The Insurer repudiated the claim, vide letter dated 05.05.2016, invoking Condition No.8 of the General Condition. Then this complaint was filed on 25.01.2017, alleging deficiency in service.

The Insurer filed its written reply on 27.04.2017 and contested the complaint. The facts relating to obtaining insurance policies, loss occurred to the Insured due to fire on 14.04.2015, appointment of the surveyor on 14.04.2015 and investigator on 15.04.2015, report of investigator dated 07.07.2015, Final Survey Report dated 23.04.2016 and repudiation of the claim on 05.05.2016, have not been disputed. The Insurer stated that the surveyor found that there was a serious financial irregularity in the books of account submitted by the Insured. The production figures were not commensurate with power consumption. Different documents show different figure of the quantity of the stock. The surveyor analysed financial books with circumstances. Since inception of the factory, the Insured was doing job work to Manjeet Cotton and Sai Cotex. Job work bills of Rs.1470000/- and Rs.720300/- were raised in the name of Manjeet Cotton on 20.04.2014 and 01.11.2014. The valuation report of the bankers dated 25.02.2014, indicates that the foreclosing of term loan and conversion of cash credit was done technically to regularise the account. Advance payments of Rs.9867473/-, in May, 2014 to middlemen i.e. 9 months before actual purchase, create doubt in respect of the transactions particularly when the farmers were known then advance payment to middlemen was not required. From the documents of the Insured, it was proved that till December, 2014, purchase of raw cotton was not started but in the statement of stock as submitted to the bank on 22.12.2014, stock of Rs.14000000/- was shown. In fact, actual purchase of raw cotton was started from 17.01.2015. Stock Audit dated 03.02.2015, shows that closing stock of Rs.10337500/-. While in Books of Account, total stock of Rs.3348313/- was shown. Stock Audit shows closing stock on 31.03.2015 of Rs.17697600/-, while in balance sheet it was shown as 00.  As per sales record, 100 bales each were sold on 07.03.2015 and 08.03.2015, vide Invoice Nos.118 & 119. In manual weighbridge register two lots were dispatched on 15.03.2015 and 17.03.2015 and in computerized weighment register two more lots dispatched on 16.03.2015. These sales were not shown the sales register. The production of the bales as shown in January, 2015, February, 2015, March, 2015 and April, 2015 were not matching with electricity consumption during this period. The Insured was grossly exaggerated its claim for the stock as such, the claim was repudiated as per Condition No.8 of the General Condition of the policy. There was no deficiency in service on the part of the Insurer. The Insurer also raised preliminary issues relating to maintainability of the complaint.

The Insured filed Rejoinder Reply, Affidavit of Evidence, Affidavit of Admission/Denial of documents of Navnath Vithoba Nagargoje, annexing Affidavits of Shankar (Fireman) and Kalyan N. Kotecha (Charted Accountant) and various documentary evidence. The Insurer filed Affidavits of Evidence of Vikash Goyal, Manager Legal, Dr. T.S.N. Murthy, (Director Technical, Truth Labs) and Kamal Biyani (the surveyor) and Affidavit of Admission/Denial of documents of  Vikash Goyal and documentary evidence. Both the parties have filed their written synopsis.

We have considered the arguments of the counsel for the parties and examined the record. The main issue relates to the cause of fire. M/s Truth Lab in its report dated 07.07.2015 observed that the incident of fire occurred due to  human intervention by igniting ginned cotton with hydraulic lubricant oil readily available in the ginning mill, thereby initiating, propagating and burning of the entire flammable materials by someone who has the motive, means and opportunity to carry out malicious act. On the other hand, in as per provisions of circular dated 04.03.2015, issued by the Government of Maharashtra, the police authorities took help of Regional Forensic Science Laboratory to ascertain the cause of fire, who vide its report dated 26.08.2015 observed that results of the tests for detection of petroleum hydrocarbon residues on exhibit Nos. 1 to 10 are negative. The aforesaid finding of Regional Forensic Science Laboratory ruled out observation of M/s Truth Labs that the fire was caused by human intervention by igniting ginned cotton with hydraulic lubricant oil. Moreover, there is report dated 27.04.2015 of the Electrical Inspector, who observed that due to fault in the internal wiring, there was a short circuit in one of the panel, which resulted in the accidental fire. Therefore, we accept that the fire was caused due to electrical short circuit and not due to human intervention as alleged by the opposite party.

Now, we come to the quantum of loss.  The claim was repudiated invoking Condition-8 of the General Condition of the policy, which is quoted below:-

“1. The policy shall be voidable in the event of misrepresentation, mis-description or non-disclosure of any material particular.

If the claim be in any respect fraudulent, or in any false declaration be made or used in support thereof or 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 wilful act, or with the connivance of the insured, all benefits under this policy shall be forfeited.”

From inception of the factory, the Insured was doing job work to Manjeet Cotton and Sai Cotex. Job work bills of Rs.1470000/- and Rs.720300/- were raised in the name of Manjeet Cotton on 20.04.2014 and 01.11.2014. The Insured obtained Cash Credit Facility of Rs.12000000/- on 28.04.2014, which was enhanced to Rs.18000000/- on 30.12.2014 from Nagar Urban Co-operative Bank Ltd. The Insured obtained Policy No.1001/90433527/00/, for the period of 07.05.2014 to 06.05.2015, for a sum of Rs.12000000/-, for stock and (v) Policy No.1001/99251250/00/, for the period of 14.01.2015 to 13.01.2016, for a sum of Rs.12000000/-, for stock, from the Insurer. The Insured claimed Rs.9069487/- for Raw cotton and Rs.5617915/- for Finished cotton, which is allegedly exaggerated.

The surveyor found that actual purchase of raw cotton was started from 17.01.2015 by the Insured. But the Insured has shown that advance payments of Rs.9867473/-, in May, 2014 to middlemen i.e. 9 months before actual purchase, which create doubt in respect of the transactions particularly when the farmers were known, advance payment to middlemen was not required. Necessity of advance payment was disbelieved further on the ground that according to the own record of the Insured, Rs.4029253/- was due for payment to the farmers. Statement of stocks as submitted to Nagar Urban Co-operative Bank Ltd. contain various overwriting. Till January, 2015, purchase of raw cotton was not started but in the statement of stock as submitted to the bank on 22.12.2014, stock of Rs.14000000/- was shown. Statement of stock as submitted to the bank on 01.03.2015 shows stock of Rs.9072676/-. No reason has been assigned how stock was reduced December, 2014. Statement of stock as submitted on 01.04.2015 shows Rs.23221740/-. Huge purchase in March, 2015 of Rs.14149064/- has not been proved from purchase register and its payment was also not proved. Stock Audit dated 03.02.2015, shows that closing stock of Rs.10337500/-. While in Books of Account, total stock of Rs.3348313/- was shown. Stock Audit shows closing stock on 31.03.2015 of Rs.17697600/-, while in balance sheet it was shown as 00.

As per sales record, 100 bales each were sold on 07.03.2015 and 08.03.2015, vide Invoice Nos.118 & 119. In manual weighbridge register two lots were dispatched on 15.03.2015 and 17.03.2015 and in computerized weighment register two more lots dispatched on 16.03.2015. The production of the bales as shown in January, 2015, February, 2015, March, 2015 and April, 2015 were not matching with electricity consumption during this period. On the basis of these discrepancies, the surveyor found the transactions as fictitious. From above discussions, exaggeration of the claim is proved. Therefore, the opposite party was justified in repudiating the claim towards stocks, invoking clause 8 of the General Conditions. However, on the basis of exaggerated claim towards stock, the opposite party cannot repudiate the claim towards building and plant & machinery for which there were separate policies. Therefore, complainant is entitled for reimbursement of loss suffered towards building and plant & machinery. The Surveyor has discussed each and every aspect of the claim in great detail. The report submitted by a Surveyor is an important piece of evidence and has to be given due weight, though it is not sacrosanct and can be ignored, provided there is cogent evidence otherwise. The opposite party has not produced any evidence to show that the assessment made by the Surveyor is not correct. The Surveyor assessed the net loss of Rs.43,98,960/- under five policies. However, the Surveyor has not given breakup of the assessment.

ORDER

In view of the aforesaid discussion, the complaint is partly allowed. The opposite party is directed to obtain supplementary survey report from the Surveyor specifying the loss sustained by the complainant towards building and plant & machinery, within three months from this order. Thereafter, the opposite party shall pay the amount assessed by the Surveyor, with 9% interest from the date of repudiation till realization, within two months from the date of supplementary survey report.