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Judgment
C. Viswanath, J
The Complainant stated that he is the proprietor of Kavit P.U. Foam Industries, manufacturing P.U. Foam since the year 1999. In 2004, the Complainant also started a CCF Plant. In the month of December, 2005, the Complainant got cash credit facility of Rs.2 Crores from Allahabad Bank. With the aid of said financial limit, the Complainant was able to increase its sales and gross Profit. The Complainant had taken a Standard Fire and Special Perils Policy from the Opposite Party for the period 26.02.2006 to 25.02.2007, wherein the building was insured for Rs.50 lakhs and the stocks for Rs.2.50 Crores. This sum was further enhanced by Rs.50 lakhs and the total insurance cover became Rs.3.5 crores. The stocks of the Complainant were duly verified by the Excise Department from time to time as the Complainant was liable to pay Excise duty on the same.
On the evening of 30.03.2006, there was a major fire at the Complainant's premises which caused heavy loss to the building and stocks therein. The fire authorities and the police were informed about the incident and both of them found the cause of fire to be short-circuit. The fire authorities took almost eight hours to extinguish the fire. Fire authorities also estimated the loss suffered to be to the tune of approximately Rs.2.5 Crore.
On the very next day i.e. 31.03.2006, the Opposite Party was informed about the said fire incident. The Opposite Party appointed M/s Aditi Consultants Pvt. Ltd. to survey and assess the loss. The Surveyors physically visited the premises of the Complainant and verified all the documents and records of the Complainant. The Complainant also submitted a Claim Bill to the Opposite Party prepared in accordance with the quantity available in the excise records. A volumetric analysis was also provided to the Opposite Party by the Complainant. Despite furnishing all documents, replying to all queries, physical verification being done, in gross violation of Regulation 13 of Insurance, Surveyors and Loss Assessors (Licensing, Professional requirement and Code of Conduct Regulations, 2000), no Survey Report was made or submitted within 30 days by the Surveyors M/s Aditi Consultants nor was any extension sought. Neither any letter was issued to the Complainant stating that there was any lack of co-operation from them nor was any such report submitted to the Opposite Party by the Surveyors M/s Aditi Consultants. This established the deficiency in service on the part of the Opposite Party. In fact, without any provision to this effect, a second entity by the name of M/s Royal Associates was appointed as "Investigators" to verify the claim of the Complainant. The Complainant co-operated with the "investigator" and provided all documents and physical verifications required by it. M/s Royal Associates is only a Category C Surveyor. Category C Surveyor is authorized to survey only motor vehicle related insurance claims and not Fire Insurance, which is done by Category A Surveyors. No explanation has been provided by the Opposite Party as to who this M/s Royal Associates was, what was its mandate, did the authority of surveyor's M/s Aditi Consultant end with appointment of a second entity and whether M/s Royal Investigator was a Chemical fire expert and more qualified than the Surveyors M/s Aditi Consultants to verify the claim of the Complainant. Under what provision could M/s Aditi Consultant base its Surveyor Report on the report of the said "Investigator". This was a gross violation of established Rules and Regulations by the Opposite Party and was a deficiency in service. It was alleged that the Survey Report or the decision of the Opposite Party on the Complainant's claim was never shared with the Complainant. In August, 2007, the Complainant visited the office of Opposite Party wherein it was informed that the claim was closed as a "no claim". Hence, Complainant filed the present Complaint.
Alleging deficiency on the part of Opposite Party, Complainant filed a Complaint before this Commission under Section 21 of the Consumer Protection Act, 1986, praying relief as under:-
a. To award a sum of Rs.2,52,58,964/- on account of loss caused to the stocks in favour of the Complainant and against Opposite Party No.1.
b. Award a sum of Rs.28,26,000/- on account of estimated cost to carry out repairs at the insured building.
c. Award interest @24% per annum on Rs.2,80,84,964/- from the date of fire till the date of realization of the amount in favour of the Complainant and against Opposite Party No.1.
d. Award additional interest @ 2% per annum under Regulation 9(6) of IRDA on Rs.2,80,84,964/- from the date of fire till the date of realization of amount in favour of Complainant and against Opposite Party No.1.
e. Award as sum of Rs.10,00,000/- on account of compensation in favour of Complainant and against Opposite Party No.1.
f. Award cost of the present proceedings in favour of the Complainant and against Opposite Party No.1.
g. Direct Opposite Party No.2 and 3 to waive off the interest being charged by them not to take any coercive steps: and
h. pass such further order(s) as it may deem fit and proper on the facts and in the circumstances of the present case.
Written arguments have been filed the Opposite Party, Insurance Company in which it was stated that the claim of the Complainant was based on fabricated and manipulated documents and fake bills. The surveyor and the investigator had concluded that the insured tried to manipulate the books of account and produced Purchase bills/invoice which were found fake to inflate the claim and to take advantage under the policy. Apart from that, the surveyor also raised doubts about the genuineness of the claim. Findings of the surveyor are summarised as under:-
i. The insured firm had availed credit facility of Rs.2 Crores from Allahabad Bank and the working capital limit was sanctioned on 27.10.2005. This was not disclosed to the insurance company and consequently the name of the bank and the agreed bank clause did not appear in the policy.
ii. The records submitted initially were incomplete. When the audited accounts were submitted by the insured, he was confronted about the incomplete record. The insured provided typed trial balance and the remaining ledger accounts were produced only in June, 2007.
iii. No salvage of burnt foam was available except for certain impression, that too at intervals was visible. The quantum of P.U. foam blocks of 98055 kgs. as claimed by the insured was not convincing in view of the condition of the remnants noticed during the first inspection. The claim for loss of cotton coated fabric of 47215 mtrs. also appeared inflated as during the inspection it was noticed that many of the rolls of fabric contained scarp, cut pieces of different colours and was old stock.
iv. The quantity of salvage available did not justify the quantum of loss claimed by the insured. No stacking plan for storage of goods was made available. The claim of the insured that no ashes were left after P.U. foam is burnt was belied from the fact that the surveyor burnt a P.U. foam block of size 6' x 6' being double of the sample burnt and the question of huge quantity of P.U. foam burnt in the incident does not arise.
v. The analysis of the audited balance sheets of the year 2003 to 2006 showed that the G.P. was showing a decreasing effect while in the year 2005-2006 showed a sudden increase to 12%.
vi. The analysis of the trading account, original and audited, for the period 01.04.2005 to 31.03.2006 found substantial variation.
vii. In respect of the loss of finished goods the insured had claimed 98055 kgs. P.U. foam. Huge production was noticed prior to the fire without any major order. From the analysis of the stock position, it was seen that the proportion of the input to output was distorted. The daily stock register an average till February 2006 showed a balance of 14000 kgs. However, in March, 2006 the balance showed a disproportionate increase to 53985 kgs. The surveyor after analyzing the entire stock position concluded that from April, 2005 to February, 2006, average manufacturing was 20358 kgs. and average sale was 19683 kgs. In the month of March 2006, the manufacturing shot upto 97666 kgs. and sale to 1,14,386 kgs. It was thus noticed that there was increase in manufacturing by 380% and sale by 482%. The Surveyor also commented on the associated concerns and various anomalies and manipulations found.
viii. Purchase bills and invoices were found to be fake and fabricated and as discussed above the enquiries by the investigator had revealed that the firm did not exist. In respect of other parties, the same could not be substantiated as the queries of the surveyor were not properly replied. The surveyor concluded that purchases worth 3.66 crores could not be substantiated.
ix. Similarly with regard to the sales, the statement would show that the sales have been made to Durga Agencies and RLF industries and the major part of the sales were in cash.
x. The analysis of the electricity consumption pattern clearly pointed out to the fact that the electricity consumption was not sufficient for such a huge production as claimed by the insured.
xi. The volume analysis conducted also did not substantiate the claim of the insured.
The claim of the Complainant was rightly repudiated under condition No. 8 of the Standard Fire and Special Perils Policy. The repudiation of the claim was on close scrutiny of documents and the recommendations of the surveyor and investigator appointed by the Opposite party.
The cause of fire, according to the Complainant, was electric short circuit. The same was not substantiated. Further, it was reported by the investigator that the inquiries made from the insured and his employees revealed that the main switch of the electric supply was switched off at 6 p.m. and the fire was reported at 8:50 p.m. As such the fire could not be due to electric short circuit. It was further submitted that the Opposite Party was informed about the fire only after 24 hours i.e. in the evening of 31.03.2006 and the police report was made on 01.04.2006 and thus there was scope for manipulating the facts and fabricating the documents.
The contention of the Complainant that it was the inherent nature of P.U. foam that in case of fire it evaporates leaving no ashes is totally incorrect. The surveyors in their report have categorically stated that they have burnt P.U. foam block and they were reduced to ashes.
The Complainant is referring to the Regulation 9 of the Insurance Regulatory and Development Authority (protection of policy holders interest) Regulations 2002 alleging delay in submission of the survey report. It was submitted that since the documents were voluminous and manipulations were noticed, further documents were required by the surveyor for correlating the figures in the documents earlier supplied by the Complainant. The documents which were sought by the surveyor were all relevant documents. Time was taken by the surveyor as the records submitted by the Complainant were fabricated and manipulated and the purchase invoices and bills were found to be fake. Time was taken for verification of the bills and further to co-relate the accounts. The voluminous records submitted by the Complainant required time to be analyzed, especially when it was manipulated and fabricated. Each and every entry was to be cross checked and purchase invoices and bills were to be verified. It was also denied that the surveyors were not competent to survey the loss in the present case or that they sought information and documents in piecemeal manner. As submitted above, the entries were to be cross checked from other documents and for which documents were sought.
The Complainant was not a Consumer within the meaning of Consumer under section 2(1) (d) of the Consumer Protection Act as the services were hired and availed for commercial purposes.
In the facts narrated herein above, it would be seen that no case was made out for the Complainant to invoke the provisions of the Consumer Protection Act in as much as there was no deficiency of service on the part of the answering Opposite Party and the claim had been rightly repudiated. The Complaint was therefore liable to be dismissed with costs.
In the alternative, it was submitted that in case this Hon'ble Commission holds that the repudiation was not correct, the liability of the company would be restricted to Rs.24,39,295/-, the amount assessed by the surveyor.
Heard the Learned Counsel for the Complainant as well as Opposite Party i.e. Insurance Company. Also carefully perused the record.
The Complainant is a manufacturer of PU Foams since the year 1999. He took a Standard Fire and Special Perils Policy from the OP Insurance Company from 26.02.2006 to 25.02.2007 initially for Rs.3 crores later increased to Rs.3.5 crores. Fire broke out in the factory premises on 30.03.2006. The cause of fire reported by the Complainant was due to short-circuit of electricity. Fire, Police Departments as well as the OP Insurance Company were duly informed about the incident. The OP appointed M/s. Aditi Consultants Pvt. Ltd. to survey and assess the loss. As the books of accounts appeared to be manipulated and the loss claimed to be highly exaggerated, the OP appointed an investigator M/s. Royal Associates. M/s Royal Associates was appointed by the Insurance Company to investigate the claim submitted by the Complainant. It is not illegal or undesirable on the part of the Insurance Company to verify the genuineness of the claim particularly when the claim amount happens to be substantial. In "National Insurance Company Ltd. vs. Harjeet Rice Mills" [III (2005) CPJ 6 (SC) = V 2005 SLT 5003], the Insurance Company engaged a private Investigator who reported that the fire might not have been caused by short circuit as was claimed by the insured and that it could have been arson or a deliberate attempt to make an insurance claim. The claimant contended that the report of the private investigator could not be looked into in the light of section 64(UM)(c) of the Insurance Act. Rejecting the contention it was held that section 64(UM) of the Insurance Act could not stand in the way of the Insurance Company in establishing that the claim was a fraud on the Company or that it was a case of deliberately causing a fire so as to lay the foundation for an Insurance Claim. The Investigator carried out detailed investigation and reported the purchase bills of certain companies to be fake and fabricated as the firms did not exist at the given addresses. The Investigator also reported that the cause of fire reported by the Complainant/insured was not true as there was no electricity supply in the godown at the time of the fire.
The cause of fire shown by insured as short circuit has not been substantiated. The main switch of the electric supply was switched off from 6:00 PM to 8:50 PM on that date. There is no evidence of the Complainant having requested the insurer to appoint an expert to visit the site of fire and give an expert opinion as regards cause of fire. The Complainant did not examine any expert nor file any evidence by way of affidavit before this Commission to establish that the fire in insured premises was actually caused due to electric short circuiting.
The Surveyor submitted his report on 05.07.2007, based on his inquiry, scrutiny of papers and documents as well as the report of the Investigator. He concluded that the insured manipulated the records and inflated the claim. The Surveyor had assessed the loss at Rs.24,39,295/-. In view of the manipulation and fabrication of records and recommendation of the surveyor and the Investigator the claim was repudiated vide letter dated 13.07.2007 in terms of condition 8 of the policy which is as follows:-
"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 sued 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."
As seen from the report of the Surveyor and the Investigator, the claim was based on fabricated and manipulated documents. The Surveyor burnt a PU Foam block in the presence of the insured and showed that if the stocks had got burnt, there had to be a certain amount of salvage. It was at variance with the assertion of the Complainant that no ashes are left after burning of PU foam. It was noticed that the salvage did not justify quantum of loss claimed by the Complainant. The surveyor reported substantial variation in various books of accounts maintained by the Complainant. It was also noticed that there was huge production before the fire, not backed by sufficient orders. The electricity consumption was also not substantiating the huge production claimed by the Complainant. Purchase bills and invoices were found to be fake and fabricated and the firms which issued the invoices did not exist. The Investigator reported that on verification, the purchase bills Kavit P.U. Leather Cloth Industries Pvt. Ltd., Kashipur, Sandeep Foam, Spurt Chemicals, Exxon Polychem, Khadipur, Delhi and Omex Polyplast were fake and fabricated as the firms by the said names did not exist at the address given in the invoices.
Despite the OP having claimed fraud on the part of the Complainant, no evidence has been produced before this Commission to prove that the invoices are genuine. No affidavit of any Director or employee of the aforesaid company has been filed to prove that the aforesaid invoices were genuine documents. The Complainant did not even make an attempt to request this Commission to send summons to the companies at the addresses given on the aforesaid invoices. Had that been done, this Commission would at least have come to know whether the Companies did exist at the given addresses. The Insurance Company was entitled to reject the claim on this ground alone. Furnishing of false and fabricated invoices is sufficient to reject the entire claim of the Complainant. The repudiation of claim under condition 8 of the Policy, by the Opposite Party after carefully considering the report of the Surveyor and the Investigator was justified. For the above reasons, the Complaint is hereby dismissed.