M/S. M.S. Manufacturing Co. vs New India Assurance Companyltd. And Ors.

This appeal has been filed by the appellant M/s.M.S. Manufacturing Co. against the order dated 14.5.2014 of the State Consumer Disputes Redressal Commission, Haryana, (in short the State Commission') passed in Complaint No.78/2013.

Brief facts of the case are that the complainant is a partnership firm in the name and style M/s M.S Manufacturing Company for manufacturing of corrugated boxes. The firm purchased Standard Fire and Special Perils Policy from the New India Insurance Co. Ltd (respondent/opposite parties) covering the period from 18th June 2012 to 17th June, 2013. The total insured amount was Rs.70.00 lacs (i.e. Rs.30.00 lacs for building-super structure, Rs.20.00 lacs for plant machinery and accessories and Rs.20.00 lacs for stock and stocks in process). In the insurance policy, there was Clause 4, i.e. reinstatement value clause. On 5.01.2013, at about 3.30 a.m. fire broke out in the premises of the company. The fire could be extinguished after about six hours. FIR was got registered in police station Rai. The insurance company was informed. Surveyor appointed by the insurance company visited the spot. The surveyor gave his report dated 15.06.2013 and assessed the gross loss to the tune of Rs.42,84,138/-. (Rs.15,68,243/- for the loss of plant and machinery, loss to the building/super structure as Rs.6,28,520/- and Rs.20,87,375/- for the loss caused to the stocks). However, the depreciation was deducted on the loss to the plant and machinery and building and after deducting that, the net loss assessed for plant and machinery was Rs.7,84,120.50 and for building Rs.4,89,647/-. It has been alleged by the complainant that the depreciation should not have been taken into consideration in view of Clause 4 of the insurance policy. Aggrieved, the complainant filed a complaint before the State Commission. The State Commission vide its final decision dated 14.05.2014 passed the following order:-"

"Having considered the facts and circumstances of the case and the evidence available on the record, the complaint is partly allowed. The opposite parties are directed to pay Rs.15,79,730/- to the complainant as assessed by surveyor appointed by the opposite parties along with interest @9% per annum from the date of filing complaint till its realization."

Hence the present appeal.

Heard the learned counsel for both the sides and perused the record. The learned counsel for the appellant stated that the surveyor appointed by the Insurance Company was a 'C' class surveyor who had power to assess the loss in cases where the loss was upto Rs.5.00 lacs, whereas the instant claim was for about Rs.48,00,000/-. Thus, the report of the surveyor on the basis of which the State Commission has decided the complaint, is a report without jurisdiction and same cannot be relied upon for deciding the insurance claim of the appellant. It was further argued by the learned counsel for the appellant that the claim should have been approved by the Insurance Company on reinstatement value clause basis (clause no.4 of the policy) instead of on depreciation basis. No reason has been given by the Insurance Company for not applying clause no.4 of the policy.

Learned counsel for the appellant stated that the State Commission failed to consider the admission of the respondent in the evidence that in the event of loss the basis of settlement for stock the value immediately before the loss entered into the books of account is to be considered and the stock was to be considered for an amount of Rs.20,87,375/- whereas the surveyor has wrongly considered the loss to the tune to Rs.7,43,627/- in his survey report and the same has been considered by the surveyor in the addendum report that the loss to the stock was Rs.17,00,000/- which is a difference of about Rs.10 lacs which the surveyor has deducted illegally in its survey report.

Learned counsel for the appellant stated that the State Commission has totally relied upon the survey report and awarded the amount equivalent to the surveyor's assessment by observing that the survey report is a cogent piece of evidence and cannot be ignored lightly without any evidence contrary to it. Now the same surveyor has reassessed the loss in his addendum report dated 27.04.2015 to the tune to Rs.31,55,848/- after getting the property reinstated by the appellant with the funds received form the respondent as per the order of the State Commission.

Learned counsel for the appellant further stated that the appellant has sought extension of six months' time for reinstatement of the insured property from the respondent vide letter dated 27.12.2013, but no response was received from the respondent.

On the other hand, learned counsel for the respondent Insurance Company stated that after the submission of the report of the surveyor, a representation was received from the complainant and the surveyor was responding to that letter, however, before the surveyor could submit the final report, the complainant filed the consumer complaint before the State Commission, therefore, the Insurance Company could not decide the claim. The State Commission has found that the report of the surveyor does not suffer from any shortcoming and therefore, on the basis of the surveyor's report, the State Commission has passed the order. As the order of the State Commission is reasonable, no appeal has been preferred by the Insurance Company. So far as the reinstatement value clause is concerned, the complainant does not satisfy the basic conditions which are required for considering the claim on reinstatement basis. First of all, notice should have been given by the complainant within a period of six months that he wishes to reinstate the insured property. No such notice was received from the complainant. The Insurance Company can extend this period, but no application for extension was received. Moreover, the reinstatement has to be completed within a period of 12 months from the date of loss. Even this period can be extended by the Insurance Company, however no such representation has been received. Thus, the complainant does not fulfil the conditions required for considering the claim on reinstatement basis. The learned counsel for the respondent Insurance Company argued that the surveyors are appointed under the Insurance Act, 1938 and the insurance claims are to be settled on the basis of the surveyor's report. The surveyor's report cannot be rejected without any cogent reasons. The State Commission has rightly accepted the surveyor's report as there is no cogent reason to reject the report of the surveyor.

Learned counsel for the respondent Insurance Company stated that the State Commission has clearly observed that the appellant/complainant did not maintain stock register. Vat returns were not filed for the previous year. The Commission rightly pointed out that there could not be sudden jump in stocks to such high amount as claimed, more particularly when there was recession during that period throughout in the industry. Besides, in the absence of any stock register and going by the trend of previous years complainant's claim appears to be highly inflated. The Vat returns for three quarters only cannot be the basis for assessing the loss.

It was further stated by the learned counsel for the respondent Insurance Company that the appellant has filed only the two-page report of surveyors dated 27.4.2015 but the crucial annexures A, B and C forming part of the said report have been concealed. Otherwise also, the report has been obtained by the complainant, hence Insurance Company is not bound to consider the same. This report has been obtained after the disposal of the complaint by the State Commission, so it cannot have any effect on the decision of the complainant. Therefore, it cannot be considered in the appeal also as the appeal is only an extension of the complaint.

I have carefully considered the arguments advanced by both the learned counsel for the parties and examined the record. One of the objections of the appellant/complainant is that the surveyor has reduced the value of stock by about 10 lacs, for which there is no justification in this regard. The surveyor has mentioned the following:-

"We asked insured to provide detailed ledger of sales and Purchases, VAT returns etc. etc. After long meetings and requests made to them the same were made available to us. We have compared sales and purchase bill and Vat returns. We found that there is difference of almost 10 lakhs in given Sales/Purchase Bills as per calculations.

Hence loss claimed as burnt

Rs.

2087375.00

Less:50% (Reducing approx. Rs.10 lakhs being visible difference in government filled returns and the bills submitted to us)

Rs.

1043687.00

Hence approx. value of stock burnt

Rs.

1043687

Less:25% for no stock registers to facilitate the precise loss assessment

Rs.

260922.00

Hence loss for stocks

Rs.

782765.00

The loss of Rs.782765/- for stocks is further subject to loss adjustment of salvage and policy excess.

From the above, it is clear that the surveyor was justified in reducing the value of the stocks. It has also been stated by the leaned counsel for the complainant that the surveyor has deducted 25% of the value for not maintaining the stock register. It has been argued by the learned counsel that stock register is not required as industry was catering to the production of corrugated boxes on the basis of the orders received. This argument of the learned counsel is not tenable. As the complainant must be purchasing the raw material and must be making finished products, it is difficult to arrive at the value of the raw material or the finished products without any stock register, therefore, some approximation for actual assessment is required to be done by the surveyor.

The main argument of the appellant/complainant has been that the same surveyor has reassessed the loss on the request of the complainant and has increased the assessment from Rs.15,79,730 to Rs.31 lacs approximately. This assessment has been done after reinstatement which was the basis of the policy because by that time the complainant has completed the reinstatement of the building as well as of the plant and machinery. It is clear that the surveyor had earlier assessed wrongly and the state Commission has accepted that wrong report of the surveyor and has allowed the claim on that basis only. As per the provision of the Insurance Act, 1938, where the claim is more than Rs.20,000/-, the insurance company is under obligation to appoint a surveyor to survey and to assess the loss. Though the policy was on reinstatement basis, the reinstatement was under certain conditions. No notice has been given by the complainant in six months or within the extended period by the Insurance Company. The complainant has allegedly given a notice on 27.12.2013, but this has been given beyond the period of six months. Moreover, as per the condition of reinstatement value clause, the reinstatement is to be done within 12 months. However, in the present case reinstatement was not completed within the stipulated period and no application was given by the complainant for extension. The complainant approached the surveyor for reassessment only after the decision of the State Commission. If the surveyor has given a reassessment report on the request of the complainant, then clearly this report is not binding on the Insurance Company. This clearly shows unprofessional and unethical attitude and working of the surveyor. As the complainant did not meet the conditions for applicability of reinstatement value clause, the complainant is definitely not entitled to payment as per reinstatement value clause because there was no reinstatement when the claim was filed and when the claim was assessed and decided. In the absence of reinstatement value clause, the only method is the depreciation method on which the insurance claim is to be approved and the surveyor has done the same. Therefore, there seems to be no reason for not accepting the report of the surveyor dated 15.06.2013. Clearly, the second report of the surveyor has no value in the eyes of law and it cannot be considered.

Another point has been raised by the appellant/complainant that the surveyor was 'C' category surveyor who had power to assess the loss only upto Rs.5 lacs. The surveyor Mr. Piyush Singhal has assessed the loss as part of the firm V.P.Singhal & Co. Insurance Surveyor and Loss Assessor Pvt. Ltd., but the fact is that in reply to the RTI application, the IRDA has informed that Mr. Piyush Singhal was not a Director of the said firm as he stated in his examination in-chief. His application was only pending with the IRDA. Thus, Piyush Singhal assessed the loss only as an individual surveyor who was a category 'C' surveyor. This fact has not been denied by the Insurance Company and the learned counsel for the Insurance Company had stated during the argument that if the complainant was not satisfied with the surveyor, why did he approach the same surveyor for reassessment of the loss privately by paying the requisite fee? In this regard, it is seen that the complainant has not raised this point in the complaint and therefore, the opposite party could not reply to this point. Clearly no issue was made by the State Commission for decision in this regard. Ambit of the appeal cannot be enlarged beyond the pleadings filed before the trial court. From this aspect, in my view, this issue is not worth considering at the appeal stge. Moreover, vide circular dated 22.12.2008, IRDA has allowed the Insurance Companies to fix their own internal limits for different types of surveyors. Therefore, this seems to be an internal matter of the Insurance Company. However, if the complainant still feels aggrieved on this count, the complainant may approach the IRDA.

Based on the above discussion, I do not find any merit in the Appeal No.413 of 2014 filed by the appellant/complainant and the same is accordingly dismissed.