M/s Pioneer Dyeing Pvt. Ltd vs Oriental Insurance Co. Ltd

Avm J. Rajendra, Avsm, Vsm (Retd.) Member

The present First Appeal has been filed under Section 19 of the Consumer Protection Act, 1986 (“the Act”) against the Order dated 13.03.2019 passed by the State Consumer Disputes Redressal Commission, Maharashtra, (“the State Commission”), in Consumer Complaint No. CC/158/2013, wherein the Complaint filed by the Complainant (Appellant herein) was dismissed.

The Complainant initially filed a Consumer Complaint No. 158 of 2013 before the learned State Commission, and vide Order dated 21.06.2016 the same was partially allowed. The Complainant (Appellant herein) challenged this order by filing FA/964/2016 before this Commission, contending that the learned State Commission inadvertently considered a previously settled ‘marine claim’ instead of the sought-after ‘Fire claim’ of Rs. 52.00 lacs and awarded sum of Rs.15,71,157/- as assessed by the surveyor toward the ‘marine claim’, which was not in line with the Fire Claim. Consequently, this Commission, vide its order dated 18.12.2017, remanded the matter back to the learned State Commission to specifically address the quantum of the claim.

Vide the impugned order dated 13.03.2019, under RBT/CC/ 18/112 in CC/13/158, the learned State Commission proceed to re-examine the matter and dismissed the complaint. The decision was grounded in the precedent set in Harsolia Motors V/s. National Insurance Company, 1(2005) CPJ 27(NC), asserting that services availed from an insurer by a commercial organization classify as a commercial activity.

For convenience, the parties involved in this Appeal will be referenced as per their identification in the Complaint filed before the State Commission. The Complainant/Appellant "M/s. Pioneer Dyeing Pvt. Ltd.," is a company engaged in the business of manufacturing and trade of textile fabrics, specifically dealing in printed cotton/ polyester materials, sarees, and dress material. "Oriental Insurance Co. Ltd." will be addressed as the Opposite Party/ Respondent (OP).

The Complainant secured a “Standard Fire and Special Peril Policy No. 11140/11/2010/125 from 09.05.2009 to 08.05.2010. On 14.02.2010, there was a fire accident at the transporter's Godown in the building owned by Calcutta Port Trust and the material owned by him stored at the transporter's godown was destroyed, resulting in Rs.52.00 Lakhs loss. The incident was reported to the OP and a claim was filed under two heads; (i) Rs.32 Lakhs under Fire Policy; and (ii) Rs.18 Lakhs under Marine Policy. Subsequently, the OP appointed M/s Absolute Surveyors Pvt. Ltd. as surveyor to assess the loss. On 31.08.2010, the surveyor assessed the loss as Rs.15,71,157/- for Marine Policy; and on 10.12.2010, the surveyor assessed the net loss as Rs.46,65,777/- for Fire Policy. Following these assessments, in April 2011, the OP engaged an investigator and subsequently repudiated the insurance claim vide letter dated 05.12.2012 on the grounds of breaching policy conditions. Despite the Complainant's request for claim settlement vide letter dated 11.12.2012, the OP did not provide resolution or compensation.

Being aggrieved by the repudiation of their Rs.52 Lakhs claim, he filed Consumer Complaint No. 158/2013 on 18.03.2013, before the learned State Commission claiming Rs.52,00,000/- towards the loss suffered against along with interest @18% per annum. The Complainant also claimed Rs1,00,000/- on account of mental torture and harassment and Rs.50,000/- as legal charges.

In their reply, the OPs have not disputed the issue of policy, the incident of fire or the claim. OP acknowledged the incident, appointment of the surveyor and the surveyor report. OP contended that the claim was rightly repudiated due to a breach of policy conditions. Further, the Complainant is not consumer under the Act.

Previously, the impugned order dated 21.06.2016 passed by the learned State Commission was set aside by this Commission in FA/964/26 vide order dated 18.12.2017 and remanded the case to State Commission for deciding afresh, by considering all aspects of the case. The learned State Commission upon hearing the parties, and considering the facts and the circumstances of the case, dismissed the complaint vide Order dated 13.03.2019 as follows: -

“ORDER

(i) Consumer complaint is returned to the complainant for presentation before proper Forum.

(ii) In the circumstances of the case parties to bear their own costs.

(iii) One set of the complaint compilation be retained and rest of the sets be returned to the complainants.

(iv) Copies of the order be furnished to the parties.”

Being aggrieved by the impugned order dated 13.03.2019, the Appellant filed this present Appeal seeking the following:

“(a). Allow the present Appeal; and

(b). set aside the impugned final judgment and Order dated 13-03-2019 passed by the Hon'ble State Consumer Disputes Redressal Commission, Maharashtra at Mumbai in Consumer Case No. RBT/CC/18/112 IN CC/13/158; and

(c) in the interest of substantive Justice, call for the records of the Hon'ble State Commission, Maharashtra in Consumer Case No. RBT/CC/18/112 IN CC/13/158 modify/correct of the order dated 21-06-2016 passed by the Hon'ble Maharashtra State Consumer Disputes Redressal Commission at Mumbai in Consumer Complaint No. CC/13/158 to substitute Rs. 46,65,777/- (Rupees Forty-six Lacs Sixty-five Thousand Seven hundred Seventy Seven) in place of Rs. 15,71,157/-.

(d) Award Rs. 2,20,000/- towards cost of this litigation;

(e) pass such other and further order or orders as this Hon'ble Commission may deem fit and proper in the facts and circumstances of the case.”

In the Appeal, the Appellant raised the following key issues:

a. The State Commission failed to recognize that as settled in the Harsolia Motors case, the acquisition of an insurance policy cannot be deemed a service sought for commercial purposes under Section 2(l)(d) of the Act.

b. The State Commission failed to grasp the remanding order dated 18.12.2017 in FA No. 964 of 2016 exclusively directing for determining the quantum of compensation. It was not within the State Commission's purview to interpret this directive and completely redecide the case. Reevaluation of issues already adjudicated by a co-equal bench of the Commission amounts to review of co-equal bench findings, which is not permitted.

c. The State Commission overlooked the fact that, vide its order dated 21.06.2016, it had already acknowledged the deficiency in service of the Respondent and allowed the complaint and, however, while granting compensation, it inadvertently considered the previously settled marine claim instead of the Fire claim, and awarded Rs. 15,71,157/-, as assessed by the surveyor, toward the marine claim.

Upon the notice on the memo of Appeal, the Respondent has not filed any reply. However, the OP submitted written submissions.

In his arguments, the learned Counsel for the Appellant/ Complainant reiterated the complaint and grounds of appeal. He argued that in the previous order dated 21.06.2016, the State Commission found the Respondent to be deficient in service and allowed the complaint. However, while determining compensation, the Commission inadvertently considered the already resolved marine claim instead of the Fire claim, resulting in an award of Rs.15,71,157/- as per the marine claim assessed by the surveyor. He asserted that the remanding order dated 18.12.2017 in FA No. 964 of 2016 was explicit and limited to the compensation quantum only. Hence, the State Commission should not have interpreted it to decide the entire complaint afresh. As per him, this amounts to a review of a co-equal bench's decision by another, which is legally impermissible. He relied on Harsolia Motors case that acquiring an insurance policy cannot be categorized as availing service for commercial purposes under Section 2(1)(d) of the Act. He further relied on the following in support his arguments: -

(a) Indraprastha Gas Ltd. Vs. The New India Assurance Co. Ltd, dated 07.11.2014 passed by the NCDRC in CC/7/2006.

(b) Acutechno Automobiles Pvt. Ltd. Vs. National Insurance Co Ltd & Anr, dated 20.09.2013 by the NCDRC in FA/84/ 2013

The learned Counsel for the Respondent/OP Insurer asserted that the complaint is barred by limitation and is liable to be dismissed with costs. The incident is reported to have occurred on 14.02.2010 and the complaint is filed in the year March 2013. Thus, the cause of action arose on 14.02.2010 and the complaint is filed beyond the period of limitation as provided under the Act 1986. He highlighted the sequence of events concerning the claim. He contended that, upon receiving the claim, the OP had appointed Absolute Surveyors Pvt. Ltd ("the Surveyor") to assess the loss. The surveyor conducted a detailed investigation, releasing a Preliminary Report and Status Report No.1 on 10.12.2010. After examining the affected site, the Surveyor submitted the Final Survey Report. Additionally, the counsel emphasized that VB Associates were engaged as investigators on 15.04.2011. It was then revealed that the Complainant had stored materials deemed highly hazardous, like thinners and cotton, in the godown. This information, as per their assertion, was not disclosed at the time of policy initiation. In addition, there were several discrepancies and violations with respect to the policy conditions and circumstances of the incident. He pointed out ambiguity between the risk location specified in the policy and the actual site of the loss, potentially violating Policy Condition No. 1. This condition mentions the policy's voidability in case of misrepresentation, misdescription, or non-disclosure of significant particulars. They emphasized an increased risk due to the storage of insured materials alongside highly hazardous goods, which were not disclosed initially. Moreover, various reports, including those from the fire brigade and the forensic science laboratory, indicated certain critical aspects. The fire brigade report highlighted a lack of due diligence in controlling the fire's spread, while the forensic report indicated the storage of combustible items in substantial quantities. Additionally, reports from the police station suggested violations of fire safety acts, non-compliance with regulations and storage of hazardous substances without proper licenses, all constituting a breach of Policy Condition No. 3. This condition specifies that insurance ceases to apply if the trade, occupation, or circumstances regarding the insured building change or increase the risk of loss or damage. These points were substantiated with the attachment of an FIR, strengthening the argument for policy violation.

We have examined the pleadings and associated documents placed on record and rendered thoughtful consideration to the arguments advanced by the learned Counsels for both the parties.

The primary issue in this case revolves around the rejection of the Complainant's insurance claim following a fire incident at a godown storing their materials. The key questions for consideration are as follows:

(a) Whether the State Commission by taking into account the precedent set by this Commission in Harsolia Motors (Supra), appropriately determined if the services of insurance availed by a commercial organization constitute commercial activity?

(b) Whether the remanding order dated 18.12.2017 in FA No. 964 of 2016 had specific scope limited solely to quantification of compensation and whether the Ld. State Commission had power to undertake fresh adjudication of the Complaint?

(c) Whether the Ld. State Commission was justified in re-examining the complaint, including the issues already adjudicated by the same State Commission?

As regards the issue “Whether the insurance services availed by a commercial organization constitute commercial activity, the latest judgment of Hon’ble Supreme Court in National Insurance Co. Ltd. Vs. Harsolia Motors and Others, CA Nos. 5352-5353 of 2017, decided on 13.03.2023 affirmed the same as below: -

“44. We further reiterate that ordinarily the nature of the insurance contract is always to indemnify the losses. Insurance contracts are contracts of indemnity whereby one undertakes to indemnify another against loss/damage or liability arising from an unknown or contingent event and is applicable only to some contingency or act likely to come in future.

This Court in United India Insurance Company Limited v. Levis Strauss (India) Private Limited10 has held as under:

“53.A contract of insurance is and always continues to be one for indemnity of the defined loss, no more no less. In the case of specific risks, such as those arising from loss due to fire, etc. the insured cannot profit and take advantage by double insurance. Long ago, Brett, LJ in Castellain v. Preston [Castellain v. Preston, (1883) 11 QBD 380] said that : (QBD p. 386)

“….. the contract of insurance … is a contract of indemnity. … and that this contract means that the assured, in the case of loss … shall be fully indemnified, but shall never be more than fully indemnified.””     (emphasis added)

Thus, it can be concluded that in the instant case hiring of insurance policy is clearly an act for indemnifying a risk of loss/damages and there is no element of profit generation and still what has been expressed by this Court is illustrative; it will always open to be examined on the facts of each case, as to the transaction in reference to which the claim has been raised has any close and direct nexus with profit generating activity.

We do not agree with the submission made on behalf of the appellant that if insurance claims are covered under the Act, 1986, then virtually all insurance matters will come within the purview of the Act, 1986 and this will render the Act, 2015 nugatory. In our view, both these Acts have different scope and ambit and have different remedial mechanism, are in different sphere having no internal co-relationship.

Consequently, the appeals are without substance and accordingly dismissed. No costs.”

As regards second and third issues, this Commission in FA-964/2016 vide order dated 18.12.2017 had set aside the order of the State Commission in CC-158/2013 dated 21.06.2016 and remanded the case to the State Commission to decide the matter on the ‘Quantum of Claim’ with the following observation:-

“Learned Counsel for the Appellant/Complainant states that the Complainant had taken two policies and the claim under the transit policy was approved and settled for Rs.15,71,157/-. The Claim in respect of the 2nd Policy i.e. the Fire Policy was not settled and, therefore, complaint was filed. Under this policy, the claim of about Rs.52.00 lakhs were filed and the State Commission, though, has allowed the complaint, but inadvertently allowed Rs.15,71,157/- which is amount that was already settled under the transit policy. Even the surveyor has assessed loss of about Rs.46.00 lakhs under this policy. As the State Commission does not have the power to review its own order, the present appeal has been filed.

Learned Counsel for the Respondent-Insurance Co. states that State Commission has only partly allowed the complaint and therefore full amount has not been awarded, however, if the Appellant/Complainant has any issue with the respect to the actual figure of the award, the matter may be remanded back to the State Commission for its proper adjudication.”

However, the State Commission's stance in the remanded back order dated 13.03.2019, seems to have turned towards arguing that a commercial entity availing itself of insurance services might not fit within the definition of a 'consumer' as outlined in the Consumer Protection Act. The State Commission in the Impugned Order dated 13.03.2019, considered three vital issues to arrive at its decision: i) Whether the Complainant is Consumer as contemplated under the Consumer Protection Act; ii) Whether the opponent has rightly repudiated the claim of the complainant: iii) Whether the Complainant is entitled for compensation. Hence, the State Commission ruled in favour of OP/ Insurance Company concluding that services availed from an insurer by a commercial organization classify the insurance itself into a commercial activity. Citing Harsolia Motors V/s. National Insurance Company, reported in 1(2005) CPJ 27(NC).

Upon a careful examination of this Commission's Order in FA-964/2016 and the Impugned order dated 13.03.2019 passed by the State Commission, it is evident that the directions were confined to the "quantification of the claim." The mandate was not extended to determining whether the Complainant qualifies as consumer at that stage. Consequently, the State Commission lacked the authority to engage in a fresh adjudication of the Complaint regarding his status as a consumer.

Now, returning to the core issue whether the Complainant is entitled to the claim after a fire incident at a Godown storing their materials, it is crucial to note that the Respondent/OP appointed a surveyor, M/s Absolute Surveyor Pvt. Ltd. who submitted two reports. The first report dated 31.08.2010 assessed the loss as Rs.15,71,157/- under the 'Marine Policy.' The second report dated 10.12.2010 assessed the loss as Rs.46,65,77/- under the 'Fire Policy.' While the Respondent/OP accepted and indemnified the Marine Policy claim based on the surveyor's assessment, however, the Fire Policy claim was repudiated on the grounds of alleged policy condition violations, as stated in the letter dated 05.12.2012.

Subsequently, the Appellant contested this repudiation by filing CC No. 158/2013 before the State Commission. In the Order dated 21.06.2016, the Ld. State Commission deemed the Respondent/OP deficient in service and allowed the complaint. However, there appears to be an inadvertent error in the order in directing the OP to pay Rs.15,71,157/- as Fire Claim, instead of Rs.46,65,777/- assessed by the surveyor for the claim under the Fire Policy.

In the aforesaid context, it is crucial to highlight several cases from the Hon’ble Supreme Court wherein the assessment made by a surveyor holds significant importance. The relevance of considering the Surveyor’s Report was elucidated in the case of New India Assurance Co.Ltd. Vs. Pradeep Kumar (2009) 7 SCC 787, decided on 9.4.2009, the relevant para is reproduced below :-

“21. Section 64-UM (2) of the Act, 1938 reads :

64-UM (2) No claim in respect of a loss which has occurred in India and requiring to be paid or settled in India equal to or exceeding twenty thousand rupees in value on any policy of insurance, arising or intimated to an insurer at any time after the expiry of a period of one year from the commencement of the Insurance (Amendment) Act, 1968, shall, unless otherwise directed by the Authority, be admitted for payment or settled by the insurer unless he has obtained a report, on the loss that has occurred, from  a person who holds a licence issued under this section to act as a surveyor or loss assessor (hereinafter referred to as “approved surveyor or loss assessor”):

Provided that nothing in this sub-section shall be deemed to take away or abridge the right of the insurer to pay or settle any claim at any amount different from the amount assessed by the approved surveyor or loss assessor.”

In the above said case, it was further held as under:

“In the said decision, it is no doubt held that though the assessment of loss by an approved surveyor is a prerequisite for payment or settlement of the claim, the surveyor report is not the last and final word.  It is not that sacrosanct that it cannot be departed from and it is not conclusive. The approved surveyor’s report may be the basis or foundation for settlement of a claim by the insurer in respect of loss suffered by insured but such report is neither binding upon the insurer nor insured. On the said proposition, we are certain that there can be no quarrel. The surveyor’s report certainly can be taken note as a piece of evidence until more reliable evidence is brought on record to rebut the contents of the surveyor’s report.

In the case of Sri Venkateshwara Syndicate Vs. Oriental Insurance Co. Ltd. & Anr., decided on 24.8.2009, the Hon’ble Supreme Court has observed as under :

“22. Surveyors are appointed under the statutory provisions and they are the link between the insurer and the insured when the question of settlement of loss or damage arises. The report of the surveyor could become the basis for settlement of a claim by the insurer in respect of the loss suffered by the insured. There is no disputing the fact that the Surveyor/Surveyors are appointed by the insurance company under the provision of Insurance Act and their reports are to be given due importance and one should have sufficient grounds not to agree with the assessment made by them.”

In a recent case in National Insurance Co.Ltd. Vs. M/s Hareshwar Enterprises Pvt. Ltd. & Ors., decided on 18.8.2021, the Hon’ble Supreme Court has made the following observations:

“16.......Therefore, in the facts and circumstances herein the surveyors report was submitted as the natural process, the conclusion reached therein is more plausible and reliable rather than the investigation report keeping in view the manner in which the insurer had proceeded in the matter. Hence, the reliance placed on the surveyor’s report by the NCDRC without giving credence to the investigation report in the facts and circumstances of the instant case cannot be faulted. In that view, the conclusion reached on this aspect by the NCDRC does not call for interference.”

“…having considered this aspect, the rate of interest to be awarded in normal circumstance should be commensurate so as to enable the claimant for such benefit for the delayed payment. There is no specific reason for which the NCDRC has thought it fit to award interest at 12% per annum. Therefore, the normal bank rate or thereabout would justify the grant the grant of interest at 9% per annum. Accordingly, the amount as ordered by the NCDRC shall be payable with interest at 9% per annum instead of 12% per annum. To that extent, the order shall stand modified…”

As regards the contention of the Respondents/OPs that the Complainant had kept certain highly hazardous materials like thinners, solvent, cotton etc which were not disclosed at the time of taking the policy, the Complainant had brought out that, the Complainant is not the owner of the godown. The godown in question is a public warehousing where the housekeeper stores the goods of not only the insured but several other parties. Therefore, the insurance company is charging more premium for private godown to cover the risk and it is within the knowledge of the insurer and the surveyor. It is not possible for any party storing the goods in such godowns to know the nature of the goods of others. Evidently, the contentions of the Complainant are tenable.

It is a matter of record that the Respondent/OP has already accepted and indemnified the Marine claim of Rs.15,71,157/- which is based on the surveyor's assessment under the Marine Policy. Based on the above discussion, therefore, the Appellant/ Complainant is also entitled to be paid the Fire Insurance Claim to the extent of Rs.46,65,777/- as assessed by the surveyor under the Fire Policy.

In view of the aforesaid discussions and consideration of the entire facts and circumstances of the case, the order dated 13.03.2019 passed by the learned State Commission, Maharashtra at Mumbai in RBT/CC 158 of 2013 is set aside and the order dated 21.06.2016 of the learned State Commission in the same case is modified with the following directions:

ORDER

I. The Respondent/Opposite Party is directed to pay the amount of Rs.46,65,777/- to the Appellant/Complainant as assessed by the surveyor for the claim under the Fire Policy along with simple interest @ 9% per annum from the date of filing of this Complaint till its realization. In the event of delay beyond one month, the interest applicable shall be @ 12% for such extended period.

II. The Respondent/OP is also directed to pay Rs.50,000/- to the Appellant/Complainant as cost of litigation.

The First Appeal No.791 of 2019 is accordingly disposed of.

All the Pending applications, if any, stand disposed of.