M/S. Satyam Ispat Ltd vs National Insurance Co. Ltd

C. Viswanath, J

Complainants were involved in the manufacture of M.S. Billets and TMT Bars with an installed capacity of 74400 M.T. and 67200 M.T. per annum respectively. The Complainant in C.C. NO. 10 of 2010 had taken two Standard Fire and Special Perils Insurance Policies from the Opposite Party (i.e. National Insurance Company Ltd.). The first Policy was for its Rolling Unit vide Policy No. 200110/11/08/3300000073 from 01.07.2008 till 30.06.2009. It covered Building plinth and foundation, Building superstructure, Furniture fixture and fittings, Plant and machinery, Finished and raw materials worth Rs.4,50,000/-, Rs.21,50,000/-, Rs.20,00,000/-, Rs.79,00,000/- and Rs.1,30,00,000/- respectively. The Second Policy was taken by the Complainant in respect of its Ingot Unit vide Policy No. 200100/11/08/3100000078 from 02.07.2008 till 01.07.2009. The Policy covered Building including Plinth, Plant and machinery, Stock and Furniture, Fixtures and Fittings worth : Rs.27,00,000/-, Rs.93,00,000/-, Rs.1,30,00,000/-and Rs.5,00,000/- respectively. In C.C. No. 11 of 2010, Complainant had taken a Standard Fire and Special Perils (Material Damage) Insurance Policy from the Opposite Party (i.e. National insurance Company Ltd.)for its Factory building and stocks for Rs.69,46,16,000/- as the total sum insured vide Policy No. 200110/11/08/33000000111 from 10.04.2008 till 09.04.2009. The said Policy covered the Boundary wall, Factory Building, Fixed Assets (Misc.), Office Building, Plant and Machinery and Stock of raw materials worth Rs.9,01,000/-, Rs.6,59,39,000/-, Rs.1,03,94,000/-, Rs.40,38,000/-, Rs.31,71,49,000/-and Rs.28,71,95,000/-. The Complainant also stated that the entire stocks/raw materials were hypothecated as security with the State Bank of India, Commercial Branch, Guwahati. The Bank had also sanctioned credit facilities to the Complainant against pledged stocks/raw materials.

On 14th/15th August, 2008, due to unprecedented rainfall, floods occurred breaching the boundary wall on the back side of the induction Furnace of the Complainant and near the Induction Furnace of Satyam Ispat (North East) Ltd. The boundary wall also breached on another common side of both the units in which large quantities of raw material were washed away causing huge loss to both the units. On 16.08.2008 and 19.08.2008 respectively, the Complainants telephonically informed the Branch Manager of National Insurance Co. Ltd., Beltola, Guwahati about the incident and obtained various certificates as evidence of occurrence of heavy flood and washing away of raw materials of the unit. None of these Statements/Reports quantified the loss except mentioning that it was a huge loss.Thereafter, written intimation was also given to the State Bank of India. The Preliminary Surveyor appointed by the Opposite Party in his Report accepted the fact that it was difficult to assess the extent of damage caused by the floods, as almost a week had passed since its occurrence. Thus, the said delay in appointment of Surveyor led to loss of crucial evidence showing the massive losses incurred by the Complainant and also in violation of the Insurance Regulatory and Development Authority (protection of Policy holders Interests) Regulations, 2002. The Final Surveyor in his Report dated 15.07.2009 stated that the boundary wall of the Unit was very weak and in a dilapidated condition. To this the Complainants states that if the condition of the wall was so dilapidated, then the Opposite Party would not have insured the same. The Opposite Party vide letter dated 30.11.2009 offered Rs.4,93,075/-, towards their claim of Rs.2,20,19,266/- and Rs.18,79,58,172/- respectively.

Alleging deficiency on the part of the Opposite Party, Complaints were filed before this Commission under Section 21 of the Consumer Protection Act, 1986, praying relief as under:-

To direct Opposite Party to settle the claim of Rs.2,20,19,266/- and Rs.18,79,58,172/- respectively.

To direct Opposite Party to pay the Petitioner as an interim measure 50% of the claimed amount or any appropriate amount which may be deemed just and proper to this Hon'ble Commission.

To award Rs.10 Lakhs and Rs.15 Lakhs respectively towards loss in business, profits etc. due to delay on the part of the Opposite Party in settling the claim in both the Complaints.

Any other orders deemed fit and proper in the facts and circumstances of the Case.

Written arguments have been filed by the Opposite Party in both the Complaints in which they contended that the claims of the Complainants were not payable both for damage to the boundary wall and alleged loss of raw material. It was contended that the Photographs/VCD of the so called floods, taken by the Complainant, revealed that water was just ankle deep and flow was also slow. Heavy iron scraps weighing five times more than water could not have been washed away. The Photographs and video taken by the Complainant further does not show any metal piece of the said raw material entangled in the paddy fields or found embedded in the path of the flow of water. The Photographs during the flood incident also show that drums, wheels/tyres, scooter frame and even the metal scrap did not shift their position. HDPS bags containing sponge iron were found stacked and not even a single bag could be traced throughout the route of water outflow from the boundary wall to the river. TheSurveyors rejected a major part of the claim of raw material consisting of M.S. Scrap alleged to have been washed away in the flood water and for the same detailed reasons were given in the final Survey report.

Heard the Learned Counsel for the Complainant as well as the Opposite Party. They reiterated the arguments as made in their written statements. Also, carefully perused the record and the VCD provided by the Opposite party.

M/s Satyam Ispat Ltd. and M/s. Satyam Ispat (North East) Ltd. are located in Bandardewa, Arunachal Pradesh. Due to heavy rainfall, floods occurred in the area on 14/15 August 2008, breaching the boundary wall and inundating the premises of the Complainants. The same was informed to the Branch Manager, National Insurance Company, Guwahati by the Authorized Signatory vide letter dated 16.08.2008. This was received in the office of the Opposite party at Guwahati on 19.08.08. Mr. Anil Aggarwal was appointed to carry out preliminary survey on 20.08.2008 and he visited the site on 21.08.2008, for inspection. After physical inspection, verification & enquiries, he submitted his Report.According to him, the severity of the flood on 14.08.2008 at about 12:30 p.m., was not as devastating in its scope as was described by the representative of the insured. The occurrence of the loss was due to entering of flood waters by breaching of the boundary walls the factory complex. The loss did not appear to be of any substantial quantity, as the path of the flood water appeared to have bypassed the stocks. It was also noted that there was no trace of washed away stock of iron materials in the paddy fields, through which the water flowed out.The paddy fields were intact, which could not have been the case if a huge amount of iron materials were washed away over it with tremendous force. The Complainant vide letter dated 16.08.2008, while informing about the flood, stated that the details of loss/damage was being assessed at the site, and the same will be submitted for information and necessary action. The Complainants' estimates of loss claiming Rs.2,18,65,186/- and Rs.18,79,58,172/- were received by the Opposite Party on 26/27.08.2008 and Mr. P.K. Chakraborti and Associates was appointed as final Surveyor on 05.09.2008. He visited the premises on 09.09.2008 and on subsequent dates to carry out survey and assessment. Complainants took quite some time to give the required information and documents to the Surveyor.

As suggested by the Surveyor, the Company also appointed Commercial Investigation Bureau to investigate into the abnormal procurement of MS Scrap in the month of loss in August 2008. The Report stated "that, though the individual suppliers do exist at Imphal, no Books of Accounts and Records were produced to establish and prove that they had actually undertaken the sale and supply of M.S. Scrap valued at several Lacs of Rupees. Again, all these transactions were in cash. In the absence of any records, except the bills/Invoices, no proof was made available to show the actual physical supply of the purported M.S. Scrap. It was also noted that the Transport Companies were located in Guwahati and running their business in a very nominal manner, without having any parapheralia for undertaking and/or handling such a large quantity of materials for transportation and that too form a far off place from Imphal to Arunachal Pradesh. Here also, no Books of Accounts and records were produced, through freight charges of Lacs of Rupees were said to have been received in cash. It appears that the Transport Companies had only issued the Consignment Note, without undertaking any actual transportation of the materials. The above whole set up and arrangement appears to be façade to cover up and inflate the whole transactions involving the materials, so that at the time of any incident, the maximum and the highest amount could be lodged claimed and obtained from the concerned Authorities."

Report was also obtained from Jadavpur University, Kolkata. They gave their opinion on 08.11.2010, on the velocity and hydraulic thrust that may have been generated due to the flow of water, and whether such force could wash away huge quantity of scrap iron/sponge-iron stocks. The Report revealed that the boundary wall at the entry point was a weak 5" thick brick-work and appeared old, in an extremely ramshackled condition. Huge amount of materials, 3850 MT Sponge Iron kept in HDP bags under the factory shed and 6785 MT from scraps heaped at locations in the factory complex, could not have moved out of the factory premises due to the force generated by the down coming muddy rain water.

Based on the preliminary and final Survey Reports, as well as the opinion given by Jadavpur University, Kolkata, Opposite Party made an offer of Rs.4,93,075/- towards settlement of their claim, vide letter dated 30.11.2009. The Surveyors submitted their report on 15.07.2009 based on independent observation, assessment and analysis and investigation report of the Commercial Investigation Bureau. They gave detailed observations which showed that the claim was highly exaggerated. They found several inconsistencies in the records and alleged purchase of huge stocks in August 2008, the very month when the flood took place. The Surveyors also gave reasons as to why such huge quantities of the stock could not be washed away. The boundary wall got breached as it was a weak 5" thick brick work and could not withstand discharges. Insured's claim that the water level rose to a maximum level of 6 feet is not supported by water level marks which showed a maximum level marks of 2 to 3 feet, as otherwise all the machinery and equipments on the plinth of the factory-around 2 to 3 feet above the ground level, would have been affected by flood water. The factory buildings, stocks of sponge iron raw material, MS scrap dumps in open and finished goods, including machinery and equipments were marginally or not affected due to the event. Nearby transformers, generators and other machinery installations were all observed in smooth running condition. As a result of deposition of mud and soil in the open areas, stocks of stored steel scrap were found embedded in soil at the bottom. There was no MS Scrap or sponge iron, as claimed by the insured. Nowhere inside the factory or its vicinity signs of any major material movement/loss was observed, because of the reported inundation.

As seen from the above, the Opposite Party, the Insurance Company did go about its investigation and assessment in a very scientific and systematic manner. There has been no delay on the part of the Opposite Party in appointing the Surveyors, on receipt of information loss assessment by the Complainant. Scientific and Investigation agencies opinion and reports have also been taken into account, while processing and making their offer of settlement of claim at Rs.4,93,075/-.

In view of the above, the Complaints stand dismissed.