M/s Shital Fibres Ltd vs United India Insurance Co. Ltd

Heard Ms. Sanjay S. Chhabra, Advocate, for the complainant and Ms. Sonia Malhotra Kumar, Advocate, for the opposite party.

M/s. Shital Fibres Limited has filed above complaint for directing United India Insurance Company Limited to pay Rs.24242668/- with pendent lite and future interest @ 18% per annum, i.e. the insurance claim and 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 the complaint, are as follows:-

(a) The complainant (the Insured) was a company, registered under the Companies Act, 1956 and engaged in the business of manufacturing, selling and exporting of mink blankets and allied products. The Insured was a professionally managed company with complete backward and forward integration i.e. manufacturing yarn from fibre, cloth from yarn, dyeing and printing cloth, drying, shearing, stitching, finishing operation of raising, and finally packaging for sale. The Insured installed fully automated, modernized and latest machineries. The Insured had multi-location factories for operation of the business. The Insured performed extremely well and there were an upward trend in the last years.

(b) United India Insurance Company Limited (the Insurer) is a public sector company and provides various types of insurance services. The Insured obtained Standard Fire and Special Perils Policy No.201302/11/06/11/00000050, from the Insurer, on entire buildings above plinth level at locations C-78, C-79, C-80 and C-112, Focal Point Extension Jalandhar, for sum assured of Rs.4/- crores (Rs.one crore, for each building) for a period of 08.05.2006 to 07.05.2007. The Insured obtained another Standard Fire and Special Perils Policy No.200500/11/05/11/00521, from the Insurer, on the stock of hosiery, lace, embroidery/thread factories at 15 locations, for sum assured of Rs.6/- crores, for a period of 11.01.2006 to 10.01.2007.

(c) Apart from aforesaid policies, the Insured obtained Standard Fire and Special Perils Policy No.20-21-11-80085-06, from Reliance General Insurance Company Limited, on stocks at various locations, for sum assured of Rs.6/- crores for a period of 05.05.2006 to 04.05.2007 and Standard Fire and Special Perils Policy No.41112/11/05/3300000319, from National Insurance Company Limited, on stock at locations, for sum assured of Rs.6/- crores for a period of 08.09.2005 to 07.09.2006.

(d) Unfortunately fire broke out on 12.06.2006 at 4:10 hours, in the factory at C-79, Focal Point Extension, Jalandhar. Piara Singh, Machine Operator, and four other workers were on duty. Piara Singh first observed fire in the stock kept on the trolley, below the electrical control panel of Drying Machine. Piara Singh and other workers tried to extinguish fire by throwing water but the fire spread to the stock in process kept in the shed and took devastating nature soon and had become beyond their control. Piara Singh immediately informed Shital Vij, Managing Director of the company on telephone and the nearest Fire Service Station, from where message was circulated to other Fire Service Stations at Kapurthala, Ludhiana, Phagwara and Hoshiyarpur. From various places about 20 fire tenders were deputed on the spot, which took about 7 hours in controlling and extinguishing the fire. The Insured also reported the incident of fire to local Police Station on 12.06.2006.

(e) The Insured informed the Insurer about the fire incident on 12.06.2006. On which, the Insurer appointed D.K. Taneja & Associates, New Delhi, for survey and assessment the loss. The surveyor inspected the Factory premises on 13.06.2006, 14.06.2006 and on subsequent dates. He took photographs and prepared inventories. He submitted Preliminary Survey Report dated 15.06.2006 and Interim Survey Report dated 10.07.2006, in which cause of fire was found covered perils under the policies.

(f) The surveyor obtained Claim Form and the papers to prove the damages from the Insured. The surveyor verified the stock of other locations of the Insured as per records. The surveyor submitted Final Survey Report dated 24.10.2006 and addendum Report dated 15.11.2006, in which, he assessed the loss of Rs.6929445/- to the building. He assessed loss of the stock to Rs.33006293/-, which was divided in 3 shares equally and liability of the Insurer was assessed to Rs.10992097.66/-. The Insurer was not satisfied with Final Survey Report dated 24.10.2006 and appointed Mr. Harjeet Singh, IPS (Retd.), Punjab Bagh, Patiala as an Investigator on 18.12.2006. Mr. Harjeet Singh submitted his Investigation Report dated 21.03.2007 stating that fire was not accidental. It is alleged that Mr. Harjeet Singh wrote a letter dated 22.05.2007 to National Insurance Company, for withdrawing his Investigation Report dated 21.03.2007.

(g) Reliance General Insurance Company Limited also appointed D.K. Taneja & Associates, New Delhi as the surveyor. Reliance General Insurance Company Limited accepted Final Survey Report dated 24.10.2006 and settled the claim for the full amount of its share as assessed by the surveyor in report dated 24.10.2006.

(h) National Insurance Company Limited appointed Mehta & Padamsey Pvt. Ltd., New Delhi as the surveyor, who also submitted Final Survey Report, assessing the loss in terms of report dated 24.10.2006. National Insurance Company Limited made interim payment of Rs.30/- lacs but withheld final settlement, in view of Investigation Report dated 21.03.2007. The Insured filed CC/48/2007, against National Insurance Company Limited, in which, the Insurer prayed for appointment of another Investigator. Earlier CC/48/2007 was consolidated with this complainant. This Commission appointed Mr. S. Arunachalam as Investigator, in CC/48/2007, who after investigation submitted his Investigation Report dated 29.07.2008 and upheld the findings of the surveyors that cause of fire was electric short circuit. On the basis of investigation report of Mr. S. Arunachalam, National Insurance Company Limited finally settled the claim according to the report of surveyor and CC/48/2007 was disposed off in view of settlement vide order dated 05.12.2008.

(i) The Insurer delayed settlement of the claim as such this complaint has been filed on 07.05.2007, alleging deficiency in service on the part of the Insurer. Thereafter, on the basis of Investigation Report, the Insurer repudiated the claim vide letter dated 05.03.2008

The Insurer filed their written reply on 11.07.2008 and contested the complaint. They stated that the Insured was engaged in commercial activities and was not a consumer. Other material facts were not disputed. It has been stated that after receiving Final Survey Report dated 24.10.2006, the Insurer received a complaint from one K.K. Kharbanda, alleging that fire incident had been engineered by burning rags and the claim was set up by manipulation of record. Due to which, the Insurer appointed Mr. Harjeet Singh, IPS (Retd.), Punjab Bagh, Patiala as an investigator on 18.12.2006. Mr. Harjeet Singh submitted his Investigation Report dated 21.03.2007 stating that fire was not accidental. He pointed out following circumstance to doubt genuineness of the incident:-

“i. “No production was being done in M/s. Shital Fibres Ltd. on the intervening night of 11/12.06.2006 as the factory was closed due to Sunday. Production register RG1 also confirms that no production was done on Sunday during those days.

ii. As no night shift was taking place due to Sunday, Piara Singh and Ram Singh Rawat were also not members of the night shift. They were thus, the planted and tutored eye witness.

iii. The version of the insured and confirmed by the surveyors that the fire originated due to spark having fallen on trolley containing cloth parked below the electrical panel has not been found to be correct. Either insured or the surveyors could not produce any photo depicting such a trolley. So the trolley story is imaginary.

iv. As mentioned in the survey reports, version of the insured that they telephoned fire station Jalandhar and after receiving telephone from his worker Piara Singh has been found baseless from the record of the fire station Jalandhar. As such, allegations of Shri K.K. Kharbanda that the telephone was made by one of the conspirators has a force.

v. There was no telephone in C-79 and the one which Piara Singh is stated to have used to inform the insured that turned out to be an intercom. Thus, his version of telephoning Mr. Vij immediately after the fire broke out is not correct.

vi. It is quite paradoxical that personal fire tender was called in the last even though the same is situated just 100 yards from the place of mishap.

vii. Sh. Vij offered on 1.2.2007 to provide movie taken by them to show devastation caused by fire but later on he backed out. Probably that movie would have exposed many facts against the insured.

viii. At the first stage, cause of fire was mentioned in the claim form as electricity short circuit. It was repeated to the inspecting teams also. They were not told that any stage generator was used by them to get the current. Perhaps Sh.Vij changed his version of using generator when he was reminded that being Sunday, it was a compulsory weekly off day. P.S.E.B. Log Book of the said generator also appears to have been fabricated. Moreover using generator for 20 hours continuously on that night and using 2600 litres of diesel costing of Rs.78,000/- just to run the dryer machine to dry cloth does not look rational and justified.

ix. Neither the insured nor the surveyors furnished particulars regarding availability of stock on 11.06.2006 at Shital Fibres and 22.06.2006 at Shital International on the prescribed format on the pretext that the insured does not maintain the record. Further after comparing with Central Excise challans, loss assessed by the surveyors on the weighment of ash was found more by 88946 Kg. than the stock claimed to have been damaged.

x. Assessment of loss made by surveyors on the basis of cones/pipes also turned out to be surplus by 39480 Kg. The amount of tempering with stock, is thus, established.

xi. The insured could not produce any photograph where in the position of rolling machine installed after the shearing machine is depicted. So it is again a fabrication made in the site plan.

xii. Stock of 500 x 70 per Kg. Roll of printed blankets claimed by the insured and assessed by the surveyor is totally baseless and imaginary.

xiii. Electrical expert namely Sh. S.K.Mahendru Dy.Xen (Retd) has completely ruled out the probability of short circuit either in Shital Fibres Ltd. or Shital International Ltd.

xiv. So it is now clear that story about detection and cause of fire and loss claimed is baseless. It was thus a planned after organized with the help of 4/5 trusted workers.

xv. There is a difference of version of Sh. Dhanji carding Machine operator and Sh. Ram Nath who was on duty as the carding machine on 23.6.06 at M/s. Shital International Ltd. about the origin and spread of fire.

xvi. The photographs have totally failed to substantiate the loss due to short circuit to electric control panel of the drawer machine on 12.6.06 in Shital International Ltd. Further Sh. Ajit Kumar, Manager failed to show the place where the above mentioned panel was fitted and where is the same now. In the photograph attached by the investigator the electrical panel shown as melted does not have any soot damage or smoke damage.

xvii. The investigator has noticed that building of Shital International Ltd. alleged to have been affected looked quite old. The sum insured is only Rs.35 lacs for the factory and building.

xviii. The insured failed to show which of the five electric motor fitted within the carding machine was affected by short circuit in Shital International.

xix. Sh. Vij. or for that matter Sh. Taneja failed to clarify as to show the fire skipped the generator room nearest to the alleged place of fire but it reached the other sheds and ultimately climbed the first story in Shital International. Some of the photographs attached by the investigator show that the cloth has been damaged from sides which is on the machines.

xx. In Shital International Ltd., it has also not been clarified as to how the panel and its cables including plaint remained safe in the devastating fire.

xxi. In one of the queries M/s. D.K.Taneja have stated that fire engulfed the adjoining building of C-79 in Shital Fibres Ltd. whereas no development has been corroborated anywhere.”

In view of Investigation Report dated 21.03.2007, the claim was repudiated vide letter dated 05.03.2008. There was no deficiency in service on their part and the complaint is liable to be dismissed. In the complaint, complicated issue of facts are involved, which requires oral evidence and cross-examination. Therefore, the complainant be relegated to go before Civil Court.

The Insured filed Rejoinder Reply, in which, the facts stated in the complaint were reiterated. The Insured filed Affidavit of Evidence of Jitender Kumar, Assistant Manager and Affidavit of Evidence of Piara Singh. The Insurer filed Affidavit of Evidence of Malkiat Singh, Deputy Manager. Both the parties filed their documentary evidence and short synopsis.

We have considered the arguments of the counsel for the parties and examined the record. D.K. Taneja & Associates, New Delhi, the surveyor appointed by the Insurer and Reliance General Insurance Company Limited in his Preliminary Survey Report dated 15.06.2006 and Final Survey Report dated 24.10.2006 found that cause of fire was electrical short circuit and assessed the loss. Reliance General Insurance Company Limited settled the claim for the full amount of its share as assessed by the surveyor in report dated 24.10.2006. National Insurance Company Limited appointed Mehta & Padamsey Pvt. Ltd., New Delhi as the surveyor, who also submitted Final Survey Report, in terms of report dated 24.10.2006. But National Insurance Company Limited also avoided settlement of claim in view of report of dated 21.03.2007.

The Insured filed CC/48/2007, against National Insurance Company Limited, in which, the Insurer prayed for appointment of another Investigator. This Commission appointed Mr. S. Arunachalam as Investigator, who after investigation submitted his Investigation Report dated 29.07.2008 and upheld the findings of the surveyors that cause of fire was electric short circuit. On the basis of investigation report of Mr. S. Arunachalam, National Insurance Company Limited finally settled the claim according to the report of surveyor and CC/48/2007 was disposed off in view of settlement vide order dated 05.12.2008.

Two surveyors and one investigator did not raise any doubt in respect of cause of fire. It may be mentioned that Preliminary Survey Report dated 15.06.2006 was based upon immediate inspection dated 13.06.2006 and 14.06.2006. At that time debris were on the spot and chance of manipulation was limited. From various reports of Fire Service Stations and Police Report it was proved that the fire was devastating and took 7 hours in extinguishing while 20 fire tenders were deputed on the spot. Mr. Harjeet Singh, IPS (Retd.), Punjab Bagh, Patiala was appointed as the investigator on 18.12.2006. He submitted his Investigation Report dated 21.03.2007, on the probabilities and not on actual observations. These probabilities were not found to be incorrect in the Investigation Report dated 29.07.2008 of Mr. S. Arunachalam, an Investigator, appointed by this Commission in CC/48/2007. In such circumstances, repudiation of the claim by the Insurer is illegal and liable to be set aside. The Insured is entitled for compensation as assessed by the surveyor in Final Survey Report dated 24.10.2006.

Regulation 9 of The Insurance Regulatory and Development Authority (Protection of Policyholder’s Interest) Regulations, 2002 directs the Surveyors to submit their Survey Report within 30 days and in any case within 45 days, from the date of his appointment. The Insurer has been directed to make settlement within 30 days of receipt of Surveyor’s report. Regulation 9 (6) provides as follows:

Regulation-9(6). Upon acceptance of an offer of settlement as stated in sub-regulation (5) by the insured, the payment of the amount due shall be made within seven days from the date of acceptance of the offer of by the insured. In case of delay in the payment, the insurer shall be liable to pay interest at a rate which is 2 per cent, above the bank rate prevalent at the beginning of the financial year, in which the claim is reviewed by it.

As such after expiry of six month, the Insured is entitled for interest @9% per annum on his claim.

ORDER

In view of the aforesaid discussions, the complaint is allowed. The opposite party is directed to pay Rs.6929445/- as loss to the building under Policy No.201302/11/06/11/00000050 and Rs.10992097.66/- as loss to the stock under Policy No.200500/11/05/11/00521, with interest @9% per annum from 12.01.2007 till actual payment. The aforesaid order be complied with within two months from the date of this judgment.