M/s Shree Khetra vs New India Assurance Co. Ltd

Heard Mr. Shakti K. Pattanaik, Advocate, for the complainant and Mr. K.K. Bhat, Advocate, for the opposite party.

M/s. Shree Khetra (the Insured) has filed above complaint for directing New India Assurance Company Limited (the Insurer) to pay (i) Rs.9614470/-, with interest @2% above the market rate, as the insurance claim assessed by the surveyor; (ii) Rs.10385530/-, with interest @2% above the market rate, as arbitrarily deducted by the surveyor, from assessed gross loss; (iii) Rs.10/- lacs, as compensation for mental agony and harassment; (iv) Rs.one lac, as costs of litigation; and (v) 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 it are as follows:-

(a) M/s. Shree Khetra (the Insured) was a proprietorship concern and engaged in trade of ladies, gents, boys and girls readymade garments, suiting, shirting, saries and clothes from its shop located at ground floor and first floor, on above address, since 2006. The proprietor with his family was residing in the same building at 2nd and 3rd floor. The Insured availed ‘Cash Credit’ facility up to the limit of Rs.25/- lacs, from Dena Bank. The Insured was registered with trade tax department and allotted TIN 21741404394.

(b) New India Assurance Company Limited (the opposite party) (the insurer) was a public insurance company and engaged in the business of providing insurance services. The Insured obtained “Shopkeepers” Insurance Policy No.55070048140600000091 for the period of 15.09.2014 to 14.09.2015, for sum insured of Rs.1.5/- crore, for stock in trade, Rs.50/- lacs on Furniture, Fixture and Fitting, Rs.2/- lacs, for glass plate, Rs.one lac for money in transit, Rs.one lac, for money in till or on counter during business hours, Rs.one lac, for money in located safe in office, after business hours and Rs.2/- lacs, for public liability, for perils of fire and allied cause, burglary and house breaking.

(c) The shop of closed on 25.04.2015. On 26.04.2015 around 3:30 hours, the proprietor heard the noise of “fire fire at the ground floor”, of 3-4 persons, coming from outside his house. Electricity supply on the 2nd and 3rd floors of the building was also interrupted. The proprietor immediately took kea of the ground floor and rushed towards ground floor. On opening the gate, he found that the fire had spread throughout his shop at ground floor and first floor. He immediately informed Fire Service Station. He also informed Electricity Sub-station for disconnection of power supply of his building. Fire Service Station sent three fire brigades on the spot, which could control the fire in about 4 hours. The Insured informed local police on 28.04.2015, about the fire incident, where it was registered in General Diary.

(d) The Insured informed Divisional Office of the Insurer about fire incident and loss on 27.04.2015 as 26.04.2015 was Sunday. The Insurer supplied a Claim Form. The insured claimed Rs.1.5 crores, towards loss of clothes and Rs.50/- lacs, towards loss of Furniture, Fixture and Fitting. The Insurer appointed Bhadra Insurance Surveyors and Loss Assessors (P) Ltd., Kolkata as the surveyor on 05.05.2015. The surveyor inspected the premises on 06.05.2015, 07.05.2015 and 08.05.2015, took photographs, prepared list of damaged stock and recorded statements of the witnesses. The surveyor vide email dated 10.05.2015, asked the Insured to submit details of damages to furniture and fixtures, showing its location, specifications etc. with location-wise layout, details of repairing to be done and estimated cost of repairing. Registers and electronic record relating to stock were totally burnt. The Insured obtained Statement of Records as submitted to the Bank month to month. The Insured arranged the duplicate of invoices taken from the suppliers, ledger of suppliers and taxation papers, Audited Profit & Loss Account, Balance Sheets, Income Tax Returns, Trade Tax Returns for a period of past three years, etc. and supplied all these papers to the surveyor.

(e) The Insured through email dated 27.05.2015, sought permission of the surveyor, for removing the burnt stocks etc. from the shop for its renovation. The surveyor did not give permission. The surveyor gave advertisement in papers on 26.11.2015 and 05.12.2015, for auction of the salvage but nobody turned up. The surveyor submitted Final Survey Report on 19.02.2016, in which, he assessed gross loss to stock to Rs.15819763/- then he deducted 40% for slow movement and old stock and 20% for salvage value and assessed net loss to Rs.7593486/-. Similarly, he assessed gross loss of Fixture, Furniture and Fittings to Rs.5273543.73, then deducted 20% for improvement, 25% for depreciation and 20% on estimated basis and assessed net loos to Rs.2531301/-. After deduction of 5% for excess clause, he assessed total net loss to Rs.9618548/-.

(f) Even after Final Survey Report, the Insurer took unreasonable time in taking decision, then the Insured wrote a letter dated 14.06.2016, for early settlement of the claim. The Insurer wrote an email dated 03.08.2016, for signing Settlement Voucher for Rs.9614470/- (after deducting reinstatement premium) as full and final settlement. The Insured vide email dated 03.08.2016, requested to supply settlement report, containing basis of settlement and amount of settlement and justification for deduction of Rs.2/- crore. The Insurer informed that the claim was being settled on the basis of report of the surveyor. The insured wrote another email dated 03.08.2016, stating that he was not satisfied with 52% deduction made by the surveyor in his survey report and he would sign discharge voucher under protest. Then Divisional Office of the Insurer denied any payment. The Insured gave a representation to Regional Office and Head Office through registered post on 01.09.2016, but in spite of service of the representations, they did not respond. The Insured then made a complainant to Insurance Regulatory and Development Authority on 17.09.2016. Divisional Manager wrote a letter dated 26.09.2016, for accepting Rs.9614470/- towards full and final settlement. The Insured through email dated 27.10.2016, requested for a joint meeting with the surveyor for clarification of multiple deductions. However, Divisional Manager, vide letter dated 02.11.2016, closed the claim. Then this complaint was filed on 25.11.2016, alleging deficiency in service.

The Insurer filed its written reply on 13.02.2017, in which, issue of policy in question for the period of 15.09.2014 to 14.09.2015, fire incident and loss in the shop of the Insured on 26.04.2015, have not been disputed. The Insurer stated that as soon as the Insured get information of the fire incident on 27.04.2015, Head Office appointed Bhadra Insurance Surveyors and Loss Assessors (P) Ltd., Kolkata as the surveyor on 05.05.2015. The surveyor submitted Final Survey Report dated 19.02.2016, assessing net loss to Rs.9618548/-. Thereafter, the papers were examined by the competent authority, who accepted survey report and wrote an email dated 03.08.2016, to the Insured for signing Settlement Voucher for Rs.9614470/- (after deducting reinstatement premium) as full and final settlement. The Insured did not agree to sign Settlement Voucher therefore, the claim was closed vide letter dated 02.11.2016. The surveyor has given comprehensive report, mentioning the reasons for various deductions. Excess deductions have been provided in the policy against every coverage. Since loss of Furniture, Fixture and Fitting has been assessed on reinstatement basis as such reinstatement premium of Rs.4078/- was deducted. There was no deficiency in service on the part of the Insurer.

The Insured filed Rejoinder Reply on 20.03.2018, in which, the facts stated in the complaint were reiterated. The Insured filed Affidavit of Evidence of Binod Bihari Rath and documentary evidence. The Insurer filed Affidavit of Ms. Sharda Sharma, Administrative Officer, Affidavit of Evidence of Shyamal Bhadra, the surveyor and documentary evidence. The Insured served the interrogatories to be answered by Ms. Sharda Sharma and Shyamal Bhadra, the surveyor on 02.05.2019, which were answered by Ms. Sharda Sharma and Shyamal Bhadra. Both the parties filed their written synopsis.

Vide order dated 17.08.2017, the Insurer was directed to pay Rs.9614470/- to the Insured, which was paid on 02.11.2017. Insurance Regulatory and Development Authority has issued circular that if the claim is payable under policy it shall be paid without insisting the Insured to sign discharge voucher. The action of the Insurer in closing the claim for not signing discharge voucher is illegal.

We have considered the arguments of the counsel for the parties and examined the record. The Insured claimed Rs.1.50 crore, for loss of the stock i.e. total sum insured. Statement of stock as submitted to the bank on 31.03.2015 was of Rs.14903082/-. Closing balance as per audited balance sheet as on 31.03.2015 was of Rs.15487000/-. The surveyor assessed the value of stock on ground floor to Rs.6418240/-, on first floor to Rs.13242806 and in store room to Rs.2405105/- (total Rs.22066151/-) on the basis MRP tags. The contract of insurance is contract of indemnity, where the Insurer undertakes to indemnify the loss. Therefore, the value of the stock had to be assessed on the basis of purchase invoices and not on the basis of MRP tags. It is well known that in readymade garment, there is vast difference between the purchase price and MRP. In the light of statement of stock as submitted to the bank on 31.03.2015 and audited balance sheet as on 31.03.2015, assessment of gross loss to Rs.15819763/- is not illegal. The surveyor found that total sale in the year 2012-2013 was of Rs.96.55 lacs, in the year 2013-2014 was of Rs.83.38 lacs and in the year 2014-2015 was of Rs.54.90 lacs. Purchases in these years also go down year to year and closing stock in the year 2014-2015 was of Rs.154.97 lacs. Examining the other records, produced by the Insured, the surveyor found that there was slow movement of the stock. Normally old stocks of garment/clothes are sold in “sale’ giving discount of 40% to 50%. Therefore, deduction of 40% for slow movement and old stock does not suffer from any illegality.

However, deduction of 20% for salvage is not justified. The surveyor in his report has mentioned that he had given advertisement for auction of salvage in newspapers on 26.11.2015 and 05.12.2015. Prior to these advertisements, the Insured also advertised for auction of salvage but nobody turned up. The clothes were damaged with heat and water and had no resale value. Deduction of Rs.1898371.56 in head of salvage is not justified. After deduction of 5% in excess clause, the Insured is further entitled to Rs.1803453/-, for loss of stock.

The Insured claimed Rs.50/- as loss of Furniture, Fixtures and Fitting, which was total amount of insurance coverage. According to the Insured, this shop was renovated in the year 2013 but the Insured did not supply purchase invoices of various articles as such purchase price and age of the articles could not be determined. The Insured submitted new estimates of interior decoration. The surveyor accepted lowest estimate of interior decoration of Rs.5913755.73 and deducted 20% of improvement of technology and 20% deduction was made for scrap. The Insurer charged Rs.4078/- for reinstatement premium. There is no illegality in it. The policy provides excess clause. Supreme Court in Amravati District Central Co-operative Bank Limited Vs. United India Fire and General Insurance Company Limited, (2010) 5 SCC 294, upheld deduction under excess clause.

The incident occurred on 26.04.2015 and was intimated to the Insurer on 27.04.2015. 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. After expiry of six months, the Insurer is held liable to pay interest @2% above the market rate.

ORDER

In view of aforementioned discussion, the complaint is partly allowed. The opposite party is directed to pay Rs.1803453/- towards balance insurance claim with interest @9% per annum from November, 2015 till the date of payment. The Insurer also shall pay interest on Rs.9614470/- from November, 2015 to 02.11.2017. The above directions will be complied with within two months from the date of judgment.