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Judgment
Heard Mr. Sanidhya Maheshwari, Advocate, for the complainant and Mr. K.K. Bhat, Advocate, for the opposite parties.
Shivam Cotton Industries (the Insured) has filed above complaint for setting aside the letter dated 23.08.2016, repudiating its insurance claim and directing New India Assurance Company Limited (the Insurer) to pay (i) Rs.66900000/-, with interest @18% per annum from 21.02.2016 till the date of payment, as the insurance claim; (ii) interest @18% per annum on the amount of “cash credit facility” given by the bank from 21.02.2016 till the date of payment; (iii) Rs.30000000/-, as compensation for business loss, due to delay in settlement of the insurance claim; and (iii) 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) Shivam Cotton Industries (the Insured) was a registered partnership firm and engaged in the business of processing of raw cotton and selling finished goods, since 2013. The factory of the Insured was located at S.R. 111/112, Leriya Road, at Ravni-Kuba Tal. Visavadar, District Junagadh, which consisted four buildings of brick walls and RCC roof and one shed of the dimension of 247’ x 127’ constructed on steel columns, walls up to 6’ heights, thereafter walls of GI sheets and roof of GI sheet resting on purlins and angles, which was used for storing raw cottons.
(b) New India Assurance Company Limited (the insurer) was a public insurance company and engaged in the business of providing insurance services to the general public. The Insured obtained “Standard Fire and Special Perils Policy” No.21120011150100000188, for the period of 09.05.2015 to 08.05.2016, for a sum of Rs.9/- crores on the Stock of Cotton loose, Kapas Cotton seeds, Cotton Wash Oil, Cotton FP Bales, Bardan Cotton, Raw Material Cotton, Packing Material, Other Goods Pertianing to Insured Trade, Lying in open Process Pala House in Compound Wall of the factory premises.
(c) Fire broke out on 21.02.2016 at 12:30 hours in the raw cotton shed of the Insured. The labourers of the Insured were unloading raw cottons from the truck, bearing registration No. GJ 03-T-2688 at that time and storing in the shed. Dharemesh Solanki, one of labourer first noticed the smoke emanating from the heap of the raw cotton, in the shed, around 12:45 hours on 21.02.2016, who informed Rahulbhai Ribadiya (the partner of the Insured), who immediately started spraying water from hydrant system installed at the factory premises. They also informed Fire Service Stations, Visavadar, Junagadh Mahanagar Palika and Bagasara Nagarpalika, on telephone. In the meantime fire brigades came on the spot and doused the fire upto 18:30 hours. Rahulbhai Sureshbhai Ribadiya informed the incident at Police Station, Visavadar, where GD Entry No.2/2016 was made on 21.02.2016 at 20:40 hours. Local police inspected the factory premises, recorded statements of witnesses and executed a Panchanama on 22.02.2016. The police obtained Forensic Laboratory Report of the samples and was satisfied that the fire was not caught due to any foul play and submitted final report, for closer of the case.
(d) The Insured informed the Insurer about the incident of fire at its factory premises and loss caused due to it on 21.02.2016. The Insurer appointed A.P. Phadke & Company, Mumbai, as the surveyor on 22.02.2016 for survey and assessment of loss. The surveyor visited the spot on 23.02.2016, inspected the fire-affected stock and submitted Preliminary Survey Report dated 27.02.2016, confirming the fire incident and tentatively assessing the loss to Rs.3.50 crores.
(e) The Insurer appointed Jagdish J. Joshi, Assistant Police Commissioner (Retd.), Ahmedabad on 21.02.2016, for carrying out investigation to determine the cause of fire at the factory premises of the Insured. Jagdish Joshi inspected the factory premises on 21.02.2016, took photographs, recorded statements of the witnesses, examined Forensic Examination reports and other police papers. After examining all the papers, Jagdish Joshi submitted its Investigation Report dated 05.08.2016, stating that fire might have been initiated due to spark arising out of use of iron shovel on iron body of the truck, while unloading raw cotton from it and there was no foul play. It appears that the Insurer also appointed Truth Labs, Delhi as a second investigator. One Miss Charu Hindwan made a telephone call on 14.07.2016 at 10:05 hours that she would inspect the factory premises on 16.07.2016, which was protested by the Insured. It appears that the Insurer later on dropped second investigator.
(f) The Insured submitted Claim Form for Rs.66900010/- and the papers i.e. Books of Account for 2014-15 and 2015-16, Stock Records for the same years, Annual Accounts for 2014-15, Provisional Balance Sheet and Profit & Loss Account on the date of loss, Stock Statement, as submitted to the bank, VAT Returns and Electricity Bills, to prove the loss. The Insured made a representation dated 15.07.2016, revising his claim and requesting to release the revised amount of Rs.141816086/- within three days. When nothing was done, the Insured gave a legal notice dated 27.07.2016. The surveyor submitted Final Survey Report dated 08.08.2016, holding that the claim was highly exaggerated and assessing total loss to Rs.6477167/-. Copy of the report dated 08.08.2016 was not supplied to the Insured. The Insurer, vide letter dated 23.08.2016, repudiated the claim, on the ground that the Insured had not cooperated with Truth Labs, Delhi and not permitted them to investigate and the claim was exaggerated as such there was violation of Condition No.8 of General Condition.
(g) Then this complaint was filed on 24.11.2016, alleging deficiency in service. The complainant stated that the Investigator in his report dated 05.08.2016 and the local police, in its investigation did not find any foul play, in respect of cause of fire. The claim of the Insured was fully proved from the documents as well as Statement of Stock as submitted to the Bank. Findings of the surveyor and the Insurer that the claim was exaggerated, is incorrect.
The Insurer filed its written reply on 27.03.2017, in which, issue of policy in question for the period of 09.05.2015 to 08.05.2016 and fire incident and loss in factory premises of the Insured on 21.02.2016, have not been disputed. The Insurer stated that as soon as the Insurer get information of the fire incident on 21.02.2016, A.P. Phadke & Company, Mumbai was appointed as the surveyor on 22.02.2016. The Insurer appointed Jagdish J. Joshi, Assistant Police Commissioner (Retd.), Ahmedabad on 21.02.2016, for carrying out investigation to determine the cause of fire at the factory premises of the Insured. The Insurer also appointed “Truth Labs”, Delhi, as the Investigator, for determining cause of fire, however, the Insured did not permit “Truth Labs”, Delhi, to investigate the incident with ulterior motive. The Investigator Jagdish J. Joshi submitted his Investigation Report dated 05.08.2016, reporting that the fire was caused due to spark arising out of use of iron shovel on iron body of the truck, while unloading raw cotton from it and there was no foul play. The surveyor submitted Final Survey Report dated 08.08.2016, assessing net loss to Rs.6477167/- as against the claim of Rs.66900010/-. The surveyor found that the claim was highly exaggerated. Thereafter, the papers were examined by the competent authority, who by letter dated 23.08.2016, repudiated the claim on the ground that the Insured had not cooperated with Truth Labs, Delhi and not permitted them to investigate and the claim was exaggerated as such there was violation of Condition No.8 of General Condition. There was no deficiency in service on the part of the Insurer.
The Insured filed Rejoinder Reply on 09.08.2019, in which, the facts stated in the complaint were reiterated. The Insured stated that the surveyor and the Insurer applied random method of calculating the closing stock, which is arbitrary. They have illegally ignored the crop production and supply period of raw cotton. The Insured was engaged in the business of ginning cotton and selling finished cotton bales. It was natural for the Insured to purchase raw cotton during crop season, in order to run its factory throughout the year. As such purchase of huge quantity of raw cotton during October, 2015 to 21.02.2016 cannot be disbelieved particularly when it was proved from Purchase Vouchers and Statement of Stock was regularly supplied to the Central Bank of India, to whom the stock was hypothecated. The Insurer had already appointed one Investigator and there was no reason to appoint another Investigator. The Insured filed Affidavit of Evidence of Rahulbhai Ribadiya and documentary evidence. The Insurer filed Affidavit of Suman Gupta, Deputy Manager and Anil Phadke, the surveyor and documentary evidence. Both the parties have filed their written synopsis.
We have considered the arguments of the counsel for the parties and examined the record. The fire took place in the shed, where raw cottons used to be stored as well as the truck from which, raw cotton was being unloaded. The Insured claimed total loss of raw cotton of 1496457 kgs. of Rs.62105689.05. In Statement of Stock as submitted to Central Bank of India on 30.09.2015, stock was 231342 kgs. of Rs.9512241/-. Same figures were in July, 2015 and August, 2015. On 31.10.2015, stock of raw cotton of 352342 kgs. of Rs.14437484/-. On 30.11.2015, stock of raw cotton of 367782 kgs. of Rs.15301720/-. On 31.12.2015, stock of raw cotton of 687502 kgs. of Rs.28360083/-. On 31.01.2016 stock of raw cotton of 1148027 kgs. of Rs.47378729/-. Above figures shows that the stock of raw cotton was of Rs.9512241/- in September, 2015 has increased on the date of loss i.e. 21.02.2016 to more than Rs.62105689.05.
The surveyor took volumetric analysis and found that raw cotton was stored in an area of 204’ x 66’. If it is multiplied with 13’ i.e. maximum height of the stack then total storage space comes to 175032 cu.ft. and 787.644 MTs raw cotton could be stored in this area and the Insured claimed 1496457 kgs., which is highly exaggerated. Having regards of uneven sizes of the heaps of raw cotton, as verified from the various photographs taken by the surveyor, in which heights of stacks were found to 6’ to 7’, he assessed the loss to 147.347 MTs.
Along with Summary of Arguments, the Insured has supplied purchase vouchers. The vouchers of October, 2015 are given below:-
Date
Quantity
Amount in rupees
01.10.2015
8220
328800
01.10.2015
7500
307500
11.10.2015
8650
346000
11.10.2015
6850
274000
11.10.2015
8520
345060
11.10.2015
6120
244800
12.10.2015
6200
241800
13.10.2015
5400
216000
13.10.2015
4520
183060
14.10.2015
6800
272000
14.10.2015
6250
250000
15.10.2015
7600
304000
15.10.2015
7990
318400
15.10.2015
4450
178000
16.10.2015
6500
260000
17.10.2015
6520
254280
18.10.2015
5230
209200
19.10.2015
7680
307200
21.10.2015
5650
231650
22.10.2015
4500
180000
23.10.2015
3250
130000
25.10.2015
12300
578100
27.10.2015
9560
446930
28.10.2015
7580
367630
28.10.2015
8900
431650
Total
172740
7206060
If this stock is added in the stock of September, 2015 i.e. Rs.9512241/- + Rs.7206060 = Rs.16718301/-, as against Rs.14437484/- which was submitted to the Bank on 31.10.2015. In the column of Received 121000 MTs was shown as against 172740 MTs., which is a huge difference. This further shows that the Insured used to procure fake purchase vouchers, in order to exaggerate his claim. Further the Insured has shown mode of payment of cash of these huge purchases. Thus finding of the surveyor and the Insurer that the claim was exaggerated, does not suffer from any illegality. The Insurer has rightly invoked the power under Condition No.8 of General Condition of the insurance policy.
ORDER
In view of aforementioned discussion, the complaint is dismissed.