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Judgment
Arguments heard for more than two hours. In the case before us, the surveyor appointed by the Insurance Company had assessed the value of the stock at risk to be Rs. 1,86,36,700.25/-, though the case of the complainant is that the value of the aforesaid stock was Rs. 2,01,17,215/-. The learned counsel for the complainants on taking instructions from the complainants states that in order to bring the controversy in this regard to an end, the complainants are ready to accept the assessment of the surveyor as regards the value of the stock on risk. We accordingly hold that the value of the stock on risk in the premises of the complainant, at the time fire broke out was Rs. 1,86,36,700.25/-.
The surveyor had initially taken the gross profit of the complainant to be 25% of the value of the stock. Later on, the gross profit margin was upwardly revised by the surveyor to 30% in Saree and ladies related cloths, whereas it was reduced to 20% in respect of the gent''s cloths. We find that according to the complainant, their gross profit margin was not more than 12%. We also take note of the fact that as per the balance sheet of the complainant for the immediately preceding years, the gross profit margin was not more than 12%. The report of the surveyor as regards the gross profit margin of the complainant was stated to be based upon the market survey, market trend etc. However, there is no evidence of either the surveyor or the Chartered Accountant engaged by the surveyor having recorded the statement of any shopkeeper engaged in a similar business at the same town, as regards the gross profit margin in such business. The surveyor did not collect the balance sheet of any other shopkeeper in the city in which the complainant was carrying business, to verify his gross profit margin from sale of readymade garments, sarees etc.
Therefore, the assessment made by the surveyor and the Chartered Accountant as regards the gross profit margin of the complainants not being based on any objective material, cannot be accepted. This is more so, when the gross profit margin in the previous years when the complainants had no reason to show a deflated gross profit, was not more than 12%.
The learned counsel for the Insurance Company submits that the complainants themselves had admitted before the surveyor that their gross profit was about 15-20%. A careful perusal of the aforesaid statement as narrated by the Chartered Accountant would show that according to the managing partner of the complainants, sometimes they were giving discount on their products and their net gross profit was not more than 12%. Therefore, in our opinion, deductions on account of gross profit should not exceed 12%. The gross profit value at risk being Rs. 1,86,36,700.25/-, the net value at risk after deducting gross profit calculated at the rate of 12% comes to Rs. 1,64,002,96.22/-.
The loss to the furniture, fixtures etc. was assessed by the surveyor at Rs. 10,00,062.54/-. The complainant had taken insurance in respect of furniture, fixtures equipments etc. only at Rs. 25 lakhs whereas the value at risk was found by the surveyor at Rs. 39,34,455.28/-. After making adjustment for the under insurance, the amount payable to the complainants was determined by him to be Rs. 6,35,451.71/-. Though the complainants are not satisfied with the assessment made by the surveyors, they are now agreeable to accept the same in order to bring the dispute to an end. We accordingly hold that the complainants are entitled to reimbursement to the extent of Rs. 6,35,451.71/- in respect of the loss to the furniture, fixtures equipments etc.
The value of the salvage was determined by the surveyor at Rs. 24 lakhs. Though initially, the complainants were not agreeable to the assessment made by the surveyor in this regard, a perusal of the documents of the final claim form submitted by them would clearly show that they held later agreed to accept Rs. 24 lakhs as the value of salvage. The learned counsel for the complainants submits that they were forced to accept the aforesaid value for the salvage since they were told that on their accepting the said value of the salvage, the assessment of their loss would be expedited by the surveyor. He also points out that initially the surveyor himself had assessed the value of the salvage by Rs. 10 lakhs vide their letter dated 20.05.2004. In our view, considering that that complainants had expressly agreed to the aforesaid salvage not only vide their letters dated 19.06.2004 and 20.06.2004, but also in the final claim submitted by them and there is no evidence of their having been pressurised or forced to accept the said valuation, the Insurance Company is entitled to deduct a sum of Rs. 24 lakhs on account of the value of the salvage.
The insurance company is also entitled to deduct a sum of Rs. 10,000/- on account of policy excess. The balance amount payable to the complainants according to the learned counsel for the complainants comes to Rs. 1,46,25,747.90/-.
The next question which arises for our consideration in this case is whether the complainants are entitled to interest and if so at what rate and for what period. It is also not in dispute that the first surveyor submitted his report to the Insurance Company on 24.12.2004. In our opinion, the aforesaid report should have been processed expeditiously particularly considering that more than seven months had already passed, if computed from the date of loss. The Insurance Regulatory and Development Authority (Protection of Policyholders'' Interests) Regulations 2002, framed by IRDA in exercise of its statutory powers under Section 114 A (zc) of the Insurance Act readwith Section 14 and 26 of IRDA Act, to the extent it is relevant reads as under:-
(3) If an insurer, on the receipt of a survey report, finds that it is incomplete in any respect, he shall require the surveyor under intimation to the insured, to furnish an additional report on certain specific issues as may be required by the insurer. Such a request may be made by the insurer within 15 days of the receipt of the original survey report: Provided that the facility of calling for an additional report by the insurer shall not be resorted to more than once in the case of a claim.
(4) The surveyor on receipt of this communication shall furnish an additional report within three weeks of the date of receipt of communication from the insurer.
(5) On receipt of the survey report or the additional survey report, as the case may be, an insurer shall within a period of 30 days offer a settlement of the claim to the insured. If the insurer, for any reasons to be recorded in writing and communicated to the insured, decides to reject a claim under the policy, it shall do so within a period of 30 days from the receipt of the survey report or the additional survey report, as the case may be.
(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 7 days from the date of acceptance of the offer by the insured. In the cases of delay in the payment, the insurer shall be liable to pay interest at a rate which is 2% above the bank rate prevalent at the beginning of the financial year in which the claim is reviewed by it."
In terms of the aforesaid regulation, the Insurance Company is liable to pay interest to the complainant at the rate of 2%, above the bank rate prevalent at the beginning of the financial year 2004-05, since the offer came to be made only on 30.03.2006, after the time stipulated in the regulations for this purpose had already expired and that offer was also not a justified offer since it was based on a gross profit margin, which was much higher than what it ought to have been, considering the balance sheet of the complainants of the previous years. Moreover, the Insurance Company admittedly utilized the money which it ought to have paid to the complainants within the time frame stipulated in the above referred stipulations framed by IRDA. The learned counsel for the complainants states that the Insurance Company was entitled to reasonable time for processing the claim after seeing the report of the surveyor and relies upon the decision of the Hon''ble Supreme Court in in Civil Appeal No. 4484 of 2004, Sri Venkateswara Syndicate Vs. Oriental Insurance Co. Ltd. & Anr. , decided on 24.08.2009. We take note of the fact that in the above referred decision, the loss to the insured occurred on 24.08.1999, much before the above referred regulations were framed by IRDA. After coming into force of the regulations only the time stipulated in the said regulation can be said to be the reasonable time for the purpose of processing the claim filed by an insured. Therefore, in our opinion, considering the time stipulated in IRDA Regulations for the processing of the claims, the complainants are entitled to interest w.e.f. 01.03.2005 at the rate of 12% per annum since the lowest landing rate of commercial bank prevailing in the financial year 2003-2004 was 10.25% per annum, as per the table produced by the learned counsel for the complainants during the course of arguments.
It transpired during the course of hearing that the Insurance Company paid a sum of Rs. 73,09,875/- to the bank through the Civil Court, with which the stock had been hypothecated. The interest in terms of this order shall be calculated on the entire payable amount w.e.f. 01.03.2005 till the date the first payment was made. Thereafter the interest shall be calculated on
the balance payment till the second payment, if any, was made. With effect from the date of second payment, if any, the interest will be payable on the remaining amount calculated in terms of this order. Subject to verification of the figures given by the learned counsel for the complainants, during the course of hearing, the amount payable to the complainants in terms of this order shall be calculated and paid by the insurance company to the banker of the complainants within six weeks from today.