DR. SADHNA SHANKER, MEMBER

1.       The present appeal has been filed under Section 51 of the Consumer Protection Act, 2019 (for short “the Act”) in challenge to the Order dated 10.12.2020 passed by the State Consumer Disputes Redressal Commission, Delhi (hereinafter referred to as the “State Commission”) in complaint No. 393 of 2014, whereby the complaint was allowed.

2.       We have heard the learned counsel for the appellant (hereinafter referred to as the ‘insurance company’) and the learned counsel for the respondent (hereinafter referred to as the ‘complainant’) and perused the record including inter alia the Order dated 10.12.2020 of the State Commission and the memorandum of appeal.

3.       Although the registry has reported that there is a delay of 21 days in filing the appeal but in view of the order of Hon’ble Supreme Court in Suo Motu Writ Petition No. 3 of 2020, the appeal is within limitation.

4.       The facts, in brief, are that the complainant, who is engaged in fabrication and export of garments and upholstery mainly to US and European countries, obtained three Standard Fire and Special Peril Policy covering building, electrical, plant/ machinery, computers, stocks etc. for past many years pertaining to the trade. First policy No. 360500/11/12/3100000233 was valid for the period from 21.08.12 to 20.08.13 for Rs.1,74,20,664/- covering building, electrical installation, plant and machinery, furniture, fixture and fittings, other stocks and specific items pertaining to the trade situated at C-39, Hosiery Complex. Phase-II Extn., Noida, Distt. Gautam Budh Nagar, UP with add on cover of earthquake (fire and shock) with terrorism loading after paying extra premium. The second policy No. 360500/11/12/3100000004 was valid for the period from 01.04.12 to 31.03.13 for Rs. 2,10,00,000/- covering stock of all kinds of fabrics including hosiery garments, readymade garments, finished / semi-finished/ un-finished goods, goods in process, raw material, packing and specific items pertaining to the trade situated at the same premises as above with add on cover of earthquake (fire and shock) with terrorism loading after paying premium. The third policy No. 360500/11/12/3100000391 was valid for the period from 26.11.12 to 25.11.13 for Rs.1,10,00,000/- covering stocks of all kinds of fabrics including hosiery garments, readymade garments, finished / semi-finished/ un-finished goods, goods in process, raw material, packing and specific items pertaining to the trade situated at the same premises as above with add on cover of earthquake (fire and shock) with terrorism loading after paying premium.  In all the policies, the property insured was subject to excess clause of AOG perils 5% of claim amount subject to a minimum of Rs.10,000/- or NON AOG perils - Rs.10,000/-. It is alleged that the unit closed its operations at around 9 p.m. on 08.02.2013 and the electrician closed all the machines and power supply to the unit also off from the panels. It is further alleged that on 09.02.2013 at around 6.30 a.m., one of the two guards namely Mr. Mithilesh Kumar noticed smoke emanating from the windows of the production hall. He immediately alerted the electrician and also informed the HR manager, Mr. O.D. Sharma over the phone. The guard used fire- fighting equipment and also informed the Municipal Fire Service. Three fire brigade vehicles came at around 7.15 a.m. and after the valiant efforts, fire crew doused the fire in another hour or so and left the premises by 8.30 am. The fire started from the finishing/packing hall and remained confined to the same hall. The complainant intimated the insurance company about fire loss on the same morning and subsequently filed the fire loss claim. The police was also informed. The insurance company appointed the investigator to investigate and assess the loss. The police entered the said incident vide GD entry no. 23 dated 09.02.2013. On 16.02.2013, the surveyor explained to the complainant through email about documents/information required for processing the claim. The fire brigade department submitted its report on 17.03.2013. On 26.04.2013 the surveyors submitted one more list of documents required for processing the claim. On 28.04.2013 the insurance company directed the complainant to file some more documents such as IC code, original police report, original fire brigade report, all quotations/ estimates of repairs in original, Fabric Purchase Bill and claim form duly filled with company stamp on it. It is alleged that the complainant completed all the formalities vide letter dated 16.05.2013 and claim form duly filled with company stamp on it. On 19.05.2013 the complainant was shocked to receive letter dated 13.05.2013 citing baseless allegations on the complainant. The complainant supplied all the information and documents on 17.08.2013. On 08.10.2013 the surveyor informed that he assessed losses to the tune of Rs.20,94,000/- after doing lot of illegal deductions and sent the provisional assessment schedule to the tune of Rs. 20.94 lakh and the loss payable after all deduction was Rs.14,55,000/- and complainant was requested to give its consent. On 10.10.2013 the complainant sent some more clarification and additional information to reconsider the claim. On 05.02.2014 the complainant refused to give his consent to the losses assessed by the surveyor. On 17.07.2014 the complainant received a letter from the insurance company asking for approval of the claimant to release Rs.18,66,141. The strategy adopted by the insurance company to minimize the claim amount without any reasonable grounds amounts to not only unfair trade practice but also arbitrary attitude. 

5.       Alleging deficiency in service on the part of the insurance company, the complainant filed a complaint before the State Commission, seeking a direction to the insurance company to pay an amount of Rs. 71,55,651/-, the claimed amount, along with interest at the rate of 18% per annum from 09.02.2013 till the date of filing the complaint. The complainant also prayed for a direction to pay Rs. 10 lakh towards harassment along with litigation cost and pendente lite interest at the rate of 18% per annum from the date of filing the complaint till the date of payment.

6.       The insurance company contested the complaint by filing a written statement and raising the preliminary objection that the complainant is not a consumer as defined under the provisions of the Consumer Protection Act, 1986 and there is no deficiency in service on the part of the insurance company. It is further stated that the claim of the complainant had been settled after getting the claim fully investigated and there being no breach of policy terms and conditions on behalf of the insured, the assessment of loss by the surveyor had been accepted. It is further stated that it is settled principle of law that once a claim had been thoroughly dealt by the insurance company with due application of mind, there would be no deficiency in service.

7.       The State Commission, vide its Order dated 10.12.2020, allowed the complaint and directed the insurance company to pay the balance amount of Rs. 52,89,510/- with interest @9% p.a. from the date of filing the complaint till the date of payment.

8.       The insurance company filed the present appeal before this Commission, seeking setting aside of the order dated 10.12.2020 of the State Commission.

9.    Before us, learned counsel for the insurance company argued that the State Commission has erred in allowing the claimed amount of Rs.71,55,651/- without taking into consideration finding and the observations of the surveyor. It is further argued that the surveyor under para 12.1.2 of the survey report, has clearly stated that the rates claimed by the complainant was found on the higher side, hence, the surveyor accepted the prevailing market rates. It is submitted that by allowing the initial claimed amount of Rs.71,55,651/- under the claim bill dated 27.05.2013, the State Commission has put the complainant in a position of profit and has completely overlooked the principle of indemnity. Further, it was argued that the State Commission under para 20 has stated that the surveyor has deducted 50% for building, 75% for computers and 75% for P&M and has reduced the claim to 25% only hence unable to agree with such whimsical report but even if it is assumed that the surveyor has excessively applied the depreciation, the State Commission is not competent to reject the depreciation entirely in absence of any other contrary report towards assessment. It is argued that the State Commission had not recorded any reason for arriving at a finding that no depreciation of any percentage was required to be applied on the building, computers, stocks and P&M, despite the fact that the surveyor has clearly mentioned under para 12.1.3 that the building was 18 years old and the paint work was done repeatedly after every 5 to 6 years and as per the rule of indemnification, the depreciation has to be applied to ascertain the actual loss suffered by the complainant, and for disallowing the under-insurance @ 3.28% applied by the surveyor in its corrigendum report which was duly deducted in accordance with the terms and conditions of policy and implied loss assessment practice, as also in allowing the compensation towards the Metal Detector Machine despite the fact that the surveyor has clearly stated that loss to the aforesaid machinery comes under the electrical exclusion No.7 of the terms and conditions of the policy. Also, the State Commission has not recorded any reason for disallowing the deduction towards the under-insurance @ 44.73% and depreciation @ 75%, whereas the surveyor has clearly stated that the machineries damaged under the fire were more than 10 years old and also attracts heavy depreciation and in not deducting the salvage at Rs.37,386/- in total received by the complainant under various heads.

10.     Further, it was argued that the State Commission has completely overlooked the findings and observations made by the surveyor under para 12.2.1 & 12.2.2 and the footnotes of the Schedule I-B, wherein it has been clearly stated that the complainant has replaced all the light fittings and ceiling fans whereas all of them were not damaged and needed to be replaced. Further, it was observed that the panels were in repairable condition whereas the complainant has claimed complete replacement cost and also the 'Earthing Work' was not found to be damaged whereas it was claimed by the complainant and has been awarded by the Hon'ble State Commission.

11.     Further, it was submitted that the surveyor under para 12.3.1 has clearly stated that the computers damaged were quite old and the quotations submitted by the complainant at Rs.28,500/- was for much advanced version. Further, it was stated that the computers became obsolete after 10 years of its purchase. Since, the quotation was much higher and for the advanced version and the computer of the complainant was old and became obsolete, the depreciation @ 75% had to be applied to ascertain the actual amount of loss suffered by the complainant.

12.     Further,  it was submitted that the State Commission has erred in allowing the entire claimed amount towards the Plant & Machinery, as the surveyor has clearly stated under Para 12.4 that the claimant has claimed replacement for 3 pressing tables, 8 spotting guns, a spotting system, 2 sewing machines and a button hole-maker machine, whereas only 1 pressing table, 1 spotting gun were found to be completely burned and rest of the items were found to be under repairable condition and accordingly, only repair costs were to be allowed.

13.     Further, it was submitted that the State Commission in para 16 has wrongly stated that the there was a self-contradictory statement on the part of the surveyor. It is submitted that the surveyor under para 10.3. has clearly stated that he does not agree with the probability and version of the complainant that the fire was occurred due to short circuit in emergency lights. The surveyor has inspected each machinery minutely and it was observed that the fire has been originated from the short circuit in the Metal Detection Machinery since there was evidence of charred inside the said machinery. Since, the cause of fire was short circuit in the Metal Detection Machinery the loss towards the same comes under the General Exclusion No.7 and hence, the same was not covered under the scope of coverage of the policies in question.

14.     Further, it was submitted that the surveyor under para no. 12.5.8 has clearly stated that the complainant has claimed the valuation of stocks on the sales price, whereas it should have been on the cost price. Since the sales price also includes the portion of profit, it could not be considered for assessment of loss under the insurance policy. Therefore, by allowing the entire initial claimed amount under the stocks, the State Commission has granted the complainant the margin of profit that it would have earned on selling of stocks.

15.     Further, it is submitted that the State commission has wrongly stated under para 19 of the order that the deduction towards the article Chameau Mangue was illogical. It is submitted that the surveyor under para 12.5.4 has clearly stated that article, Chameau Mangue was claimed to be damaged at 6200 pcs. whereas the surveyor has not found the loss to that extent via physical verification, rather only few pieces were found to be damaged. Therefore, the entire claimed quantity was inadmissible. Further, the surveyor has submitted that since the stock has been rejected, the same could not be sold at the price quoted earlier, therefore, only 10% quantity (rectified under Corrigendum dated 15.07.2014) and 50% of its cost is appropriate under the facts and circumstances.

16.  Further,  it is submitted that the surveyor under para 12.5.6 has clearly stated for the article Piazza Italia AP 07 (i.e. item no. 3 under the Schedule 1- E) that the complainant has ordered (purchased) 4400 units and has supplied 4297 units for it before the fire, therefore, only balance quantity left with the complainant was 103. Hence, the claim for 411 units was inadmissible. Also, it was submitted that the State Commission has also overlooked the observation of the surveyor under para 12.5.7 wherein it was stated that the complainant has claimed 18000 units of BG Blouses (item no.1 & 7 combined under Schedule I-E). It was observed by the surveyor that out of 13,880 pcs. only 13,500 pc. were found to be damaged through physical verification of damaged pcs, and also of the hangers used for hanging/packing blouses towards the rest of the 4120 pcs. The claim under the policy is inadmissible as they found to be safe and undamaged. Since the said stock could not be sold, major part of the shipment which was burnt, is a consequential loss and hence, not covered under the General Exclusion No. 9 which does not specify any such loss under its scope of coverage. Further, it was submitted that the report of surveyor must be given due importance and that there should be sufficient grounds for explaining a disagreement with an assessment made by a report of the surveyor. Reliance is placed on:

a. New India Assurance Co. Ltd. Vs. Sri Buchiyyamma Rice Mill and  

   Ors. Civil Appeal No. 504 of 2020, decided on 21.01.2020

b. Sri Venkateswara Syndicate Vs. Oriental Insyranve Co. Ltd. and

   Anr. [ MANU/SC/1500/2009]

17.  Lastly, it was submitted that there is no breach of the policy terms and conditions on behalf of the complainant, the assessment made by the surveyor at Rs.18,66,141/- was accepted by the complainant. The complainant was informed accordingly vide letter dated 18.07.2014 about the said settlement of the fire claim and the complainant was asked to furnish its bank account details and also to submit a signed and stamped discharge voucher. It is submitted that the complainant has signed the discharge voucher with its free will, without any undue-influence and coercion, hence, not entitled for any further amount.

18.     The learned counsel for the complainant rebutted the claims made by the insurance company and argued that the surveyor has failed to take into account that the main loss was to the finished goods, which were lying ready for export. For the sake of arguments, even if, their version be taken to be correct that the same were not completely damaged and could be retrieved despite damage not only by fire, soot, smoke, etc., but also by the water used by the fire team, the buyer in the foreign country would not accept part shipment, that too, beyond the time of supply and the said goods could not be sold to any other person and is a complete loss. It is further argued that the surveyor has not given any basis of assessment of loss in respect of the goods, which admittedly were under process and the report of the surveyor is totally based on conjectures and surmises.

19.     Further, it was submitted that the main concern is the assessment of stock. All invoices were duly produced before the Surveyor for scrutiny of the raw material, job work value addition and entry of all items in premises substantiated then there is no reason for deduction of 65% in the assessment. It is further argued that the surveyor has failed to take into account that the stock details were duly submitted regularly to the bank, where the same were hypothecated and the same were duly checked by the inspectors from the bank as and when thought necessary. No reason has been given to ignore the said bank statements and the whole report of the surveyor is based on notional conjectures and surmises. Against the production machinery, an amount of Rs. 2,38,680/- has been deducted, which is the cost of metal detecting machine. This, according to the surveyor of the iInsurance company, is the cause of the fire hence not admissible for claim. This is incorrect as the power supply to all machinery was switched off on closure of the factory. Only the emergency lights on each floor which had the power supply from the gate backed by inverter were on.

20.     Further, it was argued that as for the claim of Rs.3,58,856.00 incurred for Electricity fittings and fixtures, the surveyor has not only allowed the said claim for the affected area, but has also deducted a depreciation of 75% thereon without any basis. Similarly, with regard to claim of Rs.22,440.00 towards damage to the glass, the Surveyor have deducted a depreciation of 50% thereon, without looking into the criteria laid down. It is pertinent to mention that even in case of car Insurance, the glass parts are always allowed at 100% and no depreciation is considered therein. As against claim for Rs.238760.00 on account of for whitewash and painting, a depreciation of 50% has been deducted without any norms or practice. He further argued that the complainant has claimed Rs. 5,05,606.00 for loss to Plant and Machinery but the surveyor had assessed the loss of Rs.3,71,786.00 and has deducted an amount of Rs.2,38,680.00 therefrom without any basis. Also, for computers claim of Rs.30,450.00, the surveyor has assessed at Rs.16,950.00 without any basis.

21.     Further, it was argued that the fire had taken place on 09.02.2013 and the surveyor had submitted its Report on 10.03.2014. The insurance company offered to pay an amount of Rs.18,66,141.00 to the complainant as against the claimed amount of Rs.71,55,651.46 only vide its Letter dated 18-7-2014, i.e., after a lapse of 4 months without any reason. The said amount was disbursed by the Insurance Company after a long hastle in November- December,2014. This amount was admittedly received by the Complainant under protest without prejudice to the right to recover the balance claim amount in appropriate legal proceedings as per law. It was submitted that the complainant had the right to receive the amount as per his satisfaction. Reliance is placed on The New India Assurance Co. Ltd. Vs. M/S Uni Ply Industries decided on 16.07.2013.

22.     Further, it was submitted that the insurance company being a service provider, has miserably failed to provide service as promised at the time of issuing the policy and the approach of the surveyor appointed by the insurance company was quite non responsive and not in the line of the speedy disposal of the claim as they had not responded to any letter of the complainant and adopted various tactics to delay in setting the claim with a motto to harass the complainant and thereby deduct the legitimate payment towards the claim without any reason. The learned counsel for the complainant giving hereunder the dates and events with respect to settlement of the claim, which clearly show that, the expected service had not been rendered by the insurance company, has submitted that there is clear deficiency in service on the part of the insurance company.

23.     The question which falls for our consideration is whether the amount of loss assessed by the State Commission is correct or not.

24.     After perusing the State Commission’s Order dated 10.12.2020, we are of the opinion that the State Commission had rightly dealt with each and every issue. It pointed out all the discrepancies in the surveyor’s report and has also discussed the issues related to the grossly high rates of depreciation and issues in the valuation of finished stock. It has been recorded that all the invoices and documents necessary for such valuation has been produced before the Surveyor. Relying on the decision of the Hon’ble Supreme Court in the case of New India Assurance Vs Pradeep Kumar, the State Commission has disregarded with the surveyor’s report and given a clear finding that report is not based on any logic, and is whimsical and hence arbitrary. Therefore, the State Commission while rejecting the report of the surveyor has allowed the loss claimed by the complainant.

25.     On perusal of record, we are of the opinion that the surveyor has not given any basis for exorbitant rate of depreciation, as also on the rate of under insurance on plant and machinery charged at 44.73%. He has also not provided any evidence as to on what basis he has taken the rates for the various items to come at assessment of loss. He has simply mentioned “we have accepted the rates prevailing in the market” but has not produced any documentary evidence to show the prevailing market rates.

26.     As far as the stock is concerned, it is seen, despite having the audited capital loss and balance sheet, that the surveyor reconstructed provisional trading accounts based on average GP ratio and arrived at a figure of closing stock and has then gone on to extrapolate to say that the stock statement submitted to the bank vis-a vis the provisional figure arrived at by the surveyor are on the higher side. As duly recorded by the State Commission, despite the production of all invoices, statements of accounts, etc., the assessment of stock has been reduced by more than 65%, which is not sustainable in the eye of law.

27.     On the basis of the above, we do not find any reason to interfere with the order of the State Commission and the same is liable to be upheld.  

28.  Accordingly, the first appeal, being without merit, is dismissed. All pending applications, if any, stand dismissed.