(PER MR. JUSTICE RAM SURAT RAM (MAURYA), PRESIDING MEMBER)

1.      Heard Mr. Maibam N. Singh, Advocate for the appellant and Mr. Madhurendra Kumar, Advocate for the respondent.

2.      Above appeal has been filed against the order of Uttar Pradesh State Consumer Disputes Redressal Commission, Lucknow, dated 08.09.2015, allowing CC/132/2012 and directing the appellant to pay Rs.7800000/- with interest @9% per annum, from the date of filing of the complaint, as the insurance claim, Rs.50000/- as the cost for filing written version with delay and Rs.25000/- as litigation cost. 

3.      M/s Rituraj Seed Company (the respondent) filed CC/132/2012 with the State Commission, for directing the appellant to pay (i) a sum of Rs.78/- lacs under policy No.420385/11/10/13/00000181, as the insurance claim; (ii) Rs. one lack, as compensation for harassment and mental agony; and (iii) Rs.50000/- as litigation cost.

4.      The complainant stated that it was a proprietorship concern and Om Narayan Kushawaha was its Sole Proprietor. He was running business of processing & selling of hybrid seeds of various varieties of grains and vegetables under a valid Licence No.51/5011, issued under Seeds Control Order, 1983, for earning his livelihood. He hired a godown i.e. premises No.58, at village Deshamau, Bhauti, Pratappur, Kanpur, where he used to keep the stock of hybrid seeds of various kinds, including packaging material, generator set, office equipment such as computer and the business records including the stock register, sale and purchase bill voucher, bank records etc. and also had seed gradation plant. The complainant availed financial assistance from the Bank of India for a sum of Rs.15/- lacs. In order to expand, his business, the complainant obtained a ‘cash credit limit’ of Rs.50/- lacs from the State Bank of India on 30.03.2010 against hypothecation of stock and other equitable mortgage. Thus the complainant invested more than Rs.1/- crore including the margin money in this business. The complainant was using the ‘cash credit limit’ with the SBI and its turnover was more than Rs. one crore. For the purpose of securing the stock from calamities, the complainant purchased Standard Fire and Special Perils Policy No.420385/11/10/13/00000181 from the opposite party, for the sum insured of Rs.78/- lacs, of the stock stored at above location, for the period of 06.05.2010 to 05.05.2011, by paying a premium of Rs.15529/-. As the policy was purchased with the arrangement by the financer, it was issued in the name of State Bank of India, SMECC A/c Rituraj Seeds Company. On 06.02.2011 around 9:00 PM, the workers of the complainant started grading of paddy seeds by grading machine. All of a sudden around 12:00 PM a blast took place near D.G. Set, due to which packing materials stored there caught fire. The workers who were present at that time noticed the fire and tried to extinguish the fire but could not extinguish the fire as a lot of packing material caught the fire, which soon become devastating. The workers informed the incident to the proprietor, who was out of station at that time. His wife immediately intimated the Fire Brigade Office. By the time the fire brigade could reach, most of the stock worth more than Rs. one crore was completely burnt. The intimation of fire was also given to the police station. After return back, the proprietor through bank officials intimated the insurance company about the fire incident, who deputed M/s. Sanjeev Soni & Co., Surveyor and Loss Assessor, New Delhi, for survey and loss assessment on 08.02.2011. The opposite party also deputed Mr. R.C. Bajpai, Kanpur as an investigator on 31.03.2011. The Surveyor Mr. Sanjeev Soni, vide letter dated 09.02.2011 made several queries from the complainant and asked to produce certain documents, which were immediately supplied to him. Mr. Sanjeev Soni personally visited the spot on 14.02.2011 and physically verified the burnt stock, damaged stock, debris of burnt stock and damaged stock and also took photographs of the site. He also weighed the damaged stock and burnt stock. He asked to produce certain documents including stock register, bank statement, purchase and sale voucher, copy of license, account statement, which were supplied to him. On the next day i.e. 15.02.2011 the surveyor sought for some more information and documents, which were provided by the complainant. In spite of the fact that the complainant supplied all the documents sought by the surveyor twice, on 12.03.2011, the surveyor again sought certain documents just to harass the complainant. The investigator Mr. R.C. Bajpai sent letters dated 30.04.2011 and 13.05.2011 wherein he made certain allegations against the complainant regarding provisions of Seeds Control Act & Order instead of enquiring about the incident of fire and the loss caused to the complainant. Mr. R.C. Bajpai again sent letters dated 26.12.2011, 12.01.2012 and 28.01.2012 accusing the complainant for doing the business against the provisions of Seeds Control Act and Rules. Mr. R.C. Bajpai, instead of making an enquiry about the incident of fire and the loss suffered by the complainant, started to threaten the complainant with malafide intention. The complainant, vide letters dated 28.05.2011, 03.06.2011, 15.04.2011, 04.08.2011, 01.09.2011, 21.11.2011, 30.11.2011, 08.12.2011, 21.12.2011 and 06.01.2012 replied to the queries made by Mr. R.C. Bajpai stating that the queries made by him have no concern with the investigation of the fire incident and the claim made by the complainant. At the time of selling the policy to the complainant, the insurance company did not make any query which the surveyor and the investigators are making at the time of indemnification of loss. When Mr. R.C. Bajpai found that the complainant is not agreeing with his unwritten demand, he furnished a false report to the insurance company. The investigator (Mr. R.C. Bajpai) and the surveyor (Mr. Sanjeev Soni) colluded with each other and both of them furnished their reports favouring the opposite party. The opposite party blindly acted upon the false reports and repudiated the genuine claim of the complainant vide letter dated 06.02.2012, ignoring the documents supplied by the complainant as well as the fire brigade report. Since SBI has made arrangement for taking the insurance policy from the opposite party, SBI was also liable to pursue the insurance claim with the insurance company and to cooperate in settlement of claim but the SBI did not cooperate at all with the complainant. On the contrary, after repudiation of the claim, the State Bank of India sent a notice for payment of outstanding dues and filed a case before the Debt Recovery Tribunal seeking foreclosure of the mortgaged property. Alleging deficiency in service on the part of the New India Assurance Company Limited, above complaint was filed on 11.10.2012.

5.      New India Assurance Company Limited (the appellant) filed its written version stating that the complainant had not produced genuine record to substantiate that the stock of Rs.one crore was destroyed. There is nothing on record to show that the turnover of the complainant company was Rs.one crore. As per investigation report dated 24.12.2011, the complainant could have suffered loss of Rs.10 to 12 lakhs.  The investigator sought for only relevant and vital documents and not irrelevant document. The complainant made false allegation on the investigator regarding demand of money without any cogent evidence. The complainant submitted a forged audited balance sheet and fabricated purchase bills showing profit and loss. The investigator found serious discrepancies in the sale and purchase etc. The surveyor made thorough investigation and verification of bills and balance sheet, which took time to prepare the survey report. For this the investigator had to contact the alleged purchasers and suppliers. After thorough investigation and consideration of records, the investigation report dated 24.12.2011 was submitted stating that the complainant had furnished forged bills and forged audited balance sheet. The Investigator found that the entire set of books of account submitted by the complainant was unreliable and collection of fictitious entries. The investigator has also recorded the findings about fraud committed by the complainant. He also recorded the fact that the complainant has taken another insurance policy from National Insurance Company Limited for the same stock and this material fact had been deliberately concealed from the opposite party. The surveyor submitted the final survey report dated 23.01.2012 on the basis of physical verification, weightment and valuation of the material and assessed the loss to Rs.845667.50. The claim of the complainant was repudiated vide letter dated 06.02.2012 keeping in view the investigator’s report as well as the survey report. As the complainant played fraud with Insurer and now trying to play fraud with the Commission, by filing forged audited Balance Sheet, Profit and Loss Account, Purchase Bills, Books of Account etc. The complaint has no merit and deserves to be dismissed with heavy cost.  

6.      The State Commission, vide impugned order dated 08.09.2015, held that insurance policy issued by National Insurance Company Limited was in respect of different stock, hypothecated with the Bank of India and stored at separate location, while the opposite party insured the stock hypothecated with the State Bank of India, as such, there was no concealment on the part of the complainant in this respect. State Bank of India was not a necessary party in the complaint. The surveyor, in Status Report dated 28.02.2011, found actual damage of the stock in the fire dated 06.02.2011 and estimated to Rs.78/- lakhs and in this report, it has been also been mentioned that the relevant documents were supplied by the Insured. The opposite party, then appointed investigator, who submitted his Investigation Report dated 24.12.2011. Although the surveyor has physically verified the loss and estimated its value about Rs.78/- lakhs but ignoring physical verification, he in Final Survey Report dated 23.01.2012, assessed the loss to Rs.845667.50. On these findings State Commission allowed the complaint and directed to the opposite party as stated above. Hence, the opposite party has filed the present appeal before this Commission.

7.      We have considered the arguments of the counsel for the parties and examined the record. The appellant repudiated the claim, vide letter dated 06.02.2012, invoking powers under General Condition No.8 of Standard Fire and Special Perils Policy, as the Investigator, in his Report dated 24.12.2011, had found that audited balance sheet, profit and loss account, purchase bills and other books of account submitted by the respondent were forged and different set of documents were supplied to different insurers. Clause-8 of General Condition is quoted below:-

“8.     If the claim be in any respect fraudulent, or in any false declaration be made or used in support thereof or any fraudulent means or devices are used by the Insured or any one acting on his behalf to obtain any benefit under the policy or if the loss or damage be occasioned by the wilful act, or with the connivance of the insured, all benefits under this policy shall be forfeited.”

8.      The surveyor in, Status Report dated 28.02.2011 and Final Survey Report dated 23.01.2012, found that the appellant had issued Standard Fire and Special Perils Policy No.420385/11/10/13/00000181, for the sum insured of Rs.78/- lakhs, for the period of 06.05.2010 to 05.05.2011, of the stock of all types of hybrid seed, pesticides and such other goods in trade, hypothecated with State Bank of India stored at (i) 45 MIG, Sector-4, Barra-2, Kanpur, (ii) Chakerpur Sabzi, Main Road Chakerpur, Kanpur and (iii) Opposite to Armmaspur Power House, Kanpur Dehat. Vide Endorsement No.420385/11/10/13/00000015, dated 07.06.2010, the insured location was changed as “House No.58, Village Deshmau, Pratappur, Kanpur”. The Investigator, in his Report dated 24.12.2011, found that National Insurance Company Limited had issued Standard Fire and Special Perils Policy No.450402/11/10/3100000765, for the sum insured of Rs.22.50 lakhs, for the period of 15.10.2010 to 14.10.2011, of the stock of the seeds and pesticides, hypothecated with Bank of India and insured location was “Y D 512, World Bank Colony, Barra, Kanpur”. Insurance policy, obtained from National Insurance Company Limited, is a subsequent policy for a different location of the stock, hypothecated with Bank of India. The report of the Investigator dated 24.12.2011 that the Insured had two policies from different Insurer for same stock is apparently false. The appellant blindly accepted this report for invoking power under Clause-8 of General Condition.

9.      The respondent was trading in hybrid seeds of various varieties of grains and vegetables under Licence No.8/732, dated 25.09.2004, issued under Seeds Control Order, 1983, which was renewed vide Licence No.9/86, dated 27.07.2007 and Licence No.51/5011, dated 29.07.2009, and valid till 28.07.2012. The respondent was trading the seeds and pesticide as such Policy No.420385/11/10/13/00000181, was issued for “the stock of all types of hybrid seed, pesticides and such other goods in trade”. The respondent installed grading machine run through diesel generator, registered with District Industries Centre, Kanpur Nagar on 17.08.2010. General Manager, District Industries Centre, Kanpur Nagar also issued “No Objection Certificate” under the provision of Pollution Control Act, 1974 for doing “seeds processing”, which is the process of winnowing, cleaning, grading, drying and treating. Seeds processing does not mean farming of the seeds or manufacture of anything. After processing the seeds and grains, it used to be packed for sale. The Seeds Act, 1966 imposed only restriction in trade of hybrid seeds without certificate of Certification Agencies. The respondent also produced certificates of Certification Agencies. These licences/certificate were produced before the surveyor/investigator but the Investigator in his report has stated that the respondent was doing business of hybrid seeds in violation of the Seeds Act, 1966.

10.    The appellant filed Investigation Report dated 24.12.2011 and Final Survey Report dated 23.01.2012 without its annexures or so called materials collected by the Investigator, on which basis, the appellant has held the documents of the respondent were forged/fabricated and invoked clause-8. Neither the Investigator nor the surveyor filed their affidavits before State Commission. When the hearing in the appeal was started, we vide order dated 24.11.2023, directed the appellants to file the documents, which were necessary for hearing the appeal. The appeal was adjourned on 05.12.2023, 26.12.2023, 10.01.2024, 06.02.2024, 16.02.2024 but the appellant could not file any document. On 12.03.2024 we directed the appellant to file joint physical verification memo prepared by the surveyor and hearing was again adjourned on 04.04.2024, 02.05.2024, 21.05.2024, 10.07.2024, 06.08.2024 and 21.08.2024 but the appellant failed to produce the documents, collected by the Investigator to falsify the papers produced by the respondent or even the joint physical verification memo. In such, circumstances this Commission is bound to raise adverse inference against the appellant as they withhold the document in its possession. There was absolutely no material before the surveyor/investigator to say that the respondent had produced fabricated papers.  So far as, the allegation that different set of documents were supplied to different insurers, is concerned, as found above, the respondent had two different policies in respect of goods stored at two different locations and hypothecated with different insurer as same documents could be supplied to both the insurer.

10.    The surveyor inspected the fire affected godown on 09.02.2011. In Status Report dated 28.02.2011, the surveyor noted that during his inspection on 09.02.2011, he had noticed that the stocks of various type of seeds were in badly damaged condition. The plant & machinery, electrical wiring and the building was also badly damaged. He asked the Insured to segregate the damaged stocks and arrange joint physical inventory. After segregation, he against visited the site on 14.02.2011 and conducted the joint physical inventory (weightment) of damaged and safe stock. It was observed that due to excessive heat and water, the seeds were badly damaged. The fungus and pests were developed and the colour had been changed and found in red and blackened condition. There was lot of foul smell developed there and the stocks were badly damaged and not even usable for cattle feed. On actual weightment of the damaged stock, which were also fully verified from the Sales and Purchase Bills, the loss was estimated around Rs.78/- lacs. In Final Survey Report dated 23.01.2012, the surveyor has given the quantity of the safe stock in paragraph-14 but he has not given quantity of damaged stock and merely given its valuation as Rs.845667.50 in paragraph-15. We failed to understand the mathematic of the surveyor inasmuch as the damaged stock, which was earlier estimated to Rs.78/- lacs on its actual weight has been reduced to Rs.8.45 lacs. Supreme Court in New India Assurance Company Limited Vs. Pradeep Kumar (2009) 7 SCC 787, held that although the assessment of loss by the approved surveyor is a prerequisite for payment or settlement of claim of twenty thousand rupees or more by insurer, but surveyor's report is not the last and final word. It is not that sacrosanct that it cannot be departed from; it is not conclusive. The approved surveyor's report may be basis or foundation for settlement of a claim by the insurer in respect of the loss suffered by the insured but surely such report is neither binding upon the insurer nor insured.”

11.    Supreme Court in Ashok Kumar v. New India Assurance Co. Ltd., (2024) 1 SCC 357, held that it is well settled in a long line of judgments of this Court that any violation of the condition should be in the nature of a fundamental breach as are found to have contributed to the cause of the accident so as to deny the claimant any amount. (See B.V. Nagaraju v. Oriental Insurance Co. Ltd.,(1996) 4 SCC 647, National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297 and Lakhmi Chand v. Reliance General Insurance, (2016) 3 SCC 100 and Manjeet Singh v. National Insurance Co. Ltd., (2018) 2 SCC 108.

12.    In paragraph 17 of the final survey report dated 23.01.2012, the surveyor acknowledged that the insurer provided him all books and records, such as audited balance sheet for last three years, trading profit and loss account for the period of 01.04.2010 to 06.02.2011, along with all ledger accounts, sales and purchase bill, itemwise stock register and stock statement sent to the bank etc., major party ledger accounts, and confirmation from various customer/ suppliers, VAT returns etc. The insured also provided a list of traders with their phone numbers in order to verity the transactions made by him.

13.    In paragraph 18 of final survey report, the surveyor noticed following observations of the investigator in its report dated 24.12.2011:-

“The insured has taken insurance coverage for the same stock simultaneously with two insurers i.e. The New India Assurance Co.Ltd., & National Insurance Co.Ltd. and the insured has also lodged the claim for the same stock with National Insurance Co. concealing the fact from both the insurers about double insurance coverage for same stock.

Two year back, the insured managed a CC limit for Rs.2000000 from Bank of India, Geeta Nagar. It has come to notice that the insured has submitted fake tittle deeds to the bank as collateral security.

The insured deals in trading of seeds, however, he posses to be a dealer of hybrid seeds although he is not having requisite certificate and storage infrastructure as per provision of the Seed Act 1966. In our opinion, the seeds were not hybrid, since does not have any proof to that affect.

Regarding the cause of loss, abnormalities found in the various reports issued by Fire Station, Fazalganj, Kanpur and based on various circumstantial evidences, the investigator found that the fire was not genuine, and have also written to the Hon'ble IF Fire, Lucknow stating these abnormalities and requested to investigate further in the issue and their reply is awaited.

The Audited Balance Sheet submitted by the insured was fake. The name of certifying Chartered Accountant appearing on the Tax Audit Report stated  in writing that he has not certifying any documents of any M/s. Ritu Raj Seeds. Since the balance sheet is the summary of the Balance appearing in the ledger accounts maintained by a party and the ledger accounts are prepared on the basis of the journal entries which are passed on the basis of the voucher/ bills of the transactions entered during the year. In case the balance sheet submitted is faulty the entire set of books of accounts is unreliable and prepared as per unacceptable accountable policies and a mere collection of the fictitious entries passed by the insured to avail bank advance to take undue advantage of the insurance coverage. Thus if the books of accounts submitted by the insured are fabricated and cannot be relied upon thus the insured's claim stands unsubstantiated moreover, the insured has violated condition no.8 by submitting bogus documents.

The cash book entries shows an outright of Income Tax and Anti Money laundering provisions as per the relevant acts.

The Proprietor Rohini Seeds Mr. Balram informed that the bills raised and presented by M/s. Ritu Raj Seeds to be allegedly in the name of Rohini Seds are bogus.

On verification of purchase details of M/s. Pramod Beej Bhandar, the purchase value as appearing in the ledger of the buyer is in between Rs.40 to Rs.10000 each bill as against the huge salęs shown by the insured from the copy of invoices provided to the investigator in the range of Rs.30800 to Rs.435000 which is all together fictitious and bogus.

The Proprietor of the firm Mr. Pramod Kumar Maurya has specifically confirmed never having purchased the huge stock as shown by the insured in his books and thus the bogus claim bill submitted by the insured are an outright violation of condition no.8 of the policy.

The bills of M/s. Balaji (Uttrakhand) seed corporation found false as per verification done from Uttarakhand Seed Corporation and Sales Tax Department of Rudapur.

M/s. Ritu Raj Seeds company has mention in his brochure many hybrid varieties of different crops, it means company was producing hybrids-fi without following norms and permission of ICAR or concerning agent of government of India. Company is directly affecting law and regulation of the Seeds Acts and defaming to Govt. of India, Agriculture Ministry, State govt. in front of farmers and multinational companies.”

14.    We have already held that two insurance policies, one from New India Assurance Company Ltd. and other from National Insurance Company Ltd., were in respect of different stocks at different locations. So far as the present complaint is concerned, all the papers submitted before the surveyor as well as investigator relate to the location, which was insured by endorsement i.e. “House No.58, Village Deshmau, Pratappur, Kanpur”. Therefore, the insurance policy in this case was in respect of the insured location. The investigator observed that the insured had obtained a CC limit from the Bank of India on fake title deeds. However, as stated above that in the present case, the insured location is insured by National Insurance Company Ltd. hypothecated with the Bank of India, is not involved, therefore, this issue was wholly irrelevant. Further, on the one hand, the investigator held that the bank was not cooperating with him and had not provided any document, but on the other hand, on what basis the title deed submitted before the bank was found fake has not disclosed, either by the surveyor or by the investigator. These are stray and false remarks. We have already found that the insured produced the licence granted under the Seed Control Order, 1983, which was valid at the time of the incident. From the trading as well as the record produced by the insured, it was proved that the insured was selling hybrid seeds, as well as non-hybrid seeds. So far as, hybrid seeds are concerned, the certificates from a competent agency were also produced. The investigator did not point out that what provisions of Seeds Act 1966, Seeds Rules 1968 or Seed Control Order, 1983, had been violated by the insured. The investigator merely on the basis of the endorsement in the report of the Fire Service Department that the cause of fire is falling in other categories, has disputed the cause of fire to be genuine. It may be mentioned that the National Insurance Company has also appointed investigator to investigate the cause of fire and the investigator in its report has held the cause of fire to be genuine. The report submitted by Mr. Anil, investigation services, has been brought on record before the State Commission. Similarly, the surveyor, in its Status Report dated 28.02.2011, found the cause of the fire as genuine cause. According to the insured, at the time of processing the seeds through the diesel generator, the cable suddenly burst, due to a spark in it, the packing material caught fire, which soon took devastating nature. There was no reason for the investigator to found that cause of fire was not genuine. The investigator has observed that the audited balance sheets were fake. On the record the insurer has not produced the letter of the auditor denying his signature or an affidavit of the auditor for not certifying the record of the insured as such this observation is wholly uncalled for. The investigator has further observed that the transactions of the insured violated the Income Tax Rules and anti-money laundering. The insured is a regular income tax payer and has produced before the State Commission the assessment orders of the Income Tax Department. The bank account, cashbook, and audited records are under regular examination of Income Tax Authorities and there is no order of Income Tax Authorities holding the insured had violated any rules. The observations of the investigator in this respect are wholly illegal.

15.    Apart from the list of the traders, the insured has also produced the letters/ certificate of traders in relation to the transactions made by the insured with those traders. The appellant has not produced the letter of any of the traders, who has denied transaction with the insured. Further the transactions are subject to sales tax/ VAT, and there is no order of any Sales Tax authority holding that the insured has violated any rules.

16.    In these facts, the provisions of General Condition No.8 was not attracted and it has been illegally invoked by the appellant. In this circumstances, the State Commission has not committed any illegality in ignoring the investigators report dated 24.12.2011 and final survey report dated 23.01.2012, in so far as, it had made a contrary observation regarding forgery/ fabricated records produced by the insured. The same surveyor, in his status report after actual weightment of damaged stock, as well as the bills produced in respect of the purchase of the damaged stock has tentatively assessed the loss of Rs.78 lacs. Therefore, the State Commission has rightly relied upon this.

17.    However, the State Commission has ignored that as per the insured, the total stock at the fire affected premises was about of Rs.one crore, while the sum insured was only Rs.78 lacs. Therefore, the underinsurance was applicable. Similarly, under the insurance policy excess clause has also been provided. Therefore, the insurer was entitled to apply the underinsurance in the ratio of 78/100 and reduce the amount of excess clause.

ORDER

In view of aforesaid discussions, the appeal is partly allowed. The order of State Commission dated 08.09.2015 is partly modified. The appellant is permitted to apply underinsurance and reduce the excess clause from Rs.78/- lacs and rest of the order passed by the State Commission is affirmed.