Per Mrs. M. Shreesha, Member

          Aggrieved by the order dated 01.12.2008 in CC No. 22 of 2008 passed by the State Consumer Disputes Redressal Commission, UT Chandigarh (for short the “State Commission”), M/s Super Seeds Pvt. Ltd. preferred the present First Appeal under Section 19 of the Consumer Protection Act, 1986 (for short “the Act”).  By the impugned order, the State Commission has allowed the Complaint in part directing the Opposite Party, Insurance Company, to pay a sum of ₹4,30,825/- along with interest @ 12% p.a. w.e.f. 21.11.2006 i.e. two months after the date of the survey report dated 21.09.2006 till the date of realization and also costs of ₹5,000/-. 

2.       It is seen that the Insurance Company did not prefer any Appeal and only the Complainant has preferred this Appeal seeking enhancement.  It is an admitted fact that the Complainant took a Standard Fire & Special Perils Policy covering the period from 07.02.2006 to 06.02.2007 covering seeds of all kinds stocked in the warehouse.  The description of risk as given in the cover note of the Policy is detailed as hereunder:-

“On the stocks of seeds or grains of all types & / or raw material & / or finished &/ or semi finished goods & / or Bardana & / or all other similar goods / products pertaining to the insurance tradeoff manufacturing of seeds whilst in loose & / or in bags &/ or in any other packing whilst stored &/ or lying in the godowns &/ or in barracks &/ or in Varandah &/ or in processing blocks &/ or anywhere in the aforesaid factory premises built of 1^st  Class Construction property of the insured &/ or held in com. &/ or in trust.”(Emphasis supplied).

3.       While so, on 04.08.2006 sowed varieties of seeds stored were severely damaged due to rain water seepage and the same was immediately informed to the Insurance Company on 05.08.2006, making a claim of ₹25,00,000/-.  The Preliminary Surveyor, Mr. S. Seeta Ramaiah visited the premises on 06.08.2006 at about 6.30 p.m. and inspected the damaged stock, for a period of three days and submitted his Preliminary Report dated 10.08.2006 in which it was stated that several varieties of seeds of wheat, maize, bajra, soya bean and cotton had been damaged due to seepage of water and moisture.  Learned Counsel appearing for the Complainant submitted that it was only on suggestion of the Preliminary Surveyor that the unaffected stocks were moved to a safer dry place and, therefore, the Complainant opened several sachets, especially of cotton seeds  to ascertain as to which of the packs were not damaged.  It was observed that due to the moisture content, almost the entire cotton seeds stocks was damaged.  Learned Counsel placed reliance on the observations made by the Preliminary Surveyor which is reproduced as hereunder:-

“I physically verified the damaged items at random and advised them to shift the unaffected stocks to safer place. They have not shifted the unaffected stock up to my last visit on 8.8.2006. Hence I am unable to take inventory of affected stocks thoroughly. I opine that if they have shifted the unaffected stocks to safer place immediately as advised by me the further loss will not be there……”

           Learned Counsel submitted that the stock in go-down matched with the Stock Register.

4.       On 21.09.2006, the Insurance Company appointed one M/s Integral Assessors as the Final Surveyor who submitted the Survey Report and assessed the loss at a meagre sum of ₹3,91,797/-.  Learned Counsel vehemently contended that this valuation was based on surmises without any reference to the quality of the seeds which were stored for the purpose of growing hybrid plant varieties.  He further contended that after two months from the date of preparation of the Survey Report, the Insurance Company obtained a legal opinion from their advocate who clearly opined that the cause of the loss was definitely ‘Inundation’ which was covered by the Insurance Policy.  The Insurance Company repudiated the claim vide letter dated 31.08.2007 and the State Commission has partly allowed the Complaint directing the Insurance Company to pay only a meagre sum of ₹4,30,825/-.

5.       Learned Counsel appearing for the Insurance Company vehemently contended that Haryana Seed Certification Agency mentioned vide letter dated 05.03.2007 that the only crops and varieties notified by Government of India are being certified by their office and in respect of the varieties in question, they have not undertaken the certification; that there was no permission for production or marketing of hybrid seeds given by Deputy Director of Agriculture, Hisar; that the Preliminary Surveyor who visited the premises on 6^th, 7^th and 8^th of August, 2006 submitted his report stating that the stock at the time of loss was valued at ₹53,34,224/-; as the Policy covered stock worth ₹50,00,000/- only the uncovered stock was to the extent of ₹3,34,224; that the Final Surveyor assessed it at ₹3,91,797/-; that the cause of loss was seepage of rain water into C-3 Godown from its eastern hollow brick wall and that the loss due to seepage of rain water through hollow brick walls and flooring does not fall under the definition of ‘Flood and Inundation’ and is not covered under the Policy. 

6.       It is the case of the Insurance Company that the damage had occurred only to the lowest layer of sacks because the inundation was only up to a level of 12 inches whereas the seeds had been stored at platforms which were at a height of 6 inches and, therefore, only the lowest stocks were affected due to inundation.  He drew our attention to the finding of the State Commission that the Complainant did not place on record any documentary evidence to establish the claim of ₹25.75 lakhs and that the State Commission has rightly observed that there is no report of any kind to state what type or quantity of seeds were damaged and which had absorbed moisture and were not included by the Surveyor.  Learned Counsel also argued that the constraint of storage in the godown negates the argument of the insured that the cotton seeds were not stacked in the same way as the other seeds. 

7.       Learned Counsel appearing for the Complainant submitted that the cotton seeds packets/cartons were set individually or at the most one on top of the other.  It is the case of the Insurance Company that during the second visit of the Preliminary Surveyor on 08.08.2006, the Complainant showed him some cut open empty cotton seeds sachets stating that these were cut open while segregating which the Appellant was not supposed to do as it vitiated the opportunity to identify and confirm the damage of cut open sachets. 

8.       It is relevant to mention that in the Preliminary Survey Report the Surveyor Mr. S. Seeta Ramaiah has clearly stated that the damage was due to seepage of water and moisture caused by flood and inundation.  For better understanding of the case ‘The Nature And Extent Of Damage’, as reported by the Surveyor, is reproduced as hereunder:-

“8.0 NATURE AND EXTENT OF DAMAGE.

The loss of inundation in nature Seed of Wheat, Maize, Bajra, Soya Bean cotton of different varieties both in bulk & packed from as shown in the list dated 06.08.2006 enclosed list herewith and they are said to have been damaged by seepage water & moisture. Again on 08.08.2008 they submitted a revised list estimate and the same are enclosed here with.(Emphasis Supplied)”

9.       It is an admitted fact that the Complainant had shifted some of the wheat stocks to the nearby neighbour industries before the visit of Preliminary Surveyor Mr. S. Seeta Ramaiah and had segregated the affected stock on 06.08.2006 and submitted the damaged list limiting the claim to only ₹25,30,564/-, though the entire stock in the godown was worth more than ₹50 lakhs.  We observe from the Preliminary Survey Report that the Surveyor had tallied the Statement of Records at the time of occurrence on 08.08.2006 with the Stock Register. 

10.     It is pertinent to note that the Final Surveyor in his report stated as follows:-

“It may be appreciated that in all losses involved seeds, the lot number(s) of the involved quantity assume significance to determine the quality of the claimed quantity. However, while initially projecting the loss to the surveyor on 06 August 08 the insured has failed to identify the lot wise damage. Likewise, while revising the loss estimate on 8 August 2006, the insured had not projected the loss lot wise. Even in the suspect stock registers, the lot numbers did not figure in respect of many purchases. As most of the stocks for segregated and repacked, we were unable to ascertain the lot numbers of the seeds figuring in the claim. Only after examining the test reports of the involved lots, one would be able to ascertain the year of produce, germination levels etc. to determine whether the seeds were of true value or not. Since, the stock registers too did not bear lot no in most case, and as the loss was not projected lot wise by the insured it can be said that they had failed to give the required opportunity to the surveyors to ascertain the condition of the seeds prior to the said loss. Be that as it may, we would reject the damage in quantitative terms and assess the theoretical loss thereby without any relevance to the quality of the seeds involved in the claim.”

“Be that as it may, the insured’s averment that the cotton seed bags / cartons were not stacked in the same way as other seeds but were spread on the floor, was clearly an attempt to justify the damage claimed to more numbers of them. However, the constraints of storage space in the Godown would negate the self-serving argument of the insured. That being the case, and taking everything into account, we would proceed to assess the loss as it appears to reason as only the bottom layers of various stacks were, and indeed could get, affected. Cognizance is also taken to the fact that H & I stacks as your market in the stack plan, which can be co-related with the photographs in the album, were unaffected as water did not reach their area of storage. (Emphasis supplied).”

11.     It is interesting to note the observations of the Surveyor with respect to whether the peril was covered under the Policy or not:-

“But the question that arises is, whether the peril so posed by the seepage of rainwater can be construed as the flood / inundation peril of the Policy. Though the insured would have the insurers deem it thus,, and settle the claim, as can be seen, the spirit of the STFI cover of the Fire Policy wood negate the same. In essence, and effect too, the loss was caused by the seepage of rainwater into the Godown, and the peril posed by rainwater is not something that was covered under the policy. In its scope and spirit STFI clause of the policy covers those perils that occurred due to violent atmospheric disturbances of the specified kinds. It should be appreciated that the phenomenon of rain is a product of atmospheric changes not amounting to atmospheric disturbance, and thus it cannot be brought under the gamut of STFI perils. On the other hand, the flow of rainwater, anyway not caused due  by STFI perils specified in the policy, into low lying areas cannot be construed as an instance of flooding for the purposes of bringing the damage caused into the ambit of liability.

Now what about the so-called inundation of the godown caused by the seepage of rainwater through itS walls and flooring? After all, inundation is to be flooded with, and flood is “an overflowing or influx of water beyond its normal confines, esp. over land. Thus inundation as the covered peril under the policy is an influx of water beyond its normal confines, esp. over land, that is, the phenomenon of flooding of rivers and Nalas and the overflowing water making way to the adjoining ground. It is another matter that in the instant case, the insured’s promises and godowns were not even inundated thanks to the retaining wall that held up the Rain water accumulation on the other side of it. Thus, the seepage of rainwater into the premises through hollow brick wall, besides apparently inadequate flooring, that caused the laws cannot be construed as the operation of a covered peril for the insured to claim indemnity under the Fire Policy  he holds.(Emphasis supplied)”

12.     This Commission had occasion to examine this issue in a number of cases including in Bajaj Allianz General Insurance Co. Ltd. Vs. Gondamal Hardyal Mal IV (2009) CPJ 165(NC) and in New India Assurance Co. Ltd. Vs. Dani Mourdhwaj Cold Storage Pvt. Ltd. (R.P. No. 4113/2007 decided on 10.02.2012) wherein it had concluded in respect of an identical insurance policy that floods/inundation also means outpouring of water and on this analogy seepage would be included.  This Commission had also occasion to go into this question again in the case of  United India Insurance Co. Ltd. Vs. Imperial Gift House [I (2007) CPJ 6 (NC)], in which it was held that as per Oxford Concise Dictionary, relied upon by the State Commission, the word “Flood”, also means, “…….an outpouring of water……” and ‘Tornado’, beside other means, “….. a great down pour of rain……”.  Nothing to the contrary has been shown to challenge the finding recorded by this Commission in the two Judgements (supra), meaning thereby that ‘tornado’, will also mean, “…a great down pour of rain….”

13.     Hon’ble Supreme Court in a catena of judgements has construed floods/inundation ‘A Peril’ under the Policy.  Seepage of rain water into the premises through hollow brick wall damaging the stock of the cotton seeds can be construed as a ‘peril covered under inundation’ specially keeping in view the fact that rainfall report issued by the Government of Andhra Pradesh indicates that the area in question had very heavy rainfall i.e. 26.6 m.m. rainfall in a period of 3 days and, therefore, the observations made by the Final Surveyor that such a peril does not fall under the definition of ‘Inundation’ because it is not ‘overflowing or influx of water beyond its normal confines’ is totally unsustainable.  It is also significant to note at this juncture that the Preliminary Surveyor had clearly observed that the damage was only because of inundation due to heavy seepage of stagnated rain water from the rear side of wall and ground of the insured building.  Needless to add, the Insurance Company did not prefer any Appeal and, therefore, the finding that the repudiation was unjustified attained finality. 

14.     In the reply to the letter dated 01.02.2007 issued by the Insurance Company, the Complainant has stated that the Revised Estimates, as sought for by the Preliminary Surveyor, was submitted vide letter dated 08.08.2006 which specifies about the varieties  of seeds and price.  It is evident from this letter that the seeds which did not get damaged were re-packed, the seeds which were damaged were also re-packed in gunny bags, in the presence of the Preliminary Surveyor Mr. S. S. Seeta Ramaiah.  Based on the material filed, we find force in the contention of the Complainant that cotton seeds when they absorb moisture cannot be sown as they become defective by the absorption of moisture.  It can be seen from the documents on record that more than hundred quintals of seeds were damaged and such a huge quantity could not be kept in open.  When the same was re-packed in the presence of the Preliminary Surveyor, the contention of the Insurance Company that the same was not done is untenable.  The series of correspondence between the Complainant and the Insurance Company vide letters dated 06.02.2007, 23.02.2007, 08.03.2007, 04.08.2007 and 30.08.2007 clarify that the Complainant had given all the information sought for by the Insurance Company.  On direction by this Commission vide order dated 30.10.2017 that the Re-conciliation of the Bill of Losses be placed on record in a tabulated form, the Complainant has filed the Bill of Losses which is reproduced as hereunder:-

“BILL OF LOSSES

For Super Seeds (P) Ltd.

Director

For Super Seeds (P) Ltd.

Director”

15.     When the Preliminary Surveyor has inspected the Stock Registers and has visited the premises twice on 06.08.2006 and on 08.08.2006, there are no substantial reasons for the Insurance Company to state that the quantity of the seeds could not be ascertained.  The assessment made by the Final Surveyor at ₹3,91,797/- taking into consideration only 9.01 quintals of loss of cotton seeds cannot be accepted in its totality as the Preliminary Surveyor had stated that the ‘insured had submitted the Statement of Stocks at the time of occurrence on 08.08.2006 which tallied with the Stock Register.  Physical verification at random on 08.08.2006 appears to be in order with slight variation.’ 

16.     Further, the other contention of the Insurance Company, based on the observations of the Final Surveyors, that Lot Numbers were not given is also unsustainable as can be seen from the record that the Lot Numbers have been given as follows:-

“Super Seeds Pvt. Ltd., Nizamabad (A.P.)

Lots wise Details of Damaged Cotton Hybrid Seed

17.     As per statement enclosed herewith, the Stock at the time of loss was valued at ₹53,34,224/-, hence the Insured stood uncovered to the extent of ₹3,34,224/-.    The Hon’ble Supreme Court in New India Assurance Company Ltd. Vs. Pradeep Kumar 2009 7 SCC 787 has clearly stated that the Survey Report is not final and binding on the parties and only a pre-requisite for settlement of claim. 

18.     We place reliance on the standards laid down by the Seeds Act, 1966 which stipulates the maximum permissible level of germination of the seeds and exposure to moisture which results in germination which makes the seeds worthless.

19.     Keeping in view all the afore-noted reasons, we are of the considered view that the ‘Peril’ was covered; the Insurance Company did not prefer any Appeal to challenge the same and cannot now raise the contention that seepage from the floor and walls does not fall within the definition of ‘Inundation’; that though the entire details of Stock Register, Stock Statements and the Lot Numbers of cotton hybrid seeds were given to both the Surveyors, the Final Surveyor has assessed only a meagre sum of ₹3,91,797/- without taking into consideration that the total stock of cotton hybrid seeds was ₹23,47,400/- which was damaged and any moisture content in the cotton seeds would render them useless. 

20.     For all these reasons, we allow this First Appeal and modify the order of the State Commission by enhancing the compensation to ₹23,47,400/-, as specified in the Bill of Losses.  Since the Insurance Company did not prefer any Appeal, we find it a fit case to retain the interest rate awarded by the State Commission i.e. interest @ 12% p.a. w.e.f. 21.11.2006 i.e. two months after the date of the Survey Report till the date of realization.  We also find it a fit case to enhance the costs to ₹25,000/-.  Time for compliance within four weeks from the date of receipt of the copy of this order.