NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
Padam Cotton Yarns Ltd.
Registered office at:
71/3, Mile Stone,
Mr. Rajev Gupta, Director … Complainant
1. New India Assurance Co. Ltd. & Ors.
Having its registered office at
2. New India Assurance Co. Ltd.
Division Office, Opposite Bus Stand,
3. New India Assurance Co. Ltd.,
HON’BLE MR. JUSTICE M.B. SHAH, PRESIDENT
MRS. RAJYALAKSHMI RAO, MEMBER
For the Complainant : Mr. Priya Kumar, Advocate
For the Opposite Party: Mr. Manish Singhvi, Advocate
M.B. SHAH, J., PRESIDENT
This original complaint was filed on 4.12.2004. It is the contention of the complainant that due to unreasonable delay in settling the claim, the complainant is suffering heavy loss and is required to face the financial institutions for repayment of loan. It is, therefore, submitted that the matter may either be finally disposed of or an interim order be passed on the basis of the admitted documents.
It is an undisputed fact that fire broke out in the factory premises of the Complainant on 14.7.2002. There is no dispute with regard to the insurance policy covering the fire peril.
Mainly, it is contended by the learned counsel for the complainant that the insurance company has appointed 5 surveyors and all of them have opined that the fire was accidental. As per the final survey report, the complainant is entitled to get minimum Rs.5,27,48,094/- on account of loss suffered by it.
It is to be stated that the High Court of Punjab & Haryana by its order dated 1.4.2003 directed the insurance company to deal with the insurance claim of the complainant in accordance with law as expeditiously as possible and preferably within one month from the date of receipt of certified copy of the order by them.
this, learned counsel appearing on behalf of the opp.party
insurance company submitted that for justifiable ground, the claim is
repudiated. He submitted that by letter
dated 19.8.2003, the Manager of the insurance company informed the Regional
(i) Two sets of Final Accounts (Balance Sheet & P & L Account) for the year 2001-02 furnished with 2 different figures signed by the same Chartered Accountant. The authenticity of the accounts is completely doubtful.
(ii) During the last 5 financial years, the liability of the insured has increased from Rs. 4,16,29,439/- (1997 – 98 ) to Rs. 5,44,8,462/- (2001 – 2002).
(iii) Net profit for the last 5 years are in the average of 0.08% and no dividend has been declared by the insured since the incorporation of the Company.
(iv) Quantity-wise sales of the insured have been showing a declining trend.
(v) The total closing stock in the year 2000-2001 and 2001-2002 were at an average of 3,59,119 kgs. & 3,54,198 Kgs. respectively. But in the year 2002-2003 the total average closing stock has doubled to 7,14,888/- kgs. Such an abnormal increase appears to be unrealistic and fabricated.
(vi) Insured' opting for Depreciated Value Settlement strengthens the poor financial strength.
Cause of Fire
The spread of the raw material godown through corridor passage in not convincing in view of the following –
- The distance of between two wings is 27 ft.
- Accumulation of stocks in corridor and passage for the stock received from 9th to 12th of July, 2002, though they were having empty godown near the passage affected.
- No burn marks were observed in passage (as also confirmed by LPA) which is evident from the photographs also.
- The stocks lying in corridor and passage through which the fire has spread to raw material godown is partially burnt, while there is 100% loss in godown where 70 F.P.I.B. Bales were lying which is also turned to ashes.
the fire occurred at on the
intervening night of 13/
Following points may also be highlighted.
- Hearing of some blast in the factory by the fireman.
- The use of the fire proof door in between blow room and other sections which were open at the time of loss.
- The reports of third parties/independent agencies like Forensic Science Laboratory, TAC, LPA have all not accepted without any reservation the narrated cause of fire i.e. short circuiting.
Extract of TAC Major loss investigation Report:
The fact that the fire was noticed by the
security guard at around on
- It was difficult to understand the behaviour of fire in assuming the route, possibility of breaking out fire at two different locations simultaneously is remote. Keeping in view of the layout of both the legs and separation, fire should have confined to the leg in which it was originated.
- In leg – 1 i.e. the affected raw material godown there is no wiring at all, hence usual short circuit as cause of fire in leg – 1 is ruled out, if at all fire had originated from Leg-1.
LPA in their report have made the following observations –
i) The damage was observed maximum at the open-end machine sections.
ii) At the Blow room and carding sections it was observed cotton which was in process, burnt completely but no substantial burn mark observed in the machines or the walls.
iii) The Fire Proof Door between the Blow room and carding room did not operate, even on actual fire condition.
iv) The fire hydrant system was not used at all by security guards to control the fire at the initial stage.
v) No burn mark observed at the wall (towards the open passage between the two wings) of the manufacturing area.
vi) It was mentioned that mill was running for single shift but raw material stock maintained was too much and no significant finished goods stock available during the day of fire incidence.
viii) The pattern of fire spread, even while fire fighting was on i.e. from manufacturing side to raw material godown side, difficult to understand.
ix) Fire had damaged both wings of U shaped building (i.e. east and west side) provided with asbestos roofing.
x) The reason for initiation of fire at the raw material kept at passage is difficult to ascertain.
xi) The estimate of loss could be to the tune of Rs.2 Crores as informed by the insurer.
As per Forensic Science Laboratory, Haryana Report dated 11.09.2002 – All the electric connections fitted in the factory were examined. There was no indication of any electric short-circuiting.
The Competent Authority have also suggested invoking Standard Fire and Special Perils Policy General Conditions No.8 (Fraudulent/False declaration, etc.) while conveying repudiation letter to the insured.
Keeping in mind the above points, you are now requested to draft a suitable repudiation letter vetted by a local penal advocate and to be communicated to the insured by Registered A.D. and by had delivery also.
ensure to convey our stand to the Hon’ble High Court of Punjab and Haryana,
As against this, learned counsel for the complainant has relied upon various reports submitted to substantiate her contentions that the repudiation of the claim is totally unjustified and against the evidence collected by the insurance company through survey/investigation reports.
I. Report of Fire Station Officer:
Fire took place on 14.7.2002. The Fire Station Officer was informed and in his report he stated as under :
a) Category of fire was serious.
b) Supposed cause of fire was short circuit.
c) In the Fire Station there was only one fire tender and the fire spread due to heavy wind and cotton burnt in heavy flames till help came from another fire station.
II. Report of Tariff Advisory Committee:
On 28.7.2002, Tariff Advisory Committee, Delhi Regional Office in his report stated as under :
“The exact cause of fire is not known. In Leg I, i.e. the affected raw material godown there is no wiring at all; hence usual short circuit as cause of fire in Leg I is ruled out, if at all fire had originated from Leg I. Electric wiring in Leg II i.e. the working area condition of wiring was bad. Hence if fire had started from Leg II, electric short circuit as cause of fire cannot be ruled out”.
III. Report of Forensic Science Laboratory (FSL), Haryana.
On 13.8.2002, the Forensic Science Laboratory (FSL), Haryana pursuant to the information of the police, submitted their investigation report as under :
“(g) all electric connections fitted in this factory were examined. There was no indication of any electric short-circuiting. But it could have been possible that due to sparking in any loose connection or due to high voltage in the external electric wires, cotton sticking to these electric wires could have caught fire which further spread in other rooms of the factory due to movement of lighter pieces of burning wool.
The FSL team further found that the raw material in the godown was completely burnt and in the north-east direction adjacent to the hall, all the machines were found completely burnt.
IV. Police Investigation Report:
In the Police Investigation Report dated 16.8.2002, it has been reported that “No offence has been detected which could be doubted of any type of serious crime”.
V. Opinion of Mr. Atul Gupta, Engineer (E&E)
On 24.12.2002, Mr.Atul Gupta, Engineer (E&E) an Expert appointed by Shri R.G. Verma on cause of fire submitted that “in our opinion cause of fire could be electrical short circuit in plant area”.
VI. Report of R.G. Verma, Chartered Accountant:
On 14.1.2003, Mr. R.G. Verma submitted his report regarding cause of loss and financial part of the stock loss as under :
i) The cause of fire is short-circuit.
ii) Report of Mr.Atul Gupta, Engineer (E&E), who was deputed by the investigator Mr.R.G. Verma for investigating into the cause of fire, concluded his report stating that the cause of the fire could be electric short circuit in the plant area.
iii) No traces of petrol/diesel were found at the site. It is not a case of sabotage.
iv) In his report, the probable route of fire has been stated as under :
“It seems that fire had started somewhere near the draw frame machines as it appears after looking at the extensiveness of fire on draw frames near the carding. At this stage the semi-finished quality of yarn is being manufactured, it is loose cotton and highly inflammable. Besides this, the cotton loafs were also spread in the entire area. The electrical wiring for providing the light load was also been stuck with cotton loafs. The light bulbs were also placed in the area. From this area the fire could have spread towards the open-end and in another side towards the carding machines. Then it may have traveled to the blow room area through the open fireproof door connecting both sections. Open-end machine area has also been extensively damaged. The open-end machines are open in both sides. The cotton yarn at this stage is also usually processed in good quality, and is highly inflammable. The open-end machines are open in both sides and also has plastic parts. The roof of this area has collapsed as ACC sheets are used in the roof with steel structure. The open-end area, which is called RN section in the backside, did not collapse and had RCC slab. The stocks in bins and in plastic drums were fully burnt. The ventilators are on the rear side called RN section could also have helped spread of fire in plant as the wind pressure on that night was from west to east as per statement of various persons/authorities.
The ventilators are at the west side of plant. The fire was extensively damaging in open-end and draw frames area.
The carding machines and blow room machines are less affected. These are covered machines. The cotton yarn are in shape of laps at the backside of the carding machines. Then the fire may have routed to blow room area from the fireproof door, which was open. The material stored in the bins of blow room were also completely damaged.”
v) The fire appears to have started near the draw frame machine. This conclusion is based on investigation and the extensiveness of fire at the location. Since cotton and the semi finished yarn along with cotton loafs which were lying around and are highly inflammable were lying around, the fire could have spread towards the open end and in another side towards the carding machines and further to the blow room area. The ventilators on the rear side provided a path to the air flow that was from west to east on that night. This further contributed to the spread of the fire.
vi) Fire emanated from the manufacturing process block and subsequently spread to cotton godown.
vii) During investigation by surveyors, police, FSL and TAC, the cause of fire is established as short circuiting. No other possibility / doubt regarding cause of fire has been raised.
viii) It is a case of fire from plant area via the carding section to godown. As such the question of fire starting from godown does not arise.
ix) Police completed investigation and in their final investigation report, it has been stated “no offence has been detected that could be doubted of any type of serious crime”.
x) Considered the letter of SBI which had given cash credit and term loan facility to M/s.Padam Cotton Yarn Ltd. The said letter confirmed to the surveyors that the company had maintained a good financial record with the bank and had never defaulted in its account.
Finally, he concluded his report as under :
“We have not come across any evidence of malicious intention on the part of the insured. Financial health of the insured was good. The insured could not have benefited due to fire. Almost all the machines of the insured were working. As per evidences available, the fire had traveled from the plant section to the raw material godown through the corridor / passage. It is a case of claim due to accidental fire.
He further stated that in his considered opinion :
a) It is a case of spread of fire from plant area to raw material godown.
b) The cause of fire is electric short circuit.
c) The evidences available to us points out the fire to be accidental in nature.
d) The cause of loss is covered in the policy. The claim falls within the scope of fire and special peril policy.
VII. Report of M/s. KAYPSENS
On 17.4.2003, M/s.KAYPSENS filed their final survey and assessment report, wherein they have considered various reports of different Authorities as under :
i) Causes for spread of the fire – Considerable quantity of raw material lying in the corridor/passage and the raw material godown, had fuelled the fire which became quite intense and ferocious. It has been reported that the directions of wind was from west to east which accelerated the propagation of fire and made the job of fire brigade personnel all the more difficult as the flame/fire was coming towards them.
ii) Fire Brigade Report – Karnal Fire Station (under Rohtak Division) of M/s.Haryana Fire Services have stated in their Fire Report dated 14.7.2002 that the intimation about outbreak of fire in the insured’s premises was received at 0130 hrs. of 14.7.2002 and the fire tender had reached the factory premises at 0139 hrs. The said fire tender left the insured’s factory at 1700 hrs. after putting in around 16 hours of fire fighting operations in which 3 fire tenders, one each from Panipat, Nilokheri and Assandh, also participated. The category of fire is stated to be ‘serious’ and the supposed cause of fire has been mentioned as ‘by short circuit’. The estimated value of loss has been indicated at Rs.11 crores.
Contemporaneous media reports – The incident of fire in the insured’s factory in the intervening
night of 13th and
iv) Final investigation report of the police authorities – The concerned police authorities, after completing their investigations into the captioned fire incident, submitted their Final Investigation Report dated 16.8.2002 mentioning that “no offence has been detected which could be doubted of any type of serious crime”.
Forensic Science Laboratory (FSL) – Based on the
reported by Sector-4 Karnal Police Station, a team of
officers from FSL, Madhuban (Karnal)
vi) The report of R.G. Verma & Associates – M/s.R.G. Verma & Associates were deputed for investigating into the cause of loss/fire. They issued their Investigation Report dated 14.1.2003 wherein they have drawn the following final conclusions :
i) the financial health of the insured was good and the insured could not have benefited due to fire.
ii) The investigators had not come across any evidence of malicious intentions on the part of the insured.
iii) The available evidences point out for the fire to be accidental in nature. It is a case of spread of fire from Plant Area to Raw Material Godown through the corridor/passage.
iv) The cause of fire is ‘Electric Short Circuit’.
They have also enclosed a detailed layout plan of the insured’s factory indicating explicitly the probable rout of fire, wind flow, placement of machinery/damaged stocks and HSEB light load route.
They have come to conclusion as under :
“In view of the above cited facts/aspects & circumstances of the loss/fire and based on the physical inspection/verifications made there of by us during our visits to affected factory site, we are of the considered opinion that in all probability the sparks produced either due to electrical short-circuiting or due to certain loose connections or abnormally high supply voltage in the electrical wiring of lighting load (fixtures/fittings) had set on fire the cotton fluff sticking to the wiring or lying the close vicinity of the point of said electrical fault. Once the cotton fluff had caught fire, the fire had propagated at a rapid pace as aided by the presence of considerable quantity of stocks raw material (cotton/cotton waste/synthetic waste) & stocks in process/WIP. Also direction of flow of strong wind blowing at that point of time coupled with the high temperatures of hot dry summer period, had been quite conducive to rapid spread of fire. We are therefore of the view that the outbreak of fire under reference has been accidental in nature and in all probability the fire had been caused/occasioned by the heavy electrical sparking resulting either from electrical short-circuiting or certain loose connections or due to abnormally high supply voltage.
Finally, they assessed loss on Depricated Value Basis at 5,28,48,094/-.
After examining the invoices relating to purchase of raw material, balance-sheets, bank statements, financial transactions, documentation regarding purchase of raw material and sale of finished goods, Col.Chandra Prakash (Retd.), B.S c.(Electrical and Mechanical Engineer), in his Investigation Report dated 16.7.2003 came to the conclusion as under :
“The insured maintains his accounts on computer. All related registers and documents are properly maintained. All purchase/sale transactions for the period under investigation, have been verified with account books and related documents held by the insured, purchases (of finished goods), sellers (of raw material) and concerned monthly bank statements. All transactions have been found physically executed and in order.”
The Loss Prevention Association of
“The exact cause of initiation of fire could not be ascertained during the site visit. The initiation of fire in the manufacturing wing of the building due to electrical reason cannot be ruled out.”
From the aforesaid evidence, collected by the Insurance Company, it is revealed that:
(i) As per the Fire Brigade Report, the cause of fire was short circuit and the fire spread due to heavy wind and cotton burnt in heavy flames till help came from another fire station.
(ii) Report of the Tariff Advisory Committee also indicates electric short circuit as cause of fire cannot be ruled out.
(iii) The report of Forensic Science Laboratory establishes that the fire could have been possible due to sparking in any loose connection or due to high voltage in the external electric wires and cotton sticking to these electric wires could have caught fire.
(iv) The opinion of Shri Atul Gupta, Engineer (E&E) who is an expert appointed by Mr. R.G. Verma, Chartered Accountant, reveals that cause of fire could be electrical short circuit in plant area.
(v) Police investigation report also indicates that no offence has been detected which could be doubted as any type of serious crime.
(vi) The Surveyors - M/s. Kaypsens also accepted that cause of fire was short circuit and category of fire was senior and that the available evidence points out that it was accidental in nature.
From the above evidence collected by the Insurance Company it is apparent that the loss caused to the stock of the complainant was due to accidental fire.
On the question of loss Surveyor, Mr. R.G. Verma, Chartered Accountant, has assessed it at Rs.5,27,48,000/-. Further investigation report reveals that the insured maintains his accounts on computer. It is also stated that all related registers and documents were properly maintained and all the transactions were found in order.
From the facts stated above, interim order is required to be passed because there are number of matters pending since 1997 onwards and litigants including Insurance Company cannot be permitted to take undue advantage of such delays.
Hence, in our opinion, it would be just and proper to pass interim order directing the insurance company to deposit at least the loss assessed by the surveyor and the loss assessor, which is Rs.5,27,48,094/-. In this view of the matter, it is directed that within a period of 6 weeks from today, the insurance company shall deposit Rs.5,27,48,000/- (rounded figure) with interest at the rate of 10% p.a. from 1.2.2003 (i.e. after 6 months from the date of fire) till the date of deposit, with the Registrar of this Commission. It would be open to the complainant to withdraw the same by furnishing continuing Bank Guarantee till the complaint is disposed of.
( M.B. SHAH)