NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
M/s. Banaras Beads Ltd. & Ors. … Complainants
M/s. New India Assurance Co. Ltd. & Ors. … Opposite Parties
HON’BLE MR. JUSTICE M.B.SHAH, PRESIDENT.
MRS. RAJYALAKSHMI RAO, MEMBER.
For the Complainant : Mr. M.N.Krishnamani, Senior Advocate with
Mr. S.K. Sharma, Advocate.
For the Opposite Party : Mr. J.R.Midah &
Mr. Niraj Singh, Advocates.
To protect against perils, insurance coverage is taken by paying large premium. In case where damage is extensive and if the insured amount is not paid within a reasonable time, it can ruin the insured. This case illustrates how surveyors can play havoc with the insured and to what extent there can be negligence on the part of higher officers of the insurance company in not discharging their duties effectively in verifying whether surveyor’s report is justifiable and can be the basis of paying for the loss suffered by the insured. This is required to be stated because for the godown in Janakpuri, where fire took place, insurance coverage was for a sum of Rs.85 lakhs; as per the surveyors report damage was extensive and sound stocks would be at the most 10%; goods stored according to the complainant was worth Rs.89 lakhs and the surveyor has assessed the loss payable to the complainant at Rs.4,80,000/- It is pointed out that this is wholly arbitrary, unjustified and mala fide.
The insured M/s. Banaras Beads Ltd. has filed this complaint for recovery of loss suffered due to fire from the insurer, the New India Assurance Company Limited. The claim is for a sum of Rs.69,23,850/- being the value of goods/stock lost in fire which occurred on 23.2.1997 in the godown/showroom of the complainant situated at basement of Building Vishwa Sadan, 9, District Centre, Janakpuri, New Delhi. In the said godown, complainant has stored precious stock of goods, such as, carpets, beads, brass jewellery, brass bangles, brass fittings, iron handicrafts, bone beads, bone necklaces and other articles for export. It is also prayed that insurance company be directed to pay the said amount with interest @ 18% per annum and damages and compensation to the tune of Rs.20 lakhs.
It is not disputed that :
(a). the fire took place in the godowns
situated at Janakpuri,
(b). for the stock in the said godown, the insurance coverage was for a sum of Rs.85 lakhs; and
(c). for all the godowns at various places, the insurance coverage was for a sum of Rs.8.25 crores.
The dispute is only with regard to quantum of the loss assessed by the surveyors.
Surveyors’ Report :
The surveyors appointed by the insurance company, in their survey report dated 7.5.1998, has inter alia stated that pursuant to the instructions received, surveyors M/s. A.K. Govil & Associates visited the fire affected premises on 25.2.1997 and carried out spot inspection and submitted a preliminary survey report on 26.2.1997. Thereafter, representative of M/s.V.N. Sareen and Co. Pvt. Ltd. visited the site on 27.2.1997 and informed the insured for the inventory of the stock which remained undamaged. He was asked to produce a number of other certificates.
Further, relevant part of the report is as under :
“After completing our assignment, we are now in a position to issue our Joint Final Survey & Assessment Report for company’s consideration, as under :
Policy No. : 1142070106153
Issued by : New India Assurance Co.
Ltd., Branch Office,
Favouring : Banaras Beads Pvt. Ltd.,
For the period : 29.11.96 to 28.11.97
Covering : Rs.825 lacs on various
properties as per schedule
attached with the policy.
Against : Fire & Allied perils as per
Fire Policy “C”
The sum insured
at the affected location is Rs.85 lacs on stocks of
carpets, beads, handicraft items & other similar goods lying at
showroom/godown at Vishwa Sadan,
(ii) It may be noted that name of the insured as mentioned in the policy is Banaras Beads Pvt. Ltd. whereas the name of the insured is Banaras Beads Ltd. It was explained by the insured that the erstwhile Banaras Beads (P) Ltd. after a public issue was converted to a Public Limited Company and accordingly its name was changed to Banaras Beads Ltd.
Insured M/s. Banaras Beads
Ltd. is Public Limited Company, constituted under Companies Act, 1956 having
their Regd. Office and Works at A-1 Industrial Area, Varanasi and Branch Offices at Delhi, Noida,
Calcutta and Ernakulam. Insured is a Govt. recognized export house
mainly exporting Beads of various types, necklaces, imitation jewellery,
various types of handicraft items, carpets etc. to
Insured have been maintaing computerized financial records for conducting their business for Delhi Branch at Vishwa Sadan Building located at 9 Janakpuri, District Centre, New Delhi. However, they reportedly do not maintain any stock record.
Insured’s sister concern namely M/s. Banaras Manufacturing Pvt. Ltd.
is also in export business and operating and maintaining their separate
accounts and records at
Insured occupied second floor and basement in multi
storeyed building “Vishwa Sadan”
located at 9 District Centre, Janakpuri,
The affected premises is reportedly the centralized premises where all types of stocks were stored. Various materials from suppliers were being received at this premises and after inspection stored in the steel racks and on floor as per available space. … … … [P.135-136 of pleadings file]
… … Insured’s claim
Arising out of the fire, insured have claimed Rs.69,23,815.84 towards the damaged stocks. A copy of detailed estimate of loss and completed claim form are enclosed as Enclosure III.
As may be seen from the photographs, the fire has been devastating in nature in which entire contents of the godown including furniture/fixture/fittings and iron racks provided for storage of stocks had been extensively damaged/destroyed in the fire.
During the course of survey, we found various items such as Beads of various types, handicraft items, necklaces, leather/plastic items, packing material etc. strewn all around the place and lying buried underneath the debris. We advised the insured to segregate the fire affected stocks in sound and damaged category and retrieve the maximum possible quantity from the debris. The insured refused to segregate the sound stocks from the damaged ones on the pretext that they do not have any space or labour force to segregate the sound beads. We are of the opinion that the percentage of sound stocks could have been easily at 10%. Damaged items as far as possible were retrieved out of the debris. Majority of them were beads of various types and metallic handicraft items and all were found in badly charred/deformed/broken condition. The beads could not be separated into various categories/quality. We weighed beads, metallic items, leather item/cloth, packing material separately. The weighment was done on the weighing machine available within the premises. While weighing water and ash contents were also considered and deducted. By this we verified 11608 Kg. Beads, 106.5 Kg metallic items, 78.5 Kg cloth/leather items and 312 Kg packing material. We found items made of plastic and leather had become lumps. The items like wooden beads, clothes and packing material etc. being highly susceptible to fire had freely burnt and infact had acted as fuel to the fire. The heat generated was so extensive that it had deformed the steel racks on which stocks were stored. Although damages were severe but physically quantification was still possible to large extent. Insured however did not cooperate and lost temper whenever we proposed segregation itemwise. Quantities could not be ascertained from insured’s stock records as no such records have been produced before us for the reasons best known to insured. Indirect records produced before us also did not prove beyond doubts the existence of stocks claimed by the insured. We have, however prepared Trading Account as on the date of loss in order to work out total value of stocks at the time of fire.
We observed that cement concrete flooring had been broken/peeled off at many places due to heat. There was extensive damage to the plaster of internal walls which too had cracked and had fallen down at many places. Furniture/fixture/fittings were also damaged in the fire. … … …”
[P.138-139 of pleadings file]
After arriving at a specific conclusion that the damage due to fire was extensive, the Surveyors considered the stocks maintained by the complainant in various godowns and that was made basis for determining compensation payable to the complainant. This would be apparent from the following calculation arrived at by the surveyors:
“Closing stock as per Trading Account, on the date of loss works to Rs.3,94,62,883/-. As per details submitted by insured, total stock before the fire includes packing material worth Rs.5,53,301/- and rice worth Rs.13,71,986/-. Both these items are not covered under the policy, we have therefore excluded Rs.19,25,287.00 from the value of closing stock as per Trading A/c, in order to work out value at risk.
Looking to insured’s trade and type of product they are dealing in, dead stocks @ 10% have been considered reasonable.
After making suitable adjustments on account of uncovered stocks & dead stocks, value at risk at the time of loss was worked out at Rs.3,37,83,836/- which was under-insured to the extent of 74.84%.
Less : Value of items not covered under the policy
reasonable Rs. 37,53,760.00
Sum insured available Rs. 85,00,000.00
Extent of under insurance 74.84%
Statement of loss
We had detailed discussions with the insured for fixing the salvage value of the damaged stocks, who have refused to retain the same. As reported earlier damaged stocks as far as possible were retrieved however segregation could not be done due to non co-operation from insured. Majority of them was beads of various type mixed together and some metallic items, rest of the items either formed lump or destroyed in the fire. The beads which were observed in sound condition would be about 10%. Keeping in mind all the facts we feel that salvage value @ 10% of total damaged stock would be very reasonable.
Value of sound stocks after the fire was ascertained at Rs.3,51,67,785/- as per Annexure-5.
An excess of Rs.2500 is applicable as per policy condition.
Value at risk at the time of loss Rs.3,37,83,836.00
10% dead stock Rs. 35,16,779.00
We have conveyed the assessment of loss to the insured and have requested them to send their consent directly to the company.”
[P.140-142 of pleadings file]
Learned counsel for the complainant submitted that the method adopted by the surveyors for assessing the loss is totally unjustifiable.
This assessment by the surveyor is objected to by the complainant by submitting that the assessment of loss at Janakpuri godown cannot be based on the entire stock maintained by the complainant in various godowns. Secondly, it is contended that it was mala fide and Surveyors’ Report is biased one. It is his contention that said method is adopted for an oblique motive. For this purpose, complainant has written letter to the CMD of the insurance company and also to the Finance Minister.
In support of his contention that the report was mala fide, learned counsel for the complainant referred to :
(i) letter dated 25.4.1998 written by the complainant to the Chairman and Managing Director (CMD) of the insurance company inter alia stating as under :
“The surveyors, vide their letter dated 26.02.1997 and 27.02.97 asked for submission of details for the settlement of claim. All the details asked for were submitted to the surveyors on 22.05.1997.
But the attitude of surveyors specially Mr. J.L. Tiku and Mr.Sameer Gupta of M/s. V.N. Sarin & Co. (P) Ltd. was not towards settlement of our claim. Although the segregation of stock was done as per their instructions to the extent possible, Mr. J.L. Tiku with the intention of harassment asked for further segregation. But we requested them that further segregation in not possible and not viable. But they kept on wasting time by raising irrelevant queries.”
……… After that for almost one month whenever we contacted them they said that the report will be final within 2-3 days. On 04.02.98, the final meeting was arranged for final discussion and consent letter. But we were very shocked to see that they had not prepared any report and told us that as per their new basis the loss comes to Rs.13 lacs and tried to compel us to give the consent letter. But we refused to give the consent because their assessment was based on their own imaginations and calculations. The same was proved to them and they agreed. Again all the necessary papers and supports were given to them based on their basis of G.P. rate and the loss came out to more than Rs.70 lacs.”
……… Sir, after almost one year of harassment we are approaching your office because our financial condition is deteriorating day by day and our company has been losing its business and export orders. Sir, kindly look into the matter and instruct the concerned officials to take immediate steps for the early settlement of our claim.”
[P.79, 80, 81]
(ii) Second letter to Finance Minister : Thereafter the complainant has written letter dated 6.6.1998 to the Finance Minister, Mr. Yashwant Sinha, wherein it has been specifically stated that joint surveyors appointed by the insurance company were harassing them for the past one year for their self-interest. Further, “we complained the matter to CMD of the insurance company but we have not received any positive response till the date from their office. Sir, please take action against these corrupt and lethargic surveyors since they work only for their self-interest and they have no national interest and also take action against the CMD of the insurance company who has not taken any action against this corrupt and lethargic surveyors. Sir, if this kind of genuine claim is not settled then liberal policies are of no use”.
It appears that nobody took any notice of the aforesaid letters and permitted the surveyors to harass the pray/the victim.
Findings: It is apparent that the assessment of the surveyor is on the face of it baseless and biased for the reasons stated below:
(a) The insurance policy itself provides that complainant is having stocks at various places. The stock maintained at those places is covered as per the schedule attached to the insurance policy which is as under:
SCHEDULE ATTACHED TO & FORMING PART OF POLICY NO.11/6153
DESCRIPTION OF PROPERTY LOCATION TYPE OF OCCUPANCY SUM ASSURED
On stock of carpets, beads, A1 & A5 Fire ‘C’ Godown Rs.515 lacs
Handicraft items & other (Main Bldg.)
Kerosene oil in under A1 & A5 Fire ‘C’ Underground Rs. 1 lac
Ground tanks (Main Bldg.) Tank
Furniture fittings & computer
Sets, generator & electrical Office block
On stock of carpets, beads, C5 Fire ‘C’ Godown Rs. 2 lacs
Handicrafts items & other Main Bldg
Similar goods detatched block
On stock of carpets, beads, Tandoa Fire ‘C’ Godown Rs. 71 lacs
Handicrafts items & other with flood
Similar goods Extn.
On stock of carpets, beads, Tandoa Fire ‘C’ Open stock Rs. 5 lacs
Handicrafts items & other with flood
Similar goods Extn.
On stock of carpets, beads, Vishwa Fire ‘C’ Showroom/ Rs. 85 lacs
Handicrafts items & other Sadan Godown
Similar goods N.Delhi
Furniture/fixture/electrical Office block Fire ‘A’ Office Rs.10 lacs
Fittings & computer set Vishwasadan
On stock of carpets, semi Various Fire ‘C’ Godown Rs.100 lacs
Finished carpets, wool, sites
Handicraft items, beads
Total insurance coverage is for a sum of 8 crores 25 lacs.
There was no justifiable grounds for the surveyors except oblique motive to take entire stock of the company and reduce the loss by 74% on the ground of under-insurance.
Secondly, immediately after the fire, when first surveyor visited the site, it was pointed out by the complainant that it has suffered loss between Rs.40 and Rs.60 lakhs.
the aforesaid claim is supported by the statement of stock furnished by the
complainant to the State Bank of
“14. Janakpuri New Delhi 86,20,348.00
15. C/11, New
16. C/12, New
17. B-49, New
18. Budela 12,57,846.00
The aforesaid stock of statement reveals that at the end of January in Janakpuri godown at New Delhi, stock was worth Rs.86,20,348/-. Similar statement of stock dated 6.1.1997 is produced on record which reveals that the stock as on 28.12.1996 was as under :
15. C/11, New
16. C/12, New
17. B-49, New
18. Budela 12,55,948.00
[Pg.8 – set of papers]
Similarly, third statement dated 6.12.1996 revealing the
stock as on 28.11.1996 at godowns in
15. C/11, New
16. C/12, New
17. B-49, New
18. Budela 12,14,485.00
[Pg.10 – set of papers]
All these statements were received by the State Bank of
This undisputedly reveals that at Janakpuri godown, the stock as on 29.1.1997 was approx. Rs.86 lakhs; in December 1996 it was Rs.91 lakhs and in November 1996 it was Rs.87 lakhs. For assessing loss due to fire, there was no ground not to rely upon the said stock statements.
(c) Apart from this, complainant has produced on record computer print-out revealing that closing stock as on 22.2.1997 was Rs.89,03,032.70p. [P.84] and thereafter on 24.2.1997 i.e. after fire it was Rs.19,73,873/-. This stock position is certified by the Chartered Accountant. On the said basis complainant in the balance-sheet for the year ending 31st March 1997 has stated that stock in insurance claim was for a sum of Rs.69,23,850/-.
(d) Further, it has to be stated that if the entire stock was to be taken into consideration, then surveyors ought to have taken into consideration the insurance coverage for the stocks maintained at various places and insurance coverage for the said places. The total insurance coverage is for a sum of Rs.8.25 crores. For the stocks maintained at various places insurance coverage is for a sum of Rs.7.50 crores approximately, i.e by excluding the insurance coverage for furniture and other articles. The Surveyors arrived at the conclusion that the closing stock comes to Rs.3.94 crores approximately. In that set of circumstances, there is no question of any under insurance as insurance coverage is for more than Rs.7.50 crores. Therefore, deduction by 74.84% on the so called ground of under insurance is without any justification.
(e) Further, it is difficult, to understand how surveyors deducted large amount on the ground that the gross profit was having decreasing trend. They also deducted Rs.35,16,779/- as the dead stock. Thereafter, they deducted Rs.2,13,283/- as salvage and assessed the loss at Rs.19,19,547/-. Again, thereafter, they deducted Rs.14,36,590 on the ground of under insurance by 74.84%. Again deducted Rs.2,500/- as policy excess and assessed the loss at Rs.4,80,000/-. In our view, this is totally an unusual method. Because, in any set of circumstances:
there was no justifiable reason in
ignoring the stock statements submitted to the State Bank of
(ii) if the entire stock was to be taken into consideration, the insurance coverage was for a sum of Rs.8,25,00,000/- and for the stocks, in godowns, it was above Rs.7,50,00,000/-. Therefore, there would not be any question of under insurance;
(iii) insurance coverage for the godown where fire took place was for a sum of Rs.85 lakhs. As per the surveyors’ report, damage was extensive and ony 10% of goods can be said to be good stock;
(iv) there is no reason not to accept computerised stock statement for the godown where the fire took place;
(v) The surveyors assumption and conclusion that the entire stock of the Complainant was stored at Janakpuri location where the fire took place is without any basis;
(vi) The contention of the Insurance Company that the insured had not submitted inventory of the stock appears to be without any basis, because surveyors themselves in their report have stated that at the most the unaffected stock would be worth 10%.
It is contended by the learned Counsel for the Insurance Company that all the necessary information was given to the surveyors but, for oblique motive surveyor were delaying and asking for one or other documents. For this purpose, he has referred to various letters. In our view, it is not necessary to refer to such letters written by the surveyors and the reply given by the insured.
In this view of the matter, surveyors’ report cannot be relied upon. It is to be reiterated that it is apparently biased one for oblique motive.
QUANTUM OF LOSS:
Next question is quantum of the amount payable. As per the surveyor’s report:
(a) the sum insured at the affected location was Rs.85 lakhs on the stocks of carpets, beads, handicraft items and other similar goods lying at showroom/godown at Vishwa Sadan, New Delhi;
the insured as per the requirements
of the bank was submitting stock statements and was maintaining computerised
financial records for conducting their business for
As stated by the Surveyors:-
a. the fire has been devastating in nature in which the entire contents of the godowns including furniture/fixtures/fittings and iron racks provided for storage of stocks had been extensive damage/destroyed in fire;
b. Items such as, beads of various types, handicraft items, necklaces, leather/plastic items, packing material etc. strewn all around the place and lying buried underneath the debris.
c. Percentage of sound stocks could have been easily at 10%.
d. They found items made of plastic and leather had become lumps. The items like wooden beads, clothes and packing material etc. being highly susceptible to fire had freely burnt and in fact had acted as fuel to the fire. The heat generated was so extensive that it had deformed the steel racks on which stocks were stored.
Taking the aforesaid findings of the surveyors we have to assess the loss. Complainant has claimed loss at Rs.69,23,850/- on the basis that on the date of incident stock was for a sum of Rs.89,03,032/- and after the fire on 24.2.1997, the stock was Rs.19,73,873/-. The stock statements submitted to the SBI, stock for the months of November, December, and January, was Rs.87,21,346/-, Rs.91,24,546/- and Rs.86,20,348/- respectively. The aforesaid statements approximately justify the claim of the Complainant that on the relevant date stock was for the sum of Rs.89,03,032/-. The Complainant has admitted that the remaining good stock was for a sum of Rs.19,73,873/- and the remaining stock for a sum of Rs.69,23,850/- was affected by fire. Now taking into consideration surveyors’ report that out of the fire affected stock 10% can be held to be good stock. We have to take the stock approximately at Rs.7 lakhs out of Rs.69,23,850/-. The stock worth approximately Rs.7 lakhs could be deducted which would mean that the loss would be for a sum of Rs.62 lakhs. Further, if we take the stock at Rs.89 lakhs and the fact that insurance coverage was for Rs.85 lakhs, it would mean that there was under insurance of 1% approximately. Making all sorts of deductions we can fairly estimate that the loss would for a sum of Rs.60 lakhs. This will be in consonance with the statement made by the Complainant at the initial state, i.e. at the time of preliminary survey, to the effect that theloss was between Rs.40 lakhs and 60 lakhs.
In the result, from the evidence brought on record, it is established that the Complainant is entitled to be reimbursed by the Insurance Company for the sum of Rs.60 lakhs. And, hence, the Insurance Company is directed to pay the said amount of Rs.60 lakhs to the Complainant with interest at the rate of 10% p.a. by deducting the amount paid as per our interim order. The Insurance Company is further directed to pay costs quantified at Rs.10,000/- and the same sum shall be deposited with the N.C.D.R.C. (Legal Aid) within four weeks from today.