NATIONAL CONSUMER
DISPUTES REDRESSAL COMMISSION
M/s. Banaras Beads Ltd. & Ors. … Complainants
Vs.
M/s. New India Assurance Co. Ltd. & Ors. … Opposite Parties
BEFORE:
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.
Dated
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.
BRIEF FACTS
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,
D-58/12-A,
1, Sigra,
Favouring : Banaras Beads Pvt.
Ltd.,
Industrial
Estate,
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”
Note :
(i)
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
The company’s
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
------------------------
----------------------------
Rs. 3,75,37,596.00
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
Rs.3,51,67,785.00
10% dead
stock
Rs. 35,16,779.00
---------------------------
Rs.3,16,51,006.00
---------------------------
----------------------------
----------------------------
----------------------------
===============
Consent :
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
COVER
On stock of carpets, beads, A1 & A5 Fire ‘C’ Godown Rs.515 lacs
Handicraft
items & other (Main
Bldg.)
Similar goods
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
Fittings
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
[P.60 ]
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.
(b) Further,
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 :
14. Janakpuri,
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
14. Janakpuri,
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:
(i)
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;
(b)
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.
……………………………...J.
(M.B.SHAH)
PRESIDENT
…………………………….....
(RAJYALAKSHMI
RAO)
MEMBER