NATIONAL CONSUMER
DISPUTES REDRESSAL COMMISSION
ORIGINAL PETITION NO. 250 OF 1998
1. Ranjay
Oswal
Flat
No.1, Anarkali Complex,
The
Mall,
2. Smt.
Sneh Oswal.
Flat
No.1, , Anarkali Complex,
The
Mall,
Versus
United India Insurance Company Ltd.
24,
ORIGINAL PETITION NO. 50 OF 1999
M/s. L.C. Oswal Knits (
B-III-537, Purana Bazar,
Versus
United India Insurance Company Ltd.
24,
BEFORE:
HON’BLE MR. JUSTICE M.B. SHAH, PRESIDENT
HON’BLE MRS. RAJYALAKSHMI RAO, MEMBER
For the Complainant … Mr. Lokesh Bhola, Adv.
For the Opposite Party … Mr. Vishnu Mehra and
Ms. Sakshi
Mittal, Advocates.
For SBI/Reliance
Capital … Mr. R.K. Dikshit, Advocate
Dated:
O R D
E R
JUSTICE M.B.
SHAH, J., PRESIDENT
The only question which
requires consideration is whether the fire which destroyed the factory, building, machinery, stocks and buried the father and brother of Complainant No.1, was self-engineered or not?
In our view, for the reasons
discussed hereinafter,
it cannot be imagined that the fire was self-engineered for taking away the life of the father and
brother of the Complainant No.1. Such
far-fetched imagination on the part of the Insurance Company can be stated to be bordering
on unfair trade practice because:
.(i). undisputedly, two
Directors, namely P.C.Oswal and Sanjay Oswal, father and brother of the
Complainant No.1, were burnt to death in the said fire;
.(ii). no FIR for suicide
or murder was lodged for the said incident;
.(iii). neither the Police nor
the civil authorities have doubted the incident of accidental fire;
.(iv). the Insurance
Company has miserably failed to establish that fire was not accidental; and,
.(v). there is nothing on
record to establish that somebody planted dynamite/detonator for causing fire.
The
investigators appointed by the Insurance Company are not sure about the cause
of fire and have raised some doubt but that cannot be said to be sufficient for
avoiding liability
by the Insurance Company.
Facts:
The
day of Diwali, 11.11.1996, became a day of nightmare for the Complainants as a
terrible and devastating fire gutted the factory of the Complainants and
reduced it to ashes and debris. Not only that, the Complainant No.1’s father
and brother, namely, Prem Chand Jain and Sanjay Jain were found buried in the
debris.
The fire destroyed the
factory, building, machinery, stocks and other valuables including the relevant
documents.
Undisputedly, the Complainant
had taken various insurance policies from the Opposite Party Insurance Company
for the building, material, stocks, etc.
After the fire, the
Complainant lodged claim with the Insurance Company and supplied all the
relevant documents. The Insurance Company appointed M/sJ.B.Boda Surveyors Pvt.
Ltd., and Thapar, Srinivasan and Kapoor Pvt. Ltd. as surveyors to investigate
and assess the loss. The Surveyors
submitted their joint interim survey report on 2.1.1998. For the cause of fire, it has been stated
that “it may be construed that the fire
was accidental in origin and in all probability, caused by a misdirected fire
cracker or electric short-circuit”.
Repudiation Letter:
Despite
this, by letter dated 12.9.2000 the Insurance Company repudiated the claim of
the Complainant. In the repudiation letter the Insurance Company stated as
under:
“After getting your claim
thoroughly surveyed as mandatorily required and further investigated by
impartial agencies, and perusing the same along with all other
information/document and all other material on record and having regard to the
terms and conditions as embodied in the policy of insurance, we are constrained
to state that your claim is clearly fraudulent and we hereby regretfully
repudiate the same under policy condition No.8 on the following amongst other grounds:
.(i). The cause of fire is not accidental.
According to the investigation carried out by us, the alleged incidence of fire
was stage managed. Evidence clearly shows that the fire was caused by use of
powerful dynamite/detonator, attributable to the use of dynamite/detonator
.(ii). The transactions between you and others,
i.e. V.H.Synthetics Agency, V.H.Hosiery Textile Mills, V.H.Woollen Mills, Oswal
Enterprises, Padamshree Yarn Agencies, Peejay International, Goyal
Sons are all bogus transactions – they are mere paper transaction.
.(iii). Huge amounts were drawn from the bank by you
against a very meager value of stocks and also amounts were drawn from the bank
against fictitious sundry debtors/receivables.
.2. Without prejudice to the aforegoing and without admitting any
liability, it is stated that under the policies buildings, plant and machinery
are subject to reinstatement value clause under which it is mandatory to
reinstate the damaged property. You have failed to reinstate the damaged property”.
Hence, these
complaints.
Appreciation of Survey/Investigation Reports:
In
the present complaints, the stand taken by the Insurance Company that the fire
was not accidental, cannot be justified by any stretch
of imagination. The Surveyors appointed
by the Insurance Co. specifically
stated that the fire was accidental and
did not doubt say of the
Complainants.
Further, there is no dispute with
regard to the quantum of the loss assessed by the surveyors.
Now, the only dispute is as to whether
the fire was accidental or self-engineered.
Cause of fire as
found by surveyors/investigators.
For the cause of fire, we would refer to the findings recorded by the surveyors. In these cases, different surveyors were appointed from time to time to find out cause of fire and to assess the loss. The observations with regard to cause of fire are as under:
.I. J.B.Boda
Surveyors Pvt. Ltd. and Thapar, Srinivasan & Kapoor Pvt. Ltd., vide their
report dated 6.9.1997.
First,
M/s.Thapar, Srinivasan & Kapoor Pvt. Ltd. were appointed to survey and
assess the above loss vide instructions of the Regional Office on 11.11.1996.
Thereafter, M/s.J.B.Boda Surveyors Pvt. Ltd., Chennai, were
appointed as Joint Surveyors vide letter dated 12.2.1997. A joint visit was
made by them on 19th and
The
relevant portion with regard to cause of loss is as under:
“.6.0. CAUSE
ANALYSIS:
In view of the large scale destruction
caused by the fire, which originated from the opposite building, it has
not been possible to specifically confirm the cause of the fire. The police
and fire brigade have also not commented on the same. We have examined
various possible causes, discussed as follows:
.1. Electric short circuit
in the wiring:
This, as a cause, is a possibility, given
the overcrowding, over construction, and the poor overall state of electric
wiring in the Purana Bazar area of
.2. Accidental ignition
through a fire cracker:
This is highly probable, as the night the fire occurred was
‘Deepawali’ night, traditionally celebrated in
.3. Auto ignition of the
contents in the factory:
This has been ruled out by us, as none of the flammable contents, such as fuel oil, dry cleaning solvents, etc., were present in large quantities in the factory premises, nor was there any available igniting source, in the closed factory.
.4. Carelessly discarded
cigarette/bidi butt:
While this cannot be ruled out, it cannot be confirmed either, in the light of the complete destruction of the factory building.
.5. Malicious Intent: In the light of the tragic demise of
the two principal Directors of the Company, we are inclined to rule this
out.
In the ultimate analysis, we are satisfied
that the fire was accidental in origin, and, in all probability, caused by a misdirected
fire cracker, or an electric short circuit.
………………….
14. Insured’s liability:
In view of the accidental origin of the fire,
we are of the opinion, that the claim falls within the purview of the Fire
Policy ‘C' issued. The final decision on liability, is
however, that of the insurers”.
It
appears that the findings were not convenient to the Insurance Company. The Insurance Company for one reason or the
other appointed surveyors/investigators, one after the other, to have tailor
made reports.
.II. Report of Investigator, Vardhaman
& Co., Chartered Accountants, vide preliminary report dated 5.1.1998:
On 11.11.1996 the factory was not working due to deepavali holiday and fire took place on that day. They were appointed by the Insurance Company on 16.12.1996.
Preliminary Survey Report dated 5.1.1998:
The conclusion reached by them is to that the cause of fire was due to use of powerful dynamite/detonator and the collapse of the building and the recovery of dead bodies of Mr.Premchand Owsal and Mr.Sanjay Oswal from the debris indicates that the incidence of fire as on 11.11.1996 (early morning) was stage managed.
The surveyors,
after verification of records at the fire station office, police station and
interaction/discussion with neighbours, have reached the above conclusion.
.(i). On the basis of the FIR which
recorded the statement of one Mr.Rajesh Kumar on 11.11.1996, a resident of the
nearby area of the factory, the surveyors concluded that, “there was a blast and
then only fire started which spread to all directions. Due to blast the
building was collapsed. However, the intensity of fire was not severe”.
.(ii). The other reason for reaching the
aforesaid conclusion is that no postmortem of the deceased was conducted.
.(iii). Since the factory was not working on
that day, the generator was also not used, the blast
of the generator set was not accidental;
.(iv). The
two deceased Directors were in the factory premises well before the occurrence
of the blast, and it is not correct that they moved towards the factory on
hearing of fire accident.
.(v). The factory building was 45 years
old and the insured had taken huge advance of Rs.1.25 crores from the Bank
against stocks and book debts.
Conclusion:
As already explained the incidence of fire was stage managed and there is
enough evidence in the bank to show that huge funds were drawn by the insured
against non-existence stocks and bogus books debts.
The
transaction between insured and others v.H.Synthetics agency, V.H.hosiery
Textiles Mills, V.H.Wollen Mills, were all bogus transactions and these groups
were mentioned as Vallabh International in the news published in LUCKY change
dated 16.12.1996.
Thereafter, they gave final investigation report.
In the Final
Investigation Report dated 16.1.1998 they have concluded as under:
“With regard
to Port-mortem report:
“In
our interim report, we stated that post-mortem was not conducted. We made this
remark in our interim report because inspite of many requests to furnishy
copies of the post moretm report we were informed by the bank officials,
statutory auditors and others that they were not aware whether any port-mortem
was conducted since they did not get a copy of it. Hence, we mentioned that the post mortem was
not conducted in our interim report.
We understand that a copy of the
post-mortem report was given to the Insurance Company and a Xerox copy of the
same was given to us on 13.1.1998 by United India Insurance Co. Ltd.,
Chennai. However, we could not read and understand the particulars in the
post-mortem report because the Xerox copy furnished to us was not very clear”.
With regard to
conclusions reached by them in their final survey report, they have concluded
as under:
“We wish to state that as Chartered
accountants, we do not have any judicial/non-judicial power and we could not
go beyond certain limits.
Hence our report / observations are based
on the details and other information / documents furnished by the bank
officials, statutory auditors of the insured and others.
.1. The
cause of fire was due to use of powerful dynamite / detonator and the collapse
of the building and the recovery of dead bodies of Mr.Premchand Oswal and
Mr.Sanjay Oswal from the debris indicates that the incidence of fire as on
11.11.1996 (early morning) was stage managed. (on
10.11.1996 the factory was not working due to deepavali holiday).
Huge
amounts were drawn from the bank by the insured against a very meager value of
stock and also amounts were drawn from the bank against fictitious sundry
debtors/receivables.
It
was possible, because bank officials collude with the insured and cleverly
assisted by the statutory auditors of the insured. The statutory requirements regarding disclosure of stocks were not disclosed by
the insured in the accounts and also was not reported by the statutory
auditors in their report.
The
statement of stock as on 8.11.1996 and the statement of sundry debtors as on
8.11.1996 were in fact received by the bank only after the incidence of fire.
The
bank officials did not verify the stock physically on 8.11.1996. the value of
stocks disclosed in the stock statement
dated 8.11.1996 were highly inflated and the amount receivable as per
statement of sundry debtors as on 8.11.1996 were all fictitious / paper
transactions.
The
transaction between the insured andothers, Oswal Enterprises, Padamshree Yarn
agencies, Pee Jay International, Goyal sons, V.H.Synthetics agency, v.H.Hosiery
Textile Mills and V.H.Woollen Mills were all paper transactions and these
groups were mentioned as Vallabh International in the news published in Lucky
Change dated 16.12.1996.
We
once again place on record that the above observations are based on the
information furnished / gathered by us and on analyzing the information,
the above irregular features of the claim are exposed.
We
feel that to obtain legally enforceable evidence it is possible only for the
investigating agency of the central Government who alone could expose the
magnitude of deep rooted conspiracy of the insured who was cleverly assisted by
the bank officials and the statutory auditors of the insured”.
.III. Dinesh Gopal &
9.0 Cause of fire vis-à-vis admission of liability:
However, we cannot ignore
the fact that the insurers have already discharged their liability towards the
insureds, partly by entertaining and making payment in respect of P.A. claims
of both the deceased directors, who lost their lives in the said fire. Further,
the civil authorities did not suspect it as a created fire or else the matter
obviously enquired by them further.
We are also inclined to doubt that the remotest chance of this fire could have been because of reasons beyond control of the Directors who unfortunately became the victims of the said fire. This is a doubt which could have only been cleared by Shr.Prem Chand & Shr Sanjay had they not perished in the said ire.
They
have also observed: “In any case, we are not able to rule of the possibility of
occurrence of fire deliberately by the insured to overcome their financial
problems. However, there are no eye witnesses, no evidence and the
neighbours, also do not come forward to depose and give anything which can be
treated as evidence. We also,
analysed the possibility of seeing the directors of the firm by neighbourers
just at the junctures before collapse of building. However, this was an extremely remote
possibility and perhaps chowkidar was the person who could have seen them. He
emphatically denied having seen any of them. But, the feeling
amongst neigbourers certainly exist regarding the possibility of the
fire being set up by the insured.
The
finding on this aspect reached by the surveyor is as under:
“Cause of fire: Financial position of the Ltd.
Co. occurrence of the fire/explosion on 11.11.1996 resulting in deaths of the
directors was extremely lean combined with family tangles. The possibility of
fire due to deliberate attempt on the part of the insured is not ruled out
under the circumstances prevailing at that time and the way the fire has
been detected, reported and spread resulting tragic deaths of two directors and
loss of property. No direct supporting evidence including eyewitness are
available.
However, there was a strong felt sympathy angle all
around in favour of the insured because of the deaths of the two directors.
Motives on part of the insured to manipulate the fire for defrauding the
insurers also cannot be ruled out under the circumstances prevailing
in the business house of the insured at that time. They were in deep waters
regarding financial shape of the company with the reputation of their at stake.
Records produced by the insured regarding fire loss do not
inspire much confidence and are bereft of authenticated facts and
figures. Nothing on ground suggestive of an accidental fire apparently exists
and everything including verbal disclosures by some of the neighbors lead
towards possibility of a manipulated fire by the insured”.
This report is totally vague and is clear from the highlighted portion.
.IV. Survey Report of M/s. Rajesh Nakara
& Co., Chartered Accountants, Surveyors & Loss Assessors, dated
19.5.1997.
According
to them the cause of fire is as under:
“Cause of fire: Due to badly gutted and complete collapsed
condition of post fire premises we could not point exact cause of fire”.
This report does not help the
insurer in any way.
.V. Survey report of
M/s. Loss Prevention Association of India Ltd.,
In the introductory remarks, they have
stated as under:
“A major fire loss
occurred in the woolen garments manufacturing premises of L.C. Oswal Knits
India Ltd.,
Regarding the incident, they have stated as under:
“On
10.11.1996 factory was closed for deepawali. As stated in the early morning
hours of 11.11.1996 at about 0430
hrs., when everybody was asleep, a
loud bang was heard. Hearing the bang, Sh.Prem chand Oswal owner of M/s. L.C.Oswal Knits Ltd., came out to see what had happened and
noticed that his own factory building in front of his house was ablaze and some upper floors had already collapsed.
He immediately raised an alarm to warn the family members who were asleep as
flames of the fire leaping out through the factory building had already set the
ground floor of the residential building in fire. The owner took his eldest son
with him, along with the key of the factory building, through the fire, opened
the factory premises and entered inside the factory. In the meantime by
neighbours, who reached the site, informed the local fire brigade authorities
and police station over telephone about the incident and also engaged
themselves in the rescue of the other family members mostly ladies and
children, who were inside the residential building. Fire brigade reached the
site immediately but could not take the tender very close to the site due to
narrow lane but had to station the tenders at about 150 m
away started fire fighting operation by laying fire hoses. The family members were rescued with great
difficulty as fire by that time had engulfed entire building. Most of the
family members had
received severe burn injuries and taken to hospital immediately. Water was thrown indiscriminately by the fire fighters both on the
factory and residential building. As stated some upper floors had already
collapsed due to fire and during fire fighting operation entire factory
building got collapsed. The exact time of building collapse could not be ascertained.
The dead bodies of the owner and his son were recovered from the ground floor.
The fire at both the houses were controlled and totally extinguished by 1700 hrs. on 11.11.1996”.
According
to them, the probable cause and analysis of fire is as under:
“The exact cause of the fire could not be ascertained. The initiation of fire could be due to any
one of the following reasons:
.(i). fire crackers;
.(ii). lighted discarded ends of bidi or cigarette;
.(iii). electrical reasons.
Initiation of fire could be due to
fire crackers as 10th
November, 1996
was Diwali. But, from the
discussions with the insurance officials it was learnt that fire crackers is
totally banned in Punjab and as such in Ludhiana also there was no celebration
with fire crackers. The ban is strictly followed. So, fire due to fire crackers
may be ruled out”.
They
surveyors have also ruled out the second option of lighted discarded ends of
bidi or cigarette.
With
regard to the third option, they have observed as under:
“It is envisaged that fire was
initially started due to electrical reasons. It might be possible that inside
lights were kept energized as it was Diwali festival. Tube lights with loose
electrical wirings were available all over in the 3rd and 4th
floor above the flat machines. Therefore, there are reasons to believe that electrical short circuit
could be the cause of the initiation of fire which ultimately ignited the
combustible woolen materials kept in the floors.
It is also envisaged that fire
might have initiated either at 3rd or 4th floor. The fire
was detected only when it took a devastating shape and upper floors collapsed. As there was no high level
ventilators in the building, so building collapsed very soon and entire building was involved in fire. There was also no
opening in three sides of the building as it was
attached with other buildings, so flames leaped outside only from the front side and set the residential building
cum factory premises also in fire, which was located just in front of factory. It is presumed that
constructional feature of the residential building that is the provision of
central shaft vented the hot layers and saved the building from collapsing,
though fire might have spread to other floors through shaft and stair well.
Moreover, sufficient fire tenders
could not be put in service to combat the fire due to non-availability of
parking place, which further delayed the control fire”.
This survey report supports the case of the complainant that the fire was accidental and that it may be due to electric short circuit and the building collapsed because there were no high level ventilators in the building and there was no other opening in the three sides, so flames leaped outside only from the front side and set the residential building cum factory premises also on fire.
Findings:
(a) From the aforesaid survey reports, in our view, there is no reason for us to differ from the opinion expressed by the Joint Surveyors, namely, M/s. J.B. Boda Surveyors Pvt. Ltd. and Thapar, Sriniwasan and Kapoor Pvt. Ltd. They have specifically observed that ‘Deepawali’ night is traditionally celebrated by lighting fire crackers/candles. These are lit in an indiscriminate fashion, and a stray ‘rocket’ could have landed on the roof of the factory, igniting any of the stocks present there and spread thereafter, to the rest of the building and thereafter to the residential premises. They also specifically stated that in the light of the tragic demise of the two principal Directors of the Company, malicious intent was ruled out and in the ultimate analysis they stated that the fire was accidental in origin, and, in all probability, cased by a misdirected fire cracker, on an electric short circuit.
(b) However, learned counsel for the Insurance Company seeks reliance on the report dated 5.1.1998 of the Investigator, Vardhaman & Co. That report appears to be imaginary and vague. The observations that as the factory was not working on that day, generator must not have been used and therefore, the blast of generator set was not accidental. This reasoning cannot be said to be justified because on ‘Deepavalai day’, for maintaining electric light, generator set could have been used. However, it is to be stated that in their final report, they stated that “We wish to state that as Chartered accountants, we do not have any judicial/non-judicial power and we could not go beyond certain limits”.
If this is their stand, then the report is of no consequence. Further they doubted the bona fides of bank officials and statutory auditors of the insured. In our view, this is totally baseless and without any foundation. In any set of circumstances, the Investigators gave vague report stating that to obtain legally enforceable evidence it was possible only for the investigating agency of the central Government. Therefore, this report is of no consequence.
(c) Next, Dinesh Gopal & Co., Engineers, Surveyors, Consultants & Investigators, specifically held that the Insurance Company had already discharged its liability towards the insureds partly by entertaining and making payment in respect of Private Accident claims of both the deceased directors who lost their lives in the said fire. They rightly observed that civil authorities did not suspect it as a created fire or else the matter obviously enquired by them further. This has not been done. Despite this observation, they observed that they were inclined to doubt that the remotest chance of this fire could have been because of reasons beyond control of the directors who unfortunately became the victims of the said fire and also they could not rule out possibility of occurrence of fire deliberately by the insured to overcome their financial problems. They also observed that no direct supporting evidence including eye witness was available. This report would not help the Insurance Company.
(d) The fourth Surveyor, M/s. Rajesh Nakara & Co., Chartered Accountants, Surveyors & Loss Assessors frankly admitted that they could not point out exact cause of fire.
(e) Apart
from this, there is
survey report from M/s. Loss Prevention Association of India
Ltd.,
Considering the aforesaid survey and investigators report, in our view, it is difficult to doubt the joint surveyors report -
M/s. J.B. Boda Surveyors Pvt. Ltd. and Thapar, Sriniwasan and Kapoor Pvt. Ltd.
Apart from the aforesaid reasons, in our view, it is highly improper on the part of the Insurance Co. to go on appointing surveyors/investigators one after another.
Quantum of Compensation:
The next question is assessment of loss suffered by the Complainants.
In the present case, the learned counsel for the parties have not raised any dispute with regard to the loss assessed by the Surveyors covered by the various policies taken by the insured. Therefore, it is not necessary to refer to the statements given by the Surveyors in detail for directing the Insurance Company to reimburse the complainants for the loss suffered. We make it clear that we are directing the Insurance Company to reimburse the Complainants only on the basis of the net loss assessed by the Joint Surveyors, namely, M/s. J.B. Boda Surveyors Pvt. Ltd. and Thapar, Sriniwasan and Kapoor Pvt. Ltd. because the other investigators have not assessed the loss suffered by the Complainants.
The loss assessed in respect of various policies , is given in tabular form as under:
O.P. No.250/1998
|
S. No. |
Report Dated |
Property insured |
Policy No. |
Loss
Assessed (Rs.) |
|
1. |
06.09.1997 |
Personal
belongings |
200801-48-32-062-96 |
8,75,000/- |
|
|
|
|
Total |
8,75,000/- |
O.P. No.50/1999
|
S. No. |
Report Dated |
Property insured |
Policy No. |
Loss
Assessed (Rs.) |
|
1. |
06.09.1997 |
Factory
building |
200801-11-13-075-96 |
8,83,469/- |
|
2. |
06.09.1997 |
Factory
building |
200801-11-13-074-96 |
9,78,795/- |
|
3. |
20.09.1997 |
Machinery |
200801-11-13-0149-96 |
3,54,663/- |
|
4. |
16.01.1998 |
Stocks |
a) 200801-11-13-3018-95 b) 200801-11-13-148-96 c) 200801-11-13-013-96 d) 200801-11-13-3063-96 e) 200801-11-13-291-96 |
50,12,710/- |
|
5. |
20.09.1997 |
Computer
programming |
200801-44-11-91-96 |
2,87,500/- |
|
|
|
|
TOTAL |
75,17,137 |
In the result, the Insurance Company is directed to pay within a period of six weeks from the date of this order:
(a) Rs.8,75,000/- to the Complainants, in Original Petition No. 250/1998, and
(b) Rs.75,17,137/- in Original Petition No.50/1999.
The Insurance shall also pay interest @ 12% per annum from 1st January, 1998 i.e. after three months from the date of the Survey Report of the Joint Surveyors , M/s. J.B. Boda Surveyors Pvt. Ltd. and Thapar, Srinivasan and Kapoor Pvt. Ltd., which is after six months from the date of the fire, on the aforesaid amounts of Rs. 8,75,000/- and Rs.75,17,137/- respectively.
The Insurance Company is directed to pay costs quantified at Rs.25,000/- in Original Petition No. 250/1998, and Rs.75,000/- in Original Petition No.50/1999, to the Complainants. The Original Petitions are disposed accordingly.
The Registry is directed to send a copy of this Order to the Chairman of the United India Insurance Company Ltd for issuing directions to the concerned Officers that in future they should not adopt such unfair trade practice.
Sd/-
…………………………………..J
(M.B. SHAH)
PRESIDENT
Sd/-
……………………………………
(RAJYALAKSHMI RAO)
MEMBER
Sd/-
……………………………………
(P.D. SHENOY)
MEMBER