NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
M/s. Tanda Textiles and Processing
Mills Pvt. Ltd.,
Village Fatehpur, P.O. Surapur,
Distt. Ambedkar Nagar 9U.P.)
Through its Managing Director
T.L. Ratra ……… Complainant
1. United India Insurance Co. Ltd.
II Floor, Rekab
Faizabad-224 001 (U.P.)
Through its Branch Manager
2. United India Insurance Co. Ltd.
Through its Dvisional Manager,
3. United India Insurance Co. Ltd.
Arif Chambers, IInd Floor,
Through: it’s A.G.M.
4. United India Insurance Co. Ltd.
Chennai 500 014
Through its G.M. & Managing Director
5. The Pradeshiya Industrial and
Investment Corporation of U.P. Ltd.,
Picup Bhawan, Gomti Nagar,
Through its Regional Manager.
6. Uttar Pradesh Financial Corporation.
14/88, Civil Lines,
Through its Regional Manager
7. Bank of
Tanda, District Ambedkar Nagar (U.P.)
Through:Its Senior Branch Manager .. Opposite Parties
HON’BLE MR. JUSTICE M.B. SHAH, PRESIDENT
Mrs. RAJYALAKSHMI RAO, MEMBER
For the Complainant : Mr. S.K. Sharma, Advocate.
For the Opposite Party : Mr. A.K. Raina,
(Insurance Company) Advocate.
Dated the 9th day of February, 2007
O R D E R
M.B. SHAH, J., PRESIDENT:
M/s. Tanda Textiles and Processing Mills Pvt. Ltd., situated at Village Fatehpur, P.O. Surapur, Tehsil Akbarpur, District Ambedkar Nagar (U.P.) has filed this Complaint against the United India Insurance Company Ltd. & Ors. (Opposite Party Nos. 1 to 4 – hereinafter referred to as the Insurance Company) for recovering a sum of Rs.22 lakhs with interest and compensation of Rs.10 lakhs on the ground that the Insurance Company failed to pay the said amount in spite of the fact that as per the insurance policies taken by it, the Insurance Company is required to reimburse the Complainant for the loss suffered by it due to fire. The Complainant has taken insurance policies for a sum of Rs.10 lakhs and Rs. 12 lakhs totalling Rs. 22 lakhs operative from 20.1.98.
The other Opposite Parties are: The Pradeshiya Industrial and Investment Corporation of U.P. Ltd (Opposite Party No.5), Uttar Pradesh Financial Corporation (Opposite Party No.6) and Bank of Baroda (Opposite Party No.7) from whom the Complainant has taken loan for clothes.
During the policy period, fire broke out in the complainant's premises on 27th/28th January, 1998 due to electric short-circuit, which destroyed the stock valued at Rs.25.51 lakhs.
Undisputedly, the Complainant has taken the first policy for the fabric goods, owned and held in trust lying in its godown at Surahjpur for a sum of Rs.10 lakhs. Premium was also paid for which cover note was issued on 15.1.1998. Thereafter, second policy for a sum of Rs.12 lakhs was taken on 19.1.98 for which also cover note was issued. It has also been stated that the Complainant is taking insurance policy from the Insurance Company from time to time as per its requirement. Ordinarily, the complainant used to have stock of cloth insured upto to Rs.10 lakhs. But on account of great slump (during that period) in the cloth business, in the preceding periods, processed cloth had piled up and was got insured for a further sum of Rs.12 lakhs on estimation.
fire in the godowns of the factory was noticed by the
guard of the Company, who in turn informed the Directors of the Company living
in the residential portion within the factory premises. On being informed, the fire Services
Squad reached the factory premises within half an hour and, finally, extinguished
the fire completely. An FIR was lodged at the Police Station, Akbarpur in the morning of
the contention of the Complainant that the stock of insured goods are processed
and maintained as per the Central Excise Rules for which prescribed registers
are required to be maintained. Those registers are checked and verified from
time to time by Sector Officer,
Preliminary Survey Report:
“Godown Location & Nature:
As Physically found by us, the godown of stock finished goods where the fire loss occurred is situated within the factory in West side of the main shed and approachable from two directions (1) from open yard in South direction and (2) from main shed in West direction. The room allocated for the purpose is having a single steel door entry and no other door or windows are there.
The detailed map is available with the
insured which we verified. The same was found approved by the Supdt. Central Excise,
Source of Electrification:
Presently the factory is being run through own generation of power for which the assured is having three DG Sets of 200 KVA (1 No.) & 125 KVA (02 Nos.) and the power supply from UPSEB stands disconnected w.e.f. 08.11.97 as the matter is under dispute and a petition is pending in the High Court, Lucknow.
As per the FIR Lodged by the assured on 27/28.01.98 with P.S. – Akbarpur, as told to us verbally, they as usual, started the pump to refill the overhead water tank with the help of DG Set at 10 PM till 11 PM on 27.01.98 and as assumed, the Godown switch board caught fire due to electrical short circuiting in the duration and ignited the synthetic finished fabric kept there which could only be noticed at about 2.00 AM on 28.01.98 by the security personnel when they saw the smoke coming out of the building and raised alarm for fire extinguishing but remained in-effective in spite of all efforts including fire brigade called from Akbarpur. The entire stock valuing Rs.25,00,000/- was burnt to ashes and could not be saved due to delayed detection of fire.
Cause and Nature:
As per the text in the FIR, report to the Central Excise Deptt. Claim form completed and handed over to us, the fire occurred in the godown of finished stock due to electrical short circuiting in the switch board of the godown which remained energised during 10 PM to 11 PM on 27.01.98 as the pump was” started to refill overhead water tank in factory premises”.
Thereafter, the Surveyors stated that they had verified the Daily Stock Account Register, Grey Register, Map of the Godown and they observed:
1. The records shown including copies of the FIR, Information to Fire people, Information to the Central Excise Deptt. Confirm the mishap and loss sustained by the insured.
2. The residue of the burnt synthetic fabrics was available in the godown which was washed away/drained out & spread in other areas due to fire extinguishing operations.
3. The quantum of loss cannot be judged from the residue which is in the shape of burnt ash.
4. The occurrence of fire in the godown having extensive nature was visible from the burnt and blackened walls and burnt steel door from inside.
5. The godown was having electrical wiring and switchboard which were also burnt.
6. The security guard Shri Shyambir Singh was questioned by us who was told to be on duty and noticed the fire. His statement was got recorded and enclosed herewith. The version is indicative of a fire occurrence in the stated night. There were two more guards named Ram Kumar and Ram Milan accompanying the above person but not present during the survey, hence, could not be examined.
7. The smoke mark was visible all around the godown and inside the factory shed through ventilators which also confirmed the occurrence of fire.
Adequacy of Sum Insured.:
The stock held by the insured on the eve of loss was in the shape of finished goods and the raw material as per record was not in the stock since 25.1.98. The mill functioned till 25.1.98 and thereafter remained closed on 26.1.98 on account of weekly rest and thereafter due to non-availability of raw material. The stock held thus was as under:
Sl.No. Item Qty. Rate Value
1. Polyster/Cotton shirting 96641.01 Mtr. 16/- Rs.15,46,256.16
2. Polyster/Cotton suiting 3152.51 “ 27.60 Rs. 86,694.02
3. 100% Polyster shirting 30599.25” 16.00 Rs. 4,89,588.00
5. Poly.viscose shirting 416.88” 22.28 Rs. 9,288.08
6. Khadi (Poly Vastra)-I 10236.75 “ 33.33 Rs.3,41,190.88
7. Khadi (Poly Vastra)-II 1720.12 “ 24.00 Rs. 41,282.88
TOTAL STOCK VALUE Rs.25,51,963.47
The sum insured of both Fire Policies 'C' is Rs.22,00,000/- only and the stock value stands to be Rs.25,51,963.47 which is indicative of an under-insurance.
THE DETAILS OF LOSS
As per the list prepared by the insured and a carbon copy handed over to us during the survey, the loss was total in the shape of burn finished stock of processed fabrics held on date which we have listed under adequacy of the sum insured. The value of fabrics burnt is Rs.25,51,963.47 and the residual value being zero as fully destroyed in fire. The stock held was under insured as compared to the Cumulative sum insured of two fire 'C' polices taken by the insured. The goods were belonging to others listed at Sl.Nos. 1, 2 (Tanda, Gorakhpur etc.) Sl. 4, 5 (Elgin Mills Kanpur) Sl.6 to KVIC & rest to insured.”
Thereafter, as the insurance company failed to settle the claim, notice was issued to the Insurance Company on 22.5.1998. On receipt of the notice, after a lapse of 4 months, the Insurance Company replied by its letter dated 11.9.1998 that steps were being taken in regard to claim but nothing was done.
Thereafter, on 23.11.1998 the Complainant filed this Original Petition praying that the Respondents be directed to pay a sum of Rs.22 lakhs to the Complainant for the loss suffered; Rs.20,000/- as damages; and, a compensation of Rs.10 lakhs. It is also prayed that the Insurance Company be directed to pay penal interest which is charged by the Banks, i.e Respondent Nos. 5, 6 and 7 after the fire accident, and also to pay exemplary costs.
As against this, it is contention of the Insurance Company that on the basis of the final survey report the claim is repudiated on 9.2.1999 on the ground that the insured had made deliberate efforts by using manipulation of alleged magnitude of fire and also the huge stocks alleged to be lying in the godown, and, therefore, it had forfeited all benefits in view of Conditions 1 and 8 of the Fire Policy. Hence, we would first refer to some part of final survey report.
Final Survey Report
It is the contention of the Insurance
Company that after receipt of the preliminary report, Vinod
Sharma, surveyor and investigator, was appointed for the survey of the
Complainant's firm, who submitted his report dated 13.8.1998, doubting the
incident of fire as well as the quantity of fabrics. The surveyor opined that
the following issues required consideration and on
“ISSUES WHICH REQUIRES YOUR EXPERT OPINION
1. When there is a fire to cloth Appx. 1.44 lakhs Mtr. of polyester which consists of cotton also, can it be totally reduced to ash as reflected in the photographs? Nothing remains in the shape of unburnt/semi-burnt pressed bales of cloth.
2. Will it be possible in case so much stock is burnt, and there is a small damage to the building i.e. Walls and roof. As per our verification, not even cement plaster cracks were observed to the walls and no damage was noticed on the walls except the walls were blackened due to smoke. No damage to roof was observed except blackening.
3. Is it possible to store 1.44 lakhs Sq.Mtr. in a room of having size 16'x20'x25'?
Photographs in this respect are enclosed. You are requested to issue your expert opinion report to enable us to make a fair analysis/assessment of the loss. “
Thereafter, he submitted final report on
Though the insured's books of accounts and records shows that the Insured was having stocks worth Rs.25,71,028.23, qty. 144199.68 sqmtr. on Trust which includes stocks worth Rs.4,89,588/- Qty. 30599.25 Sq.Mtr. Which is owned by them and stocks worth Rs.25,51,963.47 lying in godown which was reportedly burnt in said fire. However, our findings, verification and as per report of the investigator, report of M/s. NITRA it is concluded that so much stocks as claimed by the Insured was not lying in the affected godown where the fire took place. By the physical evidence of the fire and based on our experience, so much stocks as claimed by the Insured would have literally blown the walls and roof of the godown which was found damaged more by the smoke rather than the heat. There was a very minor damage due to small fire to the building. Since the Insured has already removed the stocks since the stocks were not found to be involved in fire. WE ARE ASSESSING THE LOSS AS 'NIL' TO THE STOCK OF FABRICS because whatever stocks is burnt, which was later on found in the shape of ash, might be due to stocks of some rags cutting of cloth along with the waste chemicals etc. As such, we are recommending the claim as 'NO CLAIM'.
XVII Regarding findings of evidence to prove that the Insured has taken away the stocks that there cannot be any direct evidence in this case because apparently, Insured has managed with their customers who have already taken away the stocks or in case of those parties whose stocks is not returned, the Insured might have sold it as its own without returning the same to the customers. Few parties to whom the Investigators contacted clearly indicates that they are also helping the Insured in inflating the claim from the Insurers.
1. We would like to
mention that there is common practice in textile industries that no electric
point is provided in godowns. This has been confirmed
by various Units and also by M/s.
2. The rates mentioned in the claim Bill are declared to excise Deptt. For excise purposes. The Insured did not submit any purchase bills/other documents in support of rates for its own stocks as well as for stocks of other parties.
As against this, it has been pointed out by the learned counsel, appearing on behalf of the Complainant that the report submitted by Vinod Sharma, the surveyor is totally against the documentary evidence. He has pointed out that the stock of entire goods processed is required to be maintained as per the Central Excise Rules. Those stocks were checked and verified on a number of occasions. For this purpose the stock register, duly verified and checked, is produced on record. That stock register was also verified by the preliminary surveyors, M/s. Naqvi & Company. He submitted that the stock which was burnt was subject to Central Excise Duty and therefore, the Central Excise Department conducted inspection on 28th January, 1999 and 3rd February, 1999 by the joint team of Superintendent Range, Superintendent and Preventive team from Divisional Office, Faizabad as well as by the Anti-Evasion and Preventive Staff of the Commissioner, Central Excise from Zonal Head Quarter at Allahabad. Hence, there is no reason to disbelieve the say of the Complainant.
In our view, the contentions raised by the Complainant require to be accepted for the following reasons:
surveyor visited the site on
In our view, if such is the approach of the final surveyor, then it would be difficult to arrive at a conclusion that his report is just or reasonable.
.(ii). In the final survey report, it has been stated that he was assessing the loss caused as ‘Nil’ to the stock of fabrics because whatever stock was burnt, was later on found in the shape of ash, might be due to stocks of some rags cutting of cloth along with the waste chemicals etc. This finding of the final surveyor is totally perverse and without any basis.
The preliminary surveyor who went to the spot within a day after fire observed that the residue of burnt synthetic fabrics was available in the godown which was washed away/drained out and spread in other areas due to fire extinguishing operations. This finding is based on the visit of the site by the preliminary surveyor at the relevant time which is based on personal observation. Hence, the said evidence cannot be ignored.
Similarly, the findings recorded by the final surveyor that even though there is no direct evidence, it was apparent that the insured had managed with their customers and might have sold the stock on their own without returning the same to the customers. Such presumption can hardly be a ground for rejecting the claim as the said presumption is without any basis or foundation. On the basis of such presumption regular accounts maintained by the Complainant cannot be disbelieved. In any case, there is no justifiable ground in not accepting the accounts of the stock maintained under the Central Excise Rules
It is also established on record
that the said Central Excise Form register was checked by the Central Excise
Inspector prior to the date of incident.
It would be difficult
to presume that the Excise
Inspector committed any wrong in
checking the record of stocks on
The Complainant has produced on record the Inquiry Report dated 1.2.1998, which was conducted by the Sector Officer, Central Excise Department, Faizabad wherein it has been mentioned that as per the RGI Register goods worth Rs.25,51,963/- were burnt. It is specifically stated that from the circumstances and enquiries, it appears that there was no foul play on the part of the assessee and the incident has occurred due to short circuit.
.(iv). Further, in support of his
contention and to falsify the say of the final Surveyor he has produced on
record the report by the
“Please refer to your letter no.TTPM/98-99/Misc./4295 dated 16.3.1999 in reply to which our observations & comments are as under:
Sr. Particulars Burning Behaviour
1. 100% Polyester : Softy Flame, fibre shrinks and hard
bead is formed with negligible
residue. It is a petroleum product
being highly inflammable.
2. 100% cotton : Burns quickly with yellow flame with
paper like smell & small softy residue.
3. Polyester/Cotton : Polyester-cotton burns quickly and
only softy cotton residue remains.
4. Polyester/ Viscose : Burns quickly with smell of burnt
paper and leaves minor negligible
residue after having burnt.
In case any other information is required in connection with the above noted commodities in respect of their burning behavior, we shall be pleased to give our observations”.
The aforesaid report completely supports the case of the Complainant. As stated in the aforesaid report negligible residue remains in case of polyester viscos and small softy residue remains in case of 100% cotton. Hence, the presumption raised by the Surveyor on the ground that after the fire less residue was found, can hardly be a ground for disbelieving the Complainant’s version.
Hence, we hold that the final Survey report is unjustified and it is based solely on some assumptions or notions of the Surveyor that the insured might have committed some fraud, which reflects his total negative approach. Such report is required to be ignored and cannot be the basis for rejecting the claim.
In our view, there is no justifiable reason to disbelieve: (a) the preliminary Survey report; (b) the record maintained under the Central Excise Rules; (c) the inspection which was carried out by the Central Excise Inspector on the date of the incident and the inquiry report submitted by the higher officers of the Central Excise Department after the fire, and (d) in any case, there is no ground for disbelieving the regular books of accounts maintained by the Complainant on some presumptions.
the result, this complaint is allowed.
Admittedly, the sum assured is Rs.22.00 lakhs.
As against this, the stock in the premises was for a sum of Rs.25,51,963/-. Therefore, to that extent, there would be under insurance by
11%. In this view of the matter, the Complainant is entitled to be reimbursed
for a sum of Rs.19,19,285/- [Rs.
22,00,000/- (-) 2,80,715 (11% of
Rs.25,51,963)] =. Hence, the Insurance Company is directed to pay a sum of
Rs.19,19,000/- with interest @ 10% from