National Consumer Disputes Redressal
Commission
Circuit Bench at Chennai
Original
Petition No. 275 of 1999
M/s. Texcones Tubes Company,
Rep. By its Managing Director -
S.P.Sundarakesari,
1/6, Iluppakkudi,
Alagappapuram,
Karaikudi 630 003,
Sivaganga District,
Tamil Nadu
Complainant
Versus
.1. The Oriental Insurance Co. Ltd.,
Rep. By its Branch Manager,
Sathyamurthy Illam,
1st
Floor, 119,
P.B. No.
40,
Karaikudi 630 001,
Sivagangai District,
Tamil Nadu.
.2. The Bank of Madura Ltd.,
Rep. By its Branch Manager,
Karaikudi Branch,
76,
Karaikudi,
Sivagangai District,
Tamil Nadu 630 001.
Opposite Partiess
BEFORE:
HONBLE
MR. JUSTICE M.B.SHAH,
PRESIDENT.
MRS.
RAJYALAKSHMI RAO, MEMBER.
For the Complainant : Mr. V.Ramakrishnan,
Advocate.
For the Opposite Parties : Mr. R.Nageswaran,
Advocate.
Dated
M.B.SHAH, J. PRESIDENT
The only question which requires consideration
is : Whether the reduction of assessment of loss for
stock from Rs.21,59,568 to Rs.4,53,966/- by the Surveyor is justifiable? If
not, what amount is required to be awarded?
Damage to plant and machinery and building is not required to be discussed because learned Counsel for the Complainant has submitted that even though the damage is much more than what is assessed by the Surveyor he would confine his submission with regard to assessment of loss to the stocks and the stock in process.
Case of the Complainant:
It is the say of the Complainant that it is a licenced
manufacturer of papercones. It had obtained a fire
policy from M/s.Oriental Insurance Co. Ltd.,
(hereinafter referred to as the Insurance Company) to cover the risks on the building,
machinery, stocks, raw-materials, for a sum of Rs.46,50,000/-, and paid a
premium of Rs.14,379/-. The details of the insurance coverage are as under:
(i). Building Rs.13,00,000/-
(ii). Stocks Rs.25,00,000/-
(iii). Machinery Rs. 8,50,000/-
---------------------
Rs.46,50,000/-
===========
On
the intervening night of 4th and 5th of October, 1997 a
massive fire broke out in the processing hall of the Complainants factory and
caused extensive damage. This was reported to the Insurance Company, fire bridge and the Police
immediately.
On the same day,
the Insurance Company deputed M/s.Haniffa Associates,
Surveyors to inspect the premises. The
Complainant supplied the required information to the Surveyor. Thereafter, on 17.12.1997 the Complainant
submitted claim form claiming a sum of Rs.29,53,386.38,
for the loss caused to:
the buildings
Rs.1,13,830.50
the machinery
Rs.2,03,047.00
the rawmaterial
Rs. 32,752.49
finished products
Rs.25,29,182.00
cones damaged due
Rs. 74,573.39
to water spraying.
It is the further case of the Complainant that even after
providing the required information to the Surveyors, the Insurance Company did
not settle the matter till 20.11.1998. Hence, the Complainant issued a Lawyers
Notice to the Insurance Company calling upon them to pay the sum of Rs.24,85,255/- with interest at the rate of 19% p.a. In response
thereof, the Insurance Company informed the Complainant that the Surveyors were
finalizing their report and that as soon as the same was received, the papers
would be processed and needful would be done. Thereafter also the Surveyor
sought further clarifications from the Complainant on 25.01.1999.
Subsequently,
the Insurance Company vide its letter dated 10.3.1999 offered a sum of Rs.4,53,966/-, which offer was not accepted by the
Complainant. He further states that the
survey report was also not supplied to him. As all his efforts for fair
settlement have failed, he got another legal notice issued on 6.7.1999. Still, there was no response. Hence this complaint is filed claiming the
following amounts :
(i) for the loss caused to -
(a) the stocks Rs.24,85,255.00
(b) the building Rs. 1,13,830.50
(c). the machinery Rs. 2,03,047.00
(ii). Interest
at the rate of 19% p.a. from the date of claim till the date of payment;
(iii). Rs.5,00,000/- for compensation, mental agony, financial
hardship;
(iv). Rs.5,000/-
for costs of this complaint.
Evidence:
It
is to be stated that with regard to fire which broke out on
The
Surveyors found that probable cause was electrical short circuit. The Surveyors
have specifically stated that possible malicious act or arson in collusion with
the insured was investigated and there was no evidence for such acts.
The
dispute is only with regard to the assessment of loss by the Surveyor,
particularly, the loss caused to the stock. The Surveyor arrived at the
conclusion that as per the books of accounts and records loss could be assessed
at Rs.21,64,140/-. However, the Surveyors adopted
other dubious method of so called adjustment and reduced the loss to only Rs.4,53,966/-. Whether
this adjustment or reduction of the loss is justifiable or not, is required to
be decided in this complaint.
For deciding
this question we would first refer to some salient features noted by the
Surveyor in his report.
(2). The paper cones attract central excise duty and that the
Complainant was availing Modvat credit facilities for
the raw materials/inputs received for production.
(3). The fire was put off after a struggle of 4 hours, and the
incident of fire was reported in local dailies.
(4). The Police
investigated and submitted that it was accidental fire.
(5). Books of accounts
were examined which included purchase invoices, stock register, register for
the stock of finished goods maintained under the Central Excise. The Surveyor
has also noted that the register of daily stock accounts for paper cones was
periodically monitored by the Central Excise authorities.
He has also noted that at page 15 of the
RGI Register, the Superintendent of Central Excise has recorded as under:
Out
of 21,67,592 cones, recorded in RGI as closing balance on 4.10.1997, only
30,050 cones were found in tact and unaffected by fire accident. Of these, only
3,420 were totally unaffected by fire. 26,630 were the cones salvaged from the accident site but
are now in saleable condition. Apart from 30,050 cones in saleable condition,
47,300 cones affected by water spray during fire fighting operations, were kept
separately.
.(6). As per the RG23A-Part-I Register,
the closing stock of rawmaterials as on 4.10.1997 was
6,712 kgs.
.(7). Form-V Register was also examined
by the concerned officers. That register was maintained as per the instructions of
Central Excise authorities for availing of Modvat
credit facilities.
.(8). The monthly stock statement submitted
to the Bank of Madurai Ltd. was also taken into
consideration.
.(9). Profit and loss account was also
taken into consideration.
.(10). The
Surveyors have analysed the input and output register
and have certified that inputs of
raw-materials issued to produce cones, as shown in the Stock Register, are
justified.
Finally, the Surveyors have taken into
consideration that the water damaged cones were 47,300 and destroyed by fire
were 20,90,242.
.(10). For buildings, they have assessed the
loss at Rs.30,182/- after adjustment.
On the aforesaid basis, the Surveyor has assessed the loss as under:
18-2-A:
The damaged stock of Kraft Board reels is useless for insureds purpose. However, the burnt edges at both sides of reels can be cut out and the center sound portion of Kraft Board reels can be used in making fire works. In all fairness, the salvage may fetch about 50% of their value.
The fire damaged cones and water damaged cones are useless for insureds purpose.
The insured have estimated the weight of fire damaged cones as 2125 kgs. (in our opinion, the weight of damaged cones now available would be still lesser). Insured have been advised to preserve the salvage, till the claim is disposed of.
The insured have offered salvage value at Rs.2.50 per kg. It is reasonable and adopted.
The segregated water damaged cones 47,300 may fetch about 75% of the sound cones.
The details of workings are shown in Annexure-II
Net loss assessed on stock, as per Annexure-II is Rs.21,20,998/-.
Valuation:
The Surveyor has made the loss
assessment on stock as per Annexure-II, as under:
I. Kraft Board reels 2101 Kgs. @ Rs.15.37 Rs.32,292.37
Less: Salvage value at 50% Rs.16,146.18
___________
Rs.16,146.18 -A
____________
II. Pre-fire Sound Goods: Rs.17,59,806.40
-----------------------
Rs.21,88,266.32
Less: Salvage value Rs. 83,415.00
----------------------
Rs.21,04,851.32-B
-------------------------
Loss Assessed (A+B - Rs.16,146.18 + Rs.21,04,851.32)
= Rs. 21,20,997.50, Say Rs.21,20,998.00
.II. Despite
the aforesaid clear loss assessment, by unjustifiable reasoning the Surveyors
gave an alternative loss assessment, as under:
18-2-B:
There are discernible fire marks on the South inner wall
readily evidencing the level of pre-fire stack of cones only to the height of
4 from the floor (photos may please be examined). It is reasonable to consider
the bottom dimensions of pre-fire stack lying adjoining the Sough wall should
have measured 28 at E-W direction and 10 on S-N direction at the bottom and
24 at E-W direction and 10 on S-N direction at the top of the stack, based on
the fire marks.
(necessary access for handling the
cones both at East side and West side, access for door opening, etc. were taken
into account, while considering the dimensions of the stack).
We measured the volume of 25,000 sound cones stack and it
worked out 82.875 Cft.
Therefore, it is logic that the total quantity of cones in
the Southern major stack should have been
[28 +
24] x 10 x 4 (height) = 1040 Cft.
---------------
2
1040/82.875
x 25,000 = 3,13,725 Cones.
Estimating a quantity of 1,00,000 cones (small stacks) lying in the hall at the time of fire (other than the stack lying near the Southern wall), the total quantity of the cones lying in the entire process hall works out only 4,13,725 cones, as against the total cones, as per the figures in books, at 21,67,592 cones. Hence, loss assessment is worked out based on the physical evidence after the fire.
Loss assessment on 21,67,592
cones
.. Rs.21,04,851.32
Proportionate
loss
assessment on
4,13,725 cones =
Rs.21,04,851.32
------------------------ x 4,13,725 cones
21,67,592
. Rs. 4,01,749.78
Despite of our repeated requests, the insured were not able to explain the physical presence of 21,67,592 cones in the process hall and they stuck to the stand that the records would speak. In our opinion, it is proper to link the available salvage evidences after the fire to find out the quantity of pre-fire stocks.
Therefore, the net loss assessment on stock:
Rs.16,146.18 + Rs.4,01,749.78 =
(Kraft Board + Cones) Rs.4,17,895.96
Hence, we recommend to consider the
Findings:
In our view, for the reasons stated below, we have to accept the loss of assessment as per paragraph 18-2-A, i.e. net loss on the stock at Rs.21,20,998/- and disregard the alternative assessment.
.A. (i) there is no
justifiable reason to discard the books of accounts maintained by the
Complainant which consist of purchase invoices, stock register, register for
finished goods and the sale register.
.(ii). There is no reason to doubt
the register
maintained under RGI Register under the Central Excise Rules;
.(III). There is no reason to doubt
the endorsement made by the Superintendent of Central Excise with regard to the
cones which affected and unaffected by fire;
.(iv). There is no reason to doubt
the monthly stock statement submitted
to the Bank of Madurai from where the Complainant has
taken the loan;
Apart
from the aforesaid aspects, the loss assessment valuation made as per para 18-2-B is purely hypothetical, imaginative, and on assumptions
and presumptions.
.B. Secondly, even the Surveyors have mentioned that the said assessment is
made on the basis of the evidence such as fire marks left behind by the burnt
cones, the extent of damages to the building and the scene of fire occurrence
by ignoring the fact that the fire marks may not exist because of spraying of
water
.C. Thirdly, it is to be stated that
the Surveyors carried out survey on 5th October,
In
this view of the matter, we accept the assessment of loss for the stock as per para 18-2-A.
The
Complainant is, therefore, entitled to have reimbursement of a sum of Rs.21,20,998/- (rounded of to 21,21,000/).
Conclusion:
In
the result, the Complainant is entitled to have the sum of Rs.21,21,000/- for
loss caused to stock, namely, raw-material, finished products, damaged cones
(water damaged); Rs.30,182/- for the
damage caused to the building as assessed by the Surveyor; and, Rs.8,387/- for the damage caused to the
machinery (including power wiring). Thus, the total amount to be payable to the
Complainant would be Rs.21,59,569/-.
Hence,
the Insurance Company is directed to pay the amount of Rs.21,59,500/-
(rounded) to the insured with interest
at the rate of 12% p.a. from
Sd/-
.J.
( M.B.SHAH )
PRESIDENT
(RAJYALAKSHMI
RAO)
MEMBER.