Star
Chemicos Complainant
(s)
Versus
Oriental
Insurance Co. Ltd Opposite
Party (ies)
BEFORE: HON’BLE JUSTICE SHRI K S GUPTA, PRESIDING
MEMBER
HON’BLE DR.P.D.SHENOY,
MEMBER.
For
the Complainant : Shri K K Singh, Advocate
For
the Opposite Party : Shri
Vishnu Mehra, Advocate
Ms
Sakshi Mittal, Advocate
Dated
DR.P.D.SHENOY,
MEMBER
The case of the complainant is that it was engaged in
business of manufacturing and trading of menthol and allied products for the
last three years and for the year 1999-2000 the plant and machinery was insured
for a sum of Rs.3,25,000/- and stock of menthol for Rs.16 lakhs. Keeping in
view the regular increase in prices of menthol and highly inflammable nature of
menthol, the complainant enhanced the secured insurance cover for the stock for
Rs.35,25,000/- on 16.08.1999. The price of menthol was
Rs.1100/- per kg. The stock available was 2950 kg, making a total value of
Rs.32,45,000/-.
On
23rd/24th October, 1999 at about 01.00 A M the factory
premises caught fire due to short circuit which was controlled by the fire
brigade after two hours. Immediately, thereafter the complainant informed the
Insurance Company and their banker about the said fire. The complainant also
submitted a claim under the following heads :
1. Finished Product Rs.23,15,750/-
2. (2950 kg @ 785.00/ kg)
3. Plant and Machinery Rs. 3,25,000/-
4. Furniture Rs. 3,350/-
5. Wiring and Switches Rs. 6,168/-
6. Accessories Rs. 8,831/-
-----------------
Total Rs.26,59,099/-
----------------
Despite
appointment of surveyor and continuous correspondence the claim was not
accepted and the Insurance Company issued repudiation letter on 02.05.2000. The
complainant filed a complaint before the National Commission for award of Rs.26,59,099/- with interest @ 24% per annum till realization and
also compensation for harassment and business loss to the tune of Rs.05.00
lakhs.
Submissions of the ld Counsel for the complainant :
Soon
after the fire accident, the complainant has immediately informed the Insurance
Company and the banker. The company submitted the stock statement duly verified
by the Punjab National Bank for 30.07.1999, 30.08.1999 and 30.09.1999 alongwith
the prices of Menthol for the month of July, August, September and October 1999
which was compiled on the basis of prices published in the newspaper and also
copy of the special report of the fire brigade which doused the fire which had
mentioned the cause of fire as ‘short circuit’. The Insurance Company unjustifiably
has repudiated the claim on five grounds :
·
No manufacturing
activities for two months prior to the alleged fire accident
·
Policy
enhancement was obtained by fraudulent coverage
·
Not supplied stock
register in support of the claim
·
Not supplied the
declaration and returns filed with the
Excise Department
·
Not complied
with the Sales Tax registration.
The learned Counsel for the complainant submitted
that these are flimsy grounds because, as the prices of menthol was going up
and they had adequate stock and there was no necessity to produce more to accumulate
further stock as it is an expensive material. Enhanced coverage was obtained
because the prices were going up day by day which was
reflected in the newspaper report and has been tabulated and submitted to the
Insurance Company. The complainant submitted letters from the bank relating to
stocks and its valuation. As this is a new company and its total production was
within the limit and there was no need to get a certificate from Excise
Department. They had already approached the Sales Tax authorities for
registration number, hence these charges are frivolous. The special report of
the fire force is very crystal clear and it has mentioned that the accident
took place due to short circuit.
The
extract of the special report of the fire force reads as follows
:
(i)
Damaged property
(Approx.) : 40,00000/-
(ii)
Loss of property
(Approx) : 30,00000/-
(iii)
Property saved
by rescue team (Approx) : 10,00000/-
(iv)
Cause of fire : Electric
Short Circuit
Amar Ujala newspaper has also reported about the
accidental fire. The surveyors have not cooperated with the complainant and
asked for several records unnecessarily and have alleged that he has not
produced the relevant records, hence, the complaint may be allowed and
compensation as prayed may be granted.
Submissions of the learned Counsel for the Insurance Company :
It
is the responsibility of the complainant to prove his case that there was
accidental fire and which has resulted in loss of stocks which was kept in the
factory premises by adducing solid evidence. Mere submissions
of bank statements is not adequate.
The
enquiries and investigations conducted by Shri P C Shukla for Surveyors India
indicated the following :
“1. There was no manufacturing activity for
last two months and finished good stocks in 60 bags total 3000 kgs, was lying
in the work-shed since July 1999. There was no production of menthol after July
1999.
1.
Regarding
storage of finished goods for such a long time Mr Agnihotri asserted that
market rate of menthol in the open market were expected to rise during festival
season, therefore, they were going to sell this material at Sambhal on coming
Monday.
2.
There was no
stock of raw material and in process at the time of fire.
3.
Insured is
maintaining cash book, ledger, stock register, purchase register, sale bill but
all these books/ records for the financial year in question burnt in fire as
kept in the same block.
4.
Insured firm is
also filing sales tax return (quarterly) and their last income tax return filed
for the year 1997-98.”
It was possible for the complainant to reconstruct
the register if they were burnt in the fire on the basis of the supporting
documents which he has not done. Secondly, he has not submitted the Sales Tax
Return and Income Tax Return filed for the relevant period. In the cross
examination of the complainant Mr Shailendra Agnihotri has stated that his firm
maintains all the books of account. These records were available with his
Chartered Accountant. If that is so he could have obtained the record from the
office of his Chartered Accountant and submitted the same to the surveyor which
he has not done. As he has not produced the stock register and the Sales Tax
and Excise Returns, the complainant could not substantiate the loss. Even till
date the books of account are not furnished. In the report submitted by the
surveyor Mr Shukla he has concluded that :
“In view of the facts and circumstances of loss
discussed above, the claim required in depth investigation on all aspects.
Regarding books of accounts insured has manifested that all the books
pertaining to the financial year in question were burnt as kept in the premises
at the time of fire. During our detail physical inspection we did not find
debris of the alleged books of account.”
Mr
Bhatia and Company, Surveyor and Loss Assessors has stated that
:
“The insured was requested to let us have the books
of accounts for the unit, on which he first stated that these have been burnt
in the fire. On questioning as to where these were kept and if burnt, these
should have some residue, but the insured could not prove the burning of the
books. We informed him that he has no grounds to make this point acceptable in
view of the non operation of the unit since July 1999 and more so there is no
staff appointed by the insured to write books of accounts in the factory
premises. On this he stated that he has the books of accounts at his residence.
He was requested to take us to his residence, on which he agreed. On reaching
half way, he stopped and said that although the books of accounts are with him,
he would first like to consult his Chartered Accountant and then produce the
books of accounts for our verification. He requested for one week’s time for
the purpose. He was allowed one week to submit all the needed record and the
books of accounts.”
Mr
Bhatia has submitted the report on an affidavit and he was not cross examined,
accordingly his evidence has gone un-rebutted. Further Mr Dilbagh Singh,
Manager of Oriental Insurance Company has inter-alia mentioned in his reply on
oath to the interrogatories filed by the complainant as follows
:
“The complainant had requested for a policy of Rs.16,00,000/- to cover their stocks and the same was issued as
per request for a period of one year from 16.08.1999 to 15.08.2000 with a fresh
policy number. This is clearly suggestive of the fact that fresh stocks were
inducted and a policy for a period of one year was required. The earlier policy
also covering the stocks was for the period of one year from 11.03.1999 to
10.03.2000 with a different policy number. The complainant accepted the 2nd
policy for the period 16.08.1999 to 15.08.2000 as such without any objection
and did not ask for any rectification. Thus, it is evident that the two
policies bear different numbers and are for different period. I may, however,
add that there was no reach for the complainant to take another policy as they
were not carrying out any manufacturing activity since June 1999 and no fresh
stocks were either purchased or intended to be purchased.”
FINDINGS :
The
analysis of this case instead of providing answers to the dispute raises many
questions.
The
complainant had requested for enhancement of the insured amount to Rs.16 lakhs
which is clearly suggestive of the fact that fresh stocks were inducted as the
prices of raw materials had increased in the market.
The
cause of fire raises doubts as has been clearly stated. The observation of Shri
P C Shukla is relevant in this connection “that the insured factory was
closed at the time of fire and no production activity but as per insured the
electric circuit remain energized due to a lamp near
Ganesh Lakshmi Murthy. There was no electrical installation above the stacks/
heaps of bags containing menthol and only one electric line is passing through
the back wall on south. The fuse kit for the main incoming
was totally burnt/ melt. The switch board for light and fan was badly
damaged. In view of the circumstances of
the fire, condition of electrical installation, it is very difficult to pin
point the cause of fire at this stage, therefore, it needs further
investigation.”
The
fire force has given special report wherein they have given the cause of fire
as “Electric Short Circuit”. They have not given the detailed reasons for the
same. They have indicated some lumpsum figures for loss of property, the basis
of which they have not been indicated by them. The only document produced by
the complainant in support of the stocks is a banks statement for the month
ending 30.09.1999 which reads as follows :
|
1. |
Menthol
|
Rs.24,02,775/- |
|
2. |
High
C P Crystalized Menthol (Flakes |
Rs. 2,31,575/- |
|
|
TOTAL |
Rs.26,34,350/- |
Similar
statements were given for the previous month. The complainant has not produced
relevant records to consider his case as is evident from the affidavit
submitted by Shri Bhatia, the final surveyor who has arrived the following conclusions :
“(1) As per
the policy conditions, the insured is required to complete the needed formalities
within days of the incident, but it is more than 120 days now, the insured has
not furnished any supporting document for the amount claimed.
(2) There is a total non co-operation from the insured in
submitting the documents called for.
(3) The insured has no record to furnish e.g. purchase
record, sales record, stock record etc. and has been taking time to generate
the record so as to meet the insurance requirement.
(4) He has not turned back to the unit after the fire as
was evident from the registered letter returned undelivered and also the
statement of the landlord.
(5) Even the fire report has not been collected by the
insured from the fire brigade for submission.
(6) The cause of the fire as ‘short circuit’ is very much
disputed as it is not believable for the following reasons :
(a)
The insured had
visited the factory at about 10 p m i.e. just before 2 ˝ hours of the fire when
he had no work to perform there and no processing was going on which needed
supervision.
(b)
The stock was
kept about 15 feet away from the wiring complex which could cause short
circuit.
(c)
The contents
were packed in 5 kg polythene bags and then 10 such bags were tightly packed in
gunny bags they no room for vapours to come in contact with any burning
material in the vicinity.
(d)
The freezers
which are very near to the wiring complex are safe and have only smoke layer on
it.
(e)
He had not been
paying rent and electricity charges to the landlord who was pressing hard.
(f)
He had started
defaulting in making payments to the Bank as was evident from the outstanding
against him.
(g)
There were
practically no activities right from September 1998 and the sum insured for the
stock was worth Rs.16 lakhs. In August 1999, the insured increased the sum
insured to Rs. 32 lakhs in spite of the fact there were no activities being
carried out by the insured. This was admitted by the insured in writing that no
activities were being carried w.e.f June 1999.
(h)
There was no
board outside the premises right from the beginning. Just one day before the
fire a board indicating the name of the firm M/s Star Chemicos was fixed
outside the portion occupied by the insured.
Obviously, it was for claim purposes.
(i)
The firm has
been operating right from September 1997 and like wise had been kept close when
the processing was on and all the electrical equipment operating and still
nothing happened when the product used to emit vapours. How and under
conditions a fire can erupt when all the electrical equipment was closed and no
processing was on and more so the material kept in the premises was tightly
packed.
(j)
The insured had
one permanent staff who had been turned off just a few days before the incident
of fire so as to leave clue for getting past information.
(7) The circumstantial evidences makes us believe that
the insured has deliberately set the
unit on fire to claim from the Insurance and that was why the insurance cover
was enhanced from Rs.16 lakhs to Rs.32 lakhs just months prior to the incident
when practically there was no change in the stock held by the insured right
from September 1998.
(8) There is contradiction of stock statement submitted
to bank and the stock declared to be with the insured at the time of incident.”
His
evidence has gone un-rebutted as he was not cross-examined. In view of the
above analysis it is difficult to accept the claim of the complainant. Accordingly
the original complaint is dismissed. The complainant is directed to pay
Rs.5000/- as costs, which shall be deposited with the Consumer Legal Aid
account maintained by this Commission.
………………………J
[ K
Presiding Member
……………………….
[ P D
Shenoy ]
Member
rsk