NATIONAL CONSUMER DISPUTES REDRESSAL
COMMISSION
CONSUMER COMPLAINT NO.
05/2006
Jaipur Ceramics Pvt. Ltd. … Complainant
Versus
New India Assurance Co. Ltd. … Opp. Party
BEFORE:
HON’BLE MR. JUSTICE M.B. SHAH, PRESIDENT.
HON’BLE MRS. RAJYALAKSHMI RAO, MEMBER
HON’BLE MR. ANUPAM DASGUPTA, MEMBER
For the Complainant … Mr. Swadeep Singh Hora,
Advocate
For the Respondent … Mr. Kishore Rawat, Advocate
Dated:26.05.2008
ORDER
M.B. SHAH, J PRESIDENT
Heard Ld. Counsel for the parties.
Undisputedly,
the complainant took insurance policy from the respondent for a large sum of
Rs. eight crore. Unfortunately, a fire
took place in the factory of the complainant in the intervening night of the 1st
It is also
undisputed that in the morning of 02.04.2003, M/s Ritz Surveyors &
Adjusters (P) Ltd.,
along with some officers of insurer, visited the site. They observed that the finished goods kept
in the godown had been extensively
damaged.
M/s Ritz Surveyors & Adjusters (P) Ltd. submitted their
status report on 08.04.2003. In the said
report, they inter
alia stated as under:-
“3) The crockery (finished goods) was all found lying loose
on the floor (either on ground floor or mezzanine floor). Apparently cardboard cartons of the finished
goods were all burnt in the fire. Even
the records of finished goods, kept there, were all burnt.
7) The insured, being accredited with ISO certificate, was
found to have updated records. Besides
the various stock registers the accounting records are all maintained on the
computer.
8) We have taken physical quantities of the following from
the various stock registers:
·
Opening balances
(quantities as on 1.4.2002) of all raw materials
·
Closing balances
of all the raw materials
·
Opening balances
of various category of finished goods/aggregate quantities
·
Closing balances
of various category of finished goods – aggregate quantities
Crockery and decorative items enjoy
a high reputation in the market. Their
plant was established in Sept. 1996 at an outlay of about Rs. 7.00 crore. The unit had a turnover of Rs. 11,09,24,354.00 in 2k1-2k2 and Rs. 9,36,34,415.00 in 2k-2k
1. The unit has a Term Loan of Rs. 61,66,678.00 from Bank of Baroda and C.C. limit of Rs.
1,49,49,468.00 from the same bank.
It is an ISO-9002 company and hence
believes in total quality concept. It also maintains necessary records. Main Directors of the company have already
been mentioned above.”
In the last
paragraph with regard to the provisions to be made by the underwriters, it has
been stated as under:-
“We are yet to receive the estimates
from the insured. The detailed
assessment exercise could be done only thereafter. The insured had verbally communicated a
loss of Rs. 2.0 crore. However based on
the data collected so far by us we, at this stage, suggest that the insurers
make a provision of Rs. 1.0 crore in this claim.”
This would
mean that at the initial stage the insured verbally claimed that the loss was
for a sum of Rs. 2 crore and, thereafter, a suggestion was made by the
surveyors that the
insurer should make a provision for Rs. 1 crore, at least.
Thereafter, they submitted preliminary survey report on
24.04.2003. After checking the various
records, they stated
as under:-
“Following trial balance entries
were checked by us and found to be in accordance with books of Account:-
1) Opening Stock Rs. 1,82,76,546.00
2) Purchases Rs. 6,84,41,772.35
3) Sales less
sales return Rs. 12,01,94,856.00”
However, at
this stage it would be necessary to reproduce the entire observations made by
the surveyors for arriving at the said conclusion. They made the following observations after
checking the records:-
“1. As already
communicated in our Status Report we had obtained the following information
from the insured’s records:-
1.1
Quantities of
opening and closing balances of all the raw materials and finished goods from
stock registers.
1.2
Monthly sale
pieces and the billed value of finished goods as recorded in RG-1 records.
1.3
Trial balance as
on 31.03.03; There were no transactions on 1.4.03 (being a holiday).
“2. We had also obtained complete balance sheet set for the year
01-02 along with basis of valuation of closing stocks in the balance
sheet. The insured had conveyed the
following basis to us:
2.1
Raw materials in
balance sheet were valued at current costs and
2.2
Finished goods in
balance sheet were valued at rates in the stock statement submitted to the bank
less the Gross Profit. Gross Profit
ratio was taken as 16.5%.
“3. The insured had
conveyed that their actual stocks are in complete agreement with the stock
statements submitted to the bank. He has
accordingly valued his loss to finished goods on the basis of individual
quantities of items updated and ascertained from stock statement dated
07.03.03.
“4. The insured had
not carried out segregation of stocks in finished goods godown. Further neither the quantity in stock
registers have been cross-verified by us either by any material balance or
through other records nor the rates have been exhaustively verified by us by
bills. Hence we are reporting only the
closing stocks quantities appearing in insured’s stock registers. The actual
quantities at the time of final survey may become different for the reasons
stated above.
“5. The closing
quantities as on 31.03.03 as given in raw material stock register are given at
Annexure-I to this report.
“6. We have also
given the aggregate month-wise billed value (on basic rates alone) of finished
goods despatch in year 2002-03.
“7. The insured had
reported increased production capacities and hence value of WIP in his opinion ( not verified by us) had increased by about 15% over the
last year.”
Thereafter,
the second surveyors, i.e.,
C.P. Mehta & Co. Surveyors
submitted final survey report on 17.11.2003. Ld. Counsel appearing on behalf of the
Insurance Company heavily relied upon paragraph 2.3 of this report wherein it was stated that the first batch of documents were
received only in June/July, 2003 and the last of the required documents were
received in November, 2003.
Thereafter, the Surveyors
discussed various other aspects. In
paragraph 9.4 of their report it was stated under “Surveyors Conclusion” as
under:
“ Having examined the site and all the above documents, having considered the
circumstances of the case, and in the absence of any adverse features, we have
concluded that the fire was accidentally caused, probably due to an electrical
short-circuit.”
Further, on
the extent of damage they noted as under:
“10.1 The loss due to the fire was severe.
“10.2 Though the fire was confined to the finished
stocks/packing materials godown and did not spread to the factory, the loss was
heavy. In addition, there was damage by
heat to transfer prints stored in a room behind the godown.”
For the
assessment of loss they
mentioned that the entire godown building was badly damaged. Electrical wiring and fittings were severelly
damaged, racks were damaged, wooden planks were burnt in fire, finished stocks
were almost reduced to scrap, packing materials burnt away almost completely,
etc. Thereafter, they stated that the details of all losses
were examined in detail and physically verified to the extent possible and
finally assessed the loss as under:-
“12.6.3 The Insured had
opted for their claim on the racks on a depreciated value basis and the loss
was assessed accordingly.
“12.7 Re: Stocks
12.7.1. The major part
of the claim was in respect of stocks.
The Insured were able to submit their first batch of claim documents
only in June 2003 and July 2003. The
last documents were received in November 2003.
12.7.2 The details are described below:
“12.8 Re: Finished
stocks
12.8.1 The fire had occurred on
12.8.2 Steps to build up the inventory records,
from relevant peripheral records, were discussed at length with the Insured.
12.8.3 The preparation of the stocks claim
started with opening Balances as on
12.8.4 The stock registers for finished goods
and for packing materials, were burnt. Available
records such as Excise RG-1, Register for raw material stocks, daily
production reports, invoices etc. were verified and correlated. The Insured’s note on the methodology
followed for reconstructing the records is described below:
12.8.4.1 As per the Regular procedure followed the Packed material from shop floor from
12.8.5 A detailed exercise was carried out at
the site during a visit from
12.8.5.1 The standard weights of each item of claim
were ascertained and the total weight of finished goods was determined. The damaged stocks were all filled in trucks
and weighed. The results were as under:
Standard weight of claimed stocks
of Bone Chine & stone ware 2,00,785.416
kgs.
Physical weighment 2,19,460.000 kgs.
Result = Surplus found +9.32%
12.8.5.2. Thus, the physical weighment was
satisfactory. The Insured were contemplating revising their claim upwards,
based on the physical findings, but after discussion, did not pursue the
matter.
12.8.6 The volumetric parameters of the stocks were
also determined. Carton sizes in which
stocks were packed were ascertained and total volumes occupied by claimed
stocks were worked out.
12.8.6.1. Available storage space in the godown was
also worked out and determined. The findings were as under:
Volume of space required by claimed
Stocks 25,335.65
cft.
Available storage space in finished
Goods godown
Ground floor level = 54000 cft.
Above loft = 25120 cft.
79120
cft
12.8.6.2 Thus, it was seen that storage space was
adequate for the finished stocks.
12.8.6.3 The lay-out sketch showing the storage
racks/positions in the finished stocks/packing materials godown is reproduced
in the Annexure.
12.8.7 All the records/data pertaining to the
saved items of finished stocks were examined and these items were physically
checked.
12.8.8 All the relevant records, such as Bank
stock statements, purchase and sales invoices, excise records, and registers
production records, Balance sheets, costing details etc. were examined in
detail, and were co-related. Pending
orders on hand were also evaluated. The
provisional balance sheet for
12.8.9 Re: Bank statements
12.8.9.1 The Insured’s stocks (
raw materials & finished goods) were hypothecated with the Bank of
Baroda, Jaipur, to whom they were submitting detailed stock Hypothecation
statements every month.”
They also took into consideration the bank statements and
hypothecated stock statements and the item-wise valuation was found to be
satisfactory, on the basis of which the loss was assessed as under:
“ 12.11 After
taking into account all the factors, after discussing the extent of damage,
cost of repairs/replacement, value of damaged items, value of salvave,
underinsurance and deductible franchise, the Insured’s claim has been worked
out as under, on a depreciated value basis, to which they have agreed.
Net Loss Claim
Before After
IA Building Rs.
10,47,340/- Rs.
8,91,189/-
IB Furniture Fix- }
IC Tures & fittings }
(electricals/ }
Racks)
} Rs. 3,46,975/- Rs.
35,720/-
Rs. 13,94,315/- Rs.
9,26,909/-
II Stocks Rs.
1,42,39,370/- Rs. 1,31,08,836/-
Total Rs. 1,56,34,285/- Rs.
1,40,35,745/-
Less: Deductible
franchise Rs.
10,000/-
13.00 NOTES
13.1 In our opinion,
13.1.1. All terms and conditions of the policies have been observed by the Insured.
13.1.2 We have not observed any Breach of
Warranty.
13.1.3 The cause of the loss, as assessed,
is one which has been specifically covered by the policies and does not fall
under any exclusions.”
It is to be
stated that before
submitting the final report, the
Surveyors informed the complainant about the assessment and on 14.11.2003 on
behalf of the complainant the calculation was confirmed and accepted.
Thereafter,
on 26.12.2003 the
Senior Divisional Manager recommended to the Regional Manager
that the claim be settled on the basis of the loss assessed by the
surveyor.
Despite the reasoned
and detailed survey report, by letter dated 30.7.2004 the Insurance
Company repudiated the claim on the ground
that there was violation of condition Nos. 6 and 8 of the terms and
conditions of the policy. It was stated
in the repudiation letter that the fire took place on 01.04.2003 and the
completed claim was submitted on 24.04.2003 and the documents sought by the
Surveyors were only submitted in July 2003.
It was also contended that the saleable crockery allegedly packed in the
cartons in the said godown could not have been stored or accommodated in the
space available in the godown; and
further stated that the burnt cartons were not noticed in the CD.
In our view, both the aforesaid contentions
are frivolous and unjustified because the preliminary Surveyor had himself noted the
extensive fire on the 2.4.2003. Further,
with regard to damage and the storage capacity, the final Surveyors noted in
paragraph 12.8.6, as
quoted above, that there was sufficient storage space and it was adequate
to accommodate the finished stock. Further the Surveyors also specifically
stated that all the relevant records such as bank stock statements, purchase
and sales invoices, excise records, registers of production, balance-sheets,
costing details, etc. were also examined in detail and were co-related. It was
also specifically observed by the preliminary Surveyors that the insured being
accredited with I.S.O. certificate was found to have updated records. In our view, when the surveyors did the entire exercise in detail there
was no justifiable ground for the insurance company to repudiate the claim on
the flimsy ground that there was breach of condition Nos. 6 and 8.
Secondly,
with regard to the higher claim it was pointed out that at the initial stage
also claimant has claimed a sum of Rs. 2 crore as the loss and that was noted
by the Surveyors in his status report.
Further, in this complaint
also Complainant claimed a large amount for the loss due to fire. The Complainant pointed out various
infirmities with regard to the Survey report.
It highlighted that the Excise Department levied
excise duty for a sum of Rs.28,48,589/-
and, in any case, that amount was required to be paid by the Insurance
Company because that was part of
the loss suffered by the
Complainant. The Complainant admitted that against
the order passed by the Appellate Authority of the Excise Department, Complainant had preferred second appeal
before CESTAT which turned down the
appeal. In this view of the matter, it
cannot be said that there was breach of Condition No.6 and 8 of the insurance
policy.
Learned
counsel for the Complainant also contended that the Complainant was entitled to
reimbursement of the
excise duty amounting to Rs.28,48,589/- as well as other items in respect of which the Surveyor committed error in assessing the loss. In our view, it would be difficult for us to
consider the said submission, because it might require further evidence to be
led by the Complainant. The claim for
excise amount is
also rejected on the ground that after the Survey report, the Complainant
confirmed and accepted the assessment made by the surveyor.
Considering
the facts recorded by the Surveyors, in our view there was no justifiable
ground for the insurance company to repudiate the claim. Hence we direct the insurance company to reimburse the complainant a sum of Rs.
1,40,25,745/- Out of this sum, the
Insurance Company deposited a sum of Rs.
1 crore (Rupees one crore) with this Commission on the basis of our Order dated 23.8.2006. Therefore, the Insurance Company is required
to pay a sum of Rs.40,25,745/-.
Ld. Counsel
for the Complainant further pointed out that the complainant was required to pay interest at the rate of
15.77% to the Punjab National Bank for the loan taken by it for running the
factory. For this purpose, Ld. Counsel
for the complainant relied upon the
statement dated 01.10.2003 given by the Senior Branch Manager, Bank of Baroda
wherein it was stated that interest rate payable by complainant was 13.25% per
annum with monthly rest. He further
submitted that Bank of Baroda downgraded the credit rating of the
complainant because
of non-settlement of the claim by the insurance company. Therefore, they were required to shift their
accounts to the Punjab National Bank. At
present, Punjab National Bank was charging interest on their account at 14.75%
calculated on monthly rests which yearly accounts to interest at the rate of
15.77%.
Ld. Counsel
for the insurance company submitted that complainant cannot claim interest at the rate of 13 or 14%
because that was not its claim. Ld. Counsel
for the insurance company submitted that documents are unsubstantiated and,
therefore, that should not be
the basis for awarding interest at the rate of 14% per
annum.
In the complaint, complainant
has claimed Rs.3,63,35,861.96 along with interest @
18% p.a. Further, it has also produced on record the statement of Bank of
Baroda from where it has taken loan.
That statement reveals that complainant was paying interest at the rate of 13.25% with
monthly rests which annually comes to 14.35%.
Further, the complainant, at present,
is required to pay interest at the rate of 15.77% per annum to the
Punjab National Bank, the complainant is entitled to have the reimbursement of
the loss suffered by it at least at the
rate of 14% per annum.
The Insurance
company is, therefore, directed to pay the said amount
w.e.f. 1.12.2003 i.e. after six months from the date of the fire. Considering
this aspect we direct the insurance company to reimburse the complainant for a
total sum of Rs. 1,40,25,745/- with interest at the
rate of 14% per annum from 1.12.2003.
The insurance company would adjust the amount of Rs. 1,00,00,000/-
paid by it to the complainant on the basis of the interim order passed by this
Commission on 23.08.2006.
The complaint is allowed to
the aforesaid extent. There shall be no
other as to costs.
Sd/-
..…………………………………………
(M.B. SHAH, J)
PRESIDENT
Sd/-
……………………………………………….
(RAJYALAKSHMI
RAO)
MEMBER
Sd/-
……………………………………………….
(ANUPAM
DASGUPTA)
MEMBER
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