DADA SILK MILLS & ORS. vs NEW INDIA ASSURANCE CO. LTD.

The appellants/complainants obtained an insurance policy from the respondent in respect of the plant/machinery and accessories installed and the stock furniture and fixtures kept in their factory at 45-46, Hashimi Estate, Near Jivan Jyot Cinema, Surat for the period from 01.07.2001 to 30.06.2002. The total sum got assured by the appellants/complainants was Rs. 9,25,00,000/-. On 02.03.2002, fire was seen coming out of the factory premises of the complainant. The fire brigade was informed and the fire was extinguished by them. The appellants/complainants submitted a claim of Rs. 20270685/- to the insurer, comprising Rs. 13179826/- towards the value of the grey cloth, Rs. 5045048/- towards value of the semi processed cloth, Rs. 8,78,000/- towards value of the screen frames, Rs. 562404/- towards value of slotted angle racks and Rs. 605406/- being the excise duty claimed by the department on the stock. Sh. Aspi Ghadiyali was appointed as the spot surveyor followed by appointment of M/s Parimal R. Shah & Company as the final surveyor. M/s Parimal R. Shah & Company vide their report dated 15.10.2002, assessed the loss to the complainant at Rs. 12914000/-. The surveyor at that time did not take into account, the stock which the complainants had allegedly received from third parties, for the purpose of screen printing and was lying in its factory for more than six months. The complainants therefore, were not satisfied with the assessment made by the surveyor. A joint meeting was then held to address the grievances made by the complainants in this regard. Thereafter, the surveyor submitted an additional report dated 25.02.2003 taking into account the fabric which they had left out earlier, and assessing the loss to the complainants at Rs. 16864000/-. The case of the complainants is that though they were not satisfied even with the revised assessment made by the surveyor, they agreed to accept a sum of Rs. 16914000/-. However, the insurer paid only a sum of Rs. 10239053/- to the complainant vide cheque dated 22.12.2003. On receiving the cheque, the complainants/appellants vide letter dated 22.12.2003, demanded the balance amount of Rs. 6774947/- stating therein that they had agreed to accept Rs. 16914000/- as per their consent letter dated 17.02.2003, but had been paid only Rs. 10239053/-. Since the insurer failed to comply with the aforesaid letter of the complainant dated 22.12.2003, the complainants approached the concerned State Commission by way of a consumer complaint.

The complaint was resisted by the insurer. It is inter-alia stated in the reply filed by the insurer that the furniture and fixtures were under insured by 75.76% and the slotted angle racks fell under the category of furniture and fixtures and not under the category of machinery. As regards the stock, it is stated in the reply that there was under insurance to the extent of 19.61% as worked out by the surveyor and under the circumstances, the net loss to the complainant for the fabric was assessed at Rs. 9598566/- after making deductions for the salvage value and the under insurance. There was also a policy excess of Rs. 10,000/-. Thus, according to the opposite party, the total amount payable to the complainant came to Rs. 10244566/- comprising 5,50,000/- for damage to the machinery, Rs. 106000/- for damage of/loss to the furniture and fixtures and Rs. 9598566/- for loss of/damage to the stock.

Vide its order dated 24.08.2011, the State Commission dismissed the complaint finding no deficiency on the part of the respondent in rendering services to the complainants. Being aggrieved, the complainants are before us by way of this appeal.

The State Commission, while dismissing the complaint, took the view that the complainants had accepted the amount of Rs. 10244566/- in full and final settlement of its claim without any demur and protest and that the protest letter to the insurer was sent after a gap of 8 months. On a perusal of the record, we find that a factual error has been committed by the State Commission in taking the aforesaid view. A perusal of the cheque issued by the insurer to the complainants shows that the said cheque was issued on 22.12.2003. The complainant wrote a letter to the opposite party/insurer on the same date, which the insurer received on 23.12.2003. It was

expressly stated in the said letter that the complainants had given consent for settlement at Rs. 16914000/-, as per their consent letter dted 17.02.2003, a copy of which was appended to the letter dated 22.12.2003. The insurer was expressly requested to release the balance amount of Rs. 6774947/-. Therefore, it can hardly be disputed that the cheque of Rs. 1023953/- was accepted under protest and not without demur or protest as inferred by the State Commission. To this extent, the view taken by the State Commission cannot be sustained.

Though according to the insurer, the surveyor had reported under insurance to the extent of 19.61%, as rightly pointed out by the learned counsel for the complainant, no such under insurance was actually reported by the surveyor.

The complainant claimed reimbursement in respect of slotted angle racks under the category "machinery". We are in agreement with the learned counsel for the insurer that the slotted angle racks which are primarily meant for storage of goods, cannot be said to be either machinery or its accessories. Therefore, the slotted angle racks would fall under the category of furniture and fixtures and not under the category of plant/machinery and accessories. However, there is nothing in the report of the surveyor to indicate that there was under insurance in respect of the furniture, fixtures and fittings. The insurance cover to the extent of Rs. 5 lacs was taken in respect of furniture, fixtures and fittings. The value of the slotted angle racks was assessed by the surveyor at Rs. 449921/- inclusive of labour charges. There is no material in the report to show that the aggregate value of the furniture, fixtures and fittings installed in the factory premises was more than Rs. 5 lacs. In the absence of such a material, it would be difficult to say that there was under insurance in respect of furniture, fixtures and fittings.

As far as the claim in respect of screen frames is concerned, the learned counsel for the complainant submits that these frames go inside the machine for the purpose of dyeing and twisting the grey fabric. Therefore, in our opinion, they will be termed as accessories to the plant/machinery. Since there was insurance cover of Rs. 3,50,00,000/- in respect of plant and machinery and accessories, no element of under insurance is involved as far as reimbursement in respect of the screen frames is concerned.

The description of the insured property as given in the insurance policy reads as under:

Sr. No. Description of Property Sum Insured (In Rs.)

1 Stock In Process 2,40,00,000

2 Plant/Machinery and Accessories

Machinery and Accessories 3,50,00,000

Complete Unit of D.G. Set 30,00,000

Influent Treatment Plant 5,00,000

Water Treatment Plant 5,00,000

3 Furniture, Fixtures and Fittings 5,00,000

4 Category I Stocks

Stock in Trade &/Or In Process i.e. Property of Insured Pertaining to Hisbusn or Occupation. 2,40,00,000

Colour Chemicals Stocks 50,00,000

Total Sum Insured (In Figures) : Total Sum Insured (in words) : RUPEES NINE CRORE TWENTY FIVE LAKH ONLY

Rs. 9,25,00,000

It would thus be seen that insurance cover of Rs. 2,40,00,000/- at serial no. 1 was restricted to the stock in process. It would also be seen that the category I Stock at serial no. 4(1) could be either stock in trade or the stock in process. It could also be partly stock in trade and partly stock in process. However, the stock covered under clause 4(1) can only be the stock owned by the insurer and pertaining to its business or occupation. The stock owned by a third party, in our opinion, is not covered under clause 4(1) as extracted hereinabove. The stock owned by a third party cannot be said to be the property of the insured. However, as far as the stock at serial no. 1 above is concerned, that could be the stock belonging to the third parties since the policy did not qualify the stock in process at serial no. 1 by linking it to the ownership of the insured.

The learned counsel for the insured has drawn our attention to clause 5 of the above exclusion contained in the insurance policy which to the extent it is relevant provides that the policy does not cover loss, destruction or damage to the goods held in trust, unless otherwise expressly stated in the policy. His contention is that only the stock owned by the insured irrespective of whether it was the stock in process or the stock in trade was covered under the insurance policy and the third party stock of any nature whatsoever was not covered. The insurance cover under clause 4(1) has been expressly restricted to the stock in trade and/or in process which is the property of the insured, but there is no such qualification attached to the ''stock in process'' mentioned at serial no. 1 in the insurance policy. On a conjoint reading of the aforesaid two clauses, it appears to us that the insurer expressly insured the entire stock in process to the extent of Rs. 2.40 crores irrespective of its ownership, but the coverage under clause 4(1) was restricted to the stock whether in trade or in process belonging to the insured. Therefore, the complainants, in our opinion, will be entitled to reimbursement in respect of the entire stock in

process irrespective of whether it was owned by it or it was owned by the third parties. However, as far as stock in trade is concerned, the complainants/appellants, in our opinion, are entitled to reimbursement only in respect of such stock which was owned by it. In other words, the complainants will not be entitled to reimbursement in respect of stock in trade i.e. unprocessed stock belonging to third parties but kept in their factory premises at the time the fire took place.

On a perusal of the survey reports, we find that the value of semi-processed clothes which got damaged/destroyed due to fire was Rs. 5045048/-. The complainants, in our opinion, are entitled to reimbursement of the whole of the said amount, subject of course to deduction of salvage value and the policy excess amount. We also find that though the complainants had valued the grey cloth i.e. the stock in trade at Rs. 13179826/- they later on gave up the claim to the extent of (Rs. 6048133/- - 3958621/-) Rs. 20,89,512/-. If the aforesaid amount is deducted from the initial claim of Rs. 13179826/- in respect of grey cloth, the balance amount comes to Rs. 1,10,90,314/-. The complainants would be entitled to reimbursement to the extent the said grey cloth was owned by them.

We find that the surveyor did not go into the question as to how much of the grey cloth i.e. unprocessed cloth lying in the factory of the complainants at the time the fire broke out, was owned by the complainants and how much of it was owned by the third parties. Since the ownership of the grey cloth can be easily verified from the account books of the complainant, we are of the opinion that the insurer should either appoint a new surveyor or ask M/s Parimal R. Shah & Co. to ascertain the extent to which the unprocessed grey cloth, lying in the factory of the complainants at the time of fire, was owned by the complainants and to what extent it was owned by the third parties. The complainants should be reimbursed the value of the grey cloth to the extent it was owned by them after making deductions for Rs.20,89,512/-, that being the amount given up by them during the evaluation of the claim.

For the reasons stated hereinabove, the appeal is disposed of with the following directions: i. The appellants/complainants are entitled to a sum of Rs. 5,60,000/- towards value of affected 2000 screen frames.

ii. The complainants are held entitled to Rs. 449921/- towards value of the slotted angle racks including labour charges.

iii. The complainants are held entitled to Rs. 5028427/- (5045048 - 10000 - 6621) as value of the semi-processed cloth.

iv. The complainants shall be entitled to value of the unprocessed grey cloth to the extent the said grey cloth was owned by them at the time fire broke out in the factory.

v. The insurer shall either re-appoint M/s Parimal R. Shah & Co. or appoint a new surveyor to assess the value of the unprocessed grey cloth lying in the factory of the complainant, to the extent the said grey cloth was owned by the complainants. The said appointment shall be made within six weeks from today. The value of the grey cloth in terms of this order shall be assessed within six weeks thereafter. The payment for the balance amounts, if any found payable to the complainants, shall be made within four weeks from the receipt of the report of the surveyor.

vi. The complainants/appellants will also be entitled to interest @ 10% per annum on the balance amount if any found due to it in terms of this order, with effect from six months from the date of the lodgment of the claim till the date of actual payment.