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Judgment
IT is the say of the complainant that it has constructed a cold storage building having capacity to store 95,000 quintals of potatoes for which it has obtained cold storage licence from the Department of Horticulture and Food Utilisation under Uttar Pradesh (Regulation of Cold Storage) Act, 1976. It is stated that insurance policies covering perils for the cold storage, fire risk on the building and for machinery breakdown are being taken continuously since the year 1988.
IT is submitted that before providing insurance coverage the chartered engineer/surveyor/loss assessor was engaged by the insurance company to make pre-acceptance inspection reports of the cold storage describing the nature of construction, description of chambers, description of installations, plant and machinery available alongwith status of plant/machinery with their description. Copy of the report dated 12.4.1992 is produced as annexure "D" in the complaint. On 1.7.1992 one of the two compressors working in the cold storage stopped functioning; it was found to be damaged. The damage was reported to the insurance company for settlement. On the basis of the surveyors reports dated 1.7.1992, 11.7.1992 and 12.7.1992 insurance company settled the claim for repair of the compressor under the cover note dated 29.4.1992. The compressor remained under repair upto 15.7.1992 and was installed on 16.7.1992. For this purpose, reliance is placed on report of surveyor Shri H.P. Gaur dated 20th July, 1992.
ON 17.7.1992 the complainant reported to the Branch Office of the Insurance Company that potatoes were sprouting due to rise in temperature in the chambers of the cold storage. The Insurance Company appointed one Mr.H.P.Gaur, Surveyor who had submitted his report dated 24.7.1992 confirming the damage caused to the Complainant''s cold storage. Another surveyor, named Alind Kumar deputed by the Regional Office, Jaipur had also inspected the cold storage along with Divisional Manager and Branch Manager and submitted his report dated 21.9.1992 confirming damage caused to the stocks. Again on 14.8.1992 the Ghaziabad Office of the Insurance Company appointed Mr. P.S.Lahiri, a Surveyor of M/s. V.N.Sarin and Co., who had carried out spot survey. He noted the loss caused to the cold storage and advised the complainant vide letter dated 19.8.1992 to take steps to notify all concerned for minimising loss.
IT is the say of the complainant that for minimising loss, the complainant took steps and requested the insurance company to depute their official to be present while the steps for minimising loss were being taken. It is the say of the Complainant that between 21.7.1992 to 30.3.1993 complainant had paid compensation of Rs.36,54,822/- to the depositors of stocks. Thereafter, during 1.4.1993 to 28.9.1993 complainant had also paid another sum of Rs.2,84,906/- to the depositors. The total amount of compensation paid by the complainant to the depositors came to Rs.39,39,728/-. To the surveyors M/s.V.N. Sarin and Co., the Complainant submitted details of expenditure incurred and supplied necessary information and documents demanded by the surveyors. On 11.7.1994 surveyors M/s. V.N. Sarin and Co., surveyors, prepared a report confirming that the complainant had paid a sum of Rs.39,39,728/- as compensation to the depositors of stocks. It is also contended that the complainant, with a view to minimise the loss had incurred expenses of Rs.53,000/-. Despite this, it is submitted that the Opposite Party insurance company has not settled the claim in respect of the ''deteriorated stocks of potatoes'' stored in the cold storage, damage to the cold storage building and fixture therein under the following cover notes issued by the insurance company:- (i) Misc. Provisional cover Note bearing No. 18294 dated 29.4.1992 covering all risks on stock of 80,000 bags (68,000 quintal potatoes stored/kept/lying in cold storage upto value of Rs.55,76,000/- for insurance period of 7 months covering period from 13.4.1992 to 12.11.1992; (ii) Fire Provisional Cover Note bearing No.125437/86 dated 25.3.1992 covering all risks against fire on building, plant and machinery used in cold storage, upto value of Rs.110 lac covering period of one year commencing 25.3.1992 to 24.3.1993. (iii) Misc. Provisional Cover Note bearing No.18293 dated 29.4.1992 covering all risks for the MACHINERY BREAKDOWN as per risk of the insured (complainant) upto value of Rs.7,66,000 covering insurance period valid from 13.4.1992 to 12.4.1993.
It is also submitted that complainant has incurred a sum of Rs.13,70,400/- for repairing the damage caused to the building and fixtures. In all, it is claimed that the respondent insurance company be directed to pay the loss suffered by the complainant to the tune of Rs.39,39,728/- plus Rs.53,000 i.e. Rs.39,92,728/- with interest; a sum of Rs.13,70,400/- for the damage caused to the building and fixtures; and a compensation of Rs 30 lakhs for the cold storage remaining closed during the period 1993 and 1994 due to non-settlement of the claim. It is also claimed that respondent be directed to compensate for the loss suffered by the complainant as a consequence of non-payment of hire amount to UP Financial Corporation as detailed in Annexure "N" of the complaint. On this count, the amount claimed is Rs.13,62,886/-. Rs.5 lakhs is also claimed as compensation for mental agony and harassment. Since the Insurance Company has not settled the claims, the Complainant has filed this complaint wherein it is contended that: (i). (a). Non-settlement of claims by the Opposite Party in respect of the deteriorated stocks of potatoes under the DOS policy cover would amount to deficiency in service and hence the Insurance Company be directed to make good the loss suffered by the Complainant on this account; (b). There is no substance in the contention of the Insurance Company that the Complainant had failed to establish losses suffered by it due to deterioration of stock. (c). M/s.R.K.Singhal and Co., Surveyors, has prepared their survey report on the basis of the reports submitted by the other Surveyors. Moreover, they have never visited the cold storage at any time.
IT is contended that the report is obtained by the Insurance Company for reasons best known to the concerned officers despite the specific report by the other Surveyors, i.e. Mr. H.P. Gaur, Mr. Alind Kumar, who though did not specify the damage suffered by the Complainant in terms of money, but confirmed in their reports the damage caused to the Complainant''s cold storage. Thereafter M/s.V.N.Sarin and Co. had assessed the loss at Rs.32,76,672/-. Mr. Sarin was asked to give another report so that the amount could be reduced, and he has given the second report, after a lapse of three years, by reducing the amount to Rs.18,88,064/-. Still, the Insurance Company, for the reasons best known to them, obtained a third report from him wherein he had stated that the Complainant has suffered a loss of Rs.9,09,499/-. (ii). Non-settlement of claim by Opposite Parties in respect of the damage to the cold storage building under the fire policy cover is illegal. It is contended that the damage to the building and fixtures was not taken into account by the officials of the Insurance Company though the same was to be indemnified by the Opposite Parties as per the terms of the Fire Policy-C. (iii). It hardly lies in the mouth of the Insurance Company and is wholly unjustified to contend that even though it has accepted the premium and has issued the cover notes, but as the policies were not issued, the Insurance Company is not bound to reimburse the losses suffered by the Complainant. Contentions of the Insurance Company: (i). The amount claimed by the Complainant is neither supported by any books of account, vouchers or other reliable records. (ii). The claim is fraudulent for the following reasons:
(a). It is the say of the Complainant that it has raised loans from the friends and relatives for running the business. Though this statement is supported by the balance sheet of the Complainant but when the Surveyor has verified the records of the Registrar of Companies he found no balance-sheet being tendered by the Complainant since its inception. (b). The insured has not followed the condition of maintaining temperature in the chambers. As per the exclusion clause if, in any chamber, temperature exceeds 40o F, then only Insurance Company is liable to compensate for the loss suffered by the insured. (iii). (a). It is contended that the stock was under valued by incorrectly stating the market price of potatoes at Rs.82/- per quintal as against its market price of Rs.170/- per quintal. This was to save the premium. (b). Loading capacity of the cold-storage is 97,675 quintals, but insurance coverage was taken for 68,000 quintals to save the premium. (c). There are other violations of the conditions of the policy; (c). For consequential loss, the Complainant has not taken any policy; (g). Risk regarding wooden structure, building, plant, machinery and accessories not covered by the DOS Policy.
Admitted facts: The following facts are admitted by the Insurance Company: (a) As per the insurance policy, the Insurance Company was to indemnify the insured in the manner and to the extent for the damage caused to the stocks described in Schedule II by contamination and/or deterioration, putrefaction, as a result of rise in temperature in the refrigeration chambers caused by any loss of or damage due to an accident to the plant and machinery specified in Schedule I and indemnifiable under the Machinery Insurance Policy in force. (b). The Complainant was taking insurance cover regularly from the year 1985. (c). The Complainant has taken three insurance policies, namely, the Deterioration of Stock (DOS) Policy; the Machinery Breakdown Policy and the Fire Policy (d). Reports of the Surveyors appointed by the Insurance Company:
(i). Mr.H.P.Gaur submitted his report on 24.7.1992, (ii). Mr. Alind Kumar submitted his report on 21.9.1992, (iii). M/s. V.N. Sarin and Co. submitted report on 11.7.1994: (a) and assessed the loss at Rs.32,76,672/- (b) 1st Addendum was issued by him on 4.2.1995 for Rs.18,88,064/-; (c) 2nd Addendum was issued by him on 7.9.1995 for Rs.9,09,449/-. (iv). Mr. R.K. Singhal who was appointed by the Head Office of the Insurance Company, New Delhi, submitted his report on 30.4.1995 and assessed the loss at Rs.4,05,711.25. However, prior to that the Complainant had filed this petition on 7.8.1995. Reports Submitted by Surveyors: (a) Report of Mr. H.P.Gaur, Surveyor:
FOR appreciating the contentions raised by the parties, we would refer to the report dated 24th July 1992 submitted by Surveyor, Mr. H.P.Gaur. He has referred to the damage/loss caused to the compressor on 1.7.1992. For this, the total sum insured is Rs.7,66,000/- and for the two compressors, in all Rs.3 lakhs, i.e. Rs.1.5 lakhs each. For the net loss to the compressor assessment was Rs.15,900/-. Thereafter, on 17.7.1992 Complainant has informed the Branch Manager of the Insurance Company that sprouts have come up over the potatoes in the cold storage and it is reaching a very bad condition. Therefore, a request was made to take early action. For this purpose, Surveyor, Mr. H.P.Gaur visited the site and carried out the survey on 20th July, 1992. He has verified and found that in all the three chambers 80,343 bags of potatoes were stored and as per final position on 20th July, 1992, it was found that in all, there were 29,074 bags in chamber No.1, 18,490 bags in Chamber No.2, and 26,702 in Chamber No.3, totalling to 74,266. As chamber No.3 was badly affected, it was difficult to remove the bags as foul smell had developed on account of deterioration/decomposition/contamination of rotten potatoes. After considering the details, he has arrived at the following conclusions: "(a) Chamber No.3: It seems 85 to 90% bags are deteriorated/damaged in Chamber No.3. Deterioration will continue faster every hour/day. The potato bags must be taken out soon for claim minimisation. Wooden racks are likely to be affected/damaged. (b) Chamber No.2: It seems nearly 6,000 bags are damaged/deteriorated in quality. (c) Chamber No.1: Nearly 5,000 to 6,000 bags seem to have been affected/damaged/deteriorated in quality. It seems that bags in Chambers No.1 and No.2 may be more affected/damaged/deteriorated in stages and speed may be faster because of high deterioration in Chamber No.3. Sprouting was visible. (d) The insurance cover had been granted for all the three chambers, having six tiers in each, supported and controlled by two compressors of KC4. By chance, one compressor was damaged and repaired. (e) The insured had purchased third new compressor, Super Make - 8.5" x 8.5" size for extra cooling capacity. This new compressor did not work and had to be repaired by the original manufacturers, many a time and it used to get heated up after some time".
(b) Report of E.R.Alind Kumar, Surveyor: Thereafter, there is the report dated 21st September 1992 by E.R.Alind Kumar, Surveyor. He has referred to the cover note No.2/18294 covering risk from 3.4.1992 to 12.11.1992. The sum insured in all for 80,000 bags or 68,000 quintals was Rs. 55,76,000/- @ Rs.82/- per quintal. According to him the storage capacity of the three chambers was 97,676 quintals. He has referred to the temperature chart of the three chambers wherein for Chamber No.3, there is variation of temperature after 8th July, 1992 to 19th July, 1992. It is his say that the insurance coverage ought to have been for 96,000 quintals and not for 68,000 quintals as insured. He has also observed that the insured got the stock of potatoes insured @ Rs.82/- per quintal against prevailing market rate of Rs.170/- per quintal. Therefore, damaged stock can even fetch very good salvage value. He has also observed that the Complainant was not making proper entries of all the stocks which were taken out by the cultivators. Hence, instruction was given to maintain proper exit records. It is his say that on his first visit instruction was given to employ sufficient number of labour to remove stocks from Chamber No.3 and the insured ought to have started removing the stock speedily before the situation started moving out of his control, but they did not do so.
(C) Report of M/s. V.N.Sarin & Co. Pvt. Ltd., Surveyors: (i) Next report is that of M/s. V.N.Sarin and Co. Pvt. Ltd., Surveyors. They had conducted spot survey on 14th August 1992 and issued the following instructions vide their report dated 19.8.1992: (1). To notify all the depositors whose stocks were kept within chambers No.1 and 2 to lift their stocks of potatoes as soon as possible without making any delay. (2). To issue public notices in the local news dailies; (3). To intimate the local civil authorities and the Department of Horticulture regarding the condition of the stocks of potatoes and the steps taken. (4). In case the depositors do not lift their stocks of potatoes within the stipulated period, that stock should be disposed of at their risk. (5). Entire disposal proceedings would have to be recorded in identifiable manner so as to enable them to verify the same as and when required.
We may mention here that M/s. Sarin and Co., vide their report dated 19.8.1992 has only issued the above stated instructions, but they did not assess the loss caused to the Complainant. Vide their report dated 11.7.1994 they mentioned that the estimate of loss was Rs.40 lakhs and the assessed loss was Rs.32,76,672/-. With regard to the circumstances leading to deterioration of potatoes, it has been mentioned as under:- "Our investigation and discussion with the insured revealed that on 1.7.1992 compressor No. KC 4/338 K006 all of a sudden stopped working at about 7.30 AM. At the time of stopping/functioning there was a sudden sound. The operator as well as engineer Mr. Ram Naresh Sharma, switched off the motor with a view to examine the same. They opened the motor and found certain damages inside the Compressor. Because of the failure of the compressor, the temperature within the cold storage started rising. We give below the temperature chart copied from the log book maintained by the insured."
AFTER narrating the temperature in the chamber it is observed that due to rise in temperature in chamber because of break down of one compressor, the stock of potatoes in Chamber 3 started rotting and sprouts were seen in most of the potato bags in the said chamber. It is also stated that insured had immediately started unloading chamber No.3 from 21st July, 1994 and sound stocks were sent to farmers after sorting out. As per advice of the then Director P.S. Lahiri the insured was asked to inform the owners with regard to deterioration of stock of potatoes and to lift the stocks. It is also mentioned that during the visit of P.S. Lahiri, it was observed that stock in Chamber 3 had suffered extensive damage whereas stock in chamber Nos.1 and 2 had developed sprouting and had suffered damage comparatively lesser degree as compared to Chamber No.3. With regard to the quantification it has been observed thus:- Accordingly, the value at risk at the time of loss was worked out at Rs.67,04,063/- as per following details, considering the value of the potatoes at Rs. 100 /- per quintal:- Chamber No. of bags. Quantity in bags Unit rate Amount No. Rs. Rs. 1. 30612 26061.17 Rs.100/- 26061.17 2 19326 16528.76 Rs.100/- 16528.76 3 30405 24450.70 Rs.100/- 24450.70 Value at risk at the time of loss Rs. 67,04,063 Sum insured available: Rs. 55,76,000 Extent of under insurance 16.83%" It is also stated that the insured had reported that because of non-availability of funds they were required to dispose of their property such as, jewellery, tractor, fiat car, agricultural land, shops situated at Giror and had taken considerable amount from friends and relatives. Surveyors have also verified the vouchers for making payment to the farmers. The insured was asked to produce affidavits of such farmers and the same were produced by the insured and were verified. They assessed the loss at Rs.32,75,953/- as per the details given below:-
"Chamber No. Quantity Unit rate Amount Compesnation No. of bags. in bags Rs. Rs. paid Rs. 1. 30612 26061.17 Rs.100/- 2606117 1308394 2 19326 16528.76 Rs.100/- 1652876 797933 3 30405 24450.70 Rs.100/- 2445070 1833402 67040.63 39,39,728 Less: 16.83% on account of under insurance 6,63,056 Loss due to occurrence 32,76,672/- Warranties: As mentioned earlier, the insured was maintaining only two compressors and the third compressor installed after obtaining the policy and was not put to operation because of its manufacturing defect."
THERE is a note below the report wherein it has been stated that the District Horticulture Officer had visited the insured''s cold storage premises on 23.7.1992 and had inspected the stock of potatoes in chamber No.3 and had issued certificate dated 29.7.1992 stating that the potatoes stored in Chamber No.3 were completely damaged and in chamber Nos. 1 and 2 there was some damage and steps should be taken to save the potatoes immediately. (c) (ii) 1st Addendum by M/s. V.N.Sarin and Co., Surveyors: Thereafter, insurance company obtained, for the reasons best known to it, additional report dated 4.2.1995 wherein it is stated that at the time of giving the first report following provisions of the policy were not considered and after considering the said provisions, the loss worked would be Rs.18,88,064.40:-
"1. The actual amount of sum insured which should have been taken by the insured i.e. for full capacity of the chambers intended to use. 2. Deduction of 5% on account of Shrinkage. 3. Deduction of 5% on account of rottage. 4. Deduction of 20% on account of Excess clause. After considering the above provisions, the loss would work out to Rs.18,88,064.40 as per below given details:- Under insurance aspect: The insured''s loading capacity as per pre-acceptance inspection report was 97675 quintals and the insured should have covered the stocks of potato at agreed rate of Rs.82/- per quintal for 97,675 quintals i.e. for Rs.80,09,350/-. But the insured has opted for only Rs..55,76,000 i.e. for 68,000 quintals at Rs.82/- per quintal. Therefore, the insured is under insured to the extent of 30.381%.
The value of the total quantity of potatoes involved i.e. 67,040.63 quintals ( page No. 6 of survey report @ Rs. 82/- per quintal): Rs.54,97,331.66 Less: 5% on account of shrinkage and 5% on account of rottage. Total 10% Rs. 5,49,733.17 Rs. 49,47,598.49 Less: Salvage value: Total: value of the stock Rs.54,97,331.66 Less: Compensation paid by the Insured to the farmers Rs.39,39,728.00 Rs. 15,57,603.66 Rs.33,89,994.33 Less: 30,381% on account of under Insurance Rs.10,20,914.33 Rs.23,60,080.50 Less: 20% on account of excess clause as per policy condition 4,72,016.10 LOSS DUE TO THE OCCURRENCE Rs. 18,88,064.40." (c) (ii) 2nd Addendum by M/s. V.N.Sarin and Co., Surveyors: Surprisingly, they obtained third report dated 7.9.1995 from the same surveyor and the loss assessed was further reduced to Rs.9.09.449.85. (d). Before that, the insurance company had obtained report dated 30th April, 1995 from R.K. Singhal and Co. It is to be stated that this report is totally useless and is obtained by the insurance company, for reasons unknown because the damage took place in 1992 and the surveyor was asked by letter dated 6th March, 1995 to visit the cold storage and assess the loss.
In the said report, it has been observed as under:- "Though there are number of deficiencies on the part of the Insured right from the beginning to end such as adding a new chamber without its cooling arrangement, poor maintenance in terms of turning etc, which clearly indicates that the insured had taken all steps to initiate the losses. It is clearly evident that the root cause of damage is insured''s negligence or greediness to load potatoes in additional new Chamber III without increasing proper cooling machinery for the same. Hence on strict merits the claim is not maintainable. Anyhow for the limitations of Company''s liability we are assessing the losses as under:- ASSESSMEMT Value of stock at the time of first surveyor''s Inspection i.e. on 20.7.92 Chamber I Chamber II Chamber III Total In quintals 24,712.9 15,716.5 22,696,1 63,126.1 Value in Rs. 20,26,457.8 12,88,753.0 18,61,129.4 51,76,340 Rs.82/- Per quintal Since on total stock value of Rs.67,04,063/- compensation was paid Rs.39,39,728/-, hence on actual stock value on the day of loss i.e.51,76,304.2 it comes to :- 3939728 x 5176340.2 Rs.30,41,942.24 ( Gross Loss )."
6704063 Thereafter, by adopting deductions on the basis of contributory factors, the amount was reduced to Rs.4,06,711.25 ps. FINDINGS: (a) Insurance Policy not given: At the outset it is to be stated that it is totally a wrong practice on the part of the Insurance Company not to issue insurance policy either at the time of issuing the cover note or within a few days thereafter. If the policy is not issued, it would be difficult to presume that the insured would be knowing about the conditions or exclusion clauses in the insurance policy. In the present, all the contentions of the Insurance Company are based on the policy of insurance. It is not understood how the Complainant is responsible for the lapse on his part in not adhering to the clauses of the insurance policy, when the policy itself was not supplied to the Complainant. As has been held by this Commission in a number of cases, non-supply of policy to the insured amounts to deficiency in service on the part of the Insurance Company. Further, though the Insurance Company states that it had supplied the policy to the insured, but according to the Surveyors as stated in their reports, when they asked the Insurance Company to supply the insurance policy for assessment of loss, the Insurance Company had advised them to assess the loss on the basis of the cover notes. This is also borne out from the cross-examination of Mr. J.L.Tiku, Director of M/s. V.N. Sarin and Co. In his cross-examination he has sated that they (M/s. V.N. Sarin and Co., Surveyors) were asked to carry out survey on the basis of the cover note, and no policy was supplied. He has further submitted that at that time they were informed that the policy was under preparation and that the policy was not ready till then. The Complainant, Mr.Balbir Kumar Jian, in his cross-examination, with regard to the cover note, has stated that the actual position was that a Development Officer of the Company comes to them and he receives the payment/ premium and cheque. After that he issues the cover note then and there. Thereafter, they do not read and also do not see the cover note and that is a true fact. He has stated that he has asked for the policy twenty five times. Even he went personally and made requests that the policy be given. He has also stated that Mr. H.P.Gaur, Surveyor, came to the premises on 20th July, 1992 and he took away the log book. From this, it is clear that the Insurance Company prepared the policy subsequently and therefore asked the Surveyors to assess the loss on the basis of the cover note.
(b) Delay in settling the claim and onus of proof: Secondly, it is also to be stated that the claim is required to be settled within a reasonable time, so that the purpose of insurance coverage is not frustrated and the insured is not ruined because of the perils, which was sought to be covered by the Insurance policy. In the present case : (a) except issuing the cover notes, the insurance policies were not issued till the occurrence of the peril; and (b) the claim is not settled despite Surveyors'' reports in favour of the Complainant. Further, it was the duty of the Insurance Company to settle the claim on the basis of reports of M/s.V.N.Sarin and Co., who had submitted their report on 19th August, 1992 and on 11.7.1994. Delay in settlement had adversely affected the Complainant and to some extent ruined him. Further, the Insurance Company instead of settling the claim, delayed its payment on one pretext or the other by appointing Surveyors one after another and putting the Complainant in a situation where he was required to sell his properties and make the payments to the farmers whose potatoes were stored in the cold storage. This practice of appointing Surveyors one after the other, cannot be justified. The relevant norms for ''service by insurer to the insured'', as stated in Denis Riley, Consequential Loss Insurance and Claim, 4th Edn., 1977, London, Sweet and Maxwell, at paragraph 389, are:
(i) effective protection of the interest of the insured; (ii) insurer''s duty to make diligent application of mind to the terms of the policy and the relevant materials and to accept the claim of the insured unless the insured has clear evidence of the breach of a condition on the part of the insured; (iii) onus of proof of breach of conditions by insured is on the insurer; and (iv)prompt settlement and payment of claim. For the onus of proof in Halsbury''s Laws of England, Vol.25, 4th Edn., pr.421, p.254, it has been emphatically stated as under:
"421. Onus of proof. As a general principle, the onus is on the insurers to prove that a condition has been broken, not on the assured to prove compliance on his part with each and every stipulation. It may well be that, if there is a question as to whether a contract of insurance has ever come into existence or begun to be operative, the assured has to prove the happening of any events necessary to its existence or operation, but where the question is as to the insurers'' liability under an admittedly effective policy, the rule as to the burden of proof is axiomatic in insurance law. It is open to the parties to alter this result of making an express stipulation that the onus of proof is to be on the assured, but very clear words are necessary to achieve such a result".
(c) Whether the claim is fraudulent: From the aforesaid discussion of the reports of the Surveyors, it is difficult for us to accept the contention of the Insurance Company that the Complainant''s claim is fraudulent. There is no question of fraud, because, admittedly, the compressor for the 3rd chamber was damaged and because of that potatoes stocked in the cold storage got deteriorated. Further, the Insurance Company had offered to pay Rs.4,06,711.25 ps. to the Complainant on the basis of the assessment of loss made by the Surveyors, M/s. R.K. Singhal and Co. If the claim was fraudulent or not genuine, there was no question of any amount being offered to the Complainant on account of the loss suffered by him. (d) Further, on record, the Complainant has produced the pre-acceptance inspection report dated 12.4.1992 of Mr.A.P.Bhatla, Chartered Engineer, before issuance of the insurance policy. The report, inter alia, states that the storage capacity in quintals in the three chambers was 97,676. Cooling capacity was also proper and both the compressors were inter-connected. Compressors were running smoothly. As no defects were found, details were not given. It also mentions that there was general overhauling in the winter of 1991. It has also mentioned the list of machines and they were found to be in working condition and further stated that the cold storage does not suffer from any deficiency or defect, due to insufficient machinery. There was no minus point noticed by them during the inspection.
If this report is taken into consideration, it is apparent that Mr. Bhatla found the machinery in fully working condition and no minus point came to his notice during the inspection. Thereafter, if there is break down of the machinery/one compressor, then, as per the terms of the insurance policy, the Insurance Company is bound to compensate the Complainant. (e) Practice of obtaining reports from various surveyors cannot be justified: From the reports submitted by Mr. H.P.Gaur, Mr. Alind Kumar, M/s. V.N.Sarin & Co., and Mr.R.K.Singhal, Surveyors, it is apparent that the loss was genuine. Value of the deteriorated potatoes was assessed by them at more than Rs.30 lakhs. The Surveyor, Mr. V.N.Sarin, found that Complainant was required to pay damages to the tune of Rs. 39,39,728/- to the farmers by selling jewellery, tractor, fiat car, agricultural land, shops and has taken considerable amounts from friends and relatives. In view of this, it is apparent that there is gross negligence on the part of the Insurance Company in not settling the claim within a reasonable time.
FOR the circumstances leading to deterioration of potatoes, in the report of M/s. V.N.Sarin and Co., it is further stated that investigation and discussion with the insured revealed that on 1.7.1992 one compressor had, all of a sudden, stopped working at about 7.30 a.m. At the time of stopping of functioning of the compressor there was a sudden sound. The operator as well as the Engineer switched of the motor with a view to examine the same. They opened the motor and found certain damages inside the compressor. Because of the failure of the compressor the temperature within the cold storage started rising. From the report, it is apparent that for Chambers No.1 and 2 the temperature remained below 36o F. However, for Chamber No.3 it started increasing from 8.7.1992. It is the contention of the learned Counsel of the Insurance Company that the Complainant was required to maintain temperature below 40o F in all the chambers. For this purpose, reliance is placed on exception clause which reads as under: "The company shall not be liable for (i) to (v) ". (vi). any damage if the temperature in the refrigeration chambers does not exceed 40o F (4.4o C)". Firstly, it is difficult to hold that this clause requires that the Complainant is required to maintain temperature in refrigeration chambers below 40o F. On the contrary, the grammatical meaning would be that the Insurance Company shall be liable for any damage if the temperature in the refrigeration chambers exceeds 40o F. There is another clause in the policy which requires consideration, i.e. Clause No.6 of warranties, which reads as thus:
"The insured shall take care to see that: (i) the temperatures inside the cold chambers are brought down to 34o F (1.1o C) in all the floors of all the chambers before loading commences and; (ii) further ensure that the temperature in all the chambers does not exceed 50o F (10o C) during the entire period of loading and 40o F (4.4o C) during the subsequent period of storage".
FOR this purpose, there is nothing on record to hold that when the loading commenced the temperature inside the cold chambers was not brought down to 34o F in all the floors of all chambers. Second part of the clause provides that the insured shall ensure that temperature in all chambers does not exceed 50o F during the subsequent period of loading. In the present case, non-maintenance of temperature in Chamber No.3 is directly connected with the failure of compressor. For failure of the compressor, undisputedly, the Insurance Company has paid the compensation. Hence, for the chamber No.3, the case of the Complainant is completely covered by the insurance policy as, insurance coverage is to indemnify the insured for the damage to the stocks by contamination or deterioration as a result of rise in temperature in refrigeration chambers caused by damage to the plant and machinery. For the Chambers No.1 and 2, it was contended that when temperature was below 40o F, the Insurance Company is not liable for the loss suffered by the Complainant for deterioration of potatoes. Deterioration in potatoes in these two chambers is directly connected with the rise in temperature in Chamber No.3 because of the failure of one compressor. This is borne out by reports of the Surveyors. In the cross-examination of Mr.J.L.Tiku, Director of M/s. V.N.Sarin and Co., Surveyors, to a specific question with regard to the date of accident, he replied that nobody could say the date of deterioration of potatoes because there was machinery break down and the temperature started rising in the chambers and gradually the potatoes started deteriorating. Admittedly, there is no temperature chart after 20th July, 1992, because the log book was taken away by the Surveyors of the Insurance Company. Potatoes in these chambers started deteriorating after 20th July. This would be borne out from the following observations in the report of Mr.Sarin: "The insured had immediately started unloading Chamber No.3 from 21.7.1992 and sound stocks were sent to the farmers after sorting. Other than Director, Mr.P.S.Lahiri, who visited on both the occasions to the insured''s cold storage premises advised the insured to publish in any prominent newspaper about the deterioration of stock of potatoes and request the owners to lift the stock. They were also requested to dispose of the damaged stock in case the farmers refused to take the said damaged stock. Mr.Lahiri also requested them to keep separate records for the disposal of the damaged stock. The insured, however, could not dispose of the damaged stock but had managed to deliver it to the owners and also paid them compensation for deterioration of the stock. They had completed the details of the compensation paid to the farmers. At the time of the visit of our the then Director, Mr.P.S.Lahiri, all the three chambers were inspected by him in spite of the foul smell emanating from the chambers. It was observed during the inspection that stock in chamber No.3 had suffered extensive damage whereas stock in Chamber No.1 and 2 had developed sprouting and had suffered damages comparatively lesser degree as compared to Chamber No.3".
THIS would mean that deterioration of potatoes in Chambers No. 1 and 2 started after 19th July and there is no log book after 19th July. In the report dated 19th August, 1992 by M/s. V.N. Sarin & Co., it has been stated that for Chambers No. 1 and 2, there were 6 level of racking structure and on inspection of the stocks sprouting in the potatoes in varying degrees at various pockets was observed.
IN the report dated 24.7.1992 of Mr.H.P.Gaur, who had inspected, it has been stated that he carried out survey on 20th July, 1992 and for deterioration of potatoes in Chambers No. 1 and 2 it has been mentioned that bags in Chambers No.1 and 2 may be more affected/damaged/deteriorated in stages and speed may be faster because of high deterioration in Chamber No.3 and the sprouting was visible. In the alternative, for Chambers No.1 and 2, temperature was below 40o F upto 20.7.1992, and yet, there is deterioration in the potatoes, such risk is covered by the insurance policy, because deterioration of potatoes in Chamber No.3 affected the stock in Chambers No. 1 and 2. This is because, as per the pre-acceptance inspection report, compressors for the chambers were interconnected. (d) Quantum of compensation: Next, for the alleged sale or handing over of potatoes to the owners, it is to be stated that this was required to be done on the basis of the advice given by the Surveyors to minimise the loss and to save further rotting of the potatoes. As stated in one survey report, foul smell was so much that even the labourers refused to remove the potatoes from Chamber No.3. Hence, it is to be stated that after taking all these relevant factors into consideration, V.N.Sarin, Surveyor, has assessed the loss at Rs.32 lakhs and odd.
THIS report specifically mentions that the Complainant has paid Rs.39,39,728/- to the farmers who have stored their potatoes in the cold storage. Further, the compensation paid to the depositors was after applying the factors of shrinkage, rottage and the other factors totalling over 20% and that no depositor was paid compensation at the rate exceeding Rs.65/- to Rs.70/- per quintal. Thereafter, Surveyor has deducted the amount for under insurance at the rate of 16.83% and arrived at the conclusion that the loss could be assessed at Rs.32,76,672/-. This was also done after verification of vouchers of making payments to the farmers and after taking into consideration the affidavits of such farmers. In view of the above discussion, the Complainant is entitled to the amount of Rs.32,76,672/-. However, the Complainant has claimed Rs.50 lakhs on account of loss caused to the machinery, and Rs.30 lakhs because of the loss on account of the inaction of the Insurance Company. For these prayers, we do not find any sufficient evidence to justify the same and hence reject the same.
THE Complainant has further contended that he is entitled to recover Rs.52,000/- incurred by it for minimising the damages. We do not find any evidence in support of this contention that he had spent Rs.52,000/- for removal of the stock. Conclusions: From the aforesaid discussion, it is apparent that : (i) despite giving cover notes, insurance policies were not issued to the complainant. Therefore, it would be difficult to hold that so called conditions of the insurance policy were known to the complainant and are binding; (ii) there is inordinate delay in settling the claim. The claim was filed in July, 1992 and the amount of Rs.4,06,711/- was offered by letter dated 16th November, 1995. After the first report of surveyor Mr.V.N.Sarin, there was no justifiable ground for obtaining repeated reports from him and to appoint Mr. R.K.Singhal as fourth surveyor; (iii) there is no justifiable reason for not giving the copies of the survey reports; (iv) in an admitted effective policy burden of proof is on the insurance company to establish that there was violation of conditions of insurance policy and that those conditions were known to the insured. The Insurance Company has failed to establish the same as the policies were not supplied to the insured; (v) as per the report of Mr. V.N. Sarin for the deteriorated potatoes complainant was required to pay Rs.39,39,729/- to the farmers who had stored potatoes in the cold storage. It is the say of the complainant that the said amount was paid after deducting shrinkage and valuing at about Rs.65-Rs.70 per quintal, that is to say, that the calculation for shrinkage and other deduction was taken care at the relevant time. For this, there are affidavits of the farmers verified by the surveyor. Despite this, after deducting under insurance amount Mr. Sarin recommended Rs.32,76,672/-. Thereafter, there was no justifiable ground to reduce the said amount to Rs.4 lakhs and odd; (vi) it is not expected of an insurance company to obtain one after the other survey report to suit its purpose. If the Insurance Company adopts such tactics, the purpose of insurance coverage is frustrated and insured is left unprotected from expected perils.
In the result, the Insurance Company is directed to pay the aforesaid amount of Rs.32,76,672/- with interest at the rate of 9% p.a. Interest shall run from 1st January, 1993, i.e. approximately after six months from the date of reporting the incidence of damage to the Insurance Company by the Complainant. It is pointed out that pending disposal of this complaint before this Commission, the Insurance Company was directed to pay the admitted amount of Rs.4,06,711.25ps. with interest. In compliance with the directions, the Insurance Company had paid to the Complainant on 27.8.2001 a sum of Rs.7,40,360/-.
IN this view of the matter, we direct the Insurance Company to pay to the Complainant Rs.32,76,672/- with interest at the rate of 9% p.a. from 1.1.1993 till the date of payment, after debiting the amount paid to the Complainant. That is to say, the Complainant is entitled to the amount of Rs.32,76,672/- with interest at the rate of 9% p.a. from 1.1.1993 till 27.8.2001 plus interest @ 9% on the remaining amount of Rs.28,65,961/- (Rs.32,76,672/- minus Rs.4,06,711/-) from 27.8.2001 till the date of payment. The complaint stands disposed accordingly. There shall be no order as to costs.