NATIONAL PROCESSORS vs National Insurance Company Ltd.

THE National Commission vide order dated August 6, 1996 in appeal "M/s. National Processors v. National Insurance Co. Ltd." remanded the case to this Commission for de novo disposal after allowing both the parties opportunity to adduce such further evidence oral as well as documentary which they may wish to produce. It was further observed that the question of loss said to have been suffered by the insured as a result of burglary also required to be examined in a more detailed manner. Earlier, the State Commission vide order dated September 22, 1993 had dismissed the complaint, holding that the claim was repudiated by the Insurance Company bona fide and the complainant must fail to seek redressal with summary jurisdiction of the Consumer Protection Act. Thus, after remand both the parties were called upon to produce additional evidence. THEy have produced affidavits and documents.

THE complainant, National Processors, Amritsar is engaged in the business of processing of yarn, finishing of shawls etc. by undertaking job work for local manufacturers. THE complainant had taken two insurance policies from National Insurance Company. One in 1989 for Rs. 4 lacs, the period of that policy was from September 28, 1989 to September 27, 1990. THE other was for Rs. 1 lac for the period January 12, 1990 to January 11, 1991. "THE stocks in trade pertaining to business of cloth and yarn or shawls or similar property held in trust by the insured and raw material and chemicals at Banke Behari Land, Batala Road, Amritsar as stored or lying in the factory were covered under the policy for loss or damage by fire, burglary. Likewise the stocks of yam, dyes and the chemicals and all kinds of described goods in trust as well as stored or lying in the insured''s premises, built up of first class construction at Banke Behari Lane, Batala Road, Amritsar were insured. On the night intervening 4th and 5th of March, 1990, burglar took place in the factory premises. THE Insurance Company was promptly informed and so was the police on March 5, 1990. Copies of the report lodged with the police and its translation, Annexures ''A'' to ''C'' were produced. About 2400 Shawls and 350 kgs. of woollen thread was alleged to have been taken away by the miscreants. THE complainant claimed Rs. 3,28,047/- on account of loss of 2460 shawls and Rs. 73,561.74 for loss of 354.300 kgs. of yarn, as per list of articles Annexure ''D''. THE claim form submitted by the complainant to the Insurance Company is Annexure ''E''. THE Insurance Company appointed M/s. S.S.B. Surveyor and Consultant Pvt. Ltd., Chandigarh as Surveyors. A detailed survey was conducted on March 7, 1990 at the factory premises. Several documents were called, which were supplied to the Surveyors as per Annexures T'' to ''K''. Copy of the list of documents furnished to the Surveyor is Annexure ''L''. In November, 1990, the complainant was again asked to furnish duplicate copies of some of the documents which were again furnished as Annexure ''M'' & ''N''. THE police had filed the case as untraced vide report dated August 1, 1990, which was also submitted subsequently. As per information, the Surveyors had submitted the report but instead the Insurance Company appointed D.C. Sharma, Integrated Security Corporation of India, Chandigarh on January 22, 1991, who visited the factory premises and sought further information all over afresh. He was also supplied necessary documents, Annexures ''S'' to ''GG''. Mr. Sharma twice visited the factory premises in January and April, 1991. He demanded further information, which was again supplied. THE complainant continued visiting the office of the Insurance Company but the claim was not settled. Legal Notice in February, 1992 was issued to the Insurance Company through Advocate but to no effect. THE complainant had to settle with his customers and had to borrow money from the Bank at a greater interest and he suffered a sum of Rs. 3 lacs as damages on account of loss suffered, mental torture, harassment and humiliation etc. Thus he filed the complaint before the District Forum, Amritsar claiming Rs. 4,16,008.71 as price of the goods plus interest to the tune of Rs. 2.25 lacs on account of delayed payment @ 24% p.a. interest and a sum of Rs. 3 lacs on account of loss suffered in business, mental discomfort, harassment etc. Costs of" Rs. 11,500/- of the complaint were also claimed. The Insurance Company contested the complaint ''inter alia pleading that the claim filed by the complainant was repudiated vide their letter dated May 21,1992 that on verification, it was found that no claim was payable. Thus, it was not open to the District Forum to reopen the matter. On merits, it was pleaded that firstly M/s. S.S.B. Surveyor was appointed to survey the loss and thereafter M/s. Integrated Security Corporation of India was appointed to investigate the claim who had submitted a detailed report, rejecting the claim. Thus, there was no deficiency of service. It was also denied that this was the case of unfair trade practice. There was no inordinate delay in assessing the loss and rejecting the claim. The delay occurred on account of the fault of the complainants themselves, who did not submit necessary documents to the Investigator as would be apparent from the report of Investigator. It was admitted that the two policies were issued by the Insurance Company, one for Rs. 4 lacs and the other for Rs. 1 lac. It was denied that any information was received regarding the alleged burglary. Lodging of First Information Report was admitted. The theft of shawls and woollen threads as per details given in the complaint was denied as having been taken away by the miscreants. It was alleged that the complainants themselves have removed these goods to commit fraud with the Insurance Company to get the payment on the basis of false claim. It was however, admitted that the claim was lodged with the Insurance Company. Correspondence between the complainant and Surveyors and Investigators was broadly admitted, however, it was stated that the complainants did not furnish the requisite information asked for. It was denied that assurance was given to settle the claim. It was also denied that the claim was withheld with an ulterior motive. The entire basis of rejection or repudiation of the claim was the report of the Investigator, Annexure R-2. The burglary was not proved nor the loss. Alternatively in para 16, it was pleaded that loss if any occurred was only to the extent of Rs. 1,83,170/- as per report of the Surveyor. Even that was not proved. Both the parties produced their evidence on affidavits and documents. As already stated even after remand, additional evidence was produced. An opportunity of cross examining Sham Sunder & Piare Lal, whose affidavits have been produced, was also allowed, whose affidavits had been produced before remand.

Three questions are required to be considered in this case arising out of the pleadings of the parties and the evidence produced : 1. As to whether delay in settlement of the claim, per se amounts to deficiency in rendering service on the part of the Insurance Company? 2. Whether repudiation of the claim made by the Insurance Company is illegal?'' 3. How much compensation, if any, the claimants are entitled to?

QUE. 1. The burglary took place on the night of 4th and 5th of March, 1990. The Insurance Company was informed about the occurrence on March 5,1990 and immediately claim was also lodged. S.S.B. Surveyor submitted their report (Annexure R1) on September 24,1990. Inspite of that, the Insurance Company did not settle the claim rather appointed another person as Investigator, who submitted the report on May 3,1991. Finding doubt in the matter of burglary, ultimately repudiation of the claim was made by the Insurance Company on May 21,1992. This is a case where delay of two years in repudiating the claim per se amounts to deficiency in rendering service on the part of the Insurance Company. When Ex. R-l, report was made by S.S.B. Surveyor on September 24, 1990, accepting the story of commission of burglar)'' and assessing the loss suffered by the complainants at Rs. 1,83,170/-, there was no occasion for the Insurance Company to appoint a Second Surveyor in the garb of an Investigator. In para 6 of the report, the Surveyors referred to their visit to the factory premises having taken photographs of the cement lattice and broken lock of the factory. One cement sun shade was also found broken with its broken material missing. The police was also informed and thus it was opined "Thus there was physical evidence of forcible entry in the insured premises." Para 6.3 also refers to the position found at the time of survey. The height of the cement lattice noticed was 9'' -10''. It was broken from outside to make some space for entry. Broken piece of cement lattice was lying outside the premises. Further sun shade of window facing the street was also found broken. In the office room, all things were lying scattered. Telephone instrument was found broken and an attempt was made to open the steel Almirah unsuccessfully. No finished shawls were found in the factory, which were reported to have been taken by the miscreants. The Surveyors also verified the facts of loss from the stock registers maintained for job work done. The register was checked with the Challan Forms prepared. Since, no specific evidence of rates of the articles could be produced by the complainant before the Surveyor, whatever material was available, on that basis the loss was assessed as stated above. Section 64UM(G)(3) of the Insurance Act provides for appointment of Second Surveyor under orders of the Controller of Insurance Company as defined under Section 2(5)(B) of the Act. There is no material produced on the file by the Insurance Company that any such permission was taken to appoint the Second Surveyor though described as an Investigator. Learned Counsel for the Insurance Company argued that the duty of the Surveyor was only to assess the loss suffered whereas proof of loss suffered was not required to be collected by the Surveyor. In other words, as to whether any burglary had taken place, the first Surveyor appointed was not required to investigate and make a report. There is fallacy in this argument. The object of appointing Surveyor is to determine the loss, if any occurred and to assess the compensation payable. These functions cannot be separated. Rather they are co-related. It is the primary object of every Surveyor first to find out the loss if any suffered. It is only there after that the question of assessment of compensation would arise. The practice on the part of the Insurance Company to go on appointing Surveyors one after the other till someone makes a report in their favour has already been depricated on the judicial side. In this context, reference be made to decision of the Rajasthan State Commission in Virendra Chaudhary v. United India Insurance Company Ltd. & Anr., III (1996) CPJ 154, where the provisions of Section 64UM(G)(3) were referred to and it as observed that the Insurance Company could not itself go on appointing one Surveyor after the other. Before going to the next question, it may be observed that no reasons were put forth by the Insurance Company for not accepting the S.S.B. Surveyors report, Annexure R1 and appointing another Surveyor/Investigator. Annexure R3 is the repudiation letter dated May 21,1992. This was after the complaint was filed, though notice of the complaint had not been served upon the Insurance Company. As far as the complainant is concerned, he had no knowledge of this repudiation letter by the time he filed the present complaint. No reasons are recorded in this letter for repudiating the claim. Only the factum of repudiation of the claim by the Authorities was communicated. It is only at the time of arguments that it is asserted that the basis for repudiation of the claim was the report of the Investigator, Annexure R2. This report is by Integrated Security Corporation. One of the reasons recorded therein is that the complainant had failed to produce the other partners to support the version that the stocks in question were lying in the shed on March 4,1990 at midnight before they left the factory for their houses. It may be observed that all the partners were no required to prosecute the claim before the Investigator. It is not the quantity of the evidence that is material but it is quality of evidence. There is no law that evidence of one person cannot be accepted. Likewise, the question as to whether the factory worked in two shifts or one is of no consequence more so when it has been explained that it worked for two shifts whereas the partners had left the factory premises at 5.00 p.m. after closing the office. The finding arrived at that only one shift worked and thereafter there was sufficient time after 5.00 p.m. to enable the partners to remove the entire stock from the factory is basis on conjectures. The Investigators also noticed that it was improbable for the miscreants to remain within the factory after entering for a period of about four hours and 7/8 miscreants were not expected to carry the entire stock on heads. These are all conjectures. It was not expected of the owners of the factory to lead evidence with respect to the manner and modes adopted by the miscreants in taking away the stock goods finished or unfinished. It was upto them to carry the goods in any of the vehicles if any with them. Simply because, owner who was not present on the spot at the relevant time and obviously could not state with regard to mode of conveyance used is no ground to desbelieve him regarding loss. Likewise, other matters that the lattice gap was only 2'' x 1.9'' could not be considered a suspicious circumstance that the persons could not enter therefrom. The report of the Investigators concluding that no burglary was committed and that the insured himself had removed the stocks and then created false evidence in the circumstances of the case, cannot be accepted being based on conjectures and surmises. There were indications that the miscreants had entered the factory premises from the opening in the cement lattice as is shown in different photographs produced after remand of the case, Exs. PW 1/1 to 13. Specific reference be made to photographs No. 1, 2 and 4 showing opening by removing one block of lattice and placing it on the ground as shown in photograph No. 1. They could climb upto lattice as per assistance of the projection of the window, which was also broken in this process. The broken material is shown in this photograph lying on the base. The broken lock was also produced, which was inside the gate, which was opened by the miscreants at the time of leaving the factory. Other photographs No. 7 and 12 depicted the mishandling of the articles in the office and damaging the telephone etc. and the furniture. Photograph No. 11 also shows throwing of two attachi cases after unsuccessful attempt to open the same and causing damage thereto. These photographs were taken on the spot by the first Surveyor.. Photograph No. 5 shows the door which was forcibly opened to get the release of the Chowkidar from the room. It was on this evidence and on other evidence produced before the first Surveyor that he reported the actual burglary having taken place and had assessed the loss in such circumstances. The second report, which is merely in the form of an opinion on the material already discussed by the first Surveyor, cannot be said to be based on any other material collected. When there are two reports made, one in favour of the consumer can well be accepted, more so when there were no compelling circumstances to ignore the same. The present is a case where the first report being in favour of the complainant promptly made was ignored without any reasons and the subsequent repudiation, which was at a delayed stage could not be accepted. The National Commission on the question of delay in settling claim in National Insurance Co. Ltd. v. M/s. Prabhat Rubber Inds., III (1996) CPJ 85 (NC), observed in para 3 as under : "We are of the view that a period of 4 months is reasonable for the settlement of the claim by the insurer in the circumstances of the case. The date of fire being 13.5.1991, the interest @ 18% per annum a s determined by the Haryana State Commission, should be calculated from 13.9.1991 till the date of payment. This appeal is allowed to this extent with no order as to costs."

As already observed above, the other judgments on the subject relied upon by the complainants are of the State Commission in Gupta Textile Mills v. Chairman, United India Insurance Co. Ltd. & Ors., I (1995) CPJ 28; Shakun Overseas Ltd. v. National Insurance Co. Ltd., I (1995) CPJ 88 and Chuni Lal Koul v. Divisional Manager, National Insurance Co. Ltd. & Anr., II (1996) CPJ 144. The present is, therefore, a case of deficiency in rendering service on the part of the Insurance in not settling the claim within a reasonable time and just before submitting version in response to the complaint, repudiating the same. The Insurance Company took about a year''s time even to repudiate the claim after the second Surveyor / Investigator had made the report. The question is, therefore, answered against the Insurance Company and in favour of the complainant.

ALTHOUGH, sufficient evidence has been led on the affidavits by the complainant about the actual loss suffered with respect to the settlement made with the customers whose goods had been received and were stolen, it is not considered necessary to refer to the same. For the purposes of disposal of the present complaint, the report of the first Surveyor can well be accepted and complaint can be disposed of leaving the complainant, if so advised to approach the Civil Court for the remaining amount, if any due. In the summary proceedings as contemplated under the Consumer Protection Act, voluminous entries in the registers are not required to be gone into. Thus, relying upon the Surveyor''s report, it is held that the complainant is entitled to a sum of Rs. 1,83,170/-. The complainant is also entitled to interest on the aforesaid amount as he was deprived of its use for a pretty long time. The Supreme Court in New India Insurance Co. v. Adarsh Bazar Wholesale & Retail Co-operative and Consumer Store Ltd., I (1996) CPJ 286 (NC) has held that in the case of Semi-Government, Corporations and Insurance Companies, interest by way of damages should not be allowed more than @ 12% p.a. Relying thereupon, it is held that the complainant would get interest on the amount of Rs. 1,83,170/- @ 12% p.a. w.e.f. January 1, 1991 till payment, allowing about three months'' time after report was made to enable the Insurance Company to settle the claim. For the reasons recorded above, this complaint is allowed with the direction to the opposite party-the Insurance Company to pay a sum of Rs. 1,83,170/- with 12% p.a. interest thereon with effect from January 1, 1991 till payment. The complainant would also been titled to costs of litigation, which are assessed at Rs. 2,000/-. For the remaining amount, if any, the complainant may approach the Civil Court. Complaint allowed with costs.