NEW INDIA ASSURANCE CO. LTD vs Febama Agencies

TWO First Appeals (F.A. Nos. 747/2006 and 748/2006) have been filed by the New India Assurance Co. Ltd. (hereinafter referred to as the ''Appellant '') being aggrieved by the order of the State Consumer Disputes Redressal Commission, Goa (hereinafter referred to as the ''State Commission '') in Complaint Nos. 34/2000 and 35/2000 decided in favour of M/s. Lejoy Enterprises and M/s. Febma Agencies, original complainants before the State Commission and Respondents herein. Since the two appeals have arisen from the same order of the State Commission, it is decided to dispose of these appeals by a common order by taking the facts from F.A. No. 747/2006.

IN his complaint before the State Commission Respondent/Complainant who is a proprietary concern and a licensed Stockist and Dealer of various food items with its shop and godown in Febama Apartments, Taluka Ponda, Goa had contended that food stocks purchased by the Respondent were hypothecated with the Syndicate Bank as security for the advances made by that Bank to the Respondent upon production of the bills pertaining to purchase of stock which were also regularly inspected by the above said Bank. The premises including the goods therein were insured against fire with the Appellant/Insurance Company for a sum of Rs. 10,55,000 for the period from 5.1.999 to 4.1.2000 for which the required premium was paid. The mortgage clause in favour of the Syndicate Bank was attached to the insurance policy. Further, the godown belonging to the Respondent was occupied along with M/s. Lejoy Enterprises (Respondent in FA No.748/2006 herein) which was proprietary concern of Respondent ''s spouse. On 29.11.1999 at about 2.00 a.m., a fire broke out in the godown of the Respondent where various perishable edible items were stored. The Fire Brigade was notified which categorized it as a major fire and which took over one hour to extinguish. The report filed by the Fire Department and Emergency Services stated that the entire stock of cheese, butter, shrikhand, gulab jamun etc. and various other items were damaged/destroyed in the fire. The Panchnama conducted by the Police also confirmed that the godown consisting of 5 rooms along with all the items stored therein were totally burnt as also the Refrigerator and various other materials except for some Parle boxes. The damage was estimated to the extent of about Rs. 15 lakh. The husband of the Respondent also received extensive burn injuries while trying to extinguish the fire and had to be hospitalized. The Syndicate Bank as also the Appellant/Insurance Company were informed about the fire and the Appellant/Insurance Company deputed one M.N. Khandeparkar to prepare a preliminary fire survey report which also confirmed the loss. Thereafter, the Respondent appointed one Sunil Vora as Surveyor who without properly inspecting the site and without giving an opportunity to hear the Respondent ''s spouse who had been hospitalized and also without taking into account the important documentary evidence which included the report from the Fire Department and the Panchnama as also documents pertaining to inventories/stocks authenticated by Syndicate Bank, wrongly concluded that the loss was only Rs. 60,266. Later the Surveyor as well as the Appellant/Insurance Company contacted the Respondent as also the Manager of Syndicate Bank agreeing to settle the claim for Rs. 1,60,000 which was declined since the total value of the goods gutted in the fire was Rs. 2,88,000. Being aggrieved by the conduct of the Appellant/Insurance Company, Respondent filed a complaint before the State Commission requesting that Appellant/Insurance Company be directed to settle the claim of Respondent for Rs. 2,88,000 as also damages of Rs. 2,14,000 for delay in settlement of the claim leading to mental agony and anxiety with interest @ 18% per annum.

APPELLANT /Insurance Company on being served contested the allegations made by Respondent and contended that the Surveyor appointed by it had submitted a detailed survey and loss assessment report giving credible reasons for concluding that the loss caused as a result of the fire was only Rs. 70,266 and after setting off Rs. 10,000 as per policy conditions, the net loss worked out to Rs. 60,266. Appellant denied that any offer to settle the claim at Rs. 1,60,000 had been made either to the Respondent or to Syndicate Bank with whom the stocks were hypothecated. The extent of the damage to the stocks had been videotaped and a detailed investigation was carried out in which the discrepancies in the statement of stocks vis-a-vis the actual damaged stocks had been highlighted. It was also contended that the documents including Profit and Loss Account (Exhibits ''C and ''D '') were fabricated documents on which no reliance could be placed.

THE State Commission after hearing both the parties and on the basis of evidence on file, allowed the complaint by observing as follows: "At the outset, it is pertinent to note that the assessment done by the Complainant ''s witnesses is a composite opinion of a Chartered Accountant and a Chartered Engineer the latter having inspected the premises. The Complainants '' experts have considered the books of audited accounts as well as stock registers, and have certified the loss value as Rs. 15,77,789 in Complaint No. 34/00 and Rs. 2,81,830 in Complaint No. 35/00. Their report is at page C/142 onwards of the file. The said experts entered their affidavits and were also cross-examined. Their opinion remained unshaken in cross. The possibility of the presence of the stock alleged to have been destroyed cannot be considered to be abnormal on considering the annual turnover of the Complainants and further fortified by the average stock value in the three months preceding the date of the fire. No doubt, as learned Counsel for the Insurance Company pointed out that there must have been sales during the month. Conversely, there would also have been purchases of stock into the Complainants godown. Though it would be quite impossible to pin point with accuracy the value of the goods that were stocked on a particular date, one can estimate the value on the basis of an average of stock statement values of the period preceding that date. The letter from Syndicate Bank, Kavelem, dated 3.4.2000 at page C/185 stating that random stock verification was done once a month in the three preceding months and detail stock verification was made on 11.8.1999 and that the same was found to be in order ought to be given due significance in these circumstances. In our opinion, the Complainants-Consumers have shown the pre-ponderance of probability of their claim through the numerous documents and reports of experts in the field of accountancy and loss assessment. On the other hand the case of the Opposite Party-Insurance Company is based entirely on the report of M/s Sunil Vora and Associates who has opined that the loss value was Rs. 53,230 in Complaint No. 34/00 and Rs. 60,235 in Complaint No. 35/00. We have perused the report of M/s Sunil Vora and Associates in minute detail. Admittedly, the Complainants were dealing exclusively with items that were largely for human consumption and baby foods. In this backdrop, even the slightest effect of soot, smoke and water used for fire extinguishment would substantially reduce, their marketability, in fact would render them unmarketable. So also items with a short shelf lie would be rendered unmarketable in these circumstances. It appears that the surveyor Shri Vora has miread the fire report that the fire was extinguished by stamping on the fire. The fire report dated 14.1.2000 prepared by the Station Fire Officer, Ponda, does not indicate anything to this effect. In fact, the fire was categorized as "major " and the total time employed was one hour five minutes. The report further indicates that although the fire was initially brought under control, it was completely extinguished thereafter with the help of special fire fighting equipments. As stated earlier, we have also viewed the video graphic recording of the site of fire. Considering the evidence in the video graphic tapes couples with fire report and the fact that the stock comprised mainly of food items and baby foods, there is no doubt in our mind that the stock that was in the godown at the time of fire was totally destroyed and/or rendered unmarketable. The surveyor has also sought to belittle Syndicate Bank ''s statement of stock in trade and has presumed that the bank guaranteed over draft facilities to the Complainant based on false inventories. We are not inclined to accept the allegation at all. It is also on record that the Complainants were accorded a very high credit rating by the Bank which reflected on the business practices and reputation of the Complainants. "

Hence, the present First Appeal. Counsel for both parties made oral submissions. Counsel for Appellant contended that the State Commission erred in ignoring the detailed report of the Surveyor while granting compensation to the Respondent which was against the well-settled principles of law since the Surveyor ''s report is an important piece of evidence and cannot be ignored. It was further contended that in its detailed report, the Surveyor had after inspection and verification concluded that the statements of stocks declared by the Respondent to the Syndicate Bank were not accurate and a number of discrepancies had been pointed by the Surveyor who observed that the Respondent ''s accounts showed an inflated gross profit margin well above the usual permissible percentage of 3.25% which would consequently inflate the stocks shown in the records at the end of the accounting period. Further, it appeared that Respondent had suppressed sales made on cash basis which was not always possible to detect and in such a case the inventories of those items would continue to be shown in their books of accounts. Some specific instances of discrepancies were highlighted in the Surveyor ''s report, e.g. in respect of the disposal of unsold Johnson and Johnson products in bulk to another dealer in July 1999 but which continued to be reflected in the Respondent ''s inventory records by concealing the facts of disposal. Further, the Surveyor had examined all the stocks that were stored and affected by the fire and it was clear from this inspection that the fire which was not a major fire had affected only some of the stocks which had been stored and in fact, the debris and remnants on the floor comprised primarily of cartons, free samples and food items. The doors and windows were not touched by the fire which clearly indicated that the fire was not as severe so as to destroy the bulk stocks. This was confirmed by the fact that the fire was extinguished within 35 minutes. If the stocks, as claimed had indeed been destroyed, as contended, its remnants would have been present and it could not have disappeared in the fire without a trace.

COUNSEL for Respondent on the other hand challenged the bona fide of the Surveyor ''s report and the conclusions arrived at as being based primarily on contentions and conjectures and not taking into account the documentary evidence including of the Fire Service Department which certified that a major fire had occurred in which goods worth almost Rs. 3 lakh have been destroyed. Further, the Surveyor did not take into account the fact that all the items stored in the premises were edible items and even if they were partly affected by water or through seepage of oil etc. these would be rendered of no value since they could not be sold thereafter. Counsel for Respondent further pointed out that there was documentary evidence as also the affidavit of a Chartered Accountant and Tax Consultant, Shri S.P. Bhatt who had been auditing the accounts of the M/s. Febama Agencies and M/s. Lejoy Enterprises and after inspection/audit of the stock registers, had been filing the Sales Tax returns as also Income-Tax returns which were based on the quantitative details of stocks which were present in the premises. In his statement, Shri Bhatt clearly stated on oath that the balance stock at the time of the fire was around Rs. 17,40,000 for M/s. Lejoy Enterprises and Rs. 2,80,300 for M/s. Febama Agencies. Further, the audited statements were re-checked by Mr. M.R. Shenvi, Chartered Engineer and Loss Assessor who after inspecting and specifying all the items that were stocked in the premises in his report had concluded that the loss caused in the fire was @ Rs. 2,33,422.98p. The State Commission after going through this evidence as also the Surveyor ''s report rightly placed more credence on the composite reports of the Chartered Engineer and the Chartered Accountant and accepted the Respondent ''s complaint and directed the Appellant/Insurance Company to pay Rs. 2,81,830 towards the loss of the stock of insured value along with interest @ 10% per annum in favour of the Respondent.

WE have heard learned Counsel for both parties and have carefully considered the evidence filed on record. It is not in dispute that the Respondent had taken an insurance policy in respect of the godown and the goods stored therein and that a fire took place on 29.11.1999. It is also an admitted fact leading to the present Appeal that the Appellant/Insurance Company had not settled the claim as requested by the Respondent by relying on a detailed report of the Surveyor which inter alia had concluded that only some goods were destroyed in the "minor " fire and the documentary evidence produced by Respondent was not reliable. After going through the report of the Surveyor as also other documentary evidence, we are unable to accept the Appellant ''s contention. We note that the fire that took place had been categorized as a major fire both by the Fire Service Department as also the Panchnama prepared by the Police immediately after the fire. These facts have been confirmed by Shri M.N. Khandekar who was initially appointed by the Appellant/Insurance Company to inspect the premises and who prepared a report of the loss based on details of stock statements of three years which was specifically mentioned in this report. Further, since the items that were stored in the premises affected by the fire being largely for human consumption any damage caused to it not only by the fire but because of the water and the subsequent smoke and soot would also render these items unfit for sale/consumption even if these were not totally destroyed. The State Commission which is a Court of fact after seeing the videography of the premises had concluded that in fact there was very extensive damage to the stocks and we see no reason to dispute this finding of fact by the State Commission. We are also unable to accept the Surveyor ''s contention that the various statements and reports including by the Syndicate Bank are not reliable because inflated profits have been shown and goods disposed of through cash transactions have been included in the stock statements. We find that these statements have been made by the Surveyor merely on the basis of conjectures and presumptions and by summarily rejecting the report from the Syndicate Bank certifying that it had been conducting random stock verification every month as also a detailed stock verification just a couple of months before the fire incident which confirmed the statements made by the Respondent regarding the stocks which were stored and subsequently damaged. Apart from this, we note that there is also documentary evidence of the Chartered Accountant who had been filing audited accounts of the Respondent based on its inspection of stock register for filing the Income-Tax and Sales Tax Returns. A Chartered Engineer, Mr. M.R. Shenvi also inspected the premises and confirmed that the loss suffered in the fire to the tune of Rs. 2,88,000. The Surveyor has not been able to specifically counter or dispute any of these contentions. The State Commission had also carefully scrutinized these documents and had thereafter observed as follows: "At the outset, it is pertinent to note that the assessment done by the Complainant ''s witnesses is a composite opinion of a Chartered Accountant and a Chartered Engineer the latter having inspected the premises. The Complainants '' experts have considered the books of audited accounts as well as stock registers, and have certified the loss value as Rs. 15,77,789 in Complaint No. 34/00 and Rs. 2,81,830 in Complaint No. 35/00. Their report is at page C/142 onwards of the file. The said experts entered their affidavits and were also cross-examined. Their opinion remained unshaken in cross. The possibility of the presence of the stock alleged to have been destroyed cannot be considered to be abnormal on considering the annual turnover of the Complainants and further fortified by the average stock value in the three months preceding the date of the fire. No doubt, as learned Counsel for the Insurance Company pointed out that there must have been sales during the month. Conversely, there would also have been purchases of stock into the Complainants godown. "

For the reasons stated above, we agree with this conclusion of the State Commission. No doubt the report of the Surveyor is an important document and is to be relied upon unless it is contradicted by more credible evidence. In the instant case, after considering these reports, i.e. reports of the Surveyor, the Chartered Accountant and their Chartered Engineer read with the report of the Fire Service Department, we are in agreement with the order of the State Commission that there is no reason to disbelieve the latter reports vis-a-vis the report of the Surveyor and, therefore, uphold the same. The First Appeals are dismissed. Appellant/Insurance Company is directed to pay the Respondent in Rs. 2,81,830 in F.A. No. 748/2006 and a sum of Rs. 15,77,789 in F.A. No. 747/2006 along with interest @ 10% per annum from the date of filing of the respective complaints till realization and Rs. 2,500 in each case as litigation cost within six weeks from the date of receipt of this order. Appeals dismissed.