New India Assurance Co. Ltd. vs H.S. Poultry Farm

BOTH the appeals, referred to above, are being decided together inasmuch as they arise out of same judgement and order rendered by the Punjab State Consumer Disputes redressal Commission, (for short, "the State Commission") in complaint case no. 64/2002. First Appeal No. 149 / 2007 is preferred by the New India Assurance Co. Ltd. and Anr. The appellants in that appeal will be referred to hereinafter as "insurers". They are aggrieved on account of award of compensation to the original complainant " M/s. H.S. Poultry Farm, Kartarpur. The latter has preferred First Appeal No. 87 / 2007 seeking enhancement of the rate of interest and that too from the date of repudiation of the claim by suitable modification of the impugned judgement.

THERE is no dispute about the fact that complainant " M/s. H.S. Poultry Farm, Kartarpur had insured two flocks of broiler parent birds. One of the places of poultry farm was at Canal Colony, Banga Road, Gharshankar. That poultry farm had housed 8850 poultry birds. Another flock of 9103 birds of tender age, approximately 10 days, was housed at another poultry farm in Sarai Khas. There is no dispute about the fact that the complainant had obtained insurance policy in respect of the two poultry farms mentioned above for period of 72 weeks vide Policy No. 4735080001220. Consolidated premium of Rs.2,35,634/- was paid by the complainant on 17.03.2000. It appears that the complainant owned five (5) different poultry farms at different places, during the relevant period, though he had obtained insurance cover only for the two of such poultry farms. It also appears that the tender aged birds kept at Sarai Khas poultry farms were housed for the purpose of hatchery. The birds kept at the poultry farms situated in the locality of Canal Colony, Banga Road, Garhshankar were aged about 25 weeks and were on the verge of attaining age of laying of eggs.

The case of the complainant as unfolded before the State Commission was that the flock of birds at the poultry farm in Canal Colony, Banga Road, Garhshankar was required to be shifted to poultry farm situated at Kartarpur. Therefore, necessary information about shifting of the birds was given to the insurers by letter dated 4.4.2000. The insurers acknowledged receipt of the said letter on 6.04.2000 and endorsed the policy accordingly. The birds shifted from the poultry farm at Canal Colony, Banga Road, Garhshankar which were 8850 in number to the H.S. Poultry Farm, Kartarpur were thus covered by the insurance policy. Unfortunately, the birds at the poultry farm at Kartarpur were infected due to disease and reportedly mortality started on 05.04.2000. The complainant gave information to the insurers on 7.04.2000 about death of birds. There was loss of 4550 birds due to epidemic disease between 5th April to 8th April 2000. The insurers appointed a surveyor to assess the loss. The surveyor perused the relevant record and made assessment of the loss at Rs.11,92,140. The insurers did not accept the report of the surveyor. The claim was not settled. The complainant issued demand notice on 23.05.2002 but it was in vain. The complainant, therefore, sought compensation of Rs.16,78,765/- inclusive of the pecuniary and non-pecuniary damages and claimed interest @18% p.a. on that amount. By filing written statement, the insurers resisted the claim. The insurers alleged that the birds at Garhshankar poultry farms were already shifted on 4.4.2000 before the due endorsement was made on the insurance policy to allow such shifting of the birds to the new place. The insurers alleged that the information letter dated 4.4.2000 was reached to them on 6.04.2000 but prior to that so-called shifting was made. It was before such endorsement of the insurers that the mortality had started on 5.04.2000 itself. The insurers pointed out that on the very next day of such endorsement, i.e., on 07.04.2000, the claim was lodged by the complainant alleging that the birds died on 5.04.2000. The insurers submitted that they were not satisfied with the report of the surveyor and, therefore, deputed Mr. R.S. Ahluwalia to conduct investigation in the matter. He conducted a thorough and detailed investigation. The investigation report clarified the fact that the shifting of poultry birds from poultry farm at Garhshankar to the poultry farm at Hassan Manda Road, Kartarpur was only by way of paper-work. The insurers alleged that the mortality might have taken place at Garhshankar poultry farm and thereafter the dead birds might have been shifted to the H.S. Poultry Farm at Kartarpur in order to put forth false claim for the compensation. In other words, insurers alleged that the shifting of flock of the birds was "stage managed" and the claim of the complainant was unfounded and hence it was repudiated.

THE parties placed on record certain documents. THE State Commission held that the investigator was subsequently appointed without any substantial reason and that report of the investigator could not be relied upon. THE State Commission held that first surveyor"s report was acceptable and that the appointment of the investigator " Mr. R.S. Ahluwalia was illegal in view of section 64 U.M. of the Insurance Act. THE State Commission held that there was undue delay in repudiating the claim of the complainant, which amounted to deficiency in rendering of the services by the insurers. THE State Commission accepted the report of the surveyor, namely, Mr. R.K. Kumar and concluded that the complainant was entitled to seek compensation of Rs.11,92,140/- alongwith interest @6% p.a. from the date of repudiation until the payment is made. As stated earlier, both the parties being aggrieved by part of the impugned judgement unfavourable to each other preferred the above two cross-appeals. We have heard learned counsel for the parties.

THE core questions to be determined in these appeals are :- i) Whether the alleged shifting and transportation of the stock of 8850 birds from the poultry farm at Canal Colony, Garhshankar to the H.S. Poultry Farm situated at Hassan Manda Road, Kartarpur was "stage managed" and the loss of 4550 birds had already taken place before so-called shifting done prior to the endorsement on the insurance policy, effected by the insurers on 6.04.2000 and as such the insurance claim was rightly repudiated by the insurance company? ii) Whether the State Commission was justified in discarding the investigator"s report for the reason that the appointment of the investigator was in violation of section 64 UM of the Insurance Act?"

Before we proceed to determine the issues pertaining to facts, let it be noted that the surveyor"s report was sought by the insurers through appointment of Mr. R.K. Kumar. That report was submitted by Mr. R.K. Kumar on basis of the relevant record on 29.09.2000. The report of Mr. R.S. Ahluwalia was received on 12.09.2001. The report of Mr. R.S. Ahluwalia is discarded by State Commission on the ground that such appointment of the investigator was unjustified. It is argued on behalf of the complainant that appointment of Mr. R.S. Ahluwalia was hit by section 64 UM of the Insurance Act. Section 64 UM of the Insurance Act reads as follows:- "[1(A) Every surveyor and loss assessor shall comply with the code of conduct in respect of their duties, responsibilities and other professional requirements as may be specified by the regulations made by the Authority. (2) No claim in respect of a loss which has occurred in India and requiring to be paid or settled in India equal to or exceeding twenty thousand rupees in value on any policy of insurance, arising or intimated to an insurer at any time after the expiry of a period of one year from the commencement of the insurance (Amendment) Act, 1968, shall, unless otherwise directed by the [Authority], be admitted for payment or settled by the insurer unless he has obtained a report, on the loss that has occurred, from a person who holds a license issued under this section to act as a surveyor or loss assessor (hereafter referred to as "approved surveyor or loss assessor"): Provided that nothing in this sub-section shall be deemed to take away or abridge the right of the insurer to pay or settle any claim at any amount different from the amount assessed by the approved surveyor or loss assessor. (3) The Authority may, at any time, in respect of any claim of the nature referred to in subsection (2), call for an independent report from any other approved surveyor or loss assessor specified by [it] and such surveyor or loss assessor shall furnish such report to the [Authority] within such time as may be specified by the [Authority] or if no time limit has been specified by [it] within a reasonable time and the costs of, or incidental to such report shall be borne by the insurer. (4) The [Authority] may, on receipt of a report referred to in sub-section (3), issue such directions as it may consider necessary with regard to the settlement of the claim including any direction to settle a claim at a figure less than, or more than, that at which it is proposed to settle it or it was settled and the insurer shall be bound to comply with such directions: Provided that where the [Authority] issues a direction for settling a claim at a figure lower than that at which it has already been settled, the insurer shall be deemed to comply with such direction if he satisfies the [Authority] that all reasonable steps, with due regard to the question whether the expenditure involved is not disproportionate to the amount required to be recovered, have been taken with due despatch by him: Provided further that no direction for the payment of a lesser sum shall be made where the amount of the claim has already been paid and the [Authority] is of opinion that the recovery of the amount paid in excess would cause undue hardship to the insured: Provided also that nothing in this section shall relieve the insurer from any liability, civil or criminal, to which he would have been subject but for the provisions of this sub-section."

The argument of learned counsel for the complainant "M/s. H.S. Poultry Farm does not stand to reason. The Supreme Court in "National Insurance Co. Ltd. vs. Harjeet Rice Mills, [III (2005) CPJ 6 (SC)] has held that section 64 UM of the Insurance Act, 1938 cannot stand in the way of insurer in establishing, by engaging a private investigator, that the claim was fraudulent and that it was a case of deliberately causing loss so as to lay the foundation of an insurance claim. This Commission in "Ummadi Simhachalam Vs. Oriental Insurance Co. Ltd. [III (2006) CPJ 79 (NC)], held that the investigator"s report can be considered in order to arrive at conclusion as to whether the claim was fraudulent and was put-forth after pre-determined plan. The appointment of the surveyor was made in order to assess the loss on basis of the alleged mortality found after verification of the record. The first survey report dated 15.05.2002 is based upon letters issued by the insured. The relevant report shows that no record was shown by the insured in respect of the type of birds flocked in Gharshankar Poultry Farm. The report of the investigator (Mr. R.S. Ahluwalia) shows that there was no regular practice followed by the insured to shift the birds after age of 25 weeks inasmuch as at such age the birds would reach at pick of eggs laying capacity. The report also shows that no opinion was issued by any poultry expert whether the birds suffered any medical problem. The investigator reported that there was high mortality in the context of chicks supplied only by Kasila Poultry Farm. It is pertinent to notice that the insured was supplied 5300 chicks free of cost by Kasila Poultry Farm in order to replace the chicks which had reportedly died. The report of investigator, Mr. R.S. Ahluwalia, further shows that the daily mortality stock register clearly shows that Dr. Kumar had already verified the dead birds on 5.04.2000 whereas the endorsement on the insurance policy was made on 06.04.2000. What appears from the record is that insured issued letter dated 04.04.2000 about permission to shift the birds to Kartarpur Poultry Farm to Poultry Farm at Hassan Mandi from Gharshankar Poultry Farm and delivered the letter to the office of the Insurance Company on 06.04.2000. The endorsement on the insurance policy is dated 06.04.2000. Needless to say, the ante-dated letter was purportedly used only for the purpose of obtaining such endorsement on the insurance policy. In other words, the Insurance Company had not undertaken the risk of the birds flocked in the poultry farm situated at Hassan Mandi Road, Kartarpur. It appears that such endorsement was obtained by the insured in hasty and hush-hush manner. Considering this aspect, the appointment of investigator by the Insurance Company could not be faulted with.

WHAT appears from the record is that the respondent (complainant) had already received 5318 poultry birds free of cost from the supplier, by name, M/s. Kasila Poultry Farms, Hyderabad in lieu of compensation on basis of his complaints of excessive mortality in respect of the birds supplied by that poultry farm. Thus, the complainant was not put to any loss on account of mortality of the birds housed in the Gharshankar Poultry Farm which were supplied by M/s. Kasila Poultry Farm, Hyderabad. The complainant was having five (5) poultry farms at different places yet it insured only two poultry farms from the insurance company. Obviously, shifting from one uninsured poultry farm to the place of insured poultry farm ought to have been done with prior permission of the insurer. In this case, no particulars were available to the insurer to verify whether the mortality had occurred prior to 6.04.2000. The investigator noticed that mortality register indicated death of the birds on 5.04.2000 as per the endorsement of Dr. R.K. Kumar. The certificate issued by Dr. R.K. Kumar was prior in time. However, after about three months Dr. M.S. Saini issued a fresh certificate. The subsequent certificate issued by Dr. M.S. Saini on 24.07.2001 is clearly afterthought.

THE State Commission appears to have been influenced by the contention that appointment of the investigator was unjustified. THE State Commission rejected the contention that Mr. R.S. Ahluwalia was appointed as investigator and not as surveyor. THE State Commission observed: "We have already observed above that it is not the caption given to a person whether he is a surveyor or investigator but it is the purpose which is relevant and that purpose must be shown. In the present case, as observed above, the only averment made in the written statement is that the Insurance Company was not satisfied with the report of the surveyor. No document or order or any noting portion has been brought on the file of this case by the Insurance Co. to show as to what was the need for appointment of an investigator."

As a matter of fact, the survey report submitted by Dr. R.K. Kumar itself shows that a number of 9420 parent chicks were purchased by the complainant from M/s. Kasila Farms, Hyderabad and were received at Gharshankar in the month of September 1999 and were subsequently transferred to the poultry at Kartarpur Farm in March 2000. The age of those 8850 birds which were covered under the Insurance cover note dated 17.03.2000 was of 25 weeks. It is stated by the surveyor that the birds used to die in one or two weeks with no specific cause but the mortality of the birds started in the first week of April 2000 which continued till the end. He assessed loss of 4512 birds at Rs.10,50,535/-. The clinching question is whether the birds were covered under the insurance policy at the relevant time. The particulars of the endorsement on the insurance cover note go to show that 8850 birds of Gharshankar poultry farm were covered under the insurance contract. The transfer of these birds ought to have been done with prior approval of the insurance company. For, the uninsured place is not covered by the insurance contract. It is pertinent to note that the complainant obtained endorsement dated 06.04.2000 on ante-dated letter dated 04.04.2000 and immediately on next date, i.e., 07.04.2000 a claim was put forth alleging that mortality had taken place from 5.04.2000. In other words, the mortality of birds was allegedly during the period of two days, i.e., 5.04.2000 and 6.04.2000 for which the claim was submitted on 07.04.2000. This conduct of the complainant is indicative of the fact that it was a case of "stage managed" mortality of the birds which were shown to have been shifted to Katarpur Poultry Farm from Gharshankar Poultry Farm. This fact is corroborated during course of investigation made by Mr. R.S. Ahluwalia. The investigation report shows that at the Poultry farm situated at Hassan Mandi Road, Kartarpur, there were already 8850 poultry birds as per the stock register. The capacity of that poultry farm at Kartarpur was only to accommodate 11000 birds. It is obvious, therefore, that the contention of the complainant about shifting of further 8850 birds from the poultry farms at Gharshankar to the Poultry Farm at Kartarpur is illogical and unacceptable. It is nobody"s case that without proper accommodation and without taking care of proper accommodation being available in poultry farm at Kartarpur, the shifting process was completed. In fact, at the most 2150 birds could have been accommodated at the Kartarpur Poultry Farm and that is not the case of the complainant. The preponderance of probabilities go to show, therefore, that after noticing death of the poultry birds, the complainant issued the letter dated 4.4.2000 on 06.04.2000 and obtained an endorsement about receipt thereof by the insurer without giving any opportunity to the insurer to verify the fact situation prior to making of the claim for the amount with the insurers. The State Commission should have interpreted conduct of the complainant in proper perspective. We are of the opinion that the complainant attempted to take undue advantage of the endorsement dated 06.04.2000 on the insurance policy and immediately staked the insurance claim on 07.04.2000 by manipulating the record of shifting of the birds from the poultry farm at Gharshankar to the poultry farm situated at Hassan Mandi, Kartarpur. We are, therefore, of the opinion that the complainant was liable to be dismissed. The impugned judgement is, therefore, unsustainable. It follows, therefore, that the appeal preferred by the New India Assurance Co. Ltd. & Anr. will have to be allowed whereas that of M/s. H.S. Poultry Farm will have to be dismissed.

In the result, FA No. 149 / 2007 is allowed and the impugned judgement rendered by the State Commission is set aside. FA No. 187/2007 preferred by M/s. H.S. Poultry Farm is dismissed. M/s. H.S. Poultry Farm shall pay Rs.20,000/- to the New India Assurance Co. Ltd. towards consolidated costs in both the appeals. The statutory deposits made by the appellants in the appeals concerned be returned to them with accruals.