NEW INDIA ASSURANCE CO. LTD. vs Virmani Refrigeration And Cold Storage Pvt. Ltd.

AGGRIEVED and dissatisfied by the order of the Delhi State Consumer Disputes Redressal Commission, dated 13th September, 2004, in complaint case No. C 61/94 - M/s. New India Assurance Company Ltd., had filed appeal No. 396 of 2004, and the complainant -M/s. Virmani Refrigeration and Cold Storage Pvt. Ltd., had filed appeal No. 123 of 2005. The State Commission by its order has held as follows: "We find that the claim of the complainant was wrongly repudiated by way of offering a paltry sum of Rs. 44,767 against actual amount assessed by the Surveyor to the extent of Rs. 3,85,687. We allow the complaint and direct the respondent to pay a sum of Rs. 3,85,687 with 9% interest per annum from the date of filing the petition within one month."

AS both the matters emanate from the same order of the State Commission, we have heard them together and propose to pass a common order.

THOUGH there was some delay in filing the appeal by the complainant (FA No. 123 of 2005) after considering the reasons given for condonation of delay, especially that the Director -in -charge of the Company had suffered an heart attack and undergone emergency operation and was required post operative rest, the Commission admitted this matter and directed that this should be heard along with FA No. 396 of 2004. The factual matrix of this case in brief are that M/s. Virmani Refrigeration and Cold Storage Pvt. Ltd. (for short the "complainant") insured the property E2, Jhandewalan Extension, New Delhi, comprising godowns and offices against fire for an amount of Rs. 7,40,000 for the period 8.7.1986 upto 10.7.1987. On 1.6.1987 a fire broke out in the property and extensive damage was caused to the building, furniture, fixtures, fittings, electricity and sanitary system. New India Assurance Company Ltd., (for short "the Insurance Company") appointed M/s. N.T. Kothari and Company, as Surveyors. After the initial survey, the Surveyor has assessed the loss as follows: Assessment of loss: Net loss assessed on Building and Core insulation Rs. 16,56,729 Less 76.72% under insurance Rs. 12,71,042 Adjusted loss Rs. 3,85,687

DISSATISFI ED by the report of the Surveyor, the Insurance Company called the Surveyor for a discussion and ordered fresh investigation, which commenced on 2nd March, 1988 and was completed only after four years. The Surveyor submitted his report to the Insurance Company on 11th October, 1991, assessing the net loss at Rs. 1,28,253. On 1.9.1992 the Insurance Company offered 40% of this assessment i.e. Rs. 44,767 towards settlement of the claim to the complainant. Shocked by the offer, the complainant served legal notice and subsequently filed a complaint before the State Commission for directions to settle the claim of Rs. 3,85,687 along with interest @ 24% per annum.

THE main contention of the Insurance Company for rejecting Rs. 3,85,687 is that during the investigation it was discovered that 60% of the property was given to M/s. Anantraj Agencies (Pvt.) Ltd., under various agreements, whereas 40% of the property remained with the complainant and, therefore, the complainant was entitled to only 40% of the assessed loss. The State Commission after pursuing the records of the case, report of the Surveyor and also the agreement with M/s. Anantraj Agencies (Pvt.) Ltd., partly allowed the claim as elucidated above.

WHEN the matter FA No. 394 of 2004 came up for admission before this Commission on 24.11.2004, the learned Counsel for the Insurance Company submitted that the Insurance Company is ready and willing to pay Rs. 1,28,253 as assessed by the Surveyor and undertakes to pay the same by bank draft within a period of four weeks. Accordingly, stay was granted against the order of the State Commission.

WHEN the matter came up for final hearing on 17.12.2008, the learned Counsel for the Insurance Company submitted that the complainant had insurable interest only in 40% of the property, as 60% of the property was not in his possession. As the factum of agreement signed by the complainant with M/s. Anantraj Agencies (Pvt.) Ltd., was not within the knowledge of the Surveyor and the Insurance Company at the first instance had assessed the loss for a higher amount, the Surveyor was asked to investigate into the claim. When this matter came to light during investigation, the Surveyor has reduced the assessed loss accordingly. On the other hand, the learned Counsel for the complainant submitted that the Insurance Company had taken so many years to settle the matter, which has caused a lot of mental agony, harassment and, accordingly, he deserves to be compensated at 18% interest per annum on the claimed amount.

THE relevant Clause 4 of Deed of Consent executed between the complainant and M/s. Anantraj Agencies (Pvt) Ltd., reads as follows: "That in consideration of the liabilities undertaken by the builder/promoter, the co -owners have agreed to allot 60% of the total builtup area to the builder/promoter and 40% of the total builtup area will be retained by the co -owner. The co -owners and the builder/promoter may dispose of their respective shares in any such manner as they deem fit. The respective area allocated by to the builder/promoter and the co -owners have been roughly demarcated vertically to the plan annexed hereto at A''. The area which will be allocated to the builder/promoter and the co -owners will be exactly demarcated in the plan which will be annexed to the proper agreement."

THIS is only a deed of consent as the builder M/s. Anantraj Agencies (Pvt.) Ltd. did not carry out any construction and development work as per the said deed. M/s. Anantraj Agencies (Pvt.) Ltd. cannot claim insurable interest. Accordingly, when the agency claimed to be the occupant of 60% of the building claimed compensation for loss, the National Insurance Company after scrutiny rejected their claim holding that they did not have insurable interest.

THE State Commission has given detailed and convincing reasons for rejecting the contention of the appellant -Insurance Company by holding that it was only the deed in respect of the construction to be carried out by M/s. Anantraj Agencies (Pvt.) Ltd., and the latter does not have insurable interest. As the deed was not for partition of the property, the Insurance Company had no right to repudiate the major portion of the claim of the complainant. We do not want to reiterate the detailed analytical reasons given by the State Commission. Suffice to say at this juncture that we concur with the views of the learned State Commission.

M /s. N.T. Kothari, Insurance Surveyors and Loss Assessors have assessed the loss at Rs. 3,85,687 after deducting 76.72% towards under insurance which means that the complainant has already lost heavily because of the under insurance clause.

THE second report of the Insurance Surveyor starts with the following sentence: "This has reference to the discussion we had with you in the subject claim."

THIS casts a shadow of doubt about the intention of the Insurance Company. The Surveyor has taken more than 3 years to complete the investigation to produce this short report and the Insurance Company had taken again another ten months to repudiate the claim, except agreeing to compensate the complainant with a measly amount of Rs. 44,767 as against the total net loss as assessed by the Surveyor originally at Rs. 16,56,729. If the complainant is compelled to accept only this meagre amount of Rs. 44,767, what would be the nature of shock the complainant will get is difficult to imagine. Such an offer, frustrates the very purpose of insurance. Though, the fire accident took place as long back as on 1st June, 1987, the Insurance Company offered to pay Rs. 1,28,253 only on 24.11.2004 i.e. after 17 years with a view to obtain stay order against the order of the State Commission granting certain reliefs.

WHILE we concur the reasoning given by the State Commission for having assessed the loss at Rs. 3,85,687 we deem it necessary to enhance the rate of interest suitably as no compensation for mental agony, harassment, prolonged delay in settling the claim by the Insurance Company has been awarded, apart, from interest @ 9% per annum. During late 80s and 90s, the borrowing rates were very high. They have come down only in the recent past. Taking into account the totality of the circumstances and in the interest of justice, we deem it appropriate to award 12% interest. Our view is fortified by the judgment of the Hon''ble Supreme Court in Ghaziabad Development Authority v. Balbir Singh, II (2004) CPJ 12 (SC)=III (2004) SLT 161=AIR 2004 (91) SC 2141. The Apex Court has observed as follows: "Today the issue thus is not only of award of compensation but who should bear the brunt. The concept of authority and power exercised by public functionaries has many dimensions. It has undergone tremendous change with passage of time and change in socio -economic outlook. The authority empowered to function under a statute while exercising power discharges public duty. It has to act to subserve general welfare and common good. In discharging this duty honestly and bona fide, loss may accrue to any person. And he may claim compensation which may in circumstances be payable. But where the duty is performed capriciously or the exercise of power results in harassment and agony why the responsibility to pay the loss determined should be whose? In a modern society no authority can arrogate to itself the power to act in a manner which is arbitrary. It is unfortunate that matter which require immediate attention linger on and the man in the street is made to run from one end to other with no result. The culture of window clearance appears to be totally dead. Even in ordinary matters a common man who has neither the political backing nor the financial strength to match the inaction in public -oriented departments gets frustrated and it erodes the credibility in the system. Public administration, no doubt involves a vast amount of administrative discretion which shields the action of administrative authority. But where it is found that exercise of discretion was mala fide and the complainant is entitled to compensation for mental and physical harassment then the office can no more claim to be under protective cover. When a citizen seeks to recover compensation from a public authority in respect of injuries suffered by him for capricious exercise of power and the National Commission finds it duly proved then it has a statutory obligation to award the same."

"The power and duty to award compensation does not mean that irrespective of facts of the case compensation can be awarded in all matters at a uniform rate of 18% per annum. As seen above, what is being awarded is compensation i.e. a recompense for the loss or injury. It therefore, necessarily has to be based on a finding of loss or injury and has to correlate with the amount of loss or injury. Thus the Forum or the Commission must determine that there has been deficiency in service and/or misfeasance in public office which has resulted in loss or injury. No hard -and -fast rule can be laid down."

ACCORDINGL Y , we modify the order of the State Commission in the following manner - National Insurance Company Ltd., is directed to pay the complainant M/s. Virmani Refrigeration and Cold Storage Pvt. Ltd., a sum of Rs. 3,85,687 with 12% interest per annum from the date of filing of complaint before the State Commission till the date of payment. This amount shall be paid within six weeks from the date of this order, otherwise the amount will be carrying interest @ 15% per annum. The amount already paid shall be adjusted against this amount. The Insurance Company shall also pay Rs. 10,000 as cost to the complainant. Appeal disposed of.