New India Assurance Company Ltd vs Sushil Sharma

THIS appeal challenges the order dated 4.4.2005 of the Madhya Pradesh State Consumer Disputes Redressal Commission, Bhopal (in short ''the State Commission) in Complaint Case No. 37/2002. By the said order, the State Commission partly allowed the complaint of the complainant and directed the appellant-opposite party, New India Assurance Company Limited (hereafter referred to as ''the Insurance Company'') to pay to the complainant the sum of Rs. 4,89,352 (through opposite party No. 2, State Bank of India, Govindpura Branch) with interest @ 9% per annum w.e.f. 1.2.2002 and cost of Rs. 2,000. The said sum of Rs. 4,89,352 represented the difference between Rs. 12,88,106 (the total amount held by the State Commission to be payable by the Insurance Company on account of the loss suffered by the complainant due to damage to the insured stocks and machinery in his business premises) and the amount of Rs. 7,98,754 (which the Insurance Company had already paid to the bank account of the complainant towards settlement of his insurance claim). Aggrieved by this order, the appellant-opposite party, Insurance Company has preferred this appeal.

THE essential facts of the case are that the complainant ran a business in the name of M/s. Ajay Industries, dealing in auto parts, repairs to two-wheeler and four-wheeler vehicles, including denting, painting, servicing, etc. The complainant secured term loan and cash credit facility from opposite party (OP) No. 2, State Bank of India (SB I) and also obtained a Miscellaneous Accident Insurance Policy (covering burglary and material damage) for the period 11.12.2000-10.12.2001. The said policy was actually in the name of the SBI and the name of the complainant''s unit (M/s. Ajay Industries) was entered as part of the address. The plant and machinery were insured for Rs. 5 lakh while the stocks and raw material for Rs. 15 lakh. On account of a fire in the night of 13.9.2001 due to electrical short circuit, the machines, spare parts, various equipment, furniture, cables, wires, etc., in the complainant''s unit got completely damaged. The complainant intimated the incidence of fire to the Insurance Company and promptly filed the insurance claim. The Insurance Company appointed a Surveyor (one Amit Rupal) to survey and assess the loss. In his report dated 12.11.2001, the Surveyor assessed the loss to plant and machinery at Rs. 50,000 and that to stocks at Rs. 8,86,735. After deducting the salvage value @ 10% of the value of stocks, the net assessed loss of stocks was estimated at Rs. 7,78,110 and that of machinery at Rs. 50,000, aggregating to Rs. 8,28,110.

IT is the case of the Insurance Company that at the time of under writing the policy the insured unit was working, in accordance with the representation of the insured, as an "engineering" workshop whereas in reality it turned to be an "automobile" workshop for which the amount of premium would have been higher. Therefore, on receipt of report of the Surveyor and loss assessor, a sum of Rs. 32,000 was deducted from the assessed value of the loss in arriving at the amount payable towards the claim, which worked out to Rs. 7,98,754. The Insurance Company paid this amount directly to OP No. 2, SBI in the name of which the insurance policy was under written. The SBI acknowledged the payment on 11.1.2005. It was also contended by the Insurance Company that this payment was in full and final settlement of the insurance claim of the complainant, which was accepted without any protest on behalf of the complainant by the State Bank of India. Therefore, according to the Insurance Company, the complainant could not have agitated the matter before the State Commission and the latter''s order was erroneous.

WE have heard Mr. Salil Paul, learned Counsel for the appellant-Insurance Company and Mr. Rishad A. Chowdhury for respondent No. 1/complainant as well as Mr. Mayank Grover and Mr. Ravi Shanker, Proxy Counsel appearing for Mr. S. L. Gupta, Advocate on behalf of respondent No. 2, SBI and gone carefully through the documents and material on record.

WE notice that in the impugned order, the State Commission did not accept the assessment of the value of the loss of stocks by the Surveyor at Rs. 8,86,735. Instead, the State Commission adopted the sum of Rs. 12,75,856 on the basis of the valuation of the stock a little prior to the peril (as on 1.9.2001) as recorded in the surveyor''s own report quoting the valuation by M/s. Khare Pamecha and Company, Chartered Accountant is on behalf of the SBI. In addition, the State Commission did not find it justified to deduct 10% of this assessed value of the stock, i.e., Rs. 86,457 towards value of the salvage in view of the fact that the two quotations obtained by the Surveyor himself for the salvage value of the damaged stock were Rs. 28,000 and Rs. 37,750 only. The State Commission thought it appropriate to adopt the higher of the two quotations, namely, Rs. 37,750 as the appropriate salvage value of the damaged stock. Further, after a detailed discussion of the various documents produced on record as well as the averments of the parties, the State Commission came to the conclusion that the deduction of Rs. 32,000 from the assessed loss by the Insurance Company on the ground that the premium actually charged was less than what would have been due for an "automobile" workshop (as against an "engineering" workshop) was also improper because the registration of the complainant''s firm as a small scale industry clearly indicated the purpose, viz., "trading in automobile parts, repairs, renovations, denting/painting of vehicles". Secondly, on the basis of various averments, the State Commission also concluded that the SBI did not inform the complainant in detail about the nature and extent of the coverage of the insurance policy nor did it make available to the complainant a copy of the cover note or the policy document, as a result of which the complainant was completely in the dark and was justified in assuming that the insurance jointly was appropriate and insured adequate coverage. The State Commission further noted that even the proposal form for the insurance policy and the cheques for premium had been signed and issued by the officials of the SBI. Therefore, the State Commission concluded that if any one were to be held responsible for short payment of premium by Rs. 32,000, it would be OP No. 2, SBI and that the complainant could not be made to suffer on account of the lapses by the said Bank. 6.1 On careful consideration, we are inclined to agree with the State Commission''s finding that there was apparently no justification for the Surveyor to adopt the sum of Rs. 8,86,735 as the value of the damaged stock.

6.2 The relevant paragraph of the surveyor''s report is reproduced below:

"STOCK As detailed earlier in the report, the entire stock of spare parts and automobile stock was burnt, as a result of the fire. The undersigned has verified following documents/particulars to arrive at the value of fire damaged stock available within the insured''s shop premises-

(i) A detailed valued inventory of fire damaged stock was prepared by the insured in the following manner-

(a) Valued inventory of fire damaged identifiable stock detailed as per Annexure-I of the report.

(b) Valued inventory of unidentifiable burnt stock on an estimation basis, on verification of storage space available and as per insured''s memory detailed as per Annexure-II.

Valued inventory of burnt identifiable stock, as per Annexure I

-Rs. 7,76,486.00 Add Valued inventory of burnt unidentifiable stock, as per Annexure-II -Rs. 7,31,489.00 Total value of burnt stock, as per inventory furnished -Rs. 15,07,975.00 (ii) Stock audit/physical verification of stock was carried out by Chartered Accountants M/s. Khare Pamecha and Co., on behalf of M/s. State Bank of India: Value of stock as on 28.8.2001 as per physical verification report of Chartered Accountant submitted to State Bank of India on 1.9.2001 -Rs. 12,75,856.00 (iii) Stock statements submitted to Bank for the months March to June 2001, duly attested/received by bankers have been furnished. Stock as on 30.6.2001 submitted to bank Rs. 13,73,250.00 (iv) The insured has furnished a trading account prepared by a Chartered Accountant M/s. Subodh Kr. Joshi and Co. for the period 1.4.2001 to 12.9.2001 on verification of insured''s books of accounts. Value of stock as per certificate of Chartered Accountant, as on the date of Loss -Rs. 14,26,836.00 (v) Value of stock, worked out by undersigned to calculate the value at risk -Rs. 8,86,735"

6.3 Bare perusal of the surveyor''s report would show that four assessed values of the stock, namely, Rs. 15,07,975, Rs. 12,75,856, Rs. 13,73,250 and Rs. 14,26,836 were available to the Surveyor and taken note of by him. Two of these valuations, namely, Rs. 12,75,856 and Rs. 14,26,836 were duly certified by two separate Chartered Accountants, namely, M/s. Khare Pamecha and Company and M/s. Subodh Kumar Joshi and Company. In the face of these valuations, the reasons for the Surveyor to assess the value of damaged stock at Rs. 8,86,735 are totally unclear and hence this valuation is obviously completely arbitrary. As is clear from the surveyor''s own report, he has not recorded any justification whatsoever for such a significant reduction in the value of the damaged stock, even with reference to the lowest of the four valuations mentioned above. The State Commission was, therefore, fully justified rejecting the valuation of the Surveyor as arbitrary and adopting the lowest of the four other valuations, viz., Rs. 12,75,856, duly certified by the Chartered Accountants appointed by the SBI itself.

6.4 Similarly, based on its detailed analysis of the averments on record as well as the related documents, the State Commission has correctly concluded that the short payment of insurance premium, if any, on account of the complainant''s unit being classified as an "engineering" workshop in the insurance policy/documents as against an "automobile" workshop which it was in reality (and which was the classification according to the SSI registration truthfully disclosed by the complainant), was not attributable to any overt or covert action of the complainant. The latter could not, therefore, be held responsible to make good the difference in the premium amount. The fault Lay with the SBI which got the insurance policy under written, without keeping the complainant informed at any stage or caring to ensure correct classification of the complainant''s unit for insurance purposes.

6.5 Further, it is evident from the documents on record that the so-called acceptance of the payment of Rs. 7,98,754 in full and final settlement of the complainant''s insurance claim was not that of the complainant. In fact, it was one of the officials of the SBI who gave this discharge, without any evidence of his having taken the complainant into confidence and obtaining his prior acceptance/consent. Therefore, we are not persuaded that it would lie with the Insurance Company to contend in this appeal that the complainant had forfeited his right to agitate deficiency in service on the part of the Insurance Company, by way of this consumer complaint before the State Commission, after having accepted the aforesaid payment towards full discharge of his insurance claim. We are rather surprised that the SBI chose to accept the settlement to the detriment of the complainant''s interest (and at his back), on whose behalf and at whose cost the SBI obtained the insurance policy and further that the insurance policy did not even mention the complainant''s unit, Ajay Industries, as the second party/co-insured and instead reflected the unit as part of the address. How the Insurance Company underwrote such a policy is also a matter of some wonderment-surely, the address of the Govindpura Branch of the SBI was not what was written in the insurance policy.

IN conclusion, the impugned order is justified and does not suffer from any error that could call for our interference. Consequently, the appeal fails and is, accordingly, dismissed. The Insurance Company is directed to comply with the order of the State Commission within four weeks from the date of this order and also pay a sum of Rs. 5,000 to the complainant byway of cost of these proceedings.

BEFORE parting with the matter, we would like to observe that OP No. 2, State Bank of India, Govindpura Branch has showed itself up in very poor light as a lender to a small scale industrial unit. It failed to take necessary care in protecting the interest of the complainant, who was a loanee of the Bank. It was very much the duty of the Bank to safeguard the complainant''s interests while obtaining the insurance policy so that the Bank''s own interests did not suffer. We hope that these observations would be brought to the notice of the senior management of the Bank for necessary action. Appeal dismissed.