Nylofils India Ltd vs Oriental Insurance Company Ltd

COMPLAINT was filed, inter alia, alleging that the complainant is a limited company carrying on manufacturing of Nylon Filament Yarn and it makes fishnets out of it. Complainant purchased Fire Policies as detailed in para No. 1 of the complaint from the opposite party-Insurance Company.

DURING the currency of policies on 21.6.1997, a fire took place in the complainant''s premises due to electrical spark and short circuiting in one of the electrical motors. Fire Brigade and the police were intimated of the occurrence. Opposite party-Insurance Company too was informed of the occurrence. Lastly, R.L. Agarwal was appointed as Surveyor by the Insurance Company to conduct a fresh survey. It was further alleged that the complainant was forced to agree to accept amount of Rs. 9,79,763 towards full and final settlement of the claim by the Insurance Company This amount was accepted by the complainant without prejudice to its rights. Attributing deficiency in service, direction was sought to be made to the Insurance Company to pay the balance amount of Rs. 33,98,604 being the actual loss suffered by the complainant with interest as also compensation of Rs. 10 lakh. Opposite party contested the complaint by filing written version. It was alleged that the amount of Rs. 9,79,763 was received by the complainant voluntarily towards full and final settlement of the claim and the complaint is, therefore, not maintainable. Complaint was stated to be bad for non-joinder of the bank named in the policies. Amount paid was arrived at after examining the Surveyor''s report, Investigator''s report and other documents after due application of mind by the opposite party. Documents/invoices submitted in support of the claim by the complainant were fake/forged. Denying deficiency in service, liability to pay the amount paid was emphatically denied.

ORDER dated 4.8.2010 notices that R.L. Agarwal, final Surveyor had assessed the loss at Rs. 14,00,762. Opposite party-Insurance Company had offered to pay to the complainant an amount of Rs. 13,80,780 by way of settlement of claim. However, the actual amount paid to the complainant was Rs. 9,79,763. There was no material on record to suggest how the loss as assessed by the final Surveyor was reduced by the Insurance Company from Rs. 14,00,762 to Rs. 9,79,763. A responsible officer of the Insurance Company was, therefore, directed to remain present along with the claim file showing how the claim was reduced from Rs. 14,00,762 to Rs. 9,79,763 on 9.8.2010.

TODAY the concerned officer of the Insurance Company has filed the communication dated 27.1.1999 which being material, omitting immaterial portion, is reproduced below: "On the advice of Head Office, authorizing re-opening and settling of the above claim on merits immediately, RCC has re-opened and reviewed the claim approving the same for Rs. 9,79,763 subject to deduction of reinstatement premium. The amount approved of Rs. 9,79,763 has been arrived at as under: Residue weight 2281.90 Kgs. Add: 10% for washing away of material. 228.18 Kgs. 2509.98 Kgs. Original pre-fire weight 2:1 (2509.98 X 2) 5019.96 Kgs. Value @ Rs. 191 per Kg. (as given by Sri D. Ramakrishna, Chartered Accountant in his report) Rs. 9,58,812.00 Less: Salvage @ Rs. 4 per Kg. Total 1894.80 Kgs Rs. 7,579.00 Rs. 9,51,233.00 Add: Loss on building and machinery as assessed by Sri RLN Sastry and also confirmed by Sri R. L Agarwal Rs. 31,030.00 Rs. 9,82,263.00 Less: Policy excess. Rs. 2,500.00 Rs. 9,79,763.00 you are requested to release the amount immediately under advice to us. Sd/- Regional Manager"

MATERIAL portion of the report of R.L. Agarwal and Sons, Surveyor reads thus: "2. On the basis of Laboratory report of I.I.C.T. dated 22.12.1997 100 Kgms of Polyfil-6 if burnt would leave 84 Kgs to 86 Kgs of residue when the burnt Residue was 2359.85 Kg the original one should have been only 2776.29 Kgs. (2359.85 x 100/85) 3. Insured explained that when wooden door, along which the stocks were placed, was totally burnt and wooden portions of winding Machine were burnt with total Electrical wiring, Electrical Motor and Winding Machine was total loss and walls of the process hall had become black due to smoke how can we say that molten Polyfil was not washed away with buckets of water used in large quantity by 100-200 neighbours and then Fire Brigade. Secondly, the Surveyors had themselves burnt the fishing net 2 Kgs and yarn 2 Kgs. Fishing net debris was reduced to a position where he could not make the weighment but yarn remnant he was able to way 1.01 Kg after burning 2 Kgs of yarn. 4. We argued that the weight of burnt remnants was 2359.85 Kgs and even if converted in the ratio of 2 Kg 1.01 ratio it will work out to original stock of 4673 Kgs only. 5. The Managing Director argued that at least more than what was left over of molten material was washed away. We said when 2630C is the melting point of Nylofin, very soon, after getting out of Burning fire it will be converted into beads or lump form. No doubt some may be washed away with force of water and we said about 20% but insured insisted on 100%.

Various other points brought to the notice of M.D. (a) Surveyors had made estimate of total stocks on the basis of volumetric analysis at 873 cu. Ft. ----- x 304.35 Kg=12077 Kgs. 22 Out of which sound goods saved is to be deducted 5367.500 Fire affected goods 6709.500 (b) Weight of leftover residue material was 1894.800 Kgs as per final weighment done in the first week of July 1997. In addition to this some bags were weighed, (6 bags) by the other Surveyor which is not included in the above weight. It is about 387.80 Kgs. Thus total wt. of residue comes to 2281.80 Kgs. (c) ... (d) As per details obtained by us from the Supervisor (as per his written statement enclosed) the number of bags stacked were 318. We calculated the average weight from bills and found per bag average weight 52.34 Kg. Hence total stock weight works out at 12846 Kgs before fire and after deducting the saved quantity it works out at 12846 Kgs - 5367.500 Kgs=7478.50. On the basis of these points we were able to convince the insured that there are no grounds to prove that 17050 Kgs as claimed by them was burnt. After several hours discussions and persuasions insured agreed that we should consider at least 7478.50 Kgs which being based on rough calculation of No. of bags and average weight per bag. Ultimately it was agreed that the basis of weighment of burnt yarn 1.01 and original yarn 2 Kgm actually experimented by the Surveyor and because burning of net was fast and even weighment was not possible, hence 2:1 ratio was agreed. Then because of huge quantity used by more than 100 neighbours and Fire Brigade, Burnt Residue was washed away. After prolonged discussions it was agreed at 50% increase on that calculation. Thus the calculation of stock less was arrived at as follows: Residue weight : 2281.80 Kgs Add 50% : 1140.90 3422.70 Conversion to original pre- fire Weight 2:1 : 6845.40 Value at sale price of Rs. 236 per kg Rs. 16,15,514.00 Less: G.P. 14.50% as per 1996-97 Balance Sheet (Calculation of 19% Calculated by the C.A. being Average for 1995-96, 96-97 and 97-98 (upto date of fire) was not acceptable) Rs. 2,35,704.00 Rs. 13,79,811.00 We feel 1996-97 balance sheet Operative percentage is reasonable Less Salvage @ Rs. 4 per Kg For 1894.800 Kg. Rs. 7579.00 Rs. 13,72,232.00 Final assessment made by the Surveyor is further reproduced below: "Total loss for consideration as per our findings and agreed by insured (original enclosed) works out as follows: Stocks : Rs. 13,72,232 Building : Rs. 9,000 Machinery and Electrical : Rs. 22,030 Less Deductible excess (policies being before 1st July 97) : Rs. 2,500 Net loss recommended for Payment Rs. 14,00,762

COMPARISON of the assessments as made by the Surveyor and in aforesaid communication dated 27.1.1999 would show that the difference between the two is in regard to the percentage of addition of the washed away material and the rate per kg of the material. In the survey report, the percentage of washed away material has been taken as 50% while in the communication as 10%. Further, the value of material taken in Survey report is Rs. 236 per kg while it is Rs. 191 per kg. in the communication taking note of the report of the Chartered Accountant. Having heard parties learned Counsel, we are of the view that the Surveyor had rightly added 50% for the washed away material for which cogent reasons have been recorded by him in the report. At the same time, the Surveyor was not justified in brushing aside the calculation of 19% made by the Chartered Accountant based on the average for 95-96, 96-97 and 97-98. In the said communication, the calculation of the rate per kg of the material at Rs. 191 instead of Rs. 236 had rightly been done. Calculated in this manner, the total amount would work out at Rs. 13,07,395. Adding amount of Rs. 31,030 towards loss to the building and machinery as assessed by the Surveyors, the total amount would come to Rs. 13,38,395. After allowing 4% salvage and deductible excess of Rs. 2500 the final amount would come to Rs. 13,28,316, out of which amount of Rs. 9,79,763 was paid in February 1999 by the Insurance Company to the complainant. Ms. Shobha for the complainant has pressed for award of interest on the said total amount. On the other hand, Sh. Mohan Babu Aggarwal for the Insurance Company has opposed the award of interest on the grounds that the documents/bills furnished by the complainant were fake/forged and time was taken by the Insurance Company to conclude inquiry into a complaint made by a Member of Parliament of the claim made by the complainant being bogus. It has been pointed out on behalf of the complainant that the M.P. had ultimately withdrawn the complaint made. Be that as it may, also considering the reports of other Surveyors, we are inclined to award interest @ 9% per annum on the balance amount of Rs. 3,48,553 from the date of the filing of complaint. Complaint is disposed of in above terms. Complainant will be entitled to cost of Rs. 15,000 from the opposite party-Insurance Company. Awarded amount will be paid subject to furnishing of ''No Objection'' from the bank by whom the policies were purchased by the complainant. Complaint allowed.