RAJA SPINNERS vs ORIENTAL INSURANCE COMPANY LIMITED

THE complainant, Raja Spinners, Ludhiana, a partnership firm registered under the Partnership Act, is engaged in the business of manufacturing Shaddy yarn from Synthetic and Woollen Waste. THE complainant took loan from the Punjab Financial Corporation, Chandigarh for the purpose of raising the building, installation of machinery and other fixed assets, the Punjab Financial Corporation at the time of sanctioning the loan imposed a condition that the fixed assets including the building and the machinery of the complainant firm shall be insured from any subsidiary Company of the General Insurance Co. of India. Complying with the so imposed condition the complainant firm had taken one insurance policy from the Oriental Insurance Company Ltd., Chandigarh. THE factory was insured from the very first day of its existence. THE opposite party issued the Policy No. 11/96/ 00046 along with terms in favour of the complainant commencing from 11.4.1995 for a period of one year, a copy of which was retained by the Punjab Financial Corporation, Chandigarh. A copy of the proposal form covering the terms and conditions of the insurance policy is annexed as C-2. For the manufacturing of shaddy yarn, the complainant had installed the following machinery : 1. Rag Cutting Machines

RAG Tearing Machines Willow Machine/Misting Machine

Carding Machine

RAG Frames Winding Machine 2.The details of the machinery was duly supplied to the Insurance Company along with the estimated cost, including the charges of installation. The machinery was installed as per specifications. The opposite parties at no stage/ time raised any dispute about the value of the machinery or installation charges. The production started in the year 1992. The production work went smoothly and factory was having 3 shifts for production in a day. In the year 1994, there was slight downfall in the business of the complainant firm and as a result of that out of 3 shifts only one shift was retained and continued. The complainant firm returned the loan of Rs. 7.5 lacs to the Punjab Financial Corporation, Chandigarh. On the intervening night of 13/14 of July, 1995 at about 2.30 a.m. fire broke out inside the factory premises which was noticed by the factory labourers. The labourers initially attempted to extinguish the fire and simultaneously attempted to call the assistance of Fire Brigade. Since there was no Fire Brigade in Humbran, an attempt was made to contact Fire Brigade Station at Ludhiana. That attempt too failed due to technical defect in Telephone Exchange of Village Humbran. The labour, however, continued their efforts to extinguish the fire with sand, water and other material available. These efforts of the labour succeeded to save half portion of the bigger shed. As per narration, the whole stock was destroyed but some of the machinery was saved. The carding machine along with its accessories was destroyed. There was huge synthetic waste stock lying nearby which was totally burnt. The excessive heat and flames destroyed asbtstos roafing also. The cause of fire was assumed to be that of electric short circuit. 3.On 14.7.1995 at about 5.30 a.m., Sh. Jagdev Singh, worker of the factory visited Ludhiana and reported the matter to Shri Yudhvir Singh, the partner of the firm, who contacted the President of the ''Humbran Factory Owners Association'' and they together contacted various persons relating to Fire, Insurance, Police and others. A telegram was sent to Branch Manager, Oriental Insurance Company, Chandigarh and also to Punjab Financial Corporation, Chandigarh on the same very day. The accident of fire was reported to the Police Station Humbran, falling within the jurisdiction of Police Station Jagraon and the FIR bearing No. 14 dated 14.7.1995 was registered. The police party headed by Satkartar Singh, SHO and Sadhu Singh, Head Constable and others visited the site and investigated the matter and confirmed that the cause of damage was fire arising from accident. The Surveyor of the opposite parties Sh. R.P. Bhasin also visited the spot and inspected the factory along with Yudhvir Singh, partner of the complainant firm. Mr. Yudhvir Singh assisted the Surveyor in collecting the information. Some photographs were also taken by the Surveyor Sh. R.P. Bhasin. On 2.8.1995, a letter from Sh. R.P. Bhasin, Surveyor was also received by the complainant firm asking for more information and documents. In response, all required information and documents were supplied. Mr. R.P. Bhasin submitted his report to the opposite parties. After waiting for a substantial time, the complainant visited the office of opposite parties many times to enquire about the fate of the claim, but the opposite parties instead of giving definite answers gave evasive reply to the complainant firm. 4.After 4 months, to the utter surprise of the complainant, another Surveyor R.C. Chug & Company, 2114, Sector 21-C, Chandigarh was appointed. On 4.12.1995, Sh. R.C. Chug visited the site along with Yudhvir Singh, partner of the firm. All information and documents were once again supplied to the second Surveyor. Mr. R.C. Chug was convinced about the replacement of carding machine as he himself contacted various manufacturing concerns at Ludhiana and Panipat,. The complainant firm again started waiting to receive the relief in the shape of claim. That after waiting again for substantial time, the complainant firm started making visits to the opposite parties, but of no use. 5. In September 1996, the complainant firm received another letter from Sh. Duggal Gupta & Associates from where the complainant firm came to know the appointment of the third Surveyor. The third Surveyor sought certain information from the Surveyor. The letter dated 12.9.i996 was annexed as Annexure C-8. As alleged the letter was not in line with the terms and conditions of the insurance policy. After replying to the letter, the complainant again waited for a substantial period, the complainant again started visiting the opposite party. It is alleged that opposite parties from the very first day were not fair towards the complainant firm, it replaced Surveyors one after the other. The opposite parties vide letter dated October 10, 1997 informed the complainant firm about the rejection of the claim. A copy of the rejection of claim either is annexed at Annexure C-10. The complainant firm has alleged that the rejection of the claim was wholly on irrelevant and irrational grounds. The complainant firm has also alleged that the action of the opposite parties in rejecting the claim was with ulterior motive, mala fide intention, extraneous reasons and was not due to bona fide reasons. The complainant firm asserted that the total loss of the firm was Rs. 14,92,750/-. The complainant firm has prayed the opposite parties, the Insurance Company be directed to pay Rs. 14,92,750/- along with interest @ 12% p.a. and costs of Rs. 5,000/-. 6.The opposite parties while controverting the claim has raised preliminary objections. There is no deficiency in rendering service to the consumer. The opposite parties have stated that the insurer-opposite parties appointed the Surveyor immediately on the receipt of information for carrying out the preliminary survey of the alleged damage caused by the fire and thereafter due to some controversy another Surveyor and an Investigator were appointed who examined thread-bare each aspect of the controversy and when it was found that the claim was not payable, the same was repudiated vide letter dated 10.10.1997. The opposite parties asserted that if the complainant firm was not satisfied that it should have gone to the Civil Court. The Insurance Company appointed Investigator and after going through the report of the Investigator applied its mind and repudiated the claim and the repudiation in that situation could not be called to be arbitrary or without application of mind. The insured firm had neither maintained nor produced any document/books of accounts to show the loss to substantiate his contention. Non-supply of documents such as previous three years audited balance sheets, sales/purchase register was an intentional act to over-reach the opposite parties to conceal the factual position regarding financial health of the unit. The complainant firm was in great financial difficulty and the complainant was defaulter in repayment of loan raised from Punjab Financial Corporation and Punjab National Bank. The opposite parties has also asserted that the factory was closed during night and electric supply was cut from the main supply. In that situation there was no chance of short ircuiting. The opposite parties did not believe the assertion of the complainant firm. The opposite parties have alleged that the complainant firm has concealed the material facts relevant to the controversy and has tried to over-reach the Consumer Court to get bogus claim. The complainant firm has failed to prove the claim from the documentary or circumstantial evidence and the repudiation was done on the basis of material collected. The story propounded by the complainant firm could not stand to test of scrutiny and was highly unbelievable. No Fire Brigade was requisitioned and no intimation regarding the fire was ever made to the Fire Fighting Agencies. Informing police was only a padding work done with a view to ensuring the smooth passing of the claim by over-reaching the Insurance Company. The investigations carried out by the insurer laid bare the facts, in their stark reality and clearly removed the grain from the chaff and the claim was repudiated being false, fabricated and frivolous. The narration of the opposite parties revealed that actually one Surveyor was deputed, i.e. M/s. Duggal Gupta & Associates and not three as alleged in the complaint. Initially M/s. R.P. Bhasin & Company was deputed to carry out the preliminary survey to know the magnitude of the loss but his report remained inconclusive because the complainant was not able to lend him requisite assistance because of his bad health. When Sh. R.P. Bhasin failed to submit his report because of the reasons referred to above, Sh. R.C. Chugh was deputed as a Surveyor and unfortunately Sh. R.C. Chug died all of a sudden and thereafter the insurer was left with no option but to depute M/s. Duggal & Associates for carrying out the final survey. Since vital documents required by the Company were not supplied by the complainant firm, it became imperative to depute an Investigator and M/s. Chopra Associates were accordingly deputed who submitted the report (R-l). The Surveyor visited the factory premises on 25.9.1997 with a representative of Financial Corporation, Ludhiana.

BOTH the parties led their evidence on affidavits and documents. We have heard the Counsel for both the parties and have gone through the records on file. The following issues are required to be considered in the case in hand : (1) Whether there was any delay in settlement of the claim which amounts to deficiency in rendering service on the part of the Insurance Company ? (2) Whether repudiation of the claim made by the Insurance Company is legal ? (3) To how much compensation, if any, the complainants are entitled to ? Issue No. 1 ; The fire broke out on the intervening night of 13th and 14th of July, 1995. The Insurance Company was informed about the occurrence on 14.7.1995 (C-3). The police was reported on 14.7.1995 (Ex. C-4). On the investigation, the police confirmed that the cause of damage was fire arising from the accident. Surveyor visited the spot in July, 1995. Another Surveyor Company Duggal Gupta & Associates were appointed. The Surveyor proceeded to the site on 16.2.1996 and thereafter again on 8.3.1996 and finally submitted the report (R-4). The complainant sent his consent for acceptance of the claim as assessed by the Surveyor on 20.4.1996 (R-3). Finding doubt in the matter of fire, ultimately repudiation of the claim was made by the Insurance Company on 10.10,1997 (C-10). This is a case where delay of about 2Vi years in repudiating the claim per se amounts to deficiency in rendering service on the part of the Insurance Company. When Ex. R-4 Report was made by Duggal Gupta & Associates, accepting the story of commission of fire and assessing the loss suffered by the complainant at Rs. 5,95,000/-. There was no occassion for the Insurance Company to appoint a fourth Investigating Agency in the garb of an Investigator. Whatever material was available, on that basis the loss was assessed. There is no material produced on the file by the Insurance Company that any such permission was taken from the Insurance Inspector to appoint the Investigator. There is nothing on the record that the duty of the Investigator was not only to assess the loss suffered but also to investigate as to how the fire broke out. This Commission has already held that the object of appointing Surveyor is to determine the loss, if any, occurred and to assess the compensation payable. These functions cannot be separated. Rather they are co-related. It is the primary object of every Surveyor first to find out the loss, if any, suffered. It is only thereafter the question of assessment of compensation would arise. The practice on the pare of the Insurance Company to go on appointing Surveyors one after the other till someone makes a report in their favour has already been depricated on the judicial side. In this context, reference be made to decision of the Rajasthan State Commission in Virendra Choudhary v. United India Insurance Co. Ltd. & Anr., III (1996) CPJ 154, where the provision of Section 64 UM(G)(3) were referred to and it was observed that the Insurance Company could not go on appointing one Surveyor atter the other. It may be observed that no reasons were put forth by the Insurance Company for not accepting the Duggal Gupta Associates Surveyors Report (R-4) and appointing another Investigator. There was a delay in settling the claim which per se amounts to deficiency in rendering service. So held. Issue No. 2 : C-10 is the repudiation letter dated October 10, 1995. In the repudiating letter, it has been referred that on investigation it came to notice that even the New India Assurance Company had repudiated the claim of the complainant towards stocks as he was unable to substantiate the same. This was no ground for the opposite party to repudiate the claim. The report of the Investigator Chopra Associates (R-l) mentioning that the insured in all certainty engineered the fire in the factory surreptitiously for bailing out himself of the financial mess on the parachute of insurance cover relating to the mounting liabilities of loans availed from the Punjab Financial Corporation and Punjab National Bank, without any prospects of rejuvenating the sick unit. This report cannot be accepted as repudiation of claim is based on unconfirmed report. In our considered view, no importance can be attached to such reports as it has not been supported by any evidence much less cogent that the complainant in all certainty engineered the fire in the factory. We hold the letter of repudiation as illegal as not based on any material as it is not sustainable in the eyes of law. So held. Issue No. 3 :

THIS Commission has held that when there are two reports made one in favour of the consumer can well be accepted, more so, when there were no compelling circumstances to ignore the same. The present is a case where the first report (R-4) being in favour of the complainant promptly made was ignored without any reason. In this report, loss has been assessed at Rs. 5,95,000/- which can well be accepted for the purposes of disposing of this complaint. The complainant is, therefore, held entitled to the aforesaid amount.

THE present is, therefore, a case of deficiency in rendering service on the part of the Insurance Company in not settling the claim within a reasonable time and just before submitting version in response to the complaint, repudiating the same. THE Insurance Company took about 2 years'' time even to repudiate the claim after the Surveyor Duggal Gupta & Associates had made the report. THE complaint is allowed with a direction to the opposite party to pay Rs. 5,95,000/- with interest @ 12% w.e.f. the date after allowing three months from Surveyor''s report for settlement of the claim till payment. THE complainant would also be entitled to costs of litigation which are assessed at Rs. 2,000/-. Complaint allowed with costs.