Raja Tobacco Traders vs National Insurance Co Ltd

1.THE consumer dispute raised in the present complaint is in regard to the non-settlement of an insurance claim lodged by the complainant with the Insurance Company seeking indemnification of the loss suffered by it on account of the loss /damage to the stock of tobacco stacked in a godown which caught fire in the wee hours of 4.10.2000.

IN nutshell, the case of the complainant is that it is engaged in the business of tobacco and is registered with Tobacco Board for carrying its business. The complainant had availed financial services from opposite party No. 2 Andhra Bank and was enjoying the facilities. In order to safeguard its interest to the stock of tobacco, the complainant had obtained two insurance policies. one a Fire Policy bearing number 550900/2000/3100071 in the sum of Rs. 60,00,000 for the period 22.4.2000 to'' 21.4.2000 and another Fire and Special Perils Policy No. 550900/2000/3100342 in the sum of Rs. 10,00,000 which was valid from 23.7.2000 to 22.7.2001, by paying the requisite premium. The complainant had hired a godown in the town of Tangutur where he had stored the tobacco in bales as well as in gunny bags. According to the complainant, the value of the tobacco stored in the said godown was Rs. 71,00,000. As the ill luck would have it, on 4.10.2000 at about 3.00 a.m., fire incident was reported in the godown and fire tenders were summoned at the spot and the fire could be extinguished after several hours as a result of which, most of the stock of tobacco lying in the godown was damaged. Complainant being informed of the fire incident reached the spot at about 10.00 a.m. and lodged a report with the police. Even before that, the preliminary surveyor of the Insurance Company on getting the information about the fire incident reached the spot and made inspection of the site when the fire was still in progress. After two days, complainant lodged a claim of Rs. 71,00,000 with the opposite party-Insurance Company. It would appear that preliminary surveyor N. Varha Swamy who had visited the spot between 4th October to 6th October, 2000 submitted his preliminary report dated 24.10.2000. In the said report, as to the cause of occurrence, the preliminary surveyor observed as under: "It was informed by the insured that he has left, the office premises by 8 p.m. on 3.10.2000. On the next day morning, he received a telephone message that the godown was on fire from 3 a.m. on 4.10.2000. After the receipt of phone call he was rushed to the scene by 9 a.m. on the same day. But by that time insurance people and fire brigade were there and fire-fighting process is on. Then he said that he made inquiries with the neighbours and he said that he had learnt that the fire broke out at about 2 a.m. and the same was noticed by the neighbouring tobacco company M/s. Vijaya Tobacco enterprises watch man Mr. Ta. Venkateswarlu and he informed the matter to their land lord Sri Chadalavada Chenchuramaiah, and in turn he informed the matter to the fire station office, Tangutur. They rushed to the scene at about 3 a.m. and started pouring water, but they were unable to control the fire from front side. Then with the help of godown owner son, they broke open the rear shutter, entered into godown and started pouring water. But they failed to control the fire and then they requested the Ongole fire station officer, Ongole to help extinguish the fire in the premises. They too came by 6 a.m. and they tool failed to extinguish the fire but in vain. But by the time, he came the insurance people were there. Sri CH. Krishna Murthy, ADM, Ongole and Development Officer Sr. R. Prabhakara Rao were present at the time of survey and other is I."

IN regard to the extent of loss due to the fire to the stock of tobacco, the said surveyor observed that claim made by the complainant was exaggerated as according to Surveyor, the tobacco which was subjected to fire was spurious and market value of which could not be more than 17,00,000. Thereafter, Teccons and Co., Surveyors, Loss Assessors were appointed as Surveyors who submitted their interim report. In regard to cause of loss, the report observed as under: "On inquiry the insured informed as observed by us they ruled out any electrical failure as the cause of fire in the godown, however they did not rule out the possibility of sabotage by outsiders hence they lodged a case with police to find out the reasons. However, the insured expressed their ignorance about who could be the saboteurs. Moreover, in our opinion, the fire had commenced from all sides of the stock seeing the uniform intensity of fire all over the stocks in the godown. The surveyor Mr. N. Varahswamy has stated in his preliminary report that fire to the stocks in the subject godown was due to well planned and executed act of the insured." Teccons and Co. also made the following conclusion and recommendations: "Conclusion: 1. We are not in a position to confirm the exact cause of damage as explained above. 2. The insured was found to be lackadaisal and callous to the firefighting and salvaging operations as explained in the report. 3. The insured''s claim for the quantity of stocks and the rate are found to be highly exaggerated." "Recommendation- We recommend that this claim of the insured is to be investigated by an independent agency under the circumstances of the case explained above especially to find the cause of the fire accident and about the exaggerated claim for value of stocks at risk."

IT would further appear that going by the recommendations made in the preliminary and interim report, the Insurance Company appointed an Investigator Suri Security Services and Consultants who after conducting the requisite investigation concluded as under: "There was a fire accident in the premises of M/s. Raja Tobacco, Tangutur 4.10.2000. The same has been appeared in the vernacular daily also the police personnel has registered the case vide FIR No. 79/2000 at Tangutur Police Station. The police personnel with out going in to the details of the cause and origin of fire without attempting to ascertain the cause scientifically has closed the case as ''Fire accident due to short circuit''. The premises which is stored with the tobacco reveals the carelessness of the insured which is also a violation of the policy condition. It is well known fact that tobacco industry since 1996 is in its doldrums and the industry is in recession phase with lot of problems. The tobacco board in its certificate has clearly stated that the insured''s purchases for the three consecutive years is Rs. 40 lakh only. Basically no prudent trader will increase his stock while the industry itself is under going the difficult period which is in the stage of announcing ''crop-holiday'' due to surplus production and decline in the demand mainly due to the spirit of U.S.S.R., which was the major market for the India''s tobacco products which led to the restriction of the area to be cultivated with tobacco crop. Hence we strongly believe that the insured except the purchases he has made with the tobacco board has not made anyother out side purchases. Further, the insured in spite of our several requests have not furnished the details of the purchases made by him other than purchases made from the tobacco board to cross check the same, which strengthened our opinion. The sudden enhancement of sum assured by insuring the tobacco stock of Rs. 10 lakh more, with out any direction from the financier (Andhra Bank) is not answered at all by the insured. Though the insured was doing the business since 1996 the lease / rent agreement was entered in January 1 only which sounds strangely and perhaps it may be to create proper records as a prelude of the claim. On the basis of the above background we suspect the origin and cause stated by the police personnel which is not having any scientific analysis is not correct but only a stage managed and concocted one. As the assignment was allotted after 75 days of the occurrence of fire and also as the insured has taken very long gap of 11/2 years to reply our queries, we too could not get the scientific proof for the cause of the fire. Hence the insurer is suggested to take the appropriate decision on the claim."

IN the meantime, Surveyor Teccons and Co. had given their final report dated 10.9.2002, thereby assessing the net payable loss at Rs. 16,75,363. However, the said report was without prejudice but concluded as under: "After thorough study of the claim by physical inspection at the godown, weighments of damaged stock, laboratory analysis, scrutiny of the documents furnished by the insured, obtained from Bank and Tobacco Board, we have assessed the loss in the subject fire accident as Rs. 16,75,363 after deduction, salvage value of Rs. 53,600, breach of warranties of Rs. 1,87,262 and policy excess of Rs. 10,000. We have detailed our findings regarding the cause of accident in the above paras. The exact cause of loss can be arrived only after considering the findings of investigation report. The admissibility of the claim under the subject policy can be concluded only after considering the investigator report."

BASED on the said report of the Surveyors and the Investigator, the Insurance Company vide letter dated 31.3.2003 repudiated the claim of the complainant largely on the strength of Clause 8 of the terms and conditions of the policy as also on the ground that complainant had failed to give exact cause of fire by stating as under: "You have stated in the claim that the cause of fire was ''NOT KNOWN'' You have not taken any steps to find out the precise reason/cause as well. It is also observed from the record submitted by the investigator/Surveyors that the contents damaged were of low grade of tobacco with exaggeration of quantity of stocks and its value. Under these circumstances we conclude that the cause of loss is not properly substantiated based on reasoning and particulars of the tobacco stocks involved in the fire incident were highly exaggerated both in quantity and quality, which invokes condition No. 8 of our FIRE POLICY which reads as under: IF THE CLAIM BE IN ANY RESPECT FRAUDULENT, OR IF ANY FALSE DECLARATION BE MADE OR USED IN SUPPORT THEREOF OR IF ANY FRAUDULENT MEANS OR DEVICES ARE USED BY THE INSURED OR ANY ONE ACTING ON HIS BEHALF TO OBTAIN ANY BENEFIT UNDER THE POLICY OR IF THE LOSS OR DAMAGE BE OCCASSIONED BY THE WILFUL ACT OR WITH THE CONNIVANCE OF THE INSURED, ALL BENEFITS UNDER THIS POLICY SHALL BE FORFEITED."

AGGRIEVED by the said repudiation of his claim, the complainant has filed the present claim seeking total compensation of Rs. 1,26,41,729 towards the claim amount along with interest @ 18% p.a. upto 31.1.2005 i.e. till filing of the complaint. Besides a sum of Rs. 5,00,000 towards harassment and mental agony caused to the complaint besides pendente lite and future interest @ 18% per annum and cost of Rs. 50,000 was also claimed.

ON being noticed on the complaint, the Insurance Company resisted the claim by filing written version thereby raising several preliminary objections in regard to the maintainability of the present complaint under the provisions of the Consumer Protection Act as also justifying the repudiation of the claim. It is dented that Insurance Company committed any deficiency in service by repudiating the claim of the complainant. The Insurance Company gave out several reasons why it had repudiated the claim of the complainant based on different Survey and Investigator reports. Liability to pay any amount much less the amount claimed by the complainant is specifically denied. In the rejoinder, complainant controverted the objections and pleas raised in the written version of the Insurance Company and have reiterated the averments and allegations made in the complaint.

IN the written version filed by opposite party No. 2, they raised a plea that present complaint is not maintainable against them (bank) as the complainant had no cause of action against them. However, we are informed by the Counsel for the complainant that claim of the opposite party-bank in regard to the financial arrangement which existed between the parties, the complainant had settled the outstanding claim of the bank under One Time Settlement scheme.

IN support of their case, parties have largely relied upon the reports of the Surveyors and Investigator besides filing the supporting affidavits to the said reports. From the side of the complainant, affidavit of Gogineni Venkateswara Rao has been filed. We have perused the entire evidence and material brought on record and have heard Mr. K.P.S. Rao, learned Counsel representing the complainant and Mr. Kishore Rawat, learned Counsel representing the Insurance Company-opposite party and have considered their respective submissions.

IN this case, the factum of the complainant having taken two insurance policies in the sum of Rs. 60,00,000 and Rs. 10,00,000 in order to safeguard their interest against any peril to their stock of tobacco stored in the godown located in the town of Tangutur and that there was a fire incident in the said godown on 4.10.2000 at about 3.00 a.m. thereby damaging the stock of tobacco lying in the godown are not in dispute. Similarly, it is also not disputed that even when the godown was still on fire in the morning of 4.10.2000, information having been received by the Insurance Company, N. Varha Swamy was deputed and he reached the spot at about 9.00 a.m. and saw that fire was being extinguished by the fire tenders. It is also not disputed that as a result of the said fire, stock of tobacco was severely burnt and damaged. In the claim lodged by the complainant, complainant did not mention any specific cause of said fire which became the bone of contention before the Preliminary Surveyor, Surveyor, Investigator and lastly before the Insurance Company. The Surveyors and the Insurance Company had perhaps entertained suspicion over the cause of fire in absence of the complainant himself not coming out with any specific cause of fire. However, it is pertinent to note that even the Preliminary Surveyor, Surveyor and Investigator though entertained suspicion had not indicated any foul play committed by the complainant in the episode of fire so as to make undue enrichment out of the said incident. They narrated certain circumstances in their reports. Preliminary surveyor, Surveyor and the Investigator going by the attenuating circumstances as noted by them did not come to any conclusion as to the cause of fire.

THE crucial question which, therefore, arises for our consideration is as to whether on the basis of various circumstances enumerated by the above named Surveyor and Investigator, the complainant was disentitled to make any claim under the said two policies. Our answer is big ''NO'' because there exists overwhelming evidence and material on record which would rule out the possibility of any arson/mala fide stage managed fire by the complainant or its aides. In this regard, we may first of all refer to the police report which the Inspector of Police, Singarayakonda, submitted to the concerned Magistrate. The police after investigation had clearly ruled out the possibility of any foul play and on the other hand, based on the report of Assistant Engineer, A.P. Transco, C and O Section, Tangutur, report of Assistant Director Sri J. Vanaja and A. Sharad, Joint Director, Forensic Science Laboratories, Hyderabad as also the report of the Station House Officer A.P., Fire Services, Tangutur, came to the conclusion that cause of fire may be ''short circuit''. Since there is reference of the report of Forensic Laboratory of the Government of Andhra Pradesh in the above report of the police, it would be of advantage to take note of the report of the Assistant Director of the said laboratory. The above named forensic laboratory after analyzing the sample of remnants / ashes lifted from the spot came to the conclusion that "no inflammable hydrocarbons of mineral oil were found in the said sample". Although, surveyor had indicated that complainant had deputed a boy to purchase five litres of diesel from a nearby petrol pump which might have been used for setting the fire, which apprehension was also entertained by the Insurance Company but report of the forensic laboratory rules out such possibility.

HAVING regard to the evidence and material brought on record and the attenuating circumstances, we are of the opinion that cause of fire in all probability was electric short circuit. In any case no concrete evidence has been brought on record by the Insurance Company to hold that fire which occurred in godown of the complainant was a mischievous act or a stage managed affair in order to make wrongful gain. In our view, in absence of any concrete evidence and material having been broughf on record to support the theory of stage managed fire, the Insurance Company going by the relevant circumstances and the number of reports coming from public authorities was not justified in repudiating the daim, at least on the ground that complainant failed to disclose or establish the cause of fire.

THIS takes us to the next question as to what was the extent of loss which the complainant can be said to have suffered on account of loss to his stock of tobacco lying in the godown due to said fire incident. In this regard, the case of the complainant is that he is registered with the Tobacco Board and had been largely making the purchases of tobacco from the said Tobacco Board and also from certain other dealers of tobacco as also directly from farmers/growers of tobacco. Several documents in the shape of purchase invoices of the tobacco purchased in the year 1998 and 1999 as also the tobacco which was sold during that period have been filed after deducting the amount of tobacco so sold from the purchase value of the tobacco. According to the complainant, the value of the stock of tobacco as on the date of peril was Rs. 71,00,000. It is somewhat surprising to note that there were no purchases of tobacco made during the relevant period or at least few months preceding October 2000. Mr. Rao seeks to explain this on the ground that export of tobacco to U.S.S.R. had been stopped due to prevailing situation there and, therefore, the farmers had decided not to grow the crop of tobacco during the cropping season of 2000. Nothing has been brought on record to substantiate this aspect.

AS to the extent of stock of tobacco which the complainant was storing in the godown, we have three reports. In the first preliminary report dated 24.10.2000, N. Varha Swamy made a sweeping observation that the tobacco stored was spurious and the complainant had made exaggerated claim in regard to the quantity of tobacco which was stored in the godown. He estimated the loss to the stocks of tobacco to be not more than Rs. 17,00,000. In the interim report, the Surveyor Teccons and Co. gave an estimate of around 19,26,225 and in the final report after deduction of certain amount going by the terms and conditions of the policy, he assessed the net loss at Rs. 16,75,363.

MR. Rao, Counsel for the complainant has assailed the assessment of loss made by the surveyor on the ground that neither the quantity of tobacco noted by the surveyor is correct nor the rate at which he had computed the value of the tobacco viz. Rs. 15 per kg is correct. He submitted that surveyor had grossly undervalued the net loss suffered by the complainant. In this regard, Mr. Rao again referred to the purchase invoices which showed the quantity of tobacco purchased by them during the period 1998-99. On the other hand, Mr. Kishore Rawat has invited our attention to the certificate issued by the Tobacco Board to Sub-Divisional Police Officer dated 21.11.2000 in which the average price of tobacco at which the said company had purchased NO-G grade tobacco during 1997, 1998 and 1999 were given as under: tobacco at which the said company had purchased NO-G grade tobacco during 1997, 1998 and 1999 were given as under: Year Quantity of Tobacco Average Price purchased Rs./Kg. 1997 23043 22.39 1998 83220 7.16 1999 37343 13.06

GOING by the said average price of tobacco during the three preceding years, weighted average price of the tobacco would come to Rs. 11.14 per kg. However in another communication dated 28.2.2002 addressed to M/s Suri Security Services and Consultants, the said Board gave the average price per kg as under: Sl. No. Year Qty. of tobacco purchased (kgs.) Value of tobacco (Rs.) Avg. Pr. (Rs./Kg.) 1. 1999 79905 15,00,776 18.78 2. 2000 No purchases made by the Company.

TAKING both these statements, in our view, the surveyor was fully justified in coming to the conclusion that average price of the tobacco during the relevant period lying in the stock of the complainant was Rs. 15 per kg. The surveyor had given cogent reasons for making deduction of certain amount (s) from his original assessment of Rs. 19,26,225 and after deducting the salvage value of Rs. 53,600, he had correctly arrived at net loss at Rs. 16,75,363.

HAVING considered the matter in Its entirety, we are of the view that the complainant at best is entitled to indemnification to the above extent. Since the claim was filed on 6.10.2000 and remained pending with the Insurance Company for a longer period up till 31.3.2003 when it was repudiated unjustifiably, as we have already found, we are of the view that complainant need to be compensated further by awarding interest on the said amount at least w.e.f. 1.7.2001 till the date of payment. We consider award of interest @ 10% p.a. would be reasonable.

IN the result, complaint partly succeeds and is hereby allowed in the manner that opposite party is directed to pay a sum of Rs. 16,75,363 along with interest @ 10% p.a. w.e.f. 01.07.2001 till the date of payment. The payment shall be made within a period of eight weeks from the date of this order, failing which the rate of interest shall stand enhanced to 12% p.a from the date of . default. In the facts and circumstances of the case, we do not make any order as to costs. Complaint partly allowed.