S.D. Lighting vs Cholamandalam M.S. General Insurance Co. Ltd.

COMPLAINANT as well as the Opposite Party before the State Commission have filed these appeals against the judgment and order dated 14.3.2007 passed by the State Consumer Disputes Redressal Commission, Chandigarh, UT (in short, ''the State Commission'') in Complaint Case No. 87/06 whereby the State Commission partly allowing the complaint has directed the Opposite Party Insurance Company to pay Rs. 9,97,496 to the Complainant along with interest @ 9% p.a. from the date of Surveyor''s report, i.e., 25.10.2006 till the date of payment. Rs. 10,000 were awarded towards costs. Facts:

Complainant firm obtained two insurance policies from the Appellant in First Appeal No. 254/07 (hereinafter to be referred to as ''the Appellant''), one against burglary and house -breaking and the other for fire and special perils for its manufacturing unit situated at Sonepat for a sum of Rs. 40 lakh by paying the premium of Rs. 18,514. The policies were valid for the period from 24.12.2005 to 23.12.2006 (mid -night).

UNFORTUNATELY , a fire broke out on the night intervening 3rd/4th January, 2006 at the factory premises of the Complainant (hereinafter to be referred to as ''the Respondent'') due to which the entire stock was burnt and the machinery was extensively damaged. It took 3 hours to extinguish the fire by Fire Brigade. A claim for Rs. 20,55,130 regarding the loss of finished goods, semi -finished goods, raw material, packing material, flair machine, vacuum pump, spare parts, etc. was lodged with the Appellant. On receipt of information, Appellant appointed Surveyor, M/s. Mehta and Padamsey Surveyors Pvt. Ltd., to conduct the survey and assess the loss. The said Surveyor submitted its preliminary report on 5.1.2006. Thereafter, Appellant appointed Surveyor/Investigator Laxman Das Arora and Associates for further investigation into the matter. The Investigator submitted its addendum report on 10.8.2006 stating that despite the correspondence with the Bankers, Fire Services and the Complainant no legible proof regarding the sale made by the Complainant firm was forthcoming and the sales, if any, were being made to M/s. Satyam Electro Mech which was the sister concern of the Respondent. Subsequently, Appellant appointed another Investigator, Retd. Captain A.N. Chopra to further investigate the matter. On 29.8.2006, Investigator, A.N. Chopra submitted his report stating that the insured factory was a demo unit of the parent unit, i.e. M/s. Satyam Electro Mech and the majority of sales made by the Respondent Firm were to its parent unit who refused to show the record of sale of goods purchased from the Respondent. Ultimately, M/s. Mehta and Padamsey, Surveyors assessed the loss to the tune of Rs. 4,25,432 vide report dated 25.10.2006. Despite submission of the documents and the repeated letters, the Appellant did not settle the claim of the Respondent. Complainant, being aggrieved, filed the complaint before the State Commission claiming sum of Rs. 20,55,130 along with interest @ 12% p.a. w.e.f. 4.1.2006 till payment.

APPELLANT , on being served, entered appearance and filed its written statement taking the preliminary objection that the Respondent Firm being engaged in the commercial activities was not a ''consumer'' as defined in Section 2(d)(ii) of the Consumer Protection Act, 1986; that the complaint would require voluminous evidence to be recorded which could not be done before a Tribunal which decides the cases in summary manner and the matter should be referred to the Civil Court. On merits, it was pleaded that the documents asked for were not supplied by the Respondent firm; that the Respondent did not co -operate with the three Surveyors appointed by it to assess the actual loss suffered by the Respondent; that the insured factory was a demo unit of parent unit, i.e. M/s. Satyam Electro Mech and majority of sales were made by the Respondent through its parent unit who in turn refused to show the records of the sales of goods; that it was liable to pay the only sum of Rs. 4,25,432 assessed by M/s. Mehta and Padamsey, Surveyors.

STATE Commission rejected the preliminary objection taken by the Appellant regarding maintainability of the complaint relying upon the ratio of the judgment in the case of M/s. Harsolia Motors v. NIC, : I (2005) CPJ 27 (NC) : 2005 (1) CPC 53, and after scanning the material available on record and going through the evidence led by the parties, came to the conclusion that the Surveyor was not justified in making deduction @ 50% towards unsaleable/dead stocks. Accordingly, State Commission allowed the complaint and directed the Appellant to pay Rs. 9,97,496 to the Complainant along with interest @ 9% p.a. from the date of Surveyor''s report, i.e., 25.10.2006 till the date of payment. Rs. 10,000 were awarded towards costs. On merits, State Commission observed as under: The Surveyor had deducted towards unsaleable/dead stocks @ 50%. It is not the case that it was a condemned stock. At best, the Surveyor could have deducted @ 20% on Rs. 12,28,868 (13,05,681 -76,813) which the value of stock burnt/damaged in the fire i.e. it could have deducted Rs. 2,45,774 and balance comes to Rs. 9,83,094 and not Rs. 4,11,030 as assessed by the Surveyor. In Clause 11.2 the Surveyor had assessed damaged to the machinery as Rs. 24,402. The total comes to Rs. 10,07,46 out of which Rs. 10,000 are to be deducted on account of excess clause. Hence, net liability of OP comes to Rs. 9,97,496. Therefore, the complainant firm is entitled to the same.

The Surveyor had assessed the loss at Rs. 4,25,432 but OP had not even paid this amount to the complainant and made it conditional that until and unless it signed discharged voucher for the said amount, the amount would not be sent. This was certainly wrong on the, part of the Insurance Company.

Feeling aggrieved by the order passed by the State Commission, both parties have filed appeals. First Appeal No. 252 of 2007 has been filed by the complainant seeking enhancement of the amount whereas First Appeal No. 254 of 2007 has been filed by the Appellant for setting aside the impugned order of the State Commission.

WE have heard the Learned Counsel for the parties at length.

LEARNED Counsel appearing for the Appellant contends that initially the Respondent supplied to the Surveyor an unsigned profit and loss account and balance sheet for the year 2004 -05 according to which closing stock was Rs. 8,89,881 and later on a signed balance sheet for the same period was supplied showing the closing stock at Rs. 13,05,681; that the signed balance sheet was found to be false and incorrect as the administrative charges and expenses were shown as manufacturing expenses and the said balance sheet was intended to be used to claim an inflated amount of loss; that the Surveyor had rightly observed that with the meagre sales the Respondent could not have kept stored such a huge amount of stock as they claim; that the factory had run only 42 days in current year producing only 910 glass tube shells per day against the production capacity of 4000; that the purchases remained stagnant but the closing stock increased from Rs. 4,20,769 to Rs. 19,37,905 in three years even when the production was nominal and sales negligible; that keeping in view the possibility of unsaleable/dead stock in the shown amount of the closing stock, the Surveyor made deduction of 50% from the assessment of stock; that the account books were not properly maintained by the Respondent; that the Respondent was a demo unit and majority of sales by it were to its parent company, i.e., M/s. Satyam Electro which refused to provide any details to the Surveyor; that it was found that the stocks sold by the Respondent had been returned by the buyers due to poor quality and they were stored by the Respondent; that such unsaleable/dead stocks can be sold at only nominal rates; that in the absence of proper records and accurate method of evaluating the dead stock, the Surveyor was justified to treat them at 50% on ad hoc basis; that the Appellant was justified in appointing one Surveyor and two Investigators to assess the loss due to non -co -operation of the respondent and to know the role of its parent company in the loss; that the Surveyor had correctly assessed the loss at Rs. 4,25,432. As against this, learned Counsel appearing for the Respondent contends that due to absence of payment of claim by the Appellant, the investment of Rs. 40 lakh by the Respondent remained wasted and without any return; that the Respondent availed of cash credit facility from its bankers; that due to non -payment of claim it was liable to pay penal interest @ 12% p.a. and other charges to its bankers; that due to delay in settlement of the claim by the Appellant, the Respondent suffered a loss of Rs. 4 lakh towards profit for a period of over 10 months.

THE question which falls for our consideration is as to whether the Surveyor was justified in making deduction @ 50% towards the unsaleable/dead stock.

THE facts of the case much or less are not disputed before us. The issuance of the policies have not been denied. A fire took place on the night intervening 3rd/4th January, 2006 due to which the entire stock was burnt and the machinery was extensively damaged. A claim of Rs. 20,55,130 was lodged with the Appellant. On receiving intimation, Appellant appointed one Surveyor and two Investigators. The Surveyor submitted his report dated 25.10.2006 assessing the loss at Rs. 4,25,432 which according to the Appellant was payable to the Respondent against the claim amount of Rs. 20,55,130. We agree with the view taken by the State Commission that the unsigned profit and loss account and balance sheet allegedly submitted by the Respondent to the tune of Rs. 8,89,881 cannot be considered to be correct because it was not signed by any authorized person and moreover the Respondent had repeatedly denied it. The other report regarding the profit and loss account and balance sheet as certified by the concerned government assessing authority on 15.2.2006 after the date of fire and submitted to the income tax authorities on 15.12.2005, prior to the fire, appears to be genuine report stating the amount to be Rs. 13,05,681. This report appears to be genuine as it was submitted to the income tax authorities on 15.12.2005 and at that time the Respondent would not have presumed that a fire would break out in his godown on 3/4th January, 2006. M/s. Mehta and Padamsey Surveyors Ltd. in its report dated 25.10.2006 at page 13 has mentioned as under:

WE agree with the view taken by the State Commission that the Surveyor without any justification had deducted towards unsaleable/dead stocks @ 50% on ad hoc basis. It is nobody''s case that the unsaleable/dead stock was lying in the insured premises. The State Commission held that the Surveyor at best could have deducted 20% on Rs. 12,28,858 {Rs. 13,05,681 (stock lying in the insured premises) - Rs. 76,813 (Sound stock lying in insured premises)} which was the value of stock burnt/damaged in fire. State Commission has also done this on ad hoc basis which is reasonable and acceptable. The 20% comes to Rs. 2,45,774 and the balance comes to Rs. 9,83,094 and not Rs. 4,11,030 as assessed by the Surveyor. The Surveyor had assessed damage to the machinery at Rs. 24,402. Thus, the total loss comes to Rs. 10,07,496 out of which Rs. 10,000 are to be deduced on account of excess Clause. The Respondent is entitled to receive Rs. 9,97,497 as rightly awarded by the State Commission to the Respondent. Complainant/Respondent has filed the appeal seeking enhancement of compensation. Respondent has failed to refer to any evidence on the basis of which the amount awarded by the State Commission could be enhanced. In the absence of any worthwhile evidence on record, the plea taken by the Respondent that the amount should be enhanced cannot be accepted. First Appeal No. 252/07 filed by the Respondent is liable to be dismissed. For the reasons stated above, Appeals filed by both the parties are dismissed without any order as to costs.

Registry is directed to refund the sum of Rs. 35,000 deposited by the Appellant Insurance Company as statutory deposit along with accrued interest.