United India Insurance Co. Ltd. vs SINDHI SWEETS

-THE petitioner is aggrieved by the order of dismissal of their appeal No. 462 of 1999 filed before the State Consumer Disputes Redressal Commission, Punjab.

(i) The brief facts of the case as Per case of the comPlainant/resPondent are that the sons of Pritam Singh took fire insurance Policy for a sum of Rs. 3,50,000 for Period commencing from 20.1.1995 to 19.1.1996 for covering the risk of loss caused by fire to stock and machinery lying and stored in Premises No. 4769, Ram Gali, Shivaji Nagar, Ludhiana. The said comPlainant, M/s. Sindhi Sweets had obtained credit limit to the tune of Rs. 1.50 lakh against hyPothecation of stocks and had further obtained a facility of term loan to the tune of Rs. 1.00 lakh against machinery from State Bank of Patiala.

(ii) On the night intervening 14/15.10.1995 at 2.30 a.m., a fire took Place in the Premises and in sPite of massive attemPts to control the fire made by Iqbal Singh, Charanjit Singh, Ranjeet Kaur, Ms. GurPreet Kaur and neighbours, the same could not be controlled. Iqbal Singh sustained some burn injuries as a result of which, he died in Christian Medical College and HosPital, Ludhiana. A comPlaint was lodged vide DDR No. 27 dated 15.10.1995 with Police Station Div. No. 6, Ludhiana. In the fire, in addition to loss of stock and machinery, two scooters, i.e. one LML VesPa, which did not have even registration number as it was a new one and another Bajaj Chetak scooter along with T.V., refrigerator and other household articles were fully destroyed. Though, the comPlainant suffered a loss of Rs. 6,01,863.95, yet the comPlainant sought comPensation of Rs. 3,50,000, under the Policy.

(iii) One Surveyor, Mr. Kiran KaPoor, Chartered Accountant of M/s. KaPoor and Associates, Surveyor and Loss Assessor had assessed the loss of Rs. 2,86,764. For the reasons best known to the Insurance ComPany, they aPPointed another Surveyor, M/s. P. Kumar Garg and Associates. He reduced the amount of loss assessment to a Paltry sum of Rs. 93,600 as comPensation. Such a Surveyor''s rePort given without giving an oPPortunity to the comPlainant, could neither be asked for legally nor could be acted uPon by the insurers. The comPlainant/resPondent claimed a sum of Rs. 3,50,000 with interest @ 18% P.a. on the assessed loss from 15.10.1995 till the date of Payment.

The Insurance ComPany justified the restricted claim of Rs. 93,600 on the basis of the rePort of M/s. P. Kumar Garg and Associates of Rohtak, dated 31.1.1997. It had been aPProved but the comPlainant/resPondents had refused to accePt the amount of Rs. 93,600. The claim was resisted amongst others on the ground that the comPlainant was not a consumer under the Consumer Protection Act. It was also stated that the District Forum had no jurisdiction to entertain and to decide the comPlaint as it was of comPlicated nature and required evidence. It was also stated that inflated claim was made, the statements of stocks filed in the months of July and SePtember 1995 were actually filed after the occurrence of fire. Though the rePort dated 18.11.1996 of the first Surveyor, M/s. KaPoor and Associates, Surveyor and Loss Assessor had not been disPuted showing the loss to the tune of Rs. 2,86,764, yet it was alleged that on scrutiny of the Surveyors rePort, it was found to be devoid of reasoning, Proof, evidence and was based on surmises and conjectures and, accordingly, they aPPointed another Surveyor, M/s. P. Kumar Garg and Associates who assessed Rs. 93,600. Negligence or deficiency in service in settling the claim on the Part of the aPPellant was denied by M/s. P. Kumar Garg and Associates. It is evident that rePlication was filed by the comPlainants denying the allegation made in the written version and reiterating their own claim.

The District Forum rejected objection of the insurers and allowed the comPlaint and directed the Petitioners to Pay Rs. 2,86,764 along with interest @ 12% P.a.

(I) FeelIng aggrIeved by the order, the petItIoners fIled an appeal. (II) The State CommIssIon havIng heard, dId not fInd any substance In the appeal and made the followIng observatIons: "We do not fInd any reason for appoIntment of second Surveyor by the Ops. No cogent evIdence has been brought on record, whIch necessItated the appoIntment of a second Surveyor, by the Ops. SImply by statIng that scrutIny made by the offIcIals of the Ops. wIth regard to the contents of the report of the fIrst Surveyor, It was found devoId of reasonIng, proof, evIdence and was based on surmIses and conjectures was not enough. No reason, much less cogent one, had been advanced by the learned Counsel for the Ops. for appoIntment of a second Surveyor for the assessment of the loss occurred due to the fIre. It has been adversely commented by the NatIonal CommIssIon that the practIce of appoIntIng one after the other Surveyor has to be deprecated. We would lIke to refer to any order of thIs CommIssIon In UnIversal Processors v. OrIental Insurance Co. Ltd. & Anr., II (1998) CPJ 217, In thIs regard. The relevant portIon of the order In UnIversal Processors case reads as under: It has been held by the NatIonal CommIssIon In several cases that the Insurance CompanIes should settle the claIms wIthIn 3-4 months of the claIm fIled. No valId reasons have been put forth about the necessIty of appoIntIng the InvestIgator after the fIrst Surveyor had assessed the loss suffered by the complaInant as mentIoned above. It has been adversely commented by the NatIonal CommIssIon that the practIce of appoIntIng one after the other Surveyor has to be deprecated. Furthermore, a second Surveyor could not be appoInted wIthout the permIssIon of the Inspector of Insurance."

We have heard the learned Counsel for the partIes. Insofar as the questIon of condonatIon of delay of 18 days Is concerned, seeIng the averments made In the applIcatIon, we fInd that there are suffIcIent grounds to condone 18 days delay and accordIngly the applIcatIon for condonatIon of 18 days'' delay Is condoned.

AS regards validity of appointment of second Surveyor, it would be desirable to consider the impact of Sub-sections (2), (3) and (4) of Section 64UM, of the Insurance Act, which read as under: "(2) No claim in respect of a loss which has occurred in India and requiring to be paid or settled in India equal to or exceeding twenty thousand rupees in value on any policy of insurance, arising or intimated to an insurer at any time after the expiry of a period of one year from the commencement of the Insurance (Amendment) Act, 1968, shall, unless otherwise directed by the [Authority], be admitted for payment or settled by the insurer unless he has obtained a report, on the loss that has occurred, from a person who holds a licence issued under this section to act as a Surveyor or loss assessor (hereinafter referred to as "approved Surveyor or loss assessor"): Provided that nothing in this sub-section shall be deemed to take away or abridge the right of the insurer to pay or settle any claim at any amount different from the amount assessed by the approved Surveyor or loss assessor.

(3) The [Authority] may, at any time, in respect of any claim of the nature referred to in Sub-section (2), call for an independent report from any other approved Surveyor or loss assessor specified by [it] and such Surveyor or loss assessor shall furnish such report to the [Authority] within such time as may be specified by the [Authority] or if no time limit has been specified by [it] within a reasonable time and the cost of, or incidental to such report shall be borne by the insurer.

(4) The [Authority] may, on receipt of a report referred to in Sub-section (3), issue such directions as it may consider necessary with regard to the settlement of the claim including any direction to settle a claim at a figure less than, or more than, that at which it is proposed to settle it or it was settled and the insurer shall be bound to comply with such directions: Provided that where the [Authority] issues a direction for settling claim at a figure lower than that at which it has already been settled, the insurer shall be deemed to comply with such direction if he satisfies the [Authority] that all reasonable steps, with due regard to the question whether the expenditure involved is not disproportionate to the amount required to be recovered, have been taken with due despatch by him: Provided further that no direction for the payment of a lesser sum shall be made where the amount of the claim has already been paid and the [Authority] is of opinion that the recovery of the amount paid in excess would cause undue hardship to the insured: Provided also that nothing in this section shall relieve the insurer from any liability, civil or criminal, to which he would have been subject but for the provisions of this Sub-section."

(Emphasis supplied) It is not the case of the Insurance Company that at any stage the Controller/Authority, before the amendment with effect from 19th April, 2000, and thereafter, provided in Sub-section (2) called for any independent report from any other approved Surveyor. In absence of any such reference to Controller/Authority, would not justify the submission of Mr. S.M. Suri, learned Counsel for the insurer that the second Surveyor could have been legally appointed by insurers themselves. Accepting or rejecting the report of the Surveyor, in the light of the above mentioned provisions, was only within the jurisdiction of the Controller or Authority as the case may be under Sub-section (3) of the said provision and to issue subsequent direction of Sub-section (4). The learned Counsel relied upon the proviso to Sub-section (2) in support of his contention that Sub-section (2) could not be deemed to take away or abridge the right of the insurer to pay or settle any claim at any amount different from the amount assessed by the approved Surveyor or loss assessor subsequently. Yes, it could not be done but it should be settled. No arbitrary and unilateral decision to impose decision of the insurer on the insured could be imposed. It is not the case that the complainant accepted the report of the second Surveyor. Had he accepted it then the matter would have been covered by the proviso to Sub-section (2). In aforesaid circumstances, it has not been accepted. Thus, there is a very limited choice of settling the matter with the consent and not as a right. It is only for the Controller (before 19th April, 2000) and authority (after 19th April, 2000) alone to review or modify the assessment made by the Surveyor. In terms of Sub-section (7), the Controller or the authority appeared to be disciplinary authority of the erring approved Surveyor. More one reads provisions under Section 64UM; more one is convinced that by no stretch of imagination second Surveyor could be appointed except with the prior orders of the Controller/Authority. Whenever any independent report from any other Surveyor or loss assessor is required by the authority, the authority would be in much better position to specify as the reasons to accept or reject the report of the first Surveyor. If the authority does not reject the report of the first Surveyor or the insured has not amicably settled the claim with the Insurance Company in terms of Sub-section (2), then the Insurance Company is bound by the report of the first Surveyor. If submission of learned Counsel is accepted, it would frustrate the provisions under Sub-sections (3) and (4) of Section 64UM of the Insurance Act. In such circumstances, if any second Surveyor is appointed without there being any direction of Controller/Authority, the report of the second surveyor cannot be accepted and could not be acted upon.

ANOTHER aspect of the case is that, one has to take note of the fact that the complainant was running Sindhi Sweets. It was Diwali season. Incident took place on 15th October, 1995. The bank record has been produced. In case one looks into the preponderance of probability coupled with the stock reports of the month of September and subsequent months submitted to the bank, those reports could not be ignored and brushed aside lightly. It can also not be ignored that the Diwali festival had just started and the claimant was supposed to stock the basic material as well as other manufactured sweets, etc. The stock statements, filed coupled with the cash credit limit of Rs. 1.50 lakh enjoyed by the complainant from the said bank and term loan facility of Rs. 1.00 lakh against the machinery from the State Bank of Patiala should not be seen with jaundiced eye just to find fault without there being any reasonable cause. We are not inclined to approve this approach, particularly when the insurers have acted beyond provision of Section 64UM of the Insurance Act.

IT may further be mentioned that this Commission had consistently held that for rejecting the report of the first Surveyor specific reasons must be given and this Commission has also observed in para 7 in the case of National Insurance Co. Ltd. v. New Patiala Trading Company, I (2003) CPJ 33 (NC), as under: "7. Scheme of Section 64UM, particularly of Sub-sections (3) and (4), would show that insurer cannot appoint second Surveyor just as a matter of course. If the report of the Surveyor or Loss Assessor is not acceptable to the insurer it must specify reasons but it is not free to appoint second Surveyor. Appointment by the insurer of a second Surveyor itself would be a reflection on the conduct of the first Surveyor. Surveyor or Loss Assessor is duty-bound to give a correct report. If the insurer Insurance Company finds that Surveyor or Loss Assessor has not considered certain relevant points or has considered irrelevant points or for any other account it has reservation about the report, it can certainly require the Surveyor or Loss Assessor to give his views and then come to its own conclusion, but insurer cannot certainly appoint a second Surveyor-cum-Loss Assessor to counter or even contradict or rebut the report of the first Surveyor. IT is a statute which prescribes licensed Surveyor or Loss Assessor who is to be appointed to assess the loss where it is equal to or more than Rs. 20,000. Prima facie, therefore, credence will have to be given to the report of such approved Surveyor or Loss Assessor. There is nothing on record in the present case to show that report submitted by first Surveyor Shekhar and Company was in any way faulty. In our view, therefore, State Commission was right in acting upon the report of the first Surveyor and allowing the complaint of the respondent-complainant."

In matters of proof, it would be relevant to observe the judgment of this Commission in the case of Murari Woollen Mills Ltd. v. United India Insurance Co. Ltd. & Ors., III (2005) CPJ 118 (NC), it is observed as under: "In Slattery v. Mance, 1962 (1) All. E.R. 526, it was held that once the insured had shown that the loss was caused by fire, he had made out a prima facie case and the onus shifted on the insurer to show on a balance of probability that the fire caused was connived at by the assured. Aforesaid evidence adduced by the opposite party fall short of proving that fire on 7.6.1993 was set up deliberately with motive for financial gain as alleged by the complainants. From aforementioned evidence of the complainants coupled with the presumption of their having made out prima facie case it is proved that fire was accidental caused by short-circuiting in the live cables/wires passing through the shed damaged. Repudiation of claim made through the letter dated 13.5.1997 was thus bad and opposite party-Insurance Company being deficient in service, is liable to pay the amounts as recommended by J.B. Boda Surveyors Pvt. Ltd. Since complainants have been deprived of the use of money they are entitled to interest which is quantified at @ 9% p.a. payable after three months of the report Exhibit C/24 dated 5.5.1994. As the stocks and machinery damaged were hypothecated with opposite party No. 3-bank the awarded amount is to be paid to the Bank."

One of the points raised was that the complainant was not a ''consumer''. In this connection, it would suffice to say that under insurance policy, insurer undertakes to perform service within the meaning of ''consumer'' under Section 2(1)(o) of the Consumer Protection Act. Before 15th March, 2003, the services even for commercial purposes were not excluded in the definition of Sections 2(d)(i) and 2(d)(ii). Since the matter pertains to prior to 15th March, 2003, the complainants were ''consumer'' and were entitled to take advantage of Consumer Protection Act. For the aforesaid reasons, we confirm the order passed by the State Commission and dismiss this revision petition. R.P. dismissed.