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PUNJAB STATE CONSUMER DISPUTES
REDRESSAL COMMISSION, CHANDIGARH
Hon’ble Mr. Justice A.L. Bahri, President; Mr. Jasbir Singh &
Mrs. Davinder Kaur Bhamrah, Member
RAJA SPINNERS—Complainant
versus
ORIENTAL INSURANCE COMPANY LIMITED &
ANR.—Opposite Parties
Original Complaint No. 37 of 1998—Decided on 29.4.1999
For the Complainant :Mr. S.K. Guevera and Ms. Jyoti Choudhary, Advocates.
For the Opposite Parties :Mr. Vinod Choudhary, Advocate.
Delay in settlement of insurance claim and illegal repudiation of claim amount to deficiency in service under the Consumer Protection Act, 1986.
Headnote:
INSURANCE - DELAY IN SETTLEMENT OF CLAIM - REPUDIATION OF CLAIM - ASSESSMENT OF LOSS - DEFICIENCY IN SERVICE - CONSUMER PROTECTION ACT, 1986 - SECTIONS 2(1)(g), 2(1)(r), 14(1)(d), 64UM(G)(3).
Fact of the Case:
The complainant, a partnership firm engaged in manufacturing Shaddy yarn, took a loan from the Punjab Financial Corporation and insured the fixed assets, including the building and machinery, with the opposite party insurance company. On the intervening night of 13/14 July 1995, a fire broke out in the factory, causing damage to the machinery and stock. The complainant informed the insurance company and the police about the incident. The insurance company appointed three surveyors to assess the loss, but the claim was ultimately repudiated on the ground that the complainant had engineered the fire to bail himself out of financial difficulties.
Finding of the Court:
The court held that there was a delay of about 2½ years in repudiating the claim, which per se amounted to deficiency in rendering service on the part of the insurance company. The court also held that the repudiation of the claim was illegal as it was not based on any material and was not sustainable in the eyes of law. The court accepted the assessment of loss made by the first surveyor, which was Rs. 5,95,000/-.
Issues: 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?
Ratio Decidendi: The court held that the insurance company was deficient in rendering service by delaying the settlement of the claim for about 2½ years. The court also held that the repudiation of the claim was illegal as it was not based on any material and was not sustainable in the eyes of law. The court accepted the assessment of loss made by the first surveyor, which was Rs. 5,95,000/-.
Final Decision: The complaint was 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/-.
Mr. Jasbir Singh, Member—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
2. Rag Tearing Machines
3. Willow Machine/Misting Machine
4. Carding Machine
5. Rag Frames
6. 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 da
