The insurance company has the burden to disprove the claim of the insured party, and failure to do so may result in a direction to pay the claim amount.

Altamas Kabir, J.— This is an appeal under Section 23 of the Consumer Protection Act, 1986 from an order dated 21st November, 2005 passed by the National Consumer Disputes Redressal Commission, New Delhi (for short ‘the Commission’) in Original Petition No. 91 of 1999, dismissing the said petition. In order to appreciate the decision of the Commission, the facts of the case are briefly set out hereinbelow:

The appellant-firm, dealing in textile goods, has its showroom in the city of Coimbatore. It was covered by an insurance policy with the New India Assurance Company Limited, respondent No.1 herein, and at the relevant time had an insurance cover for all the stock in trade of textile items and garments. The said policy dated 11th March, 1997, expressly covered damages to the said stock in trade that might be caused due to riots, strike, malicious and terrorist damage.

2. From the materials on record, it appears that the appellant-firm had been enjoying the benefit of loans from the 2nd respondent on the hypothecation of the stock in trade, the value of which was not less than Rs. 2 crores at any given point of time. The furnitures, fixtures, fittings and glass plates of the showroom were separately insured with M/s. National Insurance Company Limited.

3. Consequent upon a series of bomb blasts, which rocked the city of Coimbatore on 14th February, 1998, a group of armed rioters are alleged to have looted the appellants’ showroom and set fire to it. According to the appellants, the entire stock of goods was either looted or reduced to ashes. The conflagration, which was of a communal nature, also saw the house of the proprietary of the appellant-firm being attacked by the rioters, causing her to flee with her family across the State border to Palghat in Kerala to save their lives. It appears that on the very next morning, a few officials of the New India Assurance Company Limited along with their Surveyors, M/s. Asawa & Co., inspected the damage at the appellants’ showroom. However, it was only after the communal passions began to subside that the proprietrix of the appellant-firm was able to return to Coimbatore on 17th February, 1998 and to lodge a complaint with the police regarding the incident. The officials of the insurance company took possession of the salvaged stock and the same was kept in the custody of their nominated Surveyors, M/s. Asawa & Co. In addition to the above, the insurance company also appointed one M/s. Standard Surveyors (P) Ltd. to survey the loss. The said Surveyors issued a questionnaire to the appellants which was replied to by the appellants on 20th March, 1998 giving details of the loss suffered by them together with various documents.

4. While the said formalities were proceeding, an anonymous information was said to have been received by the insurance company indicating that the appellants had themselves taken away some of the stock during the rioting. On the basis of such information, an inquiry was ordered by the respondent-insurance company by an investigator of M/s. Vasu Associates. The appellants and/or their officers were not associated with the said inquiry.

5. On 20th March, 1998, the appellant-firm lodged its claim with the respondent-insurance company for payment of compensation amounting to Rs. 2.20 crores. It is the case of the appellants that under the guise of ascertaining the correct picture, the respondent insurance-company for one reason or the other failed to settle the claim.

6. In the meantime, at the instance of the National Insurance Company, which had insured the fixtures, fittings and furnitures, M/s. Comtec, Surveyors, Valuers and Assessors, filed their final report on 9th June, 1998 on the basis whereof the National Insurance Company Ltd. approved the claim of the appellant for Rs. 20,43,605/-.

7. After the Surveyors had submitted their report dated 11th September, 1998, working out the damage at Rs.1,02,38,738/- excluding the stocks in the two levels of the basement