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NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
M.B. Shah, President, Rajyalakshmi Rao and Anupam Dasgupta, Members
JAIPUR CERAMICS PVT. LTD. - Appellant
Versus
NEW INDIA ASSURANCE CO. LTD. - Respondent
Consumer Complaint No. 05 of 2006
Decided on : 26-05-2008
Mr. Swadeep Singh Hora, Advocate, for the Appellant; Mr. Kishore Rawat, Advocate, for the Respondent
The insurance company must justify the repudiation of a claim with valid grounds, and the court may direct reimbursement of the assessed loss with interest if the repudiation is found unjustified.
Headnote:
Insurance Claim - Fire Damage - [Insurance Claim] - [Insurance Act, 1938, Section 64VB] - The court discussed the detailed assessment of the fire damage, the assessment of loss by the surveyors, and the repudiation of the claim by the insurance company. The court found that there was no justifiable ground for the insurance company to repudiate the claim and directed the insurance company to reimburse the complainant for the assessed loss with interest.
Fact of the Case:
The complainant took an insurance policy for a large sum of Rs. eight crores. A fire occurred in the complainant's factory causing extensive damage to finished goods. The surveyors assessed the loss, and the insurance company repudiated the claim on the grounds of violation of policy conditions and storage capacity.
Finding of the Court:
The court found that the insurance company's grounds for repudiating the claim were frivolous and unjustified. The court also rejected the complainant's claim for reimbursement of excise duty but directed the insurance company to reimburse the complainant for the assessed loss with interest.
Issues: Assessment of fire damage, repudiation of insurance claim, reimbursement of excise duty, and entitlement to interest on the assessed loss.
Ratio Decidendi: The court held that there was no justifiable ground for the insurance company to repudiate the claim and directed the insurance company to reimburse the complainant for the assessed loss with interest at the rate of 14% per annum from 1.12.2003.
Final Decision: The court allowed the complaint and directed the insurance company to reimburse the complainant for a total sum of Rs. 1,40,25,745 with interest at the rate of 14% per annum from 1.12.2003. The insurance company was also required to adjust the amount previously paid to the complainant.
ORDER
M.B. Shah, President - Heard learned Counsel for the parties.
2. Undisputedly, the complainant took insurance policy from the respondent for a large sum of Rs. eight crores. Unfortunately, a fire took place in the factory of the complainant in the intervening night of the 1st 2nd April, 2003 at 11.40 p.m. Eleven fire tenders continuously worked for more than 12 hours and 80 tankers of water were used in controlling the fire. Undisputedly, during the last stage of fire videography and photography of the fire were carried out. The same video record and photographs were supplied to the Surveyor and the CD thereof was produced before us for re-play.
3. It is also undisputed that in the morning of 2.4.2003, M/s. Ritz Surveyors and Adjusters (P) Ltd., along with some officers of insurer, visited the site. They observed that the finished goods kept in the godown had been extensively damaged.
4. M/s. Ritz Surveyors and Adjusters (P) Ltd. submitted their status report on 8.4.2003. In the said report, they inter alia stated as under:
"(3) The crockery (finished goods) was all found lying loose on the floor (either on ground floor or mezzanine floor). Apparently cardboard cartons of the finished goods were all burnt in the fire. Even the records of finished goods, kept there, were all burnt.
(7) The insured, being accredited with ISO certificate, was found to have updated records. Besides the various stock registers the accounting records are all maintained on the computer.
(8) We have taken physical quantities of the following from the various stock registers:
* Opening balances (quantities as on 1.4.2002) of all raw materials.
* Closing balances of all the raw materials.
* Opening balances of various categories of finished goods/aggregate quantities.
* Closing balances of various categories of finished goods aggregate quantities.
Crockery and decorative items enjoy a high reputation in the market. Their plant was established in Sept. 1996 at an outlay of about Rs. 7.00 crores. The unit had a turnover of Rs. 11,09,24,354.00 in 2k1-2k2 and Rs. 9,36,34,415.00 in 2k-2k1. The unit has a Term Loan of Rs. 61,66,678.00 from Bank of Baroda and C.C. limit of Rs. 1,49,49,468.00 from the same bank.
It is an ISO-9002 company and hence believes in total quality concept. It also maintains necessary records. Main Directors of the company have already been mentioned above."
5. In the last paragraph with regard to the provisions to be made by the underwriters, it has been stated as under:
"We are yet to receive the estimates from the insured. The detailed assessment exercise could be done only thereafter. The insured had verbally communicated a loss of Rs. 2.0 crores. However based on the data collected so far by us we, at this stage, suggest that the insurers make a provision of Rs. 1.0 crore in this claim."
6. This would mean that at the initial stage the insured verbally claimed that the loss was for a sum of Rs. 2 crores and, thereafter, a suggestion was made by the Surveyors that the insurer should make a provision for Rs. 1 crore, at least.
7. Thereafter, they submitted preliminary survey report on 24.4.2003. After checking the various records, they stated as under:
"Following trial balance entries were checked by us and found to be in accordance with books of Account:
(1) Opening Stock Rs. 1,82,76,546.00
(2) Purchases Rs. 6,84,41,772.35
(3) Sales less sales return Rs. 12,01,94,856.00"
8. However, at this stage it would be necessary to reproduce the entire observations made by the Surveyors for arriving at the said conclusion. They made the following observations after checking the records:
"1. As already communicated in our Status Report we had obtained the following information from the insured's records:
1.1 Quantities of opening and closing balances of all the raw materials and finished goods from stock registers.
1.2 Monthly sale pieces and the billed value of finished goods as recorded in RG-1 records.
1.3 Trial balance as on 31.3.2003; there
