Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(NCDRC) 2923

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
A. P. SAHI, PRESIDENT, MR. BHARATKUMAR PANDYA, MEMBER
M/s. Star Paper Mills Ltd. – Appellant
Versus
The United India Insurance Co. Ltd. – Respondent
CONSUMER COMPLAINT NO. 303 OF 2013

Advocates:
For the Appellants/Petitioners: Mr. S. M. Tripathi
For the Respondents: Mr. V.S. Chopra

A complainant is considered a consumer under the Consumer Protection Act, and unjust repudiation of insurance claims on miscalculated loss of profit is deemed a deficiency of service.

Headnote:(A) Consumer Protection Act, 1986 - Sections 2(d)(2) and 24-A - Insurance - Claim for loss of profit due to fire - Repudiation of claim by insurance company on grounds of not sustaining irretrievable loss deemed unjustified - The court held the complainant is a consumer and maintains the complaint against the insurance company's deficiency in service. (Paras 8, 9, 42)

(B) Claims assessment - Surveyor's conclusion disregarding appropriate interruption period and miscalculating production loss not supported by evidence - Insufficient consideration of operational restoration timeframes resulted in miscalculations affecting claim outcome. (Paras 40, 42)

(C) The actual production loss due to operational interruption spanning approximately three months, with confirmed loss amounting to Rs.19,50,515/- - The court ordered the insurance company to revise their decision in favor of the complainant regarding claim settlement. (Paras 40, 43)

Facts of the case:
The complainant, operating a pulp and paper mill, filed a complaint against the insurance company for repudiating claims related to a fire incident causing significant production loss. The repudiation, based on findings that only 9 days of production loss occurred, was challenged due to evidence showing a three-month impact on operations. (Paras 1-6)

Findings of Court:
The court found the insurance company’s repudiation of the claim to be unjustified and determined a production loss of Rs.19,50,515/- was due to the operational interruptions caused by the fire, directing the payment with interest. (Paras 43)

Issues: Primary issues included the complainant’s status as a consumer, the effectiveness of the claim within the statute of limitations, and the validity of the surveyor's damage assessment. (Paras 8, 9)

Ratio Decidendi: The court reaffirmed that the complainant, as a consumer, is entitled to indemnity for proven losses based on operational interruption and asserted errors in assessing production loss required recalibration of the claim settlement by the insurance company. (Paras 8, 42)

Result: Complaint allowed in part; insurance company ordered to pay Rs.19,50,515/- with interest. (Paras 43)

ORDER

JUSTICE A.P. SAHI, PRESIDENT

1. The Complainant is a pulp and paper manufacturing mill located in Saharanpur, U.P. The present Complaint has been filed alleging deficiency in service against the United India Insurance Co. Ltd. after it repudiated the claim of the Complainant vide letter dated 26.09.2011 in respect of a demand for indemnification resulting from a loss in production due to an accidental fire on 30.04.2009 thereby causing loss of profit that was insured under a Loss for Profit (Fire) Policy. The claim in the present complaint is for the loss of profits to the mill due to non-production or very low production as the mill had to practically face a shut down for almost 3 months.

2. The machinery, equipments, stocks and the other property were insured through a separate policy with the National Insurance Co. The damage suffered on that count was indemnified and the claim in respect thereof was settled by that company followed by a payment of Rs. 1,05,002/- for the loss of 40 MT of Wooden chips and Rs. 17,85,715/- for other properties evidenced by two cheques dated 31.03.2011 and 05.05.2011 respectively filed as Annexure C-18 to the complaint. The averment to that effect in paragraph 20 of the complaint remains unrebutted in paragraph 20 of the reply by the O.P.The surveyors for that claim were M/s. Mack Surveyors, (Pvt.) Ltd.

3. There is no dispute that the Policy was effective from 01.04.2009 to 31.03.2010. On 30.04.2009, a conveyor belt of the plant in the Chipper area caught fire as a result whereof the manufacturing came to a halt resulting in production losses and consequently loss of profit. A lot of wood and machinery had engulfed into fire that was intimated to the Insurance Company. The Insurance Company appointed the same Surveyor, M/s. Mack Surveyors (P) Ltd., who raised queries and the Complainant raised a claim regarding a production loss of 1440 metric tonnes for the months of May, June and July, 2009 for an amount of Rs. 1,28,20,520/-. The Surveyor raised queries that were replied to by the Complainant and a survey report was submitted on 03.03.2011. It is, thereafter, that the claim was repudiated on26.09.2011.

4. Learned Counsel for the Complainant, advancing his submissions, has invited the attention of the Bench to the terms of the Policy urging that the entire activity chart demonstrating the losses suffered in the month of May, June and July, 2009 was demonstrated, yet the Surveyor submitted a report that was contrary to the loss caused in production and consequential profits. The efforts made by the Complainant to revive the production and the cause for the losses were all explained yet by a strange method of calculation, which is neither objective nor in accordance with the Policy, the Surveyor tendered a report on the basis whereof, the claim was repudiated.

5. Refuting the submissions of learned Counsel for the Complainant, learned Counsel for the Insurance Company has urged that in effect, the plant had been shut down only for a period of 9 days and in view of the production and the facts and figures available, it was evident that there was enough opportunity available for retrieving the losses, yet there was inaction on the part of the mill. It is also urged that for restarting the production and for achieving the target of retrieval, the target of production to the maximum capacity could have been achieved, but even otherwise the production had started and in fact, no loss was established so as to indemnify the claim.

6. Written arguments have been advanced by Mr. Tripathi, learned Counsel for the Complainant, which is extracted hereinunder:

1. On payment of Rs. 2,98.146/- towards insurance premium a Loss of Profit insurance policy no. 082801/11/09/0700000002 was issued by OP to complainant for the period 1.4.2009 to 31.3.2010 covering the loss of Gross Profits arising from fire and allied perils for the sum insured of Rs. 48,99,87,000/-, wages for Rs. 22,13,41,000/- and Auditors' Fees for R