REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9668 OF 2014
M/s New India Assurance Co. Ltd. …… Appellant
vs.
M/s Luxra Enterprises Pvt. Ltd. & Anr. .…..Respondents
WITH
CIVIL APPEAL NOS. 4371-4372 OF 2015
M/s Luxra Enterprises Pvt. Ltd. & Anr .….. Appellants
vs.
M/s New India Assurance Co. Ltd. .……Respondent
J U D G M E N T
Hemant Gupta, J.
1. This order shall dispose of Civil Appeals filed under Section 23 of the
Consumer Protection Act, 19851
preferred by both the parties against an
order passed by the National Consumer Disputes Redressal Commission2
against its order dated 01.08.2014 wherein, a sum of Rs. 54,93,865/- has
1 1985 Act
2 Commission
1
been awarded as compensation for loss suffered on account of damage by
fire to the Complainant, subject to the condition that the said amount will
be paid within 45 days by the Insurance Company otherwise it will carry
interest at the rate of 10 % per annum till its realisation.
2. For the facility of reference, the respondent in Civil Appeal No. 9668
of 2014 will be called hereinafter as the Complainant, whereas the
Appellant- New India Assurance Co. Ltd. will be called as Insurance
Company. Civil Appeal Nos. 4371-72 of 2015 are filed by the Complainant.
3. The Complainant is an Industrial Unit engaged in manufacture of
garments. The Complainant obtained a policy of insurance for the risk of
fire for the period 27.3.2000 to 26.3.2001 with the assured sum of Rs.
85,00,000/-. It was on 12.07.2000 at about 3.45 AM, the factory of the
Complainant was engulfed in fire. It is thereafter, the Complainant lodged
a claim for loss due to fire incident in its factory.
4. M/s R.N. Sharma & Co., was appointed as an investigator to conduct
a preliminary investigation by the Insurance Company. The preliminary
investigation report was submitted on 20.07.2000. It is thereafter, M/s
Sunil J. Vora & Associates was appointed as the Surveyor by the Head
Office of the Insurance Company on July 28, 2000. The said Surveyor
submitted detailed report and accepted the claim of the Complainant for
Rs. 54,93,865/-. Out of the said amount, Rs. 1,65,430.53 was the claim on
account of damage to building; Rs. 3,93,779.78 was the claim towards the
damage to the machinery and Rs. 49,44,657.67 was the claim towards the
damage to the stocks. The amount was rounded off to Rs. 54,93,865/-.
5. The Insurance Company issued a communication dated 09.04.2001
to the Complainant asking for certain information after the said report was
2
submitted to the Insurance Company on 12.02.2001. The information
sought is as under:-
“1. List of Machineries (copy of assets register)
2. Loss and profit accounts
3. Purchase details of raw materials
4. Verified copy of Balance Sheet for last 2
years.
5. Original copy of LC & LC with extended
date of expiry
6. Details of Financial arrangements for
increasing the turn over.
7. Clarify the status of insurable interest on
building.”
6. The Surveyor in his report has given loss to the machinery giving
details of the machinery damaged in fire and the amount admissible in
respect of its loss. The Insurance Company also communicated a letter to
its Senior Branch Manager on 26.09.2001 that the letter of credit dated
11.05.2000 of Singapore Branch of Bank of India was established for
Gurcharan Singh & Co. Pvt. Ltd., but the said letter of credit expired
without receipt of any document. It was also mentioned that the
Complainant is neither a beneficiary nor a notified party of said letter of
credit.
7. Subsequently, M/s ABM Engineers & Consultants was appointed as
the second Surveyor by the Insurance Company. The said Surveyor
accepted the loss of Rs. 24,76,585/- in its report dated 28.02.2002. The
second surveyor has taken into consideration stocks statement submitted
by the Complainant to Canara Bank on 30.4.2000, 31.05.2000 and
01.07.2000 respectively. Though, the Manager of Canara Bank is said to
have pointed out that these statements are like statutory requirements
but the surveyor brushed them aside for the reason that these documents
3
cannot be treated as documents for finalising the stock value. It was
further observed that if the stocks statement is to be referred to, there is
no reason as to why letter of credit could not be materialized. The relevant
extracts from the report of the second surveyor are as under:-
“(i) Stock statement as on 1.7.2000,
31.5.2000, 30.4.2000 submitted by insured to
bank.
These statements are just like statutory
requirement (Refer opinion of Canara Bank
Manager, 13B, Investigation verification). These
documents cannot be treated as document for
finalizing stock value. If we refer to the quantity in
these stock statements then there was no reason
why LC could not materialize. Further these
documents contradict with purchase invoices of
items purchased by Luxara Enterprises Pvt. Ltd.
From their vendors.”
8. The Insurance Company was still not satisfied by the report and
thereafter appointed Mr. R.G.Verma, a Chartered Accountant as its third
surveyor. The said surveyor recommended total repudiation of claim in its
report on 28.05.2002 under Clause 8 of the Insurance Policy on the ground
that there were enough valid circumstantial reasons on the part of the
Insured to manipulate the fire. It is after the said report furnished on
28.06.2002, the claim was repudiated by the Insurance Company on the
same day i.e. 28.6.2002, inter-alia, on the ground that the Complainant
had no export order and the letter of credit does not show the name and
address of the buyer. It is mentioned therein that as per stocks statement
furnished to Canara Bank on 05.07.2000, 34,800 shirts were ready as on
01.07.2000 and that the letter of credit was expiring on 09.07.2000.
Therefore, the Complainant did not explain as to why the said
consignment was not shipped on or before 01.07.2000. Another reason
4
given was that the letter of credit was alleged to have been extended up
to 08.08.2000 in favour of somebody else. Therefore, there was no reason
for extension of letter of credit when the goods were allegedly ready on
01.07.2000 and that the garment could not be exported without
endorsement of invoice by Apparel Export Promotion Council but no such
endorsement was obtained by the Complainant. The Surveyor further
gave another reason, that 104203 meters of fabric was purchased from
M/s S.V. Traders but the address given on the invoice and the challans
was not of fabric shop but that of a photocopy shop. Still further, another
reason communicated was that the letter of credit was opened by M/s
Sirdanwal Overseas of Ajay Verma who is facing a criminal case under
Sections 420, 406, 120(B) of IPC in FIR No. 98 dated 06.04.2002.
9. The Complainant in his complaint filed on 16.5.2002, has inter-alia
averred that he has taken a credit facility from Canara Bank to the tune of
Rs. 50,00,000/- and that the loan amount was disbursed in the months of
March and May, 2000. Such advance was secured by primary security of
stocks and goods lying in the factory of the Complainant apart from the
personal guarantee of the Directors of the Complainant and equitable
mortgage/residential house of one of the Directors and plant & machinery
installed at the above said factory as collateral security. The Bank also got
insured the factory building as well as the stocks from the Insurance
Company for which premium was paid by debiting the account of
Complainant by the Bank.
10. The grievance of the Complainant is that the Insurance Company
has appointed one surveyor after another. The first surveyor- M/s Sunil J.
Vora & Associates has accepted the damage preferred by the Complainant
5
to the extent of Rs. 54,93,865/- whereas, the second surveyor- M/s ABM
Engineers & Consultants reduced the amount to Rs. 24,76,585/- and the
third surveyor-R.G. Verma repudiated the total claim.
11. In respect of second survey report, it is pointed out that Shri B. S.
Aggarwal of the surveyor- M/s ABM Engineers & Consultants attended the
meeting in the office of the Complainant which was attended by the
Officers of the Insurance Company. The Complainant submitted a letter to
the Regional Manager of the Insurance Company as well as to the Branch
Office at Delhi apart from the Grievance Cell, Mumbai on 15.01.2002. Shri
B.S. Aggarwal communicated a letter dated 30.01.2002 pointing out that
the letter dated 15.01.2002 submitted by the Complainant was misleading
as the Complainant could not make available accounting records to the
Surveyor.
12. The Complainant again submitted a letter dated 18.3.2002 aggrieved
against the actions of the surveyor to the various officers of the Insurance
Company. The Complainant also pointed out that the Insurance Company
could not appoint one surveyor after another. It was open to the Insurance
Company to apply to the Insurance Regulatory and Development Authority
to appoint an independent Surveyor under Section 64 UM (3) of the
Insurance Act, 19383
but the Insurance Company could not appoint one
surveyor after another till such time, it is successful in getting a report of
total repudiation of the claim of the Complainant. The relevant provisions
of the 1938 Act 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
3 1938 Act
6
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 (hereafter referred to as "approved
surveyor or loss assessors) :
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 him 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
him within 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 he 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 a 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 dispatch 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.”
7
13. In the written statement filed before the Commissioner, the
Insurance Company explained the reason for appointing another Surveyor
after the report of Surveyor- M/s Sunil J. Vora & Associates was submitted
on 01.02.2001. It was, inter-alia, asserted that quantum of loss has been
assessed without verifying and providing any documents and that the
clarification sought from the Surveyor has not led to any response. The
Insurance Company concluded the reasons for appointing another
Surveyor in para 3.9 of its reply which reads as under:-
“Respondent No.1 sought clarification from the
Surveyors as well as the insured on certain points
but neither the Surveyors nor the insured
submitted the clarification or the desired
documents. In the absence of the said
clarification/documents, Respondent No. 1 was not
able to ascertain the cost of the shirts. The
Surveyors had taken the value of the shirts at Rs.
235/- but it was not clear from where he had taken
the said value. On the other hand, the
Complainant had taken the order @ 5.9 US$ i.e.
Rs. 271/- and adding overhead expenses the cost
comes Rs. 295/- per shirt. The Preliminary
Surveyor in his report dated 20th July, 2000, also
did not give the basis of the estimate of loss at Rs.
75,00,000/-. The letters dated 11th May, 2001 was
written to the Preliminary Surveyor asking about
the basis of the figure of Rs. 75,00,000/- which was
not responded. This was followed by reminder
dated 28th June, 2001 which was also not
responded. The letters dated 11th May, 2001 and
28th June, 2001 is Annexure R-14 and R-15 hereto”.
14. Such are the only reasons available in the written statement as to
why another Surveyor was appointed. No other record has been furnished
for appointment of M/s ABM Engineers & Consultants, second surveyor on
22.08.2001. The Commission in its order held as under:-
8
“22. There is no evidence on record that the
appointment of Surveyor Nos. 2, 3 & 4 was with
the consent of the Head Quarters. After the
second Surveyor, there is no reasoning given as to
why third and fourth Surveyors were appointed.
This is an admitted fact that the fire broke out in
the premises of the complainant. All the first three
Surveyors spoke about this fact in one voice. Even
the Investigator/Fourth Surveyor, did not deny the
happening of incident and admitted in no
uncertain terms that shirts worth rupees few lakhs
must have been burnt. There can be no
conflictions on the point that some loss was
occurred to the complainant. Whether the Order or
LCs were fake or manipulated or the Order for
import of shirts could not be proved or Mr. Ajay
Verma was involved in a criminal case has got no
bearing on this case. There is no inkling on
evidence of record that Mr. Ajay Verma was
involved in this particular case.
23. It cannot be laid down as a rule of thumb that
the Surveyor cannot ask for other documents after
he has informed the complainant that the
documents are complete. There lies no rub.
24. Under these circumstances, we have no
hesitation to accept the second Surveyor, M/s Sunil
J. Vohra’s report. The same is partly accepted and
we allow the complaint and direct the Insurance
Company, OP1, to pay a sum of Rs. 54,93,865/- to
the complainant, within 45 days from the receipt
of this order, otherwise, it will carry interest @
10% p.a., till its realization. In view of peculiar
facts of this case, there is no order as to costs or
pendente lite interest.”
15. The learned counsel for the Appellant-Insurance Company argued
that the Commission has gravely erred in law in not examining the
question whether letter of credit was fake or manipulated or that the order
of import of shirts could not be proved or Mr. Ajay Verma was involved in a
criminal case as it was held that such facts have no bearing on this case.
Learned counsel for the Appellant-Insurance Company relies upon an
9
order passed by this Court as reported in Sri Venkateswara Syndicate
vs. Oriental Insurance Company Limited4 which case has examined
Section 64 UM of the 1938 Act to hold that there is no prohibition in the
Act for appointment of another Surveyor- M/s ABM Engineers &
Consultants by the Insurance Company except that the Insurance
Company has to record reasons for not accepting the report of the
Surveyor- M/s Sunil J. Vora & Associates. Therefore, the Insurance
Company has rightly appointed another Surveyor.
16. The Insurance Company relied upon newspaper report dated
09.05.2002 published in Punjab Kesari that the Delhi Police has arrested
three persons on the basis of forged documents duping exporters. It was
the said newspaper report which was made basis of appointing yet
another Surveyor. The relevant extract from the written statement reads
as under:-
“3.12 On 9th May, 2002, it was reported in the
“Punjab Kesari” newspaper that Delhi Police has
arrested a gang of three persons who had duped
the exporters of crores of rupees on the basis of
forged documents. It also came to the notice of
Respondent No. 1 that Mr. Ajay Verma of M/s.
Sirdanwal Overseas from whom, the Complainant
is alleged to have dealings for LC and procurement
of the export order had been arrested in a
cheating case in FIR No. 98 dated 6th April, 2002,
P.S. Chitranjan Park, under Sections 420/406/12B
of the Indian Penal Code. The newspaper report
dated 9th May, 2002 is Annexure R-25 hereto.
Respondent No. 1 appointed Shri R.G. Verma,
Chartered Accountant to conduct an investigation
of the claim. Shri R.G. Verma conducted the
detailed investigation and submitted his report
dated 28th May, 2002 in which he observed that
the claim was fraudulent. The report of Shri R.G.
Verma is Annexure R-26 hereto. The following
documents were collected by the investigator:-
4 (2009) 8 SCC 507
10
i. List of bail applications dated 24th May, 2002.
ii. FIR NO. 98 dated 6th April, 2002.
iii. Application for request for judicial custody by
the Accused.
iv. Respondent No. 1 took the photographs of the
office of S.V. Traders which are Annexure R-27
hereto”.
17. On the other hand, learned counsel for the Complainant rebutted
the arguments raised and referred to communication dated 07.12.2001
addressed by the Head Office of the Insurance Company to its Delhi
Regional Office, inter-alia, to the facts that Head Office has appointed M/s
Sunil J. Vohra & Associates as the final Surveyor and that the Head Office
is unable to understand as to why and who has appointed M/s ABM
Engineers & Consultants as Surveyor. The extracts from the said letter
read as under: -
“07.12.2001
DELHI RO II
Kind Attn. : MR. S. MAMMAN, ASSTT. GEN.
MANAGER,
Re: Fire Claim under Policy No. 11/310830/99/9010
A/c
M/s. Luxra Enterprises Pvt. Ltd.
Date of Loss : 11/12.7.2000
We note from our record that based on your
request vide letter dt. 24.7.2000, HO had
appointed Sunil J. Vora & Associates as the Final
Surveyor and we have communicated the decision
to you vide our letter dt. 27.7.2000. we
understand that surveyor had already submitted
their report also.
We have received a bunch of papers dt.
20.11.01 from M/s ABM Engineers and Consultants
pertaining to this claim. We are unable to
understand what for they are appointed and who
has appointed them. Please note that once HO has
appointed a surveyor, you cannot appoint surveyor
11
or investigator without consulting HO. Please let us
have your explanation to enable us to apprise
Management.
We note that correspondence by M/s. ABM
Engineers and Consultants are directly addressed
to the Senior Branch Manager only and copies are
seen forwarded to various higher offices. Kindly
inform us the current status of this claim also for
our records.”
18. Before considering the respective contentions of the parties, the
judgment in Sri Venkateswara (supra) is required to be examined. In
the said judgment, this Court has upheld the right of the Insurance
Company to appoint Surveyor but such right can be exercised for valid
reasons or if the report is found to be arbitrary and that Insurance
Company must give cogent reasons without which it is not free to appoint
the second Surveyor. The relevant extracts of the judgment read as under:
-
“33. Scheme of Section 64-UM, particularly of subsections (2), (3) and (4) would show that the
insurer cannot appoint a second surveyor just as a
matter of course. If for any valid reason the report
of the surveyor is not acceptable to the insurer
may be for the reason if there are inherent
defects, if it is found to be arbitrary, excessive,
exaggerated, etc., it must specify cogent reasons,
without which it is not free to appoint the second
surveyor or surveyors till it gets a report which
would satisfy its interest. Alternatively, it can be
stated that there must be sufficient ground to
disagree with the findings of surveyor/surveyors.
There is no prohibition in the Insurance Act for
appointment of second surveyor by the insurance
company, but while doing so, the insurance
company has to give satisfactory reasons for not
accepting the report of the first surveyor and the
need to appoint second surveyor.
xxx xxx xxx
35. In our considered view, the Insurance Act only
mandates that while settling a claim, assistance of
a surveyor should be taken but it does not go
further and say that the insurer would be bound by
whatever the surveyor has assessed or quantified;
if for any reason, the insurer is of the view that
12
certain material facts ought to have been taken
into consideration while framing a report by the
surveyor and if it is not done, it can certainly
depute another surveyor for the purpose of
conducting a fresh survey to estimate the loss
suffered by the insured.
xxx xxx xxx
37. The option to accept or not to accept the
report is with the insurer. However, if the rejection
of the report is arbitrary and based on no
acceptable reasons, the courts or other forums can
definitely step in and correct the error committed
by the insurer while repudiating the claim of the
insured. We hasten to add, if the reports are
prepared in good faith, with due application of
mind and in the absence of any error or ill motive,
the insurance company is not expected to reject
the report of the surveyors”.
19. In view of above, the question to be examined is whether the
Insurance Company has reasons or there were inherent defects in the
survey report of Surveyor- M/s Sunil J. Vora & Associates or that such
report is arbitrary, excessive and exaggerated, before another Surveyor
could be appointed.
20. The Surveyor- M/s Sunil J. Vora & Associates was appointed by Head
Office of the Insurance Company. The Head Office of the Insurance
Company has communicated to the Regional/ Branch Office as to why
another Surveyor has been appointed. In view of said fact, the
appointment of another surveyor could not be justified when a conscious
decision has been communicated by the Head Office of not approving the
appointment of second surveyor.
21. Still further, the reasoning given by the local office is that the
Surveyor- M/s Sunil J. Vora & Associates has not clarified certain points
13
when clarification was sought for. The said reason stands answered even
in the report of Surveyor- M/s ABM Engineers & Consultants. Such
surveyor has considered the report of the Canara Bank in respect of
stocks statement. Such stocks statement was brushed aside for the
reason that if said stocks statement was correct then as to why letter of
credit could not be materialised. The Complainant has explained that it
was on 15.06.2000, it has been communicated to the consignee to have
inspection of the stocks before exporting the consignment. The consignee
has not inspected the stocks which led to the extension of letter of credit
up to 08.08.2000. It was argued that letter of credit is to facilitate receipt
of money from the exporter and once the stock of the Complainant has
been verified by the Canara Bank, which had the first charge over the
property, therefore, such verification of stock could not be doubted by the
Insurance Company only for the reason that letter of credit could not be
materialised. The verification of the stocks by the Canara Bank which had
primary charge on the stocks could not be doubted in the manner, the
surveyor- M/s ABM Engineers & Consultants has reported.
22. Still further, it is explained in the affidavit that the letter of credit was
by M/s Sirdanwal Overseas which was endorsed to Gurcharan Singh
Company Pvt. Ltd. PTE Singapore. Therefore, the letter of credit was a
valid document which could not be said not to be genuine only on the
basis of reason that such letter of credit was not in favour of the
Complainant when the order was placed on the Complainant by the above
said Singapore based firm.
14
23. Mr. Ajay Verma is an accused in FIR in which there is no allegation in
respect of export by the Complainant. The allegation against Ajay Verma
is of duping the exporters whereas, there is no such or similar allegation
against the Complainant. The Complainant has also averred that there
was endorsement by the Apparel Export Promotion Council, therefore
factually such assertion of the Insurance Company is incorrect.
24. Thus, we find that there was no valid reason for the Insurance
Company not to accept the report of the surveyor- M/s Sunil J. Vora &
Associates nor there is any proof that such report is arbitrary & excessive.
There are no cogent reasons to appoint Surveyors time and again till such
time one Surveyor gives a report which could satisfy the interest of the
Insurance Company.
25. In fact, in the present case it is evident that the claim of Rs.
54,93,865/- was accepted by the surveyor- M/s Sunil J. Vora & Associates.
The second surveyor- M/s ABM Engineers & Consultants accepted the
claim in the sum of Rs. 24,76,585/-. The third surveyor - R.G. Verma
recommended total repudiation of claim. It is the third Surveyor’s report
which sub-served the interest of the Insurance Company which was made
basis of repudiation of the claim of the Complainant on the same day,
when the report was furnished. We find that in view of the judgment in Sri
Venkateswara (supra), it is not open to appoint another Surveyor till
such time, it gets a report in its favour. In fact, the appointment of the
Surveyors was to repudiate the claim of the Complainant on one pretext
or the other.
15
26. Thus, we do not find any illegality in the order passed by the
Commission. Consequently, Civil Appeal No. 9668 of 2014 is dismissed.
27. However, we find that the Commission has not granted interest on
the amount found due and payable to the Complainant. Therefore, Civil
Appeal Nos.4371-72 0f 2015 preferred by the Complainant are allowed.
The Complainant shall be entitled to the interest on the amount of Rs.
54,93,865/- at the rate of 6% per annum from the date of filing of petition
till the payment of the amount.
……………………...……………………………..J.
(Dr. Dhananjaya Y. Chandrachud)
…………………..………………..……………….J.
(Hemant Gupta)
New Delhi
May 1, 2019
16
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9668 OF 2014
M/s New India Assurance Co. Ltd. …… Appellant
vs.
M/s Luxra Enterprises Pvt. Ltd. & Anr. .…..Respondents
WITH
CIVIL APPEAL NOS. 4371-4372 OF 2015
M/s Luxra Enterprises Pvt. Ltd. & Anr .….. Appellants
vs.
M/s New India Assurance Co. Ltd. .……Respondent
J U D G M E N T
Hemant Gupta, J.
1. This order shall dispose of Civil Appeals filed under Section 23 of the
Consumer Protection Act, 19851
preferred by both the parties against an
order passed by the National Consumer Disputes Redressal Commission2
against its order dated 01.08.2014 wherein, a sum of Rs. 54,93,865/- has
1 1985 Act
2 Commission
1
been awarded as compensation for loss suffered on account of damage by
fire to the Complainant, subject to the condition that the said amount will
be paid within 45 days by the Insurance Company otherwise it will carry
interest at the rate of 10 % per annum till its realisation.
2. For the facility of reference, the respondent in Civil Appeal No. 9668
of 2014 will be called hereinafter as the Complainant, whereas the
Appellant- New India Assurance Co. Ltd. will be called as Insurance
Company. Civil Appeal Nos. 4371-72 of 2015 are filed by the Complainant.
3. The Complainant is an Industrial Unit engaged in manufacture of
garments. The Complainant obtained a policy of insurance for the risk of
fire for the period 27.3.2000 to 26.3.2001 with the assured sum of Rs.
85,00,000/-. It was on 12.07.2000 at about 3.45 AM, the factory of the
Complainant was engulfed in fire. It is thereafter, the Complainant lodged
a claim for loss due to fire incident in its factory.
4. M/s R.N. Sharma & Co., was appointed as an investigator to conduct
a preliminary investigation by the Insurance Company. The preliminary
investigation report was submitted on 20.07.2000. It is thereafter, M/s
Sunil J. Vora & Associates was appointed as the Surveyor by the Head
Office of the Insurance Company on July 28, 2000. The said Surveyor
submitted detailed report and accepted the claim of the Complainant for
Rs. 54,93,865/-. Out of the said amount, Rs. 1,65,430.53 was the claim on
account of damage to building; Rs. 3,93,779.78 was the claim towards the
damage to the machinery and Rs. 49,44,657.67 was the claim towards the
damage to the stocks. The amount was rounded off to Rs. 54,93,865/-.
5. The Insurance Company issued a communication dated 09.04.2001
to the Complainant asking for certain information after the said report was
2
submitted to the Insurance Company on 12.02.2001. The information
sought is as under:-
“1. List of Machineries (copy of assets register)
2. Loss and profit accounts
3. Purchase details of raw materials
4. Verified copy of Balance Sheet for last 2
years.
5. Original copy of LC & LC with extended
date of expiry
6. Details of Financial arrangements for
increasing the turn over.
7. Clarify the status of insurable interest on
building.”
6. The Surveyor in his report has given loss to the machinery giving
details of the machinery damaged in fire and the amount admissible in
respect of its loss. The Insurance Company also communicated a letter to
its Senior Branch Manager on 26.09.2001 that the letter of credit dated
11.05.2000 of Singapore Branch of Bank of India was established for
Gurcharan Singh & Co. Pvt. Ltd., but the said letter of credit expired
without receipt of any document. It was also mentioned that the
Complainant is neither a beneficiary nor a notified party of said letter of
credit.
7. Subsequently, M/s ABM Engineers & Consultants was appointed as
the second Surveyor by the Insurance Company. The said Surveyor
accepted the loss of Rs. 24,76,585/- in its report dated 28.02.2002. The
second surveyor has taken into consideration stocks statement submitted
by the Complainant to Canara Bank on 30.4.2000, 31.05.2000 and
01.07.2000 respectively. Though, the Manager of Canara Bank is said to
have pointed out that these statements are like statutory requirements
but the surveyor brushed them aside for the reason that these documents
3
cannot be treated as documents for finalising the stock value. It was
further observed that if the stocks statement is to be referred to, there is
no reason as to why letter of credit could not be materialized. The relevant
extracts from the report of the second surveyor are as under:-
“(i) Stock statement as on 1.7.2000,
31.5.2000, 30.4.2000 submitted by insured to
bank.
These statements are just like statutory
requirement (Refer opinion of Canara Bank
Manager, 13B, Investigation verification). These
documents cannot be treated as document for
finalizing stock value. If we refer to the quantity in
these stock statements then there was no reason
why LC could not materialize. Further these
documents contradict with purchase invoices of
items purchased by Luxara Enterprises Pvt. Ltd.
From their vendors.”
8. The Insurance Company was still not satisfied by the report and
thereafter appointed Mr. R.G.Verma, a Chartered Accountant as its third
surveyor. The said surveyor recommended total repudiation of claim in its
report on 28.05.2002 under Clause 8 of the Insurance Policy on the ground
that there were enough valid circumstantial reasons on the part of the
Insured to manipulate the fire. It is after the said report furnished on
28.06.2002, the claim was repudiated by the Insurance Company on the
same day i.e. 28.6.2002, inter-alia, on the ground that the Complainant
had no export order and the letter of credit does not show the name and
address of the buyer. It is mentioned therein that as per stocks statement
furnished to Canara Bank on 05.07.2000, 34,800 shirts were ready as on
01.07.2000 and that the letter of credit was expiring on 09.07.2000.
Therefore, the Complainant did not explain as to why the said
consignment was not shipped on or before 01.07.2000. Another reason
4
given was that the letter of credit was alleged to have been extended up
to 08.08.2000 in favour of somebody else. Therefore, there was no reason
for extension of letter of credit when the goods were allegedly ready on
01.07.2000 and that the garment could not be exported without
endorsement of invoice by Apparel Export Promotion Council but no such
endorsement was obtained by the Complainant. The Surveyor further
gave another reason, that 104203 meters of fabric was purchased from
M/s S.V. Traders but the address given on the invoice and the challans
was not of fabric shop but that of a photocopy shop. Still further, another
reason communicated was that the letter of credit was opened by M/s
Sirdanwal Overseas of Ajay Verma who is facing a criminal case under
Sections 420, 406, 120(B) of IPC in FIR No. 98 dated 06.04.2002.
9. The Complainant in his complaint filed on 16.5.2002, has inter-alia
averred that he has taken a credit facility from Canara Bank to the tune of
Rs. 50,00,000/- and that the loan amount was disbursed in the months of
March and May, 2000. Such advance was secured by primary security of
stocks and goods lying in the factory of the Complainant apart from the
personal guarantee of the Directors of the Complainant and equitable
mortgage/residential house of one of the Directors and plant & machinery
installed at the above said factory as collateral security. The Bank also got
insured the factory building as well as the stocks from the Insurance
Company for which premium was paid by debiting the account of
Complainant by the Bank.
10. The grievance of the Complainant is that the Insurance Company
has appointed one surveyor after another. The first surveyor- M/s Sunil J.
Vora & Associates has accepted the damage preferred by the Complainant
5
to the extent of Rs. 54,93,865/- whereas, the second surveyor- M/s ABM
Engineers & Consultants reduced the amount to Rs. 24,76,585/- and the
third surveyor-R.G. Verma repudiated the total claim.
11. In respect of second survey report, it is pointed out that Shri B. S.
Aggarwal of the surveyor- M/s ABM Engineers & Consultants attended the
meeting in the office of the Complainant which was attended by the
Officers of the Insurance Company. The Complainant submitted a letter to
the Regional Manager of the Insurance Company as well as to the Branch
Office at Delhi apart from the Grievance Cell, Mumbai on 15.01.2002. Shri
B.S. Aggarwal communicated a letter dated 30.01.2002 pointing out that
the letter dated 15.01.2002 submitted by the Complainant was misleading
as the Complainant could not make available accounting records to the
Surveyor.
12. The Complainant again submitted a letter dated 18.3.2002 aggrieved
against the actions of the surveyor to the various officers of the Insurance
Company. The Complainant also pointed out that the Insurance Company
could not appoint one surveyor after another. It was open to the Insurance
Company to apply to the Insurance Regulatory and Development Authority
to appoint an independent Surveyor under Section 64 UM (3) of the
Insurance Act, 19383
but the Insurance Company could not appoint one
surveyor after another till such time, it is successful in getting a report of
total repudiation of the claim of the Complainant. The relevant provisions
of the 1938 Act 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
3 1938 Act
6
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 (hereafter referred to as "approved
surveyor or loss assessors) :
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 him 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
him within 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 he 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 a 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 dispatch 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.”
7
13. In the written statement filed before the Commissioner, the
Insurance Company explained the reason for appointing another Surveyor
after the report of Surveyor- M/s Sunil J. Vora & Associates was submitted
on 01.02.2001. It was, inter-alia, asserted that quantum of loss has been
assessed without verifying and providing any documents and that the
clarification sought from the Surveyor has not led to any response. The
Insurance Company concluded the reasons for appointing another
Surveyor in para 3.9 of its reply which reads as under:-
“Respondent No.1 sought clarification from the
Surveyors as well as the insured on certain points
but neither the Surveyors nor the insured
submitted the clarification or the desired
documents. In the absence of the said
clarification/documents, Respondent No. 1 was not
able to ascertain the cost of the shirts. The
Surveyors had taken the value of the shirts at Rs.
235/- but it was not clear from where he had taken
the said value. On the other hand, the
Complainant had taken the order @ 5.9 US$ i.e.
Rs. 271/- and adding overhead expenses the cost
comes Rs. 295/- per shirt. The Preliminary
Surveyor in his report dated 20th July, 2000, also
did not give the basis of the estimate of loss at Rs.
75,00,000/-. The letters dated 11th May, 2001 was
written to the Preliminary Surveyor asking about
the basis of the figure of Rs. 75,00,000/- which was
not responded. This was followed by reminder
dated 28th June, 2001 which was also not
responded. The letters dated 11th May, 2001 and
28th June, 2001 is Annexure R-14 and R-15 hereto”.
14. Such are the only reasons available in the written statement as to
why another Surveyor was appointed. No other record has been furnished
for appointment of M/s ABM Engineers & Consultants, second surveyor on
22.08.2001. The Commission in its order held as under:-
8
“22. There is no evidence on record that the
appointment of Surveyor Nos. 2, 3 & 4 was with
the consent of the Head Quarters. After the
second Surveyor, there is no reasoning given as to
why third and fourth Surveyors were appointed.
This is an admitted fact that the fire broke out in
the premises of the complainant. All the first three
Surveyors spoke about this fact in one voice. Even
the Investigator/Fourth Surveyor, did not deny the
happening of incident and admitted in no
uncertain terms that shirts worth rupees few lakhs
must have been burnt. There can be no
conflictions on the point that some loss was
occurred to the complainant. Whether the Order or
LCs were fake or manipulated or the Order for
import of shirts could not be proved or Mr. Ajay
Verma was involved in a criminal case has got no
bearing on this case. There is no inkling on
evidence of record that Mr. Ajay Verma was
involved in this particular case.
23. It cannot be laid down as a rule of thumb that
the Surveyor cannot ask for other documents after
he has informed the complainant that the
documents are complete. There lies no rub.
24. Under these circumstances, we have no
hesitation to accept the second Surveyor, M/s Sunil
J. Vohra’s report. The same is partly accepted and
we allow the complaint and direct the Insurance
Company, OP1, to pay a sum of Rs. 54,93,865/- to
the complainant, within 45 days from the receipt
of this order, otherwise, it will carry interest @
10% p.a., till its realization. In view of peculiar
facts of this case, there is no order as to costs or
pendente lite interest.”
15. The learned counsel for the Appellant-Insurance Company argued
that the Commission has gravely erred in law in not examining the
question whether letter of credit was fake or manipulated or that the order
of import of shirts could not be proved or Mr. Ajay Verma was involved in a
criminal case as it was held that such facts have no bearing on this case.
Learned counsel for the Appellant-Insurance Company relies upon an
9
order passed by this Court as reported in Sri Venkateswara Syndicate
vs. Oriental Insurance Company Limited4 which case has examined
Section 64 UM of the 1938 Act to hold that there is no prohibition in the
Act for appointment of another Surveyor- M/s ABM Engineers &
Consultants by the Insurance Company except that the Insurance
Company has to record reasons for not accepting the report of the
Surveyor- M/s Sunil J. Vora & Associates. Therefore, the Insurance
Company has rightly appointed another Surveyor.
16. The Insurance Company relied upon newspaper report dated
09.05.2002 published in Punjab Kesari that the Delhi Police has arrested
three persons on the basis of forged documents duping exporters. It was
the said newspaper report which was made basis of appointing yet
another Surveyor. The relevant extract from the written statement reads
as under:-
“3.12 On 9th May, 2002, it was reported in the
“Punjab Kesari” newspaper that Delhi Police has
arrested a gang of three persons who had duped
the exporters of crores of rupees on the basis of
forged documents. It also came to the notice of
Respondent No. 1 that Mr. Ajay Verma of M/s.
Sirdanwal Overseas from whom, the Complainant
is alleged to have dealings for LC and procurement
of the export order had been arrested in a
cheating case in FIR No. 98 dated 6th April, 2002,
P.S. Chitranjan Park, under Sections 420/406/12B
of the Indian Penal Code. The newspaper report
dated 9th May, 2002 is Annexure R-25 hereto.
Respondent No. 1 appointed Shri R.G. Verma,
Chartered Accountant to conduct an investigation
of the claim. Shri R.G. Verma conducted the
detailed investigation and submitted his report
dated 28th May, 2002 in which he observed that
the claim was fraudulent. The report of Shri R.G.
Verma is Annexure R-26 hereto. The following
documents were collected by the investigator:-
4 (2009) 8 SCC 507
10
i. List of bail applications dated 24th May, 2002.
ii. FIR NO. 98 dated 6th April, 2002.
iii. Application for request for judicial custody by
the Accused.
iv. Respondent No. 1 took the photographs of the
office of S.V. Traders which are Annexure R-27
hereto”.
17. On the other hand, learned counsel for the Complainant rebutted
the arguments raised and referred to communication dated 07.12.2001
addressed by the Head Office of the Insurance Company to its Delhi
Regional Office, inter-alia, to the facts that Head Office has appointed M/s
Sunil J. Vohra & Associates as the final Surveyor and that the Head Office
is unable to understand as to why and who has appointed M/s ABM
Engineers & Consultants as Surveyor. The extracts from the said letter
read as under: -
“07.12.2001
DELHI RO II
Kind Attn. : MR. S. MAMMAN, ASSTT. GEN.
MANAGER,
Re: Fire Claim under Policy No. 11/310830/99/9010
A/c
M/s. Luxra Enterprises Pvt. Ltd.
Date of Loss : 11/12.7.2000
We note from our record that based on your
request vide letter dt. 24.7.2000, HO had
appointed Sunil J. Vora & Associates as the Final
Surveyor and we have communicated the decision
to you vide our letter dt. 27.7.2000. we
understand that surveyor had already submitted
their report also.
We have received a bunch of papers dt.
20.11.01 from M/s ABM Engineers and Consultants
pertaining to this claim. We are unable to
understand what for they are appointed and who
has appointed them. Please note that once HO has
appointed a surveyor, you cannot appoint surveyor
11
or investigator without consulting HO. Please let us
have your explanation to enable us to apprise
Management.
We note that correspondence by M/s. ABM
Engineers and Consultants are directly addressed
to the Senior Branch Manager only and copies are
seen forwarded to various higher offices. Kindly
inform us the current status of this claim also for
our records.”
18. Before considering the respective contentions of the parties, the
judgment in Sri Venkateswara (supra) is required to be examined. In
the said judgment, this Court has upheld the right of the Insurance
Company to appoint Surveyor but such right can be exercised for valid
reasons or if the report is found to be arbitrary and that Insurance
Company must give cogent reasons without which it is not free to appoint
the second Surveyor. The relevant extracts of the judgment read as under:
-
“33. Scheme of Section 64-UM, particularly of subsections (2), (3) and (4) would show that the
insurer cannot appoint a second surveyor just as a
matter of course. If for any valid reason the report
of the surveyor is not acceptable to the insurer
may be for the reason if there are inherent
defects, if it is found to be arbitrary, excessive,
exaggerated, etc., it must specify cogent reasons,
without which it is not free to appoint the second
surveyor or surveyors till it gets a report which
would satisfy its interest. Alternatively, it can be
stated that there must be sufficient ground to
disagree with the findings of surveyor/surveyors.
There is no prohibition in the Insurance Act for
appointment of second surveyor by the insurance
company, but while doing so, the insurance
company has to give satisfactory reasons for not
accepting the report of the first surveyor and the
need to appoint second surveyor.
xxx xxx xxx
35. In our considered view, the Insurance Act only
mandates that while settling a claim, assistance of
a surveyor should be taken but it does not go
further and say that the insurer would be bound by
whatever the surveyor has assessed or quantified;
if for any reason, the insurer is of the view that
12
certain material facts ought to have been taken
into consideration while framing a report by the
surveyor and if it is not done, it can certainly
depute another surveyor for the purpose of
conducting a fresh survey to estimate the loss
suffered by the insured.
xxx xxx xxx
37. The option to accept or not to accept the
report is with the insurer. However, if the rejection
of the report is arbitrary and based on no
acceptable reasons, the courts or other forums can
definitely step in and correct the error committed
by the insurer while repudiating the claim of the
insured. We hasten to add, if the reports are
prepared in good faith, with due application of
mind and in the absence of any error or ill motive,
the insurance company is not expected to reject
the report of the surveyors”.
19. In view of above, the question to be examined is whether the
Insurance Company has reasons or there were inherent defects in the
survey report of Surveyor- M/s Sunil J. Vora & Associates or that such
report is arbitrary, excessive and exaggerated, before another Surveyor
could be appointed.
20. The Surveyor- M/s Sunil J. Vora & Associates was appointed by Head
Office of the Insurance Company. The Head Office of the Insurance
Company has communicated to the Regional/ Branch Office as to why
another Surveyor has been appointed. In view of said fact, the
appointment of another surveyor could not be justified when a conscious
decision has been communicated by the Head Office of not approving the
appointment of second surveyor.
21. Still further, the reasoning given by the local office is that the
Surveyor- M/s Sunil J. Vora & Associates has not clarified certain points
13
when clarification was sought for. The said reason stands answered even
in the report of Surveyor- M/s ABM Engineers & Consultants. Such
surveyor has considered the report of the Canara Bank in respect of
stocks statement. Such stocks statement was brushed aside for the
reason that if said stocks statement was correct then as to why letter of
credit could not be materialised. The Complainant has explained that it
was on 15.06.2000, it has been communicated to the consignee to have
inspection of the stocks before exporting the consignment. The consignee
has not inspected the stocks which led to the extension of letter of credit
up to 08.08.2000. It was argued that letter of credit is to facilitate receipt
of money from the exporter and once the stock of the Complainant has
been verified by the Canara Bank, which had the first charge over the
property, therefore, such verification of stock could not be doubted by the
Insurance Company only for the reason that letter of credit could not be
materialised. The verification of the stocks by the Canara Bank which had
primary charge on the stocks could not be doubted in the manner, the
surveyor- M/s ABM Engineers & Consultants has reported.
22. Still further, it is explained in the affidavit that the letter of credit was
by M/s Sirdanwal Overseas which was endorsed to Gurcharan Singh
Company Pvt. Ltd. PTE Singapore. Therefore, the letter of credit was a
valid document which could not be said not to be genuine only on the
basis of reason that such letter of credit was not in favour of the
Complainant when the order was placed on the Complainant by the above
said Singapore based firm.
14
23. Mr. Ajay Verma is an accused in FIR in which there is no allegation in
respect of export by the Complainant. The allegation against Ajay Verma
is of duping the exporters whereas, there is no such or similar allegation
against the Complainant. The Complainant has also averred that there
was endorsement by the Apparel Export Promotion Council, therefore
factually such assertion of the Insurance Company is incorrect.
24. Thus, we find that there was no valid reason for the Insurance
Company not to accept the report of the surveyor- M/s Sunil J. Vora &
Associates nor there is any proof that such report is arbitrary & excessive.
There are no cogent reasons to appoint Surveyors time and again till such
time one Surveyor gives a report which could satisfy the interest of the
Insurance Company.
25. In fact, in the present case it is evident that the claim of Rs.
54,93,865/- was accepted by the surveyor- M/s Sunil J. Vora & Associates.
The second surveyor- M/s ABM Engineers & Consultants accepted the
claim in the sum of Rs. 24,76,585/-. The third surveyor - R.G. Verma
recommended total repudiation of claim. It is the third Surveyor’s report
which sub-served the interest of the Insurance Company which was made
basis of repudiation of the claim of the Complainant on the same day,
when the report was furnished. We find that in view of the judgment in Sri
Venkateswara (supra), it is not open to appoint another Surveyor till
such time, it gets a report in its favour. In fact, the appointment of the
Surveyors was to repudiate the claim of the Complainant on one pretext
or the other.
15
26. Thus, we do not find any illegality in the order passed by the
Commission. Consequently, Civil Appeal No. 9668 of 2014 is dismissed.
27. However, we find that the Commission has not granted interest on
the amount found due and payable to the Complainant. Therefore, Civil
Appeal Nos.4371-72 0f 2015 preferred by the Complainant are allowed.
The Complainant shall be entitled to the interest on the amount of Rs.
54,93,865/- at the rate of 6% per annum from the date of filing of petition
till the payment of the amount.
……………………...……………………………..J.
(Dr. Dhananjaya Y. Chandrachud)
…………………..………………..……………….J.
(Hemant Gupta)
New Delhi
May 1, 2019
16
