This consumer complaint has been filed by the complainant Kaizen Organics Private Limited against the opposite party National Insurance Company Limited.
2. Brief facts of the complaint are that complainant is in the business of manufacturing of the chemicals like Menthol Crystal and other allied products, since 1999. The complainant took ‘Fire Declaration Policy to have an insurance cover for factory building, plant and machinery and for its stock for total sum of Rs.4.06 crores and Rs.9.50 crores respectively from the opposite party and the policy was valid from 20.5.2007 to 19.05.2008. On 15.3.2008, at about 3:30-3:45 a.m. due to short circuiting in the electric main switch, fire broke out in the factory premises, which got spread and damaged entire inventory and part of plant and machinery as well as the building. Claim was preferred by the complainant with the opposite party which was examined by the preliminary and final surveyors. As per final survey report dated 28.4.2009 of Atul Kapur & Company, the Insurance Company settled the claim for Rs.1,22,28,654/- and issued the cheque no.42969 dated 18.11.2009. This cheque was issued in the name of State Bank of Maysore, Jaipur Branch banker of the complainant. Not satisfied with this settlement and claiming that the complainant did not receive information of this settlement, the complainant has filed the present consumer complaint alleging that the claim has not been settled though the surveyor has assessed the loss of Rs.5,96,69,594/-.
3. The complaint has been resisted by the opposite party Insurance Company by stating that the Insurance Company has already settled the claim and the amount has been paid to State Bank of Maysore, Jaipur Branch. It has been requested to dismiss the complaint.
4. Both parties have filed their evidence by way of affidavits which have been taken on record.
5. Heard the learned counsel for the parties and perused the record. Learned counsel for the complainant stated that earlier the complainant company was taking the Standard Fire & Special Perils Policy, however, from the year 2007-2008 the Fire Declaration policy was taken as suggested by the Insurance Company for the stocks. It is the common knowledge that every manufacturing company has some raw material and some finished products and some work-in-progress (WIP). In the present case, though the surveyor has assessed the total stock for over Rs.5 crores, which has been lost in the fire, but everything has been considered under the category WIP. The assertion of the Insurance Company is that WIP is insured only for Rs.1 crore and other stocks are insured for Rs.8.5 crores, therefore, insurance claim only upto Rs.1 crores can be allowed for the stocks as all the stock has been accounted for as WIP. The Company was adopting a method that as soon as a raw material was received in the Company, the same was booked under WIP, but the fact is that these materials remained as raw materials and were separately kept in drums under the heading of WIP. The surveyor should have treated these materials as raw material or finished products rather than as WIP. The Company is not getting any benefit of the insurance of Rs.8.5 crores covering other stocks due to wrong categorisation of the material by the surveyor. It was argued that if proper categorisation is made, then the complainant would be entitled to get the amount of Rs.5,96,69,594/- as assessed by the surveyor.
6. Coming to the plant and machinery, the learned counsel stated that the claim of Rs.47,41,000/- was made towards the plant and machinery, but the loss has been assessed by the surveyor for Rs.20,33,635/- only. The surveyor has wrongly calculated the net loss concerning the freezers on the basis of vague reasoning that the replacement quotes provided by the complainant were not from reputed manufacturers, but from similar manufacturer of Menthol products. It has been alleged that surveyor has used wrong method for calculating the replacement value. Furthermore, the surveyor has applied depreciation at exorbitant rate of 20% in case of freezer and 50% in case of boiler. No justification has been given by the surveyor for doing the same.
7. Coming to the loss to the building, it was stated by the learned counsel that the claim was made for Rs.14,06,000/-, however, the surveyor has assessed this loss for only Rs.7,04,764/-. It has been stated by the complainant that the rates with respect to water supply, sanitary and electrical fitting, inflation over 2004 SSR for market value taken into consideration by the surveyor for assessment of loss, have been very low and unreasonable resulting in loss to the complainant.
8. It was further argued by the learned counsel for the complainant that the complainant had also claimed a sum of Rs.4,02,995.00 towards other miscellaneous losses. However, the surveyor has completely overlooked this claim and disallowed the same without assigning any reason.
9. It was further argued by the learned counsel for the complainant that if there is any ambiguity in any clause of the Insurance policy then that ambiguity should go in favour of the complainant and against the opposite party Insurance Company. On this basis, learned counsel stated that majority of the stocks have been considered as WIP by the surveyor, should actually be considered under the head “other stocks”, so that there is genuine reasonable indemnification for the loss suffered by the complainant.
10. On the other hand, learned counsel for the opposite party/Insurance Company has stated that the complainant has wrongly alleged that the claim of the complainant has not been settled by the Insurance Company. In fact, the genuine claim has already been settled vide cheque no.422969 dated 18.11.2009 issued by the National Insurance Co. Ltd. for Rs.1,22,28,654/-. The bankers of the complainant, the State Bank of Maysore, Jaipur branch has issued receipt dated 17.11.2009 in this regard. In view of the final settlement of the claim, the present complaint is not maintainable.
11. It was further stated by the learned counsel for the Insurance Company that the complainant has not made State Bank of Maysore Jaipur branch a party in the complaint case, though the State Bank of Maysore Jaipur branch was a necessary party in the case as they have received amount of settlement of the claim. The policy in question for the stock, though is for Rs.9.50 crores, however, there is a bifurcation in the policy for “stock under process” which is for Rs.1 crores and “stock other than process” is for Rs.8.5 crores. The surveyor has examined the books of accounts and other documents of the complainant and has found that all the stocks have been figured as “stock under process”. The complainant has admitted that whatever raw material was received at the factory, the same was issued as work-in-progress. Therefore, though the loss to the stocks was more than Rs.5 crores, same was limited to Rs.1 crore as all the stock was categorised as WIP. After applying under insurance, the surveyor has assessed the loss to the stocks for Rs.95,31,578/- and similarly for machinery loss has been assessed at Rs.20,33,635/- and for building the loss has been assessed Rs.7,04,764/-. The surveyors are appointed under the provisions of the Insurance Act, 1938 and their report cannot be brushed aside without any cogent reason. The complainant has not given any cogent reason for not accepting the report of the surveyor. When the complainant is keeping all its stocks in the form of WIP, then the surveyor cannot change the category of materials and cannot treat them as raw material or finished products.
12. It was further argued by the learned counsel for the Insurance Company that after the assessment by the surveyor, the complainant has given its consent dated 28.04.2009. This consent was given to the surveyor when he assessed the loss at Rs.5,96,69,594/-. Based on this consent, the banker of the complainant accepted the cheque sent by the Insurance Company for settlement of the claim for Rs.1,22,28,654/-. Though, later on, the complainant withdrew its consent, but the withdrawal of the consent cannot undo action taken by the Insurance Company and the bank.
13. I have carefully considered the arguments advanced by the learned counsel for the parties and examined the record. The main issue involved in the present complaint case is categorisation of stocks. The policy was for the stocks and it had two components. First was “stock under process”, which was for Rs.1 crore and for “stocks other than progress”, insurance was for Rs.8.5 crores. For a normal industry/factory, the stocks in process is generally less and stocks other than in process is the major stock in the form of raw material and finished products. In the present case, the industry was adopting an accounting system where they were putting all the materials under the category of stocks in process or WIP. In this regard, it is noteworthy to see the following observations of the surveyor:
“a) the insured’s excise records for stocks do not have any item wise break up of these stocks and all these stocks are collectively shown as issued to shop floor for processing and are thus treated collectively as work in progress in the stock records
b) the insured’ own audited balance sheets (for the year of loss as well as earlier years) are showing such stocks collectively as work in progress in the earlier years as well as in the year of loss
c) the policy for stocks also has a designation of property clause and since the audited accounts and records of the insured have treated these stocks as work in progress thus these have also been clubbed together as such in Ann-2 attached
d) In the past monthly bank stock statements submitted by the insured, they have classified such stocks collectively as work in progress (WIP)
e) Even while calculating the loss for the purpose of incorporating the same in the audited accounts for FY 2007-08, the insured’s auditors have considered these as WIP as per their calculation sheet attached.
f) Apart from raw material (mentha oil) in drums, there are other intermediate products that could also possibly be store in drums at the affected area after these have undergone one or more process(es). In fact the insured’s own item wise claim (though the quantities of individual items could not be substantiated from records) contained items like mother liquor, etc which were apparently items that had already undergone some processing.
6.4. As explained earlier, the insured followed the system of showing the entire raw material received as issued for production in their stock records and thus it was not possible to determine from the stock records as to how much stock was physically lying in raw material form. Further as there was no record for the stage wise stocks in process, thus from the records it was also not possible to determine how much stock was lying in which form until the same was entered in the finished goods records.
14. From the above observations of the surveyor, it is clear that it was not possible for the surveyor to have separated the “stock under process” from “stock other than process” and all the stock was shown only as “stocks under process” as per the accounts books of the complainant company. As such, the assessment has been done on the basis of the books of accounts and other documents maintained by the complainant company as well as on the basis of the provisions of the policy. Neither the surveyor nor the Insurance Company nor this Commission has the right to change the provisions of the policy or to interpret differently various provisions of the policy as held by the Hon’ble Supreme Court in General Assurance Society Ltd. Vs.Chandmull Jain, [1966 ] 3 SCR 500, as under:-
17.” …In interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves.”
15. In Oriental Insurance Co. Ltd. Vs. Sony Cherian II(1999 )CPJ 13 (SC ), it has been observed as follows:-
“16. The insurance policy between the insurer and the insured represents a contract between the parties. Since the insurer undertakes to compensate the loss suffered by the insured on account of risks covered by the insurance policy, the terms of the agreement have to be strictly construed to determine the extent of liability of the insurer. The insured cannot claim anything more than what is covered by the insurance policy. That being so, the insured has also to act strictly in accordance with the statutory limitations or terms of the policy expressly set out therein.”
16. In United India Insurance Co. Ltd. Vs. Harchand Rai Chandan Lal, (2004) 8 SCC 644, the Hon’ble Apex Court held as follows:-
“6. ….The terms of the policy have to be construed as it is and we cannot add or subtract something: Howsoever liberally we may construe the policy but we cannot take liberalism to the extent of substituting the words which are not intended.
9. …It is settled law that terms of the policy shall govern the contract between the parties, they have to abide by the definition given therein and all those expressions appearing in the policy should be interpreted with reference to the terms of policy and not with reference to the definition given in other laws. It is a matter of contract and in terms of the contract the relation of the parties shall abide and it is presumed that when the parties have entered into a contract of insurance with their eyes wide open, they cannot rely on definition given in other enactment.
14. Therefore, it is settled law that the terms of the contract has to be strictly read and natural meaning be given to it. No outside aid should be sought unless the meaning is ambiguous.”
17. The complainant has also pointed out certain objections in the surveyor’s report in respect of plant and machinery as well as in respect of the building. In respect of plant and machinery, the main objection of the complainant has been that the surveyor has charged depreciation @20% in case of freezer and 50% in case of boiler. The surveyors are supposed to be knowledgeable persons in their filed and conversant with the current practices being followed for assessment of loss. The depreciation depends on the age of the machinery and the complainant has not indicated as to why and how the depreciation applied by the surveyor is wrong. Even in the replacement value clause, machinery is required to be replaced by the machinery which was present at the time of accident. Thus, if the rates of new machinery are considered for obtaining the replacement value, then obviously depreciation
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is to be considered as old machinery cannot be allowed to be replaced by totally new machinery. The same applies to the building. If there are some minor differences between the assessment of loss done by the complainant and actual loss assessed by the surveyor, then one has to go along with surveyor’s assessment until very glaring mistakes are pointed out against the report of the surveyor. It has been alleged that the surveyor has not correctly appreciated the market value of the building along with necessary deductions, however nothing has been mentioned by the complainant as to how the surveyor could have calculated replacement value. 18. In respect of miscellaneous losses of Rs.4,02,995/-, it has been alleged that the surveyor has not considered these losses. The surveyor has to assess the loss under the heads which can be indemnified. The building, plant and machinery are covered under one policy and stocks are covered under the second policy. Thus, apart from these three items, nothing else is covered under the Insurance policies, therefore, surveyor has assessed only the loss for the building, for plant and machinery and for stocks. The surveyor has rightly omitted the claim in respect of miscellaneous losses. 19. On the basis of the above examination, I find that the complainant has not been able to prove the deficiency of service on the part of the opposite party/Insurance Company. The full and final payment as per the report of the surveyor has already been made to the bankers of the complainant. In these circumstances, I do not find any merit in the present complaint and accordingly, CC No.165 of 2009 is dismissed.