This appeal has been filed by the appellant Sheetal Medicare Products Pvt. Ltd. against the order dated 29.10.2015 of the State Consumer Disputes Redressal Commission, Maharashtra, Mumbai (in short ‘the State Commission’) passed in Complaint No. RBT/CC/13/82.
2. Brief facts of the case are that on 31.05.2005 the appellant-company had taken insurance cover and the factory premises, plant & machinery, stocks lying at Wada factory were insured with the opponent under Standard Fire & Special Peril Policy bearing No. 140600/11/05/00000889.The sum assured was Rs.75 Lakhs. Under the said policy, the risk covered was for Rs. 5 Lakhs towards building, Rs.10 Lakhs towards plant and machinery and other stocks, Rs.60 Lakhs including medicines, raw material located at factory at Wada District Thane. Due to heavy rains in the area, the complainant’s factory got badly affected and the stocks stored in the basement godown were submerged in the flood water and the damage caused by the flood was immediately reported to the insurance company on 27.7.2005.On 31.07.2005 the insurance company appointed a surveyor to assess the damage caused to the complainant’s property including the plant, machinery etc. The surveyor visited the site on 10.08.2005.Surveyor assessed the loss and recommended the amount of Rs.40,89,416/- and submitted his report on 16.08.2006. Thereafter, respondent/opposite party appointed an investigator who recommended the insurance company to repudiate the claim on the ground that the bills supplied by the complainant’s supplier were fictitious and submitted his report dated 23.01.2008.On 16.04.2008 appellant/complainant received the repudiation letter wherein it was mentioned that the stocks purchased from M/s. Yogini Products and Yogini Ayur Pharma were never brought to India and stocks claimed to have been purchased from Nepal company were not in existence, therefore, invoice produced could not be said to be genuine invoice and the company had made an attempt to obtain undue benefits under the policy and it invited invocation of Condition No. 8 of the said policy. On 02.07.2009 appellant filed a consumer complaint before the State Commission and the same was dismissed by the State Commission vide its order dated 19.06.2012 on the ground of limitation and copy of same was received by the appellant on 30.07.2012.Thereafter, appellant filed an appeal bearing no. 538/2012 before this Commission and vide order dated 28.02.2013 this Commission remanded the matter back to the State Commission to decide the same on merits. The State Commission decided the complaint filed by the appellant/complainant on merits and dismissed the same vide order dated 29.10.2015.Hence the present appeal.
3. Heard the learned counsel for both the parties and perused the material on record.
4. Learned counsel for the appellant argued that the appellant have purchased the raw medicinal material from M/s. Yogini Products and Yogini Ayur Pharma and stocks were duly insured by the insurance company. After the loss, the surveyor was appointed by the insurance company and the surveyor verified the damaged material and got it tested from the expert and then reached to the conclusion that the damaged material was same for which the claim was lodged with the insurance company. Finally, after the verification of the stocks and the stock register etc., the surveyor assessed the loss of Rs.40,89,416/-.However, insurance company later appointed an investigator who gave the finding that the alleged material purchased from M/s. Yogini Products and Yogini Ayur Pharma have been found to be fake and no such material was imported from Nepal as there was no entry in the Plant Quarantine Station of Nepal or of India in this regard. Based on this, the investigator concluded that the insurance claim was “fraudulent claim”, therefore, insurance company repudiated the same under condition 8 of the policy.
5. It was argued that the surveyor was appointed under the provisions of the Insurance Act, 1938 and surveyor is an independent assessor of the loss and his report is to be valued and given importance for deciding the claim. Surveyor had also sent samples to the testing laboratory for confirmation that the damaged products were the same for which purchase invoices were submitted. The surveyor has stated that the same was confirmed. It was further argued that if there was no such material, how the surveyor could have sent samples to the laboratory for testing and how the test could have confirmed the same. Permission to destroy the damaged material was also obtained and all the damaged material was destroyed before the surveyor. The surveyor has clearly stated that he has verified the stocks physically and from all the documents like purchase bills, stock register etc. The insurance company has not alleged that the surveyor has given a biased report in favour of the complainant. Had this been the case, the insurance company would have black-listed the surveyor. However, nothing of this sort has been filed to prove the same.
6. It was argued by the learned counsel for the complainant that the complainant has no connection with the exporter of the products at Nepal. They are not concerned with the import of the material and they are only concerned with the fact that the appellant/complainant has purchased the raw medicinal material from the Indian firms M/s. Yogini Products and Yogini Ayur Pharma.If any violation of law has been committed by the Indian companies M/s. Yogini Products and Yogini Ayur Pharma, then they are responsible for the same and action can be taken against them. It is clear that the material was purchased by the appellant from the Indian companies M/s. Yogini Products and Yogini Ayur Pharma, and the same was insured with the opposite party/respondent. The surveyor has also corroborated the same after physically verifying the stock and tallying it with the stock register and other relevant documents. Therefore, the claim is not based on fraudulent purchase rather, the claim is genuine and supported by the surveyor’s report.Thus, clearly repudiation under condition no. 8 is not justified, which reads as under:-
8. If the claim be in any respect fraudulent or if any false declaration be made or used in support thereof or if any fraudulent means or devices are used by the insured or any one acting on his behalf to obtain any benefit under the policy or if the loss or damage be occasioned by the wilful act or with the connivance of the insured, all benefits under this policy shall be forfeited.”
7. Learned counsel for the appellant contended that though the report of the investigator has been filed by the insurance company, no affidavit of the investigator has been filed and the appellant could not get any chance to cross-examine the investigator. It was further argued by the counsel for the appellant/complainant that the present appeal has been filed with delay of 36 days though Registry has reported the delay of 45 days. It was further submitted that the order was posted by the office of the Registry on 18th November, 2015 or thereafter and the appellant has received the certified copy of the same on 26th November, 2015.Learned counsel for the appellant further submitted that the period for filing the appeal expired on 26.12.2015 and therefore, delay of approximately 36 days in filing the present appeal has occurred. Learned counsel further submitted that the delay is unintentional and caused due to reasons beyond the control of the appellant. It was prayed that the delay may be condoned as the case of the appellant is very strong on merits.
8. On the other hand, learned counsel for the respondent/insurance company stated that the appeal has been filed with delay of 45 days and the appeal is liable to be dismissed on this count as no proper explanation has been given for the delay. Learned counsel for the respondent/insurance company further stated that the investigator in its report has clearly narrated all the aspects relating to import of the raw medicinal material by two firms i.e.M/s. Yogini Products and Yogini Ayur Pharma from whom the complainant has allegedly purchased these materials. It has been found by the investigator that the material was not properly imported and in fact there is no proof of any such import. Investigator has visited the concerned exporter in Nepal and he has also taken certificates from the Plant Quarantine Stations of the exporting destination as well as of the importing destination. There is no entry of any such import in the Plant Quarantine Stations of Nepal or India, clearly implying that appellant/complainant could not have purchased these materials from Indian suppliers M/s. Yogini Products and Yogini Ayur Pharma. The investigator has clearly pointed out that it was fraudulent claim and based on the investigator’s report, claim was repudiated. When the source of the purchase is unlawful, the purchase cannot be held to be lawful and if the purchase is unlawful, no insurance claim becomes payable.It has been argued that the State Commission has already examined this matter in detail and has observed the following:-
“Complainant bought the raw material from Yogini Ayur Pharma with sale office at Dadar Mumbai amounting to Rs.16,78,560/ plus Rs.4,24,320/-, plus Rs.4,95,040/- plus Rs.25,17,840/- totalling Rs.51,15,760/- on various dates supported by tax invoice issued by Yogini Products. The supplier, as reported by the investigator, imported the raw material from M/. Dharma Kumar Rauniyar and Madhan Rai Panchattar of Nepal. On report of the investigator, opponent verified authenticity of import of raw material from Nepal and it was found that M/s. Yogini Products and M/s. Yogini Ayur Pharma, the suppliers have not obtained import, export, code number or license from Government of India as required under the provisions of relevant law. This fact is confirmed by the Government of India, Ministry of Commerce (Enforcement division) by letter dated 17/01/2008.
Investigation Report further confirmed that M/s. Dharam Kumar Rauniyar and Madhan Rai Panchattar of Nepal did not have the requisite permission to export the raw material in question purchased by the complainant company through M/s. Yogini Ayur Pharma. This fact was confirmed by letter dated 09/01/2008 of Ministry of Agriculture & Co-Op. Department of Agriculture, Bhairahawa, Rupandehi, Nepal and letter dated 17/01/2008 of Ministry of Commerce, Mumbai 400 020 from M/s. Yogini Ayur Pharma’s paid imports without legal permission deprived State Ex-chequer of receivable debt/taxes, which amounts to fraudulent transaction. Opponent after investigating the claim arrived at a conclusion that the complainants have violated provisions of condition no. 8 and filed a fraudulent claim based on the transaction without lawful sanctity. Opponents revoked the claim by invoking the said condition.”
9. The investigator has also obtained information from the Director General of Foreign Trade Office and it has clearly been stated that no permission was given to M/s. Yogini Products and Yogini Ayur Pharma to import these materials from Nepal. Once the material was not imported, it was not possible by M/s. Yogini Products and Yogini Ayur Pharma to have sold these products to the purchaser/complainant. Thus, definitely the claim was a fraudulent claim and could not be allowed on the basis of investigator’s report. Investigator’s report is based on various letters which have been issued by government agencies, therefore, they have to be taken at their face value and in this perspective, there was no need to file any affidavit of the investigator.
10. I have given thoughtful consideration to the arguments advanced by both the parties and have examined the record. First of all, the Registry has reported 45 days in filing the present appeal though the appellant has stated that there is a delay of only 36 days. Be that as it may, it has been stated in the application for condonation of delay that the delay has occurred due to the fact that a law and order situation developed in the factory premises due to certain objections of the local residents though the same was pacified due to intervention of the police, which provided security to the premises. Later on, the employees of the factory joined the Maharashtra Rajya Kamgar Sangh and therefore the work suffered in the factory. As the delay is only of 36 or 45 days, and there seems to be no intention on the part of the appellant to get the matter delayed, I deem it appropriate to condone the delay in filing the present appeal.
11. In the present case, the appellant has taken an insurance from respondent – insurance company for certain products which were damaged in the flood and inundation. The surveyor has assessed the loss and has recommended the claim. The insurance company was not satisfied with the report of the surveyor and they appointed an investigator to re-verify certain aspects in the matter. The investigator after exhaustive examination of the records of the parties, finally gave his report dated 23.01.2008, whereby it has been claimed that the material that was supplied to the complainant by sellers of those products was allegedly imported from Nepal.However, as per official documents, no such import is verifiable, hence, on the basis of this report of the investigator, the claim has been repudiated under clause 8 of the policy treating the claim as fraudulent claim. Thus, the main question in the present case arises whether the insurance claim would still be indemnifiable even if the material that was insured was properly procured but illegally imported (or not even imported) by suppliers. So far as the contract of insurance is concerned, the same is between the complainant/appellant and the insurance company and as per surveyor’s report, the conditions of this contract are mostly met. The surveyor has even relied upon the testimony of an agricultural scientist of renowned Ayurvedic company ‘Jhandu Pharmacy Ltd.’, to verify the insured products from ashes of the burnt material. Surveyor has also verified that the burnt material has been disposed of in his presence. Thus, the surveyor has assessed loss of Rs. 40,89,416/- and has recommended the same to the insurance company. Though, there was no such condition in the policy that the material will be imported from Nepal or somewhere else, however, supplier of the material have explained before the investigator that they had imported the material to be supplied to the complainant from Nepal. Then surveyor investigated the matter in India and in Nepal and found that no such material has been imported through the official channel of import and export.There is no entry of such import in Plant Quarantine Station of either Nepal or India and hence, investigator has reached to the conclusion that these materials were not actually imported and therefore, claim was a fraudulent claim under clause 8 of the policy.
12. Now the legal question to be answered here is that if the material imported is not rightfully or legally imported, but its insurance and physical presence is verified by the surveyor, whether the claim can be indemnifiable or not. Before considering this question another aspect of this matter needs to be looked into. The insurance claim of the appellant/complainant was repudiated vide letter dated 26.04.2008 and complaint has been filed in the year 2013.First of all, the complaint has been filed after five years of repudiation of the claim i.e. after five years of the arising of the cause of action. However, apart from this, by that time, the complainant was definitely aware of the fact that complainant’s claim has been rejected by the insurance company on the ground that so called material supplied to the complainant was not legally imported or was not even imported and due to this fact, the claim was repudiated. Despite knowledge of this fact, the complainant has not made the suppliers of the products i.e. M/s. Yogini Products and Yogini Ayur Pharma, as a party in the complaint case, though they were necessary party in the context of the repudiation letter. If the complainant wanted to dispute the report of the investigator and the decision of the insurance company, the complainant should have produced evidence from the supplier in this regard. However, neither the suppliers were made a party in the complaint case nor their affidavits or other evidence from them have been produced by the complainant/appellant. Thus, in my view, the complaint itself suffered from the misjoinder of parties as well apart from having been filed after roughly five years from the date of cause of action. In these circumstances, presumption would be made that the complainant had no counter to offer against the report of the investigator and against the repudiation by the insurance company.
13. Now coming to the issue as raised before, that if the material was either illegally or not even imported, but its physical presence has been verified by the surveyor of the
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insurance company, whether the insurance claim is to be admitted or not. I feel that in an insurance contract, if the subject matter of insurance is either illegally procured or purchased from an illegal source, then the contract becomes vitiated right from the very beginning because in any case, the law of the land is to be followed at every stage of the whole chain. As there is no evidence of import of the supplied material from Nepal, two possibilities arise. First, that the material was imported wrongfully and illegally through illegal means and supplied to the complainant and second that only forged entries were made in the register of the complainant and accordingly, documents were produced. In both these possibilities, the only legal presumption from the point of view of the insurance company would be that the claim is a fraudulent claim as if no material was there to be insured. Thus, the insurance company has rightly repudiated the claim under clause 8 of the insurance policy treating the claim as fraudulent claim. In taking this view, I am supported by the decision of this Commission in the case titled as M/s. Bharat Construction Vs. Divisional Manager in F.A. No 423 of 2010 decided on 29.06.2018 wherein the following has been observed:- “12. Xxxx. Hence, in these circumstances, clearly the vehicle was being run without any registration in contravention of Section 39 of the Motor Vehicle Act, 1988. This is a fundamental violation of the Motor Vehicle Act and also a fundamental breach of the terms and conditions of the policy because the policy contract cannot be sustained if the provisions of any other relevant law have been violated because no contract would be valid if it contravenes any law of the land.” 14. Based on the above discussion, I do not find any merit in the appeal filed by the appellant and consequently, F.A. No. 120 of 2016 is dismissed.