For M/s Sigma Diagnostics Ltd.    :  Mr. Sanjoy Kumar Ghosh, Advocate

   Mrs. Rupali S. Ghosh, Advocate

For Bajaj Allianz General

Insurance Co. Ltd.                         :  Mr. Prantar Basu Choudhury, Adv.

                                                             Mr. Harshul Singh, Advocate

JUSTICE V.K.JAIN, PRESIDING MEMBER (ORAL)

          The complainant, which is appellant in FA No.366/2007, obtained a Standard Fire and Special Perils Policy from Bajaj Allianz General Insurance Co. Ltd., appellant in FA No.370/2007, which covered the equipments installed in a hospital being run by it in Ludhiana.  The said equipments inter-alia included an MRI manufactured by Siemens Ltd. in the year 1995.  The MRI was a second hand equipment when it was purchased by the complainant from M/s Ludhiana Healthcare Ltd.  The MRI was got insured with Bajaj Allianz General Insurance Co. Ltd. for a sum of Rs.1,35,00,000/-.  Initially, the MRI was insured by Bajaj Allianz General Insurance Co. Ltd. for the period from 01.04.2003 to 31.03.2004.  Later, it was insured at the same valuation for the period from 19.03.2004 to 18.03.2005.  There was an incident of fire in the hospital of the complainant which resulted in damage/loss of several equipment including the MRI.  On a claim being lodged with the insurer, M/s Select Surveyors Pvt. Ltd. were appointed as the surveyors to assess the loss to the complainant.  Vide their report dated 14.07.2005, the surveyors assessed the loss to the complainant at Rs.89,84,150/-.   On the very next day i.e. on 15.07.2005, the insurer appointed M/s Cunningham Lindsey International Pvt. Ltd. as the surveyors.    M/s Cunningham Lindsey International Pvt. Ltd. assessed the loss to the complainant at Rs.24,93,078/-.  Even before submission of the report dated 27.07.2005, the insurer got prepared a cheque of Rs.24,93,078/- in favour of the Punjab & Sind Bank from which loan had been taken by the complainant against the said equipment.   The complainant executed a Discharge Voucher accepting the aforesaid amount in full and final settlement of the claim.  The discharge voucher was counter-signed by Punjab & Sind Bank on 27.07.2005.  On execution of the discharge voucher, payment by way of the cheque dated 22.07.2005 was made to Punjab & Sind Bank to be credited in the account of the complainant. 

2.      The case of the complainant is that it was pressurised by the insurer to accept the aforesaid amount of Rs.24,93,078/- and since it was in grave financial hardship at that time, having already received a notice from the bank threatening to proceed against it under the provisions of the SARFAESI Act, it had no option but to accept the offer. 

3.      Vide e-mail dated 03.08.2005, the complainant informed the insurer inter-alia as under:

          However Bajaj Allianz tried every method to humiliate us in public. During this process they met many of our professional colleagues and other adversaries, ex-employees trying every unethical mean to scuttle our claim.  Even before the report was finally submitted, we received a call from Bajaj Allianz informing us of appointment of Mr. Anil Dhingra as a second surveyor.  The conduct of Mr. Anil Dhingra was not only humiliating but clearly showed his bias against us as he was constantly briefed by Bajaj Allianz to scuttle our claim.  Even during his visit to our Hospital in third week of July 2005, he was accompanied by an official from Bajaj Allianz who was present all the time during our discussions and did not leave the room even for a minute.  Mr. Anil Dhingra, for reasons best known to him was totally under his influence.  Even after trying by hook or by crook to find loopholes in our claim papers, all their efforts came to a naught and so they decided to downsize the claim and reached an assessment of around Rs.24 lacs. 

          Meanwhile, I was suffering from great financial and emotional stress as we had received a letter from our bank  Punjab and Sind Bank threatening to issue us a notice of Asset securitization.  At this point we wish to bring to your notice that our bank account had been regular till last year, before the fire incident.  My husband’s death was deteriorating and he had undergone a major high risk surgery just few days prior to the fire.  Due to extreme resource crunch, our electricity connection was severed and our hospital working had come to a halt.

          The Bajaj Allianz meanwhile, after conducting the illegal survey, showed me a photocopy of a cheque dated 22^nd July 2005 and handed me over a stamp paper with an undertaking typed on it stating that we have agreed to a full and final settlement for the reduced amount.  When I refused to give such an undertaking they threatened me of starting a fresh investigation which could take years to conclude and withdraw the cheque.  Since I was in a dire shortage of money and needed funds to restart my hospital and we had also undergone a lot of undue harassment by then, I was left with no other alternative but to accept the cheque as demanded by Bajaj Allianz on 26^th July 2005.  The cheque was handed over to the bank on 26^th/27^th July 2005 by Bajaj Allianz.

4.      The complainant thereafter, approached the concerned State Commission by way of a Consumer Complaint seeking payment of the balance amount of Rs.65,01,072/- with interest.

5.      The complaint was resisted by the insurer primarily on the grounds that (i) The complainant accepted the amount of Rs.24,93,078/- in full and final settlement of its claim and (ii) the assessment made by M/s Cunningham Lindsey International Pvt. Ltd. was justified and appropriate.  The appointment of M/s Cunningham Lindsey International Pvt. Ltd. as the second surveyor was also sought to be justified on the ground that the first surveyor M/s Select Surveyors Private Limited had joined hands with the insured and prepared a report in excess of the loss suffered by the insured. 

6.      Vide impugned order dated 11.05.2007, the State Commission directed as under:          

          Consequently, the complaint is allowed with cost of Rs.2,500/-.  The opposite party no.1, Insurance Company, is directed to pay the amount of Rs.65,01,072/- (Rupees Sixty Five Lacs One Thousand Seventy Two Only) (Rs.89,94,150/- minus the amount already paid to the complainant i.e. Rs.24,93,078/- vide cheque dated 22.7.2005) with interest @ 9% p.a. w.e.f. 14.10.2005 till date of payment.

7.      Being aggrieved from the order passed by the State Commission, the insurer is before this Commission by way of FA No.370 of 2007.  Since the complainant is also dis-satisfied with the rate at which interest has been awarded by the State Commission, it is before this Commission by way of FA No.366 of 2007. 

8.      The first question which arises for consideration in these appeals is as to whether the cheque of Rs.24,93,078/- was accepted voluntarily or the complainant was compelled to accept it on account of its financial circumstances and constraints.  The learned counsel for the complainant has drawn my attention to the letter dated 04.06.2005 and 20.07.2005, written to the complainant by Punjab & Sind Bank, Ludhiana.  Vide this letter, the complainant was informed that if the accounts were not regularized, the bank would be constrained to initiate action against them under the provisions of the SARFAESI Act for recovery of the outstanding dues of the bank.  It is therefore, evident that by June 2005, the complainant had already defaulted in servicing the loan which it had taken from Punjab & Sind bank and there was an apprehension of the bank proceeding against it under the provisions of the SARFAESI Act, unless the account was regularized. 

9.      The learned counsel for the complainant has also placed on record today the audited balance sheet of the complainant which is a Public Limited Company for the period ending 31.03.2006.  The said report would show that there was a loss of Rs.254825.97/- in the year ending 31.03.2005 which increased to a loss of Rs.3452664.19/- in the year ending 31.03.2006.  The balance sheet corroborates the case of the complainant company that it was in grave financial difficulty at the time the loss happened and therefore, was in urgent need of money, in order to avoid proceedings under the provisions of the SARFAESI Act.  The above noted financial circumstances of the complainant, coupled with the e-mail sent to the insurer on 03.08.2005 and the fact that the insurer had prepared a cheque of Rs.24,93,078/- even before receipt of the final report from M/s Cunningham Lindsey International Pvt. Ltd. clearly shows that the offer of Rs.24,93,078/- was not accepted voluntarily but was accepted on account of the precarious financial condition of the complainant company at the relevant time.  Therefore, acceptance of the aforesaid amount of Rs.24,93,078/-, in my opinion, would not estop the complainant from making a further claim against the insurer, provided it is able to justify such a claim. 

10.    The next issue which comes up for consideration in this case is as to whether the appointment of M/s Cunningham Lindsey International Pvt. Ltd. as the second surveyor was justified or not.  The learned counsel for the insurer has drawn my attention to the decision of the Hon’ble Supreme Court in Sri Venkateswara Syndicate Vs. Oriental Insurance Company Limited & Anr. (2009) 8 SCC 507 where the Hon’ble Supreme Court inter-alia held as under:

32.    There is no disputing the fact that the Surveyor/Surveyors are appointed by the insurance company under the provisions of Insurance Act and their reports are to be given due importance and one should have sufficient grounds not to agree with the assessment made by them. We also add, that, under this Section the insurance company cannot go on appointing Surveyors one after another so as to get a tailor made report to the satisfaction of the concerned officer of the insurance company, if for any reason, the report of the Surveyors is not acceptable, the insurer has to give valid reason for not accepting the report.

33.    Scheme of Section 64-UM particularly, of sub-sections (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 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 18 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.

34.    ……………

35.    In our considered view, the Insurance Act only mandates that while settling a claim, assistance of surveyor should be taken but it does not go further and say that the insurer would be bound whatever the surveyor has assessed or quantified, if for any reason, the insurer is of the view that 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 19 estimate the loss suffered by the insured.

36.    In the present case, the insurer has stated in the counter affidavit filed before the National Commission and even before us, why the appointment of second Surveyor was necessitated and also has given valid reasons for appointing second Surveyor and also has assigned valid reason for not accepting the report of Joint Surveyor. The correspondence between the insurer and the Surveyors would indicate the particulars differed by the insurer for differing with the assessment of loss made by the Surveyors.

11.    The first surveyor M/s Select Surveyors Private Limited assessed the market value of the MRI at Rs.85,88,182/-.  The aforesaid valuation was arrived at on the basis of the market price of a new machine obtained by the said surveyor from the market and after applying depreciation to the extent of 47.5% and deducting the salvage value of Rs.3 lacs, followed by a further deduction of Rs.4,52,009/- on account of technology advancement between the model purchased by the complainant and the model for which price was enquired from the market.

12.    The primary issue between the parties is with respect to the value of the MRI as on the date the fire broke out in the hospital of the complainant.  As noted earlier, the MRI was purchased by the complainant in a second hand condition from M/s Ludhiana Healthcare Ltd. in the year 2003 for a consideration of Rs.1,35,00,000/- and it was insured at the same value, for the period from 01.04.2003 to 31.03.2004.  It is also not in dispute that the Sale Deed executed by Ludhiana Healthcare Ltd. in favour of the complainant company in respect of the MRI was duly submitted to the insurer before the loss had happened.  By insuring the MRI at that value, the insurer accepted that the market value of the MRI was Rs.1,35,00,000/- as on 01.04.2003.  This is not the case of the insurer that the contract of insurance for the period from 01.04.2003 to 31.03.2004 or for the subsequent years was obtained by the complainant by playing fraud upon it or by mis-representation or concealment of material facts.  No evidence was led by the insurer before the State Commission to prove that the actual market price of the aforesaid MRI machine at the time it was purchased by the complainant from M/s Ludhiana Healthcare Ltd. was lower than Rs.1.35 Crores.

13.    A perusal of the assessment made by the second surveyor M/s Cunningham Lindsey International Pvt. Ltd. would show that they verified the price of an MRI and thereafter, made deduction of 30% of the price on account of technology upgradation followed by a depreciation of 75%.  The depreciation to the extent of 75% was made, on the premise that the life of the machine was 12 years because the manufacturer Siemens Ltd. was to supply spares for the said machine only for a period of ten years from the date on which last MRI of that model was supplied and this machine had already been used for more than nine years.  However, the fact remains that no attempt was made by either of the surveyors to find out the market value of a nine year old MRI of the model purchased by the complainant, as on the date of the loss.  It may not be correct to compute the life of a machine such as an MRI solely on the basis of the period during which the spares would be supplied by the manufacturer.  A machine may continue to run smoothly without needing replacement of parts or it may continue to work using substituted parts available in the market.  The fact remains that at the time, the insurer Bajaj Allianz General Insurance Co. Ltd. insured the machine on 19.03.2004, it was already eight years old, said machine having been installed in the year 1996.  If the market value of the machine was less than Rs.1.35 Crores, the insurer ought not to have insured it at the valuation of Rs.1.35 Crores but obviously, the insurer was satisfied with the genuineness of the Sale Deed whereby this machine was purchased by the complainant from M/s Ludhiana Healthcare Ltd. and that seems to be the reason why the machine was insured for Rs.1.35 Crores. 

14.    In a recent decision Civil Appeal No.1299 of 2019 Sumit Kumar Saha Vs. Reliance General Insurance Company Ltd. decided on 30.01.2019, the appellant had purchased an excavator on 27.03.2007 for Rs.51,74,000/- and had accordingly, obtained an insurance cover in respect of the said excavator.  The insurance policy was thereafter, got renewed, the last policy being for the period from 22.07.2009 to 21.07.2010 for a sum insured of Rs.46,56,600/-. The excavator having got damaged in a fire, a claim was lodged and assessment of the loss was made by the surveyor at Rs.25,24,273/-.  Being aggrieved, the complainant/appellant approached the concerned State Commission by way of a Consumer Complaint.  The complaint was resisted by the insurer.  The State Commission allowed the claim to the extent of Rs.41,90,940/- with interest.  Being aggrieved from the order passed by the State Commission, the insurer approached this Commission by way of an appeal.  This Commission directed payment of a sum of Rs.34,17,500/- to the complainant.  Being aggrieved from the order passed by this Commission, the complainant approached the Hon’ble Supreme Court by way of a Special Leave Petition which was later converted into a Civil Appeal.  The damage being a case of total loss, the question which arose was as to what amount or value the complainant was entitled.  The excavator, as noted earlier, was purchased in 2007 at a price of Rs.51.47 lacs whereas it was last insured for Rs.46,56,600/-.  On the deduction of depreciation, the Hon’ble Supreme Court inter-alia observed and held as under:

16.    The relevant stipulation in the present case, namely clause (b) of Provision -Basis of Indemnity speaks of calculation of actual value by deducting “proper depreciation”. The Surveyor of the Insurance Company has worked the figure of depreciation by starting with the figure of Rs.51 lakhs as the cost of a new Excavator and then deducting 32.5% by way of depreciation assuming the life of Excavator to be 10 years. In his assessment, therefore, the stipulation of the figure of Rs.46,56,600/- on the day the contract was entered into, had no significance. Was he right and justified and how could he assume the life of the Excavator to be 10 years? If that was the understanding between the parties, the figure of sum insured could have been different. If the surveyor was calculating the depreciation from the day when the policy was entered into till the date when the accident occurred, such exercise could certainly be justified. But the exercise undertaken was in the nature of not only considering the depreciation post the policy but even including the period prior thereto. That exercise was already undertaken by the parties and in their assessment the real value of the Excavator as on the day when the policy was taken out was Rs.46,56,600/-. In the face of such agreement and understanding, the surveyor could not have calculated depreciation for a period prior to the date of policy or contract. The purport of aforesaid clause was to arrive at proper valuation as on the day when there was total destruction. He could have undertaken the exercise post the date of policy to assess the real value of the insured property as on the date when the fire actually took place. And for such purposes, the assessment must start with the amount described as “sum insured” on the day when the contract was entered into. It was not open to the Surveyor or to the Insurance Company to disregard the figure stipulated as ‘sum insured’. The loss had to be assessed in the present case, keeping said figure in mind.

17.    Having considered the entire matter, in our view, except in cases where the agreement on part of the Insurance Company is brought about by fraud, coercion or misrepresentation or cases where principle of uberrima fide is attracted, the parties are bound by stipulation of a particular figure as sum insured. Therefore, the surveyor and the Insurance Company were not justified in any way in questioning and disregarding the amount of “sum insured”. Further depreciation, if any, can always be computed keeping the figure of “sum insured” in mind. The starting figure, therefore, in this case had to be the figure which was stipulated as “sum insured”. Since Excavator, after the policy was taken out was used for eleven months, there must be some reasonable depreciation which ought to be deducted from the “sum insured”.

15.    The principal of law which emerges from the above referred decision of the Hon’ble Supreme Court is that unless fraud, misrepresentation or concealment of material facts etc. on the part of the insured is shown, the valuation given by the insured and accepted by the insurer, represents the market value of the product on the date it is insured. As noted earlier, there is no allegation of any fraud, misrepresentation or concealment of material facts etc. on the part of the complainant.  This is also not the case of the insurer that the Seed Deed executed by M/s Ludhiana Healthcare Ltd. in favour of the complainant was a sham document prepared with a view to obtain an insurance cover. 

16.    As noted earlier, no evidence has been led by the insurer to prove that the prevailing market value of such an MRI on the date the insurance was first given in the year 2003, was less than Rs.1.35 Crores.  Therefore, in my opinion, the valuation of Rs.1.35 Crores given by the complainant and accepted by the insurer at the time of issuance of the policy, is binding upon the parties.  The machine was used for a period of about two years after it was first insured in April 2003.  Therefore, depreciation only for a period of two years on the value of Rs.1.35 Crores would have been justified in the present case.  The insurer, in my view, should calculate the residual value of the MRI by deducing depreciation for two years applicable on an old machine, from the value of Rs.1.35 Crores and pay that much amount to the complainant for the MRI machine. 

The surveyor M/s Select Surveyors Private Limited had assessed the loss in respect of the other equipments at Rs.80,000/- + Rs.3,25,968/-.  In addition to the depreciated value of the MRI, in terms of this order, the insurer should also pay the aforesaid amount of Rs.4,05,968/- to the complainant.   

It is submitted by the learned counsel for the complainant that the appointment of the second surveyor was not approved by the Hon’ble Supreme Court in The New India Assurance Co. Ltd. Vs. M/s Protection Manufacturers Pvt. Ltd., Civil Appeal No.312 of 2006, in a case where the insurer had not applied to IRDA for a second opinion.  However, since the appointment of the second surveyor has otherwise not been justified by the insurer, I need not consider the applicability of the decision in M/s Protection Manufacturers Pvt. Ltd. (supra).

17.    It would thus be seen that ordinarily, a second surveyor should not be appointed by the insurer.  But, the appointment of a second surveyor would be justified, if sufficient grounds are shown for such an appointment.  In the case before the Hon’ble Supreme Court, the correspondence between the insurer and the surveyors indicated the particulars differed by the insurer for differing with the assessment of loss made by the first surveyor.  In the present case however, no justification for appointment of a second surveyor has been made out except making a bald allegation that the first surveyor had joined hands with the complainant.  There is absolutely no evidence of the first surveyor having joined hands with the complainant.  In the absence of specific material, it would be rather unfortunate to make such allegations merely because the surveyor, in his opinion and judgment, finds the claim to be justified to the extent recommended by him.  Therefore, in the present case, the appointment of the second surveyor, in my opinion, could not be justified by the insurer. 

18.    For the reasons stated hereinabove, both the appeals are disposed of with the following directions:

          (i) For the MRI, the insurer shall pay the depreciated value of the machine to the complainant calculated in terms of this order, taking value of the machine to be Rs.1.35 Crores and deducting appropriate depreciation for a period of two years from the said amount.  The depreciation shall be applied as per the rules framed in the Income Tax Act.  The maximum amount payable to the complainant for the MRI will be Rs.85,78,182/-.

          (ii) For the other equipments, the insurer shall pay a sum of Rs.4,05,968/- to the complainant. 

          (iii) The amount payable to the complainant for the MRI machine in terms of this order, shall be worked out by the complainant within two months from today and the payment shall be made within one month thereafter. 

          (iv) From the total amount worked out in terms of the above referred directions, the amount already paid to the complainant, shall be deducted and the balance amount if any, shall be paid to it.  If it is found that any excess payment has been made to the complainant, it shall be liable to refund that amount to the insurer. 

          (v) The complainant shall be entitled to interest @ 9% per annum on the amount already paid to it w.e.f. 14.10.2005 till the date on which payment was made to it.   

          (vi) If any amount becomes refundable to the insurer in terms of this order, that amount shall also be refunded alongwith interest @ 9% per annum from the date on which it was paid to the complainant till the date on which it is refunded. 

          (vii) In the facts and circumstances of the case, there shall be no order as to costs.

(viii) No ground for enhancement in the rate of interest awarded by the State Commission has been made out by the complainant.