1.       These two cross First Appeals, under Section 19 read with Section 21(a)(ii) of the Consumer Protection Act, 1986 (for short “the Act”), arise out of the order, dated 15.03.2016, passed by the U.P. State Consumer Disputes Redressal Commission at Lucknow (for short “the State Commission”) in Consumer Complaint No. 12 of 2005.  By the impugned order, while partly allowing the Complaint, preferred by the Complainant, namely, M/s Bestochem Formulation (I) Ltd., alleging deficiency in service and unfair trade practice on the part of the Opposite Parties, namely, Iffco Tokio General Insurance Company Ltd. (for short “the Insurance Company”) and its Branch Office at Noida, in not indemnifying the loss suffered by it on account of the fire in its factory and repudiating its two claims on false and frivolous grounds, the State Commission has directed the Insurance Company to pay to the Complainant a sum of ₹32,00,000/-, along with interest @ 6% p.a. from the date of filing of the Complaint till realization, as also litigation expenses, quantified at ₹5,000/-. 

2.       Dissatisfied with the said order, both the parties have filed these Appeals.  While First Appeal No. 564 of 2017 has been filed by the Complainant Company for enhancement of the compensation awarded to it by the State Commission; First Appeal No. 398 of 2016 has been filed by the Insurance Company for setting aside the impugned order itself.

3.       As per the office report, both the Appeals are barred by limitation, inasmuch as there is delay of 7 days in the Appeal filed by the Insurance Company and that of 344 days in the Appeal preferred by the Complainant.  Vide order dated 01.06.2016, the delay in filing of the Appeal by the Insurance Company already stands condoned.  Insofar as the  delay in filing the Appeal by the Complainant is concerned, vide order dated 24.03.2017, the issue was kept open for being decided at the time of final hearing of the Appeals.

4.       Succinctly put, the material facts, giving rise to the filing of the complaint are: that the Complainant, a Limited Company, was engaged in the business of manufacturing and trading in medicines/pharmaceuticals since 1985.  Its  branches were spread all over India. The quantum of its sales and stocks, which included finished/semi-finished goods, goods in transit sample stocks, gift items etc., during the last three financial years, i.e. 2001-2002, 2002-2003 and 2003-2004, was running into Crores of rupees.  As per the Complainant’s Books of Accounts, during the said years, it had written off  expired medicines/dead stocks, worth ₹13,53,052/-, ₹21,49,145/- and ₹70,42,669/- in the said years.  The Complainant had a cash credit limit with Punjab National Bank, Meerut, against hypothecation of its stocks, lying at its godowns at Industrial Area, Mohkampur, and Partapur, Meerut.  Initially, the credit limit in the said account was ₹40,00,000/-, which was enhanced to ₹2,00,00,000/- in the year 2003.  For the purpose of securing its interest and as required by the Bank, the Complainant used to take a number of policies from different insurance companies.  However, since the year 2002, the Complainant was taking all insurance policies from the present Insurance Company.  In this manner, on 14.11.2003 the Complainant obtained from the Insurance Company, two Standard Fire & Special Peril Policies, with add-on peril of earthquake, in respect of all types of medicines, packing materials etc. in its possession and the building, furniture, fixtures etc., in the assured sums of ₹300.00 Lac and ₹97.50 Lac respectively. The policies were valid from 19.11.2003 to 18.11.2004.  

4.1     The building/godown, situated at Premises No.2, Mohkampur Industrial Area, Partapur, Meerut, relevant for the present Appeals, comprised of the ground and first floor.  While the ground floor was being used for storing  the stocks, including finished/semi-finished products, consignments, samples, gift items etc., first floor was being used as Training Centre for the Medical Representatives of the Complainant. 

4.2     Unfortunately, in the intervening night of 15-16 June, 2004,  fire broke out in the godown of the Complainant, situated at the aforesaid place. The stocks lying there were gutted/destroyed.  On being intimated about the fire by some persons in the neighboring factory, at about 12.15 a.m, the fire brigade reached the spot at about 12.40 a.m. and controlled the fire around 4 a.m.  On the date of the incident itself, the Complainant lodged an FIR with the Police and also intimated the Insurance Company about it.   On receipt of the said intimation, the Insurance Company appointed one M/s S.K. Agarwal & Company as their Surveyor to assess the loss suffered by the Complainant. According to the Complainant, all necessary documents, as demanded by the Surveyor, were furnished.  The fire brigade department issued a report dated 01.07.2004, which showed that the cause of fire was electric short circuit, due to high electricity fluctuations. In the meanwhile, based on the estimates for repairs prepared by one Mr. Jagesh Kumar, Approved Architect and Valuer and the stocks destroyed, the Complainant lodged two claims, amounting to a total sum of ₹32,91,282.76 towards damage to the stocks and building/fixtures.

4.3     Upon making local enquiries, which included recording of statements of some eye-witnesses, vide its report dated 04.10.2004, the Surveyor, rejected the stand of the Complainant that the cause of fire was short circuit due to excessive fluctuation, for the following reasons:- 

          “We are of the view that the opinion given in the fire report about the cause of fire being electric short circuit is not correct. Our views are based on the following observations & findings:

• The fire report by reference to the information provided by Mr. Vikram Singh accepted that due to excessive electric fluctuations, the choke of the tube light got overheated and short circuit occurred.The storage godown was full of material up to roof level.The electric short circuit ignited the material and caused the fire.

   

• The fire report relied upon detailed information provided by Mr. Vikram Singh s/o Mr. Manphool Singh r/o Maliyana, who was produced before the fire officer as employee of the insured working as electrician.During our discussions with the insured on 09.09.2004, we were informed that Mr. Vikram Singh was not insured’s own employee but was a contract electrician.He was not produced before us for our inquiry.Even in the internal inquiry conducted by the insured, there was only a passing reference to the discussion with the electrician.When we wrote to the insured in our letter dated 11.08.04 to elaborate their discussion with the electrician, the insured’s reply was evasive.

• The fire report in their analysis wrongly assumed that the storage godown was full of material up to roof level.The stock heap was only about 5 feet high and there was a clear distance of 6-7 feet between the ceiling & top of the stock heap.This was clear from the volumetric analysis as well as from the site observations.

• The fire report by reference to the information provided by Mr. Vikram Singh accepted that due to excessive electric fluctuations, the choke of the tube light got overheated and caused electric short-circuiting.This inference is not correct as overheating in the choke would first break the flurescent tube light and thereafter would start a fire communicating with the combustible material on the ceiling and in the vicinity of the fixture.In the subject case, the tube light was not broken and there was no combustible material on the ceiling and in the vicinity of the fixture.

• The ignition by electric short-circuiting could not have caused localized pockets of severe burn marks at scattered positions of the stock heap, as we noted at the site.

Based on the above, we rule out electric short-circuiting as the likely cause of fire.”

          Inter-alia, observing that during the course of investigation at the site, they did not notice any source  which could ignite accidental fire in the godown, the Surveyor made the following final recommendation:- 

“14.01 In the course of our site investigation, we did not find any source of ignition, which could ignite accidental fire in the godown.  The cause of fire remains mysterious.  The contradictions in the statement of eye witnesses, belated intimation of fire to the fire brigade, absence of the source of ignition, which could ignite accidental fire in the godown and observed burn pattern at the site of fire makes us not to rule out the possibility of wilful act or foul play.

14.02  The insured’s major claim of loss was in respect of stock of Pefomex-50, which as per their records, was not selling well.  The stock of Pefomex-50 had piled up and its date of expiry was coming to near.  The sales trend of the preceding months indicated that the bulk of Pefomex-50 inventory was destined to be written off as non-marketable/expired stock.  These observations are evident of motive to make good the destined write off by claiming the same as damages by fire, under the fire insurance policy.

14.03  In view of the circumstances on record, our findings detailed herein above and the existence of motive to make good the business losses under the fire policy, we are of the opinion that fire in the godown was not accidental as claimed by the insured.

14.04  Without any prejudice to the right of the insurers, we have worked out  the net adjusted liability on the two policies for ₹1,41,341.00.”

4.4     Relying on the said report of the Surveyor, vide its letter dated 10.11.2004, the Insurance Company, repudiated the claims in toto, stating thus:

“On careful consideration of the information and documents provided by you and the details available from survey and investigation we observe the following:

1. The fire brigade was called in after about 45 minutes of noticing fire.No efforts were made by the persons present at the site towards fire fighting.Thus reasonable steps to mitigate the loss were not taken.

    

2. The surveyors did not find any source of accidental ignition in the godown.

    

3. The surveyors noticed contradictory statements of eyewitnesses with regard to the occurrence.

    

4. The product Pefomex – 50 was not selling well.The stock of this product had piled up and was near to its date of expiry.Sales trends clearly indicate that the stock was destined to be written off as non-marketable/expired stock with no resale value.

    

   The above facts together with the burn pattern observed by the surveyors at the site of fire leads to the conclusion that the fire in the godown was not accidental as claimed by you and the affected stocks had practically no commercial value, for which reasons the claim is not admissible.

    

   In terms of Condition 8 of the Standard Fire Insurance Policy, we regret to repudiate liability in respect of the claim lodged by you.”

    

   4.5     Clause-8, relied upon by the Insurance Company, while repudiating the claims, reads as under:

   “Clause – 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 willful act, or with the connivance of the insured, all benefit under this policy shall be forfeited.”

    

   5.       On receipt of the repudiation letter, on 17.11.2004, the Complainant wrote a strongly worded letter to the Insurance Company, contesting the afore-noted observations made by the Surveyor. The relevant portion of the letter reads as follows:-

   “As per your Point No.1 which mentions that we have called Fire Brigade after noticing 45 minutes of fire.  We wish to know either you or your Surveyor was present here at that time?  The fire happened at the ground floor and atleast 7 Trainees were present in the 1^st Floor for training and 6 Office staff were also present.  We would like to know on humanitarian grounds can we play with the Life of our own Field Staff?  Secondly we would also like to know that what would be the modus operandi of ours to deal such calamities in future also.  Even the report submitted by the Fire Brigade seems to be a fictitious as per your allegations.

    

   Regarding your Point No.2, we are sorry to say that your Surveyor was incompetent as the Fire Brigade admits that the fire was due to Short Circuit.  We feel that the Contradictory statements, as mentioned by you, may be submitted by your Surveyor because we were unable to fulfill his illegal demands.

    

   Lastly, we wish to submit that while Insuring our Medicines, have you ever noticed the Expiry Date of Medicines and Sales of the Products.  We have full faith in God and Indian judiciary.”

    

   6.       Having failed to evoke any positive response from the Insurance Company, the Complainant filed the Complaint inter alia, pleading that: (i) over the past years it had been writing off the expired/dead medicines, worth lacs of rupees; (ii) major stock damaged/destroyed in the fire was a product called Pefomax-50, a drug having salt Sednafil Sitrate, which had been purchased by it for trading and had expiry period of more than six months, inasmuch as it was to expire in November, 2004; (iii) there was no condition in the policy that the value of the materials which were nearing expiry date, would be taken as zero; (iv) the other three reasons, on the basis whereof the Insurance Company has repudiated the claims in question, are totally vague, absurd, one-sided and against the facts and evidence and (v) there was no reason for the Complainant itself putting on fire to own building, more so when its 1^st floor was being used and occupied by its Medical Representatives and other Staff at the time of the incident.  Thus, alleging deficiency in service and unfair trade practice on the part of the Insurance Company in repudiating its legitimate claims, the Complainant prayed for a direction to the Insurance Company to pay to it sums of: (i) ₹37,35,606/- towards the loss suffered on account of the fire, and interest @ 18% p.a. for the period 15.06.2004 till the date of filing of the Complaint, along with further interest at the said rate from the date of filing of the Complaint till actual payment; (ii) ₹5,00,000/- as damages for the mental pain, agony, sufferings etc.; and (iii)  ₹54,000/- as litigation costs.     

   7.       Upon notice, the Insurance Company resisted the Complaint on diverse grounds, including the pleas that the Complainant was not a “Consumer” within the meaning of Section 2(1)(d) of the Act because it was involved in commercial activities; earning huge profits; adjudication in the Complaint required elaborate evidence and that the Complaint was bad for non-joinder of a necessary party, namely the Bank with whom the goods were hypothecated and in the event of any amount payable against any claim, it was payable to the Bank, more so, when in the policy, the Bank was described as the Insured.  On merits, while reiterating the grounds stated in the letter of repudiation, it was pleaded that the time gap between noticing of the fire and intimation to the Fire Brigade, was crucial, as the fire was allowed to cause destruction without any attempt to mitigate the loss: during the course of investigations, contradictory statements were made to the Surveyor by the witnesses, in as much as, the Watchman of the insured factory, had given the statement that at about 11.30 p.m., when he heard loud sound of a blast and found some glass panes broken, through which smoke was coming out, he went to the first floor and woke up the Depot Coordinator, V.K. Naresh and then informed the Director of the Appellant Company, namely, Vijay Prakash, and the Fire Brigade about the incident  from his mobile phone, whereas, vide its letter dated 14.07.2004, the Complainant had stated before the Surveyor that while its Director was informed about the incident by the Depot Coordinator, namely, Vinod Kumar Naresh, an occupant at the subject premises,  from his mobile phone, the Fire Brigade was informed about the incident by telephone from a neighboring factory; the said V.K. Naresh had stated in his statement to the Surveyor that on hearing the sound of blast, he had rushed to the terrace and informed the Director of the Complainant and the Fire Brigade: though the Watchman and Depot Coordinator had noticed the fire at about 11.30 p.m., the intimation about the same was given only at 12.25 a.m. by one Veer Sain, Watchman of the neighboring factory, to the Fire Brigade.  As regards the stock of Pefomax-50, the Insurance Company further stated that since the drug had the validity period of two years from the date of manufacturing, the left over life of the said stock was only 5 to 8 months and despite their promotional schemes, the Complainant was not able to sell the said stock, which fact was evident from letter dated 31.03.2004, written by the Complainant to its Suppliers. It was thus asserted that the Insurance Company was justified in repudiating the subject claims and, hence, there was no deficiency in service and unfair trade practice on its part.                

   8.       Upon consideration of the submissions made on behalf of the parties, the State Commission has come to the conclusion that the rejection of the stand of the Complainant relating to the cause of fire by the Surveyor merely on the ground that there was discrepancies in the statements of the witnesses to the incident and not assessing the loss suffered by the Complainant on account of the fire and demanding illegal gratification for giving a favourable report, amounted to deficiency in service on the part of the Insurance Company.  Taking into consideration the report of the Fire Brigade as to the cause of fire and quantum of the loss suffered as per the said report, the State Commission has awarded almost the same compensation as was claimed by the Complainant and thus, issued the aforesaid directions to the Insurance Company.

   9.       Hence, the present cross Appeals.     

   10.     Questioning the correctness and legality of the findings returned by the State Commission relating to the cause of fire and the quantification of the compensation awarded, Mr. K.V.Girish Chowdary, Learned Counsel appearing for the Insurance Company strenuously urged that the State Commission has erred in basing its finding on the cause of fire, being accidental, only on the report of the Fire Brigade Department.  Learned Counsel asserted that the Surveyor’s report was based on deep analysis of the conditions at the site and the testimony of the witnesses present at the time of incident, and therefore it could not be brushed aside on the sole ground that the report of the Fire Brigade, as to the cause of fire, had also been verified by the Police.  In support of his submission that non-consideration of Surveyor’s report has resulted in miscarriage of justice and hence, the impugned order deserves to be set aside, Learned Counsel placed reliance on the decision of the Hon’ble Supreme Court in United India Insurance Co. Ltd. & Others Vs. Roshan Lal Oil Mills Ltd. & Others (2000) 10 SCC 19.  Reliance was also made to the decision dated 15.05.2009, rendered by this Commission in Ashu Textiles Vs. New India Assurance Company & Anr. (RP No. 1429 of 2009),  to bring home the point that the Fire Brigade Report and Bank statements could not be given precedence over a well reasoned report of the Surveyor, rejecting the stand of the Complainant with regard to the cause of fire.  As regards the award of compensation of ₹32,00,000/- in favour of the Complainant, Learned Counsel vehemently argued that the impugned order on the point is absolutely non-speaking and without any foundation, in as much as, the same is again based solely on an observation by the Fire Department that the “damages of more than approximately 32 lakhs have been caused in factory of the Complainant.”  It was asserted that for all these reasons the matter deserves a fresh look by the State Commission.

   11.     Per contra, Mr. Madhurendra Kumar, Learned Counsel appearing for the Complainant, while supporting the impugned order and pleading for enhancement in the rate of interest, awarded by the State Commission on the amount of compensation, relied on the decision of this Commission dated 30.10.2015 in Shiv Poojan Verma Vs. New India Assurance Co. Ltd. & Ors. (2016) 1 CPR 92 (NC), in support of the proposition that the report of the Fire Department, a government agency, based on material evidence had to be given precedence over the Surveyor’s report.

   12.     Thus, the pivotal question falling for consideration is as to whether or not the cause of fire was accidental?

   13.     Having bestowed my anxious consideration to the material on record, more precisely the Surveyor’s report, heavily relied upon by the Insurance Company, and the report of the Fire Brigade Department, I am of the opinion that though the Surveyor had reached to the conclusion “that the fire in the godown was not accidental as claimed by you”, but except for the observations that there was delay in calling the Fire Brigade; no source of accidental ignition in the godown was found; contradictory statements of eye witnesses were noticed and Pefomax-50 was not selling well, the report falls short of stating clearly the actual cause of the fire, albeit the observation in para 14.01 of the report, to the effect that “burn pattern at the site of fire makes us not to rule out the possibility of willful act and foul play.”  Having made such an observation, the Surveyor and even the Insurance Company was expected to have a proper investigation conducted to find out the real cause of  the fire to arrive at a final conclusion that the fire was handiwork of the Complainant Company, to make unwarranted gains.  Pertinently, the Surveyor did not discard the report of the Fire Brigade, clearly indicating the cause of fire.  Besides, in the light of the Affidavit of Vikram Singh, a copy whereof had been placed on record, the observation in the Surveyor’s report that despite several requests the said Vikram Singh  did not appear before them, or that his statements were contradictory also does not hold much water.  In fact, the said Affidavit makes the entire report vulnerable, as evidently, too much emphasis has been laid on his statement therein. 

   14.     It is a cardinal principle of law that ordinarily the burden of proving the fact rests on the party who asserts the affirmative issues and not on the party who denies it.  Nevertheless, there is distinction between the phrase ‘burden of proof’ and ‘onus of proof’.  Explaining the said fine distinction, in A. Raghavamma and Anr. Vs. A. Chenchamma and Anr. AIR 1964 SC 136, a three Judge Bench of the Hon’ble Supreme Court held that “there is essential distinction between burden of proof and onus of proof.  Burden of proof lies on the person who has to prove a fact and it never shifts, but the onus of proof shifts.  Such a shifting of onus is a continuous process in the evaluation of evidence.” 

   15.     Bearing in the mind the afore-noted fundamental principle, in my view on production of the Report of the Fire Brigade Department, authenticated by the Police Department and the statement of the Electrician, the Complainant had led cogent evidence in support of its stand that the cause of fire was electric short circuit and hence the onus shifted on to the Insurance Company to  prove the actual cause of the fire.  I am convinced that the Insurance Company has failed to lead any evidence in that behalf.  In that view of the matter, I do not find any illegality in the decision of the State Commission in placing reliance on the report of the Fire Department for arriving at the conclusion that the fire was on account of electric short circuit.  The decision of the State Commission on the point is affirmed accordingly.    

   16.     Having reached the said conclusion, the next question for consideration is whether the State Commission was justified in awarding a compensation of ₹32,00,000/- in favour of the Complainant?

   17.     Having carefully gone through the impugned order, I have no hesitation in coming to the conclusion that the direction for payment of the afore-stated compensation to the Complainant, is without any application of mind by the State Commission and hence, unsustainable.  The necessity of giving reasons by any authority, be it quasi-judicial or administrative, in a matter affecting the rights of the parties is too well settled and needs little emphasis.  In Woolcombers of India Ltd. Vs. Workers Union (1974) 3 SCC 318, while considering on award made under the Industrial Disputes Act, the Hon’ble Supreme Court insisted on the need of giving reasons in support of the conclusions in the award.  It was held that the very requirement of giving reason is to prevent unfairness or arbitrariness in reaching conclusions.  The second principle is based on the jurisprudential doctrine that justice should not only be done, it should also appear to be done as well.  The learned Judges said that a just but unreasoned conclusion does not appear to be just to those who read the same.  Reasoned and just conclusion on the other hand will also have the appearance of justice. 

   18.     In the present case, the State Commission has taken the report of the Fire Brigade, wherein it was stated that loss of “approximately ₹32,00,000/-“ had been caused to the Complainant, as sacrosanct and has proceeded to award the same amount as compensation, with interest @ 6% p.a.  In my opinion, the State Commission has erred in awarding the said compensation without application of mind and this part of its order deserves to be set aside.  It is ordered accordingly.

   19.     Consequently, the Appeal filed by the Complainant (FA No.  564/2017) which is otherwise barred by limitation is dismissed; the Appeal filed by the Insurance Company (FA No. 398/2016) is partly allowed to the extent indicated above and the question of compensation payable to the Complainant is remanded back to the State Commission for fresh adjudication.  Needless to add that it will be open to both the parties to lead additional evidence in support of their rival stands on the quantum of compensation, if so advised. 

   20.     Vide order dated 01.06.2016, the Insurance Company was directed to deposit in this Commission a sum of ₹10,00,000/- as a condition precedent for stay of the impugned order.  The amount is stated to have been deposited.  As Appeal of the Insurance Company on merits of the claim is being dismissed, it is directed that the afore-said amount of ₹10,00,000/- shall be released to the Complainant along with accrued interest, if any, on its filing an Affidavit, undertaking to this Commission that it will refund the excess amount, if the final compensation awarded in its favour is less than the said amount.

   21.     Since the incident took place as far back as in the year 2004, the State Commission is requested to take a final decision on the aforesaid issue, as expeditiously as possible and in any case, not later than four months from the date of receipt of a copy of this order.  The Parties/their Counsel shall appear before the State Commission on 30.07.2018 for further proceedings.

   22.     Both the Appeals stand disposed of in the above terms, leaving the parties to bear their own costs.