CC NO. 303 OF 2017

For the Complainant                :         Mr. Arvind Nayar, Sr. Advocate

Mr. K. Maruthi Rao, Advocate

                                                          Mr. C. Madhu Babu, Advocate

For Opp. Parties No.1 & 2       :         Mr.Yogesh Malhotra, Advocate

For Opp. Party No.3                :         Mr. Arjun Malik, Advocate

CC NO. 259OF 2018

For the Complainant                :         Mr. Sameer Abhyankar, Advocate

                                                          Mr. Akshay Joshi, Advocate

                                                          Ms. Vani V. Chhetri, Advocate

                                                          Ms. Nishi S., Advocate

                                                          Ms. Sugandh Rathore, Advocate

                                                          Mr. C. Madhu B., Advocate    

For Opp. Parties No.1 & 2       :         Mr.Vishnu Mehra, Advocate

For Opp. Party No.3                :         Mr. Arjun Malik, Advocate

ORDER

1.       As the facts and the dispute involved in the aforesaid two Consumer Complaints are same, they are disposed of by common order treating CC/303/2017 as the lead case.

2.       The Complainant is a cold storage and acts as a custodian for the agricultural produce stored by the farmers. The Complainant obtained a Standard Fire & Special Perils Policy No.566018111310000062 for a sum of Rs.14 crores (Rs.4 crores for building, plant & machinery and Rs.10 crores for stock) valid from 30.03.2014 to 29.03.2015 from National Insurance Company Limited. On 09.09.2014, vide endorsement No.566018111382100004, the sum insured was enhanced from Rs.14 crores to Rs.19.5 crores (Rs.5,50,000/- towards building, plant & machinery and Rs.14 crores towards stock). The insured stocks consisted of dry chilly, onion, potato, cashew nut, bengal gram, red gram, green gram, black gram, coriander, fruits, pulses, groundnuts and other agricultural products.

          The Complainant also took another Standard Fire & Special Policy No.463400/11/2015/70 on the stocks of mirchi, bengal gram, daal and all agricultural products for a sum of Rs.8 crores valid from 30.05.2014 to 29.05.2015 from Oriental Insurance Company Limited. The farmers used to take loans from the Bank by pledging their cold storage bonds issued by the Complainant. The Complainant signed as a guarantor for the farmers who took loan from the Bank. The Bank had also taken collateral securities from the Complainant apart from guarantor agreements. It was a common practice of all the cold storages to have an agreement with the bankers to give loan facility to the farmers on the guarantee and collateral securities of the cold storage.

          On 15.10.2014 at about 2.00 am, a major fire accident broke in the cold storage of the Complainant. The incident was immediately reported to the Police and A.P. State Disaster Response as well as the Fire Service Department and the local authorities. The Complainant also informed the Opposite Parties about the fire accident. Entire stocks got burnt in the fire and the building also completely collapsed. Deputy Electrical Inspector, Guntur, alongwith local electricity authorities, inspected the premises and conducted necessary investigation and enquiries. On 15.10.2014, the Opposite Parties appointed Mr. Y. Siva to conduct preliminary survey. On receipt of preliminary Survey Report, the Opposite Parties appointed M/s Comtec Surveyors for conducting final survey and assessment of loss. The Opposite Parties withdrew the said Surveyor and on 03.12.2014 appointed Mr. B. Nageswara Rao as Surveyor & Loss Assessor for assessment of loss. The Complainant submitted all documents sought by the Surveyor. The Complainant filed a claim before National Insurance Company Limited for Rs.13,98,39,112/- for loss of stocks and Rs.5,50,96,707/- towards building, plant & machinery. The Opposite Parties also appointed M/s Truth Labs for ascertaining the cause of fire. As the claim was not settled even after expiry of 13 months, on 08.02.2015 the Complainant made a Complaint to IRDA requesting  for early settlement of the claim. The Complainant also deputed M/s Startech Labs to ascertain the cause of loss, who submitted their report dated 27.10.2015 stating that the samples were free from any inflammable substances and no hydrocarbons were detected. The Surveyor submitted Final Survey Report dated 29.10.2015 assessing the loss to the building, plant and machinery etc. at Rs.2,30,71,979/- and loss to the stocks at Rs.6,84,07,938/-. The Opposite Parties, however, vide letter dated 16.05.2016, repudiated the claim on the ground that as per the report of M/s Truth Labs fire was not caused due to electrical short circuit but due to induced ignitable fire accelerants such as kerosene. Alleging deficiency in service on the part of the Opposite Parties, the Complainant filed Consumer Complaint No.303 of 2017 with following prayer:-

“1.    To pay insurance claim amount of Rs.19,49,35,819/- along with interest @ 18% p.a. from 15.10.2014 till the date of realization, covered under the policy number 566018111310000062. Also under the Policy Endorsement number 566018111382100004.

2.       To pay Rs.60,00,000/- for each year due to non settlement of the claim to the O.P. No. 1 & 2 to the Complainant towards of rent from the date of accident, 15.10.2014.

3.       To pay compensation of Rs.20,00,000/-.

4.       Costs of Rs.5,00,000/-”

3.       The Complaint was contested by the Opposite Parties by filing the written statement. It was stated that the Complainant is a commercial organization carrying on business for profit and is not a “Consumer” under Section 2 (1) (d) of the Consumer Protection Act, 1986. The Services of the Opposite Parties were engaged for commercial purpose. It was also stated that Oriental Insurance Company was a necessary Party as the Complainant had also taken Policy from them covering the stocks. The Complaint is liable to be dismissed for non-joinder of necessary Party.

4.       On merits, it was stated that claim of the Complainant was repudiated on the basis of the Final Survey Report as well as the investigation report submitted by M/s Truth Labs. The Surveyor raised suspicion regarding cause of loss and, vide email dated 24.10.2014, requested the Opposite Parties to conduct detailed investigation to ascertain the cause of loss. After thorough investigation, M/s Truth Lab, vide report dated 29.07.2015, concluded that the fire was not caused due to electric short circuit but due to induced ignitable fire accelerants such as kerosene which were detected in the analysis of the burnt debris samples collected. Fire accelerants were used deliberately for ignition for burning of stocks.

5.       The Opposite Parties were justified in repudiating the claim on the ground of fraud in terms of condition No.8 of the Policy. The Complainant had obtained Insurance Policy covering loss to the stocks for Rs.14 crores and loss to the building, plant & machinery for Rs.5.50 crores. After due investigation/verification of documents, the Surveyor assessed the loss to the stocks at Rs.10,74,92,046/-. The Surveyor, however, apportioned 63.63%                        i.e. Rs.6,84,07,938/- as payable by the National Insurance Company Limited. The Surveyor assessed the loss to the building, plant & machinery at Rs.2,30,71,979/-. The Surveyor also observed that as the fire was not caused due to electrical short circuit, the Complainant was not entitled to any claim. The Opposite Parties were justified in repudiating the claim. The Complaint filed by the Complainant was an abuse of process of law and deserves to be dismissed.

6.       Heard the Learned Counsel for the Parties and carefully perused the record. The Learned Counsel for the Complainant submitted that the whole building collapsed and the entire stock got burnt in the fire due to which the Complainant suffered huge loss. Instead of deciding the claim of the Complainant, the Opposite Parties went on to appoint one Surveyor after another with ulterior motive. Mr. Y. Siva Prasad was appointed to conduct preliminary survey. Thereafter, M/s Comtech Surveyors and Loss Assessors was appointed. Further Mr. B. Nageswara Rao was appointed to conduct final survey. M/s Truth Lab was also appointed by the Opposite Parties to ascertain the cause of loss. It was submitted that the Opposite Parties wrongly repudiated the claim on the ground that the Complainant could not establish the cause of fire. The Deputy Electrical Inspector, vide letter dated 07.11.2014, intimated the Police Inspector, Gurazala that the fire was caused by electrical short circuit. Andhra Pradesh Forensic Science Laboratories, Hyderabad in their report dated 14.02.2015 also confirmed that no inflammable hydrocarbons were present in the samples collected by them. Police authorities submitted Final Report dated 28.03.2015 stating that the cause of fire was of electrical origin. The Final Report submitted was accepted by the Judicial First Class Magistrate, Gurajala. The Complainant submitted the stock statement to the Surveyor but the Surveyor considered almost half of the actual quantity. Quantity of the stock was kept as collateral security with the Bank and the Bank also certified the quantity of the stock claimed by the Complainant. The assessment of loss made by the Surveyor was not correct and the Complainants are entitled for the claim filed.

7.       Learned Counsel for Opposite Parties No.1 and 2 in CC/303/2017 submitted that the Complainant is a commercial organization carrying on business for profit and is not a “Consumer” under Section 2 (1) (d) of the Consumer Protection Act, 1986. The Services of the Opposite Parties were engaged for commercial purpose. There is no relationship of “Consumer” and “Service provider” between the Complainant and the Opposite Parties. It was also submitted that Oriental Insurance Company was a necessary Party as the Complainant had also taken Policy from them covering the stocks. The Complaint is liable to be dismissed for non-joinder of necessary Party.

8.       On merits, Learned Counsel submitted that the Complainant did not suffer any loss as they were not the owner of stock. Complainant themselves admitted that the stock kept in the godown did not belong to them but to different farmers. The Complainant was only custodian of the goods. In the fire accident loss was caused to the farmers and not to the Complainant. Learned Counsel also submitted that the Complainant did not produce any evidence to prove that they paid any amount to the farmers. As per provisions of the Insurance Act, Insurance is a contract of indemnity. There is no whisper in the Complaint that the Complainant suffered any loss. Reimbursement can be made only on proof of loss. As the Complainant did not suffer any loss nor paid any amount to the farmers, there was no question of indemnity. It was further submitted that in the proposal form the Complainant did not disclose that stock for which Policy was taken was held in trust and did not belong to them. Learned Counsel submitted that it is a case of double insurance, which is not permissible under law. The Complainant suppressed this fact from the Opposite Parties. Learned Counsel for the Opposite Parties relied on the judgment of Hon’ble Supreme Court in General Assurance Society Limited vs.Chandumull Jain &Anr. AIR 1966 (SC) 1644 and submitted that 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. It was also submitted that the Survey Report is an important piece of evidence and the same cannot be brushed aside in absence of any cogent evidence. The Complainant had not produced any cogent evidence contrary to the Survey Report. The Complaint is misconceived and is liable to be dismissed.

9.       Learned Counsel for Opposite Parties No.1 & 2 in CC/259/2018 also took the same grounds on maintainability as taken by the Learned Counsel for Opposite Parties No.1 and 2 in CC/303/2017.

10.     On merits, Learned Counsel submitted that the Complainant played fraud by not disclosing the fact that they had already taken another Insurance Policy for stocks from National Insurance Company Limited. It was submitted that the stocks were not kept separately, rather kept in a mingled condition. The Surveyor also observed discrepancy in the stock statement submitted by the Complainant. The Complainant issued storage bonds to the farmers. Some of the stocks were already sold before the date of issue of storage bonds. As the Complainant had insured the stocks under two Insurance Policies, the Surveyor apportioned the ratio between the Oriental Insurance Company Limited and the National Insurance Company Limited at 36.36 : 63.63%. The Surveyor appointed by the Oriental Insurance Company Limited assessed the loss to the stock at Rs.6,53,12,800/- and apportioned the loss payable by Oriental Insurance Company Limited at Rs.2,25,60,347/-, being 36.36% of the assessed amount.  The Surveyor observed that the fire was caused by the Complainant with the malafide intention of availing pecuniary benefit. Relying on the Surveyor’s Report, the Opposite Parties rightly repudiated the fraudulent claim of the Complainant. The Complaint is misconceived and deserves to be dismissed.

11.     Learned Counsel for Opposite Party No.3/Canara Bank in both Consumer Complaints submitted that they had provided credit facility and the Complainant had not made allegation of deficiency in service on their part. There is inter-se dispute between the Complainant and the Insurance Company. They are, therefore, not liable to pay any compensation or damages to the Complainant.

12.     Facts of the case are that on 15.10.2014 at about 2.00 am, a fire occurred in the cold storage of the Complainant. The incident was intimated to the Police and A.P. State Disaster Response as well as the Fire Service Department and the local authorities. The Complainant also informed the fire accident to the Opposite Parties. Entire stocks got burnt in the fire accident and the building also completely collapsed. On 15.10.2014, the Opposite Parties appointed Mr. Y. Siva as preliminary surveyor to conduct preliminary survey. Deputy Electrical Inspector, Guntur alongwith local electricity authorities inspected the premises and conducted necessary investigation and enquiries. On receipt of preliminary Survey Report, the Opposite Parties appointed M/s Comtec Surveyors for conducting final survey and assessment of loss. The Opposite Parties withdrew the said Surveyor and on 03.12.2014 appointed Mr. B. Nageswara Rao as Surveyor & Loss Assessor for assessment of loss. The Complainant submitted necessary documents sought by the Surveyor. The Insurance Company also appointed M/s Truth Labs to ascertain the cause of fire. The Complainant filed a claim before National Insurance Company Limited for Rs.13,98,39,112/- for loss of stocks and Rs.5,50,96,707/- towards building, plant & machinery. The Complainant also made a Complaint to IRDA on 08.02.2015 requesting for early settlement of the claim. The Complainant also deputed M/s Startech Labs to ascertain the cause of loss, who submitted their report dated 27.10.2015 stating that the samples were free from any inflammable substances and no hydrocarbons were detected. On the basis of the Final Survey Report, the Opposite Parties, vide letter dated 16.05.2016, repudiated the claim on the ground that as per report of M/s Truth Labs, the fire was not caused due to electrical short circuit but due to induced ignitable fire accelerants such as kerosene.

13.     The Opposite Party raised the issue of maintainability stating that the Policy was obtained by the Complainant for commercial purpose. The Complainant was, therefore, not a Consumer. This Commission in Harsolia Motors v National Insurance Company Ltd. [I (2005) CPJ 26 (NC)] held that a contract of insurance is a contract of indemnity and, therefore, there is no question of commercial purpose in obtaining insurance coverage. The aforesaid judgment was upheld by Hon’ble Supreme Court, vide judgment dated 13.04.2023 in Civil Appeal No.(S) 53525353 of 2007 and other connected Appeals.  In view of law laid down by Hon’ble Supreme Court, the Complainant is a “Consumer” and the Complaint is maintainable.

14.     The Opposite Party also resisted the Complaint on the ground of non-joinder of necessary Party stating that the Complainant had not impleaded Oriental Insurance Company as a Party. We may mention that the Complainant filed a separate Consumer Complaint against Oriental Insurance Company Ltd. being CC/259/2018, which is also decided by this Common order. There is, thus, no question of not impleading Oriental Insurance Company as Opposite Party in CC/303/2017. The argument of the Opposite Parties that the Complaint is bad for non-joinder of necessary Party is rejected.

15.     The Opposite Parties also resisted the Complaint on the ground that the Complainant was not the owner of the insured goods and the same were held in trust with the Complainant. As observed in para-13 above, the Complainant is a “Consumer” and the Opposite Parties “Service providers.” It is common knowledge that in a cold storage, the owner does not keep his own stock but keeps the stock of the farmers. For any loss or damage of stock the Complainant is liable to compensate the owners of the stock. If the Opposite Parties had any grievance regarding ownership of the stock, they were required to clarify the same at the time of issuing the Policy. After issuance of the Policy, the Insurance Company cannot evade its liability on the ground that the Complainant was not owner of the insured stock. The argument of the Opposite Parties is, therefore, rejected.

16.     Learned Counsel for the Opposite Parties also resisted the claim on the ground that the Complainant committed fraud by not disclosing the fact that they had already taken another Policy. In this regard it is relevant to mention that purchasing one or more concurrent policies may be a prudent course of action for businesses to cover their risks. It also distributes the liability, if any, between the Insurance Companies. The Opposite Parties liability is apportioned between them and in the present case there is also no dispute on the sharing of liability. We see no merit in the argument of the Opposite Parties that fraud has been committed by the Complainant in taking the Policies from both Insurance Companies. In fact, their liability is shared and burdens them much less than what they would have to bear.

17.     The Opposite Parties repudiated the claim on the ground that the fire was not caused due to electrical short circuit but due to induced ignitable fire accelerants such as kerosene. The Opposite Parties relied on the report of Truth Labs. M/s Truth Labs observed that fire accelerants could have been used deliberately for ignition, initiation, propagation and burning of stocks in the cold storage unit through human intervention. Regarding use of fire accelerants for causing deliberate ignition, initiation, propagation and burning of stocks, M/s Truth Labs has not given any reason.

18.     The Complainant stated that the fire was caused due to electric short circuit. In this regard, letter dated 07.11.2014 of the Deputy Electrical Inspector to the Inspector of Police, Gurajala Rural, District Guntur is relevant, which reads as follows: -

“…

On investigation it is found that the insulation of lighting Wires (electrical) may be damaged and touched each other and short circuit occurred, or due to loose contacts of lighting wires at the terminals of plug sockets, the sparks might have been fallen on the material which was stored in the cold storage and caught fire and fully burnt the material during the fire accident.

It is also observed that two fuses are blown and one phase conductor is melted at the second side of the transformer in the transformer yard. Hence it is conformed that the fire accident occurred due to electrical short circuit.”

From the aforesaid letter it is clear that on investigation the Deputy Electrical Inspector observed that the fire accident occurred due to electrical short circuit.

In the Final Report dated 28.03.2015 submitted by the Police with the Judicial Magistrate-I, Gurjarala it is mentioned that fire occurred due to electric short circuit. Final Report dated 28.03.2015 reads as follows: -

“During investigation according to the report given by the Deputy Electrical Inspector, Guntur (West Sub-Division) who inspected the scene of offence disclosed that the incident took place due to electrical short circuit. During investigation no foul play disclosed pertaining to the fire accident and therefore as per the report of the Dy. Electrical Inspector it is clear that fire accident took place accidentally due to electrical short circuit. In this case as there is no foul play further action was dropped.”

Further in the report of Forensic Science Laboratories, Government of Andhra Pradesh dated 14.02.2015 it is clearly stated that no inflammable hydrocarbons were found in the samples collected.

          To ascertain the cause of fire, the Complainant also deputed M/s Startech Labs, Hyderabad, who collected the burnt debris of the agricultural produce from all chambers and submitted their report dated 27.10.2015 stating that the samples collected were free from inflammable substances and hydrocarbons. M/s Startech Labs, Hyderabad made specific remark, which reads as follows:-

“REMARKS: The sample is free from any inflammable substances.”

From the above, it is clear that in the samples collected from the burnt debris, M/s Startech Labs, Hyderabad found no inflammable substance. Further, against the Gas Chromatography- Head Space, it is clearly mentioned Hydrocarbons (Volatile and Inflammable) not detected.

19.     From the report of the Deputy Electrical Inspector dated 07.11.2014, Forensic Science Laboratories, Andhra Pradesh report dated 14.02.2015, M/s Startech Labs, Hyderabad report dated 27.10.2015 it is clear that the fire occurred due to electric short circuit and was not caused by the Complainant deliberately as alleged by the Opposite Parties. The Opposite Party/Insurance Company is, therefore, liable to indemnify the loss suffered by the Complainant.

20.     The other issue left is regarding quantum of loss. The Complainant claimed Rs.5,50,96,707/- towards building, plant & machinery and Rs.13,98,39,112/- towards loss to the stock. The Surveyor appointed by the National Insurance Company assessed the loss towards building, plant & machinery at Rs.2,30,71,979/- and loss to the stock at Rs.6,64,07,938/-. The Surveyor had taken the value of the building from the latest balance sheet of the firm.  According to the Surveyor, the main cold storage building had totally collapsed, except the front portion having stock unloading platform and office room. He observed that front portion of the building partially collapsed due to heat. The Surveyor examined and assessed the RCC quantity as well as cement plastering floor-wise from ground floor to fifth floor. He also carefully measured the brick area. The Surveyor also assessed the loss to the safety doors and wooden doors on the basis of quotation provided by the Complainant. Loss to the staircase was assessed on the basis of Chartered Engineer’s certificate. Painting/whitewashing and electrification loss was assessed on lumpsum basis, as no proof/record was made available by the Complainant.  Loss to the wooden storage platform was assessed on the basis of the quotation of Mr. P. Samiah, Whole sale Timber Suppliers. The Surveyor observed that 8 air conditioners were damaged in the fire. As per quotation provided by the Complainant, the Surveyor assessed the loss to 8 air conditioners. Towards loss to the plant & machinery, the Surveyor observed that the items will only fetch scrap value of metallic items. After making 40% depreciation and calculating salvage value as well as under insurance, the Surveyor assessed net loss to the building, plant & machinery at Rs.2,30,71,979/-. The Complainant had not produced any evidence to show that the assessment made by the Surveyor towards building, plant & machinery was not correct. We accept the assessment of loss made by the Surveyor at Rs.2,30,71,979/- towards building, plant & machinery.

21.     Towards loss to the stocks, the National Insurance Company Limited as well as the Oriental Insurance Company Limited appointed respective Surveyors for assessment of loss. In CC/303/2017, the Opposite Parties appointed Shri Nageswara Rao, Surveyor & Loss Assessor who assessed the loss to the stocks at Rs.10,74,92,046/-, out of which Rs.6,84,07,938 was to be payable by the National Insurance Company Limited, and rest amount by the Oriental Insurance Company Limited. In CC/259/2018, the Opposite Parties appointed J. Basheer & Associates Insurance Surveyors and Loss Assessors Pvt. Ltd., who assessed the loss to the stocks at Rs.6,53,12,800/-, out of which Rs.2,25,60,347/- was payable by the Oriental Insurance Company Limited and Rs.4,15,66,066/- was payable by the National Insurance Company Limited. Ratio of payment of the assessed loss between the National Insurance Company and the Oriental Insurance Company is 36.36: 63.63%, which is not disputed by either Party. The Surveyor appointed by the Oriental Insurance Company had not given bifurcation of the stocks of red chillies and white chillies. On the other hand, the Surveyor appointed by the National Insurance Company had given clearly and carefully bifurcated the stocks of red chillies as well as white chillies season-wise i.e. for 2013 season and 2014 season. He assessed the loss to the red chillies at Rs.11,71,18,680/-, loss to the white chillies stock at Rs.17,32,640/- and loss to the Bengal gram stock at Rs.2,53,440/-, totalling to Rs.11,91,04,760/-. After calculating depreciation of salvage value and Policy excess, the Surveyor assessed the net loss at Rs.10,74,92,046/-. As the Surveyor B. Nageswara Rao appointed by the National Insurance Company Limited had given breakup of each and every category of the stocks and made a detailed assessment of loss of stock, we find it appropriate to accept the report of the Surveyor B. Nageswara Rao appointed by the National Insurance Company Limited. Based on the detailed assessment of loss by the Surveyor Mr. B. Nageswara Rao, we are of the view that the Complainant is entitled to Rs.10,74,92,046/- towards loss of stocks.

22.     For the foregoing discussion, the Complaint is partly allowed. The National Insurance Company is directed to pay Rs.9,14,79,917/-(Rs.2,30,71,979/- towards the loss to the building, plant & machinery and Rs.6,84,07,938/- towards the loss to the stocks) under Policy No.560018111310000062, with interest @ 9% p.a. from the date of repudiation of claim till realization. Similarly, Oriental Insurance Company Limited is also directed to pay Rs.3,90,84,108/- towards the loss to the stocks under Policy No.463400/11/2015/70, with interest @ 9% p.a. from the date of repudiation of claim till realization. The National Insurance Company as well as the Oriental Insurance Company shall also pay Rs.50,000/- each as cost of litigation to the Complainant. The order shall be complied within 8 weeks from the date of this order, failing which the Opposite Parties pay interest @ 12% p.a.