Delhi

North

CC/87/2021

M/S. INDOWESTERN COMMODITIES AND ENERGY TRADE PVT. LTD. - Complainant(s)

Versus

M/S. THE NEW INDIA ASSURANCE CO. LTD. - Opp.Party(s)

NAVNEET GOYAL

27 Jul 2023

ORDER

District Consumer Disputes Redressal Commission-I (North District)

[Govt. of NCT of Delhi]

Ground Floor, Court Annexe -2 Building, Tis Hazari Court Complex, Delhi- 110054

 

CONSUMER COMPLAINT NO.: 87/2021

In the matter of

M/s Indowestern Commodities & Energy Trade Pvt. Ltd.

(Through its Director/ Authorised Representative)

1157/1139, 2^nd floor, Kucha Mahajani,

Chandni Chowk, Delhi-110006                                  …       Complainant

 

Vs.

 

M/s New India Assurance Co. Ltd.

(Through its Authorised Representative)

RG City Centre, Lawrence Road, Delhi-110035           …       Opposite Party

 

ORDER

27.07.2023

 

(Divya Jyoti Jaipuriar)

By way of this consumer complaint, the Complainant herein, which is a private limited company engaged in the business of trading and manufacturing of Gold Ornaments and Diamond Jewellery, has challenged the repudiation of its insurance claim by M/s New India Assurance Company Limited (OP herein) vide its repudiation letter dated 05.02.2021.

2. The Complainant Company is registered under the provisions of the Companies Act and is in the business since 2015. It is contended that Complainant Company has always been insuring its business and the insurance which is subject matter of this complaint, was purchased on 08/02/2017 from OP herein. The said policy was valid from the said date until 07/02/2018 and was called “Jeweller’s Block Insurance Policy”. The said policy covered the property and business of the Complainant Company, inter alia, in following categories:

Coverage	Description of coverage	Coverage address	Extent of coverage.
Section I Coverage	Insurance against Fire, Explosion, Lightning, Burglary, Housebreaking, Theft, Hold-Up, Robbery, Riot and Strike, Malicious Damage.	Property situated at 5445, 4th Floor, Arya Samaj Road, Reagar Pura, Karol Bagh, Delhi- 110005	Rs. 5,00,00,000/- (out of which, Rs. 20,00,000/- for stock in locked premises, Rs. 4,50,00,000/- for stock elsewhere within the premises and Rs. 30,00,000/- for cash and currency notes)
Section II Coverage	Loss or damage of property carried/ conveyed outside the specified premises for the purpose of insured business		Property in custody of Insured / Partner/ Employee of the Complainant Company to the extent of Rs. 1,00,00,000/- and Property in custody of brokers/ cutters/ agents worth Rs. 25,00,000/-
Section III Coverage	Loss or damage of the property in transit		NIL
Section IV coverage	Loss or damage to office furniture, fixture fittings, which are the property of the insured used in connection of Insured’s Business by Fire, Explosion, Lightning, Burglary, Housebreaking, Theft, Hold-Up, Robbery, Riot and Strike, Malicious Damage		Furniture/ Fixtures/ Fittings worth Rs.10,00,000/- and plant machinery for manufacture of jewellery.

 

3. Total sum assured in the policy was Rs. 5,00,00,000/- (Rupees Five Crore Only) as on the date of issuance of the policy i.e. 08.02.2017, but the coverage was increased to Rs. 7,00,00,000/- (Rupees Seven Crore Only) on 14.04.2017 for which the Complainant Company made payment of additional premium. The enhancement of sum insured was duly endorsed by the OP Insurance Company vide its Additional Endorsement Document issued on 19.04.2017 (Page 56 of the complaint). Additionally, the policy also covered shoplifting to the extent of 10% of Section I coverage with maximum upto Rs. 50,00,000/- subject to the condition that the incident is proved by CCTV footage. It is also important to mention here that the insurance policy records that Section I coverage is having the class of risk as “Common Watch Man”.

4. It is the case of the Complainant Company that in the intervening night of 19/20 October 2017, a burglary took place at the insured premises of the Complainant’s warehouse situated at 5445, 4th Floor, Arya Samaj Road, Reagar Pura, Karol Bagh, Delhi- 110005. FIR bearing FIR no. 334/2017 u/s 457/380/34 IPC was also registered in this connection on 20.10.2017. The OP Insurance Company was also informed on the same day and a surveyor namely M/s Associated Surveyors and Consultants was appointed by the OP insurance company to assess the claim of the Complainant Company. The said surveyor assessed the loss of the insured but on account of alleged discrepancies; it recommended vide its final survey report dated 23.07.2019 that the OP insurance Company may decide on the liability of the insurance company in accordance with the policy terms and conditions. The Surveyor has submitted an adjunct/ addendum report dated 01.12.2020 and further recommended that the claim of the Insured Complainant Company is not tenable. Accordingly, vide its repudiation letter dated 05.02.2021, the OP Insurance Company repudiated the claim of the Insured Complainant Company.

5. The repudiation letter dated 05.02.2021 indicates, inter alia, following reasons for repudiating the claim of the Complainant Company:

a. Complainant Company did not provide complete documents/ details/ information as requested by the surveyor.

b. The audited report for the FY 2016-17 was signed by directors on 22.08.2017, but the surveyor was informed on 21.10.2017 and 23.10.2017 that the report was not ready.

c. There was delay in filing the statutory returns for the FY 2016-17.

d. The revised VAT return was provided to the surveyor, but the original VAT return was not supplied despite several requests from surveyor.

e. There were large transactions in circular nature. Such transactions were also in close proximity of the date of loss.

f. Large cash balance at the time of loss was inexplicable.

6. In view of the discrepancies noted above, the OP Insurance Company repudiated the claim by invoking General Condition 3 of the Policy terms and conditions.

7. Additionally, the OP Insurance Company also informed that Surveyor has concluded that there was no watchman on the date of incident, and the “Common Watchman” in class of risk means that the Complainant Company must employ a common watchman for the building/ premises where the building is situated. As there was no common watchman for the premises where the building is situated, there was breach of terms of the policy.

8. The Complainant Company has challenged this repudiation before this Commission in this complaint. We issue notice in the matter and the OP Insurance Company has joined and participated in the proceedings before this Commission. OP Insurance Company has also filed its reply, which was followed by filing of rejoinder by Complainant and relevant evidences by way of affidavit by the respective parties. Thereafter we have heard the arguments before reserving the orders.

9. At the onset, we make it clear that we are examining the grounds of repudiation which are mentioned in the repudiation letter dated 05.02.2021. Attempts were also made by the Ld. Advocate for the OP during arguments, to point out other grounds for repudiation with respect to alleged violation of other terms and conditions of the insurance policy. But as the new grounds of repudiation pleaded during course of hearing before this Commission were not part of the repudiation letter and were not communicated to the Complainant Company earlier, we are not examining such other alleged grounds of repudiation. In this context, reliance is placed on the judgment of Hon’ble Supreme Court in the matter of JSK Industries Pvt Ltd vs Oriental Insurance Company Limited [2022:INSC:1104] in which it has been held that the insurance company cannot take a new defence which did not form the basis of repudiation of the claim. This Commission, in view of the above judgment, cannot go beyond   the   grounds   of   repudiation as communicated in the repudiation letter dated 05.02.2021.

10. The burglary is an admitted incident. The only issues to be decided are that whether the Complainant Company has committed any breach of policy terms and conditions and whether the repudiation by the OP Insurance Company is correct or not. Resultantly, we would also decide on the relief of the Complainant Company, if any.

11. The first ground for rejection by the OP Insurance Company is that the Complainant Company/ Insured did not provide complete documents/ details information as requested by the surveyor. Although the repudiation letter does not specifically identify that which documents/ details/ information were not provided by the Complainant Company, we have gone through the pleadings led by the parties and also have gone through the documents on record. In the Surveyor’s final survey report dated 23.07.2019, it has been referred that Surveyor has sought certain documents/ details/ information from the Complainant Company  and the same were allegedly not provided. As The OP could not give us any specific details of document/ details/ information, we read the surveyor report and tried to figure out the document/ details/ information which were allegedly not provided by the Complainant Company. Accordingly, we have prepared following chart:

 

Sl. No.	Documents requisitioned by surveyor	Documents supplied by Complainant
1.	a. Stock registers, sale invoices/ registers for the period from 01.04.2017 to 19.10.2017 b. Cash book, audited balance for the FY 2016-17 c. Details of closing stock at the time of loss (Requisitioned on 21.10.2017 and 23.10.2017 during physical verification of site) [para 4.03 of the final survey report]	a. Balance sheet for the period ended on 31.03.2016 b. Details of closing sock c. Purchase register/ purchase bill from 01.04.2017 to 19.10.2017 d. Stock register maintained in Tally from 01.04.2017 to 19.10.2017 e. Statement of Mr Chirag Verma [Director] (Supplied on 23.10.2017) [para 4.04 of the final survey report]
2.	28 documents/ details sought by email dated 25.10.2017 [para 4.05 of the final survey report and email dated 25.10.2017 annexed with the complaint]	a. Cashbook and two manual stock registers with regard to raw material (pure gold) b. different types of finished jewellery and stock under manufacturing and production (Provided by Insured’s representative on 25.10.2017 in Surveyor’s office) [para 4.06 of the final survey report and letter dated 06.12.2017 as annexed with the complaint] c. 283 pages of documents, photographs and video CD and affidavit as required supplied on 06.12.2017. These cover all 28 documents/ details/ information so requisitioned [para 4.11 and 4.12 of the final survey report and letter dated 06.12.2017 as annexed with the complaint]
3.	a. Total number of workers in the factory at the time of loss b. Date wise/ item wise issue and receipt of the stock to each worker from 01.04.2017 to 19.10.2017 c. Individual log book of the workers from 01.04.2017 to 19.10.2017 d. Item-wise inventory register at the time of loss on 19.10.2017 (Email dated 31.10.2017) [para 4.08 of the final survey report]	a. Lay out of factory b. Copy of newspaper cutting c. Details of other occupants of the building (Provided on 31.10.2017 and 02.11.2017 by email) [para 4.09 of the final survey report] d. Other requisitioned documents were provided on 06.12.2017 along with documents referred to at Sl. No. 2 of this table. [para 4.11 and 4.12 of the final survey report  and letter dated 06.12.2017 as annexed with the complaint] e. Purchase and sales bill for the period from 01.04.2017 to 19.10.2017 [para 4.13 of the final survey report) f. Complainant Company provided the details of police investigation report dated 08.12.2017 [para 4.14 of the final survey report] g. Complainant Company provided the copy of the final report, charge sheet submitted after investigation by the concerned IO to the Court [para 4.20 of the final survey report]
4.	a. Details of opening stocks of Raw Materials, VVIP & Finished Goods in terms of item rate, quantity & value as on 01.04.2016. b. Opening stock of alloys & consumable items as on 01.04.2016 and then details of purchases/ consumption from 01.04.2016 to 31.03.2017 and then from 01.04.2017 to 19.10.2017 i.e. date of loss. c. Copy of confirmation of accounts from all the suppliers / vendors. d. Copy of Bank Account Statement for the period from 01.04.2016 to date of loss. e. Daily Cash Movement for the period from 01.04.2016 to 31.03.2017 and then from 01.04.2017 to 19.10.2017 ie. date of loss. f. Certified Trading and P&L a/c for the period from 01.04.2017 to 19.10.2017 (date of loss). [para 4.27 of the final survey report and letter dated 07.07.2018 sent by surveyor]	a. Complainant Company provided some documents/ details vide its letter dated 09.07.2018 [para 4.28 of the final survey report] b. pending documents were provided during meeting on 13.07.2018 [para 4.29 of the final survey report] c. Complainant Company provided more documents on 24.07.2018. [para 4.30 of the final survey report] d.
5.	a. relevant records of all those sister concern companies namely M/s Lalsons Jewelers Ltd., M/s Lal Sons Gems & Jewellery Pvt. Ltd. and M/s Lal Jewels and also with other suppliers for necessary verification with respect to purchases as well as payments made to them against those purchases from 01.04.2016 to 31.03.2017 & then from 01.04.2017 to 19.10.2017 (the date of loss) (para 4.32 of the final survey report)	a. Balance sheets alongwith profit & loss account, all the schedules and tax audit reports etc. as on 31.03.2017 & 31.03.2018. b. The following details pertaining to the period from 01.04.2016 to 31.03.2017 & 01.04.2017 to 31.03.2018: i) Copies of their Stock Registers ii) Sales Register with supporting invoices iii) Purchase Register with supporting invoices iv) VAT/ GST Returns with supporting details in soft copy v) Payment details with supporting Bank Statements. vi) Insured Company's copy of accounts in the books of Group Companies / Firms namely Lalsons Jewelers Ltd., Lal Sons Gems &Jewellery Pvt. Ltd. and M/s. Lal Jewels. (para 4.33 of the final survey report)
6.	a. Details of group companies/ firms and their books of account (para 4.36 of the final survey report)	a. email dtd.19.01.2019, the insured provided the details of their group companies / firms namely Lal Sons Jewellers Ltd., Lal Sons Gems & Jewellery Pvt. Ltd. & M/s. Lal Jewels, except for the following: i. Balance sheets, profit & loss account, all the schedules and tax audit reports etc. as on 31.03.2017 & 31.03.2018 of M/s. Lal Jewels. ii. VAT/ GST Returns with supporting details in soft copy. iii. Payment details with supporting Bank Statements. (Para 4.40 of the final survey report and email dated 19.01.2019) b. Remaining pending documents/ details/ information sent by emails dated 05.03.2010 25 03.2019, 28.03.2019 & 01.04.2019 the except for the followings: i. VAT Returns of Lal Jewells for the period from 01.04.2016 to 31.03.2017 and from 01.04.2017 to 30.06.2017. ii) Payment details with supporting Bank Statements of group companies/ firms. (Para 4.42 of the final survey report and email dated 19.01.2019) c. Insured also provided the challan dated 05.07.2019 vide which Complainant Company filed its balance sheet with Registrar of Companies (ROC) fttor the financial year 2016-17. (Para 4.44 of the final survey report)

 

12. In paragraph 4.45 of the final survey report, it has been observed by the Surveyor that “despite continuously following up with the insured they did not provide the complete documents / details”. There are no details as given by the Surveyor in its final survey report that which document are deficient and were not provided by the Complainant Company. The table that we have prepared above indicates that the Complainant Insured Company has provided the documents/ details/ information as and when sought by the Surveyor except the VAT returns of M/s Lal Jewells and payment details with supporting Bank Statements of group companies/ firms. However, when we read the final survey report, we observe that the surveyor has referred to and relied on these deficient documents while analysing and assessing the loss of the Complainant. Hence, it appears that although these documents were not allegedly supplied to the OP, but were made available by the Complainant Company during various visits and physical verification.

13. Further, the OP and its Surveyor have also failed to explain as to how these alleged deficient document are germane to the taking the decision on the assessment of the loss of the Complainant Company. This is particularly in view of the fact that despite alleged deficient documents, the Surveyor was able to assess the value of loss that has been indicated in paragraphs 27.00 and 27.01 of the Final Survey Report. If the documents were deficient, the loss could not have been assessed or such assessment would have been provisional. There is no statement of the Surveyor in the Final Survey report that such assessment is provisional. As a matter of fact, in paragraph 26.00 of the Final Survey Report, the Surveyor has given opinion that the Complainant Company “has certainly suffered this loss”. The Surveyor has also mentioned that the Accounts of the Complainant Company cannot be relied upon completely, but based the records available and the physical examination, the Surveyor has “worked out the loss value” of the Insured Complainant Company at Rs. 6,32,10,826.02 (Rupees Six Crore Thirty Two Lakh Ten Thousand Eight Hundred twenty Six and Paise Two only). Once the Surveyor was able to determine the value of loss, we are of the opinion that this first ground of repudiation by the OP Insurance Company, i.e. Complainant Company did not provide complete documents/ details/ information as requested by the surveyor, is not valid and must be rejected. Accordingly the first ground of repudiation is rejected and set aside.

14. Second ground for repudiation in the repudiation letter is that the audited report for the FY 2016-17 of the Complainant Company was signed by its Directors on 22.08.2017, but the allegedly the surveyor was informed on 21.10.2017 and 23.10.2017 that the report was not ready. Hence, the Surveyor and the OP Insurance Company have concluded that that the audited report for the FY 2016-17 are created subsequently and signed by its Directors in back date. This allegation of the OP and the surveyor is not supported by any document/ email/ letter as annexed by the parties. The Surveyor has not mentioned this discrepancy in its final survey report dated 23.07.2019, but refers the same in its letter dated 01.12.2020, which was submitted after more than a year from filing of the final survey report. Further, the observation of surveyor regarding non-preparedness of audited report for the FY 2016-17 is not based on any document or statement of the representative of the Complainant Company or letters/ emails exchanged, but merely on the unverified information given by the Complainant Company on 23.10.2017.

15. It is not clear as to why the Surveyor did not point out this discrepancy in any of its letters/ emails sent to the Complainant Company and also in its final survey report dated 23.07.2019. This delay in making this statement by the Surveyor makes this observation of the Surveyor very doubtful and not-trustworthy. Further this observation of the surveyor is not based on any document/ statement/ emails/ letters; hence we are unable to believe this observation as correct. Such an observation by the Surveyor appears to have been made specifically tailor made to repudiate the claims of the Complainant Company. Hence this ground for repudiation of the claim by the OP Insurance Company that “the audited report for the FY 2016-17 of the Complainant Company was signed by its Directors on 22.08.2017, but the allegedly the surveyor was informed on 21.10.2017 and 23.10.2017 that the report was not ready” is not a valid ground. Therefore this second ground of repudiation is also rejected and set aside.

16. Third ground for repudiation of claim is that there was delay in filing the statutory returns for the FY 2016-17. The Surveyor has noted in para 4.44 of its final survey report that the balance sheet for the year 2016-17 was filed with the Registrar of Companies (ROC) by the Complainant Company only on 05.09.2019, although the balance sheet of the FY 2018-19 was filed much earlier. The Surveyor or the OP Insurance Company have not given any reason as to how delay in filing the statutory return with the ROC is important for deciding the claim of the Insured/ Complainant Company. As a matter of fact, section 92 (4) the Companies Act, 2013 provides that the Company is required to file its statutory returns within sixty days from the date on which the annual general meeting is held or where no annual general meeting is held in any year within sixty days from the date on which the annual general meeting should have been held. In case the same is not filed within the said time period, under section 92 (5) of the said Act, the Company can still file the statutory reports with the ROC, along with a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is an default. Non-filing of the statutory report invites penalty but the Companies are still permitted to file the relevant statutory reports to the ROC.

17. The OP Insurance Company in its repudiation letter and also in its reply filed before this Commission did not explain as to how delay in filing the statutory report with the ROC is important in deciding the claim of the Complainant Company. Unless the OP Insurance Company or its surveyor allege any illegality or forgery on part of the Complainant Company in preparing and filing such statutory report, the objections of the OP insurance Company that the statutory report was filed with a delay has no meaning. In the case in hand, nowhere in the final survey report or in the subsequent report or in the repudiation letter or in the reply filed by the OP Insurance Company before this Commission, the OP Insurance Company has explained the effect of delay in filing the statutory report with the ROC on the claim so filed by the Complainant Company. Hence, this ground of repudiation that there was delay in filing the statutory returns for the FY 2016-17 by the Complainant Company with the ROC is not a valid ground and the same must be rejected. Accordingly, this ground of repudiation is also rejected and set aside.

18. The OP, in its repudiation letter has also mentioned that the Complainant Company has provided revised VAT return to the surveyor, but the original VAT return was not supplied despite several requests from surveyor. We have gone through the final survey report and the documents on record. The survey report clearly indicates that the books of account and financial details as sought by the Surveyor were provided by the Complainant Company. We also observe that the in compliance of the demands raised by the Surveyor, the Complainant Company has provided complete financial records of the Complainant Company and also of the sister concern companies, including VAT/ GST Returns with supporting details in soft copy. We also see that there is no communication on record that suggests that the surveyor has ever demanded the original VAT return of the Complainant Company. It is also to be noted here that once the revised VAT return is filed and accepted by the Authorities, the original VAT return becomes redundant and of no use. In the case in hand, the OP Insurance Company or its Surveyor has again failed to point out that how non-supply of original VAT return, when the same was never specifically demanded, is a ground for repudiation of the claim of the Complainant Company.

19. It is also pointed out by the Complainant Company in its pleading that user ID and password for the VAT website was already provided to the Surveyor. This averment has been denied by the OP in its reply. But we observe that in the final survey report, the Surveyor has mentioned that the Surveyor has verified the details from DVAT website. If the details were verified by the Surveyor from DVAT website, the same cannot be done without obtaining the user ID and password of the concerned assessee. If the Surveyor has verified details from DVAT website, it is very clear that the Surveyor was having user ID and password of the Complainant Company for accessing DVAT website. Hence, in case the Surveyor was to examine the correctness of the VAT return, he could have done so on its own. Hence, this fourth ground of repudiation i.e. non-supply of the original VAT return does not appear to be correct and the same is also not a valid ground for repudiating the claim. Accordingly this ground of repudiation is also rejected and set aside.

20. In the repudiation letter, the OP Insurance Company has pointed out fifth and sixth ground for repudiation as existence of large transactions in circular nature which were also in close proximity of the date of loss; and large cash balance at the time of loss was inexplicable. It is an admitted fact that the Complainant Company is having sister concerns and is part of group of companies in similar business. It is pleaded by the Complainant Company that the Surveyor, vide its email dated 07.09.2018 has raised the query of large transactions and alleged circular nature of transactions.  It is also pleaded that the Complainant Company vide its email dated 04.10.2018 has already replied to the said query. We have also gone through the email dated 07.09.2018 and reply dated 04.10.2018. The Complainant Company has given reply to every query raised by the Surveyor. There is no document on record to suggest that the Surveyor was not satisfied with the said reply and if there was any un-satisfaction, the Surveyor has not raised any further clarification. Further the Surveyor has also not pointed out in its final survey report that how the reply sent by the Complainant Company is not satisfactory.

21. The Complainant also pleads that it is a general trade practice to purchase and sell jewellery from/to different entities to rotate the design of jewellery in different shops. It is contended that all designs of jewellery cannot be manufactured or kept in stocks by every jeweller and that is the reason that the jewellery is purchased and sold from the same/ various jewellers. It is general and common practice of this trade. Accordingly, the accounts were settled after considering the net of purchases and sales. It is therefore, argued that these transactions cannot be termed as circular trading.

22. It is argued by the Complainant that in case of all such alleged circular transaction, the sale of goods has taken place and the titles of goods are transferred in the hands of buyer. As per section 4 of Sale of goods act a contract of sale of goods is a contract whereby the seller transfers the property in goods to the buyer for a price. There is nowhere mention or bar in the Act that the price has to be paid only in currency or through banking channel. The price can be settled through exchange of goods or services as well. Merely the settlement has been made through the goods it cannot be said to be a circular trading. It has also been pleaded that the purchases and sales are actually made and taxes were duly paid and reflected in the tax returns of all such companies.

23. In regards to maintenance of high cash balance, Complainant Company pleaded that the high cash balance was due to cash sales in festive seasons due to Dhanteras and Diwali and it is unavoidable. The burglary took place on intervening night of 19.10.2017 and 20.10.2017. It is also a fact that Dhanteras and Diwali fell on 17.10.2017 and 19.10.2017 respectively. There is a general practice of purchase of gold and gold ornaments during Dhanteras and Diwali and having high cash balance in the jewellery shop during the Dhanteras and Diwali period cannot be ruled out or taken as something unusual.

24. The Complainant also contends that maintaining cash balances in hands is a business decision and it has nothing to link with claim or loss. It is also argued that merely maintaining the high cash balances, that too during festive season where cash sales take places and the same is evident from the records, cannot be the basis of denial of the claim. OP also does not deny that the burglary took place during Diwali period. We also agree with the arguments of the Complainant Company that the maintaining high cash balance during the Diwali period is not unusual for jewellery shops. It is also important to mention here that the bank was also closed on 19.10.2017 on account of Diwali so the Complainant Company would not have deposited the cash in the bank. Hence, both these fifth and sixth grounds of repudiation i.e. existence of large transactions in circular nature which were also in close proximity of the date of loss; and large cash balance at the time of loss are not tenable. Accordingly these grounds are also rejected and set aside.

25. In the repudiation letter, the OP Insurance Company, while pointing out six discrepancies in the claim of the Complainant Company, has referred to General Condition 3 of the policy terms and conditions, which reads as under:

“It is provided that the policy shall be void and all premiums paid shall be forfeited by the company in the event of misrepresentation, misdescription or non-disclosure of any material particular.”

26. This policy condition refers to three preconditions to make the policy void- misrepresentation, misdiscription and non-disclosure of material particulars. The act of making false statements or intentionally providing wrong/ false/ fake information or details is considered as misrepresentation. Similarly obtaining a policy on false grounds by making statements that are not in accordance with the facts is known as misdiscription. Non-disclosure of material particulars refers to such particulars which are paramount in determining the risk and fixing the premium. We are of the opinion that for invoking this clause, these preconditions, viz misrepresentation, misdescription or non-disclosure of any material particulars, are to be examined to at the time of issuance the policy. If the policy is obtained by making misrepresentation, misdescription or non-disclosure of any material facts, the policy can be cancelled under this clause. These conditions cannot be invoked to cancel the policy when the claim of the insured is examined and it is found during examination of the claim that there are misrepresentations or misdescription or non-disclosure of any material particulars in the claim so filed by the Insured. In cases where the disclosures made during the claim by the insured are found to be different from the disclosures made during purchase of policy (as in the proposal form), and such differences are so significant that it can affect assessment of the risk to be covered and fixing the premium for risk, then only clause 3 of the General Conditions can be invoked to cancel the policy.

27. In the case in hand, there is no averment by the OP Insurance Company either in the repudiation letter or in the survey reports or in its reply that there was misrepresentation, misdiscription and non-disclosure of material particulars by the Complainant Company while obtaining the policy. The OP Insurance Company only alleges that there are misrepresentation, misdiscription and non-disclosure of material particulars while lodging the claim by the Complainant Company. These alleged “misrepresentation, misdiscription and non-disclosure of material particulars” are in form of six grounds of repudiation as listed in the repudiation letter. On close examination, these grounds of repudiation may be treated as “non-supply of demanded documents/ details” but the same cannot be treated as “misrepresentation, misdiscription and non-disclosure of material particulars”. None of these six grounds of repudiation in the repudiation letter are germane to deciding the risk cover and fixing the premium of the policy in question. Hence invoking general condition 3 for repudiating the claim and also to cancel the policy in question is not correct. It is also important to refer here that although the OP Insurance Company has invoked General Clause 3 in the repudiation letter, but the same was only used to repudiate the claim and not to cancel the policy in question. General Clause 3 specifically provides that in case of “misrepresentation, misdiscription and non-disclosure of material particulars”, the policy would become void. However neither in the repudiation letter nor in any subsequent communications with the Complainant Company, the OP Insurance Company has informed that the policy in question has become void and the premiums have been forfeited. On the contrary, the OP Insurance Company has only examined the claim and has declined to accept the said claim filed by the Complainant Company.

28. The repudiation letter also indicates that the Surveyor has concluded that there was no watchman on the date of incident, and the “Common Watchman” in class of risk means that the Complainant Company must employ a common watchman for the building/ premises where the building is situated. As there was no common watchman for the premises where the building is situated, it is stated that there was breach of terms of the policy as well. The policy indicates that the OP Insurance Company knew about the common watchman. The policy clearly indicates “Common Watchman” in the “Class of Risk” column in the policy. The policy does not describe the “Common Watchman” anywhere in the policy that the “Common Watchman” means “Common watchman for the building/ premises”. The policy only indicates that the OP Insurance Company has acknowledges the fact that there is a “Common Watchman”. As the OP Insurance Company was in knowledge of the fact that there is a “Common Watchman” and as the policy does not indicate that the said watchman must be exclusively for the building or for the premises where the building is situated, we cannot see any breach of terms of policy or even misrepresentation on part of the Complainant Company.

29. Further, the repudiation letter also indicates that the Surveyor has informed that the there was no Chowkidar/ Watchman on duty on the intervening night of 19/20.10.2017 when the burglary took place. This observation of the Surveyor is not based on correct facts. Although the Surveyor might not have been able to interact with the Chowkidar/ Watchman on duty, but the police while investigating the crime was able to contact him and also recorded his statement. The status report submitted by the police to the concerned court, which was also made available to the Surveyor with due acknowledgment, clearly indicates that the IO has identified the watchman on duty namely Shri Ram Bahadur, S/o Late Shri Lila Ram Joshi and has interrogated him as well. The status report dated 14.12.2017 filed by the IO to the concerned court has also been annexed with the complaint at page 213. Hence, the conclusion of the OP insurance Company/ Surveyor that there was no Common Watchman/ Chowkidar on duty on the night of incident; is not a correct conclusion.

30. We also find that in reply to the email dated 14.09.2019 sent by OP Insurance Company/ Surveyor to the Complainant Company, the details of the said Common Watchman including his last known address and the Aadhaar details, were provided by the  Complainant Company through its email dated 15.10.2019 (page 187 of the complaint). However, there is no document on record that suggests that OP Insurance Company or the Surveyor has made any attempt to contact or examine the said Common Watchman.

31. Further, the Surveyor also records in paragraph 28.01 of the final survey report that the Complainant Company has informed that the Common Watchman was not employed by them but by the building owner. There is no record to suggest that the Surveyor has contacted the building owner or made any attempt to contact/ examine the Common Watchman employed by the building owner. The Surveyor’s conclusion that there was no watchman on duty in the night of incident, therefore, is not based on any investigation done on part of the said surveyor in this regard. Such conclusion is merely a speculation or assumption, which is not tenable. Hence, the final ground for repudiation of claim with respect to “common watchman” is also rejected and set aside.

32. It has also been pointed out by the Complainant Company that the Surveyor has delayed the process of the completing the survey and investigation for processing the claim. It is seen from the record that the Surveyor in letter dated 28.01.2020 sent to the OP Insurance Company has informed that the delay in filing the final survey report was for the reason of examination of voluminous records, forensic investigation and numerous visits to the sites. It has also been stated in the said letter that the said Surveyor spent more than 120 man days in the subject case.

33. We are aware of the fact that Insurance Regulation and Development Authority of India has promulgated Insurance Regulation and Development Authority of India (Insurance Surveyors and Loss Assessors) Regulations, 2015 which regulates the function of the Insurance Surveyors and loss Assessors. Regulation 13 of the said Regulations of 2015 lists out duties and responsibilities of the Insurance Surveyors and Loss Assessors. Relevant portion of Regulation 13 is reproduced below:

“13. It shall be the duty of every Licensed Surveyor and Loss Assessor to investigate, manage, quantify, validate and deal with losses (whether insured or not) arising from any contingency, and report thereon to the insurer or insured, as the case may be., All Licensed Surveyors and Loss Assessors shall carry out the said work with competence, objectivity and professional integrity and strictly adhere to the code of conduct as stipulated in these Regulations.

(1) …

(2) A surveyor or loss assessor whether appointed by insurer or insured, shall submit his report to the insurer as expeditiously as possible, but not later than 30 days of his appointment, with a copy of the report to the insured giving his comments on the insured’s consent or otherwise on the assessment of loss. Where, in special circumstances of the case, either due to its special and complicated nature, the surveyor shall under intimation to the insured, seek an extension, in any case not exceeding six months from the insurer for submission of his report.

(3) In cases where the Survey report is pending due to non completion of documents, the surveyor may issue the final survey report independently based on the available documents on record, giving minimum three reminders in writing to the insured.

(4) If an insurer, on the receipt of a survey report, finds that it is incomplete in any respect, he shall require the surveyor under intimation to the insured, to furnish an additional report on such incomplete issues. Such a request may be made by the insurer within 15 days of the receipt of the original survey report.

Provided that the facility of calling for an additional report by the insurer shall not be resorted to more than once in the case of a claim.

(5) The surveyor on receipt of this communication shall furnish an additional report within three weeks of the date of receipt of communication from the insurer.”

34. The said regulation clearly mandates that the Insurance Surveyor is required to complete its survey and submit its report to the Insurer within a period of thirty day, which may be extended for a maximum period of 6 months. In the case in hand, the surveyor has filed its final survey report on 23.07.2019 after almost two years since its appointment to examine the claim of the Complainant Company. It is to be noted here that the if the Surveyor was not able to get relevant information/ documents/ details from the Insured, under Regulation 13 (3) referred above, it could have submitted final survey report within the stipulated time, independently based on the available documents on record, giving minimum three reminders in writing to the insured. We do not see any Communication on record that would suggest that the said Surveyor made any attempt to submit its report within the time frame as stipulated in the IRDAI Regulations of 2015.

35. Further, after receiving the final survey report, the OP Insurance Company under regulation 13 (4) referred above, was required to direct the Surveyor to furnish an additional report on such incomplete issues with intimation to the Insured. The Surveyor, upon receiving the request is also required to submit the additional report within three weeks from the date of receipt of such communication (Regulation 13 (5)). In the case in hand, the additional report was submitted on 01.12.2020. It is not clear when the OP Insurance Company directed the Surveyor to submit additional report, but as there was a gap of more than one year between the final survey report and the additional report, there is clear violation of regulations 13 (4) and 13 (5) as well. Further, it is also not clear that after receiving the final survey report dated 23.07.2019, why the OP Insurance Company took almost two years in taking the decision and to issue repudiation letter. The repudiation letter was issued only on 05.02.2021, which is after almost three and a half years since the date of incident (19/20.10.2017), almost one and a half years since the date of final survey report (23.07.2019) and almost two months from the date of additional report (01.12.2020). The OP Insurance Company has failed to give any cogent reason to justify such inordinate delay. The OP Insurance Company and also the Surveyor are clearly in violation of the IRDAI Regulations as applicable to their operation.

36. In the final survey report submitted on 23.07.2019 to the OP Insurance Company, the Surveyor in paragraph 27.01 has worked out the loss value of the Complainant Company at Rs. 6,32,10,826.02 (Rupees Six Crore Thirty Two Lakh Ten Thousand Eight Hundred twenty Six and Paise Two only). The same assessment has not been questioned by the OP Insurance Company. As we have rejected all grounds of repudiation of the claim in this order, we are of the opinion that conclusion of the loss so assessed by the surveyor, be taken as correct value of loss. As the loss so assessed is well within the sum assured value of Rs. 7,00,00,000/- (Rupes Seven Crore Only), we are inclined to allow the claim of the Complainant Company to the extent the loss value worked out by the Surveyor in its Final Survey report. However, as there is inordinate delay in decision making process by the OP Insurance Company, while relying on Regulation 15 (10) of The Insurance Regulatory and Development Authority of India (Protection of Policyholders’ Interests) Regulations, 2017, we are inclined to award interest to the Complainant Company. The said regulation mandates that the OP Insurance Company shall pay penal interest at a rate, which is 2% above the bank rate on the payment to be made. The current bank rate as per Reserve Bank of India notification No. RBI/2022-23/123 DOR.RET.REC.70/12.01.001/2022-23 dated September 30, 2022 is 6.15% per annum. Hence, in conformity to the provisions of The Insurance Regulatory and Development Authority of India (Protection of Policyholders’ Interests) Regulations, 2017, we are inclined to award interest @ 8.15% per annum in the case in hand.

37. As the Surveyor was required to submit its report within 30 days from its date of appointment, and as the first visit of the surveyor to the insured site was 21.10.2017 which we are considering the said date as the date of appointment of the Surveyor, we are of the opinion that the Surveyor was required to submit the report by 21.11.2017. Although there is no document on record that suggests that the Surveyor ever sought extension of time, but in view of the fact that the Surveyor is permitted a maximum period of six months to submit its final report, time till 21.05.2018 is considered as the maximum permissible time to file the report. Further as the OP Insurance Company, upon receiving the final survey report dated 23.07.2019 failed to raise further query with the Surveyor within stipulated time as prescribed under the relevant regulations as referred above, we are of the opinion that the OP Insurance Company was not right in seeking further report from the Surveyor, which was finally submitted on 01.12.2020.

38. The OP Insurance Company was supposed to get the report from surveyor on 21.05.2018 and a decision on the claim was required to be taken within 30 days from the said date, the maximum time permitted to the OP Insurance Company under different Regulations of IRDAI, expired w.e.f. 21.06.2018. Hence, any delay in taking a decision on the insurance claim after 21.05.2018 is liable for penal interest under Regulation 15 (10) of The Insurance Regulatory and Development Authority of India (Protection of Policyholders’ Interests) Regulations, 2017. Hence the cut of date for imposing penal interest in the case in hand is worked out as 21.05.2018.

39. At this stage, we also record our displeasure to the fact that despite mandatory IRDAI Regulations in place, the OP Insurance Company and the Surveyor clearly violated the time line prescribed and took more than two years in taking a decision on the insurance claim filed by the Complainant Company.

40. Accordingly, based on above, we hold that the repudiation of the claim by the OP Insurance Company of the claim of the burglary at the insured site of the Complainant Company is not correct and accordingly, the same is set aside.

41. As a result, we allow the complaint in following terms and pass following order:

(a). OP Insurance Company is directed to make payment of the total insurance value of Rs. 6,32,10,826.02 (Rupees Six Crore Thirty Two Lakh Ten Thousand Eight Hundred twenty Six and Paise Two only)along with an interest at the rate of 8.15% PA from 21.06.2018 to the Complainant Company within a period of four weeks from the date of receipt of this order.

(b). OP Insurance Company is also directed to pay additional sum, on account of compensation, of Rs. 50,00,000/- (Rupees Fifty Lakh Only) within a period of four weeks from the date of receipt of this order.

(c). If the payments as directed in directions (a) and (b) are not made within the stipulated time, the OP Insurance Company shall pay interest @ 9% PA on the entire amount payable at the expiry of four weeks from the date of receipt of this order.

42. Before parting, we also recommend that this order be placed before the Competent Authority of the OP Insurance Company for issuing appropriate directions to the Claims departments and also to the Surveyors/ Investigators to strictly follow the timeline as prescribed under different IRDAI regulations for examination and for taking decision on the claims so filed.

43. Office is directed to supply the copy of this order to the parties as per rules. Thereafter, file be consigned to the record room.

44. Order pronounced in open court.

 

 

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Divya Jyoti Jaipuriar, President

 

 

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Ashwani Kumar Mehta, Member

 

 

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Harpreet Kaur Charya, Member