1.      The complainant is aggrieved by the non-settlement of the insurance claim under a Standard Fire and Special Perils Policy covering the loss which the petitioner had claimed for an incident of fire in the basement of the premises on 25.02.2014.  The complainant alleges that the entire stocks stored were gutted in the said fire which deserves to be indemnified as per the insurance policy duration whereof is from 25.01.2014 to 24.01.2015 and the total sum insured was Rs.10 crores.  The complainant also had a second policy with regard to the plant and machinery and other accessories insured for a sum of Rs.6 Crores.

2.      The case is a bit peculiar on facts inasmuch as the insurance company did not communicate any repudiation nor did they settle the claim on the plea that the complaint had already been filed before this Commission where they have already filed their response.  All these facts were noticed and it also emerged that the surveyor report dated 15.01.2015 had not been shared with the petitioner and after orders were passed by this Commission, that the surveyor report surfaced through the evidence affidavit of the insurance company that has been placed on record.  There were issues regarding one of the pages of the surveyor report missing that was noticed when the matter was heard earlier on 16.02.2024 and the following order was passed:

This complaint arises out of a claim under the Standard Fire & Special Perils Policy. True copies of the policies under which the claims have been made by the complainant have been placed on record and are not disputed. The first is with regard to stocks, duration whereof is from 25.01.2014 to 24.01.2015 where the total sum insured is Rs.10,00,00,000/-. The second policy is with regard to plant, machinery and other accessories, including the equipments of solar energy etc. which is also for the same duration with a total sum of Rs.6,00,00,000/- as the sum insured. The incident took place in the basement of the premises on 25.02.2014 and, according to the complainant, the entire stocks stored there were gutted in the said fire. The complainant raised his claim and also sent intimation to the Police, Fire Department and also to all concerned Authorities. There is evidence to the effect that the fire was attended to by the Fire Brigade and the cause of fire was shown to be short circuit. The claim was referred by the Insurance Company to the surveyor who raised queries and sought for documents through his letter dated 26.03.2014. The case of the complainant is that the entire documents running into hundreds of pages were supplied and the surveyor was given all answers to the queries raised by him. It was also pointed out that apart from the losses suffered, the salvage goods were also traded off for a sum of Rs.11,20,786/- accepting the highest bid that was conducted through e-tenders. This has to be noted as one of the arguments advanced is that the value of the salvage itself was more than sufficient to compute the value of the loss keeping in view the huge amount that was recovered on account of the disposal of the salvage. The Insurance Company did not respond either by supplying a copy of the surveyor’s report or by intimating any settlement or repudiation. It is in this background that the present complaint was filed on 18.03.2015 calling upon the opposite parties to answer as to why the claim has not been assessed so far, pointing out to the information already tendered and the details of the loss suffered by the complainant. A written statement came to be filed on 10.07.2015 and in paragraph-2 thereof at page 9 it has been admitted that the surveyor had submitted his report in January 2015 assessing a loss of Rs.44,19,174.15 paise. The same paragraph also recites that the claim of the complainant is still under consideration of the Insurance Company. The aforesaid recital in the written statement therefore establishes that up-to the stage of filing of the written statement no final decision had been taken in spite of the fact that the surveyor’s report had been received by the Insurance Company. It is the consistent case of the complainant that the complainant was never made aware of the surveyor’s report at any stage and it is only after the filing of the evidence of the opposite parties/Insurance Company through an affidavit on 05.04.2016 that a copy of the said report dated 15.01.2015 came to light. There is one more aspect which needs to be highlighted at this stage, namely, that the surveyor’s report consists of several pages and, according to the averments made in the application dated 30.05.2018 (IA No. 10793/2018) filed by the complainant, one page i.e. internal page no. 14 of the surveyor’s report that was filed along with the evidence, is missing. This fact was also intimated to the learned counsel for the Insurance Company vide letter dated 26.04.2018 that has been filed as annexure along with the said application at page 97. There are other missing documents as well which have been indicated therein, including the annexures, documents, photographs etc. which were not found available alongwith the written reply. Having received the aforesaid response from the complainant, there is no denial of the aforesaid facts and learned counsel submits that even the written submissions which have been filed in the year 2022 on behalf of the opposite parties/Insurance Company the aforesaid facts have not been attended to. Learned counsel submits that the details of computation were tendered by the complainant together with the supporting documents, including the purchase vouchers and the documents relating to Excise Department and VAT that have been brought on record, and had the surveyor’s report been provided to the complainant before the filing of the complaint, the complainant would have tendered all or any such documents that might be further needed for the purpose of computation. Learned counsel submits that no such opportunity was given to the complainant and, therefore all these documents have been stated in the pleadings before this Commission. The contention therefore is that the computation which has been made with regard to the loss of the value of the goods is at considerable variance and a comparative study has been made by the surveyor which, according to the complainant, has no foundation. The contention is that merely proceeding to rely on the stock statement account obtained from the bank does not suffice to calculate the entire loss, inasmuch as the stock statements are tendered to the bank in order to ensure that the withdrawal limits of the company/firm are maintained. The complete statement of the transactions, including the purchases as also the sales, were all available in the account duly audited by Chartered Accountant which could not be disputed in any way as being fake or otherwise. In the absence of any such doubt about the audited accounts, there was no occasion for the surveyor to have compared it with the stock statement and then reduced the value. It is however submitted that the surveyor has adopted a third measure as well, namely, that of reducing the value of the stocks by entering into the issues of certain goods being sent out for job orientation purposes. To that extent, the reduction made is Rs.9 Lakhs and odd. The contention is that even assuming for the sake of arguments that the said goods were not present at the time of incident, then also the reduction as against the entire claim of the complainant is below 50% which has no foundation nor any empirical basis exists for reducing the same. It is urged that the surveyor commences with an assessment of Rs.1,00,00,000/-, then Rs.44,19,174/- and then further reduces it to another amount after comparative assessment and the job oriented items to an approximate sum of Rs.29.00 Lakhs and odds. Thus the submission is that this methodology by raising presumptory calculations as against the actual documents on record is unacceptable. However one of the major issues which does arise for consideration and which has to be answered by the Insurance Company is as to why in spite of the submission of the surveyor report on 15.01.2015, the Insurance Company did not proceed to finalize the claim either way. There is no injunction either from this Commission nor was there any legal impediment for the Insurance Company to have not finalized the claim, which has not been done till date as per the records available. Learned counsel for the Insurance Company also has not been able to intimate or indicate from the documents about any such finalization of claim. Consequently, such a lapse in procedure also violates the IRDA regulations which makes provisions for the finalization of the surveyor report within a specified time as well as the finalization of the entire claim within the period as prescribed therein. This prima facie lapse on the part of the Insurance Company may also invite punitive damages for not performing its duty in accordance with law. Learned counsel for the Insurance Company contends that there might have been shortcomings in papers and documents, but in the opinion of the Commission even if the complainant has not been able to allegedly supply any document to the satisfaction of the Insurance Company, the same does not prevent the Insurance Company from passing any order or finalizing the claim. The pendency of the finalization for the past 9 years from 2015 to 2024 therefore does not seem to be justified which may also amount to a deficiency and therefore the Insurance Company is liable to answer this issue as well. In view of the aforesaid submissions that have been advanced and in view of the aforesaid facts that have emerged during the hearing, learned counsel for the Insurance Company is called upon to file an affidavit and answer the issues so raised. It may not be necessary to file any reply to the issues which have already been answered in the written version pertaining to the merits of the claim.

Let the said affidavit be filed within six weeks.

Let the complaint be listed on 29.05.2024 at 2.00 p.m.

3.      The insurance company had also been called upon to explain as to why it had not repudiated the claim upon which the matter was adjourned to 29.05.2024 when again the insurance company failed to file the affidavit as desired under the order dated 16.02.2024.  The case was therefore, finally heard on 18.09.2024 when no affidavit forthcoming from the insurance company.  However, Mr. Ajay Singh, learned Counsel for the insurance company urged that as on date, the insurance company is prepared to settle the claim in terms of the loss assessed by the surveyor in its report dated 15.01.2015 to the tune of Rs.44,19,174.51p.  It is in this background that the learned counsel has pointed out to the letters sent on 16.10.2015, 05.01.2016 and 08.03.2016 to the complainant calling upon them to submit the claim forms as well as the building repair bills and payment receipts for further action. 

4.      Be that as it may, the matter has been finally heard and learned counsel for the complainant advancing his submissions, urges that the offer made is not in conformity with the evidence already on record whereby the complainant has established that the methodology adopted by the surveyor to calculate the loss of stocks is erroneous and therefore, the amount offered by the insurance company is far below the loss suffered by the complainant.  With these arguments being advanced, there is no dispute on the fact that there is an existing policy under which the stocks and buildings as well as the plant and machinery were insured by the opposite party insurance company.  It is also not disputed that the stocks stored in the basement of the premises were gutted in a fire on 25.02.2014.  The incident was duly informed to all the authorities concerned including the insurance company who appointed M/s S. Soni & Company as their surveyor.  All documents as were desired, were submitted and the surveyor tendered his final report dated 15.01.2015 which is extracted hereinunder:

SURVEY REPORT

1. PREAMBLE:

We have been appointed by the competent authority of under writers at their Delhi Regional Office No.1 to conduct the survey and assessment of the captioned loss, we proceeded to site and conducted our survey and verification on 27/28.02.2011 and took some photographs and recorded the statements of witnesses, conducted the physical inspection of damaged & safe stocks, plant machinery and building.  The quantification/weightment of damaged stocks were done.  We asked some of the documents related to loss assessment.  Subsequently, we again visited the site on 27.03.14 & 28.03.14 and conducted the weightment of damaged stocks.  Now after verification of required documents, we proceed to report as under:

2.0       INSURANCE DETAILS:

3.0       ABOUT THE INSURED:

            M/s Gautam Polymers was started in the year 1977. They are the largest manufacturers of solar energy powered products in India. They produce goods like street lights, home lighting systems, solar power packs, and solar off grid plants. They started the this unit at Plot No.114-115, Sec.6A, Sidkul, Haridwar from 2010. The bulding having a built area of 450 Sqm consisting of basement, ground floor, 1^st Floor.

Both the plots are adjoining plots and the building connected with

4.0       INCIDENT:

According to Mr. Anuj Kumar Singh, supervisor, on 25.02.2014 at around 4.30 PM when he was doing some dispatch work at main gate and noticed some fire flames in the basement through the window. He rushed there and noticed that there was lot of fire and thick smoke in the basement. He informed the matter to other workers and they all together tried to extinguish the fire with the help of fire hydrants and extinguishers. They opened the fire hydrant system also but they could not control the fire. He sent somebody to fire brigade office and the fire brigade reached the site immediately. Around 7-8 fire tenders carne and put into operations. They could control the fire by around 10 PM. Due to the fire, the packing material, moulded goods, solar UPS wires were damaged in the basement. The building was also damaged. The fire brigade broke open the windows and poured water from there. According to him, the cause of fire might be due to some short circuit only.

5.0 FIRE BRIGADE REPORT:

The insured has provided us the fire report no. 5 monthly serial no 4, dated 07.04.2014, issued by the Haridwar Fire Service. The report is summarized as under:

6.0       F.I.R.

The insured has also intimated to the police dated 26.02.2014 and same is acknowledged by the police. According to the insured, there is fire occurred on 25.02.2014 on 4.30 in the basement at Gautam Polymer, Plot No-114, Sector 6/A Sidcul, Haridwar. The insured had tried to control the fire by using of fire fighting operation and they also intimated to the fire brigade service. The fire brigades reached on the spot and control the fire. The copy of intimation is enclosed in our report.

7.0       MEDIA REPORTING:

There are no media reports available in this case.

8.0       OUR OBSERVATIONS AT SITE

After our appointment, we visited the site on 27/28-02-2014, we observed that the insured's unit situated in two adjoining industrial plots, building having three floor, including the basement. The fire was at the basement of plot no.114, where insured had kept various types of packing material, moulded solar equipments parts. The stocks were badly damaged. The fire brigade poured a lot of water in the basement and the insured installed motor pumps for flushing out the water from the basement. The water level inside the basement was around ½ ft. on 28.02.2014.

It was observed that the switch board near to the stair case was is hardly damaged/ melted condition indicating that the fire might be started from the switch board.

We advised the insured to remove all the damaged stocks from the basement and arrange the segregation for quantification of the same. Accordingly, they done the same and we again visited the site 27.03.14 & 28.03.14 and the weighment/ physical inventory of damaged stocks was done.

9.0       STATEMENT OF WITNESS:

During survey we have recorded the some witnesses which reproduce as under.

STATEMENT OF MR ANUJ KUMAR SINGH

He is working as a supervisor since last 4 years his duty hours are from 9.00AM to 6.00PM and Sunday is weekly off day.

On 25.02.2014 at around 9.30 PM when he was on the main gate for dispatch he noticed some fire flames from the window off the basement. He rushed there and noticed that there was lot of fire in the basement. He informed the matter to his colleagues and they all tried to extinguish the fire with the help of fire extinguish. They opened the fire hydrant system but they could not control the fire. They went to the fire brigade office and the fire brigade came and put into operations. Total 7-8 vehicles were rushed and put into operation. The neighbouring units were also helped for firefighting operations. They could not control the fire by around 10 PM. The packing material, moulded good, solar UPS, wires were damaged due to fire. The cause of fire might be due to some short circuit in the switch box.

10.0    CAUSE OF FIRE:

The probable cause of fire, as per different sources, and as per our verifications, is summarized below:

As per insured; we have discussed with the insured and they explained the cause of fire is short circuit.

As per statement of witness; during survey we have recorded the statement of Mr. Anuj Kumar Singh and they explained that the cause of fire is electric short circuit.

As per police report: As per police report dated 29/02/2014, the cause of fire is short circuit.

As per fire brigade report: As per fire brigade report, the cause of fire was electric short circuit,

As per our opinion: During survey it was observed that the switch board near to the stair case was is badly damaged/melted condition indicating the fire might be started from the switch board.

11.0 FIRE FIGHTING ARRANGEMENT:

The insured had the following fire fighting arrangements at the affected premises:

➤ Underground tank, capacity 30000 litres,

➤ Main Pump 20 HP,

➤ Fire Hydrant 4 nos, Hose Pipe 8 nos,

➤ Branch Pipe 4 nos,

➤ ABC Fire Extinguisher Capacity Kgs. 15 nos,

➤ Mechanical Foam Extinguisher Capacity 9 litres 1 no., and CO2 Fire Extinguisher Capacity 4.5 Kgs. 3 nos.

The equipment had been inspected by the fire department of Haridwar. The premises were sufficiently equipped and all the equipment was in working condition at the time of the incident.

A copy of the report of the fire department has been attached with this report.

12.0 VERIFICATION OF RECORDS:

The insured provided us copies of audited balance sheets of the last three years i.e. pertaining to the years 2010-11, 2011-12 and 2012-13. The insured provided us purchases, sales, and direct expenses ledger accounts, along with purchase bills, sale bills, as well as bills for direct expenses. We cross checked these ledgers with the bills. We also crossed checked the insured's party ledgers and direct expenses ledger with their bank statements. We cross tallied the sales and purchases with the insured's VAT returns. The insured is not maintaining any item wise stock register, they are only maintaining only item wise list on their computer system. The insured explained that being a manufacturer of solar panels and lights, they are dealing with various types parts/components manufactured by themselves as well as purchased from the market and being the items are numerous, it is not possible to maintain the stock register.

13.0 CLAIM OF INSURED

The insured has not provided the claim form but they have provided the details of damaged items and summary are as under.

14.0 PHYSICAL INVENTORY OF DAMAGED STOCKS:

During the course of our initial survey, we advised the insured to shift the damaged stocks from the basement and segregate the damaged stocks. Subsequently the insured had shifted the damaged stocks from the basement to a open plot and where we conducted the physical inventory of damaged stocks of segregated stocks. However most of the stocks were badly damaged/burnt and it was not possible to identity/ quantify the same and we arranged the weighment of the damaged stocks. Since the damaged items consisting of various small components and it was not possible to segregate the same and the weighment was done together in mix condition.

15.0 PROFITABILITY ANALYSIS

The insured provided us the audited balance sheets of the years 2010-11, 2011-12, 2012-13 of Haridwar Unit. We have analyzed the gross profit of the three years as under:

From the above it is observed that gross profit ratio is decreasing trend in every year and insured has also provided the trading account from 01.04.2013 to 25.02.2014 in which they declared the gross profit ratio @ 24.79% and we have also considered the gross profit ratio @24.79% for the preparation of trading account for the period of 01.04.2013 to 25.02.2014.

16.0 CURRENT YEAR VERIFICATIONS:

The insured has provided the trading account form 01.04.2014 το 25.04.2014. We conducted the following verifications for preparing trading account for the current period, till the loss dare, i.e. from 01.04.2013 to 25.02.2014:

16.1 OPENING STOCK:

The insured has provided us the balance sheet as on 31.03.2013 of Haridwar Unit. On verification of the same we have found the amount of closing stock to be Rs. the amount of opening stock while 3,92,00 3,92,00,000 and the sarne has been considered as

preparing the trading account for the period 01.04.2013 to 25.02.2014.

16.2 PURCHASES:

The insured has provided us the purchase ledger from 01.04.2013 to 25.02.2014 along with few copies of purchase bills. We have verified the amounts in the ledger with the copies of purchase bills. We found that insured has properly declared the purchase amount into purchase and summary of purchase is as under:

Thus, for the preparation of trading account we have considered the total purchase amount Rs.32,90,03,018.40/-

16.3 DIRECT EXPENSES:

The insured has provided the ledger account of direct expenses from 01.04.2013 to 28.02.2014 but we have considered the direct expenses up to 25.02.2014 for the preparation of trading account and further we cross check the amount declared into trading account. The summary of direct expense as per ledger account is as under:

Thus we have considered the total direct expenses Rs.2,41,00,304.01 for the preparation of trading account.

16.4 SALES

The insured has provided us the sales ledger from 01.04.2013 to 28.02.2014 but we have considered upto 25.02.2014 and they have also provided the few sales invoices and we verified the same with the sales register and after the verification it is observed the sales amount declared properly. The summary of sales is as under:

Thus for the preparation of trading account we have considered the total sales amount is Rs.430,931,849/-.

16.5 PAYMENT VERIFICATIONS

The insured has provided the few major party ledgers from 01.04.2013 to 25.08.2014 along with the bank statement and we have verified the payment made by the insured and verification it is observed that purchases are authentic.

16.6 VERIFICATION VAT RETURN

The insured has provided the three quarter (from 01.04.2013 to 31.12.2013) of VAT return and we verified the sales and purchase declared into VAT return with ledger account. On verification it is observed that sales amount declared properly but purchase amount is declared excess amount. The details of purchase as per VAT and ledger as per under:

Form the above table it is observed the excess purchase amount is declared into VAT return and insured has explained that the few purchase capital goods against from C is included in VAT return so we ignore for the preparation of trading account.

16.7 CURRENT YEAR TRADING ACCOUNT:

We have prepared the trading account for the current year from 01.04.2013 to 25.02.2014, on the basis of the verifications mentioned above. The trading account prepared is as under:

Thus, the closing stock as per trading account method comes to Rs. 6,81,99,478.78/-

17.0 VALUATION OF SAFE STOCK

As explained earlier, the insured is manufacturing solar panels and for which they used various kind of small parts, pcbs, resistances etc. They are not maintaining any stock register. However the stock statements were available on their computer system. During the course of our survey, the insured had provided us a list of damaged stocks with its value and list of safe stock its value. However, they failed to provide the purchase bills of most of the items, since the most of the safe and damaged items/components are manufactured by themselves only and there is no proof of costing available. In case of safe stocks, we considered the rates provided by the insured for their own products and in case of purchased items we cross checked the rates with the purchase bills and considered accordingly. The details are given in Annexure-l and the total value of safe stock at the affected location comes to Rs.5,80,00,000.00

18.0 VALUATION OF DAMAGED STOCKS

The fire was at the basement, there is no manufacturing activities are going on. The insured is used to keep the packing material and surplus components there. The manufacturing activities are going on at the ground and first floor of each plots i.e. Plot No.114 & 115. The fire was at the basement of Plot No. 114 only.

Plastic Items: As already explained earlier, since all the plastic components were manufactured by the insured and it is not possible to compute the cost of each items. In such circumstances, we are considering the raw material cost plus 50% of the over heads on over all basis. The total weight of the damaged plastic moulded items which were all identifiable, but since they are partially burnt and heat affected and become useless Photographs of the segregated stocks also enclosed herewith and the total weight comes 16737.60 Kg and the raw material cost (plastic granules) comes to Rs.168.11 per Kg and the 50% of overheads comes to Rs.7.55 per Kg (Details are given in annexure-II) and the total cost of plastic moulds comes to Rs.175.66 per Kg and the total value of damaged plastic stocks comes to Rs.29,40,126.81.

Packing Material: The packing material is also got weighted and the total weight, which comes to 27775 per Kg. We also computed the average weight per carton (Seen Annexure-III) and the rate considered based on the average rate from the purchase bills. The average rate computation is given in Annexure-II and average rate of packing material per Kg comes to Rs.24.28 per Kg and the total value of damaged packing material comes to Rs. 6,74,377.

Nut Bolt and other MS items: The Nuts, bolts, and other misc. MS items were considered based on its weight and the rate computed based on the average purchase cost per Kg. The average rate calculation is given in Annexure-II and the average rate of nut and bolts comes to Rs.50.48 per Kg. and the total weight such items comes to 9370 Kg and the total value comes to Rs. 4,72,997.6.

Polythene:

The polythene bags kept there was also damaged. The total weight of such polythene bags comes to 3845 Kg and the average purchase cost comes to Rs.135/- per Kg (Annexure-II) and the total value of polythene bags comes to Rs.5,19,075/-.

19.0 SUMMARY OF VALUATION OF DAMAGED STOCKS

The summary of value of valuation of damaged stocks are given as under

Thus, the value of damaged stocks based on weighment comes Rs.4606576/-.

20.0 CLOSING STOCK AS PER BANK STOCK STATEMENT METHOD

The insured has taken the loan from Bank of India and submitting stock statement on monthly basis and unit wise separately. We obtained some copies of stock statement and stock declared by the insured as under.

The last statement had been submitted by the insured into bank before date of loss is for the month of Jan 2014 for Rs.5,74,70,750/- for Haridwar Unit and same has been considered for the calculation of closing stock as on loss date. For calculation of closing stock as on loss date i.e. 25.02.2014 we have added the purchase and direct and deducted the cost of sales for the period 01.02.2014 to 25.02.2014. The calculation has been detailed as under:

Thus, the value of total stock as on loss date comes to Rs.6,19,58,152/- as per bank stock statement method.

21.0 ASSESSMENT OF LOSS:

The assessment of loss based on alternative methods as under:

21.1 LOSS AS PER TRADING METHOD:

From the above verification, now we calculate the loss as per trading method is as under:

Thus, loss as per trading account method comes to Rs.1,01,99,478.78

21.2 LOSS AS PER BANK STOCK STATEMENT METHOD:

From the above verification, now we calculate the loss as per bank stock statement method is as under.

22.0 COMPARISON OF LOSS BY DIFFERENT METHODS:

Now we are comparing the loss assessment based on three alternative methods mentioned above as under:

On verification of the records, it is observed that the insured is not declaring the stock lying with job workers to the bank and they are declaring the stocks lying at the affected location only. However as per the triding account, the closing stock is including the total value of stock lying with the job workers also. The insured is getting major portion of job work and the stock lying at jobworkers included in the trading account, but the same is not included in the Physical inventory or insured having any data or details for such stocks and the insured has failed to produce / or prove any stocks records relating to job work stocks also. This variation is due to the same only. Hence we are not considering the loss assessment based on trading account in this case and considering the loss assessment based on bank stock statement only.

23.0 DEAD AND SLOW MOVING FACTOR:

The major portion of the stocks consisting of plastic components manufactured by the insured, which meant for further assembly at the ground and first, second floors. The insured also explained that once the die for particular design is fitted in the moulding machine, they produced some extra surplus components and kept the same in the basement. Considering the fact, there might be some dead stocks was also kept lying there. In such circumstances, we are deducting the dead stock as @5% in this case. Further we are again deducting @5% as variation factor in this case, since the insured is not maintaining any stock register. Thus, the total deduction @10% is reasonable in our opinion.

24.0 SALVAGE:

The salvage disposal has been done based on CVC guidelines for which we prepared the render form and advertisement format and insured had published the advertisement for calling the sealed tenders regarding the fire damaged moulded plastic & invertors and transformers at the premises in various newspapers i.e. Navbharat Times, Dainik Jagran and Hindustan Times and in response initially 5 sealed tenders were received. The tenders were opened on 06.05.2014 in presence of

1. CA Sanjeev Soni of S. Soni & Co. (Surveyor)

2. Mr. Shiv Kumar (Representative of insurer)

3. Mr. B.K. Mohanka (Representative of insured)

After opening the tenders it was agreed to allot the tender to the respective highest bidder. The details of sealed tender received as under:

On opening sealed tenders, Mr. Farooque M. Khan had offer for highest amount Rs.1120786/- and it is good and more than reasonable and decided to dispose the same to the highest bidder after receiving the payment. We have considered the net salvage value after the advertisement, cost and tender processing cost as under :

Thus we have considered the total salvage value Rs.10,03,861 and the whole process of tendering was adopted as per CVC guidelines and this immediate step helped to the maximum salvage value.

25.0 CALCULATION OF VALUE AT RISK:

Since we are considering the loss assessment on bank stock statement basis, we are computing the value at risk also on the same method. We also deducted the dead stock factor on damaged items while computing the value at risk also. The calculations are given as under:

The other methods also there is no under insurance applicable in this case.

26.0 ASSESSMENT OF LOSS OF STOCK

27.0 BUILDING

The building having basement, ground, first and second floor of reinforced concrete moment resisting frame structure with basement. The brick masonry in filled walls have been provided mainly on periphery of the building including basement.

28.0 NATURE OF DAMAGES

The high intensity of fire/ temperature due to presence of combustible materials in the basement has caused the damages. In addition, convective heat currents and radiation have helped in the growth and the development of fire in the basement. The rise in temperature activated the fire spread at faster rate. The high temperature exposure has caused the damages to reinforced concrete columns, beams, roof slabs, brick masonry, plaster and floorings.

Roof Slabs

Crazing cracks were observed predominantly all over the roof slab concrete as well as on the plaster. On tapping the plaster and concrete surface, hollow sound was observed which indicates separation of plaster includes separation of plaster including cover concrete from the slab. The ceiling plaster along with some part of concrete had peeled off at a fire location over a wide area. However reinforcements were not exposed. Disintegration of concrete has been found at a few locations

Beams

Majority of beams near starting locations were affected by high temperature during the fire. The spalling of plaster/ concrete cover was observed in the beams Disintegration of concrete in beams was also observed at a few locations. The voids were visible in several beams due to fire exposure. However exposure of main reinforcement and shear struups were not found. Surface crazing was observed predominantly all over the beam surfaces in the fire affected areas. On tapping the concrete surface, hollow sound was head at several locations which indicates separation of cover concrete from the beams.

Columns

Most of the columns suffered moderate damage causing spalling/crazing of plaster and localized spalling of concrete, whereas other columns suffered minor damage including surface crazing and deposition of black soot.

The flooring of basement was damaged at few location. The window panels were also damaged.

29.0 TEST REPORT ABOUT THE STRENGTH OF BUILING

We advised the insured to conduct various tests to know the strength of building. Accordingly the insured had arranged various tests from M/s. M/s. Retrfit Consulting Engineers. They conducted the following tests and the results are given as under.

Non-Destructive Testing: The average estimated compressive strength in columns was varying from 14MPa to 25MPa, whereas average estimated compressive strength in beams and slabs were found varying from 18MPa to 23MPs and 12MPs to 14MPs respectively. This appreciable reduction in strength was due to fire exposure of structural members.

Ultrasonic Pulse Velocity Test: As per the rest, quality of concrete is found to be from "Doubtful" to "Medium" due to presence of excessive voids/fine cracks in concrete.

Chemical Analysis : After conduction detailed rest, the sulphate content of sample collected from site was varying from 0.9-1.2%, which is below the permissible limit of (4%)

30.0 CONCLUSION ON TEST REPORTS

The extensive visual inspection, non-destructive testing leads to the conclusion that the structure in distressed condition particularly slabs, beams, columns and brick work in fire damaged area. The concrete after fire is disintegrated has become porous due to loss of water causing cracking, spalling, honeycombing, bulging, surface crazing etc. The fire exposure to brick masonry work has also causes distress. Based on damage classifications, damages were observed to be class 3. Therefore, appropriate rehabilitation/ strengthening of structural members is required for the region which is exposed to fire and elevated temperature.

31.0 ASSESSMENT OF LOSS

The rehabilitation/ strengthening of roof slabs of basement that includes exposing slabs upto good concrete, applying anti-corrosive treatment over the exposed reinforcement, treatment of structural micro cracks etc. The columns, beams, roof, floors, brick work, window panels etc. to be repaired. The details are given in Annexure-4 and the gross loss assessment comes to Rs.22,05,916/-

32.0 DEPRECIATION CHARGES

Insured had taken the policy coverage on re-instatement basis, however they have not re-instated or not provided the proof of re-instatement till date. The building is constructed during the year 2000 and we are applying the depreciation @1.5% p.a. After applying the depreciation, the net loss assessment is given as under.

33.0 VALUE AT RISK

The value of building has been worked out on covered area basis. The details calculation of value at risk is given as under.

34.0 AVERAGE CLAUSE

VALUE AT RISK                 :  Rs.1,92,81,375.00

SUM INSURED                    :  Rs.4,00,00,000.00

AVERAGE CLAUSE           :  NIL

35.0 SALVAGE VALUE

Since we are applying only the repair cost, hence there is no salvage value in this case. However considering a cautious approach, the scrap value of windows etc. we are deduction a nominal salvage value of Rs.1000/- in this case, which is reasonable in our opinion.

36.0 OVERALL SUMMARY OF ASSESSMENT

The overall summary of loss assessment is given as under:

37.0 BREACH OF WARRANTIES

These seems to be no breach of warranties in this case.

38.0 HYPOTHECATION CLAUSE

The underwriters may keep this clause while settling the claim.

39.0 OUR OPINION

In our opinion the insured had suffered a loss of Rs.4419174.51, which is a fair indemnity to the insured subject to terms and conditions of the policy.

This report issued without prejudice.

5.      Two main issues for consideration in the present case are (i) deficiency in service on the part of Insurance Company in not settling claim till date (ii) The quantum of eligible claim. 

6.      As regards Ist issue, the incident of fire took place on 25.02.2014, the claim was filed with the Insurance Company on 26.02.2014, the present complaint was filed on 01.05.2015. Learned Counsel for the Complainant contended that inspite of the submission of the report by the Surveyor, no action was taken and it is in these circumstances that the present complaint was filed on 01.05.2015 on which notices were issued after admission on 18.05.2015.  Pleadings were exchanged and, the insurance company had also attempted to make an offer calling upon the petitioner to file his documents for settling the claim but without there being any negotiations in this regard the written version was filed taking a plea that the claim has not been settled.  The learned counsel for the complainant, while advancing his submissions, has also pointed out that the inaction and omission on the part of the insurance company by not settling the claim is contrary to the Insurance Regulatory and Development Authority (Protection of Policyholders' Interests) Regulations, 2002.  Relying on clause 9 of the notification dated 26.04.2022, learned counsel submits that the insurance company has clearly breached the said guidelines that has also been noted in the order dated 06.02.2024 and therefore, in the absence of any explanation by the insurance company on that count, this by itself being a deficiency, deserves to be punitively compensated.  The insurance company, by violating the timeline provided in clause 9 of the said regulation, has rendered itself subject to punitive damages that deserve to be awarded to the complainant.  Clause 9 of the said regulation is extracted hereinunder:

9. Claim procedure in respect of a general insurance policy

(1) An insured or the claimant shall give notice to the insurer of any loss arising under contract of insurance at the earliest or within such extended time as may be allowed by the insurer. On receipt of such a communication, a general insurer shall respond immediately and give clear indication to the insured on the procedures that he should follow. In cases where a surveyor has to be appointed for assessing a loss/ claim, it shall be so done within 72 hours of the receipt of intimation from the insured.

(2) Where the insured is unable to furnish all the particulars required by the surveyor or where the surveyor does not receive the full cooperation of the insured, the insurer or the surveyor as the case may be, shall inform in writing the insured about the delay that may result in the assessment of the claim. The surveyor shall be subjected to the code of conduct laid down by the Authority while assessing the loss, and shall communicate his findings to the insurer within 30 days of his appointment with a copy of the report being furnished to the insured, if he so desires. 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 from the insurer for submission of his report. In no case shall a surveyor take more than six months from the date of his appointment to furnish his report.

(3) 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 certain specific issues as may be required by the insurer. 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.

(4) 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.

(5) On receipt of the survey report or the additional survey report, as the case may be, an insurer shall within a period of 30 days offer a settlement of the claim to the insured. If the insurer, for any reasons to be recorded in writing and communicated to the insured, decides to reject a claim under the policy, it shall do so within a period of 30 days from the receipt of the survey report or the additional survey report, as the case may be.

(6) Upon acceptance of an offer of settlement as stated in sub-regulation (5) by the insured, the payment of the amount due shall be made within 7 days from the date of acceptance of the offer by the insured. In the cases of delay in the payment, the insurer shall be liable to pay interest at a rate which is 2% above the bank rate prevalent at the beginning of the financial year in which the claim is reviewed by it.

 Insurance Company on the other hand contends that no decision was taken on the claim on account of pendency of the present complaint. 

7.      From the above, it is clear that Insurance Company is mandated to take a final decision on the claim within a maximum of about 7 months.  These provisions being statutory in nature, non-observance of these time-lines itself amount to deficiency in service on the part of Insurance Company.  In the absence of any orders / injunction from this Commission in the present case or any other legal impediment there was no bar on the Insurance Company to take a final decision on the claim.  In case of any doubt, it could have moved an application before the Commission seeking any clarification and/or permission in this regard, which was not done.  Hence, we are of the considered view that on this count, the Insurance Company is guilty of deficiency in service, entitling the Insured compensation on account of such inordinate delay/deficiency in service to decide/settle their claim, over and over the eligible claim on merits along with interest as per provisions of Insurance Regulations. 

8.      Coming to the 2^nd issue, as stated earlier, during the hearing on 18.09.2024, the learned Counsel for Insurance Company stated that the Insurance Company is prepared to settle the claim in terms of the loss assessed by the Surveyor in its report dated 15.01.2015 to the tune of Rs.44,19,174/-.  In this regard, an Affidavit dated 15.09.2024 has also been filed by the Insurance Company on 18.09.2024, extract of relevant portions of which is reproduced below:

“2. That as per information and Explanation given by the Officers of the Insurance Company and also by the Surveyor in its meeting held at Insurance company Office. Methodology Adopted by the Surveyor and Quarry raised by this Hon'ble Court are Explained below-

A. Trading Account Method: Under this method surveyor checked books of accounts of insured and from this he extracted actual opening stock, purchases, sales and direct expenses as on 31.03.13. These figure has been adjusted upto date of loss i.e. 25.02.2014. By adjusted data he prepared "Trading Account" The result of this Trading account is Closing stock as on 25.02.2014 of Rs 6,19,58,152/- Surveyor assessed safe stock after loss by physical verification Rs 5,80,00,000/-. Now the difference of Rs. (61958152- 58000000)= Rs.1,01,99,478/- It means this 1.01 cr. is ultimate loss of stock as per trading account method. Disadvantage of this method:-

1. This figure 1.01 cr is only in books of account and does not prove physical availability of closing stock for the same amount.

2. Trading account does not show closing stock in units and item wise for which separate stock register required.

3. To calculate closing stock as on date of loss (after closing of previous financial year) some adjustment have to be made resultant adjusted closing stock came out which is not actual but adjusted.

 4. By this method stock includes lying with job workers. No segregation is depicted.

B. Weightment Method:- Under this method Surveyor physically verify the stock residual and by weighing the salvage or residual he calculate the sound weight of stock. Taking the value of per unit/per item from purchase bill he calculate the loss value Rs.46,06,576/--

Disadvantage :-

1. Weight is calculated by physical verification of salvage and adjusted to sound weight. Adjustment of weight make loss valuation near approximation not exact.

C. Bank Statement Method:- Under this method stock statement is declared to Bank every month unit wise basis. As per this method closing stock came Rs. 61958152/- By physical verification safe stock came Rs.58000000/- therefore balance is loss value of stock. Rs.(61958152-58000000) = Rs.39,58,152/- Disadvantage:-

Stock declared to bank does not include stock lying with job worker. Insured declare only stock lying at affected location. (advantage for calculation).

Now the queries raised by this Hon'ble Tribunal regarding the methodology of assessing the stock can be answered as follows:

1.Query: 'Computation of loss is at considerable variance and comparative study has been made, this comparison has no foundation'

Reply: Available three method adopted and comparison done to arrive at true and fair value and to overcome disadvantage of each method.

2. Query: "Merely proceeding to reply on the stock statement account obtained from the bank does not suffice to calculate the entire loss"

Reply: Stock loss is calculated by other two method beside bank statement. Only bank statement method is fair, authenticate, devoid of approximation and near to true value therefore assessed loss on bank statement method.

3.Query: Complete trading transaction i.e. purchase, sales, opening stock direct expenses are audited figure then why needed comparison with bank statement and reduce the value"

Reply: It is agreed that loss assessed by trading method is based on audited figure but disadvantage is that assessed loss of stock by trading is only in books of accounts and stock with job worker not segregated. Therefore physical verification of stock method is adopted and reduced amount is of stock with job worker which is not damaged.

4. Query:- Reduction of loss assessment is below 50% which has no foundation nor any empirical basis exist for reducing the same.

Reply: As insured have not prepared any stock register, stock outside for job register and costing record. Therefore in absence of all record surveyor physically verified the stock lost and stock safe after fire occurrence. Physical verification is more empirical than any other evidence. Finally loss amount is reduced based on physical verification.

5.Query: Assessment started with 1 Cr. then 44 Lac and further reduces to 29 Lac.

Reply: Assessment is done by three method in which different amount came like Rs. 1 cr. 2nd method 44 lac and third method 39 lac. Therefore after comparison best and devoid of approximation method is adopted.

D. In Conclusion:-

Insured have not kept basic record of transaction therefore surveyor adopted three method and after comparison best method is adopted to calculate loss. Insured failed at producing following record:

I. No Stock Register is maintained by the insured.

II. No register is maintained by the insured for the  stock given to outside for job.

III. Costing record of stock is not maintained by the insured.

Therefore authenticate record available was bank statement which was maintained monthly on item basis and depict true value of stock lying at affected location. After comparison surveyor assessed the loss on Bank Statement basis.

3. That Officers of the Insurance Company has send several letters/ Various correspondences for compliance of claim requirements/documents but complainant was failed to reply to them. True Photo Copy of Letters issued to them is attached here for your reference in this Affidavit as Annexures A-1(Colly)

4. That the letter from Fire Dept dated 05/10/2016, where it was informed that the insured didn't submit desired information in order to process the claim and in the mean time the complainant approached NCDRC even before the decision was taken/conveyed on the claim. Officers of the Insurance Company has Bonafide Impression/Belief that the matter was subjudice before this Hon'ble Tribunal and they can not take any decision on this Case either way. Insurance Company  as already offered them to Rs.44,19,174/ as Surveyor has assessed the loss but Claimant had not accepted the Proposal and approached this Hon'ble Tribunal.

5. That the Insurance Company was always ready and willing to Pay the amount assessed by the Surveyor and Still Ready to pay the Same amount of Rs. 44,19,174/ to the Claimant.

6. That this affidavit is given on the basis of information given by the Insurance company and the contents of this affidavit true and correct to the best of my knowledge.

7. That the Annexures which annexed here are true photo copies of the orders.”

9.      Learned counsel for the complainant has contended that the surveyor has adopted a method of comparative calculation through three alternative methods; first as per trading method, the second is as per bank stock statements and the third is the weightment method.  The calculations by the three methods are indicated in clause 21 of the surveyor report extracted hereinabove and the comparison has been made in clause 22.  The surveyor therefore, has relied only on the bank stock statement method for the reasons given in clause 22 of his report.  It is thereafter, that the salvage has been deducted and other assessments have been made with a final opinion that the insured suffered a loss of Rs.44,19,174.51p only. Learned counsel for the Complainant has questioned this methodology of calculation and has urged that this is an erroneous approach and consequently, the stand of the insurance company supporting the surveyor report is untenable both on facts as well as in law.  Learned counsel has also submitted his arguments with written submissions that are on record contending that the surveyor has erroneously relied on the job work factor and has therefore, incorrectly rejected the calculation of the trading stock method.  Responding to this submission, learned counsel for the insurance company alongwith his written submissions has urged that the choice of the surveyor to assess the loss on the basis of bank stock statement cannot be faulted with and the insurance company had invited the complainant through letter referred to above demanding documents for completing the process of loss assessment but it is the complainant who did not cooperate and instead filed the consumer complaint even before the matter could be finalized by the insurance company.

10.    From a perusal of Surveyor’s report extracted in the preceding paras, it is evident that Surveyor has assessed the loss of stock by three different methods as stated below:

22.0 COMPARISON OF LOSS BY DIFFERENT METHODS:

Now we are comparing the loss assessment based on three alternative methods mentioned above as under:

xxxx

26.0 ASSESSMENT OF LOSS OF STOCK

Taking the assessment of loss of stock based on bank statement method and then adding his assessment of loss of building, the Surveyor has assessed the Net Loss assessed as Rs.44,19,174/-, as detailed below:

36.0 OVERALL SUMMARY OF ASSESSMENT

The overall summary of loss assessment is given as under:

11.    It is this figure of Net Assessed Loss of Rs.44,19,174/- for which now the Insurance Company has expressed its willingness to settle the claim.  The basic dispute in this case is on the method of assessment of loss for stocks.  The Complainant wants his stock loss to be assessed based on Audited books of accounts, rather than bank stock statement method, which as per Surveyor’s report comes to gross figure of Rs.1,01,99,478/- as against Rs.39,58,152/- by bank statement method (before adjustments towards dead stock & salvage value etc. as detailed above.  The Complainant’s contention is that merely proceeding to rely on the stock statement account obtained from the bank does not suffice to calculate the entire loss, in as much as the stock statements are tendered to the bank in order to ensure that the withdrawal limits of the company/firm are maintained. The complete statement of the transactions, including the purchases as also the sales, were all available in the account duly audited by Chartered Accountant which could not be disputed in any way as being fake or otherwise. In the absence of any such doubt about the audited accounts, there was no occasion for the surveyor to have compared it with the stock statement and then reduced the value.  Hence, the basic contention of the insured is that the stock statements being submitted to banks were not reflecting the true position of his stocks, which were reflected in the audited statements of accounts and that he was submitting stock statements to the bank only to the extent these were required to secure his loans.  We are unable to accept such contentions, even if true, it amounts to admission on the part of Complainant that he was not submitting true/correct stock statements to his bank.  It is not his case that he has been informing his bank that stock declared in the statements submitted to the bank were only to the extent required to secure the loans granted by the bank and that his actual stocks as per audited accounts were much higher.  Business entities like Complainant herein are not expected to maintain multiple set of statements for different purposes.  All their statements/books of accounts must conform to the actual state of affairs.  If the audited statement of accounts were reflecting true state of affairs, Complainant ought to have submitted stock statements to bank based on such audited statements.  Even if there were delays in getting the accounts audited, the provisional stock statements being submitted to the banks ought to have been based on actual books of accounts followed by audited statements as and when made ready. The Complainant have not notified to his bank that the stock statements being submitted to them are not based on his audited books of account and his actual stock position is/was much higher.  No harm could have been caused to Complainant  from the bank’s side had the Complainant declared his stock position correctly to bank and submitted stock statements based on audited statements.  Hence, we are of the considered view that in the given facts and circumstances of the case, Complainant is now estoppled from pleading for the purpose of claiming higher amount for his loss that bank stock statements under-stated his stock position and that audited stock statements reflected his stocks position correctly.  Hence, the surveyor was right in recommending the loss based on bank stock statement method and Insurance Company is justified in suggesting settlement of claim as per assessment of loss by Surveyor, which include assessment of stock loss based on bank stock statements.  Surveyor’s report is a valuable document based upon which Insurance Company have to take final decision on the claim.  As has been held by Hon’ble Supreme Court in Khatema Fibres Ltd. vs New India Assurance Company Ltd. & Anr., 2021 SCC OnLine SC 818 that “A Consumer Forum which is primarily concerned with an allegation of deficiency in service cannot subject the surveyor’s report to forensic examination of its anatomy, just as a civil court could do. Once it is found that there was no inadequacy in the quality, nature and manner of performance of the duties and responsibilities of the surveyor, in a manner prescribed by the Regulations as to their code of conduct and once it is found that the report is not based on adhocism or vitiated by arbitrariness, then the jurisdiction of the Consumer Forum to go further would stop.”

12.    Accordingly, after giving a thoughtful consideration to the entire facts and circumstances of the case and evidence before us, we are of the view that Complainant is entitled to a total claim of Rs.44,19,174/- only as recommended by the Surveyor. Insurance Company has also expressed its willingness to settle the claim for this amount i.e. Rs.44,19,174/-. However, in view of the provisions contained in Clause 9(6) of 2002 Regulations cited in the preceding paras, Complainant is entitled to interest on this amount. 

13.    Accordingly, we direct that Opposite Party-Insurance Company shall pay the eligible amount of Rs.44,19,174/- along with interest as per provisions under Regulation 9(6) of the Insurance Regulatory and Development Authority (Protection of Policyholders' Interests) Regulations, 2002 i.e. at the rate which is 2% above the bank rate prevalent at the beginning of the financial year in which the claim is reviewed by it, w.e.f. expiry of seven months of date of incident till the date of actual payment. In addition, in view of our observations under para 6-7, OP Insurance Company shall pay a compensation of Rs.2.0 lakhs for deficiency in service on account of inordinate delay in settling the claim, which has been established in the preceding paras.  As the Complainant has been contesting this case for more than 9 years now, we also award litigation cost of Rs.50,000/-. All payments as per this order to be made within 30 days of this order, failing which, amount payable at the expiry of 30 days shall carry interest @12% p.a. from the expiry of 30 days till the date of actual payment. 

14.    All the pending IAs, in the consumer complaint, if any, stand disposed of.