1.      Heard Ms. Subhashini Arani, Advocate, for the complainant and Mr. D. Varadarajan, Advocate, for the opposite parties.

2.      M/s. Koziflex Mattresses Private Limited (the Insured) has filed above complaint for directing SBI General Insurance Company Limited (the Insurer) to pay (i) Rs.3.07/- crores with interest @18% per annum, from 14.04.2013 till its payment, as the insurance claim, (ii) Rs.2/- crores, as the compensation for business loss, (iii) Rs.10/- lacs, as the cost of litigation; and (iv) any other relief, which is deemed fit and proper, in the facts and circumstances of the case.

3.      The facts, as stated in the complaint and emerged from the documents attached with the complaint, are as follows:-

(a) M/s. Koziflex Mattresses Private Limited (the Insured) was a private company, registered under the Companies Act, 1956 and engaged in the business of manufacture and sale of Coir Foam Mattresses, Pillows, Cushions etc. and other Coir bye-products. Mr. N.V. Krishna Giridhar was its Managing Director and his wife Mrs. N. Suhasini was its Director. Its factory was situated at Sy.no.-41-25, Village Poosapatirega, Mandal and district Vizianagaram and its sales outlet were at Shop Nos.-2 & 2-A, Leela Plaza, Daba Garden, Visakhapatnam. The Insured took term loan of Rs.8500000/-, for establishing the factory and for running the business, working capital loan of Rs.6500000/- and bank guarantee limit of Rs.12000000/- from State Bank of Hyderabad. Building, Plant & Machinery and Stocks were mortgaged/hypothecated with the said bank. The factory of the Insured was registered as “Small Scale Industry” with District Industries Centre, Vizianagaram. National Small Industries Corporation extended raw material help of Rs.18122484/- on production of bills relating to purchase of raw materials from various outlets, under the government scheme.

(b)  SBI General Insurance Company Limited (the Insurer) was a Public Insurance Company and engaged in the business of providing difference types of insurance services to the general public. The Insured obtained ‘Standard Fire and Special Perils Policy (Material Damage)’ No.0000000000807725, for a period of 28.03.2013 to 27.03.2014, for a sum of Rs.1.25/-crores on the Plant & Machinery and Rs.3000000/- on Stock. By an endorsement dated 29.03.2013, sum insured for Stock was further enhanced to Rs.1.55/- crores and sum insured of Rs.2000000/- for Building was added.

(c)   A massive fire incident took place in the night of 13/14.04.2013, in the factory premises of the complainant. Jaganatha Rao, the watchman and his wife were sleeping, outside the factory premises. At around 02:00 hours, on 14.04.2013, Jaganatha Rao noticed smoke emanating from the main shed. He immediately informed the Managing Director on phone and Police Station, which was at a distance of about 100 meter. Information was also given to Fire Service Station, from where fire tenders were sent on the spot, which doused the fire up to 07:00 hours.    

(d)     The Insured informed the Insurer about fire incident and loss at its factory premises on 15.04.2013. The Insurer appointed Professional Surveyor & Loss Adjustor Pvt. Ltd., Secunderabad, as the surveyor on 15.04.2013. The surveyor inspected the factory premises on 16.04.2013 and 17.04.2013, took photographs, videography and prepared inventory. The surveyor asked the Insured to remove the collapsed roof from the premises and informed him, in order to conduct inspection of machinery and stock and its measurements and quantification. The surveyor again visited the factory premises on 15^th & 16^th, May, 2013 and found that the collapsed roofs were not removed from the premises. The insured took unreasonable time in removing the roofs from the fire affected premises. The surveyor conducted third inspection during 15^th to 17^th, July, 2014. By that time, the machineries were got repaired. The Insured submitted claim of Rs.3.31/- crores i.e. Rs.4011152/- for Building, Rs.10847435/- for Plant & Machinery and Rs.18772489/- for Stock.

(e)     The Insurer appointed Kalahasti Satyanarayana, Deputy Superintendent of Police (Retd.), Insurance Claim Investigator, Guntur on 17.05.2013 and K. Jagannadha Sastry, Advocate, Independent Investigator and Fact Finder, Vizianagaram to verify the veracity of the documents submitted by the Insured in support of its claim and submit their independent reports. Kalahasti Satyanarayana submitted his Investigation Report dated 12.10.2013 and K. Jagannadha Sastry submitted his Investigation Report dated 25.01.2014, in which, inter-alia among other thing, they reported that purchases of Machinery from M/s. Maheswari Ribbons, Gudivada of Rs.13964475/- and Stock from Jageswari Enterprises of Rs.6439810/-, were mere paper and money transactions and had been done with an intension to syphon money from State Bank of Hyderabad and National Small Scale Industries Corporation Ltd. and there had been no actual sale/purchase of machinery and stock.

(f) After examining all the documents submitted by the Insured as well as reports of two Investigators, the surveyor submitted Final Survey Report dated 10.02.2014, observing that the claim was fraudulent and based on fabricated papers and recommended for repudiation of the claim. Thereafter, all the papers were examined by the competent authority of the Insurer, who by letter dated 03.03.2014, repudiated the claim, invoking Clause-8 of General Terms and Conditions of Standard Fire and Special Perils Policy.

(g) The Insured made a representation dated 11.01.2015 to the Grievance Redressal Manager (opposite party-1) against the repudiation of its claim. When nothing was done by opposite party-1, the Insured filed CC/329/2015, before this Commission, which was got dismissed as withdrawn on 30.06.2015, with liberty to file a fresh complaint. Thereafter, this complaint was filed on 04.08.2015, claiming deficiency in service on the part of the Insurer.

4.      The Insurer filed its written reply on 28.12.2015 and contested the complaint. The facts of obtaining ‘Standard Fire and Special Perils Policy (Material Damage)’ No.0000000000807725, for a period of 28.03.2013 to 27.03.2014, for a sum of Rs.1.25/-crores on the Plant & Machinery and Rs.3000000/- on Stock and endorsement dated 29.03.2013, for adding sum insured of Rs.1.55/- crores, for Stock and Rs.2000000/- for Building, have not been disputed. The Insurer stated that as soon as they received information of loss, they appointed Professional Surveyor & Loss Adjustor Pvt. Ltd., Secunderabad, as the surveyor on 15.04.2013. As the loss had occurred on 16^th days of obtaining insurance policy and claim was for heavy amount, the Insurer appointed Kalahasti Satyanarayana, Deputy Superintendent of Police (Retd.), Insurance Claim Investigator, Guntur on 17.05.2013 and K. Jagannadha Sastry, Advocate, Independent Investigator and Fact Finder, Vizianagaram to verify the veracity of the documents, submitted by the Insured in support of its claim and submit their independent reports. Kalahasti Satyanarayana submitted his Investigation Report dated 12.10.2013 and K. Jagannadha Sastry submitted his Investigation Report dated 25.01.2014, in which, inter-alia among other thing, they reported that purchases of Machinery from M/s. Maheswari Ribbons, Gudivada of Rs.13964475/- and Stock from Jageswari Enterprises of Rs.6439810/-, were mere paper and money transactions and had been done with an intension to syphon money from State Bank of Hyderabad and National Small Industries Corporation. After examining these reports, the papers and clarifications submitted by the Insured, the surveyor submitted Final Survey Report dated 11.02.2014, mentioning therein that the claim was fraudulent and based on fabricated papers and recommended for repudiation of the claim. Thereafter, all the papers and reports were examined by the competent authority of the Insurer, who by letter dated 03.03.2014, repudiated the claim, invoking Clause-8 of General Terms and Conditions of Standard Fire and Special Perils Policy, on the ground that the claim of the Insured was fraudulent and exaggerated. Delay was caused for the reasons that the Insured did not co-operate with the surveyor and the Investigators and took time in submitting papers and clarifications. There was no deficiency in service on the part of the Insurer. The preliminary objection that the complaint raised complicated issues of fact, which required examination of voluminous documentary evidence and cross-examination of witnesses as such the Insured be relegated to Civil Court, was raised.

5.      The Insured filed documentary evidence and Affidavit of Evidence of Nallana Venkata Krishna Girdhar and Additional Affidavit of Evidence of Nallana Venkata Krishna Girdhar and Final Survey Report dated 11.02.2014 and papers relating to Commercial Tax Department. The Insurer filed Reports of Investigators dated 12.10.2013 and 25.01.2014, Final Survey Report dated 11.02.2014 and Affidavit of Evidence of Ms. Chynikca Modie. Both the parties filed their short synopsis. 

6.      We have considered the arguments of the counsel for the parties and examined the record. Fire incident in the factory premises of the Insured and consequent loss has not been disputed. The Insurer repudiated the claim invoking Clause-8 of General Terms and Conditions of Standard Fire and Special Perils Policy, finding that the claim was exaggerated and based upon fabricated documents. Clause-8 of General Terms and Conditions is quoted below:-

“8.     If the claim be in any respect fraudulent, or in any false declaration be made or used in support thereof or any fraudulent means or devices are used by the Insured or any one acting on his behalf to obtain any benefit under the policy or if the loss or damage be occasioned by the wilful act, or with the connivance of the insured, all benefits under this policy shall be forfeited.”

7.      Main objections were in respect of exaggeration of the claim for Stock and Machinery. The Insured claimed Rs.18772489/- for loss of the Stock and produced Stock Statement as submitted to State Bank of Hyderabad on 05.04.2013, showing stock of Rs.18804105/- at the factory premises. There is no evidence that Bank Officers made physical verification of the stock, thereafter. In order to prove the stocks, among other documents, the Insured produced Invoice/Bill Nos.54/14.04.2012, 57/17.04.2012, 59/04.05.2012, 62/21.05.2012, 64/28.05.2012 and 72/09.07.2012 of total Rs.6473557/- (excluding taxes), relating to purchase of raw materials from M/s. Jagdeswari Enterprises, Visakhapatnam. Mrs. N. Suhasini, the Director and wife of Mr. N.V. Krishna Giridhar, the Managing Director of the Insured, was proprietor of M/s. Jagdeswari Enterprises, Visakhapatnam. Payment of these bills were made by National Small Industries Corporation through RTGS on the confirmation letters of the Insured. Following reasons were given to disbelieve these transactions by the investigators and the surveyor:-

(a) M/s. Jagdeswari Enterprises was located at Dr. No.29-05-12/D/14, Shop Nos.3 &3-A, Daba Garden, Visakhapatnam and manufacturing and selling furniture. Supply of Foam, Poly covers, Quilt cloth etc. by it, to the Insured was doubtful. The Insured did not give any evidence of transportation of such a large quantity of raw material of Rs.6473557/-, from Visakhapatnam to the factory premises.

(b)   No return relating to VAT was filed by the Insured for the period of 01.03.2011 to 31.05.2013. After the fire incident, the returns from April, 2012 to April, 2013 were filed on 06.06.2013. VAT Returns as submitted by the Insured to the surveyor, from April, 2012 to April, 2013, showed total purchase of Rs.18250825/-. The surveyor verified these returns from the office of Commercial Tax Officer and found that VAT Returns as submitted by the Insured From April, 2012 to April, 2013, showed total purchase of Rs.8079917/-, which was less to extent of Rs.11159583/-. The Insured took plea that there was no VAT on coir as such, its purchase were not shown in return but this explanation was also incorrect as total claim for coir was of Rs.2626343/- only. Correct value of coir was found to Rs.1681303/-. On its basis, it was inferred that the papers relating to VAT Returns were manufactured according to the claim.

(c)   The Investigator found that coir was allegedly purchased from Varalakshmi Coir Product Lavaru (V), Srikakulam district vide bill nos.2/12.12.2012, 3/06.01.2013, 4/02.02.2013, 5/03.03.2013, 6/16.03.2013 and 7/19.03.2013 of total Rs.1783488/-. This Unit was closed in 2011. The claim in this respect was also suspicious.

(d) As per surprise inspection report of the factory premises of the Insured by the officers of State Bank of Hyderabad dated 17.01.2013, around 35 drums Latex and 12 to 15 mattresses were found there. On volumetric analysis, it was found that raw material and finished goods of Rs.18772489/- cannot be stored in the area of the factory.

(e) As per Balance Sheet for FY-2012-2013, opening stock of Rs.2172569/- total purchase of raw material Rs.18049240/- and total sale of Rs.2014545/- were shown. Total purchase of raw material was about 9 times more than the actual sale. The production of the Insured was started in November, 2012 while purchase of huge raw material prior to it was not a normal act of business.

(f) Cash deposits in the account of the Insured had no correlation with the sale of finished products. The Insured could not give any explanation of huge amount of cash deposits.

8.      The Insured claimed Rs.10847435/- for loss of Machinery and produced Repair Quotation of Delhi Andhra Machinery and Revised Quotation dated 28.08.2013 of David Macwan of Rs.8815199/- to prove this claim. Following reasons were recorded for disbelieving the bills relating to repairs of the machineries:-

(a)  The surveyor, during his inspection on 16^th and 17^th April, 2013 asked the Insured to remove the collapsed roof from the premises and inform him, in order to conduct inspection of machinery to verify its damages and measurements and quantification of the damages of stock. The surveyor again visited the factory premises on 15^th & 16^th, May, 2013 and found that the collapsed roofs were not removed from the premises. The insured took unreasonable time in removing the roofs from the fire affected premises. The surveyor conducted third inspection during 15^th to 17^th, July, 2014. By that time, the machineries were got repaired. The surveyor was deprived from physical verification of the damaged machineries, deliberately.

(b) The Insured deliberately concealed the identity, address etc. of the engineer, who repaired the machinery after loss. As such, the surveyor was deprived from verification of repair estimates, as produced by the Insured.

(c)     The Insured produced Bill No.413 dated 20.02.2012 of Rs.5118750/- and Bill No.414 dated 20.02.102 of Rs.4724475/-, relating to purchase of machineries from Maheswari Ribbons Gudiwada and said that these machineries were supplied through lorry Nos. NL02 K 4986 and NL02 G 4032 at that time. During inquiry, the Investigator found that Maheswari Ribbons was located at Dr. No.1/20-90, Panchvahi colony, Bypass road, Gudivada and was not a manufacturer  or sale agent of the machinery rather manufacturer of ribbons. Transportation of machineries from Maheswari Ribbons to the factory premises of the Insured was not verified from Toll Plaza. From Commercial Tax Return, only transaction of Rs.210000/- between Maheswari Ribbons and the Insured was proved.

(d) The machineries did not have name plate to identify the year of manufacture, model, capacity etc. As such, it was not proved as to whether these were new machineries or second hand. Payment of  VAT on the purchase of these machineries has not been proved.

(e)  Maheswari Ribbons transferred Rs.1450000/- on 21.12.2012 and Rs.800000/- and Rs.600000/- on 22.12.2012, in the account of the Insured with State Bank Hyderabad through RTGS. The Insured has not given any explanation of this transfer of Rs.2850000/-. On the other hand from the receipts of Maheswari Ribbons it was proved that the Insured made payment of Rs.1450000/- and Rs.1400000/- to Maheswari Ribbons, which was returned to the Insured. 

9.      The Insured has not given any explanation in the complaint to aforementioned facts and circumstance. The Insurer is justified to repudiate the claim invoking clause-8 of General Terms and Conditions of the Insurance Policy, as the above facts and circumstances proved that the claim was exaggerated and based upon fabricated papers. The repudiation letter dated 03.03.2014 does not suffer from any illegality.

ORDER

  In view of the aforesaid discussions, the complaint is dismissed.