BEFORE:

HON’BLE MR. SUBHASH CHANDRA, PRESIDING MEMBER

For the Appellant                 Mr Vishnu Mehra, Advocate

For the Respondent              NONE

ORDER

1.          This First Appeal under Section 19 of the Consumer Protection Act, 1986 (in short, ‘the Act’) challenges the order dated 10.02.2021 in Complaint Case no. 26 of 2000 of the Uttar Pradesh State Consumer Disputes Redressal Commission, Lucknow (in short, ‘the State Commission’) whereby  it partly allowed the complaint. 

2.     The delay of 22 days in filing of this appeal is condoned in view of the Suo Motu Writ Petition of the Hon’ble Supreme Court in W P No. 3 of 2020 dated 10.01.2022.

3.     We have heard the learned counsel for the parties and have carefully perused the record.

4.     The relevant facts of the case in brief are that the respondent filed a claim under the M B Policy and DOS insurance policy obtained from the appellant in respect of loss of potatoes stored in his cold storage at Baz Nagar, Kakori District, Lucknow. The claim was repudiated vide letter dated 13.02.2021 on the basis of the report of the surveyor and on the finding that there was violation of warranty terms and policy conditions on the part of the respondent. The repudiation was challenged before the State Commission which was decided on contest and the complaint allowed in part by the State Commission. This order is impugned before us.

5.     It is the case of the appellant that under the policy issued by it and valid from 15.04.1997 to 14.11.1997 the cause of risk covered was DOS insurance pertaining to stock of potatoes in gunny bags stored in the insured premises in cold storage chamber nos.1 to 4 for a total storage capacity of 40050 quintals under different insurance policies for various sums. It is stated by the appellant that the respondent intimated it on 26.09.1997 that the stock of potatoes in all the chambers of the cold storage had been damaged which was followed by another letter of the same date conveying that the Crank Shaft of Chamber no.1/Compressor was damaged on 25.09.1997 along with other minor damages to the motor. A surveyor was appointed who visited the cold storage on 28.09.1997 and found that compressor No. 695 was not damaged but had been non-functional since 13.09.1997, as per the statement of the operator J P Maurya.  According to the appellant, as noted in the Survey Report of the surveyor, Lt Col D P Jairath, dated 21.09.1998, four identical compressors with 3 electric motors of 75 HP and one 60 HP were installed in the cold storage. Each compressor had a cooling capacity of 22,000 qtls of potatoes (total 88,0000 qtls) against the total storage capacity of 49,395/- qtls in the four chambers.

6.     According to the appellant, as per the Surveyor’s Report, potatoes were not stocked in the cold storage properly with gaps between the stock of potatoes and the wall of the cold storage or with space between rows of potatoes which prevented the flow of fresh and cool air required for maintaining low temperature. It was contended that improper stocking of potatoes was in violation of Policy Condition No. 4 (b) and of Warranty Clauses nos.12 and 14 (b) and (c) which required the insured goods to be stored in the manner specified to ensure efficient distribution and circulation of air and for loading/ unloading operations and mandated that space not less than 75 cms width between two adjacent rows and for stocking to be at least 20 cms away from the walls and above the floor. It was also contended on behalf of the appellant that the log book in the machine room of the cold storage was blank after 10.09.1997 as noted by the surveyor which indicated that the compressor was not in operation after 10.09.1997 and therefore deterioration of stocks of potatoes would have commenced from that date. It was contended that non-maintenance of log book by the insured was also a violation of Warranty No.7 under the Policy. It was also contended that the respondent failed to inform the appellant regarding non-functioning of the compressor in time, either on 10.09.1997 or 11.09.1997. It was only after receiving information on 26.09.1997 that a surveyor could be appointed who visited the insured premises on 28.09.1997. This delay has not been explained by the respondent according to the appellant. The appellant contends that as per Policy Condition No.4 (a) and (b), the insured was required to give immediate notice of any accident by telephone/ telegram or letter to the appellant which was not done. According to the appellant, the respondent had failed to maintain the required temperature in the cold storage which was a violation of Warranty Nos. 6 (ii) and 4 since in the months of August and September, prevailing humid conditions were bound to have effect on the deteriorating potatoes. According to the appellant, the insured had initially stated that the compressor had broken down on 25.09.1997; subsequently, vide letter dated 18.07.1998, it was admitted that the date the compressor stopped working was 10.09.1997.

7.     It was argued that the finding of the Surveyor’s Report could not been brushed aside unless there was sufficient and genuine material findings against the surveyor which had not been brought on record by the respondent. Hence, as stated by the surveyor in his report, no liability on the part of the appellant was made out. It was contended that the State Commission had incorrectly held that merely because stocks of potatoes were found to be damaged on 28.09.1997, the respondent was entitled to claim compensation or cost of the potatoes since, under the policy, the respondent was only indemnified against loss/damage to potatoes only if such damage/ loss was due to the break-down of the machinery. This had not been established by the respondent. Hence, any loss or damage due to reasons other than break-down of machinery would not entitle the respondent to indemnification against the loss. It was argued that the State Commission had failed to appreciate that the potatoes were the property of farmers and the respondent was liable to make payment on account of damage to such stock. The respondent had also failed to bring on record the evidence of quantum of loss.

8.     It was contended that the surveyor had intimated to the respondent on 29.09.1997 to take necessary mitigating action such as installation of high speed exhaust fans on all doors, removal of some planks and AC sheets from the affected chambers to improve air circulation, arrange for off-loading of saleable potatoes after segregating them, run the compressor during day and night to ensure maximum cooling to reduce the temperature to at least 36 F, undertake repair of Compressor No.695 on priority, issue notice in the newspaper informing farmers to unload the potato stock within 7 days for disposal, arrange to remove and unload the bags touching/close to the walls and to ensure rearranging of the bags to create 90 cm lanes between the bags in both the chambers as per the policy conditions.  On 02.10.1997, no progress was noted regarding these instructions and the same instructions were reiterated including restacking and removal of sprouted potatoes/ bags from chamber no.1 and 3. It was therefore, contended that the respondent failed to take necessary steps to safeguard the stocks of potatoes.

9.     It was argued that the State Commission had erred in holding the appellant liable under the policy since it failed to appreciate that the letter of repudiation dated 13.02.2001 had clearly mentioned that the reasons for repudiation to be on the basis of the Survey Report. It was also submitted that the State Commission had erroneously worked out the quantity of potatoes and further erred in directing the appellant to pay interest @ 12% per annum which was exorbitant. The directions to pay cost towards mental agony and harassment was also stated to be perverse. It was therefore argued that the appeal be allowed.

10.   Per contra, the respondent has contended that the claim under the policy was repudiated by the appellant after 11 months and 10 days which was contrary to IRDA’s Regulation of Settlement of Claims and was, therefore, not valid. It was submitted that the crank shaft of Compressor No.1 had broken down on the night of 25.09.1997 and information regarding the same was provided by the respondent to the appellant on 26.09.1997. The Surveyor’s Report dated 21.09.1998 had not been referred to in the written statement filed by the appellant before the State Commission in 2003. The written statement was also not signed by any officer of the appellant and was also not verified. It was stated that as per Affidavit dated 11.08.2015 of one Smt Kalpana Bajpai, an employee of the appellant, liability of Rs.12,11,279/- had been admitted. It was argued that the appellant had deliberately suppressed the report of the surveyor and admitted 50% liability on part of the appellant. Appellant had also not complied with the order of this Commission directing deposit of Rs.19,00,899/- since the appellant had deposited only Rs.14,28,000/- with the State Commission. It was argued that the order of the State Commission was based on Surveyor’s Report and calculation therein and therefore, the impugned order deserved to be confirmed in its entirety.

11.   Reliance was also placed in the case of Murli Cold Storage Limited vs Oriental Insurance Co. Ltd., and Anr. II (20140 CPJ 593 (NC) which had held that an insurance claim had to be settled within 2 months. Reliance was also placed on the judgment of the Hon’ble Supreme Court in the case of Ashok Kumar vs New India Assurance Co. Ltd., 2023 NCJ 689 (SC) that a well-reasoned order cannot be altered or reversed in absence of any just ground and in the case of Vikram Green Tech Ltd. vs New India Assurance Co. Ltd., 2009 (2) CPC, that mere aid of a Surveyor’s Report cannot be made the basis for repudiation of a policy.  Reliance was also placed on the judgment of the Hon’ble Supreme Court in the case of Jaina Construction Company vs Oriental Insurance Company, 2023 INSC 659 that repudiation of the claim could not be done merely on the ground that there was delay in intimating the insurance company. It was further contended that the appellant had admitted the loss sustained by the respondent and the issue was that of quantum of compensation which had been delayed on account of litigation. It was therefore, urged that the impugned order of the State Commission be confirmed with cost.

12.   The impugned order has held as under:

        11.     There were 4 compressors in cold storage. Only one was damaged, the remaining three were sufficient to cool down the entire cold storage as required, but the errors mentioned above by the complainant itself have been done at their level. Therefore, the insurance company is responsible for the loss of 10 percent of the potatoes placed in chamber numbers 1 and 3. As 90% of the potatoes could be safely extracted, but the efforts required by the farmers to extract the potatoes have not been made by the complainant himself. It was not enough to paste the notice at the gate of the cold storage.

12.     The potatoes of the remaining 2 chambers, i.e., chamber numbers 2 and 4 was completely spoiled. This had happened before the survey. Therefore, despite complying with the instructions given by the surveyor, the complainant is authorized to receive the cost of all the potatoes as compensation in the case of damage to the potatoes kept in these two chambers.

13.   It has further held that compensation of Rs.3,25,000/- sought for damage to the wood of the bamboo cannot be determined and therefore, has not been adjudicated. It also held that the claim of Rs.45,000/- for loss/ damage, electrical fittings cannot be considered as the details of the same have not been provided. The claim of labour expenses of Rs.85,000/- have also been disallowed on the ground of non-submission of the details of expenses incurred. However, the expenditure on wages has been estimated to be Rs.20,000/- which has been ordered. The State Commission’s order reads as under:

17.     ………………..the insurance company will pay the losses of deteriorated potatoes kept in the cold storage of the complainant at the rate of Rs.80% per quintal of 10 percent of the cost of the potato kept in chamber numbers 1 and 3 and all the loss of potato kept in chamber numbers 2 and 4 will be paid at the rate of Rs.80/- per quintal. The weight of potato will be that which is kept in each chamber in the insurance claim as described in the claim submitted to the insurance company. (Up to a limit of 10 percent in chamber numbers 1 and 3);

18.     Rs.20,000/- will be paid as wage expense in removing the spoiled potato from the godown;

19.     On paying the above amount within 03 months from the date of submission of the complaint, simple interest will be payable at 06 percent per annum. After this period, 12% PA and compound interest will be payable upon payment;

          20.     Rs.5000/- will be payable for the complainant expenses; and

          21.     An amount of Rs.25,000/- will be payable in the case of mental anguish and harassment.

14.   From the material on record it is evident that the cold storage of the respondent had been stocked with potatoes which had been obtained from the farmers in four chambers that were cooled by compressor in the cold storage. It is apparent from the record that there was a report by the respondent dated 26.09.1997 that the compressor of the cold storage no.1 had broken down and that the potatoes stocked in the gunny bags were deteriorating due to developing sprouts.  Appellant’s repudiation of the claim was on the basis of the report obtained by it through a surveyor appointed by it and rested essentially on the grounds of violation of Warranty and Policy Conditions. The letter of repudiation dated 13.02.2021 reads as under:

You had taken a DOS policy for the above mentioned period. You had lodged a claim under DOS policy. It was surveyed by Col Jairath who submitted his report and finding as:

1. No machinery breakdown claim was reported prior to 26.09.1997, i.e., date of loss of DOS claim;
2. It was found by surveyor that air circulation loss were not available inside chamber 1 & 3 and no clear space was left between potato bags and walls and bags were stacked along walls. Further there was no space left between adjacent row resulting into blockage of air. Hence, there was violation of warranty 4 (b) and 4 (c ) by you. This was pointed out to you by the surveyor vide his letter dated 28.09.1997 and 04.10.1997 but you did not take any remedial measure;
3. On analyzing the temp. chart it has been observed that before commencement of loading, temperature of chambers was not brought down to 34 F. This is violation of warranty no. 6 (1) and during the period temperature rose to 50 F which is violation of warranty no. 6 (11);
4. During this period even when there was no machinery breakdown temperature did not remain within 40 F. Hence, violation of warranty 6 (11);
5. During period 01.08.1997 to 09.08.1997 temperature rose above 40 F in all chambers. You did not take notice of such abnormal state of affair and did not inform us of the same. Thus violation of warranty 4 & 6 (11) of the policy. This long stretch of high temperature and humid condition adversely affected the state of potato this 40 days period has resulted in heavy sprouting accompanied by putrefaction. During this period there were 10 incidents of power failure for more than 8 houses this two contributed to loss;
6. You failed to maintain temperature records during period 10.09.1997 to 29.09.1997 inside the chamber;
7. Though there was damage to compressor no.1 on 10.09.1997 the intimation for this was given to our office only on 26.09.1997. Hence, you violated condition no.4 (a) of the policy which resulted into heavy loss. It has been further noticed that though there was breakdown of compressor no.1 you still had 3 nos., compressor whose total capacity was more than requisite capacity required for cooling of the total stock. Hence, you did not use machinery/ compressor properly to ensure requisite temperature;
8. Your non-intimation of loss in time has prevented us from taking suitable loss control pressure;
9. Surveyor in his letter has clearly stated that potato in chamber 2 and 4 were completely deteriorated and in chamber 1 and 3 were of satisfactory condition on had you taken proper steps in time this loss could have been saved and damage to stock 2 and 4 was not due to machinery breakdown dated 10.09.1997. Further you had reported a loss after 16 days. This is negligence on your part and violation of condition 4 (9), 4 (b) and 8 and warranty nos. 4, 6 (11), 7 and 12.

Thus competent authority on the basis of surveyor report is of opinion that there was gross violation of various condition and warranties by you. Further there is no evidence that rose in temperature is due to machinery breakdown which is pre-condition for the admission of liability. Hence, your claim has been repudiated.      

15.   From the letter of repudiation it is apparent that there was violation of Warranty Clause 4 (B) and 4 (C), 6 (11) and policy condition no. 4, 9, 4 (b) and 8. It is also seen from the record that even after the report of the incident, the respondent failed to take necessary steps to stock the potatoes properly as prescribed under the policy in the cold storage or to dispose of unaffected potatoes as also to intimate the farmers to remove their stocks. It is also evident that the respondent admitted that the compressor in question had been stopped working from 10.09.1997 which was much prior to the report of the alleged breakdown of the crank shaft on 25.09.1997. The respondent had also not disputed/ countered the contention of the appellant that its own operators had stated that the compressor had stopped working and that one of its employees abandoned the cold storage due to fear of wrath of the farmers.

16.   The appellant has contended that under the policy, loss indemnified pertained to loss on account of breakdown of the machinery. The admission of the respondent that the crank shaft which was stated to have suffered damage on 25.09.1997 had not been established. On the contrary it has been admitted that the compressor had been shut down on 10.09.1997 or 13.09.1997.

17.   The repudiation of the claim is admittedly based on the basis of the report of the surveyor appointed by the appellant/ insurance company. In terms of the law laid down by the Hon’ble Supreme Court in Sri Venkateswara Syndicate Vs. Oriental Insurance Company Ltd. & Anr., in CA No. 4487 of 2004 that on any claim in excess of Rs.20,000/- under Section 64 UM of the Insurance Act, 1938 is to be surveyed and reported by an authorised surveyor. While the report of the surveyor is a mandatory requirement under the law, it has also been held by the Hon’ble Supreme Court in New India Assurance Co. Ltd. Vs. Pradeep Kumar, (2009) 7 SCC 787, as under:

15.     ………………although the assessment of loss by the approved surveyor is a pre-requisite for payment or settlement of claim of twenty thousand rupees or more by insurer, but surveyor's report is not the last and final word. It is not that sacrosanct that it cannot be departed from; it is not conclusive. The approved surveyor's report may be basis or foundation for settlement of a claim by the insurer in respect of the loss suffered by the insured but surely such report is neither binding upon the insurer nor insured.

18.    In the instant case, the respondent has failed to establish that the Surveyor’s Report which is detailed in pointing out the violations of Warranty and Policy Conditions to be arbitrary or perverse. There is therefore, no ground made out by the respondent to establish that the Surveyor’s Report and consequently the letter of repudiation deserves to be set aside.

19.   The State Commission has clearly fallen in error in not appreciating the above position. The impugned order therefore warrants interference and is accordingly set aside. Parties shall bear their own cost.

20.   All pending IAs, if any stand disposed of by this order.