JUSTICE V.K. JAIN, PRESIDING MEMBER (ORAL)

1.      The complainant, Crescent Chemical, is a partnership firm which has divided its business into several divisions, one of them being titled as Smart Sign. The complainant-company obtained a standard fire & special perils policy bearing No.020500/11/02/00941 in the name of Smart Sign, for a sum of Rs.1,00,00,000/-, for the period from 13-11-2002 to 12-11-2003. The policy covered the stock of the insured in Godown No.6, Survey No.172, Hissa 25, Near Dal Mill Compound, Purna Village, Bhiwandi, Thane without specifying the nature of the stock which was covered under the policy. The petitioner obtained yet another policy in the name of Smart Sign (a Division of Crescent Chemical) in the sum of Rs.1,00,00,000/- for the period from 14-01-2003 to  12-07-2003. The said policy insured only Self-Adhesives PVC Vinyls Film & Flex Sheeting in the same godown, to the extent of Rs.1,00,00,000/-.

2.      On 08-03-2003, a fire broke out in the godown of one M/s. Pravin Ware Housing Company situated near the godown of the complainant-firm. The fire spread fast and engulfed the godown of the complainant-company at Godown No.6, Survey No.172, Hissa 25, Near Dal Mill Compound, Purna Village, Bhiwandi, Thane in which the stock of the petitioner firm comprising Polycarbonate Resin, PVC Self Adhesive Vinyls & Flex Sheeting and Polycarbonate Plastic Sheets stored. The complainant-firm initially submitted a consolidated claim for Rs.2,24,24,114/-. A surveyor namely, P.C. Gandhi & Associates was appointed by the opposite party- insurance company to assess the damage claimed by the complainant. Vide two letters, both dated 07-04-2003, the surveyor required Smart Sign (Division of Crescent Chemical) to submit separate claims in respect of policy No.0941 and 1221. Accordingly, the petitioner submitted the claim of Rs.1,14,85,745/- against policy No.0941 and claim of Rs.1,09,38,369.23/- against policy No.1221.

3.      Vide final survey report dated 12-02-2004 in respect of policy No.0941, the assessor while assessing the net loss at Rs.1,14,42,674/- assessed the net adjusted loss at Rs.98,90,000/-. Vide report dated        17-02-2004 in respect of policy No.1221, the surveyor assessed the net adjusted loss at Rs.81,52,455/-. This comprised the loss of Rs.53,52,668/- for PVC Self Adhesive Vinyls Flex Sheeting and Rs.27,69,178/- for Polycarbonate Plastic Sheets. The net adjusted loss was arrived at after deducting debris removal charges amounting to Rs.40,609/- and policy excess amounting to Rs.10,000/-. While computing the net adjusted loss, the surveyor declined to take into consideration goods worth Rs.20,54,383/- on the ground that the aforesaid goods had already been sold by the insured, though the delivery had not been taken by the purchaser. In the combined final survey report dated 17-02-2004, the net payable loss was assessed at Rs.1,39,81,531/- which comprised Rs.98,90,000/- against policy No.0941 and Rs.40,91,531/- against policy No.1221. Vide addendum dated 12-04-2004, the surveyor P.C. Gandhi & Associates computed the assessed loss to be Rs.81,42,455/-. The assessment made by him in the addendum was Rs.54,62,275/- in respect of policy No.0941 and Rs.26,80,180/- in respect of policy No.1221, thereby making the total sum  of Rs.81,42,455/-. In the addendum dated              12-04-2004, the surveyor, accepted the claim against policy No.0941 in respect of PVC Self Adhesive Vinyls and Flex Sheetings to the extent of Rs.26,76,334/- and in respect of Polycarbonate Plastic Sheets to the extent of Rs.27,69,178/-. Under the policy No.1221, he accepted claim for PVC Self Adhesive Vinyl and Flex Sheetings to the extent of Rs.26,76,334/-. Thus, the stock of PVC Vinyl Film and Flex Sheeting was divided equally by him in policy No.0941 and 1221 whereas the stock of Polycarbonate Plastic Sheets was taken against policy No.0941. No claim in respect of Polycarbonate Resin was, however, accepted by the surveyor in the addendum dated 12-04-2004.

4.      The insurance company also appointed a second surveyor namely Mulchand M. Nagda & Co. who submitted a report dated 07-07-2005 after considering the reports submitted by the previous surveyor and they were of the view that Smart Sign had insurable interest only in Vinyl Flex Sheeting and Polycarbonate Sheets whereas Crescent Chemical had insurable interest in Polycarbonate Resin. They also reported that as far as Vinyl Flex sheeting was concerned initially the material was purchased by Crescent Chemical and then transferred to Smart Sign. Subsequently, the material was directly purchased in the name of Crescent Chemical A/c Smart Sign. As regards Polycarbonate Sheets they reported that the material was purchased by Smart Sign. As regards PVC Resin they reported that the material was purchased by Crescent Chemical and the stock was transferred just two days prior from the incident for which the explanation given by them was not convincing. It appears to the second surveyor that the transfer had been done with the motive of gaining undue benefit from the insurer.

5.      It is an admitted case that both the policies were taken in respect of the material lying in Godown No.6, Hissa No.25, Near Dal Mill Godown, Purna Village, Bhiwandi, Thane. It is also not in dispute that Smart Sign was a division of Crescent Chemical at the time the insurance policies were taken. This is not the case of the insurance company that Smart Sign was an independent legal entity or was owned by some other entity at the time the first policy bearing No.0941 was taken. As far as the second policy is concerned, it was clearly stated in the policy itself that Smart Sign was a division of Crescent Chemical.

6.      In our view, since Smart Sign was not by itself an independent legal entity, it not being a company, a partnership firm, a society or a body corporate, the policy No.0941 taken in the name of the Smart Sign shall be deemed to have been taken by its owner Crescent Chemical, which was a partnership firm. In our opinion it makes no difference whether in the insurance policy the name of the insured was recorded as Smart Sign or Smart Sign, a Division of Crescent Chemical, or even Crescent Chemical. So long it is not in dispute that Smart Sign was not an independent legal entity and was a division of Crescent Chemical, the insured and the beneficiary of the insurance policy would be Crescent Chemical alone.

7.      The learned counsel for the opposite party submits that if the insurance policy was taken by an entity which was not a legal entity, the contract of insurance itself would be void. We, however, cannot accept the contention, since in our opinion, the policy shall be deemed to have been taken by Crescent Chemical, which was a partnership firm, Smart Sign being only one of its divisions. It appears that for the purpose of facilitating its business, the Crescent Chemical had divided its business into several divisions and Smart Sign was one such division. In fact, the complainant has placed on record sufficient material which would show that Smart Sign was only a division of Crescent Chemical and was not an independent legal entity in itself. Therefore, in our opinion the claim could not have been rejected on the ground that the policy had been taken in the name of Smart Sign whereas the ownership of some of the goods which got destroyed in the fire vested in Crescent Chemical.

8.      The complainant has placed on record a supplementary partnership agreement dated 05-09-2002, among the partners of Crescent Chemical, whereby they agreed to have a division in the name of Smart Sign of the existing firm, M/s. Crescent Chemical to carry on business as a separate division of Crescent Chemical the existing partnership firm. Paras 1, 3 and 4 of the aforesaid deed read as under:

          “1.     The parties hereto have agreed to open a new division by name “Smart Signs” to carry on business of dealer, re-seller, importer in plastic and plastic products as a separate division of existing partnership firm “M/s. Crescent Chemicals” with effect from 5^th day of September, 2002.

3.      All the trading, business, financial transactions of the said separate division by the name “Smart Signs” will be in effect part and parcel of trading, business, financial transactions of existing partnership firms “M/s. Crescent Chemicals”.

4.      Profit or loss, as the case may be, of the said division will be part and parcel of overall profit or loss of existing partnership firm “M/s. Crescent Chemicals”.”

          The commercial invoice Exhibit C-5 at page 38 along with packing list on page 39 of the affidavit filed by the complainant by way of evidence would also show that Crescent Chemical had a division under the name Smart Sign even on 30-12-2002. The Sales Tax Return for the month of November, 2002 available on page 119 of the affidavit filed by the complainant indicates sales of seven divisions of Crescent Chemical, one of them being Smart Sign. Same is the position in the Sales Tax Return for the month of December, 2002 available on page 123 of the affidavit, Sales Tax Return for the month of January, 2003 available on page 127 of the affidavit and Sales Tax Return for February 2003 available on page 131 of the affidavit. Moreover, there is no evidence produced by the insurance company to prove that Smart Sign was not owned by Crescent Chemical. This is not their case that Smart Sign was owned by person(s) other than the owners of Crescent Chemical. As noted earlier, the surveyor accepted the case of the complainant that Smart Sign was in fact a division of Crescent Chemical. As noted earlier by us, in the second policy obtained in the name of Smart Sign, it was clearly stated that it was a division of Crescent Chemical. In these circumstances, there can be no reasonable dispute that Smart Sign was not an independent legal entity but was only one of the divisions of the Crescent Chemical.

9.      The next question which arises for our consideration is as to what goods were covered under policy No.1221. The learned counsel for the complainant contends that in fact there is a typographical error while describing the property in the insurance policy, as a comma has been inadvertently omitted after the word Flex meaning thereby that the insured products were PVC Vinyl Films Flex and Sheetings irrespective of the material on which the sheets are made. However, in our view, the contention has no merit. A careful perusal of the property given in the policy would show that ‘&’ has been used between Vinyls Film and Flex Sheeting. Had Flex and Sheeting been separate products for the purpose of insurance, a comma would have come after Vinyl Films and ‘&’ would have come after the word Flex. Even otherwise, it would make no sense to obtain insurance for Sheeting without describing the product on which the sheet is made when the insured is describing the other products by qualifying the PVC as Self Adhesive PVC and the Films as Vinyl Films. Therefore, in our view, what was insured under policy No.1221 was only Self-adhesive PVC Vinyl Films and Flex Sheeting.

10.    A perusal of the claim submitted by the complainant in respect of the policy No.1221 would show that as per the stand taken by the insured, Polycarbonate Sheets and PVC Self Adhesive Vinyl Flex were covered by the said policy. However, since we are of the view that only PVC Self Adhesive Vinyl Film & Flex Sheeting were covered by the aforesaid policy, no claim in respect of Polycarbonate Plastic Sheets is admissible against policy No.1221. It was found by the surveyor that the loss on account of fire in respect of PVC Self Adhesive Vinyl film was to the extent of Rs.74,80,175/-. However, he disallowed the claims to the extent of Rs.20,54,383/- on the ground that the material to the aforesaid extent had been sold, though the buyer had not lifted the stock from the premises of the insured.

11.    Sections 19 & 20 of the Sales of Goods Act read as under:

12.    The case of the complainant is that the PVC Self Adhesive Vinyl Films worth Rs.20,54,383/- were sold by it to a buyer which had not lifted the goods from Godown No.6, Survey No.172, Hissa 25, Near Dal Mill Compound, Purna Village, Bhiwandi, Thane,  where they got destroyed in the fire. Since there is no material on record to show that the goods were not in a deliverable state and the complainant was bound to do something to the goods for the purpose of putting them into a deliverable state at the time they caught fire, the property in the said goods, in view of the provisions contained in Section 20 of the Sale of Goods Act passed to the buyer, as soon as a contract for their sale was made. Mr. Sharma states that since the claim has been rejected by the insurance company on the ground that the goods had been sold to M/s. Shah Polymers the onus was on them to prove that they were in a deliverable state within the meaning of Sections 19 & 20 of the Sale of Goods Act. We, however, cannot accept the contention. Section 106 of the Evidence Act to the extent it is relevant provides that when any fact is especially within the knowledge of any person, the onus to prove that fact is upon him. Since the contract for sale of PVC Self Adhesive Vinyl Films was between the complainant and          M/s. Shah Polymers, the insurance company being a stranger to the said contract, it is only the complainant which would know of anything, if any, which was still required to be done to put the goods into deliverable state, on the date they caught fire. No material has been placed by the complainant before us which would show that it was required to do something to the goods in order to put them in a deliverable state, at the time they caught fire. Therefore, we are clearly of the view that the property/title in the aforesaid goods had passed to M/s. Shah Polymers and, therefore, the complainant did not have an insurable interest in those goods on the date they were destroyed in fire. We are in full agreement with the view taken by the surveyor and the insurance company in this regard.

14.    However, we see no justification for the surveyor dividing the stock of PVC Self Adhesive Vinyl into two parts, taking half of those goods under the first policy and remaining half of the goods under the second policy. We cannot lose sight of the fact that in the second policy bearing No.1221, only PVC Self Adhesive Vinyl and Flex Sheeting were covered whereas the first policy bearing No.0941 pertained to stock in general lying in the godown without specifying the nature of that stock. Therefore, it would be extremely unfair to the insurer to divide the stock of PVC Self Adhesive Vinyl which was specifically insured under the second policy into two parts, and thereby deny benefit of insurance in respect of half of those goods to it. We, therefore, hold that as far as second policy is concerned the claimant was entitled to a sum of Rs.53,52,668/-. The claimant is also entitled to Rs.13,846/- for debris removal charges. However, a sum of Rs.10,000/- is to be deducted towards policy excess. Thus, the amount payable to the claimant under the second policy comes to Rs.53,56,514/-.

14.    Coming to the policy No.0941, since the goods covered under the said policy did not specify the nature of the insured goods, the entire stock which was available in Godown No.6, Survey No.172, Hissa 25, Near Dal Mill Compound, Purna Village, Bhiwandi, Thane other than PVC Vinyl Films and Flex Sheeting would be covered under the said policy. As would be seen from the claims filed by the complainant the total value of the goods in the aforesaid godown was Rs.2,23,81,043/-. After deducting Rs.74,80,175/- that being the value of the PVC Self Adhesive Vinyl Films, the value of the remaining goods comes to Rs.1,49,00,868/-. However, since the stock had been got insured only for Rs.1,00,00,000/- there was under insurance to the extent indicated above. Therefore, in our view the amount payable to the complainant before addition of charges for debris removal and deduction of policy excess has to be arrived at by making appropriate deduction from the insured amount of Rs.1,00,00,000/-. The amount payable to the complainant under the first policy would therefore come to Rs.67,11,000/-. After adding Rs.26,763/- for debris removal charges and deducting policy excess of Rs.10,000/- the amount payable to the complainant in respect of first policy comes to Rs.67,27,763/-. Thus, the total amount payable to the claimant in respect of both the policies comes to Rs.1,20,84,277/-.

The learned counsel for the petitioner submits that the deduction on account of under valuation is to be made only in a case where there is a partial loss and no such deduction is made in a case of total loss. He also submits that even the surveyor did not make any deduction on account of under insurance despite having noted the same because he found it to be a case of total loss. However, we cannot accept the contention. Our attention has not been drawn to any rule or regulation whereby the principle of under valuation would apply only to a case of total loss and not to a case of partial loss. The learned counsel for the complainant submits that information in this regard is available on the internet. However, we cannot take such information into consideration particularly when it is not coming from the website of the insurance company or from the website of IRDA.

15.    Coming to the issue of interest, the Regulation 9 of the IRDA (Protection of Policyholders’ Interests) Regulations, 2002 reads as under:

“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.”

16.    In the present case, the loss took place on 08-03-2003. Therefore, the surveyor ought to have given his report by 08-09-2003. If the insurance company found any deficiency in the report, it has to seek supplementary report/clarification within 15 days of the receipt of the report of the surveyor. Thereafter, the surveyor was required to submit his report within three weeks of the receipt of the communication from the insurer. The insurance company was required to offer a settlement to the insured within 30 days thereafter. The payment was to be made within seven days from the date of acceptance of the offer. However, in the case before us no settlement was offered by the insurance company to the complainant. Considering the schedule laid down in Regulation 9 we are of the view that interest should be paid by the insurance company to the insured/complainant at the rate of 12% per annum with effect from 01-10-2003.

The learned counsel for the complainant submits that a sum of Rs.81,62,455/- was deposited along with interest. In terms of        Regulation 9(6) extracted hereinbefore, interest is payable by the insurance company at 2% above the bank rate. We, therefore, direct that besides the principal amount of Rs.39,21,822/- arrived at by deducting Rs.81,62,455/- from the awarded amount of Rs.1,20,84,277/-, the insurance company shall also pay interest on the aforesaid amount of Rs.39,21,822/- at the rate of 12% per annum with effect from 01-10-2003 till the date of payment.

The complaint stands disposed of accordingly.