1.      Heard Mr. Ravi Gupta, Sr. Advocate, assisted by Mr. Nishant Datta, Advocate, for the complainant, Ms. Sonia Malhotra Kumar, Advocate, for opposite party-1 and Mr. Rajesh Kr Gautam, Advocate, for opposite party-2.

2.      Sree Devi Cold Storage (the Insured) has filed above complaint, for directing United India Insurance Company Limited (the Insurer) to pay (i) Rs.50605250/- with interest @18% per annum from 14.01.2014 till the date of payment, as the insurance claim; (ii) Rs.10/- lacs, as compensation for mental agony and harassment; (iii) award litigation costs; and (iv) any other relief which is deemed fit and proper in the facts and circumstance of the case.

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

(a)     Sree Devi Cold Storage (the Insured) was a partnership firm, registered under Indian Partnership Act, 1932 and running a cold storage since 2007 at Plot No.108/191, 2^nd Stage, Mundrigi Industrial Area, Bangalore Road, Bellari City, in which, the farmers used to store agricultural and olericultural produce on rent. The Insured availed ‘Term Loan’ from Canara Bank, for construction of the building and purchasing plant and machinery of the cold storage.

(b)     United India Insurance Company Limited (opposite party-1) (the insurer) was a public insurance company and engaged in the business of providing insurance services to general public. The Insured obtained (i) Standard Fire and Special Perils Policy No. 241100/11/12/11/00001384 for the period of 23.03.2013 to 22.03.2014, for a sum insured of Rs.30/- crores, on Stock of Guntur chillies/Byadigi chillies, Other variety chillies, Jawar seeds, Bengal gram, red gram, tamarind, coriander seeds & other pulses; and (ii) Standard Fire and Special Perils Policy No. 241100/11/12/11/00001385, for the period of 23.03.2013 to 22.03.2014, for sum insured of Rs.435/- lacs, for cold storage building, Rs.40/- lacs for plant & machinery, Rs.7.5 lacs for 125 KV Generator, Rs.50000/- for 7.5 KV Lighting Generator, Rs.7/- lacs for Lift, Rs.10/- lacs for Furniture, Fixtures, Fitting, Panel Board, from the Insurer.

(c)     On 14.01.2014 around 00:45 hours, Mahadeva, the security guard of M/s. Jaya Saketh Chemical, a factory adjoining to the cold storage, noticed flames coming from cold storage building. He immediately informed Mr. G. Diwakara, the plant manager and Mr. V. Samba Reddy, the owner of M/s. Jaya Saketh Chemical, about the fire, who informed Mr. B. Thimmareddy on telephone and also informed Fire Service Station, from where fire tenders were sent on the spot, which could douse the fire till 13:00 hours on 14.01.2014 but smouldering remained for several days. The local police also came to the spot around 1:50 hours on 14.01.2014. On the complaint of the Insured, the incident was registered in General Diary vide entry No.1/2014 at Rural Police Station, Bellary at 23:30 hours on 14.01.2014. The police investigated the incident, recorded Panchnama and statement of the witnesses. The police obtained reports of Fire Service Station, Deputy Electrical Inspector, Bellary and Forensic Examination Reports of the burnt samples from Government laboratory. From the evidence collected during investigation, the police was satisfied that the fire had occurred due to electrical short circuit in the cold storage and submitted final report dated 19.09.2014, which was accepted by the concerned Magistrate.

(d)     The Insured informed the Insurer about fire incident and consequent loss on 14.01.2014. The Insurer appointed Rank Surveyor Pvt. Ltd., Chennai as the surveyor on 16.01.2014. The surveyor inspected the premises on 17.01.2014, 18.01.2014, 22.01.2014 and 23.01.2014, took photographs, prepared inventory, recorded statements of the witnesses. The surveyor did physical verification of burnt/damaged stock, plant & machinery and building. The surveyor demanded various documents in proof of the incident and for assessing the loss. The Insured supplied some documents to the Divisional Office of the Insurer along with information, some available documents were supplied during inspection to the surveyor. The accountant of the Insured was out of station, as such, remaining required documents were supplied to the surveyor on 10.02.2014.

(e)     The Insurer appointed Truth Labs, Hyderabad on 20.01.2014, as an Investigator, to investigate of the cause of fire. The expert of Truth Labs inspected the cold storage on 28.02.2014, collected samples of the burnt materials, photographs and recorded statements of the witnesses. Truth Labs, after obtaining forensic examination report of the burnt samples, submitted its report dated 01.08.2014, mentioning that the cause of fire was on account of extraneous ignitable fire accelerants such as kerosene, used deliberately for ignition, initiation, propagation and burning of stocks in the cold storage through human intervention. The surveyor demanded claim form, which was submitted by the Insured on 17.09.2014, claiming Rs.274938940/- towards stock, Rs.44000000/- towards building and electrification, Rs.6260250/- towards plant and machinery, Rs.345000/- towards fire extinguisher.

(f)      The surveyor asked for Structural Stability Report, which was submitted on 09.10.2014. The surveyor asked for Inward-Outward Register, maintained on daily basis. The Insured, vide letter dated 23.02.2015, informed that Inward-Outward Register was not maintained during financial year 2013-2014. The Insured used to maintain ‘Stock Ledger’ of individual party, in which, every entry of inward-outward used to be made on day to day basis, which may be corroborated with rental receipt book. The surveyor again asked for Structural Stability Report, from a government institute, which was submitted on 05.05.2015, from Indian Institute of Technology Madras, Chennai. The surveyor submitted Final Survey Report dated 24.07.2015, assessing Net Loss of Rs.24409451/- to stock, Rs.18818341/- to building & FFF and Rs.2030096/- to plant & machinery. However, he observed that cause fire was wilful destruction/arson committed by the Insured. The Insurer vide letter dated 16.09.2015, repudiated the claim, on the ground of violation of Clauses-3 and 8 of the General Condition.

(g)     The Insured gave legal notice dated 05.12.2015, for settlement of the claim for the amount as claimed. In spite of service of notice, the Insurer did not respond. Then this complaint was filed on 11.08.2016, alleging deficiency in service, confining the claim in respect of loss of Rs.50605250/-, under policy No.241100/11/12/11/00001385, for building, plant, machinery, generators, accessories, furniture, fixtures and fittings as the farmers have already filed CC/508/2015 to CC/597/2015, before State Consumer Commission and CC/289/2015 to CC/309/2015, before District Consumer Forum, Bellary for the stock. The Insured submitted that there was no reason to doubt upon the reports of District Fire Officer, Bellary dated 31.01.2014, Electrical Inspector, Bellary dated 26.02.2014, Director, Forensic Science Lab, Madiwala, Bangalore of the burnt samples and Police Investigation Report dated 19.09.2014, in which, it has been found that fire took place due to electrical short circuit.

4.      The opposite party-1 filed its written reply on 15.02.2017, in which, material facts have not been disputed. It has been stated that as soon as information of fire incident in the cold storage of the Insured was received, the Insurer appointed Rank Surveyor Pvt. Ltd. Chennai as the surveyor on 16.01.2014. In order to ascertain cause of fire, the Insurer appointed Truth Labs, Hyderabad on 20.01.2014, as an Investigator, to investigate into the cause of fire. The expert of Truth Labs inspected the cold storage on 28.02.2014, collected samples of the burnt materials, photographs and recorded statements of the witnesses. Truth Labs, after obtaining forensic examination report of the burnt samples, submitted its report dated 01.08.2014, mentioning that the cause of fire was on account of extraneous ignitable fire accelerants such as kerosene, used deliberately for ignition, initiation, propagation and burning of stocks in the cold storage through human intervention. The surveyor, in Final Survey Report dated 24.07.2015, concurred with the report of Truth Labs, in respect of cause of fire and reported that the cause fire was wilful destruction/arson committed by the Insured. The surveyor further observed that the Insured has not taken any step to save the stock stored in western side of the cold storage and minimise the loss. Two accountants, the operator and Mr. A. Bogesh, the partner, who were involved in day to day operation of stock storage avoided to appear before the surveyor during inspection on 17.01.2014 and 18.01.2014. It has been denied that the surveyor had no expertise. Structural Stability Report dated 05.05.2015, of Indian Institute of Technology Madras, Chennai was not satisfactory. The claim was highly exaggerated and fraudulent. As such the claim was repudiated, on the ground of violation of Clauses-3 and 8 of the General Conditions. There was no deficiency in service on the part of the Insurer.

5.      The Insured filed Rejoinder Reply on 18.01.2018, in which, the facts stated in the complaint were re-iterated. The Insured filed Affidavit of Evidence of B. Thimma Reddy and various documentary evidence. Canara Bank filed Affidavit of Evidence of S. Vengada Chalapathi, Manager. The Insured filed additional documentary evidence through IA/1199/2018. The complainant and opposite party-2 filed their written synopsis.

6.      We have considered the arguments of the counsel for the parties and examined the record. As stated in the complaint, the farmers filed CC/508/2015 to CC/597/2015, before State Consumer Commission and CC/289/2015 to CC/309/2015, before District Consumer Forum, Bellary. These complaints have been finally allowed by Supreme Court by a common judgment reported as Canara Bank Vs. United Insurance Company Limited, (2020) 3 SCC 455. Supreme Court discarded the report of Truth Labs dated 01.08.2014 and the report of the surveyor dated 24.07.2015, concurring with Truth Labs, in respect of cause of fire and reported that the cause fire was wilful destruction/arson committed by the Insured and relied upon the report of Director, Forensic Science Lab, Madiwala, Bangalore and held that cause of fire was electric short circuit. Supreme Court has also relied upon cold storage receipts in respect of stock and individual ledge. Thus two grounds that cause of fire wilful destruction/arson and stock was exaggerated as taken by opposite party-1 for repudiation of the claim, have been annulled by Supreme Court.    

7.      The claim in the present complaint is confined to Standard Fire and Special Perils Policy No.241100/11/12/11/00001385, under which sum insured of Rs.435/- lacs, for cold storage building, Rs.40/- lacs for plant and machinery, Rs.7.5 lacs for 125 KV Generator, Rs.50000/- for 7.5 KV Lighting Generator, Rs.7/- lacs for Lift, Rs.10/- lacs for Furniture, Fixtures, Fitting, Panel Board. The Insured claimed Rs.44000000/- towards building and electrification, Rs.6260250/- towards plant and machinery, Rs.345000/- towards fire extinguisher.

8.      The surveyor has assessed the loss relating to building, fixture, furniture and fittings and plant & machinery, as follows:-

“II Building & FFF

NET ASSESSED LOSS- Building & FFF

The working for Net Assessed Loss of Building & FFF, are tabulated below.  A pertinent aspect to be highlighted here is that based on the report of IIT, the quality of construction has been identified to be of inferior.  The depreciation has been levied duly considering this factor.

The claim bill for building has been supported by the detailed estimate from Er. C.B. Srinivasa Reddy, Consulting Civil Engineer (Doc Ref: BPM 1- BPM 11). With regard to debris removal expenses, the Insured has claimed Rs.35 lakhs separately as per the abstract of estimate (Doc Ref: BPM 1) and Rs.17.50 lakhs (Doc Ref: BPM 20) towards crap value of building materials. Details of assessment are discussed in Annexures B-1 to B-3.

III P & M

NET ASSESSED LOSS – P & M

The Insured has furnished estimate of loss from M/s. Reshma Engineering Consultants, Secunderabad (Doc Ref: BPM 12- BPM 19) The working for Net Assessed Loss of P & M has been discussed under Annexure P-1 and the gist is tabulated below:

9.      So far as observation that the report of IIT, the quality of construction has been identified to be of inferior, is concerned, Summary has been mentioned in paragraph-7 of the which, it has been stated that ultrasonic pulse velocity in ground floor inner columns (other than peripheral columns) indicates the concrete quality is doubtful. This could be due to either induced micro cracks in concrete exposed to higher temperature or could be due to poor quality of construction. It is admitted to the surveyor that smouldering continued for several days thus micro cracks in concrete exposed to higher temperature is more probable reason and no depreciation can be done on this ground. 

10.    Main objection in respect of assessment of loss for depreciation deducted by the surveyor. The counsel for the complainant relied upon the judgment of Supreme Court in Sumit Kumar Saha Vs. Reliance General Insurance Company Limited, (2019), 16 SCC 370 in which the Supreme Court held as follows:-

“16. The relevant stipulation in the present case, namely Clause (b) of Provision -Basis of Indemnity speaks of calculation of actual value by deducting "proper depreciation”. The Surveyor of the Insurance Company has worked the figure of depreciation by starting with the figure of Rs.51 lakhs as the cost of a new Excavator and then deducting 32.5% by way of depreciation assuming the life of Excavator to be 10 years. In his assessment, therefore, the stipulation of the figure of Rs.46,56,600/- on the day the contract was entered into, had no significance. Was he right and justified and how could he assume the life of the Excavator to be 10 years? If that was the understanding between the parties, the figure of sum insured could have been different. If the surveyor was calculating the depreciation from the day when the policy was entered into till the date when the accident occurred, such exercise could certainly be justified. But the exercise undertaken was in the nature of not only considering the depreciation post the policy but even including the period prior thereto. That exercise was already undertaken by the parties and in their assessment the real value of the Excavator as on the day when the policy was taken out was Rs.46,56,600/-. In the face of such agreement and understanding, the surveyor could not have calculated depreciation for a period prior to the date of policy or contract. The purport of aforesaid Clause was to arrive at proper valuation as on the day when there was total destruction. He could have undertaken the exercise post the date of policy to assess the real value of the insured property as on the date when the fire actually took place. And for such purposes, the assessment must start with the amount described as "sum insured" on the day when the contract was entered into. It was not open to the Surveyor or to the Insurance Company to disregard the figure stipulated as 'sum insured'. The loss had to be assessed in the present case, keeping said figure in mind.”

11.    Supreme Court has clearly held that depreciation can only be considered after the date of taking insurance policies. In the present case, the insurance policy was taken on 23.03.2013 while incident occurred on 14.01.2014. Thus, the only depreciation for 10 months has to be taken and maximum depreciation of 10% can only be taken.  However, the surveyor in the present case has taken into account the depreciation of 35 to 70% which is illegal. The surveyor has committed gross illegality in quoting the gross assessment of loss for plant and machinery of Rs.3169378/- although total claim was for plant and machinery was Rs.6260250/-. Thereafter, again 35% depreciation has been allowed. In the circumstances, the loss of the building, fixture, furniture and fittings is calculated as Rs.34531850/- minus Rs.3453185/- (10% depreciation) = Rs.31078665/-. Similarity, the total loss of plant and machinery is assessed to Rs.6260250/- minus Rs.626025/- (10% depreciation) = Rs.5634225/-. The surveyor has not assessed the loss of fire extinguisher, which was claimed as Rs.345000/- and loss is being assessed to Rs.310500/-. Total loss is assessed to Rs.37023390/-. The policy is subject to 5% excess clause, therefore, net loss payable is Rs.35172220/-.

12.    Under Regulation 9 of the Insurance Regulatory and Development Authority (Protection of Policyholder’s Interest) Regulations, 2002, the Insurance Company is bound to settle the claim maximum within six months from the date of occurrence and after expiry of six months it is liable to pay interest 2% above the market rate of interest. The incident has occurred on 14.01.2014 and it was reported to the Insurance Company on the same day. Therefore, the Insurance Company is liable to pay interest from 14.07.2014.

ORDER

          In the result, the complaint is partly allowed.  The opposite party-1 is directed to pay insurance claim of Rs.35172220/- with interest @ 9% per annum from 14.07.2014 till the date of payment, within a period of two months from the date of this judgment.