JUSTICE J.M. MALIK

1.      The  long  and  short  of the complaint filed by M/s. Navneet Textiles  (P) Ltd., the complainant, through its Manager, is as follows.  The complainant has got  its premises insured from United India Insurance Co. Ltd., OP.  On 08.10.2001, at about 7.45 PM, due to short circuit, fire broke out in the factory premises of the complainant.  The matter  was reported  to the Police as well as the Insurance Company, OP.  According  to  the  complainant,  it was a major  fire and all the stocks and  goods  worth Rs.42,74,309.09  were  gutted in fire.  The Complainant claimed Rs.42,74,309/- from the OP, which also included damages to building in the sum of Rs.3,86,231.09, stocks worth Rs.38,79,330/- and  other miscellaneous  goods amounting to Rs.4,725/-.

2.      The  OP  appointed  a  Surveyor.  All  the documents were furnished to him.  However, the matter was not settled.  The Surveyor’s report  was  also  not  furnished  to the complainant.  The Surveyor  visited the premises on 10.10.2001 and again, on 11.01.2002,  and in between the documents were furnished.  On  04.02.2002,  the claim of the  complainant  was repudiated.  Ultimately,  the  present  complaint was filed before this Commission on 03.09.2002, with the following prayers :-

“a) Claim amount Rs.42,74,309.09

b) Compensation on account of loss of business, damages  and mental pain and agony Rs.25,00,000/-

c) Cost of litigation as assessed by this Hon’ble Commission”.

3.      The OP has contested this case.

4.      I have heard  the counsel for the parties.  The learned Counsel for the complainant  vehemently  argued  that the Surveyor’s report was not furnished to him by the OP and it is in itself, a deficiency on the part of the OP.  He  explained  that  the report of the Surveyor is not  reliable.   The Surveyor’s report was prepared by Sh.Vinod Sharma.  The relevant  extracts,  of which are germane to this case, are reproduced, as follows.

A.      The  Heading,  under the ‘caption’, “XII.  INVESTIGATION”, at para No.3, mentions as under :-

“3. The  Insured  did not  produce  any stock  register on our first visit and it  was reported that the same is lying with the Chartered Accountant for audit and  Chartered Accountant was not available on  that day.  On  our  insistence, stock register was produced to us, on the next day, which has definitely been prepared afresh, as it was a  brand new register.  It implies that stocks register and other records  has been manipulated to match the claimed Qty.

4. The Insured reported that Plant is closed for maintenance of machinery from last 10 days.  However, it appears that Plant has not been working for long time.  No worker was available on both  the days  of  our survey visit neither any maintenance  job  was going on.  Even, no workers were available from whom we could make any enquiry about the fire.

5. The Insured  has a sister concern, i.e., M/s. Nidhi Woolen Mills Pvt. Ltd., in the same premises.  The said firm was having a big godown adjoining the affected godown of the Insured.  The said  godown  of  sister concern was full of stocks and huge Qty. of rags (similar to  the Insured’s trade) were lying in the said godown.  The  Insured  did  not  produce stock  register/ records  of  sister concern, as we wanted  to verify  and  confirm that no stocks of the Insured  were  shifted  to  the  adjoining godown of sister concern”.

B.  The  main  findings of  Sh.B.S.Negi, the Investigator,  vide his report dated 31.12.2001,  are mentioned as follows :-

“1. The origin of fire as Short Circuit is doubtful.

 2.  The Insured failed to furnish the details of workers engaged in factory.

3. The Qty. of residue of burnt material is negligible.

4. The Sale was negligible as compared to Production.

5. As per Investigator, the stock was not more than Rs.8.74 lakhs, as the Investigator has not considered  the Purchase Bills of Sister Concern, M/s. Nidhi Woolen Mills (P) Ltd., & M/s. A.V.Textiles.

6. The Investigator has concluded  that an unsuccessful attempt was made to cover up the alleged claim reporting that damages to goods was caused by Short Circuit, which apparently is doubtful”.

C.  Under the Caption, “BASIS”,  of the said report, it mentions, as

under :

“There was a huge difference in Qty., reportedly burnt, as estimated by us and as claimed by the Insured.  The Insured insisted to settle the claim on the basis of stock records.  The stock records were not produced to us for verification immediately on  our survey visit.  Subsequently, when it was produced , it looked like that it has been prepared afresh. Even, no Accounts records were shown to us, immediately. While scrutinizing the stock records,  we have observed that Insured has reportedly purchased stocks from their sister concern, i.e., M/s. Nidhi Woolen Mills (P) Ltd., who are operating from the same premises.  Apparently, these are accommodating bills just to inflate the stocks, as there was no payments against these purchases.  Why the Insured has bought heavy stocks when it has no ready orders for sale.  No satisfactory explanation was given to us.  Since these purchases were made without payment and even stocks were not sold out of these purchases, hence, these bills are considered as accommodating bills and are not considered in loss assessment.

Similarly, the Insured purchased stocks worth Rs.2.03 lakhs from M/s. A.V. Woolen Mill (P) Ltd., with whom the Insured has no regular dealings.  No payments have been made till date.  Hence, these are also considered as accommodating bills rather than actual supply bills.  The Investigator has also made a similar

observation about these purchases.

At the time of our survey visit, it was observed that factory has not been working for a long time.  The main machines were found open and were not in operation.  There was no worker or any other staff except for a Manager and a Chowkidar.  We asked the Insured to produce wages records, which they  did not have.  It was explained that all the workers are hired  through a Contractor, who maintains the records.  Later on, after almost three months’, copies of wage bills were submitted to us.  We are not convinced about the genuinenity  of the same,  as it appeared to have been made afterwards. No details of production versus wages, i.e., co-relation between two is available with the Insured.  

We have also kept in mind  about the default of Insured Unit towards the Bank against CC Limit of Rs.20.00 lakhs. It is clear that financially, the Insured was not in sound position to clear the Bank dues”.

D.  Lastly, under the Caption, “SUMMARY OF LOSS”, of the said report,  it was mentioned, as under  :-

5.      The learned counsel for  the complainant vehemently argued that this report  should  not  be relied upon for the  following reasons.  It merely mentions  that  allegation of ‘short circuit’ is doubtful.  The counsel  has invited  my attention towards the FIR.  FIR  reveals that as  per  the  allegation made by the complainant itself, the loss was caused due  to ‘short circuit’.

6.      I, therefore, find force in  the arguments  raised by the counsel  for the complainant, in a measure.  It  is for the OP and nobody else,  which is to carry the ball,  in proving as to why did the fire occur?.  Mere saying  that  allegation of ‘short circuit’ is  doubtful, will not suffice.  It is quite possible that the building got fire due to ‘short circuit’.  The OP has  not  properly  investigated this  case.  A clear picture does not begin to jell.  It did not try to collect  cogent  and  plausible  evidence  from  an Electrical Expert.   It,  therefore,  stands proved that due to ‘short circuit’, the fire took place.

7.      Counsel  for  the complainant  further  submitted that  he had filed stock   register on the record.  He, however,  could not explain as to why the stocks were not produced  before  the Investigator, on the very  first  day.   The  Stock  Register should  have been procured there and then, even if it was lying with the office of his Chartered Accountant. The  Chartered  Accountant  should  have  been compelled  to  open  his  office and hand over the Stock Register to the Complainant, under such emergent situation.

8.      I have seen  the photocopies of the Stock Register.  It is crystal clear that they were prepared in one go.  This is in the same handwriting written by the same person, at one go.  Consequently, no reliance  can  be  placed on the evidence produced by the complainant.  This appears to be a manipulated document and  an integument of doubt  envelops  the whole document.

9.      Counsel for the complainant  vehemently argued that the defence set up by the OP that the factory was not working, is false.  He has invited my attention towards  electricity bills pertaining to the months  of  July-August.  However, no electricity bill saw the light of the day for  the months of September-October.  It is, thus, clear that the factory was  not working  in the months of September-October.

10.    Now, I turn to  the most crucial evidence in Bank Statements.  In the month of April, 2001, the Stock was shown at Rs.5,79,480/-.   In the month of May, 2001, the Stock was  shown  at Rs.6,64,530/-.  In the month of June, 2001, it was shown  in the  sum  of  Rs.6,64,170/- . In the month of July, 2001, it was shown at  Rs. 6,54,800/- .  In the month of August, 2001,  it was shown at Rs.5,79,870/- .  In the month of September, 2001, it was shown at  Rs.5,77,034/-.  The reports  of the Bank are in consonance with the report of the Surveyor.  It appears that  the Surveyor has rightly come to the conclusion that the complainant  had suffered loss at Rs.5,15,566/-.

11.    No Income Tax Returns or Sales Tax Returns  were filed.  However,  the  Balance Sheet  and  Invoices/Cash Bills were filed on the record.

12.    To sum up, I find that  there is not  even  a  scintilla  of doubt  in  my  mind  regarding  the  fact  that  some of  the goods were gutted in the fire due to ‘short circuit’.  The  doubts  entertained  by  the Surveyor  have proved to be puerile  and baseless.  In this country,  the  people  are fond of  drawing a long bow.  The  claim  made by  the Complainant is on the higher side.  The report of the Surveyor is reliable. It matches with the report of the Bank’s Statements.  Consequently,  I  have  no hesitation,  to  allow the complaint partly and  grant  compensation  in the sum of  Rs.5,15,566/- in favour  of  the complainant  and   against  the  OP.  The said  amount  be  paid  by the OP  to  the  complainant,  within a period of 90  days  from  the date of this order,  otherwise,  it will carry interest @ 10% p.a., till realization.  The  complainant  is  also entitled to receive  interest @ 9% p.a. from  the date of complaint, i.e. 03.09.2002, till its realization, on  the amount of  Rs.5,15,566/-.