BEFORE THE A.P. STATE CONSUMER DISPUTES REDRESSAL COMMISSIONAT HYDERABAD.
C.D. No. 26/2006
Between:
1. Sri Lakshmi Narasimha Timber Depot
D.No. 1-18, Main Road,
Piduguralla, Guntur Dist.
Rep. by its Proprietor
B. Purnachandra Rao
S/o. Ramakrishnaiah
Age: 38 years,
Piduguralla, Guntur Dist
2. Sri Jaya Lakshmi Saw Mill
D.No. 1-18, Main Road,
Piduguralla, Guntur Dist.
Rep. by its Proprietor
B. Purnachandra Rao
S/o. Ramakrishnaiah
Age: 38 years,
Piduguralla, Guntur Dist. *** Complainants
And
1. United India Insurance Company Ltd.,
D.No. 5-1-52/1, Bank Street
Narasaraopet-522 601
Guntur Dist. A.P.
Rep. by its Branch Manager
2. Andhra Bank
Piduguralla
Guntur Dist.
Rep. by its Branch Manager. *** Opposite Parties
Counsel for the Complainants: Mr. V. Gourisankara Rao
Counsel for the Resps: Smt. S.A.V. Ratnam (R1)
Mr. Rupendra Mahendra. (R2)
QUORUM:
HON’BLE SRI JUSTICE D. APPA RAO, PRESIDENT
&
SMT. M. SHREESHA, MEMBER
FRIDAY, THIS THE TWENTY THIRD DAY OF JANUARY TWO THOUSAND NINE
Oral Order: (Per Hon’ble Justice D. Appa Rao, President)
***
This is a complaint filed for recovery of Rs. 23,95,071/- towards insurance claim besides compensation and costs.
The case of the complainants in brief is that he has been eking out his livelihood by self employment by running a saw mill and timber depot. He got it insured with opposite party No 1 insurance company for standard fire and special perils for a sum of Rs. 24,76,000/- covering the period from 29.5.2003 to 28.5.2004 the premium of which was paid by opposite party No. 2 bank. He also took another fire insurance policy for a sum of Rs. 1,50,000/- for the tiled shed and sawmill machinery covering the period from 17.6.2003 to 16.6.2004 the premium of which was also paid by the bank. While so on 12.5.2004 at about 3.00 a.m. sawmill was burnt due to electrical short circuit. On a report Sathenapalli Fire Station personnel came and extinguished the fire. Timber and wood articles were completely gutted. On a report the police registered a case in Crime No. 105/2004. Officials of the A.P. Transco visited the place. When informed the Surveyor belonging to opposite party No. 1 visited the depot. However, insurance company gave only one claim form for both the claims. He submitted all the necessary documents. He also got a test fire conducted. The claim was not settled despite several reminders. Finally on 25.1.2006 the insurance company repudiated both the claims alleging that the genesis of the fire from electrical origin is not proved. On that he made a complaint to the grievance cell. The repudiation was unjust against reports of all the officials. Therefore, he filed the complaint claiming a compensation of Rs. 23.95,071/- with interest and compensation of Rs. 1,00,000/- and costs of Rs. 25,000/-.
The insurance company resisted the case. While denying the facts alleged in the complaint, it stated that immediately after information they appointed K. Siva Prasad a surveyor. The surveyor entertained a doubt as to the genuineness of the accounts. The complainant did not show the bank account and the loan taken from Andhra Bank. The report pertaining to test fire indicates that the wood that was burnt in the incident was not the wood specified by the complainant . He assessed the loss at Rs. 12,60,000/- only.
He found several discrepancies in the accounts. By letter Dt. 18.7.2005 the complainant has accepted his malpractices and gave consent letter for settlement of claim at Rs. 12,60,000/- as against Rs. 25,45,000/-. The Surveyor also observed that the entire area was filled with waste wooden cuts, rappers and no useful wooden cut to sizes. He also made discrete enquiries which revealed that the complainant was habituated in making false claims. The firm of the complainant was not registered nor had income tax assessment. The entire business was run with Rs. 10 lakhs loan sanctioned by Andhra Bank. At the most loss of stock would be Rs. 1, 50,000/- and the machinery was Rs. 35,000/-. Since the claim was manipulated and the incident was not within the purview of the policy, its repudiation was justified. Therefore it prayed for dismissal of the complaint with costs.
Opposite Party No. 2 filed a memo confirming that the complainant had taken loan of Rs. 10 lakhs and it had premium on behalf of the complainant. Since no relief was claimed against it, being an informal party, it prayed that the complaint be dismissed against it.
The complainant in proof of his case filed his affidavit evidence and got Exs. A1 to A36 marked. Refuting his evidence the insurance company filed affidavit evidence of its Manager and got Exs. B1 to B3 marked.
The points that arise for consideration are :
1) Whether the claim of the complainant is genuine?
2) Whether the complainant is entitled to the amount covered under the policies? If so to what amount?
It is an undisputed fact that the complainant had taken two policies one for his sawmill for the period commencing from 29.5.2003 to 28.5.2004for Rs. 24,76,000/- evidenced under Ex. A1 policy and another policy for the tiled shed and sawmill machinery for Rs. 1,50,000/- for the period from 17.6.2003 to 16.6.2004 evidenced under Ex. A2. Premium was paid by Andhra Bank from which the complainant had taken loan of Rs. 10 lakhs in 2001 and renewed on 20.3.2004.
On 12.5.2004 during the subsistence of the policies he alleges that at about 3.00 a.m. fire broke out due to electrical short circuit wherein stocks consisting of logs etc., in the sawmill besides machinery were destroyed, for which a report was given to Fire Station, Satenapalli. The Station Fire Officer gave a certificate Ex. A8 mentioning that the fire broke out at about 3.00 a.m. on 12.5.2004 and they arrived at 04.45 a.m. and the fire was extinguished. The cause was mentioned as electrical origin (short circuit). He also gave a report to the police, basing on which a case in Crime No. 105/2004 was registered evidenced under FIR Ex. A6. Ex. A7 was the final report requesting the learned Magistrate to issue proceedings on the ground that their enquiry revealed that it was accidental, and that no foul play came to light. The police in their report stated that the Assistant Engineer (Electrical) has inspected the premises and found that the meter got burnt.
The complainant informed to the insurance authorities about the loss of stock, machinery etc., and the insurance company in turn appointed K. Siva Prasad, approved valuer, Chartered Engineer, and Insurance Surveyor. He visited the place of accident on 13.5.2004 immediately on the next day gathered information, obtained written statements of the complainant and his brother and others. He perused the fire certificate and the police investigation and opined that it was accidental in nature. While he was inspecting the accounts and other materials for the reasons best known the insurance company has appointed another investigator by name Sri M. S. Prasad.
He visited the premises on 26.5.2004, fifteen days after the incident. He noted the physical features and examined cash books. He found that the entries noted were new and fresh and the transactions appears to have been written at one stretch not on day to day intervals and thus raised doubt about its authenticity. He also noted that the very availing of bank loan was not mentioned in the account books. Neither himself nor his father had paid income tax nor filed any assessment. He submitted the account books of unsecured creditors of 16 persons who said to have invested Rs. 16 lakhs who in turn did not pay any income tax. He also opined that earlier his father had reported fire accidents in the timber depots run by him at Giddalur (Prakasham district), Agirpally (Krishna district), Mellacheruvu (Nalgonda district), and Piduguralla (Guntur district) and opined that the complainant and his father was adept in filing false complaints. He also opined that investigation by police or other officials did not go in depth to know whether the electrical meter was burnt due to short circuit or due to external flames. Therefore, he was of the opinion that the claim was not genuine.
A copy of the said report seems to have been given to Sri K. Siva Prasad, who was originally directed to conduct survey, and he after perusing the report besides the accounts and various discrepancies mentioned by the investigator, opined that there was loss to a tune of Rs. 12,60,000/- vide his report Ex. B3 Dt. 01.08.2005. This was again given to Sri M. S. Prasad who after verifying the same gave his report Ex. B1 Dt. 4.12.2005 alleging that fire was not due to electrical origin. The alleged stock burnt was of unaccounted business and that not of teak and that there were previous claims which were not enquired by the police and therefore opined that the claim was not genuine.
Basing on these reports the insurance company repudiated his claim vide Ex. A4 Dt. 25.1.2006.
It is an undisputed fact that the complainant had taken the sawmill on lease from his father evidenced under lease agreement Ex. A17 for a period of three years. It is also not in dispute that on 12.5.2004 at about 3.00 p.m. the sawmill as well as machinery and stock were burnt in the fire accident that has been caused due to electrical short circuit confirmed by Ex. A7 investigation made by the police and Ex. A8 certificate issued by the Fire Officer.
It is very interesting to observe that his father had conducted the timber depot business at various places in 1991, 1993, 1994. The timber depots were gutted and when the claims were made they were settled. Unfortunately the complaint being filed under the Consumer Protection Act a detailed examination of earlier complaints of his father and more so when the very premises also belongs to his father could not be enquired into, as the parties were not subjected to cross-examination. However, both the surveyors on their enquiries confirmed that earlier four claims had been made complaining the very same incidents wherein the insurance companies had settled the claims for certain amounts.
Without keeping the incidents in mind, in the light of reports issued by electrical engineer, fire officer and the police vide Exs. A6 to A8 which are governmental officials, against whom no allegation was made, we are of the opinion that the accident took place due to electrical short circuit. The important question is what could be the loss that the complainant had sustained due to the accident?
Though Sri K. Siva Prasad, Surveyor visited the premises on the next day of the incident on 13.5.2004 noted certain physical features did not evaluate the actual quantity of timber lying in the shed nor got it scientifically tested by referring the ashes of wood etc to the laboratory. The surveyor who gave favourable report to the complainant mentioned in his report Ex. B3 that when he proposed to conduct test fire, the insured showed reluctance initially and finally agreed for it and gave a date for conducting test fire on 30.11.2004.
He himself noted that a day before the given date he again restrained from conducting test fire by giving a telegram followed by a letter expressing some unnecessary doubts about the scientific inference of the test fire. After clarifying all his queries, he again put forth another proposal for the analysis of wood in the laboratory. Finally after protracted correspondence the test fire was conducted on 5.4.2005, nearly one year after the incident. Obviously a mock test was conducted. The surveyor mentioned that “In the test fire, the weight of coal and ash are obtained at 100% dry state of coal and ash. At the time of actual fire, fire is extinguished by fire service people by using water. The weighments of coal and ash are obtained after sun drying. However, there would be some left over moisture content in coal and ash which might have leads to more weightage. As there were no moisture testing labs available in the vicinity of Piduguralla, measuring the percentage of moisture content of the coal and ash is not possible and hence weighment of the same are obtained in a physically touch and feel dry state which may contain still some moisture content when compared to the dry state at the time of test fire.“
Even he started evaluating the total quantity of wood burnt as arrived from the books of the insured plus the quantity of unaccounted stocks and held that it was closely tallying with that of arrived by test fire. The conditions which were prevailing on the date of incident, would not have been existed. Still when the test fire was conducted on 5.4.2005, it is clear that this exercise was conducted, in order to see some evidence is collected for assessing the material that was destroyed in the fire accident. The complainant, obviously by refusing for conducting such test in the fist instance, ultimately agreed in order to see that some evidence is created for claiming the amount. We do rely on such a report.
The complainant had filed day book, ledger, sale and purchase invoices before the surveyor. They were of the years from 2001 to 2005. Admittedly they were not audited by any of the Chartered Accountants. Sri K. Siva Prasad, Surveyor got these accounts audited by one Sri CH. Veera Babu, Chartered Accountants. Admittedly the complainant was not an income tax assessee. He did not get audited his accounts for any of these years. Evidently the complainant had borrowed an amount of Rs. 10 lakhs from R2 Andhra Bank in the year 2001 for doing timber business. Curiously he did not show this amount of Rs. 10 lakhs in any of the account books produced by him. The surveyor opined that on the date of loss there was an outstanding debit balance of Rs. 10,09,711/- in his account. The bank has informed that it has inspected for the last time on 20.4.2004 and the statement was also submitted on 4.5.2004. At the cost of repetition, it may be stated that these bank transactions were not shown in any of the insured’s accounts though the insured had stated that this loan amount had been utilized for purchasing timber. The surveyor noticed that all the purchases of wood were made by the insured on credit basis and the payments were effected by cash or by demand draft or by cheque. A perusal of account shows that these cheques were bounced. However, according to him, later he paid by way of cash or demand drafts. It is not known from where he got the amounts.
Apart from the above bank loan, according to the complainant he borrowed some amounts from outsiders, which were shown in the accounts. A perusal of these transactions show that the insurer had made payments to some unknown persons, and also received amounts from unknown sources. The accounts were incomplete. The surveyor had prepared a cash flow statement showing total receipts and payments during the period from 2000 to 2004 till the date of loss. We may mention that these accounts did not contain bank transactions.
The surveyor opined that “ On going through the cash flow statement prepared by taking all the cash transactions of the insured including bank transactions also into account, it can be observed that almost entire period from 2001 to 2004 when the Andhra Bank loan account is being operated, insured has around Rs. 10 lakhs worth of cash on hand. But at the same time, even though he has cash on hand, he borrowed considerable amounts from outsiders. This clearly shows that even though the cash on hand is available with the insured as per account, virtually there was no cash available with him at any point of time and this cash was utilized for purchasing of timber which is unaccounted. The excess of timber stocks available at the time of survey corroborating this fact for which insured has also agreed with.”
By preparing this statement he opined that “Insured has obtained a loan of Rs. 10 lakhs from Andhra Bank, Piduguralla under Open Cash Credit facility. Even though insured is regularly submitting monthly stock statements to his banker, the bank transactions were not shown in any of his accounts until the date of loss. The same is not reflected in the Auditor reports also. According to the statement given by the insured, the loan amount has been utilized for his unaccounted purchases and these purchases and corresponding sales are not shown in their books of accounts.
Now the excess quantities in the stocks of TW & Yepa logs corroborates the insured’s statement, and shall be attributed to the unaccounted transactions of the insured made by utilizing the bank and other loans.
Hence, by taking the value of these unaccounted stock of TW & Yepa logs also into account, the total value of timber stocks lying with the insured at the time of fire including those of arrived from the books of accounts is arrived.”
He had taken unaccounted stocks into account and finally observed that unaccounted stock of Rs. 5,83,435.92 was lying in the shed of Sri Laxmi Narasimha Timber Depot in the form of cut sizes. The analysis which he had obtained by way of test fire concluded that :
Summary of Assessment:
Loss assessed on Timber stocks Rs. 12,34,114.20
Loss assessed on shed of
Sri Lakshmi Narasimha Timber Depot Rs. 12,501.38
Loss assessed on shed of
Sri Jayalakshmi Saw Mill Rs. 14,210.63
Loss assessed on saw mill machinery
Of Sri Jayalakshmi Saw Mill Rs. 9,200.00
__________________
Total Rs. 12,70,026.20
Less: Policy excess Rs. 10,000.00
__________________
Net total loss assessed Rs. 12,60,026.20
Net total loss assessed rounded off to Rs. 12,60,000/-
As we have earlier pointed out since the complainant did not file his account books or any of the material except routine FIR, investigation report etc., we have to necessarily consider the evidence that could be accepted for arriving at the loss sustained by the complainant keeping the fact that his accounts did not reveal the amounts borrowed by him from various creditors including that of Andhra Bank, purchase of timber made by him, and the
stocks that were sold in May, 2003. There is no evidence to show that the timber purchased was worth Rs. 2,82,776/-. The estimate arrived at by Sri
K. Siva Prasad could not have been upheld as they were based mostly on assumptions and presumptions. However, admittedly as there was fire accident wherein certain stock and machinery was damaged, considering the reports of both the surveyors, we are of the opinion that loss of timber stocks and the sheds of timber depot which was assessed by Sri M. S. Prasad at Page 7 to 8 of his report Ex. B2 at Rs. 1,50,000/- besides Rs. 35,000/- towards machinery of saw mill could be held to be reasonable and just.
To sum up his father had made a number of fire claims lodged with the insurers prior to this incident. The complainant had taken the premises in question from his father on a lease which was also gutted in fire. No doubt there was a fire accident. The dispute is to the loss of stock and machinery. However, when it comes to his own books of accounts he did not disclose the very investment of Rs. 10 lakhs obtained by way of loan from Andhra Bank, except purchase bills for Rs. 2,82,776/- during May, 2003. No other purchases were made. He did not submit any income tax assessment. He was not having registration of his firm. The amounts said to have been borrowed from other creditors was also not made a mention. Therefore the only believable amount was which he had borrowed from Andhra Bank. The stocks that were remained unaffected by fire and sold by him could only be worth Rs. 1,50,000/- besides machinery worth Rs. 35,000/-. The account books that were got prepared by Sri K. Siva Prasad through CH. Veera Babu, Chartered Accountants cannot be relied for the simple reason that there was no basis for them to prepare these accounts either from the bills, vouchers, cheques or cash dealings. The so called test fie was conducted almost one year after incident and therefore the report in this regard cannot be relied. The complainant himself dragged on the matter to get the fact proved. Considering the totality of the circumstances, we are of the opinion that a compensation of Rs. 1,50,000/- towards loss of stock and Rs. 35,000/- towards machinery could only be granted.
In the result the complaint is allowed in part directing Opposite Party No. 1 insurance company to pay compensation of Rs. 1,85,000/- with interest @ 9% p.a., from the date of complaint i.e., till the date of realization with costs computed at Rs. 5,000/-. Time for compliance four weeks. The complaint against opposite Party No. 2 Andhra Bank is dismissed without costs.
PRESIDENT LADY MEMBER
APPENDIX OF EVIDENCE
WITNESSES EXAMINED FOR
COMPLAINANT OPPOSITE PARTIES
None None
DOCUMENTS MARKED FOR COMPLAINANT:
Ex. A1; 29.05.2003 Insurance Policy.
Ex. A2; 17.06.2003 Fire Cover Note Schedule
Ex. A3; Fire Claim form
Ex. A4; 25.01.2006 Repudiation letter
Ex. A5; 25.01.2006 Repudiation letter
Ex. A6; 12.05.2004 FIR copy
Ex. A7; 28.05.2004 Final Report in Cr. No. 105/2004
Ex. A8; 25.06.2004 Fire Service Attendance Certificate
Ex. A9; 18.05.2004 Letter of Andhra Bank to K. Siva Prasad
Insurance Surveyor.
Ex. A10; 22.06.2004 Demand Notice issued by CTO, Piduguralla.
Ex. A11; 29.06.2002 Demand Notice issued by CTO, Piduguralla.
Ex. A12; 19.06.2003 Demand Notice issued by CTO, Piduguralla.
Ex. A13; 04.07.2004 Notice issued by Dy.CTO, Piduguralla
Ex. A14; 22.06.2004 Demand Notice issued by CTO, Piduguralla.
Ex. A15; --- Statement of stock at premises after fire accident
Ex. A16; 19.09.2001 Lease Agreement
Ex. A17; 19.09.2001 Lease Agreement
Ex. A18; 20.04.2000 Licence to work a factory
Ex. A19; 23.03.2005 Letter of complainant to K. Siva Prasad,
Insurance Surveyor about Test Fire.
Ex. A20; 06.01.2005 Quotation for the analysis of wood and biomass
Ex. A21; 30.12.2004 Letter of complainant to K. Siva Prasad,
Insurance Surveyor.
Ex. A22; 28.12.2004 Letter of complainant to K. Siva Prasad,
Insurance Surveyor.
Ex. A23; 26.11.2004 Letter of complainant to K. Siva Prasad,
Insurance Surveyor.
Ex. A24; 14.10.2004 Letter of complainant to K. Siva Prasad,
Insurance Surveyor.
Ex. A25; 16.10.2001 Certificate issued by Panchayat Secretary
Piduguralla.
Ex. A26; 31.05.2004 Reminder issued by K. Siva Prasad
Ex. A27; 13.05.2004 Letter of K. Siva Prasad to complainant to
furnish certain documents/information.
Ex. A28; 09.08.2004 Certain registers furnished by complainant
to Sri K. Siva Prasad
Ex. A29; 18.07.2004 Particulars of records furnished.
Ex. A30; 20.06.2004 Particulars of records furnished.
Ex. A31; 12.05.2004 Minutes of Test Fire
Ex. A32; 07.06.2006 Letter of complainant to insurance company.
Ex. A33; 14.06.2005 Letter of Insurance Company to complainant
Ex. A34; 25th Jan Telegram issued by complainant to insurance
Company.
Ex. A35; 13.02.2006 Representation of complainant to Grievance
Cell, UII Co. Ltd., Visakapatnam.
Ex. A36; 13.02.2006 Representation of complainant to Grievance
Cell, UII Co. Ltd., Visakapatnam.
DOCUMENTS MARKED FOR OPPOSITE PARTY No. 1.
Ex. B1; 04.12.2005 Letter of M. S. Prasad, to insurance company
Ex. B2; 29.05.2005 Investigation Report of M.S. Prasad
Ex. B3; 01.08.2005 Fire Survey Report of K. Siva Prasad, Surveyor.
PRESIDENT LADY MEMBER
Dt. 23. 1. 2009.
