ORDER

                The present Complaint is filed under Section 21 A(1) of the Consumer Protection Act, 2019 against the Opposite Party seeking award of ₹1,15,14,259/- being the amount wrongly deducted from a valid and legal claim of the Complainant under a contract of insurance and any other order which this Hon’ble Commission may consider appropriate.

2.     The brief facts of the case are that the Complainant is a self-employed business man running a business in the name of “Surya Fabric” engaged in trading of cotton waste, polyester waste, yarn and fabric and other similar goods.  The Complainant took a Standard Fire and Special Perils Policy of insurance from the Opposite Party from 09.06.2016 to 08.06.2017 against the risks of fire and allied perils like storm, flood, earthquake, riots etc.  The policy covered stock and building of the Complainant at its two addresses for a total value of ₹2,17,00,000/-.  On the morning of 19.10.2016, a fire took place inside the insured godown.  The fire incident was immediately reported to the Fire Brigade and the police.  It is submitted that as the fire damaged the stock lying in the insured premises, the Complainant filed a claim with the Opposite Party for a sum of ₹2,11,93,394/-.  On receipt of intimation, the Opposite Party appointed a surveyor (M/s Proclaim Insurance Surveyor and Loss Assessors) to carry out the survey and assessment of loss who inspected the site on 20.10.2016.  Opposite Party also appointed              M/s Atulya Investigations to investigate the claim and M/s Truth Lab, Bangalore for forensic investigation.  On 29.07.2017, Opposite Party transferred a sum of ₹86,19,465/- to the credit of Complainant’s bank account towards full and final settlement of the claim.

3.     The Complainant has challenged this offer of settlement on the grounds that though the Surveyor recommended a loss of ₹1,26,00,000/- towards stocks and ₹67,00,000/- for building, the claim settlement was revised to ₹86,18,465/- by the Opposite Party based on a one-sided and arbitrary settlement.  The application of the ‘Gross Project’ method is contested since a duly audited profit and loss statement till the date of the fire incident was provided for ₹1,50,93,121/- which was disregarded without reason.  It was argued that as the business of the Complainant was of waste material, the deduction of ‘dead stock’ was not justified.  Expenses towards loss minimization efforts by the Complainant were erroneously not allowed and the sum of ₹2,15,380/- had been incorrectly reduced to ₹,132,380/-.  In respect of the building, the application of CPWD rates are contended to be incorrect as market rates are higher.  Depreciation of 5% against the norm of 2% on building is also contested.  Deduction of excess (deductible) of 10% against the norm of 5% is also contended to be incorrect.  Finally, in view of delay in settlement of the claim, the Complainant contends that he is entitled to 2% over the bank rate as per IRDA Guidelines.  It is submitted that his efforts with the Opposite Party to resolve the deficiency in settlement of the claim by releasing the amount to the banker did not get resolved.  Hence, it is prayed to award ₹1,15,14,259/- wrongly deducted from the claim of the Complainant and to pass any other order deemed appropriate in the matter.

4.     Upon notice, Opposite Party filed a Written Statement denying all the averments and contentions made in the Complaint.  It was submitted that the Complaint was not maintainable as no claim of the Complainant remains alive since the insurance claim of the Complainant stood settled and ₹86,18,465/- had been paid to the account of the Complainant.  It is submitted that as assessed by the investigator, a portion of the stock lost in the fire was dead stock and therefore, the deduction of 10% of the assessed loss of stock from the surveyor’s assessment was justified.  It is contended that the Complainant failed to provide certain documents asked for by them, in the absence of which it was impossible to process the claim of the Complainant or for the investigator to complete his investigation.  It is also submitted that the Complainant was guilty of a lackadaisical attitude in providing the documents which were crucial for examining the claim.  Accordingly, it is prayed that the Complaint be dismissed.

5.     Rejoinder to the Written Statement was filed by the Complainant denying the contentions of the Opposite Party.  Parties filed their short synopsis of written arguments.  I have heard the arguments of the learned Counsel for the parties and perused the relevant record. 

6.     It was argued on behalf of the Complainant that the value of the closing stock as on the date of loss was ₹1,87,73,689/-; however, the Opposite Party considered the value of the closing stock as ₹1,20,59,258/-.  It is submitted that the surveyor arrived at this figure by incorrectly taking into account the profit and loss ratio for the past three years.  It is argued that the Complainant is a trader of waste material and therefore no portion of the stock can be termed as ‘dead stock’.  It is alleged that the Opposite Party reduced the loss minimization expenses to ₹83,000/- based on its own calculations.  It is argued that the Opposite Party wrongly applied depreciation @ 5% on ₹26,61,251/- and that the Opposite Party wrongfully deducted 10% of the claim amount as excess.  Complainant has relied on Khatema Fibres Ltd. vs. New India Assurance Co. Ltd. to contend that deficiency in service is established in the instant case since the insurer acted arbitrarily on the basis of a Surveyor’s report under Section 64 UM (2) of the Insurance Act, 1938.  Reliance was also placed on National Insurance Co. Ltd. vs. M/s Hareshwar Enterprise (P) Ltd. & Ors. in CA No.7033 of 2009 dated 18.08.2021, 2021 (9) SCALE 619 which held that a Surveyor’s report though a pre-requisite was not the last and final word binding on the insurer or insured and can be departed from if found to be perfunctory.  In the instant case, the Complainant’s argument is that the insurer acted upon the Surveyor’s report which applied deductions perfunctorily in excess of the industry norm on a product insured which was itself a waste material.  Complainant also relied upon the IRDA Regulations IRDA (Protection of Policyholder’s Interests) Regulations, 2002 to argue that the claim was not settled within the prescribed period and therefore, compensation interest @2% over the bank rate be paid to him.

7.     Per contra, the Opposite Party placed reliance upon the Hon’ble Supreme Court’s judgment in Oriental Insurance Co. Ltd. vs. Sony Cherian in CA No.4913 of 1997 dated 19.08.1999, (1999) 6 SCC 451 which held that an insurer’s liability should be strictly construed to determine his liability and the insured cannot claim anything beyond that which is covered by the policy.  Learned Counsel also relied upon judgment of the Hon’ble Supreme Court in Vikram Greentech (I) Ltd. & Anr. vs. New India Assurance Co. Ltd., CA No.2080 of 2002 decided on 01.04.2009, (2009) 5 SCC 599 to argue that an insurance policy was a commercial contract based on uberrima fides which must be interpreted in the language of the contract.  Judgment of the Hon’ble Supreme Court in Sri Venkateswara Syndicate vs. Oriental Ins. Co. Ltd. (2009) 8 SCC 507 was relied upon to contend that a Surveyors’ report was binding on the insurer if prepared in good faith which can be interfered with only if found to be arbitrary or not based on valid reasons.  Opposite Party also relied upon Suraj Mal Ram Niwas Oil Mills (P) Ltd. vs. United India Ins. Co. Ltd. & Anr. in CA No.1375 of 2003 decided on 08.10.2010, (2010) 10 SCC 567 wherein the Hon’ble Supreme Court held that the language of an insurance contract should be interpreted as expressed without addition, deletion or substitution.

8.     In brief, it was the Opposite Party’s case that the claim had been considered by a Surveyor appointed under provisions of Section 64 UM(2) of the Insurance Act, 1938 as per the terms of the policy and therefore no interference in the same was warranted.  It was contended that the as per the forensic report of M/s Truth Lab the cotton waste had been improperly stored as a result of which moisture and fungal contamination of the cotton material resulted in degradation of quality of cotton material.  The Surveyor’s report noted that in view of the circumstances and condition of stocks, physical inventory was not possible and manual stock registers were reported burnt.  Bankers had waived off periodic inventory statements.  Hence, to calculate quantum of loss, sale and purchase records were sought from the Complainant’s Chartered Accountant.  Damage to the building was assessed on the basis of a report of the Complainant’s architect/engineer and the Surveyor’s physical verification.  The report held that all policy conditions with regard to fire protection systems, storage of category I materials (cotton waste, polyester waste and fabric waste) had been complied with.  There was no dispute with regard to the cause of the fire.  According to the Surveyor, the loss was summarized as below:

9.     The Surveyor re-worked the insured’s trading and profit and loss account for 2016-17 till the date of loss considering the average ratio for the past 3 years to arrive at an amount of ₹8,08,38,243/- based on which the stock held on the date of loss was calculated as ₹1,20,59,258/-.  After noting that impurities of waste was sold as fuel and that as per insured there was no dead stock or obsolescence applicable on their stock, 2% operational loss was deducted.  Safe stock was assessed at ₹32,07,148/- on date of loss and salvage value as per actuals considered at ₹5,35,000/-.  No under insurance was observed.  Final assessment of loss for stock was worked out as below:

10.    For the loss in respect of the building, based on cost of reconstruction of ₹68,08,500/- with depreciation @ 5% (₹3,40,425/-) and ‘Nil’ under insurance, loss was estimated as:

11.    Loss minimization expenses of ₹1,53,800/- claimed were moderated to ₹83,000/- based on receipts, invoices and prevailing market rates.  Overall, 10% of the claim amount was deducted on total loss assessed at ₹1,04,02,702/- to arrive at a figure of ₹93,62,432/- which was recommended to be paid.

12.    From the above, it is apparent that the report of the Surveyor is detailed and based on reasons.  As held in Sri Venkateswara Syndicate (supra) the Surveyor’s report is an essential requirement to settle a claim exceeding ₹20,000/- and must be accepted if there is no perversity in the report.  However, the Hon’ble Supreme Court has also held in Hareshwar Enterprise (P) Ltd. (supra) that a Surveyor’s report is not the final world or so sacrosanct that it cannot be departed from.  In the case in hand, admittedly the product insured was cotton and polyester waste.   The cause of the fire is not in dispute.  The need for forensic examination to determine degradation of cotton waste due to storage conditions does not appear justified as the product insured is itself a waste.  The reduction of ‘dead stock’ is also similarly unjustified.  The deviation from industry norms of deduction of 2% to 5% has not been denied by the Opposite Party nor is it justified.  Therefore, this deduction is not sustainable.   There is also merit in the contention of the Complainant that there was inordinate delay in finalizing the claim which was submitted on 28.10.2016 by way of remittance of the amount of ₹86,18,465/- on 29.07.2017 after 8 months directly into the banker’s account without obtaining a discharge voucher for a full and final settlement as per norms from the insured.  The Opposite Party has not controverted these arguments of the Complainant.  The Complaint is, therefore, liable to succeed as the Opposite Party has clearly been deficient in service.

13.    In view of the aforesaid reasons, and in the facts and circumstances of this case, the Complaint is allowed in part and the Complainant is found entitled to a sum of ₹1,15,14,259/- towards the claim of insurance.  As ₹86,19,465/- already stands paid, the Complainant is entitled to ₹28,94,794/- being  the difference of the allowable amount of ₹1,15,14,259/-.  The Complaint is accordingly disposed of with the following directions:

(i)     Opposite Party shall pay the Complainant a sum of ₹28,94,794/- with interest @ 8% (inclusive of 2% over bank rate) from 29.07.2017 till realization, within 8 weeks of this order, failing which the rate of interest payable will be 10%;

(ii)    Opposite Party shall pay litigation costs of ₹50,000/- to the Complainant;

 14.   Pending IAs, if any, stand disposed of with this order.