JUSTICE V.K. JAIN, PRESIDING MEMBER

1. The complainant, a manufacturer of nylon finishing nets obtained a Standard Fire & Special Perils policy from the opposite party, for the period from 22-10-2003 to 21-10-2004, to the extent of Rs.5,45,00,000/-. Subsequently, the insurance cover in respect of the plant & machinery was enhanced to Rs.5,00,00,000/- and the coverage for the stock was enhanced to Rs.2,00,00,000/- with effect from 12-07-2004. A fire originating from the oven allegedly broke out in the premises of the complainant at about 8:15 P.M. on 13-10-2004 causing extensive damage to the property of the complainant. On intimation being given to the insurance company, the surveyor, M/s. Ashok Chopra & Co. inspected the affected site and later obtained several documents including audited accounts, stock details, bank details, etc., from the complainant. Later the complainant submitted several other documents such as sale statements, invoices, bills of entry, packing lists, etc. to the surveyors. Being aggrieved on account of the claim having not been paid by the insurance company the complainant is before this Commission seeking the following reliefs: (a) the opposite parties be directed to pay compensation of Rs.4,65,56,000/- to the complainant as per particulars of claim, (b) the opposite parties be directed to pay compensation of Rs.4,65,56,000/- @ 18% per annum from 14-01-2005 i.e. the date when the claim became payable till realization, (c) punitive damages of Rs.10,00,00,000/- (rupees ten crores) or such other amount as this Honble Commission may deem fit may be awarded, (d) the opposite parties be directed to bear the costs of the complaint.

2. In its reply the insurance company has inter alia stated that there being voluminous documents and evidence the matter can be decided only by a Civil Court. On merits it is alleged that since the surveyor has opined that no claim is feasible, there is no deficiency on the part of the opposite party in rendering services to the complainant.

3. In its evidence by way of affidavit, the opposite party has alleged contravention of General Conditions Nos.1,6(i)(b) and 8 of the insurance policy by the complainant. It is also stated in the said affidavit that nylon only burns in an external flame, being self-extinguishing goes out when the external flame is removed and, therefore, burning material other than nylon were required by the fire to being continue to burn. It is also alleged that some foreign or non-nylon matter was clearly visible in several photographs and the video footage. Non-nylon material such as grease in some areas, certain artificial hairs, pieces of bakelite and bobbins in carton with hanks were confirmed by IIT in its report, which was not denied by the insured. It is stated that the surveyors had noted that though the oven works on electricity it was blackened inside and outside the doors side. It is alleged that since the oven was not air tight and had a hole on the top for entry of the shaft of the circulating fan pressure could not have built up for the escape of the fire. It is also stated that the doors of the oven were facing direction opposite from the stocks and, therefore, could have shot out towards the stock, as is claimed by the complainant. It is also stated in the affidavit filed on behalf of the insurance company that the insured was having multiple sets of accounts and several discrepancies in them were noted by the surveyor. It is claimed, on the basis of the report of the surveyor and expert opinion of IIT, Mumbai that the fire could have been planted by the complainant in order to file false and fabricated claim.

4. Vide its letter dated 10.01.2007, the insurance company repudiated the claim on the ground that the insured had violated the conditions Nos. 1, 6(i)(b) and 8 of the insurance policy.

5. A perusal of the report of the surveyor would show that oven door faces and opens away from the stock. The surveyor, therefore, could not appreciate how the loss could have been initiated by the oven as was claimed by the complainant. During his second visit the surveyor, on checking the oven found that the oven had a cast iron switch fuse unit (SFU) on its side and power line to it was coming from another similar SFU mounted on the nearby wall. The inspection report showed that there was industrial grease on each and every fuse and switch contact only of the SFUs. No such grease was found by him in or on any other part of the SFUs. The surveyor noted that even the slightest spark in any SFU could have catastrophic results. He noted that since SFUs were closed enclosures there was no possibility of grease reaching inside and any sort of accident happening on these contacts only. The surveyor also noted that there was no sign of any short circuiting having been occurred within the SFUs. He also noted that the oven was blackened inside while on the outside it was blackened on the door sides and tops. However, the rear side of the oven which faced the destroyed stock was not blackened at all, whereas the green paint of its top mounted air circulation motor was unaffected. The surveyor also found while going through the finished goods area, completely packed unburnt but wet cartons below the upper burnt material. On opening it was found that most of the cartons contained empty PVT bobbins which had several hanks of nylon yarn inserted in them at their tops. He also found that there was huge quantum of such empty bobbins kept inside the plastic sacks lying in the adjoining shed.

6. On digging the outer crust of a heap of material in the storage area of raw material the surveyor found many unaffected unburnt and still closed packs containing cutting of large pieces of unknown material, some looking like bakelite as well as powder or shaving which would burn immediately on heating. Even stones were found and basically the material was found to be rubbish with only a small amount of raw material.

7. On his second visit the surveyor found the outer/upper burnt crust to be lower and when the said crust at the lower level was dug through a further third burnt crust was found. There were un-burnt material between these two crusts as well as between the lower crust and the floor. This time considerable quantities of nylon artificial hairs made in the other unit of the insured were also found below the second and third crust.

8. The surveyor considered the explanation given by the insured with regard to the discovery made by him and found the same to be implausible. The observations of the surveyor in this regard were as under: (a) This is not an explanation for grease being present where it obviously should not be. (b) Bobbins are not delicate items that need to be repacked in this manner. It is quite the normal practice to just dump them in sacks rather than expensively re-pack them into cartons. Nylon Hanks were specifically found within cartons and on top of Bobbins while it has not been explained why such loose Hands were lying there in the first place. (c) Nylon does not ignite nor burn by itself but only on application of external flame. It is self-extinguishing and stops burning immediately when the external flame is removed. It is most unlikely that smoldering could have continued as it would for various other items, even if the bags materials are considered. Nylon also has a tendency to melt away from the flames and, on burning, gives off various fumes including Hydrogen Cyanide which is a poisonous gas. During our 1 visit, we actually stood on the affected goods and if any smolderingst had been continuing, we would have been poisoned by the said gas. This continued burning is further discussed below. (d) We find it difficult to accept that the insureds Unit II workers were so intellectually challenged that they came and threw more Nylon, though in a different form, on an apparently burning fire rather than water. (e) This is not a denial nor an explanation. We agree that there is no reason for any non-nylon material to be present and that is precisely the issue. The fact is that a considerable quantum of matter, including actual rubbish, completely unrelated to the insureds requirements was lying amongst their Raw Material Stocks.

9. From the very existence of this multi crust the surveyor concluded that the materials were apparently loaded on to already burnt/burning material. Since no justification was shown by the insured for such loading of further material, the surveyor doubted the explanation of the said incident being accidental.

10. The surveyor found several discrepancies in the accounts provided by the insured. It was observed that at different times the insured had given balance sheets, stock statements, as well as various statements for stocks but quantities kept on changing and there was no co-relation between their various submissions. Some of the illustrations given by the surveyor are as under: Difference in Closing/Opening Balances Annexure 1 Table 1 This gives the insureds closing balances for 31/3/2004 and thus opening balances on 01/04/2004 for Raw Materials, WIP & Wastage, Finished Goods and Sundry Creditors. Therein it will be seen the Bank Stocks Statements value the stocks by Rs.1,04,29,020/- more than their Balance Sheet while Sundry Creditors are owed Rs.57,67,772/- less. As the said figures effectively project the insured as better off by Rs.1,61,96,792/- it is only to be expected that difference in quantities of stocks is a massive 112.708 The balance sheet quantity, though very low, is still higher than the figure submitted by the insured through their letters dated 15/7/005 and 14/2/2005 as well as that found in their Plant Stock Register which was produced during 1 st visit. Differences in Sales Figures Annexure1-Table2 No clarification has been given by the insured nor their Bankers as to the meaning, in the Bank Stocks Statements, of Finished Goods taken out as these figures do not tally at all with Gross Sales. Consequently, these figures are being treated as quite separate entities. Thus the Sales for April to June 2005 vary from Rs.70,51,440/- to Rs.3,31,05,845/- the difference being Rs.2,60,54,405/-. The Sales for July to September 2005 vary from Rs.69,41,847/- to Rs.3,15,27,975/- the difference being Rs.2,45,86,128/-. However, the sales figures submitted to the Bombay Stock Exchange for the said periods are Rs.15.73 Million (Rs.1,57,30,000) & Rs.17.42 Million (Rs.1,74,20,000) respectively. In their report to the BSE for the latter period, the insured have mentioned that there has been a fire which has destroyed their plant & machinery and stocks. However, this does not seem to have affected the insureds performance at all since their sales for October to December 2005 are stated to have risen to Rs.18.68 Million.

11. The surveyor also found discrepancies in the statement of consumption, production and wastage, purchases and consumption for raw material and production and sales of finished goods. He also found that the three different sets of sale invoices were submitted by the insured. The aforesaid discrepancies were detailed on pages 8 and 9 of the report. The surveyor also found discrepancies in the bank stock statement, balance sheet and ledgers submitted by the complainant, besides variation in wastage and capacity utilization. It was also noted by the surveyor that initially the complainant submitted that no commissioning report for the Kung Hsing Line had been submitted by the manufacturer but later on a Chinese as well as English version of the commissioning report was submitted, which according to the surveyor was obviously false, considering the previous statements of the insured. In the opinion of the surveyor, the repair estimate was a planted, concocted document, generated just to accommodate the claim of the complainant. He also felt that the inspection service report had also been concocted, just to accommodate the claim of the complainant.

12. The conclusions and findings of the surveyor inter-alia read as under:

G) CONCLUSIONS:

i) The incident The Insureds Statement of the Incident, as well as its aftermath, are obviously not at all plausible. Their explanations for the various multiple inconsistencies are completely without any merit. Therefore, nothing stated by the Insured can be accepted. ii) The Accounts The Insured obviously have multiple sets of Accounts. As it is quite unclear as to which is actually correct, if any, none of these can be relied upon.

I) Findings: From all of the above, it clearly seems that:

i) The Insured have not made complete disclosures of material facts and have, in fact, deliberately withheld records, facts, etc., to mislead, misguide and have clearly attempted gross misrepresentation. ii) The insured have not submitted the details, documents, etc., as required and therefore have not proven their Claims. iii) The Insured seem to have submitted false documents and Accounts in support of their Claim.

13. General Conditions No.1, 6(i) (b) and 8 of the insurance policy, as extracted in the report of the surveyor read as under: This policy shall be voidable in the event of misrepresentation, mis-description or non-disclosure of any material particular. The insured shall also at all times at his own expense produce, procure and give to the company all such further particulars, plans, specification, books, vouchers, invoice, duplicates or copies thereof, documents, investigation reports (internal/external), proofs and information with respect to the claim and the origin and cause of the loss and the circumstances under which the loss or damage occurred, and any matter touching the liability or the amount of the liability of the company as may be reasonably required by or on behalf of the company together with a declaration on oath or in other legal form of the truth of the claim and of any matters connected therewith. If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof or if any fraudulent means or devices are used by the Insured or any one acting on his behalf to obtain any benefit under the policy or if the loss or damage be occasioned by the willful act, or with the connivance of the Insured, all benefits under this policy shall be forfeited. In the opinion of the surveyor, the insured and contravened the aforesaid terms of the insurance policy thereby, rendering the claim void.

14. As many as ten samples taken from the premises of the complainant were sent to IIT, Mumbai. A perusal of the report of IIT, Mumbai would show that the samples received were divided by IIT into two categories one containing samples exposed to fire/found in the heap of combustion debris and the other comprising fresh material of different kind collected from the site (un-burnt or unaffected by fire). The samples of the first category being fire affected were unsuitable for ignition/combustion and were subjected to chemical characterization, whereas samples of the second category were exposed to heat to ascertain their behavior.

15. With respect to the samples of the first category, IIT Mumbai found that sample-1 consisting of fully charred and burnt pieces was fully unserviceable material and was probably EVA & LDPE material charred and mixed with silicious material. The second sample containing cylindrical die cut granules was found to be totally scrapped material being mix of granules of various types, grades, colour and size. It contained mix polyester/PET & CA-/cellulose acetate/Butyrate. The third sample was found to be mix /EVA, HDPE and Polyester/PET of mix and ground powder. The fourth sample containing red, green and brown powder granules etc., was found to be mix LDPE, Nylone-6/polyamide and polyester/PET. It was a mix material of various grades, shapes, size and type. The fifth sample was burnt/charred plastic film pieces which were blackish, partly charred and bent. They were opined to be polyester/PET film. The sixth sample was reddish brown ground plastic pieces, which on analysis, indicated mix PP and nylone-6 polyamide. The seventh sample was off-white colour, small lumps of moulding grade and fibre grade (PET), polyesters. The eighth sample contained two small lumps, which on analysis indicated HDPE and fibre PET grade. The ninth and tenth samples were spindles with fibres/threads wrapped on them. The analysis indicated Nylone-6/polyamide material.

16. The result was as follows for the samples of second category:

i) When the samples were heated on higher temperature, even at 300 C, there was noo visible flame formation. ii) When the samples were kept at 3 cm to 10 cm, from the arc path line while the thin fibres melted and showed charring in loose fibres, other samples were mostly unaffected. iii) The samples were partially burnt when kept within distance of 5cm to 5cm along the weld arc. iv) The material remained almost unaffected when three spindles were placed on the flame and attempts were made to ignite them and continued efforts were required to burn the charge, that too with slow and small flame. Some loose fibres which did burn did not form even 0.1% of the collected samples.

17. The conclusions drawn by IIT read as under: Conclusion: Material collected is a mix of large variety of polymers and waste.

(i) Non flame

(ii) On heating the charge does not burn

(iii) Arching at low current does not lead to fire

(iv) Sustained arcing with 200 A current can lead to fire however, the power line at factory do not seem to have this high capacity (fuses)

(v) The material does not burn easily and that too very slowly requiring extra efforts to continue the fire.

18. It would thus be seen from the report of the surveyor and the report of IIT Mumbai that though the case of the complainant is that the fire originated from the oven which ignited the stocks, the oven which works on electricity was found burnt inside and outside on the doors, side and tops. It was not airtight and had a hole on its top for entry of the shaft of the circulating fan. The surveyor therefore, was right in taking a view that pressure could not have built up inside the oven leading to the escape of the fire from the oven. It is also not understood how the flames could have shot towards the stock, which had been kept in a direction opposite from the doors of the oven. No evidence has been led by the complainant, which would demolish the report submitted by the surveyor and IIT Mumbai. Even the discrepancies in the accounts, closing-opening balance, sale figures, consumption, production and wastage figures etc., remain unexplained. There is no explanation forthcoming for three different sets of invoices and the difference in the bank stock statement, balance sheets and ledgers etc. There is no explanation for industrial grease being present only on being fuse and switch contact of the SFUs, when no grease was found anywhere in or any other part of the SFUs. The presence of grease as noted by the surveyor was a dangerous situation, which could ignite spark in SFUs no short-circuiting in the SFUs was found by the surveyor.

19. As noted earlier, during his first visit, the surveyor had found completely packed un-burnt but wetted cartons below the upper burnt material, which gives an indication that the fire was not genuine but wetted cartons containing empty PVC bobbins having hanks of nylon yarn had been inserted in them at their top. The surveyor also found largely unaffected un-burnt and closed bags below the top crust of the area where the storage of raw material was indicated by the complainant. The packs contained mainly cuttings of large pieces of unknown material like Bakelite which would burn immediately on heating.

20. The surveyor being a third party, the report submitted by him is entitled to a great weight and should ordinarily be accepted, unless it is shown to be arbitrary or based upon extraneous material or it is shown that the view taken by the surveyor is such which no reasonable person, on the basis of the material available to him could have taken. In the case before us, no such evidence has been led by the complainant, which would compel us to reject the report of the surveyor and IIT Mumbai. The conclusions drawn by the surveyor constituted contravention of the condition 1, 6(i) (b) and 8 of the General Conditions of the Insurance Policy issued to the complainant and such contravention released the insurance company of its obligation to reimburse the complainant. IIT Mumbai which is a highly reputed institution had no reason to give a false report against the complainant. The aforesaid report casts serious doubt on the genuineness of the claim lodged by the complainant.

21. In the background of the facts and circumstances as observed hereinabove, the rejection of the claim by the insurance company, based upon the report of the surveyor and the IIT Mumbai, cannot be said to be unjustified and does not constitute deficiency in the services rendered to the complainant. Therefore, no ground for granting any compensation to the complainant is made out. The complaint is devoid of any merit and is hereby dismissed. ......................J

V.K. JAIN PRESIDING MEMBER ...................... DR. B.C. GUPTA MEMBER