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Devender Malhotra, P... v. United India Insuran...
Case Summary: National Consumer Disputes Redressal Commission — First Appeal No. 434 of 2010
Factual and Procedural Background
This summary is based exclusively on the content of the provided opinion.
The appellant, Devender Malhotra (proprietor of M/s Balaji Industries), carried on printing operations using materials such as inks, dyes and LD films. He obtained a cash credit facility of Rs. 15 lakhs from Canara Bank and a standard fire and special perils insurance policy (policy No. 041703/1106/11/00000094) for Rs. 25 lakhs, valid from 4.5.2006 to 3.5.2007, covering stock related to his trade.
On 30.9.2006 a fire occurred at the insured premises (325, Patparganj Industrial Area, New Delhi), destroying stock, materials and records and causing a loss alleged to be more than Rs. 20 lakhs. A claim was made on the insurance policy for Rs. 22.13 lakhs. The insurer deputed S. Soni & Co. as surveyor; the surveyor sought 16 documents (including stock registers, purchase and sale bills). The insured asserted that some documents were destroyed in the fire and supplied only some records, including a bank inspection report.
The surveyor's physical quantification and valuation (report dated 3.4.2007) calculated gross values and after deductions (dead stock, salvage and a 25% deduction for non-submission of records) assessed the loss at Rs. 4,51,088.75. The insurer offered payment of Rs. 4,50,344/-. The appellant rejected this amount and filed a consumer complaint.
Procedurally, the matter was initially directed to the District Forum by the State Commission; this Commission reversed that direction and remitted the matter back to the State Commission to dispose of the complaint (order dated 20.2.2008). The State Commission, after directing the insurer to adjudicate the claim on submitted materials (order dated 22.7.2008), ultimately dismissed the complaint by order dated 1.11.2010. The present first appeal under Section 19 read with Section 21(a)(ii) of the Consumer Protection Act, 1986 challenges that impugned order.
Legal Issues Presented
- Whether there was any illegality, irregularity or jurisdictional error in the State Commission's order of 1.11.2010 dismissing the consumer complaint.
- Whether the surveyor's assessment of loss (and the insurer's consequent settlement) was entitled to be accepted in the absence of cogent and convincing reasons to disbelieve the surveyor's report.
Arguments of the Parties
Appellant's Arguments
- The appellant asserted that necessary documents were filed, including fire department and police reports, in support of the insurance claim.
- The appellant emphasized portions of the surveyor's report that described widespread damage and that the whole stocks were damaged, arguing that the State Commission should not have relied upon the surveyor's valuation since the surveyor himself described total damage.
- The appellant contended that the surveyor's report was not binding on the parties and thus should not have been given decisive weight by the State Commission.
Respondent's (Insurance Company's) Arguments
- The insurer contended that the complainant/insured failed to supply relevant documents despite multiple opportunities and reminders from the surveyor and insurer.
- The insurer submitted that the surveyor's assessment properly accounted for salvage, dead stock and deductions for non-submission of records, and that the assessment was therefore correct and reasonable.
- The insurer noted that although the bank is said to have valued stock at Rs. 25 lakhs two days before the fire, no such bank valuation report was on record; only an account statement for the relevant period had been produced which did not establish stock value.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sri Venkateswara Syndicate Vs Oriental Insurance Company Limited & Anr. [2009 8 SCC 507] | The principle that an insurer cannot appoint a second surveyor as a matter of course; the report of a surveyor (a professional) should be accepted unless there are cogent and convincing reasons demonstrating inherent defects, arbitrariness, excess or exaggeration in the report. | The court applied this principle to hold that the surveyor's report should be given effect to in the absence of cogent and convincing reasons to disbelieve it; the appellant did not point to any major lacuna or infirmity in the surveyor's report, so the assessment was upheld. |
Court's Reasoning and Analysis
The court reviewed the record and the sequence of events following the fire. The surveyor inspected the premises on 5.10.2006 and requested 16 categories of documents (including stock register, balance-sheet, purchase and sale bills). The surveyor sent follow-up letters (18.10.2006, 16.1.2007, 17.2.2007, 19.2.2007) and noted that the insured had promised further documents during a meeting on 17.2.2007 but subsequently failed to provide them, explaining that many records had been destroyed in the fire.
The surveyor performed physical quantification and valuation based on the documents that were available (purchase bills and market price). The surveyor's calculations produced a gross valuation of Rs. 7,03,869.96 for materials and related items. From that, the surveyor deducted 5% for dead stock (Rs. 35,193), salvage (Rs. 31,620), a 25% deduction for non-submission of records, and an additional clause deduction of Rs. 10,000, arriving at the final assessed loss of Rs. 4,51,088.75 (reported as Rs. 4,51,086.75 in one place and Rs. 4,51,088.75 in others; the insurer paid Rs. 4,50,344/-).
The court observed that the appellant did not identify any specific inconsistency, lacuna or infirmity in the surveyor's report. The court also noted the absence on record of any bank assessment valuing the stock at Rs. 25 lakhs and that the bank account statement produced did not demonstrate the asserted stock valuation. Given the procedures followed by the surveyor, the documentation requested and the deductions applied, the court found nothing on record to disbelieve the surveyor's version.
The court relied on the legal principle from the Supreme Court decision (Sri Venkateswara Syndicate) that the report of a professional surveyor is to be accepted unless cogent and convincing reasons are shown to discard it. Applying that principle and the factual record—particularly the insured's failure to supply required documents and the reasoned deductions made by the surveyor—the court concluded that the State Commission's acceptance of the surveyor's assessment and its dismissal of the complaint did not suffer from illegality, irregularity or jurisdictional error.
Holding and Implications
Holding: The first appeal is DISMISSED and the order of the State Commission dated 1.11.2010 (dismissing the consumer complaint) is upheld. The court ordered that there shall be no order as to costs.
Implications: The direct effect is that the State Commission's decision dismissing the complaint stands and the insurer's assessment/payment based on the surveyor's report is sustained. The opinion does not indicate that it establishes any new precedent beyond applying existing principle (as stated in the cited Supreme Court judgment) that surveyor reports are to be accepted unless convincingly rebutted; the court found no such rebuttal on the record in this case.
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
NEW DELHI
FIRST APPEAL NO. 434 OF 2010
(Against the Order dated 01/11/2010 in Complaint No. 1/2009 of the State Commission Delhi)
1. DEVENDER MALHOTRA, PROP. M/S. SHRI BALAJI
INDUSTRIES
PROP .m/S SHRI BALAJI INDUSTRIES 112,GAGAN
VIHAR EXTN,
NEW DELHI ...........Appellant(s) Versus
1. UNITED INDIA INSURANCE CO. LTD. & ANR. 24/15,BHAGAT RAM ROAD ,DARYA GANJ
DARYA GANJ
NEW DELHI
2. CANARA BANK
CHANDINI CHOWK BRANCH ,242,KAISONS HOUSE
,CHANDINI CHOWK
NEW DELHI ...........Respondent(s)
BEFORE:
HON'BLE DR. B.C. GUPTA, PRESIDING MEMBER For the Appellant : Mr. P.D. Gupta, Advocate with Mr. D. Bharath Reddy, Advocate
For the Respondent : Mr. Maibam N. Singh, Advocate Dated : 26 Jul 2016
ORDER
In this first appeal, filed under Section 19, read with Section 21(a)(ii) of the Consumer Protection Act, 1986, challenge has been made to the impugned order dated 1.11.2010, passed by the Delhi State Consumer Disputes Redressal Commission ( hereinafter referred as the 'State Commission') in Consumer Complaint No.C-9/01, vide which, the said complaint stood dismissed.
2. The brief facts of the case are that the complainant/appellant Devender Malhotra, who is stated to be the sole proprietor of M/s Balaji Industries, 112, Gagan Vihar Extension, New Delhi is engaged in the business of printing of packing material such as, laminates, pouches, packets etc. and his unit consists of printing machines and processing machines and he purchases the raw-material for the said printing job, done for various industries. The printing job is done on polyester film and after that, coating of lamination is done with the help of printed polyester material and in the process, several chemicals, mainly inks, dyes, LD films etc. are used. The complainant obtained cash credit facility of 15 lakhs from the OP-2, Canara Bank, based on his turn over and stock in hand.
3. The complainant obtained a standard fire and special perils policy, bearing
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No.041703/1106/11/00000094 valid from 4.5.2006 to 3.5.2007 for a sum of Rs.25 lakhs, covering risk of stock of printing inks, rollers, LD films related to trade etc. It is stated in the consumer complaint that on 29.8.2006, the Bank carried out assessment of the stock of the factory and found that there was stock worth more than Rs.25 lakh. However, just two days after the said verification i.e. on 30.9.2006 at about 9 p.m., a fire broke out at the premises of the unit, that is, at 325, Patparganj Industrial Area, New Delhi, in which, the entire material, stock and official records were burnt, resulting in loss of more than Rs.20 lakhs. The incident was reported to the fire department as well as to the police. A claim was filed with the insurance company under the policy amounting to Rs.22.13 lakhs. The insurance company deputed S. Soni & Co. to survey and assess the loss. The said surveyor asked the complainant to submit 16 documents vide his letter dated 5.10.2006, followed by letter dated 18.10.2006. The complainant could not submit certain documents like stock register, purchase and sale bills etc. for certain periods, on the plea that the said documents had been destroyed in the fire. The surveyor in his report dated 3.4.2007, assessed the loss as Rs.4,51,088.75 after physical quantification and valuation, based on purchase and sale bills available, and market price of the goods destroyed in fire. The OP-1, insurance company offered payment of Rs.4,50,344/- to the complainant which being not acceptable to them, the consumer complaint in question was filed.
4. The said consumer complaint was first ordered to be sent to the District Forum by the State Commission, but in appeal before this Commission, the said order was reversed and the State Commission was directed to dispose of the complaint, vide this Commission order dated 20.2.2008. Vide their order dated 22.7.2008, the State Commission directed the insurance company to adjudicate the claim on the basis of the material and documents produced by the complainant. Thereafter, the insurance company vide their letter dated 7.11.2008, stated that the claim had been settled for Rs.4,50,344/- on the basis of the assessment made by the surveyor and in terms of the policy conditions. However, aggrieved by the said letter, the complainant filed complaint before the State Commission, which having been dismissed, vide impugned order dated 1.11.2010, the complainant is before this Commission by way of the present appeal.
5. It was stated by the learned counsel for the appellant during hearing that they had filed all necessary documents, including the report of the fire department and the report made to the police in support of their claim under the policy. The learned counsel has referred to the report of the surveyor, saying that the said surveyor had stated that there had been widespread damage during the fire and during their survey at 325, Patparganj Industrial Area, New Delhi, they noticed that the entire building, machinery and the stocks had been totally burnt/ damaged/destroyed in fire and nothing was left as safe. In the valuation part of the report also, the surveyor mentioned that the whole stocks were damaged by the fire. However, while making the assessment of damage, they determined the value of the damaged stock as Rs.7,03,869/- and after making deductions for dead stock, salvage and making further deduction of 25% of the value for non-submission of record, the surveyor arrived at a net value of Rs.4,51,088.75. The learned counsel argued that the report of the surveyor was not binding on the parties and hence, the State Commission should not have relied upon the said report, while passing the impugned order.
6. The learned counsel for the respondent, insurance company, however stated that the relevant documents had not been supplied by the complainant/appellant, despite giving
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numerous opportunities to them by the surveyor as well as the insurance company. The learned counsel referred to the details of the correspondence made with the complainant in this regard. The learned counsel further stated that the assessment made by the surveyor was in order and the value of the salvage etc. had also been taken into account. In the normal course, the report of the surveyor should be followed, unless there is some major lacuna or infirmity in the same. The insurance company had already made payment of a sum of Rs.4.51 lakhs to the complainant, based on the report of the surveyor. Regarding the inspection of the premises made by the Canara Bank two days before the fire, in which the value of the stock is stated to have been estimated at Rs.25 lakhs, the learned counsel stated that no such report had been filed on record.
7. I have examined the entire material on record and given a thoughtful consideration of the arguments advanced before me.
8. A perusal of the facts and circumstances on record indicates that following the incident of fire on 30.9.2006, the surveyor visited the spot on 5.10.2006 and conducted their survey and verification at 325, Patparganj Industrial Area, Delhi. The surveyor sent a letter on 5.10.2006 itself to the insured asking them to supply 16 different documents, which included copies of their stock register, balance-sheet, purchase and sale bills etc. The surveyor followed it up vide another letter dated 18.10.2006, in response to which, the insured replied on 5.12.2006, followed by letter dated 28.12.2006 etc. The insured sent some of the documents with the reply and stated that the rest of the documents had been destroyed in fire. They also stated that they had been providing stock statement to the Bank regularly, but provided only the Bank inspection report to the surveyor, rather than the stock statement. The surveyor again sent reminders to the insured vide letters dated 16.1.2007, followed by letters dated 17.2.2007 and 19.2.2007. Vide their letter dated 13.3.2007 the insured clarified that the trading and profit and loss account for the period 1.4.2006 to 30.9.2006, alongwith ledger could not be supplied as the said documents had got burnt in fire. The copies of purchase and sale bills for the period 1.4.2006 to 30.9.2006 and the outward and inward challans for the said period were also not available. The surveyor observed that the insured had agreed to provide them these documents during their meeting on 17.2.2007, but they failed to submit the same, despite that assurance. The surveyor concluded in their report, submitted to the insurance company, that there was a loss of Rs.4,51,086.75 as per their physical quantification and valuation, based on purchase bills and market price.
9. It is clear from the calculations of loss made by the surveyor that they arrived at the value of Rs.7,03,869.96 for the materials, ink, printing cylinders and rubber rollers, as per the purchase bills and version of the insured. After making deduction of 5% for dead stocks etc. valued at Rs.35,193/- and salvage valued at Rs.31,620/- and further making a deduction of 25% for non- submission of record, the surveyor arrived at the net value of Rs.4,61,088.25. After making a further deduction of Rs.10,000/- as excess clause, the surveyor assessed the net loss as Rs.4,51,088.75. The appellant has not been able to point out specifically, any inconsistency or lacuna in the report made by the surveyor. Moreover, it has been observed in the impugned order of the State Commission as well, that the assessment report made by the Bank had not been filed on record. It was therefore, not possible to accept the contention, that the stock had been valued at Rs.25 lakhs by the Bank. On record, a copy of account statement from the Bank has been produced for the period relating to 1.9.2006 to 3.10.2006. Nothing can be made out from this statement in so far as the value of the stock is concerned. It is evident
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therefore, that there is nothing on record to disbelieve the version of the surveyor in the present case.
10. It is an established legal proposition that the report made by the surveyor, who is a professional in his field, cannot be disbelieved, unless there are cogent and convincing reasons to do so. The Hon'ble Supreme Court, in the case, "Sri Venkateswara Syndicate Vs Oriental Insurance Company Limited & Anr. [2009 8 SCC 507]", held as under:-
"Scheme of Section 64-UM, particularly of sub-sections (2), (3) and (4) would show that the insurer cannot appoint a second surveyor just as a matter of course. If for any valid reason the report of the surveyor is not acceptable to the insurer may be for the reason if there are inherent defects, if it is found to be arbitrary, excessive, exaggerated, etc., it must specify cogent reasons, without which it is not free to appoint the second surveyor or surveyors till it gets a report which would satisfy its interest. Alternatively, it can be stated that there must be sufficient ground to disagree with the findings of surveyor/surveyors. There is no prohibition in the Insurance Act for appointment of second surveyor by the insurance company, but while doing so, the insurance company has to give satisfactory reasons for not accepting the report of the first surveyor and the need to appoint second surveyor."
11. A plain reading of the judgment made by the Hon'ble Apex Court reveals that the insurance company can appoint a second surveyor only, if there are convincing reasons to disbelieve the report of the first surveyor. It is very clear from this judgement that the report of a surveyor has to be given effect to, unless there are contrary reasons to disregard the same. In the present case, the appellant has not advanced any cogent and convincing reasons to disbelieve the report of the surveyor. The assessment of loss made by the surveyor is based on a correct appreciation of the material made available to him.
12. In the light of the facts stated, therefore, there does not seem to be any illegality, irregularity or jurisdictional error in the order passed by the State Commission which may necessitate any interference in the exercise of appellate jurisdiction by this Commission. The first appeal is, therefore, ordered to be dismissed and the order passed by the State Commission upheld. There shall be no order as to costs.
......................
DR. B.C. GUPTA
PRESIDING MEMBER
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