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Gulshan Chemical Lim... v. United India Insuran...

National Consumer Disputes Redressal Commission

Feb 1, 2022

Judgment

Subsequent
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National Consumer Disputes Redressal Commission — Order Summary

Factual and Procedural Background

Gulshan Chemical Limited (the Complainant / Insured) held a Standard Fire & Special Perils Policy (Declaration Basis) from United India Insurance Company Ltd. (the Opposite Party / Insurer) for the period 01.05.2013 to 30.04.2014 for a sum insured of Rs.10 crores covering stock at its manufacturing unit in RIICO Industrial Area, Bhiwadi, Alwar.

A fire occurred in the factory storage godown on 06.05.2013 at about 3:00 hours. Of a total of 2,858 drums of 100 kg each, 921 drums were removed and 1,937 drums were burnt. The Insured notified the Insurer on 06.05.2013 and submitted a written claim on the same date for Rs.17,028,635/-. The Insurer appointed investigators and surveyors (Select Surveyor Pvt. Ltd. and Cunningham Lindsey) who submitted investigation and survey reports between May and December 2013/2014, assessing loss and opining on possible causes.

The Insurer ultimately repudiated the claim (letter served 01.07.2015) on the grounds that the fire was either caused by water dropping from the roof (negligence of the Insured) or by self-decomposition/own fermentation/spontaneous combustion of the chemical, which the Insurer treated as falling under a policy exclusion.

The Insured issued a legal notice on 03.03.2015 for inordinate delay and, upon repudiation, filed Consumer Case No. 592 of 2015 on 08.07.2015 seeking (i) payment of the insurance claim of Rs.3 crores (allegedly; the complaint sought Rs.3 crores in its reliefs), (ii) compensation for delay, deficiency in service and unfair trade practice and (iii) other reliefs. Both parties filed written pleadings, affidavits of evidence and synopses; hearing concluded and the Commission delivered the order dated 01.02.2022.

Legal Issues Presented

Whether the Insurer validly repudiated the insurance claim arising from the fire loss at the Insured's godown, on the grounds of negligence (water ingress) or spontaneous combustion/own fermentation.
Whether the surveyor(s)' reports and findings concerning cause and quantum of loss should be given due weight and whether there were sufficient grounds to disagree with them.
Whether the Insured is entitled to payment of the assessed loss (including certain packing and disposal costs alleged to have been ignored by the surveyor) and interest for delay in settlement pursuant to the regulatory provisions.

Arguments of the Parties

Complainant's (Insured's) Arguments

The fire occurred on 06.05.2013 causing destruction of finished stock (1,937 drums of 100 kg each) and the Insured promptly informed the Insurer and lodged a written claim the same day.
Survey and investigation reports, including the investigation by Select Surveyor Pvt. Ltd. and the surveyor Cunningham Lindsey, supported that the occurrence was accidental and quantified the loss (the surveyor assessed loss at Rs.15,891,535/- in one report).
The Insurer's repudiation letter relied on speculative possibilities (water ingress from roof or spontaneous combustion) that were inconsistent with the surveyors' findings and unsupported by evidence (no rainfall, no water tank/pipe on roof on record).
The Insurer delayed settlement and wrongly omitted costs (drum packing, polythene liner, labour for repacking, disposal of burnt materials) which were covered by the policy and allegedly ignored by the surveyor during assessment.
The Insured sought relief including payment of the claim and compensation/interest for delay and deficiency in service.

Opposite Party's (Insurer's) Arguments

The Insurer acknowledged appointment of surveyors and investigators and relied on their reports in assessing the cause of the fire and quantum of loss.
The Insurer contended that, after considering the reports and materials, the claim was repudiated because the fire was either caused by negligence of the Insured (water dropping from roof onto finished goods) or was due to own fermentation/natural heating/spontaneous combustion of the chemical—situations covered by the policy's general exclusions.
The Insurer denied any deficiency in service and maintained that repudiation was justified based on investigation and survey findings.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Sri Venkateswara Syndicate Vs. Oriental Insurance Company Ltd., (2009) 8 SCC 507	Surveyor's report must be given due importance; there should be sufficient grounds to disagree with a surveyor's report.	The Commission relied on this principle to treat the surveyor's report as expert evidence that requires cogent reasons to be displaced; it found no such adequate basis in the Insurer's repudiation to ignore the surveyor's findings.
Khatema Fibres Ltd. Vs. New India Insurance Company Ltd., 2021 SCC OnLine SC 818	Affirms that surveyor reports are to be given due weight and cannot be disregarded without sufficient grounds; consumer forum lacks jurisdiction to ignore a proper report.	The Commission applied this principle to conclude that, absent evidence of inadequacy, arbitrariness or bad faith in the surveyor's work, the insurer's repudiatory stance could not prevail over the surveyor's findings.

Court's Reasoning and Analysis

The Commission proceeded by examining the factual record, the investigation and survey reports, and the parties' evidence and submissions.

Statutory and precedential context: The Commission observed it is mandatory under Section 68 UM of the Insurance Act, 1938 to appoint a surveyor where loss exceeds Rs.25,000/-. The Commission relied on Supreme Court authority (Sri Venkateswara Syndicate and Khatema Fibres Ltd.) to emphasize the primacy of surveyor reports as expert evidence which should be given due importance and cannot be lightly disregarded by a consumer forum unless there are sufficient grounds.
Evaluation of investigation/survey findings: The Insurer appointed Select Surveyor Pvt. Ltd. (investigation) and Cunningham Lindsey (survey). Select Surveyor's initial and final reports concluded the occurrence was accidental and confirmed 1,937 drums of finished Sodium Hydrosulphite were burnt. Cunningham Lindsey's Final Survey Report (dated 12.12.2014) assessed quantum of loss (stated as Rs.15,891,535/- in the findings recited by the Commission) and discussed cause as "heat gained by the chemical and self-decomposition".
Scrutiny of the Insurer's repudiation rationale: The Commission analyzed the two grounds relied on by the Insurer in repudiation:
- Water ingress/negligence: The Insurer asserted a possibility that water had dropped from the roof onto the finished goods. The Commission found no evidence of rainfall that night nor any evidence of a water tank or pipe on the roof at the relevant location. The Select Surveyor had examined and effectively ruled out moisture/water-drop as the cause, noting drums were sealed, packed in polyethylene liner and filled under vacuum. The Commission concluded the Insurer's suggestion of water-drop as the cause was conjectural and unsupported by record evidence.
- Own fermentation/natural heating/spontaneous combustion: The Insurer's alternate ground was that Sodium Hydrosulphite decomposed spontaneously. The surveyor's own analysis (referring to scientific literature) indicated decomposition occurs at about 60°C. The surveyor noted the ambient temperature on the day was 46°C and that, given RCC roofed, brick-built construction and night-time occurrence (3:00 hours), interior temperatures would likely be well below 46°C and certainly below the 60°C decomposition point. Thus, spontaneous combustion was held by the Commission to be not reasonably possible on the material before the court.
Weight to expert evidence and absence of contrary proof: The Commission stressed that a surveyor's report stands as expert evidence and must be corroborated by other material if it is to be challenged. In this case, the Insurer relied upon parts of reports but failed to produce independent evidence to substantiate its repudiatory conclusions. The Commission found the Insurer's findings were based on conjecture and surmise and ignored material portions of the surveyor's and investigator's reports.
Heads of loss omitted: The Commission noted the Insured's claim included costs such as drum-packing, polythene liner, labour for repacking and disposal of burnt materials, which were covered by the policy; the surveyor had ignored these while assessing loss, according to the Insured's contention.
Regulatory timeline and interest: The Commission referred to Regulation 9 of The Insurance Regulatory and Development Authority (Protection of Policyholder's Interest) Regulations, 2002 which mandates timelines for surveyors' reports and settlement and prescribes interest in case of delayed payment. The Commission observed that, in view of the statutory provision, the Insured is entitled to interest at 12% per annum after six months of the loss (the text states this specific entitlement).
Conclusion from analysis: Based on the above, the Commission concluded that repudiation was unjustified, that the surveyor's findings should be given due weight, and that the Insured was entitled to payment of the assessed loss and statutory interest for delay.

Holding and Implications

Holding: The complaint is allowed. The opposite party (United India Insurance Co. Ltd.) is directed to pay Rs.16,860,035/- to the complainant along with interest at the rate of 12% per annum from 06.01.2014 until the date of payment. Payment is to be made within two months from delivery of the judgment.

Implications:

Direct effect on parties: The Insurer must make the directed payment with interest to the Insured within the stipulated period; the Insured's claim is upheld by the Commission.
On the treatment of surveyor reports: The order reinforces that surveyor reports are expert evidence to which due weight must be given and that an insurer must produce cogent contrary evidence if it seeks to repudiate a claim contrary to a proper surveyor report.
On regulatory relief for delay: The Commission applied IRDA Regulation 9(6) and awarded interest at the specified rate for delay — signifying regulatory provisions on timelines and interest are enforceable in this forum.
Precedential note: The order applies existing Supreme Court jurisprudence regarding surveyor reports. The Commission did not purport to lay down any new law beyond applying established principles to the facts of the case.

This summary is based exclusively on the content of the provided opinion and does not add or infer information beyond what appears in that text.

Show all summary ...

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION

NEW DELHI

CONSUMER CASE NO. 592 OF 2015

1. GULSHAN CHEMICAL LIMITED

Through its AR, Mr. A.K. Jain, 302, Saraswati House, 27, Nehru Place,

New Delhi - 19. ...........Complainant(s) Versus

1. UNITED INDIA INSURANCE CO. LTD.

Through Its General Manager, Divisional Office-VI, B-2/17, Mohan Coop. Ind. Estate Badarpur,

New Delhi - 110 044 ...........Opp.Party(s)

BEFORE:

HON'BLE MR. JUSTICE RAM SURAT RAM MAURYA,PRESIDING MEMBER

For the Complainant : Mr. Neeraj K. Singh, Advocate For the Opp.Party : For Opp-Party-1 & 2 : Mr. Ravi Bakshi, Advocate : Mr. Sayma Feroz, Advocate

Dated : 01 Feb 2022

ORDER

1. Heard Mr. Neeraj Singh, Advocate, for the complainant and Mr. Ravi Bakshi, Advocate, for the opposite party.

2. Gulshan Chemicals Limited has filed aforementioned complaint for directing United India Insurance Company Ltd. (the Insurer) to pay (i) insurance claim of Rs.3/- crores, (ii) suitable compensation for not settling the claim even after long time of the loss, for deficiency in service and committing unfair trade practice and (iii) any other relief which may be deemed fit and proper, in the facts and circumstances of the case.

3. The facts, as stated in the complaint and emerged from the documents attached with the complaint, are as follows:-

(a) The complainant (hereinafter referred to as the Insured) was a company incorporated under Companies, Act, 1956 and engaged in manufacturing, refining and trading of base chemicals and all intermediate and by-products thereof and other ancillary activities. It has its manufacturing unit at A-594-595 and 595-A, RIICO, Industrial Area, Bhiwadi, district Alwar.

(b) United India Insurance Company Ltd. (for short the Insurer) is a public insurance company, engaged in the business of providing different types of insurance services. The Insured obtained Policy No.040600/11/13/12/00000019, i.e. Standard Fire & Special Perils Policy (Declaration Basis), for a sum of Rs.10/- crores, for the period of 01.05.2013 to 30.04.2014, on "Chemical Manufacturing (other), Pharmaceuticals, Toiletry Product" i.e.

"stock of all raw material, packing material, power and fuel, lab chemicals, store and spares/

work in progress stock/ finished product stock and stock of sodium sulphite & sodium hydrosulphite", of manufacturing unit at A-594-595 and 595-A, RIICO, Industrial Area, Bhiwadi, district Alwar.

(c) The fire was broke out in the Factory Storage Godown at A-594-595 and 595-A, RIICO, Industrial Area, Bhiwandi, district Alwar, on 06.05.2013 at about 3:00 hours, causing loss of finished stock, stored there. Anil Kumar, a workman of night shift, smelt gas coming out of finished goods godown, which was adjoining to the production hall and connected through a shutter door. He immediately informed Chandra Mishra, Shift Incharge. They went to finished goods godown and found that hot gas and fumes were coming out from some the drums. They immediately broke the window glasses from one side of the godown and informed Fire Service Station, Industrial Area Bhiwadi, from where, the fire tender was sent on the spot. As Sodium Hydrosulphite is inflammable due to water, as such, water spray was not found possible. The workmen of night shift started removing stock from other side and out of total 2858 drums of 100 kg, 921 drums were removed from the godowns and the remaining 1937 drums of 100 kg. were burnt.

(d) The Insured informed the Insurer on telephone on 06.05.2013 about the incident of fire and the loss. The officers of the Insurer asked to submit insurance claim in writing. Then the Insured submitted insurance claim in writing on 06.05.2013, in which, cause of fire was suspected due to electric short circuit and the loss of Rs.17028635/- was claimed. The Insurer appointed Select Surveyor Pvt. Ltd., on 07.05.2013, for investigation. The representative of Select Surveyor Pvt. Ltd. inspected the godown on 09.05.2013 and 17.05.2013 and submitted his Initial Investigation Report dated 30.05.2013, mentioning that ceiling of godown was in a depleted condition, hence there was possibility of water dropping through it, due to over flow of the tank or due to bursting of water pipe. But as on that day there was neither rain fall, nor on the roof any water tank or water pipe was found, as such, the final opinion was given that occurrence of fire was purely accidental. He confirmed that 1937 drums of 100 kg. of finished Sodium Hydrosulphite were burnt, in the fire. He submitted his Final Investigation Report dated 24.12.2013, in the same terms.

(e) The Insurer appointed Cunnigham Lindsey International Insurance Surveyor & Loss Associates, Pvt. Ltd., Delhi, on 06.05.2013, for survey and assessment of the loss. The Surveyor inspected the godown on 07.05.2013 and 15.05.2013. The Surveyor submitted Immediate Loss Advice Report dated 09.05.2013 and Final Survey Report dated 12.12.2014, stating that cause of fire was "heat gained by the chemical and self-decomposition" and quantum of loss was assessed to Rs.15891535/-.

(f) Even after, final report of the Surveyor, the Insurer did not proceed in the matter. Then the Insured gave legal notice dated 03.03.2015, for causing inordinate delay in settlement of the claim. The Insurer, vide undated letter (served on the Insured on 01.07.2015), repudiated the claim on the ground that there were two possibility of the fire i.e. (i) Fire was caused due to water dropped from roof on the finished goods. If that was the reason of fire then it was due to negligence of the Insured. (ii) Fire was triggered by the heat gained by the chemical itself. If that was the reason then it was own fermentation, natural heating or spontaneous combustion. In both the conditions, the loss was not payable. The complaint was filed on 08.07.2015, on the allegations that the Insurer had illegally repudiated the claim and the reasons for fire as mentioned in the investigation report/survey report/repudiation letter were imaginary and

improbable,.

4. The insurer filed its written reply, on 05.02.2016, in which, the facts relating to the insurance policy and fire incident have not been denied. It has been stated that after receipt of the information of the loss, the Insurer appointed Cunnigham Lindsey International Insurance Surveyor & Loss Associates, Pvt. Ltd., Delhi, on 06.05.2013, for survey and assessment of the loss. The Insurer appointed Select Surveyor Pvt. Ltd., on 07.05.2013, for investigation of the incident. Select Surveyor Pvt. Ltd. submitted his Initial Investigation Report dated 30.05.2013 and final report dated 24.12.2013. The Surveyor submitted Immediate Loss Advice on 09.05.2013 and Final Survey Report dated 12.12.2014. After consideration these reports and other materials of the record, the claim was repudiated as the Insurer founds that the fire was either caused due to negligence of the Insured or due to own fermentation, natural heating or spontaneous combustion, falling in general exclusion clause of the policy. There is no deficiency in service on the part of the Insurer.

5. The Insured filed his rejoinder reply on 03.08.2016, in which, the facts stated in the complaint were reiterated. The Insured filed various documentary evidence and Affidavit of Evidence of A.K. Jain. The Insurer filed Affidavit of Evidence of Rakesh Kumar, Assistant Manager. Both the parties filed their short synopsis.

6. I have considered the arguments of the counsel for the parties and examined the record. It is mandatory for the Insurer to appoint a surveyor for assessment of loss, exceeding Rs.25000/- under Section 68 UM of Insurance Act, 1938. Supreme Court in Sri Venkateswara Syndicate Vs. Oriental Insurance Company Ltd., (2009) 8 SCC 507 and Khatema Fibres Ltd. Vs. New India Insurance Company Ltd., 2021 SCC OnLine SC 818 held that the report of surveyor has to be given due importance. There should be sufficient ground to disagree with the report of the surveyor. Once it is found that there was no inadequacy in quality, nature and manner of performance of the duties and responsibilities and once it is found that the report is not based on adhocism or arbitrariness then the consumer forum will have no jurisdiction to ignore it.

7. The surveyor is an expert and its report stands on the footing of expert evidence and has to be corroborated from other evidence on record, in order to examine its correctness and bonafide/ malafide. In the present case, the Insurer appointed Select Surveyor Pvt. Ltd., on 07.05.2013, for investigation of the cause of fire. Select Surveyor Pvt. Ltd. submitted his Initial Investigation Report dated 30.05.2013, mentioning that ceiling of godowns was in depleted condition, hence there was possibility of water dropping through it, due to over overflow of the tank or due to bursting of water pipe. On that day there was neither rain fall, nor on the roof any water tank or water pipe was found, as such, the final opinion was given that occurrence of fire was purely accidental. He confirmed that 1937 drums of 100 kg. each of finished Sodium Hydrosulphite were burnt, in the fire. He submitted his Final Investigation Report dated 24.12.2013, in the same terms. The Insurer, however, relied upon part of these reports and in the repudiation letter has mentioned that the fire was caused due to water dropped from roof on the finished goods, due to negligence of the Insured. There is no evidence on record that in the night of 06.05.2013, there was rain fall, in the locality of the factory premises of the Insured nor there is any evidence that on the roof of the godowns, where, the fire had taken place, there was any water tank or water pipe. The Surveyor also examined this contingency in his report dated 12.12.2014 and held that the finished product was filled into drums from hopper under

vacuum. The drums were sealed and packed in Polyethylene liner. Thus fire due to moisture or water drop was completely ruled out. The Insurer has not filed any evidence in this respect, in the complaint. The findings of the Insurer that fire was caused due to water dropped from roof on the finished goods, is based upon conjectures and surmises, ignoring the material evidence on record.

8. The Insurer gave other reason for repudiation of the claim is that due own fermentation, natural heating or spontaneous combustion of Sodium Hydrosulphite. It was fully proved from the various documents, thoroughly examined by the Investigator and the Surveyor that in the godowns, where fire had occurred,finished Sodium Hydrosulphite was stored in the steel drums of 100 kg. each. On the basis of science literature, the Surveyor noted that Sodium Hydrosulphite has an inherent property of decomposition at 60 degree centigrade. The fire was caused on 06.05.2011 at 3:00 hours. The Surveyor in the Final Survey Report has noted that on the day of the fire, temperature was 46 degree centigrade. The godowns, where Sodium Hydrosulphite was stored in the steel drums, sealed and packed, was RCC roofed, brick built construction, as such, the temperature inside the godowns, during the day might be below 46 degree centigrade. At 3:00 hours, in night, the temperature might be much below 46 degree centigrade. Finding of the Surveyor in his report dated 12.12.2014 that RCC roof and metaled container might have absorbed heat during the day. This heat, in any case, might be below 46 degree centigrade while 60 degree centigrade is decomposition point. As such fire due own fermentation, natural heating or spontaneous combustion of Sodium Hydrosulphite was not possible. Repudiation of the claim is illegal.

9. The Insured claimed damages of cost of drum for packing, cost of polythene liner, labour for repacking and cost of disposal of burnt materials. These losses were covered in the policy. The Surveyor, while assessing the loss, has illegally ignored these losses.

10. Regulation 9 of The Insurance Regulatory and Development Authority (Protection of Policyholder's Interest) Regulations, 2002 directs the Surveyors to submit their Survey Report within 30 days and in any case within 45 days, from the date of his appointment. The Insurer has been directed to make settlement within 30 days of receipt of Surveyor's report. Regulation 9 (6) provides as follows:

Regulation-9(6). Upon acceptance of an offer of settlement as stated in sub-regulation (5) by the insured, the payment of the amount due shall be made within seven days from the date of acceptance of the offer of by the insured. In case of delay in the payment, the insurer shall be liable to pay interest at a rate which is 2 per cent, above the bank rate prevalent at the beginning of the financial year, in which the claim is reviewed by it. In view of this statutory provision, the Insured is entitled to interest @ 12% per annum after six months of the loss.

ORDER

In view of the aforesaid discussions, the complaint is allowed. The opposite party is directed to pay Rs.16860035/- along with interest @12% per annum from 06.01.2014 till the date of payment to the complainant, within two months from the date of delivery of this judgment.

......................J

RAM SURAT RAM MAURYA

PRESIDING MEMBER