SATENDER KUMAR & ANR. v. ORIENTAL INSURANCE COMPANY LIMITED

(c) allow the litigation charges of Rs.35,000/- in favour of the complainant and against the Opposite Party;

(d) Pass any other or further order(s) or relief(s) which this Hon'ble Forum may deem fit and proper in the facts and circumstances of the complaint in favour of the complainant and against the Opposite Parties, in the interest of justice."

2. Brief facts of the case, as per the Complainant, are that the Complainants are partners of M/s Nancy Hosiery Industry, a reputed wholesale garment business operating since 2003 and known for its quality and integrity. The Complainants have obtained a "Standard Fire & Special Perils Policy" (Policy No. 212707/11/2018/64) from the Opposite Party (OP) insuring stock worth ₹2.45 crores located at their factory premises in WZ-325/3 Yadav Market, Shakurpur Village, Delhi. The said policy covers raw materials and finished goods for the period from 23.08.2017 to 22.08.2018. On the night of 19.10.2017, a massive fire broke out due to an electrical short circuit, destroying about 70% of the insured stock, including socks, yarns, cotton, elastic materials, and packaging, resulting in loss of ₹1.7 crores. The matter was reported immediately to the OP and a claim was submitted along with supporting documents, including fire brigade reports, stock details etc. Despite reminders and follow up, the OP failed to fairly assess and release the claimed amount. Instead, the appointed surveyor acted negligently and did not provide any report to the Complainants. Their repeated pleas were ignored. Due to duress exerted by the OPs, the Complainants reluctantly agreed to partial settlements of ₹12.35 lakhs and ₹11 lakhs. Even then, these amounts were not disbursed. They alleged deficiency in service, unfair trade practice, mental and financial harassment and coercive tactics against the OP in not making the rightful payment. They sought release of ₹1.7 Cr along with ₹20 lakhs as compensation for mental agony and ₹35,000 towards litigation costs, with interest @ 24% per annum from 20.10.2017 till realization.

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3. Upon notice, the complaint was resisted by the OP by filing the Written Statement. OP-1 raised objection regarding the maintainability of the complaint contending that the Complainant, having availed insurance services for commercial purposes, did not fall within the definition of a „consumer" under the Act. It was contended that the claim was lawfully repudiated vide reasoned letter dated 08.01.2020, citing critical discrepancies: (i) the fire occurred at 325/1, Shakurpur Village and not at the insured location (325/3); (ii) the submitted rent agreement (325/2) also mismatched the policy; (iii) the Complainant failed to submit the second Fire Brigade Report (20.10.2017); (iv) purchases were undeclared in GST/VAT returns with bill-vendor inconsistencies; (v) improper/inauthentic accounting records; (vi) insured negligence (lighted diyas near stock) and absence of firefighting facilities. The Surveyor"s Final Report dated 13.10.2018 confirmed the Complainant"s failure to maintain proper books of accounts, piecemeal submission of post-loss fabricated records, lack of insurable interest on claimed stocks, delayed documentation (e.g., Claim Form submitted ~1 year post-incident), and assessed net liability at ₹12,30,472/-, without prejudice to admissibility. The OP had denied all allegations in the complaint, including the purported loss valuation (₹1.7 crore), deficiency claims, and entitlement to compensation. The OP also contended that the Complainant approached this Commission with unclean hands by concealing material facts (e.g., location mismatch, documentation gaps etc). it was further contended that the complaint is further non-maintainable under Section 69 of the Partnership Act, 1932, due to unproven firm registration. No deficiency in service exists as repudiation was justified and lawful. The OP sought the Complaint to be dismissed with costs.

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4. The Complainants filed Rejoinder and reiterated the facts of the complaint and filed its evidence on Affidavit and relied on the copy of SPA executed by Complainant No.1 in favour of Suman Lata Chumbak - CW1 as Exhibit CW1/1, Balance Sheet of the year 2017, 2014-15, 2015-16, 2016-17 as Exhibit CW1/2, the insurance policy as Exhibit CW1/3, the copy of Fire Brigade Report dated 01.11.2017 as Exhibit CW1/4, copy of the fire insurance claim form as Exhibit CW1/5, the copy of reminders as Exhibit CW1/6 (Colly), the copy of letters dated 08.04.2018 and 14.09.2018. CW2-Sh. Sunil Kumar also proved the above said documents.

5. The OP filed its evidence on Affidavit of Sh. Jitendra Singh, Chief Manager on behalf of OP and reiterated the grounds taken in the Written Statement and relied on the repudiation letter dated 08.01.2020 as Exhibit OPW1/1, detailed letter dated 21.06.2019 as Exhibit OPW1/2, copy of letter dated 21.08.2017 as Exhibit OPW1/3, copy of insurance policy as Exhibit OPW1/4. The Surveyor - Shri Sajan Kumar has filed his affidavit as OPW2 and relied upon the Interim Report dated 24.10.2017 as Exhibit OP2/1 and Final Survey Report dated 13.10.2018 as Exhibit OP2/2.

6. In his arguments, the learned counsel for the Complainants reiterated the contentions in the complaint and argued that M/s Nancy Hosiery Industry was a reputed wholesale garment firm which suffered a fire loss of ₹1,70,00,000 on 19.10.2017 at their insured premises at WZ-325/3, Shakurpur Village, wherein 70% of the items were destroyed. The stock was fully covered under Standard Fire & Special Perils Policy No.212707/11/2018/64 for sum insured of ₹2,45,00,000. Despite immediate intimation and claim submission, the insurer"s appointed M/s JSR Insurance Surveyors who conducted inadequate

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assessment and failed to provide reports, leading to inordinate delay and coercive tactics by the OP while the Complainants were facing huge debts and severe financial distress. OP pressured them into accepting a reduced settlement of ₹23.35 lakhs (₹12.35 lakhs + ₹11 lakhs), which remained unpaid. The Complainants seek the insured loss of ₹1,70,00,000 with 24% interest from 20.10.2017, ₹20,00,000 as compensation for mental harassment, and ₹35,000 litigation costs, asserting the insurer"s deficiency in service, unfair trade practices, and failure to honour policy obligations despite documented evidence including balance sheets (Ex. CW1/2), policy copies (Ex. CW1/3), fire brigade reports (Ex. CW1/4), copy of insurance claim (Ex.CW1/5) and payment reminders (Ex. CW1/6-7).

7. On the other hand, the learned counsel for OP argued that the insured premises is at WZ-325/3, Shakurpur Village, Delhi-110034 constitutes one portion of the building at the ground floor and the fire broke out at the second floor, which is not insured. She argued that the Complainant had submitted the rent agreement only with respect to WZ-325/2, Shakurpur Village, Delhi-110034 which is not the premises occupied by the Complainant and insured by the OP. She asserted that the claim is not maintainable since the insurance policy was for commercial purposes. The learned counsel argued that the claim repudiation vide letter dated 08.01.2020 which is lawful and well reasoned. She asserted that the fire occurred at 325/1, Shakurpur Village and not at the insured location 325/3. In fact the rent agreement filed was with respect to location 325/2 which is in mismatch with the policy in question. The stock purchases were not declared in GST/VAT returns and contained bill-vendor inconsistencies and improper/inauthentic accounting records. In addition, there was reported negligence by the insured wherein diyas were lit in the

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proximity of stocks, without any firefighting facilities. The Complainant failed to maintain proper books of accounts and submitted the accounts in piecemeal manner and records were fabricated. The net assessed liability was ₹12,30,472/-, without prejudice to admissibility. She asserted that there was no deficiency in service and the claim repudiation was justified and lawful. She sought the complaint to be dismissed with costs.

8. We have examined the pleadings and associated documents placed on record and rendered thoughtful consideration to the arguments advanced by the learned counsel for both the parties.

9. The main issues to be determined are, whether the incident of fire occasioned at the insured premises? Whether the said fire incident covered under the policy in question? Whether the action of OP insurer in not releasing the claim or net liability determined by the surveyor amounts to deficiency in service or unfair trade practice under the Act, 1986?

10. It is a matter of record that the Complainants have obtained Standard Fire & Special Perils Policy No.212707/11/2018/64 for insuring items worth ₹2.45 Crores at their factory premises in WZ- 325/3 Yadav Market, Shakurpur Village, Delhi, covering raw materials and finished goods for the period from 23.08.2017 to 22.08.2018. It is also not in dispute that on the night of 19.10.2017, a massive fire broke out at the premises destroying about 70% of the insured stock, including socks, yarn, cotton, elastic material and packaging, resulting in loss of ₹1.7 Cr. The Complainant notified the OP immediately and a claim was submitted. It is the contention of the Complainant that despite repeated requests the claim was delayed and under duress they reluctantly agreed to partial settlement of the claim for ₹12.35

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lakhs and ₹11 lakhs, and even this amount was not disbursed. They alleged deficiency in service, unfair trade practice, mental and financial harassment, and coercive tactics by OP to avoid their rightful claim. On the other hand, the OP contended that the insured premises is at WZ-325/3, Shakurpur Village, Delhi-110034 which constitutes one portion of the building at the ground floor and the fire broke out at the second floor, which is not insured. Further, the Rent Agreement submitted pertains to WZ-325/2, Shakurpur Village, Delhi-110034 which is not the premises occupied by the Complainant. It was argued that the claim is not maintainable since the insurance policy was for commercial purposes. The fire occurred at 325/1, Shakurpur Village which is not the insured location 325/3. The stock purchases were not declared in GST/VAT returns and there were inconsistencies of bill- vendor and improper/inauthentic accounting records. It was argued that there was negligence by the insured wherein diyas were lit in the proximity of stocks, without any firefighting facilities. They failed to maintain proper accounting and submitted in piecemeal manner with fabricated records. Thus, the claim was repudiated vide letter dated 08.01.2020. She sought the complaint to be dismissed with costs.

11. It is undisputed that both the parties have entered into insurance contract vide policy dated 23.08.2017 from 23.08.2017 to 22.08.2018. It is also undisputed that on the night of 19.10.2012, a fire broke out at the premises of the Complainant which resulted in substantial damage to the insured property/stocks. The matter was immediately reported to the OP and the OP had appointed JSR Insurance Surveyors & Loss Assessors as surveyor, who submitted a detailed report on the incident and liability of the parties on 24.10.2017. The surveyor determined the net liability as Rs.12,30,472. After considering the said survey report, the OP repudiated the claim vide letter dated 08.01.2020 citing:

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"We have gone through the claim file and observed as under:-

1. Location of Fire under the policy is 325/3, Shakurpur Village, Delhi-110034 but the fire had occurred at 325/1 Shakurpur Village, Delhi-110034 which is not covered under the policy. Moreover the Rent Agreement submitted by you is only for 325/2, Shakurpur Village, Delhi-110034 which is also not covered under the policy.

2. There was Fire occurred 2^nd time in the Premises and 2^nd Fire Brigade Report dtd. 20.10.2017 at 12:00 pm to 12:30 pm is also not submitted by you.

3. It is also noticed from the papers/documents submitted by you that all purchases from different vendors are not declared in VAT/GST returns, there are differences in purchases from the vendors when compared with purchase bills.

4. We have gone through the papers/documents submitted by you which shows that the accounting records are improper and not authentic and reliable.

5. The incident was happened due to lighted Diyas near the stock, this shows negligence on the part of insured and as per the principle of indemnity the insured has to act as uninsured but insured has not taken care of material whereas it is a common law duty on any party to a contract to avoid a loss or to minimize the loss. Moreover there are no fire fighting facilities available at the premises. On the basis of above mentioned facts, the subject claim cannot be considered for payment. Hence your claim is finally repudiated. This is for your information."

12. Careful perusal of the records reveals that the surveyor engaged by the OP had made multiple visits to the incident site and recorded the location of losses/damages as WZ325/3 Shakurpur Village, Delhi- 110034 (First Floor). It is the contention of OP that the location of the fire with respect to which the claim has been made under the policy

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was at 325/3 Shakurpur Village, Delhi-110034, while as per the Rent Agreement submitted by the Complainant to the OP it was 325/2 Shakurpur Village, Delhi 110034. Perusal of the surveyor report reveals that while the address of the Complainant has been notified as WZ325/3 Shakurpur Village, Delhi-110034. It recorded that the Complainant was occupying the complete premises of first, second and third floor of the building. After due scrutiny of the premises, scope of policy, damage occasioned and liabilities of the parties, the surveyor made no observations with respect to any ambiguity of the location/ premises where the insured goods were located. Therefore, the contentions of the OP in this regard are untenable. It is also a matter of record that the details with respect to fire incident in question in which substantial amount of stocks/assets of the complainant were destroyed were provided by the Complainant to the surveyor. The surveyor had gone into detailed evaluation of the incident and prepared the report, which included a sketch, photographs and details of stocks and property destroyed in the fire. At no stage, the surveyor raised any issues with respect to non-availability of information/records pertaining to stocks which were destroyed, for which the claim was preferred. While there was some deficiency in inventory details, the surveyor accordingly assessed the liability. The surveyor also provided details of location, layout and occupation of the premises with fair clarity at Para 5.3 of the report. Therefore, clearly, the address stated in the policy and the lease agreement between the parties is with respect to the same building and that the stocks are also stored in the same building, which was visited by the surveyor on multiple occasions.

13. On due evaluation, the surveyor had determined the gross loss suffered by the insured as Rs.51,69,000 and net assessed loss which was indemnifiable was Rs.20,04,277 and salvage was Rs.8,00,000.

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The net assessed salvage value was Rs.4,82,000, after consideration of dead stock wherein factor of 7.5% and Debris Removal Charges of 1% of the assessed loss. The segregation laborer charges of Rs.10,000 and excess loss of 5% of the claim amount, the net liability was determined as Rs.12,30,472. This amount was so determined, as the surveyor considered that the complainant was not maintaining proper books of accounts and many of the records produced on piecemeal basis and on scrutiny they were not found to have proper insurable interest on loss of the stocks claimed by the Complainant. Therefore, the net liability had been assessed as Rs.12,30,472 and the surveyor observed that it would be just and reasonable to settle the claim for the assessed net liability of the Rs.12,30,472 towards the loss suffered by the Complainant. Evidently, the OP/Insurer had processed the claim filed by the Complainant with hyper-technical approach with respect to the location, which otherwise substantially stood clarified. The issues with respect to the second occurrence of fire on 20.10.2017 and the second fire brigade report have no implication, as the said report pertained to the same incident, due to leftover simmering fire incident that had occasioned in the night of

19.10.2017.

14. The issues with respect to the invoices/documents towards purchases were already adequately addressed by the surveyor and appropriately discounted in the net assessed loss under the policy in question. Also, there is no evidence with respect to alleged negligence on the part of the Complainant in the form of lighting diyas and that the incident of fire in question had occasioned on account of the same.

15. It is also a matter of record that while the incident of fire had occasioned on 19.10.2017 and the survey report was filed on

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24.10.2017, the claim was repudiated by the OPs after the lapse of over two years on 18.01.2020, which is violation of IRDA norms.

16. In catena of judgements, the nature of insurance contracts, scope and restraint to be exercised in interpreting the terms of contract are well discussed and crystallized by this Commission and Hon"ble Supreme Court. The Hon"ble Supreme Court in the case of United India Insurance Co. Ltd. Vs M/s Hyundai Engineering & Construction Co. Ltd. & Ors., 2024 LiveLaw 409 has held that :

"16. Insurance is a contract of indemnification, being a contract for a specific purpose, Oriental Insurance Co. Ltd. v. Sony Cheriyan ., (1999) 6 SCC 451, which is to cover defined losses, United India Insurance Co. Ltd. v. Levis Strauss (India) (P) Ltd., (2022) 6 SCC 1. The courts have to read the insurance contract strictly. Essentially, the insurer cannot be asked to cover a loss that is not mentioned. Exclusion clauses in insurance contracts are interpreted strictly and against the insurer as they have the effect of completely exempting the insurer of its liabilities, New India Assurance Co Ltd v Rajeshwar Sharma, (2019) 2 SCC 671; Canara Bank v. United India Insurance Co. Ltd., (2020) 3 SCC 455; Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Coop. Bank, (1999) 8 SCC 543.

17. In Texco Marketing P. Ltd. v. TATA AIG General Insurance Company Ltd., Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Coop. Bank, (2023) 1 SCC 428, while dealing with an exclusion clause, this Court has held that the burden of proving the applicability of an exclusionary clause lies on the insurer. At the same time, it was stated that such a clause cannot be interpreted so that it conflicts with the main intention of the insurance. It is, therefore, the duty of the insurer to plead and lead cogent evidence to establish the application of such a clause, National Insurance Company Ltd. v. Vedic Resorts and Hotels Pvt. Ltd., 2023 SCC OnLine SC 648. The evidence must unequivocally establish that the event sought to be excluded is specifically covered by the exclusionary clause, National Insurance Co. Ltd. v. Ishar Das Madan Lal ., 2007

(4) SCC 105. The judicial positions on the nature of an insurance contract, and how an exclusion clause is to be proved, shall anchor our reasoning in the following paragraphs."

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17. In CA No.10671 of 2016 in Narsingh Ispat Ltd Vs Oriental Insurance Company Ltd. & Anr 2022 LiveLaw (SC) 443, the Hon"ble Supreme Court while reiterating National Insurance Co Ltd vs Ishar Das Madan Lal (2007) 4 SCC 105 (Para 12) held that the burden is on the insurer to show that the case falls within the purview of exclusion clause. In case of ambiguity, benefit goes to the insured.

18. In the given circumstances, even if there was some ambiguity with respect to the scope of cover under the policy, the same shall be interpreted in favour of the insured as clarified by the Hon"ble Supreme Court in Haris Marine Products versus Export Credit Guarantee Corporation (ECGC) Limited, 2022 SCC OnLine SC 509 wherein it was held that when there is any ambiguity in the terms and conditions of the contract, the court has the discretion to interpret the same in favour of the Insured by applying the principle of „Contra Proferentem".

The relevant portion of the said judgment is as under:-

"22. Reconciliation of ambiguous terms in commercial contracts has been a contentious issue across jurisdictions. A 2011 decision by the Supreme Court of the United Kingdom (hereafter, "UK Supreme Court") in Rainy Sky SA v. Kookmin Bank was concerned with the interpretation of refund guarantees given by a ship builder to the buyers, and whether the same was triggered when the ship builder started facing financial difficulties and was subjected to a debt workout procedure. Allowing the appeal, the UK Supreme Court provided the guiding principle for resolution of such ambiguity, keeping the „business common sense" as central:

"The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions,

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the court is entitled to prefer the construction which is consistent with business common sense and to reject the other." (emphasis supplied)

23. This principle was further developed by UK Supreme Court in Arnold v. Britton. The facts were that a 99-year lease specified that service charge of £90 levied every year was subject to 10% increase annually. The lessees submitted that by the end of the lease agreement, the service charge payable would be very high, exceeding the cost of providing the services. The UK Supreme Court refused to depart from the natural meaning of the clause, holding that:

"When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean", to quote Lord Hoffmann in Chartbrook Ltd. v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. In this connection, see Prenn at pp 1384-1386 and Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen (trading as HE Hansen-Tangen) [1976]1WLR 989 (2), 995-997 per Lord Wilberforce, Bank of Credit and Commerce International SA (in liquidation) v. Ali [2002] 1 AC 251, para 8, per Lord Bingham, and the survey of more recent authorities in Rainy Sky, per Lord Clarke at paras 21-30". (emphasis supplied)

24. Thus, a decisive method was suggested to construe the ambiguity of a term used in a commercial contract. This was applied by the UK Supreme Court in Woods v. Capita Insurance.¹⁷ The facts in brief are that the buyer of an insurance company relied on an indemnity clause to recover losses paid in the form of compensation to the customers of the insurance company to which the company has mis-sold products. According to the indemnity clause, any complaint to the Financial Services

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Authority (hereinafter "FSA") would be indemnified by the buyer. However, the contract did not clearly specify what would happen if the company itself raised a complaint before the FSA. The UK Supreme Court held that a literalist approach to resolving ambiguity in a commercial contract term would yield incorrect results, and a holistic reading was imperative to ascertain meaning of terms agreed to by parties. Dismissing the appeal, the UK Supreme Court finally held that the indemnity clause was in addition to the wide- ranging warranties specified elsewhere in the contract, which was not contrary to business common sense. The agreement might have become a poor bargain for the buyer, but it was not the Court's function to improve that bargain:

"The court's task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. ***

Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual

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matrix and the purpose of similar provisions in contracts of the same type. The iterative process, of which Lord Mance spoke in Sigma Finance Corpn (above), assists the lawyer or judge to ascertain the objective meaning of disputed provisions. On the approach to contractual interpretation, Rainy Sky and Arnold were saying the same thing." (emphasis supplied)

25. On application of the above principle to this Policy, and taking into consideration all relevant documents, this Court is of the opinion that the date of loading goods onto the vessel, which commenced one day prior to the effective date of the policy, is not as significant as the date on which the foreign buyer failed to pay for the goods exported, which was well within the coverage period of the Policy. Thus, the claim could not be dismissed simply on such basis, especially given that the date of loading the goods onto the vessel was immaterial to the purpose for which the policy was taken by the appellant.

B. Rule of contra proferentem

26. It is entrenched in our jurisprudence that an ambiguous term in an insurance contract is to be construed harmoniously by reading the contract in its entirety. If after that, no clarity emerges, then the term must be interpreted in favour of the insured, i.e., against the drafter of the policy. In deciding the applicability of a cover note on houses swept away by floods, a Constitution Bench of this Court in General Assurance Society Ltd. v. Chandumull Jain¹⁸ held as follows:

"In other respects there is no difference between a contract of insurance and any other contract except that in a contract of insurance there is a requirement of uberrima fides i.e., good faith on the part of the assured and the contract is likely to be construed contra proferentem that is against the company in case of ambiguity or doubt… (I)n interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves". (emphasis supplied)

19. In catena of judgements the Hon"ble Supreme Court observed that the assessment made by a surveyor holds significant importance. The relevance of considering the Surveyor"s Report was elucidated in

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Sri Venkateshwara Syndicate Vs. Oriental Insurance Company Limited (2009) 8 SCC 507, the Hon"ble Supreme Court has further observed:

"22. The assessment of loss, claim settlement and relevance of survey report depends on various factors. Whenever a loss is reported by the insured, a loss adjuster, popularly known as loss surveyor, is deputed who assess the loss and issues report known as surveyor report which forms the basis for consideration or otherwise of the claim. Surveyors are appointed under the statutory provisions and they are the link between the insurer and the insured when the question of settlement of loss or damage arises. The report of the surveyor could become the basis for settlement of a claim by the insurer in respect of the loss suffered by the insured. There is no disputing the fact that the Surveyor/Surveyors are appointed by the insurance company under the provisions of Insurance Act and their reports are to be given due importance and one should have sufficient grounds not to agree with the assessment made by them. We also add, that, under this Section the insurance company cannot go on appointing Surveyors one after another so as to get a tailor made report to the satisfaction of the concerned officer of the insurance company, if for any reason, the report of the Surveyors is not acceptable, the insurer has to give valid reason for not accepting the report. 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 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."

20. The Hon"ble Supreme Court in Khatema Fibres Ltd. v. New India Assurance Company Ltd., 2021 SCC OnLine SC 818, decided on 28.09.2021 has held that:

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"32. It is true that even any inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law or which has been undertaken to be performed pursuant to a contract, will fall within the definition of the expression „deficiency". But to come within the said parameter, the appellant should be able to establish (i) either that the Surveyor did not comply with the code of conduct in respect of his duties, responsibilities and other professional requirements as specified by the regulations made under the Act, in terms of Section 64UM(1A) of the Insurance Act, 1938, as it stood then; or (ii) that the insurer acted arbitrarily in rejecting the whole or a part of the Surveyor"s Report in exercise of the discretion available under the Proviso to section 64UM(2) of the Insurance Act, 1938.

…

37. Two things flow out of the above discussion, They are (i) that the surveyor is governed by a code of conduct, the breach of which may give raise to an allegation of deficiency in service; and

(ii) that the discretion vested in the insurer to reject the report of the surveyor in whole or in part, cannot be exercised arbitrarily or whimsically and that if so done, there could be an allegation of deficiency in service.

38. A Consumer Forum which is primarily concerned with an allegation of deficiency in service cannot subject the surveyor"s report to forensic examination of its anatomy, just as a civil court could do. Once it is found that there was no inadequacy in the quality, nature and manner of performance of the duties and responsibilities of the surveyor, in a manner prescribed by the Regulations as to their code of conduct and once it is found that the report is not based on adhocism or vitiated by arbitrariness, then the jurisdiction of the Consumer Forum to go further would stop."

21. In a recent case of National Insurance Co.Ltd. Vs. M/s Hareshwar Enterprises Pvt. Ltd. & Ors., Civil Appeal No.7033 of 2009 decided on 18.8.2021, 2021 SCC Online SC 628, the Hon"ble Supreme Court has been held as under :

"17.......Therefore, in the facts and circumstances herein the surveyors report was submitted as the natural process, the conclusion reached therein is more plausible and reliable rather than the investigation report keeping in view the manner in which the insurer had proceeded in the matter.

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Hence, the reliance placed on the surveyor's report by the NCDRC without giving credence to the investigation report in the facts and circumstances of the instant case cannot be faulted. In that view, the conclusion reached on this aspect by the NCDRC does not call for interference."

"18. … Having considered this aspect, the rate of interest to be awarded in normal circumstance should be commensurate so as to enable the claimant for such benefit for the delayed payment. There is no specific reason for which the NCDRC has thought it fit to award interest at 12% per annum. Therefore, the normal bank rate or thereabout would justify the grant the grant of interest at 9% per annum. Accordingly, the amount as ordered by the NCDRC shall be payable with interest at 9% per annum instead of 12% per annum. To that extent, the order shall stand modified…"

22. It is an admitted position that the Net Liability of OP was determined by the Surveyor to the extent of Rs.12,30,432 vide final survey report dated 13.10.2018. The consent of full & final settlement of claim for sum of Rs.12.35 Lakh vide letter dated 08.10.2018.

23. In view of the foregoing, after due consideration of the entire facts and circumstances of the case, including the Complainants claim under all heads of accounts as well as the Surveyor Report, considerations of OP thereon and the detailed arguments advanced by the learned counsels for both the parties:

ORDER

I. Opposite Party Insurer is directed to pay the Complainant Rs.12,30,472, along with simple interest @ 7% per annum from 08.10.2018 (the consent date of full and final settlement) till the final payment, within a period of two months from the date of this order. In the event of delay, the simple interest

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II. The Opposite Party is directed to pay Rs.50,000 to the Complainants as costs of litigation.

24. With these directions, Consumer Complaint No.2066 of 2019 is disposed of.

25. All pending Applications, if any, also stand disposed of accordingly.

…….…………………………

(DR. INDER JIT SINGH)

PRESIDING MEMBER

.........…………………..……………………… (AVM J. RAJENDRA, AVSM VSM (Retd.)

MEMBER

bs/

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