From Rs 6.97 crore to Rs 48 lakh: Why this Delhi automobile company lost consumer battle before NCDRC

The national consumer commission directed the insurance company to pay the amount within 60 days. (Image generated using AI)

‘Policy valid, survey reports accepted’

• The survey report is a crucial and relevant document in the assessment of the claim and cannot be disregarded unless proved arbitrary.
• The policy was valid on the day of the fire incident.
• Both survey reports, dated April 1, 2015, and June 27, 2024, do not suffer from any infirmity.
• Both reports can be accepted to determine or assess claims submitted by the claimant.
• However, the opposite party number 1 (The Oriental Insurance Company Ltd) rejected the entire claim of the complainant on January 3, 2016, which was not justified and without any basis.
• The complainant was at least entitled for reimbursement of claim amounting to Rs 48.83 lakh along with interest and cost of litigation.
• Accordingly, the present complaint is allowed to the extent of Rs 48.83 lakh.
• The insurance company is directed to pay Rs 48.83 lakh as loss claim to the complainant, along with interest at the rate of 9 per cent from the date of rejection of the claim, and litigation cost of Rs 2 lakh.
• The insurance company is directed to pay said amount within 60 days after adjusting the amount already paid by the company to the complainant.
• If the awarded balance amount is not paid within 60 days, then the company shall be liable to pay interest at the rate of 12 per cent to the consumer.
• The commission relied on Supreme Court precedents, including Khatema Fibres Ltd v. New India Assurance Co Ltd, Sri Venkateshwara Syndicate v Oriental Insurance Co Ltd and New India Assurance Co Ltd v. Pradeep Kumar.

Fire incident and Rs 6.97 crore claim

• Swarna Motors had obtained a ‘Standard Fire & Special Perils Policy’ from Oriental Insurance Company Ltd covering the stock of commercial vehicle spare parts stored at its Delhi and Panipat warehouses.
• On the night of October 12, 2013, at around 11.30 pm, a fire – allegedly caused by a short circuit – engulfed the Panipat warehouse, destroying stock and documents.
• At the time, the ‘Standard Fire and Special Peril Policy’ procured by the complainant was valid.
• The policy, valid from September 21, 2013, to September 20, 2014, insured stock worth Rs 7.37 crore.
• The consumer informed the insurer the next day and lodged a formal claim on October 14, 2013, seeking Rs 6.97 crore as compensation.

Surveyor assesses loss

• The insurance company appointed M/s Atul Kapur & Company, a surveyor approved by the Insurance Regulatory and Development Authority of India (IRDAI), to assess the loss.
• The company submitted the survey report on April 1, 2015.
• Atul Kapur & Company had assessed the loss at Rs 48.83 lakh.
• In a report dated April 1, 2015, the surveyor concluded that the complainant had not maintained stock registers or inward/outward registers.
• Claimed quantities were unsupported by verifiable records.
• Excel sheets produced from another office contained discrepancies.
• There was no acceptable evidence establishing the presence and damage of the claimed stock.
• After applying deductions, including policy excess, the net loss was assessed at Rs 48.83 lakh against the Rs 6.97 crore claim.
• On January 3, 2016, the insurance company rejected the claim, stating that the insured had committed a “gross breach of terms & conditions” by failing to provide required books, vouchers, invoices, and proofs despite repeated opportunities.

Legal battle reaches NCDRC, Supreme Court

• Aggrieved, Swarna Motors approached the NCDRC under the Consumer Protection Act, 1986, seeking Rs 6.97 crore with 18 per cent interest from October 14, 2013.
• The complainant also sought Rs 50 lakh for mental agony, and Rs 2 lakh in legal costs.
• In an order dated November 9, 2023, the NCDRC had allowed the complaint and directed the insurer to pay Rs 6.97 crore with 9 per cent interest.
• However, the insurer challenged the ruling before the Supreme Court in a civil appeal.

Fresh survey confirms earlier findings

• Pursuant to the Supreme Court’s directions, the insurer appointed another surveyor, Ram Gopal Verma, who submitted a fresh report on June 27, 2024.
• The second survey report reaffirmed that the complainant failed to correlate purchase invoices with claimed items.
• No stock register, purchase register, or sales register was produced.
• The claimed figure of Rs 6.57 crore (as per the claim sheet) was hypothetical and unsupported.
• The earlier assessment of Rs 48,83,696 was correct and based on physical verification.
• On March 15, 2024, the apex court set aside the NCDRC’s order, observing that the commission had erred in allowing the claim “without getting the loss verified through any identified agency” and remitted the matter for fresh consideration.
• The Supreme Court directed the payment of Rs 48.83 lakh, the amount assessed by the surveyor, with 6 per cent interest pending fresh adjudication.
• The matter was then sent back to the NCDRC.

Alleged regulatory delay not enough

• The complainant argued that there was a violation of IRDAI Regulation 13(2), which mandates submission of survey reports within 30 days.
• While the Commission acknowledged the regulatory framework, it did not find that delay alone could justify awarding the exaggerated claim in the absence of proof of actual stock loss.