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2025 DIGILAW 2632 (KER)

National Insurance Co Ltd. v. Edappanaagro Mills

2025-10-07

MOHAMMED NIAS C.P.

body2025
JUDGMENT : Mohammed Nias C.P., J. W.P.(C) No.43531 of 2024 and W.P.(C) No.195 of 2025 are filed by the National Insurance Company (hereinafter referred to as the insurer) challenging the awards passed by the Permanent Lok Adalath (hereinafter referred to as 'PLA'), Ernakulam, in O.P.No.4442/2020 and O.P.No.4443/2020, dated 06.09.2024. W.P.(C) No.3062 of 2025 and W.P.(C) No.3164 of 2025 are filed by the complainants/insured in the above proceedings, challenging the award to the extent it refused payment of interest from the date of the petition filed on 29.01.2020. 2. The brief facts necessary for the disposal of the cases are as follows: O.P.No.4442/2020 was filed by the first respondent in W.P. (C) No.43531/2024 before the second respondent, alleging that an amount of Rs 43.12 lakhs is due to him under two policies of insurance issued by the petitioner company. It was his case that he was engaged in the business of production, storage and sale of rice and allied products and that the stock of raw materials and finished goods was insured for Rs 70 lakhs, and the machinery therein was insured for Rs 24 lakhs. It was contended that in the flood that occurred on 15.08.2018, stock of 16 metric tons of paddy, 178 metric tons of rice, 43 metric tons of rice bran and new gunny bags worth Rs 1.45 lakhs were damaged and were verified by the Chartered Accountant. He also contended that the water level rose to 7 to 9 feet, and the entire stock was damaged, and the estimated loss was Rs 69.36 lakhs. 3. It was pleaded that on 23.08.2018, the Surveyor appointed by the company inspected the premises to assess the loss. It is also stated that on 12.09.2018, the Food Safety Officer concerned inspected the factory and storage of the first respondent and estimated that 60.051 metric tons of paddy and 178.545 metric tons of rice found in the premises were unfit for human consumption and that the quantity was estimated with the aid of the stock register as no physical verification was possible. The Surveyor, based on the report of the Chartered Accountant, valued the total stock at Rs.2,29,54,037/- and assessed 60% loss of the said value as loss, without considering the capillary rise of water through the stacks above the water level. The Surveyor, based on the report of the Chartered Accountant, valued the total stock at Rs.2,29,54,037/- and assessed 60% loss of the said value as loss, without considering the capillary rise of water through the stacks above the water level. It is also stated that the applicant received Rs.1,07,46,484/- in his bank account through RTGS transfer and that the entire stock and something in excess was consigned to Bharat Kataria as salvage, and it was not merely 60% of the total stock. 4. The company contended that the Surveyor appointed by the company fixed the loss at Rs.2,29,54,037/- and the consumer/insured was directed to segregate the affected stock, but they did not do so on the premise that the Food Safety Officer had certified that the whole stock was unfit for human consumption. The contention that the entire items were affected was denied. It is also stated that a further amount of Rs.11,15,571/- was paid. It was submitted that the first respondent had given a consent form for a settlement of the claim on 03.05.2019. The Survey report dated 09.03.2019 was also produced. 5. The PLA, after appreciating the documentary evidence, directed the company to pay a further amount of Rs.79,14,103/- through Ext.P6 award in W.P.(C) No.43531/2024. It was found that the survey report ought to have been accepted in toto, and that there was no justification on the part of the Surveyor in making a deduction of 40% of the stock value. 6. As regards W.P.(C) No.195 of 2025 which is more or less on the same contentions, in O.P.No.4443/2020 the first respondent complained before the second respondent that in the unprecedented flood on 15.08.2018, water entered the factory building to a height of 7 to 9 feet resulting in a damage to the tune of Rs.69,36,193.50/-. The Surveyor appointed by the writ petitioner had inspected the premises on 23.08.2018 for assessing the loss. On 12.09.2018, the Food Safety Officer inspected the factory and found that 60.051 metric tons of paddy and 178.545 metric tons of rice in the premises of the petitioner were unfit for human consumption and directed the petitioner to destroy the same at the earliest. On 12.09.2018, the Food Safety Officer inspected the factory and found that 60.051 metric tons of paddy and 178.545 metric tons of rice in the premises of the petitioner were unfit for human consumption and directed the petitioner to destroy the same at the earliest. The Surveyor had submitted a report on 09.03.2019 assessing the total value of the stock as Rs.55,22,176/-, excluding the rice bran and gunny bags, with the help of a chartered accountant, and 60% of the above value was assessed as a gross loss to the goods affected by the flood. As regards the claim for damage to the machinery, the surveyor reported an amount of Rs.19,02,333/- on the basis of the bills of repairs and calculated the net loss at Rs.9,51,167/- after applying 50% depreciation for the repairing cost. The complainant claimed an amount of Rs.43,12,179/- by way of the remaining amount on account of the loss sustained to the stock of raw materials and finished goods, and also towards the repairing cost of the machinery. 7. The insurance company contended that a Surveyor was appointed to assess the damage. It is argued that the Surveyor suggested that the assessment of loss be restricted to 60% of the stock. It was argued that the amounts due to the complainant were paid and that he is not entitled to any further amount. 8. After considering the rival contentions, the Forum directed the writ petitioner to pay an amount of Rs.19,75,630/- within two months from the date of receipt of the copy of the award, failing which the award amount will carry an interest of 9% from the date of the award till realisation from the writ petitioners. 9. The learned Senior Counsel appearing for the Insurance Company, Sri. George Cherian instructed by Sri. George A. Cherian apart from reiterating the pleadings also relied on the judgments in Sikka Papers Limited v. National Insurance Company Limited and Others [ (2009) 7 SCC 777 ] , United India Insurance Co. Ltd. and Others v. Roshan Lal Oil Mills Ltd. and Others [ (2000) 10 SCC 19 ] and National Insurance Company Ltd. v. K. Raghunathan [Civil Appeal No.1561 of 2004]. 10. Ltd. and Others v. Roshan Lal Oil Mills Ltd. and Others [ (2000) 10 SCC 19 ] and National Insurance Company Ltd. v. K. Raghunathan [Civil Appeal No.1561 of 2004]. 10. The learned counsel appearing for the insured, Sri.R. Surendran, contends that the report of the Surveyor has been scrutinised in its entirety by the PLA, and it was found, based on the evidence on record, that there was no justification for the Surveyor to deduct 40% of the gross value. As regards the contention that the insured had given consent to settle the entire claim, it is pointed out that, in the written statement filed before the Lok Adalath, it was stated that the amount shown in Ext.P4 in W.P.(C) No.43531 of 2024 is not the full and final settlement and that the signatures were obtained from the petitioners, who lacked literacy in English language, and believing that the entire amount fixed by the Surveyor would be paid, the signatures were put on blank papers. 11. It is also argued that there was no communication from the insurer/surveyor regarding the segregation of damaged stock and since the Food Safety Officer was convinced that the entire stock has become unfit for human consumption, no purpose would be served by such segregation as the photographs taken by the Surveyor itself revealed that the paddy had started germinating and the rice was decomposing. The removal of salvage as a fertiliser itself was evidence of the above facts. It is also argued that the Lok Adalath erred in not granting interest from the date of the petition, and it is for that reason that W.P.(C) No.3164/2025 and W.P.(C) No.3062 of 2025 have been filed. 12. After hearing the learned counsel on both sides and perusing the records, a few undisputed facts are to be noticed. The fact that the stock of raw materials and finished goods, such as rice, paddy, paddy bran and gunny bags in the factory building of the petitioner was insured with the respondent against all natural calamities, including flood and inundation and that there was a valid and current policy is not in dispute. It is also not in dispute that due to the unprecedented floods on 15.08.2018, the entire stock of paddy rice and the new and empty gunny bags were damaged. It is also not in dispute that due to the unprecedented floods on 15.08.2018, the entire stock of paddy rice and the new and empty gunny bags were damaged. It is also not in dispute that the Surveyor had submitted a report, based on the estimate of the Chartered Accountant's report and the valid stock. The issue between the parties is on the report of the Surveyor, which assessed the loss at 60% on the ground that the stacks of goods directly affected by the flood water alone were damaged, and some stacks above the water level did not suffer any damage. 13. The question, therefore, arises as to whether there was any justification for deducting 40% while assessing the loss. The argument of insurer is that, despite the surveyor directing the insured to segregate the damaged stock, the insured did not, and that is why the damage was fixed as 60% of the total stock assessed by the Chartered Accountant. The insured had denied the receipt of any such communication. It is to be noticed that the Food Safety Officer, Perumbavoor Circle, had directed the petitioner to destroy 4885.66 quintals of paddy and 5722.20 quintals of rice kept in the premises of the insured in W.P.(C) No.43531 of 2024, which were found to be unfit for human consumption. The Surveyor had accepted the value of the stock on the date of peril based on the report of the Chartered Accountant, whose service was availed by the Surveyor for computing the stock. In view of the above, much discussion is not needed for the quantification of the stock in this writ petition. 14. The PLA, after analysing the entire evidence threadbare, found that the report of the Surveyor suggested that the stock had been damaged due to direct contact with the standing water and partially affected due to ingress of water to the upper layers of the stack, due to capillary action. The date stamp in the photographs clearly proved that the entire stock had been affected by 30.08.2018, the date on which the Surveyor had allegedly issued the direction to segregate the stock. 15. The date stamp in the photographs clearly proved that the entire stock had been affected by 30.08.2018, the date on which the Surveyor had allegedly issued the direction to segregate the stock. 15. It was further found that all the stocks available as on the date of the peril has been assessed by the Chartered Accountant with reference to the stock register, GST and VAT returns, the original purchase bill, credit notes, bills and vouchers and the Chartered Account, had, in fact, calculated the stock available as on the date of peril based on four different methods mentioned in the report and the least amount arrived by him was accepted by the Surveyor. Under such circumstances, the PLA rightly found that there was no justification at all in the Surveyor making a deduction of 40% of the total stock value. 16. Based on the undisputed facts stated above, I am in total agreement with the PLA that no reason, much less any sufficient reason, was given by the Surveyor for making a deduction of 40%. This has to be seen in the context of the report of the Food Safety Officer, which directed the petitioner to destroy the entire food items as they were unfit for human consumption. That apart, from the records it is clear that the entire stock of rice and paddy had been lifted by M/S Bharat Kataria from Mumbai, which is also seen from Ext.P5 survey report in W.P.(C) No.43531 of 2024, which suggested that the value of damaged stocks at Rs.2,29,54,037/- was assessed after taking the entire closing stock as total loss. Under such circumstances, the reason for deducting 40% after giving allowance for ingress of water to the upper layers, beyond the water level mark, is clearly wrong. At any rate, the said finding of the PLA calls for no interference in a judicial review. 17. As far as the second contention raised that, as rightly found by the PLA, the insured had conceded that they are liable to pay Rs.1,18,71,155/- in full and final settlement of the claim and so they were liable to pay a further amount of Rs.11,15,571/- and therefore Ext.R3 could not have been relied on to act as a bar for preferring the present claim. Besides this, the IRDAI Regulations also stipulate that such consent forms cannot be utilised by the insurance company as a shield for resisting any further claims by the insured. At any rate, after having accepted the total loss, which is virtually the admitted claim, there is no justification for accepting the contention of the insurer that the insured had consented to the amount suggested by the insurer. 18. Learned Senior Counsel for the insurer would urge that the matter be remanded to the PLA based on the judgments cited. The decisions of the Supreme Court undoubtedly hold that the surveyor's report has to be given due weight. There cannot be any dispute about the propositions of law stated therein. The learned Senior Counsel also argues that the surveyor in this case had to be examined. The said request also cannot be accepted for the reason that there was no such attempt was made before the PLA, and to permit the said request at this stage will certainly work out injustice to the insured. Having found that the deduction of 40% by the Surveyor was unjustified, no purpose would be served in remitting the matter. 19. Accordingly, I do not find any merit in the writ petitions filed by the insurance company, namely W.P.(C) No.43531 of 2024 and W.P.(C) No.195 of 2025, and the same will stand dismissed. 20. As far as the writ petitions filed by the insured claiming interest from the date of the petition, I am not inclined to grant the same, taking note of the fact that partial payments were effected by the insured even before the filing of the complaint and therefore, the order of the PLA cannot be faulted. However, as rightly done by the PLA, in the absence of the insured making the payment within two months from 06.09.2024, the date of the award, interest at the rate of 9% from the date of the award till realisation, was ordered. Given the above, I am not inclined to interfere with the well-reasoned award of the PLA. In the result, all the writ petitions are dismissed.