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TMI Blog2023 (12) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... 11140046172 480000017 30.09.2017 30.09.2017 to 29.09.2018 Rs. 20 Crores 3 Standard Fire and Special Perils Policy 11140011170 100001014 30.11.2017 30.11.2017 to 29.11.2018 Rs. 150 Crores 4 Additional Endorsement to Customs Duty Package Policy 29.12.2020 - Rs. 75 Crores 4. These insurance policies covered premises of 106750 sq. ft. (covered area) and 15000 sq. ft. (open area) at Survey No. 09, Hissa No. 03, at Village - Veshvi, Taluka - Uran, District - Raigad, Maharashtra. The claimant leased the premises from M/s. Platinum Logistics for warehousing purpose. Claimant paid Rs.44,02,562/- to New India Assurance for safeguarding the custom bonded goods and for covering the risk against fire, etc. 5. During the pendency of the insurance policies, on 14.03.2018, a fire broke out at the insured warehouse. The respondent then informed the Insurance Company and the Custom authorities about the same. The Insurance Company appointed M/s. J.C. Bhansali and Co. as Surveyors to assess the loss. On 03.10.2018, the insured raised a claim for a sum of Rs. 6,57,55,155/-. Of the total claim, Rs. 5,54,17,891/- was against Policy No. 17080011170100000734; Rs.18,73,984/- u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost 18000 to 20000 sq. ft. area of the roof of bonded Warehouse which is custom bonded Warehouse was uncovered, i.e., there were no roof sheets at the time of loss, due to which circumstances affected the building insured or containing the insured property were changed, in such a way which increased the risk of loss or damage by insured perils and; 3. The Survey Numbers of the fire affected Warehouse have not been declared/covered under the Policy. 4. Policy covers location at survey No. 9/3, but the office of the insured and a Warehouse located at the Surveyor No. 9/3 were not fire affected and they were safe; 5. Hence, claim under reference is out of the scope of relevant policy & liability under the claim does not arise." 13. After receiving the Survey and Investigation Reports, the Insurance Company, with their 15.07.2019 communication, rejected the respondent's claim. In their subsequent communication (14.12.2019), the following two reasons were stated: 1) The insured premises at Survey No. 9/3 was unaffected by the fire, and 2) The fire resulted from the insured's negligence during roof construction in a secure customs-bonded warehouse with hazardous chemic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the risk, and therefore Clause no. 3 was inapplicable. Referring to the ratio in New India Assurance Co. Ltd. vs. Pradeep Kumar (2009) 7 SCC 787; NCDRC highlighted that the approved Surveyor's report, though important, is not absolute and not binding on the parties. The NCDRC accordingly ruled in favour of the insured finding deficiency in service of the insurance company. Thus, direction was issued for payment of the specified sum, with interest. ARGUMENTS 18. Mr. Aditya Kumar, the learned counsel for the appellants, contended that the cause of the fire was negligence on the part of the insured. Reports of the forensic investigator (M/s Screen Facts Services Pvt. Ltd.) dated 10.12.2018 (Annexure A-10) were relied upon, which found that electrical short-circuit was not the cause of the fire incident. Instead, the fire could have occurred due to sparks that may have fallen on flammable chemicals stored in the adjoining area, during welding. Surveyor's Report (M/s Bhansali & Co.) dated 15.04.2019 (Annexure A-12) was relied upon to further suggest that the fire occurred due to negligence on the part of the insured in not taking adequate precautions during the roof repair work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir submissions to the grounds mentioned in the repudiation letter. 24. The learned counsel then submits that it is clear from the Leave & License Agreement dated 04.07.2015 that M/s Platinum Logistics had leased out land situated on Survey No.9/3 in Village - Veshvi, Taluka - Uran, Raigad to the claimant. Further, approval was sought & obtained from the Customs Department for a bonded warehouse on the same land. The insurance policy mentions the location of the insured premises as Mudit Roadways, Survey No.9/3 CPP Forbes CFS, Chirner Road, Village - Veshvi, Uran, MH1369, Maharashtra-400702. For justifying the claim, Mr. Goswami reads the two communications from the Tehsildar, Uran, Raigad dated 25.03.2018 (Annexure R-18) and 23.03.2018 (Annexure R-20) and also relies upon the telephone connection (Annexure R-16), electricity connection (Annexure R-17) and other communications from the Executive Magistrate (Annexure R-10) to point out that the fire incident occurred in the same address of the insured ware-house. Besides, the customers who appointed their own independent surveyors (M/s Kannan & M/s Proclaim) noted that the warehouse where the stock got burnt, was located at Survey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel for the claimants relied on Canara Bank vs. United India Insurance Company (2020) 3 SCC 455 to contend that the insurance company cannot escape its liability if there is nothing to prove that the fire was caused by the insured itself, irrespective of what the cause of fire was. Reliance was also placed on Khatema Fibres Ltd. vs. New India Assurance Co. Ltd. & Anr. 2021 SCC OnLine SC 818 to argue that the surveyor's report was not sacrosanct and therefore, could be departed from, if needed. DISCUSSION AND CONCLUSION 30. We have reviewed both parties' arguments and carefully examined the multiple reports from various agencies, civic authorities, the insurance company, and surveyors. CONTENTIONS BEYOND THE LETTER OF REPUDIATION 31. The relevant portion of the letter of repudiation is reproduced below: "... ... ... ... the insured premises not affected due to alleged fire. The above mention premises where the loss occurred due to alleged fire is not insured under the Policy. Thus the alleged loss dogs (sic) not fall within the purview of the policy... ... ... ... The root cause of the fire incident was due to the negligence on the part of the Management in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FIRE IF COVERED UNDER THE POLICY 34. Let us now analyse whether the burnt site was covered under the insurance policy. The Leave & License Agreement dated 04.07.2015 identifies all three warehouses functioning within the compound operated by M/s Platinum Logistics, with the same Survey No. i.e., 9/3. In fact, the policy documents as well as the License issued under Section 57 of Customs Act 1962 refers to the warehouse situated at Survey No. 9/3, Village - Veshvi, Gavan Phata, Chirner Road, Opp. Forces CFS, Taluka - Uran, Raigad. The policy document specified the address of the insured as 'Mudit Roadways, Survey No. 9/3, Opp. Forbes CSF, Chirner Road, Village - Veshvi, Uran, MH1369, MH-4000702.' In addition, the impugned order rightly points out that the warehouse was physically verified by the Customs Authorities after which telephone and electricity connections were provided to the insured at the same address. All communication addressed to the claimants, including letters of repudiation from the insurance company, admit to having insured the premises located at the given address. 35. Therefore, looking at the policy documents, the Leave & License Agreement and various communic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated from the Short Circuit of the Electrical setup at the corner of the Godown. Under Section 161(2)(a), The Electricity Act, 2003 by the Appropriate Government. 2. Asst. Manager, Jawaharlal Nehru Port Trust's 09.05.2018 Probable cause of incident reported as Electrical Short Circuit. Claimant 3. Independent Sy. - M/s H Kannan 07.08.2018 Sparks from Electrical Short Circuit ignited inflammable chemicals stored. Bajaj Allianz Gen. Insurance Co. - Insurers to M/s. Global Exim (M/s Mudit Roadway's Clients) 4. Independent Sy. - M/s Proclaim 31.08.2018 Probable Cause of incident determined as Short Circuit based on the police report & fire brigade. TATA AIG Gen. Insurance Co. - Insurers to Expanded Polymer System (M/s Mudit Roadway's Clients) 5. Police Investigation (Not annexed) 03.11.2018 Electrical short circuit could be the cause of fire 6. Order of the Executive Magistrate 03.11.2018 IO concluded that the accidental fire was caused pursuant to Short Circuit Section 21 CrPC, Rule 105 of Bombay Police Manual, 1959. 7. M/s. J Basher & Associates 11.04.2019 Relied on Police Report (3.11.18) to conclude cause of fire a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 38.4 Although the footage from Camera No. 3 and video from Camera No.9 were not available, the forensic team analysed the available CCTV footage. They observed that welding equipment with cylinders were being brought to the rooftop at 11:51:17 hrs and the welding work being carried out from 11:51:17 hrs to 11:56:16 hrs, after which the equipments were removed from the vicinity. At 12:10:17 hrs., a worker was observed removing the welding red boxes. This is noteworthy as it indicates that the welding equipments were taken away by the workers around four hours before the fire occurred. Subsequently, the workers were seen transporting GI roofing sheets as head loads to the roofing work site, which continued until 16:04 hrs. The CCTV footage showed workers also using a crane to move GI roofing sheets and MS Roofing Trusses to the roof repair area post-welding. A substantial time gap of 4 hours, 19 minutes, and 43 seconds separated the end of welding work from the fire itself. Even if rooftop repair continued until 16:04 hrs., a significant 26-minute time lag existed before the fire started. 38.5 The Forensic Investigator's conclusion that sparks from rooftop welding caused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected by the Authority, be admitted for payment or settled by the insurer unless he has obtained a report, on the loss that has occurred, from a person who holds a licence issued under this section to act as a surveyor or loss assessor (hereafter referred to as "approved surveyor or loss assessor"): Provided that nothing in this sub-section shall be deemed to take away or abridge the right of the insurer to pay or settle any claim at any amount different from the amount assessed by the approved surveyor or loss assessors"." 43. The above provision mandates that claims above Rs. 20,000 must be initially assessed by an approved surveyor. It is noteworthy that the insurer has the discretion to settle the claim for a different amount, than what is assessed by the surveyor. 44. In New India Assurance Co. Ltd. v. Pradeep Kumar (supra), the court addressed whether one had to accept payment based on the surveyors' assessment or could provide independent evidence to support higher costs for replacement and repairs. The court's pertinent conclusion is as follows: "22. In other words 1although assessment of loss by approved surveyor is a prerequisite for payment or settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimant, which include assessments by government departments and two independent surveyors, have however consistently identified the cause of the fire as a shortcircuit. While it is difficult to go by the reports relied upon by the insurance company, the reports furnished by the claimants being consistent and logical are more acceptable in ascertaining the true cause of the fire. 49. On the above aspect, the NCDRC has rightly placed reliance on Canara Bank v. United India Insurance Co. Ltd. (2020) 3 SCC 455, wherein the Court decided to not place reliance on the surveyor's report conducted by M/s Truth Labs, for lack of sufficient analysis & held that: "In any event, neither in the report of M/s Truth Labs nor in the other reports by the Insurance Company is there anything to show that the insured had set the cold store on fire. Whether the fire took place by a short circuit or any other reason, as long as insured is not the person who caused the fire, the Insurance Company cannot escape its liability in terms of the insurance policy. We reject the contention of the Insurance Company that the fire was ignited by the use of kerosene and hence it is not liable." 50. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is liable to pay customs duty when they file a bill of entry. 54. The insurer anchored their stand on Section 15(1)(b) of the Customs Act stating that duty rates for warehoused goods are determined when a bill of entry for home consumption is filed, and duty assessment (Section 17) only occurs when a bill of entry (Section 46) is presented. In this case, no bills of entry were filed, and no assessed goods were lost in the fire. According to the insurer, since the taxable event never happened, there is no customs duty liability. The counsel also cited Section 23 of the Customs Act, which required the Assistant Commissioner of Customs to remit duty for lost or destroyed goods, before clearance. 55. However, the counsel for the claimant rightly contended that the privileges enshrined in Sections 22 and 23 of the Customs Act, pertaining to abetment and remission, extend exclusively to those classified as 'importers' of insured goods. The crux of the argument revolves around the claimant's distinct position, as the claimant neither assumes the role of importer nor owner; instead, they function solely as a custodian entrusted with the goods on behalf of their clients. 56 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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