Case: M/S. Sbhobika Attire Vs. New India Assurance Co. Ltd.

The appellant-firm, dealing in textile goods, has its showroom in the city of Coimbatore. It was covered by an insurance policy with the New India Assurance Company Limited, respondent No.1 herein, and at the relevant time had an insurance cover for all the stock in trade of textile items and garments. The said policy dated 11th March, 1997, expressly covered damages to the said stock in trade that might be caused due to riots, strike, malicious and terrorist damageFrom the materials on record, it appears that the appellant-firm had been enjoying the benefit of loans from the 2nd respondent on the hypothecation of the stock in trade, the value of which was not less than Rs.2 crores at any given point of time. The furnitures, fixtures, fittings and glass plates of the showroom were separately insured with M/s. National Insurance Company LimitedConsequent upon a series of bomb blasts, which rocked the city of Coimbatore on 14th February, 1998, a group of armed rioters are alleged to have looted the appellants showroom and set fire to it. According to the appellants, the entire stock of goods was either looted or reduced to ashes. The conflagration, which was of a communal nature, also saw the house of the proprietary of the appellant-firm being attacked by the rioters, causing her to flee with her family across the state border to Palghat in Kerala to save their lives. It appears that on the very next morning, a few officials of the New India Assurance Company Limited along with their surveyors, M/s. Asawa & Co., inspected the damage at the appellants showroom. However, it was only after the communal passions began to subside that the proprietrix of the appellant-firm was able to return to Coimbatore on 17th February, 1998 and to lodge a complaint with the police regarding the incident. The officials of the insurance company took possession of the salvaged stock and the same was kept in the custody of their nominated surveyors, M/s. Asawa & Co. In addition to the above, the insurance company also appointed one M/s. Standard Surveyors (P) Ltd. to survey the loss. The said surveyors issued a questionnaire to the appellants which was replied to by the appellants on 20th March, 1998 giving details of the loss suffered by them together with various documentsWhile the said formalities were proceeding, an anonymous information was said to have been received by the insurance company indicating that the appellants had themselves taken away some of the stock during the rioting. On the basis of such information, an inquiry was ordered by the respondent-insurance company by an investigator of M/s. Vasu Associates. The appellants and/or their officers were not associated with the said inquiryOn 20th March, 1998, the appellant-firm lodged its claim with the respondent-insurance company for payment of compensation amounting to Rs.2.20 crores. It is the case of the appellants that under the guise of ascertaining the correct picture, the respondent insurance-company for one reason or the other failed to settle the claimIn the meantime, at the instance of the National Insurance Company, which had insured the fixtures, fittings and furnitures, M/s. Comtec, Surveyors, Valuers and Assessors, filed their final report on 9th June, 1998 on the basis whereof the National Insurance Company Ltd. approved the claim of the appellant for Rs.20,43,605/-. After the surveyors had submitted their report dated 11th September, 1998, working out the damage at Rs. 1,02,38,738/- excluding the stocks in the two levels of the basement, the respondent-insurance company wrote to the respondent-bank on 8th October, 1998 stating that the claim of the appellant-firm had been approved for the aforesaid amount as assessed by the surveyors and the settlement offer was full and final. The respondent-insurance company also enclosed a cheque for a sum of Rs.1,02,16,173/- after deducting a sum of Rs.22,565/- towards reinstatement of the sum insured from the date of loss till the date of expiry of policy. The bank responded by informing the respondent-insurance company on 9th October, 1998, that the stocks insured were for Rs. 2 crores and the average stock at any point of time in the insured premises was more than Rs. 2 crores. The respondent-bank requested the insurance company to reconsider the claim of the appellant-firm in full to enable it to reestablish its business. The appellants also wrote to the respondent-insurance company on 5th November, 1998, indicating as to how they were entitled to whole of the claim and sought settlement of the full claim to which they were entitled. As there was no response from the respondent-insurance company, the appellant-firm filed a claim petition before the Commission on 16th March, 1999, inter alia, praying for a direction upon the respondent-insurance company to settle the balance of the claim of the appellants for a sum of Rs.97,83,827/- and interest at the rate of 18 per cent thereupon from the date of claim, namely, 23rd March, 1998, till realization. A further sum of Rs.10,00,000/- was also claimed towards hardship and mental agony caused to the appellants due to deficiency of service on the part of the respondent-insurance companyThe respondent-insurance company filed its written statement relying upon the investigation report dated 15th August, 1998, the surveyors report dated 11th September, 1998, and the statements of Nagarajan - the Cashier, Pankajam and Sivasubramaniam, who were working in the showroom of the appellant at the relevant time as sales persons. The appellant filed a rejoinder statement and the 2nd respondent bank also filed an affidavit dated 18th December, 2003, supporting the case of the appellants. A further rejoinder dated 16th February, 2004, was filed on behalf of the appellants on the basis of the survey report and the letter of the National Insurance Company accepting the claim of the appellants in respect of the destroyed plate glass, furnitures, fixtures and fittingsAfter the filing of the affidavits of evidence on behalf of the respective parties, the Commission by its Order dated 21st November, 2005, dismissed the complaint filed by the appellant-firm upon holding that there was remote possibility of the riotous mob having entered the 1st and 2nd levels of basement as the only point of entry from the elevated ground floor was blocked by fire, heat and smoke and particularly in the absence of any lights in the basement area. It is against such order of rejection of the appellants claim, that the instant appeal has been filed.

Court's reasoning:
In view of the above, the surveyors only took into consideration the damage caused to the stock in the elevated ground floor level and the insurance company settled the claim for loss to the stock on the said basis. From the statements of the sales persons who were in the two basement levels, it was sought to be argued that no one from the mob had entered the two levels of the basement as long as the employees were inside and it was doubtful as to whether after they left whether anyone could have entered the two levels of the basement in view of the conditions prevailing in the elevated ground floor. From the submissions made on behalf of the parties, it is evident that in the wake of a series of bomb blasts in the city of Coimbatore on 14th February, 1998, there was wide spread unrest in the city of Coimbatore coupled with mob frenzy, arson and looting. Although, an attempt has been made on behalf of the investigating agency to clinically examine the manner in which the incident involving the appellants firm had occurred, it is doubtful whether the incident which occurred at the showroom of the appellants on 14th February, 1998 can be explained with such clinical precision as to when exactly the sales persons in the two basement levels escaped from the showroom through the elevated ground floor or when the police and fire fighting personnel arrived at the site and when exactly the riotous mob took over the showroom. The statements of the sales persons clearly indicate that when they were fleeing the showroom they saw the mob trying to break through the plate-glass doors and windows leading to the first level of the two basement floors. There is also no denial of the fact that the said plate-glass doors and windows were in fact broken and for which insurance coverage was paid by the National Insurance Company on the basis of a report submitted by M/s. Comtec, Surveyors, Valuers and Assessors. The report submitted by the investigators, M/s. Vasu Associates, proceeds to a large extent on surmises and the conclusion ultimately arrived at by them which reads as follows does not inspire much confidence:-"The owners themselves claim looting, because they did not find some of the textile goods after the incident, but they have no material to strengthen their claim by way of supplying us with substantial evidence which are unassailable. In the absence of substantial evidence they themselves are not for sure, it was looting. From what we have seen and heard, we are also of the opinion that, there could not have been looting at all. Surveyors are also convinced and therefore, they are not also inclined to assess the loss"As will be evident from the above, it will appear that the aforesaid conclusion was arrived at by adopting a negative approach. The investigators reached the aforesaid conclusion merely by stating that the appellants had no material to strengthen their claim by providing unassailable evidence of looting. Such an approach cannot be supported since apart from claiming that the goods in the showroom had been looted and the attendant circumstances, the appellants were not in a position to supply any further evidenceThat there was communal unrest in the city of Coimbatore on the date in question is not denied. That the mob attacked and set fire to the showroom of the appellants is also an established fact. That the showroom was attacked by a frenzied mob, which set fire to the elevated ground floor of the showroom and indulged in looting, is also established. At exactly what point of time the mob may have entered into the two basement levels is difficult to determine in the prevailing circumstances and it is quite possible that the looting had taken place before the police and the fire fighting personnel arrived at the siteThere is nothing on record to indicate that the stock in trade had been removed from basement levels in anticipation of any such rioting. On the other hand, the bank has clearly supported the case of the appellants by informing the insurance company that the stock insured was for Rs.2 crores and the average stock at any point of time in the insured premises was more than Rs. 2 crores and the bank requested the insurance company to re-consider the claim of the appellant-firmAlthough, M/s. Vasu Associates were engaged on a suspicion that the appellants had themselves transported part of the goods from the showroom, there is no real evidence in support thereofIn our view, the appellants had discharged the initial burden regarding destruction, damage of the showroom and the stocks therein by fire and riot in support of the claim under the insurance policy and it was for the insurance company to disprove such claim with evidence, if any. In our view, the insurance company, despite the report of the investigator, failed to establish that the claim of the appellants was not justified and was not covered by the policy of insurance