Compensation Must Be Based On Actual Value At The Time Of Loss, Rules NCDRD
Pranav B Prem
The National Consumer Disputes Redressal Commission (NCDRC), presided over by Dr. Inder Jit Singh (Presiding Member) and Dr. Sudhir Kumar Jain (Member), held that insurance compensation must be based on the actual value of the insured goods on the date of the loss and not on assumptions or hypothetical stock valuations. The Commission dismissed the revision petition filed by New India Assurance Co. Ltd., thereby upholding the order of the Chhattisgarh State Consumer Disputes Redressal Commission, which directed the insurer to pay the wrongly deducted amount along with interest.
Factual Background
The complainant, M/s Bajrang Motors Pvt. Ltd., an authorised Ashok Leyland service centre, had availed of a Shopkeeper's Insurance Policy from New India Assurance Co. Ltd. for the period from 03.07.2013 to 02.07.2014, covering stock and spare parts stored at its premises. On the intervening night of 29/30 July 2013, heavy rains caused water ingress into the complainant’s workshop, damaging spare parts, lubricants, and other materials stored there.
The complainant promptly informed the insurer, lodged an FIR with the local police, and estimated the loss at ₹15,15,061/-. A claim was duly filed along with all supporting documents. After the insurer processed the claim, a partial payment of ₹5,09,000/- was made through RTGS on 09.12.2013. However, the insurer deducted ₹2,08,060/- on account of alleged underinsurance, which the complainant contested, claiming deficiency in service. After the District Forum dismissed the complaint, the complainant appealed to the Chhattisgarh State Commission, which reversed the Forum's decision and ordered the insurer to pay the deducted amount with 9% interest per annum. Aggrieved by this, the insurer filed the present revision petition before the NCDRC.
Contentions of the Parties
New India Assurance contended that the stock value on the date of loss exceeded ₹1.03 crores, which was substantially more than the insured sum of ₹75,00,000/-. Therefore, applying the underinsurance clause and calculating a 27.3% shortfall, the insurer argued that the deduction of ₹2,08,060/- was justified as per the policy terms. The insurer further argued that the complainant had accepted the settlement amount without protest via RTGS and had thus waived further claims. The insurer also contended that some damaged items such as oils and lubricants were stored outside the insured premises, and hence, they were not covered under the policy.
The complainant refuted these arguments, stating that the surveyor's valuation of stock was arbitrary, lacked documentary support, and was inconsistent with the monthly stock statements regularly filed with Union Bank of India, the complainant’s banker. These statements reflected an average stock value between ₹75 lakhs and ₹77 lakhs during the relevant period, which was fully covered by the sum insured. The complainant also argued that merely accepting an RTGS payment does not amount to full and final settlement unless it is shown to be voluntary, clear, and informed, which the insurer failed to prove.
Observations and Findings of NCDRC
The Commission noted that the insurer’s deduction of ₹2,08,060/- on the ground of underinsurance was not substantiated. It held that the surveyor had erroneously arrived at a stock value of ₹1.03 crores on the date of loss without documentary evidence, despite the complainant’s consistent submission of monthly stock statements showing stock levels between ₹75 lakhs and ₹77 lakhs, which aligned with the sum insured. The Commission emphasized that compensation must reflect the actual value of the goods on the date of the loss and cannot be inflated by assumptions or estimates, relying on the Supreme Court’s judgment in Sikka Papers Ltd. v. National Insurance Co. Ltd [(2009) 7 SCC 777].
The NCDRC rejected the insurer’s argument that acceptance of the RTGS payment amounted to a final settlement. Citing established legal principles, the Commission held that unless it is proven that the insured accepted the payment voluntarily and knowingly waived its rights, such acceptance does not bar the insured from seeking legal remedies. The Commission also clarified that the deduction on account of items stored outside the premises was unjustified since the insurer had earlier accepted these goods under the policy coverage and raised no objections at the inception of the policy.
The Commission observed that both the District Forum and the insurer failed to appreciate that the insurer's reliance on the inflated stock figure lacked credible documentary basis. The State Commission had rightly corrected this error by restoring the disallowed amount of ₹2,08,060/- to the complainant. The NCDRC further noted that surveyor reports, while important, are not binding on the forum if found to be flawed or based on unsupported assumptions.
Also Read: CESTAT Rules, Royalty Paid For Exclusive Trademark License Is Not Taxable As A Service
Verdict
The NCDRC dismissed the revision petition filed by New India Assurance Co. Ltd. and upheld the State Commission’s direction to pay ₹2,08,060/- to the complainant, along with 9% interest per annum from 05.12.2013 until realization. The Commission also ruled that if the payment is not made within six weeks from the date of this order, the amount shall carry an enhanced interest rate of 12% per annum from the expiry of six weeks until full payment. Thus, the NCDRC concluded that the insurer was liable for deficiency in service by making an unjustified deduction and affirmed that compensation must reflect the real value of the goods at the time of loss rather than theoretical estimates.
Appearance
For the Petitioner: Mr. Parveen Kumar Mehdiratta, Advocate
For the Respondent(s): Mr. Anand Shankar Jha, Advocate & Ms. Meenakshi S. Devgan, Advocate for R-l(vc), NEMO for R-2
Cause Title: The New India Assurance Co. Ltd. V. Ajay Agarwal
Case No: R.P. No. 3725 of 2017
Coram: Hon'ble Dr. Inder Jit Singh [Presiding Member], Hon'ble Justice Dr. Sudhir Kumar Jain [Member]
[Read/Download order]
