KHATEMA FIBRES LTD. versus NEW INDIA ASSURANCE COMPANY LTD. & ANR on 28 September 2021

SUPREME COURT REPORTS

[2021] 9 S.C.R.

KHATEMA FIBRES LTD.

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v.

NEW INDIA ASSURANCE COMPANY LTD. & ANR

(Civil Appeal No.9050 of 2018)

BSEPTEMBER 28, 2021

[HEMANT GUPTA AND V. RAMASUBRAMANIAN, JJ.]

Consumer Protection Act, 1986 – ss. 23 and 2(1)(g) –Surveyor’s Report – Assessment of loss – Correctness of – Accidentalfire in the factory of complainant – Waste paper destroyed by fire –CClaim raised by complainant estimating the value of the paperdestroyed – However, the surveyor appointed by the InsuranceCompany assessed the loss suffered by the complainant on accountof the fire accident at a lesser amount – Consumer complaint –National Commission awarded compensation payable to them onlyDto the extent of the assessment made by the final surveyor –Interference with – Held: Not called for – In a complaint before theConsumer Forum, a consumer cannot succeed unless he establishesdeficiency in service on the part of the service provider – ConsumerForum which is primarily concerned with an allegation of deficiencyin service cannot subject the surveyor’s report to broad examinationE– Once it is found that there was no inadequacy in the quality,nature and manner of performance of the duties and responsibilitiesof the surveyor, and the report is not based on adhocism or vitiatedby arbitrariness, then the jurisdiction of the Consumer Forum to gofurther would stop – On facts, Insurance Company admitted theFclaim of the complainant to the extent of the loss as assessed by theSurveyor – All the objections of the complainant to the Surveyors’Report wholly unsustainable and the National Commission rightlyrejected those objections – Insurance Act, 1938 – s.64UM(1A), (2).

Dismissing the appeal, the CourtG

HELD: 1. A Consumer Forum which is primarily concernedwith an allegation of deficiency in service cannot subject thesurveyor’s report to forensic examination of its anatomy, just asa civil court could do. Once it is found that there was no inadequacyin the quality, nature and manner of performance of the dutiesHand responsibilities of the surveyor, in a manner prescribed by the Regulations as to their code of conduct and once it is foundthat the report is not based on adhocism or vitiated byarbitrariness, then the jurisdiction of the Consumer Forum to gofurther would stop. In view thereof, the judgment of the NationalCommission does not call for any interference. [Para 38, 39] [283-A-C]

2.1 The Surveyor decided to adopt volumetric analysismethod rather than rely upon the stock records of the insured.The Surveyors could not be found at fault with, for rejecting thestock records of the insured. When the insured produced twosets of records and the quantum of material destroyed by firearrived on the basis of these records showed huge discrepancies,the Surveyor had no alternative except to reject these recordsand proceed on volumetric analysis. The appellant themselveshave admitted to the Chartered Accountant, who went for spotinspection when the fire was still raging, that the appellant hadnot conducted physical verification of its raw material stock inthe recent past and that the consumption was recorded onestimated yield basis. In their own letter dated 5.12.2007, theappellant had conceded that stock taking was done on the basisof receipts and consumptions as well as physical verification onvolumetric basis. Therefore, the refusal of the Surveyor to go bythe stock records of the appellant, but to adopt volumetricanalysis, was fully justified and no exception can be taken to thesame. [Para 19, 20][277-D-H]

2.2 It is seen from the Surveyors’ Report that there wereactually three different measurements available with the Surveyor,with a huge variation between one another. Faced with threedifferent measurements, the Surveyor reonciled the same byholding that despite the measurement of the open stockyard being22.5 mtrs. X 105 mtrs. = 2362 mtrs., the area affected by firecould only be 1485 sq. mtrs. In view of the given circumstances,there is nothing wrong in the Surveyor taking the measurementof the area of the stockyard affected by fire, as 27 mtrs. X 55mtrs.=1485 sq. mtrs. for the purpose of volumetric analysis. [Para22, 23][278-C, E-H; 279-A-B]

2.3 The allowance of some space within the open stockyard,for the purpose of movement of men and material is logical. It is A

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Anot possible to accept that the whole space in the stockyard wascompletely stacked by material without any space for movement.Without providing adequate gaps and spaces within the opencourtyard, it would not have been possible for the appellant toremove the material for the purpose of processing, even if forkliftswere used. Therefore, the objection to the provision for openBspace/gaps is unfounded. [Para 26][279-G-H; 280-A-B]

2.4 In the calculation sheet annexed to the letter addressedto the Surveyor, the appellant themselves estimated the averageweight per bale to be 900 kgs. What is arrived at by the Surveyor,in Annexure A-3 to their Report, as 988.889 kgs is based onlyCupon the sizes of different types of bales and the areas occupiedby different types of bales, and arriving at the average weight.There was no reason for the Surveyor to adopt the average weightper bale, when the party himself has provided the average weightto be 900 kgs. per bale. [Para 28][280-C-D]

D2.5 All the objections of the appellant to the Surveyors’Report are wholly unsustainable and the National Commissionrightly rejected those objections. [Para 29][280-E-F]

3.1 This is not a case where the Insurance Company hasrepudiated the claim of the appellant arbitrarily or on unjustifiableEgrounds. This is a case where the claim of the appellant has beenadmitted, to the extent of the loss as assessed by the Surveyor.In cases of this nature the jurisdiction of the special forumconstituted under the Consumer Protection Act, 1986 is limited.Perhaps if the appellant had gone to the civil court, they couldFhave even summoned the Surveyor and cross examined him onevery minute detail. But in a complaint before the ConsumerForum, a consumer cannot succeed unless he establishesdeficiency in service on the part of the service provider. [Para31][280-H; 281-A-B]

G3.2 Any inadequacy in the quality, nature and manner ofperformance which is required to be maintained by or under anylaw or which has been undertaken to be performed pursuant to acontract, will fall within the definition of the expression‘deficiency’. But to come within the said parameter, the appellant H

should be able to establish either that the Surveyor did not complywith the code of conduct in respect of his duties, responsibilitiesand other professional requirements as specified by theregulations made under the Act, in terms of Section 64UM(1A)of the Insurance Act, 1938, as it stood then; or that the insureracted arbitrarily in rejecting the whole or a part of the Surveyor’sReport in exercise of the discretion available under the Provisoto section 64UM(2) of the Insurance Act, 1938. [Para 32][281-B-E]

3.3 Section 64UM (2) , before its amendment by Act 5 of2015, mandated that no claim equal to or exceeding a sum ofrupees twenty thousand only shall be admitted for payment unlessthe insurer had obtained a report from an approved surveyor orloss assessor. But the Proviso to sub-section (2) of section 64UMalso recognized the right of the insurer to pay any amount differentfrom the amount as assessed by the approved surveyor or lossassessor. [Para 33, 34][281-E-F; 282-B-C]

3.4 The surveyor’s report is not the last and final word.The surveyor’s report is not so sacrosanct as to be incapable ofbeing departed from. The Insurance Act, 1938 even whileassigning an important role for the surveyor, casts an obligationon him under section 64UM(1A) to comply with the code ofconduct in respect of his duties, responsibilities and otherprofessional requirements as specified by the regulations madeunder the Act. Two things flow that the surveyor is governed bya code of conduct, the breach of which may give raise to anallegation of deficiency in service; and that the discretion vestedin the insurer to reject the report of the surveyor in whole or inpart, cannot be exercised arbitrarily or whimsically and that if sodone, there could be an allegation of deficiency in service. [Para35-37][282-C-H]

United India Insurance Company Ltd. And Others v.Roshan Lal Oil Mills Ltd. and Others (2000) 10 SCC19; Sikka Papers Limited v. National InsuranceCompany Limited And Others (2009) 7 SCC 777 :[2009] 9 SCR 1088; New India Assurance CompanyLimited v. Luxra Enterprises Private Limited and Another A

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A(2019) 6 SCC 36 : [2019] 6 SCR 1172; New IndiaAssurance Company Limited v. Pradeep Kumar (2009)7 SCC 787 : [2009] 16 SCR 508 – referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No.9050 ofC2018.

From the Judgment and Order dated 03.07.2018 of the NationalConsumer Disputes Redressal Commission, New Delhi in ConsumerCase No.19 of 2010.

DMs. Meenakshi Arora, Sr. Adv., Prasenjit Keswani, UpmanyuTiwari, Mrs. V. D. Khanna, Advs. for the Appellant.

Joy Basu, Sr. Adv., K. K. Bhat, Kanak Bose, Ranjan KumarPandey, Advs. for the Respondents.

The Judgment of the Court was delivered byE

V. RAMASUBRAMANIAN, J.

1. Aggrieved by the Judgment of the National Consumer DisputesRedressal Commission (for short “National Commission”) confiningthe compensation payable to them only to the extent of the assessmentFas made by the final Surveyor, the complainant before the Nationalmission has come up with the above appeal.

2. We have heard Ms. Meenakshi Arora, learned senior counselfor the appellant and Mr. Joy Basu, learned senior counsel for therespondent-Insurance Company.

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3. The appellant took a “Standard Fire and Social Perils” policyfor the period from 7.05.2007 to 6.05.2008, for a sum of Rs.42,40,00,000/-. When the policy was in force, a fire broke out in the factory premisesof the appellant on 15.11.2007.

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4. The appellant submitted a claim on 19.11.2007, estimating thequantity of waste paper destroyed by fire at 8500 MT and its value atRs.13,00,00,000/-.

5. One M/S Adarsh Associates, appointed by the respondent-Insurance Company, conducted a survey, sought documents from theappellant, raised queries and received clarifications from the appellantand submitted a final report dated 9.01.2009, assessing the loss sufferedby the appellant on account of the fire accident as Rs.2,86,17,942/-.

6. Though the appellant, vide their letter dated 2.5.2009, objectedto the survey and assessment report and sought the appointment ofanother surveyor, the respondent informed the appellant by their letterdated 21.08.2009 that the claim of the appellant has been approved onlyto the extent of Rs.2,85,76,561/-, in full and final settlement. The appellant,through letter dated 14.09.2009, again raised objections to the SurveyReport, but the respondent informed the appellant by their letter dated7.10.2009 that the claim could be finalized only for the amount indicatedin the letter dated 21.08.2009.

7. Therefore, the appellant filed a consumer complaint before theNational Commission under Section 21(a)(i) of the Consumer ProtectionAct, 1986, claiming: (i) compensation in a sum of Rs.1364.88 lakhstowards the loss suffered in the fire accident; (ii) compensation in a sumof Rs.2095.52 lakhs, for the financial stress caused by the respondentby delaying the processing of the claim; (iii) interest @ 18% p.a. on thecompensation amount of Rs.1364.88 lakhs from November, 2007 till31.12.2009; and (iv) the cost of litigation estimated at Rs.1,00,000/-.

8. The National Commission, by its Judgment dated 3.07.2018rejected the claim of the appellant under both the heads, but directedthe respondent to pay only the amount of Rs.2,85,76,561/- as admittedby them. This amount was directed to be paid to the appellant withinterest @ 9% p.a. from 15.11.2007, only till the date the InsuranceCompany had made the offer. It is against the said Judgment of theNational Commission that the appellant has come up with the aboveappeal under Section 23 of the Consumer Protection Act, 1986.

9. Admittedly, the respondent-Insurance Company appointed oneShri Kapil Vaish, a Chartered Accountant, on 16.11.2007 itself (the dayfollowing the date of fire accident), to conduct a spot inspection andfile a status report. When he visited the factory premises, the fire fighting ABC

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Awas still going on and it was found that the fire had taken place only inthe waste paper yard of the factory. In the status report submitted byShri Kapil Vaish on 16.11.2007, he indicated that the fire had affectedwaste paper bales lying in an area measuring 27 mtrs. X 55 mtrs. =1485 sq.mtrs. in open compound. Presuming that waste paper wouldhave been stacked in bunches of six bales, one on top of the other andBthat the quantity of affected waste paper could be around 5000 MT,whose cost may be around Rs.20-22 per kg., Shri Kapil Vaish roughlyestimated the loss to be around Rs.10-11 crores. The appellant themselvesestimated the quantity of waste paper burnt in the fire to be 8500 MTvalued at Rs.13,00,00,000/-.C10. M/s Adarsh Associates who conducted the actual survey withreference to the records and other evidence available with the appellant,had two options before them for arriving at the quantity of materialdestroyed by fire. The first option was to proceed on the basis of thestock registers and other records of the appellant company to fix theDquantum of loss. The next option was to proceed on the basis of volumetricanalysis, by taking the measurement of the open yard in which the firebroke out, finding out the optimum capacity of the yard with referenceto the measurement of the bales of paper stored therein and then workingout the quantum of material destroyed.

E11. The Surveyor adopted the second option namely that ofvolumetric analysis and assessed the quantity of raw material damagedat 2264.400 MT. He valued this raw material @ Rs.15137.35/- per MT,inclusive of CENVAT. Thus, he arrived at the value of the materialdamaged to be Rs.3,42,77,015.34/-. Then the Surveyor fixed the salvagevalue at Rs.18,92,200/- and deducted the same from the value of theFraw material, to arrive at the gross assessed loss at Rs.3,23,84,815.34/-From out of this amount the Surveyor deducted the CENVAT as well as1% towards soiled goods. After so doing, the surveyors arrived at thevalue of loss at Rs.2,86,17,942/-.

12. For proceeding on volumetric analysis method, the SurveyorGtook the measurement of the open yard as 27 mtrs. X 55 mtrs. = 1485sq. mtrs. This was on the basis of the Status Report of the CharteredAccountant who made the spot inspection on 16.11.2007 when the firefighting was still in progress. There was a finding in the status report ofthe Chartered Accountant that the material affected by the fire wasHlying in the yard measuring 27 mtrs. X 55 mtrs. = 1485 sq. mtrs.

Therefore, the Surveyor took this measurement as the starting point andproceeded as detailed above.

13. Keeping the above background in mind, let us now come tothe grievance of the appellant, against the Judgment of the NationalCommission. Ms. Meenakshi Arora, learned senior counsel for theappellant contended that the National Commission committed a seriouserror first in taking the net weight of waste paper bales burnt/damagedduring the incident as 2264.400 MT, as against the claim of the appellantthat the net weight of the material damaged was 8332 MT. According tothe learned senior counsel, there were no discrepancies in the variousrecords and stock registers maintained by the appellant with respect tothe quantity and weight of material stored in the open yard, but theSurveyor chose to reject the same arbitrarily and proceeded on volumetricanalysis basis. The learned senior counsel further contended that evenwhile proceeding on volumetric analysis basis, the Surveyor did not dojustice. Though, the total area of the open yard was 27 mtrs. X 100 mtrs.= 2700 sq. mtrs., the Surveyor took the measurement as 27 mtrs. X 55mtrs = 1485 sq. mtrs., despite they themselves finding that the areawas 22.5 mtrs. X 105 mtrs. = 2362 mtrs. This, according to the learnedsenior counsel for the appellant, resulted in gross injustice to the appellantin the matter of assessment of the quantum of loss.

14. Another gross error committed by the Surveyor, according tothe learned senior counsel for the appellant, is that despite finding the netweight per bale as 988.889 kgs. as per Annexure A-3 to the SurveyReport dated 9.01.2009, the Surveyor took the net weight as 900kgs. per bale, merely because the complainant had indicated the same tobe 900 kg. per bale. The Surveyor had thus adopted double standards, intaking either what is found by them or what is claimed by the appellant,whichever was less. This according to the learned senior counsel for theappellant resulted in the Insurance Company eventually admitting theclaim only to the extent of less than 25% of the total amount of losssuffered by the appellant.

15. Justifying the judgment of the National Commission, it iscontended by Mr. Joy Basu, learned senior counsel for the respondentthat M/S Adarsh Associates were appointed by the respondent asSurveyors to act as such in terms of Section 64UM(2) of the InsuranceAct, 1938 and that they have assessed the loss in a scientific manner.As the Surveyors appointed by the respondent are experts in the field, AB

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Awho have gone into every minute detail by examining the records of theappellant scientifically, their report is unassailable. In the case on hand, itwas admitted even by the appellant, to Shri Kapil Vaish who conductedspot inspection that there was no physical verification of the stock ofraw material in the recent past and that the consumption of raw materialwas recorded only on estimated yield basis. Therefore, the learned seniorBcounsel for the respondent contended, by drawing our attention to theletter dated 5.12.2007 sent by the appellant that the appellant themselveswere adopting volumetric analysis for the quantification of the stock.The learned senior counsel relied upon the decisions of this Court in(i) United India Insurance Company Ltd. And Others vs. Roshan LalCOil Mills Ltd. And others[1]; (ii) Sikka Papers Limited vs. National InsuranceCompany Limited And Others[2]; and (iii) New India Assurance CompanyLimited vs. Luxra Enterprises Private Limited And Another.[3], insupport of his contention that the report of the surveyor is an importantdocument and that Courts may have to show deference to the report ofthe surveyor appointed in terms of section 64UM(2) of the Act.D

16. We have carefully considered the rival contentions.

16. We have carefully considered the rival contentions.

17. As could be deciphered from the grounds of appealand thesubmissions made at the time of hearing, the grievance of the appellantis primarily with respect to the quantification of the net weight of theEraw material destroyed in the fire accident. The price of the material,fixed by the Surveyor at Rs.15137.35/- per MT, is not seriously disputed.Though a dispute is raised with regard to the salvage value, thecontention relating to the same is very weak and feeble and hence wewould not get into the same.

F18. Insofar as the quantification of the weight of raw materialdamaged in the fire is concerned, the Surveyor had, in fact, worked outthe quantity, as seen from paragraph 9.7 of his Report, both on the basisof the appellants’ stock records and also on the basis of volumetric analysisof the area involved.

G19. After extensively analyzing what is reflected in the stockrecords of the appellant, the Surveyor came to the conclusion that therewere discrepancies which could not be reconciled. It is recorded by the 1 2000 (10) SCC 192 2009 (7) SCC 777H3 2019(6) SCC 36

Surveyor in paragraph 9.8.2 of the Report that the appellant initiallysubmitted one set of documents, which reflected a huge quantity ofimported waste paper both for general use and for newsprint. Therefore,the Surveyors requested the appellant to submit documents in supportof reversal of CENVAT, on the damaged quantity of waste paper.Immediately the appellant submitted a revised claim bill along with afresh set of documents. In fact imported waste paper for newsprint isexempt from payment of customs duty subject to submission of end usecertificate. In the revised set of documents, the quantity of closing stocksof imported waste paper meant for newsprint was substantially increased.The Surveyor also found in paragraph 9.8.7.7 of their Report that therewas a huge difference between the overall quantity of burnt/damagedstock of waste paper arrived at on the basis of the initial set of recordsand the overall quantity of burnt/damaged stock of waste paper arrivedat on the basis of the revised set of records. Therefore, the Surveyordecided to adopt volumetric analysis method rather than rely upon thestock records of the insured.

20. We fail to understand how the Surveyors could be found faultwith, for rejecting the stock records of the insured, especially in thelight of the circumstances narrated above. When the insured produced 2sets of records and the quantum of material destroyed by fire arrived onthe basis of these records showed huge discrepancies, the Surveyorhad no alternative except to reject these records and proceed onvolumetric analysis. In any case, as rightly pointed out by the learnedcounsel for the respondent, the appellant themselves have admitted toShri Kapil Vaish, who went for spot inspection when the fire was stillraging, that the appellant had not conducted physical verification of itsraw material stock in the recent past and that the consumption wasrecorded on estimated yield basis. In their own letter dated 5.12.2007,the appellant had conceded that stock taking was done on the basis ofreceipts and consumptions as well as physical verification on volumetricbasis. The following extract from the appellant’s letter dated 5.12.2007would clinch the issue in this regard; “the estimates for stocks andburnt quantities may not be appearing close to stock inventorymaintained in the books, since the estimates prepared for burntmaterial was not on weighment basis but on volumetric basis”.Therefore, we find that the refusal of the Surveyor to go by the stockrecords of the appellant, but to adopt volumetric analysis, was fullyjustified and no exception can be taken to the same.

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A21. On the method of volumetric analysis adopted by the Surveyor,the first grievance of the appellant is that the physical measurement ofthe stockyard was 27 mtrs. X 100 mtrs. = 2700 sq. mtrs. But the Surveyortook the measurement as given by Shri Kapil Vaish, namely, 27 mtrs.X 55 mtrs. = 1485 sq. mtrs., despite finding in para 4.7 of the SurveyReport that the actual measurement was 22.5 mtrs. X 105 mtrs. = 2362Bsq. mtrs. Such a drastic reduction in the total measurement of the areaof the open stock yard, according to the appellant, led to the quantum ofthe material burnt/damaged getting substantially reduced.

22. But it is seen from paragraph 9.4 and 9.5 of the Surveyors’Report that there were actually three different measurements availableCwith the Surveyor, with a huge variation between one another. The StatusReport dated 16.11.2007 filed by Shri Kapil Vaish, about which theappellant did not have any serious grievance, recorded clearly as follows“it was estimated that the fire had affected waste paper bales lyingin the area of 27 mtrs. X 55 mtrs. = 1485 sq. mtrs. in the openDcompound.” The appellant claimed in their letter dated 13.12.2007addressed to the Surveyor that the total affected area was 27 mtrs. X100 mtrs. = 2700 sq. mtrs. These two documents, namely, the StatusReport of Shri Kapil Vaish and the measurement given by the appellantin their letter dated 13.12.2007 were in contrast to the measurementgiven by the Tehsildar, Khatima, relied upon by the appellant themselves,Eaccording to which the measurement was 90 mtrs. X 23 mtrs. = 2070mtrs.

23. Faced with three different measurements as aforesaid, theSurveyor reconciled the same by holding that despite the measurementof the open stockyard being 22.5 mtrs. X 105 mtrs. = 2362 mtrs., theFarea affected by fire could only be 1485 sq. mtrs. This is for the reasonthat during their visit to the site, the damaged/burnt bales as well asloose waste papers were found spread over an area of 22.5 mtrs. X 105mtrs. and the insured was carrying out salvaging/segregation in the saidarea after the extinction of the fire. In other words, what was witnessedGby Shri Kapil Vaish personally on 16.11.2007 was that the fire wasconfined to an area of 1485 sq.mtrs, but what was seen by the Tehsildarand the Surveyor was of a larger area where the salvage operation wasgoing on. Therefore, the Surveyor chose to go by the measurement ofthe area mentioned in the Status Report of Shri Kapil Vaish, who had thebenefit of witnessing what was happening when fire fighting was still inH

progress. In such circumstances, we find nothing wrong in the Surveyortaking the measurement of the area of the stockyard affected by fire, as27 mtrs. X 55 mtrs. = 1485 sq. mtrs. for the purpose of volumetricanalysis.

24. At this stage it will be useful to extract the table given by theSurveyor in paragraph 9.9.2 of his Report, where detailed calculationsare provided as to how the net weight of waste paper burnt/damagedduring the incident was arrived at:

25. An objection was raised by Ms. Meenakshi Arora, learnedsenior counsel for the appellant about 20% reduction made by theSurveyor in the measurement of the area. Such a reduction was madeby the Surveyor, on the ground that gaps/space was required for themovement of men and material. It is her contention that when admittedlythe appellant was using forklifts to move and store material, there wasno question of leaving any vacant space.

26. But we do not agree. The allowance of some space withinthe open stockyard, for the purpose of movement of men and materialis logical. It is not possible for us to accept that the whole space inthe stockyard was completely stacked by material without any spacefor movement. Without providing adequate gaps and spaces within theopen courtyard, it would not have been possible for the appellant to A

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Aremove the material for the purpose of processing, even if forklifts wereused. Therefore, the objection to the provision for open space/gaps isunfounded.

27. The next crucial objection of the appellant is to the adoptionof the overall weight per bale at 900 kgs. According to the appellant, theBSurveyors themselves calculated the average weight per bale in AnnexureA-3 to their report as 988.889 kgs. and that, therefore, this could nothave been reduced to 900 kgs. per bale.

28. But the appellant has to blame themselves for this. In thecalculation sheet annexed to the letter dated 13.12.2007 addressed toCthe Surveyor, the appellant themselves estimated the average weightper bale to be 900 kgs. What is arrived at by the Surveyor, in AnnexureA-3 to their Report is based only upon the sizes of different types ofbales and the areas occupied by different types of bales. Annexure A-3to the Surveyors’ Report arrives at the average weight per bale bymultiplying the size of the bales by the area occupied. There was noDreason for the Surveyor to be more royal than the king by adopting theaverage weight per bale on the basis of paper calculations, when theparty himself has provided the average weight to be 900 kgs. per bale.

29. Thus, we find that all the objections of the appellant to theSurveyors’ Report are wholly unsustainable and the National CommissionErightly rejected those objections. As a matter of fact we have takenpains to go into elaborate factual details, as this is a first appeal underSection 23 of the Consumer Protection Act, 1986.

30. As correctly pointed out by the National Commission, theappellant was not entitled to succeed unless they were able to establishFany deficiency in service on the part of the Insurance Company. Theexpression deficiency is defined in Section 2(1)(g) of the ConsumerProtection Act, 1986, as follows:

“2(1)(g) deficiency” means any fault, imperfection, shortcomingor inadequacy in the quality, nature and manner ofGperformance which is required to be maintained by or underany law for the time being in force or has been undertaken tobe performed by a person in pursuance of a contract orotherwise in relation to any service”

31. This is not a case where the Insurance Company hasHrepudiated the claim of the appellant arbitrarily or on unjustifiable grounds.

This is a case where the claim of the appellant has been admitted, to theextent of the loss as assessed by the Surveyor. In cases of this nature thejurisdiction of the special forum constituted under the Consumer ProtectionAct, 1986 is limited. Perhaps if the appellant had gone to the civil court,they could have even summoned the Surveyor and cross examined himon every minute detail. But in a complaint before the Consumer Forum,a consumer cannot succeed unless he establishes deficiency in serviceon the part of the service provider.

32. It is true that even any inadequacy in the quality, natureand manner of performance which is required to be maintained byor under any law or which has been undertaken to be performedpursuant to a contract, will fall within the definition of the expression‘deficiency’. But to come within the said parameter, the appellantshould be able to establish (i) either that the Surveyor did not complywith the code of conduct in respect of his duties, responsibilities andother professional requirements as specified by the regulations madeunder the Act, in terms of Section 64UM(1A) of the Insurance Act,1938, as it stood then; or (ii) that the insurer acted arbitrarily in rejectingthe whole or a part of the Surveyor’s Report in exercise of the discretionavailable under the Proviso to section 64UM(2) of the Insurance Act,1938.

33. Section 64UM (2) of the Insurance Act, 1938, before itsamendment by Act 5 of 2015, mandated that no claim equal to orexceeding a sum of rupees twenty thousand only shall be admitted forpayment unless the insurer had obtained a report from an approvedsurveyor or loss assessor.[4] This provision read as follows:

“(2) No claim in respect of a loss which has occurred inIndia and requiring to be paid or settled in India equal to orexceeding twenty thousand rupees in value on any policy ofinsurance, arising or intimated to an insurer at any time afterthe expiry of a period of one year from the commencementof the Insurance (Amendment) Act, 1968, shall, unlessotherwise directed by the [Authority], be admitted for paymentor settled by the insurer unless he has obtained a report, 4 After amendment through Act 5 of 2015, what was sub-section (2) earlier, hasbecome sub-section (4) with the modification that the words “twenty thousand rupees” have been substituted by the words “amountspecified in the Regulations by the Authority”.

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Aon the loss that has occurred, from a person who holds alicence issued under this section to act as a surveyor orloss assessor (hereafter referred to as “approved surveyoror loss assessor”):

34. But the Proviso to sub-section (2) of section 64UM alsoBrecognized the right of the insurer to pay any amount different from theamount as assessed by the approved surveyor or loss assessor. Theproviso reads as follows:

“Provided that nothing in this sub-section shall be deemed totake away or abridge the right of the insurer to pay or settleCany claim at any amount different from the amount assessedby the approved surveyor or loss assessor.”

35. This is why the law is settled that the surveyor’s report is notthe last and final word. It has been held by this Court in several decisions,that the surveyor’s report is not so sacrosanct as to be incapable ofDbeing departed from. A useful reference can be made in this regardto the decision of this court in New India Assurance Company Limitedvs. Pradeep Kumar[5].

36. The Insurance Act, 1938 even while assigning an importantrole for the surveyor, casts an obligation on him under sub-sectionE(1A) of section 64UM[6] to comply with the code of conduct in respectof his duties, responsibilities and other professional requirements asspecified by the regulations made under the Act. This provision readsas follows:“(1A) Every surveyor and loss assessor shall comply with theFcode of conduct in respect of their duties, responsibilities andother professional requirements as may be specified by theregulations made by the Authority.”

37. Two things flow out of the above discussion, They are (i) thatthe surveyor is governed by a code of conduct, the breach of which mayGgive raise to an allegation of deficiency in service; and (ii) that thediscretion vested in the insurer to reject the report of the surveyor inwhole or in part, cannot be exercised arbitrarily or whimsically and thatif so done, there could be an allegation of deficiency in service.

5 (2009) 7 SCC 787H6 Now sub-section (2) of section 64 UM after amendment under Act 5 of 2015

38. A Consumer Forum which is primarily concerned with anallegation of deficiency in service cannot subject the surveyor’s reportto forensic examination of its anatomy, just as a civil court could do.Once it is found that there was no inadequacy in the quality, natureand manner of performance of the duties and responsibilities of thesurveyor, in a manner prescribed by the Regulations as to theircode of conduct and once it is found that the report is not based onadhocism or vitiated by arbitrariness, then the jurisdiction of theConsumer Forum to go further would stop.

39. In the light of the above we are of the considered viewthat the Judgment of the National Commission does not call for anyinterference. Hence the appeal is dismissed. No costs.

Nidhi Jain

Appeal dismissed.

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H