Holding

The insurer may appoint a second or further surveyor provided it furnishes satisfactory reasons for rejecting the prior surveyor’s report, and interest on the awarded amount should be 9% per annum from the date of the chartered accountant’s assessment.

Summary

Sri Venkateswara Syndicate, a cotton trading partnership, suffered an accidental fire in its godown and claimed Rs.1.90 crore under its fire insurance policies with Oriental Insurance Company Ltd. The insurer appointed a series of surveyors – a licensed surveyor, joint surveyors, a second surveyor, and finally a chartered accountant – each producing differing loss assessments, ultimately accepting the chartered accountant's figure of Rs.1,05,00,817. The syndicate approached the National Consumer Disputes Redressal Commission, which ordered payment of the chartered accountant's amount with interest at 6% per annum from March 2001. The insurer appealed, raising the questions whether it could repeatedly appoint surveyors under Section 64‑UM of the Insurance Act and whether the commission was justified in fixing interest at 6% instead of a higher rate. The Supreme Court held that the Act does not forbid appointing additional surveyors, but the insurer must give satisfactory reasons for rejecting earlier reports; it also directed that interest be awarded at 9% per annum from the date of the chartered accountant’s assessment. Consequently, the appeal was partly allowed, confirming the quantum of loss and increasing the interest rate.

Issues considered

Whether an insurer may repeatedly appoint surveyors after surveyors for loss assessment under Section 64‑UM of the Insurance Act, 1938.
Whether the National Consumer Disputes Redressal Commission was justified in awarding interest at 6% per annum instead of a higher rate.

Legislation cited

Insurance Act, 1938s. 64-UM(2), s. 64-UM(3), s. 64-UM(4)
Insurance (Amendment) Act, 1968
Insurance Surveyors and Loss Assessors (Licensing, Professional Requirements and Code of Conduct) Regulations, 2000

Subjects

insurancesurveyor appointmentSection 64‑UMclaim settlementinterest rateconsumer protectionNational Consumer Disputes Redressal Commissiondelayfire insurance

Judgment

(2009) 14 (ADDL.) S.C.R. 57
~

SRI VENKATESWARA SYNDICATE A
v.
ORIENTAL INSURANCE COMPANY LTD. AND ANR.
(Civil Appeal No. 4487 of 2004) .
AUGUST 24, 2009
B
[MARKANDEY KATJU AND H.L. DATTU, JJ.]
-'(
Insurance - Accidental fire resulting in Joss of cotton
stock - Claim - Insurance company appointing Surveyor after
Suttteyor and delaying payment towards the claim - Claimant c
approaching National Consumer Commission !Jfhich passed
an order directing payment of the agreed loss with 6% interest -

... ....
thereon - On appeal, Held: There is no prohibition in the
Insurance Act for appointment of second Surveyor by the
Insurance Company but it has to give satisfactory reasons for D
not accepting the report of the first Surveyor and the need to
appoint second Surveyor - On the facts of the case quantum
of loss determined and awarded by the Commission affirmed
- However, interest awarded at 6% p.a. increased to 9% p.a.
- Insurance Surveyors and Loss Assessors (Licensing, E
Professional Requirements and Code of Conduct)
"
-- Regulations, 2000- Insurance Act, 1938, Section 64 UM (2).

Appellant, a registered partnership firm has been
trading in cotton. It had a ginning mill on lease. There has
been an accidental fire in its godown. Appellant made a F
claim of Rs.190 Crores towards the loss. The Insurance
Company appointed a licensed Surveyor and he
estimated the loss of stock at Rs.1, 73,92,310/-. Thereafter
appellants had appointed a Joint Surveyor in terms of
""( Section 64 UM(2) of the Insurance Act. The Joint Surveyor G
report estimated the loss of stock at Rs.1,67 ,fl0,9251-. The
Insurance Company was of the view that the report is
perfunctory and appointed another Surveyor. This
Surveyor confirmed the report of the Joint Surveyor. Still
57 \H
58 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R.

A not satisfied, the Insurance Company appointed a i
Chartered Accountant to give a fresh report, and he had
estimated the loss of stock at Rs.1,05,00,817/-. The
Insurance Company had placed the report before the
Joint Surveyors for their opinion. The Joint Surveyors in
B their clarificatory report, did not agree with the findings
of the Chartered Accountant on the ground that the
findings were based on books of accounts for the period
1-.10.1998 to 31.3.1999 and not till the date of fire accident.
Since there was inordinate delay in settling the claim, the -
c appellant approached the National Consumer
Commission. The Commission directed the Insurance
Company to pay Rs.1,05,00,817/- with interest at 6% p.a.
Hence the appeal.

The main issue that arose for consideration was
D whether the insurance company can repeatedly appoint
Surveyors after Surveyors for getting the loss/damaged
assessed before settling the claim of the insured, and the
incidental issue was whether the Nationai Consumer
Commission was justified in awarding interest at 6% p.a.
E as against 18% claimeq by the appellant.
J.
Partly allowing the appeal, the Court

.HELD: 1.1. Parties have not lead in· any evidence in
·support of their claim. In fact Natfonal Consumer
F Commission has proceeded to decide the lis between the
parties based on certain documents filed by the parties
along with their pleadings. [Para 19] [7 4-A-B]

1.2. A perusal of the joint su..Vey report reveals that
G the Joint Surveyors without going into the records of the
appellant firm had assessed the loss said to have been
sustained by the insured in the fire accident. The Joint
Surveyors had arrived at the cost of own Ginned lint at
Rs. 7084/- as against the records of the insured which
H
SRI VENKATESWARA SYNDICATE v. ORIENTAL 59
-
~

INSURANCE COMPANY LTD.
,_
itself shows the cost of Ginned lint at Rs. 6,229.35 and A
wt Rs. 6,181.57 per quintal. Secondly, the Joint Surveyors
'
(' had taken into ~ccount 88 borahs while assessing the
loss, whereas as per the records of the insured submitted
to the bank, there were 551 borahs as on 31.7.1999, out
of which 548 bor~s were sold from 1.8.1999 to 24.8.1999, B
(the date of the .fire inciden~) thus leaving only 3 borahs
in the stock. Mr. R. Srinivasan, Chartered Accountant,
-I
who gave the report h~ving noticed all these omissions
and after detailed verification of the books of accounts
and records maintained by the appellant has assessed c
the loss at Rs.1,05,00817/-. In his report he has specifically
stated that the Joint Surveyors have failed to notice that
the accounts presented to them belonged to one of the
y
several firms operating from the same premises under the

• same or similar names and further the Joint Surveyors
had overlooked to ascertain the identity of the firm which
was insured and the firm which had in fact sustained the
D

loss. [Para 20] [7 4-8-G]
1.3. A bare perusal of the report of the Chartered
Accountant would clearly demonstrate that:'.it is only after E
l\
verifying the books of accounts maintained by the
... appellant in the regular course of business, has
calculated the number of borahs that could have been
~
available in the business premises at the time of fire
incident. These finer aspects of the matter has been taken F,
into consideration by the National Consumer Commission
while rejecting the Joint Survey report of Joint Assessors
and for accepting the report of Chartered Accountant. The
Commission has also observed that after looking into
several reports of the surveyors and the loss assessed G
.,. by them, it would be fair to go by what the Chartered
Accountant has said in his report. May be, the discussion
is brief, but the conclusion is sound, and this Court
...
/
concurs with it. [Para 20] [75-A-C]
H

~
60 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R. _._

~
1
A 2.1. ·The assessment of loss, claim settlement and
relevance of survey report depends on various factors.
~~
Whenever a loss is reported by the insured, a· loss
adjuster, popularly known as loss surveyor, is deputed
who assess the loss and issues report known as
B surveyor report which forms the basis for consideration·
or otherwise of the claim. Surveyors are appointed under,
the statutory provisions and they are the link between the
insurer and the insured when the question of settlement
of loss or damage arises. The report of the surveyor
c could become the basis for settlement of a claim by the
insurer in respect of the loss suffered by the insured.
There is no disputing the fact that the _Surveyor/Surveyors
are appointed by the insurance ,company under the

D
provisions of Insurance Act and their reports are to be
given due importance and one should have sufficient
grounds not to agree with the assessment made by them.
Under Section 64-UM, the insurance company cannot go
y

..
,,

on appointing Surveyors one after another so as to get
a tailor made report to the satisfacti:m of the concerned
officer of the insurance company, if for any reason, the
E report of the Surveyors is not acceptable, the insurer has
to give valid reason for not accepting the report. Scheme j.

of Section 64-UM particularly, of sub-sections (2), (3) and
(4) would show that the insurer cannot appoint a second
surv~yor just as a matter of course. If for any valid reason
F the report of the Surveyor is not acceptable to the insurer
may be for the reason if there are inhe.rent defects, if it is
found to be arbitrary, excessive, exaggerated etc., it must
specify cogent reasons,. without which it is not free to
appoint second Surveyor or Surveyors till it gets a report
G which would satisfy its interest. Alternatively, it can be
~
stated that there must be sufficient ground to disagree
with the findings of Surveyor/Surveyors. There is no
prohibition in the Insurance Act for appointment of
second Surveyor by the Insurance Company, but while '
H

....
SRI VENKATESWARA SYNDICATE v. ORIENTAL 61
-+ INSURANCE COMPANY LTD.
doing so, the insurance company has to give satisfactory A
reasons for not accepting the report of the first Surveyor
and the need to appoint second Surveyor. [Para 22] [75-
F-G; 76-A-E]

2.2. The Insurance Act only mandates that while
B
settling a claim, assistance of surveyor should be taken
but it does not go further and say that the insurer would
be bound whatever the surveyor has assessed or
quantified, if for any reason, the insurer is of the view that
certain material facts ought to have been taken into
consideration while framing a report by the surveyor and c
. if it is not done, it can certainly depute another surveyor
for the purpose of conducting a fresh survey to estimate
the loss suffered by the insured. [Para 23] [77-A-C]
,,_
2.3. In the instant case, the insurer has stated in the D
counter affidavit filed before the National Commission
and even before this Court as to why the appointment of
second Surveyor was necessitated and also has given
valid reasons for appointing second Surveyor and also
has assigned valid reason for not accepting the report of E
Joint Surveyor. The correspondence between the insurer
:i..
and the Surveyors would indicate the particulars differed
" by the insurer for differing with the assessment of loss
made by the Surveyors. The option to accept or not to
accept the report is with the insurer. However, if the F
~
rejection of the report is arbitrary and based on no
acceptable reasons, the courts or other .forums can
definitely step in and correct the error committed by the
insurer while repudiating the claim of the insured. If the
reports are prepared in good faith, due application of
G
mind and in the absence of any error or ill motive, the
--+
insurance company is not expected to reject the report
of the Surveyors. [Para 23] [77-C-F]

3.1. In this Case, the insurer after rejecting the
assessments of the surveyor and the joint surveyor has H
62 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R.
...._

-t
A accepted the assessment made by the Chartered
Accountant. Therefore, it would not be correct to say that
insurer while settling the claim has caused an
unnecessary delay of three years. But once the insurer
has reached a settlement he should make the payment
B at the earliest. And if further delay is caused by the
insurer in making the payment then he should. be made
liable to pay the interest on the amount settled, as ).-
compensation at the current rate of interest till the
payment is made, as it has deprived the appellant from
c using his money for which he is legitimately entitled.
[Para 27] [78-F-H; 79-A]

3.2. The respondent Insurance Company to pay
Rs.1,05,00817/- with interest at the rate of 9% as ..,,
compensation from the date of assessment done by the
D ....
Chartered Accountant, within two months from the date
of this order. [Para 28] (79-B]

Secretary, Irrigation Deptt., Govt. of Orissa v. G.C. Roy,
(1992) 1 SCC 508; Ghfl,~iabad Development Authority v.
E Balbir Singh, (2004) 5 SCC 65 and ·Kaushnuma Begum v.
New India Assurance Co. Ltd., (2001) 2 SCC 9, relied on. ~

Case Law Reference: ~

(1992) 1 sec 508 relied on Para 24
F (2004) 5 sec 65 relied on Para 25 ~

(2001) 2 sec 9 relied on Para 26
CIVIL AP PELLATE JURISDICTION : Civil Appeal No.
4487 of 2004.
G
From the Judgment & Order dated 19.1.2004 of the
National Consumer Disputes Redressal Commission at New
Delhi in OP No. 135 of 2001.

H
j

SRI VENKATESWARA SYNDICATE v. ORIENTAL 63
INSURANCE COMPANY LTD.
~-
K.V. Viswanathan, P.B. Suresh, Vipin Nair (for Temple A
Law firm) for the Appellant.

Kishore Rawat, M.K. Dua for the Respondents.

The Judgment of the Court was delivered by
B
H.L. DATTU, J. 1. This appeal is directed against the
_.(
order passed by National Consumer Disputes Redressal
Commission, New Delhi in Original Petition No.135 of 2001
dated 19th day of January, 2003.

2. The brief facts are as under :
c
The appellant is a registered partnership firm. Their line
of activity is trading in cotton. For the purpose of their business,
" they had taken Mis Jai Bharat Traders Cotton Ginning Mill on
,; lease. The claim of the appellant is that an accidental fire took 0
place in the godown of Mis Jai Bharat Traders, leased by the
appellant firm, where its cotton stocks were stored and insured
at about 2.10 a.m. in the morning hours of 24.8.1999 and
according to the appellant the estimated loss was of Rs. 1.90
crores. The cotton stocks in question were covered by seven E
insurance policies issued by respondent - Oriental Insurance
~
Company Ltd. hereinafter for the sake of brevity referred to as
-+ 'insurer' for a total sum of Rs.1.98 Crores during the period
when the fire accident took place. The appellant made a claim
of Rs.1.90 crores towards loss of stock due to accidental fire F
io
in its business premises, with the insurer. Pursuant the claim
so made, the insurance company appointed one Sri K. Siva
Prasad, a licensed surveyor for preliminary investigation and
for submitting a preliminary report, about the cause of fire and
the probable loss said to have been suffered by the insured. G
,._ The surveyor having examined the place of fire accident gave
preliminary report dated 09.09.1999 to the insurance company
estimating the loss of stock at Rs.1,73,92,310/-, however, had
noticed in his report that the number of bales and borahs lying
H
I

/
•
64 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R.

A in the Godown and the actual quantity of lint damaged by fire 1'
has to be got confirmed from the accounts of the insured and
also by physical verification of bale hoops. The insurer after
receipt of the preliminary report of Sri K. Siva Prasad, had
appointed Joint Surveyors M/s Mehta and Padamsey and
B Kaypens, in terms of Section 64 UM(2) of the Insurance Act to
give a joint report. They conducted a joint survey and in that,
had estimated the loss of stock insured at Rs.1,67,80,925/- and
gave a report to that effect to the .insurer. The insurer being of ).
the view that the report is perfunctory, had appointed yet another
c Surveyor viz. Dinesh Gopal and Co. who, in turn appointed one
Mr. Panchal, former DIG (Fire). CISF and Fire Adviser to the
Government of India to investigate. and submit a report, who in ,-.
turn after investigation and· survey submitted his report dated
07.05.2000, confirming the quantification made by the Joint
Surveyor. Since the insurer was not satisfied with the aforesaid
.,
D
report also, appointed R. Srinivasan and Co., Chartered
Accountant to give a fresh report by estimating the loss of stock
insured due to accidental fire incident. After inspection of the
godown and verifying the books of accounts, estimated the loss
of stock at Rs.1,05,00,817/-. The insurance company had
E placed the aforesaid report before the Joint Surveyor viz. M/s.
Mehta and Padamsey and Kaypsens for their opinion. The joint
~
surveyors in their clarificatory report dated 06.01.2001, did not
agree with the finding'.> of the chartered accountant, on the
ground that the chartered accountant had based his report only
F after verifying the books of accounts for the period 01.10. 1998
to 31.03. 1999 and not till the date of fire accident.

3. Since there was inordinate delay in settling the lawful
claim under the fire insurance policy, the appellant preferred
G original complaint before the National Consumer Forum against
the insurer, inter-alia, alleging that there was deficiency in ...,
service and, therefore, they are entitled for a sum of
Rs.1,67,80,925/- being the value of loss assessed by the Joint
Surveyors and, therefore, sought a direction to the insurer for ~

H
SRI VENKATESWARA SYNDICATE v. ORIENTAL 65
• INSURANCE COMPANY LTD. [H.L. DATTU, J.]
"" payment of the aforesaid amount with interest at 18% from the A
date of fire accident till its realization and for payment of a sum
of Rs. 6,91, 155/- being the value of the salvage as assessed
by the surveyors and also to award damages in causing
unnecessary and unwarranted delay in settling the claim under
the insurance policy. B

4. The National Consumer Disputes Redressal
°" Commission, hereinafter for the sake of brevity referred to as
"Commission" on the concession made by the insurance
company based on the report of Chartered Accountant has C
passed the impugned order, directing the insurer to pay a sum
of Rs. 1,05,00,817/- with interest at 6% per annum from
01.03.2001 till the date of payment within two months from the
date of receipt of the order. The reasons assigned by the
" Commission for accepting the concession made by the
respondents is forthcoming in its order. The same is extracted D
for better appreciation of the case pleaded by the parties to
the lis. It is as under :

"7.5. As regards the quantum of loss, we need to give
weightage to the estimates made by various Investigators E
appointed by the Insurance Co. The first three Investigators
assessed the loss at about the same figures i.e. the loss
is of 1350 fully pressed bales of cotton and 88 boras of
lint valued that about Rs. 1. 73 to Rs. 1.74 crores. However,
the Insurance Co. having noticed that these Investigators F
had not gone into the details of transactions and stocks in
a thorough manner, asked another Chartered Accountant,
Mis R. Srinivasan & Co. to specially ascertain the quantum
of loss caused by the fire. M/s R. Srinivasan & Co.
submitted a "Accounts Verification Report" on 22.11.2000 G
and assessed the loss at Rs. 1,05,00,817/-. They also
furnished subsequent clarification on 22.12.2000,
22.1.2001 and 9.9.2002 pointing out the lacunae in the
reports of the previous Investigators."

H
66 SUPREME COURT REPORTS [2009) 14 (AOOL) $.C.R. ,
~

A Finally, the opposite party themselves, while disputing their -f

liability to pay, have however agreed that the loss Is ·only
Rs.1,05,00,817/- and not Rs.1.90 crore, as claimed by the "'
appellant.

5. Being aggrieved by the aforesaid order, the claimant is ·
B
before us in this appeal.
6. The learned senior counsel Shri K.V. Viswanathan· 'r
appearing for the appellant submitted, that, the actlt>n of the
insurance company in appointing several surveyors tili it got a.
c favourable report to suitits estimatiQn Qf loss of stock in the fire
incident is illegal and shatters the confidence and trust of the
people on the very purpose of insurance. It is further submitted
that the National Commission despite upholding the report of
the Joint Surveyors which assessed the loss at Rs.1,64, 70,407/ ?'
•
r'
D -, ought not to have accepted the concession made. by the '
insurer and directed the insurance company to -pay only the
. amount as quantified by the chartered accountant. Lastly, it is
submitted that the National Commission despite giving a finding
that there is gross deficiency in service has only granted interest
E at 6% per annum from 01.03.2001 and not from the date o{ fire
accident, which,· according to learned counsel is. impropf!r and
...
illegal.
7. In response to the submission made by learned senior
counsel for the appellant, the learned counsel for the insurer
F invites our attention to the counter affidavit filed by them before
this Court in justification of the order passed by National ..._I'
Consumer Commission and then submits that the provisions of
Section 64-UM of Insurance Act, 1938 does authorize the
insurer to appoint surveyor or surveyors, may be for the second
G time for the purpose of getting a fair report of the -actual Joss ..,.
suffered by the insured. To buttress their submission, they invite
our attention to the provision of Section 64-UM of the Insurance
Act, 1938, for which we will make reference at the appropriate
stage. The learned counsel also submitted several reasons for
H
t
I
SRI VENKATESWARA SYNDICATE v. ORIENTAL 67
INSURANCE COMPANY LTD. [H.L. DATTU, J.]
' not accepting the report of Joint Surveyors in view of the lacuna A
pointed out by the Chartered Accountant, who was asked to
verify the Books of Accounts maintained by the insured to
ascertain the actual loss incurred due to the fire accident by
the insured in its place of business and therefore, there is no
illegality committed by the National Consumer Commission in B
accepting the report of Chartered Accountant and directing the
insurance company to pay as assessed and quantified by an
independent agency. The learned counsel also submits that
keeping in view the facts and circumstances of the case, the
National Consumer C<iJlmission was justified in awarding c
... interest at the rate of 6% per annum from 01.03.2001, though
a claim was made for awarding interest at the rate of 18% from
the date of fire incident till the date of payment.
'y

8. Two issues would arise for our consideration and
decision. Firstly, whether the insurance company can repeatedly D
appoint Surveyors after Surveyors for getting the loss/damage
assessed before settling the claim of the insured. The incidental
question is, whether the National Consumer Commission was
justified in awarding 6% interest per annum from 01.03.2001
as against the claim of the appellant at 18% from the date of E
the fire accident, viz. 24.08.1999.

9.-To appreciate the issues raised in this civil appeal, we
extract relevant Section by omitting what is not necessary for
the purpose of this case. Section 64-UM(2) of the Insurance Act, F
1938 is as under :

"64- UM(2) - No claim in respect of a loss which has
occurred in India and requiring to be paid or settled in India
equal to or exceeding twenty thousand rupees in value <;>n
any policy of insurance, arising or intimated to an insurer . G
at any time after the expiry of a period of one year from
the commencement of the Insurance (Amendment) Act,
· 1968, shall, unless otherwise directed by the Authority, be
admitted for payment or settled by the insurer unless he
H·
....

68 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R.

-1
A has obtained a report, on the loss that has occurred, from
a person who holds a licence issued under this section to ·
Al
act as a surveyor or loss assessor (hereafter referred to
as "approved surveyor or loss assessors):

Provided that nothing in this sub-section shall be deemed
B
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 assessor.
(3) The Authority may, at any time, in respect of any claim
c of the nature referred to in sub~ection (2), call for an
independent report from any other approved surveyor or· ~

loss assessor specified by him and such surveyor or loss
assessor shall furnish such report to the Authority within
y
such time as may be specified by the Authority or if no
D time limit has been specified by him within reasondiJle time
and the cost of, or incidental to, such report shall be borne
· by the insurer.

(4) The Authority may, on receipt of a report referred to in
sub-section (3), issue such directions as he may consider
E
necessary with regard to the settlement of the claim
a
including any direction to settle claim at a figure less than, 1'

or more than, that at which it is proposed to settle it or it
was settled and the insurer shall be bound to comply with
such directions:
F
Provided that where the Authority issues a direction for
settling a claim at a figure lower than that at which it h.as
already been settled, the insurer shall be deemed to
comply with such direction if he satisfies the Authority that
G all reasonable steps with due regard to the question
whether the expenditure involved is not disproportionate
to the amount required to be recovered, have been taken
with due despatch by him:

Provided further that no direction for the payment of a
H
SRI VENKATESWARA SYNDICATE v. ORIENTAL 69
INSURANCE COMPANY LTD. [H.L. DATIU, J.]
lesser sum shall be made where the amount of the claim A
has already been paid and the Authority is of opinion that
the recovery of the amount paid in excess would cause
undue hardship to the insured:

Provided also that nothing in this section shall relieve the B
insurer from any liability, civil or criminal, to which he would
have been subject but for the provisions of this sub-section. n

10. Section 64-UM (1) of the Act speaks of licensing of.
Surveyors and loss assessors. We are not very much concerned
with this sub-section. Sub-section (2) mandates that no claim c
in respect of a loss which has occurred in India and requiring
• to be paid in India equal to or exceeding twenty thousand rupees
in value on any policy of insurance be admitted for payment,
unless insurer obtains a report on the loss that has occurred
from ao person who holds a license issued under sub-section D
(1) of Section 64 UM of the Act as a Surveyor or loss assessor.
The proviso to sub-section(2) however, retains the right of the
insurer to settle a claim for an amount different from that
assessed by the surveyor. This proviso impliedly permits an
insurer to obtain a second or further report where considered E
appropriate or expedient in the circumstances of a case, based
., upon which the claim could be settled for a different amount than
as assessed earlier.

11. Sub-section (3) provides for the Authority (Insurance
F
Regulatory and Development Authority), the power to obtain an
independent report from any other surveyor in respect of a claim
referred to in sub-section (2). This sub-section vests in the
Authority the power to call for a second report, either suo motto
or upon the application by the insured person or on a complaint
by a third party. Under sub-section (3), the second report is G
required to be called by the Authority. himself for use,
consideration and further directions.

12. Sub-section (4) envisages, that the authority may on
receipt of a report referred to in sub-section (3), issue such H
70 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R.
...._
A directions as he may consider necessary with regard to the i
settlement of the claim including any direction to settle a claim
at a figure less than, that at which it is proposed to settle it or
'\
it was settled and the insurer shall be bound .to comply with such
directions. ;
~
B
13. The learned senior counsel Shri K.V. Viswanathan for
the app~llant, submits that, despite the surveyors having
consistently given a specific finding that the claim was bonafide
and the fire was accidental had assessed the loss at Rs.1. 70
crores, but the insurance company has repudiated the claim
c on frivolous ground, that too after a period of three years from
the date of fire incident. It is further contended that the company
had appointed several surveyors, which they could not have
..
done in terms of Section 64-UM of the Insurance Act, ,1938.
.,,,
D 14. In the instant case, the insurer had appointed a
surveyor for preliminary inspection and survey to assess the
loss caused due to the fire accident in the business premises
of the appellant. In the preliminary survey report dated
09.09.1999, Sri K. Siva Prasad had given broadly an estimate
E of loss caused due to the fire accident. in the business
premises of the appellant. He had specifically reported that the
')Umber of bales and borahs lying- in the godown and the actual ,.
quantity of lint damaged by the fire has to be got confirmed from
the accounts of the insured and also by physical verification of
F the bale hoops. In his report, he had made ~ clear that he has
hot finally assessed the loss. The Joint Surveyors who were
· appointed to jointly assess the loss had given their report dated
15.11.1999, wherein they had assessed the loss at Rs.
1,67,80,925/- on receipt of this report, the insurance company
·G by their letter dated 7.1.2000, had sought several clarifications
from their Joint Surveyors, which according to them were
omitted to be noticed by the Joint Surveyors while assessing
the loss caused due to the fire accident in the appellant's
business premises. The letter dated 7.1.2000, is extracted for
better understanding the rival claims of the parties :
H
SRI VENKATESWARA SYNDICATE v. ORIENTAL 71
INSURANCE COMPANY LTD. [H.L. DATTU, J.]
"THE ORIENTAL INSURANCE HYDERABAD REGION A

THEORIENTAL INSURANCE COMPANY LIMITED

DIVISIONAL OFFICE : GUNTUR

Dear.Sirs, B

. RE: FIRE LOSS TO COTTON STOCKS ON 24-8-1999
~ ·.

OUR CLAIM NO. 432301/136/0/F/04/2000 -
c
Ale: M/S SRI VENKATESWARA SYNDICATE·-
. GUNTUR
We refer to your joint survey report bearing Nos. MR/1269
· (MS/61640) and KPS/CL/1837 dated 15.11:99 D
respectively.
On perusal of the. papers, we have observed as under :
(1) The cause of the accident is mentioned as electrical
short circuit because of voltage fluctuations. When the E
stocks were kept in a locked godown and when there was
no kind of activity for months together, we wonder as to
why the lights in the godown were kept switched on round
the clock. Had the lights been switched off the short circuit
causing the fire accident could not have occurred. Please F
let us have your comments.

(2) From the balance sheet of insured as on 31st march,
1999 nearly 50% of the purchases i.e. Rs. 1.07 crore out
of Rs. 2.27 crores were from individual village ryots on
a
.credit basis. We fell in a claim of such magnitude some G
random investigation is required on th~ credit purchases
to confirm their genuinity.

(3) As per the preliminary survey report there were two
H
72 SUPREME COURT REPORTS [2~09] 14 (ADDL.) S.C.R.

A varities of bales/borahs viz. MCU-5'@ Rs. 7, 140/- per i
quintal in bales and Rs. 7,040/- per quintal in borahs and
LK variety @ Rs. 5,650/- per quintal in bales and Rs.
5,550/- in borahs. But, in your assessment you have taken
a
the entire quantity as single variety i.e. MCU-5 @ Rs.
8 7,193/- per quintal in FP bales and Rs. 7,084-19 ps per
quital in bor~hs and assessed the loss@ Rs. 1,74,82,080/
-. Whereas, when we have applied the different rating the
assessment is claiming to Rs. 1,72,57,3Q5/-. Please ~
clarify.
c Please let us have your clarification on the above points
at the earliest to enable us to proceed further. ~

"'
Thanki~g you,
-~

D Yours faithfully,

Sd/-

·SR. DIVISIONAL MANAGER

E cc to: Regional Office, Hyder~bad, forJnformation:"

15. The Joint Surveyors by their reply letter dated r'
12.1.2000 had stated.that they did not consider an investigation
into .the purchases necessary although they stated ~hat the ·
insurer may cause and/or carry out any investigation as
F necessary. We intend to extract only that portion of the reply,
which may be relevant for tpe purpose of knowing why the
insurer thought it fit to appoint Chartered Accountants for
verification of the accounts of the insured firm :

G · "(2). The doubts on procurements and need for
investigations (irrespective of cas~ or credit purchase) +·
would arise only if the stock position as claimed did not
tally with the available physical evidence. Even if purchases
are proved against actual payment, the physical evidence
H
SRI VENKATESWARA SYNDICATE v. ORIENTAL 73
);.
INSURANCE COMPANY LTD. [H.L. DATTU, J.]
t· A
after the incident, the single most important factor in such
situations can necessitate further enquiries and
investigation. That kind of a situation never arose in this
particular incident as the physical evidence and the extent
of damage to the building were supportive of the quantum
of stocks claimed to have been held. Our local enquiries B
did not show any evidence otherJhan an accidental fire.
In the circumstances, we do not, from our survey and
assessment point of view, consider an investigation into,
the purchases too essential. Nevertheless, as insurers with
privy to the contract, we note that you may cause and/or c
carry out any investigation as necessary."

[Emphasis is supplied by us]

... ... 16. In view of certain discrepancies in the joint report of,
the Joint Surveyors, the insurer was constrained to appoint a D
Chartered Accountant for verification of the books of accounts
of the insured, to ascertain the actual quantum of loss caused
by fire accident in the business place of the appellant.
17. Mr. Srinivasan, the Chartered Accountant, after detailed E
verification of the books of accounts and other relevant material
~

- had assessed the loss at Rs. 1,05,00817/-. In his report, he has '
~

I
stated that the Joint Surveyors without verifying the books of
account and other relevant records of the appellant firm had
assessed the loss which does not reflect the loss sustained by
F
the insured. They had also pointed out various other omissions
in the joint report of the Joint Surveyors.

18. The insurer for the purpose of ascertaining the actual
loss sustained by the insured had sought clarifications from the
Joint Surveyors in view of the findings by the Chartered G
' ~ Accountant. We were taken through their replies by learned '

counsel for the insurance company. To our mind, it appears,
they were not prepared to accept their omissions while
preparing their reports after inspection and verification of the
H
74 SUPRf;ME COURT REPORTS [2009) 14 (AODL.) S.C.Ft
~

A place of fire BCCident. 1

19. Parties have not l~ad in any evidence in support .of their
claim. tn fact National Consumer CQmmission has proceeded
to decide the lis between the parties based .on certain
B documents filed by the parties along with their pleadings. . · . .
..
20. We have carefully perused the joint survey report
' .
submitted by the surveyors who were appointed by the lnsu~r ·. .t. '.
and the report of the. Chartered Accountant.. The perusal of the
joint survey report reveals that the Joint Surveyors without going ·
.C into the records of the appellant firm had assessed the loss said
to have been sustained by the insured inthe fire accident. The
Joint Surveyors had arrived at the cost of own Ginned lint at ·.
Rs. 7084/- as against the records of the insured which itself
shows the post of Ginned lint at Rs. 6,229.35 and Rs. G, 181.57 ..,.
D per quintal. Secondly, the Joint Surveyors had taken intg
account 88 borahs while assessing the loss, whereas '1& per '"""""""
the records of the insured submitted to the bank. there Wire
551 borahs as on 31.7.199~, oµt gf wfligh §4a bg~h~ w@rt sold
from 1.8.1999 to 24.8.19~~. (~~e Q@t~ gf t~~ fim ln@id@n~ thua
E leaving only 3 borahs in the ~~~gk. Mr~ R: iRRiV~§lU,, Chartered
Accountant, who gave the report having noticed all these
;J I
omissions and after detailed verification of the books of
accounts and records maint~ined l>Y th' IPRtllant haa ......
'

assessed the loss at Rs.1,05,00817/-.. ln his report he has
F specifically stated that the Joint Surveyors have failed to notice
.that the accounts presented to them b~lof'ged to one of the · ....
several firms operating from the SPme premises under the
same or similar names and further the Joint Surveyors had over
looked to ascertain the identity of the firm which Was Insured
G and the firm which had in fact sustained the loss: The learned
senior counsel Sri K.V. Viswanathan would contend that the + :
Chartered Accountant who was deputed in conducting the
survey had verified the books of accounts of the appellant till
31.3.1999 and not till the date of Incident and, therefore, the ....
National Commission could not have accepted the report of the
\.
H
SRI VENKATESWARA SYNDICATE v. ORIENTAL 75
INSURANCE COMPANY LTD. [H.L DATTU, J.]

~ Chartered Accountant. This submission of the learned counsel A
is not based on facts. A bare perusal of the report of the ·
Chartered Accountant would clearly demonstrate that it is only
after verifying the books of accounts maintained by the appellant
in the regular course of business, has calculated the number
of borahs that could have been available in the business B
premises at the time of fire incident. These finer aspects of the
. matter has been taken into consideration by the National
-~ Consumer Commission while rejecting the Joint Survey report.
of Joint Assessors and for accepting the report of Chartered
Accountant. The Commission has also observed ..that after. c
looking into several reports of the surveyors and the los's
assessed by them, it would be fair to go by what the Chartered
Accountant has said in his report. May be, the discussion is
brief, but the conclusion is sound, and we concur.
" D
21. The Insurance Regulatory Authority ('IRDA' for short)
has· fcmnulated Insurance Surveyors and Loss Assessors
(Ucensing, Professional Requirements and Code of Conduct)
Regulations, 2000, which regulate the licensing and the work
of surveyors. These regulations stipulate that the surveyor shall
investigate, manage, quantify, validate and deal with losses E
arising from any contingency and carry out the work with
competence, obj3ctivity and professional integrity by strictly
adhering to the Regulations.

22. The assessment of loss, claim settlement and F
relevance of survey report depends on various factors.
Whenever a loss is reported by the insured, a loss adjuster,
popularly known as loss surveyor, is deputed who assess the
loss and .issues report known as surveyor report which forms
the basis for consideration or otherwise of the claim. Surveyors
G
are appointed under the statutory provisions and they are the
link between the insurer and the insured when the question of
settlement of loss or damage arises. The report of the surveyor
could become the basis for settlement of a claim by the insurer
in respect of the loss suffered by the insured. There is no
H
76 SUPREME COURT REPORTS [2009) 14 (ADDL.) S.C.R.

A disputing the fact that the Surveyor/Surveyors are appointed by
the insurance company under the provisions of Insurance Act
and their reports are to be given due importance and one
should have sufficient grounds not to agree with the assessment
made by them. We also add, that, under this Section the
B insu~ance ·company cannot go on appointing Surveyors one
after another so as to get a tailor made report to the satisfaction
of the concerned officer of the insurance company, if for any -
reason, the report of the Surveyors is not acceptable, the insurer
has to give valid reason for not accepting the report. Scheme
c of Section 64-UM particularly, of sub-sections (2), (3) and (4)
would show that the insurer cannot appoint a second surveyor
just as a matter of course. If for any valid reason the report of
the Surveyor is not acceptable to the insurer may be for the
reason if there are inherent defects, if it is found to be arbitrary,
excessive, exaggerated etc., it must specify cogent reasons,
0
without which it is not free to appoint second Surveyor or
Surveyors till it gets a report which would satisfy its interest.
Alternatively, it can be stated that there must be sufficient
ground to disagree with the findings 0f Surveyor/Surveyors.
E There is no prohibition in the Insurance Act for appointment of
second Surveyor by the Insurance Company, but while doing
so, the insurance company has to give satisfactory reasons for
not accepting the. report of the first Surveyor and the need to
appoint second Surveyor.

F . 23. Section 64 UM(2) of the Insurance Act, 1938, reads
that 'No claim in respect of a loss which has occurred in India
and requiring to be paid or settled in India equal to or exceeding
twenty thousand rupees in value on any policy of insurance,
arising or intimates to an insurer at any time after the expiry of
G a period of one year from the commencement of the Insurance
(Amendment) Act, 1968 shall, unless otherwise directed 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 license issued under this Section
H
SRI VENKATESWARA SYNDICATE v. ORIENTAL 77
INSURANCE COMPANY LTD. [H.L. DATIU, J.]
to act as a surveyor. In our considered view, the Insurance Act A
only mandates that while settling a claim, assistance of surveyor
should be taken but it does not go further and say that the
insurer would be bound whatever the surveyor has assessed
or quantified, if for any reason, the insurer is of the view that
certain material facts ought to have been taken into B
consideration while framing a report by the surveyor and if it is
I not done, it can certainly depute another surveyor for the
~
purpose of conducting a fresh survey to estimate the loss
-· suffered by the tnsured. In the present ~ase, the insurer has
stated in the counter affidavit filed before the National c
Commission and even before us, why the appointment of
second Surveyor was necessitated and also has given valid
reasons for appointing second Surveyor and also has
assigned valid reason for not accepting the report of Joint
Surveyor. The correspondence between the insurer and the
D
Surveyors would indicate the particulars differed by the insurer
for differing with the assessment of loss made by the Surveyors.
The option to accept or not to accept the report is with the
insurer. However, if the rejection of the report is arbitrary and
based on no acceptable reasons, the courts or other forums
can definitely step in and correct the error committed by the E
lt
insurer while repudiating the claim of the insured. We hasten
to add, if the reports are prepared in good faith, due application
of mind and in the absence of any error or ill motive, the
insurance company is not expected to reject the report of the
Surveyors. F

24. Now with regard to the question of awarding rate of
interest as compensation in cases where loss is caused due
to deficiency/delay in services, this court in various judgments
has held that the award of compensation must depend on facts G
and circumstances of each case and has to be worked out after
determining the amount of loss suffered by the consumer. In the
case of Secretary, Irrigation Deptt., Govt. of Orissa v. G.C. Roy,
(1992) 1 sec 508, this court has stated that "a person
H
78 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R. ,...
A deprived of the use of money to which he is legitimately entitled
has a right to be compensated for the deprivation, call it by any
name. It may be called interest, compensation or damages."

25. It was observed. in the case of Ghaziabad
Development Authority v. Balbir Singh, (2004) 5 SCC 65, that:
8
"it is already held that awarding interest at a flat rate of
18% is not justified. It is clear that in all these cases interest +-
is being awarded. as and by way of compensation/ >
~
damages. Whils( so awarding it must be shown that there
c is relationship between the amount awarded and .the
default/unjustifiable delay/harassment. It is thus necessary
that there be separate awards under each such head with
reasons why such award is justified." T

D
26. In the case of Kaushnuma Begum v. New India
Assurance Co. Ltd., (2001) 2 SCC 9, this court has held that,
"with a change in economy and the policy of Reserve Bank of
India the interest rate has ,been lowered. The nationalized banks
are now granting interest at the. rate of 9% on fixed deposits
for one year. We, therefore, direct that the· compensation
E
amount fixed hereinbefore shall bear interest at the rate of 9% -;I
per annum from the date of the claim made by the appellants." .....
•
f-
27. In the case before us it has been made clear that if
F the insurer is not satisfied with the assessment of the surveyor, ;;>
he retains the right to settle claim for a differentamount. The
insurer after rejecting the assessments of the surveyor and the
· joint surveyor has accepted the assessment made by the
Chartered Accountant. Therefore, it would not be correct to say
G that insurer while settling the claim has caused an unnecessary +-
delay of three years. But once the insurer has reached a
settlement he should make the payment at the earliest. And if
further delay is caused by the insurer in making the payment
then he should be made liable to pay the interest on the amount
H settled, as compensation at the current rate of interest till the
. SRI VENKATESWARA SYNDICATE v. ORIENTAL 79
INSURANCE COMPANY LTD. [H.L. DATTU, J.]

..
'
paytnent is made, as it has deprived the appellant from using A
his money for Which he is legitimately entitled .
. 28. lhus, in vie~ of the above discussion, we direct the
respondent Insurance Company to ··pay Rs.1,05;00817/- with, .
interest atthe raje of 9% as compensation from the date of
8
assessment done by the Chartered Accountant, within two·
months from the date of this order. The appeal is partly allowed. ·
No order as to costs.
G.N. Appeal Partly allowed .

..
<.,.

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