KHATEMA FIBRES LTD.versusNEW INDIA ASSURANCE COMPANY LTD. & ANR

268                      [2021]REPORTS
               SUPREME COURT    9 S.C.R. 268              [2021] 9 S.C.R.


A                         KHATEMA FIBRES LTD.
                                       v.
            NEW INDIA ASSURANCE COMPANY LTD. & ANR
                         (Civil Appeal No.9050 of 2018)
B                           SEPTEMBER 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 – Accidental
      fire in the factory of complainant – Waste paper destroyed by fire –
C
      Claim raised by complainant estimating the value of the paper
      destroyed – However, the surveyor appointed by the Insurance
      Company assessed the loss suffered by the complainant on account
      of the fire accident at a lesser amount – Consumer complaint –
      National Commission awarded compensation payable to them only
D     to the extent of the assessment made by the final surveyor –
      Interference with – Held: Not called for – In a complaint before the
      Consumer Forum, a consumer cannot succeed unless he establishes
      deficiency in service on the part of the service provider – Consumer
      Forum which is primarily concerned with an allegation of deficiency
      in service cannot subject the surveyor’s report to broad examination
E
      – Once it is found that there was no inadequacy in the quality,
      nature and manner of performance of the duties and responsibilities
      of the surveyor, and the report is not based on adhocism or vitiated
      by arbitrariness, then the jurisdiction of the Consumer Forum to go
      further would stop – On facts, Insurance Company admitted the
F     claim of the complainant to the extent of the loss as assessed by the
      Surveyor – All the objections of the complainant to the Surveyors’
      Report wholly unsustainable and the National Commission rightly
      rejected those objections – Insurance Act, 1938 – s.64UM(1A), (2).
            Dismissing the appeal, the Court
G             HELD: 1. A Consumer Forum which is primarily concerned
      with an allegation of deficiency in service cannot subject the
      surveyor’s report to forensic examination of its anatomy, just as
      a civil court could do. Once it is found that there was no inadequacy
      in the quality, nature and manner of performance of the duties
H     and responsibilities of the surveyor, in a manner prescribed by
                                         268
    KHATEMA FIBRES LTD. v. NEW INDIA ASSURANCE                       269
              COMPANY LTD. & ANR.

the Regulations as to their code of conduct and once it is found     A
that the report is not based on adhocism or vitiated by
arbitrariness, then the jurisdiction of the Consumer Forum to go
further would stop. In view thereof, the judgment of the National
Commission does not call for any interference. [Para 38, 39] [283-
A-C]
                                                                     B
      2.1 The Surveyor decided to adopt volumetric analysis
method rather than rely upon the stock records of the insured.
The Surveyors could not be found at fault with, for rejecting the
stock records of the insured. When the insured produced two
sets of records and the quantum of material destroyed by fire
arrived on the basis of these records showed huge discrepancies,     C
the Surveyor had no alternative except to reject these records
and proceed on volumetric analysis. The appellant themselves
have admitted to the Chartered Accountant, who went for spot
inspection when the fire was still raging, that the appellant had
not conducted physical verification of its raw material stock in     D
the recent past and that the consumption was recorded on
estimated yield basis. In their own letter dated 5.12.2007, the
appellant had conceded that stock taking was done on the basis
of receipts and consumptions as well as physical verification on
volumetric basis. Therefore, the refusal of the Surveyor to go by
the stock records of the appellant, but to adopt volumetric          E
analysis, was fully justified and no exception can be taken to the
same. [Para 19, 20][277-D-H]
      2.2 It is seen from the Surveyors’ Report that there were
actually three different measurements available with the Surveyor,
with a huge variation between one another. Faced with three          F
different measurements, the Surveyor reonciled the same by
holding that despite the measurement of the open stockyard being
22.5 mtrs. X 105 mtrs. = 2362 mtrs., the area affected by fire
could only be 1485 sq. mtrs. In view of the given circumstances,
there is nothing wrong in the Surveyor taking the measurement        G
of the area of the stockyard affected by fire, as 27 mtrs. X 55
mtrs.=1485 sq. mtrs. for the purpose of volumetric analysis. [Para
22, 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    H
270            SUPREME COURT REPORTS                      [2021] 9 S.C.R.


A     not possible to accept that the whole space in the stockyard was
      completely stacked by material without any space for movement.
      Without providing adequate gaps and spaces within the open
      courtyard, it would not have been possible for the appellant to
      remove the material for the purpose of processing, even if forklifts
      were used. Therefore, the objection to the provision for open
B
      space/gaps is unfounded. [Para 26][279-G-H; 280-A-B]
            2.4 In the calculation sheet annexed to the letter addressed
      to the Surveyor, the appellant themselves estimated the average
      weight 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 only
C     upon the sizes of different types of bales and the areas occupied
      by different types of bales, and arriving at the average weight.
      There was no reason for the Surveyor to adopt the average weight
      per bale, when the party himself has provided the average weight
      to be 900 kgs. per bale. [Para 28][280-C-D]
D           2.5 All the objections of the appellant to the Surveyors’
      Report are wholly unsustainable and the National Commission
      rightly rejected those objections. [Para 29][280-E-F]
            3.1 This is not a case where the Insurance Company has
      repudiated the claim of the appellant arbitrarily or on unjustifiable
E     grounds. This is a case where the claim of the appellant has been
      admitted, to the extent of the loss as assessed by the Surveyor.
      In cases of this nature the jurisdiction of the special forum
      constituted under the Consumer Protection Act, 1986 is limited.
      Perhaps if the appellant had gone to the civil court, they could
F     have even summoned the Surveyor and cross examined him on
      every minute detail. But in a complaint before the Consumer
      Forum, a consumer cannot succeed unless he establishes
      deficiency in service on the part of the service provider. [Para
      31][280-H; 281-A-B]

G           3.2 Any inadequacy in the quality, nature and manner of
      performance which is required to be maintained by or under any
      law or which has been undertaken to be performed pursuant to a
      contract, will fall within the definition of the expression
      ‘deficiency’. But to come within the said parameter, the appellant

H
     KHATEMA FIBRES LTD. v. NEW INDIA ASSURANCE                        271
               COMPANY LTD. & ANR.

should be able to establish either that the Surveyor did not comply    A
with the code of conduct in respect of his duties, responsibilities
and other professional requirements as specified by the
regulations made under the Act, in terms of Section 64UM(1A)
of the Insurance Act, 1938, as it stood then; or that the insurer
acted arbitrarily in rejecting the whole or a part of the Surveyor’s
                                                                       B
Report in exercise of the discretion available under the Proviso
to section 64UM(2) of the Insurance Act, 1938. [Para 32][281-B-
E]
       3.3 Section 64UM (2) , before its amendment by Act 5 of
2015, mandated that no claim equal to or exceeding a sum of
rupees twenty thousand only shall be admitted for payment unless       C
the insurer had obtained a report from an approved surveyor or
loss assessor. But the Proviso to sub-section (2) of section 64UM
also recognized the right of the insurer to pay any amount different
from the amount as assessed by the approved surveyor or loss
assessor. [Para 33, 34][281-E-F; 282-B-C]                              D
      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 of
being departed from. The Insurance Act, 1938 even while
assigning an important role for the surveyor, casts an obligation
on him under section 64UM(1A) to comply with the code of               E
conduct in respect of his duties, responsibilities and other
professional requirements as specified by the regulations made
under the Act. Two things flow that the surveyor is governed by
a code of conduct, the breach of which may give raise to an
allegation of deficiency in service; and that the discretion vested
in the insurer to reject the report of the surveyor in whole or in     F
part, cannot be exercised arbitrarily or whimsically and that if so
done, there could be an allegation of deficiency in service. [Para
35-37][282-C-H]
      United India Insurance Company Ltd. And Others v.
      Roshan Lal Oil Mills Ltd. and Others (2000) 10 SCC               G
      19; Sikka Papers Limited v. National Insurance
      Company Limited And Others (2009) 7 SCC 777 :
      [2009] 9 SCR 1088; New India Assurance Company
      Limited v. Luxra Enterprises Private Limited and Another
                                                                       H
272             SUPREME COURT REPORTS                         [2021] 9 S.C.R.


A             (2019) 6 SCC 36 : [2019] 6 SCR 1172; New India
              Assurance Company Limited v. Pradeep Kumar (2009)
              7 SCC 787 : [2009] 16 SCR 508 – referred to.
                              Case Law Reference
      (2000) 10 SCC 19                 referred to.             Para 15
B
      [2009] 9 SCR 1088                referred to.             Para 15
      [2019] 6 SCR 1172                referred to.             Para 15
      [2009] 16 SCR 508                referred to.             Para 35
              CIVIL APPELLATE JURISDICTION: Civil Appeal No.9050 of
C
      2018.
           From the Judgment and Order dated 03.07.2018 of the National
      Consumer Disputes Redressal Commission, New Delhi in Consumer
      Case No.19 of 2010.
D           Ms. Meenakshi Arora, Sr. Adv., Prasenjit Keswani, Upmanyu
      Tiwari, Mrs. V. D. Khanna, Advs. for the Appellant.
           Joy Basu, Sr. Adv., K. K. Bhat, Kanak Bose, Ranjan Kumar
      Pandey, Advs. for the Respondents.
              The Judgment of the Court was delivered by
E
              V. RAMASUBRAMANIAN, J.
            1. Aggrieved by the Judgment of the National Consumer Disputes
      Redressal Commission (for short “National Commission”) confining
      the compensation payable to them only to the extent of the assessment
F     as made by the final Surveyor, the complainant before the National
      mission has come up with the above appeal.
             2. We have heard Ms. Meenakshi Arora, learned senior counsel
      for the appellant and Mr. Joy Basu, learned senior counsel for the
      respondent-Insurance Company.
G            3. The appellant took a “Standard Fire and Social Perils” policy
      for 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 premises
      of the appellant on 15.11.2007.


H
     KHATEMA FIBRES LTD. v. NEW INDIA ASSURANCE                                   273
    COMPANY LTD. & ANR. [V. RAMASUBRAMANIAN, J.]

      4. The appellant submitted a claim on 19.11.2007, estimating the            A
quantity of waste paper destroyed by fire at 8500 MT and its value at
Rs.13,00,00,000/-.
       5. One M/S Adarsh Associates, appointed by the respondent-
Insurance Company, conducted a survey, sought documents from the
appellant, raised queries and received clarifications from the appellant          B
and submitted a final report dated 9.01.2009, assessing the loss suffered
by 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, objected
to the survey and assessment report and sought the appointment of
another surveyor, the respondent informed the appellant by their letter           C
dated 21.08.2009 that the claim of the appellant has been approved only
to 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 Survey
Report, but the respondent informed the appellant by their letter dated
7.10.2009 that the claim could be finalized only for the amount indicated
in the letter dated 21.08.2009.                                                   D

      7. Therefore, the appellant filed a consumer complaint before the
National Commission under Section 21(a)(i) of the Consumer Protection
Act, 1986, claiming: (i) compensation in a sum of Rs.1364.88 lakhs
towards the loss suffered in the fire accident; (ii) compensation in a sum
of Rs.2095.52 lakhs, for the financial stress caused by the respondent            E
by delaying the processing of the claim; (iii) interest @ 18% p.a. on the
compensation amount of Rs.1364.88 lakhs from November, 2007 till
31.12.2009; and (iv) the cost of litigation estimated at Rs.1,00,000/-.
       8. The National Commission, by its Judgment dated 3.07.2018
rejected the claim of the appellant under both the heads, but directed            F
the respondent to pay only the amount of Rs.2,85,76,561/- as admitted
by them. This amount was directed to be paid to the appellant with
interest @ 9% p.a. from 15.11.2007, only till the date the Insurance
Company had made the offer. It is against the said Judgment of the
National Commission that the appellant has come up with the above                 G
appeal under Section 23 of the Consumer Protection Act, 1986.
        9. Admittedly, the respondent-Insurance Company appointed one
Shri Kapil Vaish, a Chartered Accountant, on 16.11.2007 itself (the day
following the date of fire accident), to conduct a spot inspection and
file a status report. When he visited the factory premises, the fire fighting
                                                                                  H
274            SUPREME COURT REPORTS                           [2021] 9 S.C.R.


A     was still going on and it was found that the fire had taken place only in
      the waste paper yard of the factory. In the status report submitted by
      Shri Kapil Vaish on 16.11.2007, he indicated that the fire had affected
      waste paper bales lying in an area measuring 27 mtrs. X 55 mtrs. =
      1485 sq.mtrs. in open compound. Presuming that waste paper would
      have been stacked in bunches of six bales, one on top of the other and
B
      that the quantity of affected waste paper could be around 5000 MT,
      whose cost may be around Rs.20-22 per kg., Shri Kapil Vaish roughly
      estimated the loss to be around Rs.10-11 crores. The appellant themselves
      estimated the quantity of waste paper burnt in the fire to be 8500 MT
      valued at Rs.13,00,00,000/-.
C            10. M/s Adarsh Associates who conducted the actual survey with
      reference to the records and other evidence available with the appellant,
      had two options before them for arriving at the quantity of material
      destroyed by fire. The first option was to proceed on the basis of the
      stock registers and other records of the appellant company to fix the
D     quantum of loss. The next option was to proceed on the basis of volumetric
      analysis, by taking the measurement of the open yard in which the fire
      broke out, finding out the optimum capacity of the yard with reference
      to the measurement of the bales of paper stored therein and then working
      out the quantum of material destroyed.
E            11. The Surveyor adopted the second option namely that of
      volumetric analysis and assessed the quantity of raw material damaged
      at 2264.400 MT. He valued this raw material @ Rs.15137.35/- per MT,
      inclusive of CENVAT. Thus, he arrived at the value of the material
      damaged to be Rs.3,42,77,015.34/-. Then the Surveyor fixed the salvage
      value at Rs.18,92,200/- and deducted the same from the value of the
F     raw 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 as
      1% towards soiled goods. After so doing, the surveyors arrived at the
      value of loss at Rs.2,86,17,942/-.
             12. For proceeding on volumetric analysis method, the Surveyor
G     took the measurement of the open yard as 27 mtrs. X 55 mtrs. = 1485
      sq. mtrs. This was on the basis of the Status Report of the Chartered
      Accountant who made the spot inspection on 16.11.2007 when the fire
      fighting was still in progress. There was a finding in the status report of
      the Chartered Accountant that the material affected by the fire was
H     lying in the yard measuring 27 mtrs. X 55 mtrs. = 1485 sq. mtrs.
     KHATEMA FIBRES LTD. v. NEW INDIA ASSURANCE                                  275
    COMPANY LTD. & ANR. [V. RAMASUBRAMANIAN, J.]

Therefore, the Surveyor took this measurement as the starting point and          A
proceeded as detailed above.
       13. Keeping the above background in mind, let us now come to
the grievance of the appellant, against the Judgment of the National
Commission. Ms. Meenakshi Arora, learned senior counsel for the
appellant contended that the National Commission committed a serious             B
error first in taking the net weight of waste paper bales burnt/damaged
during the incident as 2264.400 MT, as against the claim of the appellant
that the net weight of the material damaged was 8332 MT. According to
the learned senior counsel, there were no discrepancies in the various
records and stock registers maintained by the appellant with respect to
the quantity and weight of material stored in the open yard, but the             C
Surveyor chose to reject the same arbitrarily and proceeded on volumetric
analysis basis. The learned senior counsel further contended that even
while proceeding on volumetric analysis basis, the Surveyor did not do
justice. 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 55             D
mtrs = 1485 sq. mtrs., despite they themselves finding that the area
was 22.5 mtrs. X 105 mtrs. = 2362 mtrs. This, according to the learned
senior counsel for the appellant, resulted in gross injustice to the appellant
in the matter of assessment of the quantum of loss.
       14. Another gross error committed by the Surveyor, according to           E
the learned senior counsel for the appellant, is that despite finding the net
weight per bale as 988.889 kgs. as per Annexure A-3 to the Survey
Report dated 9.01.2009, the Surveyor took the net weight as 900
kgs. per bale, merely because the complainant had indicated the same to
be 900 kg. per bale. The Surveyor had thus adopted double standards, in
taking either what is found by them or what is claimed by the appellant,         F
whichever was less. This according to the learned senior counsel for the
appellant resulted in the Insurance Company eventually admitting the
claim only to the extent of less than 25% of the total amount of loss
suffered by the appellant.
      15. Justifying the judgment of the National Commission, it is              G
contended by Mr. Joy Basu, learned senior counsel for the respondent
that M/S Adarsh Associates were appointed by the respondent as
Surveyors to act as such in terms of Section 64UM(2) of the Insurance
Act, 1938 and that they have assessed the loss in a scientific manner.
As the Surveyors appointed by the respondent are experts in the field,           H
276             SUPREME COURT REPORTS                             [2021] 9 S.C.R.


A     who have gone into every minute detail by examining the records of the
      appellant scientifically, their report is unassailable. In the case on hand, it
      was admitted even by the appellant, to Shri Kapil Vaish who conducted
      spot inspection that there was no physical verification of the stock of
      raw material in the recent past and that the consumption of raw material
      was recorded only on estimated yield basis. Therefore, the learned senior
B
      counsel for the respondent contended, by drawing our attention to the
      letter dated 5.12.2007 sent by the appellant that the appellant themselves
      were 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 Lal
C     Oil Mills Ltd. And others1; (ii) Sikka Papers Limited vs. National Insurance
      Company Limited And Others2; and (iii) New India Assurance Company
      Limited vs. Luxra Enterprises Private Limited And Another.3, in
      support of his contention that the report of the surveyor is an important
      document and that Courts may have to show deference to the report of
      the surveyor appointed in terms of section 64UM(2) of the Act.
D
             16. We have carefully considered the rival contentions.
             17. As could be deciphered from the grounds of appeal and the
      submissions made at the time of hearing, the grievance of the appellant
      is primarily with respect to the quantification of the net weight of the
E     raw 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, the
      contention relating to the same is very weak and feeble and hence we
      would not get into the same.

F             18. Insofar as the quantification of the weight of raw material
      damaged in the fire is concerned, the Surveyor had, in fact, worked out
      the quantity, as seen from paragraph 9.7 of his Report, both on the basis
      of the appellants’ stock records and also on the basis of volumetric analysis
      of the area involved.

G           19. After extensively analyzing what is reflected in the stock
      records of the appellant, the Surveyor came to the conclusion that there
      were discrepancies which could not be reconciled. It is recorded by the

      1
        2000 (10) SCC 19
      2
        2009 (7) SCC 777
H     3
        2019(6) SCC 36
    KHATEMA FIBRES LTD. v. NEW INDIA ASSURANCE                                 277
   COMPANY LTD. & ANR. [V. RAMASUBRAMANIAN, J.]

Surveyor in paragraph 9.8.2 of the Report that the appellant initially         A
submitted one set of documents, which reflected a huge quantity of
imported waste paper both for general use and for newsprint. Therefore,
the Surveyors requested the appellant to submit documents in support
of reversal of CENVAT, on the damaged quantity of waste paper.
Immediately the appellant submitted a revised claim bill along with a
                                                                               B
fresh set of documents. In fact imported waste paper for newsprint is
exempt from payment of customs duty subject to submission of end use
certificate. In the revised set of documents, the quantity of closing stocks
of imported waste paper meant for newsprint was substantially increased.
The Surveyor also found in paragraph 9.8.7.7 of their Report that there
was a huge difference between the overall quantity of burnt/damaged            C
stock of waste paper arrived at on the basis of the initial set of records
and the overall quantity of burnt/damaged stock of waste paper arrived
at on the basis of the revised set of records. Therefore, the Surveyor
decided to adopt volumetric analysis method rather than rely upon the
stock records of the insured.
                                                                               D
       20. We fail to understand how the Surveyors could be found fault
with, for rejecting the stock records of the insured, especially in the
light of the circumstances narrated above. When the insured produced 2
sets of records and the quantum of material destroyed by fire arrived on
the basis of these records showed huge discrepancies, the Surveyor
had no alternative except to reject these records and proceed on               E
volumetric analysis. In any case, as rightly pointed out by the learned
counsel for the respondent, the appellant themselves have admitted to
Shri Kapil Vaish, who went for spot inspection when the fire was still
raging, that the appellant had not conducted physical verification of its
raw material stock in the recent past and that the consumption was             F
recorded on estimated yield basis. In their own letter dated 5.12.2007,
the appellant had conceded that stock taking was done on the basis of
receipts and consumptions as well as physical verification on volumetric
basis. The following extract from the appellant’s letter dated 5.12.2007
would clinch the issue in this regard; “the estimates for stocks and
burnt quantities may not be appearing close to stock inventory                 G
maintained in the books, since the estimates prepared for burnt
material was not on weighment basis but on volumetric basis”.
Therefore, we find that the refusal of the Surveyor to go by the stock
records of the appellant, but to adopt volumetric analysis, was fully
justified and no exception can be taken to the same.                           H
278            SUPREME COURT REPORTS                          [2021] 9 S.C.R.


A            21. On the method of volumetric analysis adopted by the Surveyor,
      the first grievance of the appellant is that the physical measurement of
      the stockyard was 27 mtrs. X 100 mtrs. = 2700 sq. mtrs. But the Surveyor
      took 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 Survey
      Report that the actual measurement was 22.5 mtrs. X 105 mtrs. = 2362
B
      sq. mtrs. Such a drastic reduction in the total measurement of the area
      of the open stock yard, according to the appellant, led to the quantum of
      the 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 available
C     with the Surveyor, with a huge variation between one another. The Status
      Report dated 16.11.2007 filed by Shri Kapil Vaish, about which the
      appellant did not have any serious grievance, recorded clearly as follows
      “it was estimated that the fire had affected waste paper bales lying
      in the area of 27 mtrs. X 55 mtrs. = 1485 sq. mtrs. in the open
D     compound.” The appellant claimed in their letter dated 13.12.2007
      addressed to the Surveyor that the total affected area was 27 mtrs. X
      100 mtrs. = 2700 sq. mtrs. These two documents, namely, the Status
      Report of Shri Kapil Vaish and the measurement given by the appellant
      in their letter dated 13.12.2007 were in contrast to the measurement
      given by the Tehsildar, Khatima, relied upon by the appellant themselves,
E     according to which the measurement was 90 mtrs. X 23 mtrs. = 2070
      mtrs.
             23. Faced with three different measurements as aforesaid, the
      Surveyor reconciled the same by holding that despite the measurement
      of the open stockyard being 22.5 mtrs. X 105 mtrs. = 2362 mtrs., the
F     area affected by fire could only be 1485 sq. mtrs. This is for the reason
      that during their visit to the site, the damaged/burnt bales as well as
      loose waste papers were found spread over an area of 22.5 mtrs. X 105
      mtrs. and the insured was carrying out salvaging/segregation in the said
      area after the extinction of the fire. In other words, what was witnessed
G     by Shri Kapil Vaish personally on 16.11.2007 was that the fire was
      confined to an area of 1485 sq.mtrs, but what was seen by the Tehsildar
      and the Surveyor was of a larger area where the salvage operation was
      going on. Therefore, the Surveyor chose to go by the measurement of
      the area mentioned in the Status Report of Shri Kapil Vaish, who had the
      benefit of witnessing what was happening when fire fighting was still in
H
    KHATEMA FIBRES LTD. v. NEW INDIA ASSURANCE                                279
   COMPANY LTD. & ANR. [V. RAMASUBRAMANIAN, J.]

progress. In such circumstances, we find nothing wrong in the Surveyor        A
taking the measurement of the area of the stockyard affected by fire, as
27 mtrs. X 55 mtrs. = 1485 sq. mtrs. for the purpose of volumetric
analysis.
      24. At this stage it will be useful to extract the table given by the
Surveyor in paragraph 9.9.2 of his Report, where detailed calculations        B
are provided as to how the net weight of waste paper burnt/damaged
during the incident was arrived at:



                                                                              C




                                                                              D




                                                                              E



      25. An objection was raised by Ms. Meenakshi Arora, learned
senior counsel for the appellant about 20% reduction made by the
Surveyor in the measurement of the area. Such a reduction was made            F
by the Surveyor, on the ground that gaps/space was required for the
movement of men and material. It is her contention that when admittedly
the appellant was using forklifts to move and store material, there was
no question of leaving any vacant space.
       26. But we do not agree. The allowance of some space within            G
the open stockyard, for the purpose of movement of men and material
is logical. It is not possible for us to accept that the whole space in
the stockyard was completely stacked by material without any space
for movement. Without providing adequate gaps and spaces within the
open courtyard, it would not have been possible for the appellant to
                                                                              H
280             SUPREME COURT REPORTS                            [2021] 9 S.C.R.


A     remove the material for the purpose of processing, even if forklifts were
      used. Therefore, the objection to the provision for open space/gaps is
      unfounded.
             27. The next crucial objection of the appellant is to the adoption
      of the overall weight per bale at 900 kgs. According to the appellant, the
B     Surveyors themselves calculated the average weight per bale in Annexure
      A-3 to their report as 988.889 kgs. and that, therefore, this could not
      have been reduced to 900 kgs. per bale.
             28. But the appellant has to blame themselves for this. In the
      calculation sheet annexed to the letter dated 13.12.2007 addressed to
C     the Surveyor, the appellant themselves estimated the average weight
      per bale to be 900 kgs. What is arrived at by the Surveyor, in Annexure
      A-3 to their Report is based only upon the sizes of different types of
      bales and the areas occupied by different types of bales. Annexure A-3
      to the Surveyors’ Report arrives at the average weight per bale by
      multiplying the size of the bales by the area occupied. There was no
D     reason for the Surveyor to be more royal than the king by adopting the
      average weight per bale on the basis of paper calculations, when the
      party himself has provided the average weight to be 900 kgs. per bale.
             29. Thus, we find that all the objections of the appellant to the
      Surveyors’ Report are wholly unsustainable and the National Commission
E     rightly rejected those objections. As a matter of fact we have taken
      pains to go into elaborate factual details, as this is a first appeal under
      Section 23 of the Consumer Protection Act, 1986.
            30. As correctly pointed out by the National Commission, the
      appellant was not entitled to succeed unless they were able to establish
F     any deficiency in service on the part of the Insurance Company. The
      expression deficiency is defined in Section 2(1)(g) of the Consumer
      Protection Act, 1986, as follows:
             “2(1)(g) deficiency” means any fault, imperfection, shortcoming
             or inadequacy in the quality, nature and manner of
G            performance which is required to be maintained by or under
             any law for the time being in force or has been undertaken to
             be performed by a person in pursuance of a contract or
             otherwise in relation to any service”
            31. This is not a case where the Insurance Company has
H     repudiated the claim of the appellant arbitrarily or on unjustifiable grounds.
     KHATEMA FIBRES LTD. v. NEW INDIA ASSURANCE                                      281
    COMPANY LTD. & ANR. [V. RAMASUBRAMANIAN, J.]

This is a case where the claim of the appellant has been admitted, to the            A
extent of the loss as assessed by the Surveyor. In cases of this nature the
jurisdiction of the special forum constituted under the Consumer Protection
Act, 1986 is limited. Perhaps if the appellant had gone to the civil court,
they could have even summoned the Surveyor and cross examined him
on every minute detail. But in a complaint before the Consumer Forum,
                                                                                     B
a consumer cannot succeed unless he establishes deficiency in service
on the part of the service provider.
       32. It is true that even any inadequacy in the quality, nature
and manner of performance which is required to be maintained by
or under any law or which has been undertaken to be performed
pursuant to a contract, will fall within the definition of the expression            C
‘deficiency’. But to come within the said parameter, the appellant
should be able to establish (i) either that the Surveyor did not comply
with the code of conduct in respect of his duties, responsibilities and
other professional requirements as specified by the regulations made
under the Act, in terms of Section 64UM(1A) of the Insurance Act,                    D
1938, as it stood then; or (ii) that the insurer acted arbitrarily in rejecting
the whole or a part of the Surveyor’s Report in exercise of the discretion
available under the Proviso to section 64UM(2) of the Insurance Act,
1938.
      33. Section 64UM (2) of the Insurance Act, 1938, before its                    E
amendment by Act 5 of 2015, mandated that no claim equal to or
exceeding a sum of rupees twenty thousand only shall be admitted for
payment unless the insurer had obtained a report from an approved
surveyor or loss assessor.4 This provision read as follows:
       “(2) No claim in respect of a loss which has occurred in                      F
       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 intimated to an insurer 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                G
       or settled by the insurer unless he has obtained a report,
4
  After amendment through Act 5 of 2015, what was sub-section (2) earlier, has
become sub-section (4) with the modification
that the words “twenty thousand rupees” have been substituted by the words “amount
specified in the Regulations by the Authority”.                                      H
282                SUPREME COURT REPORTS                              [2021] 9 S.C.R.


A               on the loss that has occurred, from a person who holds a
                licence issued under this section to act as a surveyor or
                loss assessor (hereafter referred to as “approved surveyor
                or loss assessor”):
            34. But the Proviso to sub-section (2) of section 64UM also
B     recognized the right of the insurer to pay any amount different from the
      amount as assessed by the approved surveyor or loss assessor. The
      proviso reads as follows:
                “Provided that nothing in this sub-section shall be deemed to
                take away or abridge the right of the insurer to pay or settle
C               any claim at any amount different from the amount assessed
                by the approved surveyor or loss assessor.”
             35. This is why the law is settled that the surveyor’s report is not
      the 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 of
D     being departed from. A useful reference can be made in this regard
      to the decision of this court in New India Assurance Company Limited
      vs. Pradeep Kumar5.
             36. The Insurance Act, 1938 even while assigning an important
      role for the surveyor, casts an obligation on him under sub-section
E     (1A) of section 64UM6 to comply with the code of conduct in respect
      of his duties, responsibilities and other professional requirements as
      specified by the regulations made under the Act. This provision reads
      as follows:
                “(1A) Every surveyor and loss assessor shall comply with the
F               code of conduct in respect of their duties, responsibilities and
                other professional requirements as may be specified by the
                regulations made by the Authority.”
             37. Two things flow out of the above discussion, They are (i) that
      the surveyor is governed by a code of conduct, the breach of which may
G     give raise to an allegation of deficiency in service; and (ii) that the
      discretion vested in the insurer to reject the report of the surveyor in
      whole or in part, cannot be exercised arbitrarily or whimsically and that
      if so done, there could be an allegation of deficiency in service.

      5
          (2009) 7 SCC 787
H     6
          Now sub-section (2) of section 64 UM after amendment under Act 5 of 2015
     KHATEMA FIBRES LTD. v. NEW INDIA ASSURANCE                              283
    COMPANY LTD. & ANR. [V. RAMASUBRAMANIAN, J.]

       38. A Consumer Forum which is primarily concerned with an             A
allegation of deficiency in service cannot subject the surveyor’s report
to forensic examination of its anatomy, just as a civil court could do.
Once it is found that there was no inadequacy in the quality, nature
and manner of performance of the duties and responsibilities of the
surveyor, in a manner prescribed by the Regulations as to their
                                                                             B
code of conduct and once it is found that the report is not based on
adhocism or vitiated by arbitrariness, then the jurisdiction of the
Consumer Forum to go further would stop.
       39. In the light of the above we are of the considered view
that the Judgment of the National Commission does not call for any
interference. Hence the appeal is dismissed. No costs.                       C


Nidhi Jain                                               Appeal dismissed.


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