A voucher is not payment: NCDRC orders insurer to pay Begusarai store Rs 31.85 lakh with 9 per cent from 2013
Thirteen years after a fire gutted an exclusive Reebok outlet in Bihar, the National Commission rejected the fraud, suppression and limitation pleas raised by National Insurance, awarded the sum the insurer had itself assessed, and refused the Rs 49 lakh franchise income claim.
A fire on the night of 22 and 23 March 2013 destroyed an exclusive Reebok store at Hira Lal Chowk in Begusarai, Bihar. National Insurance Company Ltd. had the loss surveyed and assessed by 25 September 2013, then did nothing for nearly two years, asked again for documents it already had, sent in an investigator, tendered a discharge voucher in August 2016 and closed the file as no claim a month later. It never paid a rupee. On 22 October 2026 the National Consumer Disputes Redressal Commission ordered it to pay the store's owners ₹31,85,000, the figure it had itself pleaded as admissible, with 9 per cent simple interest from 25 October 2013 and ₹50,000 in costs. Handing an insured a voucher to sign is not payment, the bench held, and an admitted amount cannot be withheld to extract a full and final discharge.
The store, the fire and three years of silence
M/s Jai Mata Di Fashions, a partnership of Rajeev Kumar, Kaushal Kumar Gautam and Poonam Kumari, had run the outlet since 2009 under a franchise with Reebok India Company, which required a minimum stock of ₹30 lakh and promised a trade discount, or minimum guarantee, of ₹1,32,000 a month. The firm insured the shop with the insurer's Begusarai branch under a Vyapar Suraksha package policy for 11 August 2012 to 10 August 2013, with fire cover of ₹36,88,418 on stock, ₹11,00,000 on furniture, fixtures and fittings, ₹48,000 on money in the counter and ₹50,000 on the neon sign, among other heads.
Three fire tenders could not control the blaze and a special unit from IOCL had to be called. The Fire Officer's report of 9 April 2013 put the damaged goods at around ₹35 lakh. The firm informed the branch on 23 March 2013 and lodged a claim of ₹40,42,000: ₹25 lakh for stock, ₹12 lakh for furniture and fittings, ₹32,000 cash in the counter, ₹60,000 cash in the safe, ₹50,000 for the sign board and ₹2 lakh for miscellaneous items.
The first surveyor, Rajesh Kumar, visited in the last week of March 2013 but said his authority stopped at ₹30 lakh. A second, Santosh Kumar Sharma, was appointed about two and a half months later and inspected on 13 June 2013. The firm's own records had burned, so it collected copies from Reebok and from its financier, Bank of India, and handed them over. The final survey report of 25 September 2013 assessed the loss at ₹33,58,727. Then the insurer went quiet. The firm says it heard nothing for over three years despite visits, calls and emails, that on 7 January 2016 the insurer demanded documents already supplied, and that a legal notice of 29 August 2016 drew no reply. Unable to reopen the store, it repaid its ₹14 lakh cash credit limit from its own pocket in January 2014. It filed the present complaint on 18 January 2017, claiming about ₹1.45 crore in all, including ₹49 lakh for 36 months of lost minimum guarantee.
What the insurer pleaded
National Insurance's written statement attacked the claim from several directions. The firm had suppressed material facts, it said: a settlement agreement under which its Reebok franchise had been terminated with effect from 31 December 2012 and Reebok had paid it ₹12,26,557, and the insurer's own offer of settlement by a discharge voucher dated 16 August 2016. Despite reminders the firm had not produced its bank stock statements, a certified copy of the Reebok agreement or certified purchase invoices. An investigator, Anil Kumar Shukla, reported on 22 April 2016 that the franchise had ended on 31 December 2012, that the stock on the date of loss could not be ascertained and that the firm was holding Reebok stock in breach of its agreement. A Bank of India letter of 20 August 2015 recorded that no stock statement had been filed after 31 December 2012. The insurer said it had sent a voucher for ₹31,85,000 on 16 August 2016, followed by reminders and a final email of 15 September 2016 treating the claim as no claim.
It also argued that the National Commission lacked pecuniary jurisdiction because the claim lodged with it was only ₹40.42 lakh; that the complaint was barred by limitation under Section 24A of the Consumer Protection Act, 1986, since the cause of action arose on the night of the fire, relying on Kandimalla Raghavaiah and Co. v. National Insurance Co. (2009) 7 SCC 768; that no business interruption cover had been bought; and that no interest was payable because settlement had been offered. For the firm, counsel Aishvary Vikram and Lucky Sharma answered that the fire, the policy and the claim were all admitted, that the surveyor's own enclosures showed he had the Reebok and bank records, and that the voucher was unsigned, unstamped and never received. On limitation they relied on National Insurance Co. Ltd. v. Hindustan Safety Glass Works Ltd. (2017) 5 SCC 776.
Jurisdiction and limitation
Presiding Member Dr. Inder Jit Singh, writing for a bench with Member Shashi Nandkeolyar, dealt first with maintainability. The firm was a consumer, its unrebutted case being that the partners earned their livelihood by self-employment within the explanation to Section 2(1)(d). On pecuniary jurisdiction, the Commission applied Section 21(a)(i) of the 1986 Act and the Larger Bench ruling in Ambrish Kumar Shukla v. Ferrous Infrastructure Pvt. Ltd.: jurisdiction turns on the aggregate value of the service and compensation claimed in the complaint, here ₹1,45,02,000, not on what is finally found payable.
On limitation, the Commission held that Kandimalla turned on its own facts: there the insured had made no claim at all until it asked for claim forms more than four years after the fire. Here the loss was intimated the next day and a claim lodged, two surveyors were appointed, a final report was received on 25 September 2013, and the insurer neither accepted nor rejected it. It kept the claim alive by demanding documents on 1 and 24 August 2015 and 7 January 2016, appointed an investigator on 24 February 2016 and, on its own case, tendered a voucher on 16 August 2016 and marked the file no claim on 15 September 2016. No repudiation was ever communicated before the complaint, so the cause of action was a continuing one, and even counting from 15 September 2016 the complaint of 18 January 2017 was well within two years. In any event, the firm's documented follow-up and the insurer's own demands as late as January 2016 were sufficient cause under the proviso to Section 24A(2) to condone any delay.
Fraud must be proved, not pleaded after the claim is assessed
The Commission rejected the suppression and fraud defence on four grounds. First, fraud must be specifically pleaded and strictly proved, and there was no finding by any authority, and no material on record, that the fire was staged, the stock inflated or any policy condition breached. The final surveyor had recorded the opposite: no breach of conditions, a business running smoothly at a profit, and stock and furniture completely destroyed. The fire was independently confirmed by the Fire Officer, by the surveyor's description of a “major fire tragedy” and by the insurer's own investigator. An insurer that has quantified a claim and tendered a voucher cannot then call the same claim fraudulent.
Second, the Reebok settlement did not touch the insured stock. The agreement was executed on 17 September 2013, nearly six months after the fire, even though it recited termination from 31 December 2012, and its clauses 4 to 7 recorded that unsold stock at the store was the franchisee's own and could be sold at any discount. Possessing Reebok stock on 22 March 2013 could not breach an agreement that did not yet exist and that expressly permitted the sale of that stock.
Third, the documents said to be missing were, in substance, already with the insurer. The final survey report listed seventeen categories of papers received, including four years of audited balance sheets, Reebok's online stock statements up to March 2013, the bank stock statement of 31 December 2012, Reebok's purchase summary and per-day sales to 22 March 2013, VAT returns and the cash credit statement, and the surveyor had verified the closing stock against them. The Bank of India letter itself recorded stock of ₹25,04,523.79 on 31 March 2012 and ₹21,09,122.84 on 31 December 2012; that no later statement was filed with the bank did not show there was no stock. The one new document asked for in January 2016, the certified agreement, was supplied the next day.
Fourth, the investigator was commissioned on 24 February 2016, about two years and five months after the final survey report, and no reason for doubting that report was recorded anywhere. Citing Sri Venkateshwara Syndicate, the Commission said an insurer may not appoint successive surveyors or investigators without cogent reasons for rejecting the first report. The remark that the stock could not be ascertained contradicted the loss assessor's verified computation, which the insurer had itself adopted when it tendered the voucher.
The amount, the delay and the voucher
Neither side had challenged the survey figures, so the Commission adopted them, with the furniture head computed on the ₹11,00,000 sum insured shown in the schedule. Stock was assessed at ₹24,34,787 against the ₹25 lakh claimed; furniture and fittings at ₹9,06,000 against ₹12 lakh; cash in the counter at ₹1,998, the day's sale; the neon sign at ₹12,580 after an underinsurance factor of 0.789; and nothing for cash in the safe, which was not an insured head and was disproved by a ₹50,000 bank deposit the day before the fire, or for miscellaneous items. After the 5 per cent policy excess of ₹1,67,768 and a recovery of ₹847 on water-soaked garments, the arithmetic came to ₹31,86,750. Because the insurer had pleaded ₹31,85,000 throughout, the Commission fixed the payable amount at that figure.
On deficiency, the bench turned to Regulation 9 of the IRDA (Protection of Policyholders' Interests) Regulations, 2002, which requires a surveyor to report within 30 days, or at most six months, and the insurer to offer settlement or reject the claim with reasons within 30 days of receiving the report, failing which interest at 2 per cent above the bank rate runs. The report was dated 25 September 2013; nothing was offered or rejected by 25 October 2013, and the record showed no step at all for nearly 22 months. Nothing explained why a claim assessed in September 2013 could not be settled until August 2016 at the earliest, and the insurer's witness affidavit merely repeated the written statement. Through 2015 and 2016 the firm kept writing about its “36 month old pending claim”.
The voucher did not rescue the insurer. The copy on record was unsigned and unstamped, there was no proof of dispatch or receipt, and the firm denied receiving it or the no claim letter. That letter, issued 17 days after the legal notice, recited that the claim had been withdrawn by a letter whose date was left blank, and no such letter existed. Closing a claim on grounds so unsupported was a further deficiency. More fundamentally, “the tender of a voucher for signature is not payment”: not even the admitted sum had been paid or deposited in the nearly ten years since the complaint was filed.
The ₹49 lakh claim for lost minimum guarantee failed on several independent grounds. The business interruption section of the policy had not been opted for and consequential loss was excluded. The guarantee was an entitlement against Reebok, not the insurer; on the firm's own admission the relationship had ended on 31 December 2012, before the fire, and by clause 9 of the September 2013 settlement it had accepted ₹12,26,557 in full and final settlement of all claims including minimum guarantee support. Its own email of 23 February 2016 said it had abandoned the plan to restart the store. The claim for 12 per cent interest on the ₹14 lakh cash credit limit was another measure of the same loss of use of money and would be double recovery. The ₹25 lakh sought for harassment was excessive; the 9 per cent interest from 25 October 2013 would serve as compensation for the delay and the unsupported closure, with ₹50,000 added for litigation costs.
Order
National Insurance's three offices, jointly and severally, must pay the firm ₹31,85,000 as the net assessed loss under Policy No. 170602/48/12/9800000201, with simple interest at 9 per cent a year from 25 October 2013 until actual payment, plus ₹50,000 as costs. Payment is due within 45 days; if it is not made, the whole amount then outstanding carries 12 per cent interest from the end of that period until paid. All other claims were rejected, pending applications were disposed of, and the complaint was partly allowed.