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Khatema Fibres Ltd. v. New India Assurance Company Ltd.

Civil Appeal · 2021 INSC 565Decided 28 Sept 2021
Civil Appeal No. 9050 of 2018
Justice Hemant Gupta · Justice V. Ramasubramanian

Background

Khatema Fibres took a "Standard Fire and Social Perils" insurance policy for its factory. A fire broke out in November 2007, destroying waste paper stored in the factory's open yard. The company claimed about Rs. 13 crore in losses, but the insurer's appointed surveyor assessed the loss at only about Rs. 2.86 crore using a volumetric (area-based) calculation method rather than the company's own stock records, since those records showed major inconsistencies. The National Consumer Disputes Redressal Commission accepted the surveyor's lower figure, and the company appealed to the Supreme Court.

Decision Breakdown

The Supreme Court upheld the surveyor's assessment and dismissed the appeal. It found that the surveyor was justified in rejecting the company's stock records because the company itself had submitted two inconsistent sets of documents with widely differing quantities, and had admitted in its own correspondence that its stock-taking was done on an estimated, volumetric basis rather than actual weighment. The Court held that a consumer forum's jurisdiction is limited to examining "deficiency in service," and cannot subject a surveyor's report to the kind of detailed forensic scrutiny a civil court could undertake; as long as the surveyor followed proper procedure and was not acting arbitrarily, the forum's power to interfere stops there.

Lesson Learnt

An insurance surveyor's report is not beyond challenge, but a policyholder cannot expect a consumer forum to re-investigate every technical detail of a loss assessment, especially if the policyholder's own records are inconsistent. Keeping accurate, consistent stock and loss records is essential to supporting a larger insurance claim.

Official source (sci.gov.in)View Judgment (PDF)

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