A Bench of the Supreme Court comprising Justice Hemant Gupta and Justice V. Ramasubramanian has held that, "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."

The Bench further noted that, "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 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."

The Bench also highlighted the necessity of deficiency in service for Consumer Forum to exercise jurisdiction,

(i) 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

(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.

Facts of the case

The Appellant Khatema Fibres Ltd took a "Standard Fire and Social Perils" policy for the period from May 7, 2007 to May 6, 2008, for a sum of Rs.42.40 crore from New India Assurance Company Ltd­. When the policy was in force, a fire broke out in the factory premises of the Appellant on November 15, 2007. The Appellant submitted a claim estimating the quantity of waste paper destroyed by fire at 8500 MT and its value at Rs.13,00,00,000/-­.

One M/S Adarsh Associates, appointed by the Respondent had conducted a survey and submitted a final report assessing the loss suffered by the Appellant on account of the fire accident as Rs.2,86,17,942/-­.

The Appellant objected to the survey and assessment report and sought the appointment of another surveyor, but the Respondent approved the claim by the surveyor in full and final settlement. Therefore, the Appellant filed a consumer complaint before the National Consumer Disputes Redressal Commission under Section 21(a)(i) of the Consumer Protection Act, 1986, claiming compensation in a sum of Rs.1364.88 lakhs and other monetary reliefs. However, the Commission rejected the claim by observing that the Appellant was not entitled to succeed unless it is able to establish any deficiency in service on the part of the Insurance Company.

Arguments by the Counsel

Senior Counsel Meenakshi Arora for the Appellant contended that the National Commission committed a serious 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. 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 Surveyor chose to reject the same arbitrarily and proceeded on a volumetric analysis basis.

She further submitted that even while proceeding on a volumetric analysis basis, the Surveyor did not do justice. This had resulted in gross injustice to the Appellant in the matter of assessment of the quantum of loss. Another gross error committed by the surveyor was that despite finding the net weight per bale as 988.889 kgs., 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.

She also stated that the surveyor had thus adopted double standards, in taking either what is found by them or what is claimed by the Appellant, whichever was less. The Insurance Company eventually admitted the claim only to the extent of less than 25% of the total amount of loss suffered by the Appellant.

Senior Counsel Joy Basu for the Respondent submitted that the surveyor was appointed as per 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, who have gone into every minute detail by examining the records of the Appellant scientifically, their report is unassailable.

It was even admitted by the Appellant, to Kapil Vaish (a chartered accountant appointed by the Respondent) 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 an estimated yield basis. The Senior Counsel also cited a letter dated December 5, 2007 sent by the Appellant about adopting a volumetric analysis for the quantification of the stock.

The Senior Counsel cited judgments of (i) United India Insurance Company Ltd. vs. Roshan Lal Oil Mills Ltd. (ii) Sikka Papers Limited vs. National Insurance Company Limited and (iii) New India Assurance Company Limited vs. Luxra Enterprises Private Limited to substantiate 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.

After hearing the parties, the Bench noted that the nature of the jurisdiction of Consumer Forum is limited and it can not cross-examine the surveyor like the civil court,

"This is not a case where the Insurance Company has repudiated the claim of the appellant arbitrarily or on unjustifiable 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 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."

The Bench further observed that a consumer has to establish that the surveyor did not follow the provisions of the Insurance Act

"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 '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, 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."

The Court noted that the insurer has the right to pay an amount different from the surveyor's report and the report is not sacrosanct

"As per Section 64UM (2) of the Insurance Act, 1938, before it's 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. But the Proviso to sub­section (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. 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 being departed from."

The Bench also observed,

"The Insurance Act, 1938 even while assigning an important role for the surveyor, casts an obligation on him under sub­section (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."

Accordingly, the appeal was dismissed.