REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4487 OF 2004

Sri Venkateswara Syndicate                                             ……….Appellant

Versus

Oriental Insurance Company Ltd. and Anr.                    ……..Respondents

JUDGMENT

H.L. Dattu,J.  

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 :

          The appellant is a registered partnership firm.  Their line of activity is  

trading in cotton.  For the purpose of their business, they had taken  

M/s Jai Bharat Traders Cotton Ginning Mill on lease. The claim of the  

appellant is that an accidental fire took place in the godown of M/s Jai  

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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  

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 in its business premises,  

with  the  insurer.  Pursuant  to  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.  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 in the Godown and the actual quantity of lint damaged by fire  

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  

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preliminary  report  of  Sri  K.  Siva  Prasad,  had  appointed  Joint  

Surveyors M/s Mehta and Padamsey and 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 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  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 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  findings  of  the  chartered  

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accountant, on the ground that the chartered accountant had based his  

report  only  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 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 payment of  

the aforesaid amount with interest at 18% from the 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.  

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 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  

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reasons assigned by the Commission for accepting the concession made  

by the respondents is forthcoming in its order.  The same is extracted 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  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 had not gone into  the  details  of  transactions  and  stocks  in  a  thorough  manner,  asked another Chartered Accountant, M/s 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  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.”

Finally, the opposite party themselves, while disputing their 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 before us in this  

appeal.

6) The  learned  senior  counsel  Shri  K.V.  Viswanathan  appearing  for  the  

appellant  submitted,  that,  the  action  of  the  insurance  company  in  

appointing  several  surveyors  till  it  got  a  favourable  report  to  suit  its  

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estimation of 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/-,  

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 at 6% per annum  from 01.03.2001 and  

not from the date of fire accident, which, according to learned counsel is  

improper and illegal.

7) In response to the submission made by learned senior counsel  for the  

appellant, the learned counsel for the insurer invites our attention to the  

counter affidavit filed by them before this Court in justification of the  

order passed by National 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 time  

for the purpose of getting a fair report of the actual loss 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  

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will make reference at the appropriate stage.  The learned counsel also  

submitted several reasons  for not accepting the report of Joint Surveyors  

in view of the lacuna 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  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 Commission was justified in awarding 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.

8) Two  issues  would  arise  for  our  consideration  and  decision.  Firstly,  

whether the insurance company can repeatedly 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  

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from 01.03.2001 as against the claim of the appellant at 18% from the  

date of 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, 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  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 or settled by  the insurer unless he has obtained a report, 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 assessors):

             Provided that nothing in this sub-section shall be deemed 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 of the  nature  referred  to  in  sub-section  (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 such time as may be specified  by the Authority or if no time limit has been specified by him  within  reasonable  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 necessary  with regard to the settlement of the claim including any direction  to settle a claim at a figure less than, 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:

             Provided that where the Authority issues a direction for settling  

a claim at a figure lower than that at which it has already been  

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settled, the insurer shall be deemed to comply with such direction  if  he satisfies the Authority that  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 lesser  

sum shall be made where the amount of the claim 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  

insurer from any liability, civil or criminal, to which he would  have been subject but for the provisions of this sub-section.”

 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 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 a person who holds a license issued under sub-section (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 appropriate or expedient in the circumstances of a case, based  

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upon which the  claim could be settled for a different  amount than as  

assessed earlier.  

11)Sub-section  (3)  provides  for  the  Authority  (Insurance  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 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 directions as he may consider  

necessary  with  regard  to  the  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.   

13) The learned senior counsel Shri K.V. Viswanathan for the appellant,  

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  

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company has repudiated the claim 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.

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 of  

loss  caused due  to   the  fire  accident  in  the  business  premises  of  the  

appellant.   He had specifically  reported that  the number 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 the bale hoops. In his report, he had made it  

clear that he has not 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  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  

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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 :

“THE ORIENTAL INSURANCE HYDERABAD REGION

THE ORIENTAL INSURANCE COMPANY LIMITED DIVISIONAL OFFICE : GUNTUR

            Dear Sirs,  

                RE:   FIRE LOSS TO COTTON STOCKS ON 24-8-1999 –                           OUR CLAIM NO. 432301/136/0/F/04/2000 –                           A/c : 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 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 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 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  credit  basis.  We  fell  in  a  claim  of  such  a  magnitude  some  random  investigation is required on the credit purchases to confirm their genuinity.  

3)     As per the preliminary survey report there were two varities of bales/borahs  viz.  MCU-5 @ Rs.  7,140/- per 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 the entire quantity as a single  variety i.e. MCU-5 @ Rs. 7,193/- per quintal in FP bales and Rs. 7,084-19 ps per  quital in borahs and assessed the loss @ Rs. 1,74,82,080/-.  Whereas, when we  have applied the different rating the assessment is claiming to Rs. 1,72,57,305/-.  Please clarify.  

Please let us have your clarification on the above points at the earliest to enable us  to proceed further.  

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Thanking you,

Yours faithfully,

Sd/-

SR. DIVISIONAL MANAGER

cc to: Regional Office, Hyderabad, for information.”

15)The Joint Surveyors by their reply letter dated 12.1.2000 had stated that  

they  did  not  consider  an  investigation  into  the  purchases  necessary  

although they  stated  that  the  insurer  may cause  and/or  carry  out  any  

investigation as necessary.  We intend to extract only that portion of the  

reply, which may be relevant for the purpose of knowing why the insurer  

thought  it  fit  to appoint  Chartered Accountants  for verification of the  

accounts of the insured firm :

                    “(2).  The doubts on procurements and need for  investigations  (irrespective  of  cash  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  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 did not show any evidence other than 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  

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note  that  you  may  cause  and/or  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  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 verification of  

the books of accounts and other relevant material had assessed the loss at  

Rs. 1,05,00817/-.   In his report, he has 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  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 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  

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preparing their reports after inspection and verification of the place of  

fire accident.  

19)Parties have not lead in any evidence in support of their claim.  In fact  

National Consumer Commission has proceeded to decide the lis between  

the parties based on certain 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  insurer  and  the  report  of  the  

Chartered Accountant.  The perusal of the joint survey report reveals that  

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 itself shows  

the cost  of  Ginned lint  at  Rs.  6,229.35 and Rs.  6,181.57 per  quintal.  

Secondly, the Joint Surveyors had taken into account 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  

borahs  were  sold  from  1.8.1999  to  24.8.1999,  (the  date  of  the  fire  

incident) thus leaving only 3 borahs in the stock.  Mr. R. Srinivasan,  

Chartered  Accountant,  who  gave  the  report  having  noticed  all  these  

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omissions and after detailed verification of the books of accounts and  

records  maintained  by  the  appellant  has  assessed  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 several firms operating from the same 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 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 Chartered Accountant.  This submission of the learned counsel 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 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  

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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 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.  

21)The Insurance Regulatory Authority (`IRDA’ for short) has formulated  

Insurance  Surveyors  and  Loss  Assessors  (Licensing,  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  arising  from  any  contingency  and  carry  out  the  work  with  

competence, objectivity and professional integrity by strictly adhering to  

the Regulations.  

22)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  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  

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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 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 insurance 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 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,  

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  

of Surveyor/Surveyors.  There is no prohibition in the Insurance Act for  

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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.  

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 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 to act  as a surveyor.  In our  

considered view, the Insurance Act 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 consideration while  

framing a report by the surveyor and if it is not done, it can certainly  

depute another surveyor for the purpose of conducting a fresh survey to  

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estimate the loss suffered by the insured. In the present case, the insurer  

has stated in the counter affidavit filed before the National 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  

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 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.  

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 and circumstances of each case and  

has to be worked out after determining the amount of loss suffered by the  

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consumer. In the case of Secretary, Irrigation Deptt., Govt. of Orissa v.  

G.C.  Roy,  (1992)  1  SCC  508,  this  court  has  stated  that  “a  person  

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:

“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.  Whilst so awarding it must be shown that there 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.”   

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  

amount fixed hereinbefore shall bear interest at the rate of 9% per annum  

from the date of the claim made by the appellants.”  

27)In the case before us it  has been made clear that if the insurer is not  

satisfied with the assessment of the surveyor, he retains the right to settle  

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claim for a different amount. 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  

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 settled,  as compensation  at  the current  rate  of  

interest till the payment is made, as it has deprived the appellant from  

using his money for which he is legitimately entitled.     

28)Thus,  in  view  of  the  above  discussion,  we  direct  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 Chartered  

Accountant, within two months from the date of this order. The appeal is  

partly allowed. No order as to costs.               

…………………………………J  [ MARKANDEY KATJU ]

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………………………………… J                       [ H.L. DATTU ]

New Delhi, August 24, 2009.

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