Case: Khatema Fibers Ltd. vs. New India Assurance Company Ltd.
Summary
The Supreme Court has ruled that a Consumer Forum focusing on service deficiency allegations cannot forensically examine an insurance surveyor’s report. The court stated that once the report is found to be consistent with the regulations governing the surveyor’s code of conduct and not based on adhocism or vitiated by arbitrariness, the forum’s jurisdiction would cease. This ruling was made while affirming a National Consumer Disputes Redressal Commission judgment that limited the amount of compensation owed to claimants to the final surveyor’s assessment.
The court noted that to prevail in a complaint before the Consumer Forum, a consumer must prove that the service provider has provided inadequate service. The court also noted that the authority of the special forum established pursuant to the Consumer Protection Act of 1986 is restricted in situations of this kind. The court’s ruling highlights the importance of ensuring that insurance companies adhere to their code of conduct and not rely on ad hocism or vitiated arbitrariness.
About the case
The Supreme Court noted that while an insurance surveyor’s report may not be entirely reliable, a Consumer Forum that focuses primarily on a service deficiency allegation cannot “forensically examine its anatomy.” “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 justices on the bench of Hemant Gupta and noted. The court made this observation while affirming a National Consumer Disputes Redressal Commission judgment that limited the amount of compensation owed to claimants to the final surveyor’s assessment.
The complainant procured a “Standard Fire and Social Perils” policy from the insurance provider in this particular instance. A fire broke out in the factory buildings while the policy was in effect. Appointed by the insurance company, M/S Adarsh Associates conducted a survey and submitted a report estimating the loss to be Rs. 2,86,17,942. The aggrieved party lodged a consumer complaint with the National Commission, seeking, among other things, Rs. 1,344.88 lakhs in compensation. As acknowledged by the insurance company, the commission ordered them to pay only Rs. 2,85,76,561. The Apex Court bench, after reviewing the relevant documents, determined that the objections raised against the Surveyors’ Report are completely unfounded. It further stated that the National Commission correctly dismissed those objections.31. The Insurance Company has not rejected the appellant’s claim in this instance on arbitrary or unjustifiable grounds. In this instance, the appellant’s claim has been acknowledged to the extent of the loss as determined by the surveyor. The authority of the special forum established pursuant to the Consumer Protection Act of 1986 is restricted in situations of this kind. If the appellant had appeared in civil court, it is possible that they could have even subpoenaed the surveyor for cross-examination regarding each and every minute detail.
“However, the court noted that in order to prevail in a complaint before the Consumer Forum, a consumer must prove that the service provider has provided inadequate service.” An inspector is bound by a code of conduct (32). Indeed, the term ‘deficiency’ encompasses any inadequacy in the quality, nature, or mode of performance that is mandated to be maintained by law or contract, or that has been agreed to be performed. However, in order to meet the aforementioned criteria, the appellant must demonstrate one of the following: (i) either the Surveyor failed to adhere to the code of conduct outlined in the regulations promulgated under the Act, as per Section 64UM(1A) of the Insurance Act, 1938, which outlined his duties, responsibilities, and other professional obligations; or (ii) the insurer erred in its decision to reject the entirety or a portion of the Surveyor’s Report on the basis of the 37…. They are as follows: (i) the surveyor is bound by a code of conduct a violation of which may result in an allegation of inadequate service; and (ii) the insurer’s authority to reject the surveyor’s report in its entirety or partially should not be exercised capriciously or arbitrarily; doing so could lead to an allegation of inadequate service. 38.
In contrast to a civil court, a Consumer Forum that predominantly addresses an allegation of deficiency in service is not authorized to conduct a forensic examination of the surveyor’s report’s anatomy. The Consumer Forum’s jurisdiction would cease once it is determined that the surveyor’s duties and responsibilities were carried out in a manner consistent with the regulations governing their code of conduct, in terms of quality, nature, and manner. Additionally, the forum’s authority would cease to proceed once it is confirmed that the report is not based on ad hocism or vitiated by arbitrariness.
