Zephyr Agro Chemicals vs East West Insurance Company etc.

Stereo. H C J D A 38 Judgment Sheet

IN THE LAHORE HIGH COURT,

BAHAWALPUR BENCH, BAHAWALPUR

Judicial Department

R. F. A. No. 192 of 2019 / BWP

Zepyr Agro Chemical (Private) Limited through Masooma Hidayat Ullah, Authorized Director Versus

East West Insurance Company Limited through Branch Manager and another

JUDGMENT

Date of Hearing: 07.10.2021 Appellant(s) By: Mr. Muhammad Hanif Chughtai, Advocate Respondent(s) By: Mr. Muhammad Mustafa Khalid, Advocate

ABID HUSSAIN CHATTHA, J: This Appeal instituted under Section 124 of the Insurance Ordinance, 2000 (the “Ordinance”) is directed against the Judgment and Memo of Cost dated 14.10.2019 passed by the Insurance Tribunal, Bahawalpur.

2.Brief facts necessary for the decision of the titled Appeal are that the Appellant submitted an Application for the recovery of an insurance claim of Rs. 10,000,000/- under Fire Insurance Policy No. EWI/MRO/MUL/GFP/209267/02/2012 (the “Policy”) along with liquidated damages under Sections 118 and 122 of the Ordinance against Respondent No. 1 (hereinafter referred to as the “Respondent”). Habib Bank Limited and the Surveyor were also arrayed as Respondents No. 2 and 3, respectively. It was averred in the Application that the Appellant having been incorporated and existing under the company law in Pakistan is engaged in the business of packing, distribution and sale of pesticides, insecticides, fungicides and herbicides and in order to protect and secure its packing stock and products on 17.02.2012 purchased the Policy for an amount of Rs.

10,000,000/- against a premium of Rs. 50,379/- per month from the Respondent through Habib Bank Limited. A fire broke out in the insured premises of the Appellant on 30.06.2012 and consequently, all the stock of packing material, pesticides and fertilizers lying in the insured building of the Appellant was burnt to ashes. The incident was reported to the Police on the same day and the Respondent through Habib Bank Limited was also approached claiming the insured amount under the Policy. A Legal Notice dated 07.10.2019 was also issued to the Respondent. A Surveyor was appointed by the Respondent who was provided all the required documents for Survey and loss assessment of the insured premises. It was contended in the Application that the Surveyor in connivance with the Respondent prepared a wrong, negligent and belated Survey Report on 15.09.2012, which was deficient in material aspects. The Survey Report declined the insurance claim based on the following conclusions:-

i)Location of stock which claimed to have been involved in fire was kept in “Filling Hall” i.e. a process hall where process of bottles/tins filling, packing etc. is carried out which cannot be considered as “Godown”. One Godown was present in the same premises where stock of packing material, machinery etc. was stored but this Godown was found intact.

ii)Construction warranty breach was found at site. The roof of buildings (process hall) so claimed as Godown was constructed with asbestos sheets on steel frame whereas it was required that the asbestos sheets should be covered with tiles to fall within the parameters of 1st class construction as per rules/ regulations provided in fire tariff.

iii)The sufficient documentary evidence in support of the claim was not provided. Moreover, record partially submitted was unauthenticated, over- written and contradictory or shows the reluctance of insured to cooperate during the survey.

Accordingly, the Respondent repudiated the insurance claim by declaring it as that of “No Loss” vide letter dated 26.09.2012. It was further alleged in the Application that the Appellant kept on disputing the Survey Report through various communications

which were not replied by the Respondent till 30.11.2012, which shows mala fide and collusion on the part of the Respondent and the Surveyor. The Appellant also approached the Securities and Exchange Commission of Pakistan (the “SECP”) against the Survey Report and Surveyor requesting for conducting second survey but the Appellant remained unsuccessful. It was asserted that the Appellant is entitled to receive its insurance claim under the Policy.

3.The Application was resisted by the Respondent both on legal and factual plane. The issuance of the Policy was admitted. It was specifically stated that only Godown of the Appellant was insured under the Policy. The entire process regarding appointment of the Surveyor and investigation of the claim was transparent and in accordance with law. Fire did not occur in the insured Godown but in the Filling Hall, which was beyond the ambit of the Policy. The insurance claim was denied on the basis of Survey Report which was conducted by the Surveyor, who was duly licensed by the SECP. As such, the impugned Judgment was passed in accordance with law.

4.Out of the divergent pleadings of the parties, the Insurance Tribunal framed the following five issues:--

i)Whether the stock burnt in the fire in premises of Petitioner was insured with the Respondent and Petitioner is entitled to the insurance claim of Rs. One Crore alongwith liquidated damages? OPA

ii)Whether the Applicant is entitled to the exemplary damages against the Respondents, if so to what extent? OPA

iii)Whether the Applicant acted negligently and indolently and did not fulfill the terms and conditions of insurance policy? OPR

iv)Whether the suit is bad for non-joinder and mis- joinder of parties? OPR

v)Relief.

The parties duly recorded their respective evidence. The Appellant produced Khawaja Hidayatullah, Director of the Appellant as AW-1; Farhan, Manager of the Appellant as AW-2,

and Ubaid-ur-Rehman as AW-3. In documentary evidence, the Appellant tendered Exhibit A-1 to Exhibit A-25/1-6. The Respondent produced only one witness, namely, Muhammad Saleem, Regional Manager of the Respondent and in documentary evidence, Exhibits R-1 to R-6 were produced. The pivotal issue was as to whether the burnt stock by fire was insured with the Respondent and the Appellant was entitled to the insurance claim as prayed for.

5.Learned counsel for the Appellant contended that the impugned Judgment is against the law and facts of the case and is a result of misreading and non-reading of evidence on record. The insurance claim of the Appellant was discarded by the Respondent on account of a defective, erroneous and collusive Survey Report. The Appellant has from the very inception disputed the Survey Report since the Survey was not conducted by the appointed and approved Surveyor, namely, Qayyum Pervez Malik, rather, by a junior associate, namely, Azhar Javed on 01.07.2012, who conducted Survey and prepared the Survey Report (Exhibit R-3). The said Azhar Javed was not a license holder under the provisions of the Ordinance with requisite qualification of a Fire Surveyor rather he was a license holder of “Marine and Motors Survey”, which license had also expired on 06.04.2012. Accordingly, the Survey conducted by Azhar Javed was liable to be discarded on the score that the Survey was conducted by an unauthorized and incompetent person without license who had no authority and expertise to conduct a Fire Insurance Survey. In this behalf, Section 111 of the Ordinance was referred which provides that the Surveyor must be duly licensed under the Ordinance. Further, the Surveyor, namely, Qayyum Pervez Malik, who allegedly signed and authenticated the Survey Report was not produced as a witness. Hence, the Survey Report as such was not per se admissible and was not proved in accordance with law but reliance upon the same by the Insurance Tribunal has vitiated the entire trial which is not sustainable in the eyes of law. It was also

contended that RW-1 in his cross examination admitted by accepting the suggestion to the effect that the Appellant was not in breach of any warranty attached with the Policy. Therefore, the Appellant was entitled to keep its stock in the insured premises. There is no separate classification of Godown or Filling Hall. However, the Insurance Tribunal erroneously took another view based upon the Report of Rescue-1122 which was not a technical Report and could not be used in the interpretation of the Policy. In this behalf, the Insurance Tribunal erred to understand the term “Packing Plant” as synonymous to that of a “Filling Plant”. In fact, they are two different terms. Packing Plant means the nature of the business that is being carried out in a specific premises while Filling Plant is specific unit in a Packing Plant being used for filling process in bottles for completing the packing process. In other words, the Filling Plant is a part of the Packing Unit which includes all types of process to produce the final products for sale. Hence, the use of the term Packing Plant in the report of Rescue-1122 only referred to the nature of business as the officials of the Rescue-1122 are not familiar with business but are only making a report with respect to the incident of fire in general. Accordingly, no inference can be drawn on the basis of such Report to declare the particular nature and character of the business. He importantly submitted that Insurance Tribunal observed that Bank officer who certified the Appellant’s assessed claim (Exhibit A-6) was not produced for cross examination completely ignored that the Bank was made a party who submitted written reply with Annexures and did not object to the authenticity of the claim. As the same was exhibited without any objection, it ought to have been considered. Finally, he prayed that the insurance claim is based on the admitted Policy which should be granted as the Appellant has suffered genuine loss on account of the unfortunate fire incident.

6.Conversely, learned counsel for the Respondent vehemently defended the impugned Judgment and stated that the

insurance claim has been rejected on the basis of valid and trustworthy Survey Report submitted by the Surveyor. The Survey Report was prepared, signed and submitted by the appointed Surveyor, namely, Qayyum Pervez Malik and not by the said Azhar Javed as alleged. Hence, the objection that the Survey was not conducted by the duly authorized and licensed Surveyor is frivolous. He insisted that the incident of fire did not occur in the Godown which was insured under the Policy. Accordingly, the insurance claim of the Appellant has been denied in accordance with the terms and conditions of the Policy.

7.Arguments heard and record perused.

8.The insurance claim of the Petitioner was primarily denied by the Insurance Tribunal by affirming the interpretation put forwarded by the Surveyor in the Survey Report to the effect that the location of insured stock claimed to have been burnt in the fire was kept in the “Filling Hall i.e. a process hall where process of bottles/tins filling/packing, etc. is carried out which cannot be considered as “Godown”. One more Godown was also available in the same premises, where, stock of Packing Material and Machinery was available, but this Godown was found intact. Reliance by the learned Insurance Tribunal upon this finding of the Surveyor in our view is misconceived and is directly in conflict with the admitted Policy. Importantly, the Policy with respect to the insured property reads as under:- “On stock of Pesticides, Fertilizer, Seeds, Bottles, Cartons, Shrinks and Microtraint in various packing in tins, in drums, plastic bottles and in pett bottles and/or Powder in bags/in cartons only, the property of the insured held by them in trust and/or in deposit and/or on commission and/or in joint account with others for which, they are legally responsible in the event of loss or damage by Fire, whilst stored and/or lying in the Godown No. 15/3- B of the insured known as M/s Zephar Agro Chemicals (pvt) Ltd, situated at Small Industrial Estate, Bahawalpur.” [Emphasis supplied]

9.From perusal of the above, it is explicitly clear that the stock was insured whilst stored and / or lying in the Godown

No. 15/3-B at the Appellant’s insured premises. No particular Godown was identified or specified within the insured premises which necessarily implies that all Godowns within the premises of the insured were included in it as depicted from the Survey Report as well as from other evidence on record that there were several halls and constructed rooms within the insured premises. Merely because the Surveyor described one hall as “Godown” and the others as “halls” or “rooms” would not exclude such halls and rooms out of purview of the term “Godown”. The only logical inference is that all the insured stock which was stored or kept within covered areas in the insured premises was duly insured under the Policy. The word “Godown” would be given a general and plain meaning to cover all constructed rooms and halls where the insured stock was kept within four walls of the insured premises. Hence, the rejection of the insurance claim based upon particularly narrow interpretation of the Surveyor was erroneously accepted by the Insurance Tribunal in violation of the terms of the Policy.

10.Even otherwise, the Respondent did not produce the Surveyor, namely, Qayyum Pervez Malik as a witness and as such the insurance report was not proved in accordance with the requirements of Qanun-i-Shahadat Order, 1984. No opportunity was provided to the Appellant to cross examine him regarding the interpretation put forward by him and confront him with the Survey Report regarding various allegations of fact recorded therein. More surprisingly, it is noted that vide order dated 09.06.2015, the Insurance Tribunal allowed the Surveyor arrayed as Respondent No. 3 to be deleted by observing that the Surveyor would definitely be produced by the Respondent in support of his claim or pleadings and would have to tender the original Survey Report in evidence, as such, the purpose of the Appellant for arraying him as Respondent No. 3 by way of cross examination would definitely be served. Having observed as such, it is strange that the Insurance Tribunal without considering that the Surveyor was not produced at all based its Judgment upon the Survey Report of the Surveyor which was neither admissible nor had any evidentiary value especially when

the Appellant had consistently disputed the same. The creditworthiness of the Survey Report was further eroded by the testimony of the only witness of the Respondent, namely, Muhammad Saleem, who in his capacity as Regional Manager of the Respondent appeared as RW-1. The following statements made by him during his cross-examination are of paramount significance:-

(i)He candidly admitted that all record which was demanded from the Appellant was provided to the Respondent and that the Appellant did not make breach of any warranty attached with the Policy. (This statement became basis to reject two of the findings of the Surveyor recorded in the Survey Report by the Insurance Tribunal). [Emphasis Supplied] (ii) It is correct to suggest that claim of the Petitioner was rejected on the basis of Survey Report.

(iii)Loss assessment was never made in the Survey Report as fire was set in the Filling Hall, hence, there was no need for further loss assessment report.

(iv)He deposed that he did not know that Building No. 15/3-B, Industrial Estate, Bahawalpur of the Appellant is insured and mentioned in the Policy.

(v)He stated that he did not know any person, namely, Azhar Javed as Surveyor, who was never appointed by the Respondent Company but stated that one witness Azhar Javed has come today on behalf of Qayyum Pervez Malik & Company for recording his statement before the Insurance Tribunal.

(vi)He testified that it is correct to suggest that in the preliminary Insurance report, there is specified Godown instead of Filling Hall and that the preliminary Insurance Report is in the possession of the Respondent (which was never brought on record).

For the reasons recorded as aforesaid, we hold that the Survey Report was not a proved document and could not be relied upon

by the Insurance Tribunal to reject the insurance claim of the Appellant.

11.From the above examination of evidence on record, it is established that the Policy, the eruption of fire and the loss caused by fire was admitted. It was proved that the Appellant was not in breach of any construction warranty under the Policy and the Appellant provided all the required documents to the Respondent. The Policy clearly stipulated that the insured stock stored and / or lying in Godown of the insured premises was protected without specifying any particular Godown. It was proved on record that there were several Godowns in the premises of the insured. Loss occasioned to the Appellant is not denied which is consistently acknowledged by all the stakeholders and severity of the same is duly highlighted in the Report of Rescue 1122 (Exhibit R-4). It is admitted that insurance claim was denied solely on the basis of Survey Report which was not proved. The Respondent itself instructed the Surveyor not to assess the quantum of loss. Conversely, the Loss Assessment Report submitted by the Appellant (Exhibit A-6) was the only material before this Court which was not questioned and went unrebutted and coupled with the Stock Report (Exhibit A-5) as well as other oral and documentary evidence produced by the Appellants constituted sufficient evidence to prove the insurance claim of the Appellant. As such, the claim of the Appellant was duly exhibited without objection and was never rebutted, controverted or confronted to any witness of the Appellant. Even RW-1 admitted that Appellant was not in breach of the Policy or any of its warranties and the Appellant filed claim of Rs. 10,000,000/-. He did not depose that the claim was excessive or exorbitant. Hence, the Appellant has successfully established its insurance claim.

12.In view of the above discussion, this Appeal is accepted, the impugned Judgment and Memo of Cost is set aside and the Application of Insurance Claim of the Appellant is decreed against the Respondent for an amount of Rs.

10,000,000/- with interest @ 10% per annum from the date of institution of the Application till realization of the decreed amount alongwith costs of the Application. Application against Respondent No. 2 (Habib Bank Limited) is dismissed. Decree Sheet be drawn, accordingly.

(Anwaarul Haq Pannun) (Abid Hussain Chattha)

JUDGE JUDGE

*Bilal/WaqaR*

Approved for reporting.

JUDGE