NCDRC ORDERS INSURANCE COMPANY TO PAY RS. 65.36 LAKHS IN A FIRE INSURANCE CLAIM CASE.

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On the 18th of August 2025, the National Consumer Disputes Redressal Commission (NCDRC), delivered a landmark judgment in our firm’s long going case in the matter titled M/s Sumer International Ltd v. Oriental Insurance Co. Ltd strengthening the consumer rights in insurance claim disputes specifically in cases where, fire insurance claims have been arbitrarily repudiated.

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OVERVIEW OF THE FACTS OF THE CASE-

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The complainant, M/s Sumer International Ltd is a rice milling and export company producing “Old Gold” brand basmati rice. The Insurance Coverage was taken for the duration of 01.05.2000 - 30.04.2001 from Oriental Insurance Co. Ltd. The total insurance claim was under seven specific heads which amounted to a total of Rs. 477.28 lakhs. On the night of 1st-2ndJanuary 2001, a fire broke out at the company’s godown, destroying nearly 30,000 kg of packaging material that had been procured for fulfilling an export order to Dubai.

The Insurance claim was filed by the company for Rs. 80.90 lakhs along with an interest @ 18% p.a. This claim was arbitrarily repudiated by the insurance company on the following points:

• The fire was minor and could not have caused extensive loss.

• The supplier (Shree Bhagwati Enterprises) was allegedly non-existent.

• The invoices and payments for packing material produced appeared suspicious and fabricated.

• The cause of fire could not be established.

 

ARGUMENTS BEFORE THE NCDRC-

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COMPLAINANT’S STANCE-

• The Complainant produced invoices, bank drafts, transporter receipts, stock registers, and supplier confirmations to establish the purchase and the existence of an arrangement with the supplier. 

• The Complainant also pointed out the harassment by the insurance company by appointing multiple surveyors in order to delay the settlement.

1. The preliminary surveyor submitted a report in January 2001, doubting the scale of the fire.

2. The final surveyor (Aditi Consultants Pvt. Ltd.) gave a detailed report in June 2001, but raised questions about supplier documentation.

3. A third investigator (Mr. G.B. Mathur),who was also a retired officer of Oriental Insurance, was appointed in September 2001. His report also cast suspicion on the supplier and the invoices.

This repeated inquiry process was heavily criticised by the complainant as an attempt to delay settlement and harass the insured.

• The Complainant also pointed out Supreme Court precedents like, Venkateswara Syndicate v. Oriental Insurance, 2009; M.K.U. Pvt. Ltd. v. United India Insurance, 2019 wherein it was held that multiple investigations are against law and frowns upon multiple surveyors being appointed to deny claims.

 

INSURANCE COMPANY’S STANCE-

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• It was claimed that the fire was too minor to cause the alleged destruction.

• The insurer questioned the supplier’s existence and whether payments were genuinely made.

• It was also alleged that invoices and stock records were fabricated post-incident.

 

NCDRC’S RULING:

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The Commission in this case spanning for over two decades with hearings between 2019 and 2025, presided over by Justice A.P. Sahi (President) and Member BharatKumar Pandya, found and concluded that:

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• The fire was genuine and corroborated by the fire brigade and police reports. As per the records the fire brigade arrived at 04:00 am and worked till 05:00 am thus, the insurer’s attempt to downplay the fire was rejected.

• The complainant had provided enough documentary proof which included, bank certifications of payments, transporter confirmations and supplier’s correspondence to establish the genuineness of the supplier and the supplies.

• The repudiation letter doubted the extent of the fire, existence of the supplier, and validity of the documents but failed to cite cogent evidence to disprove the claim. The Commission emphasised that insurers cannot rely on “mere suspicion or conjecture” to deny indemnification.

• The Commission held that the appointment of a second investigator after the final report was biased and legally impermissible. The Supreme Court in New India Assurance Co. v. Venkateswara Syndicate (2009) and M.K.U. Pvt. Ltd. v. United India Insurance Co. (2019) observed that appointment of multiple surveyors to fish for a favourable report amounts to unfair practice.

• The Commission held that unless the insurer can prove deliberate mischief or fraud by the insured, the cause of fire is immaterial.As per Canara Bank v. United India Insurance (2020), once fire damage is proved, the insurer cannot evade liability by questioning the precise cause unless fraud or wilful misconduct is shown.

• The complainant had a confirmed export order from Dubai-based M/s Nabel General, which required specific packaging material.Letters from the foreign buyer confirmed the urgency of the order and the requirement of physical verification of the packing material.

 

FINAL JUDGMENT OF THE NCDRC-

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The NCDRC ruled in favour of the Complainant, directing Oriental Insurance to:

• PayRs. 65,36,450/- (Rupees Sixty-Five Lakh Thirty-Six Thousand Four Hundred and Fifty, only) as insurance amount.

• Pay interest at 6% per annum from 28.02.2003 (from the date of filing of complaint until the date of realization).

 

ANALYSIS

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This decision of the NCDRC in Sumer International Ltd. v. Oriental Insurance Co. Ltd. is a landmark in Insurance Law and Consumer Rights in India. It clarifies that insurance claims cannot be denied only on account of suspicion, and that insurers must act in utmost good faith and fairness. When an insurance policy is issued, the insurer is bound to honour it, unless there is an evident and proven fraud.

This judgment reaffirms that policyholders are protected against arbitrary repudiation of claims. It sets a precedent for businesses and individuals facing fire insurance disputes and arbitrary rejection of claims.For policyholders, this judgment serves as a reassuring reminder that when insurers fail, the Consumer Courts will step in to deliver justice thereby making it clear that the Consumer Protection Act, 2019 is not a mere formality but a powerful safeguard against arbitrary action.

This case is particularly significant because it recognises several recurring issues in matters related to insurance claims that includes, insurers downplaying the seriousness of an accident, questioning the existence of suppliers and documents without sufficient proof against the same, appointing several investigators to delay and deny the insurance claim. The NCDRC in this judgment held these practices to be illegal and against public policy. Not only was the Insurance Company ordered to pay the indemnify the complainant but also the interest for more than two decades from the date of complaint until the actual payment is made. This ruling serves as a deterrent to insurers who try to adopt similar tactics in future. Alongside this, it also restores public faith in judiciary underscoring that, “Justice, though delayed, is not denied”. Even after more than two decades of litigation, the NCDRC delivered a reasoned and consumer-friendly verdict that will resonate in future insurance claim disputes.