Shashi Nandkeolyar, Member

1. The present First Appeal No. 158 of 2025 and First Appeal No. 159 of 2025 have been preferred by the Appellant/Complainant under Section 51 of the Consumer Protection Act, 2019 ["Act"] assailing the common judgment and order dated 20.12.2024 ["Impugned Judgement"] passed by the State Consumer Disputes Redressal Commission, Bihar, Patna in Complaint Case No. 01 of 2015 and Complaint Case No. 85 of 2018 respectively.

2. Since both the aforesaid appeals emanate from the similar impugned judgment, arise out of the same fire incident, involve substantially identical questions of fact and law, rest upon common documentary and oral evidence, and challenge the findings recorded by the State Commission on interconnected issues, the same were heard together and are being disposed of by this common order.

3. First Appeal No. 158 of 2025 arises out of Complaint Case No. 01 of 2015 and pertains to Standard Fire and Special Perils Policy bearing No. 210102/11/11/11/00000238 issued by the Respondent-Insurance Company for the period commencing from 30.03.2012 and ending on 29.03.2013. The said policy was obtained in respect of the rice milling unit of the Appellant and covered, inter alia, Rice Mill Machinery and Stock of Rice Mill Products (Finished Goods). The aggregate sum insured under the said policy was Rs.20,00,000/- in respect of the insured stock, besides, Rs.12,35,625/- was the coverage extended to the machinery and allied assets specified in the policy schedule, making the total aggregate to Rs.32,35,625/-. The Appellant, being dissatisfied with the quantum of compensation awarded by the State Commission, has preferred the present appeal seeking enhancement of the amount awarded under the said policy and consequential modification of the impugned judgment.

4. First Appeal No. 159 of 2025 arises out of Complaint Case No. 85 of 2018 and relates to Standard Fire and Special Perils Policy bearing No. 210102/11/11/11/00000220 issued by the Respondent-Insurance Company for the period from 13.03.2012 to 12.03.2013. The said policy principally covered stock of paddy, rice and similar goods stored and utilized in the rice milling operations of the Appellant and carried a sum insured of Rs.1,00,00,000/-. It is under this policy that the principal claim arising from the fire incident dated 20.11.2012 was lodged. Aggrieved by the assessment adopted by the State Commission on the basis of the final survey report, the Appellant has approached this Commission seeking enhancement of the compensation payable under the policy and acceptance of the loss assessment reflected in the contemporaneous survey conducted immediately after the fire incident.

5. The only distinguishing feature between the two appeals pertains to the insurance policies under which the risk was covered. In First Appeal No. 158 of 2025, the claim arises under Standard Fire and Special Perils Policy bearing No. 210102/11/11/11/00000238, valid for the period from 30.03.2012 to 29.03.2013, whereas in First Appeal No. 159 of 2025, the claim arises under Policy No. 210102/11/11/11/00000220, valid for the period from 13.03.2012 to 12.03.2013. Save and except the aforesaid distinction regarding the policy coverage, the factual matrix, the nature of loss, the repudiation of claim, the evidence adduced by the parties and the issues arising for determination remain substantially common.

6. In view of the aforesaid commonality and for the sake of convenience, brevity and to avoid repetition of facts and discussion, the facts are being primarily referred to from First Appeal No. 158 of 2025 arising out of Complaint Case No. 01 of 2015, and the findings recorded herein shall, unless otherwise indicated, govern both the connected appeals.

7. The parties shall be referred to in the same manner as they were arrayed before the State Commission. The Appellant shall hereinafter be referred to as the "Complainant" and the Respondents shall be referred to as the "Opposite Parties" or the "Insurance Company", as the context may require.

8. Before adverting to the rival submissions and the issues arising for consideration, it would be apposite to briefly delineate the factual backdrop leading to the institution of the consumer complaints and the present appeals.

BRIEF FACTS:

9. The facts giving rise to the present appeals, shorn of unnecessary details, reveal that the Complainant is a partner of M/s Saurabh Rice Mills, situated at Khurd Ushari Shivalpur, P.S. Shahpur, District Patna, Bihar. The rice mill was established in the year 2011 after availing financial assistance from Canara Bank, Danapur Cantt Branch. Upon investment of substantial capital, the Complainant set up and operationalized a rice milling unit comprising factory premises, godowns, machinery and other allied infrastructure required for carrying on the business of custom milling of paddy into rice. The assets and stocks associated with the rice mill were insured under policies issued by the Opposite Party/Insurance Company.

10. In the ordinary course of its business, the Complainant entered into Rice Milling Agreements with the Bihar State Food and Civil Supplies Corporation Limited ["BSFC/ State Food Corporation"] through its depots at Gaya and Patna. Agreements in this regard were executed on 08.02.2012 and 11.05.2012, respectively, pursuant to which paddy was entrusted to the Complainant for the purposes of custom milling and subsequent delivery of rice in accordance with the specifications prescribed by the Corporation. Subsequent to the execution of the milling agreements, specific lot numbers were allotted to the Complainant's rice mill for undertaking the milling operations entrusted by the Corporation.

11. The record further discloses that the Opposite Party/Insurance Company had issued Standard Fire and Special Perils Policies covering the risk associated with the business activities of the rice mill. The policies were in force during the relevant period and covered the stocks and properties described therein. The Complainant asserts that the policies were issued after due verification and inspection by the Opposite Party/Insurance Company and that all requisite premiums had been duly paid.

12. On 20.11.2012, during the currency of the insurance policies, a major fire broke out in the premises of the rice mill in the early morning hours. The fire allegedly engulfed a substantial quantity of paddy and rice stored within the mill premises, resulting in extensive loss and damage. The incident was promptly attended to by the Fire Brigade, which reached the site and undertook firefighting operations. The Fire Brigade reports indicated that the probable cause of the incident was accidental short-circuiting in the electrical wiring installed within the premises. The Divisional Fire Officer also recorded that a substantial quantity of rice stored in the premises suffered damage as a consequence of the fire.

13. Following the occurrence of the fire, the Complainant intimated the Insurance Company and lodged claims under the respective policies seeking indemnification of the losses suffered. Upon receipt of the claim intimation, the Insurance Company appointed surveyors to assess the nature and extent of the loss. The survey proceedings continued over an extended period and various inspections, verifications and assessments were undertaken by the surveyors appointed by the insurer.

14. Upon receipt of intimation regarding the fire incident, the Insurance Company appointed a licensed surveyor to conduct an assessment of the loss sustained by the Complainant. The first surveyor undertook inspection of the site, verified the records and stocks available at the premises and submitted an interim survey report assessing the loss suffered by the Complainant. The said report recorded a substantially higher loss and quantified the claim payable at approximately Rs.94,39,200/-. The interim assessment was based upon the quantity of rice bags alleged to have been damaged in the fire and the supporting material made available during the course of inspection.

15. The record further reveals that notwithstanding the submission of the aforesaid interim assessment, the Insurance Company did not proceed to settle the claim on the basis thereof. Instead, after the first surveyor had already undertaken the assessment process and furnished his report, the insurer proceeded to appoint another surveyor for reassessment of the alleged loss. The second surveyor conducted a fresh evaluation and arrived at a substantially reduced assessment of the loss.

16. The second surveyor, after examining the available stock position, storage capacity, production records, physical dimensions of the affected area and other supporting documents, opined that the quantity of rice claimed to have been damaged could not have been physically accommodated in the affected storage space. Proceeding on the said basis, the second surveyor reassessed the extent of loss and ultimately quantified the net admissible claim at Rs.32,77,517/-. The reassessment was founded principally upon the surveyor's conclusions regarding the storage capacity of the godown, the number of rice bags that could have been stored in the affected area and the quantity of stock that could reasonably be treated as damaged in the incident.

17. It is the case of the Complainant that no cogent reason was ever assigned by the Insurance Company for disregarding the assessment made by the first surveyor and for appointing a second surveyor to undertake a fresh exercise. According to the Complainant, the appointment of the second surveyor resulted in a drastic reduction of the assessed loss from Rs.94,39,200/- to Rs.32,77,517/- and ultimately became the foundation for the subsequent processing and repudiation of the claim. The legality and propriety of the appointment of the second surveyor, as also the evidentiary value of the two survey reports, therefore constitute one of the principal issues arising for determination in the present appeals.

18. Despite the claim having been processed and assessed, the Insurance Company, by communication dated 21.04.2015, repudiated the claims primarily on the ground that the rice and paddy damaged in the fire did not belong to the Complainant but belonged to the Bihar State Food Corporation. According to the insurer, the goods in question constituted "Goods Held in Trust" and therefore fell within General Exclusion Clause No. 5 of the Standard Fire and Special Perils Policy. The Insurance Company consequently took the position that the loss was outside the scope of coverage available under the policy and declined liability. The aforesaid repudiation letter is reproduced as under :-

                          "UNITED INDIA INSURANCE CO.LTD.

                          (Regd. & Head Office: 24, Whites Road, Chennai-600 014) Branch Office -2, 220, Dak Bunglow Road, Patna 800001 Phone: 2224458, 2233656, Fax: 2216343 Ref. No.210102/Fire: C1/10/2015 Date:21/04/2015 To: Without Prejudice Sri Sugandh Kumar H. No.-23, Kothama (Morgiachak) Po+Ps-Khagaul, Patna-801105 Sir, Re-Repudiation of your claim, A/c-Saurabh Rice Mills Claim No.-210102/11/12/11/90000001 Policy No.-210102/11/11/11/00000220 Policy No.-210102/11/11/11/00000238 Date of Loss-20/11/2012(8:50 Α.Μ) Relevant part of the repudiation letter dated 21.04.2015 on the basis of which insurance claim was denied is reproduced below:- "This is to inform you that the above mentioned claim AIC-Saurabh Rice Mills was assessed for Rs.32,77,517=00.

                          We regret-to inform you that this claim is repudiated for the below mentioned reason :

                          The Rice which was damaged in the Fire incident on 20/11/2012, was not owned by you. Paddy and Rice belonging to the State Food Corporation are not "Stock In Trade" but are "Goods Held In Trust". "

                          As per the Condition and General Exclusion no. 5 of our Standard Fire and Special Perils Policy: "Loss, Destruction or damage to goods held in trust or commission, are excluded unless otherwise expressly stated in the policy." In this policy "Goods held in trust or on commission is not expressly stated in the policy".

                          Hence the loss is not covered under the Terms and Conditions of the policy. This Fire claim stands repudiated.

                          With Regards Sr. Branch Manager Branch II, Patna"

19. Aggrieved by the repudiation of the claims, the Complainant instituted consumer proceedings before the State Consumer Disputes Redressal Commission, Bihar, Patna, alleging arbitrary repudiation, deficiency in service and unfair conduct on the part of the Insurance Company. It was the consistent case of the Complainant that the goods entrusted by BSFC were not goods merely held in trust but were entrusted under a custom milling arrangement, creating a commercial relationship of bailor and bailee, and therefore the repudiation founded upon Exclusion Clause No. 5 was wholly misconceived and unsustainable in law.

20. The disputes eventually culminated in the impugned judgments dated 20.12.2024 passed by the State Commission, which has given rise to the present connected appeals. Since the findings recorded by the State Commission and the rival contentions advanced by the parties form the core controversy in the present proceedings, the same shall be adverted in the succeeding paragraphs.

21. The State Commission, after considering the pleadings of the parties, documentary evidence available on record and the submissions advanced on their behalf, proceeded to examine the principal controversy relating to the validity of the repudiation of the insurance claim by the Opposite Party-Insurance Company.

22. The State Commission framed the following issues for consideration:

                          i. Whether the repudiation of the insurance claim by the Insurance Company on the basis of General Exclusion Clause No. 5 of the Standard Fire and Special Perils Policy was legally sustainable?

                          ii. Whether the paddy/rice entrusted by the Bihar State Food and Civil Supplies Corporation Ltd. to the Complainant was in the nature of "goods held in trust" or whether the relationship between the parties was that of bailor and bailee? iii. Whether the loss suffered by the Complainant was covered under the insurance policy issued by the Opposite Parties? iv. Whether the Complainant was entitled to the reliefs claimed in the complaint petition?

23. Upon appreciation of the material placed before it, the State Commission recorded findings on the issue relating to the nature of the goods stored in the rice mill and the applicability of Exclusion Clause No. 5 of the insurance policy.

24. The State Commission further examined the terms of the milling agreement executed between the Complainant and the Bihar State Food and Civil Supplies Corporation Ltd., the obligations undertaken by the parties thereunder and the legal relationship arising therefrom.

25. After analyzing the statutory provisions governing bailment and the judicial precedents cited before it, the State Commission arrived at a conclusion regarding the nature of the transaction and the applicability of the exclusion clause relied upon by the Insurance Company.

26. Upon returning findings in favour of the Complainant on the principal issues, the State Commission held that the repudiation of the claim by the Insurance Company was not justified and that the Complainant was entitled to indemnification in accordance with the assessment accepted by the Commission.

27. Consequently, the complaint was allowed the operative portion of the said impugned judgment reads as under:

                          "In present case also the paddy was given by State Food Corporation Ltd. on contractual bailment for purpose of milling on payment of cost of milling and thereafter rice was to be given to State Food Corporation Ltd. as such the goods were not held by the complainant in trust but on bailment. All the three conditions were satisfied for bailment. 24. For the reasons as stated above, letter of repudiation dated 21.04.2015 on the ground of exclusion clause-5 that the paddy/rice of ashes was held in trust by . complainant is not sustainable in law and is accordingly set aside.Complaint case is allowed and Insurance Company is directed to pay the insured amount as assessed by the surveyor in final surveyor report to. the complainant within 45 days with interest @8% p.a. from the date of filing complaint case till its payment, from the date of receipt production of a copy of the order passed this Commission. A Copy of this order be supplied to both the parties free of cost as mandated by the Consumer Protection Act. The order be uploaded forthwith on the Confonet of the Commission."

SUBMISSIONS ON BEHALF OF RESPONDENT NOS. 1 TO 4:

28. Learned counsel appearing on behalf of Respondent Nos. 1 to 4-United India Insurance Company Ltd. supported the impugned judgment and submitted that the State Commission has already granted the Complainant the amount lawfully payable under the policy and, therefore, no further enhancement or interference is warranted in the facts of the present case.

29. Learned counsel submitted that the insurance policies obtained by the Complainant were Standard Fire and Special Perils Policies covering only the risks expressly specified therein. Drawing attention to the schedule of insurance, it was argued that the subject matter of coverage was confined to "Rice Mill Machinery and Stocks of Rice Mill Products (Finished and Unfinished Goods)". According to the insurer, the policy did not extend coverage to every loss allegedly suffered by the Complainant, and the liability of the insurer could not travel beyond the scope of the contractual coverage expressly undertaken.

30. It was further contended that immediately upon receipt of information regarding the fire incident, the Insurance Company acted in due course and appointed Shri Anil Kumar Sinha as Preliminary Surveyor for conducting spot inspection and assessment of the loss. The said surveyor submitted an interim report dated 21.01.2013. Thereafter, in accordance with the established practice followed in the insurance industry and the regulatory framework governing assessment of losses, an independent final surveyor, Shri Satish Saran, was appointed for conducting a detailed and comprehensive assessment of the claim.

31. Learned counsel submitted that the final survey report dated 16.12.2013 assessed the net admissible loss at Rs.32,77,517.58 and categorically recorded that the policy in question covered only the stocks insured thereunder. It was argued that the State Commission rightly relied upon the final survey report, which was prepared after detailed scrutiny of records, physical verification and assessment of the material available on record.

32. It was argued that there exists no legal prohibition against appointment of a preliminary surveyor at the initial stage followed by appointment of a final surveyor for detailed assessment. According to the insurer, such a course of action is recognised in insurance practice and is intended to facilitate proper assessment of the claim. Consequently, the Complainant cannot derive any advantage merely from the fact that an interim report was prepared at an earlier stage.

33. Learned counsel further submitted that the claim of the Complainant must necessarily be examined strictly within the four corners of the insurance contract. It was contended that an insurance policy constitutes a commercial contract and the rights and obligations of the parties are entirely governed by its terms and conditions. The Consumer Fora, while interpreting such contracts, cannot rewrite the bargain struck between the parties or enlarge the scope of coverage beyond what has been expressly insured.

34. In support of the aforesaid proposition, reliance was placed upon the judgment of the Hon'ble Supreme Court in Vikram Greentech (I) Ltd. v. New India Assurance Co. Ltd., [(2009) 5 SCC 599], wherein it was held:

                          "15. An insurance contract, is a species of commercial transactions and must be construed like any other contract to its oun terms and by itself. In a contract of insurance, there is requirement of uberimma fides ie. good faith on the part of the insured. Except that, in other respects, there is no difference between a contract of insurance and any other contract. The four essentials of a contract of insurance are, (i) the definition of the risk, fil the duration of the risk, (ii) the premium and (iii) the amount of insurance. Since upon issuance of insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the insurance policy, its terms have to be strictly construed to determine the extent of liability of the insurer. The endeavour of the Court must always be to interpret the words in which the contract is expressed by the parties. The Court while construing the terms of policy is not expected to venture into extra liberalism that may result in re-writing the contract or substituting the terms which were not intended by the parties. The insured cannot claim anything more than what is covered by the insurance policy. /General Assurance Society Ltd. Vs. Chandumull Jain & Anr., AIR 1966 (SC) 1644; Oriental Insurance Co. Ltd. Vs. Sony Cheriyan, VI (1999) SLT 565

- II (1999) ACC 196 (SC) - II (1999) CPJ 13 (SC) - (1999) 6 SCC 451; and United India Insurance Co. Ltd. V. Harchand Rai Chandan Lal, IV (2004) CPJ 65 (SC) = V (2004) SIT 876 - (2004) 8 SCC 644]"

35. Reliance was further placed upon Suraj Mal Ram Niwas Oil Mills Pvt. Ltd. v. United India Insurance Co. Ltd., [(2010) 10 SCC 567], wherein the Hon'ble Supreme Court held "' "24. In General Assurance Society Ltd. /AIR 1966 SC 1644: (1966) 3 SCR 500] a Constitution. Bench of this Court had observed that:(AIR p. 1649, para 11)

                          11. :.. In interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves."

(See also Oriental Insurance Co. Ltd. v. Sony Cheriyar [(1999) 6 SCC 451); Vikram Greentech [(2009) 5 SCC 599); Sicka Papers Itd. v. National Insurance Co. Ltd. |(2009) 7 SCC 777); New India Assurance Co. Ltd. v. Zuari Industries Itd. (2009) 9 SCC 70); Amravati District Central Coop. Bank Ltd. v. United India Fire and General Insurance Co. Ltd. [(2010) 5 SCC 294: (2010) 2 SCC (Civ) 386j).

                          25. Similarly, in Harchand Rai Chandan Lal case [(2004) 8 SCC 644) this Court held that: (SCC p. 647, para 6)

                          6.... The terms of the policy have to be construed as it is and we cannot add or subtract something Howsoever liberally we may construe the policy but we cannot take liberalism to the extent of substituting the words which are not intended.

                          26. Thus, it needs little emphasis that in construing the terms of a contract of insurarles, the words used therein must be given paramount importance, and it is not open for the court to add, delete or substitute any words. It is also well settled that since upon issuance of an insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account-of risks covered by the policy, its terms have to be strictly construed to determine the extent of liability of the insurer. Therefore, the endeavour of the court should always be to interpret the words in which the contract is expressed by the parties.

                          27. Having considered the instant case on the touchstone of the aforenoted broad principles to be borne in mind while examining the claim of an insured, we are of the opinion that the claim of the appellant must fail on the short ground that there was a breach of the afore extracted special condition incorporated in the cover note. The special condition viz. *each and every consignment" must be declared before dispatch of goods is clear and admits of no ambiguity. The appellant was obliged to declare "each and every consignment" before it left the appellant's factory premises and there is nothing in the policy to suggest that the insured had the liberty to pick and choose the dispatches which they wanted to declare to the insurer, not even at the instance of the consignee, who otherwise is a stranger to the contract between the insurer and the insured."

Learned counsel submitted that the said principle squarely governs the present dispute.

36. Learned counsel next submitted that the assessment carried out by a licensed surveyor appointed under Section 64UM of the Insurance Act, 1938 constitutes a vital and credible piece of evidence and ordinarily cannot be disregarded in the absence of cogent material demonstrating patent error, arbitrariness or perversity in the assessment.

37. In support of the evidentiary value of survey reports, reliance was placed upon United India Insurance Co. Ltd. v. Roshan Lal Oil Mills Ltd., [(2000) 10 SCC 19], wherein the Hon'ble Supreme Court held:

                          "7. The appellant had appointed joint surveyors in terms of Section 64 UM (2) of the Insurance Act, 1938. Their report has been placed on the record in which a detailed account of the factors on the basis of which the joint surveyors had come to the conclusion that there was no loss or damage caused on account of fire, was given and it was on this basis that the claim was not found entertainable. This is an important document which was placed before the Commission but the Commission, curiously, has not considered the report. Since the claim of the respondent was repudiated by the appellant on the basis of the joint survey report, the Commission was not justified in awarding the insurance amount to the respondent without adverting itself to the contents of the joint survey report specially the factors enumerated therein. In our opinion, non-consideration of this important document has resulted in serious miscarriage of justice and vitiates the judgment passed by the Commission. The case has, therefore, to be sent back to the Commission for a fresh hearing."

38. Learned counsel further relied upon Khatema Fibres Ltd. v. New India Assurance Co. Ltd., [2021 SCC OnLine SC 818], wherein the Hon'ble Supreme Court held:

                          "36. The Insurance Act, 1938 even while assigning an important role for the surveyor, casts an obligation on him under sub-section (1-A) of Section 64UM 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. This provision reads as follows:

                          "64-UM. (1-A) Every surveyor and loss assessor shall comply with the code of conduct in respect of their duties, responsibilities and other professional requirements as may be specified by the regulations made by the Authority."

                          37. Two things flow out of the above discussion. They are: (1) that the surveyor is governed by a code of conduct, the breach of which may give rise to an allegation of deficiency in service; and (if) 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.

38. A consumer forum which is primarily concerned with an allegation a of deficiency in service cannot subject the surveyor's report to forensic examination of its anatomy, just as a civil court could do. Once it is found that there was no inadequacy in the quality, nature and manner of performance 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."

39. On the strength of the aforesaid authorities, learned counsel submitted that the final survey report dated 16.12.2013 constituted the most reliable and legally admissible assessment of the loss suffered by the Complainant. It was argued that the Complainant has failed to place any credible evidence capable of dislodging the findings recorded by the final surveyor and, therefore, no case for enhancement of the amount awarded by the State Commission is made out.

40. It was accordingly urged that the impugned judgment does not suffer from any perversity, jurisdictional error or misapplication of law warranting interference by this Commission. The present appeals, according to the Respondents, are devoid of merit and deserve to be dismissed.

SUBMISSION ON BEHALF OF THE PETITIONERS:

41. Learned counsel appearing on behalf of the Appellant assailed the impugned judgment to the limited extent that although the State Commission rightly rejected the stand of the Insurance Company regarding exclusion of liability, it erred in restricting the compensation to the amount assessed by the second surveyor and failed to accord due weight to the assessment made by the first surveyor immediately after the occurrence of the fire.

42. Learned counsel submitted that the Appellant is a partner of M/s Saurabh Rice Mills, a rice milling unit established in the year 2011 with financial assistance from Canara Bank. The rice mill, together with its machinery, godowns, stocks of paddy and rice and other allied assets, stood insured under valid policies issued by the Respondent-Insurance Company. It was contended that the policies were issued after due verification and inspection by the insurer and all requisite premiums had been duly paid.

43. It was further submitted that pursuant to Rice Milling Agreements executed with the Bihar State Food and Civil Supplies Corporation Ltd., the Appellant had been entrusted with paddy for custom milling and had been regularly carrying out milling operations. According to the Appellant, substantial quantities of paddy and rice were lying stored within the mill premises when the unfortunate fire incident occurred on 20.11.2012.

44. Learned counsel submitted that the fire incident was immediately reported to the concerned authorities, including the Fire Brigade and local police authorities. The fire was eventually brought under control after extensive firefighting operations. The Fire Brigade records and contemporaneous reports, according to the Appellant, conclusively established the occurrence of the fire and the resultant damage to the stocks and machinery situated within the insured premises.

45. It was argued that immediately after lodging the insurance claim, the insurer appointed Shri Anil Kumar Sinha, a licensed surveyor and loss assessor, who visited the site at the earliest opportunity and conducted a detailed spot assessment. The said surveyor submitted an interim report dated 21.01.2013 assessing the loss at Rs.94,39,200/-. Learned counsel submitted that the assessment was undertaken while the physical evidence remained intact and before any material alteration of the site's conditions could take place.

46. Learned counsel emphasized that the first surveyor physically inspected the affected premises, verified the stacking pattern of rice bags, recorded statements of witnesses and officials, considered the police and fire brigade records and relied upon photographic evidence collected contemporaneously with the incident. It was therefore submitted that the first survey report constituted the most reliable and proximate assessment of the loss actually suffered by the Appellant.

47. The principal grievance of the Appellant was directed against the appointment of a second surveyor after the first surveyor had already completed the assessment exercise. It was argued that no valid or cogent reason was ever assigned by the Insurance Company for discarding the findings of the first surveyor. According to the Appellant, the appointment of the second surveyor was solely intended to reduce the quantum of liability and resulted in an arbitrary reassessment of the loss.

48. Learned counsel submitted that the second surveyor assessed the loss at only Rs.32,77,517/- and arrived at such figure by employing theoretical calculations and geometric extrapolation of floor area and stacking height rather than actual physical verification of the damaged stock. It was argued that the second survey report was prepared much later and suffered from retrospective assumptions, thereby rendering it inherently less reliable than the contemporaneous assessment made by the first surveyor.

49. Inviting attention to the comparative features of both survey reports, learned counsel submitted that while the first surveyor physically assessed approximately 8,280 damaged rice bags on the basis of actual stacking configuration and site inspection, the second surveyor reduced the quantity to approximately 5,364 bags by relying upon hypothetical calculations regarding storage capacity. According to the Appellant, the methodology adopted by the second surveyor was inconsistent with the physical conditions existing at the site and ignored the direct evidence available on record.

50. It was further argued that the second survey report suffers from internal inconsistencies and contradictions. Learned counsel submitted that while one set of figures was adopted for reducing the quantity of damaged stock, a substantially higher stock volume was simultaneously assumed for the purpose of invoking underinsurance and reducing the admissible claim amount. Such inconsistent assumptions, according to the Appellant, strike at the very credibility of the final survey report and render its conclusions unreliable.

51. Learned counsel contended that the first survey report was prepared contemporaneously with the occurrence of the incident and was supported by physical inspection, documentary records, witness statements, photographs and official reports. On the contrary, the final survey report was prepared after considerable lapse of time when the condition of the site had materially changed and much of the physical evidence had ceased to exist in its original form. Consequently, greater evidentiary weight ought to have been attached to the first survey report.

52. It was further submitted that the Insurance Company, despite repeated requests made by the Appellant, failed to act promptly for disposal of the damaged stock and delayed the claim process. Such conduct, according to the Appellant, contributed to further complications in assessment and ultimately prejudiced the insured.

53. Learned counsel therefore urged that while the findings recorded by the State Commission on the question of liability deserve affirmation, the quantum of compensation awarded requires modification. It was contended that the loss assessed by the first surveyor at Rs.94,39,200/- represents the true and correct assessment of the damage suffered by the Appellant and ought to have been accepted in preference to the substantially reduced assessment made by the second surveyor.

54. On the strength of the aforesaid submissions, learned counsel prayed that the impugned judgment be modified to the extent of quantum and the Respondent/Insurance Company be directed to indemnify the Appellant on the basis of the assessment contained in the first survey report together with appropriate interest and costs.

ANALYSIS:

55. We have heard the learned counsel appearing for the Appellant as well as the learned counsel appearing on behalf of the Respondent-Insurance Company at considerable length. We have also carefully perused the pleadings, documentary evidence, survey reports, insurance policies, fire brigade records, milling agreements, the impugned judgment passed by the State Commission and the written submissions filed by the respective parties.

56. Upon consideration of the rival submissions and the material available on record, the following questions arise for determination in the present appeals:

                          (i) Whether the repudiation of the insurance claim on the premise that the damaged stocks constituted "goods held in trust" was legally sustainable?

                          (ii) Whether the relationship between the Appellant and the Bihar State Food and Civil Supplies Corporation Ltd. was that of trustee and beneficiary or that of bailor and bailee?

                          (iii) Whether the Insurance Company was justified in appointing a second surveyor after receipt of the assessment made by the first surveyor?

                          (iv) Whether the State Commission was justified in placing reliance upon the final survey report dated 16.12.2013 in preference to the first survey report dated 21.01.2013?

                          (v) Whether the Appellant is entitled to enhancement of the compensation awarded by the State Commission?

ISSUES NO. I AND II: (Whether the damaged stock constituted "goods held in trust" and whether Exclusion Clause No. 5 was attracted?)

57. Since the aforesaid questions are interrelated, they are being considered together.

58. The principal defense raised by the Insurance Company throughout the proceedings is that the paddy and rice damaged in the fire admittedly belonged to the Bihar State Food and Civil Supplies Corporation Ltd. and, therefore, fell within the expression "goods held in trust", attracting General Exclusion Clause No. 5 of the Standard Fire and Special Perils Policy.

59. We are unable to persuade ourselves to accept the aforesaid contention.

60. The material on record reveals that the stocks in question were delivered by the Bihar State Food and Civil Supplies Corporation Ltd. to the Appellant under duly executed Rice Milling Agreements for the specific purpose of processing and conversion of paddy into rice. The Appellant was under a contractual obligation to mill the paddy, preserve the stock, and return the resultant rice in accordance with the terms of the agreement. Possession of the goods was undoubtedly transferred to the Appellant, however, ownership continued to remain with the Corporation.

61. Such an arrangement, in our considered view, satisfies the essential ingredients of a contract of bailment as contemplated under Sections 148 and 151 of the Indian Contract Act, 1872. The delivery of goods was for a specific purpose; the goods or their processed equivalent were required to be returned and the Appellant was under a legal duty to exercise reasonable care while the goods remained in its custody.

62. Merely because ownership of the goods continued to vest in the Corporation cannot lead to the automatic conclusion that the goods were "held in trust". A distinction of considerable significance exists between a fiduciary relationship arising out of a trust and a commercial arrangement creating a relationship of bailor and bailee. The former is founded upon confidence and fiduciary obligations; the latter arises from contractual entrustment of goods for a specific purpose.

63. The Rice Milling Agreement, when read as a whole, does not disclose the creation of any trust in the legal sense. Rather, it evidences a commercial transaction under which goods were entrusted to the Appellant for processing, storage and eventual return. The Appellant was therefore functioning as a bailee and not as a trustee.

64. We find ourselves in agreement with the reasoning adopted by the State Commission on this aspect. Once the relationship between the parties is understood as one of bailment, the foundation of the insurer's repudiation substantially collapses. Goods entrusted under a contract of bailment cannot be mechanically equated with "goods held in trust" so as to attract an exclusion clause which must necessarily receive strict construction.

65. It is a settled principle that exclusion clauses in insurance contracts are required to be construed narrowly and any ambiguity therein must operate against the insurer seeking to avoid liability. The burden of establishing the applicability of an exclusion rests squarely upon the insurer. In the present case, the Insurance Company has failed to establish that the contractual arrangement between the Appellant and the Corporation created a trust relationship attracting General Exclusion Clause No. 5.

66. Consequently, we hold that the repudiation of the claim on the ground that the damaged stock constituted "goods held in trust" was not justified and the Insurance Company could not have avoided its contractual liability on the basis of the aforesaid exclusion.

ISSUE NO. III, IV, V:

67. The next and perhaps the most crucial issue that arises for consideration pertains to the evidentiary value of the two survey reports and the legality of the insurer's decision to disregard the assessment made by the first surveyor while acting upon the report of the subsequently appointed surveyor.

68. Learned counsel appearing for the Insurance Company has vehemently contended that there exists no legal embargo against appointment of a preliminary surveyor at the initial stage and a final surveyor thereafter. Reliance has been placed upon the practice prevailing in the insurance industry and the provisions of Section 64UM of the Insurance Act, 1938.

69. There can be no quarrel with the proposition that a preliminary survey and a final survey may, in appropriate circumstances, be undertaken by different persons. Equally well settled is the principle that a survey report prepared under Section 64UM constitutes an important piece of evidence and ordinarily deserves due weight while adjudicating an insurance dispute.

70. However, the issue in the present case is not merely whether a second surveyor could have been appointed. The real question is whether, in the facts of the present case, the second survey report inspires greater confidence than the assessment made by the first surveyor and whether the substantial reduction in the assessed loss stands justified on the material available on record.

71. It is not in dispute that immediately after receipt of the claim intimation, the Insurance Company appointed Shri Anil Kumar Sinha as the preliminary surveyor. The said surveyor visited the site when the aftermath of the incident was still visible, the damaged stock remained available for inspection, and the physical condition of the premises had not undergone any material alteration.

72. The significance of a contemporaneous assessment cannot be overstated. A survey conducted immediately after the occurrence of a fire carries with it an inherent degree of reliability because it captures the physical realities existing at the site before deterioration, removal of stock, weather conditions, passage of time or subsequent human intervention can affect the evidence.

73. The first surveyor recorded the stacking pattern of the rice bags, examined the physical layout of the affected godown, interacted with witnesses and officials, considered the records maintained by the mill, and assessed the damage at Rs.94,39,200/-. The report was prepared while the traces of the incident remained fresh and while the surveyor had the benefit of direct physical verification.

74. On the other hand, the final survey report came to be submitted on 16.12.2013, nearly one year after the occurrence of the fire. By that time, the condition of the premises had inevitably undergone substantial change. The damaged stock had deteriorated, portions of the affected material had been dealt with, and the surveyor was largely required to reconstruct the events retrospectively from records and assumptions.

75. A comparison of the two reports reveals that while the first surveyor physically assessed approximately 8,280 damaged rice bags on the basis of actual stacking and site inspection, the second surveyor drastically reduced the number to 5,364 bags by adopting geometric extrapolation and theoretical calculations regarding floor area and storage capacity.

76. What is particularly striking is that the second surveyor appears to have discarded the findings of the first surveyor without undertaking any satisfactory exercise to demonstrate why the contemporaneous assessment was fundamentally erroneous. Mere disagreement with the conclusions of the earlier surveyor cannot constitute a sufficient basis for disregarding an assessment prepared immediately after the incident.

77. The contradiction becomes even more apparent when the methodology adopted by the second surveyor is examined in its entirety. For the purpose of reducing the quantity of damaged stock, reliance was placed upon a comparatively lower estimate of the number of bags allegedly capable of being stored in the affected area. However, while invoking the principle of underinsurance, the surveyor appears to have proceeded upon a substantially higher stock volume. Such inconsistent assumptions cannot coexist without creating serious doubt regarding the accuracy of the assessment.

78. The law undoubtedly recognises the importance of survey reports. In United India Insurance Co. Ltd. v. Roshan Lal Oil Mills Ltd., [supra], the Hon'ble Supreme Court observed that a survey report prepared under Section 64UM constitutes an important document and ought not to be discarded without cogent reasons. Similarly, in Khatema Fibres Ltd. v. New India Assurance Co. Ltd., [supra], it was held that a survey report deserves due weight where it is shown to be fair, objective and free from arbitrariness.

79. Significantly, neither of the aforesaid authorities lays down that a survey report must be accepted mechanically irrespective of its internal inconsistencies. The evidentiary value of a survey report ultimately depends upon the soundness of its reasoning, the reliability of its methodology and its conformity with the surrounding circumstances.

80. Applying the aforesaid principles to the facts of the present case, we find that the first survey report possesses several distinguishing features which enhance its evidentiary worth. The assessment was contemporaneous, based upon direct physical inspection, supported by photographic evidence, corroborated by fire brigade records and founded upon actual observations at the site. The report was prepared before the passage of time could erode the available evidence.

81. Conversely, the final survey report substantially departs from the factual observations recorded in the first assessment and relies heavily upon theoretical reconstruction. The report does not satisfactorily explain the basis on which the physical assessment of 8,280 damaged bags was reduced to 5,364 bags. Nor does it adequately reconcile the inconsistencies arising from its own calculations concerning stock position and underinsurance.

82. We are therefore of the considered opinion that the State Commission, although justified in holding the Insurance Company liable under the policy, fell into error in accepting the final survey assessment as the sole basis for quantification of loss without adequately examining the evidentiary superiority of the contemporaneous report prepared by the first surveyor.

83. The circumstances of the case demonstrate that the first survey report reflects a more accurate and realistic assessment of the damage occasioned by the fire incident. The substantial reduction effected by the second surveyor does not appear to be supported by sufficiently convincing reasons and consequently cannot be accepted as representing the true extent of the loss suffered by the Appellant.

84. Having held that the repudiation of the claim was unsustainable and having further found that the first survey report deserves greater evidentiary weight than the subsequent assessment, the inevitable consequence is that the Appellant becomes entitled to reassessment of the compensation awarded under the impugned order.

85. This Forum relies on the judgment passed by the Hon'ble Supreme Court in Sri Venkateswara Syndicate v. Oriental Insurance Co. Ltd., [(2009) 8 SCC 507], particularly paragraphs 32 and 33, has unequivocally held that an insurer cannot appoint surveyor after surveyor merely because the earlier assessment is not to its liking and that valid, cogent and satisfactory reasons must exist before discarding the report of the first surveyor. The concerned paragraphs of the aforesaid judgment reads as under:

                          "32. There is no disputing the fact that the surveyor/surveyors are appointed by the insurance company under the provisions of the 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 officer concerned 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.

                          33. Scheme of Section 64UM, 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 the 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 the surveyor/surveyors. There is no prohibition in the Insurance Act for appointment of second surveyor by the insurance company, but while doing so, the insurance company has to give satisfactory reasons for not.

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86. The first surveyor assessed the loss suffered by the Appellant at Rs.94,39,200/-. The said assessment was prepared on the basis of physical verification conducted immediately after the occurrence of the fire and is duly supported by the contemporaneous material available on record. We find no sufficient reason to depart from the said assessment.

87. The object of an insurance contract is indemnification. Once the occurrence of the insured peril stands established and the loss has been duly proved, the insured must be placed, so far as money can do, in the same financial position in which he would have stood had the loss not occurred. The assessment made by the first surveyor most appropriately advances this principle.

88. Consequently, the impugned judgment warrants modification to the extent of quantum alone. The findings recorded by the State Commission regarding the liability of the Insurance Company and the inapplicability of Exclusion Clause No. 5 are affirmed. However, the quantum of compensation awarded deserves enhancement in accordance with the assessment contained in the first survey report dated 21.01.2013.

89. In view of the foregoing discussion, First Appeal No. 158 of 2025 and First Appeal No. 159 of 2025 are partly allowed.

90. The impugned common judgment and order dated 20.12.2024 passed by the State Consumer Disputes Redressal Commission, Bihar, Patna is modified to the extent indicated hereinbelow:

                          (i) The Respondent-Insurance Company shall pay to the Appellant the sum of Rs.94,39,200/- towards loss suffered on account of the fire incident in terms of the assessment made in the first survey report dated 21.01.2013;

                          (ii) The aforesaid amount shall carry interest at the rate directed by the State Commission from the date specified therein till realization;

                          (iii) The remaining findings and directions contained in the impugned order shall remain unaltered;

                          (iv) Compliance of the aforesaid directions shall be affected within a period of eight weeks from the date of this order.

91. Pending applications, if any, stand disposed of accordingly.