Insurance – Stock Valuation – Reports of Surveyor   Vs  Audit

The petitioner had taken insurance fire policy for Rs.30 crores for 2016-2017.  On 25.4.2017, there was fire in the godown.    The petitioner submitted claim for Rs.37,27,22,010/-.  The surveyor had assessed the loss of Rs.20,65,27,032/- vide report dated 9.7.2018.  However, the respondent unilaterally reduced the said loss to Rs.65,86,125/- as full and final settlement after 20 months of surveyor assessment.

The arbitral award for Rs.20,65,27,032/- was passed.

The Award is challenged on the grounds – pre-reference interest, double deduction, undervaluation of stock and taxation component.

As per the petitioner, its stock was audited on 31st March, 2017, as per AS-2 (Accounting Standard for Inventories), which valued the stock at cost value or NRV, whichever was lower. The incident of fire at the petitioner‟s premises occurred only twenty five days later, i.e., on 25th April, 2017. Therefore, a 91% crash in valuation, without any evidence, was impermissible.

Thus, the petitioner‟s grievance against finding of Issue No. 4 is that the learned Arbitral Tribunal has disregarded vital evidence, such as, audited stock registers, AS-2 valuation and purchase invoices on record, while rendering the finding.

So far as the Audit Report is concerned, upon which the petitioner has based its challenge to the finding of Issue No. 4, it is to be noted that the purpose of said Report was not specific to or relevant for loss assessment in case of insurance claims. The categorization of stock for the purpose of valuation by the auditor was not as per the date of purchase of particular garment/stock; rather, said categorization was based upon “stock at commencement” and “stock at closing”. Hence, for assessing claim/loss arising out of an insurance policy, the Auditor‟s Report cannot be considered to be a cogent evidence vis-à-vis the Surveyor‟s Report.

 Judgment dated 10.4.2026 of the High Court of Delhi in O.M.P. (COMM) 8/2024 of Panchanan International  Vs   The Oriental Insurance Company Ltd