LAXMI SILK HOUSE Vs. NATIONAL INSURANCE COMPANY LTD

JUDGEMENT

(1.) Arguments heard for more than two hours.

(2.) The surveyor had initially taken the gross profit of the complainant to be 25% of the value of the stock. Later on, the gross profit margin was upwardly revised by the surveyor to 30% in Saree and ladies related cloths, whereas it was reduced to 20% in respect of the gent's cloths. We find that according to the complainant, their gross profit margin was not more than 12%. We also take note of the fact that as per the balance sheet of the complainant for the immediately preceding years, the gross profit margin was not more than 12%. The report of the surveyor as regards the gross profit margin of the complainant was stated to be based upon the market survey, market trend etc. However, there is no evidence of either the surveyor or the Chartered Accountant engaged by the surveyor having recorded the statement of any shopkeeper engaged in a similar business at the same town, as regards the gross profit margin in such business. The surveyor did not collect the balance sheet of any other shopkeeper in the city in which the complainant was carrying business, to verify his gross profit margin from sale of readymade garments, sarees etc. Therefore, the assessment made by the surveyor and the Chartered Accountant as regards the gross profit margin of the complainants not being based on any objective material, cannot be accepted. This is more so, when the gross profit margin in the previous years when the complainants had no reason to show a deflated gross profit, was not more than 12%.

(3.) The learned counsel for the Insurance Company submits that the complainants themselves had admitted before the surveyor that their gross profit was about 15-20%. A careful perusal of the aforesaid statement as narrated by the Chartered Accountant would show that according to the managing partner of the complainants, sometimes they were giving discount on their products and their net gross profit was not more than 12%. Therefore, in our opinion, deductions on account of gross profit should not exceed 12%. The gross profit value at risk being Rs. 1,86,36,700.25/-, the net value at risk after deducting gross profit calculated at the rate of 12% comes to Rs. 1,64,002,96.22/-.