The case study is based on an actual claim lodged with one of the PSI companies, and focuses on the scope of organized frauds by way of collusion and conspiracy, and the procedural safeguards available for diligent insurers to counter such attempts; thus, meticulously playing their role as `custodians of public funds'. It also testifies as to how far the vested interests indulge in extreme unethical practices to realize their evil designs.

Under an open policy arrangement, a leading public sector general insurer insured a series of consignments of paper and paper products of a large-scale paper manufacturing mill situated in Andhra Pradesh, against Inland Transit Rail/Road clause B (basic cover) along with theft, pilferage and non-delivery, whilst in the course of transit and whilst in the custody of the carrier (rail/road and/or rail-cum-road), from the warehouse of the insured paper mill to consignee's warehouse in Central Kolkata. In all, 56 truck loads of paper was consigned to M/s. Panchmukhi Paper Traders Pvt. Ltd., the consignee, through M/s. Maruthi Road Carriers Ltd., Kolkata, during the period February 14, 2004, to March 20, 2004. The carrier issued a separate Lorry Receipt (LR) for each truck load, specifying the size, weight and monetary value of the paper bundles.

The insured, as per the sale contract with the consignee at Kolkata, sent all the consignments against specific `hundi' (one kind of Bill of Exchange) through his bankers, a South India-based private bank, having a branch at Kolkata, along with other documents like invoice, LR, individual `hundies' and certificates of insurance, etc.

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