Indu Nissan Oxo Chemical Industries Ltd. vs ORIENTAL INSURANCE CO. LTD.

COMPLAINT was filed by Indu Nissan Oxo Chemical Industries Ltd. -complainant, inter alia, alleging that it has a plant manufacturing oxo -alcohols at Bajuwa near Vadodara. Plant can manufacture four different oxo -alcohols -any one at a time -depending upon the raw material used. For the last about 10 years the plant has been manufacturing only two oxo alcohols -Iso -Octanol and Iso -Decanol. Oxo -alcohols are manufactured in "Runs", a run being the total period for which a particular Oxo -alcohol is manufactured. Major inputs thereof are -(1) Oxo synthesis gas; (2). Hydrogen gas; and (3) Olefin. Olefin is the generic name of the raw material which is imported. Two Olefins namely Heptene and Nonene are used to manufacture Iso -octanol and Iso -decanol respectively. The process comprises two main reactions, i.e., oxonation and hydrogenation. The by -products produced during the reactions are separated from alcohol by distillation. The distilled alcohol so produced has traces of aldehyde which are removed by hydrogenation in the finishing section. Distilled alcohol separated in distillation is stored in distilled alcohol storage tanks T501 A, B, C or D. Distilled alcohol stored in these tanks is then fed into the finishing section of the plant with the help of two pumps -a centrifugal pump (P -503A and/or B) and a reciprocating high pressure pump (P -501A and/or B) operating in series. The meter readings obtained from FRS -502 are used to calculate the input/output norms between the raw material and the finished product. Pumps are equipped with an air -lock removing vent valve and drain valve, etc. The material flowing from those valves is collected and lead to an underground organic receiver V -208 through an underground pipeline. An air -lock vent valve is a hand -wheel type valve. It was further alleged that the present run of the manufacture of Iso -decanol commenced on 22.11.1994. During this run, daily calculations up to the end of December 1994 did not reveal any abnormality in consumption/production patterns. However, when the fortnightly calculations for the second fortnight of December 1994, i.e., for the period from 16.12.1994 to 31.12.1994 were carried out, a higher than normal consumption of Nonene per ton of Iso -decanol was reported. This was attributed to an abnormally high operating temperature experienced during this period for some time at one of the intermediate steps in the Oxonation Section which was later on corrected by the operating personnel. It was expected that the consumption/production ratio for the fortnight, i.e., 1.1.1995 to 15.1.1995 will be normal. However, when fortnightly calculations for the fortnight of January 1995 were carried out, again a higher than normal Nonene consumption was reported. When high Nonene consumption for the period 1.1.1995 to 15.1.1995 was reported, a detailed and thorough physical checking of the plant was carried out by the plant in -charge and the technical service engineer. As a consequence of this checking, on 17.1.1995, it was noticed that the air -lock removal vent valve in the discharge pipeline of pump P -501A was partially open allowing the flow of distilled alcohol into the drain funnel under this vent line. The valve was closed at around 2 p.m. on the same day. The outlet from the air -lock removal vent valve leads to a overground funnel which goes to an underground HDPE pipeline which further leads to an underground vessel V -208. Material collected in V -208 is pumped back from time -to -time for re -processing in the plant. On checking it was noticed that the material drained in the funnels near P -501 A and B did not reach the underground receiver V -208. It was stated that due to partial opening of the air -lock removal vent valve and consequent drainage of the material into the soil, the complainant suffered a loss of distilled Iso -decanol of a total quantity estimated at 245 MT valued at Rs. 98 lakh from 21.12.1994 to 17.1.1995. At the time of loss, the complainant was insured under Fire Policy C bearing No. 121700/061/00000/11/33/95/01967 covering the building, plant, machinery/accessories, furniture and fixtures, fittings, stock and stock in process in the plant for the period from 9.11.1994 to 8.11.1995. Amount of Rs. 37,92,341 was paid towards premium for obtaining this policy from the opposite party. Opposite party was informed of the loss. It was stated that at the time of the occurrence of loss, A.K. Shah, K.M. Chotai and P.B. Patel were the operators in -charge of the finishing section. Suspicion fell on them and they were charge -sheeted. After replies were filed by them, an inquiry officer was appointed who is enquiring into the matter. On 21.6.1995, on a complaint made by the complainant, the police started investigation after registering FIR. On 27.7.1995, during the course of police investigation, Sanjiv Naidu, one of the plant operators admitted to his involvement in causing loss to the complainant company. Shri Naidu has had a history of offences and misdemeanours that have been committed by him during the course of his employment and he was also suspended on several occasions. After completion of departmental inquiry, the service of Shri Naidu was terminated by the complainant on 11.11.1995. R.V. Shah of M/s. Mehta and Padamsey Pvt. Ltd., Surveyor, appointed by the opposite party -Insurance Company visited the manufacturing unit of the complainant. Complainant supplied information which was asked by the Surveyor. On 29.12.1997, the Surveyor gave report assessing the loss at Rs. 34.17 lakh. By the letters dated 4.2.1998 and 6.4.1998, the complainant represented to the Surveyor giving all necessary data. After due deliberations and discussions, the Surveyor revised the estimate of loss to Rs. 58.18 lakh without referring to the liability of the Insurance Company to pay that amount. By the letter dated 8.12.1998, the opposite party -Insurance Company repudiated the claim on the ground that this loss was not covered by RSMD clause of the aforesaid policy. Attributing deficiency in service, the complainant sought direction to the opposite party -Insurance Company to pay amount of Rs. 98 lakh with interest at the rate of 24% per annum from 1.2.1994.

OPPOSITE party contested the complaint by filing written version. By way of preliminary objections, it was alleged that complicated questions, both of facts and law involved in the complaint, cannot be determined in summary jurisdiction of this Commission. Claim made is not covered by RSMD (Riots, Strike, Malicious Damage) clause of the policy issued by the opposite party. It was admitted that M/s. Mehta and Padamsey, surveyor revised the estimate of loss to Rs. 58.18 lakh as alleged. Denying deficiency in service, the liability to pay the amount claimed as per the surveyor''s report was denied.

ORDER dated 29.7.2002 notices the statement made by Mr. Parag Tripathi, Sr. Advocate appearing for the complainant that in case he succeeds in legal issues, he will confine the claim to whatever has been admitted by the opposite party -Insurance Company and for the balance claim the complainant will either go to arbitration or civil Court or any other appropriate forum. We have heard Shri P.H. Parekh for the complainant and Shri V. Shankara for the opposite party.

CONTROVERS Y in this complaint mainly centers round the interpretations and applicability of RSMD clause which being material is reproduced below: "(i) Loss of or visible physical damage by external violent means to the property insured directly caused by -

The act of any person taking part together with others in, any disturbance of the Public peace (whether in connection with a strike or lock -out or not) not being an occurrence mentioned in Exclusion (h)(iii) and (iv);

The action of any lawfully constituted authority in suppressing or attempting to suppress any such disturbance or in minimizing the consequences of any such disturbance;

The wilful act of any striker or locked -out -worker done in furtherance of strike or in resistance to a lock -out resulting in visible physical damage by external violent means;

The action of any lawfully constituted authority in preventing or attempting to prevent any such; or

Any malicious act but excluding any omission of any kind of any person (whether or not such act is committed in the course of a disturbance of public peace) provided that the Company shall not be liable for any loss or damage arising out of or in the course of burglary, housebreaking, theft or larceny or any attempt by any person taking part therein."

READING of the clause would show that it covers loss of the property insured or visible physical damage to the property by external violent means directly caused by any of the events enumerated in five sub -clauses. We are unable to accept the submission advanced by Mr. Shankara, Advocate that the word or'' between the words loss of'' and visible physical damage'' occurring in above Clause (I) is conjunctive/additive and not disjunctive and this clause would be inapplicable till the loss is shown to have been caused by visible physical damage by external violent means to the property. Clause (I) is in two parts. Loss to the insured property by any malicious act will be covered by the former part of Clause (I) read with Sub -clause 5 above. In Black''s Dictionary, malicious act'' is defined as an intentional or wrongful act performed against another without any legal justification or excuse. In para 4 of the additional affidavit dated 19.8.2002 of Mehool N. Bhuva, Director of the complainant, it is averred that on 6.4.1993 a warning notice was issued to Shri Naidu for violation of safety norms, on 14.4.1993 notice was issued for sleeping on duty, on 1.6.1993 and again on 2.12.1993 show -cause notices for not sitting on designated place and for his indecent behaviour with the Vice -President of the company were issued, on 11.12.1993 he was charge -sheeted for the same offence, on 18.12.1993 he was again charge -sheeted for sleeping on 15.12.1993 in compressor station, on 11.4.1994 a letter was issued for sleeping on night duty, on 13.4.1994 he was suspended pending inquiry and after inquiry and his acceptance of the charges on 20.4.1994 he was served with suspension order for 4 days i.e. from 21st to 24th April, 1994, on 30.4.1994 he was suspended for 2 days against the charge -sheet dated 18.12.1993 and on 4.5.1994 a show -cause notice was served for harassing the Vigilance Officer. Copies of warning notices, etc. Exhibits 37 to 49 have been filed along with this additional affidavit. Said Sanjeev Naidu, thus, may be having grudge against the management. Malicious act of leaving the valve open was committed by him with intention to cause loss to the complainant company. Had the valve not being left open deliberately, the loss would not have occurred whether or not the pipe leading to the underground vent corroded. Loss was, therefore, the direct result of the deliberate opening of the valve by Shri Naidu with intent to cause loss to the complainant company. Case is thus fully covered by RSMD clause of the policy. Repudiation of the claim by the letter dated 8.12.1998 by the Insurance Company was without any justification. In the survey report dated 29.12.1997, M/s. Mehta and Padamsey Pvt. Ltd., Surveyor assessed the loss for cogent reasons at Rs. 34,17,174. It is admitted by the opposite party that this assessment was revised by the Surveyor to Rs. 58.18 lakh. Complainant is entitled to this amount along with interest which in the facts and circumstances of case, is quantified at 12% per annum commencing after the expiry of two months from the said report dated 29.12.1997.

ACCORDINGL Y , the complaint is allowed with direction to the opposite party -Insurance Company to pay amount of Rs. 58.18 lakh along with interest at the rate of 12% per annum from after two months of the report of the Surveyor dated 29.12.1997. Opposite party will pay Rs. 25,000 as cost to the complainant. Complaint allowed.