NATIONAL INSURANCE COMPANY vs SHYAM INTERMEDIATES

THIS appeal arises from order dated 16.1.1997 rendered by the learned Consumer Disputes Redressal Forum, Sabarkantha at Himatnagar in Complaint No. 83 of 1995. As per the impugned order, the opponent of the complaint was directed to pay to the complainant Rs. 2,08,014/- with running interest @ 18% p.a. from 3.7.1995 till payment and cost quantified at Rs. 1,000/- in respect of the complainant''s claim for indemnity regarding loss on account of damage to the stock occurred due to fire while the material was in the dryer during process.

ADMITTEDLY, the complainant was covered by insurance under policy No. 3011102/11/3100/106/94-95 for the period 12.10.1994 to 11.10.1995. The incident of fire occurred on 1.3.1995 on account of some damage to one of the parts of the drier. The Surveyor assessed the loss but left the matter to the Insurance Company for decision on the basis of the terms and conditions of the policy. The claim was repudiated by letter dated 27.6.1995 reading as under : "As per the attending Surveyor''s observation the damages to the stock occurred due to fire in the material in the drier during the process. Fire policy C excludes any loss or damage to the property occasioned by its own fermentation, natural heating or spontaneous combustion or by its undergoing any heating or drying process."

The complainant, therefore, filed the aforesaid complaint before the learned Forum. The opponent Insurance Company - appellant herein resisted the claim on the same ground as is appearing in the letter of repudiation. The learned Forum came to the conclusion that the relevant term or condition of the policy did not apply to the facts of the incident in question and, therefore, it had proceeded to award compensation as per the Surveyor''s report with interest as aforesaid and cost of the complaint. The opponent Insurance Company has filed this appeal against the said order as stated above. We have heard the learned Advocates for the parties at length. In our considered opinion, the fate of this appeal apparently depends upon the consideration of the policy in question and its relevant term/condition. Before we proceed to consider the same, it would be appropriate to reproduce the Surveyor''s report to highlight the factual aspect of the matter. The report appears at Exh. 18 and reads as under : "Pursuant to the instructions received on 2.3.1995 from National Insurance Company Limited, Jashwant Chambers, Ahmedabad, we had paid a visit to assess loss and damages caused during process of material in the Drier on 2.3.1995 at about 3.30 a.m. (night period of 1.3.1995) belonging to the insured''s M/s. Shyam Intermediates, 123/E/A, GIDC, Phase-1, Vatwa, Ahmedabad. The insured carry out the business of manufacturing chemicals like used in dyes intermediates for textile industries, since November, 1990. The insured have installed various machineries such as Dryers, Pulverisers, Centrifuges, tanks for storage of chemicals, filteration plant, ball mill condensate reaction vessel with GB Box, Ele. Motors etc. 96 Trays Dryer and 240 Trays Dryer Machine. The insured maintain records of Stock Registers, Production Registers, Wages Registers etc. The insured''s factory worked in 2 shifts and observing weekly holiday on Thursday. OCCURRENCE As reported the insured had loaded the batch of DASA (Die Amino Di Phienyl Sulphone Amide) in lump/wet cake in the 240 trays (in each twin row of 60 trays - total 4 trollies) in the Dryer Machine at about 9.30 a.m. on 1.3.1995. The material was kept in the Dryer for heating/drying process by hot air through blower and thermic fluid heaters at a temperature of 70 degree C. At about 3.30 a.m. Mr. Kanubhai Patel, Chemist had noticed that some foul smell coming and he saw smoke coming out from the Dryers, he had immediately switched off the power supply and called production supervisor as well as workers working surrounding areas in the factory. After about 10/15 minutes, they opened the doors of Dryer, and smoke came out from the trays. After coming out of the entire smoke in about 20/25 minutes, they observed that the material kept for process got spoiled and in many trays it was turned into black coal in hard and thick form. Insured had managed to took out the trays from the Dryer machine and observed that the entire Batch of 960 kgs. got spoiled during the process, meanwhile Mr. Kantibhai Patel, Chemist had telephonically informed the partners. Partners reached to the factory without loss of time, and controlled the situation, as workers were gathered together. No fire brigade was summoned nor police complaint lodged. There was no human injury reported. During the course of survey the photographs of the damaged material were taken. The damaged materials were bagged immediately due to stringent inspection of Pollution Control Board as damaged material was very harmful for the fertile soil, being Acidic base. Extent of Damage : When we attended the insured''s factory, the dryer machine, its trays (having size of 79 cm. L x 39 cm. W x 2 cm.), fin tubes, heaters etc. electrical installation such as contractors, cables, thermostat, switches, fuses etc. out of which thermostate got damaged and malfunctioning. Due to which the temperature inside the Dryer was not controlled, and it had risen up more than 70 degree due to which the spoilage of material occurred. The 40''Nos. of Alu. Trays got heavily damaged. When we attended the insured''s factory on 3.3.1995 i.e. next day for discussions about the loss, the insured, on demand had furnished all the purchaser bills, stock registers etc. As the exact cause of malfunctioning of Dryer m/c. could not be ascertained, but it appears to be the failure/malfunctioning of thermostat the inside temperature of Dryer M.S. raised up more than 70 degree C, and thereby material/stock in process 960 kgs. got spoiled moreover there were no other loss/damage in the Dryer Machine nor in around the areas. The insured is having factory building of walls made out of bricks set in sand/cement. Roof covered with asbestos corrugated sheets fixed on M.S. Turners/pushing. During the course of discussions and on verification of all documents, we had informed insured that since the material got spoiled during the process, the claim may not be admissible, but insured shown us the another policy copy bearing No. 301102/11/3100106/94-95 period 12.10.1994 to 11.10.1995 in which the spoilage of material damages covered. A xerox copy of the same is enclosed with this report for your perusal please. As reported the insured had estimated the loss Rs. 3,00,000/-, on discussion with the insured on 25.3.1995 the amount loss and damage was worked out at Rs. 2,08,014/- as per the appended statement of loss and damages attached herewith. This report is issued without prejudice and subject to terms and conditions of the policy of insurance, and no breach of warranty was observed."

It would now be appropriate to refer to the policy in question which is not in dispute. It can be seen from the policy in question that premium in the sum of Rs. 6,000/- has been paid as additional premium for spoilage material damage. Our attention however drawn to the exclusion Clause No. (c) which reads as under : "Loss or damage to property occasioned by its own fermentation, natural heating or spontaneous combustion or by its undergoing any heating or drying process."

OUR attention has also been drawn to relevant tariff from Part III of tariffs at Section 10 with the heading special tariffs and the same would read as under : "In consideration of the payment of an additional premium to Rs. ...it is hereby agreed and declared that notwithstanding anything contained to the contrary in the within written policy the insurance under Item No.... of this policy shall extend to cover loss or damage by spoilage resulting from the retardation or interruption or occasion of any process or operation caused by any of the perils covered under this policy provided that liability for destruction or or damage to the property insured described in the schedule to this policy or any part of such property is first admitted by the Company."

It has been submitted from the aforesaid exclusion clause read with the aforesaid exception contained in tariff that the complainant would not be entitled for loss on account of spoilage of material while the same was in the dryer. It is not in dispute that the material has not been spoiled on account of the process itself or on account of natural overheating in the process. It has also been admitted that the material was spoiled on account of damage to the thermostat resulting into steep rise in the temperature of over the required temperature of 70 degree C. In our considered opinion, therefore, neither the exclusion clause will apply nor will the tariff have the effect of saving the exclusion clause. As a matter of fact, the tariff will stand to support the claim of the complainant. It will, therefore, be plain to conclude that the claim which was accepted by the Surveyor was very much a subject matter of indemnity under the policy of insurance in question and was not subject to the exclusion clause as aforesaid. We have considered the decision of the Honourable Supreme Court in the case of Oriental Insurance Company Limited v. Sony Cherian, II (1999) CPJ 13 (SC)=VI (1999) SLT 565=AIR 1999 SC 3252, where the Apex Court has held that the terms of insurance policy have to be strictly construed to determine the extent of liability of insurer and the insured cannot claim anything more than what is covered by the insurance policy. However, in the present case, on the one hand the term of policy provides for indemnity of spoilage of the material and on the other hand the exclusion clause which is relied upon for getting away from the liability will not be applicable as stated above. On behalf of the complainant reference has been made to a decision of the Apex Court in B.V. Nagaraju v. Oriental Insurance Company, II (1996) CPJ 28 (SC)=1996 (3) CPR 222, for the proposition that the exclusion clause cannot be read so as to defeat the main purpose of the policy. In our considered opinion, there is no need to apply this decision inasmuch as on a plain reading of the exclusion clause itself the same will not be applicable. In the same manner decision in the case of M/s. Saraya Sugar Mills Ltd. v United India Ins. Co. Ltd., 1999 NCJ 196 NC, will not be applicable as that was a case where risk covered for fire as well as spontaneous combustion. This is not the case of spontaneous combustion.

IN above view of the matter in so far as grant of main relief is concerned, the order of the learned Forum cannot faulted. IN so far as grant of interest is concerned, we propose to scale down the same from 18% to 12%. Following order is, therefore, passed : ORDER This appeal is partly allowed. The impugned order is maintained subject to alteration of rate of interest from 18% to 12%. There shall be no order as to costs so far this appeal is concerned. Appeal partly allowed.