SHIRDI TRADERS vs BRANCH MANAGER, ORIENTAL INSURANCE CO. LTD.

THE allegations in this complaint filed under Section 17(a)(1) of the Consumer Protection Act, 1986 (the ''Act'' for short) are stated briefly as follows.

THE complainant i.e. M/s. Shirdi Traders, Khammam is a trader in Neem fruit and its products like Neem oil extracted by solvent extraction method. THE complainant purchases Neem fruit from various sources and stores them in his godown for future use. THEre is a risk of spontaneous combustion due to heat generated by natural process on account of storage in godowns and in such a situation the entire stock gets damaged on account of the combustion. THE complainant took Fire Policy ''C'' from the Oriental Insurance Company Limited, Khammam (1st opposite party) for a sum of Rs. 8,00,000/- (Rupees eight lakhs) covering the risk of special perils like terrorism and spontaneous combustion apart from other risks covered by the policy and the policy was for a period from 23.6.1992 to 22.6.1993 and its number is 431401/102/97/F/102/93. An additional premium was paid for this policy. At about 9.00 a.m. on 27.7.1992 smoke was noticed coming out of the godown wherein the Neem fruit was stored by the complainant. THEre was also underneath fire. Immediately it was informed to the Fire Service Station and with the help of the fire service personnel the fire was extinguished but the entire stock was damaged. By that date 4,000 quintals of Neem fruit worth Rs. 6,00,000/- was in that godown. THE complainant informed the 1st opposite party about the accident. THEreupon the 1st opposite party deputed its Surveyor who came and estimated the loss. THE complainant thereafter made a claim for Rs. 5,00,000/- (Rupees five lakhs). Subsequently, the, 2nd opposite party i.e. THE Divisional Manager, Oriental Insurance Company Limited, Warangal sent a letter of repudiation stating that the policy does not cover the damage caused due to spontaneous combustion. THE opposite party No. 2 has not clearly stated the reasons for repudiating the claim. THEre is a clear deficiency in service on the part of the opposite party. THE complainant therefore filed this complaint for a direction to the opposite parties to pay compensation of Rs. 5,55,000/- (Rupees five lakh fifty-five thousands) including interest at the rate of 12% per annum from the date of claim till the date of realisation. The opposite parties filed a version/ counter contending that this Commission has no jurisdiction since the proper Forum for redressing the grievance of the complainant is Civil Court as the claim of the complainant involves disputed questions of fact requiring elaborate evidence that according to the All India Fire Tariff Manual the spontaneous combustion clause is defined as under: "In consideration of the payment by the insured to the company of additional premium of Rs. the company agrees notwithstanding what is stated in the printed exclusions of this policy to the contrary that the insurance by this policy shall extend to include loss or damage by fire only of or to the property insured caused by its own fermentation, natural heating or spontaneous combustion."

It is further stated by the opposite parties in their version/counter that the matter has to be referred to an Arbitrator as per Clause 13 of the policy, that the liability of the Insurance Company is limited to Rs. 2,500/- in respect of every loss exempted according to exclusion A, that the insured undertook to take reasonable precautions to protect the goods from the possible perils, that according to preliminary Survey Report submitted by the Surveyor, Mr. K. Kishan, who was deputed by the 1st opposite party to assess the loss, the percentage of the oil in the Neem fruit is to the extent of 10% to 11%, that according to another Surveyor, Mr. IVLN Chary, a Chartered Engineer, the stocks mentioned in the Stock Register do not tally with the monthly stock statement submitted by the complainant to his Banker, that one of the quadrants is left empty with storage of Neem fruit being confined to other three quadrants only, that within a time frame of 4 to 7 days the material is shifted in a circular way periodically depending on the drainage of the Neem fruit stored and by this, method the heat produced due to inherent fermentation of the pulp due to oxydation when the moisture content exceeds 10 per cent is prevented and the generation of heat is minimised and that in the present case the Neem fruit is completely spread in all the four quadrants without any place left for circular shifting. It is also stated in the version/ counter that the charring and the destruction of the Neem fruit in this case is because of intense heat produced due to fermentation by absorption of oxygen, that some of the Neem fruits were kept in the gunny bags which should not be done in normal practice, that except charring of the Neem fruit because of heat produced due to heat fermentation there was no fire accident in the godown, that the certificate issued by the Fire Station at Khammam says that the time taken for extinguishing the fire is nil and therefore it has to be concluded that no fire accident took place in such a magnitude as claimed by the complainant. It is further stated in the counter that the Fire Service people advised the complainant to provide full ventilation by removing the G.I. sheets of the roof and according to the Surveyor the smoke vanished after removing the G.I. sheets of the roof and disturbing the stocks to some extent, that at no point of time the fire was seen and it is clear from the statement of the complainant himself and that under those circumstances the Surveyor recommended that the Insurance Company is not liable for the loss suffered by the complainant as the accident is not within the scope of the terms and conditions of the policy. It is also stated that there is no actual ignition of fire out of spontaneous combustion and the charring of the stocks kept in the godown is due to heat produced because of wrong storing method adopted by the complainant himself and the complainant is guilty of negligence and the Insurance Company is not liable to pay any compensation to the complainant and there is no deficiency in service on the part of the opposite parties. Finally the opposite parties prayed for dismissal of the complaint with costs.

AT the time of enquiry one Sri Vempati Lakshmi Narayana, Managing Partner of the complainant Company filed his affidavit reiterating the facts of the case. No documents were filed on behalf of the complainant. Xerox copy of the report dated 5.9.1992 of the Surveyor, IVLN Chary was filed on behalf of the opposite party. No oral evidence was adduced by either party. Arguments of both the Counsel were heard.

THE point for consideration is whether there is deficiency in service on the part of the opposite party and whether the complainant is entitled to payment of compensation and if so, to what amount ? The case of the complainant is that he stored 4,000 quintals of Neem fruit worth Rs. 6,00,000/- in his godown and that due to spontaneous combustion the entire stock was damaged at about 9.00 a.m. on 27.7.1992 and that the opposite parties are liable to pay compensation of Rs. 5,55,000/-, since the insurance policy obtained by him from the opposite party for a sum of Rs. 8,00,000/- (Rupees eight lakhs) for the period from 23.6.1992 to 22.6.1993 covers this damage and the policy was in force on the date of the accident. There is no dispute by the opposite party that the Fire Policy ''C'' was issued in favour of the complainant for a sum of Rs. 8,00,000/- for the stock in question and that the said policy was in force on the date of the accident. The 1st contention of the opposite party is that several questions of fact and law are involved in this case and therefore the case has to be referred to the Civil Court. We are not inclined to accept this contention since the complaint relates to deficiency in service on the part of the opposite parties and no complicated questions of fact and law arise in this case.

THE next contention of the opposite party is that the accident in question occurred due to the negligence of the complainant in regard to storing of the stocks in the godown, that the damage of the Neem fruit stocks in question occurred due to spontaneous combustion without fire because of wrong storing method adopted by the complainant and that inasmuch as the Fire Policy ''C'' issued in favour of the complainant covers only the damage caused by fire arising from spontaneous combustion, this damage is not covered by the policy. THE opposite party relied upon report of the Surveyor, Sri IVLN Chary who stated in his report that at no point of time fire was seen and that the spontaneous combustion reaction terminated even before actual ignition occurred and that the Fire Station Officer confirmed that there was no fire during his visit. It may be noted that the opposite party did not dispute the damage caused to the stock of the complainant. Even the Surveyor reported that the stocks were charred and there was damage and that 43.75% is the salvage. He assessed the loss at Rs. 2,78,224/-. THErefore it cannot be disputed that the Neem fruit stock of the complainant was damaged due to spontaneous combustion.

THE question that arises for consideration is whether the damage was due to fire arising from spontaneous combustion. Obviously this is not a case of fire accident. The opposite party did not dispute that the stocks were damaged due to spontaneous combustion.

The learned Counsel for the complainant points out that fire need not necessarily be accompanied by flames and the term combustion signifies the process of burning associated generally with fire, flame, generation of heat, and certain products of reaction. He relied upon a decision of the National Commission in Saraya Sugar Mills Ltd. v. United India Insurance Co. Ltd., II (1996) CPJ 6 (NC) wherein it was held by the National Commission as follows : ".....From the definitions of terms ''combustion'' and spontaneous combustion, and the dictionary meaning of ''FIRE'', it would only be natural to presume that the damage to the stock of molasses has been caused by fire arising from spontaneous combustion."

It was also observed in paragraph 5 of the above decision that "fire need not necessarily be accompanied by flame and that fire is a form of heat energy which causes smouldering, burning, heating, melting and perhaps some few more words." Finally it was held by the National Commission that the repudiation by the Insurance Company on the ground that there was no fire due to spontaneous combustion and therefore the loss was not covered under the policy is not justified and the damage caused by spontaneous combustion has to be understood as damage caused by fire arising from spontaneous combustion. In this decision the National Commission followed its earlier decision in M/s. Roshanlal Oil Mills Ltd. v. M/s. United India Insurance Co. Ltd., I (1992) CPJ 293 (NC). This Commission also followed the above decision and held in CD No. 134/1991 dated 26.6.1996 that the damage caused by spontaneous combustion is covered under the Fire Policy ''C''. In the circumstances, we hold that the damage to the stock in question was caused by fire arising from spontaneous combustion and the said damage is covered by policy issued to the complainant in this case.

THE next question is what is the compensation to be paid to the complainant. The Surveyor assessed the total loss at Rs. 2,78,224/- after taking into consideration the value of the affected stock at Rs. 147.13 ps. per quintal less salvage value at 43.75% and also deducting policy excess at Rs. 2,500/-. The complainant has not placed any material in support of his claim for payment of compensation of Rs. 5,55,000/-. In the circumstances, we accept the assessment made by the Surveyor and hold that the complainant is entitled to a sum of Rs. 2,78,224/-. The accident occurred on 27.7.1992. If a period of three months is allowed to the opposite party for processing and settling the claim, the opposite party should have paid the amount by the end of October, 1992. Since the claim of the complainant was repudiated we are of the opinion that the opposite party has to pay interest @ 15% per annum from 1.11.1992 till the date of payment.

IN the result, the complaint is allowed in part and the opposite party is directed to pay to the complainant a sum of Rs. 2,78,224/- with interest @ 15% per annum from 1.11.1992 till the date of payment and costs of Rs. 2,000/-, within two months from today. Complaint partly allowed with costs.