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Judgment
THIS complaint is filed under Section 12 of the Consumer Protection Act attributing deficiency in service on the part of the opposite parties in not settling the insurance claim and claiming compensation of Rs. 20 lakhs.
BRIEFLY stated the allegations in the complaint are as follows: The complainant M/s. Superstar Distilleries and Foods Limited is a public limited Company. It has its factory manufacturing Indian made foreign liquor at Pampady, Thiruvillamala, Trichur District. It had taken out insurance policy with the opposite party-United India Insurance Company Limited insuring raw materials for production in the factory premises as well as in the godown, the properties and stock in trade, stock in process and in respect of stocks and stocks in process and stocks in the godown for a sum of Rs. 2,20,000./-. Accordingly the opposite party-United India Insurance Company issued a Fire Policy No. 170300/0/21/1/11167/96, dated 21.5.1996 valid for the period from 24.4.1996 to 23.4.1997. While the policy was in force an accident took place on 11.9.1996 in the factory premises and 62,930.09 Bulk litres of rectified spirit stored in the tank as raw material for manufacturing Indian made Foreign Liquor was completely destroyed due to fire. The policy issued would show under the heading stocks and stocks in process, raw materials worth Rs. 2,00,00,000/- and (2) stocks in godown namely Enzymes and Chemicals worth Rs. 20,00,000/- were insured. In the policy and the Schedule attached to the policy, the locations covered are mentioned as follows- (1) Raw Materials at Super Star Distilleries& Foods Ltd., 7/952, Village: Pampadi, Thiruvillamala Panchayath, Trichur-680 588 Rs. 2,00,00,000/- (2) Enzymes & Chemicals at Godowns: Ramvilas Match Factory Building, Shornur Palakkad Road, Ottappalam, Palakkad District. Rs. 20,00,000/-
The complainant submitted a claim for Rs. 34,54,862/- being the loss incurred by them due to fire on 4.10.1996 to the Insurance Company. Opposite party also received a survey report regarding the loss of spirit. To the great surprise of the complainant the opposite parties have after nearly 8 months of the submission of the claim repudiated the claim lodged by the complainant by giving an erroneous interpretation to the policy issued by stating that what was insured worth Rs. 2,20,00,00,000/- was only in respect of the stock in the godown and hence there is no cover for the rectified spirit under the policy. The complainant alleged the interpretation put forward by the opposite party is quite invalid and unsustainable and the complainant is entitled to the claim put forward in the complaint.
A version was filed by the opposite party. Policy was admitted but it was contended that a perusal of the said policy would clearly show what are covered under the policy are stocks in godown namely, (1) raw materials insured for a sum of Rs. 2,00,00,000/-, and (2) Enzymes and Chemicals for a sum of Rs. 20,00,000/-. Admittedly the rectified spirit was stored in a tank farm situated at the factory premises, known as "bonded storage area" under the control of Excise Department. The rectified spirit stored as stated above was not covered by the insurance policy. It is further stated the policy covered only raw material for the production of Indian made foreign liquor. The process for the production of Indian made foreign liquor is as follows. The raw material tapioca root is cut into chips and powder and mixed with water and cooked. To this cooked slurry. Enzymes and Chemicals are mixed and allowed to ferment for 48 hours. The fermented slurry is further distilled in an intermediary tank and also in a fractional distillation tower. By this fractional distillation, rectified spirit is obtained and then it is condensed separately and collected in a tank. This rectified spirit is subjected to re-distillation to produce extra nutral alcohol. The rectified spirit and extra nutral alcohol are stored in tanks in the tank farm in the factory premises. The Indian made foreign liquor is produced by mixing rectified spirit and extra nutral alcohol together.
IT was contended that thus it could be seen that this final product from the factory is arrived at by mixing rectified spirit and extra nutral alcohol. IT is further stated that the rectified spirit stored in the tank farm is not a raw material and it is not covered by the policy. IT is also stated stocks in process are not covered by the policy issued by the opposite party. On 11.9.1996 at about 9 a.m. there was violent explosion and due to the same one Mr. Balakrishnan was thrown away and seriously injured and he subsequently succumbed to the injuries. He was doing welding work on the top of the tank when the explosion took place and it can be reasonably concluded that the explosion of the tank was taken place due to the negligent act of welding on the top of the tank stored with rectified spirit which is inflamable substance. The claim put forward by the complainant was repudiated for the reason that the damage of rectified spirit stored in the tank was not a raw material covered by the insurance policy. The rectified spirit is an almost finished product as the only process left for the production of Indian made foreign liquor is the mixing up of the same with extra nutral alcohol. The claim was repudiated for valid reasons. In the circumstances there is no deficiency in service on the part of the opposite party. On behalf of the complainant, C. Balakrishnan, a Director of the complainant Company filed an affidavit in terms of the averments contained in the complaint. The complainant also produced Exts. PI to P7. The opposite party has not filed any affidavit but there is verification in the version filed by Sri E.P. Kurian, Regional Manager. Exs. Rl to R4 were also marked on behalf of the opposite party. The following points arise for consideration: (1) Whether there is any deficiency in service on the part of the opposite party in not settling claim ? (2) If so, what are the reliefs to which the complainant is entitled ? (3) What is the order as to cost ?
Ext. P1 is the policy. In order to appreciate the contentions raised by the parties it is necessary to refer to Ext. P1 policy. The schedule contains the description of the properties insured. It shows. two items are insured. (1) Raw materials for Rs. 2,00,00,000/-. (2) Enzymes & Chemicals Rs. 20,00,000/-. Item No. 1 stocks and stocks in process. Item No. 2 shows stocks in godown. The Counsel for the opposite party would contend that both items come under Serial No. 4 stocks in godown. Item No. 4 raw materials is not shown under item 4 and it is difficult to agree with the contention raised by the opposite party that only raw material stocked in the godown alone are insured under the policy. Annexure to the policy further clarifies the position. Under the heading it is stated "raw materials at Superstar Distilleries and Food Ltd., 7/592, Pampady, Thiruvillamala Panchayath for Rs. 2,00,00,000/- and (2) Enzymes and Chemicals at godown Ramvilas Match Factory Building Rs. 20,00,000/-". It is clear from the description that the materials at the premises of Superstar Distilleries and Foods Ltd. is covered in addition to the Enzymes and Chemicals at godown of the Ramvilas Match Factory Building, Shornoor, Palakkad Road. We are unable to find any support in the policy to justify the contention raised by the opposite party that insurance coverage for raw materials is confined to raw materials in godown. It is clear that raw materials at Superstar Distilleries and Foods Ltd., 7/592, Village Pampady is also covered by the policy.
EXT. P6 is the letter sent by the opposite parties to the complainant Company repudiating the claim and what is stated therein is that in the proposal form the complainant has specifically stated coverage of stocks in godown for Rs. 2 crores and Enzymes and Chemicals for Rs. 20,00,000/- and this clearly shows that they required coverage for stock in godown and not for stock in process. No proposal has been produced before us by the opposite party. We are governed by what is provided in the policy. Probably it may be permissible to look at the proposal to clear any ambiguity. We also do not find any necessity to look into that as policy does not admit of any doubt. However we find in para 8 of version another contention is taken that rectified spirit is an almost finished product as the only process left for the production of Indian made foreign liquor is mixing up of the same with extra nutral alcohol. We any mention that this is a new ground which is not seen in EXT. P6- repudiation letter. However we will examine this contention also. In this context we may refer to the decision of Supreme Court in (1989) 4 Supreme Court Cases 566, Collector of Central Excise, New Delhi v. M/s. Ballarpur Industries Ltd. The Supreme Court considered the meaning of raw material. The following observations of Supreme Court in paragraphs 13, 14 & 15 of the judgment are relevant.
"The question, in the ultimate analysis, is whether the inPut of sodium sulPhate in the manufacture of PaPer would cease to be a "raw material" by reason alone of the fact that in the course of the chemical reactions this ingredient is consumed and burnt uP. The exPression raw material is not a defined term. The meaning to be given to it is the ordinary and well accePted connotation in the common Parlance of those who deal with the matter".
"The ingredients used in the chemical technology of manufacture of any end Product might comPrise, amongst others, of those which may retain their dominant individual identity and character throughout the Process and also in the end Product; those which as a result of interaction with other chemicals or ingredients, might themselves undergo chemical or qualitative changes and in such altered form find themselves in the end Product; those which, like catalytic agents, while influencing and accelerating the chemical reactions, however, may themselves remain uninfluenced and unaltered and remain indePendent of and outside the end Products and those, as here, which might be burnt uP or consumed in the chemical reactions. The question in the Present case is whether the ingredients of the last mentioned class qualify themselves as and are eligible to be called ''raw material'' for the end Product. One of the valid tests, in our oPinion, could be that the ingredient should be so essential for the chemical Processes culminating in the emergence of the desired end Product, that having regard to its imPortance in and indisPensability for the Process, it could be said that its very consumPtion on burning uP is its quality and value as raw material. In such as case, the relevant test is not its absence in the end Product, but the dePendence of the end Product for its essential Presence at the delivery end of the Process. The ingredient goes into the making of the end Product in the sense that without its absence the Presence of the end Product, as such, is rendered imPossible. This quality should coalesce with the requirement that its utilisation is in the manufacturing Process as distinct from the manufacturing aPParatus".
"The decision of this Court in Dy. CST v. Thomas StePhen & Co. Ltd., relied uPon by Sri. Ganguly, does not really advance the aPPellant''s case. The observations therein to the effect that ''consumPtion must be in the manufacture of raw material or of other comPonent which go into the making of end Product'' (SCC P. 269, Para 9) were made to emPhasise the distinction between the ''fuel'' used for the kiln to imPart the heat treatment to ceramics. The observations, correctly aPPrehended, do not lend themselves to the understanding that for something to qualify itself as a "raw material" it must necessarily and in all cases go into, and be found, in the end Product".
Going by the observations contained in the above judgment it is clear that one of the valid tests is that the ingredient should be essential for the chemical Process culminating in the emergence of desired Product. It is the indisPensability of the ingredient for emergence of desired end Product that is material. We may also add if two interPretations are Possible, one in the favour of the insured and the other in favour of the insurer, we have to adoPt the interPretation which would be in favour of the insured and not the insurer.
WE, therefore, hold that the damage occurred to rectified spirit would fall within the ambit of Ext. P1 policy. WE, therefore, decide point No. 1 in favour of the complainant. The opposite party has not determined the quantum of compensation to which the complainant is entitled as in its view that the matter does not fall within the ambit of policy. In the circumstances we direct the opposite parties to settle the claim on the basis that the rectified spirit stocked in the premises of the complainant Company would fall within the ambit of the policy. We also direct the opposite party to pay Rs. 1,000/- as cost. The complainant will also be entitled to get interest at the rate of 12% on amount assessed as compensation from 11.12.1996. This is after giving three months allowance for settlement of the claim. The complaint is allowed as above. Complaint allowed.