Madras High Court
Unknown vs The New India Assurance Company Limited on 30 July, 2024
Author: P.Velmurugan
Bench: P. Velmurugan
C.S.(Comm.Div.) No.412 of 2013
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 04.04.2024
Pronounced On : 30.07.2024
Coram :
THE HONOURABLE MR. JUSTICE P. VELMURUGAN
Civil Suit (Comm. Div.) No.412 of 2013
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Solara Active Pharma Sciences Limited
201, Devavrata, Sector 17,
Vashi, Navi Mumbai - 400 075, Maharashtra
(Amended as per Order dated 05.09.2018 in
Application No.6648 of 2018
in C.S.No.412 of 2013) .. Plaintiff
Versus
The New India Assurance Company Limited
A Government of India Undertaking
Having its Chennai Regional Office
at 770A, Spencer Towers,
3rd Floor, Anna Salai, Chennai - 600 002
Rep. by its General Manager .. Defend-
ant
Prayer: Plaint filed under Order IV Rule 1 of the Madras High
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C.S.(Comm.Div.) No.412 of 2013
Court Original Side Rules read with Order VII Rule 1 of the Code of Civil
Procedure, 1908, praying to pass a judgment and decree against the
defendant;
a. For a sum of Rs.4,84,02,556/- with interest at
the rate of 18% per annum from the date of plaint till the
date of realisation.
d. For payment of costs of the suit.
For plaintiff : Mr. P. Giridharan
For Defendant : Mr. S.R. Sundar
JUDGMENT
This suit is filed by the plaintiff to direct the defendant to pay a sum of Rs.4,84,02,556/- with interest at the rate of 18% per annum from the date of plaint till the date of realisation and for costs.
2. The averments made in plaint are as follows;
2.1 The plaintiff is a public limited company registered under the provisions of the Companies Act, 1956. The plaintiff is a manufacturer of 2/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 pharmaceutical ingredients, their intermediates and enteric coating excipients and they export it to North America, Europe, Asia and Latin America. The defendant is a general Insurance company and covers various kinds of risks including risk of loss to the goods due to fire. The plaintiff has got a manufacturing facility in Cuddlore wherein, the plaintiff manufactures anti-ulcerant bulk drugs. In the said plant, there are storage steel tanks, which are used for the purpose of storing chemicals and adjacent to the tanks, a RCC building (reinforced concrete building) is situated with 5 storage rooms. The five storage rooms are marked serially as Room 1 to Room 5 and each of the rooms are used for the following purposes:
Room 1: Storing of solid chemicals for the purpose of research and development Room 2: Storing of solid chemicals for the purpose of research and development (air conditioned) Room 3: Storing of bromine, iron free Hydrochloric Acid Room 4: Storing of acetic acid and Hydrochloric Acid Room 5: Cold storage 3/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 2.2 The plaintiff, vide policy Nos.712800/11/09/12/00000902-
904, with the defendant, insured the risk of loss of stock of intermediary chemicals, fuels, stores, packing materials, spares and all materials connected with the trade of the plaintiff which are lying at the plaintiff's factory at Cuddalore, due to Earth-quake, fire and shock for a sum of Rs.24,73,74,400/- and also business loss for a sum of Rs.80,00,00,000/- and paid a valuable premium of Rs.2,40,331/- and Rs.7,26,171/- respectively. The period of insurance was from 31.03.2010 to 30.03.2011. The policy was further enhanced on 02.03.2011 from Rs.24,73,74,400/- to Rs.32,73,74,400/- (i.e. by Rs.8,00,00,000/-) for loss of raw materials and finished goods, for which, additional premium was paid by the plaintiff and acknowledged by the defendant. When things stood thus and when the plaintiff was carrying on manufacturing of chemicals and drugs at its factory at Cuddalore, on 07.03.2011 at about 19.30 hrs., the employees of the plaintiff noticed that dense smoke was coming out of the Storage Room 4/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 No.3, where liquid bromine and hydrochloric acid was stored. Since this was irritating to the eye, the employees of the plaintiff could not enter the room immediately. Then, scrubbing arrangements were made and the vapour was sucked from the spot. Then, large volumes of water, along with foam, were used to quell the emission. When the employees of the plaintiff went inside the storage room, they noticed that the saw-dust and wooden cartons in which, the liquid bromine bottles were stored, were in a red hot condition and some of the bromine bottles were also damaged. The nearby public fire brigade also joined the operations and thereafter, the heat was constantly quenched with non-stop fire tender and the fire was put-off on 08.03.2011 at about 22.33 hrs. and normalcy was restored. Thus, the incident was brought under control by the plaintiff's workers jointly with the Fire Department officials.
2.3. The Fire Department after bringing the situation under control, along with the plant personnel, had subsequently issued a brief report on 5/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 the incident. In the said report, the Fire Department categorically mentioned that the leakage of bromine had caused the fire and it had reacted with surrounding substances like saw-dust and caused fire. The saw-dust is the material in which the Bromine bottles are packed by the manufacturer of Bromine, as the saw-dust acts as a cushion when Bromine is transported. On 09.03.2011, the plaintiff reported the incident to the Deputy Chief Inspector of Factories, Cuddalore and submitted Form 18-A as prescribed under the Factories Act and Rules framed thereunder. Thereafter, the matter was investigated by the plaintiff and an accident investigation report dated 12.03.2011 was released by the plaintiff, in which, the causes for the incident was stated to be that of the liquid Bromine bottles stored in wooden crates, which, due to the impact of stacking, one or more of the bottles could have broken resulting in leakage. The spilling of the Bromine onto the saw-dust, which in turn generating the heat, could have caused the fire. The accident consumed about 1030 6/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 kgs. of Bromine and 247 litres of Hydrochloric Acid. The said incident was also reported by the plaintiff to the defendant and the defendant-Company had sent their Surveyor, one Mr.V.Arul, B.E., who arrived at the Cuddalore plant on 09.03.2011, investigated the accident.
2.4. The defendant also instructed its Claim Managers and Loss Adjusters i.e. one M/s.Cunningham and Lindsey to investigate the event and they reached Cuddalore Plant on 29.03.2011. On 08.03.2011, the Deputy Chief Inspector of Factories, Cuddalore had issued a Notice of Prohibition of manufacturing and directed the plaintiff to close its factory due to the accident. The Tamil Nadu Pollution Control Board also issued a notice stopping electricity to the factory due to alleged violation of the provisions of the Air (Prevention and Control of Pollution) Act. Therefore, the plaintiff was constrained to file writ petitions in W.P. Nos.7848 to 7850 of 2011 and consequent to interim order, dated 20.04.2011 passed by this Court, the Tamil Nadu Pollution Control Board, by their order dated 7/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 22.04.2011, restored electricity supply to the plant of the plaintiff. The plaintiff filed a claim form with the defendant on 22.04.2011, claiming loss of Rs.23.03,99,794/- due to burning of stock and spoilage of materials under process.
2.5. The defendant's Surveyor issued a Survey Report dated 21.03.2011, wherein, he gave a finding that, bottles in which the Bromine was stored, were damaged in transit and the plaintiff was careless in not storing the chemicals properly, which had resulted in the accident. In the said report, the Surveyor further went on to give a finding that no fire occurred in storage Room No.3 and only leaking and subsequent evaporation occurred. In the said report, the Surveyor has further advised the defendant not to compensate the plaintiff for the events that had occurred as the same were not covered under the Standard Fire and Perils Policy. M/s. Cunningham and Lindsey also issued a report dated 30.06.2011, stating that the claim does not fall within the purview of the 8/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 policy. On 14.07.2011, the defendant repudiated the claim of the plaintiff under both the policies on the ground that there was no fire in the premises and the fumes were only due to evaporation of Bromine and it is not covered under the terms of the policy. To this letter, the plaintiff sent two letters on 10.08.2011 and 01.10.2011 stating that there was a fire and even as per the report of the Fire Department, the heat generated was due to the fire and the fire was brought under control using foam and water. In the said letters, the plaintiff dis-agreed with the conclusions reached by the defendant and requested the defendant to re-consider the claim of the plaintiff. The defendant-Company by their letters dated 27.08.2011 and 07.10.2011 acknowledged the letters of the plaintiff. Thereafter, the defendant sent a letter dated 31.10.2011, reiterating that the claim is repudiated on the grounds as mentioned in the letter dated 14.07.2011. Hence, the present suit is filed.
2.6. Though the plaintiff is entitled to recover a sum of 9/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 Rs.23,03,99,794/- being the loss suffered by them due to the above mentioned fire accident which is a covered risk, the plaintiff-Company is restricting their claim to Rs.4,92,94,558/- being the loss of profit suffered by the plaintiff due to the above fire incident, with liberty to claim for the balance in future proceedings or amend the present plaint and claim the balance. The loss of profit calculated by the plaintiff, has also been certified by its Auditor as being the proper mode of valuation of the loss. For the purpose of Court fees and jurisdiction, the plaintiff values their claim in the present suit at Rs.4,82,02,556/-. The reason given by the defendant to repudiate the claim is flimsy and paradoxical and it cannot be accepted. Aggrieved by the same, the present suit is being laid by the plaintiff seeking judgment and decree against the defendant to pay a sum of Rs.4,84,02,556/-. The plaintiff is also entitled to claim, interest at 18% p.a. on the suit claim as the suit is of commercial nature for wrongful repudiation of a valid insurance claim.
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3. The defendant has filed the written statement, denying the allegations made in the plaint stating that the plaintiff has taken an Insurance policy with the defendant being Fire Declaration Policy at the Divisional Office, Cuddalore, bearing Policy No.712800/11/09/12/ 00000902 covering stocks, raw materials, finished goods, intermediaries, etc. The currency of the period of the policy is from 31.3.2010 to 30.3.2011 and the sum insured was Rs.24,73,74,400/-. Similarly, the plaintiff has taken Consequential Loss (Fire) policy bearing No.712800/11/09/07/00000904, for loss of profit for a sum of Rs.80 crores for the same period. On 09.3.2011, the Divisional Office, Cuddalore, was intimated about the incident occurred on 07.03.2011 which necessitated the defendant to appoint Category-B Surveyor Mr.V.Arul, an Insurance Surveyor/Loss Assessor. It is stated that upon instructions from the defendant, the said Mr.V.Arul visited the plaintiff-Company's premises at A1/A and A1/B, SIPCOT Industrial Estate, Kudikadu Village, Cuddalore 11/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 on 9.3.2011 along with plaintiff's representatives.
3.1. A detailed investigation was done by the Surveyor and the Surveyor was informed that 8,550 kgs. of liquid Bromine in bottles, are packed in wooden boxes which had been unloaded from the Truck on 06.3.2011 at around 8.30 a.m. and the Wooden boxes were stacked in "Raw Material Storage Room No.3" which is located at the rear most area of the plaintiff-Company's plant. Further, it was informed that, on 07.3.2011 at around 8.00 p.m., some of the plaintiff's employees noticed high fumes coming from the Raw Material Storage Room No.3 and they made an alarm and while opening the room, they found that the room was completely engulfed with highly pungent irritating odour fumes, which started spreading to the surrounding areas and the same resulted in the persons near the village gripped with panic and had irritations in the eye and trouble in breathing. They therefore, blocked the Highway Road as a mark of their protest.
12/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 3.2. During the inspection of Raw Material Storage Room No.3, certain observations were made by the Surveyor Mr.V.Arul, which is as follows:-
(1) There was no mark in the cement plastering either in the wall or in the floor of Room No.3.
(2) The electrical fittings in that room were in good condition and there was no melting of electrical cables.
(3) 41 wooden boxes had blech recovered from that room were shown at outside yard and I find that those boxes were in good condition and noted that each box contain liquid Bromine in six bottles (3 kg x 6) and those six bottles were kept in a box surrounded by saw-dust.
(4) In the scrap yard, the broken bottles and broken wooden boxes (mostly they had been taken to clear the leaking bottle) removed from the said damaged room were shown and I noticed that those pieces of wooden boxes blackened/baked and not burnt/charred.13/77
https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 3.3. The surveyor Mr.V.Arul gave his Survey Report on 29.03.2011 dealing with the admissibility and scope of the policy. He has stated that the proximate root cause for the leakage and evaporation is failure in handling the toxic chemical in glass bottles during transit and subsequently due to total carelessness and failure while stacking the highly toxic chemicals caused self heating by leakage of corrosive chemical and packed with combustible wooden boxes and both the perils are not insured perils under the Standard Fire and Special Perils Policy with the defendant and also opined that the cost of evaporation of bromine in glass bottles need not be compensated by the defendant. Further, he has clearly observed that the leakage/evaporation of some portion of one raw material (Bromine) did not make the plaintiff to stop production in the entire plant, but they were forced to shut down by the Government Authorities only to pacify the people agitating in the surrounding village and hence, consequential loss need not be compensated by the insurer. Further, there was breakage of 14/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 bottle containing Bromine stored in saw-dust, filled in wooden boxes in the storage shed, causing a spill of chemical causing gaseous fumes only. There was only a Bromine gas leak on the date of incident. The Standard Fire and Special Perils Policy is a named peril policy and in the instant case, there was no physically visible fire, but there was only chemical fumes, which peril is not covered under the fire policy.
3.4. The defendant also appointed M/s.Cunningham & Lindsey International Pvt Ltd category 'A' Surveyor on 23.03.2011, to inspect the premises and assess the loss, if any, due to the perils covered under the policy 71200/11/09/07/00000904. There was a visit to the plant at Cuddalore on 23.03.2011 and joint meeting at the Regional office of the defendant was held on 23.05.2011 and subsequent visits to the plant on 25.05.2011 and 10.06.2011 by Mr.J.Rajan of Cunningham & Lindsey International Pvt. Ltd., a report dated 30.6.2011 was given, wherein the 15/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 circumstances of the loss, nature of accident and extent of damage were captured. The conclusion on cause and liability are summarised below:-
1. Based on the reports mentioned earlier (insured's accident investigation report, Inspector of Factories closure order etc) it is observed that dense fumes were seen out of storage room 3.
2. Bromine is a dark brown fuming liquid in appearance with pungent odour.
3. Its flammability is 0 as per hazard ratings.
4. Study of properties of bromine reveals that due to high vapour pressure- 175 mm Hg 20, when it escapes out of the container, it emanates dense fume which is heavier than air. It is a dense reddish brown liquid which evaporates easily at room temperature. Therefore emanation of fumes when leaked is inherent property of Bromine.
5. At the time of incident from the glass bottles which due to its high vapour pressure more travelled out of insured's compound and came into contact and more fumes started releasing with public resulting in eye irritation, etc. 16/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013
6. Due to public disturbance the concerned authority intervened and ordered closure of the plant on account of bromine leak and causing public danger.
Besides the public disturbance, the impact and damage if any on account of bromine leakage & the fumes to insured's property is examined below:
1. No damage is reported to storage room 3 inside area plastering, walls, electrical wiring etc remained intact. We understand renovation (with installation of sprinkler system etc) is due to requirement/ compliance of concerned authority and not warranted by any damage.
2. 41 wooden crates were recovered from the storage in apparently sound condition.
3. Balance crates and glass bottles dumped in metal drums show only sign of overheating/blackening.
4. There is no damage to neighbouring process block or any other manufacturing facility, building, Plant and Machinery, etc in this premise.
To summarise, the chain of events are given below:-
1. In-house restacking of bromine crates.
2. Braking of bottles & leakage of bromine.17/77
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3. Emanation of dense fumes from storage room.
(Prolonged fumes resulting in rise in temperature caused over heating of some wooden crates.)
4. Escape of fumes out of insured premise & public disturbance.
5. Intervention of Factory Inspector, TNPCB, etc and closure order.
From the above, it is evident that proximate cause is improper handling by insured's own employees which resulted in glass bottle breakage, leakage of bromine and resultant fumes emanation. There is no operation of any peril covered as per Standard Fire & Special Peril Policy under the claim is lodged, in the incident/events that occurred. Since no insured peril acted causing any damage, the claim does not fall within the purview of the policy.
REMARKS:
Quantity of bormine that leaked out of bottles is 1030 kg. as per inventory card. Invoice value of this quantity (considering the bromine quanitity in 41 craes also as leaked even though the crates apparently are sound conditions as per preliminary survey) is Rs.2,31,132/-.
BUSINESS INTERRUPTION:
Insured's claim under policy No.71200/11/09/07/00000904 for interruption in operation 18/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 is not tenable since material damage proviso condition of the policy is not complied with.
3.5. Even in the Accident Investigation Report of the plaintiff dated 12.03.2011, Mr. K.Devarajan D.G.M.Safety confirms the causes for the incident. The team members consisting of Mr.K.Devarajan (DGM/SAFTY), Mr.Uma Maheaswaran (AGM/ Production), Tr.Jayamuruga Prakash (Sr.G.M./ Operation), Mr.P.Rajendran (DGM/Production), Mr.S.Balasubramaniam (AGM/stores) and Mr.N.C.George (Manager/Environment) investigated the incident and stated that the following are the root cause for the incident:-
1. While stacking the crates, due to impact, one or more bottles could have been damaged, resulting in leakage.
2. The bromine crates are stacked in three rows. Because of this the load acted on the bottom crate ked damaged both crates and bottles resulting burning and subsequent damage of other crates kept inside the room.
3. Since bromine is a low boiling liquid and having vapour pressure of 100 mm of Hg @9.3 C, there may be a possibility of vapour released from bottle due to loose 19/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 condition of the bottle which in turn due to charring of saw-dust.
4. when the house keeping activity was carried out, some of the Bromine crates were restacked and there may be a possibility of breaking of bottles due to the impact resulting in leakage.
3.6. Even in the print out of SIPCOT-The Hindu, dated 09.03.2011, it refers to Closing of the factory as Engineers of Tamil Nadu Pollution Control Board found that the bottles containing Bromine stored in saw-
dust filled in wooden boxes, spilled due to mis-handling and it reacted with hydro chloric acid nearby which created dense fumes which spread to the near-by places. Further, no FIR is filed by the plaintiff in relation to the incident. Further, in the letter of the Inspectorate of Factories, dated 8.3.2011, there is no mentioning of the occurrence of fire, whereas it is stated that there was only leakage of gas. Also in the Notice of Deputy Chief Inspector of Factories dated 11.03.2011, occurrence of fire is not mentioned. Even in TNPCB letter, dated 08.3.2011, occurrence of fire is 20/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 not mentioned. This defendant states that in the letter dated 24.03.2011 of Joint Chief Inspector of Factories, only gas leak is indicated and not fire. If at all had there been a fire for more than 24 hours, the wooden crates in the small room, would have become ash, but it is not so and it has become blackish because of dense fumes.
3.7. The defendant further states that the plaintiff had informed about the event only on 09.3.2011 to this defendant that some of the raw materials/semi finished goods got spoiled at process stage which was kept in hold and to be taken for final process. It is also stated, vide letter dated 01.06.2011, that it is due to sudden power shut down on the event of accident that had occurred on 07.3.2011. It is pertinent to note that the power was shut down in the plaintiff's factory not on account of any fire, but due to the order of the Tamil Nadu Pollution Control Board on account of air pollution due to leakage of Bromine resulting in agitation of people in the near-by villages.
21/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 3.8. On 22.04.2011, concerning Policy No.71200/11/09/07/00000904 and on 20.03.2011, concerning Policy No.71200/11/09/12/00000902, the plaintiff sent claim Form claiming a sum of Rs.23,03,99,794/- and Rs.2,74,245/- respectively. It is pertinent to note that the plaintiff, by restricting the claim to Rs.4,84,02,556/-, filed this suit only under policy No.71200/11/09/07/00000904. By e-mail dated 24.05.2011, the Surveyor M/s.Cunningham & Lindsey confirmed that at the instance of the defendant, he visited the Department of Chemical Engineering and discussed with the Professor and Head of Department and they have ruled out the possibility of fire triggered of Bromine in contact with wood. It was informed that it is a natural fuming liquid which emanated dense fumes out of leaking container. The quality control of the material in reference gives the complete scenario. The plaintiff sent a letter dated 09.03.2011 that due to the accident the production suffered and material got damaged in the accident when especially there was no fire 22/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 concerning the same. The plaintiff gave a false and frivolous letter dated 26.07.2011, which necessitated a reply from the defendant on 02.08.2011, in which, it is clearly stated that the proximate cause of loss is only due to leakage of Bromine liquid arising out of disturbance from transit from Gujarat to possibility of breakage of bottles due to the impact, resulting in leakage. A copy of the preliminary report and final survey report was also handed over to the plaintiff and it was clearly observed that the loss is due to improper handling of consignment trans-shipped from Gujarat and the claim does not fall within the scope of the Standard Fire and Special Perils Policy.
3.9. In so far as the Policy No.71200/11/09/07/00000904 is concerned, it covers any loss due to operation of peril covered under the policy No.71200/11/09/12/00000902 and only when the claim is admissible under Policy No.71200/11/09/12/00000902, the liability will fall on the defendant under Policy No.71200/11/09/07/00000904. 23/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 3.10. After several rounds of discussion with the Surveyor and the plaintiff, the defendant was constrained to send a repudiation letter dated 14.7.2011, regretting their inability to consider the claim of the plaintiff, since there is no operation of insured peril covered under the policy and the incident that had occurred is not due to insured peril causing any damage and the claim does not fall within the purview of the policy. The plaintiff sent a reply dated 10.8.2011, followed by another letter dated 01.10.2011. The defendant once again sent a reply dated 27.8.2011 reiterating their earlier communications dated 14.7.2011 and 02.8.2011. The defendant further stated that in so far as the Policy No. 71200/11/09/12/00000902 is concerned, it covers raw materials, finished goods and intermediaries, damaged due to the perils notified in the policy. The fumes coming out of Bromine due to contact with saw-dust and wooden box due to irregular stacking, does not come within the purview of the policy. 24/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 3.11. The defendant denied the averment with regard to the alleged accident. As per the version of the plaintiff, the incident took place from 07.03.2011 at about 19.30 hours to 08.03.2011 till 22.33 hours. If that be the case, there is every possibility of a major damage caused to the building as well as to the factory which is conspicuously absent in the present case. Further, no particulars have been given in the fire brigade report on the number of vehicles used and the quantity of water for dousing of fire. According to the defendant, no fire had occurred and there was only dense fumes caused due to reaction of Bromine with saw-dust, which does not fall within the scope of the Perils. Further, if Bromine is combustible with saw-dust, there is no possibility of Bromine bottles packed together with saw-dust and being transported by the manufacturer and no remedial measures were taken by the plaintiff to retrieve the Bromine bottles from saw-dust and stored with proper non- combustible material in the factory to prevent any hazard.
25/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 3.12. The saw-dust has been kept as cushion during the transit and once the transit is over, it requires vigilance on the part of the plaintiff, to remove the Bromine bottles in contact with saw-dust and keep it in a proper place to prevent any hazard. In this case, it is clear that, on 06.3.2011, while 8550 kgs. of liquid Bromine in bottles were taken delivery by the plaintiff, there were damages to some of the bottles containing bromine and they found leakage. For any fire, it requires Oxygen and fuel substance together with a spark to ignite fire. In the absence of any ignition, there is no possibility of fire. In the instant case, it is only Bromine gas leakage, which has generated fumes and the same falls outside the scope of the policy. Out of 8550 kgs. of Bromine, only 1030 kgs. of Bromine were lost due to the leakage, which has resulted in dense fumes in the room of 288 sq.ft area. This itself establishes that there was no fire and it is only leakage of Bromine.
26/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 3.13. As per Doc.No.5 of the plaintiff, the fire occurred at around 07.30 hours on 07.3.2011 to 22.33 hours on 08.3.2011 and in effect for more than 24 hours, however there does not seem to be any total damage or loss to the remaining Bromine in bottles and factory building. On the contrary, the plaintiff retrieved about 41 crates of bromine after the incident and returned to the supplier. Had there been a fire in the said room No.3 of about 288 sq. ft., the entire bromine would have got damaged, but there was no damage to the Nylon straps of wooden crates, which is evident from the photographs. It is only fumes which are the inherent nature of the substance Bromine, which has broken out because of the leakage due to breakage and the same is not covered under the policy. Further, though there was a separate policy covering the building, there was no claim made towards building by the plaintiff, which fortifies the stand of the defendant that the building is not damaged. Thus, there was no fire and there was only formation of dense fumes, which is evident from 27/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 the Survey reports dated 21.3.2011 and 30.6.2011 of Mr. V.Arul and M/s.Cunningham and Lindsey, respectively.
3.14. With respect to Doc. No.7 of the plaintiff, it confirms that it is only the leakage of Bromine and nowhere it is stated that there is a fire accident or leakage due to fire. It fortifies that there is no fire at all coming within the purview of the Policy. From the admission made by the plaintiff that the notice of prohibition of manufacturing was made on the plaintiff only due to Bromine leakage and not due to fire. The very purpose of invocation of provisions of the Air (Prevention and Control) Pollution Act, it establishes that there is an air pollutant, which is due to liquid Bromine leakage and not due to fire. The leakage of Bromine as well as the air pollution, are outside the scope and purview of the policy. The very reason the factory was closed is due to agitation by public, which does not entitle the plaintiff to claim loss of profit under the policy, when especially there is no fire and no further process has been done on account of the 28/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 repudiation by the defendant by the plaintiff. The affidavit and counter affidavits filed in W.P. Nos.7848 to 7850 of 2011 as well the final order, will establish the correct facts, but the plaintiff has not produced the same.
3.15. The defendant admits that the plaintiff submitted a claim form for Rs.23,03,99,794/-, whereas, denies that there was fire and the spoilage of materials under process, if any, is due to the peril covered under the policy bearing No. 71200/11/09/12/00000902. The defendant was constrained to repudiate the claim, since no fire had occurred for settling any claim under the policies. It is the contention of the plaintiff that heat generated was due to fire and fire was brought under control by using foam and water is denied. The alleged fire brigadier report dated 04.5.2011, was not shared with the Surveyor M/s.Cunningham & Lindsey International Pvt. Ltd. and the said letter is a procured one on the date of coming to know of the report of the Surveyor, dated 29.3.2011. It is relevant to note 29/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 that the case of fire was not at all explained or reiterated in the letter dated 04.05.2011 on extinguishing fire and quantity of water.
3.16. The plaintiff is not entitled for recovery of any sum towards loss of profit arrived at by the plaintiff, as certified by their Auditor and it is not sustainable. The defendant denied any liability under the policy for the incident referred to by the plaintiff and without any prejudice and with abundant caution, they state that arrival of the sum claimed and certified by their Auditor, is not as per the terms and conditions of the contract and hence, the same is not sustainable and also not permissible under law. There is no cause of action to file the present suit and the suit is barred by limitation. Further, it is denied that the plaintiff is entitled for any interest and the claim is repudiated as per the terms and conditions of the policy. Therefore, the suit is liable to be dismissed.
4. Upon considering the pleadings, the following issues have been framed by this Court on 12.07.2018.
30/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 i. Whether the policy issued by the defendant, vide No.712800/11/09/12/00000902-904, covers the risk of loss of intermediary chemicals, fuels, stores, spares, packing materials, spares and all materials connected with the trade of the plaintiff?
ii. What is the cause for leakage of Bromine and whether leakage of bromine will cause fire or fumes?
iii) Whether the plaintiff has established before Surveyor that there was a fire?
iv) Whether a fire accident occurred at the premises of the defendant on 07.03.2011?
v. Whether the fire report dated 04.05.2011 confirms the incident of fire in the factory of the defendant on 07.03.2011?
vi. Whether the plaintiff has claimed for the value of Bromine and whether the same is payable under the terms and conditions of the Standard Fire and Special Perils Policy?
vii. whether the policy issued by the defendant covers the risk of loss due to fire caused by chemicals, fuels, stores, 31/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 spares, packing materials, spares and all materials connected with the trade of the plaintiff?
viii. Whether the defendant wrongfully rejected the claim of the plaintiff.
ix. Whether the loss due to the closure of the factory is due to the orders of the public authorities and if so, whether the same is covered under the policy taken by the Insured?
x. Whether the loss of profit which is restricted to Rs.4,84,02,556/- is payable as per the terms and conditions of the policy?
xi. Whether the defendant is liable to pay interest at 18% per annum? and xii. To what other reliefs?
5. In order to substantiate the case of the plaintiff, on the side of the plaintiff, three witnesses were examined as P.W.1 to P.W.3 and 20 documents were marked as Ex.P1 to Ex.P.20. On the side of the defendants, four witnesses were examined as D.W.1 to D.W.4 and 14 32/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 documents were marked as Ex.D1 to Ex.D14, besides one Court witness was cross examined as C.W.1 by both the learned counsel and 3 documents were marked as Ex.C1 to Ex.C3.
6. Heard the learned counsel for the plaintiffs and the learned counsel for the defendant and perused the materials available on record.
7. The learned counsel for the plaintiff submitted that the plaintiff is a public limited company registered under the provisions of Companies Act, 1956. The plaintiff is a manufacturer of pharmaceutical ingredients, their intermediates and enteric coating excipients and they exports it North America, Europe, Asia and Latin America. The plaintiff has got a manufacturing facility in Cuddalore wherein, the plaintiff manufactures anti-ulcerant bulk drugs. In the said plant, there are storage steel tanks which are used for the purpose of storing chemicals and adjacent to the tanks, a RCC building (reinforced concrete building) is situated with 5 storage rooms in which, Room 3 is used for storing of bromine, iron free 33/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 Hydrochloric Acid.
7.1. The defendant is a general Insurance company and covers various kinds of risks including risk of loss to goods due to fire. The plaintiff company had taken three insurance policies from the defendant. Insofar as the first policy No.712800/11/09/12/00000902 is concerned, it is a Fire Declaration Policy which covers stock of Raw Material, Finished Goods, Intermediaries, Fuel Stores Spares, Packing Materials, Spares and all materials connected with insured's trade including stocks held in trust. The second policy No.712800/11/09/12/00000903 is a Standard Fire and Special Perils Policy which covers stocks in process, buildings, plaint/machinery and accessories including the property held in trust, electrical installations, furniture, fixtures and fittings. The third Policy No.712800/11/09/12/00000904 is concerned, it is a Consequential Loss (Fire) Policy which covers any loss of profit due to operation of peril covered under the Policy No.712800/11/09/12/00000902 and only when 34/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 the claim is admissible under the Policy No.712800/11/09/12/00000902, the liability will fall on the defendant under the Policy No.712800/11/09/12/00000904.
7.2. When the plaintiff was carrying on manufacturing of chemicals and drugs at its factory at Cuddalore on 07.03.2011, at about 19.30 hrs., the employees of the plaintiff noticed dense smoke was coming out of the Storage Room No.3, where liquid bromine and hydrochloric acid was stored. Since this was irritating to the eye, the employees of the plaintiff could not enter the room immediately. Then, Scrubbing arrangements were made and the vapour was sucked from the spot. Then, large volumes of water along with foam were used to quell the emission. The nearby public fire brigade also joined the operations and thereafter, the heat was constantly quenched with non stop fire tender and the fire was put off on 08.03.2011 at about 22.33 hrs. and normalcy was restored. Thus the incident was brought under control by the plaintiff's workers jointly with 35/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 the Fire Department officials.
7.3. The Fire Department after bringing the situation under control along with the plant personal, had subsequently issued a brief report on the incident in which it is categorically mentioned that the leakage of bromine had caused the fire and it reacted with surrounding substances like saw- dust and caused the fire. On 09.03.2011, the plaintiff reported the incident to the Deputy Chief Inspector of Factories, Cuddalore and submitted Form 18A as prescribed under the Factories Act and Rules thereunder. Thereafter, the matter was investigated by the plaintiff and an accident investigation report dated 12.03.2011 was released by the plaintiff, in which, the causes for the incident was stated to be that the liquid bromine bottles stored in wooden crates, which, due to impact of stacking one or more of the bottles, have broken resulting in leakage. The spilling of the bromine onto the saw-dust, which in turn generated the heat could have caused the fire. The accident consumed about 1030 kgs. of bromine and 36/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 247 litres of Hydrochloric Acid.
7.4. The said incident was also reported by the plaintiff to the defendant and the defendant had sent its surveyor, one Mr.V.Arul B.E. who arrived and investigated at Cuddalore plant on 09.03.2011, issued a Survey Report dated 21.03.2011 stating that the bottles in which the bromine was stored was damaged in transit and the plaintiff was careless in not storing the chemicals properly, which resulted in the accident and there was no fire occurred in storage Room No.3 and it was only leaking of Bromine and subsequent evaporation occurred. In the said report, the surveyor has further advised the defendant not to compensate the plaintiff for the events that occurred as the same were not covered under the Standard Fire and Perils Policy. The defendant's Claim Managers and Loss Adjusters one M/s.Cunningham and Lindsey also investigated the incident and issued a report dated 30.06.2011 stating that the claim does not fall within the purview of the policy. On 22.04.2011, the plaintiff filed a claim form with 37/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 the defendant, claiming loss of Rs.23.03,99,794/- due to burning of stock and spoilage of materials under process. On 14.07.2011, the defendant repudiated the claim of the plaintiff under both the policies on the ground that there was no fire in the premises and there was fumes due to leakage of bromine and it is not covered under the terms of the policy.
7.5. The contention of the defendant that the closure of the factory was due to the public orders and therefore, any loss sustained due to the closure of the factory qua the public order is not covered under the terms of the policy, is not legally unsustainable. Even the fire report clearly establishes the fact that there was fire along with black smoke at the time when the fire department was called to extinguish the fire. The defendant cannot blow hot and cold at the same time by stating that Bromine leakage will cause fumes , which in turn will cause heat but the heat will not result in fire despite reacting with wood and saw-dust. The photographs of the room, which has been annexed to the investigation report, clearly shows 38/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 the existence of fire as all the walls of the storage room have been blackened due to constant fire outbreak and the condition of the wooden crates in which the Bromine was stored as well as the glass bottles also indicates the involvement of fire. The smoke caused due to the accident created a havoc amongst the nearby villagers, which further indicates the existence of fire without which the spread of the fumes and smokes will not be violent. The doctrine of proximate cause ought to be applied to determine what was the closest cause for closure of the factory. In this case, the proximate cause for the closure of the factory by the Public Authorities is due to the outbreak of fire. As a result of the fire accident, the raw materials of the plaintiff in the Storage Room No.3, were completely damaged and were unfit for further use by the plaintiff and the plaintiff could not continue production in the absence of the raw materials. Therefore, the closure of the factory was not only on account of the directions issued by the public department, but also non availability of the 39/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 raw materials. In any event the proximate cause for closure of the factory is 'the fire accident' which is covered within the four corners of the insurance policy issued by the defendant. Therefore, the defendant cannot escape its liability from indemnifying the plaintiff the losses suffered due to the fire accident.
7.6. As stated above, since it is a fire accident, the plaintiff is entitled to consequential loss of profit as per the third policy. Though the plaintiff is entitled to recover a sum of Rs.23,03,99,794/- being the loss suffered by them due to said fire accident which is a covered risk, as assessed by the Chartered Accountant, the plaintiff is restricting its claim to Rs.4,84,02,556/- being the loss of profit suffered by the plaintiff due to the said fire accident. The reason given by the defendant to repudiate the claim is flimsy and paradoxical and the same cannot be accepted. In support of this contention, the learned counsel relied on the following judgments;
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1. New India Assurance Company Limited Vs. Zuari Industries Limited and Others reported in (2009) 9 SCC 70
2. S.S.Cold Storage India Private Limited Vs. National Insurance Company Limited reported in (2024) 2 SCC 467
3. Kailash Nath Associates Vs. Delhi Development Authorities and Another reported in (2015) 4 SCC 136
8. The learned counsel for the defendant submitted that admittedly the plaintiff has taken three insurance policies with the defendant in which, the Policy No.712800/11/09/12/ 00000902 is a Fire Declaration Policy which covers stocks, raw materials, finished goods, intermediaries, etc. The policy No.712800/11/09/07/00000904 is a Consequential Loss (Fire) policy. On 09.03.2011, the Divisional Office, Cuddalore, was intimated about the incident occurred at the plaintiff's factory on 07.03.2011 which necessitated the defendant to appoint Category-B Surveyor Mr.V.Arul, an Insurance Surveyor/Loss Assessor who investigated the incident and filed a report stating that the proximate root cause for the leakage and 41/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 evaporation is failure in handling the toxic chemical (Bromine) in glass bottles during transit and subsequently due to total carelessness and failure while stacking the highly toxic chemicals caused self heating by leakage of corrosive chemical and packed with combustible wooden boxes and both the perils are not insured perils under the Standard Fire and Special Perils Policy with the defendant and also opined that the cost of evaporation of Bromine in glass bottles need not be compensated by the defendant. As per his report, there was no mark in the cement plastering either in the wall or in the floor of Room No.3. The electrical fittings in that room were in good condition and there was no melting of electrical cables. 41 wooden boxes which had been recovered from that room were in good condition. The broken bottles and broken wooden boxes removed from the said damaged room were blackened/baked and not burnt/charred.
8.1. The defendant also appointed M/s.Cunningham & Lindsey International Pvt Ltd category 'A' Surveyor on 23.03.2011 to inspect the 42/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 premises and assess the loss if any due to the perils covered under the policy 71200/11/09/07/00000904. Mr.J.Rajan of Cunningham & Lindsey International Pvt. Ltd. who inspected the plaintiff's plant, gave a report dated 30.06.2011 stating that the proximate cause is improper handling by insured's own employees which resulted in glass bottle breakage, leakage of bromine and resultant fumes emanation. There is no operation of any peril covered as per Standard Fire & Special Peril Policy under the claim is lodged, in the incident/events that occurred. Since no insured peril acted causing any damage, the claim does not fall within the purview of the policy.
8.2. Even in the Accident Investigation Report of the plaintiff dated 12.03.2011, Mr. K.Devarajan D.G.M.Safety confirms that the cause for the incident is, while stacking the crates, due to impact, one or more bottles could have been damaged, resulting in leakage; since bromine is a low boiling liquid and having vapour pressure of 100 mm of Hg @9.3 C, there 43/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 may be a possibility of vapour released from bottle due to loose condition of the bottle which in turn due to charring of saw-dust. Even Ex.P8 and Ex.P9, the copy of notice issued by Deputy Chief Inspector of Factories and the notice issued by the Tamil Nadu Pollution Control Board would clearly show that there was no fire accident and the factory of the plaintiff was not closed due to fire accident.
8.3. Further, no FIR is filed by the plaintiff in relation to the accident. In the letter dated 24.3.2011 issued by the Joint Chief Inspector of Factories, it is only indicated as gas "leak" and not "fire". Though the plaintiff filed a letter dated 04.05.2011 said to be the report issued by the fire department, the plaintiff has failed to mark the same as exhibit. Further, no particulars have been given in the fire brigade report on the number of vehicles used and the quantity of water for dosing of fire. Even the plaintiff has not examined anyone from the Fire Department to prove their claim. If there had there been a fire for more than 24 hours, there 44/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 would have been heavy damages to the building, electricity and the wooden crates kept in the small room would have become ash but it is not so and it has become blackish because of dense fumes which clearly shows that there is no fire occurred and there was only dense fumes caused due to reaction of Bromine with saw-dust, which does not fall within the scope of Perils. Further, the defendant by cross examining C.W.1 namely K.Kumar, Office of the District Officer, Fire and Rescue Services Department, Cuddalore District, has proved that no such fire accident took place and only rescue operation was taken.
8.4. Since there was no fire and no spoilage of materials under process, if any, the defendant repudiated the claim of the plaintiff which was preferred towards the value of Bromine which was lost due to the leakage, under Standard Fire and Special Perils policy bearing policy No.712800/11/09/12/00000902. When the claim is not admissible under the Policy No.712800/11/09/12/00000902, the liability will not fall on the 45/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 defendant under the Policy No.712800/11/09/07/00000904 which is a Consequential Loss (Fire) Policy which covers any loss of profit due to operation of peril covered under the Policy No.712800/11/09/12/00000902. Therefore, both the claims of the plaintiff were repudiated by the defendant.
8.5. Though the plaintiff has stated that they suffered a loss of Rs.23,03,99,794/-, in the present plaint, the plaintiff restricts its claim to loss of profit alone suffered by them due to the alleged fire accident to the tune of Rs.4,82,02,556/-. As already stated, only when the claim is admissible under the Policy No.712800/11/09/12/00000902, the claim under the Consequential Loss (Fire) Policy which cover any loss of profit due to operation of peril covered under the Policy No.712800/11/09/12/00000902, will admissible. Already the claim of the plaintiff under the Policy No.712800/11/09/12/00000902 was repudiated by the defendant on the ground that there was no fire in the premises of the 46/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 plaintiff and there were only fumes due to evaporation of Bromine. Therefore, now the claim of the plaintiff towards the loss of profit under the consequential policy is not sustainable. There is no cause of action for the present suit and the suit is barred by limitation. Further, the plaintiff is not entitled for any interest and the claim of the plaintiff was repudiated by the defendant as per the terms and conditions of the policy. Therefore, the suit is liable to be dismissed with exemplary costs. In support of his contention, the learned counsel for the defendant relied on the following judgments;
1. Indo-Rama Synthetics India Ltd. Vs. IFFCO Tokio General Insurance reported in 2019 SCC Online Del 7026.
2. National Insurance Co. Ltd. Vs Chief Electoral Officer and Others (2023) 6 SCC 441.
3. Century Textiles & Industries Ltd. Vs. Oriental Fire & General Insurance Co. Ltd. & Others. reported in 2010 SCC Online Bom 1273
4. M/s. Grasim Industries Vs. New India Assurance Co. reported in 2016 SCC Online NCDRC 467.
47/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013
5.Oriental Insurance Company Ltd. Vs. Narbheram Power and Steel Private limited reported in (2018) 6 SCC 534
6. Iffco Tokio General Insurance Co. Ltd. Vs. Indo Rama Synthetics Ltd. reported in 2015 SCC Online Del. 6669
7. Sri Venkateswara Syndicate Vs. Oriental Insurance Company Ltd. and Another reported in (2009) 8 SCC 507
8. National Insurance Company Limited Vs. Chief Electoral Officer and Others reported in (2023) 6 SCC 441.
9. Sika Papers Limited Vs. National Insurance Company Ltd. reported in (2009) 7 SCC 777.
9. On hearing of arguments of both sides and perusal of materials available on record, the issues are answered as follows;
10. Issue Nos.1 to 5 : Since the issue Nos.1 to 5 are similar and related, they are being dealt together as follows;
Issue No.1.Whether the policy issued by the defendant vide No.712800/11/09/12/00000902-904, covers the risk of loss of intermediary chemicals, fuels, stores, spares, packing materials, spares and all materials 48/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 connected witht the trade of the plaintiff?
Issue No.2. What is the cause for leakage of Bromine and whether leakage of bromine will cause fire or fumes?
Issue No.3. Whether the plaintiff has established before surveyor that there was a fire?
`Issue No.4. Whether a fire accident occurred at the premises of the defendant on 07.03.2011?
Issue No.5. Whether the fire report dated 04.05.2011 confirms the incidence of fire in the factory of the defendant on 07.03.2011?
10.1. According to the plaintiff, the plaintiff had taken three policies with the defendant and after the incident that took place on 07.03.2011, the plaintiff preferred two claims with the defendant, one was towards the value of Bromine which was lost due to the leakage for Rs.2,74,245/- under Standard Fire and Special Perils policy bearing policy No.712800/11/09/07/00000902 and another claim was under the Loss of Profit (Fire) insurance policy bearing No.712800/11/09/07/00000904 for 49/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 Rs.23,03,99,794/-. But both the claims were repudiated by the defendant.
10.2. According to the defendant, the bottles in which the Bromine was stored were damaged in transit and the plaintiff was careless in not storing the chemicals properly, which resulted in the accident. There was no fire occurred in storage Room No.3 and it was only a dense fume. Therefore, the defendant need not compensate the plaintiff. Thereby, the defendant repudiated the claim of the plaintiff under both the policies on the ground that there was no fire accident and the fumes were only due to evaporation of Bromine and therefore, the same is not covered under the terms of the policy.
10.3. Admittedly, the plaintiff company had taken three insurance policies from the defendant viz., Policy No.712800/11/09/12/00000902, No.712800/11/09/12/00000903 and No.712800/11/09/07/00000904. Insofar as the first policy No.712800/11/09/12/00000902 is concerned, it is a Fire Declaration Policy which covers stock of Raw Material, Finished 50/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 Goods, Intermediaries, Fuel Stores Spares, Packing Materials, Spares and all materials connected with insured's trade including stocks held in trust. The peril of FIRE is covered subject to the following exclusion;
1.FIRE - Excluding destruction or damage caused to the property insured by;
(a) (i) its own fermentation, natural heating or spontaneous combustion, (ii) its undergoing any heating or drying process
(b) Burning of property insured by order of any Public Authority.
10.4. Insofar as the 2nd policy No.712800/11/09/12/00000903 is concerned, it is a Standard Fire and Special Perils Policy which covers stocks in process, buildings, plant/machinery and accessories including the property held in trust, electrical installations, furniture, fixtures and fittings.
10.5. Insofar as the Policy No.712800/11/09/07/00000904 is concerned, it is a Consequential Loss (Fire) Policy which covers any loss of profit due to operation of peril covered under the Policy 51/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 No.712800/11/09/12/00000902 and only when the claim is admissible under the Policy No.712800/11/09/12/00000902, the liability will fall on the defendant under the Policy No.712800/11/09/07/00000904.
10.6. According to the plaintiff, there was a fire accident in Storage Room No.3 of their Plant from 07.03.2011 at about 19.30 hours to till 22.32 hrs. on 08.03.2011. The incident was brought under control by the plaintiff's workers jointly working with the Fire Department officials. The Fire Department subsequently issued a brief report dated 04.05.2011 confirming the existence of fire. On 09.03.2011, the plaintiff reported the incident to the Deputy Chief Inspector of Factories, Cuddalore and submitted Form 18A as prescribed under the Factories Act and Rules thereunder. Thereafter, the matter was investigated by the plaintiff and the Accident Investigation Report dated 12.03.2011 (Ex.P.7) was issued by the plaintiff, in which, it is stated that the following are the route cause for the incident;
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1. While stacking the crates, due to impact, one or more bottles could have been damages, resulting in leakage.
2. The bromine crates are stacked in three rows. Because of this the load acted on the bottom crate and damaged both crates and bottles resulting burning and subsequent damage of other crates kept inside the room.
3. Since bromine is a low boiling liquid and having vapour pressure of 100 mm of Hg @9.3 C, there may be a possibility of vapour released from bottle due to loose condition of the bottle which in turn due to charring of saw-dust.
4. when the house keeping activity was carried out, some of the Bromine crates were restacked and there may be a possibility of breaking of bottles due to the impact resulting in leakage.
10.7. The said incident was also reported by the plaintiff to the defendant and the defendant's Category-B Surveyor Mr.V.Arul who arrived to the Plant on 09.03.2011, investigated the accident. The Surveyor was informed that 8550 Kgs. of liquid Bromine bottles packed in wooden boxes had been unloaded from the truck on 06.03.2011 at around 8.30 a.m. 53/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 and the same were stacked up in Raw Material Storage Room No.3. On 07.03.2011 at around 8.00 p.m., the plaintiff's employees noticed high fumes coming from the raw material Storage Room No.3 and after making an alarm, while opening the room, they found the room was completely engulfed with highly pungent irritating odour fumes which started spreading to the surrounding areas. On inspection of Raw Material Storage Room No.3, the Surveyor has made certain observations as follows;
(1) There was no mark in the cement plastering either in the wall or in the floor of Room No.3.
(2) The electrical fittings in that room were in good condition and there was no melting of electrical cables.
(3) 41 wooden boxes had been recovered from that room were shown at outside yard and I find that those boxes were in good condition and noted that each box contain liquid Bromine in six bottles (3 kg x 6) and those six bottles were kept in a box surrounded by saw-dust.
(4) In the scrap yard, the broken bottles and broken wooden boxes (mostly they had been taken to clear 54/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 the leaking bottle) removed from the said damaged room were shown and I noticed that those pieces of wooden boxes blackened/baked and not burnt/charred.
10.8. Ex.P12/Report of Catergory-B Surveyor Mr.V.Arul indicates that the proximate root cause for the leakage and evaporation was the failure to handle the toxic chemical (Bromine) in glass bottles during transit. Subsequently, due to total carelessness and improper stacking of the highly toxic chemicals, self heating occurred as a result of the leakage of corrosive chemical as these chemicals packed with combustible wooden boxes. Furthermore, both the perils are not insured perils under the Standard Fire and Special Perils Policy with the defendant and hence, it was stated that the cost of evaporation of bromine in glass bottles is not covered. Further it has been observed that the leakage/evaporation of some portion of one raw material (Bromine) did not make the plaintiff to stop production in the entire plant but they were forced to shut down by the 55/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 Government Authorities to pacify the people agitating in the surrounding village and hence, the consequential loss need not be compensated by the insurer. Further, there was breakage of bottles containing Bromine stored in saw-dust filled wooden boxes in the storage shed causing a spill of chemical causing gaseous fumes only. There was only a bromine gas leak on the date of incident. The Standard Fire and Special Perils Policy is a named-peril policy, and in the instant case since there was no physically visible fire but only chemical fumes, the peril is not covered under the fire policy.
10.9. Ex.P.13 is the report of category 'A' surveyor Mr.Rajan of Cunningham & Lindsey International Pvt. Ltd., who was appointed by the defendant to assess the loss, if any, due to the perils covered under the policy 71200/11/09/07/00000904 wherein, the circumstances of the loss, nature of accident and extent of damage were captured. As per their report, the proximate cause is improper handling by the insured's own employees 56/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 which resulted in glass bottle breakage, leakage of Bromine and resulted fumes emanation. Since no insured peril acted causing any damage, the claim does not fall within the purview of the policy.
10.10. Ex.P.8/copy of the notice issued by the Deputy Chief Inspector of Factories clearly reveals that the plaintiff did not handle the liquid Bromine being a hazardous chemical in a manner as required for that particular chemicals which has caused leakage and resulted into health hazard for 153 people in and around that village due to which, the plaintiff's factory was ordered to be closed. Ex.P9/copy of the notice issued by the Tamil Nadu Pollution Control Board dated 08.03.2011 wherein, order has been issued to the Tamil Nadu Electricity Board to stop the electricity to the Plant of the plaintiff. Ex.P.20/Auditor's certificate dated 11.03.2013 wherein, it is clearly recorded that, reason for closure of the plaintiff's Cuddalore Factory is, leakage of Bromine which occurred on 07.03.2011.
57/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 10.11. Ex.P10 is the copy of the order passed in W.P. Nos.7848 to 7850 of 2011 dated 22.04.2011 which were by filed by the plaintiff to reopen the factory that was closed to due to the orders issued by the authorities. In that order, affidavit has been filed in each and every writ petitioner by the plaintiff and during the cross examination, P.W.1 has admitted to Q.No.66 that the recordings in para 3 of the order regarding lapse on part of the company and to that extent an undertaking was filed by the plaintiff.
10.12. Ex.D1 to D8 are petitions and counter affidavit filed by the plaintiff and respondent in W.P.Nos.7848 to 7850 of 2011 and in the said documents, neither the plaintiff nor the authorities concerned have mentioned that there was a "fire" but, it is mentioned as a leakage of bromine and fumes and there is no mention of "fire".
10.13. To establish the claim due to fire, the basic document required is the fire brigade report issued by the Fire Department. In this 58/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 case, though the plaintiff has filed a letter dated 04.05.2011 said to be the report issued by the authorities concerned, the plaintiff has failed to mark the same as exhibit to prove that there was a fire accident on the said date. Even no one from the Fire Department was examined on the side of the plaintiff to prove their claim. Even there was no registration of complaint/FIR regarding fire accident.
10.14. According to the defendant, since, no fire brigade report was submitted to the Surveyor, the investigator of the defendant obtained a reply dated 14.03.2017 under RTI from the Fire Department, in which, it was stated that no records were available which necessitated the defendant to examine C.W.1 namely K.Kumar, Office of the District Officer, Fire and Rescue Services Department, Cuddalore District, who has clearly stated during cross examination that no such fire accident took place and only rescue operation was taken. The relevant portion is extracted hereunder;
Q: On which date, the fire incident happened in the premises of the plaintiff?
59/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 A: No such fire accident took place, only rescue operation was taken.
Q: Did you attend to the fire incident?
A: No Q: On what basis you say, no fire accident took place in the premises of the plaintiff?
A: On the basis of available records.
Q. See the fire report dated 07.03.2011 enclosed in Ex.C3. Whether it is specifically mentioned in fire report no fire accident took place?
A: It is not a fire accident report. It is a rescue call report. It is not specifically mentioned as fire accident not happened.
...
...
Q. Have you mentioned the occurrence of fire accident Form 40 and in the rescue calling record annexed in Ex.C3?
A: No such word as fire accident mentioned Q: Do you maintain separate register as "fire calling records and rescue calling cords"?
A: Yes.
Q: Is it correct the incident occurred in the premises is recorded only in rescue calling register?
A: Yes.
10.15. D.W.1 being the preliminary surveyor happened to be a 60/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 chemical engineer during cross examination by the plaintiff, has revealed that the leakage of bromine when in contact with saw-dust will generate low heat only. D.W.3 being the final surveyor during the cross examination by the plaintiff has clearly stated that the Bromine is not an oxidizer and it will not cause fire when it reacts with other substances and it will release only "heat" and not "fire".
10.16. Therefore, it is clear that the incident was not a fire accident. The proximate cause for the incident is leakage and evaporation of toxic chemicals (Bromine) in transit and also carelessness and failure in vigilant while stacking the said toxic chemicals (Bromine). The accident is caused only due to emanation of fumes and not fire. If at all there was a fire accident on 07.03.2011 and if it had prolonged for such a long time till 08.03.2011, certainly it would have resulted a heavy loss and all the wooden things in the Storage Room No.3 and also in the plant, would have burnt and became ash. But in this case, as observed by the surveyor of the 61/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 defendant, there was no damage to the walls, electrical wirings etc. of the Storage Room No.3 which is an area of 288 Sq.ft. and 41 other wooden crates were recovered from the said storage room in sound condition. There were no damages to the neighbouring blocks or rooms.
10.17. Under these circumstances, the plaintiff has failed to establish that the incident is only a fire accident and the damages and loss are only due to the fire accident. Therefore, as rightly stated by the defendant, when the accident is not due to fire, the claim under the Policy No.712800/11/09/12/00000902 is not admissible. As such, the claim under the Policy No.712800/11/09/07/00000904 which is a Consequential Loss (Fire) Policy which covers any loss of profit due to operation of peril covered under the Policy No.712800/11/09/12/00000902, is also not admissible. Accordingly, the issue Nos.1 to 5 are answered against the plaintiff.
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11. Since the issue Nos.6 and 7 are similar and related, they are being dealt together as follows;
Issue No.6: Whether the plaintiff has claimed for the value of bromine and whether the same is payable under the terms and conditions of the Standard Fire and Special Perils Policy? and Issue No.7 : whether the policy issued by the defendant covers the risk of loss due to fire caused by chemicals, fuels, stores, spares, packing materials, spares and all materials connected with the trade of the plaintiff?
11.1. According to the plaintiff, as soon as the fire broke out in the premises of the plaintiff's factory, it was immediately informed to insurance authorities within the prescribed period as per the terms and conditions of the policy and the same is not disputed by the defendant. Initially, the plaintiff has preferred two claims with the defendant, one 63/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 towards the value of Bromine which has been lost due to the leakage for Rs.2,74,245/- under the Standard Fire and Special Perils Policy bearing No.712800/11/09/12/00000902 and another claim under Fire Loss of Profit bearing Policy No. No.712800/11/09/07/00000902 for Rs.23,03,99,794/- and both the claims have been repudiated by the defendant and the copy of the repudiation has been marked as Ex.P.14. According to the defendant, the policy No.712800/11/09/12/00000902 covers only named perils, one amongst the 10 covers is 'Fire' and there is no coverage of risk for leakage of Bromine and fumes and therefore, the defendant repudiated the claim of the plaintiff. However, in the present suit, the plaintiff has restricted their claim only to the loss of profit sustained by the plaintiff due to the fire accident to Rs.4,84,02,556/- allegedly suffered by it under Policy No. 712800/11/09/07/00000904.
11.2. Further, it is seen that the Policy No.712800/11/09/12/00000902 is a named perils policy which covers Fire 64/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 one among the 10 risks covered under the said policy. The items covered under the said policy is "on stock of raw materials, finished goods, intermediaries, fuel storage spares, packing materials, spares and all materials connected with insured's trade including stocks held in trust". The peril of Fire is covered subject to the following exclusion;
"I. FIRE Excluding destruction or damage caused to the property insured by;
(a) (i) its own fermentation, natural heating or spontaneous combustion (ii) its undergoing any heating or drying process
(b) Burning of property insured by order of any Public Authority.
11.3. Since the damage was caused by the leakage of corrosive chemicals and not by fire, as per the above clause, the insurer is not liable to pay the claim. The policy clearly excludes coverage for damage not caused by fire or by other specified conditions. Since the incident does not fall within those covered risks, the claim is not payable. Hence, the issue 65/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 Nos.6 and 7 are decided in favour of the defendant and against the plaintiff.
12. Issue No.8: Whether the defendant wrongfully rejected the claim of the plaintiff?
As already stated in the above issues that the damages were not due to fire accident and loss due to closure of the plaintiff's factory was not due to fire accident. Unless the plaintiff proves that there was a fire accident and the damages and loss were due to fire accident, the rejection of claim by the defendant is not wrongful one. Though the plaintiff has stated that it was a fire accident, the same has not been proved by the plaintiff in the manner known to law. Hence, the issue No.8 is answered accordingly.
13. Issue No.9: Whether the loss due to the closure of the factory is due to the orders of the public authorities and if so, whether the same is covered 66/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 under the policy taken by the Insured?
13.1. The defendant's Surveyor Mr.Arul, has clearly observed that the leakage/evaporation of some portion of one raw material (Bromine) did not make the plaintiff to stop production in the entire plant but they were forced to shut down by the Government Authorities only to pacify the people agitating in the surrounding village and hence, the consequential loss need not be compensated by the insurer.
13.2. Ex.P.8/copy of the notice dated 08.03.2011 issued by the Deputy Chief Inspector of Factories clearly shows that the improper handling of the liquid bromine being a hazardous chemical caused leakage and resulted into health hazard for 153 people in and around that village due to which, on the complaints of the public from nearby village, the plaintiff's factory was closed and P.W.1 has also admitted to that effect during cross-examination by the defendant while answering question No.65, which reads as follows:-
67/77
https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 "Q.No.65. Do you agree that certain stipulations were given by the pollution authorities during the pendency of the WP to the members of your company?
A. Yes."
13.3. Ex.P9/notice issued by the Pollution Control Board dated 08.03.2011 shows that the the Tamil Nadu Pollution Control Board has issued an order to the Tamil Nadu Electricity Board to stop the electricity to the plant of the plaintiff subsequent to the issuance of proceedings of closure of the plaintiff's factory. Therefore, it is clear that the closure of the plaintiff's factory was not due fire accident as alleged by the plaintiff and it was due to the orders of the public authorities.
13.4. As already stated above, the Policy No.712800/11/09/07/00000904 is a Consequential Loss (Fire) Policy which covers any loss of profit due to operation of peril covered under the Policy No.712800/11/09/12/00000902 and only when the claim is admissible under the Policy No.712800/11/09/12/00000902, the liability will fall on the defendant under the Policy No.712800/11/09/07/00000904.68/77
https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 The claim of loss due to the closure of the factory due to the orders of the public authorities does not fall within the purview of the policy. The issue No.9 is answered accordingly.
14. Issue No.10: Whether the loss of profit which is restricted to Rs.4,84,02,556/- is payable as per the terms and conditions of the policy?
14.1. According to the plaintiff, the loss of profit incurred by the plaintiff due to the damage of raw materials and closure of the factory is Rs.4,84,02,556/- which has been assessed by Chartered Accountant and they have also produced a certificate/Ex.P.20 to that effect.
14.2. In Ex.P.20 issued by ASA and Associates, Chartered Accountants dated 11.03.2013, the Auditor has clearly certified that the loss is “because of closure of companies Cuddalore factory due to Bromine leakage which occurred on 07.03.2011" and they have not certified that the loss is due to fire. Further it is seen that the said document has been 69/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 marked only with objection subject to proof and relevancy. However, the plaintiff has not established its loss of profit by examining the Auditor.
14.3. According to the defendant as per the provisions of Insurance Act with regard to assessment of loss, it has to be done only by an IRDAI licensed Surveyor. IRDAI Act and Regulations provides that either the insurer or insured can appoint a Surveyor to assess the loss and the Chartered Accountant is not entitled to assess the loss under the terms and conditions of the insurance policy as well as the provisions of the status.
14.4. Even otherwise, as stated above, the Policy No.712800/11/09/12/00000904 is a Consequential Loss (Fire) Policy which covers any loss of profit due to operation of peril covered under the Policy No.712800/11/09/12/00000902 and only when the claim is admissible under the Policy No.712800/11/09/12/00000902, the liability will fall on the defendant under the Policy No.712800/11/09/07/00000904. This Court has already held in the previous issues that the plaintiff has 70/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 failed to establish that the incident is solely a fire accident and the damages and loss are only due to the fire accident and therefore, the claim under both the policies is not admissible. As such the loss of profit which is restricted to Rs.4,84,02,556/- is not payable as per the terms and conditions of the policy. Accordingly, the issue No.10 is answered.
15. Issue No.11: Whether the defendant is liable to pay interest at 18% per annum?
Since the issue Nos.8 and 10 regarding rejection of claim and loss of profit which is restricted to Rs.4,84,02,556/- have been answered against the plaintiff, this issue regarding interest does not arise. The issue No.11 is answered accordingly.
16. Issue No.12: To what other reliefs the plaintiff is entitled?
The plaintiff is not entitled to any other relief. Issue No.12 is answered accordingly.
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17. Accordingly, this suit is dismissed. There shall be no order as to costs.
30.07.2024 (1/2) ksa-2 List of Witnesses Examined on the side of the Plaintiff:
P.W.1 : S.Choodamani
P.W.2 : S.Balasubramanian
P.W.3 : Dr.K.Palanivel
List of Exhibits marked on the side of the plaintiff:
S. No. Exhibits Dated Description of Documents 1 P.1 09.02.2018 Certified true copy of the board resolution dated 2 P.2 31.03.2010 Original fire policy No.712800/11/09/12/00000902 3 P.3 31.03.2010 Original fire policy No.712800/11/09/12/00000903 4 P.4 31.03.2010 Original fire policy No.712800/11/09/07/00000904 5 P.5 02.03.2011 Original Certificate of Policy enhancement 72/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 S. No. Exhibits Dated Description of Documents 6 P.6 09.03.2011 Copy of Form 18A filed with Deputy Chief Inspector of Factories 7 P.7 12.03.2011 Original Investigation Report of the plaintiff 8 P.8 08.03.2011 Copy of notice issued by Deputy Chief Inspector of Factories 9 P.9 08.03.2011 Copy of notice issued by TNPCB 10 P.10 22.04.2011 Copy of order in W.P.Nos.7848 to 7850/2011 11 P.11 22.04.2011 Copy of the claim filed by the plaintiff with the defendant 12 P.12 21.03.2011 Copy of Survey report issued by the defendant's surveyor 13 P.13 30.06.2011 Copy of the report issued by M/s.Cunningham and Lindsany 14 P.14 14.07.2011 Original letter of Repudiation 15 P.15 10.08.2011 Copy of the letter by plaintiff to defendant 16 P.16 01.10.2011 Copy of the letter by plaintiff to defendant 17 P.17 27.08.2011 Copy of the letter by defendant to plaintiff 18 P.18 07.10.2011 Original letter by defendant to plaintiff 19 P.19 31.10.2011 Original letter of Repudiation from defendant 20 P.20 11.03.2013 Original Auditor's Certificate 73/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 List of Witnesses Examined on the side of the Defendant:
D.W.1 : V.Arul
D.W.2 : V.Murali Maran
D.W.3 : J.Rajan
D.W.4 : M.Ramesh Babu
List of Exhibits marked on the side of the defendant:
S.No. Exhibits Description of Documents
1 D1 Photocopy of the petition in W.P.No.7850/2011 (marked
through P.W.1 cross)
2 D2 Photocopy of the counter filed in W.P.No.7849 to 7850 of
2011 (marked through P.W.1 cross)
3 D3 Photocopy of the counter affidavit in W.P. No.7848/2011
to 7850/2011 (marked through P.W.1 cross)
4 D4 Photocopy of the counter affidavit in W.P.No.7849/2011
(marked through P.W.1 cross)
5 D5 Photocopy of the counter affidavit in W.P.No.7849/2011 to
7850/2011 (marked through P.W.1 cross)
6 D6 Certified copy of the order dated 24.01.2012 passed in
W.P.No.7848 to 7850/2011 (marked through P.W.1 cross) 7 D7 Photocopy of the common affidavit in support of W.P.No.7850/2011 (marked through P.W.1 cross) 8 D8 Photocopy of the common reply filed by the 5th respondent in W.P.No.7849/2011 (marked through P.w.1 cross) 74/77 https://www.mhc.tn.gov.in/judis C.S.(Comm.Div.) No.412 of 2013 S.No. Exhibits Description of Documents 9 D9 Original Board resolution dated 19.12.2022 10 D10 Original authorization letter dated 10.04.2023 11 D11 Original Policy bearing No.712800/11/09/12/00000902 with terms and conditions for the period 31.03.2010 to 30.03.2011 12 D12 Original Policy bearing No.712800/11/09/07/0000 0904 with terms and conditions for the period 31.03.2010 to 30.03.2011 13 D13 Pringout of the letter received from the plaintiff Cuddalore Divisional office to the Regional Officer of the defendant by fax dated 09.03.2011 along with 65B certificate. 14 D14 Original survey report dated 30.06.2011 (Copy of the survey report is already marked as Ex.P13) List of Court Witnesses:
C.W.1 : K.Kumar List of Court Documents:
S.No. Exhibits Dated Description of Documents
1 C1 25.10.2019 Original letter of Fire Department
2 C2 23.02.2017 Photocopy of the application filed by
Mr.B.Muralimaran, Insurance Claim
Investigator
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S.No. Exhibits Dated Description of Documents
3 C3 22.03.2017 Series are the photocopy of the application
30.07.2024
(2/2)
Index : Yes / No
Speaking Order : Yes / No
Neutral Case Citation : Yes/No
Ksa-2
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C.S.(Comm.Div.) No.412 of 2013
P.VELMURUGAN. J.
Ksa-2
Pre-delivery Judgment
Civil Suit (Comm. Div.) No.412 of 2013
30.07.2024
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