National Consumer Disputes Redressal
Adarsh Chemicals & Fertilisers Ltd. & ... vs United India Insurance Co. Ltd. on 5 September, 2013
NATIONAL CONSUMER DISPUTES
RERESSAL COMMISSION
NEW DELHI
ORIGINAL PETITION NO. 398 OF 2000
Adarsh Chemicals & Fertilizers Ltd.
Udhna, Surat 394 210
Gujarat
2. Dr.Prakash D.Patel
Director
Adarsh Chemicals & Fertilizers Ltd.
Udhna, Surat 394 210
Gujarat Complainants
Versus
United India Insurance Company Ltd.
Head Office, 24, Whites Road
Chennai 600 014
Opposite Party
BEFORE:
HON'BLE
MR. JUSTICE J.M. MALIK, PRESIDING MEMBER
HONBLE DR.
S.M.KANTIKAR, MEMBER
For the Complainants : Mr. Anil Nauriya, Advocate
With Ms. Sumita Hazarika,
Advocate
For the Opposite Party
: Mr. P.K. Seth, Advocate
PRONOUNCED ON 05.09.2013
ORDER
JUSTICE J.M. MALIK
1. This complaint was filed before this Commission, on 01.02.1999. The Registry has given wrong number as, 398 of 2000. They are directed to be more careful.
2. This is a unique case, where the Insurance Company contends that report of its Surveyor should be discarded because this witness and his report cannot be said to be guileless. The Insurer were to appoint another Surveyor, but for the reasons best known to them, the needful was not done. Can a party claim the benefit by keeping the facts under the hat or to burry ones head in the sand?.
3. The facts of this case are these. Adarsh Chemicals & Fertilizers Ltd., Udhna, Surat, Gujarat and Dr.Prakash D.Patel, Director of the said Company, complainant Nos. 1 & 2, respectively, filed a claim for Rs.166.07 lakhs, as per the Surveyors report, along with interest @ 18% p.a. They have also claimed consequential losses, including the loss of business to the complainants, in the sum of Rs.60.00 lakhs besides special damages. The complainants obtained insurance policy from the United India Insurance Co.Ltd., the Oppoiste Party, in the sum of RS.22,22,25,000/-. A fire occurred on 16.04.1995, in the reactor of the complainants Maleic Anhydride Plant, which gutted the plant and machinery situated in Surat, Gujarat, leading to a major fire loss. The OP was informed telephonically as well as vide letter dated 26.04.1995.
4. In order to produce Malelic Anhydride, a mixture of Benzene and Air, has to be reacted in a shell and tube reactor, in the presence of vandadim pentoxide catalyst. The temperature is controlled through cooling, by circulation on the shell side of fused salt consisting of potassium nitrate, sodium nitrite and sodium nitrate. The technology for producing Maleic Anhydride was licenced from Scientific Design Company Inc., USA.
5. The plant was shut down at about 8.14 hours on 16.04.1995 due to the failure of Gujarat Electricity Board Grid Power Supply on account of tripping of three feeders. The power could not be fully resotred until after 7.00PM. After the re-starting of the reactor, temperature reached high levels and crossed the auto-ignition temperature for the gas mixture which resulted in fire. Due to fire, the entire batch of catalyst was damaged irreversible and non-selectively along with the springs, besides gas mixture and thermocouples. The excessively high temperature generated by fire also brought about change in the microstructures, reactor, tube sheets. The cause of fire was auto-ignition of the gas mixture in the reactor due to rise in temperature caused by continued reaction and the lack of salt circulation, which otherwise could have aided in the removal of heat.
6. The facts of the fire stands confirmed vide Panchanama, dated 29.04.1995, the report dated 24.07.1996 of the Loss Prevention Association of India Ltd., Assessment made by Technical Collaborator, Scientific Design Company Inc., USA, vide their letters dated 23.05.1995, 19.09.1995, 31.07.1996 and 23.09.1996, which confirmed the temperatures at which fire could occur and catalyst would sinter, the comments received from the Indian Institute of Petroleum, Dehradun, Analysis reports received from the Gujarat Industrial Research & Development Agency, Baroda, a Government of Gujarat Organisation, Analysis report dated 17.06.1995 of Electrical Research & Development Association, Vadodara. The Metallographic report, dated June, 1995 of Larsen & Toubro Ltd, Mumbai, confirmed that the tubesheet of the reactor was affected. The data sheets of the Loss Prevention Association of India Ltd. and the technical work on Maleic Anhydride by B.C.Trivedi and E.M.Culbertson, complainants Technology Development Centre at Pune, Joint Survey Report, dated 09.12.1996, confirmed the auto-ignition temperatures.
7. The OP refused to accept the survey report. Thereafter, negotiations took place between the parties. The OP Company vide its letter dated 03.11.1997, contended that it will re-examine the matter. Vide their letter dated 05.02.1998, the OP informed the complainant that, although, the matter had been re-examined, yet, they had concluded that the loss did not fall within the ambit of the policy. OP repudiated the claim, vide its repudiation letter, dated 05.02.1998. The main plea taken by the OP was that no fire occurred in the premises, in dispute. Ultimately, this complaint was filed with the prayers, detailed above.
8. In the written statement, the OP has placed reliance on the repudiation letter dated 29.08.1997. The claim of the complainant was repudiated on the following grounds, as per repudiation letter :-
1.
At 8.00AM, power failure stopped the reactor from working and the power was restored at 7.00PM, i.e., after 11 hours. The reactor was started without warming up the catalyst bed. Reportedly, this was overlooked.
2. While feeding Benzene at 8.00PM, salt circulation pump was not started. This was also overlooked.
3. The reactor did not start and the reactor was shut down at 9.20PM. In this duration of 75 minutes the temperature reading of the Bottom of reactor alone was observed. Temperature reading of the top of the reactor was not monitored.
4. Salt outlet temperature was not monitored. Salt circulation pump was not started.
5. It is claimed that temperature of salt outlet was 476 C (against normal temperature of 380 C). The gas outlet temperature is claimed to be at 1200 C. Besides only bottom of reactor temperature was observed and top of reactor temperature was not monitored.
One fails to understand as to how only one out of the 3 temperatures was continued to be monitored by the operator for 70 mints. The control panel of the reactor will normally contain all these reacorders together. The operator can look at them in a single glance, in which case it is curious to note how he could look fixedly at one guage without allowing his eyes to wander to rest of the temperatures for a long period of 70 minutes.
6. The report of I.I.P. is of a general nature only. Insured did not refer the exact parameters and sequence to IIP to come out with their views. In fact, the date on the catalyst was not supplied to IIP.
7. Considering the report of Alpha and the stimulation exercise of the insured the following are observed.
a) Heat balance exercise not carried out
b) The high temperature readings observed simulation study are not agreed by Alpha.
c) Dynamic simulation study of insured is not verified from any unbiased source.
d) The temperature at which sintering of the catalyst occurs is disputed by Alpha.
e) Alpha observes that fire, if at all, cannot be prolonged for 75 minutes.
f) The reactor has high gas velocity. So the high temperature of the salt solution indicates only runaway reaction and not a fire.
A careful consideration of all the above points, reveal that :-
a. There is no damage to any part of reactor except catalyst.
b. No fire came out of shell/ tube sheet joints c. No show of open flame or glow was observed.
d.
No fire fighting took place.
e. No external accidental spark or any other cause is established for the origin of the alleged fire.
In view of the above, we regret to inform that the claim is to be treated as No Claim since the alleged occurance did not get established.
9. Other defences set up in the written statement are these. Complicated and disputed facts are involved in this case. The case should be decided by the Apex Court as per law laid down in Syncho Industries Vs. State Bank of Bikaner, (2002) 2 SCC 1. The complaint is barred by time. There is no deficiency on the part of the OP. All the allegations are incorrect.
10. We have heard the counsel for the parties. The learned counsel for the Insurance Co., OP, vehemently argued that there is no deficiency on the part of the OP. The above said loss occurred due to negligence on the part of the complainants. They did not take the action in time. There was no fire at all. The report submitted by the Surveyor is not correct.
He admitted that no Second Surveyor was appointed.
Only one Investigator inspected the spot and another one was assigned the work of assessing the loss, if any. It was argued that the OP cannot be held liable for the mistake committed by the complaiant itself.
11. His argument is a strawman intended to divert us from real issue. His plea is typically gauche. Attention of this Commission was invited towards the report submitted by Alpha Project Services Pvt. Ltd., Baroda, who were employed by United India Insurance Co. Ltd., through Surveyors Rakesh Narula & Co., to investigate the above said incident on 16.04.1995. The relevant extracts of its report rather go contrary to the repudiation report and support it to some extent. It was mentioned :-
4. Incident Description :-
. After introduction of the feed, it was observed that the temperature in the bottom section of the reactor was dropping instead of going up and there was no sign of reaction being initiated. Temperature data in the top section of the reactor could only be seen on the DCS screen and they were not stored. The gas temperature at the reactor outlet had jumped from 228 to above 480* C (average outlet being 477*C). Operators may not have seen the temperature rise in the top section as well as at the outlet and therefore the salt circulation pump was not turned on. As a result, the salt outlet temperature also had shot up to 480*C. This temperature probably was also overlooked by the operators. The plant was then taken under shut-down as the operators felt that reaction was not commencing.
6.2 Reaction Initiation :-
. Based on the information provided by ADARSH, the reaction can initiate when the bed temperature is about 300-325*C. Since the bed in the top section was well above the reaction initiation temperature, the reaction had started there.
12. Ultimately, he came to the following conclusions in his 19-page long report :-
6.7 Combustion/Fire:-
Since the gas mixture was ignitable, occurrence of a small fire cannot be theoretically denied in the last stage of the operator..
7. Conclusions :-
2. Based on the reactor gas inlet temperature, gas outlet temperature and salt temperature, fire could not have occurred due to static charge.
4. The gas temperature was 477*C at the reactor outlet. Heat transfer area available in the top head is too small to heat the salt solution to 480*C. Thus, high gas temperature must have occurred in the tubes.
5.
Since salt circulation was not turned on and the reaction was started in the top section, catalyst temperature jumped to about 400*C in less than fifteen minutes. Once the temperature of catalyst was 400*C, the reaction rate would have been very high resulting into further temperature rise. Thus the catalyst bed in the top had experienced runaway temperature condition with peak temperature of 550-600*C
6. . The heat balance indicates that only 20% feed benzene would have burnt after reaching the auto-ignition temperature had the fire ocurred.
7. Due to high gas velocity in the tubes, fire could have occurred only at the outlet of the tubes. Thus, heat transfer to salt could take place only through the tubesheet. Heat transfer area through the tubesheet was too smalll to heat the salt solution to 490*C. Thus the high salt temperature indicate that high temperature have reached in the tubes because of run-away temperature conditions and not because of long continuous fire in the dome.
13. The final survey report dated 09.12.1996, prepared by M/s.P.C.Gandhi & Associates & M/s. Rakesh Narula & Co., running into 40 pages, reveals the following facts :-
10.12.21 In view of all above facts, follwing facts can be summarised.
a) Auto ignition temperature of the mixture was 450 degree C to 475 degree C and was much lower than sintering temperature of catalyst which was above 525 degree C.
b) The gas mixture was always under ignitible condition.
c) The physical measurements of temperatures and mettallurgical analysis of L & T, concludes that temperature of gases must have gone above 700 degree C. Insureds dynamic analysis indicates localised gas temperatures to be as high as 1243 degree C, at about 2.1 m bed height inside the tubes just before Benzene feed was stopped.
d) Dynamic analysis carried out by Insured confirms the results more close to actual recording. It is understood that insured had applied the same simulation module for actual operating conditions and results were found to be satisfactory.
10.12.22 Considering above discussions, we are of the opinion that damage to the catalyst by all probability was due to rise in temperature following fire as gases will ignite at 450 degree C to 475 degree C before temperature would increase further.
Further, initiation of fire would quickly raise temperature of the adjacent catalyst bed which in this case would be the layers just below, and as soon as temperature of the bed reaches above 450 degree C, gases will ignite at that level. In this manner, the flame travelled down from 3.1m to 1.9m by the time Benzene feed was stopped.
Therefore, damage to the catalyst can be said to have been caused by an insured peril, i.e. Fire.
[Emphasis supplied]
14. The Surveyors came to the conclusion that the net payable amount is Rs.1,66,06,993/-. The Joint Surevyors Report also opined :-
15.0 Consequential Loss:-
15.1 Insured have not yet submitted their claim in respect of the consequential loss. Estimated loss is visualised at Rs.50 to 60 lacs.
15. It must be borne in mind that the claim does not include the consequential loss. It is not to be granted by mere asking of the Surveyors. We are of the considered view that there is no reason to discard the report of the Surveyor.
No cogent and plausible reason was given by the OP. In D.N.Badoni Vs. Oriental Insurance Co. Ltd, 1 (2012) CPJ 272 (NC), the Bench headed by his Lordship, Mr. Justice Ashok Bhan, was pleased to hold :-
It is well settled law that a Surveyors report has significant evidentiary value unless it is proved otherwise, which petitioner has failed to do so in the instant case.
16. In United India Insurance Co. Ltd., & Ors. Vs. Roshan Lal Oil Mills Ltd. & Ors., (2000) 10 SCC 19, the Honble Apex court was pleased to hold :-
7. The appellant had appointed joint surveyors in terms of Section 64-UM(2) of the Insurance Act, 1938.
Their report has been placed on the record in which a detailed account of the factors on the basis of which the joint surveyors had come to the conclusion that there was no loss or damage caused on account of fire, was given and it was on this basis that the claim was not found entertainable. This is an important document which was placed before the Commission, but the Commission, curiously, has not considered the report. Since the claim of the respondent was repudiated by the appellant on the basis of the joint survey report, the Commission was not justified in awarding the insurance amount to the respondent without adverting itself to the contents of the joint survey report, specially the facts enumerated therein. In our opinion, non-consideration of this important document has resulted in serious miscarriage of justice and vitiates the judgment passed by the Commission. The case has, therefore, to be sent back to the Commission, for a fresh hearing.
17. In New India Assurance Co. Ltd., Vs. Protection Manufacturers Pvt. Ltd., (2010) 7 SCC 386, it was held that in the absence of any material to support investigators report, National Commission rightly held that fire was accidental and that Investigators attempt to attribute the same to arson was motivated and intended to benefit insurer.
18. Counsel for the complainant has also cited few authorities in his favour. In Harris Vs. Poland, Lloyds List Law Reports, Vol.69-35, March, 12, 1941, it was held :-
The object of the contract is to indemnify the assured against accidental loss by fire, and so long as the property is accidentally burnt, the precise nature of the accident seems to be immaterial. It may be therefore concluded that the loss in both cases falls equally, within the contract.
19. In Sri Venkateswara Syndicate Vs. Oriental Insurance Co.Ltd. & Anr., (2009) 8 SCC 507, it was held that appointing surveyors one after another so as to get a tailor-made report to the satisfaction of the insurer is impermissible.
20. In New India Assurance Co.Ltd., Vs. Zuari Industries Ltd. & Ors., (2009) 9 SCC 70, it was held that the duration of fire is not relevant as long as there is fire, which caused the damage, claim is maintainable even if the fire is for a fraction of a second.
21. Consequently, and according to the Surveyors report, we allow the complaint and hereby direct the Insurance Company, OP, to pay a sum of Rs.1,66,09,493/- with interest @ 9% p.a. from the date of filing of this complaint, i.e. 01.02.1999, which be paid within 60 days, otherwise, it will carry interest @ 9% p.a., till the date of realisation. Costs in the sum of Rs.25,000/- be also paid by the opposite party to the complainant, within 60 days, failing which, it will carry interest @ 9% p.a, till realisation.
....J (J.M. MALIK) PRESIDING MEMBER ...
(DR.S.M. KANTIKAR) MEMBER dd/14