State Consumer Disputes Redressal Commission
M/S. R.R. Energy Limited., vs M/S. The Oriental Insurance Co. Ltd., on 19 April, 2012
CHHATTISGARH STATE
CONSUMER DISPUTES REDRESSAL COMMISSION
PANDRI, RAIPUR
Complaint Case No. 07/2010
Instituted on 16.07.10
M/s. R.R. Energy Limited,
A Company Incorporated under
the Companies Act, 1956, having its
registered office at P.O. Garhumaria,
National Highway No.200, Jharsuguda Road, Raigarh,
Tah. & Dist. RAIGARH (C.G.) - 496 004 ... Complainant.
Vs.
M/s. The Oriental Insurance Company Limited,
A Company Incorporated under
the Companies Act, 1956, having its
registered office at Oriental House, A-25/27,
Aasaf Ali Road, New Delhi - 110 002 and
inter-alia a Branch Office At Naya Gunj,
Sunday Market, Raigarh,
Tah. & Dist. RAIGARH (C.G.) ... Opposite Party.
PRESENT: -
HON'BLE JUSTICE SHRI S.C. VYAS, PRESIDENT
HON'BLE SHRI V.K. PATIL, MEMBER
COUNSEL FOR THE PARTIES: -
Shri Mohit Diwan, for complainant.
Shri Shishir Bhandarkar, for OP.
ORDER
Dated:19/04/2012 PER: - HON'BLE JUSTICE SHRI S. C. VYAS, PRESIDENT This is a complaint under section 17 of the Consumer Protection Act 1986 for seeking direction against the OP / insurance company to pay Rs.67,83,000/- along with interest @ 18% p.a. from the date of filing of the complaint till the date of payment and also to pay Rs.5,00,000/- as compensation for deficiency in service and Rs.5,00,000/- as compensation for unfair trade practice and Rs.1,00,000/- as cost of litigation, on account of damages to Electro // 2 // Static Precipitator (ESP) installed in the complainant Company, during the period of insurance cover, under the insurance policy, issued by the OP in favour of the complainant.
2. It is not in dispute that the complainant is a Private Limited Company incorporated under the Companies Act 1956 having its Registered Office at the address given in the cause title of the complaint. The Director of the Company Mr. Amar Agrawal is authorized signatory on behalf of the company and he has filed this complaint. It is also not in dispute that in the year 2006-07 the complainant has established a husk and coal based power plant having capacity of 14 MW, which commenced commercial production of power on 13.07.2007. As per the statutory requirement, the complainant had also installed at the aforesaid Power Plant an Electro Static Precipitator (ESP) as a pollution control measure, which was manufactured and installed by M/s. Thermax Babcock & Wilcox (a division of Thermax Ltd.) Pimpri Pune, a renowned manufacturer of ESP. It has also been averred that function of ESP is to separate dust and ash particles, contained in the smoke which emitted while burning of coal and husk, through chimney. Such dust particles and ash on account of heaviness and weight cannot travel along and resultantly engulfs the surrounding area and pollutes the atmosphere. The ESP separates such heavy dust and ash particles from the smoke and // 3 // allows dust free smoke to pass through chimney. It is also not in dispute that the complainant has obtained a Machinery Breakdown Insurance Policy for the period between 12.07.07 to 11.07.08, covering 13 items including the ESP.
3. The case of the complainant before us is that a premium of Rs.1,70,335/- was paid for obtaining insurance cover for 13 items including ESP and the insurance company had supplied only copies of the policy schedule along with money receipt and list of 13 items covered by the said insurance policy, total six sheets, to the complainant and the terms and conditions of the policy were not supplied, so whatever material was supplied at the time of obtaining insurance, amounts concluded and binding contract of insurance between the parties. It has also been averred in the complaint that on 13.02.2008, the ESP installed in the complainant Power Plant suddenly broke down and stopped functioning in the midnight. Aforesaid ESP broke down incident was duly intimated to Raigarh Branch Office of the OP on telephone as well as vide letter dated 14.02.08 and was also intimated to the Manufacturer of the ESP M/s. Thermax Ltd. Report on 15.02.08 of ESP damage was prepared through joint inspection between the complainant and M/s. Emnas O & M Services (P) Ltd. and was furnished to the OP's Raigarh Branch on 18.02.08. Initial survey of the damaged ESP was carried out by Mr. Ajay Athaley on 14.02.08 // 4 // in presence of engineers of M/s. Thermax Ltd. and it was found during survey that first and second field of the ESP had been extensively damaged due to accident, requiring at least 2-3 months time frame to complete replacement of collecting plates etc. It was also duly intimated to the insurance company in time. The complainant had also received quotations from their suppliers and was in the process of placing orders for materials required for replacing the damaged parts of the ESP. The complainant intended to restart the Power Plant by using the 3rd field of the ESP because it was not practicable and viable to shutdown the plant for 2-3 months for want of materials required for replacement. So the plant was restarted after initial survey where it was found that replacement of ESP will cost around Rs.30 lacs. On 10.09.08 the OP forwarded the complainant a printed Claim Form which was submitted along with necessary documents on 15.04.08 in the Office of the OP claiming thereby amount of Rs.67,83,000/- under the subject Machinery Breakdown Insurance Policy. In the meantime, the complainant had received the components for replacement of damaged parts and therefore intimated to the insurance company on 16.07.09 that the plant would be shutdown for repairing of ESP on 19.07.2009. After completion of replacement of the damaged parts it was again intimated to the insurance company that the plant would be restarted on 04.08.09 and the OP was called upon to send surveyor for final inspection of the // 5 // ESP and thereafter final survey was carried out by Mr. N.K. Gupta, surveyor but his report was not furnished to the complainant despite repeated demands. The surveyor obtained signature of the complainant on several printed and typed papers and assured the complainant that their claim would be settled soon. But later on the insurance company / OP vide letter dated 31.03.2010 repudiated the claim of the complainant on the ground that the loss falls under the policy exclusion. Copy of such exclusion clause or terms and conditions of the policy was never supplied by the insurer to the insured and it was unfair on the part of the insurance company to repudiate the claim on such ground. Then, notice through Advocate was issued and complaint has been filed before us for seeking compensation.
4. The insurance company in the written version has taken this preliminary objection that the complainant being a Company incorporated under the Companies Act 1956, is not competent to file complaint under Consumer Protection Act 1986. It has also been objected that the claim was repudiated on 31.03.2010, whereas the present complaint has been filed on 02.07.10 i.e. after lapse of 3 months. Whereas under condition No.4.2 of the policy the action or suit should have been commenced within 3 months after such rejection and therefore the complaint is barred under the law. On merits also it // 6 // has been averred that complete policy document was forwarded to the complainant by the OP, as per routine practice. It was also containing policy schedule along with terms and conditions. Had there been any omission on the part of the OP, then in this regard the complainant would have immediately demanded, for the terms and condition of the policy, from the insurance company and since there was no demand, so it can well be presumed that the terms and conditions of the policy were supplied to the complainant. It has also been averred that the ESP installed in the plant of the complainant had not suddenly broke down and stopped functioning in the midnight of 13.02.08. There was also no joint inspection and preliminary survey with the engineers of the M/s. Thermax Ltd. It has been averred that surveyor Mr. N.K. Gupta has found that cause of the damage was gradual wearing away and wasting/corroding of Gas Distribution plates, electrode plates, tadpoles etc. and no signs of fire or electrical melting were noted. It was evident that phenomena of gradual material wasting of surface layers, and gradual wearing occurred in above components. The probable cause of corrosion/erosion to gas distribution plate is atmosphere of low temperature, excessive amount of sulpher trioxide gas, failure of hopper heater, moisture etc. in the ESP. Consequently, erosion / corrosion damage in bottom portion of GD plate caused improper / uneven gas, concentrated in bottom portion of ESP. Thus, flue gas and smoke flow was concentrated in bottom portion of ESP, // 7 // causing corrosion / erosion. Thus, loss falls under exclusion of policy and the damages to electrodes, plates and rigitrodes were minimized after repairs / fabrication of inlet GD plate by insured in February 2008. As per the claim form dated 16.03.08 only two fields were damaged, but in their subsequent statement it was also stated that 3rd field was also damaged to the extent of 20%. This, statement shows that entire portion of inner components, electrical and non-electrical, were gradually wasting, eroding and wearing out. It has also been averred that purchase order for replacement of the damaged parts was already placed, as back on 13.10.07, whereas the reported event was that of 13.02.08. Thus, the damages cannot be attributed to the reported event of 13.02.08. It has also been averred that the insured reported breakdown on 13.02.08. But, this breakdown did not necessitate the replacement of their claimed items viz. electrodes, tadpoles, guide frames, structural steel members etc. only the GD plate was fabricated locally and ESP was again put to operation on 19.02.08 without any replacement and was working for more than six months continuously, without replacement of claimed items. Thus the damages claimed cannot be attributed to event dated 13.02.08 and it is established that these items did not suffer sudden and unforeseen loss / breakdown, so the damages were beyond the scope of machinery breakdown policy. It has also been averred that non-electrical items i.e. hopper support pipe, structural steel angles, girders, which were // 8 // away from electrodes, plates etc., have also suffered similar damages, which shows that nature of damages to electrical and non-electrical items are identical. It has also been averred that the logbook confirms that they used the first and second field equally for more than 6 months, so it was a false declaration on the part of the complainant, dated 18.02.08, that ESP would be put on by using 3rd field only. It has also been averred that the insured did not follow manufacturer's instructions and did not regularly checked hopper, plates, electrodes etc., which resulted in heavily corroded electrodes, for more than 6 months. As per manufacturer's instructions the distorted / misaligned / corroded components / parts were to be checked and avoided, but the insured operated ESP with heavily corroded electrodes for more than 6 months, which was contrary to the instructions of the manufacturer and so the policy stands null and void. Logbook was also not maintained with necessary parameters such as gas temperature, unburnt carbon percentage; dust load; moisture etc. which was also a breach of terms and conditions. On the basis of aforesaid observation the surveyor found that the insurer's liability stood nil and the OP relying on the report of the surveyor has averred that it was not liable for paying any amount to the complainant, because the damage was on account of gradual corrosion/erosion and wearing / wasting away of different components, which were not // 9 // timely attended and maintained by the complainant. So liability of the insurance company has been totally denied.
5. We have heard arguments of both parties and have very minutely gone through the record of the case.
6. First question for consideration is as to whether only policy schedule, in six sheets, was supplied to the complainant by the OP and terms and conditions of the insurance policy were not supplied ?
7. In this regard there appears contradictory statement of the complainant as well as the Officers of the OP. The Director of the complainant Amar Agrawal in his affidavit supporting the statement made in the complaint has stated that at the time of effecting the Machinery Breakdown Insurance Policy only 6 sheets document, containing policy schedule 1 page, money receipt 1 page and list of 13 items covered by the subject insurance policy containing 4 pages was supplied and besides the aforesaid 6 page documents no other document was supplied to the complainant by the insurance company. To counter this statement, Mr. Ramesh Chandra Keshwani, Senior Divisional Manager of the OP insurance company in his affidavit has stated that the complainant M/s. R. R. Energy Ltd., as per the requirement, had submitted a proposal form to the Raigarh branch // 10 // office for Machinery Breakdown Insurance Policy and on their submission of proposal form, complete set of the subject Machinery Breakdown Insurance Policy bearing No.18/2008, subject to terms, conditions and exclusions contained therein, were supplied to the complainant covering the risk of 13 ESPs, for the period from 12.07.2007 to 11.07.2008. The said policy has also been filed by the OP before us and Mr. Ramesh Chandra Keshwani in his affidavit has stated that the complete set of the said policy document is Annexure OP-1 and has been filed before us along with affidavit of Mr. K.S. Chhabda. Mr. K.S. Chhabda Senior Divisional Manager of the insurance company in his affidavit has stated that when Machinery Breakdown Insurance Policy was obtained by the complainant from the OP / insurance company for 13 ESPs then as per the routine practice complete set of policy schedule along with terms and conditions were supplied to the complainant at the time of effecting the insurance. Thus, the statement of the complainant to the effect that terms and conditions of the policy were not supplied to the complainant along with policy document stands contradicted by statement of two Senior Officers of the OP / insurance company. Apart from it, in a notice which has been sent by counsel for the complainant to the OP on 07.11.2009, (Annexure A-14), in paragraph No.10, under the instruction of the complainant / Company, it was informed to the OP that the complainant Company had lodged in time // 11 // their bonafide and genuine claim towards breakdown of their ESP under the subject insurance policy for settlement by the addressees "in accordance with terms and conditions of the Policy". This reference in the notice issued by counsel for the complainant about 8 months prior to the date of filing of the complaint, clearly shows that the complainant and its counsel both were fully aware regarding the terms and conditions of the policy and that is why they were requesting the OP to settle the claim of the complainant in accordance with terms and conditions of the policy. If they were not supplied with the copy of terms and conditions of the policy or the policy was not having any terms and conditions other than one page policy schedule, then there was no necessity of mentioning these words that the claim be settled in accordance with terms and conditions of the policy.
8. Apart from it, the complainant is a Private Limited Company having power plant of big capacity and is a large business concern. It must be having a team of Managers who are well versed to the provisions of Law, particularly the Insurance Law. If the insurance company had not supplied the terms and conditions of the insurance policy then the Officers of the complainant Company would have immediately demanded from the insurance company the terms and conditions of the policy before accepting the policy document or immediately thereafter. Because a large concern will not like to pay a // 12 // huge sum of Rs.1,70,335/- for obtaining insurance cover for 13 items including ESPs without having any terms and conditions of the insurance cover. As no such demand was ever made by the complainant from the OP, so this conduct also shows that terms and conditions of the policy were also supplied along with policy document.
9. The complainant, to justify its version that terms and conditions had not been supplied, immediately before filing of the complaint had sent an application under Right to Information Act to the OP on 01.07.2010, demanding the insurance policy as original and then the insurance company on 27.07.10 had supplied the complainant the policy document and also the terms and conditions of the policy, which was attached along with the policy document and immediately thereafter on 30.07.2010 the present complaint has been filed. This conduct also shows that the demand was merely to get support for this argument that the terms and conditions were not supplied, whereas the circumstances as well as the statement of the Officers of the insurance company clearly shows that terms and conditions were supplied to the complainant by the Office of the insurance company at the time of providing insurance cover. So we decide this question against the complainant and hold that the terms and conditions of the // 13 // policy were attached with the policy document and are binding upon the both parties.
10. Next question for consideration is whether the insurance company is not liable to provide any benefit under the policy, as the complaint has not been filed within three months from the date of repudiation of the claim ?
11. Learned counsel for he insurance company has drawn our attention towards condition No.4.2 of the insurance policy, which read as under : -
"If a claim is in any respect fraudulent or if any false declaration is made or used in support thereof or if any fraudulent means or devices are used by the Insured or any one acting on his behalf to obtain any benefit under this Policy, or if a claim is made and rejected and no action or suit is commenced within three months after such rejection or in case of arbitration taking place as provided therein within three months after the arbitrator or umpire have made their award, all benefit under this Policy shall be forfeited."
(Emphasis supplied by us) He submitted that as the claim, which was made before the insurance company, was rejected on 31.03.10 by sending letter of repudiation to the complainant, therefore under the aforesaid clause the complainant was free to initiate any action against the insurance company either in the form of complaint before this Commission or in // 14 // the form of any suit before a competent Court within a period of three months from the date of rejection of his claim and in case no such action is taken or suit is filed within a period of three months, then all benefits under the policy stands forfeited and the insurance company cannot be held liable.
12. Learned counsel for the complainant to counter this arguments submitted that under the provisions of 24 A of the Consumer Protection Act 1986, period of limitation for preferring complaint before Consumer Forum is two years and that period of limitation cannot be curtailed by the insurance company under any condition in the policy document and if such condition is there, then it was not binding upon the complainant, being contrary to the provisions of Law.
13. The argument advanced by learned counsel for the complainant has no force and is to be rejected. So far as repudiation of claim of the complainant by the OP insurance company vide letter dated 31.03.10 is concerned there appears no quarrel between the parties. Complainant in the complaint itself in paragraph No.17 and 18 in very specific words has stated that a letter of repudiation was served on the complainant by the OP and thus that letter was received by the complainant and the period of limitation has been computed in // 15 // paragraph No.24, of the complaint, from the date of letter of repudiation of claim itself and 31.03.10 has been said as last date of arising cause of action for filing the complaint before this Commission, as on that date the claim of the complainant was repudiated by the insurance company for the first time. Record of the case further shows that this complaint was filed before this Commission on 16.07.10. If the period of three months is calculated from 31.03.10, then such period expires on 30.06.10 and the complaint was to be filed before 30.06.10, if condition No.4.2 of the insurance policy is to be given effect.
14. Hon'ble Apex Court in the case of H.P. State Forest Company Ltd. Vs. United India Insurance Co. Ltd., I (2009) CPJ 1 (SC), has taken into consideration similar question and in paragraph No.9 & 10 has held as under : -
"9. Mr. Sharma has, however, submitted that in view of the observations in some paragraphs in Food Corporation of India's case, the observations in Sujir Nayak's case were liable to reconsideration. We, however, find no merit in this plea for the reason that in Sujir Nayak's case, Food Corporation of India's case (supra) has been specifically considered and Vulcan Insurance Company's case (supra) too had been relied upon. In Sujir Nayak's case, this Court was called upon to consider Condition 19 of the policy which was in the following terms :
"Condition 19. - In no case whatever shall the company be liable for any loss // 16 // or damage after the expiration of 12 months from the happening of loss or the damage unless the claim is the subject of pending action or arbitration."
10. While construing this provision vis-à-vis Section 28 of the Contract Act and the cases cited above and several other cases, in addition, this is what the Court ultimately concluded:
"16. From the case-law referred to above the legal position that emerges is that an agreement which in effect seeks to curtail the period of limitation and prescribes a shorter period than that prescribed by law would be void as offending Section 28 of the Contract Act. That is because such an agreement would seek to restrict the party from enforcing his right in Court after the period prescribed under the agreement expires even though the period prescribed by law for the enforcement of his right has yet not expired. But there could be agreements which do not seek to curtail the time for enforcement of the right but which provide for the forfeiture or waiver of the right itself if no action is commenced within the period stipulated by the agreement. Such a clause in the agreement would not fall within the mischief of Section 28 of the Contract Act. To put it differently, curtailment of the period of limitation is not permissible in view of Section 28 but extinction of the right itself unless exercised within a specified time is permissible and can be enforced. If the policy of insurance provides that if a claim is made and rejected and no action is commenced within the time stated in the policy, the benefits flowing from the policy shall stand extinguished and any subsequent action would be // 17 // time-barred. Such a clause would fall outside the scope of Section 28 of the Contract Act. This, in brief, seems to be the settled legal position. We may now apply it to the facts of this case.
19. The clause before this court in Food Corpn. case extracted hereinbefore can instantly be compared with the clause in the present case. The contract in that case said that the right shall stand extinguished after six months from the termination of the contract. The clause was found valid because it did not proceed to say that to keep the right alive the suit was also required to be filed within six months. Accordingly, it was interpreted to mean that the right was required to be asserted during that period by making a claim to the Insurance Company. It was, therefore, held that the clause extinguished the right itself and was therefore not hit by Section 28 of the Contract Act. Such clauses are generally found in insurance contracts for the reason that undue delay in preferring a claim may open up possibilities of false claims which may be difficult of verification with reasonable exactitude since memories may have faded by then and even ground situation may have changed. Lapse of time in such cases may prove to be quite costly to the insurer and therefore it would not be surprising that the insurer would insist that if the claim is not made within a stipulated period, the right itself would stand extinguished. Such a clause would not be hit by Section 28 of the Contract Act.
21. Clause 19 in terms said that in no case would the insurer be liable for any loss or damage after the expiration of twelve months from the happening of // 18 // loss or damage unless the claim is subject of any pending action or arbitration. Here the claim was not subject to any action or arbitration proceedings. The clause says that if the claim is not pressed within twelve months from the happening of any loss or damage, the Insurance Company shall cease to be liable. There is no dispute that no claim was made nor was any arbitration proceeding pending during the said period of twelve months. The clause therefore has the effect of extinguishing the right itself and consequently the liability also. Notice the facts of the present case. The Insurance Company was informed about the strike by the letter of 28.4.1977 and by letter dated 10.5.1977. The insured was informed that under the policy it had no liability. This was reiterated by letter dated 22.09.1977. Even so more than twelve months thereafter on 25.10.1978 the notice of demand was issued and the suit was filed on 2.6.1980. It is precisely to avoid such delays and to discourage such belated claims that such insurance policies contain a clause like clause 19. That is for the reason that if the claims are preferred with promptitude they can be easily verified and settled but if it is the other way round, we do not think it would be possible for the insurer to verify the same since evidence may not be fully and completely available and memories may have faded. The forfeiture clause 12 also provides that if the claim is made but rejected, an action or suit must be commenced within three months after such rejection; failing which all benefits under the policy would stand forfeited. So looked at from any point of view, the suit appears to be filed after the right // 19 // stood extinguished. That is the reason why in Vulcan Insurance case while interpreting a clause couched in similar terms this Court said: (SCC p. 952, para
23) "It has been repeatedly held that such a clause is not hit by Section 28 of the Contract Act."
Even if the observations made are in the nature of obiter dicta we think they proceed on a correct reading of the clause."
In the light of the fact that Food Corporation's case has been considered in Sujir Nayak's case, no further argument remains in the present matter, as Clause 6(ii) and Condition 19 are, in their essence, pari materia."
Thus, as per the settled Law, condition No.4.2 which was there in the insurance policy is not hit by Section 28 of the Contract Act and this clause 4.2 in terms says that if a claim made, is rejected, and no action or suit is commenced within three months after such rejection, then all benefits under the policy shall be forfeited. Thus, before expiration of such period of three months, if any action or suit is not filed and no relief was pressed before any Forum or Court then the insurance company cannot be said to be liable on account of forfeiture of all benefits under the policy and the clause therefore has the effect of extinguishing the right itself and consequently the liability also. Such clause has been held valid by the Hon'ble Supreme Court and has not been found hit by Section 28 of the Contract Act and so on account of effect of such clause, the rights available to the insured under the insurance policy has been forfeited, as the complaint was not filed or // 20 // no action before any Court has been initiated within three months from the date of repudiation of claim. Thus, on the basis of settled Law by Hon'ble Supreme Court, we are of the view that the present complaint is not maintainable and is liable to be dismissed on this short ground.
15. Next question for consideration is whether the complainant has suffered any loss regarding which compensation may be paid by the insurance company under the terms of the insurance policy ?
16. Learned counsel for the complainant has very heavily placed reliance upon the report of the preliminary surveyor and submitted that preliminary surveyor Mr. Ajay Athaley, appointed by the insurance company, after inspection and observation has estimated the repairing cost of the damaged parts as around Rs.30,00,000/- and has also opined that the peril comes under the Machinery Breakdown Insurance Policy and thus the damages were under the terms of the insurance policy and compensation is payable by the insurance company. Whereas learned counsel for the insurance company has referred the report of final surveyor Mr. N.K. Gupta, Annexure OP-3 and 35 and submitted that in final survey report it was found that the insurer's liability stands nil and the insurer is not liable to pay any // 21 // amount under the insurance policy, as the loss falls under exclusions of the policy.
17. The exclusion clause of the insurance policy says that "any loss or damage by fire within the electrical appliances and installation insured by the Policy arising from or occasioned by overrunning, excessive pressure, short circuiting, arcing, self heating or leakage of electricity, from whatever cause (lightning included), is covered, provided that this extension shall apply only to the particular electrical machines, apparatus, fixture, fitting or portions of the electrical installation so affected and not to other machines apparatus, fixture, fittings or portions of the electrical equipments which may be destroyed or damaged by fire so set up." Clause 4 of General Exceptions further says that "gradually developing flaws, defects, cracks or partial fractures in any part not necessitating immediate stoppage although at some future time repair or renewal of the parts affected may be necessary" and clause 5 of General Exceptions further says that "deterioration of or wearing away or wearing out of any machine caused by or naturally resulting from normal use or exposure".
18. Thus, the aforesaid two circumstances are also under the exclusion clause and which begins with the words "THE COMPANY // 22 // SHALL NOT BE LIABLE UNDER THIS POLICY IN RESPECT OF : ". It has been argued that as the parts regarding which it is claimed that there was sudden breakdown whereas actually the damages, were affected on account of gradually developing defects and deterioration of or wearing away or wearing out of those parts of the machine, so it comes under the exclusion clause.
19. Mr. N.K. Gupta, in his report Annexure OP-3 has elaborated on this subject under the head CAUSE OF DAMAGE AND INSURER'S LIABILITY and in sub-para 1 of the aforesaid head it has been stated by him that "the cause of damage is gradual wearing away and wasting / corroding of Gas Distribution plate, electrode plates, tadpoles etc. No signs of fire or electrical melting were noted. It was evident that phenomena of gradual material wasting of surface layers, and gradual wearing occurred in above components." He has further stated that "the probable cause of corrosion / erosion to gas distribution plate is atmosphere of low temperature, excessive amount of sulpher trioxide gas, failure of hopper heater, moisture etc. in the ESP. Consequently, erosion / corrosion damage in bottom portion of GD plate caused improper / uneven distribution of smoke / flue gases into the ESP. Thus, flue gas and smoke flow was concentrated in bottom portion of ESP, causing corrosion / erosion of bottom portion of electrodes, plates and tadpoles etc. Thus, loss falls under exclusion 7 of Policy." He // 23 // has further noted that "further damages to electrodes, plates, rigitrodes was minimised after repairs / fabrication of inlet GD plate by Insured in February, 2008." Preliminary surveyor Mr. Ajay Athaley in his report Annexure OP-37 has mentioned under the head Occurrence that "as reported by the insured that on 13/02/2008 at about 10.00A.M. it was noticed that conveying of ash to silo had stopped hence thorough inspection was carried out and found that the first field of the ESP had caught fire. Immediately shut down was taken at about 12.00 in the noon. Under the head Inspection & Observation he has found that "------. On inspection it was observed that electrodes of the first fields were completely melted as well as the electrodes of the other two fields were partially damaged. Rapping system of the ESP was said to be intact and was in working condition. Insured could not give the exact cause of damage but looking to the situation it appears that dust particle might have accumulated on the electrodes which might have reduced the distance of two electrodes and ultimately lead to short circuit which lead to burning of dust particle present in side the chamber. After inspection it was noticed that Electrodes of all the three fields need to be changed. The estimate of repair may be around Rs.30 Lacs."
20. Thus, Mr. Athaley, who inspected the premises of the complainant on 14.02.08 i.e. on the next day of happening, has opined // 24 // that there was burning of dust particles inside the chamber, which was because of short circuit between two electrodes on account of accumulation of dust particles. These facts were immediately noted by Mr. Athaley, whereas Mr. N.K. Gupta, who inspected the affected ESP on 19.10.08 i.e. after around 8 months from the date of incident, in his report has stated that no signs of fire or electrical melting were noted there. This finding runs counter to the what has been inspected by Mr. Athaley, immediately after the incident.
21. To understand functioning of ESP, the notes which have been made by two surveyors are to be read carefully. From the notes as well as from the description which is given in the complaint and in the affidavit of Mr. Amar Agrawal it is clear that as an statutory measures of pollution control ESP was installed in the factory of the complainant, so that the dust and ash particles can be separated from the smoke and flue gases before it can be liberalized in the atmosphere. The functions of ESP are to the effect that the dust particles become charged by means of a corona which produces ions that become attached to the dust particles. Corona is a luminous discharge which appears round the surface of the conductor when voltage gradient exceeds a critical value. This corona causes ionization of air. The corona is generated when high voltage is applied to emitting electrodes. The ions produced as a result of corona, migrate towards // 25 // the collection electrodes, and in the process collide / attach to the dust particles. The attachment of ions results in the build up of electric charge, the magnitude of which is determined by the No. of ions attached. Dust particle collects on collection electrodes, due to forceful movement of above charged dust particles towards collection electrodes and then emitting electrodes are made of rigid ERW alloy steel tubes with staggered pins welded to it. The sharp pins provide excellent property for excellent discharge of electrons. The plate collection electrodes are generally made of carbon steel and consist of solid sheet plates with structural stiffeners. Thus, dust particles collect gradually upon the electrodes and its periodic removal is necessary.
22. Mr. N.K. Gupta, surveyor has found that there was no regular check up of hopper, plates, electrodes etc. so the dust particles were going on collecting upon electrodes at the bottom and that is why the incident happened, which was clearly a damage on account of gradually wearing away and wasting / corroding of gas distribution plate, electrode plates tadpoles etc. As per the case of the complainant, Engineers from the Manufacturing Company had also inspected the premises and then gave some report, copy of few pages, written in hand, have been filed by the complainant but the concerned Engineer or anybody else from the concerned Company could not be produced to show that the damage was on account of sudden incident // 26 // of breakdown and was not on account of regular non-maintenance of ESP.
23. Complainant says that the breakdown was immediately reported to M/s. Thermax Ltd., being the manufacturing Company and supplier of ESP and then on 15.02.08 report on ESP damage was prepared through joint inspection between the complainant and M/s. Emnas O & M Services (P) Ltd. and their detailed report was furnished to the OP insurance company. But no-one could come from that Manufacturing Company or from M/s. Emnas O & M Services (P) Ltd., to say that any such joint inspection was conducted and that it was found that the damage was on account of mechanical breakdown. The complainant has filed Annexure A-B, which appears to be exchange of e-mail between the complainant and one Mr. Subir Banerjee. The complainant requested to Mr. Subir Banerjee that Engineer of the Company came to the complainant and inspected the damaged ESP and signed the Minutes of Meeting with the complainant and for claiming loss from the insurance company the complainant needs affidavit from Thermax Ltd. to support the claim. In reply, it has been informed that as a corporate policy Thermax Ltd. are not authorised to give any affidavit on any matter. Hence, it was informed that the Company is not in a position to provide any help to the complainant. Thus, no technical opinion from Thermax Ltd. could // 27 // come on record on behalf of the complainant. However, document Annexure A-4, which is on the letterhead of the complainant, shows that it was signed by someone on behalf of the complainant R.R. Energy Ltd. and someone on behalf of M/s. Emnas O & M Services (P) Ltd., probably namely Mr. P. Soma Sundaram. Annexure A-5 shows that minutes of the meeting were prepared in presence of Mr. Prabir Debnath for M/s. Thermax Ltd. and two other persons for the complainant. But nothing technically had been said in this letter. Annexure A-6 is a handwritten document and probably has been signed by someone on behalf of Thermax Ltd. and one on behalf of the complainant. It is difficult to understand this document and to say anything on its basis as to what has been written in this document. So, there was complete lack of evidence on behalf of the complainant to show that the damages to the ESP were on account of some mechanical failure.
24. Preliminary Surveyor Mr. Athaley has filed his affidavit and in that affidavit it has been stated by him that on 14.02.08, he visited the plant and inspected the alleged damage to the ESP and observed that the electrodes of the first field were in damaged condition. It has further been stated by him that the rapping system of the ESP was however intact and was in working condition and the insured could not give the exact cause of damage to the electrodes, as no one from // 28 // manufacturer M/s. Mega Therm or M/s. Enmas O & M Service Pvt. Ltd. was present at the time of his inspection, therefore no definite opinion about the cause of damage could be given and because of that he could no go into the details of assessment of loss as it was not his job to assess the loss at that stage. The estimate of repairs was thus only a guess work, which could not have been confirmed without the final survey.
25. Similarly, Mr. Gupta in his affidavit has supported his report and mentioned many reasons on the basis of which it was stated by him that the damage was on account of gradual wearing and tearing and wasting of components of the machinery because of non- maintenance. It has been stated that on account of gradual wearing away and wasting / corroding of components the damage occurred. It has also been averred by him that purchase order dated 13.10.2007 was placed by the complainant with the manufacturer for the same components, which shows that corrosion / damages existed prior to the reported loss on 13.02.08 and thus the damages cannot be attributed to the reported event of 13.02.08. It has also been highlighted by him that breakdown dated 13.02.08 did not necessitate the replacement of their claimed items i.e. electrodes, tadpoles, guide frames structural steel members etc. only the GD plate was fabricated locally and ESP was again put to operation on 19.02.08 and which was // 29 // working for more than six months continuously, without replacement of claimed items and so also the damages claimed cannot be attributed to event dated 13.02.08. It has also been highlighted by him that the insured stated that the ESP would be put on using the third field only, but the logbook shows that it was functioning as good as it was earlier using all the three fields, for more than six months. So, there was no substantial loss on the reported date of event. He has also assigned many other reasons.
26. Logbook, copy of which has been filed by the OP as Annexure OP-4, is available on record. It is a document of the complainant, provided to the insurance company. This logbook shows that on 13.02.08 all the three fields were continuously working almost round the clock for 24 hours and sometime for a little less time. On 14, 15, 16, 17 and 18 there was shutdown and then all the three fields again started working, though with a lesser capacity. But gradually the same marginal capacity was achieved and which continued for next many- many months. Such reading itself shows that all the components were functional. Thus, this logbook shows that in fact the incident of 13.02.08 might had not very substantially damaged any of the field and that is why the fields were capable of putting on to use immediately thereafter and after replacement of few lesser important parts by some fabricated parts. It goes very strongly in favour of report of Mr. N.K. // 30 // Gupta to show that there was not much impact on the functioning of all the components of ESP in the incident of 13.02.08 as the components were working well even thereafter.
27. Second important aspect is that purchase order was placed much earlier with the Manufacturing Company by the complainant. Annexure A-17 is the purchase order dated 13.10.07, for which quotation was submitted by the Manufacturing Company on 07.05.07 i.e. around 9 months prior to the date of incident and purchase order was also placed around 4 months prior to the date of incident. However, by Annexure A-18 another quotation was given on 15.02.08, as per verbal instruction of the complainant / Company for the same components and in the same quantity. Purchase order, Annexure A- 19, was placed on 16.02.08 for the same components, but the Proforma Invoice for Despatch, Annexure A-20 shows that though it was dated 19.02.08, but it was to comply purchase order dated 13.10.07 i.e. much prior to the date of incident and by that Invoice, collecting plates were supplied. That order was placed much earlier. The Proforma Invoice for Despatch, Annexure A-23 dated 19.03.08 also shows that the purchase order was placed on 13.10.2007 and by that Invoice 14 loose + 01 Case + 01 MI Crate of some components which have not been named were supplied. Annexure A-26 is again a Proforma Invoice dated 26.08.08 for which purchase order was placed on 19.02.08 i.e. // 31 // after the date of incident and the supplied articles have not been named in it and only it has been mentioned that 1 Bundle + 1 Crate + 2 Case + 2 Loose were supplied. Similarly, Annexure A-29 is also a Proforma Invoice for Despatch dated 26.08.08, for which purchase order was given on 19.02.08. From these documents it appears that earlier supply order was placed much prior to the date of incident in the year 2007 for the same components. Later on same components were again ordered and ultimately they were replaced. From these documents it becomes doubtful that repair or replacement of the components was necessitated because of the incident dated 13.02.08 and it appears that the parts were functioning already under the damaged condition and that is why the purchase orders were placed earlier.
28. One witness Mr. Vishal Masih, has filed his affidavit in favour of the complainant. He is Diploma holder in Mechanical Engineering and was working on the post of Manager Maintenance of the complainant Company. In his affidavit, he has stated that electrodes of the ESP got melted due to secondary combustion and after duly intimating the OP, minor changes and repairs were done and the ESP was restarted in low efficiency as first two fields were working in low efficiency and the third field was working at 80% efficiency. Thus, this witness has also admitted that in spite of incident, the ESP was // 32 // restarted and all the fields were put on with some lesser efficiency. He has stated that quotation for purchase of spares was offered by Thermax Ltd. on 07.05.07. He has further stated that ESP is a big and complex apparatus / machine and spare parts are not readily available in open market unlike two wheeler or four wheeler automobiles. They have to be purchased from the manufacturer anticipating accidents and to maintain stock. Therefore, purchase order dated 13.02.08 was placed, which was in response to quotation offered by Thermax Ltd. dated 07.05.07 and then they supplied new and original parts. This statement appears to be clear cut after thought because nothing was stated by the complainant in his affidavit in this regard. Nor anything was said in the complaint itself regarding purchase. There appears no stock book and there is no material on the basis of which it can be inferred that stock of spares was necessary to be maintained by the complainant Company and that is why purchase order regarding the same components, which are said to be damaged in the incident, was placed much earlier than the date of incident. It is also to be kept in mind that cost of the components was not a meager amount, but was in many lacs and normally the components which are costing in lacs are not required to be stored unnecessarily without their demand and without report of any expert to the effect that their replacement would be needed at any time and particularly when the machine was functioning quite well even without any such replacement.
// 33 //
29. Thus, the action of calling quotation in the month of May 2007 and giving purchase order in the month of October 2007 or on nearby dates clearly shows that there was gradual corrosion / erosion of components of the machine and that is why purchase order was earlier placed and then it has been reported that there was sudden mechanical breakdown.
30. Thus, we agree with the report of surveyor Mr. N.K. Gupta to the effect that the damage to the components of the ESP was not on account of sudden mechanical breakdown, but was on account of gradual corrosion / erosion, wearing away and wasting of the components of the ESP, which comes under the exclusion clause of the insurance policy and so if the insurance company has repudiated the claim, then such letter of repudiation cannot be said to be deficiency in service on the part of the insurance company.
31. Therefore, on the basis of aforesaid discussion, the complaint itself is not maintainable because it has been filed after the forfeiture of benefits under the insurance policy as per clause 4.2 of the policy and the damages to the components of the ESP was not a sudden mechanical breakdown, but was on account of gradual corrosion / // 34 // erosion, which comes under the exclusion clause of the insurance policy, so the insurance company is not liable.
32. Thus, the complaint has got no substance and is dismissed. No order as to cost.
(Justice S.C.Vyas) (V.K. Patil)
President Member
/04/2012 /04/2012