State Consumer Disputes Redressal Commission
M/S. Sunil Solvent Ext. Ltd. vs The United Insurance Co. Ltd. on 25 January, 2011
CHHATTISGARH STATE
CONSUMER DISPUTES REDRESSAL COMMISSION
PANDRI, RAIPUR
Complaint Case No. 04/2010
Instituted on 13.04.10
M/s. Sunil Solvent Extraction Ltd.,
Through its Director,
Shri Saurabh Agrawal, S/o Shri Suresh Agrawal,
Add. Katangikala,
Tah. & Dist. GONDIA (M.S.) ... Complainant.
Vs.
The United Insurance Co. Ltd.,
Divisional Office, Krishna Complex,
Kutchery Chowk, Jail Road,
RAIPUR (C.G.) ... Opposite Party.
PRESENT: -
HON'BLE JUSTICE SHRI S.C. VYAS, PRESIDENT
HON'BLE SMT. VEENA MISRA, MEMBER
HON'BLE SHRI V.K. PATIL, MEMBER
COUNSEL FOR THE PARTIES: -
Shri Sudipta Gupta, for complainant.
Shri P. K. Paul, for opposite party.
ORDER
Dated: 25/01/2011 PER: - HON'BLE JUSTICE SHRI S. C. VYAS, PRESIDENT This complaint has been filed under section 17 of the Consumer Protection Act, 1986 (hereinafter referred as "the Act") for seeking compensation of Rs.72,34,305/- from the OP insurance company on account of loss suffered to the insured property in an incident of fire.
2. It is not in dispute that the complainant is a Public Limited Company having its Solvent Extraction Plant at Katangikala, Tehsil Gondia Dist. Gondia (Maharashtra) and is engaged in extraction of Rice Bran Oil etc. and also in producing De-oiled cakes (DOC) in the // 2 // form of Rice Bran DOC in that Plant. A policy was issued by the OP in favour of the complainant which was a Standard Fire & Special Perils Policy bearing No.190500/11/08/12/0000029 for a total sum insured of Rs. Five Crores covering risks of DOC stock, Oilseeds, Gunny Bags, Crude & Refined Oil, Hexane, Chemicals (Category II) stocks, Spares & Soap stocks, with added on covers of loss due to spontaneous combustion & earthquake (fire & shock). Stocks in the form of Rice Bran Oil etc. as well as Rice Bran DOC were hypothecated with the Bank of India, Gondia Branch, Maharashtra. It is also not in dispute that fire broke out in the insured premised on 04.06.08 and report was sent by the complainant to the insurance company OP and then surveyor was appointed to investigate and assess the loss, who submitted a report to the insurance company. Claim was also preferred by the complainant before the insurance company, which was repudiated.
3. The case of the complainant is that in the insured premises, it was engaged in extraction of Soya Oil, Rice Bran Oil and thereby producing DOC in the form of Soya DOC and Rice Bran DOC etc. The complainant also trades in the above commodities from time to time as per the market demand. Under the Standard Fire & Special Perils Policy, risk in respect of DOC stock, Oilseeds, Gunny Bags etc. was covered due to spontaneous combustion and earthquakes for which // 3 // premium of Rs.20,500/- was paid in addition to the basic premium of Rs.44,750/- and the period of insurance cover was 27.05.08 to 26.05.09. On 04.06.08 fire broke out in the premises of the Company at about midnight causing colossal damage to the Soya DOC stocks in particular and also Rice Bran DOC stocks, which were stored in gunny bags side by side. Immediately the Fire Brigade Station was informed and fire extinguishing measures were carried out in the early hours of 05.06.08. The cause of loss as derived from the report of the fire brigade was spontaneous combustion. Intimation of the fire incident was promptly served on the Gramin Thana, Gondia on 05.06.08 and letter of intimation was issued to the Divisional Manager of the OP insurance company on the same day. Then surveyor Mr. Rajeev Dausage and his associates were appointed, who came to visit the premises of the complainant Company on 06.06.08 and inspected the site of incident. Statement of Director of the complainant Company was also taken by the surveyor. The surveyor reported that the damages caused to the DOC stocks was due to spontaneous combustion, an operated peril under the policy and also called upon the complainant Company to provide the documents mentioned therein for processing of the claim. The complainant then complied with the directions and lodged the fire claim together with all the required documents to the OP insurance company. Then letters were exchanged between the parties, but the OP never showed any exigency // 4 // on their part to settle the claim and after a year from the date of incident, the OP intimated that the fire claim from was not received by them. Immediately claim form was submitted and request after request was made to settle the claim, but the insurance company kept the matter pending for a long time and ultimately repudiated the claim of the complainant on the ground that neither the operated peril nor the affected items are covered in the policy under reference. Complainant felt aggrieved by this repudiation and file this complaint before us for seeking compensation of Rs.72,34,305/- along with interest @ 12% p.a. from the date of incident and also compensation for financial loss to the extent of Rs.50,000/- and compensation for mental agony Rs.50,000/-, apart from cost of litigation.
4. The OP in the written version denied the allegations made by the complainant and averred that the policy proposal, as was filled up and signed by the complainant, clearly mentions that the unit is a working solvent extraction plant from Rice Bran meaning thereby, in unambiguous terms, that the Plant should be fully operational during the policy period and more so at the inception of the policy. It has been averred that Soya DOC, whether by manufacturing or trading, is not included in the policy proposal and hence is outside the cover of the policy. The nature of industrial activity pursued by the complainant has been deliberately suppressed by the complainant. Only trading // 5 // activity was being carried out during the period under consideration and the plant was not running and hence no manufacturing activity of any sort was taking place since a considerable period of time, prior to the start of the policy. It has also been averred that Standard Fire and Special Perils Policy, issued by the OP was strictly in conformity with the policy proposal covering DOC stock from Rice Bran extraction, subject of course to the general conditions and exclusions in the policy. It has also been denied by the OP that any fire has ever occurred in the premises of the complainant and that too on 04.06.08, resulting in damages to the Soya DOC stocks. It has been pleaded that spontaneous combustion was originated in the stacks long before the inception of the policy and definitely not during the subsistence of the policy. The same has not been disclosed at any point of time to the OP and certainly not in the proposal form. It has been averred that the surveyor in his report has found that the marks of fire, noted at different locations in the covered premises, establishes that fire/spontaneous combustion had previously occurred. The theory described by the surveyor is that spontaneous combustion originates in those stacks which are kept for long time which is more than 20 to 30 days at one location. It has been averred by the OP that this report clarifies that the incident of spontaneous combustion had occurred prior to the commencement of the policy period and by the time the smoke was observed by one of the workers of the complainant // 6 // company, the affected material had already charred and charring is not an operated peril contemplated under the policy. It has also been averred that the claim of the complainant was repudiated under General Conditions 1 & 3 (a) of the policy, under which, the policy was voidable in the event of misrepresentation, misdescription or non- disclosure of any material particular and if the trade or manufacture carried on be altered, or if the nature of the occupation or of other circumstances affecting the building insured or containing the insured property be changed in such a way as to increase the risk of loss or damage by insured perils. It has been pleaded that the insurance company was having a right to avoid its liability on the aforesaid terms.
5. We have heard arguments of both parties and very minutely gone through the record of the case.
6. First question for consideration, before us, is whether there was any incident of fire, covered under the insurance policy, in the insured premises of the complainant Company ?
7. Counsel for the complainant had drawn our attention towards report of the Fire Brigade Department of Municipal Corporation, Gondia. The original report is in Marathi and its translation, in Hindi, // 7 // has been filed. The department in its report has opined that on account of excessive heat, the incident of spontaneous combustion happened and the fire broke out in the premises, in which DOC stock of about 7000 bags was damaged. The fire was extinguished by the fire fighting party and fee of Rs.25,150/- was paid to the Fire Fighters by the complainant. In this report it has been clearly stated that it was an incident of spontaneous combustion on account of excessive heat in the month of June and on account of such excessive heat, the stock of DOC started blazing. Complainant in the report to the police, Annexure A- 4, has also stated that the fire in their godown of DOC broke at about midnight. Then Fire Brigade was called and they were doing their work. During the operation of extinguishing of fire, the incident was reported to the police, then and there, immediately on 05.06.08. Intimation was also sent to the insurance company, in which also it has been reported that fire broke out at about 12 O‟clock in the night in the DOC stacked in the godown of the Factory and then approximate value of the stock was mentioned. This report is Annexure A-5 and statement of the complainant is Annexure A-6, which was given to the surveyor and in this statement also it has been stated that on 04.06.08, in night at around 11 O‟clock the workers noticed smoke coming out of the stack of Soya DOC, which was kept there for the purpose of onward sale and the cause of fire in his opinion was due to spontaneous combustion, since the stock stack, on opening, change of // 8 // colour of Soya DOC was noticed and lot of heat use to emerged out. The fire was extinguished on 05.06.08.
8. The surveyor appointed by the insurance company Mr. Rajeev Dausage, in his report Annexure OP-3, under the head Executive Summary stated that "As reported by one of the Directors of M/s. Sunil Solvent Extraction Ltd., that on 04.06.08 at around 11 O‟clock, workers of the plant noticed the smoke emerging out of the stack of DOC. On 05.06.08 morning at around 1:00 am the extinguishing of the fire was started by calling the fire tenderers and water was poured in the stack". Under the head incident report also it has been noted that "As per information gathered from Insured‟s Director on 04.06.08 at 11:00 p.m. workers noticed smoke coming out from the stack of Soya DOC in the covered godown. Immediately, labour was arranged and extinguishing of the fire with own hydrant system was started. But the smoke and fire could not be controlled since repeatedly fire use to reappear. Hence fire tenderers were called. After arrival of the fire tenderers the fire was controlled".
9. It appears that even the surveyor who was appointed by the insurance company was of the clear opinion that it was an incident of fire, which could not be controlled by own hydrant system of the Factory and the fire used to reappear. Under the head cause of fire also // 9 // he has again reported that "in opinion of the insured the stock is affected with Spontaneous Combustion. Undersigned opinion is also the same as narrated by insured". Thus, it was the clear cut opinion of the surveyor that it was a case of spontaneous combustion, as reported by the complainant and agreed by the surveyor. It was really an incident of fire, on account of spontaneous combustion.
10. The OP has also taken shelter of some of the portion of the surveyor‟s report and argued that the spontaneous combustion started even prior to the date of taking insurance cover. In this regard paragraph No.14 of report of the surveyor has been referred, which is in respect of CAUSE OF FIRE. The Surveyor in his report, under the head CAUSE OF FIRE has opined as under : -
"14. CAUSE OF FIRE:-
In opinion of insured the stock is affected with Spontaneous Combustion. Undersigned opinion is also the same as narrated by the insured. However, the Spontaneous Combustion originates in those stacks which are kept for long time which is more than 20 to 30 days at one location.
The marks of the fire noted at different location in the covered premises, it establishes that fire/ Spontaneous Combustion had previously also occurred. Kindly refer the enclosed photograph No.9 which confirms that Fire/Spontaneous Combustion has previously occurred also.
From the nature of the sale & purchase it is revealed that Insured is holding the same material at the same location for more than 20-30 days time.
// 10 // There is no procedure of FIFO & LIFO is followed. The material purchased recently is normally sold from outside only before stacking and old stock is lying at same location. Kindly refer the following schedule of monthly sale & purchase as per (Annecure-III-A), from which it is revealed that insured is holding average stock of 261.00 M.T."
In this paragraph the surveyor has stated that the spontaneous combustion originates in those stacks which are kept for along time which is more than 20 to 30 days, at one location. This opinion never means that the spontaneous combustion originated 20 to 30 days prior to commencement of the insurance cover. 20 to 30 days has been said to be a period of keeping the stack at one location and the stack which was kept at one location for more than 20 to 30 days were having spontaneous combustion. He has also noted some marks of fire at different location in the insured premises and opined that previously also spontaneous combustion occurred. It is possible that previously also there might be some occurrence of spontaneous combustion and there might be marks of combustion at different locations in the covered premises, but merely on account of such marks, it cannot be said that the fire in question was on account of spontaneous combustion which was already started much prior to the date of issuance of insurance policy. Thus, if we carefully read this paragraph in respect of cause of fire from the report of the surveyor, then we find that the surveyor has never stated that the present incident of fire was on account of spontaneous combustion originated more than 20 to 30 // 11 // days back. Therefore, we do not find any substance in the contention of the OP, particularly when fire was noticed on 04.06.08 for the first time and was immediately reported to the Fire Fighting Party and fire was extinguished by the Fire Fighting Party after few hours. The OP has not filed any evidence on the basis of which it can be held that the fire was already in the premises since from a date prior to the date of issuance of policy i.e. 27.05.08.
11. Counsel for the OP has referred judgement of Hon‟ble National Commission in the case of Best Food International Vs. National Insurance Co. Ltd. & anr., IV (2009) CPJ 77 (NC) and New India Assurance Co. Ltd. Vs. Novelty Palace, I (2009) CPJ 71 (NC). In the first case cited by counsel for the OP, it was found that the stock was already damaged, which was received by the complainant and then it had been tried to take benefit of insurance cover. In the second case, there was not an actual fire. It was a case of falling of hot melted insulated material of electric wire at few places, on false ceiling of cloth. Both the aforesaid cases were having different facts then that of the present case. The third case cited by learned counsel for the OP is Vijay Solvex Limited Vs. United India Insurance Co. Ltd., II (2007) CPJ 316 (NC), that was a case in which goods were stored in open and not in godown, whereas the policy was obtained only respect of the goods lying in godown alone. Such are // 12 // also not the facts of the present case. Thus, all the cases referred by counsel for the OP are of no avail to the insurer.
12. Therefore, on the basis of surveyor‟s report, immediate report made by the complainant to the insurer as well as to the police and the report of Fire Brigade, we are convinced that the incident of fire happened on account of spontaneous combustion. So, this issue is decided in favour of the complainant and against the OP.
13. The next question to be considered is, whether insurance cover was provided only in respect of Rice Bran Solvent Extraction Plant and therefore Soya DOC, which was also affected in the fire was having no cover of insurance?
14. In this regard counsel for the OP has drawn our attention towards the insurance proposal made by the complainant. Photocopy of the proposal form has been filed. It appears that the complainant has made proposal for two insurance policies, one in respect of insurance cover of Oil Extraction Building, Plant & Machinery, Accessories & Stock and another in respect of on stock of DOC, Oilseeds, Gunny Bags, Crude and Refined Oil, Hexane, Chemicals (Category-II Stocks), Spares and Soap Stocks etc. The insurance cover of Rs.1,93,00,000/- was provided for Oil Extraction Building, Plant & // 13 // Machinery and Accessories & Stock of the OP and policy in favour of Sunil Solvent Extraction Ltd. was issued having No.190500/11/08/11/00000028. For the present we are not concerned with that policy. The second policy, which is subject matter of decision in the present case, was issued for covering the risk of stock of DOC, Oilseeds and Gunny Bags etc. The proposal form for getting insurance cover in respect of the aforesaid items, submitted by the complainant before the insurance company, is available on record. The proposal form has been filled up and signed by the complainant Proposer. In this proposal form in column No.18, which is in respect of "if used as an industrial Manufacturing unit, please state whether the factory is working or silent," it has been stated that „Working, Solvent Extraction from Rice Bran‟. Column No.16 is in respect of "if used as warehouse / godown (not located in a manufacturing unit) please give the list of goods stored," it has been stated that it is „not applicable‟, meaning thereby that the insured premises was not used as a warehouse, godown (not located in a manufacturing unit). In Column No.15 also it has been stated that „not applicable‟ regarding the question that "if used as Shop please declare whether the goods handled are as per the following list, if yes, whether the stock value will exceed 5% of shops value." In Column No.14, it has been clarified that the insured property has „industrial / manufacturing risks‟ and has no risk of storages outside industrial, no risk of Tanks/Gas Holders outside // 14 // industrial / manufacturing etc. In the whole of the proposal form there is no reference that any risk in respect of storage and sale of anything else than the goods manufactured and produced in the manufacturing unit was also applied for. Thus, from the proposal form it is clear that proposal for working, solvent extraction from Rice Bran was made and the insurance cover for on stock of DOC, Oilseeds, Gunny Bags, Crude and Refined Oil, Hexane, Chemicals (Category-II Stocks), Spares and Soap Stocks etc. was applied and the policy was obtained in respect of the business of Oil Extraction from manufacturing unit of extraction from Rice Bran. Thus, when we read the proposal form as well as the insurance policy together then there remains no doubt that the risk cover was only in respect of Rice Bran DOC, Oilseeds of Rice Bran, Crude and Refined Oil manufactured in the Plant, Spares and Soap Stock of the manufacturing Plant. By no stretch of imagination it can be said that risk in respect of DOC of Soya was also covered, which was purchased by the insured for the purpose of resale from outside and therefore so far as Soya DOC is concerned we are of the view that looking to the proposal as well as the insurance policy no risk was covered in respect of Soya DOC.
15. In this regard, it will be useful to refer statement of Saurav Agrawal Director of the Complainant. He has stated that earlier the unit was engaged in Oil extraction from Soya seeds, but prior to taking // 15 // policy from the OP, it has stopped Oil extraction activities from Soya seeds and has shifted towards Solvent Extraction from Rice Bran. He stated that apart from producing Rice Bran Oil and DOC, the Company was also engaged in trading of Soya DOC and these business activities were nowhere inconsistent with the objectives pursued by the Company. This statement clarifies that the Soya DOC stored there is not the product of the Solvent Extraction Plant, so it was an activity out of the purview of insurance policy issued by the OP.
16. Now the question is whether the Plant was not working at the relevant time, and if so whether even then any risk was covered under the insurance policy?
17. It has been stated by Saurav Agrawal, Director of the complainant that the production activities in the Plant are subject to constrains like availability of labours and market demand. He stated that the Plant was closed for past two months in view of non- availability of labours. It has also been stated by him that the Plant was sometimes started for production of Rice Bran DOC and its Oil. It has also been stated by owner of the complainant that only because for sometime the Plant remained closed on account of non-availability of labours, it cannot be said that the Factory was silent. It has been stated by him that the premium rate for working plant is more than a silent // 16 // one and if the Plant had been silent Plant only, then policy for working Plant should not have been proposed and should not have been granted by the OP.
18. We find sufficient force in the aforesaid saying of the complainant. In the whole of the report of the surveyor appointed by the insurance company it has not been stated that the Plant was not functional, on the contrary under the head ABOUT INSURED, paragraph No.3, it has been stated that "presently, insured is producing Rice oil and Rice DOC and are engaged in trading of Soya DOC". It has also been stated that "the Plant was closed by insured for past two months". This opinion of the surveyor shows that the Plant was not presently closed or was not a silent Plant, but was temporarily not working for past two months and there was a reason, which has been stated by the complainant, that workers were not available and so the Plant was not functional for two months, though it was a working Plant.
19. Thus, we find that there is nothing on the basis of which it can be said that the complainant Company was not functional and was not a working Plant or was a silent Plant. It appears that it was engaged in producing Rice Bran Oil and Rice Bran DOC and temporarily was not working for last two months for want of labours. Thus the report of the // 17 // surveyor and terms and conditions, of the policy, in this regard are not such that the claim could have been repudiated on this ground that the Plant was not working. If the proposal was made for working Plant, then also it is not necessary that the Plant should work round the clock for the whole 365 days. There may be certain unavoidable circumstances on account of which temporarily the Plant may be closed and such closure for limited period cannot relieve the insurance company from its liability of paying compensation in respect of insured perils.
20. Now the question is, what should be the appropriate amount of compensation to be awarded to the complainant?
21. Surveyor appointed by the insurance company Mr. Rajeev Dausage in his report has assessed the loss to the Soya DOC of Rs.27,38,292.48p. after deducting salvage of Rs.1,97,568/- and Rice Bran DOC of Rs.3,29,280/-, after deducting salvage of Rs.65,856/- and has recommended for deduction of policy excess Rs.10,000/-. We find that as no cover was obtained for Soya DOC, so the insurance company is not liable to compensate the loss in respect of Soya DOC, which was outside the purview of insurance policy and for which no insurance cover was obtained and which was also not a product of the Rice Bran Solvent Extraction, for which the insurance cover was // 18 // obtained. However, as there was loss of Rs.3,29,280/-, after deducting salvage, in respect of Rice Bran DOC and there is excess clause of Rs.10,000/- in the policy, therefore we are of the view that Rs.3,19,280/-, as assessed by the surveyor, is the just and proper amount to be paid by the insurance company to the complainant on account of loss to the insured property, under the insurance cover. This amount was not paid by the insurance company, so it is also liable for payment of further amount by way of compensation and interest.
22. It would be worth mentioning that the complainant has not filed any document in support of its claim. Neither any document of purchase of stock nor any other document in respect of hold stock etc. have been filed, so the report of the surveyor can only be the basis for making assessment of loss for any award of compensation.
23. Therefore, this complaint is allowed. The OP is directed to pay Rs.3,19,280/- (Three Lacs Nineteen Thousand Two Hundred Eighty) along with interest @ 6% p.a. from the date of filing of the complaint till the date of payment to the complainant. Further amount of Rs.15,000/- is awarded as compensation for mental agony on account of nonpayment of any amount against the claim of the complainant. Cost of litigation is quantified as Rs.10,000/- and the insurance company is directed to pay that amount within 30 days to the // 19 // complainant, otherwise it would be payable with interest @ 9% p.a. from the date of order. With these directions the complaint is disposed of.
(Justice S.C. Vyas) (Smt. Veena Misra) (V.K. Patil)
President Member Member
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