National Consumer Disputes Redressal
Cm Farming Ltd. vs The New India Assurance Co. Ltd. on 21 May, 2014
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
NEW
DELHI
ORIGINAL PETITION
NO.
324 OF 2000
C & M Farming
Ltd., C & M House
N.D. Patel Road, Nasik
422 001 ....
Complainant
Versus
The New India Assurance Co.
Ltd.
150702, Purti Bungalow, 2nd Floor
Opp. Gadre Mangal Karyalaya
Gole
Colony, Nasik ... Opposite parties
BEFORE:
HON'BLE MR.
JUSTICE J.M. MALIK, PRESIDING MEMBER
HONBLE DR.
S.M. KANTIKAR, MEMBER
For the Complainant : Mr. K.P.S. Rao, Advocate
With Ms. A. Subhashini,
Advocate
For the Opposite Party
: Mr. Nikunj
Dayal, Advocate
PRONOUNCED
ON 21ST
MAY, 2014
ORDER
JUSTICE J.M. MALIK
1. The main controversy in this case swirls around the question, whether, the four 2000 MT Silos and four 200 MT Commercial bin Silos (15 ring), imported from USA, installed in the company of the Complainant, C & M Farming Ltd., were damaged by explosion/ implosion/centrifugal forces, for which the complainant would get compensation from the insurance company or for their non-presence, the complainant would not get any compensation?
2. The case of the complainant is this. The complainant got the above said silos installed at his feed Mill at Sawargaon Road, Village Gowardhan, Near Nasik. The plant, machinery and stock of the complainant were insured with the New India Assurance Co. Ltd., OP. The relevant exclusion clause of the policy, runs as follows :-
In consideration of the insured named in the schedule hereto having paid to the New India Assurance Company Limited (hereinafter called the Company), the premium mentioned in the said schedule, THE COMPANY AGREES, (subject to the conditions and exclusions contained herein of endorsed or otherwise expressed hereon) that if after payment of the premium the property insured described in the said Schedule or any part of such property be destroyed or damaged by :-
1. Fire
2.
Lightning
3. Explosion/implosion but excluding Loss of or damage
a) ..
b) caused by centrifugal forces.
3. On 05.08.1998, while three Supervisors and six Workers were working during the night shift and while the main silo containing about 150 MT of Maize was in operation, at about 10.45PM, a big noise was heard out of blue. One of the silos containing maize was seen falling down on one of the Supervisors, Mr.Bachav, who was standing a few meters away from the silo outside the feed mill. The silo hit the North-East portion of feed mill, damaging the civil works, elevator, screw conveyer, two more feeding silos of 30 MT each, weigh hoppers, a store room, electrical installation, etc. The entire quantity of red maize from the main Silo was observed to have scattered and below the same, two workers were trapped. With the help of other supervisors and workers, Mr.Bachav pulled them out and made arrangements to send them to hospital.
4. Preliminary observations indicated that there can be an air bridge developed inside the silos when the material was being drawn through the weigh hopper, which has a pneumatic opening. The silo was filled to full capacity for night shift pressure on the walls of silo. When maize was drawn, the air bridge exerted pressure on the walls of silo. This must have caused the explosion of silo.
5. The matter was reported to the police authorities and the OP. The complainants letter dated 06.08.98 to the OP was proved on record as Annexure C, where the initial claim of Rs.60.00 lakhs was made. On 12.08.1998, the OP carried out an inspection. The complainant sent a letter dated 14.08.1998, which was proved on record as Annexure D. Thereafter, correspondence was exchanged.
6. Mr.R.V.Dixit, preliminarily investigated the case and came to the conclusion that there was a sudden fall of processing Silo, causing further damage to feed mill wall, roof, two small silos containing feed ingredients. The report also indicated that failure of mill processing silo had taken place of its own and it did not consider the cause of damage as explosion.
7. Again, the police recorded the Panchanama and statements of nine workers/staff members. There is no inkling in the statements of these witnesses that the said incident took place due to explosion.
8. The Expert, Dr.W.D.Patwardhan, Ex-Director of Explosive Research & Development Laboratory, visited the site on 26.08.1998, and submitted his report dated 11.12.1998. Dr. W.D. Patwardhan, visited the site on 26.08.1998 and inspected the silos and other items. He also ruled out the possibility of any explosion. Dr.C.M.Pandit, Consulting Engineer, also visited the site on 19.04.1999 and inspected the damaged site. As per his report dated 08.05.1999, he came to the conclusion that cause of damage of processing silo was not explosion. Their views further found support from M/s. Bhatwadekar & Co. dated 11.06.1999.
9. The complainant appointed its Consultant-cum-Loss Assessor, Mr. Bhaskar Joshi, who gave his report. The complainant company also submitted three Test Reports in respect of damaged maize, rice polish and soya D.O.C. of M/s. Italab Laboratories.
10. Ultimately, the insurance company repudiated the claim vide its letter dated 04.05.2000. The said letter runs as follows :-
In respect of above mentioned claim after making the due scrutiny of the documents produced by you in respect of your claim and after making the survey of the damage from authorized surveyors we came to the conclusion that the damage of Silo is due to unsymmetrical loading conditions caused by arching and piping only and therefore the said cause of damage is not covered under the policy and hence the loss of your Silo is not admissible and payable as per the terms and conditions of the policy.
After the report of authorized surveyor and also after the discussions and meetings with you and your representatives we came to the conclusion that the damage to your Silo not caused by the explosion/ implosion as alleged by you. In the said circumstances as your loss and reasons for the loss are outside the scope of the terms and conditions of the policy. Hence, we are unable to settle and pay your claim and hereby repudiate the same.
11. The reports of the Surveyor, appointed by the company were challenged and this complaint was filed before this Commission, on 03.08.2000, wherein the complainant made the following claims :-
19. The repudiation of claim of the complainant by the respondent is absolutely illegal and arbitrary. The complainant has suffered loss and damages on account of illegal repudiation of the claim:-
i) Actual claim made Rs. 35,78,000/-
ii) Business losses suffered on account of non-functioning of the silo from 06.08.1998 to the date of filing of the present petition at the rate of Rs.45,000/-
per month, for 25 months (Details in Schedule A) Rs. 10,35,000/-
iii) Incidental expenses incurred in connection with settling the claim (Details in Schedule B) Rs. 2,50,000/-
iv) Cost of the present litigation tentatively estimated Rs. 1,00,000/-
--------------------------
TOTAL Rs. 49,63,000/-.
12. The OP has contested this case. It is explained that the claim of the complainant was repudiated on the basis of the preliminary survey report dated 23.08.1998, the report of Dr.W.D. Patwardhan, dated 11.12.1998, the report of Dr. C.M. Pandit, Consulting Engineer, dated 08.05.1999 as also the report of M/s. Bhatwadekar & Co., dated 11.06.1999. The disputed questions are of technical nature and this Commission has got no jurisdiction.
13. The complainant did not produce any technical report establishing the cost of damage due to explosion. On 30.08.1998, the representative of Manufacturer and Supplier of Silo, Mr.Volkan Selcuk, made a joint inspection of damaged silo with the Surveyor, M/s. Bhatwadekar & Co. There is no indication that explosion was caused.
14. The OP has further contended that damage caused to the silo was not covered under the policy. All the other allegations have been denied.
15. We have heard the counsel for the parties and scrutinized the oral arguments and written synopses.
Learned counsel for the OP has placed reliance on the reports of the Surveyors and Experts.
It was argued that the accident took place on account of unsymmetrical loading conditions. Although, the final surveyor assessed the loss to the tune of Rs.19,79,394/-, yet, at the same time, concluded that loss was not covered under the said insurance Policy. The reports of Sh.R.V.Dixit, dated 28.08.1998, report of Dr. W.D.Patwardhan, dated 11.12.1998, mentioned that damages were not falling under the basic cover of fire policy. Dr. Patwardhan opined that the Silo was stated to have contained 150 Tonnes of maize, 25% of the contents were discharged. If this quality has flowed from out from one side, it would create a large cavity near the walls of silo. In such a situation, this side will crumple inward causing the entire column of contents to bend in that direction and the weight of the inclined column will completely break up the silo and destroy it. The loud noise heard when the accident occurred was produced by the buckling of the side of the silo when it started bending. He gave his considered opinion that this is what had happened and the cause of the accident is uneven loading of the silo contents due to presence of excess of moisture in an appreciable part of the contents.
The damage caused to the silo is certainly not due to an explosion or implosion.
16. Then, there is a report of C.M. Pandit, dated 08.05.1999. He listed the causes of failure which are hereby reproduced as under :-
3.1 Almost certainly the failure is caused by unsymmetrical loading conditions by arching and piping. The question would be what caused this arching and piping.
3.2 I rule out any big explosion or implosion.
The adjoining 2 silos are absolutely intact and unscratched. Small air-pockets due to methane gas generation may have taken place. Although this possibility also seems remote considering cool temperatures prevalent in Nashik during Monsoons. And even if such air pockets are formed, they would only enhance the formations of arching and piping leading to unsymmetrical loading conditions given under 3.3. below.
Considering that August is a monsoon month, the moisture contents of maize must have varied. As per records, they did vary between 9.7% to 12.3%. Further, these silos do not appear to be either air tight or water tight. Atmospheric humidity which in monsoon could reach 85%-90% would also affect the moisture contents of stored material affecting its free flowing characteristics.
3.3 Once free flowing characteristics of the stored material are affected because of various reasons mentioned above under 3.2, arching and piping would take place resulting into severe unsymmetrical loading conditions esp. during emptying. The arch-thrust would tend to ovalise the circular shape and would cause buckling at the crown.
Once this has happened the tall silo structure would just topple over as there is nothing to hold it back.
This is exactly what has happened as can be seen from photographs taken after the collapse. Nowhere in the debris or the photographs are there indications of the shattered pieces to be expected after an explosion or implosion. The parts show bending or bucking only. Moreover, as recorded the silo, in a single piece had hit an adjoining structure. In an explosion only flying pieces would have hit adjoining structure.
[Emphasis supplied]
17. Again, the final survey report was prepared by M/s. Bhatwedkar. He also came to the conclusion that the silo was not damaged due to the explosion. He took the same view, as already taken by Dr.C.M.Pandit. It was also argued that the complainant company has filed a claim in the sum of Rs.49,63,000/- but it did not claim any interest.
18. On the other hand, the report given by the complainants Surveyor Mr. Bhaskar Joshi, runs counter to these views. His report, goes to reveal that the damage to the silo was due to dust explosion and since explosion is a peril insured under the fire policies held by the insured, the loss would fall within the purview of the fire policy and insurers would be well within their right to indemnity insureds claim.
19. It was also explained that on 17.04.2006, the complainant filed an IA wherein it was prayed that the insurance company be directed to pay an amount of Rs.19,79,394/- together with interest @ 21% p.a., from the date of the accident. On 11.05.2006, this Commission passed an order directing the insurance company to deposit with this Commission, a sum of Rs.19,80,000/- with interest @ 9% p.a. from 01.02.1999, on or before 30.05.2006. A Special Leave Petition was filed before the Honble Supreme Court against the order dated 11.05.2006, by the OP, which was dismissed.
20. The whole gamut of all the evidence and circumstances clearly goes to show the present case squarely falls within the exception clause. We have perused few words from The New Shorter Oxford English Dictionary- Edition 1993, wherein the word explosion means the action or an act of forcing out or emitting something suddenly, esp. with violence and noise. The action of scorning or rejecting an opinion, proposal, etc. The action or an act of bursting or flying into pieces with extreme violence and noise; the loud noise accompanying this. More fully explosion shot. A shot in which the ball is made to jump out of a bunker by striking the sand just behind the ball. A sudden outbreak or show of emotion. A sudden or rapid increase, esp. in size, numbers, or amount. Again, the word implosion means - A bursting or collapsing inward. The sharp intake of air in the pronunciation of some consonants. When the core of a star collapses the inner part undergoes an implosion, while the outer part undergoes an explosion. There was an implosion, as firms rushed together from great financial conglomerates.
21. The case of all the four Surveyors, namely, Sh.R.V.Dixit, Dr.W.D. Patwardhan, Mr.C.M. Pandit and M/s. Bhatwadekar & Co., are vague, evasive and lead the Commission nowhere. Their reports are based on ifs and buts. They have wavering and flickering minds. A report should not be based on hypothecal views. The meanings obtained from The New Shorter Oxford English Dictionary, clearly go to show that the present case falls within the above said exception.
It is also surprising to note that everybody followed Mr.R.V.Dixit, who gave report without any basis. The doubts created by Mr.R.V.Dixit were followed adamantly, till the tailor-made reports were made.
22. The Surveyors have not ruled out the possibility of presence of dust. We have gone through the literature under the caption Dust Explosions, by Rosalie Alexander and Chilworth Technology. Mr.Bhaskar Joshi, the Surveyor, appointed by the Complainant, gave his findings, as follows :-
4.03 Our Findings:
4.03.01 Narrations of incidence by eye witnesses have confirmed presence of large quantum of grain dust inside the silo.
4.03.2 Insured have a practice of accepting grain upto 12% moisture, upto 15% with some price discount and all grains with moisture content above 15% are rejected. However, since it was peak monsoon time, grain absorbing moisture from atmosphere cannot be ruled out and hence presence of hot grain (ref para 3.02.2) 4.03.3 Organic vapours of chemicals mentioned in para 2.02 do not wet the grain and hence possibility of co-existence of both vapours and grain dust is quite high.
4.03.4 Any source of ignition such as build up of static electricity charge (although silos are well earthed, build up of static charge during monsoon cannot be ruled out totally), or a high friction among grains could give rise to a spark.
4.03.5 The explosion may be caused by any or combination of the following factors:-
4.03.5.1 The spark would ignite the organic vapour which in turn cause dust to explode.
4.03.5.2 The spark would cause the fine grain dust to explode.
4.03.6 It may be noted here that presence of organic vapours would not be uniform all over the volume of silo but there would be some pockets with high concentration of vapour.
4.03.7 It is known beyond doubt that grain silos carry dust in concentrations higher than the safe limits and thus probability of a dust explosion is very high.
4.03.8 Case studies cited in this report also confirm that the phenomenon of dust explosion in grain silos is very common.
4.03.9 We, therefore, are of the opinion that the damage to the silo is due to dust explosion and since explosion is a peril insured under the fire policies held by the insured, the loss would fail within the purview of the fire policy and insurers would be well within their right to indemnity insureds claim.
23. Secondly, Dr. C.M. Pandit was appointed by the Surveyor and not by the insurance company itself. The following extract of Dr.C.M. Pandits report is also relevant :-
In absence of my detailed designs made available for my review, I cannot make any comments as to what provisions were made either in design loads or in providing appropriate devices to forestall development of undesirable loading conditions. However, after overall inspection of collapsed material, nature of construction, chosen gauges of material etc., I feel that unsymmetrical loading conditions are not catered for in design.
24. This is an admitted fact that two persons were trapped in heap maize that spilled out from the silo.
25. In its report, M/s. Bhatawadekar & Co., while discussing the observations made by Mr. Bhaskar Joshi, also mentioned, as under :-
(5)Observations of Mr.Bhaskar Joshi Presence of organic vapours would not be uniform all over the Silo, but there would be some pockets with high concentration of organic vapour.
Our Comments:
(a) In our opinion, the possibility of formation of pockets by organic vapour in the running Silo is remote, as there is constant downward flow of maize which will not allow any such pockets to remain unremoved.
(b) Further such cause leading to explosion will not allow the Silo to bend and collapse in one direction only.(6)
Observations of Mr.Bhaskar Joshi.
Dust in concentration higher than the safe limit is a common phenomena responsible for the explosion in Silos.
Our Comments
(a) There was no dust formation reported by the eye witnesses when failure of Silo occurred.
(b) When tons of grain fall out of the Silo, some dust will obviously fly but it cannot become a cause of damage to Silo.
(7)Observations of Mr.Bhaskar Joshi.
Case studies cited in the report confirm that the phenomena in dust explosion in the grains Silos is very common.
Our comments
(a) The case study only cites what can happen. Insured has not anyway proven what and how these conditions apply to the present case.
The case study cited do not represent the same technical parameters, atmospheric conditions, chemical analysis of the ingredients, method of operation of the Silo, to that of the Silo handling red maize which failed on 05.08.1998, in the insureds premises.
(b) No two events can be of the same nature, having same circumstantial conditions and hence it is improper to correlate the same.
[EMPHASIS SUPPLIED]
26. The But and Ben stand, set up by Mr. Bhatwadekar, further makes his report doubtful. On the one hand, he reports that the possibility of dust cannot be ruled out. On the other hand, he denies it. Again, until and unless one specifically asks the question about dust, the witness of his accord will not mention it. Mr.R.V.Dixit and others should have put a specific question. Even the efforts were made to take the photographs of silo only.
The surroundings were not properly shown. Moreover, how can one may garner the presence of dust in photographs. It cannot be a dallop. It must have spread or flown as suggested by the above said report.
27. Counsel for the complainant has placed reliance on Venkateswara Syndicate Vs. Oriental Insurance Co. Ltd., 2009 (8) SCC 507, Jagir Singh Vs. Ranbir Singh, AIR 1979 SC 381, Sant Lal Gupta & Ors., Modern Co-operative Group Housing Society Ltd. & Ors., (2010) 13 SCC 336, The New India Assurance Co. Ltd. Vs. M/s. Protection Manufacturers Pvt. Ltd., [2010] 7 SCC
386.
28. Under these circumstances, we pass the decree in the sum of Rs.19,80,000/-, along with interest @ 9% p.a. from 01.02.1999, till its deposit with this Commission. The Registry is directed to pay the said amount to the complainant, along with interest accrued thereafter, after the date of deposit with this Commission, till payment. We also award costs in the sum of Rs.50,000/- in favour of the complainant and against the New India Assurance Co. Ltd., OP. The said costs be paid to the complainant, within 90 days from the date of this order, otherwise, it will carry interest @ 12% p.a., till its realization.
...J (J.M. MALIK) PRESIDING MEMBER ...
(DR.S.M. KANTIKAR) MEMBER dd/