ACME FLUORO POLYMERS LTD. vs CENTRAL WAREHOUSING CORPORATION

IT is the case of the complainant that it imported critically important machinery called Iso-static presses from the Belgian manufacturer and as per the invoice dated 24.11.1994 it was valued at Rs. 1,60,00,000/-. It is the contention of the complainant that the project being export oriented, it was required to complete many formalities before taking delivery of the said machinery including arranging for the necessary Bank Guarantee to the Central Government and for arranging the necessary foreign exchange loans from the Banks. Therefore, pending clearance of the said machinery, he filed the warehousing bond and sought to get the goods stored in the bonded warehouse of Central Warehousing Corporation Ltd. The warehousing bond was filed for the term of one year as per Section 61 of the Customs Act. When the Customs House agent of the complainant applied for necessary warehousing space, he was informed that goods had to be stacked in the open yard of the warehouse. As there was no option, complainant''s agent applied for open space for the time being. The machinery was stored in Custom''s bonded warehouse at Mumbai in March, 1995. The initial period of storage was for a period of three months. But, before expiry of the same, more time was sought in May, 1995 which was accordingly granted.

IT is contended that the machinery stacked in the open yard was badly damaged by falling of the rolled steel coils each weighing 15 metric tonnes on the containers of the said machinery. It is pointed out that heavy steel sheet coils in cylindrical shape were stacked close to the goods of the complainant one over the other in a highly perilous condition. On 4th August, 1995, when the agent of the complainant went to the yard for deposit of storage and insurance charges levied by the respondent, he found that the machinery was badly damaged. He came to know that the damage had occurred due to the fall of steel coils each weighing 15 metric tonnes and by its heavy impact. Immediately, the information was given to the officers of the respondents and to the Chairman of respondent No. 1. Thereafter, respondent No. 1 lodged a claim before the insurer, i.e., respondent No. 2, for a sum of Rs. 1,72,30,180/- under their All India Floater Declaration Policy which covered the risk of fire, flood and theft for the relevant period (i.e., from 1.4.1995 to 31.3.1996). It is, therefore, submitted that there Acme Fluoro Polymers Ltd.. V. Central Warehousing Corporation 551 is deficiency in service by respondent No. 1 by which complainant has suffered heavy loss and for the same he has filed this complaint. Written version by respondent No. 1 In written version, it has not been disputed by respondent No. 1 that on 25.2.1995, the Custom House agent, M/s. Shree Shipping Services, approached the Warehouse Manager for issuance of a no-objection certificate of 10 sq. metres open space, for storage of the consignment under bond. The custom house agent was advised to store the said consignment in covered area and for that purpose he was to obtain a number on the waiting list. Despite this, Customs House agent opted for open space and undertook to clear the consignment before May, 1995, which is the expected month of onset of monsoon in Mumbai. However, the consignment was not cleared in the month of May. It is submitted that the accident occurred due to erosion of soil caused by heavy rains which destabilized the adjoining stack of coils. Thus, the circumstances leading to the accident were beyond the control of the answering respondent. It is, therefore, submitted that there was no deficiency in service by respondent No. 1. It is also stated that insurance cover provided by respondent No. 1 is for the statutorily prescribed risk of fire, flood and theft, as also mentioned in general terms and conditions of storage.

IT is submitted that the metal coils were stacked as per the norms of the warehousing in a pyramid shape with an individual coil being in sleeping position, the height of which did not exceed 3 metres. In addition to the above, stone boulders were used as stoppers to ensure stability. It is submitted that the stack of coils destabilized on account of erosion of soil due to heavy rains and thus fell on the goods of the complainant. It is, therefore, evident from the circumstances leading to accident that it was vis majeure, i.e., an act of God and, therefore, respondents are not liable to compensate the complainant for damages.

APART from the written submissions, we have heard the learned Counsel for the parties extensively and considered the written submissions filed by the complainant on 23.1.2004 and 30.4.2004 and that by opposite party on 5.5.2004. Application by Canara Bank On record, on behalf of the Canara Bank, an application is filed for permitting it to join as co-complainant or in the alternative to pass appropriate orders by declaring and directing that any compensation that may be awarded in favour of the complainant company be paid to the Canara Bank, towards satisfaction of such monetary award that may be passed by this Commission. For this, it has been pointed out that the complainant owes a huge liability in the sum of Rs. 2,78,45,275/- as on 11.8.1999 with interest at the rate of 19.38% p.a. For this purpose, it has been pointed out that the Canara Bank had given Bank guarantee in the sum of Rs. 145.10 lakhs for the purchase of the aforesaid press from M/s. National Forge Europe on the condition of 15% down payment and 10% cash margin. That application is dismissed by this Commission by order dated 27.7.2000, relevant portion of which reads as under : "Presently, Canara Bank is not interested in the dispute before us. This Commission cannot pass any order in favour of the Canara Bank. The Bank can seek relief in some other Forum. It has been stated that some proceedings are pending before the Debt Recovery Tribunal. The statement is recorded but we cannot pass any order of restraint or attachment on that ground. The application of the Canara Bank to be added as a party cannot be entertained because they are not an interested party in the dispute as it is. Their claim for attachment will arise only if an order is passed in favour of the complainant which is a hypothetical situation. The application is dismissed."

Acme Fluoro Polymers Ltd.. V. Central Warehousing Corporation 552 A. Evidence brought on record. From the facts stated in the complaint and the written version it is apparent that the goods imported by the complainant reached Mumbai Port in January, 1995 and they were required to be kept in a bonded warehouse till the complainant could complete the customs formalities. As shaded area was not available, the goods were required to be stored in open warehouse of respondent No. 1 in May, 1995 the customs house agent informed the complainant that some more time was likely to be taken in clearance of the goods. Thereafter, respondent No. 1 raised the bill of Rs. 46,354/- for storage charges and insurance charges for the period between 1.4.1995 and 7.7.1995 on the basis of the value of the goods at Rs. 1,72,30,180/-.

ON 7.8.1995 when an officer of the complainant visited the Warehouse to start the process of clearance of the goods, after inspection, he found extensive damage to the boxes because of falling of heavy steel sheet coils on the boxes containing machinery. It is stated that weight of each steel coil was 15 metric tonnes. It is also pointed out that the complainant was not informed by the opposite party about the time and cause of damage. Thereafter, the officer of the complainant sent a report to the Managing Director at Hyderabad.

FOR this, the Commercial Manager, Central Ware Housing Corporation, had stated that, "It is evident from the perusal of the letter dated 8.8.1995 addressed by the Warehouse Manager to M/s. Oriental Insurance Co. that the cause of damage to the consignment has been attributed to continuous rains from 16.7.1995 to 25.7.1995 which caused fast-flow of water in the premises of the warehouse. The flow of water thus caused soil erosion and the stoppers used for stabilising the stacks of metal coil stored adjacent to the complainant goods were washed away. The displacement of stoppers thus caused collapse of the stackof heavy coils on the consignment of the complainant. In view of the above, it is evident that there is no contradiction in the contents of the letter dated 8.8.1995 and that of 23.8.1995 of the Warehouse Manager, in so far as the above accident occurred due to erosion of soil caused by heavy rains which destabilised the adjoining stack of metal coils which thus fell on the goods of the complainant". B. Insurance coverage : The Warehouse Manager wrote a letter dated 8th August, 1995 to the Oriental Insurance Company (opposite party No. 2) with regard to the damage due to rain/flood caused to the machinery stored by the complainant. The said letter reads thus : "Dear Sirs, This has in reference to our phonogram message on the captioned subject it is to state that during continuous rain from 10.7.1995 to 23.7.1995 there was fast flow of water into the premises of the warehouse. The flow of water caused soil erosion into open space where the cargo of heavy weight are in storage under custom bond. The stoppers are to be used for stable stacking of consignment and the same were washed away due to fast flow of water. The displacement of stoppers caused collapse of stock of heavy coils on wooden cases consignment of M/s. ACME Fluoro Polymers Ltd. under bond No. CW-20-4997 dated 28.3.1995. The collapsed lot of coils damaged the cases of machinery consignment. The consignment is worth Rs. 1,72,30,180/-. Therefore, you are requested to register the claim for flood loss of Rs. 1,72,30,180/- and arrange the survey of damaged consignment to enable the importer to get the compensation at the earliest. Acme Fluoro Polymers Ltd.. V. Central Warehousing Corporation 553 Sd/- xxxxxxx (R. V. Vishwanath) Warehouse Manager"

For insurance coverage also it has been stated in the affidavit of the Commercial Manager that the complainant was informed that the insurance cover was limited to the statutory risk of fire, theft and floods. That the grant of no-objection certificate by the answering respondent only imply that the importer is at liberty to store his goods after taking the requisite handling operation, in any part or area of the Warehouse subject to the availability." C. Survey Report : The complaint was filed on 26.2.1996 and this Commission, after hearing the parties, permitted the complainant to appoint a qualified Surveyor to get the goods inspected. The Surveyor was to find out the damage caused to the said goods and to report the nature and extent of damage and the probable factors that caused the damage, according to his considered opinion. The Surveyor was also required to report appropriate action for conserving the goods from future damage. M/s. Rane Engineers and Surveyors, Chartered Engineers, Marine, Fire Engineering Surveyors and Valuers (Govt. Regd.), submitted a report dated 28.10.1996 to this Commission. In the said report, it has been pointed out that the machinery imported by the complainant is used for providing anti-corrosive lining of PTFE on articles used in chemical industries. He found the said machinery was packed in six packages. For each package there was verification by him and damage was assessed. Finally in the concluding portion it has been observed that for six packages (cases) and one Pallet the invoice value in Bill of Entry was Rs. 1,45,90,000/- and the estimated amount of loss was Rs. 61,44,000/-. The probable cause for damage is mentioned as under : "Falling of very heavy material on the machine cases - The cases have been badly damaged due to sudden impact caused by the falling of heavy steel coils stacked nearby. The cause of falling may be due to external accidental impact or may be tumbling due to marshy soil where coils have been stacked in three to four tires one above the other. When we visited the site on 25.3.1996 all the coils had been removed by CWC Authorities, as such our observation is based on the photographs shown by the Company and our detailed study of the location of the equipment. Even now, lot of old heavy equipments have been stacked nearby and the equipment is thus prone to further damage."

The relevant photographs are produced on record.

IN addition to the aforesaid report, the complainant has produced the Chartered Accountant''s report on loss of profit. Further, pending hearing, as an interim relief, this Commission, by order dated 30.4.1997 permitted the complainant to remove from the warehouse the goods which are said to be damaged subject to the condition that the complainant pay the warehousing charges due in respect of the goods. This was subject to Customs Regulations. Acme Fluoro Polymers Ltd.. V. Central Warehousing Corporation 554 Relevant Rules : The relevant terms of the Central Warehousing Corporation for the purpose of appreciating the contentions raised in this complaint are as under : "2.2. The Corporation will normally insure the goods against the risk of damage or loss by fire, theft, burglary, riots and strikes. The charges for insurance as prescribed by the Corporation shall be payable by the depositor, in addition to storage charges. 2.3. The Corporation may, at its discretion, permit a depositor to have his own insurance which shall be for the C.I.F. value of the goods plus duties and also penalties, if any, payable for the same. This will further be subject to his obtaining a clear declaration from his insurers in the form of an endorsement on the insurance policy, with a copy to the Corporation, that so long as the goods remain in the Warehouse, the Corporation holds lien on the same to satisfy the requirements of law relating to bonding of goods and dues of the Corporation as the goods remain in the Warehouse, the Corporation holds lien on the same to satisfy the requirements of law relating to bonding of goods and dues of the Corporation. 7.0. Rights and Liabilities of the Corporation : 7.1. The Corporation will take care of the goods while in storage to ensure their security and proper upkeep. However, the Corporation shall not be responsible for any deterioration or damage in quality or quantity of goods and packages on account of any inherent quality of the goods or packages or for causes beyond the control of the Corporation. 7.2. Subject to these terms and conditions, the rights and liabilities of the Corporation will be as that of the bailee."

Finding : From the aforequoted rules, it is apparent that : (i) it was the duty of the respondent Corporation to insure the goods against the risk of damage by fire, theft, burglary, riot, strike, etc; (ii) if the Corporation had not taken insurance, it would have permitted the complainant to take insurance, but no such direction or permission was given by the Corporation; (iii) it was the responsibility of the Corporation to take care of the goods while in storage and to ensure security and proper upkeep. The liability of the Corporation is excluded in cases : (a) for any deterioration or damage in quality or quantity of goods and packages on account of inherent quality of the goods or packages; and/or (b) for causes beyond the control of the Corporation; (iv) other rights and liabilities of the Corporation is that of a bailee.

IN the present case, there is no question of deterioration of goods because of its inherent quality. Acme Fluoro Polymers Ltd.. V. Central Warehousing Corporation 555 Further, in a warehouse, it is the responsibility of the respondent for the safety of the goods entrusted to it, in all events, except when loss or injury arises solely from the act of God or from the fault of the persons who stored the goods or from inherent vice in the goods themselves. The respondent is the insurer of safety of the goods against every thing extraneous which may cause loss or injury. Therefore, the sole question is whether the damage is for the cause beyond the control of the Corporation. For this defence raised is of vis-majeure. In our view, it is difficult to accept the contention of the respondent No. 1 that the damage caused to the machinery stored in the warehouse can be attributed to vis-majeure (act of God). The metal coils were stacked in a pyramid shape and the height was upto 3 metres. It is submitted by respondent No. 1 that the stack of coils destabilised on account of erosion of soil due to heavy rains and thus the metal coils fell on the packages of the complainant. It is also contended that in between the packages of the complainant and that of the other goods, stone boulders were used as stoppers to ensure stability. In our view, for vis-majeure settled law is that it is an external occurrence due to natural causes which is not the result of any human intervention and which could not be avoided by any amount of foresight and care. For example, it is stated that fire caused by lightening would be vis-majeure, but the accidental fire, though it may not have resulted from any act of or omission cannot be said to be an act of God. In the present case, it is not the case that the machinery stored by the complainant is damaged by the ram water. As stated above, fall of steel coils weighing 15 metric tonnes on the packages of the equipments stored by the complainant cannot be directly held due to heavy rains. It is apparent that there was negligence in storing the goods. It was the duty of the officers of the Corporation to keep proper margin between storage of such goods and not to store close to the machinery.

DEALING with the contention of act of God in case of carrier''s liability the Apex Court in Patel Roadways Ltd. v. Birla Yamaha Ltd., I (2000) CPJ 42 (SC) = III (2000) SLT 554 = (2000) 4 SCC 91, referred to with approval the decision of Madras High Court in P. K. Kalasami Nadar v. K. Ponnuswami Mudaliar, AIR 1962 Mad. 44, wherein for the act of God, the Court has observed that an act of God will be an extraordinary occurrence due to natural causes, which is not the result of any human intervention and which could not be avoided by any amount of foresight and care, e.g. a fire caused by lightening; but an accidental fire though it might not have resulted from any act of or omission of the common carrier, cannot be said to be an act of God.

THE same principles would apply to the facts of the present case. It was the duty of the bailee/warehouse to keep goods in safe custody and to take care of such eventualities, that is, falling of heavy articles do not occur. As per the letter written by the Manager of the opposite party No. 1 to the Insurance Company the flow of water caused soil erosion into open space where the cargo of heavy weights were stored. The stoppers were washed away due to fast flow of water collapsing the heavy coils on wooden cases and damaging the machinery. From this admission, it cannot be held that the damage to the machinery is an act of God. It is sheer negligence in storing articles in a warehouse. Further, it is evident from the letter dated 8.8.1995 that there were continuous rains between 16th to 23rd July, 1995, and there was fast flow of water into the premises causing soil erosion into open space where the cargo of heavy weight was stored. The stoppers used for stabilizing the stackings were also being washed away. If that was the situation, it was the duty of the concerned officers or employees of the respondent No. 1 to take appropriate precautions and care so that such event does not occur. No such steps were taken. Therefore, this is pure and simple case of negligence and deficiency in service on the part of the warehouse management. Even in heavy rains, prudent person would take appropriate steps to prevent damage to his properties. Respondent No. 1 being bailee was required to be a prudent person. Acme Fluoro Polymers Ltd.. V. Central Warehousing Corporation 555-A It is contended by the learned Counsel for the opposite party No. 1 that the complainant was required to remove the goods before the onset of monsoon. In our view, there is no such condition and no such written condition was produced before us. It is next contended that the complainant was required to store the goods in covered warehouse. This submission is also without substance. If the complainant was required to store in a covered warehouse, then the opposite party No. 1 ought to have refused the space for storing the goods in open area. In this view of the matter, the opposite party No. 1 is liable for the damages. Quantification of Damages :

FOR quantification of damages reliance is placed on the letter written by the Manager of the respondent No. 1 who had reported to the Insurance Company that the consignment was worth Rs. 1,72,30,180/- and register the claim for flood loss for the same, and to arrange the survey of damaged consignment so as to enable the importer to take compensation at the earlier. However, the Surveyor appointed on the basis of the order of this Commission, after verifying in detail, arrived at the conclusion that the complainant has suffered damage to the tune of Rs. 61,44,000/-. It is also pointed out that because of damage and delay, the project is frustrated and the complainant is ruined. In this view of the matter, the complainant is entitled to recover the said amount of damages from the respondent No. 1. With regard to rate of interest it has been pointed out that the complainant had taken loan for import of the machinery and was required to pay interest at the rate of 19% p.a. and above, and, therefore, complainant should be reimbursed accordingly.

THE opposite party was expected to, settle the claim of the complainant within a reasonable time of six months from the date when the complainant''s agent had brought the damage to the notice of the opposite party No. 1, i.e., on 4th August, 1995. Taking into consideration the aforesaid submissions, it is directed that the opposite : party No. 1 shall pay the above said amount of Rs. 61,44,000/- to the complainant with interest at the rate of 19% from 1st February, 1996 till its payment. For the demurrage charges, the damage to the machinery had occurred in August, 1995 and for one reason or the other, the claim was not settled. Therefore, it will be just and proper to direct the opposite party No. 1 not to recover demurrage charges for the goods stored in the godown from 1st September, 1995 and permit the complainant to remove the same within a period of eight weeks from today. The Registry of this Commission is directed to send the information to the Canara Bank about this order, so that if any amount is due and payable by the complainant the Bank can file proper application. The complaint stands disposed of accordingly. There shall be no order as to costs.