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Judgment
Ram Surat Ram Maurya, Presiding Member
Heard Ms. K. Radha, Advocate, for the complainant and Mr. Abhishek Gola, Advocate, for the opposite parties.
M/s. NSL Textiles Limited (the Insured) has filed above complaint for directing The Oriental Insurance Company Limited (the Insurer) to pay (i) Rs.17493414/- with interest @18% per annum, from 27.05.2015 till the date of payment, as the insurance claim, (ii) Rs.1/- crores, as the compensation for mental agony and harassment, (iii) Rs.10/- lacs, as the cost of litigation; and (iv) any other relief, which is deemed fit and proper, in the facts and circumstances of the case.
The facts, as stated in the complaint and emerged from the documents attached with the complaint, are as follows:-
(a) M/s. NSL Textiles Limited (the complainant) (the Insured) was a company, registered under the Companies Act, 1956 and engaged in the business of cotton ginning, spinning and weaving of different textiles. Its factory was located at Inkollu village and Mandal, Prakasam district, Andhra Pradesh, which had two spinning units and one weaving unit. The factory premises consisted two parts. The raw cotton lint bales were stored in Godown Part No.-1, which consisted three blocks and Machinery were installed in part No.-2, which consisted more blocks. The factory was running in three shifts, where about 1500 workers were working. After process of ginning, the cotton is pressed and packed in the form of bales. The pressed cotton bales, yarn, finished & semi-finished goods, fabrics, by-products, spare etc. were used to be stored in godown.
(b) The Oriental Insurance Company Limited (the Insurer) is a Public Insurance Company and engaged in the business of providing different types of insurance services to the general public. The Insured obtained ‘Standard Fire and Special Perils Policy’- Declaration Policy No.462300/11/2014/714, for a sum of Rs.45/- crores on Stock of all varieties of yarn, finished & semi-finished goods, by-products, pressed cotton bales, fabrics, spare, related materials including packing materials belonging to the Insured lying anywhere including in the open area in factory premises at Inkollu village and Mandal, Prakasam district, for a period of 31.03.2014 to 30.03.2015, from the Insurer. The Insured obtained other ‘Standard Fire and Special Perils Policy’ No.462300/11/2014/1028, for a sum of Rs.274.12/- crores (i.e. Rs.16/- crores on Stock in process, Rs.36.36/- crores on Building and Rs.221.76/- crore on Plant & Machinery) at the factory premises at Inkollu village and Mandal, Prakasam district, for a period of 31.03.2014 to 30.03.2015, from the Insurer.
(c) On 22.08.2014 around 22:45 hours, Mr. K. Pawan Kumar, shift supervisor observed that cotton burnt smell was coming out from east side of cotton FP Godown. He immediately alerted the security to check it and put off the fire using own hydrant system. The employees immediately started fire fighting, using hydrant system but the fire spread in large area and had become out of control. The management informed Fire Service Station Chirala on phone, from where two fire tenders were deputed on the spot, which could control the fire up to 06:40 hours on 23.04.2014. The insured also informed the local police about the incident on 25.08.2014, where it was registered as FIR No.83/2014. The police inspected the spot and found no foul play and executed a Panchnama dated 25.08.2014. The police investigated the incident. During investigation, took samples of burnt materials and sent these samples for chemical examination to Forensic Science Laboratory, State of Andhra Pradesh, who submitted report dated 15.11.2014, after chemical examination that “no inflammable hydrocarbons are found”. The police after investigation, submitted Final Report dated 22.12.2015, for dropping the case, which has been accepted by the concerned Magistrate.
(d) The Insured informed the Insurer about fire incident and loss at its factory premises on 23.08.2014, on phone. The Insurer instructed V. Balaji, Insurance Surveyor, Guntur, for preliminary survey. V. Balaji, Insurance Surveyor, inspected the factory premises on 23.08.2014 along with Divisional Manager of the Insurer, took photographs and submitted his Preliminary Survey Report dated 25.08.2014, stating therein that cause of fire was not known. Affected godown was divided into 2 parts with separation of burnt brick wall and one shutter for passage. In this entire godown there was no power supply and shutter was closed and locked on 22.08.2014 at about 18:00 hours. The Insured submitted one print out of closing stock 22.08.2014, according to that total 2379 FP bales were stacked in the fire affected godown. Out of which, 1441 FP bales were found unaffected. Remaining 938 FP bales were burnt, of which outer layer were charred/burnt and damaged and remaining part were wetted and damaged due to water, pored by the fire brigade. AC sheets roof of the building were broken and damaged.
(e) The Insurer appointed Kaushal Kishore & Associates, Charted Accountants, Mumbai, as the surveyor on 28.08.2014, who inspected the factory premises of the Insured on 30.08.2014 and on subsequent dates. He took photographs of affected stock and godown and verified the loss. The Insured submitted various papers for assessment of loss to the surveyor. As directed by the surveyor, the Insured submitted a claim form on 21.02.2015, on printed proforma, claiming total loss of Rs.20394916/-. The surveyor submitted Final Survey Report dated 27.05.2015, in which, he observed that there was no electricity connection in godown and the godown was “No Smoking Zone” as such there was no possibility of fire, either from electric short circuit or due to inadvertent throwing of ignited cigarettes & beedi buts etc. Only possibility is left out of “Spontaneous Combustion”. He assessed gross loss to Rs.21989915.73. after deducting, the deductions and policy excess, he assed net liability of the Insurer to Rs.17493414/-. In conclusion, he stated that the occurrence of fire on 22.08.2014 in the Insured’s godown appeared to be true and liability would exist under the policy. He recommended for settlement of the claim.
(f) On coming to know about the report dated 27.05.2015, the Insured approached Andhra Pradesh Cotton Association, Guntur, who provides lab services and educating the member mills on cotton products. Senior Textiles Technologist posted in the lab of Andhra Pradesh Cotton Association gave his report dated 24.08.2016 stating that internal or spontaneous combustion is totally impossible in dried cotton bales. The Insured supplied this report dated 24.08.2016 to the surveyor along with his letter dated 24.08.2016. Then the surveyor, after considering this report, sent an email dated 29.10.2016 to the Insurer that in view of the Insured’s suggestion and expert opinion, it is difficult to prove cause of fire as spontaneous combustion and fire due to use of cigarette or beedi to be considered as cause of fire.
(g) However, the Insurer vide letter dated 21.12.2016, repudiated the claim on the ground that fire was caused due to own fermentation, natural heating or spontaneous combustion, which was an exclusion cause. Thereafter, this complaint was filed on 08.05.2017, claiming deficiency in service on the part of the Insurer.
The Insurer filed its written reply on 10.08.2017 and contested the complaint. The facts of obtaining ‘Standard Fire and Special Perils Policy No.462300/11/2014/714, for a sum of Rs.45/- crores on Stock, for a period of 31.03.2014 to 30.03.2015 and ‘Standard Fire and Special Perils Policy’ No.462300/11/2014/1028, for a sum of Rs.274.12/- crores (i.e. Rs.16/- crores on Stock in process, Rs.36.36/- crores on Building and Rs.221.76/- crore on Plant & Machinery) at the factory premises at Inkollu village and Mandal, Prakasam district, for a period of 31.03.2014 to 30.03.2015, from the Insurer, appointment of the preliminary surveyor and the surveyor and their reports and repudiation of claim vide letter dated 21.12.2016 are not disputed. It is stated that cause of fire was spontaneous combustion. Eruption of flame engulfed the outer layer of stock and remaining part was damaged due to water poured by Fire Brigade. The peril ‘Fire’ contained exclusion clause as “its own fermentation, natural heating or spontaneous combustion”. As such the claim was repudiated. There was no deficiency in service on the part of the Insurer. The preliminary objection that the Insured is engaged in commercial activities and not a ‘consumer’, is also raised.
The Insured filed Rejoinder Reply on 08.02.2018, documentary evidence and Affidavit of Evidence of Ch. Appa Rao, the Director and Affidavit of Evidence of D.H. Srinivasa Reddy, an employee. The Insurer filed Affidavit of Evidence of Bipin Kumar, Chief Manager. Both the parties filed their short synopsis.
I have considered the arguments of the counsel for the parties and examined the record. V. Balaji, Insurance Surveyor, in his Preliminary Survey Report dated 25.08.2014, has stated that cause of fire was not known. Affected godown was divided into 2 parts with separation of burnt brick wall and one shutter for passage. In this entire godown there was no power supply and shutter was closed and locked on 22.08.2014 at about 18:00 hours. Total 2379 FP bales were stacked in the fire affected godown. Out of which, 1441 FP bales were found unaffected. Remaining 938 FP bales were burnt, of which outer layer were charred/burnt and damaged and remaining part were wetted and damaged due to water, pored by the fire brigade. AC sheets roof of the building were broken and damaged. This report has not been controverted by the surveyor in Final Survey Report dated 27.05.2015 nor it was doubted by the Insurer, in the repudiation letter. The claim was repudiated on the ground that fire was caused due to own fermentation, natural heating or spontaneous combustion, which was an exclusion cause.
Spontaneous combustion is a phenomenon, in which, a hydrocarbon or a chemical substance unexpectedly burst into flame without apparent cause. The Insured has filed an Article published in July, 2002, by New Mexico State University on “Evaluation of the flammability of cotton bales”. In which, it has been stated that “spontaneous combustion” is self-ignition of combustible materials through chemical action (usually oxidation), which results in evolution of heat. If the temperature of the material reaches its ignition temperature (for cotton cellulose this is about 360’C to 400’C), spontaneous ignition occurs.”
The surveyor and the Insurer have illegally ignored report of Forensic Science Laboratory, State of Andhra Pradesh, dated 15.11.2014, who after chemical examination held that “no inflammable hydrocarbons are found”. The incident occurred on 22.08.2014 around 22:45 hours. Dry cotton bale is not a chemical substance as such fermentation is not possible. The minimum temperature of 360’C is required for self-ignition of the cotton bales, which is not possible, during night in the godown. The repudiation letter dated 21.12.2016, is illegal and is liable to be set aside.
Regulation 9 of The Insurance Regulatory and Development Authority (Protection of Policyholder’s Interest) Regulations, 2002 directs the Surveyors to submit their Survey Report within 30 days and in any case within 45 days, from the date of his appointment. The Insurer has been directed to make settlement within 30 days of receipt of Surveyor’s report. In case of delay, the Insurer is held liable to pay interest 2% above the bank rate. In the present case, the surveyor submitted Final Survey Report on 27.05.2015 as such interest is payable from July, 2015.
ORDER
In view of the aforesaid discussions, the complaint is partly allowed. The Insurer is directed to pay Rs.17493414/- with interest @9% per annum from July 2015 till the date of payment, within period of two months from the date of this judgment.