Shree Cements Ltd. vs Oriental Insuracne Co. Ltd. & Ors.

This complaint has been filed by the complainant against OP for claiming compensation of Rs. 2,46,54,377 along with cost of litigation and compensation for harassment. 2. Brief facts of the case are that complainant is a Company incorporated under Companies Act and complainant employs various machineries for manufacturing cement and raw material for cement, Clinker is required to be crushed to a particular size and for crushing heavy Roller Press is being used. Complainant obtained "Industrial All Risk policy No. 242103/11/2007/00059" from OPs for a sum of Rs. 114,87,28,000 for a period of one year from 26.5.2006 to 25.5.2007. On 22.11.2006, during routine daily plant round, the Engineer in Charge of the Complainant observed abnormal sound from the movable roller. Thereafter, the plant was immediately stopped for inspection and after opening the gates of the roller press, set material (Clinker Powder) was seen on the non-drive end side of movable roller and water leakage was seen from the sealed area. After clearing the area, cracks were seen on the shaft surface through which water was found to be leaking. So as to confirm the leakage, the cover of the hollow shaft in the said roller, used for water cooling, was opened and inside was inspected. On such inspection, circumferential crack was seen and visible through naked eyes confirming the crack through out of the shaft wall. On the same day complainant contacted OP No. 2 over phone and sent written communication on 23.11.2006 for appointment of surveyor for assessment of loss. OP appointed M/s. United Technical Services to whom requisite information and documents as and when called were supplied. It was further submitted that roller press was supplied by KHD Humboldt Wedag GmbH and after incident, complainant got it inspected from experts of KHD with prior permission of surveyor and experts visited the plant site on 20.6.2007 and submitted report which was sent to the surveyor by complainant vide letter dated 20.8.2007. It was further submitted that surveyor informed complainant that he has appointed National Metallurgical Laboratory (NML) to carry out a third party investigation and concerned persons from NML visited the factory site in the first week of November, 2007 and advised complainant to submit the sample of the Roller Press which was supplied to surveyor for forwarding to NML and NML submitted report to surveyor on 3.1.2008 wherein it was concluded that moving roller failed by fatigue mechanism, though, as per report, NML was not clear about the reasons for fatigue crack initiation. It was further submitted that roller mill was installed in 1997 and except for hard facing done in 2003, no other procedure was carried on the said roller. Complainant rejected NML report vide letter dated 15.3.2008. It was further submitted that complainant procured a new roller press from KHD in which expenses of Rs. 2,46,54,377 were incurred and complainant submitted its final claim to the surveyor, but complainant was shocked to receive repudiation letter dated 23.9.2009 from OP No. 3, on the basis of report submitted by NML wherein it was concluded that the failure occurred over a period of time because of fatigue mechanism. Complainant submitted objections against repudiation vide letter dated 30.9.2009. Surveyor in its survey report, concluded that break down was an instance/occurrence which was instantaneous in nature probably due to entry of an un-crushable material which would have resulted in premature failure of the roller. It was further submitted that complainant''s case was not even remotely related for Fatigue failure, as damaged roller had operated only for 25,244 working hours till its break down. It was further submitted that as per Ultrasonic Inspection Report dated 6.7.2006, no crack was detected and the roller was found to be in sound condition and since 6.7.2006 said roller had operated for 2,639 hours whereas Roller & Shaft are designed for a life time of 70,000 hours and more and complainant''s other cement mill No. 2 of identical roller press has run 78,553 hours. It was further submitted that claim was rejected on the basis of opinion of the Legal Advisor Mr. Vishnu Mehra, Advocate which suffers from inherent defects and distortion of facts. Alleging deficiency on the part of OP, complainant filed complaint and claimed Rs. 2,46,54,377 as cost of new roller with 18% p.a. interest from the date of loss and further a sum of Rs. 25,00,000 as compensation for harassment and mental agony and Rs. 50,00,000 as cost of litigation and damages. 3. OP resisted complaint and denied every allegation of the complaint in one para. It was further submitted that KHD experts visited plant, but surveyor was not informed about his visit in spite of surveyors specific request by letter dated 29.11.2006. It was further submitted that surveyor approached NML for carrying out necessary tests for complete failure investigation and obtained report as surveyor was not satisfied with report of KHD. It was further submitted that OP obtained legal opinion and rightly repudiated claim, as claim was covered under the expressions "Gradual Deterioration" and/or "Wear & Tear". It was further submitted that as per report of NML, accident occurred over a period of time because of fatigue mechanism and surveyor regarded "Gradual Deterioration" as fatigue failure. Denying any deficiency on their part, prayed for dismissal of complaint. 4. Complainant filed rejoinder. 5. Complainant filed affidavit of Arvind Khicha and Rajeev Jain in their evidence and OP filed affidavit of Sushil Kumar in their evidence. 6. Heard learned Counsel for the parties and perused record. 7. Learned Counsel for the complainant submitted that in spite of proof of damage to the roller due to sudden jerk and high impact which caused crack on shaft, OP has committed deficiency in repudiating claim by distorting NML report. It was further submitted that as per terms and conditions of policy, complainant got roller replaced by new one and incurred expenditure of Rs. 2,46,54,377 and surveyor has wrongly assessed loss of Rs. 1,31,80,501; hence, full claim be allowed. On the other hand, learned Counsel for the OP submitted that OP has not committed any deficiency in repudiating claim on the basis of NML report; hence, complaint be dismissed. 8. It is not disputed that complainant obtained "Industrial All Risk Policy" from the OP party and during subsistence of insurance policy, complainants roller was damaged and caused crack on shaft. 9. Now, the core question to be decided in this complaint is whether loss caused to the shaft and roller was covered under exclusion clause of the policy, which runs as under: "1(a)(1) faulty or defective design materials or workmanship inherent vice latent defect gradual deterioration deformation or distortion or wear and tear." 10. Learned Counsel for complainant has proved KHD expert''s report dated 25.6.2007 and KHD who is manufacturer of aforesaid roller and shaft by method of elimination observed that cracks of roller press shaft- "1. May be due to inadequate clearance between rollers, passing of large size metal grinding ball (>50 mm dia.) through the roller during operation may result in sudden jerk and high impact, which may create crack on shaft. Though we have the magnetic separator and metal detector on line, due to occasional high quality of materials flow and possible submerged position of the metal piece inside the material bed, it could not be detected by the detector, which has moved into the circuit and finally passed through the roller, causing the damage. A heavy dent over the roller can be witnessed through the photographs is indicating that the probable cause mentioned above is line as detected". 11. He has also proved ultra-sonic Inspection Report dated 6.7.2006 according to which, no crack was detected on roller shaft and roller was found OK. Surveyor appointed by OP obtained report from NML, Jamshedpur. Representative of NML inspected site on 5.11,2007 and discussed about failure of roller press and as sample NML received cut pieces of the failed components by courier on 15.11.2007. NML concluded that the moving roller press failed by "fatigue mechanism". However, the reasons for fatigue crack initiation could not be established because of non-availability of whole fracture surface of the failed roller press. Surveyor after considering all reports observed that fatigue failure is not befitting and there was an instance/occurrence which was instantaneous in nature probably due to entry of an uncrushable material resulting in premature failure of the element which was not falling under exclusion clause and ultimately opined for payment of Rs. 1,31,80,501 as full and final settlement of the claim. 12. Learned Counsel for OP has drawn our attention towards opinion taken from Vishnu Mehra & Co. Law Offices and it appears that on the basis of aforesaid opinion, claim was repudiated by letter dated 23.9.2009. 13. Learned Counsel for OP submitted that in the light of observations made by NML, claim was falling under exclusion clause; so, it was rightly repudiated. Perusal of NML report reveals that on account of "beach marks" "Progression marks" fatigue fracture was concluded by NML, but at the same time, it was also mentioned in the report that other fatigue fracture relating features like "ratchet marks and river marks" were not noticed in the case in hand so it was not possible to comment on the origin of fatigue cracking. However, it may be speculated that fatigue crack had started from the inner periphery of the hollow roller press. It was further observed that this would have been verified if the whole fracture surface of the roller press is examined. 14. Admittedly, NML representative visited site of the complainant mill and after discussions, he asked for samples of cut pieces through courier. If for definite opinion regarding fatigue cracking whole fracture surface of the roller press that required, NML could have 48 asked complainant or surveyor for placing before it whole fracture surface of the roller press and due to not obtaining whole fracture surface of roller press, merely on the basis of speculation it could not have been held that fatigue crack started from inner periphery of the hollow roller press particularly when other necessary features ("ratchet marks and river marks") were not noticed and in such circumstances, OP has committed deficiency in repudiating claim of the complainant on the basis of NML report which is based on speculation and not supported by necessary features for fatigue crack for covering complainant''s case under exclusion clause of the policy. 15. Surveyor after discussing Ultra-Sonic Inspection Report, KHD report, NML report has rightly observed that complainant''s case does not fall within exclusion clause and rightly assessed loss of Rs. 1,31,80,501. 16. Ultrasonic Test Report dated 22.11.2006 proved by complainant''s witness reveals that on account of sudden jerk and high impact, damage was caused to shaft and roller and complainant is entitled to amount assessed by surveyor. 17. Learned Counsel for complainant submitted that surveyor committed mistake in assessing loss of only 1,31,80,501 against expenditure of Rs. 2,46,54,377 incurred in replacement of roller press. Admittedly, roller was installed in 1997 and damage was caused in 2006, i.e. after 9 years and in such circumstances, complainant is not entitled to get full cost of replacement of the roller and surveyor has rightly assessed loss of Rs. 1,31,80,501 and complainant is entitled to get aforesaid amount from OP. 18. Consequently, complaint filed by complainant is partly allowed against OP and OP is directed to pay Rs. 1,31,80,501 along with 7% p.a. interest from 22.11.2006 till payment along with Rs. 50,000 as cost of litigation. Complaint Partly Allowed.