TATA REFRACTORIES LTD. vs CHAIRMAN, NEW INDIA ASSURANCE CO. LTD.

THIS is an original case, M/s. Tata Refractories registered under the Companies Act, through its General Manager (Personnel) claims the action of the New India Assurance Company Ltd. as arbitrary in repudiating their claim under the insurance coverage in respect of 130 Kilo Litres (''KL'', for short) of furnace oil in the oil tank that was accidentally damaged by fire on 29.11.1994.

IT is not disputed that the company manufactures refractory products at Belpahar in the district of Jharsuguda, it has got its registered office. The Company obtained an erection-all-risk insurance policy for its dolomite refractory under Insurance Company. The insurance policy was to be operative for 21 months, i.e., 31.3.1993 to 31.12.1994. ITems insured included plant and equipments to be erected, plant cost, machineries, Civil Engineering, escalation in replacement cost, etc. The policy also included to indemnify the loss relating to erection cost which was valued and accepted by the Insurance Company for Rs. 8,31,97,000/-. Article 6 of the insurance policy provided for regulations for fire protection which the company, according to their case, complied with all the conditions as detailed in the complaint petition. IT is also not disputed that on 29.11.1994 there was a devastating fire that caused damage to the oil tank. IT is claimed that it contained 130 KL furnace oil. The complainant lodged a claim under Annexure-3, the letter dated 16.1.1995. The total claim was Rs. 53 lakhs. On receiving the claim the Insurance Company appointed a Surveyor and Loss Assessor Mr. A.K. Govil and Associates. A final claim for an amount of Rs. 28,97,539.40 was submitted claiming loss on different heads and one of the items was cost of 130 KL of furnace oil burnt in fire incident which was valued at Rs. 10,72,00,000/-. This is the subject-matter of dispute because the Insurance Company did not accept the claim to that extent. The Insurance Company filed a written version. They admitted the fact of fire on 29.11.1994 and that the complainant informed the Insurance Company regarding the fire explosion. They denied the fact that there was oil in the oil tank. They further took the stand that on 30.11.1994 their Senior Divisional Manager along with the Surveyor Shri B.K. Pujari and the Development Officer visited the spot and submitted a report after assessing the loss which they estimated around Rs. 25 lakhs. So far as the furnace oil in the tank is concerned the team found that approximately 25 to 30 KL of furnace oil was available in the furnace oil tank which was damaged due to fire.

Heard Mr. Ashok Parija, learned Counsel for the complainant, and Miss Meera Ghose, learned Counsel for the Insurance Company. Perused the complaint petition and the materials on record.

THE crux of the point is whether at the time of the accidental fire there was at all in the furnace oil tank 130 KL of oil. It is relevant to go through Annexure-B, the report of Engineer B.K. Pujari who inspected the site on 2.12.1994 along with Mr. Das of M/s. Govil and Co. He reported generally about the dolomite refractory which was an expansion unit and at that time was under final shaping and its infrastructures were under construction. THEre were two oil tanks with about 125 KL capacity placed and erected at the site of old storing yard. THE oil preserved in that tank was furnace oil. THE dolomite refractory was designed for production of 2500 MT of dolomite refractory per month. In the note of inspection at page-2 he mentioned that during inspection out of 2 number oil tanks, tank No. 2 with 125 KL capacity was affected by fire accompanied with explosion. He mentioned that it was learnt from the officials of the complainant''s company that just before during the time of incident there were 30 KL furnace oil inside the tank. He noted that no detailed specification was available. But few external dimensions could be noted which were as follows: Maximum height - 9 Mtrs. from base. Die of tank - 6 Mtrs. The tank was fabricated with iron sheets. He gave the details of the tank, its construction and other details, which are not necessary for our present purpose. Both the tanks were placed at a distance of not less than one metre from each other. There was immersion heaters fixed at the bottom of the tank.

HAVING gone through the report of Mr. Pujari, it is abundantly clear that though he inspected the tank but did not report whether either there was no oil at all in the tank when the damage occurred or there was any quantity of oil in the tank. He has clearly mentioned that on information from the staff of the complainant''s factory it could be known that there was about 30 KL of oil. Therefore, the information gathered about the tank having 30 KL of furnace oil at the time of inspection could be said to be only hearsay and there is no authentic report that he himself enquired about that. Rather the xerox copy of the statement of the factory, i.e., furnace oil consumption, the document maintained during the usual course of transaction cannot be disbelieved. This shows as on 29.11.1994, there was 135 KL of furnace oil in Tank No. 1. There is nothing to disbelieve the document from the side of the complainant. The learned Counsel for the Insurance Company however, laid stress on the terms of the policy and submitted that the cost of the furnace oil burnt in fire was not included in the contract. He further submitted that the loss of raw materials/consumables during testing or commissioning was not indemnifiable under the policy. The Insurance Company by their letter dated 6th June, 1997 vide Annexure-15 accepted the case of the complainant that the cost of oil to be used for testing and commissioning was not included anywhere in the project report, but subsequently Mr. A.K. Govil and Associates found that the cost of furnace oil was included in the erection charge, the cost of which was Rs. 8,31,97,000/- and in the said letter they required the complainant to send a project report which included the cost of oil so that they could take up the matter with the Regional Office. The correspondence from the side of the Insurance Company vide their letter dated 10.11.1997 under Annexure-20 mentions that the subject-matter of the oil came under pre-operative expenses and they would report on the issue as soon as they got a clarification from the higher authorities. But in their subsequent letter dated 19.2.1998 they refused for any further consideration.

STRANGELY this letter does not indicate as to why there was no scope for further consideration of the claim so far as the furnace oil was concerned. They could have as well replied that on further investigation or inquiry they found the claim of the complainant to be false one inasmuch as they accepted the case that there was no oil at all in the tank. Annexure-9 is the letter dated 22.7.1996 of the complainant written to the Senior Divisional Manager of the Insurance Company wherein the company certified that 130 KL of furnace oil was in the tank which was bunt by fire on 29.11.1994. They also enclosed a photocopy of the furnace oil consumption record of which we have mentioned before. The statement indicates that tank No. 1 caught fire at 7.15 a.m. We have no reason to disbelieve the xerox copy of the statement furnished under the signature of the Senior Divisional Manager (Project).

THUS, we are satisfied that the complainant has been able to make out a claim so far as its loss of furnace oil in explosion is concerned and, therefore, they are entitled to the relief claimed. In the result, the complaint petition is allowed. The Insurance Company is directed to pay a sum of Rs. 10,72,000/- along with interest at the rate of ten per cent per annum from 9.2.1998 till date of payment and Rs. 2,000/- as cost of litigation. Complaint allowed.