Full Judgment Text
Non-Reportable
2023 INSC 689
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2042/2012
S.S. Cold Storage India Pvt. Ltd. … APPELLANT
VS.
National Insurance Company Limited … RESPONDENT
J U D G M E N T
DIPANKAR DATTA, J.
1. The present appeal, under Section 23 of the Consumer Protection Act,
1986 (for brevity, “CPA” hereafter) registers a challenge to the
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judgment and order dated 13 September 2011 passed by the
National Consumer Disputes Redressal Commission, New Delhi (for
brevity, “NCDRC” hereafter), whereby Original Petition No. 80 of 1999
(for brevity, “Complaint” hereafter) filed by the Appellant was
dismissed.
2. A decision herein, by virtue of being a first appeal, necessitates
looking at the facts in some depth. The relevant facts triggering the
Complaint are noticed hereunder:
Signature Not Verified
Digitally signed by
SWETA BALODI
Date: 2023.08.08
17:27:35 IST
Reason:
a. The Appellant is engaged in the business of operating a cold
storage facility (for brevity, “Facility” hereafter), the plant,
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machinery, and stock whereof were continually insured by the
Respondent.
b. The Appellant had obtained the following insurance policies
from the Respondent between 1997 and 1998:
i. Machinery Insurance Policy,
ii. Refrigeration Plant (Stock) Policy (for potatoes) (for
brevity, “Refrigeration Policy” hereafter),
iii. Fire Policy (Comprehensive Fire Policy for the building,
furniture plant, machinery, and installation),
iv. Fire Policy (On stock of potatoes in the Facility).
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c. Sometime around 3 and 4 October 1997, there was leakage
of ammonia gas in Chamber Nos. 1 and 2 of the Facility (for
brevity, “Chambers” hereafter), resulting in significantly
elevated temperatures, and a foul smell, culminating in a
closure of the Facility.
d. In the immediate aftermath of the incident of leakage of gas,
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on 4 October 1997 to be precise, the Appellant informed the
Respondent and the District Horticulture Officer of the same,
whilst requesting an inspection of the Facility.
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e. The Appellant, on 10 October 1997, also wrote to the District
Horticulture Officer to sell the potatoes that were stored in the
affected Chambers in order to have the Chambers cleared.
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f. The Appellant, on 14 October 1997, filed a claim with the
Respondent claiming an amount of Rs.1,03,15,080/-. Therein,
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the damage was claimed in respect of 85,956 bags of potatoes,
each weighing around 80kg, where the amount claimed was
calculated at Rs.150/- per quintal as per the stipulations of the
Refrigeration Policy.
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g. The District Horticulture Officer, on 18 October 1997, while
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responding to the Appellant’s letter dated 10 October 1997
stated that the disposal of potatoes should be prioritised to
prevent the spread of any disease or epidemic in the vicinity.
h. The Respondent meanwhile had instructed a surveyor named
Mr. S.K. Agarwal to inspect the Facility. However, he expressed
his inability to assess the Facility due to the magnitude of the
damage.
i. Then the Respondent appointed another surveyor, M/s Mehta
and Padamsey Surveyors Pvt. Ltd. (for brevity, “Surveyor”
hereafter) to inspect the Facility. One Mr. A. Banerjee was sent
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by the Surveyor to visit the Facility from 23 October 1997 to
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25 October 1997. On 27 October 1997, the Surveyor
addressed a letter to the Appellant asking it to preserve the
existing state of affairs in the Facility as the Chambers were
inaccessible due to high temperature and the stench of
ammonia.
j. After the Chambers were cleared of the ammonia gas, the
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Surveyor visited the Facility on 17 January 1998, to conduct
the requisite inspection.
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k. The Surveyor, by letter dated 10 March 1998, informed the
Appellant that the incident had occurred due to decay, wear and
tear, leading to leakage of ammonia gas. The pipe had given
way along the seam, and that was attributable to decay, wear,
and tear; hence the same was excluded as per the Refrigeration
Policy.
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l. On 22 January 1999, the Respondent informed the Appellant
that its claim had been repudiated by its competent authority.
m. The Appellant then instituted the Complaint before the NCDRC
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on 17 April 1999 claiming an amount of Rs.1,03,15,680/- and
certain further amounts, upon the repudiation of its claim under
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the Refrigeration Policy. On 7 January 2010, the Appellant’s
amended complaint was taken on record by the NCDRC,
wherein the following relief was sought:
1. Respondent be ordered to pay to the complainant the
claim amount of Rs.98,03,640/- (Rupees Ninety Eight
Lakh Three Thousand Six Hundred and Forty only)
towards the actual loss on account of stock (potato)
damage;
2. Direct the Respondent no.1 to pay the complainant an
amount of Rs.20,000/- towards the cost of the ammonia
pipeline as per the insurance policy;
3. Award adequate compensation to the Complainant
towards the financial losses suffered by the complainant
due to the reason the Respondent did not settle the claim
and withhold the claim amount, which resulted closure of
instant cold storage for full one season, especially in view
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of the fact that the complainant had to bear the penal
interest on the loan taken from State Financial
Corporation/bank;
4. Award interest @18% from the date of instant incident
i.e. 04.10.1997 and till the date of actual payment on the
entire losses suffered by the complainant;
5. Award adequate compensation to the complainant on
account of mental agony and torture, the complainant
suffered and also as exemplary damages against unfair
trade practices adopted by the Respondent;
6. Award legal costs and damages to the complainant;
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n. The Respondent filed its reply to the aforesaid Complaint on 7
August 2000, placing on record the report of the Surveyor
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dated 3 August 1998 (for brevity, “Surveyor’s Report”
hereafter).
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o. At the stage of evidence, on 19 April 2008, the Appellant
placed on record before the NCDRC a report by one Mr. S.K.
Ahuja, Chartered Engineer/Loss Assessor (for brevity, “Loss
Assessor” hereafter), wherein inter alia it was stated that the
crack in the pipes could not have been due to wear and tear.
p. Subsequently, the Appellant filed an application before the
NCDRC to allow the inspection of the pipes, which had been
removed from the Facility by the Surveyor, by two technical
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experts. The NCDRC, on 11 May 2009, allowed the Appellant’s
application. Subsequently, the pipes were inspected (then in
the custody of the Surveyor) in the presence of two technical
experts, viz . (i) Dr. Manohar Prasad (a retired professor of IIT,
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Kanpur) and (ii) Mr. K.K. Gupta (Chartered Engineer) on 25
July 2009 (for brevity, “Experts” hereafter when referred to
jointly).
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q. On 4 November 2009, the said Dr. Prasad submitted his
report stating inter alia that the leakage of ammonia could only
be termed as an accidental happening, and that the theory of
it being due to normal wear and tear was not correct. On his
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part, Mr. Gupta submitted a report dated 6 November 2009
where he concluded inter alia that the pipes could not have
been termed as worn out as the material flowing through them
was alkaline, and not corrosive like acid.
3. After considering the pleadings as well as the other materials on
record, the NCDRC opined that the Appellant had failed to establish
deficiency by the Respondent in providing services and declined to
grant compensation, as a consequence whereof it dismissed the
Complaint filed by the Appellant as noted above. Certain salient
observations made by the NCDRC in the impugned judgment are
summarised below for convenience:
a. The NCDRC noted that the cracks in the pipes were thin
(hairline) and had occurred at the joints. The pipes were not
seamless as claimed by the Appellant; hence, the leakage of
gas could not be due to a bursting of pipes.
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b. Relying on the dictionary definition of burst, it was held by the
NCDRC that there was no sudden burst in the pipe resulting in
the leakage of ammonia.
c. The NCDRC also went on to reproduce certain findings from the
Surveyor’s Report, indicating that the leakage of ammonia was
attributable to the hairline opening along with welding joints in
the pipe and that the same was due to wear and tear.
d. Further, the NCDRC reproduced certain portions of Mr. Gupta’s
report to substantiate its conclusions that the leakage occurred
due to normal wear and tear as the same had appeared after 5
to 7 years of usage and were not due to any accident. Further,
it noted that the report submitted by Mr. Gupta supported the
view that there was no proper fusion of the welding joints along
the welding line, and that this could have resulted in hairline
cracks.
e. Also, the NCDRC observed that the “C Class” pipes claimed to
be used by the Appellant, that purportedly had a lifespan of 20
to 25 years, were not actually used in the Facility as the pipes
used were not seamless and had welded joints.
f. Pertinently, the NCDRC noted that the expert opinions had been
obtained after a span of more than 10 years, and they could
not be given credence as the Experts had refrained from giving
any definite opinion as to the real cause of the cracks. Further,
the reports could not be treated as fully independent as the
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choice of Experts was that of the Appellant’s. It also dismissed
the allegations of collusion against the Respondent and the
Surveyor as the same had not been substantiated by the
Appellant.
g. The NCDRC went on to observe that the hairline cracks in the
pipes, in all probability, had occurred due to wear and tear and
gradual deterioration rather than a sudden burst. Since the
damage was due to wear and tear, the other aspects of the
claim did not require consideration as per Exception Clause 3
of the Refrigeration Policy which excluded such an occurrence
from the scope of the Refrigeration Policy.
h. It was also noted by the NCDRC that the Appellant had made
no payment to the potato growers and even the original and
amended Complaint recorded no detail of any payment of such
a nature; hence, the Appellant had suffered no loss in that
respect.
4. We have heard Mr. Vijay Hansaria, learned senior counsel appearing
on behalf of the Appellant and Mr. Yogesh Malhotra, learned counsel
appearing for the Respondent.
Contentions of the Appellant
5. At the outset, Mr. Hansaria urged that the NCDRC had erred in holding
that the hairline cracks along the welding joints of the pipes were
attributable to wear and tear. He emphasised that the Refrigeration
Policy had been issued to the Appellant after a thorough inspection
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of the Facility, and that the same had been conducted only five
months prior to the incident in question.
6. Mr. Hansaria then submitted that the reports of three experts, viz. ,
Mr. Ahuja, Dr. Prasad, and Mr. Gupta, indicated that the cracks in the
pipes were not due to normal wear and tear, but due to an accident.
Further, he iterated that the Surveyor had not sent the extracted
portion of the pipes to any approved laboratory for testing after the
incident, and it was thus clear that the Surveyor’s views were not
tenable.
7. Next, Mr. Hansaria contended that the NCDRC fell in error by adopting
an approach which is impermissible in law. Our attention was invited
to the impugned judgment to show how selectively the NCDRC had
relied on observations in the reports of Mr. Ahuja, Dr. Prasad and Mr.
Gupta which tended to support the conclusions reached by it while
brushing aside the observations which did not support such
conclusions. According to him, the contents of the reports being
inseparable the same could not have been accepted in part and
rejected in part; either it had to be accepted as a whole or rejected
in toto .
8. Adverting to the findings of the NCDRC regarding the damage caused
to the potatoes stored in the Facility, Mr. Hansaria submitted that the
Respondent was contractually obliged to pay the amount claimed to
the Appellant at the agreed rate of potatoes as per the Refrigeration
Policy and that the Appellant had indeed suffered a loss. He indicated
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that the potato growers, whose stocks were stored at the Facility,
refused to take back the ammonia affected potatoes and also refused
to clear their rental dues with the Appellant whilst litigation regarding
the same was pending before the respective fora. In fact, a writ
petition filed by the Appellant challenging recovery proceedings
initiated by the potato growers is pending before the Allahabad High
Court and that the Appellant still runs the risk of being burdened by
orders of court to compensate the potato growers whose produce had
been stored in the Facility.
9. Contending that the Appellant has been unfairly treated by the
Respondent and the NCDRC having failed to redress its lawful
grievance on untenable grounds, the appeal ought to succeed and
the Appellant be held entitled to relief as claimed before the NCDRC.
Contentions of the Respondent
10. Mr. Malhotra urged this Court not to disturb the finding of the NCDRC
in the impugned judgment that the leakage of ammonia was not due
to any sudden burst or an accidental occurrence. He submitted that
the Surveyor’s Report was clear in its findings that the leakage of
ammonia was due to hairline openings along the welding joint of the
pipes caused by normal wear and tear and, hence, was excluded by
Exception Clause No. 3 of the Refrigeration Policy.
11. Further, Mr. Malhotra pointed out that the Appellant had appointed
the Experts after more than a decade of the incident, and that even
their reports did not identify any specific cause of the hairline cracks.
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He then submitted that the said reports did not add any credibility to
the Appellant’s submissions and were rightly rejected.
12. Mr. Malhotra also brought to our attention that the Appellant had not
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made any payments to the potato growers as of 24 July 1998, and
that there was no loss caused to the Appellant as the stock was not
owned by it.
13. Resting on the aforesaid contentions, Mr. Malhotra submitted that the
appeal being devoid of merits deserves outright dismissal.
Consideration of the cited decisions
14. Both Mr. Hansaria and Mr. Malhotra invited our attention to several
decisions of this Court, which we propose to consider hereafter before
embarking on an appreciation and analysis of the evidence that was
led by the parties before the NCDRC.
15. The proper approach in a case of the present nature where there are
multiple reports of surveyors and experts has been outlined in a
catena of decisions of this Court. Presently, we wish to advert to the
decisions cited by the parties.
a. United India Insurance Company Limited vs. Kantika
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Colour Lab and Others , where this Court held that simply
the happening of a covered event did not entitle the insured to
claim reimbursement of the amount stated in the policy, and
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(2010) 6 SCC 449
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that only upon proof of actual loss could the insured claim
reimbursement to the extent the same were established.
b. United India Insurance Co. Ltd. and Others vs. Roshan
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Lal Oil Mills Ltd and Others , where this Court remanded the
matter back to the NCDRC as due consideration was not placed
on the joint survey report of the relevant incident on the basis
of which the insurer had repudiated the claim of the insured;
and that non-consideration of this important document resulted
in a serious miscarriage of justice and vitiated the judgment of
the NCDRC.
c. Sikka Papers Limited vs. National Insurance Company
3
Limited and Others , where this Court observed that a
surveyor’s report was not the final word, and that there must
be legitimate reasons for departing from such a report.
d. Sri Venkateswara Syndicate vs. Oriental Insurance
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Company Limited and Another where this Court expounded
on the duties of a surveyor, and the due importance to be given
to his assessment. It was also observed that an insurance
company was not bound by a surveyor’s report, but also could
not go on appointing surveyors one after the other so as to get
a tailormade report to its satisfaction. Further, in the case that
it did appoint a second surveyor, satisfactory reasons for the
2
(2000) 10 SCC 19
3
(2009) 7 SCC 777
4
(2009) 8 SCC 507
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same needed to be provided. It was also laid down that if the
surveyor’s reports were prepared in good faith and with due
application of mind – in the absence of any error or ill motive –
the insurer was not expected to reject the same, and in the
event of an arbitrary rejection of a surveyor’s report, the courts
could intervene and correct the error committed by the insurer
while repudiating the claim of the insured.
e. New India Assurance Company Limited vs. Pradeep
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Kumar where it was observed that a surveyor’s report was not
the last and final word. Further, it was not that sacrosanct that
it could not be departed from, and that though it could be the
foundation/basis of the settlement of a claim, it was not binding
upon the insurer or the insured.
f. New India Assurance Co. Ltd. vs. Luxra Enterprises (P)
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Ltd and New India Assurance Co. Ltd. vs. Sri
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Buchiyyamma Rice Mill , where this Court relied on Sri
Venkateswara Syndicate (supra) to observe that a
surveyor’s report may be rejected only due to the report
containing inherent defects, it being arbitrary, excessive, and
exaggerated, or any such cogent reasons before the
appointment of another surveyor.
5
(2009) 7 SCC 787
6
(2019) 6 SCC 36
7
(2020) 12 SCC 105
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g. National Insurance Company Ltd. vs. Hareshwar
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Enterprises (P) Ltd and Others where this Court, relying on
Pradeep Kumar (supra) , observed that while the assessment
of loss by an approved surveyor was a prerequisite for
settlement of the claim, it was not the last and final word.
Further, it was not that sacrosanct so as not to warrant a
departure if necessary. Further, the report was not binding on
either party, and could be taken on as evidence until more
reliable evidence was brought on record to rebut the contents
of the surveyor’s report.
h. Khatema Fibres Ltd. vs. New India Assurance Company
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Ltd. where this Court, while discussing the scope of the
expression deficiency , stated that the appellant should be able
to establish either that the surveyor did not comply with the
code of conduct in respect of its duties, responsibilities, and
other professional requirements or that the insurer acted
arbitrarily in rejecting the whole or a part of the surveyor's
report. It also reiterated the dicta of Pradeep Kumar (supra)
as discussed hereinabove. Further, this Court held that a
consumer forum, which was primarily concerned with an
allegation of deficiency in service, cannot subject the surveyor's
report to forensic examination. Once it was found that there
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(2021) SCC OnLine SC 628
9
(2021) SCC OnLine SC 818
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was no inadequacy in the quality, nature, and manner of
performance of the duties and responsibilities of the surveyor,
and that the report is not based on adhocism or vitiated by
arbitrariness, then the jurisdiction of the forum to go further
would stop.
Analysis
16. The issue which arises for determination, in the present appeal, lies
within a narrow compass, i.e., whether the NCDRC was justified in
rejecting the Complaint of the Appellant holding that there is no
deficiency of service on the part of the Respondent. While deciding
this issue, we would necessarily be required to assess the relative
weightage to be placed on the report of the Surveyor appointed by
the Respondent as well as the reports of the Loss Assessor and the
Experts appointed by the Appellants regarding the possible cause for
leakage of ammonia gas. That there were four reports on record
before the NCDRC, one from the side of the Respondent and three
from the Appellant’s side, is not in dispute.
17. As our discussion hereafter would reveal, much depends on the
answer to the question as to what was the ‘make’ of the pipes that
were installed in the Chambers and through which ammonia gas
leaked. It would have been fair, just, and expedient if direct and not
opinion evidence was placed before the NCDRC by the parties or if
the NCDRC itself had called upon an expert to give his opinion on the
make of the pipes in view of the NCDRC not accepting the Appellant’s
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claim that it was of make Tata Steel C Grade Heavy Duty . The answer
to such question would have been clinching. It would have been
proper for us, in the light of the aforesaid circumstance, to remand
the Complaint to the NCDRC for a fresh decision. However, having
regard to the fact that the incident is more than 25 years old, and
the parties also urged us to render a decision on the merits of this
appeal, we proceed to decide the contentious issue by this judgment.
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18. At the outset, a reference to the Surveyor’s Report dated 3 August
1998 is merited in some detail since it formed the foundation on
which the impugned judgment and order of the NCDRC rests. Salient
observations from the Surveyor’s report are quoted below:
18. Following the Insured’s advice, we were at Mehmoodabad
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on 17 Jan. 1998. We found the area around the cold storage
was dumped with rotten potatoes. Though the Chamber No. I
& II, were cleared of the rotten stocks even then the stench
was unbearable. In order to identify the source of leakage, the
Compressors were started and the source of leakage identified.
The leakage in both the Chambers were in the liquid ammonia
pipeline laid out in the top most tier and a thin (hair breadth)
opening found along the seam (welding joint) through which
the Gas had leaked. The location of the leakage was identified
in each Chamber as under:
Chamber No. I: Between Rack No. 199 and 200 as marked on
the column.
Chamber No. II: Between Rack No. 4/15 & 4/16 as marked on
the columns.
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19. It did not require much of an explanation that the hairline
opening along the welding joint was attributable to wear & tear
(a contingency clearly excluded under the policy) […].
20. We would once refer to the fact that the hairline crack along
the welding seam in the liquid Ammonia Pipeline in both
Chamber Nos. I & II was attributable to the wear and tear of
the Pipeline – expressly excluded from the scope of insurance
as per the Policy Conditions. […]
23. We would submit once again that the
damage/decomposition of the stocks held in Chamber Nos. 1 &
II of the Insured’s Cold Storage was not attributable to any of
the insured peril under the Policy. It is entirely left to National
Insurance Co. Ltd. to examine and decided as they deem fit
and proper.
(emphasis ours)
19. We have noticed that the averments made in paragraph 3(xxxvi) of
the appeal have not been dealt with by the Respondent in its counter
affidavit; only the first sentence being relevant, is quoted hereunder:
xxxvi) That on the perusal of the Reply filed to the Complaint
and the report of M/s Mehta and Padamsey Surveyors Pvt. Ltd.,
the Appellant came to know that neither a technical expert's
opinion was obtained nor the pieces of pipes were sent to any
laboratory by the said Surveyors before recommending the
repudiation of the Appellant's claim by the said surveyors. […]
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There being no rebuttal from the side of the Respondent, it stands to
reason that the Surveyor’s Report was not based on any scientific
investigation.
20. As recorded in the Surveyor’s Report, construction works of Chamber
Nos. 1 and 2 were completed in March 1990 and February 1992
respectively, whereas the incident of leak of ammonia gas occurred
in October 1997. It is trite to note that while the Surveyor’s Report
does advert to certain construction specifications of the Facility but
the said report makes little mention of the nature of the compound
(acidic or alkaline) passing through the pipes, its effect on the pipes,
and does not dwell at all on the potential causes of such a wear and
tear despite only a few years having lapsed post installation. Further,
there is no discussion as to the details of the manufacturer, the likely
lifespan of such installed pipes, and whether such pipelines could
have developed a hairline crack akin to that of a hair’s breadth within
5/7 years of their installation. It is undisputed that the Surveyor did
not send the pieces of damaged pipes to an expert or a laboratory to
identify the cause of leak. There was neither any oral or documentary
evidence to support the theory of wear and tear. Also, no reason, far
less cogent reason, was furnished by the Respondent to arrive at the
conclusion that the leakage of ammonia occurred due to simple wear
and tear. Such omission assumes greater importance as the
Respondent had inspected the Facility prior to renewal of the policies
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(including the Refrigeration Policy) by the Appellant just a few
months prior to the incident of gas leak, after which the policies were
renewed. Significantly, the Appellant after initial purchase of the
policy went on seeking renewal of the same year after year and the
Respondent too, on its part, permitted such renewal at regular
intervals prior to expiry accepting substantial sums as premia,
lending credence to the argument on behalf of the Appellant that all
such renewals were preceded by a satisfaction reached by the
Respondent that providing insurance cover for the Facility would not
expose it to any risk. More importantly, what is apparent on a perusal
of the Surveyor’s Report is an ipse dixit that ammonia gas leaked
because of wear and tear of the pipelines in the Chambers, rather
than a conclusion drawn on the basis of a process of reasoning having
regard to all relevant factors.
21. Whilst considering the rival submissions, useful guidance can be
drawn from the decisions of this Court in Hareshwar Enterprises
(supra) and Pradeep Kumar (supra) where it was held that though
the report of a surveyor appointed by the insurance company may be
considered as evidence while settling a claim, more evidence on
record could be used to rebut the contents of the same.
22. In the instant case, the Appellant has placed on record reports of the
Loss Assessor, and those of the Experts. No doubt, the said reports
were not obtained in close proximity to the date of the incident of gas
leak but at this juncture, we may remind ourselves that it was the
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NCDRC which, vide its order dated 11 May, 2009, had allowed an
application of the Appellant seeking permission to inspect the pipes,
which were cut and kept in the custody of the Surveyor, for obtaining
experts’ reports thereon. It is in pursuance thereof that the Experts
submitted their reports. If inspection and subsequent reports at such
distance of time were not to be of any worth, it defies logic as to why,
in the first place, the application was allowed. Next, if the reports of
the Experts did not qualify to be considered only because they had a
belated look at the pipes, on the same analogy the observations
made by the NCDRC on visual impression thereof a few days before
delivery of judgment is liable to be discredited and invalidated on the
self-same ground of delay. We thus find the approach of the NCDRC
to be flawed.
23. As Judges, we are not experts in the field of refrigeration of cold
storages to opine on our own which of the two versions is correct and
acceptable. This also applies to the members of the NCDRC. We are
aghast to find that the members, who heard the Complaint, have
made observations as if they were experts sitting in appeal on the
reports of the Loss Assessor and the Experts. Within our limited
jurisdiction, we are only entitled to draw inferences from the
materials on record including the aforementioned reports, which the
Respondent could not discredit, and say upon applying the test of
preponderance of probabilities as to which of the two versions is more
probable. Be that as it may, we intend to rely on certain general
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observations made in the reports which the NCDRC did not discard
with cogent reasons. Since the contents of the Surveyor’s Report and
those reports placed on record by the Appellant conflict with each
other, we have thought it prudent to separate the grain and the chaff.
24. While it is true that the Experts’ reports were based on their visual
impression of the pipes, it is equally true that it is the Appellant who
had appointed them. The NCDRC rightly observed that the reports
“ cannot be treated as totally independent as it was the complainant
who made a choice of his experts ”; nevertheless, there are certain
general observations in such reports to be noticed hereafter which do
help us in our search for the truth.
25. The Loss Assessor’s report states that for wear and tear to occur,
there should have been a chemical active reaction of mechanical
frictional force; hence, in the present case, due to the lack of such
factors, the leakage of ammonia was not attributable to decay or
wear and tear along the welding seam of the said pipes. It also
discussed the kinds of materials ammonia would be corrosive to,
where the steel of the present pipes does not find a mention. There
is also a discussion on the make of the concerned pipes being of Tata
Steel C Grade Heavy Duty , and those of its specifications as per the
product catalogue. It then stated that as per the said specifications,
the life of such pipes would be beyond 25 years, and to say that their
failure was due to wear and tear within 10 years of installation does
not hold good. It also remarked that any failure caused by wear and
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tear would be preceded by marks of corrosion; further, the pipes were
also said to be painted with anticorrosive paint for protection against
deterioration. Hence, it was concluded, that leak of ammonia gas was
a natural outcome not related to ageing or normal wear and tear.
26. Dr. Prasad, in his report, while considering the thickness and class of
pipes and the nature of ammonia, noted that there was no possibility
of wear and tear. He went on to state that such C Class pipes operate
without any issues for 20 to 25 years, and that the present sudden
leakage of ammonia can only be explained as an accidental
happening.
27. Mr. Gupta’s report observed that the Facility was in conformity with
all relevant safety norms prescribed for running such a cold storage
facility. It further noted that the pipelines and equipment in the
Facility (Chambers) were 5 to 7 years old as Chamber No. 1 was
constructed in 1990 and Chamber No. 2 in 1992. Pertinently, Mr.
Gupta observed that wear and tear would take place only when there
was movement and friction between two objects. In the present case,
his report stated that there was no sort of movement, vibration, or
air resistance. He further pointed out that anhydrous ammonia
flowing through the pipes, being alkaline, could not damage them,
unlike an acidic compound which could attack the pipes. The report
also proceeded to indicate that the lifespan of such mild steel pipes
(C Class pipes) would be around 20 years and ruled against 5 to 7
years old pipes being worn out.
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28. While the reports were such, on the one hand the NCDRC refused to
give credence to the reports of the Loss Assessor and the Experts
appointed by the Appellant on the ground that such reports, obtained
belatedly, did not also contain any definite opinion as to what was
the real cause of the cracks; yet, on the other hand, the NCDRC
picked up stray observations contained in the reports to reject the
claim of the Appellant. We are in agreement with Mr. Hansaria that it
was not open to the NCDRC to rely on portions of the reports which
supported its conclusions drawn from its visual impression of the
pipes and discard the rest because the observations came in conflict
with such conclusions. The NCDRC ought to have either accepted or
rejected the reports in full and not accept/reject the same in part,
since the contents were to be read as a whole, not being severable.
29. In the light of Exception Clause 3 and in the context of the Complaint
of the Appellant read together with the Expert’s reports, we are
inclined to the view that wear and tear would generally refer to the
expected deterioration of the plant and equipment caused by
frictional force. The Surveyor’s Report is conspicuously silent on this
aspect. The Surveyor identified the cause for the leak as wear and
tear, without delving deep into the matter as to whether the pipes
that were used were likely to develop such wear and tear within 7
and 5 years of their installation in the two Chambers. There was
nothing in the report to suggest that the Appellant had failed to
maintain the Facility satisfactorily for inferring wear and tear. Thus,
23
there was absence of material resting whereon it could be pointed
out by the Surveyor that even a normal and gradual wear and tear
by passage of time resulted in the cracks developing on the surface
of the pipes.
30. Absence of consideration of relevant factors is, therefore, writ large
on the Surveyor’s Report. The reports of the Loss Assessor and the
Experts dwelled on general aspects of scientific observations relating
to the absence of friction or movement when ammonia passes
through the pipes and its alkalinity (non-acidic nature) not being
corrosive to the pipes as well as the manufacturing details, and
specifications of the pipes, which are conspicuous by their absence in
the Surveyor’s report. It seems, all relevant factors were not
considered in the proper perspective by the Surveyor, yet, such
Surveyor’s Report was relied on by the Respondent to defeat the
claim of the Appellant. The report having recorded the ipse dixit of
the Surveyor, without any reference to the aforesaid aspects touched
upon by the Loss Assessor and the Experts, the same is, in our
opinion, not worthy of acceptance.
31. The observation of the NCDRC that the pipes used in the Chambers
were not seamless and had welding joints was apparently made to
discard the reports of the Loss Assessor and the Experts. The Loss
Assessor and the Experts had opined that the pipes were seamless.
If at all the NCDRC had reason not to rely on the reports of the Loss
Assessor and the Experts with regard to the make, quality, thickness,
24
and other features of the C Class Pipes, instead of relying on its
opinion based on a visual impression of the pipes, it ought to have
ordered an examination of the same by an independent expert in
exercise of power conferred on it by Section 22(1) read with Section
13(4)(iv) of the CPA. Although the said power is to be sparingly used,
this was, in our opinion, a fit and proper case calling for exercise of
the power. It seems to us that the NCDRC made observations in the
impugned judgment as if its members were experts in the relevant
field and clothed with authority to sit in appeal over the same.
32. Considering all these factors and the attending circumstances and by
applying the standard of proof of preponderance of probabilities, we
feel inclined to lean in favour of the inference that the version of the
Appellant, was more probable, i.e., that the leak of ammonia gas was
not occasioned due to wear and tear (as claimed by the Respondent)
10
but was the outcome of an accident which was not foreseen and
beyond its control and not covered by any of the exceptions in the
Refrigeration Policy (Exception Clause 3) so as to entitle the
Respondent to claim immunity for the ultimate purpose of repudiating
the insurance claim lodged by the Appellant.
33. We hold that the NCDRC committed serious error by not giving the
reports placed on record by the Appellant the extent of credence the
same deserved. The manner in which the NCDRC dealt with such
10
Accident , according to the Cambridge Dictionary, is something bad that happens
that is not expected or intended and that often damages something or injures
someone.
25
reports was not proper and legal; major part of the reports could not
have been rejected and only stray observations relied upon to
support the conclusions. This is one of the foremost reasons which
compels us to interfere with the impugned judgment and order. The
other reason assigned by the NCDRC that the Appellant did not have
to pay compensation to the potato growers is equally untenable. The
Appellant has brought on record particulars of certain proceedings at
the instance of the potato growers which, having reached the
Allahabad High Court, is being pursued by it. In any event, the fact
that the Appellant has not paid compensation to the potato growers
as yet is hardly a factor for determining whether the Respondent was
justified in repudiating the insurance claim on the basis of the
Surveyor’s Report for damage caused to the stock of potatoes, which
was duly insured, because of the accident.
34. Repudiation of the insurance claim by the Respondent, on facts and
in the circumstances, is held to amount to deficiency in service on its
part. We, therefore, see no reason to accept any of the grounds
assigned by the NCDRC for rejection of the Complaint.
Conclusion
35. Since we have noticed, for the foregoing reasons, that the impugned
judgment and order of the NCDRC, on merits, is indefensible and that
there has indeed been a deficiency of service at the end of the
Respondent, we are of the considered view that ends of justice would
26
be sufficiently served by granting to the Appellant a lumpsum amount
of Rs. 2,25,00,000/- towards full and final settlement of the insurance
claim. It is ordered accordingly. Let such amount be released by the
Respondent to the Appellant within two months from date. Should
there be a failure in this regard, the said amount shall carry interest
@ 10% p.a. till the amount is paid.
36. The present appeal is accordingly allowed to the extent as aforesaid
and pending applications, if any, stand disposed of.
37. No costs.
..........................., J.
[A.S. BOPANNA]
..........................., J.
[DIPANKAR DATTA]
NEW DELHI;
TH
8 AUGUST, 2023.
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