Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2009 Supreme(SC) 1522

2009(6) Supreme 290
SUPREME COURT OF INDIA
Markandey Katju and Asok Kumar Ganguly,JJ.
New India Assurance Company Ltd. — Appellant
versus
M/s. Zuari Industries Ltd. & Ors. — Respondents
Civil Appeal No. 4436 of 2004
Decided on : 01-09-2009

Advocates Appeared:
For the Appellant :Ms. Meenakshi Midha (for Mr. Pranab Kumar Mullick) Advocate.
For the Respondents:K.K. Venugopal, Sr. Adv., Sanjeev K. Kapoor, Vishal Gupta (for M.A. Chinnasamy and Animesh Sinha (for B.K. Satija) Advocates.

IMPORTANT POINT
Proximate cause is not the cause which is nearest in time or place but the active and efficient cause that sets in motion a train or chain of events which brings about the ultimate result without the intervention of any other force working from an independent source.

Headnote:Fire Insurance Policies – Complainant respondent took Insurance Policies from the appellant in respect of its factory situated in Jauhri Nagar, Goa – One policy was a fire policy and the other was a consequential loss due to fire policy- On date of incident there was a short circuiting in the main switch board installed in the sub-station receiving electricity from the State Electricity Board, which resulted in a flashover producing over currents – The flashover and over currents generated excessive heat – Entire electric supply to the plant stopped and due to the stoppage of electric supply, the supply of water/steam to the waste heat boiler by the fuel gases at high temperature continued to be fed into the boiler, which resulted in damage to the boiler – Repudiation of claim by Insurance Company – Stand of the appellant-Insurance Company was that the loss to the boiler and other equipments was not caused by the fire, but by the stoppage of electric supply due to the short circuiting in the switch board-It was submitted that the cause of loss to the boiler and the equipments was the thermal shock caused due to stoppage of electricity and not due to any fire – It was submitted that the proximate cause has to be seen for settling an insurance claim, which in the present case, was the thermal shock caused due to stoppage of electricity-However, the National Commission allowed claim of the respondent – Appeal – Instantly it was evident from the chain of events that fire was the efficient and active cause of the damage- Had the fire not occurred, the damage was also would not have occurred and there was no intervening agency which was an independent source of the damage – Hence conclusion of the surveyors that the fire was not cause of the damage to the machinery of the claimant held unsustainable – Appeal dismissed. (Paras 29 to 33)
       Facts of the Case :
        1. Complainant respondent herein in the instant case took Insurance Policies from the appellant in respect of its factory situated in Jauhri Nagar, Goa. One policy was a fire policy and the other was a consequential loss due to fire policy. On date of incident there was a short circuiting in the main switch board installed in the sub-station receiving electricity from the State Electricity Board, which resulted in a flashover producing over currents.The flashover and over currents generated excessive heat. Entire electric supply to the plant stopped and due to the stoppage of electric supply, the supply of water/steam to the waste heat boiler by the flue gases at high temperature continued to be fed into the boiler, which resulted in damage to the boiler. Stand of the appellant-Insurance Company was that the loss to the boiler and other equipments was not caused by the fire, but by the stoppage of electric supply due to the short circuiting in the switch board. It was submitted that the cause of loss to the boiler and the equipments was the thermal shock caused due to stoppage of electricity and not due to any fire. It was submitted that the proximate cause has to be seen for settling an insurance claim, which in the present case, was the thermal shock caused due to stoppage of electricity.However, the National Commission allowed claim of the respondent.
        2. Present appeal has been filed against said order of National Commission.
       Findings of the Court :
        Instantly it was evident from the chain of events that fire was the efficient and active cause of the damage. Had the fire not occurred, the damage was also would not have occurred and there was no intervening agency which was an independent source of the damage.Hence conclusion of the surveyors that the fire was not cause of the damage to the machinery of the claimant held unsustainable.Appeal dismissed.
       Result : Appeal dismissed.

JUDGMENT

Markandey Katju, J.—

1. This appeal has been filed against the impugned judgment of the National Consumer Disputes Redressal Commission, New Delhi dated 26.3.2004 in Original Petition No.196 of 2001.

2. Heard Ms. Meenakshi Midha, learned counsel for the appellant and Shri K.K. Venugopal and Shri Nageshwar Rao learned counsel for the respondent.

3. The facts of the case were that the complainant (respondent in this appeal) had taken Insurance Policies from the appellant on 1.4.1998 in respect of its factory situated in Jauhri Nagar, Goa. One policy was a fire policy and the other was a consequential loss due to fire policy.

4. On 8.1.1999 at about 3.20 p.m. there was a short circuiting in the main switch board installed in the sub-station receiving electricity from the State Electricity Board, which resulted in a flashover producing over currents. The flashover and over currents generated excessive heat. The paint on the panel board was charred by this excessive heat producing smoke and soot and the partition of the adjoining feeder developed a hole. The smoke /soot along with the ionized air traveled to the generator compartment where also there was short circuiting and the generator power also tripped. As a result, the entire electric supply to the plant stopped and due to the stoppage of electric supply, the supply of water/steam to the waste heat boiler by the flue gases at high temperature continued to be fed into the boiler, which resulted in damage to the boiler.

5. As a result the respondent -complainant approached the Insurance Company informing it about the accident and making its claim. Surveyors were appointed who submitted their report but the appellant-Insurance Company vide letter dated 4.9.2000 rejected the claim. Hence the petition before the National Commission.

6. The claimant-respondent made two claims (I) Rs.1,35,17,709/- for material loss due to the damage to the boiler and other equipments and (ii) Rs.19,11,10,000/- in respect of loss of profit for the period the plant remained closed.

7. The stand of the appellant-Insurance Company was that the loss to the boiler and other equipments was not caused by the fire, but by the stoppage of electric supply due to the short circuiting in the switch board. It was submitted that the cause of the loss to the boiler and the equipments was the thermal shock caused due to stoppage of electricity and not due to any fire. It was submitted that the proximate cause has to be seen for settling an insurance claim, which in the present case, was the thermal shock caused due to stoppage of electricity. However, the National Commission allowed the claim of the respondent and hence this appeal.

8. Ms. Meenakshi Midha who argued this case with great ability submitted that the loss to the boiler and to the equipments did not occur due to any fire. Hence she submitted that the claim of damages did not fall under the cover of the Insurance Policy. She submitted that for a claim relating to fire insurance policy to succeed it is necessary that there must be a fire in the first place. In the absence of fire the claim cannot succeed. She submitted that in the present case (1) there was no fire and (2) in any case it was not the proximate cause of the damage.

9. On the other hand, Shri K.K. Venugopal, learned senior counsel, supported the judgment of the National Commission and stated that the judgment was correct.

10. We have therefore to first determine whether there was a fire. Admittedly there was a short circuit which caused a flashover.

11. Wikipedia defines flashover as follows :

“A flashover is the near simultaneous ignition of all combustible material in an enclosed area. When certain materials are heated they undergo thermal decomposition and release flammable gases. Flashover occurs when the majority of surface in a space is heated to the autoignition temperature of the flammable gases.”

12. In this connection, it is admitted that the short circuit in the main

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2009 Supreme(SC) 1522

2009(6) Supreme 290SUPREME COURT OF INDIAMarkandey Katju and Asok Kumar Ganguly,JJ. New India Assurance Company Ltd. — AppellantversusM/s. Zuari Industries Ltd. & Ors. — RespondentsCivil Appeal No. 4436 of 2004Decided on : 01-09-2009

IMPORTANT POINT Proximate cause is not the cause which is nearest in time or place but the active and efficient cause that sets in motion a train or chain of events which brings about the ultimate result without the intervention of any other force working from an independent source.

2009(6) Supreme 290
SUPREME COURT OF INDIA
Markandey Katju and Asok Kumar Ganguly,JJ.
New India Assurance Company Ltd. — Appellant
versus
M/s. Zuari Industries Ltd. & Ors. — Respondents
Civil Appeal No. 4436 of 2004
Decided on : 01-09-2009

IMPORTANT POINT
Proximate cause is not the cause which is nearest in time or place but the active and efficient cause that sets in motion a train or chain of events which brings about the ultimate result without the intervention of any other force working from an independent source.