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2007 Supreme(Bom) 667
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
DR.D.Y.CHANDRACHUD, J.
The Century Spinning and Manufacturing Co.Ltd. ...Plaintiff.
Vs.
Oriental Fire and General Insurance Co. & Ors. ...Defendants.
Suit no.1723 of 1978
Decided on: May 4, 2007.
Advocates appeared :
Mr. M. L. Bansal for the Plaintiff.
Mr.E. P. Bharucha, Senior Advocate with Mr. C.E. Bharucha and
Ms. Brotin Das i/b. Gagrats for the Defendants.
The judgment establishes the principle that loss or damage resulting from a total or partial cessation of work or retarding, interruption or cessation of any process or operation is an excepted peril and is not covered by the insurance policies.
Headnote:
Insurance Policies - Fire Insurance - Riot and Strike Damage - Malicious Damage - Consequential Loss Insurance - Companies' Act, 1913 - [JURISDICTION] - [INSURANCE POLICIES, SPECIAL CONDITIONS 5(i)(a) AND 5(i)(b), MALICIOUS DAMAGE RISKS CLAUSE] - The court discussed the jurisdiction of the court, the interpretation of the insurance policies, and the exclusions for loss or damage resulting from a total or partial cessation of work or retarding, interruption or cessation of any process or operation. The court found that the loss and damage in the case was not occasioned by an insured peril, leading to the dismissal of the suit.
Fact of the Case:
The Plaintiff, a Public Limited Company, obtained seven Insurance Policies covering its divisions. The Plaintiff claimed loss due to labour unrest and subsequent damage to its property. The Defendants contended that the loss fell within an excepted peril and was not covered by the insurance policies.
Finding of the Court:
The court found that the loss and damage in the case was not occasioned by an insured peril, leading to the dismissal of the suit.
Issues: 1. Jurisdiction of the court. 2. Suit maintainability against the Defendants. 3. Entitlement of the Plaintiffs to claim for loss or damage under insurance policies. 4. Proof of malicious damage or loss or riot or strike damage. 5. Proof of alleged loss or damage directly caused by malicious acts. 6. Proof of loss, destruction, or damage. 7. Proof of loss, destruction, or damage under the Consequential Loss Policy. 8. Proof of debt due and payable by the Defendants. 9. Decree. 10. Order.
Ratio Decidendi: The court analyzed the evidence and found that the loss and damage in the case was not occasioned by an insured peril, leading to the dismissal of the suit.
Final Decision: The suit was dismissed, and the Plaintiff was liable to pay the costs of the Defendants.
The Plaintiff which is a Public Limited Company, registered under the Companies' Act, 1913, owns and runs three Divisions known as (i) Century Rayon Division, (ii) Century Rayon Tyrecord Division and (iii) Century Chemicals. All the three Divisions are situated at Murbad Road, Kalyan. The Defendants are companies which carry on General Insurance business. Between the period 1st January 1977 and 1st January 1978, the Plaintiff obtained seven Insurance Policies from the Defendants, namely:
a) Policy No.1110/0/0/F/2126 (inter alia covering the building, machinery and accessories of the Rayon division);
b) Policy No.1110/0/0/F/2128 (inter alia covering the stock and stock-in-process of the Rayon division;
c) Policy No.1110/0/0/F/2129 (inter alia covering the building, machinery and accessories of the Tyrecord division;
d) Policy No.1110/0/0/F/2131 (inter alia covering the stock and stock-in-process of the Tyrecord division;
e) Policy No.1110/0/0/F/2132 (inter alia covering the building, machinery and accessories of the Chemicals division;
f) Policy No.1110/0/0/F/2134 (inter alia covering the stock and stock-in-process of the Chemicals division;
g) Policy No.1110/0/0/F/2135 (inter alia giving consequential loss insurance cover to the Plaintiff in respect of all its aforesaid three divisions). The first six policies are described collectively as policies of Fire Insurance, but they have been extended to cover a risk of loss and damage caused by riot and strike,malicious damage and explosion. The seventh policy is a policy to cover consequential loss. For the relevant period, the Plaintiff paid an amount of Rs. 11.44 lakhs towards the premium, the total sum insured being in the amount of Rs. 69.15 lakhs.
2. The claim of the Plaintiff is that prior to 4th April 1977, there was a situation of labour unrest within and outside the Factory. On 4th April 1977, an agitation took place by the workmen within the premises of the factory at Kalyan. The agitating workers surrounded and damaged the car of the President of the Plaintiff and demanded that the Senior Vice President be handed over to the crowd. The Plaintiff had an apprehension that the riot would spread occasioning wide spread damage. The management of the Plaintiff declared a lockout at the end of the second shift, from 11 p.m. on 4th April 1977 in all the three Divisions. A notice of lockout was published. The notice stipulated that Departments concerned with essential services such as the Power House, Pump House and Water Treatment would continue to work as usual. Moreover, in order to salvage the work in progress and the finished goods, the Viscose, Spinbath, Spinning and After Treatment Departments were to be partially operated. The case of the Plaintiff is that despite the notice of lockout, the workmen remained within the factory premises till 2 a.m. on 5th April 1977. The workers were alleged to have stopped work in protest against the lockout until eventually they left the premises with the assistance of the Police. While leaving the factory premises, the workmen, according to the Plaintiff forced the Supervisory staff, Engineers and Officers as well as the Canteen employees to leave the factory. The factory remained under lockout until 12th April 1977 when the lockout was lifted on the intervention of the Minister for Labour of the Government of Maharashtra.
3. The case of the Plaintiff is that the workmen of the second shift had been directed that before leaving the plant, they should break the threads and lift the spinning machines to facilitate the bleeding of viscose, in order to avoid the viscose getting 'jammed' in the pipelines/tanks. The workers did not do so which according to the Plaintiff caused the viscose (in the Rayon and Tyrecord Division) in the tanks, pipelines, machinery and accessories to coagulate and solidify. In the Chemical Division, the agitation of the workmen is alleged to have resulted in (i) corrosion due to leakage of chlorine; (ii)
