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NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
R.K. Agrawal, President and Dr. S.M. Kantikar, Member
M/s. Manglam Organics Limited – Complainant
versus
New India Assurance Co. Ltd. – Opp. Party
Consumer Case No.2421 of 2019
Decided on 12.2.2021
Counsel for the Parties:
For the Complainant:Mr. Vivek Jain, Advocate
For the Opp. Party:Mr. S.M. Tripathi, Advocate
IMPORTANT POINT
Loss caused to insured has to be determined in terms of the policy.
Headnote:
Consumer Protection Act, 1986 – Section 21 and 2(1)(g) : [Consumer Protection Act, 2019 – Section 58 and 2(11)] – Standard fire policy – Insurance claim – Scope – Complainant company obtained three insurance policies – Due to short-circuit there was a major fire accident in the Resin plant – Complaint sough full claim amount of Rs. 17,00,00,000/- In view of terms and conditions of policy, under the “Alternative Basis” clause, the term “output” can be substituted by the term “Turnover” and under the “Departmental clause” if the business is conducted in Departments, the Independent Trading Results which are ascertainable, the policy will cover such Departmental Independent Trading Results – Fire occurred in the Resin Plant, thus loss of profits during Business Interruption period has to be worked out is respect of Resin Plant alone and that too on basis of Turnover of Resin Plant only – In cost and Audit Report, Cost Accountant had worked out the loss suffered by Resin Plant for a period of 12 months, at approximately Rs. 17 crores – Insurance company erred in paying Rs. 4,66,43,644/- only – Complainant held entitled to full claim of Rs. 17 crores – Along with interest @ 12% p.a. – Further direction issued.
Held: For deciding the issue regarding the payment of the full claimed amount of Rs.17 Crores for the actual loss covered in the Insurance Policy we deem it appropriate to refer to the various relevant clauses of the terms and conditions of the Loss of Profits during Business Interruption Period Policy No. 11080011150500000002, which was valid from 01.05.2015 to 30.04.2016.It is not in dispute that under the Business Interruption (Fire) Policy No. 11080011150500000002 issued on 01.05.2015 the risk which was insured was related to Standing Charges & Net Profit (12 months 7 days Gross Profit Turnover Basis) and the Insured Business was Rs.30,00,00,000/- (Rupees Thirty Crores only).
From a conjoint reading of the aforesaid clauses of the terms and conditions of the Business Interruption (Fire) Policy, we find that under the ‘Alternative Basis’ clause, the term ‘Output’ can be substituted by the term ‘Turnover’ and under the ‘Departmental Clause’ if the business is conducted in Departments, the Independent Trading Results which are ascertainable, the Policy will cover such Departmental Independent Trading Results. The determination of Gross Profit on Turnover Basis has also been laid down in the terms and conditions of the Loss of Profits during Business Interruption Period Policy. Thus, the Business Interruption (Fire) Policy issued by the Opposite Party Insurance Company provides for taking the Trading Results of a Department where the fire has occurred and also takes into consideration the Turnover. Admittedly, the Complainant Company is having two independent Manufacturing Blocks in the same campus, viz.. the Resin Plant for manufacturing of various Resin Products and another Block comprising of Camphor Plant used for manufacturing of Camphor Products. The fire occurred in the Resin Plant and, therefore, the Loss of Profits during Business Interruption Period has to be worked out in respect of the Resin Plant alone and that too on the basis of the Turnover of the Resin Plant only and the Turnover / Groff Profit of the Camphor Plant has no bearing at all and cannot be included or taken into consideration while computing the Loss of Profit on account of Interruption of manufacturing in the Resin Plant due to fire. It has also come on record that in the Cost and Audit Report, the Cost Accountant had worked out the loss suffered by the Resin Plant for a period of 12 months at approximately Rs.17 Crores (Rupees Seventeen Crores only).We are in full agreement with the said Report. Thus, the Opposite Party Insurance Company was not at all justified and should not have determined the Loss of Profit during Business Interruption Period by taking into account the Turnover / Gross Profit of the Camphor Plant as the Complainant Company had suffered Loss of Profit in respect of the Resin Plant alone.
In view of the foregoing discussions, we are of the considered opinion that the Complainant Company has made out its case for allowing the Complaint and is entitled for payment of Rs.17 Crores as claimed by it and the action of the Opposite Party Insurance Company in paying only a sum of Rs.4,66,43,644/- (Rupees Four Crore Sixty Six Lakh Forty Three Thousand Six Hundred Forty Four only) was not justified. We accordingly direct the Opposite Party Insurance Company to pay the balance amount of Rs.12,33,56,356/- (Rupees Twelve Crores Thirty Three Lakh Fifty Six Thousand Three Hundred Fifty Six only) alongwith interest @12% p.a. with quarterly rest w.e.f. 22.06.2015 till the date of realization to the Complainant Company within a period of six weeks from today failing which the Opposite Party Insurance Company will be liable to pay interest @15% p.a. with quarterly rest. The Opposite Party Insurance Company shall also pay a sum of Rs.10 lakh towards costs of litigation to the Complainant Company. The Complaint is hereby allowed in above terms. (Paras 14, 22 & 23)
Result: Complaint allowed.
ORDER
R.K. Agrawal, President.—The present Consumer Complaint has been filed under Section 21 of the Consumer Protection Act, 1986 (hereinafter referred to as the Act) by M/s. Mangalam Organics Limited, Mumbai (hereinafter referred to as the Complainant Company) against The New India Assurance Company Limited (hereinafter referred to as the Opposite Party Insurance Company).
2. Brief facts as narrated in the Consumer Complaint are that the Complainant Company M/s. Mangalam Organics Limited (earlier known as Dujodwala Products Limited in the year 1981 and subsequently known as Allied Colloids Pvt. Ltd. in the year 1992) is engaged in the manufacture of Terpene Products such as Camphor Technical, Camphor A Grade, Camphene, Isoborneol, Dipentene, Sodium Acetate Trihydrate, Camphor Oil, Pine Oil, Pine Tar, Resin Products such as Terpene Phenolic Resin, Penta Ester Gum, Glycerol Ester Gum, Alkyl Phenolic Resin, Phenol Formaldehyde Resin, Gum Rosin etc. The Complainant Company is an ISO certified Company and is a Government recognized Export House with customers in Europe, USA, Africa and Middle East. The Factory of the Complainant Company comprised of various departments for the storage, production and Office. One Block of the Factory was used for Resin Plant for manufacture of various Resin Products and other Block comprises of a Camphor Plant used for the manufacture of Camphor Products. The Complainant Company obtained three Insurance Policies, i.e., Standard Fire Policy No. 11080011150100000168, the Declaration Policy No. 110800111-50200000001 and Loss of Profits during Business Interruption Period Policy No. 11080011150500000002 valid from 01st May 2015 to 30th April 2016 from the Opposite Party Insurance Company for covering the risk of Building (Super Structure / Plinth & Foundations), Plant & Machinery (P&M), Furniture, Fittings, Fixtures (“FFF”), Stock and Stock (Work-in-progress) at the Factory and also the Loss of Profit (LOP) during the business interruption period. During the currency of the Insurance Policies on 22 June 2015, due to short-circuit there was a major fire accident at about 12:30 hours in the Resin Plant located in the Factory. Upon noticing the fire, the power supply of the entire Factory was isolated and the Plant Operations, including the Boiler Line, Chilling Plant and other Common Utilities were completely shut down as the path of the power cables, the boiler pipelines and the other utility lines moved close to the origin of fire at the Resin Plant. The fire which broke out in the Resin Plant reached the Common Utilities connected to the Camphor Plant. Having no alternative arrangement to cool off the Camphor Plant, maintain the temperature and to prevent the possibility of an explosion, resulting from the exothermic heating of the material charged in process at the various Reactors at the Camphor Plant, the Complainant Company was compelled to drain out Work-in-Progress (WIP) items in the Reactors, Columns and Pipelines to avoid fire/explosion in the Camphor Plant. It is the case of the Complainant Company that if drain out of Work-in-Progress was not done, the Camphor Plant would have also caught fire and it would have lead to an enormous loss to the tune of Rs.80 – Rs.100 crores. The Opposite Party Insurance Company was informed about the fire incident on 22nd June, 2015, who appointed M/s. Allied Insurance Surveyors & Loss Assessors Pvt. Ltd. (hereinafter referred to as the First Surveyor) to assess the loss. The First Surveyor visited the Factory to assess the loss, where Surveyor was categorically informed that to avoid possibility of a major catastrophe taking place in Camphor Plant and the damage to common utility pipelines, the Camphor Plant and the Sodium Plant were shut down. Requisite information / documents were provided to the First Surveyor. The Complainant Company informed the Opp
