1.      This consumer complaint under section 21 of the Consumer Protection Act, 1986 (in short, the ‘Act’) alleges deficiency in service and unfair trade practice in repudiation of a claim under a valid Standard Fire And Special Perils Policy (in short, the ‘Policy’) held by the complainant with the opposite party in respect to its factory at Rewari, Haryana. 

2.      The facts, according to the complainant, are that it is a registered company since 1967 which established a factory in 2012 for the manufacture of malt and malt extract for the brewing, distilling, confectionary, pharmaceutical and malted food industries. It took insurance cover from the opposite party through two Policies including the said Policy on 01.02.2014, viz., Policy no. 351600/11/13/3400000204 for Rs 1,19,76,00,000/- and Policy no.  351600/11/13/3400000199 for Rs 66,40,00,000/- from 01.02.2014 to 31.01.2015. These policies are stated to have been in force since 1967. On account of issues over discharge of waste water from the plant in the lands of local farmers, there was an issue on 10.05.2014 when local villagers entered the factory and disrupted production by preventing staff from entering or leaving the plant, disconnecting power supply by snapping the electric cables. The local police from Dharuhera Police Station and the District Administration were informed but on 13.05.2014 the local villagers again forced the shut-down of the plant and Effluent Treatment Plant (ETP) around 7.30 pm. Despite the presence of the police, the agitation prevented the operations of the plant and as a result the grain which was in wet condition began to rot and deteriorate. On 14.05.2014, due to intervention of the authorities, the plant was allowed to resume for 48 hours to prevent rotting of raw material although the ETP was not permitted. As the complainant was unable to run the plant, the factory was shut down completely on 16.05.2014. A claim under the Policy for Rs 85,85,056/- along with cost for restarting the ETP was preferred. The opposite party appointed M/s Cunningham Lindsey International, Insurance Surveyors & Loss Assessors to assess the loss. The Surveyors visited the plant on 15.05.2014 and in their report dated 18.05.2014 held that the claim under the policy did not lie since the Policy was triggered by loss that was not direct and in the present case was consequential to the acts of omission of the agitators.  The complainant also sought approval for the disposal of salvage and the Surveyor expressed inability to comment on the issue as the liability of insurer was not established. The Surveyor’s Final Report dated 19.12.2014 was submitted to the opposite party based on which the opposite party repudiated the claim on 24.11.2015 under Clause V. A consumer complaint (No. 170 of 2015) filed by the complainant before the Haryana State Consumer Disputes Redressal Commission, Panchkula was dismissed on 22.03.2017 on the ground of pecuniary jurisdiction. The complainant is before this Commission with the prayer to direct the opposite party to:

(i)     to allow the claim of Rs 82,85,056/- with interest @ 12% from the date of claim (14.05.2014) till the filing of the complaint, i.e. Rs 1,20,54, 751/- with future interest @ 12% until realization;

(ii)    pay Rs 10,00,000/- towards compensation for mental agony, harassment and inconvenience on account of gross deficiency in service and unfair trade practice;

(iii)    pay costs relating to the complaint; and

(iv)   any other reliefs deemed fit.

3.      Upon notice, the complaint was resisted by the opposite party by way of a reply. Averments of the complainant were denied. It was averred that the complainant was a manufacturer of malt having one of its production unit at village Khaliawas, Rewari. The complainant purchased a Standard Fire and Special Perils Policy which was valid from 01.02.2014 to 31.01.2015 covering risk of plant and machinery, furniture, fixture and fittings and stocks in process. The opposite party has stated that there was another Standard Fire and Special Perils Policy to cover the risk of category 1 stocks and further this policy does not have any concern with the present loss. The opposite party states that the complainant gave the intimation about the alleged loss and disruption of functioning of plant on 14.05.2014. On receipt of the intimation, the opposite party deputed Proclaim Insurance Surveyors and Loss Assessors Private Limited. The surveyor immediately contacted the officials of the complainant and as per advice of the complainant’s officials the visit to the next day, i.e., 15.05.2014 was deferred due to the agitation of the villagers.

4.      The opposite party alleges that as per the survey report, the agitating villagers did not resort to agitation of any sort outside the unit of complainant on 11^th and 12^th May 2014. On 13.05.2014, the agitators gathered outside the unit and stopped entry of workers and vehicles which resulted into shutting down of plant/ unit by 19.30 hours causing damage to the stocks in process within the plant. The opposite party has further stated that the agitators did not resort to any direct physical damage to the insured’s building, plant and machinery, furniture, fixture and fittings, stocks etc.,  It is further stated that the plant of the complainant remained shut down for about 24 hours after the villagers forced the complainants to shut it down. The opposite party has further stated that the surveyor vide letter dated 18.05.2014 informed the complainant that the damage/ loss in question was not direct but is a consequential due to an act of omission of the agitators which was not covered under the insurance policy. It is also stated that the surveyor proceeded to carry out the final survey and assessment of loss at the behest of the complainant as well as the opposite party.  It is further stated that the surveyor vide detailed and reasoned final survey report dated 19.12.2014 assessed the net loss at Rs.81,43,936/- stating that the insurers liability does not rise under insurance policy. Hence, the insurance company sent a detailed repudiation letter dated 24.11.2015 denying their liability under the insurance policy and conveyed the same to the complainant. Thereafter, the complainant filed a consumer complaint no.170 of 2015 before the Haryana State Consumer Disputes Redressal Commission, Panchkula which was dismissed on the ground of pecuniary jurisdiction.

5.     The opposite party further states that the act of agitators does not come under the purview of pressure, force, coercion, restriction, terrorism, constraint and duress, etc., rather the damage to the stocks in process was not caused directly by external violence. The opposite party has relied upon the judgment of the Hon’ble Supreme Court in the case of Industrial Promotion and Investment Corporation of Orissa Ltd., vs New India Assurance Company Ltd., and Ors – MANU/SC/0920/2016 and reiterating the principles laid down in United India Insurance Co. Ltd., vs Harchand Rai Chandan Lal – MANU/SC/0803/2004 that ‘it is well settled law that there is no difference between a contract of insurance and any other contract, and that it should be construed strictly without adding or deleting anything from the terms thereof’. Hence, the opposite party prays that the present complaint be dismissed.

6.      Parties led their evidence and filed rejoinder, affidavit, and evidence as well as short synopsis of arguments. I have heard the learned counsel for the parties and carefully considered the material on record.

7.      On behalf of the complainant it was argued that the factory in question had a continuous production process and disruption of this process due to the agitation by the local villagers involving snapping of electrical connection and stopping entry and exit of personnel led to the deterioration of raw material and closure of the STP. The claim under the Policy was necessitated on this account and the repudiation of the claim was erroneous based on a wrong interpretation of facts by the Surveyor on the basis of whose report the opposite party took its decision. It was averred that the complainant was a ‘consumer’ under section 2(1)(d) of the Act and the Policies were for indemnification against loss on account of various perils involved in the process of manufacturing and were not intended to generate profit. Therefore, the contention of the opposite party that the complainant was not a ‘consumer’ under the Act was incorrect. It was also averred that this Commission had the jurisdiction to adjudicate in the matter as per the Consumer Protection Act, 1986. It was contended that the repudiation of the claim on grounds that were not cogent and were based on assumptions and surmises amounted to deficiency in service and unfair trade practice under the Act. According to the complainant the opposite party’s conclusion that the loss for which the claim was filed was not a ‘direct’ loss was consequential due to the acts of omission of the agitators was incorrect since the agitators had trespassed and took control of the plant, forcibly shut down operations and evacuated the personnel present even in the presence of the police. The Surveyor’s conclusion that the damage was not caused by external violent means but was on account of cessation of process due to the act of omission is contended to be wrong since it ws due to the external violent means as outsiders/villagers forcibly entered the plant and took over control illegally in the presence of the police and shut down the plant under coercion. It is therefore, argued that as per the Doctrine of Proximate Cause, the proximate cause of loss was the attack by the outsiders and that as per the Hon’ble Supreme Court’s decision in New India Assurance Co. Ltd. Vs. M/s Zuari Industries Ltd. & Ors., Civil Appeal  no.4436 of 2004 dated 01.09.2009 ‘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 from an independent source. It is argued that the facts and circumstances of the case does not fall under the definition of “omission” and that the acts of the agitators fall under the purview of pressure, force, coercion, restriction, terrorization, constraint and duress and therefore do not qualify under the exclusion clause as claimed by the opposite party. It is therefore contended that the complaint deserves to be owed with costs. 

8.      Per contra, the learned counsel for the opposite party contended that the complainant was not a ‘consumer’ under the purview of the Act and that the complaint could not be adjudicated in summary proceedings. It was argued that as per the Surveyor’s report, the agitating villagers did not resort to agitation of any sort outside the unit on 11-12.05.2014. It was on 13.05.2014 that they stopped the entry of workers and vehicles resulting in the shutting down of the plant by 7.30 pm causing damage to the stocks in process within the plant. There was no damage to the insured’s building, plant & machinery, furniture, fixtures and fittings, stocks, etc. The preliminary report of the Surveyor noted shut down of about 24 hours. It is averred that as per the Policy, the special perils clause covers riots, strikes, malicious and terrorism related damage, i.e., coverage of loss or visible physical damage or destruction by external violent means by rioters, strikers or persons acting against the insured with a malicious intent. However, it is contended that damage caused by any act of omission of the agitators was not covered since even after 24 hours allowed the insured to initiate loss minimization measures and arrest consequential damage to stock in progress by allowing the plant to be re-started for 48 hours. It is noted that the HT supply cables were snapped by the agitators on 10.05.2014 but the complainant was allowed to operate the plant with captive power plant and that HT supply was restored after the agitators departed in the evening of 10.05.2014. The plant was noted by the Surveyor to be running after 24 hours and was fully operational on 14 & 15.05.2014 Hence, the opinion of the Surveyor with regard to no liability under the Policy since it was due to consequential and not direct act of omission of the agitators, is stated to be in order. The loss is stated to be not covered under the covered ‘perils’ under Clause V of the Policy. Reliance is placed on the judgment of the Hon’ble Supreme Court in Industrial Promotion & Investment Corporation of Orissa Ltd. Vs. New India Assurance Co. Ltd. & Ors., MANU/SC/0920/2016 which reiterated the principles laid down in United India Insurance Co. Ltd. Vs. Harchand Rai Chandan Lal, MANU/SC/0803/2004 which held that

”It is well-settled law that there is no difference between a contract of insurance and any other contract, and that it should be construed strictly without adding or deleting anything from the terms thereof.”

He also relied upon United India Assurance Co. Ltd. Vs. Orient Treasure Pvt. Ltd., (2016) AIR (SC) 363 which also held similarly.  It is also stated that the assessment of loss, without prejudice, of Rs 81,43,936/- though justified, was not payable in view of the claim being inadmissible. 

9.      Clause V of the Policy which provides the exclusions to coverage under the Policy reads as follows:

        V.       Riot, Strike, Malicious and Terrorism damage:-

     Loss of or visible physical damage or destruction by external violent means directly caused to the property insured but excluding those caused by:

1. Total or partial cessation of work or the retardation or interruption or cessation of any process or operations or omissions of any kind.
2. Permanent or temporary disposition resulting from confiscation, commandeering, requisition or destruction by order of the government or any lawfully constituted authority.
3. Permanent or temporary disposition of any building or plant or unit or machinery resulting from the unlawful occupation by any person of such building or plant or unit or machinery or prevention of access to the same.
4. Burglary house breaking theft larceny or any such attempt or any omission of any kind of any person (whether or not such act is committed in the course of a disturbance of public peace) in any malicious act.

(Emphasis added)

From a plain reading of this clause, it is evident that it is intended to exclude any claims that may arise on account of riot, strike, malicious and terrorism damage that is directly caused to the property but excludes permanent or temporary dispossession resulting from unlawful occupation of a plant or machinery or access to the same (sub clause 3). The conclusion of the Surveyor is that the cessation of production in the plant of the complainant was on account of a ‘riot/strike’ leading to ‘temporary dispossession’ but one which did not cause ‘direct’ loss.

10.    During oral submissions, learned counsel for the complainant relied upon Manmohan Nanda vs. United India Assurance Co. Ltd. & Anr., Civil Appeal No. 8386 of 2015 decided on 06.12.2021, (2022) 4 SCC 582 to contend that in a contract of insurance under the principle of uberrimae fidei there was an obligation on the insurer to also disclose material facts about the terms and conditions of the policy which must strictly conform to the statements in the proposal form or prospectus and that the rule of Contra Proferentum would apply, i.e., when interpretation of words in a contract are to be construed resulting in two alternative interpretations, the interpretation which is against the person drafting the contract will apply. It was therefore argued that the interpretation of Clause V of the contract of insurance should apply as per the rule of Contra Proferentum against the opposite party.   

11.    From the foregoing, it is manifest that the complaint’s plant was covered by a valid Policy on the day of the incident of its process being interrupted due to an agitation by external forces. It is clear that the plant was engaged in the process of making malt and malt extracts which process involved a continuous production process which, if interrupted for a duration of 24 hours or more would result in deterioration of stock in process. The insurance cover for loss against such deterioration was under Policy no. 351600/11/13/3400000204 for a sum of Rs.4,16,00,000/-. The complainant filed a claim for Rs 82,85,056/- on account of loss due to deterioration of stock due to interruption of the malt manufacturing process in view of the interruption of the process due to snapping of HT power supply as part of an agitation on the premises by external forces. This agitation resulted in damage to the stock in progress which is a covered peril on 14.05.2014. The opposite party contends, on the basis of the Surveyor’s Report, that this was not an act of commission but one of omission and therefore the claim is inadmissible under Clause V of the Policy.

12.    Complainant relies upon the rule of Contra Proferentum and argues that the exclusions under Clause V not be applied against it as held in Manmohan Nanda (supra). The opposite party, on the other hand, contends that the contract of insurance be interpreted ‘as is’ on the basis of IPIC, Orissa (supra) and Orient Treasure       Pvt. Ltd. (supra).

13.    The opposite party has relied upon the Final Report of the Surveyor dated 19.12.2014. The Surveyor has noted that:

        Cause of Loss.

The plant remained shut down for about 24 hours, after the local villagers forced the insured to shut it down. The material in process was in various stages of manufacture.

Since the material in the flat bottom tanks requires continuous cooling during germination, and the material in the drying kilns requires constant heating during drying, and as these (cooling as well as drying) were stopped abruptly, the material in the generator tanks got burnt due to the uncontrolled exothermic reaction during germination. Likewise the material in the drying kilns fermented, due to stoppage of heating of the wet germinated grain.

In our opinion, the material that was in process in the plant, got damaged due to stoppage of the plant, as a consequence of the action of the local villagers, who agitated against the insured.

          Nature and Extent of Damage/ Restoration

The Plant remained shut down for about 24 hours, after the local villagers forced the insured to shut it down, Six batches were at various stages of manufacture. One batch was in the kiln, having been dried completely, and was, therefore, unaffected.

Five batches of about 210 MT each of barley in various stages of the process, had got affected and damaged due to interruption and break in process. We understand that there was no material in the steeping stage, while there was one batch (other than the one that was completely dried and therefore unaffected) in the process of drying. Four batches were in the process of being germinated in the flat bottom tanks.

The insured was provided a respite of 48 hours, during which period, the agitating villagers allowed it to pass the process material through the various stages of germination and drying to arrest further deterioration, if any.

Accordingly, the insured started drying the remaining five batches of barely at various stages in process, by supplying hot air. During our inspection, we confirmed burn marks on the material, apparently caused by excessive heat.

The insured claimed the following quantities, batch-wise, toward loss of material (refer appendix 2)

The agitators did not cause any direct physical damage, whatsoever, to the insured’s building, plant and machinery and stocks, etc., except the above material damage to the WIP caused by interruption of the process.

He has then proceeded to conclude as under:  

        Policy Conditions/Warranties/ Liability

The Special Perils Claus of RSMD under the Standard Fire and Special Perils Policy provides coverage of physical damage directly caused to the insured’s property by rioters, strikers, or persons acting against the insured with a malicious intent.

In the instant case, the damage was restricted to the stock in process, consequential to the action of agitating villagers, who did not cause direct damage to the insured property and saw reasons after 24 hours of stoppage, to allow the insured to initiate loss intimation measures, and arrest consequential damage, if any, to stocks in process.

We reiterate that the agitators did not cause any physical damage to the insured property.

In view of the above, the damage was caused by an act of omission of the agitators, and was, thus, not covered under the policy. We are of the considered opinion that the insurers liability under the policy does not arise.

The opposite party has relied upon this Report and stated in its letter of repudiation as stated below:

3.       The event (giving rise to the captioned claim): Agitation by the local villagers against the operations of your plant which started on the 10.05.2014 and the subsequent shutting down of the plant by them on 13.05.2014. Though the agitation and the perceived threat thereof was brought to the notice of the local administration, the local law enforcement agency etc., it is seen that officially the policy do not seem to have registered any case whatsoever against the villagers who participated in the agitation, disrupted the plant’s operations and shut it down.

4.       The loss:     There was no physical loss or damage to any of the assets of the insured facility. None was caused by the agitators. (This aspect is crucial to your claim for reasons which will be dealt in detail in the subsequent paragraph/s). “The only ascertained loss was the spoilage of the work/ stock in process caused by the interruption /cessation of the work process”.

5.       The event and the policy coverage: The Standard Fir and Special Perils (Material Damage only) policy  covers certain named perils. One of the perils so named and covered under the policy was riot, strike, malicious and terrorism damage (RSMTD).

The event in question cannot be termed be termed a riot because it does not fit the description of a riot as per IPC. It was not a strike since your labour/ work force was not a part of it. It was not even an act of terrorism.

The event was an unlawful gathering of local villagers who had a perceived grievances against the plant and/ or its owners and who indulged in certain activities which caused disruption in the functioning or operation of the plant. The IPC does not deal with the term malicious damage. It however does deal with mischief.

The event in question therefore, can broadly be deemed to be coming within the scope of the malicious damage part of the riot, strike, malicious and terrorism damage named peril of the governing fire insurance policy.

The scope of coverage offered under the said named RSMTD peril is described in the policy. To quote the relevant portions of the same;

Loss of or visible physical damage or destruction by external violent means directly caused to the property insured but excluding those caused by:

1. Total or partial cessation of work or the retarding or interruption or cession of any process or operations or omissions of any kind;
2. Permanent or temporary dispossession of any building or plant or unit or machinery resulting from the unlawful occupation by any person of such building or plant or unit or machinery or prevention of access to the same.
3. Burglary, housebreaking or any malicious act.

6.      Our conclusion: Given the circumstances that brought about the spoilage of the work/ stock in process and for which the claim has been preferred, the loss and conversely the claim are in our opinion outside the scope of coverage granted by the policy under the named peril riot, strike, malicious and terrorism damage (RSMTD). The claim is not tenable.

[ Emphasis added ]

14.    While a contract of insurance is undoubtedly based upon the principle of uberima fides, it is salient to note that it is a document formulated by the opposite party. The contention of the complainant that the document is also covered by the doctrine of Contra Proferentum can also not be denied. I am inclined to accept the argument of the complainant in this regard. The conclusion of the opposite party and the surveyor that the cause of loss was due not to an act of commission but of omission cannot therefore be accepted.

15.   For the aforesaid reasons, in the facts and circumstances of this case, the complaint is allowed partly with the following directions.

(i)     the claim of the complainant is allowed to the extent of Rs.81,43,936/- as assessed by the Surveyor;

(ii)    the claim amount shall be paid to the complainant by the opposite party with interest @ 6% per annum; and

(iii)    This order shall be complied with within 2 months of this order failing which the rate of interest will be 9% p.a.

All pending IAs, if any, stand disposed of with this order.