Assurance Company Ltd. Vs. M/S Zuari Indsustries Ltd. & Ors.  INSC
1520 (1 September 2009)
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.4436
OF 2004 New India Assurance Company Ltd.
- versus- M/s. Zuari Industries Ltd. & Ors.
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.
Heard Ms. Meenakshi Midha, learned counsel for the appellant and
Shri K.K. Venugopal and Shri Nageshwar Rao learned counsel for the respondent.
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.
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, 3 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.
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 4 rejected the claim. Hence the petition before the
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
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 5 caused due to
stoppage of electricity. However, the National Commission allowed the claim of
the respondent and hence this appeal.
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.
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.
On the other hand, Shri K.K. Venugopal, learned senior counsel,
supported the 6 judgment of the National Commission and stated that the
judgment was correct.
We have therefore to first determine whether there was a fire. Admittedly
there was a short circuit which caused a flashover.
Wikipedia defines flashover as follows :
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
In this connection, it is admitted that the short circuit in the
main switch board caused a flashover. The surveyor Shri M.N. Khandeparkar in
his report has observed :
"Flashover, can be defined as a phenomenon of a developing fire (or
radiant heat source) radiant energy at wall and ceiling surfaces within a
compartment.................. In the present case, the paint had burnt due to
the said flashover ............... Such high energy levels, would undoubtedly,
have resulted in a fire, causing melting of the panel board............"
The other surveyor P.C. Gandhi Associates has stated that
"Fire of such a short duration cannot be called a `sustained fire' as contemplated
under the policy".
In our opinion the duration of the fire is not relevant. As long
as there is a fire which caused the damage the claim is maintainable, even if
the fire is for a fraction of a second. The term `Fire' in clause (1) of the
Fire Policy `C' is not qualified by the word 'sustained'. It is well settled
that the Court cannot add words to statute or to a document 8 and must read it
as it is. Hence repudiation of the policy on the ground that there was no
`sustained fire' in our opinion is not justified.
We have perused the fire policy in question which is annexure P-1
to this appeal.
used therein is 'fire' and not 'sustained fire'. Hence the stand of the
Insurance Company in this connection is not acceptable.
Shri K.K. Venugopal invited our attention to exclusion (g) of the
Insurance Policy which stated that the insurance does not cover :
Loss of or damage to any electrical machine, apparatus, fixture or fitting
(including electric fans, electric household or domestic appliances, wireless
sets, television sets and radios) or to any portion of the electrical
installation, arising from or occasioned by over running, excessive pressure
short circuiting, arcing self-heating or 9 leakage of electricity from what ever
cause (lightning included), provided that this exemption shall apply only to
the particular electrical machine apparatus, fixtures, fittings or portion of
the electrical installation so affected and not to other machines, apparatus,
fixture, fittings or portion of the electrical installation which may be
destroyed or damaged by fire so set up."
A perusal of the exclusion clause (g) shows that the main part of
the exclusion clause which protects the insurer from liability under the policy
covers loss of damage to any electrical machinery, apparatus, fixture or
fittings including wireless sets, television sets, radio and so on which
themselves are a total loss or a damage or damaged due to short circuiting,
arcing, self heating or leakage of electricity. However, the proviso to the
said clause through inclusion of any other machinery, apparatus, fixture or
fitting being destroyed or damaged by the fire which has affected any other 10
appliances such as television sets, radio, etc. or electrical machines or
apparatus are clearly included within the scope of the Fire Policy for whatever
damage or destruction caused by the fire. If for example the short circuiting
results in damage in a television set through fire created by the short
circuiting in it the claim for it is excluded under the fire policy. However,
if from the same fire there is a damage to the rest of the house or other
appliances, the same is included within the scope of the Fire Policy by virtue
of the proviso.
words, if the proximate cause of the loss or destruction to any other including
other machines, apparatus, fixtures, fittings etc. or part of the electrical
installation is due to the fire which is started in an electrical machine or
apparatus all such losses because of the fire in other machinery or apparatus
is covered by the Policy.
The main question before us now is whether the flashover and fire
was the proximate cause of the damage in question.
To understand this we have to first know the necessary facts. The
insurance company pointed out the chain or sequence of events as under :
takes place in the INCOMER 2 of the main switchboard receiving electricity from
the State Electricity Board possibly due to the entry of a vermin.
Short-circuiting results in a flashover.
Short-circuiting and flashover produced over-currents to the tune of 8000
amperes, which in turn produced enormous heat. The over currents and the heat
produced resulted in the expansion and ionization of the surrounding air.
? 12 The
electricity supply from the State Electricity Board got tripped.
paint of the Panel Board charred by the enormous heat produced above and the MS
partition of the adjoining feeder connected to the generator power developed a
hole. It also resulted in formation of smoke/soot.
smoke/soot and the ionized air crossed over the MS partition and entered into
the compartment receiving electricity from the generator.
Consequently the generator power supply also got tripped.
tripping of purchased power and generator power resulted in total stoppage of
electricity supply to the plant.
power failure resulted in stoppage of water/steam in the waste heat boiler.
flue gases at high temperature continued to enter the 13 boiler, which resulted
in thermal shock causing damage to the boiler tubes."
In this connection, it may be noted that in its written submission
before the National Commission the appellant has admitted that there was a
flashover and fire.
relevant portion of the written statement of the appellant before the National
Commission is as follows :
1 of the Preliminary Objections wherein it is stated :
January, 99 there was a short circuiting..........which resulted in flash over............
cause of loss to the boiler and equipment is the thermal shock caused due to
stoppage of electricity...... The stoppage of electricity was due to the
circuiting results in a flash over...........
3(iv) of the Preliminary Objections wherein it is stated :
to this flash over and over currents excessive heat energy was generated which
resulted in the evolution of marginal fire.........
3(vi) of the Preliminary Objections wherein it is stated :
surveyors observed that the experts in all the reports submitted by the
complainant admitted that a flash over took place.........
3(viii) of the Preliminary Objections wherein it is stated :
of extremely short duration followed and preceded by short circuit..........
Para 7 of the reply wherein it is stated :
is correct that on 8th January, 1999, short circuit occurred on INCOMER-2 of
the 3.3 KV main switch board in the electrical sub station which resulted in a
10 of the reply wherein it is stated :
to this flash over and over currents excessive heat energy was generated which
resulted in the evolution of marginal fire...........
21 of the reply wherein it is stated :
reference of fire, as opposed to sustained fire, in the opinion of M/s. P.C.
Gandhi & Associates has been made.........
is in this context that M/s. P.C. Gandhi & Associates have referred to the
possible fire after the flash over being of a very short duration.
Thus it is admitted in the written statement of the appellant
before the National Commission that it was the flashover/fire which started the
chain of events which resulted in the damage.
Apparently there is no direct decision of this Court on this point
as to the meaning of proximate cause, but there are decisions of foreign
Courts, and the predominant view appears to be that the 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
Thus in Lynn Gas and Electric Company vs. Meriden Fire Insurance
Company & Ors. 158 Mass. 570; 33 N.E. 690; 1893 Mass. LEXIS 345 Supreme
Court of Massachusetts was concerned with a case where a fire occurred in the
wire tower of the plaintiff's building, through which the wires of electric
lighting were carried from the building. The fire was speedily extinguished,
without contact with other parts of the building and contents, and with slight
damage to the tower or its contents.
in a part of the building remote from the fire and untouched thereby, there
occurred a disruption by centrifugal force of the fly wheel of the engine and
their pulleys connected therewith, and by this disruption the plaintiff's
building and machinery were damaged to a large extent. It was held that the
proximate cause was not the cause nearest in time or place, and it may operate
through successive instruments, as 18 an article at the end of a chain may be
moved by a force applied to the other end. The question always is : Was there
an unbroken connection between the wrongful act and the injury, a continuous
operation? In other words, did the facts constitute a continuous succession of
events, so linked together as to make a natural whole, or there was some new
and independent cause intervening between the wrong and the injury?
The same view was taken in Krenie C. Frontis et al. vs. Milwaukee
Insurance Company 156 Conn. 492; 242 A.2d 749; 1968 Conn. LEXIS 629. The facts
in that case were that the plaintiffs owned the northerly half of a building
that shared a common wall with a factory next door. A fire broke out in the
factory and damaged that building. Minimal fire damage occurred to the
plaintiffs' building. However, due to the damage next door, the building
inspector ordered the removal of the three upper stories of the factory
building, which left the common wall 19 insufficiently supported. Due to the
safety issue, the inspector ordered the third and fourth floors of plaintiffs'
building to be demolished. On this fact it was held that the fire was the
active and efficient cause that set in motion a chain of events which brought
about the result without the intervention of any new and independent source,
and hence was the proximate cause of the damage.
In Farmers Union Mutual Insurance Company vs. Blankenship 231
Ark.127; 328 S.W..2d 360; 1959 Ark. LEXIS 474; 76 A.L.R..2d 1133 the claimant's
goods were damaged after a fire originated in his place of business. The goods
were not damaged by the flames but by a gaseous vapour caused by the use of a
fire extinguisher in an effort to put out the fire. On these facts the Supreme
Court of Arkansas upheld the claim of the claimant.
In Leyland Shipping Company Limited vs. Norwich Union Fire
Insurance Society Limited  1 K.B. 873, the facts of the case were that a
ship was insured against perils of the sea during the first world war by a time
policy containing a warranty against all consequences of hostilities. The ship
was torpedoed by a German submarine twenty five miles from Havre. With the aid
of tugs she was brought to Havre on the same day. A gale sprang up, causing her
to bump against the quay and finally she sank. The House of Lords upheld the
claim for damages observing that the torpedoing was the proximate cause of the
loss even though not the last in the chain of event after which she sank.
In Yorkshire Dale Steamship Company Ltd. vs. Minister of War
Transport (The Coxwold)  AC 691,  2 All ER 6 during the Second
World War a ship 21 in convoy was sailing carrying petrol for use of the armed
forces. There was an alteration of the course of the ship to avoid enemy
action, and an unexpected and unexplained tidal set carried away the ship and
she was stranded at about 2.45 a.m. It was held that the loss was the direct
consequence of the warlike operation on which the vessel was engaged.
In The Matter of an Arbitration between Etherington and the
Lancashire and Yorkshire Accident Insurance Company  1 K.B. 591 by the
terms of the policy (an accident) the insurance company undertook that if the
insured should sustain any bodily injury caused by violent, accidental,
external and visible means, then, in case such injuries should, within three
calendar months of the causing of such injury, directly cause the death of the
insured, damages would be paid to his legal heirs. There was a proviso in the
policy 22 that this policy only insured against death where the accident was
the proximate cause of the death. The assured while hunting had a fall and the
ground being very wet he was wetted to the skin. The effect of the shock lowered
the vitality of his system and being obliged to ride home afterwards, while
wet, still further lowered his vitality. As a result he developed pneumonia and
died. The Court of Appeal uphold the claim holding that the accident was the
proximate cause of death.
In the present case, it is evident from the chain of events that
the 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 we cannot agree with the conclusion of the surveyors that
the fire was not 23 the cause of the damage to the machinery of the claimant.
Moreover in General Assurance Society Ltd. vs. Chandmull Jain
& Anr. AIR 1966 SC 1644 it was observed by a Constitution Bench of this
Court that in case of ambiguity in a contract of insurance the ambiguity should
be resolved in favour of the claimant and against the insurance company.
counsel for the appellant relied on the decision of the British High Court in
Everett & Anr. vs. The London Assurance S.C. 34 L.J.C.P. 299; 11 Jur. N.S.
546; 13 W.R. 862. By the terms of the policy the premises in question was
insured against "such loss or damage by fire to the property." It was
held by the High Court that this did not cover damage resulting from the
disturbance of the atmosphere by the explosion of a gunpowder magazine a mile
distant from the premises insured. We are 24 in respectful disagreement with
the said judgment as the predominant view of most Courts is to the contrary.
For the reasons given above we see no merit in this appeal and it
shall be no order as to costs.
......................... .................. .J. (Markandey Katju)
...........................................J. (Asok Kumar
September 01, 2009.