S.S.Cold Storage India P.Ltd. vs National Ins.Co.Ltd.

2023 INSC 689 Non-Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2042/2012

S.S. Cold Storage India Pvt. Ltd. … APPELLANT

VS.

National Insurance Company Limited … RESPONDENT

JUDGMENT

DIPANKAR DATTA, J.

1. The present appeal, under Section 23 of the Consumer Protection Act,

1986 (for brevity, “CPA” hereafter) registers a challenge to the

judgment and order dated 13th September 2011 passed by the

National Consumer Disputes Redressal Commission, New Delhi (for

brevity, “NCDRC” hereafter), whereby Original Petition No. 80 of 1999

(for brevity, “Complaint” hereafter) filed by the Appellant was

dismissed.

2. A decision herein, by virtue of being a first appeal, necessitates

looking at the facts in some depth. The relevant facts triggering the

Signature Not Verified Complaint are noticed hereunder:

Digitally signed by

a. The Appellant is engaged in the business of operating a cold SWETA BALODI Date: 2023.08.08 17:27:35 IST Reason:

storage facility (for brevity, “Facility” hereafter), the plant,

1 machinery, and stock whereof were continually insured by the

Respondent.

b. The Appellant had obtained the following insurance policies

from the Respondent between 1997 and 1998:

i. Machinery Insurance Policy,

ii. Refrigeration Plant (Stock) Policy (for potatoes) (for

brevity, “Refrigeration Policy” hereafter),

iii. Fire Policy (Comprehensive Fire Policy for the building,

furniture plant, machinery, and installation),

iv. Fire Policy (On stock of potatoes in the Facility).

c. Sometime around 3rd and 4th October 1997, there was leakage

of ammonia gas in Chamber Nos. 1 and 2 of the Facility (for

brevity, “Chambers” hereafter), resulting in significantly

elevated temperatures, and a foul smell, culminating in a

closure of the Facility.

d. In the immediate aftermath of the incident of leakage of gas,

on 4th October 1997 to be precise, the Appellant informed the

Respondent and the District Horticulture Officer of the same,

whilst requesting an inspection of the Facility.

e. The Appellant, on 10th October 1997, also wrote to the District

Horticulture Officer to sell the potatoes that were stored in the

affected Chambers in order to have the Chambers cleared.

f. The Appellant, on 14th October 1997, filed a claim with the

Respondent claiming an amount of Rs.1,03,15,080/-. Therein,

2 the damage was claimed in respect of 85,956 bags of potatoes,

each weighing around 80kg, where the amount claimed was

calculated at Rs.150/- per quintal as per the stipulations of the

Refrigeration Policy.

g. The District Horticulture Officer, on 18th October 1997, while

responding to the Appellant’s letter dated 10th October 1997

stated that the disposal of potatoes should be prioritised to

prevent the spread of any disease or epidemic in the vicinity.

h. The Respondent meanwhile had instructed a surveyor named

Mr. S.K. Agarwal to inspect the Facility. However, he expressed

his inability to assess the Facility due to the magnitude of the

damage.

i. Then the Respondent appointed another surveyor, M/s Mehta

and Padamsey Surveyors Pvt. Ltd. (for brevity, “Surveyor”

hereafter) to inspect the Facility. One Mr. A. Banerjee was sent

by the Surveyor to visit the Facility from 23rd October 1997 to

25th October 1997. On 27th October 1997, the Surveyor

addressed a letter to the Appellant asking it to preserve the

existing state of affairs in the Facility as the Chambers were

inaccessible due to high temperature and the stench of

ammonia.

j. After the Chambers were cleared of the ammonia gas, the

Surveyor visited the Facility on 17th January 1998, to conduct

the requisite inspection.

3 k. The Surveyor, by letter dated 10th March 1998, informed the

Appellant that the incident had occurred due to decay, wear and

tear, leading to leakage of ammonia gas. The pipe had given

way along the seam, and that was attributable to decay, wear,

and tear; hence the same was excluded as per the Refrigeration

Policy.

l. On 22nd January 1999, the Respondent informed the Appellant

that its claim had been repudiated by its competent authority.

m. The Appellant then instituted the Complaint before the NCDRC

on 17th April 1999 claiming an amount of Rs.1,03,15,680/- and

certain further amounts, upon the repudiation of its claim under

the Refrigeration Policy. On 7th January 2010, the Appellant’s

amended complaint was taken on record by the NCDRC,

wherein the following relief was sought:

1. Respondent be ordered to pay to the complainant the claim amount of Rs.98,03,640/- (Rupees Ninety Eight Lakh Three Thousand Six Hundred and Forty only) towards the actual loss on account of stock (potato) damage;

2. Direct the Respondent no.1 to pay the complainant an amount of Rs.20,000/- towards the cost of the ammonia pipeline as per the insurance policy;

3. Award adequate compensation to the Complainant towards the financial losses suffered by the complainant due to the reason the Respondent did not settle the claim and withhold the claim amount, which resulted closure of instant cold storage for full one season, especially in view

4 of the fact that the complainant had to bear the penal interest on the loan taken from State Financial Corporation/bank;

4. Award interest @18% from the date of instant incident i.e. 04.10.1997 and till the date of actual payment on the entire losses suffered by the complainant;

5. Award adequate compensation to the complainant on account of mental agony and torture, the complainant suffered and also as exemplary damages against unfair trade practices adopted by the Respondent;

6. Award legal costs and damages to the complainant;

n. The Respondent filed its reply to the aforesaid Complaint on 7th

August 2000, placing on record the report of the Surveyor

dated 3rd August 1998 (for brevity, “Surveyor’s Report”

hereafter).

o. At the stage of evidence, on 19th April 2008, the Appellant

placed on record before the NCDRC a report by one Mr. S.K.

Ahuja, Chartered Engineer/Loss Assessor (for brevity, “Loss

Assessor” hereafter), wherein inter alia it was stated that the

crack in the pipes could not have been due to wear and tear.

p. Subsequently, the Appellant filed an application before the

NCDRC to allow the inspection of the pipes, which had been

removed from the Facility by the Surveyor, by two technical

experts. The NCDRC, on 11th May 2009, allowed the Appellant’s

application. Subsequently, the pipes were inspected (then in

the custody of the Surveyor) in the presence of two technical

experts, viz. (i) Dr. Manohar Prasad (a retired professor of IIT,

5 Kanpur) and (ii) Mr. K.K. Gupta (Chartered Engineer) on 25th

July 2009 (for brevity, “Experts” hereafter when referred to

jointly).

q. On 4th November 2009, the said Dr. Prasad submitted his

report stating inter alia that the leakage of ammonia could only

be termed as an accidental happening, and that the theory of

it being due to normal wear and tear was not correct. On his

part, Mr. Gupta submitted a report dated 6th November 2009

where he concluded inter alia that the pipes could not have

been termed as worn out as the material flowing through them

was alkaline, and not corrosive like acid.

3. After considering the pleadings as well as the other materials on

record, the NCDRC opined that the Appellant had failed to establish

deficiency by the Respondent in providing services and declined to

grant compensation, as a consequence whereof it dismissed the

Complaint filed by the Appellant as noted above. Certain salient

observations made by the NCDRC in the impugned judgment are

summarised below for convenience:

a. The NCDRC noted that the cracks in the pipes were thin

(hairline) and had occurred at the joints. The pipes were not

seamless as claimed by the Appellant; hence, the leakage of

gas could not be due to a bursting of pipes.

6 b. Relying on the dictionary definition of burst, it was held by the

NCDRC that there was no sudden burst in the pipe resulting in

the leakage of ammonia.

c. The NCDRC also went on to reproduce certain findings from the

Surveyor’s Report, indicating that the leakage of ammonia was

attributable to the hairline opening along with welding joints in

the pipe and that the same was due to wear and tear.

d. Further, the NCDRC reproduced certain portions of Mr. Gupta’s

report to substantiate its conclusions that the leakage occurred

due to normal wear and tear as the same had appeared after 5

to 7 years of usage and were not due to any accident. Further,

it noted that the report submitted by Mr. Gupta supported the

view that there was no proper fusion of the welding joints along

the welding line, and that this could have resulted in hairline

cracks.

e. Also, the NCDRC observed that the “C Class” pipes claimed to

be used by the Appellant, that purportedly had a lifespan of 20

to 25 years, were not actually used in the Facility as the pipes

used were not seamless and had welded joints.

f. Pertinently, the NCDRC noted that the expert opinions had been

obtained after a span of more than 10 years, and they could

not be given credence as the Experts had refrained from giving

any definite opinion as to the real cause of the cracks. Further,

the reports could not be treated as fully independent as the

7 choice of Experts was that of the Appellant’s. It also dismissed

the allegations of collusion against the Respondent and the

Surveyor as the same had not been substantiated by the

Appellant.

g. The NCDRC went on to observe that the hairline cracks in the

pipes, in all probability, had occurred due to wear and tear and

gradual deterioration rather than a sudden burst. Since the

damage was due to wear and tear, the other aspects of the

claim did not require consideration as per Exception Clause 3

of the Refrigeration Policy which excluded such an occurrence

from the scope of the Refrigeration Policy.

h. It was also noted by the NCDRC that the Appellant had made

no payment to the potato growers and even the original and

amended Complaint recorded no detail of any payment of such

a nature; hence, the Appellant had suffered no loss in that

respect.

4. We have heard Mr. Vijay Hansaria, learned senior counsel appearing

on behalf of the Appellant and Mr. Yogesh Malhotra, learned counsel

appearing for the Respondent.

Contentions of the Appellant

5. At the outset, Mr. Hansaria urged that the NCDRC had erred in holding

that the hairline cracks along the welding joints of the pipes were

attributable to wear and tear. He emphasised that the Refrigeration

Policy had been issued to the Appellant after a thorough inspection

8 of the Facility, and that the same had been conducted only five

months prior to the incident in question.

6. Mr. Hansaria then submitted that the reports of three experts, viz.,

Mr. Ahuja, Dr. Prasad, and Mr. Gupta, indicated that the cracks in the

pipes were not due to normal wear and tear, but due to an accident.

Further, he iterated that the Surveyor had not sent the extracted

portion of the pipes to any approved laboratory for testing after the

incident, and it was thus clear that the Surveyor’s views were not

tenable.

7. Next, Mr. Hansaria contended that the NCDRC fell in error by adopting

an approach which is impermissible in law. Our attention was invited

to the impugned judgment to show how selectively the NCDRC had

relied on observations in the reports of Mr. Ahuja, Dr. Prasad and Mr.

Gupta which tended to support the conclusions reached by it while

brushing aside the observations which did not support such

conclusions. According to him, the contents of the reports being

inseparable the same could not have been accepted in part and

rejected in part; either it had to be accepted as a whole or rejected

in toto.

8. Adverting to the findings of the NCDRC regarding the damage caused

to the potatoes stored in the Facility, Mr. Hansaria submitted that the

Respondent was contractually obliged to pay the amount claimed to

the Appellant at the agreed rate of potatoes as per the Refrigeration

Policy and that the Appellant had indeed suffered a loss. He indicated

9 that the potato growers, whose stocks were stored at the Facility,

refused to take back the ammonia affected potatoes and also refused

to clear their rental dues with the Appellant whilst litigation regarding

the same was pending before the respective fora. In fact, a writ

petition filed by the Appellant challenging recovery proceedings

initiated by the potato growers is pending before the Allahabad High

Court and that the Appellant still runs the risk of being burdened by

orders of court to compensate the potato growers whose produce had

been stored in the Facility.

9. Contending that the Appellant has been unfairly treated by the

Respondent and the NCDRC having failed to redress its lawful

grievance on untenable grounds, the appeal ought to succeed and

the Appellant be held entitled to relief as claimed before the NCDRC.

Contentions of the Respondent

10. Mr. Malhotra urged this Court not to disturb the finding of the NCDRC

in the impugned judgment that the leakage of ammonia was not due

to any sudden burst or an accidental occurrence. He submitted that

the Surveyor’s Report was clear in its findings that the leakage of

ammonia was due to hairline openings along the welding joint of the

pipes caused by normal wear and tear and, hence, was excluded by

Exception Clause No. 3 of the Refrigeration Policy.

11. Further, Mr. Malhotra pointed out that the Appellant had appointed

the Experts after more than a decade of the incident, and that even

their reports did not identify any specific cause of the hairline cracks.

10 He then submitted that the said reports did not add any credibility to

the Appellant’s submissions and were rightly rejected.

12. Mr. Malhotra also brought to our attention that the Appellant had not

made any payments to the potato growers as of 24 th July 1998, and

that there was no loss caused to the Appellant as the stock was not

owned by it.

13. Resting on the aforesaid contentions, Mr. Malhotra submitted that the

appeal being devoid of merits deserves outright dismissal.

Consideration of the cited decisions

14. Both Mr. Hansaria and Mr. Malhotra invited our attention to several

decisions of this Court, which we propose to consider hereafter before

embarking on an appreciation and analysis of the evidence that was

led by the parties before the NCDRC.

15. The proper approach in a case of the present nature where there are

multiple reports of surveyors and experts has been outlined in a

catena of decisions of this Court. Presently, we wish to advert to the

decisions cited by the parties.

a. United India Insurance Company Limited vs. Kantika

Colour Lab and Others1, where this Court held that simply

the happening of a covered event did not entitle the insured to

claim reimbursement of the amount stated in the policy, and

1 (2010) 6 SCC 449

11 that only upon proof of actual loss could the insured claim

reimbursement to the extent the same were established.

b. United India Insurance Co. Ltd. and Others vs. Roshan

Lal Oil Mills Ltd and Others2, where this Court remanded the

matter back to the NCDRC as due consideration was not placed

on the joint survey report of the relevant incident on the basis

of which the insurer had repudiated the claim of the insured;

and that non-consideration of this important document resulted

in a serious miscarriage of justice and vitiated the judgment of

the NCDRC.

c. Sikka Papers Limited vs. National Insurance Company

Limited and Others3, where this Court observed that a

surveyor’s report was not the final word, and that there must

be legitimate reasons for departing from such a report. d. Sri Venkateswara Syndicate vs. Oriental Insurance

Company Limited and Another4 where this Court expounded

on the duties of a surveyor, and the due importance to be given

to his assessment. It was also observed that an insurance

company was not bound by a surveyor’s report, but also could

not go on appointing surveyors one after the other so as to get

a tailormade report to its satisfaction. Further, in the case that

it did appoint a second surveyor, satisfactory reasons for the

2 (2000) 10 SCC 19 3 (2009) 7 SCC 777 4 (2009) 8 SCC 507

12 same needed to be provided. It was also laid down that if the

surveyor’s reports were prepared in good faith and with due

application of mind – in the absence of any error or ill motive –

the insurer was not expected to reject the same, and in the

event of an arbitrary rejection of a surveyor’s report, the courts

could intervene and correct the error committed by the insurer

while repudiating the claim of the insured.

e. New India Assurance Company Limited vs. Pradeep

Kumar5 where it was observed that a surveyor’s report was not

the last and final word. Further, it was not that sacrosanct that

it could not be departed from, and that though it could be the

foundation/basis of the settlement of a claim, it was not binding

upon the insurer or the insured.

f. New India Assurance Co. Ltd. vs. Luxra Enterprises (P)

Ltd6 and New India Assurance Co. Ltd. vs. Sri

Buchiyyamma Rice Mill7, where this Court relied on Sri

Venkateswara Syndicate (supra) to observe that a

surveyor’s report may be rejected only due to the report

containing inherent defects, it being arbitrary, excessive, and

exaggerated, or any such cogent reasons before the

appointment of another surveyor.

5 (2009) 7 SCC 787 6 (2019) 6 SCC 36 7 (2020) 12 SCC 105

13 g. National Insurance Company Ltd. vs. Hareshwar

Enterprises (P) Ltd and Others8 where this Court, relying on

Pradeep Kumar (supra), observed that while the assessment

of loss by an approved surveyor was a prerequisite for

settlement of the claim, it was not the last and final word.

Further, it was not that sacrosanct so as not to warrant a

departure if necessary. Further, the report was not binding on

either party, and could be taken on as evidence until more

reliable evidence was brought on record to rebut the contents

of the surveyor’s report.

h. Khatema Fibres Ltd. vs. New India Assurance Company

Ltd.9 where this Court, while discussing the scope of the

expression deficiency, stated that the appellant should be able

to establish either that the surveyor did not comply with the

code of conduct in respect of its duties, responsibilities, and

other professional requirements or that the insurer acted

arbitrarily in rejecting the whole or a part of the surveyor's

report. It also reiterated the dicta of Pradeep Kumar (supra)

as discussed hereinabove. Further, this Court held that a

consumer forum, which was primarily concerned with an

allegation of deficiency in service, cannot subject the surveyor's

report to forensic examination. Once it was found that there

8 (2021) SCC OnLine SC 628 9 (2021) SCC OnLine SC 818

14 was no inadequacy in the quality, nature, and manner of

performance of the duties and responsibilities of the surveyor,

and that the report is not based on adhocism or vitiated by

arbitrariness, then the jurisdiction of the forum to go further

would stop.

Analysis

16. The issue which arises for determination, in the present appeal, lies

within a narrow compass, i.e., whether the NCDRC was justified in

rejecting the Complaint of the Appellant holding that there is no

deficiency of service on the part of the Respondent. While deciding

this issue, we would necessarily be required to assess the relative

weightage to be placed on the report of the Surveyor appointed by

the Respondent as well as the reports of the Loss Assessor and the

Experts appointed by the Appellants regarding the possible cause for

leakage of ammonia gas. That there were four reports on record

before the NCDRC, one from the side of the Respondent and three

from the Appellant’s side, is not in dispute.

17. As our discussion hereafter would reveal, much depends on the

answer to the question as to what was the ‘make’ of the pipes that

were installed in the Chambers and through which ammonia gas

leaked. It would have been fair, just, and expedient if direct and not

opinion evidence was placed before the NCDRC by the parties or if

the NCDRC itself had called upon an expert to give his opinion on the

make of the pipes in view of the NCDRC not accepting the Appellant’s

15 claim that it was of make Tata Steel C Grade Heavy Duty. The answer

to such question would have been clinching. It would have been

proper for us, in the light of the aforesaid circumstance, to remand

the Complaint to the NCDRC for a fresh decision. However, having

regard to the fact that the incident is more than 25 years old, and

the parties also urged us to render a decision on the merits of this

appeal, we proceed to decide the contentious issue by this judgment.

18. At the outset, a reference to the Surveyor’s Report dated 3 rd August

1998 is merited in some detail since it formed the foundation on

which the impugned judgment and order of the NCDRC rests. Salient

observations from the Surveyor’s report are quoted below:

18. Following the Insured’s advice, we were at Mehmoodabad on 17th Jan. 1998. We found the area around the cold storage was dumped with rotten potatoes. Though the Chamber No. I & II, were cleared of the rotten stocks even then the stench was unbearable. In order to identify the source of leakage, the Compressors were started and the source of leakage identified.

The leakage in both the Chambers were in the liquid ammonia pipeline laid out in the top most tier and a thin (hair breadth) opening found along the seam (welding joint) through which the Gas had leaked. The location of the leakage was identified in each Chamber as under:

Chamber No. I: Between Rack No. 199 and 200 as marked on the column.

Chamber No. II: Between Rack No. 4/15 & 4/16 as marked on the columns.

16

19. It did not require much of an explanation that the hairline opening along the welding joint was attributable to wear & tear (a contingency clearly excluded under the policy) […].

20. We would once refer to the fact that the hairline crack along the welding seam in the liquid Ammonia Pipeline in both Chamber Nos. I & II was attributable to the wear and tear of the Pipeline – expressly excluded from the scope of insurance as per the Policy Conditions. […]

23. We would submit once again that the damage/decomposition of the stocks held in Chamber Nos. 1 & II of the Insured’s Cold Storage was not attributable to any of the insured peril under the Policy. It is entirely left to National Insurance Co. Ltd. to examine and decided as they deem fit and proper.

(emphasis ours)

19. We have noticed that the averments made in paragraph 3(xxxvi) of

the appeal have not been dealt with by the Respondent in its counter

affidavit; only the first sentence being relevant, is quoted hereunder:

xxxvi) That on the perusal of the Reply filed to the Complaint and the report of M/s Mehta and Padamsey Surveyors Pvt. Ltd., the Appellant came to know that neither a technical expert's opinion was obtained nor the pieces of pipes were sent to any laboratory by the said Surveyors before recommending the repudiation of the Appellant's claim by the said surveyors. […]

17 There being no rebuttal from the side of the Respondent, it stands to

reason that the Surveyor’s Report was not based on any scientific

investigation.

20. As recorded in the Surveyor’s Report, construction works of Chamber

Nos. 1 and 2 were completed in March 1990 and February 1992

respectively, whereas the incident of leak of ammonia gas occurred

in October 1997. It is trite to note that while the Surveyor’s Report

does advert to certain construction specifications of the Facility but

the said report makes little mention of the nature of the compound

(acidic or alkaline) passing through the pipes, its effect on the pipes,

and does not dwell at all on the potential causes of such a wear and

tear despite only a few years having lapsed post installation. Further,

there is no discussion as to the details of the manufacturer, the likely

lifespan of such installed pipes, and whether such pipelines could

have developed a hairline crack akin to that of a hair’s breadth within

5/7 years of their installation. It is undisputed that the Surveyor did

not send the pieces of damaged pipes to an expert or a laboratory to

identify the cause of leak. There was neither any oral or documentary

evidence to support the theory of wear and tear. Also, no reason, far

less cogent reason, was furnished by the Respondent to arrive at the

conclusion that the leakage of ammonia occurred due to simple wear

and tear. Such omission assumes greater importance as the

Respondent had inspected the Facility prior to renewal of the policies

18 (including the Refrigeration Policy) by the Appellant just a few

months prior to the incident of gas leak, after which the policies were

renewed. Significantly, the Appellant after initial purchase of the

policy went on seeking renewal of the same year after year and the

Respondent too, on its part, permitted such renewal at regular

intervals prior to expiry accepting substantial sums as premia,

lending credence to the argument on behalf of the Appellant that all

such renewals were preceded by a satisfaction reached by the

Respondent that providing insurance cover for the Facility would not

expose it to any risk. More importantly, what is apparent on a perusal

of the Surveyor’s Report is an ipse dixit that ammonia gas leaked

because of wear and tear of the pipelines in the Chambers, rather

than a conclusion drawn on the basis of a process of reasoning having

regard to all relevant factors.

21. Whilst considering the rival submissions, useful guidance can be

drawn from the decisions of this Court in Hareshwar Enterprises

(supra) and Pradeep Kumar (supra) where it was held that though

the report of a surveyor appointed by the insurance company may be

considered as evidence while settling a claim, more evidence on

record could be used to rebut the contents of the same.

22. In the instant case, the Appellant has placed on record reports of the

Loss Assessor, and those of the Experts. No doubt, the said reports

were not obtained in close proximity to the date of the incident of gas

leak but at this juncture, we may remind ourselves that it was the

19 NCDRC which, vide its order dated 11th May, 2009, had allowed an

application of the Appellant seeking permission to inspect the pipes,

which were cut and kept in the custody of the Surveyor, for obtaining

experts’ reports thereon. It is in pursuance thereof that the Experts

submitted their reports. If inspection and subsequent reports at such

distance of time were not to be of any worth, it defies logic as to why,

in the first place, the application was allowed. Next, if the reports of

the Experts did not qualify to be considered only because they had a

belated look at the pipes, on the same analogy the observations

made by the NCDRC on visual impression thereof a few days before

delivery of judgment is liable to be discredited and invalidated on the

self-same ground of delay. We thus find the approach of the NCDRC

to be flawed.

23. As Judges, we are not experts in the field of refrigeration of cold

storages to opine on our own which of the two versions is correct and

acceptable. This also applies to the members of the NCDRC. We are

aghast to find that the members, who heard the Complaint, have

made observations as if they were experts sitting in appeal on the

reports of the Loss Assessor and the Experts. Within our limited

jurisdiction, we are only entitled to draw inferences from the

materials on record including the aforementioned reports, which the

Respondent could not discredit, and say upon applying the test of

preponderance of probabilities as to which of the two versions is more

probable. Be that as it may, we intend to rely on certain general

20 observations made in the reports which the NCDRC did not discard

with cogent reasons. Since the contents of the Surveyor’s Report and

those reports placed on record by the Appellant conflict with each

other, we have thought it prudent to separate the grain and the chaff.

24. While it is true that the Experts’ reports were based on their visual

impression of the pipes, it is equally true that it is the Appellant who

had appointed them. The NCDRC rightly observed that the reports

“cannot be treated as totally independent as it was the complainant

who made a choice of his experts”; nevertheless, there are certain

general observations in such reports to be noticed hereafter which do

help us in our search for the truth.

25. The Loss Assessor’s report states that for wear and tear to occur,

there should have been a chemical active reaction of mechanical

frictional force; hence, in the present case, due to the lack of such

factors, the leakage of ammonia was not attributable to decay or

wear and tear along the welding seam of the said pipes. It also

discussed the kinds of materials ammonia would be corrosive to,

where the steel of the present pipes does not find a mention. There

is also a discussion on the make of the concerned pipes being of Tata

Steel C Grade Heavy Duty, and those of its specifications as per the

product catalogue. It then stated that as per the said specifications,

the life of such pipes would be beyond 25 years, and to say that their

failure was due to wear and tear within 10 years of installation does

not hold good. It also remarked that any failure caused by wear and

21 tear would be preceded by marks of corrosion; further, the pipes were

also said to be painted with anticorrosive paint for protection against

deterioration. Hence, it was concluded, that leak of ammonia gas was

a natural outcome not related to ageing or normal wear and tear.

26. Dr. Prasad, in his report, while considering the thickness and class of

pipes and the nature of ammonia, noted that there was no possibility

of wear and tear. He went on to state that such C Class pipes operate

without any issues for 20 to 25 years, and that the present sudden

leakage of ammonia can only be explained as an accidental

happening.

27. Mr. Gupta’s report observed that the Facility was in conformity with

all relevant safety norms prescribed for running such a cold storage

facility. It further noted that the pipelines and equipment in the

Facility (Chambers) were 5 to 7 years old as Chamber No. 1 was

constructed in 1990 and Chamber No. 2 in 1992. Pertinently, Mr.

Gupta observed that wear and tear would take place only when there

was movement and friction between two objects. In the present case,

his report stated that there was no sort of movement, vibration, or

air resistance. He further pointed out that anhydrous ammonia

flowing through the pipes, being alkaline, could not damage them,

unlike an acidic compound which could attack the pipes. The report

also proceeded to indicate that the lifespan of such mild steel pipes

(C Class pipes) would be around 20 years and ruled against 5 to 7

years old pipes being worn out.

22

28. While the reports were such, on the one hand the NCDRC refused to

give credence to the reports of the Loss Assessor and the Experts

appointed by the Appellant on the ground that such reports, obtained

belatedly, did not also contain any definite opinion as to what was

the real cause of the cracks; yet, on the other hand, the NCDRC

picked up stray observations contained in the reports to reject the

claim of the Appellant. We are in agreement with Mr. Hansaria that it

was not open to the NCDRC to rely on portions of the reports which

supported its conclusions drawn from its visual impression of the

pipes and discard the rest because the observations came in conflict

with such conclusions. The NCDRC ought to have either accepted or

rejected the reports in full and not accept/reject the same in part,

since the contents were to be read as a whole, not being severable.

29. In the light of Exception Clause 3 and in the context of the Complaint

of the Appellant read together with the Expert’s reports, we are

inclined to the view that wear and tear would generally refer to the

expected deterioration of the plant and equipment caused by

frictional force. The Surveyor’s Report is conspicuously silent on this

aspect. The Surveyor identified the cause for the leak as wear and

tear, without delving deep into the matter as to whether the pipes

that were used were likely to develop such wear and tear within 7

and 5 years of their installation in the two Chambers. There was

nothing in the report to suggest that the Appellant had failed to

maintain the Facility satisfactorily for inferring wear and tear. Thus,

23 there was absence of material resting whereon it could be pointed

out by the Surveyor that even a normal and gradual wear and tear

by passage of time resulted in the cracks developing on the surface

of the pipes.

30. Absence of consideration of relevant factors is, therefore, writ large

on the Surveyor’s Report. The reports of the Loss Assessor and the

Experts dwelled on general aspects of scientific observations relating

to the absence of friction or movement when ammonia passes

through the pipes and its alkalinity (non-acidic nature) not being

corrosive to the pipes as well as the manufacturing details, and

specifications of the pipes, which are conspicuous by their absence in

the Surveyor’s report. It seems, all relevant factors were not

considered in the proper perspective by the Surveyor, yet, such

Surveyor’s Report was relied on by the Respondent to defeat the

claim of the Appellant. The report having recorded the ipse dixit of

the Surveyor, without any reference to the aforesaid aspects touched

upon by the Loss Assessor and the Experts, the same is, in our

opinion, not worthy of acceptance.

31. The observation of the NCDRC that the pipes used in the Chambers

were not seamless and had welding joints was apparently made to

discard the reports of the Loss Assessor and the Experts. The Loss

Assessor and the Experts had opined that the pipes were seamless.

If at all the NCDRC had reason not to rely on the reports of the Loss

Assessor and the Experts with regard to the make, quality, thickness,

24 and other features of the C Class Pipes, instead of relying on its

opinion based on a visual impression of the pipes, it ought to have

ordered an examination of the same by an independent expert in

exercise of power conferred on it by Section 22(1) read with Section

13(4)(iv) of the CPA. Although the said power is to be sparingly used,

this was, in our opinion, a fit and proper case calling for exercise of

the power. It seems to us that the NCDRC made observations in the

impugned judgment as if its members were experts in the relevant

field and clothed with authority to sit in appeal over the same.

32. Considering all these factors and the attending circumstances and by

applying the standard of proof of preponderance of probabilities, we

feel inclined to lean in favour of the inference that the version of the

Appellant, was more probable, i.e., that the leak of ammonia gas was

not occasioned due to wear and tear (as claimed by the Respondent)

but was the outcome of an accident10 which was not foreseen and

beyond its control and not covered by any of the exceptions in the

Refrigeration Policy (Exception Clause 3) so as to entitle the

Respondent to claim immunity for the ultimate purpose of repudiating

the insurance claim lodged by the Appellant.

33. We hold that the NCDRC committed serious error by not giving the

reports placed on record by the Appellant the extent of credence the

same deserved. The manner in which the NCDRC dealt with such

10 Accident, according to the Cambridge Dictionary, is something bad that happens that is not expected or intended and that often damages something or injures someone.

25 reports was not proper and legal; major part of the reports could not

have been rejected and only stray observations relied upon to

support the conclusions. This is one of the foremost reasons which

compels us to interfere with the impugned judgment and order. The

other reason assigned by the NCDRC that the Appellant did not have

to pay compensation to the potato growers is equally untenable. The

Appellant has brought on record particulars of certain proceedings at

the instance of the potato growers which, having reached the

Allahabad High Court, is being pursued by it. In any event, the fact

that the Appellant has not paid compensation to the potato growers

as yet is hardly a factor for determining whether the Respondent was

justified in repudiating the insurance claim on the basis of the

Surveyor’s Report for damage caused to the stock of potatoes, which

was duly insured, because of the accident.

34. Repudiation of the insurance claim by the Respondent, on facts and

in the circumstances, is held to amount to deficiency in service on its

part. We, therefore, see no reason to accept any of the grounds

assigned by the NCDRC for rejection of the Complaint.

Conclusion

35. Since we have noticed, for the foregoing reasons, that the impugned

judgment and order of the NCDRC, on merits, is indefensible and that

there has indeed been a deficiency of service at the end of the

Respondent, we are of the considered view that ends of justice would

26 be sufficiently served by granting to the Appellant a lumpsum amount

of Rs. 2,25,00,000/- towards full and final settlement of the insurance

claim. It is ordered accordingly. Let such amount be released by the

Respondent to the Appellant within two months from date. Should

there be a failure in this regard, the said amount shall carry interest

@ 10% p.a. till the amount is paid.

36. The present appeal is accordingly allowed to the extent as aforesaid

and pending applications, if any, stand disposed of.

37. No costs.

..........................., J.

[A.S. BOPANNA]

..........................., J.

[DIPANKAR DATTA] NEW DELHI;

8TH AUGUST, 2023.

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