Calcutta High Court
Tirupati Cold Storage Private Limited vs The Oriental Insurance Company Limited on 21 November, 2025
IN THE HIGH COURT AT CALCUTTA
ORIGINAL SIDE
COMMERCIAL DIVISION
Presents
The Hon'ble Justice Krishna Rao
C.S. (COM) No. 519 of 2024
(Old No. C.S. 132 of 2023)
With
G.A. (Com) No. 8 of 2024
Tirupati Cold Storage Private Limited
Versus
The Oriental Insurance Company Limited
Mr. Jishnu Saha, Sr. Adv.
Mr. Jaydeep Sen
Mr. Rohit Banerjee
Ms. Sananda Ganguli
Mr. Shubradip Roy
... For the plaintiff.
Mr. Abhimanyu Shandilya
Mr. Gourab Das
Ms. Biyas Banerjee
Ms. Simi Paul
... For the defendant.
2
Hearing Concluded On : 25.09.2025
Judgment on : 21.11.2025
Krishna Rao, J.:
1. The plaintiff has filed the present suit praying for a decree for a sum of Rs. 12,63,41,316/- along with interest at the rate of 12% per annum or in the alternative for enquiry to ascertain the loss and damage suffered by the plaintiff, declaration that the Clauses 4, 5 and 6 of the Deterioration of Stock (Potatoes) at Cold Storage Policy No. 311400/44/2023/45 as void, non-est and inoperative and a decree for permanent injunction restraining the defendant from giving any effect or further effect to Clause Nos. 4, 5 and Clause no.6. At the time of argument, Learned Counsel for the plaintiff has not pressed the claim of Rs. 98,05,440/- and Rs. 39,53,096/- out of the total claim of Rs. 12,63,41,316/-.
2. The plaintiff is running a business of providing services of cold storage facilities to the potato cultivators of Bishnupur and Burdwan. The plaintiff has obtained financial assistance from Punjab National Bank. The plaintiff has insured its stock of potato under Deterioration of Stocks (Potato) policy "hereinafter referred to as DOS policy" and the refrigeration plant and machinery of the Cold Storage under Plant and Machinery Breakdown Policy "hereinafter referred to as MBD policy".
3. Fixation of "rent" for potato storage, fixation of "Insured value" of potatoes, choice of insurance companies for insuring stocks at cold 3 storage and fixation of insurance premium are wholly regulated and determined by the State Government under the West Bengal Cold Storage (Licensing and Regulation) Act, 1966 and Rules framed therein. The Directorate of Agricultural Marketing Department, Government of West Bengal has determined the "Insured value" at Rs. 1370/- per quintal, which includes Rs. 170/- being cold storage rent per quintal of potatoes by a notification dated 29th March, 2022.
4. The total loading capacity of the cold storage of the plaintiff is 1,95,537.50 quintals in its three refrigeration chambers. On 8th May, 2022, a surveyor appointed by the defendant had conducted a pre- acceptance survey of every equipment and facility constituting the plant and machinery of the cold storage of the plaintiff and certified that the plant and machineries in the cold storage to be in good, working and sound condition. Being satisfied with the report of the surveyor, the defendant has issued Machinery Breakdown Policy No. 311400/44/2023/46 dated 18th May, 2022, covering the entire plant and machinery of the cold storage of the plaintiff from 18th May, 2022 till 17th May, 2023 and Deterioration of Stock (Potatoes) at Cold Storage Policy No. 311400/44/2023/45 dated 17th May, 2022, covering the entire stock of potatoes loaded from March 2022, for the period from 17th May, 2022 till 15th May, 2023. The premium of the MBD insurance policy was Rs.37,297/- and DOS policy was Rs. 13,94,008/-.
5. On 19th May, 2022, an incident occurred at the cold storage of the plaintiff. The said incident was escapement of ammonia gas from the 4 refrigeration system in the chamber no.3 as a result of which the entire stock of potatoes i.e. 115663 bags weighing 57831.5 quintals and valued at Rs. 79,229,115/- suffered ammonia contamination. The plaintiff has intimated the said incident to the defendant. Initially, the defendant has appointed a preliminary surveyor but no report of the preliminary surveyor was provided to the plaintiff and finally on 30th May, 2022, a final surveyor, namely, M/s. Proclaim Insurance Surveyors and Loss Assessors Private Limited was appointed by the defendant. The surveyor has submitted a final survey report dated 22nd August, 2022, confirming accidental damage to the main valve of the refrigeration system due to sudden rise in ammonia vapour pressure, and assessing net indemnifiable loss at Rs. 6,103/- as replacement cost of the damaged valve.
6. In the final survey report under the DOS policy, the Surveyor mentioned that the loss is not payable as per the operative clause of DOS policy since there was no rise in temperature due to contamination and the temperature in the refrigeration chamber did not rise for more than 24 hours. The plaintiff had sent an email to the defendant protesting against the observation of the surveyor by explaining the meaning and purport of the operative clauses of the DOS policy. On 20th December, 2022, the plaintiff has called upon the defendant to settle the claim of the plaintiff but instead of settling the claim of the plaintiff, the defendant repudiated the insurance claim under the MBD policy by invoking Exclusion Clause nos. 4 and 5 of the 5 MBD policy and the claim under the DOS policy by invoking Exclusion Clause nos. (II), (IV) and (VI) of the DOS policy.
7. In the meantime on 20th June, 2022, the Director of Agricultural Marketing, Government of West Bengal passed an order by determining the rate of compensation payable by the plaintiff to the "hirers"/ "farmers" whose potatoes/stocks have been damaged by ammonia in the cold storage of the plaintiff on 19th May, 2022. The plaintiff has challenged the said order in a writ proceeding. Pending adjudication of the said writ petition, the Writ Court directed the plaintiff to pay an amount of Rs. 3,00,00,000/- as an adhoc compensation to the farmers whose potatoes have been damaged in the said incident. To pay the said amount of compensation, the plaintiff has utilized the entire credit limit in the business and also borrowed an amount of Rs. 1,50,00,000/- from the financial institution at the rate of 9% per annum and at present the rate of interest is 12% per annum. The plaintiff has further obtained a loan of Rs. 2,00,00,000/- from the financial institution at the rate of 12% per annum in the month of March, 2023 for meeting operational costs and payment of further compensation to the farmers whose potatoes were damaged in the incident to persuade the farmers to allow the plaintiff to remove the contaminated potatoes from chamber no.3.
8. The loading season of 2023 commenced from 1st March, 2023 and the blockade was removed by the farmers only on and from 7th March, 2023 due to which the plaintiff lost an opportunity to load potatoes in 6 its cold storage and optimizing its rent. The plaintiff could load only 60212 quintals in 2023 season. After removal of blockade by the farmers on and from 7th March, 2023, the plaintiff could remove the huge volume of contaminated stock of potato from chamber no.3 and dispose of the same as and when the labour force was available. In the said process of disposal of contaminated stock, the plaintiff has incurred a total expense of Rs.38,72,721/- being the labour charges, accessories, transportation and earth cutting equipment.
9. Mr. Jishnu Saha, Learned Senior Advocate representing the plaintiff submits that General Exclusion No. 4 of the MBD policy gradually developing flaws, defects, cracks or partial fractures and General Exclusion No. 5 in sum and substance contemplates wear and tear. In both cases burden of proving existence of circumstances triggering exclusions in insurance policy is on the defendant. In support of his case, he has relied upon the judgement in the case of National Insurance Company Limited Vs. Ishar Das Madan Lal reported in (2007) 4 SCC 105.
10. Mr. Saha submits that the plaintiff has suffered loss due to ammonia contamination and quantum of the loss to the tune of Rs. 79,229,155/. Value is not in dispute and the fact is admitted in the final survey report under DOS policy. He submits that the DOS policy covers two different spices of perils, namely, 'deterioration, putrefaction' and 'contamination' and while fluctuation of temperature i.e. rise of the same beyond a specific time and level, as a triggering factor, has 7 bearing on causing the peril like 'DETERIORATION, PUTREFACTION' due to inherent nature of vegetable and food items 'CONTAMINATION' is altogether a different spices of peril, which cannot be caused due to inherent nature of the item but necessarily requires "an external contaminant agent" to be induced into the item, which is ammonia gas in the instant case.
11. Mr. Saha submits that the repudiation of claim under DOS policy is a product of wrongful and absurd construction of DOS policy and the standard clauses of the said policy expressly covers "loss by contamination" treating the same as an "accident". The operative clause of DOS policy treats "contamination" as separate type of peril independent of any rise in temperature, which is self-evident from the operative clause read with definition of "accident" provided in the policy.
12. Mr. Saha submits that each of the DOS policy Exclusion Nos. (ii), (iv) and (vi) relates to loss due to rise of temperature resulting from the circumstances stated in such clauses. In view of such, clear wordings in the policy excluding "rise of temperature" from the chain of causation in respect of "loss by contamination" following an "accident", such Exclusion Clause Nos. (ii), (iv) and (vi) of the DOS policy are not applicable in respect of loss by contamination. As such repudiation of the insurance claim of the plaintiff on account of loss due to contamination of stock of potatoes caused by escape of refrigerant is contrary to and in violation of the DOS policy contract. He submits that 8 it is a settled position of law that "Exclusion Clauses" cannot be given such wide meaning and effect that would defeat the main purpose of the insurance contract and render such contract illusory, when such insurance contract is a standard form contract where the insured does not have any role to negotiate for or contribute to the framing of terms and conditions thereof, and in such cases, the 'exclusion clause' has to be read down to save the main purpose of the insurance contract. In support of his submissions, he has relied upon the judgment in the case of Texco Marketing (P) Ltd. Vs. Tata AIG General Insurance Co. Ltd. reported in (2023) 1 SCC 428 and in the case of B.V. Nagaraju Vs. Oriental Insurance Co. Ltd. reported in (1996) 4 SCC
647.
13. Mr. Saha submits that the DOS policy is a standard form of contract. The said operative clause has to be read contra proferentum against the defendant in favour of such construction of the said operative clause which exclude rise in temperature not being a condition precedent for covering loss by contamination, as rise in temperature does not have any cause effect nexus with contamination and as such Exclusion Clause Nos. (ii), (iv) and (vi) of the DOS policy has to be construed to be limited only in cases of loss by 'deterioration, putrefaction'. In support of his submissions, he has relied upon the judgment in the case of Industrial Promotion and Investment Corporation of Orissa Ltd. Vs. New India Assurance Co. Ltd. reported in (2016) 15 SCC 315 9 and in the case of Soham Shipping Pvt. Ltd. Vs. New India Assurance Co. Ltd. reported in 2025 SCC OnLine SC 746.
14. Mr. Saha submits that the standard form of DOS policy provides for standard deductibles @ 5% of the gross loss on account of "Rottage" and @5% of the gross loss on account of "Shrinkage", totaling the deductible of 10% of the loss irrespective of storage period. He submits that such deductibles on account of "Rottage" and "Shrinkage" is an unconscionable term of the insurance contract unilaterally incorporated by the defendant which is unreasonable, contrary to the statutory law which mandates cold storage operators to obtain DOS policy and substantially defeats the main purpose of the insurance contract i.e. indemnification of the cold storage operators against liability towards potato cultivators in the event of loss of stock at cold storage. He submits that the deduction made by the surveyor on account of "Shrinkage" (5%) and "Rottage" (5%) and "Excess" (10%) is liable to be struck down and the plaintiff is entitled to be indemnified for the admitted gross loss quantifying to Rs. 7,92,29,155/- under the subject DOS policy.
15. Mr. Saha submits that payment of compensation to the potatoes cultivators, the plaintiff was entirely dependent on the insurance claim under the DOS policy, since full compensation could not be paid, the cultivators blocked the main gate of the cold storage and even physically assaulted the P.W.2 and employees of the plaintiff. The plaintiff had missed the opportunity to utilize their loading capacity and 10 could load only 60212 quintals compared to their loading capacity of 195500 quintals, though 2023 was a bumper crop season. He submits that if the insurance claim had been repudiated and was timely paid, there would not have been the dispute with the potatoes cultivators for non-payment of compensation and the plaintiff could utilize its full loading capacity and earn rent therefrom.
16. Mr. Abhimanyu Shandilya, Learned Advocate representing the defendent submits that the suit filed by the plaintiff suffers from misjoinder of party as the plaintiff has not made the surveyor as party defendant. He submits that actual dispute is between the plaintiff and the surveyor. He submits that the surveyor has recommended that the plaintiff is not entitled to get any claim and as per the recommendation, the defendant has repudiated the claim of the plaintiff.
17. Mr. Shandilya submits that the documents which the plaintiff has exhibited cannot be taken into consideration and the said documents are not proved by the plaintiff in accordance with law. He submits that there are about 30 documents, which have been originated from computer and are electronics documents but the plaintiff has not filed affidavit to prove the said documents under Section 65(B) of the Indian Evidence Act, 1972.
18. Mr. Shandilya submits that the claim made by the plaintiff is premature. He submits that challenging the rate fixed by the Director of Agricultural Marketing, Government of West Bengal, the plaintiff has 11 filed writ petition and the same is pending before the Hon'ble Court for adjudication.
19. Mr. Shandilya submits that the suit filed by the plaintiff is speculative. He submits that the plaintiff is not sure what claim the plaintiff is entitled to. Time and again, the plaintiff changed its claim amount. The amount claim by the plaintiff is not supporting with any documents. He submits that in one hand the plaintiff prays for a decree for a sum of Rs.12.00 Crores and on the other hand, the plaintiff prayed for conducting enquiry to the loss and damage suffered by the plaintiff.
20. Mr. Shandilya submits that the plaintiff has admitted that the nut and bolt of the flange was unthreaded. Unthreaded nut and bolt cannot happen in an accident. Unthreading of a nut and bolt occurs due to change in temperature and continuous vibrations over the period of time. Unthreading of nut and bolt is a gradual process, therefore, it was result of normal wear and tear and not a result of accident. He submits that the surveyor being the expert has already given report that the "incident" was not an "accident" but normal wear and tear for such kind of incident causing damage to potatoes is not covered under the risk coverage. He submits that the DOS policy covered contamination only through rise in temperature and no other contamination. Contamination by leakage of ammonia is out of purview of the DOS policy.
12
21. Mr. Shandilya submits that the suit filed by the plaintiff is an afterthought and pre-planned. He submits that the plaintiff is trying to cover its operational expenses/ loan and debt payment through the insurance claim. The plaintiff obtained loan from Punjab National Bank for Rs. 7.28 Crores on 11th March, 2022 i.e. just before two months and 8 days prior to the alleged incident. The compensation claim in the suit is very close to the loan amount. He submits that DOS policy is effective from 17th May, 2022 and MBD policy, which covers the accident is effective from midnight of 18th May, 2022 and the alleged incident occurred on 19th May, 2022, evening i.e. within 24 hours.
22. Mr. Shandilya submits that the plaintiff had renewed both DOS and MBD policies from time to time between 31st March, 2019 to 30th March, 2022 without any gap except for 9 days in the year, 2020, during Covid period. The plaintiff was without any insurance coverage for 47 days for MBD and 46 days for DOS as both policies were expired on 30th March, 2022. He submits that the loan was sanctioned on 11th March, 2022, policies expired on 30th March, 2022, policy coverage renewed on 18th May, 2022 after 47 days and the incident occurred on 19th May, 2022 within 24 hours of renewal of policy.
23. Mr. Shandilya submits that as per the case of the plaintiff, the average expenses for the Financial Year 2019-2020, 2020-2021 and 2021-2022 was around 2.36 crores and as per the evidence of the plaintiff's witness, the expenses for the Financial Year 2022-2023 ending in 13 March, 2024 was Rs. 2.5 crores, in these situations what was the need for a new loan of Rs. 7.28 crores.
24. Mr. Shandilya submits that the DOS policy is operative when an accident has to be followed by rise in temperature to cause damage to the goods by deteriorations, putrefaction or contamination. In the present case both the accident and rise in temperature are missing, thus the coverage clause is inoperative.
25. The issues in the present suit are:
(a) whether the defendant has rightly repudiated the claim of the plaintiff by invoking Exclusion Clauses 4 and 5 of the Machinery Breakdown Policy and Exclusion Nos. (ii), (iv) and (vi) of the Deterioration of Stocks Policy.
(b) Whether the plaintiff is entitled to get the claim under the Machinery Breakdown Policy and Deterioration of Stocks Policy.
26. On 8th May, 2022, the Surveyor appointed by the defendant had conducted pre-acceptance survey of each and every equipment of the plant and machinery of the cold storage of the plaintiff and submitted report certifying that "All the machineries of the above cold storage were inspected by undersigned and found that all are in good/ working/sound/intact condition and running smoothly with full efficiency output. Undersigned is of the opinion that the all plant and machineries as per list enclosed may be covered by the Machinery Insurance Policy". The list contains all together 64 items. This case is with regard to valve. As per Serial No. 61, "All Valves, Pipe lines, Fittings etc.". The remark 14 portion of the said report, it is recorded that "All the above machineries are found as sound and good running condition with full efficiency output".
27. On being satisfied with the pre-acceptance survey report, the defendant issued the following insurance policies in favour of the plaintiff:
"8. (a) Machinery Breakdown Policy No. 311400/44/2023/46 dated May 18, 2022 (hereinafter referred to as the said MBD insurance policy) dated 18.05.2022 covering the entire Plant and Machinery of the said cold storage for the period from May 18, 2022 till May 17, 2023.
(b) Deterioration of Stock (Potatoes) at Cold Storage Policy No. 311400/44/2023/45 (hereinafter referred to as the said DOS insurance policy) dated 17.05.2022 covering the entire stock of potatoes loaded from March 2022, for the period from May 17, 2022 till May 15, 2023."
The premium for the MBD insurance policy was Rs. 37,297/- and for the DOS policy was Rs. 13,94,008/-.
28. A damage to the refrigeration plant and machinery of the cold storage happened on 19th May, 2022, leading to escape of ammonia gas in the Chamber no.3 due to which, the entire stock of potatoes in the chamber no.3 suffered ammonia contamination.
29. After the incident, the plaintiff has obtained a report from Professor N.C. Mandal, Retired Professor of Plant Pathology at the Visva Bharati University regarding the suitability of the contaminated stock of potatoes for consumption. In the said report, it was opined that 15 consumption of such ammonia contaminated potatoes should be avoided. It was further observed that the incident can be treated as an accident rather than fault of the technician. It was suggested that stringent measures be taken up for training of every technician.
30. By a letter dated 7th July, 2022, the defendant has informed the plaintiff that "the damage to stock is caused by ammonia leakage duration of which was about 35 minutes and there was no rise of temperature within the cold storage chamber. The stock damage was found caused due to impact of ammonia due to leakage caused from failure of nut bolt and gasket. We regret to mention that the reported loss was not caused due to deterioration caused by rise in temperature and hence falls outside the scope of the policy".
31. General Exceptions of the Machinery Breakdown Policy, reads as follows:
"GENERAL EXCEPTIONS THE COMPANY SHALL NOT BE LIABLE UNDER THIS POLICY IN RESPECT OF -
1. Loss, damage and/or liability caused by or arising from or in consequence, directly or indirectly of fire including extinguishment of a fire or clearance of debris and dismantling necessitated thereby, smoke, soot, aggressive substance, lightning, explosion of any kind (other than bursting or disruption of turbines, compressors, cylinders of steam engines, hydraulic cylinders or fly wheels or other apparatus subject to centrifugal force, internal pressure) theft, collapse of buildings, subsidence, landslide, rockslide, water which escapes from water containing apparatus, flood, inundation, storm, tempest, earthquake, volcanic eruption or other Acts of God, impact of land borne 16 or waterborne or airborne craft or other aerial devices and/or articles dropped therefrom.
Any loss or damage by fire within the electrical appliances and installation insured by this Policy arising from or occasioned by over running, excessive pressure, short circuiting arcing, self heating or leakage of electricity, from whatever cause (lightning included), is covered, provided that this extension shall apply only to the particular electrical machine, apparatus fixture fitting or portions of the electrical installation so affected and not to other machines, apparatus, fixtures fittings or portions of the electrical installation which may be destroyed or damaged by fire so set up.
2. Loss damage and/or liability caused by or arising from or in consequence, directly of
a) War, invasion, Act of foreign Enemy, Hostilities or war like operations (Whether war be declared or not). Civil war, rebellion, revolution Insurrection, Mutiny, Riot, Strike, Lockout and Malicious Damage, Civil Commotion, Military or Usurped Power, Martial Law, Conspiracy Confiscation, Commandeering by a group of malicious persons or persons acting on behalf of or in connection with any political Organization, Requisition or Destruction or damage by order of any Government de-jure or de facto or by any Public, Municipal or Local Authority.
b) Nuclear reaction, nuclear radiation or radioactive contamination.
3. Accident, Loss, damage/and/or liability resulting from over load experiments or tests enquiring the imposition of abnormal conditions.
4. Gradually developing flaws, defects, cracks or partial fractures in any part not necessitating immediate stoppage, although at some future time repair or renewal of the parts affected may be necessary.
5. Deterioration of or wearing away or wearing out any part of any machine caused by or naturally resulting from normal use or exposure.
6. Loss, damage and/or liability caused by or arising out of the willful act to willful neglect or 17 gross negligence of the insured or his responsible representatives.
7. Liability assumed by the insured by agreement unless such liability would have attached to the Insured notwithstanding such agreement.
8. Loss, damage and/or liability due to faults or defects existing at the time of commencement of this Insurance and known to the insured or his responsible representative but not disclosed to the Company.
9. Loss of use of the Insured's plant or property of any other consequential loss incurred by the insured.
10. Loss, damage/and/or liability due to explosions in Chemical Recovery Boilers, other than pressure explosions for e.g. smell, chemical, ignition, Explosions etc. SPECIAL EXCLUSIONS The Company shall not be liable for
1. The Excess, as stated in the Schedule, to be first borne by the insured out of each and every claim; where more than one item is damaged in one and same occurrence, the insured shall not, however, be called upon to bear more than the highest Excess applicable to any one such item;
2. Loss of or damage to belts, ropes, chains, rubber tyres, dies, moulds, blades, cutters, knives or exchangeable tools, engraved or impression cylinders or rolls, objects made of glass, porcelain, ceramics, all operating media (e.g. lubricating oil, fuel, catalyst, refrigerant, dowtherm) felts, endless conveyor belts or wires, sieves, fabrics, heat resisting and anti-corrosive lining and parts of similar nature, packing material, parts not made of metal (except insulating material) and non-metallic lining or coating of metal parts, unless loss or damage to the equipments/machinery is indemnifiable in terms of the policy.18
3. Loss or damage for which the manufacturer or supplier or repairer of the property is responsible either by law or contract.
In any action, suit or other proceeding where the Company alleges that by reason of the provisions of the exceptions or exclusions above, any loss, destruction, damage or liability is not covered by this insurance, the burden of proving that such loss, destruction, damage or liability is covered shall be upon the insured.
PROVISIONS
1. SUM INSURED It is the requirement if this Insurance that the Sum Insured shall be equal to the cost of replacement if the insured property by new property of the some kind and same capacity which shall mean its replacement cost including freight and customs duties, if any, and erection costs."
32. General Exceptions of the Deterioration of Stock Policy reads as follows:
"NOW THIS POLICY OF INSURANCE WITNESSETH that in consideration of the Insured having paid to the Company, the premium mentioned in the said Schedule. The Company hereby agree with the Insured, subject always to the teams, provisions, warranties and conditions contained herein or endorsed hereon, that if at any time during the period of insurance stated in the Schedule, or during any subsequent period for which the Insured pays and the Company may accept the premium for the renewal of this policy, there shall occur an ACCIDENT as hereinafter defined, to the Refrigeration Machinery described in the Schedule I resulting in a rise in temperature in the Refrigeration chambers thereby directly causing damage to the goods described in Schedule II by deterioration, putrefaction or contamination following such accident, then the Company will subject to the terms, exceptions, warranties and conditions contained herein or endorsed or otherwise expressed hereon, indemnify the Insured for such damage in the manner described hereafter but not exceeding in all, the Sum Insured stated in 19 Schedule II. The total liability of the Company under this policy shall be limited to the Sum Insured specified in Schedule II.
DEFINITIONS:
1. The Term accident shall mean and be limited to
(a) Any sudden or unforeseen loss of or damage to the Refrigeration Machinery described in Schedule I of this policy due to any accidental cause covered by Machinery Insurance Policy specified in Schedule I and not hereinafter excluded.
EXCLUSIONS
(i) failure of any part or parts requiring periodical renewal (such as failure of belts, gaskets, packing material, joints of any kind and insulation).
(ii) Operation of fuses and safety devices.
(b) Escape of Refrigerant in the refrigerated chamber as a direct result of damage to machinery and plant described in Schedule I for which damage a claim is admissible under the Machinery Insurance Policy specified in the Schedule.
EXCEPTIONS:
The Company shall not be liable for:
i) Excess amount mentioned in Schedule II of Policy.
ii) Any damage to the stocks due to rise or fall in temperature caused by stoppage of any section or sections of the Refrigeration Plant for less than 24 hours following an accident to the Refrigeration Plant & Machinery specified in Schedule I and covered by concurrent Machinery Insurance policy.20
iii) Any damage to the stocks due to rise or fall in temperature caused by failure of electric supply for whatever reasons.
iv) Any damage to stocks caused by a rise or fall in temperature due to stoppage of any section or sections of the Refrigeration Plant for repairs, maintenance, overhauling or for replacement of parts due to wear and tear of the plan and equipments or failure of any part's requiring periodical renewal and operation of fuses and safety devices.
However, this exception will not apply for repairs es replacement necessitated by operation of an Insured policy.
v) Any damage to the stocks arising out of overloading of the Refrigeration Plant and Equipments beyond its maximum rated capacity.
vi) Any damage if the temperature in the Refrigeration Chambers does not exceed 40°F (4.4°C).
vii) Any loss or damage to the stocks as a result of inherent defects or diseases, natural deterioration or natural putrefaction even though they may be contained in the Cold Storage Chambers.
viii) Any loss arising from improper storage, insufficient circulation of air/non-uniformity of temperature for whatsoever reasons.
ix) Any loss of or damage to the packing materials.
x) Any damage to the stocks caused by collapse of rack structure/storage platforms due to uneven loading or any other reasons.
However, this exception shall not apply for the collapse of rack structure/storage platform leading to Machinery Breakdown and resulting in deterioration of stocks, 21
xi) Any damage directly or indirectly occasioned by or happening through or in consequence of or aggravated by
(a) War, invasion, act of foreign enemy, hostilities or war like operations (whether war be declared or not), Civil war, Rebellion, Insurrection, Mutiny, Riot, Strike, Lockout and Malicious Damage, Terrorism, Civil Commotion, Military or usurped power, martial law, conspiracy. confiscation, commandeering a group of malicious person or persons acting on behalf of or in connection with any political organization, requisition or destruction or damage by order of any government de jure or de facto or by any public, Municipal or Local Authority.
(b) Nuclear reaction, Nuclear radiation or Radioactive contamination.
(c) The willful act of willful negligence of the Insured or his representative.
(d) Fire, Lightning, Extinguishment of a fire or subsequent demolition, collapse of building, Flood, Inundation, Earthquake, Subsidence, Landslide, Rockslide, Storm, Tempest, Hurricane, Typhoon, Cyclone or other natural catastrophe.
xii) Loss or reduction of the Insured's Refrigeration capacity or other consequential loss or damage or liability of any nature whatsoever."
33. The defendant repudiated the claim of the plaintiff of both the policies on the following reasons:
(a) Reasons for repudiation of Machinery Breakdown Policy (MBD):
Exclusion No.4: "Gradually developing flows, defects, cracks, or partial fractures in any part not necessitating immediate stoppage, although at 22 some future time repair or renewal of the parts affected may be necessary."
Exclusion No. 5: "Deterioration of or wearing away or wearing out any part of any machine cause by or naturally resulting from normal use or exposure."
(b) Reasons for repudiation of DOS policy:
Exclusion No. (ii) : "Any damage to the stocks due to rise or fall in temperature caused by stoppage of any section or sections of the Refrigeration Plant for less than 24 hours following an accident to the Refrigeration Plant & Machinery specified in Schedule and covered by concurrent Machinery Insurance Policy."
Exclusion No. (iv): "Any damage to stocks caused by a rise or fall in temperature due to stoppage of any section or sections of the Refrigeration Plant for repairs, maintenance, overhauling or for replacement of parts due to wear and tear of the plant and equipment or failure of any part/s requiring periodical renewal and operation of fuses and safety devices. However, this exception will not apply for repairs or replacement."
Exclusion No. (vi): "Any damage if the temperature in the Refrigeration Chambers does not exceed 40 degree F (4.40C)."
34. After inspection of the cold storage of the plaintiff wherein the said incident occurred and after perusing the testing report of Dr. N.C. Mondal, the Surveyor come to the conclusion that "the damage to potatoes is not due to rise in temperature. The damage to potatoes is due to leakage of ammonia gas. The operative clause of the policy states that accident must result in rise in temperature in the refrigeration chamber thereby directly causing damages to goods. The direct cause of damage to potatoes is not rise in temperature rather leakage of ammonia gas. 23 This fact is also confirmed by the testing report of Dr. N.C. Mandal which is provided by insured to us. Hence, operative clause did not operate in this incident".
35. In the survey report, it is also mentioned that "temperature did not exceed 40 Degree Fahrenheit. As per log records provided by insured it was within 38 Degree Fahrenheit. We have obtained the Machine Log book record from 1st April, 2022 to 30th May, 2022. This Log Book records temperature of each chambers (I, II & III) for every two hours. The leakage of ammonia has took place on 19th May, 2022 at 7.45 PM in 5th Floor in Chamber No. III. We received log book from insured and verified temperature at 8PM and 10 PM of each floor on 19th May, 2022".
36. The cause of loss is due to leakage of ammonia gas and due to the failure of the gasket holding bolt of the expansion valve caused by gas vapour pressure on the 5th floor in the 3rd chamber of the cold storage of the plaintiff.
37. As per DOS policy the definition of the term "accident" reads as follows:
"DEFINITIONS:
1. The Term accident shall mean and be limited to
(a) Any sudden or unforeseen loss of or damage to the Refrigeration Machinery described in Schedule I of this policy due to any accidental cause covered by Machinery Insurance Policy specified in Schedule I and not hereinafter excluded.24
EXCLUSIONS
(i) failure of any part or parts requiring periodical renewal (such as failure of belts, gaskets, packing material, joints of any kind and insulation).
(ii) Operation of fuses and safety devices.
(b) Escape of Refrigerant in the refrigerated chamber as a direct result of damage to machinery and plant described in Schedule I for which damage a claim is admissible under the Machinery Insurance Policy specified in the Schedule."
38. There is no dispute that the incident occurred due to the failure of gasket holding bolt of the expansion valve caused by the gas vapour pressure for which ammonia gas was leaked. In the report, the surveyor has come to conclusion the temperature did not exceed 40 Degree Fahrenheit, thus the claim of the plaintiff falls outside the scope of the policy and the exclusion clause.
39. The surveyor has relied upon the testing report of Dr. N.C. Mandal. In the testing report, under the general observation and conclusion, it is stated that "this can be treated as an accident rather than the fault of technician". As per the definition of the accident in the DOS Policy, it is mentioned that "any sudden or unforeseen loss of or damage to the refrigeration machinery described in the Schedule-I of this policy due to any accidental cause covered by machinery insurance policy specified in Schedule 1 and not hereinafter excluded".
40. Exclusion 4 of the MBD Policy provides that gradually developing flaws, defects, cracks or partial fractures in any part not necessitating 25 immediate stoppage, although at some future time repair or renewal of the parts affected may be necessary and Exclusion 5 provides that Deterioration of or wearing away or wearing out any part of any machine caused by or naturally resulting from normal use or exposure.
41. The surveyor has not denied that unthreaded nuts and bolts of the flange is not an accident. The surveyor is only taking into consideration that the temperature has not exceeded 40 degree Fahrenheit. In the case of Vikram Greentech India Ltd. and Anr. vs. New India Assurance Company Limited reported in (2009) 5 SCC 599, the Hon'ble Supreme Court held that :
"16. An insurance contract, is a species of commercial transactions and must be construed like any other contract to its own terms and by itself. In a contract of insurance, there is requirement of uberrima fides i.e. good faith on the part of the insured. Except that, in other respects, there is no difference between a contract of insurance and any other contract.
17. The four essentials of a contract of insurance are: (i) the definition of the risk, (ii) the duration of the risk, (iii) the premium, and (iv) the amount of insurance. Since upon issuance of the insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of the risks covered by the insurance policy, its terms have to be strictly construed to determine the extent of liability of the insurer."
42. On 8th May, 2022 i.e. prior to issuance of Machinery Background Policy dated 18th May, 2022 and Deterioration of Stock (Potatoes) at Cold Storage Policy dated 17th May, 2022, the Surveyor of the defendant had conducted a pre-acceptance survey of each and every equipments and 26 facilities of the plant and machineries of the cold storage of the plaintiff and certified that the plant and machineries in the cold storage of the plaintiff is in good, working and sound condition. The pre-acceptance report was accepted by the defendant and the defendant issued the two policies. The pre-acceptance survey was conducted on 8th May, 2022, Machinery Background Policy was issued on 18th May, 2022 and deterioration of Stock was issued on 17th May, 2022. The incident occurred on 19th May, 2022 i.e. just after 2 days from the issuance of the DOS Policy and within 24 hours after the renewal of MBD Policy. In the pre acceptance survey report, at serial no. 61, it is also mentioned that "all valves, pipes lines, fittings etc. are found as in sound and in good condition with full efficiency output".
43. The language used in the operative clause of DOS Policy, it appears that "contamination" as a peril has been separated from the perils of "deterioration, putrefaction" by placing the disjunctive word "or" before the word "contamination". In the operative clause, with respect to loss by deterioration, putrefaction in the chain of causation, in between accident and deterioration, putrefaction, rise in temperature has been placed as a condition precedent but with respect to loss by "contamination", "rise in temperature" has not been placed as a condition precedent between accident and contamination. Thus, distinction makes the requisite ingredients for coverage of loss by "contamination" independent of a "rising in temperature". 27
44. Exclusion Nos. (ii), (iv) and (vi) relates to loss due to rise in temperature resulting from the circumstances as mentioned in the said clause. The clear wording in the policy excluding "rise of temperature" from the chain of causation in respect of loss by "contamination" following an accident, such Exclusion Nos. (ii), (iv) and (vi) of the DOS Policy are not connected with loss by "contamination". In general the word "contamination" having no necessary nexus with rise in temperature. The operative clause the of DOS Policy which is the standard form of contract and as well as the Exclusion nos. (ii), (iv) and (vi) of DOS Policy cannot be stretched to exclude loss by contamination due to "escape of refrigerant in the refrigerated chamber as a direct result of damage to machinery" as the same will defeat one of the main purpose of DOS Policy contract i.e. indemnification against loss due to contamination by escape refrigerant. In the case of Texco Marketing (P) Ltd. vs. Tata AIG General Insurance Company Ltd. reported in (2023) 1 SCC 428, the Hon'ble Supreme Court held that :
"12. An exclusion clause in a contract of insurance has to be interpreted differently. Not only the onus but also the burden lies with the insurer when reliance is made on such a clause. This is for the reason that insurance contracts are special contracts premised on the notion of good faith. It is not a leverage or a safeguard for the insurer, but is meant to be pressed into service on a contingency, being a contract of speculation. An insurance contract by its very nature mandates disclosure of all material facts by both the parties.
13. An exclusion clause has to be understood on the touchstone of the doctrine of reading down in the light of the underlining object and intendment of the contract. It can never be understood to mean 28 to be in conflict with the main purpose for which the contract is entered. A party, who relies upon it, shall not be the one who committed an act of fraud, coercion or misrepresentation, particularly when the contract along with the exclusion clause is introduced by it. Such a clause has to be understood on the prism of the main contract. The main contract once signed would eclipse the offending exclusion clause when it would otherwise be impossible to execute it. A clause or a term is a limb, which has got no existence outside, as such, it exists and vanishes along with the contract, having no independent life of its own. It has got no ability to destroy its own creator i.e. the main contract. When it is destructive to the main contract, right at its inception, it has to be severed, being a conscious exclusion, though brought either inadvertently or consciously by the party who introduced it. The doctrine of waiver, acquiescence, approbate and reprobate, and estoppel would certainly come into operation as considered by this Court in Union of India v. N. Murugesan.
14. On the aforesaid principle of law, particularly with respect to the issues qua onus, burden and reading down, this Court in Shivram Chandra Jagarnath Cold Storage v. New India Assurance Co. Ltd., has held as follows :
"19. Another instance where exception clauses may be interpreted to the benefit of the insured is when the exception clauses are too wide and not consistent with the main purpose or object of the insurance policy. In B.V. Nagaraju v. Oriental Insurance Co. Ltd., a two-Judge Bench of this Court read down an exception clause to serve the main purpose of the policy. However, this Court clarified that the breach of the exception clause was not so fundamental in nature that would have led to the repudiation of the insurance policy. In that case, the terms of the insurance policy allowed an insured vehicle to carry six workmen, excluding the driver. When the vehicle met with an accident, it was carrying nine persons apart from the driver. The insured had moved a claim for repair of the vehicle, which was rejected by the insurer.29
20. Allowing the claim, this Court held thus : (B.V. Nagaraju case, SCC pp. 650-51, para &) '7. It is plain from the terms of the Insurance Policy that the insured vehicle was entitled to carry 6 workmen, excluding the driver. If those 6 workmen when travelling in the vehicle, are assumed not to have increased any risk from the point of view of the Insurance Company on occurring of an accident, how could those added persons be said to have contributed to the causing of it is the poser, keeping apart the load it was carrying. Here, it is nobody's case that the driver of the insured vehicle was responsible for the accident. In fact, it was not disputed that the oncoming vehicle had collided head- on against the insured vehicle, which resulted in the damage. Merely by lifting a person or two, or even three, by the driver or the cleaner of the vehicle, without the knowledge of the owner, cannot be said to be such a fundamental breach that the owner should, in all events, be denied indemnification. The misuse of the vehicle was somewhat irregular though, but not so fundamental in nature so as to put an end to the contract, unless some factors existed which, by themselves, had gone to contribute to the causing of the accident. In the instant case, however, we find no such contributory factor. In Skandia case, this Court paved the way towards reading down the contractual clause by observing as follows :
"14. ... When the option is between opting for a view which will relieve the distress and misery of the victims of accidents or their dependants on the one hand and the equally plausible view which will reduce the profitability of the insurer in regard to the occupational hazard undertaken by him by way of business activity, there is hardly any choice. The Court cannot but opt for the former view. Even if one were to make a strictly doctrinaire approach, the very same conclusion would emerge in obeisance to the 30 doctrine of "reading down" the exclusion clause in the light of the "main purpose" of the provision so that the "exclusion clause" does not cross swords with the "main purpose"
highlighted earlier. The effort must be to harmonise the two instead of allowing the exclusion clause to snipe successfully at the main purpose. This theory which needs no support is supported by Carter's "Breach of Contract" vide para 251. To quote:
'Notwithstanding the general ability of contracting parties to agree to exclusion clauses which operate to define obligations there exists a rule, usually referred to as the "main purpose rule", which may limit the application of wide exclusion clauses defining a promisor's contractual obligations. For example, in Glynn v. Margetson & Co., AC at p. 357, Lord Halsbury, L.C. stated :
"... It seems to me that in construing this document, which is a contract of carriage between the parties, one must in the first instance look at the whole instrument and not at one part of it only. Looking at the whole instrument, and seeing what one must regard, ... as its main purpose, one must reject words, indeed whole provisions, if they are inconsistent with what one assumes to be the main purpose of the contract."
Although this rule played a role in the development of the doctrine of fundamental breach, the continued validity of the rule was acknowledged when the doctrine was rejected by the House of Lords in Suisse Atlantique Societe d' Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale. Accordingly, wide exclusion clauses will be read down to the extent to which they are inconsistent with the main purpose, or object of the contract.'"'"
23. In such a situation, the doctrine of "blue pencil" which strikes off the offending clause being void ab initio, has to be pressed into service. The said clause being repugnant to the main contract, and thus destroying it without even a need for 31 adjudication, certainly has to be eschewed by the court. The very existence of such a clause having found to be totally illegal and detrimental to the execution of the main contract along with its objective, requires an effacement in the form of declaration of its non-existence, warranting a decision by the court accordingly.
24. The aforesaid principle evolved by the English and American courts has been duly taken note of by this Court in Beed District Central Coop. Bank Ltd. v. State of Maharashtra:
"10. The "doctrine of blue pencil" was evolved by the English and American courts. In Halsbury's Laws of England, (4th Edn., Vol.
9), p. 297, para 430, it is stated:
'430. Severance of illegal and void provisions.--A contract will rarely be totally illegal or void and certain parts of it may be entirely lawful in themselves. The question therefore arises whether the illegal or void parts may be separated or "severed" from the contract and the rest of the contract enforced without them. Nearly all the cases arise in the context of restraint of trade, but the following principles are applicable to contracts in general.'
11. In P. Ramanatha Aiyar's Advanced Law Lexicon, 3rd Edn. 2005, Vol. 1, pp. 553-
54, it is stated:
'Blue pencil doctrine (test).--A judicial standard for deciding whether to invalidate the whole contract or only the offending words. Under this standard, only the offending words are invalidated if it would be possible to delete them simply by running a blue pencil through them, as opposed to changing, adding, or rearranging words. (Black, 7th Edn., 1999) This doctrine holds that if courts can render an unreasonable restraint reasonable by scratching out the offensive portions of the covenant, they should do so and then enforce 32 the remainder. Traditionally, the doctrine is applicable only if the covenant in question is applicable, so that the unreasonable portions may be separated. E.P.I. of Cleveland Inc. v. Basler, NE 2d at p. 556.
Blue pencil rule/test.--Legal theory that permits a Judge to limit unreasonable aspects of a covenant not to compete.
Severance of contract; "severance can be effected when the part severed can be removed by running a blue pencil through it without affording the remaining part". Attwood v. Lamont . (Banking) A rule in contracts a court may strike parts of a covenant not to compete in order to make the covenant reasonable. (Merriam Webster) Phrase referring to severance (q.v.) of contract. "Severance can be effected when the part severed can be removed by running a blue pencil through it" without affording the remaining part. Attwood v. Lamont [ (Banking)'
12. The matter has recently been considered by a learned Judge of this Court while exercising his jurisdiction under sub-
section (6) of Section 11 of the Arbitration and Conciliation Act, 1996 in Shin Satellite Public Co. Ltd. v. Jain Studios Ltd."
It is settled position of law that the Exclusion Clauses cannot be given such wide meaning and effect that would defeat the main purpose of the insurance contract and render such contract illusory, when such insurance contract is a standard form of contract where the insured does not have any role to negotiate for or contribute to the framing of terms and conditions thereof. In such cases, the "Exclusion Clause" 33
has to be read down to save the main purpose of the insurance contract.
45. In the case of General Assurance Society Limited vs. Chandmull Jain & Anr. reported in 1966 SCC OnLine SC 208, the Hon'ble Supreme Court held that there is no difference between a contract and insurance and any other except that in a contract of insurance there is a requirement of good faith on the part of the assured and the contract is likely to be construed against the company in case of any ambiguity or doubt. It was further held by the Hon'ble Supreme Court that the duty of the court is to interpret the words in which the contract is expressed by the parties and it is not for the court to make a new contract, however, reasonable.
46. Section 24 of the West Bengal Cold Storage (Licensing and Regulation) Act, 1966 reads as follows:
"24. Compensation payable for loss or deterioration of agricultural produce stored in a cold storage. -
(1) In the event of any loss of or deterioration in any agricultural produce stored in a cold storage caused on account of any negligence of the licensee or any defect in the refrigeration machinery, the hirer may, within thirty days from the date of detection of such loss or deterioration by him, apply in writing to the Licensing Officcer for assessing the compensation payable by the licensee on account of such loss or deterioration Explanation. - In this sub-section burden of proof that the loss or deteriaration was cause beyond the control of the licensee shall lie on the licensee 34 (2)The Licensing Officer on receipt of an application under sub-section (1) shall cause en enquiry to be made in accordance with such procedure as may be prescribed and shall also assess the amount of compensation payable by the licensee to the hirer.
(3)The Licensing Officer may also on his own motion cause the enquiry to be made in the matter of any loss or deterioration in any agricultural produce stored in a cold storage and pass such orders as to the amount of compensation payable by the licensee to the hirer as he thinks proper and just.
(4)In case of any dispute between the licensee and the hirer as to the amount of compensation to be paid, the Licensing Officer shall settle the dispute as expeditiously as possible and shall also make an order determining the amount of compensation payable by the licensee who shall make payment of the compensation to the hirer within two months from the date of the order, whether any claim against insurance, if any, is settled or not.
(5) In determining the amount of compensation payable by the licensee, the Licensing Officer shall take into account the market price of the agricultural produce at the time of detection of loss or deterioration:
Provided that in case of agricultural produce stored for seed purposes, such amount of compensation shall be twenty per cent, higher than that of other agricultural purposes.
(6) If the compensation or any portion of it remains upaid after the date specified in the order passed under sub-section (4), the same shall be recoverable as an arrear of land revenue.
(7) The licensee shall also be required to furnish fortnightly reports regarding settlement of compensation cases."35
47. Rule 4(q) of the West Bengal Cold Storage (Licensing and Regulation) Rules, 1967 reads as follows:
"4. Terms and conditions of the licence. -
(q) The licensee shall faithfully abide by the provisions of the Act and the Rules and shall also comply with such directions or orders as may be issued to him for the purposes of the Act by the Licensing Officer from time to time."
48. Fixation of rent for potato storage, fixation of insured value of potato stored at cold storage, fixation of insurance premium and choice of insurance companies are regulated and determined by the State Government under the West Bengal Cold Storage (Licensing and Regulation) Act 1966 and the Rules framed thereunder. In the present case the Government of West Bengal has taken the following decision:
"In exercise of the power conferred upon the Licensing Officer under section 19 of the West Bengal Cold Storage (Licensing & Regulation) Act, 1966 and Rule 4q of the West Bengal Cold Storage (Licensing & Regulation) Rules, 1967 and consequence upon the decision taken in the meeting held on 23.03.2022 and 29.03.2022 regarding fixation of price of potato for insurance coverage, all the licensees of the potato cold storage of West Bengal are hereby instructed to cover D.O.S. and F.O.S. policies at the price of Rs.1370/qtl of potato during the year 2022. In this respect rate of calculation of premium on D.O.S and F.O.S policy would be @Rs.0.708 and Rs.0.2065 per Rs.100 (including GST) respectively. Maximum Pro-rata charge allowable for realization from the hirers would be Rs.12.50/per quintal of potato.
Sd/- A. Bharati Director of Agricultural Marketing West Bengal"36
49. The DOS policy is required to be obtained by the cold storage operators in West Bengal in terms of directions issued by the Government under Section 19 of the West Bengal Cold Storage (Licensing and Regulation) Act, 1966 under which, the insured value as well as the rate of insurance premium and rate of cold storage rent are determined by the Government but the terms and conditions of the DOS policy are standard terms determined by the insurance company. The main purpose of the DOS policy is to indemnify the cold storage operators against the liability to compensate the potato cultivators in the event of losses at the cold storages.
50. Rule 13 and Schedule II of the West Bengal Cold Storage (Licensing and Regulation) Rules, 1967 reads as follows:
"13. Liability of licensee for shortage or excess in agricultural produce stored. --- For the purpose of sub-section (1) of section 13 allowable limits of loss of weight or bulk due to dryage or shrinkage shall be such as specified in Schedule II and in case of gain in weight, if any, it will go to the hirer in entirety under sub-section (2) of section 13."
SCHEDULE II [Vide rule 13] Maximum loss allowable in weight or bulk due to dryage or shrinkage No. Name of the Maximum Period of commodity loss in storage percentage
1. Potato .. .. 3 5 months
(a) 4 6 months 4-5 7 months 5 8 or 9 months 37
51. The extent of liability of cold storage operators are provided in Rule 13 and Schedule II of the West Bengal Cold Storage (Licensing and Regulation) Rules, 1967. Schedule II provides deductibility on account of shrinkage to the extent of only 3% maximum upon storage period of five (5) months and does not provide any deductible on account of rottage. The standard and blanket deductible of 5% in the DOS policy on account of each shrinkage and rottage defeat the main purpose of the DOS policy. The surveyor has also deducted 10% of the gross loss on account of excess deductible. The excess deductible shall be as provided in the policy Schedule. The policy Schedule to the DOS policy does not provide for any deductible on account of excess.
52. As the respondent repudiated the claim of the plaintiff and thus the plaintiff could not make payment of compensation to the potato cultivators. The Director of Agricultural Marketing, Government of West Bengal determined the rate of compensation payable by the plaintiff to the cultivators/ hirers on account of damaged stock of potatoes at the cold storage of the plaintiff. The plaintiff has challenged the order of determination before this Court by filing Writ Application and in the said proceeding, the Court has directed the plaintiff to pay adhoc payment of Rs. 3 Crores to the potato cultivators through the Director of Agricultural Marketing, Government of West Bengal and in compliance of the order, the plaintiff has paid the said amount. The writ application is still pending for adjudication. The plaintiff has paid part payment of the amount as directed by the Court in a writ 38 proceeding by utilizing the entire credit limit from its business loan account maintained with the Punjab National Bank and the bank has charged interest at the rate of 9% per annum. The plaintiff has further borrowed an amount of Rs. 1,50,00,000/- from a non-banking financial institution, namely, M/s. Innocent Merchandise Private Limited against interest at the rate of 12% per annum to pay the amount as directed by the Court.
53. The insurance claim of the plaintiff was not settled for a long time due to which the plaintiff could not dispose of the contaminated stock of 57,831.50 quintals of potatoes i.e. 1,15,663 bags each contains 50 kgs of potato from chamber no.3 of the cold storage due to paucity of fund. As the plaintiff could not able to pay compensation, the cultivators whose stocks were damaged, resisted the plaintiff from removing the contaminated stock for which the plaintiff had to keep the contaminated potatoes in chamber no.3. Only after removal of blockade by the potato cultivators on and from 7th March, 2023, the plaintiff could remove the contaminated stock of potatoes from chamber no.3 and dispose of the same. The plaintiff has incurred total expense of Rs. 38,72,721 on account of labour, accessories, transportation and earth cutting equipment. The loading season of 2023 commenced from 1st March, 2023 but the blockade was removed by the cultivators on 7th March, 2023, the plaintiff lost opportunity to load potatoes in the cold storage due to which the plaintiff suffered severe financial losses. The plaintiff could load only 60212 quintals in the year 2023 season. 39
54. Inspite of receipt of writ of summons, the defendant has not appeared in the suit nor has filed any written statement. Initially the defendant has not come forward to cross-examine the plaintiff's witnesses, subsequently, as per leave granted by this Court cross-examined the plaintiff's witnesses on commission. In the case of National Insurance Co. Ltd. Vs. Ishar Das Madan Lal reported in (2007) 4 SCC 105, the Hon'ble Supreme Court held that wherever such exclusionary clause is contained in a policy, it would be for the insurer to show that the case falls within the purview thereof. In a case of ambiguity, it is trite, the contract of insurance shall be construed in favour of the insured. For defeating the claim of the plaintiff, it was, thus, obligatory on the part of the defendant to establish that the conditions prescribed therein were satisfied. In the case of National Insurance Company Limited Vs. Vedic Resorts and Hotels Private Limited reported in (2023) 12 SCC 823, the Hon'ble Supreme Court held that it is trite to say that wherever such an exclusionary clause is contained in a policy, it would be for the insurer to show that the case falls within the purview of such clause. In case of ambiguity, the contract of insurance has to be construed in favour of the insured.
55. The defendant has not filed written statement by disclosing any defence. During argument, the defendant has submitted that the suit filed by the plaintiff is an afterthought and a pre-planned. On 8th May, 2022, the defendant appointed a surveyor to conduct pre-acceptance survey of the equipment and machinery. On receipt of report of the 40 surveyor, insurance policies were issued in favour of the plaintiff on 18th May, 2022 and 17th May, 2022. On 22nd May, 2022, the surveyor appointed by the defendant has not find any foul play on the part of the plaintiff or any case is initiated against the plaintiff. The defendant has also argued that the plaintiff trying to cover its operational expenses/loan/debt payment through the insurance claim. The plaintiff has made the claim as per the loss occurred in the said incident. The surveyor of the defendant has also confirmed that 115663 bags of potatoes were damaged due to leakage of ammonia out of which the plaintiff was able to dispose of only 2162 bag and other bags were kept in the cold storage and not yet disposed of. The surveyor of the defendant has also not denied that the incident is an accident.
56. The plaintiff during argument has not pressed the claim of Rs. 98,05,400/- being the expenses incurred in repairing chamber no.3 of the cold storage and Rs. 39,53,096/- being the cost of additional interest.
57. Considering the above, this Court finds that the defendant has wrongly repudiated the claim of the plaintiff and thus the plaintiff is entitled to get the claim under both policies. Issues are decided in favour of the plaintiff and against the defendant.
58. As per enquiries made by the surveyor regarding nature of damage to the plant and machineries and issued final surveyor report under the MBD Policy dated 22nd August, 2022, confirming accidental damage to 41 the main valve of the refrigeration system due to sudden rise in ammonia vapour pressure and assessed net indemnifiable loss of Rs.6,103/- as replacement cost of damage value. On 30th September, 2022, the defendant sent discharge voucher of Rs.6,044/- under the MBD policy for execution and return to the defendant. The plaintiff has executed and returned to the defendant but subsequently the defendant repudiated the total claim of the plaintiff including MBD Policy, thus the defendant is liable to pay Rs. 6,044/- to the plaintiff under MBD Policy being the damage of machinery of the plant.
59. As regard to the insurance claim under Deterioration of Stock (Potatoes) at Cold Storage, compensation due to loss of business opportunity, expenses incurred for disposal of contaminated potatoes and interest. This Court appointed Mr. Debnath Ghosh, Senior Advocate as Special Referee to ascertain the above claim of the plaintiff by conducting enquiry after giving an opportunity of hearing to both the parties and to submit report within three (3) months from the date of receipt of this Judgment.
60. The remuneration of the Special Referee is fixed at Rs.3,00,000/- (Rupees Three Lacks Only). Initially, the plaintiff shall pay the remuneration to the Special Referee and the plaintiff is entitled to recover the same from the defendant.
42
61. List the matter on 26th February, 2026 for filling report by the Special Referee.
62. G.A. (Com) No. 8 of 2024 is accordingly disposed of.
(Krishna Rao, J.)