1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUIT NO.1164 OF 1979 1. The NRC Limited, a company incorporated under the Indian Companies Act 1913, and having its office at Ewart House, 2nd floor, Homi Mody Street, Mumbai- 400 001. 2. Bank of Baroda, a body corporate constituted under the Banking Companies(Acquisition and Transfer of Undertakings) Act, 1970, and having its Head Office at Mandvi, Baroda, and having its Central Office at 3, Walchand Hirachand Marg, Ballard Pier, Bombay-400 038. ..Plaintiffs. V/s. 1. The New India Assurance Company Limited, a Company incorporated under the Indian Companies Act, 1913 and having their Registered Office at New India Assurance Building, 87, Mahatma Gandhi Road, Fort, Bombay 400 023. 2. The Oriental Fire and General Insurance Company Ltd., a Company incorporated under the Companies Act, and having their Registered Office at Oriental House, Asafali Road, New Delhi-2. 3. United India Fire and General Insurance Company Ltd., a Company incorporated under the 2 Companies Act, and having their Registered Office at SIAL Building, 24, Whites Road, Madras-600 014.. ..Defendants. WITH SUIT NO.1165 OF 1979 1. The NRC Limited, a company incorporated under the Indian Companies Act 1913, and having its office at Ewart House, 2nd floor, Homi Mody Street, Mumbai- 400 001. ..Plaintiffs. V/s. 1. The New India Assurance Company Limited, a Company incorporated under the Indian Companies Act, 1913 and having their Registered Office at New India Assurance Building, 87, Mahatma Gandhi Road, Fort, Bombay 400 023. ..Defendants. WITH SUIT NO.1166 OF 1979 1. The NRC Limited, a company incorporated under the Indian Companies Act 1913, and having its office at Ewart House, 2nd floor, Homi Mody Street, Mumbai- 400 001. 2. Bank of Baroda, a body corporate constituted under the Banking Companies(Acquisition and Transfer 3 of Undertakings) Act, 1970, and having its Head Office at Mandvi, Baroda, and having its Central Office at 3, Walchand Hirachand Marg, Ballard Pier, Bombay-400 038. ..Plaintiffs. V/s. 1. The New India Assurance Company Limited, a Company incorporated under the Indian Companies Act, 1913 and having their Registered Office at New India Assurance Building, 87, Mahatma Gandhi Road, Fort, Bombay 400 023. 2. Bank of Baroda, a body corporate constituted under the Banking Companies(Acquisition and Transfer of Undertakings) Act, 1970, and having its Head Office at Mandvi, Baroda, and having its Central Office at 3, Walchand Hirachand Marg, Ballard Pier, Bombay-400 038. 3. Dena Bank a body corporate constituted under the Banking Companies (Acquisition & Transfer of Undertakings Act 1970) and having its Head Office at Dena Bank Building, Horniman Circle, Bombay- 400 023. 4. Punjab National Bank a body corporate constituted under the Banking Companies(Acquisition & Transfer undertakings Act, 1970) and having its Head Office at 5, Parliament Street, New Delhi and having main Office at Express Tower, Nariman Point, Bombay-400 021. 4 5. Canara Bank a body corporate constituted under the Banking Companies(acquisition & Transfer of Undertakings Act, 1970) and having its office at Canara Bank Building, Mangalore Street, Bellard Estate, Bombay 400 038. ..Defendants. Mr.Satish J. Shah with Mr.Levi A. Rubens, Sujit S. Suryawanshi i/b. Vigil Jiris for Plaintiffs. Ms.Alpana Ghone a/w. Mr.Farhan Dubhash i/b. Ms. Geeta Dagli i/b. Mulla & Mulla & C.B.E.C. For defendants. CORAM: A.M.KHANWILKAR,J DATE : JUNE 10, 2009. JUDGMENT : 1. This Judgment will dispose of all the three suits together, inasmuch the facts giving rise to the claim in the respective suits are common. 2. Briefly stated, the Plaintiffs have filed three suits in respect of claims under three separate insurance policies, which were issued by the Defendants. The risk covered under the three different policies was for fire, riots, strikes, malicious damages and consequential losses; and destruction of raw material, stock in process, finished products etc. 5 respectively. At the relevant time, all the three suit policies were operating. 3. The Plaintiffs are engaged in manufacture of rayon textile yarn, rayon tyre cord yarn, nylon tyre cord and other artificial fibers at their plant at Kalyan. According to the Plaintiffs on 1st July, 1978, some of its workers at its Kalyan factory created riot situation damaging the property of the Plaintiffs and compelled the other workers to abandon their work. As as a result of abandonment and complete abrupt stoppage of work by the workers, there was severe coagulation of viscose in the machinery which ultimately led to its damage. In addition to damage caused due to coagulation of viscose in the machinery, even the raw material, stock in process lying therein was damaged as the abandonment and stoppage of work by the striking workers lasted for about four days and ultimately ceased on 4th July, 1978 only after the settlement reached between the Management and the workers. The Plaintiffs invoked the insurance claim on the basis of the three policies. Consequent thereto, the Defendants appointed independent surveyor M/s.Mehta and Padamsey Limited to conduct detailed survey and assess loss occasioned to the Plaintiffs as a result of the said illegal strike and riot situation created by the workers. The Surveyor prepared exhaustive survey report after visiting the factory. Insofar as the loss caused to the 6 Plaintiffs on account of riot and strike including malicious damage to building, plant and machinery, he virtually accepted the claim of the Plaintiffs regarding assessed loss to the extent of Rs.26,74,000/-. However, in his opinion, the Plaintiffs had under covered insurance to the extent of 50% of the value of the said property; as a result would be at best entitled to net claim of Rs.13,88,000/-. However, the surveyor further opined that out of the stated losses, loss amounting to only Rs. 1,18,000/- was on account of direct damage caused by the striking workers and the remaining was indirect loss. This opinion is recorded on the basis of interpretation of the terms provided in the Insurance Policy. Insofar as the Plaintiffs’ claim towards loss or damage due to loss of stock of raw materials and finished products, the entire loss assessed by the Plaintiffs in that regard was accepted to the extent of Rs. 11,36,665/-. However, he proceeded to opine that the Plaintiffs were not entitled for even this amount as the said loss was not on account of direct damages done by the striking workers, but was indirect loss caused due to abandonment and stoppage of work. Insofar as the Plaintiffs’ claim assessed towards consequential losses in the sum of Rs.1,52,58,448.90, the Surveyor accepted the net loss towards that head only in the sum of Rs.73,32,562/- on the assumption that the loss of gross profit was only to the extent of 27.48%. However, he proceeded to opine that since the loss or damage caused to the Plaintiffs was not covered by the perils of the 7 insurance and was an excepted one, the Plaintiffs were not entitled for consequential losses. In his report the Surveyor has also opined that the Insurer will have to decide the question of scope of policy covering plant and machinery for risk of fire, riot, strike damages and malicious damages and unless the claim for material damage to plaint and machinery is admitted the claim towards consequential loss would not be tenable. 4. The Defendants relying on the Surveyor’s report offered only a sum of Rs.1,18,000/- to the Plaintiffs towards losses and damages caused due to act of the striking workers to the building, plant and machinery directly through the striking workers in furtherance of their strike to building, plant and machinery. The Plaintiffs refused to accept the said amount and instead, have filed three separate suits for enforcement of their claim arising on account of the willful act of the striking workers in furtherance of their strike. 5. Suit No.1164 of 1979 is in relation to the Policy No. 1933108035, which covers the risk of losses or damages on account of riot and strike including malicious damages to building, plaint and machinery. The Plaintiffs are claiming entire amount of losses assessed by them towards this head in the sum of Rs.26,74,000/- alongwith 8 interest thereon at the rate of 16% per annum from the date of institution of the suits till realisation of the amount. 6. Suit No.1165 of 1979 is filed to enforce the claim in relation to the policy No.1933107069, which has covered consequential losses caused to the Plaintiffs on account of riot strike damage including malicious damage to the building, plant and machinery. The Plaintiffs have claimed the amount of Rs.1,52,58,440.90 towards this head alongwith interest. 7. The third suit being Suit No.1166 of 1979 is filed to enforce the claim arising out of Policy No.1933108037, regarding loss or damage caused on account of fire, riots, strike and malicious damages to the building, plant and machinery, damage to raw materials, stock in process, finished products etc. The Plaintiffs have claimed amount of Rs. 11,36,666/- towards this head with interest. 8. The Defendants have filed their Written Statements and denied the case made out by the Plaintiffs. On the basis of pleadings, issues were seperately framed in all the three suits. The issues in respect of the suit No.1164 of 1979 and 1166 of 1979 are identical except it varies to the extent of claim amount. Most of the issues in Suit No.1165 9 of 1979 are common and overlapping issues with the issues in the other two suits, except the additional issues relevant to consider the claim of consequential losses purportedly covered by the Policy. Besides the commonality in the issues in all the three suits, even the evidence in all the three suits is similar. The Plaintiffs besides, relying on documentary evidence have also relied on oral evidence of four witnesses examined on their behalf. On the other hand, the Defendants have merely examined one witness namely the representative of the independent surveyor appointed to assess the losses suffered by the Plaintiffs. Before analysing the pleadings and the oral as well as documentary evidence, it would be appropriate to reproduce the amended and recasted issues in terms of order dated 7th July, 2005 passed by my Predecessor. The amended and recasted issues in Suit No.1164 of 1979 read thus: 1. Do the Plaintiffs prove that they have been regularly insuring the said buildings, machinery etc. since 1965 or any other date with the Defendants as alleged in para 3 of the Plaint ? 2. Do the Plaintiffs prove that it was known to the Defendants that (i) the running of the Textile Rayon Yarn or the Rayon Tyre Cord Plant for the manufacture of rayon yarn was a continuous process required to be carried on 24 hours a day throughout the year; (ii) that disruption or interference even for short period would cause damage to stock in process or to the concerned machinery and equipment, resulting in loss of 10 production and consequential loss of profit; and (iii) that coagulation of viscose in the course of manufacture of textile rayon yarn or rayon tyre cord would damage the said machinery or accessories as alleged in para 4 of the Plaint ? 3. Do the Plaintiffs prove that such information was provided to the Defendants by the Plaintiffs or was available to the Defendants from the reports of inspection of the Tariff Advisory Committee acting through Bombay Regional Committee and/or sub- committee or that in the business of General Insurance of the type undertaken by the Defendants the matters stated in para 4 of the plaint, were matters of general knowledge or information ? 4. Whether the Plaintiffs prove that the workmen concerned with the manufacture of textile rayon yarn and rayon tyre cord were aware of the alleged facts of the nature of the said process or the alleged damage which would be caused by disruption of the manufacturing process ? 5. Do the Plaintiffs prove that the riot and strike damage alleged in para 5 of the plaint was caused directly by the perils mentioned in the said endorsement of Policy dated 13th May 1978 bearing No.1933108035 ? 6. Do the Plaintiffs prove: (i) that from 1st July 1978 to 4th July 1978, members of the N.R.B.Mazdoor Union resorted to obstructionist tactics and/or intimidation and thereby willfully and maliciously caused extensive damage to diverse properties of the 1st Plaintiff including the Textile Rayon Yarn Plant and the Rayon Tyre Cord Plant and the stock in process of the two plants; and (ii) that the police were unable to calm the situation; and (iii) that the willful and malicious acts of the workers caused the viscose in the said plants to coagulate ? 7. Were the consequences alleged in the said para 7 of the plaint directly caused by the misdeeds of the rioting workers whose primary intention was to cause loss to 11 the Plaintiffs? 8. Do the Plaintiffs prove that they have suffered damage to the extent set out in Exhibit “B” to the plaint and that the same has been caused directly from the acts of rioting of the workers? 9. Do the Plaintiffs prove that they could resume full and normal production only by or about the end of September 1978 ? 10.Do the Plaintiffs prove that they attempted to mitigate the loss caused to them by taking immediate steps to resume production ? 11.Do the Plaintiffs prove that they carried out substantial repairs and replacements to the buildings machinery and plant ? 12.Do the Plaintiffs prove that they are entitled to claim from the Defendants and amount of Rs.26,74,000/- or any other amount with 16% interest per annum thereon or any other sum under the Policy in question ? 13.What order ? The amended and recasted issues in Suit No.1165 of 1979 read thus: 1. Whether the Plaintiffs prove that they have been regularly insuring the said buildings machinery Plants etc as set out in para 3 of the Plaint, since 1965 with the Defendants ? 2. Whether the Plaintiffs prove that it was known to the defendants that the running of the Textile rayon yarn or the rayon tyre cord plant for the manufacture of rayon yarn was a continuous process required to be carried on 24 hours a day throughout the year or that disruption or interference even for a short period, would cause damage to stock in process or to the concerned 12 machinery and equipment, resulting in loss of production and consequential loss of profit and that coagulation of viscose in the course of manufacture or textile rayon yarn or rayon cord could damage the said machinery or accessories as alleged in para 4 of the Plaint ? 3. Whether the Plaintiffs prove that such information was provided to the Defendant by the Plaintiffs or was available to the Defendants from the reports of inspection of the Tariff Advisory committee acting through Bombay Regional Committee and/or sub- committee or that in the business of General Insurance of the type undertaken by the defendants the matter stated in para 4 of the Plaint, were matters of general knowledge or information ? 4. Whether the Plaintiffs prove that the workmen concerned with the manufacture of textile rayon yarn and rayon tyre cord were aware of the alleged facts of the nature of the said process or the alleged damage likely to be carried by the description of the manufacturing process ? 5. Whether the rights and liabilities of the parties were to be determined only in accordance with the terms of the policy issued by the defendant ? 6. Whether condition 5 forms an integral part of the Policies dated 13th May 1978 bearing Nos. 1933108035, 1933108037 and 1933108036 and the Policy dated 19th May, 1978 bearing No.193108068 and that the riot and strike endorsement was subject to the conditions mentioned therein including condition 5? 7. Whether the Plaintiff proves that by a policy No. 193310803 copy para 5,6,7,8 as separate paras each being with whether the Plaintiff proves that - (a) By a Policy No.1933108035 dated th 13th May 1978 jointly issued by the Defendants, the Original Fire and General Insurance Co.Ltd. And the United India Fire and General Insurance 13 Co. Ltd. in consideration of the payment by the Plaintiffs a sum of Rs.4,87,113/- as premium, the said three companies insured the Plaintiffs against loss or damage to their buildings, machinery, accessories, furniture and fixtures and other equipments lying and being at their aforesaid factory inclusive of their rayon and being at their aforesaid factory including of their rayon tyre cord plant and all other plants against risk of fire, riots, strikes, malicious damage and explosion. (b) By another Policy bearing No. 1933108037 dated the 13th May, 1978, issued by the Defendants herein in consideration of the payment by the Plaintiffs to the Defendants of a premium Rs.88,025/-, the Defendants insured the Plaintiffs against loss and/or damage to raw- materials chemicals, stores, and/or finished products, stock and stock in process and other hazardous and non-hazardous goods(as mentioned therein), the extract of Rs.5,23,46,000/- caused by diverse perils therein mentioned inclusive of risk of fire, riot and strikes malicious damage and explosion. (The aforesaid policy is hereinafter referred to as “the Second Policy”). (c) By a third policy of Insurance bearing No.1933108036 dated the 13th May 1978, in consideration of the payment of a premium of Rs. 1,01,437/- by the Plaintiffs to the Defendants, the Defendants insured the Plaintiffs against loss or damages from 10th May 1978 to 10th May 1979 to raw-materials chemicals, stores, finished products and other hazardous and non-hazardous goods mentioned in the said policy by perils therein mentioned inclusive of risk of fire, riot and strikes, malicious damage and explosion to the extent of Rs.6,82,00,000/- upon terms and conditions therein mentioned. Under the said Policy such goods covered thereby as were declared from time to time by the Plaintiffs to the Defendants would be covered under the declarations clause thereto (the said Policy is hereinafter referred to as “the Third 14 Policy”). (d) By a Policy of Insurance bearing No. 1933108068 dated the 19th of May 1978, in consideration of the payment of a premium of Rs. 1,47,961/- by the Plaintiffs to the Defendants and the said Oriental company, the Defendants and the said Oriental Company insured by the Plaintiffs against loss of or damage to the buildings, plants and machinery belonging to the Plaint by the perils therein mentioned inclusive of risk of fire, riot and strike, malicious damages and explosion. The Fourth Policy”. 8. Whether malicious damage as extended by the endorsement was of the type mentioned in condition 6 of the riot and strike endorsement of the Policy and whether the proviso to the consequential loss Policy No.1933107669 could be invoked as stated inn para 3 of the written statement and whether the risks of riot and strike damage for malicious damage are also covered as per the respective endorsement classes ? 9. Whether condition 5 forms an integral part of the special condition of the riot and strike endorsement of the Policy dated 13th May 1978 bearing No.1933108035 ? 10.Whether the Plaintiffs prove that : (i) the workers resorted to rioting, obstructionist tactics or intimidation during the period 1st to 4th July 1978 as set out in para 14 of the Plaint; and (ii) the Plaintiffs required 12 weeks to conduct the repairs and replacements to the damage caused by the workmen ? 11.Whether the Plaintiffs prove: (i) that they suffered losses from damage caused to the properties as set out in Exhibit B to the Plaint, or any part thereof, (ii) consequential losses; and (iii) that the said losses were caused directly by the acts of rioting committed by the workers ? 12.Whether the Plaintiffs prove (i) that they took 15 immediate steps to resume normal production and mitigate the loss caused by the extensive damage done to the plants and machinery by the rioting workers; and (ii) that they could resume full and formal production only by or about the end of September 1978 because of the need to carry out substantial repairs and replacements to the concerned buildings, machinery and plants damaged by the rioting workmen ? 13.Whether the Plaintiffs prove that they had insurable interest in the said properties at all material times, inclusive of the date on dates of the damage, and whether the defendants were notified about the same ? 14.Whether the Defendants prove that on receipt of the Survey Report they had intimated to the Plaintiffs that a substantial part of the material damage, losses could not be said to be directly caused by the alleged acts as the same fell under losses excepted under the Policy and that only a sum of Rs.1,18,000/- was payable to the Plaintiffs with no liability with regards the consequential loss policy ? 15.Whether the Plaintiffs prove that they were and at all material times ready and willing to carry out their obligations under the said policy as alleged in para 12 of the Plaint ? 16.Whether the Defendants prove that no payment has been made under the material demand policy and no liability admitted by the Defendants under the consequential loss policy and whether the defendants prove that the alleged damage falls within the scope of the exceptions in special condition No.5 particularly 5(1) of the said policies and that the loss or damage resulted from a total or partial cessation of work or the retarding or interruption of process or operation not expressly covered by the insurance and that the condition No.5(1)b of the riot and strike endorsement was also made specifically endorsement as set out in para 9 of the written statement? 17.Whether the plaintiffs prove that a claim made on 16 account of shortage of industrial yarn and chemicals is admissible under the policies ? 18.Whether the Plaintiffs prove that they are entitled to claim from the Defendants a sum of Rs.1,52,488.90 p. with 16% interest per annum under the Policies in question ? 19.Whether the Plaintiffs prove cause of action has arisen in their favour in Bombay ? 20.Whether the Plaintiffs prove the defendants liability under the Policies ? 21.Whether the defendants prove that the Plaintiffs suit should be dismissed with costs as set out in para 13 of the written statement ? 22.Whether the Plaintiffs are entitled to any relief as prayed for ? 23.What order ? The amended and recasted issues in Suit No.1166 of 1979 read thus: 1. Do the Plaintiffs prove that they have been regularly insuring the said buildings, machinery etc. since 1965 or any other date with the Defendants as alleged in para 3 of the Plaint ? 2. Do the Plaintiffs prove that it was known to the Defendants that (i) the running of the Textile Rayon Yarn or the Rayon Tyre Cord Plant for the manufacture of rayon yarn was a continuous process required to be carried on 24 hours a day throughout the year, (ii) that disruption or interference even for short period would cause damage to stock in process or to the concerned machinery and equipment, resulting in loss of production and consequential loss of profit; and (iii) 17 that coagulation of viscose in the course of manufacture of textile rayon yarn or rayon tyre cord could damage the said machinery or accessories as alleged in para 4 of the Plaint ? 3. Do the Plaintiffs prove that such information was provided to the Defendants by the Plaintiffs or was available to the Defendants from the reports of inspection of the Tariff Advisory Committee acting through Bombay Regional Committee and/or sub- committee or that in the business of General Insurance of the type undertaken by the Defendants the matters stated in para 4 of the plaint, were matters of general knowledge or information ? 4. Whether the Plaintiffs prove that the workmen concerned with the manufacture of textile rayon yarn and rayon tyre cord were aware of the alleged facts of the nature of the said process or the alleged damage which would be caused by disruption of the manufacturing process ? 5. Do the Plaintiffs prove that the riot and strike