1    REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4436 OF 2004

New India  Assurance  Company  Ltd.

.. Appellant

- versus-

M/s. Zuari  Industries  Ltd. &  Ors.

..       

Respondents

J U D G M E N T

MARKANDEY KATJU, J.

2

1. This  appeal  has  been  filed  against  the  impugned  judgment  of  the  National  

Consumer  Disputes  Redressal  Commission,  New Delhi  dated  26.3.2004  in  Original  

Petition No.196 of 2001.

2. Heard Ms. Meenakshi Midha, learned counsel for the appellant and Shri  K.K.  

Venugopal and Shri Nageshwar Rao learned counsel for the respondent.

3. The  

facts of the  

case  were  

that  the  

complainant (respondent in this appeal) had taken Insurance Policies from the appellant  

on 1.4.1998 in respect of its factory situated in Jauhri Nagar, Goa.  One policy was a  

fire policy and the other was a consequential loss due to fire policy.

4. On 8.1.1999 at about 3.20 p.m. there was a short circuiting in the main switch  

board installed in the sub-station receiving electricity from the State Electricity Board,

3 which resulted in a flashover producing over currents.  The flashover and over currents  

generated excessive heat.  The paint on the panel board was charred by this excessive  

heat producing smoke and soot and the partition of the adjoining feeder developed a  

hole.  The smoke /soot along with the ionized air traveled to the generator compartment  

where also there was short circuiting and the generator power also tripped.  As a result,  

the entire electric supply to the plant stopped and due to the stoppage of electric supply,  

the  supply  

of  

water/steam to the waste heat boiler by the flue gases at high temperature continued to  

be fed into the boiler, which resulted in damage to the boiler.  

5. As  a  result  the  respondent  -complainant  approached  the  Insurance  Company  

informing it about the accident and making its claim.  Surveyors were appointed who  

submitted their report but the appellant-Insurance Company vide letter dated 4.9.2000

4 rejected the claim.  Hence the petition before the National Commission.

6. The claimant-respondent made two claims (I) Rs.1,35,17,709/- for material loss  

due  to  the  damage to  the boiler  and other  equipments  and (ii)  Rs.19,11,10,000/-  in  

respect of loss of profit for the period the plant remained closed.  

7. The  

stand  of  

the  

appellant-

Insurance  

Company  

was  that  

the  loss  to  

the  boiler  

and other equipments was not caused by the fire, but by the stoppage of electric supply  

due to the short circuiting in the switch board.  It was submitted that the cause of the  

loss to the boiler and the equipments was the thermal shock caused due to stoppage of  

electricity and not due to any fire.  It was submitted that the proximate cause has to be  

seen for settling an insurance claim, which in the present case, was the thermal shock

5 caused due to stoppage of electricity.  However, the National Commission allowed the  

claim of the respondent and hence this appeal.   

8.  Ms. Meenakshi Midha who argued this case with great ability submitted that the  

loss  to  the boiler  and to  the equipments  did  not  occur due to  any fire.   Hence she  

submitted that the claim of damages did not fall under the cover of the Insurance Policy.  

She  

submitted  

that  for  a  

claim  

relating  to  

fire  

insurance  

policy  to  

succeed  it  

is necessary that there must be a fire in the first place.  In the absence of fire the claim  

cannot succeed.  She submitted that in the present case (1) there was no fire and (2) in  

any case it was not the proximate cause of the damage.

9. On the other hand, Shri K.K. Venugopal, learned senior counsel, supported the

6 judgment of the National Commission and stated that the judgment was correct.   

10. We have therefore to first determine whether there was a fire.  Admittedly there  

was a short circuit which caused a flashover.  

11.. Wikipedia defines flashover as follows :

“A  flashover  is  the  near  simultaneous  ignition  of  all  combustible  material  in  an  enclosed  area.   When  certain  materials are heated they undergo thermal decomposition and  release flammable gases.  Flashover occurs when the majority  of surface in a space is heated to the autoignition temperature of  the flammable gases.”

12.   In this connection, it is admitted that the short circuit in the main switch board  

caused a flashover.  The surveyor Shri M.N. Khandeparkar in his report has observed :

7

“Flashover,  can  be  defined  as  a  phenomenon  of  a  developing fire (or radiant heat source) radiant energy at wall  and ceiling surfaces within a  compartment..................   In  the  present  case,  the  paint  had  burnt  due  to  the  said  flashover  …............  Such high energy levels, would undoubtedly, have  resulted in a fire, causing melting of the panel board............”     

13. The  

other  

surveyor  

P.C.  

Gandhi  

Associates  

has  stated  

that  “Fire  

of  such  a  

short duration cannot be called a `sustained fire' as contemplated under the policy”.

14. In our opinion the duration of the fire is not relevant.  As long as there is a fire  

which caused the damage the claim is maintainable, even if the fire is for a fraction of a  

second.  The term `Fire' in clause (1) of the Fire Policy `C' is not qualified by the word  

'sustained'.  It is well settled that the Court cannot add words to statute or to a document

8 and must read it as it is.  Hence repudiation of the policy on the ground that there was  

no `sustained fire' in our opinion is not justified.   

15. We have perused the fire policy in question which is annexure P-1 to this appeal.  

The word used therein is 'fire' and not 'sustained fire'.  Hence the stand of the Insurance  

Company in this connection is not acceptable.   

        16. Shri K.K. Venugopal invited our attention to exclusion (g) of the Insurance Policy  

which stated that the insurance does not cover :

“(g)  Loss  of  or  damage to  any electrical  machine,  apparatus, fixture or fitting (including electric fans, electric  household or domestic appliances, wireless sets, television  sets  and  radios)  or  to  any  portion  of  the  electrical  installation,  arising  from or  occasioned by over  running,  excessive pressure short  circuiting, arcing self-heating or

9 leakage  of  electricity  from  what  ever  cause  (lightning  included), provided that this exemption shall apply only to  the particular electrical machine apparatus, fixtures, fittings  or portion of the electrical installation so affected and not  to other machines, apparatus, fixture, fittings or portion of  the  electrical  installation  which  may  be  destroyed  or  damaged by fire so set up.”   

17. A perusal of the exclusion clause (g) shows that the main part of the exclusion  

clause  

which  

protects  

the  insurer  

from  

liability  

under  the  

policy  

covers loss  

of damage to any electrical machinery, apparatus, fixture or fittings including wireless  

sets, television sets, radio and so on which themselves are a total loss or a damage or  

damaged due to short circuiting, arcing, self heating or leakage of electricity.  However,  

the  proviso  to  the  said  clause  through inclusion  of  any other  machinery,  apparatus,  

fixture or fitting being destroyed or damaged by the fire which has affected any other

10 appliances such as television sets, radio, etc.  or electrical  machines or apparatus are  

clearly included within the scope of the Fire Policy for whatever damage or destruction  

caused by the fire.  If for example the short circuiting results in damage in a television  

set through fire created by the short circuiting in it the claim for it is excluded under the  

fire policy.  However, if from the same fire there is a damage to the rest of the house or  

other appliances, the same is included within the scope of the Fire Policy by virtue of  

the  

proviso.  

In  other  

words,  if  

the  

proximate  

cause  of  

the loss  or  

destruction  

to any other including other machines, apparatus, fixtures, fittings etc. or part of the  

electrical  installation  is  due  to  the  fire  which  is  started  in  an  electrical  machine  or  

apparatus all such losses because of the fire in other machinery or apparatus is covered  

by the Policy.

11

18. The  main  question  before  us  now is  whether  the  flashover  and  fire  was  the  

proximate cause of the damage in question.   

19. To understand this  we have to  first  know the necessary facts.   The insurance  

company pointed out the chain or sequence of events as under :

“Short-circuiting takes place in the INCOMER 2 of the  

main  switchboard  receiving  electricity  from  the  State  Electricity Board possibly due to the entry of a vermin.

?

Short-circuiting results in a flashover. ?

Short-circuiting and flashover produced over-currents to  the tune of 8000 amperes, which in turn produced enormous  heat.  The over currents and the heat produced resulted in the  expansion and ionization of the surrounding air.

?

12 The electricity supply from the State  Electricity Board  

got tripped. ?

The paint of the Panel Board charred by the enormous  heat  produced  above  and  the  MS partition  of  the  adjoining  feeder connected to the generator power developed a hole.  It  also resulted in formation of smoke/soot.

? The smoke/soot and the ionized air crossed over the MS  

partition and entered into the compartment receiving electricity  from the generator.

? Consequently  the  generator  power  supply  also  got  

tripped. ?

The  tripping  of  purchased power  and  generator  power  resulted in total stoppage of electricity supply to the plant.

? The power failure resulted in stoppage of water/steam in  

the waste heat boiler. ?

The flue gases at high temperature continued to enter the

13 boiler, which resulted in thermal shock causing damage to the  boiler tubes.”

20. In  this  connection,  it  may be  noted  that  in  its  written  submission  before  the  

National Commission the appellant has admitted that there was a flashover and fire.  

The  relevant  portion  of  the  written  statement  of  the  appellant  before  the  National  

Commission is as follows :

............. (a) Para 1 of the Preliminary Objections wherein it is stated :

On  8th January,  99  there  was  a  short  circuiting..........which  resulted in flash over............

…......The  cause  of  loss  to  the  boiler  and  equipment  is  the  thermal shock caused due to stoppage of electricity......   The  stoppage of electricity was due to the fire.......

14

…..short circuiting results in a flash over...........

(b)  Para  3(iv)  of  the    Preliminary  Objections  wherein  it  is  stated :

…........Due to this flash over and over currents excessive heat  energy  was  generated  which  resulted  in  the  evolution  of  marginal fire.........

(c) Para 3(vi) of the Preliminary Objections wherein it is stated  

:

…......The surveyors observed that the experts in all the reports  submitted by the complainant admitted that a flash over took  place.........  

(d)  Para  3(viii)  of  the  Preliminary  Objections  wherein  it  is  stated :

…......Fire of extremely short duration followed and preceded  by short circuit..........

15

(e) Para 7 of the reply wherein it is stated :

…........It  is  correct  that  on  8th January,  1999,  short  circuit  occurred on INCOMER-2 of the 3.3 KV main switch board in  the electrical sub station which resulted in a flash over.........

(f) Para 10 of the reply wherein it is stated :

….......Due to this flash over and over currents excessive heat  

energy  was  generated  which  resulted  in  the  evolution  of  marginal fire...........

(g) Para 21 of the reply wherein it is stated :

…....A reference of  fire,  as  opposed to  sustained fire,  in  the  opinion of M/s. P.C. Gandhi & Associates has been made.........

…......It is in this context that   M/s. P.C. Gandhi & Associates  have referred to the possible fire after the flash over being of a  very short duration.

16

21. Thus it is admitted in the written statement of the appellant before the National  

Commission  that  it  was  the  flashover/fire  which  started  the  chain  of  events  which  

resulted in the damage.   

22.

Apparently there is no direct decision of this Court on this point as to the meaning of  

proximate cause, but there are decisions of  foreign Courts, and the predominant view  

appears to be that the proximate cause is not the cause which is nearest in time or place  

but the active and efficient cause that sets in motion a train or chain of events which  

brings about the ultimate result  without  the intervention of any other force working  

from an independent source.

17

23. Thus  in  Lynn  Gas  and  Electric  Company  vs.   Meriden  Fire  Insurance  

Company & Ors.  158 Mass. 570; 33 N.E. 690; 1893 Mass. LEXIS 345 Supreme Court  

of Massachusetts was concerned with a case where a fire occurred in the wire tower of  

the plaintiff's building, through which the wires of electric lighting were carried from  

the building. The fire was speedily extinguished, without contact with other parts of the  

building  

and  

contents,  

and  with  

slight  

damage  to  

the  tower  

or  its  

contents.  

However, in a part of the building remote from the fire and untouched thereby, there  

occurred  a  disruption  by centrifugal  force  of  the  fly  wheel  of  the  engine  and  their  

pulleys  connected   therewith,  and   by  this  disruption  the  plaintiff's  building  and  

machinery were damaged to a large extent.  It was held that the proximate cause was not  

the cause nearest in time or place, and it may operate through successive instruments, as

18 an article at the end of a chain may be moved by a force applied to the other end.  The  

question always is : Was there an unbroken connection between the wrongful act and  

the injury, a continuous operation?  In other words, did the facts constitute a continuous  

succession of events, so linked together as to make a natural whole, or there was some  

new and independent cause intervening between the wrong and the injury?        

24. The  

same  view  

was  taken  

in  Krenie  

C. Frontis  

et  al. vs.  

Milwaukee Insurance Company 156 Conn. 492; 242 A.2d 749; 1968 Conn. LEXIS  

629.   The  facts  in  that  case  were  that  the  plaintiffs  owned  the  northerly  half  of  a  

building that shared a common  wall with a factory next door.  A fire broke out in the  

factory and damaged that building.  Minimal fire damage occurred to the  plaintiffs'  

building.  However, due to the damage next door, the building inspector ordered the  

removal of the three upper stories of the factory building, which left the common  wall

19 insufficiently supported.  Due to the safety issue, the inspector ordered the third and  

fourth floors of plaintiffs' building to be demolished.  On this fact it was held that the  

fire was the active and efficient cause that set in motion a chain of events which brought  

about the  result  without  the intervention of any  new and independent source,  and  

hence was  the proximate cause of the damage.

25. In  

Farmers  

Union  

Mutual  

Insurance  

Company  

vs.  

Blankenship  231 Ark.127; 328 S.W..2d 360; 1959 Ark. LEXIS 474; 76 A.L.R..2d 1133  

the claimant's goods were damaged after a fire originated in his place of business.  The  

goods were not damaged by the flames but by a gaseous vapour caused by the use of a  

fire extinguisher in an effort to put out the fire.  On these facts the Supreme Court of  

Arkansas upheld the claim of the claimant.  

20 26. In Leyland Shipping Company Limited  vs.  Norwich Union Fire Insurance  

Society Limited  [1917] 1 K.B. 873, the facts of the case were that  a ship was insured  

against  perils  of  the  sea  during  the  first  world  war  by  a  time policy  containing  a  

warranty against all consequences of hostilities.  The ship was torpedoed by a German  

submarine twenty five miles from Havre.  With the aid of tugs she was brought to Havre  

on the same day.  A gale sprang up, causing her to bump against the quay and finally she  

sank.   The  

House  of  

Lords  

upheld  the  

claim  for  

damages  

observing  

that  the  

torpedoing  

was the proximate cause of the loss even though not the last in the chain of event after  

which she sank.      

27. In Yorkshire Dale Steamship Company Ltd.  vs.  Minister of War Transport  

(The Coxwold) [1942] AC 691, [1942] 2 All ER 6 during the Second World War a ship

21 in  convoy  was  sailing  carrying  petrol  for  use  of  the  armed  forces.   There  was  an  

alteration  of  the  course  of  the  ship  to  avoid  enemy action,  and  an  unexpected  and  

unexplained tidal set carried away the ship and she was stranded at about 2.45 a.m.  It  

was held that the loss was the direct consequence of the warlike operation on which the  

vessel was engaged.   

28.  In  

The  

Matter  of  

an  

Arbitration  between   Etherington  and  the  Lancashire  and  Yorkshire  Accident  

Insurance Company   [1909] 1 K.B. 591 by the terms of the policy (an accident) the  

insurance company undertook that if the insured should sustain any bodily injury caused  

by violent, accidental, external and visible means, then, in case such injuries should,  

within three calendar months of the causing of such injury, directly cause the death of  

the insured, damages would be paid to his legal heirs.  There was a proviso in the policy

22 that this policy only insured against death where the accident was  the proximate cause  

of the death.  The assured while hunting had a  fall and the ground being very wet he  

was wetted to the skin.  The effect of the shock lowered the vitality of his system and  

being obliged to ride home afterwards, while wet, still further lowered his vitality.  As a  

result  he  developed  pneumonia  and  died.   The  Court  of  Appeal  uphold  the  claim  

holding that the accident was the proximate cause of death.   

29. In  

the present  

case,  it  is  

evident  

from  the  

chain  of  

events that  

the  fire  

was the efficient and active cause of the damage.  Had the fire not occurred, the damage  

was also would not have occurred and there was no intervening  agency which was an  

independent source of the damage.   

30. Hence we cannot agree with the conclusion of the surveyors that the fire was not

23 the cause of the damage to the machinery of the claimant.    

31. Moreover in   General Assurance Society Ltd.  vs.  Chandmull Jain & Anr.  

AIR 1966 SC 1644 it was observed by a Constitution Bench of this Court that in case of  

ambiguity in a  contract of insurance the ambiguity should be  resolved in favour of the  

claimant and against the insurance company.   

32.

Learned  

counsel  

for  the  

appellant  

relied  on  

the  

decision of  

the  British  

High Court in Everett & Anr.  vs. The London Assurance S.C. 34 L.J.C.P. 299; 11 Jur.  

N.S. 546; 13 W.R. 862.  By the terms of the policy the premises in question was insured  

against “such loss or damage by fire to the property.”  It was held by the High Court that  

this  did  not  cover  damage resulting  from the disturbance  of  the  atmosphere  by the  

explosion of a gunpowder magazine a mile distant from the premises insured.   We are

24 in respectful  disagreement  with the said judgment  as the predominant  view of most  

Courts is to the contrary.  

33. For the reasons given above we see no merit in this appeal and it is dismissed.  

There shall be no order as to costs.  

....... .................. .................. .J.

(Markandey Katju)

...........................................J.      (Asok Kumar Ganguly)

New Delhi; September 01, 2009.