A.P. Sahi, President

The present complaint was heard on 08.07.2025 when the following order was passed:

The present complaint arises out of the repudiation of a claim of the complainant in respect of the component of a cement manufacturing plant known as Reverse Air Bag House (RABH). Mr. Navneet Kumar has commenced his arguments by inviting the attention of the Bench to the policy as well as to the contents of the repudiation letter to urge that the repudiation has been intimated to the complainant on the basis whereof the entire complaint was drafted without any other information being available to the complainant. He submits that the survey report and the other documents were all filed along with the reply by the opposite party, Insurance Company and therefore he has given a response to the same only through the rejoinder which should be treated as a part of his pleadings. The reason given by him is that had this information been tendered earlier, the complaint would have exhaustively dealt with such documents. But in spite of making several attempts to obtain the documents, since they were not supplied, the complaint came to be filed only with the aid of the repudiation letter, which according to him does not take into account the real manner and method of the installation and the functioning of the cement plant and the testing of its components, as a result where of the conclusions drawn by the surveyor and the Insurance Company are based on a limited material without understanding the entire mechanism. He submits that the surveyor has based his report only on the strength of a resolution and minutes of a meeting and a report from another company without understanding and assessing the actual mechanism of the functioning of the unit and therefore the report of the surveyor and the letter of repudiation being bereft of any such analysis are liable to be rejected. Neither the report, nor the repudiation letter have embarked upon a correct assessment and have erroneously repudiated the claim of the complainant.

Mr. Navneet Kumar, learned counsel urged that on account of his personal indisposition having been affected by Covid, he may be permitted to continue on some other day. Mr. Aditya Kumar, learned counsel is present online for the Insurance Company.

Let the matter be listed on 30.10.2025 at 2 p.m.

The matter was heard at length on 30.10.2025 and orders were reserved.

2. As noted above, the claim is regarding the loss and damage of a Reverse Air Bag House equipment of a cement plant due an explosion that took place on 03.05.2012. It is a device connected to all the production components of the plant for filtering pollutants. An equipment to sustain purity, environmental cleanliness and provide the plant with a pollutant free atmosphere. The loss is being claimed under a Storage cum Erection Insurance Policy that was originally issued for the period 29.06.2010 to 30.09.2011 that was renewed with an endorsement by the Insurance Company that was extended till 28.09.2012. The policy was for the plant having a coverage of Rs. 849,59,00,000/- for which the complainant had made payment of a premium of Rs. 40,07,967/- and while getting the extension of the policy, an extra premium of Rs. 13,11,937/- was paid. As noted above, the incident took place on 03.05.2012 which was during this period of the subsistence of the policy. There is no dispute that the equipment was secured in the event it suffered any loss in terms of Erection policy and was liable to be indemnified during the coverage period.

3. The claim for the loss was forwarded that was assessed by a Surveyor, who tendered a report on 04.08.2012. The claim was repudiated on 08.03.2013 by the following order of the Insurance Company:





4. The complainant has alleged that the said repudiation was made on the basis of surmises and conjectures without intimating the complainant or sharing the copy of the Surveyor report and without putting any questions and on a total misrepresentation of the terms of the policy. Aggrieved, the present complaint was filed and notices were issued to which a reply has been filed by the Insurance Company, denying the claim set up on the ground that as on the date of the incident, the coverage had ceased to operate on account of the conditions of the cover. The sum and substance of the contention of the Insurance Company is that not only had the period of coverage expired but also the policy had ceased because of the equipment having become operational as the plant had undertaken full production and was in use. The complainant came out with a case that the testing period as per the coverage period under the policy was still available till 05.05.2012 and the incident having occurred on 03.05.2012, the loss was indemnifiable. Further the contention of the complainant is that there was no production of cement and the cement plant was yet to be completely installed, hence there was no question of the testing period having come to an end. The plant had not started any operations and was still in the process of getting installed and had reached only an approximate 1/3rd of its capacity, hence neither the plant had become operational as understood under the terms of the policy nor had the testing period come to an end. It is in this background that the complainant has come up with a case that the Insurance Company has violated all statutory provisions and its Surveyor acted in a very casual fashion by relying on evidence which did not support the conclusions drawn by him which were also sketchy and unacceptable. The letter of repudiation is also based on such facts and is therefore untenable. Learned counsel has also advanced his submissions by pointing out to details of the policy, the report of the original equipment manufacturer M/s. Thermax as well as the findings recorded by the Surveyor.

5. Mr. Navneet Kumar also pointed out that the complainant was almost taken by surprise, in as much as, in spite of applications having been moved under the Right to Information Act, the Insurance Company refused to share the report of the Surveyor and after it was filed along with the reply, the complainant has raised objections to the same through the rejoinder which has been read extensively by Mr. Navneet Kumar to counter the submissions raised on behalf of the Insurance Company. It is therefore urged that all procedural norms have been violated by the Surveyor as also by the Insurance Company and they have acted in breach of regulation framed by the IRDA. It is therefore submitted that on the facts of this case, it is established that the complainant had proved the occurrence of the loss and its cause to be covered under the terms of the policy and the repudiation therefore was uncalled for.

6. In response to the arguments of Mr. Navneet Kumar, learned counsel for the complainant, Mr. Aditya Kumar, learned counsel for the Insurance Company has emphasized on the terms of the policy and the facts of the case to urge that the complainant itself has admitted the facts relating to the operation of the plant in the minutes of the meeting, which also stands confirmed with the report of the original equipment manufacturer that the plant was in operation and therefore the coverage of the policy had ceased to exist apart from the fact that the period of coverage was also over. He has taken us through the pleadings to advance his submissions.

7. To appreciate the arguments of the learned counsel for the parties, it would be appropriate to extract the terms of the policy. The period of cover being core dispute the relevant provision of the policy is extracted hereinunder:

The liability of the Company shall commence, (notwithstanding any date to the contrary specified in the Schedule) only from the time after the unloading of the property specified in the Schedule from any conveyance at the site specified in the schedule and shall continue until immediately after the first test operation or test loading is concluded (whichever is earlier) but in no case beyond four weeks from the day on which after completion of erection a trial running is made and/or readiness for work is declared by the erectors/contractors, whichever is earlier. If however, a part of a plant or one or several machine/s is/are tested and put into operation the cover and consequently the liability of the Company for that particular-part of the plant or machine ceases whereas. It continues for the remaining parts which are not yet ready.

In case after the expiry of four weeks of trial running, approval of the plant or any part thereof is not given by the concerned Authorities the cover for the extended period of further trial running can be covered at extra premium to be arranged before hand.

8. Apart from this, learned counsel for the complainant has invited the attention of the Bench to the endorsement made in the column below the period described which is as follows:

Including 3 Month testing period and followed by NIL month extended maintenance period.

9. We will discuss the arguments advanced and the impact of the terms of the policy later on, but we may point out that another document which is at the core of the contentions between the parties is the memorandum of minutes dated 05.05.2012 that was drawn up in the presence of the Insurance Surveyor and four officials of the complainant company. The same is extracted hereinunder:



10. With this in hand, a technical opinion was also reported by the original equipment manufacturer M/s. Thermax after making a site visit and inspection the raw mill / kilm reverse air bag house. This report dated 12.05.2012 has also been filed as Annexure R3 and the purpose of the visit described in the said report is extracted hereinunder:



11. The entire report consists of technical evaluation that has been perused by us.

12. The Surveyor tendered his report on 04.08.2012 which is extracted hereinunder:

















13. The complainant had also demanded a copy of the survey report, but unfortunately the Insurance Company vide letters dated 30.04.2013 and 31.07.2013 refused to supply the same on the ground that only citizens have the right to information and later on that the survey report and other documents relate to claim under a policy issued to a third party and therefore the same cannot be supplied. We are mentioning this fact to appreciate the arguments raised on behalf of the complainant that the Insurance Company failed to share the copy of the survey report and proceeded to repudiate the claim by the impugned letter of repudiation already extracted hereinabove.

14. The main bone of contention is about the duration specifying the coverage under the terms of the policy, its commencement and its termination. The operational duration of the policy is clearly defined commencing only 'from the time after the unloading of the property from any conveyance at the site' and 'shall continue until immediately after the first test operation or test loading is concluded (whichever is earlier) but in no case beyond four weeks from the day on which after completion of erection a trial running is made, and / or readiness for work is declared by the erectors / contractors, whichever is earlier'.

15. The second part of the coverage is qualified by another caveat that if however a part of the plant or one or several machine/s is/are tested and put into operation, the cover and consequently the liability of the company for that particular part of the plant or machine ceases, whereas it continues for the remaining part which are 'not yet ready'.

16. Another component of the term of the policy aforesaid is that in case after the expiry of four weeks of trial running, approval of the plant or any part thereof is not given by the concerned authorities, the cover for the extended period of further trial running can be covered at extra premium.

17. The terms further qualify that in the case of second hand or used property, the coverage shall cease immediately on the commencement of the testing. The insurance at the latest shall expire on the date specified in the schedule that can be extended on payment of additional premium as provided therein.

18. There is no dispute that the date of expiry of the policy is 28.09.2012 as per the endorsement that was given effect to from 29.06.2012. However, the dispute in the present case is that the Insurance Company has repudiated the claim primarily on the ground that the RABH equipment being part of the clinkerization component of the plant became operational on 25.02.2012, and since the unit had produced 1.2 lakh Metric Tonnes of clinker till the date of damage on 03.05.2012, it was admittedly in use from 06.02.2012. Accordingly, the plant having run for nearly three months before the damage occurred during continuous operation and production, the policy had ceased to cover the loss at the time of occurrence of the damage.

19. Learned counsel Mr. Navneet Kumar for the complainant has advanced his submissions urging that neither the testing period report of the RABH had come to an end nor was the plant producing any cement and therefore to describe it as being involved in use for production and continuous operation is an incorrect premise on the basis whereof the repudiation has been made. He further submits that the repudiation is based on the surveyor's report which also proceeds on an erroneous construction of the terms of the policy and has wrongly applied the facts to portray as if the production in the plant had already started and the testing period was already over.

20. Advancing his submissions, he contends that it is only part of the plant that had been set up whereas a huge part of the plant was yet to be completed and in fact the installation of the plant was still incomplete. Hence, there was no question to gather an impression that the plant had started actual production of cement. He further submits that with the partial semifinished products, the RABH equipment had to be operated to filter the garbage and therefore the RABH equipment was also undergoing testing of its capacity. Mr. Naveneet Kumar submits that the full capacity of the RABH was yet to be tested as it was only 1/3rd of the plant that had been set up and was undergoing expansion. His submission is that unless and until the entire plant became functional, the question of certifying the testing of the RABH equipment, which is common for all, could not have arisen with the operation of only a couple of the mills involved in clinkerization.

21. He therefore submits that if the minutes of meeting dated 05.05.2012 have recorded about a couple of the components of the plant having been put to use, the same does not amount to a continuous operation of the plant for producing cement and therefore it was not the commencement of the operation as understood by the Surveyor or in the letter of repudiation. In essence, the process of installation of the plant was still incomplete and therefore there was no question of the RABH equipment being tested for the entire plant as there cannot be a presumption of continuous operation of the plant without it being installed in its full capacity.

22. Mr. Navneet Kumar urges that the plant was still being set up in stages and therefore to construe that the RABH equipment will be deemed to have come into operation in February, 2012 is incorrect. He submits that neither the testing period was complete nor had the production actually commenced and it was an installation and an erection period, which even otherwise had not come to an end nor had the period of the policy expired. It is therefore submitted that the repudiation is based on an incorrect appreciation of facts by placing reliance on the minutes of the meeting dated 05.05.2012, the Surveyor's report and the terms of the policy.

23. Mr. Navneet Kumar has also invited the attention of the Bench to the evidence filed on behalf of the complainant to urge that the complainant could have raised issues in the complaint itself but the other deficiency which is writ large on the face of it is that the survey report was never supplied to the complainant and saw the light of the day for the first time only through the written version before this Commission. As such the relevant issues had to be categorically stated in the rejoinder filed on record.

24. Mr. Aditya Kumar responding to the said submissions urged that the arguments are based on a total misunderstanding of the provisions of the policy. The minutes of the meeting dated 05.05.2012 are a clinching piece of evidence, in as much as, the same have been drawn up by the complainant itself in the presence of four of its senior most officials including technical persons, who have admitted the commencement of the plant and its being put to use, as such the duration of coverage ceased and was not available as on the date of the incident.

25. Mr. Aditya Kumar further points out that the calculation made by the complainant is not in accordance with the terms of the policy which provides for an outer limit of four weeks of the testing period, and is not an unending ongoing coverage. He further submits that the period of three months described as a testing period in the policy does not in any way come to the aid of the complainant once it is established on record that the production had already commenced and 1.2 lakh Metric Tonnes of clinker had already been produced.

26. We have considered all the submissions and perused the documents on record as well as the written arguments filed on behalf of the OPs Insurance Company that was filed vide Diary No. 37898 dated 19.12.2022.

27. There is no dispute that the RABH equipment that suffered losses due to the explosion on 03.05.2012 is part of the clinkerization unit / circuit. We may point out that the word 'clinker' is not synonymous to 'cement'. The word 'clinker' means a fused lump of incombustible residue that remains after coal has burned. This fusion is brought about through great heat whereupon a cindery mass is left after the combustion. The process is described as clinkerization. It involves the operation of mills that crush and grind raw material towards the production of cement. All these production equipments including the clinkerization kiln, the raw mill and the coal mill are connected to the RABH for filtering the pollutants emanating from each of these equipments during productional operations. Thus, the RABH is supposed to operate for this cleansing purpose and filtering pollutants while the plant is in operation.

28. It is for the erection of the plant that the policy was taken which obviously includes the erection of its various components and there is no dispute that this installation of the plant had commenced long before after its foundations were laid in 2009 when in February 2012, the clinkerization circuit commenced its operation. The contention of the complainant is that this commencement was of a testing trial period and there was no production of cement so as to construe that the plant had already commenced production and had been put to use.

29. On the other hand, it has been disclosed by the Insurance Company that immediately on the explosion taking place on 03.05.2012, the Surveyor was appointed, who visited the spot and the minutes of the meeting dated 05.05.2012 were drawn up in close proximity of the incident after detailed deliberations that have already been extracted hereinabove. We find that the said minutes of the meeting record the presence of four officials of the complainant along with the Surveyor. Out of the four officials, the first is the Senior Vice President accompanied by the Vice President, Technical and the General Manager, Process along with the Consultant. There cannot be any doubt that these officials are not only administrators, but also supervising the technical monitoring and processing of the plant. The Surveyor is also a Chartered Engineer. The minutes have been signed by all of them and which records that the project had commenced way back in September - October, 2009. The erection of the clinker plant stood completed by February, 2012 and the RABH unit / equipment was part of it. The equipments were put into operation on 5th and 6th of February, 2012. The raw mill was tested with a no load that was successful on 04.02.2012 itself. The no load trial runs had been undertaken. The trial run with load of the clinkerization unit commenced on 25.02.2012 and since then the entire clinkerization unit was in operation and had produced 'clinker' to the tune of 1.20 lakh tonnes.

30. We may point out that cement is a building material manufactured by grinding calcined, limestone and clay to a fine powder. Earlier it was a substance made out of chalk and clay for masonry. In the instant case, it is the production of 1.2 lakh tonnes of clinker which has been recorded in the minutes of meeting held on 05.05.2012.

31. It is therefore evident that a huge amount of production towards the manufacturing process had been carried out with 1.2 lakh tonnes of clinker for manufacturing cement having been produced.

32. What is more important is that this production also seems to be not disputed and to the contrary in paragraph 28 of the complaint, it has been recited that the efficiency level of production was only 32.58% and therefore the production of 1.2 lakh Metric Tonnes was simply a production during trial period that was very low in quantity and quality and cannot be treated as a finished product. This itself is clearly an evidence of production. There is one important fact which needs to be noticed and has been pointed out by the learned counsel for the Insurance Company that the complainant itself has referred to the product having rolled out for which excise returns are an evidence to the fact that 1.2 lakh Metric Tonnes had been produced and was subjected to excise levy that could not have possibly happened unless the finished product had rolled out from the factory. Thus, the contention raised on behalf of the complainant that production had not started cannot be accepted. The production of the clinker therefore stands admitted and from the minutes of the meeting, it is evident that the RABH equipment was duly charged on 05.02.2012 and the grinding and the crushing of the raw mill and coal mill had commenced on 06.02.2012. The load trial run commenced on 25.02.2012. This is admitted at item no. 6 in the minutes of the meeting dated 05.05.2012. The complaint nowhere disputes this date, but the contention is that this was the commencement of the testing period and not of actual production. What is more revealing is that from 05.02.2012 upto 05.05.2012, 1.2 lakh Metric Tonnes of clinker had already been produced which is a span of almost three months. Consequently, the commencement in our considered opinion had triggered with the testing that started on 06.02.2012. The test of the grinding mills had been started on 06.02.2012 as indicated at item no. 4 in the minutes of the meeting dated 05.05.2012.

33. The 'no load trial' had commenced as indicated at item no. 5 of the said minutes, but the 'load trial' run of the clilnkerization admittedly commenced on 25.02.2012.

34. These recitals in the minutes therefore establish that the equipments already installed had been put to test which included the operation of the mills with the grinding and crushing having commenced as well as the RABH unit through which the pollutants had to be filtered. It is not the case of the complainant that the RABH was not functional or had not started to receive the product for filtration of pollutants from the clinkering unit. To the contrary, the RABH equipment had been charged on 05.02.2012 and had been put to operation on 06.02.2012. It is quite possible that it had commenced with a no load testing, but for all purposes, the load trial run had commenced on 25.02.2012.

35. It is for this reason that the original equipment manufacturer M/s. Thermax in its report dated 12.05.2012 has recorded that the RABH equipment was in operation from February, 2012 due to the continuous operation of the raw mill and the coal mill leading to the accident on 03.05.2012.

36. The Surveyor in his report while recording the cause of loss has referred to the inspection report of the Consultant M/s. Holtech Consulting Pvt. Ltd. dated 06.06.2012, which indicated the excessive Carbon Monoxide (CO) generation in the equipment resulting in explosion. The report had also been enclosed along with the survey report. He has also referred to the date of charging of the equipment and the load trial run as mentioned in the minutes of the meeting dated 05.05.2012. Accordingly, in his comments on admissibility, he has observed that the entire clinkerization unit including the equipment had been put to use and the explosion had occurred after three months of the commencement of the production.

37. So far as the report of the Surveyor is concerned and the dates referred to above, it would be apt to once again mention that the period of three months mentioned by the Surveyor seems to be in order to meet the three months period of testing referred to in the policy. On a simple calculation, if the testing period with the commencement of the operation started on 06.02.2012, the period of three months would expire on 05.05.2012 and therefore the date of explosion falls within the said period of three months. To that extent, the observation of the Surveyor that the incident had happened after three months may not be correct, but at the same time, even if it is presumed that a period of three months was provided for as the testing period, the testing had already commenced on 06.02.2012 upon erection. The RABH equipment stood installed and charged on 05.02.2012 and therefore upon installation, it had the three months period of carrying out the test. As is evident from the narration of the fact and the minutes of the meeting dated 05.05.2012, upon erection, the 'no load' trial test did commence on 06.02.2012 itself. Thus, in fact the testing of the equipment had commenced and then the 'load trial' run commenced on 25.02.2012. The period of 3 months is provided for commencing the trial after erection to carry out the testing.

38. The testing period having commenced, in our considered opinion, the policy conditions describing the period of coverage as extracted hereinabove categorically prescribes that after the first test operation or test loading, the same can, in no case, provide a coverage beyond four weeks from the date the trial run is made after completion of erection. Undoubtedly, the trial run with load capacity commenced on 25.02.2012 and in our considered opinion, the coverage would continue for four weeks thereafter to provide coverage in case a loss is suffered. The period of four weeks came to an end on 24.03.2012. There was no complaint or any damage to the equipment during this period.

39. As noted above, by 03.05.2012, the plant had already produced 1.2 lakh Metric Tonnes of clinker and therefore this production was after having load tested the equipments including the RABH.

40. Thus, the testing period had commenced and as noted above, the coverage ceased to operate after four weeks in respect of the equipments which had already been load tested including the RABH.

41. Mr. Navneet Kumar urged that the testing had to be concluded or treated to have been concluded only after a certification was given by a Contractor / Erector. This argument deserves rejection, in as much as, this readiness for work certification is an alternative to the main clause of coverage as is evident by the phrase 'and / or' occurring therein. There is no reported fault of the trial run by the erector nor is there any evidence of any error in the equipments or their functioning pointed out by the Erector or by the complainant. The plant started running and it produced 1.2 lakh Metric Tonnes for almost three months before the incident occurred. Thus the trial on load had surpassed the period of four weeks of productional operation.

42. It was open to the complainant to have secured a machinery breakdown policy after the equipments had commenced manufacturing, but the erection policy cannot be construed to continue unendingly even beyond the period of coverage as prescribed. The period of coverage cautiously includes the maximum period of coverage of erection of four weeks duration after the equipment is operated upon. The testing cannot await the erection of the entire plant which may take years together and that is not the intention of the coverage under the erection policy.

43. There is no material or operational manual or technical literature evidencing the trial run testing period that may have been prescribed by the original equipment manufacturer. There is no other brochure or literature on record to construe the method of testing and its possible duration. No other expert evidence has been adduced by the complainant to substantiate the same.

44. We therefore find this difficult to accept that as on the date of the incident, the coverage with regard to the RABH equipment was still continuing.

45. We further find that the policy puts in a caveat that it ceases only for those parts of the plant or machine which have become operational and not with regard to the remaining part which are not yet ready. On the facts of the present case, it is evident that the RABH was ready and was connected with the raw mill and the coal mill that was producing clinkers and had actually produced 1.2 lakh Metric Tonnes. This by all standards of probability amounts to a production having been undertaken and the goods having been produced and already rolled out of the factory as already mentioned above. In such circumstances, in our opinion, the coverage had come to an end on the date of the incident and therefore the complainant is not entitled for any indemnification on that account, hence there being no deficiency, the claim cannot be accepted on that score.

46. However, while proceeding to consider the grievances raised, we find one apparent issue which can be termed as a deficiency on the part of the Insurance Company. It is by now a settled mandate under the IRDA Regulations that the Surveyor is obliged to share the survey report with the insured and the Insurance Company cannot prevent the same. However, this is a matter relating to the year 2013, yet we find that under specific letters, the Insurance Company has firstly vide letter dated 30.04.2013 denied providing information on the ground that the complainant was not a citizen and it is only a citizen who had a right to information under the RTI Act, 2005. The second letter dated 31.07.2013 states that the claim under the policy is in respect of M/s. KJS Cement, whereas the RTI application had been moved by an individual Mr. Ravi Shankar Tiwari. Consequently, the information cannot be divulged to a third party and hence, the claim was rejected. We find that this is a totally incorrect stand of the Insurance Company, in as much as, the information sought ought to have been supplied and moreso, there was no reason to withhold the surveyor report dated 04.08.2012 from the complainant insured, who could have represented against the same or even questioned its correctness in this complaint. This is therefore an act of deficiency and also a violation of the intent and purpose of the fair processing of an insurance claim.

47. Accordingly, for all the reasons given hereinabove, we do not find the claim to be admissible, in so far as the loss to the equipment is concerned and we accordingly decline the same, but we impose a cost of Rs. 1 lakh on the Insurance Company for having failed to supply the report of the Surveyor dated 04.08.2012 to the complainant that had prejudiced its case in presenting their claim.

48. The complaint accordingly stands disposed of.