LexM/S BASPA ORGANICS LIMITED versus UNITED INDIA INSURANCE COMPANY LTD.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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M/S BASPA ORGANICS LIMITED
v.
UNITED INDIA INSURANCE COMPANY LTD.
(Civil Appeal No. 13401 of 2015)
FEBRUARY 14, 2020
[MOHAN M. SHANTANAGOUDAR AND
R. SUBHASH REDDY, JJ.]
Consumer Protection Act, 1986: Fire and Special Peril policy
– Insurance claim – Repudiation of claim – On the ground of
suppression of material fact of not being duly licensed for storage
and use of Hexane at the factory – Held: In terms of either Article
3 or 7 of the Petroleum Rules, 1976, the Appellant was required to
obtain a license for the purposes of storing Hexane in excess of 20
kilolitres – The quantity of Hexane stored by the Appellant was
more than 20 kilolitres – In the absence of a license, the Appellant
could not have lawfully stored Hexane – Non-disclosure of non-
possession of a licence was of a material nature, and constituted a
violation of Condition 1 of the insurance policy – Insurer was
justified in repudiating the claim of the Appellant on this ground –
Petroleum Rules, 1976 – rr.3 and 7 – Petroleum Act, 1934 – s.2(b).
Dismissing the appeal, the Court
HELD: 1.1 As per Section 2(b) of the Petroleum Act, 1934,
petroleum Class A means petroleum having a flash-point below
23°C. As per the records of physical properties of selected
chemicals prepared by the NFPA, the flash point of n-Hexane is
-23°C. Admittedly, the substance being stored by the Appellant
was n-Hexane, or normal Hexane. Since the flash point of the
substance is well below 23°C, it can safely be said that it falls
under the category of petroleum Class A. [Paras 9, 10][849-G-H;
850-A-D]
1.2 Section 8 of the Petroleum Act makes it clear that for
the storage of petroleum Class A less than 30 litres in quantity,
no licence is required under the Petroleum Act or rules
thereunder. As per Article 3, a licence issued by the District
[2020] 2 S.C.R. 843
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SUPREME COURT REPORTS
[2020] 2 S.C.R.
Authority is required for importing and storing petroleum Class
A in a quantity not exceeding 300 litres. Thus, the Respondent
may be justified in arguing that for storage of petroleum Class A
ranging from 30 litres to 300 litres in quantity, a licence under
Article 3 may be required. However, in the instant case, the
Appellant had stored much more than 300 litres of Hexane, and
therefore, a licence under Article 3 was not sufficient. [Para 13,
13.1][851-D; G-H; 852-A]
1.3 The expression “petroleum in bulk” as defined in clause
(xv) of Rule 2 of the 1976 Rules means petroleum contained in a
tank irrespective of the quantity of petroleum contained therein.
The term ‘tank’ is defined in clause (xxii) of rule 2 as a receptacle
for petroleum exceeding 1000 litres in capacity. From the
definitions, it becomes evident that irrespective of the quantity
of petroleum, when petroleum is stored in a tank, it is referred to
as “petroleum in bulk” under the 1976 Rules. Article 7 deals with
the grant of a licence for storage of petroleum otherwise than in
bulk, i.e. otherwise than in a tank. In other words, for petroleum
Class A exceeding 300 litres, a licence under Article 7 is required
when it is not being stored in receptacles exceeding 1000 litres
in capacity. [Para 14, 14.1, 15][852-B-F]
1.4 A store shed, is a building where petroleum is stored
otherwise than in bulk, i.e., otherwise than in receptacles with a
capacity of over 1000 litres. Clause (xxi) of Rule 2 states that a
store shed may be a part of an “installation”. This term is also
defined under the 1976 Rules, in clause (xiv) of Rule 2. Upon
reading the definitions of “store shed” and “installation” together,
it becomes clear that “installation” carries a much broader
meaning. In order for any premises to be an “installation” under
the 1976 Rules, it must necessarily contain a place specially
prepared to store petroleum in bulk. At the same time, an
installation may also have the capacity to store petroleum
otherwise than in bulk. An installation, therefore, may consist of
both tanks and storage sheds, or it may consist only of tanks.
[Paras 16, 17][853-B-F]
2.1 In the instant case, the second surveyor clearly stated
that the Hexane had leaked from the tanks in which it was stored.
However, it is not clear from the material on record whether or
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not the term “tank” was assigned the same meaning as under
the 1976 Rules. If the tanks referred to by the second surveyor
were receptacles that could not store more than 1000 litres of
petroleum, then they would not constitExcerpt shown. Read the full judgment & AI analysis in Lexace.