Hole in fuse box cover?

This is a sub panel in a home yesterday. It had a hole burned right thru the cover. When I started to look around I determined all the connections below the fuses were live. Not sure if all are suppose to be as I am no electrician. However I noticed this panel was fed by a 40 breaker in a brand new main panel. The white wire in the main panel is connected to the neutral bar and then pigtailed to a live wire in the fuse box. I confirmed the short wire going into the cap was live with tester and the wire going to the main panel was not. The short white wire also had the coating melting and wire exposed. I of course do not know if this would be what started all this possible issue or if something different. So please feel free to turn this into a mini CE class.

Also I felt I needed to point out issue to owner since he was there. Advised him to contact electrician. Of course he could not just do that and turned off panel and disconnected white wire capped both ends and I said again I would contact the gentleman who did the work (since he said someone a few years ago did work). I do not believe he will since home is up for sale so I called his realtor and left vm advising I strongly recommend a prof. evaluate.

DSC09029.JPG

DSC09031.JPG

DSC09030.JPG

dangerous hazard Obsolete worn out panel many deficiencies need’s to be upgraded immediately by a qualified person .
Good call I expect there could be many other concerns with the home wiring .