Navinya Shipping Services Pvt. Ltd vs Iffco Tokio General Insurance Co. Ltd

Heard Ms. Sukruta A. Chimalker, Advocate, for the complainant and Mr. Samir Dawar, Advocate, for the opposite party.

Navinya Shipping Services Private Limited (the Insured) has filed above complaint, for directing IFFCO Tokio General Insurance Company Limited (the Insurer) to pay (i) Rs.40000000/- with interest @12% per annum from 23.06.2015 till the date of payment, towards insurance claim; (ii) Rs.one lakh, as litigation costs; and (iii) Any other relief, which is deemed fit and proper in the facts of the case.

The facts as stated in the complaint and emerged from the documents attached with it, are as follows:-

(a) Navinya Shipping Services Private Limited (the Insured) was a company, registered under the Companies Act, 1956 and engaged in the shipping business since 2010. The Insured used to operate maximum cargos in west coast of India for river minor ports. The Insured purchased the vessel ‘Costal Pride’ and obtained its Certificate of Indian Registry on 18.02.2013. IFFCO Tokio General Insurance Company Limited (the Insurer) was an insurance company and used to provide insurance services to the general public. The Insured obtained “Marine Hull Insurance Policy” No.21891157 of the vessel ‘Costal Pride’ for a period of 15.11.2014 to 14.11.2015, for a sum insured of Rs.40000000/-, for hull and machinery. Insured obtained Indian River-Sea Vessel Safety Certificate dated 13.05.2015 & Certificate of Class-BOM14P639 dated 13.05.2015 of above vessel.

(b) The vessel ‘Costal Pride’ was loaded about 1960 metric tonnes cement in bags and sailed from Porbandar port on 20.06.2015 at 16:30 hours (IST). While passing Danau on 22.06.2015, the ship was drifted due to adverse weather condition at that time, which resulted in shearing of air vent pipes of water ballast tank due to which water entered into ‘Port Side Ballast Tank’ and in ‘ Port Fuel Tank’. While the ship was at a distance of about 20 nautical miles from Tarapur in the gulf of Khambhat, about 10 nm South-West of Umargaon on 23.06.2015 at 00:30 hours, the Chief Engineer on the vessel reported that both the main Engines of the ship failed due to contamination of the diesel with water. About 15 minutes thereafter Auxiliary Engine No.3 also stopped and there had become total blackout. Chief Engineer opened air vent plugs of the fuel filters of Auxiliary Engine and found presence of water contamination in diesel. Then he opened the drain cocks of ‘Fuel Service Tank’ and found excess water contamination in starboard fuel tank. He then shut the valve of the starboard fuel tank. By using ‘Port Fuel Tank’, he started Auxiliary Engine at about 02:30 hours and resumed power supply. He reported to the Master that due to contamination of the diesel with water, it was not possible to start main Engines.

(c) The Master dropped the Anchor. However, weather condition continued to become more adverse. The Master informed above conditions in the office of the Insured in morning of 23.06.2015. As both the Engines were stopped, the Insured realized that a Tug would be required. The Insured contacted Mr. Narayanan of M/s. KNK Shipping, Mumbai for a Tug, who reverted with a quote of Rs.30/- lacs, for Tug at about 11:45 hours on 23.06.2015. The Insured approved it and paid Rs.15/- lacs to Mr. Nagesh Bhode of M/s. Innovative Maritime Solution Pvt. Ltd., Mumbai, for the Tug, who confirmed that Tug would depart at 17:30 on 23.06.2015, for the place, where the ship was anchored. Around 20:30 hours, Gajendra Mishra, the owner of the Tug, informed that the Master of the Tug was not available and expressed his inability to depart the Tug. Around midnight of 23/24.06.2015, he informed that the Master of the Tug has come and boarded the Tug but due to Weather Warning Signal hoisted in the port of Mumbai, he did not depart. Capt. Edwin Das, the Master of Tug MERMAID-2, informed at 8:00 hours on 24.06.2015, that he was approaching Ferry Wharf (Baucha Dhakka) and would launch to board as soon as it would be available.

(d) Around in noon on 23.06.2015, Chief Engineer noticed that sea water started entering in the ship through the air vent pipe of Port Ballast Tank No.3, which had been sheared off by the waves on the deck. De-ballasting of the Port Ballast Tank No.3 started on continuous basis. In the evening the air vent pipe of the Port Ballast Tank No.4 was also sheared off and sea water started entering in the ship through it. Second pump was started for de-ballasting of the Port Ballast Tank No.4. However, Auxiliary Engine No.3 again stopped on 24.06.2015 at 6:30 hour again, resulting in total blackout. In the absence of power supply, de-ballasting was stopped. As both the fuel service tanks were contaminated with water, as such, it was not possible to start Auxiliary Engine.

(e) The Master of the ship reported to Indian Navy and Indian Coast Guard on 23.06.2015 and made distress signal. Later on Indian Navy and Indian Coast Guard safely rescued 6 crew members from the ship and 8 crew members from sea water. All the 14 crew members of the ship were taken to Daman Air Station for their police verification. The crew members lost their personal documents, including passport, CDCs, COCs, GOCs with endorsements and STCW certificate, INDOS number, Educational and Training certificates etc. and personal belongings, during rescue.

(f)  The Insured informed the incident to the Insurer on 24.06.2015. The Insured filed Affidavit of Surinder Singh Kailey, the Master of the ship on 29.06.2015, Additional Affidavit of Surinder Singh Kailey, the Master and Merrick Augustine De Silva, Chief Engineer of ship on 30.06.2015. The Insurer appointed ‘Alex Stewart Insurance Surveyors & Loss Assessors Pvt. Ltd., Mumbai’ as the surveyor. The surveyor attended at Fansa Beach, Daman on 04.07.2015, 15.07.2015 and 22.08.2015. As desired by the surveyor, the Insured submitted claim form and the documents for assessment of loss. The surveyor, in Final Survey Report dated 02.12.2015, found that (i) Valuation Report dated 26.09.2014 was fair and reasonable, (ii) the vessel was adequately manned and crew were trained and qualified as per STCW 95 Code, (iii) total repair costs would exceed the vessels value of Rs.4/- crores thus confirming that the vessel could be considered as CTL, as declared by the Insured, (iv) renewals were carried out to the satisfaction of the attending IR Class Surveyor and the Insured had exercised due diligence to ensure that all the recommendation of the IR Class Surveyor in order to maintained the vessel’s class, (v) proximate cause of the loss of the vessel may thus reasonably attributed to heavy weather, leading to the shearing of the air vent pipes causing sea water ingress in to vessel’s ballast tank and failing of main and auxiliary engines due to sea water contamination. But he observed that (i) Valuation Report dated 26.09.2014, issued by Yardi Prabhu Consultants & Valuer was based upon report of Mr. S.K. Gupte, the surveyor, and none of them were “Hull Surveyor” and recommended for examining warranty clause. (ii) Marine Casualty Report prepared Mercantile Marine Department and Weather Signals had not been provided by the Insured to him.

(g) The Insurer, vide letter dated 19.03.2016, sought for 10 information/documents from the Insured, which was replied by the Insured, vide letter dated 12.04.2016. Thereafter a meeting was held on 12.05.2016. The Insurer again vide dated 16.05.2016, sought for 13 information/documents from the Insured, which was replied by the Insured, vide letter dated 02.06.2016. The Insurer, vide letter dated 03.10.2016, repudiated the claim, reserving its right to review on the grounds that (i) it was first appointment of the Master on this type of vessel, which proved disastrous resulting into total loss; (ii) the Master was not aware of method of handling the navigational equipment like Navtex and nobody contacted any coast station for weather report through Navtex as such due diligence was not observed regarding safety before voyage; (ii) the Insured had also not acted prudently nor directed the Master/Crew to act prudently to save the voyage; (iv) The Insured/ the manager failed in providing timely assistance to the vessel, though they were informed well in advance the plight of the vessel in early morning of 23.06.2015 itself. The Insured, vide letter dated 21.11.2016, gave a detailed reply and sought for review of the order 03.10.2016. The Insured gave legal notice, vide email dated 08.12.2016, but the Insurer did not respond. Then this complaint was filed on 19.06.2017.

The Insurer filed its written reply on 09.10.2017 and contested the complaint. The facts relating to obtaining insurance policy on 15.11.2014, loss occurred to the vessel on 24.06.2015, appointment of the surveyor, Final Survey Report dated 02.12.2015 and repudiation of the claim on 03.10.2016 and 21.11.2016, have not been disputed. The Insurer stated that “Marine Hull Insurance Policy” No.21891157 was subject to clauses (i) Institute Time Clauses (Hull); (ii) Cancellation Return Only; (iii) No Lay Up Return; (iv) Premium Instalment Clause; (v) Institute Radioactive Contamination and Chemical Biological and Electromagnetic weapon exclusion Clause; (vi) Classification and Maintenance of Class Clause; (vii) Class Warranty dated 29.06.1989; (viii) Warranted satisfactory condition cum valuation report by duly qualified Hull Surveyor; and (ix) Trading Warranty-Institute Warranties dated 01.07.1976 but Trading limited to East and West Coast of India. The policy contained an express warranty as “warranted satisfactory condition cum valuation report by duly qualified Hull Surveyor. But at the time of obtaining policy, the Insured supplied Valuation Report dated 26.09.2014, issued by Yardi Prabhu Consultants & Valuer, which was based upon report of Mr. S.K. Gupte, the surveyor, who were not a “Hull Surveyor” and the Insured has committed breach of warranty. The Insured did not supply Marine Casualty Report dated 24.06.2015 prepared Mercantile Marine Department and Weather Signals to the surveyor. Therefore, the Insurer collected these documents and found that Gujarat Maritime Board, Weather Met Centre, Porbandar vide Circular dated 07.06.2015, displayed warning signal No.2, alerting all port users, fishermen, boats, vessels owners that cyclone storm by the name “Ashoba” had evolved at location North 17.9 longitude and East 67.2 E Longitude. The loaded vessel “Coastal Pride” started its voyage on 20.06.2015 from the port of Porbandar to the port of Mumbai. The Master and the Manager of the vessel did not exercise due diligence in taking stock of the adverse weather reports before its departure. Regional Metrological Centre, India Metrological Department, Mumbai gave weather reports on 22.06.2015 and 23.06.2015 that sea weather condition near latitude 20 deg North longitude 67 deg East longitude about 320 km southwest of Porbandar was ‘rough to very rough”. In intervening night of 22/23.06.2015, the insured vessel faced adverse weather condition and perilous sea, because of which the vessel capsized (overturned). The weather was so rough that even dropping of harbour anchor and shafts could not stabilize the vessel. Although Navtex system was installed in the vessel for regular updates of the weather conditions and forewarning signal but the Master of the vessel had no knowledge to use it as such he could not notice perilous condition, in spite of reports on 22.06.2015 and 23.06.2015 by Regional Metrological Centre, Mumbai. Due to which, the vessel proceeded straight into the centre of depression. The Master admitted this fact before Inquiry Officer of Mercantile Marine Department, Mumbai, as mentioned in the Inquiry Report dated 24.06.2015, which was a statutory inquiry. Although the vessel was on long journey but sufficient stock of diesel had been preserved in ‘Port Fuel Tank’. When the diesel of ‘Service Fuel Tank’ was contaminated with water then due to insufficient diesel in ‘Port Fuel Tank’, main engines could not be started and after some time auxiliary engine was also stopped. Total time of the journey in calm sea was of 2.5 to 3 days. Per day consumption of the diesel was 2 MT, while total diesel in the vessel on start of journey was 9.1 MT, which was a lack of exercise of due diligence. The Master informed the owner/manager of the vessel about failure of two main engines in morning of 23.06.2015. The owner/manager could not arrange for a Tug for more than 24 hours and failed to take reasonable step to minimise the loss. Inquiry Report dated 24.06.2015 noted that thickness of air vent pipe and strength of weld and supporting brackets may have become weal due to which air vent pipes of 3P and 4P ballast tanks were sheared off. After examining Final Survey Report dated 02.12.2015, Inquiry Report dated 24.06.2015 and other documents, the competent authority of the Insurer, vide letter dated 19.03.2016, called for various papers/explanations from the Insured. The Insured, vide letter dated 12.04.2016 and 02.06.2016 submitted its reply. The competent authority, in the repudiation letter dated 03.10.2016, found that as per Inquiry Report dated 24.06.2015, this was first posting of the Master on such type of vessel and he was not aware to handle the navigational equipment like Navtex, due to which nobody could contact any coast station for weather report through Navtex, which implies that the vessel was not properly manned. The vessel proceeded straight into the centre of depression as neither the Master could notice weather condition and warning due to lack of knowledge to use Navtex nor the owner/manager informed to the Master in this respect. The manager/Master did not exercise due diligence and proceeded to a long journey without storing sufficient diesel into ‘Port Fuel Tank’. The owner/manager was informed about failure of main engines and insufficient diesel to run main engines in morning of 23.06.2015 but they could not arrange for a Tug for more than 24 hours and failed to take reasonable step to avoid the loss. At the time of obtaining policy, the Insured supplied Valuation Report dated 26.09.2014, issued by Yardi Prabhu Consultants & Valuer, which was based upon report of Mr. S.K. Gupte, the surveyor, who were not a “Hull Surveyor” and the Insured has committed breach of warranty. After rescue to 14 crews of the vessel, a preliminary report was prepared by Coastguard Daman, in which, names of 14 crew persons were noted but the name of Merrick Augustine De Silva, Chief Engineer was not noted in it, which shows doubt of his presence in the vessel during voyage. On these grounds, the claim was repudiated. There is no deficiency on the part of the Insurer.

The Insured filed Rejoinder Reply, Affidavits of Evidence of Hemant Mali and various documentary evidence. The Insurer filed Affidavit of Evidence of Navneet Singh Bawa and Joint Affidavit of Evidence of Kushal Roy and Capt. Collin Lopes and documentary evidence. The Insured, through IA/2074/2019, filed Affidavit of Evidence of Surinder Singh Kailey, along with his testimonials and through IA/19238/2019, filed Counter Affidavit of Evidence of Hemant Mali annexing Interim Certificate of Class issued by Indian Register of Shipping relating to the vessel “Coastal Pride”. The Insured, through IA/1923/2020, served interrogatories to be answered by Navneet Singh Bawa, Kunal Roy and Capt. Colin Lopes, the witnesses of the Insurer. Navneet Singh Bawa, Kunal Roy and Capt. Colin Lopes, the witnesses of the Insurer answered the interrogatories on Affidavits and filed it on 06.05.2022. Both the parties have filed their written synopsis.

We have considered the arguments of the counsel for the parties and examined the record. The policy contained an express warranty as “warranted satisfactory condition cum valuation report by duly qualified Hull Surveyor. The Insurer, in repudiation letter dated 03.10.2016, found  breach of warranty. In Final Survey Report dated 02.12.2015, the surveyor noted that the Insured had supplied Valuation Report dated 26.09.2014, issued by Yardi Prabhu Consultants & Valuer, which was based upon report of Mr. S.K. Gupte, the surveyor, who were not a “Hull Surveyor” and the Insurer was advised to examine warranty. The Valuation Report dated 26.09.2014 was obtained by Indian Overseas Bank, Vashi Branch and was supplied to the surveyor for the purposes of assessment of loss. The Insured did not dispute Valuation Report dated 26.09.2014 but along with Counter Affidavit of Evidence of Hemant Mali has filed Interim Certificate of Class issued by Indian Register of Shipping relating to the vessel “Coastal Pride” dated 13.05.2015, showing that the vessel had been surveyed on 13.05.2015 by Society’s Surveyors as “Special Survey Hull” and “Special Survey Machinery”, which was a qualified “Hull Surveyor”.  As such on 24.06.2015, there was survey report of duly licensed “Hull Surveyor”. The Insurer did not rebut/controvert this Interim Certificate of Class dated 13.05.2015. As such there was no breach of warranty.

Relying upon Inquiry Report dated 24.06.2015 of Mercantile Marine Department, Mumbai, the Insurer, in repudiation letter dated  03.10.2016, found that this was first posting of the Master on this type of vessel, which implies that the vessel was not properly manned, which proved disastrous, resulting into total loss. In Final Survey Report dated 02.12.2015, the surveyor found that the vessel was adequately manned and crew were trained/qualified as per the STCW 95 Code. Commodore Surinder Singh Kailey, the Master of the vessel, filed his Affidavit of Evidence of along with his testimonials. He stated that he was very much familiar with the operation of Navtex and had been formally trained in theory and practical to use the same and had certificate GMDSS. He in his affidavit has stated that it is true that he had not handled a small coasting vessel like “Coastal Pride” prior to his posting on this vessel but he had previously handled more sophisticated vessel. He was fully competent to handle the “Coastal Pride”. The surveyor was fully satisfied with his qualification and experience. There was no reason to take contrary view ignoring testimonials of the Master.

Relying upon Inquiry Report dated 24.06.2015 of Mercantile Marine Department, Mumbai, the Insurer, in repudiation letter dated  03.10.2016, found that due diligence was not observed regarding safety of the voyage and the master/crew were not properly instructed to take the weather forecast from Navtex or any other reliable sources. In Final Survey Report dated 02.12.2015, the surveyor found that on the night of 22/23.06.2015, the vessel encountered with very heavy weather condition, which caused shearing of the air vent pipes of “Water Ballast Tank” 3P & 4S on the main deck, resulting in water ingress in Port side Ballast Tank, causing vessel to list heavily to port. The proximate cause of loss to the vessel may thus reasonably attributed to heavy weather. The Insurer relied upon Circular dated 07.06.2015, issued by Gujarat Maritime Board, Weather Met Centre, Porbandar displaying warning signal No.2, alerting all port users, fishermen, boats, vessels owners that cyclone storm by the name “Ashoba” had evolved at location North 17.9 longitude and East 67.2 E Longitude and Weather Reports dated 22.06.2015 and 23.06.2015, issued by Regional Metrological Centre, India Metrological Department, Mumbai, showing that sea weather condition near latitude 20 deg North longitude 67 deg East longitude about 320 km southwest of Porbandar was ‘rough to very rough”. The Insurer filed Annexure-R-3 as Weather Forecast from 19.06.2015 to 24.06.2015, at Porbandar port. “Weather warning” for all the 5 days were Nil. Hemant Mali in his Counter Affidavit of Evidence has stated that the vessel “Coastal Pride” was a sea going vessel, designed to withstand bad weather conditions. Weather warning as issued by Gujarat Maritime Board, Weather Met Centre, Porbandar dated 07.06.2015 was in respect of port craft and fishing vessels. So far as Weather Reports dated 22.06.2015 and 23.06.2015, issued by Regional Metrological Centre, India Metrological Department, Mumbai, are concerned, at that time, the vessel was sailed out for two days after its departure. There was no justifiable reason for the Insurer to ignore Final Survey Report dated 02.12.2015. Under Section 41 of the Marine Insurance Act, 1963, sea worthiness has to be examined at the time of commencement of the voyage and not after 2 days of voyage.

In repudiation letter dated 03.10.2016, the Insurer found that the best preventive measure any vessel can take against heavy weather is to slow down and alter to more favourable course. However the manager, master & crew had not acted prudently. In the Inquiry Report dated 24.06.2015, it has been found that after stopping of main engines, the vessel started drifting in NE direction and gradually towards coast. The port anchor was dropped with 5 shackles in the water at approximately position 10 MM South West Umargaon. Initially the vessel stabled in her position but due to inclement weather, she started dragging. Due to deteriorated weather ship crew were unable to go forward for paying more cable or dropping starboard anchor. The Insurer has not pointed out any alternate course. The surveyor has accepted the affidavits filed by the Insurer on 29.06.2015 and 30.06.2015. There was no reason/evidence for the Insurer to record contrary findings.

The finding that although the vessel was on long journey but sufficient stock of diesel had been preserved in ‘Port Fuel Tank’. When the diesel of ‘Service Fuel Tank’ was contaminated with water then due to insufficient diesel in ‘Port Fuel Tank’, main engines could not be started and after some time auxiliary engine was also stopped. Total time of the journey in calm sea was of 2.5 to 3 days. Per day consumption of the diesel was 2 MT, while total diesel in the vessel on start of journey was 9.1 MT. Thus as against total consumption of maximum 6 MT, there was 9.1 MT diesel in the vessel. It cannot be said that there was insufficient stock of the diesel or there was a lack of exercise of due diligence. Navneet Singh Bawa avoided to answer various questions put in inventory.

In repudiation letter dated  03.10.2016, the Insurer found that although the owner/manager were informed in morning of 23.06.2015 about the condition of the vessel but they failed to arrange Tug for more than 24 hours and failed to provide timely assistance to the vessel. The Insured has stated that he contacted Mr. Narayanan of M/s. KNK Shipping, Mumbai for a Tug, who reverted with a quote of Rs.30/- lacs, for Tug at about 11:45 hours on 23.06.2015. The Insured approved it and paid Rs.15/- lacs to Mr. Nagesh Bhode of M/s. Innovative Maritime Solution Pvt. Ltd., Mumbai, for the Tug, who confirmed that Tug would depart at 17:30 on 23.06.2015, for the place, where the ship was anchored. Around 20:30 hours, Gajendra Mishra, the owner of the Tug, informed that the Master of the Tug was not available and expressed his inability to depart the Tug. Around midnight of 23/24.06.2015, he informed that the Master of the Tug has come and boarded the Tug but due to Weather Warning Signal hoisted in the port of Mumbai, he did not depart. The Insurer has filed Weather Report dated 22.06.2015 and 23.06.2015 as Annexure-R-5, showing that weather conditions for both the days were rough to rough. If in this weather condition the Master of the Tug did not depart the Tug, then blaming the owner/manager that they could not arrange for Tug, is not proper.

In repudiation letter dated  03.10.2016, the Insurer found that in Preliminary Report of Coastguard Daman, name of Chief Engineer has not been mentioned as such his presence  on the vessel was doubtful. Additional Affidavit of Surinder Singh Kailey and Merrick Augustine De Silva, Chief Engineer dated 30.06.2015 has been filed before the Insurer/surveyor, in proof of present of Chief Engineer. The Insurer has not produced Preliminary Report of Coastguard Daman to contradict the presence of Chief Engineer on the vessel.

The opposite party himself relied upon judgment of Supreme Court in Khatema Fibres Limited Vs. New India Assurance Company Limited, 2021 SCC OnLine SC 818, in which it has been held that once it is found that there was no inadequacy in the quality, nature and manner of performance of the duties and responsibilities of the surveyor, in a manner prescribed by the Regulations as to their code of conduct and once it is found that the report is not based on adhocism or vitiated by arbitrariness, then it cannot be ignored. There was no ground to ignore Final Survey Report dated 02.12.2015 and rely upon Inquiry Report dated 24.06.2015. Repudiation of the claim vide letter dated 03.10.2016 was illegal and amount to deficiency in service. The surveyor assessed the loss to Rs.4/- crores. Rs.1500000/- is deductible under the policy. The Insured is entitled to Rs.38500000/-.

ORDER

In view of the aforesaid discussion, the complaint is partly allowed. Repudiation letter dated 03.10.2016 is set aside. The opposite party is directed to pay Rs.38500000/- with interest @ 9% per annum from July 2015 till the date of payment, within a period of two months.