New India Assurance Co. Ltd vs Necter Lifesciences Limited & Anr

Sudip Ahluwalia, Member

This Appeal has been filed by the New India Assurance Co. Ltd. against the impugned Order dated 02.06.2017 passed by the State Consumer Disputes Redressal Commission, Punjab in Complaint No. 296 of 2016, vide which the Consumer Complaint No. 296 of 2016 was allowed in favour of the Complainant/ Respondent.

The underlying facts involve the Complainant - Necter Lifesciences Ltd. The complainant company is engaged in pharmaceutical product preparation and supply. They received an order for 18,000 Kgs of Menthol Crystal USP, valued at USD 3,03,300, destined for Hawley & Hazel Chemical Company (HK) Ltd. in Hong Kong. The shipment was insured under Open Marine Turnover Policy No. 36100/21/13/05/ 00000001/ CERTIFICATE NO. 2013/NLL/1432 with the Appellant- Insurance Company. The Complainant prepared the consignment, consisting of 720 fiber drums weighing 20,754 Kgs, which were packed and loaded into a 1x40 feet HC Container at ICD, New Delhi. Subsequently, the container was shipped on the vessel ‘Northern Guard’ V.0036 from Pipavav. Unfortunately, while enroute to Hong Kong, the vessel experienced an explosion off Mumbai's West Coast on 06.04.2014, leading to damage to containers, including the complainant's shipment. The vessel was diverted to Mumbai for cargo operations. The consignment remained at the Mumbai port until 26.08.2014 due to fire outbreak. It was later transported on the vessel ‘Hoechst Express’, reaching Hong Kong on 04.09.2014. Customs procedures were completed, and on 08.09.2014, the container was delivered to the consignee. An inspection revealed damage to the contents in the drums on the 3rd and 4th tiers, affecting a total of 190 drums. The menthol within these drums had melted and solidified, causing loss to the consignment. On 05.09.2014, the consignee applied for a survey by ‘Intertek Testing Services Hong Kong Ltd.’, whose report on 03.11.2014 deemed the claim fair and reasonable. The Complainant served the insurance company with a claim, but it was repudiated on 22.09.2015, attributing the damage to a covered delay, as per WK Webster (International) Pte. Ltd.'s settling agents' report. Despite a Legal Notice on 05.10.2015, the Insurance Company did not approve the claim. Dissatisfied with the repudiation, the complaint was filed with the Ld. State Commission, Punjab.

The Ld. State Commission vide the impugned Order dated 02.06.2017 allowed the Complaint. The relevant extracts of the impugned Order are set out as below –

“10. It was argued by the counsel for the Ops that the goods were received by the consignee and payment was received by the complainant from the consignee then how he has a locus-standi to file this complaint. Consignee received the goods in short as is clear from the facts of the case. Ops have not placed on the record any document that the complainant has received the full payment from the consignee, otherwise, the policy was taken by the complainant and then he has a right to file the complaint. Since the consignee will not make the full payment as the goods received are in short, therefore, it cannot be said that the complaint on behalf of the complainant is not maintainable.

Another point is that the complainant has lodged the claim for a full amount of USD 80,037.50 whereas the excess Clause has not been taken care while deciding the claim. Excess clause is required to be reduced, which is equivalent to USD 1668.15, therefore, the payable claim is USD 78,369.35.

No other point was argued.

In view of the above, we accept the complaint and direct Op Nos. 1 to 4 as under:-

(i) pay to the complainant USD 78,369.35 or equivalent amount in INR all as on 22.9.2015;

(ii) pay interest @ 9% p.a. on the amount calculated in Clause No. 1 from 22.9.2015 till the date of payment; and

(iii) pay Rs. 1 Lac on account of compensation for harassment and litigation expenses.

The abovesaid directions be complied within 45 days from the receipt of a certified copy of the order...”

Aggrieved by the Order of the Ld. State Commission, the present Appeal has been filed, raising the following issues –

a. That the State Commission erred in not appreciating the terms and conditions of the Marine Cargo Insurance Policy which was subject to the condition that the validity of the consignment was 60 days from the date of dispatch or date on which the consignment is received by the buyer/consignee whichever is less;

b. That the State Commission erred in not appreciating that as per the Surveyor who conducted the survey on 08.09.2014 and submitted his report on 03.11.2014, it was reported that the proximate cause of damage was delay which as per terms and conditions of the Insurance Policy, the damage caused due to delay was not covered under it. Therefore, the repudiation was just and legal;

c. That the State Commission failed to appreciate that the material may be having a shelf life of 5 years, but that is only under defined storage condition. In the present case, the consignment was exposed to the higher degrees of temperature for prolonged period, which caused the damage to the insured goods. The boxes which were on the top got damaged and the remaining which were not exposed to high temperature were not damaged. In case of fire damaging the consignment, all the drums ought to have damaged, thus the repudiation of the claim of by the Respondent is correct.

Ld. Counsel for the Appellant has argued that the Appellant had issued the Marine Cargo Annual Turn Over Policy to the Complainant, subject to ICC-A, War and SRCC; ITC-A and SRCC; ICC-Air and War and SRCC, ITC-A and ICC-A. It was subject to the condition that the validity of the consignment was 60 days from the date of dispatch or the date on which the consignment is received by the buyer/consignee, whichever is less; That in the present case, the consignment was sent to Hong Kong, as per Clause ICC-A and was subject to cost insurance and freight charges. The consignment was sent on 06.04.2014 and on the very next day, the fire was noticed in the ship in Sri Lanka and the consignment was sent back to Port of Distress at Mumbai. As no damage was observed to the consignment, therefore the Captain of the Ship did not issue any damage certificate; That the Appellant after scrutinizing the case file and particularly the survey report of M/s WK Webster (International) Pvt. Ltd. came to the conclusion that the claim lodged by the Complainant was outside the scope of the Insurance Policy’s terms and conditions and therefore the Appellant repudiated the claim vide letter dated 22.09.2015; That the loss was due to the container being offloaded from the vessel ‘Northern Guard’ and being kept in storage in India for about 4 months, i.e. from April 2014 to August 2014, when the average monthly temperature was about 32 Degrees Celsius. It was due to the prolonged storage at higher temperatures because of which the consignment was damaged at the top tiers of the container and not at the bottom tiers; That the report of the Surveyor is an important document and its findings have to be relied upon unless it is controverted or contradicted by evidence challenging the same or by contradicting by more credible evidence.

Ld. Counsel for Respondent No. 1 has argued that the Appellant repudiated the claim on the ground that the proximate cause of damage was delay. The cargo was insured under ICC(A) terms and was allegedly covered under exclusion Clause 4.5. However, under Marine Insurance Act, 1963, Section 50 deals with delay in voyage and Section 51 deals with excuse for deviation or delay; Clause (b) of Section 51(1) reveals that where delay caused by circumstances beyond the control of the master and his employer then deviation of delay in prosecuting the voyage contemplated by the Policy is excused; That there is no evidence on behalf of the Appellant that the ship was available and there was intentional delay on the part of the Complainant, otherwise, once the goods have been booked with the Transport Company, i.e. through voyage, then it depends upon the booking company on how to arrange an alternative. When the goods reached at destination, immediately a Surveyor was appointed. The consignee had not refused all the goods, and whatever goods were in intact condition were accepted by the consignee and this fact has been corroborated by the Surveyor as well; That since the incident of fire occurred, there is possibility that the goods got melted in the fire incident; Therefore, there is nothing on record that the delay was due to any fault on the part of the Complainant, and if any, is duly covered subject to Clause (b) of Section 51(1) of the Marine Insurance Act, 1963.

This Commission has heard the Ld. Counsel for both the Appellant and the Respondent No. 1, and perused the material available on record.

The Appellant/Insurance Company had repudiated the Insurance Claim by invoking Clause 4.5 of the Insurance Policy which is set out as below –

“4.5- General Exclusion Clause – In no case shall this insurance cover loss of/ damage or expense proximately caused by delay, even though the delay be caused by a risk insured against.”

Admittedly, the consignment reached the destination in Hong Kong on 4.9.2014 which was 5 months after it had been shipped on the vessel ‘Northern Guard’. Undoubtedly, there was a delay and for that reason the Insurance Company invoked the aforesaid General Exclusion Clause 4.5 in repudiating the Insurance Claim.

However, the Ld. State Commission was not convinced with such justification for the repudiation, in the given facts and circumstances of the case. It considered the relevant Sections 50 and 51 of the Marine Insurance Act, 1963 and applied the same to the facts and circumstances of the present case. These two Sections of the Marine Insurance Act are set out as below –

“50. Delay in voyage – In the case of a voyage policy, the adventure insured must be prosecuted throughout its course with reasonable dispatch, and, if without lawful excuse it is not so prosecuted, the insurer is discharged from liability as from the time when the delay became unreasonable.

Excuse for deviation or delay – (1) Deviation or delay in prosecuting the voyage contemplated by the Policy is excused –

(a) where authorised by any special term in the policy; or

(b) where caused by circumstances beyond the control of the master and his employer; or

(c ) where reasonably necessary in order to comply with an express or implied warranty; or

(d) where reasonably necessary for the safety of the ship or subject-matter insured; or

(e ) for the purpose of saving human life or aiding a ship in distress where human life may be in danger; or

(f) where reasonably necessary for the purpose of obtaining medical or surgical aid for any person on board the ship; or

(g) where caused by the barratrous conduct of the master or crew, if barratry be one of the perils insured against.

(2) Where the cause excusing the deviation or delay ceased to operate, the ship must resume her course, and prosecute her voyage, with reasonable dispatch.”

Now, it is undeniable that the vessel ‘Northern Guard’ had caught fire near Colombo, Sri Lanka on account of which it had to be taken to its place of refuge at Mumbai, and the consignment was off-loaded there, till it was reloaded on 26.8.2014. As seen from Section 51 (2) of the Marine Insurance Act, 1963, as re-produced above, it was incumbent upon the said vessel to resume its course once the reason for deviation or delay had ceased to operate within a reasonable time. Admittedly, the Complainant/Consignor was not responsible for the delay occasioned since the vessel in question on which the cargo was loaded had caught fire while at Sea, which was certainly beyond the control of the Complainant. The vessel was then sent to its place of refuge at Mumbai. It is also undisputed that the cargo was ultimately loaded on a different vessel ‘Hoechst Express’ on 26.8.2014. Although according to Section 51 (2) of the Marine Insurance Act, 1963, the original vessel “Northern Guard’ ought to have resumed her course and prosecute her voyage. But in the present case, there was no evidence to show when the said vessel had become sea-worthy again after the fire incident. The cargo was no longer in the own control of the Complainant once the consignment had been made over to the concerned Shipping Company. Had the Appellant/Opposite Party been able to lead any evidence that the vessel ‘Northern Guard’ had become sea-worthy on any given date, or had sailed again on any given date, before the consignment was loaded on a different vessel, repudiation of the claim on the ground of delay would have appeared logical or justified. But no such evidence actually was forthcoming in the case. On the other hand, the fact that the consignment was loaded on an entirely different vessel would rather go to indicate that the original vessel could not be repaired or made seaworthy after the fire incident for atleast the following 4-5 months, on account of which the consignment had to be loaded on a different vessel for delivery at its destination in Hong Kong, In this view of the matter where the delay was caused on account of fire breaking out in the vessel in which the cargo was loaded, and/was beyond the control of the Consignor/Complainant, and there was no evidence to show that the same should have been despatched to the destination by any other means, the delay/deviation in the voyage, would be excused by virtue of the Section 51 (1) (b) of the Marine Insurance Act, 1963, and repudiation of the Claim on the ground of delay, which in the given facts and circumstances was in violation of the aforesaid statutory position of law, was not justified. Even otherwise the fact that only some part of the entire consignment was found to have melted/damaged on account of heat would also go to indicate that the same could as well have been due to proximity of the fire in the concerned vessel at the relevant time.

For the aforesaid reasons, this Commission finds no grounds to interfere with the well-reasoned decision of the Ld. State Commission. Appeal is, therefore, dismissed. Parties to bear their own costs.

Pending application(s), if any, also stand disposed off as having been rendered infructuous.