Orchid Impex & Anr vs United India Insurance Company Ltd

Heard Mr. Shiddharth Nath, Advocate, for the complainants and Mr. Amit Kumar Singh, Advocate, for the opposite party.

Orchid Impex (the Insured) and Central Forex General Trading have filed above complaint for directing United India Insurance Company Limited (the Insurer) to pay (i) Rs.23601447/-, with interest @12% per annum from 25.07.2013 till the date of payment, as insurance claim; (ii) costs of litigation; and (iii) any other relief which is deemed fit and proper, in the facts and circumstances of the case.

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

(a)  Orchid Impex (the Insured) was a partnership firm and engaged in export-import business. Central Forex General Trading (complainant-2) was an U.A.E. based a “single share-holder limited liability company” and engaged in export-import business. Through a sale contract dated 02.02.2013, Central Forex General Trading (complainant-2) purchased 1000 MTs ‘best quality parboiled non-basmati rice’ from Orchid Impex (the Insured). Modes of payment were 20% in advance and balance against document. The Insured had to transport rice from Raipur to Adani Sea Port, Mundra, by rail/road and from Mundra Port to Salalah Port, Somalia through voyage. Central Forex General Trading booked the vessel and nominated the vessel MSY “AMRUTA”, belonging to M/s. Euro Arian Shipping Company, Porbandar, for voyage from Mundra Port to Salalah Port. From where it had to be transported to Mogadishu, Somalia by Central Forex General Trading. The Insured purchased 1000 MTs ‘best quality parboiled non-basmati rice’ through broker at Raipur, packed in 40000 bags (25 kg. each) and prepared its Invoice dated 15.02.2013.

(b)  United India Insurance Company Limited (the insurer) was a public insurance company and engaged in the business of providing insurance services. The Insured obtained “Marine Cargo Specific Voyage Policy No.066200/21/12/01/00000633, for one voyage after 20 hours from 20.02.2013, for a sum of Rs.25542000/-, of 1000 MTs ‘best quality parboiled non-basmati rice’ packed in 40000 bags (25 kg. each), from Raipur to Adani Port Mundra and from Adani Port Mundra to Salalah Port, Somalia, on 20.02.2013.

(c)  The Insured’s Clearing Agent “M/s. Cargo Corporation, Mundra” completed all the export formalities. Loading of rice bags in vessel was started on 20.02.2013 and completed on 26.02.2013. By that time total 36961 bags of rice were loaded as remaining 3039 bags would take time in transporting from Raipur to Mundra, as such loading was closed, as it would delay the voyage. The vessel was sailed from Adani Port, Mundra on 27.02.2013 at 14:00 hours for Salalah, Somalia. However, the vessel grounded at about 14:45 hours on 27.02.2013 at a short distance from Adani Port en-route. M/s. Omkar Shipping, Mundra, the shipping agent informed “AMRUTA’ about the incident. They tried to salvage the vessel but could not succeed.

(d)  M/s. Omkar Shipping informed the Insured on 28.02.2013 at 1:00 hours that the vessel was grounded and sustained heavy damage from bottom and at high tide the water had ingressed into the vessel up to deck level and they were trying to pump out. M/s. Omkar Shipping informed the Insured on 28.02.2013 in morning that they had decided to jettison the cargo from the vessel. The shipping agent also informed Adani Port Authority through Clearing Agent for help in saving the remaining cargo. M/s. Euro Arian Shipping Company, Porbandar attended the vessel and informed the Insured in morning on 28.02.2013 that there was no option except to jettison the cargo.

(e)  The Insured informed on 28.02.2013 through e-mail about the incident and thereafter by letter dated 01.03.2013 about the grounding of the vessel and loss, to the Insurer. The Insurer appointed J.B. Boda Surveyor Pvt. Ltd., Mumbai on 07.03.2013 as the surveyor for survey and assessment of the loss. The surveyor after survey submitted final report on 21.06.2013, in which, he has verified the loss. He has mentioned that cause of loss was due to jettisoning of cargo to lighten the vessel, to enable the vessel to be re-floated. The vessel grounded due to error/misjudgement in navigation which in turn was caused by the frequent shifting of navigable channel for sailing basis. The dredged material is often dumped in the port area instead of being dumped for away at sea in safe/nominated dumping change, thus, changing of topography of sea water. In respect of loss minimizing, the surveyor found that the owner of the cargo had taken all possible steps for minimizing the loss but could not succeed as the deck was breaking up. The dump rice would be purified and contaminated.

(f)   After receiving the survey report, the Insurer through insurance broker asked the Insured to submit the claim form. The Insured submitted the claim form through M/s. Skyline Assurance, Rajkot on 27.07.2013 claiming loss of Rs.23601447/-. Later on, Divisional Office of the Insured required the Insurer to submit the original papers. The Insured submitted the original papers on 07.08.2013 to Divisional Office. The Insured also submitted the letter dated 16.08.2013 written by M/s. Euro Arian Shipping Company, explaining the circumstances in which the vessel was grounded as well as other documents related to the vessel. The Insured received a letter dated 01.02.2014 from M/s.J. Basheer & Associates Pvt. Ltd. making certain queries from the Insured, which were replied.

(g)  Thereafter matter was examined by the competent authority of the Insurer who by letter dated 04.07.2014 repudiated the claim on the ground that the policy was subject to “Institute Classification Clause” with deletion of held cover provision. The policy, therefore, covered only carriage by classed vessel of the nature contemplated by the said clause. In view of the deletion of held covered provision, there was no scope for covering carriage by any other vessel. In any event, no intimation prior to loading of the vessel was given. The endorsement for incorporating B/L details in the policy, was innocuously sought on 28.02.2013 at 12:25 hours, which was issued in good faith subject to terms and conditions of the policy. Vessel did not comply with the “Institute Classification Clause”, therefore, the loss was not payable.

(h)  The Insured gave a representation dated 18.12.2014 to Managing Director of the Insurer explaining all the circumstances. In April, 2015, the Insurer agreed to re-open the investigation and appointed J. Basheer, surveyor to re-examine the claim in the light of the reply of the Insured dated 18.12.2014, but nothing was done.  Then, this complainant was filed on 08.07.2016.

The opposite party filed its written reply on 08.12.2016 and contested the matter. The opposite party stated that the Court in India have no jurisdiction to try the present complaint inasmuch as contract of insurance is subject to English Law as provided in clause 19 of the Institute Cargo Clause. Sale Contract has certain abbreviated trade terms and are basis of sale price, described the responsibility of buyer and seller. This term stipulates matter such as the time and place of delivery payment, when the risk in cargo shifts from seller to buyer, who pays the costs of freight who is responsible to take insurance. These terms are referred as International Commercial Terms (incoterms) which are published by International Chamber of Commerce. Incoterms are used as standard sets of terms and conditions in contract of sale/trade. Incoterms assist by specifying the obligations of each party in regards to transport, export clearance, the physical point where risk transfer from seller to buyer and many more.  The consignment was exported on FOB (Free On Board) basis, therefore, the Insured had no insurable interest on the date of loss.  Under FOB contract, the moment the bill of lading is issued, the ownership of cargo transfers to consignee or buyer. The cargo which was being exported under CFR basis, the seller must deliver the goods, for export on board the transport vessel and transport to the named port. The risk of loss or damage is transferred to the buyer once the goods are loaded on board under CFR contract. The responsibility of arranging insurance for main ocean transit shall be that of buyer. From this, it is clear that the seller has no responsibility for any loss caused to the goods and not responsible for insuring of goods beyond placing on board. Further as per the invoice dated 15.02.2013, payment towards consignment was to be made in advance. As per payment clause of the sale agreement, 20% advance and balance against documents were required to be paid by the seller. The lading vessel was complete on 26.02.2013 and documentation was completed on 27.02.2013. The seller liabilities ceased from that time onwards. The liability of the goods shifted from the buyer to the seller, at the same time insurable interest ceased with the Insured. The policy was void on the ground of non-disclosure of material fact. The bill of lading dated 27.02.2013 mentioned the discharge port as Salalah, however, it was declared to the opposite party that the consignment being sent to Mogadishu, Somalia. There was no declaration to the underwriter with regard to mode of conveyance from Salalah to Mogadishu, Somalia. Mechanised Sailing Vessels are banned by the Director General Shipping beyond Salalah, Oman Coast due to piracy problem in Somalia and therefore, there was sanction clause in the policy in question. On account of incorrect declaration on the part of the complainant, the present complaint is liable to be dismissed. Mala fide intention of Insured to commit fraud in obtaining marine insurance is abundantly clear. The insurance was taken on 20.02.2013 from Raipur to Salalah Port Somalia although at that time the consignment reached to Adani Port as lading 36961 bags had completed on 26.02.2013. The distance between Raipur and Mundra is approximately 1500 kms. Usually loaded trucks take at least five days’ time in completing the journey. The name of vessel was not declared although hiring agreement was entered on 15.01.2013 and shipping bill was issued on 15.02.2013. The name of cargo was declared on 28.02.2013 for first time after its grounding, therefore, endorsement No.82000262 dated 28.02.2013 was obtained after grounding the vessel. Purpose of Classification Society is to provide classification and statutory services and assistance to the maritime industries and regulatory body as regards maritime safety and pollution, prevention, based on the accumulation maritime knowledge and technology regulations on behalf of flag administration. The objective of ship classification to verify the structural strength and integrity of essential parts of the ship’s hull and its appendages, and the reliability and function of the propulsion and steering systems, power generation and other features and auxiliary system which have been built in the ship in order to maintain essential  services on board. The Classification Societies aim to achieve the objective through the development and application of their own rules and by verifying the compliance with international or National statutory regulations on behalf of flag industries. The vast majority of commercial ships are built for surveying for compliance with the standards laid down by Classification Societies. These standards are issued by the society as published Rules. A vessel that has been designed and built to the appropriate rules of the Society may apply for certificate of classification from that society. The role of classification and classification societies has been recognized in International Convention for Safety of Life at Sea in 1988 protocol to the International Convention on load lines. The classification of a vessel is based with understanding that the vessel is loaded, operated and maintained in a proper manner by competent and qualified crew or operating personnel. The vessel may be maintained the class provided that in the opinion of the society concerned, it remains in compliance with the relevant rules as certain period or non-period surveying classification societies are of simply referred to as “Class Societies” or just “Class”. Non-disclosure the name and class of the vessel renders the policy void. Due to error in judgment of the tindel the vessel has grounded off Adani Port at 14:45 hours. The vessel has been reported to have used the pilot service while entering the port, followed prescribed rules. However, outgoing use of pilot and its memo is not on record. It is deliberately brought forth inasmuch as the same would establish negligence on the part of the tindel substantiated the incident and its gravity. The Insured was informed on 28.02.2013 when the jettisoning of cargo was started. At that time the vessel was just 900 meters from the shore and if the complainants were diligent, they could have saved the large amount of bags. The vessel was alflot till the end and there was no substantial ingress of water. The hull surveyor visited the vessel on 08.03.2013. The vessel has been inspected in float condition. The complainants did not take proper steps to minimise the loss. There was no deficiency in service on the part of the Insurer.

The complainants filed Affidavit of Evidence of Digant Joshi.  The opposite party filed Affidavit of Evidence of Ramesh Kumar. The complainants also filed documentary evidence with affidavit on 26.03.2017, annexing copy of Investigation Report of J. Basheer & Associated, Mumbai dated 02.11.2015, in which he found that loss was accidental and the Insurer is liable to reimburse the loss.  Both the parties have filed their short synopsis arguments.

We have considered the arguments of the counsel for the parties and examined the record. Supreme Court in Galada Power and Telecommunication Ltd. Vs. United Insurance Company Ltd., (2016) 14 SCC 161 and Saurashtra Chemical Ltd. Vs. National Insurance Company Limited, (2019) 19 SCC 70, held that the ground other than assigned in the repudiation letter, cannot be allowed to be raised in the court. Repudiation letter assigned grounds (i) violation of “Institute of Classification Clause” and (ii) sale contract was on FOB basis as such the title of the consignment was passed to the buyer upon loading of the cargo on the vessel.

In the proposal form for insurance, the Insured has mentioned MSV i.e Mechanised Sailing Vessel. In the Insurance policy, mode of transit has been mentioned as “country craft”. Along with the complaint, the Insured has filed Certificate of Registration of a Sailing Vessel, MSV “AMRUTA”, issued by Government of India, Certificate of Inspection of a Sailing Vessel, and Supplement to Certificate of Inspection of a Sailing Vessel issued by Registrar of Sailing Vessels, which was valid on the date of incident. The policy document does not contain “Institute Classification Clause with deletion of held cover provision”, although it was mentioned as Terms of Insurance cover. The complainants have stated that Mechanised Sailing Vessel have never any Classification Society Certificate. Mechanised Sailing Vessels are used for voyage under standard practice of trade. Although these facts have been denied by the Insurer but it is proved from Insurance Proposal Form filed (on pg.20 of the complaint) and Insurance Policy (pg.22 of the complaint). Insurance Policy was issued taking notice of mode of transit as “country craft” as such the Insurer cannot be permitted to say that “Institute Classification Clause” was violated. Particularly when the Insurer has not supplied “Institute Classification Clause” along with the policy document to the Insured.

The sale contract dated 02.02.2013, mentioned “20% advance and balance against document”. In the Insurance proposal form, nothing has been mentioned. In Invoice No.010-2012/2013 dated 15.02.2013, it has been mentioned that Port of Discharge-Salalah. Country of origin of goods-India. Terms of payment and delivery- Advance-FOB & I. Therefore Free on Board would be the port of discharge i.e. Salalah and not Mundra. Section-10 of Marine Insurance Act, 1963 permits insurance of partial interest. The Insured has denied receiving of 20% advance. Even if it is not accepted, then also it cannot be said that the Insured had lost his interest as soon as the goods were loaded in the vessel at Mundra.

So far as argument that the complainants have not taken suitable step to minimise the loss is concerned, the vessel was grounded on 27.02.2013 at 14:45 hours. The consignment was rice and after grounding the vessel, putrefaction was started. Nether the surveyor in his Final Survey Report nor in Repudiation Letter and Investigation Report dated 02.11.2015 any finding that been recorded in this respect. So far as Issue relating to territorial jurisdiction is concerned, in the proposal form, it has been mentioned, claim was payable at the Divisional office to Rajkot, therefore, it is within territorial jurisdiction of this Commission. Supreme Court in United India Insurance Co. Ltd. & others Vs. Roshan Lal Oil Mills Ltd. and others (2000) 10 SCC 19 and Sri Venkateswara Syndicate Vs. Oriental Insurance Company Ltd and another, (2009) 8 SCC 507 has held that non-consideration of survey report is not justified.

Regulation-9 of The Insurance Regulatory and Development Authority (Protection of Policyholder’s Interest) Regulations, 2002, required to settle the claim within six months of the report of the loss. If the claim is not settled within six months, then the Insurer is liable to pay interest @2% above the market rate.

ORDER

In the result, complaint is allowed. The opposite party is directed to pay Rs.23601447/- with interest @9% per annum from September, 2013 till the date of payment, within a period of two months from the date of this judgment.