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Judgment
V.K.Jain, J
IA/......................(to be numbered)
The delay of 48 days in filing the appeal is condoned.
The complainant/respondent received a purchase order dated 24.10.1992 from an overseas buyer Beacon Granite Co. for purchase of granite blocks. The goods were to be shipped from Kandla Port in India to Bangkok by ship. The terms and conditions as contained in the order dated 24.10.1992, read as under:-
"1
Price
:
US$ 200 per CBM FOB Kandla Port/India
2
Delivery
:
Earliest possible
3
Payment
:
75 days through Thai Military Bank Bangkok on collection basis
4
Insurance
:
Goods to be insured by supplier C&F"
On receipt of the aforesaid order, the complainant/respondent applied to the appellant for issuance of an insurance policy. In the said letter dated 10.12.1992, the complainant/respondent sought transit insurance policy for export consignment from Kandla to Bangkok, by sea, without disclosing as to whether the order had been placed on FOB basis or on CIF basis. An insurance policy was issued by the appellant on the basis of the aforesaid proposal without asking for a copy of the purchase order or the invoice which the complainant had issued for the sale of the said goods to the overseas buyer. The said policy covered the goods till the time they reached the destination. Since the goods did not reach the destination, a claim was lodged by the complainant/respondent with the appellant which came to be rejected vide letter dated 9.2.1996, which, to the extent it is relevant, reads as under:-
"Moreover, it is evident that the said contract was not submitted by you despite various reminders till 27.4.1995 when the insurance company could get it from you and the contract makes it clear that the sale contract was on FOB terms and not on CIF terms. There is enough material with us to prove that there was several placement of the consignment into the vessel. We rightly contend that the risk of covering voyage by the above vessel ceased the moment the goods were loaded in to the vessel in question. No doubt the insurance from Kandla to Bangkok was applied for the policy was taken from the Branch Office on CIF terms due to gross misrepresentation on your part. The misrepresentation consists of the real nature of the contract between the parties and so you have no insurable interest in the goods. The contract between you and the purchaser provides only for free loading on the board of the vessel. So you do not stand in legal or equitable relation to the adventure or any insurable property at risk therein in consequence of which you may benefit by the safety or due arrival of insurable property or may be prejudice by its loss or by damage thereto, or by the detention thereof, or may incur liability in respect thereof. When the contract between the parties i.e between insured and the purchaser was on FOB basis the insurer had no liability whatsoever if the goods came to be lost in transit."
Being aggrieved from the repudiation of the claim, the complainant/respondent approached the concerned State Commission by way of a consumer complaint. The complaint was contested by the appellant primarily on the grounds on which the claim had been repudiated.
The State Commission vide its order dated 6.2.2007 allowed the complaint and directed the appellant to pay a sum of Rs.1496000/- to the complainant alongwith interest @ 9% p.a. from the date of complaint till realization. Being aggrieved, the appellant is before this Commission by way of this appeal.
The main contention of the learned counsel for the appellant is that since the transaction between the complainant and the overseas buyer was on FOB basis and not on CIF basis, the insurance policy was obtained by misrepresentation without the Insurance Co. knowing the true nature of the transaction between the complainant and the overseas buyer. I, however, find no merit in the aforesaid submission. Firstly, it its letter dated 10.12.1992 seeking insurance cover, the complainant did not claim that the transaction between the parties was on CIF basis. More importantly, in an order placed on CIF basis, the seller / exporter has to arrange the insurance in respect of the goods till they reach the destination. In the present case, the complainant was specifically obliged under Clause 4 of the terms and conditions of the purchase order to obtain insurance in respect of the cost of the goods as well as in respect of the freight. There is no allegation that the cost of the goods had been received by the complainant before shipment of the goods or that the freight was not paid by it. Thus, for all practical purposes, it became a transaction on CIF basis. Therefore, I find it difficult to accept the contention that the insurance policy on CIF basis was obtained by misrepresentation.
Mr. Rawat submits that a transaction on C&F basis is altogether different from a transaction on CIF basis and in support of his contention he relies upon on Incoterms Rules 2010. The said rules refer to CFR Cost and Freight as well as to CIF Cost, Insurance and Freight. As per the said rules, cost and freight means that the seller deliver the goods on board the vessel and the risk of loss or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the cost and freight necessary to bring the goods to the named port of destination. It further says that the cost insurance and freight means that the seller deliver the goods on board the vessel, the risk of loss or damage to the goods passes when the goods are on board the vessel and the seller must contract for and pay the cost and freight necessary to bring the goods to the named port of destination. In such a case, the seller also contracts for insurance cover against the buyer's risk of loss of or damage to the goods during the carriage. Thus, the only distinction I find is that in the second case i.e. CIF, the seller has to obtain the insurance cover against the buyer's risk of loss or damage to the goods during carriage, which he is not required to obtain in a transaction on C&F basis. However, the aforesaid distinction stood removed in the present case on account of Clause 4 of the terms and conditions of the order which expressly required the supplier i.e. the complainant to insure the goods in respect of cost as well as the freight.
A similar issue came up for consideration of this Commission in Oriental Insurance Co. Ltd. Vs. Ajanta International [IV (2016) CPJ 685 (NC)]. In Ajanta International (supra), the sale to the overseas buyer was made on C&F basis whereas the basis of valuation as per the insurance policy was CIF (cost, insurance and freight) plus 10%. Noticing that the terms of the transaction between the complainant and the overseas buyer were contained in the invoice which had been submitted to the insurer, this Commission held that there was no misrepresentation on the part of the complainant and that the Insurance Co. was only itself to blame if it was not to issue a policy on CIF basis in such a transaction. An appeal against the said order is stated to have been dismissed by the Hon'ble Supreme Court. In the present case, the appellant did not ask the complainant to submit the purchase order and / or the invoice raised by it upon the overseas buyer. Had that been done, the terms of the transactions would have easily come to its notice. In any case, what is more important in this case is that under the terms of the transaction, the goods were to be insured by the complainant itself, thereby converting the transaction into a transaction on CIF basis.
In Ajanta International (supra), this Commission noticed that the transaction between the complainant and the consignee was on D/A 120 days basis which meant that the complainant was to draw a bill of exchange on the consignee and on the consignee accepting the bill of exchange and promising to make payment to the complainant within 120 days, the delivery of the consignment could be given to him. It was further held that so long as the bill of exchange was not accepted and paid the property/ownership of the goods would continue to vest in the seller. This Commission, therefore, held that the property/ownership in the goods had not been transferred from the complainant to the consignee. A reference by this Commission was made to Section 25(3) of the Sale of Goods Act, which to the extent it is relevant provides that where the seller of the goods draws on the buyer for the price and transmits to the buyer the bill of exchange together with the bill of lading, to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honour the bill of exchange and if he wrongfully retains the bill of lading, the property in the goods does not pass to him.
In the present case, the payment was to be made by the overseas buyer through Thai Military Bank on collection basis, within 75 days, meaning thereby that the overseas buyer had to make payment through the bank within 75 days of receiving the requisite intimation and thereafter the bill of lading was to be collected by the overseas buyer from the bank and delivery of the goods was to be taken against the bill of lading. Since admittedly, the goods insured under the insurance policy never reached the destination, the property in the goods at the time they were lost continued to vest in the seller i.e. the complainant in this matter. Hence, being the owner of the goods at the time the same were lost, the complainant had an insurable interest in the said goods and it also being the insured, is entitled to reimbursement in terms of the insurance policy issued by the appellant. The order passed by the State Commission, therefore, does not call for interference by this Commission in exercise of its appellate jurisdiction.
However, in order to rule out any reasonable possibility of the complainant having received the price of the insured goods from the overseas buyer or / it having been reimbursed for its loss from any other source, the complainant is directed to file an affidavit within 6 weeks from today stating therein that it has not received the price of the goods from the overseas buyer nor has it been reimbursed by any source whatsoever for the loss sustained by it on account of loss of the goods in question. Such an affidavit will be filed after serving advance copy upon the appellant. The amount which the appellant has deposited with this Commission shall be released to the complainant within four weeks of the said affidavit being filed by it. The balance amount, if any, shall be paid to the complainant within four weeks of its filing the affidavit in terms of this order. Interest in terms of the order of the State Commission would be payable only till the date on which the principal amount was deposited by the appellant. The statutory deposit shall be released to the appellant after compliance of the order. The appeal stands disposed of.