Oriental Insurance Co. Ltd. vs Vijay Kantilal Sanghvi

A.P. SAHI, J., PRESIDENT

The Appeal arises out of an order passed on 24.09.2021 in Complaint Case No. 21 of 2012 by the State Consumer Disputes Redressal Commission, Gujarat (for short the State Commission) whereby the Complaint filed by the Respondent/Complainant has been allowed in respect of a loss caused to a vessel having sunk that was covered under a Marine Hull Policy of the Oriental Insurance Company Limited. The terms of the policy are not disputed which provides a trade warranty in respect of operation of the vessel at Karaikal Port, Pondicherry. The policy was taken at Jamnagar, Gujarat.

The condition prescribed with the said policy is that vessel has to proceed to and from any wet or dry docks, harbours, ways, cradles and pontoons within the limits specified in this insurance policy. It covers the perils of the sea and navigable waters and other hazards with limitations, the details whereof need no reference at this stage.

The status of the vessel and its description and the geographical limits within which the vessel was to operate as per the policy was Karaikal Port, Pondicherry and the learned Counsel for the Appellant/Insurance Company Mr. Gola has invited the attention of the Bench to the Marine Hull Proposal Form which also confirms the same against the column of Geographical Limits where the Respondent/Complainant had clearly described the policy to be made available for operation within the geographical limits of the Karaikal Port, Pondicherry.

The vessel is a Motor Tug named KB-1 of 195 BHP that was manufactured in 1999 and was registered with the Registrar of Shipping at Jamnagar, Gujarat.

According to the Appellant/Insurance Company, the vessel had obtained a towing permission on 16.10.2007 that mentions the journey of the vessel from Puducherry to Cuddalore for towing a Dumb Barge KB-V. The permission from the Puducherry Port Authority was also issued on a licence known as the Harbour Craft Licence issued for the said vessel.

The vessel departed from Jamnagar and the Certificate of Departure dated 17.10.2007 refers to the name of Master of the vessel as Mr. Abdul Shaikh. The work of tugging the barge was under a specific contract from the Design and Construction of Marine Terminal Facility at Cuddalore. The work order has also been placed on record. The vessel under the contract had to be tugged to Cuddalore from Karaikal under the terms and conditions of the contract.

The Certificate of Entry at Cuddalore Port has been filed on record which is dated 19.10.2007 where also the name of the Master of the vessel is mentioned as Mr. Abdul Shaikh.

While performing the said job the vessel sunk. The Insurance Company appointed M/s Admire Marine Services Pvt. Ltd. as the Preliminary Surveyors who tendered their report on 24.12.2007. The Final Survey Report was tendered on 19.08.2009.

When the matter was being processed, the Respondent/Complainant represented that one Mr. Musharaf S. Gazi was the Serang of the vessel as if the vessel was being navigated by Mr. Gazi. It is the Certificate of Service of Mr. Gazi that was utilized for raising the claim through the Surveyor. It may be pointed out that a Serang is also equivalent to the Master of a vessel as provided for in the definitions of vessels propelled by mechanical power under the Tamil Nadu Minor Ports Harbour Craft Rules 1953.

The Surveyor submitted a Final Survey Report on 19.08.2009 which records that the tug was allowed to be disposed of on 'as is where is' basis for calculating its salvage and the Final Survey Report recorded the statement of Mr. Musharaf S. Gazi as the Master of the vessel. However, the Final Survey Report indicated that no apparent breach of warranty was observed.

It also provides the qualifications of the Master or Serang with a special condition that he shall have served for not less than 5 years on a harbour craft vessel propelled by mechanical power. It has been urged by Mr. Gola that the Certificate dated 29.09.2008 of Mr. Gazi recites that he had worked only for 4 years, and even otherwise the Certificate was of 29.09.2008 that was issued long after the incident in which the vessel had sunk on 15.12.2007.

Mr. Gola urged that the vessel was not being navigated by a duly qualified Master of the vessel and even otherwise the vessel had been navigating beyond the territorial and geographical limits of Karaikal Port as defined under the policy.

Mr. Gola has then invited the attention of the Bench to the written arguments filed by him on 24.05.2024 vide diary no. 19586.

As noted above, no one has appeared on behalf of the Respondent/Complainant to contest the matter.

We have examined the submissions raised as also perused the documents on record. The Appeal was reported to be delayed by 109 days. A reply to the same had already been filed and, having perused the affidavits, we are satisfied that the delay has been sufficiently explained and accordingly the delay in the filing of the Appeal is condoned and the Appeal shall be treated to have been filed within time.

We have proceeded to hear the matter finally as well. To appreciate the arguments advanced by Mr. Gola and the findings recorded by the State Commission there is more than one reason as to why the impugned order dated 24.09.2021 cannot be sustained and deserves to be set aside. The Complaint has been allowed by the State Commission with a direction to pay the amount of indemnification as claimed together with Rs.25,000/- as compensation and Rs.5,000/- as costs.

The Insurance policy is a Marine Hull Policy with a trade warranty that it shall be governed according to the Port conditions of Karaikal, Pondicherry. The vessel had to proceed to and from the navigation points as specified in terms of the Insurance policy. It is evident that the contract was obtained by the Respondent/Complainant for towing of a Dumb Barge from Puducherry to Chennai by the Ministry of Shipping, Road Transport and Highways Department on 16.10.2007. The possession of a Port Licence is essential that was issued under the Pondicherry Port Harbour Craft Rules, 1970 to the Respondent/Complainant, mentioning the name of Mr. Musraf Gazi for operating at Pondicherry subject to the Pondicherry Port Harbour Craft Rules, 1970. However, when the vessel actually negotiated the waters, according to Mr. Gola, it had travelled beyond its territorial jurisdiction to Cuddalore with one Mr. Abdul Shaikh as the Master of the vessel. The Certificate of Departure dated 17.10.2007 is already on record as Annexure P-5. The Certificate of Entry at Cuddalore Port dated 19.10.2007 is also filed as Annexure P-8 which records the arrival at Cuddalore Port with Mr. Abdul Shaikh as the name of the Master. It is while arriving in the Cuddalore Harbour area that the vessel sank between 12.00 and 12.30 p.m. on 15.12.2007. Intimation was given to the Appellant/Insurance Company and M/s Admire Marine Services Pvt. Ltd. were appointed to conduct a Preliminary Survey. The Preliminary Survey Report dated 24.12.2007 is extracted hereunder:

A Final Survey was also conducted and the Report dated 19.08.2009 is extracted hereunder:

All steel, carvel built, single screw tug. Tug is having flush forecastle & poop deck. The hull is provided with forward & aft peak tanks, engine room, side buoyancy tanks on port & starboard side of cargo hold, accommodation & wheel house.

MAIN ENGINE : Second-hand: Make: Cummins; 6 Cylinders; BHP: 195@1800 RPM; 6 Cylinders; Model No.: NP - 743; Sr. No. 25243238; Fuel: Diesel; Water cooled.

GEAR BOX : Second-hand Make: M/s. Krioskar Pneumatic Company; Model: MG-512; Sr. No.: Obliterated; Ratio: 4.15:1

PROPELLER : 1 No. fixed pitch, Mn. Br. Propeller.

STEERING GEARS : The tug is provided with steering helm & chain with associated fittings.

TIME, DATE & PLACE OF INCIDENT OF DAMAGE : Around 12:00 Hrs. ~ 12:30 Hours on 15.12.2007, whilst plying at Cuddore harbour area.

DATE & PLACE OF SURVEY : On 18.12.2007 along shore-line, near Vill. Chitrapete near jetty construction site of Messrs. Sanmar Chemplast Ltd., (T.N) and on subsequent dates during salvage operation.

Motor tug "KB-I" Reg. No.: PY-367 was built at Rosy Port in the year 1999. The tug was utilised for towing dumb barges, etc. between shore & anchorage point and for port operations. We further gathered from Insured that they had supplied their tug to Messrs. Sanmar Chemplast Ltd., (T.N) and was operating at their jetty construction site near Vill. Chitrapete.

Whilst the M.T. "KB-I" Reg. No. PY-367 (Bedi Port Reg. No. B.P. 1137) was lying at Karaikal Port, Pondicherry, our representative had inspected the same on 02.01.2007 and our findings are inserted in our survey report No.: ADM/JAM/INS_001 dated 04.01.2007. At the time of our inspection, i.e. on 02.01.2007, the tug was found to be fit in all respect to withstand ordinary perils associated with inland waterways. -A copy of our aforesaid survey report is attached herewith as ANNEXURE-I.

In view of our inspection / survey as above and based on our queries to supervisor, master, engine driver, crew, etc., at the time our inspection, we consider pre-accident condition of the tug to be free from any defects and fit to withstand ordinary sea perils.

Our representative had discussions with master of the tug M.T. 'KB - I' and also with owners of the tug and we learnt that whilst she was plying in Cuddore harbour area near river mouth, master & crew of the tug noticed entry of sea water into under-deck accommodation compartment. Due to abrupt rise in water level they were unable to find the location of the leakage. Looking to the situation, master moved the tug towards shore line off Vill. Chitrapete. Master of the tug 'KB - I' succeeded in moving the tug abreast shore line off Vill. Chitrapete. The tug grounded whilst she was off the shoreline around 55 ~ 65 Mtrs. Master and crew members left the tug and reached to shore.

They informed the tug owners regarding the incident, who accordingly applied for survey.

Our representative attended along shoreline, near Vill. Chitrapete near jetty construction site of Messrs. Sanmar Chempast Ltd., (T.N), on 18.12.2007 & on subsequent dates and noted that the tug 'KB - I' had overturned, resting on her starboard-side in sandy sea bed around 55 ~ 65 Mtrs. away from shore line. During low tide hours port-side bulwark, shell and cabin becomes visible, remaining portion remains submerged in water.

All feasible option to salvage the tug were discussed and finally, a 75 ton capacity crane along with necessary tools, tackles, equipments and a team of experienced people was employed to lift the tug from location where she had grounded. While the operation was under progress, cyclonic weather was repeatedly being experienced in the area and, it was delayed. Later on, when weather permitted the operation was vigorously carried out. However, the operation could not be succeeded.

Fine sand & mud had entered into under deck compartments of the tug and instead of being lifted; the tug has slowly sunk into the sandy sea bed.

During our further discussions, it was suggested to call upon professional salvagers, consider their view and decide upon future course of action.

We had detailed discussions with insured as well as underwriters Jamnagar D.O. regarding the situation and status of the ill-fated tug. We contacted various prospective salvages, who were willing to work at the site of sinking and asked them to forward us/insured their quotation in sealed cover. During our continuous contact with insured and prospective salvager, we understood that 3 Nos. quotes were received by the insured in sealed cover. We asked insured to submit the same to underwriters Jamnagar D.O.

Insured submitted the quotes to underwriters on 28.12.2007. We also remained present at underwriters office and the covers containing the quotes were opened up in presence of all the concerned and details of the quotes were as under:

We had interrogated the master and engine driver of the ill-fated tug "KB-I" Reg. No. PY-367 (Bedi Port Reg. No. B.P. 1137) the summarised versions of these statements are as under:

At the time of our attendance, Insured had shown us documents pertaining to tug "KB-I". We had verified the same and retain photocopies of the same. The documents are enumerated item-wise with comments - where necessary, as under:-

On our investigation / survey and scrutiny / verification of documents as narrated above, we opine that probable cause of sinking of the tug could be due to ingress of sea-water due to hole as a result of dashing of tug with some hard object floating at the construction site, whilst the tug was under operation.

As per our inspection / valuation report No.: ADM/JAM/INS_001 dated 04.01.2007, gross market value of the tug on date of our inspection was worked out to be at Rs. 25,00,000.00 and same is considered as fair & reasonable looking to the market conditions / trends on date of loss. Therefore, insured's tug was considered as adequately covered.

Policy conditions observed complied with.

No apparent breach of warranties observed.

Insured's claim is allowable & payable, as above as the loss & damage to the tug has occurred due to sea perils and same is covered under relevant policy of insurance.

4 Sets of coloured photographs taken by us during our attendance on various dates, are attached herewith.

Issued Without Prejudice subject to terms, condition & amount of policy of insurance, reserving the right to alter / amend any unintentional error / omission, if any.

On submission of the said Report of the Surveyor, the claim was rejected on 04.02.2011 by the Appellant/Insurance Company and aggrieved Complaint Case No. 21/2012 was filed before the State Commission claiming indemnification. The repudiation letter is extracted hereunder:

The Appellant/Insurance Company observed that there was no statutory permission for plying at Cuddalore Port nor did its Master have the requisite licence to operate Inland Mechanically Propelled Vessel on the date of the casualty. The tug was not within the geographical limits of Karaikal Port.

Mr. Gola has urged that all these grounds are sustainable, inasmuch as on the date of the incident the tug was not within the geographical limits of Karaikal Port. This was a condition attached to the policy and the vessel was subject to the operational limits. He then urges that no statutory permissions existed as per the Tamil Nadu Minor Ports Harbour Craft Rules 1953 read with the Pondicherry Port Harbour Craft Rules, 1970. The third contention is that the name of the Captain of the vessel in the licence/permission was mentioned as Mr. Gazi whereas the vessel was actually being plied by Mr. Abdul Shaikh as Master of the vessel. Mr. Abdul Shaikh did not have the requisite licence to operate the vessel and that the Certificate dated 29.09.2008 of Mr. Gazi was inadequate as he had only 4 years of experience. Otherwise also, the said Certificate is dated 29.09.2008 that was obtained after almost 9 months of the incident and therefore would not be applicable. Apart from this, on the said date also Mr. Gazi had only 4 years of experience whereas Rule 32 of the Rules applicable categorically requires that the applicant for a Certificate of Competency should have served for 5 years in a vessel propelled by engines similar to those of such vessels in respect of which the certificate is required. Mr. Gola has referred to Rule 32(b) of the said Rules to urge that the Certificate of Competency of Mr. Gazi dated 29.09.2008 only refers to 4 years of experience and therefore the Certificate by itself proves the incompetence of the Master of the Vessel. Nonetheless, it is not proved that it was Mr. Gazi who was piloting the vessel as Master and in fact it was Mr. Shaikh who has no licence. Even assuming that Mr. Gazi was the Master, he was unqualified and his certificate was of no consequence as explained above.

We have also perused the written submissions that have been filed on behalf of the Respondent/Complainant and we find that all the three grounds of repudiation are clearly established on record. The vessel was operating outside the territorial limits of Karaikal which is a pre-condition for the purpose of coverage under the policy. It is also evident that requisite orders from the competent authority do not seem to be available and the vessel was being manned by Mr. Shaikh who was not possessed of the requisite qualified experience of 5 years. The Certificate dated 29.09.2008 that was relied on which is after almost 9 months of the incident did not suffice as the experience of Mr. Gazi on that date was only 4 years. The name of the Master of the vessel in the licence/permission was that of Mr. Gazi but an altogether different person Mr. Shaikh had been negotiating the vessel who was not possessed of the qualification. The licence of Mr. Gazi in no way comes to the aid of the Respondent/Complainant and consequently the findings recorded by the State Commission cannot be sustained.

We therefore find that the repudiation by the Appellant/Insurance Company rests on valid grounds as the material policy conditions have been breached.

On the other hand, the State Commission has proceeded to record findings that does not conform to the records. In the instant case, the Certificates of Exit and Entry coupled with the Work Order that was issued to the Respondent/Complainant indicate that the work had commenced by the Respondent/Complainant and therefore the finding to that effect is perverse. The finding recorded that the work had never commenced is incorrect because the tug had arrived for the said work. While recording the fact with regard to the name of the Master of the vessel, the name of Mr. Gazi had been mentioned who was not mastering the vessel and his Certificate was also for 4 years and 5 months.

The State Commission has further examined the matter in the light of the provisions of Inland Vessels Act, 1917. We may point out that even though the letter of repudiation does not mention anything about the engine power of the vessel, yet the proposal form mentions that the vessel was powered with a 195 BHP engine. This has completely escaped the notice of the State Commission while relying on the said Rule which is applicable to less than 100 nominal horse-power vessels. Given the power of the engine of the present vessel, the provisions of the said Act were not at all attracted, yet the same has been made the basis to record a finding and as such cannot be sustained. Consequently, the order passed by the State Commission dated 24.09.2021 cannot be sustained.

Accordingly, the impugned order is set aside and the Appeal is allowed. The Complaint stands dismissed.