National Consumer Disputes Redressal
Dynametic Overseas Private Limited vs New India Assurance Co. Ltd. on 22 June, 2023
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 1345 OF 2015 1. DYNAMETIC OVERSEAS PRIVATE LIMITED 85, Ballygunge Gardens, KOLKATA - 700 019. WEST BENGAL. ...........Complainant(s) Versus 1. NEW INDIA ASSURANCE CO. LTD. 510100, Barick Bhavan, 4th Floor, 8, Chhittaranjan Avenue, KOLKATA - 700 072 WEST BENGAL. ...........Opp.Party(s)
BEFORE: HON'BLE MR. SUBHASH CHANDRA,PRESIDING MEMBER
FOR THE COMPLAINANT : MS. SANDHYA PILLAI, MR. MAYANK JOSHI &
MR. UDAY PRAKASH, ADVOCATES FOR THE OPP. PARTY : MR. R.B. SHAMI, ADVOCATE
Dated : 22 June 2023 ORDER
1. This Consumer Complaint has been filed under the Consumer Protection Act, 1986 (in short, the 'Act') alleging deficiency in service in repudiation of an insurance claim in a Marine Cargo Specific Voyage Policy issued by the Opposite Party in respect of transportation of a cargo of Iron Ore fines in bulk.
2. The facts, in brief, as stated by the complainant, are that the complainant formerly registered as "R. Piyarelall International Private Limited., (RPIL)" for the business of import and export of Minerals, Food Grains and Consumer Articles, changed its name on 13.03.2015 to "M/s. Dynametic Overseas Private Limited". A policy for consignment of 8,125 WMT of Iron Ore fines in bulk from Haldia Port (India) to one main port (China), commencing from 08.10.2013 was taken by it. The Iron Ore was loaded on the ship 'M.V. Bingo', on 08.10.2013 partly at Haldia (6000 WMT) and partly (2125 WMT) at Sagar Anchorage on 11.10.2013, in view of the limitation of loading of cargo vessels at Haldia Port due to draught issues. The Bill of Lading dated 11.10.2013 of the entire consignment of 8,125 WMT iron ore was issued and the vessel sailed the same day. The vessel, however, sank on 12.10.2013 near sandheads in the Bay of Bengal about 28 nautical miles off Balasore Coast in Odisha, on account of cyclone 'Phailin'. The Complainant filed a claim of Rs.05,03,03,468/- on 30.10.2013 under the said policy. The Opposite Party appointed M/s. Cunningham Lindsey International Private Limited, as Surveyor who in their report dated 25.04.2014 reported that the claim was not valid since the Complainant did not have any insurable interest at the time of loss as the title of the cargo had been transferred to the buyer on stowage of goods on the vessel. It was also reported, inter alia, that there was a large discrepancy between the purchase price and the sale price of the cargo; the moisture content and SiO2 was in excess of the permitted limits; the loading of cargo was not supervised by the surveyor and / or engineer approved by the Respondent. The cargo was also not packed and / or carried according to the guidelines specified as per the trade. There was a breach of policy with regard to chemical analysis of samples during loading and prior to the sailing of the vessel, the buyers and / or their Bankers had returned the documents, interalia, on the ground of discrepancies and the Claimant/Complainant did not have insurable interest at the time of loss.
3. According to the Complainant, the vessel sank because the Master did not heed warnings about the cyclone and due to navigational fault on the part of the Master which is covered under the policy for reimbursement of claim. He is, therefore, before this Commission with the following prayer:-
To show cause as to why the claimant should not be indemnified with Rs. 5,03,03,468/-;
To pay Rs. 05,03,03,468/- to the claimant;
To pay interest on Rs. 05,03,03,468/- @18% per annum from 29.10.2013, till the date of filing of the claim;
Any other relief or reliefs which the claimant entitled to;
4. The complaint was resisted by the Opposite Party by way of Written Statement filed on 31.03.2013. Preliminary objections were taken that (i)the Complainant was not a 'consumer' u/s 2 (d) of the Act; (ii) there was no deficiency of service or negligence or unfair trade practice on the part of the Opposite Party; (iii) the Consumer Complaint was not maintainable for Non-joinder of M/s Shandong Zhongshuo Iron & Steel Co. Ltd., as a party; and (iv) that there are complicated and disputed questions of facts requiring elaborate trial, which cannot be done by this Commission.
5. On merits, it was argued that under the Marine Cargo Specific Voyage Policy in question, there were special conditions as per the Annexure and under condition No.14 and the insurance covered was to be commensurate only with the terms of sale. The INCOTERMS were CFR FO main Port China. The title of the cargo was transferred to the Buyer on stowage of goods on the vessel and, therefore, the Complainant being the seller did not have any insurable interest at the time of loss.
6. As per condition No.4, the vessel was required to be ISM Code compliant subject to Institute Classification Clause (ICC). It was also subjected to an excess applicable of 1% of the consignment but in the event ICC (A) coverage is extended to the Complainant, the excess applicable would be 25% of each and every claim. The Opposite Party has relied upon the preliminary enquiry report of the Director General (Shipping) regarding the sinking of the vessel that the moisture of the cargo was in excess of the specified level in the sales contract, that the cargo was loaded during rain and the vessel had listed prior to its sinking. It is stated that the cargo had been stored in an open space covered with tarpaulin, some distance away from the jetty, and thereafter was kept in the open, prior to loading on the vessel, which was itself done during heavy rain as a consequence of which the moisture content of Iron Ore fines loaded was very close to the Transportable Moisture Limits (TML). While the sale contract stipulated maximum moisture content to not exceed 11%, as per the Bill of Lading, the moisture content recorded was 11.52%. The Opposite Party states that the guidelines for loading as per the policy were violated by the Complainant. The listing of the vessel to one side due to the wet cargo was on account of high moisture content which was due to negligence on part of the complainant, in keeping the cargo in the open prior to loading, unsafe loading of cargo on board the vessel, lack of monitoring and care on vessel as required u/s 55 (2) (C) of the Marine Insurance Act, 1963.
7. The Opposite Party submitted that considering all relevant documents, for violation of condition No.1 of attachment forming part of policy, warranty No.2 of the endorsement dated 08.10.2013, Condition No.2 and warranty No.3 of endorsement dated 08.10.2013, warranty no.7 of the said endorsement, condition No.14 of the attachment, clause 16.2 of the ICC (A), clause 4.3 of ICC (A) read with clause 4.4 of ICC (A) and finally clause 11.1 of the ICC (A), the subject claim was repudiated for the reasons stated in the letter of repudiation, which reads as below:-
"There is a large discrepancy between the price at which M/s. R. Piyarelall International Pvt. Ltd. purchased and subsequently declared and on-sold the Cargo. We require evidence of compliance with the following warranty: "Warranty basis of valuation on the market value certified by qualified valuer".
Further the said policy was issued 8th October, 2013 on "Consignment of 8,125 WMT Iron Ore fines (in Bulk)". The said Policy was issued by us without you disclosing the material fact that 6,000 MT of cargo was already loaded on the vessel MV Bingo.
Condition No.1 of the attachment forming part of the Policy and Warranty 2 of the Endorsement No.51010021130182000230 dated 08.10.2013 on the Policy further required that, "Loading/ Unloading supervision by an approved surveyor / engineer at Assured's cost", However, loading of the cargo was not supervised by a surveyor and / or engineer approved by us and therefore there was a breach of Condition No.1 of the attachment forming part of the Policy and Warranty No.2 of the Endorsement No. 51010021130182000230 dated 08.10.2013 on the Policy.
Condition No.2 of the attachment forming part of the Policy and Warranty No.3 of the Endorsement No. 51010021130182000230 dated 08.10.2013 on the Policy further required that: "Warranted that cargo should be packed and carried according to the guidelines and norms specified as per the trade at all times". Since the IMSBC Code including (without limitation)to the one identified above were not adhered to, there was a breach of Condition No.2 of the attachment forming part of the Policy and Warranty No.3 of the Endorsement No. 51010021130182000230 dated 08.10.2013 on the Policy.
Warranty No.7 of the Endorsement No. 51010021130182000230 dated 08.10.2013 on the Policy required "Chemical analysis of samples during loading /unloading to ascertain the moisture content of ore" However, there was no chemical analysis of the cargo to ascertain moisture content during loading. No laboratory reports from the competent Laboratory showing the moisture content of the cargo during loading was available before sailing of the vessel and therefore there was a breach of Warranty No.7 of the Endorsement No. 51010021130182000230 dated 08.10.2013 on the Policy.
This was a critical requirement having regard to the nature of the cargo as a category A bulk cargo prone to liquefaction to which the IMSBC Code applied. The Certificate of Quality indicates that analysis was performed at some point after loading and very likely after sailing, and one of the parameters tested was moisture, although the test was against the contract specification. The result confirmed that the cargo exceeded its TML as well as its contractual specification. If that result had been available during loading as required by the warranty, the vessel might never have sailed with a cargo with moisture exceeding its TML.
Condition No.14 of the attachment forming part of the Policy is: " warranted that the cover under within mentioned policy to commensurate only with terms of sale under no circumstances the coverage shall be extended beyond the terms of sale between the concerned parties", However, the cargo was out of specification on shipment as regards both moisture content and SiO2. In these circumstances, the bank's refusal to accept the documents under the letter of credit is understandable.
Breach of any or all of the above warranties discharges us from any liability under the Policy with effect from the date(s) of breach, all of which preceded the alleged Loss.
Without prejudice to the above, there also has been a breach of the following policy condition: " The cargo to be stored in covered port warehouse and kept above 5 feet height of platform from the ground" in that the cargo was not stored in a covered port warehouse 5 feet above the ground but in the open in M/s. R. Piyarelall International Pvt. Ltd.'s stockpile.
Therefore, there has been a breach of each of the above terms and conditions of the Policy which is exclusive and independent of each other.
Further, you were required to comply with your duty to take all reasonable steps to minimize the loss and take steps to protect the underwriter's right of recovery. These duties were imposed upon you as the Assured under clause 16.2 of the Institute Cargo Clauses (A) stated as under:
"16. It is the duty of the Assured and their employees and agents in respect of loss recoverable hereunder 16.2 to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised and the Insurers will, in addition to any loss recoverable hereunder, reimburse the Assured for any charges properly and reasonably incurred in pursuance of these duties".
However, you have failed to take necessary steps as advised by us repeatedly and are therefore in breach of clause 16.2 of the Institute Cargo Clauses(A).
We also believe that the proximate cause of the vessel's list and resulting casualty and Loss was the excessive inherent moisture content of the cargo, and that the Loss is therefore excluded by clause 4.3 of the Institute Cargo Clause (A), by reason of insufficiency and/or inadequacy of the preparation of the cargo for carriage and / or clause 4.4 of the Institute Cargo Clauses (A), by reason of the inherent vice or nature of the subject-matter insured.
We require M/s. R. Piyarelall International Pvt. Ltd. to prove it had an insurable interest in the cargo at the time of the Loss in accordance with clause 11.1 of the Institute Cargo Clauses (A).
Accordingly, we must reject any and all liability in respect of the Loss and claim".
(Emphasis supplied)
8. Parties filed their evidence. Complainant filed a rejoinder. Heard the learned Counsel for both the parties and perused the material on record carefully. Both sides filed their short synopsis of arguments.
9. Admittedly, the vessel M.V. Bingo loaded with the Iron Ore fines sank during cyclone 'Phailin' on 12.10.2013. The following issues arise for consideration:-
a) whether there was any insurable interest of the Complainant, since the cargo had been loaded and as per condition No.3 the insurable interest shifted to the consignee from the consigner once the loading was complete;
b) whether the loading had been done in an improper manner and PML was within permissible limit and whether the excess moisture content in the cargo of an Iron Ore fines was on account of improper loading during rain which caused the vessel to list even prior to the cyclone;
c) whether the repudiation of claim is in order.
10. The Opposite Party contended that the complainant did not have any insurable interest which has been considered in light of the policy in question.
As per clause 11.1 of the Institute Cargo Clause the insurable interest clause states that "in order to recover under this Insurance the Assured must have an insurable interest in the subject-matter insured at the time of the loss".
The IMSBC Code section 4.5.2 provides "Sampling and testing for moisture content shall be conducted as near as practicable to the time of loading. If there has been significant rain or snow between the time of testing and loading, check tests shall be conducted to ensure that the moisture content of the cargo is still less than its TML. The interval between sampling/testing and loading shall never be more than 7 days". It is admitted that this was not complied with as the cargo was stored in open during the rainy season and there was rain during the time of loading, as the INCOTERMS were CFR FO main port China, the surveyor has rightly concluded that the title was transferred to the buyer on stowage of goods on the vessels.
According to this condition, the insurable interest of the consignee's ends once the cargo is loaded and the necessary documentation relating to the cargo is completed. In the instant case, this process should be reckoned to be completed on 11.10.2013, the date on which the vessel sailed from the Sagar Anchorage. On the contrary, the Complainant contends that is insurable interest of consignee, however, did not end as above.
11. As per Warranty No. 14 of the policy, the policy cover is commensurate only with terms of sale and under no circumstances, the coverage to extend beyond the terms of sale between the parties. The surveyor has, therefore, correctly concluded that as per the terms of sale and the policy the Complainant (assured) would not have insurable interest at the time of loss. The Opposite Party has arrived at this conclusion based on this observation.
Condition No.14 of policy reads as below:-
"Warranted that the cover under within mentioned policy to commensurate only with terms of sale. Under no circumstances the coverage shall be extended beyond the terms of sale between the concerned parties".
It is evident that as per the terms and conditions of the policy, the insurable interest of the Complainant as consignee was to end once the cargo had been loaded on the vessel. Admittedly, the loading was concluded on 08.10.2013. Therefore, it is the contention of the Opposite party that the Complainant lacked insurable interest in the cargo and, accordingly, this complaint does not lie. The Complainant has not been prove by way of evidence that it was not in default of various terms and conditions that have been highlighted in the letter of repudiation or disapproved the enquiry of the most of the ship in attempting to sale in adverse sea conditions.
12. In view of the fact that the policy terms specify that the complainant's insurable interest in the cargo ends once the cargo of iron ore fines was loaded on the ship, the arguments of the complainant is difficult to sustain. Issue (a) has, therefore, to be answered in the negative.
The letter of repudiation has clearly stated the reason for repudiation of the claim.
1) The loss is therefore excluded by clause 4.3 of the Institute Cargo Clauses (A), by reason of insufficiency and / or inadequacy of the preparation of the Cargo for carriage and / or clause 4.4 of the Institute Cargo Clauses (A), by reason of the inherent vice or nature of the subject-matter insured.
2) We require M/s. R. Piyarelall International Pvt. Ltd. to prove whether it had an insurable interest in the cargo at the time of loss in accordance with clause 11.1 of the Institute Cargo Clauses (A);
13. As per the report of the Director General (Shipping), who enquired into the sinking of the 'M.V.Bingo', it is evident that the vessel had begun to list soon after being loaded and commencing to sail.
14. The TML of the cargo was clearly in excess of the permissible limit of 11%. The report of the surveyor that the loading of the Cargo was done in conditions at the jetty that led to high moisture content have not been contended with any evidence by the complaint. This, issue (b) has to be answered in the affirmative.
15. In view of the warnings regarding the weather, the Master of the ship was clearly negligent in attempting to sail and to negotiate the rough seas on account of the cyclonic conditions. As per the Policy schedule, the insurer cannot be held liable for any loss or damage to the insured cargo on account of the negligence or fault of the Master of the ship. For this reason also, the claim of the Complainant is liable to be set-aside. Issue (c), is therefore, answered in the affirmative.
16. For the afore-mentioned reasons, the claim preferred by the Complainant is liable to be set-aside. The repudiation of the claim preferred by the Complainant by the Opposite Party is based on valid reasons and does not want any interference on behalf of this Commission. The complaint is, therefore, disallowed. There shall be no order as to costs. All the pending I.As are also disposed off.
...................................... SUBHASH CHANDRA PRESIDING MEMBER