National Consumer Disputes Redressal
M/S. Kalyanji Jethalal Shah vs The National Insurance Co. Ltd. on 28 February, 2001
ORDER
Suhas C. Sen. J., President
1. The Complainant- M/s. Kalyanji Jethalal Shah had purchased a Ship 'M.V. CHANDA' for breaking. A Marine Hull Policy was issued by National Insurance Co. Ltd. for the journey of the Ship from Bombay Harbour to Power Works Bunder Darukhana Ship Breaking Yard by Towing. In the cover note the interest insured was stated as under:
"Interest Incured Hull & Machinery Trading Warranties Total Loss, Constructive Total Loss, Salvage Chargee, 4/4th RDC with an excess of 1/2% of the sum insured for higher all claims other than TL/CL. Subject to Warrant that adequate crew is maintained on board at all times".
2. It was also stated under Special Conditions & Warranties inter alia "Cover for voyage only on its own power (including fire) from Bombay Harbour to Darukhana Ship breaking Yard, Bombay, within the sheltered and protected waters of the same port".
3. Since there is some dispute about exact language used in the policy it will be useful to refer to the questionnaire filled in by the Complainant before issuance of the policy. In the column 'Risk against which Insurance granted', the words 'By towing voyage only', are hand written. The Complainant has also annexed a standard form of Institute Voyage Clauses, Hulls. This is headed with phrase "This insurance is subject to English law and practice". Under the column 'Perils' it is written:
4. Perils 4.1 This insurance covers total loss (Actual or constructive) to the subject matter insured caused by 4.1.1 perils of the seas rivers lakes or other navigable waters 4.1.2 fire, explosion 4.1.3 violent theft by persons from outside the Vessel 4.1.4 jettison 4.1.5 piracy 4.1.6 breakdown of or accident to nuclear installations or reactors 4.1.7 contact with aircraft or similar objects, or objects falling therefrom, land conveyance, dock or harbour equipment or installation 4.1.8 earthquake volcanic eruption or lightning 4.2 This insurance covers total loss (actual or constructive) 4.2.1 accidents in loading discharging or shifting cargo or fuel 4.2.2 bursting of boilers breakage of shafts or any latent defect in the machinery or hull 4.2.3 negligence of Master Officers Crew or Pilots 4.2.4 negligence of repairers of charters provided such repairers or charterers are not an Assured hereunder 4.2.5 barratry of Master Officers or Crew, Provided such loss or damage has not resulted from want of due diligence by the Assured Owners or Managers.
4.3 Master Officers Crew or Pilots not to be considered Owners within the meaning of this Clause 4 should they hold shares in the Vessel.
4. The Complainant has stated that the risk covered under the policy included "any risk arising due to fire". The Opposite Party has strongly denied the allegation and has alleged that the words "any risk arising due to fire" were not to be found in the original insurance policy and were interpolations made by the insured.
5. The contention of the Insurance Co. prima facie appears to be correct, In the questionnaire filled in by the Complainant at the time of Issuance of policy the risk against which insurance was granted has been set out hereinabove. There total loss and constructive total loss has been insured. Loss caused by fire has been incorporated therein by the words "including fire". Therefore, what was insured was total loss and constructive total loss which may be due to various causes including fire.
6. Otherwise, if it is a case of fraud or forgery this Commission has no jurisdiction to entertain and try the complaint. It has to be tried by a Civil Court. But in the instant case, in view of the questionnaire filled in by the Complainant, it clearly appears that what was covered was total loss or constructive total loss, 'including fire' which indicates' that fire was one of the causes for which an insurance claim could be made in case of total loss or constructive total loss of the ship.
7. This is also borne out by the cover note itself which clearly states that the cover was for total loss or constructive total loss only. In the Special Condition it has been mentioned that cover for voyage only on its own power (including fire).
8. There is also a letter on record dated 12th March, 1991 written on behalf of the National Insurance Company to M/s. Kalyanjee Sethalal Shah to the following effect:
Dated: 12-3-1991.
Messrs. Kalyanjee Jethalal Shah, Dharukhana, 19, Magazene Street, Ready Road.
Bombay-400 010 Dear Sirs/Madam Re: Insurance of Hull-M.V. CHANDA, Against T.L./C.T.L. Including S.C. & 4/4th R.D.C. Whilst awaiting break-up, Voyage by Towing from Bombay Harbour to Powder Works - Bunder, Darukhana, Shipbreaking Yard, within the sheltered and Protected waters of the same port.
Sum Insured; 2,25,53,000/-.
With reference to the above, we have to inform you that we have received advices to cover above insurance from BOMBAY HARBOUR to POWDER WORKS BUNDER, DARUKHANA, SHIP BREAKING YARD.Marine/Hull 250300/4100401
Please note that our fire policy No.6530/500/ ... is under preparation and the same will be forwarded to you shortly. In the meantime, please note that your interests are held covered.
Premium of Rs.27,600/00 only, is received in this connection.
thanking you for esteemed patronage c.c. to Yours faithfully sd/-
Asstt.Admn.Officer"
9. This letter is important because it clearly mentions the subject matter of the insurance. T.L. and C.T.L. stand for total loss and constructive total loss. It indicates the insurance cover is for "Voyage by Towing from Bombay Harbour to Powder Works - Bunder, Darukhana, Shipbreaking Yard". It also specifically states that it will be Marine/Hull policy. The words 'fire policy' and number has been scored out. There is no way from the questionnaire filled in by the complainant or the cover note issued by the Insurance Co. or the covering letter dated 12th March, 1991 that the policy taken by the Complainant can be construed to be a fire policy and not a Marine/Hull Policy. An additional cover of fire for total or partial loss does not appear to have been given by the Insurance Company, from the cover note annexed to the petition.
10. There is no dispute that there is a condition that adequate Crew on board was to be maintained at all times. It is also stipulated in the cover note that the voyage from Bombay Harbour Darukhana Ship breaking Yard, Bombay was to be by towing.
11. The basic fact is not in dispute that the Ship 'M.V. CHANDA" was lying at V-4 Anchorage in Bombay which is about 6 to 7 Kms. from the Darukhana Ship-breaking yard. Captain Bhave, was given the contract for bringing the ship to Darukhana Shipbreaking yard by towing the ship by tug. Captain Bhave used a tug belonging to the Bombay Port Trust. On or about 18th March, 1991 he started the process of towing by tug and he could bring the ship with the help of tugs upto a distance of about 1-1/2 Kms. away form the ship breaking yard (Reti-Bunder Wharf). The ship could not be taken any further as its bottom touched the ground. Captain Bhave had engaged Crew members. He stated in his cross-examination," I was required to have a complement of 6 crew members on board of that vessel during that voyage". He further stated, "After towing of the voyage was completed, my job was completed, and accordingly, the crew employed by me and myself left the vessel".
12. There is no dispute about these facts. It clearly appears from the deposition of Captain Bhave that the ship was lying at V-4 Anchorage, he employed crew members on vessel. He also engaged tugs with which to pull the vessel as far as he could to the ship-breaking yard. He was able to bring it within 1-1/2 Kms. from the ship-breaking yard (Reti-Bunder Wharf). Thereafter, the bottom of the ship touched the ground. Further towing was not possible. He left with his tug and also the crew members he had placed on board the ship. There was no other crew member on board the ship thereafter till the fire broke out on 12.4.1991. It was a requirement of the policy that adequate crew must be maintained on board at all times.
13. It is an admitted position that when the fire broke out there was no one on board the ship. It has been stated by the Complainant in his deposition that the labourers employed by the ship-breaker and left the ship for lunch at the time the fire broke out. Had the crew-men on board the ship, they could have doused the fire when it broke out or contain it and immediately inform the Fire Bridge. The Complainant informed the Fire Brigade only when someone rang up and informed him that the ship caught fire. The fire had progressed considerably by that time.
14. Another curious fact was that the labourers were the employees of the ship-breaker - Dharamraj Sahadev Yadav. According to the deposition of Dharamraj, he had entered into an agreement with the owner of the ship on 1.4.1991 that his job included pulling the vessel by rope and to bring it to the proper place allotted by Bombay Port Trust. He has stated that since the ship struck the ground it could be moved only during high-tide waters. He has strongly denied the suggestions that ship breaking operation had already started on 12.4.91 when the fire broke out. But he has not explained what the labourers were doing on board the ship before they went down for lunch. The complainant was asked to produce the log book of the ship to ascertain what was happening on 12.4.1991. The log book was nt produced. In other words, the material evidence was withheld by the Complainant or no log book was maintained because the Captain and the crew had left the ship.
15. In any way, it is nt disputed that no one was on board the ship when it caught fire which was in clear violation of the insurance contract.
16. Next point is about towing. The insurance cover was for the voyage from "Bombay Harbour to Power Works Bunder Darukhana Shipbreaking Yard by towing".
17. There is no dispute that the voyage of the ship started from V-4 Anchorage of Bombay Harbour on 18th March, 1991. The Complainant, Kalyanji, engaged Capt. S.N.Bhave for this purpose. Bhave in his deposition has stated that he had provided the crew members to the ship and engaged tugs for towing the ship. He could bring the ship by towing with the help of tugs of B.P.T. only upto a distance of about 1-1/2 kms. away from the ship breaking yard, 'Reti Bunder Wharf'. The ship could not be taken any further as its bottom had touched the ground. Thereafter, the ship had to be pulled manually by another contractor, engaged by the Complainant. He further stated that manual pulling up work was done by the Contractor, Mr. Dharamraj Yadav, a partner of M/s. D.S.Enterprises of Bombay. In answer to the cross-examination, Bhave stated that, "it is true towing of a vessel means pulling of the vessel with the help of the tug till the vessel touches the ground in the water and thereafter cannot be pulled by a tug". He further explained, "manually pulling the vessel is not called towing. ...... It is known as hauling. In common parlance hauling is known as pulling. It is true that the job of hauling was not part of my job of towing with the tug."
18. Dharamraj Yadav also stated in his deposition that he had helped the Complainant for pulling the ship manually form Reti Bunder Wharf till ship breaking yard at Powder Bunder Works, Darukhana, Bombay. In answer to questions put in cross-examination he stated that he was doing the business of ship breaking since 1976. For ship braking, a vessel can be brought in water upto the entrance of Darukhana Ship Breaking Yard and not beyond that, as it touches the ground at the point. The ship breaking starts after the vessel is brought by the tug from the see to the utmost point to which the tug can bring the ship. His contract of ship breaking included hauling or manual pulling the vessel by rope and to bring it to the proper place allotted by the B.P.T.
19. The question is that did the voyage of the ship by towing end when it stuck the ground? Capt. Bhave with six crew men left the ship with the tug boats. According to him, towing is done by tugs, what is done thereafter is known as hauling or pulling by rope. It is a manual operation. According to Black's Law Dictionary, 'towage' means 'the act of service of towing ships and vessels, usually by means of a small vessel called "tug". Nothing has been brought on record to show that the hauling of the vessel after it got stuck in the ground to the ship breaking yard by labourers amounted to towing. In any event, there were no crew members on board. The stipulation as to having adequate crew members on board all the time indicates that towing in the context of the rules and regulations of Bombay Port Trust could only mean towing by tugs where it was essential to have adequate crew men present on board the ship. Therefore, the Complainant's case will fail on this ground also. The ship was not being towed at the time the fire broke out and the ship's crew had been withdrawn. According to the Insurance Company the voyage by towing had ended when the ship got stuck and the crew men and the tug boats left. There is considerable force in this contention and must be upheld.
20. Lastly, the main contention of the Insurance Company has been that the Marine Hull Policy issued by the Insurance Company was for total loss and constructive total loss. 'Partial Loss' was not covered by the policy at all.
21. Section 56 of the Marine Insurance Act, 1963, draws a distinction between the partial loss and total loss in the following manner:
"56. Partial and total loss:-(1) A loss may be either total or partial. Any loss other than a total loss, as hereinafter defined, is a partial loss.
(2) A total loss may be either on actual loss, or a constructive total loss.
(3) Unless a different intention appears from the terms of the policy, an insurance against total loss includes a constructive, as well as an actual, total loss.
(4) Where the assured brings a suit for a total loss and the evidence proves only a partial loss, he may, unless the policy otherwise provides, recover for a partial loss.
(5) Where the goods reach their destination in specie, but by reason of obliteration of marks, or otherwise, they are incapable of identification, the loss, if any is partial and not total."
.....
"57. Actual total loss:- (1) Whether the subject-matter insured is destroyed, or so damaged as to cease to be a thing of the kind insured, or where the assured is irretrievably deprived thereof, there is an actual total loss.
(2). In the case of an actual total loss no notice of abandonment need be given.
......
"61. Constructive total loss defined:- (1) Subject to any express provision in the policy, there is a constructive total loss where the subject matter insured is reasonably abandoned on account of actual total loss appearing to be unavoidable, or because it could not be preserved from the actual total loss without an expenditure which would exceed its value when the expenditure had been incurred.
(2) In particular, there is a constructive total loss-
(i) where the assured is deprived of the possession of his ship or goods by a peril insured against, and
(a) it is unlikely that he can recover the ship or goods, as the case may be, or
(b) the cost of recovering the ship or goods, as the case may be, would exceed their value when recovered; or
(ii) in the case of damage to a ship, where she is so damaged by a peril insured against that the cost of repairing the damage would exceed the value of the ship when repaired.
In estimating the cost of repairs, no deduction is to be made in respect of general average contributions to those repairs payable by other interests, but account is to be taken of the expense of future salvage operations and of any future general average contributions to which the ship would be liable if required; or
(iii) in the case of damage to goods, where the cost of repairing the damage and forwarding the goods to their destination would exceed their value on arrival."
......
"61. Effect of constructive total loss:- Where there is a constructive total loss the assured may either treat the loss as a partial loss, or abandon the subject matter insured to the insurer and treat the loss as if it were an actual total loss."
22. (SIC)It appears that Sections 56 and 57 of the Marine Insurance Act, 1963, are verbatim reproduction of Sections 56 and 57 of the Marino Insurance Act of (SIC)19 of England. Likewise, the definition of constructive total loss in Section 60 of the Indian Act is verbatim reproduction of Section 60 of the English Act.
23. Our attention was drawn to three decisions where the English Courts have held that if the insurance is for total loss, the insured could not claim any compensation on account partial loss.
24. In the case of Price & Anr. Vs. Maritime Insurance Co. Ltd. (1901) 2 KB 412,a ship along with its cargo was insured for a voyage to Southampton. The ship got as far as Azores and then became a constructive total loss. The ship was insured for total loss but only a partial loss took place. The Court held that since the loss was only partial and the insurance was against total loss, the action by the insured must fail. Repelling the argument that it would be very inconvenient that persons covering themselves by insurance should not be entitled to recover because the entire ship and cargo was not lost. Stirling L.J. observed: "The answer to that suggestion seems to be that they could insure, not against total loss only, but against partial loss also"
25. In the instant case also the insured could have covered himself not only for total loss but also for partial loss which they did not. In this connection it has to be borne in mine that it has been stated by the Insurance Company on affidavit that for this type of voyages, partial loss policies are not issued as a matter of practice. Out break of fire in the ship breaking yard is very frequent and the Insurance Company does not usually cover such risks.
26. In the case of Continental Grain Company Inc. Vs. Twitchell, Vol. 78 Lloyd's Law Reporter 251, the material words of the policy, as showing the subject matter of the insurance were:
Anticipated earnings and/or interest, warranted free of all average. Only against total and/or constructive total loss of vessel as per clause attached hereto".
After setting out the material words, Lord Goddard observed :
"As I read that policy, it means this : "We, the under writers, are willing to insure the earnings which you, the assured, anticipate you will make in respect of this ship, but only against the loss of those earnings through a total or constructive total loss of the vessel; and, as it is warranted free of all average, we will pay you only if you sustain a total and nota partial loss of those earnings."
27. In the case of Western Assurance Co. of Toronto Vs. Poole (1903) 1 Kings Bench Division 376 the disputes was about the policy of reinsurance. The facts of the case were that .lm10 "the owners of the ship Edmund by a policy dated November 21, 1900, insured her with the plaintiffs for a voyage from Santa Rosalia to Portland (Oregon). By the terms of the policy, which was against partial as well as total loss, the sound value of the ship was agreed at 19, 0001. By a policy of reinsurance dated December 11, 1900, the plaintiffs reinsured themselves with the defendant (amongst other underwriters) "against the risk of total and/or constructive total loss only", the ship being expressed therein to be "valued as per original policy".
28. One of the question before the Court was whether the owners of the ship could recover for partial loss under the policy on reinsurance.
"The first question is whether there has been any constructive loss within the meaning of the contract sued on. It is quite a common practice for an insurer against total and partial loss to insure the risk of total loss while keeping himself uncovered as to partial loss. Of course he does this at a premium much lower than that which he himself receives for the double risk, and in the event of the insured vessel sustaining damage by the perils insured against it is very much to his interest that the damage should be sufficiently serious to constitute a constructive total loss, for in that event only can he get his loss recouped by his reinsurer, and secure his profit, namely, the difference between the two premiums. So, in the present case, the plaintiffs are anxious to make that which the ship owners treated as a partial loss under the original policy a total loss under the reinsurance policy".
29. Ultimately, it was held in that the risks covered by the policy of reinsurance did not extend to partial loss. It was found that it was not a case of constructive or actual total loss.
30. All these cases clearly bring out the principle that if a policy of insurance is taken for total loss, or constructive total loss, the Insurance Company will not be liable to pay for partial loss. Partial loss has to be separately insured.
31. Section 56(4) of the Marine Insurance Act enables the Court to award compensation even for the partial loss when a claim is brought for total loss, unless there are words in the insurance policy ruling out that possibility. The position has been explained in O'MAY or Marine Insurance, 1993 Edition, which reads as under:
"Similarly, "where the assured brings an action for a total los and the evidence proved only a partial loss", Section 56(4) of the Marine Insurance Act, 1906 states that the "assured may recover for a partial loss". If, of course, the policy "otherwise provides" as, for instance, the cover is against "total loss only", there would be no alternative claim for partial loss".
32. These observations will apply in full force to the law in India because the relevant statute is similarly worded. The Complainant had insured himself against the total or constructive total loss of the vessel. There was no insurance against partial loss. What has taken place is partial loss. The claim is also for partial loss only. The claim is also for partial loss only.
33. In fact, that is the reason why Surveyor, M/s. Tony Fernandez Average Adjusters Pvt Ltd. appointed by the Insurance Company declined to carry out the survey and assess the damage to the ship. The Complainant informed the Insurance Company by letter dated 16.4.1991 that a fire had taken place on the ship; "M.V.Chanda" on 12.4.1991 during the course of voyage. Tony Fernandes found the Insurance cover was for total or constructive total loss and not for partial loss. The Insurance Company wrote to the Complainant:
"On 16.4.1991, Tony Fernandezs Average Adjusters Pvt. Ltd. was appointed by the Insurance Company to carry out survey of the damages sustained by M.V.Chanda, as a result of a fire, on a strictly "without prejudice" basis. They requested Kalyanjee Jethalal Shah, the Complainant herein, to provide some documents like the Proposal Form, Insurance Policy complete with wordings, attachments endorsements of any, Seaworthiness Certificate for Voyage, Post Clearance. Ultimately, on 8.5.1991, the surveyor informed Kalyanjee Jethalal Shah that they will not be able to assess the loss "since there is no reason to do so. The purpose of this letter is to inform him that our assignment on behalf of your underwriters has been completed."
34. The Insurance Company explained its stand in its letter dated 1.11.1991 in the following manner:-
"We have given the cover for old ships which are meant and carried for ship breaking on its own power from the Ferrywharf to Bombay Darukhana Ship Breaking Yard, Bombay within the sheltered and protected water of the same port under the above referred policy. As soon as the loss was reported, M/s. Tony Fernandez Average Adjusters Pvt. Ltd. were appointed by us on 16.4.1991 and they have clearly mentioned that based on the (SIC)scruti of documents and policy terms and conditions, they are of the opinion that since the vessel is not a total loss (TL) or constructive total loss (CTL), as a result of the fire which occurred on 12(SIC).1991 there is no liability under the policy which only covers TL/CL."
35. The Complainant has relied upon the report of the Surveyor appointed by itself, M/s. Kanti Karansey & Co., who has made assessment of loss suffered as a result of fire, whose assessment clearly goes to show that certain parts of the ship and its footings were damaged. It was not a case of partial loss and not total loss or constructive total loss.
36. The law appears to be well settled that if there is an Insurance for total loss or constructive total loss in an action for total loss, the Court is empowered to award compensation for partial los also. But, that does not mean that even in a case where there is no allegation of total loss of the ship either actual or constructive, the loss is only a partial, the court can allow a claim of partial loss ignoring the wordings of the contract entered into by the Complainant and the Insurance Company under which cover was provided only to total loss or constructive total loss. Partial loss was not covered under the policy of insurance at all.
37. Under these circumstances the original petition must fail and is dismissed. There will be no order as to costs.