National Consumer Disputes Redressal
M/S. Syndicate Shipwright vs New India Assurance Co. Ltd. on 27 March, 2023
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 231 OF 2011 1. M/S. SYNDICATE SHIPWRIGHT Through Its (Partner) B-15, D.M. Kosambi Building, Vasco-Da- GAMA-403 802, Goa (India) ...........Complainant(s) Versus 1. NEW INDIA ASSURANCE CO. LTD. Senta Palagia Building, 1st Floor, Opp. Khalap Mansion Vasco Da Gama-403802 Goa ...........Opp.Party(s)
BEFORE: HON'BLE MR. C. VISWANATH,PRESIDING MEMBER HON'BLE MR. SUBHASH CHANDRA,MEMBER
For the Complainant : Mr Hemant Chaudhri, Advocate For the Opp.Party : Mr Vishnu Mehra, Advocate
Dated : 27 Mar 2023 ORDER
PER MR SUBHASH CHANDRA, MEMBER
1.This complaint under section 21(a)(i) of the Consumer Protection Act, 1986 (in short, the 'Act') seeks settlement of a claim of insurance with compensation and interest pertaining to complainant's barge insured with the opposite party alleging deficiency in service in the settlement.
2. The complainant states that he is the owner of MV Jay Gomenteshwar, a barge insured under Hull and Machinery policy no.141500/22/07/01/00000140 with the opposite party from 12.12.2007 to 11.12.2008. On 23.05.2008 the vessel was loaded with iron ore for Capxem and anchored in Zuari River, Goa due to low tide. However, due to tidal conditions in high tide subsequently, it drifted and turned on 24.05.2008 resulting in damage to the bottom. The opposite party was intimated on 26.05.2008 and an inspection was conducted by M J Alvares, a Surveyor appointed by the opposite party. The complainant was advised to take steps to remove the iron ore to prevent further damage. The complainant engaged M/s Western Dredgers to remove the cargo, keeping opposite party informed. On 27.05.2008 the iron ore was trans-shipped to the cargo owner. On 28.05.2008, M/s Kanishka Salvage & Underwaters Services Pvt. Ltd. was engaged to salvage the vessel after tender by publication in the local newspaper with consent of the Surveyor and the opposite party. The vessel was approved to be towed to Timblo Shipyard for bottom inspection which was done on 07.06.2008 as per agreement dated 29.05.2008. The opposite party appointed Mohan Naik as Principal Surveyor on 07.06.2008. As the vessel could not be dry docked at Timblo Shipyard due to technical problems, it was delivered to M/s Marine Tech Services at Chicalim on 24.06.2008. Bills for Rs.18,93,266/- and Rs.5,05,620/- were raised by M/s Kanishka Salvage and M/s Western Dredgers respectively which were submitted to opposite party. On 03.07.2008 the Surveyor, Mohan Naik admitted claim of Rs.26,63,401/- against the expenditure of Rs 28,29,257/- incurred. The opposite party, however, did not settle this amount till 17.07.2008. The complainant applied for a loan to Bank of Baroda to settle the bills. An estimate of Rs 80 lakhs to repair the vessel was conveyed to the opposite party by the complainant on 19.07.2008. Some correspondence seeking clarifications transpired between the parties, including the complainant providing to the opposite party cargo details from the cargo company and a certificate from M/s Agencia Commercial Maritime.
3. The Surveyor, Mohan Naik, submitted his report on 04.08.2008 certifying the bill of Rs 26,63,401/- as reasonable, recommending repair of 8 meters of midship section of the vessel and mentioning that steel and labour costs were rising while noting that dry dock facilities in Goa during the ensuing off season ending September were difficult to be secured. Complainant states that the opposite party failed to respond to this report resulting in it addressing a letter dated 16.08.2008 to the Goa Barge Owners Association for intervention. Complainant sent letter dated 18.08.2008 to the opposite party proposing dry docking in M/s Waterways Shipyard Pvt. Ltd., for which he received consent on 27.08.2008. Complainant requested the shipyard to purchase steel in advance since it lacked funds. Opposite party was informed that the salvagers had a Maritime Lien on the vessel and were pressing for their bills. M/s Waterways Shipyard sought an advance of Rs 30,00,000/- to commence works on 11.09.2008. On 25.09.2008 the Surveyor sent another report certifying that the vessel was manned by competent and certified crew and while General Average was not allowed, loss to vessel and cargo was caused by an insured peril under the policy. As per Marine Law, the complainant kept the Captain of the Port and the Indian Register of Shipping informed. The complainant avers that he availed a term loan of Rs 30,00,000/- from Bank of Baroda of which Rs 24,00,000/- was released to Waterways Shipyard as per a tripartite agreement between complainant, M/s Waterways Shipyard Pvt. Ltd., and the Bank dated 16.10.2008.
4. In view of the delay in repairs and pressure from the bank, complainant states that he requested for rescheduling of the loan with a year's moratorium on the interest on 24.11.2008 and sought time from M/s Kanishka Salvage Services on 26.11.2008 for payment. M/s Waterways Shipyard commenced dry dock from 14/15.01.2009 and asked for advance of Rs.30,00,000/-. Opposite party released Rs 13,00,000/- to them on 15.01.2009. As per damage report of Indian Register of Shipping, the shipyard asked for an additional Rs 25,00,000/- for repairs. The complainant states that he sought a Rs 6,00,000/- loan from the bank for this purpose. Despite a request from the shipyard for advance of Rs 35,00,000/- and demand letter dated 05.02.2009 for Rs 30,00,000/-, according to the complainant the opposite party did not respond and sought information vide letter dated 19.02.2009. M/s Kanishka Salvage sent a final notice dated 21.02.2009 which was conveyed to opposite party along with bills of M/s Waterways Shipyard on 26.02.2009. Due to lack of payments, the Shipyard undocked the vessel after bottom repairs. On 15.04.2009 the opposite party released Rs 15,00,000/- to Bank of Baroda to clear salvage and repair dues. Consequently the ship was re-docked on 08.08.2009 by M/s Waterways Shipyard with a further demand of Rs.5,00,000/-. The repair work was completed on 27.08.2009 and a bill of Rs.90,78,506.28 was raised which, on objection by the surveyor, was reduced to Rs.84,68,519.51. However, this was also contested by the opposite party and a request for interim payment of Rs 5,00,000/- was not agreed to. The Principal Surveyor, in his report dated 25.11.2009, stated that the steel prices charged were very high and that it should not have been procured in September 2008 when the docking schedule was in January 2009; hence, steel prices of December 2008 would be considered. Fabrication charges were also stated to be very high and damages due to grounding on 24.05.2008 and subsequent handling were considered ineligible to be included for the claim which was sanctioned for Rs 31,42,642.34 against Rs.99,92,583.50 claimed.
5. The complainant states that he appointed M/s Richard Hogg Lindley (India) as an Average Adjuster and, on their advice, appointed M/s Scansea Marine as Surveyor to review the report of the Principal Surveyor. On 13.01.2010 and 16.02.2010 the opposite party sought additional documents which were provided by the complainant. In the meanwhile the complainant was under constant pressure from the Bank which threatened to make the account a Non - Performing Asset (NPA). On 16.03.2010 the opposite party released Rs.6,00,000/- as part payment and held the claim to be 'Non Standard'. During discussions on 19.06.2010 the opposite parties objected to the appointment of the Average Adjuster. Vide email dated 24.06.2010 the Surveyor claimed to be an Average Adjuster as well, which according to the complainant, is bad in law since the adjuster was required to be a Third Party. The complainant avers that its efforts with the opposite party at senior levels not to consider the claim to be 'Non-Standard' as its own Surveyor had found the vessel to be manned by certified and competent crew was disregarded. The opposite party pressurized the complainant to settle the claim for Rs 10,35,455/-. Its legal notice dated 01.07.2011 was not replied to by the opposite party. Its account with the Bank of Baroda has been declared NPA due to the delay by the opposite party. The complainant is therefore, before us with the prayer to:
Award the compensation amounting to Rs 6,96,42,327/- as against the opposite party and in favour of the complainant; Award interest at the rate of 18% on the awarded amount from the date of filing till the payment is made; Award a sum of Rs 10,35,445/- as part payment of the total claim as an interim relief; and Pass any other order/ direction as this Commission may deem fit and proper in the facts and circumstances of the case.
6. The complaint was resisted by opposite party by way of a reply. He has contended that the complaint is not maintainable as the complainant has taken the policy of insurance from opposite party no.1 for a commercial purpose and that a report from a licensed surveyor was mandatory as per Section 64 UM (2) of the Indian Insurance Act, 1938 to settle claims. According to the opposite party, the surveyor's report dated 03.07.2009 stated that the vessel was damaged due to gross negligence of the crew which was negligent in not taking periodic soundings of water in the double bottom tanks and not reporting that the vessel was drifting so that adequate action could have been taken to prevent the accident. Two punctures in the outer shell just below the chine were noticed by the divers and sealed with cement during the salvage operation which indicate damage due to hitting a hard underwater object. The report of the final surveyor dated 04.08.2008 also observed negligent acts of crew in loading, anchoring, watch keeping etc. According to this report, improper loading ultimately led to grounding of the loaded barge as it was loaded in two end points which caused buckling at midship.
7. However, the surveyor recommended to disburse the expenditure incurred by insured for sue and labour etc., and assessed the net liability of the opposite party at Rs.31,42,642.34/-. As the opposite party had already paid a sum of Rs.34,00,000/- to the complainant, the balance of Rs.10,35,445/- was offered in full and final settlement of the claim treating the claim as 'non-standard' which was paid as per orders of this Commission dated 24.08.2012. This offer was rejected by the complainant.
8. It is contended by the opposite party that complainant has also included charges incurred towards annual repair in the claim which has been disallowed by the surveyor in his adjustment report dated 25.11.2009 and that the complainant is not entitled to any amount over what has already been paid to him by the opposite party, i.e., Rs.44,35,445/-. As the surveyor's report is an important document as per law settled by Hon'ble Supreme Court, the claim has been settled on non-standard basis by the opposite party which has held that the complainant had been grossly negligent and had not acted with due diligence.
9. Parties led their evidence and filed rejoinder and written submissions. We have heard the learned counsel for both the parties and carefully considered the material on record.
10. Learned counsel for complainant argued that the claim of Rs.87,06,882/- was justified. It was argued that the opposite party had wrongly settled the claim on 'non-standard' basis for Rs.34,00,000/-. It was contended that the crew of the vessel was certified as competent and had not been negligent and that the vessel was damaged due to tidal conditions. The vessel was repaired under intimation to the opposite party at a cost of Rs 1,31,42,327/- on account of salvage, dredging and repairs for which the opposite party paid only Rs 34,00,000/- leaving a balance of Rs.97,42,327/- which is claimed towards interest, business and financial loss, mental agony and litigation costs. Deduction of 25% claim by treating the claim as Non Standard due to alleged negligence by opposite party is contested as being contrary to the report of the Spot Surveyor, M J Alvares. The report dated 03.07.2008 of Mohan Naik, Surveyor, M/s Maritime Services Company is also cited to state that the insured acted prudently to minimize the loss. The report of the Final Surveyor dated 25.09.2008 is also relied upon as it noted that the vessel was manned by competent and certified crew and no lack of diligence was noted. It is also argued that as per clause 6.2.3 of the Hull Policy, crew negligence is also an insured peril. It is, therefore, argued that the stand of the opposite party is not justified. It is also argued that the opposite party's stand that the cost of steel purchased was high is not valid since the purchase was done by M/s Waterways Shipyard based on the planned schedule for dry docking and no advance was released by opposite party. The prices of steel in September 2008 need to be considered and approved as repairs were scheduled for September 2008 as informed to the opposite party and as noted by the Surveyor himself in his report dated 04.08.2008 that steel prices were rising; therefore, purchase of steel in September 2008 should not be faulted. It is argued that General Average has no bearing since river transit in Goa is not covered under insurance and complainant did not receive any freight charges even after delivering cargo to the cargo owner and hence there was no contribution in this regard by them. The delay in payments by the opposite party are stated to have caused huge financial losses, including the loan obtained turning NPA resulting in interest liabilities and the non-availability of barge causing business and financial losses.
11. On the contrary, it has been argued on behalf of the opposite party that the report of M J Alvares, Spot Surveyor dated 03.07.2008 had held the crew to be negligent in anchoring of the vessel by the Master and the crew did not report the drifting of the vessel which could have prevented it from running aground. The loading was done negligently as the cargo of iron ore was not evenly distributed in the holds of the barge. It was stated that due to improper anchoring, the bottom hull, in all probability, hit a hard object when the tide swung it around and this punctured the hull. Two punctures in the outer hull were noticed by divers below the chine which were sealed with cement during salvage operations. It is also contended that the pumps could not pump out the large volume of water in the barge which caused the barge to buckle due to the load in the midship section and the weight of water. The Final Surveyor in his final report dated 25.09.2008 noted that the loss suffered was due to grounding which was not a covered peril. While there was extraordinary expenditure on preserving the cargo, the Master did not declare General Average which is not covered under insurance. The opposite party assessed partial loss of general average including expenditure for sue & labour etc. (recovery & removal) without considering damage repair due to the grounding incident and other damages. The net liability of opposite party was assessed at Rs.44,35,445/-. As part payment of Rs 34,00,000/- has been made, Rs 10,35,445/- was offered as full and final settlement of the claim on non-standard basis which was rejected by the complainant. However, this amount stands paid as per this Commission's order dated 24.08.2012. Charges against annual repairs included in the claim by the complainant have been disallowed. According to the opposite party, the complainant is not entitled to any claim beyond Rs 44,35,445/- already paid.
12. From the above, it is manifest that the opposite party has concluded based on the final Surveyor's report dated 04.08.2008 that the crew of the barge was not certified and competent, and, therefore, considered the accident to be due to the negligence of the complainant. Accordingly, it has been held that General Average be applied and the claim be settled on Non Standard basis, the implication of which is a 25% deduction in the claim amount. It is not denied by the opposite party that the complainant did not keep it informed of the developments in the matter such as the salvage of the barge and cargo, identification of the dry dock in M/s Waterways Shipyard and procurement of steel, etc. The opposite party released funds in installments (Rs.13,00,000/-, Rs.15,00,000/- and Rs.6,00,000/-) and Rs.10,34,445/- as per order of this Commission dated 24.08.2012. However, from the evidence, based on the correspondence, placed on record by the complainant, it is apparent that there had been considerable delays in release by the opposite party. The opposite party has admitted the claim to the extent of Rs.44,35,455/-.
13. The report of the Spot Surveyor, M J Alvares reads as under:
"On Master's orders the engine driver started the aux. engine and began pumping out the water. He also opened the manhole of the double bottom tank and with the help of the deck pump removed water from the double bottom. However, despite all their effort the water level inside the cargo hold kept on rising as the high tide came in. As more and more water collected in the cargo hold the midship of the barge slowly began to buckled and water started coming over the coming of the cargo hold. And soon after the crew heard loud sounds of steel members and plats of the cargo hold breaking/bending as the barge slowly got grounded on the spot. The Master and the crew got busy to keep the engine room free from ingress of water by plugging whatever leaks appeared on the engine room bulkhead. At this stage the Master informed the owners on mobile and asked for more pump sets.
14. The final report of the surveyor Mr Mohan Naik on the issue reads as below:
"Grounding is one of the perils of the seas rivers lakes or other navigable waters, the insured perils, in terms of clause 4.1.1 of ITC Hulls Port Risks wordings, which is attached to the policy. This peril is not subject to the 'Due diligence proviso'. We have investigated and noted that, at the time of casualty, the vessel was manned by competent and certified crew . Also, we haven't come across any evidence to indicate lack of due diligence on the part of assured in having caused or aggravated the loss."
15. The opposite party while allowing the claim for Rs.44,35,455/- has considered the following calculation:
a.
Salvage Charges Rs.27,82,141.00 b.
Sue and Labour Rs. 3,99,602.00 c.
Particular Average (repairs) Rs.30,96,075.00 TOTAL Rs.62,77,818.00 Less : Under Insurance Rs. 3,13,891.00 TOTAL Rs.59,63,927.00 Less : Deductible Rs. 50,000.00 TOTAL Rs.59,13,927.00 75% (Claim being non-standard) Rs.44,35,445.00 Less: On account payments (3 Nos.) already made Rs.34,00,000.00 Balance Amount to be paid Rs.10,35,445.00 Further, agreeing with the surveyor's adjustment report dated 25.11.2009 to be considered as final, the opposite party offered the balance amount of Rs.10,35,445/- in full and final settlement of the claim treating the claim as non-standard since the complainant was found to be grossly negligent in not acting with due diligence.
16. The complainant has contended that the opposite party has wrongly considered the claim on 'non-standard' basis as its own surveyor had noted that the crew was certified and competent. It has also contended that the 'General Average' applied was incorrect as the Surveyor claimed to be the Average Adjuster also since he should be a third party apart from not being applicable to riverine transport in Goa. Disallowance of steel prices of September 2008 on the ground that these were higher than prices in December 2008 and the schedule of dry docking was in January 2009 is disputed as it was planned to dry dock in September 2008 itself as per advice of the surveyor. Finally, loss due to interest on bank loan to pay for repairs and on account of loss of business opportunity Rs.42,71,437/- have also been claimed.
17. The complainant has claimed the repair expenditure of Rs.1,31,42,327/-. The opposite party has disallowed Rs.99,92,583.50 from this amount as annual repairs and therefore, ineligible. Against the balance of Rs. 31,49,743.50, the opposite party has paid Rs.34,00,000/- towards salvage and repairs. A further Rs.10,35,445/- was paid as per this Commission's interim order dated 24.08.2012, whereby the net payment by opposite party is Rs.44,35,445/-.
18. However, from the records it is evident that the surveyor had advised the complainant to initiate and complete the dry dock repairs of the barge expeditiously. As per the report of the surveyor Mr Mohan Naik dated 04.08.2008 which reads as under:
c. That for repairing the vessel around 8 meters of midship section should be renewed to repair the causality damages suffered by the vessel.
e. That since the day of casualty, steel prices is going up and also of connected consumables and labour.
f. It is very difficult to get dry docking facility in Goa in this off season, as the most of the vessels in Goa are being repaired for maintenance and trading license in this season only, ending September 2008.
g. Generally vessel repair is booked in advance in the month of March of before, to repair vessels in the Month of May, June, July, August and September after paying an advance of Rs.2 to 3 lakh and assuring them that, requisite steel shall be available at that time. Many time, advance booked dates are not entertained by the shipyard, if the steel is not made available to them before the booked date.
[ Emphasis added ]
19. It is also stated by the surveyor, in the same report under the heading "Estimate of Barge Repair', it has been stated that:
"Owner had informed vide his letter dated 17.07.2008, that his estimate of repairs is Rs.80,00,000/-. As per our survey findings and considering the present rate of steel, repair charges etc., it should be in the region of Rs.36,00,000/- subject to the testing of plates for thickness and staging of joints. We noted that since the day of casualty, steel prices are going up and also of connected consumables and labour.
[Emphasis added]
20. As per the letter dated 11.09.2008 (Annexure C - 29) from the Waterways Shipyard Pvt. Ltd., addressed to the complainant procurement of 50 metric tonnes of steel for repairs had been done on the basis of complainant's letter dated 04.09.2008 and an advance of Rs.30 lakh to cover the steel cost was asked for since "in today's market credit facilities are not available for purchase of steel".
21. From the foregoing it is evident that the surveyor had noted the constraints in procuring the steel during off season when dry dock facilities were undertaken. It is also evident that the complainant was acting in his best interest by seeking expeditious repairs of the barge while it was in dry dock for which also there was great demand during the off season. Any delay in procurement of steel would have entailed higher costs in dry dock and consequently, the delay in repair of the barge and its subsequent utilization. It is therefore, logical to consider the procurement of steel in September to have been in the best interest of the complainant under the circumstances.
22. The action of the complainant in identifying M/s Waterways Shipyard for the purpose of dry dock has not been denied. It is also apparent from the record that the complainant had sought on account of transfer of funds for the procurement of steel items for undertaking the repairs of the barge which was not done. Under such circumstances, disallowance of the steel price paid by M/s Waterways Shipyard in September 2008 on the ground that the steel items should have been procured in December 2008 when prices were lower cannot be justified. No evidence has been brought on record to show that steel prices were likely to fall in December 2008. Since the intention of the complainant was early repair of the barge and the surveyor had advised "it is very difficult to get the dry dock facility in Goa in this off season", the complainant should not be penalized for having acted with due diligence to expedite the repairs of his barge when the apprehension of the surveyor himself was that there could be delays on account of availability of steel for the required repairs, if advance action was not undertaken to procure the steel. Disallowance of this item by the surveyor in his final report is contrary to his own advice on which the complainant acted. The final report of the surveyor has allowed Rs.31,43,642.34 towards steel prices based on the price of steel in December 2008 as against Rs.34,99,432.32 for steel and Rs. 23,75,573.28 for fabrication as against Rs.43,26,768.63 claimed by the complainant as per the price in December 2008. While a surveyor's report under section 64 UM of the Insurance Act, 1938 is an essential requirement in finalizing insurance claims, the Hon'ble Supreme Court in New India Assurance Co. Ltd. Vs. Pradeep Kumar (2009) 7 SCC 787 has held that:
"...the assessment of loss by the approved surveyor is a prerequisite for payment or settlement of claim of twenty thousand rupees or more by insurer, but surveyor's report is not the last and final word. It is not that sacrosanct that it cannot be departed from; it is not conclusive . The approved surveyor's report may be the basis or foundation for settlement of a claim by the insurer of the loss suffered by the insured but surely such report is neither binding upon the insurer not insured."
(Emphasis added)
23. We are therefore, of the view that the opposite party has acted arbitrarily in disallowing the claim on account of steel prices and fabrication charges for Rs.43,26,768.63 and allowing only Rs.31,43,642.34/-. For this reason, the complainant is entitled to the difference of Rs.11,83,126.29 in addition to Rs.44,35,445/- already paid.
24. In view of the foregoing, we find merit in the complaint which is partly allowed. The opposite party is directed to pay a sum of Rs.11,83,126.29 along with interest @ 9% per annum from the date of filing of this complaint within eight weeks from the date of receipt of this order. In case the order is not complied within the stipulated period, it shall carry an interest @ 12% per annum till the date of realization.
25. The complaint is disposed of with these directions.
...................... C. VISWANATH PRESIDING MEMBER ...................... SUBHASH CHANDRA MEMBER