National Consumer Disputes Redressal
Ceyaki Shipping Pvt. Ltd. vs New India Assurance Pvt. Co. Ltd. on 21 March, 2017
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 278 OF 2011 1. CEYAKI SHIPPING PVT. LTD. No.1, Alfred House Avenue, Colombo 3, Sri Lanka ...........Complainant(s) Versus 1. NEW INDIA ASSURANCE PVT. CO. LTD. New India Assurance Building, 87, M.G. Road, Fort, Mumbai - 400 001 ...........Opp.Party(s) BEFORE: HON'BLE MR. JUSTICE V.K. JAIN,PRESIDING MEMBER
For the Complainant : Mr. Vikas Mehta, Advocate Mr. Rajat Sehgal, Advocate For the Opp.Party : Mr. Vishnu Mehra, Advocate Mr. Thomas Mofatt, R.O. Dated : 21 Mar 2017 ORDER JUSTICE V.K. JAIN, PRESIDING MEMBER
The complainant, being owner of a vessel namely MV Comorin Pride, submitted a proposal dated 18.6.2007 to the opposite for insurance of the aforesaid vessel. The complainant got the said vessel inspected through Industrial Maritime Surveyors Ltd. The said inspection / survey was carried out on 03.7.2007 and 04.7.2007 at a Port in Mombasa, Kenya. The report of the surveyor was forwarded by the complainant to the opposite party vide Email dated 12.7.2007, through its broker Athena Insurance & Reinsurance Brokers Pvt. Ltd. The opposite party then issued a Marine Hull Policy, insuring the aforesaid vessel for the period from 13.7.2007 to 12.7.2008 to the extent of US$ 6.4 million. The case of the complainant is that from 15.7.2007 to 17.7.2007, when the aforesaid vessel was on a voyage in Ballast from Dare-E-Salam Tanzania to Cochin to load a cargo she encountered heavy weather, as a result of which the vessel started rolling and pitching heavily due to continuous hitting of long swell on the vessel over the main deck and forecastle deck. On 17.7.2007, an inspection of the vessel was carried out by the crew which noted substantial deck side electrical and steel damages on the forward portion. Despite the aforesaid incident, the vessel completed her voyage, loaded the containers at Cochin and sailed to Jabel Ali in UAE on or about 01.8.2007. When the vessel arrived at Port of Khorfakkan in UAE, Master of the Vessel issued a Marine Note Protest, it was inspected by the surveyor appointed by the opposite party, namely BMT Marine & Offshore Surveyors at Jabel Ali. The surveyors issued a preliminary report referring to the damages found by them on the vessel. The aforesaid preliminary report dated 08.8.2007 was forwarded to the opposite party on 11.8.2007. After completing the discharge at Jabel Ali, the vessel proceeded to Mina Saqr Port where berth was not available from 16.8.2007 onwards and therefore, it sailed to Sharjah for completing the repair work. The repair work was carried out at the cost of US $ 4,13,948.85. The final report of the surveyor dated 16.1.2008 was forwarded to the opposite party. The opposite party thereafter, advised the complainant to appoint an Average Adjuster to determine the amount payable under the policy. The opposite party also received the Class Maintenance Certificate and International Safety Management Certificate, in terms of the request made by it. The complainant appointed J.B. Boda & Co. Pvt. Ltd., as the Average Adjuster who approved a sum of US $ 4,10,181.03 as the amount payable by the opposite party. Subsequently, the aforesaid Adjuster also raised a bill of US $ 19,596/- towards their fee which was paid by the complainant.
2. The claim was rejected vide letter dated 15.4.2010, which to the extent it is relevant, reads as under:
"1) The Certificate of Class and Certificate of Registry do not bear the name of the owner referred on the insurance policy viz. M/s. Ceyline Shipping (P) Ltd. These documents stand in favour of M/s. Ceyaki Shipping Pvt. Ltd.
As per Hull Classification clause (forming part of Policy), condition 1.4 warrants that all statutory or regulatory requirements whether arising before or during the period covered by this insurance shall be complied with insofar as they relate to the seaworthiness of the vessel. Therefore, not holding the registration certificate and certificate of class in favour of the insured mentioned in the policy M/s. Ceyline Shipping Pvt. Ltd., stands non-fulfilment of statutory regulations, thus resulting in breach of policy conditions.
Also the subject policy is having a condition of International Safety Management Code, which necessitates the owner/manager to hold valid documents of compliance as to International Safety Management Code under the solas convention 1974 as amended and also the vessel covered by the insurance policy to hold a valid safety Management Certificate issue by appropriate authorities. In the absence of this compliance "in no case shall this insurance conver any loss, damage, expenses and / or liabilities are traceable to non-compliance of provisions of ISM Code". In this case SMC is in the name of Ceyline Shipping Ltd., which is contradictory to owner as per class and registration certificate. The insured under the policy is not holding the certificate of registration as well as certificate of class but holding SMC. This is being breach of policy condition the insurance cover falls outside the purview of indemnity.
2. There was a claim reported on the subject vessel nothing damage due to bad weather on dated 29.6.2007. As per Hull Classification Clause (HCL-17) forming part of the policy. Its provision 1.5 stipulates that the owners / managers shall comply with all requirements of classification society regarding reporting to the society of accidents to and defects in the vessel. The clause further provides conditions point 1.3 that all outstanding recommendations, requirements or restrictions specified by the immediate past classification of society and relating to the seaworthiness of the vessel, such recommendations requirements or restrictions shall be complied with as specified. Non reporting of accident to the vessel on 29.6.2007 to class and not taking their recommendations for further voyages tantamount to breach of condition of classification society.
3. The current claim is reported to have happened on 15, 16, 17.7.2007, these dates of causality are not supported by proper evidence. As far as the documents submitted along with Marine Note of Protest dated 01.8.2007 with attachments of deck logbook does not contain date. Also, no further proof submitted to substantiate the loss independently happened on 15, 16, 17.7.2007. In the absence of class reporting and no proof to have completed the repairs arising out of the report accident on 29.6.2007 the vessel automatically stands un-seaworthy for its subsequent voyage after the date of causality on 29.6.2007. Hull classification clause and its conditions mentioned in above para-2 apply to the issue discussed in this para also.
In view of the above explained circumstances, we express our inability to consider your claim for payment".
Being aggrieved from the rejection of the claim, the complainant is before this Commission seeking a sum of US $ 4,56,482.06 along with interest @ 18% per annum, on US $ 4,29,777.01.
3. The complaint has been resisted by the opposite party, primarily on the grounds on which the claim was repudiated. It is alleged that due to non-submission of the heavy weather report and Class Maintained Certificate, the loss was from the incident of 25.6.2007 and there is no evidence of the class having been intimated either of the loss dated 25.6.2007 or of the loss subject matter of the complaint. It is also pointed out that since the vessel was sold after the incident, there was no scope for investigation. It is pointed out that some documents, related to the vessel, were in the name of Sea Ship Management Ltd., while offers were in the name of the complainant and the policy is in the name of the Indian Managers namely Cargo Serve. It is also stated that the Deck Logbook does not contain a date and there is no proof of the loss having occurred on 15th 16th and 17.7.2007.
4. The first question which arises for consideration is as to whether the insured had an insurable interest in the vessel on the date the loss is alleged to have taken place, or not. As per the proposal seeking insurance of the vessel, the name of the owner / proposer was Ceyaki Shipping Pvt. Ltd. The insurance policy was issued in the name of the Cargo Serve Shipping India Pvt. Ltd., as Managers, noting Ceyline Shipping Pvt. Ltd., as owners. A perusal of the agreement dated 10.6.2006 executed between Ceyaki Shipping Pvt. Ltd. and M/s. Cargo Serve Shipping India Pvt. Ltd. would show that the Cargo Serve Shipping India Pvt. Ltd. was appointed as the commercial manager of the Ceyaki Shipping Pvt. Ltd. As per the earlier agreement dated 01.6.2005, Ceyline Shipping Pvt. Ltd. was appointed as the Manager of Ceyaki Shipping Pvt. Ltd. Therefore, it is obvious that the policy was obtained by Cargo Serve Shipping India Pvt. Ltd. on behalf and for the benefit of Ceyaki Shipping Pvt. Ltd. It is also evident from the proposal that the name of the owner had been disclosed as Ceyaki Shipping Pvt. Ltd. to the insurer.
5. As rightly stated in para-21 of the Rejoinder, it was the mistake of the insurer to name Ceyline Shipping Pvt. Ltd. as the owners. Considering the ownership disclosed in the proposal, the name of the owner should have been Ceyaki Shipping Pvt. Ltd. It thus stands proved that the complainant company was not only the owner of vessel in question, the insurance policy was also obtained by it for its own benefit through its then agent M/s. Cargo Serve Shipping India Pvt. Ltd. Therefore, the complainant did possess the requisite insurable interest in the vessel on the date it allegedly got damaged.
6. One of the grounds for rejection of the claim is that the certificate of class and certificate of registry are not in the name of the complainant. As noted earlier, M/s. Ceyline Shipping was the previous Manager of the complainant, whereas the vessel was owned by the complainant. The certificate in the name of Ceyline Shipping Pvt. Ltd. was obviously issued on account of the fact that the vessel was being operated by it under Management Agreement it had executed with the complainant. The certificate being vessel specific, what is relevant is as to whether the Safety Management System of the vessel complied with the requirements of the ISM Code or not. The requisite certificate in respect of the vessel Comorin Pride issued on 28.12.2005 and valid upto 08.12.2010 is available on the paper book. Similarly, the certificate of Class dated 27.6.1986 in respect of Hull & Machinery of the aforesaid vessel valid upto 30.6.2011 is also available on record. Therefore, it cannot be disputed that the vessel in question did possess the requisite certificates. The name of the company in whose name the certificates are issued would be irrelevant so long as it is shown that the vessel was owned by the same entity which had obtained the insurance policy.
7. Admittedly, an incident involving this vessel had happened on 29.6.2007. It is also not in dispute that the aforesaid incident was not reported by the complainant to the class i.e. the entity which had issued the requisite class certificate to the vessel. As per Clause 1.5 of the insurance policy the complainant was under an obligation to comply with all the requirements of the Classification Society regarding the reporting to the Society, of accidents to and defects in the vessel. The question which arises for consideration is as to whether the incident of 29.6.2007 was required to be reported to the Classification Society or not. The contention of the learned counsel for the insurer was that had the incident been reported to the Classification Society as per Clause 1.5 of the ISM Code, the vessel would have been got inspected by the Classification Society and the measures recommended by the said society would have been taken by the complainant as a pre-condition for continuation of the Class Certificate. If the insurer is able to establish that the incident of 29.6.2007 was mandatorily required to be reported to the Classification Society, the repudiation of the claim would be justified since in that case it can be validly said that had it been brought to the notice of the Classification Society that the incident and / or the defect in the vessel which was required to be reported to it having not been reported, the class certificate had lost its validity.
No rules of the concerned Classification Society as regards the accidents and defects in the vessel required to be reported to it have been produced by the insurer though the complainant has placed on record instructions which to the extent they are relevant read as under:
"11.0 MARINE CASUALTY REPORTING 11.1 To Classification Society Company vessel are built and classed under the rules and supervision of a classification society. The rules of the classification society stipulates that damage to hull, machinery or equipment, which affects or may affect the seaworthiness or the classification, is to be submitted by the owners or their representatives for examination by the Surveyors.
In the event a vessel sustains damage which affects classification, the company shall make arrangements for Surveyor's attendance unless specifically advised to the Master to do so. All repairs recommended by the Surveyors are to be carried out to their satisfaction immediately or within the allowed ensuing period. Upon completion of the repairs, temporary or permanent, a Surveyor of the relevant society must be called to attend and approve the repairs and issue a certificate of seaworthiness.
It should be noted that the rules of the classification calls for automatic suspension of representations as to classifications if notification is not given promptly of any such instance. This could have significant consequences including possible loss of insurance coverage. The insurance policy contains a 'WARRANTED CLASS MAINTAINED' clause. This means vessels covered must remain in class at all times".
8. It appears from a perusal of the aforesaid clause that rules of the Classification Society may stipulate reporting of damage to the hull machinery or equipment of the vessel to the society where the damage affects or may affect the seaworthiness or the classification of the vessel. The rules may also provide for automatic suspension of the classification if such a report is not promptly given. The onus was upon the insurer to prove that the incident of 29.6.2007 had resulted in damage to the hull, machinery or equipment of the vessel and the said damage had affected or may affect the seaworthiness or the classification of the vessel. No evidence however, has been led by the insurer to prove that the hull, machinery or equipment of the vessel had sustained such a damage in the incident of 29.6.2007.
9. The case of the complainant as regards the incident of 29.6.2007 is that only two containers had fallen over board when the vessel was passing from Aden at Mombasa, but when the hatch covers were opened after discharging deck cargo no damage was observed to the vessel and therefore, the class was not informed. This is also their case that when survey was done on 03.7.2007, hull afloat machinery and spaces, deck machinery and fittings, container handling equipment, cargo hold, safety, communication and navigation equipment, firefighting and lifesaving appliances, crew and officers accommodation were noted to remain in satisfactory condition.
10. The report of M/s. Spica Marine Inspections Limited, Mombasa dated 05.7.2007 with respect to hull and machinery condition of the vessel Comorin Pride would show that the vessel was found to be in operation using shore cranes to discharge cargo of containers. The cranes of ship were stated to be out of use due to defective / severed power cables to the cranes having incurred damage at sea due to bad weather. Though, the power cables to the cranes were found to be defective or severed when the vessel was inspected on 03.7.2007, there is no expert opinion filed by the insurer to prove that mere defective / sea power cables to the crane had affected the seaworthiness or the classification of the vessel and therefore, was mandatorily required to be reported to the Classification Society. On the other hand, the surveyor after inspection of the vessel on 03.7.2007 concluded as under;
"Conclusion -
Hull and Equipment The hull was examined on the areas accessible and with full cooperation from the Master particularly on the internal examination of the cargo hold and deck areas.
From what we were able to examine, we noted some deficiencies as mentioned in this report.
Some hatch cover stools which are corroded and wasted need to repair Cargo hold require complete painting Some hatch pontoon require minor repairs, and made watertight.
b) Machinery installation, accommodation and Bridge Equipment Having examined all the engine room, accommodation and navigation bridge equipment as far as practicable at this time, it is a fair and just conclusion that the aforementioned machinery and structures therein remain in reasonably maintained condition as of this date.
The vessel is equipped with adequate spares to effect routine maintenance and deal with emergencies.
The engine room staff were noted to have the necessary experience and the engine room was considered well managed and maintained".
11. The above referred report does not indicate any such damage to the hull machinery or equipment which had affected or could affect the seaworthiness or the classification of the vessel. In any case, even if it is presumed that the aforesaid defects, which were noticed by the surveyor after the incident of 29.6.2007 had happened due to the incident of 29.6.2007, the fact remains that those defects were admittedly brought to the notice of the insurer and the insurance policy was issued only after the aforesaid report had been received by the insurer. Having issued the insurance policy, after coming to know the above referred deficiencies in the vessel, the insurer is precluded from denying the claim on account of the aforesaid defects and deficiencies or on account of the said defects and deficiencies having not been reported to the Classification Society. Having received the aforesaid report before issue of the insurance policy the insurer had an opportunity to ask the proposer as to whether the said defects / deficiencies in the vessel been reported to the Classification Society or not. That having not been done, the insurer is estopped from denying the claim on the ground that the defects were not reported to the Classification Society.
12. The claim has also been repudiated on the ground that there was no proper evidence of the damage to the vessel having happened on 15, 16 and 17.07.2007. It is pointed out that the deck logbook submitted along with Marine Note of Protest dated 01.8.2007, does not bear a date and no report of the incident of 15.7.2007 to 17.7.2007 was made to the Classification Society. As far as the alleged failure to report the incident of 15.7.2007 to 17.7.2007 to the Classification Society is concerned, the alleged failure would not affect the claim since an event post-damage to the vessel would not affect the claim for the damage caused prior to that event. The important aspect in this regard is that after the incident of 15.7.2007 to 17.7.2007, the vessel was inspected by M/s. BMT Marine and Offshore Surveys, appointed by the insurer.
13. The damages noted by the surveyor M/s. BMT Marine and Offshore Surveys were the same which were reported by the captain of the vessel. The survey was conducted at Jabel Ali Container Port UAE and a perusal of the said report shows that the surveyor had access to the logbook of the vessel at the time of survey. The survey was conducted in the presence of the Captain and Chief Engineer of the Vessel who were representing the owners. The vessel was found to be in possession of Valid Safety Management and Document of Compliance Certificates. The surveyor was informed that the damage was a result of heavy weather damage. In the opinion of the surveyor the damage could be reasonably attributed to the alleged cause. Thus, the surveyor did not dispute the cause of the damage given by the insured. The surveyor approved what they found to be fair and reasonable cost of repair agreed between the owners of the vessel and the repairers. The surveyors noted that the incident resulting in damage had happened on 15, 16 and 17.7.2007, the repair commenced at Mina on 03.8.2007, had to be stopped on 18.8.2007, it commenced again at Sharjah on 21.8.2007 and was completed there on 29.9.2007. Ordinarily, the report of the surveyor needs to be accepted unless it is shown to be a wholly arbitrary, perverse or untenable. In the absence of evidence to the contrary from the insurer, the cause of the damage accepted by the surveyor cannot be faulted with and needs to be accepted. It is important to note again that this vessel was first inspected on 03.7.2007, before the insurance policy was issued. The insurance policy commenced on 13.7.2007. There is no allegation of the ship having encountered an incident or having got damaged at any time between 03.7.2007 and 13.7.2007. The damages noted at the time of inspection on 02.8.2007 were different from the damages noted at the time of inspection on 03.7.2007. Therefore, it can be safely said that the damages giving rise to this claim were actually sustained by the vessel in the incident which happened from 15.7.2007 to 17.7.2007.
14. The learned counsel for the insurer sought to highlight that the photocopies of the logbook filed by the complainant which are available on pages 69, 72 and 75 of the paper book do not bear complete date. In order to satisfy myself as regard the dates on which the aforesaid logbook entries were made, I asked the learned counsel for the complainant as to whether the original logbooks can be produced before this Commission for its perusal. The learned counsel, after taking instructions, stated that since the vessel has been sold by the complainant, it is not possible for them to procure and obtain the original logbooks. The failure of the complainant to produce the original logbooks and to explain the absence of date on the photocopies however, is not sufficient to reject the claim which otherwise has been verified by the surveyor appointed by the insurer who had access to the logbook of the vessel. In fact, after receipt of the report from the Adjustor, the insurer informed the complainant that they had submitted the Claim Note to the head office and were awaiting the final sanction from the head office.
15. For the reasons stated hereinabove, I hold that the complainant is entitled to an amount equivalent to Indian Rupee US $ 410181.01 on the date of the loss, towards the cost of the repairs and US $ 19596 towards fee paid to the Average Adjustors appointed by the complainant at the instance of the insurer. The aggregate of the aforesaid two sums comes to Indian Rupee equivalent to US $ 429777.01 on the date of the loss. According to the complainant one US$ was equivalent to Indian Rupee 45/- at that time. There is no evidence to the contrary. Calculated accordingly the complainant is entitled to a sum of Rs.1,93,39,965.45 from the opposite party.
15. The complainant has claimed interest @ 18% per annum with effect from 19.7.2011. Considering the nature of transaction between the parties, the complainant, in my opinion, should be awarded simple interest @ 9% per annum on the aforesaid amount of Rs.1,93,39,965.45 with effect from 19.7.2011.
16. For the reasons stated hereinabove, the complaint is disposed of with the following directions:
(i) The opposite party shall pay a sum of Rs. 1,93,39,965.45 to the complainant; (ii) The opposite party shall also pay, to the complainant, simple interest @ 9% per annum on the aforesaid amount of Rs.1,93,39,965.45 with effect from 19.7.2011, till the date of payment;
(iii) The payment in terms of this order shall be made within three months from today;
(iv) In the facts and circumstances of the case there shall be no order as to costs.
......................J V.K. JAIN PRESIDING MEMBER