Delhi High Court
Jk Metal Industries vs Lloyds Agency & Anr on 17 April, 2014
Author: Sanjeev Sachdeva
Bench: Sanjeev Sachdeva
IN THE HIGH COURT OF DELHI AT NEW DELHI
Order Reserved on: 26 th March, 2014
Order Pronounced on: 17 th April, 2014
CS(OS) 1341/2013
JK M ETAL INDUS TR IES ..... P LAIN TIFF
Through: Mr. Rajan Khosla,
Advocate.
Versus
LLOYDS A GENCY & A NR ..... D EFENDAN TS
Through: Mr. Ankit Jain,
Advocate.
CORAM:
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
SANJEEV SACHDEVA, J.
IA No.18158/2013 (under Order XXXVII Rule 3 CPC for leave to defend by Defendant No.2.
1. The Plaintiff has filed the present suit under Order XXXVII CPC. The present suit is for recovery of a sum of Rs. 46,98,522/- alongwith pendente lite and future interest. As per the Plaintiff, the Plaintiff is in the business of manufacturing of Aluminium Cookwares. On 30.06.2012, a pro-forma invoice was ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 1 of 15 raised in favour of the Plaintiff by M/s. Qingdao Weilibang Chemical Co. Ltd., China for supply o f Aluminium Ingots 40 MT for a total amount of US D 65,400/-. On 22.08.2012, commercial invoice for the aforesaid transaction was issued by the supplier.
2. On 29.08.2012, the supplier executed a contract for insurance titled as "Cargo Transportation Insura nce Policy". As per the Plaintiff, in terms of the policy, in consideration of the premium paid by the insured, the affiliate of the Defendants undertook to insure the goods in transportation subject to the conditions of the policy. The contract of insur ance is stated to be from warehouse to warehouse covering marine insurance.
3. As per the Plaintiff, subsequent to the contract of insurance and the shipment of the goods by Cargo Transportation Company, the Plaintiff paid the price of the cargo and gained the right to file claim for the same. On 30.10.2012, subsequent to the arrival of the shipment at ICD Dadri, upon custom examination in ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 2 of 15 one container out of the two, the goods were found to contain stone painted with aluminium colour instead of aluminium ingots. The Plaintiff requested for a joint survey alongwith the survey of the second container which was yet to be opened by the Customs. On the conduct of the joint survey, it transpired that both the containers contained stones pain ted with aluminium colour instead of Aluminium ingots. The Joint Survey Report indicated that one of the seals of both the containers was found open and in one container the wire rope binding the tarpaulin of the open top container was found cut. The survey report indicated total loss caused to the Plaintiff with regard to the shipment. The Plaintiff submitted their insurance claim with the Defendants. The Defendants are stated to have issued a letter dated 28.12.2012 enclosing a copy of the survey report.
4. The Plaintiff claims to have sent reminders to the Defendants for the payment of the insurance claim. ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 3 of 15 However, the claim of the Plaintiff is stated to have been rejected by the Defendants, who advised the Plaintiff to take up the claim directly with the shipping company. The Plaintiff has, thus, filed the present suit under Order XXXVII CP C contending that there is a written contract i.e. the policy of insurance an d since there was total loss, liquidated amount being the amount of the invoice is due and payable by the Defendants.
5. The Suit is filed against one M/s Lloyds Agency and the Defendant No. 2. Neither the shipper nor the Insurance Company has been arrayed as a Defendant.
6. The Defendant No.2 has filed an application under Order XXXVII Rule 3 seeking unconditional leave to contest and defend the suit. As per the applicant/Defendant No.2, there is no entity by the name of the Defendant No.1 M/s. Lloyds Agency. The Defendant No.2 has further contended that it is not ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 4 of 15 liable to pay any amount towards the insurance claim as neither it is the insurance company that had issued the insurance policy nor it had entered into an insurance contract on behalf of the insurance company. The Defendant No.2 is not even a party to the insurance contract.
7. As per the Defendant No.2, the insurance policy has been issued by the insurance company M/s. PICC Property and Casualty Co. Ltd. (hereinafter referred to as "PICC") having its registered office in China. The insurance policy placed on record by the Plaintiff shows the name of the insurance company as PICC and the name of the underwriters also as PICC.
8. The Defendant No. 2 claims to be merely a surveyor appointed by PICC for the purposes of conducting a survey and submitting a report. The Defendant No. 2 is not underwriters to the policy of insurance. As per the Defendant No.2, the Plaintiff had themselves been communicating with the insurance company PI CC and ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 5 of 15 it is the insurance company that had declined the claim of the Plaintiff and answering Defendant had merely informed the Plaintiff that the underwriters had repudiated the claim on the ground that there was no proof that loss or pilferage had occurr ed during marine transaction.
9. Without prejudice to the stand that the Defendant No. 2 is not the insurance company and is not liable under the Insurance Policy, alternatively the Defendant No. 2 has further contended that there are disputed questions of facts relating to the transaction and the issue of loss of goods and the alleged pilferage is itself questionable inasmuch as the shipper had stated that the cargo was discharged at Nhava Sheva as a direct shipment from the port of loading and as such there were no chances of the cargo being pilfered as well as replaced with painted stone. The shipper has further stated that in their opinion fake cargo was loaded or replaced before the containers were received by the ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 6 of 15 carriers for shipping at load port and thus the very contract of insurance was eroded as what was insured was aluminium and what was shipped was painted stones. The Defendant No.2 has further submitted that a detailed investigation and trial would be requ ired to establish as to what was shipped and whether there was any collusion between the seller and the Plaintiff.
10. The Defendant No.2 has submitted that the Defendant No.2 is merely a survey agent which conducts the survey of goods and forwards the survey report to the insurance company for its consideration and once the survey is conducted and the report is submitted, the role of the Defendant No.2 ceases. The Defendant No.2 is not responsible for settlement of the claims of the insured nor has any authority of accepting or rejecting any claim. The Defendant No.2 has further submitted that the insurance company , which is a necessary party, has not been impleaded and as such, the suit is liable to be dismissed for non-joinder of the ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 7 of 15 necessary parties. It is further contended that the Defendant No.2 is neither a necessary nor a proper party to the present suit. The suit against the Defendant No.2 is not maintainable.
11. It is further submitted by the Defendant No. 2, that there is no entity by the name of M/s. Lloyds Agency the Defendant No.1. The Corporation of Lloyds does not conduct any insurance business. The function of Lloyds is to manage and regulate the Lloyds insurance market. The Defendant No.2 acts as survey agents for several underwriters at Lloyds and also for various other private insurance companies. The Lloyds agency has no concern or connection with the transaction. However, the word s "Lloyds Agency"
appearing on the letterhead of the Defendant indicates that it is associated with several syndicates at Lloyds and is a Lloyds certified surveyor. It is contended that there is no entity by the name of "Lloyds Agency" and as such, the Defendant No.1 is neither a necessary ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 8 of 15 nor a proper p arty.
12. The Defendant No.2 has further contended that the principal of the Defendant No.2 i.e. PICC is disclosed and as such, the Defendant No.2 is not liable under Section 230 of the Indian Contract Act. Learned counsel for the Defendant No.2 has relied on the judgment of the Bombay High Court in Midland Overseas vs. CMBT Tana, AIR 1999 Bombay 401 to contend that under Section 230 of the Indian Contract Act before the agent can be sued, it must be pleaded and shown that the principal is undisclosed and th e contract, the breach of which is sued on was entered into by the agent as having contracted personally.
13. Learned counsel for the Defendant No.2 has relied on the judgment in the case of Mathuradas Govardhandas vs. Eagle Metal & Industrial Products Pvt. Ltd. and Anr., 71 Calcutta Weekly News, CW M Page 211 to show what Lloyds Corporation is and does and that M/s Lloyds Agency is ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 9 of 15 not an entity.
14. The Supreme Court of India in the case of M ECHE LAC E NGINEERS & M ANUFAC TURERS V ERSUS B ASIC E QUIPMENT C ORPORATION 1976 (4) SCC 687 has laid down the principles for grant of leave to defend as under:
(a) If the Defendant satisfies the court that he has a good defence to the claim on its merits the Plaintiff is not entitled to leave to sign judgment and the Defendant is entitled to unconditional leave to defend.
(b) If the Defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the Plaintiff is not entitled to sign judgment and the Defendant is entitled to unconditional leave to defend.
(c) If the Defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 10 of 15 he has a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action be may be able to establish a defence to the Plaintiff's claim the Plaintiff is not entitled to judgment and the Defendant is entitled to leave to defend but in such a case the court may in its discretion impose conditions as to the time or mode of trial but not as to payment into court or furnishing security.
(d) If the Defendant has no defence or the defence set-up is illusory or sham or practically moonshine then ordinarily the Plaintiff is entitled to leave to sign judgment and the Defendant is not entitled to leave to defend.
(e) If the Defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the Plaintiff is entitled to leave to sign judgment, the court may protect the Plaintiff by only allowing the defence to proceed if the amount claimed is paid into court or otherwise secured and give leave to the Defendant on such condition, and ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 11 of 15 thereby show mercy to the Defendant by enabling him to try to prove a defence."
15. The Supreme Court in the case of M ECHE LAC E NGINEERS & M ANUFACTURERS (S UPRA ) has laid down that where the Defendant satisfies the court that he has a good defence to the claim on its merits or where the Defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence th e Defendant is entitled to unconditional leave to defend. Where the Defendant discloses such facts as may be deemed sufficient to entitle him to defend, i.e. though the affidavit does not positively and immediately make it clear that he has a defence, still, shows such a state of facts as leads to the inference that at the trial, the Defendant may be able to establish a defence to the Plaintiff's claim the Defendant is entitled to leave to defend but in such a case the court may in its discretion impose conditions as to the time or mode of trial but not as to payment ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 12 of 15 into court or furnishing security. Where the Defendant has no defence or the defence set-up is illusory or sham or practically moonshine then ordinarily the Plaintiff is entitled to a Decree and the Defendant is not entitled to leave to defend. Even in cases where the Defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the Plaintiff is entitled to a decree , the court may protect the Plaintiff by only allowing the defence to proceed if the amount claimed is paid in to court or otherwise secured and give leave to the Defendant on such condition, and thereby show mercy to the Defendant by enabling him to try to prove a defence.
16. In the present case, the affidavit filed by the Defendant seeking leave to defend raises a triable defence. The defence raised is that neither the Defendant is the insurance company that had issued the insurance policy nor had it entered into an insurance contract on ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 13 of 15 behalf of the insurance company. The Defendant No. 2 is not even a party to the insurance contract. The insurance policy has been issued by PICC which were also the underwriters and PICC had not even been impleaded as a party to the suit. The Defendant No. 2 is merely a surveyor appointed by PICC for the purposes of conducting a survey and submitting a report. The underwriters had repudiated the claim on the ground that there was no proof that loss or pilferage had occurred during marine transaction. There are disputed questions of facts raised relating to the transaction and the issue of loss of goods and the alleged pilferage is itself questionable in view of the stand of the shipper that the cargo was discharged at Nhava Sheva as a direct shipment from the port of loading and that there were no chances of the cargo being pilfered as well as replaced with painted stone. The shipper has opin ed that fake cargo was loaded or replaced before the containers were received by the ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 14 of 15 carriers for shipping at load port and thus the very contract of insurance was eroded as what was insured was aluminium and what was shipped was painted stones. Further that the Defendant No. 2 is not responsible for settlement of the claims of the insured nor has any authority of accepting or rejecting any claim. These are all disputed question of fact that require examination.
17. Applying the principles as laid down by the Supreme Court in the case of Mechelac Engineers & Manufacturers (Supra) it cannot be held that the Defendant No. 2 has no defence or the defence is illusory or sham or practically moonshine .
18. For the above reasons, I am of the view that the Defendant No. 2 is entitled to unconditional leave to defend the suit. The application i s accordingly allowed.
SANJEEV SACHDEVA, J April 17, 2014 st ========================================================= IA 18158/2013 in CS(OS) 1341/2013 Page 15 of 15