National Consumer Disputes Redressal
Forbes & Co. Ltd. vs Oriental Insurance Co. Ltd. & Others on 20 July, 2016
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 34 OF 2008 1. FORBES & CO. LTD. FORBES BUILDING, CHARANJIT RAI MARG, FORT, MUMBAI - 400001 ...........Complainant(s) Versus 1. ORIENTAL INSURANCE CO. LTD. & OTHERS ORIENTAL HOUSE, P. B. NO. 7037, A - 25 / 27, ASAF ALI ROAD, NEW DELHI - 11002 2. ORIENTAL INSURENCE CO. LTD. MUMBAI CITY DIVISIONAL OFFICE NO. 14, ORIENTAL HOUSE, 1ST FLOOR, 7, J. TATA ROAD, CHURCH GATE, MUMBAI - 400020 3. ORIENTAL INSURANCE CO. LTD. REGIONAL OFFICE - I, MUMBAI, ORIENTAL HOUSE, 2ND FLOOR, 7, J. TATA ROAD, CHURCH GATE, MUMBAI - 400020 ...........Opp.Party(s) BEFORE: HON'BLE MR. JUSTICE V.K. JAIN, PRESIDING MEMBER
For the Complainant : Mr. Joy Basu, Sr. Advocate with Mr. Saurajay Nanda, Advocate Mr. Ishaan Chhaya, Advocate For the Opp.Party : Mr. Vishnu Mehra, Advocate Dated : 20 Jul 2016 ORDER JUSTICE V.K. JAIN, PRESIDING MEMBER
The complainant purchased a Combined Marine Hull Policy from the opposite party, in respect of a vessel, namely, MV Sterling Seas, for the period from 1.3.2004 to 28.2.2005, for a sum assured of Rs.12.5 crores. On 4.3.2004, the aforesaid vessel, after completion of sale to the complainant, set sail from Dubai Anchorage, where it had been docked. The vessel allegedly ran aground within 40 minutes of having set sail and allegedly touched the bottom of the seabed, leading to damage to the blades of its propellers and its port side bilge keel. The vessel was refloated on 7.3.2004 using a tug in conjunction with the vessel own power and it proceeded to Dubai Anchorage for investigation and inspection. An underwater dive survey, held following the refloating, revealed no damage relating to the incident. It was reported by the Principal Surveyor, Mr. Graham Ellis that the dive survey highlighted damages which were apparently pre-existing the incident. The first damage was stated to be damage to 4 out of the 5 blades of the propeller near the tips, including missing material and bent over leading edges. The other damage was that a one metre section of the bilge keel on port side was bent over and required renewal. The surveyor however recommended further inspection at the next dry-docking which was due in December 2004. As regards the allegation of the complainant that the vessel had grounded on 4.3.2004, the surveyor opined that the incident, as described by the complainant had reasonably occurred in the manner alleged by it.
2. The complainant had on its own appointed UMC International Plc to ascertain the damages to the vessel. After inspection, it was reported by them on 07.3.2004, that the port side bilge keel had a small bend which was not a recent anomaly or related to the grounding incident. They also found propeller to have bendings in way of edges, coupled with small splits and missing sections. They reported that the vessel had touched the bottom on the seabed as was visible by the presence of soft mud and sand attached to some areas of the flat bottom but there was no set up, indentation or undulation evident or indeed present throughout the vessel length.
Vide letter dated 08.3.2004, ASP Ship Management (I) Pvt. Ltd. informed Director General of Shipping and Mercantile Marine Department that the underwater inspection had been completed and no damage was found on the bottom. It was further stated in the said letter that there were no injuries. Vide letter dated 08.3.2004, the complainant informed the insurer that no apparent damage had been noticed on completing the underwater surveyor, but a closer examination would be required.
3. The aforesaid vessel was also inspected at Muldwarka (Gujarat) by the Ericson & Richards (Gujarat) on 21-22.03.2004 in the presence of the Superintendent of the complainant and found to be in a very poor state of upkeep and maintenance. The inspection report, submitted by the aforesaid agency, which was also signed by the Master of the vessel, pointed out a large number of the damages and deficiencies in the said vessel. Some of the said damages and deficiencies were as under:
"1. Gangway platform, portside, underside of turntable corroded. To repair as necessary.
2. Hoisting wire to gangway heavily corroded and individual wires broken. To renew.
3. Fuel oil, Diesel oil - spark arresters to air / overflow pipes to replace where heavily corroded / holed / missing.
4. Winches on forecastle deck to forward derricks, wires heavily corroded and individual strands broken. Wires to renew. Winch foundation platform, heavily corroded / holed in places. To repair as required.
5. Gunwale capping and guard rails on forecastle deck poop deck and rails to accommodation access ladders heavily wasted / corroded. To renew as necessary.
6. Roller fairleads on forecastle and poop decks heavily corroded / holed and frozen. To repair / renews as required.
7. Hydraulic header tank to anchor windlass located on Samson post, tank plating, heavily corroded and piping from tank to the hydraulic pump heavily wasted and leaking. To repair.
8. Operating platform to windlass, heavily corroded / wasted. To repair / renew joy stick bearing housing, bearing and connecting rods, heavily corroded. To repair / renew.
12. Weather deck hatch coaming stays, flanges holed and corroded in several locations. Necessary repairs / renewals to be carried out.
13. Chronometer not on board. To supply.
15. Satellite EPIRB on Navigating Bridge portside not fitted with flat free release mechanism. The EPIRB was also found secured to the stand. To rectify.
16. Both port and starboard lifeboats, thwarts, clamps, skates etc. in poor condition. Internal of both boats found dirty. To rectify through renewals / repairs.
22. All topside tanks, frame, longitudnals, bulkheads, dockheads, beams, sloping plates, upper and lower brackets to frames and piping heavily corroded. All tanks dirty and filled with loose rust. Necessary repairs to carry out and tanks to be cleaned and coated.
25. Main deck, poop deck and forecastle plating, including cross deck plating, heavily rusted, devoid of coating and thinned down in various locations. To be attended to.
26. Access platforms over piping of weather deck between hatches, plating corroded and thinned down. To repair / renew as necessary.
32. Hydraulic lines to cranes, corroded / holed in places. To repair / renew as required.
38. Almost all pipelines under engine room floor plates heavily corroded. Few pipes found temporarily repaired and secured with jubilee clips and rubber joints. To be replaced and coated.
44. Sound powered communication between engine room and wheel house, as also between steering flat and wheel house inoperative. To rectify.
50. Emergency Fire pump not developing pressure to deliver two jets of water. To be repaired and made functional.
4. The case of the complainant is that subsequently the vessel experiences extensive shuddering during its voyage and, therefore, its dry docking was preponed to May 2004. For this purpose, the vessel was docked at Dubai Dry Docks on 27.5.2004. At Dubai Dry Dock, the propeller of the vessel was allegedly removed to workshops and later refitted. Bent sections were faired as necessary and the areas of missing material were dressed. The propeller was then balanced to account for the areas of the missing material. The tail shaft was removed to check for damage to the stern tube bushes and later refitted. The owner elected not to repair the damaged bilge keel sections. The owner also reported that a sea trial was completed after repairs with no problem encountered. The repairs were carried by the owners on account of their own account during the docking. The vessel sailed from Dubai Dry Docks on 10.7.2004. In his report dated 9.9.2004, Mr. Graham Ellis, Principal Surveyor with Mr. Mark Ross as Attending Surveyor confirmed that the damages were in the way of bottom plating of the hull which was in contact with the seabed during the grounding. They considered it possible that the said damages could relate to the grounding incident of 4.3.2004.
5. Vide letter dated 28.03.2006, the claim lodged by the complainant was repudiated by the insurer. The said letter, to the extent it is relevant reads as under:
"With reference to your letters dated 23rd July, 2005 and 4th January, 2006 in the above matter we have thoroughly investigated the cause of alleged damage to 4 Blades of Propeller and Port Side Bilge Keel and our enquiry reveals that the nature of damage is such that it would not be due to grounding or during re-floating with the propulsion at full ahead. Further the vessel did not have updated Navigation Chart with information relevant to the location which was previously issued in notices to the Mariners and the Vessel was not carrying full set of notice Mariners describing the start of the Land Reclamation project at the grounding location.
In view of the above and following grounds amongst others in Terms and Conditions of the Policy, the claim is not payable.
The damage to 4 Blades of Propeller and Port side Bilge Keel is found to be pre-existed and during the Underwater Survey no damage was observed relating to the incident as was confirmed by Vessel's Manager M/s. ASP Ship Management India Pvt. Ltd.In their letter No.200/DGS/ASP dated 8th March, 2004 to The Director General of Shipping as well as to The Principal Officer, MMD, Bombay.
The Vessel has violated Warranty of Seaworthiness and the alleged loss / damage, if any, due to grounding is attributable to Unseaworthiness.
Under the circumstances, with regret we have to reject your claim for alleged damage to 4 Blades of Propeller and Port Side Bilge Keel etc. of physical damage which had either pre-existed before the incident of Grounding or has occurred due to Unseaworthiness of the Vessel".
6. Being aggrieved from the rejection of its claim, the complainant is before this Commission, seeking award of a sum of Rs.1,23,54,151/-, along with interest, etc.
7. The complaint has been resisted by the insurer which has inter-alia taken the stand that the complainant did not suffer any loss due to alleged grounding incident of 04.3.2004 and the alleged damages to the blades of the propeller were pre-existing. The opposite party has in its reply also referred to the survey report dated 21/22.03.2004 bringing out as many as 52 deficiencies / defects in the vessel and has pointed out that damage to the propeller blades is nowhere mentioned in the said survey report. The insurer has also alleged that the vessel had violated the warranty of seaworthiness and the loss / damage, if any, is attributed to the unseaworthiness of the vessel.
8. Section 41 (4) of the Marine Insurance Act, 1963 provides that a ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the sea of the adventure insured. Section 41 (5) of the said Act provides that in a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.
The case of the insurer is that since the vessel in question when allowed to sail was in an unseaworthy state as would be evident from the survey report dated 21/22.03.2004, and the alleged loss, if any, happened due to the unseaworthiness of the vessel, they are not liable to reimburse the complainant. Considering the serious nature of the defects, damages and deficiencies referred in the report of M/s. Ericson & Richards (Gujarat) dated March 21/22, 2004 it would be difficult to dispute that the vessel in question was not at all seaworthy at the time it set sail from Dubai Anchorage on 04.03.2004. The aforesaid damages cannot be said to be a minor or trivial in nature and no prudent owner would allow the vessel to sail, without removing the said defects and deficiencies. This is complainant's own case that even prior to purchase of the vessel it was being operated by it in time charter. Therefore, the complainant could not have been unaware of the aforesaid damages. As pointed out earlier, the Superintendent of the complainant was present at the time the vessel was inspected on 21/22.3.2004 and the inspection report was duly signed by the Master of the ship, without any protest recorded on the report. This is not the case of the complainant that these damages had happened between 04.3.2004 when the vessel left Dubai Anchorage and 21/22.03.2004 when it was inspected at Muldwarka in Gujarat. In any case, considering the nature of the defects and damages referred in the inspection report dated 21/22.3.2004, there is no reasonable possibility of the said defects and damages having occurred between 04.3.2004 and 21/22.03.2004.
9. The next question which would arise in this regard is as to whether the alleged damage to the propeller of the vessel had happened due to the unseaworthiness of the vessel. For the reasons to be stated herein below, we are of the opinion that the alleged damages, if any, were pre-existing when the insurance policy was taken. Therefore, we need not go into the question as to whether they had happened due to unseaworthiness of the vessel or otherwise.
10. Admittedly, after the incident of 4th March, 2004, the vessel was inspected by Principal Surveyor Mr. Graham Ellis with Mr. Mark Ross as the attending surveyor. The report shows that on inspection they found damage to four out of five blades of propeller near the tips with damages including missing material and bent over leading edges. A section of the bilge keel on the port side was also found bent over. The aforesaid report was given on the basis of dive survey. Therefore, it cannot be accepted that the damaged propeller and section of bilge keel could not be noticed before the first report was submitted by Mr. Graham Ellis and Mr. Mark Ross. They clearly stated in the aforesaid report that the damages were apparently pre-existing the incident. It was only in the subsequent report dated 11.8.2004, following the dry docks at Dubai, that the same surveyor opined that damage to propeller were consistent with the allegation of the owner that the same were caused when the vessel grounded on 04.3.2004 and was later refloated. When the aforesaid contradiction in the two reports were pointed out to the surveyor, Mr. Mark Ross, staff surveyor vide his letter dated 29.8.2004 stated that the first report wherein they had opined that the damages were old damages was based upon the initial surveyor dated 07.3.2004, whereas the second report dated 11.8.2004 was based upon the dry dock survey. We however, are not at all satisfied with the aforesaid explanation given by Mr. Mark Ross. Had the damaged propeller not been seen during the dive survey on the basis of which the report dated 14.3.2004, opining the damage to be old damage was given, there could have been merit in the explanation given by Mr. Mark Ross, but, having examined the damaged propeller on 07.3.2004 itself they certainly were in a position to find out whether the damage was old or of a recent origin. It is the same propeller which the surveyor saw in damaged condition during dive survey on 07.3.2004 and then during dry dock survey at Dubai dockyard. The letter of Mr. Mark Ross dated 29.8.2004 does not satisfactorily explain how he could opine the same damage to be old damage in the first report and of recent damage in the second report, which they gave much later.
The view sought to be taken by us also find strength from the report of M/s. UMC International (Plc) dated 07.3.2004. The aforesaid agency was engaged by none other than the complainant company and the purpose of the survey conducted by them was to determine the extent of damage to the vessel's submerged or as a result of the grounding. The underwater vision was apparently 2 mtr. at the time of the survey and they also took underwater coloured photographs during the said survey. A recorded video was also prepared by them. They also found damage in the propeller, which was seen to have bending in the way of the edges, coupled with small splits and missing sections. They clearly reported that though the vessel had touched the bottom at the sea bed as was visible by the presence of soft mud and sand that was still attached to some areas of the flat bottom, there was no set up, indentation or undulation that was evident or indeed present through the vessel's length. Based upon the said letter, ASP Ship Management (I) Pvt. Ltd., intimated the Director General of Shipping that no damage was found on the bottom and there was no injuries. Had the damage to the propeller been of recent origin, M/s. UMC International (Plc) would certainly have reported so in their report.
11. There is yet another strong circumstance, which shows that the damage to the propeller was indeed a pre-existing damage when the insurance policy was taken by the complainant. Admittedly, a Memorandum of Agreement was executed between the complainant and the Radiant Shipping Ltd., previous owner of this vessel, incorporating the terms of the agreement between the parties. Clause-20 of the said Memorandum of Agreement reads as under:
"20. The sellers will give a letter to buyers confirming that the vessel has not touched bottom since her last dry docking but in any event the Buyer may, at their expense, arrange for and class approved diver to inspect the bottom of the vessel at the time of delivery and if there is any damage found affecting the vessel's class the sellers shall have the right to repair the same or compensate Buyers for the cost of repairs".
Noticing the above referred clause in the Memorandum of Agreement this Commission vide order dated 26.2.2016, directed the complainant to place on record the copy of the letter, which the sellers was required to give to the complainant confirming that the vessel had not touched the bottom since her last docking. This Commission also directed that if no such letter was given, the complainant will request the seller to give the requisite letter certifying that the vessel had not touched the bottom since her last docking, which had happened on 01.02.2002. Pursuant to the aforesaid direction, the complainant filed an affidavit stating therein that no such letter could be located in their record. It was further stated in the affidavit filed by the complainant that the company which had sold the vessel to them had been wound up and they had inspected the record of the said company in the office of the Official Liquidator but could not locate any such certificate in the said file.
12. In our opinion, the letter, in terms of the Clause 20 of the Memorandum of Agreement, was a crucial document for the complainant company since without such a certificate it could not have known whether the vessel had actually touched bottom or not since her last dry docking which had taken place in February, 2002 about two years before the transaction took place. In fact, even on receipt of such a letter, the complainant was entitled to arrange for an approved diver to inspect the bottom of the vessel and in case, any repairs were required, the complainant could carry out the same and claim reimbursement from the seller. The complainant has not placed on record any report of an approved diver pursuant to the inspection carried out in terms of the Clause 20 of the Memorandum of Agreement to ascertain whether there was any damage to the bottom of the vessel or not. Since no prudent buyer was likely to purchase a vessel without such inspection, particularly when it was also entitled to carry out the repairs if any, required to the vessel, at the cost of the seller, it appears to us that the complainant has deliberately withheld the report of the approved diver from this Commission since the said report would have revealed damage to the bottom of the vessel, at the time it was purchased by the complainant from the Radiant Shipping company.
13. It was contended by the learned counsel for the complainant that since this particular vessel was already under the charter of the complainant at the time it was purchased, the condition of the vessel was already known to them and therefore, there was no necessity of any inspection by an approved diver. We however, find no merit in the contention. Firstly, there is no evidence to prove that the vessel was continuously under the charter of the complainant since the time of its last docking on 01.02.2002. Moreover, had the condition of the bottom of the vessel been known to the complainant, there would have been no occasion to incorporate such a right in the Memorandum of Agreement. The very fact that the parties to the transaction decided to incorporate such a clause in the Memorandum of Agreement clearly undertakes that the condition of the bottom of the vessel was not known to the complainant before execution of the said Memorandum of Agreement and that is why it reserved a right to inspect the same at the time of delivery and to rectify the damage, if any, found therein at the cost to the seller.
14. The complainant has also relied upon the report of M/s. Cleghorn, Wilton & Associates Ltd., whom it had engaged for inspection of the vessel at Dubai Dockyard. The said inspection is stated to have been carried out on 07.06.2004 and 09.6.2004. In the opinion of the said surveyor, the damage to the propeller was caused by contact with an external object and was consistent with the owner's allegation. The said inspection was carried out in the absence of the insurer, without any advance notice to it. Therefore, not much reliance can be placed upon the said report. In any case, for the reasons stated herein-above, I am not inclined to accept the opinion of the aforesaid surveyor engaged by the complainant.
15. The report of M/s. J. Basheer & Associates Surveyors Pvt. Ltd., whom the insurer had engaged for opinion / comments has been challenged by the complainant on the ground that the second surveyor could not have been appointed by the insurer. Admittedly, the vessel in question was not inspected by J. Basheer & Associates Surveyors Pvt. Ltd. at any point of time. Therefore, the expert opinion / comments given by them with respect to damage to the propeller of the vessel cannot be said to be the report of a surveyor and consequently the said opinion is not hit by Section 64-UM of the Insurance Act. There is no legal bar on the insurer obtaining an expert opinion on the basis of the material available to it, before taking a final call on the admissibility or otherwise of a claim. In any case, the view taken by me is based upon the admitted documents and not upon the opinion of J. Basheer & Associates Surveyors Pvt. Ltd. though the very same documents were also examined by them while giving their expert opinion.
16 Since I am of the view that the damages to the vessel were pre-existing when the insurance policy was taken, the insurer is not liable to reimburse the complainant for the repair of the said damages. Considering the view being taken by me I need not examine the plea of the insurer that the vessel did not have on board, the Notice to Mariners, as a result of which the vessel had entered an area which was otherwise prohibited for the vessels being reclamation area as declared in the Notice to Mariners.
I also need not consider the contradictions with official log book, Deck logbook and letter of the complainant dated 13.4.2005, to the underwriter.
17. For the reasons stated hereinabove, I hold that since the damages to the vessel already existed when the insurance policy was taken, they are not covered under the said policy, and the insurer is not liable to reimburse the complainant.
The complaint is therefore dismissed, with no order as to costs.
......................J V.K. JAIN PRESIDING MEMBER