National Consumer Disputes Redressal
Shree Swastik Trading Company vs The Oriental Insurance Co. Ltd. & Anr. on 26 February, 2001
ORDER
Mrs. Rajyalakshmi Rao, Member
1. This is a complaint preferred by Shree Swastik Trading Co. against the Oriental Insurance Co. Ltd., Opposite Party No.1 alleging deficiency of service for non-settlement of their claim. Later, this Commission allowed the Complainant to amend the complaint and implead the State Bank of India as Opposite Party No.2. The value of their claim was enhanced accordingly. The Complainant originally Claimed Rs.1,35,50,976-50 mainly from Opposite Party No.1 for non-settlement of the claim for a long time which resulted in heavy loss to them. This prayer was amended and a claim of Rs.1,68,77,135.47 was made by including the charges levied by the State Bank of India, Opposite Party No.2, and for other expenses arising out of it.
2. The brief facts of the present case are that the Complainant, is a Proprietorship concern, carrying on the activitiers of exporting engineering goods for three years. It is an undisputed fact that the Complainant received confirmation of an export order to supply steel bars of specified description by Gulf Markets International W.L.L., Manama, Baharin. Accordingly, Gulf Markets International W.L.L. had placed the purchase order and opened Irrevocable Letter of Credit No. FIM 6285 for an amount not exceeding US $ 312,336.00 through its FM Banque Paribas FCB, Baharin, in favour of the Complainant. On the basis of the said letter of credit, State Bank of India, Bharuch Branch, sanctioned an amount of Rs.91 lakhs. The Complainant despatched two consignments on the same letter of credit and the present dispute is regarding the third consignment which was booked through Unimarine Agencies Pvt. Ltd., the Ship Agents & Shipping Consultants. Materials were delivered to the above ship agents for loading through Laxmi Agency, the clearing and forwarding Agent and they issued five bills for the materials of the Complainant which are on record.
3. Oriental Insurance Co. Ltd., the Opposite Party No.1, issued the marine cargo insurance policy jointly in favour of the complaint as well as the State Bank of India after accepting the amount of premium to the tune of Rs.54,243/- and insured the loss of US $21664.95 on 28.2.1995.
Policy No. Premium Amount Date of Issue
01023 Rs. 1,035.70 28.2.1995
01024 Rs.16,446.00 28.2.1995
01025 Rs.10,361.00 28.2.1995
01026 Rs. 3,323.00 28.2.1995
01027 Rs.23,780.00 28.2.1995
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Rs.54,243.70
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4. The said Vessel, BISMI- VOY:34 commenced its voyage from Bombay to Beharin on 20.3.1995 at 20.30 hrs and the duration of the journey was to be about 8 days. On 27.3.1995, unfortunately, the vessel capsized off Beharin. The Complainant received the information of the incident on 29.3.1995. That very day, Opposite Party No.1 was intimated and registered the claim was registered. The four claim bills against five marine insurance polices with all the requisite documents, are as follows:
Sl. Policy No. of Claim in Claim in
No. No. steel bars US Indian
lost Dollars. Rupees
1. 01023 320 4141 1,30,441-50
2. 01025 315 41427 13.04,050-50
3. 01026 101 13283 4,18,414-50
4. 10024 700 92058 28,99,827-00
&
01027
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216665 68,24,947-50
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5. Thereafter, the Complainant made frequent visits to Bombay to follow up the claim, had met all the necessary officers of the Opposite Party No.1 and the required documents and authorisations were submitted. Depsite all these representations, their claim was not settled by the Opposite Party No.1.
6. A legal notice was issued to the Opposite Party No.1 on 26.12.1995. His letters pleading for early claim settlement starting from 3.7.1995, 5.8.1995 to 6.11.1995 received a reply from the Grievance Cell of General Insurance Corporation of India dated 14.11.1995 that they will follow on this case soon. Meanwhile, Opposite Party No.1 demanded extra additional premium which was to be deducted from the claim amount and the required authorisation letter of deduction was also complied with by the Petitioner. Various letters of representations made to competent authorities upto the Chairman are placed on record uptill 1.5.1997. The continued silence of Opposite Party No.1 forced the Petitioner to file the present complaint in the National Consumer Disputes Redressal Commission on 1.8.97 with a claim against OP 1 for a sum of Rs.1,35,50,976.50.
7. After the Petition was filed, the complainant received a statement from the State Bank of India, Bharuch Branch, where the latter calculated its claim at the compound rate of interest at the interval of each three months whereas the Complainant claimed at the simple rate of interest @ 24% in his original claim. He amended the prayer clause to include the interest charges from Rs.37,54,370/- to Rs.45,83,288/97 and also to claim the interest on the amount to be awarded till its realisation of its claim. He further claimed loss of profit from the future loss of valuable contract for Rs.24,97,260.00. The amended claim at present amounts to Rs.1,68,77,155.47. The Bank was impleaded as Opposite Party 2 as a necessary party in the amended complaint because the Bank had executed various security documents to secure their claim to recover from the amount received from Insurance Company.
8. The Oriental Insurance Co. Ltd., Opposite Party No.1, in its affidavit explained that the time consumed in the process of settlement of insurance claim in question was because of the reasonable suspicion created by the act of the Complainant in furnishing the Bill of Lading dated 15.2.1995 with a 'Shipped on Board' stamp whereas on investigation it was found that loading of the consignments actually took place between March 9th to 14th, 1995. Since it was a case of pre-dating of loading which was unlawful, Opposite Party No.1 sought the expert opinions of M/s. W.K.Webster & Co., London and Shri V.Ramdas, Advocate on the liability of the Insurer.
9. The above experts advised that the adventure had been carried out by user of fraudulent documentation and that there has been a breach of the implied warranty of legality in the Marine Insurance Act and with the result the Insurance Policy was unenforceable. Hence, the repudiation of the claim came about initially. However, their own Technical Department was not fully satisfied and agreeable with the aforesaid expert opinions. They relied on the undisputed fact that the consignment in question was loaded for shipment and there was genuine shipment and the said loss was established beyond doubt. The department again referred the matter for the legal opinion of M/s. Narichania & Narichania and thereafter to Shri Jitendra Sharma (Senior Advocate).
10. It is evident from the records filed with us that the Insurance company did not even consider any merit in the Complainant's claim till Shri Jitender Sharma gave a written opinion on 15.12.1997. He noted "under the circumstances the insured has not violated the provisions of Sections 20, 25 or 43 of the Marine Insurance Act, 1963, and the querist will not be justified in repudiating the claim of the insured merely because the Bills of Lading state that the good were "shipped on Board" on 15.2.1995 where in fact the goods were so loaded around 9th March, 1995 and after".
11. The above expert has in no uncertain terms opined, "it is wholly misconceived that due to the misstatement in the Bill of Lading, in the manner detailed above, would render the adventure/voyage illegal. The warranty implied in Section 43 of the Act has not been breached/violated in any manner and the adventure of insured was a lawful one". The opinion of Shri Jitendra Sharma made it clear that the so called misstatement in the Bill of Lading had violated no law and did not even render it to be inoperative or ineffective much less illegal.
12. It has been pointed out on record, that Opposite Party No.1 has sent a FAX to M/s. Narichania & Narichana, Solicitors, on 20.5.1998 to which the latter replied on 10.6.1998 regarding the approval of the claim at 75% i.e., Rs.49,52,556/- by the Head Office to the Insured. Mr. Narichania wherein advised not to place on record a letter making offer of settlement to the insured as he may place it before the National Consumer Disputes Redressal Commission and as a result of such submission, the National Commission may pass an award for full amount instead of 75% of the amount with interest and costs, against them. He further suggested that Opposite Party No.1 may discuss the matter with the insured personally and after convincing them, obtain their letter of agreement as per draft prior to the date of hearing in the National Commission and deliver the cheque to the consignee against withdrawal of their complaint in the Commission itself to ensure the matter is finally concluded.
13. During the pendency, the this case for final hearing, the National Consumer Commission directed on 27.10.1998 the Opposite Party No.1 to pay the undisputed amount of Rs.49,52,550/- to Opposite Party No.2 within three weeks. It has been brought to our notice during arguments that the above amount was paid on 16.11.1999 on the directions of the National Commission but not as final settlement as Opposite Party No.1 hoped. At this stage, again the Counsel for Opposite Party No.1 at the time of arguments raised another issue that the Petitioner had not duly informed his client about the casualty of the Vessel, "BISMI" which capsized off Bahrain on 27.3.1995 and that there is no record of the said communication with them. This contention is not acceptable because the relevant communication is on record as Annexure-P, to the Original Complaint. The Ship Agents "Unimarine Agencies Pvt. Ltd." on 29.3.1995 addressed a letter to Shree Swastik Trading Co. with the copies to Opposite Party No.1, Opposite Party No.2 and to Laxmi Agency reporting the unfortunate incident about the vessel in question. The plea taken on behalf o the Opposite Party No.1 is without any foundation.
14. Reliance based on the Carriage of Goods by Sea Act, 1925 on behalf of the Insurance Company is also misconceived. In the schedule to the Act, responsibilities and liabilities of the carrier has been set up in Article III. Under Rule 6 of Article 3, notice of loss or damage has to be given in writing to the carrier or his agent at the time of removal of goods or if the loss or damage is not apparent within three days of removal of the goods. The Rule 6 further states, "in any event the carrier and ship shall be discharged from liability in respect of loss of damage unless suit is brought within one year after delivery of the goods from the date when the goods should have been delivered." This provision has been incorporated in the Insurance Policy itself. But in this case the ship capsized with all the goods on board the ship. In such a situation, the shipping company cannot take the plea that it was not notified about the loss of the goods along with the ship. It was the shipping company's duty to inform the shipper of the loss of ship with cargo which its agent did on 29.3.1995.
15. Moreover, as we have noted that the shipping agenst notified to all parties including the Insurance Company about the loss of ship as well as cargo on board the ship within two days of the sinking of the ship on 27.3.1995. That very day the Complainant lodged its claim with Insurance Company which was registered by the Insurance Company. The Insurance Company could have expeditiously settled the claim and brought a suit against the carrier for the loss of cargo within one year. If the shipping company cannot be sued at this stage, it must be due to the laches of the Insurance Company. The Insurance Company cannot claim any deduction from the amount payable to the Complainant on this account. All the rights of the insured against the carrier subsisted for nearly a year after the claim was lodged. The Insurance Company could have settled the claim within a reasonable time and proceed against the carrier in the name or in place of the insured.
16. We have considered various section of Marine Insurance policy and the views taken by both the parties and following discussions and the clinching clause to decide is under Section 43 which specifies "warranty of legality" as under "there is an implied warranty that the adventure insured is a lawful one, and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner". In the present case disclosure of every material circumstance has been state which would influence the judgement of a prudent insurer in fixing the premium or in deciding whether he will take the risk.
17. We have seen that under Section 25 of the Policy which requires that Policy must specify :-
1) "the name of the assured, or of some person who effects the insurance on his behalf;
2) the subject-matter insured and the risk insured against;
3) the voyage, or period of time, or both, as the case may be covered by the insurance
4) the sum or sums insured;
5) the name of names of the insurer or insurers"
18. It is an admitted fact that all these details which were material have been disclosed and have been so recorded in the declarations made and the policies issued by the insurer.
19. It is seen that the risk on the cargo commence from the time it was loaded on board the ship. It was mentioned in one of the declarations that "ETD-8/3/95" and the cargo was loaded only between 9th and 14th March and as such the period for which the insurer was on risk got reduced/diminished. Clause (a) of Sub Section (3) of Section 20 of the Act clearly mentions that unless specifically enquired there is no obligation on the part of the insured to disclose such a circumstances which diminishes the risk of the querist.
20. It is also common knowledge that in the shipping industry, due to stiff competition to secure freight, the ship owners/Agents do assist and co-operate with the shippers by issuing Bill of Lading with "Shipped on Board" endorsement without the goods being actually loaded, to enable the shippers to negotiate the documents and bill of the lading with Bankers within the time limit fixed as per the letter of credit. This market practice is expected to/presumed to be known to the insurer and the clause (b) sub-section (3) of Section 20 of the Act, specified that such circumstances which insurer is presumed to know need not be disclosed unless specifically enquired from the insured.
21. Prof. E.R. Hardy Ivamy in his book, "Marine Insurance" has quoted a classic old case 'Carter Vs. Boehm (1766, 3 Burr 1905 at page 1910), in which Lord Mansfield illustrated this point when he said:
"The underwriter needs not be told what lessons the risque agreed and understood to be run by the express terms of the policy.... If he insures for three years, he need not be told any circumstances to shew it may be over in two; or if insures a voyage, with liberty of deviation, he needs not be told what tends to shew there will be no deviation."
22. Similarly, in the present case, the insurer did not base the policy of insurance on the statement of the goods tag "shipped on Board" on 15.2.95 and it was not a material fact/circumstances which could influence the judgement of a prudent insurer in either fixing the premium or in determining whether the risk being taken or not. In our opinion, in the given case, Insurance Co. should have decided the matter within reasonable time having decided to pay and this inordinate delay is not explained to our satisfaction.
23. We went into all the contentions and the relevant placed by the parties and find Opposite Party No. 1 has not only delayed the offer of settlement at 75% of the insured amount and eventually paid the settled amount as late 16.11.1999 only with the intervention of the National Commission whereas the Petitioners loss starts as early as 27.3.1995. Though the Oriental Insurance Co. took us through the various opinions taken to enable them to come to any settlement, it is clear from their own documents, how slack and in the light of Shri Jitendra Sharma's opinion, as early as on 15.12.97 which clarified that there was no illegality in the conduct of the Complainant and to pay the insured, yet the insurer took nearly two years to offer and give the part payment i.e. 75% on 16.11.99, that too on the direction of the National Commission. We consider this is a clear deficiency in service. The insured had to pursue endlessly with the officers of the insurer and had to come with his grievance to the Consumer Court to get justice. The time and costs involved have taken heavy toll on their business.
24. We do not see merit in the other claims of the complainant on account of damages and loss of idle-operation, expenses, loss of reputation and loss of profit etc. We feel it is justified that the balance of Rs.19,24,947.50 as part of the claim for Rs.68,24,947.50 which is actually admitted should be paid and the interest on the balance of Rs.49,00,000 from the time of complaint to the date of payment i.e. 16.11.99 is paid. The Complainant has not claimed any relief against the State Bank of India, Opposite Party No. 2 and all the parties are agreeable that the amount to be received by Complainants, if any, from Opposite Party, should be deposited to them as it was the prior condition while granting credit facilities.
25. In the light of the above discussion, we allow the complaint and pass the following order. We direct the Oriental Insurance Co. Ltd., Opposite Party No.1 to pay the balance of Rs.19,24,947.50/- with interest at the rate of 12% from the date of complaint i.e. 1.11.1995 till the date of payment and also interest on Rs. 49,00,000/- from 1.11.1995 till 16.11.1999 at the rate of 12%. This amount is to be paid directly to the Opposite Party No. 2, state Bank of India, Bharuch Branch on behalf of the Complainant. The Original Petition is finally disposed of as above.