Ashapura Minechem Limited vs UNITED INDIA INSURANCE COMPANY LTD

MR. Justice K.S. Gupta, Presiding Member-Complaint was filed, inter alia, alleging that the complainant placed an order for import of 1600 metric tons of Soda Ash Light and 400 metric tons of Soda Ash Dense on Goverest International S.R.L. Romania, through its agent-ATV Projects India Ltd. at the rate of USD 158.75 per metric ton, aggregating to USD 3,17,500. Indent contract was dated 12th August, 1997 along with addendum dated 18th August, 1997. By the letter dated 29th August, 1997 the complainant approached the opposite party-Insurance Company for a marine insurance policy of USD 3,49,250 being the value of the said goods at 110%. On payment of premium, the opposite party issued a cover note dated 4th September, 1997. On informing that the voyage of the cargo will be by Ship Golden Sunlight, the opposite party demanded overage premium as well as non-classification premium since that ship was an unclassified vessel built in 1971 which the complainant paid. Opposite party-Insurance Company issued marine insurance policy bearing No. 020900/21/11/06/01147/97 for a sum of Rs. 1,26,35,865 being USD 3,49,250. Ship Golden Sunlight which left Constanta, was expected to arrive at Mumbai between 27th/30th October, 1997 but it failed to reach there on the announced date(s). Complainant made attempts to ascertain the delay in arrival of the ship at Mumbai and also its present location. Opposite party was also informed of this fact by the letter dated 12th December, 1997. As the ship and cargo were not traceable, the complainant by the letter dated 29th December, 1997 informed the opposite party to settle the claim for the insured amount of Rs. 1,26,35,865. Meanwhile, complainant continued its efforts to trace the whereabouts of the ship. It learnt that the said ship had proceeded to China and was contemplating to illegally discharge the cargo in China. It was stated that the complainant was, therefore, forced to engage Advocates to arrest the ship and the cargo to minimise the loss.

THE complainant informed the opposite party about these developments by the letter dated 30th December, 1997. By the letter dated 2nd January, 1998, the opposite party acknowledged the fax message sent by the complainant and assured it that necessary action was being taken by the Head Office in the matter. However, no action was taken by the opposite party. By the letter dated 8th January, 1998 the opposite party informed the complainant that they have engaged ICC International Maritime Bureau, Essex, U.K. to protect the interest of the complainant and this agency had sent an investigator to Ningbo, China. Since the said policy was valid for six months only and proceedings before the Maritime Court in China to arrest the ship and get orders to have the cargo released and trans-shipped to Mumbai was likely to take time, the complainant sought extension of the insurance cover, which was granted by the opposite party on receiving additional premium from time to time. It was stated that the cargo of other Indian buyers was also on board the ship Golden Sunlight and they were insured either with the opposite party or other subsidiaries of General Insurance Corporation. Complainant remitted USD 50,000 being the share of fee and expenses to the solicitors and Advocates in foreign exchange to conduct the proceedings filed in China. The complainant was successful in getting an order dated 27th April, 1998 for shipment of its cargo from China to Mumbai from Ningbo Maritime Court in China. Complainant was required to bear the expenses of legal fee, Court fee, port charges, customs costs and re-shipment expenses, etc., amounting to USD 2,70,000. It was stated that the complainant transported the cargo through MV RYOKOHI from Ningbo to Mumbai in May, 1998. Three Bills of Lading bearing Nos. 24, 25 and 26 were issued for shipment of the cargo. The complainant appointed its Surveyor and asked the opposite party also to appoint its Surveyor and asked the opposite party also to appoint Surveyor by the letter dated 9th June, 1998. Finally, the opposite party informed about the appointment of M/s. Geo Chem Laboratories as Surveyors on 26th June, 1998.

M/s. Geo Chem Laboratories, Surveyors carried on the survey and submitted the survey report dated 9th July, 1998. Vide letter dated 10th October, 1998, the complainant lodged a preliminary claim with the opposite party along with supporting documents. By the letter dated 23rd September, 1998 the opposite party informed the complainant that the matter had been referred to their Controlling Office which was awaiting the report of the International Maritime Bureau. It was further alleged that the occurrence was not due to insolvency or financial default of the owners or managers or charterers of the said ship. Claim of the complainant is not for the entire cargo. The complainant finalised and forwarded its claim for Rs. 93,83,728 to the opposite party along with covering letter dated 6th May, 1999. By the letter dated 12th September, 2000 the opposite party rejected the complainant''s claim on the ground that it falls within Exclusion Clause 4.6 of the Institute Cargo Clauses of the policy. It was claimed that repudiation is illegal and unjust and constitutes deficiency in service. Direction was sought to be made to the opposite party- Insurance Company to pay amount of Rs. 93,83,728 with interest @ 18% p.a. from 6.5.1999 along with compensation and cost.

OPPOSITE party-Insurance Company contested the complaint by filing written version. By way of preliminary objections, it was alleged that on investigation it was revealed that there were instructions from the masters of the ship for diverting it to Ningbo. As the manager of the ship had debts against the complainant, the complainant had decided to discharge the cargo in exchange thereof. Complainant had full knowledge of the diversification of the ship to Ningbo still it lodged insurance claim vide letter dated 29th December, 1997. The cause of loss to the cargo was on account of financial default of the complainant, which falls within Exclusion Clause 4.6 of the Institute Cargo Clauses of the policy. Claim was, thus, rightly repudiated by the letter dated 12th September, 2000. On merits, issuance of the policy and its extensions as alleged were not disputed. Contents of various letters referred to in the complaint were not denied. It was also not denied that the cargo of other Indian buyers was on board the ship and other importers were insured either with the answering opposite party or other subsidiaries of General Insurance Corporation. It was denied that the complainant had remitted USD 50,000 of its share of fee and expenses to the Solicitors and Advocates in foreign exchange to conduct the proceedings filed in China. Passing of the judicial order dated 27th April, 1998 was not denied. Appointment of M/s. Geo Chem Laboratories as Surveyors and International Maritime Bureau as Investigator was admitted. Allegations regarding deficiency in service and the claim made were denied.

WE have heard Mr. L.P. Dhir for the complainant and Mr. P.K. Seth for the opposite party-Insurance Company and have been taken through the records.

BEFORE adverting to the submissions, reference need be made to the break-up of the amount of Rs. 93,83,728 as claimed in the complaint. Break-up is at page 140 and it being material is reproduced as under: (1) Legal Costs: S. No. Date Beneficiary Amount in F.C. Amount in IRS 1.1 30.12.1997 H.F.W. USD 15,000 5,90,550 Hong Kong 1.2 2.2.1998 -do- USD 35,000 13,59,750 1.3 23.2.1998 -do- USD 3,576.94 1,40,395 1.4 24.3.1998 -do- USD 10,000 3,96,000 1.5 29.12.1998 -do- USD 5,823.6 2,48,030 (2) Local Consultancy for Insurance 2.1 28.7.1998 Shri Narichania - 15,000 (3) Ningbo Maritime Court, Ningbo 3.1 8.5.1998 Towards custom W.H. dues USD 82,197 32,64.043 (4) Freight on Reshipment 4.1 29.5.1998 Starship, USD 79.000 32,06,610 Singapore (5) Cargo Survey Fees 5.1 9.7.1998 SGS India - 26,00 5.2 21.7.1998 GEO- - 3,000 CHEM (6) United India Insurance Company Ltd. Mumbai Premium for Extension of Original Insurance Cover 6.1 29.1.1998 U. India 29,170 6.2 27.2.1998 -do- 12.636 6.3 30.3.1998 -do- 12,636 6.4 6.5.1998 -do- 12,636 6.5 28.5.1998 -do- OAP 23,318 6.6 9.6.1998 -do- 12,636 (7) C & F Charges at Mumbai due to Cancellation of the Original B/E filed for "Golden Sunlight"

1 13.4.1998 NEELKANTH Forwarders 25,000 (8) Loss of Cargo-As recommended by Geo-Chem, Mumbai (Appointed by United India Insurance Company

1 LOSS of 1.040 MT of cargo as confirmed by Geo-Chem Report 5,744 8.2 Plus 10% on 1 MT 574 Total : 93,83,728 7. This break up is in continuation of the break-up at page 124 of the paper book. 8. It was contended by Mr. Seth, Advocate that the claim made fell within Exclusion Clause 4.6 of the Institute Cargo Clauses of the policy which was taken as a ground for repudiation of claim in the letter dated 12th September, 2000. Further, under the terms of policy, the Insurance Company is not liable to pay the cost of legal proceedings, amounts allegedly paid to the Custom Authority, towards warehouse dues at Ningbo and freight for reshipment of the cargo from Ningbo to Mumbai. Complainant is also not entitled to the refund of the premium paid for extension of the original insurance cover. On the other hand, Mr. Dhir, Advocate argued that the documentary evidence in regard to the payments made by the complainant had been submitted to the opposite party and those payments are supported by the affidavits of Piyush Arora, Director of the complainant filed by way of evidence and complainant is entitled to the reimbursement of the same by the Insurance Company. Copy of the policy initially issued for a sum of Rs. 1,26,35,865 along with Institute Cargo Clauses (A) issued by the opposite party is placed on the file. It would show that the transit risk covered was from Romanian Port to Mumbai Port. aforesaid Clauses 4.6 as also 12 of the said institute Cargo Clauses (A) which are material, are reproduced below: "4.6. In no case shall this insurance cover loss, damage or expenses from insolvency or financial default of the owners, managers, charterers or operators of the vessel. 12. Where as a result of the operation of a risk covered by this insurance, the insured transit is terminated at a port or place other than that to which the subject-matter is covered under this insurance, the underwriters will reimburse the assured for any extra charges properly and reasonably incurred in unloading, storing and forwarding the subject-matter to the destination to which it is insured hereunder. This Clause 12, which does not apply to general average or salvage charges, shall be subject to the exclusions contained in Clauses 4,5,6 and 7 above and shall not include charges arising from the fault, negligence, insolvence or financial of the assured or their servants".

LETTER dated 22nd July, 1998 on the letter head of the opposite party-Insurance Company''s Branch at Chennai sent by P. Gurumurthy, Manager to K. Rangarajan, General Manager (Tech), New India Assurance Company Ltd., Mumbai has bearing on the applicability/non-applicability of said Exclusion Clause 4.6 of ICC(A). Para Nos. 5 and 6 thereof read thus: "Though initially it was felt that attempted sale of the cargo to a Chinese Party was due to a dispute between owners and the charterers, M/s. IMB after their investigation stated that no direct evidence could be established to prove that there had been financial default by the charterers and, therefore, the call of the vessel to Ningbo would be due to an attempt of the ship owner to illegally sell the cargo to buyers in China. M/s. IMB are of the view that it is not an excluded risk under ICC(A) and hence the consequent expenses/loss at Nigbo would be covered under the policy. They have also said that their counterpart at Kualumpur Mr. Choong during his visit to Ningbo, has sighted a false bill of lading issued by the ship owners indicating that the cargo was destined to the Chinese consignee. This view of IMB is also supported by the independent opinion given by the Solicitors, Ince. and Co. In view of the foregoing, since you have also commitments per this vessel, we wrote to your office for unified approach especially in regard to application of Clause 4.6 of ICC(A) to this case. We were informed by your office that they had already sought IMB''s clarifications on this point. IMB has been sending all their communication to us and also to New India including the final opinion that Clause 4.6 is not applicable in this case. Based on the opinion given by IMB we have written number of letters to your Marine Department to confirm to us the proposed action to be taken by New India and we are yet to receive any response".

OPPOSITE party has not filed the copy of the report of M/s. IMB. In absence thereof, there seems to be no reason to disbelieve what is stated in the said paras of the letter dated 22nd July, 1998 placed on record regarding the views of IMB with respect to non-applicability of Clause 4.6 of ICC(A) to this case. Repudiation made on the basis of Exclusion Clause 4.6 is, therefore, bad in law. Turning to the other limb of submission, referred to above, advanced on behalf of Insurance Company, in case the complainant would not have moved the Ningbo Maritime Court of PRC and obtained the order dated 27th April, 1998, complainant''s entire cargo may have been lost. Shipment was from Romanian Port to Mumbai Port. In view of aforesaid Clause 12 of ICC(A), the complainant is not only entitled to the paid custom charges, warehouse dues and freight on re-shipment from Ningbo to Mumbai but also to legal expenses incurred in getting the cargo released by pursuing remedy before the said Court. Report of M/s. Geo Chem Laboratories, Surveyor dated 9th July, 1998 would show that at destination there was net shortage of 1,040 kgs. of Soda Ash. Complainant is, therefore, entitled to the value thereof assessed at Rs. 5,744 together with the fee paid to the Surveyor of Rs. 3,000. To be only noted that the expenses under the said heads are connected undue affidavits of Piyush Arora, Director of the complainant. However, we are of the view that complainant is not entitled to the expenses listed at aforementioned Sl. Nos. 2.1,5.1, 7.1 and refund of the premium amount as at Sl. Nos. 6.1 to 6.6 as it had availed of the extension and item at Sl. No. 8.2.

NON-payment of the said amounts and illegal repudiation of claim is deficiency on the part of opposite party-Insurance Company. Since the complainant has been deprived of the use of money all these years, it is entitled to interest from the date of filing of complaint @ 10% p.a. which is reasonable till realisation.

ACCORDINGLY, complaint is partly allowed with direction to the opposite party Insurance Company to pay amount of Rs. 92,14,122 with interest @ 10% p.a. from the date of filing of complaint to the complainant. Complainant will be entitled to cost of Rs. 20,000. Since the policy was taken in the name of Bank of India (Mumbai Overseas Branch) A/c M/s. Ashapura Minechem Ltd., the payment of the awarded amount to the complainant will be made subject to furnishing of ''No-objection'' by the said branch of the Bank, by the Insurance Company.