M/S. INDOSIN LTD. vs UNITED INDIA INSURANCE LTD.

The key controversy in this one and half decade old case pivots around the question, "whether the bankruptcy or insolvency of the owners of a ship can cause a hole in the claim made by the insured".

The above said complaint was filed as back as on 7.9.2001. In this case, M/s Indosin Ltd.- the complainant has claimed a sum of Rs.40,75,651/- alongwith pendentalite and future interest @ 18% till the actual payment from United India Insurance Company Ltd.-OP-1 and its functionary-OP-2. The complainant received purchase order from M/s Modi Alkalies & Chemicals Ltd. 18, Community Centre, New Friends Colony, New Delhi for supply of 100 tons of Calcium Carbide for a value of US$ 38,500 C & F Mumbai from M/s Govcrest International SRL 23-J.L., Calderon Street, Bucharest Romania. The complainant was authorised by the purchaser M/s Modi Alkalies & Chemicals Ltd., by its letter dated 06.11.1997 to open letter of credit in favour of M/s Govcrest International SRL against the purchase order. The copy of letter of authority, the letter of credit No.NEHPAR 977041 dt. 13.11.97, the invoice No. 889 dated 30.12.97 have been placed on the record as Annexures C-3, C-4 & C-4 A respectively.

The above said goods were to be shipped through the vessel MV SAPPHIRE under Bill of Lading No. 62 dated 30.12.1997 from Port of Loading CONSTANTA (Romania) to Port of -1- Discharge (Mumbai-India). It was further agreed vide agreement dated 06.11.1997 that the Bill of Lading No. 62 dated 30.12.1997 shall notify address of the party as M/s Modi Alkalies & Chemicals Ltd., Alwar, Rajasthan. The copies of the agreement and bill of loading have been placed on the record as Annexures C-4B and C-4C.

The Insurance was obtained in respect of these goods from OP-2 for a sum of Rs.15,65,850/- . Marine Insurance Certificate was issued on receipt of Rs.3800/- for opening of Foreign Letter of Credit and Marine Insurance Certificate No. 99484 dated 22.01.1998 for covering Cargo Insurance for the loss or damage. The Insurance Companies were liable to indemnify the same. The complainant was required to issue the notice in this respect before-hand. The Marine Insurance Certificate dated 04.11.1997 and 22.01.1998 are annexed as C-5 & C-6 with this complaint. The complainant duly paid the consideration of goods to the Romanian Exporter through its banker by retiring the Letter of Credit No. NEHPAR 977041.

Further it transpired that the Vessel MV SAPPHIRE Ltd. did not arrive at the destination i.e. Mumbai. The supplier conveyed the message through fax dated 24.02.1998 that the said Vessel MV SAPPHIRE was wrongly arrested at "PORT SAID" and the lawsuit was pending at PORT SAID. The claim, vide the copy of letter dated 10.03.1998 as Annexure C-7, was lodged with the OP-2. Its receipt was confirmed by OP-2 vide letter dated 10.03.1998 and through its letter dated 12.03.1998. It asked M/s Modi Alkalies & Chemicals to supply the original insurance documents, original invoice bill of lading and claim form, and requested it to take all necessary steps to protect their recovery rights. The said letter is annexed as C-8. The Govcrest International SRL , the supplier further conveyed to the complainant through fax message dated 26.03.1998 that the Vessel MV SAPPHIRE was arrested due to wrong identification by Port authorities and confusion was created because of the Romanian flag.

The shipping company SC MUNSON SRL, the owner of the vessel MV SAPPHIRE informed the complainant through fax message dated 26.05.1998 that the vessel was again wrongly arrested by the Local Authorities at PORT SAID in respect of a claim for pollution, believing this vessel to be the SAFIRE a Korean Vessel since the Arabian Pronunciation and spelling is similar to that of "SAPPHIRE". M/s Modi Alkalies & Chemicals Ltd. Vide its letter dated 29.04.1998, supplied all the requisite details to the OP-2 and further confirmed that the whereabouts of the vessel were not known to them vide letter dated 29.04.1998 annexure C-9.

It is alleged that the OPs did not convey any development in processing and payment of claim. M/s Modi Alkalies & Chemicals Ltd. through its letter dated 06.07.1998 supplied the copy of invoice dated 30.12.1997 and bill of lading dated 30.12.1997 and further lodged the claim of US$42,350/- (CIF Value + 10%) due to non-delivery of the above said goods. The letter dated 06.07.1998 is annexed as Annexure C-10. The OP-2 was informed about the fact that the ship was arrested due to wrong identification. The OP was further informed that the ship was released and the non-delivery certificate dated 12.5.1999 was issued by the shipping company. The letter dated 20.07.1999 and the non-delivery certificate dated 12.05.1999 were annexed as C-11 were placed on the record. All the information was placed before the OPs vide letter dated 17.08.1999, annexed as Annexure C-12. The complainant also supplied a bunch of 18 fax messages and letters sent by Govcrest International SRL Romania and the relevant correspondence vide letter dated 30.08.1999, Annexure C-13.

Despite various requests, the OPs failed to honour the claim and did not settle the same in view of the non-delivery certificate dated 12.05.99. Various letters were sent but those did not ring the bell. The copies of the aforesaid letters are annexed as Annexure C-14 (Colly). The OPs

are deficient in their service as the claim falls under exclusion clause of 4.6 of the Institute Cargo Clauses (A) claim, which was treated as if uninsured. However, it was stated the final decision on the basis of the facts will be taken after consulting the experts. However , as per the contract of Insurance, the OPs agreed to indemnify all risk of the consignment. The complainant sent a legal notice dated 25.03.2001, Ex-C-15. The OP was asked to pay Rs.19,90,450/- with interest @18% per annum. Break up losses as per para 25 runs as follows:- "25. That the details of losses as well as damages suffered by the complainant and to be recovered from the opposite parties equal to Rs.40,75,651/- are mentioned as under:

110% of C&FD value of Insurance policy Being the value of goods insured amount to US$42,350 Rs.19,90,450/-

Interest w.e.f. 10.3.98 to 10.8.2001 @ 18% p.a. Rs.15,25,201/-

Expenses incurred to look after the interest of opposite parties against the carrier Rs. 10,000/-

Litigation Charges Rs. 50,000/-

Damages for agony, harassment and mental distress to deficiency in service Rs. 5,00,000/-

____________________ Rs. 40,75,651/-

____________________ Opposite Party''s Defense

The case is barred under the provisions of section 24-A of the Consumer Protection Act, 1986. Reliance has been placed on the Apex Court''s Judgment in the case of "Synco Industires Versus State Bank of Bikaner & Ors. Reported as (2002) 2 Supreme Court Cases 1, a judgment by three Hon''ble Judges. The claim of the complainant was repudiated on 04.12.1998 followed by letter dated 31.08.2001. The complaint entails intricate questions of Law and facts, therefore, this Commission has no jurisdiction to entertain this case. It is averred that a bare reading of the allegations made in the complaint and the documents filed by the complainant in support of its complaint clearly shows that the complainant was not transparent in its correspondence/dealing with OP and did not give true and correct facts to the Opposite Party. The complainant also took time to give information and to supply the documents/information after long gaps. On the contrary, the OP was in constant touch with the complainant and apprised of all the documents from time to time. The claim is not payable because it transpired by the investigation conducted by International Maritime Bureau (in short, IMB) to the full knowledge of the complainant. It clearly attract Exclusion Clause No.4.6 of the Institute Cargo Clause (A) of the Transit Policy issued to the complainant. At the initial stage itself, the OP had made it clear to the complainant that the decision of admissibility of the claim would be taken after a categorical confirmation from IMB to the effect that Exclusion Clause No. 4.6 of the Institute Cargo Clause (A) will not be applicable in this case. It is incorrect that basis of the claim is non-delivery. The position was made clear vide its letter dated 21.08.2001. The following extracts were quoted:- "Please refer to your letter of 02 Jan 1998 intimating claims. Please also refer to various correspondence exchanged in this matter and also our letter dated 04 Dec. 1998 informing about the Clause 4.6 of ICC (A) and therefore no liability exists under the policy. Further the matter was under investigation by M/s International Maritime Bureau, London and when it was revealed that the cargo was available on a vessel of similar description but with the changed name Elizabath plying in Greece. With the Assistance of a Greek Lawyer appointed by IMB the cargo was saved. However you/your representative were not interested in taking delivery of the same.

The action taken in Greece by way of arresting the vessel can be described as the measures taken with the object of saving, protecting or recovering the cargo. ICC (A) provides that the measures taken by the assured or the underwriter with the object of saving, promoting, or recovering the subject matter insured shall not be considered as a waiver or acceptance of abandonment or otherwise prejudice the rights of either party.

Further the assured have refused to accept the goods on the grounds that the cargo is valueless because, owning to passage of time, the chemical properties of cargo would have changed. Assuming that the change has occurred, the proximate cause of change occurring would be either due to (i) The inherent nature of the cargo or (ii) delay. Under ICC(A) Clause loss/damage/ expenses caused by the inherent vice or nature of the subject matter (Clause 4.4) is irrecoverable. Similarly, any loss/ expenses proximately caused by the delay even though the delay be caused by risk insured against (Clause 4.5) is irrecoverable.

In the event of the above given clause/circumstances there exists no liability on the part of the insurance company to indemnify any loss suffered under the above mentioned policy for the commodity being conveyed by MV Saphire".

The OP has also quoted the relevant Exclusion Clause No. 4.4, 4.5 and 4.6 of the Institute Cargo Clause (A) of the Transit policy, which run as follows:- "EXCLUSIONS

In no case shall this insurance cover

4.4 Loss damage or expense caused by inherent vice or nature of the subject matter insured.

4.5 Loss damage or expense proximately caused by delay, even though the delay be caused by a risk insured against (except expenses payable under Clause 2 above)

4.6 Loss damage or expense arising from insolvency or financial default of the owners managers charterers or operators of the vessel". About Limitation:-

Counsel for the Opposite Party vehemently argued that the case is barred by limitation. She pointed out that the claim was repudiated vide their reasoned letters dated 04.12.1998 followed by another letter dated 31.08.2001. The instant complaint was filed in this Commission on 04.12.1998. Consequently, the case is barred by time. In support of her case, she has cited the above mentioned authorities.

All these arguments are bereft of merits. The entire case of the OP revolves around letter dated 04.12.1998. This is an indisputable fact that the said letter did not see the light of the day. Counsel for the OP tried to explain that they have made frantic efforts to search it out but could not recover it. She has made a half hearted effort to convince the Commission that the letter dated 31.08.2001 clearly, specifically and unequivocally mentions the letter dated 04.12.1998 and the same was not denied by the complainant. We are unable to locate any substance in these arguments. In absence of the repudiation letter itself, the clear picture does not emerge. The production of that crucial and significant letter would have elicited the true picture. We cannot assume what was written in that letter. Whether some scope for further investigation was left or not? Whether it was the full and final repudiation of the claim? All these questions remained un-answered. It also goes to show negligence, inaction and passivity on the part of the OP. Consequently, we decide this point in favour of the complainant and against the OP.

The second important question swirls around the fact whether the complainant is entitled to the above said claim or not? The repudiation letter runs as follows:- " REPUDIATION OF CLAIM- CARGO OF CALCIUM CARBIDE-MV SAPHIREARRESTED AT PORT "SAID" IN JANUARY 1998- POLICY NO. 041200/21/06/11/05/97 ISSUED BY DO 12- INSURED MODI ALKALI & CHEMICALS.

Please refer to your letter of 02 Jan 1998 intimating claims. Please also refer to various correspondence exchanged in this matter AND ALSO OUR LETTER DATED 04 Dec 1998 informing about the Clause 4.6 of ICC (A) and therefore no liability exists under the policy.

Further the matter was under investigation by M/s International Maritime Bureau, London and when it was revealed that the cargo was available on a vessel of similar description but with the changed name ELIZABATH plying in Greece. With the Assistance of a Greek Lawyer appointed by IMB the cargo was saved. However you/your representative were not interested in taking delivery of the same.

The action taken in Greece by way of arresting the vessel can be described as the measures taken with the object of saving, protecting or recovering the cargo. ICC (A) provides that the measures taken by the assured or the underwriter with the object of saving, protecting, or recovering the subject matter insured shall not be considered as a waiver or acceptance of abandonment or otherwise prejudice the rights of either party.

Further the assured have refused to accept the goods on the ground that the cargo is valueless because, owing to passage of time, the chemical properties of cargo would have changed. Assuming that the change has occurred, the proximate cause of the change occurring would be either due to (i) The inherent nature of the cargo or (ii) delay. Under ICC (A) Clause Loss/damage/expenses caused by inherent vice or nature of the subject matter (Clause 4.4) is irrecoverable. Similarly, any loss/expenses proximately caused by the delay even though the delay be caused by risk insured against (Clause 4.5) is recoverable.

In the event of the above given clause/circumstance there exists no liability on the part of the insurance company to indemnify any loss suffered under the above mentioned policy for the commodity being conveyed by MV Saphire".

Learned counsel for the complainant vehemently argued that the repudiation letter is not valid. First of all it does not stand proved that the owners of the ship were declared as insolvent. In support of his case, Counsel for the complainant has cited an authority reported in "Metal Power Co. Ltd. v. Oriental Insurance Co. Ltd. (2014) 5 Supreme Court Cases 771" . Counsel for the complainant has invited our attention towards para Nos. 8, 9,10 & 11, which are reproduced here as under:- "8. Learned counsel for the appellant has strenuously urged that there is no material on record to hold that the owners of the ship have been adjudged as insolvent or bankrupt so as to attract exclusion clause 4.6 of the Insurance Policy under which the liability of the insurer is excluded in case of loss or damage arising from the insolvency or financial default of the owners etc. of the vessel. Referring to the communication dated 05.01.1984 learned counsel has submitted that the reason for abandonment of the ship by the owners is that the estimate of the cost of repairs are much higher than the insured value of the ship. It is pointed out that the letter dated 14.10.1985 (Exbt.D-37) relied upon by the defendant to show financial default and bankruptcy of the owners of the vessel does not contain any basis to support the contention advanced. Learned counsel has further pointed out that the risks covered by the Policy included ''non- delivery of the goods at Maravankulam'' and the cargo not having been so delivered, the defendant is clearly liable. It is also contended that the alleged arrangement made by the insurer to have the goods transported by a third party on payment of additional cost of US$ 900 by the plaintiff was outside the scope of the agreement between the parties and hence was rightly rejected by the plaintiff.

On the other hand, learned counsel for the insurer has contended that under the Policy, the risk covered was in respect of the loss and damage to the subject matter insured. It is pointed out that in the present case the cargo which was insured was in perfect condition and no loss or damage was caused to it. Learned counsel has also relied on Clause 5.1 of the Institute Cargo Clauses (A), which formed a part of the insurance agreement between the parties, to contend that the loss or damage claimed by the plaintiff is not covered by the policy.

Under the Policy the risks covered are :

"All risks" Marine, theft, pilferage, non-delivery, civil commotion, strikes, riots, breakage, damage, dentage, etc."

''Non-delivery'' being a specific risk covered by the Insurance Policy, the failure to deliver the cargo, as agreed, would clearly amount to loss of the subject matter insured. The situations in which the insurer could avoid its liability are contemplated by the exclusion clauses. Clause 4.6 which was sought to be invoked by the defendant insurer excludes the liability of the insurer for loss or damage arising from the insolvency or financial default of the owners etc. Insolvency or bankruptcy would always be a matter of authoritative determination under the relevant municipal laws of a country and certainly not a matter of individual perceptions and opinions. No material to establish the insolvency or bankruptcy of the owners is available on record. In fact, in the earliest communication i.e. dated 05.01.1984, the plaintiff was informed that the repair cost of the vessel having exceeded the insured value, the owners had decided to abandon the ship. The said act on the part of owners cannot have the effect of their being adjudged as insolvents, which Clause 4.6 contemplates. The subsequent communication of the insurer dated 14.10.1985 (Exbt. D-3), relied upon by the defendant, is a mere assertion made by it that the owners have become bankrupt. The same is neither conclusive nor determinative of the question and appears to have been made by the insurer only to attract Clause 4.6. In the absence of any material whatsoever to show that Clause 4.6 can be attracted to the present case, the finding to the said effect, recorded by the High Court, cannot be sustained".

However, it may be mentioned here that the facts of this case are wee bit different. Here the interim report of IMB dated 28.04.2000 is significant. It has to be given due weightage and cannot be pushed under the carpet. Its relevant extract runs as follows:- "We understand that by the this time Messrs NI Johnson SRL were facing a liquidity crisis. They were unable to immediately pay port dues which had accrued and sought assistance from the cargo owners with undertakings to repay any monies put forward by the cargo interest once the vessel was back in employment. The cargo owners were reluctant to accede to his request and NI Johnson SRL turned to Navrom and Navrom''s bank for financing.

At this stage it appears that the Romanian government was undertaking an audit of its entire fleet and pending the auditor''s report the Government of Romania had instructed Romanian Banks to freeze all credit lines for shipping. Accordingly, financiers were reluctant to put forward the money requested by Messrs NI Johnson and latter had no other means of raising the required funds. We have received conflicting reports of what transpired thereafter and are in the process of trying to resolve the conflict".

"We understand from Lawyers we have contacted in Port Said that the vessel was unable to leave because she had been detained by the Port Said Port Authority until the payment of berthing dues amount to US$11,703 from 20/01/98 to 08/02/98 and US17,944 from 09/02/98 to 19/02/98 and all sums accrued to date at the daily rate of US$2,340.60".

"On 29 th October 1998 the Court delivered judgment affirming its Arrest Order and requiring the Owners of the Sapphire to pay the moneys claimed by the SCA plus costs and further berthing dues accruing after 09/05/1998. However, it apparently referred the SCA''s application for the sale of the vessel to another Court citing lack of jurisdiction".

"We have been informed that the Sapphire was sold by the liquidators of Navrom whilst she was under arrest at Port Said. We understand she was sold "as is where is" i.e. with her cargo on board. She was delivered to her new Owners on 23 rd August 1999 and on the 26 th of August 1999 she broke arrest. To the best of our knowledge none of the shippers/cargo Owners (who include some other members of the IMB) have heard from the new Owners once.

Messrs Price Waterhouse Coopers (Romania), who are the liquidators of Navrom have informed us that the new Owners are a company called Kent View Holdings Ltd, (KVH) of PO Box 398, 11 Bath Street, St Hellier, Jersey, JE4 8 UT Channel Islands, UK. The contact numbers provided by KVH are those of a firm of Solicitors i n London who have told us that whilst KVH is their client, KVH have not told them where the vessel or the cargo is.

The vessel has been renamed Sapphire 1 and now flies the flag of Panama. We understand that no deletion certificate has been issued by the Romanian Register".

It is, thus, clear that the facts of the above said authority in the case of Metal Power Co. Ltd. v. Oriental Insurance Co. Ltd. (Supra) hardly dovetail with the facts of this case. Here in this case, the bankruptcy of the owners of the firm stand proved. The complainant has failed to produce the evidence in rebuttal. It could not produce evidence to show that all the allegations levied against the owners of the ship are made out of whole cloth. Under these circumstances, the case of complainant goes in a tizzy and hence it is dismissed. No order as to costs.