Oriental Insurance Co. Ltd. vs GANPATI SOLVEX (P) LTD.

THIS appeal is directed against the order dated 18th August, 2000 passed in Case No. 52/1999 by the District Consumer Disputes Redressal Forum, Rajnandgaon (for short the "District Forum").

FACTS giving rise to this appeal are thus : the respondent obtained a Marine Cargo Inland Transit Policy No. 162602/1998 27 covering the risk for the period from 2.3.1998 to 1.3.1999 of the sum assured of Rs. 20 lacs from plant at village Tumdibod to anywhere in India by road in drums or in tankers on declaration basis each and every declaration to be given within 48 hrs. after loading the truck or tanker goods dispatched for destination within 200 Kms. not be declared for insurance. The respondent on 11.4.1998 in tanker CIS 188 loaded 10,320 Kgs. Rice Bran Oil at the factory of the respondent for its transportation and delivery at Bargarh (Orissa). The said tanker met with an accident at village Keradawari, 60 Kms. away from Durg. In the accident a large quantity of rice bran oil was leaked, drained and scattered on the road and nearby agriculture land. After receipt of the information of the accident, the respondent lodged a First Information Report on 13.4.1998 at the Police Station, Keradawari and information was also sent to the Insurance Company. The Insurance Company appointed Nanda & Nanda Associates, Surveyor who visited the spot on 13.4.1998 and carried the inspection. Nanda & Nanda Associates found that tilted tanker badly damages from the top and right side of the tanker was resting on the road. The Surveyor again went on 14.4.1998 and found the right side of the tanker torn from 2-3 places and the bottom supporting bracket of the tanker were also uprooted. Out of 10,320 kgs. quantity of oil, 7,660 kgs. oil was found drained, scattered. The Surveyor vide report dated 26.5.1998 found that quantity of 2,660 kgs. of oil was saved. The loss was of the value of Rs. 2,29,800/-. The Surveyor charged the survey fee of Rs. 3,529/- from the respondent. The Insurance Company after receipt of the spot survey report appointed Mr. S.K. Kansal, Surveyor who went at the spot as well as at the plant of the respondent and as the policy was for the sum of Rs. 20 lacs, he required documents and various declarations, which all were not supplied to him except two declarations out of which one tanker got accidented. He found that respondent in past has dispatched some consignments without declaration, hence, he was not allowed to examine the books of accounts nor was permitted to see the factory records. He also reported that for almost 34 hrs. the oil kept on leaking, the insured did not take reasonable care to save the oil and violated the policy conditions of minimizing losses. He also observed that the respondent intimated the Insurance Company late intentionally because during this period, the insured managed the documents as per the need of the case and concluded that the respondent declared the consignment after the accident and with the fear of disclosing material facts the insured did not cooperate in the matter. The Insurance Company vide letter dated 26.2.1999 repudiated the marine claim of the respondent on the following three grounds : "(1) The insured has not declared all dispatches under the policy. (2) Even after 34 hrs. of the accident oil kept on leaking, and insured did not take reasonable care to minimize the extent of loss. (3) Non-cooperation with the Surveyor/Investigator Shri S.K. Kansal with the clear intention of hiding the material fact of accident/claim."

The respondent filed the complaint which was resisted on the grounds of the repudiation and that the respondent has not impleaded necessary parties that is the carrier and its driver as parties. The respondent also did not take any action by filing a complaint or suit against the carrier to recover the amount. The District Forum after appreciation of evidence held the Insurance Company deficient in service and ordered to pay the amount of Rs. 2,33,329/- with interest thereon at the rate of 12 percent per annum from the date of repudiation of the claim, that is from 22.6.1999 and Rs. 1,000/- as costs of the proceedings to be paid within a period of two months failing which the amount to carry interest at the rate of 15 percent per annum.

After hearing learned Counsel for the parties at length and reappraisal of evidence on record, it is evident that for about 34 hrs., the respondent did not take any steps to minimize losses and allowed the oil to be leaked or to be stolen. It is also evident from the report of Mr. S.K. Kansal that previous to this accident, various declarations were not given and the declaration of this accidental truck was given after the accident. Admittedly, the respondent did not take any action against the carrier except issue of notice under Section 10 of the Carriers Act, 1865 has nor impleaded the carrier as a party to this complaint, which was a necessary party. In the circumstances, the Insurance Company now even after the execution of the letter of subrogation and power of attorney cannot institute the suit or take any action against the carrier for indemnity if the Insurance Company is made liable to pay. Therefore, even if for non-cooperation with the Surveyor, Mr. S.K. Kansal the repudiation of the claim is not considered to be justified, the Insurance Company rightly repudiated the claim as no steps were taken to minimise the losses over and above it no suit or complaint was filed by the respondent against the carrier nor carrier was impleaded as party in the present case. Thus the respondent for best reasons known to the respondent allowed the suit or complaint against the carrier as barred by time.

THIS Commission in Appeal No. 1062/1998 decided on 20.3.2001, M/s. B.K. Traders v. Divisional Manager, M/s. United India Insurance Co. Ltd. & Anr., in similar circumstances considered the question of liability of the Insurance Company and observed in paras 9 to 14 and 16 thus : "9. Section 9 of the Carriers Act raises an inference of legal presumption of negligence due to the accident and the burden is on the carrier to prove the absence of negligence. The consignee has got a right to claim the amount from the carriers even if the goods loaded and carried in the carrier are insured or covered by marine transit policy. Instead of suit in summary proceedings, the consignee or the consignor can institute the proceedings before the Consumer Fora under the Act to make a claim against a common carrier. See, the decisions of the Supreme Court in M/s. Economic Transport Organisation etc. v. Dharwad Distt. Khadi Gramudyog Sangh etc., I (2000) CPJ 41 (SC), and Patel Roadways Ltd. v. Birla Yamaha Ltd., I (2000) CPJ 42 (SC). 10. The policy is subject to undernoted clauses attached which form part of the policy. Evidently, in relation to inland transit, rail/road, condition No. 8 of clause A of the policy relates to minimizing the losses, which we quote : Minimising Losses 8. It is the duty of the Assured and their servants and agents in respect of loss recoverable hereunder 8.1 to take such measures as may be reasonable for the purpose of averting or minimising such loss, and 8.2 to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised by lodging a monetary claim against railway/road carriers/bailee within six months from the date of railway/lorry receipt or as prescribed by the relevant statute. And the underwriters will, in addition to any loss recoverale hereunder, reimburse the Assured for any charges properly and reasonably incurred in pursuance of these duties. 11. Inspite of the advise of the Surveyor oil was not transhipped as allegedly it could not have been transhipped and no report was lodged against the carrier. The report lodged by the carrier speaks of fall of small quantity of oil which supports the version of the Insurance Company. If, the total quantity of oil fell on the ground, the appellant after service of notice to the carrier ought to have instituted the suit or filed a complaint against the carrier. Not only this in the complaint filed, the carrier was not impleaded as a party so as to make the carrier for its negligence liable, even jointly or severally and allowed the claim or complaint or suit to become barred by time so that the Insurance Company, after execution of the documents of subrogation and power of attorney, may not institute the suit against the carriers. The State Commission, Tamil Nadu in case of K.M. Ponnappan, supra, a case where the insured thought that the Insurance Company is liable to pay, hence, did not take any action against the carrier and allowed the suit or proceeding to become barred by time against the carrier, considered the question and observed in paras 10 and 11 thus : "10....Unfortunately the complainants have not taken any legal steps against the carrier who is primarily responsible for this short landing. Under Article III Rule 6 paragraph 3 of the Indian Carriage of Goods by Sea Act of 1925 the carrier and the ship shall be discharged from all the liabilities in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered. The goods have been delivered in this case on 30.7.1991 and no action has been brought by the complainants against the third opposite party carrier on or before 30.7.1992. The third opposite party stands discharged from all liabilities in respect of this short delivery. As pointed out by the Supreme Court in East and West Steamship Company v. S.K. Ramalingam Chettiar, AIR 1960 SC 1058. Clause 3 of paragraph 6 of Article III in the Schedule to the Carriage of Goods by Sea Act of 1925 provides for the extinction of the right to compensation and is not merely a rule of limitation. The complainants have thus lost the right to claim any compensation against the Shipping Company. 11.....It is contended by the learned Counsel for the complainant that these printed conditions were not issued to the complainants and they are not, therefore, bound by the terms and conditions set out in the printed forms. We are unable to accept this contention. The first page of Exh. A1/Exh. 826 clearly reads thus : "Subject to important Notice attached hereto. The attached clauses and endorsements form part of this policy."

Evidently, the complainants have not produced those printed forms for reasons best known to themselves. (Condition No. 11 of Minimising Losses is not quoted as verbatim Condition No. 8 quoted in para 10 of this order)..... It is, therefore, the contention of the first opposite party that since the complainants have not taken any action against the carrier, they have failed to ensure that the rights against the carriers were properly preserved and exercised and the insurer is not, therefore, liable to indemnify the complainants. The point is covered by a direct decision of the High Court of Madras in E.I.D. Parry India Limited v. Far Eastern Marine Transport Co. Ltd., 1988-1 LW 321. The Court observed as follows : "As is laid down in the policy of insurance, the insurer''s liability is only to succeed to and not in any way supersede any claim which the insurer may be entitled to make on any carriers or their agents. It is also laid down therein that it is the duty of the assured and the agents in all cases to take such measures as may be reasonable for the purpose of averting or minimizing a loss and to ensure that all the rights against the carriers, bailees or other third parties and properly observed and exercised. In particular, the assured or their agents are required to take these steps and failure to comply with this requirement may prejudice any claim under this policy. Under the law of insurance, the right of the insurer on payment of the loss to the assured is to be subrogated to the rights of the assured so as to enable the insurer to proceed against the third party and any default committed by the assured either by allowing the remedy to get time barred or by abdicating or abandoning, his rights against the carrier or the third party will deprive the insurer of its remedies against the third party for indemnity. In such cases, it is open to the insurer to repudiate the liability under the policy, if the loss is not paid to the assured or to lay a counter-claim against the assured for damages if it has paid the loss to the assured. The law is thus stated in MacGillvray and Parkington Insurance Law, Seventh Edition, Paragraph 1172 : ''The Assured is under an obligation not to deal with any claim he possesses, or will possess, against a third party such a manner as to prejudice the insurer''s rights of subrogation in relation to it. The insurer''s remedy will be to repudiate liability on the policy, or to counter claim for damages for the loss of, or diminution of their rights, depending on the circumstances. The position varies slightly, depending on whether the insurer has paid for the loss.'' In the instant case, the plaintiff by its failure to institute this action in time against the first defendant-carrier has lost its remedy against the carrier and consequently the third defendant-insurer is deprived of its right of indemnity against the carrier. It is, therefore, open to the third defendant insurer to repudiate the claim under the policy of insurance, and the suit against the third defendant must, therefore, fail. We, therefore, hold that the complainants are not entitled to make any claim for compensation against the first opposite party. The complaint must fail." 12. THIS Commission in case of M/s. Siddharth Soya v. The New India Insurance Co. Ltd., 2000 (1) CPR 17, has also considered the question in a loss caused to the consignment by railways and after considering the clause of minimizing the loss observed that if the complainant wanted to be indemnified the complainant ought to have taken steps as required under the terms of the policy to minimise the loss which amounts to breach of the policy. Therefore, in the circumstances, in our opinion, it cannot be said that repudiation of the claim was without application of mind, not in good faith and on justifiable ground. Hence, we do not find any deficiency in service on the part of the opposite party. 13. In view of the above, in our opinion, the District Forum rightly held that the carrier was a necessary party, therefore, the complaint was liable to be dismissed on this ground alone. 14. The District Forum in the circumstances and the facts of this case in our opinion rightly held that the Insurance Company bonafidely on justifiable ground after due application of mind repudiated the claim. The complaint involves complex issues which require an elaborate enquiry, therefore, the appellant if so advised may institute the civil suit for seeking the relief in the Court of competent jurisdiction. On reappraisal of the evidence on record in our opinion, no different conclusion can be arrived at merely on the ground that reports of the Surveyor and the Investigator have not been proved by their affidavits. From the circumstances, the damage or loss of the oil of 9,257 mtrs. cannot be inferred contrary to the evidence adduced which does not establish the fall or leaking of the oil from other two chambers, nor the surrounding area shows the absorption of the total quantity of the oil. 15. xxx xxx xxx 16. Moreover, in the present case the appellant has not taken any action against the carrier under the provisions of the Carriers Act, 1985. In case the Insurance Company is made liable to pay the amount it would not be able to recover the amount from the carriers. Considering overall circumstances, we are of the view that no deficiency in service can be found on the part of the Insurance Company, in repudiating the claim which was after due application of mind."

In view of the above, in our opinion, the repudiation of the claim by the Insurance Company was after due application of mind and was on justifiable ground.

THE decision of the National Commission in National Insurance Company Ltd. v. New Patiala Trading Company, 2002 CTJ 516 (CP) (NCDRC), and of this Commission in Gurudutt Uro Hospital, Lithotripsy Centre v. Smt. Nusrat, 2002 CTJ 52 (CP) (SCDRC), relied by the learned Counsel for the respondent are distinguishable on facts and are of no help to the respondent. In the result, the appeal is allowed. The order of the District Forum is set-aside and the complaint is dismissed with no order as to costs. A copy of this order be conveyed to the parties and a copy be sent to the District Forum along with record of the case. Appeal allowed.