OZMA SHIPPING COMPANY vs Oriental Insurance Co. Ltd.

THIS is a complaint filed by a partnership firm in the name of M/s. Ozma Shipping Co., having its main office at Mangalore, Karnataka, carrying on business as cargo carriers, shipping and clearing agents against M/s. Oriental Insurance Co. Later, Bank of Baroda was allowed to be impleaded as a party to the proceedings on their submission that the Bank had extended the credit facilities against the beneficiary, under the insurance policy taken by the complainant. The facts of the case are :

THE complainant is the owner of a mechanized sailing vessel named "MSV Ozma" bearing Registration No. CLR-126 for carrying goods and registered at the Port of Cuddalore, Tamil Nadu under the Mercantile Shipping Act and the same was insured on 14th December, 1987 for a sum of Rs. 21,50,000/- under Insurance Policy No. 42223/2/0/MH/569/87 MHE/332/ 88 with the Oriental Insurance Co. A total premium amount of Rs. 40,832.50 was paid for the above policy for the coverage for the term from 14th December, 1987 to 13th March, 1988 and subsequently extended the term of the insurance cover from 14th March, 1988 up to 13th June, 1988 by payment of Rs. 30,383.00 as the premium and Rs. 322.50 on stamp duty accordingly. THE Official Surveyor of the Insurance Company, Mr. Ashraff conducted the survey to assess and determine the value of the said vessel and accordingly issued the Valuation and Seaworthiness Certificate on 18th September, 1987 before insuring the vessel. He opined that the said vessel should last for another 12 years if properly maintained and valued it at Rs. 21,50,000/-. The vessel "MSV Ozma" sailed from Beypore on 23rd April, 1988 at 3.00 p.m. to Kavarati loaded with goods after obtaining necessary port clearance. That very night when the vessel was 50 miles off around 10.00 p.m., the crew members noticed sea water entering into the vessel due to strong wind and rain. In spite of the best efforts of the crew members, the vessel completely sunk at 10.30 p.m. with the entire cargo. The crew members managed to save themselves using life boats.

As required under law, a protest was submitted to the concerned Officer of the calamity, and Port Officer, Calicut accordingly recorded the statement of Tindel and cancelled the Certificate of Registration issued to the vessel as required under law after being satisfied with the genuineness of the calamity. It was finally confirmed that the above calamity is the ''Will of God". Taking into consideration the above facts on record and the weather report issued by the Meteorological Center, Madras (Chennai) the complainant submitted the claim for the insured amount of Rs. 21,50,000/- with the respondent on 6th May, 1989 enclosing all the necessary documents. These are admitted facts between both the parties.

IT is the complainant''s say, that the claim was not settled by the respondent Company in spite of personal visits and reminders through post. On 23rd January, 1990, the respondent had arbitrarily approved the claim for only Rs. 15,00,000/- instead of settling the claim in terms of the policy conditions which was Rs. 21,50,000/. Reason stated in this letter by the respondent is that the vessel was previously insured with the New India Assurance Company for Rs. 14,94,000/- and that the value would have been further depreciated by the following year. The complainant yielded to accept the above amount under protest reserving its rights to seek legal remedies later on and accordingly signed the receipt of discharge for Rs. 15,00,000/- on 4th April, 1991. In the meantime, a civil recovery suit was filed by M/s. United India Insurance Co. Ltd., a non-party of the agreement, against the respondent at Kozhikode for recovery of a sum of Rs. 2,93,055/- being the cost of the goods loaded in the sunken vessel and an injunction order was in operation, against the respondent to withhold Rs. 3.5 lakhs pending disposal of the suit. The said recovery suit was dismissed and the injunction against the respondents was also automatically vacated on 12th December, 1993. The complainant agitated the fact that after signing the discharge voucher without prejudice to his rights on 4th April, 1991, the Insurance Company revealed only then, about the injunction order and that they cannot make the payment. He further averred that though the injunction order was vacated by the order passed on 12th December, 1993, the Insurance Company corresponded after seven months, i.e. on 7th July, 1994, that they would issue a cheque for Rs. 15 lakhs subject to certain conditions.

THE complainant''s Counsel argued that the Insurance Company was not prepared to settle their legitimate claims made since 6th May, 1989, even though all the documentary evidence as called for by the Insurance Company as per the policy conditions was provided to their satisfaction. It is their case, that the respondents arbitrarily decided not to pay this amount with some pretext or any other without any basis or justification which is clear deficiency of service. For the foregoing reasons given above the complainant prayed that the Insurance Company . should pay them entire insured amount of Rs. 21,50,000/- with 18% rate of interest from the date of calamity, i.e. from 23rd April, 1988 and compensation for seven years of delay along with costs. Insurance Company, the respondent took a preliminary objection that the complaint is time barred and that it should be dismissed. THE learned Counsel for the respondent submitted that the complainant had settled to receive the award of Rs. 15,00,000/- when it was initially communicated to them vide letter dated 23rd January, 1990 and the discharge voucher was signed on 4th January, 1991 by the complainant. According to them, the said claim of Rs. 21,50,000/- which in itself exaggerated amount and that the Insurance Company took a lenient view and decided to settle the claim as per the actual loss instead of repudiating on the ground of deliberate and willful concealment of the material facts by the complainant while obtaining the insurance coverage in question and also while lodging this claim based on misrepresentation of facts. On receipt of the intimation regarding the loss from the complainant, the respondent Company appointed M/s. J.B. Boda, Marine and General Survey Agencies (P) Ltd., to carry out the preliminary survey and they vide their report dated 19th September, 1988, advised proper investigations should be carried on the following grounds : (a) The complainant in claim form stated that the vessel in question had collusion bulk heads whereas in fact there was no such collusion. (b) The complainant had wrongly stated in claim form that the vessel had not met with any accident in the last four years whereas it had met with two accidents when previously insured with the New India Assurance Company Ltd.

This is how they came to know that the same vessel was earlier insured for Rs. 14,02,000/- with the New India Assurance Company Ltd. and that during the said period it had met with accidents twice which was settled and paid by the said Insurance Company to the complainant. Further investigations revealed that the loan installments to Bank of Baroda towards the repayment obtained against the vessel were not being paid by the complainant and that the Bank received only the insurance claim amount from the New India Assurance Company Ltd. They stated that this information was not brought to their knowledge as per the Bank clause on the insurance policy which was deliberate concealment of material facts. It was then, vide letter dated 16th November, 1989, they deputed M/s. AWJ Fernandez to investigate into all these aspects of the claim in association with Mr. R. Nair of M/s. J.B. Boda, Surveyors Pvt. Ltd. After thorough investigations into all the aspects of the claim in question, they arrived at the following conclusions that : (a) The valuation report of the Surveyors Mr. Ashraff was not correct because the said vessel was not more than Rs. 15 lakhs in value according to the policy taken by M/s. New India Assurance Company, and it was already three years old which was within their knowledge, which was concealed by the complainant. (b) The two accidents it met with during the relevant period with New India Assurance Company was in the knowledge of the complainant and he concealed these facts from the respondent Insurance Company. (c) The complainant, in the proposal form, nowhere stated that it had remodeled and reconditioned the vessel by spending a sum of over 5 lakhs in the year 1989 and it was alleged for the first time vide their letter dated 28th February, 1990, which is an after-thought according to them, as this plea was never taken by the complainant during the entire process of settlement . (d) The market value of the vessel will decrease from year to year and that cannot be increased to such an exorbitant figure by mere reconditioning and remodeling and that the insurance coverage was obtained for higher sum insured than the actual cost by deliberately concealing the material facts in order to cover up its losses.

IT was further submitted by the respondent that these investigations confirmed that the loss was genuine and Insurance Company was left with two options : (a) either to repudiate its liability on account of misrepresentation and deliberate concealment of the material facts while obtaining the insurance policy and lodging the claim in question; or (b) to deal vith the claim on compromise basis to avoid litigation. The learned Counsel for the respondent argued that though the claim could have been repudiated on the basis of above said reasons, the lenient view has been taken and that is how the offer of settlement of the claim in question as per the actual loss came about. After considering all material aspects such as the condition of the vessel, year of its manufacturing and marketing value and the earlier sum insured with the New India Assurance Company they offered Rs. 15 lakhs. IT is pleaded that the delay caused was due to the case filed by the United India Insurance Company Ltd. in civil suit wherein the Hon''ble Court passed an order restraining the respondent from releasing a sum of Rs. 3.5 lakhs to the complainant. IT was further stated that the complainant itself never approached the respondent with a request to release all the insurance claim amount till the letter dated 27th December, 1993, wherein they requested to settle and pay the claim amount to the Bank account Herald D''souza, partner of the complainant The respondent Company gave a routine reply on 7th July, 1994 and contended that this does not give fresh cause of action to the complainant under the Consumer Protection Act for filing this complaint and that the limitation for filing the complaint expired in February, 1992. They contended that the claim is time barred both under the Consumer Protection Act and also under Civil Law and hence the complaint is not maintainable and is liable to be dismissed on this ground and further prayed that a sum of Rs. 10,000/- be paid to the respondent Company, on account of filing such a false and baseless complaint, causing harassment and damage to the respondent. In view of the above rival arguments we are called upon to decide the following issues whether the complaint is maintainable, (a) on the issue of limitation; (b) whether there is deficiency of service in not settling the claim in full; (c) if so, what is the amount to be paid as final settlement; and (d) whether there is a delay in the settlement of the claim by the respondent.

AS far as the issue of limitation is concerned, it is seen from the records that the recovery suit against the respondents was dismissed and the injunction against them was automatically vacated by order passed on 12th December, 1993 and it was the respondent Company which wrote a letter after an inordinate delay of 7 months, i.e. on 7th July, 1994, that they were prepared to release the amount of Rs. 15 lakhs, which is also an acknowledgement of liability on the part of the Insurance Company. This should also be viewed as deficiency of service. Briefly stated, there was no repudiation of liability on the part of Insurance Company and hence question of limitation, pales into insignificance. Once decided to settle the claim, whatever the amount be as far back as on 23rd January, 1990, it is their duty and the onus and responsibility to immediately pay the amount at the earliest opportunity is on the respondents because it is within their knowledge that the suit was filed also that it was dismissed. AS soon as injunction was vacated, it is solely their duty to send the cheque for Rs. 15,00,000/- against which discharge voucher was already given by the complainant as far back on 4th April, 1991. After the suit was dismissed, it was a reply given by the respondent to the complainant''s letter was after 7 months. This cannot justify any delay by any means of imagination. This conduct of apathy is not explained except to say in their words that the letter dated 7th July, 1994 of the respondents was a routine reply from the office of the Public Sector Company to the letter dated 27th December, 1993, of the complaint, will not give a fresh cause of action to the complainant for the purpose of period of limitation for filing the complaint. We cannot countenance this attitude of indifference of respondent Company and cannot sustain plea of limitation. In II (1999) CPJ 41 (SC)=VII (1999) SLT 92=(1999) 6 SCC 627, in the case of France B. Martins & Anr. v. Mafalda Maria Teressa Rodriques (Mrs.), it was held by the Hon''ble Supreme Court that it is clear that prior to its amendment of the Act did not prescribe any period of limitation for filing complaints by consumers till the insertion of Section 24-A. Vide amendment made w.e.f. 18th June, 1993 which prescribed the two years from the cause of limitation and Sub-section (2) of Section 24-A authorizes the Commission to entertain a complaint even after the period of limitation on the existence of sufficient cause for not filing the complaint within the statutory period by recording its reasons for condoning the delay. They observed that the addition of Section 24-A reflects the mind of the legislature that they had initially not intended to prescribe any period of limitation for filing the complaint under the Act and left it to be governed by Indian Limitation Act. The present complaint has been filed on 18.5.1995 and since the cause of action continued since the respondent finally offered to pay the claim vide letter dated 7th July, 1994, to the complainant. Even otherwise, the claim was made in time and never formally repudiated by the Insurance Company. Letter dated 7.7.1994 is the admission of the claim and that lends lease of life to the complaint. Prior to amendment in Consumer Protection Act the claims were governed by General Law of Limitation. Hence, we answer the question of limitation raised by the respondents in the negative.

As far as the settlement of the claim, it is evident from the records, that the value was respondent''s agent who went into all the aspects of the vessel and gave a detailed valuation certificate after taking into consideration, the major overhauling of the engine and accessories, assessed that the market value would be Rs. 21,50,000/-. In the Valuation and Seaworthiness Certificate dated 18th September, 1987, given by Mr. Ashraff, the Official Surveyor of respondent''s stated "if properly maintained, the vessel should in my opinion last for another 12 years". Considering all the above aspects and the present market condition of materials and labour charges and after allowing appropriate depreciation/appreciation on the value of the Hull Engine and Accessories, in our opinion the value of the Hull of the above construction and dimensions with all its accessories would be Rs. 21,50,000/- and we have no reason to depart from the valuation arrived at by the Surveyor of the respondent. Few months after this valuation the ship sunk. In I (1995) CPJ 41 (NC), in the case of Sitha Vedanayagam v. New India Assurance Co. Ltd., this Commission laid down the ratio that when there is no fraud, alleged in the matter of valuation the whole amount should be allowed. In this case, the Surveyor of the Insurance Company has valued the subject-matter at Rs. 21 lakhs, we feel that the Insurance Company is rather estopped from contending otherwise. Again looking to the short interval between valuation and the sinking of the vessel, we do not want the question of depreciation to dominate our reasoning. The question of fraud regarding previous accidents and fall in valuation, in our view stands well-rebutted in the valuation arrived at by the Surveyor of the Insurance Company. We believe the Surveyor is an independent body appointed by the Insurance Company and effectively represents the interest of that Company. We also observe that on the basis of the valuation respondent themselves decided the premiums and insured the said vessel and collected all the premiums and this is an admitted fact. Merely because there was another valuation at the different time to a different Insurance Company, at Rs. 15 lakhs, the respondent Insurance Company cannot shirk their duty to pay as per terms of the contract, i.e. Rs. 21,50,000/- because it suits them to pay less. Respondent Company is liable to pay as per their policy contract with the complainant and the reasons given by the respondents are not justified because they relied on the valuation of M/s. Boda Surveyors and the earlier policy amount which is obliterated in the valuation made by their own Surveyor Mr. Ashraff.

THE delay of settling this claim by the respondent Company is also not warranted considering they had no intention of paying the full amount of Rs. 21,50,000/- and secondly when the suit was dismissed, they were still taking their sweet time to offer to pay the complainant even Rs. 15 lakhs after knowing the financial difficulties of the complainant. We feel the claim of the complainant is justified and there is no concealment of facts as far as the damage is concerned. We feel that the delay can be suitably compensated by awarding interest at the rate of 12% p.a. on the above amount from 4th April, 1991, the day of signing of discharge receipt. THE Insurance Company may pay the amount to the Bank of Baroda since the Debt Recovery Tribunal has allowed the Bank to receive the amount as the said vehicle was placed a security with them by the complainant. It is not disputed that the insurance policy in the present case is a marine policy and is a valued policy under the Marine Insurance Act, 1963. As to what is valued policy, we may refer to Section 29 of the said Act which reads as under : "29. Valued Policy-(1) A policy may be either valued or unvalued. (2) A valued policy is a policy which specifies the agreed value of the subject matter insured. (3) Subject to the provisions of this Act, and in the absence of fraud, the value fixed by the policy is, as between the insurer and assured, conclusive of the insurable value of the subject intended to be insured, whether the loss be total or partial. (4) Unless the policy otherwise provides, the value fixed by the policy is not conclusive for the purpose of determining whether there has been a constructive total loss."

Under Section 68 of the Act, total loss has been defined. This section reads as under : "Total loss-Subject to the provisions of this Act, and to any express provision in the policy, where there is a total loss of the subject-matter insured,- (1) if the policy be a valued policy, the measure of indemnity is the sum fixed by the policy; (2) if the policy be an unvalued policy, the measure of indemnity is the insurable value of the subject-matter insured."

IN fact, Mr. P.K. Seth, learned Counsel for the INsurance Company could not dispute that the policy in question is a valued policy and that under Section 68 the insured has to be indemnified for the amount fixed by the policy. The policy, in the present case, had fixed the amount at Rs. 21.5 lakhs. Mr. Seth''s stress was on the question of limitation as well as the value of the vessel was wrongfully valued at Rs. 21.5 lakhs. We have held that the complaint is within the limitation and in any case considering the facts and circumstances of the case, where the INsurance Company withheld even the amount of Rs. 15 lakhs all this period on the plea that a civil suit has been filed against it where there was an injunction for holding certain amounts, but not all, to the petitioner, it is a fit case where we should condone the delay in filing the complaint. Moreover, it does not look proper for the INsurance Company, a Government Company, to raise plea of limitation in the facts of the case. As to how the valuation of Rs. 21.50 lakhs of the vessel has been arrived at, we have already referred to the report of the Surveyor appointed by the INsurance Company. IN fact, it cannot disown the report of the Value appointed by it which was the basis of its charging premium in respect of the insurance of vessel in question. IN not settling the claim of the complainant all this period, there is certainly deficiency in service and for this delay the INsurance Company has to pay interest as well on the amount of the policy. As noted above, there has been a total loss and the policy was a valued policy. IN view of the above discussion, we pass the following order. We direct the Oriental INsurance Company to pay Rs. 21,50,000/- with interest at the rate of 12% p.a. from 4th April, 1991 upto the date of payment within six weeks from the date of receipt of a copy of this order to Bank of Baroda since they have a claim on the amount. We also direct them to pay Rs. 10,000/- as costs of the complaint to the complainant Company. Complaint allowed with costs.