SARVALAXMI MARINES vs Oriental Insurance Co. Ltd.

THE appellant was the complainant before the State Commission, where he had filed a complaint alleging deficiency in service on the part of the respondent Insurance Company.

VERY briefly the facts leading to filing the complaint were that the appellant / complainant was in the business of marine food which also included fishing in deep seas. Undoubtedly, the complainant had a ''Boat'' which he had purchased on 31.5.1989 and was registered as a sea going vessel with the Port Authorities on 16.6.1989. This boat was insured for Rs. 16.5 lakh with the respondent Insurance Company for the period from 7.11.1990 to 6.11.1991. This boat left for fishing expedition on 29.1.1991 and starting collecting fish, but while the vessel was fishing in the sea, flooding of engine room consequent upon the breaking of stern tube, was noticed at about 04 :30 hrs on 30.1.1991. Thereafter the ''lascar'' abandoned the sinking boat and started swimming. As per the complainant, the boat sank at about 03.00 hrs on 31.1.1991 and crew who had jumped / abandoned the boat and had started swimming, was rescued by another boat, which landed at the Dibbalapalem around 07.00 hrs. on 31.1.1991. The incident was reported to the Port Conservator, Visakhapatnam and Police Station and the Marine Mercantile Department, Visakhapatnam and Kakinada Port Office. The respondent Insurance Company was intimated on 31.1.1991 who appointed a Surveyor M/s. Sea Scan Services Private Ltd., who submitted its report on 13.4.1992 concluding that this was a case of ''total loss'' of boat. It appears that subsequent to receiving of this report an Investigator was appointed by the respondent Insurance Company on 7.7.1993, i.e., almost after two and a half years of the episode and almost one year and four months after receiving the report of the first Surveyor. Yet when the case of the appellant was not getting, a complaint was filed before the State Commission, who after hearing the parties dismissed the complaint primarily relying upon the report of the Investigator, i.e., a retired Police Officer. Aggrieved by this order this appeal has been filed before us. We heard the learned Counsel for the parties at considerable length. There is no dispute about the fact that the boat was insured during the relevant period and it is also not in dispute that after sinking the boat when the matter was reported to the respondent, they appointed a Surveryo as per law, who reported this to be a case of ''total loss'' vide its report dated 13.4.1992.

On a specific query, learned Counsel for the respondent Insurance Company is not able to satisfy us as to under what provision of Insurance Act, did they appoint the Investigator? Section 64 UM of the Insurance Act is relevant for this point and after carefully going through this we find that there is no provision for appointing Second surveyor much less, an unlicensed Investigator. Even though, the learned Counsel for the respondent was unable to come out with a reply to our query on the point of appointing an Investigator after having received the report of the Surveyor, yet we are aware of the judgment of the Hon''ble Supreme Court in the case of National Insurance Co. Ltd. v. Harjeet Rice Mills, III (2005) CPJ 6 (SC)=V (2005) SLT 503=2005 CTJ 961 (CP) (SC), in which Hon''ble Supreme Court had held as follows : "6. We are of the view that the State Commission should have given an opportunity to the appellant before us to prove the investigation report. Section 64 UM of the Insurance Act cannot stand in the way of the Insurance Company in establishing that the claim was a fraud on the Company, or that it was a case of deliberately causing a fire so as to lay the foundation for an insurance claim..........."

ACCORDING to the observation of the Hon''ble Supreme Court in the cited judgment, perhaps the insurer could appoint Investigator in case a claim is found to be fraudulent. We have carefully gone through the written version filed by the respondent before the State Commission, the word fraud has not been mentioned at all. In this regard para 4 of the written version filed by the respondent before the State Commission is relevant, which reads as follows : "In reply to para 3 (f) to (O) it is submitted that on receipt of an intimation from the complainant, that the insured vessel had sunk into the sea at Gangavaram Sea area, near Dibbalapalem on the night of 31.1.1991, the resspondent company instructed Sea Scan Services Private Ltd., Visakhapatnam to conduct a survey and investigate into the claim by the insured (complainant)., who submitted its report on 13.4.1992 in which it concluded that the insured vessel was a total loss at sea on 31.1.1991 and recommended to deal with the claim accordingly. But the Regional Manager, Oriental Insurance Co. Ltd., Hyderabad, studying the facts of the case considered another investigation was necessary into the claim and accordingly appointed Sri M.V. Reddy, Addl. D.I.G. (Retired)., Hyderabad as Investigator on 7.7.1993."

(Emphasis supplied) The reasons for appointing the second Investigator has been summarised above and there is no allegation of any fraud which needed investigating, in view of which we are of the view that as per law and even as per the observation of the Supreme Court (supra), the respondent could not appoint the second Surveyor for the reasons mentioned earlier.

WE have also seen the cross-examination of the Investigator which, to say the least, makes a pathetic reading. Firstly, this Investigator is not qualified as a marine engineer or any engineering. Be that as it may. He went to the spot after three years, recorded statements of the lascar and other people and obtained their signatures, copy of the statements were not given to the parties as according to him the inquiry was confidential. WE are afraid that he forgot to shed his ''Khaki'' uniform while conducting inquiry of this nature. He has clearly stated that the statement was recorded in his own handwriting and obtained the thumb impression or signature as the case may be. It is very important to note that he did not consult the Sea Scan Services Pvt. Ltd., the original Surveyors, who are licensed Surveyors, and had carried out their survey after visiting the spot of sinking, twice and also recording statements of lascars and other people. It is also important to note that he did not consult the Port authorities. In our view, lesser said the better, about the conduct of this unlicensed and, in our view, unauthorised Investigator whose report appears to have been obtained with the sole purpose of repudiating the claim after three years of incident. It is also on record that the local S.I. informed the Investigator that the boat could not be traced out. The matter was also gone into by the Ministry of Surface Transport, Government of India. They also reported that matter be setted as the boat has sunk. Like the Investigator the State Commission has also relied upon, in our view, inconsequential discrepancies like the number of lascar of the boat and the type of boat which rescued them and also unsubstantiated and self-opined conclusion by both the Surveyor on which State Commission has relied upon and observed that it is improbable that water up to the neck level entered into the engine room, driver was still operating to the engine without being unaware of this development. The State Commission has arrived at a conclusion of his own, "in other words it is common knowledge that engine will not work when the engine is submerged in water". WE are constrained to observe that perhaps the State Commission had already made-up its mind to take a view, completely ignoring the report of the Surveyor who is licensed as well as highly professional and qualified to report. As reported in the report of the Surveyor on this point, he makes the following observations under the heading "causes and circumstances leading to the loss of vessel", which reads as under : "The vessel KKD 1853 sailed from Vishakhapatnam fishing harbour in the early hours of 29th January, 1991 to carry out fishing operations between Gangavaram and Dibbalapalem, area. Finding good catches in the fishing ground of Gangavaram Coast the vessel continued fishing operations in that area for 2 days, i.e., till the early hours of 31st January, 1991. On 31st January, 1991 when the vessel was travelling off Gangavaram Coast around 0200 hours one of the crew members attempted to collect some sea water for washing the prawns/fish which they were sorting out on the deck. When he lowered the bucket into the sea he found sea level near to the upper fender. The crew member had immediately shouted for the driver to come to the afterpart of the boat. The driver instantly left the wheel house and came to the afterpart of the boat when he saw considerable amount of water in the aft hold of the boat. The driver could also hear gurgling sound of water coming into the boat. The driver immediately stopped the engine and went inside the aft hold of the boat. While getting down into the hold the driver had found that the water level by that time had come up to his neck level. The driver had reached near the stern tube and feeling with his feet found that the stern gland, gland packing and cutlass bush had become free and slid forward on the propeller shaft and sea water was entering into the boat through stern tube. Although he made several attempts to arrest the leakage, due to the high pressure of water leaking into the vessel through the stern tube, the driver was unable to arrest the water leakage by jamming a waste cloth in place. Moreover, it would have been difficult to work in a submerged area. The crew of KKD 1853 tried to bail out the seawater manually and also with the help of hand pump. Since the inflow of water was much greater than the rate at which the water could be pumped out, their efforts became futile and at last finding no other means to save the boat from sinking the driver and crew of KKD 1853 decided to abandon the vessel. While the crew jumped out of the vessel and were swimming around it, the boat slowly sank."

(Emphasis supplied) As has been severally held by this Commission as also by the Hon''ble Supreme Court, the report of the Surveyor, who is independent agency and are qualified and licensed to carry out the work, cannot be brushed aside lightly. The above reason and sinking of boat itself needs no further elaboration. It adequately explains as to how and what was done by the lascars once the driver on coming to know of the mishap leading to entry of water much deep. In our view, there was no cause for the State Commission at the word ''probability'' or ''improbability''. The report of the Surveyor is comprehensive, detailed and as thorough as could be and has been written, after speaking to all the authorities, visiting the site of sinking and after hearing/recording the statements of boat owner, driver and crew members. This report has not been challenged by the respondents on any ground except as it appears in para 4 of the reply filed by the respondent before the State Commission (already reproduced earlier). Another point at this stage sought to be raised regarding the sea-worthiness of the boat. The report of the Surveyor more than adequately deals with the point at page 7 of its report (page 98 of the paper book), and held the vessel to be sea-worthy.

THE police states that the boat could not be traced; Ministry of Surface Transport, Government of India, after preliminary inquiry states that claim of the appellant be setted. Surveyor appointed by the respondent after thorough inquiry concludes that it is a case of total-loss, yet the respondent go on repudiate the claim only on 31.3.1995, i.e., after four years of the incident of sinking on the following grounds : 1. THE total loss claimed by you is false and not genuine. THE boat KKD-1853 has not sunk in the sea on the night. 2. THE contention that two boats have been engaged by you for salvage purpose on 31.1.1991 and 1.2.1991, is totally incorrect. 3. THE variation in the number of crew members present on the sunken ship indicates the falsehood in the statements of the crew members themselves. 4. Variation in the number of crew members present on the rescue boat, and in the nature of the rescue boat itself clearly indicate that the whole story of boat sinking in the sea was cooked-up. 5. Function of gear box and engine, after they were submerged in the water is an improbability of all the improbabilities which definitely reflect on the very veracity of the crew members. 6. THE evidence deposed by the crew members is prompted and false."

FIRST ground has no legs to stand on. Police report and survey report is against the respondents. As far as second ground is concerned, complainant has said in his examination-in-chief that a boat was sent on 31.1.1991 for searching the sinking boat, which remains unrebutted. About ground Numbers 3 and 4 as already observed, the number of crew members varying by figure one or the type of rescue boat cannot be fatal to the claim of the complainant about the boat having been sunk. Ground No. 5 remains unproved, unsubstantiated by the respondent. In fact, the report of the Surveyor goes against the respondent as already discussed above earlier.

We are somewhat at our wits end, when we notice the written version filed by the respondent before the State Commission to the effect that the report of the Surveyor is only "primary" and not "final" and goes on to add that it has to be "scrutinised" by making further inquiry or investigation......". We are afraid that is neither the practice nor is the law. While we can appreciate, that the survey report conducted by a licensed Surveyor, may need some clarification, this could have been sought from the Surveyor himself but this was not done, or at best they could have appointed anther licensed Surveyor. This was not done. In view of above, we find that the report of the Investigator is without jurisdiction which only goes on to substantiate the fact that since the whole repudiation of the claim is based on the report of the Investigator which we are unable to sustain for the reasons already discussed earlier, in view of which we find it difficult to agree with the findings returned by the State Commission. In our view, the State Commission completely failed in giving the importance it deserves, to the report of the licensed Surveyor and went on a tangent to exclusively rely upon the report of an investigator, who had no authority under the law to carry out investigation. In any case, he was neither qualified nor licensed to do so, not to say law does not permit the respondent to appoint such Investigator as already discussed earlier.

IN view of above, we are unable to sustain the order passed by the State Commission, which is set aside. The appeal and the complaint is allowed and the respondents are directed to pay an amount of Rs. 11,55,000 being 70% of the insured amount. This is worked on the basis of the fact that the boat was licensed to operate from June 1989 and it sank in Jan. 1991, i.e., after a period of one year and seven months, and applying the standard depreciation as applicable under provisions of income tax, 20% on first year and 10% on second year, we direct 30% deduction from the price of boat. The appellant / complainant shall also be entitled to interest @ 9% p.a. from two months after the receipt of the report of the Surveyor, i.e., from 1.7.1992 till the date of payment along with cost of Rs. 5,000 payable by the respondent INsurance Company to the appellant. The respondent shall pay all the amount to the appellant/complainant within a period of six weeks from the date of passing of this order, failing which the appellant shall be free to proceed under Section 25/27 of the Consumer Protection Act, 1986. The appeal stands disposed of in above terms. Appeal disposed of.