Soimex International (P) Ltd vs AIR India International

MR. Justice K.S. Gupta, Presiding Member-Complaint was filed, inter alia, alleging that M/s. Al Khwaja Overseas, Ajman, UAE, a leading importer of cotton fabric in Middle East placed an order dated 2.3.1996 (revised on 25.3.1996) for supply of 100% cotton fabric on the complainant against Letter of Credit at sight bearing No. C-17/669602769 dated 24.3.1996 issued by Standard Chartered Bank, Dubai. Since the delivery of fabric was time bound, the complainant in part compliance of the said order, delivered consignment comprising of 43 bales weighing 2725 kgs for carriage Ex-Delhi to Dubai to opposite party No. 1 vide Airway Bill No. 098-6580 2531 dated 16.10.1996 (ought to have been 10.6.1996). Standard Chartered Bank, Dubai was the consignee. M/s. Al Khwaja was the notify party. Consignment was sent on "freight collect" basis. Freight was Rs. 1,04,913. Complainant raised invoice No. SIL/Exp/056/96 for US$ 18672.30. Complainant continued to manufacturer the balance fabric in the meantime. It was further alleged that consignment was insured by the complainant with opposite party No. 2- Insurance Company under Marine Certificate No. 360700/C15/63/96 dated 11.6.1996. Flying time between Delhi and Dubai is about 3 hours. Since the consignment did not reach destination as scheduled, the complainant wrote letters dated 28.6.1996 and 29.6.1996 to opposite party No. 1 to enquire about the status thereof. Complainant further wrote letters dated 4.7.1996, 11.7.1996, 27.6.1996, 29.7.1996, 31.7.1996 and 1.8.1996 to opposite party No. 1. It was stated that the complainant later on came to know that opposite party No. 1 had allowed the consignment to damage by exposing it to pilferage/theft and soaked in rain and chemicals. On 22.7.1996, opposite party No. 1 sent a letter to the complainant stating that the consignment was lying undelivered at the destination and complainant should give alternate disposal instructions and pay the freight charges. On 26.7.1996, opposite party No. 1 wrote another letter stating that 8 pieces of consignment were with Bombay Police, it was recalling 17 bales from Dubai and remaining 18 bales were lying at Bombay. On or about 31.7.1996, complainant received a telegram from opposite party No. 1 calling upon it to collect the subject consignment on payment of charges of Rs. 1,10,982. On the same date, opposite party No. 1 wrote a letter advising that 25 out of 43 bales have reached Delhi on 30.7.1996 and in regard to remaining 8 bales, its Bombay office was in touch with the concerned authorities and shall forward the same as soon as those would be received. On or about 31.7.1996 (ought to have been 31.8.1996), opposite party No. 1 returned 35 damaged bales out of 43 bales to the complainant. At the time of return, opposite party No. 1 compelled the complainant to pay amount of Rs. 1,10,982 on account of freight. It further demanded storage charges. In view of the failure of opposite party No. 1 to deliver 43 bales the buyer cancelled the entire order. Complainant had manufactured the balance quantity of the ordered fabric and value thereof was Rs. 6,77,692. It was alleged that complainant spent more than Rs. 1,36,497 on travel and stay, etc., at Dubai. Opposite party No. 1 sent the copy of survey report of M/s. A.C. Chopra and Co.-Surveyors, opposite party No. 4 on 16.5.1997. This survey report has been challenged on a number of counts as detailed in para No. 16 of the complaint. Complainant also lodged claim upon opposite party No. 2 by the letter dated 1.9.1996. Opposite party - Insurance Company thereafter appointed M/s. has Surveyors and Loss Assessors-opposite party No. 3 to assess the loss and decision to that effect was conveyed to the complainant by the Insurance Company by the letter dated 3.9.1997. After opposite party No. 3 had completed the survey, they authorized the complainant to dispose of the salvage which was disposed of on or about 30.4.1997 for a sum of Rs. 69,020. Para No. 20 of the complaint seeking direction to the opposite party to pay compensation being material is reproduced below: (i) Towards cost of value of suit cargo as per invoice value. Rs. 6,56,238.00 (ii) Duty draw back given by the Government on account of export of goods. This duty draw back is given by the Govt. so as to enable the exporter to compete with the International market. Rs. 35,605.00 (iii) Loss of value of balance goods which were manufactured and were ready for dispatch but could not be dispatched due to rescinding of the contract by the buyer for the reasons stated hereinabove. Rs. 6,77,492.00 (iv) Duty draw back on balance goods as per item (iii) above. Rs. 39,633.00 (v) Storage and other charges paid to the Airport Authority of India vide Pay Order No. 200594 dated 30.7.1996. Rs. 55,265.00 (vi) Cost of air ticket to and from Dubai for Shri J. P. Gupta paid vide cheque No. 299440 dated 13.9.1996. Rs. 11,862.00 (vii) Boarding & lodging charges for 7 days at Dubai (the amount spent was more but the permissible expenses by the Govt. is @ USD 500 per day). Rs. 1,24,635.00 (viii) Interest on the amount as per interest charged by the bankers of the complainant. This interest is calculated upto the date of filing of the complaint. Rs.

,50,000.00 (IX) Loss of business and reputation (This amount is direct loss as result of the cancellation of the order by the buyer who has since stopped dealing with the complainant and some other buyers also did not conclude the contract in view of the rescinding of the contract by buyer). Rs. 10,00,000.00 (x) Mental tension and torture. Rs. 10,00,000.00 Total: Rs. 38,50,730.00 2. Opposite party No. 4 was appointed as Surveyor by opposite party No. 1. Opposite party No. 3 was appointed as Surveyor by opposite party No. 2- Insurance Company. After filing of written versions by both opposite party Nos. 3 and 4, they were allowed to be deleted from the array of parties vide order dated 4.3.2002.

OPPOSITE party Nos. 1 and 2 contested the complaint by filing separate written versions. It was alleged by OP No. 1 that the consignment in question was booked through M/s. Skyrider Freight (P) Ltd., agent and it was airlifted on flight AI-112 on 13th June, 96 (ought to have been 10th June) DEL/BOM to connect Al-711/15th June, 1996 BOM/SXB. While in transit, 9 bales were pilfered. Only 17 bales out of 23 bales were forwarded to Dubai. Remaining 25 bales including 9 bales were held up in Bombay for security and investigation purposes by Bombay police. One bale was still missing. Damage to the consignment was caused due to rain while it was lying in the custody of Airport Authority of India at Bombay. This Authority is, therefore, liable for the alleged loss suffered by the complainant. Complaint was stated to be bad for non-joinder of the Authority. Consignment was called back at the request of complainant and 34 bales were delivered to the complainant. On 4.11.1996, answering opposite party appointed M/s. A.C. Chopra and Company-Surveyors to conduct the survey. Surveyor visited the factory of the complainant on 6.11.1996 and 27.12.1996 and submitted the report on 30.12.1996. Surveyor assessed the loss @ Rs. 100 per kg for 31 damaged/soaked bales consisting of 1725.320 kgs which comes to Rs. 1,72,632. Regarding loss due to non-delivery of 9 bales, the complainant in one of their letter No. SIL/EXP/743/96 dated 1.2.1996 (ought to have been 1.8.1996) mentioned that the approximate value of 8 bales was Rs. 46,800. If the average of one bale is taken on that basis the amount would come to Rs. 5,850. Therefore, the total loss of 9 bales would be Rs. 52,650. By letter No. DL/FR-2631/SCS dated 16th May, 1997 the answering opposite party had offered to settle the claim for a total amount of Rs. 2,25,282 (Rs. 1,72,632 + Rs. 52,650) and asked the complainant to give their concurrence for the same. The complainant, however, chose not to accept this amount and instead filed this complaint. It was pleaded that as per the conditions printed on the reverse side of airway bill, the answering opposite party is within its right to carry the shipment directly or through any other route or on another airline and these conditions are binding on the complainant. It was further alleged that airway bill constitutes a contract of carriage between the parties. Liability of the answering opposite party is limited to USD 20 per kg. or its equivalent as the complainant had not declared the value of the consignment at the time of booking. Complainant had mentioned different figures of the alleged claim at three or four different places including the legal notice and the amount claimed is grossly inflated. Liability to pay the amount claimed was denied.

OPPOSITE Party No. 2 in its written version admitted that the complainant had purchased a Marine Insurance Policy bearing certificate No. 360700/C15/63/96 dated 11.6.1996 for a sum of USD 20,539 to cover the risk to 43 bales of 100% cotton knitted fabric to be transported from New Delhi to Ajman as per invoice dated 5.6.1996 valued at USD 18,672.30. After about 3 months on 2.9.1996, the complainant informed the replying opposite party for the first time that due to cargo handling problem by opposite party No. 1, the consignment in question could not reach the destination. Insurance Company was also informed that opposite party No. 1 had returned 33 bales to it in damaged condition and 9 bales were short. Immediately thereafter M/s. Ilas Surveyors and Loss Assessors was deputed on 3.9.1996 to survey and assess the loss. Surveyor visited the office of the complainant. It was revealed that 9 bales which were missing from Bombay airport had been recovered by the police and were lying in the custody of the competent Court. Therefore, vide letter dated 6.9.1996, complainant was asked by the Surveyor to get those bales released from the competent Court. This letter was followed by the letter dated 2.1.1997. Complainant did not respond to any of these letters and sent a fax message to the Surveyor threatening to dispose of the consignment. On receipt of this fax message, by the letter dated 18.1.1997 the Surveyor advised the complainant that it was supposed to retain the damaged bales till the settlement of claim and anything done in contravention thereof shall prejudice their claim. It was further informed that since 15 days period as per letter dated 2.1.1997 had already expired, the Surveyor is free to assess the claim without considering shortage of 9 bales. Surveyor submitted the report dated 22.1.1997. After receiving the survey report through the complainant the replying opposite party asked the complainant vide letter dated 3.5.1997 to submit necessary documents and information including claim form. However, no information or documents were furnished by the complainant and they filed the present complaint on 5.6.1997. Even claim form was submitted during the pendency of complaint. It was further alleged that clauses 5, 5.1 and 5.1.3 of the Institute Cargo Clauses form part of the policy. The policy ceased on the expiry of 30 days after unloading of part of consignment at Dubai and consignment having been brought back to Delhi on 30.7.1996. It was stated that risk from Dubai to Delhi was not covered under the policy. Complainant had not taken any steps to recover the stolen bales and Insurance Company is, therefore, not liable to compensate for the loss. It was stated that primary liability was that of opposite party No. 1. If replying opposite party is to settle the claim, it will have to be subrogated by the complainant and Insurance Company thereafter will be entitled to institute appropriate proceedings and recover the amount from opposite party No. 1. Since Airlines is already a party to this complaint, it will be in the interest of justice that all the disputes are settled in these proceedings rather than asking the Insurance Company to pay some claim to the complainant and then leaving the Insurance Company to sue opposite party No. 1. Claim was stated to be excluded by Clause 2.6 of the policy. It was denied that there was any deficiency in service on the part of the Insurance Company.

CONSIDERING the terms of Marine Insurance Certificate dated 11.6.1996 issued by opposite party No. 2 and applicable provisions of Carriage by Air Act, 1972 in our view, the claims made at serial Nos. (ii), (iii), (iv), (vi), (vii) and (ix) in prayer clause No. 20 of the complaint cannot be examined in these proceedings.

IT is not in dispute that 43 bales of 100% cotton fabric were booked by the complainant with opposite party No. 1 on 10.6.1996 for being transported from Delhi to Dubai pursuant to the order placed on the complainant by M/s. Al Khwaja; bales were airlifted on flight Al-112 DEL/BOM to connect AI-711 BOM/DXB; damage to the bales was caused due to rain and 9 bales were stolen at Bombay Airport; 17 bales were sent to Dubai on 15.6.1996 while remaining 16 bales continued to lie at the Airport. It is further not in dispute that acting on the complainant''s letter dated 28.6.1996, opposite party No. 1 called back 34 bales and those were released to the complainant on 31.8.1996 on payment of certain charges by them. Submission advanced by Shri M. Wadhwani for the complainant was that Rule 25 of II Schedule of the Carriage by Air Act, 1972 is attracted in this case and opposite party. No. 1 cannot claim limited liability on weight loss basis as provided in Rule 22(2)(a) of the above schedule. Order dated 28.8.2002 passed by the Commission would show that vide order dated 14.3.2002, the complainant was given one more opportunity to file the affidavits of evidence which was not done and Shri Wadhwani made the statement that affidavits filed along with the complaint and rejoinders may be read as affidavits of evidence on behalf of the complainant. Affidavits filed along with complainant and rejoinders to the written versions of OP-1 and 2 are cryptic. Allegation made in para No. 8 of the complaint in regard to opposite party No. 1 having permitted the consignment in question exposed to rains and chemicals is not based on the personal knowledge of J.P. Gupta, Managing Director of complainant-Co. whose cryptic affidavits have been filed. Thus, merely on ground of consignment having been damaged due to rains, etc., at the Bombay airport, it cannot be inferred that damage had resulted from an act or omission of the employees of opposite party No. 1/Airport Authority of India, done with intent to cause damage or recklessly and with the knowledge that damage would probably result into loss to the consignment within the meaning of said Rule 25 of II Schedule. Indisputably at the time of booking, the complainant had neither made a special declaration of the value of consignment nor had they paid any supplementary amount. In this backdrop, the liability of opposite party No. 1 to compensate the complainant will have to be determined based on aforesaid Rule 22(2)(a). Liability under this Rule is limited to 250 francs per kg.

AT this stage, it will be profitable to decide the objection taken in para No. 6 of the complaint as to the diversion of the route of flight. Terms and conditions of carriage printed on the back side of airway bill dated 10.6.1996 have been filed by opposite party No. 1 along with the affidavit of evidence of Mrs. A.K. Mathew, Cargo Sales Manager, Northern India. Condition No. 8.1 runs thus: "Carrier undertakes to complete the carriage hereunder with reasonable dispatch. Carrier may use alternate carriers or aircraft and may without notice and with due regard to the interest of the shipper use other means of transportation. Carrier is authorized to select the routing or to change or deviate from the routing shown on the face hereof. Thus, sub paragraph is not applicable for/from USA."

THIS condition of airway bill constitutes a contract between the parties and is binding on them. In view of this condition, above objection is repelled being without any substance.

BEFORE proceeding to decide the apportionment of compensation payable by the two opposite parties, let us deal with two fold objections raised in written version by opposite party No. 2-Insurance Company regarding applicability of Clauses 5, 5.1, 5.1.3 and 2.6 of the Institute Cargo Clauses. Copy of the Institute Cargo Clauses is at pages 147 to 149. The clauses are as under: "5. 5.1 This insurance attaches from the time the subject-matter insured leaves the warehouse, premises or place or storage at the place named herein for the commencement of the transit, continues during the ordinary course of transit and terminates either 5.1.1 On delivery to the consignees'' or other final warehouse premises of place of storage at the destination named herein. 5.1.2 On delivery to any other warehouse premises or place of storage, whether prior to or at the destination named herein, which the Assured elect to use either 5.1.2.1 for storage other than in the ordinary course of transit or 5.1.2.2 for allocation or distribution or 5.1.3 on the expiry of 30 days after unloading the subject-matter insured from the aircraft at the final place of discharge, shall first occur whichever." General Exclusion Clause No. 2: "2. In no case shall this insurance cover 2.1 loss damage or expense attributable to willful misconduct of the Assured 2.2 ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject-matter insured. 2.3 Loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject-matter insured (for the purpose of this Clause 2.3 "packing" shall be deemed to include stowage in a container or liftvan but only when such stowage is carried out to attachment of this insurance or by the Assured or their servants) 2.4 Loss damage or expense caused by inherent vice or nature of the subject-matter insured 2.5 Loss damage or expense arising from unfitness of aircraft conveyance container or liftvan for the safe carriage of the subject-matter insured, where the Assured or their servants are privy to such unfitness at the time the subject-matter insured is loaded therein 2.6 Loss damage or expense proximately caused by delay, even though the delay be caused by a risk insured against 2.7 Loss damage or expense arising from insolvency or financial default of the owners managers characters or operators of the aircraft 2.8 Loss damage or expense arising from the sue of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter."

IN the Marine Insurance Certificate (copy at page 39) Delhi is shown to be the port of loading while Ajman as port of discharge. Opposite party No. 1 - carrier alleges that consignment in question was airlifted on flight A1-112 on 10.6.1996 DEL/BOM to connect Al-711 on 15.6.1996 BOM/DXB. 43 bales had reached Bombay Airport on way to Ajman. It was during this period the bales were damaged due to rain, etc., at Bombay Airport. Consignment was in transit when it was affected by rain. Out of 43 bales, only 17 bales reached Dubai on 15.6.1996. 9 bales were stolen. Remaining continued to lie at the said Airport. Unloading of 17 Bales at Dubai by no stretch of imagination can be taken of the entire consignment having been unloaded at Dubai within the meaning of Clause No. 5. Clause 2.6 is inapplicable to the facts of present case. Date of 30.7.1996 on which date 34 out of 43 bales were brought back to Delhi by opposite party No. 1 has no relevance as regards liability of opposite party No. 2 under the Marine cover.

ONE of the pleas taken in written version by opposite party No. 1 is that as the damage to the consignment was caused due to rains, etc., while lying in the custody of Airport Authority of India at Bombay, it was only this Authority which is liable to compensate the complainant. Consignment was to be transported from Delhi to Dubai. If opposite party No. 1- Carrier had chosen to break the journey after airlifting the consignment to connect AI-711 on 15.6.1996 BOM/DX, any loss caused to consignment at Bombay Airport will have to be borne by opposite party No. 1-Carrier. Complainant was under no legal obligation to implead the said Authority with whom they did not have any privity of contract as a party.

THIS brings us to the assessment of compensation and apportionment thereof between opposite party Nos. 1 and 2. Report of M/s. Ilas Surveyors and Loss Assessors appointed by opposite party No. 2 - Insurance Company dated 22.1.2007 had been filed along with the complaint. Part of this report under the sub-headings ''Salvage Retreivable/quantum of loss'' and ''our assessment'' being material is reproduced below: "Salvage Retrievable / quantum of loss After completion of inspection/ discussion and relevant enquiries, the matter of quantum of loss was taken up and discussed with representative of insured. It was thereupon reported that the subject damaged consignment which is very costly, is of no use in any of their process and is liable to be scrapped only. As discussed earlier, the insured agreed to quote his rates for retention of salvage. Finally after several reminders, three quotations (for lifting of the salvage), collected by themselves from their scrap buyers were finally submitted by insured in third week of Dec. 96. The rates quoted were Rs. 40 per kg., Rs. 45 per kg & Rs. 50 per kg of the entire lot of material. However, the rates seemed quite on the lower side. We, therefore, made our enquiries in the market whereupon, it was learnt that the material of such huge quantity can be lifted by manufacturers of local textile/hosiery goods and such buyers can be found in wholesale market only. After several visits and hard efforts we could found a quotation for Rs. 60 per kg only. Considering the extent/type of damage its cost, usage and large quantity of damaged material this rate of salvage appears reasonable. Hence, we took up the matter and after prolonged discussion, the aforesaid rate of salvage was agreed, albeit reluctantly. We now, recommend our assessment accordingly. Our Assessment Cost of 34 bales damaged Rs. 5,24,127.40 Less: Salvage @ Rs. 60 per kg. on 2036.44 kgs. Rs. 1,22,186.40 (round off) Rs. 4,01,941.00 Add: 10% incidental charges Rs. 40,194.00 Net claim payable Rs. 4,42,135.00

IN the rejoinder to the written version of opposite party No. 2-Insurance Company, the complainant has alleged that FIR regarding theft of 9 bales was lodged by opposite party No. 1. Complainant could not have obtained the release of those bales on superdhari from the concerned Court. Said Surveyor should have assessed the loss taking the number of bales as 43 instead of 34 as has been done by them. In the complaint, costs of 43 bales is noted as Rs. 6,56,238. Adding 10% incidental charges the value would come to Rs. 7,21,861.80. In para 18 of the complaint, it is alleged that 34 bales were disposed of on or about 30.4.1997 for Rs. 69,020 by the complainant. Neither name of purchaser nor receipt evidencing receipt of this money has been filed by the complainant. Complainant has also not filed the communication authorizing sale of 34 bales by the said Surveyor as alleged. On the contrary, by the letter dated 18.1.1997 the Surveyor had asked the complainant to retain the damaged bales till the settlement of claim. In this backdrop, the value of salvage is to be taken as Rs. 1,22,186.80 as shown in the survey report dated 22.1.1997 instead of Rs. 69,020. Amount of loss after deducting said salvage amount would come to Rs. 5,99,675.40.

M/s. A.C. Chopra and Co., Surveyor appointed by opposite party No. 1- Carrier in survey report dated 30.12.1996 has assessed the damages for 31 damaged bales at Rs. 1,72,632 taking the loss @ Rs. 100 per kg for 1726.320 kgs. 3 bales are stated to have been received intact while 9 bales were not received. In the written version, opposite party No. 1- Carrier has alleged that it had offered amount of Rs. 2,35,280 which included cost of 9 bales of Rs. 52,650. Amount of Rs. 52,650 was reached considering the value given of 8 bales in the complainant''s letter No. SIL/Exp/743/96 dated 1.8.1996. Needless to repeat that in the complaint, the complainant has challenged the survey report dated 30.12.1996 on a number of grounds. In the survey report dated 22.1.1997, M/s. Ilas Surveyors and Loss Assessors (P) Ltd. have given cogent reasons for assessing the value of the salvage at Rs. 1,22,186.40. Also considering this value of salvage, we are of the view that the assessment @ Rs. 100 per kg on weight basis made by M/s. A.C. Chopra and Co. is on lower side and the same deserves to be increased to Rs. 150 per kg. Computed at this rate and taking the total weight of 2575.490 kgs, the amount of loss would be Rs. 3,86,323.50. Complainant is, thus, entitled to this amount instead of the said amount of Rs. 2,25,280 from opposite party No. 1. Liability for the balance amount of Rs. 2,13,351.90 would be that of opposite party No. 2- Insurance Company

AMOUNT of Rs. 55,265 which is included in the claim amount of Rs. 38,50,730 is stated to have been paid by the complainant towards storage and other charges for release of 34 bales. It is true that there was delay of about one month in getting these bales released on the part of complainant, the opposite party No. 1-Carrier shall have to share this payment as there was gross deficiency in service on its part in not having made available all the 43 bales in good condition at the final destination. We feel that out of said amount, amount of Rs. 30,000 should be borne by opposite party No. 1.

COMPLAINANT has been deprived of the use of money for no fault on its part all these years. They are, therefore, entitled to interest which we, in the facts and circumstances of case, quantify @ 10% p.a. from the date of filing of complaint. Since we have awarded interest, the complainant is not separately entitled to any compensation on account of mental agony, etc., as claimed.

FOR the foregoing discussion, complaint is partly allowed with direction to opposite party No. 1 to pay amount of Rs. 4,16,323.50 (Rs. 3,86,323.50 + 30,000) with interest @ 10% p.a. from the date of filing of the complaint to the complainant. Opposite party - Insurance Company is directed to pay the aforesaid balance amount of Rs. 2,13,352 with interest at the said rate and from the said date to the complainant. Complainant will also be entitled to cost of Rs. 12,500 each from opposite party Nos. 1 and 2. Payment will be made within six weeks from today. Complaint partly allowed.