Whirlpool of India Ltd vs NEW INDIA ASSURANCE COMPANY LTD

VIDE common order dated 24.3.2004, O.P. Nos. 355 of 2001, 356 of 2001, 357 of 2001 and 358 of 2001 which we propose to dispose of by this order, were dismissed by this Commission and against that order of dismissal the complainants had filed Civil Appeal Nos. 4359 of 2004, 4406 of 2004, 4453 of 2004 and 4435 of 2004. By the order dated 20.8.2009, the Supreme Court has remanded the complaints for fresh decision holding- "The facts of the case have been mentioned in detail in the impugned judgment and hence we are not repeating the same. It appears that there were 3 Surveyors who were appointed by the respondent-Insurance Company who submitted their reports. The first two survey reports were in favour of the appellant company while the third and last survey report was against the appellant company. From the impugned judgment of the NCDRC it is clear that the first two survey reports were not properly considered by the NCDRC and no reasons have been recorded as to why these two survey reports were being rejected and the third report alone has been accepted. It is true that a Judge can certainly reject a piece of evidence, but then he must give his reasons for doing so. He cannot ignore material evidence. A Surveyor''s report is certainly a material piece of evidence. Since it appears from the impugned judgment that only the third survey report has been taken into consideration and no reasons have been recorded by the NCDRC as to why the first two reports have not been accepted, in our opinion the impugned judgment and order cannot be sustained. Accordingly, we set aside the impugned judgment and order of the NCDRC, allow these appeals and remit the matter to the NCDRC for a fresh decision in accordance with law in the light of the observations made by us. We hope and trust that the NCDRC will make all endeavour to dispose of the original petitions as expeditiously as possible preferably within a period of six months from the date a copy of this order is produced before it. We make it clear that we have not expressed any opinion on the merits of the case and all questions of law and fact are left open to the parties to be urged before the NCDRC. Appeals allowed. No order as to the costs."

SINCE the allegations made in the aforesaid four complaints are identical and the insurance policy is the same, only the facts leading to filing of O.P. No. 355 of 2001 are being referred to. It was alleged that complainant-Company is engaged in the manufacture of refrigerators and washing machines and has one of its plants at A-4, MIDC Industrial Area, Shirur Taluk, Ranjangaon, Pune District. New India Assurance Company Ltd. -opposite party issued a marine open cover in respect of the raw material, machines, spares incidental to the trade of the complaint from anywhere in the world to Ranjangaon. Cover was against all risks subject to Institute Cargo Clause (A). The complainant placed a Purchase Order on M/s. Inland Steel Company of Chicago, Illinois, USA on 9.2.1998 for supply of galvanized steel G30 for CFC Free, No Frost refrigerators in the form of coils. M/s. Inland International Trading Inc. had specified the packing recommendations for shipment of the consignment on 19.3.1998. 9 Nos. of containers containing the ordered galvanized steel coils were shipped per "SL COMET" under Bill of Lading No. CGI002943 dated 19.4.1998. This consignment was declared by the complainant for insurance to the opposite party under declaration No. 21/16.4.1998 for a sum insured of Rs. 44,53,000 towards its CIF value and for Rs. 24,60,282 towards custom duty which declaration was accepted by the opposite party. The consignment en route was transhipped from M.V. "S.L. COMET" to another vessel M.V. "S.L. VALUE". On reaching consignment at Nhava Sheva Port the delivery thereof was taken by the complainant and containers were transported by road to the complainant''s factory at Ranjangaon where they arrived on 8.5.1998. At the time of delivery of consignment no outward sign of damage was visible on the containers. It was further alleged that on destuffing the containers, it was found that though there was no water inside the containers still the steel coils were damp, water droplets were there on inner side of the polythene sheets covering the coils. It was noticed that due to contact with water there was formation of Zinc oxide on the galvanized layer and the coils were badly rusted. It was also found that the skid rafters were foggy indicating that there was water in the containers. On being intimated of damage to the consignment, the opposite party-Insurance Co appointed S.P. Parulekar, Surveyor to inspect the consignment and to assess the loss. The Surveyor found that the steel coils had white rust both at the top and bottom sides. The loss was assessed for the top side at Rs. 8,08,720. Loss at the bottom side of the coil was assessed at Rs. 18,47,484. The containers were not water proof and, therefore, in the long journey from Norfolk (USA) to Nhava Sheva (India) during monsoon period the rain/fresh water must have gone inside the containers through door gaps and small holes causing the aforesaid damage. Opposite party repudiated the claim by the letter dated 4.12.2000 on baseless grounds. Complainant is entitled to recover the amount of Rs. 26,56,204 being the sum of rust damage caused to the steel coils and Rs. 19,614 being the Surveyor''s fee paid by the complainant. Direction was sought to be made to the Insurance Company opposite party to pay amount of Rs. 26,75,818 along with interest @ 18% p.a. from 24.7.1998, pay Rs. 1.00 lakh towards compensation for harassment and the costs.

COMPLAINT was contested by filing written version by the opposite party - Insurance Company It was not denied that Marine Open Cover for the period 3.7.1997 to 2.7.1998 was issued in favour of the complainant. This cover was subject to Institute Cargo Clause (A). In the last week of July, 1998, the complainant informed the Insurance Company about the loss to the galvanized coils because of white rust formation. Insurance Company thereupon deputed Surveyors. The consignment had reached the factory of the complainant in June, 1998 still it was opened only on 24.7.1998. It was stated that complainant has relied upon the packing recommendations of M/s. Inland International Trading Inc. This Company is the marketing representative of the supplier. As per the accepted standards of packaging for the galvanized steel laid down by Indian Standard Institute and Lloyds it can be seen that the packaging of the consignment was not adequate nor did the supplier adhere to the recommendations as 7 different consignments by 7 different vessels over a period of 3 months had suffered the same type of damage. Caution should have been exercised in selecting the proper containers to avoid transit hazards. It was pleaded that the complainant had not lodged any complaint on M/s. Inland Steel Company though it was responsible for safe passage of the consignment sold up to the time it was on board the ship at Norfolk (the sale being FOB basis). The steel coils were not given Chromatic treatment prior to dispatch but were only oiled. Damage was not within the scope of policy and was excluded by Exclusion Clauses 5.1, 4.2 and 4.3 of the policy. It was also alleged that the consignment was stuffed in the containers at Chicago and was loaded on board at port Norfolk. The transportation of containers from Chicago to Norfolk was covered by road and the distance was around 2500 kms. From Norfolk the containers were brought on vessel and were dispatched to Mumbai which was a distance of around 6,000 nautical miles and at the rate of 10 nautical miles an hour daily, it would have taken 25 days to arrive at JNPT Port, Mumbai. After clearance, the consignment was taken to Ranjangaon which is at a distance of 200 kms. Taking into consideration the above facts as also the reports of the Surveyors the claim was validly repudiated. Liability to pay the amount claimed was denied.

IN O.P. No. 356 of 2001/the number of containers was 5 which were transported by M.V. "MARSTAL MAERSK" under Bill of Lading dated 12.4.1998. The compensation claimed is Rs. 31,31,96,105 with interest, etc.

IN O.P. No. 357 of 2001 under the Bill of Lading dated 25.4.1998, 13 Nos. of containers containing steel coils were shipped per "DRAGOER MAERSK". The total amount of compensation claimed is Rs. 77,21,005 with interest, etc.

IN O.P. No. 358 of 2001, the number of containers containing steel coils shipped per "MAJESTIC MAERSK" under the Bill of Lading dated 2.5.1998 was 3. Total amount of compensation claimed is Rs. 21,25,768 with interest, etc.

OPPOSITE party - Insurance Company contested said O.P. Nos. 356 of 2001, 357 of 2001, 358 of 2001 on the pleas similar to those taken in the written version filed in O.P. No. 355 of 2001.

WE have heard Mr. Sanjeev Narula for the complainant and Mr. Maibam N. Singh for the opposite party-Insurance Company and have been taken through the record.

THE claim made in these complaints arise out of the declarations referred to in para No. 8 of the complaints of the Open Marine Insurance Policy. Indisputably, on being intimated by the complainant of the damage to galvanized steel coils the opposite party- Insurance Company deputed S.P. Paruleker- Surveyor whose report dated 29.3.1999 is at page 30 in O.P. No. 355 of 2001. Similar reports filed by this Surveyors are placed in the files of remaining three complaints. SKS Surveyors was, thereafter, appointed as Surveyors by the Insurance Company and their report dated 5.11.1999 is at pages 142 to 144. Insurance Company alleges that as the reports of these two Surveyors were incomplete, Transocean Marine and General Survey Agencies was appointed to investigate and report on all the matters of claim Nos. 21/150200/99-2000/1831 This claim pertains to O.P. No. 357 of 2001 Report of this Surveyor is dated 24.7.2000. It has been relied upon in all these complaints. Aforesaid report of S.P. Parelekar-Surveyor under the heading "observation" reads thus: "(1) The stores personnel of the consignees, who did the destuffing of these 9 containers reported that the containers were outwardly sound and also there was no water inside the containers, but the steel coils were damp and water droplets were there on inner side of the polythene sheets covering the coils. (2) We observed the coil wrappings of polywoven sheets without any water marks but the inner dia hard board cover observed with stains of water drops. (3) The metal coil top side observed damp. (4) In some of the coils the bottom rafter are foggy, the steel straps rusty at bottom. (5) Upon opening the coils observed patches of white rust spread from edges inward for depth of 2 to 7 cms. The rusting/oxidation is white in nature indicating formation of Zinc oxide of the galvanized layer due to contact with water. Except for these patches at the edges (top or bottom) there is no rust damage to remaining surface. (6) The sample of water affected paper, wood as well as scraping of rust surface were tested for salinity and confirmed that the salinity test was negative. (7) The consignees use these galvanized steel sheets for the purpose of making door panels and other cabinet panels, for domestic refrigerators." Material portion of the discussion under the heading "Attributed Cause of Damage" runs as under: "Therefore, in our opinion the rust damage on top edges of the coil is probably from the dew formation of the vapours/moisture in the container. However, this dew formation will not be there on the bottom side of the coil. The coils which are observed with rust damage from bottom side are also noticed with the skid rafters foggy, indicating that there was water in this containers. This damage to the bottom side is, therefore, in our opinion because of entry of small quantity of fresh/rain water during voyage which got splashed on the bottom side of the coil during rolling of the ship."

LOSS was assessed for rust damage caused from dew formation (on top side of the coil) at Rs. 8,08,720. Loss assessed for the rust damage from fresh/rain water during the transit at bottom side of the coil was Rs. 18,47,484. Surveyor was of the opinion that the rust damage at the bottom side of the coil was fortuitous in nature while damage at top side from dew formation was not fortuitous in nature and aforesaid amount of Rs. 18,47,484 was, therefore, payable by the Insurance Company. Only the portion of the second survey report dated 5.11.1999 of SKS Surveyors under the heading "Our Remarks" is material on the controversy on hand and the same is reproduced below: "On the strength of documents furnished to us, discussions we had with Mr. S.P. Parulekar and insured''s rep., our remarks for admissibility/pay ability of the claim is as under: Packing: As per the correspondence between consignor and the consignees, packing seems to be as per their described norms and customary. Anyhow any sea worth packing norms may not be applied in this case as coils were stuffed in mahne containers and no bulk loading was effected. Further claim m question is not because of packing but doe to water ingress in containers. Surveyors had opined that rust damage at bottom was due to water ingress in containers. Normally the containers are water proof with rubber gaskets around door seals which hold tight when doors are closed and secured. But with consistent use and length of time these gaskets sometime gets worn out resulting in improper bearing against door seals. Further container bottom is made up of wooden battens with slip-gap or tongue and groove joints. The gap between these joints can sometimes may widen giving way to accumulated water at bottom where containers are stored on decks. Thirdly there can be cracks/holes in container''s body going un-noticed at times. Water can get through these either worn out seals/bottom and/or cracks/holes in body and/or through gaps in wooden joints at floor. This water most possibly had been instrumental in formation of rust at bottom, which Surveyor had taken as insured peril being fortuitous in nature. Thus on the strength of above factors, it can be said that rust damage had occurred during sea transit. Further Bill of Lading issued is clean with usual remarks by carriers like ''shippers stow, load and count''. But as B.L. is not claused with any adverse remarks it can safely be said that coils were stuffed in containers in sound condition. For rust at top he had remarked it b''coz of dew formation resulting due to change in environmental conditions (heavy temp, variations) during month long sea transit. These climatic patterns are usually encountered and being non-fortuitous in nature, claim against this factor has not been taken by him for claim calculations, these arguments we find convincing enough. Lack of Recovery Rights from the Sea Carriers-If the loss/damage be not apparent before or at time of taking delivery, then notice for loss/damage should be given to earners within 3 days of taking delivery. In this case no such exercise was carried out by the insured, hence there is no documentary proof/evidence to establish the fact that coils were damaged during sea transit. Thus in absence of any recovery rights from sea carriers, appropriate deductions may be made in claim amount, while the claim is being processed. On the strength of our above observations/remarks and in our opinion the claim (assessed by Mr. S.P. Parulekar) may be admitted and processed."

AT this juncture, reference need to be made to the report dated 24.7.2000 of said Transocean Marine and General Survey Agencies-Surveyors which is supported by the affidavit of A.M. Gawarikar-Proprietor thereof. Under the heading "Our Investigation", it was observed: "Details of transit /transportation: The consignment was stuffed in containers at Chicago and containers were loaded on board M. V. Dradger Maersk Voy-98.5 at Port Norfolk thus total transportation involved is as follows: (i) Transportation of containers from Chicago to Norfolk: The distance is approx. 2300 KM as crow flies. The actual distance by road would be slightly more say around 2500 kms, the distance from Chicago through Lake Michigan is more than 3000 Knotical miles, however container were not loaded on board vessel at Chicago and were transported by road. (ii) Norfolk to Mumbai : The distance is around 6000 Knotical miles and @ 10 knotical miles per hour it would take 25 days to arrive at JNPT/Mumbai. However, the containers were transhipped at some port and therefor it has taken more time to arrive at Mumbai/JNPT. (iii) JNPT arrival and storage: Apparently vessel arrived on 10.6.1998. (iv) JNPT to Ranjangaon: This distance is less than 200 kms and truck would reach destination on same day upon clearance. Rainfall and Weather report of Chicago: Month Average high and Record high temp. C Average Low and Record Low temp. C Average Precipitation in inches Number of show and rains days April 15 C/32.8 C 3.9 C/-13.9 C 3.64" 13 May 21.1 C/33.9 C 8.9 C/-4.4 C 3.32" 11 June 26.7 C/40C 14:4 C/2.2C 3.78" 10 Mumbai generally do not experience any rains in month of May and Monsoon normally starts from first week of June and continues up to month of September and can experience showers intermittently in month of October. INFORMATION IN WHITE RUST, WET STORAGE STAINS PREVENTION and CURE One of the commonly encountered problems with galvanized coatings of all kinds is ''white rust, or ''white storage stain''. It is manifested as a bulk, white, powdery deposit that forms rapidly on the surface of the galvanized under certain specific conditions. White rust can cause considerable damage to the coating and is always detrimental to the galvanized coating''s appearance. The surface of galvanized coatings is almost 100% zinc. It is the durability of the zinc that provides the outstanding anti-corrosion performance for steel, yet zinc is a relatively ''reactive metal'', it is the stable oxides that form on the zinc''s surface that determine its durability, and these oxides are formed progressively as the zinc is exposed to the atmosphere. Carbon dioxide in particular is a contributor to the formation of these stable oxides. With newly galvanized steelwork, the zinc''s surface has been subjected to little oxidation and is at its most vulnerable. For this reason, Industrial Galvanisers uses a chromate passivation in conjunction with its galvanizing operations to provide protection to the galvanized coating during the ''youth'' period of the coating. This passivation, coating provides short terms protection to the zinc to give the stable oxides time to form on the surface. While Rust Formation Pure water (H2O) contains no dissolved salts or minerals and zinc will react quickly with pure water to form zinc hydroxide, a bulky white and relatively unstable oxide of zinc. Where freshly galvanized steel is exposed to pure water (rain, dew or condensation), in an oxygen deficient environment, the water will continue to react with the zinc and progressively consume the coating. The most common condition in which white rust occurs is with galvanized products that are nested together, tightly packed, or when water can penetrate between the items and remain for extended periods." Discussion made under the heading "Precautions To Be Taken For Container Stuffing" of the report being material runs as under: "Before packing: The container operator will, or should, have checked the container before presenting it for packing. There will be instances, though, when the container has come straight from the last consignee-in other words the only people to have seen inside that container since it was unpacked are the recipient of the last load of cargo and the vehicle''s driver. So at best it will only have received a sweep out and a quick check for obvious damage. At worst it will not have been cleaned or inspected at all. It is not possible for any but skilled personnel to thoroughly inspect a container for structural damage. (Movers are being made on the international scenic for an annual inspection of all containers to become obligatory.) However, it is very much in the interest of the user to carry out a quick externally and internal inspection before packing and after unpacking the containers. The following: External: (a) No obvious holes or tears in the outside panelling. (b) No broken or distorted door hinges or locks. (c) That soil removable lids of open topped containers are not distorted and that they fit properly on the seating. (d) Canvas tilts are complete and not ripped. They should be in position and fitting correctly. (e) Soft-topped containers should have all the roof-bows (supports) in place, if the roof is of the retractable sort then the roof bows should slide satisfactorily to end of the containers. (f) Any labels remaining on the outside of the container which refer to previous cargo e.g. dangerous goods labels-and which, through subsequent misunderstanding, might affect the cargo to be loaded, should be removed. (g) The temperature setting (in case of a mechanically refrigerated container) is correct for the commodity about to be packed.

Intemal: (i) CLEANING: There should be no evidence of the previous cargo-no sweepings, dust, grease or liquid. This may be appropriately relaxed if the nature of the cargo to be carried will allow it. (ii) DRYNESS: The interior should be free of any sweat, frost, etc., which might adversely affect the cargo to be packed. (iii) INFESTATION: There should be no evident of pests even if the cargo to be carried is unaffected. The presence of insect''s, etc. may cause the container and its cargo to be subsequently delayed by port Health Authorities. (iv) TAINT FREE: If delicate goods susceptible to damage by bad odours are to be packed, then the container must be sweet smelling. This should be checked IMMEDIATELY on opening the doors when any lingering smells will be at their strongest. (v) WATERTIGHT INTEGRITY: This is best checked be entering the container and shutting both doors. If any spots of light can be seen then water can gain entry. This also applies to the container on a ship''s upper deck could occasionally be awash. (vi) INSTRUCTIONS: And recommendations posted inside the container should be noted (e.g. use only these securing points for heavy cargo")." Material portion of the discussion under the heading "Our Opinion on Damages'' of the report is re-produced below: (5) The splashing of water and ingress of rain water in defective containers in voyage is remote possibility as in deep sea rains are not experienced and rains on sea are experienced only when vessel is close to shore. Similarly entry of water in all the containers is also not possible considering probably stowage. ............................ (7) Cargo was not having any moisture, but rafter were seen to be foggy by attending Surveyors and this could be due to water ingress from container flooring during long journey of 2500 kms from Chicago to Norfolk VA (Port). The rains are experienced in Chicago-Norfolk journey similarly improper seasoned wood pallet/damage can release moisture. In April Chicago and Norfolk experiences snow/rains to the extent of 4" and precipitation days are around 10 to 12 in month. The wooden pallet can release the moisture in transit. (8) No signs of water ingress was found in the containers, oxidation due to atmospheric moisture is a inherent nature of the galvanized iron sheets and bad stowage and/or improper condition of containers is excluded from scope of the policy. (9) Apparently damage noticed can be attributed to bad condition of containers, poor and absence of ventilation and nature of the product. (10) The subject loss is beyond scope of the policy and falls under following exclusions: ............................ 4.3 Clause reads as follows: Loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject matter insured (for the purpose of this Clause 4.3 packing shall be deemed to include stowage in a container or liftvan but only when such stowage is carried out prior to attachment of this insurance of by Assured or their servants). This packing was not adequate to endure the ordinary contemplated handling and carriage. Similarly loss or damage due to bad stowage is not covered."

IT may be seen that S.P. Parulekar and SKS Surveyors assessed the loss and recommended payment only in respect of damage caused by rust from fresh/rain water during transit at the bottom side of the coils. In its report, SKS Surveyors has given the causes due to which the water entered at the bottom of the containers. In their report dated 24.7.2000, Transocean marine and General Survey Agencies - Surveyor have also opined that damage to the coils should be attributed to the bad condition of the containers and absence of ventilation in addition to the nature of the product. All the containers were selected by the shipper. In the said report, it has also been opined that the splashing of water and ingress of rain water in defective containers in voyage is remote possibility as in deep sea rains are not experienced and rains on sea are experienced only when vessel is dose to shore. Assuming for the sake of argument that rain water entered the containers during voyage in sea, the loss/damage was excluded under Clause 4.3 of the policy because of unseaworthy containers. In all probability, the water may have entered the flooring of the containers during long journey of 2500 kms from Chicago to Norfolk VA (Port) which experienced snow/rains to the extent of 4" and precipitation days being around 10 to 12 in a month. The wooden pallet could have also released the moisture in transit. This risk was not covered and the claim is, thus, not payable by the Insurance Company.

IN para No. 24.1 of the complaint m O.P. No. 355 of 2001. it is alleged that under similar condition the opposite party - Insurance Company has settled the claim of the complainant for Rs. 3,20,529. In our view, this payment cannot be taken as admission of liability of the amount claimed in these complaints.

FOR the foregoing discussion, the complaints deserve to be dismissed being without any merit. Dismissed as such. No order to costs. Complaints dismissed.