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Tuesday, April 8, 2014

Insured Claim suit against non - delivery - the insured goods while in transit -non-delivery of goods - Trial court decreed the suit - High court reversed the decree held that “the liability of the Insurance Company is excluded when the ship owners are declared as insolvent.” as per clause 4 - Apex court set aside the High court order and held that mere notice of abandon the vessel as the value of repairs costs more than insured does not amount to bankruptcy unless any order was filed under their country laws - in the absence of record , it should not be presumed as bankruptcy as per clause 4 and much more in the absence of unseasworthiness to the knowledge of the plaintiff under clause 5 and when the insurance covered for non-delivery of goods , the defendant is liable to pay the insured claim along with interest and as such allowed the appeal by restoring the trial court judgement = Insured Claim suit against non - delivery - METAL POWDER COMPANY LTD. ... APPELLANT (S) VERSUS ORIENTAL INSURANCE CO. LTD. ... RESPONDENT (S) =2014 ( April. Part ) http://judis.nic.in/supremecourt/filename=41393

 Insured Claim suit against non - delivery - the insured goods while in transit -non-delivery of goods - Trial court decreed the suit - High court reversed the decree held that “the  liability  of
the Insurance Company is excluded when  the  ship  owners  are  declared  as
insolvent.” as per clause 4 - Apex court set aside the High court order and held that mere notice of abandon the vessel as the value of repairs costs more than insured does not amount to bankruptcy unless any order was filed under their country laws - in the absence of record , it should not be presumed as bankruptcy  as per clause 4 and much more  in the absence of unseasworthiness to the knowledge of the plaintiff under clause 5 and when the insurance covered for non-delivery of goods , the defendant is liable to pay the insured claim along with interest and as such allowed the appeal by restoring the trial court judgement = 

The plaintiff had purchased 15.06 metric tonnes of yellow  phosphorous  from
M/s. Metallgeseliachaft AG, Frankfurt, West Germany under  Invoice  No.  410
64821 dated 06.06.1983 for a value of US$ 23,946 C&F.   
The  said  commodity
was booked through M.V. “Palam Trader” to be delivered at  Bombay  Port  and
from the Bombay Port to the plaintiff’s factory at Maravankulam.  
The  goods
were insured for a sum  of  Rs.  2,65,000/-  under  Insurance  Policy  dated
24.06.1983 with the Divisional Office of the defendant-insurance company  at
Madurai.  The policy specifically included and covered amongst  other  risks
“loss due to non-delivery of the goods at Maravankulam.”     
While in transit the  ship  caught  fire  on  18.10.1983.   
The  first
intimation of the mishap was communicated to the plaintiff on 05.01.1984  by
Richard Hoggs International Limited, Greece who appear to be the  agents  of
the owners of the vessel “Palm Trader”.  
By the  aforesaid  intimation,  the
plaintiff was informed that the estimate of the cost of repairs to the  ship
are much higher than the ship’s  insured  value  and,  therefore,  the  ship
owners consider the  vessel  as  a  total  loss  and  had  given  notice  of
abandonment of the ship to the underwriters. 
The aforesaid facts  were  very
promptly communicated to the defendant insurance company  by  the  plaintiff
on 06.01.1984 which was followed by a claim to indemnify the  plaintiff  for
the value of the goods insured i.e. Rs. 2,65,000/-.  Thereafter, it  appears
that the defendant repudiated its liability  on  15.07.1985  on  the  ground
that the ship was abandoned by its owners due to bankruptcy and,  therefore,
the claim made by the plaintiff was covered  by  an  exclusion  clause  i.e.
Clause 4.6 of the Institute Cargo Clauses which formed a part of  the  terms
and conditions of the Insurance Policy.  Clause  4.6  is  to  the  following
effect:

           “4.6 Loss damage or expense arising from insolvency or financial
                 default of the owners managers charterers or  operators  of
                 the vessel.”
The learned Trial Court decreed the plaintiff’s suit for an amount  of
Rs. 3,38,053/- inclusive of interest  at  18%  per  annum  upto  30.09.1985.
Aggrieved, the Insurance Company filed a regular  first  appeal  before  the
Madras High Court which was allowed  by  the  impugned  judgment  and  order
dated 28.04.2006 on the ground that as per the terms and conditions  of  the
policy, the plaintiff was not entitled to its claim  as  “the  liability  of
the Insurance Company is excluded when  the  ship  owners  are  declared  as
insolvent.”  Aggrieved, the present appeal has been filed by the plaintiff.
=


   Under the Policy the risks covered are :

           “All  risks”  Marine,  theft,  pilferage,  non-delivery,   civil
           commotion, strikes, riots, breakage, damage, dentage, etc.”

11.    ‘Non-delivery’  being  a  specific  risk  covered  by  the  Insurance
Policy, the failure to deliver the cargo, as agreed,  would  clearly  amount
to loss of the subject matter insured.  
The situations in which the  insurer
could avoid  its  liability  are  contemplated  by  the  exclusion  clauses.
Clause 4.6 which was sought to be invoked by the defendant insurer  excludes
the liability of the insurer for loss or damage arising from the  insolvency
or financial default of the owners  etc.   
Insolvency  or  bankruptcy  would
always be  a  matter  of  authoritative  determination  under  the  relevant
municipal laws of a  country  and  certainly  not  a  matter  of  individual
perceptions and opinions.  
 No  material  to  establish  the  insolvency  or
bankruptcy of the owners is available on record.  
In fact, in  the  earliest
communication i.e. dated 05.01.1984, the plaintiff  was  informed  that  the
repair cost of the vessel having exceeded the insured value, the owners  had
decided to abandon the ship.  The said act on  the  part  of  owners  cannot
have the effect of their being adjudged  as  insolvents,  which  Clause  4.6
contemplates. 
The subsequent communication of the insurer  dated  14.10.1985
(Exbt. D-3), relied upon by the defendant, is a mere assertion  made  by  it
that the owners have become bankrupt.  
The same is  neither  conclusive  nor
determinative of the question and appears to have been made by  the  insurer
only to attract Clause 4.6.  
In the absence of any  material  whatsoever  to
show that Clause 4.6 can be attracted to the present case,  the  finding  to
the said effect, recorded by the High Court, cannot be sustained.

12.   Insofar as Clause 5.1 is concerned the same ex facie is not  attracted
inasmuch as no question of unseaworthiness of the vessel, much  less,  prior
knowledge of the plaintiff of such unseaworthiness can and  does  not  arise
in the present case so as to exclude the loss and  damage  suffered  by  the
plaintiff from the purview of the Insurance Cover as contemplated by  Clause
5.1.

13.   In view of the above, we  set  aside  the  judgment  and  order  dated
28.04.2006 passed by the High Court of Madras and restore the  judgment  and
decree dated 28.04.1989 passed by the learned  Trial  Court.   Consequently,
the appeal is  allowed.   If  the  amount  has  not  been  paid  till  date,
naturally, the same will carry interest at the rate awarded by  the  learned
Trial Court, namely, 18% per annum till date of payment.    
2014 ( April. Part ) http://judis.nic.in/supremecourt/filename=41393
P SATHASIVAM, RANJAN GOGOI, N.V. RAMANA
                  NON-REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL  NO. 481 OF 2009


METAL POWDER COMPANY LTD.         ...   APPELLANT (S)

                                   VERSUS

ORIENTAL INSURANCE CO. LTD.       ...   RESPONDENT (S)


                               J U D G M E N T

RANJAN GOGOI, J.


1.    This is a plaintiff’s appeal against a decree of reversal made by  the
High Court of Madras by its judgment and order dated 28.04.2006.

2.    The facts, which are not in dispute, are as follows:-

      The plaintiff is a company engaged in  the  manufacture  and  sale  of
metal  powders  and  red  phosphorous  having  its  manufacturing  unit  and
administrative office  at  Maravankulam,  Thirumangalam,  Madurai  District.
The plaintiff had purchased 15.06 metric tonnes of yellow  phosphorous  from
M/s. Metallgeseliachaft AG, Frankfurt, West Germany under  Invoice  No.  410
64821 dated 06.06.1983 for a value of US$ 23,946 C&F.   The  said  commodity
was booked through M.V. “Palam Trader” to be delivered at  Bombay  Port  and
from the Bombay Port to the plaintiff’s factory at Maravankulam.  The  goods
were insured for a sum  of  Rs.  2,65,000/-  under  Insurance  Policy  dated
24.06.1983 with the Divisional Office of the defendant-insurance company  at
Madurai.  The policy specifically included and covered amongst  other  risks
“loss due to non-delivery of the goods at Maravankulam.”

3.    While in transit the  ship  caught  fire  on  18.10.1983.   The  first
intimation of the mishap was communicated to the plaintiff on 05.01.1984  by
Richard Hoggs International Limited, Greece who appear to be the  agents  of
the owners of the vessel “Palm Trader”.  By the  aforesaid  intimation,  the
plaintiff was informed that the estimate of the cost of repairs to the  ship
are much higher than the ship’s  insured  value  and,  therefore,  the  ship
owners consider the  vessel  as  a  total  loss  and  had  given  notice  of
abandonment of the ship to the underwriters. The aforesaid facts  were  very
promptly communicated to the defendant insurance company  by  the  plaintiff
on 06.01.1984 which was followed by a claim to indemnify the  plaintiff  for
the value of the goods insured i.e. Rs. 2,65,000/-.  Thereafter, it  appears
that the defendant repudiated its liability  on  15.07.1985  on  the  ground
that the ship was abandoned by its owners due to bankruptcy and,  therefore,
the claim made by the plaintiff was covered  by  an  exclusion  clause  i.e.
Clause 4.6 of the Institute Cargo Clauses which formed a part of  the  terms
and conditions of the Insurance Policy.  Clause  4.6  is  to  the  following
effect:

           “4.6 Loss damage or expense arising from insolvency or financial
                 default of the owners managers charterers or  operators  of
                 the vessel.”

4.    Following the repudiation of its claim  legal  notice  was  issued  on
behalf of the plaintiff and as the same was not responded  to  the  suit  in
question was filed  claiming  the  value  of  the  goods  insured  i.e.  Rs.
2,65,000/- alongwith interest @ 18% per annum calculated from 21.03.1984  to
30.09.1985 which was quantified at Rs.73,053/-.

5.    The claim made by the plaintiff was resisted by the defendant  Insurer
by relying on the  exclusion  clause,  noticed  above.    According  to  the
defendant the ship was abandoned by  its  owners  on  account  of  financial
difficulties in meeting the cost of repairs.  The claim  was  also  resisted
by the defendant on the ground that there was no  damage  to  the  cargo  in
transit and in fact the defendant  had  arranged  with  a  third  party  for
transporting the cargo to its destination at an additional cost of  US$  900
to be paid by the plaintiff  which  offer  was,  however,  rejected  by  the
plaintiff.

6.    The learned Trial Court decreed the plaintiff’s suit for an amount  of
Rs. 3,38,053/- inclusive of interest  at  18%  per  annum  upto  30.09.1985.
Aggrieved, the Insurance Company filed a regular  first  appeal  before  the
Madras High Court which was allowed  by  the  impugned  judgment  and  order
dated 28.04.2006 on the ground that as per the terms and conditions  of  the
policy, the plaintiff was not entitled to its claim  as  “the  liability  of
the Insurance Company is excluded when  the  ship  owners  are  declared  as
insolvent.”  Aggrieved, the present appeal has been filed by the plaintiff.

7.    We have heard Mr. V. Prabhakar, learned  counsel  for  the  plaintiff-
appellant and Mr. M.K. Dua,  learned  counsel  for  the  defendant-Insurance
Company.

8.    Learned counsel for the appellant has strenuously urged that there  is
no material on record to  hold  that  the  owners  of  the  ship  have  been
adjudged as insolvent or bankrupt so as to attract exclusion clause  4.6  of
the Insurance Policy under which the liability of the  insurer  is  excluded
in case of loss or damage arising from the insolvency or  financial  default
of the owners etc. of the vessel.   Referring  to  the  communication  dated
05.01.1984 learned counsel has submitted that the reason for abandonment  of
the ship by the owners is that the estimate of the cost of repairs are  much
higher than the insured value of the ship.   It  is  pointed  out  that  the
letter dated 14.10.1985 (Exbt.D-37) relied upon by  the  defendant  to  show
financial default and bankruptcy of  the  owners  of  the  vessel  does  not
contain any basis to support the contention advanced.  Learned  counsel  has
further pointed out that the risks covered  by  the  Policy  included  ‘non-
delivery of the goods at Maravankulam’ and the  cargo  not  having  been  so
delivered, the defendant is clearly liable.  It is also contended  that  the
alleged arrangement made by the insurer to have the goods transported  by  a
third party on payment of additional cost of US$ 900 by  the  plaintiff  was
outside the scope of  the  agreement  between  the  parties  and  hence  was
rightly rejected by the plaintiff.

9.    On the other hand, learned counsel for the insurer has contended  that
under the Policy, the risk covered was in respect of the loss and damage  to
the subject matter insured.   It is pointed out that  in  the  present  case
the cargo which was insured was in perfect condition and no loss  or  damage
was caused to it.  Learned counsel has also relied  on  Clause  5.1  of  the
Institute Cargo Clauses (A), which formed a part of the insurance  agreement
between the parties, to contend that the  loss  or  damage  claimed  by  the
plaintiff is not covered by the policy.

10.   Under the Policy the risks covered are :

           “All  risks”  Marine,  theft,  pilferage,  non-delivery,   civil
           commotion, strikes, riots, breakage, damage, dentage, etc.”

11.    ‘Non-delivery’  being  a  specific  risk  covered  by  the  Insurance
Policy, the failure to deliver the cargo, as agreed,  would  clearly  amount
to loss of the subject matter insured.  The situations in which the  insurer
could avoid  its  liability  are  contemplated  by  the  exclusion  clauses.
Clause 4.6 which was sought to be invoked by the defendant insurer  excludes
the liability of the insurer for loss or damage arising from the  insolvency
or financial default of the owners  etc.   Insolvency  or  bankruptcy  would
always be  a  matter  of  authoritative  determination  under  the  relevant
municipal laws of a  country  and  certainly  not  a  matter  of  individual
perceptions and opinions.   No  material  to  establish  the  insolvency  or
bankruptcy of the owners is available on record.  In fact, in  the  earliest
communication i.e. dated 05.01.1984, the plaintiff  was  informed  that  the
repair cost of the vessel having exceeded the insured value, the owners  had
decided to abandon the ship.  The said act on  the  part  of  owners  cannot
have the effect of their being adjudged  as  insolvents,  which  Clause  4.6
contemplates. The subsequent communication of the insurer  dated  14.10.1985
(Exbt. D-3), relied upon by the defendant, is a mere assertion  made  by  it
that the owners have become bankrupt.  The same is  neither  conclusive  nor
determinative of the question and appears to have been made by  the  insurer
only to attract Clause 4.6.  In the absence of any  material  whatsoever  to
show that Clause 4.6 can be attracted to the present case,  the  finding  to
the said effect, recorded by the High Court, cannot be sustained.

12.   Insofar as Clause 5.1 is concerned the same ex facie is not  attracted
inasmuch as no question of unseaworthiness of the vessel, much  less,  prior
knowledge of the plaintiff of such unseaworthiness can and  does  not  arise
in the present case so as to exclude the loss and  damage  suffered  by  the
plaintiff from the purview of the Insurance Cover as contemplated by  Clause
5.1.

13.   In view of the above, we  set  aside  the  judgment  and  order  dated
28.04.2006 passed by the High Court of Madras and restore the  judgment  and
decree dated 28.04.1989 passed by the learned  Trial  Court.   Consequently,
the appeal is  allowed.   If  the  amount  has  not  been  paid  till  date,
naturally, the same will carry interest at the rate awarded by  the  learned
Trial Court, namely, 18% per annum till date of payment.


                                       ...…………………………CJI.
                                        [P. SATHASIVAM]


                                  .........………………………J.
                                        [RANJAN GOGOI]

                                                       …..........……………………J.
                                        [N.V. RAMANA]

NEW DELHI,
APRIL 7, 2014.
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