Case: M/S. Peacock Plywood Pvt. Ltd Vs. The Oriental Insurance Co. Ltd

as to whether the sale would go through at Singapore or in Calcutta by its letter dated 12th August, 1989 which was marked as Ex. S, relevant portion whereof reads as under: "Local Sale in Singapore" "On Solicitors request the Court has given permission to dispose off the cargo in order to minimize the loss in view of the deterioration in quality of material. Accordingly, the Solicitors appointed M/s. Toplings, Recovery Agent, who advertised the sale in newspapers and the best offer received for the cargo consisting of 2300 CBM now lying over there is U.S. $ 85,000. Out of this our share comes as under:Total value offered for 2300 CBM = US$ 85,000.Therefore, our shoare 85000 x 2057.73/ 2300 = US$ 76,046.54US$ 76,046.54 x Rs. 16.90 = Rs. 12,85,166.50Whereas we have already paid Rs. 12,85,166.50 towards the consignment of 296 logs measuring 1268.99 CBM under the L/C and US $ 1,18,416/- is still payable to the shipper against the documents for 178 Logs measuring 789.74 CBM received under the D.A. Thus, there is a loss of around over 30 lakhs while disposing the entire consignment in Singapore.To bring the Cargo to Calcutta for Sale in India:To bring the cargo from Singapore to Calcutta for sale in India, the position will be as under:a) Expenditure to be borne by insurance co. towards freight and other charges like loading into ship etc. at Singapore i.e. US $75/- per CBM i.e. 2057.73 CBM x US $ 75$1,54,329.75 x Rs. 16.90 = Rs. 26,08,172.77b) Expenditure to be borne by us towards Duty and clearing expenses i.e. Rs. 721/- CBM i.e. 2057.73 CBM x Rs. 721/- per CBM comes = Rs. 14,83,623.30Total = Rs. 40,91,796.07The best price that we can get for the said Cargo in Calcutta is Rs. 1942/- per CBM. Therefore, the total sale realization will be as under:2057.73 x Rs. 1942 = Per CBM Rs. 39,95,700/-" 66. In that view of the matter, Respondent was held to be entitled to get credit thereof. Clause 13 of the insurance policy was, thus, clearly attracted. 67. Reliance has strongly been placed on a decision of this Court in Bihar Supply Syndicate v. Asiatic Navigation and Others [(1993) 2 SCC 639 : AIR 1993 SC 2054 ] wherein this Court was dealing with a different fact situation. In that case, the vessel in question was diverted to Vishakhapatnam along with cargo where the repairs of the vessel were expected to be completed. The vessel was, however, not repaired nor the wages of the crew members were paid as a result whereof the ship was directed to be arrested. It was in the aforementioned fact situation opined: "It is thus clear, after knowing the fact, that we are dealing with a Marine Insurance Policy with Institute Cargo Clauses (FPA) attached against the Insurance Company, it is the duty of the plaintiff to prove as a fact that the cargo was lost due to perils of the sea. Since the finding of the High Court is that no sea water entered in the engine room and the fact that the cargo was intact even after the ship was towed to Vishakhapatnam showed that no sea water entered the ship and, therefore, the loss to the plaintiff was not on account of perils of the sea and the suit of the plaintiff against the Insurance Company i.e. defendant 4 was rightly dismissed by the High Court." 68. The said decision cannot be said to have any application in this case in view of the extended terms of policy. Non-delivery of goods may be on any account. It need not always be a case of reasonably abandoned. The meaning of the expression peril insured against would depend upon the terms of the policy. The policy was extended to a case where the costs of transportation would be more than the value of the goods. Marine Insurance Act is subject to the terms of insurance policy. Where the insurer takes additional premium and insure a higher risk, no restrictive meaning thereto need be given. A term of the policy must be given its effect. While construing a contract of insurance, the reason for entering thereinto and the risks sought to be covered must be considered on its own terms.69. When the entire case is based on a construction of insurance policy, the question of adduction of any oral evidence would be irrelevant particularly when the learned Single Judge gave due credit of the amount received on auction of the goods under the orders of the Singapore Court. The value of the cargo was known. It is not a disputed amount. Thus, whatever has been recovered by way of sale of the said logs, the same has to be credited for and Appellant should be held entitled only to the balance amount.70. What would, thus, be the meaning of the word possession under Sub-section (2) of Section 60 of the Marine Insurance Act read with Clause 13 of the policy? It is not the case of any of the parties that Appellant was given actual possession of the goods. Unseaworthiness of vessel due to which it became stranded as a result whereof the goods could not be delivered to Appellant, in our opinion, would come within the meaning of the expression "peril insured against".71. This leaves us to the question as to whether the exclusionary clauses contained in the insurance policy are attracted. Respondent in its written statement did not raise such a contention. It was required to be specifically pleaded and proved by Respondent. The burden to prove the applicability of exclusionary clauses was on Respondent. Neither any issue has been raised, nor any evidence has been adduced in this behalf. It is also not a case that the servants of the assured were privy to the unseaworthiness as provided for in Clause 5.5.1 of the insurance policy. There has been no evidence to that effect. Even the said provision has not been applied by the learned Single Judge.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]34. From a perusal of the said letter, it is evident that the only ground on which the claim of Appellant was not accepted was that the question of any Non-delivery" did not arise as the cargo had been in existence. Other contentions of Appellant in the said letter had not been repudiated.We have noticed hereinbefore that indisputably Appellant on its own as also at the behest of Respondent took steps for realisation of cargo to the extent possible. It moved the Singapore High Court for sale of the cargo. It had also opposed the prayer of arrest of ship before a Malaysian Court. Respondent itself contended that Appellant made a pre-mature claim of constructive total loss. Having said so, it could not have raised a plea of limitation.There had been no repudiation even at that stage. It was only when the ship could not leave the Singapore Port due to unseaworthiness, a claim of constructive total loss was made. Terms of the policy would indisputably have to be invoked for determining the rival clauses. But, it is one thing to say that the claim was barred by limitation or the exclusionary clauses would apply; but it is another thing to say that the question of invoking the said clause did not arise in terms of the contract of insurance.41. Only because the expression "without prejudice" was mentioned, the same, in our opinion, by itself was not sufficient and would not curtail the right of the insured to which it was otherwise entitled to. The expression "without prejudice" may have to be construed in the context in which it is used. If the purpose for which it is used is accomplished, no legitimate claim can be allowed to be defeated thereby.When the termination of the contract of insurance has actually taken place is essentially a question of fact. An insurance policy is to be construed in its entirety. A marine insurance policy does not come to an end only because the ship became stranded at a port.None of the aforementioned clauses are attracted in the facts and circumstances of the present case.The Division Bench of the High Court committed an error in holding that the insurance policy stood terminated after June/ July, 1988 in terms of clause 9 of the policy when the contract of carriage had terminated on account of the unseaworthiness of the ship. Even Respondent had not made out any case to the said effect in the pleadings. If the contract of insurance did not terminate on its own, as was wrongly opined by the Division Bench of the High Court, the question of any request for its extension did not arise.49. Undoubtedly, the contract of insurance was covered under Institute Cargo Clause (C). However, it included expressly the risk of non-delivery of even single piece of log. It included the risk of the vessel or craft being stranded or grounded. It also included the risk of institute theft pilferage and non-delivery.50. Yet again on 2nd March, 1988 and 11th March, 1988, evidently, the scope of aforesaid policy was enlarged pursuant whereto or in furtherance whereof further endorsements were made by paying additional premium, in terms whereof the risk of non-delivery was specifically covered. It will bear repetition to state that the vessel could not proceed from Singapore owing to its unseaworthiness. It was, thus, covered by the terms of the extended terms of insurance policy. The Division Bench failed to consider this aspect of the matter.If the ship was stranded at Singapore and goods were offloaded from it, Appellant must be held to have discharged its burden. Findings of fact were arrived at by the learned Single Judge on the basis of the pleadings of the parties. If a clause of Marine Insurance policy covers a broad fact, in our opinion, it would be inequitable to deny the insured to raise a plea particularly when the insurer being a State within the meaning of Article 12 of the Constitution of India is expected to act fairly and reasonably. The purport and object for which goods are insured must be given full effect. In a case of ambiguity, the construction of an insurance policy should be made in favour of the insured and not insurer.The likelihood of recovery must be judged in the light of the probabilities as they would have appeared to a reasonable assured at the moment when he knew of his loss and could have given notice of abandonment. The former rule of law that a frustration of the venture by an insured peril gives rise to a constructive total loss under a voyage policy on goods, although the goods themselves are not damages, has not been altered. [See RickardsIn that view of the matter, Respondent was held to be entitled to get credit thereof. Clause 13 of the insurance policy was, thus, clearly attracted.The said decision cannot be said to have any application in this case in view of the extended terms of policy. Non-delivery of goods may be on any account. It need not always be a case of reasonably abandoned. The meaning of the expression peril insured against would depend upon the terms of the policy. The policy was extended to a case where the costs of transportation would be more than the value of the goods. Marine Insurance Act is subject to the terms of insurance policy. Where the insurer takes additional premium and insure a higher risk, no restrictive meaning thereto need be given. A term of the policy must be given its effect. While construing a contract of insurance, the reason for entering thereinto and the risks sought to be covered must be considered on its own terms.69. When the entire case is based on a construction of insurance policy, the question of adduction of any oral evidence would be irrelevant particularly when the learned Single Judge gave due credit of the amount received on auction of the goods under the orders of the Singapore Court. The value of the cargo was known. It is not a disputed amount. Thus, whatever has been recovered by way of sale of the said logs, the same has to be credited for and Appellant should be held entitled only to the balance amount.70. What would, thus, be the meaning of the word possession under Sub-section (2) of Section 60 of the Marine Insurance Act read with Clause 13 of the policy? It is not the case of any of the parties that Appellant was given actual possession of the goods. Unseaworthiness of vessel due to which it became stranded as a result whereof the goods could not be delivered to Appellant, in our opinion, would come within the meaning of the expression "peril insured against".71. This leaves us to the question as to whether the exclusionary clauses contained in the insurance policy are attracted. Respondent in its written statement did not raise such a contention. It was required to be specifically pleaded and proved by Respondent. The burden to prove the applicability of exclusionary clauses was on Respondent. Neither any issue has been raised, nor any evidence has been adduced in this behalf. It is also not a case that the servants of the assured were privy to the unseaworthiness as provided for in Clause 5.5.1 of the insurance policy. There has been no evidence to that effect. Even the said provision has not been applied by the learned Single Judge.