New India Assurance Co. Ltd vs M/S. Hira Lal Ramesh Chand & Ors

2. As the ranks of parties differ in the two appeals and as some parties were given up before the Commission, for convenience, we will also refer to the parties as follows : New India Assurance Co. Ltd., as `Appellant' or `Insurer'; M/s Hira Lal Ramesh Chand and its partners (Respondents 1 & 2 in the first matter) and M/s Ratan Chand Deep Chand and its partners (Respondents 1 to 3 in the second matter) as the `complainants'; M/s Niranjan Shipping Agency Pvt. Ltd., (third Respondent in the first matter and fourth Respondent in the second matter) as `Niranjan Shipping'; Punjab National Bank (fourth Respondent in the first matter and fifth Respondent in the second matter), and Bank of Baroda (sixth Respondent in the second matter) by their names; Atlanta Rugs Inc. as the `Buyer'; and Overseas 3 Container Lines Inc. (the Non-Vessel Owning Common Carrier acting as shipping Agent) as `NVOCC' or `Overseas Container'.

3. The case of the complainants, in brief, is as follows : Complainants are manufacturers of Rugs and Durries, carrying on business at Mirzapur, UP. In pursuance of orders placed by Atlanta Rugs Inc., Atlanta (for short the `buyer'), M/s. Hira Lal Ramesh Chand dispatched 17 consignments of rugs and durries of the value of US $ 4,06,096 between 15.3.1995 and 29.6.1995; and M/s. Ratan Chand Deep Chand dispatched 38 consignments of the value of US $ 8,87,973 between 23.8.1994 and 4.7.1995. The consignments were entrusted to M/s Overseas Container Line Inc., a non- vessel owning shipping Agent represented by its Agent Niranjant Shipping Agency (P) Ltd., for transhipment from Mumbai to Atlanda (USA). The Bill of Lading issued by Overseas Container in regard to each of the consignment showed the consignee as "Unto order" and party to be notified as "Atlanta Rugs Inc.". All the consignments were insured by the consignors, with the New India Assurance Co. Ltd. The original documents relating to the consignments were forwarded by Niranjan Shipping to the Bankers of complainant - Punjab National Bank. The complainants obtained credit facilities from Punjab National Bank by discounting the Bills and endorsed the Bill of Lading in favour of the said Bank. The said Bank, in 4 turn, forwarded the original documents of title to its agent Sun Trust Bank (earlier known as Trust Company Bank) Atlanta, for collection, by endorsing the documents in their favour. The buyer (Atlanta Rugs Inc.) did not make payment and obtain release of the documents of title. They therefore made efforts to contact the buyer and the shipping Agent- Overseas Container. They were also not able to locate them. Nor were they able to find out the whereabouts of the consignments. Therefore they telephonically lodged an oral claim with the insurer on 2.2.1996 seeking payment of the value of the consignments. The insurer directed them to get in touch with their Surveyor-cum-Claim Settlement Agent at Atlanda -- M/s. Toplis and Hoarding Inc. They accordingly requested the said Surveyor to inquire and investigate the matter and issue necessary certificates. The surveyor submitted their reports to the Insurer, but failed to furnish copies thereof to the complainants. Their claim was not settled by the Insurer for more than a year in spite of reminders. Such failure amounted to deficiency in service and consequently the insurer became liable to pay the value of the consignments and the other amounts claimed, as compensation.

6. Initially, there were four common respondents in both the complaints. The Divisional Office, Regional Office and Head Office of New India Assurance company Ltd. were respondents 1 to 3. Overseas Container Lines Inc., was the fourth Respondent. By order dated 10.11.2000, the Commission directed the complainants to implead M/s Atlanta Rugs Inc. (Buyer), M/s Niranjan Shipping Agency Pvt. Ltd. (Forwarding Agent of the Complainants, as also the agent of Overseas Container Lines Inc.), Punjab National Bank and Bank of Baroda (Bankers of complainant), Sun Trust Bank, earlier known as Trust Company Bank (the foreign correspondent Bank of Punjab National Bank) as they were proper and necessary parties. Accordidngly, M/s Atlanta Rugs Inc., Niranjan Shipping Agency (P) Ltd., Punjab National Bank and Sun Trust Bank, were impleaded as respondents 5 to 8 in OP no.45 of 1997. However, subsequently respondents 4, 5, and 8 were given up by the complainants as service could not be effected and their names were deleted from the array of parties and consequently, when the matter was heard, the respondents in OP No.45/1997 were the insurer, M/s 9 Niranjan Shipping Agency (P) Ltd., and the Pubjab National Bank. Similarly, the said four persons as also Bank of Baroda were impleaded as respondents 5 to 9 in OP No.49 of 1997. But later, the three respondents who could not be served were given up and deleted and at the time of hearing the respondents were the insurer, M/s Niranjan Shipping Agency (P) Ltd., Punjab National Bank and Bank of Baroda.

7. The parties did not lead any oral evidence nor mark any document as exhibits, but produced some documents. The complainants and the insurer filed affidavits supporting the complaint and the written statement. On the basis of the pleadings, affidavits, copies of documents produced and arguments, the Commission decided the complaints by its common order dated 31.1.2003. The Commission held that the complainants held valid marine insurance cargo policies which gave insurance cover against all risks of loss. The bills of lading showed the consignee as "Unto order" and they were endorsed in favour of Sun Trust Bank. The original documents were not retired by the buyer and were returned by Sun Trust Bank to Punjab National Bank. As delivery could be taken only after obtaining original bills of lading which were with the Sun Trust Bank and as the original documents had been returned, and as there was no evidence on record about the fate of the shipments, the shipments should be covered under the term 10 "loss" and insurer will have to indemnify the complainants for such loss. Even if Atlanta Rugs Inc. had managed to receive the consignments by fraudulent means without legitimate endorsement or transfer of the original documents of title which were in the custody of the Sun Trust Bank, that amounted to loss of goods. As the consignee was shown as "Unto order" in the bills of lading, the complainants had lien and control over the consignments and consequently, property in the goods did not pass to the buyer and in such circumstances, delivery to Atlanta Rugs Inc. would still amount to loss of goods. As the goods were lost, the insurer was liable to indemnify the complainants for such loss and failure to do so was a deficiency in service. It therefore allowed both the complaints in part.

8. In OP No.45/1997, the Commission directed the insurer to indemnify the complainant - M/s. Hira Lal Ramesh Chand by paying US $ 367311 (equivalent to Rs.1,32,78,293 at an exchange rate of Rs.36.15 per US Dollar) with interest at 12% p.a. from the date of complaint till the date of payment, and pay the said amount to Punjab National Bank so that the said Bank could adjust the said amount against the amount due from the complainants. In OP No.49/1997 the Commission directed the insurer to indemnify the complainant - M/s. Ratan Chand Deep Chand to an extent of 11 Rs.30,00,000/- with interest at 12% p.a. from the date of complaint to the date of payment, and pay the said amount equally to the complainants' Bankers, Punjab National Bank and Bank of Baroda, Mirzapur.

10. M/s. Hira Lal Ratan Chand had taken two marine policies (cargo) which are in the nature of open covers, from the Insurer. They are open cover Policy Nos.2142 11000 8745 dated 29.4.1994 (which was in force from 29.4.1994 to 28.4.1995) and No.2142 11000 9032 dated 19.5.1995 12 (which was in force from 19.5.1995 to 18.5.1996) each with an assured limit of Rs.50 lakhs. The assured limit of Open Cover No.2142 11000 8745 was extended by another Rs.50 lacs with effect from 22.2.1995 and by another Rs.7 lacs with effect from 27.4.1995 the total assured amount being Rs.1.07 crore. The Open Cover constituted the contract under which the insurer agreed to issue separate Marine Insurance Certificates as and when the insured made declarations of each shipment. The terms of the open cover are extracted below (from Policy No.2142 11000 8745) :

20. The complainants were manufacturers and exporters of carpets and durries, having their principal place of business and manufacturing unit at Mirzapur. They allege that M/s Atlanta Rugs Inc. based at Atlanta (USA) placed orders on them for supply of rugs/durries. The orders are not placed on record. The complainants allege that they sent several shipments of Rugs/durries to Atlanta (USA) for the buyer. The two complaints relate to 17 consignments sent by M/s. Hira Lal Ramesh Chand and 38 consignments sent by M/s. Ratan Chand Deep Chand, for which they did not receive payment. The common procedure adopted for supply is set out below. 20.1) The complainants handed over the consignment with an invoice made out in the name of Atlanta Rugs Inc., to their Forwarding Agent at Mumbai, namely, M/s Niranjan Shipping Agency Pvt. Ltd. The said Niranjan Shipping was also the shipping agent of Overseas Container Lines Inc., which was a Non Vessel Owning Common Carrier registered in USA. Niranjan Shipping as Forwarding Agent of the complainant entrusted the goods to Overseas Container Line Inc. (also represented by Niranjan Shipping as Shipping Agent) for transhipment from Mumbai to Atlanta. Overseas Container Line Inc., represented by Niranjan Shipping issued a 26 Bill of lading in regard to each consignment. The Bill of lading showed the complainant as the consignor and mentioned "unto order" in the consignee column. Atlanta Rugs Inc. was shown as the buyer who should be notified by the collecting Bank. Overseas Container Line Inc. (represented by Niranjan Shipping) in turn entrusted the consignment to a shipping line which actually carried the consignment and the Shipping Line would issue a Master Bill of Manifest also known as Master Bill of Lading, showing the details of all consignments loaded in the container for being carried from the load port to the foreign destination port.

20.4) The complainant had a foreign Out Bill Purchase Account with Punjab National Bank. The Bank used to purchase/ discount the bills, and the Bill of Lading (Negotiable copy) was endorsed by the complainant in favour of Punjab National Bank or its order. The Punjab National Bank in turn endorsed the Negotiable copy of Bill of Lading in favour of its foreign correspondent Bank namely Trust Company Bank, Atlanta (subsequently known as Sun Trust Bank) and forwarded the documents of title to the said Trust Company Bank for collection. The foreign correspondent Bank would intimate the buyer about the receipt of the documents. On the buyer making payment of the Invoice amount, the foreign Bank would endorse the documents in favour of the buyer to enable the buyer to take delivery of the consignment. If the buyer did not make payment and retire documents 28 within 90 days, the foreign correspondent Bank would return the documents to the Punjab National Bank.

21. OP No.45/1997 filed by M/s. Hira Lal Ramesh Chand related to 17 consignments of the total value of US$ 406,096. According to complainant, 12 consignments were covered by Marine Insurance Certificates issued under marine open policy cover No.2142 11000 8745 and 5 consignments were covered by certificates issued under Marine open Policy Cover No.2142 11000 9032. The seventeen invoices were made between 9.3.1995 and 13.6.1995 and corresponding Bills of Lading were dated between 15.3.1995 to 29.6.1995.

22. OP No.49/1997 filed by M/s. Ratan Chand Deep Chand related to 38 consignments of the total value of US$ 8,87,973. According to complainants, 33 consignments were covered by Marine Insurance 29 Certificates issued under Marine Open Cover Policy No.2142 11000 8749 (validity period 4.5.1994 to 3.5.1995), two consignments were covered by certificates issued under Marine Open Policy Cover No.2142 11000 9038 (validity period 23.5.1995 to 22.5.1996) and three consignments were covered by specific policies No.2142 11000 8868, 2142 11000 8869 and 2142 11000 8870. The invoices in regard to these 38 consignments were made between 28.7.1994 to 25.6.1995 and corresponding Bills of Lading were dated between 23.8.1994 to 4.7.1995. According to the complainants, the original insured value of the two marine open cover policies was Rs.20 lakhs and Rs.10 lakhs, but on account of extra endorsements in respect of the open covers the extent of cover in respect of the two open covers stood increased to Rs.3,70,00,000 and Rs.90,00,000, and the three specific policies were for Rs.4,06,300, Rs.2,91,000 and Rs.2,81,700 in all Rs.4,69,79,000/-. It is contended that the value of 38 consignments which was US$ 887973 (equivalent to Indian Rs.3,21,00,224/-) was well within the insurance cover amount and the commission erred in taking the total extent of cover as only Rs.30 lakhs. The complainants (respondents 1 to 3 in CA 4307/2003) have therefore filed cross-objections seeking increase in the amount awarded for Rs.30 lakhs to Rs.3,21,00,224/-. Be that as it may. 30

26. Thereafter, the complainants telephonically informed the insurer on 2.2.1996 about the non-realization of the Bills and claimed the value of the consignments. The insurer instructed the complainants to get in touch with their Surveyor and Claim settlement Agent -- M/s Toplis & Harding Inc., Atlanta, to investigate into the matter and give their report/certificate. Accordingly, the complainant sent a letter on 6.2.1996 to the said Surveyor 32 requesting for an inquiry and investigation in regard to the consignments. In that letter the complainant stated :

27. The complainants also contacted the Federal Meritime Commission, Washington, seeking their help to ascertain whether their consignments were lying at port or had been released and if lying at the port under whose custody they were lying or if they were released, when and to whom they had been released and under what conditions. The Federal Meritime Commission sent a reply dated 1.3.1996 to the complainant stating that it had been unable to locate either Overseas Container Lines Inc. or Atlanta Rugs Inc and advising the complainant to seek legal advice. The Commission also informed the complainant that Overseas Container Lines Inc. as a Non-vessel operating common carrier (NVOCC) had maintained a bond for US $ 50000 and if any judgment is rendered, against it, the 35 complainant could present a copy to Inter-Cargo Insurance Co., Illinois who were the insurer of Overseas Container Lines Inc. for payment.

(emphasis supplied)

Master Bills of lading should have been issued by the steamship line but none were in Sun Trust Bank's possession. We noted that the Overseas Container Line Inc. bills of lading were consigned to the order of Trust Company Bank with the notified party as Atlanta Rugs Inc. At no time, have we been shown the master bills of lading issued by the steamship line.

This confirmed our earlier suspicion that probably Overseas Container Lines were using the steamship line master bill of lading to obtain and clear the shipments.

At this time, we believe that Atlanta Rugs, Inc, has been dissolved and that Mr. Chaudhary is operating a different company. Based upon all the available information, at this present time, it would appear that all shipments were picked up by Atlanta Rugs, Inc. who used fraudulent methods to obtain the shipments without payment through the bank. We believe that the involvement of the steamship lines will be necessary to prevent further acts and to obtain more information on the stolen shipments. We are issuing our report to document all the facts as known at his present time and it is our intention to issue an addendum should our further involvement be necessary. Please note that we do not comprehend, and have received no explanation as to why the shipments were continually being sent even when the shipper was not receiving any proceeds."

35. There is no averment or proof that the consignments did not reach the destination namely the Port at Atlanta or that the goods were not taken delivery by the Overseas Containers. There is no averment as to whether the holders of the documents namely the Sun Trust Bank applied for delivery or attempted to take delivery of the consignment and store them in a bonded warehouse and whether they were refused delivery within the insurance cover period.

42. In this view of the matter, it is unnecessary to consider the counter claim of the respondents 1 to 3 in CA No.4307 of 2003. Nor is it necessary to consider whether such counter claim is maintainable in an appeal under section 23 of the Consumer Protection Act, 1996.

43. In view of the foregoing, the appeals are allowed and the order of the National Consumer Redressal Commission is set aside and OP No.45/1997 and 49/1997 before the Commission stand dismissed. Parties to bear their respective costs.