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

3. Appellant herein agreed to purchase 4000 cu. mt. of Sabha Log (logs) at a total price of US $6,00,000/- from a Malaysian firm. 474 pieces of logs were loaded on a vessel known as Indera Pertama (vessel) at the port of Western Sabah, Malaysia for their delivery at Calcutta. The ship left the Malaysian Port with cargo on 16th February, 1988. The logs were insured by Appellant with Respondent - Insurance Company for a sum of Rs. 39,90,122/- against the peril and/ or risk of non-delivery of said goods. The policy contained Institute Cargo Clause (C). It also expressly included the risk of non-delivery of even single piece of log.4. The relevant clauses of the said contract are asCargo Clause (C) Risks covered:1. This insurance covers, except as provided in Clauses 4, 5, 6 and 7 below,1.1 ***1.1.1 ***1.1.2 vessel or craft being stranded grounded, sunk or*** *** *** *** ***The insurance contract contained exclusion clauses, some of which are asIn no case shall this insurance cover*** *** *** *** *** ***4.6 loss, damage or expense arising from insolvency or financial default of the owners, managers, chaterers or operators of the vessel.*** *** *** *** *** ***5.1 In no case shall this insurance cover loss damage or expense arising from unseaworthiness of vessel or craft;Unfitness of vessel craft conveyance container or lift-van for the sale carriage of the subject-matter insured.Where the assured or their servants are privy to such unseaworthiness or unfitness, at the time the subject-matter insured is loaded therein.*** *** *** *** *** ***6. In no case shall this insurance cover loss, damage or expenses caused by*** *** *** *** *** ***6.2 capture, seizure, arrest, restraint or detainment and the consequences thereof or any attempt thereat;"*** *** *** *** *** ***8.3 This insurance shall remain in force (subject to termination as provided for above and to the provisions for clause 9 below) during delay beyond the control of the Assured, any deviation, forced discharge, re-shipment or trans-shipment and during any variation of the adventure arising from the exercise of a liberty granted to ship owners or charterers under the contract of affreightment.9. If owing to circumstances beyond the control of the Assured either the contract of carriage is terminated at a port or place other than the destination named therein or the transit is otherwise terminated before delivery of the goods as provided for in clause 8 above, then this insurance shall also terminate unless prompt notice is given to the Underwriters and continuation of cover is requested when the insurance shall remain in force, subject to an additional premium if required by the Underwriters, either*** *** *** *** *** ***9.2 if the goods are forwarded within the said period of 60 days (or any agreed extension therein) to the destination named herein or to any other destination, until terminated in accordance with the provisions of clause 8 above.*** *** *** *** *** ***13. No claim for Constructive Total Loss shall be recoverable hereunder unless the subject-matter insured is reasonably abandoned either on account of its actual total loss appearing to be unavoidable or because the cost of recovering, reconditioning and forwarding the subject-matter to the destination to which it is insured would exceed its value on arrival.An extended warranty clause was endorsed in the policy wherefor additional premium was paid in the followinganything contained herein to the contrary, it is hereby declared and agreed that the coverage granted under the within mentioned policy be extended to include the risks of "Theft, Pilferage and Non-Delivery" as well as "War and S.R.C.C." as per attached clause 6 & 11. In consequence above extension of risks, an additional premium of Rs. 1,496/- is hereby charged to the insured.The ship developed engine troubles and was held up at Singapore Port till 13th March, 1988. It sailed for Port of Calcutta thereafter. It was, however, immobilised on reaching high sea at Anadamans. It underwent repairs but eventually returned back to Malaysia. Indisputably, Appellant kept Respondent - Insurance Company informed all through. While at Malaysian Port, the ship was arrested at the instance of one Gobsobs, one of the owners of the cargo in May, 1988. Appellant filed a caveat in the said proceedings with a view to take appropriate steps to have the logs belonging to it released.7. The Malaysian Court discharged the order of arrest on 30th December, 1988 and the ship eventually proceeded again towards Singapore. At Singapore, the ship became stranded. On 3rd January, 1989, it offloaded its cargo and did not resume its journey. Appellant, however, with a view to minimise its loss due to non-delivery, took steps to recover the cargo or its value and on an application filed by it, the High Court of the Republic of Singapore in suit No. 711 of 1989 passed an order on 9th June, 1989 allowing the sale of the cargo. Admittedly, Appellant had received a sum of Rs. 20,01,743.53 out of the sale proceeds.8. A claim by way of constructive total loss was raised by Appellant with the Insurer in terms of its letter dated 12th August, 1989 which was repudiated by Respondent in terms of its letter dated 1st April, 1991. The said stand was reiterated by it in terms of a letter dated 22nd October, 1991.9. Appellant filed a suit before the original side of the Calcutta High Court which was marked as CS No. 480 of 1992 praying for a decree for a sum of Rs. 49,48,407/- with interest.10. The Singapore Court, however, during pendency of the said suit on or about 19th May, 1995 released the money in favour of Appellant. The said sum being 20,01,740.53 was received by it at the then prevailing exchange rate on 22nd June, 1995.11. The learned Single Judge in the suit inter alia framed the followingIs the plaintiff the owner of the subject goods?*** *** ***2(b) Was there any constructive total loss as alleged in paragraph 8 of the plaint?3. Is the suit barred by the laws of limitation?4. To what relief, if any, is the plaintiffIn regard to Issue No. 1, the learned Judgefollows therefore that the said Clause 6 cannot be set up by the defendant against the plaintiffs claim on account of non-delivery i.e. the peril insured against. Further in any event I am satisfied on the evidence adduced at the trial that the plaintiff had given prompt notice of the termination of the voyage at the Singapore Port but the defendant did not ask for payment of additions, premium for continuation of the said policy. The defendant therefore must be considered to have acquiesced in the continuation of the said policy at any rate it must be taken to have waived the condition prescribed in the said clause. I, therefore, answer this issue in the affirmative.So far as Issue No. 2(b) is concerned, the learned Judge noticed the definition of constructive total loss as contained in Section 60 of the Marine Insurance Act, 1963 andis no "express provisions" to the contrary in the said policy and as such it cannot be disputed that there has been constructive total loss of the said consignment. There is evidence on record to show that the cost of bringing down the said consignment to the Calcutta Port from the Singapore Port would be more than it is actual cost (see exhibit S supra). I, therefore, here (sic) that this issue should be answered in the affirmative.As regards, Issue No. 3, the learned Judge noticed the Respondents contention which is in the followingclaim was wrongful and not maintaining and the same was repudiated by this defendants letter dated April 1, 1991 and October 22, 1991.In regard to the said contention, it opined that the said repudiation was made on 1st April, 1991 and 22nd October, 1991.16. As regards Issue No. 4, it was held that the suit was within limitation. Keeping in view the fact that Appellant had received a sum of Rs. 20,01,740.53, it was opined that it was entitled only to a sum of Rs. 8,48,259.47 and the suit was decreed therefor together with simple interest at the rate of 18% per annum.17. Aggrieved thereby, Respondent filed an intra-court appeal before a Division Bench of the said High Court which was marked as APD No. 363 of 2000. The High Court held that the repudiation of claim having been made on 8th July, 1988, subsequent correspondences having been marked as without prejudice, the same would not amount to extension of period of limitation as the suit was filed on 7th August, 1992. In regard to the correspondences passed between the parties, it wasconduct of the defendant/appellant in this regard clearly indicates that in order to help tracing out the situation, the defendant had extended its good office and that too without prejudice. Such a gesture does not seem to extend the period of limitation by admission or otherwise when on the face of Exhibit 5 (8th July, 1988), the defendant had already declined/denied its liability.It was furthermore held that having regard to Clause 9 of the policy, the contract of carriage stood terminated. On merit of the matter, the court, on the question as to whether the claim was established, held that the same had not been quantified in the absence of any definite proof with regard to the amount to be ascertained as claimable.19. In regard to the question as to whether the policy was an all risk policy, the Division Bench opined that the policy was not an all risk policy and the exclusion clause contained in Clause 4.6 would operate.20. In regard to the question of constructive total loss, keeping in view the fact that the goods were in existence, the court purported to have relied upon Middows v. Robertson [(1940) 67 Lloyds Law Report 484]unseaworthiness would not come within the peril of the insured against as was held in Wadsworth Lighterage Co. Ltd. (supra). The unseaworthiness of the vessel is a ground excluded in the policy as referred to hereinbefore. There is no pleading or any attempt to prove that the plaintiff or its servant was not privy to the unseaworthiness of the vessel at the time of loading..15 If in a situation, loss occurs due to combination of more than one factors then if one factor is excluded the claim of the plaintiff cannot succeed. In the instant case, the proximate cause was delay and defaults committed by the plaintiff as mentioned aforesaid. Hence, the plaintiffs claim must fail.In regard to the issue of loss caused by measures taken by Appellant to avert or minimize the effect of an insured period, it was opined that as the ship was detained due to unseaworthiness which is exclusionary clause the plaintiff cannot succeed in its claim. It was further opined that the insurance was hit by sue and labour clause and Appellant has not been able to discharge its burden.23. In regard to warehouse to warehouse loss, it was held that the policy did not include the risk of loading the goods in vessel which were unseaworthiness. It being a maritime industry peril, the enforcement would be against the exclusion clause contained in Clause 5.1.24. It wasFor all these reasons, we are of the view (1) that because of the fact of denial by the insurer by its letter dated 8th July, 1988 (Ext. 5) coupled with the termination of the policy and its non-extension after the Cargo Safety Construction Certificate and Load Line Certificate expired on 15th July, 1988 and on account of plaintiffs failure to discharge its obligation either to obtain re-shipment of the goods soon thereafter and the failure to take a decision to sell the goods locally immediately and filing of the suit after 7th August, 1992 clearly indicates that the claim of the plaintiff was barred by limitation and the suit ought to have been dismissed; (2) the plaintiff has not been able to prove that he had taken all steps to avoid the delay; (3) the policy was not an all risk policy but was circumscribed and restricted by reason of the Institute Cargo Clause (c) containing the restrictive clauses enumerated in paragraph 5 hereinbefore; (4) the plaintiff has not been able to establish its claim by discharging the burden lay upon it to sustain the claim on merit and that the goods were not lost when the claim was lodged; (5) the plaintiff has not been able to prove constructive loss by reason of abandonment; (6) that by reason of Sections 20 and 32 of the Evidence Act, it was proved that the goods were still in existence and were in good condition; and (7) that the loss cannot be ascribed to any peril insured as discussed

Court's reasoning:
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.