Case: New India Assurance Co. Ltd Vs. M/S. Hira Lal Ramesh Chand

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 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.4. The complainants sought a direction to the New India Assurance Co. Ltd. (appellant) to pay the following amounts as compensation:Particulars Claim inOA 45/1997 Amount (in US $)Claim inOA 49/1997 Amount (in US $)(a)Insurance amount (unrealized value of shipments):406096887973(b)Increase in cost of goods (10%):4060988797(c)Compensation for mental agony:100000100000(d)Business loss for one year:58091100000(e)Expenses for pursuing the claim:1000010000TOTAL:6147961186770(f)Interest at 24% p.a. with quarterly rests on the unrealized value of shipments from the date of claim to date of complaint:108253233072(g)Pendente liteand future interest at 24% p.a. from the date of complaint to date of payment.5. The Appellant - Insurer, the opposite party - Respondent in the two complaints, resisted the said claims. It contended that the claim was not maintainable as none of the consignments were lost or damaged in transit. According to them, the investigation report of the surveyor disclosed that one Kumar Chaudhary was the common President of M/s. Overseas Container Lines Inc. (the shipping Agent) and M/s. Atlanta Rugs Inc. (the buyer) and that the said Kumar Chaudhary had admitted to the surveyors that the consignments had all been received by the buyer. If the buyer, having taken delivery of all the consignments, failed to pay the value of the consignments, such non-payment of price by the buyer or non-realisation of the price by the seller, will not be a maritime peril giving rise to a claim against the Insurer under a Marine Insurance Policy. When the insured consignments had been delivered to the buyer, it cannot be said that there is a loss of the consignments. The claims were repudiated on 4.3.1997. The reasons for repudiation were furnished to the complainants by the Insurer as also by the surveyors. There was thus no deficiency in service. It was also pointed out that when the goods are entrusted to a sea going vessel, a master bill of lading is issued by the vessel/shipping line showing the particulars of consignments and the names of the consignees and the said Master Bill of Lading was not part of the documents of title. The failure on the part of the complainants to take any action against the buyer and the manner in which the transactions were conducted, gave room for doubt that there has been a collusion between the complainants and the buyer to foist false claims against the insurer. The Insurer also prayed that the detailed reasons for repudiation given in its letter dated 4.3.1997 be read as part of its written statement. The relevant portions of the letter of repudiation are extractedbuyer had taken delivery of all the consignments but has not paid your Company for the same. Non-payment of the price by the buyer is not an insured peril under the captioned policies and hence your claim falls beyond the scope and ambit of the policies issued by our company.xxxxInstead of taking up the matter with your buyer for the payment of the price of the said consignments, you thought it fit to take no action whatsoever against your buyer.xxxxxxD) You have failed and neglected to act with reasonable dispatch as required by Clause 18 of the Institute cargo clauses (A) to which the above polices were made subject to. Clause 18 reads as under:‘It is a condition of this Insurance that the Assured shall act with reasonable dispatch in all circumstances within their control.The consignments were shipped from Bombay to Atlanta between the months of August 1994 to July 1995. However, your company has informed our company and our aforesaid Surveyors of the alleged loss allegedly suffered by you only in the first week of February, 1996. As you have failed to act with reasonable dispatch as required by the said policies, our company is not liable to pay any amount under the captioned policies.E) As you are aware, it is a conditions of the policy that a certificate of loss/damage should be obtained from our Surveyors who are the companys agents at the Port of discharge. It is an admitted position that no such certificates has been obtained by your company. In view of breach of the aforesaid condition our company is not liable to pay any amount to your company under the captioned policies.G) We have to state that under the aforesaid policies, we had agreed to insure that consignment subject to Institute Cargo Clause (A). Clause I of the said Institute Cargo Clause (A) clearly stipulates as under :‘This insurance covers all risks of loss or damage to the subject matter.....As is pointed out by the surveyors, that the consignment under the captioned policies have been received by the buyers. In view thereof, there is no loss and/or damage to the subject matter i.e. the said consignments entitling your company to seek an indemnity from our company.H) Records in our possession show that you kept on sending consignments to your buyer without caring to ascertain if the buyer was financially solvent and would make payment in respect of the consignments shipped to you. In view thereof, we have to state that the alleged loss is also attributable to the aforesaid willful misconduct on the part of your company under provisions of Institute Cargo Clause (A) - clause 4.1 and section 55 of the Marine Insurance Act, 193.I) You will appreciate that our company has agreed to indemnify you for the loss and/or damage suffered to the consignments during its journey from your companys warehouse to the buyers warehouse due to the insured perils. Financial insolvency and/or refusal of the buyer to pay for the price of the said consignments is not one of the perils insured under the captioned policies and hence your company cannot seek any indemnity under the captioned policies.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. Accordingly, 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 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 "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 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.

Court's reasoning:
Re : QuestionHaving regard to clause (8) of Institute Cargo clause (A) relating to duration, the insurance cover attaches from the time the goods leave the warehouse of the assured and terminates either on delivery at the consignees final warehouse or store at the destination named in the policy (or on delivery to any other warehouse or place of storage, which the assured elects to use) or on the expiry of 60 days after completion of discharge of the goods from the vessel at the final port of discharge. The insurance cover commences when the consignment leaves the warehouse or place of storage at the place named in the policy for commencement of transit and the cover continues during transit and continues until the consignment reaches the final destination specified in the policy as the consignees warehouse. Where the consignment is temporarily stored on arrival at an interim destination (as for example on the dock, or in the shipping lines warehouse or in the custom warehouse, pending onward journey to the consignees warehouse mentioned as final destination in the policy), the cover would remain only for a period of 60 days from the discharge of the consignments from the ship irrespective of whether consignment is put on onward journey to the consignees warehouse/storage place, or not.17. In view of the insurance cover extending `warehouse to warehouse the consignments are covered by insurance not only during the sea journey, but beyond as stated in the policy. Therefore the contention of the insurer that the insurance cover is available only in regard to maritime perils that is perils relating to or incidental to the navigation of the sea may not be correct. Having regard to section 4 of the Marine Insurance Act and the terms of the policy undertaking insurance cover against wider risks, the policy of insurance would cover the loss not only while goods or navigating the sea but also any loss or damage during transit from the time it leaves the consignors warehouse till it reaches the consignees warehouse. The cover against risks will however cease on the expiry of 60 days after discharge of the consignment from the vessel at the final port of discharge, if the goods do not reach the consignees warehouse or place of storage for any reason within the said 60 days.There is a difference between marine insurance policies which extend cover only against marine losses or maritime perils (as enumerated) and marine `extra insurance policies which extend cover against all risks from consignors warehouse to consignees warehouse which include not only the sea journey but also the land journey at either end. The decision in Concord of India Insurance Co. (supra) of the Kerala High Court and the decision of this Court in Bihar Supply Syndicate (supra) relate to marine insurance policies and not to mixed sea/land risks policies or to marine `extra insurance policies. They are not of assistance while considering the scope of a policy covering all risks including ICC(A), ITC(A), IWC(Cargo), ISC (Cargo). In fact in Peacock Plywood (P) Ltd. v. Oriental Insurance Co. Ltd. [2006 (12) SCC 673 ], this Court held that where the policy contained a wider term of risk coverage, the decision in Bihar Supply Syndicate (supra) will not apply. In Peacock Plywood, the extended warranty clause in the insurance policy specifically extended the coverage to include the risks of theft, pilferage and non-delivery. In view of it, this Court held that a claim by way of constructive total loss on account of a ship being stranded on sea on account of its unseaworthiness was maintainable, although the goods themselves were not damaged. In that case when the ship carrying the goods got stranded at a port due to its unseaworthiness, the assured took steps to recover the value of the cargo with a view to minimize its total loss due to non delivery, but found that the cost of recovering and getting the cargo back to the destination port would be more than the value of the goods. Therefore the assured effected sale of the insured goods at the port where ship was stranded. Insurer was found liable to pay the insured value of the goods (less the amount actually recovered by such(ii) and (iii)We have considered the detailed submissions made by learned counsel. We have also considered the material that was placed before the Commission. We find on a careful consideration that the Commission has not addressed itself to the relevant issues. It is no doubt true that the complainants had booked the consignments showing the consignee as `unto order thereby indicating that the goods covered by the Bills of lading should be delivered only to the holder/endorsee of the Bills of Lading. There is also no doubt that the original documents were not cleared/retired by the buyer `Atlanta Rugs Inc. and that the original documents were ultimately returned by the foreign correspondent Bank to Punjab National Bank and they are lying with Punjab National Bank. There is also no doubt that the consignments were insured against all risks of loss and damage.32. The basic and fundamental averment and proof required in a case of this nature is that the consignments had been lost or damaged in transit or that when the holder of the documents applied for delivery, the goods were not delivered on account of the same being irretrievably lost that is having been pilfered, stolen, lost or misdelivered. But there is no such averment or evidence that the consignments were lost or damaged. Nor is there any averment that the holder of the documents of title applied for delivery of the consignments, and was denied or refused delivery on account of non-availability of the consignments either due to pilferage, loss or misdelivery. When there is no allegation or proof of Sun Trust Bank having applied for delivery and refusal of delivery, it is inconceivable how the complainants can maintain a claim against the insurer.33. Failure of the buyer to make payment and take delivery is not a `loss of consignment which is covered by the Insurance Policy. The complainant should make out a case of actual `loss of the consignment covered by the contract of insurance or non-delivery of the consignment, that is refusal to meet a demand for delivery. The question is whether the complainants have proved such loss or non-delivery. The case of the complainant as put forth in the complaint and reiterated in the affidavit is that they have dispatched the consignment to Atlanta, that the consignments were insured against all risks; that the buyer did not retire the documents by making payment; that they do not know what happens to the consignments and that therefore the Insurer ought to have paid them the value of the consignment and failure to do so amounted to deficiency in service as contemplated under the Consumer Protection Act, 1986. We are afraid that these are not allegations or proof of loss or non-delivery sufficient to foist any liability on the insurer.34. Another question that arises for consideration is whoresponsible for transshipment anddelivery. Admittedly Overseas Containers was only a non-vessel owning common carrier (NVOCC) and not the actual shippingline. Necessarily therefore Overseas Container had to entrust the consignment to an actual shipping line for transportation and the Master Bill of Lading given by the shipping line would show the Overseas Containers as the consignee entitled to receive the delivery. The very fact that the Master Bill of Lading is not given to the consignors/complainants and the fact that the complainants did not demand for the same shows that they did not intend to apply for delivery directly from the shipping line that carried the consignments but only intended that delivery should be from Overseas Containers which had issued the Bill of lading. As the contract for carriage was between complainants and Overseas Containers and as the Bills of Lading issued by the Overseas Container showed that the consignments were deliverable to the order of the complainants, necessarily Overseas Containers were expected to take delivery of the consignment at Atlanta from the shipping line which actually transported the consignments and then deliver it to the holder of the documents of title who seeks delivery. If that is so, the Overseas Containers were entitled to take delivery from the shipping line which transported the consignment and there was nothing collusive, clandestine or irregular about delivery of consignments being taken by Overseas Containers from the shipping line, as it had entrusted the consignment to the shipping line for transportation.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.36. The insurance cover was in regard to all risks from consignors warehouse to consignees warehouse. There is no dispute as to what is the consignors warehouse as the complainant is clearly shown as the consignor. The difficulty arises about the consigneesdoes not obviously refer to complainants warehouse as admittedly the complainants were not having any warehouse in Atlanta (USA), nor were they the holders of the documents. The `consignee at the relevant time could only be the Sun Trust Bank in whose favour the documents had been endorsed. But it is not the case of the complainant that Sun Trust Bank as the holder of the documents of title sought delivery of the consignments from the customs warehouse or steam ship line or from Overseas Containers. Where there is no effort on the part of the `consignee to take delivery from the shipping line/customs warehouse, the duration of insurance cover cannot be infinite or indefinite. In such circumstances the risk cover would terminate on the expiry of 60 days after completion of discharge overside of the insured shipment from the Overseas vessel at the final port of discharge at Atlanta having regard to clause 8 of Institute Cargo clause. It is not the case of the complainant that within that time (of 60 days), delivery was sought by the holder of the documents and that such delivery was refused. It is also not the case of the complainants that the consignments were unauthorizedly delivered to Atlanta Rugs or that such delivery was within 60 days of the landing of the consignments at Atlanta. In the absence of any averment or evidence as to when the consignments were discharged from the ship at Atlanta and an averment that within 60 days of the landing of the consignments at Atlanta the holder sought delivery and delivery was refused, the question of the Insurer being made liable for non delivery does not arise. After 60 days of the landing of a consignment even if the consignment is destroyed, lost or mis-delivered, it is no concern of theis unfortunate that the Commission disposed of the matter without examining the terms of the policy and obligations undertaken by the insurer. In fact, having regard to the nature of issues involved, this was more appropriately a matter for civil court. Be that as it may.38. Another significant aspect is that the consignments were being continuously sent from August, 1994 to July, 1995 by M/s. Ratan Chand Deep Chand and from March to June, 1995 by M/s. Hira Lal Ramesh Chand without making any effort to ascertain the fate of the earlier consignments. Even when they learnt none of the documents relating to the consignments had been retired by the buyer, they merely gave the oral intimation to the insurer that too on 2.2.1996 about the non-retirement of the documents. No claim was lodged with the insurer in writing. The allegation that orally a claim for `loss of goods was made on 2.2.1996 cannot be true as according to complainants themselves till that date they had no knowledge that the consignments had been either lost or wrongfully delivered. In fact the complainant have not produced even a single document making a claim on the insurer on the ground that the goods had been lost or not delivered.The complainants have failed to plead and make out a case of loss, in respect of each and every consignment, either during transit or within 60 days of the consignments being discharged from the ship at Atlanta Port. They merely proceed the assumption that the Insurer is liable when the documents are not retired by the buyer, which, to say the least, is untenable. As there is no averment or proof that the consignor or the foreign correspondent Bank holding the documents of title or any person authorized by the said Bank applied for delivery within 60 days of the goods being discharged, and as there is no averment or proof that the consignments were lost or wrongly delivered within the said period of 60 days, the liability and responsibility of the insurer under the policy of insurance came to an end with reference to each of those consignments. Consequently the claim of the complainants against the insurer is liable to be rejected.41. The Commission has referred to the delay of nine months on the part of the Insurer in repudiating the claim, after receiving the surveyors Report, and the failure to furnish a copy of the reports to the complainants as deficiency in service. But what is overlooked is that the complainants did not lodge any claim in writing. At all events, they did not produce any document showing the lodging of claim. It was on a mere oral intimation on 2.2.1996, the investigation by surveyor was set in motion. Further the contents of the report had already been notified to the complainants by the surveyor in the telexes dated 4.3.1996 and 1.4.1996. Therefore, the finding of deficiency in service was not warranted.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.