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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.
———————–
8

 

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