TaxTMI 
TaxTMI 
2006 (12) TMI 558
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....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 as under: "Institute Cargo 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 capsized " *** *** *** *** *** *** The insurance contract contained exclusion clauses, some of which are as under: "4. In no case shall this insurance cover *** *** *** *** *** *** 4.6 loss, damage or expense arising from insolvency ....
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....ts value on arrival." An extended warranty clause was endorsed in the policy wherefor additional premium was paid in the following terms: "Notwithstanding anything 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." 5. 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. 6. The Malaysian Court discharged ....
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....d clause. I, therefore, answer this issue in the affirmative." 12. 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 and opined: "There is 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." 13. As regards, Issue No. 3, the learned Judge noticed the Respondent's contention which is in the following terms: " Plaintiff's claim was wrongful and not maintaining and the same was repudiated by this defendant's letter dated April 1, 1991 and October 22, 1991." 14. In regard to the said contention, it opined that the said repudiation was made on 1st April, 1991 and 22nd October, 1991. 15. As regards Issue No. 4, it was held that the sui....
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.... 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." 22. 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 was concluded: "10. For 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 t....
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....n favour of the insured. Reliance in this behalf has been placed on United India Insurance Co. Ltd. v. Pushpalaya Printers [(2004) 3 SCC 694]. 27. Mr. Vishnu Mehra, learned counsel appearing on behalf of Respondent, on the other hand, would submit that Institute Cargo Clause (C) contained restrictive clauses. Drawing our attention to Section 78 of the Marine Insurance Act, he would submit that the Division Bench of the High Court has rightly construed the words 'any peril'. It was submitted that having regard to Sub-section (4) of Section 78 of the Marine Insurance Act, the insured had a duty to minimize the loss and only in that view of the matter, Respondent extended its assistance which cannot be said to be an admission of its liability. It was urged that the insurance policy would cover only the perils mentioned therein and no case has been made out that the vessel was stranded. 28. Having regard to Clause No. 9 of the policy, it was contended that the contract became terminated and there being no request for continuation of the contract, it came to an end in December, 1988 when it was stranded at Singapore. 29. In regard to claim of Appellant on constructive t....
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....lcutta Port as lading issued by them. Please note that as the vessel loaded with full cargo has been located the question of 'Non- delivery' does not arise and no claim will be admissible by the underwriters where the existence of the goods is there. As per the terms and conditions of Marine Insurance Policy "Delay" is the excluded peril which note." 36. 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. 37. On or about 11th August, 1988, Appellant herein served a notice of abandonment inter alia stating: "In the circumstances of the case, we are to give you this Notice of abandonment of the consignments to you and you are at liberty to take possession of the subject matters insured. In this connection, we may state that in a similar case in British & Foreign Marine Insurance Company Limited vs. Sanday & Another it was held that "Consequent on the adventure being frustrated by an insured peril the assured....
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.... duty bound to see that all protective measures are taken adequately against Carriers. 43. However, settlement of the claim under the policy would be considered only strictly in terms and conditions of the policy of insurance. This is without prejudice." 44. 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. 45. 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. [See....
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....l rule, not be admissible. The converse is that there are some circumstances in which the words are used but where the documents do not attract without prejudice privilege. This may be because although the words without prejudice were used, the negotiations were not for the purpose of a genuine attempt to settle the dispute. The most obvious cases are first, where the party writing was not involved in genuine settlement negotiations, and secondly, where although the words were used, they were used in circumstances which had nothing to do with negotiations. Surveyors reports, for example, are sometimes headed without prejudice, although they have nothing to do with negotiations. The third case is, where the words are used in a completely different sense. Thus, in Council of Peterborough v. Mancetter Developments, the documentation was admissible because in context the words meant "without prejudice to an alternative right and without concession to the other application" and had nothing to do with settlement. 48. There are circumstances in which the correspondence is initiated with a view to settlement but the parties do not intend that the correspondence should be without prejudi....
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....nal warehouse; (ii) on delivery to any other warehouse or place of storage; (iii) for storage other than in the ordinary course of transit; or (iv) for allocation or distribution or on the expiry of 60 days after completion of discharge overside of the goods insured from the oversea vessel at any final port of discharge. 53. None of the aforementioned clauses are attracted in the facts and circumstances of the present case. 54. Clause 8.3, subject of course to the operation of other provisions contained in Clause 8 as also the provisions contained in Clause 9, remains in force during delay beyond the control of the assured, any deviation, forced discharge, reshipment or transshipment and during variation of the adventure arising from the exercise of a liberty granted to ship owners or charterers under the contract of affreightment. 55. 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 ef....
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....ionary, Fifth Edition, the word 'strand' has been defined as : "A shore or bank of the sea or a river." 63. 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. 64. In Pushpalaya Printers, this Court held: "Where the words of a document are ambiguous, they shall be construed against the party who prepared the document. This rule applies to contracts of insurance and clause 5 of the insurance policy even after reading the entire policy in the present case should be construed against the insurer " 6....
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..... It must be read in the context of the phrase which would define it. It should not be vague or ambiguous. The definition of words must be given a meaningful application; where the context makes the definition given in the interpretation clause inapplicable, the same meaning cannot be assigned. 28. In State of Maharashtra v. Indian Medical Assn. one of us (V.N. Khare, C.J.) stated that the definition given in the interpretation clause having regard to the contents would not be applicable. It was stated: (SCC p. 598, para 8) '8. A bare perusal of Section 2 of the Act shows that it starts with the words "in this Act, unless the context otherwise requires ". Let us find out whether in the context of the provisions of Section 64 of the Act the defined meaning of the expression "management" can be assigned to the word "management" in Section 64 of the Act. In para 3 of the Regulation, the Essentiality Certificate is required to be given by the State Government and permission to establish a new medical college is to be given by the State Government under Section 64 of the Act. If we give the defined meaning to the expression "management" occurring in Section 64 of the Act, i....
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....recovered;" 71. 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 Rickards (supra)] 72. It is again undisputed that after the ship became unseaworthy, Appellant took steps to recover the value of the cargo with a view to minimize its loss due to non-delivery. It, therefore, fulfilled its contractual obligation in that behalf. Sale of cargo was allowed by the High Court of Singapore in suit No. 711 of 1989. It was only at that stage, Appellant could come to the conclusion that the cost of recovering and getting the cargo back to Calcutta would cost more than if the sale was effected at Singapore. The cause of action arose then. The learned Single Judge has taken specific note of the said fact stating that Appellant had sought for advice of Respondent as to whether the sale would go through at Singapo....
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.... 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." 75. 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 te....