2006 Supreme(SC) 1237

2006(9) Supreme 895
SUPREME COURT OF INDIA
(From Calcutta High Court)
S.B. Sinha and Dalveer Bhandari, JJ.
M/s Peacock Plywood Pvt. Ltd. - Appellant
versus
The Oriental Insurance Co. Ltd. - Respondent
Civil Appeal No. 5608 of 2006
(Arising out of S.L.P. (C) No. 7392-7393 of 2005)
Decided on 5-12-2006
Counsel for the Parties :
For the Appellant : Prasenjit Keswani and Prashant Kumar, Advocates.
For the Respondent : Vishnu Mehra, Ms. Sakshi Mittal and B.K. Satija, Advocates.

Headnote:Marine Insurance Act - Section 60 - Constructive total loss - Likelihood of Recovery - Interpretation of a policy of marine insurance - Appellant agreed to purchase logs from a Malaysian firm - 474 pieces of logs were loaded on a vessel at the port of Malaysia for their delivery at Calcutta - Ship left the Malaysian Port with cargo - Logs were insured by appellant with respondent Insurance Company against the peril and/or risk of non delivery of said goods - Policy expressly included the risk of non delivery of even single piece of log - Ship developed engine troubles and held up at Singapore Port - It sailed for Port of Calcutta but immobilised on reaching high sea at Andamans - It underwent repairs but eventually returned back to Malaysia - Malaysian Court discharged order of arrest but at Singapore, the ship became stranded - Ship offloaded its cargo but did not resume its journey - Appellant with a view to minimise its loss due to non-delivery, took steps to recover the cargo or its value and received Rs. 20,01,743.53 out of the sale proceeds - A claim by way of constructive total loss was raised with the insurer which was repudiated - High Court held that the policy was not an all risk policy and the exclusion clause would operate - It was opined that as the ship was detained due to unseaworthiness the plaintiff cannot succeed in its claim - Whether judgment of the High Court is sustainable - (No)

       Held : 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. 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. (Paras 43 and 44)

       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. 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. (Paras 60 and 61)

       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". 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.(Paras 62 to 64)

       (ii) WORDS AND PHRASES - Word ‘Strand’ - Meaning - Word ‘Stranded’ is not a term of art - Dictionary meanings.(Para 47)

       (iii) INTERPRETATION OF STATUTES - Contract of Insurance - 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 - When the entire case is based on a construction of insurance policy - Adduction of any oral evidence would be irrelevant.(Paras 60 and 61)