2020 Supreme(SC) 132

SUPREME COURT OF INDIA
MOHAN M. SHANTANAGOUDAR, K.M. JOSEPH, JJ.
M/s Rajankumar and Brothers (Impex) – Appellant
Versus
Oriental Insurance Company Ltd. – Respondent
Civil Appeal No. 971 of 2014
Decided on : 07-02-2020

IMPORTANT POINTS
If the assured does not give prompt notification to the insurer about noncompliance with warranty conditions of ICC, ‘held covered’ clause will not be applicable. Liability of Insurer will be automatically discharged not requiring any express conduct or representation from the insurer.
Mere formal issuance of the Marine Insurance Policy does not indicate ‘acceptance’/waiver of the vessel’s classification or lack thereof.
If the assured is privy to un-seaworthiness of the vessel and does not communicate it to the insurer, he would not be saved by section 36(5.2).
Knowledge of insurer about breach of warranty and his unequivocal representation are sine qua non for constituting waiver.

Headnote:

(a) Marine Insurance Act, 1963 - Sections 35(3) - Marine Insurance policy - A vessel not classed with a recognized classification society - Any loss incurred by cargo-owner will be excluded from the scope of the insurance cover - In case of the vessel not having been classed in accordance with the ICC, owner required to immediately notify underwriters and negotiate an additional premium - Instantly subject vessel not in compliance with the ICC clause - Appellant not giving prompt notification to the Respondent about such noncompliance - Appellant breached clause 1 of ICC - ‘Held covered’ clause not applicable - Liability of Insurer automatically discharged not requiring any express conduct or representation from the insurer - Clause 5, ICC. (Para 5, 6)

(b) Marine Insurance Act, 1963 - Sections 36 r/w Clause 5, Marine Insurance Policy - ‘Open-cover’ insurances and ‘facultative’ insurance policy - Not mutually exclusive with ICC - Mere formal issuance of the Marine Insurance Policy does not indicate ‘acceptance’/waiver of the vessel’s classification or lack thereof. (Para 6)

(c) Marine Insurance Act, 1963 - Sections 36 - Appellant knew that the subject vessel was classed with a non-member of IACS - Thus privy to un-seaworthiness of subject vessel - Appellant not saved by Clause 5.2 - It cannot be said that Respondent had waived breach of warranty before the Appellant’s claim. (Para 6)

(d) Marine Insurance Act, 1963 - Sections 36 - Waiver - By conduct - Conduct must include two indispensable elements - Knowledge of insurer and his unequivocal representation - Insurer not knowing un-seaworthiness of subject vessel - Issuing GAA in form ‘B’ without any representation or indication that it knew breach of ICC terms of warranty does not amount to waiver by conduct. (Para 6)

Facts of the case:

The Respondent insurance company issued a Marine Cargo Cover Note dated 14.5.2010 for a sum of 12,63,712.50 US Dollars, covering voyage from any port in China to Mumbai Port. The Appellant’s case is that it had communicated the details regarding the subject vessel to the Respondent, as well as the Respondent’s insurance broker, as per the documents presented by the Overseas Seller.

Thereafter, Hangzhou Cogeneration (Hong Kong) Co. Ltd. shipped 80 prime hot rolled steel coils weighing 2000 Metric Tonnes on board the subject vessel from Caofeidian Port, China to the Appellant, for discharge at Mumbai Port. The subject vessel was carrying on board consignments of prime hot rolled steel coils of seven other importers who had also imported them from the same Overseas Seller. Subsequently, the Respondent’s brokers issued a single voyage policy dated 2.7.2010 (‘Marine Insurance Policy’) to the Appellant. The Marine Insurance Policy covered all risks as per the Institute Cargo Clauses (A), Institute War Clause, and Institute Strike Clause.

The subject vessel reached Mumbai port on 6.7.2010 and was allotted a berth on 14.7.2010 for discharge of the cargo. However, on account of failure of the vessel’s crane during discharge, further discharge could not take place, and the subject vessel was removed from the allotted berth. Subsequently, on 19.7.2010, the Appellant came to know that the subject vessel had run aground on the midnight of 18.7.2010. Thus, by letter dated 20.7.2010, the Appellant informed the Respondent that there was a possibility of them claiming under the Marine Insurance Policy.

Thereafter, the shipowners engaged the services of M/S. Smit Singapore Private Ltd. (‘Salvors’) for the purpose of recovering the cargo. The shipowners also appointed M/s Richard Hogg Lindley as the General Average Adjustor (‘GAA’). The GAA sent an email dated 27.7.2010 to both the Appellant and the Respondent, stating that the situation had given rise to a “General Average”. Under GAA if there is a contract of marine insurance in respect of the voyage, the insurer will be liable for reimbursing the amount on behalf of the assured cargo owner.

Accordingly, the Appellant requested its insurer i.e. the Respondent, to issue a General Average Guarantee in ‘Form B’, as required by the GAA. The Respondent consequently issued a guarantee dated 3.8.2010, agreeing to pay the GAA on behalf of the Appellant, for contribution towards the General Average, as well as towards other special charges. These documents were submitted by the Appellant to the GAA.

After the receipt of the General Average Guarantee, the GAA requested the Appellant to pay a separate salvage security of 25 per cent of the ‘Cost, Insurance, and Freight’ (‘C.I.F.’) value of their cargo, which amounted to 256,880 US dollars. Hence, by letter dated 5.8.2010, the Appellant requested the Respondent to issue the salvage security. The Appellant contends that the Respondent did not issue the separate salvage security as required, resulting in the withholding of the release of the Appellant’s consignment at Mumbai port, and exposing it to heavy demurrage and likelihood of further damages. In addition to not issuing the salvage security, the Respondent, by letter dated 20.8.2010, informed the Appellant that they were withdrawing the General Average Guarantee, ‘Form B’ issued by them earlier in respect of the Appellant’s consignment on the subject vessel, on account of noncompliance with the ‘Institute Classification Clause’ (‘ICC’) in the Marine Insurance Policy.

The Appellant, by letter dated 2.2.2012, requested the Respondent to settle the losses incurred by it, and also forwarded a copy of the arbitration award dated 2.12.2011. A legal notice was also sent on 21.6.2012, followed by a reminder on 4.7.2012, but these went unanswered. Hence, the Appellant filed a consumer complaint before the NCDRC against the Respondent, asking for compensation on account of the losses incurred, for deficiency in service, and for the legal and other incidental expenses.

The NCDRC found that the Appellant had failed to prove that the subject vessel was in compliance with the ICC stated in the Marine Insurance Policy. It noted a communication dated 9.8.2010, in which the Respondent’s claim settling agent in London had informed the Respondent that the subject vessel was classed with Lloyd’s Register of Shipping until 10.10.2007, after which Lloyd’s had withdrawn the aforesaid classification, and that the subject vessel appeared to be outside the scope of the ICC. The NCDRC further found that the subject vessel had been more than 25 years old on the date of loss i.e. when it ran aground on 18.7.2010, and the Appellant had not produced any document showing that the subject vessel was classed as ‘I.R.S.’ Hence, the complaint was dismissed.

Finding of the Court:

Appellant had committed breach of warranty and the same was not waived by the Respondent. As a result, the Respondent rightly repudiated the claim of the Appellant.

Result: Appeal dismissed.