NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
Anup K. Thakur, Presiding Member
Mavji Kanji Jungi and Anr. – Complainants
versus
M/s Oriental Insurance Company Ltd. – Opp. Party
Consumer Case No.85 of 2014
Decided on 22.12.2020

IMPORTANT POINT
Repudiation of insurance claim for total loss of the vessel sank held not justified.

Headnote:

Consumer Protection Act, 1986 – Sections 21, 2(1)(c) and 24-A : [Consumer Protection Act, 2019 – Section 58, 2(6) and 69] – Sea vessel – Sank – Total loss – Repudiation of insurance claim – Complainant on the owners of vessel insured with opposite party – Vessel en route was hit by some unidentified object from the bottom which resulted in ingress of water causing it to finally sink – Claim repudiated on 6.6.2012 whereas complaint was filed on 28.3.2014, therefore complaint was not barred by limitation – Vessel was sea worthy and having all the documents necessary for sailing – Nobody involved in the sailing of vessel really knew as to what precisely was the cause of the accident – Benefit of doubt should go to the insured – Opposite party directed to pay Rs.1,75,00,000/- to complainants with interest @ 6% p.a. – Further directions issued.

Held: The facts of the case are straight forward viz. the insured vessel sank on 16/17.12.2009. There was a valid insurance policy cover available on the date of the incident/accident. The case of the complainant is simple: the vessel was seaworthy and certified to be so by the authorities; it sank upon some unidentified object hitting it from below and causing a breach in the hull resulting in huge ingress of water which, despite over three hours of pumping, could not be controlled and caused the vessel to sink. The case of the opposite party is that it could not have been a matter of some unidentified object hitting it from below; rather, it was clearly a case of a poorly maintained vessel, propelled by engine as against sails, which caused vibrations over a period, causing the breach in the hull and thereby the vessel.

After hearing detailed arguments of the learned counsels and a careful perusal of the record, I am of the considered view that in the facts of the case, it is reasonable to say that nobody involved in the sailing of the vessel really knew as to what precisely was the cause of the accident. It is for this reason that the statements of the tindel/master of the vessel and the insured have, to their credit, very forthrightly, answered the query as to what was the cause of accident by simply stating that they did not know. They indeed could not have said otherwise. Instead of making any extraordinary claim qua the cause of accident, record reveals they preferred to simply state what they did know which was that they did not know. This cannot be held against the complainants as argued on behalf of the opposite party.

It is clear from the facts of the case that this vessel had come from Dubai with cargo on 21.5.2009. Thereafter, after obtaining all port clearances, it sailed to Sharjah, on 15.12.2009. It had all the documents necessary for sailing and there was no reason to believe that it was not sea worthy at the time of sail. The incident/accident happened on 16/17.12.2009. The first surveyor submitted it’s report on 6.12.2010. In this final report, the surveyor, on the basis of enquiry of the insured/owner, the Tindel (Master of the vessel), the navigator of the vessel, khalasi of the vessel, the Indian Coast Guard, the Custom Authority, the Port Officer, and the Marine Casualty Report, the Preliminary Enquiry Report by Mercantile Marine Department, came to the conclusion “that the incident of sinking of Vessel would have been due to the cause as alleged by the Tindel & Insured and it is accidental in nature”. Since the vessel was lost irretrievably, the surveyor correctly concluded that it was a case of total loss.

It seems unreasonable to me that this first surveyor’s report was disregarded and brushed aside by the OP on certain grounds argued in the written version and during oral arguments. This was not merely a question of whether the OP had the legal right to appoint an investigator or not. OP certainly had the right and there are indeed citations to support the view that it did. What however has to be seen is whether the first surveyor report was really and manifestly so deficient, so apparently in error that it needed another surveyor /investigator to investigate the cause of loss. However, the OP exercised it’s right and appointed a second investigator, mandating that it ascertain the cause of sinking of the vessel.

With such a mandate, perhaps unsurprisingly, the investigator arrived at it’s opinion that it was not possible that some unidentified object in the deep sea could have been the cause of accident. Rather, he surmised, after asking for maintenance invoices and being given only cash invoices totaling Rs. 17,89,586/- with the explanation that these were all settled in cash, that this established conclusively that the vessel was poorly maintained. It is hard to agree with this conclusion. First, a poorly maintained vessel would not have led M/s J.B. Boda, Surveyors Pvt. Ltd. to reach the opinion viz. “ Taking into consideration the condition of the vessel as inspected by us, we are of the opinion that the vessel is found fit in all respect for proceeding at sea and is an insurable risk”, in report dated 15.10.2008. Nor would the vessel have been permitted to sail by the relevant authorities on the fateful voyage. The fact that the insured could only provide maintenance invoices towards maintenance expenditure became a determining factor for the Investigator to conclude that the vessel was poorly maintained; the OP accepted this finding in toto and proceeded to repudiate the claim. However, this was possibly a wrong conclusion. If the complainant claimed cash expenditure against maintenance invoices, it would have been necessary for the Investigator to make further inquiries to investigate this claim. This was not done. Making expenditure in cash of over Rs. 20,000/- may indeed be illegal but that was not the issue: the issue was whether the vessel had or had not been maintained as per standards and to prove this, the investigator had to have inquired from the maintenance service providers who had raised maintenance invoices. Transactions in cash over Rs. 20,000/- were required to be made through Banks. There may therefore have been a violation of banking laws. But this did not mean that payments were not made towards maintenance or that maintenance was given the go by completely. OP was therefore mistaken in accepting the Investigator’s report in toto and making it the basis for repudiation of the claim, notwithstanding that OP has not denied the loss of the vessel, the existence of the insurance policy nor has alleged any foul play by the complainant qua the facts of the case. This was, on the face of it, unreasonable. At best, the complainant had violated a banking law for which the remedy lies elsewhere. It was wrong to have concluded poor maintenance and use this finding to repudiate the claim.

Further, the repudiation letter claimed that the loss was attributable to continuous vibrations caused by the engine over a period of time which resulted in giving away of joints causing the vessel to sink. Clearly, for the OP, it was poor maintenance, coupled with use of engine, which must have led to continuous vibration, over a period of time, which caused the vessel to sink. However, the relevant questions here would be that if this was so, how could the vessel been have been certified as sea worthy and cleared for undertaking the voyage? If the concerned authorities had cleared the vessel for sailing, and no questions on these clearances has been raised, there cannot reasonably be any scope for expressing an opinion on this later, after the happening of an accident. Yet, the admitted fact is that the vessel sank. So, the cause has to be what the Master of the vessel and the navigator of the vessel say. They say that they heard a thud, found a breach in the hull, and that this led to huge ingress of water. They also say that they do not know any more than this. This has to be accepted. The Tindel, as argued by the counsel for the complainant, is a responsible position and his testimony is important. The First Surveyor did accept this and made it’s recommendation. It is well established law that a surveyor’s report is an important document and cannot be treated lightly. It is therefore unreasonable on the part of the OP to have not accepted the first report citing the reason that it did not come to it’s own finding but relied on statements of the Tindel, the Insured and so on while readily accepting the Investigator’s report which too was, in the nature of an opinion, and hardly a conclusive finding.

One argument of the OP is that the first surveyor did not come to it’s own finding; rather, the surveyor accepted the statements of the concerned parties, including the Tindel and the maritime authorities. So, the OP had to per force appoint a second investigator. However, the fact is that even the second investigator ended up expressing an opinion, not a definitive finding. It was his opinion that continuous vibration over a period of time may have caused the hull to breach on that fateful night, especially because engine may have been used, causing vibrations. This opinion of the investigator is such as would apply in all similar cases!!! The fact that it is based on a legal factum of cash payments for maintenance expenditure which, as discussed earlier, proves nothing about maintenance per se, only underscores the fragile basis for the opinion formed. Not only this, the finding of the second Investigator viz. …in our opinion the most probable cause for breach in the hull could be as follows…continuous vibrations caused by engine over a period severely affected the hull joints and resulted in giving away the joints.” is not only vague, but tantamount to saying that any machine that is put to use would, over a period of time, fail and collapse, precisely because it was put to use. Clearly, this opinion/finding/conclusion of the second investigator is tautological and not at all helpful to the case of the OP.

Arguing, as the learned counsel has, that the first surveyor could not have concluded as it did, since it was not their finding but was merely accepting self serving averments of the insured and the Tindel/master, is fraught: It can be asked as to how else could the surveyor have found the reason for sinking of the ship? Obviously, it had to be based on inquiries made from all concerned. The exercise undertaken by the second surveyor was no different, except that it was in a different direction viz. looking for documents of repair, finding cash transactions and concluding, wrongly as discussed earlier, that maintenance was poor, and was thus equally fraught. Law is established that in a case where it is not clear whether there is doubt over the admissibility of a claim in terms of the insurance policy, benefit of doubt should go to the insured. Even on this reasoning, the repudiation of the claim has to be held to have been incorrect. From this discussion, I am of the considered view that this complaint deserves to be allowed.

As far as the issue of limitation raised by the OP is concerned, it is seen that accident took place on 16/17.12.2009 and the insured was first informed about it’s claim by the opposite party vide registered letter dated 17.11.2011. In this letter, two grounds were cited : (i) the loss could not be attributed to the perils of the sea/insured perils, and the cause of loss was continuous vibrations caused by the engine over a period ; (ii) the vessel was not navigated under sails as required under Merchant Shipping Act, 1958. This was first letter of repudiation. It was reasonable to accept that the complaint would seek recourse in the first instance from the opposite party itself. It is often the case that when a complainant does not do so, an argument is made that complainant ought to have approached the OP first instead of approaching the Commission. Be that as it may, in this case, the complainant represented to the OP and was visited with the second letter of repudiation dated 15.05.2012. The reasons furnished were similar to the first letter of repudiation; however, the gist of the investigator’s findings was also enclosed. Notably, this had not been done with the first letter of repudiation. Again, it was reasonable that complainant seek recourse with the opposite party in the first instance. The complainant did that and thereafter, the claim was repudiated vide letter dated 06.06.2012. In this final letter of repudiation, it was mentioned, in addition to the fact that claim stood repudiated, that the vessel came under jurisdiction of Mercantile Marine Department who had conveyed that sailing vessels were permitted to navigate on sails and occasionally / during restricted waters, on engine power. As pointed out by counsel for the complainant, this was a new ground furnished and, therefore, period of limitation would start from the date of receipt of this letter dated 06.06.2012. It is reasonable that it is this last letter that would be considered as all options for recompense finally stood closed by the OP. The complaint was filed on 28.03.2014. This was within two years of 06.06.2012 and hence within the period of limitation.

The next question that needs to be decided is the compensation that may be awarded to the complainant. It is established law that apart from insured amount, since the complainant has remained deprived of the vessel as well as any insurance amount thereby suffering a loss, some compensation by way of interest would be justified. As to what this rate of interest should be, this has been discussed in various judgment of the Hon’ble Supreme Court: It has been held that no hard and fast rule can be laid down for the purpose and that the rate of interest payable by way of compensation would depend on the facts of the case and would have to be reasonable, neither too low nor exorbitantly high. The complainants have claimed interest @ 16% p.a. w.e.f. the date of occurrence of the accident alongwith Rs.10.00 lakh for mental agony, Rs.5,00,000/- towards loss of business and cost. In the facts of the case, I am of the view that an interest of 6% p.a. would meet the ends of justice. As interest itself is a compensation for the insurance money not paid to the complainants, there cannot be separate award towards mental agony and loss of business. (Paras 20 to 29)

Result: Complaint allowed.