METAL POWDER COMPANY LTD. Vs ORIENTAL INSURANCE CO. LTD.
Bench: P SATHASIVAM,RANJAN GOGOI,N.V. RAMANA
Case number: C.A. No.-000481-000481 / 2009
Diary number: 22474 / 2006
Advocates: REVATHY RAGHAVAN Vs
M. K. DUA
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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
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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
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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
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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
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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
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(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
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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
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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.
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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.
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