2010 (3) TMI 992 - SC - Indian Laws

Whether a seller of goods on FOB basis like the complainant in the present case can be said to be interested in marine adventure within the meaning of Section 7? Whether the National Commission was justified in holding that the service rendered by the carrier was deficient and if so whether it was right in awarding rupee equivalent of US 1800 by way of compensation? Held that - Appeal partly allowed. It is not in dispute that 122 cartons despatched by the shipper were consolidated in a container nor is it disputed that there was only one package indicated in the Bill of Lading concerning the consignment meant for Pindikas. The National Commission could not go beyond the Bill of Lading and award compensation on the basis of the packing list which may have mentioned several packages consolidated in one bigger package delivery whereof was acknowledged in the Bill of Lading. The Commission ought to have taken the number of packages to be only one as mentioned in the Bill of Lading. The shipper would be entitled to the value of the goods misdelivered which according to the shipper was not less than Rs.39, 23, 225/-. There is no merit in that submission. We say so because compensation by reference to the value of the goods lost or damaged can be claimed only if the nature or the value of such goods has been declared by the shipper before shipment and inserted in the Bill of Lading. Even assuming that the nature and the valuation of the goods had been declared by the shipper before the shipment the requirement of insertion of the same in the Bill of Lading was not satisfied in the present case. The Bill of Lading does not mention either the nature or the value of the goods. That being so compensation of rupee equivalent of 666.67 Special Drawing Rights was the only amount that could be awarded by the Commission to the shipper. In as much as the Commission awarded US 1800 it committed a mistake that calls for correction.

Summary

Issues Involved:
1. Liability of the Insurance Company.
2. Liability of the Carrier.

Detailed Analysis:

1. Liability of the Insurance Company:

The core issue was whether the exporter had an insurable interest in the goods shipped on an FOB (Free on Board) basis. The Insurance Company argued that in an FOB transaction, the property in the goods transfers to the buyer once the goods are delivered to the carrier, implying the exporter had no insurable interest post-delivery. The Marine Insurance Act, 1963, defines insurable interest under Section 7, which requires the person to be interested in a marine adventure. The court referenced the Marine Insurance Act, 1906, and English judicial interpretations to conclude that the seller loses insurable interest once the property and risk pass to the buyer upon shipment.

Additionally, the court emphasized the principle of utmost good faith in insurance contracts, as codified in Section 19 of the Marine Insurance Act, 1963. The exporter had obtained insurance on the pretense that the goods were dispatched on a CIF (Cost Insurance and Freight) basis, whereas they were actually sent on an FOB basis. This misrepresentation constituted a breach of the duty of utmost good faith, absolving the Insurance Company of liability. The court upheld the National Commission's finding that the exporter failed to maintain utmost good faith, thus justifying the rejection of the insurance claim.

2. Liability of the Carrier:

The National Commission found that the carrier's service was deficient as the consignment meant for Pindikas was misdelivered. The court noted that out of 122 cartons, 121 were correctly delivered to M/s Natural Selection International, while the remaining carton, intended for Pindikas, contained steel furniture instead of miniature paintings. The carrier's failure to deliver the correct carton constituted a deficiency in service.

However, the court identified errors in the National Commission's calculation of compensation. The compensation should have been based on the Bill of Lading, which mentioned only one package for Pindikas. The court clarified that under Rule 5 of Article IV of The Indian Carriage of Goods by Sea Act, 1925, the carrier's liability was limited to 666.67 Special Drawing Rights per package or two Special Drawing Rights per kilogram, whichever was higher. The package weighed 200 kgs, translating to 400 Special Drawing Rights by weight, but 666.67 Special Drawing Rights per package was higher and thus applicable.

The court corrected the National Commission's award of US$ 1800, reducing it to the rupee equivalent of 666.67 Special Drawing Rights, as the Bill of Lading did not declare the nature or value of the goods, which is a prerequisite for claiming higher compensation based on the goods' value.

Conclusion:

The court dismissed the appeal against the Insurance Company, upholding the National Commission's decision. However, it partly allowed the appeals concerning the carrier, modifying the compensation to the rupee equivalent of 666.67 Special Drawing Rights. The parties were directed to bear their own costs.