2006 (12) TMI 558 - SC - Indian Laws

Interpretation of a policy of marine insurance - sale of logs - claim by way of constructive total loss - expression without prejudice - burden to prove - HELD THAT - There had been no repudiation even at that stage. It was only when the ship could not leave the Singapore Port due to unseaworthiness a claim of constructive total loss was made. Terms of the policy would indisputably have to be invoked for determining the rival clauses. But it is one thing to say that the claim was barred by limitation or the exclusionary clauses would apply; but it is another thing to say that the question of invoking the said clause did not arise in terms of the contract of insurance. Only because the expression without prejudice was mentioned the same in our opinion by itself was not sufficient and would not curtail the right of the insured to which it was otherwise entitled to. The expression without prejudice may have to be construed in the context in which it is used. If the purpose for which it is used is accomplished no legitimate claim can be allowed to be defeated thereby. 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. Yet again on 2nd March 1988 and 11th March 1988 evidently the scope of aforesaid policy was enlarged pursuant whereto or in furtherance whereof further endorsements were made by paying additional premium in terms whereof the risk of non-delivery was specifically covered. It will bear repetition to state that the vessel could not proceed from Singapore owing to its unseaworthiness. It was thus covered by the terms of the extended terms of insurance policy. The Division Bench failed to consider this aspect of the matter. Findings of fact were arrived at by the learned Single Judge on the basis of the pleadings of the parties. If a clause of Marine Insurance policy covers a broad fact in our opinion it would be inequitable to deny the insured to raise a plea particularly when the insurer being a State within the meaning of Article 12 of the Constitution of India is expected to act fairly and reasonably. The purport and object for which goods are insured must be given full effect. In a case of ambiguity the construction of an insurance policy should be made in favour of the insured and not insurer. 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. 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. It is also not a case that the servants of the assured were privy to the unseaworthiness as provided for in Clause 5.5.1 of the insurance policy. There has been no evidence to that effect. Even the said provision has not been applied by the learned Single Judge. Thus the appeal is allowed and the impugned judgment of the Division Bench is set aside and the judgment and order of the learned Single Judge is restored.

Summary

Issues Involved:
1. Whether the suit was barred by limitation.
2. Whether the policy of insurance was an all-risk policy.
3. Whether the policy covered constructive total loss.
4. Whether the exclusion clauses in the policy are applicable in the facts of this case so as to repudiate the claim of the appellant.

Issue-Wise Detailed Analysis:

1. Limitation:
The appellant lodged its claim on 24th June 1988, which was repudiated by the insurance company on 8th July 1988. The suit was filed on 7th August 1992. The Division Bench held that the repudiation of the claim on 8th July 1988 and subsequent correspondences marked "without prejudice" did not extend the limitation period. However, the Supreme Court noted that the actual repudiation was made on 1st April 1991, and thus, the suit filed on 7th August 1992 was within the period of limitation as per Article 44 of the Limitation Act, 1963.

2. All-Risk Policy:
The Division Bench opined that the policy was not an all-risk policy and that the exclusion clause contained in Clause 4.6 would operate. The Supreme Court, however, noted that the contract of insurance was covered under Institute Cargo Clause (C) and included the risk of non-delivery of even a single piece of log. The policy was extended to include the risks of theft, pilferage, and non-delivery, which was overlooked by the Division Bench.

3. Constructive Total Loss:
The learned Single Judge found that there was a constructive total loss as defined in Section 60 of the Marine Insurance Act, 1963. The Supreme Court noted that the goods were reasonably abandoned because the cost of recovering and forwarding the goods to Calcutta would exceed their value on arrival. The Division Bench's reliance on Middows v. Robertson was misplaced as it was reversed by the House of Lords in Rickards v. Forestal Land Timber and Railways Co., Ltd. The Supreme Court emphasized that the policy covered non-delivery for any reason, including the cost of transportation exceeding the value of the goods.

4. Applicability of Exclusion Clauses:
The Division Bench held that the exclusion clauses applied due to the unseaworthiness of the vessel. The Supreme Court, however, noted that the exclusionary clauses were not specifically pleaded or proved by the respondent. The burden of proof was on the respondent, which was not discharged. The Supreme Court concluded that the unseaworthiness of the vessel, leading to it being stranded and the subsequent non-delivery of goods, fell within the "peril insured against" as per the policy terms.

Conclusion:
The Supreme Court allowed the appeal, setting aside the judgment of the Division Bench and restoring the judgment and order of the learned Single Judge. The appellant was entitled to the balance amount after giving credit for the amount received from the sale of the goods. The Supreme Court also awarded costs to the appellant, with counsel's fees assessed at Rs. 10,000/-.