9911796707
TMI Blog2006 (12) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... gs) at a total price of US $6,00,000/- from a Malaysian firm. 474 pieces of logs were loaded on a vessel known as 'Indera Pertama' (vessel) at the port of Western Sabah, Malaysia for their delivery at Calcutta. The ship left the Malaysian Port with cargo on 16th February, 1988. The logs were insured by Appellant with Respondent Insurance Company for a sum of Rs. 39,90,122/- against the peril and/ or risk of non-delivery of said goods. The policy contained Institute Cargo Clause (C). It also expressly included the risk of non-delivery of even single piece of log. 4. The relevant clauses of the said contract are as under: "Institute Cargo Clause (C) Risks covered: 1. This insurance covers, except as provided in Clauses 4, 5, 6 and 7 below, 1.1 *** 1.1.1 *** 1.1.2 vessel or craft being stranded grounded, sunk or capsized " *** *** *** *** *** *** The insurance contract contained exclusion clauses, some of which are as under: "4. In no case shall this insurance cover *** *** *** *** *** *** 4.6 loss, damage or expense arising from insolvency or financial default of the owners, managers, chaterers or operators of the vessel. *** *** *** *** *** *** 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eby declared and agreed that the coverage granted under the within mentioned policy be extended to include the risks of "Theft, Pilferage and Non-Delivery" as well as "War and S.R.C.C." as per attached clause 6 & 11. In consequence above extension of risks, an additional premium of Rs. 1,496/- is hereby charged to the insured." 5. The ship developed engine troubles and was held up at Singapore Port till 13th March, 1988. It sailed for Port of Calcutta thereafter. It was, however, immobilised on reaching high sea at Anadamans. It underwent repairs but eventually returned back to Malaysia. Indisputably, Appellant kept Respondent Insurance Company informed all through. While at Malaysian Port, the ship was arrested at the instance of one Gobsobs, one of the owners of the cargo in May, 1988. Appellant filed a caveat in the said proceedings with a view to take appropriate steps to have the logs belonging to it released. 6. The Malaysian Court discharged the order of arrest on 30th December, 1988 and the ship eventually proceeded again towards Singapore. At Singapore, the ship became stranded. On 3rd January, 1989, it offloaded its cargo and did not resume its journey. Appellant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions" to the contrary in the said policy and as such it cannot be disputed that there has been constructive total loss of the said consignment. There is evidence on record to show that the cost of bringing down the said consignment to the Calcutta Port from the Singapore Port would be more than it is actual cost (see exhibit 'S' supra). I, therefore, here (sic) that this issue should be answered in the affirmative." 13. As regards, Issue No. 3, the learned Judge noticed the Respondent's contention which is in the following terms: " Plaintiff's claim was wrongful and not maintaining and the same was repudiated by this defendant's letter dated April 1, 1991 and October 22, 1991." 14. In regard to the said contention, it opined that the said repudiation was made on 1st April, 1991 and 22nd October, 1991. 15. As regards Issue No. 4, it was held that the suit was within limitation. 16. Keeping in view the fact that Appellant had received a sum of Rs. 20,01,740.53, it was opined that it was entitled only to a sum of Rs. 8,48,259.47 and the suit was decreed therefor together with simple interest at the rate of 18% per annum. 17. Aggrieved thereby, Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s caused by measures taken by Appellant to avert or minimize the effect of an insured period, it was opined that as the ship was detained due to unseaworthiness which is exclusionary clause the plaintiff cannot succeed in its claim. It was further opined that the insurance was hit by 'sue and labour clause' and Appellant has not been able to discharge its burden. 23. In regard to warehouse to warehouse loss, it was held that the policy did not include the risk of loading the goods in vessel which were unseaworthiness. It being a maritime industry peril, the enforcement would be against the exclusion clause contained in Clause 5.1. 24. It was concluded: "10. For all these reasons, we are of the view (1) that because of the fact of denial by the insurer by its letter dated 8th July, 1988 (Ext. 5) coupled with the termination of the policy and its non-extension after the Cargo Safety Construction Certificate and Load Line Certificate expired on 15th July, 1988 and on account of plaintiff's failure to discharge its obligation either to obtain re-shipment of the goods soon thereafter and the failure to take a decision to sell the goods locally immediately and filing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Marine Insurance Act, he would submit that the Division Bench of the High Court has rightly construed the words 'any peril'. It was submitted that having regard to Sub-section (4) of Section 78 of the Marine Insurance Act, the insured had a duty to minimize the loss and only in that view of the matter, Respondent extended its assistance which cannot be said to be an admission of its liability. It was urged that the insurance policy would cover only the perils mentioned therein and no case has been made out that the vessel was stranded. 28. Having regard to Clause No. 9 of the policy, it was contended that the contract became terminated and there being no request for continuation of the contract, it came to an end in December, 1988 when it was stranded at Singapore. 29. In regard to claim of Appellant on constructive total loss, it was submitted that the contract came to an end in December, 1988 and, thus, the case would come within the purview of Section 60 of the Marine Insurance Act. Constructive total loss, it was urged, must be commensurate with actual total loss, but, no case has been made out that it was a case of actual total loss as goods were existing and they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the only ground on which the claim of Appellant was not accepted was that the question of any 'Non-delivery" did not arise as the cargo had been in existence. Other contentions of Appellant in the said letter had not been repudiated. 37. On or about 11th August, 1988, Appellant herein served a notice of abandonment inter alia stating: "In the circumstances of the case, we are to give you this Notice of abandonment of the consignments to you and you are at liberty to take possession of the subject matters insured. In this connection, we may state that in a similar case in British & Foreign Marine Insurance Company Limited vs. Sanday & Another it was held that "Consequent on the adventure being frustrated by an insured peril the assured may abandon it and rever for a constructive total loss on the ground that the actual loss of the subject matter insured appears to be unavoidable, even though the goods themselves are uninjured." 38. It was stated: "We lodged our formal claim with the shipowners at Kuala Lumpur as required under the Policy and copy of the same was endorsed to you. The shipowners have not acknowledged our claim notice and they have purposely kept silent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputably 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. 45. 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. [See Cutts v. Head and Another, (1984) 2 WLR 349 and Rush & Tompkins Ltd v. Greater London Council and another, (1988) 1 All ER 549] 46. In Phipson on Evidence, Sixteenth Edition, pages 655-657, it is stated: "Without prejudice privilege is seen as a form of privilege and usually treated as such. It does not, however, have the same attributes as the law of privilege. Privilege can be waived at the behest of the party entitled to the privilege. Without prejudice privilege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in circumstances which had nothing to do with negotiations. Surveyors reports, for example, are sometimes headed without prejudice, although they have nothing to do with negotiations. The third case is, where the words are used in a completely different sense. Thus, in Council of Peterborough v. Mancetter Developments, the documentation was admissible because in context the words meant "without prejudice to an alternative right and without concession to the other application" and had nothing to do with settlement. 48. There are circumstances in which the correspondence is initiated with a view to settlement but the parties do not intend that the correspondence should be without prejudice. It may be that the parties positively want any subsequent court to see the correspondence and always had in mind that it should be open correspondence. It may be a nice point whether negotiations at which no one mentioned the words "without prejudice" should be admitted in evidence: for example at an early meeting between the parties when the dispute first developed. There is no easy rule here. On the other hand, even when a letter is sent as the "opening shot" in negotiations, and is not prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions contained in Clause 9, remains in force during delay beyond the control of the assured, any deviation, forced discharge, reshipment or transshipment and during variation of the adventure arising from the exercise of a liberty granted to ship owners or charterers under the contract of affreightment. 55. 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. 56. 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. 57. Yet again on 2nd March, 1988 and 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airly 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. 64. In Pushpalaya Printers, this Court held: "Where the words of a document are ambiguous, they shall be construed against the party who prepared the document. This rule applies to contracts of insurance and clause 5 of the insurance policy even after reading the entire policy in the present case should be construed against the insurer " 65. Section 60 of the Marine Insurance Act defines 'constructive total loss' in the following terms: "60. Constructive total loss defined.-- (1) Subject to any express provision in the policy, there is a constructive total loss where the subject- matter insured is reasonably abandoned on account of its actual total loss appearing to be unavoidable, or because it could not be preserved from actual total loss without an expenditure which would exceed its value when the expenditure had been incurred. (2) In particular, there is a constructive total loss-- (i) where the assured is deprived of the possession of his shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provisions of Section 64 of the Act the defined meaning of the expression "management" can be assigned to the word "management" in Section 64 of the Act. In para 3 of the Regulation, the Essentiality Certificate is required to be given by the State Government and permission to establish a new medical college is to be given by the State Government under Section 64 of the Act. If we give the defined meaning to the expression "management" occurring in Section 64 of the Act, it would mean the State Government is required to apply to itself for grant of permission to set up a government medical college through the University. Similarly it would also mean the State Government applying to itself for grant of Essentiality Certificate under para 3 of the Regulation. We are afraid the defined meaning of the expression "management" cannot be assigned to the expression "management" occurring in Section 64 of the Act. In the present case, the context does not permit or requires to apply the defined meaning to the word "management" occurring in Section 64 of the Act.'" [See also M/s. Pandey & Co. Builders Pvt. Ltd v. State of Bihar & Anr. 2006 (11) SCALE 665] Interpretation of ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court of Singapore in suit No. 711 of 1989. It was only at that stage, Appellant could come to the conclusion that the cost of recovering and getting the cargo back to Calcutta would cost more than if the sale was effected at Singapore. The cause of action arose then. The learned Single Judge has taken specific note of the said fact stating that Appellant had sought for advice of Respondent as to whether the sale would go through at Singapore or in Calcutta by its letter dated 12th August, 1989 which was marked as Ex. S, relevant portion whereof reads as under: "Local Sale in Singapore" On Solicitor's request the Court has given permission to dispose off the cargo in order to minimize the loss in view of the deterioration in quality of material. Accordingly, the Solicitors appointed M/s. Toplings, Recovery Agent, who advertised the sale in newspapers and the best offer received for the cargo consisting of 2300 CBM now lying over there is U.S. $ 85,000. Out of this our share comes as under: Total value offered for 2300 CBM = US$ 85,000. Therefore, our shoare 85000 x 2057.73/ 2300 = US$ 76,046.54 US$ 76,046.54 x Rs. 16.90 = Rs. 12,85,166.50 Whereas we have already paid R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. defendant 4 was rightly dismissed by the High Court." 75. The said decision cannot be said to have any application in this case in view of the extended terms of policy. Non-delivery of goods may be on any account. It need not always be a 'case of reasonably abandoned'. The meaning of the expression 'peril insured against' would depend upon the terms of the policy. The policy was extended to a case where the costs of transportation would be more than the value of the goods. Marine Insurance Act is subject to the terms of insurance policy. Where the insurer takes additional premium and insure a higher risk, no restrictive meaning thereto need be given. A term of the policy must be given its effect. While construing a contract of insurance, the reason for entering thereinto and the risks sought to be covered must be considered on its own terms. 76. 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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