Monday, 26 April 2021

Whether the appellate can take the plea of non-maintainability of the suit in the appeal if he has not taken said plea in the written statement?

 In so far as the first point of determination is concerned, it

is an admitted position that no such objection to the institution of

the suit was ever taken by the Appellant in their, otherwise detailed, written statement. Order VIII, Rule 2 of the CPC, provides that the defendant must raise by his pleading, all matters which show the suit not to be maintainable. If objection to the non-maintainability of the suit were to be raised by the appellant their written statement in the first place or even by amending the written statement, the Respondent would have had an opportunity to meet with such objection. The mere fact that some questions were posed to Mr. C. D. Chitnis (PW.1) in the course of his cross examination, is not sufficient to conclude that the Respondent was not taken by surprise or was not likely to be taken by surprise. Order 8, Rule 2 of CPC, as noted earlier, inter alia, provides that the Defendant must raise by his pleading all matters which show the suit not to be maintained and all grounds of defence, if not raised, would be likely to take the opposite party by surprise, or would raise the issues of

fact, not arising out of the plaint. Ordinarily, therefore, the

Appellant ought not to be allowed to raise such objection at the

appellate stage. {Para 19}


IN THE HIGH COURT OF BOMBAY AT GOA

FIRST APPEAL NO. 123 OF 2013

The New India Assurance Co. Ltd.  Vs  Messrs Sesa Goa Ltd.,

Coram : M.S. Sonak &

Smt. M.S. Jawalkar, JJ.

Pronounced on : 16th January, 2020

J U G M E N T : (Per M.S. SONAK, J.)

Citation: 2020(5) MHLJ 66

This Appeal by the Insurance Company and the Cross

Objections by the Respondents-Claimants are directed against the

Judgment and Decree dated 30th April, 2013 made by the learned

Civil Judge, Senior Division, at Panaji in Special Civil Suit

No.124/98/B, instituted by the Respondents herein, seeking to

recover an amount of Rs.4,98,70,343/- with interest at the rate of

18% per annum, as against the insurance claim arising out of Marine

Insurance Policies issued by the Appellant.

2. There is no dispute between the parties that the Vessel M.V.

Orissa in which, the Respondent had insurable interest was, in fact,

insured under the aforesaid policies for the period between 1st April,

1996 and 31st March, 1997. It is the case of the Respondent that the

Vessel, whilst on a voyage between Marmugao – Goa and Toronto,

Italy, navigated through the rough weather between 10th June, 1996 -

18th June, 1996 and suffered substantial damages. It is the case of the

Respondent that the Appellant is duty bound to indemnify the

Respondent against such damages. Some correspondence ensued

between the Respondent and the Appellant regards the claim under

the said insurance policies, which finally led to the institution of the

civil suit, in which, the aforesaid impugned Judgment and Decree

came to be made.

3. The Appellant had raised the issue of territorial jurisdiction

of the trial Court to entertain and try the suit as instituted. This

issue has been decided by the trial Court against the Appellant. Mr.

Afonso, the learned Counsel for the Appellant has, however, made it

clear that this objection based upon the territorial jurisdiction, was

not being pursued by the Appellant in the present appeal.

4. Mr. Afonso, however, submitted that the suit as instituted,

was not maintainable because the same was not validly instituted. He


submits that the plaint, in the present case, was signed and verified

by the alleged officer of the Company who had no authority to do

the same. He submits that in this case, neither any resolution of the

Company, nor any Power of Attorney, were produced on record on

behalf of the Respondent. He submits that even though such

objection may not have been specifically raised in the written

statement, questions were posed to PW.1 on this issue and even the

learned Trial Judge has squarely addressed such issues, without any

objection on the part of the Respondent. Mr. Afonso submits that

this is basically a legal issue which goes to the root of the matter and,

therefore, there can be no bar to raising such issue at the appellate

stage. He relies upon a decision of the learned Single Judge of the

Delhi High Court in M/s. Nibro Limited vs. National Insurance Co.

Ltd.1 and the decision of the Hon'ble Supreme Court in State Bank

of Travancore vs. Kingston Computers India Private Limited2 in

support of this objection.

5. Mr. Afonso, then submits that the evidence on record very

clearly makes out a case that the Respondent had breached the

warranties and conditions of the insurance policies and, therefore, the

Appellant stood absolved of the liability to make any payments under

the insurance policies. He submits that the vessel was out of class

1 AIR 1991 Delhi 25;

2 (2011) 11 SCC 524

during the relevant period and, in any case, the vessel which was

basically a trans-shipper, was not seaworthy to embark upon an

adventure between Mormugao and Taranto at the onset of

monsoons. He submits that the Respondent, despite being privy to

the unseaworthiness of the vessel, undertook/permitted the voyage,

which clearly constitutes a breach of warranties and conditions

subject to which the insurance policies came to be issued. He

submits that this also attracts the provisions of Section 41(5) of the

Marine Insurance Act, 1963, in terms of which the Appellantinsurance

company cannot be held liable for any loss attributable to

any unseaworthiness.

6. Mr. Afonso submits that there was a specific condition in

the class certificate issued by one of the classification societies that

the vessel on full load must keep one of the 9 holds empty. He

submits that there is ample evidence on record, inter alia, in the form

of admissions on behalf of the witnesses of the Respondent that all

the 9 holds were full/loaded. He submits that this also constitutes a

breach of one of the conditions, subject to which the insurance

policies came to be issued and therefore, no liability can be imposed

upon the Appellant-insurance company.

7. Mr. Afonso, without prejudice, submits that there is no

clear evidence about the vessel running into any rough weather. He

submits that necessary logbooks have been suppressed and this is a

clear case which warrants drawal of adverse inference. He points out

that though it is the case of the Respondent that some seamen were

actually injured on account of rough weather and had to be embarked

at Aden, no evidence on this aspect is produced. He points out that

the logbooks are required to statutorily make entries on such aspects

and the fact that no logbooks were produced, clearly warrant drawal

of adverse inference against the Respondent.

8. Mr. Afonso, without prejudice, further submits that the so

called damages to the vessel have absolutely no nexus with the

alleged rough weather which it is said to have alleged encountered

between 10th June, 1996 - 18th June, 1996. He submits that the

damages, if any, are at the highest attributable to normal wear and

tear, as well as the circumstance that the damaged parts were already

corroded. He submits that the evidence in the form of survey report

furnished by the Salvage Association is very clear on this aspect. He

submits that the learned Trial Judge erred in relying upon the report

furnished by J. Basheer and Associates who are neither actual

surveyors, nor did they have any occasion to actually survey the vessel

M.V. Orissa. He submits that in the absence of any evidence that the

alleged damages had any nexus with any alleged rough weather, the

learned Trial Judge, was not justified in partly decreeing the suit in

favour of the Respondents.

9. Mr. Afonso, again without prejudice, submits that the

learned Trial Judge has failed to appreciate that this was a clear case

of breach of clause 10 of the insurance policies, inasmuch as no

intimation was ever sent to the Lloyd's Agent, by the Respondent.

He submits that in these circumstances, deduction at the rate of 15%

was due. He submits that in addition, deduction of Rs.20.00 lakhs

was clearly due in terms of the insurance policies. He relies on a

decision of the Hon'ble Apex Court in Suraj Mal Ram Niwas Oil

Mills Pvt. Ltd. vs. United India Insurance Co. Ltd. and another3 to

submit that the terms of a insurance contract have to be strictly

construed and no exception can be made on the ground of equity in

such matters.

10. Mr. Afonso submits that on a cumulative consideration of

the aforesaid grounds, the impugned Judgment and Decree is liable

to be reversed.

11. Mr. Ramani, learned Counsel for the Respondent contests

the aforesaid contentions raised by Mr. Afonso. He submits that the

objection with regard to any alleged incompetence of PW.1 to

institute the suit on behalf of the Respondent Company was never

3 (2010) 10 SCC 567


raised in the written statement. He submits that this was a hypertechnical

objection, which was rightly rejected by the learned Trial

Judge. He relies on a decision of the Hon'ble Supreme Court in the

case of United Bank of India vs. Naresh Kumar and ors .4 to submit

that a suit cannot be dismissed on such grounds.

12. Mr. Ramani then submits that the evidence on record

clearly bears out that the vessel was not only in its class during the

voyage, but further the same was very much sea-worthy. He refers to

the survey carried out by Palco Surveyors and Adjusters Pte Ltd., a

agency chartered by the Appellant themselves. He submits that in

terms of the Palco's report, the vessel was quite sea-worthy and even

recommendations in the said report were complied with by the

Respondent. He submits that there was no condition in the

classification certificate regards keeping of one hold empty. He

submits that neither the Salvage Association's report, nor the

Basheer's report make any reference to either existence or breach of

any such condition. He submits that there is absolutely no breach of

any warranty or condition on the basis of which the Appellant can be

permitted to avoid any liability under the insurance policies.

13. Mr. Ramani submits that since the vessel was absolutely seaworthy

at the time when it sailed from Mormugao and further since

4 AIR 1997 SC 3


there is ample evidence that the vessel ran into rough weather during

the period between 10th June, 1996 to 18th June, 1996, the damages

caused to the vessel can be said to be attributable only to this rough

weather and not to any other cause. He submits that there is no

serious challenge to the fact that the Respondent had to expend an

amount of Rs.4,98,70,343/- towards setting right the damages

caused to the vessel. He, therefore, submits that the impugned

Judgment and Decree warrants no interference at the behest of the

Appellant, but warrants interference at the behest of the Respondent

to the extent that the learned Trial Judge has not decreed the entire

claim of the Respondent. He submits that the cross objections,

therefore, deserve to be allowed.

14. Mr. Ramani submits that there is substantial compliance

with the provisions of Clause 10 of the insurance policies and,

therefore, there is no question of making a 15% deduction as urged

on behalf of the Appellant. However, on the aspect of deduction of

Rs.20.00 lakhs, Mr. Ramani quite fairly concedes that such deduction

was perhaps required to be made in terms of the insurance policies.

15. Mr. Ramani submits that Basheer's report is quite right to

the extent it sees nexus between the damages to the vessel and the

rough weather. But he submits that the distinction sought to be

made in such report is not quite right. Mr. Ramani submits that the


material on record justifies a decree for the entire claimed amount of

Rs.4,98,70,343/-. Mr. Ramani submits that the learned Trial Judge

should have awarded interest @ 18% per annum, taking into

consideration that this was a commercial transaction.

16. For all the aforesaid reasons, Mr. Ramani submits that the

Appeal may be dismissed and the cross objection may be allowed.

17. The rival contentions now fall for our determination.

18. Having heard the learned Counsel for the parties

extensively, and having regard to the contentions raised by them,

according to us, the following points for determination arise in this

Appeal :

(i) Whether the suit in the present matter was not properly

instituted on account of failure on the part of the

Respondent Company to produce on record any resolution

or power of attorney to authorise Shri C.D. Chitnis to sign,

verify the plaint and to institute the suit on behalf of the

Respondent Company ?

(ii) Whether the Respondent can be said to have breached

the warranties and conditions set out in the insurance

policies, thereby absolving the Appellant of any liability to

make any payments under the insurance policies ?

(iii) Whether the Respondent Company has succeeded in

establishing that the vessel M.V. Orissa indeed encountered

the rough weather between 10th June, 1996 and 18th June,

1996 on her voyage between Mormugao (India) and

Taranto (Italy) ?

(iv) If the answer to the aforesaid point is in the

affirmative, then, whether the damages suffered by the

vessel M.V. Orissa have any nexus with such rough weather

or whether, the damages are on account of normal wear and

tear ?

(v) Whether an amount of Rs.20.00 lakhs is required to be

deducted from the amount of ascertained claim in terms of

the expressed stipulation in the insurance policies ?

(vi) Whether, in the facts and circumstances of the present

case, there is compliance with the conditions imposed in

Clause 10 of the insurance policies, and if not, whether

deduction of 15 % is required to be made from the amount

of ascertained claim ?

19. In so far as the first point of determination is concerned, it

is an admitted position that no such objection to the institution of

the suit was ever taken by the Appellant in their, otherwise detailed,

written statement. Order VIII, Rule 2 of the CPC, provides that

the defendant must raise by his pleading, all matters which show

the suit not to be maintainable. If objection to the nonmaintainability

of the suit were to be raised by the appellant their

written statement in the first place or even by amending the written

statement, the Respondent would have had an opportunity to meet

with such objection. The mere fact that some questions were posed

to Mr. C. D. Chitnis (PW.1) in the course of his cross examination,

is not sufficient to conclude that the Respondent was not taken by

surprise or was not likely to be taken by surprise. Order 8, Rule 2 of

CPC, as noted earlier, inter alia, provides that the Defendant must

raise by his pleading all matters which show the suit not to be

maintained and all grounds of defence, if not raised, would be likely

to take the opposite party by surprise, or would raise the issues of

fact, not arising out of the plaint. Ordinarily, therefore, the

Appellant ought not to be allowed to raise such objection at the

appellate stage.

20. However, considering the position that there was some cross

examination of PW.1 on the aforesaid objection and further the fact

that the learned Trial Judge, in the impugned Judgment and Order

has also considered and rejected such objection, we heard Mr.

Afonso on the objection as raised. The material on record bears out

that Shri C.D. Chitnis (PW.1) who has signed and verified the

plaint, was the Company Secretary and General Manager (Corporate

Affairs) of the Respondent at the relevant time. This was specifically


disclosed in the verification clause to the plaint and this position,

despite the cross examination, the Appellant was not successful in

proving otherwise. In this state of the evidence, coupled with the

fact that no such objection was raised in the written statement, we see

no error on the part of the learned Trial Judge in rejecting the

objection to the maintainability of the suit.

21. According to us, the decision of the Hon'ble Supreme

Court in the case of United Bank of India vs. Naresh Kumar and

ors. (supra) affords a complete answer to the objection now raised by

the Appellant. In this case, it is held that as far as possible,

substantive rights should not be allowed to be defeated on account of

procedural irregularities which are curable. It is further held that

companies can sue and can be sued in their own name. Under

Order 6, Rule 14 of the CPC, a pleading is required to be signed by

the party ad its pleader, if any. As a company is a juristic entity it is

obvious that some persons has to sign the pleadings on behalf of the

company. Order 29, Rule 1 of CPC, therefore, provides that in a suit

by or against a Corporation, the Secretary or any Director or other

principal officer of the Corporation who is able to depose to the facts

of the case might sign and verify on behalf of the company. Reading

Order 6, Rule 14, together with Order 29, Rule 1 of CPC, it would

appear that even in the absence of any formal letter of authority or

power of attorney having been executed a person referred to in Rule


1 of Order 29 can, by virtue of the office which he holds, sign and

verify the pleadings on behalf of the Corporation. In addition

thereto and dehors Order 29, Rule 1 of the Code of Civil Procedure,

as a company is a juristic entity, it can duly authroise any person to

sign the plaint or the written statement on its behalf and this would

be regarded as sufficient compliance with the provisions of Order 6,

Rule 14 of the Code of Civil Procedure.

22. The Hon'ble Supreme Court, in the aforesaid Judgment has

further proceeded to hold that a person may be expressly authorised

to sign the pleadings on behalf of the company, for example, by the

Board of Directors passing a resolution to that effect or by a power

of attorney being executed in favour of any individual. In absence

thereof and in cases where pleadings have been signed by one of its

officers a Corporation can ratify the said action of its officer in

signing the pleadings. Such ratification can be express or implied.

The Court can on the basis of evidence on record, and after taking

all the circumstances of the case, specifically with regard to the

conduct of the trial, come to the conclusion that the corporation had

ratified the act of signing of the pleadings by its officer.

23. In the aforesaid case, a specific objection had in fact been

taken to the authority of Shri L.K. Rohatgi to institute the suit on

behalf of the Union Bank of India. Such objection had, in fact, been


upheld upto the stage of the High Court. Hon'ble Supreme Court,

however, noted that the suit had been filed in the name of the

Appellant Company (the Bank); full amount of court fee had been

paid by the Appellant Company; documentary, as well as oral

evidence had been led on behalof of the Appellant and trial of the

suit before the trial Court had continued for about two years. The

Hon'ble Supreme Court observed that it is difficult, in these

circumstances, even to presume that the suit had been filed and tried

without the appellant having authorized the institution of the same.

24. In Nibro Limited (supra), the learned Single Judge of the

Delhi High Court has taken a view that the question of authority to

institute a suit on behalf of a company is not a technical matter, but

has far-reaching consequences.

25. In State Bank of Travancore (supra), the Hon'ble Supreme

Court has taken a view that a suit filed by a person not duly

authorised by the Company, is not maintainable. In latter case, the

company had neither produced any evidence to prove that the

signatory was appointed as the Director of the Company, nor was

there any resolution of the Board of Directors, authorising the

signatory to file the suit on behalf of the Company.

26. According to us, both the aforesaid decisions are quite

distinguishable. In the present case, there is evidence on record that

PW.1, who actually signed, verified and instituted the suit on behalf

of the Respondent, was its Company Secretary and General Manager

(Corporate Affairs). Besides, the facts in the present case on the

issue of institution of the suit, are substantially similar to the facts in

the case of United Bank of India vs. Naresh Kumar and ors . (supra).

Accordingly, the first point for determination will have to be

answered against the Appellant and in favour of the Respondent.

27. The second point for determination relates to the breach of

warranties and conditions of the policies on the part of the

Respondent. The Appellant alleges the following breaches :

(A) That though the insurance policies required the vessel M.V.

Orissa to maintain its class, the vessel failed to maintain its class

beyond 20th February, 1996 and, consequently, was not within its

class, when it undertook the voyage between Mormugao and Taranto

in June, 1996.

(B) The vessel M.V. Orissa was not sea-worthy at the time of its

voyage between Mormugao (India) and Taranto (Italy). Besides, the

Respondent despite being privy to this position, permitted sail of

the vessel. The Appellant submits that in terms of Section 41(4) of

the Marine Insurance Act, 1963, the Appellant in such circumstances

is not liable to any loss attributable to unseaworthiness.

(C) There was a specific condition in the class certificate issued

by the Registro Italiano Navale (RINA) that the vessel, carrying with

full load coditions must keep one of the 9 holds empty. This

condition was breached and, therefore, the vessel was out of class.

28. Clause 4 of the insurance policies, inter alia, provides that

unless the underwriters agree to the contrary in writing, the insurance

shall terminate automatically at the time of, inter alia, suspension,

discontinuance, withdrawal or expiry of the class of the vessel,

provided that if the vessel is at see, such automatic termination shall

be deferred until arrival at her next port. Therefore, it does appear

that if there was any suspension, discontinuance, withdrawal or

expiry of the class of the vessel which is insured, there shall be

automatic termination of the insurance. The insurance policies also

have specific classification and maintenance of class clause, which

inter alia, provides that warranted vessel classed as below by one of

the following Classification Societies and Class maintained

throughout the currency of this policy or held covered at Additional

Premium, if any, as may be decided by the committee, provided

immediate notice as to change of Classification Society of the vessel

or change, suspension, discontinuance, withdrawal or expiry of her

class is given to the Insurer :

1. Lloy's Register : 100A or B.S.

2. American Bureau of Shipping : + A 1

3. Bureau Verities (B.V.) : 13/3 E +


4. Germanischer Lloyd (G.L.) : + 100A 4

5. Korean Register of Shipping : + KRS 1

6. Nippon Kaiji Kyokai : NS *

7. Norske Varitas (NV/DNV) : + 1A1

8. Registro Italiano : * 100A 1.1 Nav.

9. Russian Register of Shipping : KM *

10. Polish Register of Shipping : * KM

11. Indian Register of Shipping (IRS): SU

(NOTE : + in the above symbols denote MALTESE CROSS)

* All Classes mentioned above are subject to Class without

any modification.

29. The Classification Society referred to in the class and

maintenance of class, as aforesaid, included, inter alia, Registro

Italiano (RINA) at Entry 8 and Indian Register of Shipping (IRS) at

Entry 11. This means that the requirement of the insurances

policies is that the vessel must be classed by any one of the

Classification Societies and the class maintained throughout the

currency of the insurance policy.

30. There is evidence on record which suggests that the vessel

had dual class, i.e. the class issued by RINA as well as IRS. Mr.

Afonso's arguments were mainly based upon the certificate of class

issued by RINA, on the basis of which he urged that at least with

effect from 20/02/1996, the vessel was without any class.

31. The certificate of class at Exhibit 25, in the first place,

indicates that the vessel was classed for a period of 5 years, running

from September, 1992. The certificate, however, contains an

endorsement that it will be invalidated whenever the requirements of

the Rules are not complied with. Further, there is a note that the

certificate is only valid provided it also contains the pages with the

expiry date of periodical surveys and the endorsements.

32. The certificate of class, as annexed to it, shows the expiry

dates of periodical surveys and the endorsements. If the details

placed and the date of service as indicated in the endorsements are

perused, then, it is apparent that there is a clearly discernible scheme,

in which, the class of vessel is confirmed a maximum period of time

and until the following survey. This scheme is discernible from the

detailed endorsements from 25th November, 1992 till 16th September,

1996.

33. The endorsement dated 17th March, 1995 is of some

significance and the same reads as follows :

“SURVEYS NOW CARRIED OUT : INTERMEDIATE HULL

AND

MACHINERY ANNUAL SURVEYS; DRYDOCKING SURVEY;

AUX. BOILER RINA N.93; OCCASIONAL HULL SURVEY.

THE SHIP CONTINUES IN HER CLASS SUBJECT TO

SURVEY

WITHIN 31ST AUGUSUT 1995.”

34. The endorsement dated 17th March, 1995 makes it clear

that the vessel was in Singapore during January-March, 1995 and that

the vessel continued in her class, subject to survey within 31st August,

1995. The next endorsement is dated 4th September, 1995 on the

basis of survey at Kaolising.

35. This endorsement indicates the ship continued in her

class till 31st October, 1995. The next endorsement is dated 16th

September, 1995, which indicates that survey was carried out at

Hong Kong and the class was confirmed until 31st December, 1995.

The next endorsement is dated 9th November, 1995 in relation to the

survey carried out at Ulsan, Korea in November, 1995 which

confirms the class until 31str December, 1995.

36. The next, perhaps most significant endorsement dated

10th February, 1996 and the same reads as follows :

“Surveys carried out : annual hull and machinery survey;

Aux. Boiler RINA N.92; Occasional hull and machinery

surveys- Class confirmed for the voyage in ballast

conditions from Singapore to Mormugao (India) -

The containerized aux. Diesel Generator on main deck and

the conveyor belts system have to be considered

temporarily out of order.”

37. The aforesaid endorsement dated 10th February, 1996 is to

be read in conjunction with the endorsement dated 16th September,

1996 in order to appreciate Mr. Afonso's contention. The

endorsement dated 16th September, 1996 which immediately follows

the endorsement dated 10th February, 1996, reads as follows :

“Hull and machinery ordinary surveys, hull occasional

survey carried out.

The containerized aux diesel generator on main deck and

the conveyor belts system have to be considered

temporarily out of order.

Ship continues in her class”

38. Cumulative reading of all the aforesaid endorsements, as

well as conjoint reading of the endorsements dated 10th February,

1996, and 16th September, 1996, do indicate that the vessel was

within the RINA class upto conclusion of its voyage in ballast

condition from Singapore to Mormugao (India). There is evidence

on record that this voyage commenced sometime on 12th February,

1996 in Singapore and concluded on 20th February, 1996 in Port of

Mormugao (India).

39. The endorsement dated 10th February, 1996 makes it clear

that at the survey carried out at Singapore between November, 1995

and February, 1996, the class was confirmed for the voyage in ballast

condition from Singapore to Mormugao (India). Unlike in the

previous endorsements, there was no confirmation or continuance of

class up to a particular date or upto the next survey indicated, but

the class was confirmed only for the purpose of voyage and that too

in ballast condition from Singapore to Mormugao (India). There is

evidence forthcoming from the Respondents themselves in the form

of testimony of PW.3 that this voyage was necessary in order to save

time pending preparation of Trim and Stability Report by RINA.

There is no endorsement that the class was either confirmed or

extended beyond the date on which the voyage in ballast condition

from Singapore to Mormugao (India) was concluded.

40. The next endorsement dated 16th September, 1996 refers to

the survey at Taranto (Italy) between the period July – September,

1996. That is the period after the vessel sailed through the alleged

rough weather between 10th June, 1996 - 18th June, 1996 and after

extensive repairs were carried out at Taranto in Italy between July –

September, 1996. There is a gap or break between 20th February,

1996 and July-September, 1996 during which it cannot be

considered that the Vessel was in its class, in so far as RINA is

concerned.

41. Mr. Ramani contends that since the endorsement dated 16th

September, 1996 refers to 'ship continues in her class' , it must be

presumed that there was no gap or break, cannot be accepted in the

state of the evidence on record. The expression 'continues' has to be

understood in the context that the classification was otherwise valid

for a period of 5 years running from September, 1992 i.e. up to

September, 1997. There are similar endorsements made earlier and

on the basis of such endorsements or rather use of the expression

'continues', it cannot be said that there was no break in the class for

the period between 20th February, 1996 and July-September, 1996.

42. There is no proper explanation furnished by any of the

witnesses examined on behalf of the Respondents in so far as this

break or gap is concerned, though there was a specific defence raised

by the Appellant on this issue. Therefore, in the present case, at least,

in so far as RINA classification is concerned, there is material on

record to hold that the vessel was out of its class for the relevant

period when it is alleged to have sustained damages on account of the

alleged rough weather. However, according to us, the aforesaid

circumstance, by itself, will not constitute any breach of warranties,

having regard to the specific classification and maintenance of class

clause in the insurance policies.

43. As noted earlier, this clause requires the warranted vessel to

be classed by one of the classification societies referred to in the


clause. In the present case, there is material on record which

establishes that the vessel had a dual class, that it was classified with

RINA as well as IRS. The Respondent has produced on record a

certificate of class dated 15th March, 1996 issued by the Indian

Register of Shipping (IRS), the validity period of which is extended

upto 30th September, 1997. This certificate at Exhibit 26 speaks

about the vessel having been certified on 17th March. 1995 by the

Society's Surveyors in accordance with the Rules and Regulations or

their equivalent for class notations. The Respondent has also

produced on record a Class Maintained Certificate dated 11th

December. 2007 at Exhibit 27. The latter certificate cannot be taken

into consideration because the same is not really a certificate of class,

but is only a certificate issued by Senior Surveyor, certifying that the

vessel was classed with the IRS that her class was maintained during

the period from 1st June, 1996 to 31st March, 1997. What is really

relevant is actually the certificate of class dated 15th March, 1996

which is at Exhibit 26 on record.

44. Mr. Afonso did submit that the vessel was in Singapore as

on 17th March 1995 and, therefore, it is not understood as to how the

Surveyors of IRS could have undertaken the survey of the vessel on

17th March, 1995. There is evidence on record that the Surveyors of

IRS have undertaken the survey in Singapore. Besides, PW.3 has


deposed that there was understanding between RINA and IRS to act

on the basis of survey reports made by their respective Surveyors.

45. According to us, once there is a certificate of class on

record, in a matter of this nature, it would not be appropriate for us

to go into the issue as to whether this certificate of class was validly

issued by the IRS or not. The document at Exhibit 25 came to be

admitted in evidence. It contents indicate that the vessel was within

IRS class for the relevant period between 1st June, 1996 to 31st

March, 1997. There is also endorsement dated 5th June, 1996 made

by the Marine Mercantile Department (MMD) on record. On the

basis of this documentary evidence, no interference is called for with

the view taken by the learned trial Judge that the vessel was within its

class during the operation of the policies and consequently, there

was no breach of any conditions or warranties as to the classification.

46. On the aspect of seaworthiness of the vessel, to begin with,

reference is required to be made to the report of Palco Surveyors &

Adjusters Pte Ltd., which is on record at Exhibit 68. No doubt, it is

correct as pointed out by Mr. Afonso that Palco Surveyors were

engaged by the Appellant in order to find out whether the Appellant

should reasonably accept the report and underwrite the insurance qua

the vessel M.V. Orissa. However, Palco Surveyor's report gives an

indication as to the state of the Vessel on 5th January, 1995. The

report, no doubt, makes certain recommendations which reads as

follows :

“Recommendations

1. Owing to the age and type of the vessel, thickness

gaugings are recommended to ascertain the extent of

wastage of steel plating of the vessel.

2. Owing to present change of class to ABS; class records

have not been sighted and we recommend all outstanding

class items to be attended to.”

47. There is evidence on record that some measures were

undertaken by the Respondent to comply with the recommendations

of Palco Surveyors and it is only upon the Appellant being satisfied

that such recommendations were duly complied with, that the

Appellant issue the marine insurance policies on the basis of which

the Respondent claims amount in the suit. Besides, it is necessary to

note that even the report of the Salvage Association at Exhibit 4,

upon which strong reliance is placed by the Appellant, does not

indicate that the vessel was unseaworthy for undertaking the voyage

between Mormugao (India) and Taranto (Italy). The report of

Salvage Association, no doubt, refers to corrosion of some of the

frames in holds and to the renewal of some of the frames in the

holds. All these observations may be extremely relevant to

determining the issue as to whether the damages which the vessel

suffered, were on account of the alleged rough weather or whether the

same was on account of the state of the vessel and it is normal wear

and tear. However, even the Salvage Association report, despite

making specific reference to the corroded frames in the holds, does

not go to the extent of observing that the vessel was unseaworthy to

undertake the voyage between Mormugao (India) and Taranto (Italy).

48. The Trim and Stability report issued by RINA is also on

record and on the basis of the same as well, it cannot be said that the

vessel was unseaworthy to undertake the voyage between Mormugao

(India) and Taranto (Italy). Then, there is a report of Basheer and

Association, again commissioned by the Appellants itself which also

does not say that the vessel was unseaworthy to undertake the voyage

between Mormugao (India) and Taranto (Italy).

49. Further, PW.3, who was the Marine Engineer, holding Class

I (Motor) Certificate of Competency issued by the Mercantile Marine

Department, Mumbai has deposed to the surveys, repairs and

modifications which were carried out to the vessel from time to time

before it ultimately sailed from Mormugao to Taranto. Similarly,

PW.2, again, Master Mariner (Foreign Going), holding Certificate of

Competency issued by the Mercantile Marine Department, Mumbai

has deposed that necessary Cargo Ship Safety Construction

Certificate was obtained and the said Certificate contained an

endorsement dated 5th June, 1996 that annual inspection of the


vessel structures had been carried out prior to sailing. He has

deposed that this endorsement was made without any conditions

which would affect the seaworthiness of the vessel. The witnesses on

behalf of the Respondent have deposed that all statutory compliances

were in place before the vessel sailed from Mormugao to Toranto.

PW.4 Nitin Sahakari is B.E. (Mechanical) Marine Engineer holding

Class I (Motor) Certificate of Competency issued by the Marine

Mercantile Department, Mumbai. He was on board the vessel during

the voyage between Mormugao and Tarato. He too has deposed to

the seaworthiness of the vessel. All these witnesses were subjected to

extensive cross examination. However, at least, on the aspect of

seaworthiness, it cannot be said that any serious dent has been made

to their depositions. Therefore, on the basis of the documentary, as

well as oral evidence on record, we see no ground to differ from the

findings recorded by the learned Trial Judge on the aspect of

seaworthiness of the vessel.

50. The contention based upon keeping one of the holds

empty, is based upon the endorsement in the certificate of class,

issued by RINA against the entry “Trade” which reads as follows :-

“Carriage of bulk sold cargoes restricted to ore, coal,

grain, unseasoned timber, non combustible goods or

goods which constitute a low fire risk; specifically

strengthened to carry very heavy cargoes in full load

conditions which specified hold empty”.

51. According to Mr. Afonso, the aforesaid endorsement

means that the vessel, when carrying very heavy cargo in full load

condition, must keep one out of nine holds empty. DW1 or DW2

examined on behalf of the Appellant has really not thrown sufficient

light as to the meaning of the aforesaid endorsement. In contrast,

PW.2 has explained that the aforesaid endorsement only means that

the vessel has been specifically strengthened to carry very heavy cargo

in full load condition even with a specified hold being kept empty.

52. Neither Salvage Association, nor Basheer Associates, the

agency engaged by the Appellant, have really commented upon this

aspect. In this state of evidence, it is really not possible to hold, one

way or the other as to whether the aforesaid endorsement is to be

interpreted in the manner suggested by the Appellant, or in the

manner suggested by the Respondent. However, it is necessary to

note that the aforesaid endorsement is not some warranty or

condition specified in the insurance policy. The aforesaid

endorsement is a condition imposed by RINA for vessel to continue

in its class. As noted earlier, we have, in fact, agreed with the

contention of Mr. Afonso that the vessel was not in RINA class post

the conclusion of its voyage for ballast condition from Singapore to

Mormugao i.e. from 20th February, 1996. Therefore, even if Mr.


Afonso's contention regards the interpretation of the aforesaid

endorsement is to be accepted, the same might afford yet another

ground to hold that the vessel was not within RINA class at the time

of voyage between Mormugao and Taranto. However, again, as noted

earlier, that would make no difference because the vessel which had a

dual class, continued to have IRS class, which is evident from the

document at Exhibit 25 and the findings thereon recorded earlier in

this judgment and order.

53. For all the aforesaid reasons, we are unable to interfere

with the findings recorded by the learned Trial Judge that there was

any breach of warranty or condition on the part of the Respondent,

so as to absolve the Appellant of the liability under the insurance

policies. The second point for determination is accordingly required

to be answered against the Appellant and in favour of the

Respondent.

54. The third point for determination is whether the

Respondent company has succeeded in establishing that the vessel

indeed encountered the rough weather between 10th June, 1996 and

18th June, 1996 on her voyage between Mormugao and Taranto.

55. The documentary evidence produced on record by the

Respondent are two Notes of protest at Exhibit 30 issued by Master

of Vessel and Accord Ship Management (Pvt.) Ltd., Bombay. To the

Notes of protest issued by Accord Ship Management (Pvt.) Ltd.,

there are annexed certain copies of log extracts. Then there is a

document at Exhibit 32 issued by the India Meteorological

Department. These documents do indicate that the vessel

encountered the severe weather condition between 10th June, 1996

and 18th June, 1996 at the Arabian Sea.

56. Although, there is some merit in the contention of Mr.

Afonso that all the logbooks or entries therein have not been

produced by the Respondent, we do not think that non-production

of such logbooks, in the facts and circumstances of the present case,

calls for a drawal of any adverse inference to the extent of disbelieving

the documentary evidence already produced on record. Besides, in

this case, the Respondent has examined Nitin Vinayak Sahakari

( PW4), second Engineer, who was on board the vessel at the time

when it took voyage from Mormugao to Taranto in Arabian Sea.

PW.4 has deposed, in detail, as to the weather conditions during the

period from 10th June, 1996 and 18th June, 1996. Though, PW4 was

extensively cross examined, it cannot be said that any serious dent

was made to his deposition. The learned Trial Judge has accepted the

documentary as well as oral evidence produced on behalf of the

Respondent and we do not think that there is any serious error in

appreciation or evaluation of such evidence.

57. Mr. Afonso may be right in his submission that if some of

the crew members were injured and vessel had to be diverted to the

port of Aden to drop them, all these matters would have certainly

been reflected in the logbooks. However, as noted earlier, nonproduction

of the logbooks cannot result in virtually discarding all

other documentary and oral evidence on record. Accordingly, even

the third point for determination is required to be answered against

the Appellant and in favour of the Respondent.

58. The fourth and perhaps most important point for

determination is, whether the damages suffered by the vessel have

nexus with rough weather or whether the damages are on account of

normal wear and tear.

59. In the plaint at paragraph 9, the Respondent has pleaded

that as a consequence of the severe weather, the vessel sustained

damages to its frame and brackets in various holds, suffered burn out

to the electric cables in junction box of Crane 3, sustained damage to

her hydraulic pipelines, as well as damage to an accommodation

ladder and platform. The evidence produced on record substantially

bears out that the vessel did suffer the damages as indicated in the

pleadings. The evidence on record also substantially establishes that

the Respondent spent an amount of Rs.4,98,70,343/- towards repairs

or setting right for the aforesaid damages caused to the vessel.

However, the moot question is whether all these damages are

attributable to the rough weather which the vessel encountered

between 10th June, 1996 and 18th June, 1996 or, whether these

damages are attributable to the normal wear and tear arising out of

condition of the vessel when it sailed from Mormugao to Taranto.

60. The entire case of the Respondent is that once it is

established that the vessel was seaworthy at the time when it set sailed

from Mormugao to Taranto and once it is established that it

encountered rough weather on her voyage, it must be presumed that

the damages caused to the vessel are solely on account of such rough

weather alone. According to us, even if it is established that the vessel

was seaworthy at the time when it sailed from Mormugao to Taranto

and even if it is established that the vessel did encounter some rough

weather between 10th June, 1996 and 18th June, 1996 still it does not

follow that the damages can invariably to be attributed to such rough

weather.

61. Merely because the vessel may be seaworthy, does not mean

that the damages caused to it in the course of voyage are only

attributable to the perils of sea like rough weather. In this case, there

is evidence to indicate that the frames were already corroded. Despite

the corroded frames, it is possible that the vessel could qualify to be

declared as seaworthy. However, the damages caused to such corroded

frames can hardly be regarded as damages on account of any peril of

sea like rough weather.

62. The Respondent, has hardly led any independent evidence

in order to establish nexus between damages and rough weather. The

Respondent instead has relied almost entirely upon the report of

Basheer and Associates, an agency engaged by the Appellant

themselves. Basheer and Associates admittedly, did not themselves

carry out any survey of the vessel, but have only offered their opinion

on the report of Salvage Association, who actually carried out the

survey on the vessel on behalf of the Appellant. Basheer and

Associates, after considering the report of Salvage Association, have

opined that only the damages to the extent of Rs.1,12,46,999/- can

be reasonably attributed to the rough weather and rest of the

damages, in monetary terms, are attributable to the condition of the

vessel at the time it set to sail from Mormugao to Taranto and

consequently, two factors like normal wear and tear. J. Basheer and

Associates have, therefore, only partially agreed or rather disagreed

with the report of the Salvage Association who are the actual

surveyors of the vessel on behalf of the Appellant.

63. The survey report of the Salvage Association at Exhibit

40 was in fact produced on record by the Respondents themselves.

This report is totally against the case of the Respondent. This report

refers to the survey of each of nine holds of the vessel and points out

that in so far as the first hold is concerned, a total of 19 frames were

found to be corroded and 19 frames were found to be recently

renewed; in so far as the second hold is concerned, about 22 frames

were found to be distorted, holed, buckled and heavily wasted.

However, all the remaining frames, although undamaged, were found

only to be heavily wasted; In so far as the third hold is concerned, the

position was similar to the second hold; In so far as the fourth hold

is concerned, no severe wastage of the structure was evident; In so

far as the fifth hold is concerned, nine frames were found to be

distorted, buckled and wasted and all remaining frames, though

undamaged, were found to be heavily visited; In so far as the sixth

hold is concerned, 23 frames were found to be distorted, buckled and

corroded. Thus, all the remaining frames, with the exception of

eight, were heavily corroded; In so far as the seventh hold is

concerned, again, 19 frames were found to be heavily corroded and

holed and all other frames, though undamaged, were found to be

heavily corroded; In so far as the eighth hold is concerned, 14 frames

were found to be buckled, distorted and wasted and remaining

frames, which were undamaged, were found to be heavily corroded;

In so far as the ninth hold is concerned, no frames were found to be

damaged, however all the frames port and starboard were found to be

heavily corroded.

64. The Salvage Association, in its report, has made a detailed

assessment and thereafter opined that the damage found and the

permanent repairs detailed in this report are what can reasonably be

attributed to normal wear and tear. The report opines that the

evidence available at survey indicates that the wastage of the side shell

frames and brackets was beyond classification limits and as a result,

were unfit to cope with the weather the vessel was built to withstand.

The report also comments upon ultrasonic readings taken by yet

another agency SANKI at Singapore by surmising that the thickness

gauge readings were taken by inexperienced operators and the results

were not representative of the true state of the side frames. The report

also refers to extensive photographs having taken and records kept of

the condition of the frames. Mr. Afonso submits that no such

photographs were produced on record by the Respondent.

65. J. Basheer and Associates analysed the report of the

Salvage Association as also the other material on record produced on

behalf of the Respondent and finally opined that they were only to

agree in entirety with the observations in the report of the Salvage

Association, but felt that damages to the extent of Rs.1,12,46,999/-

could be attributed to rough weather, though rest of the damages can

be attributed to the condition of the vessel and normal wear and tear.

Again even the report of J. Basheer and Associates was relied upon

and produced by the Respondents themselves. Thereafter, the matter

was once again referred to the Salvage Association and the Salvage

Association, by its communication dated 18th August, 1998 at

Exhibit 95, reiterated its opinion by disagreeing entirely with the

opinion expressed by J. Basheer and Associates. The Salvage

Association reasoned that despite so called rough weather, the frames

and plates which have been renewed and strengthened, did not suffer

any damage and therefore, the damage suffered by the remaining

frames is attributable to normal wear and tear and has no nexus with

the weather condition.

66. Now it is necessary to note that the reports of Salvage

Association and J. Basheer and Associates were commissioned by

none other than the Appellant itself. The Respondent had also

commissioned a report, however, the same was never produced on

record by the Respondent. Nevertheless, what is important is the two

reports produced on record by the Respondent, were the reports

which were commissioned by the Appellant itself. The first report of

the Salvage Association attributes the entire damage to normal wear

and tear. The second report analyses the first report, as also the other

material placed on record by the Respondent and thereafter concludes

that the damages ,at least to the extent of Rs.1,12,46,999/-, cannot

be said to be attributable to the normal wear and tear, but can be said

to be attributable to the weather condition. It is true that J. Basheer

and Associates were not actually involved in the survey. However, J.

Basheer and Associates had the benefit of survey undertaken by the

Salvage Association, as also the other material placed on record on

behalf of the Respondent. J. Basheer and Associates have analysed this

material, in substantial detail, and thereafter given their opinion.

67. The learned Trial Judge has accepted the opinion of expert

J. Basheer and Associates. The material produced on record by the

parties indicate that though the vessel was seaworthy nevertheless,

number of plates were indeed corroded and it is these corroded plates

which have suffered the maximum damage during the voyage. No

doubt, there are also some other plates which had suffered damage.

There are some other parts of the vessel which had suffered damage

as pointed out in the report of J. Basheer and Associates. Upon

cumulative consideration of all this material on record, as also the

analysis offered by J. Basheer and Associates, we find that no serious

error can be said to have been committed by the learned Trial Judge

in accepting the report of the J. Basheer and Associates.

68. As noted earlier, J. Basheer and Associates has, in fact,

agreed with the report of the Salvage Association, the actual surveyor

of the vessel and on the said basis, held that the claims of the

Respondent to the extent of almost 75% do not deserve to be

accepted, since, damages on the basis of such claims which have been

raised. have no nexus with rough weather or peril of the sea, but

these damages are basically on account of condition of the vessel at

the time of its sail and normal wear and tear. The evidence on record

indicates that in fact the vessel was due for its annual survey and it

cannot be ruled out the reason as to why the vessel was proceeding to

Taranto, eventually the annual survey was carried out. The report of

J. Basheer and Associates disagrees with the opinion of the Salvage

Association only to the extent of 25% of the total claim. It is on this

basis, the learned Trial Judge has awarded the Respondent an amount

of Rs.1,12,46,999/- as against the claimed amount of

Rs.4,98,70,343/-.

69. At this stage, it is necessary to consider the evidence on

behalf of the Appellant. The Appellant has examined Aloke N. Jha,

the Deputy General Manager as DW.1. The learned Trial Judge in

paragraphs 96 to 111 of the impugned Judgment and Decree has

discussed the deposition of DW.1 in the context of the issues in the

suit. On most of the aspects, DW.1 has disclaimed any knowledge.

DW.1 has, however, admitted that the representatives of Palco

Surveyors attended the vessel on behalf of the underwriters and on

completion of the repairs, they even confirmed that all the repairs

were satisfactorily completed. DW.1 has admitted that the

classification notations are indicatives of the specific rule

requirements which have been met and the classification notations

assigned to a ship are indicated on the certificate of classification, as

well as the register of ship published by the Society. DW.1 even

admitted that the total loss recorded in the Basheer's report comes to

Rs.1,12,46,999/-. As noted earlier, all this evidence has been

discussed in substantial details by the learned Trial Judge and there is

really no reason to differ from the findings recorded by the learned

Trial Judge. The fourth point for determination will have to be

answered by endorsing the findings recorded by the learned Trial

Judge that the damages to the extent of Rs.1,12,46,999/-, are only

the damages which can be said to be relatable to the perils of the sea,

like rough weather and not the entire damages of Rs.4,98,70,343/- as

urged by the Respondent in its cross objection. The fourth point for

determination is answered accordingly.

70. The fifth point for determination relates to deduction of

amount of Rs.20.00 lakhs in terms of the insurance policy. On this

aspect, there was really no serious dispute and such deduction is

required to be done in terms of the insurance policies. Accordingly,

from the amount of Rs.1,12,46,999/-, the learned Trial Judge,

ought to have deducted the amount of Rs.20.00 lakhs and to this

extent, interference is warranted with the impugned judgment and

decree. The sixth point for determination is accordingly required to

be answered in favour of the Appellant and against the Respondent.

71. The sixth point for determination is whether there was any

breach of clause 10 of the insurance policy. Clause 10 of the

insurance policy reads as follows :-

“10. NOTICE OF CLAIM AND TENDERS

10.1 In the event of accident whereby loss or damage

may result in a claim under this insurance, notice shall

be given to the Underwriters prior to survey and also, if

the vessel is abroad, to the nearest Lloyd's Agent so that a

surveyor may be appointed to represent the Underwriters

should they so desire.

10.2 The Underwriters shall be entitled to decide the

port to which the Vessel shall proceed for docking or

repair ( the actual additional expense of the voyage

arising from compliance with the Underwriters'

requirements being refunded to the Assured) and shall

have a right of veto concerning a place of repair or a


repairing firm.

10.3 The Underwriters may also take tenders or may

require further tenders to be taken for the repair of the

Vessel. Where such a tender has been taken and a tender

is accepted with the approval of the Underwriters, an

allowance shall be made at the rate of 30% per annum

on the insured value for time lost between the despatch

of the invitations to tender required by Underwriters and

the acceptance of a tender to the extent that such time is

lost solely as the result of tenders having been taken and

provided that the tender is accepted without delay after

receipt of the Underwriters' approval.

Due credit shall be given against the allowance as above

for any amounts recovered in respect of fuel and stores

and wages and maintenance of the Master Officers and

Crew or any member thereof, including amounts

allowed in general average, and for any amounts

recovered from third parties in respect of damages for

detention and/or loss of profit and/or running expenses,

for the period covered by the tender allowance or any

part thereof.

Where a part of the cost of the repair of damage other

than a fixed deductible is not recoverable from the

Underwriters the allowance shall be reduced by a similar

proportion.

10.4 In the event of failure to comply with the

conditions of this Clause 10 a deduction of 15% shall be

made from the amount of the ascertained claim.”

72. In this case, admittedly, the accident whereby the loss or

damage is said to have taken place when the vessel was abroad.

Therefore, in terms of Clause 10.1, the Respondent was duty bound

to give notice not only to the Respondent, but also to the Lloyd's

Agent, so that the surveyor could be appointed to represent the

underwriters and should they so desire. Admittedly, no such notice

was given by the Respondent to Lloyd's Agent.

73. Mr. Ramani, however, tried to contend that there was

substantial compliance with this clause, inasmuch as the notice was

given to the Appellant. He also pointed out that eventually the

Appellant did appoint the surveyors. According to us, the fact that

after some time the surveyors were indeed appointed by the

Appellant, is not a good ground to hold that there was compliance

with the conditions prescribed in clause 10.1 of the insurance

policies. The purpose for which the notice is required to be given to

the Lloyd's Agent, is so that the Lloyd's Agent can immediately

survey the vessel and give a report to the insurance company as to

whether the vessel was involved in any accident and whether loss or

damage has no nexus with such accident. In the present case, if the

Respondents were to comply with the requirements of giving notice

to the Lloyd's Agent, then, as pointed out by Mr. Afonso in all

probabilities the Lloyd's Agent who have surveys practically in every

port, would have surveyed the vessel at the port of Aden itself, where

the vessel is alleged to have called.

74. In any case, when it comes to interpretation of insurance

contract and its terms, the words used therein must be given

paramount importance and interpreted as expression without any

addition, deletion or substitution. Besides, in a contract of insurance,

the rights and obligations are governed by the terms of the said

contract. Since, upon issuance of an insurance policy, the insurer

undertakes to indemnify the loss suffered by the insured on account

of risks covered by the policy, its terms have to be strictly construed

to determine the extent of liability of the insurer and no exception

can be made on the ground of equity. Thus construed, we find merit

in the contention of Mr. Afonso that this is a case where the

Respondent has breached the provisions of clause 10 of the insurance

policy.

75. In Suraj Mal Ram Niwas Oil Mills Private Limited

( supra ) there was a condition in the insurance policy that each and

every consignment must be declared. The claimant failed to disclose

the number of consignments during the relevant period when its

goods suffered damages. The claimant, however, took up a defence

that there was substantial compliance, because the claimant had

declared the goods having insurable interest and non-declaration of

goods, which, in any case had no insurable interest, did not constitute

any breach of the conditions of the insurance policy. However, the

Hon'ble Supreme Court held that there was a breach of this

condition and the appellant's claim must fail on this short ground. It

was held that as per the policy, the appellant could not have picked

and chosen dispatches to be declared and that too at the instance of

the third party consignee who was otherwise a stranger to the

contract. It is in this case that the Hon'ble Supreme Court has held

that in a contract of insurance, the rights and obligations are

governed by the terms of the said contract. Since upon issuance of an

insurance policy, the insurer undertakes to indemnify the loss suffered

by the insured on account of risks covered by the policy, its terms

have to be strictly construed to determine the extent of liability of the

insurer and no exception can be made on the ground of equity. The

Hon'ble Supreme Court further held that the Courts should always

try to interpret the words in the insurance contract as they have been

expressed by the parties. It is not open for the Court to add, delete or

substitute any words. The words used in the insurance contract must

be given paramount importance.

76. In the present case, although the breach of Clause 10 of the

insurance policy is established, that, by itself, does not entitle the

Appellant to repudiate the policy or reject the Respondent's claim. In

fact, that was not even the case of the Respondent. Mr. Afonso's

contention was only that in the event of failure to comply with the

conditions of clause 10, a deduction of 15% to be made from the

amount of ascertained claim.

77. Clause 10.4 of the insurance policy, in terms provide that

in the event of failure to comply with the conditions of this clause 10,

a deduction of 15% shall be made from the amount of the

ascertained claim. Accordingly, the contention of Mr. Afonso in this

regard is quite well founded and will have to be upheld. Therefore,

from the ascertained claim of Rs.92,46,999/-, a further deduction of

15% is due. This means that the Respondent's suit can be decreed to

the extent of Rs.78,59,949.15. The impugned judgment and decree

therefore warrants further modification. The fifth point for

determination will also have to be decided in favour of the Appellant

and against the Respondent.

78. There is absolutely no case made out by the Respondent in

their cross objections. As noted earlier, the report of J. Basheer and

Associates deserves to be accepted in its entirety, as has been done by

the learned Trial Judge. Reasoning for this has been set out not only

in the impugned judgment and decree, which we have endorsed, but

further we too have set out our own reasons for upholding the view

taken by the learned Trial Judge. Accordingly, we find that there is

absolutely no merit in the cross objections, which deserve to be


dismissed. Even on the aspect of rate of interest, we are of the opinion

that the interest at the rate of 6% per annum awarded by the learned

Trial Court is fair and reasonable, having regard to all circumstances

in which the claim arose.

79. For all the aforesaid reasons, we dispose of this appeal and

cross objections by making the following order :-

(a) The appeal is partly allowed and the cross objections are

dismissed;

(b) The impugned judgment and decree is modified by

substituting the amount of Rs.1,12,46,999/- with

Rs.78,59,949.15. This means that there shall now be a

decree directing the Appellant to pay to the Respondent a

sum of Rs.78,59,949.15, together with interest at the rate

of 6% per annum from the date of institution of suit, till its

actual payment.

(c) From out of the amount deposited by the Appellant in

this Court, the Respondent is entitled to withdraw the

amount to the aforesaid extent along with accrued interest,

if any, thereon and the Registry is directed to refund the

balance amount to the Appellant again, along with accrued

interest thereon, if any;

(d) In the facts of the present case, there shall be no order as

to costs.

Smt. M.S. Jawalkar, J. M.S. Sonak, J.

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