JUSTICE DEEPA SHARMA, PRESIDING MEMBER

1.      The present revision petition under Section 21 (b) of the Consumer Protection Act, 1986 ( in short, ‘the Act’) has  been filed by the petitioner challenging the order dated 17.04.2017 of the Telangana State Consumer Disputes Redressal Commission, Hyderabad ( in short, the State Commission) in Appeal No. 25 of 2014.  The appeal was filed by the respondent ( hereinafter referred to as  ‘complainant’) against the order of the District Forum dated 09.12.2013 dismissing his complaint no.1041 of 2011.  The said appeal was allowed by the State Commission and order of District Forum was set aside vide impugned order. 

2.      The present revision has been filed by the insurance company challenging the impugned order on the ground that State Commission has committed illegality and perversity while allowing the complaint despite the fact that complainant had violated the terms and conditions of the policy.  It is argued that the policy was obtained on the wrong premise i.e. on CIF basis for the subject consignment although the original contract of the complainant with its buyer was on C&F basis upto the destination.  It is submitted that since the policy had been wrongly obtained by the complainant, concealing the fact that contract with the buyer was on C&F basis, complaint was rightly dismissed by the District Forum and the impugned order, therefore is liable to be set aside. 

3.      Counsel for the respondent / complainant, however, has stated that they had not concealed any material fact from the insurance company.  It is submitted that initially contract was of C&F basis but later on buyer had converted into CIF basis and Bill of Lading was  issued on that basis and that while issuing the insurance policy, the insurance company has issued the same in respect of the said Bill of Lading.  It is submitted that all the facts were known to the insurance company and that repudiation, therefore, amount to deficiency in service and the impugned order does not suffer with any illegality or infirmity.

4.      I  have heard the arguments and perused the relevant record.

5.      The brief facts of the case are that complainant had entered into a contract for export of biscuits. For that purpose, he obtained a Marine Insurance Policy  having CIF value of US$ 22186.45 covering a consignment of 3636 cartons of biscuits from Hyderabad to South Sudan WAU by road and sea covering all risk by remitting an amount of  Rs.715/- towards premium on 19.07.2010. The consignment was loaded in the vessel on 07.08.2010 at JNPT Port, Mumbai but after travelling 3 nautical miles, it collided with another vessel ‘Khalija’ in the Indian Arabian sea and sank resulting in total damage to the consignment.  The insurance company was duly informed and the surveyor and loss assessors were approached by the insurance company. The complainant filed a monetary claim for the loss with the agent of Mediterranean Shipping Co., Mumbai, but it was rejected with an advice to claim the same from the other vessel Khalija-3.  Claim submitted with the insurance company was rejected solely on the ground that terms of invoices were different from terms of the policy and the buyer alone could claim the proceeds of the contract.  Therefore, buyer / importer and the complainant mutually agreed to amend the C&F contract to CIF contract as per the insurance policy and, thereafter, submitted its claim but that was also denied.  Complaint to the statutory authorities by the complainant were also rejected and then  the claim was filed.

6.      The petitioner had filed their written version. The plea taken was that liability of the insurance company had ceased as soon as the goods / consignment were placed safely on board, the vessel and, thereafter, there remains no insurable interest of the complainant in those goods.

7.      Parties led their evidences before the  District Forum.  The District Forum, however, dismissed the complaint.  Before the State Commission, the  plea taken by the respondent / complainant was that consignment was on CIF basis and not FOB basis and, therefore, responsibility of the seller ceases after delivering the goods to the buyer at port Mombasa. It was submitted that District Forum came to a wrong conclusion that as per the invoice the amount was paid as FOB but not CIF by the complainant.  It was, however, contended that respondent / complainant is an unpaid seller and he has to be indemnified for the loss. 

8.      After hearing all the contentions of the parties and perusing the relevant record, the State Commission has held as under:

“10. The complainant has contended that it did not suppress any material fact while entering into the contract of Insurance with the Opposite Parties and that though infact the initial contract between the Complainant and the Buyer of the goods from South Sudan was but subsequently it was amended on C & F basis mutually in accordance with law and that thus when the consignment of goods was covered with insurable interest of the Buyer, the repudiation of the claim by the Opposite Parties was arbitrary and illegal.  Per contra, the Opposite Parties have contended that the Complainant has obtained the policy in question with regard to the consignment pertaining to a contract with the Buyer on C & F basis and that subsequent to repudiation sought its conversion to C.I.F. basis by way of an amendment which is not permissible.  Further, as per the Opposite Parties, the Complainant has suppressed the material terms and conditions of the said C & F contract while obtaining the Insurance Policy from them and that infact their liability ceases once the consignment was loaded on board of the vessel.  This is the only crux of the issue. 

11. It is evident from the contents of the documents enclosed with the Claim Form under Ex.A13   that  the C & F value of the consignment up to Mombassa was of $ 22186.45.  Further, as per the letters of the Opposite Party no.1 Company addressed to the Complainant vide Ex.A14 & A16 the contract was on C & F invoice basis.  But the Complainant has filed a letter of the Buyer, Emar Exports and Imports, WAU South Sudan addressed to the Opposite Party no.1 Company vide Ex.A20, in which a request was made to the complainant by the Buyer to obtain the policy on C.I.F. basis for the subject consignment even though the original contract was on C & F basis up to the destination and that accordingly it was later amended to C.I.F. basis on payment of the due premium by the Buyer to the Complainant.  In this regard it is pertinent to note that such type of amendment is certainly permissible under section 85 of the Marine Insurance Act, 1963 which is as under:-

Where a contract of Marine Insurance is good faith effected by one person on behalf of another, the person on whose behalf it is effected, may ratify the contract even after he is aware of a loss.

In the present case the initial contract was on C & F basis but subsequent to the mishap on 07.08.2010 the contract was amended to C.I.F. basis even after knowing of the loss by the Buyer.  Infact, the Opposite Party no.1Company has clearly noted in the letter, Ex.A14 that after the Complainant has placed the consignment safely on board thereby handing over the possession of the goods to the ship in terms of bill of lading, its responsibility ceases and delivery of the goods to the Buyer are complete and that from that stage onwards the goods are at the risk of the Buyer.  Therefore, in view of the amendment of the terms of the contract from C.I.F to C & F the Buyer took the risk of the goods in terms of Section 85 of the Act, 1963.  The said goods were un- disputedly covered by the Insurance Policy, Ex.A1.  Thus, it is clear that the Buyer became owner of the goods irrespective of the mishap and thereby got insurable interest in the goods.  To appreciate this aspect the learned counsel for the Complainant has relied on the unreported decision dated 05.09.2016 in F.A.no.435/2011 of the Hon’ble National Commission in, Oriental Insurance Company Ltd., Ahmedabad Vs. M/s. Ajanta International, Rajkot.  In this case also the goods were sold on C.I.F. basis and not on C & F basis.  Therefore, the insurer took the defence that the Complainant was responsible for the goods only till they were put on board of the vessel at the Port, Mumbai.  The Hon’ble National Commission even in such situation held as under:-   

……………Therefore, it cannot be said that the insurer was not aware that the transaction between the complainant and the overseas Buyer was on C & F basis, and not on CIF basis. …………… The insurer, despite knowing, through the invoice, that the transaction between the complainant and the overseas Buyer was on C&F basis, having issued a policy on CIF basis, has only itself to blame if in such a transaction it was not to issue a policy on CIF basis.  Therefore, the claim cannot be denied on the ground that the transaction between the parties was on C&F basis, and not on CIF basis. ……………Having insured the goods up to Lusaka, without any concealment on the part of the complainant, the insurer, in our view, is stopped from repudiating the claim solely on the ground that the transaction between the parties was on C&F basis.      

In the said case also the goods did not reach to the purchaser at the destination but were stolen away on the way.  Having regard to the facts and circumstances we are of the considered opinion that the ratio laid down by the Hon’ble National Commission is certainly applicable to the facts of the present case.  Further, a recent decision dated 29.06.2016 of the Hon’ble Supreme Court in Civil Appeal No.1004/2006 in United India Insurance Company Ltd., vs. Leisure Wear Exports Ltd., was referred to by the Hon’ble National Commission in the above noted case.  In the said case the question before the Hon’ble Supreme Court was as to whether the Respondent had a locus standi to file the complaint on the strength of the contract of the Insurance Policy in question, claiming compensation for the loss sustained in the transaction.  By referring to Section 17 of the Act, 1963 it was inter-alia observed and held as under:-

“26. Section 17, in terms, recognizes and permits the insured to make assignment of their contract of insurance policy in favour of an assignee and at the same time allows the insured even after making an assignment to retain all those rights which are available to them under the contract of insurance with the insurer (appellant).  In other words, in terms of Section 17, even after making an assignment by  the insured of their contract of insurance policy, the rights of insured under the contract of insurance policy are not assigned in favour of assignee by the deed of assignment but they are continued to remain with the insured.

27.   We are, therefore, of the considered view that firstly, we do not find that the respondent (insured) assigned the contract of insurance policy in favour of their consignee as contended by the appellant.  Secondly, even assuming that the respondent (insured) assigned the contract of insurance policy in favour of their consignee, yet the assignment so made did not have any adverse effect on the right of the insured under the contract of insurance policy as the rights continued to remain with them by virtue of Section 17 of the Act.

28.   The respondent was, therefore, legally entitled and had the locus to file a complaint against the appellant on the strength of contract of insurance policy for enforcement of their all contractual rights available to them under the insurance policy for claiming compensation for the loss caused from the appellant and the complaint so filed by the respondent could not be dismissed as not maintainable on the ground of locus.  It was thus rightly held as maintainable”.   

In the above referred case of the Hon’ble National Commission a reference was also made to the earlier decision of the Hon’ble Supreme Court in, Contship Container Lines Ltd., vs. D.K. Lall & Others, II (2010) CPJ-12 (SC).  This decision was made a basis by the Opposite Parties in the present case to sustain their defence.  In this case, the declaration sent to the insurer no details of conditions of the shipment were mentioned.  But even then it was held that the carrier was deficient in rendering service to the Complainant. 

14.    It is significant to note that the Complainant has specifically asserted that the terms and conditions of the policy were neither supplied nor explained to it by the Opposite Party no.1 Company.  The Opposite Parties did not rebut the said claim by adducing any clinching evidence.  Thus, the IRDA regulations were not duly followed by the Opposite Party no.1 Company.  In this regard it is just, necessary and expedient to refer to the decision dated 03.05.2007 of the Hon’ble National Commission in R.P.no.3110/2016 in, National Insurance Company Ltd., Vs. Gynander Singh where in it was observed as under:

We hope that companies in India would try to follow such a gesture towards the consumers and not to raise unnecessary dispute and litigate, so that the consumers are not driven for a small amount to the National Commission or to the Supreme Court.  This type of practice is required to be adopted in the interest of consumers all over the country.  Unfortunately, we have developed a genitive legal practice to such an extent that even established facts are denied in the written version. 

9.      Thus concluding, the following directions were issued by the State Commission:

“17.  In the result, the Appeal is allowed by setting aside the impugned order directing the Respondents, jointly and severally, to pay the sum insured of Rs.10,20,568/- with interest @ 12% from the date of the claim i.e., 02.02.2011 till realization and compensation of Rs.50,000/- with costs of Rs.10,000/-.

Time for compliance, 4 weeks.

10.    The consignment was an insurable property within the meaning of  Section 2 (c) of the Marine Insurance Act, 1963 ( in short, the Act).  The expression ‘insurable property’ under the Act reads as under:

2(c) “insurable property” means any ship, goods or other movables which are exposed to maritime perils”

11.    Since it was put to carrier for transport through sea, it was also exposed to maritime peril.  The expression ‘maritime perils’ is defined in section 2 ( e) of the Act as under:

2 (e)  “maritime perils” means the perils consequent on, or incidental to, the navigation of the sea, that is to say, perils of the sea, fire, war perils, pirates, rovers, thieves, captures, seizures, restraints and detainments of princes and peoples, jettisons, barratry and any other perils which are either of the like kind or may be designated by the policy.”

12.    Thus, goods were duly insured and marine insurance cover was issued in favour of the complainant.  The Marine Insurance is defined under section 3 of the Act as under:

3. “Marine insurance defined.—A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses incidental to marine adventure”

13.    There is no doubt to the fact that insured goods were totally  lost in the collision with vessel Khalija in the Indian Arabian Sea and thus the respondent / complainant has suffered total loss.  The respondent / complainant had itself stated that he is an unpaid seller.  It, therefore, is apparent that respondent / complainant has suffered maritime peril but yet he had been denied the claim simply on the ground that he did not   have insurable interest in the goods.  Apparently, at the time of issuance of marine insurance policy, the petitioner had acknowledged the insurable interest of the respondent / complainant in the insured property.  

14.    The insurable interest has been defined under section 7 of the Act as under:

“7. Insurable interest defined-

(1) Subject to the provisions of this Act, every person has an insurable interest who is interested in a marine adventure.

(2) In particular a person is interested in a marine adventure where he stands in any legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or by damage thereto, or by the detention thereof, or may incur liability in respect thereof.”

15.    Under the Act, the insurable Act has to be determined on the basis of benefit or loss  likely to be suffered by a person by safe arrival of insurable property or loss due to its damage.  Apparently, in this case, the respondent / complainant has duly stated that he was an unpaid seller and, therefore, loss of the goods on way to Mombasa where it was to be delivered to the buyer certainly amounts to loss to him and, therefore, it cannot be said that respondent / complainant did not have any insurable  interest in the goods.

16.    In the case of Contship Container Lines Limited Vs.D.K.Lall and Others (2010) 4 SCC 256, the Hon’ble Supreme Court has discussed at length the transaction  between exporter and purchaser on FOB basis and CIF basis and whether in transaction on FOB basis, the exporter retains insurable interest in the exported goods or not and whether such interest is retained in transaction of CIF nature. 

17.    The goods were sent by Bill of Lading having no. MSCUM5008646 and the policy issued by the petitioner also contains the said bill number.  The policy, therefore was issued against the said Bill of Lading and this Bill of Lading clearly states that Port of Discharge is Mombasa, Kenya. From this bill, it is apparent that the seller retains the insurable interest in the goods till the time of delivery and this fact was recognized by the petitioner.

18.    The argument of the petitioner that since contract was on C&F basis and the bill was issued on CIF basis, it is a concealment of fact and the invoices were  issued on C&F basis.  My attention has  been brought to a letter addressed to the respondent / complainant by the buyer wherein the respondent / complainant was asked to obtain the policy on CIF basis.  The argument is that C&F contract was then converted into CIF basis on payment of due premium by the buyer to the respondent / complainant.  The invoices also shows that it was the duty of the respondent / complainant under the agreement to buy the necessary insurance policies and the goods to be delivered upto port Mombasa.  The State Commission has rightly observed that Section 85 of the Act allowed the person to rectify the contract even after he is aware of the loss.  The contract was thus validly rectified in terms of the Act. This fact was also acknowledged by the petitioner since the insurance policies contains the description of the Bill of Lading that respondent / complainant had retained the insurable interest in the goods which have been subject to maritime peril till its delivery to Mombasa.  In the case of D.K.Lall and Others ( supra), the Hon’ble Supreme Court has defined the distinction between the contract of sale on FOB  basis  and contract of sale on CIF basis.  The Hon’ble Supreme Court has held as under:

31.  “Coming to the case at hand, the contract of sale was on FOB basis even when the contract of insurance proceeded on the basis that the transactions between the seller and the purchaser and meant to be covered by the policy would be on CIF basis. The distinction between CIF (Cost Insurance and Freight) and FOB (Free on Board) contracts is well recognized in the commercial world. While in the case of CIF contract the seller in the absence of any special contract is bound to do certain things like making an invoice of the goods sold, shipping the goods at the port of shipment, procuring a contract of insurance under which the goods will be delivered at the destination etc., in the case of FOB contracts the goods are delivered free on board the ship. Once the seller has placed the goods safely on board at his cost and thereby handed over the possession of the goods to the ship in terms of the Bill of Lading or other documents, the responsibility of the seller ceases and the delivery of the goods to the buyer is complete. The goods are from that stage onwards at the risk of the buyer”

19.    In the present case, it is the seller who under the contract did the thing like preparing the invoice, shipping the goods at the port of shipment, procuring a contract of insurance  under which goods will be delivered at the destination.  Therefore, it is  not a FOB contract where the goods are delivered free on board and once the goods are placed on board,  responsibility of the seller ceases and the delivery of the goods to the board is complete.  The terms and conditions of the Bill of Lading clearly shows that responsibility of the respondent / complainant who is the seller was to deliver the goods at Mombasa port, Kenya and its liability did not cease simply on putting the goods on the ship.  This Bill of Lading has been duly acknowledged by the petitioner since the noting to this fact has been made in the policy by hand.

20.    In view of these facts and circumstances, I found no illegality or infirmity in the impunged order.  The present revision petition has no merit and same is dismissed.