# M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL INSURANCE COMPANY LTD

- **Citation:** [2020] 6 S.C.R. 163
- **Court:** Supreme Court of India
- **Decided:** 2020-02-07
- **Case number:** Civil Appeal No. 971 of 2014
- **Bench:** Mohan M. Shantanagoudar, K. M. Joseph
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-rajankumar-and-brothers-impex-v-oriental-insurance-company-ltd-34094
- **Pages:** 35

## Headnote

Insurance:
Marine insurance - Open cover insurance - Claim for
insurance in respect of insured cargo - Denied by insurer -
Consumer complaint alleging deficiency in service - Complaint
dismissed by NCDRC - Appeal to Supreme Court - Held: Marine
Cargo Cover Note as well as Marine Insurance Policy stated that
Institute Classification Clause (ICC) was one of the warranties/ terms
of insurance - The subject vessel was neither in compliance with
the ICC, nor had the insured given prompt notification to the insurer
about such non-compliance - It is also not proved that such breach
was waived by the insurer - Hence, the insurer rightly repudiated
the insurance claim - Marine Insurance Act, 1963 - ss. 35(3) and
36(3).
Marine Insurance Act, 1963:
ss. 35(3) and 36(3) - Nature of promissory warranty and its
waiver - Held: Automatic consequence of a breach of warranty, is
discharge of insurer's liability - Such discharge of liability does
not require any express conduct or representation from the insurer
- However, waiver of breach of warranty can be done by way of
incorporating certain terms in the insurance contract or the
exclusion clause in the Institute Cargo clause or by a representation
or conduct of the insurer.
Dismissing the appeal, the Court
HELD: 1.1 The Marine Cargo Cover Note as well as the
Marine Insurance Policy stated that the Institute Classification
Clause (ICC) would be one of the warranties/terms of insurance.
Additionally, Clause 6 of the Cover Note prescribed that the
[2020] 6 S.C.R. 163
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subject vessel needed to conform to the current ICC, in the
absence of which, the insurance cover would be subject to
payment of an additional premium. [Para 5][177-A-B]
1.2 The ICC is drafted and issued by the Joint Cargo
Committee of the Lloyd's Marketing Association (a premier
marine insurance market in London) in consultation with
insurance and shipping interests. It is commonly understood that
this 'classification' relates to the seaworthiness of the vessel in
which the cargo is carried. The ICC 01/01/2001 imposes two
requirements to ensure that the vessel complies with a certain
minimum standard of seaworthiness. The first is a classification
requirement which requires that the vessel should be classed
with a Classification Society which is a Member/Associate
Member of the International Association of Classification
Societies ('IACS') or, in the case of vessels engaged exclusively
in coastal trading, a National Flag Society. The second is an age
limitation in respect of the insured vessel. [Para 5][177-B-D; 178E-F]
1.3 An underwriter/insurer would usually trust the quality
of, and be prepared to issue a reasonable premium for, a vessel
classed with an IACS member society. On the other hand, the
insurer may demand a higher premium, or deny insurance cover
altogether, for a voyage in respect of a vessel classed by a nonIACS member society. Hence, the ICC prescribes classification
with a member of the IACS as the baseline for ensuring that the
policy involves less risk for the underwriter. [Para 5][179-E-F]
1.4 NCDRC has relied on the older version of the ICC, i.e.
the 1978 version. The 1978 version of the ICC was replaced by
the ICC 13/4/92, the ICC 1/8/97, and the ICC 01/01/2001. The
ICC 01/01/2001 is the most recent version of the ICC, and the
one which is relevant for the purpose of the present case. The
most recent version of the ICC, i.e., ICC 01/01/2001 does not
help the appellant's case inasmuch as it is stricter in its import.
English jurisprudence stipulates two requirements to avail of such
'held covered' provisions - first, 'prompt notification' to the
underwriter, and second, the availability of cover at reasonable
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165
commercial market rates. However, the wording of the 'held
covered' provision in the ICC 1978, did not expressly state these
requirements, leading to the apprehension that it may be
interpreted to mean that cover could be o

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M/S RAJANKUMAR AND BROTHERS (IMPEX)
v.
ORIENTAL INSURANCE COMPANY LTD.
(Civil Appeal No. 971 of 2014)
FEBRUARY 07, 2020
[MOHAN M. SHANTANAGOUDAR AND
K. M. JOSEPH, JJ.]
Insurance:
Marine insurance - Open cover insurance - Claim for
insurance in respect of insured cargo - Denied by insurer -
Consumer complaint alleging deficiency in service - Complaint
dismissed by NCDRC - Appeal to Supreme Court - Held: Marine
Cargo Cover Note as well as Marine Insurance Policy stated that
Institute Classification Clause (ICC) was one of the warranties/ terms
of insurance - The subject vessel was neither in compliance with
the ICC, nor had the insured given prompt notification to the insurer
about such non-compliance - It is also not proved that such breach
was waived by the insurer - Hence, the insurer rightly repudiated
the insurance claim - Marine Insurance Act, 1963 - ss. 35(3) and
36(3).
Marine Insurance Act, 1963:
ss. 35(3) and 36(3) - Nature of promissory warranty and its
waiver - Held: Automatic consequence of a breach of warranty, is
discharge of insurer's liability - Such discharge of liability does
not require any express conduct or representation from the insurer
- However, waiver of breach of warranty can be done by way of
incorporating certain terms in the insurance contract or the
exclusion clause in the Institute Cargo clause or by a representation
or conduct of the insurer.
Dismissing the appeal, the Court
HELD: 1.1 The Marine Cargo Cover Note as well as the
Marine Insurance Policy stated that the Institute Classification
Clause (ICC) would be one of the warranties/terms of insurance.
Additionally, Clause 6 of the Cover Note prescribed that the
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subject vessel needed to conform to the current ICC, in the
absence of which, the insurance cover would be subject to
payment of an additional premium. [Para 5][177-A-B]
1.2 The ICC is drafted and issued by the Joint Cargo
Committee of the Lloyd's Marketing Association (a premier
marine insurance market in London) in consultation with
insurance and shipping interests. It is commonly understood that
this 'classification' relates to the seaworthiness of the vessel in
which the cargo is carried. The ICC 01/01/2001 imposes two
requirements to ensure that the vessel complies with a certain
minimum standard of seaworthiness. The first is a classification
requirement which requires that the vessel should be classed
with a Classification Society which is a Member/Associate
Member of the International Association of Classification
Societies ('IACS') or, in the case of vessels engaged exclusively
in coastal trading, a National Flag Society. The second is an age
limitation in respect of the insured vessel. [Para 5][177-B-D; 178E-F]
1.3 An underwriter/insurer would usually trust the quality
of, and be prepared to issue a reasonable premium for, a vessel
classed with an IACS member society. On the other hand, the
insurer may demand a higher premium, or deny insurance cover
altogether, for a voyage in respect of a vessel classed by a nonIACS member society. Hence, the ICC prescribes classification
with a member of the IACS as the baseline for ensuring that the
policy involves less risk for the underwriter. [Para 5][179-E-F]
1.4 NCDRC has relied on the older version of the ICC, i.e.
the 1978 version. The 1978 version of the ICC was replaced by
the ICC 13/4/92, the ICC 1/8/97, and the ICC 01/01/2001. The
ICC 01/01/2001 is the most recent version of the ICC, and the
one which is relevant for the purpose of the present case. The
most recent version of the ICC, i.e., ICC 01/01/2001 does not
help the appellant's case inasmuch as it is stricter in its import.
English jurisprudence stipulates two requirements to avail of such
'held covered' provisions - first, 'prompt notification' to the
underwriter, and second, the availability of cover at reasonable
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commercial market rates. However, the wording of the 'held
covered' provision in the ICC 1978, did not expressly state these
requirements, leading to the apprehension that it may be
interpreted to mean that cover could be obtained in all cases,
without any precautionary measures being followed by the
assured. Hence, it appears that in order to avoid any confusion,
the ICC 01/01/2001 has been drafted to expressly incorporate
the aforesaid two requirements. Under the ICC 01/01/2001, the
assured must immediately inform the insurer/underwriter if they
discover that the vessel carrying the cargo does not meet the
classification requirement. Additionally, if the vessel is such that
a prudent underwriter would not be prepared to underwrite the
risk at a reasonable premium, the assured is not entitled to the
insurance cover. These requirements are important because the
classification of the vessel is a significant factor for influencing
the underwriter's decision-making as regards whether an
insurance cover should be issued for the marine voyage or not.
[Para 5.1][180-A-C; 181-A-C]
1.5 Sub Clause 1 of the ICC 01/01/2001 provides that cargo
interests are obligated to promptly notify insurance underwriters
if the cargo is being carried by a vessel which is not classed as
prescribed in the ICC, and Clause 5 thereof makes it clear that
failure to provide such information will lead to exclusion of the
insurance cover. It is the burden of the assured to inform the
insurer about such non-compliance and negotiate a reasonable
premium beforehand. [Paras 5 and 5.2][179-G-H; 180-A; 181-F]
1.6 Thus, where a vessel is not classed with a recognized
classification society in terms of the ICC, any loss incurred by
the cargo-owner will be excluded from the scope of the insurance
cover. Further, the cargo owner is required to immediately notify
the underwriters and negotiate an additional premium if the vessel
is not classed in accordance with the ICC. [Para 5.6][189-D-E]
1.7 In the instant case, it is apparent that neither was the
subject vessel in compliance with the ICC clause, nor had the
appellant given prompt notification to the respondent about such
non-compliance. The appellant, in its letter had informed the
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respondent that the vessel is of 'I.R.S.' class. However, the full
form of 'I.R.S.' was not specified. The appellant has contended
that the NCDRC wrongly interpreted the term 'I.R.S.' to mean
'Indian Register of Shipping' and that the subject vessel was
actually registered and classified with the 'International Register
of Shipping'. However, the official website of the International
Register of Shipping shows that its official acronym is 'INTLREG'.
Whereas 'I.R.S.' is the official acronym of the 'Indian Register of
Shipping'.Hence the appellant's contention that 'I.R.S.' refers to
the International Register of Shipping is prima facie not
sustainable. [Para 5.7][189-E-H; 190-A]
1.8 The appellant had also averred in its complaint before
the NCDRC that the Overseas Seller had produced a certificate
dated 11.6.2010, certifying that the subject vessel was registered
with an approved Classification Society as per the ICC. Further,
that as per the said certificate, the class of the subject vessel was
equivalent to Lloyd's 100A1, and the subject vessel was seaworthy
and not more than 30 years old. However, no such evidence of
the vessel's classification was ever provided to the respondent.
It is true that the appellant has, during the course of hearing this
appeal, placed the certificate dated 11.6.2010 before this Court.
However, a perusal of the certificate shows that is only a selfcertification wherein the vessel owners have claimed that the
subject vessel is classed with an approved classification society
as per the ICC clause. It cannot be taken as conclusive evidence
that the vessel was actually classed with an IACS member society.
[Para 5.7][190-A-D]
1.9 Even if it is accepted that the vessel is classed with the
International Register of Shipping 'INTLREG', this does not help
appellant's case inasmuch the INTLREG is not one of the 12
accredited Member Societies of the IACS. Rather, it is the I.R.S.
which is an IACS member. It has never been the case of the
appellant that the subject vessel was classed by the Indian
Register of Shipping. It is also not the appellant's case that the
subject vessel was classed with a National Flag Society. Hence,
the appellant had committed breach of the classification
requirement contained in Clause 1 of the ICC. [Para 5.7]
[190-D-F]
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1.10 The letter dated 26.5.2010 sent by the appellant to
the respondent, in respect of the ship's particulars, cannot be
said to constitute 'prompt notification' as the particulars of the
subject vessel's classification were not clearly specified therein.
The respondent may have, in good faith, assumed that 'I.R.S.'
meant that the subject vessel was classed with the 'Indian
Register of Shipping', and may have consequently inferred that
the subject vessel fell within the scope of the ICC clause.
[Para 5.8][190-F-H]
1.11 It was only pursuant to the appellant's request for
release of separate salvage security that the respondent's claim
settling agents, M/s. W.K. Webster & Co., London by e-mail
dated 9.8.2010 informed the respondent that as per their
investigation, the subject vessel was classed with Lloyd's Register
of Shipping only until 10.10.2007, after which the classification
was withdrawn. Hence it was only from this e-mail that the
respondents came to know that the shipment may fall outside
the scope of the insurance cover, as per the terms of the ICC.
Consequently, the 'prompt notification' requirement has not been
satisfied, and there is no ground for the application of the 'held
covered' clause. [Para 5.8][191-A-C]
1.12 No prudent underwriter would have agreed to cover
the risk involved in a such a high value shipment under the
Marine Cargo Clause even though the appellant had no
documentary evidence on record to prove the classification of
the subject vessel. However, neither of the parties has led
evidence on whether the respondent would have agreed to insure
the policy for a reasonable premium had the correct particulars
of the subject vessel been disclosed. Hence, it is not appropriate
to record any findings on the same. In any case, such question
does not arise inasmuch as the appellant did not provide "prompt
notification" in the first place. Hence, as provided under Clause
5 of the ICC, the insurer's liability is automatically discharged.
[Para 5.9][191-C-E]
1.13 Consequently, the appellant had committed breach of
the warranty contained in the Marine Insurance Policy requiring
the subject vessel to be classed in accordance with the ICC, and
such breach of warranty discharged the liability of the insurer.
[Para 5.9][191-F]
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2.1 A warranty imposes certain obligations on the insured,
and Section 35(3) of Marine Insurance Act, 1963 makes it amply
clear that a warranty needs to be complied with, regardless of
whether or not its non-compliance materially affects the risk
involved in carrying the shipment. As a corollary, when a warranty
is not complied with, i.e., there is a breach of warranty, the insurer
is discharged from liability from the date of such breach, by virtue
of Section 35(3). At the outset, therefore, it is important to note
that the scheme of the 1963 Act is clear inasmuch as the automatic
consequence of a breach of warranty is discharge of the insurer's
liability. Such discharge of liability does not require any express
conduct or representation from the insurer. [Para 6][192-E-G]
2.2 However, Section 36(3) of the 1963 Act provides that
the insurer may waive a breach of warranty. Such a waiver may be
done either by or by way of incorporating certain terms in the
insurance contract, such as the 'held covered' clause in the ICC
or the exclusion clause found in the Institute Cargo Clauses, or
by a representation or conduct of the insurer. [Para 6][192-G-H;
193-A]
2.3 It is commonly understood that a waiver in the context
of marine insurance, apart from one already provided for by way
of 'held covered' or other such terms in the insurance contract,
must include two elements, namely, (i) knowledge of the insurer,
and (ii) unequivocal representation of the insurer. The presence
of both these elements is indispensable. [Para 6.3][194-E-F]
2.4 Even if the insurer makes an express representation
that it would affirm the contract and indemnify the loss, if the
insurer can prove that such a representation was made without
the knowledge that there was a breach of warranty on part of the
insured, the liability of the insurer would stand discharged from
the date on which the warranty was breached. Similarly, mere
knowledge on the part of the insurer that there was a breach of
warranty would not amount to a waiver, in the absence of an express
representation to that effect. [Para 6.3][194-F-H]
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2.5 Insofar as the element of knowledge is concerned, if
the vessel carrying the insured cargo incurs loss, and the insurer
seeks to investigate into whether or not there was a breach of
warranty, no knowledge can be attributed to the insurer until such
investigation is completed. Once there is knowledge, the second
element, i.e., unequivocal representation comes into play. The
representation must be of such a nature that it is sufficient for
the insured to conclude that the insurer is aware of the breach of
warranty and has chosen to waive such breach and indemnify the
loss. The determination of whether or not these elements are
present, assumes more complexity in cases where such a
representation comes from an agent of the insurer, or where such
an agent has knowledge of the breach. However, these arguments
with respect to representations made by the insurer's agent have
not been raised and hence, such issues need not be addressed
for the purposes of the present case. [Para 6.4][195-A-C]
2.6 In the instant case, though the respondent initially issued
the Cover Note dated 14.5.2010 without knowing the particulars
of the vessel in which the appellant's cargo was to be carried, it
subsequently issued the Marine Insurance Policy after the
particulars of the subject vessel, including the purported
classification of 'I.R.S.', were received. However, while the
importance of the ICC is undoubtedly more significant in cases
of 'open-cover' insurances where the specific details of the vessel
carrying the cargo are not known to the insurer, a 'facultative'
insurance policy in which the details of the subject vessel are
specified, need not be mutually exclusive with the ICC. Mere
formal issuance of the Marine Insurance Policy by the respondent
does not indicate 'acceptance'/waiver of the vessel's classification
or lack thereof. [Para 6.1][193-A-E]
2.7 It was contended by the appellant that non-compliance
with the ICC stood waived by Clause 5.2 of the Marined Insurance
Policy. However, it cannot be said that the ICC was an 'implied'
warranty within the meaning of Clause 5.2. It was stated on the
face of the Marine Cargo Cover dated 14.5.2010 and the Marine
Insurance Policy that the ICC is one of the warranties/terms of
insurance. [Para 6.2][193-G-H; 194-A]
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2.8 In any case, the appellant's stand is that the subject
vessel was classed with the 'INTLREG' (which it has mistakenly
referred to as 'I.R.S.'). The very purpose of adopting the ICC is
to ensure that the vessel chosen by the insured meets certain
minimum standards of seaworthiness, by virtue of being classed
with one of the well-established member societies of the IACS.
The appellant, having known that the subject vessel was classed
with the 'INTLREG', which neither was nor is a member of the
IACS, was privy to the fact that the subject vessel was not
compliant with the minimum standard of seaworthiness as laid
out in the Marine Insurance Policy. Clause 5.2 only waives
breaches of implied warranties of seaworthiness where the
assured was not privy to the unseaworthiness of the vessel.
Hence, the appellant would not be saved by Clause 5.2 of the
Policy, and it cannot be said that the respondent had waived the
breach of warranty before the appellant's claim, by incorporating
Clause 5.2 of the Policy. [Para 6.2][194-A-D]
2.9 Under the facts and circumstances of the present case,
the breach of warranty occurred when the appellant informed the
respondent by letter dated 26.5.2010 that the subject vessel was
classed by 'I.R.S.', thereby indicating the subject vessel was
compliant with the ICC. After the subject vessel ran aground on
the midnight of 18.7.2010, the appellant requested the issuance
of General Average Guarantee, and the same was issued on
3.8.2010. At the outset, the General Average Guarantee in 'Form
B' dated 3.8.2010 issued by the respondent to the GAA was only
an undertaking to pay the shipowners and the GAA on behalf of
the appellant for their contribution to the General Average, as
and when such contribution was ascertained. This Guarantee was
issued as per Clause 2 of the Marine Insurance Policy, under
which the respondent had agreed to cover all general average
and salvage charges. At the time the aforesaid General Average
Guarantee dated 3.8.2010 was issued, the respondent was still
under the impression that the subject vessel is in compliance
with the ICC. Obviously, such impression was based on the
representation made by the appellant that the subject vessel was
classed with I.R.S. It was only by the e-mail dated 9.8.2010 from
its claim settling agent that the respondent came to know that
the subject vessel does not meet the prescribed classification.
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Subsequently, the respondent withdrew the Guarantee and
refused to pay the separate salvage security. Hence, the issuance
of the General Average Guarantee cannot be understood as a
waiver inasmuch as the respondent, on the date of such issuance,
did not have the knowledge of the breach of warranty committed
by the appellant and was only fulfilling its duty to contribute to
the General Average in good faith, as required by Clause 2 of the
Marine Insurance Policy. [Para 6.5][195-D-F]
2.10 Further, in any case, at the time of issuing the General
Average Guarantee, the respondent did not expressly state that
it was aware of the non-compliance with the ICC and it was waiving
the same. In fact, the moment the breach of warranty was
discovered, the respondent initiated steps to withdraw the
General Average Guarantee that had been issued by them and
refused to pay the additional salvage security, which clearly
demonstrates that there was no intent to waive the breach of
warranty. Therefore, it cannot be said that the respondent had
waived the breach of warranty through its conduct or
representations after the claim was made by the appellant. [Para
6.6][196-D-E]
2.11 Thus, the appellant had committed breach of warranty
and the same was not waived by the respondent. As a result the
respondent rightly repudiated the claim of the appellant. [Para
9][197-B]
Everbright Commercial Enterprises Pte Ltd v. Axa
Insurance Singapore Pte Ltd [2001] SGCA 24; Thames
and Mersey Marine Insurance Co Ltd v. H T Van Laun
& Co [1917] 2 KB 48; Liberian Insurance Agency Inc
v. Mosse [1977] 2 Lloyd's Rep 560; Nam Kwong
Medicines & Health Products Co. Ltd. v. China
Insurance Co. Ltd. [2002] 2 Lloyd's Rep. 591; Kam
Hing Trading (Hong Kong) Ltd. v. The People's
Insurance Co. of China (Hong Kong) Ltd. and Anr.
[2010] 4 HKLRD 630 - referred to.
John Dunt, Marine Cargo Insurance by (Informa Law,
Routledge, 2009) 166 - referred to.
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 971 of
2014.
From the Judgment and Order dated 12.11.2013 of the National
Consumer Disputes Redressal Commission, New Delhi in Consumer
Complaint No. 200 of 2012.
Parthiv K. Goswami, Syed Naqvi, Vinod Kumar, Rajesh Kumar,
Advs. for the Appellant.
Santosh Paul, Sr. Adv., Sudhanshu Das, Akshat Vikram, Ms. Arti
Singh, Advs. for the Respondents.
The Judgment of the Court was delivered by
MOHAN M. SHANTANAGOUDAR, J.
1. This appeal arises out of judgement of the National Consumer
Disputes Redressal Commission ('NCDRC') dated 12.11.2013, dismissing
the consumer complaint filed by the Appellant herein.
2. The timeline of events giving rise to the present appeal is as
follows: The Appellant is a partnership firm in the business of
import-export of various commodities, including steel coils. The
Respondent insurance company issued a Marine Cargo Cover Note
(hereinafter 'Cover Note') dated 14.5.2010 for a sum of 12,63,712.50
US Dollars, covering voyage from any port in China to Mumbai Port. It
was stated in the aforesaid Cover Note that a policy document would be
issued once the Appellant furnished the requisite particulars of the vessel
in which the cargo was being carried. Accordingly, the Appellant
forwarded the particulars of 'Khalijia-III', the vessel in which the cargo
was to be carried (hereinafter 'subject vessel'), to the Respondent, vide
letter dated 26.5.2010. It was stated in this letter that the subject vessel
was built in March 1985, and its "class" was specified as 'I.R.S.'. The
Appellant's case is that it had communicated the aforementioned details
regarding the subject vessel to the Respondent, as well as the
Respondent's insurance broker, as per the documents presented by the
Overseas Seller.
2.1 Thereafter, Hangzhou Cogeneration (Hong Kong) Co. Ltd.
(hereinafter 'Overseas Seller'), through its agent M/s Kirtanlal & Sons,
shipped 80 prime hot rolled steel coils weighing 2000 Metric Tonnes on
board the subject vessel from Caofeidian Port, China to the Appellant,
for discharge at Mumbai Port. The subject vessel was carrying on board
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consignments of prime hot rolled steel coils of seven other importers
who had also imported them from the same Overseas Seller.
Subsequently, the Respondent's brokers issued a single voyage policy
dated 2.7.2010 (hereinafter 'Marine Insurance Policy') to the Appellant.
It is undisputed that the Marine Insurance Policy covered all risks as per
the Institute Cargo Clauses (A), Institute War Clause, and Institute Strike
Clause.
2.2 The subject vessel reached Mumbai port on 6.7.2010 and
was allotted a berth on 14.7.2010 for discharge of the cargo. However,
on account of failure of the vessel's crane during discharge, further
discharge could not take place, and the subject vessel was removed
from the allotted berth by an order of the port authorities. Subsequently,
on 19.7.2010, the Appellant came to know that the subject vessel had
run aground on the midnight of 18.7.2010. Thus, by letter dated 20.7.2010,
the Appellant informed the Respondent that there was a possibility of
them claiming under the Marine Insurance Policy.
2.3 Thereafter, the shipowners engaged the services of M/S. Smit
Singapore Private Ltd. ('Salvors') for the purpose of recovering the
cargo. The shipowners also appointed M/s Richard Hogg Lindley as the
General Average Adjustor ('GAA'). The GAA sent an email dated
27.7.2010 to both the Appellant and the Respondent, stating that the
situation had given rise to a "General Average". The concept of General
Average, in maritime law, refers to a loss mitigation measure whereby
all those who are interested in a marine adventure make pro rata
contributions towards the losses sustained or expenditure incurred in
time of peril for the common good of all parties.1 For instance, if a ship
runs aground, as in the present case, the shipowners and the cargo
interests are mutually liable for reimbursing the losses arising from such
an event. If there is a contract of marine insurance in respect of the
voyage, the insurer will be liable for reimbursing the amount on behalf of
the assured cargo owner.
Accordingly, the Appellant requested its insurer i.e. the Respondent,
to issue a General Average Guarantee in 'Form B', as required by the
GAA. The Respondent consequently issued a guarantee dated 3.8.2010,
agreeing to pay the GAA on behalf of the Appellant, for contribution
1 Kyraki Nouassia, The Principle of Indemnity in Marine Insurance Contracts: A
Comparative Approach (Springer, 2007) 161.
M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL
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towards the General Average, as well as towards other special charges.
These documents were submitted by the Appellant to the GAA.
2.4 After the receipt of the General Average Guarantee, the GAA
requested the Appellant to pay a separate salvage security of 25 per
cent of the 'Cost, Insurance, and Freight' ('C.I.F.') value of their cargo,
which amounted to 256,880 US dollars. Hence, by letter dated 5.8.2010,
the Appellant requested the Respondent to issue the salvage security.
The Appellant contends that the Respondent did not issue the separate
salvage security as required, resulting in the withholding of the release
of the Appellant's consignment at Mumbai port, and exposing it to heavy
demurrage and likelihood of further damages. In addition to not issuing
the salvage security, the Respondent, by letter dated 20.8.2010, informed
the Appellant that they were withdrawing the General Average Guarantee,
'Form B' issued by them earlier in respect of the Appellant's consignment
on the subject vessel, on account of non-compliance with the 'Institute
Classification Clause' ('ICC') in the Marine Insurance Policy.
2.5 Unfortunately for the Appellant, on 7.8.2010 there was a
collision between the subject vessel and a navy vessel in the waters
near Mumbai Port. On 13.8.2010, the Salvors claimed a maritime lien on
the cargo. Further, the Salvors initiated arbitration proceedings against
the Appellant and the shipowners. During the course of the aforesaid
arbitration proceedings, the Salvors obtained interim orders from the
Hon'ble High Court of Mumbai, restraining the Appellant from removing
their consignment from Mumbai Port. Ultimately, vide order dated
24.8.2010, the High Court directed that the Appellant would be allowed
to take its consignment on furnishing security in the form of a bank
guarantee in the sum of Rs. 14 crores. The Appellant furnished the
security as directed and took delivery of the consignment from the
Mumbai Port Trust on 3.9.2010. On 2.12.2011, the Arbitrator passed an
award against the Appellant and other cargo owners, finding them liable
for reimbursing the costs incurred by the Salvors.
2.6 The Appellant, by letter dated 2.2.2012, requested the
Respondent to settle the losses incurred by it, and also forwarded a copy
of the aforementioned arbitration award dated 2.12.2011. A legal notice
was also sent on 21.6.2012, followed by a reminder on 4.7.2012, but
these went unanswered. Hence, the Appellant filed a consumer complaint
before the NCDRC against the Respondent, asking for compensation
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on account of the losses incurred, for deficiency in service, and for the
legal and other incidental expenses.
2.7 The Respondent did not file a written statement before the
NCDRC, and its request for consideration of written arguments was
rejected. However, counsel for the Respondent was allowed to make
oral submissions on the questions of law involved in the case. The
NCDRC found that the Appellant had failed to prove that the subject
vessel was in compliance with the ICC stated in the Marine Insurance
Policy. It noted a communication dated 9.8.2010, in which the
Respondent's claim settling agent in London had informed the Respondent
that the subject vessel was classed with Lloyd's Register of Shipping
until 10.10.2007, after which Lloyd's had withdrawn the aforesaid
classification, and that the subject vessel appeared to be outside the
scope of the ICC. The NCDRC further found that the subject vessel
had been more than 25 years old on the date of loss i.e. when it ran
aground on 18.7.2010, and the Appellant had not produced any document
showing that the subject vessel was classed as 'I.R.S.' Hence, the
complaint was dismissed.
3. Heard learned counsel for both parties.
3.1 Learned counsel for the Appellant submitted that the 'I.R.S.'
classification was granted to the subject vessel by the 'International
Register of Shipping', which is an independent classification society.
Further, that after the issuance of the Cover Note, the Appellant had
provided all particulars regarding the subject vessel, and expressly asked
the Respondent whether the subject vessel was acceptable. It was argued
that had the Respondent indicated at the time of the issuance of the
Marine Insurance Policy that the classification was not acceptable; the
Appellant could have paid an extra premium to purchase the policy. This
is as per the terms of Clause 6 of the Cover Note, which reads thus:
"6 For coverage of shipments by sea: the vessel shall conform to
the current Institute Classification Clause; otherwise the cover
shall be subject to additional steamer extra premium such as
coverage, under tonnage, non- classification and non approval extra
at underwriter's discretion."
Learned counsel also referred to the Institute Marine Cargo
Clause (A) ('Cargo Clause') within the Marine Insurance Policy,
which provides for waiver of any breach of implied warranties of
seaworthiness of the subject vessel. He argued that under the terms of
M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL
INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]
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the Cargo Clause, the Respondent would have the right to not indemnify
the Appellant only if the Appellant or its servants were privy to such
unseaworthiness. It was argued that the Appellant was merely a
cargo-importer, and not the vessel owner, and had communicated all the
particulars of the vessel as provided to it by the Overseas Seller.
Therefore, the Appellant could not be said to have been privy to the
unseaworthiness, if any, of the subject vessel.
Lastly, it was contended that indemnification by the Respondent
could not be dependent on the amount of loss caused to the insured or on
the nature of accident that caused the loss. It was argued that that once
the Respondent provided the General Average Guarantee, it was estopped
from claiming that the Appellant had breached the ICC.
3.2 On the other hand, learned counsel for the Respondent argued
that there was a clear breach of the ICC, inasmuch as the Appellant had
failed to disclose that the classification granted to the subject vessel by
Lloyd's Register of Shipping had been withdrawn on 10.10.2007. So far
as the I.R.S. classification is concerned, it was submitted that 'I.R.S.'
referred to Indian Register of Shipping, and not International Register of
Shipping, as claimed by the Appellant. Furthermore, it was contended
that although the Appellant claimed to possess a certificate proving the
'I.R.S.' classification of the subject vessel, it had neither submitted the
said certificate to the Respondent, nor produced the same before the
NCDRC.
In response to the Appellant's argument that the Respondent was
estopped from claiming breach of the ICC by its conduct in providing
the General Average Guarantee, it was submitted that at the time when
such Guarantee was sought for by the Appellant, the priority of all parties
involved was to ensure mitigation of losses by saving as much of the
cargo as possible. It was only after the collision of the subject vessel on
07.08.2010 that the Respondent began investigating into the seaworthiness
of the vessel, and found out that it was not a classed vessel at the time of
issuance of the Marine Insurance Policy. Therefore, it was submitted
that the Respondent would not be estopped from claiming breach of the
ICC merely because it had, in good faith, provided the General Average
Guarantee so as to mitigate the Appellant's losses.
4. Upon our perusal of the material on record and after hearing
the learned counsels, we find that two issues arise in the instant case:
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First, whether the Appellant had committed breach of warranty
with respect to compliance with the ICC?
Second, whether the Respondent had waived such breach of
warranty by the Appellant?
5. With respect to the first issue, it is not disputed that both the
Cover Note and the Marine Insurance Policy stated that the 'ICC' would
be one of the warranties/terms of insurance. Additionally, Clause 6 of
the Cover Note, as mentioned supra, prescribed that the subject vessel
needed to conform to the current ICC, in the absence of which, the
insurance cover would be subject to payment of an additional premium.
At this juncture, we find it useful to dwell upon the scope and
relevance of the ICC in marine insurance contracts. The ICC is drafted
and issued by the Joint Cargo Committee of the Lloyd's Marketing
Association (a premier marine insurance market in London) in
consultation with insurance and shipping interests. It is commonly
understood that this 'classification' relates to the seaworthiness of the
vessel in which the cargo is carried.2 The relevant portion of the latest
version of the ICC, as revised in 2001 ('ICC 01/01/2001'), which was in
force at the time of the Marine Insurance Policy, and continues to be in
force till date, reads as follows:
"QUALIFYING VESSELS
1 This insurance and the marine transit rates as agreed in the
policy or open cover apply only to cargoes and/or interests carried
by mechanically self-propelled vessels of steel construction classed
with a Classification Society which is:
1.1 a Member or Associate Member of the International
Association of Classification Societies (IACS), or
1.2 a National Flag Society as defined in Clause 4 below, but only
where the vessel is engaged exclusively in the coastal trading of
that nation (including trading on an inter-island route within an
archipelago of which that nation forms part).
Cargoes and/or interests carried by vessels not classed as above
must be notified promptly to underwriters for rates and conditions
to be agreed. Should a loss occur prior to such agreement being
obtained cover may be provided but only if cover would have
2 See John Dunt, Marine Cargo Insurance (Informa Law, Routledge, 2009)166.
M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL
INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]
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been available at a reasonable commercial market rate on
reasonable commercial market terms.
AGE LIMITATION
2 Cargoes and/or interests carried by Qualifying Vessels (as
defined above) which exceed the following age limits will be
insured on the policy or open cover conditions subject to an
additional premium to be agreed.
Bulk or combination carriers over 10 years of age or other vessels
over 15 years of age unless they:
2.1 have been used for the carriage of general cargo on an
established and regular pattern of trading between a range of
specified ports, and do not exceed 25 years of age, or
2.2 were constructed as containerships, vehicle carriers or
double-skin open-hatch gantry crane vessels (OHGCs) and have
been continuously used as such on an established and regular
pattern of trading between a range of specified ports, and do not
exceed 30 years of age.
xxx
PROMPT NOTICE
5 Where this insurance requires the assured to give prompt notice
to the Underwriters, the right to cover is dependent upon
compliance with that obligation." (emphasis supplied)
As is evident from the above, the ICC 01/01/2001 imposes two
requirements to ensure that the vessel complies with a certain minimum
standard of seaworthiness. The first is a classification requirement which
requires that the vessel should be classed with a Classification Society
which is a Member/Associate Member of the International Association
of Classification Societies ('IACS') or, in the case of vessels engaged
exclusively in coastal trading, a National Flag Society. The second is an
age limitation in respect of the insured vessel. The IACS consists of 12
member societies, as listed below:
(i)
American Bureau of Shipping (A.B.S.)
(ii)
Bureau Veritas
(iii)
China Classification Society (C.C.S.)
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(iv)
Croatian Register of Shipping (C.R.S.)
(v)
Det Norske Veritas-Germanischer Lloyd (D.N.V.-G.L.)
(vi)
Indian Register of Shipping (I.R.S.)
(vii) Korean Register of Shipping (K.R.)
(viii) Lloyd's Register (L.R.)
(ix)
Nippon Kaiji Kyokai (ClassNK)
(x)
Polish Register of Shipping (P.R.S.)
(xi)
Registro Italiano Navale (R.I.N.A.)
(xii) Russian Maritime Register of Shipping (R.S.)
The official statement provided by the IACS about its Quality
Standards is significant for understanding why classification of a cargo
vessel with a member-society of the IACS, as opposed to any other
society, is considered as a yardstick to judge whether the voyage policy
can be reasonably insured. Members of the IACS have to comply with
the IACS 'Quality System Certification Scheme' (QSCS), which, after
25 years of continuous evolution, is considered as the 'gold standard' for
ship classification societies. Moreover, every IACS member is required
to have its own 'Internal Quality Management System' for ensuring that
classed vessels meet certain minimum criteria of quality. The audits of
all IACS members, and of those societies who wish to be considered for
such membership, are carried out by independent accreditation bodies,3
which lends further legitimacy to the classification accorded to vessels
by IACS members.
Thus, it can be inferred from the above that an underwriter/insurer
would usually trust the quality of, and be prepared to issue a reasonable
premium for, a vessel classed with an IACS member society. On the
other hand, the insurer may demand a higher premium, or deny insurance
cover altogether, for a voyage in respect of a vessel classed by a
non-IACS member society. Hence, the ICC prescribes classification
with a member of the IACS as the baseline for ensuring that the policy
involves less risk for the underwriter.
3 International
Association
of
Classification
Societies,
Quality
System Certification Scheme (QSCS), http://www.iacs.org.uk/quality/qualitysystem-certification-scheme- qscs/ (Last visited Feb. 2, 2020).
M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL
INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]
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Therefore, Sub Clause 1 of the ICC 01/01/2001 provides that
cargo interests are obligated to promptly notify insurance underwriters
if the cargo is being carried by a vessel which is not classed as prescribed
in the ICC, and Clause 5 makes it clear that failure to provide such
information will lead to exclusion of the insurance cover.
5.1 It has been contended by the Appellant that the NCDRC has
erred in relying on the older version of the ICC, i.e. the 1978 version.
We are in agreement with the said contention of the Appellant, inasmuch
as the 1978 version of the ICC was replaced by the ICC 13/4/92, the
ICC 1/8/97, and the ICC 01/01/2001. As mentioned supra, the ICC 01/
01/2001 is the most recent version of the ICC, and the one which is
relevant for the purpose of the present case.
However, the most recent version of the ICC, i.e., ICC 01/01/
2001, parts of which we have quoted earlier, does not help the Appellant's
case inasmuch as it is stricter in its import. We find it useful to undertake
a comparative analysis of the older versions of the ICC and the ICC 01/
01/2001 in this regard.