Supreme court citation

You should provide Name of the parties or case No.

case no and party details not known. case pertains to marine claim.

It appears you are taking it very lightly and in casual manner and donot deserve getting the information.

If you donot have case no and name of party then you should have furnished atleast the information you have or the copy of news or reference you looked into.

what you provided is simply a reference no of some law cases publishing house ,had it been the no. of AIR or SCR then the position would have been different.

Hon’ble Supreme Court, reported in 2010 CTJ 1109 (Supreme Court) (CP), wherein Their Lordships have held that ‘seller having no insurable interest in the goods, the insurance company was not to reimburse the loss arising from mis-delivery of the carton’

                                               REPORTABLE

 

               IN THE SUPREME COURT OF INDIA

               CIVIL APPELLATE JURISDICITION

               CIVIL APPEAL NO. 3245 OF 2005

Contship Container Lines Ltd.                      ...Appellant

      Versus

D.K. Lall & Ors.                                   ...Respondents

(With C.A. No.6232 of 2004 and C.A. No.8276 of 2003)

 

                       JUDGMENT

 

T.S. THAKUR, J.

 

1.    These three cross appeals arise out of an order passed

by the National Consumer Disputes Redressal Commission,

New    Delhi   (hereinafter   referred   to   as    the   `National

Commission') whereby it has dismissed the complaint filed
                              2

by the respondent Shri D.K. Lall, proprietor of M/s Lall

Enterprises against respondent-National Insurance Company

Ltd. while granting relief in part to the complainant against

Contship Container Lines Ltd., the shipping company to

whom the      consignment in question was entrusted for

delivery to the consignee in Barcelona, Spain. The facts

giving rise to the controversy may be summarised as under:

2.   M/s D.K. Lall Enterprises, a sole proprietary concern,

claims to have received an order for export of iron furniture

and iron handicraft items from M/s Natural Selection

International, a Spanish purchaser of those items. A similar

order for export of miniature paintings is also said to have

been received by the said concern from M/s Pindikas another

concern located in Spain. The case of M/s D.K. Lall

Enterprises (hereinafter to as the `Exporter') is that all the

items meant for export in terms of the above orders were

packed in 122 different cartons for shipment to the

purchasers in Spain. According to the exporter while

miniature paintings were packed in one carton meant for
                                3

export to M/s Pindikas, the iron furniture items meant for

export to M/s Natural Selection International were packed in

121 other cartons. These packages were, according to the

Exporter, checked and cleared by the Customs Authority at

Jodhpur and finally stuffed in one simple container, for which

purpose the exporter hired the services of M/s Samrat

Shipping & Transport System Pvt. Ltd. through its local

agent who forwarded the container to Bombay where it was

put on board CMBT Himalaya, a vessel belonging to M/s

Contship Container Lines Ltd.-appellant in C.A. No.6232 of

2004. It is noteworthy that the exporter had obtained a

Marine Cargo/Inland transit insurance policy to cover risks

enumerated in the policy.

3.   The case of the exporter is that the consignment

reached Barcelona, Spain on 1st March, 1997 and that while

121 cartons had been duly received by M/s Natural Selection

International,   one   carton       marked   for   M/s   Pindikas

comprising miniature paintings was not so delivered to the

consignee. The claim for payment of compensation on
                             4

account of the alleged deficiency of service having been

denied by the Shipping Company as also by the Insurance

Company the exporter filed O.P. No.272 of 1997 before the

National Consumer Disputes Redressal Commission, New

Delhi, claiming compensation to the tune of Rs.39,23,225/-

representing the value of the miniature paintings with

interest pendente lite and till realization. The respondents

contested the claim made against them, inter alia, on the

ground that the petitioner was not a consumer and that the

case involved complicated questions of fact and law, which

could not be determined in summary proceedings       before

the Consumer Commission. It was also alleged that the

exporter had never stuffed/exported the carton containing

miniature paintings and that the claim made by the exporter

to that effect was false. Reference was made to the Bill of

Lading according to which the particulars declared by the

shipper/exporter had not been checked by the carrier.     It

was also alleged that under clause 17 of the Bill of Lading

and Article IV Rule 5 of The Indian Carriage of Goods by Sea
                               5

Act, 1925 the liability of the carrier was limited to 2 SDRs

per kg of weight, which came to 400 SDRs for the loss of the

undelivered   package   weighing   200   kgs.   equivalent   to

Rs.21,428/- only. The respondents further alleged that the

cartons had not been properly marked with the result that

the same could not be segregated before being delivered to

the consignee concerned.

4.   The Insurance Company also filed a separate reply,

alleging that the exporter was in collusion with the buyers

trying to perpetrate a fraud on them with a view to making

an undeserved & unjust financial gain. The company alleged

that the valuation indicated in the policy was C.I.F. + 10%

whereas the invoice FOB (Free on Board) and the Bill of

Lading was clean. The company asserted that the liability of

the seller came to an end no sooner the consignment was

loaded on to the ship leaving the exporter with no insurable

interest in the consignment.
                             6

5.   The Commission received three affidavits as evidence

one filed by the exporter, the second by Carrier while the

third was filed by Mr. Ramesh Goyal, Senior Branch Manager

of the Insurance Company. By its order dated 14th July,

2003 the Commission held that the Insurance Policy had

been obtained on the representation that the transactions

between the exporter and the purchasers were on C.I.F.

basis whereas the consignment had in fact been sent on FOB

basis which absolved the Insurance Company of any liability

for the failure of the insured to maintain utmost good faith

essential for a marine insurance policy. The Commission

noted that in the declaration of the consignment sent to the

insured no details of the conditions of shipment were

mentioned.   There   was   thus,   in   the   opinion   of   the

Commission, absence of good faith on that account also. The

Commission further held that the policy covered risks only at

sea and "that ware house to ware house" coverage was

limited to risk arising from inland transit alone. The terms

of the policy did not according to the Commission cover the
                             7

risk till delivery was made to the consignee. The Commission

on that basis held that there was no deficiency of service on

the part of the Insurance Company.

 

6.   In so far as the claim against the carrier was

concerned, the Commission recorded a finding that the

service provided by them was deficient but held that the

liability of the carrier for payment of compensation to the

consignee was limited by the provisions of the Indian

Carriers of Goods by Sea Act, 1925. The Commission noted

that since no value of goods was given in the Bill of Lading

the only amount which the exporter was entitled to was a

sum equivalent to 1800$ in Indian rupee as per the then

prevailing rate of exchange with interest @ 9% from

1.7.1998 till the date of payment with costs of Rs.10,000/-.

The complaint, so far as M/s Samrat Shipping & Transport

System Pvt. Ltd. was concerned, was dismissed on the

ground that it was acting only as an agent of the carrier. A

review petition filed against the said order by Mr. D.K. Lall
                                 8

having been dismissed by the Commission by its order dated

29th October, 2003, the appellants have filed the present

appeals to assail the correctness of the orders passed by the

Commission.

7.   Two distinct issues fall for our consideration, one

touching the liability of the Insurance Company and the

other concerning the liability of the carrier.   On behalf of the

insurance company a two-fold submission was advanced

before   us.   Firstly,   it   was   contended   that   since   the

transaction between the exporter and the purchaser in Spain

was on FOB basis, the exporter had no insurable interest in

the goods once the same were delivered to the carrier. It

was argued that in a FOB transaction the property in goods

stands transferred to the purchaser no sooner the goods are

entrusted to the carrier or at least when the same cross the

customs barrier for shipment. This implies that all the risks

relating to such goods are that of the purchaser who alone

could sue the carrier or insurance company if there was an

insurance cover obtained by him for such goods. The terms
                               9

of   the   transaction   between    the    shipper     and      the

purchaser did not in the instant case reserve in favour of the

shipper any right or interest in the goods so as to constitute

an insurable interest within the meaning of Section 7 of the

Marine Insurance Act, 1963.

8.    Secondly,   it   was   contended    that   a   contract    of

insurance was based on utmost good faith not only by

reason of the general principles governing such contracts

but also by reason of Section 19 of the Marine Insurance

Act, 1963. The shipper had not, however, observed utmost

good faith while obtaining the insurance cover from the

respondent-insurance company inasmuch as the shipper had

taken out an insurance policy from the company on the

representation that the goods were being dispatched on CIF

(cost insurance and freight basis) while in reality the goods

had been sent by the shipper on FOB basis which constituted

a material non-disclosure hence failure of utmost good faith

by him within the meaning of Section 19 of the Act

aforementioned.
                               10

9.   Section 3 of the Marine Insurance Act, 1963 defines

marine insurance to mean an agreement whereby insurer

undertakes to indemnify the assured, in the manner and to

the extent thereby agreed, against marine losses, that is to

say, losses incidental to a marine adventure. Section 4 of

the Act provides that a contract of marine insurance may, by

its express terms, or by usage of trade, be extended so as

to protect the assured against losses on inland waters or on

any land risk which may be incidental to any sea voyage.

Section 5 permits every lawful "marine adventure" to be the

subject matter of a contract of marine insurance.            The

expression "marine adventure" is defined by Section 2(d) in

the following words:

          "2(d): "marine adventure:         includes   any
          adventure where -

          (i)    any insurable property is exposed to
                 maritime perils;

          (ii)   the earnings or acquisition of any
                 freight, passage money, commission,
                 profit or other pecuniary benefit, or the
                 security for any advances, loans, or
                 disbursements is endangered by the
                              11

               exposure of insurable        property   to
               maritime perils;

          (iii) any liability to a third party may be
                incurred by the owner of, or other
                person interested in or responsible for,
                insurable    property  by   reason    of
                maritime perils".

 

10. The expression "maritime perils" referred to in Section

2(d) supra is defined in Section 2(e) 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 seas, fire, war perils, pirates, rovers,
          thieves, captures, seizures, restraints and
          detainments of princes and people, jettisons,
          barratry and any other perils which are either
          of the like kind or may be designated by the
          policy".

 

11. Section 7 of the Act stipulates that subject to the

provisions of the Act every person interested in a marine

adventure has an insurable interest. It reads:

          "Section 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.
                              12

          (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".

 

12. What is noteworthy is the use of the words "interested

in a marine adventure" appearing in Section 7 of the Act.

The expression "interested" has not been defined in the Act

although sub-section (2) to Section 7 gives an indication of

what would constitute `interest' in a marine adventure. The

question is whether a seller of goods on FOB basis like the

complainant in the present case can be said to be `interested

in marine adventure' within the meaning of Section 7. If the

answer be in the affirmative, the complainant would have an

insurable interest but not otherwise.

13. The provisions of Marine Insurance Act, 1906 enacted

by the British Parliament are in pari materia with those

contained in the Indian Act. The former is in fact a precursor
                                     13

to the latter.   The definition of `insurable interest' given in

the English legislation is the same as the one given in

Section 7 of our enactment. Judicial pronouncements by

English Courts would, therefore, be both relevant and helpful

in   understanding      the   true        purport   of   the   expression

`insurable interest'.

14. Halsbury's Laws of England, Fourth Edition has,

while dealing with the expression "insurable interest" under

the Marine Insurance Act, 1906 prevalent in that country,

explained the purport of the expression "interest" in a

marine adventure in the following words:

           "A person may be said to be interested in an
           event when, if the event happens, he will
           gain an advantage, and, if it is frustrated, he
           will suffer a loss, and it may be stated as a
           general principle that to constitute an
           insurable interest it must be an interest such
           that the peril would by its proximate effect
           cause damage to the assured, that is to say
           cause him to lose a benefit or incur a liability.
                             14

15. Halsbury's refers to the decision of House of Lords in

Lucena V. Craufurd (1806) 2 Bos & PNR 269 as to the

meaning of the expression "insurable interest":

          "A man is interested in a thing to whom
          advantage may arise or prejudice happen
          from the circumstances which may attend
          it;...and whom it importeth that its condition
          as to safety or other quality should continue.
          Interest does not necessarily imply a right to
          the whole or part of the thing, nor
          necessarily and exclusively that which may
          be the subject of privation, but the having
          some relation to, or concerning the subject of
          the insurance; which relation or concern by
          the happening of the perils insured against,
          may be so effected as to produce a damage,
          determent or prejudice to the person
          insuring.     And where a man is so
          circumstanced with respect to matters
          exposed to certain risks and dangers as to
          have a moral certainty of advantage or
          benefit but for those risks and dangers, he
          may be said to be interested in the safety of
          the thing. To be interested in the
          preservation of a thing is to be so
          circumstanced with respect to it as to have
          benefit from its existence, prejudice from its
          destruction."

 

16. Dealing with the question whether the seller of goods

retains any insurable interest, Halsbury explains:
                             15

          "When, however, the property which is the
          subject matter of the contract of sale has
          completely passed from the seller to the
          buyer or when it has under the contract of
          sale become completely at the buyers' risk,
          the seller ceases to have any insurable
          interest, and the buyer acquires one. Thus, a
          contract for the sale of goods to be supplied
          on board, a particular vessel may be so
          framed that the property in them and the risk
          of their loss do not pass to the buyer until a
          complete cargo has been loaded, in which
          case the buyer has no insurable interest until
          the complete cargo has been loaded; or the
          contract may be so framed that the property
          in and the risk as to any part of the goods
          passed to the buyer on shipment, in which
          case the buyer acquires an insurable interest
          on any part of the goods then shipped."

                                   (emphasis supplied)

 

17. Reference may also be made by us to Macgillivray on

Insurance Law. While dealing with insurable interest under

contracts for the Sale of Goods, the author has the following

to say:

          "The unpaid seller of goods who has parted
          with property in them has no insurable
          interest in them unless either they remain at
          his risk or he has a lien, charge or other
          security interest over them for the price. So
                              16

          long as the risk remains with him, he has an
          interest whether the property has passed or
          not, and the measure of his interest is the
          purchase price or the actual value of the
          goods, whichever is the greater.

                Even when risk and property have both
          passed, the seller retains an insurable
          interest in the goods while he still possesses
          them because, if he is unpaid in whole or
          part on account of the buyer's insolvency or
          for other reasons, he has an interest in
          respect of his lien for the purchase money.
          His possession of the goods would also
          permit him to insure on the buyer's behalf if
          his intention is clear and the policy does not
          forbid it."

                                     (emphasis supplied)

 

18. We may now refer to the provisions of the Sales of

Goods Act, 1930 relevant to the transfer of the property in

goods to the purchaser specially in a FOB-transaction like

the one in the instant case.       Section 19 of the said Act

provides that in a contract for the sale of specific or

ascertained goods, the property in them is transferred to the

buyer at such time as the parties to the contract intend it to

be transferred and that for the purpose of ascertaining the
                              17

intention of the parties regard shall be had to the terms of

the   contract,   the   conduct    of   the   parties   and   the

circumstances of the case. Sections 20 to 24 of the said Act

prescribe rules for ascertaining the intention of the parties

as to the time at which the property is to pass to the buyer.

One of the said rules is that in unconditional contracts for

the sale of specific goods in a deliverable state, the property

in the goods passes to the buyer when the contract is made

irrespective of the fact that the time of payment of the price

or the time for the delivery of the goods or both are

postponed. Yet another rule contained in Section 23 of the

Act is that where contract for the sale of uncertained or

future goods by descripttion are unconditionally appropriated

to the contract either by the seller with the assent of the

buyer or by the buyer with the assent of the seller, the

property in the goods passes to the buyer. So also where

the seller delivers the goods to the buyer or to a carrier or

other bailee for the purpose of transmission to the buyer

and does not reserve the right of disposal, he is deemed to
                              18

have   unconditionally   appropriated    the   goods   to   the

contract. Section 23(2) which stipulates that rule reads:

          "Delivery to carrier. - Where, in pursuance
          of the contract, the seller delivers the goods
          to the buyer or to a carrier or other bailee
          (whether named by the buyer or not) for the
          purpose of transmission to the buyer, and
          does not reserve the right of disposal, he is
          deemed to have unconditionally appropriated
          the goods to the contract."

 

19. Section 25 provides that where there is a contract for

the sale of specific goods or where goods are subsequently

appropriated to the contract, the seller may, by the terms of

the contract or appropriation, reserve the right of disposal of

the goods until certain conditions are fulfilled. In such a

case, notwithstanding the delivery of the goods to a buyer or

to a carrier or other bailee for the purpose of transmission to

the buyer, the property in the goods does not pass to the

buyer until the conditions imposed by the seller are fulfilled.

Section 26 of the Act provides that unless otherwise agreed,

the goods remain at the seller's risk until the property
                             19

therein is transferred to the buyer but when the property

therein is transferred to the buyer, the goods are at the

buyer's risk whether delivery has been made or not. Section

26 may at this stage be extracted:

         "Section 26: Risk prima facie passes
         with property - Unless otherwise agreed,
         the goods remain at the seller's risk until the
         property therein is transferred to the buyer,
         but, when the property therein is transferred
         to the buyer, the goods are at the buyer's
         risk whether delivery has been made or not:

          Provided that, where delivery has been
          delayed through the fault of either buyer or
          seller, the goods are at the risk of the party
          in fault as regards any loss which might not
          have occurred but for such fault:

          Provided also that nothing in this section
          shall affect the duties or liabilities of either
          buyer or seller as a bailee of the goods of
          the other party."

 

20. Section 39, inter alia, provides that delivery of the

goods to a carrier whether named by the buyer or not, is

prima facie deemed to be delivery of the goods to the

buyer. Sections 46 and 47 deal with unpaid seller's rights

and lien and, inter alia, provide that unpaid seller shall,
                              20

subject to the provisions of the Act and of any law for the

time being in force, have a lien on the goods for the price

while he is in possession of them and that the seller can

retain the possession of the goods until payment or tender

of the price in situations where the buyer has become

insolvent or goods have been sold on credit, but the term of

credit has expired. The lien, however, stands terminated in

terms of Section 49 of the Act when the goods are delivered

to a carrier for the purpose of transmission to the buyer

without reserving the right of disposal of the goods.

21. 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
                              21

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.

22. It is common ground that the seller had, in the case at

hand, reserved no right or lien qua the goods in question.

In the absence of any contractual stipulation between the

parties the unpaid seller's lien over the goods recognised in

terms of Sections 46 and 47 of the Sale of Goods Act, 1930

stood terminated upon delivery of the goods to the carrier.

The goods were from that stage onwards held by the carrier

at the risk of the buyer and the property in the goods stood

vested in the buyer. The principle underlying transfer of title
                              22

in goods in FOB contracts was stated by a Constitution

Bench of this Court in B.K. Wadeyar V. Daulatram

Rameshwarlal (AIR 1961 SC 311). The question as to

the transfer of title in the goods arose in that case in the

context of a fiscal provision but the principle relating to the

transfer of title in goods in terms of FOB contract was

unequivocally recognised. This Court held that in FOB

contracts for sale of goods, the property is intended to pass

and does pass on the shipment of the goods. The National

Commission was, therefore, right in holding that the seller

had no insurable interest in the goods thereby absolving the

insurance company of the liability to reimburse the loss, if

any, arising from the mis-delivery of such goods.

23. We consider it unnecessary to delve any further on this

aspect of the matter for in our opinion the claim made by

the shipper against the insurance company has been rightly

rejected by the National Commission on the ground that the

shipper had not observed utmost good faith while obtaining

the insurance cover. The principle that insurance is a
                              23

contract founded on good faith is of vintage value. In Carter

V. Boehm (1766) 3 Burr 1905 one of the earliest cases on

the subject the principle was stated by Lord Mansfield in the

following words:

              "Insurance is a contract of speculation.
          The special facts upon which the contingent
          chance is to be computed lie most commonly
          in the knowledge of assured only; the
          underwriters trusts to his representation and
          proceeds upon confidence that he does not
          keep back any circumstance in his knowledge
          to mislead the underwriter into a belief that
          the circumstance does not exist.            The
          keeping back such circumstance is a fraud,
          and therefore the policy is void. Although the
          suppression should happen through mistake,
          without any fraudulent intention, yet still the
          underwriter is deceived and the policy is
          void; because the risqui run is really
          different from the risqui understood and
          intended to be run at the time of the
          agreement....The policy would be equally void
          against the underwriter if he concealed......
          Good Faith forbids either party, by concealing
          what he privately knows, to draw the other
          into a bargain from his ignorance of the fact,
          and his believing the contrary."

24. Section 19 of the Marine Insurance Act, 1963 grants

statutory recognition to the above principle. It reads:
                             24

         "19. Insurance is uberrimae fidei. - A
         contract of marine insurance is a contract
         based upon the utmost good faith, and if
         the utmost good faith be not observed by
         either party, the contract may be avoided
         by the other party."

 

25. In United India Insurance Company Ltd. V. M.K.J.

Corporation (1996 (6) SCC 428) this Court declared good

faith as the very essence of a contract of insurance in the

following words:

         "It is a fundamental principle of Insurance
         law that utmost good faith must be observed
         by the contracting parties. Good faith forbids
         either party from concealing (non-disclosure)
         what he privately knows, to draw the other
         into a bargain, from his ignorance of that fact
         and his believing the contrary. Just as the
         insured has a duty to disclose, similarly, it is
         the duty of the insurers and their agents to
         disclose all material facts within their
         knowledge, since obligation of good faith
         applies to them equally with the assured. The
         duty of good faith is of a continuing nature.
         After the completion of the contract, no
         material alteration can be made in its terms
         except by mutual consent. The materiality of
         a fact is judged by the circumstances existing
         at the time when the contract is concluded."
                               25

26. To the same effect is the decision of this Court in

Modern Insulators Ltd. V. Oriental Insurance Co. Ltd.

(2000 (2) SCC 734) where this Court observed:

               "It is the fundamental principle of
         insurance law that utmost good faith must be
         observed by the contracting parties and good
         faith forbids either party from non-disclosure
         of the facts which the parties know. The
         insured has a duty to disclose and similarly it
         is the duty of the insurance company and its
         agents to disclose all material facts in their
         knowledge since the obligation of good faith
         applies to both equally."

 

27. The National Commission has, in the instant case,

recorded a clear finding the        correctness whereof has not

been disputed before us that the insurance cover obtained

by the exporter envisaged goods being despatched on CIF

basis whereas the goods were, in fact, sent on FOB basis.

This was a material departure which breached the duty of

utmost good faith cast upon the exporter towards the

insurance company.    If the proposal for insurance had

disclosed that the goods will be sent on FOB basis, the
                                       26

question whether the supplier had any insurable interest in

the goods and if he had what premium the company would

charge for the same may have assumed importance. Be that

as it may, the duty to make a complete disclosure not

having   been    observed         by    the      exporter,    the    National

Commission was justified in holding that the insurance

company stood absolved of its liability under the contract

and in dismissing the petition qua the said company.

28. That brings us to the question whether the National

Commission      was    justified       in   holding    that    the    service

rendered by the carrier was deficient, and if so, whether it

was right in awarding rupee equivalent of US$ 1800 by way

of   compensation.          The   National        Commission         has   on

appreciation    of    the    material       on    record     come     to   the

conclusion that the consignment meant to be delivered to

Pindikas was misdelivered and what was offered to Pindikas

did not actually contain miniature paintings meant for the

said consignee. That finding is, in our opinion, justified on

the material on record from which it is evident that out of
                             27

122 cartons 121 cartons were delivered to M/s Natural

Selection International while the only remaining carton when

checked in the presence of the General Counsulate of India

was found to contain steel furniture items.      The inference,

therefore, is that the carton containing miniature paintings

had been misdelivered by the carrier who ought to have

taken care to deliver the same to the consignee concerned.

The National Commission has rightly rejected the contention

that the carton was not properly marked making it difficult

for the shipping company to separate the same from other

cartons   which   were   meant    for   M/s   Natural   Selection

International. There is indeed, no room for us to interfere

with the findings of the National Commission. The question,

however, is whether the National Commission was justified

in awarding rupee equivalent of US$ 1800 to the shipper by

way of compensation. There are two errors which are

evident in the order by the National Commission in that

regard.   Firstly, the National Commission has instead of

going by the number of packages entered in the Bill of
                              28

Lading gone by the packages mentioned in the packing list.

The Bill of Lading was the only document on the basis of

which compensation could be determined against the carrier

in terms of the provisions of The Indian Carriage of Goods

by Sea Act, 1925 and the Schedule thereto. Section 2 of the

said Act provides that the rules set out in the Schedule shall

have effect in connection with the carriage of goods by sea

in ships carrying foods from any port in India to any other

port whether in or outside India. Section 4 requires that

every Bill of Lading or similar document of title issued in

India to which Rules apply shall contain an express

statement that it is to have effect subject to the provisions

of the said Rules as applied by the Act. In terms of Rule 5 of

Article IV neither the carrier nor the ship shall be liable for

any loss or damage to or in connection with goods in excess

of the amounts stipulated therein. Rule 5 of Article IV to the

extent the same is relevant for our purposes may be

extracted at this stage:
                               29

          "5. Neither the carrier nor the ship shall in
          any event be or become liable for any loss or
          damage to or in connection with goods in an
          amount exceeding 666.67 Special Drawing
          Rights per package or unit or two Special
          Drawing Rights per kilogram of gross weight
          of the goods lost or damaged, whichever is
          higher, or the equivalent of that sum in other
          currency, unless the nature and value of such
          goods have been declared by the shipper
          before shipment and inserted in the bill of
          lading.

                Where a container, pallet or similar
          article of transport is used to consolidate
          goods, the number of packages or units
          enumerated in the bill of lading and as
          packed in such article of transport shall be
          deemed to be the number of packages or
          units for the purposes of this paragraph as
          far as these packages or units are concerned.

                Neither the carrier nor the ship shall be
          entitled to the benefit of limitation of liability
          provided for in this paragraph if it is proved
          that the damage resulted from an act or
          omission of the carrier done with intent to
          cause damage, or recklessly and with
          knowledge that damage would probably
          result".

 

29. A careful reading of the above would show that in cases

where a container, pallet or similar article of transport is

used to consolidate goods, the number of packages or units
                              30

enumerated in the Bill of Lading and as packed in such

article of transport shall be deemed to be the number of

packages or units for purposes of Rule 5 as far as these

packages or units are concerned.

30. It is not in dispute that 122 cartons despatched by the

shipper were consolidated in a container, nor is it disputed

that there was only one package indicated in the Bill of

Lading concerning the consignment meant for Pindikas. The

National Commission could not go beyond the Bill of Lading

and award compensation on the basis of the packing list

which may have mentioned several packages consolidated in

one bigger package, delivery whereof was acknowledged in

the Bill of Lading. The Commission ought to have taken the

number of packages to be only one as mentioned in the Bill

of Lading.

31. The      second   error   committed   by   the   National

Commission is equally manifest.    The Commission appears

to have gone by the unamended provisions of Rule 5 in

which the amount of compensation was stipulated to be US$
                               31

100 per package. After the amendment to the Schedule in

the   year   1992   by   Act   28   of   1993   the   amount   of

compensation was to be paid in terms of Special Drawing

Rights. As noticed above the shipper would be entitled to the

compensation of 666.67 Special Drawing Rights per package

or two Special Drawing Rights per kilogram according to the

gross weight of the goods lost or damaged whichever is

higher. The single package meant for Pindikas weighed 200

kgs. The amount of compensation payable by reference to

the weight of the package would come to 400 Special

Drawing Rights. The amount of compensation, actually

payable would, however, be 666.67 Special Drawing Rights

being higher of the two amounts.

32. It was next argued that the shipper would be entitled

to the value of the goods misdelivered which according to

the shipper was not less than Rs.39,23,225/-. There is no

merit in that submission. We say so because compensation

by reference to the value of the goods lost or damaged can

be claimed only if the nature or the value of such goods has
                              32

been declared by the shipper before shipment and inserted

in the Bill of Lading. Even assuming that the nature and the

valuation of the goods had been declared by the shipper

before the shipment the requirement of `insertion of the

same in the Bill of Lading' was not satisfied in the present

case. The Bill of Lading does not mention either the nature

or the value of the goods. That being so, compensation of

rupee equivalent of 666.67 Special Drawing Rights was the

only amount that could be awarded by the Commission to

the shipper.    In as much as the Commission awarded

US$1800 it committed a mistake that calls for correction.

 

33. In the result we dismiss C.A. No.8276 of 2003 but

partly allow C.A. Nos.3245 of 2005 and 6232 of 2004 to the

extent that the amount of compensation payable to the

shipper shall stand reduced to the rupee equivalent of

666.67 Special Drawing Rights only.     The order passed by

the National Commission shall stand modified to the above

extent leaving the parties to bear their own costs.
                 33

 

                      ......................................J.
                      (MARKANDEY KATJU)

 

                      ......................................J.
                      (T.S. THAKUR)
New Delhi:
March 16, 2010


thanks for the judgement