Allahabad High Court
Oriental Insurance Co. Ltd. vs M/S Rain Bow Steels Ltd. on 14 October, 2025
HIGH COURT OF JUDICATURE AT ALLAHABAD
Judgment Reserved on- 26.09.2025
Judgment Delivered on- 14.10.2025
Neutral Citation No. - 2025:AHC:182723
Court No. - 38
Case :- FIRST APPEAL No. - 566 of 1992
Appellant :- Oriental Insurance Co. Ltd.
Respondent :- M/S Rain Bow Steels Ltd.
Counsel for Appellant :- A.B. Saran, Amaresh Sinha
Counsel for Respondent :- A.P. Mathur
Hon'ble Sandeep Jain, J.
1. The instant appeal has been filed by the defendant The Oriental Insurance Company Ltd. under section 96 CPC against impugned judgment and decree dated 30.5.1992 passed by the court of IIIrd Additional Chief Judicial Magistrate/Civil Judge, Muzaffarnagar in O.S. No. 253 of 1986 Messers Rainbow Steels Ltd. versus The Oriental Insurance Company Ltd., whereby the plaintiff 's suit has been decreed.
Plaint case
2. Factual matrix in brief is that the plaintiff Messers Rainbow Steels Ltd. filed original suit no. 253 of 1986 against the defendant-appellant with the averments that the plaintiff carries on the business of manufacturing steel ingots etc. from iron scraps through electric arc furnace at Muzaffarnagar. On account of scarcity of the iron scrap in India, the Government of India permitted the import of iron scrap from abroad through the Metal Scrap Trading Corporation, for short MSTC. Messers Rathi Alloys & Steels Ltd. have been the group leader in respect of the disputed supplies for the northern zone, including the supplies to the plaintiff. Messers Rathi Ispat Ltd. Ghaziabad was also one of the importers through the said group leader in respect of the same supplies referred to hereinafter and Messers Rathi Ispat Ltd., was a sister concern of Messers Rathi Alloys & Steels Ltd.
3. It was further averred that under the group, plaintiff and others, which included Messers Rathi Ispat Ltd, Ghaziabad and others, placed orders dated 17.9.1985 with Messers Nissho Iwai American Corporation, Japan for import of melting scrap of carbon steel, shredded scrap, hereinafter referred to as a scrap, to be trans-shipped from New York to India. The plaintiffs scrap amounted to 1837.500 metric tons and the consignment of the group was trans-shipped from New York by vessel MV Bijela. It was further submitted that the value of the above goods aforesaid in Indian currency was about ₹ 50 lakhs, which included the subsequent expenditure from port to the destination i.e. Muzaffarnagar.
4. The plaintiff was informed through telegram received on 19.11.1985 that the said goods of the plaintiff have been shipped from Providence Rhode(New York) to Kandla port in India and that the plaintiff may take the insurance and accordingly, the plaintiff approached the defendant's branch office situated at Muzaffarnagar, which issued the covernote covering all risk including rail road risks on 21.11.1985 after charging the relevant premium through the relevant marine insurance policy. Subsequently, the amount insured was increased to ₹ 50 lakhs, additional premium was paid, as desired by the defendant and policy was issued on 21.11.1985 and additional endorsement relating to the enhanced amount was also issued on 25.11.1985. It is the case of the plaintiff that the above marine policy number 22247/20/11/00024/85 covered all marine risks including general average, contribution and salvage charges, as provided under section 73 of the Marine Insurance Act. It was also averred that similarly Messers Rathi Ispat Ltd., Ghaziabad was also issued a covernote no. 039112 dated 21.11.1985 by the defendant covering all the risk in respect of supplies to be received by it under the same shipment, referred to herein-before.
5. The plaintiff was informed on 26.11.1985 through its group leader that the aforesaid vessel Bijela had struck sea bed of river Providence on its way to the sea and since the vessel had been damaged, it could not pursue without repairing. Consequently, general average had been declared. Later on the ship owners according to the marine law and practices, required a cash deposit from the consignor's or the underwriters i.e. the insurance company, to deposit a particular amount, for meeting the ultimate amount ascertained against the particular consignment. It is the case of the plaintiff that the ship owners could refuse delivery of the entire quantity on the failure of the consignee to deposit the amount.
6. It is the case of the plaintiffs that the ship Bijela arrived in India at Kandla port on 8.3.1986 and with the efforts of the consignee, the plaintiff received 75% of the quantity of the consignment, and the remaining 25% remained at the above port. Messers S.D.S.Corporation, Bombay, the agents of the shipowners intimated the plaintiff about the appointment of the average adjuster and advised the plaintiff regarding the said deposit guarantee from the under writers. The plaintiff was required to submit an average bond of the underwriter of an amount of US dollars 34,600/- amounting to about ₹ 4.40 lakhs. It was further averred that under the law there was no alternative for the plaintiff but to ask the defendant to make arrangement for the said purpose without any delay whatsoever and consequently, the plaintiff wrote to the defendants head office at Delhi for the said purpose intimating them to furnish the said bond/guarantee and further informed them that the same was to be submitted to SDS Corporation ,Bombay transferable to Wm.ELMSLIE & Son, London, average adjusters so appointed by the ship owners in US dollars. The scrap was perishable in nature so far as if it was allowed to remain at the port because it was getting more and more rusty due to the sea winds and it was apprehended that further losses may occur by way of demurrage and other circumstances beyond the control of the plaintiff. The plaintiff further averred that inspite of its request, the defendant had not issued the relevant guarantee nor given any specific reply to the plaintiff.
7. It is the case of the plaintiff that the defendant was duty bound under the law to issue the said guarantee and to take the responsibility as an underwriter/insurer in respect of the said general average that may be ultimately fixed by the adjuster in respect of the plaintiffs goods. It was further averred that unless the guarantee was submitted the plaintiff could not be entitled to take the delivery of the remaining 25% of the goods. It was further submitted that in identical circumstances in which the covernote/policy was issued to the plaintiff, another covernote/policy was issued in favour of Messers Rathi Ispat Ltd., in which the defendant issued a guarantee in favour of that firm regarding the same goods covered by the same shipment.
8. The plaintiff further averred that since the guarantee was not submitted by the defendant and goods was not released, the plaintiff in order to avoid further losses had to give an independent guarantee and only thereafter, the plaintiff was allowed to take delivery of the aforesaid 25% of the goods. It was further averred that general average having been declared the plaintiff 's liability to the extent of ₹ 4.40 lakhs was fixed and the beneficiaries under the bank guarantee invoked the same and the amount was paid by Punjab and Sind Bank to the beneficiaries debiting the said amount to the plaintiff account on 21.4.1989 and thus the amount was paid by the plaintiff to the bank and the plaintiff had been suffering damages by way of interest at the rate of 18% per annum from 21.4.1989 with quarterly rests.
9. The plaintiff claimed the following relief:-
By decree of mandatory injunction granted in favour of the plaintiff against the defendant, the defendant be directed to compensate the plaintiff by way of payment of ₹ 4.40 lakhs in respect of the bank guarantee mentioned in schedule I along with ₹ 13,200, the commission's paid by the plaintiff with interest at the rate of 18% per annum with quarterly rests from 21.4.1989 till the date the defendant discharges that obligation for fulfilling its obligations under the insurance policy issued by the defendant through covernote dated 21.11.1985
OR
The defendant be directed through suitable and appropriate order to cover the guarantee mentioned in schedule I at the end of the plaint i.e. to cover all the risk making appropriate arrangements for discharging the same providing for such relief as may be deemed fit and proper regarding the failure of the defendant to provide the guarantee earlier in respect of any liability of the plaintiff that may be found in respect of the said general average relating to the plaintiff.
Written statement of the defendant
10. The defendant insurance company filed its written statement before the trial court in which it admitted that plaintiffs scrap amounting to 1837.500 metric tons was trans-shipped from New York by vessel MV Bijela. It was also admitted that the plaintiff initially approached it for insurance to the tune of ₹ 35 lakhs, which was subsequently enhanced to ₹ 50 lakhs. It was also admitted that the plaintiff approached the defendant company's Muzaffarnagar branch on 20.11.1985 with the proposal to get the goods insured and the above branch issued the covernote as desired by the plaintiff subject to the rules of the department. It was admitted that as per the rules, the policy was issued. The defendant denied the rest of the contents of the plaint on the ground of want of knowledge. The defendant further averred that it was not liable to provide the desired guarantee to the plaintiff.
11. It was further averred by the defendant in its written statement that the plaintiff had not disclosed the actual date of trans-shipment and the alleged ship striking seabed in the plaint and the plaintiff has also not informed the defendant about the same. It was further submitted that for adjudication of the dispute, there is a special forum, which the plaintiff has not availed and the nature of the suit is such that it was barred by law and was not cognizible in the civil court. It was also averred that the plaintiff withheld the necessary information and it never disclosed to the defendant before 21.11.1985 about any damage to the ship.The plaintiff has not complied with the mandatory provisions of law before filing the suit as such, the suit was not maintainable. The defendant accepted the proposal and issued the covernote in good faith. The defendant was not liable to compensate the plaintiff or to issue the certificate demanded by the plaintiff. The suit was bad for non-joinder of necessary parties.
12. It was also averred that any liability of the defendant could be only regarding act/accident after 21.11.1985 and not for any act before 21.11.1985, as the risk was covered from the date of the policy. The loss, if any, as per own version of the plaintiff, occurred before the date of the insurance. The court at Kandla had the jurisdiction to entertain the suit. The plaint does not disclose the dispatch of the goods from USA, the quantity and quality of the goods dispatched and the alleged accident of the vessel in the sea. The plaint as such was vague and not maintainable. The suit be dismissed with costs.
13. The defendant filed additional written statement in the trial court in which it averred that issuance of policy in favour of Messers Rathi Ispat Ltd., who was not a party to the suit, was not relevant for the case and the same cannot be looked into. It was admitted that policy in the case of Messers Rathi Ispat Ltd. was issued by Ghaziabad office of the defendant company and the claim for the issue of guarantee was also processed by the said office, while policy in favour of the plaintiff was issued by the Muzaffarnagar office and the claim for the issue of guarantee was also processed by the said office. It was averred that both the policies covered risk differently. In the case of the policy issued in favour of the plaintiff, the covernote specifically provided that the risk commenced with effect from 21.11.1985. While in the case of Messers Rathi Ispat Ltd. the 'voyage' had been covered. The premium charged from both the parties were also different. In the case of the plaintiff the premium was charged at the rate of 0.30 % in the case of Rathi Ispat Ltd. the rate charged was 0.35%.
14. It was further averred by the defendant that even if, it is assumed that the risk covered under both the policies were identical, then the guarantee was issued wrongly in the case of Messers Rathi Ispat Ltd. and as such, it will not confer any right on the plaintiff, because the plaintiff was not otherwise entitled under the policy. Further, the defendant cannot be directed to commit the same mistake again knowingly. The plaintiff had not disclosed the actual date of the ship striking the sea bed and the date of consequent trans-shipment in the plaint. The plaintiff also did not inform the defendant about the same. The peril of sea, claimed in the suit, had already operated upon the goods prior to the proposal for insurance and was not covered under the policy. The plaintiff never disclosed to the defendant about any damage to the ship prior to 21.11.1985. The policy was obtained without disclosing the full and correct facts. In fact, the plaintiff suppressed the material facts from the defendant. The plaintiff was bound to disclose all the facts before obtaining the policy and thereafter too, which the plaintiff has failed to do.
15. The plaintiff filed the replica in which it reiterated the plaint averments. It was reiterated that in identical conditions in respect of the same risk, by the same shipment and in respect of the same goods, the policy was issued by the defendant in favour of Messers Rathi Ispat Ltd. It was averred that the contract of insurance with Rathi Ispat Ltd, was most relevant to the matters in dispute, since in the suit the very same goods from the same shipment were to be insured on behalf of the plaintiff and there could not be any different conditions of the policy in favour of the plaintiff as compared to that, which was issued in favour of Messers Rathi Ispat Ltd. It was further averred that the defendant could not discriminate between the plaintiff and Rathi Ispat Ltd. in respect of the insurance covering the same goods by the same shipment, having been insured at about the same time. The defendant was not entitled to treat the plaintiff differently.It was further averred that the plaintiff wanted to get the goods insured for the entire voyage and the defendant was fully aware of the same.
Issues Framed
16. On the basis of the pleadings of the parties, the trial court framed the following issues:-
(1)Whether the plaintiff had obtained the disputed policy by concealing true facts? If so, its effect? OPD
(2)Whether on the basis of disputed policy the plaintiff was entitled to get a bank guarantee of ₹ 4.40 lakhs from the defendant insurance company? OPP
(3)Whether the court has got no jurisdiction to hear the suit? OPD
(4)Whether the plaintiff failed to inform the defendant prior to 21.11.1985 regarding damage to the ship? If so, its effect? OPD
(5) Whether the suit was bad for non-joinder of necessary parties? OPD
(6)To what relief the plaintiff was entitled?
(7)Whether the defendant's plea was barred by the principle of waiver and estoppel? If so, its effect? OPP
(8)Whether the plaintiff was entitled to get any benefit for the claim granted by defendant to Rathi Ispat? If so, its effect? OPP
(9)Whether the defendant has provided guarantee to the sister concern of the plaintiff i.e.Messers Rathi Ispat Ltd on similar conditions? If so, its effect? OPP
Documents submitted by the plaintiff
(i)The original telegram dated 19.11.1985 that the ship had left Providence Rhode to Kandla and insurance be taken, proved as Exh.-4 during trial;
(ii)Covernote dated 21.11.1985 issued by the defendant's branch office situated at Muzaffarnagar in favour of the plaintiff for sum assured ₹ 35 lakhs, proved as Exh.-1 during trial,
(iii) Endorsement dated 25.11.1985 enhancing the sum assured to ₹ 50 lakhs, proved as Exhibit-2 during trial,
(iv)Original telegram received by plaintiff on 29.11.1985 informing that the ship has touched bottom and has sustained heavy damages requiring repairs and general average was going to be declared, the CIF value of cargo, invoice value of cargo, name of cargo underwriter, copy of cargo insurance policy be informed. This document was proved as Exh.- 5 during trial.
(v)A letter written by Rathi Alloys and Steel Ltd. to the plaintiff dated 3.12.1985 that the general average has been declared on the vessel MV BIJELA and a quantity of 1837.500 metric ton has been shipped on account of the plaintiff.
(vi)A letter written by SDS Corporation Bombay dated 10.2.1986 to the plaintiff informing that in the month of November 1985, the vessel Bijela struck bottom in Providence River, and was detained for effecting repairs necessary for safe prosecution of voyage. The shipowners declared general average in this regard and appointed Wm.ELMSLIE & Son, average adjusters of London to deal therewith. It was further directed in this letter that full details of the underwriters of the plaintiff be informed so that cargo be released against receipt of cash deposit. This letter was proved as Exh.-6 during trial.
(vii)The letter written by SDS Corporation Bombay to the plaintiff dated 29.3.1986 to provide underwriters average guarantee at an early date to avoid undue delay in discharge of MV Bijela at Kandla and in the absence thereof, to provide requisite bank guarantee. This letter was proved as Exh.-7 during trial.
(viii)The letter dated 1.4.1986 written by agents R.Tulsi Dass & Co. to the plaintiff that the vessel berthed at Kandla on 10.2.1986 for discharging the plaintiffs consignment of shredded scrap in bulk but, till date the plaintiff had not furnished an average guarantee bond from the underwriters in respect of the above vessel. It was requested that average bond from the underwriters or a guarantee from the bankers for US dollars 34,600/- or in the equivalent Indian rupees be provided so as to enable them to release the delivery of the remaining goods.
(ix)The original policy issued by the defendant in favour of plaintiff on 21.11.1985, which discloses that 1837.500 metric ton carbon steel Multi scrap was insured on vessel Bijela with effect from 21.11.1985, till the consignment reaches at destination, which was proved as Exh.-3 during trial.
Findings of the Trial Court
17. Issue no.3 was not pressed by the defendant on 21.7.1988. Further, the trial court held that since the policy was issued by the Muzaffarnagar branch of the defendant as such, the court at Muzaffarnagar had jurisdiction to try and decide the suit.
18. The defendant failed to prove that the suit was bad for nonjoinder of necessary party as such, issue no.5 was decided against the defendant in favour of the plaintiff.
19. Issue no. 1 and 4:- was decided jointly by the trial court. The trial court concluded that in order to prove that the plaintiff had concealed true and material facts at the time of obtaining insurance from the defendant as such, it was incumbent upon the defendant to produce the original insurance proposal form and other documents submitted by the plaintiff to the defendant for obtaining the insurance but since, the defendant failed to produce before the court the above relevant documents, which were in its possession, as such, the trial court drew an adverse presumption against the defendant. The trial court opined that the covernote which was proved as Exh.-1 during trial, itself disclosed that the cargo had already been loaded on ship MV Bijela, the ship had left the port, the defendant had covered the risk of the cargo. The trial Court also opined that Exh.-4 telegram mentions that the ship had left for its destination and this telegram must have been produced before the defendant insurance company otherwise, the defendant would not have insured the cargo. The trial court further opined that the insurance was effected on 21.11.1985, the telegram Exh.-5 was received on 29.11.1985, which disclosed that the ship had struck the seabed and on the basis of this telegram, the plaintiff had requested the defendant to provide the guarantee but, the defendant failed to produce the correspondence that took place between it and the plaintiff, which was also in possession of the defendant insurance company. The trial court further opined that the plaintiff disclosed that for the first time on 26.11.1985 it received information from group leader that the ship had struck the seabed, which has not been denied by the defendant. The trial court opined that since the plaintiff had no information on 21.11.1985 that the ship had struck seabed as such, no question arose to disclose that information to the defendant. In view of the above facts, the trial court concluded that the plaintiff had no information prior to 21.11.1985 that the ship had struck the seabed. The trial court concluded that the plaintiff had not concealed anything from the defendant and the insurance policy was obtained after disclosing all the facts. In view of this, issue no.1 was decided in the negative and issue no. 4 was decided accordingly.
20. Issue no.7,8 & 9:-these issues were decided jointly by the trial court. The trial court opined that through the group leader, the cargo was loaded at the same destination, on the same ship, and for the same destination and the cargo of Messers Rathi Ispat Ltd. was insured on the same day 21.11.1985, as in plaintiffs case, the identical risk of Messers Rathi Ispat Ltd. was covered. The trial court opined that the circumstances in which the covernote was issued to Messers Rathi Ispat Ltd. were identical to the plaintiff and if, there was a difference of premium collected in the above cases, then it was the duty of the defendant to charge the correct amount of premium. The trial court further opined that since the defendant failed to produce the relevant documents submitted by Messers Rathi Ispat Ltd. for obtaining insurance on 21.11.1985 before the court as such, it cannot be believed that the cargo of Messers Rathi Ispat Ltd. was insured under different circumstances. On this ground of parity, the defendant could not have refused to pay insurance claim to the plaintiff. On this reasoning, the issue no. 7,8 and 9 were decided in favour of the plaintiff.
21. Issue no.2 & 6:-both the issues were decided jointly by the trial court. The trial court concluded that the plaintiff had paid ₹ 4.40 lakhs towards general average. The trial court opined that previously the plaintiff had claimed relief regarding bank guarantee but since through bank guarantee the plaintiff has paid the amount as such, the plaintiff was entitled to get the amount paid through bank guarantee. In view of this, the plaintiff 's suit was decreed with costs. The defendant was directed to pay an amount of ₹ 4.40 lakhs within a period of 3 months, failing which, the plaintiff was held entitled to interest at the rate of 6% per annum, aggrieved against which, the defendant insurance company is in appeal before this Court.
Arguments of the Learned Counsels
22. Learned counsel for the defendant-appellant insurance company submitted that the plaintiff had not disclosed the true facts before obtaining insurance from the defendant. Learned counsel submitted that the plaintiff knew at the time of obtaining insurance policy on 21.11.1985 that the ship had already struck seabed and suffered damage, but this fact was concealed by the plaintiff at the time of obtaining policy as such, the defendant was not bound to pay any amount towards guarantee undertaken by it. Learned counsel submitted that the burden was upon the plaintiff to prove that the ship had not suffered accident before obtaining policy, the date when the accident took place, when the information of accident was conveyed by the plaintiff to the defendant, but the plaintiff failed to prove the above facts as such, the trial court erred in decreeing the plaintiff 's suit. With these submissions, it was prayed that the appeal be allowed and the suit be dismissed.
23. Per contra, learned counsel for the plaintiff-respondent submitted that the plaintiff never concealed anything from the defendant insurance company, while insuring the shipment of cargo of iron scrap from New York to Kandla. Learned counsel submitted that the policy was obtained on 21.11.1985 and at that time, the ship had left New York port, for its destination. Learned counsel submitted that on 26.11.1985 for the first time through telegram, the plaintiff became aware that the ship had struck seabed and suffered damage and this fact was duly informed to the defendant. Learned counsel submitted that the defendant could have independently verified when the ship left the New York port, when it struck the seabed and when the information of accident was conveyed to the plaintiff but, the defendant has not led any evidence whatsoever, to contradict the evidence submitted by the plaintiff during trial. Learned counsel submitted that on 21.11.1985 similar cargo of Messers Rathi Ispat Ltd. was insured, which was also loaded on the same ship MV Bijela, regarding which claim was given by the insurance company to Messers Rathi Ispat Ltd. but acting arbitrarily, the insurance company denied the claim to the plaintiff, in the similar circumstances. Learned counsel submitted that in view of the above facts, the trial court has not erred in decreeing the plaintiff 's suit. With these submissions, it was prayed that the appeal is meritless and be dismissed.
24. I have heard the learned counsel of both the sides and perused the record.
25. On the basis of the submissions of the learned counsel of the parties, pleadings and the evidence on record, the following issues arise for determination in this appeal:-
(1)Whether the plaintiff knew at the time of obtaining policy from the defendant on 21.11.1985 that the ship MV BIJELA had struck seabed and suffered damage?
(2)Whether the ship MV BIJELA struck seabed and suffered damage after the insurance policy was obtained by the plaintiff from the defendant?
(3)Whether in the identical circumstances, for identical cargo, which was loaded on the same ship MV BIJELA, the defendant insurance company has paid the claim to Messers Rathi Ispat Ltd?
(4)Whether the insurance policy of plaintiff and Messers Rathi Ispat Ltd. were different?
Oral evidence of the parties
26. The plaintiff examined its director Alok Maheshwari as PW-1 and the defendant examined its Asst. Divisional Manager Sureshchand Tayal as DW-1.
27. The director of plaintiff company Alok Maheshwari PW-1 deposed in his examination-in-chief that the plaintiff company imported scrap through MSTC. The group leader was Rathi Alloys and Steels. The imported scrap was to be shipped. The scrap of plaintiff was also to be imported along with it. A telegram was received by the company on 19.11.1985 in which it was directed to get the cargo insured. The witness proved the telegram received on 19.11.1985 as Exh.-4. 20.11.1985 was holiday, as such on 21.11.1985, he went to the Muzaffarnagar office of the defendant ,showed them the above telegram and requested them to get the whole cargo insured. The proposal form was filled by the officers of the insurance company. The plaintiff company paid the premium. Thereafter, defendant issued the covernote. Subsequently, due to calculation error ,the value was enhanced and again additional premium was paid. Exh.-2 & 3 were issued by the defendant. Again on 29.11.1985 a telegram was received, which was proved as Exh.-5. Prior to the receiving of the above telegram, the plaintiff was not aware of any damage. Thereafter, a letter 15-A was received from the SDS Corporation, which was signed by its agent, which was proved as Exh.-6 by this witness. Thereafter, a letter 16-A was received signed by the agent , which was proved as Exh.-7 by this witness.
28. This witness further deposed that the shipping company declared general average and the agent had demanded guarantee, which is mentioned in letter 17-A. The plaintiff requested the defendant to give guarantee, but the defendant refused. If guarantee had not been given then the cargo would have been ruined. Subsequently,a guarantee of ₹ 4.40 lakhs mentioned in schedule I was given to the ship owner, which was encashed, due to which the plaintiff had to pay ₹ 4.40 lakhs to the bank providing the above guarantee.
29. The witness further deposed that the defendant had also insured the same cargo, which was loaded on the same ship, which was of Rathi Udyog and Rathi Steels. The insurance policy issued to the above company was annexure-1 of the plaint. The defendant had given guarantee to Rathi Udyog and had also paid it. The insurance of Muzaffarnagar Steels was done by New India General Insurance, guarantee was given and paid. There was no difference in the insurance of plaintiff, Rathi Udyog and Muzaffarnagar Steels. In this regard, the loss suffered by the plaintiff was bound to be indemnified by the defendant.
30. PW-1 deposed in cross-examination that import of cargo was through MSTC. The cargo was to be imported from New York. The date when the ship departed was mentioned in telegram 10-A, which was sent by BVH Steels, which was an agent of an American company. There was no contract between the plaintiff and BVH, plaintiff 's contract was with MSTC. The proposal form for insurance was signed by director or secretary. He himself went to the office of the insurance company. Initially, the sum insured was ₹ 35 lakhs. He was not aware of the date, when the ship Bijela met with an accident. The telegram 10-A dated 26.11.1985 was sent by BVH Steel, Bombay. The guarantee was demanded by SDS Corporation through letter 15-A and 16-A. He denied the suggestion that the plaintiff company never asked the defendant to give guarantee. He also denied the suggestion that the insurance policy was obtained after the ship departed and the accident occurred, by concealing the true facts.
31. PW-1 admitted in cross-examination that the plaintiff company obtained the insurance policy after the cargo loaded ship left the port.
32. DW-1 Sureshchand Tayal deposed in examination-in-chief that in November, 1985 he was in-charge of the branch office of defendant situated in Muzaffarnagar. On 20.11.1985 just before the close of the office, Shri RK Parihar, the manager of the plaintiff company met him and told that cargo of scrap was being imported, which was to be insured, then they issued covernote on 21.11.1985, the risk also started from 21.11.1985. No risk prior to this date, was covered. Prior to insurance, he was not told that the cargo had left or the accident had happened. He acts on behalf of the defendant insurance company in good faith and the insurance was also done in good faith. If he knew about the accident, then he would not have insured. If there was a dispute, then it is decided through arbitration.
33. DW-1 admitted in cross-examination that the proposal form of the insurance given by the plaintiff company, was in the possession of the defendant company. He admitted that the proposal of insurance was according to the format, which had full details, on the basis of which policy was issued. He also admitted that due to error of calculation, subsequently enhanced premium was paid. He disclosed that in the proposal form usually it is mentioned that the ship had departed, but in this case, it was not mentioned. He admitted that the plaintiff had told that the information of the ship leaving the port would be communicated to the defendant, as and when received by the plaintiff.
34. DW-1 admitted that as per his personal knowledge the cargo of Rathi Ispat was insured by Ghaziabad office and they were given guarantee. He denied the suggestion that the plaintiff had disclosed all the facts including, when the ship departed and the whole voyage was insured. The witness admitted that the defendant company had charged the premium for the whole voyage. He denied the suggestion that due to malafide intention the defendant company had neither submitted the documents nor paid the guarantee of ₹ 4.40 lakhs. He admitted that the claim of Rathi Ispat was sanctioned by the defendant company. This witness failed to disclose whether the insurance of Rathi Ispat was issued on the same date, as in the case of plaintiff.
Findings of this Court
35. The Apex Court in the case of Mussauddin Ahmed vs. State of Assam (2009) 14 SCC 541, held as under:-
11. It is the duty of the party to lead the best evidence in its possession which could throw light on the issue in controversy and in case such material evidence is withheld, the court may draw adverse inference under Section 114 Illustration (g) of the Evidence Act, 1872 notwithstanding that the onus of proof did not lie on such party and it was not called upon to produce the said evidence (vide Gopal Krishnaji Ketkar v. Mohd. Haji Latif [AIR 1968 SC 1413] ).
36. The Apex Court in the case of Tomaso Bruno & Another vs. State of UP (2015) 7 SCC 178, held as under:-
27. As per Section 114 Illustration (g) of the Evidence Act, if a party in possession of best evidence which will throw light in controversy withholds it, the court can draw an adverse inference against him notwithstanding that the onus of proving does not lie on him. The presumption under Section 114 Illustration (g) of the Evidence Act is only a permissible inference and not a necessary inference. Unlike presumption under Section 139 of the Negotiable Instruments Act, where the court has no option but to draw a statutory presumption, under Section 114 of the Evidence Act, the court has the option; the court may or may not raise presumption on the proof of certain facts. Drawing of presumption under Section 114 Illustration (g) of the Evidence Act depends upon the nature of fact required to be proved and its importance in the controversy, the usual mode of proving it; the nature, quality and cogency of the evidence which has not been produced and its accessibility to the party concerned, all of which have to be taken into account. It is only when all these matters are duly considered that an adverse inference can be drawn against the party.
37. It is apparent that the defendant insurance company has admitted that it had insured the cargo of scrap which was loaded on ship MV Bijela, on 21.11.1985, till the cargo reached its destination. It is also admitted to the insurance company that the whole voyage was insured but the only dispute is regarding the date of accident of the ship. It is the contention of the insurance company that the ship met with an accident before the issuance of the above insurance policy, the insurance policy was obtained by the plaintiff by concealing true facts, the plaintiff company was aware at the time of obtaining policy that the ship had already met with an accident, as such, the defendant insurance company was not liable to indemnify the plaintiff company.
38. It is also apparent that the insurance was effected w.e.f. 21.11.1985 after the plaintiff company submitted the proposal form and paid the requisite premium to the insurance company.DW-1 has admitted that the proposal form submitted by the plaintiff company was in the possession of the defendant, as such, the defendant insurance company should have produced the original proposal form and other documents submitted by the plaintiff company at the time of obtaining insurance, before the trial court, in order to prove the concealment of facts on the part of the plaintiff company, but the defendant company failed to do so. Since, the above original documents submitted by the plaintiff company were in the possession of the defendant, as such, the burden was upon the defendant to produce them in the court, in order to prove concealment or suppression on the part of the plaintiff company in obtaining the insurance. It is apparent that the defendant insurance company has withheld that vital evidence as such, an adverse presumption was drawn against it by the trial court under section 114(g) of the Evidence Act, 1872, which is perfectly legal.
39. Since, the defendant insurance company failed to produce the original proposal form and the relevant documents submitted by the plaintiff company at the time of obtaining insurance from the defendant, before the court as such, in the absence of those documents it cannot be presumed that the plaintiff company obtained the insurance by concealing or suppressing the true facts.
40. The plaintiff has filed the original covernote and insurance policy dated 21.11.1985 issued by the Muzaffarnagar office of defendant insurance company.The covernote which was proved as Exh.-1 by PW-1, mentions:-
Type of insurance: Transit, Non-Delivery, Pilferage, Shortage, War and S.R.C.C.
Perils Covered & Warranties: As Above
Period of insurance: 21.11.1985 till the consignment reaches at destination.
Description of risk: On 1750 Metric tonnes of carbon steel melting scrap from M/S NISSHO IWAI AMERICAN CORPN .TOKYO, JAPAN at their USA address 1211 Avenue of America, New York 10036, USA. The above material has been loaded on the vessel BIJELA AND HAS BEEN shipped from PROVIDENCE, By single consignment and/or more than single consignment and then to Insured's factory by road/rail at above address of Muzaffarnagar(U.P.) India.
41. It is apparent that in the above covernote it is mentioned that the cargo of the plaintiff company has been loaded on the vessel MV BIJELA and it has been shipped from Providence, New York as such, it cannot be said that the plaintiff company had not disclosed to the defendant ,that the ship had already departed from the New York port.
42. Telegram Exh.-4, proved by PW-1, reads as under:-
''OUR PRINCIPAS NISSHO IWAI CRPM HAVE SHIPPED 1831.50 MTS AMOUNTING SER 518 322,000 034 BIJELA ON NOV 10 FROM PROVIDENCE RHODE TO KANLA S ETA DEC 14 BL ND 6 PLS COVER INSURANCE IF NOT TAKEN BHV STEEL.''
43. It is apparent that in this telegram, which was received by the plaintiff company on 19.11.1985, it was mentioned that the ship MV BIJELA has left Providence Rhode, New York on November 10, 1985, for its destination Kandla, where it was expected to reach on 14.12.1985.DW-1 accepted in cross-examination that the insurance was done on the basis of proposal form and documents submitted by the plaintiff company, which were in the possession of the defendant, which were never produced before the trial court, in order to contradict the plaintiff . It is apparent that the plaintiff company had submitted the above telegram to the defendant company at the time of obtaining insurance of the cargo loaded on ship MV BIJELA.
44. The plaintiff proved that when the insurance policy was obtained on 21.11.1985, it had no knowledge that the ship MV BIJELA had struck the seabed and suffered accident as such, there was no concealment by it while obtaining the insurance policy from the defendant. The plaintiff specifically averred in the plaint that for the first time it became aware of the accident on 26.11.1985(in oral evidence on 29.11.1985) when it received the telegram from BVP Steel Corporation. This telegram was proved as Exh.-5 by PW-1 during trial. The telegram reads as under:-
''WE QUOTE BELOW TELEX MESSAGE RECEIVED FROM NISSHO IWAI CORPORATION REGARDING VESSEL BIJELA SINCE THE VESSEL TOUCHED BOTTOM PROVIDENCE RIVER AND SUSTAINED HEAVY DAMAGES PROVISIONAL REPAIRS ARE NECESSARY TO PERMIT PROSECUTION OF THE VOYAGE AND THE OWNERS ARE INFORMING HEREWITH CHARTERERS THAT GENERAL AVERAGE IS GOING TO BE DECLARED AND CONSEQUENTLY AS YOU TO PROVIDE THE FOLLOWING INFORMATION (A) CIF VALUE OF CARGO (B) INVOICE VALUE OF CARGO (C) NAME OF CARGO UNDERWRITERS (D) COPY OF CARGO INSURANCE POLICY.AWAITING TO RECEIVE YOUR NEWS BY RETURN. KINDLY DO THE NEEDFUL. PAY MASTER BVP STEEL CORPORATION.''
45. From the above telegram it is evident that it mentions that the vessel Bijela touched bottom of Providence river and sustained heavy damages and provisional repairs were necessary to continue the voyage and further, the owners of the ship were going to declare general average and for this, plaintiff was requested to provide the cargo insurance policy and other particulars. There is no evidence on record to prove that the above ship had already suffered damage when the insurance policy was obtained by the plaintiff company from the defendant. The plaintiff proved that prior to 26.11.1985 it had no knowledge of any accident suffered by the above ship, as such, the burden was upon the defendant to submit contrary evidence, but it failed to do so. The defendant insurance company could have deployed its surveyor and conducted independent investigation into the matter so as to ensure that the plaintiff was not making a fraudulent claim. The insurance company could have enquired from the ship owners,port authorities, underwriters, ship repairer's, agents of the ship owners regarding the date when the accident took place, but neither such effort was made nor any investigation was conducted by the defendant insurance company, as such, there was no evidence on record to presume that the accident had indeed occurred before the insurance policy was obtained by the plaintiff company.
46. The plaintiff also proved that the scrap of other companies was also being imported simultaneously and loaded on the same ship, on which the plaintiffs cargo was loaded, and similar cargo of other companies namely Rathi Ispat Ltd. was also insured by the defendant insurance company on similar terms, and the claims of other companies were also satisfied by the defendant, but arbitrarily the claim of the plaintiff was rejected. DW-1 expressly admitted in his evidence that cargo of Rathi Ispat Ltd was insured by the Ghaziabad office of the defendant insurance company, which was provided guarantee by the defendant. It was admitted that claim was paid to the Rathi Ispat Ltd. In the written statement it was submitted that erroneously claim was paid to Rathi Ispat Ltd and as such, the defendant was not bound to repeat the error. Whether the claim was paid to Rathi Ispat Ltd erroneously or bona fidely, could have been only ascertained if, the relevant proposal forms, documents, survey reports,etc. would have been submitted by the defendant insurance company before the trial court but, the defendant company deliberately did not produce them. It is apparent that, the insurance company deliberately failed to produce the relevant documents before the trial court as such, it was the insurance company, which acted malafidely by concealing the relevant information from the court. In view of this, it cannot be accepted that the claim of Rathi Ispat Ltd was altogether different and was erroneously paid. It is apparent that the defendant insurance company acted arbitrarily in rejecting the plaintiffs' claim in similar set of circumstances.
47. In view of the above facts, since the insurance policy was admitted to the defendant insurance company and the insurance company failed to prove, that the policy was obtained by concealing material facts from it, as such, under the terms and conditions of the insurance policy, the defendant insurance company was bound to indemnify the plaintiff for the guarantee of ₹ 4.40 lakhs submitted on behalf of the plaintiff company by its banker, in order to take possession of 25% of the cargo of the scrap, which was withheld by the ship owners, due to the damage sustained by the ship MV Bijela when it hit the seabed of river Providence in New York. The ship owners demanded guarantee to release the above cargo and when the plaintiff requested the defendant to provide the guarantee in terms of the insurance policy taken by it, the defendant refused, compelling the plaintiff to obtain guarantee from its banker Punjab & Sind Bank, who submitted the guarantee on behalf of the plaintiff, which was encashed by the ship owner and the plaintiff was forced to pay the guarantee amount of rupees 4.40 lakhs to the banker, regarding which, the suit has been filed.
48. For the reasons mentioned aforesaid, the trial court has not erred in decreeing the plaintiff 's suit. Accordingly this appeal is meritless and is liable to be dismissed.
49. The appeal is hereby dismissed. The impugned judgement and decree of the trial court dated 30.5.1992 is affirmed. Costs easy.
50. Interim order, if any, stands vacated. Office is directed to prepare the decree accordingly.
51. Office is directed to send back the original trial court record, if received, forthwith.
Order Date:- 14.10.2025
Jitendra/Himanshu/Mayank
(SANDEEP JAIN, J. )
