M/S. Jagdish Prasad & Company vs United India Insurance Co.Ltd.
2011 Latest Caselaw 6361 Del

       IN THE HIGH COURT OF DELHI AT NEW DELHI


                        Judgment reserved on: 19.5.2011
                        Judgment delivered on: 23.12.2011


+                  RFA No. 127/2005


M/s. Jagdish Prasad & Company                  ......Appellant.

                        Through: Mrs. Mala Goel, Adv.


                        Vs.

United India Insurance Co.Ltd.                ......Respondent

                        Through:   Mr.Vineet Malhotra, Advocate.


CORAM:
HON'BLE MR. JUSTICE KAILASH GAMBHIR



KAILASH GAMBHIR, J.

1. By this appeal filed under Section 96 of the Code of

Civil Procedure, 1908, the appellant seeks to set aside the

judgment and decree dated 30.10.2004, passed by the learned

ADJ, Delhi, whereby the suit filed by the appellant against the

respondent for recovery of Rs 5,30,000/- alongwith interest @ 18%

and costs was dismissed.

2. The brief facts as set out in the present appeal are that

the appellant is a registered partnership firm carrying on the

business of iron and steel merchants including the business of

importing iron and steel products from various places like Europe,

South Korea, Australia and other places. As per the appellant, the

standard practice of the appellant in the past has been that an

order would be placed, a contract entered into on C&F terms, the

Letter of Credit opened and after that the documents i.e. Bill of

Lading, Commercial Invoices etc would come for acceptance

through a nationalized bank when non-negotiable set of

documents would be received by the appellant through the

indenting agent. Based on the information from the set of

documents received, an insurance would be taken out and the

goods would then be taken release of on their arrival at the port.

As per the appellant, the officials of the insurance company

advised the appellant to avoid taking insurance in advance and

take only on receipt of documents as for adjustment of the

premium or refund the insurance companies create trouble and

accordingly, the appellant adopted the same as a practice. The

appellant entered into a contract dated 20.01.1982 with one M/s.

Kukje Corporation of Seoul, South Korea, for the import of 200

metric tones of galvanized plain steel sheets coil of a value of US

Dollar 1,05,300/- through their local agent M/s. Lakhotia

International. Out of the said contracted quantity, 84.78 tonnes of

galvanized plain steel sheets were shipped by the said M/s. Kukje

Corporation to the appellant and were placed on board the ocean

Vessel "Ivory Dragon" at Pusan, Korea, destined for Bombay. The

Bill of Lading, Commercial Invoice, packing list, rate list and

surveyor certificate etc were all sent by the said Kukje

Corporation to the Indian Overseas Bank, Bombay and one set of

non-negotiable documents was sent by them to the indenting

agents for onward transmission of the same to the appellant and

accordingly the agent sent the same to the appellant along with

their covering letter dated 13.5.82 which was received by the

appellant on 14.5.1982 late in the evening. In the morning of

Monday, the 17th May, 1982(15th and 16 being Saturday and

Sunday) the insurance was taken out for the said goods from the

respondent company and Marine Cargo Cover Note No. 71643 was

issued and then the respondent issued Policy No.

40400/81/0057/82, dated 18th May, 1982. The appellant received

a letter dated May 20,1982 stating that the vessel „Ivory Dragon‟

carrying the cargo from Korea to Bombay sank off Phillipines.

Accordingly, the appellant submitted its claim to the insurance

company on 15.6.1982 and further submitted certain particulars

sought by the insurance company. The sinking of the ship was

investigated by the surveyors who were both licensed by the

Korean Government as well as agents for LLOYD‟s. The

respondent company kept on assuring the appellant that its claim

would be settled, but vide their letter dated 11.8.1983 the

respondent company rejected the claim of the appellant. As per

the appellant, the respondent company is liable under the

contract to pay the money to the appellant as the insurance was

taken out in good faith as per the past practice and therefore it

was effective for the entire period of transportation from Pusan

to Bombay. The appellant also claims that the goods were not lost

at the time the insurance was taken out and in any case the

appellant could not have been aware of it and therefore the

appellant is entitled to recover the amount along with interest.

3. The respondent insurance company contested the suit

by filing written statement taking preliminary objection that the

appellant company be put to strict proof that it is a duly

registered partnership firm with the Registrar of Firms and Mr.

Purshottamdas Poddar was entitled to sign, verify and institute

the suit on behalf of the appellant company. The respondent

denied in their written statement that there was any standard

practice that the appellant had all along been entering into

contract of C&F terms and that the insurance used to be obtained

with the respondent company after opening of letter of credit and

receipt of documents through agents. The respondent further

denied that there was any such practice or there was any

sanction of law or contract and took a stand that the insurance is

obtained in advance before the consignment is loaded in the ship

and further denied that their officials had advised the appellant

company not to take the insurance in advance but to take the

same only on the specific amount on receipt of the documents.

The respondent also denied the stand of the appellant that they

started the practice of obtaining insurance later. The respondent

stated that they were not aware of the alleged contract dated

20.1.82 between the appellant and M/s. Kukje Corporation of

Seoul for the import of 200 metric tones of galvanized plain steel

sheets coil and took a stand that the appellant has deliberately

and intentionally not stated as to when the said galvanized plain

sheets were shipped and placed on board on vessel „Ivory Dragon‟

at Pusan, Korea by the said Korean corporation. The respondent

also disputed that the indenting agent sent the documents to the

appellant vide their letter dated 13.5.82 which was allegedly

received by the appellant on 14.5.82 late in the evening. The

respondents have taken a stand that nothing could have prevented

the appellant to take the insurance either at the time the

consignment was said to have been booked or when the letter of

credit was opened, and the appellant could have taken insurance

even on 14th, 15th or 16th May, 1982. The respondent stated that

the circumstances and the manner of obtaining the insurance

clearly shows that the appellant has made an attempt to cheat the

nationalized insurance company with a view to cause wrongful loss

to the respondent and wrongful gain to the appellant. The stand

of the respondent in the written statement was that the insurance

was obtained on the condition that the company will not be liable

for any loss if the loss occurs on or prior to 17.5.82 and in this

case the loss occurred prior to 17.5.1982, therefore the insurance

company is not liable, even if the policy is deemed to be validly

issued in favour of the appellant. As per the respondent, the

appellant came to know of the alleged loss much prior to

obtaining of insurance and the same was obtained collusively.

4. Based on the above pleadings of the parties, the learned trial

court framed the following issues:-

"1. Whether the plaintiff firm is a registered partnership firm and Sh. Purshottamdas Poddar was its registered partner?

2. On which date the vessel „Ivory Dragon‟ carrying the goods in question sank and the goods subject matter of the insurance policy lost?

3. Whether the plaintiff knew about the loss of the goods insured and obtained the policy by cheating the defendant.

4. Whether the defendant was liable, even if the loss had occurred on or before 17.05.1988? (Note: This issue would cover the plea that the subject matter of the insurance did not exist on the date of insurance)

5. Whether the plaintiff was entitled to interest? If so, at what rate?

6. To what amount, if any, is the plaintiff entitled?"

5. Relevant for the purpose of the present appeal are

issues No.2,3 and 4. While deciding Issue No.2, the trial court

came to the conclusion that the Vessel „Ivory Dragon‟ carrying

the consignment in question sunk on 16.5.82 and not on 17.5.82

at 20.30 hrs. GMT, after having taken into consideration the

survey report and the statement of facts given by Mr. K.D.

Hoyung, Master of the vessel. Issue nos. 3 and 4 were decided

together by the trial court as being interconnected and the

findings on both the issues were returned against the appellant

and in favour of the insurance company. The trial court after

taking into consideration the cover note and insurance policy

which were proved on record as Ex.P-31 and Ex.P-32, held that

there is a specific clause in the contract that the respondent

insurance company is not liable for any loss if the loss occurs on or

before 17.5.82 and thus held that the appellant was disentitled

to claim recovery of the amount from the insurance company.

6. Assailing the impugned judgment and decree, Mrs.

Mala Goel, learned counsel for the appellant has vehemently

contended that the above matter in controversy was duly

investigated by the CBI and after the investigation, the CBI found

nothing against the appellant but the trial court had ignored the

finding of the CBI for no reasons whatsoever. Counsel further

argued that even the respondent never amended their written

statement although in the written statement the respondent took a

stand that they will amend their written statement after the

matter is investigated by the CBI. The contention of the counsel

was that since no such amendment was made by the respondent

therefore the respondent impliedly has also accepted the findings

given by the CBI exonerating the appellant from the alleged

charge of lodging a false claim against the insurance company.

Counsel further contended that the trial court has not appreciated

the fact that the appellant had no knowledge about the sinking

of the ship before it had received the information vide

communication dated 20.5.82 proved on record as Ex. P-33.

Counsel further argued that the trial court has also failed to

appreciate that as per the past practice the appellant used to take

the insurance policy only when the goods were loaded and after

the receipt of non-negotiable documents through the indenting

agent and in the present case the insurance policy was taken on

17.5.82 after the receipt of the said non-negotiable documents on

14.5.82. The counsel also argued that the trial court has also not

properly appreciated the survey report wherein it was clearly

stated that the ship in question sank on 18.5.82 at 04.30 hrs. The

contention of the counsel was that the Greenwich Mean Time

(GMT) is completely different from the Indian Time and thus

submitted that the time and date on which the ship sank cannot

be calculated as per the GMT but the same has to be calculated

as per the Indian Time. Counsel also argued that the goods which

were subject matter of import were very much in existence on

17.5.82, the time when the insurance was taken by the appellant

and there is no question of a false claim and conversion of GMT

for 17.05.1982 at 20.30 is 4.30 Indian time on 18.05.1982.

Counsel further argued that PW-1 had duly proved on record the

documents of contract, bill of lading and other documents besides

proving on record that the said non-negotiable documents were

sent by M/s. Lakhotia International vide their communication

dated 13.5.82 which were received by the appellant on 14.5.82

late in the evening and since 15.5.82 and 16.5.82 were holidays

being Saturday and Sunday, therefore, the appellant could take

the insurance cover only on 17.5.82. Counsel thus urged that the

goods in question did exist at the time of appellant taking the

insurance cover and the insurance cover was taken by the

appellant as per the past standard practice only after the receipt

of the shipping documents. Counsel also argued that the

encashment of the cheque towards the insurance premium on

19.5.82 would not mean that the policy would commence on

19.5.82 as held by the learned trial Court as the cover note by the

insurance company was issued on 17.5.82 and the insurance thus

came into effect immediately on the issuance of the said cover

note. Counsel also argued that the learned trial court ought to

have taken judicial notice of the time under Section 56 and 57 of

the Evidence Act as the appellant had no means to know the

exact time of the sinking of the ship which could come to its

notice only when communication dated 20.5.82 was received by it

as the means of communication back then were not as advanced

as they are today.

7. Opposing the present appeal, Mr. Vineet Malhotra,

learned counsel for the respondent submitted that the judgment of

the learned trial court does not call for any interference by this

court as the same is based on sound reasoning and correct

appreciation of facts. Counsel further argued that the appellant

was well aware of the fact that the ship in question had already

sunk on 16.5.82 and with a view to cover up the loss the

insurance policy was taken by the appellant on 17.5.82 by

suppressing the said vital fact. Counsel further argued that since

the subject matter of insurance did not exist on the date of the

insurance, therefore, the insurance company has no legal liability

to compensate the appellant. The contention of the counsel was

that the insurance company is not liable to pay any amount

under the contract of insurance because the contract itself was

void as the subject matter of the insurance did not exist on the

date of taking the insurance policy. Counsel also argued that in

the cover note and the insurance policy it was clearly stipulated

that the insurance company would not be liable for any loss

which had occurred on or prior to 17.5.82. Counsel further

argued that the date of shipment of the said goods was 31.3.82

which date is duly mentioned on the indent letter issued by M/s

Lakhotia International, proved on record as Ex.P-24, but the

appellant took no steps to take the insurance cover till 17.5.82,

till when the ship had already sunk in the midstream. Counsel

placed reliance on the statement of facts submitted by the Master

of the said ship which is a part and parcel of the survey report

proved on record as Ex.P-36, which clearly states that the vessel

"Ivory Dragon" had actually sunk on 16.5.82. Counsel thus states

that the trial court rightly placed reliance on the said statement

of the Master of the ship who was the prime witness to have

known the actual facts with regard to the exact date and time of

sinking of the said ship. Counsel submitted that it was clearly

proved on record that the appellant had taken up the insurance

cover fraudulently after the ship carrying the subject goods had

already sunk and thus is not entitled to any relief.

8. I have heard learned counsel for the parties at

considerable length and given my thoughtful consideration to

the pleas advanced by them.

9. The balance of the entire controversy rests on the

determination of the question as to when did the ship in question,

the "Ivory Dragon" sink. The main argument canvassed by the

counsel for the appellant was that the ship had sunk on 17.5.82 at

20.30 hours GMT which corresponds to 4.30 hours on 18.5.82 as

per the Indian Time and therefore the insurance policy taken by

the appellant on 17.5.82 was valid, legal and binding on the

insurance company and the appellant entitled to the recovery of

the said amount. Counsel for the respondent on the other hand

took a stand that the ship in question in fact had actually sunk on

16.5.82 and not on 18.5.82 as per the claim of the appellant. The

appellant has however feigned complete ignorance with regard to

the personal knowledge about the exact time and date when the

vessel in question carrying the consignment ordered by the

appellant had sunk and has only claimed knowledge about the

sinking of the said ship through the communication dated

28.5.1982 sent by M/s Lakhotia International Ltd. which was

proved on record as Ex.P-34, informing the appellant that the

vessel in question sunk off at 13-10‟N, 113-55‟E on 17.5.82 20.30

hrs GMT, and also vide letter dated 20.5.82 sent by the Intermodal

Transport & Trading System Pvt. Ltd. informing the appellant

that the said vessel had sunk off Phillipines in the morning of

18.5.82.

10. It is not in dispute between the parties that the appellant

had taken the said insurance policy vide insurance cover note

issued by the respondent on 17.5.82 and the two propositions that

emerge out of the conspectus of facts is that if by 17.5.82, the

vessel had not sunk then certainly the appellant could

legitimately maintain the claim against the respondent for the

alleged loss of consignment but if the said vessel had already

sunk prior to 17.5.82, then certainly the recovery suit filed by the

appellant could not have sustained. The trial court has placed

reliance on the statement of facts submitted by the Master of the

ship, K.D. Hoyung, whose statement formed part of the survey

report proved on record as Ex.P-36 over the survey report and the

two letters dated 20.5.1982 and 28.5.1982 which stated that the

ship sunk on 17.5.1982 20.30 GMT. Undoubtedly, Master of the

ship was the prime witness with regard to the exact facts leading

to sinking of the said ship and therefore the date and time

indicated by the Master of the said ship cannot be disbelieved. In

his statement, the Master of the ship has clearly disclosed that the

vessel "Ivory Dragon" actually sank at 0430 hours on 16.5.82 in

approximate position Lat 13-10‟N, 113-55‟E. It is beyond the

comprehension and understanding of this court that once the

Master of the ship had stated the said date of 16.5.82 as the date

when ship sank then how in the survey report the date of sinking

of the ship could be shown as 18.5.82. The surveyors in the

survey report could not have introduced their own date, ignoring

the date of sinking as stated by the Master of the ship. The

learned trial court, therefore, has rightly observed that there is a

manipulation in the date mentioned in second last line of page

no.2 of the survey report to make the same as 18.5.82 as opposed

to 16.5.1982. This court therefore does not find any reason to

upset the said finding given by the learned trial court placing

reliance on the statement of the said prime witness who actually

witnessed the sinking of the said vessel carrying the consignment

in question. The argument of the counsel for the appellant that

the said vessel had sunk on 17.5.82 at 20.30 hrs GMT which

corresponds to 4.30 hours on 18.5.82 Indian time thus cannot

sustain as the vessel in fact had actually sunk on 16.5.82. It is also

a fact that in the survey report the date of sinking of the ship is

stated to be 18.5.1982 at 0430 hours where it is not stated to be at

GMT or at IST and if this is taken to be as GMT as the entire

report talks in terms of GMT, then it is to be converted to IST in

which case the contention of the appellant would be totally belied

that the ship sank at 17.5.82 at 2030hours GMT. It is thus quite

manifest that the appellant has built a concocted and fabricated

case to extract money from the respondent on false claims. It is

thus quite explicit that the appellant had taken the insurance

cover when the said goods were already lost due to the sinking of

the said vessel carrying the consignment in question and hence

the subject matter of the contract did not subsist at the time of

entering into the contract which makes it a void contract. The

findings on Issue no.1 have been thus correctly decided by the

learned trial court and the appellant has not been able to

persuade this court otherwise.

11. This court also does not find any illegality or perversity

in the findings arrived at by the learned trial court on the Issue

nos. 3 and 4. The issuance of the cheque by the appellant on

19.5.82 which is dated as 16.5.1982, (which was admittedly a

Sunday) certainly proves the point that the appellant was well

aware of the said fact of sinking of the ship otherwise there was

no explanation by the appellant as to why the need arose to issue

the cheque on 16.5.82 when the cover note was taken by the

appellant on 17.5.82. The cover note proved on record as Ex.P-31

and the insurance policy proved on record as P-32 clearly stipulate

that the respondent insurance company will not be liable for any

loss if the loss occurs on or before 17.5.82. The insurance policy

is in the nature of a contract between the parties and the liability

of the insurance company to compensate for the loss could arise

only when the goods that are insured under the policy had existed

at the time of taking the said policy. The learned trial court has

rightly observed that in the light of the specific clause in the

insurance policy clearly stipulating that the insurance company

will not be liable for any loss if it occurs on or before 17.5.82,

then the appellant could not have filed a claim for the losses

which had already occurred prior to 17.5.82. The findings given

by the trial court on the Issue nos. 3 and 4 also do not call for any

interference and the same are accordingly upheld.

12. Therefore in the light of the above discussion, this court

does not find any merit in the present appeal and the same is

accordingly dismissed.

December 23 , 2011                      KAILASH GAMBHIR, J.