Jk Metal Industries vs Lloyds Agency & Anr
2014 Latest Caselaw 1943 Del

     IN THE HIGH COURT OF DELHI AT NEW DELHI

                           Order Reserved on: 26 th March, 2014
                           Order Pronounced on: 17 th April, 2014

                          CS(OS) 1341/2013

JK M ETAL INDUS TR IES                                   ..... P LAIN TIFF

                                 Through:   Mr. Rajan           Khosla,
                                            Advocate.

                                 Versus

LLOYDS A GENCY & A NR                              ..... D EFENDAN TS

                                 Through:   Mr.   Ankit             Jain,
                                            Advocate.

       CORAM:

       HON'BLE MR. JUSTICE SANJEEV SACHDEVA

SANJEEV SACHDEVA, J.

IA No.18158/2013 (under Order XXXVII Rule 3 CPC for leave to defend by Defendant No.2.

1. The Plaintiff has filed the present suit under Order

XXXVII CPC. The present suit is for recovery of a

sum of Rs. 46,98,522/- alongwith pendente lite and

future interest. As per the Plaintiff, the Plaintiff is in

the business of manufacturing of Aluminium

Cookwares. On 30.06.2012, a pro-forma invoice was =========================================================

raised in favour of the Plaintiff by M/s. Qingdao

Weilibang Chemical Co. Ltd., China for supply o f

Aluminium Ingots 40 MT for a total amount of US D

65,400/-. On 22.08.2012, commercial invoice for the

aforesaid transaction was issued by the supplier.

2. On 29.08.2012, the supplier executed a contract for

insurance titled as "Cargo Transportation Insura nce

Policy". As per the Plaintiff, in terms of the policy, in

consideration of the premium paid by the insured, the

affiliate of the Defendants undertook to insure the

goods in transportation subject to the conditions of the

policy. The contract of insur ance is stated to be from

warehouse to warehouse covering marine insurance.

3. As per the Plaintiff, subsequent to the contract of

insurance and the shipment of the goods by Cargo

Transportation Company, the Plaintiff paid the price of

the cargo and gained the right to file claim for the

same. On 30.10.2012, subsequent to the arrival of the

shipment at ICD Dadri, upon custom examination in =========================================================

one container out of the two, the goods were found to

contain stone painted with aluminium colour instead of

aluminium ingots. The Plaintiff requested for a joint

survey alongwith the survey of the second container

which was yet to be opened by the Customs. On the

conduct of the joint survey, it transpired that both the

containers contained stones pain ted with aluminium

colour instead of Aluminium ingots. The Joint Survey

Report indicated that one of the seals of both the

containers was found open and in one container the

wire rope binding the tarpaulin of the open top

container was found cut. The survey report indicated

total loss caused to the Plaintiff with regard to the

shipment. The Plaintiff submitted their insurance claim

with the Defendants. The Defendants are stated to

have issued a letter dated 28.12.2012 enclosing a

copy of the survey report.

4. The Plaintiff claims to have sent reminders to the

Defendants for the payment of the insurance claim.

=========================================================

However, the claim of the Plaintiff is stated to have

been rejected by the Defendants, who advised the

Plaintiff to take up the claim directly with the shipping

company. The Plaintiff has, thus, filed the present suit

under Order XXXVII CP C contending that there is a

written contract i.e. the policy of insurance an d since

there was total loss, liquidated amount being the

amount of the invoice is due and payable by the

Defendants.

5. The Suit is filed against one M/s Lloyds Agency and

the Defendant No. 2. Neither the shipper nor the

Insurance Company has been arrayed as a

Defendant.

6. The Defendant No.2 has filed an application under

Order XXXVII Rule 3 seeking unconditional leave to

contest and defend the suit. As per the

applicant/Defendant No.2, there is no entity by the

name of the Defendant No.1 M/s. Lloyds Agency. The

Defendant No.2 has further contended that it is not =========================================================

liable to pay any amount towards the insurance claim

as neither it is the insurance company that had issued

the insurance policy nor it had entered into an

insurance contract on behalf of the insurance

company. The Defendant No.2 is not even a party to

the insurance contract.

7. As per the Defendant No.2, the insurance policy has

been issued by the insurance company M/s. PICC

Property and Casualty Co. Ltd. (hereinafter referred to

as "PICC") having its registered office in China. The

insurance policy placed on record by the Plaintiff

shows the name of the insurance company as PICC

and the name of the underwriters also as PICC.

8. The Defendant No. 2 claims to be merely a surveyor

appointed by PICC for the purposes of conducting a

survey and submitting a report. The Defendant No. 2

is not underwriters to the policy of insurance. As per

the Defendant No.2, the Plaintiff had themselves been

communicating with the insurance company PI CC and =========================================================

it is the insurance company that had declined the

claim of the Plaintiff and answering Defendant had

merely informed the Plaintiff that the underwriters had

repudiated the claim on the ground that there was no

proof that loss or pilferage had occurr ed during marine

transaction.

9. Without prejudice to the stand that the Defendant No.

2 is not the insurance company and is not liable under

the Insurance Policy, alternatively the Defendant No. 2

has further contended that there are disputed

questions of facts relating to the transaction and the

issue of loss of goods and the alleged pilferage is itself

questionable inasmuch as the shipper had stated that

the cargo was discharged at Nhava Sheva as a direct

shipment from the port of loading and as such there

were no chances of the cargo being pilfered as well as

replaced with painted stone. The shipper has further

stated that in their opinion fake cargo was loaded or

replaced before the containers were received by the

=========================================================

carriers for shipping at load port and thus the very

contract of insurance was eroded as what was insured

was aluminium and what was shipped was painted

stones. The Defendant No.2 has further submitted

that a detailed investigation and trial would be requ ired

to establish as to what was shipped and whether there

was any collusion between the seller and the Plaintiff.

10. The Defendant No.2 has submitted that the Defendant

No.2 is merely a survey agent which conducts the

survey of goods and forwards the survey report to the

insurance company for its consideration and once the

survey is conducted and the report is submitted, the

role of the Defendant No.2 ceases. The Defendant

No.2 is not responsible for settlement of the claims of

the insured nor has any authority of accepting or

rejecting any claim. The Defendant No.2 has further

submitted that the insurance company , which is a

necessary party, has not been impleaded and as such,

the suit is liable to be dismissed for non-joinder of the

=========================================================

necessary parties. It is further contended that the

Defendant No.2 is neither a necessary nor a proper

party to the present suit. The suit against the

Defendant No.2 is not maintainable.

11. It is further submitted by the Defendant No. 2, that

there is no entity by the name of M/s. Lloyds Agency

the Defendant No.1. The Corporation of Lloyds does

not conduct any insurance business. The function of

Lloyds is to manage and regulate the Lloyds insurance

market. The Defendant No.2 acts as survey agents

for several underwriters at Lloyds and also for various

other private insurance companies. The Lloyds

agency has no concern or connection with the

transaction. However, the word s "Lloyds Agency"

appearing on the letterhead of the Defendant indicates

that it is associated with several syndicates at Lloyds

and is a Lloyds certified surveyor. It is contended that

there is no entity by the name of "Lloyds Agency" and

as such, the Defendant No.1 is neither a necessary

=========================================================

nor a proper p arty.

12. The Defendant No.2 has further contended that the

principal of the Defendant No.2 i.e. PICC is disclosed

and as such, the Defendant No.2 is not liable under

Section 230 of the Indian Contract Act. Learned

counsel for the Defendant No.2 has relied on the

judgment of the Bombay High Court in Midland

Overseas vs. CMBT Tana, AIR 1999 Bombay 401 to

contend that under Section 230 of the Indian Contract

Act before the agent can be sued, it must be pleaded

and shown that the principal is undisclosed and th e

contract, the breach of which is sued on was entered

into by the agent as having contracted personally.

13. Learned counsel for the Defendant No.2 has relied on

the judgment in the case of Mathuradas

Govardhandas vs. Eagle Metal & Industrial

Products Pvt. Ltd. and Anr., 71 Calcutta Weekly

News, CW M Page 211 to show what Lloyds

Corporation is and does and that M/s Lloyds Agency is =========================================================

not an entity.

14. The Supreme Court of India in the case of M ECHE LAC

E NGINEERS & M ANUFAC TURERS V ERSUS B ASIC

E QUIPMENT C ORPORATION 1976 (4) SCC 687 has laid

down the principles for grant of leave to defend as

under:

(a) If the Defendant satisfies the court that he has a good defence to the claim on its merits the Plaintiff is not entitled to leave to sign judgment and the Defendant is entitled to unconditional leave to defend.

(b) If the Defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the Plaintiff is not entitled to sign judgment and the Defendant is entitled to unconditional leave to defend.

(c) If the Defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that

=========================================================

he has a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action be may be able to establish a defence to the Plaintiff's claim the Plaintiff is not entitled to judgment and the Defendant is entitled to leave to defend but in such a case the court may in its discretion impose conditions as to the time or mode of trial but not as to payment into court or furnishing security.

(d) If the Defendant has no defence or the defence set-up is illusory or sham or practically moonshine then ordinarily the Plaintiff is entitled to leave to sign judgment and the Defendant is not entitled to leave to defend.

(e) If the Defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the Plaintiff is entitled to leave to sign judgment, the court may protect the Plaintiff by only allowing the defence to proceed if the amount claimed is paid into court or otherwise secured and give leave to the Defendant on such condition, and

=========================================================

thereby show mercy to the Defendant by enabling him to try to prove a defence."

15. The Supreme Court in the case of M ECHE LAC

E NGINEERS & M ANUFACTURERS (S UPRA ) has laid down

that where the Defendant satisfies the court that he

has a good defence to the claim on its merits or where

the Defendant raises a triable issue indicating that he

has a fair or bona fide or reasonable defence although

not a positively good defence th e Defendant is entitled

to unconditional leave to defend. Where the Defendant

discloses such facts as may be deemed sufficient to

entitle him to defend, i.e. though the affidavit does not

positively and immediately make it clear that he has a

defence, still, shows such a state of facts as leads to

the inference that at the trial, the Defendant may be

able to establish a defence to the Plaintiff's claim the

Defendant is entitled to leave to defend but in such a

case the court may in its discretion impose conditions

as to the time or mode of trial but not as to payment

=========================================================

into court or furnishing security. Where the Defendant

has no defence or the defence set-up is illusory or

sham or practically moonshine then ordinarily the

Plaintiff is entitled to a Decree and the Defendant is

not entitled to leave to defend. Even in cases where

the Defendant has no defence or the defence is

illusory or sham or practically moonshine then

although ordinarily the Plaintiff is entitled to a decree ,

the court may protect the Plaintiff by only allowing the

defence to proceed if the amount claimed is paid in to

court or otherwise secured and give leave to the

Defendant on such condition, and thereby show mercy

to the Defendant by enabling him to try to prove a

defence.

16. In the present case, the affidavit filed by the Defendant

seeking leave to defend raises a triable defence. The

defence raised is that neither the Defendant is the

insurance company that had issued the insurance

policy nor had it entered into an insurance contract on

=========================================================

behalf of the insurance company. The Defendant No.

2 is not even a party to the insurance contract. The

insurance policy has been issued by PICC which were

also the underwriters and PICC had not even been

impleaded as a party to the suit. The Defendant No. 2

is merely a surveyor appointed by PICC for the

purposes of conducting a survey and submitting a

report. The underwriters had repudiated the claim on

the ground that there was no proof that loss or

pilferage had occurred during marine transaction.

There are disputed questions of facts raised relating to

the transaction and the issue of loss of goods and the

alleged pilferage is itself questionable in view of the

stand of the shipper that the cargo was discharged at

Nhava Sheva as a direct shipment from the port of

loading and that there were no chances of the cargo

being pilfered as well as replaced with painted stone.

The shipper has opin ed that fake cargo was loaded or

replaced before the containers were received by the

=========================================================

carriers for shipping at load port and thus the very

contract of insurance was eroded as what was insured

was aluminium and what was shipped was painted

stones. Further that the Defendant No. 2 is not

responsible for settlement of the claims of the insured

nor has any authority of accepting or rejecting any

claim. These are all disputed question of fact that

require examination.

17. Applying the principles as laid down by the Supreme

Court in the case of Mechelac Engineers &

Manufacturers (Supra) it cannot be held that the

Defendant No. 2 has no defence or the defence is

illusory or sham or practically moonshine .

18. For the above reasons, I am of the view that the

Defendant No. 2 is entitled to unconditional leave to

defend the suit. The application i s accordingly allowed.

SANJEEV SACHDEVA, J April 17, 2014 st =========================================================