TMI Blog2006 (12) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... to which it was otherwise entitled to. The expression without prejudice may have to be construed in the context in which it is used. If the purpose for which it is used is accomplished, no legitimate claim can be allowed to be defeated thereby. The Division Bench of the High Court committed an error in holding that the insurance policy stood terminated after June/ July, 1988 in terms of clause 9 of the policy when the contract of carriage had terminated on account of the unseaworthiness of the ship. Even Respondent had not made out any case to the said effect in the pleadings. If the contract of insurance did not terminate on its own, as was wrongly opined by the Division Bench of the High Court, the question of any request for its extension did not arise. Undoubtedly, the contract of insurance was covered under Institute Cargo Clause (C). However, it included expressly the risk of non-delivery of even single piece of log. It included the risk of the vessel or craft being stranded or grounded. It also included the risk of institute theft pilferage and non-delivery. Yet again on 2nd March, 1988 and 11th March, 1988, evidently, the scope of aforesaid policy was enlarged p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Petitioner : Mr. Prasenjit Keswani, Adv., Mr. Prashant Kumar, Adv. For the Respondent : Mr. Vishnu Mehra, Adv., Ms. Sakshi Mittal, Adv., Mr. B.K. Satija, Adv. JUDGMENT S.B. SINHA, J : 1. Leave granted. 2. Interpretation of a policy of marine insurance entered into by and between the parties herein covering goods in transit is in question in this appeal which arises out of a judgment and order dated 16th December, 2004 passed by the High Court of Calcutta in APO No. 363 of 2000 whereby and whereunder the appeal preferred by Respondent Insurance Company herein from a judgment and order dated 3rd December, 1999 passed in C.S. No. 480 of 1992 passed by a learned Single Judge of the said Court was allowed. 3. Appellant herein agreed to purchase 4000 cu. mt. of 'Sabha Log' (logs) at a total price of US $6,00,000/- from a Malaysian firm. 474 pieces of logs were loaded on a vessel known as 'Indera Pertama' (vessel) at the port of Western Sabah, Malaysia for their delivery at Calcutta. The ship left the Malaysian Port with cargo on 16th February, 1988. The logs were insured by Appellant with Respondent Insurance Company for a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... *** *** *** *** *** *** 9.2 if the goods are forwarded within the said period of 60 days (or any agreed extension therein) to the destination named herein or to any other destination, until terminated in accordance with the provisions of clause 8 above. *** *** *** *** *** *** 13. No claim for Constructive Total Loss shall be recoverable hereunder unless the subject-matter insured is reasonably abandoned either on account of its actual total loss appearing to be unavoidable or because the cost of recovering, reconditioning and forwarding the subject-matter to the destination to which it is insured would exceed its value on arrival. An extended warranty clause was endorsed in the policy wherefor additional premium was paid in the following terms: Notwithstanding anything contained herein to the contrary, it is hereby declared and agreed that the coverage granted under the within mentioned policy be extended to include the risks of Theft, Pilferage and Non-Delivery as well as War and S.R.C.C. as per attached clause 6 11. In consequence above extension of risks, an additional premium of ₹ 1,496/- is hereby charged to the insured. 5. The ship develope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause 6 cannot be set up by the defendant against the plaintiff's claim on account of non-delivery i.e. the peril insured against. Further in any event I am satisfied on the evidence adduced at the trial that the plaintiff had given prompt notice of the termination of the voyage at the Singapore Port but the defendant did not ask for payment of additions, premium for continuation of the said policy. The defendant therefore must be considered to have acquiesced in the continuation of the said policy at any rate it must be taken to have waived the condition prescribed in the said clause. I, therefore, answer this issue in the affirmative. 12. So far as Issue No. 2(b) is concerned, the learned Judge noticed the definition of 'constructive total loss' as contained in Section 60 of the Marine Insurance Act, 1963 and opined: There is no express provisions to the contrary in the said policy and as such it cannot be disputed that there has been constructive total loss of the said consignment. There is evidence on record to show that the cost of bringing down the said consignment to the Calcutta Port from the Singapore Port would be more than it is actual cost (see e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the goods were in existence, the court purported to have relied upon Middows v. Robertson [(1940) 67 Lloyd's Law Report 484] opining: The unseaworthiness would not come within the peril of the insured against as was held in Wadsworth Lighterage Co. Ltd. (supra). The unseaworthiness of the vessel is a ground excluded in the policy as referred to hereinbefore. There is no pleading or any attempt to prove that the plaintiff or its servant was not privy to the unseaworthiness of the vessel at the time of loading. 21. It was held: 6.15 If in a situation, loss occurs due to combination of more than one factors then if one factor is excluded the claim of the plaintiff cannot succeed. In the instant case, the proximate cause was delay and defaults committed by the plaintiff as mentioned aforesaid. Hence, the plaintiffs claim must fail. 22. In regard to the issue of loss caused by measures taken by Appellant to avert or minimize the effect of an insured period, it was opined that as the ship was detained due to unseaworthiness which is exclusionary clause the plaintiff cannot succeed in its claim. It was further opined that the insurance was hit by 'sue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that cost of transportation of goods from Singapore to Calcutta was much higher than the actual costs of the goods. The burden of proof to show that the exclusionary clauses are attracted being on the insurer and such burden having not been discharged the decision of the Division Bench should not be upheld. 26. It was furthermore pointed out that neither any case of applicability of the exclusion clauses was made in the written statement nor any issue was raised. In any event, in case of an ambiguity, a contract of insurance should be construed in favour of the insured. Reliance in this behalf has been placed on United India Insurance Co. Ltd. v. Pushpalaya Printers [(2004) 3 SCC 694]. 27. Mr. Vishnu Mehra, learned counsel appearing on behalf of Respondent, on the other hand, would submit that Institute Cargo Clause (C) contained restrictive clauses. Drawing our attention to Section 78 of the Marine Insurance Act, he would submit that the Division Bench of the High Court has rightly construed the words 'any peril'. It was submitted that having regard to Sub-section (4) of Section 78 of the Marine Insurance Act, the insured had a duty to minimize the loss and onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24th ultimo and note what you write. We would like to invite your attention to our letter dated 3.6.88, wherein requested you to take sincere and serious efforts to get the cargo landed at Calcutta Port before 11.7.88 even if necessary, by taking appropriate action that may be deemed fit. We also advised you to utilize the assistance of our Singapore Office, as and when necessary. 35. It is not clear from your letter under reference what steps have been taken to compel the ship owners to deliver the cargo at Calcutta Port as lading issued by them. Please note that as the vessel loaded with full cargo has been located the question of 'Non- delivery' does not arise and no claim will be admissible by the underwriters where the existence of the goods is there. As per the terms and conditions of Marine Insurance Policy Delay is the excluded peril which note. 36. From a perusal of the said letter, it is evident that the only ground on which the claim of Appellant was not accepted was that the question of any 'Non-delivery did not arise as the cargo had been in existence. Other contentions of Appellant in the said letter had not been repudiated. 37. On or about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by you as consignees and owners of the goods in proper Court at Kuala Lumpur to compel the shipowners to complete the voyage and meantime, 'restraint order' should also be secured to protect your interest as well alongwith the other interested Consignee so that no single or arbitrary action is taken by the Court jeopardizing your other consignee's interest. 42. We may here draw your attention that in terms of the Loss Minimisation Clause in the Policy, you are in duty bound to see that all protective measures are taken adequately against Carriers. 43. However, settlement of the claim under the policy would be considered only strictly in terms and conditions of the policy of insurance. This is without prejudice. 44. There had been no repudiation even at that stage. It was only when the ship could not leave the Singapore Port due to unseaworthiness, a claim of constructive total loss was made. Terms of the policy would indisputably have to be invoked for determining the rival clauses. But, it is one thing to say that the claim was barred by limitation or the exclusionary clauses would apply; but it is another thing to say that the question of invoking the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nevertheless, admit such communications. 47. Correspondence will only be protected by without prejudice privilege if it is written for the purpose of a genuine attempt to compromise a dispute between the parties. It is not a precondition that the correspondence bears the heading without prejudice. If it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations will, as a general rule, not be admissible. The converse is that there are some circumstances in which the words are used but where the documents do not attract without prejudice privilege. This may be because although the words without prejudice were used, the negotiations were not for the purpose of a genuine attempt to settle the dispute. The most obvious cases are first, where the party writing was not involved in genuine settlement negotiations, and secondly, where although the words were used, they were used in circumstances which had nothing to do with negotiations. Surveyors reports, for example, are sometimes headed without prejudice, although they have nothing to do with negotiations. The third case is, where the words are use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A marine insurance policy does not come to an end only because the ship became stranded at a port. 52. Termination of the transit before delivery of goods is subject to Clause 8 of the contract. The duration of contract is mentioned in Clause 8 of the contract of insurance. It commences from the time the goods leave the warehouse or other contingencies mentioned therein. It terminates: (i) on delivery to the Consignees or other final warehouse; (ii) on delivery to any other warehouse or place of storage; (iii) for storage other than in the ordinary course of transit; or (iv) for allocation or distribution or on the expiry of 60 days after completion of discharge overside of the goods insured from the oversea vessel at any final port of discharge. 53. None of the aforementioned clauses are attracted in the facts and circumstances of the present case. 54. Clause 8.3, subject of course to the operation of other provisions contained in Clause 8 as also the provisions contained in Clause 9, remains in force during delay beyond the control of the assured, any deviation, forced discharge, reshipment or transshipment and during variation of the adventure arising from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le was stranded. 61. In P. Ramanatha Aiyar's Advanced Law Lexicon, 3rd edition, page 4494, it is stated: Strand. The word strand means the verge of the sea, or of any river. Strand (Sax.) is any shore or bank of a sea or river. Hence the street in the west suburbs of London, which lay next the shore or bank of the Thames, is called the Strand. 62. In Black's Law Dictionary, Fifth Edition, the word 'strand' has been defined as : A shore or bank of the sea or a river. 63. If the ship was stranded at Singapore and goods were offloaded from it, Appellant must be held to have discharged its burden. Findings of fact were arrived at by the learned Single Judge on the basis of the pleadings of the parties. If a clause of Marine Insurance policy covers a broad fact, in our opinion, it would be inequitable to deny the insured to raise a plea particularly when the insurer being a State within the meaning of Article 12 of the Constitution of India is expected to act fairly and reasonably. The purport and object for which goods are insured must be given full effect. In a case of ambiguity, the construction of an insurance policy should be made in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the object and purport of the statute which takes him out of the said definition. Furthermore, the interpretation section begins with the words unless the context otherwise requires . 40. In Ramesh Mehta v. Sanwal Chand Singhvi it was noticed: (SCC p. 426, paras 27-28) 27. A definition is not to be read in isolation. It must be read in the context of the phrase which would define it. It should not be vague or ambiguous. The definition of words must be given a meaningful application; where the context makes the definition given in the interpretation clause inapplicable, the same meaning cannot be assigned. 28. In State of Maharashtra v. Indian Medical Assn. one of us (V.N. Khare, C.J.) stated that the definition given in the interpretation clause having regard to the contents would not be applicable. It was stated: (SCC p. 598, para 8) '8. A bare perusal of Section 2 of the Act shows that it starts with the words in this Act, unless the context otherwise requires . Let us find out whether in the context of the provisions of Section 64 of the Act the defined meaning of the expression management can be assigned to the word management in Section 64 of the Act. In pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss-- (1) where the assured is deprived of the possession of his ship or goods by a peril insured against, and: (a) it is unlikely that he can recover the ship or goods, as the case may be, or (b) the cost of recovering the ship or goods, as the case may be, would exceed their value when recovered; 71. The likelihood of recovery must be judged in the light of the probabilities as they would have appeared to a reasonable assured at the moment when he knew of his loss and could have given notice of abandonment. The former rule of law that a frustration of the venture by an insured peril gives rise to a constructive total loss under a voyage policy on goods, although the goods themselves are not damages, has not been altered. [See Rickards (supra)] 72. It is again undisputed that after the ship became unseaworthy, Appellant took steps to recover the value of the cargo with a view to minimize its loss due to non-delivery. It, therefore, fulfilled its contractual obligation in that behalf. Sale of cargo was allowed by the High Court of Singapore in suit No. 711 of 1989. It was only at that stage, Appellant could come to the conclusion that the cost of recovering and getting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e v. Asiatic Navigation and Others [(1993) 2 SCC 639 : AIR 1993 SC 2054] wherein this Court was dealing with a different fact situation. In that case, the vessel in question was diverted to Vishakhapatnam along with cargo where the repairs of the vessel were expected to be completed. The vessel was, however, not repaired nor the wages of the crew members were paid as a result whereof the ship was directed to be arrested. It was in the aforementioned fact situation opined: It is thus clear, after knowing the fact, that we are dealing with a Marine Insurance Policy with Institute Cargo Clauses (FPA) attached against the Insurance Company, it is the duty of the plaintiff to prove as a fact that the cargo was lost due to perils of the sea. Since the finding of the High Court is that no sea water entered in the engine room and the fact that the cargo was intact even after the ship was towed to Vishakhapatnam showed that no sea water entered the ship and, therefore, the loss to the plaintiff was not on account of perils of the sea and the suit of the plaintiff against the Insurance Company i.e. defendant 4 was rightly dismissed by the High Court. 75. The said decision cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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