w w w . L a w y e r S e r v i c e s . i n

M/s. Mauria Udyog Limited v/s United India Insurance Company Ltd. & Others

Company & Directors' Information:- UNITED INDIA INSURANCE COMPANY LIMITED [Active] CIN = U93090TN1938GOI000108

Company & Directors' Information:- MAURIA UDYOG LTD [Active] CIN = L51909WB1980PLC033010

Company & Directors' Information:- V K UDYOG LTD [Active] CIN = U51909WB1995PLC075722

Company & Directors' Information:- S M S UDYOG LIMITED [Amalgamated] CIN = U99999DL1982PLC013302

Company & Directors' Information:- A P UDYOG LTD [Active] CIN = L01132WB1984PLC037221

Company & Directors' Information:- H M A UDYOG PRIVATE LIMITED [Active] CIN = U36999DL1981PTC011548

Company & Directors' Information:- H R UDYOG PRIVATE LIMITED [Active] CIN = U01132WB2005PTC101729

Company & Directors' Information:- J D M UDYOG PRIVATE LIMITED [Active] CIN = U51109WB1997PTC085842

Company & Directors' Information:- J A UDYOG PRIVATE LIMITED [Active] CIN = U15122BR2013PTC021705

Company & Directors' Information:- P K UDYOG PRIVATE LIMITED [Active] CIN = U74899DL1994PTC058102

Company & Directors' Information:- G. S. UDYOG PRIVATE LIMITED [Active] CIN = U51909AS2009PTC008948

Company & Directors' Information:- M R UDYOG PRIVATE LIMITED [Amalgamated] CIN = U74900WB2011PTC157973

Company & Directors' Information:- M G UDYOG PRIVATE LIMITED [Active] CIN = U74899DL1994PTC056983

Company & Directors' Information:- J B UNITED PRIVATE LIMITED [Active] CIN = U93000MH2014PTC258844

Company & Directors' Information:- J B UNITED PRIVATE LIMITED [Active] CIN = U74999MH2014PTC258844

Company & Directors' Information:- M M UDYOG LTD [Active] CIN = U17111WB1984PLC038345

Company & Directors' Information:- R. S. UDYOG PRIVATE LIMITED [Active] CIN = U74994OR2019PTC032093

Company & Directors' Information:- INDIA UDYOG PVT LTD [Active] CIN = U51109WB1959PTC034780

Company & Directors' Information:- R K P UDYOG LTD [Active] CIN = U70101WB1980PLC033207

Company & Directors' Information:- V P UDYOG LTD [Active] CIN = U51109WB1985PLC038397

Company & Directors' Information:- G. K. UDYOG PRIVATE LIMITED [Active] CIN = U31300WB1967PTC026996

Company & Directors' Information:- A S UDYOG PRIVATE LIMITED [Active] CIN = U29253HR2016PTC058096

Company & Directors' Information:- S B J UDYOG PRIVATE LIMITED [Active] CIN = U28998HR2015PTC057664

Company & Directors' Information:- UNITED CORPORATION LIMITED [Liquidated] CIN = U99999TN1942PLC003159

    Consumer Case No. 205 of 2012

    Decided On, 28 January 2021

    At, National Consumer Disputes Redressal Commission NCDRC


    For the Complainant: Joy Basu, Sr. Advocate, T.S. Ahuja, Advocate. For the Opposite Parties: Amit Kr. Singh, Advocate.

Judgment Text

Anup K. Thakur1. By this order it is proposed to decide C.C. No.205 of 2012 and C.C. No.206 of 2012. In C.C. No.205 of 2012, the complainant is M/s. Mauria Udyog Ltd. and in C.C. No.206 of 2012, the complainant is M/s. Jotindra Steel & Tubes Limited. Both had purchased marine cargo specific voyage insurance policy from United India Insurance Co. Ltd., Noida (OP-1 henceforth) and facts in both are almost identical.2. Arguments were heard on 25.11.2020. Facts were taken from CC 206 of 2012.3. Learned Sr. Counsel for the complainant briefly narrated the facts. On 04.06.2010, a Marine Cargo Specific Voyage Policy No.221800/21/10/01/00000043 (policy hereafter) was taken by the complainant from OP1 (Annexure-1). This policy, for voyage from Jingtang, China to Kandla Port, Gujrat, covered a consignment of H.R. Steel Coils with the sum insured at Rs.10,31,93,25/-. Premium paid was Rs.22,764/-. Details such as Invoice, Container Details, Vessel name etc., were not shown initially in the policy; instead, the relevant box for these details carried the remark “To be declared”. Subsequently, these details were submitted to OP1 and were duly endorsed in the policy on 20.07.2010 (Annexure-4). Learned counsel explained that the initial policy read with this endorsement made the whole policy of insurance.4. Per the plaint, on 18.7.2010, the marine vessel, Khallijia-3 (M.V. hereafter),at 20:45 hours, experienced ingress of water below the water line, which caused damage to cargo. Since there were other cargoes also on the M.V., general average principle became applicable. So, a Salvor, M/s. Smith Singapore Pvt. Ltd., was appointed who, in turn, appointed another company to procure guarantees from the affected parties i.e. owner of the M.V. and owners of their respective cargoes. OP provided a guarantee on behalf of the complainant on 10.8.2010 (Annexure-8). This guarantee was however recalled by the OP on 12.8.2010 (Annexure-9). Learned counsel submitted that in the recall letter, OP had taken the ground that the M.V. classification was not as required under the ‘Institute Classification Clause’ of the policy and resultantly, it was constrained to withdraw the ‘average guarantee’ given to the Adjusters.5. Counsel referred to complainant’s letter to the OP dated 15.6.2010 (Ann.-2) whereby all relevant details of the shipment, including the name of the M.V., MV Khalijia 3 V.10086, had been furnished. Again, vide letter dated 7.7.2010 (Ann. 3), the complainant had, in continuation of letter dated 15.6.2010, enclosed invoice number, packing list, copy of bill of lading to the OP. On this basis, OP had duly endorsed the policy (Ann.-4).6. Learned counsel then drew attention to the policy schedule (Ann.-1), specifically to the box describing the “Terms of Insurance Cover: As per the following Clauses”, and thereunder, to clause no. 8 viz. “Institute Classification Clause with deletion of held cover provision”. He pointed out that the first 7 clauses – Important Notice, Institute Radio-Active Contamination Exclusion Clause, Institute Replacement Clause, Institute War Clauses (Cargo), Institute Strike Clauses (Cargo), Strike, Riots & Civil Commotion Clause and Cargo ISM endorsement were all elaborated in the body of the policy. Not so, however, the clause “Institute Classification Clause with deletion of held cover provision” (supra). His argument therefore was that this clause was never meant to be operationalized at any point of time else it would have also found elaboration in the body of the policy. He then argued that it was this clause which was the basis for repudiation of the insurance claim. He submitted that except for this, the policy covered the voyage from Jingtag, China to Kandla Port, Gujarat, India, “ON WAREHOUSE TO WAREHOUSE BASIS”, and thus clearly covered the incident which took place in Mumbai, enroute to Kandla and warehouse.7. He further submitted that despite intimation of 15.6.2010 (supra) having been stamp receipted by the OP’s office, OP had denied having received the same. Counsel submitted that this could not be. He drew attention to complainant’s further intimation dated 7.7.2010 (Ann.-3) whose receipt was acknowledged by the OP: this too had a similar stamp of the OP company, without any initial. Counsel argued that both these letters had therefore been similarly received by the OP1 and accepting receipt of one and denying receipt of other was not understood. His argument was that in both these letters, the name and number of the M.V. was mentioned, and thus, there was no question that the name of the vessel had been declared to the OP and that the OP was aware of it. To therefore deny knowledge of the M.V.’s classification on 12.8.2010 and withdraw the guarantee(supra) was unwarranted. Learned counsel then explained in some detail the events following the incident resulting in damage to the vessel and loss to the cargo. He explained that as per international practice, a salvor was appointed who, in turn, appointed the average adjuster who then wrote to the owners of the M.V. and the cargoes to provide guarantees in order to cover all expenses incurred by the salvor on prorata basis. This being so, the complainant had approached the OP, the insurer, to provide a guarantee to M/s. Richards Hogg Lindley (Hellas) Ltd., the average adjuster appointed by the M/s. Smit Singapore Pvt. Ltd., salvor. The complainant provided a counter guarantee to the OP for this purpose and the OP then provided the said guarantee on 10.08.2010 (Ann. 8). In this guarantee, the name of the vessel was duly mentioned, clearly showing therefore that the OP was always in the know of the M.V. carrying the cargoes. Counsel argued that it has to be presumed that the OP had provided guarantee only after being satisfied with the classification and condition of the M.V.. It was therefore strange that the OP, after only 2 days, vide letter dated 12.8.2010, withdrew the guarantee from the adjuster (Ann. 9). He argued that this withdrawal of guarantee and repudiation of the claim was untenable as the OP could not deny its liability: the insurance policy was fully operational at the time of the incident, and all details necessary for the voyage including the name of the vessel, was in the knowledge of the OP. He further argued that OP’s repudiation was inexplicable: what could have transpired between 10.8.2010, the date OP extended guarantee to the adjuster and 12.8.2010 when the OP withdrew this guarantee? Still further, he submitted that a perusal of this letter dated 12.8.2010 (supra) would show that it was cryptic and bereft of any detail. OP’s contention that the M.V. Khalijia did not possess the classification required under the Institute Classification Clause of the policy was unacceptable as this clause was neither reproduced in this letter nor had been elaborated in the policy, as explained earlier. Since no clear reasons were given for repudiation in this letter of 12.8.2010, learned counsel argued that this by itself was also a deficiency in service. He then submitted that the M.V. was registered in the International Register of Shipping and had an interim certificate of classification issued on 2.6.2010 which was valid till November 2010. He cemented this argument by further submitting that it was not as if it was the complainant’s responsibility alone to have ascertained the classification of the M.V., it being the case that it was only one of the cargo owners on this vessel and could not be expected to know the vessel’s status etc. since the import was on CIF basis. So, the complainant was not privy to the classification of the vessel and also not responsible for the correct classification. OP, the insurer, also had a responsibility to check all this before extending the guarantee to the adjustor.8. Learned counsel then drew attention to complainant’s reply dated 17.8.2010 (Ann. 10) to the OP’s letter of repudiation dated 12.8.2010 (Ann.9): it had been contended by the complainant that the OP remained fully responsible for all the losses covered under the policy as the cargo was fully insured by a named vessel in good faith; that the policy was issued on 4.6.2010 and OP was subsequently informed about the particulars of shipment with vessel name, value and quantity details which were duly endorsed on the policy. OP replied to this vide its letter dated 3.9.2010: It denied receipt of letter dated 15.6.2010 and held that “the vessel did not qualify for cover in terms of the Classification Clause as it was found not to have held classification by any entity contemplated by the said clause”. Learned counsel argued that even in this reply, there was no reproduction of the classification clause being relied upon by the OP (Ann.-11).9. Learned counsel then referred to an internal circular of the OP viz. HO:MC:Cir:30:2013 dated 30.04.2013, obtained by the complainant through RTI. This circular had made it obligatory upon OP’s offices issuing marine insurance policies to first verify the vessel particulars; if the vessel was not classed as per recognized classification society, no cover was to be granted i.e. NO CLASS, NO COVER. Counsel argued that it seems to be the case that OP had failed to carry out this due diligence. In such a case, however OP ought to have refunded the premium and cancelled the policy. Instead, it has repudiated the insurance claim. Counsel further argued that nowhere in the pleadings or in the various documents on record is the institute classification clause mentioned and that it has been mentioned for the first time in the synopsis of arguments filed in the proceedings. This was not acceptable, argued the counsel. Without this, the OP’s case fails completely.10. Summing up, the learned counsel reiterated that the institute classification clause and the factum of M.V. being not classified under this cannot be considered as a ground for repudiation by the OP because this clause does not form part of the policy nor has it been explained in the repudiation letter of 12.8.2010 nor does it form part of the documents on record. Second, it is not the case that the M.V. was not a registered vessel; it was registered in the International Shipping Register.11. Towards evidence supporting the consumer complaint, learned counsel pointed to affidavit by way of evidence of Shri V.K. Sureka, Chairman of the complainant company, affidavit of Shri Gopal Gupta, Manager of Import & Export and A.R. of the complainant company, and affidavits of Shri Sandeep Sharma and Shri Dinesh Sharma, Field Boys employed with the complainant company for delivery of letters etc. In particular, he emphasized the affidavit of Shri Sandeep Sharma: It has been stated that he had delivered various letters to OP-1’s office, including on 15.6.2010, and that these had been received by the officials and acknowledged by affixing seal on the duplicate copy.12. Finally, learned counsel invoked some citations in support of his arguments. In the case of Saurashtra Chemicals Ltd. Vs. National Insurance Co. Ltd. decided on 13.12.2019, the Apex Court had held that “It is a settled position that an insurance company cannot travel beyond the grounds mentioned in the letter of repudiation.” He submitted that the only issue in the letter of repudiation of 12.8. 2010 was to do with the classification of the M.V.. And he had already shown that the M.V. was indeed classified though with another society and not IACS which the OP was insisting upon. In the case of Modern Insulators Ltd. Vs. Oriental Insurance Company Ltd. 2000 (2) SCC 734, it was held that “Exclusion clauses which are not explained to the insured, are not binding to the insured and are required to be ignored.” This would apply to the “Institute Classification Clause with deletion of held cover provision” which was never made clear to the complainant, as argued by the counsel. In the case, National Insurance Co. Ltd. Vs. Sh. D.P. Jain, it was held by the National Commission in its order dated 15.05.2007 that “In our view, the unexplained or unnoticed exclusion would not be binding to the insured.” In UII vs MKJ Coproration, the Apex Court had held that “An insurer cannot reply on and the insured is not bound by, a clause that the insurer should have but did not incorporate into the policy.” Learned counsel argued that in the case in hand, the Institute Classification Clause was unexplained, vague, non-specific and ambiguous and thus, the insured complainant was not bound by it and the OP could not take advantage of it.13. Learned counsel for the OP also began his submissions by referring to the policy (Annexure-1) to submit that it was not in doubt at all that the following had been clearly mentioned under Terms of Insurance Cover viz. “Institute Classification Clause with deletion of held cover provision”. He then argued that nowhere in the initial complaint of the complainant filed in March 2016 was there any whisper of this policy not having been supplied to the complainant for the complainant to claim that it was not aware of this clause, especially because the complainant company was a regular importer and should have known better. If the insured had any doubt about this clause, it could have asked the OP. Merely advancing rhetorical arguments was of no avail as it would not make the claim admissible under the policy.14. Referring to the internal circular of the OP argued by the counsel for the complainant (Ex-CW 1), he argued that this circular was dated 30.4.2013 and had referred to another circular dated 24.1.2012. None of these were available when the M.V. was insured and suffered damage in 2010. It is obvious that the OP following instances such as the one in hand, learnt this lesson and issued these circulars qua exercising care about the classification of M.V. before issuing insurance coverage. Be that as it may, counsel argued that these circulars could not have retrospective effect and therefore this argument of the complainant fails. Referring to learned counsel for the complainant’s argument qua the policy wherein it had drawn attention to clause 4.1 which had mentioned that “In no case shall this insurance cover loss damage or expense arising from unseaworthiness of vessel or craft, unfitness of vessel craft conveyance container or liftvan for the safe carriage of the subject matter insured, where the assured or their servants are privy to such unseaworthiness or unfitness, at the time the subject matter insured is loaded therein.”, Counsel submitted that this exclusion clause was in respect of “Institute War Clauses (Cargo)” and had no applicability to the present complaint.15. Regarding letter dated 15.6.2010 (supra) claiming intimation of M.V.’s particulars, Counsel submitted that OP had denied receipt of this unequivocally. He further argued that even if, for the sake of argument, it’s receipt were to be acknowledged, it would be seen that this letter had only mentioned the M.V.’s name, not it’s classification. This would be a violation of good faith. As for endorsement on the insurance policy on 20.7.2010, counsel submitted that this was on the basis of the letter dated 7.7.2010. He further pointed out that the endorsement clearly mentioned that “All other terms and conditions were unaltered.” Thus, the original policy condition qua vessel classification remained as intended.16. He then referred to the report of the D.G. Shipping mentioned in the surveyor’s report which had listed as many as 37 deficiencies in the vessel. His argument was that there was little doubt that the M.V. was an old, substandard vessel, not worthy of being insured.17. Referring to the surveyor’s report, pages 6 and 7 thereof, he pointed out that it was clear that the loss to the cargo was on account of the poor condition of the vessel and that the collision on 7.8.2010, after the incident of ingress of water on on 18.7.2010, was again due to steering failure of the M.V.. The surveyor report had also mentioned that the loss to the cargo was on account of ingress of sea water and not due to the accident. Further, this report also mentioned that the cargo on the M.V. had already been sold on the high seas; if so, in any case, the counsel argued, there was no loss to the complainant and so the question of any claim did not arise.18. Referring to the average guarantee extended by the OP to the adjuster, he drew attention to letter of Richards Hogg Lindley dated 18.7.2010 to the complainant to make the point that the amount of security sought was to the tune of US$ 600,000 ( Rs. 2.74 crore at Rs. 45.73 per US $) whereas the claim of the complainant was for a loss of Rs.4.41 crore, questioning therefore as to how this was justifiable.19. Finally, he argued that it has to be understood that the purpose of classification of M.V. is to ensure that it is safe and seaworthy and therefore insurable. This basic principle was incorporated in the insurance policy which was given to the complainant on good faith. This basic ingrdient having been violated, the OP was justified in repudiating the claim. Learned counsel further mentioned that strictly speaking, in fact, there was no repudiation of the claim but only a withdrawal of guarantee that had been extended on behalf of the complainant wherein the grounds for so doing were explained.20. In a short rebuttal, learned counsel for the complainant made the following points:i. Terms and conditions of the insurance policy are available in the public domain; the policy issued had eight sub clauses, of which 7 had been explained in the body of the policy and only one, “Institute Classification Clause with deletion of held cover provision” had not been explained. If so, OP could only rely upon the first 7 clauses.ii. OP’s argument that clause 4.1 under Exclusions under “Institute War clauses(Cargo)” did not apply to the case in hand as there was no war, was not quite correct because on the right hand side, it had been described as “Unseaworthiness And Unfitness Exclusion Clause”, i.e. a general clause with general applicability.iii. Reference the internal circular of 2012 referring to the circular of 2010 (supra), he clarified that in fact both related to a memo of 2001and therefore both were clarificatory in nature; he argued that they had applicability to the instant case.iv. Regarding the endorsement of the insurance policy incorporating the insurance details furnished by the complainant, counsel argued that this endorsement is not disputed in any away, and the only submission here was that the complainant had merely filled up the blank box of the initial policy that had been issued.v. As far as M.V. being old and unfit leading to the repudiation made on 12.8.2010, he argued that clearly the OP’s counsel’s argument was that the vessel had not been classified as per OP’s classification, and that as argued earlier, the vessel was registered and classified elsewhere.vi. Regarding further argument of the OP that the surveyor’s report has mentioned that the damage to the cargo was not because of collision was immaterial as this ground had not been taken in the letter of repudiation.vii. As for the amount of insurance claim, the policy was for total sum insured of Rs.10.31 crore and the estimated gross expenses due to the incident had been estimated to be Rs.5.81 crore by the surveyor.DISCUSSION AND ORDER21. It is clear from the detailed arguments articulated on behalf of the parties that the facts of the case viz. the policy (4.6.2010), the endorsement (20.7.2010), the incident of water ingress(18.7.2010) and collision with another vessel subsequently (7.8.2010), the granting of average guarantee (10.8.2010) and it’s withdrawal (12.8.2010) are not in dispute. What is in dispute is whether the OP had committed any deficiency in service by withdrawing the guarantee and impliedly, denying the insurance claim on the ground that the M.V. was not a classified M.V., and did not satisfy the condition mentioned in the policy viz. the “Institute Classification Clause with deletion of held cover provision”. It is this issue that has to be decided in this consumer complaint, first and foremost. Main argument of the complainant is that if this was the case, it was not known to the complainant: As far as the complainant was concerned, it had acted in good faith, had furnished all relevant information on which basis, the insurance policy had also been duly endorsed, and that for the OP to take this plea now was not tenable.22. Both parties have claimed that they had acted in good faith. OP’s case is that it depended entirely on the information furnished by the insured to issue the policy and when it came to know that the M.V. was not a classified M.V., it immediately withdrew the guarantee it had extended to the adjusters and informed the complainant. Complainant, on the other hand, has argued that it supplied information on the M.V. when it came to it’s knowledge, as early as 15.6.2010, and that, in as much as it was only one of the importers of cargo, on CIF basis, it had no means of knowing the classification of the vessel any sooner. Further, it was not it’s responsibility alone to have ascertained the classification of the M.V. and the implied seaworthiness or otherwise. OP too could have and should have ascertained the M.V.’s classification status, as per it’s own internal circulars. That the OP singularly failed to do so was a deficiency in service and the complainant should not have to suffer repudiation of it’s genuine claim on this account.23. Indeed, insurance contract is a contract of utmost good faith, as laid down by the Hon’ble Apex Court. This is a basic, well established, well understood principle of insurance law. What has to be decided in the case in hand is whether this principle of good faith was violated.It is very clear, from a reading of the surveyor’s report and other documents, that the M.V. was old and that at the time of it’s engagement in the instant case, it was not classed with any approved society under International Association of Classification Societies (IACS). First para under “CLASSIFICATION OF THE VESSEL M.V. KHALIJIA-3” reads as below:“The Vessel M.V. Khalijia-3 was found classed with LRS till 09/10/07 (A member of IACS) and thereafter, she was found classed with non approved Classification Society-International Register of Shipping.”This finding of the surveyor has not been disputed. Indeed, complainant’s argument has remained confined to claiming that it was not as if the vessel was not classified at all; rather, it was listed in the International Register of Shipping. OP has, on the other hand, firmly held that the vessel was not classified as required by the policy clause “Institute Classification Clause with deletion of held cover provision”. Indisputably therefore, it can be safely concluded that as per OP’s policy clause, the vessel was not worthy of being insured. Yet, it was.The next question therefore is that if so, should the OP have insured the complainant’s cargo, without full knowledge of the vessel and its classification? A related question is whether the OP should then have conducted due diligence on the vessel as soon as it came to know it’s name which, as per the complainant, was furnished vide letter dated 15.6.2010, and was certainly known to the OP by letter dated 7.7.2010, received by the OP on 20.7.2010, delivered by the insurance broker, M/s SREI Insurance Private Broking Ltd..24. After having considered the rival arguments, the record, the surveyor’s report, it is my considered view that the complainant has failed to establish it’s case.It was the complainant, the importer, who had purchased the insurance cover. It was therefore reasonable that it had to be vigilant about all the conditions of taking insurance cover. It is also reasonable, as argued by the counsel for the OP, that the complainant, a regular importer, ought to have known the terms and conditions accompanying a Marine Cargo Specific Voyage Policy. It argued that it was importing on a CIF basis and that it’s own consignment would be on a vessel carrying other consignments also and therefore it had no means of knowing, at the time it took the policy (4.6.2010), any particulars about the vessel. This is reasonable and fair. However, what is not reasonable is the further argument of the complainant that since the import was on CIF basis, it’s responsibility ended with this declaration and that it was for the OP to do the necessary due diligence on the classification of the vessel. It was the complainant whose cargo was to be insured against all risks associated with the marine voyage. It was therefore for the complainant to have ensured full compliance of all the policy conditions, in it’s own interest. Merely a cover note, with details of vessel and voyage left blank, on “To Be Declared” basis, from the OP-insurance company, could not have meant that the complainant could then have assumed the contract of insurance as complete and taken no further steps other than a mere communication of details of the shipment, including the vessel’s name, to the OP. The insurance policy conditions should have been known to the complainant and taking the plea that it was not it’s responsibility alone, is unacceptable. It ought to have insisted with the exporter or to whoever was the contracting party to make sure that the vessel for voyage satisfy the policy condition of suitable classification. There is no averment on this aspect in the complaint or in the arguments. The only argument appears to be that it was for the OP to have done due diligence before issuing the policy in the first instance and before making the endorsement in the policy subsequently.25. On the other hand, it was not unreasonable for the OP insurance company to proceed on good faith and issue the insurance policy, in the hope that all terms and conditions would be complied with, if and when a claim were to be filed. If OP were to find subsequently, at any stage, that the M.V. did not satisfy the classification criteria, it would indeed have no option but to hold the complainant to be non-compliant with the policy condition(s) and deny the claim. In the instant case, it is this perspective which explains the revealed facts. OP displayed the good faith in issuing the insurance policy, leaving the box in the policy schedule blank. It did so because it would have had no good reason not to do so. Even though the voyage particulars were not known, they would be known later. So, the policy could be issued, for a voyage yet to be undertaken, on the understanding that the details would be furnished and that the policy conditions set out clearly in the policy schedule would be fulfilled. So, when details of the specific voyage were furnished by the complainant, these details were duly endorsed on the policy. This again was an act of good faith, and for the same reasons. After all, the complainant would have satisfied itself that the vessel met the classification condition clearly set out in the policy, there being no reason why it would not do so. When the incident of water ingress happened (18.7.2010), upon a request to provide guarantee to the average adjuster, OP did so (10.8.2010). This again was an act of good faith. When however it learnt that the M.V. did not satisfy the classification criteria, it immediately withdrew the guarantee as well as intimated the complainant that it was doing so (12.8.2010). It is apt to reproduce OP’s letter of 12.8.2010 at this stage:“We send herewith a copy of the letter given to the Average Adjusters on the subject.We understand from the Surveyors that the vessel MV Khalijia 3 did not possess classification as required under the Institute classification Clause of the policy. Accordingly, we are constrained to inform you that in terms of the policy conditions, prima-facie, we as insurers would not be liable for loss or expenses in respect of the subject cargo, and hence have been constrained to withdraw the Average Guarantee given to the Adjusters.”26. The above letter clearly reveals that the OPs were surprised when they found, from the surveyor, that

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M.V. Khalijia 3 did not possess classification as required under the Institute Clause of the policy. Further, in such a situation, they, prima-facie, felt that they would not be liable for the loss and therefore withdrew average guarantee given to the adjusters. This letter answers the question that was put during the arguments by the learned counsel for the complainant: It was mentioned that between issuing letter of guarantee on 10.8.2010 and withdrawal of the guarantee on 12.8.2010, it was not understood what had transpired, leading OPs to deny their insurance liability. The answer lies in the OP’s interaction with surveyors of the case. In fact, the OPs were, vide this letter of 12.8.2010, alerting the complainants of the possibility of not being in a position to entertain the claim on account of the loss while immediately withdrawing their guarantee; arguably, not having done so could have led to a further valid argument that the OP did not withdraw the guarantee as soon as it came to know. Indeed, in a contract of utmost good faith, the only proper and defensible course of action is to act as soon as any violation of any kind comes to notice.27. The principle of utmost good faith, in the instant case, favours the OP strongly. It was the complainant’s responsibility, first and foremost, to have kept the OP fully apprised of the classification status of the M.V. as soon as it came to know. As argued by the counsel for the OP, too much cannot be made of the letter of 15.6.2010 which the OP denies having received. Indeed, even if OP had received the letter earlier, it may not have materially had any effect on it’s action of endorsement which was carried out in good faith. The letter only mentioned the vessel’s name and nothing more. The complainant should have done more than this and apprised the OP about the vessel’s seaworthiness. Of course, this could have been done only if the complainant had first made the effort to find out. It failed to do so. It has only itself to blame. It cannot foist it’s own negligence on to the OP by arguing that it was not it’s responsibility alone. Even if this averment is conceded, it has still to be said that the complainant failed to carry out what was also very much it’s own responsibility. By failing to do so, and by then advancing arguments such as have been e.g. not the complainant’s responsibility alone, OP cannot deny receipt of letter dated 15.6.2010, complainant not made aware of the policy condition qua classification properly enough, cannot absolve the complainant. Finally, the underlying factum in the case is that the M.V. was not at all compliant with the policy condition of classification per “Institute Classification Clause with deletion of held cover provision.” In the face of this basis, fundamental fact, this consumer complaint cannot sustain.28. Facts in CC 205/2012 are almost identical, the only difference being in the value of the cargo and the loss claimed.29. In view of the discussion above, both consumer complaints, CC/206/2012 and CC/205/2012, are dismissed. In the facts of the case, there shall be no order as to costs.