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Saif-ud DIn Mohammad Ibrahim Vs. the New India Assurance Co. Ltd. - Court Judgment

LegalCrystal Citation
Subject ;Insurance
CourtPunjab and Haryana
Decided On
Reported inAIR1949P& H185
AppellantSaif-ud DIn Mohammad Ibrahim
RespondentThe New India Assurance Co. Ltd.
Cases ReferredRickards v. Forestal Land Timber and Railways Co. Ltd.
Excerpt:
.....under article 227 of the constitution. - if the assured elects to avail himself of this option, he must do so by giving notice of abandonment within a reasonable time after the receipt of sufficient information, he is not allowed to await events to see how things turn out or to decide what may best suit his interests. if he duly elects to abandon en good grounds, the risk is ended, because the assured can recover as for a total loss, and the salvage vests in the underwriter. 364 that whether the conditions prescribed by the act as essential to a constructive total loss are or are not satisfied is in each case a question of fact. if any and every claim for loss of goods by war peril is rendered futile by the insertion of the frustration clause the policy, so far as loss by war..........as mentioned in their original plaint were that the insured goods had become a constructive total loss on the declaration of war, on account of the capture of the steamer by the british navy and also because of the reason that the goods were of perishable nature and became totally unfit for use due to detention of the steamer at freetown. in the amended plaint, which the plaintiffs were allowed to put in later, they took up an additional ground, namely, that the goods had become actual total loss on account of having been destroyed by the enemy action while they were lying at the london port in october 1940. the defendant company joined issue with the plaintiffs on almost all the points and even denied the questions of fact which were or should have been within their knowledge. in.....
Judgment:

Teja Singh, J.

1. This is a second appeal from an appellate decree of the District Judge, Delhi, whereby he accepted an appeal from a decree of a Subordinate Judge who had decreed the plaintiffs' claim for Rs. 3,960.

2. The facts briefly stated are as follows: The plaintiffs, Messrs. Saif-ud-Din Mohammad Ibrahim, merchants of Delhi, consigned two cases of rolled dried beef runners to a firm, called Messrs. Antz Graggen at Hergiswal, Switzerland. The cases were despatched to Antwerp by a German Steamer, S.S. Uhenfelz, which sailed from Bombay on 28th August 1939. The second world war in the meanwhile broke out on 3rd September 1939, i.e., only a few days after the Uhenfelz had left Bombay. The plaintiff firm had taken out two insurance policies with the New India Insurance Co. Ltd. of Bombay in respect of the cases that had been despatched to the Switzerland firm, one an ordinary insurance policy and the other a War Risk Insurance policy. Towards the end of October, the plaintiffs were informed by the Insurance Company that Uhenfelz had taken shelter in a neutral port of Lourenco Marques.

3. Later on the ship left that port and when she was on the high seas the British Navy captured it and took it to the port of Freetown in Sierra Leone in West Africa. Information of this fact was also conveyed to the plaintiffs by the Insurance Company by their letter dated 20th November 1939. From Freetown 'Uhenfelz' was taken to London where she reached in the beginning of April 1940. The plaintiffs' cargo was discharged from the ship at that port between 4th April and 13th April and while she was lying there she was damaged by the enemy action. What remained of the goods was subsequently sold and the proceeds of the same amounted to 44-6-6. It may here be mentioned that on 11th December 1939 the plaintiffs had sent a notice of abandonment to the defendant company. On 3rd October 1942, the plain-tiffs sued the Insurance Company for Rs. 4,627-4.6, consisting of Rs. 3,980 as the total value of their claim on account of insurance and Rs. 667/4/6 interest due on the said amount at the rate of 6 per cent. The grounds of the claim put forward by the plaintiffs as mentioned in their original plaint were that the insured goods had become a constructive total loss on the declaration of war, on account of the capture of the steamer by the British Navy and also because of the reason that the goods were of perishable nature and became totally unfit for use due to detention of the steamer at Freetown. In the amended plaint, which the plaintiffs were allowed to put in later, they took up an additional ground, namely, that the goods had become actual total loss on account of having been destroyed by the enemy action while they were lying at the London Port in October 1940. The defendant company joined issue with the plaintiffs on almost all the points and even denied the questions of fact which were or should have been within their knowledge. In addition they pleaded that they were protected by the frustration clause that appeared in the War. Risk Policy and they had no liability whatsoever. The trial Sub-Judge framed as many as 11 issues. It is unnecessary to reproduce those issues, because it is conceded before us by counsel for both sides that the issues that related to the questions of fact are no longer material, as the evidence adduced by the parties and the statements by their counsel have established beyond doubt the facts which have been set out above. The only questions which the trial Sub-Judge was called upon to determine were whether the goods became, a constructive total loss, or whether they became actual total loss because of the enemy action in October 1940 and whether the company was protected by the frustration clause. The trial Sub-Judge found against the plaintiffs on the question of constructive total loss of the goods but held that they had become actual total loss because of their destruction by the enemy action. He further held that the frustration clause did not protect the defendant company and in the result decreed the plaintiffs' claim for the total amount of insurance, i.e., Rs. 3,960, without any interest.

4. On appeal the learned District Judge upheld the findings of the trial Court on the question of constructive total loss but disagreed with it as regards the point which it had decided in the plaintiffs' favour. The learned District Judge further held that though a part of the goods had been destroyed by enemy action while they were lying at a warehouse in a Port of London the company was not liable on account of that loss. On these findings he set aside the decree of the trial Sub-Judge and dismissed the plaintiffs' suit with costs in both Courts.

5. The first point urged before us by the appellants' counsel was that the view taken by both the Courts below on the point of constructive total loss was erroneous. Before discussing this point it appears to be necessary to explain what a constructive total loss is, The mattar was considered by the House of Lords in Rickards v. Forestal Land Timber and Railways Co. Ltd. (1941) 3 All. E.R. 62, in which Lord Wright made the following observations:

A constructive total loss is a device intended to subserve the purpose of indemnity by enabling the assured, when by insured perils the postulated danger of loss or deprivation is caused, to disentangle himself, subject to definite limits and conditions, from the danger and throw the burden upon the underwriters. If the assured elects to avail himself of this option, he must do so by giving notice of abandonment within a reasonable time after the receipt of sufficient information, He is not allowed to await events to see how things turn out or to decide what may best suit his interests. If he duly elects to abandon en good grounds, the risk is ended, because the assured can recover as for a total loss, and the salvage vests in the underwriter.

6. The statutory provisions of the Marine Insurance Act, which admittedly applies to the present case because of the specific conditions of the policies, are contained in Sections 60, 61, and 62. Section 60 sets forth generally the grounds on which a constructive total loss may be founded and it is laid down therein that subject to any express provision in the policy, there is a constructive total loss where the subject-matter insured is reasonably abandoned on account of its actual total loss appearing to be unavoidable, or because it could not be preserved from actual loss without an expenditure which would exceed its value when the expenditure had been incurred. It is also mentioned in the section that there is a constructive total loss, (1) where the assured is deprived of the possession of his ship or goods by a peril insured against, and (i) it is unlikely that he can recover the ship or goods, as the ease may be, or (ii) the cost of recovering the ship or goods, as the case may be, would exceed their value when recovered; or (2) in the case of damage to a ship, where she is so damaged by a peril insured against that the costs of repairing the damage would exceed the value of the ship when repaired.

7. It is mentioned in Halsbury's Laws of England (2nd Edn. Vol. 18), para. 522, p. 364 that whether the conditions prescribed by the Act as essential to a constructive total loss are or are not satisfied is in each case a question of fact. Later on the learned author has made the following observations towards the end of the same paragraph:

There are thus two main grounds on which a constructive total loss may be founded. The assured may, by the perils insured against, be deprived of the possession of the insured property in circumstances which make it unlikely that he can recover it within any assignable time. For instance, it may be captured by the enemy, or by the assured's own Government, or by pirates, or a ship may be deserted by the master and crew. In the second place, although the assured may not be forcibly dispossessed of the insured property, it may be so damaged by the perils insured against that the cost of repairing the damage or of carrying the goods to the port of destination may be so great as to make it in the mercantile sense impracticable to incur I that cost.

So what has to be seen is whether the plaintiff was able to prove in the present case that conditions occurred on account of which the goods became a total constructive loss in the light of the above observations.

8. In spite of the fact that there is no evidence in this case as regards what happened immediately before the war began, abundant indication of these facts is obtainable from the observations made by the House of Lords in the case cited above. This is what Lord Wright said:

The material facts agreed (in addition to those already stated) were that on and after 3rd September 1939, (when war broke out), there was risk of capture whenever the Minden was outside territorial waters of any neutral state, that as from that date there was an effective blockade of all German ports by the British and French naval forces, which were further taking all possible steps to intercept, capture and destroy all German vessels on the high seas, that at all material times the German Government, in furtherance of German War policy, had taken control of all German-owned merchant vessels and had given orders to all such vessels and their masters to take refuge in neutral ports, and, if possible, to return to Germany with their cargoes, or as a last resort, to scuttle their vessels....

In the cases before their Lordships the ships were pursued by the British Navy and ultimately they were scuttled on the high seas. Now taking into consideration the fact that if the Uhenfelz had proceeded on her normal course she would have reached her port of destination at the most in about a month, and the fact that she did not even succeed in crossing the Indian Ocean by the month of October and she ultimately took refuge in the port of Lourenco Marques, the inference is clear that the master of Uhenfelz also acted in accordance with the instructions issued by the German Government referred to in the Rickards' case 1941-3 All. E.R. 62, and she deviated from her normal route in order to avoid the British Navy or to go down to the bottom of the seas by scuttling. In this view it is legitimate to presume that as soon as the master of the steamer decided to adopt that course, he took hold of all the cargo that was lying thereon and from that moment the cargo ceased to be in the possession of the plaintiffs. The reason why the steamer did not stay in the neutral port for a longer period and took to the high seas appears to be that according to International law a ship belonging to the nationals of a belligerent country cannot stay in a neutral port for an indefinite period. So Uhenfelz had to resume her journey and when she was captured by the British Navy, it simply became impossible for her to reach the port of destination. I am, therefore, of opinion that the total constructive loss took place come time before the Master took shelter in the neutral port or at the latest when the ship was captured by the British Navy. It was urged by the respondent's counsel that since the goods in question belonged to a British subject, they could not have been regarded as having been confiscated because of the capture of the steamer by the British Navy. There does not appear to me to be any force in the contention, for the reason that the steamer was a German steamer and the presumption was that the cargo contained therein was the enemy property unless it was proved to the contrary and since there could have been no evidence to this effect in the possession of the Navy that captured the ship, they must have treated the goods as the enemy property. Apart from this, even if it be conceded for a single moment that the goods could not be regarded to have been confiscated and consequently they technically remained in the possession of the plaintiffs, it was not possible to take them to Antwerp, which was the port of destination, and for this reason also the plaintiffs could legitimately regard them as constructive total loss. Relying upon the quotation from Halsbury which I have given above, I hold that the mere fact that the steamer was captured by the British Navy cannot make any difference and all that has to be seen is whether it was not unlikely that the plaintiffs could recover the goods, or even if they could, whether in doing so the cost of their recovery would exceed their value when recovered. I have no hesitation in answering the question in the plaintiffs' favour.

9. Coming now to the frustration clause, which appears as Clause 2(b) in the policy and reads as follows:

This policy is warranted free of any claim based upon loss of, or frustration of, the insured voyage or adventure caused by arrests, restraints, or detainments of kings, princes, peoples, usurpers or persons attempting to usurp power.

The important words are 'frustration of the insured voyage or adventure' and in order to determine whether the case comes within the purview of these words we must again turn to the Rickard's case 1941-3 All. E.R. 62. A similar clause existed in the policies which were under consideration in that case. There also the ships had taken refuge first in neutral ports and later when they were compelled to leave those ports they were pursued by the British Navy. The distinguishing feature was that while they were being pursued the ships were scuttled and consequently the goods that they carried became actual total loss. It was argued on behalf of the insurance companies in those cases that because of the ships having been scuttled there were frustration of voyage and adventure and consequently the companies were-protected. It was held that on the true construction of the contracts, the frustration clause afforded no defence to the underwriters, since, if there had been a constructive total loss of the goods within the meaning of the Marine Insurance Act, 1906, Section 60, the mere fact that there had also been a loss of the voyage could not exclude the right of recovery for the former loss. The question was discussed at great length by Lord Wright and he observed that the frustration clause could not be applied to a case where the assured is claiming for loss of, or damage to, the actual physical things or chattels and that he was entitled to resist the application of the clause on the ground that the primary subject-matter was the goods, and that the adventure was merely ancillary or accessory. 'A claim in respect; of the loss of the adventure,' remarked his Lordship,

is an added benefit granted to the assured over and above his interest in the goods themselves. The exception is expressly by its language limited to the loss of, or frustration of, the insured voyage or adventure.

Viscount Simon L.C., while agreeing with the observations made by Lord Wright remarked as follows:

The constructive total loss occurred when the German captain obeyed the instructions of his Government' and held the goods as the subject and servant of that Government instead of holding them as the bailee of the assured. That was, in the circumstances, a restraint; of princes or peoples.

While dealing with the construction of the frustration clause this is what his Lordship said:

If any and every claim for loss of goods by war peril is rendered futile by the insertion of the frustration clause the policy, so far as loss by war perils is concerned, is perfectly useless. Such a result is no doubt possible if clear and apt. words are used, with the result that the underwriter takes away with one hand what he gives with the other, but it seems to me that the fallacy in the argument arises from assuming that every loss of goods is bated upon loss of adventure.' I agree with the Court of Appeal in thinking that the proper interpretation of the frustration clause is not 'free of any claim which on the facts might be based on loss of the insured voyage,' and that, its proper meaning must be 'free of any claim which is in fact based, because it can only be based, upon loss of the insured voyage'.

I, therefore, hold that the learned District Judge was wrong in giving the insurance company the benefit of the frustration clause.

10. As regards the actual loss caused to the goods while they were lying at the London Port all that I consider it necessary to mention is that it is not covered by Clause 2(a)(ii) of the policy. The relevant words of the clause are:

2. Notwithstanding the foregoing:--

(a) the insurance against the said risks shall not attach to the interest hereby insured or to any part thereof--

(i) * * * * (ii) after being discharged over side from an overseas vessel at the final port of discharge, or after expiry of fifteen days counting from midnight of the day on which the overseas vessel is safely anchored or moored at the final port of discharge whichever shall first occur.

It is admitted that the final port of discharge was Antwerp and not London. The learned District Judge has, however, taken the view that since it was impossible to take the goods to Antwerp and the steamer was captured on the way and was taken to London, the latter port should be regarded as the final port of discharge. I do not [find it possible to accept this view. It is correct t hat because of the war and the conditions brought about by it, it was not possible for the steamer or the goods to reach Antwerp which was the final port agreed upon by the parties, but this cannot be a ground for substituting another port for the one mentioned in the policy. According to the policy, which is a contract binding upon the parties, the insurance company could claim the benefit of Clause (ii) only after the goods had been taken to the final port of discharge and if I this could not be done the effect is that the clause I would not apply and the company could not be protected. I may also in this connection refer to Para. 330 of Halsbury's Laws of England (Edn. 2, vol. 18), p. 241, wherein the question is discussed. The words of the paragraph are:

According to the common clause in English policies, the risk on goods continues during the voyage to the port of discharge 'until the same be there discharged and safely landed.' The port of discharge is either the particular port which is named in the policy for that purpose, or that which, by reason of the terms of the policy or the usage of trade, is inferred to be intended by the parties. Sometimes the place named in the policy as the place of discharge is a district containing several ports. In such case the policy will, generally speaking, protect the outward cargo until the whole of it has been or, in the usual course of trade, ought to have been safely landed at that port in the district which, for the aforesaid reasons, is taken to be the ultimate port of discharge contemplated by the parties.

11. It is obvious that in the present case when the insurance was taken and the goods were shipped, it could not have been in the contemplation of the parties that the war would break out or at least that the steamer carrying the goods would be captured on the way and then taken to London. So, it cannot be said that the port of London could have been contemplated is the final port of discharge by the parties, nor is it alleged that there is any question of usage of trade, etc. in the present case. All that we are, therefore, left with is the policy and since Antwerp is mentioned as the port of final discharge therein, the insurance company could not claim the benefit of the clause in question because the goods never reached Antwerp.

12. For all these reasons I would allow the appeal, set aside the decree of the learned District Judge and restoring that of the trial Sub-Judge decree the plaintiffs' claim for Rs. 3960. I would also direct that the plaintiffs get their costs from the defendants throughout.

Mahajan, J.

13. I agree that the appeal should be allowed and would like to add that in this case no sooner the war broke out on' 3rd September 1939, the Master of the German ship S.S. Uhenfelz, which carried the goods for the plaintiffs, was bound to obey the instructions of the German Government which were to the effect that all German merchant vessels were either to return to Germany if possible, or to take shelter in a neutral port and in the last resort to scuttle themselves. The goods insured were owned by a British Indian subject and were on board a German steamer and were thus enemy goods on board a belligerent ship. These goods thus must be presumed to have been totally lost to the consignor as soon as the cargo fell into enemy hands. In other words, the cargo belonging to a British Indian subject came into possession of the master of a German ship which on 3rd September 1939 became an enemy ship. There can be no manner of doubt that on that date there was a constructive total loss of the goods so far as the plaintiffs were concerned, because they fell on that date into the hands of the enemy.

14. Though the goods became a constructive total loss to the plaintiffs on 3rd September 1939, the adventure or the voyage of the ship to Antwerp could not be held to have been frustrated by reason of the fact that it was a part of the directions of the German Government to the masters of all the German merchant ships that they could take shelter in a neutral port. Antwerp was a neutral port and, therefore, the voyage to Antwerp was not frustrated by any directions of the German Government. The ship could still continue her voyage to Antwerp which was a neutral port. However, the voyage was frustrated as soon as the British Navy captured the ship and that happened in the beginning of November 1939. The goods became a constructive total loss on 3rd September 1939 while the voyage of the ship was frustrated sometime in November 1939. In these circumstances the frustration clause could not in any way save the insurance company from liability in respect of the claim made by the plaintiffs. That clause has been recently construed by the House of Lords in the case cited by my learned brother. The interpretation placed on this clause is a very restricted and narrow one and can only benefit the insurance company in cases where the loss of the goods is consequential on the frustration of the voyage. But where the constructive total loss of the goods is independent of the frustration of the voyage, the company in that case cannot save its liability by pleading frustration clause. As pointed out above, in the present case the goods were lost constructively to the plaintiffs on 3rd September 1939 when they fell into enemy hands, while the adventure of the ship was frustrated in November 1939 when the British Navy captured her. As the plaintiffs gave a notice of abandonment, they were entitled to recover the value of their claim on the basis of the goods having been constructively lost to them.

15. As regards the alternative ground of the claim discussed by my learned brother, I have no hesitation in agreeing with the view expressed by him because of the fact that it was never in the contemplation of the parties that London would be the final port of discharge or would be a port where the goods could be taken for being laden on another ship. The only port contemplated by the policy to be the final port of discharge was Antwerp and in these circumstances the learned District Judge was in error when he expressed the opinion that the company was entitled to the benefit of the exception mentioned in the war risk clauses. The trial Judge, in my opinion, had placed a correct interpretation on this clause and no reason whatsoever existed for reversing this decision on that point.


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