M/s Engineers India Limited Vs PT. Asuransi Mitsui Sumitomo, Indonesia And Anr

1. Heard Mr. Anuj Shah, Advocate, for the complainant, Mr. Amit Kumar Singh, Advocate, for opposite party-1 and Ms. K. Enatoli Sema, Advocate, for opposite party-2.

2. M/s. Engineers India Limited has filed above complainant for directing the opposite parties, jointly and severally to pay (i) Rs.148062187/- with pendent lite and future interest @18% per annum, as insurance claim; (ii) litigation costs; and (iii) any other relief, which is deemed fit in the facts and circumstances of the case.

3. The facts as stated in the complaint and emerged from the documents are as follows:-

(a)  M/s. Engineers India Limited was a government company, registered under the Companies Act, 1956 and working under the Ministry of Petroleum and Natural Gas, Government of India. It used to provide engineering and related technical services to petroleum refineries and other industrial projects. The complainant purchased eight legged jackets and appurtenances (for short the jackets), from PT. Nippon Steel Batam, Indonesia, which were sailed from Batam Jetty on 02.10.2003 and arrived at Offshore of Mumbai High North, India on 20.10.2003, where it had to be installed at Offshore MNW Process Platform Project of Oil and Natural Gas Corporation of India.

(b) PT. Asuransi Mitsui Sumitomo, Indonesia (OP-1) (the Insurer) was an insurance company and M/s. Gladstone Agencies Limited (OP-2) was a surveyor and ‘claim settling agent’ of OP-1, in India. PT. Nippon Steel Batam (the supplier) obtained ‘Marine Insurance Policy No.DC10308761 000100’ of the jackets, for a sum of USD 6249000/- for “Institute Cargo Clauses (A)” and “Institute War Clauses (Cargo)” from the Insurer, effective from 16.09.2003, in the name of the complainant. During voyage of the jackets, a group of fishing boats of the Sri Lankan Coast attacked the vessel in mid of October, 2003.

(c)  The representatives of PT. Nippon Steel Batam (the supplier), Det Norske Veritas (DNV) (the certification agency for MNW Platform), Engineers India Limited (the complainant), Larsen & Turbo Limited and JRMEHL (the launching contractors) and Marine Installation Surveyor inspected the consignments on 06.11.2003, at Offshore site on barge and sharp cuts were found on the diaphragms in main legs of the jackets, namely A4, B1, B3 & B4. The engineers of IRM Offshore and Marine Engineers Pvt. Ltd. (the representatives of the manufacturer of the diaphragm) observed that due to deflation in the diaphragms, there would be loss of internal pressure in the jacket and suggested for its repair, before installation. The complainant wrote a letter dated 06.11.2003 to PT. Nippon Steel Batam to take remedial measure of deflated diaphragms and also informed that assistance from Larsen & Turbo Limited, JRMEHL and Barge DB-27 relating to all facilities as required can be provided on cost reimbursement basis, who denied its liability as the export was ‘Free On Board’ (FOB) basis.

(d) The complainant, then, wrote another letter dated 07.11.2003 to PT. Nippon Steel Batam, for setting up insurance claim and requested to inform/arrange for the required documentation for the same prior to commencement of repair. PT. Nippon Steel Batam informed that it had discussed with the Insurer, who had permitted to go on for repair. The complainant deployed IRM (the manufacturer’s representative) and Derrick Lay Barge (DB-27) for repair of the damaged diaphragms, who repaired it. IRM issued certificate of repair dated 10.11.2003. The representatives of PT. Nippon Steel Batam (the supplier), Det Norske Veritas (DNV) (the certification agency for MNW Platform), Engineers India Limited (the complainant), Larsen & Turbo Limited and JRMEHL (the launching contractors) and Marine Installation Surveyor prepared a jointly certified brief report of inspection and repair dated 11.11.2003. The complainant forwarded the papers i.e. (i) Jointly certified brief report establishing the damage and repair; (ii) MOM establishing the requirement from MWS/JRMEHL for repair of the same; (iii) Two photographs, one showing cut on the diaphragms prior to repair and the other showing repaired diaphragms; and (iv) Conformation of repair by IRM, on 11.11.2003 to PT. Nippon Steel Batam, for setting up insurance claim. The complainant wrote a fax message dated 11.11.2003 to PT. Asuransi Mitsui Sumitomo, Indonesia (the Insurer), informing that the papers relating to insurance claim, in respect of the damage of diaphragm during transit, have been given to PT. Nippon Steel Batam, who has been authorised to set up insurance claim on its behalf. The complainant forwarded Claim Form along with all necessary documents to PT. Nippon Steel Batam on 19.01.2014, for being submitted to the Insurer. PT. Nippon Steel Batam informed the complainant through email dated 03.03.2004 that the insurance claim was forwarded to PT. Asuransi Mitsui Sumitomo, Indonesia (the Insurer) through letter dated 03.03.2004.

(e)  PT. Nippon Steel Batam, subsequently, informed that the insurance policy was in the name of the complainant and the complainant had to submit insurance claim directly before M/s. Gladstone Agencies Limited (OP-2), who was ‘claim settling agent’ in India of OP-1. The complainant then submitted Claim Form along with all necessary documents to M/s. Gladstone Agencies Limited (OP-2) on 19.05.2004. The complainant supplied some more papers to OP-2 on 11.06.2004. OP-2, vide letter dated 25.06.2004, made a detail queries from the complainant. The complainant, vide letter dated 29.07.2004, replied the queries and supplied more papers as desired by OP-2. OP-2, vide letter dated 29.07.2004, asked for some more papers, which were supplied through letter dated 26.08.2004, 03.09.2004 and 13.09.2004.

(f) OP-2, vide letter dated 18.04.2005, found that the services of DB-27 were availed for offshore installation and testing of the jackets and due to damage to the diaphragm, “idle time” of DB-27 was increased by 5.64 days, which are to be considered as “consequential loss”. The claim under ‘Marine Cargo Policy” should be restricted to the cost of direct repairs, which would include the material cost and not infrastructure cost, which assisted repair work. The complainant was asked to submit a revised claim bill of USD 20000/- i.e. repair cost only although total insurance claim was for USD 2621111.82.

(g)  The complainant, vide letter dated 31.05.2005, informed that the crane and crane boom of DB-27 including DB-27 was not mobilized for testing of the jackets, which was neither required nor envisaged. Marine Installation Surveyor alerted and authorised detail investigation of deflated diaphragm. DB-27 was never idle during the repair of jackets diaphragm nor “idle time” was increased. An offshore repair on a floating jacket located more than 200 KM inside sea requires a floating and mobile workshop. DB-27 was available on the site and immediately undertook repair work and was fully engaged for 5.64 days. As such, the costs of the services of DB-27 are liable to be included in the repairing costs. However, without considering the reply of the complainant, PT. Asuransi Mitsui Sumitomo, Indonesia (the Insurer), vide letter dated 11.11.2005, approved the claim for USD 20000/-. Then this complainant was filed on 24.04.2007 for balance amount of the insurance claim.

4. PT. Asuransi Mitsui Sumitomo, Indonesia (the Insurer) (OP-1) filed its written reply on 01.08.2007, in which, issue of ‘Marine Insurance Policy No.DC10308761 000100’ of the jackets, for a sum of USD 6249000/- for “Institute Cargo Clauses (A)” and “Institute War Clauses (Cargo)” by it, effective from 16.09.2003, in the name of the complainant, is not disputed. OP-1 stated that the complainant had to inform to M/s. Gladstone Agencies Limited (OP-2), immediately after the damage and submit its claim with due notice to the carrier. Submission of the claim through PT. Nippon Steel Batam was not required. When PT. Nippon Steel Batam notified the claim to OP-1, then OP-1 inquired from OP-2, about the claim of the complainant, through fax dated 11.05.2004. OP-2, then, contacted the complainant, who submitted the claim on 19.05.2004, although, the loss was detected on 06.11.2003. Immediate information of the loss to the ‘claim settling agent’ was necessary to investigate the causes of damage and extent of loss. Due to inordinate delay in information, the OPs were deprived from investigating the cause of loss and extent of the damage. OP-2, vide letter dated 14.06.2004, informed OP-1 that (i) No details of drawing, showing the legs and the diaphragm has been provided although it has been indicated that 4 main legs namely A4, B1, B3, & B4 exhibited deflated shape, confirming loss of internal pressure vide EIL’s letter No. EIL/NSB/MNW/DB/01 dated 06.11.2003. In the same letter, it was advised that remedial measures should be taken up for all the 4 legs so that positive pressure of about 15 psi for holding period of 4 hours can be established. There is no such detail as to what extent of repairing work was done to set right the jacket. (ii) The report from EIL, vide their letter No.EIL/NSB/MNW/DB/05 dated 11.11.2003, indicates that the sharp cut was observed on the diaphragm at 6:00 ‘O’ clock position moving upward on the diaphragm at leg No.A4. The cut was about 100 mm long and maximum depth about 12 mm. In the same letter, it was mentioned that certificate was issued by IRM for repair works of the damaged diaphragm at leg A4 but this has not been forwarded. (iii) The 2 photographs, one indicating the damaged diaphragm and other indicating repaired diaphragm, cannot be evaluated properly without proper drawings and inspection report. (iv) There is no mention about the materials of construction of diaphragm. (v) No details of exact nature of repairing works and actual methods adopted for repairing have been indicated. Complete details of materials used and certified procedure of the actual repair work carried out would be required. (vi) No detail of man hour spent directly on the repairing job and time sheet of individual engineers with description of job done on every hour, have been provided. (vii) Annexure-I as indicated in the Claim Bill said to contain the breakup of (1A) cost on account of DB-27 Barge and associated marine spread used in repair of diaphragm. (1B) Repair cost of material etc. used for damaged diaphragm. 7.5% fees applicable on 1A and 1B totalling to approximately USD 1067010 have not been provided. (viii) There is no detail of DNV’s inspection report of the said jacket, also details of test carried out indicating NDT have not been provided. In effect, there is no test report and we find that pressure was only 10 psi although EIL indicated 15 psi (letter No. EIL/NSB/MNW/DB/05 dated 11.11.2003). (ix) A huge amount of liquidated damages of USD 1014435.84 has been shown which does not appear to be covered under the subject policy. (x) Similarly a penalty @ INR one lac per day totalling to USD13186.80 has been charged. The reason for charging this penalty is also not clear. (xi) Why two standby charges were considered in the Claim Bill for DB-27 as well as for NSB’s barge tug boat standby (USD 91200) is not clear. OP-2, vide letter dated 25.06.2004 made a detail queries and comments of the complainant on above points. Some of the queries were answered by the complainant through the letter dated 29.07.2004. The repair was done by the manufacturer namely IRM. The complainant little realized that consequential loss was not covered in Marine Cargo Insurance Policy rather under “Erection All Risk” or “Business Interruption” Insurance Policies. OP-2 required the Insured to explain after confirmation from PT. Nippon Steel Batam, whether mobilization of DB-27 was absolutely necessary for repair work and whether without it, repairs would not be possible. Whether mobilization of DB-27 was the most economical way of conducting repairs? What repair facility was exclusively available with DB-27 and whether the same was necessary for the repair the diaphragm? Was there any other alternative way to carry out repairs more economically, if DB-27 was not engaged by you? How repair facility at DB-27 was utilized for the repair of the diaphragm. Further details along with respective invoices of materials used for the repair with respect to claim of USD 20000. In response to the said letter dated 09.11.2004, the Insured forwarded the opinion of PT Nippon Steel Batam, which is quite evasive and demolished the claim of the Insured. It suggested that Engineers India Limited, McDermost/L&T and MD, Marine Warrantee Surveyor were involved in offshore work and they should have taken appropriate short and simple decision to repair the damaged diaphragm. The Insured did not furnish satisfactory answer and document. It is significant to note that DNV is certification agency for MNW Platform Project. It carried out inspection prior to load out at the fabrication yard of PT. Nippon Steel Batam, in which, it has been mentioned that all the diaphragms including A4 were subjected to visual inspection. This means that no detailed section-wise inspection, adopting scientific method was made. The leak test was concluded to be satisfactory only on looking at air pressure of 10 psi inside all the legs. After the alleged damage also air pressure was at 10 psi. There was no drop of pressure for entire period of 1 and 1/2 months. Thus it was difficult to conclude whether the damage was preload fact or post load. The slit found about was only 12 mm in the middle of the slit gradually reducing at the end. There was every possibility of the said defect existing at the preload stage since visually the pressure was all throughout at 10 psi and there was no obvious clue of the damage and it was detected only at the time of prelaunch inspection and testing, which was a routine mandatory procedure. The said report clearly admits that it was not associated with any detailed investigation. DNV report was not able to determine the possible reason of the damage. DNV report further abstained from giving any opinion as to justification of the alleged repair. It simply mentioned that due to the slit in the rubber diaphragm, the installation contractor namely J Ray McDermost opined that there would be an adverse impact on the launching/towing/ bending/flooding operation. The installation contractor was required to carry repair work under direct supervision of the OEM viz. IRM. The repair procedure was approved by installation contractor/EIL/ONGC. The OPs were not informed during the repair period. The manufacturer decided to repair, as such, insurance claim was not maintainable. The repair included sanding, application of adhesive, placement of asbestos sheet and placement of neoprene. Mathew Daniel Services (MDS) carried the survey and assessed the loss. It was decided that the defect would be repaired on an offshore site for which assistance regarding providing of derrick Lay barge (DB-27) was advised for remedial measures. But survey report of MDS was not made available. No expert opinion is brought on record for deployment of DB-27 for the alleged repair nor do the same appear to have been witnessed by DNV. The OPs never admitted that use of DB-27 barge was required for repairs. Although claim was not maintainable but as a good gesture actual repair cost has been accepted. There is no evidence to prove that the vessel was attacked by fishing boats near Sri Lanka during voyage. Date, time, place of attack, details of attacking fishing boats are not given. Preliminary issues relating to (i) territorial jurisdiction, (ii) OP-1 is not subject to Indian Laws and Court (iii) the complainant is not a consumer, and (iv) Non-joinder of necessary parties, are raised. There is no deficiency in service on the part of the OPs.

  OP1 filed Additional Written Reply on 31.10.2007, stating that the Policy was subject to excess deductible of Japanese Yen of 3000000 equivalent to USD 30000, while actual repair cost claimed by the complainant was USD 20000 as such nothing was payable.  

5. M/s. Gladstone Agencies Limited (OP-2) filed its written version on 16.07.2007, raising similar plea as raised by OP-1. OP-2 stated that it was an accredited surveyor, having ISO9001 certification, in the field of survey and loss adjustment. OP-1 appointed OP-2 as “claim settlement agent” in the insurance policy itself. The complainant was required to inform OP-2 about the loss at the earliest and not to anyone else. Although loss was allegedly detected on 06.11.2003 but the complainant informed OP-2 on 19.05.2004, which was serious default of the part of the complainant. Due to delayed information, OP-2 was deprived of its right to investigate the cause of loss and extent of damage. Insurance claim against OP-2 is not maintainable. The complaint has no merit and is liable to be dismissed.  

6. The Complainant filed Rejoinder Replies, Affidavit of Evidence of S. Majumdar (General Manager) and documentary evidence. PT. Asuransi Mitsui Sumitomo, Indonesia (OP-1) filed Affidavit of Evidence of Amuthan Das (Constituent Attorney) and documentary evidence. M/s. Gladstone Agencies Limited (OP-2) filed Affidavit of Evidence, Additional Affidavit of Evidence of Ashok Jatia (Director) and documentary evidence. All the parties have filed written arguments.

7. We have considered the arguments of the counsel for the parties and examined the record. Preliminary issues raised by the OPs have no merit. Supreme Court in National Insurance Company Limited Vs. Harsolia Motors, 2023 SCC OnLine SC 409, held that contract of insurance is a contract of indemnity and has no profit motive. Even a commercial entity can obtain insurance policy for self-use and is a consumer. M/s. Gladstone Agencies Limited (OP-2) was authorised as a ‘claim settlement agent’ by OP-1 under the insurance policy, which is located in India. OP-2 has admitted part of the claim of the complainant. OP-2 situates in the territorial limits of this Commission. The supplier/manufacturer and the carrier are neither necessary nor proper party in the matter related to insurance claim.

8. M/s. Gladstone Agencies Limited (OP-2), in its letter dated 18.04.2005 found that direct cost of materials used for repair is admissible in the policy and expenses in relation to DB-27 and other infrastructure items etc. are not admissible. Therefore objection of the opposite parties that transit had completed on 20.10.2003 and insurance was discharged, is not liable to be accepted. From the letter of OP-2 dated 18.04.2005 and OP-1 dated 11.11.2005, it is clear that they admitted loss during transit. Supreme Court in Galada Power and Telecommunication Limited Vs. United Insurance Company Limited, (2016) 14 SCC 161 and Saurashtra Chemicals Limited Vs. National Insurance Company Limited (2019) 19 SCC 70, held that the ground other than taken by the Insurer in the repudiation/settlement letter cannot be permitted to be raised by the Insurer in the court.

9. The complainant stated that the consignments were opened and inspected by the representatives of PT. Nippon Steel Batam (the supplier), DNV Malaysia (certification agency), Engineers India Limited (the complainant), Larsen & Turbo Limited and JRMEHL (the launching contractors) and Marine Installation Surveyor at Offshore site on barge on 06.11.2003 and sharp cuts were found on the diaphragms in main legs of the jackets, namely A4, B1, B3 & B4. The engineers of IRM Offshore and Marine Engineers Pvt. Ltd. (the representatives of the manufacturer of the diaphragm) observed that due to deflation in the diaphragms, there would be loss of internal pressure in the jacket and suggested for its repair, before installation. The complainant wrote a letter dated 06.11.2003 to PT. Nippon Steel Batam to take remedial measure of deflated diaphragms, who denied its liability as the export was ‘Free On Board’ (FOB) basis. The complainant then wrote another letter dated 07.11.2003 to PT. Nippon Steel Batam, for setting up insurance claim and requested to inform/arrange for the required documentation for the same prior to commencement of repair. PT. Nippon Steel Batam informed that it had discussed with the Insurer, who had permitted to go on for repair. The complainant deployed IRM (the manufacturer’s representative) and Derrick Lay Barge (DB-27) for repair of the damaged diaphragms, who repaired it. The complainant forwarded the papers i.e. (i) Jointly certified brief report establishing the damage and repair; (ii) MOM establishing the requirement from MWS/JRMEHL for repair of the same; (iii) Two photographs, one showing cut on the diaphragms prior to repair and the other for repaired diaphragms; and (iv) Conformation of repair by IRM, on 11.11.2003 to PT. Nippon Steel Batam, for setting up insurance claim. The complainant wrote a fax message dated 11.11.2003 to PT. Asuransi Mitsui Sumitomo, Indonesia (the Insurer), informing that the papers relating to insurance claim, in respect of the damage of diaphragm during transit, have been given to PT. Nippon Steel Batam, who has been authorised to set up insurance claim on its behalf. Under Marine Cargo Claim Manual, the claim notice is required to be given to the Carrier/Bailees and documentary evidence is required to be obtained first and send fax, which were done.

10. The OPs found cause of loss within insurance peril and admitted part of the insurance claim. Now in the complaint, they are raising issue that the loss was detected on 06.11.2003 but the complainant informed OP-2 on 19.05.2004, which was serious default of the part of the complainant. Due to delayed information, OP-2 was deprived of its right to investigate the cause of loss and extent of damage. Had PT. Nippon Steel Batam not discussed with the Insurer on 07.11.2003 and repair was not permitted by the Insurer and fax message dated 11.11.2003 of the complainant to the Insurer, informing that the papers relating to insurance claim, in respect of the damage of diaphragm during transit, having been given to PT. Nippon Steel Batam, who had been authorised to set up insurance claim on its behalf, were not there, the claim would have been repudiated as whole. OP-2, in its letter dated 25.06.2004 has not raised this plea relating to delayed information. As such, the OPs will not be permitted to raise the plea of delayed information, at this stage.

11. IRM Offshore and Marine Engineers Pvt. Ltd. (the representatives of the manufacturer of the diaphragm) issued repair certificate dated 10.11.2003 (filed on page 36). The representatives of PT. Nippon Steel Batam (the supplier), DNV Malaysia (certification agency), Engineers India Limited (the complainant), Larsen & Turbo Limited and JRMEHL (the launching contractors) and Marine Installation Surveyor at Offshore site, with their joint signatures prepared a Memo dated 11.11.2003 (filed at page 35 of the complaint) relating to the damage and repair of diaphragm at leg A4 of the jacket.

12. Clause-2 of “Institute Cargo Clauses (A) provides that the insurance covers general average and salvage charges, adjusted or determined according to the contract of carriage and/or the governing law and practice, incurred to avoid or in connection with the avoidance of loss from any cause except those excluded in clause 4, 5, 6 and 7. Under Clause-12, any extra charges properly and reasonably incurred in unloading, storing and forwarding the subject matter insured, in case, insured transit is terminated at a port other than final port, are payable. Under clause-16 loss minimization charges are payable. Under Exclusion clause 4.5, loss, damage or expense caused by delay even through the delay be caused by a risk insured against. In view of above provisions, in the present case, total costs incurred in repair, alone were payable.

13. The complainant submitted Claim Bill of USD 2621111.82 (filed at page 66 of the complaint), which is reproduced below:-

14. OP-2, vide letter dated 02.09.2004, required for giving details of the Claim Bill, which was supplied by the complainant on 13.09.2004 (page 64 of the complaint). In this letter, the complainant stated that USD 972568 is the claim towards DB-27 barge used for repair of diaphragm. This includes the manpower, available in the barge and utilized for various activities, viz. inspection of diaphragm, pressure testing and checking, to function as a moving work platform around the jacket, to install access walkways and platform, rotating the barge to access the diaphragm and making scaffolding, various other preparatory work of repair of the jacket diaphragm and to carryout repair work. USD 20000 was claimed towards cost of material used for repair of jacket diaphragm. USD 659.34 was claimed towards DNV inspection, which was necessary to confirm that repairs are satisfactory for launching. Apart from above expenses, other losses as claimed were falling within Exclusion clause 4.5.

15. The complainant has filed breakup of USD 972568, the claim towards DB-27 barge used for repair of diaphragm (on page 39 of the complaint). A perusal of this chart shows that diaphragm checking and repair was started on 08.11.2003 and continued till 11.11.2003 (24 hours daily). However from repair certificate dated 10.11.2003 (filed on page 36) issued by IRM Offshore and Marine Engineers Pvt. Ltd. and  Memo dated 11.11.2003 (filed at page 35 of the complaint) signed by the representatives of PT. Nippon Steel Batam (the supplier), DNV Malaysia (certification agency), Engineers India Limited (the complainant), Larsen & Turbo Limited and JRMEHL (the launching contractors) and Marine Installation Surveyor at Offshore site, it is proved that repair of diaphragm at leg A4 of the jacket was completed on 10.11.2003. Therefore, charges of DB-27 barge, for repair can be claimed for 72 hours only and not for 135.50 hours. This amount will be USD 398145.65. Total amount spent for repair is USD 418795. The OP-1 is entitled for excess deduction of Japanese Yen of 3000000 equivalent to USD 30000. The complainant is entitled for reimbursement of USD 388795 (as on 11.11.2003). As the claim was submitted by the complainant on 19.05.2004 as such, the complainant is entitled for interest on above amount from June, 2004.

ORDER

In view of the aforesaid discussion, the complaint is partly allowed. PT. Asuransi Mitsui Sumitomo, Indonesia (OP-1) is directed to pay USD 388795 (as on 11.11.2003) with interest @9% per annum from June, 2004 till the date of payment, within a period of two months from the date of this judgment.