Holding

The insurer is not liable to pay the claim in Pounds Sterling because title and insurable interest remained with the consignor, so payment must be made in Indian rupees.

Summary

The appellant National Insurance Co. Ltd. issued two insurance policies covering consignments of precious stones exported by the respondent Sky Gems on a CIF basis, with the sum insured expressed in Pounds Sterling and the claim payable at London. The consignments were lost in transit, and Sky Gems claimed the amount in Pounds Sterling, arguing that title passed to the London consignee upon shipment. The National Consumer Disputes Redressal Commission ordered payment in Pounds Sterling, but the Supreme Court held that the consignee had not produced any title documents and had not paid the value of the goods, so title and insurable interest remained with Sky Gems. Consequently, the insurer was not obliged to pay in foreign currency; payment was to be made in Indian rupees with interest. The Court set aside the Commission’s direction and modified the order, allowing the appeal.

Issues considered

Whether the insurance claim payable at London must be settled in Pounds Sterling when title to the goods has not passed to the consignee.
Whether title under a CIF contract passes to the buyer at shipment, giving the buyer the right to claim the policy amount.
Whether the insurer is liable to pay the claim in foreign currency or Indian rupees given the circumstances.
Whether the National Consumer Disputes Redressal Commission erred in directing payment in Pounds Sterling.

Subjects

insurance claimCIF contracttitle of goodsinsurable interestforeign currency paymentNational Consumer Disputes Redressal Commissionloss in transitprecious stones

Judgment

A NATIONAL INSURANCE CO. LTD.
v.
SKY GEMS

JANUARY 9,'2002

B [D.P. MOHAPATRA AND K.G. BALAKRJSHNAN, JJ.)

Insurance Claim

Mode ofpayment-CIF contract-Consignor exported precious stones-
C Insurance cover procured-Insured value of consignments in terms of Pounds
Sterling-But the premium paid in Indian currency-Consignment however,
lost in transit-Claim filed against Insurance Company to pay in Pounds
Sterling-National Commission allowed the claim-On appeal, held the title
to the goods had not passed to the consignee as he could not produce any
D document of title-Therefore, consignor is not entitled to receive payment in
Pounds sterling.

Respondent-consignor exported parcels of precious stones to the
consignee in London. He obtained insurance policies from the appellant-
insurance company and the insured value of the consignments were in terms
E of Pounds Sterling. Consignment did not reach the consignee and the
investigators appointed confirmed that the consignment had either been lost
or stolen. Respondent-consignor filed a claim against the appellant and insisted
the payment in Pounds sterling. Appellants contended that as the title in the
goods had not passed to the consignees, the respondent-consignor continued
F to be the owner of the goods and, therefore, the payment could be effected
only in Indian currency. National Commission held that as the insurance
policies stated that the claim was payable in London and the insured value of
the consignments were in terms of Pounds Sterling, the appellant was liable
to pay to the respondent in Pounds Sterling. Hence the present cross appeals.

G Respondent-consignor contended that as the claim was payable at
London, the payment should be made by the appellant only in Pounds Sterling.
It also contended that the goods were sent on CIF contract and the moment
the goods were consigned, the title would pass to the consignee.

Disposing of the appeal, the Court
H 118
-"··.

NATIONAL INSURANCE CO. LTD. v. SKY GEMS [K.G. BALAKR!SHNAN, J] 119

HELD : I. The right of the buyer to claim policy amount would arise A
when he obtained title to the property and he must produce the documents of
transfer. In the instant case, the buyer-consignee was not in possession of
any documents concerning the title of the goods as such could not produce
them before the investigators. The letter written by the consignee clearly
shows that they had not paid the value of the missing merchandise to the
consignor and had suggested to the investigator that the claim may be settled B
with the respondent-consignor in India. More so there is no evidence to show
that the necessary documents were endorsed in favour of the consignee and
that they were transferred to them. These facts show that the title to the goods
in question had not passed to the consignee at London. The insurable interest
over the goods continued to be with the respondent-consignor. Thus under C
such circumstances, the respondent-consignor is not entitled to receive the
payment in Pounds Sterling. (122-H; 123-A-B]

2. The respondent-consignor has paid the insurance premium in Indian

J. currency and continued to have title over the goods as it never passed to the
consignee. Had the title passed to the consignee, and if they had preferFed
the claim, the insurance amount would have been payable in London in Pounds
D
Sterling. (123-C)

Comptoir d' Achat v. luis de Ridder; The Julia, (1949) A.C. 293 at 309,
referred to.
E
Schmitt off's Export Trade-The law and Practice ofInternational Trade
by Leo D' Arey. Carole Murray Barbara Cleave (10th Edn.), referred to.
)

CIVIL APPELLATE JURJSDICTION : Civil Appeal No. 559 of 1994.

From the Judgment and Order dated 21.12.93 of the National CQnsumer F
Disputes Redressal Commission, New Delhi in O.P. No. 248of1992.

M.S. Nargolkar and D.M. Nargolkar for the Appellant.

V.A. Mohanty and Praveen Swarup for the Respondent.
G
The Judgment of the Court was delivered by

K.G. BALAKRISHNAN, J. Civil Appeal No. 559 of 1994 by National
Insurance Co. Ltd. and Civil Appeal No. 633of1994 by Mis Sky Gems are
filed against the judgment dated 21st December, 1993, passed by the National
Consumer Disputes Redressal Commission (hereinafter referred to as 'National H
120 SUPREME COURT REPORTS [2002) I S.C.R.

A Commission'). The respondent-Sky Gems exported two parcels of precious
stones (Emerald) to London through the Foreign Post Office, New Delhi on
10.9.1990. However, the consignment did not reach the consignee and was
believed to have been either stolen or lost in transit. The respondent had
taken two insurance policies from the appellant-insurance company. The total
B sum assured was Pound Sterling 85,740.55 (CIF value + 10%). Mis. W.K.
Webster & Company, London, were appointed as investigators and their
report dated 25 .3 .1991 confirmed that the consignment had either been lost
or stolen. Non-delivery certificate was issued by the Department of Posts
(Foreign Post), New Delhi, in respect of the consignment. The postal authorities
admitted their liability and made payment at the rate of Rs. I 0,254.50 for each
C parcel representing the full insured value and service charges. In respect of
the two policies obtained from the appellant-insurance company, respondent
preferred a claim and the appellant agreed to settle the same for Rs. 28,30,000.
The respondent claimed from the appellant an amount of Pounds Sterling
1,07, 175.60 and insisted that the payments be made in Pounds. For some
reason or the other, there was a delay in settlement of the claim and the
D respondent filed a petition before the National Commission. The appellant
resisted the claim and contended that it was not liable to pay the respondent
in Pounds Sterling. It was also contended that as the title in the goods had
not passed to the consignee, the respondent continued to be the owner of
the goods and, therefore, the payment could be effected only in Indian
E currency.

The National Commission held that as the insurance policies clearly
stated that the claim was "payable at London" and the declared invoice value
and the insured value of the consignments were in terms of Pounds Sterling,
the appellant was liable to pay to the respondent in Pounds Sterling and
F ultimately ordered the appellant to pay Pounds Sterling 85,740 + 10% or
Pounds Sterling 94,314. The respondent was also held entitled to recover
interest at the rate prevalent on commercial borrowings in U .K. from time to
time, commencing from January, 1991 to the end of December, 1993. The
appellant was entitled to adjust the amount of Rs. 20,000 received as
G compensation from the postal authorities. A sum of Rs. 50,000 was also
ordered as compensation for delayed payment. This Order of the National
Commission has been challenged before us.

We heard Mr. M.S. Nargolkar, learned senior Counsel on behalf of the
appellant and Mr. V.A. Mohanty, learned senior Counsel on behalf of the
H respondent. The dispute in this case is only with regard to the mode of
NATIONAL INSURANCE CO.LTD. v. SKY GEMS [K.G. BALAKRISHNAN, J.] 12 J
payment to be effected by the appellant in favour of the respondent. The A
counsel for the respondent contended that as per the terms of the policy, the
insured amount was payable at London and, therefore, the payment to be
effected has to be in Pounds Sterling. The consignment of the precious
stones was dispatched in favour of Mis. Emdico (London) Limited. As per
the insurance policy, the claim for settlement was given to Mis. W.K. Webster B
& Company, 6 Lloyd's Avenue, London. The contention of the respondent
is that as the insurance policy specifically stated that the claim was payable
at London, the payment should be made by the appellant only in Pounds
Sterling.

But, some important facts are to be noted in this case. The two C
consignments were sent from India on 10.9.1990. After survey, it was found
that these consignments were either lost or stolen. The consignee of these
goods had approached Mis. W.K. Webster & Company for the settlement of
the claim and there was correspondence between the consignee and Mis.
W.K. Webster & Company. Some of this correspondence has been placed
before us. It is noticed that in the letter dated 2nd April, 1991, Mis. W.K. D
Webster & Co. had asked the consignee, Mis Emdico (London) Limited, for
the original Policies of Insurance together with all correspondence exchanged
with the postal authorities concerning their liability, and also a clarification as
to whether they had remitted full payment of the value of the missing
merchandise to the Indian suppliers. In another letter dated 20th June, 1991, E
Mis. W.K. Webster & Co. offered to settle the claim as soon as they received
the necessary documentation from India and also mentioned that they shall
present the same to the Bank in order to obtain the required funds against
the Letter of Credit, which was available to them for payment of claims. The
consignee, Emdico (London) Limited, sent a reply to Mis. W.K. Webster &
Co. on 8th April, 1991 and the last paragraph of their letter reads as follows:- F
"As regards the question whether we have remitted full payment
of the value of the missing merchandise to our Indian suppliers, the
answer is that we haven't done so and we suggest that the settlement
may be concluded direct with Sky Gems in India, however, if you will
feel it is more convenient for you to deal with us as the consignees G
of the goods, we shall be happy to do so. One way or the other it
doesn't seem to make much difference."

From the above correspondence, it is evident that the consignee, Emdico
(London) Limited, did not pay the value of the missing merchandise to the
respondent. There is no evidence to show that the necessary documents were H
122 SUPREME COURT REPORTS · (2002] l S.C.R.

A endorsed in favour of the consignee and that they were transferred to them.
These facts will show that the title to the goods in question had not passed
to the consignee, Mis. Emdico (India) Limited and the respondent continued
to be the owner having insurable interest over the goods.

The learned senior Counsel for the respondent contended that the
B goods were sent on CIF contract and the moment the goods were consigned,
the title would pass to the consignee. We do not find much force in this
contention. It is true that the goods are ascertained, but even then the title
would pass based on the contract between the parties. The rights and liabilities
of the parties in a CIF contract have been described by Lord Porter in
C Comptoir d' Achat v. Luis de Ridder; The Julia, (1949] A.C. 293 at 309, which
is quoted in the Book Schmitthoff's Export Trade - The Law and Practice of
International Trade by Leo D' Arey, Carole Murray and Barbara Cleave [10th
edition], at page 29, and read as follows:

"The obligations imposed on a seller under a c.i.f. contract are
D well known, and in the ordinary case, include the tender of a bill of
lading covering the goods contracted to be sold and no others,
coupled with an insurance policy in the normal form and accompanied
by an invoice which shows the price and, as in this case, usually
contains a deduction of the freight which the buyer pays before
delivery at the port of discharge. Against tender of these documents
E the purchaser must pay the price. In such a case the property may
pass either on shipment or on tender, the risk generally passes on
shipment or as from shipment, but possession does not pass until the
documents which represent the goods are handed over in exchange
for the price. In the result, the buyer, after receipt of the documents,
can claim against the ship for breach of the contract of carriage and
F
against the underwriters for any loss covered by the policy. The
strict form of c.i.f. contract may, however, be modified. A provision
that a delivery order may be substituted for a bill of lading or a
certificate of insurance for a policy would not, I think, make the
contract be concluded on something other than c.i.f. terms."
G
(Emphasis supplied)

From the above passage, it is clear that the right of the buyer to claim
policy amount would arise when he obtained title to the property and he must
produce the documents of transfer. Here, the buyer was not in possession of
H any such documents of title. The letter written by the consignee, Mis. Emdico
NATIONAL INSURANCE CO.LTD. v. SKY GEMS [K.G. BALAKRISHNAN, J.] 123
(London) Limited on 8th April, 1991 clearly shows that they had not paid the A
value of the missing merchandise and had suggested to M/s. W.B. Webster
& Co. that the claim may be settled with the respondent-Sky Gems in India.
The consignee could not produce any documents concerning their title to the
goods before M/s. W.K. Webster & Company and this evidently shows that
the title had not passed to the consignee at London. The insurable interest B
over the goods continued to be with the respondent. Under such circumstances,
the respondent is not entitled to receive the payment in Pounds Sterling.

The respondent has paid the insurance premium in Indian currency and
continued to have title over the goods as it never passed to the consignee.
Had the title passed to the consignee, and if they had preferred the claim, the C
insurance amount would have been payable.in London in Pound Sterling. The
National Commission did not notice these points and directed the appellant
to pay the amount in Pound Sterling mainly on the ground that the policies
issued by them stated that the insurance amount was payable at London.

Having regard to the facts and circumstances of the case, we do not D
think that the appellant is liable to pay the insurance amount in Pounds
Sterling. We set aside the direction of the National Commission to pay the
amount in Pounds Sterling and hold that the respondent is entitled to get Rs.
28,30,000 with interest @ 18% from the date on which it preferred the claim
petition before the appellant, till payment. The respondent is also entitled to
receive Rs. 20,000 towards costs ordered by the National Commission. E

The Order passed by National Commission shall stand modified to the
extent indicated above.

With the above directions, Civil Appeal No. 559 of 1994 is disposed of.
Civil Appeal No. 633 of 1994 is without any merits and is dismissed. The cost F
of these proceedings shall be borne by the respective parties.

N.J. C.A. No. 559/94 disposed of.
C.A. No. 633/94 dismissed.