Professional Documents
Culture Documents
RESEARCH METHODOLOGY.
13/10/1347.
III) METHODOLOGY:
2) Case Studies: Within the set-up of the research project from which this
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case studies can provide important indications of the instruments used in the
design has been adopted. Exploratory research is one which is largely interprets
and already available information and it lays particular emphasis on analysis and
So far, I have studied more than seven books, including the The Law
Law, Marine Insurance Its Principles and Practice (Classic Reprint), Marine
Insurance: Law and Practice (Lloyd's Shipping Law Library) etc., and a couple of
these sites have a large number of links to other sites with information about the
‘Marine Insurance’, so I plan to look at many of these other sites. The majority of
the sites that I evaluated had the text of complete articles, law reports and
insurance is a part of the research project, the survey of complete articles, law
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V) DATA COLLECTION SOURCE:
i) Primary Data:
problem. In some cases the researchers may realize the need for collecting the
first hand information. As in the case of everyday life, if we want to have first
hand information or any happening or event, we either ask someone who knows
Any data, which have been gathered earlier for some other purpose, are
secondary data in the hands of researcher. Those data collected first hand, either
by the researcher or by someone else, especially for the purpose of the study is
known as primary data. The data collected for this project has been taken from the
Questionnaire
Internet
Magazines
Publications
Newspapers
Brouchers
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VI) SAMPLE SIZE:
1) Importers – 10 Respondents
2) Exporters – 10 Respondents
3) Others - 10 Respondents
order to collect the right data so as to achieve the research objective. A sample is
a part of the universe that can be used as respondents to a survey or for the
particular problem.
VIII) HYPOTHESIS:
determine its validity. The hypothesis may prove to be correct or incorrect. In any
question put in such a way that an answer of some kind can be forthcoming. In the
risk.”
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Chapter - 2
MEANING OF MARINE INSURANCE.
undertakes to indemnify the insured, in the manner and to the extent thereby
agreed, against transit losses, that is to say losses incidental to transit. A contract
as to protect the insured against losses on inland waters or any land risk which
machinery, etc.).
(transit) insurance will be insured after the offer is accepted by the insurance
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company. Example: A proposal submitted to the insurance company along with
15/4/2013. The risk is covered from 15/4/2013 and any loss prior to this date will
2) Payment of premium:
An owner must ensure that the premium is paid well in advance so that the
risk can be covered. If the payment is made through cheque and it is dishonored
then the coverage of risk will not exist. It is as per section 64VB of Insurance Act
3) Contract of Indemnity:
liable only to the extent of actual loss suffered. If there is no loss there is no
20 lakhs and during transit it is damaged to the extent of Rs 10 lakhs then the
information to the insurance company while insuring their goods. The marine
Example: The nature of goods must be disclosed i.e. whether the goods are
hazardous in nature or not, as premium rate will be higher for hazardous goods.
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5) Insurable Interest:
interest at the time of loss. The insurable interest will depend upon the nature of
sales contract.
Example: Mr. A sends the goods to Mr. B on FOB (Free on Board) basis
which means the insurance is to be arranged by Mr. B. And if any loss arises
during transit then Mr. B is entitled to get the compensation from the insurance
company.
Example: Mr. A sends the goods to Mr. B on CIF (Cost Insurance and
Freight) basis which means the insurance is to be arranged by Mr. A. And if any
loss arises during transit then Mr. A is entitled to get the compensation from the
insurance company.
6) Contribution:
If a person insures his goods with two insurance companies, then in case
of marine loss both the insurance companies will pay the loss to the owner
proportionately.
Example; Goods worth Rs. 50 lakhs were insured for marine insurance
with Insurance company A and B. In case of loss, both the insurance companies
The period of insurance in the policy is for the normal time taken for a
particular transit. Generally the period of open marine insurance will not exceed
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one year. It can also be issued for the single transit and for specific period but not
8) Deliberate Act:
act of an owner then that damage or loss will not be covered under the policy.
9) Claims:
To get the compensation under marine insurance the owner must inform
the insurance company immediately so that the insurance company can take
international trade. Most contracts of sale require that the goods must be covered,
either by the seller or the buyer, against loss or damage. Who is responsible for
affecting insurance on the goods, which are the subject of sale? It depends on the
terms of the sale contract. A contract of sale involves mainly a seller and a buyer,
apart from other associated parties like carriers, banks, clearing agents, etc.
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He can get the insurance done
wherever he likes.
internal transactions.
onwards.
invoice.
The normal practice in export / import trade is for the exporter to ask the
importer to open a letter of credit with a bank in favour of the exporter. As and
when the goods are ready for shipment by the exporter, he hands over the
documents of title to the bank and gets the bill of exchange drawn by him on the
importer, discounted with the bank. In this process, the goods which are the
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subject of the sale are considered by the bank as physical security against the
policy is also required by the bank to protect its interests in the event of the goods
suffering loss or damage in transit, in which case the importer may not make the
payment. The terms and conditions of insurance are specified in the letter of
credit.
For export/import policies, the- Institute Cargo Clauses (I.C.C.) are used.
These clauses are drafted by the Institute of London Underwriters (ILU) and are
A. Submission of form
C. Payment of Premium
A) Submission of form:
are susceptible for different types of damage during transit- sugar, cement, etc are
easily damaged by sea water; cotton is liable to catch fire; liquid cargoes are
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c) Method and type of packing: The possibility of loss or damage depends on
this factor. Generally, goods are packed in bales or bags, cases or bundles, crates,
points:
i. The name of the place from where transit will commence and the name of
rail, lorry, air, etc., or a combination of two or more of these. The name of
transit by rail, lorry or air, the number of the consignment note and the
date thereof should be furnished. The postal receipt number and date
e) Risk Cover required: The risks against which insurance cover is required
should be stated.
quote the premium rate. In nutshell, the rates of premium depends upon:
a) Nature of commodity.
b) Method of packing.
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c) The Vessel.
C) Payment of premium:
On accepting the premium rates, the concerned person will make the
consignment basis.
i) Cover Note:
of a regular policy. It happens frequently that all the details required for the
purpose of issuing a policy are not available. For instance, the name of the
steamer, the number and date of the railway receipt, the number of packages
insurance. It contains the individual details such as name of the insured, details of
goods etc. These have been identified earlier. The policy makes specific reference
terms and is issued to take care of all “shipments” coming within its scope. It is
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period of time. Declarations are made under the open policy and these go to
reduce the sum insured. Open policies are normally issued for a year. If they are
fully declared before that time, a fresh policy may be issued, or an endorsement
placed on the original policy for the additional amount. On the other hand, if the
policy has run its normal period and is cancelled, a proportionate premium on the
unutilized balance is refunded to the insured if full premium had been earlier
collected.
issued thereunder need not be stamped. Open policies are generally issued to
An open cover is particularly useful for large export and import firms-
inconvenient to obtain insurance cover separately for each and every shipment. It
is also possible that through an oversight on the part of the insured a particular
shipment may remain uncovered and should a loss arises in respect of such
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shipment, it would fall on the insured themselves to be borne by them. In order to
means of an open cover is taken by big firms having regular shipments. An open
cover describes the cargo, voyage and cover in general terms and takes care
automatically of all shipments which fall within its scope. It is usually issued for a
either side, i.e., the insurer or the insured, by giving due notice.
certificates of insurance are issued against declaration and they are required to be
stamped according to the Stamp Act. There is no limit to the total number or value
The following are the important features of an open policy/ open cover.
The limit per bottom means that the value of a single shipment declared
under the open cover should not exceed the stipulated amount.
The ‘Basis’ normally adopted is the prime cost of the goods, freight and
other charges incidental to shipment, cost of insurance, plus 10% to cover profits,
(the percentage to cover profits may be sometimes higher by prior agreement with
the clients).
While the limit per bottom mentioned under (a) above is helpful in
restricting the commitment of insurers on any one vessel, it may happen in actual
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practice that a number of different shipments falling under the scope of the open
cover may accumulate at the port of shipment. The location clause limits the
Generally, this is the same limit as the limit per bottom or conveyance
specified in the cover, but sometimes it may be agreed at an amount, say, upto
200% thereof.
(d) Rate:
(e) Terms:
coming within the scope of the open cover. An unscrupulous insured may omit a
few declarations to save premium, especially when he knows that shipment has
This clause provides for cancellation of the contract with a certain period
of notice, e.g., a month’s notice on either side. In case of War & S.R.C.C. risks,
The open policy differs from an open cover in certain important respects.
They are:
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a) The open policy is a stamped document and is, therefore, legally
b) An open policy is issued for a fixed sum insured, whereas there is no such
limit of amount under any open cover. As and when shipments are made
under the open policy, they have to be declared to the insurers and the sum
insured under the open policy reduces by the amount of such declarations.
When the total of the declarations amounts to the sum insured under the
open policy, the open policy stands exhausted and has to be replaced by a
fresh one.
h) Certificate of Insurance:
insured or the banks in respect of each declaration made under an open cover and
and conditions of the original cover are also mentioned. Certificates need not be
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Chapter - 3
TYPES OF MARINE INSURANCE
I) WHY SHOULD CARGO BE INSURED?
There are many different things that can potential happen during shipment
of cargo and container on a ship. The loading cranes could damage the containers,
theft and piracy, weather damage, as well as potentially losing the cargo
overboard or other marine disasters. All of these possible issues are exactly why
you need marine cargo insurance. Your goods need to be protected, and if you are
a company transporting goods this way, then you need to protect your company
1) Hull Insurance:
the ship. It is basically a property insurance which covers the ship itself, the
normally collision liability with another ship and sometimes also liability for
Claims Included:
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Collisions – damage sustained to the ship and sometimes also liability
Striking other objects – damage inflicted to own ship and sometimes also
2) Cargo Insurance:
damage to, or loss of your goods while in transit by land, sea and air and offers
i. Open Cover: This is the most usual type of cargo insurance, where a
either for a specific value that requires renewal once the insured amount is
ii. Specific (Voyage) Policy: Although not the norm for cargo insurance, you
may from time to time need to approach an insurance company (or broker,
terms where your customer (as the importer) is responsible for insuring (or
at least bearing the risk of damage of or loss to) the goods, for example
under FOB and CFR Inco terms 2010. In these cases you are exposed to
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the risk of damage to the goods while in transit and your customer
refusing to accept them. In the worse case your customer may not have
Claims Included:
ship owner's insurance cover for legal liabilities to third parties. “Third parties”
are any person, apart from the ship-owner himself, who may have a legal or
contractual claim against the ship. P&I insurance is usually arranged by entering
owners are members of such clubs. Legal liability is decided in accordance with
the laws of the country where an accident takes place. The P&I insurance cover
for contractual liability is agreed at the time the owner requests insurance cover
from the club and is usually in accordance with the owner’s responsibility under
crew contracts or special terms relating to the trading pattern of the vessel.
Other risks covered include liability for stowaways, liability for oil
pollution and other types of pollution and legal liability for wreck removal if the
ship sinks and is blocking free navigation for other vessels. In short, P&I
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for a ship owner or charterer to trade in international shipping transportation. P&I
cover.
P&I insurance also covers the owner’s liability for loss of crew belongings
in cases of shipwreck or fire on board. The cover only applies to items which are
deemed to be reasonable for any crew member to have with him on board. A crew
gold watches etc should make sure that he has such items separately insured.
adjusted on expiry of the policy based on the total declared amount. When the
exceeding Rs.5 crores etc.) on a slab basis and loss ratio is applicable.
declaration policy. The purpose of this policy is to cover goods lying at the
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open or special declaration policies but pending clearance by the consignees. The
c) Annual Policy:
This policy, issued for 12 months, covers goods belonging to the insured,
which are not under contract of sale, and which are in transit by rail / road from
d) “Duty” Insurance:
the Customs Act. This duty can be included in the value of the cargo insured
under a Marine Cargo Policy, or a separate policy can be issued in which case the
Duty Insurance Clause is incorporated in the policy. Warranty provides that the
claim under the Duty Policy would be payable only if the claim under the cargo
policy is payable.
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Chapter - 4
PROCEDURE OF CLAIM SETTLEMENT
As the risk coverages are different for import/export and inland (with in
Claims Documents
which vary according to the type of loss as also the circumstances of the claim
company. This document establishes the claimant’s title and also serves as an
c) Bill of Lading: Bill of Lading is a document which serves as evidence that the
description of the goods, prices, etc. The invoice enables the insurers to see that
the insured value of the cargo is not unreasonably in excess of its cost, and that
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there is no gross overvaluation. The original invoice (or a copy thereof) is
e) Survey Report: Survey report shows the cause and extent of loss, and is
absolutely necessary for the settlement of claim. The findings of the surveyors
relate to the nature and extent of loss or damage, particulars of the sound values
and damaged values, etc. It is normally issued with the remarks “without
prejudice,” i.e. without prejudice to the question of liability under the policy.
f) Debit Note: The claimant is expected to send a debit note showing the amount
a claim bill.
g) Copy of Protest: If the loss or damage to cargo has been caused by a peril of
the sea, the master of the vessel usually makes a protest on arrival at destination
before a Notary Public. Through this protest, he informs that he is not responsible
for the loss or damage. Insurers sometimes require to see the copy of the protest to
transfers the rights of the claimant against a third party to the insurers.
carrier or other third party who, in their opinion, is responsible for the loss. The
claims are Ship survey report lost overboard certificate if cargo is lost during
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i) Bill of entry: The other important document is bill of entry issued by the
customs authorities showing therein the amount of duty paid, the date of arrival of
the steamer, etc., account sales showing the proceeds of the sale of the goods if
they have been disposed of; repairs or replacements bills in case of damages or
breakage; and copies of correspondence exchanged between the carriers and the
d) If goods are totally lost or not delivered, the original railway receipt and /
e) Copy of the claim lodged against the railways / road carriers (By Regd.
A.D.)
consignees.
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j) Letter of Undertaking from the claimant in case of non delivery of
consignment.
For export/import policies, the Institute Cargo Clauses (I.C.C.) are used.
These clauses are drafted by the Institute of London Underwriters (ILU) and are
Exclusions
All three sets of clauses contain general exclusions. The important exclusions are:
ii. Ordinary leakage, ordinary loss in weight or volume or ordinary wear and
tear. These are normal ‘trade’ losses which are inevitable and not
accidental in nature.
iii. Loss caused by ‘inherent vice’ or nature of the subject matter. For
vice’.
iv. Loss caused by delay, even though the delay is caused by an insured risk.
‘malicious damage’ and can be covered at extra premium, under (B) and
vi. Loss arising from insolvency or financial default of owners, operators, etc.
of the vessel. Many ship owners, especially tramp vessel owners, fail to
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perform the voyage due to financial troubles with consequent loss or
viii. War and kindred perils. These can be covered on payment of extra
premium.
ix. Strikes, riots, lock-out, civil commotions and terrorism (SRCC) can be
B) Inland Consignments.
Exclusions
All three sets of clauses have the same exclusions as are found in ICC Clauses.
III) MISCELLANEOUS:
Cargo policies are issued for specified voyage or transit whatever the time
terminates under a voyage policy. The duration of cover is defined in the Transit
the ICC.
The cover commences from the time the goods leave the warehouse at the
place named in the policy, continues during the ordinary course of transit and
terminates either
named.
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ii. On delivery to any intermediate warehouse used by the insured for
iii. On the expiry of 60 days after discharge from the vessel at the final port of
(Note: The time limit of 60 days is prescribed to ensure early clearance of goods
by the consignee. Insurers extend the time limit, at extra premium, in genuine
Insurance attaches with the loading of each bale / package into the wagon /
of each bale/package –
Note: Under both clauses the risk attaches from the time the goods leave the
warehouse and / or the store at the place named in the policy for the
i. until delivery to the final warehouse at the destination named in the policy,
days after arrival of the railway wagon at the final destination railway
station, or
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ii. in respect of transits by Road only, until expiry of 7 days after arrival of
the vehicle at the destination town named in the policy, whichever first
occur.
c) Total Loss:
Goods may be totally lost by the operation of the marine peril. The
measure of indemnity in the event of total loss of the goods is the full insured
value. The insurers are entitled to take over the salvage, if any. An actual total
loss takes place where the subject matter is entirely destroyed or damaged to such
commercial total loss, takes place where the subject matter insured is abandoned
on account of the actual total loss being inevitable, or where the expenditure to be
incurred for repairs or recovery would exceed the value of the subject-matter after
d) Particular Average:
These are partial losses caused by marine perils. The particular average
losses occur when there is a total loss of part of the goods covered, e.g., a
completely. Another way in which particular average loss occurs is when there is
damage to the goods. Where whole or any part of the goods insured is delivered
surveyor appointed for the purpose, by comparing on the one hand the gross
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sound market value and, on the other, the gross damaged market value on arrival
e) General Average:
is made to save the entire ship. Such an act should be voluntary, and the
contribution from the other parties, who are interested in the adventure and who
interests at risk at the time of the general average act, i.e. ship, cargo and freight.
In the event of a general average act, the ship owner declares “general
average”. He has a lien on the goods for the general average contribution.
Therefore, before the goods are released at destination, the ship owner insists on
the consignees to execute a bond. In addition to the general average bond, the
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Thus, there are two types of losses resulting from a general average act:
sacrifice and expenditure. These losses are payable under the marine policy
provided an insured peril was the cause of the general average act. Cargo which is
made by owners of ‘cargo’ saved are also paid as a loss under their cargo policies.
adjusters.
f) Salvage Loss:
When the goods insured are damaged during transit, and the nature of the
goods is such that they would deteriorate further and would be worthless by the
time the vessel arrives at destination, it would be a prudent and sensible way of
dealing with the situation by disposing off the same at an intermediate port for the
best price obtained. The term ‘salvage loss’ refers to the amount payable which is
the difference between the insured value and the net proceeds of the sale. This is a
Insurers expect that the insured should at all times act as if he was
uninsured and take such steps as a prudent person would normally take. In view
of this, if there be any expenses incurred by the insured or his agents to minimize
the loss or damage payable under the policy, the same are reimbursed by insurers.
Examples of such charges known as Sue and Labour charges are landing,
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h) Extra Charges:
Under this expression come survey fees, settling agents fees, etc. They are
payable if the claim is admitted. Whenever a marine survey is arranged, the fees
are paid by the claimant initially and are reimbursed when the claim is paid.
from the carriers, i.e., road carriers, railways, steamer companies, etc. After
payment of claim, the insurers are subrogated the rights and remedies available to
the insured against the carriers or third parties responsible for the loss.
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Chapter – 5
MARINE INSURANCE COMPANIES IN INDIA
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II) UNITED INDIA INSURANCE COMPANY LIMITED:
southern region of Life Insurance Corporation of India were merged with United
India Insurance Company Limited. After Nationalization United India has grown
by leaps and bounds and has 18300 work force spread across 1340 offices
providing insurance cover to more than 1 Crore policy holders. The Company has
satellites.
Devasthanam etc. They have been also the pioneer in taking Insurance to rural
(covering 45 lakhs women in the state of Madhya Pradesh) , Tsunami Jan Bima
Yojana (in 4 states covering 4.59 lakhs of families) , National Livestock Insurance
and many such schemes. They have also made their presence in more than 200
tier II & III towns and villages through our innovative Micro Offices.
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b) Their vision:
The most preferred insurer in India with global footprint & recognition.
multiple channels.
c) Corporate Mission:
To help minimise national waste and to help develop the Indian economy.
They Cover:
Any loss or damage to ships tankers bulk carriers smaller vessels fishing
What is Insured?
The various vessels that are covered under this policy are:
Fishing Vessels
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Ocean Going Vessels.
Sailing Vessels.
Other Vessels.
Collision.
The policy does not pay any loss / damage caused by attributable to due to:
person.
fusion.
They Cover:
Any loss or damage to goods in transit by rail sea road air or post.
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What is Insured?
Goods carried by coastal vessels plying between the various ports within
the country.
Collision.
Jettison.
Earthquake lightning.
Washing overboard.
Open Cover.
Open Policy.
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Specific Voyage Policy.
Annual Policy.
Marine insurance deals with goods when these are being moved from one
within the country and outside the country. The risks are involved in any type of
The risk coverage depends upon the nature of goods and packing and to cover the
risks the price is to be paid which is known as premium. The consignment can be
single or multiple and accordingly the marine insurance policy i.e. single transit or
open cover or open policy is issued by the insurance company. The risk coverage
is defined by Institute of London Underwriters under the various clause ICC (A),
(B), (C) and the same is acceptable to all throughout the world. Similarly the
clauses for inland transit have been defined as ITC (A),(B), (C). Thus our
Most of the data is collected from secondary source due to lack of time.
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BIBLIOGRAPHY
1) DATA BASE:
Keeping in view the objective of the study, the data have been taken from
the reputed published sources. Notable among these are: The Law Relating to
Marine Insurance; The Law of Marine Insurance in India, Maritime Law, Marine
Insurance Its Principles and Practice (Classic Reprint), Marine Insurance: Law
and Practice (Lloyd's Shipping Law Library) etc. The data published in reputed
2) REFERENCES:
http://www.irda.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?page=Page
No264&mid=3.2.10 Retrieved on 7th August, 2013.
B.C. Mitra, “The Law Relating to Marine Insurance”, 5th edition, 2012.
Ambalal Bhikhabhi Gandhi, “The Law of Marine Insurance in India”, Milan Law
Publishers, 1974.
Francis Rose, “Marine Insurance: Law and Practice (Lloyd's Shipping Law
Library)”, July 2012.
The Data analysis & Interpretation are given in this project report are collected
with the help of Structured Questionnaire.
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