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A PROJECT WORK “RISK MANAGEMENT IN CARRIAGE BY SEA: AN

INSURANCE PERSPECTIVE”

LAW OF CARRIAGE

GUIDED BY- AMRUTA DAS

A PROJECT WORK

Submitted by:

NISHA TIWARY
BBA.LLB (H)
Regd.No. – 1541801012
Batch - 2015-2020
S‘O’A NATIONAL INSTITUTE OF LAW
SIKSHA ‘O’ ANUSANDHAN UNIVERSITY, BHUBANESWAR
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Contents
TOPIC PAGE NO.

I. Declaration 05

II. Acknowledgement 06

III. Preface 07

IV. Guide to Certificate 08

1. INTRODUCTION 09
1.1Concept of risk under sea carriage 10

1.1.1 The meaning of risk under sales law 10

1.2 Time of transfer under CIF contract 10

1.3 Ships rail concept 10

1.4 Combined transport and tender 11

1.5 Passing of risk and or property 11

1.6 Passing of property 12

1.7 Passing of risk under multimodal transport 13

1.8 Consequence of the passing of risk 13

Chapter II 14
2. Risk inherent in the bill of lading 14

2.1 As receipt of cargo 15

2.2 As document of title 15

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2.2 Delivery of Cargo 15

2.3 Letters of indemnity 15

Chapter III 16
3. THE INTERNATIONAL CODE FOR THE SAFE MANAGEMENT OF SHIPS
AND POLLUTION PREVENTION 16

3.1 SAFETY MANAGEMENT SYSTEM AND

QUALITY ASSURANCE 17

3.2 TO REPORT ACCIDENTS, INCIDENTS AND NON-CONFORMITIES - A

KEY TO RISK ASSESSMENT AND PREVENTION 17

3.3 System Design 19

3.4 What is reported? 19

3.5 Who is reporting? 19

3.6 How is the form designed and forwarded? 20

3.7 Who registered and stores the information and how is it done? 20

3.8 How is the database designed? 21

3.9 Kinds of the risk in carriage 22

3.9.1 Risk owner 22

3.9.2 Declared value 22

3.9.3 Limited carrier’s risk 24

3.9.4 Popular terms 24

Chapter IV 25
4.1 Sea carriage 25

4.2 How to move goods by sea 25

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4.3 Case laws 26

4.3.1 Dreymoor Fertilizers Overseas ... vs Panama on 18 March, 2014 26

4.3.2 In The High Court Of Judicature At ..vs M/S.United

India Insurance Co. 27

4.3.3 Board of Trustees of Madras vs. M/S.National Engineering ... on 11 March,

2011 27

4.3.4 National Insurance Company Ltd. vs Navrom Constantza And Ors.

on 26 June, 1987 28

Chapter V 30
Conclusion 30

BIBILOGRAPY 31
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DECLARATION

I Nisha Tiwary, a student of BBA LLB Siksha ‘o’ Anusandhan national institute of
law, Bhubaneswar does hereby declare that the Project work titled “RISK
MANAGEMENT IN CARRIAGE BY SEA: AN INSURANCE PERSPECTIVE”.

NISHA TIWARY
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ACKNOWLEDGEMENT

I take immense pleasure in thanking Miss. Amruta DAS for having permitted me to
carry out this assignment work.

I wish to express my deep sense of gratitude to Miss. Amruta Das for his able
guidance and useful suggestions, which helped me in completing the assignment
work, in time.

Words are inadequate in offering my thanks to all my friends who are been a
source of encouragement and cooperation in carrying out the assignment work.

Finally, yet importantly, I would like to express my heartfelt thanks to my

beloved parents for their blessings.

I had taken care to provide analytical assessment in my assignment work,

however there might be errors and omissions for which I owe responsibility.

Any guidance for correction or rectification will be duly appreciated.

NISHA TIWARY

BBA.LLB

REGD.1541801012
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PREFACE

It gave me immense pleasure to write a preface on my project work title

“RISK MANAGEMENT IN CARRIAGE BY SEA: AN INSURANCE
PERSPECTIVE”.

I have divided to assigned work into three chapters; in first chapter I have
introduced the subject.

In the second chapter I have cited some examples related to the topic along
the explanation of the same.

In the third chapter I have concludes the topic.

I have tried my best to omit the errors but still if there is any then they are
deeply regretted & the feedbacks are most humbly welcome…

Nisha Tiwary
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GUIDE TO CERTIFICATE

This is to certify that NISHA TIWARY of BBA.LLB course has successfully

completed her LAW OF CARRIAGE project work on the top “RISK
MANAGEMENT IN CARRIAGE BY SEA: AN INSURANCE PERSPECTIVE”
as provided by the institution for the session 2017-2018.

FACULTY IN CHARGE DEAN’S SIGNATURE

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CHAPTER-I

INTRODUCTION

The shipping industry is in a way the first global industry. It is the link between nations and
continents. The establishment of international co-operation and conventions has therefore a long
history in the shipping industry.
The public, as well as others who use shipping services have the right to expect that the ship they
board or which carries their cargo is safe and within the context of the voyage, seaworthy and
otherwise fit for the purpose. Seafarers too have the right to expect that their ship is safe and they
will not be exposed to danger or unacceptably high levels of risk.
There are many stakeholders in marine transportation safety. The industry is highly regulated with
prescriptive requirements to ensure well-designed and constructed ships. Many operational
procedures and training or certification requirements have been researched and mandated to ensure
safe operations. It has always been recognised that the best way of improving safety at sea is by
developing international regulations that are followed by all shipping nations and from the mid
19th century onwards a number of such treaties were adopted.
In 1948 United Nations established the International Maritime Organization (IMO). The first task
was to adopt a new version of the International Convention for the Safety of Life at Sea (SOLAS),
the most important of all treaties dealing with maritime safety. This was achieved in 1960 and
IMO then turned its attention to such matters as facilitation of maritime traffic, load lines, and the
carriage of dangerous goods.
But although safety was and remains IMO's most important responsibility, a new problem was
Emerging - pollution. Pollution prevention was part of IMO's original mandate but in the late
1960´s a number of tanker accidents resulted in further action being taken. As an example, recent
changes to the convention will make it necessary for all new tankers to be fitted with double-hulls
or a design that provides equivalent cargo protection in the event of a collision or grounding. These
changes are also applied to existing tankers when they reach 25 years of age.

For certain maritime segments, the International Safety Management (ISM) Code has just come
into force. For others it will enter into force soon and further insure quality of operations. State
agencies i. e. Maritime Directorates, mariners, pilots, those involved with maritime control or
advisement systems, as well as operating companies, classification societies, and many others have
interests in developing a practical system that contributes to better working environment and safer
operations. The shipping industry has shown that free market forces can provide efficient cheap
transport and it does this through a complex web of contracts and agreements. However, as ships
increase in size, cargoes become more complex and ferries run even faster, the risk of disruption
following an incident become correspondingly greater.
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1.1Concept of risk under sea carriage

1.1.1 The meaning of risk under sales law
According to Ewan Mckendrick, “to say that a party to a contract for the sale of goods bears the
risk means that he bears the loss if the goods are damaged or destroyed without fault on the part
of either party to the contract”. Hence risk is concerned only with events causing damage or loss
of the goods which are due to neither of the parties fault. The damage or loss can be accidental or
caused by a third party.

The concept of risk therefore deals with which of the contractual parties under the sales contract
has to bear the loss. This is an important problem to be solved by sales law. Usually a policy of
insurance is acquired to cover such losses. However the passage of risk determines which of the
parties is to press a claim against the carrier or issuer and where insurance is absent, the risk
becomes even more pronounced.

Goods may suffer loss or damage while at the seller’s premises, during packaging, on the way to
the port for shipment, during the sea carriage and the like. The most important question then
becomes who is responsible for these losses or damage to the goods. The rules on passing of risk
under sea carriage is to determine whether the seller is entitled to receive the purchase price after
delivery of the goods to a carrier and whether the buyer is entitled to pay for the goods delivered.

1.2 Time of transfer under CIF contract

The transfer of risk is regulated in sections A5 and B5 in all the different variants of incoterms.
The risk passes at the time of delivery. The time of delivery is defined in sections A4 and B4 and
it regulates the time of handing over the goods by the seller and it being taking over by the buyer.
Under CIF contracts, A5, the “seller must, subject to the provisions of B5, bear all risk of loss or
damage to the goods until such time as they have passed the ship’s rail at the port of shipment.”

According to A4 and B5, the seller fulfils his obligation to deliver when the goods pass the ship’s
rail at the named port of shipment on the agreed date or time. The transfer of risk is thus tied to
delivery at a definite point in time. This is when the goods pass the ship’s rail. This means that the
seller is free from all liability when the goods pass the ship’s rail provided he has delivered
contractual goods which will be eminent in the shipped bill of lading.
What constitutes the ships rail is a subject of debate and there are many views on this point.

1.3 Ships rail concept

Under CIF contracts, the point of delivery and hence passing of risk is the moment when the goods
pass the ship’s rail. The problem is what constitutes the ship’s rail. This is an issue worth
considering as it is difficult to determine the exact point in time when the risk passes. Who bears
the loss if the goods suffer loss or damage in the process of loading?
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There have been various suggestions as to who bears the responsibility at this point. Some theories
suggest that the seller bears the risk if the goods fall on the wharf or into the sea while others think
the buyer bears the risk if the goods fall on the deck since the goods would have already passed
the ship’s rail.

Both opinions are not clear and that it makes it difficult to determine when exactly the risk passed
to the buyer. In an attempt to clarify the issue, two answers have been given. The first theory
suggests that the goods pass the ship’s rail when they actually cross the rail of the vessel. Therefore,
if the goods get damaged in the loading process or fall on the wharf, the risk is on the seller.
Likewise, if it falls on deck, it will be on the buyer. The second theory suggests that the risk only
passes when the loading process is completed. This may be in line with the carrier’s period of
responsibility under the Hague Visby rules.

This problem has been further exacerbated by the evolution of containerization. Where goods are
packed in containers and placed at vantage points for pick up by the carrier. In this sense what
constitutes the ship’s rail? Is it when the carrier picks up the container or when the container has
already been put on board the vessel? Therefore it is not out of place to say that the concept of the
ship’s rail needs to be reconsidered under CIF contracts to be abreast with modern trends. This
point is also reiterated by Day and Griffin who state that “the ship’s rail has clearly lost all
significance as a transitional point in the performance of the contract’’. Instead if the goods are
handed over to a carrier for onward shipment to the buyer, risk should pass to the buyer. This can
be looked at in the light of article 67(1) of CISG.

1.4 Combined transport and tender

The seller may deliver the goods to a combined transport operator who will issue a received for
shipment bill of lading as the goods have not yet been shipped on board. “Such a document may
not be a good tender under a CIF contract since it cannot, by mere transfer, pass the property in
the goods.”

Article 19 of UCP 600 rules deals with transport documents covering at least two modes of
transport. Article 19(a) (ii) states that the document issued should indicate that the goods have
been taken in charge of or shipped on board. This presumes that if the transport document indicates
that the goods have been taken, it should be acceptable for tender. But how can the property pass
to the buyer under a received for shipment bill of lading which just indicates the goods have been
taken to be shipped? When the goods are loaded on board a shipped bill of lading will be issued in
exchange for the received for shipped on board bill of lading.

1.5 Passing of risk and or property

Another issue worth discussing with regards to risk is when property passes to the buyer under sea
carriage. Risk usually passes on shipment. Under a normal sale, for instance, when one purchases
goods, by paying for the goods, the person assumes ownership. However under a CIF sale, this is
a different case. There are various opinions to as to when property in the goods pass to the buyer.
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Some suggest property passes on shipment while others support the view that property passes when
the buyer has received the tendered documents and paid the price.

1.6 Passing of property

According to A4 and A5, the seller fulfils his obligation to deliver when the goods pass the ship’s
rail at the named port of shipment on the agreed date and time. After delivery, the risk passes to
the buyer. This is compatible with CISG article 67(1), where the risk passes when the goods are
handed over to the carrier. Under the documentary letters of credit, where shipment takes place
before tender of the documents, if the bank rejects the documents for being none conforming, the
risk in the goods would have passed to the buyer without ownership passing to him. As such, the
buyer assumes risk in the goods on and after shipment. However, property in the goods may not
pass with risk. Property may pass on tender and payment. Both incoterms and CISG are not clear
about when ownership rights in the goods should pass.

As such, the intention of the parties is taken into consideration together with the governing law. In
such instances, ownership is transferred at the time the parties intended it to. However, a problem
arises if the parties did not have any intention as to when property should pass. Under a CIF sale
as we have discussed so far, risk passes on shipment as the contract of carriage is a pre-requisite
for the sales contract to be fulfilled. As such, it cannot be said that property has passed before
shipment. If the property has passed from shipment, then the seller does not have right of claim on
the goods, although he has not received payment because he has not yet tendered the document.
By making a valid tender however, the seller is sure of payment under the current UCP600 rules
where the credit is irrevocable. Nevertheless, the seller can also retain the bill of lading as security
for nonpayment of the purchase price. In such instance, property rights in the goods remain with
the seller although risk has passed to the buyer on shipment. It should be noted that the seller will
not be interested in retaining property in goods he has shipped to a foreign country where he will
be required to claim the goods when the ship arrives.

On the other hand, when the buyer assumes risk on shipment without property, then he is acquiring
liability in something he cannot claim ownership to. This presupposes that the passing of risk is
inherent in the documents such as the bill of lading. This can be explained by the functions of the
bill of lading. Property passes to the buyer when he makes payment against the documents. Risk
passes as from the time of shipment. Griffin also points out that “the most practical point for the
passing of property under a CIF contract will be on the tender of the documents to the
buyer…”However, the problem still exist as the buyer has a right to reject non conforming
documents back to the seller in which case property revert back unto the seller although risk would
have passed on shipment to the buyer.

The theory of passing of risk with ownership therefore seems unrealistic since the seller can
maintain ownership in the goods while the buyer bears the risk. Passing of risk with delivery
though realistic, is not so simple under documentary letters of credit. This is due to the fact that,
the document that gives the buyer title is still with the seller after shipment. This is only transferred
after tender and it is only when the documents are accepted that ownership is transferred to the
buyer.
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1.7 Passing of risk under multimodal transport

Another area to be looked at is passing of risk under multimodal transport. With current
containerization of goods, it is not uncommon for more than one mode of transport to be used for
conveying goods from one place to the other. A seller under a CIF contract using such mode of
transport will give the goods to one carrier for onward shipment by sea. When the shipper
deliveries goods to a multimodal transport operator, a received for shipment bill of lading is issued.
This is not equivalent to a shipped bill of lading as the goods have not been shipped on board for
a shipped bill of lading to be issued. When will the risk pass to the buyer under the circumstance?
Is it when the goods have been delivered to the first carrier or when they actually cross the ship’s
rail? This is uncertain although under the current revision of UCP rules, a received for shipment
bill of lading makes a valid tender. This can be looked at under article 19 of UCP600 rules where
when transport document indicate that the goods have been taken in charge of by a carrier, the
document merits a valid tender. This goes on to prove that the ship’s rail concept is obsolete or
rather needs to be reconsidered!

For further consideration, it can be stated that the transfer of risk affects the parties’ situations of
loss or damage under the contract of carriage and policy of insurance. It determines the point in
time when the seller is entitled to get payment for the goods and when the buyer after acquiring
title can enforce property rights action against others in court. It is needless to say then that risk of
loss or damage passes to the buyer upon shipment and title passes upon payment as you cannot
fully claim title to something you have not paid for.

1.8 Consequence of the passing of risk

The consequence of passing of risk can be looked at with regards to article 66 of CISG. The buyer
is obliged to pay for the goods provided the goods conform to the contract of sale and the right
documentation provided. As such, if a loss or damage occurs accidentally, the buyer cannot hold
the seller responsible for nonperformance.

On the other hand, if the goods are nonconforming, the seller shall continue to bear the risk of loss
in the goods until the defect is rectified. In such instances title is reverted to the seller. However,
if the loss or damage is as a result of an act or omission on the part of the seller, then the seller will
be the party to bear the risk of loss. In such instances, the buyer can claim for remedies subject to
articles 74 to 77.

With regards to documentation, the issuing bank can reject non conforming documents according
to article 16 UCP 600 rules. However, the remedies after such refusal are not clear cut. The seller
has a right to make another presentation within the stipulated time stated in the credit provided this
does not cause an unreasonable inconvenience to the buyer.
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CHAPTER-II
Risk inherent in the bill of lading

2.1 As receipt of cargo

The bill of lading is prima facie evidence that goods have been shipped with the stated quantity,
quality and condition. The burden of prove is on the carrier to show that such quantity was actually
shipped. Due to such circumstances, bills of lading are issued with the words” weight and quantity
unknown” or “said to contain…” The burden of prove is reversed in such instances as it rest on
the shipper to prove that such quantity was actually shipped. However under The Hague Visby
rules, note article 3 rules 4, the quantities recorded becomes conclusive evidence that such quantity
has been shipped and the buyer can rely on the bill of lading to claim for shortages against the
carrier.

Furthermore, the condition of the cargo is also stated in the bill of lading. Generally words such as
“shipped in apparent order and condition” appear on the face of the bill of lading. This is due to
the fact that, the carrier does not conduct thorough examination of the cargo despite the use of the
word “apparent” which indicates some precision. Moreover, the carrier becomes at risk as goods
stowed in containers, crates and cases cannot be seen through. This confirms the fact that only the
shipper can actually prove the actual condition and quality of the goods.

Another issue worth considering as an element of risk is the date on the bill of lading. This is
significant for payment of the price and fulfilling the sales contract. Under documentary letters of
credit, the date of shipment is important as it must conform to that on the face of the document.
Most shippers can connive with carriers to issue shipped bills of lading when goods have actually
not been loaded on board. This is a risk for the buyer as the expected time of arrival of the goods
will be deviated from, preventing the buyer from fulfilling his contractual obligations to his clients.
It is therefore important that a shipped bill of lading shows the date on which loading was
completed with regards to the parcel of cargo identified in it.

2.2 As document of title

The function of the bill of lading as a document of title is of major concern for the seller, buyer,
bank and carrier. The risk here is that the holder of the original bill of lading becomes the owner
of the goods. There are times that we have more than one person demanding the delivery of the
cargo. This may be due to the fact that, the bill of lading has fallen into the wrong hand and such
a person uses it to claim for the cargo leaving the original buyer without the goods. Furthermore,
there could be situations where goods arrive at the discharging port without the bill of lading being
available. Again, if the original shipper has not parted with the bill of lading due to non-payment
by the buyer such a situation could arise.
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These problems are further exacerbated with the issuing of more than one original.
Currently under UCP600 rules, the banks demand that all three sets if issued must be presented
against payment. This is a check against having other originals in circulation against presentation
for the release of the cargo. It should be noted that, in the hands of an innocent buyer, an
unauthorized bill of lading may not be worthless.

2.3 Delivery of the cargo

Delivery of cargo to the right consignee is of major concern to the parties under the sales contract.
Sometimes, there is the possibility of the carrier delivering cargo without the presentation of the
bill of lading. For the underlying sale to be complete, the goods must be delivered to the right
owner. Delivery of cargo without the bill of lading is a breach of contract and the cargo owner can
bring an action against the carrier.
The carrier’s liability for misdelivery is unlimited. This is so if the carrier fails to delivers the
goods to the consignee without the presentation of at least one original bill of lading. It must be
noted that the issuing of more than one original bill of lading can be a cause of misdelivery
reiterating the risky nature of such practice.

2.4 Letters of indemnity

Shippers sometimes deliver cargo that is not in conformity with the required standard. This may
be with regards to defective cargo or the date of shipment which may not be in line with the letters
of credit. In such instances, the carrier will not be willing to issue a clean bill of lading as required
under letters of credit. The shipper then influences the carrier to issue a clean bill of lading in
exchange for a letter of indemnity. “This is a document under which the shipper promises to
indemnify the carrier for any liability which arises out of the issuance of a clean bill of lading.”
Although the consignee can hold the carrier liable, such back letters are not admissible in a court
of law. As such carrier sometimes require a bank guarantee in place of letters of credit.

Not all letters of indemnity are issued based on fraudulent bases. Some have been used overtime
due to the nature of the trade. A further consequence of the issuing of a clean bill of lading against
back letters is that it is not recoverable under any insurance.

To sum up, generally when goods are sold under a CIF contract, the seller will not have an interest
in suing the carrier for loss or damage at sea when he has obtained payment for the goods. Although
the buyer does not make the contract of carriage, he has the utmost interest in the goods after
shipment as he has paid the price for the goods, so is the bank which is financed the sale. It is
therefore important that, the buyer gains rights under the contract of carriage through the bill of
lading in order to gain title to the goods and be able to sue the carrier against damages. The parties
to the contract must therefore explicitly state where property should pass to the buyer in addition
to the trade term selected. Not all of the risk factors under the sea carriage have remedies. As such
quoting Romberg, “…the parties to a contract of sale cannot expect to get satisfactory protection
for the risk of loss of or damage to the goods in transit by the liability resting upon the carrier and
other persons engaged in the carriage of the goods from point to point. Instead, it is for the seller
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and buyers in the first instance to distribute such risk between themselves with the trade terms of
their contract and arrange insurance protection accordingly.”
CHAPTER-III
THE INTERNATIONAL CODE FOR THE SAFE MANAGEMENT
OF SHIPS AND POLLUTION PREVENTION
To understand the need for the ISM Code it is first necessary to consider the evolution of safety
systems in the shipping industry. The process of regulating shipping activity has evolved primarily
in response to marine disasters like the Titanic. The great market expansion in crude oil carriers
led to new and greater risks for the pollution of the marine environment following accidents like
the Torrey Canyon, the Amoco Cadiz and the Exxon Valdez founderings that gave rise to a range
of pollution control measuring. More recently the ro-ro ferry disasters of the Herald of Free
Enterprise, the Scandinavian Star and the Estonia have led to new design rules and management
practices. These lessons from the past have been the only source of reference that has enabled the
industry to move forward with the desire not to make the same mistakes again. It is a fact that all
major disasters capture the headlines and influence public opinion. Groundings, strandings,
collisions, fires and explosions have become a driving force for new legislation and the focus of
safety training standards. Having prescribed requirements to ensure that ships are loaded properly,
built and equipped to meet seagoing conditions and are designed and operated in such way that
environment will be protected it becomes necessary to focus on the role of people and the human
element so that at all times they can safely monitor and develop the management skills to improve
ship operations. Adequate safety standards and environmental protection exists in many companies
but this, by itself, is not enough. Good safety management requires a commitment through all
levels of a company's hierarchy and effective communication channels between the management
ashore and those on board ship are a prerequisite of safe operations. The ISM Code aims at
contributing to safer shipping and cleaner oceans by laying down requirements for a clear link
between shore and sea staff of a company and for a designated person to strengthen that link. A
key aspect of the ISM Code is that companies must have a verifiable safety management in place.
For the system to be effectively implemented there must be a commitment from the top,
responsibilities assigned and measures in place to remedy deficiencies. The Code requires that any
non-conformity is reported with its possible cause, if known. The Safety Management System shall
include procedures ensuring those accidents, incidents and hazardous situations are reported to the
company. The company shall have a system for recording, investigating, evaluating, reviewing
and analysing reports and for taking action as appropriate. It may be, as is sometimes said, that the
ISM Code is simply a restatement of good practices that have existed over the years, but for some
it harbours many new elements that must be learned. Every company in the industry will be
affected by this important regulation on ship safety. The question is how to provide the insight,
concepts and techniques that put an effective ISM system into place.
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3.1 SAFETY MANAGEMENT SYSTEM AND QUALITY

ASSURANCE
It would of course be wrong to assume that the shipping industry did not have good safety control
systems in place before the ISM Code became a statuary requirement. Many shipping companies
successfully operate safely and have an impeccable safety record. A number of companies have
already embraced the concepts of quality assurance and the ship management companies have
introduced their own code of practice based upon similar principles. 3 Manufacturers need their
goods just in time and distributors require their outlets to be topped up on demand without the
need to maintain costly stocks. The shipping industry has no option but to offer a quality service
at minimum prize and to that it has to be able to manage quality effectively. A shipping company
can become more competitive only if it is able to offer safe and reliable service. There is however
need for improvement both at sea and ashore, in order to meet the new code. The nature of the
ISM Code will ensure that no shipping company will be able to escape the process. ISM will
accentuate the positive aspects of the Safety Management System and everyone in the company
can benefit from the enhancement of safe practices in ship operations. Reduced damage, improved
safety consciousness, greater professionalism and improved morale are likely to bring genuine cost
savings and better efficiency. The concept of marine safety management is based on a structural
and controlled approach similar to ISO 9000 standards relating to quality control systems. The
reason for using the concept of quality assurance is based on the self-evident reflection that it is
not possible to have a quality company, which is not safe. Good safety management is the starting
point for all commercial operations involving third parties. Essentially the only major differences
are that the ISO standard 9002 covers the contractual concept of the relationships between a client
and a supplier and controls the quality of the expected service; while the ISM Code covers the
organization and provisions taken by the company to control safety and to prevent pollution risks.

3.2 TO REPORT ACCIDENTS, INCIDENTS AND NON-

CONFORMITIES - A KEY TO RISK ASSESSMENT AND
PREVENTION

The seafarer learns his profession from training and experience. Few occupations provide an
unforgiving working environment as the sea and hardly a day will pass without even the most
weather beaten mariner learning something beneficial. A far more easier, and safer, way to
accumulate knowledge is to learn from mistakes and experience of others. We do this in a variety
of ways and there are many characters forming anecdotes that are passed on in the mess on board
or elsewhere in the industry. Systematic accident prevention is a process of defining, deciding and
doing. The information needed is selective and qualitative with added quantitative variables such
as consequence costs and measures of severity. Actual accident prevention has to be exercised
hands on, at location or in designing or constructing the physical or socio-technical conditions. It
comes into existence when the preventer is supplied with the relevant information, motivation and
resources. The defining of conditions and events that is critical for the safety on board requires a
reporting system that can identify accident precursors. Unsafe practices, near misses and many
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other problem items must be identified by the people involved with the work on board as well as
with the transportation system as a whole. Regardless of the initial focus, the intent is to
collaboratively develop a system that can gather, maintain, analyze, edit and distribute information
on safety problems or situations. The gathering and distribution of information will permit the
maritime community to take action on potential system vulnerabilities and weaknesses before a
system failure and/or marine casualty occurs. Success will depend on the extent of industry's
involvement in this progress, the mechanism for gathering data and developing means for
effectively analyzing, using and disseminating the information gleaned. Assessing risks is a
qualitative undertaking. It takes the expert opinions of those familiar with the physical and social
processes exposing people to hazards. It is done with the help of experience and knowledge rather
than with assumed probabilities. It is thus something which, expressed in today's computer
language, lends itself to the structure of an expert system. An expert system typically contains
systematic knowledge - as provided by experts or by structured, historic performance - about a
problem area that is complex, ambiguous and qualitative. The result of collected and structured
expert knowledge in computerized form, for non-experts to use, has sometimes been called
artificial intelligence. In fact the intelligence is quite genuine, since it is drawn from experience
and conclusions of human experts. What makes it artificial is the memory of the computer and the
ability of the programmers to help the user access the information in such a way that he expands
his expertise through the help of others.

There are several good reasons to create an expert system for prevention on reported incident data.
The accident problems are qualitative in nature, solutions require information processed with this
in mind; simplistic statistics will not be of any use. The difficulties of local accident prevention
can be overcome with the linking of the local field to the national or industrial overview; if tools
for local assessment are structured in the same way as collected data on national or industry level,
comparisons will be possible. If tools for local risk assement are implemented they could also be
used for local storing of information about injuries/claims. This would improve the quality of
reporting, the supervisory knowledge - if combined with the computing of quality, injury and
damage-associated, uninsured costs - the incentives for prevention. A bank of knowledge about
accidents and incidents will turn into an expert system if and when the coding of the variables is
done in such a way that their qualitative level is kept intact. It must be possible to ask questions
about accidents, incidents and hazardous events (risks) and its observed or possible consequences
and the user must be able to compare his findings with those of the system. The accident databank
should yield answers that are conclusive and possible to interpret, apply and act upon by the user.
Today, it seems that all members of the maritime community are quite excited about the safety and
preventive possibilities that international and/or national maritime safety reporting systems could
bring to the individual mariner and/or shore worker and the industry as a whole. Many companies
will soon be or have already implemented incident reporting procedures under the ISM Code. An
effective national system could possible enhance compliance with the code, autonomous reporting
and encouragement of confidential information sharing.
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3.3 System Design

The ideal purpose of an information system on incidents is to stimulate or make prevention
more effective. The actual measures of prevention are not always in par with the efforts in
collecting information and designing computerized systems of information and banks of accident
data. Sometimes it can be explained as shortcomings of the system - such as lack of validity or
reliability of important data. Sometimes there are parallel motives for operating the information
system - political, organizational or purely statistical - and this could explain why the result s is
trivial or not applied.
The ideal use of an information system on accidents, incidents and hazardous situations is
to select a certain problem, measure its severity, analyse the practical implications of the risk
information available, direct technical development, organizational change or other preventive
counter-measures and thus reduce or eliminate exposures to risks. In the overall design and
planning for the system many considerations have to be made during the test period. The system
is to be developed and reviewed over the years and the system shall in the end be evaluated.
A strategic concept and a data-base prototype are the starting point for the project.
However, the following questions, addressing essential system elements are still at this early stage
of the project under consideration:

3.4 What is reported?

The ISM-code asks for accidents, incidents and non-conformities. That includes near-
accidents and precursor events, causality data and hazardous situations.
To record an accident process implies a number of methodological problems. The
collection of information is influenced by human reactions to and interpretations of other people's
motives and unforeseen effects of interaction between men and machines.
A victim reporting on his own accident will have problems in discriminating between
accident and injury, between intent and actual behaviour, between causes, reasons and effects. The
same is true for the witness. The measurement and control system needed for accident prevention
has to contain valid, reliable and useful information of the accident sequence. One basic problem
is that these variables must be based on human memory, influenced by a number of psychological
parameters.
The report should be focused on safety problems, unsafe occurrencs and critical events.
Accidents, incidents and deviations (non-conformities) that are identified in the daily work or as a
special activity in the safety work on board should be reported as an event, a riskscenario that can
lead to a hazardous situation or has, in fact, happend (accident) and can be related to a certain
consequence.

3.5 Who is reporting?

The reporter, the informant, could be anyone that experiences a safety issue that he/she
wants to share with the rest of the maritime community. In Swedish ships, the safety committee
usually deal with the safety matters on board and the main contributions are expected to come out
as a result of that committee´s ordinary work.
In the company it is the responsibility of, according to the ISM-code, the designated person
to verify and monitor the incident reporting activity. This designated person is the link 6 between
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those on board and the incident reporting system. For successful implementation and development
of incentives for reporting, unions and ship-owners jointly are marketing the system.

3.6 How is the form designed and forwarded?

0The form must be easy to complete and also be highly flexible so as to be compatible with
other reports and formats used in the company. The report should contain a free text description
of the risk scenario or the accident or incident sequence, the causes, the consequences and
preventive measures. It must be available in both printed and electronic form. Ample use of
Internet technologies are to be employed.

3.7 Who registers and stores the information and how is it done?
The system is to be run by IPSO Classification & Control (ICC) who validate reports, de-
identify the information received, manage the data-base and analyse the information. It is
important that data entered into the system must be validated if useful results are to be obtained
through analysis.
There are many considerations for those who will be running the system. The competence
of the experts must be high to ensure the quality of the data. There must be the technical capability
to identify immediate problems and there must be the ability to inform and distribute reports to
those who need to know.

3.8 How is the database designed?

The database must support trend analysis and lessons learned and should have the
capability to do keyword searches on narrative reports. The present prototype is based upon the
Microsoft Access relational database software. This prototype is to be tested and evaluated within
the project. The first goal is to collect 3 000 accidents, incidents and risk scenarios. An accident is
defined as an event that has happened and has a certain observed unwanted consequence.
An incident is an event that has happened and has the potential to cause an unwanted
consequence and a risk is an event that can happen and can be related to a probable consequence.
A scenario, the sequence of the accident, incident or risk, is descreibed and registred in full free
text. The scenario is then structured wih the help of answering to the following questions: What
was the activity of the ship?

What is the activity of the ship? (risk)

· What was/is the activity of the crew involved in the event?
· Where? Location on board.
· What went wrong? (accident, incident) What goes wrong? (risk)
· How is the damage/injury inflicted

What were/are the causes?

· What were the consequences? (accident) What are the probable consequences? (risk) ·
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What are the suggested preventive measures?

The system supplies different lists of keywords in order to facilitate selections and make
all possible kinds of cross references.

What does the output data looked like? How shall the results be presented? How shall the results
be used?

Results from the system need to be reported in various fashions. Publications should
include immediate safety alerts and lesson learned focused periodic reports. Each audience and
distribution mechanism needs to be carefully analyzed.
Most important is probably to provide a direct access to the database and the de-identified
information for validation of local risk assessment.
The data from an incident reporting system must if it effectively should be used for
prevention, be put in a separate data file together with internally and externally produced estimates
of costs and exposures. One possible external source of complementary information is the
insurance. The system should be provided with a user-friendly menu and accessible by
internal/external users through terminals or modems.
The user of the system should also be provided with a simple PC-program, built as a
relational data-base, structured in the same way as the central incident information system. In any
medium size company there is a need for a safety monitoring system. There is an obvious benefit
to local safety work in keeping reported accidents, incidents and non-conformities on file at the
company.
The comparison of locally perceived risks and exposures together with the average severity
of the outcome of very same risks as accidents that have taken place and are in record with the
insurer can be very useful to the determination of the relative importance of the risk, its possible
consequences and to motivate intervention. Information on hazards and harmful exposures
associated with particular work stations, and assements on risks in different parts of the operation
of the ship, could in this way be computed and reviewed. Typically, information on lost time and
uninsured costs associated with injuries and damages are parts of such a system.
The unfolding of risk scenarios - critical incidents - will furthermore correct and adjust the
supervisor´s view of the safety on board from "how it is supposed to be", towards "how it is
actually done". The collection of perceived risks has the further merit that it locally yields practical
and applied suggestions for solutions to risk problems.
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3.9 KINDS OF RISK IN CARRIAGE

(1) For the purpose of determining upon whom liability for the loss of or damage to any goods is
to fall, every contract of carriage shall be one of the following kinds:
(a) a contract for carriage at owner’s risk, under which the carrier shall not be liable for the loss
of or damage to any goods, except where the loss or damage is intentionally caused by the carrier:
(b) a contract for carriage at limited carrier’s risk, under which the carrier shall be liable for the
loss of or damage to any goods in accordance with sections 9, 14, and 15:
(c) a contract for carriage at declared value risk, under which the carrier shall be liable for the
loss of or damage to any goods up to an amount specified in the contract and otherwise in
accordance with sections 9, 14, and 15:
(d) a contract for carriage on declared terms, under which the carrier shall be liable for the loss
of or damage to any goods in accordance with the specific terms of the contract.
(2) Subject to the succeeding provisions of this section, where in any contract of carriage the
term “at owner’s risk” or the term “at limited carrier’s risk” or the term “at declared value risk” or
the term “on declared terms” is used, the contract shall be deemed for the purposes of this Act to
be one to which paragraph (a) or paragraph (b) or paragraph (c) or paragraph (d) (as the case may
require) of subsection (1) applies.
(3) Subject to the succeeding provisions of this section, the kind of contract of carriage to be
entered into in a particular case is a matter for agreement between the parties.
(4) Where the contract does not purport to be of a particular kind, it shall be deemed for the
purposes of this Act to be a contract for carriage at limited carrier’s risk.
(5) No contract of carriage purporting to be a contract for carriage at owner’s risk shall have effect
as such (but instead shall have effect as a contract for carriage at limited carrier’s risk) unless—
(a) the contract is—
(i) in writing; and
(ii) expressed to be at owner’s risk; and
(iii) signed by the parties or their agents; or
(b) before, or at the time when, the goods are accepted for carriage, the contracting party or his
agent signs a statement in the following terms:
“
These goods are to be carried at owner’s risk. This means that the carrier will pay no compensation
if the goods are lost or damaged, unless he intentionally loses or damages them.”
For the purposes of this paragraph, that statement may be included in the consignment note or any
other document relating to the carriage, but in that case the statement shall be conspicuous and
shall be separately signed by the contracting party or his agent.
(6) No contract of carriage purporting to be a contract at declared value risk shall have effect as
such (but instead shall have effect as a contract for carriage at limited carrier’s risk) unless the
contract is in writing.
(7) No contract of carriage purporting to be a contract for carriage on declared terms shall have
effect as such (but instead shall have effect as a contract for carriage at limited carrier’s risk) unless
the contract is—
(a) freely negotiated between the parties; and
(b) in writing; and
(c) signed by the parties or their agents.
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(8) Where, in any proceeding, the question of whether any contract of carriage was or was not
freely negotiated is in issue, the court in determining that question shall have regard to the
following matters:
(a) the respective bargaining strengths of the parties:
(b) the course of dealing between the parties in respect of the particular transaction in question,
and any other transactions between them:
(c) the value of the transaction:
(d) any extraordinary features of the goods to be carried or the route over which they are to be
carried:
(e) any other matters that the court considers may properly be taken into account,—
and either party may adduce evidence relating to any such matter.
(9) No contract of carriage at owner’s risk or at declared value risk shall have effect as such (but
instead shall have effect as a contract for carriage at limited carrier’s risk) unless the amount by
which the freight charged by the contracting carrier under the contract differs from the amount that
he would have charged for the same carriage at limited carrier’s risk is fair and reasonable, having
regard to the difference in the risk actually undertaken by the carrier and the risk that he would
have undertaken if the carriage had been at limited carrier’s risk.
(10) For the purposes of subsection (9), any rate of freight prescribed by or under any enactment
in respect of any mode of carriage pursuant to any kind of contract of carriage shall be deemed to
be a fair and reasonable rate to charge for such carriage.
(11) Any contract of carriage entered into by a contracting carrier with an actual carrier, or between
actual carriers, may be of any kind, regardless of the kind of contract that subsists between the
contracting carrier and the contracting party; but subsections (5) to (8) shall not apply in respect
of any such contract.
(12) The provisions of sections 9, 14, and 15 apply to contracts for carriage at limited carrier’s risk
and to contracts for carriage at declared value risk.
(13) Sections 9(1), 14, and 15 do not apply to contracts for carriage at owner’s risk or to contracts
for carriage on declared terms.
(14) Notwithstanding anything in section 7, the provisions of subsections (2) to (7) of section
9 apply to contracts for carriage at owner’s risk and to contracts for carriage on declared terms,
subject to any express term in the contract.
.
3.9.1 Risk Owner:
The individual who is ultimately accountable for ensuring the risk is managed appropriately.
There may be multiple personnel who have direct responsibility for, or oversight of, activities to
manage each identified risk, and who collaborate with the accountable risk owner in
his/her risk management efforts.

3.9.2 Declared Value:

You can increase a carrier's limit of liability by Declaring a Value. This is determined by you,
the shipper or the party to whom the shipment belongs, and typically costs around $.85 per $100
of value. ... The cost for All-Risk insurance is comparable to Declare Value and offers far greater
coverage.
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3.9.3 Limited carrier’s risk

(1)This section applies to contracts for carriage at limited carrier’s risk and to contracts for carriage
at declared value risk, but not to contracts for carriage at owner’s risk or contracts for carriage on
declared terms.
(2) For the purposes of this subpart, the following are limited in amount in each case to the sum of
$2,000 for each unit of goods lost or damaged or, in the case of a contract at declared value risk,
the amount specified in the contract:
(a) the liability of the contracting carrier to the contracting party:
(b) the separate liability of any actual carrier to the contracting carrier:
(c) the joint liability of any actual carriers (where there is more than 1) to the contracting carrier:
(d) the joint and several liability of every successive carrier under a contract of successive carriage
to which section 270 applies.
(3) The limitation of amount specified in subsection (2) does not apply to—
(a) any liability for the loss of or damage to any goods that is intentionally caused by the carrier;
or
(b) any liability arising out of the terms of the contract for damages other than for the loss of or
damage to the goods; or
(c) any liability arising out of the terms of the contract for damages that is consequential on the
loss of or damage to the goods.
(4) The reference to each unit of goods in subsection (2) is to each unit of goods as accepted for
carriage by the actual carrier or (if the carriage is undertaken by more than 1 carrier) the first actual
carrier (whether or not the unit that is accepted is subsequently packed, repacked, or unpacked, or
otherwise aggregated with or segregated from any other goods, at any stage of the carriage).

3.9.4 POPOLAR TERMS

Value of a shipment as declared by its shipper to serve as the basis for computing freight charges,
and for limiting the carrier's liability for damage, loss, or delay. It usually reflects the cost price of
the shipment, and is normally lower than the declared value for customs.
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CHAPTER-IV
4.1 Sea carriage
Until the emergence of modern national states, the law governing maritime commerce had been
largely uniform in the Western world. In the 18th and 19th centuries, however, legislative
enactments and judicial decisions in pursuit of narrowly conceived national interests gradually
displaced in various countries the venerable and uniform law of the sea and gave rise to sharp
conflicts of laws. The movement of goods from country to country was thus hampered at a time
when advancing technology and the spreading Industrial Revolution were about to lead to an
expansion of maritime commerce on a world scale. Beginning with the last decades of the 19th
century, it has become increasingly apparent that these conflicts of laws might be overcome by
means of international conventions. The law of merchant shipping was quite naturally one of the
first branches of private law to attract attention for possible international regulation.
The movement for uniformity culminated in the signing in 1924 of the International Convention
for the Unification of Certain Rules of Law Relating to Bills of Lading. The convention was merely
intended to unify certain rules of law relating to bills of lading and only with regard to damages
occurring to hull cargo other than live animals. All bills of lading covered by the convention are
subject to certain standard clauses defining the risks assumed by the carrier, which are absolute
and cannot be altered by contrary agreement, and the immunities the carrier can enjoy, unless the
parties agree otherwise. In general, clauses relieving the carrier from liability for negligence in
loading, handling, stowing, keeping, carrying, and discharging the goods or that diminish his
obligation to furnish a seaworthy vessel are declared null and void. The carrier, however, is
relieved from liability for negligence in navigation or in the management of the vessel and from
the absolute warranty of seaworthiness. The convention was originally intended to apply to all bills
of lading issued in any one of the contracting states.

Most maritime nations have ratified or adhered to the convention, and others, such as Greece and
Indonesia, have enacted domestic legislation incorporating the rules agreed upon in Brussels.
Some adhering nations, including Germany, Belgium, Turkey, and the Netherlands, have
incorporated the rules of the convention into their commercial codes. Others, including the United
States, Japan, Great Britain, and most members of the British Commonwealth, have enacted the
rules in the form of special statutes known as Carriage of Goods by Sea Acts. Still others, including
France, Italy, Egypt, and Switzerland, have given the convention itself the force of law and, in
addition, have enacted domestic legislation modelled on the convention. The substantive standards
governing bills of lading in maritime carriage have become largely uniform in most of the Western
world.

4.2 How to move goods by sea

You will also need one of the following:
 If the goods are hazardous, a Dangerous Goods Note (DGN). This document details the nature of
any dangerous goods in a consignment and the hazards presented by them.
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 If the goods are non-hazardous, a Standard Shipping Note. This gives the port of loading the
information it needs to handle your goods correctly. It's also used by the shipping company to
check the actual information about the goods once they have been loaded into the container with
the predicted information supplied beforehand.
In addition, you will also need one of the following:
 A Bill of Lading. Issued by the carrier, this serves three purposes - it shows that the carrier has
received the goods, provides evidence of a contract of carriage, and serves as a document of title
to the goods.
 A Sea Waybill. This fulfils the same practical functions as the bill of lading, but does not confer
title to the goods and is therefore quicker and easier to use. It's often used where there's a well-
established trading relationship between buyer and seller or in transactions where ownership
doesn't change hands, e.g. between divisions of a single company.

4.3 CASE LAWS

4.3.1 Dreymoor Fertilizers Overseas ... vs Panama on 18 March, 2014

As I indicated earlier, under the usual c.i.f. or c. and f. contract the bill of lading issued in respect
of the goods is endorsed and delivered by the seller to the buyer against payment by the buyer of
the price. When that happens, the property in the goods passes from the sellers to the buyers upon
or by reason of such endorsement, and the buyer is entitled, by virtue of section 1 of the Bills of
Lading Act 1855, to sue the shipowners for loss of or damage to the goods on the contract
contained in the bill of lading. The remedy so available to the buyer is adequate and fair to both
parties, and there is no need for any parallel or alternative remedy in tort for negligence. In the
present case, as I also indicated earlier, the variation of the original c. and f. contract agreed
between the sellers and the buyers produced a hybrid contract of an extremely unusual character.
It was extremely unusual in that what had originally been an ordinary c. and f. contract became, in
effect, a sale ex-warehouse at Immingham, but the risk in the goods during
their carriage by sea remained with the buyers as if the sale had still been or a c. and f. basis. In
this situation the persons who had a right to sue the shipowners for loss of or damage to the goods
on the contract contained in the bill of lading were the sellers, and the buyers, if properly advised,
should have made it a further term of the variation that the sellers should either exercise this right
for their account or assign such right to them to exercise for themselves. If either of these two
precautions had been taken, the law would have provided the buyers with a fair and adequate
remedy for their loss.
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4.3.2 In The High Court Of Judicature At ... vs M/S.United India

Insurance Co....

In Amravati District Central Cooperative Bank Limited v. United India Fire and General Insurance
Company Ltd., reported in 2010 (5) SCC 294, the Honble Supreme Court had pointed out that the
contract of Insurance should be construed strictly to determine the extent of liability of the insurer.
After referring to the earlier judgment of the Supreme Court in General Assurance Society Ltd v.
Chandmull Jain, reported in AIR (1966) SC 1644, the Honble Supreme Court, had quoted the
following observations in that judgment: 11. . In interpreting documents relating to a contract of
insurance, the duly of the Court is to interpret the words in which the contract is expressed by the
parties, because it is not for the court to make a new contract, however reasonable, if the parties
have not made it themselves.The following passage from germane in Oriental Insurance Co. Ltd.,
v. Sony Cheriyan, reported in (1999) 6 SCC 451, was also quoted with the approval. 17.The
Insurance Policy between the insurer and the insured represents a contract between the parties,
since the insurer undertakes to compensate the loss suffered by the insured on account
of risks covered by the Insurance Policy, the terms of the agreement have to be strictly construed
to determine the extent of liability of the insurer. The insured cannot claim anything more than
what is covered by the Insurance policy. That being so, the insured has also to act strictly in
accordance with the statutory limitations or terms of the policy expressly set out therein. 13.5. The
Marine Cargo Open Cover issued by the Insurance Company, which has been marked as Ex.P102,
very clearly states that the cover is granted, subject to the conditions of the Companies Marine
Cargo Policy and the assured limit is about Eight Crore of Rupees per one approved vessel or
conveyance. The assured voyage is shown to be from any country port to
Kakinada/Vizak/Nagapattinam/Chennai and there from anywhere in India. The other clauses may
not be very germane, since the dispute is restricted to the interpretation of the nature and extent of
the cover that is under taken by the Insurance Company under the Policy. From the above
description of the term voyage in the policy, it would only mean the Cover begins from the port of
origin or when the goods are loaded on to the ship at the port of origin and not at any time prior in
point. The portion of the policy extracted above, relied upon by Mrs.Jeyanthi Venkatesh, learned
counsel appearing for the plaintiff relates to inland transit and the same cannot be applied to transit
by sea. It is only the conditions shown as Institute Cargo Clause (A), which covers the risk of loss
or damage, during carriage by sea that could be applied to the present case. In view of the
categorical and unambiguous description of the term voyage in the policy, it is clear that the policy
covers the loss that occurs after the cargo is loaded in the ship at the port of origin.

4.3.3 Board of Trustees of Madras vs. M/S.National Engineering ... on

11 March, 2011

Decree and Judgment was passed on 02.11.1998. Registry has drafted the decree calculating the
amount at Rs.43,45,190.48 payable on the date of decree and thereafter at 6% p.a. on Rs.28,21,979
till the date of realisation.
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Extent of 1st Defendant's liability Case of 1st Defendant is that Vessel's principal place of
business in Japan and therefore, only Japanese Carriage of Goods by Sea Act would govern the
contract of carriage. Case of 1st Defendant is that under the provisions of Japanese Carriage of
Goods by Sea Act, the maximum liability of 1st Defendant cannot exceed Japanese Yen %100,000
[then exchange rate %843 = Rs.100]. Learned counsel for 1st Defendant contended that the Cargo
having been consigned from Japan, only Japanese Carriage of Goods by Sea Act would be
applicable. In this regard, learned counsel for 1st Defendant places reliance upon the terms and
conditions in Ex.P3-Bill of Lading. As per Ex.P3-Bill of Lading, the contract is governed by
Japanese Carriage of Goods by Sea Act and the limits of 1st Defendant's liability is stipulated in
Clauses 1 and 23 which reads as follows:-

Clause [1] (Clause Paramount) This bill of lading shall have effect subject to the provisions of the
International Carriage of Goods by Sea Act of Japan, 1957 (Hague Rules Legislation) unless it
shall be adjudged that the like statute of another country is applicable when this bill of lading shall
have effect subject to the provisions of such statute and the said Act or statute shall be deemed to
be incorporated herein, and nothing herein contained shall be deemed a surrender by the carrier of
any of its rights or immunities or an increase of any of its responsibilities or liabilities under the
said Act or statute, if any, terms of this bill of lading be repugnant to the said Act or Statute to any
extent, such term shall be null and void to that extent and no further.

4.3.4 National Insurance Company Ltd. vs Navrom Constantza And

Ors. on 26 June, 1987

It is the submission of the plaintiff respondent that to decide whether on not a plaint discloses the
cause of action; the court has to look at such statements as are contained in the plaint and to nothing
else. It is also the contention of the plaintiff respondent that for the purpose of dismissal of this
application at an interlocutory stage the petitioners, the defendants Nos. 1 and 2 must be taken to
have admitted the statements contained in the plaint and it is the further contention of the plaintiff
respondent that the power to reject the plaint for not disclosing the cause of action can only be
exercised if the Court comes to the conclusion that even though all such statements are proved the
plaintiff would not be entitled to any relief whatsoever. It is also the averment of the plaintiff
respondent in the plaint that the quantity of mild steel plates was consigned for carriage by Sea on
board the vessel "Cugir" from "Galatz" a Port in the Socialist Republic of Romania to the Port of
Calcutta in India. It is contended by the plaintiff respondent that it is nowhere pleaded in the plaint
that the vessel left the Port of Calcutta on 7th Dec. 1981. It is also the case of the Plaintiff
respondent that the bill of lading whether or not it incorporated the Hague Rules 1924 does not
form any part of the cause of action as disclosed in the plaint but constitute the documentary
evidence of contract of carriage which however, no doubt has been pleaded a sa part of the cause
of action in the plaint. It is also the case of the plaintiff respondent that the Carriage of Goods
by Sea Act, 1925 incorporating the said Hague Rules, 1924 are not applicable to the transaction.
Between the parties. It is also the contention of the plaintiff respondent that in any event, Article
111 Rule 6 of the said rules or the said Carriage of Goods by Sea Act, 1925 has no application to
the liability of the defendant carrier as alleged in the plaint. It is being pleaded that the goods were
consigned for carriage on the said vessel for reward from the Port of "Galatz" in Romania to the
Port of Calcutta in India.
29 | P a g e

It has been submitted by Mr. Deb. Iearged counsel appearing for the plaintiff respondent that in
terms of Section 2 of the said Act, the said Act has no application to the present case inasmuch as
the consignment was made from the Port outside India for delivery to a Port within India and he
has cited in support of his contention a decision of this Court reported in (1969) 73 Cal WN 279
(supra). Mr. Roy Chowdhury, learned Counsel appearing for the petitioner in answer to the said
contention has submitted that the Hague Rules 1924 have been given a statutory recognition and
codified in the said Act and this Act applies and the effect of Section 2 of the said Act is that the
said Hague Rules as adopted and codified by this Act are applicable also to the carriage of goods
by Sea carrying goods from any other Port outside India to the Port within India. It would be clear
because it is also provided in Section 4 of the Act that every bill of lading or similar document of
title issued in India should contain an express statement that it is to have effect subject to the
provisions of the said Rules as applied by the said Act. Therefore, according to Mr. Roy
Chowdhury it is merely an extension of the Hague Rules to carriage of goods from one Port of I
ndia to other Port within or outside India. It is his submission that Section 2 of the said Act is no
bar to the application of this Act to the carriage of goods by Sea carrying goods from any other
port outside India to the Port within India. Mr. Roy Chowdhury, in any. event, suggests that it
would appear from another case deciding the scope of the said Article III of Rule 6 in a case that
the said Act has been applied to case of carriage of goods by sea from a port outside India to a
port within. It is also in relation to carrying of goods by Sea from a port outside India to a Port
within India. In the said Bench decision the Port of loading was outside India and Port of discharge
was within India. The said Act was made applicable to the case as well. I agree with the submission
made by Mr. Roy Chowdhury. In my view, Section 2 of the said Act is merely an extension of the
application of the Hague Rules to a case of a carriage of goods in ship carrying goods from any
Port of India to any other pori in India or outside, I am, therefore, of the view that this Act is
equally applicable to the present case.
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CHAPTER-V

5.1 CONCLUSION
One major task of the rules of international maritime conventions is the allocation of risks
between the carrier and the cargo interest. The basis (the reason for liability of the carrier) and the
associated burden of proof are the major areas of concern in the task of allocation. In the past
century the basis of sea carrier’s liability for loss of, damage or delay in delivery of goods has
shifted from the traditional strict liability (liability without fault), where the carrier was liable
irrespective fault, to the system of liability based on fault. The historical evidences of allocating
risks between the two were started in the bill of lading. It was originally issued only to evidence
the receipt of goods by the carrier.
Through time, it started the allocation of liabilities between a carrier and cargo owners.
The carriers, by using their greater bargaining powers, started to incorporate extensive exemption
clauses in the bill of lading under the guise of freedom of contract. These exemptions clauses were
enforced by courts of many jurisdictions. This had inevitably affected the cargo interests.
The resulting imbalance required the statutory intervention with the objective of striking
the balance of rights and duties between them. The aim of the resulting legal regimes is to ensure
the fair allocation of risks between the carrier and the cargo interest by laying down the irreducible
minimum obligations and liabilities of the carrier. Within these minimum bounds of law parties
enjoy significant freedom to determine the terms of their contract of carriage by sea.
This is clearly the manifestation of public policy through statutory interventions. The
statutory intervention at international level started with the meeting of a few maritime nations in
Brussels in 1924. They agreed on some international rules addressing the contract of carriage of
goods evidenced by bills of lading. Their efforts culminated in the making of the Hague rules with
its later protocols.
The substantive contents of the rules contained in these instruments reflected that the
liability regime forms the heart of international transport convention/s. The pivotal areas these
liability regimes regulate, inter alia, include determining the basis of liability and the concomitant
allocation of burden of proof.
The Hague-Visby rules literally abolished the system of absolute liability (liability without
fault) for the loss of, or damage to the cargo. The core duties of the carrier under Hague-Visby
rules are the duty to 50 exercise due diligence to provide the seaworthy vessel before and at the
commencement of the voyage, care for the goods, issue bills of lading and not to deviate from the
contractual route.
Thus, if the carrier or a person for whom he answers breaches these duties, the carrier is
liable. The Hague-Visby rules established a fault based liability as the basis of carrier’s liability.
However, there are excepted perils of the sea for which a carrier assumes no liability. Some
of the immunities are maintained either expressly or impliedly in the cargo liability regimes of the
later maritime conventions. Owing to its peculiar exemptions for nautical fault, fault in the
management of cargo, and fire it provides, literatures designate the system of liability in the Hague-
Visby rules as 'an incomplete fault liability system'.
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BIBILOGRAPY

1. AVATAR SINGH
2. Www. google.com
3. Indian kanoon