UNIT I

Insurance Meaning
Insurance is a means of protection from any unforeseen losses and contingencies. It
is a risk-management technique used for hedging against various uncertain losses.
Insurance is a contractual agreement between two parties in which one party
promise to protect another party from uncertainties and losses. The first party is
insurance company or insurer who agrees to protect and compensate the other
party for losses suffered by it. Another one is insured or insurance policyholder who
gets protection under insurance policy in return for premium which he is required to
pay regularly to insurer. In simple terms, insurance is just the protection against the
losses. By taking insurance policy, different insurance policy holders pool their
interest together. Loss suffered by any of the insured is paid out of premium amount
paid by these policy holders to insurance company. 
Insurance is an effective tool to avoid losses by transferring or sharing it with other
individual. It boosts confidence level of peoples and acts as supporting pillar by
compensating them at time of emergencies. Insurance helps in economic
development of country by mobilising people’s saving by attracting them for
investment in insurance policies. Insurance companies reinvest the collected
amount in different investment avenues for earning profit. There are generally three
steps in insurance process: Firstly, select the insurance policy as per your needs,
then you need to pay the premium amount regularly and at last claim your insured
amount with the help of supporting documents in case if any unfortunate event
occurs. Nature of Insurance is discussed in points as given below:
Nature of Insurance
Nature of Insurance
Contract
Insurance is contract between two parties in which one party agrees to provide
protection to other party from losses in exchange for premium. The parties are
insurer and insured. Insurer guarantees compensation in occurrence of any
contingency to insured and insured pays premium to insurer for protection.
Insurance companies accept the offer made by the insurance policy holder and
enter into contract. Contract for insurance is always in written.
Lawful Consideration
Existence of lawful consideration is must for insurance contract like any other lawful
contract. The insurance policy holder is required to pay premium regularly to the
insurance company. This premium is paid in exchange for protection against losses
and damages guaranteed by insurance companies.
Payment On Contingency
Insurer is required to compensate the insured only on happening of contingency for
the damages and losses done. Insured cannot make profit from insurance policy but
can only claim compensation from insurer in case of contingency. If no contingency
occurs, insurer is not required to pay any compensation to insured. 
Risk Evaluation
Insurer evaluates the risk associated with subject matter of insurance contract.
Proper risk evaluation enables the insurer to calculate the right amount of premium
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to be paid by insured. Insurer uses different techniques for risk evaluation. If
insurance object is subject to heavy losses, heavy premium will be charged. On the
other hand, if there is less expectation of losses then low premium will be charged.
Large Number Of Insured Persons
There are large numbers of insured person’s takes insurance policy from insurer.
Larger the number of insurance policy holders with insurance companies, smaller
will be the degree of risk on any individual. Risk arising from any contingency is
shared among these large numbers of insured persons.
Co-Operative Device
Insurance is a cooperative device to pool risk among large number of persons.
Insurance is a platform where different persons come together to share risk by
taking insurance policy from insurer. All persons pay premium regularly to insurance
companies. If any of person incurs losses or damages due to occurrence of any
contingency, insurance company will compensate him out of premiums paid by
different persons. 
Not A Charity Or Gambling
Insurance is a legal contract. It cannot be termed as a charity or gambling.
Compensation paid to insured by insurer is not in charity but is paid in exchange of
premium deposited by him. Insured pays premium to insurer for guarantee of
compensation in happening of contingency. Also, insured cannot make profit out of
insurance policy and is meant for recovering him from losses only. He is paid
compensation only when he incurs losses due to contingency. That is why it is not a
gambling.

Types of Insurance
Insurance policies provide protection against the various types of uncertainties that
can occur in the life of an individual. Having health insurance can help you cover up
for the expenses paid for any diseases, while an accident insurance can help you in
getting cover for any kind of accidents that may occur.
There are various types of insurance in the market due to the presence of a large
number of insurance companies. But, the purview of this article is restricted to
dealing with the types of Insurance as prescribed in the Business Studies syllabus
for CBSE Class 11.
The types of Insurance that will be discussed are:
1. Life Insurance
2. General Insurance (which includes fire insurance, health insurance and marine
insurance)
Let us discuss these types in detail.

1. Life Insurance:
Life insurance is a type of insurance policy in which the insurance company
undertakes the task of insuring the life of the policyholder for a premium that is paid
on a daily/monthly/quarterly/yearly basis.
Life Insurance policy is regarded as a protection against the uncertainties of life. It
may be defined as a contract between the insurer and insured in which the insurer

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agrees to pay the insured a sum of money in the case of cessation of life of the
individual (insured) or after the end of the policy term.
For availing life insurance policy the person needs to provide some details like age,
medical history and any type of smoking or drinking habits.
As there are many requirements of persons for availing a life insurance, the
requirements can be needs of family, education, investment for old age, etc.
Some of the types of life insurance policies that are prevalent in the market are:
a. Whole life policy: As the name suggests, in this kind of policy the amount that is
insured will only be paid out to the person who is nominated and it is only payable
on the death of the insured.
Some insurance policies have the requirement that premium should be paid for the
whole life while others may be restricted to payment for 20 or 30 years.
b. Endowment life insurance policy: In this type of policy the insurer undertakes
to pay a fixed sum to the insured once the required number of years are completed
or there is death of the insured.
c. Joint life policy: It is that type of policy where the life insurance is availed by two
persons, the premium for such a policy is paid either jointly or by each individual in
the form of installments or a lump sum amount.
In the case of such a policy the assured sum is provided to both or any one of the
survivors upon the death of any policyholder. These types of policy are taken mostly
by husband and wife or between two partners in a business firm.
d. Annuity policy: Under this policy, the sum assured or the policy money is paid to
the insured on a monthly/quarterly/half-yearly or annual payments. The payments
are made only after the insured attains a particular age as dictated by the policy
document.
e. Children’s Endowment policy: Children’s endowment policy is taken by any
individual who wants to make sure to meet the expenses necessary for children’s
education or for their marriage. Under this policy, the insurer will be paying a certain
sum of money to the children who have attained a certain age as mentioned in the
policy agreement.
2. General Insurance:
General Insurance is related to all other aspects of human life apart from the life
aspect and it includes health insurance, motor insurance, fire insurance, marine
insurance and other types of insurance such as cattle insurance, sport insurance,
crop insurance, etc.
We will be discussing the various types of general insurances in the following lines.
a. Fire Insurance: Fire insurance is a type of general insurance policy where the
insurer helps in paying off for any damage that is caused to the insured by an
accidental fire till the specified period of time, as mentioned in the insurance policy.
Generally, fire insurance policy is valid for a period of one year and it can be
renewed each year by paying a premium, which can be a lump sum or in
installments.
The claim for a fire loss must satisfy the following conditions:
i. It should be an actual loss
ii. The fire must be accidental and not done intentionally

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b. Marine Insurance: Marine insurance is a contract between the insured and the
insurer. In marine insurance, the protection is provided against the perils of the sea.
The instances of dangers in sea can be collision of ship with rocks present in sea,
attacking of the ship by pirates, fire in ship.
Marine insurance covers three different types of insurance which are ship hull, cargo
and freight insurance.
Ship or hull insurance: As the ship is exposed to many dangers at the sea, the
insurance covers for losses caused by damage to the ship.
Cargo Insurance: The ship carrying cargo is subjected to many risks which can be
theft of cargo, lost goods at port or during the voyage. Therefore, insuring the cargo
is essential to cover for such losses.
Freight Insurance: In the event of cargo not reaching the destination due to any
kind of loss or damage during transit, the shipping company does not get paid for
the freight charges. Freight insurance helps in reimbursing the loss of freight caused
due to such events.
Marine insurance is a contract of indemnity where the insured can recover the cost
of actual loss from the insurer in event of any loss occurring to the insured item.
c. Health Insurance: Health insurance is an effective safeguard for protection
against rising healthcare costs. Health insurance is a contract that is made between
an insurer and an individual or a group where the insurer agrees to provide health
insurance against certain types of illnesses to the insured individual or individuals.
The premium can be paid in installments or as a lump sum amount and health
insurance policy is renewed every year by paying the premium.
The health insurance claims can be done either directly in cashless or
reimbursement availed after treatment is done. Health insurance is available in the
form of Mediclaim policy in India.
d. Motor vehicle insurance: Motor vehicle insurance is a popular option for the
owners of motor vehicles. Here the owners’ liability to compensate individuals killed
by negligence of motorists is borne by the insurance company.
e. Cattle Insurance: In case of cattle insurance, the owner of the cattle receives an
amount in the event of death of the cattle due to accident, disease or during
pregnancy.
f. Crop Insurance: Crop insurance is a contract for providing financial support to
the farmers in the event of crop failure due to drought or flood.
g. Burglary Insurance: Burglary insurance comes under the insurance of property.
Here the insured is compensated in the event of a burglary for the loss of goods,
damage occurred to household goods and personal effects due to burglary, larceny
or theft.

Insurance Definition
Insurance is generally defined as a contract which is also called a policy. An
insurance policy is a contract in which an individual or an organization gets financial
protection and compensation for any damages by the insurer of the insurance
company. In simpler words, one can answer what is an insurance policy as a form of

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protection from any unexpected loss or damage. From this paragraph, one can get a
clear overview of insurance meaning. 
 
Principles of Insurance
To ensure the proper functioning of the insurance contract, the insurer and the
insured have to follow the following principles.
 Utmost Good Faith
 Direct Cause
 Insurable Interest
 Indemnity
 Subrogation
 Contribution 
 Minimizing the loss   

History of the insurance sector in India

Ancient times
The concept of insurance was loosely practised in ancient Indian society. It also
finds mention in some religious scriptures such as Dharmasastra and Arthasastra.
The scriptures mention that communities pool their resources and redistribute them
when natural calamities hit them. 

British rule 
With the advent of the British, the concept of insurance in India changed. India had
its first British insurance firm with the establishment of the Orental Life Insurance
Company in 1818, which later failed in 1834. Subsequently, the British Insurance
Act was enacted in 1870. Most of the insurance companies in India were owned and
operated by foreigners. In 1912, the Government of India passed the first statute
called Indian Life Assurance Companies Act, 1912. For the first time, in 1914, the
Government of India started to publish the returns of insurance companies in India.
And, in 1928, the Indian Insurance Companies Act was enacted, empowering the
government to collect data on the business of both Indian and foreign insurers. In
1938, Insurance Act, 1938, was enacted, whose importance was diminished by
subsequent legislation. 

Post-independence 
In the 1950s, the Government of India started to nationalize the insurance sector of
the country. In 1956, the Life Insurance Corporation Act, 1956 was enacted which
led to the establishment of Life Insurance Corporation, popularly known by its
abbreviation LIC, which has a monopoly over the life insurance business in India.
After the enactment of this Act, life insurance fell out of the purview of the Insurance
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Act, 1938. In 1973, the General Insurance Business (Nationalisation) Act,
1972 came into effect, nationalizing general insurance business. 

Liberalization policy 
In 1991, liberalization and privatization brought forth many changes in the Indian
economy. When the need to reopen the insurance sector to private parties arose,
the central government set up a committee headed by R.N. Malhotra, former
governor of RBI, to examine the changes to be made in the insurance sector. The
eight-member committee recommended privatization of the insurance sector and the
establishment of the Insurance Development Regulatory Authority (IRDA), an
autonomous body to regulate the insurance sector. Finally, the monopoly of LIC
over the life insurance sector ended and the IRDA Act, 1999 was enacted. 

Insurance contract : meaning 

 An insurance contract is essentially a contract between two parties, where

one of them is called an “insurer” and the other party is “insured”. 
 In this type of contract, the insurer promises the insured party that he will
save or indemnify him from losses caused by a particular contingent event,
on the payment of an amount called “premium”. 
 Insurer usually refers to the insurance company that sells the insurance and
the insured or policyholder is the person who buys it by paying the premium.
In a contract of insurance, the insurer or insurance company advertises the
insurance policy, which is an invitation to offer. 
 Then, on seeing the invitation to offer, the insured makes an offer to the
insurer. When the insurer accepts, it becomes an insurance contract. 

Purpose of insurance 
The following are the two main purposes of insurance contracts : 

1. Protection against uncertain events: The main purpose of an insurance

contract is to make the insured person secure and financially protected from
certain uncertain contingencies that would cause a huge financial burden. 
2. Better management of finances: Many people have the tendency to make
poor financial decisions that could potentially leave them without any
support when faced with an unfortunate situation. By subscribing to an
insurance policy, the insured would be able to make better financial
decisions.

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Life insurance contract

Life insurance is a contract between the insured and an insurance company wherein
the insurance company pays a lump sum amount to the policyholder or their
nominees mentioned in the insurance policy in the event of maturity of the policy or
death of the policyholder. A life insurance contract provides risk coverage
throughout the policy period. On the expiry of the policy term, the insurance
company pays bonuses and dividends to the policyholder as survival benefits. In the
event of the policyholder's death during the policy term, the sum insured under the
policy, along with the vested bonus, is paid to the policyholder's nominee, as
mentioned in the insurance contract.

Types of life insurance contract

There are three major types of life insurance contracts based on the period of risk
coverage: term insurance contract, whole life insurance contract, and universal life
insurance contract. These three are the basic types of life insurance contracts, but
the market is flooded with several life insurance policies that combine these three
types of life insurance contracts.

 Term life insurance policy: A term insurance contract is the simplest form of
a life insurance contract. Term insurance contracts are entered into by the
insurer and the insured for a fixed duration of time, and the provision for
protection gets exhausted once the policy period is over. Also, in such
contracts, there is no cash value remaining at the end of the policy period.
 Whole life insurance policy: Whole life insurance contracts do not have any
clause relating to a specified policy period, and they provide risk coverage for
the entire lifetime of the insured. Such insurance contracts accumulate a cash
value that is not more than the face value of the insurance policy. Such
policies have a provision to pay the cash value to the policyholder on maturity
or surrender of the policy.
 Universal life insurance policy: Such insurance contracts have a provision
for allowing the owner to decide the policy period, amount of premium, and the
amount of death benefit required to be covered by the life insurance policy.
Such policies have a provision wherein the insurer makes a monthly charge
for general expenses and mortality costs and credits the amount of interest
earned to the policyholder. Universal life insurance policies are further divided
into type A and type B policies. Type A policies have a provision for a specified
amount of death benefits, whereas type B universal life insurance policies
have a provision for a specified amount of death benefits along with an
accumulated cash value to be paid to the insured.

Life insurance contracts can further be classified as follows:

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  Group life insurance policy: This type of insurance coverage is provided by
employers to groups of employees.
 Industrial life insurance policy: Industrial life insurance policy consists of a
large number of individual contracts with weekly or daily premiums.
 Credit life insurance: Credit life insurance is created when an individual
purchases an asset on an installment basis. Such life insurance policies have
a clause which states that if the insured dies before the payment of all the
installments, the seller will be protected against any losses arising due to the
non-payment of the remaining installments.

Types of Life Insurance

Non-life or general insurance contract

General insurance is a contract between the insured and the insurer wherein the
insurance company provides risk coverage to any asset or object other than an
individual's life in which the insured has a financial interest. Motor insurance,
property insurance, and travel insurance are a few types of general insurance
products sold by insurance companies. General insurance policies are issued for a
period of one year and are renewable annually.

Types of general insurance products

 Motor insurance: A motor insurance policy is mandatory for driving legally in

the country. Motor insurance policies can be of two types, namely, a third-
party liability insurance policy or a comprehensive package policy. Third-party
liability insurance has liability coverage for losses arising in a situation where
the insured's motor vehicle causes damage to a third party, such as public
property or some other vehicle. A comprehensive package policy has liability
coverage for third-party losses as well as losses arising to the insured's motor
vehicle for no fault of his, such as accident, theft, fire, natural calamities, or
any other causes.
 Homeowners insurance: Homeowners insurance covers the entire range of
risks and losses arising from burglary, theft, or natural calamities.
 Health insurance: Health insurance provides coverage against the expenses
related to hospitalization, accidental illness, day-care procedures, psychiatric
support, annual health check-up, maternity benefits, and critical illnesses.
 Accident insurance: Accidental coverage is a type of casualty insurance and
protects an individual against out-of-pocket expenses arising to the insured in
the event of an accident or physical injury.

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  Travel insurance: Travel insurance covers financial liability if any when the
insured is traveling within or beyond the boundaries of the country. The scope
of coverage of this type of policy extends to loss of baggage, loss of passport,
losses arising due to hijacking, medical emergencies during travel, and
delayed flights.
 Disaster insurance: Disaster insurance covers losses arising to the insured
due to multiple perils, such as extreme weather conditions as well as losses
arising due to natural disasters, such as floods and earthquakes.
 Commercial line insurance: Such insurance policies provide coverage to
business entities against losses arising due to moral hazards as well as any
unforeseen events that disrupt the business operations. Property insurance,
marine insurance, liability insurance, and employee benefits insurance are
some examples of such insurance. Out of these, liability insurance can be
further categorized into third-party liability

 insurance, public liability insurance, product liability insurance, and
professional liability insurance.

Types of insurance policies in India

Introduction
Insurance is a contract in form of a policy where one party agrees to pay a certain
amount for consideration to make the other party liable to recover the amount of
damage caused to that party. Insurance is an old concept in India but today it’s
becoming very common and important for every person who is either a
businessman, or a person holds assets. Protecting the asset or businesses is very
important to cover up the losses through insurance. Various insurance companies in
India are:

1. Life Insurance Corporation of India

2. Max Life Insurance Company
3. HDFC Life Insurance Company
4. ICICI Prudential Life Insurance
5. Tata AIA Life Insurance Company,.etc

Types of insurance policies in India

REFFER THE ABOVE TYPES
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Conclusion
Insurance gives a way to manage the financial risks caused to the person or the
businesses. Insurance policies are made to recover the amount of loss/damage
caused to the people at a point of time where they are in need of financial
assistance. Insured person gets the benefit of the amount invested from time to time
when they are in need. By taking the insurance, an insured person can easily own a
home without being concerned about the loss/ damage to his house, Drive vehicles
in accordance with the fulfillment of legal requirements and without worrying about
the injuries and damages, Cover the need of financial assistance at the time of
health related risks, run the business smoothly and even travel without worries!

Understanding the concept of insurable interest

Introduction
Due to the incidence and risk of expanded risks previously unknown to life, trade,
and commerce, the necessity for insurance coverage is increasing today. Insurance
is designed to protect a person against unforeseeable events that may be harmful to
him. It assures him that he will not suffer any financial loss as a result of the
occurrence of any unanticipated calamity affecting his life or possessions. Insurance
is a contract in which one party guarantees to the other that he will not suffer loss,
damage, or prejudice as a result of the occurrence of hazards defined to the
particular objects that may be exposed to them in exchange for a sum, also known
as premium, given to him, adequate to the risk. There must be some ambiguity as to
whether the event will occur or not, or if the event is one that must occur at some
point, there must be a doubt as to when it will occur.

Definition of insurable interest

The term “insurable interest” refers to a sort of investment that protects against
financial loss. When the damage or loss of an item, event, or action will result in
financial loss or other problem, a person or entity has an insurable interest in it. A
person or entity with an insurable interest would purchase an insurance policy to
cover the person, thing, or event in the issue. If something occurs to the asset, such
as it being destroyed or lost, the insurance coverage would reduce the risk of
losses.

Insurable interest is a condition for providing an insurance policy since it makes the
entity or event legitimate, valid, and protected against malicious activities. People
who are not at risk of losing money do not have an insurable interest. As a result, a
person or corporation cannot buy insurance to protect themselves if they are not
truly at risk of financial loss.

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Understanding insurable interest
Insurance is a kind of risk pooling that protects policyholders against financial
losses. Insurers have devised a variety of instruments to cover losses resulting from
a variety of reasons, including automotive expenditures, health-care expenditures,
lost income due to disability, death, and property damage.
Insurable interest refers to persons or institutions with a reasonable expectation of
longevity or sustainability, assuming no unanticipated negative occurrences. This
individual or entity’s insurable interest protects them against the possibility of a loss. 
As an instance, homeowners and mortgage lenders both have an insurable interest
in their properties. You can’t insure anything if you don’t have an insurable interest
in it. Renters only have an insurable interest in their belongings, not in the building
they live in. If you own something or would suffer financially if it was damaged or
destroyed, you have an insurable interest in it.

Working principle of insurable interest

In this context, insurable interest has nothing to do with earning interest on a bank
account or a fixed-income investment. Consider if you would lose money if someone
or something in your life died, or whether you would lose money if a piece of
property was destroyed. If you do, you may have an insurable interest in that
person’s, group’s, or thing’s survival. And life and/or disability insurance, as well as
property insurance, can safeguard that interest.

Conclusion 
The world we live in is full of hazards and uncertainty. Individuals, families,
businesses, buildings, and investments are all vulnerable to various dangers. These
include the danger of losing one’s life, health, possessions, and property, among
other things. While it is not always feasible to avoid unfavourable occurrences from
occurring, the financial industry has devised solutions that safeguard individuals and
organisations from such losses by providing financial resources to compensate
them. Insurance is a financial instrument that lowers or eliminates the cost of a loss
or the effect of a loss caused by various risks. Provides financial security throughout
one’s life. An insurance policy relieves strain and worry brought on by unforeseen
negative situations. It makes a significant contribution to living a stress-free
existence.
Meaning and definition of Premium (Insurance Law)
Introduction -
Insurance is a Contract, there are two parties in the contract of Insurance, Insurer
and Insured. The insured gives premium as a consideration in return of which
insurer undertakes to pay a certain amount at a specified contingency.  There is no
precise definition of the Insurance Contract, Several Jurists tried to define it. Some
of the Important Definitions are given here.

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Meaning of Premium  -   

 Premium is a price that insurer charges from the insured, either lumpsum of or in
installments assured for covering some certain or ascertainable perils or risks. The
price varies from insurer to insurer, as with any product or service.

Different types of insurance cover require different premiums based on the degree
of risks.

Illustration -

    A policy insuring a house valued at $50,000 for fire requires a higher premium
that one insuring a bike valued $25,000.

    Although the degree of risk insured might be similar, the cost of repairing the
house is much higher than the bike and this difference is also seen in the premium
paid by the insured.

Definitions of Premium - 

       According to the MacMillan Dictionary, " regular payment made to an

insurance company so that you are protected by the insurance."

       National Insurance Company Limited defines premium as, "premium is fixed

amount of sum paid over the period by ensured to the insurer in order to secure an
insurance policy and to complete the  contract of insurance

       In Lucena Vs Crawford, Lawrence J defined premium as "a price paid

adequate to the risk".

        Generally, the premium is paid in cash. But it is up to the insurer to accept the
payment in any other modes such as cheque, promissory note, bill of exchange,
credit card, post, etc.

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Risk in Insurance: Meaning,
Meaning of Risk:
In simple words risk is danger, peril, hazard, chance of loss, amount covered by
insurance, person or object insured. The risk is an event or happening which is not
planned but eventually happens with financial consequences resulting in loss. There
is saying higher the risk more the profit.
A risky proposal can on one hand bring higher profits but on the other hand looming
losses. The risk can never be certain or predictable. Therefore there is need for the
risk management.
The risk management is nothing but a method to prejudge the risk that may come up
sometime in future. It is not prediction but a process of reducing the risk to a
minimum level. Risk management involves a number of measures that are used to
keep the risk at possible minimum level.
In our day to day life also we take many steps to keep the risk at lower level for
example most people do not keep valuables at home and rather prefer to keep them
in a bank locker by paying certain locker rent to the bank.
Similarly risk of life, health or property is reduced by purchasing a proper insurance.
All these actions of individual persons are done under fear of uncertainty and
unpredictability of future. Likewise in business and commerce also an element of
fear of loss always exists if the risk components are not managed properly.
Risk is a fear of happening something adverse and in order to restrict such adverse
happenings a plan is envisaged to overcome such adverse happenings. Which is
called as risk management. In the field of Insurance such fears, uncertainties,
prejudgments of forthcoming risks and the size of risk and its potentiality is
determined by the Actuary appointed by the IRDA.
The first step towards arrested the risk or fear of risk is to identify the risk. But how
to identify it unless it is known what type of risk should looked into. Hence it
important to know the nature of the risk.
.
Assignment under Insurance Policies
INTRODUCTION
For any facility sanctioned by a lender, collateral is always deposited to secure the
same. Such mere deposition will not suffice, the borrower has to explicitly permit the
lender to recover from the borrower, such securities in case of his default.
This is done by the concept of assignment, dealt with adequately in Indian law.
Assignment of obligations is always a tricky matter and needs to be dealt with
carefully. The Bank should not fall short of any legally permitted lengths to ensure
the same. This is why ambiguity in its security documents have to be rectified. 
This paper attempts to explore the concept of assignment in contract law. It seeks to
appreciate why the assignment is made use of for securities of a facility sanctioned
by ICICI Bank. The next section will deal with how ICICI Bank faces certain

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problems in executing the same. The following sections will talk about possible risks
involved, as well as defenses and solutions to the same.
WHAT IS ASSIGNMENT?
Assignment refers to the transfer of certain or all (depending on the agreement)
rights to another party. The party which transfers its rights is called an assignor, and
the party to whom such rights are transferred is called an assignee. Assignment only
takes place after the original contract has been made. As a general rule, assignment
of rights and benefits under a contract may be done freely, but the assignment of
liabilities and obligations may not be done without the consent of the original
contracting party.
The liability on a contract cannot be transferred so as to discharge the person or
estate of the original contractor unless the creditor agrees to accept the liability of
another person instead of the first.[i]
Illustration
P agrees to sell his car to Q for Rs. 100. P assigns the right to receive the Rs. 100 to
S. This may be done without the consent of Q. This is because Q is receiving his
car, and it does not particularly matter to him, to whom the Rs. 100 is being handed
as long as he is being absolved of his liability under the contract. However, notice
may still be required to be given. Without such notice, Q would pay P, in spite of the
fact that such right has been assigned to S. S would be a sufferer in such case.
In this case, that condition is being fulfilled since P has assigned his right to S.
However, P may not assign S to be the seller. P cannot just transfer his duties under
the contract to another. This is because Q has no guarantee as to the condition of
S’s car. P entered into the contract with Q on the basis of the merits of P’s car, or
any other personal qualifications of P. Such assignment may be done with the
consent of all three parties – P, Q, S, and by doing this, P is absolved of his
liabilities under the contract.

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 UNIT II
Role of insurance in Economic Development

Insurance is a big deal not just in the world of business but also contributes to the
economy as a whole. It has a huge impact on how businesses evolve, how people
think about economics and how the world moves forward. Insurance is the bedrock
of the economy, and while it may not be something you love, it is something you
need to support your business.
The insurance industry is one of the major players in the economy and contributes
to the world's economy. This is because they help in the smooth running of the
world's economy through the payment of insurance claims and are considered one
of the safest investments for people to have.
In a variety of ways, insurance companies contribute to the strength and vitality of
our economy.
How? You may ask.
Insurance companies assist businesses in reducing risk and protecting their
employees:
As with consumers, assisting businesses in reducing risk can have a long-term
positive impact on the economy. Insurance is like the backbone of the economy.
Businesses, like consumers, can endure financial hardship as a result of unforeseen
obstacles.
When an unfortunate event strikes, insurance is one of the strongest financial tools
businesses have at their disposal to help them deal with the situation. Furthermore,
when an employee is hurt on the job, company insurance helps to cover the costs of
the person's care as well as any potential salary loss.
Business insurance also aids in the expansion of a company. At its most basic level,
insurance provides a protective safety net that allows organisations to engage in
higher-risk, higher-return activities than they would otherwise. These acts assist
firms in operating successfully, resulting in more jobs and increased overall
economic activity.
Insurance companies provide financial security to customers:
Consumers have become so accustomed to the routine that they are often unaware
of the daily onslaught of risk and uncertainty. Unexpected problems can strike at any
time, whether a car accident, house fire, a flooded basement after a major storm, or
a work injury.
By providing crucial financial protection, insurance can assist manage this
uncertainty and potential loss. When a calamity occurs, an insurance policy can help
consumers get the money they need. Many people in these situations would be
financially pressured and possibly bankrupt if it weren't for insurance.
Insurance companies help in the funding of economic development projects:
Insurance companies often invest the premiums that are not utilised to pay claims
and other operating expenses. These investments frequently finance building
construction and offer other critical assistance to economic development projects
around the country through stock, corporate and government bonds, and real estate
mortgages.

15
Insurance is about much more than the monthly premiums that individuals and
businesses must pay. The insurance business, as a whole, is an important thread in
the fabric of a healthy economy.
Insurance has a favourable impact on the financial system's stability:
One of the most important industries in the service sector is insurance. Insurance
firms are an essential component of the financial system. In addition, insurance
corporations have a significant role in the formation of state budgets. They are large
taxpayers in the state. Taxes, as we all know, make up a large portion of the state
budget. As a result, the insurance industry plays a critical role in maintaining the
stability of the tax and financial systems.
Insurance provides employment:
Unemployment is one of the most serious economic issues. This is a problem that
many countries are dealing with these days. In most emerging countries, the
number of unemployed individuals is rising. However, the insurance system aids in
the resolution of this economic issue by providing employment.
Insurance contributes to an increase in GDP:
GDP is one of the most important macroeconomic metrics. The volume of GDP is
used to determine each country's level of development. People can choose from a
variety of insurance plans offered by insurance firms. These premiums are used by
insurance companies in the financial and investment operations of the economy. As
a result, this process boosts the economy's GDP.
Conclusion:
We hope this article has helped you understand how insurance can help with
economic development. If you have any questions about insurance, how it can help
with economic development, or learn more about insurance, visit the Future
Generali India Life Insurance website.

Redressal of consumer grievance

How grievance redressal for insurance policies work

BENGALURU: Are you being served? Policyholders need to understand how

grievance redressal works as well as recourse available if the steps taken fail to
satisfy them. The Insurance Regulatory and Development Authority of India (IRDAI)
is cracking down on insurers who do not handle customer grievances according to
laid down procedures. This move has brought the entire redressal framework into
focus. As a policyholder, you need to understand how grievance redress works as
well as recourse availabl ..

Rules On Handling Grievances

The entire process is governed by the IRDA Protection of Policyholders' Interests

(PPHI) Regulations 2002. As part of this, the regulator had issued detailed
16
guidelines specifying turnaround times in July 2010. The insurer is required to send
a written acknowledgement to the complainant within three working days,
mentioning the name and designation of the officer in charge of resolving the
grievance, in addition to details of the redress process. The maximum turnaround
time for resolving complaints is two weeks. If the complaint is rejected within two
weeks, the insurer has to give reasons for the same and guide the policyholder on
subsequent recourse options.
“In case the policyholder receives no response from the company , he or she can
approach IRDAI's call centre (toll-free at 155255). It has emerged as an effective
alternative channel for policyholders,“ says consumer rights activist Gaurang
Damani, who had filed a petition in the Bombay High Court seeking guidelines on

The Next Level

The first point of contact for a policyholder should always be the insurer.If you are
unhappy with the compa ny's response, you can approach the insurance
ombudsman in your city 30 days after you first lodged the complaint with the insurer.
It is a quasijudicial body which deals with cases up to a value of Rs 20 lakh and has
the power to award compensation to aggrieved policyholders. The ombudsman
primarily comes into the picture for complaints that involve monetary compensation,
IGMS is the way to go for simpler complaints (chart). Some consumer activists
complain that the ombudsman framework has not turned out to be as helpful as it
was expected to be. “This procedure is good in theory and looks attractive on paper,
but is not effective. Most often, the grievance cell ignores the complaint, or acts like
a postman, forwarding the grievance to the divisional office and communicating the
same response to the insured,“ says consumer activist  ..

Final Recourse

Consumer courts are the last resort for a policyholder. You need not approach the
ombudsman before knocking on the consumer courts' doors, you can do so
directly.“Approaching the consumer forum would be the simplest, fastest and most
economical remedy . The forum is better accessible, and awards compensation and
costs,“ advises Gai.

Role of OMBUDSMAN

17
 Brief on Insurance Ombudsman
The Offices of Insurance Ombudsman are under the administrative control of
Council for Insurance Ombudsmen (CIO), which has been constituted under the
Insurance Ombudsman Rules, 2017.
Office of Insurance Ombudsman is an alternate Grievance Redressal platform which
has been setup with an aim to resolve grievances of aggrieved policyholders of all
personal lines of insurance, group insurance policies, policies issued to sole
proprietorship and micro enterprises, against Insurance Companies and their agents
and intermediaries in a cost-effective and impartial manner.
There are 17 Ombudsman Centres, covering the country, situated in Ahmedabad,
Bengaluru, Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi, Guwahati,
Hyderabad, Jaipur, Kochi, Kolkata, Lucknow, Mumbai, Noida, Pune and Patna.
The Insurance Ombudsmen are appointed by the Council for Insurance
Ombudsmen in terms of Insurance Ombudsman Rules, 2017 (as amended from
time to time) and empowered to receive and consider complaints alleging deficiency
in performance required of an insurer (including its agents and intermediaries) or an
insurance broker, on any of the following grounds:
 Delay in settlement of claims.
 Any partial or total repudiation of claims by the life insurer, general insurer or
health insurer.
 Disputes over premium paid or payable in terms of insurance policy.
 Misrepresentation of policy terms and conditions at any time in the policy
document or policy contract.
 Legal construction of insurance policies in so far as the dispute relates to claim.
 Policy servicing related grievances against insurers and their agents and
intermediaries.
 Issuance of life insurance policy, general insurance policy including health
insurance policy which is not in conformity with the proposal form submitted by
the proposer.
 Non-issuance of insurance policy after receipt of premium in life insurance and
general insurance including health insurance.
 Any other matter arising from non-observance of or non-adherence to the
provisions of any regulations made by the Authority (IRDAI) with regard to
protection of policyholders’ interests or regulations, instructions or guidelines
issued by the IRDAI or of the of the terms and conditions of the policy contract,
insofar as such matter relates to issues referred to the above clauses.
18
IRDA Regulation 2000

Introduction

IRDA Full Form

Insurance Regulatory and Development Authority of India, commonly known as,
IRDA, is the supreme authority that authorizes the insurance business in India. It
was established by the Insurance Regulatory and Development Authority of India
Act, 1999 after the declaration made by the former President of India, Pranab
Mukherjee, on Insurance Laws (Amendment) Ordinance of 2014. 

Establishment of IRDA
The Insurance Regulatory and Development Authority of India was established on
the recommendations made by the Malhotra Committee in its report. This committee
was headed by Mr. R.N. Malhotra (retired Governor of the Reserve Bank of India). It
was finally set up at New Delhi on April 2000, but later on, it was shifted to
Hyderabad, Telangana in 2001. The main recommendation made by this committee
was to allow the entrance of private sector companies and foreign promoters and
independent regulatory authority for the Insurance sector in India.

Objectives of IRDA
Following are the objectives of the IRDA:

 To carry forward the interests of the policyholders.

 To uphold the development of the Insurance industry.
 To ensure speedy resolution of claims.
 To prevent frauds and malpractices.
 To ensure fair conduct on the part of the financial market and transparency
when dealing with insurance. 

Composition of IRDA
According to Section 4 of the Insurance Regulatory and Development of Authority
Act, 1999, the members of the Authority will consist of the following :

 a chairman
 not more than five full-time members
 not more than four-part time members

19
And together they are supposed to work as a team, work cooperatively and not
individually.
These members are to be appointed by the Government of India from amongst the
persons exhibiting qualities that would be useful to the Authority like, exceptional
knowledge in the field of life insurance, financial markets, economics, law,
accountancy, general insurance. They should have good experience in these fields,
too. Though, the chairman and each of the five full-time members are expected to
have knowledge and experience in life insurance, general insurance, or actuarial
science respectively. The current chairman of the Authority is Subhash Chandra
Khuntia. He was appointed in 2018.
It has the right to sue the other party on its name. It can also be sued in its name.
Also, if any of the members dies or resigns, the Authority will continue to work.

Powers of IRDA / IRDA Functions

As per Section 14 of the Insurance Regulatory and Development of Authority Act,
1999 the Authority has to ensure the regulation, development and promotion of the
insurance business and reinsurance business. Following are the other powers,
duties and functions of the Authority:

 To avail the applicant a certificate of registration, renewal, modification,

withdrawal, suspension or cancellation of such registration.
 To protect the interests of the policy holders in cases related to assigning
and nomination of policy holders, understanding of insurance claims,
insurable interests, surrendering of the value of the policy and other terms
and conditions of the insurance contract.
 To specify the necessary qualifications, code of conduct and practical
training for intermediary or insurance intermediaries and agents.
 Explaining the required code of conduct to the surveyors and loss
assessors.
 To ensure that the proficiency and efficiency of the conduct of the business
of insurance.
 To encourage and regulate the relationship between the professional
organisations and the insurance and reinsurance businesses. 
 To levy charge to carry out the purpose of the Act.
 To call for the information, undertaking an inspection of, conducting
enquiries and investigations including the audit of insurers, intermediaries,
insurance intermediaries and other organisations connected with the
insurance business.
 To control and regulate the rates, benefits, terms and conditions which are
offered to the insurer in respect of general insurance business that is not
controlled and regulated by the Tariff Advisory Committee under Section
64U of the Insurance Act of 1938 (4 of 1938).
 To specify the manner in which the books are to be maintained and the way
in which the statement of accounts shall be rendered by insurers and other
insurance companies.

20
  To maintain the investment funds by the insurance companies.
 To regulate the maintenance of margin solvency.
 Deciding the disputes between the insurers and the intermediaries of
insurance intermediaries.
 Administering the functioning of the Tariff Advisory Committee. 
 To set down the percentage premium income of the insurer of finance
schemes for promoting and regulating the professional organisations.
 To protect the interests of the policyholders in cases related to assigning
and nomination of policyholders.
 To set out the percentage of life insurance business and general insurance
business to be taken forward by the insurer in the rural or social sector.
 Exercising other powers as may be prescribed.

IRDA Regulations 
According to section 26 of the Insurance Regulatory and Development Authority of
India Act, 1999, the Authority after consulting the Insurance Advisory Committee can
introduce some new regulations under the Act which will help in achieving the
objectives of the Act. The Authority make regulations in the following matters:

1. The time and place of the meetings and the manner in which they are to be
held.
2. In the provisions mentioned in section 10(4) of the Act.
3. The conditions of service of officers and other employees.
4. The powers entrusted in the hands of the committees of the members under
section 23(2).
5. In any other matter that requires new rules. 

Conclusion 
Insurance is an important aspect of the economy which requires changes from time
to time according to the needs of the people. An individual should be aware of the
opportunities that are available to him in the form of health and life insurances. The
Insurance Regulatory and Development Authority of India plays a significant role in
ensuring that the interests of the policyholders remain secured. Though competition
has increased with necessary changes, the objectives of the insurers and
policyholders can be achieved. 

Insurance Regulatory and Development Authority of India (IRDA) Act, 1999

Some of the important provisions of the Insurance Regulatory and Development
Authority of India Act, 1999 are as follows:

 Section 5 – Tenure of office of chairperson and the other members.

The Chairperson and all the whole- time members shall remain in office for a term of
five years from the date on which they first entered their office. Also, they will be
21
eligible for re-appointment. The Chairperson can not remain in the office after they
have attained the age of sixty-five years and the whole-time members shall not hold
the office once they have the age of sixty-two years. The part-time members can
hold their position for a term not more than five years from the date on which he
entered his office.

Section 6 – Removal from office.

Any member of the Authority can be removed from his office if:

1. He has been declared as insolvent.

2. He has lost his ability to work mentally or physically.
3. He has committed any offence which in Central Government’s opinion
involves moral turpitude.
4. He has developed any financial interest which in turn will jeopardize his
position in the office.
5. He has used his position in such a way that it is no longer in the interest of
the public.
Though the removal of a member under the 4th and 5th point mentioned above
cannot be done unless the accused person has been given an opportunity to explain
his conduct.

 Section 9 – Administrative powers of the Chairperson.

The Chairperson will have the powers related to general superintendence and
direction in respect of all the administrative matters of the Authority.

 Section 13 – Transfer of assets, liabilities, etc., of Interim Insurance

Regulatory Authority  
On the appointed day:

1. All the assets and the liabilities of the Insurance Regulatory Authority will be
transferred to the Authority. The assets of the Interim Insurance Regulatory
Authority will include assets like movable and immovable property, rights
and powers, cash balances, deposits, interests that arises out of the
property possessed by the Interim Insurance Regulatory Authority, and all
the books and documents. The liabilities in such cases will include all kinds
of debts and any kind of liability.
2. Irrespective of the fact mentioned in the above point, all the activities that
involved the participation of the Interim Insurance Regulatory Authority and
were related to the Insurance Authority will be deemed as having been
constituted and engaged by the Authority.
3. All the amount of money that was due to the Interim Insurance Regulatory
Authority exactly before such an appointed day will be presumed to be due
to the Authority.
4. All those legal proceedings (either by or against the Interim Insurance
Regulatory Authority) that were supposed to be constituted before that day
will be continued or constituted by or against the Authority.
22
  Section 16 – Constitution of Funds.
According to this provision, a fund will be constituted which will be known as ‘the
Insurance Regulatory and Development Authority of India Fund’. This fund will be
credited to:

1. All the government grants, fees that the Authority receives.

2. The amount received by the Authority from the sources agreed by the
Government.
3. The percentage of the minimum premium income that the insurers receive.
The fund constituted will be used for meeting the salaries, allowances, and
remuneration of all the members of the Authority and also, to meet the expenses
incurred by the Authority to fulfil its daily functions.

 Section 17 – Accounts and Audit.

1. The Authority will have to maintain accounts and annual statements in

accordance with the guidelines prescribed by the Government. 
2. The accounts and the annual statements of the Authority will be maintained
by the Comptroller and Auditor General of India. If any expense is incurred
by the Comptroller and Auditor General in maintaining such accounts then,
the Authority will have to pay the Comptroller and Auditor General. 
3. Any person appointed by the Comptroller and Auditor General of India
concerning the maintenance of the accounts and annual statements of the
Authority will have the same rights and privileges as that of the Comptroller
and Auditor General. These rights include the right to demand the
production of books of accounts, connected vouchers, and other relevant
documents and papers.
4. The audit report prepared by the Comptroller and Auditor General of India
and the other person appointed by him will be forwarded annually to the
Central Government. The Government, in turn, will present it before each
House of the Parliament. 

 Section 18 – Powers of the Central Government to issue Directions.

The Central Government can issue directions to the Insurance Regulatory Authority
on matters related to questions of policy. Such directions will bind the Authority to
act according to the Government’s directions. But, all this will happen only when the
Authority will also be given the chance to present its views before the Government
before the directions are issued. 
Whether a question is one of the policies or not, will be decided by the Central
Government.

 Section 19 – Powers of Central Government to supersede the Authority.

In case of any fault on the part of the Authority, the Government has the right to
intervene in the matter. If not satisfied by the functioning of the Authority the
Government will appoint a person to act as the Controller of Insurance under section
2B of the Insurance Act, 1938 (Act 4 of 1938). But before appointing Controller of
23
Insurance the government will have a reasonable amount of time to the Authority to
make corrections in its functioning. 
But first, the Government will issue a notification of superseding the Authority.
Though the Government can only supersede for a period specified in the notification
and this period shall not be more than six months. 

1. If the Central Government realises that the Authority is not able to discharge
its functions properly like it was supposed to perform. 
2. If because of the functioning of the Authority the financial condition or the
administration of the Authority has suffered. 
3. If the circumstances are such that it becomes necessary for the
Government to intervene to ensure public interest.

 Section 20 – Furnishing of Returns, etc. to the Central government.

1. The Authority will have to furnish all those documents, returns, statements
and other particulars that the Government demands from the Authority. 
2. The Authority will  provide the Government a report consisting of all the
activities it performs, expenses incurred, assets formed, cash generated,
promotion and development of the insurance business during the previous
financial year. The accounts should be correct. This report is to be
submitted within nine months after the close of every financial year. 
3. The copies of the report submitted by the Authority to the Government will
have to present before each House of the Parliament by the Government. 

 Section 22 – Protection of Action taken in Good Faith.

If any action is taken by the Authority or the Central Government in good faith under
the provisions of the Act, then, no suit can be filed against them. But if any step is
taken which is not in accordance with the provisions of the Act, and is against some
person, then, the person has the right to file a suit against the Authority or the
Central Government. 

 Section 24 – Power to make rules.

This provision entitles the Central government to make rules regarding the
provisions of the Act. These provisions include salaries and allowances payable to
the members of the Authority, the format of the annual statements accounts
prepared by the Authority, powers that may be exercised by the Authority in
accordance with Section 7(2) of the Act, etc. 

Role of IRDA
The role of IRDA includes:

 To ensure interests and fair treatment to the insurance policy holders.

 To ensure the development of the insurance industry or sector and to impart
benefits to people and long-term funds to increase the growth of the
economy.
24
  To promote and apply high standards of integrity, fair dealing, the ability of
all those companies that it administers.
 To ensure clarity and accuracy while contracting with the insurance
policyholders. The Authority has to ensure that true information has been
rendered regarding products and services. Also, to make policyholders
aware of the different plans and policies that are being implemented by the
Insurance sector.
 To provide speedy trials in case of disputes and to prevent fraud or any
other misconduct.
 To initiate new standards where they are needed or where there is lack of
such standards.
 To promote self-regulation in daily activities with the necessary regulations

Redressal of grievances by IRDAI

Grievance Cell
 Cell for redressal of grievances of Policyholders
The Grievance Redressal Cell in the Consumer Affairs Department of the
Insurance Regulatory and Development Authority of India looks into
complaints/grievances from policyholders. This Cell takes up the grievances with
the respective insurers for redressal.
Policyholders who have complaints against insurers are required to first approach
the Complaints/Grievance Redressal Cell of the insurer concerned. Click here for
the mail ids of the Grievance Redressal Officers of the insurers. If they do not
receive a response from the insurer within a reasonable period of time or are
dissatisfied with the response of the company, they may approach the Grievance
Redressal Cell in the Consumer Affairs Department of the IRDAI. 
Only complaints from the insured or the claimants shall be entertained. The Cell
shall not entertain complaints written on behalf of policyholders by advocates or
agents or by any third parties.
Complainants are requested to submit complete details of the complaint as
required in the complaint registration form put on the IRDAI website –
policyholder.gov.in (http://www.policyholder.gov.in/Report.aspx#). Click here to
download the Complaint Registration Form. Without the required information called
for in the Complaint Registration Form, IRDAI will not be in a position to register the
complaint.
Registration of Complaints with the IRDAI by Policyholders:
1.       Can make use of the Bima Bharosa -   Portal
at https://bimabharosa.irdai.gov.in for registering the complaints themselves and to
monitor the status of the complaints.
2.       Can send the complaint through Email 4.       Apart from the above options, if it
is felt necessary by the complainant to send the  communication in physical form,
25
the same may be sent to IRDAI addressed to:

UNIT III
Special doctrines relating to insurance
Doctrine of reinstatement
Reinstatement of any property generally means replacement of what is lost or
repairing the damaged property by bringing it to its original value and usefulness. In
case of total destruction of an asset, the company generally replace the same with
new assets or if possible, repair the old one to bring it at the same conditions or
positions that it never damaged. In case when assets under damage have been
covered with an insurance policy then insurer try to repair damaged assets to bring
them in their condition before the peril or risk.
The term “reinstate”, in a Fire Insurance Policy refers to buildings and the terms
“replace”, refers to goods which have been completely destroyed. But we generally
use term “restoration “which has combined effect of “reinstatement “as well as
“replacement”.
Normally insurer indemnify the insured of the loss suffered by him, but the insurer
with the consent of the insured can take recourse to reinstatement.
Leppard Vs. Express Insurance Co. it was held that the assured has not right to
compel the insurer to reinstate nor does the insurer has a right to compel insured to
apply the amount of indemnification flowing from the insurance policy to
reinstatement. Generally, an insurer discharges its liability as;
1. Compensate the insured by payment of damages for his loss;
2. Restore the subject matter of insurance to its earlier conditions. In both way an
insurer will discharge its liabilities and in case of fire policy there is a condition on
due to which an insurer has right to repair the subject matter and brought the
property to its conditions before fire.
Anderson Vs. Commercial Union Assurance Company the reinstatement has been
defined as “the restoring of the property insured to the conditions in which it was
immediately before the fire , in case of total loss by rebuilding the premises or
replacing the goods by an equivalent , as the case may be , and in the case of
partial loss by executing the necessary repair.”
Note: if it is specifically mentioned in the insurance policy then only an insured can
demand reinstatement or otherwise the insurer is only liable ton indemnify in money
only. In case of insurer also, it cannot force for reinstatement, if the terms of
insurance policy provide other method of indemnification.
Once the insurance money has been paid to the insured, he cannot be compelled to
spend the some received on reinstatement of property damaged or subject matter of
26
insurance, except as required under section 76(f) of the Transfer of Property Act,
1882.
The insurer can insist on the right of reinstatement only under any of the below
mentioned conditions;
1. Where the reinstatement is one of the conditions of the policy;
2. Where it is suspected that the loss is caused by the wilful or fraudulent acts of the
assured;
3. Where they are bound to reinstate as a request from any person other than
assured, who is interested in the subject matter of the insurance.

The policy of insurance generally gives the insurers an option of reinstating the
property damaged or destroyed instead of making a payment in money. This clause
enables the right of an insurer to reinstate the property in lieu of payment of money.
But there are some cases in which the cost of reinstatement may increase sum
insured. The main purpose of a fire policy is indemnification of insured against loss
suffered in the peril and payment of money. The reinstatement clause in the fire
policies are included for the benefit of insurance companies and this clause does not
change the nature of fire policy.
Note: if an insurer does elect to reinstate and a fire occurs during reinstatement, it
would seem that the company are their own insurers till the reinstatement is
complete and must commence reinstating de-novo and cannot charge the assured
with the cost of second fire.
Conclusion: from above we find out that in case of a fire insurance they are two
options with an insurance company, i.e. payment of amount of claim in money or
reinstate the property destroyed. The insurance companies for their benefit put
reinstatement clause in policy document, but true nature of fire policy is to indemnify
the insured by way of money against damage or loss of subject matter of insurance.
In many cases the reinstatement value increases the sum insured and insurers are
liable to pay damages. Thus is in the betterment of insurance companies to
determined best options for themselves ,while choosing right mote of discharging
their liability.

Doctrine of Subrogation: Meaning, Case laws and Provisions

Subrogation can be defined as a legal doctrine in which one person takes away the
rights of a creditor against his debtor. In India, the right of Subrogation has been
discussed under section 140 and 141 of the Indian Contract Act, 1872.

Definition of Doctrine of Subrogation

Subrogation can be defined as a legal doctrine in which one person takes away the
rights of a creditor against his or her debtor. The right of subrogation usually arises
in 2 conditions that is, either it will arise automatically because of matter of fact or it

27
will arise due to the law of contract. Most often the doctrine of subrogation arises in
contract which is related to insurance. Subrogation as a matter of law is a wider part
of law and is usually denoted as the unjust enrichment.[1]

Importance
Doctrine of subrogation is most commonly seen in the contracts of insurances and
sureties. So in each case, the main essence is that, when a particular person makes
a payment on an obligation then according to the law it is the prime responsibility of
the other party, the person who is making the payment is subrogated to the claims
of that particular person to whom they made the payment with respect to claims or
remedies which are exercisable against the primarily responsible party.[2] The term
subrogation has been derived from the Latin word sub (under) and rogare (to
ask).
In the case of, Morgan v Seymore, it was held that a surety who has performed the
obligations of the principal which are the subject of his guarantee is entitled to stand
in the shoes of the creditor and to enjoy all the rights that the creditor had against
the principal. Hence, this is an equitable right. It is in fact a right that arises out of the
relationship between of surety and creditor itself.
The doctrine of subrogation confers upon the insurer the right to benefit of such
rights against the third parties which is regard to the loss and which has been
indemnified. Thus, the insurer is entitled to exercise any rights so as to recover the
compensation for the loss, but one thing has to be remembered that, it must be
done in the name if the assured. So, under the Law of Contracts, the right of
subrogation arises when a contract puts an obligation on the person who breaches
the contract to compensate to the other person who has been aggrieved by the
breach of contract.
In India, the right of Subrogation has been discussed under section 140 and 141 of
the Indian Contract Act, 1872. In the case of, State Bank of India v Fravina Dyes[3],
High court of Bombay held that, the guarantor by invoking the doctrine of
subrogation can apply for a temporary injunction against the debtor if he apprehends
that the debtor threatens or is about to remove or dispose of his property with intent
to defraud the creditor.
Whereas, Section 141 of The Indian Contract, 1872 talks about the surety’s right to
benefit out of creditor’s security. In the case of State of M.P v Kaluram[4], Supreme
Court held that, the term ‘security’ in Section 141 of the Indian Contracts, 1872 is not
used in any technical sense, in fact it includes all the rights which the creditor had
against the property of the principal at the date of contract.

Conclusion
In all, while considering the applicability of the equitable principles of subrogation, it
is critical to look carefully at the manner in which the insured party is reimbursed for
the loss suffered. The existence or otherwise of rights of subrogation may
significantly affect the profile of a given exposure, particularly in relation to large and
complex risks involving multiple insured. The party taking control of proceedings
after a loss has occurred has to take care in respect of any settlement and to ensure

28
that it complies with its duty of good faith. The settlement will need to be consistent
with legal advice so as to the merits of the overall claim.
Where a subrogated claim includes losses, which are not covered under the policy,
there remains some uncertainty as to who is entitled to control the proceedings and
is in how the proceeds of any recovery should be distributed between them. The
rights provided by the law states that, all the securities to the surety so that they can
get their claim in full amount.

Doctrine of Contribution
Contribution means providing money for the common fund.
The doctrine of contribution is predicated on the principle of equity.
If several properties belonging to many persons are mortgaged to secure a debt
because of taking of a loan, the law says that every property should contribute
towards the debt in proportion to its value.
Section 82 of Transfer of Property Act, 1882 (Contribution to mortgage- debt)
Where property subject to a mortgage belongs to two or more persons having
distinct and separate rights of ownership therein, the different shares in or parts of
such property owned by such persons are, in the absence of a contract to the
contrary, liable to contribute rate ably to the debt secured by the mortgage, and, for
the purpose of determining the rate at which each such share or part shall
contribute, the value thereof shall be deemed to be its value at the date of the
mortgage after deduction of the amount of any other mortgage or change to which it
may have been subject on that date.
Where, of two properties belonging to the same owner, one is mortgaged to secure
one debt and then both are mortgaged to secure another debt, and the former debt
is paid out of the former property, each property is, in the absence of a contact to
the contrary, liable to contribute rate ably to the latter debt from the value of the
property out of which it has been paid.
Nothing in this section applies to a property liable under section 81 to the claim of
the subsequent lender.
COMMENT
This section deals with the foundation regarding the contribution of funds. It is a right
of someone who has discharged a common liability to recover proportionate share
from others.
Rules of Contribution
 The mortgaged property belongs to two or more persons.
 First the property is mortgaged and then again mortgaged with another
property.
 Marshalling takes place of contribution.
CASES
Bohra Thakur Das v. Collector of Aligarh
In this case the borrower mortgaged the village of Kachaura to at last one, Nand
Kishor. He again mortgaged villages, Kachaura and Agrana, to Nand Kishore. The
plaintiffs purchased the equity of redemption from Agrana. The primary lender
29
purchased Kachaura by a decree. The plaintiffs sued and contended that he first
lender were susceptible to pay the proportionate share of the debt for redemption of
the second mortgage.
The court held that the full of Kachaura was swallowed up by the primary mortgage
by the decree; the complete burden of the second mortgage fell entirely on Agrana.
The Privy Council, in appeal, overruled the decision of the court and held that the
first mortgages would have to contribute to the second mortgage, as they purchased
Kachaura.

SUBROGATION vs CONTRIBUTION – WHAT’S THE DIFF.

PUBLISHED ON JUN 28, 2016

Ever wondered about the difference between rights of subrogation and rights of
contribution?
It really comes down to who is prepared to share the cost of the exposure. As dry as
the topic can be, the difference is becoming critical in contracts that require you to
have certain clauses in your insurance policies.
Consider this. A contract requires your client’s insurer to waive their rights of
subrogation. A claim occurs. The other party to the contract tried to assert that your
client’s insurer can’t seek contribution from their insurer because of the waiver of
subrogation.
Wrong! They’ve thought ‘subrogation’ and ‘contribution ‘are the same when they’re
actually two completely different legal rights!
Subrogation
An insurer’s ‘right of subrogation’ arises when they insure a person for an insured
loss and that person has a legal right to make a recovery against a third party who
has caused or contributed to the insured loss.
A simple example is motor vehicle insurance. Where an accident is caused by the
fault of another driver and the vehicle owner’s insurer agrees to pay for the repair,
the insurer can recover the repair cost from the ‘at fault’ driver. However the
insurer’s ability to recover depends on the owner’s legal rights – if the owner had
already released the at fault driver from liability, they have no legal rights, so the
insurer also has no right.
This is why insurers don’t like it when an insured agrees to ‘hold harmless’! clause in
a contract
Contribution
Insurer’s ‘rights of contribution’ are completely different – this is the insurer’s own
legal right, under the Insurance Contracts Act. It doesn’t depend on the insured’s
rights. It exists where two (or more) insurance policies cover the same loss. The
insurer who pays the claim can require the other insurer(s) to contribute. That’s why
insurers will not usually waive their right of contribution or treat their policy as
“primary” to another policy.

30
Waivers of subrogation are useful to protect someone from legal action brought by
an insurer but they don’t enable their insurer to avoid claims for contribution by other
insurers.
What is a Proximate Cause?
The term proximate cause refers to the nearest cause leading to the loss. It is the
direct cause of a loss event. The principle of proximate cause is the cause that is
primary to the occurred event. It could also be the most significant incident which
cascades into the loss event.
The insurer will entertain the claim only if this significant cause is close enough to
the loss.

Proximate Cause Principle of Insurance

Proximate cause is concerned with how the actual loss or damage happened to the
insured party and whether it resulted from an insured peril. It looks for is the reason
behind the loss; it is an insured peril or not. The doctrine of proximate cause is one
of the six principles of insurance.

The principle of proximate cause virtually revolves around the claims administration
and, more precisely, diagnosing the playability or otherwise of a claim on the
question of perils covered by a policy.

A policy may cover certain perils mentioned specifically therein (known as insured
perils), whilst some perils may be specifically excluded (known as excepted perils),
and some may still be neither included nor excluded (known as uninsured perils).

It is not always that straightforward that a loss would be caused by a singular

insured or uninsured or an excepted peril so that a claim would be either payable or
not payable.

Difficult situations occur where numbers of perils get involved simultaneously, some
insured, some uninsured, and some still accepted.

More so, the position gets further complicated when an excepted peril follows up an
insured peril, or an excepted peril is followed up by an insured peril, simultaneously
getting mixed up by uninsured perils.

The principle of proximate cause has been established to solve such a cumbersome
situation and to enable a claims manager to decide whether a claim is at all payable
or not and, if payable, then to what extent.

Rule of Proximate Cause

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Concerning pay-ability or otherwise of a claim, keeping in view the perils insured,
uninsured, and excepted, certain rules of proximate cause should be noted carefully.

These are;

1. Single Cause: When a single cause gives rise to a claim, the issue is simple.
If the cause is an insured one, the claim is payable. If the cause is uninsured
or excepted, the claim is not payable.
2. Concurrent Causes: It becomes a difficult proposition when a loss is caused
by the operation of many perils, some insured, some uninsured, and some
excepted. If no excepted peril is involved, then provided that there is at least
one insured peril involved, the claim becomes payable by disregarding others.
However, suppose excepted peril is involved with insured peril. In that case, if
the effects of excepted peril can be separated from that of the insured peril,
there is a liability for the loss caused by the insured peril. But, on the other
hand, if it cannot be so separated, there is no liability whatsoever.
3. Unbroken Sequence: If an insured peril follows excepted peril, there is no
claim. If, on the other hand, an insured peril is followed by an excepted peril,
there is a claim for the loss caused by the insured peril. When several events
occur in an unbroken sequence than provided, there is no excepted peril
involved, and the whole claim is payable only if an insured peril is involved.
4. Broken Sequence: If an insured peril follows excepted peril as a new and
independent cause, then there is a liability for the loss caused by the insured
peril. If, on the other hand, an insured peril is followed by an excepted peril as
a new and independent cause, there is also a liability for the loss caused by
the insured peril.
Proximate Cause Examples

It is only by considering some propositions and examples that the proximate cause
doctrine can best be understood.

A man goes to a late-night cinema, and whilst returning home from the show, he is
attacked by a group of vandals, stabbed, and killed.

The proximate cause of his death is stabbing and certainly not going to the cinema,
although it may be wrongly argued that has he not had gone to the cinema, he
would not have met the vandals and got killed in this way.

Here, going to the cinema may be simply a remote cause without proximately
causing his death.

What is Marine Insurance?

Marine insurance refers to a contract of indemnity. It is an assurance that the goods
dispatched from the country of origin to the land of destination are insured. Marine
insurance covers the loss/damage of ships, cargo, terminals, and includes any other
32
means of transport by which goods are transferred, acquired, or held between the
points of origin and the final destination.
The term originated when parties began to ship goods via sea. Despite what the
name implies, marine insurance applies to all modes of transportation of goods. For
instance, when goods are shipped by air, the insurance is known as the contract of
marine cargo insurance.

Nature of Insurance Contract in Marine

Important Features of Marine Insurance Contract

Introduction
Marine Insurance Contract means an agreement where insurer undertakes to pay to
the assured in the manner as agreed between them for the damages occurred
during the marine journey. It also includes the incident in which the losses are
occurred in inland waters and also on land risk which may be assumed as sea
voyage.
The features of Marine Insurance Contract are as follows:-

Insurable Interest
For effecting marine insurance like any other insurance, the assured must have an
insurable interest. If there is no such interest, the policy would be a wagering
contract and thus it will be void.  Any person does have an insurable interest who is
interested in a marine journey or who can get affected due to the losses and
damages caused in the marine journey or adventure. The interest must subsist
either at the time of effecting the insurance or at the time of loss. Any interest which
is defeasible or contingent or partial can be insured. A lender under a bottomry bond
or respondentia bond has insurable interest as well as master’s and seamen’s
wages, advance freight are insurable, a mortgagee has also insurable interest.

Proposal and Acceptance

A contract of insurance becomes concluded when there is a proposal to the assured
and as insurer accepts the contract, irrespective of issue of policy. Though a
contract is concluded without issue of policy but it cannot be treated as an evidence
if marine policy is not issued with respect to the contract. The policy must specify

1. Name of the assured or of some person who effects the insurance on his
behalf
2. Subject matter insured and the risk insured against
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 3. Voyage or term of policy or both agreed by the parties
4. Sum assured e. Name of the Insurer.

Consideration
Here the premium is called Consideration which is captured in the contract and is
computed on the basis of assessment of proposal form and is paid at the time of
executing the contract.

Issuance of Policy
Policy can be considered as effective legal evidence in a court of law when it is
prepared, stamped and signed and finally issued to the assured party. Although the
policy is issued it can be rectified by the order of court to express the intention of
parties stated in the contract.

Floating
Marine insurance contract can be a floating policy which means where a policy
through which insurance only mentions the general terms and names of the ships
are left out and other details to be defined by subsequent declaration to be made by
endorsement on the policy or otherwise.

Assignment
It can be transferred by assignment unless there is a term prohibiting transfer and it
can be assigned before or after loss. Assignment can be effected through a
customary manner or any other manner as agreed between the parties. The party
cannot assign the policy after losing interest in the subject matter.

Doctrine of subrogation
This doctrine means that the assured shall not get more amount than the actual loss
or damage caused. The insurer has the right to receive compensation from the third
party from whom he is actually liable to receive the amount after the payment of the
loss/damage amount. In marine insurance the right of subrogation arises only after
the payment. The assured shall assist the insurer in every possible manner to
receive money from the third party.

Utmost good faith

The doctrine of utmost good faith is covered in section 19, 20, 21 and 22 of the
Marine Insurance Act 1963. Contracts regarding insurances are based on the
principle of uberrimae fides which means utmost good faith. If any party to the
contract fails to comply with this principle then contract can be avoided by the other
party.

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Doctrine of Indemnity
Marine insurance is an indemnity policy under which an insurer agrees to
compensate for losses or damages in consideration of the timely payment of
premium. The contract of marine insurance shall cover the clause for indemnity as in
no case Assured shall be allowed to make profits out of claim amount. There is a
possibility of making profits by the party in the absence of indemnity clause in the
marine insurance contract.
The insurer agrees to indemnify the assured only to the extent agreed upon. Marine
insurance contract does not often includes complete indemnity due to
. However Indemnity clause has exceptions which are as follows:

1. Profits Allowed
The market value of the loss should be indemnified and no profit is allowed in
general commercial contracts, but in marine insurance contract a certain profit
margin is also allowed as covered in the Marine Insurance Act.

2. Insured Value
The doctrine of indemnity covers the insurable value, wherein the marine insurance
covers insured value. The purpose of the valuation is to determine the value of
insured in advance.

Warranties
A warranty means that assured shall abide by and shall fulfill certain condition as
covered in contract. If in case any of the warranty is breached, contract shall stand
terminated.
Warranties are of two types: Express Warranties, and Implied Warranties.

1. Express Warranties: It is expressly included in the Marine insurance

contract.
2. Implied Warranties: It is not covered in the contract but it is assumed to be
binding on the parties.
3. Seaworthiness of Ship – Ship should be seaworthy at the time of the
journey of the ship begins, or if the voyage takes place in stages, during the
beginning of each stage. Seaworthiness is not calculated on the basis of
physical condition of ship, but it is calculated on many other important
aspects which includes the suitability and adequacy of the parts of the ship,
experience and quality of the officers and crew. At the commencement of
the journey, the ship must be take the ordinary strain and stress of the sea
on which factors the seaworthiness is calculated and looked upon.
4. Legality of Venture; – This warranty concludes that the journey insured
shall be legal and that the assured can control the matter it shall be carried
out in a lawful manner of the country. Violation of foreign laws does not

35
 necessarily involve breach of the warranty. Implied warranty for the
nationality of a ship is not covered in the contract.

Types of Marine Insurance – based on coverage area

The coverage area of an insurance policy is the geographical area or the protected
area in which the benefits of an insurance policy apply. The following types of
marine insurance are classified, based on the coverage area of the insurance policy
–

 Hull & machinery insurance – Hull is the most noticeable part of any ship.
It is the watertight body of a ship or a boat that protects the cargo inside the
ship from being damaged. Hull and Machinery Insurance, therefore, covers
the loss or the damage caused to the body of the ship or any machinery or
equipment in it, used for the functioning of the ship. It mostly covers
accidents caused due to collisions, or the damages caused by earthquakes
and explosions. This type of insurance is generally taken by the owners of
the ship.

 Marine cargo insurance – Marine cargo insurance is a type of property

insurance that covers the cargo owners against any loss or damage caused
to their cargo during its transit. It has extensive coverage, but also has
certain limitations, for instance, the cargo owners lose their claims if the
packaging of the cargo was defective. It also comes with a third-party
liability, which covers the damages caused to the port, or a ship, or a
railway track due to the presence of defective cargo.

 Liability insurance – Liability insurance covers the financial liability of the

person who is insured. It covers primarily the liabilities which arise due to
the damages or injuries caused to the third party, for instance, the death or
personal injury caused to any third party traveling in the ship.
 Freight insurance – Freight insurance covers the liability of the shipping
company or the logistics provider for the damage or loss caused to the
shipment during transit due to events outside the control of the company.

Types of Marine Insurance policies – based on the structure of the contract

A ‘policy is a document that embodies the terms and conditions of the contract of
insurance. It essentially is a written form of agreement between the insurance
company and the person insured. It generally contains the provisions regarding the
coverage area, the limitations of insurance policies, etc. Thus the different types of
policies available under marine insurance are –

 Open policy – An open policy, also called a floating policy, provides
coverage for an indefinite number of transit journeys during the subsistence
of the policy. This is especially beneficial for the companies which are
36
 involved in high-volume trade, as they are saved from taking an insurance
policy on each transit journey. It covers all the transit journeys of the insured
until the policy is canceled or until the last of the payment is realized,
whichever is earlier.

 Voyage policy – A voyage policy works on the same lines as the marine
cargo insurance. Under this policy, the insurance company agrees to cover
the losses or damages caused to the cargo during a specific voyage. It
expires when the vessel reaches its destination, irrespective of the time it
takes to reach there. Usually, it is bought by small exporters who ship their
goods by sea only on some occasions.

 Time policy – A time policy, as the name suggests, is issued for a fixed
period of time. The vessel may make any number of voyages during this
period. Generally, the insurance company issues this policy for one year,
however, the period may vary depending on the agreement between both
parties. 

 Mixed policy – A mixed policy is a combination or a mix of voyage and time
policies. The insurance company, while issuing this policy, agrees to cover
the loss or damage to the ship for a particular voyage till a particular period
of time.

 Single vessel policy – A single vessel policy insures only a single ship of
the insured.

 Fleet policy – The person insured has an option of either insuring a single
ship by a policy, or of insuring several ships under one policy. If he chooses
the latter option, he undertakes a ‘Fleet Policy’, under which a fleet of ships
is insured under a single policy.

 Unvalued policy – Every insurance policy is either an unvalued or a valued

policy. Under an unvalued policy, the insurance company does not assign a
value to the thing insured (the vessel or the cargo), at the time of
underwriting the policy. The valuation of the property is done only after the
claim of insurance has been filed. However, for a successful claim, the true
value of the property has to be proved by the insured by way of invoices or
estimates, before the valuation.

 Valued policy – In a valued policy, the insured property is given a specific
value when the policy is issued, and before any claims are made. When the
claim is made by the insured, a pre-estimated or the specified amount is
given, which does not depend on the amount of loss incurred by the
insured. The depreciation of the property also does not affect the amount of
claim, under a valued policy. 

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  Block policy – A block policy is an all risks policy. Unless a contrary
intention is expressed by the insurer, it essentially covers all the risks to
which the goods are exposed when they are in transit, bailment, and on the
premises of the third party. There are two popular types of block policy
– furrier’s block policy, and jeweler’s block policy since fur and jewelry are
two high-value commodities that are exposed to a greater threat of theft.

 Port-risk policy – A port-risk policy covers ships that are either docked or
are undergoing repair works at the port. It is an all-risk policy that covers all
the risks unless otherwise agreed between the parties. It provides coverage
for physical damages to the vessel as well as protection and indemnity but
excludes any liability arising on account of the crew and cargo.

 Named policy – A named policy is one in which the name or names of the
ships is mentioned in the contract of insurance.
 Wager policy – A wager policy protects from loss of the property of which
the insured does not have legal proof of possession. This means, when the
insured is not able to prove an insurable interest in the property, the
insurance company may issue a wager policy to him. Under it, the whole
claim of the insured is subject to the discretion of the insurer and the merits
of the claim made. It is not a written policy as it is issued in contravention of
the law.

Conclusion
Marine insurance has always been more popular than its peers, mainly because of
the persistent and comparatively larger number of threats faced by marine transport.
With the deteriorating conditions of the environment, and an upward trend of
cyclones and hurricanes forming in seas in recent years, no one can foresee the
potential risks to marine transport. In this vast pool of uncertainties, the only
certainty cargo and ship owners have is of the compensation by way of insurance,
as the law in India mandates all the people engaged in commercial transport to buy
an insurance policy suitable to their business. Marine insurance has an impressive
array of policies, which cater to the needs of almost all of the business owners and
people associated with a particular shipment or consignment. It ensures that not
even the smallest intermediary is left with losses due to events out of their control.
However, irrespective of the benefits it provides, marine insurance is not void of
limitations, drawbacks, and loopholes. Therefore, it is always advised to the people
buying a marine insurance policy to determine their needs before they make any
agreement with the insurer.

Warranties
A warranty means that assured shall abide by and shall fulfill certain condition as
covered in contract. If in case any of the warranty is breached, contract shall stand
terminated.
Warranties are of two types: Express Warranties, and Implied Warranties.
38
 1. Express Warranties: It is expressly included in the Marine insurance contract.
2. Implied Warranties: It is not covered in the contract but it is assumed to be
binding on the parties.
3. Seaworthiness of Ship – Ship should be seaworthy at the time of the
journey of the ship begins, or if the voyage takes place in stages, during the
beginning of each stage. Seaworthiness is not calculated on the basis of
physical condition of ship, but it is calculated on many other important
aspects which includes the suitability and adequacy of the parts of the ship,
experience and quality of the officers and crew. At the commencement of
the journey, the ship must be take the ordinary strain and stress of the sea
on which factors the seaworthiness is calculated and looked upon.
4. Legality of Venture; – This warranty concludes that the journey insured
shall be legal and that the assured can control the matter it shall be carried
out in a lawful manner of the country. Violation of foreign laws does not
necessarily involve breach of the warranty. Implied warranty for the
nationality of a ship is not covered in the contract.

Marine Claims

Claim Process

After purchasing the marine insurance, in case there arises a situation when you
need to make a claim under the policy, you can follow the below mentioned steps:

 In case of loss or damage to the cargo or the ship, you need to immediately
inform the insurance provider
 A surveyor will assess the damage or loss mentioned
 All the proofs and witnesses need to be submitted along with the duly filled in
claim form
 For a missing package, the insured must lodge file a monetary claim with the
insurance provider and get an acknowledgement for it
 If the provider finds the case fit, it would approve the claim, else it would reject
it
 In case you are not satisfied with the case, you can approach the court of law

Documents Required for Claim Process

To make the claims under marine insurance and be able to reap the benefits, the
correct documents should be submitted. In case of any lapse, there is a chance of
the risk being rejected. Some of the documents are:

39
  Duly filled in claim form
 Original insurance certificate with the policy number
 Copy of Billing Lading
 Survey report or missing certificate
 Original invoice, packing list, shipping specification
 Copies of correspondence exchanged

Exclusions

Marine insurance has various kinds of coverage for the benefit of all. However, the
policy does not cover certain situations, also called exclusions. Some of these cases
are:

 Wilful, planned or intentional misconduct

 Strike, rioting, war
 Poor packaging quality of the cargo
 Delays
 General leakage or wear and tear of the cargo
 Financial distress or insolvency of the shipping line
 Removal of wreck

Voyage Policy

What Is a Voyage Policy?

A voyage policy is marine insurance coverage for risks to a ship's cargo during a
specific voyage. Unlike most insurance policies it is not time-based but expires
when the ship arrives at its destination. It covers only the cargo, not the ship that
carries it.
A voyage policy is also known as marine cargo insurance.

Understanding a Voyage Policy

Voyage policies are commonly used by exporters who need marine shipping only
occasionally or for relatively small amounts of cargo. Large exporters who ship by
sea routinely tend to prefer open cover marine insurance, which covers all cargo
shipped by the policyholder for a specified time period.
 
A voyage policy is in effect only while the ship is at sea; additional insurance is
needed to cover losses during loading and unloading of cargo.
A voyage policy covers unforeseen risks but not preventable risks. For a voyage
policy to be valid, the vessel transporting the cargo must be in good condition and
capable of making the journey, and the vessel's crew must be competent.
Voyage policies generally cover against accidental damage and collisions as well
as natural disasters. Losses due to delays may be covered as well. Voyage policies
40
 may specifically exclude losses caused by willful misconduct, ordinary leakage,
ordinary wear and tear, improper or inadequate packaging, and labor strikes. Acts
of war and terrorist activity also are usually excluded.
The policyholder may need to purchase additional insurance to cover the cargo
during the entire transport process as voyage policies typically exclude losses that
occur during the loading and unloading of the cargo.
KEY TAKEAWAYS

 A voyage policy, or marine cargo insurance, covers losses incurred to a ship's

contents during a journey.
 A voyage policy is used mainly by exporters who need to ship only
occasionally or only in small amounts of cargo.
 Exporters who ship routinely generally use open cover marine insurance.
The policy is in place for the duration of the voyage, however long it takes. If there
are unanticipated delays en route, the coverage remains in place. This allows for
factors such as inclement weather at sea or a shortage of docking at the destination
port.
Because each policy is specific to a particular cargo and voyage, all details of both
are recorded in the policy contract.

MARINE ADVENTURE (Voyage):
It is an adventure in which:
 Any property that is insured (Ship, Goods or Cargo) is exposed to maritime
perils (Risks).
 Any earnings or acquisitions of freight, commissions, profits, financial benefits,
any security on advances, loans, disbursements etc. are endangered by
exposure of the insured property to maritime perils. Ex: Bottomry Bond,
Respondentia Bond.
 Any liability to third party, which may be incurred by the owner, or any person
responsible for the insured property is exposed to maritime perils.
MARITIME PERILS
Maritime Perils means the perils or dangers incidental to the navigation of the ship
at sea. This Includes
 Perils of the sea (Act of winds, waves and other forces of nature)
 Fire
 Act of war
 Act of public enemies
 Act of God/Vis Major/Force Majeure/ Force Major
 Piracy
 Robbery, theft or pilferage
 Capture by alien enemy
 Restraint of princes, detainment by rulers and government of people
 Jettison
 Any other perils similar to one at the land.
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LOSSES COVERED BY PERILS OF SEA are:
 Loss of cargo caused by vessel striking upon a submerged rock or wreck
 Loss due to fouling or collision
 Loss brought about by ship’s crew by negligence so long is not willful
 Loss or damage to grains due to ingress of moisture when the ship sails
through rough weather.
 Loss or damage to grains by heating of compartments when the ship sails
through rough weather and the ventilations of the compartments are closed.
 Damage of cargo caused by entrance of seawater through rat holes.
 
LOSSES NOT COVERED BY PERILS OF SEA are :
 Loss or damage of cargo due to chemical reaction with seawater.
 Action of worms on Timbers/Woods etc.
 Death of cattle carried as cargo due to shortage of fodder on elongation of
ship’s voyage.
.

loss and abandonment

Introduction
Sections 55 to 66 of the Marine Insurance Act, 1963 (hereinafter referred to as MIA)
enshrine the principles related to loss and abandonment as applicable to marine
insurances. 

Section 55 makes it clear at the offset that only those losses that have a reasonable
proximate relation with the perils the insurer(s) has insured against could the
assured person claim indemnification. Thus, Section 55, by making a demarcation
between the losses that could be indemnified and those that cannot, effectively
excludes certain losses from the ambit of insurance. Further, it also places, unless
they are specifically included in any insurance policy, a general exclusion on the
following losses-

1. Any loss that takes place owing to negligence or any intentional mis-
conduct on the part of the assured. However, as an exception, the
aforementioned would not be excluded, except if the policy so mandates,
from the ambit of insurance when such negligent loss has been caused
owing to a peril the assured was insured against.
2. Any loss, except if the policy so mandates, that is caused to the assured
due to any delay even if the same has been caused by a maritime peril.

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 3. The general rule is that the assured does not have the right to seek
indemnification from the insured if any damage to the ship or the cargo that
has taken place does not have a proximate relationship with the peril the
assured was insured against. Similarly, damage caused due to gradual
wear and tear of the ship or any other insured object, or its ordinary leaking
and breaking, or owing to its innate flaw, or by rodents is not qualified for
insurance, except if the policy so mandates.
The aforementioned raises questions about the scope of the term “proximate cause”
as it is fundamental to the inclusion or exclusions of the losses from the purview of
insurance. The High Court of Calcutta relied upon a series of judgments to elucidate
its understanding of the said term in the 1972 case of A. Akooji Jadwat Pvt. Ltd. vs
Oriental Fire & General Insurance Co Ltd.

Facts of the case

The ship of the assured that was insured against the peril of detention, capture,
arrest, etc. during wartime was captured by Pakistan during the 1965 Indo-Pak
skirmish. The insurer refused to indemnify the assured stating that Pakistan had not
declared any war on India and, therefore, the said clash was an informal war and
such wars were not covered under their insurance policy.

The ruling of the Court

The HC ruled that the insurers could not take the aforementioned excuse to free
themselves of their liability. Any hostility on the part of an enemy state will be
covered under the policy of the defendant insurers.
The HC reflected upon the extent of the term “proximate cause” and held that any
loss which occurs to which the peril insured against was the direct cause or that the
peril had a predominating and efficient effect on it could be said to be proximately
caused by the said peril. 
In the case of Canada Rice Mills Ltd. V/s Union Marine & General Insurance Co
Ltd, a ship was transporting rice and owing to the severe weather, the assured shut
down all the ventilators of the room where the cargo was stored to prevent water
from coming inside and damaging the rice. However, this led to the overheating of
the cargo and they were damaged. The judicial court held the said loss to be a loss
owing to the peril of the sea. The Judges opined that the rough weather, being a
peril of the sea, served as a proximate cause for the shutting down of the ventilators
as the same would not have been done except for the former and therefore both the
factors must be viewed together and not separately. 
Now, all those losses, which have not been excluded from insurance indemnification
under Section 55, have been divided into two categories-

1. Partial loss
2. Total loss

43
Total loss
In cases of marine insurances, the total loss has been categorised into two
divisions, namely, actual total loss, and constructive total loss.

Actual Total Loss

As per section 57 of the MIA, an actual total loss could occur in three situations-

1. Destruction of the insured object.

2. When extensive damage is caused to the insured object which changes its
very inherent nature and quality.
3. Irretrievable deprivation of the insured object to the assured.
While the first two cases make the ascertainment of a loss as actual or constructive
relatively easier, it is the third scenario where determination becomes difficult or a
little dubious to fathom. In the case of George Cohen Sons and Co v/s Standard
Marine Insurance Co Ltd, an insured ship had been taken to the port but it somehow
went shore. The British Court observed that the assured had not been irretrievably
deprived of the ship. The process of retrieval, the Court opined, would be difficult
and also expensive to a large extent but would not be impossible. Therefore, the
Court held the aforementioned loss to not be in the nature of an actual total loss.
Further, in the case of Loyal Marines v/s National Insurance Co Ltd, it was found
that the insured ship had got submerged in the sand up to its deck and it was
therefore not possible to retrieve it for the use of the assured. The Court declared
the said loss to be an actual total loss and asked the insurers to indemnify the
assured for the same.

Constructive total loss

The term constructive stands for something which is not explicit but derived from
conjecture. Applying the said definition to understand a constructive total loss, it can
be said that when an actual total loss defined under Sections 57 and 58 have not
explicitly taken place but the loss caused is such that the insured object is as
useless as it would have had been in case of an actual total loss. 

Effect of a constructive total loss

In case the loss in the nature of the aforementioned takes place, the assured could
either abandon the object or continue possessing it. In the case of the former, the
loss is to be treated as an actual total loss, whereas if the assured does the latter,
they are said to be treating the loss as a partial loss. Abandonment is thus a
necessary prerequisite for a loss to be deemed as an actual total loss. The concept
of abandonment has been discussed in greater detail in the subsequent chapter.

Difference between an actual total loss and constructive total loss

44
In simple words, the difference between the two aforementioned types of total
losses is that while the former is a factual total loss, the latter is but a legal fiction,
created to give those losses that are akin to an actual total loss equitable protection.
Thus constructive total loss is a total loss in law and spirit. 

Partial loss
Section 56 of the MIA defines partial loss as any loss other than a total loss. While
the exact definition of Partial loss cannot be found in the MIA, Sections 64-66 deal
with various components of a partial loss, namely, average general loss, particular
average loss, and salvage charges.

General average loss

Section 66 of the MIA defines general average loss as any loss caused by a general
average act, which is any wilful momentous expense or sacrifice carried out by the
assured to prevent the insured object from being damaged by a peril insured
against. The person carrying out such a general average act has the right to ask for
contributions from other persons who have any interest in the insured object. Then,
the assured can claim for indemnification from the insurer for such part of the money
or sacrifice which is attributable to him after contribution. However, the insurer
cannot be compelled to indemnify the assured for a general average loss if the
general average act was not incurred for the purpose of preventing any damage or
prospective damage to the insured object. All the aforementioned provisions,
however, are dependent upon the terms of the marine insurance policy. 

Particular average loss

Any loss which is not a general average loss falls under the category of particular
average loss.

Salvage charge

Salvage charges are charges that are incurred to avert any loss flowing from the
peril insured against and can be indemnified to the salvor independently of a
contract. The salvor can recover such charge either as a general average loss or a
particular average loss, depending upon the circumstances in which the salvage
charge was sustained.

The doctrine of abandonment under mia

As mentioned before, a constructive total loss cannot be treated as if it were a total
loss unless the subject matter of the same has been abandoned by the assured. If
the insured object that has suffered a constructive total loss is not abandoned, it is
presumed that the assured is going to treat the same as a partial loss. 

Notice of Abandonment
45
Now, after having abandoned the insured object, or after the intention of doing the
same has been formed, owing to the occurrence of a constructive total loss, the
assured needs to give a notice of abandonment to the insurer to express the
bequeathing of his interest in the insured object in the favour of the insurer. Upon
the acceptance of such notice by the insurer, the abandonment cannot be revoked.
If, however, the assured fails to give such notice, the constructive total loss gets
converted to a partial loss.

Effect of Abandonment
The effect of abandonment is that whatever little remains of the insured
object/property becomes the insurer’s. By abandoning and serving notice about the
same to the insurer, the assured gives away his interest in the insured object to the
insurer. And if he follows the procedure properly, the constructive total loss he
suffered is indemnified by the insurer as if it were an actual total loss. This is the
benefit of abandonment to the assured, which if he had not practised would have led
to the treatment of the loss as a partial one, leading to indemnification of a lesser
value. 
Now, after the insurer indemnifies the assured for the loss being treated as an actual
total loss, the assured the benefits the insured derives from abandonment on the
part of the assured as mentioned under Section 63 of MIA are as follows-

1. The insurer gets hold of all the freight that was in the course of being
earned or that is earned after the loss. (for the latter, however, such amount
that was spent in earning the fright after the loss would be subtracted)
2. If the ship is carrying the cargo of the owner, the insurer would be free to
charge him for their transportation on the ship post abandonment.

Objectives of the Motor Vehicle Act, 1988

The Indian Motor Vehicle Act of 1988 was established to solve the following issues: 

 Sticking to strict procedures for granting licences and calculating the validity
period of such licences.
 To maintain road safety requirements, dangerous and explosive material
transportation rules, and pollution control measures.
 To maintain the country’s rapidly growing quantity of personal and
commercial cars.
 To raise the amount of compensation available to hit-and-run cases.
 To eliminate the time limit for traffic accident victims to file a compensation
claim.

Offences covered under the Motor Vehicle Act

The following are the offences covered under the original Motor Vehicle Act that 
includes:

 Driving without a licence, 

 Allowing someone without a licence to operate a vehicle owned by the
vehicle owner, 
46
  Failing to possess all of the relevant documentation required to operate a
motor vehicle on Indian roads, 
 Driving without a permit if required, 
 Driving without a vehicle fitness report, driving without a registration
certificate or R.C, 
 Operation of a vehicle by a minor, 
 Allowing an unauthorised individual to operate a vehicle,
 Riding certain motor vehicles without a helmet, 
 Driving without fastening the driver’s seat belt, 
 Exceeding the speed limit and rash driving, 
 Risky driving, 
 Driving against the flow of traffic in a one-way lane, and other violations are
considered offences under the Act.

Important Sections of the Motor Vehicle Act

The following are some of the most important provisions of the Motor Vehicle Act:

Section 3 of the Motor Vehicle Act

Section 3 of the Motor Vehicle Act deals with the necessity of driving licence, stating
that-

 A person cannot drive a vehicle in public unless they have a valid and authorised
driver’s licence. Furthermore, they are not permitted to operate any transport
vehicle other than a motor-taxi or a motor bicycle for personal use or to rent the
same under any scheme unless their driving licence allows them to.
 The above-mentioned circumstances shall not apply to an individual when
operating a motor vehicle in India unless prescribed by the central government

Section 4 of the Motor Vehicle Act

Section 4 of the Motor Vehicle Act deals with age limitations, stating that-

 No one under the age of 18 is permitted to operate a motor vehicle in public.

However, driving a motor vehicle with an engine capacity of less than 50cc is
permitted when the individual reaches the age of 16.
 No one under the age of 20 is allowed to drive a public transportation vehicle.
 No one will be awarded a learner’s or permanent driving licence to operate a
motor vehicle of the class for which they have applied unless they are qualified to
drive.

Section 39 of the Motor Vehicle Act

Section 39 of the Motor Vehicle Act deals with the necessity for registration, which
stated that-

 No person is permitted to drive a motor vehicle in a public place, and no owner of

a motor vehicle shall cause or let the vehicle to be driven in a public place by
47
 another person unless it is registered and the vehicle’s certificate of registration
has not been suspended or cancelled.

Section 66 of the Motor Vehicle Act

Section 66 of the Motor Vehicle Act deals with the necessity for permits, which
stated that- 

 The owner of a transport vehicle cannot operate his vehicle in any public area
unless it is authorised and covered by a valid authorization.
 Transport vehicles of the central or state government, local authorities,
ambulances, fire brigade, police vehicles, hearses, and those with a registered
loaded weight of not more than 3000 kg are exempted from the permission.
 Every educational institution bus requires a permit.

Section 112 of the Motor Vehicle Act

Section 112 of the Motor Vehicle Act deals with speed limitations, stating that-

 No person must drive or allow a motor vehicle to be driven in any public place at a
speed exceeding the maximum speed or dropping below the minimum speed
specified for the vehicle under the Act.
 No one is permitted to drive at high speeds and should not exceed the maximum
set speed for any motor vehicle.
 If the state government or other authorities believe that it is important to restrict
the speed of motor vehicles for public safety or convenience due to the nature of
the road, bridge, or other suitable location, they may do so. This restriction is only
in effect for one month and no longer.

Section 113 of the Motor Vehicle Act

Section 113 of the Motor Vehicle Act deals with weight limits and limitations on use,
stating that-

 The conditions for the issuance of permits by the State or Regional Transport
Authorities may be prescribed by the state government. Overloaded vehicles must
be prohibited or restricted in any region or route.
 It is prohibited to drive a vehicle without pneumatic tyres fitted.
 No one is permitted to operate any motor vehicle or trailer in any public place with 
o An unladen weight (i.e., not carrying a load) that exceeds the weight specified on
the certificate of registration, or 
o A laden weight (i.e., carries load) that exceeds the gross weight specified on the
certificate of registration.
 When a driver or any person other than the owner of a motor vehicle drives an
excess weight, the court will assume that the offence was done with the
knowledge or commands of the owner of the vehicle driven.

Section 129 of the Motor Vehicle Act

Section 129 of the Motor Vehicle Act deals with the necessity of wearing head
protection, stating that-
48
 While driving a motor vehicle in a public location, every driver is required to wear
a helmet. Headgear is just a helmet that protects a person from causing injuries in
an accident. It is securely fastened to the wearer’s head using straps or other
fastenings supplied on the helmet.

Section 130 of the Motor Vehicle Act

Section 130 of the Motor Vehicle Act deals with the requirement to provide a driver’s
licence and a registration certificate, stating that-

 A police officer in uniform may ask a driver of a motor vehicle in any public
location to view his or her driving licence.
 A police officer in uniform or a motor vehicle department officer may ask a
conductor of a motor vehicle in any public location to view his or her driving
licence.
 The registering authority or any other official of the motor vehicle department
legally authorised on this purpose should request insurance for the vehicle and
the certificate of fitness referred to as per Section 56 by the owner or person in
charge of the vehicle.
 If the driver of the vehicle has no certifications of all this possession are available
within fifteen days of the demand,  he/she shall produce photocopies, duly
attested in person or by registered post to the officer who made the demand.

Section 140 of the Motor Vehicle Act

Section 140 of the Motor Vehicle Act deals with the obligation to provide
compensation in specific circumstances based on the no-fault principle, stating
that-

 The Act compensates the aggrieved person in the event that the vehicle
defendant, himself, or the driver of any such vehicle causes death or permanent
disability to the aggrieved party. When a death or permanent disability occurs as a
result of a motor vehicle accident, no-fault liability is invoked.
 The amount of compensation due for a claim under this Section is as follows:
o If the accident results in the death of a person, a fixed payment of Rs.50,000/- is
payable, and 
o If the accident results in the permanent disability of any person, a fixed sum of
Rs.25,000/- is payable.
 The Act makes it clear that, regardless of whether the claimant or his heir or
representative committed wrongful conduct, carelessness, or default, the
compensation under this Section is not subject to any burden of proof on the
claimant’s shoulders. This Section’s compensation is controlled by no-fault
liability.
 If the victim is unaffected but an accident occurs, the vehicle’s owner is
responsible for compensating the victim and he is also responsible for any other
Act that is enforceable at the time of the incident.
 The amount can be reduced from the compensation amount under Section 163A
of the Act.

49
Section 163A of the Motor Vehicle Act
Section 163A of the Motor Vehicle Act deals with special provisions for
compensation payments based on a structured formula, stating that-

 The owner of the authorised insurer’s motor vehicle is responsible for

compensating the legal heirs or the victim in the event of death or permanent
disability caused by an accident resulting from operating the motor vehicle.
 The claimant does not have to prove or plead that the death or permanent
disability for which the claim is being filed was caused by any unlawful conduct,
negligence, or failure of the vehicle owner or vehicles in question or any other
person.

Section 166 of the Motor Vehicle Act

Section 166 of the Motor Vehicle Act deals with the application for compensation,
stating that-

 The claimant might file a claim with the Motor Accident Claim Tribunal for
compensation.
 An application for compensation arising from an accident can be made by:
o Anyone who has been injured, or
o The owner of the property damaged/involved in the accident, 
o A legal representative of the person who died in a road accident, or 
o An authorised agent of the injured party or 
o Legal representatives of the person who died in the accident.
 The application must be filed on behalf of or for the benefit of all of the deceased’s
legal representatives.

Section 177 of the Motor Vehicle Act

Section 177 of the Motor Vehicle Act deals with the punishment of offences, stating
that-

 Anyone who violates the Act’s rules, regulations, or notifications is subject to a

penalty of Rs.100/- if the violation is committed for the first time. If the violation is
for the second or subsequent time, she/he has to pay Rs.300/- as a penalty.

Section 179 of the Motor Vehicle Act

Section 179 of the Motor Vehicle Act deals with disobedience of orders, obstruction
and refusal of information, stating that-

 If no other penalty is provided for the offence, 

o Any person who willfully disobeys any laws directed by any person or authority
under this Act or 

50
o Any person who obstructs or discharges any functions or is empowered to
discharge any laws directed by a person or authority under this Act shall be
punished with a fine that may extend to five hundred rupees.
 If no other penalty is provided for the offence, 
o Any person who is required or under this Act to supply any information wilfully
withholds such information, or 
o Any person who gives information that he knows to be false or does not believe to
be true shall be punished with imprisonment up to one month or a fine of Rs.500,
or both.

Section 181 of the Motor Vehicle Act

Section 181 of the Motor Vehicle Act deals with driving a vehicle under the
requirement for a driving licence and the age restriction related to driving a motor
vehicle, stating that-

 Any person who drives a motor vehicle without a licence prescribed under Section
3 of the act, or 
o Any person who drives a motor vehicle while under the age restriction prescribed
under Section 4 of the Act.
 The above-mentioned conditions are punishable by imprisonment for a maximum
of three months or a fine of Rs.1,000/-, or both.

Section 184 of the Motor Vehicle Act

Section 184 of the Motor Vehicle Act deals with driving dangerously, stating that-

 Any person who drives a motor vehicle at a dangerous speed or in a dangerous

manner to the public, taking into account all circumstances of the case, including
the nature, condition, and use of the place where the vehicle is driven and the
amount of traffic that actually exists at the time, 
 If the above-mentioned offence happens, then the person shall be punished for
the first offence with imprisonment for six months or a fine of one thousand
rupees, and for the second or subsequent offence if committed within three years
of the previous offence with the imprisonment of 2 years or fine of 2000 rupees or
both.

Section 185 of the Motor Vehicle Act

Section 185 of the Motor Vehicle Act deals with drunk and driving or a person who is
under influence of drugs, stating that-

 Any person who is driving or attempting to drive a motor vehicle-

o Any person who has consumed alcohol in excess of 30 milligrams per 100
millilitres of blood as determined by a breath analyzer test, or 

51
o Any person who is under the influence of a substance to the point of being unable
to exercise adequate control over the vehicle. 
 For the first offence, a person who is inebriated or under the influence of narcotics
is penalised by imprisonment for a term of up to 6 months or a fine of up to 2000
rupees or both. 
 If the offence is committed for the second or subsequent time, the individual is
sentenced to two years in jail or a fine of 3000 rupees, or both, if the offence is
committed within three years of the prior identical offence.

UNIT IV
Carriage of Goods by road
Goods can be carried by land (including inland waterways), sea, air or a
combination
of all these modes of transportation (multimodal transport system). Different laws
govern such different modes of carriage of goods:-
 For carriage of goods by land:
– Carriage by Road Act, 2007;
– The Railways Act, 1989.
 For carriage of goods by air:
– The Carriage by Air Act, 1972.
 For carriage of goods by sea:
– The (Indian) Bills of Lading Act, 1856;
– The Carriage of Goods by Sea Act, 1925;
– The Merchant Shipping Act, 1958.
 For multimodal transportation of goods:
– The Multimodal Transportation of Goods Act, 1993.

The Commercial Courts, Commercial Division and Commercial Appellate

Division of High Courts Act , 2015
 Disputes in respect of ‘Carriage of Goods’ are ‘commercial disputes’.
 Section 2 (c) of the Commercial Courts Act defines a commercial dispute and
includes
disputes arising out ‘carriage of goods’.
52
 Section 2 (i) defines ‘specified value’ in relation to a commercial dispute, to mean
the
value of the subject-matter in respect of a suit as determined in accordance with
Section
12 which shall not be less than one crore rupees or such higher value, as may be
notified
by the Central Government.
 Section 6 provides that the jurisdiction of a Commercial Court is to try all suits and
applications relating to a commercial dispute of a Specified Value arising out of the
entire territory of the State over which it has been vested territorial jurisdiction.
Disputes
in respect of ‘carriage of goods’ of the ‘specified value’ would be triable by
Commercial
Courts or Commercial Divisions of High Courts, as the case may be.
 However, Section 11 provides for a bar of jurisdiction of Commercial Courts where
the
jurisdiction of the civil court is either expressly or impliedly barred under any other
law
for the time being in force.
Carriage of Goods by Land
Carriage by Road Act, 2007 - Overview
• Carriage by Road Act, 2007 came into force on March 1, 2011
superseding the erstwhile Carriers Act, 1865. The Carriage by Road
Rules, 2011 came into force on the same day.
• This Act provides for the regulation of common carriers, limiting their
liability and declaration of value of goods delivered to them to
determine their liability for loss, or damage to, such goods occasioned
by their negligence or criminal acts, their servants or agents and for
incidental matters.
• Carriage by Road Act 2007 does not apply to the Government or private
carriers.
Carriage of Goods by Land
Classification of Carriers
• As per Section 2 (a), a ‘common carrier’ is defined as: “a person
engaged in the business of collecting, storing, forwarding or distributing
goods to be carried by goods carriages under a goods receipt or
transporting for hire of goods from place to place by motorized transport
on road, for all persons undiscriminatingly and includes a goods booking
company, contractor, agent, broker and courier agency engaged in the
door-to-door transportation of documents, goods or articles utilizing the
services of a person, either directly or indirectly, to carry or accompany
such documents, goods or articles but does not include the Government”.

53
• Private Carrier - A private carrier is distinct from a common carrier as
it has the discretion to refuse to sell its services. A private carrier does
not make a general offer to carry goods and enters into a contract with
other parties to carry goods on mutually agreed terms.
Carriage by Road Act, 2007
Rights, Liabilities and Responsibilities of Common Carriers
 Under Section 8, every consignor is required to issue a ‘goods forwarding
note’ which would declare inter alia value and nature of the consignment.
 Consignor is responsible for the correctness of the particulars in the goods
forwarding note, and is liable to indemnify the common carrier for any loss
or damage suffered by him by reason of incorrectness or incompleteness of
the particulars on the note.
 As per Section 10 of the Act, the liability of a common carrier for loss of, or
damage to any consignment, ‘shall be limited to ten times the freight paid or
payable (as per Rule 12 of the Carriage by Road Rules, 2011) having regard
to the value, freight and nature of goods, documents or articles of the
consignment, unless the consignor or any person duly authorised in that
behalf has expressly undertaken to pay higher risk rate fixed by the common
carrier, under Section 11.
Carriage by Road Act, 2007
Rights, Duties and Liabilities of Common Carriers
 As per Section 10 (2), for any delay in delivery up to the mutually
agreed period, the liability is limited to the freight charged.
 Under Section 12, a common carrier is liable to the consignor for the
loss or damage to any consignment, where such loss or damage has
arisen on account of any criminal act of the common carrier, or any of
his servants or agents. The Plaintiff does not bear the onus to prove
such negligence or criminal act.
 Section 15 provides for common carrier’s right to sell the goods in
case of consignor’s default to take delivery of the goods. In case of
non-perishable goods, a prior notice of 30 days is required before the
common carrier can exercise his right to sell.
Carriage by Road Act, 2007
Rights, Duties and Liabilities of Common Carriers
 Section 16 provides that a prior notice by the consignor to the common
carrier for loss or damage is mandatory for instituting any suit or other
proceedings, Such notice should be served within a period of 180 days
from the date of booking the consignment.
 Under Section 17 of the Act, a common carrier is responsible for the
loss, destruction, damage or deterioration in transit or non-delivery of
any consignment entrusted to him for carriage, arising from any cause
except acts of God; war, riots and civil commotion; arrest, restraint or

54
seizure under legal process; or an order, restriction, or prohibition
imposed by the Government.
 However, even in above cases, common carrier is required to exercise
due diligence and care to avoid such loss, destruction, damage or
deterioration

Salient Features of MULTINODAL TRANSPORTATION OF GOODS ACT, 1993

Multimodal Transportation.
1. The Multimodal Transportation of Goods Act, 1993 (MMTG) provides for the
regulation of Multimodal Transportation of Goods from any place in India to any
place outside India involving two or more modes of Transport on the basis of a
single Multimodal Transport Contract. This act came into force from 2.4.1993 and it
provides for Registration of a person a Multimodal Transport operator and
Multimodal Transportation can be carried out only by persons registered as MTO
under MMTG Act, 1993. The Director General of Shipping has been notified as the
competent authority to perform functions under the Act including registration of
MTOs. The MTO registration is valid for period of 1 year and may be renewed for
further period of one year from time to time. The Director General of Shipping has,
after obtaining the prior approval of Ministry of Surface Transport, prescribed the
Multimodal Transport Document under Rule 3 of Multimodal Transport Document
Rules, 1994.
2. The Multimodal Transportation of Goods Act, 1993 was introduced to facilitate the
exporters and give them a sense of security in transporting their goods. The concept
of door to door delivery, which is MULTIMODAL Transportation is all about, is
catching up fast in international trade. Reduction of logistics costs is one of the
important aspects of Multimodal Transportation, thereby reducing the overall cost to
the exporter and making his products more competitive in the international market. It
is in this context that the Government of India thought it necessary to codify the
rules and regulations governing Multimodal Transportation and enacted the
Multimodal Transportation of Goods Act, 1993 based on the UNCTAD/ICC rules
which have gained widespread acceptance. The Multimodal Transportation Act lays
down the standard terms and conditions governing this activity. Under the provision
of the Act only those companies who are registered by the competent authority
which has been notified to be the Director General of Shipping, can carry out
Multimodal Transportation. This requirement of registration has been imposed by
the government to ensure that only such companies which have the necessary
expertise infrastructure and financial capability are allowed to undertake Multimodal
Transportation so that the interests of shippers are fully protected.
Salient features of Multimodal Transport Goods Act, 1993 (MMTGA) are  as below
1. Distinction between Carrier and MTO in the Act
2. Provision for cancellation of registeration as per section 5 of the Act.
3. Freedom to exporters to make the multimodal transport document eighter
negotiable or non-negotiable
4. Overcoming the restrictions of Hague-Visiby Rules by inclusion of animals,
container, pallets or similar articles of transport in the defintion of goods.
55
5. MTD as document of title
6. Presumption about receipt of goods in good condition and quantity
7. Basis of liability of MTO is on ‘presumed fault or neglect’
8. Liability of the MTO not only for delay but also for any consequential loss or
damage arising from such delay
9. presumption fo consignment as being lost if delivery not effected with 90
consecutive days following the date of delivery stipulated
10. Limits of liability in case of loss or damage as 666.67 SDR per package or 2
SDR per kg. of weight
11. Limits of liability in case of loss to consignment not involving carriage by sea
as 8.33 SDR per kg in accordance with CMR Conventions
12. Liability for delay of consignment limited to the freight payable for the
consignment so delayed.
13. Valuation of the compensation linked to jurisdiction and the commodity
exchange rate
14. MTO debarred to limit his liability in certain circumstances.
15. Notice Period about the loss or damage to the consignment has been kept as
six consecutive days after the stipulated period time
16. Limitation of action against MTO kept wide
17. Jurisdiction for institution action kept as wide as possibel
18. Provision of any MTD necessariy to be in accordance with MTGA 

Law of carriage of goods by sea

From Wikipedia, the free encyclopedia
Jump to navigationJump to search
The law of carriage of goods by sea is a body of law that governs the rights and
duties of shippers, carriers and consignees of marine cargo. [1]
Primarily concerned with cargo claims, this body of law combines the international
commercial law, the law of the sea and admiralty laws.
The typical obligations of a carrier by sea to a shipper of cargo are:

 to provide a seaworthy ship

 to issue a bill of lading
 to "properly and carefully load, handle, stow, carry, keep, care for, and discharge
the goods carried".[2]
 to proceed with "reasonable despatch"
[3]

 to follow the agreed route (and not to deviate from it).

[4][5]
Cargo claims[edit]
Main article: freight claim
Consignees (or indeed any lawful holder of the bill of lading)[6] who wishes to make a
cargo claim because their goods are substandard or have been lost or damaged at
sea, typically have four options:

 They may sue the seller, the shipper, or the carrier; or they may claim from
their own insurance policy.
56
 A suit will lie against the seller if the seller has insufficient title, [7] or the goods are
not of satisfactory quality,[8] or do not comply with sample[9] or description.[10]
 A suit will lie against the shipper if the goods are damaged through insufficient
packing,[11][12] or if any loss is suffered through insufficient labelling. [13][14][15]
 A suit will lie against the carrier if the damage occurred aboard ship. [16] The
carrier's P&I Club cover will normally bear the cost.
 If the cargo is damaged where the shipper without fault (e.g. if the goods have
been properly packed and stowed) or if the carrier is either blameless or
exempted from liability[17] (e.g. because of 'Act of God' or 'Justifiable Deviation'),
[18][19][20][21]
 a cargo-owner will have to claim on his own cargo policy.
A claim having been paid, the assured's rights of claim will be subrogated to the
insurer, who may consider proceeding against a party who has caused the damage.
A shipowner may sue a time-charterer or voyage-charterer in the event of breach of
contract. For instance, if the charterer exceeds laytime, demurrage will have to be
paid; and if the charterer cannot comply with a Notice of Readiness (NOR), the
shipowner may repudiate (cancel) the contract of carriage and claim damages for
any loss.[22]

Carriage conventions[edit]
In most contracts of carriage the carrier has greater bargaining power than the
shipper, and in the 19th century English judges developed rules to protect the
weaker parties.[23] Beginning with the Hague Rules, the various conventions set out
to codify and develop such common law principles by providing an international set
of basic standards to be met by the carrier, with a view to establishing a universal
framework of legal rights and duties. In practice, however, the level of protection
was actually reduced because of new provisions allowing the carrier to (i) limit his
liability, and (ii) rely on a wide array of exemptions from liability [24][25][26] Also,
whereas up until about 1885,[27] the carrier's duties were deemed to be strict, by
1905 the duty became one of "reasonable care" or "due diligence" only.[28]
The Hague Rules of 1924 effectively codified, albeit in a diluted form, the English
common law rules to protect the cargo owner against exploitation by the carrier.
Nearly 50 years later, the Hague-Visby "update" made few changes, so that the
newer Rules still applied only to "tackle to tackle" carriage (i.e. carriage by sea) and
the container revolution of the 1950s was virtually ignored. The Hague-Visby Rules
both excluded cabotage carriage, and declared that deck cargo and live animals
were not to be considered as "goods" (although the Carriage of Goods by Sea Act
1971 provided that cabotage, deck cargo and live animals are to be covered in
English contracts).
The enormous list of exemptions to liability in Article IV made the Rules seem
biased in favour of the carrier. As a result, The United Nations produced its own
Hamburg Rules which were both more modern and fairer to cargo-owners; but while
these have been enthusiastically adopted by developing nations, the wealthier ship-
owning nations have stuck to Hague-Visby. In 2008 the final text of the Rotterdam
Rules was agreed at UNCITRAL.[29] These Rules are very extensive, with over 90
57
Articles against 11 in Hague-Visby. Although the Rotterdam Rules are up-to-date
and address multimodal carriage, they have, nine years later, yet to be in force. It
now seems doubtful that the Rotterdam Rules will ever be adopted, but there is a
slim possibility that a cut-down version of the Rules ("Rotterdam Lite") might find
favour.
China has effectively adopted the Hague Rules. The USA, which tends to shun
conventions and instead rely on homespun legislation, has its own statutes. These
comprise the Carriage of Goods by Sea Act (a mildly updated version of the Hague
Rules for goods in foreign commerce), and the Harter Act (for mostly domestic
carriage).[30]

THE CARRIERS ACT, 1865

An Act relating to the rights and liabilities of Common Carriers.

PREAMBLE.—WHEREAS it is expedient not only to enable common carriers to limit
their liability
for loss of or damage to property delivered to them to be carried but also to declare
their liability for
loss of or damage to such property occasioned by the negligence or criminal acts of
themselves, their
servants or agents; It is enacted as follows : —
1. Short title. —This Act may be cited as the Carriers Act, 1865.
2. Interpretation-clause.—In this Act, unless there be something repugnant in the
subject or
context, —
“common carrier” denotes a person, other than the Government, engaged in the
business
of 2
[transporting property under multinodal transport document or of] transporting for
hire
property from place to place, by land or inland navigation, for all persons
indiscriminately:
“Person”. — “person”3
includes any association or body of persons, whether incorporated or
not.
4
*****
3. Carriers not to be liable for loss of certain goods above one hundred rupees in
value,
unless delivered as such.—No common carrier shall be liable for the loss of or
damage to property
delivered to him to be carried exceeding in value one hundred rupees and of the
description contained
58
in the Schedule to this Act, unless the person delivering such property to be carried,
or some person
duly authorised in that behalf, shall have expressly declared to such carrier or his
agent the value and
description thereof.

Objectives of Railway Act

The Railway Act 1989 establishes the railway administration’s substantive obligation
for loss, destruction, damage, non-delivery, or degradation of goods entrusted to
them for carriage, as well as death, injury, or loss to a passenger in a railway
accident or adverse occurrence.

Consignors/consignees and passengers or their representatives pursue

compensation claims for damages and losses to booked goods and, if unsatisfied
with the railway administration’s decisions, seek legal redress in court.
Claims for compensation for the death, injury, or loss of a passenger in a train
accident are currently decided by claims commissioners.
Due to the lengthy nature of litigation in courts of law and before claims
commissioners, it’s decided to establish a specialised Tribunal for the expeditious
adjudication of such claims.

The establishment of such a Claims Tribunal, with Benches in various regions of the
country and judicial and technical members, will bring significant relief to train users
by expediting payment of compensation to victims of rail accidents and those whose
products are lost or damaged in rail transit.
The following are the further objectives of the Railway Act:

 Maintain an unyielding struggle against criminals to protect railway passengers,

the passenger area, and railway property.

 Remove any anti-social elements from trains, railway premises, and passenger
places to improve passenger travel and security.

 Maintain vigilance to avoid human trafficking of women and children, and take
necessary action to rehabilitate poor children located in railway areas.

59
 Cooperate with other Indian Railways departments to improve the Indian
Railways’ efficiency and image.

 Serve as a link between the Railway administration and the Government Railway
Police/local police.

 In pursuit of these goals, use all modern technology, best human rights
practices, management strategies, and specific steps to protect female, elderly,
and children passengers.
Features of Railway Act
The Indian Railway act provides the following legislative provisions for:
Railway Zones
The Indian Railway System currently gets organised into 18 zones, including two
deemed zones (i.e. Kolkata metro and Konkan railway), each led by a General
Manager who is accountable to the Railway Board for the railway’s operation,
maintenance and financial status.
Construction and maintenance of works
According to the railway act, a railway administration has the authority to make,
construct, and perform any other actions necessary for the construction,
maintenance, alteration, or repair of the railway and use it.
Employee and Passenger Services
According to the act, the Central Government may fix rates for the carriage of
passengers and goods for the whole or any part of the railway from time to time by
general or special order. Different rates may get fixed for different goods classes
and specify in such order the conditions subject to which such rates shall apply.
Rules and regulations under Railway Act
According to section 131 of the Railway Act, the railway rule in chapter XIV will not
apply to any of the railway servants to whom the Factories act of 1948, the Mines
Act of 1952, the railway protection force act (1957), the merchant shipping act of
1958 applies.
Limitations of hours of work
A railway servant whose work is intermittent may not work more than seventy-five
hours in any week. A continuous railway servant may not work for more than fifty-
four hours per week on average throughout two weeks of fourteen days. An

60
intensively engaged railway servant may not work more than forty-five hours per
week on average throughout two weeks of fourteen days.
Grant of periodical rest
A railway servant whose employment is demanding or prolonged shall be given rest
of not less than thirty hours straight for each week beginning on a Sunday. A railway
servant whose employment is intermittent shall be given rest of not less than twenty-
four hours, along with a whole night, for each week beginning on a Sunday.
Railway servant to remain on duty.
Where proper provisions for a railway servant’s relief got established, the act’s rules
authorise him to leave his duties until he is relieved.
Supervisors of Railway Labor
The Central Government has the authority to select railway labour supervisors.
Supervisors of railway labour are responsible for inspecting railways to see whether
the provisions of this Chapter or the rules promulgated thereunder are being
followed and performing any other responsibilities that may get specified.
Provisions of the Railway Act
According to the legislation, any accident involving the loss of human life, grievous
bodily harm as defined by the Indian Penal Code, or severe property damage as
may be prescribed;

 any collision involving trains, one of which is a passenger train;

 a train carrying passengers, or any component of a train carrying passengers,

derailing;

 any accident that is generally accompanied by the loss of human life or such
grave harm as stated, or with severe property damage;

 The railway administration whose territory the incident happens and the railway
administration whose train is associated with the accident must notify the State
Government and the Commissioner with authority over the accident site as soon
as possible.
Section 143 of the Railway Act
Section 143 of the Railways act states that the unauthorised procurement and
supplying of railway tickets can result in a penalty.

61
If any person, who is not a railway servant or an agent duly authorised in this
capacity,

 engages in procuring and supplying railway tickets or reserved accommodation

for a train journey.

 acquires or sells, or seeks to purchase or sell, tickets with the intent of carrying
on a business of any kind, whether for himself or someone else;

shall be punished by imprisonment for a term of up to three years or a penalty of up

to rupees ten thousand, or both, and shall forfeit the tickets that he procures,
purchases supplies, sells or attempts to purchase or sell.

Whether or not the offence gets committed, anyone who aids and abets any crime
punishable under this section faces the same punishment as the offender.
Proposed amendments to Railways act, 1989
The Ministry of Railways recently recommended decriminalising begging on trains or
railway premises and compounding the offence of smoking by imposing a spot fee
and dismissing all charges/actions against the person involved. These amendments
are part of a larger effort to decriminalise and rationalise penalties under the Railway
Act of 1989.
 On Begging

o Current Provision: According to Section 144 (2) of the Act, anyone who begs
in a railway carriage or at a railway station faces a penalty of either one year
in prison or a fine of up to Rs. 2,000, or both.
o Proposed Amendment: “No individual shall be permitted to beg in any railway
carriage or upon any section of the Railway,” according to the proposed
amendment.
In 2018, the Delhi High Court struck down a similar rule that made begging in
the national capital a criminal offence, ruling that the law did not distinguish
between voluntary and involuntary begging.
The statute breached articles 14 and 21 of the Constitution. The Supreme
Court concluded that the government could not fail to provide a decent life for
its citizens and then add insult to injury by arresting, detaining, and, if
62
 necessary, imprisoning those who beg for necessities. After conducting an
empirical analysis of the sociological and economic sides of the situation, city
governments can introduce alternative legislation to stop any racket of forced
begging.
 On Smoking:
o Current Provision: According to Section 167 of the Act, no individual shall
smoke in any train cabin if another passenger objects. Regardless of any
objections, the railway administration has the authority to prohibit smoking in
any train or section of a train. Whoever violates these provisions is subject to
a punishment of up to Rs.100.
o Proposed Amendment: If the individual who must pay the fine is willing to
pay it right away, the authorised officer may compound the offence by
charging the maximum amount to the railway administration. The perpetrator
will be released, and no further action will be taken against him or her in
connection with the offence.
Offences under Railway Act
The offences under the railway act are as follows:
Smoking
Smoking is prohibited in any cabin of a train if any other passenger in that
compartment objects. A railway administration may ban smoking in any train or part
of a train, notwithstanding anything in other subsections. Whoever violates the terms
of other sub-sections is subject to a fine.
Risking safety
Any person committing an offence under this Act or any rule established thereunder
shall get tried for that crime in any place where he is or where the State Government
may inform him in this regard, and in any other place liable to be tried under any law
currently in force.

If a railway employee, while on duty, puts another person’s safety in jeopardy-

 by breaking any rule established under this Act

 by disregarding any instruction, direction, or order issued under this Act or its
provisions

63
 He shall get punished for any reckless or negligent conduct or omission by
imprisonment for a period of up to two years, or a fine of up to 1000 rs, or both.
Obstructions
If any railway servant or other person obstructs, causes to be obstructed, or
attempts to obstruct any train or other rolling stock on a railway-

 squatting, picketing, or participating in any Rail roko movement or bandh

 by retaining any rolling stock on the railway without authorisation

 tampering with, detaching from, or otherwise interfering with its hose pipe,
tampering with signal gear, or otherwise

He may get sentenced to a period of imprisonment of up to two years, a fine of up to

two thousand rupees, or both.
Travelling on roofs, steps or the engine of the trains
A passenger or other person who continues to travel on the roof, step, or footboard
of any carriage or engine or in any other component of a train not designated for
passenger use will get punished under Section 156 of this act.

He may get imprisoned for up to three months or fined up to five hundred rupees, or
both, and may be removed off the railway by any railway servant.
Travelling without tickets or pass
If, to defraud a railway administration,-

 enters or remains in a railway carriage or travels in a train in violation of section

55,

 uses or seeks to use a single pass or single ticket already been used on a prior
journey, or, in the case of a return ticket, a portion thereof that has previously
been used.

He shall get punished by imprisonment for a term not exceeding six months, or by a
fine not exceeding one thousand rupees, or by both: provided, however, that in the
absence of unique and sufficient grounds to the contrary specified in the court’s
judgement, such punishment shall not be less than a fine of five hundred rupees.
Entering Reserved compartments
64
 If a person enters a compartment where the railway administration has not
assigned him a berth or seat,

 Suppose a passenger refuses to leave an unapproved berth or seat booked by

the railway administration to use other passengers. In that case, a railway
employee may evict him or force him to be removed from the compartment,
berth, or seat, as the case may be, and fine him up to 500 rupees.

 A passenger who refuses to allow another passenger to enter a compartment

not designated for the resisting passenger will get fined up to two hundred
rupees.
Conclusion
Since British dominance in India, railways have been an essential mode of
transportation. The Ministry of Railways operates Indian Railways, which ranks
fourth among the world’s largest railway networks. As one of the world’s major
railway networks, it is evident that it employs many people.
All land acquisition and related aspects are given considerable importance under the
Railway Act of 1989. Proper sections get prescribed that contribute to the smooth
operation of the railways while also considering people displaced due to land
acquisition railway development.

The Railways Act 1989 is a piece of legislation enacted by the Indian Parliament
that addresses all areas of railway transportation. It comprises provisions about
railway development, railway zones, railway agencies, the right to purchase land,
etc.

The Carriage by Air Act, 1972: Background, Objective & Purpose

The advancement of aerial navigation has changed the modes of transportation. To

synchronize with the global developments, air navigation in India also grew. Further,
India was a party to many international conventions relating to air carriage and
therefore, for regulating international air carriage, India had to make its domestic
laws in consonance with the international instruments. Furthermore, India being a

65
party to the Warsaw Convention has formulated the Carriage by Air Act 1934 in
order to apply private international air obligations. But due to the limitations in the
1934 Act, the Carriage by Air Act, 1972 was enacted.
Historical Background
The development of international aviation law has proved to be advantageous in
dealing with various multifaceted concerns under the domestic aviation sector.
Nevertheless, India too had adopted most of the international conventions and
instruments. To implement these international conventions norms, India enacted
various domestic legislations. The Warsaw Convention 1929 was adopted by India
through the formulation of the Indian Carriage Act of 1934.
The Indian Carriage Act, 1934 deals with only the air navigation done internationally
whereas the domestic air carriage was governed by the common law principles.
However, to the air carriers, the common law principles provided unrestricted
freedom. Thus, the Indian Carriage Act 1934 was repealed and a new Carriage by
Air Act of 1972 was legislated.
Advertisements
Significantly, the Carriage by Air Act, 1972 was designed to encompass death,
injury, or wounding to the passengers, loss or delay to the cargo and goods,
destruction, and delay. Besides this, the other facets of the carriage were controlled
under the Contract Act, Consumer Protection Act, and the DGCA guidelines. In the
Carriage by Air Act, 1972, the application of the Second Schedule was expended in
a further notification to include domestic air navigation also. Furthermore, the Third
Schedule of the Act was extended in 2014 to include domestic air carriage.
However, the Carriage by Air Act, 1972 was approved by Parliament to include
Hague protocol into the Carriage by Air Act. Thus, in 2009 it was again modified for
assimilation of the Montreal Convention 1999. So, in India the Carriage by Air Act
1972 as amended in 2009 levies responsibility on international air carriers.
Objectives and Purposes of the Act
On December 19, 1972, the Carriage by Air Act was passed by the Parliament and
was enforced on March 23, 1973. The Act basically targets to apply the Warsaw

66
Convention for the amalgamation of laws relating to the International Carriage by Air
that was contracted in October 1929. The provisions of the Convention covers all or
any carriage such as the carriage of passengers, cargo or baggage executed for the
reward.
The purpose of the Act is to conjointly conform with the amendments introduced
through various Protocols to the Warsaw Convention. The Act “extends to the whole
of India.”1 The object of the Act has been highlighted in the preamble of the Act
which is as follows:
“An Act to give effect to the Convention for the unification of certain rules relating to
international carriage by air signed at Warsaw on the 12th day of October, 1929 and
to the said Convention as amended by the Hague Protocol on the 28th day of
September, 1955 and also to the Montreal Convention signed on the 28th day of
May, 1999 and to make provision for applying the rules contained in the said
Convention in its original form and in the amended form subject to exceptions,
adaptations and modifications to non-international carriage by air and for matters
connected therewith.”
Salient Features
The Carriage by Air Act, 1972 is the domestic legislation governing the air carriage
and it contains all the three international air conventions concerning international air
carriage to which India is a member. All these international conventions have been
encapsulated in this Carriage by Air Act without substituting or revoking.
Section 2 of the Act describes various terms such as the ‘amended Convention,’
‘Convention,’ and ‘Montreal Convention’ etc. Further, the Act contains Three
Schedules, which is explained with the help of Section 3, 4, and 4A and also with
one Annexure which is distributed in three portions. The first portion discusses the
High Contracting Parties to the Warsaw Convention; the second deals with the High
Contracting Parties to Hague Protocol and the third part describe the High
Contracting Parties to the Montreal Convention.
Moreover, Part I of the Act delivers essential standards enumerated under the
Warsaw Convention. Further, the Second Schedule has increased the quantum of
67
recompense in situations of death or wounding of the passengers. Furthermore, the
Act put numerous checks on air carriers from misusing the navigational error and
pilotage error as protection in case of accountability. The Third Schedule of the Act
not only offers greater compensation but also introduces “fifth jurisdiction” with
respect to the right to sue successive or the actual carrier individually.
Another significant incorporation done in the Carriage Act was the introduction of
section 5. As per Section 5 of the Act, it states that notwithstanding any other law
applied in India, the various Schedules like the Schedule First, the Schedule
Second, and the Schedule Third will be applied for ascertaining the liability of the air
carrier. Further, it excludes the application of other laws in instances of wounding,
death of passenger or loss and damage of unchecked and checked baggage.
The underlying principle behind it is that it proscribes passengers from prosecuting
air carriers under the Law of Contract, Law of Tort, or Consumer Protection laws
which could have directed to the ambiguity of laws. This preventive provision
provides a solution to the difficulty of vagueness and also gives certainty to the
liability of air carriers.
Further, Section 6 and 6 A of the Act highlights the change of the sum (Francs or
SDR) into Indian rupees at the prevailing exchange rate on the date on which the
sum is to be paid.5 Furthermore, Section 7 has enacted the provision for cases
against the High Contracting Parties. The Section states that if any High Contracting
Party undertakes the air carriage, then it will be considered to have acquiesced its
jurisdiction to the Indian courts. To put it simply it means that the States which are
involved in air carriage business cannot raise the plea of sovereign immunity.
Important Provisions
Listed below are some of the key provisions of the Carriage by Air Act, 1972:
• Liability in case of death- The liability of a carrier with reference of the death of a
passenger is determined by the First Schedule, the Second Schedule and the Third
Schedule. Further, “the liability shall be enforceable for the benefit of such of the
members of the passenger’s family as sustained damage by reason of his death.”

68
• Documents of Carriage covered by the Act: In each Schedule, chapter II deals with
the ‘documents of the carriage.’  These documents are as follows:
i. Passenger Ticket
ii. Baggage check
iii. Air consignment note or Airway bill
• Jurisdiction of the Act: As per the Carriage by Air Act, all the three Schedules
confer the jurisdiction wherein petitioner can bring an action for recompense. Four
jurisdictions are provided by the First and Second Schedule, whereas, an additional
jurisdiction in the form of Fifth jurisdiction have been given by in the Third Schedule.
These are listed below –
i. The ordinary place of residence of the Carrier, or
ii. Carrier’s principal place of business, or
iii. Establishment or place where contract has been entered into, or
iv. Place of Destination, or
v. Passenger’s permanent or principal residence.
Moreover, the “Fifth Jurisdiction” is given by the Third Schedule which is applicable
only when there is damage or loss caused by the injury or death of a passenger.
• Liability of the Carrier: The Schedules of the Act provides that the carrier is
accountable for the injury or damage caused in the cases of wound or death “of a
passenger or any other bodily injury suffered by a passenger, if the accident which
caused the damage so sustained took place on board the aircraft or in the course of
any of the operations of embarking or disembarking.”
• The provisions relating to the combined carriage: The chapter IV of all the
Schedules deals with combined carriage. On the issue of combined carriage, the Act
states that where a carriage has been carried out “partly by air and partly by any
other mode of carriage,” then in such cases the provisions of the Schedule will be
applicable. Further, the parties are not prevented “in the case of combined carriage
from inserting in the document of air carriage conditions relating to other modes of
carriage, provided that the provisions of this Schedule are observed as regards the
carriage by air.”

69
Indian Carriage of Goods by Sea Act, 1925

Introduction
Have you ever wondered which Act controls the regulation of the smooth flow of
your goods and transportation of passengers? The Act is Indian Carriage of Goods
by Sea Act, 1925 and it is contained in the Indian Bills of Lading Act, 1956. The Act
of 1925 is extended to the whole of India. Before the invention of airplanes, the
transportation and exportation of goods out of India was done through ships, as the
earth has seventy percent of seawater and humans from the beginning used ships
for export and import. When the Britishers came to India, firstly they only came for
the export and import business using the ships, this tells us that ships were
important from the very beginning. As this was an important aspect of trade
business so they made an Act which says that the liability, responsibility, and rights
of goods starts when the vessel is being loaded and till when the goods in the vessel
is unloaded. This law also restricts people to export or import illegal goods, and here
at every step, the quality of the goods is checked. The carrier will not be liable if the
quality of the good is poor before the loading of the consignment has been started.
Contract which is made for carrying goods by the ship in sea whether it is loading or
handling comes under the rules of “responsibility and liability

Carriage of Goods by Sea

Sea transportation of the country is the most important part of export and import. It
gives the structure, pattern and pace of development. The laws which regulate the
Sea of India are the Indian Bills of Lading Act, 1856, the Indian Carriage of Goods
by Sea Act, 1925, the Merchant Shipping Act, 1958, and general laws, such as the
Marine Insurance Act, 1963, the Contract Act, 1872, the Evidence Act, 1872,
the Indian Penal Code, 1860, the Transfer of Property Act, 1882, the Code of Civil
Procedure, 1908, the Criminal Procedure Code, 1973, the Companies Act, 1956,
etc. The Ministry of Shipping is the authority in India which governs the shipment of
the ship, in 2009 it was formed from the Ministry of Shipping, Road Transport and
Highways. The Carriage of Good by Sea Act is governed by the Bill of Lading, which
tells the shipper the number of goods loaded, the quality of goods and many more
things about the product which is on the deck.

 Indian Carriage of Goods by Sea Act 1925

This Act has the Hague Rules which regulates everything including the bills of
lading, the rights and liabilities of both the parties from any port of India to any other
port of India or Outside India. At the starting of the journey, the carrier is bound to
check each and everything like the cooling system so that the goods do not get any
damage or everything is on the deck which he would need in the future according to
the sea and the weather. Ship or the carrier is not responsible if anything happens to

70
the goods due to the sea, the act of god, act of war, any circumstance which he
could not foresee or any kind of riots but this act would not protect the carrier to be
liable if he is negligent on his part, as the result he will be liable of the losses or
damages that happen to the goods or products. Shippers or the carrier are not held
liable if there is any mistake done by their servant or helper. If the product is
destructive or explosive in nature and the carrier is not in possession of the goods
and if the goods get destroyed in the middle then the shipper will be held liable for
all the damages or losses to all the goods on the deck. The ship or the carrier can
increase or decrease the liabilities and the immunities on their own.

THE INDIAN CARRIAGE OF GOODS BY SEA ACT, 1925

An Act to amend the law with respect to the carriage of goods by sea.
WHEREAS at the International Conference on Maritime Law held at Brussels in
October, 1922, the
delegates at the Conference, 2
***, agreed unanimously to recommend their respective Governments to
adopt as the basis of a convention a draft convention for the unification of certain
rules relating to bills of
lading;
AND WHEREAS at a meeting held at Brussels in October, 1923, the rules contained
in the said draft
convention were amended by the Committee appointed by the said Conference;
3
[AND WHEREAS the said rules were amended by the Protocol signed at Brussels
on 23rd February,
1968 and by the Protocol signed at Brussels on 21st December, 1979;]
4
[AND WHEREAS it is expedient that the said rules as so amended and as set out
with modifications in
the Schedule should, subject to the provisions of this Act, have the force of law with
a view to
establishing the responsibilities, liabilities, rights and immunities attaching to carriers
under bills of
lading; it is hereby enacted as follows:—]
1. Short title and extent.—(1) This Act may be called the Indian Carriage of Goods
by Sea Act,
1925.
(2) It extends to 5
[the whole of India].
2. Application of Rules.—Subject to the provisions of this Act, the rules set out in the
Schedule
(hereinafter referred to as “the Rules”) shall have effect in relation to and in
connection with the carriage
of goods by sea in ships carrying goods from any port in 6
[India] to any other port whether in or outside
6
71
[India].
3. Absolute warranty of sea worthiness not to be implied in contracts to which Rules
apply.—
There shall not be implied in any contract for the carriage of goods by sea to which
the Rules apply any
absolute undertaking by the carrier of the goods to provide a seaworthy ship.
4. Statement as to application of Rules to be included in bills of lading.—Every bill of
lading, or
similar document of title, issued in 6
[India] which contains or is evidence of any contract to which the
Rules apply, shall contain an express statement that it is to have effect subject to
the provisions of the said

Rules as applied by this Act.

5. Modification of Article VI of Rules in relation to goods carried in sailing ships and
by
prescribed routes.—Article VI of the Rules shall, in relation to—
(a) the carriage of goods by sea in sailing ships carrying goods from any port in 6
[India] to any
other port whether in or outside 6
[India], and
(b) the carriage of goods by sea in ships carrying goods from a port in 6
[India] notified in this
behalf in the Official Gazette by the Central Government to a port in Ceylon
specified in the said
notification,
have effect as though the said Article referred to goods of any class instead of to
particular goods and as

though the proviso to the second paragraph of the said Article were omitted.

72