Carriage by Road Rules 2011 :: under Carriage by Road Act 2007 - implications for Insurers

whom would you select for transporting  your goods ?

For a Trader or a Manufacturer – the goods are of great significance – their existence, leave alone their profits depend on production and sales of the commodity.  This involves moving from one to place to another – either by way sale or in the process stage itself.  Movement of cargo is done by entrusting them to Carriers – the owners are extremely concerned about the safe movement of goods from one place to another and they require financial security to take care of perils that might impede such safe transportation.  There would be the sale contract between the Seller and buyer; the transport contract entered with the transporter or Carrier and the insurance contract, the protection obtained from the Insurer.

pack them properly before commencement

Goods are important and are to handled properly but all of us have seen loss or damage taking place.  It not only the packaging of the commodity but also the selection of Carrier which is of great relevance to the owner of the goods. 

to be handled with utmost care.....

The Carriage Act has a long and chequered history -   The Carriage by Road Act 2007 was notified on 29th Sept 2007 repealing the earlier Carriers Act of 1865.  The Statute of 2007 was an Act to provide for the regulation of common carriers, limiting their liability and declaration of value of goods delivered to them to determine their liability for loss of, or damage to, such goods occasioned by the negligence or criminal acts of themselves, their servants or agents and for matters connected therewith or incidental thereto.

The existing Act of 1865 itself was based on the British Carriers Act of 1830 which in many ways was the first legislative intervention in the field of carriage of goods.  This Act of 1830 of UK originally applied to all common carriers – operating by land -  both road and railway carriage.

The Act of 1865 outlived its existence and with changing times amendments were necessitated.  The Carriage by Road Act 2007 though came in to being in 2007 could not be procedurally implemented for lack of rules.  After nearly 3 years of the Act, the draft of Carriage by Road Rules 2010 were published vide GSR 505 (E) dt 15th June 2010 inviting objections, suggestions from all persons likely to be affected.  This legally had to be done within 45 days from the date on which copies of  publication of the Gazette notification was made available to the public.

The copies were available on 17th June 2010 but the notification of the Rules were postponed due to objection of some powerful lobbies who wielded clout.

After passage of some more months, now the Ministry of Road Transport and Highways have notified the rules on 28th Feb 2011.  These rules are called “The Carriage by Road Rules 2011” and come into force from the date of publication in the Official Gazette.

On 10th March 2011 – the Govt published another Gazette Notification.  It was in fact a corrigendum.  In the notification of 28th Feb 2011 – erroneously in the English version contained the words ‘the draft of the Carriage by Road rules 2010’ – whereas it was no longer the draft but the version.  This was corrected by this notification.

The Carriage by Road Act 2007 as read with the Carriage by Road Rules 2011 is in many ways prejudicial to the interests of Insurers and primarily those who utilize the services of transporters.  As one would appreciate, the contract of carriage is an agreement between the Transport / Carrier and the owner of the goods / consignor / consignee and Insurers are not a direct party to the contract.  When goods are insured, they only enter as subrogees having a paid a claim.  It is this subrogation, more specifically, the extent of recovery which is threatened now. 

Those who have some knowledge of logistics and transportation or owning goods and transporting them are well aware that the value of the goods might pose no direct proportion to the value of freight that is paid for transportation.  Again, the value of goods would remain constant throughout the transportation and might not be affected by the distance involved BUT the cost of freight would be proportionate to the volume / weight of the consignment as also to the distance.
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Sec 12 of the new rules (the Carriage  by Road Rules 2011) deal with the liability of Common carrier for loss of or damage to any consignment. 

What is given below is mostly reproduction of Carriage by Road Rules 2011 with some commentary and is not be construed as reproduction of the Rules themselves.

(1)     Liability of common carrier under Sec 10 for total loss shall be limited to ten times the freight paid or payable.  Provided that the amount so calculated shall not exceed the value of the goods as declared in the goods forwarding note. 

This sounds inexorable – think of the implications.  For example, a consignment worth 10 lakhs (the size depends upon the material] – freight for a distance say from Chennai to Bangalore is not going to be Rs. 1 lakh. 

If it is going to be say Rs.15000/- then the maximum of carriers’ liability would Rs.1,50,000/- .  For a mischief or negligence of the carrier, the owner of the goods is going to incur a huge loss, if their goods are not insured.

The poor Insurer who now is collecting rates in paise (0.00X%) – would end up total loss for the insured value of the consignment, which could be more than the value of the consignment but the recovery (if at all something could be gotten) is going to be a paltry % of what he has paid.

(2)     For partial damage to goods,  evaluation of such damage may be done by an independent Govt approved valuer or Surveyor selected by the consignor out of the list notified by the common carrier. 

-  this is likely to have different implications for the Insuring public, those in survey / loss assessment field and for Insurers and would involve some new procedure of enlisting surveyors by the Carriers

[3]  in case of partial loss, the amount of liability shall be assessed by the Govt. approved valuer or surveyor

[4]  liability for loss of documents sent along with consignment order shall not exceed Rs. Five hundred.

[5]  for perishable goods, the consignor or consignee shall select the Govt. approved valuer or surveyor within a period 24 hours from the time of report of the loss or deterioration of goods, failing which the common carrier shall be free to select surveyor for assessment of quantum of loss.

[6] the delivery of the consignment to the consignee by the common carrier shall be treated as  prima-facie evidence of delivery of goods – unless notice of the loss of or damage to the goods is given in writing by the consignee to the carrier at the time of handing over the goods

The earlier Act of 1865 specified that ‘no suit shall be instituted against a common carrier unless notice in writing was given before the institution of suit and within six months from the date of knowledge of loss.

The present rules of 2011 further provide that in cases where loss of or damage to the consignment is not apparent, the provisions [1-6] shall not apply unless notice in writing is given by the consignee, of the loss of or damage to, the goods within six days from the date of actual handing over of the consignment to the consignee.   

-                 a similar provision with restriction of 3 days exist in Carriage of Goods by Sea Act but there the actual handing over date is mostly recorded. 

[7]  -  speaks of the responsibility of Common carrier – during the transit period, from the date of taking over the goods on their charge to the date of arrival at the destination point plus three calendar days.

The date of arrival is deemed to be day on which goods physically arrive at the destination or day on which the consignee / consignor is informed of the arrival of the goods at destination, whichever is later.

[8]  - in case of liability to be incurred on part of the common carrier, the consignor / consignee may have a relook at the distance declared by the common carrier in goods receipt and actual liability shall be based on the documentary evidence adduced by the common carrier, consignor and consignee 

~~   the implication and meaning of this is not easily understood as the relevance of distance being brought in at this stage is not comprehensible.

      [9]  - the liability of the common carrier shall be calculated on the actual freight collected or due or 90% of total charges excluding the taxes shown on goods receipt whichever higher.

Provided that in case of vehicle carrying or meant to carry dangerous or hazardous goods, the common carrier shall ensure that such goods are insured in any one of the policy under PLI Act 1991.  

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Whether one likes these or not, this is an enactment and after notification, its existence cannot be questioned, nor undermined. 

It is time for Insurers to brace themselves by studying the implications and drafting terms and conditions protecting their and that of their insureds as also charge premium rates as appropriate !!!!

Look forward to hearing more from the experts who regularly utilize Carriers and sometimes have had the unfortunate experience of loss or damage caused during transportation either by negligence of the carriers or otherwise. 

Regards – S. Sampathkumar.