Sohom Shipping Pvt. Ltd. v. New India Assurance

, ,

Read Judgment: https://lawyerslibrary.in/books/mwum/

Insurance Contract – Special Condition – Breach – Uberrima Fides – Contra Proferentem – Consumer Protection Act, 2019, Section 67

Appeal against NCDRC order dismissing consumer complaint for repudiation of insurance claim. Insurance policy for voyage contained special condition that voyage “commence & complete before monsoon sets in.” Vessel sailed after monsoon began, ran aground; claim repudiated for breach of condition.

Held

Special condition non-material and impliedly waived as policy period covered foul weather, and strict compliance impossible without absurd results. No ambiguity in condition, so contra proferentem inapplicable. Appellant disclosed voyage purpose, negating breach of uberrima fides. Repudiation invalid; NCDRC order set aside, case remanded for determining insured sum.

[General Assurance Society Ltd. v. Chandumull Jain (1966) 3 SCR 500; Industrial Promotion and Investment Corporation of Orissa Ltd. v. New India Assurance Co. Ltd. (2016) 15 SCC 315; Ramji Karamsi v. The Unique Motor and General Insurance Co. Ltd. AIR 1951 Bom 347, relied on.]

Citation: 2025 (4) KLR (SC) 34 : 2025 INSC 453
Court: Supreme Court of India
Judges: B.V. Nagarathna, J.; Satish Chandra Sharma, J.
Date of Judgment: Civil Appeal No. 2323 of 2021; April 7, 2025
Parties : Sohom Shipping Pvt. Ltd. v. New India Assurance Co. Ltd. & Anr.

Facts

Sohom Shipping Pvt. Ltd., engaged in the shipping business, purchased a barge, ‘Srijoy II,’ and planned its maiden voyage from Mumbai to Kolkata. The appellant obtained a single voyage permit from the Director General of Shipping (DGS) and an insurance policy from the respondent for the period of May 16, 2013, to June 15, 2013. The insurance contract included a special condition that the “voyage should commence & complete before monsoon sets in” and a warranty that the vessel depart in weather conditions not exceeding Beaufort Scale No. 4. The voyage began on June 6, 2013, but the vessel ran aground near Ratnagiri Port on June 7 due to bad weather and engine failure. The appellant claimed total loss, issuing a ‘Notice of Abandonment’ on July 25, 2013. The respondent repudiated the claim on September 12, 2013, citing a breach of the special condition as the voyage started after the monsoon season began (June 1, per DGS Circular). The National Consumer Disputes Redressal Commission (NCDRC) dismissed the appellant’s consumer complaint on April 13, 2021, citing a breach of uberrima fides (utmost good faith) due to suppression of material facts. The appellant appealed to the Supreme Court under Section 67 of the Consumer Protection Act, 2019.

Issues

  1. Whether the special condition “voyage should commence & complete before monsoon sets in” was breached, justifying the respondent’s repudiation of the insurance claim.
  2. Whether the special condition was ambiguous, warranting application of the contra proferentem rule.
  3. Whether the special condition was material and a condition precedent to the insurance contract’s validity.

Arguments

Appellant

  • The NCDRC’s dismissal was contrary to law.
  • The respondent knew the policy period (May 16–June 15, 2013) covered the monsoon season, implying a waiver of the special condition.
  • The special condition was non-material and ambiguous, invoking contra proferentem to construe it against the respondent.
  • The respondent failed to conduct due diligence, knowing the voyage would occur during foul weather.
  • Treating the condition as precedent leads to absurd outcomes, as no claim could be made if the voyage was incomplete due to a peril.

Respondent

  • The NCDRC’s order was well-reasoned and valid.
  • The appellant breached the special condition by sailing after June 1, when the monsoon began, and violated Clause 3.1.2 by sailing in waves exceeding 2 meters.
  • The special condition was clear, negating contra proferentem.
  • The appellant suppressed its intent to sail during foul weather, breaching uberrima fides.
  • Allegations of forgery were raised, claiming the appellant fabricated the policy submitted to authorities.

Judgment

The Supreme Court allowed the appeal, set aside the NCDRC’s order, and remanded the case to the NCDRC for determining the insured sum payable. Key findings:

  1. Interpretation of Special Condition: The phrase “before monsoon sets in” was clear, referring to the period before foul weather (June 1 on the West Coast, May 1 on the East Coast, per DGS Circular). No ambiguity existed in the clause itself, so contra proferentem did not apply.
  2. Materiality and Waiver: The special condition was non-material and impliedly waived. The policy covered May 16–June 15, 2013, overlapping with the foul weather period. The respondent knew the voyage’s purpose and route, making strict compliance impossible (e.g., even starting on May 16, the vessel would reach Kolkata after June 1). Enforcing the condition strictly would render claims impossible in case of perils, leading to absurd results and defeating the insurance’s purpose.
  3. Uberrima Fides: The appellant disclosed the voyage’s purpose in the proposal form, negating claims of suppression. The respondent’s assumption that the vessel would be laid up during foul weather was unreasonable given the policy’s purpose and period.
  4. Other Claims: Allegations of forgery and breaches of other conditions (e.g., Clause 3.1.2) were not addressed in detail, to be examined by the NCDRC on merit.

Ratio Decidendi

  • Insurance contracts require uberrima fides, but terms must be construed strictly. A non-material condition, if impossible to fulfill or leading to absurd outcomes, is impliedly waived and cannot justify repudiation.
  • The contra proferentem rule applies only to genuinely ambiguous clauses, not when ambiguity is introduced by external factors.
  • Repudiation based on a breach of a non-material condition, known to be impractical at the contract’s inception, is invalid.

Obiter Dicta

The Court noted that other objections raised by the respondent (e.g., forgery, breach of weather warranties) require separate examination by the NCDRC.

Disposition

  • Appeal allowed.
  • NCDRC’s order dated April 13, 2021, set aside.
  • Case remanded to NCDRC to determine the insured sum payable, with directions to appear on April 29, 2025, and expedite proceedings.
  • Parties to bear their own costs.

Precedents Relied Upon

  • General Assurance Society Ltd. v. Chandumull Jain (1966) 3 SCR 500: Insurance contracts require uberrima fides and may be construed contra proferentem if ambiguous.
  • Industrial Promotion and Investment Corporation of Orissa Ltd. v. New India Assurance Co. Ltd. (2016) 15 SCC 315: Contra proferentem applies only to real ambiguities in policy wording.
  • Ramji Karamsi v. The Unique Motor and General Insurance Co. Ltd. AIR 1951 Bom 347: Conditions leading to absurd results are not precedent to liability.

Significance

This judgment clarifies the interpretation of insurance contract conditions, emphasizing that non-material or impractical terms may be waived, especially when the insurer is aware of the circumstances. It reinforces the limits of contra proferentem and the importance of uberrima fides in insurance disputes.

, , , , ,