Supreme Court: In an appeal filed by Hind Offshore Pvt. Ltd. / appellant against the order of the National Consumer Disputes Redressal Commission (‘NCDRC’) dated 15-05-2015 wherein the Commission held that the insurance company/respondent is under no contractual or legal obligation to reimburse the appellant for the loss suffered by it on account of the sinking of the vessel, the division bench of A.S. Bopanna and M.M. Sundresh, JJ. after taking note of the provisions relating to warranty and the way the Classification Certificate is issued, said that the appellant had failed to establish that the warranty class had not been breached by them and in that context the seaworthiness or otherwise at the point of accident is not of relevance. Thus, the Court opined that the NCDRC, having considered the relevant aspects of the matter in its correct perspective, has arrived at its conclusion, which cannot be interfered with.
The appellant entered into Bareboat Charter Party Agreement for a sea vessel known as M.V. Sea Panther (‘vessel’). The appellant obtained ‘Marine Hull Insurance Policy’ in respect of the said vessel from the insurance company covering the vessel for various risks including the ‘perils of the seas’ for an insured sum of Rs. 8,26,92,000/- for the period 09-11-2005 to 08-11-2006. The Marine Hull Insurance Policy is subject to the vessel possessing a Class Warranty. On 22-02-2006, the vessel on a voyage from Singapore to Mumbai suffered major damage to its port main engine. Thereafter, the main port engine was temporarily repaired The appellant presented an invoice of Rs. 1,32,66,803/- towards the cost to be incurred. Subsequent to the term of the first policy ending, the appellant entered a fresh Marine Hull Insurance Policy in respect of the vessel. Again, the vessel on a voyage was struck by a Tugboat because of which the vessel sank with all cargo on board. The appellant submitted a claim amounting to Rs 8,26,92,000/- due to the total loss of the vessel and cargo.
Thereafter, the insurance company appointed surveyors, who ascertained that the owners of the appellant had not informed the American Bureau of Shipping (‘ABS’) about the previous damage to the port main engine. ABS only based on their inspection, had issued the Class certificate. The Country Manager of ABS also reported that if a vessel sustains any damage to either Hull or Machinery and the same is not reported to the Class, then the Class would deem to be automatically suspended as per ABS Rules for Building and Classing Steel Vessels.
Since the claim of Rs. 8,26,92,000/- was not settled by the insurance company, the appellant approached the NCDRC by filing consumer complaint.
Issue: Whether the consideration made, and conclusion reached by the NCDRC would admit of any perversity or error in its reasoning?
The Court took note of the Marine Insurance Act, 1963, (‘MIA’) and the Rules for Building and Classing. From perusal of Sections 35, 37, 41(5) and 55 of the Marine Insurance Act, 1963 relating to warranties, the Court noted that if the requirement is not complied with, then the insurer is discharged from liability as from the date of breach of warranty, but without prejudice to any liability incurred before that date. Further, it also noted that if the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.
Placing reliance on Rajankumar & Bros. (Impex) v. Oriental Insurance Co. Ltd., (2020) 4 SCC 364, the Court said that mere knowledge on the part of the insurer that there was a breach of warranty would not amount to a waiver in the absence of an express representation to that effect.
The Court further said that in the present case, though during the subsistence of the insurance policy for the earlier term there was a claim lodged towards damage to the main engine of the port and crank shaft. Based on the recommendation of the surveyor a substantial amount has been paid to the appellant. Except for the knowledge of the insurer that in view of the waiting period prescribed by the manufacturers for supply of the engine crank shaft for replacement, repairs were carried out and a voyage would be undertaken for urgent delivery of the cargo during the subsistence of the earlier policy period, there is nothing on record to indicate that prior to the issue of the instant insurance policy for the period 09-11-2006 to 08-11-2007 or during subsistence, the replacement of the engine had been waived. Thus, when the insurance company relied upon the Class Certification to issue the policy, there was no express or implied waiver. The appellant has not established that the defects were brought to the notice of the Classification Society and thereafter the certificate was obtained. In such a situation when it is subsequently noticed that these defects were not intimated and the warranty class had not been complied with, the Classification Certificate would automatically become invalid.
Concerning the contention, that Rs. 1,00,000/- advanced towards replacement of the engine crank shaft can be recovered, the Bench said that the issue of policy is based on trust , the natural conduct of the appellant ought to have been to come clean on this aspect before the issuance of subsequent policy by informing the insurance company of non-utilisation of the advance receipt, offer to return the sum or with consent retain it to be utilised when the engine crank shaft was available. If such a course was adopted, the appellant could have been heard to put forth such a plea, not otherwise.
[Hind Offshore (P) Ltd. v. IFFCO – Tokio General Insurance Co. Ltd., 2023 SCC OnLine SC 966, decided on 09-08-2023]
*Judgment Authored by: A.S. Bopanna