Supreme Court of India
The Supreme Court set aside the National Consumer Disputes Redressal Commission's order requiring Bajaj Allianz General Insurance to pay Rs. 64 Lakhs by way of compensation to Madhya Pradesh government for wrongful repudiation of a claim of damages to a helicopter in transit from Canada to Bhopal.
CIVIL APPEAL NO. 2366-67 OF 2020/DATED 24 APRIL, 2020
BAJAJ ALLIANZ GENERAL INSURANCE Vs. THE STATE OF MADHYA PRADESH
IN THE SUPREME COURT OF INDIA/CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2366-67 OF 2020/DATED 24 APRIL, 2020
Sub: The Supreme Court set aside the National Consumer Disputes Redressal Commission's order requiring Bajaj Allianz General Insurance to pay Rs. 64 Lakhs by way of compensation to Madhya Pradesh government for wrongful repudiation of a claim of damages to a helicopter in transit from Canada to Bhopal.
1. The respondent purchased a "Transit Marine Insurance Policy" from the appellant on 21 July 2005, to cover the transportation of a Bell – 430 Helicopter from Langley, Canada to Bhopal, India. By an acceptance letter dated 1 July 2005, the appellant set out the transit route for the transportation of the helicopter by air, sea and road. By a letter dated 10 July 2005, the proposed route was altered as follows:"Transit Details: Langley to Pithampur/Bhopal (by road/ by air)."
2. The policy schedule issued by the appellant indicated that the policy was issued from 22 July 2005 for transportation of the helicopter with standard packaging from Langley to Bhopal for a total sum insured of ₹ 20,00,00,000. The policy was to be governed by the accompanying clauses that included, inter alia, Institute Cargo Clauses (Air Cargo), Institute War Clauses (Air Cargo), Institute Strike Clauses (Air Cargo), and an Institute Theft Pilferage Non Delivery Clause that listed out the terms and conditions of all damages and loss covered under the policy. The duration of the policy was to be governed in terms of Clause 5 of First Appeal no 279 of 2009 First Appeal no 25 of 2010 "ICC" the ICC.
3. On 5 October 2005, the helicopter was transported in a knocked down state by air to New Delhi. On 13 October 2005, the helicopter was cleared by the customs and was shifted to a hangar at New Delhi. On 21 October 2005, the helicopter was inspected by a representative of the manufacturer during routine inspection and the window of the crew door was reported to be damaged.
4. The respondent sought the permission of the Director General of Civil Aviation to fly the helicopter to Bhopal but was denied permission on account of the damage to the window of the crew door.
5. By a letter dated 22 October 2005, the respondent informed the appellant of the damage and stated that the helicopter was "being assembled at the Hangar of Indamer Co. located at Delhi so that the Helicopter can fly from Delhi to Bhopal".
6. On 23 November 2005, the respondent informed the appellant that upon inspection, the tail boom of the helicopter was found to be damaged.
7. A surveyor was appointed by the appellant to assess the alleged damage to the window of the crew door and the tail boom of the helicopter. By a report dated 14 March 2006, the surveyor concluded as follows:
i) "The damage to window glass of pilot seat and damage to tail boom of helicopter are two separate incidents not related to each other.
ii) The replacement cost of damaged window glass of pilot seat is below Rs 10,00,000 and hence would fall under the excess prescribed under the policy.
iii) The damage to the tail boom had occurred at Hangar #3, Bay 15/33 IGI Airport Delhi after substantial assembly but prior to test flight and not during transit and hence would not fall under the purview of marine insurance policy as issued to the insured."
8. By a letter dated 10 April 2006, the appellant informed the respondent that the damage to the tail boom was not detected during transit or customs clearance and it was only detected in the third week of November 2005 before which multiple inspections had been carried out and no damage was reported earlier. The appellant further informed the respondent that the representatives of the manufacturer had also admitted that the loss to the tail boom was only noticed in the month of November.
9. On 10 April 2006, the appellant informed the respondent that both the losses claimed were inadmissible for the following reasons:
i) Claim for damage to Windscreen glass – The total cost of replacement for this loss is quoted to be Rs (amount of windscreen glass)/- This amount is within the policy deductible of 0.5% of sum insured of Rs 20 Crores. As such there is no liability attaching to the policy.
ii) Claim for dent on Tail Boom of the aircraft-
a) This was discovered at Hanger-3 Bay 15/33 IGI Airport Delhi in the third week of Nove-2005. The dent was noticed by the representative of manufacturer during routine inspection. It is important to note that cargo had landed on (date).
b) We deputed Surveyors, M/s Puri Anuj & Associates, to inspect and report on loss.
c) Surveyors have reported that the loss was not identified/ reported during Customs Clearance. As clean delivery has been accepted.
d) Representatives of Canadian manufacturers, Mr Lorne Vowles and Mr Adrine Lawrence, have admitted that the loss was noticed only in November. There was no damage to the tail boom during their thorough inspection on landing of cargo.
e) The loss claimed is caused during the storage/movement/ handling of cargo and long after it‟s delivery at desired destination.
10. INSURER POINT OF VIEWS:In view of these facts, we regret to say that the loss falls beyond the scope of cover granted. Both the losses claimed are inadmissible."
11. By a letter dated 11 April 2006, the respondent responded to the above letter stating that even though the damage was noticed after a month of customs clearance, the policy of transit was up to Bhopal and therefore, damage to the helicopter in the month of November 2005 would also be covered under "transit".
12. The appellant repudiated the claim of the respondent by a letter dated 11 July 2006 on the ground that the loss that occurred to the helicopter was after the duration of the policy had ended as mentioned in Clause 5 of the ICC:
"In the present case, the destination of the consignment of air transit was New Delhi Airport. The cargo [aircraft] was to be assembled at this location and then aircraft was to fly to Bhopal. The flight would be out of the Marine Transit scope of insurance. The named destination "Bhopal" of issued policy has no relevance in this context.Thus, insurance cover ended on delivery at the final warehouse, premises or place of storage...".
13. The respondent filed a consumer complaint before the SCDRC on 18 August 2006 seeking compensation from the appellant for wrongful repudiation of the claim and towards the loss sustained by the respondent.
14. On 16 May 2009, the SCDRC found the appellant to be deficient in its service and directed the appellant to pay a compensation of ₹ 64,89,205 to the respondent. The SCDRC held that the present case was not a case of delivery before the final destination but the halt at New Delhi was only a transit halt and the assembly of the helicopter at New Delhi did not change the nature of the cargo.
15. Being aggrieved by the judgment of the SCDRC, both the petitioner and the respondent preferred separate appeals before the NCDRC. The NCDRC by its judgment dated 10 August 2018, upheld the finding of the SCDRC that there was a deficiency of service on behalf of the appellant in repudiating the claim. In addition to the compensation which was granted by the SCDRC, the NCDRC awarded "interest compensation by way of damages" at the rate of six(6%) percent per annum from the date of repudiation till realisation.
16. Assailing the decision of the NCDRC, the appellant has filed the present Special Leave Petition before this Court under Article 136 of the Constitution.
17. The NCDRC has in the impugned judgment proceeded on the understanding that "since customs clearance is essentially at New Delhi, it has to be construed and interpreted in the right spirit that the commencement of the transit is at Langley and ordinary course of transit includes the staying at Delhi for customs clearances and for assembling".
18. The NCDRC has further noted that there existed no ambiguity regarding the commencement of the risk at Langley and ending at the final destination i.e. Bhopal.
19. According to the NCDRC, the expiry of thirty days after completion of discharge at the final port of discharge should be essentially interpreted as thirty days after reaching Bhopal and not thirty days during the course of transit which included the halt at New Delhi.
20. The line of approach adopted by the NCDRC is evidently incorrect. While construing a contract of insurance, it is not permissible for a court to substitute the terms of the contract. The court should always interpret the words used in a contract in a manner that will best express the intention of the parties.
21. The NCDRC has incorrectly proceeded on the path that the ordinary course of transit would include assembling of the helicopter at New Delhi and the policy covered all risks till the time the helicopter did not reach Bhopal.
22. The risks associated with the assembled helicopter were not covered within the purview of the policy, as the subject-matter which had been insured was a helicopter being transported in a packaged knocked down condition. The act of assembling the helicopter with a view to having it flown under its own power, instead of transporting the packaged knocked down helicopter further to Bhopal by road, would not constitute as storage in the ordinary course of transit.
23. The interpretation adopted by the NCDRC strikes fundamentally at the purpose of the policy and is not in accordance with sound commercial principles. The interpretation altered the character of the risk insured beyond the scope of the policy as agreed between the parties.
24. We are hence of the view that the interpretation placed on the terms of the insurance policy was manifestly incorrect and that the impugned orders of the NCDRC and SCDRC are unsustainable.
25. The appeals are accordingly allowed and the impugned judgments and orders of the NCDRC and the SCDRC shall stand set aside. The consumer complaint shall stand dismissed. There shall be no order as to costs. Pending application(s), if any, shall stand disposed of.
Clause 6 of the ICC provides for continuation of insurance cover after termination in circumstances beyond the control of the insured.
Clause 6 provides thus:" 6. If owing to circumstances beyond the control of the Assured either the contract of carriage is terminated at a place other than the destination named therein(from Langley and ending at the final destination i.e. Bhopal) i.e. from or the transit is otherwise terminated before delivery of the subject-matter insured as provided for in Clause 5 above, then this insurance shall also terminate unless prompt notice is given to the Underwriters and continuation of cover is requested when the insurance shall remain in force, subject to an additional premium if required by the Underwriters, either;
6.1 until the subject-matter is sold and delivered at such place or unless otherwise specially agreed, until the expiry of 30 days after arrival of the subject-matter hereby insured at such place, whichever shall first occur, or
6.2 if the subject-matter is forwarded within the said period of 30 days (or any agreed extension thereof) to the destination named herein or to any other destination, until terminated in accordance with the provisions of Clause 5 above."
Clause 6 states that the insured can issue prompt notice to the underwriters to continue the cover upon payment of an additional premium, if owing to circumstances beyond its control either the contract of carriage is terminated at a place other than the destination named therein or the transit is otherwise terminated before the delivery of the subject matter insured as provided for in Clause 5.
In the present case, if the respondent decided to retain the helicopter in New Delhi awaiting the arrival of the replacement window from USA, it could have issued a notice to the underwriters to continue the cover of carriage till the time the repairs were carried out. However, the respondent did not issue any notice seeking extension of the insurance cover under Clause 6.
The court further held that the NCDRC has incorrectly proceeded on the path that the ordinary course of transit would include assembling of the helicopter at New Delhi and the policy covered all risks till the time the helicopter did not reach Bhopal.
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