SUPREME COURT INTERPRETS INSURANCE CONDITIONS IN MARINE CONTRACTS
The Judgment in the Case of Sohom Shipping Pvt. Ltd. v. The New India Assurance Co. Ltd. &Anr, Civil Appeal No. 2323 of 2021,was delivered by a Division Bench of the Supreme Court of India, comprising Hon’ble Justice B.V. Nagarathna and Justice Satish Chandra Sharma on 7th April 2025.This Case primarily deals with the interpretation of a special condition in a marine insurance contract regarding the requirement that the voyage should commence & complete before monsoon sets in and whether its breach justified the repudiation of an insurance claim.
Facts of the Case
The Appellant, Sohom Shipping Pvt. Ltd, engaged in the shipping business, acquired a barge named ‘Srijoy II’ for its maiden voyage from Mumbai to Kolkata. A single voyage permit was obtained from the Director General of Shipping and the Appellant secured insurance for the voyage from the Respondent, The New India Assurance Co. Ltd, for the period from 16.05.2013 to 15.06.2013. The insurance policy included a condition stating that the voyage should begin and end before the monsoon sets in. The vessel commenced the voyage on 06.06.2013 but was halted due to bad weather and engine failure, eventually running aground. The Appellant filed a claim for total loss, which the insurer repudiated on the ground that the vessel sailed after the monsoon had begun, thus breaching the material condition of the policy. Aggrieved by this repudiation, the Appellant filed a complaint before the National Consumer Disputes Redressal Commission (NCDRC), which dismissed the complaint. Hence, The Appellantpreferred the present Appeal.
Issues
- Whether the condition that the “voyage should commence & complete before monsoon sets in” was breached.
- Whether such a condition was material to the contract and whether its breach justified repudiation of the claim.
- Whether the rule of contra proferentem (interpretation against the drafter) applied to the ambiguous clause.
- Whether the Appellant failed in its duty of utmost good faith (uberrima fidei).
Contentions by the Appellant
The Appellant argued that the insurer was fully aware that the voyage was scheduled during the monsoon season, thereby rendering the special condition non-material or at least impliedly waived. They contended that the phrase “before monsoon sets in” was vague and ambiguous and therefore should be interpreted in favor of the insured by applying the contra proferentem rule. It was further argued that the insurance policy was granted with full knowledge of the timing and route of the voyage and hence, repudiation of the claim on that basis was unjust. The Appellants also alleged that treating the special condition as a condition precedent would lead to absurd consequences, effectively defeating the entire purpose of securing insurance for marine perils.
Contentions by the Respondent
The Respondents argued that the Appellant clearly breached the specific and determinable special condition by setting sail after the monsoon had commenced. They contended that the vessel navigated in conditions where the wave height exceeded permissible limits, thereby violating the classification requirements under the contract. It was further alleged that the contra proferentem rule was not applicable, as the phrase “before monsoon sets in” was precise and left no room for ambiguity. The Respondents also alleged that the Appellant committed forgery and failed to disclose material facts, thereby breaching the duty of utmost good faith (uberrima fidei), which is essential in contracts of insurance.
Judgment
The Supreme Court held that the special condition was not ambiguous and hence the rule of contra proferentem did not apply. However, it found the condition to be non-material and impliedly waived, considering the insurance was knowingly issued for a period covering the monsoon season and the voyage route necessarily included areas where monsoon had already begun. It ruled that treating the clause as a condition precedent would lead to absurd outcomes, nullifying insurance benefits in genuine claims. Consequently, the Court set aside the NCDRC’s order, allowed the appealand remanded the matter back to NCDRC to assess the quantum of the claim, while leaving other allegations (like forgery) to be determined on merits.
Parichaya Reddy
Associate
The Indian Lawyer & Allied Services
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