Hind Offshore Pvt. Ltd. vs Iffco-Tokio General Insurance Co. Ltd

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7228 OF 2015

Hind Offshore Pvt. Ltd. .… Appellant(s)

Versus

IFFCO – Tokio General Insurance Co. Ltd. …. Respondent(s)

JUDGMENT

A.S. Bopanna, J.

1. The present appeal is directed against the order of the

National Consumer Disputes Redressal Commission

(hereinafter for short “NCDRC”) dated 15.05.2015

dismissing the consumer complaint filed by the appellant

herein.

2. The brief facts leading to the claim before the NCDRC

are that the appellant entered into Bareboat Charter Party

Agreement dated 02.10.2006 for a sea vessel known as M.V. Signature Not Verified Digitally signed by

Sea Panther (hereinafter for short “vessel”), the registered Nisha Khulbey Date: 2023.08.10 10:51:39 IST Reason:

C.A. No.7228/2015

Page 1 owner whereof is Astron Equities S.A. The appellant

obtained ‘Marine Hull Insurance Policy’ in respect of the

said vessel from the respondent bearing policy no.

21212985 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.

3. On 22.02.2006, the vessel on a voyage from Singapore

to Mumbai suffered major damage to its port main engine.

Dhiraj Offshore Surveyors and Adjusters Pvt. Ltd. conducted

a preliminary inspection on 22.04.2006 and opined that the

crankshafts and connecting rods were found beyond repair.

Since the wait time for the replacement of the engine crank

shaft was six months, considering the urgent commercial

commitments, the main port engine was temporarily

repaired. The appellant had presented an invoice of

Rs.1,32,66,803/- towards the cost to be incurred. The

respondent on the recommendation of Dhiraj Offshore

Surveyors and Adjusters Pvt. Ltd. issued a cheque for Rs.

C.A. No.7228/2015

Page 2 1,00,00,000/- dated 09.06.2006 as an advance payment for

replacing the engine crank shaft and other components.

4. Subsequent to the term of the first policy ending, the

appellant entered into a fresh Marine Hull Insurance Policy

in respect of the vessel, bearing policy no. 21306557

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 09.11.2006 to 08.11.2007. The American Bureau of

Shipping (hereinafter for short “ABS”) conducted a survey

on the vessel on 29.09.2006 and 14.10.2006 and issued

Class Certificate dated 19.10.2006 extending the Class

Certificate until 30.06.2009. The Class Certificate

constitutes a representation by ABS as to the structural

and mechanical fitness of the vessel.

5. Unfortunately for the appellant, on 03.12.2006, the

vessel on a voyage from Mumbai to SLQ Complex, Mumbai

High South Field was struck by a Tug Boat ‘Sea Ways 9’ as a

result of which the vessel sank with all cargo on board. The

appellant submitted a claim amounting to Rs.

C.A. No.7228/2015

Page 3 8,26,92,000/- due to the total loss of the vessel and cargo.

As per the procedure, the respondent appointed M/s. J.

Basheer & Associates Surveyors Pvt. Ltd. (hereinafter for

short “surveyor”) as the surveyors to assess the loss. The

surveyor on visiting the ABS ascertained that the

owners/representatives of the appellant had not informed

the ABS about the previous damage to the port main engine

and ABS only based on their inspection, had issued the

Class certificate dated 19.10.2006. The surveyor’s report

also states that 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-2005

Edition, Part 1, Chapter 1, Section 2 heading ‘Suspension

and Cancellation of Classification’.

6. In the meanwhile, Dhiraj Offshore Surveyors and

Adjusters Pvt. Ltd. submitted its final report on 19.02.2007.

As per their conclusion, it was considered unlikely that the

vessel will be recovered and as such permanent repairs to

C.A. No.7228/2015 Page 4 the port main engine will not be effected, as were supposed

to be done as a consequence of the first accident. Thus, it

was recommended that the sum of Rs.1,00,00,000/- paid

as “on account” on the basis of their report dated

22.04.2006 be recovered.

7. In that background, since the claim of Rs.

8,26,92,000/- was not settled by the respondents, the

appellant approached the NCDRC by filing Consumer

Complaint No.166 of 2008 claiming Rs.16,62,51,467/-

comprising of Rs.8,26,92,000/- towards loss of insured

asset, loss of earnings of Rs.5,41,98,144/-, and interest on

the insured asset @ 18% along with the cost of proceedings

i.e. Rs.2,93,61,324/-.

8. The gist of contentions raised by Sri Neeraj Kishan

Kaul, learned senior counsel for the appellant is as follows:

(a) It is submitted on behalf of the appellants that though

ABS was empowered to reconsider, withhold, suspend or

cancel the Class of any vessel or any part of the machinery

for non-compliance of the Rules, at no point of time did the

C.A. No.7228/2015 Page 5 ABS alter the Class Certificate accorded to the Vessel or

impose any conditions thereon. There was no withdrawal,

suspension or cancellation of the Class by ABS and in the

absence thereof, the same cannot and could not be

presumed to have been automatic.

(b) It is further submitted on behalf of the appellant that

the Class Certificate issued by the ABS was after a rigorous

physical inspection of the vessel and its machinery that was

conducted by ABS on 14.10.2006.

(c) It was further submitted that there was no breach of

class warranty insofar as there were neither any

recommendations, requirements or restrictions imposed by

ABS relating to unseaworthiness to be complied with by the

appellant as per clause 1.2 of class warranty nor was there

any obligation on the appellant regarding reporting to ABS

of accident and defects in the vessel as per clause 1.5 of

class warranty, as the same was applicable prospectively i.e.

to accident and defects in the vessel after issuance of the

Class Certificate and not during the term of the earlier

C.A. No.7228/2015 Page 6 Class Certificate or Policy. The appellant's vessel was

classed with ABS and the existing class was maintained as

per clause 1.1 of the class warranty. The appellant complied

with all statutory requirements relating to the

seaworthiness of the vessel as per clause 1.4 of class

warranty and provided clarification by ABS that the vessel's

Class has been maintained as per clause 4 of the class

warranty.

(d) It was also submitted that the factum of the meeting

between the surveyors and the ABS on 22.12.2006 was

only hearsay and there was no evidence which was led

regarding to the purported meeting. The surveyor

purportedly approached the Classification Society directly,

without seeking authorisation of the Appellant as required

under clause 3 of class warranty. This assumes

significance in view of the comments of this Court on the

tailor-made report of this very Surveyor in the case of The

New India Assurance Ltd vs. M/s. Protection

Manufacturers Pvt. Ltd., (2010) 7 SCC 386.

C.A. No.7228/2015

Page 7

9. The gist of the contentions put forth by Sri Devdatt

Kamath, learned senior counsel for the respondent is as

follows:

(a) The main contention of the sole respondent is that

appellant’s vessel was without Class Certification on the

date of the incident, being invalid and the respondent was

under no contractual and/or legal obligation to reimburse

the appellant. As per Section 2 of the Rules of the ABS

Classification Society, any damage to the Hull or Machinery

of the vessel has to be necessarily reported to the

Classification Society of the vessel and repairs conducted

thereto have to be as per the recommendations and under

supervision of the Classification Society. Any violation

and/or breach of the rules of classification society leads to

withdrawal/ suspension of the class of the vessel.

(b) It was further argued that there was a breach of

warranty by the appellants. As per the terms of the

insurance policy, the termination clause at 4.1 reads

“Unless the Underwriters agree to the contrary in writing,

C.A. No.7228/2015 Page 8 this insurance shall terminate automatically at the time of

change of the Classification Society of the vessel, or change,

suspension, discontinuance, withdrawal or expiry of her

Class therein, provided that if the Vessel is at sea, such

automatic termination shall be deferred until arrival at her

next port. However, where such change, suspension,

discontinuance or withdrawal of her Class has resulted

from loss or damage covered by Clause 6 of this insurance,

such automatic termination shall only operate, should the

Vessel sail from her next port without the prior approval of

the Classification Society”.

(c) Clause 6 covers perils and includes the perils of the

sea. Rivers, lakes or other navigable waters.

(d) Class warranty as per the policy warranted that the

Assured Owner’s Manager and Superintendents shall

comply with all requirements of the Classification Society

regarding the reporting to the society of accident to and

defects in the vessel and for the purpose of any claim the

Assured will provide certification by the Classification

C.A. No.7228/2015 Page 9 Society that the vessel's Class has been maintained. It is

contended that the said warranty constitutes an express

warranty in terms of Section 37 of the Marine Insurance

Act, 1963 which was breached by the appellants by not

disclosing the first accident and damage to the vessel. The

appellant’s failure to comply with the requirements of ABS

Rules and warranties by not reporting the accidents and

damages to the vessel discharge the respondent from any

liability under the insurance policy as per Section 35(3) of

the Marine Insurance Act, 1963. Reliance has been placed

in this regard on Ranjan Kumar and Brothers v. Oriental

Insurance Co., (2020) 4 SCC 364.

(e) It is further submitted that it is a settled principle of

Law that a contract of insurance is based on the principle of

Ubberimae fide, as stipulated under Section 19 of the

Marine Insurance Act, 1963. The appellant after receiving

an amount of Rs. 1,00,00,000/- from the respondent on

09.06.2006, never replaced the crank shaft and connecting

rods. As per the Preliminary report of Surveyor the same

was stated to be done in six months. The respondent issued

C.A. No.7228/2015 Page 10 the second Insurance Policy to the appellant on 09.11.2006.

Emphasis is supplied on the fact that the appellant never

informed the insurer that they had not carried out the

replacement of the vital parts to the main engine. It is

submitted by the respondent that this non-disclosure by the

appellant would tantamount to misrepresentation and

breach of good faith. Reliance in this regard is placed on

Sea Lark Fisheries vs. United India Insurance Company

and Anr., 2008 (4) SCC 131; Contship Container Lines

Limited vs. D.K. Lall & Ors., 2010 (4) SCC 256.

10. The rival contentions noted above were essentially

the case put forth by the parties before the NCDRC since

the facts referred to by the NCDRC in the impugned order

would refer to the same. In that background, at the outset,

it would be apposite to note the conclusion reached by the

NCDRC. The relevant portions read as hereunder;

“Despite knowing the stand taken by the insurance company viz. the damage which took place during the term of the first policy had not been reported to ABS, no effort was made by the complainant to produce any evidence from ABS before

C.A. No.7228/2015 Page 11 this Commission to prove that the aforesaid damage, including the fact that the crankshaft and connecting rods had not been replaced, was duly reported to them by the complainant. In these circumstances, it would be difficult for us to reject the report of the surveyor, who specifically stated that he had met the Principal Surveyor Mr. Ashok and Country Manager, Mr. R.C. Bhavnani of ABS to enquire whether they were informed of the damage to the port main engine of the vessel, which had occurred on 22.02.2006 and the temporary repairs carried out as per their recommendations and they were quite surprised to learn about such serious damage to the port main engine of the vessel. According to Mr. Basheer they clearly told him that they were not aware of the aforesaid damage nor had the owner of the vessel intimated any such incident to them.

They also told the surveyor that when they had inspected the vessel, no damage to the port main engine had been reported to them. Mr. R.C. Bhavnani told the surveyor that if a vessel sustains any damage to either HULL or machinery and the same is not reported to them, then the Class was deemed to be automatically suspended. Reliance in this regard was placed on the rules of the ABS and relevant rule has been extracted in the report of the surveyor and reproduced hereinabove.”

“There is no dispute that the vessel was actually classed with ABS for the period from 30.03.2006 to 03.12.2006; the issue before us is that the aforesaid

C.A. No.7228/2015 Page 12 Classification was obtained by concealing vital information with respect to the damage to the vessel, from the Classification Society. We are therefore, satisfied that had the complainant disclosed to ABS that the vessel had met with a serious accident on 22.02.2006 and only temporary repairs to the port main engine had been carried out whereas the crankshaft and connecting rods were yet to be replaced, the requisite Class Certificate would not have been issued by the ABS in respect of the vessel in question. The Class Certificate obtained by the complainant, therefore, has to be excluded from consideration, the same having been obtained by concealment of material facts from the Classification Society. Consequently, the vessel shall be deemed to be without class on the date it was hit by ship Seaways-9. The insurance company therefore is under no contractual or legal obligation to reimburse the complainant company for the loss suffered by it on account of sinking of the vessel.”

“The case of the insurance company is based on the Class Certificate having been obtained by concealment of material fact from the Classification Society and not on the actual unseaworthiness or otherwise of the vessel.”

11. The question, therefore, is as to whether the

consideration made and conclusion reached by the NCDRC

as extracted above would admit of any perversity or error in

C.A. No.7228/2015 Page 13 its reasoning. In the instant case, the fact that an ABS

classification certificate was obtained by the appellant and

was produced to the respondent, based on which a Marine

Hull Insurance Policy valid for the period 09.11.2006 to

08.11.2007 was issued in favour of the appellant by the

respondent is the accepted position. The fact that the vessel

had a collision with a Tug boat ‘Sea Ways 9’ on 03.12.2006

during the subsistence of the policy is also the accepted

factual position. The policy vide Clause 6 thereto, inter alia

provides for covering loss or damage suffered due to ‘perils

of the seas’ is also evident.

12. In a normal circumstance noted above, it would be

sufficient to admit the claim and determine the quantum of

loss suffered. However, in the instant case, there is a

prelude which provides a different dimension to the claim.

Prior to the instant policy, the vessel was covered under a

policy for the period 09.11.2005 to 08.11.2006. During the

subsistence of the earlier insurance policy, a claim was

lodged by the appellant claiming the reimbursement of the

insurance amount towards damage to the engine crank

C.A. No.7228/2015 Page 14 shaft and the related parts of the vessel. Dhiraj Offshore

Pvt. Ltd. was appointed as a surveyor to assess the loss for

which the insurance amount was claimed by the appellant.

The Surveyor on inspection found that the chief component

of the port main engine of the vessel was beyond repairs.

However, the appellant had indicated that they had carried

out temporary repairs to the port main engine due to their

urgent commitments for delivery of cargo and as there was

a waiting period of six months for delivery of the engine

crank shaft and connecting rods from the manufacturers,

the replacement was not immediately possible. The

insurance company based on the recommendations of the

surveyor made a payment of Rs.1,00,00,000/- to the

appellant, on account, towards the said damage to the

engine crank shaft and connecting rods which required

replacement. However, the said replacement was not made

and the status continued to be the same which came to be

known only on 19.02.2007 when Dhiraj Offshore Pvt. Ltd.

submitted the final report by which time the present

accident had occurred. It is in that light, the question would

C.A. No.7228/2015 Page 15 arise as to whether the obtainment of the Class Certificate

from ABS based on which the present policy covering the

period between 09.11.2006 to 08.11.2007 was issued would

be valid to be invoked by the appellant in respect of the

damage suffered in the accident which occurred on

03.12.2006.

13. The respondent insurance company declined to

honour the claim under the said policy on the basis that the

non-disclosure of the fact that the engine crank shaft and

connecting rods had suffered damage requiring the

replacement, had not been informed by the appellant to the

Classification Society for the issue of the Class Certificate

and therefore, the Class Certificate would not remain valid

for the reason of non-compliance of the warranty

requirement. The appellant would however contend that the

insurance company having issued the policy for the earlier

period and having made the payment on account for the

replacement, being aware of the repairs carried out and

having gone on a voyage to deliver the booked cargo cannot

now decline and it was for the respondent insurance

C.A. No.7228/2015 Page 16 company to make appropriate inquiries before issuing the

policy. It is in that background a consideration was made

by the NCDRC.

14. To put the matter in perspective by keeping in view

the rival contentions and the provisions as also the

regulations guiding the parties under the Marine Insurance

Act, 1963, and the Rules for Building and Classing, the

relevant provisions are required to be noted. In this regard,

Sections 35, 37, 41(5) and 55 of Act, 1963 which are

relevant have been brought to the notice of this Court which

read as hereunder:

“35. Nature of warranty.—(1) A warranty, in the following sections relating to warranties, means a promissory warranty, that is to say a warranty by which the assured

undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts. (2) A warranty may be express or implied. (3) A warranty, as above defined, is a condition which must be exactly complied with, whether it be material to the risk or not. If it be not so complied with, then, subject to any express provision in the policy, the

C.A. No.7228/2015 Page 17 insurer is discharged from liability as from the date of the breach of warranty, but without prejudice to any liability incurred by him before that date.

37. Express warranties.—(1) An express warranty may be in any form of words from which the intention to warrant is to be inferred. (2) An express warranty must be included in, or written upon, the policy, or must be contained in some document incorporated by reference into the policy. (3) An express warranty does not exclude implied warranty, unless it be inconsistent therewith.

41. Warranty of seaworthiness of ship. —

(1) xxxxx

(2) xxxxx

(3) xxxxx

(4) xxxxx

(5) In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.

55. Included and excluded losses.—(1) Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for

C.A. No.7228/2015 Page 18 any loss which is not proximately caused by a peril insured against. (2) In particular— (a) the insurer is not liable for any loss attributable to the wilful misconduct of the assured, but, unless the policy otherwise provides, he is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew; (b) unless the policy otherwise provides, the insurer on ship or goods is not liable for any loss proximately caused by delay, although the delay be caused by a peril insured against; (c) unless the policy otherwise provides, the insurer is not liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of the subject-matter insured, or for any loss proximately caused by rats or vermin, or for any injury to machinery not proximately caused by maritime perils.”

15. The relevant Classing Rules to be noted are as follows:

“The continuance of the classification of any vessel is conditional upon the Rule requirements for periodical, damage and other surveys being duly carried out. The Committee reserves the right to reconsider, withhold, suspend, or cancel the class of any vessel or any part of the machinery for noncompliance with the Rules, for defects or damages which are not reported to ABS, for defects reported by the Surveyors which have not been rectified in accordance with their recommendations, or for nonpayment of

C.A. No.7228/2015 Page 19 fees which are due on account of Classification, Statutory or Cargo Gear Surveys. Suspension or cancellation of class may take effect immediately or after a specified period of time.

Class will be suspended and the Certificate of Classification will become invalid in any of the following circumstances:

i) If recommendations issued by the Surveyor are not carried out by their due dates and no extension has been granted.

ii) If Continuous Survey items which are due or overdue at the time of Annual Survey are not completed and no extension has been granted.

iii) If the other surveys required for maintenance of class, other than Annual, Intermediate or Special Surveys, are not carried out by the due date and no Rule allowed extension has been granted, or

iv) If any damage, failure or deterioration repair has not been completed as recommended.

(10 August 2004)

Classification may be suspended, in which case the Certificate of Classification will become invalid, upon failure to submit any damage, failure, deterioration or repairs for examination upon the first opportunity or, if proposed repairs, as referred to in 7-1-1/7, have not been submitted to the Bureau and

C.A. No.7228/2015 Page 20 agreed upon prior to commencement, as referred to in 7-1-1/7.”

16. From a perusal of the provisions as contained in the

Marine Insurance Act 1963 relating to warranties, 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. In that background, in a time policy, there

is no implied warranty that the ship shall be seaworthy at

any stage but where with the privity of the assured, the

ship is sent to sea in an unseaworthy state, the insurer is

not liable for any loss attributable to unseaworthiness. It is

in that light, the Classification Certificate assumes

relevance with reference to the manner in which it was

obtained. In view of the warranty requirement, the assured

is expected to bring to the notice of the Classification

Society the shortcomings or the defects if any, before the

issue of such Class Certificate since the insurance coverage

to be provided by the insurer is based on such Class

Certificate which is assumed to have been issued by the

Classification Society after keeping in view all aspects

C.A. No.7228/2015 Page 21 including the defects if any brought to their notice. It is in

that light the provisions extracted above becomes relevant

as to the circumstance under which the Class will be

suspended and the Certificate of Classification will become

invalid in the circumstances stated therein, which also

refers to such suspension and invalidation, if any damage,

failure or deterioration repair has not been completed as

recommended.

17. Hence if these aspects are kept in perspective, the

entire issue in the instant case would hinge on the aspect

as to whether the appellant had brought any material on

record, either when the claim was lodged or before the

NCDRC to indicate that the damage to the engine crank

shaft which was required to be replaced and on account of

which payment had been obtained, had been factually

replaced, or if it had not been replaced, whether it was

reported to ABS so that the Classification Society would

have thereafter assessed as to whether even in that

circumstance where the replacement had not been made,

whether the repairs carried out were sufficient to certify the

C.A. No.7228/2015 Page 22 seaworthiness of the vessel. On being aware, an informed

decision was to be taken to issue the Class Certificate. In

the instant case, no such material was brought on record.

18. The learned senior counsel for the appellant would

however seek to rely at the outset on a decision rendered by

the NCDRC in the case of Ceyaki Shipping Pvt. Ltd. vs.

New India Assurance Pvt. Co. Ltd. in Consumer Case

No.278 of 2011 dated 21.03.2017 to persuade us to adopt

the view taken therein. In the said case the facts reveal

that the incident had been brought to the notice of the

insurer and the policy was issued only thereafter. In that

circumstance, it was held that it was not open for the

insurance company to repudiate the claim inasmuch as the

insurer had an opportunity to ask the proposer whether the

said defects/deficiencies in the vessel had been reported to

the Classification Society or not. Having noted the same we

are of the opinion that the said decision would not be of

assistance inasmuch as the defects which were existent was

known to the insurance company. However, in the instant

case though, there was an earlier damage to the engine

C.A. No.7228/2015 Page 23 crank shaft and on the recommendation for replacement,

the insurer had reimbursed the amount for that purpose.

Though the immediate voyage with repairs had been

brought to the knowledge of the insurer, the replacement

was to be made in due course. The entire onus cannot be on

the insurer to check as to whether subsequently the engine

had been replaced by utilising the amount received. In such

situation when the replacement, in fact was not made, the

onus was entirely on the appellant to bring it to the notice

of the Classification Society and in that circumstance when

the Class Certificate was issued, the warranty class had in

fact been violated by the appellant and the exclusion as

indicated would apply and make it invalid.

19. The decision relied on by the learned Senior Counsel

for appellant in the case of Marine Offshore Pvt. Ltd. vs.

China Insurance Company (Singapore) Pvt. Ltd. & Anr.,

(2006) 4 SLR 689 is also not of assistance to the appellant

since the consideration therein was entirely in a different

circumstance where the clause relating to the perils of the

sea was the issue and, in that circumstance, whether the

C.A. No.7228/2015 Page 24 unseaworthiness could be considered. In the instant facts

as noted the unseaworthiness alone is not the issue but the

non-reporting of the damage/defects to the Classification

Society before issue of the certificate and the same

rendering the Class Certificate invalid though issued earlier

is the issue and in that circumstance whether the owner is

to inform this aspect or as to whether the verification by the

insurer is warranted.

20. Further, the decision in the case of New India

Assurance Company Ltd. vs. Pradeep Kumar, (2009) 7

SCC 787 relied on by the learned senior counsel for the

appellant to contend that the word of the surveyor is not

final would not assist the appellant. In the instant case, the

surveyor has recommended rejection of the claim mainly on

the reason that the earlier defect with reference to

seaworthiness had not been brought to the notice of the

Classification Society. It is in that regard the surveyor has

referred to the inquiries made by him from the

Classification Society and has indicated that the persons

representing the Classification Society had stated that the

C.A. No.7228/2015 Page 25 said deficiencies had not been brought to their knowledge.

Though the learned senior counsel would contend that such

indication in the surveyor’s report being hearsay cannot be

relied upon, we are of the opinion that in the absence of any

material on behalf of the appellant to indicate that they had

intimated the Classification Society, there was no obligation

in terms of the legal position for the insurance company to

make such inquiry. Therefore, the inquiry made by the

surveyor was an additional factor which has not been

rebutted or controverted with any other evidence by the

appellant. In that circumstance the decision in New India

Assurance Company Limited vs. Protection

Manufacturers Private Limited, (2010) 7 SSC 386 relied

on by the learned Senior Counsel to comment on the

conduct of the Surveyor is also of no relevance.

21. Insofar as the provisions relating to warranty, the

manner in which the representation is required to be made

has been considered in detail by this Court in the case of

Rajankumar & Brothers (IMPEX) vs. Oriental Insurance

Company Ltd., (2020) 4 SCC 364 relied upon by the

C.A. No.7228/2015 Page 26 learned senior counsel for the respondent insurance

company. The referred paragraphs read as hereunder:

“19. Subsequent common-law decisions, however, have held that the obligation of the assured to inform the correct details in respect of the vessel's classification extends even where a policy is issued after the particulars of the vessel have been provided.

32. A warranty imposes certain obligations on the insured, and Section 35(3) makes it amply clear that a warranty needs to be complied with, regardless of whether or not its non-

compliance materially affects the risk involved in carrying the shipment. As a corollary, when a warranty is not complied with i.e. there is a breach of warranty, the insurer is discharged from liability from the date of such breach, by virtue of Section 35(3). At the outset, therefore, it is important to note that the scheme of the 1963 Act is clear inasmuch as the automatic consequence of a breach of warranty is discharge of the insurer's liability. Such discharge of liability does not require any express conduct or representation from the insurer.

35. It is not the appellant's case that the respondent had chosen to issue the marine insurance policy despite being informed by the appellant that the vessel was non-classed. Rather the appellant had represented that the subject vessel was “IRS” classed. That being the case, as

C.A. No.7228/2015 Page 27 noted in Everbright Commercial Enterprises [Everbright Commercial Enterprises Pte Ltd. v. Axa Insurance Singapore Pte Ltd., 2001 SGCA 24] and Kam Hing Trading [Kam Hing Trading (Hong Kong) Ltd. v. The People's Insurance Co. of China (Hong Kong) Ltd., (2010) 4 HKLRD 630] , it was not the respondent's burden to have investigated the appellant's claim and informed the appellant that the subject vessel was non- classed. Hence, at the outset it is important to note that the mere formal issuance of the marine insurance policy by the respondent does not indicate “acceptance”/waiver of the vessel's classification or lack thereof.

40. For instance, after the occurrence of loss, even if the insurer makes an express representation that it would affirm the contract and indemnify the loss, if the insurer can prove that such a representation was made without the knowledge that there was a breach of warranty on the part of the insured, the liability of the insurer would stand discharged from the date on which the warranty was breached. Similarly, 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.”

From a perusal of the above judgment, it is clear that the

mere knowledge on the part of the insurer that there was a

breach of warranty would not amount to a waiver in the

C.A. No.7228/2015 Page 28 absence of an express representation to that effect. As

noted in the instant 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

substantial amount had been paid, on account, to the

appellant since such advancement of the amount was

towards the replacement of the engine crank shaft. 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. In that circumstance, when the

respondent 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

C.A. No.7228/2015 Page 29 defects were brought to the notice of the Classification

Society and thereafter the certificate had been obtained. In

such a situation when it is subsequently noticed that these

defects were not intimated and the warranty class had not

been complied, the Classification Certificate would

automatically become invalid. In fact, in the instant case,

the fact that the replacement of the engine crank shaft had

not been made had come to the knowledge of the insurer

only when the final surveyor report was submitted on

19.02.2007 after the policy had already been issued on

09.11.2006 and the accident had occurred on 03.12.2006.

As such there is no waiver on the part of the respondent

insurer in this case.

22. The learned senior counsel for the appellant, during

the course of his argument has repeatedly contended that at

best the sum of Rs.1,00,000/- advanced towards

replacement of the engine crank shaft can be recovered and

not deny the claim when the policy was in force. In our

view, such contention is not acceptable at a point after the

accident. When we have noted that the issue of policy is

C.A. No.7228/2015 Page 30 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 respondent

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. Only if such course was adopted,

the appellant could have been heard to put forth such a

plea, not otherwise.

23. The learned senior counsel for the respondent has on

this aspect relied on the decision in the case of Sea Lark

Fisheries vs. United India Insurance Company & Anr.,

(2008) 4 SCC 131 wherein the requirements of Marine

Insurance Policy and the implied warranty of seaworthiness

was considered and it was also held that as per Section 19

of the Act, insurance is Uberrimae Fidei, which means that

the issuance of the policy is based on trust. To the same

effect, the learned senior counsel for the respondent has

also relied on the decision in the case of Contship

Container Lines Ltd. vs. D.K. Lall & Ors., (2010) 4 SCC

256.

C.A. No.7228/2015 Page 31

24. Therefore, keeping in view the consideration made by

us hereinabove and also taking note of the provisions

relating to warranty and the manner in which the

Classification Certificate is issued, in the instant facts 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. In that circumstance, we are of the opinion that

the NCDRC having considered the relevant aspects of the

matter in its correct perspective has arrived at its

conclusion, which would not call for interference.

25. Accordingly, the appeal being devoid of merit is

dismissed with no order as to costs.

26. Pending application, if any, shall stand disposed of.

….……………………….J. (A.S. BOPANNA)

….……………………….J. (M.M. SUNDRESH) New Delhi, August 09, 2023

C.A. No.7228/2015 Page 32