Kopargaon Sahakari Sakhar Karkhana Ltd (now known as Karmaveer Shankarrao Kale Shahkari Shakhar Karkhana Ltd) vs National Insurance Co. Ltd. & Anr.

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No……….. OF 2025 (Arising out of SLP (C) Nos. 1377-1378/2022)

KOPARGAON SAHAKARI SAKHAR KARKHANA LTD (NOW KNOWN AS KARMAVEER SHANKARRAO KALE SHAHKARI SHAKHAR KARKHANA LTD.)

…APPELLANT(S)

VERSUS

NATIONAL INSURANCE CO. LTD. & ANR.

…RESPONDENT(S)

JUDGMENT

MANOJ MISRA, J.

1. Leave granted.

2. These two appeals arise from a Consumer Complaint

No. 7 of 2007 filed by the appellant against the Signature Not Verified Digitally signed by

respondents before the Maharashtra State Consumer KAVITA PAHUJA Date: 2025.11.13 16:51:46 IST Reason:

Dispute Redressal Commission, Mumbai, Circuit

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 1 of 33 Bench at Aurangabad1. The State Commission vide

order dated 24.07.2012 partly allowed the complaint

and, inter alia, awarded Rs.49 lacs as compensation

to the complainant-appellant with interest @ 6% p.a.

w.e.f. 03.07.2006 till realization of the awarded

amount.

3. Against the order of State Commission two appeals

were filed before the National Consumer Disputes

Redressal Commission, New Delhi2. Appeal No.166 of

2013 was by the appellant for enhancement of

compensation whereas Appeal No.580 of 2012 was by

the insurance company (i.e., the first respondent)

against award of compensation.

4. NCDRC allowed the appeal of the first respondent and

dismissed the appeal of the appellant by a common

judgment and order dated 09.11.2020, which is

impugned in these appeals filed by the complainant-

appellant.

1 State Commission 2 NCDRC

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 2 of 33 Facts

5. Relevant facts are as under:

(i) The appellant obtained an insurance policy from

the first respondent (i.e., insurance company). The

policy provided insurance cover, inter alia, to Boiler

no.GT-23 for the period starting from 01.02.2005 up

to 31.01.2006. The risk covered loss /damage up to

Rs.1.60 crores.

(ii) On 12.05.2005, a blast/ explosion took place in

that boiler. Intimation of the blast was provided to the

boiler inspector as also to the first respondent.

(iii) The first respondent appointed a surveyor to

inspect the boiler and assess the loss.

(iv) Based on surveyor’s report, appellant’s claim for

compensation was repudiated by the first respondent

vide letter dated 22.06.2005, which reads thus:

“NATIONAL INSURANCE COMPANY LTD. (Subsidiary of General Insurance Corporation of India) Branch Near Kanya Vidyalaya KOPARGAON-423601

Our ref.no.270708 22.06.2005

To, The Managing Director,

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 3 of 33 The Kopargaon Sahakari Sakhar Karkhana Ltd., Gautamnagar, Kolpewadi, Kopargaon.

Dear Sir, Re: Claim for accident damaged Boiler No.2 GT-23 on 14.05.2005 at night- Our Policy No.271901/ 44/04/51/16. Claim No.271901/ 44/ 05/ 51/ 001

We refer to your claim intimation letter dt. 20.05.2005 & subsequent letter dt.21.06.2005 on the captioned claim & would inform you as under:

Our Regional Office had appointed Shri Pradeep Tambe, Surveyor to ascertain the exact cause of loss who carried out the inspections about reported loss on 27.05.2005 at site & submitted his report. According to the report

1. Two number of boiler tubes had slipped off from the connection with the drum. This connection was made by expanding of tubes in boiler shell holes made for the purpose of connection.

2. Other many tubes had become loose in expanded portion, which were marked by chalk.

3.The tubes were seen bulged for rest of the portion of length of tubes.

4. In the region of expansion of tube heavy corrosion was observed.

5. Majority of those tubes were fitted in 1986 and had served their useful life.

Based on the above observations and photographs the loss was occasioned by wasting of tube material in way of expansion joint due to corrosion which is a slow deterioration over a period of about 20 years resulted into failure of expanded joint of tubes with steam drum. Further bulging of tubes in general is also in one direction only indicating that it has happened due to long usage.

All above reasons are detailed in exclusion no.5 of our BPP policy issued to you and we quote the same here for your reference.

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 4 of 33 Defects due to the wearing away or wasting of the materials of a boiler or a pressure plant whether by leakage, corrosion or by the action of fuel or otherwise the grooving or the fracturing of any of the parts of a boiler or pressure plant or for deterioration generally or for the development of cracks, blisters, limitation and other flaws or fractures failures of joint within the range of steam or feed pipes or for bulging and deformation due to overheating of tubes (unless such defect, fractures, failure or bulging result in explosion or collapse) or for the cracking of section of cast iron heating boilers or other vessels constructed of cast iron.

In view of the above referred reasons which are falling under exclusion no.5 of our B.P.P. Policy, we are absolved from the liability under the policy and hence we repudiate your claim.

We regret the inconvenience caused to you.

Kindly acknowledge receipt.

Sd/-

BR. MANAGER”

(i) On receipt of the repudiation letter, the appellant

made a fresh representation to the first respondent. In

the meantime, Maharashtra State Insurance Fund

also appointed a joint surveyor who submitted a report

on 16.01.2006. In their opinion, there was no

explosion in the boiler. Rather, leakage was from boiler

tubes which had slipped off from the expanded portion

in the drum.

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 5 of 33

(ii) Consequently, vide letter dated 03.07.2006, the

claim was again rejected.

(iii) Aggrieved by rejection of its claim, the appellant

filed Consumer Complaint Case No. 7/2007 before the

State Commission.

Issues framed by State Commission

6. Based on pleadings of the parties, the State

Commission framed the following issues:

(1) Whether the insurance claim is barred by

limitation?

(2) Whether the complainant proved deficiency in

service on part of the insurance company?

(3) Whether the complainant is entitled to receive

compensation as claimed?

(4) What relief to be granted?

State Commission’s Finding(s)

7. On Issue no.1 (supra), the State Commission held that

as per the provisions of Section 24A of the Consumer

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 6 of 33 Protection Act, 19863, the complaint must be filed

within two years from the date the cause of action has

arisen, since the cause of action first arose on

repudiation of the claim, that is, on 22.06.2005, and

thereafter, on rejection of the revised claim, that is, on

03.07.2006, both being within two years of the date of

filing of the complaint, the complaint was not barred

by limitation.

8. On Issue no.2 (supra), the State Commission held that

there was deficiency in service on part of the first

respondent because Boiler Inspector had examined

and tested the boiler before its explosion and had

issued a certificate of fitness on 17.11.2004; and the

explosion took place during currency of the fitness

certificate. Otherwise also, it is expected that the

insurance company would inspect and satisfy itself

about the fitness of the boiler before issuing an

insurance cover. Thus, repudiation of the claim by

3 1986 Act

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 7 of 33 taking aid of clause 5 of the terms and conditions of

the policy was not sustainable.

9. On issues 3 and 4 (supra), the State Commission

opined that against the compensation claim of

Rs.87,49,141 only Rs.48,91,596.75 is payable as

certain bills were doubtful and 10% deduction was

permissible towards salvage amount. Besides that, as

per norms 75 per cent of the balance amount is to be

awarded on non-standard basis.

Appeal(s) before NCDRC

10. Two appeals were filed before NCDRC against the

order of the State Commission. The appellant

challenged the deductions from the compensation

claimed by him. Whereas, the first respondent

questioned the award of compensation in view of the

exclusion clause 5.

NCDRC Finding(s)

11. During proceedings before NCDRC, survey reports

relied by the first respondent (i.e., the insurance

company) were taken on record. Based on those

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 8 of 33 survey reports including joint survey report dated

16.01.2006, NCDRC concluded that accident occurred

due to slipping out of tubes from the boiler as survey

reports indicated that two boiler tubes had slipped off

from the drum of the boiler because they were

expanded to fit in the boiler holes, and many tubes

had gotten loose. Besides, some tubes were fitted in

1986 and had outlived their useful life. Moreover,

there was no damage to the boiler. Therefore, the

accident occurred on account of tubes slipping off

from the main body/drum which risk was excluded

from boiler and pressure plant insurance policy

though, as per report, it may fall under machinery

insurance policy. NCDRC thus found the claim

excluded under exclusion clause 5 incorporated in the

insurance policy. Consequently, the order of the State

Commission was set aside and the complaint

dismissed.

12. Aggrieved by the decision of NCDRC, these appeals

have been filed.

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 9 of 33

13. We have heard Shri Shekhar G. Devasa for the

appellant and Shri Gaurav Sharma for the

respondents.

Submissions on behalf of the Appellant

14. The learned counsel for the appellant submitted:

(i) Insurance policy was issued on 01.02.2005 after

being satisfied with boiler’s condition, based on

inspection report dated 17.11.2004 of the Boiler

Inspector prepared under the Indian Boilers Act,

19234.

(ii) Under the Boilers Act unless a boiler is registered

thereunder, it cannot be used or permitted to be used5.

(iii) Section 7 of the Boilers Act mandates that the

owner of any boiler, which is not registered under the

provisions of the Act, may apply to the inspector to

have the boiler registered. Upon receipt of such

application, the inspector is required to proceed to

examine the boiler to determine, in a prescribed

4 Boilers Act.

5

Section 6 of the Boilers Act.

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 10 of 33 manner, the maximum pressure, if any, at which such

boiler may be used; and the result of such examination

is to be reported to the Chief Inspector in the

prescribed form. The Chief Inspector, thereafter, may

register the boiler and assign a registration number.

Otherwise, the Chief Inspector has power to refuse

registration of the boiler.

(iv) Section 8 of Boilers Act governs renewal of the

certificate. Section 19 provides for an appeal if any

person is aggrieved by an order made, or purported to

be made by an Inspector, in exercise of any power

conferred by or under the Boilers Act, or by refusal to

make an order or to issue any certificate which the

Inspector is required or enabled by or under the Act to

make or issue. Further, Section 21 attaches finality to

the orders passed under the Act.

(v) Admittedly, the boiler which met with an

accident was registered under the provisions of the

Boilers Act and its fitness certificate was valid on the

date when the accident occurred. Moreover, insurance

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 11 of 33 policy was issued by the first respondent after being

fully satisfied with the state of the boiler and the plant

and machinery, therefore, repudiation of the claim, by

taking recourse to clause 5, based on subsequent

reports, after the accident had occurred, was not

justified at all.

(vi) The view of NCDRC that there was no explosion,

only tubes got detached is perverse because

repudiation letter itself does not deny explosion.

Moreover, tubes can slip off due to explosion also. And

where tubes slip off due to explosion, clause 5 would

not apply to exclude a claim based thereupon.

15. To buttress his submissions, learned counsel for the

appellant placed reliance on a decision of this Court

in Canara Bank vs. United India Insurance

Company Limited and Ors.6, wherein it was

observed that a prudent insurance company before

issuing a policy of a heavy amount must or at least

6 (2020) 3 SCC 455

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 12 of 33 should have ascertained the value and the nature of

the goods insured. In case it chooses not to verify the

stock, it cannot take advantage of its own negligence.

Based on the aforesaid judgment, it was argued that if

the insurance company had conducted its own

investigation/ inspection before the accident, it

cannot come up with a case that the accident occurred

on account of lack of maintenance of the boiler parts

and, if it had not conducted the requisite inspection

before issuing the insurance policy, it cannot take

advantage of its own negligence.

16. It was also argued on behalf of the appellant that the

insurance policy was issued on 01.02.2005 after the

requisite team constituted under the Boilers Act

conducted its inspection therefore, the repudiation

was completely unjustified.

17. Besides above, it was argued that when the matter was

argued before the State Commission, the survey report

on which reliance has been placed by the first

respondent was not on record. In fact, it was placed

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 13 of 33 before NCDRC after more than a decade. In such

circumstances, survey report should not have been

accepted on record as was done vide order dated

17.08.2020. More so, when burden to bring the case

within the exclusionary clause lies on the insurance

company. Consequently, the State Commission was

justified in drawing adverse inference against the

insurance company for not having placed the

surveyor’s report on record.

Submissions on behalf of the Respondent(s)

18. Per contra, learned counsel for the insurance

company submitted that this appeal, by special leave,

should not be entertained in view of the decision of

this court in Universal Sompo General Insurance

Company Limited vs. Suresh Chand Jain and

Anr.7, as the appropriate course for the appellant is to

invoke the writ jurisdiction of the High Court.

7 2023 SCC OnLine SC 877 = (2024) 9 SCC 148 Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 14 of 33

19. It was next contended that a survey report should

never be overlooked as it is prepared by experts.

Therefore, due regard must be given to survey reports.

Since State Commission had not given due weightage

to the survey report(s), NCDRC’s order which gave due

weightage to them requires no interference. To

buttress his submission, reliance was placed on

decisions of this Court in Sikka Papers Limited vs.

National Insurance Company Limited and Ors.8;

and Sri Venkateswara Syndicate vs. Oriental

Insurance Company Limited and Anr.9

DISCUSSION/ANALYSIS

20. Before we address the rival submissions, it would be

useful to cull out those facts as regards which there

exist no dispute. These are:

(i) The appellant had its Boiler no.GT-2310 (i.e., in

respect of which claim was made) insured with the

8 (2009) 7 SCC 777 9 (2009) 8 SCC 507 10 Boiler in question

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 15 of 33 first respondent for Rs.1.60 crores with effect from

01.02.2005 up to 31.01.2006.

(ii) Boiler in question was registered under the

Boilers Act and certified for use vide certificate dated

17.11.2004.

(iii) On 12.05.2005, the accident occurred due to

which two tubes attached to the Boiler got snapped/

detached.

(iv) The accident was reported to the Boiler Inspector

who carried out inspection on 14.05.2005 and

suggested repairs.

(v) Information of the accident was sent to the

insurance company on 16.05.2005. Initial claim was

of Rs.39.60 lacs, based on estimated cost of repairs,

later, claim of Rs.87,49,141 was submitted on

23.11.2005 based on actual cost of the repairs.

(vi) Claim was repudiated on 22.06.2005.

Repudiation letter dated 22.06.2005 cited that two

boiler tubes had slipped off from the drum of the Boiler

as they were placed on holes by expanding the tubes.

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 16 of 33 Besides those, other tubes had loosened at the joints.

Moreover, around the region of expansion, heavy

corrosion was observed. Repudiation letter also

remarked that majority of those tubes were fitted in

1986 and had outlived its serviceable period.

21. The main issue which arises for our consideration is

whether the first respondent was justified in

repudiating appellant’s claim based on exclusion

clause 5.

Exclusion clause 5

22. Exclusion clause 5 relied by NCDRC is reproduced

below:

“The defects due to the wearing away or wasting of the material of a boiler or a pressure plant whether by leakage, corrosion or by the action of fuel or otherwise the grooving or the fracturing of any of the parts of a boiler or pressure plant or for deterioration generally or for the development of cracks, blisters, lamination and other flaws or fractures, failures of joint within the range of steam or feed pipes or for bulging and deformation due to overheating of tubes (unless such defects, fractures, failure or bulging result in explosion or collapse) or for the cracking of section of cast iron heating boilers or other vessels constructed of cast iron.”

No serious challenge to the factum of explosion

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 17 of 33

23. Before considering whether under clause 5 the insurer

was justified in repudiating the claim, we must put on

record that in the complaint the appellant had taken

a specific plea that there was a loud explosion on

account of which two boiler tubes had slipped off. The

plea regarding there being an explosion was not

traversed by the first respondent in its written

statement though it raised various pleas regarding

corrosion, improper fitting of tubes etc. In such

circumstances, in our view, there is no serious

challenge to the factum of an explosion in the boiler

resulting in damage including tubes slipping off.

General principles governing repudiation of an insurance claim

24. Now we shall examine the general principles governing

repudiation of a claim under an insurance contract. A

contract of insurance is a contract based on utmost

good faith, and if utmost good faith is not observed by

either party the contract may be avoided by the other

party. This principle is of universal application to all

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 18 of 33 types of insurance contracts. The principle of utmost

good faith imposes positive obligations of disclosure.

In its practical application the principle permits either

party to avoid the contract altogether if it is

established against the other party either that: (1)

there has been a failure by the other party to disclose

a material fact; or (2) the other party has made an

innocent misrepresentation of a material fact, since

statements made in a contract must be true in fact.

Further, the onus of proving that the insured has

failed to perform the duty of disclosure or has broken

a condition relating to disclosure lies on the insurer11.

25. A proposer is under a duty to disclose to the insurer

all material facts as they are within its knowledge. The

proposer is presumed to know all the facts and

circumstances concerning the proposed insurance.

Whilst the proposer can only disclose what is known

to him the proposer’s duty of disclosure is not confined

11 See: Halsbury’s Laws of England, Fourth Edition, Reissued 2003, Volume 25, Pages 36 and 37, Paras 36 and 37

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 19 of 33 to his actual knowledge. Rather, it also extends to

those material facts which, in the ordinary course of

business, he ought to know. However, the proposer is

not under a duty to disclose facts which he did not

know and which he could not reasonably be expected

to know at the material time12.

26. A fact is material if it would influence the judgment of

a prudent insurer in fixing the premium or

determining whether he will take risk. Whether a fact

is material will depend on the circumstances, as

proved in evidence, of the case. If a fact, although

material, is one which the proposer did not and could

not in the circumstances have been expected to know,

or if its materiality would not have been apparent to a

reasonable man, his failure to disclose it is not a

breach of his duty. The proposer need not disclose

matters already known to the insurer or matters as to

which the insurer has waived information. An insurer

12 Halsbury’s Laws of England, Fourth Edition, Reissued 2003, Volume 25, Page 41, Para 44.

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 20 of 33 is deemed to know of matters of common knowledge

and matters of which he ought to be aware as an

insurer in that line of business.13

27. Further, if the insurer while accepting the proposal

form does not ask the insured to clarify any

ambiguities then the insurer after accepting the

premium cannot urge that there was a wrong

declaration made by the insured14.

28. An exclusion clause in the policy is to be construed in

a manner that it does not defeat the main purpose of

the contract15 and could even be read down to serve

the main purpose of the policy that is to indemnify the

policy holder16.

There is no failure in observing duty to disclose

29. In the light of the above general principles, we would

examine whether there was any failure on part of the

insured in making disclosure of those facts which the

13 Halsbury’s Laws of England, Fourth Edition, Reissued 2003, Volume 25, Page 39, paragraph 41. 14 See: Paragraph 44 of Canara Bank v. United India Insurance Co. Ltd. (supra), Footnote 6 15 See: Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan, (1987) 2 SCC 654, paragraph 14. 16 See: B.V. Nagaraju v. Oriental Insurance Co. Ltd., (1996) 4 SCC 647, paragraphs 7 and 8; followed in Mata Ram v. National Insurance Company Limited and others, (2018) 18 SCC 289, paragraph 6

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 21 of 33 surveyor discovered and mentioned in its report; and

also, whether the survey report discovers any breach

of the terms and conditions of insurance as to enable

the insurer to repudiate the claim.

30. First, we shall consider whether the survey report in

categoric terms highlights a breach by the appellant of

the terms and conditions of the contract of insurance.

In our view, there is no indication in the survey report

that the appellant had been guilty of breaching the

terms and conditions of the contract. Reason is

simple. Though the report speaks of two boiler tubes

slipping off from its joint on the drum of the boiler, it

does not rule out boiler tubes slipping off due to an

explosion as had been the claim of the appellant. Mere

mention in the report that majority of tubes were fitted

in 1986 and had outlived their lives, is of no help to

the insurance company because, (a) there is nothing

on record that tubes have a specified life; and (b) there

is nothing on record that tubes’ age disclosure was

sought, or was required, and such disclosure was

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 22 of 33 either not made or incorrectly made. Besides above, it

is expected that an insurer would accept a proposal of

insurance on being satisfied with the condition of the

subject matter of insurance. Otherwise, the purpose

of an insurance, which is to tide over financial

implications of an unforeseen event such as an

accident, would stand frustrated. Moreover, an

accident may occur on account of latent or non-

detectable defects. Duty to disclose is dependent on

knowledge of the proposer as also on the nature of

disclosure sought. If the law does not specify a boiler’s

life, or life of its parts, and disclosure is not sought

regarding the age of the boiler or its parts, there may

be no corresponding duty to disclose. Further, a

latent or non-detectable defect may not be in the

knowledge of the proposer.

31. Besides above, mere discovery of corrosion on

underlying parts while making a survey is not

conclusive to hold that there was infraction of duty to

make a fair disclosure for the simple reason that those

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 23 of 33 underlying parts got noticed only because tubes

slipped off on account of the explosion. Whether those

defects were noticeable even before the explosion, is a

question which cannot be determined in absence of

proper pleading and evidence. Here, as we have

observed, there was no denial of an explosion.

Appellant’s specific case was that an explosion took

place resulting in tubes slipping off from boiler’s main

body. This plea of appellant was not traversed. Even

survey report was placed on record at the appellate

stage and not before. There is no plea that insured

played fraud upon the insurer either by not allowing

an inspection or by submitting a false data. All of this

shows that the first respondent was interested in

somehow defeating the claim of the appellant not on

facts but on pleas taken as an after-thought.

32. Furthermore, the boiler in question was registered

under the Boilers Act and its usage was permitted for

crushing season 2004-05 during which the accident

occurred. The Boilers Act not only ensures that a

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 24 of 33 boiler cannot be used without registration but

provides for registration of boilers17. It also confers

power to refuse such registration18. Orders passed

thereunder are appealable to the appellate authority

specified therein. Therefore, once a certificate of

registration for use of such boiler is issued, during

currency of that certificate, the boiler concerned would

be considered, prima facie, fit for usage. In such

circumstances, to substantiate that the insured

suppressed information of boiler being unworthy of

use, burden would be very heavy on the insurer,

particularly, when the accident occurs during

currency of its registration.

33. No doubt, despite a certificate of registration, an

insurer may refuse insurance based on its own inputs

about the condition of the boiler. This is because

whether an insurer should take the risk or not is best

left to its wisdom. However, when an insurer accepts

17 See: Section 6 of Boilers Act, 1923 18 See: Section 7(4)(b) of Boilers Act, 1923

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 25 of 33 the risk, it can repudiate the claim on limited grounds

such as, (a) by pleading and proving that there was a

failure on part of the insured in making disclosure of

a material fact which renders the contract voidable at

the instance of the insurer19; and (b) by demonstrating

that the terms and conditions of the contract of

insurance exclude such claims.

34. Now, we shall consider whether there was non-

disclosure of material facts, or misrepresentation, or

suppression of material facts, by the insured justifying

repudiation of contractual obligations by the insurer.

Admittedly, it is not the case of the insurer that any

specific information was sought from the proposer

which the proposer either failed to provide or provided

incorrectly. Therefore, once a proposal is accepted by

the insurer and formalities are complete, in absence of

plea and evidence of fraud or misrepresentation

making the contract voidable at the instance of the

19 See: Section 19 of the Indian Contract Act, 1872

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 26 of 33 insurer, the insurer cannot be permitted to wriggle out

of its liability under the contract.

35. In the case on hand, no material has been placed to

demonstrate fraudulent suppression or

misrepresentation or non-disclosure on part of the

insured, and there is no violation of any statutory rule

/provision regarding disclosure alleged. In such

circumstances, the first respondent could not have

repudiated the claim under the contract of insurance.

36. As regards age of the boiler in question, or of its tubes/

parts, there is no material on record to indicate that

information regarding age of the boiler or its parts was

sought for but not provided, or that beyond a specified

age a boiler is not usable. In these circumstances,

merely by saying that some of the tubes were of 1986

and, therefore, had outlived their life, in our view, the

insurer cannot escape from its liability. That apart, if

consent was caused by misrepresentation or silence,

fraudulent within the meaning of Section 17 of the

Indian Contract Act, 1872, the contract is not

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 27 of 33 rendered voidable, if the party whose consent was so

caused had the means of discovering the truth with

ordinary diligence20. Here, there is nothing on record

to indicate that insurer was deprived or denied an

opportunity to inspect the boilers to enable it to take

a decision whether it was worthy to take the risk. Had

tubes been fitted in the boiler holes by expansion, an

inspection could have revealed the truth. Therefore,

the ground of non-disclosure to repudiate the

contract, in our view, is completely unsustainable,

particularly, in absence of pleading and evidence that

by playing fraud the appellant prevented a meaningful

inspection of the boiler in question.

Exclusion clause 5 not applicable

37. Exclusion clause 5 indicates that if defects appear

because of explosion in the boiler, it may not exclude

a claim. Reason is simple. A defect may not be visible

unless the boiler is dismantled. Therefore, when a

20 See: Exception to Section 19 of the Indian Contract Act, 1972.

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 28 of 33 registered boiler explodes within its serviceable period,

it is quite possible that its shortcomings may go

unnoticed. Those shortcomings may get exposed only

on explosion. The survey reports are not categoric that

there was no explosion. Further, specific pleading of

the claimant regarding explosion causing tubes

slipping off is not traversed. In such circumstances, it

would be extremely unjust to non-suit a claim on

discovery of defects post the blast in absence of any

specific material that such defects cannot be an

outcome of the blast or explosion.

38. No doubt, due regard is to be given to the survey

reports, particularly when they relate to technical

aspects. But here they are not of much help to the first

respondent as the survey reports are not categoric

regarding noticeable defects being present in the boiler

in question from before as could enable repudiation of

a claim.

39. Notably, the boiler in question was certified and

registered; the insurance policy was issued after the

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 29 of 33 certificate of registration was provided; and the

accident occurred while the certificate of registration

was subsisting. In such circumstances, burden was

heavy on the insurer to prove that the boiler was not

worthy of insurance cover or that such cover was

obtained by misrepresentation or suppression of

material facts or by playing fraud. Nothing of the kind

has been pleaded or proved by the insurer. A

subsequent discovery of damage or corrosion cannot

be used to repudiate the claim as it would defeat the

main purpose of the insurance contract. In our view,

therefore, in absence of a stand that the boiler and its

parts had a prescribed life and that the boiler had

outlived its prescribed life, or that there was a failure

on part of the insured in making full and complete

disclosure, making the contract voidable, exclusion

clause 5 could not have been pressed into service to

repudiate the claim of the insured.

40. Further, in the case on hand, the reports were not

conclusive of any suppression/ misrepresentation or

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 30 of 33 fraud played by the insured upon the insurer, and

facts stated therein were ambivalent in respect of

applicability of exclusion clause 5 inasmuch as the

reports do not rule out an explosion resulting in tubes

slipping off, as was the specific case of the appellant.

Therefore, based on the discussion above, in our

considered view, the insurer was not justified in

repudiating the claim by invoking the exclusion clause

5.

41. Accordingly, we are of the view that NCDRC was not

justified in setting aside the order of the State

Commission and discarding the claim of the appellant

by relying on exclusion clause 5 (supra).

42. Insofar as the plea that this Court should not

entertain the appeal, by special leave, is concerned,

suffice it to say that there is no inherent lack of

jurisdiction for this Court to exercise its power under

Article 136 of the Constitution of India against an

order of a tribunal or a court including NCDRC.

However, ordinarily, when an alternative remedy is

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 31 of 33 available before the High Court, this Court may, in its

discretion, relegate the petitioner to avail such

alternative remedy. But such discretion is to be

exercised judiciously. Here, parties had exchanged

their pleadings, and matter was ripe for hearing,

therefore, relegating the appellant to the remedy under

Articles 226 and 227 of the Constitution of India

would only delay the decision by re-starting the

proceeding that could culminate here. In such

circumstances, we decline the prayer to relegate the

appellant to the remedy under Articles 226 and 227 of

the Constitution.

43. For all the reasons above, these appeals are allowed.

The impugned judgment and order of NCDRC is set

aside. However, since NCDRC did not address the

claim of either side on the quantum of compensation

payable, we deem it appropriate to restore the appeals

on the file of NCDRC for a consideration only on the

quantum of compensation payable to the appellant.

Rest of the issues stand closed.

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 32 of 33

44. The appeals are allowed in the aforesaid terms. First

Appeal No.580/2012 and First Appeal No.166/2013

are restored on the file of NCDRC, New Delhi for

considering the quantum of compensation payable to

the appellant. All other issues stand closed. Pending

application (s), if any, shall also stand disposed of.

45. Parties to bear their own costs.

….............................................J. (Pamidighantam Sri Narasimha)

................................................J. (Manoj Misra)

New Delhi;

November 13, 2025.

Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 33 of 33