Voyage Insurance and the Monsoon Clause: Supreme Court Remands Case on Interpretation and Materiality.


07 April 2025 Civil Appeals >> Civil & Consumer Law   |   Consumer Protection Act >> Consumer Rights  

A significant legal battle of Sohom Shipping Pvt. Ltd. v/s M/s. The New India Assurance Co. Ltd. & Another., concerning the interpretation and validity of a "voyage should commence & complete before monsoon sets in" clause in a marine insurance contract has led the Supreme Court of India to set aside an order by the National Consumer Disputes Redressal Commission (NCDRC). The apex court, hearing an appeal under Section 67 of the Consumer Protection Act, 2019, has remanded the matter back to the NCDRC for a fresh determination on the payable insured sum, while firmly addressing the contentious monsoon clause.

The case originated from a consumer complaint filed by a shipping business, the Appellant, whose newly built barge, ‘Srijoy II’, suffered damage during its maiden voyage from Mumbai to Kolkata. The Appellant had secured a voyage insurance policy from the Respondent, valid from May 16, 2013, to June 15, 2013. A special condition within this insurance contract stipulated that the "voyage should commence & complete before monsoon sets in."


 

 

The factual backdrop reveals that the Appellant had obtained necessary clearances from the Director General of Shipping (DGS) and the Indian Register of Shipping (IRS) for the voyage, initially planned for April-May 2013. However, the vessel eventually set sail on June 6, 2013. The very next day, it encountered bad weather and engine failure near Ratnagiri Port, ultimately running aground.

Following the expiry of the insurance contract, the Appellant sought assistance for salvage and subsequently issued a ‘Notice of Abandonment’ claiming total loss. The Respondent repudiated the claim, citing a breach of the special condition regarding the monsoon, arguing that the vessel sailed after the monsoon had commenced. The NCDRC upheld this repudiation, citing a compromise of the doctrine of Uberrima Fidei (utmost good faith) due to alleged suppression of material facts.

Before the Supreme Court, the Appellant's counsel, Mr. Huzefa Ahmadi, vehemently argued against the NCDRC's conclusion. A key contention was that the Respondent was aware, or should have been aware, that the policy period itself encompassed the monsoon season, rendering the repudiation on this ground untenable. It was further argued that the special condition was non-material, and even if considered, there was an implied waiver by the Respondent as the one-month policy period covered the monsoon's onset on both the west and east coasts of India. Reliance was placed on the principle of Contra Proferentum, urging the court to interpret the ambiguous phrase against the insurer.

Conversely, Mr. Devadatt Kamat, representing the Respondent, strongly defended the Impugned Order, asserting that the Appellant had clearly breached the special condition by sailing after the monsoon had begun, as per the DGS circular defining the foul weather period. He also alleged breaches of other policy clauses and even forgery of the policy document.

The Supreme Court, after careful consideration, focused on the interpretation of the phrase "before monsoon sets in." The court noted that a literal interpretation refers to an event occurring prior to the commencement of the monsoon. Referring to the DGS circular dated April 25, 2008, the court highlighted that the foul weather period starts on June 1st on the West Coast (Arabian Sea) and as early as May 1st on the East Coast (Bay of Bengal).

Addressing the Appellant's argument on ambiguity and the application of Contra Proferentum, the court clarified that this rule applies only in cases of genuine ambiguity within the policy's wording itself, irrespective of external factors. While acknowledging the rule's incorporation into Indian law, the court found no inherent ambiguity in the special condition's literal meaning.

However, the court then delved into the materiality and validity of the condition. It highlighted the inconsistency between the policy period (May 16 to June 15) and the special condition. Given the voyage from Mumbai (West Coast) to Kolkata (East Coast), even an immediate departure on May 16th would have resulted in the vessel's arrival in Kolkata after the monsoon's onset on the East Coast (May 1st).

The Supreme Court emphatically rejected the Respondent's contention that they were unaware of the intended voyage during the foul season. The proposal form clearly stated the voyage's origin and destination, and the chosen insurance period inherently covered the monsoon. The court reasoned that a strict interpretation of the special condition would lead to an absurd outcome, where any claim arising from an incident during the policy period, but after the monsoon's onset, would be invalid, effectively nullifying the purpose of the insurance itself.

Drawing a parallel with the case of Ramji Karamsi v. The Unique Motor and General Insurance Co. Ltd., where a condition requiring claim proof within an impossibly short timeframe was deemed not a condition precedent, the Supreme Court held that the "voyage should commence & complete before monsoon sets in" clause, in the given context, could not be treated as a strict condition precedent to negate all liability. The court concluded that this condition was impliedly waived by the parties due to its non-material nature, likely being a standard clause that the Respondent failed to exclude from the Appellant's specific policy.

Consequently, the Supreme Court allowed the appeal, setting aside the NCDRC's order. The matter has been remanded to the NCDRC with a clear directive to determine the extent of the insured sum payable to the Appellant. The court also acknowledged the Respondent's other objections, such as forgery and breach of other conditions, instructing the NCDRC to consider these on their own merits.


Consumer Protection Act, 1986