Supreme Court of India
ALLIANZ GENERAL INSURANCE CO LTD & ANRversusTHE STATE OF MADHYA PRADESH
- Citation
- 2020 INSC 358
- Decided
- 24 April 2020
- Disposal
- Appeal(s) allowed
- Bench
- D Y CHANDRACHUD
Holding
The insurance cover terminates when the cargo is taken out of the ordinary course of transit; therefore, the insurer is not liable for damage occurring after the helicopter was stored and assembled at New Delhi.
Summary
The State of Madhya Pradesh bought a transit marine insurance policy from Bajaj Allianz to cover the transport of a Bell‑430 helicopter from Canada to Bhopal. After the helicopter arrived in a knocked‑down condition at New Delhi, it was stored and assembled for a planned flight to Bhopal; damage to the window and tail boom was later discovered. The insurer denied the claim, arguing that the policy covered only the voyage in the "ordinary course of transit" and that unpacking and assembly at Delhi terminated coverage. Consumer dispute commissions held the insurer deficient and ordered compensation, which the insurer appealed. The Supreme Court held that the act of storing, unpacking and assembling the helicopter at Delhi was a departure from the ordinary course of transit, changing the nature of the subject‑matter and ending the policy, and that the burden of proof lay on the insured. Consequently, the Court set aside the lower tribunals' orders and dismissed the consumer complaint.
Issues considered
- The meaning and scope of "ordinary course of transit" under the marine transit insurance policy.
- Whether storage, unpacking and assembly of the helicopter at New Delhi falls within that scope.
- Whether the insurer’s liability extends to damage discovered after the helicopter was assembled.
- The allocation of the burden of proof in insurance claims under the Consumer Protection Act, 1986.
Legislation cited
- Consumer Protection Acts. 1986
Subjects
marine transit insuranceordinary course of transitpolicy interpretationinsurance liabilityconsumer protectionburden of proofstorage and assemblyhelicopter transportinsurance claim denial
Judgment
198 [2020]REPORTS
SUPREME COURT 6 S.C.R. 198 [2020] 6 S.C.R.
A BAJAJ ALLIANZ GENERAL INSURANCE CO LTD & ANR
v.
THE STATE OF MADHYA PRADESH
(Civil Appeal No. 2366-67 of 2020)
B APRIL 24, 2020
[DR. DHANANJAYA Y CHANDRACHUD AND
AJAY RASTOGI, JJ.]
Consumer Protection Act, 1986: Deficiency in service –
C Insurance policy – Respondent purchased a “Transit Marine
Insurance Policy” from the appellant-insurer on 21 July 2005, to
cover the transportation of Helicopter from Langley, Canada to
Bhopal, India – As per the acceptance letter, the transit route for
the transportation of the helicopter was ‘Langley to Bhopal (by
road/by air)” – On 5 October 2005, the helicopter was transported
D in a knocked down condition 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 inspection, the window of crew door
was reported to be damaged – By letter dated 22 October 2005, the
respondent informed insurer of the damage and stated that the
E helicopter was “being assembled at the Hangar located at Delhi so
that the Helicopter can fly from Delhi to Bhopal” – On 23 November
2005, the respondent informed insurer that upon inspection, the
tail boom of the helicopter was found damaged – A surveyor was
appointed by the appellant to assess the alleged damage – In the
report, surveyor concluded that the damage to the tail boom had
F occurred at Hangar 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 –
Whether storage, unpacking and assembly of the helicopter at New
Delhi would fall outside the scope of the expression “ordinary
course of transit”, terminating coverage under the policy – Held:
G
The insurance cover in the instant case is expressed in terms of the
voyage itself – It provided that policy commenced from the time the
insured cargo left the warehouse, premises or place of storage at
the place named in the policy and continued during the “ordinary
course of transit” – The specific act of unpacking the cargo at New
H
198
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 199
STATE OF M.P.
Delhi for assembling it for the flight to Bhopal indicated that the A
transportation of the cargo in a knocked down state had come to
an end – Once the respondent decided to leave the goods in the
hangar at New Delhi for its commercial convenience not associated
with or in furtherance of the requirements of their carriage to
Bhopal, the transit insurance ended – The act of assembling the
B
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 – The policy covered only those risks
that were associated with the transportation of the helicopter and
did not cover the risks associated with the flight or operation of the C
helicopter – Change in the character of the helicopter from a
knocked down state to a ready to fly state exposed insurer to risks
not contemplated by the parties under the policy – Nature of the
subject-matter having been altered, the cargo could not be said to
be in transit and insurer was absolved from any liability arising out
D
of any subsequent damage to the consignment.
Insurance Policy – Expression “in the ordinary course of
transit”, meaning of – Held: Expression “in the ordinary course of
transit” depends on the context, object and the wording of the
particular policy – In context of the policy, the words “in transit”
E
do not require transportation of the consignment in a single trip
from the commencement to the final destination but includes those
interruptions in motion that are incidental to or in furtherance of
the conveyance or transportation of the consignment – The question
of what does and does not constitute a deviation in furtherance of
the conveyance of the goods is a question of fact that must be F
determined by both the intent of the policy and the actions of the
parties.
Insurance Policy – Burden of proof – For the respondent to
prove its case, a mere assertion that the loss incurred during the
course of transit is not sufficient – Burden of proof lies on the G
respondent to show that the loss incurred was covered within the
terms of the policy and that on a balance of probabilities there
existed a proximate cause between the loss incurred and the
consignment being in transit.
H
200 SUPREME COURT REPORTS [2020] 6 S.C.R.
A Insurance Policy – Construction of – Held: Insurance policies
should be construed according to the principles of construction
generally applicable to commercial and consumer contracts – The
court must interpret the words in which the contract is expressed by
the parties and not embark upon making a new contract for the
parties – Interpretation of statutes.
B
Insurance Policy – Marine transit insurance policy – The
purpose of the marine transit insurance policy is to cover the
consignment from risks associated with transportation of the
consignment from one place to another – It is fundamental for those
responsible for carrying the cargo to ensure that all stages of the
C transportation are effected with reasonable promptness – “In
transit”, however, does not necessarily mean that the consignment
needs to be in continuous motion at all times – A mere brief
suspension must however be in furtherance of the ordinary course
of transit – During the ordinary course of transit, the consignment
D might frequently come to rest or be temporarily stored in the dock
awaiting loading or customs clearance – However, unduly protracted
steps in the cargo’s transportation are not within, and may terminate,
the “ordinary course of transit.”.
Allowing the appeals, the Court
E HELD: 1. Insurance policies should be construed according
to the principles of construction generally applicable to
commercial and consumer contracts. The court must interpret
the words in which the contract is expressed by the parties and
not embark upon making a new contract for the parties. A
F reasonable construction must therefore be given to each clause
in order to give effect to the plain and obvious intention of the
parties as ascertainable from the whole instrument. The liability
of the insurer cannot extend to more than what is covered by the
insurance policy. In order to determine whether the claim falls
within the limits specified by the policy, it is necessary to define
G exactly what the policy covered and to identify the occurrence of
a stated event or the accident prior to the expiry of the policy.
[Para 16][213-F-H; 214-A]
2. The insurance cover in the present case is expressed in
terms of the voyage itself. It provided that the duration of the
H
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 201
STATE OF M.P.
policy attached and commenced from the time the insured cargo A
left the warehouse, premises or place of storage at the place
named in the policy and continued during the “ordinary course of
transit”. The expression “in the ordinary course of transit” cannot
be divorced from the context and must be read along with the
other conditions which appeared in the policy document. The
B
meaning of the expression “in the ordinary course of transit”
depends on the context, object and the wording of the particular
policy. [Para 17, 18][214-F; 215-E]
3. In context of the policy, the words “in transit” do not
require transportation of the consignment in a single trip from
the commencement to the final destination but includes those C
interruptions in motion that are incidental to or in furtherance of
the conveyance or transportation of the consignment. The
question of what does and does not constitute a deviation in
furtherance of the conveyance of the goods is a question of fact
that must be determined by both the intent of the policy and the D
actions of the parties. An action that is wholly unrelated to the
usual or ordinary method of pursuing the transportation of goods
would prevent the goods from being covered under the definition
of the expression “in transit” under the policy. [Para 25]
[221-F-H]
E
4. It is undisputed that at the time of customs clearance, no
damage was reported. It was when the helicopter was inspected
by the representative of the manufacturer during a routine
inspection on 21 October 2005 that damage was reported to the
window of the crew door of the helicopter. The helicopter was
transported from Langley in a “knocked down state”. The specific F
act of unpacking the cargo at New Delhi in furtherance of the
purpose of assembling it for the flight to Bhopal indicated that
the transportation of the cargo in a knocked down state had come
to an end. The act of unpacking the helicopter for the purpose of
assembling it for undertaking the flight to Bhopal was unrelated G
to the usual or ordinary method of pursuing the transportation of
the cargo insured. The policy covered only those risks that were
associated with the transportation of the helicopter and did not
cover the risks associated with the flight or operation of the
helicopter. [Paras 26, 27][222-B-C, F-H]
H
202 SUPREME COURT REPORTS [2020] 6 S.C.R.
A 5. Change in the character of the helicopter from a knocked
down state to a ready to fly state exposed the appellant to risks
not contemplated by the parties under the policy. The effect of
the alteration of the subject-matter insured is outside the scope
of the agreed cover and brings an end to the policy. Once the
nature of the subject-matter was altered, the cargo cannot be
B
said to be in transit and the appellant is absolved from any liability
arising out of any subsequent damage to the consignment.
Exposure to risks associated with the flight substantially and
unnecessarily added to the risks of the journey that were not
covered by the policy. Accordingly, the submission that the cover
C against risks would be provided till the time the helicopter was
not delivered at the final destination of Bhopal is unsustainable.
[Para 29][223-E-H]
6. Clause 5.1.2 of the ICC provided that the policy may
terminate upon the assured choosing to use an alternate place of
D delivery, prior to the destination named therein for one of two
purposes, either for storage other than in the ordinary course of
transit or for allocation or distribution of the cargo. The purpose
of a transit policy is to cover the carriage of goods to the final
destination. In the present case, storage of the helicopter in the
hangar at New Delhi awaiting replacement of the spare window
E cannot be said to be incidental or in furtherance of the carriage of
the goods to the ultimate destination. It would be unreasonable
to suggest that the transit policy intended to cover indefinite
storage of the helicopter at the hangar in New Delhi not brought
about by the requirements of transport but determined by
F commercial convenience of the respondent. Once the respondent
decided to leave the goods in the hangar at New Delhi for its
commercial convenience not associated with or in furtherance of
the requirements of their carriage to Bhopal, the transit insurance
ended. [Para 30][224-B-F]
G 7. Clause 15 of the ICC provided that during the period of
the transit policy, the insured shall act with reasonable dispatch.
The purpose of the marine transit insurance policy is to cover
the consignment from risks associated with transportation of the
consignment from one place to another. It is fundamental for those
responsible for carrying the cargo to ensure that all stages of the
H
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 203
STATE OF M.P.
transportation are effected with reasonable promptness. “In A
transit”, however, does not necessarily mean that the consignment
needs to be in continuous motion at all times. In the instant case,
the insured voluntarily decided to store the helicopter in the
hangar at New Delhi out of commercial convenience and not in
furtherance of the transit. In addition, the insured by assembling
B
the knocked down helicopter for the purposes of flying it to
Bhopal changed the nature of the consignment and exposed the
appellant to operational risks beyond the scope of the policy. [Para
31][224-G; 225-A-D]
8. Clause 6 of the ICC provided for continuation of
insurance cover after termination in circumstances beyond the C
control of the insured. Clause 6 stated 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 D
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 E
respondent did not issue any notice seeking extension of the
insurance cover under Clause 6. [Para 32][225-D; 226-A-B]
9. Clause 8 of the ICC provided for claims under the
insurance policy. In terms of Clause 8, for the respondent to prove
its case, the basic and fundamental fact which needs to be proved F
is that: (i) the respondent must have an insurable interest in the
subject matter insured at the time of loss; and (ii) the loss insured
against occurred during the period covered by the policy. [Para
34, 35][226-F, G-H; 227-A]
10. For the respondent to prove its case, a mere assertion G
that the loss incurred during the course of transit is not sufficient.
The burden of proof lies on the respondent to show that the loss
incurred was covered within the terms of the policy and that on a
balance of probabilities there existed a proximate cause between
H
204 SUPREME COURT REPORTS [2020] 6 S.C.R.
A the loss incurred and the helicopter being in transit. The
respondent has adduced no evidence to supports its case. [Para
36][228-C-D]
11. According to the NCDRC, the expiry of thirty days after
completion of discharge at the final port of discharge should be
B essentially interpreted as thirty days after reaching Bhopal and
not thirty days during the course of transit which included the
halt at New Delhi. 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
C contract in a manner that will best express the intention of the
parties. 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. The risks associated
D 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,
E would not constitute as storage in the ordinary course of transit.
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
F between the parties. [Para 39][230-A-E]
Export Credit Guarantee Corporation of India Ltd v.
Garg Sons International (2014) 1 SCC 686 : [2013] 1
SCR 336 – referred to.
Verna Trading Pty Ltd v. New India Assurance Co Ltd.
G (1991) 1 VR 129; QBE Insurance Limited v. Patterson
Fine Jewellery Pty Ltd. 2004 VSC 31; Bethell v. Clark
(1888) 20 QBD 615; SCA (Freight) Ltd v. Gibson [1974]
2 Lloyd’s Rep 533; Wiggins Teape Australia Pty Ltd v.
Baltica Insurance Co Ltd [1970] 2 NSWR 77; First
American Artificial Flowers, Inc v AFIA Worldwide Ins
H
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 205
STATE OF M.P.
1977 AMC 376 (N Y Sup Ct 1976); Lumber & Wood A
Products, Inc v. New Etc 807 F 2d 1987, 1987 AMC
1244; Verna Trading Pty Ltd v. New India Assurance
Co Ltd [1991] 1 VR 129; NEC Australia Pty Ltd v. Gamif
Pty Limited [1993] FCA 252; Rhesa Shipping Co S A v.
Edmunds [1985] 2 All ER 712 – referred to.
B
Mac Gillivray on Insurance Law Twelfth Edition, Sweet
and Maxwell (2012); P Ramanatha Aiyar’s Law Lexicon
3rd Edition, 2012 Black Law’s Dictionary 10th Edition,
Colinvaux’s Law of Insurance 10th Edition by Robert
Merkin – referred to.
C
Case Law Reference
[2013] 1 SCR 336 referred to Para 9
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2366-
67 of 2020.
From the Judgment and Order dated 10.08.2018 of the National D
Consumer Disputes Redressal Commission in First Appeal No. 279 of
2009 and First Appeal No. 25 of 2010.
Joy Basu, Sr. Adv., Prantar Basu Choudhury, Kanak Bose, Harshul
Singh and Sahil Tagotra, Advs. for the Appellants.
E
J. S. Attri, Sr. Adv., Aditya Ranjan, Narender Singh, Advs. for the
Respondent.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
1. Leave granted. F
2. The present appeals arise from a judgment of the National
Consumer Disputes Redressal Commission1 dated 10 August 2018 which
in first appeal upheld the judgment of the Madhya Pradesh State
Consumer Disputes Redressal Commission2. The SCDRC held the
appellant to be deficient in its service and directedit to pay compensation G
of 64,89,205 towards the cost of repair of a helicopter to the
respondent.Both the appellant and the respondent had preferred appeals
against the order of the SCDRC. The NCDRC dismissed the appeal3
1
"NCDRC”
2
"SCDRC”
3
First Appeal no 279 of 2009 H
206 SUPREME COURT REPORTS [2020] 6 S.C.R.
A preferred by the appellant and partly allowed the appeal4 preferred by
the respondent for enhancement of compensation and awarded interest
at the rate of six percent per annum.
3. The respondent purchased a “Transit Marine Insurance
Policy”from the appellant on 21 July 2005, to coverthe transportation of
B a Bell – 430 Helicopter from Langley, Canada to Bhopal, India. By an
acceptance letter dated 1July 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).”
C 4. The policy scheduleissued 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)5,
D 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 losscovered under the policy.
The duration of the policy was to be governed in terms of Clause 5 of
the ICC. On 5 October 2005, the helicopter was transported in a knocked
down state by air to New Delhi. On 13 October 2005, the helicopter
E was cleared by the customs and was shifted to a hangar at New Delhi.
On 21October 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. The respondent sought the permission
of the Director General of Civil Aviation to fly the helicopter to Bhopal
F but was denied permission on account of the damage to the window of
the crew door.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”. On 23 November 2005, the
respondent informed the appellant that upon inspection, the tail boom of
G the helicopter was found to be damaged. 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:
4
First Appeal no 25 of 2010
5
H "ICC”
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 207
STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]
“The damage to window glass of pilot seat and damage to tail A
boom of helicopter are two separate incidents not related to each
other.
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. B
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.”
5. By a letter dated 10 April 2006, the appellant informed the C
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 D
admitted that the loss to the tail boom was only noticed in the month of
November. On 10 April 2006, the appellant informed the respondent that
both the losses claimed were inadmissible for the following reasons:
“1. Claim for damage to Windscreen glass – The total cost of
replacement for this loss is quoted to be Rs (amount of windscreen E
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.
2. Claim for dent on Tail Boom of the aircraft-
a. This was discovered at Hanger-3 Bay 15/33 IGI Airport Delhi F
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. G
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 H
208 SUPREME COURT REPORTS [2020] 6 S.C.R.
A 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.
B 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.”
6. By a letter dated 11 April 2006, the respondent responded to
the above letter stating that even though the damage was noticed after a
C month of customs clearance,the policy of transit was upto Bhopal and
therefore, damage to the helicopter in the month of November 2005
would also be covered under “transit”. 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
D 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.
E 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...”
7. The respondent filed a consumer complaint6 before the SCDRC
F on 18 August 2006 seekingcompensation from the appellant for wrongful
repudiation of the claim and towards the loss sustained by the respondent.
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
G
was only a transit halt and the assembly of the helicopter at New Delhi
did not change the nature of the cargo. 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
6
H Consumer Complaint no 13 of 2006
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 209
STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]
August 2018, upheld the finding of the SCDRC that there was a deficiency A
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
percent per annum from the date of repudiation till realisation. Assailing
the decision of the NCDRC, the appellant has filed the present Special
B
Leave Petition before this Court under Article 136 of the Constitution.
8. By an order of this Court dated 15 February 2019, a stay was
granted on the operation of the judgment of the NCDRC. The issue
before this Court iswhether storage, unpacking and assembly of the
helicopter at New Delhi would fall outside the scope of the expression
“ordinary course of transit”, terminating coverage under the policy. C
9. During the course of the submissions before this Court, Mr Joy
Basu, learned Senior Counsel appearing on behalf of the appellants made
the following submissions:
(i) The tenure and duration of the policy was contingent upon D
an event which may trigger Clause 5 of the ICC. The
respondent took the delivery of the helicopter, prior to the
final destination- Bhopal, and stored it in its hangar at New
Delhi. The storing of the helicopter in the hangar was not
“for onward carriage to Bhopal” but for the “convenience”
of the respondent.In doing so, the respondent took the cargo E
in its own custody and acted beyond the scope of the
“ordinary course of transit”, terminating coverage under the
policy. The goods in the ordinary course of transit are
inextricably linked to a carrier who is responsible for
expediting the journey and taking care of the goods during F
transit. Once the respondent took the cargo in its own custody
and chose to assemble the helicopter in New Delhi, the link
with the carrier came to an end affecting the risk cover;
(ii) The delay and deviation caused due to the respondent taking
custody and delivery of the helicopter was not covered by G
Clause 6 of the ICC and ran contrary to Clause 15 of the
ICC, which required the respondent to act with reasonable
dispatch;
(iii) The policy covered risks associated with transportation of
the helicopter in a disassembled state as cargo through a
H
210 SUPREME COURT REPORTS [2020] 6 S.C.R.
A carrier.When the respondent assembled the helicopter at the
hangar in New Delhi, it changed the character and nature of
the said cargo and created an entirely new product. The
modified cargo was incapable of being insured under the
existing policy as it exposed the appellant to risks that were
not agreed upon in the transit marine insurance policy. The
B
risks associated with the transportation of a disassembled
helicopter as cargo are different from those associated with
the flight of a helicopter under its own power. Operational
risks associated with the flight of the helicopter are covered
under a separate‘Aviation Hull All Risk Insurance Policy’;
C (iv) Clause 2.3 of the ICC excludes from the insurance cover
the loss, damage or expense caused by insufficiency or
unsuitability of packing or preparation of the cargo;
(v) The NCDRC in its interpretation of the policy has, in essence,
re-written the policy providing a meaning contrary to that
D envisaged by the parties. In this regard, reliance was placed
upon the decision of this Court in Export Credit Guarantee
Corporation of India Ltd v Garg Sons International7.
Even if the container containing the disassembled helicopter
had not been opened in New Delhi and not continued its
E onward journey to Bhopal, then too the ordinary course of
transit would have been interrupted. Breaks in transport of
the cargo have to be incidental to such transport and not as
a matter of convenience.The storage of the helicopter in the
hangar at New Delhi for the purpose of assembly and
subsequent flight could not be called storage being incidental
F to the transportation.Reliance was placed upon the judgments
of the Supreme Court of Victoria(Appeal Division) in Verna
Trading Pty Ltd v New India Assurance Co Ltd8, and
Supreme Court of Victoria(Common Law Division) in QBE
Insurance Limited v Patterson Fine Jewellery Pty Ltd9;
G and
(vi) Damage to the window of the door of the helicopter would
fall within the excess clause which in any event is not covered
7
(2014) 1 SCC 686
8
(1991) 1 VR 129
9
H 2004 VSC 31
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 211
STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]
under the insurance policy. The damage to the tail boom A
admittedly occurred in the third week of November 2005
which is after the period of thirty days from 13 October 2005
(the date of customs clearance and the respondent taking
possession of the cargo). Therefore, the claim for damage
in this period is not payable in terms of Clause 5.1.3.
B
10. On the other hand, Aditya Rajan, learned counsel appearing
on behalf of the respondent supported the decisions of the NCDRC and
SCDRC and made the following submissions:
(i) The copy of the ICC was never provided by the insurer. The
manner in which the helicopter is transported by air and by C
road is different. The helicopter in a knocked down state
first landed in New Delhi and was then taken to the hangar,
where it was to be assembled and prepared for transportation
by road to Bhopal.The respondent did not choose New Delhi
as the selected warehouse for the purposes of accepting the
delivery.During the assembly, only the fuselage assembly D
(front body of the helicopter) was inspected and a crack
was noticed in the window of the front body of the helicopter.
At that stage, there was no possibility of detecting any other
damage to the helicopter as the helicopter was still in transit
and therefore, no formal complaint was lodged with the E
appellant. Only after the delivery of the helicopter at Bhopal
could the helicopter be checked properly and a claim be
lodged;
(ii) The letter dated 22 November 2005, was written by an
administrative manager, who had no idea whether the F
helicopter was to be transported to Bhopal by road or air. It
was stated in the letter that some parts of the helicopter
were broken during transit;
(iii) There was justifiable ground for the helicopter to be stored
at the hangar at New Delhi. Since the replacement window G
was not available in India, the respondent decided to procure
a new window from the US in order to prevent the possibility
of further damage to the mounting frame of the
helicopter.Since the procurement and supply of the new
window was taking considerable time, the helicopter was
kept in storage in the meantime in the hangar covered with a H
212 SUPREME COURT REPORTS [2020] 6 S.C.R.
A bubble sheet and packing material. In addition, the helicopter
was retained in New Delhi as the respondent had all the
necessary skilled manpower and special tools to replace the
damaged window;
(iv) On 20 November 2015, the engineer of the helicopter
B manufacturer noted a dent in the tail boom during a routine
check. Upon being informed of the dent in the tail boom, the
respondent’s engineer conducted a further assessment to
determine the extent of damage. Accordingly, the inside of
the helicopter was accessed by opening the access panels
and the main structural bulkhead was found damaged. The
C mere fact that the damage was discovered on 20 November
2005, does not imply that the dent was actually caused on
that date. The damage to the tail boom,the bulk head, and
the damage to the window glass established that the damage
had been caused during transit as it could not have been
D caused to a stationary helicopter stored at the hangar in New
Delhi. No report or CCTV footage of any incident of the
helicopter being damaged in the hangar was reported; and
(v) The manufacturer of the helicopter provided a repair scheme
through which the structural damage to the helicopter could
E be repaired at the hangar in New Delhi. After the repair, in
order to verify the serviceability of the helicopter it was
essential to test fly it and since the helicopter was assembled
in a flying state, it was decided not to disassemble it for
transportation by road but instead fly the helicopter to Bhopal.
The respondent never gave any instructions to change the
F final destination from Bhopal to New Delhi and for the
purposes of Clause 5.1.2, Bhopal continued to be the final
place of delivery.
11. The rival submissions fall for our consideration.
G 12. The dispute before this Court is with respect to the damage to
the tail boom of the helicopter and not as regards the damage to the
windscreen glass. By a letter dated 10 April 2006, the appellant informed
the assured that the total cost of replacement of the windscreen glass
was within the policy deductible of 0.5% of the sum insured and as such
no liability arose under the policy. The assured has not challenged that
H before this Court.
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 213
STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]
13. The insurance policy issued by the insurer to the insured A
represents a contract between the parties. The insurer undertakes to
compensate the insured for the losses covered under the insurance cover
subject to the terms and conditions of the policy.The appellant issued
apolicy to the respondent on 22 July 2005.Under the policy schedule, the
cargo was to be transported from Langley to Bhopal. The policy schedule
B
prescribed that the appellant company “agrees to insure against loss,
damage, liability or expenses subject to the limit of indemnity and the
clauses, endorsements, exclusions, conditions and warranties in the
schedule to the policy.” The extent of the policy cover was governed by
and subject to various clauses mentioned in the policy schedule which
included the ICC. The ICC,inter alia, prescribed the risks covered, C
exclusions, duration and duties of the insurer and the insured.
14. The dispute in the present case is on the interpretation of the
termination clause of the ICC.
15. MacGillivray on Insurance Law10 elucidates the principles
which govern the interpretation of insurance contracts: D
“11-007 It is an accepted canon of construction that a commercial
document, such as an insurance policy, should be construed in
accordance with sound commercial principles and good business
sense, so that its provisions receive fair and sensible application.
Several consequences flow from this principle... E
11-008 It follows that in interpreting any clause of a policy, it is
correct to bear in mind: (1) the commercial object of purpose of
the contract; and (2) the purpose or function of the clause and its
apparent relation to the contract as a whole... ’’
F
16. The provisions of an insurance contract must be imparted a
reasonable business like meaning bearing in mind the intention conveyed
by the words used in the policy document. Insurance policies should be
construed according to the principles of construction generally applicable
to commercial and consumer contracts. The court must interpret the
words in which the contract is expressed by the parties and not embark G
upon making a new contract for the parties. A reasonable construction
must therefore be given to each clause in order to give effect to the plain
and obvious intention of the parties as ascertainable from the whole
instrument. The liability of the insurer cannot extend to more than what
10
Twelfth Edition, Sweet and Maxwell (2012) H
214 SUPREME COURT REPORTS [2020] 6 S.C.R.
A is covered by the insurance policy. In order to determine whether the
claim falls within the limits specified by the policy, it is necessary to
define exactly what the policy covered and to identify the occurrence of
a stated event or the accident prior to the expiry of the policy. Hence,while
considering the rival submissions, it is necessary to preface our analysis
with the provisions of the policy.
B
17. Clause 5 of the ICC provides thus:
“5.1 This insurance attaches from the time the subject-matter
insured leaves the warehouse, premises or place of storage at the
place named herein for the commencement of the transit, continues
C during the ordinary course of transit and terminates either
5.1.1 On delivery to the Consignees’ or other final warehouse,
premises or place of storage at the destination named herein.
5.1.2 On delivery to any other warehouse, premises or place of
storage, whether prior to or at the destination named herein, which
D the Assured elect to use either.
5.1.2.1 for storage other than in the ordinary course of transit
or
5.1.2.2 for allocation or distribution or
E 5.1.3 On the expiry of 30 days after unloading the subject-matter
insured from the aircraft at the final place of discharge, whichever
shall first occur.”
The insurance cover in the present case is expressed in terms of
the voyage itself. The above clause providesthat the duration of the
F policy attachedand commencedfrom the time the insuredcargo leftthe
warehouse, premises or place of storage at the place named in the policy
and continued during the “ordinary course of transit”. So far as the
termination of the transit is concerned three alternate events are put
forward in Clause 5:
G (i) Under Clause 5.1.1, insurance terminates “on delivery” of
the cargo “to the consignees or other final warehouse or
place of storage at the destination named” in the policy;
(ii) Under clause 5.1.2, the alternative place of delivery is to
“any other warehouse, premises or place of storage whether
H prior to or at the destination named herein” which the assured
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 215
STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]
chooses to use for one of two purposes namely -(a) either A
for storage other than in the ordinary course of transit or (b)
for allocation or distribution of the cargo; and
(iii) Clause 5.1.3 prescribes a period of thirty days after unloading
of the insured cargo from the aircraft at the final place of
discharge. If that event first occurs, the question of delivery B
to any warehouse or place of storage becomes redundant.
Even though in Clause 5.1.1 the choice of final warehouse is
restricted to the destination named therein,by virtue of Clause
5.1.2, it is possible that the policy terminates upon delivery to
some other final warehouse or place of storage as chosen
by the assured.Under Clause 5.1.1, the delivery of the C
subject-matter at the warehouse, premises or place of storage
at the named destination also constitutes the termination of
the insurance. Clause 5.1.2 provides for situations where
the policy terminates upon delivery of the goods at any other
warehouse, premises or place of storage prior to or at the D
destination named in the policy which is elected by the insurer
for the purpose indicated in Clause 5.1.2.1 or Clause 5.1.2.2.
18. The expression “in the ordinary course of transit” mentioned
in Clause 5 of the ICC cannot be divorced from the context and must be
read along with the other conditions which appear in the policy E
document.The meaning of the expression “in the ordinary course of
transit” depends on the context, object and the wording of the particular
policy. P Ramanatha Aiyar’s Law Lexicon11, defines the expression
“ordinary”:
“Regular; usual; normal; common; often recurring; according to F
established order; settled; customary; reasonable; not characterised
by peculiar or unusual circumstances; belonging to, exercised by,
or characteristic of, the normal or average individual.”
The same Law Lexicon, relying onan 1888 decision of the Queen’s
Bench Division in Bethell v Clark12, defines the expression “transit” G
as:
“The term “transit” does not mean that the goods must be actually
moving as the relevant time: they must, however, be still in
possession of the carrier.”
11
3rd Edition, 2012 H
12
(1888) 20 QBD 615
216 SUPREME COURT REPORTS [2020] 6 S.C.R.
A Black Law’s Dictionary13 defines the expression “transit” as:
“1. The transportation of goods or persons from one place to
another. 2. Passage; the act of passing.”
19. Precedents across various jurisdictions have dealt with the
meaning of the expression “in transit”and “in the ordinary course of
B transit”. In SCA (Freight) Ltd v Gibson14 (“Gibson”), the plaintiff
who agreed to carry a consignment of books from Rome to Manchester
purchased from the defendant a policy against liability for damage to
goods in transit. Instead of proceedingto England, the plaintiff decided to
take the loaded lorry on a trip to the centre of Rome.On the way, the
C lorry overturned, and the consignment of books suffered damage. The
plaintiffs claimed indemnity under the policy on the ground thatwhen the
accident occurred, the books were still in transit. While interpreting the
meaning of the expression goods “in transit”,Justice Ackner, speaking
for the Queen’s Bench Division (Commercial Court) held thus:
D “Goods cease to be in transit when they are on a journey
which is not in furtherance of their carriage to their ultimate
destination.Obviously a detour which is reasonably necessary
to enable a driver to obtain food or rest would be in furtherance of
the safe and expeditious carriage of the goods to their final
destination. It would be an ordinary incident in the transit of goods
E by the plaintiff’s vehicles. It is a question of degree, as to
what is or not in reasonable furtherance of the carriage of
the goods. A deviation which is wholly unrelated to the usual
and ordinary method of pursuing the adventure would
prevent the goods being “in transit” within the meaning of
F the policy.”
(Emphasis supplied)
20. In Wiggins Teape Australia Pty Ltd v Baltica Insurance
Co Ltd15 (“Wiggins Teape”), the plaintiff shipped a quantity of wood
pulp from Sweden to Port Kembla. The destination of the wood pulp, as
G specified in the policy of marine insurance, was the plaintiff’s place of
business at Bomaderry in New South Wales. After the wood pulp was
unloaded at the port, the plaintiff had stored the consignment in three
13
10th Edition
14
[1974] 2 Lloyd’s Rep 533
15
H [1970] 2 NSWR 77
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 217
STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]
other stores because of insufficient storage space at Bomaderry. About A
thirty-eight days after the wood pulp had been unloaded, the woodpulp
in one of the stores was destroyed by fire. The plaintiff claimed under
the policy on the ground that the risk of fire at the store where the fire
took place was still covered by the policy, as the wood pulp had notreached
its final destination but was still in transit.Justice Macfarlan, speaking
B
for the New South Wales Supreme Court held thus:
“... the purpose of a warehouse-to-warehouse clause is to insure
during a limited land movement, but, as far as I am aware, it has
never been suggested it is intended to cover indefinite
storage at some place not brought about by the
requirements of transport, but determined by the voluntary C
decision of the consignee. In my opinion the facts of this case
prove that the Unanderra store was something more than a mere
transit store and that when goods entered it, it was for an indefinite
duration. I am also of the opinion that in the present case transit
had ceased and that unless there were an express provision in the D
policy, the cover ceases. For this purpose, it does not matter
whether the store at Unanderra was a final warehouse or a
transit store...”
(Emphasis supplied)
21. In First American Artificial Flowers, Inc v AFIA E
Worldwide Ins16 (“First American Artificial Flowers”), the New York
Supreme Court was called upon to determine whether coverage existed,
in a warehouse to warehouse clause, during the ordinary course of transit
until delivery to the consignee’s or other final warehouse or place of
storage at the destination named in the policy. Aconsignment of artificial F
plastic flowers had been shipped from Hong Kong to New York. Upon
the arrival of the shipment in New York, the container loaded with flower
was trucked to the consignee’s warehouse and the activity of unloading
the trailer commenced. The container was not unloaded completely by
the end of the day and when the workers arrived the next morning, the
goods were found to be stolen. The shipper of the flowers sued its G
underwriters on the ground that the transit policy of insurance required
delivery into the warehouse of the consignee and since that event had
not occurred, the loss was covered under the insurance policy. The court
held thus:
16
1977 AMC 376 (N Y Sup Ct 1976) H
218 SUPREME COURT REPORTS [2020] 6 S.C.R.
A “[T]he Court is of the opinion that by opening the sealed
container and removing some of the contents thereof, the
insured accepted delivery outside of the warehouse and
terminated the coverage. Once plaintiff accepted the goods, it
was free to commence unloading and continue with that work
until the job was completed. It was also free to leave some of the
B
goods on the truck until it was more convenient to unload – but at
its own risk. The plaintiff could not ‘extend indefinitely the
duration of defendant’s policy risk after the goods were at
the destination’.”
(Emphasis supplied)
C
22. In Lumber & Wood Products, Inc v New Hampshire
Insurance Company, Etc17, the United States Court of Appeals for
the Eleventh Circuit referred to the decision in First American Artificial
Flowersand observed thus:
D “The court in First American relied upon, among other cases
Boonton Handbag Co v The Home Ins Co, 125 N J Super, 287,
310 A 2d 510 (1973), a similar case which also held that the arrival
of the truck at the consignee’s warehouse was sufficient to
terminate transit coverage under the policy. The guiding precept
behind both of these cases is that a transit policy of insurance
E should not be stretched or tortured to provide coverage
for losses which take place after delivery at the consignee’s
facility. In those circumstances where it is simply more
convenient for the consignee to allow the cargo to be stored
outside its warehouse, the shipper cannot indefinitely avail
F himself of the coverage because the cargo is allegedly “in
transit”. Once the final destination has been reached, transit
has ceased. Consequently, the coverage must also cease.”
(Emphasis supplied)
23. In Verna Trading Pty Ltd v New India Assurance Co
G Ltd18 (“Verna”), the Supreme Court of Victoria (Appeal Division) dealt
with whetherthe storage of goods by the consignees at a warehouse for
the purpose of commercial convenience was storage other than in the
ordinary course of transit.The plaintiff had purchased a policy of marine
17
807 F 2d 1987, 1987 AMC 1244
18
H [1991] 1 VR 129
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 219
STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]
insurance for covering the transportation of goods from Hong Kong to A
Australia. After the shipment arrived in Melbourne, the goods were
transferred to a storage area, awaiting customs clearance. After clearing
all dues, the plaintiff made a deliberate decision to retain the goods in the
storage area until they were able to accept delivery of the goods from
their customers and transfer the goods to another warehouse.After the
B
container was transferred, the goods were found to be missing. The
plaintiff lodged a claim alleging that the goods while in the storage
areawere in transit and the alleged theft would be covered by the policy.
Justice Beach referred to the decision in Wiggins Teapeand held thus:
“... once the decision was made by Verna to leave the cassettes
C
in Strang’s Triangle until such time as they were able to accept
delivery of them into the Multi Group warehouse, the cassettes
ceased to be in transit. The storage of the cassettes in the
triangle had nothing to do with the requirements of
transportation. They were left there as a matter of
convenience until such time as they could be taken to their D
final destination. In that situation, once the decision was
made to leave them in the triangle, the insurance
terminated. It must also follow from Verna’s actions in that
regard that it did not act with reasonable dispatch in so far
as delivery of the cassettes to their final destination was
E
concerned.”
(Emphasis supplied)
Justice Kaye in his concurring opinion discussed the meaning of
the expression “in transit” and held thus:
“... While the expression “in transit” is not a term of art, F
its intended meaning may become apparent from the
context in which it is used: cf. Peter Jackson Pty Ltd v
Consolidated Insurance of Australia Ltd. [1975] VicRp 77; [1975]
VR 781, at p. 799. In the present case the meaning of the phrase
“during the ordinary course of transit” is indicated by the purpose G
of the warehouse to warehouse clauses forming part of the marine
policy. The voyage policy component of the policy covered the
risk of loss and damage while the goods were in the course of
carriage from Hong Kong to Melbourne. Upon the discharge of
the goods from the ship, the voyage cover ceased. The purpose
H
220 SUPREME COURT REPORTS [2020] 6 S.C.R.
A of the warehouse to warehouse CL81, in so far as it related
to the goods after discharge from the ship, was to provide
for the continuation of insurance whilst the goods were being
carried by land to the final destination. This was during
transit. But that period was limited to the time during which
the goods were in the ordinary course of transit. The period
B
of the ordinary course of transit continued during periods
or intervals which were in reasonable furtherance of the
carriage of the goods to the final destination: cf. SCA.
(Freight) Ltd. v Gibson [1974] 2 Lloyds Rep 533, at p. 535 per
Ackner J. (as his Lordship then was). Implicit in the phrase
C “during the ordinary course of transit” wasrecognition and
acceptance that the movement of the insured goods by land
might be interrupted by circumstances associated with the
requirements of their transportation.”
(Emphasis supplied)
D Justice Ormiston referred to the decision in Gibson and dwelt
the meaning of the expression “ordinary course of transit”:
“It would therefore appear that the “ordinary course of transit”
would end if an act or acts took place which would,
reasonably considered, indicate that the transit had
E terminated or that the transit had been so interrupted that
it could not be seen as likely that the transit would
recommence without there being a positive decision to that
effect by the assured or consignee.Even if neither of those
two conclusions could be drawn, the cargo may no longer
F be in the “ordinary course” of transit if it is dealt with in a
manner inconsistent with the prosecution of the adventure,
that is, in a way or for a purpose which is unrelated to
bringing the transit to its expected conclusion by delivery
to the defined warehouse or store.”
G (Emphasis supplied)
24. In NEC Australia Pty Ltd v Gamif Pty Limited,19 the insured,
a transporter of goods claimed against its insurers for a loss resulting
from the theft of certain goods from one of the insured’s warehouses.
The issue was whether or not the goods were “in transit” at the time of
19
H [1993] FCA 252
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 221
STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]
the theft within the ordinary meaning of that term in the policy of A
insurance. Justice Lockhart speaking for the Federal Court of Australia
while referring to the decisions in Wiggins Teape and Verna held thus:
“In my opinion the policy covers machines of NEC whilst being
transported from one place to another. It does not mean that the
machines must be in motion at all times. But it does mean that the B
overall object of the insurance contract is to facilitate the
transportation of machines of NEC from one place to another.
The “transit” may be interrupted to permit efficient and
economical loading, transhipment, unloading and storage
to await another vehicle to carry the goods from the point
of original shipment to the point of destination; but the C
interruption cannot be merely for the commercial
convenience of one of the parties.
The ordinary meaning of “transit” essentially connotes that goods
are in motion between two points, but the period of transit may
continue during intervals or periods when they may be loaded or D
unloaded and temporarily housed provided that this is reasonably
referable to the furtherance of the carriage of goods to the final
destination. The notion of “in transit” accepts that the movement
of the goods may be interrupted by circumstances associated with
the requirements of their transportation.” E
(Emphasis supplied)
25. In context of the policy, the words “in transit” do not require
transportation of the consignment in a single trip from the commencement
to the final destination but includes those interruptions in motion that are
incidental to or in furtherance of the conveyance or transportation of the F
consignment.The words of the policy ought to be construed so as to
conform to the usual and ordinary method of pursuing the venture or
operation. The question of what does and does not constitute a deviation
in furtherance of the conveyance of the goods is a question of fact that
must be determined by both the intent of the policy and the actions of the G
parties. An action that is wholly unrelated to the usual or ordinary method
of pursuing the transportation of goods would prevent the goods from
being covered under the definition of the expression “in transit” under
the policy. Words used in the policy must be construed in their commercial
setting having regard to the purpose of the policy.
H
222 SUPREME COURT REPORTS [2020] 6 S.C.R.
A 26. The appellant issued a policy cover to the respondent providing
coverage for the transport of the helicopter from Langley to Bhopal.
The helicopter was transported in a knocked down state by air through
Cathay Pacific Airlines and reached New Delhi on 5 October 2005. It
cleared customs on 13 October 2005 and on the same day, the respondent
after taking possession of the cargo shifted it to the hangar at New
B
Delhi. It is undisputed that at the time of customs clearance, no damage
was reported.It was when the helicopter was inspected by the
representative of the manufacturer during a routine inspection on 21
October 2005 that damage was reported to the window of the crew
door of the helicopter.In acommunication dated 21 October 2005
C addressed by the representative of the manufacturer for placing an order
for a crew door window, it was stated that “further unpacking of the
Fuselage Assembly was carried out and no other damage was
evident.”By a letter dated 22 October 2005, the respondent informed
the appellant of the said damage by stating:
D “On the helicopter reaching Delhi, the package was opened it
was found that some of its parts were found broken during transit”
Presently, the Helicopter is being assembled at the Hangar
of Indamer Co. located at Delhi so that the Helicopter can
fly from Delhi to Bhopal.”
E (Emphasis supplied)
27. The contents of the above letter negate the submission of the
learned counsel for the respondent that the helicopter was shifted to the
hangar for the purposes of assembling and preparing it for further
transportation by road to Bhopal. It is evident from the above letter that
F the intention of the respondent was to assemble the helicopter at New
Delhi and to fly it to Bhopal. The helicopter was transported from Langley
in a “knocked down state”. The specific act of unpacking the cargo at
New Delhi in furtherance of the purpose of assembling it for the flight to
Bhopal indicated that the transportation of the cargo in a knocked down
G state had come to an end. The act of unpacking the helicopter for the
purpose of assembling it for undertaking the flight to Bhopal was unrelated
to the usual or ordinary method of pursuing the transportation of the
cargo insured. The policy covered only those risks that were associated
with the transportation of the helicopter and did not cover the risks
associated with the flight or operation of the helicopter.
H
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 223
STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]
28. Colinvaux’s Law of Insurance20 elucidates on the distinction A
between increase of risk and change of risk:
“5-023 There is a distinction at common law between cases in
which the danger of loss increases during the currency of the
policy, and cases in which the very nature of the subject-matter
insured has altered: the former has no adverse effects on the B
policy, whereas the latter operates automatically to
discharge the insurer on the basis that what was agreed
between the parties has ceased to exist. The distinction
between an alteration of the risk and an alteration in the subject-
matter may at the margins be fine, but it is nevertheless crucial...”
C
“5-034 Where the change occurring is not merely an increase
in the risk faced by the insurer, but amounts to a substantive
change in the insured subject-matter itself, the common
law discharges the insurer from all liability for loss to the
subject matter... To determine whether or not there has been a
change in the subject-matter, it is necessary to construe the policy D
to determine exactly what subject-matter was contemplated by
the parties as falling within its coverage...”
(Emphasis supplied)
29. In the present case, the transit policy only covered such risks E
that may have arisen by the venture or operation being carried out in the
usual or ordinary manner and did not include risks that were out of the
scope of the policy. Change in the character of the helicopter from a
knocked down state to a ready to fly state exposed the appellant to risks
not contemplated by the parties under the policy. The effect of the
alteration of the subject-matter insured is outside the scope of the agreed F
cover and brings an end to the policy. Once the nature of the subject-
matter was altered, the cargo cannot be said to be in transit and the
appellant is absolved from any liability arising out of any subsequent
damage to the consignment. Exposure to risks associated with the flight
substantially and unnecessarily added to the risks of the journey that G
were not covered by the policy. Accordingly, the submission of the learned
counsel for the respondent that the cover against risks would be provided
till the time the helicopter was not delivered at the final destination of
Bhopal is unsustainable. Once the respondent intended to alter the subject-
20
10th Edition by Robert Merkin H
224 SUPREME COURT REPORTS [2020] 6 S.C.R.
A matter it becomes irrelevant to determine whether the hangar at New
Delhi was a transit store or the final destination of delivery.
30. The learned counsel for the respondent has argued that there
was justifiable ground for the helicopter to be stored at the hangar in
New Delhi since procurement and supply of the new window was taking
B considerable time and all the necessary skilled manpower and special
tools to replace the damaged window were only available in New Delhi.
Clause 5.1.2 of the ICC provides that the policy may terminate upon the
assured choosing to use an alternate place of delivery, prior to the
destination named therein for one of two purposes, either for storage
other than in the ordinary course of transit or for allocation or distribution
C of the cargo.The purpose of a transit policy is to cover the carriage of
goods to the final destination. In the present case,storage of the helicopter
in the hangar at New Delhi awaiting replacement of the spare window
cannot be said to be incidental or in furtherance of the carriage of the
goods to the ultimate destination.It would be unreasonable to suggest
D that the transit policy intended to cover indefinite storage of the helicopter
at the hangar in New Delhi not brought about by the requirements of
transport but determined by commercial convenience of the respondent.
The degree of deviation of storing the helicopter at the hangar awaiting
replacement of the spare window is at variance with the ordinary course
of transit.Ordinary course of transit is the period when the cargo is in
E the course of transportation, and not in the immediate control of the
buyer or seller. After the goods cleared customs, the helicopter was in
possession of the respondent and it took a voluntary decision of retaining
the helicopter in New Delhi on the basis of commercial convenience.As
found in the earlier part of the judgment, the intention of the respondent
F was not to prepare the helicopter for transportation by road to Bhopal
but to assemble the helicopter in New Delhi and fly it to Bhopal.Once
the respondent decided to leave the goods in the hangar at New Delhi
for its commercial convenience not associated with or in furtherance of
the requirements of their carriage to Bhopal, the transit insurance ended.
G 31. Clause 15 of the ICC provides that during the period of the
transit policy, the insured shall act with reasonable dispatch:
“It is a condition of this insurance that the assured shall act with
reasonable dispatch in all circumstances within their control”
H
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 225
STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]
The purpose of the marine transit insurance policy is to cover the A
consignment from risks associated with transportation of the consignment
from one place to another. It is fundamental for those responsible for
carrying the cargo to ensure that all stages of the transportation are
effected with reasonable promptness.”In transit”, however, does not
necessarily mean that the consignment needs to be in continuous motion
B
at all times. A mere brief suspension must however be in furtherance of
the ordinary course of transit. During the ordinary course of transit, the
consignment might frequently come to rest or be temporarily stored in
the dock awaiting loading or customs clearance. However, unduly
protracted steps in the cargo’s transportation are not within, and may
terminate, the “ordinary course of transit.”In the present case, the C
insuredvoluntarily decided to store the helicopter in the hangar at New
Delhi out of commercial convenience and not in furtherance of the
transit.In addition, the insured by assembling the knocked down helicopter
for the purposes of flying it to Bhopal changed the nature of the
consignment and exposed the appellant to operational risks beyond the
D
scope of the policy.
32. Clause 6 of the ICC provides forcontinuation 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 E
either the contract of carriage is terminated at a place other than
the destination named therein 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 F
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 G
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.”
H
226 SUPREME COURT REPORTS [2020] 6 S.C.R.
A Clause 6 states that the insuredcan 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,
B
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.
C 33. After determining that the ordinary course of transit ended in
Delhi when the cargo consisting of a helicopter in a disassembled state
was unloaded for the purpose of assembling the helicopter and flying it
to Bhopal, we must next determine the question of whether the damage
to the helicopter had occurredduring the course of transit from Langley
D to Delhi. On the damage to the tail boom of the helicopter, the learned
counsel for the respondent advanced the argument that the fact that the
damage was discovered on 20 November 2005, did not imply that the
dent was actually caused on that date. It was urged that the damage to
the tail boom, and to the window glass had been caused during transit as
it could not have been caused to a stationary helicopter at the hangar in
E Delhi.
34. Clause 8 of the ICC provides for claims under the insurance
policy:
“8.1 In order to recover under this insurance the assured must
F have an insurable interest in the subject-matter insured at the time
of the loss.
8.2 Subject to 8.1 above, the assured shall be entitled to recover
for insured loss occurring during the period covered by this
insurance, notwithstanding that the loss occurred before the
G contract of insurance was concluded, unless the assured were
aware of the loss and the underwriters were not.”
35. In terms of Clause 8, for the respondent to prove its case, the
basic and fundamental fact which needs to be proved is that: (i) the
respondent must have an insurable interest in the subject matter insured
at the time of loss; and (ii) the loss insured against occurred during the
H
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 227
STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]
period covered by the policy. The position has been formulated in A
MacGillivray on Insurance Law21:
“20-006 The burden of proving that the loss was caused by
a peril insured against is on the assured. It is not necessary
for him to prove precisely how the casualty occurred, but he
must show the proximate cause falls within the perils insured B
against...”
(Emphasis supplied)
22
In Rhesa Shipping Co S A v Edmunds , the plaintiff’s cargo
ship sank in calm weather in the Mediterranean Sea. The plaintiff sought
to recover damages under two identical marine insurance policies that C
covered losses incurred by perils of the sea. While discussing the burden
of proof on the plaintiff to prove its case, Lord Brandon, speaking for the
House of Lords held:
“In approaching this question it is important that two matters should
be borne constantly in mind. The first matter is that the burden D
of proving, on a balance of probabilities, that the ship was
lost by perils of the sea, is and remains throughout on the
shipowners. Although it is open to underwriters to suggest and
seek to prove some other cause of loss, against which the ship
was not insured, there is no obligation on them to do so. Moreover, E
if they chose to do so, there is no obligation on them to prove,
even on a balance of probabilities, the truth of their alternative
case.
The second matter is that it is always open to a court, even
after the kind of prolonged inquiry with a mass of expert F
evidence which took place in this case, to conclude, at the
end of the day, that the proximate cause of the ship’s loss,
even on a balance of probabilities, remains in doubt, with
the consequence that the shipowners have failed to
discharge the burden of proof which lay upon them.
G
...
... It requires a judge of first instance, before he finds that
a particular event occurred, to be satisfied on the evidence
21
Twelfth Edition, Sweet and Maxwell (2012)
22
[1985] 2 All ER 712 H
228 SUPREME COURT REPORTS [2020] 6 S.C.R.
A that it is more likely to have occurred than not. If such a
judge concludes, on a whole series of cogent grounds, that the
occurrence of an event is extremely improbable, a finding by him
that it is nevertheless more likely to have occurred than not, does
not accord with common sense. This is especially so when it is
open to the judge to say simply that the evidence leaves him in
B doubt whether the event occurred or not, and that the party on
whom the burden of proving that the event occurred lies has
therefore failed to discharge such burden.”
(Emphasis supplied)
36. For the respondent to prove its case, a mere assertion that the
C loss incurred during the course of transit is not sufficient. The burden of
proof lies on the respondent to show that the loss incurred was covered
within the terms of the policy and that on a balance of probabilities there
existed a proximate cause between the loss incurred and the helicopter
being in transit. The respondent has adduced no evidence to supports its
D case.
37. After the respondent informed the appellant on 23 November
2005 that upon inspection, the tail boom of the helicopter was found to
be damaged, the appellant promptly appointed a surveyor, who in its
report dated 14 March 2006 observed:
E “During our re-visit along with Insured’s engineer we observed
that the Tail boom was badly dented (apart from the crack
in the glass of pilot side window initially surveyed by us) at
the point where it joins the main frame. The frame was also
affected and bulged inside. It appeared from the nature of
damage that some hard and/or sharp object hit the frame
F whilst it was parked at hanger...”
(Emphasis supplied)
Based on the above, the surveyor concluded thus:
“The damage to the tail boom had occurred at Hangar #3, Bay
G 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.”
On the basis of the surveyor’s report,the appellant rejected the
claim of the respondent on 10 April 2006. By a letter dated 11 April
2006, the Directorate of Aviation, Government of Madhya Pradesh
H responded to the above letter on behalf of the respondent stating:
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v. 229
STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]
“It is very important to mention here that the investigation by your A
surveyors and their interviews with technical representatives of
Acro Helipro, scrutiny of customs documents, physical inspection
of helicopter at Palam airport etc. confirms that this damage to
the helicopter was caused in Nov’ 05 whereas this helicopter was
cleared from customs on 13th Oct’ 05.
B
...
Though your findings of damage to helicopter in Nov’05
i.e. after a month after receipt of helicopter from customs
are based on facts but here we wish to inform you that our
policy for transit is up to Bhopal and therefore damage to
the helicopter after a month from receipt of the customs C
i.e. in the month of Nov’ 05 is also covered under transit.”
(Emphasis supplied)
38. It is evident from the contents of the above letter written by
the the Directorate of Aviation, Government of Madhya Pradesh that
D
the respondent did not challenge the surveyor’s report. Instead it accepted
the finding of the surveyor that the damage to the helicopter took place
only in November 2005, after the helicopter had been cleared through
customs on 13 October 2005. Accepting the report of the surveyor, the
Directorate of Civil Aviation of the Government of Madhya Pradesh
sought to contend that the ordinary course of transit extended until E
Bhopal.This admission is contrary to the stance taken by the respondent
before this Court that the damage to the helicopter occurred during the
course of transit before the cargo was cleared from customs at Delhi.
The learned counsel for the respondent has in his written submissions
before this Court argued that sincethe procurement and supply of the
new window was taking considerable time, the helicopter was kept in F
storage in the meantime in the hangar was covered with a bubble sheet
and packing material.The respondent has on the balance of probabilities
failed discharge its burden that the damage to the helicopter incurred
during the course of transit. No proximate cause has been shown
between the damage to the helicopter and the helicopter being in a state
G
of transit. Hence, it is difficult for this Court to come to the conclusion
that the damage to the helicopter incurred during the course of transit.
39. 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
H
230 SUPREME COURT REPORTS [2020] 6 S.C.R.
A commencement of the transit is at Langley and ordinary course of transit
includes the staying at Delhi for customs clearances and for assembling”.
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. According to the NCDRC, the expiry of thirty days after
completion of discharge at the final port of discharge should be essentially
B interpreted as thirty days after reaching Bhopal and not thirty days during
the course of transit which included the halt at New Delhi.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
C in a contract in a manner that will best express the intention of the
parties.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
didnot reach Bhopal.The risks associated with the assembled helicopter
were not covered within the purview of the policy, as the subject-matter
D 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. The interpretation
adopted by the NCDRC strikes fundamentally at the purpose of the
E
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.
40. We are hence of the view that the interpretation placed on the
terms of the insurance policy was manifestly incorrect and that the
F impugned orders of the NCDRC and SCDRC are unsustainable.
41. The appeals are accordingly allowed and the impugned
judgments and orders of the NCDRCand the SCDRC shall stand set
aside. The consumer complaint shall stand dismissed. There shall be no
order as to costs.
G Pending application(s), if any, shall stand disposed of.
Devika Gujral Appeals allowed.
H
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