Holding

A breach of the ICC warranty, without prompt notice, automatically discharges the insurer’s liability and no waiver was effected by the insurer.

Summary

The appellant, a cargo importer, obtained a marine cargo cover note and later a policy from the respondent insurer for a shipment carried on the vessel Khalijia‑III. The vessel was not classed with an IACS‑member society as required by the Institute Classification Clause (ICC) and the appellant failed to give prompt notice of this non‑compliance. The insurer therefore repudiated the claim, and the NCDRC dismissed the appellant's consumer complaint. On appeal, the Supreme Court examined whether the breach of the ICC warranty discharged the insurer’s liability under Sections 35(3) and 36(3) of the Marine Insurance Act, 1963, and whether any waiver of the breach occurred. The Court held that the ICC was a clear warranty, the appellant breached it without prompt notification, and no waiver by the insurer was established. Consequently, the insurer’s liability was discharged and the appeal was dismissed.

Issues considered

Whether the appellant breached the warranty under the Institute Classification Clause by failing to ensure the vessel was classed with an IACS‑member society and by not giving prompt notice to the insurer.
Whether the insurer waived the breach of warranty either by contract terms or by its conduct, including the issuance of a General Average Guarantee.

Legislation cited

Marine Insurance Act, 1963s. 35(3), s. 36(3)

Subjects

marine insurancewarrantybreach of warrantyInstitute Classification ClauseICCheld covered clauseMarine Insurance Act 1963general averageclassification societyopen coverfacultative insuranceconsumer complaintNCDRC

Judgment

[2020] 6 S.C.R. 163 163

M/S RAJANKUMAR AND BROTHERS (IMPEX) A
v.
ORIENTAL INSURANCE COMPANY LTD.
(Civil Appeal No. 971 of 2014)
FEBRUARY 07, 2020 B

[MOHAN M. SHANTANAGOUDAR AND
K. M. JOSEPH, JJ.]
Insurance:
Marine insurance – Open cover insurance – Claim for C
insurance in respect of insured cargo – Denied by insurer –
Consumer complaint alleging deficiency in service – Complaint
dismissed by NCDRC – Appeal to Supreme Court – Held: Marine
Cargo Cover Note as well as Marine Insurance Policy stated that
Institute Classification Clause (ICC) was one of the warranties/ terms
D
of insurance – The subject vessel was neither in compliance with
the ICC, nor had the insured given prompt notification to the insurer
about such non-compliance – It is also not proved that such breach
was waived by the insurer – Hence, the insurer rightly repudiated
the insurance claim – Marine Insurance Act, 1963 – ss. 35(3) and
36(3). E
Marine Insurance Act, 1963:
ss. 35(3) and 36(3) – Nature of promissory warranty and its
waiver – Held: Automatic consequence of a breach of warranty, is
discharge of insurer’s liability – Such discharge of liability does
not require any express conduct or representation from the insurer F
– However, waiver of breach of warranty can be done by way of
incorporating certain terms in the insurance contract or the
exclusion clause in the Institute Cargo clause or by a representation
or conduct of the insurer.
Dismissing the appeal, the Court G

HELD: 1.1 The Marine Cargo Cover Note as well as the
Marine Insurance Policy stated that the Institute Classification
Clause (ICC) would be one of the warranties/terms of insurance.
Additionally, Clause 6 of the Cover Note prescribed that the
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163
164 SUPREME COURT REPORTS [2020] 6 S.C.R.

A subject vessel needed to conform to the current ICC, in the
absence of which, the insurance cover would be subject to
payment of an additional premium. [Para 5][177-A-B]
1.2 The ICC is drafted and issued by the Joint Cargo
Committee of the Lloyd’s Marketing Association (a premier
B marine insurance market in London) in consultation with
insurance and shipping interests. It is commonly understood that
this ‘classification’ relates to the seaworthiness of the vessel in
which the cargo is carried. The ICC 01/01/2001 imposes two
requirements to ensure that the vessel complies with a certain
minimum standard of seaworthiness. The first is a classification
C
requirement which requires that the vessel should be classed
with a Classification Society which is a Member/Associate
Member of the International Association of Classification
Societies (‘IACS’) or, in the case of vessels engaged exclusively
in coastal trading, a National Flag Society. The second is an age
D limitation in respect of the insured vessel. [Para 5][177-B-D; 178-
E-F]
1.3 An underwriter/insurer would usually trust the quality
of, and be prepared to issue a reasonable premium for, a vessel
classed with an IACS member society. On the other hand, the
E insurer may demand a higher premium, or deny insurance cover
altogether, for a voyage in respect of a vessel classed by a non-
IACS member society. Hence, the ICC prescribes classification
with a member of the IACS as the baseline for ensuring that the
policy involves less risk for the underwriter. [Para 5][179-E-F]
F 1.4 NCDRC has relied on the older version of the ICC, i.e.
the 1978 version. The 1978 version of the ICC was replaced by
the ICC 13/4/92, the ICC 1/8/97, and the ICC 01/01/2001. The
ICC 01/01/2001 is the most recent version of the ICC, and the
one which is relevant for the purpose of the present case. The
most recent version of the ICC, i.e., ICC 01/01/2001 does not
G help the appellant’s case inasmuch as it is stricter in its import.
English jurisprudence stipulates two requirements to avail of such
‘held covered’ provisions - first, ‘prompt notification’ to the
underwriter, and second, the availability of cover at reasonable

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M/S RAJANKUMAR AND BROTHERS (IMPEX) v. 165
ORIENTAL INSURANCE COMPANY LTD.

commercial market rates. However, the wording of the ‘held A
covered’ provision in the ICC 1978, did not expressly state these
requirements, leading to the apprehension that it may be
interpreted to mean that cover could be obtained in all cases,
without any precautionary measures being followed by the
assured. Hence, it appears that in order to avoid any confusion,
B
the ICC 01/01/2001 has been drafted to expressly incorporate
the aforesaid two requirements. Under the ICC 01/01/2001, the
assured must immediately inform the insurer/underwriter if they
discover that the vessel carrying the cargo does not meet the
classification requirement. Additionally, if the vessel is such that
a prudent underwriter would not be prepared to underwrite the C
risk at a reasonable premium, the assured is not entitled to the
insurance cover. These requirements are important because the
classification of the vessel is a significant factor for influencing
the underwriter’s decision-making as regards whether an
insurance cover should be issued for the marine voyage or not.
D
[Para 5.1][180-A-C; 181-A-C]
1.5 Sub Clause 1 of the ICC 01/01/2001 provides that cargo
interests are obligated to promptly notify insurance underwriters
if the cargo is being carried by a vessel which is not classed as
prescribed in the ICC, and Clause 5 thereof makes it clear that
failure to provide such information will lead to exclusion of the E
insurance cover. It is the burden of the assured to inform the
insurer about such non-compliance and negotiate a reasonable
premium beforehand. [Paras 5 and 5.2][179-G-H; 180-A; 181-F]
1.6 Thus, where a vessel is not classed with a recognized
classification society in terms of the ICC, any loss incurred by F
the cargo-owner will be excluded from the scope of the insurance
cover. Further, the cargo owner is required to immediately notify
the underwriters and negotiate an additional premium if the vessel
is not classed in accordance with the ICC. [Para 5.6][189-D-E]
1.7 In the instant case, it is apparent that neither was the G
subject vessel in compliance with the ICC clause, nor had the
appellant given prompt notification to the respondent about such
non-compliance. The appellant, in its letter had informed the

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166 SUPREME COURT REPORTS [2020] 6 S.C.R.

A respondent that the vessel is of ‘I.R.S.’ class. However, the full
form of ‘I.R.S.’ was not specified. The appellant has contended
that the NCDRC wrongly interpreted the term ‘I.R.S.’ to mean
‘Indian Register of Shipping’ and that the subject vessel was
actually registered and classified with the ‘International Register
of Shipping’. However, the official website of the International
B
Register of Shipping shows that its official acronym is ‘INTLREG’.
Whereas ‘I.R.S.’ is the official acronym of the ‘Indian Register of
Shipping’.Hence the appellant’s contention that ‘I.R.S.’ refers to
the International Register of Shipping is prima facie not
sustainable. [Para 5.7][189-E-H; 190-A]
C 1.8 The appellant had also averred in its complaint before
the NCDRC that the Overseas Seller had produced a certificate
dated 11.6.2010, certifying that the subject vessel was registered
with an approved Classification Society as per the ICC. Further,
that as per the said certificate, the class of the subject vessel was
D equivalent to Lloyd’s 100A1, and the subject vessel was seaworthy
and not more than 30 years old. However, no such evidence of
the vessel’s classification was ever provided to the respondent.
It is true that the appellant has, during the course of hearing this
appeal, placed the certificate dated 11.6.2010 before this Court.
However, a perusal of the certificate shows that is only a self-
E certification wherein the vessel owners have claimed that the
subject vessel is classed with an approved classification society
as per the ICC clause. It cannot be taken as conclusive evidence
that the vessel was actually classed with an IACS member society.
[Para 5.7][190-A-D]
F 1.9 Even if it is accepted that the vessel is classed with the
International Register of Shipping ‘INTLREG’, this does not help
appellant’s case inasmuch the INTLREG is not one of the 12
accredited Member Societies of the IACS. Rather, it is the I.R.S.
which is an IACS member. It has never been the case of the
G appellant that the subject vessel was classed by the Indian
Register of Shipping. It is also not the appellant’s case that the
subject vessel was classed with a National Flag Society. Hence,
the appellant had committed breach of the classification
requirement contained in Clause 1 of the ICC. [Para 5.7]
[190-D-F]
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ORIENTAL INSURANCE COMPANY LTD.

1.10 The letter dated 26.5.2010 sent by the appellant to A
the respondent, in respect of the ship’s particulars, cannot be
said to constitute ‘prompt notification’ as the particulars of the
subject vessel’s classification were not clearly specified therein.
The respondent may have, in good faith, assumed that ‘I.R.S.’
meant that the subject vessel was classed with the ‘Indian
Register of Shipping’, and may have consequently inferred that B
the subject vessel fell within the scope of the ICC clause.
[Para 5.8][190-F-H]
1.11 It was only pursuant to the appellant’s request for
release of separate salvage security that the respondent’s claim
settling agents, M/s. W.K. Webster & Co., London by e-mail C
dated 9.8.2010 informed the respondent that as per their
investigation, the subject vessel was classed with Lloyd’s Register
of Shipping only until 10.10.2007, after which the classification
was withdrawn. Hence it was only from this e-mail that the
respondents came to know that the shipment may fall outside
D
the scope of the insurance cover, as per the terms of the ICC.
Consequently, the ‘prompt notification’ requirement has not been
satisfied, and there is no ground for the application of the ‘held
covered’ clause. [Para 5.8][191-A-C]
1.12 No prudent underwriter would have agreed to cover
the risk involved in a such a high value shipment under the E
Marine Cargo Clause even though the appellant had no
documentary evidence on record to prove the classification of
the subject vessel. However, neither of the parties has led
evidence on whether the respondent would have agreed to insure
the policy for a reasonable premium had the correct particulars F
of the subject vessel been disclosed. Hence, it is not appropriate
to record any findings on the same. In any case, such question
does not arise inasmuch as the appellant did not provide “prompt
notification” in the first place. Hence, as provided under Clause
5 of the ICC, the insurer’s liability is automatically discharged.
[Para 5.9][191-C-E] G
1.13 Consequently, the appellant had committed breach of
the warranty contained in the Marine Insurance Policy requiring
the subject vessel to be classed in accordance with the ICC, and
such breach of warranty discharged the liability of the insurer.
[Para 5.9][191-F] H
168 SUPREME COURT REPORTS [2020] 6 S.C.R.

A 2.1 A warranty imposes certain obligations on the insured,
and Section 35(3) of Marine Insurance Act, 1963 makes it amply
clear that a warranty needs to be complied with, regardless of
whether or not its non-compliance materially affects the risk
involved in carrying the shipment. As a corollary, when a warranty
is not complied with, i.e., there is a breach of warranty, the insurer
B
is discharged from liability from the date of such breach, by virtue
of Section 35(3). At the outset, therefore, it is important to note
that the scheme of the 1963 Act is clear inasmuch as the automatic
consequence of a breach of warranty is discharge of the insurer’s
liability. Such discharge of liability does not require any express
C conduct or representation from the insurer. [Para 6][192-E-G]
2.2 However, Section 36(3) of the 1963 Act provides that
the insurer may waive a breach of warranty. Such a waiver may be
done either by or by way of incorporating certain terms in the
insurance contract, such as the ‘held covered’ clause in the ICC
D or the exclusion clause found in the Institute Cargo Clauses, or
by a representation or conduct of the insurer. [Para 6][192-G-H;
193-A]
2.3 It is commonly understood that a waiver in the context
of marine insurance, apart from one already provided for by way
E of ‘held covered’ or other such terms in the insurance contract,
must include two elements, namely, (i) knowledge of the insurer,
and (ii) unequivocal representation of the insurer. The presence
of both these elements is indispensable. [Para 6.3][194-E-F]
2.4 Even if the insurer makes an express representation
F that it would affirm the contract and indemnify the loss, if the
insurer can prove that such a representation was made without
the knowledge that there was a breach of warranty on part of the
insured, the liability of the insurer would stand discharged from
the date on which the warranty was breached. Similarly, mere
knowledge on the part of the insurer that there was a breach of
G warranty would not amount to a waiver, in the absence of an express
representation to that effect. [Para 6.3][194-F-H]

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ORIENTAL INSURANCE COMPANY LTD.

2.5 Insofar as the element of knowledge is concerned, if A
the vessel carrying the insured cargo incurs loss, and the insurer
seeks to investigate into whether or not there was a breach of
warranty, no knowledge can be attributed to the insurer until such
investigation is completed. Once there is knowledge, the second
element, i.e., unequivocal representation comes into play. The
B
representation must be of such a nature that it is sufficient for
the insured to conclude that the insurer is aware of the breach of
warranty and has chosen to waive such breach and indemnify the
loss. The determination of whether or not these elements are
present, assumes more complexity in cases where such a
representation comes from an agent of the insurer, or where such C
an agent has knowledge of the breach. However, these arguments
with respect to representations made by the insurer’s agent have
not been raised and hence, such issues need not be addressed
for the purposes of the present case. [Para 6.4][195-A-C]
2.6 In the instant case, though the respondent initially issued D
the Cover Note dated 14.5.2010 without knowing the particulars
of the vessel in which the appellant’s cargo was to be carried, it
subsequently issued the Marine Insurance Policy after the
particulars of the subject vessel, including the purported
classification of ‘I.R.S.’, were received. However, while the
importance of the ICC is undoubtedly more significant in cases E
of ‘open-cover’ insurances where the specific details of the vessel
carrying the cargo are not known to the insurer, a ‘facultative’
insurance policy in which the details of the subject vessel are
specified, need not be mutually exclusive with the ICC. Mere
formal issuance of the Marine Insurance Policy by the respondent F
does not indicate ‘acceptance’/waiver of the vessel’s classification
or lack thereof. [Para 6.1][193-A-E]
2.7 It was contended by the appellant that non-compliance
with the ICC stood waived by Clause 5.2 of the Marined Insurance
Policy. However, it cannot be said that the ICC was an ‘implied’ G
warranty within the meaning of Clause 5.2. It was stated on the
face of the Marine Cargo Cover dated 14.5.2010 and the Marine
Insurance Policy that the ICC is one of the warranties/terms of
insurance. [Para 6.2][193-G-H; 194-A]

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170 SUPREME COURT REPORTS [2020] 6 S.C.R.

A 2.8 In any case, the appellant’s stand is that the subject
vessel was classed with the ‘INTLREG’ (which it has mistakenly
referred to as ‘I.R.S.’). The very purpose of adopting the ICC is
to ensure that the vessel chosen by the insured meets certain
minimum standards of seaworthiness, by virtue of being classed
with one of the well-established member societies of the IACS.
B
The appellant, having known that the subject vessel was classed
with the ‘INTLREG’, which neither was nor is a member of the
IACS, was privy to the fact that the subject vessel was not
compliant with the minimum standard of seaworthiness as laid
out in the Marine Insurance Policy. Clause 5.2 only waives
C breaches of implied warranties of seaworthiness where the
assured was not privy to the unseaworthiness of the vessel.
Hence, the appellant would not be saved by Clause 5.2 of the
Policy, and it cannot be said that the respondent had waived the
breach of warranty before the appellant’s claim, by incorporating
Clause 5.2 of the Policy. [Para 6.2][194-A-D]
D
2.9 Under the facts and circumstances of the present case,
the breach of warranty occurred when the appellant informed the
respondent by letter dated 26.5.2010 that the subject vessel was
classed by ‘I.R.S.’, thereby indicating the subject vessel was
compliant with the ICC. After the subject vessel ran aground on
E the midnight of 18.7.2010, the appellant requested the issuance
of General Average Guarantee, and the same was issued on
3.8.2010. At the outset, the General Average Guarantee in ‘Form
B’ dated 3.8.2010 issued by the respondent to the GAA was only
an undertaking to pay the shipowners and the GAA on behalf of
F the appellant for their contribution to the General Average, as
and when such contribution was ascertained. This Guarantee was
issued as per Clause 2 of the Marine Insurance Policy, under
which the respondent had agreed to cover all general average
and salvage charges. At the time the aforesaid General Average
Guarantee dated 3.8.2010 was issued, the respondent was still
G under the impression that the subject vessel is in compliance
with the ICC. Obviously, such impression was based on the
representation made by the appellant that the subject vessel was
classed with I.R.S. It was only by the e-mail dated 9.8.2010 from
its claim settling agent that the respondent came to know that
H the subject vessel does not meet the prescribed classification.
M/S RAJANKUMAR AND BROTHERS (IMPEX) v. 171
ORIENTAL INSURANCE COMPANY LTD.

Subsequently, the respondent withdrew the Guarantee and A
refused to pay the separate salvage security. Hence, the issuance
of the General Average Guarantee cannot be understood as a
waiver inasmuch as the respondent, on the date of such issuance,
did not have the knowledge of the breach of warranty committed
by the appellant and was only fulfilling its duty to contribute to
B
the General Average in good faith, as required by Clause 2 of the
Marine Insurance Policy. [Para 6.5][195-D-F]
2.10 Further, in any case, at the time of issuing the General
Average Guarantee, the respondent did not expressly state that
it was aware of the non-compliance with the ICC and it was waiving
the same. In fact, the moment the breach of warranty was C
discovered, the respondent initiated steps to withdraw the
General Average Guarantee that had been issued by them and
refused to pay the additional salvage security, which clearly
demonstrates that there was no intent to waive the breach of
warranty. Therefore, it cannot be said that the respondent had D
waived the breach of warranty through its conduct or
representations after the claim was made by the appellant. [Para
6.6][196-D-E]
2.11 Thus, the appellant had committed breach of warranty
and the same was not waived by the respondent. As a result the E
respondent rightly repudiated the claim of the appellant. [Para
9][197-B]
Everbright Commercial Enterprises Pte Ltd v. Axa
Insurance Singapore Pte Ltd [2001] SGCA 24; Thames
and Mersey Marine Insurance Co Ltd v. H T Van Laun F
& Co [1917] 2 KB 48; Liberian Insurance Agency Inc
v. Mosse [1977] 2 Lloyd’s Rep 560; Nam Kwong
Medicines & Health Products Co. Ltd. v. China
Insurance Co. Ltd. [2002] 2 Lloyd’s Rep. 591; Kam
Hing Trading (Hong Kong) Ltd. v. The People’s
Insurance Co. of China (Hong Kong) Ltd. and Anr. G
[2010] 4 HKLRD 630 – referred to.
John Dunt, Marine Cargo Insurance by (Informa Law,
Routledge, 2009) 166 – referred to.

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172 SUPREME COURT REPORTS [2020] 6 S.C.R.

A
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 971 of
2014.
From the Judgment and Order dated 12.11.2013 of the National
Consumer Disputes Redressal Commission, New Delhi in Consumer
B Complaint No. 200 of 2012.
Parthiv K. Goswami, Syed Naqvi, Vinod Kumar, Rajesh Kumar,
Advs. for the Appellant.
Santosh Paul, Sr. Adv., Sudhanshu Das, Akshat Vikram, Ms. Arti
Singh, Advs. for the Respondents.
C The Judgment of the Court was delivered by
MOHAN M. SHANTANAGOUDAR, J.
1. This appeal arises out of judgement of the National Consumer
Disputes Redressal Commission (‘NCDRC’) dated 12.11.2013, dismissing
the consumer complaint filed by the Appellant herein.
D 2. The timeline of events giving rise to the present appeal is as
follows: The Appellant is a partnership firm in the business of
import-export of various commodities, including steel coils. The
Respondent insurance company issued a Marine Cargo Cover Note
(hereinafter ‘Cover Note’) dated 14.5.2010 for a sum of 12,63,712.50
E US Dollars, covering voyage from any port in China to Mumbai Port. It
was stated in the aforesaid Cover Note that a policy document would be
issued once the Appellant furnished the requisite particulars of the vessel
in which the cargo was being carried. Accordingly, the Appellant
forwarded the particulars of ‘Khalijia-III’, the vessel in which the cargo
was to be carried (hereinafter ‘subject vessel’), to the Respondent, vide
F letter dated 26.5.2010. It was stated in this letter that the subject vessel
was built in March 1985, and its “class” was specified as ‘I.R.S.’. The
Appellant’s case is that it had communicated the aforementioned details
regarding the subject vessel to the Respondent, as well as the
Respondent’s insurance broker, as per the documents presented by the
G Overseas Seller.
2.1 Thereafter, Hangzhou Cogeneration (Hong Kong) Co. Ltd.
(hereinafter ‘Overseas Seller’), through its agent M/s Kirtanlal & Sons,
shipped 80 prime hot rolled steel coils weighing 2000 Metric Tonnes on
board the subject vessel from Caofeidian Port, China to the Appellant,
for discharge at Mumbai Port. The subject vessel was carrying on board
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M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL 173
INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]

consignments of prime hot rolled steel coils of seven other importers A
who had also imported them from the same Overseas Seller.
Subsequently, the Respondent’s brokers issued a single voyage policy
dated 2.7.2010 (hereinafter ‘Marine Insurance Policy’) to the Appellant.
It is undisputed that the Marine Insurance Policy covered all risks as per
the Institute Cargo Clauses (A), Institute War Clause, and Institute Strike
B
Clause.
2.2 The subject vessel reached Mumbai port on 6.7.2010 and
was allotted a berth on 14.7.2010 for discharge of the cargo. However,
on account of failure of the vessel’s crane during discharge, further
discharge could not take place, and the subject vessel was removed
from the allotted berth by an order of the port authorities. Subsequently, C
on 19.7.2010, the Appellant came to know that the subject vessel had
run aground on the midnight of 18.7.2010. Thus, by letter dated 20.7.2010,
the Appellant informed the Respondent that there was a possibility of
them claiming under the Marine Insurance Policy.
2.3 Thereafter, the shipowners engaged the services of M/S. Smit D
Singapore Private Ltd. (‘Salvors’) for the purpose of recovering the
cargo. The shipowners also appointed M/s Richard Hogg Lindley as the
General Average Adjustor (‘GAA’). The GAA sent an email dated
27.7.2010 to both the Appellant and the Respondent, stating that the
situation had given rise to a “General Average”. The concept of General
Average, in maritime law, refers to a loss mitigation measure whereby E
all those who are interested in a marine adventure make pro rata
contributions towards the losses sustained or expenditure incurred in
time of peril for the common good of all parties.1 For instance, if a ship
runs aground, as in the present case, the shipowners and the cargo
interests are mutually liable for reimbursing the losses arising from such F
an event. If there is a contract of marine insurance in respect of the
voyage, the insurer will be liable for reimbursing the amount on behalf of
the assured cargo owner.
Accordingly, the Appellant requested its insurer i.e. the Respondent,
to issue a General Average Guarantee in ‘Form B’, as required by the
G
GAA. The Respondent consequently issued a guarantee dated 3.8.2010,
agreeing to pay the GAA on behalf of the Appellant, for contribution

1
Kyraki Nouassia, The Principle of Indemnity in Marine Insurance Contracts: A
Comparative Approach (Springer, 2007) 161. H
174 SUPREME COURT REPORTS [2020] 6 S.C.R.

A towards the General Average, as well as towards other special charges.
These documents were submitted by the Appellant to the GAA.
2.4 After the receipt of the General Average Guarantee, the GAA
requested the Appellant to pay a separate salvage security of 25 per
cent of the ‘Cost, Insurance, and Freight’ (‘C.I.F.’) value of their cargo,
B which amounted to 256,880 US dollars. Hence, by letter dated 5.8.2010,
the Appellant requested the Respondent to issue the salvage security.
The Appellant contends that the Respondent did not issue the separate
salvage security as required, resulting in the withholding of the release
of the Appellant’s consignment at Mumbai port, and exposing it to heavy
demurrage and likelihood of further damages. In addition to not issuing
C the salvage security, the Respondent, by letter dated 20.8.2010, informed
the Appellant that they were withdrawing the General Average Guarantee,
‘Form B’ issued by them earlier in respect of the Appellant’s consignment
on the subject vessel, on account of non-compliance with the ‘Institute
Classification Clause’ (‘ICC’) in the Marine Insurance Policy.
D 2.5 Unfortunately for the Appellant, on 7.8.2010 there was a
collision between the subject vessel and a navy vessel in the waters
near Mumbai Port. On 13.8.2010, the Salvors claimed a maritime lien on
the cargo. Further, the Salvors initiated arbitration proceedings against
the Appellant and the shipowners. During the course of the aforesaid
E arbitration proceedings, the Salvors obtained interim orders from the
Hon’ble High Court of Mumbai, restraining the Appellant from removing
their consignment from Mumbai Port. Ultimately, vide order dated
24.8.2010, the High Court directed that the Appellant would be allowed
to take its consignment on furnishing security in the form of a bank
guarantee in the sum of Rs. 14 crores. The Appellant furnished the
F security as directed and took delivery of the consignment from the
Mumbai Port Trust on 3.9.2010. On 2.12.2011, the Arbitrator passed an
award against the Appellant and other cargo owners, finding them liable
for reimbursing the costs incurred by the Salvors.
2.6 The Appellant, by letter dated 2.2.2012, requested the
G Respondent to settle the losses incurred by it, and also forwarded a copy
of the aforementioned arbitration award dated 2.12.2011. A legal notice
was also sent on 21.6.2012, followed by a reminder on 4.7.2012, but
these went unanswered. Hence, the Appellant filed a consumer complaint
before the NCDRC against the Respondent, asking for compensation
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M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL 175
INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]

on account of the losses incurred, for deficiency in service, and for the A
legal and other incidental expenses.
2.7 The Respondent did not file a written statement before the
NCDRC, and its request for consideration of written arguments was
rejected. However, counsel for the Respondent was allowed to make
oral submissions on the questions of law involved in the case. The B
NCDRC found that the Appellant had failed to prove that the subject
vessel was in compliance with the ICC stated in the Marine Insurance
Policy. It noted a communication dated 9.8.2010, in which the
Respondent’s claim settling agent in London had informed the Respondent
that the subject vessel was classed with Lloyd’s Register of Shipping
until 10.10.2007, after which Lloyd’s had withdrawn the aforesaid C
classification, and that the subject vessel appeared to be outside the
scope of the ICC. The NCDRC further found that the subject vessel
had been more than 25 years old on the date of loss i.e. when it ran
aground on 18.7.2010, and the Appellant had not produced any document
showing that the subject vessel was classed as ‘I.R.S.’ Hence, the D
complaint was dismissed.
3. Heard learned counsel for both parties.
3.1 Learned counsel for the Appellant submitted that the ‘I.R.S.’
classification was granted to the subject vessel by the ‘International
Register of Shipping’, which is an independent classification society. E
Further, that after the issuance of the Cover Note, the Appellant had
provided all particulars regarding the subject vessel, and expressly asked
the Respondent whether the subject vessel was acceptable. It was argued
that had the Respondent indicated at the time of the issuance of the
Marine Insurance Policy that the classification was not acceptable; the F
Appellant could have paid an extra premium to purchase the policy. This
is as per the terms of Clause 6 of the Cover Note, which reads thus:
“6 For coverage of shipments by sea: the vessel shall conform to
the current Institute Classification Clause; otherwise the cover
shall be subject to additional steamer extra premium such as G
coverage, under tonnage, non- classification and non approval extra
at underwriter’s discretion.”
Learned counsel also referred to the Institute Marine Cargo
Clause (A) (‘Cargo Clause’) within the Marine Insurance Policy,
which provides for waiver of any breach of implied warranties of
H
seaworthiness of the subject vessel. He argued that under the terms of
176 SUPREME COURT REPORTS [2020] 6 S.C.R.

A the Cargo Clause, the Respondent would have the right to not indemnify
the Appellant only if the Appellant or its servants were privy to such
unseaworthiness. It was argued that the Appellant was merely a
cargo-importer, and not the vessel owner, and had communicated all the
particulars of the vessel as provided to it by the Overseas Seller.
Therefore, the Appellant could not be said to have been privy to the
B
unseaworthiness, if any, of the subject vessel.
Lastly, it was contended that indemnification by the Respondent
could not be dependent on the amount of loss caused to the insured or on
the nature of accident that caused the loss. It was argued that that once
the Respondent provided the General Average Guarantee, it was estopped
C from claiming that the Appellant had breached the ICC.
3.2 On the other hand, learned counsel for the Respondent argued
that there was a clear breach of the ICC, inasmuch as the Appellant had
failed to disclose that the classification granted to the subject vessel by
Lloyd’s Register of Shipping had been withdrawn on 10.10.2007. So far
D as the I.R.S. classification is concerned, it was submitted that ‘I.R.S.’
referred to Indian Register of Shipping, and not International Register of
Shipping, as claimed by the Appellant. Furthermore, it was contended
that although the Appellant claimed to possess a certificate proving the
‘I.R.S.’ classification of the subject vessel, it had neither submitted the
E said certificate to the Respondent, nor produced the same before the
NCDRC.
In response to the Appellant’s argument that the Respondent was
estopped from claiming breach of the ICC by its conduct in providing
the General Average Guarantee, it was submitted that at the time when
F such Guarantee was sought for by the Appellant, the priority of all parties
involved was to ensure mitigation of losses by saving as much of the
cargo as possible. It was only after the collision of the subject vessel on
07.08.2010 that the Respondent began investigating into the seaworthiness
of the vessel, and found out that it was not a classed vessel at the time of
issuance of the Marine Insurance Policy. Therefore, it was submitted
G that the Respondent would not be estopped from claiming breach of the
ICC merely because it had, in good faith, provided the General Average
Guarantee so as to mitigate the Appellant’s losses.
4. Upon our perusal of the material on record and after hearing
the learned counsels, we find that two issues arise in the instant case:
H
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INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]

First, whether the Appellant had committed breach of warranty A
with respect to compliance with the ICC?
Second, whether the Respondent had waived such breach of
warranty by the Appellant?
5. With respect to the first issue, it is not disputed that both the
Cover Note and the Marine Insurance Policy stated that the ‘ICC’ would B
be one of the warranties/terms of insurance. Additionally, Clause 6 of
the Cover Note, as mentioned supra, prescribed that the subject vessel
needed to conform to the current ICC, in the absence of which, the
insurance cover would be subject to payment of an additional premium.
At this juncture, we find it useful to dwell upon the scope and C
relevance of the ICC in marine insurance contracts. The ICC is drafted
and issued by the Joint Cargo Committee of the Lloyd’s Marketing
Association (a premier marine insurance market in London) in
consultation with insurance and shipping interests. It is commonly
understood that this ‘classification’ relates to the seaworthiness of the D
vessel in which the cargo is carried.2 The relevant portion of the latest
version of the ICC, as revised in 2001 (‘ICC 01/01/2001’), which was in
force at the time of the Marine Insurance Policy, and continues to be in
force till date, reads as follows:
“QUALIFYING VESSELS E
1 This insurance and the marine transit rates as agreed in the
policy or open cover apply only to cargoes and/or interests carried
by mechanically self-propelled vessels of steel construction classed
with a Classification Society which is:
1.1 a Member or Associate Member of the International F
Association of Classification Societies (IACS), or
1.2 a National Flag Society as defined in Clause 4 below, but only
where the vessel is engaged exclusively in the coastal trading of
that nation (including trading on an inter-island route within an
archipelago of which that nation forms part). G
Cargoes and/or interests carried by vessels not classed as above
must be notified promptly to underwriters for rates and conditions
to be agreed. Should a loss occur prior to such agreement being
obtained cover may be provided but only if cover would have
2
See John Dunt, Marine Cargo Insurance (Informa Law, Routledge, 2009)166. H
178 SUPREME COURT REPORTS [2020] 6 S.C.R.

A been available at a reasonable commercial market rate on
reasonable commercial market terms.
AGE LIMITATION
2 Cargoes and/or interests carried by Qualifying Vessels (as
defined above) which exceed the following age limits will be
B insured on the policy or open cover conditions subject to an
additional premium to be agreed.
Bulk or combination carriers over 10 years of age or other vessels
over 15 years of age unless they:

C 2.1 have been used for the carriage of general cargo on an
established and regular pattern of trading between a range of
specified ports, and do not exceed 25 years of age, or
2.2 were constructed as containerships, vehicle carriers or
double-skin open-hatch gantry crane vessels (OHGCs) and have
D been continuously used as such on an established and regular
pattern of trading between a range of specified ports, and do not
exceed 30 years of age.
xxx
PROMPT NOTICE
E 5 Where this insurance requires the assured to give prompt notice
to the Underwriters, the right to cover is dependent upon
compliance with that obligation.” (emphasis supplied)
As is evident from the above, the ICC 01/01/2001 imposes two
requirements to ensure that the vessel complies with a certain minimum
F standard of seaworthiness. The first is a classification requirement which
requires that the vessel should be classed with a Classification Society
which is a Member/Associate Member of the International Association
of Classification Societies (‘IACS’) or, in the case of vessels engaged
exclusively in coastal trading, a National Flag Society. The second is an
G age limitation in respect of the insured vessel. The IACS consists of 12
member societies, as listed below:
(i) American Bureau of Shipping (A.B.S.)
(ii) Bureau Veritas
(iii) China Classification Society (C.C.S.)
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(iv) Croatian Register of Shipping (C.R.S.) A
(v) Det Norske Veritas-Germanischer Lloyd (D.N.V.-G.L.)
(vi) Indian Register of Shipping (I.R.S.)
(vii) Korean Register of Shipping (K.R.)
(viii) Lloyd’s Register (L.R.) B

(ix) Nippon Kaiji Kyokai (ClassNK)
(x) Polish Register of Shipping (P.R.S.)
(xi) Registro Italiano Navale (R.I.N.A.)
C
(xii) Russian Maritime Register of Shipping (R.S.)
The official statement provided by the IACS about its Quality
Standards is significant for understanding why classification of a cargo
vessel with a member-society of the IACS, as opposed to any other
society, is considered as a yardstick to judge whether the voyage policy
D
can be reasonably insured. Members of the IACS have to comply with
the IACS ‘Quality System Certification Scheme’ (QSCS), which, after
25 years of continuous evolution, is considered as the ‘gold standard’ for
ship classification societies. Moreover, every IACS member is required
to have its own ‘Internal Quality Management System’ for ensuring that
classed vessels meet certain minimum criteria of quality. The audits of E
all IACS members, and of those societies who wish to be considered for
such membership, are carried out by independent accreditation bodies,3
which lends further legitimacy to the classification accorded to vessels
by IACS members.
Thus, it can be inferred from the above that an underwriter/insurer F
would usually trust the quality of, and be prepared to issue a reasonable
premium for, a vessel classed with an IACS member society. On the
other hand, the insurer may demand a higher premium, or deny insurance
cover altogether, for a voyage in respect of a vessel classed by a
non-IACS member society. Hence, the ICC prescribes classification
with a member of the IACS as the baseline for ensuring that the policy G
involves less risk for the underwriter.

3
International Association of Classification Societies, Quality
System Certification Scheme (QSCS), http://www.iacs.org.uk/quality/quality-
system-certification-scheme- qscs/ (Last visited Feb. 2, 2020). H
180 SUPREME COURT REPORTS [2020] 6 S.C.R.

A Therefore, Sub Clause 1 of the ICC 01/01/2001 provides that
cargo interests are obligated to promptly notify insurance underwriters
if the cargo is being carried by a vessel which is not classed as prescribed
in the ICC, and Clause 5 makes it clear that failure to provide such
information will lead to exclusion of the insurance cover.
B 5.1 It has been contended by the Appellant that the NCDRC has
erred in relying on the older version of the ICC, i.e. the 1978 version.
We are in agreement with the said contention of the Appellant, inasmuch
as the 1978 version of the ICC was replaced by the ICC 13/4/92, the
ICC 1/8/97, and the ICC 01/01/2001. As mentioned supra, the ICC 01/
01/2001 is the most recent version of the ICC, and the one which is
C relevant for the purpose of the present case.
However, the most recent version of the ICC, i.e., ICC 01/01/
2001, parts of which we have quoted earlier, does not help the Appellant’s
case inasmuch as it is stricter in its import. We find it useful to undertake
a comparative analysis of the older versions of the ICC and the ICC 01/
D 01/2001 in this regard. Clause 1 of previous versions of the ICC stated
that, “The marine transit rates agreed in this insurance apply only to
cargoes and/or interests…classed as below by one of the following
classification societies.” This phrasing had led to confusion as to whether
a failure of the vessel to comply with the classification requirement would
E mean that the risk was completely excluded from cover or merely that
the premium rate, as agreed upon, would no longer apply and the assured
would have to pay a different premium rate.4 Hence, in the ICC 01/01/
2001, Sub Clause (1) was modified to read as follows:
“This insurance and the marine transit rates as agreed in the policy
F or open cover apply only to cargoes and/or interests…classed
with a Classification Society...” (emphasis supplied)
The word ‘insurance’ was specifically added in the ICC 01/01/
2001 to clarify that the insurance itself, and not merely the rate of
premium, is subject to compliance with the classification requirement.5
G Furthermore, the 1978 version provided that:
“Cargoes and/or interests carried by mechanically self- propelled
vessels not falling within the classification of the above are held covered
subject to a premium and on conditions to be agreed.” (emphasis supplied)
4
Dunt, supra note 2, at 167.
H 5
Dunt, supra note 2, at 167.
M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL 181
INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]

The aforementioned ‘held covered’ provision acted as a saving A
clause to cater for situations where an assured discovered that the vessel
in which their cargo was being carried fell outside the classification and/
or age requirement in the ICC. In such a situation the assured cargo
owner could still avail of the insurance cover subject to negotiating
payment of an additional premium with the insurer. B
English jurisprudence stipulates two requirements to avail of such
‘held covered’ provisions - first, ‘prompt notification’ to the underwriter,
and second, the availability of cover at reasonable commercial market
rates. However, the wording of the ‘held covered’ provision in the ICC
1978, quoted supra, did not expressly state these requirements, leading
C
to the apprehension that it may be interpreted to mean that cover could
be obtained in all cases, without any precautionary measures being
followed by the assured. Hence, it appears that in order to avoid any
confusion, the ICC 01/01/2001 has been drafted to expressly incorporate
the aforesaid two requirements. Under the ICC 01/01/2001, the assured
must immediately inform the insurer/underwriter if they discover that D
the vessel carrying the cargo does not meet the classification requirement.
Additionally, if the vessel is such that a prudent underwriter would
not be prepared to underwrite the risk at a reasonable premium, the
assured is not entitled to the insurance cover.6 These requirements are
important because, as discussed earlier, the classification of the vessel is E
a significant factor for influencing the underwriter’s decision-making as
regards whether an insurance cover should be issued for the marine
voyage or not.
5.2 We find it useful to refer to some of the common law decisions
on the impact of non-compliance with the classification requirement in F
the ICC. The courts of Singapore and Hong Kong have frequently been
seized with this question, and have held that non-compliance would render
the claim of the assured excluded from cover, and that it is the burden of
the assured to inform the insurer about such non-compliance and negotiate
a reasonable premium beforehand.
G
5.3 In Everbright Commercial Enterprises Pte Ltd v. Axa
Insurance Singapore Pte Ltd [2001] SGCA 24, the respondent
insurance company issued an ‘open cover note’ to the appellant in that
case, trading in respect of shipment of wood logs from the Solomon
6
Dunt, supra note 2, at 168. H
182 SUPREME COURT REPORTS [2020] 6 S.C.R.

A Islands to Tuticorin, India. The arrangement between the parties under
the terms of the aforesaid ‘open cover’ was that the appellant would
provide the respondent’s insurance broker, Wilcom, the details with
respect to the description of the goods, and the ports of loading and
discharge, for the purposes of issuance of the cover note. However, the
particulars of the carrying vessel were to be declared subsequent to the
B
cover note being issued. The insurance policy was to be issued only
once the vessel was on the way to the port of discharge.
The cover note was issued by Wilcom on behalf of the insurer on
9.5.1997. On 2.7.1998, the appellant communicated the particulars of
the ship to Wilcom, including that the class of the vessel was
C ‘HSR-100A1’. Subsequently, before the insurance policy could be issued,
the ship was lost. The insurer came to know that the ship was a ‘phantom
ship’, i.e. one which has no valid classification, is not registered with any
recognized ship registry, and is usually operated by criminals. Hence,
the insurer repudiated the appellant’s claim on the ground that the vessel
D did not comply with the requirements of the ICC 13/4/92 (which was the
version of the ICC in force at that time) as stipulated in the cover note.
The Singapore Court of Appeal upheld the repudiation. It also
held that though the appellant cargo company had given prompt notice, it
would not be saved by the ‘held covered’ clause as no reasonable
E underwriter would agree to issue cover for a vessel with a suspicious
classification background, even for a higher premium. It is pertinent to
note that the above decision in Everbright Commercial Enterprises
(supra) was rendered in the context of the ICC 13/4/92 when the ‘held
covered’ provision did not expressly provide for the requirements of
‘prompt notification’ and ‘availability of reasonable premium’. However,
F the Court relied upon the common law interpretation of ‘held covered’,
as laid down in the decisions of Thames and Mersey Marine Insurance
Co Ltd v. H T Van Laun & Co [1917] 2 KB 48 and Liberian Insurance
Agency Inc v. Mosse [1977] 2 Lloyd’s Rep 560, to incorporate the
aforesaid requirements, and made the following observations:
G “35 In construing this clause, we should bear in mind that the
purpose of adopting the ICC is to ensure that the vessel chosen
by the insured to carry his cargo would meet certain standards of
seaworthiness and maintenance by virtue of the fact that the
carrying vessel is classed by one of the well-established
H international classification societies listed in the ICC and is within
M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL 183
INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]

certain age limits. In an open-cover insurance, as in the present A
case, the ICC is adopted and forms part of the cover note, and is
principally intended to deal with the agreed rates of premium for
the insurance of a shipment in a case where the cover is provided
before the particulars of the carrying vessel are declared to the
underwriter. Where the carrying vessel subsequently declared has
B
a listed classification and is within the age limitation, the ICC applies
the agreed rates of premium for the insurance of such shipment.
Where, however, the carrying vessel declared does not have a
listed classification or is not within the age limitation, such agreed
rates are not applicable for the insurance of the shipment; but in
such event, the shipment is, nonetheless, covered and falls within C
the held covered clause, subject to the payment of a premium as
well as on conditions to be agreed between the underwriter and
the insured. In Marine Reinsurance (1981) by Robert H Brown
and Peter B Reed, the learned authors said at p 127:
When operating a cargo open cover the underwriter is not D
in a position to examine each risk separately, nor to assess it on
the basis of the carrying vessel. He is obliged to accept all valid
declarations declared under the open cover. However, to ensure
that he obtains a premium commensurate with the additional risk
arising from the use of inferior vessels or bad management he
attaches a “classification clause” to the open cover. The effect of E
this clause is to apply a higher premium rate to shipments carried
by overseas vessels that do not meet the minimum requirements
of the classification clause.
The held covered clause is in effect a safety net to provide shippers
a cover for their cargoes in the event that the carrying vessels F
declared by them do not satisfy the requirements as to class and
age specified in the ICC, subject to the payment of a premium
and on conditions to be agreed…
Xxx
G
53 Reverting to the present facts, one has to ask what a reasonable
commercial rate of premium would be, that would have been fixed,
if the parties were aware of all the facts affecting the risk involved
in shipping the cargo on board the Sirena 1. No regard should be
given to the fact that the Sirena 1 eventually turned out to be a
phantom ship since that would be erroneously taking into account H
184 SUPREME COURT REPORTS [2020] 6 S.C.R.

A the “casualty” that happened later. Instead, the focus should be
on all the facts that were available on 2 July 1998,
when Everbright declared the details of the Sirena 1 to AXA…It
is clear from the Greenock case ([49] supra) and the two cases
which followed it, that it does not matter that the relevant facts
affecting the risks were not known to the parties until after the
B
loss had already occurred. All the facts that were available at that
time should be taken into account. The following are the relevant
and undisputed facts about the Sirena 1 which we find could
have been known to the parties on 2 July 1998:
(a) The vessel was not classed by any recognised classification
C society. Its classification was stated as HSR-100A1. It is unclear
which classification society classed the vessel. It was speculated
that “HSR” could either be Hellenic Shipping Registry of Greece
or Honduras Shipping Registry. A proper check would have
revealed that the Sirena 1 had no proper classification…
D (c) The vessel was not listed or found in the Lloyd’s Register of
Ships…
(e) The cover was on Institute Cargo Clauses (All Risks) terms.
(f) The shipment was a chartered shipment, where there is higher
E risk involved, bearing in mind the size and value of the cargo to be
insured.
54 Before the incidence of the loss, it was probably unlikely that a
reasonable and prudent underwriter would conclude with
reasonable certainty that the Sirena 1 was a phantom ship. But it
F does not follow that a reasonable and prudent underwriter would
be prepared to provide insurance for the kind of risks involved. In
our view, when confronted with the facts which we have discussed,
a reasonable and prudent underwriter would be put on enquiry
and upon enquiry, they would find that there was no record of
Sirena 1, and what emerged would be a vessel with a highly
G suspect background. Clearly, there were sufficient warning signs
which would persuade a reasonable and prudent underwriter to
reject providing cover rather than to accept a higher premium to
cover the increased risks. This is especially so since the policy
required was on Institute Cargo Clauses (All Risk) terms and the
value to be insured was high as it was a chartered shipment. In
H
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INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]

our judgment, in the circumstances, a reasonable commercial rate A
of premium would not be available for insuring the shipment of
logs on board the Sirena 1, and consequently Everbright would
not be able to invoke successfully the held covered clause…”
(emphasis supplied)
Thus, it can be seen from the above that the lack of recognized B
classification was a significant factor in leading the Court to conclude
that the appellant therein would not be saved by the ‘held covered’ clause.
This is because no underwriter/insurer would agree to insure a high
value shipment, and include all risks arising thereunder for a voyage
involving a vessel which is of suspect classification, even if the assured C
agreed to pay a higher premium in respect of the same.
The Court further held that the fact that the insurer had not
specifically informed the appellant, prior to loss of the ship, that the vessel
was not included in the ICC, would not amount to a case of estoppel by
silence or acquiescence. Rather, it was held that it was the obligation of D
the assured to ensure that the shipment complied with the terms and
conditions of the cover note, as elucidated by the Court in the following
terms:
“57 In considering this issue of estoppel, it is helpful to bear in
mind the obligations of each party in effecting the insurance under E
the cover note. It is not disputed that the insurance sought to be
effected by Everbright with AXA was not a facultative insurance
where the insured provides full details of the shipment, including
the relevant particulars of the vessel, to the underwriter for
consideration on whether the shipment would be accepted for
immediate insurance. What the parties here had arranged for was F
an open-cover insurance or one akin to an open-cover insurance,
where a cover note incorporating the ICC was first issued for the
prospective shipment of cargo and the relevant particulars relating
to the shipment were to be declared later by Everbright to AXA.
In respect of this arrangement, the obligation was on Everbright G
to ensure that their shipment complied with the terms and conditions
of the cover note, and only if such shipment complied with the
terms would there be insurance coverage for the shipment. AXA,
on their part, had no right to reject a vessel which complied with
the terms and conditions, but they were under no obligation to
H
186 SUPREME COURT REPORTS [2020] 6 S.C.R.

A inform Everbright, if the vessel declared did not fall within the
terms of the ICC.”
It is true that the Court’s reasoning in Everbright was significantly
predicated upon the fact that the respondent insurer had issued an
‘open-cover’ insurance in which the insurer had only issued a cover-note
B based on the details of the cargo and the port of origin and destination of
the voyage, and the relevant particulars of the vessel had not been
provided to the insurer in advance. This is important to note because in
the present case, though the Respondent initially issued the Cover Note
dated 14.5.2010 (supra) without knowing the particulars of the vessel, it
subsequently issued the Marine Insurance Policy dated 2.7.2010 after
C having received the Appellant’s communication that the vessel was
classed as ‘I.R.S.’
Subsequent common-law decisions, however, have held that the
obligation of the assured to inform the correct details in respect of the
vessel’s classification extends even where a policy is issued after the
D particulars of the vessel have been provided.
5.4 In Nam Kwong Medicines & Health Products Co. Ltd. v.
China Insurance Co. Ltd. [2002] 2 Lloyd’s Rep. 591, the insurer denied
liability for loss of goods during sea voyage inter alia on the ground that
the vessel was unclassified, and thus, there was a breach of the ICC. It
E was contended by the insured that in ‘facultative’ insurance covers where
there was no warranty that the ship was classed with an approved
classification society, and where an ‘overage’ surcharge (i.e. an extra
premium with respect to the age of the vessel) had been duly paid, the
ICC could not be made applicable.
F The High Court of Hong Kong rejected the argument of the
insured, holding that facultative insurance covers and the ICC were not
mutually exclusive, and that the requirement of ICC classification was
no different from the one that existed in open- cover insurances. The
Court also reaffirmed the principle of English law as stated in Liberian
G Insurance Agency (supra), i.e., that the ‘held covered’ clause in
insurance contracts could not be invoked in cases where it would have
been impossible to insure the risk at a reasonable commercial rate of
premium.
5.5 In Kam Hing Trading (Hong Kong) Ltd. v. The People’s
Insurance Co. of China (Hong Kong) Ltd. and Anr. [2010] 4 HKLRD
H
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630, the respondent insurance company repudiated the claim of the A
appellant cargo seller on the ground that the vessel carrying was not
classed in compliance with the ICC. It may be worth noting that in Kam
Hing Trading (supra), the appellant cargo company had produced a
certificate to show that the vessel was classed by the International
Register of Shipping. However, it was observed by the High Court of
B
Hong Kong that the International Register of Shipping was not a Member
or Associate Member of the IACS, as required by the ICC 01/01/2001.
It was argued by the appellant that the burden to verify whether
or not the vessel was classed was upon the insurer, and that once the
insured had provided the name of the vessel to the insurer, the insurer
had the means to verify the class of the vessel from registers/databases C
of ships, and the subsequent issuance of a marine cargo policy by the
insurer amounted to acceptance of the non-classed vessel.
The High Court of Hong Kong, referring to the decision of the
Singapore Court of Appeal in Everbright Commercial Enterprises
(supra), held that as per the ICC 01/01/2001, the insured was obligated D
to disclose that the vessel was not classed in accordance with the ICC.
The Counsel for the appellant sought to distinguish Everbright on the
ground that in Kam Hing, a policy had been issued subsequent to the
open cover-note. However, the High Court of Hong Kong held that the
obligation to disclose the vessel’s classification was a continuing obligation E
- the assured was required to provide a ‘prompt notice’ to the insurer
once it became privy to the fact that the vessel was non-classed, even if
such information was discovered after the policy had already been
issued. The following observations of the High Court of Hong Kong are
relevant to the instant case:
F
“172. It was the evidence of Mr Bilney, which in its substantially
amended form I accept, that the ICC/01 class requirement is of
central importance, and constitutes a condition of the insurance. I
also accept the evidence of Mr Xie that such internal check as
was made by the insurer did not extend to class, and in any event
my view is that as a matter of principle that in the situation as had G
arisen the plaintiff was obliged to ensure by ‘prompt notice’ to the
insurer that the carrying vessel was an “approved” vessel in terms
both of the Open Cover and after issue of an actual policy; the
Open Cover and the Cargo Policy each incorporated the ICC,
and I have no doubt that this must be a continuing obligation on H
the part of the insured.
188 SUPREME COURT REPORTS [2020] 6 S.C.R.

A xxx

174. It follows that I reject the plaintiff’s submission that the legal/
evidential ‘burden’ of discovering the non- compliant class of the
vessel lay on the insurer, which in light of such information as it
B may then discover of its own volition then has to evaluate whether,
and upon what terms, it is going to assume the increased risk, just
as I reject the argument that the formal issuance of a cargo policy
effectively is conclusive of the insurer’s acceptance of the situation
and/or that by such issuance a ‘non-ICC-classed’ vessel thereby
C is, in effect, somehow transmuted to an ICC/01 ‘approved vessel’.
xxx
179. Accordingly, I reject the argument that in the circumstances
of this case the information given by the insured to the insurer
constituted ‘prompt notice’ in ICC/01 terms (see clauses 1 and 5
D of ICC/01), and that thereafter it was the responsibility of the
insurer to do its own investigation from the primary (but patently
incomplete) data provided by the putative insured, and thereafter
to ‘fill in the blanks’ in terms of acceptance or otherwise arising
from any perception of increased risk due to any knowledge which
E may have been gained as to the ‘non-ICC-classed’ status of this
carrying vessel.
180. I accept the contention of the 1st defendant that the whole
object of the ICC/01 - even absent an express ‘held covered’
clause - is to place the underwriter on risk, and that if the assured
F wishes to seek extended cover - as for example, due to the use,
as here, of a non-ICC-classed vessel - then “prompt notice” (vide
Clause 5 of the ICC) must be given to underwriters.
xxx
181. In this context I record, and also accept, Mr Bartlett’s
G submission that the plaintiff never pleaded a case that it did send
‘notice’ to the insurers, and factually never did so, although he
noted that at trial Mr Sussex but “faintly” had referred to an email
from a Mr Sunny Ng of the plaintiff to loss adjusters dated 27
December 2007 as comprising such ‘notice’. I agree with the
submission that this email clearly was nothing of the sort, and said
H
M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL 189
INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]

no more than it was attaching documents pursuant to a request A
from the loss adjusters for such documents, and made no mention
of a desire to engage in negotiation for revised insurance terms,
and thus could not possibly constitute nor purport to be a ‘notice’
to insurers; indeed, in her evidence Ms Lui had confirmed that the
plaintiff had never sent nor instructed the 2nd defendant to send
B
such a notice to the insurer under ICC/01.”
(emphasis supplied)
Therefore, where the insurer issues the insurance policy based
on incomplete or incorrect details provided by the assured, it does not
amount to acquiescence to improper classification of the vessel. It is the C
duty of the assured to provide the full and correct particulars of the
vessel at the time of issuance of the policy, irrespective of whether or
not the insurer carries out any due diligence from their end. Since no
such prompt notice was given by the appellant in Kam Hing Trading
(supra), the High Court held that the appellant was excluded from the
scope of the insurance cover. The High Court further observed that D
even if such evidence had been given, there was no evidence to show
that premium could have been obtained at reasonable market terms, and
hence the ‘held covered’ clause would not apply.
5.6 Thus, it can be seen from the above decisions that where a
vessel is not classed with a recognized classification society in terms of E
the ICC, any loss incurred by the cargo-owner will be excluded from the
scope of the insurance cover. Further, the cargo owner is required to
immediately notify the underwriters and negotiate an additional premium
if the vessel is not classed in accordance with the ICC.
5.7 In the instant case, it is apparent that neither was the subject F
vessel in compliance with the ICC clause, nor had the Appellant given
prompt notification to the Respondent about such non-compliance. The
Appellant, in its letter dated 26.5.2010 (supra) had informed the
Respondent that the vessel is of ‘I.R.S.’ class. However, the full form of
‘I.R.S.’ was not specified. As mentioned supra, the Appellant has
contended that the NCDRC wrongly interpreted the term ‘I.R.S.’ to G
mean ‘Indian Register of Shipping’ and that the subject vessel was
actually registered and classified with the ‘International Register of
Shipping’. However, our perusal of the official website of the International
Register of Shipping shows that its official acronym is ‘INTLREG’.7
7
See International Register of Shipping, ‘About’, https://intlreg.org/about/. H
190 SUPREME COURT REPORTS [2020] 6 S.C.R.

A Whereas ‘I.R.S.’ is the official acronym of the ‘Indian Register of
Shipping’.8 Hence the Appellant’s contention that ‘I.R.S.’ refers to the
International Register of Shipping is prima facie not sustainable.
The Appellant had also averred in its complaint before the NCDRC
that the Overseas Seller had produced a certificate dated 11.6.2010,
B certifying that the subject vessel was registered with an approved
Classification Society as per the Institute Classification Clause. Further,
that as per the said certificate, the class of the subject vessel was
equivalent to Lloyd’s 100A1, and the subject vessel was seaworthy and
not more than 30 years old. However, no such evidence of the vessel’s
classification was ever provided to the Respondent. It is true that the
C Appellant has, during the course of hearing this appeal, placed the
certificate dated 11.6.2010 before this Court. However, a perusal of the
certificate shows that is only a self-certification wherein the vessel
owners have claimed that the subject vessel is classed with an approved
classification society as per the ICC clause. It cannot be taken as
D conclusive evidence that the vessel was actually classed with an IACS
member society.
Even if we were to accept the Appellant’s contention that the
vessel is classed with the International Register of Shipping (hereinafter
‘INTLREG’ for convenience), this does not help its case inasmuch the
E INTLREG is not one of the 12 accredited Member Societies of the
IACS. Rather, it is the I.R.S. which is an IACS member. It has never
been the case of the Appellant that the subject vessel was classed by
the Indian Register of Shipping. It is also not the Appellant’s case that
the subject vessel was classed with a National Flag Society. Hence we
find that the Appellant had committed breach of the classification
F requirement contained in Clause 1 of the ICC.
5.8 The letter dated 26.5.2010 sent by the Appellant to the
Respondent, in respect of the ship’s particulars, cannot be said to
constitute ‘prompt notification’ as the particulars of the subject vessel’s
classification were not clearly specified therein. The Respondent may
G have, in good faith, assumed that ‘I.R.S.’ meant that the subject vessel
was classed with the ‘Indian Register of Shipping’, and may have

8
See Indian Register of Shipping, ‘About IRClass’, https://www.irclass.org/about-
irclass/.
H
M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL 191
INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]

consequently inferred that the subject vessel fell within the scope of the A
ICC clause.
It was only pursuant to the Appellant’s request for release of
separate salvage security that the Respondent’s claim settling agents,
M/s. W.K. Webster & Co., London by e-mail dated 9.8.2010 informed
the Respondent that as per their investigation, the subject vessel was B
classed with Lloyd’s Register of Shipping only until 10.10.2007, after
which the classification was withdrawn. Hence it was only from this
e-mail that the Respondents came to know that the shipment may fall
outside the scope of the insurance cover, as per the terms of the ICC.
Consequently, we find that the ‘prompt notification’ requirement has not
been satisfied, and there is no ground for the application of the ‘held C
covered’ clause.
5.9 Further, as per the observations of the Singapore Court of
Appeal in Everbright Commercial Enterprises (supra), we consider it
highly unlikely on the facts of this case that any prudent underwriter
would have agreed to cover the risk involved in a such a high value D
shipment under the Marine Cargo Clause (which covers almost all risks
of loss or damage), even though the Appellant had no documentary
evidence on record to prove the classification of the subject vessel.
However, neither of the parties has led evidence on whether the
Respondent would have agreed to insure the policy for a reasonable E
premium had the correct particulars of the subject vessel been disclosed.
Hence we do not consider it appropriate to record any findings on the
same. In any case, such question does not arise inasmuch as the Appellant
did not provide “prompt notification” in the first place. Hence, as provided
under Clause 5 of the ICC, the insurer’s liability is automatically
discharged. F

Consequently, we conclude that the Appellant had committed
breach of the warranty contained in the Marine Insurance Policy requiring
the subject vessel to be classed in accordance with the ICC, and such
breach of warranty discharged the liability of the insurer.
G
6. The second issue which then arises for our consideration is
whether the Respondent had, through its conduct or in any of its
communications, waived the requirement of compliance of the subject
vessel with the classification requirement of the ICC. In this regard, it
may be of use to refer to Sections 35 and 36 of the Marine Insurance
Act, 1963 (‘1963 Act’): H
192 SUPREME COURT REPORTS [2020] 6 S.C.R.

A “35. Nature of warranty.—(1) A warranty, in the following
sections relating to warranties, means a promissory warranty, that
is to say a warranty by which the assured undertakes that some
particular thing shall or shall not be done, or that some condition
shall be fulfilled, or whereby he affirms or negatives the existence
of a particular state of facts.
B
(2) A warranty may be express or implied.
(3) A warranty, as above defined, is a condition which must be
exactly complied with, whether it be material to the risk or not. If
it be not so complied with, then, subject to any express provision
C in the policy, the insurer is discharged from liability as from the
date of the breach of warranty, but without prejudice to any liability
incurred by him before that date.
36. When breach of warranty excused.—(1) Non- compliance
with a warranty is excused when, by reason of a change of
D circumstances, the warranty ceases to be applicable to the
circumstances of the contract, or when compliance with the
warranty is rendered unlawful by any subsequent law.
(2) Where a warranty is broken, the assured cannot avail himself
of the defence that the breach has been remedied, and the warranty
E complied with before loss.
(3) A breach of warranty may be waived by the insurer.”
A warranty imposes certain obligations on the insured, and Section
35(3) makes it amply clear that a warranty needs to be complied with,
regardless of whether or not its non-compliance materially affects the
F risk involved in carrying the shipment. As a corollary, when a warranty
is not complied with, i.e., there is a breach of warranty, the insurer is
discharged from liability from the date of such breach, by virtue of Section
35(3). At the outset, therefore, it is important to note that the scheme of
the 1963 Act is clear inasmuch as the automatic consequence of a breach
of warranty is discharge of the insurer’s liability. Such discharge of
G
liability does not require any express conduct or representation from the
insurer.
However, Section 36(3) of the 1963 Act provides that the insurer
may waive a breach of warranty. Such a waiver may be done either by
or by way of incorporating certain terms in the insurance contract, such
H
M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL 193
INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]

as the ‘held covered’ clause in the ICC or the exclusion clause found in A
the Institute Cargo Clauses, or by a representation or conduct of the
insurer. We shall first examine whether the Respondent had waived the
breach of warranty by way of incorporating certain terms in the contract.
6.1 In the instant case, though the Respondent initially issued the
Cover Note dated 14.5.2010 without knowing the particulars of the vessel B
in which the Appellant’s cargo was to be carried, it subsequently issued
the Marine Insurance Policy after the particulars of the subject vessel,
including the purported classification of ‘I.R.S.’, were received. However,
while the importance of the ICC is undoubtedly more significant in cases
of ‘open-cover’ insurances where the specific details of the vessel
carrying the cargo are not known to the insurer, as held in Nam Kwong C
Medicines (supra), a ‘facultative’ insurance policy in which the details
of the subject vessel are specified, need not be mutually exclusive with
the ICC.
It is not the Appellant’s case that the Respondent had chosen to
issue the Marine Insurance Policy despite being informed by the Appellant D
that the vessel was non-classed. Rather the Appellant had represented
that the subject vessel was ‘I.R.S.’ classed. That being the case, as
noted in Everbright Commercial Enterprises and Kam Hing Trading
(supra), it was not the Respondent’s burden to have investigated the
Appellant’s claim and informed the Appellant that the subject vessel E
was non-classed. Hence, at the outset it is important to note that the
mere formal issuance of the Marine Insurance Policy by the Respondent
does not indicate ‘acceptance’/waiver of the vessel’s classification or
lack thereof.
6.2 At this juncture, it may be pertinent to refer to Clause 5 of the F
Marine Insurance Policy which provides for exclusion of loss arising
from unseaworthiness of the subject vessel.
“5.1 In no case shall this insurance cover loss damage or expense
arising from unseaworthiness of vessel or craft…
5.2 The Underwriters waive any breach of the implied warranties G
of seaworthiness of the ship and fitness of the ship to carry the
subject-matter insured to destination, unless the Assured or their
servants are privy to such unseaworthiness or unfitness.”
It was contended by the Appellant that non-compliance with the
ICC stood waived by Clause 5.2, as stated above. However, it cannot H
194 SUPREME COURT REPORTS [2020] 6 S.C.R.

A be said that the ICC was an ‘implied’ warranty within the meaning of
Clause 5.2. It was stated on the face of the Marine Cargo Cover dated
14.5.2010 and the Marine Insurance Policy that the ICC is one of the
warranties/terms of insurance.
In any case, the Appellant’s stand is that the subject vessel was
B classed with the ‘INTLREG’ (which it has mistakenly referred to as
‘I.R.S.’). As the Singapore Court of Appeal has observed in Everbright
Commercial Enterprises (supra) and as discussed supra, the very
purpose of adopting the ICC is to ensure that the vessel chosen by the
insured meets certain minimum standards of seaworthiness, by virtue of
being classed with one of the well-established member societies of the
C IACS. The Appellant, having known that the subject vessel was classed
with the ‘INTLREG’, which neither was nor is a member of the IACS,
was privy to the fact that the subject vessel was not compliant with the
minimum standard of seaworthiness as laid out in the Marine Insurance
Policy. Clause 5.2 only waives breaches of implied warranties of
D seaworthiness where the assured was not privy to the unseaworthiness
of the vessel. Hence, the Appellant would not be saved by Clause 5.2 of
the Policy, and it cannot be said that the Respondent had waived the
breach of warranty before the Appellant’s claim, by incorporating Clause
5.2 of the Policy.
6.3 We may now turn to whether the Respondent waived the
E breach of warranty by its conduct or any representation. During the
course of arguments, it was put to the learned counsel for the parties
whether the act of provision of General Average Guarantee amounted
to a waiver of breach of warranty. It is commonly understood that a
waiver in the context of marine insurance, apart from one already provided
F for by way of ‘held covered’ or other such terms in the insurance contract,
must include two elements, namely, (i) knowledge of the insurer, and (ii)
unequivocal representation of the insurer. The presence of both these
elements is indispensable.
For instance, after the occurrence of loss, even if the insurer makes
an express representation that it would affirm the contract and indemnify
G
the loss, if the insurer can prove that such a representation was made
without the knowledge that there was a breach of warranty on part of
the insured, the liability of the insurer would stand discharged from the
date on which the warranty was breached. Similarly, mere knowledge
on the part of the insurer that there was a breach of warranty would not
H
M/S RAJANKUMAR AND BROTHERS (IMPEX) v. ORIENTAL 195
INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]

amount to a waiver, in the absence of an express representation to that A
effect. 9
6.4 Insofar as the element of knowledge is concerned, if the vessel
carrying the insured cargo incurs loss, and the insurer seeks to investigate
into whether or not there was a breach of warranty, no knowledge can
be attributed to the insurer until such investigation is completed.10 Once B
there is knowledge, the second element, i.e., unequivocal representation
comes into play. The representation must be of such a nature that it is
sufficient for the insured to conclude that the insurer is aware of the
breach of warranty and has chosen to waive such breach and indemnify
the loss. The determination of whether or not these elements are present
assumes more complexity in cases where such a representation comes C
from an agent of the insurer, or where such an agent has knowledge of
the breach. However, these arguments with respect to representations
made by the insurer’s agent have not been raised before us, and hence,
such issues need not be addressed for the purposes of the present case.
6.5 Under the facts and circumstances of this case, the breach of D
warranty occurred when the Appellant informed the Respondent by letter
dated 26.5.2010 that the subject vessel was classed by ‘I.R.S.’, thereby
indicating the subject vessel was compliant with the ICC. After the subject
vessel ran aground on the midnight of 18.7.2010, the Appellant requested
the issuance of General Average Guarantee, and the same was issued
on 3.8.2010. At the outset, the General Average Guarantee in ‘Form B’ E
dated 3.8.2010 issued by the Respondent to the GAA was only an
undertaking to pay the shipowners and the GAA on behalf of the Appellant
for their contribution to the General Average, as and when such
contribution was ascertained. This Guarantee was issued as per Clause
2 of the Marine Insurance Policy, under which the Respondent had agreed
F
to cover all general average and salvage charges. Clause 2 reads as
follows:
“2. This insurance covers general average and salvage charges,
adjusted or determined according to the contract of affreightment
and/or the governing law and practice, incurred to avoid or in
connection with the avoidance of loss from any cause, except G
those excluded in Clauses 4, 5, 6 and 7 or elsewhere in this
insurance.”
(emphasis supplied)
9
Baris Soyer, Warranties in Marine Insurance (Cavendish, 2001) 206-213.
10
Udm 209. H
196 SUPREME COURT REPORTS [2020] 6 S.C.R.

A At the time the aforesaid General Average Guarantee dated
3.8.2010 was issued, the Respondent was still under the impression that
the subject vessel is in compliance with the ICC. Obviously, such
impression was based on the representation made by the Appellant that
the subject vessel was classed with I.R.S. It was only by the e-mail
dated 9.8.2010 from its claim settling agent that the Respondent came to
B know that the subject vessel does not meet the prescribed classification.
Subsequently, the Respondent withdrew the Guarantee and refused to
pay the separate salvage security. Hence, the issuance of the General
Average Guarantee cannot be understood as a waiver inasmuch as the
Respondent, on the date of such issuance, did not have the knowledge
C of the breach of warranty committed by the Appellant and was only
fulfilling its duty to contribute to the General Average (as explained supra)
in good faith, as required by Clause 2 of the Marine Insurance Policy.
6.6 Further, in any case, at the time of issuing the General Average
Guarantee, the Respondent did not expressly state that it was aware of
the non-compliance with the ICC and it was waiving the same. In fact,
D
the moment the breach of warranty was discovered, the Respondent
initiated steps to withdraw the General Average Guarantee that had been
issued by them and refused to pay the additional salvage security, which
clearly demonstrates that there was no intent to waive the breach of
warranty. Therefore, it cannot be said that the Respondent had waived
E the breach of warranty through its conduct or representations after the
claim was made by the Appellant.
7. Since we have concluded that the liability of the insurer was
discharged on account of the breach of warranty caused by
non-compliance with the classification requirement within the ICC, we
F do not consider it relevant to deal with the age limitation requirement
therein for the purpose of the present case.
8. It is pertinent to note that during the course of hearing the
present appeal, three other parties, namely K. Amishkumar Trading Pvt.
Ltd., Baijnath Melaram and Viraj Impex Pvt. Ltd. (‘Intervenors’) filed
Intervention Applications No. 3 of 2016, No. 4 of 2016 and No. 5 of
G
2016 respectively in the present appeal. The aforesaid Intervenors filed
individual consumer complaints against the Respondent before the
NCDRC, which are presently pending adjudication.
The Intervenors’ applications were allowed by this Court vide
order dated 27.10.2017. We do not consider it appropriate to decide the
H
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INSURANCE COMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J.]

Intervenors’ claims on merits at this stage, especially since these may A
require separate findings of fact as to the terms and conditions of the
policies issued by the Respondent to them, the warranties made by the
Intervenors to the Respondent and so on. Hence, we direct that the
Intervenors be relegated to record their evidence before the NCDRC,
and the NCDRC is requested to hear the matters on merits and decide
the same expeditiously, in accordance with the law as stated by us above. B

9. Thus, we conclude that the Appellant had committed breach of
warranty and the same was not waived by the Respondent. As a result,
the Respondent rightly repudiated the claim of the Appellant.
10. In view of the above, the impugned judgement of the NCDRC C
stands confirmed, and the appeal is dismissed.

Kalpana K. Tripathy Appeal dismissed.

D

E

F

G

H