IN THE SUPREME COURT OF INDIA  

CIVIL APPELLATE JURISDICTION  

CIVIL APPEAL NO. 3714 OF 2005  

The New India Assurance Co. Ltd.  …Appellant

Versus

Priya Blue Industries Pvt. Ltd.   …Respondent

WITH

CIVIL APPEAL NO. 2116 OF 2006  

Priya Blue Industries Pvt. Ltd.  … Appellant

Versus

The New India Assurance Co. Ltd. …

Respondent

J U D G M E N T  

B. SUDERSHAN REDDY, J.

1. This  appeal  under  Section  23  of  the  Consumer  

Protection  Act,  1986  is  directed  against  the  final  

judgment and order of the National Consumer Disputes

Redressal  Commission.  The National Commission by  

the  impugned  judgment  allowed  the  complaint  

preferred  by  the  respondent  complainant  and  

accordingly directed the appellant Company to pay a  

sum of Rs. 13.69 crores with interest at 9% per annum  

from 9th June, 1997 till its realization.  

2.  In order to consider as to whether the impugned  

judgment of  the National  Commission (for short  ‘the  

Commission’) suffers from any infirmity requiring our  

interference,  it  may be just  and necessary to notice  

relevant facts.  

3. The respondent-complainant at the relevant time  

was  carrying  on  ship  breaking  and  scrap  dealing  

business.  It  had under a Memorandum of Agreement  

dated 2.6.1997 purchased and imported to Alang,  a  

very large bulk ore and oil carrier by the name of “Vloo  

Arun”  for  the  purpose  of  scrapping  (ship  

breaking/demolition) from one M/s.  Ruby Enterprises  

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Inc.  Belgium.   There  is  no  controversy  that  the  

respondent  has  taken  a  marine  insurance  policy  for  

hull  and machinery  on 4.6.1997 for  the said  vessel.  

The policy was obtained after taking possession of the  

vessel for covering only 9 kms. distance between Alang  

Anchorage  to  Alang  Ship  Breaking  yard.  Insurance  

cover was for a sum of Rs. 25.70 crores for which a  

premium of Rs. 1,14,280/- was paid. As per the special  

condition it was “Institute Voyage Clause (hulls) dated  

1.10.1983 as attached with a specific condition, ‘but to  

cover  and/or  Constructive  Total  Loss  only’  including  

salvage and sue and labour and expenses.”

4. The case of the complainant is that on 9.6.1997,  

when vessel started its ‘funeral voyage’ on its way it  

was completely damaged and could not be beached at  

the  specified  place  because  of  extremely  rough  

weather  resulting  in  total  loss.   The  insurance  

Company  was  accordingly  informed,  followed  by  

several  letters  by  the  complainant  requesting  it  to  

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state as to what action was to be taken with regard to  

the stranded vessel.  The insurance Company did not  

respond.  

5. It  is  under  those  circumstances  the  respondent  

complainant  has  claimed  an  amount  of  Rs.  

18,30,44,912/-  with  interest  @  19.5%  p.a  from  

14.6.1997 till its payment and Rs. 2.5 lakhs as costs  

and expenses of the  litigation and  further a sum of  

Rs.  5  lakhs  towards  harassment  meted  out  by  the  

appellant insurance Company.  

6. In response to the claim, the appellant insurance  

Company  appointed  two  Surveyors,  and  the  

respondent  complainant  with  the  acceptance  and  

approval  of  the  appellant  insurance  Company  

appointed Tony Fernandez Average Adjusters Pvt. Ltd.  

as its Surveyor. Each one of the Surveyors appointed  

by the  appellant  insurance Company submitted their  

respective reports on 24.6.1997 and 14.7.1997.  

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7. In addition to the aforesaid two reports on record,  

there is a report on record of Tony Fernandez Average  

Adjusters  Pvt.  Ltd.  which  was  appointed  by  the  

respondent  complainant.   The  appellant  insurance  

Company had accepted and approved its appointment.  

In  the report  submitted by Tony Fernandez Average  

Adjusters Pvt. Ltd., the cause of loss is as under:  

“The  proximate  and  dominant  cause  of  the  vessel  becoming a total  loss  was the stranding on a rocky  shoal  prior  to  arriving  at  the  destination.   The  stranding itself was due to heavy weather encountered  on the “funeral” voyage to the ship-breaking yard. The  stranding was accidental and fortuitous in nature.  

Both  heavy  weather  and  stranding  are  perils  of  the  sea.  The proximate cause of the loss is an insured  peril,  falling  under  Clause  4.1.1  of  Institute  Voyage  Clauses Hulls, 1/10/83 wordings (Clause 285), which  covers loss of or damage to the subject-matter caused  by, ‘perils of the seas rivers, lakes or other navigable  waters.’  

We have satisfied ourselves that the loss was neither  caused  proximately  nor  concurrently,  by  any  of  the  excluded  perils  listed  in  Section  55  of  the  Marine  Insurance Act, 1963, (MIA 1963), read in conjunction  with  the  terms  and  conditions  of  the  Policy  of  Insurance.  

We have also satisfied ourselves that the loss was not  caused  proximately  or  concurrently  by  perils  

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enumerated  in  the  Paramount  Exclusions  of  Clauses  20, 21, 22 and 23 of the Institute Voyage Clause Hulls  1.10.83 wordings.”

It is further observed in the said report that there was  

“no  evidence  to  indicate  that  there  was  either  non-

disclosure of material facts or of any misrepresentation  

to underwriters by PBIL as the Proponent.” They finally  

assessed the claim under Total Loss Claim at Rs. 13.69  

crores.  

8. The  National  Commission,  upon  a  meticulous  

assessment  and  analysis  of  all  the  aforesaid  survey  

reports, found that:  

A) Insurance coverage was taken for a short voyage  of  the  vessel  from  Alang  Anchorage  to  Alang  Ship  Breaking Yard;  

B) The  vessel  came  from  Singapore  to  Alang  Anchorage point and was on its funeral voyage;  

C) From Singapore to Alang Anchorage point voyage  was carried out on one engine only.  

D) Delivery of the vessel was given to the insured at  the Alang Anchorage point by the seller;  

E) At  the  time  of  the  delivery  one  engine  was  functioning  and was  in  working condition.  The other  engine was out of order;  

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F) Beaching  of the vessel was scheduled on 6.6.97  at the evening tide time;  

G) As the engine failed to start,  beaching was not  carried out;  

H) Thereafter, beaching was scheduled on 9.6.97;  

I) During the voyage, the sea condition was rough  and strong  sea  currents  were  flowing  due  to  strong  monsoon winds.;  

J) The vessel  started drifting away from the yard,  and drifted towards a different point;  

K) Near Plot No. V-5(resting place) and beyond there  was a coral rock structure on see bed which was not  visible during the high tide time. The vessel’s bottom  collided with rocks and the vessel was grounded and  all efforts to move the vessel on available power failed.  

L) The  vessel  was  thereafter,  badly  damaged  and  was found deeply imbedded to the depth of 5ft.  

M) It has developed holes and cracks;  

N) With all normal efforts floating of the vessel was  not possible because it was partially lying on the rock  structure and partially submerged in sand; and  

O) The grounded vessel could not be re-floated with  the  normal  salvaging  procedure  and  could  not  be  beached.

In  addition,  in  the  report  of  J.B.  Boda  Offshore  

Surveyors  &  Adjusters  Pvt.  Ltd,  it  is  inter  alia  

observed:  ”It  is  a  ‘total  loss’  because  it  was  

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irretrievably  stranded  –  it  was  concluded  that  the  

vessel  was  irretrievably  stranded  due  to  marine  

casualty  which  has  resulted  for  the  vessel  being  

deemed a total loss.”

9. Tony  Fernandez  Average  Adjusters  Pvt.  Ltd.  

further inter alia stated that “there is no evidence with  

regard  to  non-disclosure  of  material  fact,  nor  

misrepresentation;  and  the  proximate  and  dominant  

cause of vessel becoming a total loss was stranding on  

the  rocky  shoal  prior  to  arriving  at  the  destination.  

This  was due  to  heavy  weather  encountered  on  the  

‘funeral’  voyage  to  the  ship-breaking  yard.   The  

stranding was accidental and a fortuitous one in nature  

and was proximately caused by an insured peril”.  

10. In  the  proceedings  before  the  National  

Commission,  the  respondent  complainant  mainly  

contended that the vessel was badly damaged due to  

rough weather and strong winds and has collided with  

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coral rock structure which was not visible during the  

high tide and efforts to move the vessel failed.  It had  

relied  upon  the  surveyors’  reports  that  there  was  a  

total loss and grounded vessel cannot be refloated with  

normal salvaging procedure and cannot be beached.  It  

relied  upon  the  version  of  the  Port  Officer  that  the  

damage by stranding was attributable to the prevailing  

adverse weather conditions at the time of attempting  

to beach the vessel at the designated plot.  It is under  

those  circumstances  the  complainant  contended  that  

there  was  no  justifiable  reason  or  ground  for  

repudiating the claim.  

11. On behalf of the appellant insurance Company, it  

was merely contended that there was no deficiency of  

service on the part of the appellant insurance Company  

which  was repelled  by the National  Commission.   It  

was  also  contended  on  behalf  of  the  appellant  

Insurance Company that there was no  ‘total  and/or  

constructive  loss’ as defined under Sections 57 and 60  

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of  the  Marine  Insurance  Act,  1963 inasmuch  as  the  

insured has recovered more than Rs. 13.00 crores by  

sale  of  the  vessel.   The  Commission  having  

meticulously  examined  the  rival  contentions  with  

regard to this  particular  point,  found that there was  

actual total loss of the vessel to the complaint because  

the  complainant  could  not  bring  the  vessel  to  the  

destined point for its breaking.  The Commission found  

that  the vessel  was brought  for  the sole  purpose of  

‘breaking’ and the complainant has lost its purpose as  

it could not bring it to the destined point because of  

the sea peril.  It was impossible for the complainant to  

refloat the vessel for bringing it to the destined point  

for  the  purpose  for  which  it  was  purchased.   The  

National  Commission  also  rejected  the  contention  of  

the appellant insurance Company that the respondent  

complainant  has  committed  utmost  breach  of  the  

principles of good faith.  It was the contention of the  

appellant  insurance  Company  that  the  respondent  

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complainant  did  not  disclose  at  or  before taking the  

insurance policy that:  

(a) one engine of the vessel (viz. starboard engine)  

was not working.  

(b) the Addendum no. 2 dated 3.6.97, which records  

that  the  starboard  engine  of  the  vessel  was  not  

working.  

This  plea  of  the  appellant  insurance  Company  was  

resisted by the respondent mainly contending that the  

issue has been raised for the first time at the time of  

filing the written statement alleging non-disclosure of  

material facts. The National Commission, after a critical  

analysis of the material available on record, found that  

the  contract  is  liable  to  be  repudiated  for  non-

observance  of  good  faith  or  non-disclosure  of  the  

material facts. At all points of time, the contract was  

sought to be repudiated on the one and only ground  

that there was no total  loss.  In this  connection,  the  

National  Commission  examined  the  complete  

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correspondence  that  has  taken  place  between  the  

parties  prior  to  filing  of  the  complaint  and  written  

statement before the National Commission and found  

that at no point of time the insurance company took  

any plea or stand that there was any suppression on  

the part of the complainant in not disclosing that one  

engine  of  the  vessel  was  not  functioning.  The  

Commission  referred  to  the  evidence  led  by  the  

appellant  insurance  Company  in  which  it  was  

specifically admitted that repudiation was only on the  

ground that the vessel had encountered neither total  

loss nor a constructive total  loss.   It  is  under those  

circumstances  the  Commission  found  that  the  issue  

has been raised by the insurance Company for the first  

time  in  the  proceedings  before  it  only  as  an  

afterthought.  

12. The Commission also found that at the time of  

making insurance proposals, the respondent had given  

Memorandum  of  Agreement  (MOA)  along  with  two  

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addendums and one addendum clearly stated that the  

vessel  was  with  one  engine,  and  it  has  come  from  

Singapore to Alang Anchorage for its funeral voyage.  

The  Commission  found  that  there  is  no  reason  to  

disbelieve this version of the respondent.  Neither the  

agent of the insurance Company nor the Development  

Officer stated that addendum No. 2 was not given to  

the  insurance  Company  at  the  time  of  issuing  the  

policy.  The Commission also noticed that the vessel  

sailed  from  Singapore  with  one  engine  without  any  

difficulty  and  in  such  view  of  the  matter,  the  

Commission found that it would be of no significance in  

the present case even if there is non-disclosure of fact  

that only one engine was working.  

13. We do not wish to refer to other issues raised by  

the insurance Company before the Commission which  

were  dealt  with  since  the  only  question  that  was  

argued  before  us  in  this  appeal  relates  to  non-

disclosure of the material facts.  The learned counsel  

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for  the  appellant  submitted  that  the  respondent  

complainant  suppressed  the  material  fact  that  one  

engine of the vessel  was not working and therefore,  

not entitled to any relief.  We do not find any merit  

whatsoever  in  the  submission  made  by  the  learned  

counsel  for the appellant.  The material  available on  

record which has been taken into consideration by the  

National  Commission  clearly  demonstrates  that  the  

respondent  complainant  never  made  any  

representation  that  the  vessel  had  two  functional  

engines.  On the other hand, addendum No. 2 to MOA  

expressly speaks about the fact that starboard engine  

was  not  working.   The  MOA  that  was  forwarded  

included both the addendums and in fact it was one of  

the reasons for demolishing the vessel.  At any rate, as  

observed by the National Commission, at no point of  

time  the  insurance  Company  took  this  plea  to  

repudiate the contract.  This plea was raised for the  

first time in the written statement filed in the National  

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Commission as an afterthought.  

14.  The  learned  counsel  for  the  appellant  did  not  

show any material available on record in support of her  

submission.   Nor  the  counsel  could  point  out  any  

material or evidence which has a bearing on the issue  

that  had  escaped  the  attention  of  the  Commission.  

Thus  it  is  not  a  case  of  non-consideration  of  any  

evidence available on record by the Commission.  The  

findings  and  conclusions  drawn  by  the  National  

Commission  are  based  on  proper  appreciation  and  

elaborate consideration of the entire material available  

on record.  The Commission did not commit any error  

in appreciating the evidence available on record. The  

contention urged before us in this appeal is accordingly  

rejected. No other contention was raised.

15. For  the same reasons,  we find  no merit  in  the  

cross appeal preferred by the respondent complainant.  

16. The appeals are accordingly dismissed.  

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….………..………………………J.                                         (B. SUDERSHAN REDDY)

……………………………………J. (SURINDER SINGH NIJJAR)

NEW DELHI, March 9, 2011.  

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