The Supreme Court Friday set aside the National Consumer Disputes Redressal Commission (NCDRC's) order asking an insurance company to pay over Rs 64 lakh as compensation to Madhya Pradesh government for alleged wrongful repudiation of a claim regarding damages to a helicopter, which was in transit from Canada to Bhopal in 2005.
Observing that courts should always interpret the words used in a contract in a manner that would best express the intention of parties, the top court said that on balance of probabilities the state has failed to discharge its burden that damage to the tail boom of the Bell-430 helicopter had incurred during the course of transit.
The apex court was dealing with a matter in which the Madhya Pradesh government had purchased a 'transit marine insurance policy' from Bajaj Allianz General Insurance Co Ltd in July 2005 to cover the transportation of a Bell-430 Helicopter from Langley, Canada to Bhopal.
A bench comprising Justices D Y Chandrachud and Ajay Rastogi noted in the verdict that the helicopter was transported by air in a "knocked down state" and reached New Delhi on October 5, 2005 and after customs clearance, it was shifted to a hangar.
"It is undisputed that at the time of customs clearance, no damage was reported," the bench noted in its verdict.
The bench referred to a letter addressed to the insurance firm by the state government and , observed that it indicated the state's intention was to assemble the helicopter at New Delhi and then fly it to Bhopal.
"The act of unpacking the helicopter for the purpose of assembling it for undertaking the flight to Bhopal was unrelated to the usual or ordinary method of pursuing the transportation of the cargo insured," it said.
The bench said the policy covered only those risks that were associated with transportation of the helicopter and did not cover risks associated with its flight or operation.
The bench said that change in the character of the helicopter "from a knocked down state to a ready to fly state" exposed the insurance firm to risks not contemplated by the parties under the policy.
"Once the nature of the subject-matter was altered, the cargo cannot be said to be in transit and the appellant (insurance firm) is absolved from any liability arising out of any subsequent damage to the consignment," the bench said.
Detailing the facts, the judgement noted that on October 21, 2005, when the helicopter was in the hangar, it was inspected by a representative of manufacturer and window of crew door was reported to be damaged.
Later, in November 2005, the state informed the insurance firm that upon inspection, the tail boom of the helicopter was found to be damaged.
The insurance firm had repudiated the state's claim on the ground that loss that occurred to helicopter was after the duration of policy had ended as mentioned in one of the clause of Institute Cargo Clauses (ICC).
Thereafter, the state filed a complaint before the Madhya Pradesh State Consumer Dispute Redressal Commission (SCDRC), which found the insurance firm to be deficient in its service and directed it to pay compensation of Rs 64,89,205 to the state.
Later, the NCDRC had in August 2018 upheld the findings of SCDRC and also awarded interest at the rate of six per cent per annum from the date of repudiation till realisation.
The insurance firm approached the apex court against the NCDRC's order and argued that the state had taken delivery of helicopter, prior to the final destination that is Bhopal, and stored it in hangar.
The state's counsel had argued that there was justifiable ground for the helicopter to be stored at the hangar at New Delhi as replacement window was not available in India and the state had decided to procure it from the US.
The bench, which allowed the appeal of the insurance firm, noted in its verdict that dispute before it was with respect to damage to the tail boom of the helicopter.
Referring to several judgements of various jurisdictions, the bench said that they have dealt with the meaning of the expression 'in transit' and 'in the ordinary course of transit'.
While terming as "unsustainable" the orders passed by NCDRC and SCDRC, the apex court said, "While construing a contract of insurance, it is not permissible for a court to substitute the terms of the contract.
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