# BAJAJ ALLIANZ GENERAL INSURANCE CO LTD & ANR v. THE STATE OF MADHYA PRADESH

- **Citation:** [2020] 6 S.C.R. 198
- **Court:** Supreme Court of India
- **Decided:** 2020-04-24
- **Case number:** Civil Appeal No. 2366-67 of 2020
- **Bench:** Dr. Dhananjaya Y Chandrachud, Ajay Rastogi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bajaj-allianz-general-insurance-co-ltd-anr-v-the-state-of-madhya-pradesh-34581
- **Pages:** 33

## Headnote

Consumer Protection Act, 1986: Deficiency in service -
Insurance policy - Respondent purchased a "Transit Marine
Insurance Policy" from the appellant-insurer on 21 July 2005, to
cover the transportation of Helicopter from Langley, Canada to
Bhopal, India - As per the acceptance letter, the transit route for
the transportation of the helicopter was 'Langley to Bhopal (by
road/by air)" - On 5 October 2005, the helicopter was transported
in a knocked down condition by air to New Delhi - On 13 October
2005, the helicopter was cleared by the customs and was shifted to
a hangar at New Delhi - On inspection, the window of crew door
was reported to be damaged - By letter dated 22 October 2005, the
respondent informed insurer of the damage and stated that the
helicopter was "being assembled at the Hangar located at Delhi so
that the Helicopter can fly from Delhi to Bhopal" - On 23 November
2005, the respondent informed insurer that upon inspection, the
tail boom of the helicopter was found damaged - A surveyor was
appointed by the appellant to assess the alleged damage - In the
report, surveyor concluded that the damage to the tail boom had
occurred at Hangar Delhi after substantial assembly but prior to
test flight and not during transit and hence would not fall under the
purview of marine insurance policy as issued to the insured -
Whether storage, unpacking and assembly of the helicopter at New
Delhi would fall outside the scope of the expression "ordinary
course of transit", terminating coverage under the policy - Held:
The insurance cover in the instant case is expressed in terms of the
voyage itself - It provided that policy commenced from the time the
insured cargo left the warehouse, premises or place of storage at
the place named in the policy and continued during the "ordinary
course of transit" - The specific act of unpacking the cargo at New
[2020] 6 S.C.R. 198
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Delhi for assembling it for the flight to Bhopal indicated that the
transportation of the cargo in a knocked down state had come to
an end - Once the respondent decided to leave the goods in the
hangar at New Delhi for its commercial convenience not associated
with or in furtherance of the requirements of their carriage to
Bhopal, the transit insurance ended - The act of assembling the
helicopter with a view to having it flown under its own power,
instead of transporting the packaged knocked down helicopter
further to Bhopal by road, would not constitute as storage in the
ordinary course of transit - The policy covered only those risks
that were associated with the transportation of the helicopter and
did not cover the risks associated with the flight or operation of the
helicopter - Change in the character of the helicopter from a
knocked down state to a ready to fly state exposed insurer to risks
not contemplated by the parties under the policy - Nature of the
subject-matter having been altered, the cargo could not be said to
be in transit and insurer was absolved from any liability arising out
of any subsequent damage to the consignment.
Insurance Policy - Expression "in the ordinary course of
transit", meaning of - Held: Expression "in the ordinary course of
transit" depends on the context, object and the wording of the
particular policy - In context of the policy, the words "in transit"
do not require transportation of the consignment in a single trip
from the commencement to the final destination but includes those
interruptions in motion that are incidental to or in furtherance of
the conveyance or transportation of the consignment - The question
of what does and does not constitute a deviation in furtherance of
the conveyance of the goods is a question of fact that must be
determined by both the intent of the policy and the actions of the
parties.
Insurance Policy - Burden of proof - For the respondent to
prove its case, a mere assertion that the loss incurred during the
course of transit is not sufficient - Burden of proof lies on th

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SUPREME COURT REPORTS
[2020] 6 S.C.R.
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD & ANR
v.
THE STATE OF MADHYA PRADESH
(Civil Appeal No. 2366-67 of 2020)
APRIL 24, 2020
[DR. DHANANJAYA Y CHANDRACHUD AND
AJAY RASTOGI, JJ.]
Consumer Protection Act, 1986: Deficiency in service -
Insurance policy - Respondent purchased a "Transit Marine
Insurance Policy" from the appellant-insurer on 21 July 2005, to
cover the transportation of Helicopter from Langley, Canada to
Bhopal, India - As per the acceptance letter, the transit route for
the transportation of the helicopter was 'Langley to Bhopal (by
road/by air)" - On 5 October 2005, the helicopter was transported
in a knocked down condition by air to New Delhi - On 13 October
2005, the helicopter was cleared by the customs and was shifted to
a hangar at New Delhi - On inspection, the window of crew door
was reported to be damaged - By letter dated 22 October 2005, the
respondent informed insurer of the damage and stated that the
helicopter was "being assembled at the Hangar located at Delhi so
that the Helicopter can fly from Delhi to Bhopal" - On 23 November
2005, the respondent informed insurer that upon inspection, the
tail boom of the helicopter was found damaged - A surveyor was
appointed by the appellant to assess the alleged damage - In the
report, surveyor concluded that the damage to the tail boom had
occurred at Hangar Delhi after substantial assembly but prior to
test flight and not during transit and hence would not fall under the
purview of marine insurance policy as issued to the insured -
Whether storage, unpacking and assembly of the helicopter at New
Delhi would fall outside the scope of the expression "ordinary
course of transit", terminating coverage under the policy - Held:
The insurance cover in the instant case is expressed in terms of the
voyage itself - It provided that policy commenced from the time the
insured cargo left the warehouse, premises or place of storage at
the place named in the policy and continued during the "ordinary
course of transit" - The specific act of unpacking the cargo at New
[2020] 6 S.C.R. 198
198
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Delhi for assembling it for the flight to Bhopal indicated that the
transportation of the cargo in a knocked down state had come to
an end - Once the respondent decided to leave the goods in the
hangar at New Delhi for its commercial convenience not associated
with or in furtherance of the requirements of their carriage to
Bhopal, the transit insurance ended - The act of assembling the
helicopter with a view to having it flown under its own power,
instead of transporting the packaged knocked down helicopter
further to Bhopal by road, would not constitute as storage in the
ordinary course of transit - The policy covered only those risks
that were associated with the transportation of the helicopter and
did not cover the risks associated with the flight or operation of the
helicopter - Change in the character of the helicopter from a
knocked down state to a ready to fly state exposed insurer to risks
not contemplated by the parties under the policy - Nature of the
subject-matter having been altered, the cargo could not be said to
be in transit and insurer was absolved from any liability arising out
of any subsequent damage to the consignment.
Insurance Policy - Expression "in the ordinary course of
transit", meaning of - Held: Expression "in the ordinary course of
transit" depends on the context, object and the wording of the
particular policy - In context of the policy, the words "in transit"
do not require transportation of the consignment in a single trip
from the commencement to the final destination but includes those
interruptions in motion that are incidental to or in furtherance of
the conveyance or transportation of the consignment - The question
of what does and does not constitute a deviation in furtherance of
the conveyance of the goods is a question of fact that must be
determined by both the intent of the policy and the actions of the
parties.
Insurance Policy - Burden of proof - For the respondent to
prove its case, a mere assertion that the loss incurred during the
course of transit is not sufficient - Burden of proof lies on the
respondent to show that the loss incurred was covered within the
terms of the policy and that on a balance of probabilities there
existed a proximate cause between the loss incurred and the
consignment being in transit.
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v.
STATE OF M.P.
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Insurance Policy - Construction of - Held: Insurance policies
should be construed according to the principles of construction
generally applicable to commercial and consumer contracts - The
court must interpret the words in which the contract is expressed by
the parties and not embark upon making a new contract for the
parties - Interpretation of statutes.
Insurance Policy - Marine transit insurance policy - The
purpose of the marine transit insurance policy is to cover the
consignment from risks associated with transportation of the
consignment from one place to another - It is fundamental for those
responsible for carrying the cargo to ensure that all stages of the
transportation are effected with reasonable promptness - "In
transit", however, does not necessarily mean that the consignment
needs to be in continuous motion at all times - A mere brief
suspension must however be in furtherance of the ordinary course
of transit - During the ordinary course of transit, the consignment
might frequently come to rest or be temporarily stored in the dock
awaiting loading or customs clearance - However, unduly protracted
steps in the cargo's transportation are not within, and may terminate,
the "ordinary course of transit.".
Allowing the appeals, the Court
HELD: 1. Insurance policies should be construed according
to the principles of construction generally applicable to
commercial and consumer contracts. The court must interpret
the words in which the contract is expressed by the parties and
not embark upon making a new contract for the parties. A
reasonable construction must therefore be given to each clause
in order to give effect to the plain and obvious intention of the
parties as ascertainable from the whole instrument. The liability
of the insurer cannot extend to more than what is covered by the
insurance policy. In order to determine whether the claim falls
within the limits specified by the policy, it is necessary to define
exactly what the policy covered and to identify the occurrence of
a stated event or the accident prior to the expiry of the policy.
[Para 16][213-F-H; 214-A]
2. The insurance cover in the present case is expressed in
terms of the voyage itself. It provided that the duration of the
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policy attached and commenced from the time the insured cargo
left the warehouse, premises or place of storage at the place
named in the policy and continued during the "ordinary course of
transit". The expression "in the ordinary course of transit" cannot
be divorced from the context and must be read along with the
other conditions which appeared in the policy document. The
meaning of the expression "in the ordinary course of transit"
depends on the context, object and the wording of the particular
policy. [Para 17, 18][214-F; 215-E]
3. In context of the policy, the words "in transit" do not
require transportation of the consignment in a single trip from
the commencement to the final destination but includes those
interruptions in motion that are incidental to or in furtherance of
the conveyance or transportation of the consignment. The
question of what does and does not constitute a deviation in
furtherance of the conveyance of the goods is a question of fact
that must be determined by both the intent of the policy and the
actions of the parties. An action that is wholly unrelated to the
usual or ordinary method of pursuing the transportation of goods
would prevent the goods from being covered under the definition
of the expression "in transit" under the policy. [Para 25]
[221-F-H]
4. It is undisputed that at the time of customs clearance, no
damage was reported. It was when the helicopter was inspected
by the representative of the manufacturer during a routine
inspection on 21 October 2005 that damage was reported to the
window of the crew door of the helicopter. The helicopter was
transported from Langley in a "knocked down state". The specific
act of unpacking the cargo at New Delhi in furtherance of the
purpose of assembling it for the flight to Bhopal indicated that
the transportation of the cargo in a knocked down state had come
to an end. The act of unpacking the helicopter for the purpose of
assembling it for undertaking the flight to Bhopal was unrelated
to the usual or ordinary method of pursuing the transportation of
the cargo insured. The policy covered only those risks that were
associated with the transportation of the helicopter and did not
cover the risks associated with the flight or operation of the
helicopter. [Paras 26, 27][222-B-C, F-H]
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v.
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5. Change in the character of the helicopter from a knocked
down state to a ready to fly state exposed the appellant to risks
not contemplated by the parties under the policy. The effect of
the alteration of the subject-matter insured is outside the scope
of the agreed cover and brings an end to the policy. Once the
nature of the subject-matter was altered, the cargo cannot be
said to be in transit and the appellant is absolved from any liability
arising out of any subsequent damage to the consignment.
Exposure to risks associated with the flight substantially and
unnecessarily added to the risks of the journey that were not
covered by the policy. Accordingly, the submission that the cover
against risks would be provided till the time the helicopter was
not delivered at the final destination of Bhopal is unsustainable.
[Para 29][223-E-H]
6. Clause 5.1.2 of the ICC provided that the policy may
terminate upon the assured choosing to use an alternate place of
delivery, prior to the destination named therein for one of two
purposes, either for storage other than in the ordinary course of
transit or for allocation or distribution of the cargo. The purpose
of a transit policy is to cover the carriage of goods to the final
destination. In the present case, storage of the helicopter in the
hangar at New Delhi awaiting replacement of the spare window
cannot be said to be incidental or in furtherance of the carriage of
the goods to the ultimate destination. It would be unreasonable
to suggest that the transit policy intended to cover indefinite
storage of the helicopter at the hangar in New Delhi not brought
about by the requirements of transport but determined by
commercial convenience of the respondent. Once the respondent
decided to leave the goods in the hangar at New Delhi for its
commercial convenience not associated with or in furtherance of
the requirements of their carriage to Bhopal, the transit insurance
ended. [Para 30][224-B-F]
7. Clause 15 of the ICC provided that during the period of
the transit policy, the insured shall act with reasonable dispatch.
The purpose of the marine transit insurance policy is to cover
the consignment from risks associated with transportation of the
consignment from one place to another. It is fundamental for those
responsible for carrying the cargo to ensure that all stages of the
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transportation are effected with reasonable promptness. "In
transit", however, does not necessarily mean that the consignment
needs to be in continuous motion at all times. In the instant case,
the insured voluntarily decided to store the helicopter in the
hangar at New Delhi out of commercial convenience and not in
furtherance of the transit. In addition, the insured by assembling
the knocked down helicopter for the purposes of flying it to
Bhopal changed the nature of the consignment and exposed the
appellant to operational risks beyond the scope of the policy. [Para
31][224-G; 225-A-D]
8. Clause 6 of the ICC provided for continuation of
insurance cover after termination in circumstances beyond the
control of the insured. Clause 6 stated that the insured can issue
prompt notice to the underwriters to continue the cover upon
payment of an additional premium, if owing to circumstances
beyond its control either the contract of carriage is terminated at
a place other than the destination named therein or the transit is
otherwise terminated before the delivery of the subject matter
insured as provided for in Clause 5. In the present case, if the
respondent decided to retain the helicopter in New Delhi awaiting
the arrival of the replacement window from USA, it could have
issued a notice to the underwriters to continue the cover of
carriage till the time the repairs were carried out. However, the
respondent did not issue any notice seeking extension of the
insurance cover under Clause 6. [Para 32][225-D; 226-A-B]
9. Clause 8 of the ICC provided for claims under the
insurance policy. In terms of Clause 8, for the respondent to prove
its case, the basic and fundamental fact which needs to be proved
is that: (i) the respondent must have an insurable interest in the
subject matter insured at the time of loss; and (ii) the loss insured
against occurred during the period covered by the policy. [Para
34, 35][226-F, G-H; 227-A]
10. For the respondent to prove its case, a mere assertion
that the loss incurred during the course of transit is not sufficient.
The burden of proof lies on the respondent to show that the loss
incurred was covered within the terms of the policy and that on a
balance of probabilities there existed a proximate cause between
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the loss incurred and the helicopter being in transit. The
respondent has adduced no evidence to supports its case. [Para
36][228-C-D]
11. According to the NCDRC, the expiry of thirty days after
completion of discharge at the final port of discharge should be
essentially interpreted as thirty days after reaching Bhopal and
not thirty days during the course of transit which included the
halt at New Delhi. The line of approach adopted by the NCDRC
is evidently incorrect. While construing a contract of insurance,
it is not permissible for a court to substitute the terms of the
contract. The court should always interpret the words used in a
contract in a manner that will best express the intention of the
parties. The NCDRC has incorrectly proceeded on the path that
the ordinary course of transit would include assembling of the
helicopter at New Delhi and the policy covered all risks till the
time the helicopter did not reach Bhopal. The risks associated
with the assembled helicopter were not covered within the purview
of the policy, as the subject-matter which had been insured was a
helicopter being transported in a packaged knocked down
condition. The act of assembling the helicopter with a view to
having it flown under its own power, instead of transporting the
packaged knocked down helicopter further to Bhopal by road,
would not constitute as storage in the ordinary course of transit.
The interpretation adopted by the NCDRC strikes fundamentally
at the purpose of the policy and is not in accordance with sound
commercial principles. The interpretation altered the character
of the risk insured beyond the scope of the policy as agreed
between the parties. [Para 39][230-A-E]
Export Credit Guarantee Corporation of India Ltd v.
Garg Sons International (2014) 1 SCC 686 : [2013] 1
SCR 336 - referred to.
Verna Trading Pty Ltd v. New India Assurance Co Ltd.
(1991) 1 VR 129; QBE Insurance Limited v. Patterson
Fine Jewellery Pty Ltd. 2004 VSC 31; Bethell v. Clark
(1888) 20 QBD 615; SCA (Freight) Ltd v. Gibson [1974]
2 Lloyd's Rep 533; Wiggins Teape Australia Pty Ltd v.
Baltica Insurance Co Ltd [1970] 2 NSWR 77; First
American Artificial Flowers, Inc v AFIA Worldwide Ins
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1977 AMC 376 (N Y Sup Ct 1976); Lumber & Wood
Products, Inc v. New Etc 807 F 2d 1987, 1987 AMC
1244; Verna Trading Pty Ltd v. New India Assurance
Co Ltd [1991] 1 VR 129; NEC Australia Pty Ltd v. Gamif
Pty Limited [1993] FCA 252; Rhesa Shipping Co S A v.
Edmunds [1985] 2 All ER 712 - referred to.
Mac Gillivray on Insurance Law Twelfth Edition, Sweet
and Maxwell (2012); P Ramanatha Aiyar's Law Lexicon
3rd Edition, 2012 Black Law's Dictionary 10th Edition,
Colinvaux's Law of Insurance 10th Edition by Robert
Merkin - referred to.
Case Law Reference
[2013] 1 SCR 336
referred to
Para 9
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 236667 of 2020.
From the Judgment and Order dated 10.08.2018 of the National
Consumer Disputes Redressal Commission in First Appeal No. 279 of
2009 and First Appeal No. 25 of 2010.
Joy Basu, Sr. Adv., Prantar Basu Choudhury, Kanak Bose, Harshul
Singh and Sahil Tagotra, Advs. for the Appellants.
J. S. Attri, Sr. Adv., Aditya Ranjan, Narender Singh, Advs. for the
Respondent.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
1. Leave granted.
2. The present appeals arise from a judgment of the National
Consumer Disputes Redressal Commission1 dated 10 August 2018 which
in first appeal upheld the judgment of the Madhya Pradesh State
Consumer Disputes Redressal Commission2. The SCDRC held the
appellant to be deficient in its service and directedit to pay compensation
of 64,89,205 towards the cost of repair of a helicopter to the
respondent.Both the appellant and the respondent had preferred appeals
against the order of the SCDRC. The NCDRC dismissed the appeal3
1 "NCDRC"
2 "SCDRC"
3 First Appeal no 279 of 2009
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preferred by the appellant and partly allowed the appeal4 preferred by
the respondent for enhancement of compensation and awarded interest
at the rate of six percent per annum.
3. The respondent purchased a "Transit Marine Insurance
Policy"from the appellant on 21 July 2005, to coverthe transportation of
a Bell - 430 Helicopter from Langley, Canada to Bhopal, India. By an
acceptance letter dated 1July 2005, the appellant set out the transit route
for the transportation of the helicopter by air, sea and road. By a letter
dated 10 July 2005, the proposed route was altered as follows:
"Transit Details: Langley to Pithampur/Bhopal (by road/ by air)."
4. The policy scheduleissued by the appellant indicated that the
policy was issued from 22 July 2005 for transportation of the helicopter
with standard packaging from Langley to Bhopal for a total sum insured
of 20,00,00,000. The policy was to be governed by the accompanying
clauses that included, inter alia, Institute Cargo Clauses (Air Cargo)5,
Institute War Clauses (Air Cargo), Institute Strike Clauses (Air Cargo),
and an Institute Theft Pilferage Non Delivery Clause that listed out the
terms and conditions of all damages and losscovered under the policy.
The duration of the policy was to be governed in terms of Clause 5 of
the ICC. On 5 October 2005, the helicopter was transported in a knocked
down state by air to New Delhi. On 13 October 2005, the helicopter
was cleared by the customs and was shifted to a hangar at New Delhi.
On 21October 2005, the helicopter was inspected by a representative of
the manufacturer during routine inspection and the window of the crew
door was reported to be damaged. The respondent sought the permission
of the Director General of Civil Aviation to fly the helicopter to Bhopal
but was denied permission on account of the damage to the window of
the crew door.By a letter dated 22 October 2005, the respondent informed
the appellant of the damage and stated that the helicopter was "being
assembled at the Hangar of Indamer Co. located at Delhi so that the
Helicopter can fly from Delhi to Bhopal". On 23 November 2005, the
respondent informed the appellant that upon inspection, the tail boom of
the helicopter was found to be damaged. A surveyor was appointed by
the appellant to assess the alleged damage to the window of the crew
door and the tail boom of the helicopter. By a report dated 14 March
2006, the surveyor concluded as follows:
4 First Appeal no 25 of 2010
5 "ICC"
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"The damage to window glass of pilot seat and damage to tail
boom of helicopter are two separate incidents not related to each
other.
The replacement cost of damaged window glass of pilot seat is
below Rs 10,00,000 and hence would fall under the excess
prescribed under the policy.
The damage to the tail boom had occurred at Hangar #3, Bay 15/
33 IGI Airport Delhi after substantial assembly but prior to test
flight and not during transit and hence would not fall under the
purview of marine insurance policy as issued to the insured."
5. By a letter dated 10 April 2006, the appellant informed the
respondent that the damage to the tail boom was not detected during
transit or customs clearance and it was only detected in the third week
of November 2005 before which multiple inspections had been carried
out and no damage was reported earlier.The appellant further informed
the respondent that the representatives of the manufacturer had also
admitted that the loss to the tail boom was only noticed in the month of
November. On 10 April 2006, the appellant informed the respondent that
both the losses claimed were inadmissible for the following reasons:
"1. Claim for damage to Windscreen glass - The total cost of
replacement for this loss is quoted to be Rs (amount of windscreen
glass)/-This amount is within the policy deductible of 0.5% of
sum insured of Rs 20 Crores. As such there is no liability attaching
to the policy.
2. Claim for dent on Tail Boom of the aircrafta. This was discovered at Hanger-3 Bay 15/33 IGI Airport Delhi
in the third week of Nove-2005. The dent was noticed by the
representative of manufacturer during routine inspection. It is
important to note that cargo had landed on (date).
b. We deputed Surveyors, M/s Puri Anuj & Associates, to inspect
and report on loss.
c. Surveyors have reported that the loss was not identified/
reported during Customs Clearance. As clean delivery has been
accepted.
d. Representatives of Canadian manufacturers, Mr Lorne Vowles
and Mr Adrine Lawrence, have admitted that the loss was
BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v.
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noticed only in November. There was no damage to the tail
boom during their thorough inspection on landing of cargo.
e. The loss claimed is caused during the storage/movement/
handling of cargo and long after it's delivery at desired
destination.
In view of these facts, we regret to say that the loss falls beyond
the scope of cover granted. Both the losses claimed are
inadmissible."
6. By a letter dated 11 April 2006, the respondent responded to
the above letter stating that even though the damage was noticed after a
month of customs clearance,the policy of transit was upto Bhopal and
therefore, damage to the helicopter in the month of November 2005
would also be covered under "transit". The appellant repudiated the
claim of the respondent by a letter dated 11 July 2006 on the ground that
the loss that occurred to the helicopter was after the duration of the
policy had ended as mentioned in Clause 5 of the ICC:
"In the present case, the destination of the consignment of air
transit was New Delhi Airport. The cargo [aircraft] was to be
assembled at this location and then aircraft was to fly to Bhopal.
The flight would be out of the Marine Transit scope of insurance.
The named destination "Bhopal" of issued policy has no relevance
in this context.
Thus, insurance cover ended on delivery at the final warehouse,
premises or place of storage..."
7. The respondent filed a consumer complaint6 before the SCDRC
on 18 August 2006 seekingcompensation from the appellant for wrongful
repudiation of the claim and towards the loss sustained by the respondent.
On 16 May 2009, the SCDRC found the appellant to be deficient in its
service and directed the appellant to pay a compensation of 64,89,205
to the respondent. The SCDRC held that the present case was not a
case of delivery before the final destination but the halt at New Delhi
was only a transit halt and the assembly of the helicopter at New Delhi
did not change the nature of the cargo. Being aggrieved by the judgment
of the SCDRC, both the petitioner and the respondent preferred separate
appeals before the NCDRC. The NCDRC by its judgment dated 10
6 Consumer Complaint no 13 of 2006
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August 2018, upheld the finding of the SCDRC that there was a deficiency
of service on behalf of the appellant in repudiating the claim.In addition
to the compensation which was granted by the SCDRC, the NCDRC
awarded "interest compensation by way of damages" at the rate of six
percent per annum from the date of repudiation till realisation. Assailing
the decision of the NCDRC, the appellant has filed the present Special
Leave Petition before this Court under Article 136 of the Constitution.
8. By an order of this Court dated 15 February 2019, a stay was
granted on the operation of the judgment of the NCDRC. The issue
before this Court iswhether storage, unpacking and assembly of the
helicopter at New Delhi would fall outside the scope of the expression
"ordinary course of transit", terminating coverage under the policy.
9. During the course of the submissions before this Court, Mr Joy
Basu, learned Senior Counsel appearing on behalf of the appellants made
the following submissions:
(i)
The tenure and duration of the policy was contingent upon
an event which may trigger Clause 5 of the ICC. The
respondent took the delivery of the helicopter, prior to the
final destination- Bhopal, and stored it in its hangar at New
Delhi. The storing of the helicopter in the hangar was not
"for onward carriage to Bhopal" but for the "convenience"
of the respondent.In doing so, the respondent took the cargo
in its own custody and acted beyond the scope of the
"ordinary course of transit", terminating coverage under the
policy. The goods in the ordinary course of transit are
inextricably linked to a carrier who is responsible for
expediting the journey and taking care of the goods during
transit. Once the respondent took the cargo in its own custody
and chose to assemble the helicopter in New Delhi, the link
with the carrier came to an end affecting the risk cover;
(ii)
The delay and deviation caused due to the respondent taking
custody and delivery of the helicopter was not covered by
Clause 6 of the ICC and ran contrary to Clause 15 of the
ICC, which required the respondent to act with reasonable
dispatch;
(iii) The policy covered risks associated with transportation of
the helicopter in a disassembled state as cargo through a
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carrier.When the respondent assembled the helicopter at the
hangar in New Delhi, it changed the character and nature of
the said cargo and created an entirely new product. The
modified cargo was incapable of being insured under the
existing policy as it exposed the appellant to risks that were
not agreed upon in the transit marine insurance policy. The
risks associated with the transportation of a disassembled
helicopter as cargo are different from those associated with
the flight of a helicopter under its own power. Operational
risks associated with the flight of the helicopter are covered
under a separate'Aviation Hull All Risk Insurance Policy';
(iv) Clause 2.3 of the ICC excludes from the insurance cover
the loss, damage or expense caused by insufficiency or
unsuitability of packing or preparation of the cargo;
(v)
The NCDRC in its interpretation of the policy has, in essence,
re-written the policy providing a meaning contrary to that
envisaged by the parties. In this regard, reliance was placed
upon the decision of this Court in Export Credit Guarantee
Corporation of India Ltd v Garg Sons International7.
Even if the container containing the disassembled helicopter
had not been opened in New Delhi and not continued its
onward journey to Bhopal, then too the ordinary course of
transit would have been interrupted. Breaks in transport of
the cargo have to be incidental to such transport and not as
a matter of convenience.The storage of the helicopter in the
hangar at New Delhi for the purpose of assembly and
subsequent flight could not be called storage being incidental
to the transportation.Reliance was placed upon the judgments
of the Supreme Court of Victoria(Appeal Division) in Verna
Trading Pty Ltd v New India Assurance Co Ltd8, and
Supreme Court of Victoria(Common Law Division) in QBE
Insurance Limited v Patterson Fine Jewellery Pty Ltd9;
and
(vi) Damage to the window of the door of the helicopter would
fall within the excess clause which in any event is not covered
7(2014) 1 SCC 686
8 (1991) 1 VR 129
9 2004 VSC 31
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under the insurance policy. The damage to the tail boom
admittedly occurred in the third week of November 2005
which is after the period of thirty days from 13 October 2005
(the date of customs clearance and the respondent taking
possession of the cargo). Therefore, the claim for damage
in this period is not payable in terms of Clause 5.1.3.
10. On the other hand, Aditya Rajan, learned counsel appearing
on behalf of the respondent supported the decisions of the NCDRC and
SCDRC and made the following submissions:
(i)
The copy of the ICC was never provided by the insurer. The
manner in which the helicopter is transported by air and by
road is different. The helicopter in a knocked down state
first landed in New Delhi and was then taken to the hangar,
where it was to be assembled and prepared for transportation
by road to Bhopal.The respondent did not choose New Delhi
as the selected warehouse for the purposes of accepting the
delivery.During the assembly, only the fuselage assembly
(front body of the helicopter) was inspected and a crack
was noticed in the window of the front body of the helicopter.
At that stage, there was no possibility of detecting any other
damage to the helicopter as the helicopter was still in transit
and therefore, no formal complaint was lodged with the
appellant. Only after the delivery of the helicopter at Bhopal
could the helicopter be checked properly and a claim be
lodged;
(ii)
The letter dated 22 November 2005, was written by an
administrative manager, who had no idea whether the
helicopter was to be transported to Bhopal by road or air. It
was stated in the letter that some parts of the helicopter
were broken during transit;
(iii) There was justifiable ground for the helicopter to be stored
at the hangar at New Delhi. Since the replacement window
was not available in India, the respondent decided to procure
a new window from the US in order to prevent the possibility
of further damage to the mounting frame of the
helicopter.Since the procurement and supply of the new
window was taking considerable time, the helicopter was
kept in storage in the meantime in the hangar covered with a
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bubble sheet and packing material. In addition, the helicopter
was retained in New Delhi as the respondent had all the
necessary skilled manpower and special tools to replace the
damaged window;
(iv) On 20 November 2015, the engineer of the helicopter
manufacturer noted a dent in the tail boom during a routine
check. Upon being informed of the dent in the tail boom, the
respondent's engineer conducted a further assessment to
determine the extent of damage. Accordingly, the inside of
the helicopter was accessed by opening the access panels
and the main structural bulkhead was found damaged. The
mere fact that the damage was discovered on 20 November
2005, does not imply that the dent was actually caused on
that date. The damage to the tail boom,the bulk head, and
the damage to the window glass established that the damage
had been caused during transit as it could not have been
caused to a stationary helicopter stored at the hangar in New
Delhi. No report or CCTV footage of any incident of the
helicopter being damaged in the hangar was reported; and
(v)
The manufacturer of the helicopter provided a repair scheme
through which the structural damage to the helicopter could
be repaired at the hangar in New Delhi. After the repair, in
order to verify the serviceability of the helicopter it was
essential to test fly it and since the helicopter was assembled
in a flying state, it was decided not to disassemble it for
transportation by road but instead fly the helicopter to Bhopal.
The respondent never gave any instructions to change the
final destination from Bhopal to New Delhi and for the
purposes of Clause 5.1.2, Bhopal continued to be the final
place of delivery.
11. The rival submissions fall for our consideration.
12. The dispute before this Court is with respect to the damage to
the tail boom of the helicopter and not as regards the damage to the
windscreen glass. By a letter dated 10 April 2006, the appellant informed
the assured that the total cost of replacement of the windscreen glass
was within the policy deductible of 0.5% of the sum insured and as such
no liability arose under the policy. The assured has not challenged that
before this Court.
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13. The insurance policy issued by the insurer to the insured
represents a contract between the parties. The insurer undertakes to
compensate the insured for the losses covered under the insurance cover
subject to the terms and conditions of the policy.The appellant issued
apolicy to the respondent on 22 July 2005.Under the policy schedule, the
cargo was to be transported from Langley to Bhopal. The policy schedule
prescribed that the appellant company "agrees to insure against loss,
damage, liability or expenses subject to the limit of indemnity and the
clauses, endorsements, exclusions, conditions and warranties in the
schedule to the policy." The extent of the policy cover was governed by
and subject to various clauses mentioned in the policy schedule which
included the ICC. The ICC,inter alia, prescribed the risks covered,
exclusions, duration and duties of the insurer and the insured.
14. The dispute in the present case is on the interpretation of the
termination clause of the ICC.
15. MacGillivray on Insurance Law10 elucidates the principles
which govern the interpretation of insurance contracts:
"11-007 It is an accepted canon of construction that a commercial
document, such as an insurance policy, should be construed in
accordance with sound commercial principles and good business
sense, so that its provisions receive fair and sensible application.
Several consequences flow from this principle...
11-008 It follows that in interpreting any clause of a policy, it is
correct to bear in mind: (1) the commercial object of purpose of
the contract; and (2) the purpose or function of the clause and its
apparent relation to the contract as a whole... ''
16. The provisions of an insurance contract must be imparted a
reasonable business like meaning bearing in mind the intention conveyed
by the words used in the policy document. Insurance policies should be
construed according to the principles of construction generally applicable
to commercial and consumer contracts. The court must interpret the
words in which the contract is expressed by the parties and not embark
upon making a new contract for the parties. A reasonable construction
must therefore be given to each clause in order to give effect to the plain
and obvious intention of the parties as ascertainable from the whole
instrument. The liability of the insurer cannot extend to more than what
10 Twelfth Edition, Sweet and Maxwell (2012)
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is covered by the insurance policy. In order to determine whether the
claim falls within the limits specified by the policy, it is necessary to
define exactly what the policy covered and to identify the occurrence of
a stated event or the accident prior to the expiry of the policy. Hence,while
considering the rival submissions, it is necessary to preface our analysis
with the provisions of the policy.
17. Clause 5 of the ICC provides thus:
"5.1 This insurance attaches from the time the subject-matter
insured leaves the warehouse, premises or place of storage at the
place named herein for the commencement of the transit, continues
during the ordinary course of transit and terminates either
5.1.1 On delivery to the Consignees' or other final warehouse,
premises or place of storage at the destination named herein.
5.1.2 On delivery to any other warehouse, premises or place of
storage, whether prior to or at the destination named herein, which
the Assured elect to use either.
5.1.2.1 for storage other than in the ordinary course of transit
or
5.1.2.2 for allocation or distribution or
5.1.3 On the expiry of 30 days after unloading the subject-matter
insured from the aircraft at the final place of discharge, whichever
shall first occur."
The insurance cover in the present case is expressed in terms of
the voyage itself. The above clause providesthat the duration of the
policy attachedand commencedfrom the time the insuredcargo leftthe
warehouse, premises or place of storage at the place named in the policy
and continued during the "ordinary course of transit". So far as the
termination of the transit is concerned three alternate events are put
forward in Clause 5:
(i)
Under Clause 5.1.1, insurance terminates "on delivery" of
the cargo "to the consignees or other final warehouse or
place of storage at the destination named" in the policy;
(ii)
Under clause 5.1.2, the alternative place of delivery is to
"any other warehouse, premises or place of storage whether
prior to or at the destination named herein" which the assured
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chooses to use for one of two purposes namely -(a) either
for storage other than in the ordinary course of transit or (b)
for allocation or distribution of the cargo; and
(iii) Clause 5.1.3 prescribes a period of thirty days after unloading
of the insured cargo from the aircraft at the final place of
discharge. If that event first occurs, the question of delivery
to any warehouse or place of storage becomes redundant.
Even though in Clause 5.1.1 the choice of final warehouse is
restricted to the destination named therein,by virtue of Clause
5.1.2, it is possible that the policy terminates upon delivery to
some other final warehouse or place of storage as chosen
by the assured.Under Clause 5.1.1, the delivery of the
subject-matter at the warehouse, premises or place of storage
at the named destination also constitutes the termination of
the insurance. Clause 5.1.2 provides for situations where
the policy terminates upon delivery of the goods at any other
warehouse, premises or place of storage prior to or at the
destination named in the policy which is elected by the insurer
for the purpose indicated in Clause 5.1.2.1 or Clause 5.1.2.2.
18.