Aditya Krishnamurthy
Vedika Bhadoria
Published On January 17, 2024
1. The judgment of Hind Offshore Pvt. Ltd. v. IFFCO-Tokio General Insurance Co. Ltd., 2023 SCC OnLine SC 966 breaks new ground on issues surrounding the duty of utmost good faith/ uberrimae fidei and the warranty of the vessel to be in class under Indian maritime insurance law. In this case, the Supreme Court of India held that an underwriter can validly repudiate liability under a Hull & Machinery Policy (“H&M Policy”) inter alia on the failure of the assured to ensure that the certification issued by the Classification Society was valid as well as the failure of the assured to provide requisite disclosure to the underwriter.
2. The H&M Insurance Policy between the Underwriter and the Assured for M.V. Sea Panther (“the Vessel”) contained a clause providing that “this insurance shall terminate automatically” upon “suspension, discontinuance, withdrawal” of Class. During the currency of H&M Policy, the Vessel suffered damage to its port main engine, and the surveyors upon the preliminary inspection opined that the crankshafts and connecting rods were found beyond repair. Due to the urgency of the commercial commitments of the Vessel, temporary repairs were carried out on the main port engine. The Underwriter issued a cheque of INR 1,00,00,000/ USD 120,125 as an advance payment for replacing the engine crankshaft and other components. Despite receiving INR 1,00,00,000/ USD 120,125 from the Underwriter for replacing the engine crankshaft and other components, the Assured chose not to do the same.
3. Subsequently, after the expiry of the initial H&M Policy, the Assured entered into a subsequent H&M Policy with the Underwriter. Unfortunately, during the currency of the Subsequent Policy, the Vessel was struck by a tugboat while being on a voyage and sank with all cargo on board, following which the Assured submitted a claim with the Underwriter for the total loss of the Vessel and the cargo. The surveyors as appointed by the Underwriter for ascertaining the loss arrived at a finding that the Assured had not disclosed to the Classification Society the previous damage sustained by the main port engine. According to the rules of the Classification Society, should the Vessel sustain damage to its machinery and the same was not reported to the Classification Society, the Vessel would be deemed to be out of Class. The Underwriter repudiated liability inter alia on the ground that at the time of the incident leading to the total loss of the Vessel, she was not in class and that the same constitutes a breach of warranty on the part of the Assured. The Assured had initiated proceedings before the National Consumer Disputes Redressal Commission (“NCDRC”).
4. The NCDRC accepted the contention of the Underwriter that they could validly repudiate liability on the ground that at the time of the incident leading to the total loss of the Vessel, the Vessel’s class had been suspended. The NCDRC arrived at a finding that the Assured ought to have disclosed to the Classification Society the damage sustained to the port main engine and the remedial measures undertaken to rectify the same. Given that there was a failure of disclosure of material on the part of the Assured to the Classification Society, the certificates issued by the Classification Society had been suspended.
5. The Assured appealed against the judgment of the NCDRC to the Supreme Court of India inter alia on the ground that the Underwriter’s surveyor got in touch with the Classification Society without seeking the approval of the Assured and that at the time of the incident, the Vessel was seaworthy. The Supreme Court of India rejected these arguments by referring to the below provisions of sections 35, 37, 41(5), and 55 of the Indian Marine Insurance Act, 1963 (“the Act”) (which substantially mirrors the provisions of the English Marine Insurance Act, 1906):
