Source: Supreme Court  

Why in News? 

Recently, the bench of Justice MM Sundresh and Justice Rajesh Bindal has held that an insurance claim cannot be denied for breach of a contract condition that was impossible to fulfill. 

• The Supreme Court held this in the matter of Sohom Shipping Pvt. Ltd. v. M/S. The New India Assurance Co. Ltd. & Anr.(2025). 

What was the Background of Sohom Shipping Pvt. Ltd. v. M/S. The New India Assurance Co. Ltd. & Anr. Case? 

• Sohom Shipping Pvt. Ltd. purchased a newly built barge 'Srijoy II' and sought to undertake its maiden voyage from Mumbai to Kolkata. 
• The company applied for a 'single voyage permit' to the Director General of Shipping (DGS), estimating the vessel would sail from Mumbai on 30th April 2013 and arrive at Kolkata on 15th May 2013. 
• The DGS directed the Indian Register of Shipping (IRS) to conduct a detailed inspection of the vessel. 
• Sohom Shipping entered into an insurance contract with The New India Assurance Co. Ltd. for the period between 16th May 2013 to 15th June 2013, which contained a special condition that the "voyage should commence & complete before monsoon sets in." 
• The vessel undertook the voyage on 06th June 2013 but was anchored off near Ratnagiri Port the next day due to bad weather and engine failure, ultimately running aground. 
• After the insurance contract expired, Sohom Shipping sought assistance from the insurer for towing and salvaging the vessel. 
• On 25th July 2013, Sohom Shipping issued a 'Notice of Abandonment' to the insurer claiming total loss on the grounds that repairing the vessel would be more expensive than the insured amount. 
• The insurer issued a 'Repudiation Notice' on 12th September 2013, rejecting the claim on the ground that the vessel set sail after 'monsoon set in,' thereby breaching the special condition in the insurance contract. 
• Aggrieved by the repudiation, Sohom Shipping filed a consumer complaint under Section 21 of COPRA before the National Consumer Disputes Redressal Commission (NCDRC), which was subsequently dismissed. 

What were the Court’s Observations? 

• The Supreme Court observed that the insurance policy was taken for a period of one month specifically to cover the voyage from Mumbai to Kolkata, during which time foul weather was already in effect on the East Coast from 1st May. 
• The Court rejected the insurer's contention that they had no knowledge of the voyage during foul weather season, noting that the appellant had clearly stated in the form that the purpose of insurance was to undertake the voyage from Mumbai to Kolkata. 
• The Court concluded that the insurance was availed to cover the foul weather period along both coasts, as even if the voyage commenced immediately on 16.05.2013, the vessel would have arrived at Kolkata harbor after the onset of the monsoon on the east coast. 
• The Court held that the special condition requiring voyage completion before monsoon was impossible to comply with given the voyage route and timing, rendering the condition non-material and implicitly waived by the parties. 
• The Court further noted that a strict interpretation of such a condition would leave the assured without remedy in case of marine accidents during monsoon, which would vitiate the very purpose of an insurance contract. 
• The Court determined that the insurer was not entitled to repudiate the claim on the grounds of breach of the special condition, as this would result in an absurdity that could not have been the intention of any reasonable parties to the contract. 
• The Supreme Court consequently allowed the appeal, setting aside the NCDRC's order and remanding the matter back to determine the extent of the insured sum payable to the appellant. 

What are the Legal Provisions Referred? 

• Section 67 of the Consumer Protection Act, 2019 (COPRA) - The appeal was preferred by the Appellant under this section against the NCDRC's order. 
• Section 21 of COPRA - The original consumer complaint was filed under this section before the NCDRC. 
• Clause 3 of the Insurance Contract, particularly Clause 3.1.2 - This clause required compliance with recommendations and requirements imposed by the vessel's Classification Society relating to seaworthiness. 

What is Section 67 and 21 of COPRA? 

Section 21 of COPRA (2019)  

The Central Authority has the power to issue directions to traders, manufacturers, endorsers, advertisers, or publishers to discontinue or modify false or misleading advertisements that harm consumer interests or violate consumer rights. 

• The Central Authority may impose penalties up to ten lakh rupees on manufacturers or endorsers for false or misleading advertisements, which may extend to fifty lakh rupees for subsequent contraventions. 
• The Central Authority can prohibit endorsers of false or misleading advertisements from endorsing any products or services for up to one year, extending to three years for subsequent contraventions. 
• Publishers or parties to the publication of misleading advertisements may face penalties up to ten lakh rupees. 
• Endorsers can claim exemption from penalties if they exercised due diligence to verify the claims made in the advertisements they endorsed. 
• Publishers could claim a defense if they published the advertisement in the ordinary course of business without prior knowledge of any order by the Central Authority for withdrawal or modification. 
• When determining penalties, the Authority considers factors such as population and area impacted, frequency and duration of the offense, vulnerability of affected persons, and gross revenue from sales resulting from the offense. 
• The Central Authority must provide an opportunity of being heard before passing any order under this section. 

Section 67 of COPRA (2019)  

Any person aggrieved by an order of the National Commission made under sub-clause (i) or (ii) of clause (a) of sub-section (1) of section 58 may appeal to the Supreme Court within thirty days of the order. 

• The Supreme Court may entertain appeals filed after the thirty-day period if sufficient cause for the delay is established. 
• If the appellant is required to pay any amount as per the National Commission's order, the appeal will only be entertained if the appellant has deposited fifty percent of that amount as prescribed. 
• This section establishes the Supreme Court as the appellate authority for challenging certain orders of the National Commission. 
• The appeal mechanism provides a safeguard against potentially erroneous decisions of the National Commission while requiring good faith compliance through the deposit requirement.