Supreme Court: ‘Contra Proferentum’ Rule Only Applies To Cases Of Real Ambiguity Where Clause Is Ambiguous Irrespective Of Any External Considerations
The Supreme Court allowed a Civil Appeal of a shipping company against the Judgment of the National Consumer Disputes Redressal Commission, New Delhi.
The Supreme Court observed that the Rule of ‘Contra Proferentum’ only applies to cases of real ambiguity where the clause is ambiguous irrespective of any external considerations.
The Court observed thus in a Civil Appeal preferred by a company under Section 67 of the Consumer Protection Act, 2019 (CPA) against the Judgment of the National Consumer Disputes Redressal Commission, New Delhi (NCDRC) which dismissed a Consumer Complaint on account of the Doctrine of Uberrima Fidei being compromised.
The two-Judge Bench of Justice B.V. Nagarathna and Justice Satish Chandra Sharma held, “The Appellant has attempted to introduce ambiguity in the condition by bringing in external factors and considerations, which is impermissible under the rule of contra proferentum. The said rule only applies to cases of real ambiguity, where the clause by itself is ambiguous irrespective of any external considerations. Accordingly, we find no ambiguity in the text of the policy itself. However, the rejection of the applicability of the rule of contra proferentum does not prejudice the case of the Appellant on the counts of validity and materiality of the condition itself.”
Senior Advocates Huzefa Ahmadi and Siddharth Bhatnagar appeared on behalf of the Appellant while Senior Advocate Devadutt Kamat appeared on behalf of the Respondents.
Brief Facts
The Appellant-company was engaged in the shipping business and it purchased a newly built barge ‘Srijoy II’ (Vessel) and sought to undertake its maiden voyage from Mumbai to Kolkata. In pursuance of the same, the Appellant applied for a “single voyage permit” to the Director General of Shipping (DGS) wherein the Vessel was expected to sail from Mumbai and arrive at Kolkata. The DGS directed the Indian Register of Shipping (IRS) to carry out a detailed inspection. The Appellant sought to insure its voyage and the vessel and submitted its insurance proposal to the Respondent (Insurance Company). Thereafter, an insurance contract was entered into between the parties which contained a special condition that the “voyage should commence & complete before monsoon sets in”. The IRS granted clearance to the Appellant to undertake its voyage and the DGS issued a ‘No Objection’ with respect to the same.
The Vessel undertook the voyage but unfortunately on the very next day, it was anchored off near Ratnagiri Port due to bad weather and engine failure. Ultimately, it ran aground. The Appellant sought assistance from the Respondent for towing and salvaging the vessel after the insurance contract had expired. It issued a “Notice of Abandonment” to the Respondent claiming total loss on the ground that repair of the Vessel would be more expensive than the amount insured for. Thereafter, the Respondent issued a ‘Repudiation Notice’ rejecting the Appellant’s claim on the ground that the vessel set sail after “monsoon set in”, breaching the special condition in the insurance contract. Subsequently, the Surveyor appointed by the Respondent issued its final report concluding that the Appellant was in willful breach of the condition. Being aggrieved, the Appellant filed a Consumer Complaint and the NCDRC dismissed the same on the ground that the Appellant suppressed material facts by not disclosing all its plans to the Respondent. Challenging this, the Appellant approached the Apex Court.
Reasoning
The Supreme Court in view of the above facts, noted, “As per the aforementioned rule, we are unable to find that the special condition contained in the policy is ambiguous per se. As demonstrated above, the policy can be construed literally, wherein the special condition envisages the voyage to be started and completed before the monsoon/foul weather season commences.”
The Court said that the special condition cannot be treated as a condition precedent to waive any liability under the policy and it has been impliedly waived by the parties due to its non-material nature.
“It is probably a term used in all contracts by the Respondent as a part of its standard form, and it failed to exclude the same from the policy availed of by the Appellant”, it added.
The Court, therefore, concluded that the Respondent is not entitled to repudiate the claim of the Appellant on the ground of breach of the special condition.
Accordingly, the Apex Court allowed the Appeal, set aside the NCDRC’s Order, remanded the case, and directed NCDRC to determine the extent of the insured sum liable to be paid by the Respondent to the Appellant.
Cause Title- Sohom Shipping Pvt. Ltd. v. M/s. The New India Assurance Co. Ltd. & Anr. (Neutral Citation: 2025 INSC 453)
Appearance:
Appellant: Senior Advocates Huzefa Aziz Ahmadi, Siddharth Bhatnagar, Advocates Amol Chitale, Sonia Dube, Kanchan Yadav, Tanishq Sharma, Saumya Sharma, Ashray Chopra, and Aditya Sidhra.
Respondents: Senior Advocate Devadatt Kamat, AOR Nikhil Jain, Advocates Abhishek Kumar, Anshul Mehral, Ajay Desai, Sayantani, and Divya Jain.
