ALLIANZ GENERAL INSURANCE CO LTD & ANR versus THE STATE OF MADHYA PRADESH on 24 April 2020

[2020] 6 S.C.R.

ABAJAJ ALLIANZ GENERAL INSURANCE CO LTD & ANR

v.

THE STATE OF MADHYA PRADESH

(Civil Appeal No. 2366-67 of 2020)

B

APRIL 24, 2020

[DR. DHANANJAYA Y CHANDRACHUD ANDAJAY RASTOGI, JJ.]

Consumer Protection Act, 1986: Deficiency in service –Insurance policy – Respondent purchased a “Transit MarineCInsurance Policy” from the appellant-insurer on 21 July 2005, tocover the transportation of Helicopter from Langley, Canada toBhopal, India – As per the acceptance letter, the transit route forthe transportation of the helicopter was ‘Langley to Bhopal (byroad/by air)” – On 5 October 2005, the helicopter was transportedDin a knocked down condition by air to New Delhi – On 13 October2005, the helicopter was cleared by the customs and was shifted toa hangar at New Delhi – On inspection, the window of crew doorwas reported to be damaged – By letter dated 22 October 2005, therespondent informed insurer of the damage and stated that thehelicopter was “being assembled at the Hangar located at Delhi soEthat the Helicopter can fly from Delhi to Bhopal” – On 23 November2005, the respondent informed insurer that upon inspection, thetail boom of the helicopter was found damaged – A surveyor wasappointed by the appellant to assess the alleged damage – In thereport, surveyor concluded that the damage to the tail boom hadFoccurred at Hangar Delhi after substantial assembly but prior totest flight and not during transit and hence would not fall under thepurview of marine insurance policy as issued to the insured –Whether storage, unpacking and assembly of the helicopter at NewDelhi would fall outside the scope of the expression “ordinarycourse of transit”, terminating coverage under the policy – Held:GThe insurance cover in the instant case is expressed in terms of thevoyage itself – It provided that policy commenced from the time theinsured cargo left the warehouse, premises or place of storage atthe place named in the policy and continued during the “ordinarycourse of transit” – The specific act of unpacking the cargo at NewH

Delhi for assembling it for the flight to Bhopal indicated that thetransportation of the cargo in a knocked down state had come toan end – Once the respondent decided to leave the goods in thehangar at New Delhi for its commercial convenience not associatedwith or in furtherance of the requirements of their carriage toBhopal, the transit insurance ended – The act of assembling thehelicopter with a view to having it flown under its own power,instead of transporting the packaged knocked down helicopterfurther to Bhopal by road, would not constitute as storage in theordinary course oftransit – The policy covered only those risksthat were associated with the transportation of the helicopter anddid not cover the risks associated with the flight or operation of thehelicopter – Change in the character of the helicopter from aknocked down state to a ready to fly state exposed insurer to risksnot contemplated by the parties under the policy – Nature of thesubject-matter having been altered, the cargo could not be said tobe in transit and insurer was absolved from any liability arising outof any subsequent damage to the consignment.

Insurance Policy – Expression “in the ordinary course oftransit”, meaning of – Held: Expression “in the ordinary course oftransit” depends on the context, object and the wording of theparticular policy – In context of the policy, the words “in transit”do not require transportation of the consignment in a single tripfrom the commencement to the final destination but includes thoseinterruptions in motion that are incidental to or in furtherance ofthe conveyance or transportation of the consignment – The questionof what does and does not constitute a deviation in furtherance ofthe conveyance of the goods is a question of fact that must bedetermined by both the intent of the policy and the actions of theparties.

Insurance Policy – Burden of proof – For the respondent toprove its case, a mere assertion that the loss incurred during thecourse of transit is not sufficient – Burden of proof lies on therespondent to show that the loss incurred was covered within theterms of the policy and that on a balance of probabilities thereexisted a proximate cause between the loss incurred and theconsignment being in transit.

AB

CD

EF

G

H

A

AInsurance Policy – Construction of – Held: Insurance policiesshould be construed according to the principles of constructiongenerally applicable to commercial and consumer contracts – Thecourt must interpret the words in which the contract is expressed bythe parties and not embark upon making a new contract for theparties – Interpretation of statutes.B

Insurance Policy – Marine transit insurance policy – Thepurpose of the marine transit insurance policy is to cover theconsignment from risks associated with transportation of theconsignment from one place to another – It is fundamental for thoseresponsible for carrying the cargo to ensure that all stages of theCtransportation are effected with reasonable promptness – “Intransit”, however, does not necessarily mean that the consignmentneeds to be in continuous motion at all times – A mere briefsuspension must however be in furtherance of the ordinary courseof transit – During the ordinary course of transit, the consignmentDmight frequently come to rest or be temporarily stored in the dockawaiting loading or customs clearance – However, unduly protractedsteps in the cargo’s transportation are not within, and may terminate,the “ordinary course of transit.”.

Allowing the appeals, the Court

E

HELD: 1. Insurance policies should be construed accordingto the principles of construction generally applicable tocommercial and consumer contracts. The court must interpretthe words in which the contract is expressed by the parties andnot embark upon making a new contract for the parties. AFreasonable construction must therefore be given to each clausein order to give effect to the plain and obvious intention of theparties as ascertainable from the whole instrument. The liabilityof the insurer cannot extend to more than what is covered by theinsurance policy. In order to determine whether the claim fallswithin the limits specified by the policy, it is necessary to defineGexactly what the policy covered and to identify the occurrence ofa 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 interms of the voyage itself. It provided that the duration of the H

policy attached and commenced from the time the insured cargoleft the warehouse, premises or place of storage at the placenamed in the policy and continued during the “ordinary course oftransit”. The expression “in the ordinary course of transit” cannotbe divorced from the context and must be read along with theother conditions which appeared in the policy document. Themeaning of the expression “in the ordinary course of transit”depends on the context, object and the wording of the particularpolicy. [Para 17, 18][214-F; 215-E]

3. In context of the policy, the words “in transit” do notrequire transportation of the consignment in a single trip fromthe commencement to the final destination but includes thoseinterruptions in motion that are incidental to or in furtherance ofthe conveyance or transportation of the consignment. Thequestion of what does and does not constitute a deviation infurtherance of the conveyance of the goods is a question of factthat must be determined by both the intent of the policy and theactions of the parties. An action that is wholly unrelated to theusual or ordinary method of pursuing the transportation of goodswould prevent the goods from being covered under the definitionof the expression “in transit” under the policy. [Para 25][221-F-H]

4. It is undisputed that at the time of customs clearance, nodamage was reported. It was when the helicopter was inspectedby the representative of the manufacturer during a routineinspection on 21 October 2005 that damage was reported to thewindow of the crew door of the helicopter. The helicopter wastransported from Langley in a “knocked down state”. The specificact of unpacking the cargo at New Delhi in furtherance of thepurpose of assembling it for the flight to Bhopal indicated thatthe transportation of the cargo in a knocked down state had cometo an end. The act of unpacking the helicopter for the purpose ofassembling it for undertaking the flight to Bhopal was unrelatedto the usual or ordinary method of pursuing the transportation ofthe cargo insured. The policy covered only those risks that wereassociated with the transportation of the helicopter and did notcover the risks associated with the flight or operation of thehelicopter. [Paras 26, 27][222-B-C, F-H]

AB

C

D

E

F

G

H

A5. Change in the character of the helicopter from a knockeddown state to a ready to fly state exposed the appellant to risksnot contemplated by the parties under the policy. The effect ofthe alteration of the subject-matter insured is outside the scopeof the agreed cover and brings an end to the policy. Once thenature of the subject-matter was altered, the cargo cannot beBsaid to be in transit and the appellant is absolved from any liabilityarising out of any subsequent damage to the consignment.Exposure to risks associated with the flight substantially andunnecessarily added to the risks of the journey that were notcovered by the policy. Accordingly, the submission that the coverCagainst risks would be provided till the time the helicopter wasnot 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 mayterminate upon the assured choosing to use an alternate place ofDdelivery, prior to the destination named therein for one of twopurposes, either for storage other than in the ordinary course oftransit or for allocation or distribution of the cargo. The purposeof a transit policy is to cover the carriage of goods to the finaldestination. In the present case, storage of the helicopter in the hangar at New Delhi awaiting replacement of the spare windowEcannot be said to be incidental or in furtherance of the carriage ofthe goods to the ultimate destination. It would be unreasonableto suggest that the transit policy intended to cover indefinitestorage of the helicopter at the hangar in New Delhi not broughtabout by the requirements of transport but determined byFcommercial convenience of the respondent. Once the respondentdecided to leave the goods in the hangar at New Delhi for itscommercial convenience not associated with or in furtherance ofthe requirements of their carriage to Bhopal, the transit insuranceended. [Para 30][224-B-F]

G7. Clause 15 of the ICC provided that during the period ofthe transit policy, the insured shall act with reasonable dispatch.The purpose of the marine transit insurance policy is to coverthe consignment from risks associated with transportation of theconsignment from one place to another. It is fundamental for thoseresponsible for carrying the cargo to ensure that all stages of theH

transportation are effected with reasonable promptness. “Intransit”, however, does not necessarily mean that the consignmentneeds to be in continuous motion at all times. In the instant case,the insured voluntarily decided to store the helicopter in thehangar at New Delhi out of commercial convenience and not infurtherance of the transit. In addition, the insured by assemblingthe knocked down helicopter for the purposes of flying it toBhopal changed the nature of the consignment and exposed theappellant to operational risks beyond the scope of the policy. [Para31][224-G; 225-A-D]

8. Clause 6 of the ICC provided for continuation ofinsurance cover after termination in circumstances beyond thecontrol of the insured. Clause 6 stated that the insured can issueprompt notice to the underwriters to continue the cover uponpayment of an additional premium, if owing to circumstancesbeyond its control either the contract of carriage is terminated ata place other than the destination named therein or the transit isotherwise terminated before the delivery of the subject matterinsured as provided for in Clause 5. In the present case, if therespondent decided to retain the helicopter in New Delhi awaitingthe arrival of the replacement window from USA, it could haveissued a notice to the underwriters to continue the cover ofcarriage till the time the repairs were carried out. However, therespondent did not issue any notice seeking extension of theinsurance cover under Clause 6. [Para 32][225-D; 226-A-B]

9. Clause 8 of the ICC provided for claims under theinsurance policy. In terms of Clause 8, for the respondent to proveits case, the basic and fundamental fact which needs to be provedis that: (i) the respondent must have an insurable interest in thesubject matter insured at the time of loss; and (ii) the loss insuredagainst occurred during the period covered by the policy. [Para34, 35][226-F, G-H; 227-A]

10. For the respondent to prove its case, a mere assertionthat the loss incurred during the course of transit is not sufficient.The burden of proof lies on the respondent to show that the lossincurred was covered within the terms of the policy and that on abalance of probabilities there existed a proximate cause between A

B

C

D

E

F

G

H

[2020] 6 S.C.R.

Athe loss incurred and the helicopter being in transit. Therespondent has adduced no evidence to supports its case. [Para36][228-C-D]

11. According to the NCDRC, the expiry of thirty days aftercompletion of discharge at the final port of discharge should beBessentially interpreted as thirty days after reaching Bhopal andnot thirty days during the course of transit which included thehalt at New Delhi. The line of approach adopted by the NCDRCis evidently incorrect. While construing a contract of insurance,it is not permissible for a court to substitute the terms of thecontract. The court should always interpret the words used in aCcontract in a manner that will best express the intention of theparties. The NCDRC has incorrectly proceeded on the path thatthe ordinary course of transit would include assembling of thehelicopter at New Delhi and the policy covered all risks till thetime the helicopter did not reach Bhopal. The risks associatedDwith the assembled helicopter were not covered within the purviewof the policy, as the subject-matter which had been insured was ahelicopter being transported in a packaged knocked downcondition. The act of assembling the helicopter with a view tohaving it flown under its own power, instead of transporting thepackaged knocked down helicopter further to Bhopal by road,Ewould not constitute as storage in the ordinary course of transit.The interpretation adopted by the NCDRC strikes fundamentallyat the purpose of the policy and is not in accordance with soundcommercial principles. The interpretation altered the characterof the risk insured beyond the scope of the policy as agreedFbetween the parties. [Para 39][230-A-E]

Export Credit Guarantee Corporation of India Ltd v.Garg Sons International (2014) 1 SCC 686 : [2013] 1SCR 336 – referred to.

Verna Trading Pty Ltd v. New India Assurance Co Ltd.G(1991) 1 VR 129; QBE Insurance Limited v. PattersonFine Jewellery Pty Ltd.2004 VSC 31; Bethell v. Clark(1888) 20 QBD 615; SCA (Freight) Ltd v. Gibson [1974]2 Lloyd’s Rep 533; WigginsTeape Australia Pty Ltd v.Baltica Insurance Co Ltd[1970] 2 NSWR 77; FirstAmerican Artificial Flowers, Inc v AFIA Worldwide InsH

1977 AMC 376 (N Y Sup Ct 1976); Lumber & WoodProducts, Inc v. New Etc 807 F 2d 1987, 1987 AMC1244; Verna Trading Pty Ltd v. New India AssuranceCo Ltd [1991] 1 VR 129; NEC Australia Pty Ltd v. GamifPty Limited [1993] FCA 252; RhesaShipping Co S A v.Edmunds [1985] 2 All ER 712 – referred to.

Mac Gillivray on Insurance Law Twelfth Edition, Sweetand Maxwell (2012); P Ramanatha Aiyar’s Law Lexicon3[rd] Edition, 2012 Black Law’s Dictionary 10[th] Edition,Colinvaux’s Law of Insurance 10[th] Edition by RobertMerkin – referred to.

Case Law Reference

[2013] 1 SCR 336referred toPara 9

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2366-67 of 2020.

From the Judgment and Order dated 10.08.2018 of the NationalConsumer Disputes Redressal Commission in First Appeal No. 279 of2009 and First Appeal No. 25 of 2010.

Joy Basu, Sr. Adv., Prantar Basu Choudhury, Kanak Bose, HarshulSingh and Sahil Tagotra, Advs. for the Appellants.

J. S. Attri, Sr. Adv., Aditya Ranjan, Narender Singh, Advs. for theRespondent.

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 NationalConsumer Disputes Redressal Commission[1] dated 10 August 2018 whichin first appeal upheld the judgment of the Madhya Pradesh StateConsumer Disputes Redressal Commission[2]. The SCDRC held theappellant to be deficient in its service and directedit to pay compensationof 64,89,205 towards the cost of repair of a helicopter to therespondent.Both the appellant and the respondent had preferred appealsagainst the order of the SCDRC. The NCDRC dismissed the appeal[3]

1 "NCDRC”2 "SCDRC”3 First Appeal no 279 of 2009

A

B

C

D

E

F

G

H

Apreferred by the appellant and partly allowed the appeal[4] preferred bythe respondent for enhancement of compensation and awarded interestat the rate of six percent per annum.

3. The respondent purchased a “Transit Marine InsurancePolicy”from the appellant on 21 July 2005, to coverthe transportation ofBa Bell – 430 Helicopter from Langley, Canada to Bhopal, India. By anacceptance letter dated 1July 2005, the appellant set out the transit routefor the transportation of the helicopter by air, sea and road. By a letterdated 10 July 2005, the proposed route was altered as follows:

“Transit Details: Langley to Pithampur/Bhopal (by road/ by air).”C4. The policy scheduleissued by the appellant indicated that thepolicy was issued from 22 July 2005 for transportation of the helicopterwith standard packaging from Langley to Bhopal for a total sum insuredof 20,00,00,000. The policy was to be governed by the accompanyingclauses that included, inter alia, Institute Cargo Clauses (Air Cargo)[5],DInstitute War Clauses (Air Cargo), Institute Strike Clauses (Air Cargo),and an Institute Theft Pilferage Non Delivery Clause that listed out theterms and conditions of all damages and losscovered under the policy.The duration of the policy was to be governed in terms of Clause 5 ofthe ICC. On 5 October 2005, the helicopter was transported in a knockeddown state by air to New Delhi. On 13 October 2005, the helicopterEwas cleared by the customs and was shifted to a hangar at New Delhi.On 21October 2005, the helicopter was inspected by a representative ofthe manufacturer during routine inspection and the window of the crewdoor was reported to be damaged. The respondent sought the permissionof the Director General of Civil Aviation to fly the helicopter to BhopalFbut was denied permission on account of the damage to the window ofthe crew door.By a letter dated 22 October 2005, the respondent informedthe appellant of the damage and stated that the helicopter was “beingassembled at the Hangar of Indamer Co. located at Delhi so that theHelicopter can fly from Delhi to Bhopal”. On 23 November 2005, therespondent informed the appellant that upon inspection, the tail boom ofGthe helicopter was found to be damaged. A surveyor was appointed bythe appellant to assess the alleged damage to the window of the crewdoor and the tail boom of the helicopter. By a report dated 14 March2006, the surveyor concluded as follows:

4 First Appeal no 25 of 2010H5 "ICC”

“The damage to window glass of pilot seat and damage to tailboom of helicopter are two separate incidents not related to eachother.

The replacement cost of damaged window glass of pilot seat isbelow Rs 10,00,000 and hence would fall under the excessprescribed 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 testflight and not during transit and hence would not fall under thepurview of marine insurance policy as issued to the insured.”

5. By a letter dated 10 April 2006, the appellant informed therespondent that the damage to the tail boom was not detected duringtransit or customs clearance and it was only detected in the third weekof November 2005 before which multiple inspections had been carriedout and no damage was reported earlier.The appellant further informedthe respondent that the representatives of the manufacturer had alsoadmitted that the loss to the tail boom was only noticed in the month ofNovember. On 10 April 2006, the appellant informed the respondent thatboth the losses claimed were inadmissible for the following reasons:

“1. Claim for damage to Windscreen glass – The total cost ofreplacement for this loss is quoted to be Rs (amount of windscreenglass)/-This amount is within the policy deductible of 0.5% ofsum insured of Rs 20 Crores. As such there is no liability attachingto the policy.

2. Claim for dent on Tail Boom of the aircraft-

a. This was discovered at Hanger-3 Bay 15/33 IGI Airport Delhiin the third week of Nove-2005. The dent was noticed by therepresentative of manufacturer during routine inspection. It isimportant to note that cargo had landed on (date).

b. We deputed Surveyors, M/s Puri Anuj & Associates, to inspectand report on loss.

c. Surveyors have reported that the loss was not identified/reported during Customs Clearance. As clean delivery has beenaccepted.

d. Representatives of Canadian manufacturers, Mr Lorne Vowlesand Mr Adrine Lawrence, have admitted that the loss was A

B

C

D

E

F

G

H

Anoticed only in November. There was no damage to the tailboom 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 desireddestination.BIn view of these facts, we regret to say that the loss falls beyondthe scope of cover granted. Both the losses claimed areinadmissible.”

6. By a letter dated 11 April 2006, the respondent responded tothe above letter stating that even though the damage was noticed after aCmonth of customs clearance,the policy of transit was upto Bhopal andtherefore, damage to the helicopter in the month of November 2005would also be covered under “transit”. The appellant repudiated theclaim of the respondent by a letter dated 11 July 2006 on the ground thatthe loss that occurred to the helicopter was after the duration of theDpolicy had ended as mentioned in Clause 5 of the ICC:

“In the present case, the destination of the consignment of airtransit was New Delhi Airport. The cargo [aircraft] was to beassembled at this location and then aircraft was to fly to Bhopal.The flight would be out of the Marine Transit scope of insurance.EThe named destination “Bhopal” of issued policy has no relevancein this context.

Thus, insurance cover ended on delivery at the final warehouse,premises or place of storage...”

7. The respondent filed a consumer complaint[6] before the SCDRCFon 18 August 2006 seekingcompensation from the appellant for wrongfulrepudiation of the claim and towards the loss sustained by the respondent.On 16 May 2009, the SCDRC found the appellant to be deficient in itsservice and directed the appellant to pay a compensation of 64,89,205to the respondent. The SCDRC held that the present case was not acase of delivery before the final destination but the halt at New DelhiGwas only a transit halt and the assembly of the helicopter at New Delhidid not change the nature of the cargo. Being aggrieved by the judgmentof the SCDRC, both the petitioner and the respondent preferred separateappeals before the NCDRC. The NCDRC by its judgment dated 10

H6 Consumer Complaint no 13 of 2006

August 2018, upheld the finding of the SCDRC that there was a deficiencyof service on behalf of the appellant in repudiating the claim.In additionto the compensation which was granted by the SCDRC, the NCDRCawarded “interest compensation by way of damages” at the rate of sixpercent per annum from the date of repudiation till realisation. Assailingthe decision of the NCDRC, the appellant has filed the present SpecialLeave Petition before this Court under Article 136 of the Constitution.

8. By an order of this Court dated 15 February 2019, a stay wasgranted on the operation of the judgment of the NCDRC. The issuebefore this Court iswhether storage, unpacking and assembly of thehelicopter 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 JoyBasu, learned Senior Counsel appearing on behalf of the appellants madethe following submissions:

(i) The tenure and duration of the policy was contingent uponan event which may trigger Clause 5 of the ICC. Therespondent took the delivery of the helicopter, prior to thefinal destination- Bhopal, and stored it in its hangar at NewDelhi. 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 cargoin its own custody and acted beyond the scope of the“ordinary course of transit”, terminating coverage under thepolicy. The goods in the ordinary course of transit areinextricably linked to a carrier who is responsible forexpediting the journey and taking care of the goods duringtransit. Once the respondent took the cargo in its own custodyand chose to assemble the helicopter in New Delhi, the linkwith the carrier came to an end affecting the risk cover;

(ii) The delay and deviation caused due to the respondent takingcustody and delivery of the helicopter was not covered byClause 6 of the ICC and ran contrary to Clause 15 of theICC, which required the respondent to act with reasonabledispatch;

(iii) The policy covered risks associated with transportation ofthe helicopter in a disassembled state as cargo through a A

B

C

D

EF

G

H

210SUPREME COURT REPORTS

Acarrier.When the respondent assembled the helicopter at thehangar in New Delhi, it changed the character and nature ofthe said cargo and created an entirely new product. Themodified cargo was incapable of being insured under theexisting policy as it exposed the appellant to risks that werenot agreed upon in the transit marine insurance policy. TheBrisks associated with the transportation of a disassembledhelicopter as cargo are different from those associated withthe flight of a helicopter under its own power. Operationalrisks associated with the flight of the helicopter are coveredunder a separate‘Aviation Hull All Risk Insurance Policy’; C

(iv) Clause 2.3 of the ICC excludes from the insurance coverthe loss, damage or expense caused by insufficiency orunsuitability 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 thatDenvisaged by the parties. In this regard, reliance was placedupon the decision of this Court in Export Credit GuaranteeCorporation of India Ltd v Garg Sons International[7].Even if the container containing the disassembled helicopterhad not been opened in New Delhi and not continued itsEonward journey to Bhopal, then too the ordinary course oftransit would have been interrupted. Breaks in transport ofthe cargo have to be incidental to such transport and not asa matter of convenience.The storage of the helicopter in thehangar at New Delhi for the purpose of assembly andsubsequent flight could not be called storage being incidentalFto the transportation.Reliance was placed upon the judgmentsof the Supreme Court of Victoria(Appeal Division) in VernaTrading Pty Ltd v New India Assurance Co Ltd[8], andSupreme Court of Victoria(Common Law Division) in QBEInsurance Limited v Patterson Fine Jewellery Pty Ltd[9];Gand

(vi) Damage to the window of the door of the helicopter wouldfall within the excess clause which in any event is not covered 7(2014) 1 SCC 686

8 (1991) 1 VR 129

H9 2004 VSC 31

under the insurance policy. The damage to the tail boomadmittedly occurred in the third week of November 2005which is after the period of thirty days from 13 October 2005(the date of customs clearance and the respondent takingpossession of the cargo). Therefore, the claim for damagein this period is not payable in terms of Clause 5.1.3.

10. On the other hand, Aditya Rajan, learned counsel appearingon behalf of the respondent supported the decisions of the NCDRC andSCDRC and made the following submissions:

(i) The copy of the ICC was never provided by the insurer. Themanner in which the helicopter is transported by air and byroad is different. The helicopter in a knocked down statefirst landed in New Delhi and was then taken to the hangar,where it was to be assembled and prepared for transportationby road to Bhopal.The respondent did not choose New Delhias the selected warehouse for the purposes of accepting thedelivery.During the assembly, only the fuselage assembly(front body of the helicopter) was inspected and a crackwas noticed in the window of the front body of the helicopter.At that stage, there was no possibility of detecting any otherdamage to the helicopter as the helicopter was still in transitand therefore, no formal complaint was lodged with theappellant. Only after the delivery of the helicopter at Bhopalcould the helicopter be checked properly and a claim belodged;

(ii) The letter dated 22 November 2005, was written by anadministrative manager, who had no idea whether thehelicopter was to be transported to Bhopal by road or air. Itwas stated in the letter that some parts of the helicopterwere broken during transit;

(iii) There was justifiable ground for the helicopter to be storedat the hangar at New Delhi. Since the replacement windowwas not available in India, the respondent decided to procurea new window from the US in order to prevent the possibilityof further damage to the mounting frame of thehelicopter.Since the procurement and supply of the newwindow was taking considerable time, the helicopter waskept in storage in the meantime in the hangar covered with a A

B

C

D

E

F

G

H

212SUPREME COURT REPORTS

Abubble sheet and packing material. In addition, the helicopterwas retained in New Delhi as the respondent had all thenecessary skilled manpower and special tools to replace thedamaged window;

(iv) On 20 November 2015, the engineer of the helicopterBmanufacturer noted a dent in the tail boom during a routinecheck. Upon being informed of the dent in the tail boom, therespondent’s engineer conducted a further assessment todetermine the extent of damage. Accordingly, the inside ofthe helicopter was accessed by opening the access panelsand the main structural bulkhead was found damaged. TheCmere fact that the damage was discovered on 20 November2005, does not imply that the dent was actually caused onthat date. The damage to the tail boom,the bulk head, andthe damage to the window glass established that the damagehad been caused during transit as it could not have beenDcaused to a stationary helicopter stored at the hangar in NewDelhi. No report or CCTV footage of any incident of thehelicopter being damaged in the hangar was reported; and

(v) The manufacturer of the helicopter provided a repair schemethrough which the structural damage to the helicopter couldEbe repaired at the hangar in New Delhi. After the repair, inorder to verify the serviceability of the helicopter it wasessential to test fly it and since the helicopter was assembledin a flying state, it was decided not to disassemble it fortransportation by road but instead fly the helicopter to Bhopal.The respondent never gave any instructions to change theFfinal destination from Bhopal to New Delhi and for thepurposes of Clause 5.1.2, Bhopal continued to be the finalplace of delivery.

11. The rival submissions fall for our consideration.

11. The rival submissions fall for our consideration.

G12. The dispute before this Court is with respect to the damage tothe tail boom of the helicopter and not as regards the damage to thewindscreen glass. By a letter dated 10 April 2006, the appellant informedthe assured that the total cost of replacement of the windscreen glasswas within the policy deductible of 0.5% of the sum insured and as suchno liability arose under the policy. The assured has not challenged thatHbefore this Court.

13. The insurance policy issued by the insurer to the insuredrepresents a contract between the parties. The insurer undertakes tocompensate the insured for the losses covered under the insurance coversubject to the terms and conditions of the policy.The appellant issuedapolicy to the respondent on 22 July 2005.Under the policy schedule, thecargo was to be transported from Langley to Bhopal. The policy scheduleprescribed that the appellant company “agrees to insure against loss,damage, liability or expenses subject to the limit of indemnity and theclauses, endorsements, exclusions, conditions and warranties in theschedule to the policy.” The extent of the policy cover was governed byand subject to various clauses mentioned in the policy schedule whichincluded 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 thetermination clause of the ICC.

15. MacGillivray on Insurance Law[10 ]elucidates the principleswhich govern the interpretation of insurance contracts:

“11-007 It is an accepted canon of construction that a commercialdocument, such as an insurance policy, should be construed inaccordance with sound commercial principles and good businesssense, 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 iscorrect to bear in mind: (1) the commercial object of purpose ofthe contract; and (2) the purpose or function of the clause and itsapparent relation to the contract as a whole... ’’

16. The provisions of an insurance contract must be imparted areasonable business like meaning bearing in mind the intention conveyedby the words used in the policy document. Insurance policies should beconstrued according to the principles of construction generally applicableto commercial and consumer contracts. The court must interpret thewords in which the contract is expressed by the parties and not embarkupon making a new contract for the parties. A reasonable constructionmust therefore be given to each clause in order to give effect to the plainand obvious intention of the parties as ascertainable from the wholeinstrument. The liability of the insurer cannot extend to more than what 10 Twelfth Edition, Sweet and Maxwell (2012)

A

B

C

D

E

F

G

H

Ais covered by the insurance policy. In order to determine whether theclaim falls within the limits specified by the policy, it is necessary todefine exactly what the policy covered and to identify the occurrence ofa stated event or the accident prior to the expiry of the policy. Hence,whileconsidering the rival submissions, it is necessary to preface our analysiswith the provisions of the policy.B

17. Clause 5 of the ICC provides thus:

“5.1 This insurance attaches from the time the subject-matterinsured leaves the warehouse, premises or place of storage at theplace named herein for the commencement of the transit, continuesCduring 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 ofstorage, whether prior to or at the destination named herein, whichDthe Assured elect to use either.

5.1.2.1 for storage other than in the ordinary course of transitor 5.1.2.2 for allocation or distribution or

E5.1.3 On the expiry of 30 days after unloading the subject-matterinsured from the aircraft at the final place of discharge, whichevershall first occur.”

The insurance cover in the present case is expressed in terms ofthe voyage itself. The above clause providesthat the duration of theFpolicy attachedand commencedfrom the time the insuredcargo leftthewarehouse, premises or place of storage at the place named in the policyand continued during the “ordinary course of transit”. So far as thetermination of the transit is concerned three alternate events are putforward in Clause 5:G(i)Under Clause 5.1.1, insurance terminates “on delivery” ofthe cargo “to the consignees or other final warehouse orplace 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 whetherHprior to or at the destination named herein” which the assured chooses to use for one of two purposes namely -(a) eitherfor 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 unloadingof the insured cargo from the aircraft at the final place ofdischarge. If that event first occurs, the question of deliveryto any warehouse or place of storage becomes redundant.Even though in Clause 5.1.1 the choice of final warehouse isrestricted to the destination named therein,by virtue of Clause5.1.2, it is possible that the policy terminates upon delivery tosome other final warehouse or place of storage as chosenby the assured.Under Clause 5.1.1, the delivery of thesubject-matter at the warehouse, premises or place of storageat the named destination also constitutes the termination ofthe insurance. Clause 5.1.2 provides for situations wherethe policy terminates upon delivery of the goods at any otherwarehouse, premises or place of storage prior to or at thedestination named in the policy which is elected by the insurerfor the purpose indicated in Clause 5.1.2.1 or Clause 5.1.2.2.

18. The expression “in the ordinary course of transit” mentionedin Clause 5 of the ICC cannot be divorced from the context and must beread along with the other conditions which appear in the policydocument.The meaning of the expression “in the ordinary course oftransit” depends on the context, object and the wording of the particularpolicy. P Ramanatha Aiyar’s Law Lexicon[11], defines the expression“ordinary”:

“Regular; usual; normal; common; often recurring; according toestablished order; settled; customary; reasonable; not characterisedby peculiar or unusual circumstances; belonging to, exercised by,or characteristic of, the normal or average individual.”

The same Law Lexicon, relying onan 1888 decision of the Queen’sBench Division in Bethell v Clark[12], defines the expression “transit”as:

“The term “transit” does not mean that the goods must be actuallymoving as the relevant time: they must, however, be still inpossession of the carrier.”

11 3rd Edition, 201212 (1888) 20 QBD 615

A

B

C

D

E

F

G

H

216SUPREME COURT REPORTS

ABlack Law’s Dictionary[13] defines the expression “transit” as:“1. The transportation of goods or persons from one place toanother. 2. Passage; the act of passing.”

19. Precedents across various jurisdictions have dealt with themeaning of the expression “in transit”and “in the ordinary course ofBtransit”. In SCA (Freight) Ltd v Gibson[14 ](“Gibson”), the plaintiffwho agreed to carry a consignment of books from Rome to Manchesterpurchased from the defendant a policy against liability for damage togoods in transit. Instead of proceedingto England, the plaintiff decided totake the loaded lorry on a trip to the centre of Rome.On the way, theClorry overturned, and the consignment of books suffered damage. Theplaintiffs claimed indemnity under the policy on the ground thatwhen theaccident occurred, the books were still in transit. While interpreting themeaning of the expression goods “in transit”,Justice Ackner, speakingfor the Queen’s Bench Division (Commercial Court) held thus:

D“Goods cease to be in transit when they are on a journeywhich is not in furtherance of their carriage to their ultimatedestination.Obviously a detour which is reasonably necessaryto enable a driver to obtain food or rest would be in furtherance ofthe safe and expeditious carriage of the goods to their finaldestination. It would be an ordinary incident in the transit of goodsEby the plaintiff’s vehicles. It is a question of degree, as towhat is or not in reasonable furtherance of the carriage ofthe goods. A deviation which is wholly unrelated to the usualand ordinary method of pursuing the adventure wouldprevent the goods being “in transit” within the meaning ofFthe policy.”

20. In Wiggins Teape Australia Pty Ltd v Baltica InsuranceCo Ltd[15 ](“Wiggins Teape”), the plaintiff shipped a quantity of woodpulp from Sweden to Port Kembla. The destination of the wood pulp, asGspecified in the policy of marine insurance, was the plaintiff’s place ofbusiness at Bomaderry in New South Wales. After the wood pulp wasunloaded at the port, the plaintiff had stored the consignment in three 13 10th Edition 14 [1974] 2 Lloyd’s Rep 533H15 [1970] 2 NSWR 77

other stores because of insufficient storage space at Bomaderry. Aboutthirty-eight days after the wood pulp had been unloaded, the woodpulpin one of the stores was destroyed by fire. The plaintiff claimed underthe policy on the ground that the risk of fire at the store where the firetook place was still covered by the policy, as the wood pulp had notreachedits final destination but was still in transit.Justice Macfarlan, speakingfor the New South Wales Supreme Court held thus:

“... the purpose of a warehouse-to-warehouse clause is to insureduring a limited land movement, but, as far as I am aware, it hasnever been suggested it is intended to cover indefinitestorage at some place not brought about by therequirements of transport, but determined by the voluntarydecision of the consignee. In my opinion the facts of this caseprove that the Unanderra store was something more than a meretransit store and that when goods entered it, it was for an indefiniteduration. I am also of the opinion that in the present case transithad ceased and that unless there were an express provision in thepolicy, the cover ceases. For this purpose, it does not matterwhether the store at Unanderra was a final warehouse or atransit store...”

21. In First American Artificial Flowers, Inc v AFIAWorldwide Ins[16 ](“First American Artificial Flowers”), the New YorkSupreme Court was called upon to determine whether coverage existed,in a warehouse to warehouse clause, during the ordinary course of transituntil delivery to the consignee’s or other final warehouse or place ofstorage at the destination named in the policy. Aconsignment of artificialplastic flowers had been shipped from Hong Kong to New York. Uponthe arrival of the shipment in New York, the container loaded with flowerwas trucked to the consignee’s warehouse and the activity of unloadingthe trailer commenced. The container was not unloaded completely bythe end of the day and when the workers arrived the next morning, thegoods were found to be stolen. The shipper of the flowers sued itsunderwriters on the ground that the transit policy of insurance requireddelivery into the warehouse of the consignee and since that event hadnot occurred, the loss was covered under the insurance policy. The courtheld thus:

16 1977 AMC 376 (N Y Sup Ct 1976)

A

B

C

D

E

F

G

H

A“[T]he Court is of the opinion that by opening the sealedcontainer and removing some of the contents thereof, theinsured accepted delivery outside of the warehouse andterminated the coverage. Once plaintiff accepted the goods, itwas free to commence unloading and continue with that workuntil the job was completed. It was also free to leave some of theBgoods on the truck until it was more convenient to unload – but atits own risk. The plaintiff could not ‘extend indefinitely theduration of defendant’s policy risk after the goods were atthe destination’.”

C

22. In Lumber & Wood Products, Inc v New HampshireInsurance Company, Etc[17], the United States Court of Appeals forthe Eleventh Circuit referred to the decision in First American ArtificialFlowersand observed thus:

D“The court in First American relied upon, among other casesBoonton Handbag Co v The Home Ins Co, 125 N J Super, 287,310 A 2d 510 (1973), a similar case which also held that the arrivalof the truck at the consignee’s warehouse was sufficient toterminate transit coverage under the policy. The guiding preceptbehind both of these cases is that a transit policy of insuranceEshould not be stretched or tortured to provide coveragefor losses which take place after delivery at the consignee’sfacility. In those circumstances where it is simply moreconvenient for the consignee to allow the cargo to be storedoutside its warehouse, the shipper cannot indefinitely availFhimself of the coverage because the cargo is allegedly “intransit”. Once the final destination has been reached, transithas ceased. Consequently, the coverage must also cease.”

23. In Verna Trading Pty Ltd v New India Assurance CoGLtd[18 ](“Verna”), the Supreme Court of Victoria (Appeal Division) dealtwith whetherthe storage of goods by the consignees at a warehouse forthe purpose of commercial convenience was storage other than in theordinary course of transit.The plaintiff had purchased a policy of marine17 807 F 2d 1987, 1987 AMC 1244H18 [1991] 1 VR 129

insurance for covering the transportation of goods from Hong Kong toAustralia. After the shipment arrived in Melbourne, the goods weretransferred to a storage area, awaiting customs clearance. After clearingall dues, the plaintiff made a deliberate decision to retain the goods in thestorage area until they were able to accept delivery of the goods fromtheir customers and transfer the goods to another warehouse.After thecontainer was transferred, the goods were found to be missing. Theplaintiff lodged a claim alleging that the goods while in the storageareawere in transit and the alleged theft would be covered by the policy.Justice Beach referred to the decision in Wiggins Teapeand held thus:

“... once the decision was made by Verna to leave the cassettesin Strang’s Triangle until such time as they were able to acceptdelivery of them into the Multi Group warehouse, the cassettesceased to be in transit. The storage of the cassettes in thetriangle had nothing to do with the requirements oftransportation. They were left there as a matter ofconvenience until such time as they could be taken to theirfinal destination. In that situation, once the decision wasmade to leave them in the triangle, the insuranceterminated. It must also follow from Verna’s actions in thatregard that it did not act with reasonable dispatch in so faras delivery of the cassettes to their final destination wasconcerned.”

Justice Kaye in his concurring opinion discussed the meaning ofthe expression “in transit” and held thus:

“... While the expression “in transit” is not a term of art,its intended meaning may become apparent from thecontext in which it is used: cf. Peter Jackson Pty Ltd vConsolidated Insurance of Australia Ltd. [1975] VicRp 77; [1975]VR 781, at p. 799. In the present case the meaning of the phrase“during the ordinary course of transit” is indicated by the purposeof the warehouse to warehouse clauses forming part of the marinepolicy. The voyage policy component of the policy covered therisk of loss and damage while the goods were in the course ofcarriage from Hong Kong to Melbourne. Upon the discharge ofthe goods from the ship, the voyage cover ceased. The purpose AB

CD

E

F

G

H

Aof the warehouse to warehouse CL81, in so far as it relatedto the goods after discharge from the ship, was to providefor the continuation of insurance whilst the goods were beingcarried by land to the final destination. This was duringtransit. But that period was limited to the time during whichthe goods were in the ordinary course of transit. The periodBof the ordinary course of transit continued during periodsor intervals which were in reasonable furtherance of thecarriage of the goods to the final destination: cf. SCA.(Freight) Ltd. v Gibson [1974] 2 Lloyds Rep 533, at p. 535 perAckner J. (as his Lordship then was). Implicit in the phraseC“during the ordinary course of transit” wasrecognition andacceptance that the movement of the insured goods by landmight be interrupted by circumstances associated with therequirements of their transportation.”

DJustice Ormiston referred to the decision in Gibson and dweltthe meaning of the expression “ordinary course of transit”:

“It would therefore appear that the “ordinary course of transit”would end if an act or acts took place which would,reasonably considered, indicate that the transit hadEterminated or that the transit had been so interrupted thatit could not be seen as likely that the transit wouldrecommence without there being a positive decision to thateffect by the assured or consignee.Even if neither of thosetwo conclusions could be drawn, the cargo may no longerFbe in the “ordinary course” of transit if it is dealt with in amanner inconsistent with the prosecution of the adventure,that is, in a way or for a purpose which is unrelated tobringing the transit to its expected conclusion by deliveryto the defined warehouse or store.”

G

24. In NEC Australia Pty Ltd v Gamif Pty Limited,[19 ]the insured,a transporter of goods claimed against its insurers for a loss resultingfrom the theft of certain goods from one of the insured’s warehouses.The issue was whether or not the goods were “in transit” at the time of BAJAJ ALLIANZ GENERAL INSURANCE CO LTD v.STATE OF M.P. [DR. DHANANJAYA Y CHANDRACHUD, J.]

the theft within the ordinary meaning of that term in the policy ofinsurance. Justice Lockhart speaking for the Federal Court of Australiawhile referring to the decisions in Wiggins Teape and Verna held thus:

“In my opinion the policy covers machines of NEC whilst beingtransported from one place to another. It does not mean that themachines must be in motion at all times. But it does mean that theoverall object of the insurance contract is to facilitate thetransportation of machines of NEC from one place to another.The “transit” may be interrupted to permit efficient andeconomical loading, transhipment, unloading and storageto await another vehicle to carry the goods from the pointof original shipment to the point of destination; but theinterruption cannot be merely for the commercialconvenience of one of the parties.

The ordinary meaning of “transit” essentially connotes that goodsare in motion between two points, but the period of transit maycontinue during intervals or periods when they may be loaded orunloaded and temporarily housed provided that this is reasonablyreferable to the furtherance of the carriage of goods to the finaldestination. The notion of “in transit” accepts that the movementof the goods may be interrupted by circumstances associated withthe requirements of their transportation.”

25. In context of the policy, the words “in transit” do not requiretransportation of the consignment in a single trip from the commencementto the final destination but includes those interruptions in motion that areincidental to or in furtherance of the conveyance or transportation of theconsignment.The words of the policy ought to be construed so as toconform to the usual and ordinary method of pursuing the venture oroperation. The question of what does and does not constitute a deviationin furtherance of the conveyance of the goods is a question of fact thatmust be determined by both the intent of the policy and the actions of theparties. An action that is wholly unrelated to the usual or ordinary methodof pursuing the transportation of goods would prevent the goods frombeing covered under the definition of the expression “in transit” underthe policy. Words used in the policy must be construed in their commercialsetting having regard to the purpose of the policy.

A

BC

D

E

F

G

H

A26. The appellant issued a policy cover to the respondent providingcoverage for the transport of the helicopter from Langley to Bhopal.The helicopter was transported in a knocked down state by air throughCathay Pacific Airlines and reached New Delhi on 5 October 2005. Itcleared customs on 13 October 2005 and on the same day, the respondentafter taking possession of the cargo shifted it to the hangar at NewBDelhi. It is undisputed that at the time of customs clearance, no damagewas reported.It was when the helicopter was inspected by therepresentative of the manufacturer during a routine inspection on 21October 2005 that damage was reported to the window of the crewdoor of the helicopter.In acommunication dated 21 October 2005Caddressed by the representative of the manufacturer for placing an orderfor a crew door window, it was stated that “further unpacking of theFuselage Assembly was carried out and no other damage wasevident.”By a letter dated 22 October 2005, the respondent informedthe appellant of the said damage by stating:

D“On the helicopter reaching Delhi, the package was opened itwas found that some of its parts were found broken during transit”

Presently, the Helicopter is being assembled at the Hangarof Indamer Co. located at Delhi so that the Helicopter canfly from Delhi to Bhopal.”

E

27. The contents of the above letter negate the submission of thelearned counsel for the respondent that the helicopter was shifted to thehangar for the purposes of assembling and preparing it for furthertransportation by road to Bhopal. It is evident from the above letter thatFthe intention of the respondent was to assemble the helicopter at NewDelhi and to fly it to Bhopal. The helicopter was transported from Langleyin a “knocked down state”. The specific act of unpacking the cargo atNew Delhi in furtherance of the purpose of assembling it for the flight toBhopal indicated that the transportation of the cargo in a knocked downGstate had come to an end. The act of unpacking the helicopter for thepurpose of assembling it for undertaking the flight to Bhopal was unrelatedto the usual or ordinary method of pursuing the transportation of thecargo insured. The policy covered only those risks that were associatedwith the transportation of the helicopter and did not cover the risksassociated with the flight or operation of the helicopter.

H

28. Colinvaux’s Law of Insurance[20] elucidates on the distinctionbetween increase of risk and change of risk:

“5-023 There is a distinction at common law between cases inwhich the danger of loss increases during the currency of thepolicy, and cases in which the very nature of the subject-matterinsured has altered: the former has no adverse effects on thepolicy, whereas the latter operates automatically todischarge the insurer on the basis that what was agreedbetween the parties has ceased to exist. The distinctionbetween an alteration of the risk and an alteration in the subject-matter may at the margins be fine, but it is nevertheless crucial...”

“5-034 Where the change occurring is not merely an increasein the risk faced by the insurer, but amounts to a substantivechange in the insured subject-matter itself, the commonlaw discharges the insurer from all liability for loss to thesubject matter... To determine whether or not there has been achange in the subject-matter, it is necessary to construe the policyto determine exactly what subject-matter was contemplated bythe parties as falling within its coverage...”

29. In the present case, the transit policy only covered such risksthat may have arisen by the venture or operation being carried out in theusual or ordinary manner and did not include risks that were out of thescope of the policy. Change in the character of the helicopter from aknocked down state to a ready to fly state exposed the appellant to risksnot contemplated by the parties under the policy. The effect of thealteration of the subject-matter insured is outside the scope of the agreedcover 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 theappellant is absolved from any liability arising out of any subsequentdamage to the consignment. Exposure to risks associated with the flightsubstantially and unnecessarily added to the risks of the journey thatwere not covered by the policy. Accordingly, the submission of the learnedcounsel for the respondent that the cover against risks would be providedtill the time the helicopter was not delivered at the final destination ofBhopal is unsustainable. Once the respondent intended to alter the subject- A

B

C

D

E

F

G

Amatter it becomes irrelevant to determine whether the hangar at NewDelhi was a transit store or the final destination of delivery.

30. The learned counsel for the respondent has argued that therewas justifiable ground for the helicopter to be stored at the hangar inNew Delhi since procurement and supply of the new window was takingBconsiderable time and all the necessary skilled manpower and specialtools to replace the damaged window were only available in New Delhi.Clause 5.1.2 of the ICC provides that the policy may terminate upon theassured choosing to use an alternate place of delivery, prior to thedestination named therein for one of two purposes, either for storageother than in the ordinary course of transit or for allocation or distributionCof the cargo.The purpose of a transit policy is to cover the carriage ofgoods to the final destination. In the present case,storage of the helicopterin the hangar at New Delhi awaiting replacement of the spare windowcannot be said to be incidental or in furtherance of the carriage of thegoods to the ultimate destination.It would be unreasonable to suggestDthat the transit policy intended to cover indefinite storage of the helicopterat the hangar in New Delhi not brought about by the requirements oftransport but determined by commercial convenience of the respondent.The degree of deviation of storing the helicopter at the hangar awaitingreplacement of the spare window is at variance with the ordinary course of transit.Ordinary course of transit is the period when the cargo is inEthe course of transportation, and not in the immediate control of thebuyer or seller. After the goods cleared customs, the helicopter was inpossession of the respondent and it took a voluntary decision of retainingthe helicopter in New Delhi on the basis of commercial convenience.Asfound in the earlier part of the judgment, the intention of the respondentFwas not to prepare the helicopter for transportation by road to Bhopalbut to assemble the helicopter in New Delhi and fly it to Bhopal.Oncethe respondent decided to leave the goods in the hangar at New Delhifor its commercial convenience not associated with or in furtherance ofthe requirements of their carriage to Bhopal, the transit insurance ended.

G31. Clause 15 of the ICC provides that during the period of thetransit policy, the insured shall act with reasonable dispatch:

“It is a condition of this insurance that the assured shall act withreasonable dispatch in all circumstances within their control”

H

The purpose of the marine transit insurance policy is to cover theconsignment from risks associated with transportation of the consignmentfrom one place to another. It is fundamental for those responsible forcarrying the cargo to ensure that all stages of the transportation areeffected with reasonable promptness.”In transit”, however, does notnecessarily mean that the consignment needs to be in continuous motionat all times. A mere brief suspension must however be in furtherance ofthe ordinary course of transit. During the ordinary course of transit, theconsignment might frequently come to rest or be temporarily stored inthe dock awaiting loading or customs clearance. However, undulyprotracted steps in the cargo’s transportation are not within, and mayterminate, the “ordinary course of transit.”In the present case, theinsuredvoluntarily decided to store the helicopter in the hangar at NewDelhi out of commercial convenience and not in furtherance of thetransit.In addition, the insured by assembling the knocked down helicopterfor the purposes of flying it to Bhopal changed the nature of theconsignment and exposed the appellant to operational risks beyond thescope of the policy.

32. Clause 6 of the ICC provides forcontinuation of insurancecover after termination in circumstances beyond the control of the insured.Clause 6 provides thus:

“6. If owing to circumstances beyond the control of the Assuredeither the contract of carriage is terminated at a place other thanthe destination named therein or the transit is otherwise terminatedbefore delivery of the subject-matter insured as provided for inClause 5 above, then this insurance shall also terminate unlessprompt notice is given to the Underwriters and continuation ofcover is requested when the insurance shall remain in force, subjectto an additional premium if required by the Underwriters, either 6.1 until the subject-matter is sold and delivered at such place orunless otherwise specially agreed, until the expiry of 30 days afterarrival of the subject-matter hereby insured at such place,whichever shall first occur, or 6.2 if the subject-matter is forwarded within the said period of 30days (or any agreed extension thereof) to the destination namedherein or to any other destination, until terminated in accordancewith the provisions of Clause 5 above.”

A

B

C

D

EF

G

H

AClause 6 states that the insuredcan issue prompt notice to theunderwriters to continue the cover upon payment of an additionalpremium, if owing to circumstances beyond its control either the contractof carriage is terminated at a place other than the destination namedtherein or the transit is otherwise terminated before the delivery of thesubject matter insured as provided for in Clause 5. In the present case,Bif the respondent decided to retain the helicopter in New Delhi awaitingthe arrival of the replacement window from USA, it could have issued anotice to the underwriters to continue the cover of carriage till the timethe repairs were carried out. However, the respondent did not issue anynotice seeking extension of the insurance cover under Clause 6.

C

33. After determining that the ordinary course of transit ended inDelhi when the cargo consisting of a helicopter in a disassembled statewas unloaded for the purpose of assembling the helicopter and flying itto Bhopal, we must next determine the question of whether the damageto the helicopter had occurredduring the course of transit from LangleyDto Delhi. On the damage to the tail boom of the helicopter, the learnedcounsel for the respondent advanced the argument that the fact that thedamage was discovered on 20 November 2005, did not imply that thedent was actually caused on that date. It was urged that the damage tothe tail boom, and to the window glass had been caused during transit as it could not have been caused to a stationary helicopter at the hangar inEDelhi.

34. Clause 8 of the ICC provides for claims under the insurancepolicy:

“8.1 In order to recover under this insurance the assured mustFhave an insurable interest in the subject-matter insured at the timeof the loss.

8.2 Subject to 8.1 above, the assured shall be entitled to recoverfor insured loss occurring during the period covered by thisinsurance, notwithstanding that the loss occurred before thecontract of insurance was concluded, unless the assured wereGaware of the loss and the underwriters were not.”

35. In terms of Clause 8, for the respondent to prove its case, thebasic and fundamental fact which needs to be proved is that: (i) therespondent must have an insurable interest in the subject matter insuredat the time of loss; and (ii) the loss insured against occurred during theH

period covered by the policy. The position has been formulated inMacGillivray on Insurance Law[21]:

“20-006 The burden of proving that the loss was caused bya peril insured against is on the assured. It is not necessaryfor him to prove precisely how the casualty occurred, but hemust show the proximate cause falls within the perils insuredagainst...”

In Rhesa Shipping Co S A v Edmunds[22], the plaintiff’s cargoship sank in calm weather in the Mediterranean Sea. The plaintiff soughtto recover damages under two identical marine insurance policies thatcovered losses incurred by perils of the sea. While discussing the burdenof proof on the plaintiff to prove its case, Lord Brandon, speaking for theHouse of Lords held:

“In approaching this question it is important that two matters shouldbe borne constantly in mind. The first matter is that the burdenof proving, on a balance of probabilities, that the ship waslost by perils of the sea, is and remains throughout on theshipowners. Although it is open to underwriters to suggest andseek to prove some other cause of loss, against which the shipwas not insured, there is no obligation on them to do so. Moreover,if they chose to do so, there is no obligation on them to prove,even on a balance of probabilities, the truth of their alternativecase.

The second matter is that it is always open to a court, evenafter the kind of prolonged inquiry with a mass of expertevidence which took place in this case, to conclude, at theend of the day, that the proximate cause of the ship’s loss,even on a balance of probabilities, remains in doubt, withthe consequence that the shipowners have failed todischarge the burden of proof which lay upon them.

...

... It requires a judge of first instance, before he finds thata particular event occurred, to be satisfied on the evidence 21 Twelfth Edition, Sweet and Maxwell (2012)

22 [1985] 2 All ER 712

AB

C

D

E

F

G

H

Athat it is more likely to have occurred than not. If such ajudge concludes, on a whole series of cogent grounds, that theoccurrence of an event is extremely improbable, a finding by himthat it is nevertheless more likely to have occurred than not, doesnot accord with common sense. This is especially so when it isopen to the judge to say simply that the evidence leaves him inBdoubt whether the event occurred or not, and that the party onwhom the burden of proving that the event occurred lies hastherefore failed to discharge such burden.”

36. For the respondent to prove its case, a mere assertion that theCloss incurred during the course of transit is not sufficient. The burden ofproof lies on the respondent to show that the loss incurred was coveredwithin the terms of the policy and that on a balance of probabilities thereexisted a proximate cause between the loss incurred and the helicopterbeing in transit. The respondent has adduced no evidence to supports itsDcase.

37. After the respondent informed the appellant on 23 November2005 that upon inspection, the tail boom of the helicopter was found tobe damaged, the appellant promptly appointed a surveyor, who in itsreport dated 14 March 2006 observed:

E“During our re-visit along with Insured’s engineer we observedthat the Tail boom was badly dented (apart from the crackin the glass of pilot side window initially surveyed by us) atthe point where it joins the main frame. The frame was alsoaffected and bulged inside. It appeared from the nature ofdamage that some hard and/or sharp object hit the frameFwhilst it was parked at hanger...”

Based on the above, the surveyor concluded thus:

“The damage to the tail boom had occurred at Hangar #3, Bay15/33 IGI Airport Delhi after substantial assembly but prior to testGflight and not during transit and hence would not fall under thepurview of marine insurance policy as issued to the insured.”

On the basis of the surveyor’s report,the appellant rejected theclaim of the respondent on 10 April 2006. By a letter dated 11 April2006, the Directorate of Aviation, Government of Madhya PradeshHresponded to the above letter on behalf of the respondent stating:

“It is very important to mention here that the investigation by yoursurveyors and their interviews with technical representatives ofAcro Helipro, scrutiny of customs documents, physical inspectionof helicopter at Palam airport etc. confirms that this damage tothe helicopter was caused in Nov’ 05 whereas this helicopter wascleared from customs on 13[th] Oct’ 05.

...

Though your findings of damage to helicopter in Nov’05i.e. after a month after receipt of helicopter from customsare based on facts but here we wish to inform you that ourpolicy for transit is up to Bhopal and therefore damage tothe helicopter after a month from receipt of the customsi.e. in the month of Nov’ 05 is also covered under transit.”

38. It is evident from the contents of the above letter written bythe the Directorate of Aviation, Government of Madhya Pradesh thatthe respondent did not challenge the surveyor’s report. Instead it acceptedthe finding of the surveyor that the damage to the helicopter took placeonly in November 2005, after the helicopter had been cleared throughcustoms on 13 October 2005. Accepting the report of the surveyor, theDirectorate of Civil Aviation of the Government of Madhya Pradeshsought to contend that the ordinary course of transit extended untilBhopal.This admission is contrary to the stance taken by the respondentbefore this Court that the damage to the helicopter occurred during thecourse of transit before the cargo was cleared from customs at Delhi.The learned counsel for the respondent has in his written submissionsbefore this Court argued that sincethe procurement and supply of thenew window was taking considerable time, the helicopter was kept instorage in the meantime in the hangar was covered with a bubble sheetand packing material.The respondent has on the balance of probabilitiesfailed discharge its burden that the damage to the helicopter incurredduring the course of transit. No proximate cause has been shownbetween the damage to the helicopter and the helicopter being in a stateof transit. Hence, it is difficult for this Court to come to the conclusionthat the damage to the helicopter incurred during the course of transit.

39. The NCDRC has in the impugned judgment proceeded on theunderstanding that “since customs clearance is essentially at New Delhi,it has to be construed and interpreted in the right spirit that the A

B

C

D

E

F

G

H

Acommencement of the transit is at Langley and ordinary course of transitincludes the staying at Delhi for customs clearances and for assembling”.The NCDRC has further noted that there existed no ambiguity regardingthe commencement of the risk at Langley and ending at the final destinationi.e. Bhopal. According to the NCDRC, the expiry of thirty days aftercompletion of discharge at the final port of discharge should be essentiallyBinterpreted as thirty days after reaching Bhopal and not thirty days duringthe course of transit which included the halt at New Delhi.The line ofapproach adopted by the NCDRC is evidently incorrect. While construinga contract of insurance, it is not permissible for a court to substitute theterms of the contract. The court should always interpret the words usedCin a contract in a manner that will best express the intention of theparties.The NCDRC has incorrectly proceeded on the path that theordinary course of transit would include assembling of the helicopter atNew Delhi and the policy covered all risks till the time the helicopterdidnot reach Bhopal.The risks associated with the assembled helicopterwere not covered within the purview of the policy, as the subject-matterDwhich had been insured was a helicopter being transported in a packagedknocked down condition. The act of assembling the helicopter with aview to having it flown under its own power, instead of transporting thepackaged knocked down helicopter further to Bhopal by road, would notconstitute as storage in the ordinary course of transit. The interpretationadopted by the NCDRC strikes fundamentally at the purpose of theEpolicy and is not in accordance with sound commercial principles. Theinterpretation altered the character of the risk insured beyond the scopeof the policy as agreed between the parties.

40. We are hence of the view that the interpretation placed on theterms of the insurance policy was manifestly incorrect and that theFimpugned orders of the NCDRC and SCDRC are unsustainable.

41. The appeals are accordingly allowed and the impugnedjudgments and orders of the NCDRCand the SCDRC shall stand setaside. The consumer complaint shall stand dismissed. There shall be noorder as to costs.GPending application(s), if any, shall stand disposed of.

Devika Gujral

Appeals allowed.