“Voyage Must Start and End Before Monsoon Sets In — But What If That’s Practically Impossible?” SC Rules Against Insurance Company in Shipping Dispute

“A condition that renders the insured without any remedy in case of peril defeats the very purpose of the policy — it cannot be treated as a condition precedent.” - In a landmark ruling delivered on April 7, 2025, the Supreme Court of India struck down the ground on which New India Assurance Co. Ltd. had repudiated an insurance claim made by Sohom Shipping Pvt. Ltd., calling the clause vague, impractical, and non-material to the insurance contract’s purpose. The Court held that the special condition requiring the vessel’s voyage to “commence & complete before monsoon sets in” could not be enforced so literally as to deny the claim altogether.

Bench of Justices Satish Chandra Sharma and B.V. Nagarathna set aside the decision of the National Consumer Disputes Redressal Commission (NCDRC), which had earlier upheld the insurer’s repudiation based on an alleged breach of this clause.

“The Phrase ‘Before Monsoon Sets In’ Cannot Be Interpreted to Make the Policy Unworkable”

The case stemmed from an insurance dispute over the barge Srijoy II, which was insured by Sohom Shipping for a single delivery voyage from Mumbai to Kolkata between 16 May and 15 June 2013. The policy carried a clause stating that the “voyage should commence & complete before monsoon sets in.”

But the voyage commenced on 6 June 2013 — after monsoon began on India’s west coast, and soon after, the vessel ran into bad weather, suffered engine failure, and ultimately ran aground near Ratnagiri Port. The insurer rejected the claim citing violation of the monsoon clause, calling it a breach of the “Special Conditions” of the policy.

The Supreme Court, however, found this logic deeply flawed.

“Even if the voyage was undertaken immediately on 16.05.2013, the vessel would have arrived at Kolkata in the first week of June — after commencement of foul weather on the east coast… There is absolutely no permutation or combination in which the condition could have been fulfilled.”

The Court held that enforcing such a clause as a condition precedent to liability would result in absurdity, defeating the purpose of marine insurance altogether.

“You Can’t Write a Clause That Makes the Insurance Pointless — That’s Not a Condition, That’s a Trap”

The insurer had argued that the vessel’s journey into foul weather after 1 June violated the DGS Circular defining monsoon periods and thus justified repudiation. The policy also specified that the vessel should depart in “weather not exceeding Beaufort Scale No. 4”.

However, the Supreme Court took a firm view that such clauses, if interpreted strictly and mechanically, could nullify the very object of marine insurance, particularly when the insurer knew the full route and timeline.

“The only logical conclusion of the information provided is that the insurance was availed to cover the foul weather period… The condition has been impliedly waived by the parties due to its non-material nature.”

The Court also remarked that the clause appeared to be a standard term copied into every policy, and not tailored for this specific voyage — weakening the insurer’s claim that it was essential.

“No Ambiguity, But Still No Valid Ground to Reject the Claim” – SC Explains Why Contra Proferentem Didn’t Apply, Yet Ruled Against Insurer

Sohom Shipping had argued that the clause was ambiguous and should be interpreted against the insurer (applying the contra proferentem doctrine). The Court disagreed — holding that the clause was not ambiguous, and could be literally understood. However, it still ruled that the clause was not material to determining liability.

“The rejection of contra proferentem does not prejudice the appellant — because the clause, even if unambiguous, cannot be allowed to nullify the insurance coverage altogether.”

Supreme Court Sends Case Back to NCDRC to Decide Payout Amount

The Court concluded that New India Assurance Co. Ltd. had no valid basis to reject the claim merely because the monsoon had started. However, it refrained from quantifying the exact sum payable to the insured party, since other issues — including allegations of forgery — remained pending before the NCDRC.

“The Respondent is not entitled to repudiate the claim on the ground of breach of the special condition. Other objections must be considered by the NCDRC on their own merits.”

The Court directed that the parties appear before the NCDRC on 29 April 2025, and that the case be disposed of expeditiously given that the claim dates back to 2013.

“This clause, if enforced literally, would leave the assured without a remedy even for losses occurring well within the policy period. Such a result is absurd and unacceptable.”

Accordingly, the appeal was allowed. The judgment of the NCDRC was set aside, and the matter remanded for adjudication of the actual insurance amount payable.

Date of decision : April 7, 2025