Vessel Not Classed Per ICC Norms Is Breach Of Warranty; Insurer Can Repudiate Claim Despite Receiving Information: NCDRC - 2025-07-15

NCDRC: Insurer Can Repudiate Marine Claim for Unclassed Vessel Despite Receiving Information; No Waiver Implied

New Delhi: The National Consumer Disputes Redressal Commission (NCDRC), in a significant ruling on marine insurance law, has dismissed three complaints filed by importers against The Oriental Insurance Co. Ltd. The Commission, led by President Justice A. P. Sahi and Member Mr. Bharatkumar Pandya , held that an insurer is justified in repudiating a claim if the vessel carrying the insured cargo does not comply with the Institute Classification Clause (ICC), a fundamental warranty in the policy.

The NCDRC affirmed that the insured’s duty to ensure the vessel is properly classed is absolute. Even if the insurer was provided with information and documents regarding the vessel’s status, this does not constitute a waiver of the warranty, especially if the information provided was itself incorrect or related to a non-recognized classification society.

The Commission, while dismissing the complaints, imposed a punitive cost of ₹5 lakhs on the insurance company for its negligent conduct and for raising misleading arguments during the proceedings.

Background of the Case

The case involved three importers—M/s. Viraj Impex Pvt. Ltd., K. Amishkumar Trading Pvt. Ltd., and Baijnath Melaram—who had insured their consignments of rolled steel coils with Oriental Insurance. The cargo was shipped from China to Mumbai aboard the vessel MV Khalijia-III in 2010.

The vessel arrived safely in Mumbai but, due to a crane failure, had to be moved for repairs. During this maneuver, on the night of July 18-19, 2010, it collided with another ship and ran aground, leading to a claim for losses.

Oriental Insurance repudiated all claims, arguing that the vessel Khalijia-III was not classed in accordance with the ICC, a warranty clause in the marine insurance policies. The insurer contended this breach of warranty discharged them from all liability.

Key Arguments

• Complainants' Stance: The complainants argued their cases were distinct from a previously decided matter involving the same vessel ( Rajankumar and Brothers ). They asserted they had provided "prompt notice" to the insurer about the vessel's classification by sending an email on May 28, 2010, with all particulars, including certificates from the "International Register of Shipping." They claimed that since the insurer issued the policy and initially provided a General Average Guarantee after receiving this information, it had waived its right to object to the vessel's classification.

• Insurer's Position: Despite having forfeited its right to file a written statement, the insurer argued that the vessel was not compliant with the ICC. It maintained that the "International Register of Shipping" is not a member of the International Association of Classification Societies (IACS), a requirement under the policy. Furthermore, the vessel's previous valid classification with Lloyd’s Register had expired in 2007. The insurer argued that providing a General Average Guarantee did not amount to a waiver, as the breach was discovered only later upon investigation.

Commission's Analysis and Findings

The NCDRC meticulously analyzed the evidence, particularly in light of the Supreme Court's judgment in the Rajankumar case, which also dealt with the Khalijia-III incident. The Commission noted that the complainants in the present case were interveners in the Rajankumar appeal, where the Apex Court allowed them to argue their cases independently on facts before the NCDRC.

Despite the new documents and arguments, the Commission arrived at the same conclusion.

"We find that the dual factual foundation laid by the Complainants to distinguish the present case from that of Rajankumar & Bros (Impex) (supra) has been extensively examined by us and it has been found on the facts pleaded in this case that the vessel was not classed with a recognised classification society as on the date of the voyage or even thereafter when it met with an accident."

The Commission made several key findings:

1. Incorrect Classification: The certificates from the "International Register of Shipping" were deemed invalid for the purpose of the policy, as this body is not a recognized IACS member society.

2. Lapsed Lloyd's Certification: Evidence showed the vessel's valid classification with Lloyd's Register, an IACS member, had been withdrawn in 2007. The self-certification by the vessel's Master stating otherwise was incorrect and could not be relied upon.

3. No Waiver by Insurer: The act of issuing the policy or a General Average Guarantee after receiving information did not constitute a waiver. The Commission highlighted that waiver cannot be claimed based on the insured's own incorrect representation. Citing Section 35(3) of the Marine Insurance Act, 1963, the NCDRC reiterated that a breach of warranty automatically discharges the insurer from liability.

"Waiver will not come to the aid of the insured because of its own reliance on misinformation about the Lloyd’s register classification that was discontinued and did not exist on the date of the voyage or the incident... The representation of classification was therefore deceptive for whatever reason, and therefore a factually incorrect information transformed itself into a misrepresentation that was procured, handled and relied on by the insured, hence waiver by the Insurance company is nowhere attracted."

Final Decision and Stern Remarks

The NCDRC dismissed all three complaints, finding that the complainants failed to establish that the vessel was properly classed as per the insurance warranty.

However, the Commission came down heavily on Oriental Insurance for its conduct, noting its failure to file a written version and its attempt to dispute its own internal communications during arguments. Calling this conduct "inappropriate," "negligent," and "misleading," the Commission imposed a punitive cost of ₹5 lakhs to be deposited in the Consumer Legal Aid Account.