Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-013604-013605 – 2025 |
| Diary Number | 2480/2022 |
| Judge Name | HON’BLE MR. JUSTICE MANOJ MISRA |
| Bench | HON’BLE MR. JUSTICE MANOJ MISRA; HON’BLE MR. JUSTICE UJJAL BHUYAN |
| Precedent Value | Binding authority |
| Affirms | Upholds the principle of utmost good faith and narrow construction of exclusion clauses |
| Type of Law | Insurance law; Contract law |
| Questions of Law | Whether an insurer can repudiate a boiler explosion claim by relying on an exclusion clause for wear, corrosion or aging absent proof of misrepresentation or non-disclosure by the insured |
| Ratio Decidendi |
The insurer accepted risk on a boiler with a valid registration and fitness certificate under the Boilers Act and did not allege any misrepresentation or non-disclosure by the insured at the proposal stage. Exclusion clause 5, read in context, does not bar claims where an explosion occurred within the policy period; latent defects discovered post-loss cannot defeat coverage absent proof that they were known to the insured and withheld. Burden lies on the insurer to prove a material non-disclosure or fraud to void the policy, and survey reports that are ambivalent about explosion cannot sustain repudiation. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon |
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| Facts as Summarised by the Court | Boiler GT-23 was insured from 1 Feb 2005 to 31 Jan 2006 for ₹1.60 crore; registered and certified fit on 17 Nov 2004; explosion on 12 May 2005 caused two tubes to detach; claim was repudiated on 22 Jun 2005 and again on 3 Jul 2006; consumer complaint filed. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All courts and tribunals deciding insurance disputes |
| Persuasive For | High Courts, National Consumer Disputes Redressal Commission |
| Overrules | The NCDRC order dismissing the boiler explosion claim |
| Follows | Established precedents on utmost good faith and narrow construction of exclusions (e.g., Canara Bank v. United India Insurance Co. Ltd.) |
What’s New / What Lawyers Should Note
- Exclusion clauses for wear, corrosion or aging cannot bar a claim when an explosion occurs within the policy period and the boiler held a valid fitness certificate under the Boilers Act.
- The insurer must plead and prove any material misrepresentation or non-disclosure by the insured to void the policy; latent defects discovered only post-loss are insufficient.
- A registered boiler’s fitness certificate creates a prima facie presumption of insurability; subsequent survey reports ambivalent on explosion do not justify repudiation.
- Survey reports placed on record at appellate stages cannot remedy an insurer’s failure to inspect pre-policy or to raise specific disclosure queries at inception.
- Lawyers can cite this judgment to resist repudiation attempts based solely on latent defect exclusions, emphasizing the insurer’s burden under the doctrine of utmost good faith.
Summary of Legal Reasoning
- A boiler with a valid registration and fitness certificate under the Boilers Act, 1923, is prima facie fit for insurance.
- Insurance contracts rest on utmost good faith; the insurer must prove any material non-disclosure or misrepresentation to void coverage (Indian Contract Act, Section 19).
- Exclusion clause 5, covering defects from corrosion or wear, excludes only non-explosive deterioration; defects resulting from explosion remain covered.
- The survey reports did not categorically deny an explosion and identified defects that could have been latent until the blast; they were therefore ambivalent on exclusion applicability.
- In absence of any allegation or proof of fraud, suppression, or breach of proposal disclosures, the insurer cannot repudiate the claim post-loss.
- The insurer bears the burden to prove it was misled, which was not discharged; the policy must be honored subject to quantum.
Arguments by the Parties
Petitioner (Appellant)
- Policy issued after boiler inspection under Boilers Act; fitness certificate valid when accident occurred.
- Loud explosion caused tubes to detach; survey reports do not rule out explosion.
- Insurer failed to inspect before issuing cover and cannot invoke latent defect exclusion as an after-thought.
Respondent (Insurer)
- Survey reports by independent and joint surveyors show tubes slipped due to corrosion and aging, not explosion.
- Exclusion clause 5 applies to slipping tubes and latent defects; no explosion within policy context.
- Appeal by special leave improper; alternative writ remedy available (Universal Sompo v. Suresh Chand Jain).
Factual Background
The appellant’s boiler GT-23 was insured for ₹1.60 crore from 1 February 2005 to 31 January 2006 and held a valid fitness certificate under the Boilers Act dated 17 November 2004. On 12 May 2005, the boiler exploded, detaching two tubes. The appellant’s repair-cost claim was first repudiated on 22 June 2005 and again on 3 July 2006. A consumer complaint was filed in 2007; the State Commission awarded compensation, but the NCDRC reversed that award, prompting these appeals under Article 136.
Statutory Analysis
- Boilers Act, 1923 (Sections 6–8, 19, 21): registration and fitness certificate requirements create a presumption of fitness for use.
- Indian Contract Act, 1872 (Section 19): duty of disclosure and voidability for misrepresentation or non-disclosure.
- Consumer Protection Act, 1986 (Section 24A): limitation period considerations affirmed by the State Commission.
Procedural Innovations
- Supreme Court restored appeals to NCDRC for reassessment of compensation quantum without reopening liability issues, demonstrating flexible appellate process under Article 136.
Alert Indicators
- ✔ Precedent Followed – reaffirms narrow construction of exclusion clauses and insurer’s burden under utmost good faith
- 🚨 Breaking Precedent – overturns NCDRC’s dismissal of the boiler explosion claim based solely on latent defect exclusion