SUPREME COURT OF INDIA

Before:- A.P. Misra and N. Santosh Hegde, JJ.

Civil Appeal No. 2956 of 1991. D/d. 8.11.2000.

Syed Mohammed - Appellant

Versus

New India Assurance Co. Ltd. - Respondent

A. Marine Insurance Act, 1963, Section 35(3) - Contract Act, 1872, Sections 37 to 39 - Warranty clause - Conditions obligating the insured to perform or not to perform any act, should be so interpreted as to cover acts normally expected to be performed - Where the insurance policy required the insured vessel, when not in use, to be safely anchored or moored or secured with proper watch and ward - Temporary withdrawal of the watch and ward from the vessel due to bad weather does not amount to violation of the warranty clause - Held that, if conditions develop to such an extent which require for his safety a temporary withdrawal for shelter away from the vessel, the principle of strict compliance could not be stretched to make this temporary withdrawal as violation of the warranty clause and to discharge the liability of the insurer.

[Para 12]

B. Marine Insurance Act, Section 35(3) - Accident due to bad whether - Burden of proof - Surveyor's report itself records that the cause of the accident was on account of bad weather - Submission of the Insurance Company is that the appellant should have submitted a copy of the weather report from the authorised authorities to find the extent of bad weather and the burden is on the appellant to prove his claim under the policy held not tenable - Appellant has discharged his initial burden of proof about rough weather and in case the Insurance Authority wanted to prove the extent of rough weather not to be such for the watch and ward to abandon the vessel, then it was on the Insurance Company to have obtained such report.

[Paras 13 and 14]

Cases Referred :-

New India Assurance Co. Ltd. v. Radhakrishnan, (1990) 2 KLT 318.

Commissioner Income Tax v. Vegetables Products Ltd., (1973) 1 SCC 442 .

ORDER

A.P. Misra, J. - This appeal raises an interesting question of interpretation of clause 7 of the insurance policy, which is quoted herein:

"Warranted vessel not to be employed during unsafe weather conditions and when not in use, vessel should be safely anchored or moored or secured with proper watch and ward."

2. The appellant instituted a civil suit against New India Assurance Company Ltd., the respondent, for the recovery of insurance money in terms of the policy. The appellant was the owner of the fishing vessel which, while anchored at the coast of Purakkad at Alleppey, drifted from that place, was lost and destroyed. The appellant informed the respondent. As the claim could not be settled on account of denial by the respondent, the aforesaid suit was filed. The trial court decreed the suit holding against the Insurance Company by rejecting its contention that the appellant had violated the aforesaid clause 7.

3. In appeal the question raised was, whether it was the obligation of the appellant under the policy to appoint watch and ward and whether, on the facts and circumstances of this case, it could be said that compliance with the aforesaid clause was not made by the appellant. It is not in dispute that the vessel was anchored. The High Court in appeal set aside the findings recorded by the trial court by holding that the appellant had violated the warranty clause, as, at the relevant time, watch and ward was not present in the vessel in question. Hence the Insurance Company cannot be fastened with the liability as in view of this violation the respondent is discharged from the liability to pay the compensation.

4. The submission on behalf of the appellant is that watch and ward was there and he only returned from the vessel on account of the bad weather and hence withdrawal from the vessel temporarily to save himself from the onslaught of the bad weather cannot be construed to be a case of violation of the aforesaid clause. On the other hand, learned counsel for the Insurance Company submits with vehemence that in view of sub-section (3) of Section 35 of the Marine Insurance Act, 1963 and in view of the settled law, strict compliance be made with the warranty clause under the Marine Insurance Act, even if substantial compliance is made, it would still amount to violation of the warranty clause. He submits that the warranty clause has to be strictly complied with and, admittedly, as at the relevant time, watch and ward was not in the vessel, it runs contra to the condition stated in clause 7 of the warranty. Hence the submission is that the High Court is right in rejecting the contention of the appellant and upholding that of the Insurance Company.

5. The trial court recorded the following findings:

"In this case, the insured vessel was found missing since the night of 3-4-1977. It is more or less admitted by the defendant that this vessel was lost because of some accident. In order to prove that there was a watch and ward in the vessel in the night of 3-4-1977 the plaintiff examined witnesses ? PW 5. He also deposed that in the night of 3rd April there was heavy rain and wind and some of the boats which were anchored near Purakkad seashore were lost."

6. This finding of the trial court was set aside by the High Court holding that there is no such deposition by PW 5 that some of the boats which were anchored on that date were lost. To this extent, we find that the High Court was right as we do not find any such statement given by PW 5.

7. One of the questions which is up for consideration is, whether there was any rain with high wind in the early morning of 4-4-1997, when the incident was said to have taken place, which could be the cause of drifting of the vessel and its ultimately being destroyed. It is not the case of the respondent that on that date the vessel had not drifted or sunk and been finally destroyed. The submission is that if there would have been watch and ward at the relevant time, the situation could have been saved and when warranty clause 7 of the insurance policy specifically conditions to ensure to have such watch and ward, in its absence it is violation of that warranty clause. The submission is, the watch and ward should not have abandoned the vessel and come on the shore. Learned counsel for the Insurance Company submits that warranty clause specifically provided, when the vessel is not employed or in use, it should be with proper watch and ward. Section 35 of the aforesaid 1963 Act provides that the warranty is a condition which must be exactly complied with and in case not so complied, the insurer is discharged from the liability from the date of such breach of warranty.

8. In order to strengthen the submissions of strict compliance with such warranty clause, reliance is being placed on New India Assurance Co. Ltd. v. Radhakrishnan, (1990) 2 KLT 318. It has been held therein that: (KLT Headnote)

"If the special condition is violated, the insurer is automatically discharged from liability. A warranty in a marine insurance policy involving risk is a special condition which may be either express or implied. It must be exactly complied with, whether it be material to the risk or not. If it is not complied with, then, subject to any express provision in the policy, the insurer is discharged from liability as from the date of the breach of warranty,?.

The contract does not exist unless the warranty is literally complied with. It is a promissory warranty by which the assured undertakes that some particular thing shall or shall not be done or that some condition shall be fulfilled or affirms or negatives the existence of a particular state of facts. Warranty, as signifying a condition precedent, is inveterate in marine insurance unlike in some other branches of law, for example, in relation to the law of sale of goods, where it signifies only a collateral stipulation, the breach of which gives rise to merely a claim for damages and not a right to avoid the contract."

9. Reference is also made to Commissioner Income Tax v. Vegetables Products Ltd., (1973) 1 SCC 442 , which held that for a court interpreting any statute, if the language of the statute leads to any inconvenience, it has not to be taken into account in interpreting that statute.

10. There is no dispute so far on these legal positions. The question is, whether, on the facts and circumstances of the case, it could be said that there was violation of the warranty clause. The present is not a case where the watch and ward was not kept by the insured. The only question is, whether during some point of time, the absence of watch and ward could be construed to be a violation of the warranty clause. Clause 7 refers to "with proper watch and ward". It has to be read in the context of the preceding words in the same warranty clause. It has two parts, first that "the vessel not to be employed during unsafe weather conditions" and second, "when not in use, vessel should be safely anchored or moored or secured with proper watch and ward". So in unsafe weather it has not to be used and it has not been used.

11. The second part states, when the vessel is not in use, it should be safely anchored, moored and finally secured with proper watch and ward. When clause 7 refers that the vessel should be safely anchored with proper watch and ward, would mean, there should be watch and ward to secure the vessel. When we speak of strict compliance with warranty clause, would mean, there cannot be any dilution from the condition of having a watch and ward, when the vessel is not in use, vessel is not to be employed during unsafe weather. In other words, in case if the vessel is employed during unsafe weather or the vessel is without watch and ward when not in use, would be violation of the warranty clause.

12. In the present case, the watch and ward was there on the vessel when not in use, then the question is whether it could be said, on the facts and circumstances of this case, when he returns from the vessel at about 1.00 a.m. because of high wind and rain for his safety, would constitute a violation of the warranty clause. Every condition which obligates any party to perform or not to perform any act under any clause of the contract has to be so interpreted as to cover such act which normally could be expected from such person to perform. In the case of high wind with rains, rough weather at the sea, when the vessel is strongly anchored, a watch and ward in the vessel could be expected to continue up to a time when his own safety is not in doubt. However, if conditions develop to such an extent which require for his safety a temporary withdrawal for shelter away from the vessel, principle of strict compliance could not be stretched to make this temporary withdrawal as violation of the warranty clause and to discharge the liability of the insurer.

13. It is in this context we proceed to examine the averments on the record including the evidence of the Surveyor of the Insurance Company reported in the Surveyor's report. The fact which emerges is that at that point of time the weather was rough and cause of the accident was on account of the bad weather. This conclusion is clearly recorded in the Surveyor's report itself. There has been some submission on either side taking to two other extremes, one that the weather was very bad and on the other that it was not. However, the Surveyor's report itself records that the cause of the accident was on account of bad weather. The submission on behalf of the Insurance Company is that the appellant should have submitted a copy of the weather report from the authorised authorities to find the extent of bad weather and the burden is on the appellant to prove his claim under the policy.

14. On the facts of this case we find the appellant has discharged his initial burden of proof about rough weather and in case the respondent Insurance Authority wanted to prove the extent of rough weather not to be such for the watch and ward to abandon the vessel, then it was on the Insurance Company to have obtained such report. In fact the Surveyor's report records:

"Our enquiries at Purakkad coast revealed that the weather on the date of accident was rough. However, sea weather report is awaited so as to confirm the above. The proximate cause of accident appears to be bad weather."

15. Yet it seems that the Insurance Company has not taken the trouble to find the same or in case found, not placed the same on record.

16. On the evidence on record it is clear, which has not been disputed that the watch and ward was in the vessel till 1.00 a.m. in the night. It was only on account of rough weather at sea he retraced back to the shore for a few hours. PW 3 also stated, even other persons in the vessel which according to PW 5 were seven, returned back to the shore. This temporary absence of watch and ward for his own security when threatened by the fury of the rough sea cannot be construed to be a violation of the warranty clause.

17. For the aforesaid reasons, we have no hesitation to hold that there has not been any breach of the aforesaid warranty clause by the appellant and the High Court fell into error in declining to grant the claim of the appellant based on this violation. Accordingly, the present appeal is allowed. The judgment and order passed by the High Court dated 15-3-1991 is set aside. We hold that the appellant is entitled to the compensation. We restore the judgment of the trial court.

18. Costs on the parties.

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