Full Judgment Text
2025 INSC 1315
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No……….. OF 2025
(Arising out of SLP (C) Nos. 1377-1378/2022)
KOPARGAON SAHAKARI SAKHAR KARKHANA LTD
(NOW KNOWN AS KARMAVEER SHANKARRAO KALE
SHAHKARI SHAKHAR KARKHANA LTD.)
…APPELLANT(S)
VERSUS
NATIONAL INSURANCE CO. LTD. & ANR.
…RESPONDENT(S)
J U D G M E N T
MANOJ MISRA, J.
1. Leave granted.
2. These two appeals arise from a Consumer Complaint
No. 7 of 2007 filed by the appellant against the
Signature Not Verified
Digitally signed by
KAVITA PAHUJA
Date: 2025.11.13
16:51:46 IST
Reason:
respondents before the Maharashtra State Consumer
Dispute Redressal Commission, Mumbai, Circuit
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 1 of 33
1
Bench at Aurangabad . The State Commission vide
order dated 24.07.2012 partly allowed the complaint
and, inter alia , awarded Rs.49 lacs as compensation
to the complainant-appellant with interest @ 6% p.a.
w.e.f. 03.07.2006 till realization of the awarded
amount.
3. Against the order of State Commission two appeals
were filed before the National Consumer Disputes
2
Redressal Commission, New Delhi . Appeal No.166 of
2013 was by the appellant for enhancement of
compensation whereas Appeal No.580 of 2012 was by
the insurance company (i.e., the first respondent)
against award of compensation.
4. NCDRC allowed the appeal of the first respondent and
dismissed the appeal of the appellant by a common
judgment and order dated 09.11.2020, which is
impugned in these appeals filed by the complainant-
appellant.
1
State Commission
2
NCDRC
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 2 of 33
Facts
5. Relevant facts are as under:
(i) The appellant obtained an insurance policy from
the first respondent (i.e., insurance company). The
policy provided insurance cover, inter alia , to Boiler
no.GT-23 for the period starting from 01.02.2005 up
to 31.01.2006. The risk covered loss /damage up to
Rs.1.60 crores.
(ii) On 12.05.2005, a blast/ explosion took place in
that boiler. Intimation of the blast was provided to the
boiler inspector as also to the first respondent.
(iii) The first respondent appointed a surveyor to
inspect the boiler and assess the loss.
(iv) Based on surveyor’s report, appellant’s claim for
compensation was repudiated by the first respondent
vide letter dated 22.06.2005, which reads thus:
“ NATIONAL INSURANCE COMPANY LTD.
(Subsidiary of General Insurance Corporation of India)
Branch Near Kanya Vidyalaya KOPARGAON-423601
Our ref.no.270708 22.06.2005
To,
The Managing Director,
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 3 of 33
The Kopargaon Sahakari Sakhar Karkhana Ltd.,
Gautamnagar, Kolpewadi, Kopargaon.
Dear Sir,
Re: Claim for accident damaged Boiler No.2 GT-23
on 14.05.2005 at night- Our Policy No.271901/
44/04/51/16. Claim No.271901/ 44/ 05/ 51/ 001
We refer to your claim intimation letter dt. 20.05.2005
& subsequent letter dt.21.06.2005 on the captioned
claim & would inform you as under:
Our Regional Office had appointed Shri Pradeep Tambe,
Surveyor to ascertain the exact cause of loss who carried
out the inspections about reported loss on 27.05.2005
at site & submitted his report. According to the report
1. Two number of boiler tubes had slipped off from the
connection with the drum. This connection was made
by expanding of tubes in boiler shell holes made for the
purpose of connection.
2. Other many tubes had become loose in expanded
portion, which were marked by chalk.
3.The tubes were seen bulged for rest of the portion of
length of tubes.
4. In the region of expansion of tube heavy corrosion was
observed.
5. Majority of those tubes were fitted in 1986 and had
served their useful life.
Based on the above observations and photographs the
loss was occasioned by wasting of tube material in way
of expansion joint due to corrosion which is a slow
deterioration over a period of about 20 years resulted
into failure of expanded joint of tubes with steam drum.
Further bulging of tubes in general is also in one
direction only indicating that it has happened due to
long usage.
All above reasons are detailed in exclusion no.5 of our
BPP policy issued to you and we quote the same here for
your reference.
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 4 of 33
Defects due to the wearing away or wasting of the
materials of a boiler or a pressure plant whether by
leakage, corrosion or by the action of fuel or otherwise
the grooving or the fracturing of any of the parts of a
boiler or pressure plant or for deterioration generally or
for the development of cracks, blisters, limitation and
other flaws or fractures failures of joint within the range
of steam or feed pipes or for bulging and deformation
due to overheating of tubes (unless such defect,
fractures, failure or bulging result in explosion or
collapse) or for the cracking of section of cast iron
heating boilers or other vessels constructed of cast iron.
In view of the above referred reasons which are falling
under exclusion no.5 of our B.P.P. Policy, we are
absolved from the liability under the policy and hence
we repudiate your claim.
We regret the inconvenience caused to you.
Kindly acknowledge receipt.
Sd/-
BR. MANAGER”
(i) On receipt of the repudiation letter, the appellant
made a fresh representation to the first respondent. In
the meantime, Maharashtra State Insurance Fund
also appointed a joint surveyor who submitted a report
on 16.01.2006. In their opinion, there was no
explosion in the boiler. Rather, leakage was from boiler
tubes which had slipped off from the expanded portion
in the drum.
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 5 of 33
(ii) Consequently, vide letter dated 03.07.2006, the
claim was again rejected.
(iii) Aggrieved by rejection of its claim, the appellant
filed Consumer Complaint Case No. 7/2007 before the
State Commission.
Issues framed by State Commission
6. Based on pleadings of the parties, the State
Commission framed the following issues:
(1) Whether the insurance claim is barred by
limitation?
(2) Whether the complainant proved deficiency in
service on part of the insurance company?
(3) Whether the complainant is entitled to receive
compensation as claimed?
(4) What relief to be granted?
State Commission’s Finding(s)
7. On Issue no.1 (supra), the State Commission held that
as per the provisions of Section 24A of the Consumer
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 6 of 33
3
Protection Act, 1986 , the complaint must be filed
within two years from the date the cause of action has
arisen, since the cause of action first arose on
repudiation of the claim, that is, on 22.06.2005, and
thereafter, on rejection of the revised claim, that is, on
03.07.2006, both being within two years of the date of
filing of the complaint, the complaint was not barred
by limitation.
8. On Issue no.2 (supra), the State Commission held that
there was deficiency in service on part of the first
respondent because Boiler Inspector had examined
and tested the boiler before its explosion and had
issued a certificate of fitness on 17.11.2004; and the
explosion took place during currency of the fitness
certificate. Otherwise also, it is expected that the
insurance company would inspect and satisfy itself
about the fitness of the boiler before issuing an
insurance cover. Thus, repudiation of the claim by
3
1986 Act
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 7 of 33
taking aid of clause 5 of the terms and conditions of
the policy was not sustainable.
9. On issues 3 and 4 (supra), the State Commission
opined that against the compensation claim of
Rs.87,49,141 only Rs.48,91,596.75 is payable as
certain bills were doubtful and 10% deduction was
permissible towards salvage amount. Besides that, as
per norms 75 per cent of the balance amount is to be
awarded on non-standard basis.
Appeal(s) before NCDRC
10. Two appeals were filed before NCDRC against the
order of the State Commission. The appellant
challenged the deductions from the compensation
claimed by him. Whereas, the first respondent
questioned the award of compensation in view of the
exclusion clause 5.
NCDRC Finding(s)
11. During proceedings before NCDRC, survey reports
relied by the first respondent (i.e., the insurance
company) were taken on record. Based on those
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 8 of 33
survey reports including joint survey report dated
16.01.2006, NCDRC concluded that accident occurred
due to slipping out of tubes from the boiler as survey
reports indicated that two boiler tubes had slipped off
from the drum of the boiler because they were
expanded to fit in the boiler holes, and many tubes
had gotten loose. Besides, some tubes were fitted in
1986 and had outlived their useful life. Moreover,
there was no damage to the boiler. Therefore, the
accident occurred on account of tubes slipping off
from the main body/drum which risk was excluded
from boiler and pressure plant insurance policy
though, as per report, it may fall under machinery
insurance policy. NCDRC thus found the claim
excluded under exclusion clause 5 incorporated in the
insurance policy. Consequently, the order of the State
Commission was set aside and the complaint
dismissed.
12. Aggrieved by the decision of NCDRC, these appeals
have been filed.
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 9 of 33
13. We have heard Shri Shekhar G. Devasa for the
appellant and Shri Gaurav Sharma for the
respondents.
Submissions on behalf of the Appellant
14. The learned counsel for the appellant submitted:
(i) Insurance policy was issued on 01.02.2005 after
being satisfied with boiler’s condition, based on
inspection report dated 17.11.2004 of the Boiler
Inspector prepared under the Indian Boilers Act,
4
1923 .
(ii) Under the Boilers Act unless a boiler is registered
5
thereunder, it cannot be used or permitted to be used .
(iii) Section 7 of the Boilers Act mandates that the
owner of any boiler, which is not registered under the
provisions of the Act, may apply to the inspector to
have the boiler registered. Upon receipt of such
application, the inspector is required to proceed to
examine the boiler to determine, in a prescribed
4
Boilers Act.
5
Section 6 of the Boilers Act.
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 10 of 33
manner, the maximum pressure, if any, at which such
boiler may be used; and the result of such examination
is to be reported to the Chief Inspector in the
prescribed form. The Chief Inspector, thereafter, may
register the boiler and assign a registration number.
Otherwise, the Chief Inspector has power to refuse
registration of the boiler.
(iv) Section 8 of Boilers Act governs renewal of the
certificate. Section 19 provides for an appeal if any
person is aggrieved by an order made, or purported to
be made by an Inspector, in exercise of any power
conferred by or under the Boilers Act, or by refusal to
make an order or to issue any certificate which the
Inspector is required or enabled by or under the Act to
make or issue. Further, Section 21 attaches finality to
the orders passed under the Act.
(v) Admittedly, the boiler which met with an
accident was registered under the provisions of the
Boilers Act and its fitness certificate was valid on the
date when the accident occurred. Moreover, insurance
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 11 of 33
policy was issued by the first respondent after being
fully satisfied with the state of the boiler and the plant
and machinery, therefore, repudiation of the claim, by
taking recourse to clause 5, based on subsequent
reports, after the accident had occurred, was not
justified at all.
(vi) The view of NCDRC that there was no explosion,
only tubes got detached is perverse because
repudiation letter itself does not deny explosion.
Moreover, tubes can slip off due to explosion also. And
where tubes slip off due to explosion, clause 5 would
not apply to exclude a claim based thereupon.
15. To buttress his submissions, learned counsel for the
appellant placed reliance on a decision of this Court
in Canara Bank vs. United India Insurance
6
Company Limited and Ors. , wherein it was
observed that a prudent insurance company before
issuing a policy of a heavy amount must or at least
6
(2020) 3 SCC 455
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 12 of 33
should have ascertained the value and the nature of
the goods insured. In case it chooses not to verify the
stock, it cannot take advantage of its own negligence.
Based on the aforesaid judgment, it was argued that if
the insurance company had conducted its own
investigation/ inspection before the accident, it
cannot come up with a case that the accident occurred
on account of lack of maintenance of the boiler parts
and, if it had not conducted the requisite inspection
before issuing the insurance policy, it cannot take
advantage of its own negligence.
16. It was also argued on behalf of the appellant that the
insurance policy was issued on 01.02.2005 after the
requisite team constituted under the Boilers Act
conducted its inspection therefore, the repudiation
was completely unjustified.
17. Besides above, it was argued that when the matter was
argued before the State Commission, the survey report
on which reliance has been placed by the first
respondent was not on record. In fact, it was placed
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 13 of 33
before NCDRC after more than a decade. In such
circumstances, survey report should not have been
accepted on record as was done vide order dated
17.08.2020. More so, when burden to bring the case
within the exclusionary clause lies on the insurance
company. Consequently, the State Commission was
justified in drawing adverse inference against the
insurance company for not having placed the
surveyor’s report on record.
Submissions on behalf of the Respondent(s)
18. Per contra, learned counsel for the insurance
company submitted that this appeal, by special leave,
should not be entertained in view of the decision of
this court in Universal Sompo General Insurance
Company Limited vs. Suresh Chand Jain and
7
Anr. , as the appropriate course for the appellant is to
invoke the writ jurisdiction of the High Court.
7
2023 SCC OnLine SC 877 = (2024) 9 SCC 148
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 14 of 33
19. It was next contended that a survey report should
never be overlooked as it is prepared by experts.
Therefore, due regard must be given to survey reports.
Since State Commission had not given due weightage
to the survey report(s), NCDRC’s order which gave due
weightage to them requires no interference. To
buttress his submission, reliance was placed on
decisions of this Court in Sikka Papers Limited vs.
8
National Insurance Company Limited and Ors. ;
and Sri Venkateswara Syndicate vs. Oriental
9
Insurance Company Limited and Anr.
DISCUSSION/ANALYSIS
20. Before we address the rival submissions, it would be
useful to cull out those facts as regards which there
exist no dispute. These are:
10
(i) The appellant had its Boiler no.GT-23 (i.e., in
respect of which claim was made) insured with the
8
(2009) 7 SCC 777
9
(2009) 8 SCC 507
10
Boiler in question
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 15 of 33
first respondent for Rs.1.60 crores with effect from
01.02.2005 up to 31.01.2006.
(ii) Boiler in question was registered under the
Boilers Act and certified for use vide certificate dated
17.11.2004.
(iii) On 12.05.2005, the accident occurred due to
which two tubes attached to the Boiler got snapped/
detached.
(iv) The accident was reported to the Boiler Inspector
who carried out inspection on 14.05.2005 and
suggested repairs.
(v) Information of the accident was sent to the
insurance company on 16.05.2005. Initial claim was
of Rs.39.60 lacs, based on estimated cost of repairs,
later, claim of Rs.87,49,141 was submitted on
23.11.2005 based on actual cost of the repairs.
(vi) Claim was repudiated on 22.06.2005.
Repudiation letter dated 22.06.2005 cited that two
boiler tubes had slipped off from the drum of the Boiler
as they were placed on holes by expanding the tubes.
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 16 of 33
Besides those, other tubes had loosened at the joints.
Moreover, around the region of expansion, heavy
corrosion was observed. Repudiation letter also
remarked that majority of those tubes were fitted in
1986 and had outlived its serviceable period.
21. The main issue which arises for our consideration is
whether the first respondent was justified in
repudiating appellant’s claim based on exclusion
clause 5.
Exclusion clause 5
22. Exclusion clause 5 relied by NCDRC is reproduced
below:
“The defects due to the wearing away or wasting
of the material of a boiler or a pressure plant
whether by leakage, corrosion or by the action of
fuel or otherwise the grooving or the fracturing of
any of the parts of a boiler or pressure plant or for
deterioration generally or for the development of
cracks, blisters, lamination and other flaws or
fractures, failures of joint within the range of
steam or feed pipes or for bulging and
deformation due to overheating of tubes (unless
such defects, fractures, failure or bulging result
in explosion or collapse) or for the cracking of
section of cast iron heating boilers or other
vessels constructed of cast iron.”
No serious challenge to the factum of explosion
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 17 of 33
23. Before considering whether under clause 5 the insurer
was justified in repudiating the claim, we must put on
record that in the complaint the appellant had taken
a specific plea that there was a loud explosion on
account of which two boiler tubes had slipped off. The
plea regarding there being an explosion was not
traversed by the first respondent in its written
statement though it raised various pleas regarding
corrosion, improper fitting of tubes etc. In such
circumstances, in our view, there is no serious
challenge to the factum of an explosion in the boiler
resulting in damage including tubes slipping off.
General principles governing repudiation of an
insurance claim
24. Now we shall examine the general principles governing
repudiation of a claim under an insurance contract. A
contract of insurance is a contract based on utmost
good faith, and if utmost good faith is not observed by
either party the contract may be avoided by the other
party. This principle is of universal application to all
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 18 of 33
types of insurance contracts. The principle of utmost
good faith imposes positive obligations of disclosure.
In its practical application the principle permits either
party to avoid the contract altogether if it is
established against the other party either that: (1)
there has been a failure by the other party to disclose
a material fact; or (2) the other party has made an
innocent misrepresentation of a material fact, since
statements made in a contract must be true in fact.
Further, the onus of proving that the insured has
failed to perform the duty of disclosure or has broken
11
a condition relating to disclosure lies on the insurer .
25. A proposer is under a duty to disclose to the insurer
all material facts as they are within its knowledge. The
proposer is presumed to know all the facts and
circumstances concerning the proposed insurance.
Whilst the proposer can only disclose what is known
to him the proposer’s duty of disclosure is not confined
11
See: Halsbury’s Laws of England, Fourth Edition, Reissued 2003, Volume 25, Pages 36 and 37, Paras 36 and 37
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 19 of 33
to his actual knowledge. Rather, it also extends to
those material facts which, in the ordinary course of
business, he ought to know. However, the proposer is
not under a duty to disclose facts which he did not
know and which he could not reasonably be expected
12
to know at the material time .
26. A fact is material if it would influence the judgment of
a prudent insurer in fixing the premium or
determining whether he will take risk. Whether a fact
is material will depend on the circumstances, as
proved in evidence, of the case. If a fact, although
material, is one which the proposer did not and could
not in the circumstances have been expected to know,
or if its materiality would not have been apparent to a
reasonable man, his failure to disclose it is not a
breach of his duty. The proposer need not disclose
matters already known to the insurer or matters as to
which the insurer has waived information. An insurer
12
Halsbury’s Laws of England, Fourth Edition, Reissued 2003, Volume 25, Page 41, Para 44.
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 20 of 33
is deemed to know of matters of common knowledge
and matters of which he ought to be aware as an
13
insurer in that line of business.
27.
Further, if the insurer while accepting the proposal
form does not ask the insured to clarify any
ambiguities then the insurer after accepting the
premium cannot urge that there was a wrong
14
declaration made by the insured .
28. An exclusion clause in the policy is to be construed in
a manner that it does not defeat the main purpose of
15
the contract and could even be read down to serve
the main purpose of the policy that is to indemnify the
16
policy holder .
There is no failure in observing duty to disclose
29. In the light of the above general principles, we would
examine whether there was any failure on part of the
insured in making disclosure of those facts which the
13
Halsbury’s Laws of England, Fourth Edition, Reissued 2003, Volume 25, Page 39, paragraph 41.
14
See: Paragraph 44 of Canara Bank v. United India Insurance Co. Ltd. (supra), Footnote 6
15
See: Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan, (1987) 2 SCC 654, paragraph 14.
16
See: B.V. Nagaraju v. Oriental Insurance Co. Ltd., (1996) 4 SCC 647, paragraphs 7 and 8; followed in Mata Ram
v. National Insurance Company Limited and others, (2018) 18 SCC 289, paragraph 6
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 21 of 33
surveyor discovered and mentioned in its report; and
also, whether the survey report discovers any breach
of the terms and conditions of insurance as to enable
the insurer to repudiate the claim.
30. First, we shall consider whether the survey report in
categoric terms highlights a breach by the appellant of
the terms and conditions of the contract of insurance.
In our view, there is no indication in the survey report
that the appellant had been guilty of breaching the
terms and conditions of the contract. Reason is
simple. Though the report speaks of two boiler tubes
slipping off from its joint on the drum of the boiler, it
does not rule out boiler tubes slipping off due to an
explosion as had been the claim of the appellant. Mere
mention in the report that majority of tubes were fitted
in 1986 and had outlived their lives, is of no help to
the insurance company because, (a) there is nothing
on record that tubes have a specified life; and (b) there
is nothing on record that tubes’ age disclosure was
sought, or was required, and such disclosure was
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 22 of 33
either not made or incorrectly made. Besides above, it
is expected that an insurer would accept a proposal of
insurance on being satisfied with the condition of the
subject matter of insurance. Otherwise, the purpose
of an insurance, which is to tide over financial
implications of an unforeseen event such as an
accident, would stand frustrated. Moreover, an
accident may occur on account of latent or non-
detectable defects. Duty to disclose is dependent on
knowledge of the proposer as also on the nature of
disclosure sought. If the law does not specify a boiler’s
life, or life of its parts, and disclosure is not sought
regarding the age of the boiler or its parts, there may
be no corresponding duty to disclose. Further, a
latent or non-detectable defect may not be in the
knowledge of the proposer.
31. Besides above, mere discovery of corrosion on
underlying parts while making a survey is not
conclusive to hold that there was infraction of duty to
make a fair disclosure for the simple reason that those
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 23 of 33
underlying parts got noticed only because tubes
slipped off on account of the explosion. Whether those
defects were noticeable even before the explosion, is a
question which cannot be determined in absence of
proper pleading and evidence. Here, as we have
observed, there was no denial of an explosion.
Appellant’s specific case was that an explosion took
place resulting in tubes slipping off from boiler’s main
body. This plea of appellant was not traversed. Even
survey report was placed on record at the appellate
stage and not before. There is no plea that insured
played fraud upon the insurer either by not allowing
an inspection or by submitting a false data. All of this
shows that the first respondent was interested in
somehow defeating the claim of the appellant not on
facts but on pleas taken as an after-thought.
32. Furthermore, the boiler in question was registered
under the Boilers Act and its usage was permitted for
crushing season 2004-05 during which the accident
occurred. The Boilers Act not only ensures that a
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 24 of 33
boiler cannot be used without registration but
17
provides for registration of boilers . It also confers
18
power to refuse such registration . Orders passed
thereunder are appealable to the appellate authority
specified therein. Therefore, once a certificate of
registration for use of such boiler is issued, during
currency of that certificate, the boiler concerned would
be considered, prima facie , fit for usage. In such
circumstances, to substantiate that the insured
suppressed information of boiler being unworthy of
use, burden would be very heavy on the insurer,
particularly, when the accident occurs during
currency of its registration.
33. No doubt, despite a certificate of registration, an
insurer may refuse insurance based on its own inputs
about the condition of the boiler. This is because
whether an insurer should take the risk or not is best
left to its wisdom. However, when an insurer accepts
17
See: Section 6 of Boilers Act, 1923
18
See: Section 7(4)(b) of Boilers Act, 1923
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 25 of 33
the risk, it can repudiate the claim on limited grounds
such as, (a) by pleading and proving that there was a
failure on part of the insured in making disclosure of
a material fact which renders the contract voidable at
19
the instance of the insurer ; and (b) by demonstrating
that the terms and conditions of the contract of
insurance exclude such claims.
34. Now, we shall consider whether there was non-
disclosure of material facts, or misrepresentation, or
suppression of material facts, by the insured justifying
repudiation of contractual obligations by the insurer.
Admittedly, it is not the case of the insurer that any
specific information was sought from the proposer
which the proposer either failed to provide or provided
incorrectly. Therefore, once a proposal is accepted by
the insurer and formalities are complete, in absence of
plea and evidence of fraud or misrepresentation
making the contract voidable at the instance of the
19
See: Section 19 of the Indian Contract Act, 1872
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 26 of 33
insurer, the insurer cannot be permitted to wriggle out
of its liability under the contract.
35. In the case on hand, no material has been placed to
demonstrate fraudulent suppression or
misrepresentation or non-disclosure on part of the
insured, and there is no violation of any statutory rule
/provision regarding disclosure alleged. In such
circumstances, the first respondent could not have
repudiated the claim under the contract of insurance.
36. As regards age of the boiler in question, or of its tubes/
parts, there is no material on record to indicate that
information regarding age of the boiler or its parts was
sought for but not provided, or that beyond a specified
age a boiler is not usable. In these circumstances,
merely by saying that some of the tubes were of 1986
and, therefore, had outlived their life, in our view, the
insurer cannot escape from its liability. That apart, if
consent was caused by misrepresentation or silence,
fraudulent within the meaning of Section 17 of the
Indian Contract Act, 1872, the contract is not
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 27 of 33
rendered voidable, if the party whose consent was so
caused had the means of discovering the truth with
20
ordinary diligence . Here, there is nothing on record
to indicate that insurer was deprived or denied an
opportunity to inspect the boilers to enable it to take
a decision whether it was worthy to take the risk. Had
tubes been fitted in the boiler holes by expansion, an
inspection could have revealed the truth. Therefore,
the ground of non-disclosure to repudiate the
contract, in our view, is completely unsustainable,
particularly, in absence of pleading and evidence that
by playing fraud the appellant prevented a meaningful
inspection of the boiler in question.
Exclusion clause 5 not applicable
37. Exclusion clause 5 indicates that if defects appear
because of explosion in the boiler, it may not exclude
a claim. Reason is simple. A defect may not be visible
unless the boiler is dismantled. Therefore, when a
20
See: Exception to Section 19 of the Indian Contract Act, 1972.
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 28 of 33
registered boiler explodes within its serviceable period,
it is quite possible that its shortcomings may go
unnoticed. Those shortcomings may get exposed only
on explosion. The survey reports are not categoric that
there was no explosion. Further, specific pleading of
the claimant regarding explosion causing tubes
slipping off is not traversed. In such circumstances, it
would be extremely unjust to non-suit a claim on
discovery of defects post the blast in absence of any
specific material that such defects cannot be an
outcome of the blast or explosion.
38. No doubt, due regard is to be given to the survey
reports, particularly when they relate to technical
aspects. But here they are not of much help to the first
respondent as the survey reports are not categoric
regarding noticeable defects being present in the boiler
in question from before as could enable repudiation of
a claim.
39. Notably, the boiler in question was certified and
registered; the insurance policy was issued after the
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 29 of 33
certificate of registration was provided; and the
accident occurred while the certificate of registration
was subsisting. In such circumstances, burden was
heavy on the insurer to prove that the boiler was not
worthy of insurance cover or that such cover was
obtained by misrepresentation or suppression of
material facts or by playing fraud. Nothing of the kind
has been pleaded or proved by the insurer. A
subsequent discovery of damage or corrosion cannot
be used to repudiate the claim as it would defeat the
main purpose of the insurance contract. In our view,
therefore, in absence of a stand that the boiler and its
parts had a prescribed life and that the boiler had
outlived its prescribed life, or that there was a failure
on part of the insured in making full and complete
disclosure, making the contract voidable, exclusion
clause 5 could not have been pressed into service to
repudiate the claim of the insured.
40. Further, in the case on hand, the reports were not
conclusive of any suppression/ misrepresentation or
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 30 of 33
fraud played by the insured upon the insurer, and
facts stated therein were ambivalent in respect of
applicability of exclusion clause 5 inasmuch as the
reports do not rule out an explosion resulting in tubes
slipping off, as was the specific case of the appellant.
Therefore, based on the discussion above, in our
considered view, the insurer was not justified in
repudiating the claim by invoking the exclusion clause
5.
41. Accordingly, we are of the view that NCDRC was not
justified in setting aside the order of the State
Commission and discarding the claim of the appellant
by relying on exclusion clause 5 (supra).
42. Insofar as the plea that this Court should not
entertain the appeal, by special leave, is concerned,
suffice it to say that there is no inherent lack of
jurisdiction for this Court to exercise its power under
Article 136 of the Constitution of India against an
order of a tribunal or a court including NCDRC.
However, ordinarily, when an alternative remedy is
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 31 of 33
available before the High Court, this Court may, in its
discretion, relegate the petitioner to avail such
alternative remedy. But such discretion is to be
exercised judiciously. Here, parties had exchanged
their pleadings, and matter was ripe for hearing,
therefore, relegating the appellant to the remedy under
Articles 226 and 227 of the Constitution of India
would only delay the decision by re-starting the
proceeding that could culminate here. In such
circumstances, we decline the prayer to relegate the
appellant to the remedy under Articles 226 and 227 of
the Constitution.
43. For all the reasons above, these appeals are allowed.
The impugned judgment and order of NCDRC is set
aside. However, since NCDRC did not address the
claim of either side on the quantum of compensation
payable, we deem it appropriate to restore the appeals
on the file of NCDRC for a consideration only on the
quantum of compensation payable to the appellant.
Rest of the issues stand closed.
Civil Appeals @ SLP (C) Nos.1377-1378/2022 Page 32 of 33
44. The appeals are allowed in the aforesaid terms. First
Appeal No.580/2012 and First Appeal No.166/2013
are restored on the file of NCDRC, New Delhi for
considering the quantum of compensation payable to
the appellant. All other issues stand closed. Pending
application (s), if any, shall also stand disposed of.
45. Parties to bear their own costs.
…............................................. J.
(Pamidighantam Sri Narasimha)
................................................ J.
(Manoj Misra)
New Delhi;
November 13, 2025.
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