Sufficient Evidence To Justify Repudiation By Invoking Exclusion Clause: SC Allows Insurance Company's Appeal Against NCDRC Judgment In 2009 Chambal Bridge Collapse Case

The Supreme Court allowed the appeal filed by United India Insurance Co. Ltd. against M/s Hyundai Engineering & Construction Co. Ltd. & Ors., challenging the decision of the National Consumer Disputes Redressal Commission (NCDRC) which allowed the consumer complaint and directed the insurance company to release and pay an insurance claim of Rs. 39,09,92,828/-.

The Court said that the NCDRC fell into a clear error of law and fact in allowing the consumer complaint and that there is sufficient evidence to justify repudiation of the claim on the basis of the exclusion clause.

The two-Judge Bench of Justice P.S. Narasimha and Justice Aravind Kumar observed, “… we are of the opinion that the NCDRC fell into a clear error of law and fact in allowing the consumer complaint for multiple reasons. As we have not agreed with the preliminary objection of the appellant to reject the complaint and relegate the respondents to civil court, we made extra efforts to examine the facts in detail. It is for this reason that the evidentiary value of the reports, their scope and ambit, and their contents were examined by us in some detail.”

Senior Advocates Abhishek Manu Singhvi and Niraj Kishan Kaul appeared for the appellant while Senior Advocate Dama Seshadri Naidu appeared for the respondents.

Brief Facts -

The National Highways Authority of India (NHAI) awarded a contract for the design, construction, and maintenance of a cable-stayed bridge across the river Chambal on NH-76 at Kota, Rajasthan to a joint venture company comprising the respondent. The value of the project under the contract was Rs. 2,13,58,76,000/-. The appellant (insurance company) issued a Contractor’s All Risk Insurance Policy covering the interest of NHAI as principal. While the construction was in progress, a part of the constructed bridge collapsed in 2009, resulting in the death of 48 workmen. The Ministry of Road Transport and Highways, Government of India constituted a committee of experts (Expert Committee) for investigating and reporting the cause of the said collapse. An FIR was lodged against the respondent for offences under Sections 304 and 308 of the Indian Penal Code (IPC). The respondent was found liable for the loss of 48 lives due to several defects at the stage of design, construction, and supervision. While the surveyor was furnishing the details, the respondent made a claim of Rs. 1,51,59,94,542/-.

In 2010, NHAI issued a show-cause notice to the respondent and in the meanwhile, the surveyor appointed by the insurance company/appellant submitted its final report. It was recommended that the insurance claim must be rejected as the respondent violated the conditions of the insurance policy and hence, the claim was repudiated. On the request of the respondent, the appellant agreed to reconsider the repudiation but it did not find any justifiable reason for accepting the claim. In the meanwhile, the bridge was inaugurated and put to public use and was operating since then. After almost 2 years of the rejection of the claim, the respondent filed a consumer complaint before the NCDRC and the same directed the appellant to pay a sum and strangely, when its judgment was pronounced, an addendum was added to the judgment. The same was undated and sought to amend paras and directed payment of Rs. 1,51,59,94,542/- instead of Rs. 39,09,92,828/-. Being aggrieved, the insurance company approached the Apex Court.

The Supreme Court in view of the facts and circumstances of the case noted, “At the outset, the concerned experts were never examined before the NCDRC. Further, these reports were not based on site inspection. They are all theoretical in nature.”

The Court further noted that there is sufficient evidence to indicate that the surveyor made site-visits and the proof of that was part of the pleadings filed before it.

“The submission that NHAI continuing the contract with respondent nos. 1 and 2 and they have, in fact, completed the contract does not impress us. The continuation of work by respondent nos. 1 and 2 could be due to various reasons”, it said.

The Court added that even if the NHAI’s decision to continue is taken to be a valid economic decision, that by itself cannot be a reason for not applying the applicable clause of the contract if such applicability is otherwise proved by cogent evidence.

Accordingly, the Apex Court allowed the appeal and set aside the order of the NCDRC.

Cause Title- United India Insurance Co. Ltd. v. M/s Hyundai Engineering & Construction Co. Ltd. & Ors. (Neutral Citation: 2024 INSC 431)

Appearance:

Appellant: Senior Advocates Abhishek Manu Singhvi, Niraj Kishan Kaul, AOR Amit Kumar Singh, Advocates K Enatoli Sema, Chubalemla Chang, and Prang Newmai.

Respondents: Senior Advocate Dama Sheshadri Naidu, Advocates Mahesh Agarwal, Rishi Agrawala, Ankur Saigal, S. Lakshmi Iyer, Anwesha Padhi, Himanshu Saraswat, and AOR E. C. Agrawala.

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