Case: BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD. &amp; ANR Vs. THE STATE OF MADHYA PRADESH

show that the loss incurred was covered within the terms of the policy and that on a balance of probabilities there existed a proximate cause between the loss incurred and the helicopter being in transit. The respondent has adduced no evidence to supports its case. 37. After the respondent informed the appellant on 23 November 2005 that upon inspection, the tail boom of the helicopter was found to be damaged, the appellant promptly appointed a surveyor, who in its report dated 14 March 2006 observed: During our re-visit along with Insureds engineer we observed that the Tail boom was badly dented (apart from the crack in the glass of pilot side window initially surveyed by us) at the point where it joins the main frame. The frame was also affected and bulged inside. It appeared from the nature of damage that some hard and/or sharp object hit the frame whilst it was parked at hanger... (Emphasis supplied) Based on the above, the surveyor concluded thus: The damage to the tail boom had occurred at Hangar #3, Bay 15/33 IGI Airport Delhi after substantial assembly but prior to test flight and not during transit and hence would not fall under the purview of marine insurance policy as issued to the insured. On the basis of the surveyors report, the appellant rejected the claim of the respondent on 10 April 2006. By a letter dated 11 April 2006, the Directorate of Aviation, Government of Madhya Pradesh responded to the above letter on behalf of the respondent stating: It is very important to mention here that the investigation by your surveyors and their interviews with technical representatives of Acro Helipro, scrutiny of customs documents, physical inspection of helicopter at Palam airport etc. confirms that this damage to the helicopter was caused in Nov? 05 whereas this helicopter was cleared from customs on 13 th Oct? 05. ... Though your findings of damage to helicopter in Nov? 05 i.e. after a month after receipt of helicopter from customs are based on facts but here we wish to inform you that our policy for transit is up to Bhopal and therefore damage to the helicopter after a month from receipt of the customs i.e. in the month of Nov? 05 is also covered under transit. (Emphasis supplied) 38. It is evident from the contents of the above letter written by the the Directorate of Aviation, Government of Madhya Pradesh that the respondent did not challenge the surveyors report. Instead it accepted the finding of the surveyor that the damage to the helicopter took place only in November 2005, after the helicopter had been cleared through customs on 13 October 2005. Accepting the report of the surveyor, the Directorate of Civil Aviation of the Government of Madhya Pradesh sought to contend that the ordinary course of transit extended until Bhopal. This admission is contrary to the stance taken by the respondent before this Court that the damage to the helicopter occurred during the course of transit before the cargo was cleared from customs at Delhi. The learned counsel for the respondent has in his written submissions before this Court argued that since the procurement and supply of the new window was taking considerable time, the helicopter was kept in storage in the meantime in the hangar was covered with a bubble sheet and packing material. The respondent has on the balance of probabilities failed discharge its burden that the damage to the helicopter incurred during the course of transit. No proximate cause has been shown between the damage to the helicopter and the helicopter being in a state of transit. Hence, it is difficult for this Court to come to the conclusion that the damage to the helicopter incurred during the course of transit. 39. The NCDRC has in the impugned judgment proceeded on the understanding that since customs clearance is essentially at New Delhi, it has to be construed and interpreted in the right spirit that the commencement of the transit is at Langley and ordinary course of transit includes the staying at Delhi for customs clearances and for assembling . The NCDRC has further noted that there existed no ambiguity regarding the commencement of the risk at Langley and ending at the final destination i.e. Bhopal. According to the NCDRC, the expiry of thirty days after completion of discharge at the final port of discharge should be essentially interpreted as thirty days after reaching Bhopal and not thirty days during the course of transit which included the halt at New Delhi. The line of approach adopted by the NCDRC is evidently incorrect. While construing a contract of insurance, it is not permissible for a court to substitute the terms of the contract. The court should always interpret the words used in a contract in a manner that will best express the intention of the parties. The NCDRC has incorrectly proceeded on the path that the ordinary course of transit would include assembling of the helicopter at New Delhi and the policy covered all risks till the time the helicopter did not reach Bhopal. The risks associated with the assembled helicopter were not covered within the purview of the policy, as the subject-matter which had been insured was a helicopter being transported in a packaged knocked down condition. The act of assembling the helicopter with a view to having it flown under its own power, instead of transporting the packaged knocked down helicopter further to Bhopal by road, would not constitute as storage in the ordinary course of transit. The interpretation adopted by the NCDRC strikes fundamentally at the purpose of the policy and is not in accordance with sound commercial principles. The interpretation altered the character of the risk insured beyond the scope of the policy as agreed between the parties. 40. We are hence of the view that the interpretation placed on the terms of the insurance policy was manifestly incorrect and that the impugned orders of the NCDRC and SCDRC are unsustainable.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]12. The dispute before this Court is with respect to the damage to the tail boom of the helicopter and not as regards the damage to the windscreen glass. By a letter dated 10 April 2006, the appellant informed the assured that the total cost of replacement of the windscreen glass was within the policy deductible of 0.5% of the sum insured and as such no liability arose under the policy. The assured has not challenged that before this Court13. The insurance policy issued by the insurer to the insured represents a contract between the parties. The insurer undertakes to compensate the insured for the losses covered under the insurance cover subject to the terms and conditions of the policy. The appellant issued a policy to the respondent on 22 July 2005. Under the policy schedule, the cargo was to be transported from Langley to Bhopal. The policy schedule prescribed that the appellant company agrees to insure against loss, damage, liability or expenses subject to the limit of indemnity and the clauses, endorsements, exclusions, conditions and warranties in the schedule to the policy. The extent of the policy cover was governed by and subject to various clauses mentioned in the policy schedule which included the ICC. The ICC, inter alia, prescribed the risks covered, exclusions, duration and duties of the insurer and the insured14. The dispute in the present case is on the interpretation of the termination clause of the ICCThe insurance cover in the present case is expressed in terms of the voyage itself. The above clause provides that the duration of the policy attached and commenced from the time the insured cargo left the warehouse, premises or place of storage at the place named in the policy and continued during the ordinary course of transit18. The expression in the ordinary course of transit mentioned in Clause 5 of the ICC cannot be divorced from the context and must be read along with the other conditions which appear in the policy document26. The appellant issued a policy cover to the respondent providing coverage for the transport of the helicopter from Langley to Bhopal. The helicopter was transported in a knocked down state by air through Cathay Pacific Airlines and reached New Delhi on 5 October 2005. It cleared customs on 13 October 2005 and on the same day, the respondent after taking possession of the cargo shifted it to the hangar at New Delhi. It is undisputed that at the time of customs clearance, no damage was reported. It was when the helicopter was inspected by the representative of the manufacturer during a routine inspection on 21 October 2005 that damage was reported to the window of the crew door of the helicopter. In a communication dated 21 October 2005 addressed by the representative of the manufacturer for placing an order for a crew door window, it was stated that further unpacking of the Fuselage Assembly was carried out and no other damage was evident27. The contents of the above letter negate the submission of the learned counsel for the respondent that the helicopter was shifted to the hangar for the purposes of assembling and preparing it for further transportation by road to Bhopal. It is evident from the above letter that the intention of the respondent was to assemble the helicopter at New Delhi and to fly it to Bhopal. The helicopter was transported from Langley in a knocked down state. The specific act of unpacking the cargo at New Delhi in furtherance of the purpose of assembling it for the flight to Bhopal indicated that the transportation of the cargo in a knocked down state had come to an end. The act of unpacking the helicopter for the purpose of assembling it for undertaking the flight to Bhopal was unrelated to the usual or ordinary method of pursuing the transportation of the cargo insured. The policy covered only those risks that were associated with the transportation of the helicopter and did not cover the risks associated with the flight or operation of the helicopter29. In the present case, the transit policy only covered such risks that may have arisen by the venture or operation being carried out in the usual or ordinary manner and did not include risks that were out of the scope of the policy. Change in the character of the helicopter from a knocked down state to a ready to fly state exposed the appellant to risks not contemplated by the parties under the policy. The effect of the alteration of the subject-matter insured is outside the scope of the agreed cover and brings an end to the policy. Once the nature of the subject- matter was altered, the cargo cannot be said to be in transit and the appellant is absolved from any liability arising out of any subsequent damage to the consignment. Exposure to risks associated with the flight substantially and unnecessarily added to the risks of the journey that were not covered by the policy. Accordingly, the submission of the learned counsel for the respondent that the cover against risks would be provided till the time the helicopter was not delivered at the final destination of Bhopal is unsustainable. Once the respondent intended to alter the subject-matter it becomes irrelevant to determine whether the hangar at New Delhi was a transit store or the final destination of deliveryClause 5.1.2 of the ICC provides that the policy may terminate upon the assured choosing to use an alternate place of delivery, prior to the destination named therein for one of two purposes, either for storage other than in the ordinary course of transit or for allocation or distribution of the cargo. The purpose of a transit policy is to cover the carriage of goods to the final destination. In the present case, storage of the helicopter in the hangar at New Delhi awaiting replacement of the spare window cannot be said to be incidental or in furtherance of the carriage of the goods to the ultimate destination. It would be unreasonable to suggest that the transit policy intended to cover indefinite storage of the helicopter at the hangar in New Delhi not brought about by the requirements of transport but determined by commercial convenience of the respondent. The degree of deviation of storing the helicopter at the hangar awaiting replacement of the spare window is at variance with the ordinary course of transit. Ordinary course of transit is the period when the cargo is in the course of transportation, and not in the immediate control of the buyer or seller. After the goods cleared customs, the helicopter was in possession of the respondent and it took a voluntary decision of retaining the helicopter in New Delhi on the basis of commercial convenience. As found in the earlier part of the judgment, the intention of the respondent was not to prepare the helicopter for transportation by road to Bhopal but to assemble the helicopter in New Delhi and fly it to Bhopal. Once the respondent decided to leave the goods in the hangar at New Delhi for its commercial convenience not associated with or in furtherance of the requirements of their carriage to Bhopal, the transit insurance endedIn the present case, the insured voluntarily decided to store the helicopter in the hangar at New Delhi out of commercial convenience and not in furtherance of the transit. In addition, the insured by assembling the knocked down helicopter for the purposes of flying it to Bhopal changed the nature of the consignment and exposed the appellant to operational risks beyond the scope of the policyIn the present case, if the respondent decided to retain the helicopter in New Delhi awaiting the arrival of the replacement window from USA, it could have issued a notice to the underwriters to continue the cover of carriage till the time the repairs were carried out. However, the respondent did not issue any notice seeking extension of the insurance cover under Clause 636. For the respondent to prove its case, a mere assertion that the loss incurred during the course of transit is not sufficient. The burden of proof lies on the respondent to show that the loss incurred was covered within the terms of the policy and that on a balance of probabilities there existed a proximate cause between the loss incurred and the helicopter being in transit. The respondent has adduced no evidence to supports its case38. It is evident from the contents of the above letter written by the the Directorate of Aviation, Government of Madhya Pradesh that the respondent did not challenge the surveyors report. Instead it accepted the finding of the surveyor that the damage to the helicopter took place only in November 2005, after the helicopter had been cleared through customs on 13 October 2005. Accepting the report of the surveyor, the Directorate of Civil Aviation of the Government of Madhya Pradesh sought to contend that the ordinary course of transit extended until Bhopal. This admission is contrary to the stance taken by the respondent before this Court that the damage to the helicopter occurred during the course of transit before the cargo was cleared from customs at Delhi. The learned counsel for the respondent has in his written submissions before this Court argued that since the procurement and supply of the new window was taking considerable time, the helicopter was kept in storage in the meantime in the hangar was covered with a bubble sheet and packing material. The respondent has on the balance of probabilities failed discharge its burden that the damage to the helicopter incurred during the course of transit. No proximate cause has been shown between the damage to the helicopter and the helicopter being in a state of transit. Hence, it is difficult for this Court to come to the conclusion that the damage to the helicopter incurred during the course of transit39. The NCDRC has in the impugned judgment proceeded on the understanding that since customs clearance is essentially at New Delhi, it has to be construed and interpreted in the right spirit that the commencement of the transit is at Langley and ordinary course of transit includes the staying at Delhi for customs clearances and for assembling . The NCDRC has further noted that there existed no ambiguity regarding the commencement of the risk at Langley and ending at the final destination i.e. Bhopal. According to the NCDRC, the expiry of thirty days after completion of discharge at the final port of discharge should be essentially interpreted as thirty days after reaching Bhopal and not thirty days during the course of transit which included the halt at New Delhi. The line of approach adopted by the NCDRC is evidently incorrect. While construing a contract of insurance, it is not permissible for a court to substitute the terms of the contract. The court should always interpret the words used in a contract in a manner that will best express the intention of the parties. The NCDRC has incorrectly proceeded on the path that the ordinary course of transit would include assembling of the helicopter at New Delhi and the policy covered all risks till the time the helicopter did not reach Bhopal. The risks associated with the assembled helicopter were not covered within the purview of the policy, as the subject-matter which had been insured was a helicopter being transported in a packaged knocked down condition. The act of assembling the helicopter with a view to having it flown under its own power, instead of transporting the packaged knocked down helicopter further to Bhopal by road, would not constitute as storage in the ordinary course of transit. The interpretation adopted by the NCDRC strikes fundamentally at the purpose of the policy and is not in accordance with sound commercial principles. The interpretation altered the character of the risk insured beyond the scope of the policy as agreed between the parties.40. We are hence of the view that the interpretation placed on the terms of the insurance policy was manifestly incorrect and that the impugned orders of the NCDRC and SCDRC are unsustainable.