Kopargaon Sugar Mill vs National Insurance: SC Sets Aside NCDRC Decision, Says Boiler Blast Claim Was Wrongly Rejected

The Supreme Court recently set aside a National Consumer Disputes Redressal Commission (NCDRC) decision that had denied compensation to a Maharashtra sugar factory for damages suffered in a 2005 boiler accident, holding that the insurer wrongly repudiated the claim by invoking an exclusion clause meant for wear and tear.

The bench of Justices P S Narasimha and Manoj Misra held that National Insurance Company could not escape liability when the insured boiler was duly certified under law, the accident involved an explosion, and no material was placed to show misrepresentation or suppression by the policyholder.

The case concerned Kopargaon Sahakari Sakhar Karkhana Ltd., now known as Karmaveer Shankarrao Kale Sahkari Shakhar Karkhana Ltd., which had insured one of its boilers, Boiler GT-23, for a sum of Rs. 1.60 crore for the period between February 1, 2005 and January 31, 2006. On May 12, 2005, a blast occurred in the boiler, causing two tubes to slip from their joints and rendering the equipment non-functional. The accident was promptly reported to the boiler inspector and the insurer, which appointed a surveyor to inspect the damage.

However, by a letter dated June 22, 2005, the insurer rejected the claim. The repudiation was based on a conclusion that the accident was not caused by an explosion but by corrosion and deterioration of tubes that had been installed in 1986 and had allegedly outlived their service life. The insurer invoked Exclusion Clause 5 of the Boiler and Pressure Plant policy, which excludes claims arising from wear and tear, corrosion or defects unless those defects result in an explosion.

The factory contested the repudiation and later filed a consumer complaint before the Maharashtra State Commission. While the initial estimated loss was around Rs. 39.6 lakh, the final claim submitted was for Rs. 87.49 lakh. A joint surveyor appointed by the Maharashtra State Insurance Fund also opined that the incident was due to tube leakage and slippage rather than an explosion, and the insurer maintained its refusal through a second rejection letter issued on July 3, 2006.

The State Commission, however, held in 2012 that the accident took place during the validity of the boiler’s fitness certificate issued under the Boilers Act, which prescribes a statutory inspection and certification process for safe operation. It found that the insurer had failed to justify its reliance on the exclusion clause and had rendered deficient service. The Commission awarded compensation of about Rs. 49 lakh with interest.

On appeal, the NCDRC reversed this finding in 2020, holding that the survey reports indicated no explosion and that the claim was therefore excluded under the policy. The sugar factory then approached the Supreme Court.

In its judgment, the Supreme Court noted that the insured had specifically pleaded an explosion, and the insurer had not contested this in its written reply. The survey reports, it observed, did not conclusively rule out an explosion, and loose or corroded tubes could have been a consequence rather than a cause. Court emphasised that insurance contracts rest on utmost good faith, and repudiation on the basis of alleged non-disclosure must be supported by clear material, which was lacking in this case.

It also highlighted that a boiler registered and certified under the Boilers Act is presumed fit during the period of certification. If the insurer wished to avoid the risk, it was open to it to inspect the boiler before issuing the policy. Having chosen not to do so, the insurer could not rely on alleged wear and tear discovered after the accident.

Holding that Exclusion Clause 5 was wrongly applied, the court restored the appeals to the NCDRC only for determining the quantum of compensation payable to the sugar factory and closed all other issues.

Case Title: Kopargaon Sahakari Sakhar Karkhana Ltd (now known as Karmaveer Shankarrao Kale Shahkari Shakhar Karkhana Ltd) Vs National Insurance Co Ltd & Anr

Judgment Date: November 13, 2025

Bench: Justices P S Narasimha and Manoj Misra