No Privity Of Contract: Bombay HC Rejects 31.77 Million USD Appeal By Insurance Companies Against Company Providing Airport Handling Services

A division bench of Justice Bharati Dangre and Jusitce Abhay J. Mantri was considering the appellants' challenge to the order of Commercial Court, which returned the plaint filed by them, The Commercial Court found that the dispute was not a commercial dispute under the Commercial Courts Act, 2015 (CC Act) and held that it was not a proper court to adjudicate the case.

The New India Assurance Company Limited along with four other Insurance Companies (appellants/ plaintiffs) insured Indigo aircrafts. Janus Aviation Pvt. Ltd (respondent/defendant) is a company engaged in business of providing ground handling services.

Due to a storm, the passenger step ladders of the Janus blew away and struck the trailing edge of the Indigo aircraft's left wing. The Indigo aircraft, which was insured by the appellants, was damaged in the accident. The appellants claim that the aircraft was damaged due to the negligence of Janus.

The insurer/underwriter of Indigo appointed McLarens Aviation as their loss adjuster to assess the quantum of loss caused to its aircraft. The quantum of damages was set at approximately 32 million USD.

The appellants sent legal notices to the Janus stating that they suffered loss of around 31.77 million USD due to its negligence. It thus filed the suit for subrogated recovery of damages and sought recovery of approximately 31.77 million USD (equivalent to 24.69 crores) from Janus.

The appellants claimed that the dispute arose out of insurance agreement and thus is a commercial disputes under Section 2 (c)(xx) of the CC Act (disputes arising out of insurance and re-insurance).

However, Janus contended that there was no commercial relationship between it and the appellants. It contended that the appellant are relying on the purported commercial relationship of insurance between them and Indigo and thus there is no privy of contract.

The High Court noted that only those disputes which are commercial disputes within the meaning of Section 2 (1)(c) of CC Act should be entertained by the Commercial Courts and Commercial Appellate Division of High Courts.

It referred to the Supreme Court case of Ambalal Sarabhai Enterprises Limited vs. K.S. Infraspace LLP and another (2020), where it was observed that only disputes of commercial nature should be entertained by the Commercial Courts. It was observed that suits not relating to commercial disputes are filed merely because of the high value and with the intention of seeking early disposal

In the present case, the Court noted that even the plaintiff's counsel agreed that there was no privity of contract between Indigo and the Janus. It observed that the present suit did not arise out of an agreement of insurance or reinsurance as contemplated under 2(1)(c)(x) of the Act.

“Upon perusal of the pleadings in the plaint, we specifically enquired with the learned counsel for the plaintiffs as regards any privity of contract between the Indigo and the defendant and his answer is in the negative.”

“We also scanned through the pleadings, to reflect the same, but unfortunately could not find any such averment, which would lead us to derive an inference about privity of contract between the plaintiffs and Janus Aviation Pvt. Ltd.”

The Court held that there was no privity of contract between the parties.

It thus upheld the order and dismissed the appeal.

Case title: New India Assurance Co. Ltd. & Ors. vs. Janus Aviation Pvt. Ltd. (COMMERCIAL APPEAL NO. 03 OF 2024)