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Friday, January 18, 2013

Exclusion of Liability: Notwithstanding anything to the contrary contained in this policy, unless otherwise agreed to by the Corporation in writing, the Corporation shall cease to have any liability in respect of the gross invoice value of any shipment or part thereof, if: (a) the insured has failed to declare, without any omission, all the shipments required to be declared in terms of clause 8(a) of the policy and to pay premium in terms of clause 10 of the policy; (b) the insured has failed to submit declaration of overdue payments as required by clause 8(b) of the policy; or (c) ……………”- “An insurance contract, is a species of commercial transactions and must be construed like any other contract to its own terms and by itself…. The endeavour of the court must always be to interpret the words in which the contract is expressed by the parties. The court while construing the terms of policy is not expected to venture into extra liberalism that may result in re- writing the contract or substituting the terms which were not intended by the parties.”


REPORTABLE

                        IN THE SUPREME COURT OF INDIA
               CIVIL APPELLATE JURISDICTION


                     CIVIL APPEAL NO.  1557  OF 2004




      Export Credit Guarantee Corpn.
      …Appellant
      of India Ltd.




                                   Versus


      M/s Garg Sons International                      …Respondent


                                    With




      Civil Appeal Nos. 1553, 1548, 1555,  1556,  1549,  1552,  1551,  1558,
      1550, 1559, 1543, 1542, 1546, 1544, 1545 and 1547 of 2004.






                               J U D G M E N T




      Dr. B.S. CHAUHAN, J.




      1.    All the above-mentioned appeals have been preferred against  the
      common impugned judgment and  order  dated  18.2.2003  passed  by  the
      National  Consumer  Disputes  Redressal  Commission,  New  Delhi,   in
      Revision Petition Nos. 662, 663, 664, 665, 666, 667,  668,  669,  670,
      671, 672, 673, 674, 933 of 2002 and 238, 246 and 247 of 2001.
      2.    Facts and circumstances giving rise to these appeals are that:
      A.    The appellant herein, 
Export  Credit  Guarantee  Corporation  of India  Ltd., 
 (hereinafter  referred  to  as  `the  insurer’), 
 is a government company, which is in the business  of  insuring  exporters.
      
Respondent, M/s Garg Sons  International,  on  23.3.1995  purchased  a
      policy for the purpose of insuring a shipment to foreign  buyers  i.e.
      M/s Natural Selection Co. Ltd. of UK, and  
the  said  buyer  committed default  in  making  payments  
towards  such  policy  from  28.12.1995 on wards, with respect to the said consignment.


      B.    The  insured,  that  is  M/s  Garg  Sons  International,  sought
      enhancement of credit limit to the tune of Rs.50 lakhs with respect to
      the said defaulting foreign importer.  Subsequently, he  presented  17
      claims.


      C.    The insurer rejected all the abovementioned claims on the ground
      that the insured did not ensure compliance with Clause  8 (b)  of  the
      insurance agreement, which stipulated  the  period  within  which  the
      insurer is to be informed about any default  committed  by  a  foreign
      importer.


      D.    Thus, the insured then filed several complaints before the State
      Disputes Redressal Commission, to which the insurer filed replies. The
      State Disputes Redressal Commission  adjudicated  upon  the  case  and
      disposed of the said complaint, vide order dated  4.6.2001,  directing
      the insurer to make various requisite  payments  due  under  different
      claims, with 9 per cent interest and litigation expenses etc.


      E.    Being aggrieved against the orders passed in all 17 claims,  the
      insurer preferred appeals under Section 19 of the Consumer  Protection
      Act, 1986, before the National Consumer Disputes Redressal Commission,
      wherein the impugned judgment and order was disputed, stating that  it
      was evident from the said judgment that 11 claims  had  been  rejected
      and that 5 claims made by the insured were accepted.
            Hence, both the parties preferred these appeals.


      3.    Shri Santosh Paul, learned counsel appearing on  behalf  of  the
      insurer,  has  submitted  that 
 the  insured  failed  to   communicate
      information pertaining to the default made by the foreign importer, to
      the insurer, within the stipulated period, which was fixed as 45  days
      from the date on which the payment  became due, and  thus,  failed  to
      ensure compliance with  the mandatory requirement under Clause 8  (b),
      owing to which, the claims with respect to which the said  information
      was not furnished within the time period stipulated in the  agreement,
      have wrongly been allowed.  
Moreover, it is evident from the  judgment
      that only 5 claims made by the insured  were  accepted,  and  that  11
      claims were rejected, though in the said order,  only  9  claims  were
      found to be rejected and 4  were  shown  as  accepted.   
As  the  only
      numbers of 4 revisions have been mentioned, stating  that  only  these
      were worth acceptance, and those of 9 revisions have  been  mentioned,
      as those that were rejected, which was all  stated to show that  there
      were typographical errors in the judgment itself.
           In addition thereto, there were also certain appeals  and  thus,
      the order was required to be modified to  the  extent  that  only  two
      claims which were made in respect of Civil Appeal Nos.  1547  of  2004
      and 1557 of 2004, wherein all statutory  requirements  were   complied
      with deserve to be allowed, while the others, owing to  default on the
      part of the insured, are liable to be rejected.


      4.    On the other hand, Shri Satinder Singh Gulati,  learned  counsel
      appearing on behalf of the insured, has  submitted  that  
 admittedly,
      there is in fact a typographical error in the  impugned  judgment  and
      order, and has stated that the claims of the insured, with respect  to
      which there has been no default on the part  of  insured,  i.e.,  some
      claims have wrongly been rejected. 
Therefore, the appeals filed by him
      i.e. Civil Appeal Nos. 1559, 1544, 1545, 1543 and 1546 of 2004  should
      be allowed and the other appeals, should be rejected accordingly.


      5.    We have considered the rival submissions made by learned counsel
      for the parties and perused the record.


      6.    Relevant clauses of the insurance policy dated  23.3.1995,  read
      as under:
          “8. Declarations:
        a) Declaration of shipments :- …………
        b) Declaration of overdue payments:  The insured shall also deliver
           to the Corporation, on  or  before  the  15th  of  every  month,
           declaration in the term prescribed by the  Corporation,  of  all
           payments which remained wholly or partly unpaid for more than 30
           days from the due date of payment in respect of  shipments  made
           within the policy period and such declaration shall continue  to
           be rendered to the Corporation even  after  the  expiry  of  the
           policy period so long as any such payment remains overdue.
                       xx          xx         xx
           19.   Exclusion of Liability:
Notwithstanding  anything  to  the
           contrary contained in this policy, unless otherwise agreed to by
           the Corporation in writing, the Corporation shall cease to  have
           any liability in respect of  the  gross  invoice  value  of  any
           shipment or part thereof, if:
           (a)   the insured has failed to declare, without  any  omission,
           all the shipments required to be declared  in  terms  of  clause
           8(a) of the policy and to pay premium in terms of clause  10  of
           the policy;
           (b)   the insured has failed to submit  declaration  of  overdue
           payments as required by clause 8(b) of the policy; or
           (c)   ……………”

   7. If both the conditions referred to hereinabove are read  together,  it
      becomes evident that the  insured  must  make  a  declaration  in  the
      prescribed form (Form No. 205), on the 15th of every month as  regards
      whether or not, there has been any default committed  by  the  foreign
      importer, either in part, or in full, for a period exceeding  30  days
      from the date on which the payment fell due, with respect to shipments
      made within the policy period. Non-compliance with the said term(s) of
      contract, will exonerate the insurer of all liability in this regard.


      8.    It is a settled legal  proposition  that  while  construing  the
      terms of a contract of insurance, the words used therein must be given
      paramount importance, and it is not open for the Court to add,  delete
      or substitute any words. 
It is also  well  settled,  that  since  upon
      issuance of an insurance policy, the insurer undertakes  to  indemnify
      the loss suffered by the insured on account of risks  covered  by  the
      policy, its terms have to be strictly construed in order to  determine
      the extent of the liability of the insurer.
Therefore,  the  endeavour
      of the Court should always be to  interpret  the  words  used  in  the
      contract in the manner that will best express  the  intention  of  the
      parties. (Vide: M/s. Suraj Mal Ram Niwas Oil Mills (P) Ltd. v.  United
      India Insurance Co. Ltd.,  (2010) 10 SCC 567).


      9.    The insured cannot claim anything more than what is  covered  by
      the insurance policy. “…the terms of the contract have to be construed
      strictly, without altering the nature of the contract as the same  may
      affect the interests of the parties  adversely.”  The  clauses  of  an
      insurance policy have to be read as they are…Consequently,  the  terms
      of the insurance policy, that fix  the responsibility of the Insurance
      Company must also be read strictly. The contract must  be  read  as  a
      whole and every attempt should be made to harmonize the terms thereof,
      keeping in mind that the rule of contra proferentem does not apply  in
      case of commercial contract,  for  the  reason  that  a  clause  in  a
      commercial contract is bilateral and has mutually been agreed upon.
       (Vide : Oriental Insurance Co. Ltd. v.  Sony  Cheriyan  AIR  1999  SC
      3252;  Polymat India P. Ltd.  v.  National  Insurance  Co.  Ltd.,  AIR
      2005 SC 286; M/s. Sumitomo Heavy Industries Ltd. v. Oil & Natural  Gas
      Company, AIR 2010 SC 3400; and Rashtriya  Ispat  Nigam  Ltd.  v.  M/s.
      Dewan Chand Ram Saran AIR 2012 SC 2829).


      10.   In Vikram Greentech (I) Ltd. & Anr. v.  New India Assurance  Co.
      Ltd. AIR 2009 SC 2493, it was held :
           “An insurance contract, is a species of commercial  transactions
           and must be construed like any other contract to its  own  terms
           and by itself…. The endeavour of the court  must  always  be  to
           interpret the words in which the contract is  expressed  by  the
           parties. The court while construing the terms of policy  is  not
           expected to venture into extra liberalism that may result in re-
           writing the contract or substituting the terms  which  were  not
           intended by the parties.”


      (See also : Sikka Papers Limited v. National Insurance Company  Ltd  &
      Ors. AIR 2009 SC 2834).


      11.   Thus, it is not permissible for  the  court  to  substitute  the
      terms of the contract itself,  under  the  garb  of  construing  terms
      incorporated in the agreement of insurance. No exceptions can be  made
      on the ground of equity. The liberal attitude adopted by the court, by
      way of which it interferes in the terms of an insurance agreement,  is
      not permitted.  The same must certainly not be extended to the  extent
      of substituting words that were never  intended to form a part of  the
      agreement.


      12.   The instant case is required to be considered in  light  of  the
      aforesaid settled legal propositions. The requisite record reveals the
      factual matrix as under:

CA No. |Invoice No. |Invoice date |Date of shipment  |Due  date  of  payment
|Period for payment |Date for submission of Form-205 8(b) compliance  |Delay
in filing 8(b) compliance
(i.e. form 205) |Amount | |1555/04 |160/95 |3.11.95 |13.11.95 |28.12.95  |45
days |17.7.96 |More than  5  months  |8777/-  |  |1548/04  |163/95  |8.11.95
|20.11.95 |5.1.96 |45  days   |17.7.96  |More  than  5  months  |116424/-  |
|1552/04 |165/95 |13.11.95 |19.11.95 |4.1.96 |45 days |17.7.96 |More than  5
months |96474/- | |1549/04 |166/95  |13.11.95  |19.11.95  |4.1.96  |45  days
|17.7.96 |More than 5 months |67194/- |  |1551/04  |177/96  |2.1.96  |3.2.96
|18.3.96 |45 days |17.7.96 |More than 2 months |52629/- |  |1558/04  |182/96
|16.1.96 |3.2.96 |18.3.96 |45 days |17.7.96 |More than 2 months |249377/- |
|1553/04 |184/96 |29.1.96 |15.2.96 |31.3.96 |45 days |17.7.96 |More  than  2
months |414354/-  |  |1559/04  |186/96  |7.2.96  |6.3.96  |6.5.96  |60  days
|17.7.96 |More than 1 month |239656/- | |1550/04 |191/96  |22.2.96  |24.2.96
|24.4.96 |60 days |17.7.96 |More than 1 month |242055/- |  |1544/04  |192/96
|22.2.96 |6.3.96 |6.5.96 |60 days |17.7.96 |More than 1  month  |343777/-  |
|1545/04 |193/96 |26.2.96 |28.2.96 |30.4.96 |60 days |17.7.96 |More  than  1
month |267229/- | |1543/04  |195/96  |13.3.96  |25.3.96  |25.5.96  |60  days
|17.7.96 |2 days |306159/- | |1556/04  |196/96  |22.3.96  |25.3.96  |25.5.96
|60 days |17.7.96 |2 days |264400/-  |  |1547/04  |200/96  |19.4.96  |6.5.96
|6.7.96 |60 days |17.7.96 | |314961/- | |1546/04 |162/95 |8.11.95  |20.11.95
|5.1.96 |45 days |17.7.96 |More than 5 months |528257/- |  |1557/04  |201/96
|19.4.96 |6.5.96 |6.7.96 |60 days |17.7.96 | |1362688/- |  |1542/04  |164/95
|11.11.95 |19.11.95 |4.1.95 |45 days |17.7.96 |More than 5 months  |579766/-
| |13.      The aforesaid chart clearly establishes that the insured  failed
      to comply with  the  requirement  of  clause  8(b)  of  the  agreement
      informing the insurer about the non-payment of outstanding dues by the
      foreign importer within the stipulated time except in two cases.


      14.   Thus, we are of the view that only two claims which are subject-
      matters in Civil Appeal Nos. 1547 and  1557  of  2004  deserve  to  be
      allowed.  The others are dis-allowed.
            With these observations, all 17 appeals stand disposed of.





    ..………………………….J.
                                                                 (Dr.   B.S.
    CHAUHAN)




                                        .…………………………..J.
                                         (V. GOPALA GOWDA)
    New Delhi,
    January 17, 2013


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