TMI Blog2015 (7) TMI 1161X X X X Extracts X X X X X X X X Extracts X X X X ..... covered, how the premium is to be computed and paid. What eventually matters is where the liability of the insurer is exclusively excluded, the said clauses of the policy are absolutely clear, unequivocal and unambiguous. The insured after availing a policy in commercial transactions is to understand the policy in entirety. The construction of the policy in entirety and in a harmonious manner leaves no room for doubt that there is no equivocality or ambiguity warranting an interpretation in favour of the insured-appellant. Whatever the reasons the appellant may give, he having not declared as prescribed in Clause 8(a), which is again reiterated by way of reference in Clause 19(a), the exclusionary clause, it will be an anathema to the concept of interpretation of contract of insurance of such a nature, if liability is fastened on the insurer. The finding of the Commission that the appellant had not take steps to retrieve the goods is absolutely immaterial for the present purpose. The said finding though is flawed, the ultimate conclusion, which is based upon our independent analysis, is correct. - CIVIL APPEAL NO. 2729 OF 2009 - - - Dated:- 7-7-2015 - MISRA,DIPAK AND GOPALA GO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal credit. Under these circumstances the appellant had sent two shipments amounting to ₹ 2,77,732/- and 1,00,512/- on 20.8.1999. It is the case of the appellant that the said two shipments were sent at its own risk as the corporation had not accorded the additional limit as asked for. When the matter stood thus, on 29.9.1999 the appellant was informed by its bank that the buyer had refused to accept the documents negotiated with the drawee bank i.e Sun Trust Altanta, USA in respect of the shipments sent vide invoices dated 15.7.1999 and 20.8.1999 and accordingly the documents were returned. Since the buyer had refused to accept the goods which had already been exported from India, the appellant on 22.10.1999 intimated the corporation regarding non-acceptance of documents by the buyer. The appellant also informed the respondent-corporation regarding the shipment which was not covered through insurance by letter dated 10.12.1999. 3. As the factual matrix would further unfurl, on 22.12.1999 the corporation sent a communication stating that the approved limit was ₹ 20 lacs, and it required the appellant to comply with the formalities on the prescribed format. On 11.1.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments and had refused to accept the goods and as such documents were returned to Punjab Sind Bank. Nothing is known as to what happened to the goods which were whipped through invoice No.005 on 15.7.99 or invoice No.006 dated 20.8.99. It is stated in annexure P-35 that the goods were lying in bonded warehouse. It is not known what steps were taken by the complainant to get those goods sold and to retrieve some money. The bills were not got noted and protested through a notary. It is alleged that the drawee s bank had refused to get the documents noted and protested . If complainant had taken some steps then perhaps goods had been retrieved or could have been auctioned and some money would have been got but complainant did not bother for goods shipped considering that OP was bound to make payment of those goods. There is no evidence that complainant had written any letter to the Debt Collecting Agency in USA. Thus, the complainant did not take proper steps to safeguard the goods and as such is not entitled to claim the amount. Complainant should have safeguarded the goods by opening letter of credit but it failed to do so. There is no letter from drawee s bank Sun Trust I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 20 lakhs and asked the appellant to intimate on the prescribed format, which was duly complied with by the appellant, but despite such a situation, the Corporation vide letter dated 6.6.2000 repudiated the claim of the appellant. The relevant part of the communication by the insurer is reproduced hereinbelow:- 1. The terms of payment mentioned in order form as DA-90 days via Sea, but you have effected the shipment worth ₹ 4,76,139/- by air on DA-60 days. As far as shipment worth ₹ 6,50,000/- effected on DA-90 days is concerned, the Invoice shows the terms of payment as DA-90 days, whereas the Bill of Exchange was drawn on DA-60 days basis. This is construed as a violation of contract on the part of you. 2. You have omitted to declare shipments amounting to 50% in number and 34% in value. This is considered as serious and uncondonable lapse, violating clauses nos. 1,2,8(a) 10, 19(1), 28, 7(a) and 29 of the Policy Bond. 3. Bill was not Noted and Protested at buyer s country. 8. The crux of the matter whether the reasons ascribed for repudiation by the insurer withstand scrutiny. Mr. Nidhesh Gupta, learned senior counsel has commended us to certain aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it has been held that it is the duty of the court to interpret the document of contract as was understood between the parties. In the case of General Assurance Society Ltd. v. Chandumull Jain (1996) 3 SCR 500 : AIR 1966 SC 1644 , it was observed as under: In interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves. 20. Similarly, in the case of Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Coop. Bank (1999) 8 SCC 543 , it was observed as under: The insurance policy has to be construed having reference only to the stipulations contained in it and no artificial far-fetched meaning could be given to the words appearing in it. 21. Therefore, the terms of the contract have to be construed strictly without altering the nature of the contract as it may affect the interest of parties adversely. 13. Learned senior counsel for the appellant has also drawn inspiration from the decision in General Assurance Society Ltd. v. Chand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning. But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety. So, for the moment, I concentrate on the assistance to be gained in that connection. 15. Relying on the authorities which have been stated by Mr. Gupta, it is submitted by him that the policy between the parties is required to be read as a whole and on a reading of the policy in entirety, it is clear that the declaration of all the shipments whether covered under the policy or not, is not mandatory and only the shipments in respect of which claims are lodged are required to be declared. As an alternative submission, it is urged by him that the respondent-Corporation had vide letter dated 26.1.2000 deducted premium in respect of the two undeclared shipments from the credit balance of the appellant and, therefore, the respondent-Corporation had itself ratified the action of the appellant of sending the aforesaid two shipments and under these circumstances, it was not justified o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sured has also to act strictly in accordance with the statutory limitations or terms of the policy expressly set out therein. 18. Apart from the aforesaid authority, he has also commended us to two decisions of the Commission wherein claim was rejected and he has been emboldened to do so as one of the orders was assailed before this Court in Civil Appeal No. 8052 of 2004, and this Court has dismissed the appeal in limine. 19. Presently to the basic anatomy of the policy. At the outset it is essential to state that we, in due course, refer to the clauses of the policy in extenso as learned counsel for both the parties have relied upon, but prior to that the framework of the policy is apposite to be indicated. The initial part of the policy refer to the risks insured and the proviso appended thereto. Clause 2 of the Policy, as is evident, requires the insured to disclose the facts at the date of issue of the policy and also at all times during the operation of the policy that affect the risks of the insured. Clause 3 deals with covering of shipments and exceptions. The said coverage is subject to terms and conditions of the policy. Clause 5 deals with shipments which are not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... backdrop, submission of Mr. Gupta, learned senior counsel for the appellant is that policy does not cover the two shipments and hence, there was no obligation on the part of the appellant to declare the same to the respondent-Corporation. Referring to Clause 8(a), it is contended by him that the words used therein i.e. all shipments have to be understood in the backdrop of Clause 10 and Clause 10 uses the word relevant declaration and, therefore, only relevant declarations are to be made. Referring to the concept of premium, contends Mr. Gupta, that the premium payable is on the gross invoice value and all shipments to which the policy applies and the said premium is payable to the Corporation while submitting the relevant declaration of the shipment as per Clause 8(a) of the policy and, therefore, the payment to be made under Clause 10 is in relation to the gross invoice value of all shipments to which the policy applies and the declaration to be made under Clause 8(a) is also in relation thereto. Emphasising on the language employed in Clause 14B(b), it is urged by him that the policy envisages the liability of the Corporation with regard to only such shipments which are inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale which does not specify the nature, the quantity and price of the goods sold or agreed to be sold, the due date of payment and the currency in which the payment is to be made; (b) is invoiced to any buyer in a currency not permitted by the exchange control laws, rules and/or regulations for the time being in force in India; (c) Involves granting of credit by the Insured to the buyer for a period longer than 180 days from the date of shipment unless specifically agreed to the contrary by the Corporation in writing. 23. Clause 5(c) of the policy, as we find, requires the grant of credit by the insured to the buyer not for a longer period than 180 days unless specifically agreed to the contrary by the Corporation in writing. As per the letter dated 2.9.1999, the appellant has shown the terms of payment due within 90 days of the shipment. The appellant had given a credit of 60 days which is well within the outer limit of 90 days. If the Clause 5(c) is properly understood, in the obtaining factual matrix we are unable to agree with the findings recorded by the State Commission and the Commission that there has been violation of the terms of the policy as regards the reductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, that may become due and payable after adjustment of the Minimum Premium referred to hereinabove, while submitting the relevant declaration of shipments as per clause 8(a) of this Policy. xxx xxx xxx 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. xxx xxx xxx 28. Observance of conditions: The due performance and observance of each term and condition contained herein or in the proposal or declaration shall be a condition precedent to any liability of the Corporation hereunder and to the enforcement thereof by the insured. 29. Failure to comply with conditions: No failure by the Insured to comply with the terms and conditions of the Policy shall be deemed to have been waived, excused or accepted by the Corporation unless the same is expressl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Policy has to be read in entirety and so read, the clauses do not require that all shipments are to be declared. To appreciate the submission, we think it appropriate to reproduce Clauses 2, 10, and 30:- 2. Disclosure of facts: Without prejudice to any rule of law it is declared that this Policy is given on condition that the Insured has at the date of issue of this Policy disclosed and will at all times during the operation of this Policy promptly disclose all facts in any way affecting the risks injured. xxx xxx xxx 10. Incidence of premium and payment of additional premium: The Insured shall be liable to pay premium, at the rates set out in Schedule-II hereto, or, as the case may be, at such other rates for the time being in force, on the gross invoice value of all shipments to which this Policy applies forthwith on the making of such shipments and shall pay to the Corporation additional premium, if any, that may become due and payable after adjustment of the Minimum Premium referred to hereinabove, while submitting the relevant declaration of shipments as per clause 8(a) of this Policy. xxx xxx xxx 30. Uncovered Risks: If any account or bill (or any extension o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in terms of Clause 8(a) without omission and also pay the premium in terms of Clause 10. Premium of payment alone does not make the Corporation liable to indemnify the loss or fasten the liability on it. It is also required on the part of the insured for the purpose of sustaining the claim to show that there has been compliance as regards the declaration. To construe Clause 8(a) that the insured has a choice to declare which shipment he would cover and which ones he would leave, would run counter to the mandate of the policy. It has to be borne in mind that these are specific clauses relating to the obligations of the insured. The attempt on the part of the appellant to inject concept of payment of premium and the risk covered to this realm would not be acceptable. The general clauses basically convey which risks are covered and which risks are not covered, how the premium is to be computed and paid. What eventually matters is where the liability of the insurer is exclusively excluded, the said clauses of the policy are absolutely clear, unequivocal and unambiguous. The insured after availing a policy in commercial transactions is to understand the policy in entirety. The constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned once the State or instrumentality is a party to the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India, and therefore, being the instrumentality of the State, the Corporation had acted in contravention of the requirements of Article 14, and hence, the writ court could issue appropriate writ to nullify the arbitrary action. The court referred to relevant Clauses of contract of insurance in the background of admitted facts. The contract of insurance between the insured and insurer was primarily based on the contract between exporter and the Kazak Corporation. The relevant Clause in regard to payment of the tea exported was incorporated in Clause 6. The said Clause came to be amended on the very same day when the contract was signed by the exporter and the Kazak Corporation by way of an addendum. The Court opined the addendum in the obtaining facts therein had become an integral part of the original Clause 6 of the Contract. The Court further proceeded to deal with the Clauses in the agreement and held that alternative modes of payment of consideration were permissible as per Clause 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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