LexEXPORT CREDIT GUARANTEE CORPN. OF INDIA LTD. versus M/S. GARG SONS INTERNATIONAL
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A B [2013] 1 S.C.R. 336 EXPORT CREDIT GUARANTEE CORPN. OF INDIA LTD. v. M/S. GARG SONS INTERNATIONAL (Civil Appeal No.1557 of 2004) JANUARY 17, 2013 [DR. B.S. CHAUHAN AND V. GOPALA GOWDA, JJ.] Insurance - Contract of Insurance - Interpretation of - Held: While construing the terms of a contract of insurance, C the words used therein must be given paramount imporlance, and it is not open for the Courl to add, delete or substitute any words -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 D have to be strictly construed in order to determine the extent of the liability of the insurer - It is not permissible for the courl to substitute the terms of the contract itself, under the garb of construing terms incorporated in the agreement of insurance E - No exceptions can be made on the ground of equity. Insurance - Policy terms - Non-compliance - Effect - Appellant, a government company, in the business of insuring exporters - Respondent purchased insurance policy for purpose of insuring shipment to a foreign buyer/importer - F Foreign buyer committed default in making payments - Claims presented by respondent-insured rejected by appellant-insurer - Validity - Held: Respondent-insured failed to comply with the requirement under clause B(b) of the insurance agreement, of informing the appellant-insurer about G the non-payment of outstanding dues by the foreign imporler within the stipulated time except in two cases - Liability of appellant-insurer exonerated to that extent - Thus, only two claims deserve to be allowed - Other claims dis-allowed. H 336 EXPORT CREDIT GUARANTEE CORPN. OF INDIA LTD. v. 337 GARG SONS INTERNATIONAL Contract - Commercial contract - Inapplicability of the A rule of contra proferentem - Held: 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. The appellant is a government company, in. the business of insuring exporters. Respondent purchased insurance policy for the purpose of insuring shipment to B a foreign buyer/importer. The foreign buyer committed default in making payments towards such policy, with C respect to the· said consignment. Respondent- insured sought enhancement of credit limit with respect to the defaulting foreign importer and subsequently, presented 17 claims. The appellant-insurer rejected all the claims on the ground that the respondent-insured failed to 0 communicate information pertaining to the default made by the foreign importer, to the appellant-insurer, within the stipulated period and thus, failed to ensure compliance with the mandatory requirement under Clause 8 (b) of the insurance agreement. E Respondent-insured thereafter filed several complaints before the State Disputes Redressal Commission, which directed the appellant-insurer to make various requisite payments due under different claims, with 9 per cent interest and litigation expenses F etc. Aggrieved, the appellant-insurer preferred appeals under Section 19 of the Consumer Protection Act, 1986, before the National Consumer Disputes Redressal Commission, which rejected some of the claims made by the insured while accepting the other claims. Hence, both G the parties preferred appeals before this Court. Disposing of the appeals, the Court HELD: 1.1. It is a settled legal proposition that while H 338 SUPREME COURT REPORTS [2013] 1 S.C.R. A 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 B 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 c in the contract in the manner that will bes.t express the intention of the parties. [Para 8) [344-C-E] 1.2. The insured cannot claim anything more than what is covered by the insurance policy. " ... the terms of 0 the contract have to be construed strictly, without altering the nature of the contract as
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