HARIS MARINE PRODUCTS versus EXPORT CREDIT GUARANTEE CORPORATION (ECGC) LIMITED

Citation: [2022] 17 S.C.R. 297 · Decided: 25-04-2022 · Supreme Court of India · Bench: UDAY UMESH LALIT · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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[2022] 17 S.C.R. 297
297
HARIS MARINE PRODUCTS
v.
EXPORT CREDIT GUARANTEE CORPORATION (ECGC)
LIMITED
(Civil Appeal No. 4139 of 2020)
APRIL 25, 2022
[UDAY UMESH LALIT, S. RAVINDRA BHAT AND
PAMIDIGHANTAM SRI NARASIMHA, JJ.]
Insurance – Respondent-ECGC provides a range of credit
risk insurance cover to exporters – Appellant-exporter paid premium
to ECGC for the Single Buyer Exposure Policy which covered
foreign buyer’s failure to pay for goods exported – Coverage of
the Policy was w.e.f 14.12.2012-13.12.2013 – The vessel set sail
on 15.12.2012 – The Bill of Lading was prepared with a line
specifying the date of ‘onboard’ (i.e., date on which vessel
commenced loading the goods in question on board) as 13.12.2012
– The overseas buyer defaulted on payment – Appellant’s claim
rejected by ECGC – Filed complaint before NCDRC, dismissed –
On appeal, held: A plain reading of the policy in question
demonstrates that it was taken to protect against failure of the
foreign buyer in paying the Indian exporter for goods exported – It
was not a policy taken to cover in-transit insurance, and the cause
of action triggering the claim arose much later, i.e., on 14.02.2013,
well within the coverage of the policy – While interpreting insurance
contracts, the risks sought to be covered must also be kept in mind
– The date of loading goods onto the vessel, which commenced one
day prior to the effective date of the policy, is not as significant as
the date on which the foreign buyer failed to pay for the goods
exported, which was well within the coverage period of the Policy
– Thus, the claim could not be dismissed simply on such basis,
especially given that the date of loading the goods onto the vessel
was immaterial to the purpose for which the policy was taken by
the appellant – On harmoniously construing the documents of the
policy, it is in fact the date on the Bill of Lading, and not the Mate’s
Receipt / date of shipment which ought to be considered as the date
of ‘despatch / shipment’, for the Bill of Lading is the legal document
conferring title and possession of the goods to the carrier – Further,
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SUPREME COURT REPORTS
[2022] 17 S.C.R.
deviating from the rule of contra proferentem, even if in the present
instance the third-party DGFT Guidelines were to be applied, it
would not favour the ECGC – Impugned order set aside and the
appellant’s complaint is allowed – Foreign Trade (Development and
Regulation) Act, 1992.
Insurance – Rule of contra proferentem – Standard form
insurance policies – Contract d’ adhesion or boilerplate contracts –
Reconciliation of ambiguous terms – Held: An ambiguous term in
an insurance contract is to be construed harmoniously by reading
the contract in its entirety – If after that, no clarity emerges, then
the term must be interpreted in favour of the insured, i.e., against
the drafter of the policy – The rule of contra proferentem thus protects
the insured from the vagaries of an unfavourable interpretation of
an ambiguous term to which it did not agree – The rule assumes
special significance in standard form insurance policies, called
contract d’ adhesion or boilerplate contracts, in which the insured
has little to no countervailing bargaining power – This consideration
is highlighted in the present case, since the risks that respondent-
ECGC is mandated to cover is its business, and other insurers rarely
foray into the field.
Allowing the appeal, the Court
HELD: 1.1 The date of loading goods onto the vessel, which
commenced one day prior to the effective date of the policy, is
not as significant as the date on which the foreign buyer failed to
pay for the goods exported, which was well within the coverage
period of the Policy. Thus, the claim could not be dismissed simply
on such basis, especially given that the date of loading the goods
onto the vessel was immaterial to the purpose for which the policy
was taken by the appellant. [Para 15][311-G-H; 312-A]
1.2 The rule of contra proferentem protects the insured from
the vagaries of an unfavourable interpretation of an ambiguous
term to which it did not agree. The rule assumes special
significance in standard form insurance policies, called contract
d’ adhesion or boilerplate contracts, in which the insured has little
to no countervailing bargaining power. This consideration is
highlighted in the facts of this case, since the risks that ECGC is
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mandated to cover is its business, and other insurers 

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