M/S. RAHEE INDUSTRIES LTD. versus EXPORT CREDIT GUARANTEE CORPN. OF INDIA LTD. AND ANR.

Citation: [2008] 14 S.C.R. 556 · Decided: 17-10-2008 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Dismissed

Judgment (excerpt)

·A 
[2008] 14 S.C.R. 556 
M/S. RAHEE INDUSTRIES LTD. 
v. 
. EXPORT CREDIT GUARANTEE CORPN. OF INDIA LTD. 
. 
AND ANR. 
. 
·. . 
. . 
. 
(Civil Appeal No.6145 of 2008) · 
oc1qBER 17, 2008. 
(S.H. KAPADIA ·AND B .. SUDERSH~N REDDY,• JJ] 
Insurance: 
· · C 
.Specjfic Shipments (Political Risks) Policy No: 144991 
1987 - Export of goods - Balance consideration amount for 
.. the consignment insured to the extent of 90% under the Policy· 
-
~xporter not. receiving the balance consideration amount 
within time. due to political embargo - Export Credit Guaran-
D tee Corporationpaying the insured money to the exporter -
After lifting of embargo balance consideration amount trans.:. .· 
· ferred to Bank in India. in foreign currency -:- Appreciation of . 
the currency due to fluctuation in exchange rate, resulting in 
increased.recovery - Policy providing ratio of apportionment 
E. of recovery as f}O: 10 between the Corporation and exporter· 
respectively - Exporter cf aiming increased recovery - Held: 
In view of language of Clause 16 of the Policy; all the sums 
recovered has to be apportioned in the ratio of 90: 1 O between 
the Corporation and the exporter respectively - Exporter hot 
F entitled to the increased recovery. 
· 
Policy of insurance...,.. Interpretation of- Held: Words in a 
policy are to be understood in their ordinary meaning except 
where a word has a technical or legal meaning or where the 
context requires otherwise - Principles of Subrogation to be 
G invoked only in case of doubt and ambiguity in the construe-
. tion of Policy 
Doctrines/Principles: 
H 
556 
·.~
'·L 
. r --=
M/S. RAHEE INDTS. LTD. v. EXPORT C. G CORPN. 
557 
OF INDIA LTD. & ANR. 
Principle of Subrogation - Applicability of 
A 
Predecessor of the appellant entered into contract 
for export of certain goods with a foreign buyer. As pe.r 
contract, the exporter got 20% of the invoice value as 
advance. The balance price of 80%, was covered to the 
B 
extent of 90% by specific Shipments (Political Risks) 
Policy No.14499/1987. The balance amount was not re-
ceived by the exporter within time because of political 
embargo. The exporters,, therefore, applied to the Export 
Credit Guarantee Corporation under the Policy, seeking 
payment for the risk covered to the extent of 90% of the c 
balance price. Corporation paid the same. Thereafter, the 
embargo was lifted and the balance amount was trans-
ferred to the Bank in India. The amount was received by 
the Bank in US Dollar. By the time it reached India, it got 
a·ppreciated and thus resulted in increased recovery . . 
D 
~ 
The exporter filed a suit contending that exporter was 
entitled to the full i.ncreased recovery and the Corpora-
tion was entitled'to only the sum which it had-paid to the 
exporter. Stand of the Corporation was that the increased 
E 
. recovery was to be apportioned in the ratio of 90:10 in 
terms of Clause 16 of the Policy. During pendency of the 
suit, the Bank disbursed the recovered sum in the ratio of 
90:10 between the Corporation and the exporter respec-
tively. Single Judge of High Court decreed the Suit. In 
~,J 
appeal, Division Bench of High Court reversed the order F. 
of Single Judge holding that the Corporation was entitled 
to 9()% of the increased recovery. Hence the present ap-
peal. 
Dismissing the appeal, the Court 
G 
"'}. 
HELD: 1.1 It is well-settled rule of construction that 
words in a contract (Policy herein) are to be understood 
in their ordinary meaning. However, this ordinary mean-
ing will not prevail in two cases, namely, where a word 
has techniGal or legal meaning and secondly where the H 
558 
SUPREME COURT REPORTS 
[2008] 14 S.C.R. 
A context requires otherwise. In a contract of insurance, par-
ties may,; introduce express terms which are at variance 
from or :in conflict with the ordinary principles of subro-
gation. Hence, the correct approach is to consider the 
l . 
. 
policy of insurance by reference to its terms. If, however, 
B there is some doubt or ambiguity in· the construction of 
the policy only then it would be correct to invoke the prin-
. ciples of subrogation as a guide or a controlling author-
ity. [Para 1 O] [508-A to D] 
1.2 If a debt in a foreign currency is sued for, the judg-
e ment must be in terms of Rupee and the rate of exchange 
(subject to express contractual provisions to the. contrary) 
will be the rate of exchange between Rupee and the for-
eign currency prevailing at the date when the debt be-
D 
comes 

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