TaxTMI 
TaxTMI 
2022 (4) TMI 1219
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.... appellant's claim. The facts 2. The appellant is an exporter of fish meat and fish oil, whereas the respondent (hereafter, "ECGC") is a government company (under the control of the Ministry of Commerce and Industry, Union Government). ECGC provides a range of credit risk insurance cover to exporters. On 13.12.2012, the appellant paid premium to ECGC for the Policy (bearing no. 0540000143), which covered foreign buyer's failure to pay for goods exported. The coverage of this Policy, (with effect from 14.12.2012-13.12.2013), was for Rs. 2.45 crores. The vessel (Tiger Mango Voyage 62) set sail on 15.12.2012. The Bill of Lading (hereinafter, "BOL") was prepared on 19.12.2012, 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 vessel delivered the goods on 22.01.2013. The overseas buyer defaulted on payment. The appellant then lodged a claim with ECGC on 14.02.2013. 3. ECGC rejected the appellant's claim on several levels; with the final rejection by the Independent Review Committee (hereinafter, "IRC") on 28.03.2015. IRC's view was that the date of 'despatch / shipment' (provided in the....
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....ill of Lading or date of mate receipt, whichever is later. a) For containerised cargo, date of "Onboard Bill of Lading", or "Received for Shipment Bill of Lading", where the L/C provides for such Bill of Lading. For exports by containers from Inland Container Depot (ICD), date of Bill of Lading issued by shipping agents at the time of loading of export goods in ICD after customs clearance. b) For Lash barges, date of Bill of Lading evidencing loading of export goods on board". (emphasis supplied) The date of 'Onboard Bill of Lading' had no application to the present facts, as no Letter of Credit (hereafter, "L/C") was issued. In any event, such an interpretation of an unspecified term was contrary to consensus ad idem arrived at by the parties. The unjustness of such an interpretation was compounded by the fact that the appellant was not in a position to negotiate the standard terms of the Policy issued by the respondent, and thus ECGC could not have unilaterally relied on such a definition. 7. Ms Prakash further submitted that as the policy was silent on the date of 'despatch' or 'shipment', an insurance policy being a commercial contract, had to be stri....
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....h an argument on disallowing such assignment on grounds of public policy, this Court held: "We also think that it is not appropriate to import the principles of public policy, which are always imprecise, difficult to define, and akin to an unruly horse, into contractual matters. The contra proferentem rule is extremely relevant inasmuch as it is the appellant who has drafted the insurance policy and was, therefore, well positioned to include clauses making it specifically impermissible to assign policies". Lastly, in Industrial Promotion & Investment Corpn. of Orissa Ltd. v. New India Assurance Co. Ltd. (2016) 15 SCC 315, para 11., while again interpreting the term 'burglary' in the insurance policy, the rule of contra proferentem as explained in Colinvaux's Law of Insurance^5 was reiterate by this Court: "Quite apart from contradictory clauses in policies, ambiguities are common in them and it is often very uncertain what the parties to them mean. In such cases the rule is that the policy, being drafted in language chosen by the insurers, must be taken most strongly against them. It is construed contra proferentes, against those who offer it. In a doubtful cas....
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....onstrued strictly without altering the nature of the contract as it may affect the interest of parties adversely". Coverage was thus denied on a contextual interpretation of the term, including placing reliance on the definition of 'factory' under Section 2(m) of the Factories Act, 1948 and under the Law Lexicon, to exclude goods destroyed by fire placed outside the plant premises but within the factory-cum-godown wall. Mr Jha submitted, therefore, that in absence of an express definition of a term, other relevant laws cannot be ignored. 11. Further, Mr Jha submitted that the court could not alter the interpretation of terms of the policy by reading in something which did not exist. In Export Credit Guarantee Corpn. of India Ltd. v. Garg Sons International (2014) 1 SCC 686, para 13., denying the application of contra proferentem where the insurance contract clearly specified that any default on part of a foreign buyer had to be brought to the respondent's attention within a specified time period^6, it was held: "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....
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.... than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other." (emphasis supplied) 13. This principle was further developed by the UK Supreme Court in Arnold v Britton [2015] UKSC 36, para 15. The facts were that a 99-year lease specified that service charge of GBP90 levied every year was subject to 10% increase annually. The lessees submitted that by the end of the lease agreement, the service charge payable would be very high, exceeding the cost of providing the services. The UK Supre....
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.... agreed to by parties. Dismissing the appeal, the UK Supreme Court finally held that the indemnity clause was in addition to the wide-ranging warranties specified elsewhere in the contract, which was not contrary to business common sense. The agreement might have become a poor bargain for the buyer, but it was not the Court's function to improve that bargain: "The court's task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. *** Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the ....
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....terpreted in favour of the insured, i.e., against the drafter of the policy. In deciding the applicability of a cover note on houses swept away by floods, a Constitution Bench of this Court in General Assurance Society Ltd. v. Chandumull Jain (1966) 3 SCR 500, para 11. held as follows: "In other respects there is no difference between a contract of insurance and any other contract except that in a contract of insurance there is a requirement of uberrima fides i.e., good faith on the part of the assured and the contract is likely to be construed contra proferentem that is against the company in case of ambiguity or doubt... (I)n 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". (emphasis supplied) While the court ultimately denied insurer's liability, it laid down the manner in which ambiguities were to be interpreted. Since then, a catena of judgments has upheld this approach. In United India Insurance Co. Ltd. v. Pushpalaya Printers (2004) ....
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....o application." 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^7. This consideration is highlighted in the facts of this case, since the risks that ECGC is mandated to cover is its business, and other insurers rarely foray into the field. 17. 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. In Peacock Plywood (P) Ltd. v. Oriental Insurance Co. Ltd (2006) 12 SCC 673, paras 45 and 69. while determining the validity of an insurance policy for a stranded ship, a Division Bench of thi....
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....ology with such exceptions, modifications and adaptations, as may be specified by it by notification in the Official Gazette.] *** II. Foreign Trade Policy, 2009-2014: Paragraph 1.03: Hand Book of Procedures (HBP) and Appendices & Aayat Niryat Forms (AANF): Director General of Foreign Trade (DGFT) may, by means of a Public Notice, notify Hand Book of Procedures, including Appendices and Aayat Niryat Forms or amendment thereto, if any, laying down the procedure to be followed by an exporter or importer or by any Licensing/Regional Authority or by any other authority for purposes of implementing provisions of FT (D&R) Act, the Rules and the Orders made there under and provisions of FTP. Paragraph 1.04: Specific provision to prevail over the general: Where a specific provision is spelt out in the FTP/Hand Book of Procedures (HBP), the same shall prevail over the general provision. Paragraph 2.04: Authority to specify Procedures: DGFT may, specify Procedures to be followed by an exporter or importer or by any licensing/Regional Authority (RA) or by any other authority for purposes of implementing provisions of FT (D&R) Act, the Rules and the....