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REPORTABLE

IN THE SUPREME COURT OF INDIA     CIVIL APPELLATE JURISDICTION

              CIVIL APPEAL NO.  1557  OF 2004

Export Credit Guarantee Corpn.                                …Appellant of India Ltd.   

Versus

M/s Garg Sons International          …Respondent

With  

Civil  Appeal  Nos.  1553,  1548,  1555,  1556,  1549,  1552,  1551,  1558,  1550,  1559,  1543,  1542,  1546,  1544,  1545  and 1547  of  2004.  

J U D G M E N T

Dr. B.S. CHAUHAN, J.

1. All the above-mentioned appeals have been preferred against  

the common impugned judgment and order dated 18.2.2003 passed  

by the National Consumer Disputes Redressal Commission, New  

Delhi, in Revision Petition Nos. 662, 663, 664, 665, 666, 667, 668,

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669, 670, 671, 672, 673, 674, 933 of 2002 and F.A.238, 246 and  

247 of 2001.   

2. Facts and circumstances giving rise to these appeals are that:  

A. The appellant herein, Export Credit Guarantee Corporation  

of  India  Ltd.,  (hereinafter  referred  to  as  `the  insurer’),  is  a  

government  company,  which  is  in  the  business  of  insuring  

exporters. Respondent, M/s Garg Sons International, on 23.3.1995  

purchased  a  policy  for  the  purpose  of  insuring  a  shipment  to  

foreign buyers i.e. M/s Natural Selection Co. Ltd. of UK, and the  

said buyer committed default  in  making payments towards such  

policy  from  28.12.1995  onwards,  with  respect  to  the  said  

consignment.  

B. The  insured,  that  is  M/s  Garg  Sons  International,  sought  

enhancement of credit limit to the tune of Rs.50 lakhs with respect  

to the said defaulting foreign importer.  Subsequently, he presented  

17 claims.   

C. The insurer rejected all  the abovementioned claims on the  

ground that the insured did not ensure compliance with Clause  8  

(b) of the  insurance agreement, which stipulated the period within  

which the insurer is to be informed about any default committed by  

a foreign importer.    

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D. Thus,  the insured then filed several  complaints  before the  

State Disputes Redressal  Commission,  to which the insurer filed  

replies.  The  State  Disputes  Redressal  Commission  adjudicated  

upon the case and disposed of the said complaint, vide order dated  

4.6.2001, directing the insurer to make various requisite payments  

due under different claims, with 9 per cent interest and litigation  

expenses etc.  

E. Being aggrieved against the orders passed in all 17 claims,  

the insurer  preferred appeals  under Section 19 of  the Consumer  

Protection  Act,  1986,  before  the  National  Consumer  Disputes  

Redressal Commission, wherein the impugned judgment and order  

was disputed, stating that it was evident from the said judgment  

that 11 claims had been rejected and that 5 claims made by the  

insured were accepted.   

Hence, both the parties preferred these appeals.    

3. Shri Santosh Paul,  learned counsel  appearing on behalf of  

the  insurer, has submitted that the insured failed to communicate  

information pertaining to the default made by the foreign importer,  

to the insurer, within the stipulated period, which was fixed as 45  

days from the date on which the payment  became due, and thus,  

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failed to ensure compliance with  the mandatory requirement under  

Clause 8 (b), owing to which, the claims with respect to which the  

said  information  was  not  furnished  within  the  time  period  

stipulated  in  the  agreement,  have  wrongly  been  allowed.  

Moreover, it is evident from the judgment that only 5 claims made  

by the insured were accepted,  and that  11 claims were rejected,  

though in the said order, only 9 claims were found to be rejected  

and 4 were shown as accepted.  As the only numbers of 4 revisions  

have  been  mentioned,  stating  that  only  these  were  worth  

acceptance, and those of 9 revisions have been mentioned, as those  

that were rejected, which was all  stated to show that there were  

typographical errors in the judgment itself.   

In addition thereto, there were also certain appeals and thus,  

the order was required to be modified to the extent that only two  

claims which were made in respect of Civil Appeal Nos.  1547 of  

2004 and 1557 of 2004, wherein all statutory requirements were  

complied with deserve to be allowed, while the others, owing to  

default on the part of the insured, are liable to be rejected.  

4. On  the  other  hand,  Shri  Satinder  Singh  Gulati,  learned  

counsel  appearing  on  behalf  of  the  insured,  has  submitted  that  

admittedly, there is in fact a typographical error in the impugned  

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judgment and order, and has stated that the claims of the insured,  

with  respect  to  which there  has  been  no default  on  the  part  of  

insured, i.e., some claims have wrongly been rejected. Therefore,  

the appeals filed by him i.e. Civil Appeal Nos. 1559, 1544, 1545,  

1543 and 1546 of 2004 should be allowed and the other appeals,  

should be rejected accordingly.  

5. We have considered the rival submissions made by learned  

counsel for the parties and perused the record.   

6. Relevant  clauses  of  the  insurance  policy  dated  23.3.1995,  

read as under:  

 “8. Declarations:

(a) Declaration of shipments :- …………

(b) Declaration of overdue payments:  The insured shall  

also deliver to the Corporation, on or before the 15th of  

every month, declaration in the term prescribed by the  

Corporation, of all payments which remained wholly  

or partly unpaid for more than 30 days from the due  

date of payment in respect of shipments made within  

the policy period and such declaration shall continue  

to be rendered to the Corporation even after the expiry  

of  the  policy  period  so  long  as  any  such  payment  

remains overdue.  

xx xx xx

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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;

(b) the insured has failed to submit declaration of overdue  

payments as required by clause 8(b) of the policy; or  

(c) ……………”   

7. If  both  the  conditions  referred  to  hereinabove  are  read  

together, it  becomes evident that the insured must make a  

declaration in the prescribed form (Form No. 205), on the  

15th of every month as regards whether or not, there has been  

any default committed by the foreign importer, either in part,  

or in full, for a period exceeding 30 days from the date on  

which the payment fell due, with respect to shipments made  

within  the  policy  period.  Non-compliance  with  the  said  

term(s) of contract, will exonerate the insurer of all liability  

in this regard.  

8. It  is  a  settled  legal  proposition  that  while  construing  the  

terms of a contract of insurance, the words used therein must be  

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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  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 in the contract in the manner that will best express  

the intention of the parties. (Vide: M/s. Suraj Mal Ram Niwas Oil  

Mills (P) Ltd. v. United India Insurance Co. Ltd.,   (2010) 10  

SCC 567).

9. The  insured  cannot  claim  anything  more  than  what  is  

covered by the insurance policy. “…the terms of the contract have  

to be construed strictly, without altering the nature of the contract  

as the same may affect the interests of the parties adversely.” The  

clauses  of  an  insurance  policy  have  to  be  read  as  they  are…

Consequently,  the  terms  of  the  insurance  policy,  that  fix   the  

responsibility of the Insurance Company must also be read strictly.  

The contract must be read as a whole and every attempt should be  

made to harmonize the terms thereof, keeping in mind that the rule  

of  contra  proferentem  does  not  apply  in  case  of  commercial  

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contract, for the reason that a clause in a commercial contract is  

bilateral and has mutually been agreed upon.

(Vide : Oriental Insurance Co. Ltd. v. Sony Cheriyan AIR 1999  

SC 3252;  Polymat India P. Ltd.  v.  National Insurance Co.  

Ltd.,  AIR 2005 SC 286;  M/s. Sumitomo Heavy Industries Ltd.  

v.  Oil  &  Natural  Gas  Company,  AIR  2010  SC  3400;  and  

Rashtriya Ispat Nigam Ltd. v. M/s. Dewan Chand Ram Saran  

AIR 2012 SC 2829).

10. In  Vikram  Greentech  (I)  Ltd.  &  Anr.  v.   New  India  

Assurance Co. Ltd. AIR 2009 SC 2493, it was held :

“An  insurance  contract,  is  a  species  of   commercial  transactions  and  must  be  construed   like  any other contract  to  its  own terms and by   itself…. The endeavour of the court must always   be to interpret the words in which the contract is   expressed  by  the  parties.  The  court  while   construing the terms of policy is not expected to   venture into extra liberalism that may result in re- writing  the  contract  or  substituting  the  terms   which were not intended by the parties.”

(See  also  : Sikka  Papers  Limited  v.  National  Insurance  

Company Ltd & Ors. AIR 2009 SC 2834).

11. 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 insurance. No exceptions can be  

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made on the ground of equity. The liberal attitude adopted by the  

court, by way of which it interferes in the terms of an insurance  

agreement,  is  not  permitted.   The  same  must  certainly  not  be  

extended  to  the  extent  of  substituting  words  that  were  never  

intended to form a part of  the agreement.  

12. The instant case is required to be considered in light of the  

aforesaid settled legal propositions. The requisite record reveals the  

factual matrix as under:   

CA No. Invoice  No.

Invoice  date

Date  of  shipment

Due  date  of  payment

Period  for  payment

Date  for  submission  of  Form- 205  8(b)  compliance

Delay  in  filing  8(b)  compliance (i.e.  form  205)

Amount

1555/04 160/95 3.11.95 13.11.95 28.12.95 45 days 17.7.96 More  than  5 months

8777/-

1548/04 163/95 8.11.95 20.11.95 5.1.96 45 days 17.7.96 More  than  5 months

116424/-

1552/04 165/95 13.11.95 19.11.95 4.1.96 45 days 17.7.96 More  than  5 months

96474/-

1549/04 166/95 13.11.95 19.11.95 4.1.96 45 days 17.7.96 More  than  5 months

67194/-

1551/04 177/96 2.1.96 3.2.96 18.3.96 45 days 17.7.96 More  than  2 months

52629/-

1558/04 182/96 16.1.96 3.2.96 18.3.96 45 days 17.7.96 More  than  2 months

249377/-

1553/04 184/96 29.1.96 15.2.96 31.3.96 45 days 17.7.96 More  than  2 months

414354/-

1559/04 186/96 7.2.96 6.3.96 6.5.96 60 days 17.7.96 More  than  1 month

239656/-

1550/04 191/96 22.2.96 24.2.96 24.4.96 60 days 17.7.96 More  than  1 month

242055/-

1544/04 192/96 22.2.96 6.3.96 6.5.96 60 days 17.7.96 More  than  1 month

343777/-

1545/04 193/96 26.2.96 28.2.96 30.4.96 60 days 17.7.96 More  than  1 month

267229/-

1543/04 195/96 13.3.96 25.3.96 25.5.96 60 days 17.7.96 2 days 306159/- 1556/04 196/96 22.3.96 25.3.96 25.5.96 60 days 17.7.96 2 days 264400/- 1547/04 200/96 19.4.96 6.5.96 6.7.96 60 days 17.7.96 314961/- 1546/04 162/95 8.11.95 20.11.95 5.1.96 45 days 17.7.96 More  than  

5 months 528257/-

1557/04 201/96 19.4.96 6.5.96 6.7.96 60 days 17.7.96 1362688/- 1542/04 164/95 11.11.95 19.11.95 4.1.95 45 days 17.7.96 More  than 579766/-

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5 months 13. The aforesaid chart clearly establishes that the insured failed  

to comply with the requirement of clause 8(b) of the agreement  

informing the insurer about the non-payment of outstanding dues  

by the foreign importer within the stipulated time except in two  

cases.

14. Thus,  we are of  the view that  only two claims which are  

subject-matters  in  Civil  Appeal  Nos.  1547  and  1557  of  2004  

deserve to be allowed.  The others are dis-allowed.   

With these observations, all 17 appeals stand disposed of.  

                                                          ..………………………….J.                                                       (Dr. B.S. CHAUHAN)

.…………………………..J.  (V. GOPALA GOWDA)

New Delhi,  January 17, 2013

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