ON On Monday, a Supreme Court bench consisting of Justices Uday Umesh Lalit, Ravindra Bhat and Pamidighantam Sri Narasimha, in the case of Haris Marine Products v Export Credit Guarantee Corporation, observed that, in the case of insurance coverage extended to exporters, the date on which the foreign buyer failed to pay for the exported goods is more important than the date on which the goods were loaded into the vessel, even if that date began one day before the effective date of the policy.
In this case, the appellant, an exporter of fish meat and fish oil, paid a premium to the Export Credit Guarantee Corporation [ECGC] Limited, a government company that provides credit risk insurance coverage to exporters, for a single buyer exposure policy of Rs 2.45 crores. The policy was in effect from December 14, 2012 to December 13, 2013. Notably, although the bill of lading was prepared or issued on December 19, 2012, the “on board” date was mentioned as being December 13, 2012 (being a day before the effective date of the policy).
On the foreign buyers in default of payment, the appellants raised the insurance claim. While the respondents rejected the request, the appellants applied to the National Commission for the Redress of Consumer Disputes [NCDRC].
The Appellant asked the Supreme Court to challenge the NCDRC’s order which relied on the direction of the Bureau of Foreign Trade to interpret the date of the “bill of lading on board” (December 13, 2012) as the date of “expedition” or “expedition”, and thus rejected the claim of the appellant not to fall within the effective dates of the policy (from December 14, 2012). She rejected the appellant’s claim to apply the rule of verba chartium fortius accipiuntur contra proferentum (i.e. if the terms of a contract are ambiguous, of two equally possible meanings, they must be interpreted against the writer of the contract and not against the other party).
The appellant’s lawyer, lead counsel Anjana Prakash, argued that the policy did not specify the date of “dispatch” or “dispatch” or the exact date when coverage began. Prakash submitted that the date of issue of the second-in-command receipt which indicates the date of completion of the loading of the goods, being December 15, 2012, should be considered later than December 13, 2012 (the date appearing on the bill of lading). She further insisted on the fact that the letter of credit was not issued and, therefore, on the non-applicability of the date of the “bill of lading on board”. According to Prakash, in case an ambiguous term was used in a contract, the rule of contra proferentum must be invoked and the contract must be interpreted in favor of the appellant.
Reflection on the rule of contra proferentumthe court observed:it is enshrined in our case law that an ambiguous clause in an insurance contract must be interpreted harmoniously by reading the contract in its entirety. If after this no clarity emerges, then the term should be interpreted in favor of the insured, i.e. against the policy writer.”.
The Court relied on its judgment of a Constitutional Bench in General Assurance Society Ltd v Chandumull Jain (1966) and a series of other judgments to interpret the ambiguities of an insurance contract, in the light of the rule of contra proferentum. She held that the rule should be applied to protect the insured against “the adverse interpretation of an ambiguous clause”.
In particular, while interpreting the motive for the policy in question, the court concluded that the policy was intended to “protect against the failure of the foreign buyer to pay the Indian exporter for the exported goods”, not to cover the insurance in transit. On the question of the date of “dispatch” or “dispatch”, the court held that the date on the bill of lading, the legal document giving the carrier title and possession of the goods , had to be taken into consideration, not the Receipt of the companion. However, it was further observed that in the absence of signature of the letter of credit, the date of the bill of lading “on board” was not applicable. It considered that to reject the appellant’s request on the grounds of adopting an unfavorable interpretation of an ambiguous term would imply that the respondent was not fulfilling its functions as a Crown corporation.
Securing the order of the NCDRC, the Court ordered the defendant to pay the claim amount of Rs. 2.45 crores to the appellant, with an interest rate of 9 per cent per annum.
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