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TMI Blog2022 (4) TMI 1219X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 facts of this case, since the risks that ECGC is mandated to cover is its business, and other insurers rarely foray into the field. 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, as a plain reading of provision 9.12 shows that the date on the Bill of Lading has to be considered as the date of despatch / shipment. The date of onboard Bill of Lading is not applicable to the present facts as no letter of credit was executed, much less providing for application of such date. Therefore, ECGC could not have denied the appellant s claim, even on a consideration the DGFT Guidelines. ECGC enjoys a significant position in the market for export credit insurance in India in F.Y. 2012- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for ₹ 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 Policy) was not clearly defined, and it placed reliance on the definition contained in the DGFT Guidelines. For containerized cargo, the same was to be interpreted as the date of Onboard Bill of Lading 3 , which in the present case was 13.12.2012. This was just a day prior to the effective date of the Policy, i.e., 14.12.2012. It was therefore reasoned that the appellant was not entitled to the claim amount. The appellant, feeling aggrieved, complained of deficiency of service, and approached the NCDRC for compensation. ECGC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... board 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 strictly interpreted in terms of the clauses it contained, which reflected the intentions of the parties, and not secondary sources. In the event that a contract contained an ambiguous term, which could be interpreted in more than one way, the well-recognized rule of contra proferentem must be made available to the appellant, i.e., it must be interpreted against the drafter of the contract (the respondent herein) who is deemed to be aware of the consequences of imprecise drafting. The NCDRC therefore, could not have placed reliance on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, 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 case the turn of the scale ought to be given against the speaker, because he has not clearly and fully expressed himself. Nothing is easier than for the insurers to express themselves in plain terms. The assured cannot put his own meaning upon a policy, but, where it is ambiguous, it is to be construed in the sense in which he might reasonably have understood it. If the insurers wish to escape liability under given circumstances, they must use words admitting of no possible doubt . However, it must be noted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws 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 insurance. No exceptions can be 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 . And further: 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd 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 90 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 Supreme Court refused to depart from the natural meaning of the clause, holding that: When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean , to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 14. And it does so by focussing on the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 3 SCC 694, para 6., a Division Bench of this Court was confronted with interpreting the term impact in an insurance policy for protection against damage caused to the insured building. Interpreting the term to include damage caused by strong vibrations by heavy vehicles without direct impact, this Court held: The only point that arises for consideration is whether the word impact contained in clause 5 of the insurance policy covers the damage caused to the building and machinery due to driving of the bulldozer on the road ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 this Court, noting that none of conditions in the termination clause were triggered, held: When the termination of the contract of insurance has actually taken place, is essentially a question of fact. An insurance policy is to be construed in its entirety. A marine insurance policy does not come to an end only because the ship became stranded at a port . And further: (W)hile construing a contract of insurance, the reason for entering thereinto and the risks sought to be covered must be considered on its own ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Orders made there under and FTP. Such procedures, or amendments if any, shall be published by means of a Public Notice. *** i. Handbook of Procedures (Vol I) 10 : Chapter 9: Miscellaneous Matters Provision 9.12: Date of shipment / despatch in respect of Exports - (i) By Sea: For bulk cargo, date of Bill 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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