Export Credit Guarantee Corporation Of India Ltd.- vs Neelkanth Empire

APPELLANT which was the opposite party before the State Commission has filed this Appeal against the judgment and order dated 4.1.2005 passed by the State Consumer Disputes Redressal Commission, Rajasthan (in short, ''the State Commission '') in Complaint Case No. 25/2002 whereby the State Commission while allowing the complaint has directed the Appellant Insurance Company to pay a sum in Indian Currency equivalent to US $ 27,700 as per exchange rate on 1.9.2000 to the Respondent along with interest @ 9% p.a. from 1.9.2000 till payment. State Commission also directed the Syndicate Bank, M.I. Road, Jaipur to credit the sum of Rs. 5,40,000 to the relevant loan/current account of the Respondent within a week. It was also directed that on Bank ''s crediting the sum of Rs. 5,40,000 in the account of the Respondent, the principle amount and the interest due thereupon payable by the Appellant shall get reduced with the said amount and the reduced amount with interest shall be thereafter payable by the Appellant to the Respondent. Rs. 3,500 were awarded as costs.

COMPLAINANT /Respondent who is an exporter of precious and semi-precious stones, gems and jewelleries obtained a Shipments (Comprehensive Risk) insurance cover No. JAI/SCR/90509/98 for Rs. 25,00,000 from the Appellant for the period from 27.4.1998 to 1.5.2000 covering the risk of loss involved in export of goods on credit terms to the foreign buyers. Respondent sent a consignment of cut and polished precious and semi-precious stones worth US $ 27,700 (including freight and insurance) on 5.3.1999 to its foreign buyer, namely, GEM ''N '' GEMS, Hong Kong. Respondent did not receive the price of the consignment despite several communications to its foreign buyer. Respondent filed the claim along with relevant information and documents with the Appellant on 28.4.2000 for payment of US $ 27,700 equivalent to Indian Rupees 11,85,006. Appellant did not settle the claim despite several communications from the Respondent. Ultimately, vide letter dated 28.7.2000, Appellant informed the Respondent that in view of the credit limit cancellation communication dated 24.2.1999, they are not in a position to settle the claim. Complainant, being aggrieved, filed the complaint before the State Commission alleging that the Appellant never informed it about the cancellation of the credit limit facility and it regularly paid the premiums and submitted the "declarations " to the Appellant and the Bank in terms of policy conditions. Appellant, on being served, entered appearance and filed its written statement resisting the complaint, inter alia, on the grounds that as per condition No. 8(a) of the policy Respondent was required to submit the declarations pertaining to the shipments sent by it in a particular month, by the 15 of the next month. If there was no shipment in a particular month, a nil declaration was to be submitted. That as per condition 8(b) of the policy, Respondent was also required to submit a declaration by the 15th of a particular month if there was a default in payment by the foreign buyer, 30 days after the due date of payment. That the Respondent made three shipments on 5.9.1998, 23.9.1998 and 18.11.1998 to a foreign buyer. In terms of Clause 8(a) of the policy, the shipments should have been declared on or before 15th of the next month, i.e. 15.9.1998, 15.10.1998 and 15.12.1998 respectively with the premium due thereon. Respondent filed the declaration of the three shipments only on 28.4.2000 without remitting the premium due thereon. Since, there was delay of 12 months in furnishing the declaration of the shipment and the requisite premium was not paid, the Appellant was justified in rejecting the claim of the Respondent. That the payment of Rs. 5,40,000 made by the Appellant to the Syndicate Bank had nothing to do with the claim of the Respondent as the same was not made towards its claim. The Appellant had issued a separate Guarantee Policy called "Whole Turnover Post Shipment Guarantee " (WTPSG) to the Syndicate Bank for the period from 1.7.1997 to 30.6.1999 to cover the losses to the Bank by the acts and conduct of its exporter/consumers. That the Respondent was duly informed about the cancellation of credit limit vide letter dated 23.6.2000 and there was no deficiency in service on their part.

STATE Commission, after considering the facts, pleadings and evidence led by the parties came to the conclusion that admittedly the Respondent did not make the declaration of the shipments to the Appellant within the time contemplated under Clauses 8(a) and 8(b) of the policy but the time was not the essence of contract for the performance of the complainant ''s or his bank ''s obligation to submit the declaration of shipment under the said Clauses and even there was a practice to condone the delay in submitting the declarations in terms of Clauses 8(a) and 8(b) of the policy.

STATE Commission allowed the complaint and directed the Appellant to pay a sum in Indian Currency equivalent to US $ 27,700 as per exchange rate on 1.9.2000 to the Respondent along with interest @ 9% p.a. from 1.9.2000 till payment: State Commission also directed the Syndicate Bank, M.I. Road, Jaipur to credit the sum of Rs. 5,40,000 to the relevant loan/current account of the Respondent within a week. It was also directed that on Bank ''s crediting the sum of Rs. 5,40,000 in the account of the Respondent, the principle amount and the interest due thereupon payable by the Appellant shall get reduced with the said amount and the reduced amount with interest shall be thereafter payable by the Appellant to the Respondent. Rs. 3,500 were awarded as costs. State Commission observed as under: "There is no dispute that the declaration in respect of the disputed shipment of US $ 27,700 was not made and payment declaration in form No. 205 was not submitted to the ECGC by or on behalf of the complainant within the time contemplated by and under Clauses 8(a) and 8(b) respectively of the policy issued by the ECGC to him. Therefore, in normal course, the consequences in the form of repudiation of the claim of the complainant should follow. But that is not to be the position in the instant case for the reasons stated hereunder: It is established fact in this case that declaration under Clause 8(a) and payment declaration under Clause 8(b) of the policy in question used to be sent by the Syndicate Bank. M.I. Road, Jaipur for and on behalf of the complainant. ECGC ''s letter dated 31.3.2000 (Annex. 5) informing the complainant that declaration of shipment and payment declaration in form No. 205 have not been received by it for the period from April, 1998 to February 2000 and that the same be sent to them by 30.4.2000 and then complainant ''s bank sending them to the ECGC and it having accepted them and retained the premium thereof supports complainant ''s version regarding the practice adopted and arrangement made by the Bank and the ECGC in respect of late receipt of the declarations and the ECGC condoning the delay. It is pertinent to note that even the disputed claim of the complainant was received by the ECGC from his bank on 28.4.2000, i.e. two days before the expiry of the date given by the Corporation in its letter dated 31.3.2000 (Annex. 5). It may be recalled that the ECGC had issued the Standard Policy to the complainant for the period from 27.4.1998 to 1.5.2000 and the Whole Turnover Post Shipment Guarantee Policy had been issued by the Corporation to his bank for the period from 1.7.1997 to 30.6.1999 and the shipment of US $ 27,000 was made by the complainant on 5.3.1999. It may further be pointed out that Syndicate Bank ''s letter No. 83001/99 dated 1.5.1999 to the Manager, ECGC, Jaipur clearly mentions that a sum of Rs. 23,500 was being remitted to the ECGC towards premium for a ''pre-shipment '' and ''post-shipment '' finance for the month of March 1999 along with declaration forms for pre-shipment and post-shipment finance. Delay was sought to be condoned. It shows that premium in respect to even pre-shipment also used to be paid and received by the parties. "

Appellant, being aggrieved, has filed the present appeal.

WE have heard the learned Counsel for the parties at length. Learned Counsel appearing for the Appellant contends that the Respondents made 3 shipments to a foreign buyer but did not submit any declaration of shipments to the Appellant in time. That as per condition No. 8(a) of the policy, Respondent was required to submit the declarations pertaining to the shipments sent by it in a particular month, by the 15th of the next month. The condition also stipulates that even if there is no shipment, a nil declaration was to be submitted. Further, that as per condition No. 8(b) of the policy, Respondent was required to submit to the Appellant, a declaration by the 15th of a particular month, if there was a default in payment by the foreign buyer, 30 days after the due date of payment. Respondent did not give information/declarations of the default in payment by the foreign buyer as required within the stipulated time. Since there was violation of the terms and conditions of the policy by non-declaration of the shipments, the claim of the Respondent was rightly rejected. That the terms and conditions of the policy have to be strictly construed to determine the extent of liability of the insurer. He further contends that though the State Commission has recorded a finding that admittedly the Respondent did not make the declaration in terms of the condition Nos. 8(a) and 8(b) of the policy but it has committed an error in arriving to the conclusion that the declarations under the said Clauses used to be sent by the Syndicate Bank for and on behalf of the Respondent. That the Appellant had issued a separate Guarantee Policy called "Whole Turnover Post Shipment Guarantee " (WTPSG) to the Syndicate Bank for the period from 1.7.1997 to 30.6.1999 to cover the losses to the Bank by the acts and conduct of its exporter/consumers. This was a distinct policy covering the risk of banker in case of default by the exporters and was subject to the terms of the conditions to be observed by the Bank. That the State Commission has wrongly and erroneously mixed up the two policies, one issued to the Respondent and the other to Syndicate Bank. Two of them are altogether different and cannot be clubbed together in any manner.

IN support of his contention that the terms and conditions of the policy have to be strictly construed to determine the extent of liability of the insurer, Counsel for the Appellant has relied upon the judgment of the Hon ''ble Supreme Court in the case of Suraj Mal Ram Niwas Oil Mill (P) Ltd. v. United India Insurance Co. Ltd., IV (2010) CPJ 38 (SC)=VIII (2010) SLT 375=IV (2010) ACC 653 (SC)=Civil Appeal No. l375 of 2003 decided on 8.10.2010, wherein Hon ''ble Supreme Court after considering the earlier judgments in extenso has held that the terms of a contract of insurance have to be strictly construed and no exception can be made on the ground of equity. That in 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. That nothing can be added or subtracted in the terms and conditions. The relevant observations read as under: "22. Before embarking on an examination of the correctness of the grounds of repudiation of the policy, it would be apposite to examine the nature of a contract of insurance. It is trite that in a contract of insurance, the rights and obligations are governed by the terms of the said contract. Therefore, the terms of a contract of insurance have to be strictly constructed and no exception can be made on the ground of equity. In General Assurance Society Ltd. (supra), a Constitutional Bench of this Court had observed that - In 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. " (See also OIC v. Sony Cheriyan, MANU/SC/0495/1999 : (1999) 6 SCC 451; Vikram Greentech (supra) : Sikka Papers Ltd. v. NIC and Ors. MANU/SC/0907/2009 : (2009) 8 SCC 888; New India Assurance Co. Ltd. v. Zuari Industries Ltd. And Ors. MANU/SC/1586/2009 : (2009) 9 SCC 70: Amravati District Central Cooperative Bank Ltd. v. United India Fire and General Insurance Co. Ltd., MANU/SC/0250/2010 : (2010) 5 SCC 294). 23. Similarly, in Harchand Rai Chandan Lal ''s case (supra), this Court held that: The terms of the policy have to be construed as it is and we cannot add or subtract something. Howsoever liberally we may construe the policy but we cannot take liberalism to the extent of substituting the words which are not intended. 24. Thus, it needs little emphasis that in construing the terms of a contract of insurance, the words used therein must be 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 to determine the extent of liability of the insurer. Therefore, the endeavor of the Court should always be to interpret the words in which the contract is expressed by the parties. "

In support of his contention that non-filing of declarations in terms of Clauses 8(a) and (b) of the policy was fatal to the claim under the policy, Counsel for the Appellant has relied upon the two judgments of this Commission in the cases of RP Nos. 662 to 674/02 -Export Credit Guarantee Corporation of India Ltd. v. Garg Sons International, decided on 1.8.2003 and First Appeal No. 90/04 -M/s. Mohd. Ibrahim and Sons v. Export Credit Guarantee Corporation of India Ltd., decided on 17.9.2009. As against this, learned Counsel for the Respondent supports the order passed by the State Commission.

WE find substance in the submissions made by the learned Counsel for the Appellant. As observed by the State Commission in its order, Respondent admittedly did not make declarations in respect of the disputed shipment of US $ 27,700 in terms of the Clauses 8(a) and (b) of the policy. That since no declaration was made by the Respondent, Appellant was not bound to settle the claim of the Respondent.

THIS Commission in Export Credit Guarantee Corporation of India Ltd. (in short, ECGC) ''s case (supra), has held that violation to make declarations in terms of Clauses 8(a) and 8(b) of the policy was fatal to the claim made by the insured and the Insurer was not liable to indemnify for the loss suffered by the insured. Facts of that case are that the insured had made 14 shipments to the U.K. Claim made by it for the loss suffered was repudiated by ECGC, Appellant herein on the ground that the insured had failed to make declarations in terms of Clauses 8(a) and 8(b) of the policy. 14 different complaints were filed. District Forum passed a common order in respect of the 14 shipments covering the 14 complaints, holding that since the mandatory declarations to be made pursuant to Clauses 8(a) and 8(b) of the policy, had not been made the insurer was justified in repudiating the claim. State Commission, in appeal, reversed the order of the District Forum on the ground that the said declarations had in fact been made to the insurer. Feeling aggrieved by the order of the State Commission, Appellant herein filed the Revision Petitions before this Commission. In revision, this Commission held that the declarations were made on a plain paper and not on the prescribed form. Another fact to be mentioned is that out of the 14 shipments, declarations had been filed in respect of 5 shipments only and in respect of remaining 9 shipments, no declarations were filed. This Commission reversing the order of the State Commission regarding the shipments for which no declarations were filed, held as under: "We have perused the orders of the Fora below as well as the documents produced before us. The State Commission was of the opinion that it would be enough if the insured had given intimation of payments outstanding every month and it is not necessary that it should be given in the prescribed format. We feel that the State Commission fell into error in arriving at such a conclusion. It is the term of the policy that monthly declaration on payment delayed for one month or over has to be filed in the prescribed format. It is not enough that a party has given intimation of the payments outstanding every month. The intimations are in the letter forms which do not give all the particulars which are required in the monthly declaration forms. It could be considered to be substantial compliance with this condition being in the letter of intimation if such letter had clearly set out that the payment had been outstanding for a period of over one month in each such case. A perusal of those communications does not disclose that the payments had been outstanding for more than 30 days. The format was prescribed only to focus the attention of the insurer to the defaults of the importer abroad which continued for more than 30 days. The important object of this condition is that if the insurer gets intimation of the default of the purchasers in making payment, they could take precautions in not covering future consignments of such defaulting purchaser and could also warn other parties so that they could be on their guard in dealing with such party. The form which has been filled up in the present case and copy whereof has been produced before us does show that most of the defaults were disclosed very late. But, items in that statements appearing at Sl. Nos. 12 to 16 meet with the requirements of the terms of the policy. This statement has been filed in the month of June, 1996. After accounting for the terms of payment of 60 days and after 60 days from the date of shipments. Therefore, in the case of these 5 items clearly there is absolutely no breach of the terms of the policy and the Petitioner is liable to pay the amount covered by these items Nos. 12 to 16. The rest of the items clearly show considerable delay in filing these declarations and will not be entitled to reimbursement. In view of the above discussion, the result is that items at Sl. Nos. 12 to 16 be allowed while the items claimed under the item Nos. 1, 3 and 5 to 11 in the statement filed before us are disallowed, i.e. the Revision Petition Nos. 662, 663, 664, 665, 666, 667, 933, 669, 673 are dismissed and Revision Petition Nos. 668, 670, 672, 671, 674 are allowed. In the facts and circumstances of the cases, there will be no order as to costs. " (Emphasis supplied)

In Mohd. Ibrahim ''s case (supra), the insured who had taken the same policy had exported carpets from Mirzapur in Uttar Pradesh to a foreign buyer in Zurich, Switzerland. The insured had not filed the declarations in terms of Sections 8(a) and 8(b) of the Policy. The Corporation repudiated the claim, aggrieved against which, the insured filed the complaint before the State Commission, UP. State Commission dismissed the complaint, aggrieved against which, the insured filed the appeal before this Commission. This Commission after referring to the Clauses 8, 10 and 14 of the policy which are reproduced below: "3.2 This is obvious from the preamble to the policy as well as Clauses 8, 10 and 14. (a) The preamble reads: ''NOW, THEREFORE, in consideration of the Policy fee and premiums to be paid by the Exporter to the Corporation ... '' (Emphasis supplied) (b) Similarly, Clause 8 reads - ''Declaration -The Exporter shall (a) on or before the 15th day of each calendar month deliver to the Corporation a declaration in the form prescribed by the Corporation of (a) all shipments made by him during the previous month; (ii) all amounts which at the end of the previous month remain wholly or partly unpaid for more than one month from the due date of payment in respect of shipments previously declared (such declaration shall continue to be delivered to the Corporation in respect of all transactions insured with it, so long as such transactions remain outstanding, even though the Policy might have expired); and (b) furnish the Corporation promptly with any other information regarding such shipments that the Corporation may from time to time require. " In addition, after Sub-clause (a)(ii) quoted above, there is a Note, which reads: "Even if there are no shipments or there are no amounts overdue, a declaration shall nevertheless be filed showing this fact. '' (Emphasis supplied). (c) Clause 10 reads as under: ''Payment of Premium: The Exporter shall be liable to pay premium on the shipments to which this policy applies forthwith on making of such shipments and shall pay the said premium at the rates set out in the Schedule (or, as the case may be, at any varied rate for the time being in force) on the gross value of such shipments, and shall pay the said premium when making the declaration under Clause 8 of this Policy. '' (Emphasis supplied) 3.3 Further, the proviso to Sub-clause (b)(iii) of Clause 14 of the policy states: ''Provided always that (a) the goods not delivered shall remain the property of the Exporter and any resale thereof by the Exporter shall be with the prior approval of the Corporation. In case the sale of goods not delivered is made without the prior approval of the Corporation, the Corporation shall not be liable for any loss suffered by the Exporter in connection with the particular shipment con-cerned ''. " (Emphasis supplied) held that since the insured had violated the basic requirements of the insurance contract by not filing the declarations, Appellant was justified in repudiating the claim made by the insured. The appeal was dismissed. It was held: "The terms of the insurance contract in question {Shipments -Comprehensive Risks Policy (SC)} are rather different from those of other types of general insurance contracts inasmuch as they take into account the specific features of and risks in the business of exports, not covered by the standard general insurance policies. The assured pays a nominal "policy fee " (in this case, a paltry Rs. 2000 only) at the time of obtaining the policy. The actual premia are payable, not in advance and in lump sum based on the total amount assured (Rs. 10 lakh in this case) but in tranches, as the goods are shipped for export from time-to-time during the period of validity of the policy, for coverage of these perils (including loss due to default in payment and refusal to accept the exported goods) assured under this policy, a policy holder (as in this case) has to necessarily furnish to the ECGC a monthly declaration in a prescribed form, by the 15th of each month, each consignment that it exports to each foreign buyer during the previous month, irrespective of whether any of the consignments suffers any peril indemnified under the contract/policy. The premia have to be paid accordingly. " (Emphasis supplied) The learned Counsel for the appellant has not been able to show us anything that would amount even distantly to a factual error or failure of due appreciation of the policy terms in the impugned order of the State Commission. We are rather surprised that even in a case as blatantly violative of the explicit terms of the policy as this, the complainant/appellant thought it fit to challenge the State Commission ''s order. The appeal is totally devoid of merit and is dismissed as such. "

IN the present case, admittedly Respondent had not filed the declarations under Clauses 8(a) and (b) of the policy within the stipulated time. In terms of Clauses 8(a) and 8(b) of the policy, assured has to necessarily furnish to the ECGC a monthly declaration in a prescribed form by the 15th of each month, each consignment that it exports to each of foreign buyer during the previous month irrespective of whether any of the consignments suffers from peril indemnified under the contract of the policy. It is further provided that even if there was no shipments or there was no amounts overdue, a declaration shall nevertheless be filed showing this fact.

RESPECTFULLY following the view taken by this Commission in the above mentioned judgments, it is held that the declaration to be made in terms of the policy was mandatory in nature and non-filing of the declaration was fatal to the claim made under the policy. We also respectfully follow the law laid down by the Hon ''ble Supreme Court in Suraj Mal ''s case (supra), that the terms and conditions of the policy have to be strictly construed to determine the extent of liability of the insurer. In our view, State Commission has committed a grave error in reaching to the conclusion that since the Bank had made the declaration it be deemed to be a declaration made on behalf of the Respondent as well. State Commission has erroneously mixed up the two policies, one issued to the Respondent and the other to the Syndicate Bank. Appellant had issued a separate Guarantee Policy called "Whole Turnover Post Shipment Guarantee Policy " to the Syndicate Bank to cover the losses to the Bank by the acts and conduct of the exporter. The declaration was made by the Bank in terms of the condition of the said policy and the payment of Rs. 5,40,000 was made by the Appellant qua the said policy. It had nothing to do with the policy taken by the respondent insured. The two policies were distinct and separate. For the reasons stated above, the First Appeal is allowed, impugner order is set aside and consequently the complaint is dismissed with no order as to costs. First Appeal allowed.