IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2729 OF 2009

M/s. BHS Industries ... Appellant

Versus

Export Credit Guarantee Corp. & Anr. ... Respondents

J U D G M E N T

Dipak Misra, J.

The present appeal, by special leave, assails the judgment and order

dated 20.08.2007 passed by National Consumer Disputes Redressal Commission,

New Delhi (for short “the Commission’) in First Appeal No.189 of 2007

whereby it has affirmed the Judgment and Order dated 15.2.2007 passed by

the State Consumer Disputes Redressal Commission, Union Territory of

Chandigarh (for short, “the State Commission”) in complaint case No.

82/2002 (Pb)/RBT No. 46 of 2006 wherein the State Commission had rejected

the claim of the complainant-appellant on two counts, namely, the claim was

barred by limitation, and that under the postulates of the policy, it was

totally untenable.

2. The factual score that is essential to be depicted is that the

appellant, a small scale industry and a proprietary concern dealing in

handicraft goods, being desirous of exporting its goods to a buyer, namely,

M/s Treasures of India, Atlanta, USA took insurance cover from the first

respondent on 15.6.1999 and accordingly the appellant was issued a Shipment

Comprehensive Risk Policy on the same date. The maximum liability of the

respondent-insurer under the policy was Rs.30 lakhs. The insurer had

initially granted provisional credit limit of Rs.8 lakhs on 14.7.1999 in

respect of M/s Treasures of India which was enhanced to Rs.10 lakhs on

20.7.1999 and later on enhanced to Rs.20 lakhs. The appellant had sent one

consignment of Rs.6,50,000/- to M/s Treasures of India on 15.7.1999 and a

declaration to that effect was duly sent to the respondents. Be it noted,

the appellant has arrayed the Export Credit Guarantee Corporation Limited,

Nariman Point, Mumbai through its Managing Director and the same

corporation at Suryakant Complex, Ludhiana through its Branch Manager as

respondents 1 and 2 respectively. As averred, the appellant had obtained

further orders from the aforesaid buyer and the shipments were required to

be sent immediately. The appellant kept writing to the respondents to send

the approval for the additional limit in respect of the said buyer. On

20.8.1999 the appellant made another shipment of Rs.4,76,139/- to the said

buyer and a declaration to that effect was also sent to the respondents.

The appellant received further orders from the buyer but the corporation

had not accorded approval for the additional credit. Under these

circumstances the appellant had sent two shipments amounting to

Rs.2,77,732/- and 1,00,512/- on 20.8.1999. It is the case of the appellant

that the said two shipments were sent at its own risk as the corporation

had not accorded the additional limit as asked for. When the matter stood

thus, on 29.9.1999 the appellant was informed by its bank that the buyer

had refused to accept the documents negotiated with the drawee bank i.e Sun

Trust Altanta, USA in respect of the shipments sent vide invoices dated

15.7.1999 and 20.8.1999 and accordingly the documents were returned. Since

the buyer had refused to accept the goods which had already been exported

from India, the appellant on 22.10.1999 intimated the corporation regarding

non-acceptance of documents by the buyer. The appellant also informed the

respondent-corporation regarding the shipment which was not covered through

insurance by letter dated 10.12.1999.

3. As the factual matrix would further unfurl, on 22.12.1999 the

corporation sent a communication stating that the approved limit was Rs.20

lacs, and it required the appellant to comply with the formalities on the

prescribed format. On 11.1.2000, the corporation asked the appellant the

reason for non-payment and to explore the possibilities and further

negotiate with the buyer and to take steps. Thereafter, the appellant sent

a letter for payment of the aforesaid claim and as there was no response to

the said communication, it sent reminders to process the claim with

expediency. In response to said letters the respondents on 6.6.2000

repudiated the claim by stating that the corporation’s liability was not

attracted because of series of unavoidable lapses.

4. Being aggrieved by the aforesaid communication, the appellant

approached the State Commission for redressal of its grievance. Though two

appeals were filed, the State Commission treated them as one appeal. The

respondents before the State Commission took two preliminary objections

that the complaint was barred by limitation, and it had not been filed by

the authorised person. The State Commission, appreciating the factual

matrix in entirety came to hold that the complaint had been filed by a

properly authorised person but it was barred by limitation. However, the

State Commission proceeded to deal with the matter on merits and in that

regard came to hold that:-

“27. The shipment made on 20.8.99 vide invoice No.006 for Rs.4,76,139/-,

whose copy is annexure P-13 cannot be taken into consideration because

complainant had changed the terms of payment which had been mentioned as 60

days DA i.e. payment after 60 days of delivery while it is mentioned to be

90 days DA in annexure P-9 i.e. payment on acceptance of documents within

90 days from the date of shipment and not 60 days. It has been stated in

the insurance policy under the terms and conditions, whose copy is annexure

P-4 under heading “General” in conditions 28 and 29 that due performance

and observance of each term and condition contained herein or in the

proposal or declaration shall be a condition precedent to any liability of

the Corporation hereunder and if the insured fails to comply with the

condition, then policy shall be deemed to have been waived. Since,

complainant failed to comply with condition of 90 days DA with respect to

2nd shipment dated 20.8.99 for Rs.4,76,139/- as term of payment was changed

to 60 days DA instead of 90 days DA, so, OP was absolved from making

payment of this amount.

28. The further case of complainant is that buyer did not retire the

documents and had refused to accept the goods and as such documents were

returned to Punjab & Sind Bank. Nothing is known as to what happened to

the goods which were whipped through invoice No.005 on 15.7.99 or invoice

No.006 dated 20.8.99. It is stated in annexure P-35 that the goods were

lying in bonded warehouse. It is not known what steps were taken by the

complainant to get those goods sold and to retrieve some money. The bills

were not got ‘noted and protested’ through a notary. It is alleged that

the drawee’s bank had refused to get the documents ‘noted and protested’.

If complainant had taken some steps then perhaps goods had been retrieved

or could have been auctioned and some money would have been got but

complainant did not bother for goods shipped considering that OP was bound

to make payment of those goods. There is no evidence that complainant had

written any letter to the Debt Collecting Agency in USA. Thus, the

complainant did not take proper steps to safeguard the goods and as such is

not entitled to claim the amount. Complainant should have safeguarded the

goods by opening letter of credit but it failed to do so. There is no

letter from drawee’s bank Sun Trust International Atlanta, USA that it had

‘noted and protested’ the documents. No steps were taken to bring back

goods. Certainly act of the complainant is against terms and conditions of

the policy and as such is not entitled to the claimed amount.”

5. The unsuccess before the State Commission constrained the appellant

to prefer a first appeal before the Commission which did not agree with the

finding of the State Commission that the complaint was barred by time.

However, the Commission referred to the terms and conditions of the policy,

specifically condition no. 28, 29, the exclusion clause no. 7 of the

policy, referred to the communication dated 26.1.2000 which was a reply

given by the respondent to the letters dated 15.1.2000 and 18.1.2000 of the

appellant, the communication of repudiation, emphasised on the unilateral

change of terms and conditions relating to the terms of payment, the non-

taking of steps by the appellant for retrieving the goods and accordingly

opined that there had been violation of the terms of the policy and the

appellant had not been diligent to protect the shipment. Being of this

view, it dismissed the appeal.

6. We have heard Mr. Nidhesh Gupta, learned senior counsel for the

appellant and Mr. Bharat Sangal, learned counsel for the respondents.

7. On a scrutiny of facts, it is clear as crystal that one consignment

of Rs.6,50,000/- was sent to M/s. Treasures of India on 15.7.1999 and a

declaration to that effect was also communicated to the respondents.

Similarly, on 20.8.1999, the appellant made another shipment of

Rs.4,76,139/- to the same buyer i.e. M/s. Treasures of India and

declaration was sent to the Corporation. It is also undisputed that the

appellant had sent two shipments amounting to Rs.2,77,732/- and

Rs.1,00,512/- on 20.8.1999. The stand of the appellant is that as the

earlier two transactions covered the credit limit of Rs.10 lakhs and as the

Corporation was causing undue delay in granting the limit, the latter two

consignments were sent at the risk of the appellant. As the buyer refused

to accept the goods, the appellant communicated the same on 22.10.1999 to

the Corporation and on 10.12.1999 intimated regarding the shipments which

were not covered under the insurance. It is the stance of the appellant

that the Corporation communicated on 22.12.1999 stating that the approved

limit was Rs.20 lakhs and asked the appellant to intimate on the prescribed

format, which was duly complied with by the appellant, but despite such a

situation, the Corporation vide letter dated 6.6.2000 repudiated the claim

of the appellant. The relevant part of the communication by the insurer is

reproduced hereinbelow:-

“1. The terms of payment mentioned in order form as DA-90 days via Sea,

but you have effected the shipment worth Rs. 4,76,139/- by air on DA-60

days. As far as shipment worth Rs. 6,50,000/- effected on DA-90 days is

concerned, the Invoice shows the terms of payment as DA-90 days, whereas

the Bill of Exchange was drawn on DA-60 days basis. This is construed as a

violation of contract on the part of you.

2. You have omitted to declare shipments amounting to 50% in number and

34% in value. This is considered as serious and uncondonable lapse,

violating clauses nos. 1,2,8(a) 10, 19(1), 28, 7(a) and 29 of the Policy

Bond.

3. Bill was not Noted and Protested at buyer’s country.”

8. The crux of the matter whether the reasons ascribed for repudiation

by the insurer withstand scrutiny. Mr. Nidhesh Gupta, learned senior

counsel has commended us to certain authorities, which, according to him,

are relevant when a Court is required to construe an insurance policy. We

shall refer to the authorities first and thereafter in the backdrop of the

ratio laid down therein shall scrutinize the various clauses in the

insurance policy and express our views with regard to the issue whether

they are applicable to the case at hand and if so, whether such

applicability would demolish the claim of the appellant.

9. At the outset, it may be stated that contracts of insurance are

contracts of uberrima fides and every material fact is required to be

disclosed. In United India Insurance Co. Ltd. v. M.K.J. Corpn.[1], a

two-Judge Bench has observed:-

“It is a fundamental principle of Insurance law that utmost good faith must

be observed by the contracting parties. Good faith forbids either party

from concealing (non-disclosure) what he privately knows, to draw the other

into a bargain, from his ignorance of that fact and his believing the

contrary. Just as the insured has a duty to disclose, “similarly, it is the

duty of the insurers and their agents to disclose all material facts within

their knowledge, since obligation of good faith applies to them equally

with the assured”.”

Regard being had to these principles, the authorities cited by Mr.

Gupta, learned senior counsel for the appellant are to be seen.

10. In Amalgamated Electricity Co. v. Ajmer Municipality[2], though in a

different context, it has been held that:-

“In construing the true nature of the contract entered into between the

parties, the contract has to be read as a whole and if so read it is clear

that what the plaintiff undertook was to pump water from the wells in

question and not to supply any electrical energy. Hence we are in agreement

with the learned Judges of the High Court that the plaintiff's case in this

regard should fail.”

11. In Bay Berry Apartments (P) Ltd. and Another v. Shobha and others[3],

the Court has observed that in construing a document, the Court cannot

assign any other meaning; and a document as is well known must be construed

in its entirety.

12. In Polymer India (P) Ltd. and Another v. National Insurance Co. Ltd.

and Others[4], this Court has held thus:-

“19. In this connection, a reference may be made to a series of decisions

of this Court wherein it has been held that it is the duty of the court to

interpret the document of contract as was understood between the parties.

In [pic]the case of General Assurance Society Ltd. v. Chandumull Jain[5],

it was observed as under:

“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.”

20. Similarly, in the case of Oriental Insurance Co. Ltd. v. Samayanallur

Primary Agricultural Coop. Bank[6], it was observed as under:

“The insurance policy has to be construed having reference only to the

stipulations contained in it and no artificial far-fetched meaning could be

given to the words appearing in it.”

21. Therefore, the terms of the contract have to be construed strictly

without altering the nature of the contract as it may affect the interest

of parties adversely.”

13. Learned senior counsel for the appellant has also drawn inspiration

from the decision in General Assurance Society Ltd. v. Chandmull Jain[7],

rendered by the Constitution Bench wherein it has been held that:-

“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. A contract is formed

when there is an unqualified acceptance of the proposal. Acceptance may be

expressed in writing or it may even be implied if the insurer accepts the

premium and retains it. In the case of the assured, a positive act on his

part by which he recognises or seeks to enforce the policy amounts to an

affirmation of it. This position was clearly recognised by the assured

himself, because he wrote, close upon the expiry of the time of the cover

notes that either a policy should be issued to him before that period had

expired or the cover note extended in time. 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. Looking at the proposal, the letter of

acceptance and the cover notes, it is clear that a contract of insurance

under the standard policy for fire and extended to cover flood, cyclone

etc. had come into being.”

14. Mr. Gupta, learned senior counsel for the appellant has also drawn

our attention to Baj (Run Off) Ltd. v. Durham and others[8], wherein the

Supreme Court of United Kingdom, while interpreting the contract of

insurance has opined:-

“To resolve these questions it is necessary to avoid over-concentration on

the meaning of single words or phrases viewed in isolation, and to look at

the insurance contracts more broadly. As Lord Mustill observed in Charter

Reinsurance Co. Ltd. v. Fagan[9], all such words “must be set in the

landscape of the instrument as a whole” at p.381, any “instinctive

response” to their meaning “must be verified by studying the other terms of

the contract, placed in the context of the factual and commercial

background of the transaction”. The present case has given rise to

considerable argument about what constitutes and is admissible as part of

the commercial background to the insurances, which may shape their meaning.

But in my opinion, considerable insight into the scope, purpose and proper

interpretation of each of these insurances is to be gained from a study of

its language, read in its entirety. So, for the moment, I concentrate on

the assistance to be gained in that connection.”

15. Relying on the authorities which have been stated by Mr. Gupta, it is

submitted by him that the policy between the parties is required to be read

as a whole and on a reading of the policy in entirety, it is clear that the

declaration of all the shipments whether covered under the policy or not,

is not mandatory and only the shipments in respect of which claims are

lodged are required to be declared. As an alternative submission, it is

urged by him that the respondent-Corporation had vide letter dated

26.1.2000 deducted premium in respect of the two undeclared shipments from

the credit balance of the appellant and, therefore, the respondent-

Corporation had itself ratified the action of the appellant of sending the

aforesaid two shipments and under these circumstances, it was not justified

on its part in rejecting the claim of the appellant on the foundation that

there had been non-declaration of the said shipments. To buttress the

concept of ratification, he has commended us to the authorities in High

Court of Judicature for Rajasthan v. P.P. Singh[10], Marathwada University

v. Seshrao Balwant Rao Chavan[11] and Babu Varghese v. Bar Council of

Kerala[12]. We think it appropriate that this submission of Mr. Gupta has

to be dealt with while construing the other clauses of the policy.

16. Mr. Gupta, while criticizing the repudiation of the claim, has drawn

our attention to clause 3 of the communication which states that the bill

was not noted and protested at buyer’s country and in that regard argued

that the ascription of the said reason is beyond the terms and conditions

of the policy, for it has nowhere been prescribed in the policy that

insured has to get the bill noted and protested at buyer’s country in order

to claim the amount under the policy. It is argued by him that the terms

of the policy are to be construed strictly and neither any addition nor any

subtraction from it is permissible. To substantiate the said stand, he

has placed reliance on United India Insurance Co. Ltd. v. Harchand Rai

Chandan Lal[13].

17. The aforesaid authorities being basically pronouncements pertaining

to the construction to be placed on a policy, we shall proceed to deal with

the terms and conditions of the policy. We may hasten to add that Mr.

Bharat Sangal, learned counsel for the respondent-Corporation has basically

urged that there has been gross violation of the terms and conditions of

the policy and the clauses in policy have to be read as they are inasmuch

as there is no ambiguity in any of the clauses. As regards the

interpretation, he has placed reliance on Oriental Insurance Co. Ltd. v.

Sony Cheriyan[14], wherein it has been held thus:-

“The insurance policy between the insurer and the insured represents a

contract between the parties. Since the insurer undertakes to compensate

the loss suffered by the insured on account of risks covered by the

insurance policy, the terms of the agreement have to be strictly construed

to determine the extent of liability of the insurer. The insured cannot

claim anything more than what is covered by the insurance policy. That

being so, the insured has also to act strictly in accordance with the

statutory limitations or terms of the policy expressly set out therein.”

18. Apart from the aforesaid authority, he has also commended us to two

decisions of the Commission wherein claim was rejected and he has been

emboldened to do so as one of the orders was assailed before this Court in

Civil Appeal No. 8052 of 2004, and this Court has dismissed the appeal in

limine.

19. Presently to the basic anatomy of the policy. At the outset it is

essential to state that we, in due course, refer to the clauses of the

policy in extenso as learned counsel for both the parties have relied upon,

but prior to that the framework of the policy is apposite to be indicated.

The initial part of the policy refer to the risks insured and the proviso

appended thereto. Clause 2 of the Policy, as is evident, requires the

insured to disclose the facts at the date of issue of the policy and also

at all times during the operation of the policy that affect the risks of

the insured. Clause 3 deals with covering of shipments and exceptions.

The said coverage is subject to terms and conditions of the policy. Clause

5 deals with shipments which are not covered and includes grant of credit

of the insured to the buyer for a period longer than 180 days from the date

of shipment. Clause 7, requires the insured to notify to the Corporation

of the occurrence of any event likely to cause a loss maximum within 30

days. Clause 8(a) requires a declaration to be given as regards the

shipment. Clause 14B(b) states that the goods that have not been delivered

remains the property of the insured and any resale thereof by the insured

shall be with the prior approval of the Corporation. Clause 19 that deals

with the exclusion of liability under sub-clause (a) stipulate that if 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, the insurer would not be

liable unless otherwise agreed to by the Corporation in writing. Clause 28

provides for observance of conditions which specifically states that due

performance and observance of each term and condition contained in the

policy or the declaration or the proposal or declaration shall be a

condition precedent to fasten liability on the Corporation. Clause 29

deals with the failure to comply with the conditions. It says that no

failure by the insured to comply with the terms and conditions of the

policy would bee deemed to have been waived, excused or accepted by the

Corporation unless there has been express waiver by the Corporation in

writing. Clause 30 deals with uncovered risks and states that if any

account or bill in respect of any shipment declared exceeds the limits

provided under the policy, no acknowledgement of the declaration of the

Corporation, no payment or tender of premium by the insured shall be deemed

to bind the Corporation to undertake the liability. These are the basic

components of the policy.

20. Learned counsel for the respondents has contended that the appellant

has violated clauses 3, 7, 8, 19, 27, 28 and 29 of the policy. Relying on

the authorities which we have referred to hereinbefore, if clauses 2 and 10

are read together, it becomes quite clear that the premium is payable only

in respect of the shipments to which the policy applies. The appellant had

sent two shipments at its own risk as the credit limit already stood

exhausted and no cover was sought by the appellant in respect of the said

shipments. In this backdrop, submission of Mr. Gupta, learned senior

counsel for the appellant is that policy does not cover the two shipments

and hence, there was no obligation on the part of the appellant to declare

the same to the respondent-Corporation. Referring to Clause 8(a), it is

contended by him that the words used therein i.e. all shipments have to be

understood in the backdrop of Clause 10 and Clause 10 uses the word

“relevant declaration” and, therefore, only relevant declarations are to be

made. Referring to the concept of premium, contends Mr. Gupta, that the

premium payable is on the gross invoice value and all shipments to which

the policy applies and the said premium is payable to the Corporation while

submitting the relevant declaration of the shipment as per Clause 8(a) of

the policy and, therefore, the payment to be made under Clause 10 is in

relation to the gross invoice value of all shipments to which the policy

applies and the declaration to be made under Clause 8(a) is also in

relation thereto. Emphasising on the language employed in Clause 14B(b),

it is urged by him that the policy envisages the liability of the

Corporation with regard to only such shipments which are intended to be

covered and the Corporation is not liable to suffer the loss and the

insured will not get the benefit of the shipments which are not covered

under the insurance cover. Criticizing the reliance on Clause 30 by the

learned counsel for the respondents, it is highlighted by Mr. Gupta that it

deals with uncovered risks inasmuch as the words used are “not in

accordance with the policy” and in the case at hand at best the two

undeclared shipments can be termed as not in accordance with the policy and

the same can be treated as uncovered risks. In any case, there is no claim

in respect of the same. As far as the reduction of the debts from 90

days to 60 days, it has been canvassed that it is within the outer limit

and no exception can be taken to the same.

21. Another aspect which has been highlighted by him is that the

Commission has returned a finding that the appellant has not taken any

steps to retrieve the goods and has not communicated anything to the Debt

Collecting Agency. It is argued that there is no obligation under the

policy conditions to do so and, in fact, the appellant had taken all

requisite steps as suggested by the Corporation vide letter dated

11.1.2000. In any case, as per Clause 23 of the policy, there is a

postulate that the respondent-Corporation has to make payment to the

appellant of the amount due under the policy and only after payment of such

amount, the Corporation could ask the insured to take steps as stipulated

in the clause and, therefore, the finding recorded by the Commission is

absolutely misconceived. As far as writing to the Debt Collecting Agency

is concerned, learned senior counsel has seriously criticized the finding

recorded by the Commission on the ground that there are documents to show

that it had communicated as per the address given by the Corporation and

there was a communication by the insured to the insurer that the address

was incorrect and the registered letter sent by him had returned. The

request sent at the correct address remained unresponded.

22. First, we shall deal with Clause 5 that deals with the shipments not

covered. The said clause reads as follows:-

“5. Shipments not covered. Except with the approval in writing of the

Corporation (which the Corporation shall not be obliged to give), this

Policy shall not apply to any shipment which:

(a) is made under a contract or agreement of sale which does not specify

the nature, the quantity and price of the goods sold or agreed to be sold,

the due date of payment and the currency in which the payment is to be

made;

(b) is invoiced to any buyer in a currency not permitted by the exchange

control laws, rules and/or regulations for the time being in force in

India;

longer than 180 days from the date of shipment unless specifically agreed

to the contrary by the Corporation in writing.

23. Clause 5(c) of the policy, as we find, requires the grant of credit

by the insured to the buyer not for a longer period than 180 days unless

specifically agreed to the contrary by the Corporation in writing. As per

the letter dated 2.9.1999, the appellant has shown the terms of payment due

within 90 days of the shipment. The appellant had given a credit of 60

days which is well within the outer limit of 90 days. If the Clause 5(c)

is properly understood, in the obtaining factual matrix we are unable to

agree with the findings recorded by the State Commission and the Commission

that there has been violation of the terms of the policy as regards the

reduction of the period for payment. What is stipulated is that the

Corporation should not be liable if the insured gives credit for more than

180 days. That is the outer limit and as the insured has fixed the debt

within the said period, that cannot be held against him.

24. The second violation of condition relates to omission of declaration

of shipments amounting to 50% in number and 30% in value. The Corporation

has considered the said lapse as serious and uncondonable being violative

of Clauses 1, 2, 7(a), 8(a), 10, 19(a), 28, and 29 of the policy. To

appreciate the controversy in an appropriate manner, we reproduce the said

clauses hereunder:-

“1. Proposal and Declaration: The Proposal and the Declaration therein

shall be the basis of this Policy and shall form part thereof and if any of

the statements contained in the Proposal or the Declaration be untrue or

incorrect in any respect, this Policy shall be void but the Corporation may

retain any premium that has been paid.

2. Disclosure of facts: Without prejudice to any rule of law it is

declared that this Policy is given on condition that the Insured has at the

date of issue of this Policy disclosed and will at all times during the

operation of this Policy promptly disclose all facts in any way affecting

the risks injured.

xxx xxx xxx

7. Obligations of the Insured: The Insured shall:

(a) use all reasonable and usual care, skill and forethought and take all

practicable measures, including any measures which may be required by the

Corporation, (including if so required the institution of legal

proceedings) to prevent or minimize loss.

8. Declarations:

(a) Declarations of shipments: On or before the 15th day of each calendar

month, the Insured shall deliver to the Corporation a declaration, in the

form prescribed by the Corporation, of all shipments made by him during the

previous month. If no shipment has been made during a month, a ‘NIL’

declaration shall nevertheless be submitted.

xxx xxx xxx

10. Incidence of premium and payment of additional premium: The Insured

shall be liable to pay premium, at the rates set out in Schedule-II hereto,

or, as the case may be, at such other rates for the time being in force, on

the gross invoice value of all shipments to which this Policy applies

forthwith on the making of such shipments and shall pay to the Corporation

additional premium, if any, that may become due and payable after

adjustment of the Minimum Premium referred to hereinabove, while submitting

the relevant declaration of shipments as per clause 8(a) of this Policy.

xxx xxx xxx

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.

xxx xxx xxx

28. Observance of conditions: The due performance and observance of each

term and condition contained herein or in the proposal or declaration shall

be a condition precedent to any liability of the Corporation hereunder and

to the enforcement thereof by the insured.

29. Failure to comply with conditions: No failure by the Insured to

comply with the terms and conditions of the Policy shall be deemed to have

been waived, excused or accepted by the Corporation unless the same is

expressly so waived, excused or accepted by the Corporation in writing and

such waiver, excuse or acceptable shall be subject to such terms and

conditions as the Corporation may stipulate, including a reduction in the

percentage specified under clause 30 of this policy being the percentage of

loss payable by the Corporation.”

25. As has been held in Chandmull Jain (supra) by the Constitution Bench

that in a contract of insurance, there is a requirement of good faith on

the part of the insured and in case of ambiguity, it has to be construed

against the company. As per other authorities, the insurance policy has to

be strictly construed and it has to be read as a whole and nothing should

be added or subtracted. That apart, as has been held in Polymer India (P)

Ltd. (supra), it is the duty of the Court to interpret the document as is

understood between the parties and regard being had to the reference to the

stipulations contained in it.

26. Keeping in view the aforesaid parameters of law, we are required to

appreciate the stipulations in the policy pertaining to rejection on the

said score. Clause 8(a) which deals with declarations, assumes

significance. The said clause requires that before the 15th day of each

calendar month, the insured shall deliver to the Corporation a declaration

in the prescribed format of all shipments made by him during the previous

month and if no shipment has been made during a month, a ‘NIL’ declaration

shall nevertheless be submitted. Clause 9 deals with minimum premium and

Clause 10 with incidence of premium and payment of additional premium.

Clause 19(a), as has been indicated earlier, deals with exclusion of

liability. Clause 19, the exclusionary clause, categorically states that

unless otherwise agreed to by the Corporation in writing, the Corporation

shall cease to have any liability in respect of gross invoice value of any

shipment or part thereof if 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.

Submission of Mr. Sangal is that these clauses are binding on the insured

and he cannot play with the requirements at his own will. Mr. Gupta,

learned senior counsel, as we have noted earlier, has contended that these

clauses are to be read in juxtaposition with Clauses 2, 10 and 30, for the

Policy has to be read in entirety and so read, the clauses do not require

that all shipments are to be declared. To appreciate the submission, we

think it appropriate to reproduce Clauses 2, 10, and 30:-

“2. Disclosure of facts: Without prejudice to any rule of law it is