Summary
ECGC denied an exporter’s buyer-default insurance claim because loading began a day before policy coverage, relying on an onboard date and DGFT guidelines. Reading the policy as a whole and considering the insured risk, the Court rejected that interpretation. Despatch required completed handing over, and the relevant bill-of-lading date fell within coverage; the guideline alternative also did not support denial without the stipulated letter of credit. The complaint was allowed with payment of Rs.1,96,38,400 and 9% annual interest.
Issues
- How an ambiguous despatch date in the buyer-default policy should be construed.
- Whether the DGFT guidelines justified the insurer’s rejection.
Provisions considered
- Provision 9.12(i), Foreign Trade Policy 2009-2014, Handbook of Procedures, Volume IEven assuming the guidelines applied, the special onboard-bill rule relied upon required the relevant letter-of-credit stipulation, which was absent here. (¶ 19-20)
Held
- Contract interpretation required the policy’s language, overall purpose and commercial context to be considered together. The insured risk was the foreign buyer’s payment default, which occurred within the policy period. Treating commencement of loading as decisive disregarded that risk and the transaction’s documents. (¶¶ 12-15, 17)
- Genuine ambiguity remaining after reading the insurance contract harmoniously was resolved against its drafter under contra proferentem, especially in a standard-form policy. The rule resolved ambiguity; it did not permit creation of uncertainty or rewriting clear contractual language. (¶ 16)
- Despatch in this policy required completion of handing over the goods to the first carrier, rather than the date loading commenced. On the documents, the date of the bill of lading was the relevant despatch date, so rejection on the earlier commencement date was unsustainable. (¶ 17-18)
- The Court also examined the insurer’s alternative reliance on the DGFT guidelines. No letter of credit providing for the onboard-bill date existed. Even applying those guidelines, ECGC’s chosen date did not justify refusal of this claim. (¶ 19-20)
Result
Appeal allowed without costs. The NCDRC order was set aside and the complaint allowed. ECGC was directed to pay Rs.1,96,38,400 with interest at 9% per annum. Pending applications disposed of.