Sakunjay Vyas
Published on: April 26, 2022 at 17:51 IST
The Three-Judge Bench of Justice Uday Umesh Lalit, Justice S. Ravindra Bhat and Justice Pamidighantam Sri Narasimha of the Supreme Court overturned the order of the National Consumer Disputes Redressal Commission, dismissing the appellant’s complaint.
The Supreme Court recently ruled that the Government-owned export credit providers cannot deny a consumer’s claim over an incorrect interpretation of an ambiguous term.
The Three-Judge Bench of Justice Uday Umesh Lalit, Justice S. Ravindra Bhat and Justice Pamidighantam Sri Narasimha, where-in the issue urged by the appellant is whether the NCDRC was correct in placing reliance on guidelines issued by the Directorate General of Foreign Trade to interpret the date of ‘despatch/shipment’ in the Single Buyer Exposure Policy of the respondent and thereby deny the appellant’s claim.
The Apex Court, after going through all the material facts and evidence, was of the opinion that the date noted on the loading vessels is not material and cannot form the basis for the rejection of the claim.
“This Court is of the opinion that the date of loading goods onto the vessel, which commenced one day prior to the effective date of the policy, is not as significant as the date on which the foreign buyer failed to pay for the goods exported, which was well within the coverage period of the Policy.”
“Thus, the claim could not be dismissed simply on such basis, especially given that the date of loading the goods onto the vessel was immaterial to the purpose for which the policy was taken by the appellant.” the Court said.
The Apex Court stated the rule of contra proferentem protects the insured from unfavourable interpretations of ambiguous terms that were not agreed to by the insured.
That a standard form policy, known as a contract d’ adhesion or a boilerplate policy, has special significance in cases where the insured does not have much countervailing bargaining power. Since ECGC is mandated to cover the risks in this case, other insurers rarely delve into this area, thereby highlighting this consideration.
“The 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.22 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..“ the Court said.
The Apex Court stated that if the third-party DGFT Guidelines were applied in the present instance – departing from contra proferentem – the result would not favour the ECGC, as a plain reading of provision 9.12 shows that the date on the bill of lading must be taken as the date of dispatch/shipment.
That there is no way to apply the “onboard” date of the Bill of Lading in this case as no letter of credit has been executed, let alone allowing its application.
That as a result, even if ECGC had taken into account the DGFT Guidelines, it could not have denied the appellant’s claim.
The Apex Court further stated that ECGC is the only government company offering such niche services which do not have to follow the Trade Credit Insurance Guidelines periodically reviewed by the Insurance Regulatory and Development Authority of India.
The denial of the appellant’s claim due to incorrect interpretation of an ambiguous term, and that too with only one day’s delay, goes against such duties, especially given that the appellant had conducted business with the respondent previously on several occasions.
“It is the only government company offering such niche services, and is exempt from following the Trade Credit Insurance Guidelines periodically revised by the Insurance Regulatory and Development Authority of India.”
“To deny the appellant’s claim over an incorrect interpretation of an ambiguous term, that too with delay amounting to only one day, goes against such duties, especially given the fact that the appellant had transacted with the respondent on several previous occasions.” the Court said.
As a result, the Apex Court overturned the impugned order of the National Consumer Disputes Redressal Commission by stating that the impugned order of the NCDRC is hereby set aside; the appellant’s complaint is consequently allowed.
ECGC is hereby directed to pay the claim amount of Rs. 2.45 crores to the appellant, with interest at the rate of 9% p.a. The appeal is allowed; all pending application(s) are disposed off. There shall be no order on costs.