HARIS MARINE PRODUCTS VS EXPORT CREDIT GUARANTEE CORPORATION (ECGC) LIMITED

HARIS MARINE PRODUCTS VS EXPORT CREDIT GUARANTEE CORPORATION (ECGC) LIMITED

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

 REPORTABLE

 IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4139/2020

HARIS MARINE PRODUCTS …APPELLANT

VERSUS

EXPORT CREDIT GUARANTEE

CORPORATION (ECGC) LIMITED …RESPONDENT

J U D G M E N T

S. RAVINDRA BHAT, J.

1. With consent of counsel for the parties, the appeal was heard finally. The

appellant is aggrieved by an order1 of the National Consumer Disputes Redressal

Commission (hereinafter, “NCDRC”) dismissing its complaint. 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 (hereinafter, “DGFT

Guidelines”)2

to interpret the date of ‘despatch / shipment’ in the Single Buyer

Exposure Policy of the respondent (hereinafter, “Policy”), and thereby deny the

appellant’s claim.

The facts

1 CC No. 1546/2016, dated 13.07.2020.

2 Ministry of Commerce and Industry, Directorate General of Foreign Trade, Foreign Trade Policy, Handbook of

Procedures (Volume I) w.e.f. 27.08.2009 – 31.03.2014.

2

2. The appellant is an exporter of fish meat and fish oil, whereas the respondent

(hereafter, “ECGC”) is a government company (under the control of the Ministry

of Commerce and Industry, Union Government). ECGC provides a range of credit

risk insurance cover to exporters. On 13.12.2012, the appellant paid premium to

ECGC for the Policy (bearing no. 0540000143), which covered foreign buyer’s

failure to pay for goods exported. The coverage of this Policy, (with effect from

14.12.2012-13.12.2013), was 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 resisted the claim.

4. By the impugned order, NCDRC upheld the rationale of the IRC and

rejected the appellant’s contention that in absence of a clearly specified provision

in the Policy, it was entitled to the benefit of the rule of verba chartarum fortius

accipiuntur contra proferentem (hereinafter, “contra proferentem”). Hence the

present appeal.

3

Id., Chapter 9 Definitions – Clause 9.12(i) (Date of shipment / Dispatch in respect of Exports by Sea).

3

Contentions of parties

5. Ms Anjana Prakash, the appellant’s Senior Advocate, brought the Court’s

attention to the relevant clause in the Policy, which is reproduced as follows:

“Part IV – Definitions

(1) DESPATCH OR DESPATCHED

‘Despatch’ means passing or handing over of the goods to the first

carrier for through carriage to the place where the Insured Buyer or

his nominee is to accept them ‘despatched’ will be construed

accordingly”.

Ms Prakash submitted that a plain reading of the above stipulation did not

clarify the exact date of initiation of the coverage. However, the condition must be

interpreted to mean the date on which the vessel set sail, and not the initial date of

loading of the goods, given that four thousand containers were to be loaded, which

took time, and was completed by 10 PM on 14.12.2012. Thus, possession by the

first carrier (the vessel herein) could only be completed when all the goods were

loaded, and the vessel sailed. To support her submissions, Ms Prakash alluded to

the Mate’s Receipt, i.e., the receipt issued by the Master of the vessel when the

cargo was loaded on board4

, issued on 15.12.2012. Therefore, the date of ‘despatch

/ shipment’ had to be construed as 15.12.2012, and not 13.12.2012.

6. Ms Prakash submitted that as opposed to this, the DGFT Guidelines defined

the date of ‘shipment’ as follows:

“Date of shipment/despatch for exports will be reckoned under:-

(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. For exports by containers from Inland Container

Depot (ICD), date of Bill of Lading issued by shipping agents at the

time of loading of export goods in ICD after customs clearance.

b) For Lash barges, date of Bill of Lading evidencing loading of export

goods on board”.

4 See Shaw Wallace & Co. Ltd. v. Nepal Food Corpn., (2011) 15 SCC 56, paras 26-28 for relationship between

Mate’s Receipt and Bill of Lading.

4

 (emphasis supplied)

The date of ‘Onboard 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 guidelines

issued by a third party (DGFT) which was an external entity not privy to the

contract between the present parties, to disallow the claim5

.

8. Ms Prakash placed reliance on certain judgments of this Court. In United India

Insurance Co. Ltd. v. Harchand Rai Chandan Lal6

, on the interpretation of the word

‘burglary’ in the insurance policy, this Court held:

“It is settled law that terms of the policy shall govern the contract

between the parties, they have to abide by the definition given therein

and all those expressions appearing in the policy should be interpreted

with reference to the terms of policy and not with reference to the

definition given in other laws. It is a matter of contract and in terms of

the contract the relation of the parties shall abide and it is presumed

5 See also, Modern Insulators Ltd. v Oriental Insurance Co. Ltd., (2000) 2 SCC 734 and Polymat India (P) Ltd. &

Ors. v National Insurance Co. Ltd. & Ors., (2005) 9 SCC 174.

6

(2004) 8 SCC 644, para 9.

5

that when the parties have entered into a contract of insurance with

their eyes wide open, they cannot rely on the definition given in other

enactment”.

 (emphasis supplied)

Thus, the Court refused to import the definition of the term ‘burglary’ from

criminal statutes into the insurance policy. However, it is pertinent to note that this

Court also went on to hold the following7

:

“Therefore, it is settled law that the terms of the contract have to be

strictly read and natural meaning be given to it. No outside aid should

be sought unless the meaning is ambiguous”.

Ms Prakash then placed reliance on LIC v. Insure Policy Plus Services (P)

Ltd.,

8

in which the assignment of insurance policies prior to the 2015 amendment

to the Insurance Act, 1938 was in question. While dealing with an argument on

disallowing such assignment on grounds of public policy, this Court held:

“We also think that it is not appropriate to import the principles of

public policy, which are always imprecise, difficult to define, and akin

to an unruly horse, into contractual matters. The contra proferentem

rule is extremely relevant inasmuch as it is the appellant who has

drafted the insurance policy and was, therefore, well positioned to

include clauses making it specifically impermissible to assign policies”.

Lastly, in Industrial Promotion & Investment Corpn. of Orissa Ltd. v. New

India Assurance Co. Ltd.,

9 while again interpreting the term ‘burglary’ in the

insurance policy, the rule of contra proferentem as explained in Colinvaux’s Law

of Insurance10 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

7

(2004) 8 SCC 644, para 14.

8

(2016) 2 SCC 507, para 18.

9

(2016) 15 SCC 315, para 11.

10 Robert and Merkin (Eds.), Colinvaux's Law of Insurance (6th Edn., 1990) at p. 42.

6

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 Court found no necessity to invoke the

rule of contra proferentem in the aforementioned matter, holding that the terms of

the policy were clear enough to be correctly interpreted with no ambiguity.

9. Appearing for ECGC, Mr Rajnish Kumar Jha, Advocate submitted that the

DGFT as the statutory body for regulation and promotion of foreign trade, had

formulated the DGFT Guidelines to provide a legal framework to the Foreign Trade

Policy 2009-2014 as envisioned by the Ministry of Commerce and Industry,

Government of India. It was empowered to do so under Section 5 of the Foreign

Trade (Development and Regulation) Act, 1992:

“5. Foreign Trade Policy.—The Central Government may, from time

to time, formulate and announce, by notification in the Official Gazette,

the foreign trade policy and may also, in like manner, amend that

policy:

Provided that the Central Government may direct that, in respect of the

Special Economic Zones, the foreign trade policy shall apply to the

goods, services and technology with such exceptions, modifications and

adaptations, as may be specified by it by notification in the Official

Gazette.”.

ECGC, being a government insurance company specifically providing

coverage for exports, had to thus abide by the DGFT Guidelines, including the

definitions contained in them. On an application of the definition of date of

‘despatch / shipment’ under the DGFT Guidelines, it was clear that the date to be

construed was 13.12.2012, which was a day prior to the effective date of the Policy.

10. ECGC relied on Polymat India (P) Ltd. v. National Insurance Co. Ltd11

where this Court, while interpreting the term ‘factory-cum-godown’ and the

11 (2005) 9 SCC 174, para 21.

7

application of a fire insurance policy on goods kept within the boundary wall, held

as follows:

“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”.

Coverage was thus denied on a contextual interpretation of the term,

including placing reliance on the definition of ‘factory’ under Section 2(m) of the

Factories Act, 1948 and under the Law Lexicon, to exclude goods destroyed by fire

placed outside the plant premises but within the factory-cum-godown wall. Mr Jha

submitted, therefore, that in absence of an express definition of a term, other

relevant laws 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 International12

, 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 period13

, 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 of the contract as the same may

affect the interests of the parties adversely.” The clauses of an

insurance policy have to be read as they are. Consequently, the terms

12 (2014) 1 SCC 686, para 13.

13 But see Oriental Insurance Company Limited v Sanjesh & Anr., SLP(C) No. 3978 of 2022, dated 11.03.2022,

which qualified such a restriction as being void under Section 28 of the Contract Act, 1872.

8

of the insurance policy, that fix the responsibility of the insurance

company must also be read strictly. The contract must be read as a

whole and every attempt should be made to harmonise the terms

thereof, keeping in mind that the rule of contra proferentem does not

apply in case of commercial contract, for the reason that a clause in a

commercial contract is bilateral and has mutually been agreed upon.

(Vide Oriental Insurance Co. Ltd. v. Sony Cheriyan [(1999) 6 SCC

451], Polymat India (P) Ltd. v. National Insurance Co. Ltd. [(2005) 9

SCC 174], Sumitomo Heavy Industries Ltd. v. ONGC Ltd. [(2010) 11

SCC 296] and Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram

Saran [(2012) 5 SCC 306].)”14

 (emphasis supplied)

Thus, according to the counsel for ECGC, the date of shipment being a day

prior to the effective date of implementation of the Policy, ECGC was not bound

to honour to claim.

Analysis and Conclusions

A. Business common sense

12. Reconciliation of ambiguous terms in commercial contracts has been a

contentious issue across jurisdictions. A 2011 decision by the Supreme Court of

the United Kingdom (hereafter, “UK Supreme Court”) in Rainy Sky SA v Kookmin

Bank15 was concerned with the interpretation of refund guarantees given by a ship

builder to the buyers, and whether the same was triggered when the ship builder

started facing financial difficulties and was subjected to a debt workout procedure.

Allowing the appeal, the UK Supreme Court provided the guiding principle for

resolution of such ambiguity, keeping the ‘business common sense’ as central:

“The language used by the parties will often have more than one

potential meaning. I would accept the submission made on behalf of the

appellants that the exercise of construction is essentially one unitary

exercise in which the court must consider the language used and

ascertain what a reasonable person, that is a person who has all the

background knowledge which would reasonably have been available to

the parties in the situation in which they were at the time of the contract,

14 (2014) 1 SCC 686, para 11.

15 [2011] UKSC 50, para 21.

9

would have understood the parties to have meant. In doing so, the court

must have regard 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.

16 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 of the relevant words, in

this case clause 3(2) of each of the 25 leases, in their documentary,

factual and commercial context. That meaning has to be assessed in

the light of (i) the natural and ordinary meaning of the clause, (ii) any

other relevant provisions of the lease, (iii) the overall purpose of the

clause and the lease, (iv) the facts and circumstances known or

assumed by the parties at the time that the document was executed,

and (v) commercial common sense, but (vi) disregarding subjective

evidence of any party's intentions. In this connection, see Prenn at pp

1384-1386 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen

(trading as HE Hansen-Tangen) [1976] 1 WLR 989 , 995-997 per Lord

Wilberforce, Bank of Credit and Commerce International SA (in

liquidation) v Ali [2002] 1 AC 251 , para 8, per Lord Bingham, and the

survey of more recent authorities in Rainy Sky , per Lord Clarke at

paras 21-30”.

 (emphasis supplied)

16 [2015] UKSC 36, para 15.

10

14. Thus, a decisive method was suggested to construe the ambiguity of a term

used in a commercial contract. This was applied by the UK Supreme Court in

Woods v Capita Insurance.17 The facts in brief are that the buyer of an insurance

company relied on an indemnity clause to recover losses paid in the form of

compensation to the customers of the insurance company to which the company

has mis-sold products. According to the indemnity clause, any complaint to the

Financial Services Authority (hereinafter “FSA”) would be indemnified by the

buyer. However, the contract did not clearly specify what would happen if the

company itself raised a complaint before the FSA. The UK Supreme Court held

that a literalist approach to resolving ambiguity in a commercial contract term

would yield incorrect results, and a holistic reading was imperative to ascertain

meaning of terms agreed to by parties. Dismissing the appeal, the UK Supreme

Court finally held that the indemnity clause was in addition to the wide-ranging

warranties specified elsewhere in the contract, which was not contrary to business

common sense. The agreement might have become a poor bargain for the buyer,

but it was not the Court's function to improve that bargain:

“The court's task is to ascertain the objective meaning of the language

which the parties have chosen to express their agreement. It has long

been accepted that 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

17 [2017] UKSC 24, paras 10, 13-14.

11

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 example because of their informality, brevity or the absence of

skilled professional assistance. But negotiators of complex formal

contracts may often not achieve a logical and coherent text because of,

for example, the conflicting aims of the parties, failures of

communication, differing drafting practices, or deadlines which

require the parties to compromise in order to reach agreement. There

may often therefore be provisions in a detailed professionally drawn

contract which lack clarity and the lawyer or judge in interpreting such

provisions may be particularly helped by considering the factual matrix

and the purpose of similar provisions in contracts of the same type. The

iterative process, of which Lord Mance spoke in Sigma Finance

Corpn (above), assists the lawyer or judge to ascertain the objective

meaning of disputed provisions.

On the approach to contractual interpretation, Rainy Sky and Arnold

were saying the same thing.”

 (emphasis supplied)

15. On application of the above principle to this Policy, and taking into

consideration all relevant documents, 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.

B. Rule of contra proferentem

16. It is entrenched in our jurisprudence that an ambiguous term in an insurance

contract is to be construed harmoniously by reading the contract in its entirety. If

after that, no clarity emerges, then the term must be interpreted in favour of the

insured, i.e., against the drafter of the policy. In deciding the applicability of a cover

12

note on houses swept away by floods, a Constitution Bench of this Court in General

Assurance Society Ltd. v. Chandumull Jain18 held as follows:

“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… (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 Printers19

,

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 close to the building… (I)t is also settled position

in law that if there is any ambiguity or a term is capable of two possible

interpretations, one beneficial to the insured should be accepted

consistent with the purpose for which the policy is taken, namely, to

cover the risk on the happening of certain event… Where the words of

a document are ambiguous, they shall be construed against the party

who prepared the document. This rule applies to contracts of insurance

and clause 5 of the insurance policy even after reading the entire policy

in the present case should be construed against the insurer”.

 (emphasis supplied).

18 (1966) 3 SCR 500, para 11.

19 (2004) 3 SCC 694, para 6.

13

Similarly, in Sushilaben Indravadan Gandhi v New India Assurance

Company Ltd.,

20 this Court charted the evolution of the rule of contra proferentem,

and relied inter alia on its explanation as provided under Halsbury's Laws of

England:

21

“Contra proferentem rule.—Where there is ambiguity in the policy the

court will apply the contra proferentem rule. Where a policy is

produced by the insurers, it is their business to see that precision and

clarity are attained and, if they fail to do so, the ambiguity will be

resolved by adopting the construction favourable to the insured.

Similarly, as regards language which emanates from the insured, such

as the language used in answer to questions in the proposal or in a slip,

a construction favourable to the insurers will prevail if the insured has

created any ambiguity. This rule, however, only becomes operative

where the words are truly ambiguous; it is a rule for resolving

ambiguity and it cannot be invoked with a view to creating a doubt.

Therefore, where the words used are free from ambiguity in the sense

that, fairly and reasonably construed, they admit of only one meaning,

the rule has no application.”

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.

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

20 (2021) 7 SCC 151, paras 37-42.

21 5th Edn., vol. 60, para 105.

22 Jacob Punnen & Anr. v United India Insurance Co. Ltd., (2021) SCCOnline SC 1207, paras 30-33.

14

Insurance Co. Ltd.23 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 terms”.

 (emphasis supplied)

As argued on behalf of the appellant, the Mate’s Receipt indicating the

completion of loading of the goods onto the ship was issued on 15.12.2012,

pursuant to which the vessel sailed on 15.12.2012, and the Bill of Lading was

issued on 19.12.2012. The term ‘despatch’ -contained in the policy implied

‘completion’ of handing over of possession of the goods to the first carrier (the ship

herein), and not the date on which the loading ‘commenced’ – such an interpretation

would give rise to an absurdity. On harmoniously construing the documents of this

policy, it is the in fact the date on the Bill of Lading, and not the Mate’s Receipt /

date of shipment which ought to be considered as the date of ‘despatch / shipment’,

for the Bill of Lading is the legal document conferring title and possession of the

goods to the carrier.24

18. Therefore, reliance on the DGFT Guidelines to disallow the claim of the

appellant was not good in law. The Counsel for the respondent has argued that the

DGFT Guidelines are enforceable against the present facts. Therefore, an analysis

of the same is merited.

23 (2006) 12 SCC 673, paras 45 and 69.

24 Carriage of Goods by Sea Act, 1925.

15

19. The DGFT Guidelines are part of a ‘Handbook of Procedures (Volume I)’ to

enforce the Foreign Trade Policy of 2009-2014, which in turn emerge from Section

5 of the Foreign Trade (Development and Regulation) Act, 1992 (supra). The

relevant provisions are as follows:

I. Foreign Trade (Development and Regulation) Act, 1992:

Section 5. Foreign Trade Policy25

.—The Central Government may,

from time to time, formulate and announce, by notification in the

Official Gazette, the foreign trade policy and may also, in like manner,

amend that policy:

Provided that the Central Government may direct that, in respect of

the Special Economic Zones, the foreign trade policy shall apply to

the goods, services and technology with such exceptions,

modifications and adaptations, as may be specified by it by

notification in the Official Gazette.]

***

II. Foreign Trade Policy, 2009-2014:

Paragraph 1.03: Hand Book of Procedures (HBP) and Appendices &

Aayat Niryat Forms (AANF): Director General of Foreign Trade

(DGFT) may, by means of a Public Notice, notify Hand Book of

Procedures, including Appendices and Aayat Niryat Forms or

amendment thereto, if any, laying down the procedure to be followed

by an exporter or importer or by 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.

25 W.e.f. 27.08.2010.

16

***

i. Handbook of Procedures (Vol I):26

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. For exports by containers from Inland Container

Depot (ICD), date of Bill of Lading issued by shipping agents at the

time of loading of export goods in ICD after customs clearance.

b) For Lash barges, date of Bill of Lading evidencing loading of export

goods on board”.

 (emphasis supplied)

20. 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.

21. ECGC enjoys a significant position in the market for export credit insurance

in India – in F.Y. 2012-2013, the total income received by way of premiums

exceeded Rupees one thousand crores,27 with the figures only growing ever since.

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.

26 The Handbook of Procedures (Volume I) was published by way of a public notice on 27.08.2009.

27 Export Credit Guarantee Corporation, 55th Annual Report, 2012-2013, pg. 6.

17

22. Accordingly, 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 ₹ 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.

..………………………………………….……

 [UDAY UMESH LALIT, J.]

.………………………………………………

 [S. RAVINDRA BHAT, J.]

…….…………………………………………

 [PAMIDIGHANTAM SRI NARASIMHA, J.]

New Delhi

April 25, 2022.