Ruling in Export Credit Guarantee Corporation of India Ltd v M/s Garg Sons International, a single judge of the Supreme Court recently held that while construing the terms of a policy, a court “is not expected to venture into extra liberalism that may result in re-writing the contract or substituting the terms which were not intended by the parties”, and that an insured party “cannot claim anything more than what is covered by the insurance policy”.
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The dispute in the case centred on insurance policies purchased in March 1995 by an exporter, Garg Sons International, from a government company, Export Credit Guarantee Corporation of India (ECGC). In December 1995 Garg Sons International had presented 17 claims to ECGC when a foreign buyer defaulted on payments. ECGC rejected all the claims on the ground that it was no longer liable as Garg Sons International had not complied with conditions in the policy regarding declarations it had to make regarding overdue payments.
Garg Sons International moved the State Consumer Disputes Redressal Commission, which directed the insurer to make payments under various claims, and later the National Consumer Disputes Redressal Commission, which ordered payment in five of the claims and rejected 11 claims. Both parties then filed appeals to the Supreme Court.
Ruling that “the endeavour of the court must always be to interpret the words in which the contract is expressed by the parties”, the Supreme Court found ECGC liable to pay in respect of only two claims. The court found that ECGC was not liable to pay for the other claims as Garg Sons International had failed to provide monthly statements to ECGC on payments that remained wholly or partly unpaid in respect of shipments pertaining to the claims, as required by a clause in the insurance policy.
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The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
