Holding

The policy covers the buyer’s default and the date of despatch is the date on the Bill of Lading, so the claim is within the coverage period and must be honoured.

Summary

Harish Marine Products (the appellant) purchased a Single Buyer Exposure Policy from Export Credit Guarantee Corporation (ECGC) covering the risk of a foreign buyer’s non‑payment for goods exported between 14‑12‑2012 and 13‑12‑2013. The goods were loaded onto the vessel on 13‑12‑2012 (as per the Bill of Lading) and the vessel sailed on 15‑12‑2012; the buyer defaulted and the appellant filed a claim on 14‑02‑2013, which ECGC rejected, relying on the DGFT Guidelines that defined the date of despatch as the ‘on‑board Bill of Lading’ dated 13‑12‑2012, a day before the policy became effective. The NCDRC upheld ECGC’s rejection, and the appellant appealed to the Supreme Court. The Court held that the purpose of the policy was to cover buyer default, that the relevant date of despatch is the date on the Bill of Lading (which confers title to the carrier), and that the loading date preceding the policy’s effective date is immaterial. Applying the rule of contra proferentem, the Court interpreted the ambiguous term in favour of the insured and set aside the NCDRC order, directing ECGC to pay the claim with interest.

Issues considered

The correct interpretation of the term ‘despatch/ shipment’ in the Single Buyer Exposure Policy.
Whether the DGFT Guidelines can be invoked to determine the date of despatch for the purpose of the policy.
Whether the rule of contra proferentem applies to ambiguous terms in a standard‑form insurance contract.
Whether the claim is covered despite the loading date being one day before the policy’s effective date.

Legislation cited

Subjects

insurance contract interpretationcontra proferentemdate of despatchDGFT GuidelinesForeign Trade Actexport credit insurancesingle buyer exposure policyclaim denial

Judgment

[2022] 17 S.C.R. 297 297

HARIS MARINE PRODUCTS A
v.
EXPORT CREDIT GUARANTEE CORPORATION (ECGC)
LIMITED
(Civil Appeal No. 4139 of 2020) B
APRIL 25, 2022
[UDAY UMESH LALIT, S. RAVINDRA BHAT AND
PAMIDIGHANTAM SRI NARASIMHA, JJ.]
Insurance – Respondent-ECGC provides a range of credit
C
risk insurance cover to exporters – Appellant-exporter paid premium
to ECGC for the Single Buyer Exposure Policy which covered
foreign buyer’s failure to pay for goods exported – Coverage of
the Policy was w.e.f 14.12.2012-13.12.2013 – The vessel set sail
on 15.12.2012 – The Bill of Lading was prepared with a line
specifying the date of ‘onboard’ (i.e., date on which vessel D
commenced loading the goods in question on board) as 13.12.2012
– The overseas buyer defaulted on payment – Appellant’s claim
rejected by ECGC – Filed complaint before NCDRC, dismissed –
On appeal, held: A plain reading of the policy in question
demonstrates that it was taken to protect against failure of the
E
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
– The date of loading goods onto the vessel, which commenced one F
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
G
was immaterial to the purpose for which the policy was taken by
the appellant – On harmoniously construing the documents of the
policy, it is 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 – Further, H
297
298 SUPREME COURT REPORTS [2022] 17 S.C.R.

A 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 – Impugned order set aside and the
appellant’s complaint is allowed – Foreign Trade (Development and
Regulation) Act, 1992.
B Insurance – Rule of contra proferentem – Standard form
insurance policies – Contract d’ adhesion or boilerplate contracts –
Reconciliation of ambiguous terms – Held: 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
C the drafter of the policy – 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
D has little to no countervailing bargaining power – This consideration
is highlighted in the present case, since the risks that respondent-
ECGC is mandated to cover is its business, and other insurers rarely
foray into the field.
Allowing the appeal, the Court
E HELD: 1.1 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
F 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. [Para 15][311-G-H; 312-A]
1.2 The rule of contra proferentem protects the insured from
the vagaries of an unfavourable interpretation of an ambiguous
G 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. This consideration is
highlighted in the facts of this case, since the risks that ECGC is

H
HARIS MARINE PRODUCTS v. EXPORT CREDIT GUARANTEE 299
CORPORATION (ECGC) LIMITED

mandated to cover is its business, and other insurers rarely foray A
into the field. 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
B
within the coverage of the policy. While interpreting insurance
contracts, the risks sought to be covered must also be kept in
mind. 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 C
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
D
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.
Therefore, reliance on the DGFT Guidelines to disallow the claim
of the appellant was not good in law. [Paras 16-18][313-G; 314- E
A-C, F-G; 315-B]
1.3 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. Deviating from F
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, G
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. 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 H
300 SUPREME COURT REPORTS [2022] 17 S.C.R.

A exceeded Rupees one thousand crores, 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
B
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 impugned order of the NCDRC is hereby set aside; the
appellant’s complaint is consequently allowed. ECGC is hereby
C directed to pay the claim amount of ` 1,96,38,400/- crores to the
appellant, with interest at the rate of 9% p.a. [Paras 19-22][315-
B-C; 316-G; 317-A-D]
General Assurance Society Ltd. v. Chandumull Jain
[1966] 3 SCR 500 – followed.
D United India Insurance Co. Ltd. v. Pushpalaya Printers
(2004) 3 SCC 694 : [2004] 2 SCR 631; Sushilaben
Indravadan Gandhi v New India Assurance Company
Ltd., (2021) 7 SCC 151; Jacob Punnen & Anr. v United
India Insurance Co. Ltd. (2021) SCC Online SC 1207;
E Peacock Plywood (P) Ltd. v. Oriental Insurance Co.
Ltd. (2006) 12 SCC 673 : [2006] 10 Suppl. SCR 140 -
relied on.
Shaw Wallace & Co. Ltd. v. Nepal Food Corpn. (2011)
15 SCC 56 : [2011] 15 SCR 1181; Modern Insulators
F Ltd. v Oriental Insurance Co. Ltd., (2000) 2 SCC 734 :
[2000] 1 SCR 1076; Polymat India (P) Ltd. & Ors. v
National Insurance Co. Ltd. & Ors. (2005) 9 SCC 174
: [2004] 6 Suppl. SCR 535; United India Insurance Co.
Ltd. v. Harchand Rai Chandan Lal (2004) 8 SCC 644 :
[2004] 4 Suppl. SCR 662; LIC v. Insure Policy Plus
G Services (P) Ltd. (2016) 2 SCC 507; Industrial
Promotion & Investment Corpn. of Orissa Ltd. v. New
India Assurance Co. Ltd. (2016) 15 SCC 315; Polymat
India (P) Ltd. v. National Insurance Co. Ltd. (2005) 9
SCC 174 : [2004] 6 Suppl. SCR 535; Export Credit
H Guarantee Corpn. of India Ltd. v. Garg Sons
HARIS MARINE PRODUCTS v. EXPORT CREDIT GUARANTEE 301
CORPORATION (ECGC) LIMITED

International (2014) 1 SCC 686 : [2013] 1 SCR 336; A
Rainy Sky SA v. Kookmin Bank [2011] UKSC 50; Arnold
v. Britton [2015] UKSC 36; Woods v Capita Insurance
[2017] UKSC 24 – referred to.
Case Law Reference
[2011] 15 SCR 1181 referred to Para 5 B
[2000] 1 SCR 1076 referred to Para 7
[2004] 6 Suppl. SCR 535 referred to Para 7
[2004] 4 Suppl. SCR 662 referred to Para 8
[2004] 6 Suppl. SCR 535 referred to Para 10 C
[2013] 1 SCR 336 referred to Para 11
[1966] 3 SCR 500 followed Para 16
[2004] 2 SCR 63 relied on Para 16
[2006] 10 Suppl. SCR 140 relied on Para 17 D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4139
of 2020.
From the Judgment and Order dated 13.07.2020 of the National
Consumer Disputes Redressal Commission, New Delhi in Consumer
Complaint No. 1546 of 2016. E

Ms. Anjana Prakash, Sr. Adv., Shahbaaz Husain, Mahesh Thakur,
Ms. Vipasha Singh, Ms. Shailaja Das, Advs. for the Appellant.
Rajnish Kumar Jha I, Adv. for the Respondent.
The Judgment of the Court was delivered by F
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
G
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
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. H
302 SUPREME COURT REPORTS [2022] 17 S.C.R.

A 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
2. The appellant is an exporter of fish meat and fish oil, whereas
B 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
C 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
D 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’
E (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
F 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
G 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.
Contentions of parties
3
Id., Chapter 9 Definitions – Clause 9.12(i) (Date of shipment / Dispatch in respect of
H Exports by Sea).
HARIS MARINE PRODUCTS v. EXPORT CREDIT GUARANTEE 303
CORPORATION (ECGC) LIMITED [S. RAVINDRA BHAT, J.]

5. Ms Anjana Prakash, the appellant’s Senior Advocate, brought A
the Court’s attention to the relevant clause in the Policy, which is
reproduced as follows:
“Part IV – Definitions
(1) DESPATCH OR DESPATCHED
B
‘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 C
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 D
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. E
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:-
F
(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 G
issued by shipping agents at the time of loading of export
goods in ICD after customs clearance.

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. H
304 SUPREME COURT REPORTS [2022] 17 S.C.R.

A b) For Lash barges, date of Bill of Lading evidencing loading
of export goods on board”.
(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
B 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
C 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
D 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
E 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 Lal 6,
F 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
G in the policy should be interpreted with reference to the terms
of policy and not with reference to the definition given in
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
H (2004) 8 SCC 644, para 9.
HARIS MARINE PRODUCTS v. EXPORT CREDIT GUARANTEE 305
CORPORATION (ECGC) LIMITED [S. RAVINDRA BHAT, J.]

other laws. It is a matter of contract and in terms of the A
contract the relation of the parties shall abide and it is
presumed 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) B
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 C
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. D
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 E
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 F
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, G
ambiguities are common in them and it is often very uncertain
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. H
306 SUPREME COURT REPORTS [2022] 17 S.C.R.

A 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.
B
Nothing is easier than 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,
C 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.
D 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
E 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
F 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
G 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
H
day prior to the effective date of the Policy.
HARIS MARINE PRODUCTS v. EXPORT CREDIT GUARANTEE 307
CORPORATION (ECGC) LIMITED [S. RAVINDRA BHAT, J.]

10. ECGC relied on Polymat India (P) Ltd. v. National Insurance A
Co. Ltd11 where this Court, while interpreting the term ‘factory-cum-
godown’ and the 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 B
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 C
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 D
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 E
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 F
words that were never intended to form a part of the
agreement”.
And further:
“The insured cannot claim anything more than what is covered
G
by the insurance policy. “The terms of the contract have to
11
(2005) 9 SCC 174, para 21.
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. H
308 SUPREME COURT REPORTS [2022] 17 S.C.R.

A 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 of the insurance
policy, that fix the responsibility of the insurance company
must also be read strictly. The contract must be read as a
B
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
C 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
D (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
E
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”)
F in Rainy Sky SA v Kookmin Bank 15 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’
G as central:
“The language used by the parties will often have more than
one potential meaning. I would accept the submission made

14
(2014) 1 SCC 686, para 11.
15
H [2011] UKSC 50, para 21.
HARIS MARINE PRODUCTS v. EXPORT CREDIT GUARANTEE 309
CORPORATION (ECGC) LIMITED [S. RAVINDRA BHAT, J.]

on behalf of the appellants that the exercise of construction A
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
B
the contract, 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.” C
(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, D
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 E
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 F
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 G
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
16
[2015] UKSC 36, para 15. H
310 SUPREME COURT REPORTS [2022] 17 S.C.R.

A 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
B
Sky , per Lord Clarke at paras 21-30".
(emphasis supplied)
14. Thus, a decisive method was suggested to construe the
ambiguity of a term used in a commercial contract. This was applied by
C 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
D 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
E 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:

F “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
G 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.
***
17
H [2017] UKSC 24, paras 10, 13-14.
HARIS MARINE PRODUCTS v. EXPORT CREDIT GUARANTEE 311
CORPORATION (ECGC) LIMITED [S. RAVINDRA BHAT, J.]

Textualism and contextualism are not conflicting paradigms A
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
B
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 analysis, for example because of their sophistication
and complexity and because they have been negotiated and
prepared with the assistance of skilled professionals. The C
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
D
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 E
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.
F
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 G
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 H
312 SUPREME COURT REPORTS [2022] 17 S.C.R.

A 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
B 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 note on houses swept
away by floods, a Constitution Bench of this Court in General Assurance
Society Ltd. v. Chandumull Jain18 held as follows:
C “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
D 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”.
E
(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
F 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
G
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…

18
(1966) 3 SCR 500, para 11.
19
H (2004) 3 SCC 694, para 6.
HARIS MARINE PRODUCTS v. EXPORT CREDIT GUARANTEE 313
CORPORATION (ECGC) LIMITED [S. RAVINDRA BHAT, J.]

(I)t is also settled position in law that if there is any ambiguity A
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
B
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).
C
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 D
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 E
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 F
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 G
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
20
(2021) 7 SCC 151, paras 37-42.
21
5th Edn., vol. 60, para 105. H
314 SUPREME COURT REPORTS [2022] 17 S.C.R.

A 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
B 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
C 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
D 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:

E “(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
F 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
G
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
22
Jacob Punnen & Anr. v United India Insurance Co. Ltd., (2021) SCCOnline SC 1207,
paras 30-33.
H 23
(2006) 12 SCC 673, paras 45 and 69.
HARIS MARINE PRODUCTS v. EXPORT CREDIT GUARANTEE 315
CORPORATION (ECGC) LIMITED [S. RAVINDRA BHAT, J.]

/ shipment’, for the Bill of Lading is the legal document conferring title A
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. B
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: C

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:
D
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.]
E
***
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, F
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 G
FTP.

24
Carriage of Goods by Sea Act, 1925.
25
W.e.f. 27.08.2010. H
316 SUPREME COURT REPORTS [2022] 17 S.C.R.

A 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,
B 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.
C
***
i. Handbook of Procedures (Vol I):26
Chapter 9: Miscellaneous Matters

D 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
E 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.
F 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
G 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
26
The Handbook of Procedures (Volume I) was published by way of a public notice on
H 27.08.2009.
HARIS MARINE PRODUCTS v. EXPORT CREDIT GUARANTEE 317
CORPORATION (ECGC) LIMITED [S. RAVINDRA BHAT, J.]

providing for application of such date. Therefore, ECGC could not have A
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 B
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 C
given the fact that the appellant had transacted with the respondent on
several previous occasions.
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 ` 1,96,38,400/- to the appellant, D
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.

Divya Pandey and Amarendra Kumar Appeal allowed.
(Assisted by : Adnan Khan, LCRA) E

F

G

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